It is evident that the businesslike management of industry under these conditions need not involve derangement and cross purposes at every turn. It should always be likely that the business men in charge will find it to their profit to combine forces, eliminate wasteful traffic, allow a reasonably free and economical working of the country's productive powers within the limits of a profitable price, and so come in for a larger total of free income to be divided amicably among themselves on a concerted plan. This can be done by means of a combination of ownership, such as the corporations of the present time. But there is a difficulty of principle involved in this use of incorporation as a method of combining forces. Such a consolidation of ownership and control on a large scale appears to be, in effect, a combination of forces against the rest of the community or in contravention of the principles of free competition. In effect it foots up to the same thing as a combination in restraint of trade; in form it is a concentration of ownership. Combination of owners in restraint of trade is obnoxious to the liberal principles of free bargaining and self-help; consolidation of ownership by purchase or incorporation appears to be a reasonable exercise of the right of free bargaining and self-help. There is accordingly some chance of a difference of opinion at this point and some risk of playing fast and loose with these liberal principles that disallow conspiracy in restraint of trade. This difficulty of principle has been sought to be got over by believing that a combination of ownership in restraint of trade does not amount to a conspiracy in restraint of trade, within the purport of these liberal principles. There is a great and pressing need of such a construction of these principles, which would greatly facilitate the work of corporation finance; but it is to be admitted that some slight cloud still rests on this manner of disposing of ownership. It involves abdication or delegation of that discretionary exercise of property rights which has been held to be of the essence of ownership.
The new state of things brought about by such a consolidation is capitalised as a permanent source of free income. And if it proves to be a sound business proposition the new capitalisation will measure the increase of income which goes to its promoter or to the corporation in whose name the move has been made; and if the work is well and neatly done, no one else will get any gain from it or be in any way benefited by the arrangement. It is a business proposition, not a fanciful project of public utility.
The capitalised value of such a coalition of ownership is not measured by any heightened production or any retrenchment of waste that may come in its train, nor need the new move bring any saving or any addition to the community's net productive resources in any respect. Indeed, it happens not infrequently that such a waste-conserving coalition of ownership leads directly to a restriction of output, according to the familiar run of monopoly rule. So frequently will restriction, enhanced prices, unemployment, and hardship follow in such a case, that it has come to be an article of popular knowledge and belief that this is the logical aim and outcome of any successful manoeuvre of the kind.
So also, though its output of marketable goods or services may be got on easier terms, the new and larger business concern which results from the coalition need be no more open-handed or humane in its dealings with its workmen. There will, in fact, be some provocation to the contrary. A more powerful corporation is in a position to make its own terms with greater freedom, which it then is for the workmen to take or leave, but ordinarily to take; for the universal rule of businesslike management -- to charge what the traffic will bear -- continues to hold unbroken for any business concern, irrespective of its size or its facilities. As has already been noted in an earlier passage, charging what the traffic will bear is the same as charging what will yield the largest net profit.
There stand over two main questions touching the nature and uses of these vested interests: -- Why do not these powerful business concerns exercise their autocratic powers to drive the industrial system at its full productive capacity, seeing that they are in a position to claim any increase of net production over cost? and, What use is made of the free income which goes to them as the perquisite of their vested interest? The answer to the former question is to be found in the fact that the great business concerns as well as the smaller ones are all bound by the limitations of the price system, which holds them to the pursuit of a profitable price, not to the pursuit of gain in terms of material goods. Their vested rights are for the most part carried as an overhead charge in terms of price and have to be met in those terms, which will not allow an increase of net production regardless of price. The latter question will find its answer in the well-known formula of the economists, that "human wants are indefinitely extensible," particularly as regards the consumption of superfluities. The free income which is capitalised in the intangible assets of the vested interests goes to support the well-to-do investors, who are for this reason called the kept classes, and whose keep consists in an indefinitely extensible consumption of superfluities.
