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lost sight of the advantages attending combination or association-such as re duced cost by producing in large quantity in standard patterns, and the united front which can be presented in competing abroad against foreign manufacturers.

In the textile industry marketing conditions are more satisfactory and the Committee on the Textile Trades declared (May 22, 1917):

We consider the organization of the larger textile trades for the distribution of their goods both in the United Kingdom and abroad is as efficient as that employed by any of our competitors.

At the same time, however, the committee deplored the almost complete lack of associations representative of industries as a whole, and it recommended that "with a view to the reduction of the expenses of distribution incurred by individual firms in oversea markets, efforts should be made in the direction of combined representation or cooperative selling."

The report of the Committee on the Tron and Steel Trade (June 13, 1917) has the following to say on export-sales association:

It is the view of the committee that competition in external markets is likely to be severe in the extreme, as a result of the enormous increase in the world's production of steel. They are persuaded that only solidarity of action will enable the iron and steel industries of Great Britain to maintain and improve their position in the markets of the world. They approve generally of the principle of concerted action in the commercial distribution of manufactured iron and steel goods.

The committee recognize that the principle of cooperation is not applicable in the same manner or in the same degree to all products of the iron and steel industries, and it is possible that in the case of highly specialized products its aplication might not be necessary; but they are convinced of its value in respect to the great bulk of iron and steel products.

The committee recommend that the iron and steel manufacturers should associate themselves for the purpose of export trade and should form common selling organizations by the extension and consolidation of associations which already exist. The various products are well distinguished, and their export distribution should be controlled by associations of manufacturers concerned in their production. The committee recommend an organization divided into groups, each dealing with specific products.

The foregoing statements were considered at length by the Committee on Commercial and Industrial Policy, from whose report the following excerpts are presented:

It is in our view necessary that in some important directions the individualistic methods hitherto adopted should be supplemented or entirely replaced by cooperation and coordination of effort.

* * *

The establishment of joint selling organizations, such as are suggested by the various trade committees, involves the regulation of prices and some control of output. Their formation for export purposes would undoubtedly make possible a more vigorous and systematic handling of some branches of oversea trade than there has been hitherto, though in saying this we do not wish to imply any adverse criticism of the work of British merchant houses or to overlook the very effective organization which prevails in certain trades; but it can hardly be doubted that the formation of combinations for export trade would react on the home market and that the creation of combinations for control of domestic sales-which, as we have shown, are already numerous-would be largely stimulated. We believe, however, that such development is not only desirable in some cases, but is practically inevitable under modern economic conditions, and we think that the attitude of public opinion, of local authorities, and of the State, which, broadly speaking, has hitherto been more or less avowedly antagonistic to the very principle of combination, must be modified. * * *

We think that if serious efforts are to be made by British manufacturers and traders to organize themselves on the lines recommended by the various trade committees, which we have set out above, it is desirable that some means

should be devised for securing to a responsible Government department adequate information as to any combination so formed, and that provision should be made for State investigation in special cases. We believe that this would be advantageous to the combinations themselves, since the knowledge that a power of investigation did exist and could be brought into operation whenever adequate cause was shown would be likely to have a moderating effect upon public opinion. We think that the experience of the war has shown that it is particularly desirable that information as to all international combinations affecting the production of goods in the United Kingdom, or the restriction of the markets in which they may be sold, should be in the possession of some Government department. On the other hand, it is in our judgment of great importance that Government intervention in or control of the operation of combinations should be carefully restricted to cases in which those operations can be clearly shown to be inimical to national interests.

It has been represented to us, by the Federation of British Industries amongst others, that any substantial progress in the direction of marketing combinations is dependent upon a revision of the law in this country as regards associations. It is urged that it is "absolutely essential either that the law in regard to ' restraint of trade' should be so amended that the ordinary objects of associations, such as the regulation of prices or output, become legal objects, and associations are consequently able, as in Germany, to enforce their rules in this respect upon their members, or else some other legislation having the same effect, such as the conferring of a special legal status upon associations, should be passed." We approve of combinations amongst manufacturers. All such combinations should, where necessary, be legalized, so as to be enforceable between members. We think that combinations, to be useful to the trade of the country, should be upon lines aimed at coordinating production, promoting efficiency, economizing waste, promoting home trade, facilitating export trade, and unifying selling arrangements. The ideal at which trade combinations should aim is the maximum of production at minimum of cost.

EFFECT ON COMPETITION AND PRICES.

The "ideal" as stated above, if taken literally, holds out no promise as to the interests of the home consumer. From this point of view it is interesting to consider the findings of the report recently (April 24, 1919) presented to the Ministry of Reconstruction by the Committee on Trusts.

* * *

This committee found that "there is at the present time in every important branch of industry in the United Kingdom an increasing tendency to the formation of trade associations and combinations, having for their purpose the restriction of competition and the control of prices. Many of the organizations which have been brought to our notice have been created in the last few years, and there has been a great increase in the creation of trade associations during the period of the war." There are associations that deal with raw materials or intermediate products and others that have to do with the more finished goods. They occupy a prominent position in the iron and steel, chemical, soap, tobacco, salt, cement, and textile industries. The report itself contains no reference as to associations designed to promote economical production, but that there are such organizations is evident from data given in the appendix.

EFFECT ON FOREIGN TRADE.

As to the effect of such organizations on foreign trade the committee says:

We found a unanimous opinion on the part of members of these associations that their effect is not only beneficial to the effective carrying on of business, but essential in many cases for the maintenance of export trade and for effectively meeting foreign competition.

