-Caveat Lector-

an excerpt from:
The Emergence of Oligopoly
Alfred S. Eichner
The John Hopkins Press�1968
Baltimore & London
LCCN 74-7930
388 pps. � First Edition � Out-of-print
also available;
Greenwood Publishing Group(1978); ISBN: 0313205981
-----
1:: THE LARGER FRAMEWORK

BETWEEN 1895 and 1907 the American economy experienced a momentous
organizational convulsion. It was not only that the pace of merger activity
increased, that over this thirteen-year period an average of 266 firms a year
were absorbed competitors.[1] Much more important was the fact that the
surviving enterprises were of a radically different nature. Whereas, before,
scores of firms had competed somewhat independently in these various
industries, now in many cases a single firm controlled a major share of the
market. In 60 per cent of the consolidations that took place between 1895 and
1904, a single large corporation gained control of at least 62.5 per cent of
its industry's market as measured by capitalization. And in another 10 per
cent of the consolidations it gained control of 42.5-62.5 per cent.[2] By
1904, it was estimated, 318 corporations owned 40 per cent of all
manufacturing assets.[3]

This Corporate Revolution, as it has been termed, marked the birth of what
Adolph A. Berle and Gardiner C. Means later described as "the modem
corporation."[4] From this period of consolidation came many of the large
corporations that today play such an important role in the American economy.
Of the 100 largest corporations in 1955, 20 were born in consolidation during
this period; another 8 were the court-ordered offspring of the pre-1895
Standard Oil trust which had provided the model for the Corporate
Revolution.[5]

>From this Corporate Revolution have flowed many important political and
social consequences, from the "trust busting" of the Progressive era to
today's organization man. The economic consequences, though not always so
clearly recognized, have been at least equally by important. In many an
industry, including the most important ones, the Corporate Revolution spelled
an end to competition, at least as economists have defined the term.[6]
Instead were created first monopoly, and then, later and more enduringly,
oligopoly. It is important to understand this history because it reveals how
the industrial structure of the American economy has evolved in the past,
posing a challenge to both the economic theorist and the national
policy-maker. The large bureaucratic corporation, or "megacorp "[7] that
emerged from the Corporate Revolution to dominate nearly every oligopolistic
industry was a quite different social institution from its predecessor,
Alfred Marshall's representative firm.[8] It was no longer subject to the
same life-and-deatb cycle which had previously applied to business firms. A
professional, self-perpetuating management and an almost impregnable market
position assured the megacorp of virtually continual existence, and this in
turn forced the megacorp's executive group to base its decisions increasingly
on longer-run considerations. But it was not only along the time axis that
the previous human limitations on a firm's growth were transcended. The
reorganization of production and new management techniques made it possible
for the megacorp to expand to any size it might wish without suffering
diseconomies of scale, and this in turn reinforced the megacorp's already
considerable market power. For the economic theorist the challenge posed was
to adapt the traditional models of market bebavior to the new institutional
form; to the national policy-maker it was to see that a satisfactory degree
of social control was maintained. That neither has met the challenge with
complete success may well reflect a failure to understand the process by
which oligopoly emerged from the Corporate Revolution.


While students of the 1895-1907 period do not deny that something
approximating a Corporate Revolution did, in fact, occur, they are quite
divided over its causes. The simplest explanation comes from those who
wistfully look back to the days when competition was the general rule, even
in key industries. "Few of our gigantic corporations," Henry Simons wrote,
"can be defended on the ground that their present size is necessary to
reasonably full exploitation of production economies; their existence is to
be explained in terms of opportunities for promoter profits, personal
ambitions of industrial and financial 'Napoleons,' and the advantages of
monopoly power."[9] This view had earlier found support from a one-time
Princeton University professor, who gave this explanation for the Corporate
Revolution: "It is not competition that has done that; it is illicit
competition." Added Woodrow Wilson, "It is competition of the kind that the
law ought to stop, and can stop-this crushing of the little man."[10]

