Natural monopoly

“ Wherever the tendency in any particular industry continued to run in the direction of combination, and wherever the increasingly centralized control of that industry was associated with a practical monopoly of some mineral, land, or water rights, the government might be confronted by another instance of a natural monopoly, which it would be impolitic and dangerous to leave in private hands. In all such cases some system of public ownership and private operation should, if possible, be introduced. ”

“ The consequence is that the people receive the benefit from the country's natural resources, while the private owner gets only enough to compensate him reasonably well for the labor he employs and the capital which he invests. Certain other gifts of Nature are, as we have found, very scarce; the number of men who can own and use them and compete with each other in offering their advantages to the public is necessarily small. The inevitable result of this condition is, first, intense competition and then monopoly. ”

“ Rent the Effect of a Natural Monopoly. The requisites of production being labor, capital, and natural agents, the only person, besides the laborer and the capitalist, whose consent is necessary to production, and who can claim a share of the produce as the price of that consent, is the person who, by the arrangements of society, possesses exclusive power over some natural agent. The land is the principal of the natural agents which are capable of being appropriated, and the consideration paid for its use is called rent. ”

“ These again have been modified or overcome, giving wider scope to liberty, but again producing fresh developments of monopoly, and so on until now. The reason why an artificial monopoly is so abominable is not only that it interferes to put some men down in order that others may rise at their expense, but that it is a working backward of the state machinery against that whole drift of civilization, which the state machine ought to fall in with and assist by constantly enlarging the fields of individual effort and modifying the play of natural monopoly by intelligent control. ”

“ That monopoly, that keeping out of play the natural forces, influences the price of land, and thereby influences the health and happiness and right to live, of human society. I use this simply as an example, to point out to you that in our present condition of society we have not the full, fair, free play of the natural forces of economic or social life. They are being interfered with on all hands. We are speaking of monopolies this evening. A complete monopoly is only the highest development of something which exists from the very basis of society up. ”

“ It is not reasonable to denounce natural monopolies, because if they are founded in the order of nature no one is to blame for them, and nothing can modify them but such applications of intelligence as may change their form or combine their action with new forces. Neither are natural monopolies all or always mischievous; they have very great utility and advantage. It is therefore an abuse to use "monopoly" as a word of sweeping and self-evident condemnation. ”

“ There is no form of monopoly which exists or ever has existed on any large scale which was not based more or less directly upon the control of natural resources. There is no form of monopoly that has ever existed or can exist which can do harm if the people understand that the natural resources belong to the people of the Nation, and exercise that understanding, as they have the power to do. ”

“ Now, granting that that would be a good thing—that artificial monopoly should be done away with and natural monopolies held by the State—the question still remains whether there are not other lines of business which would still be monopolized, for instance, the manufacture of starch, the catching of fish, the curing of salt, or anything at all. Is there not a natural tendency in human society towards the aggregation of forces, toward grasping natural forces, and uniting to crush out opposition? ”

“ Other things are legal monopolies, or patented articles, which can be produced by only one concern and are not subject to the direct influence of competition. Still others are natural monopolies due to the fact that from the nature of things only one concern can produce the goods or render the service. A telephone company, for example, has a natural monopoly. Competition involves a complete duplication of the service. ”

“ First, the supply of natural agents of which new competitors in any industry may avail themselves has been largely exhausted, or has been gathered up by existing monopolies to render their position more secure; the world has not the natural resources to develop that she had a century ago. Second, the concentration of all the productive industries, except agriculture, into great establishments, while it has enormously lessened the cost of production, has so reduced the number of competing units that a monopoly is the inevitable final result. ”

“ We have now at last deduced the important facts, that the only remedy for the evils of monopoly must come from the popular will, expressed in direct action by the government; that the government may possibly keep competition alive by checking its intensity, or can certainly allow events to take their natural course and permit monopolies to be established. ”

“ It is at least partly due to the heavy drain upon our resources that the cost of building homes, heating them, feeding the population, and carrying on the varied activities of American industry is steadily increasing.
370. MONOPOLY.—Throughout the history of our natural resources there has been a strong tendency toward monopoly. Natural resources should be safeguarded for the benefit of the people as a whole, yet much of our natural wealth has been monopolized by individuals. Four fifths of our timber lands are privately owned, and of that four fifths about half is controlled by 250 companies. ”

“ Each is working unconsciously in obedience to a natural law; and the only reason that almost every man is not engaged in forming or maintaining a similar monopoly is that he is not placed in similar circumstances. Away, then, with the pessimism which declares that the prevalence of monopolies evidences the decay of the nobler aspirations of humanity. The monopolies of to-day are a natural outgrowth of the laws of modern competition, and they are as actually a result of the application of steam, electricity, and machinery to the service of man, as are our factories and railways. ”