*

* *

There was a general agreement among representatives of associations before us that one of the beneficial results of the formation of associations sufficiently powerful to control and maintain prices in the home market was that it enabled British manufacturers to extend their output by selling their products at a lower price, or even at a loss, in foreign markets. The chairman of an important metal association stated that:

The cause of the formation of the association was the fact that this industry in Great Britain had been very unremunerative for many years, and had stood in danger of being crushed out of existence by foreign competition and by too much competition among manufacturers at home, and it was realized that if the industry was to be saved at all the manufacturers would have to come together and form an association. * * * By securing remunerative prices in the home market they could make a successful bid against foreign competition in the export trade. They had a fund, a fighting fund, for the special purpose of subsidizing members who found it necessary to sell at less than an economic price in order to cut out foreign competitors. That might be called meeting dumping by dumping, but he would not agree that British firms dumped in the aggregate much more than foreign firms. They had dumped in Belgium as a reprisal against Belgium dumping here.

The chairman of a number of important associations stated that:

In the past it had paid Germany handsomely to export a large part of her steel products at a loss. In the future it will pay this country to do the same. He had no doubt at all that it would be a sound policy to sell in foreign markets at a loss. It was true that 80 per cent of their output went abroad, so that it was not any matter of dumping an occasional surplus that the home market could not absorb, but a large proportion of their exports went to our own colonies, and by getting some little preference there and sufficiently good prices at home the industry would be able, as organized in its conference, to undersell Germany or America in such a market as South America, even if that meant selling at a loss. About 60 per cent of their output was sold within the Empire and 40 per cent outside. A slightly increased preferential price on the 60 per cent would enable them to hold the 40 per cent against competitors.

Upon this point the committee expresses no opinion, although it must be recalled that one of the German practices that has been most vigorously condemned by the spokesmen for British industry is "dumping." On the broader question, as to the possible effect on the public, the committee found itself unable to share the optimism of the sponsors for the associations, and it declared:

We are unanimously of opinion that it would be desirable to institute in the United Kingdom machinery for the investigation of the operation of monopolies, trusts, and combines, similar to the commissions and other tribunals created for that purpose in the United States and the British colonies above referred to. The problems to be considered, before any just conclusion can be arrived at with regard to the actual existence of abuses tending to the detriment of the public, or with regard to a form of safeguard or control which it would be practicable to adopt to prevent such abuses, if proved, are not matters on which it is possible for a committee such as this to form any final or considered judgment. But we are satisfied that trade associations and combines are rapidly increasing in this country, and may within no distant period exercise a paramount control over all important branches of the British trade.

We are satisfied that considerable mistrust with regard to their activities exists in the public mind, and that the effect of such mistrust may be equally hurtful to the political and social stability of the State, whether or not the public mistrust and resentment be in fact well founded. We consider that it is desirable that means should be provided whereby the fullest information as to the activities of trade associations may be made available to the public, and complaints may be promptly and thoroughly investigated, so that doubts and suspicions may be dispelled, or, on the other hand, the true facts ascertained as to evils for which a remedy is required. We believe that it will be found necessary ultimately to establish further machinery for promptly and effectively dealing with such abuses as the tribunal of investigation may discover.

It therefore recommended that the Board of Trade should be authorized to obtain information and to present to Parliament an annual report upon the nature, extent, and development of such forms of organization, to make preliminary investigations into any complaint as to restraint of trade, to refer such matters to a special tribunal to be set up to investigate and to report, and upon receipt of such reports to make recommendations as to State action calculated to remedy the grievances thus disclosed.

It appears, then, that there is no further need to encourage British industries to combine or to enter into associations for mutual advantage. That has been already accomplished. The danger would seem to be that in their eagerness to obtain foreign markets the leaders of industry may overreach themselves. This is recognized by the Government, which plans to introduce a bill to protect the interest of the public.

APPENDIXES.

Appendix A.-THE MINISTRY OF RECONSTRUCTION AND THE RECONSTRUCTION PROGRAM.

DEFINITION.

In the constantly increasing mass of literature, official and unofficial, upon the subject, one searches in vain for a satisfactory definition of "reconstruction." The word implies a return to previously existing conditions, but nowhere in current discussion is it thus used. Not even the most reactionary person expects or hopes to see a restoration of the situation that existed in 1914. To-day even those of dimmest vision are looking toward the future and seeking to adjust themselves to new conditions. Reconstruction, therefore, means readjustment and betterment as well. In this larger sense it has been used to include all "questions which will arise at the close of the war," whether British or imperial, whether political, economic, or social. Many of these questions have arisen in direct consequence of the war, but there are other matters, which were under consideration before the war, that are again pressing for solution.

GOVERNMENT ORGANIZATIONS CONCERNED.

As the scope of reconstruction is as wide as the Empire, there are few, if any, branches of the State that have not been concerned with the subject. There is a (temporary and moribund) Ministry of Reconstruction; but it is concerned solely with the domestic aspects of the problem, and it is only an intermediary body with power to investigate and to advise. "The business of the ministry is to be acquainted with all proposals for dealing with post-war problems which are under consideration by Government departments or committees, or put forward by responsible bodies or persons, to study them in their bearings upon each other, to initiate proposals for dealing with matters which are not already covered, and out of all this material to build up in consultation with other departments for submission to the Cabinet and ultimately to Parliament, a reasoned policy of reconstruction in all its branches."

DEVELOPMENT OF RECONSTRUCTION MINISTRY.

Historically the present ministry is the third organization created by the Government to deal with reconstruction problems. The first was a Reconstruction Committee (consisting of Ministers of the Crown who were members of the Cabinet), which was appointed by Mr. Asquith in March, 1916. This committee worked through sub· committees set up to deal with:

Acquisition of powers.
Agricultural policy.

Aliens.

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