The theory that the Corporate Revolution was caused by the machinations of
evil, ambitious, and money-mad men suffers, however, from a major defect.
Such men have never been in short supply throughout history. Why, in the
years between 1895 and 1907, should they suddenly have been capable of
transforming the structure of the American economy? The answer, in part, has
been supplied by those who trace the Corporate Revolution to the growth and
maturation of the American capital markets. "Our theory," George Stigler has
written,

... is that mergers for monopoly are profitable under easy assumptions that
were surely fulfilled in many industries well before the mergers occurred.
The only persuasive reason I have found for their late occurrence is the
development of the modem corporation and the modern capital market. In a
regime of individual proprietorships and partnerships, the capital
requirements were a major obstacle to buying up the firms in an industry....

I am inclined to place considerable weight upon one . . . advantage of
merger: it permitted a capitalization of prospective monopoly profits and a
distribution of a portion of these capitalized profits to a professional
promoter. The merger enabled a Morgan or Moore to enter a new and lucrative
industry: the production of monopolies.[11]

At first glance, the empirical data seem to bear out this contention. By
1895, the New York Stock Exchange "had reached a sufficiently advanced stage
of development to be capable of playing an important role in the [subsequent]
merger movement. The quantitative and qualitative growth of the New York
Stock Exchange from the early 1880's to the late 1890's was appreciable and
was apparently based largely on factors other than the financing of
mergers."[12] Moreover, a large proportion of the corporate consolidations
later had stocks listed by an organized capital market. Of the various
consolidations which took place between 1897 and 1902, 68.4 per cent were
listed on the New York, Boston, Philadelphia, or Baltimore exchanges.[13]

To connect the growth of the stock market with the Corporate Revolution,
however, poses the nearly impossible task of separating cause and effect. One
group of authors, for example, has attributed the growth of the stock market,
or at least the market for industrial securities, to the consolidation
movement .[14] Even if this view is not accepted, it may well be that the
growth of the capital market was a necessary precondition for, but not
necessarily the primary cause of, the Corporate Revolution. And since it is
difficult to believe that the strong-willed, independent owners of the many
businesses that were consolidated agreed to merge their firms simply to
enable promoters to foist overvalued stock on the public, one is inclined to
look for that primary cause elsewhere.

One possibility frequently suggested is that economies of scale were growing
more rapidly at this time than was the market, making economically feasible
larger firms relative to the market. Alfred D. Chandler, Jr., for example,
has pointed out the advantages which new marketing arrangements and vertical
integration, together with the possibility of large-scale production, offered
certain firms. "These pioneers in high volume manufacturing and distribution
of both perishable and relatively complex durable goods," be has written,
"demonstrated the clear economies of scale. They provided obvious models for
manufacturers who had until then found the existing wholesale network quite
satisfactory."[15] While Chandler distinguishes the role played by economies
of scale in the growth of large firms before 1895 from that which they played
during the subsequent Great Merger Movement-economies of scale in his view
being only a necessary precondition for, but not a sufficient cause of, the
latter phenomenon-others, especially defenders of the giant enterprises thus
created, have seen the need to exploit the advantages of greater size as
creating the underlying pressure for consolidation throughout the entire
period.

As Nelson has noted, however, the data are inadequate to determine the
precise role played by economies of scale.[16] What little evidence there is
disputes the view that economies of scale were the precipitating factor in
the Corporate Revolution, though they may, as Chandler suggests, have been a
necessary precondition. Nelson himself cites the great diversity of
industries involved in the Corporate Revolution. "It is hard to believe," he
concludes, "that such a variety of technological developments as would be
needed to bring production economies of scale to these diverse industries
could have converged in the same short period of time."[17] And although
Donald Dewey, in analyzing the data on average plant size from 1869 to 1909,
found a significant increase during this period, he could find no evidence of
an acceleration in the trend after 1895 or shortly before. As for the
specific role played by new marketing arrangements and the other means of
achieving economies of vertical integration, it would appear that in many
cases, as Chandler himself indicates,[18] they came into being only after an
industry had already been consolidated. To the extent that this was the case,
the creation of new distribution networks was a result rather than a cause of
the Corporate Revolution.

