TRADE AND LABOUR

Ashburton Guardian, Volume XL, Issue 9203, 30 April 1920, Page 2

TRADE AND LABOUR

THE -GENESIS OF TRUSTS.

(By "Gracchus.")

"The tariff is .the mother of trusts, is a maxim that is well-known: Perhaps also 1 it is little understood .because, to take our own country for example, although there is incessant outcry agaiiist trusts and rings and merchants' associations and labour monopoly, at the same time a protective -cariff is universally sanctioned. It the policy of protection has been seriously questioned in recent years, the writer cannot remember the occasion. Yet the New Zealand protective tariff is encouraging the growth of common or garden variety trusts, which once established are of the hydra-headed species; a head may be topped off here, but appears elsewhere, and the dogv corporate is as strong as ever, llia't trusts have not appeared openly as yet is not the slightest guarantee of their permanent absence, it is really because New Zealand so far has been mainjy concerned with her primary industries. Yet. but lately, there has been a movement of amalgamation in our textile industry which is not without significance.

A protective tariff, as its ; .very name implies, aims &v fostering industry. Under its shelter the promoters hope existing trades will expand ana now ones will be called into life. An unsuccessful industry complains of foreign competition and a benign Government acids' a clause to the tariff, placing a stiff duty upon the foreign article. But the knowledge that the industry is now safeguarded encourages other producers to enter the field and ,as far as the earlier producers are concerned, the competition is none the less severe because the goods have not crossed an ocean or a political frontier.

Competition means lowering of prices, and the manufacturer sees the extra profit slipping away which he hoped to extract from the buyer by prices screwed up to meet the tariff, it is at this point that one of the competitors is struck by a great thought. The tariff has aggravated the disease, but it can also provide the remedy. Foreign corripetition is shut out; if the home producers come to terms they will have the control of the output and of prices in their hands. This general enunciation of the origin of monopolistic combinations may be supported by two-fold proof. First, in .cases where their existence is not due to a tariff they are nevertheless sheltered by other circumstances from foreign competition—by a natural monopoly,, by cost of carriage, or by production of a special class of goods. Conversely a trust has never been formed in an industry exposed to the competition of foreign goods of a similar quality. Thus the tariff,' by an artificial limitation of the field of competition and by an equally artificial stimulation of the industry, doubly encourages trusts.

The name of "Trust" came from the United States, and America is always, associated with trusts in the popular idea. But trusts are not confined to the States by any means, otherwise t the maxim that the tariff is the moth-' er of trusts would be inaccurate. It is because we are more familiar with economic conditions in the United States than with those of, say, Germany or Russia, that America is said to be the home of trusts. An instance of a trust in the States that is of interest to New Zealand will be taken in the first place. It is a trust which has wrought the most widespread, evil to the general public. Except for the three years of the Wilson tariff (1894-97), up to 1913, the United States maintained high duties on imported wool for the benefit of the American grower. Then to compensate the American manufacturer there was erected an elaborate and towering edifice of "ad valorem" and specific duties on imported woollen goods, which were equivalent in somo cases to more than 200 per cent "ad valorem." The edifice in the final form was the famous "Schedule X" oi the Payn^-41drich Tariff of 1909.

The protection of the woollen industry had some remarkable results. In the first place, the quantity of wool consumed in America decreased in the 20 years preceding 1914 by about 15 per cent. The population in the same period had of course increased enormously; so had the consumption of cotton. _ In oilier words, the American population was wearing very little pure wool and a great deal of mixed wool and cotton. "Very few Americans now sleep under all-woollen blankets," said the "New York World" in 1913. Yet the woollen mills were not able to produce cloth of sufficiently good quality to satisfy the rich American. He bought clothes in England or France and paid double for the imported article in America. Meanwhile the vast bulk of the American population shivered in high-priced " cotton substitutes for wool," and one of the most earnest agitators against the woollen tariff was the National Society for the Prevention of Tuberculosis. The American Woollen Company, formed in 1899, with a capital of £10,000,000, made its profits out of the health of the people, and there has been an evil alliance between the woolgrowers of the West and the manufacturers of the East against the consumer. It was said at the time of the Dingley Tariff that the president of the Wool_ Manufacturers' Association urged his colleagues to leave thenmills to be run by the office boy if need be, that they might be present to exercise their influence on the revision of the tariff at Washington.

However, nothing is to be gained by exaggeration of the trust menace. It has been pointed out that these unions oiily appear, or, at least, only meet with any chance of success^ in one quarter of the industrial field—in trades which require large amounts of capital, in which routine predominates, in which the product is of a uniform or -bulky nature, and freight expenses are heavy; or. lastly, in those which depend on costly patents or lavish advertising. We may add to this last the industries in which it is easy to ohtain control, of raw materials and those which are specially favoured by tariff regulations. It is true that many branches lie outside the grasp of the trust, but those which itreaches include some of the most important and _ fundamental of modern trades. In view of the heightened wall of protection recently erected in Australia, and Mr Massey's hints of the need for more revenue, and consequently more taxation, in New Zealand, this article has been penned to trace the connection between tariffs and trusts. . No