CHAPTER XXII PUBLIC POLICY: EVILS AND CAUSES Introductory Statement of the Problem. Undoubtedly danger exists whenever rigid rules are laid down concerning social processes, the danger of preventing those adjustments to changing conditions which are so essential to life and progress. At the same time, few now deny that the existence of short-time or special interests which are contrary to long-time or general interests may make regulation desirable; and that regulation actually becomes desirable whenever the dangers of encroachment by the short-time, special interests upon the general, longtime interests outweigh the dangers of rigidity or retarded industrial and social progress. Very broadly stated, the problem of public policy towards business organization is to combine prevention of abuse with progressiveness, to secure justice and safety without hindering initiative and flexibility. Most thinkers agree that down to the present time the spur of private profit has been the most effective stimulus to economic progress; but more and more these same thinkers have also come to agree that with the growth of economic life and business organization that spur has stimulated some actions which have not been progressive in the best sense. The interests of the general public and of never-dying society have been endangered by the interests of the few in their search for private profits. There can be no doubt that it is the consensus of the best opinion that, barring public-service industries, the burden of proof is upon those who would substitute some other driving force for the spur of private profit, and in this opinion the author concurs. The question, then, is to what extent can the stimulus of the old spur safely be retained? How can rules and regulations be applied without deadening it? When one comes to examine carefully the great problem to which the various abuses of business organization give rise, one finds that this problem is made up of many minor problems, some of which are legal, others economic, others political, while some may be called ethical. It will be impossible here to take up these various aspects in detail. By holding to the economic point of view, and sketching in the more essential outlines with care for the perspective, we may be able to see the fundamental part of the problem in a comprehensive though rough way, and to reach some general conclusions concerning the remedies to be applied. The Evils stated and Analyzed. - Setting to work according to the method of observation, we will first seek accurately to understand the evils which constitute the problem. If one were to jot down the various evils retailed in newspapers, magazines, and reports to legislatures, a somewhat confused list similar to the following one would be the result: 1. Exorbitant prices. 15. Overgrown corporations. 2. Bribery of the employees of 16. Fraudulent promotion. competitors. 3. Abuse of patents. 17. Excessive promoters' and underwriters' profits. 4. Secret control of so-called 18. Inadequate financial state competitors. 5. Price discriminations. 6. Discriminations in granting credit. 7. Preventing purchasers from dealing with competitors. 8. Factors' agreements. 9. Monopoly of natural re sources. ments. 19. Inadequate reserves. 20. Interlocking directorates. 22. "Melon cutting." 24. Abuse of minority stock- io. Retarded progress through 25. Abuse of employees. A cursory inspection of this sinister list leads one to see that it contains some overlapping and duplication, and to surmise that a little analysis might lead to a classification which would bring out the underlying causes. Obviously it will hardly be possible to act thoroughly or even intelligently by beginning with secondary and non-coördinate evils. Many of the evils in the list, in fact, are but symptoms of the disease. Instead, then, of forthwith passing a law fixing prices or forbidding overcapitalization, the wise man will go below the surface of these evils. In the first place, it becomes evident that this long list of evils all centers in four or five main points. Thus, all the abuses which lead to the terrorism or destruction of competitors by wrongful means tend to establish, or at least to make possible, high prices through monopoly. All those which lead to waste and uneconomical production tend towards higher costs and prices, and towards poorer service. Those evils, however, which, like promotion abuses, manipulation by directors, and abuse of minority stockholdings, mean a clash of interests within corporations and a loss to investors, do not directly mean monopoly or higher prices to consumers. Other evils center in the labor problem, or in politics. These last evils will not be discussed in these pages, the one group being rather indirectly and remotely connected with business organization; the other being non-economic. We can therefore group all the evils mentioned under six heads: I. High prices (1-9, 10-17, 20, 28, etc.) 1. Monopoly control (1-9, 20) 2. Uneconomical production (10-15, 26-28, The consuming public 3, 4, 9, 16, 19) II. Inefficient service (10-15) III. Abuse of investors (12-24) IV. Abuse of employees (25) V. Uncertainty among business men (26-28) VI. Political corruption (29) Security holders Laborers Business Men The state In the second place, and closely related to the foregoing heads, several different classes of interests are clearly impinged upon |