“ Why, we know that the one hundred owners of these ten thousand humming birds, having thus secured to themselves an absolute monopoly of all the money in the country, would demand for their birds as money, a hundred, a thousand, or a million times more than their true and natural value, – that is, more than they were worth simply as humming birds. By the monopoly of money, they would be put in possession of a substantially absolute power over all the property and labor of our forty-five millions of people. There would be but one holder of money for every four hundred and fifty thousand people. ”

“ If in both these trades they should succeed, so as to exclude those who trade on natural and private capitals, then they will have a monopoly in their hands, which, under the appearance of a monopoly of capital, will, in reality, be a monopoly of authority, and will ruin whatever it touches. The agriculture of the kingdom cannot stand before it. ”

“ But they know that the combination will concentrate its strength to fight them in every way; and if they must invest a great deal of money in buildings, plant, etc., to start operations, they will be apt to think twice before they take the field against the combination.
The seventh law of competition is: In any given industry in which natural agents are necessary, the tendency toward the inequality of competition (monopoly) tends to vary directly with the scarcity of available like natural agents. ”

“ While the fact that land is natural wealth must be freely acknowledged, it is only where population is most dense that any great monopoly appears in its ownership. The principle is well established, indeed, that private ownership of land cannot stand in the way of the public good. ”

“ We must first find out as fully as possible the actual facts with regard to monopolies of every sort and the competition which monopoly replaces. Next, by discussing and comparing the evidence obtained, we may be able to discover the natural laws by which competition and monopoly are controlled; and finally, with our knowledge of these, we will try to discover both the source of the evils which vex us and the proper methods for ameliorating, curing, or preventing them, whichever may be found possible. ”

“ By the close of the last Administration, the Conservation program had grown into a well-defined platform, and the only important addition of more recent date is a clearer understanding—and we have now a very clear understanding—that monopoly of natural resources is the great enemy of Conservation, and that monopoly always must depend on the control of natural resources and natural advantages of a few as against the interests of the many. ”

“ Those competitors who have the richest and best natural resources to work with have an advantage over their competitors which is essentially a monopoly. Thus the owners of fertile lands near a large city have an advantage over the owners of less fertile lands far removed from markets, which is of a monopolistic nature. If any one doubts this, let him say how this case is logically different from that of the ownership of a mine of native copper so near to New York City that the cost of laying it down in the market there will be half what it is from any existing mine ”

“ No description could exaggerate the evil which is in store for a society given hopelessly over to a régime of private monopoly. Under this comprehensive name we shall group the most important of the agencies which not merely resist, but positively vitiate, the action of natural economic law. ”

“ But since the late nineteenth century, when the frontier was closed, all the best of the country’s land and natural resources being legally occupied, monopoly has been able to exact an ever greater share of production; for while monopoly progresses, the population grows, and competitive demand for access to the source of production increases ”

“ Now by the laws of competition, when the number of competing units is small, competition is intense and wasteful, and acts to so reduce the returns from industry that combination and the establishment of a monopoly are a natural sequence. ”

“ Those who believe that in other lines of business than the recognized natural monopolies, all embracing combinations would be able to produce more efficiently and therefore sell more cheaply than smaller producing units, think that regulated competition, at least for these lines, must develop in the long run into regulated monopoly. ”

“ A monopoly granted either to an individual or to a trading company, has the same effect as a secret in trade or manufactures. The monopolists, by keeping the market constantly understocked by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emo [Pg 26] luments, whether they consist in wages or profit, greatly above their natural rate.
The price of monopoly is upon every occasion the highest which can be got. ”

“ Not only does the State do the work badly on a domain not its own, roughly, at greater cost, and with smaller yield than spontaneous organizations, but, again, through the legal monopoly which it deems its prerogative, or through its unfair competition, it kills and paralyzes these natural organizations or prevents their birth; and hence so many precious organs, which, absorbed, curbed or abandoned, are lost to the great social body.—And still worse, if this system lasts, and continues to crush them out, the human community loses the faculty of reproducing them; ”

“ The fact maybe alluded to, that even under widespread competition the holders of the most favorably situated and richest lands, mines, etc., receive a benefit which in absolute equity should be divided among all men. But the vastly more important matter of the monopolies which prevent the public from obtaining the benefit of the natural resources to which it holds an inalienable title, so overshadows such trivial injustices that they may be neglected. ”

“ The influence of limited natural agents in promoting the growth of monopolies is a matter of the greatest importance. That the law is true, is evident upon slight investigation. For if some especial gift of Nature is a necessity to any industry, and those who are engaged in that industry can secure all the available gifts of Nature of that sort, there is no opportunity for new competitors to enter the field. ”

“ We cannot create new gifts of Nature, and it would be nonsense to attempt to bring about an increase in the number of competing units and a decrease in the capitalization of each by exchanging our factories and works of to-day for the workshops of our grandfathers. But while monopolies are inevitable, our subjection to them is not inevitable; and when the public once comes to fully understand that the remedy for the evils of monopoly is not abolition, but control, we shall have taken a great step toward the settlement of our existing social evils. ”