§ 4. Monopoly and corporate organization. It is necessary to distinguish from monopoly three other features appearing in some enterprises, that are readily and constantly confused with monopoly, viz.: large individual capital, large production, and corporate organization.4 Evidently any one of these four features may appear without the other; e. g., a person of large aggregate capital may have his investments distributed among a large number of small enterprises, such as farms, without a trace of corporate organization or monopoly, and numerous examples could be given of large production, or of corporate organization, or of monopoly, without one or more of the other features.

But the presence of any one of these features is a favoring condition for the development of the others. Hence they are frequently found together, and of late this occurs increasingly. It is difficult to say in every, indeed in any, case which feature has been cause and which effect in this development; but, on the whole, large production seems to have been primary.

4 See Vol. I, p. 267, on capital; pp. 388-393. on large production. See also references in preceding note 1 on monopoly.

Itself made possible by inventions, by better transportation, and by the widening of markets, it in turn helped to build up large individual fortunes, and then to create a need for the corporate form of organization. And monopoly power no doubt is more easily gained by large aggregations of capital in a corporation having the advantages of large production.

In the frequent concurrence of these four features in a modern industry, probably the dominant role is taken by corporate organization. It has been, often in a special sense, causal in that it has made possible and advantageous great aggregations of capital and large units of production, and thus has bestowed monopolistic power.

§ 5. Rise of the corporation concept. In the legal systems of primitive people and long afterwards, only natural persons had legal rights, could make contracts, have property, and carry on a business. But in a number of cases, very early, groups of men came to have certain interests in common and certain possessions. Gradually some such groups gained more or less of legal recognition, with certain political and economic rights as a body and not as individuals. Thus evolved the conception of a "corporation" (body) having men as "members," an artificial person, yet not the same as any one or as all the individuals together, and legally distinct from the individuals. A group of burghers obtaining a charter from the lord of the realm became a municipal corporation; a group of teachers, a collegium, became the corporation of a college or a university (a number of persons united into one association) ; a group of craftsmen became a gild corporation. Each corporation had certain rights, privileges, and immuni-' ties, and used a corporate seal as a signature. All of the early corporations had some economic features that were incidental to the main purposes, which were political, ecclesiastical, educational and fraternal. Toward the end of the Middle Ages groups of traders obtained charters to act as corporations permanently for business purposes, such as foreign trade, colonization, and banking. These increased in the sixteenth and seventeenth centuries, and in the eighteenth century this form of organization was adopted also, and parliamentary charters obtained, by groups of men for building turnpikes and canals and for carrying on other kinds of business. The great era of the corporations did not begin, however, until well on in the second quarter of the nineteenth century. Then, both in Europe and in America, the corporate form of organization was extended to a greater number and to other kinds of enterprises.

§ 6. Advantages of corporate organization. The corporate form proved itself to be well adapted to enterprises for the construction and operation of canals and railroads, requiring a larger amount of capital than usually could or would be risked by one person. The investor in a corporation bought shares, and his liability for debts and losses was limited by charter to his share capital. It is an advantage that permanent enterprises of that kind are owned by corporations with charters perpetual or for long periods. It is possible for corporations to make investments running for longer periods than would be safe for individuals. The corporation with an unlimited charter has legally an immortal life. Sale and change of management are not necessary on the death or failure in health of any one owner. As the factory system, and large production developed, the corporate form of organization was found to have these same advantages in manufacturing. It appeared in textile, iron, mercantile, and other industries. After 1865 the corporate form of organization increased at a cumulative rate, until now it is applied to many enterprises of small extent and local in operation. Of the 300,000 corporations making returns to the United States Commissioner of Internal Revenue in 1915, 70,000 were manufacturing corporations, which were 26 per cent of the whole number of manufacturing establishments, but which employed 76 per cent of all wage-earners and turned out 79 per cent of the whole product.

"With the corporations came the "corporation problem," a single name for a complex of problems - legal, political, moral, and economic - which arise out of the relations of corporations to their individual stockholders, to their employees, to the state, to the general public, and to their competitors in business. The problems differ also in corporations of different sizes and in different businesses. Of the various forms of corporations, banks first presented problems calling for economic legislation and regulation. This is explained by the fact that it was the first kind of business corporation to become important, and further by the fact that its work was in various ways closely connected with coinage and regulation of money, which had already become a governmental function. The railroad was the form of corporation next, in point of time, to become a great problem - this because of the peculiarly vital and far-reaching effects that such railroad transportation has upon all other kinds of business in the com-munitjr. Finally, industrial monopoly loomed before the American people threatening the very existence of our democratic society.