spectively. During the depression | basic commodities of nearly 40 per year of 1921 the corresponding aver- cent. All the leading index numbers age fell to 159, while during the boom thus indicate that, after the first year of 1920 the same average reached violent drop during the depression the record breaking height of 284 year of 1921, a rebound of normal (294 for the April individual aver-proportions occurred, but that this age). As compared with the average increase has been very gradual during for the first 9 months of 1920, the the past three years, with a slight 1925 corresponding average represents tendency towards a further increase a decline in this important list of during the present year. By SOLOMON S. HUEBNER PROFESSOR AT THE UNIVERSITY OF PENNSYLVANIA and MORRIS BIEN OF THE WASHINGTON, D. C., BAR COMPENDIUMS AND ANALYSES Alexander Hamilton Institute, Bureau of Business Conditions. Trade Bulletin. (New York, issued periodically.) Babson Statistical Organization, Babson's Reports on Fundamental Conditions. (Monthly, Wellesley Hills, Mass.) Brookmire Economic Service, Brook mire Analyst. (Fortnightly, N. Y.) Brookmire Economic Service, Brookmire Bulletins. (Monthly, N. Y.) Chronicle Company, The Economic World. (Weekly, N. Y.) Federal Reserve Board, Federal Reserve Bulletins. (Monthly, Wash.) Gibson, Thomas, Weekly Market Let(N. Y.) ter. Harvard Economic Service, Harvard Economic Service, Cambridge. (Periodic letter.) Harvard Economic Service, Review of MCCLUNG, Reid L.-Resale Price Trade, May, 1925).-Puts emphasis on economic effects of this practice. National Bank of Commerce of New York, Commerce Monthly. (N. Y.) Trade Associations: Their Economic Prentice-Hall, Inc., Business Forecast. | Annual Register: a review of public (Monthly, N. Y.) Standard Statistics Co., Standard William B. Dana Company, Commer Literary Digest-Vol. 86, p. 14 (July 4, 1925). A Symposium of press comments on court decisions. MONTAGUE, Gilbert H.-"New Opportunities of Trade Associations as a Result of the Recent U. S. Supreme Court Decisions." (Acad. of Pol. Sci., Proceedings, Vol. 11, No. 4.) COMPTON, Wilson.-"How Competition Can Be Improved Through the Trade Association." (Acad. of Pol. Sci., Proceedings, Vol. 11, No. 4.) Reaction of business men to governmental action. WILLIS, H. Parker.-"The Problem of a Competitive Price." (Am. Econ. Rev., vol. 15, Sup. 42-47, May, 1925.)-Urges need for a scientific definition of terms. events at home and abroad, Year THURSTONE, L. L.-Fundamentals of CHAMBERS, G. G.-Introduction to CRUM, W. L., and PATTEN, A. C.—In- Statesman's Year Book, 1925.-The Statistical Abstract of the United States, 1924.-U. S. Bureau of DIVISION XV ORGANIZATION AND CONTROL OF BUSINESS CONTROL OF PRODUCTION BY JOHN F. FENNELLY ASSOCIATE EDITOR OF COMMERCE AND FINANCE Control of production may mean fied by the diamond monopoly of various things, but to the present South Africa. But now it has been generation it signifies above all else the artificial restriction on output through some sort of monopolistic control by producers; as in the case of trusts, etc. Confusion as to Trusts.-The year 1925 revealed nothing to upset the general belief that, in the United States, we must always have the trust problem with us. Twenty years ago there was some unanimity of opinion as to what constituted monopoly and restraint of trade. Today, however, we are drifting on a sea of doubt more uncertain than ever regarding the wisdom of our established policies of attempting to enforce competition. "To be, or not to be; that is the question." When is a trust not a trust, and why? Or, if it is a trust, does it really matter? The confusion of thought on the subject is most apparent in the present dissension within the Federal Trade Commission which, during the past year, was continually split into two camps, divided not so much by economic opinion as by political differ ences. forced upon the attention of the American public, in such a way as to leave no doubt of its importance. It has become a source of grave concern to our government officials who see in this condition the prospect of future trade wars and international ill-feeling. Coffee and Rubber.-Coffee and rubber are the two commodities which have focused this problem so sharply in the public eye. The so-called "Defense of Coffee" in Brazil, inaugurated two years ago, still continues in operation. Last year it was followed by the Stevenson Plan for restricting the rubber output of the British East Indies. Both plans were started origi nally with the idea of obtaining "a fair price" for the producer. In each case, however, the producers have not been satisfied with "a fair price," but have pushed the restriction of output to a point where clear monopoly gains have resulted. The rubber monopoly came into prominence last summer with the spectacular rise in the price of raw rubber to $1.21 a pound. This figure International Monopolies. The is so far above the cost of producing outstanding event of 1925 was not, rubber as to constitute an undoubted however, in the field of domestic case of monopoly of price. Coffee, on monopolies within the United States, the other hand, fell off considerably but was the startling development of during 1925 from the high price international control of raw mate- reached in 1924 when the valorizarials. International monopoly is not tion scheme began to take effect. a new phenomenon. It has been fa- Nevertheless, the price still remains miliar to students of economics since much above what it would be under the time of Adam Smith, and, in normal conditions of free competition. recent years, has been well exempli- As a result American importations of coffee showed a marked decline | sidered in case we cannot achieve muduring the past fiscal year. tual trade agreements for the abolishment of all such international monopolies. Space does not permit any extended discussion of the details of the plans in question. Suffice it to say that monopolistic control in rubber, as well as in coffee, has been possible because of the concentration of such a large proportion of the world's supply within a small area. Thus, by holding surplus stocks off the market the producers have been able to obtain a greatly enhanced return for the restricted output. Difficulty of a Remedy.-Now that we are face to face with the problem, the question arises as to what we are going to do about it. Are we to sit quietly by and continue to pay tribute to foreign monopolists, or are we to retaliate by establishing monopolies of our own? Monopoly of Capital.