Another version of the above argument cites the completion of the national
railroad network at this time. This development, it is held by Jesse Markham,
increased the market area of the typical firm and enabled it to take
advantage of potential economies of scale previously unrealizable. ". . . It
can be crudely estimated," he says, "that the area served by the average
manufacturing establishment in 1900 was about 3.4 times as large as it was in
1882."[19] Joe S. Bain also links the Corporate Revolution to railroad
development, but emphasizes a somewhat different effect. "Competition," he
says,

was intensified by the continuing growth of the railroad systems, which
tended to bring all of the principal firms together in direct competition for
a single national market. The economy was passing from a situation where a
fairly large number of small manufacturers sold their products, each in a
limited local market somewhat protected by high costs of transportation, to a
situation where a few large firms vied among themselves for sales in a single
market, in the new environment, price competition was potentially ruinous to
all.[20]

 According to Nelson,[21] industries with high transport costs were, in fact,
the ones mainly involved in mergers and consolidations. Moreover, the number
of miles of railroad track in America increased substantially from 1882 to
1916, while the cost of rail transportation declined steadily. However, as
Nelson also points out,[22] at the time of the Corporate Revolution there was
no sharp acceleration in the trend toward increased railroad trackage and
falling freight rates. More important, much of the increased railroad mileage
represented not an extension of the railroad network but an intensification
of it-the double-tracking, for example, of an already existing line. Except
in the non-industrial Southwest and Northwest, the era of railroad pioneering
had come to an end at least a decade before the Corporate Revolution.

The Bain version of the railroad development hypothesis finds little support
in the empirical data as well. For Nelson discovered that, in the case of
many of the industries consolidated, plants were already concentrated within
a narrow geographical area.[23] Therefore, the completion of the national
railroad network could not have led to ruinous competition by bringing
previously separated local markets together in one large national market,
because the markets had not previously been separated by high transport costs.

The Bain hypothesis does touch on another explanation of the Corporate
Revolution, however, one that is frequently advanced by businessmen or the
defenders of consolidation. "In the United States as elsewhere," say Seager
and Gulick,

the combination movement has resulted from the efforts of businessmen to
throw off the restraints and avoid the wastes of unregulated competition. It
is one of our conclusions that even after all of the economies of largescale
production have been realized, there remain wastes and losses that can be
avoided only through the exercise of sufficient control over output to secure
the highest attainable regularity in the operation of plants. The combination
movement is therefore a natural and indeed inevitable business development,
which is not in and of itself opposed to the public business.[24]

This argument, that businessmen agreed to consolidation in order to avoid
ruinous competition, keep production levels steady, and maintain reasonable
profit margins, has much in common with the explanation, rhetoric aside, that
the consolidation movement was fostered by the desire for monopoly profits.
Ignoring for the moment the question of whether or not monopoly results in
certain economies, one should realize that the only difference between these
two views is their difference of opinion as to what constitutes a
"reasonable" profit. But whether the objective was, in fact, a "reasonable"
or a "monopoly" profit, it was attained in much the same way-that is, by
gaining control over an industry.

The evidence to support this thesis, that the Corporate Revolution was caused
primarily by the desire to avoid "ruinous" competition, is quite substantial,
if only on the basis of the actual results. As already noted,[25] a
substantial percentage of the consolidations, if market control was actually
the motive behind them, achieved their objective. But this still does not
solve the problem of timing. Like the evil-men explanation, which it closely
resembles, the market-control hypothesis does not explain why businessmen
should have become more highly motivated by this desire in 1895 than in
previous times, or even why they should have been more successful in
satisfying it.

