Limited transferability, 368; Directors' holdings, 369; 377-394 Overcapitalization, 377; Holding companies, 379; Postulates for a solution of the trust problem, 382; Natural monopolies, 383; Segregation of limited natural resources, 384; Local price discriminations, 385; Legalized agreements and consolidations, 386; Tariff reduction, 389; Sherman Anti-Trust Law, 390; General basis of the plan, 391; The alternatives, 392. XXV. THE LIMITED-LIABILITY ASSOCIATION: A REMEDY. 395-397 G. TRUST AGreement (DISTILLERS AND Cattle Feeders) . H. REORGANIZATION AGREEMENT (AMERICAN COTTON OIL TRUST) I. TYPICAL AMalgamation (AMERICAN SNUFF Company) . CHAPTER I BUSINESS ORGANIZATION IN GENERAL Business Organization Defined. The term "Business Organization" has a very definite meaning to the scientific student of industrial affairs. In the first place, he would explain that the idea of "business" is capable of pretty accurate definition. Business may be defined as human activity directed toward producing or acquiring wealth through buying or selling goods. Men do not, as a general thing, enter business for their health, but for the purpose of making money, and, as a rule, money making involves the production of things which men desire. Business reaches its culmination at the end of the technical processes of production and at the beginning of the consuming process; for everywhere in the world of industry "products" are being turned out by plants, mills, farms, stores, offices, etc., and taken over by other plants, mills, farms, stores, and offices as producing consumers, or by individuals as "final" consumers. Such transfers mean buying and selling, and in buying and selling lies the essence of business. On the one hand, business rests on technical processes of trade and manufacture; on the other hand, it looks to the market. At the junction stands the business man, either directing the technical process of production or gauging the market, or doing both; but always engaged in buying and selling for the purpose of gain. Burglars make money, but burglary is not business - at least not ordinary burglary. Neither the economist nor the law can recognize anti-social and unlawful activities, for such activities tend to destroy society, without which business would be impossible; and they are carried on outside the pale of the laws, without which society could hardly exist. Business is founded upon the exchange of goods, and for exchange to exist there must be both an exchangor and an exchangee: without mutuality based on a quid pro quo exchange, business would soon cease. Two kinds of business, however, must be recognized: business that is productive from the social point of view, and business that is productive only from the individual point of view. According to the social point of view, business is productive when it adds to the net sum of goods and services which men want; that is, when the amount of food, clothes, books, automobiles, teaching, medical service, etc., is increased. But individuals may grow rich in ways which do not increase the net sum of goods and services and still be actively engaged in business, or in production from the individual standpoint. A large part of advertising is merely acquisitive, not adding anything, but taking for one business man what another business man loses. So it is with some " speculation," and some middlemen's activities. But all this, when recognized as lawful and when the price is freely paid, is "business"; and in the long run the test of a good business man is simply the amount of income or private gain which he acquires legally. Business thus includes some activities which do not add anything to the sum total of society's wealth. Most thinkers who are not socialists, however, believe that, while there are many hitches and mistakes, and while individuals may merely acquire without increasing total wealth, on the whole and in the long run it is true that in the fields where competition prevails the more efficient business men there are, and the larger their total gains, the greater is production from the social point of view. This conclusion, of course, rests on the fact that men can generally make money in legal ways only by making things other men want. Or, to put the idea another way, it rests upon the fact that exchange-in which business subsists - must ordinarily be mutual, and be based upon a gain in utility though not necessarily an equal one-to both parties to the exchange; otherwise exchanging will become one-sided and decline. Of course, this works out more readily under |