-But the American retaliation, already in effect, has not been in the form of anything so crude as the restriction of raw materials. It has come as the subtle result of our quasi-monopoly over the world's supply of capital. The United States is now in the singular position of possessing the one great reservoir of liquid capital in the world. Although we are only gradually realizing it, this has placed in our hands a power for good or evil that transcends in importance any monopolies of raw materials that have yet been established. The other nations of the world are in crying need of capital to rehabiliIt is easy to say that no permanent tate their industries laid waste by monopoly of raw material is possible the war; a need that is more urgent because of the power of substitution than our need of coffee and rubber, on the part of consumers, and the and one which does not offer the stimulation to production in other possibility of substitution. parts of the world when the price rises above the natural cost of production. This is all very true, but it must not be forgotten that the process of substitution is a slow and painful one. Furthermore, in the case of a commodity like rubber, the stimulation to new production cannot affect the supply before five to eight years have passed. Meantime, the consumer suffers. Interference by the United States Government. Qur government officials have been among the first to realize the importance of this situation, and last year began to wield this power for the purpose of coercing foreign countries. This control is entirely without legal sanction and has been effected through a sort of moral pressure from Washington to inhibit foreign loans to countries which we desired to bring to terms. It was used first with considerable success in hastening the funding of the national war debts owed to the United States. By merely frowning on foreign loans to the nations whose debts remained unfunded, the federal government has been able to exert a pressure that a decade ago would have been thought impossible. Possible Retaliation.-Has the United States done anything to retaliate for the protection of the American consumer? Most casual observers will be surprised to learn that important steps in this direction have already been taken, despite the protestations of government officials to the contrary. Thus Secretary Hoover has declared his opposition to all forms of retaliation except as a final resort. He has hinted at the power The most recent example of this of this country to establish retalia- quasi-monopolistic practice has been tory monopolies on such basic com- the refusal of our government to sancmodities as cotton, copper, etc. He tion a loan to Brazil for the purpose has even suggested the possibility of of strengthening the "Defense of Cofconsolidated purchasing agencies in fee." In fact, the weakness in cofthe United States for the protection fee prices during the last months of All these altern- 1925 was attributed directly to this atives, declares Secretary Hoover, are governmental inhibition. How far merely suggestions only to be con- this practice will be carried, or what of the consumer. the eventual outcome will be, it is impossible to predict at present. But at least we should recognize that we are not the only nation suffering from international monopolies. We are being forced to pay dearly for certain raw materials, and in turn are forcing other nations to come to terms before we will permit them to obtain access to our money market. World Afraid of Production. This world-wide tendency to restrict production by artificial means is the subject of much concern to serious students of economics. What the world wants is more and cheaper goods of every variety and not a vicious circle of international monopolies which can only result in making us all poorer. This situation has been aptly described by B. M. Anderson, Jr., a prominent American economist, as a "World afraid of production," when increased production is the only solution of our economic problems. PRICE FIXING BY JOHN J. QUIGLEY and to ignorance of the facts, had a hampering effect upon industry, and resulted in much confusion and uncertainty. Court decisions under the new laws were contradictory. Those business concerns which wanted to conform to the law often found themselves prosecuted for violations. During the year just passed, distinct progress has been made in the direction of clearing up many of the uncertainties which have prevailed regarding the attitude of the government toward business activity. Nowhere was this progress more evident than in the problem of protecting the consuming public against excessively The government has aimed at the high prices for manufactured articles. preservation of competition, but the Interests Involved. In examining interpreters of the law have found it the various instances of the develop- difficult to define competition. In ment of governmental policy, we must some cases, business concerns have be careful to keep in mind the several been prosecuted for maintaining a conflicting interests involved in the uniform price, and in others, for not marketing problem. The manufac-maintaining a uniform price. turer is in business for profit, and so long as the profit be a reasonable one, his claim should be respected. But the price must be kept within the scope of the consumer's purchasing power, not only for his welfare alone, but for that of the producer, as well. Through the very nature of the industrial system, the manufacturer is better able to protect his interests than is the consumer. The result has been an inequality, which the Federal Government has attempted to remove. In the past, the theory has been that all the interests concerned were best served through the maintenance of free competition between producers as well as consumers, and the government has endeavored to maintain such a relation in the] market. Progress. The first measures taken to gain this end, due to partisan zeal Gradually, with succeeding deci sions, a more definite policy of gov ernmental control has been formulated. This growth of fundamental attitude has largely resulted from the division of federal activity into several different fields, which, in turn, was made necessary by the increasing complexity of business organization. The efforts of organized business to protect its interests in the market have taken two new forms. These are what is known as "Resale Price Maintenance," and the Trade Association. And it is in its attempts to analyze and to control these activities, that the development of governmental policy has been most apparent during 1925. Resale Price Maintenance.-In this matter the Supreme Court had already made its attitude fairly clear in the previous year. In several im |