The ruinous-competition explanation for the Corporate Revolution has
sometimes been linked to the decline-of-growth argument, namely, that the
American economy at the end of the nineteenth century experienced a fall in
its rate of growth and that the slackened demand led to ruinous competition
among firms fighting for their former share in a reduced market. As Myron
Watkins has explained:

The opening of a new and wider market involves pioneering costs which call
for the compact association of producers. But once a market has been opened
by the joint action of the associated producers, its development attracts the
ambition and varied talents of many producers, the prize for successful
competition being high. The third and final phase is reached when the limit
of the expansion of a given market has been touched, and the amount and
character of its consumption have become settled and known. The gains from
initiative and ingenuity are then no longer sufficient to bold producers upon
an independent course, and they fall in together for their common enrichment
at the expense of consumers .[26]

Nelson's empirical study, however, throws great doubt on this explanation.
Analyzing the data on production trends, Nelson found that the Corporate
Revolution took place at a time of increasing growth rather than of decline.
In fact, he discovered a high correlation between growth and merger, not only
for the turn-of-tbe-century period, but also for subsequent periods of high
merger activity. He also found that those industries which experienced
consolidation or merger generally had higher growth rates than did the
economy as a whole.[27]

A final economic explanation for the Corporate Revolution points to the high
American tariffs in effect at this time. From 1883 to 1897,
Republican-controlled Congresses steadily revised American tariffs upward,
and they remained at a high plateau until the Underwood Tariff of 1913. For
many years the belief was widely held that "the tariff is the mother of
trusts."[28] Nelson attempts to dispose of this explanation by citing a
similar British merger movement, also at the turn of the century, which,
since Great Britain at this time was still deeply committed to a policy of
free trade, occurred without the protection of tariffs.[29] Even disregarding
Nelson's argument,[30] the question of timing still remains. Why would high
tariffs not have induced a wave of industrial consolidations before 1895?

Two non-economic factors have also been cited as explanations for the
Corporate Revolution. One of these was the change in corporate law  which
took place in the late 1880's. Before then, corporations were generally
prohibited by common law from owning shares in other corporations, a
prohibition which largely precluded the possibility of using the holding
company as a means of effecting industrial consolidation. Then, in 1888, New
Jersey enacted a new law permitting corporations chartered in that state to
purchase stock in other corporations. Dewey, however, contends that this was
no more than a contributing factor to the Corporate Revolution. Even before
1888, he says, other states conferred the same privilege on corporations or
could do so by simple legislative enactment.[31]

The second non-economic explanation for the Corporate Revolution points to
the changing legal attitude toward cartels and other forms of industry price
control. The Corporate Revolution erupted, it is held, when the U.S. Circuit
Court of Appeals in 1898 ruled in the Addyston Pipe & Steel case that cartel
agreements were illegal under the Sherman Act. With this method of avoiding
ruinous competition closed to them, businessmen were forced to turn to
consolidation as the only alternative. "This contention has its grain of
truth," notes Dewey. "The condemnation of a cartel in the Addyston Pipe case
... coincided with the start of the eighteen-month period that saw merger
activity reach its peak, and at least two major consolidations�the mergers
creating the United States Pipe and Foundry Company and the United Shoe
Machinery Company-were precipitated by this decision, the promoters having
previously inclined to some less irrevocable arrangement. "[32] But, as
Nelson points out, the Corporate Revolution had already begun, even before
the Addyston Pipe decision was announced. Moreover, in Great Britain, where a
similar merger movement was occurring, British courts were simultaneously
declaring that cartel agreements were not necessarily illegal, even if they
were unenforceable in a court of law.[33]

Thus, of the numerous explanations that have been offered for the great
merger movement in American industry at the turn of the century, none seems
wholly adequate.[34] The evidence in support of any one of the explanations
is, at best, inconclusive. Clearly, there is need for a better understanding
of what actually happened during this critical phase of American economic
development.

This monograph represents the beginning of an effort to provide that better
understanding. It will attempt to place the events occurring between 1895 and
1907 in a larger historical context, that of the long-run evolution of the
structure of American industry. It will do so by re-examining the historical
evidence from the period as it pertains to a single industry, sugar refining,
in light of present economic theory. Too often this evidence has been framed
in moralistic terms, either decrying or defending the events reported. But
the time has long since passed when such an approach serves any useful
purpose. Like it or not, the Corporate Revolution is a fact of our historical
experience, the precursor of today's economic world. The time has now come to
try to understand that revolution with the aid of modem economic analysis.

