Beginning Of A Monopoly. How A Monopoly Overwhelms Its Rivals

Or, again, a Monopoly may take its rise and get its hold from its purely site value as a trading centre, and this whether in the case of an individual trader, a city, or a nation - as is seen in the historical instances of Constantinople, Venice, Amsterdam, and London, and of Spain, Holland, and England generally. But once securely entrenched by these or other means, the monopoly may afterwards maintain itself indefinitely and make itself absolute, by the mere possession of an amount of free capital sufficient when concentrated on any given point to annihilate its rivals by underselling them - as in the case of the Standard Oil, Beef, Sugar, Soap, and other American Trusts. This it can do either directly by buying them out, or by drawing them into amalgamation with itself; or eventually by the power which the enormous aggregation of capital in single hands gives its possessor of keeping down costs below the level of his rivals through the advantages he gets in higher rates of discount, or greater rebates in transportation; in the power his free capital gives him of buying up the best patents and processes, the best talents and services; and, we may add, in the power it gives him of corrupting Courts of Justice in countries where corruption has become a recognised business transaction.

The Effect On A Monopoly Of Controlling The Selling End

But however strongly a Monopoly may be able to entrench itself by these or other means, it is rarely that it can make itself complete. To do so, it must have the power of controlling its selling end as well as its cost or buying end; and this is scarcely possible, except when it deals in one or other of the great necessaries of life - as is the case with the great American Trusts. But should it succeed in thus controlling its selling end, as well as sealing up its buying end against all attack, it is evident that it will not only be as stable, secure, and equable as the Banks, but that it will have possibilities within it of a much greater yield of income on an equal amount of capital; and so will stand higher in the scale of securities than either Banks or Insurance Companies. For, dealing with those ultimate necessaries which all must buy, and not with such comparative luxuries as are involved in the ability to keep a bank account, or to insure your life or your house, it can never want for customers; nor, indeed, can it if it deals in those collaterals like steel, iron, and timber, which are everywhere involved in production and transportation. Banks and Insurance Companies have a narrower range of customers than these giant Industrial Monopolies, and, being subject to competition among themselves, a lower rate of profit; and so have not only a lower yield on the same amount of capital, but, in consequence, a lower natural rank in the financial scale for stability and security as well.

Incomplete Monopolies Less Secure Than Banks

Incomplete or Partial Monopolies, on the other hand, stand lower in the scale than Banks or Insurance Companies, inasmuch as, however much they may be able to control their cost end, they are unable as a rule to control their selling end, even when there is no alternative commodity on which their customers can fall back as a substitute. A Diamond Monopoly, for example, even were it absolutely secure against competition, could never fix its sale price with the certainty with which a Standard Oil, Meat, Sugar, or Soap Trust, all of which deal with the necessaries of life, can, inasmuch as, being a luxury, the sale of diamonds falls off of itself in periods of crisis or trade stagnation. And although the sales are almost sure to recover when trade revives, this monopoly, even were it complete in its way, cannot have the calculable stability of monopolies founded on the necessaries of life; and so takes a lower rank in the scale of stable, secure, and high-yielding investments. Indeed, Industrial Monopolies which can in any sense be called complete, that is to say, which can control both the buying and the selling ends of their transactions, are, as I have said, the rarest of phenomena.

How Industrial Monopolies May Control The Selling End

The land of a country is spoken of as a monopoly, owing to its scarcity; but there are few countries that could control the selling price of their own corn without Protection. As for the ordinary Industrial Monopolies which do not depend on scarcity values, they will have to be internationalised - as, indeed, some of them are fast becoming - before they can so far control their selling ends as to become complete. But for the great mass of Industrial Monopolies there are so many alternatives to the use of any but the most pressing necessaries of life, and so many difficulties in the way of effective "cornering," that they may safely be put under the category of Incomplete or Partial Monopolies, with a status for stability and security lower than Banks and Insurance Companies - to which indeed they stand in the same relation of inferiority as Ordinary Joint Stock shares do to them.