the consequent high profits of the existing combination, the result must inevitably be a competition so fierce that prices would be forced below usual competitive rates, and profits would entirely disappear. If it be suggested that such competition might be started with the idea of selling out to the combination, the fact still remains that this enlarged combination, organized with the certainty that it would possess plants sufficient to supply considerably more than the normal demand of the country at remunerative rates for a period of years, would, in all probability, make low profits on the total capital invested. If it attempted to make high ones, its prices would need to be put so high that still other competitors would enter the lists, and in course of time a reorganization must take place which must result in great loss of capital. This ultimate result will make the first strong would-be competitors wary.

This same line of argument applies to practically all of the advantages that are to be secured by a large industrial plant. The only difference between the large business and the capitalistic monopoly is, after all, one of size and power which come from capital.

A large

manufacturing establishment which does not supply more than 10 per cent. of the output of the country may, perhaps, as regards the division of labor in the manufacturing plant itself, be able to manufacture as cheaply as a great combination which controls 90 per cent. of the output. On the other hand, in many lines of industry, it does not have the same facilities for marketing its product, owing to increased cost of transportation and a relative increase in the cost of advertising. Its power of competition is also smaller, since it cannot so readily make cuts in special localities against small competitors while keeping up its prices elsewhere, and since, also, supplying so small a part of the market, it cannot get its prices even temporarily above normal competitive rates. Neither can it secure the numerous other advantages of a great combination which have already been cited.

This element of fear on the part of the small would-be competitor, who knows that he can be crushed out, is the influence which keeps him from investing his capital until the combination is securing considerably more for its product than competitive rates among small

manufacturers.

The certainty which keeps the large would-be competitor out, even when prices are considerably above such competitive rates, is that after he has entered the business the existing combination must force the competitive fighting so hard that profits will entirely disappear during the contest; and the knowledge that if a combination with the competitor is made, it must be with so large a capital and so much surplus productive capacity that even for a goodly time in the future the profits must be comparatively low, or more probably non-existent; while the endeavor to make profits would push prices up again which might tempt in new rivals.

The only competition that is likely to prove effective, if any does, is that from another great combination in a collateral line of work. For example, a great steel combination might effectively add to its plants some tin-plate mills. This movement has already begun, both in the way of competition and of combinations which attempt to include all steps of manufacture from the mine to the highly finished product. Such combinations will probably extend still further; but this fact does not change the principles laid

down. It simply points to larger consolida

tions.

It will thus be seen that we may make properly a distinction between merely large capital and capital large enough to give an organization a virtual monopoly. It also seems certain that the sources of savings of a great combination, added to this fear of the attacks by great capital, are sufficient, in spite of potential competition, to enable a large combination to secure permanently under existing laws profits considerably above those which could be secured under a competitive system of smaller men, although not so high as might readily be secured by a legal monopoly or by a natural monopoly. This fact seems to justify the use of the expression "capitalistic monopoly," although of course one may readily concede that the power of monopoly in this case is not so complete as in the others.

One may grant still further that experience so far does seem to show that these larger combinations have ordinarily pushed their prices so far above usual competitive rates that other capital has entered the field and pushed prices from time to time back to, or often below, former competitive rates. On the whole, however, the fact

that, during the twelve years of its existence, the American Sugar Refining Company (with capital stock not a little watered, if one judges on the basis of cost of reproduction and running cash capital) for more than nine of these years has been able to keep its margin between raw and refined sugar considerably above the former competitive margin, and has paid dividends of 7 per cent. on its preferred stock and 12 on its common stock, while laying up a surplus, seems to show that its large capital has secured more than former competitive prices, and that it has had certain monopolistic power. The nature of competition between large competitors as compared with that among small rivals is considered at length in the chapter on Prices.

The assertion made that the Sugar Combination has also received special favors from the railroads may or may not be true. It certainly has not been proved, while the other reasons, and the undeniable facts regarding the increase in the margin between raw and refined sugar, as shown in the chapter on Prices, furnish sufficient cause for the high dividends. A somewhat similar assertion may be made regarding