Recent developments in economic theory, especially in the field of industrial
organization, provide the guide. The pre-conditions of competition, the
behavior of cartels, the importance of barriers to entry, and other aspects
of industrial organization are much better understood now than when the
Corporate Revolution was actually taking place. The older historical
evidence, meanwhile, stripped of its moralistic overtones, supplies the raw
data. This evidence, much of which has been ignored previously, is to be
found in business records, government documents, court papers, trade
journals, newspaper accounts, and biographical materials. Together, these two
elements�recent economic theory and the older historical evidence�make
possible a comprehensive explanation of the Corporate Revolution, such as the
one presented below.

***

The changes that have occurred in the structure of the American economy over
time, the most dramatic of which was the Corporate Revolution itself, can
best be understood in terms of a four-stage model. Each of the last three
stages, while evolving directly out of the previous stage, has nonetheless,
like the first stage, been characterized by a unique market structure. The
number of competing firms, the importance of barriers to entry, and the
extent of product differentiation are the factors that have determined the
nature of each typical market structure, and since these are the factors that
determine which theoretical model of pricing behavior is applicable in any
given situation, they also indicate the nature of the competitive processes
that have been at work during each successive stage.[35] The exogenous
force-that is, the engine of change throughout-has been technological
progress, each stage representing the adaptive response of market structure
to the evolving technical basis of economic activity. But technological
progress as the engine of change should not be thought of as simply the
effect of new production methods on an industry's cost structure. It must be
viewed in the larger sense of being the factor which historically has made
possible entirely new industries, rising output per worker, reduced
transportation and communications barriers, and more complex social
organization-these developments both influencing and in turn influenced by
the nature of demand in a subtle interplay of forces.[36] It is only in this
broader sense that technological progress may be said to be the independent
variable in the four-stage process described below.[37]

The first of the four stages was the initial Period of Imperfect Competition.
This was essentially a preindustrial stage during which handicraft techniques
largely prevailed in the manufacturing sector�insofar as there was a
manufacturing sector. The stage lasted from the time of the first colonial
settlements in this country until the triumph of the factory system sometime
during the two decades preceding the Civil War. While the precise timing
varied in each industry, a useful bench mark was that parallel technological
achievement, the transportation revolution, which by creating a vast domestic
market both was stimulated by and in turn stimulated large-scale
manufacturing. The typical market structure during this initial Period of
Imperfect Competition reflected the conditions that underlie the theory of
monopolistic competition today. Production was generally carried out by firms
which, if not individually owned proprietorships, were at most only two- or
three-man partnerships. Entry into any particular field, moreover, was
moderately easy, being limited primarily by the skill required to perform the
various handicraft operations and secondarily by the working capital needed
to keep the business solvent. The distinguishing characteristic of the
period, however, was the lack of uniformity among the goods produced. Because
of the handicraft techniques employed, the quality of the product varied both
among firms and even within the same firm over time. This gave rise to a
product differentiation not unlike that achieved in more recent times by
advertising and other forms of sales promotion. Each firm became known for
the particular quality of its own product and the extent to which that
quality varied. This product differentiation, together with the regional
segmentation of markets, in turn provided the firm with partial protection
against the forces of competition, thereby assuring some degree of stability
and security.

The second stage in the development of industrial organization was the Golden
Age of Competition, so called because of the tendency of so many persons in
later years to look back on it with nostalgia. The first phase of this stage
represented the culmination of a series of striking technological
innovations, the effect of which was to make possible large-scale, low-cost
production of manufactured goods. In addition, the new mechanical techniques,
together with improved measuring devices, made it possible for the first time
to turn out articles of uniform quality. The interaction of these
developments with the transportation revolution and the creation of a vast
domestic market has already been touched on. Together they led to an
unprecedented expansion of manufacturing activity, variously timed in
individual industries but most generally occurring in the years immediately
after the return of prosperity in 1843.[38]

Two groups of entrepreneurs rushed to take advantage of the resulting
opportunities: those who among the older artisan group were able to adapt to
the new mechanical techniques and those who among the commercial classes were
willing to risk their capital in less liquid enterprises. The former brought
with them a tradition of workmanship, the latter the habits of commodity
dealing. The characteristic business spirit of the period derived from both
sources, producing a condition similar to that underlying the model of
perfect competition later developed by economists. The large number of
separate enterprises created to take advantage of the rapidly expanding
market meant that no one firm could hope to influence the market by its
actions alone. Technological improvements meanwhile created a degree of
product homogeneity dictating the same type of independent pricing which had
long characterized commodity markets. Each firm was forced to take the
industry price as given and to seek to maximize its net revenue by varying
output-even if from time to time it might bring about a change in that very
industry price through its testing.. of the market. The countervailing power
exercised by brokers, commission merchants, and wholesale dealers served to
keep the new manufacturing markets "honest," a true barometer of shortrun
supply-and-demand forces. In the long-run the still-relative freedom of
entry-absolute capital requirements had increased but the wealth of the
country had increased even more-performed the same function. Finally, the
drive on the part of at least some individuals to continually improve both
the product and the way in which it was manufactured meant that those who
failed to adopt the new techniques found themselves at an increasing
disadvantage-even if this disadvantage was not always immediately apparent.

The Golden Age of Competition, however, like many another heroic era,
contained within it the elements of its own destruction. The same force of
technology which so greatly reduced the costs of production and made it
possible to turn out goods of uniform quality in large numbers also required
a substantial investment in fixed assets, thereby making the capital-output
ratio significantly high. This meant that whenever the demand for a firm's
product fell, it was under considerable economic pressure to try to expand
its sales by cutting its price and in this way spread its overhead costs over
a larger volume. As long as the revenue received more than covered the
variable or "out-of-pocket" costs, it was to the advantage of the individual
firm to shade its price in this manner-even if, as a result, the industry
price fell below long-run average total costs.

In the long period of prosperity that lasted through the Civil War and on
into the second term of the Grant administration, this proclivity toward
price cutting posed no serious problem. The times of falling or stagnant
demand, when they occurred, were relatively brief and soon forgotten in the
subsequent further expansion of the economy. But in the years after the Panic
of 1873�though here again the precise date varied for each industry-secular
conditions changed. The times of falling or stagnant demand were now much
more frequent .[39] Equally important, the forces of supply-that is, the
ability of new or existing firms to increase production-proved more vigorous
than those of demand. Manufacturing firms no longer found it unusual to be
forced for considerable periods of time to sell their output at prices below
their long-run average total costs. This was particularly true of the
marginal firms, those enterprises which had been less willing to modernize
their plants during the earlier period of prosperity. For these firms there
ensued a desperate struggle for survival, and in the process of that struggle
they significantly influenced industry price levels. Somehow a few of them
managed to hang on, shutting down when the price fell below a certain point
but starting up again whenever it rose sufficiently to cover their
out-of-pocket expenses. The result was to keep the industry price from
reaching much higher than the average variable costs of the marginal firms.
While a few of the more efficient enterprises could nonetheless earn an
adequate return, the majority of firms could not .[40]

For the owner-entrepreneurs associated with these enterprises it was an
entirely unsatisfactory state of affairs. In the long run, unable to cover
their total costs, they faced probable economic extinction. The loss of both
their capital and the social position which that capital afforded them was
too great a blow to accept, and so these businessmen resolved to do something
about their plight. The years from 1873 to 1895, the second phase of the
Golden Age of Competition, thus constituted a period of transition presaging
the Corporate Revolution as those who had invested their capital in
manufacturing assets sought in various ways to mitigate the expropriating
effects of competition.

The period as a whole was one of instability, for the ad hoc solutions that
businessmen devised to cope with the situation inevitably failed to solve the
underlying problem of excess supply relative to the demand. In most cases the
first response of the manufacturing firms was to agree among themselves not
to sell below a certain price or produce in excess of a given quantity. But
like all such agreements heretofore, they were soon violated, sometimes even
before they could be put into effect.[41] The advantages of cutting the price
were so great and the ability to police the agreements so limited that this
result was all but inevitable-and the knowledge that the agreements would
soon be violated was itself a factor contributing to their abrogation. While
these cartel arrangements gradually grew more sophisticated with the creation
of pools and common sales agencies, they nonetheless continued to suffer from
a generally fatal defect: the agreements, obviously designed to suppress
competition, were unenforceable in a court of law. Thwarted along these
lines, businessmen turned to legal and extralegal alternatives. In some cases
they simply sought additional tariff protection or even export subsidies. In
others they tried to enlist the support of politicians and government
officials for whatever scheme promised to bring relief from competition-and
in the process helped set the tone for what has come to be known as the
Gilded Age of Politics. Even so, in most cases the only real alternative was
a more furious struggle for survival, the tactics employed becoming less
restrained as the contest itself became more desperate.[42]

While instability was the general rule, the period was also one during which
the solution to the problem of how to mitigate the effects of competition was
gradually being worked out as a result of the cumulative experience in a few
key industries. Even before 1873 the firms active in anthracite coal mining
learned that control over transportation could be used to obtain control over
the entry of new firms into the industry and thus to provide a check on
competition from without.[43] Earlier, Cornelius Vanderbilt and the
organizers of the Western Union Company had demonstrated that the exchange of
stock was an effective means of gaining control over the firms already in the
industry and thus of assuring a check on competition from within.[44] The
Standard Oil Company, under the direction of John D. Rockefeller, then
combined both these lessons to achieve an unprecedented degree of control
over prices in the petroleum industry. With low-cost methods of production
and railroad rebates providing the Standard Oil Company with an unmatchable
advantage, rival refiners were left with the choice of either selling out to
the Rockefeller group-generally for stock but, if they insisted, for cashor
facing competitive ruin.[45]

The importance of the Standard Oil example was not only the success it
achieved on so large a scale but, even more important, the new legal device
it created for controlling the various properties acquired. That new legal
device was the trust form of business organization. It consisted of a group
of trustees, the functional equivalent of a board of directors, in whom the
stock of different corporations could be vested, giving the trustees absolute
control over the management of the properties. In return for handing over
their stock to the trustees, the shareholders in the various companies
received trust certificates, the functional equivalent of common shares. This
arrangement, besides making it possible to get around the common law
prohibition on holding companies, enabled the very existence of the trust to
remain a secret, since, unlike a corporation, the trust did not have to
obtain a state charter.[46] In the late 1880's, as knowledgeable businessmen
gradually became aware of the Standard Oil trust's formation, a number of
other industries were quick to follow petroleum's example. The certificates
of these trusts, traded in the New York Stock Exchange's unlisted department,
created the first significant market for industrial securities in this
country.[47]
--[cont]--
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End

DECLARATION & DISCLAIMER
==========
CTRL is a discussion and informational exchange list. Proselyzting propagandic
screeds are not allowed. Substance�not soapboxing!  These are sordid matters
and 'conspiracy theory', with its many half-truths, misdirections and outright
frauds is used politically  by different groups with major and minor effects
spread throughout the spectrum of time and thought. That being said, CTRL
gives no endorsement to the validity of posts, and always suggests to readers;
be wary of what you read. CTRL gives no credeence to Holocaust denial and
nazi's need not apply.

Let us please be civil and as always, Caveat Lector.
========================================================================
Archives Available at:
http://home.ease.lsoft.com/archives/CTRL.html

http:[EMAIL PROTECTED]/
========================================================================
To subscribe to Conspiracy Theory Research List[CTRL] send email:
SUBSCRIBE CTRL [to:] [EMAIL PROTECTED]

To UNsubscribe to Conspiracy Theory Research List[CTRL] send email:
SIGNOFF CTRL [to:] [EMAIL PROTECTED]

Om

Reply via email to