end of the last century and the beginning of this, little of that wealth came into the hands of the labourers, but went mainly into the hands of the great landlords and the new capitalist manufacturers, or was spent in the enormous expenses of foreign war." In addition to the tremendous power which possession of wealth gave to the employers, by legal methods, they were enabled to turn the institutions of government into instruments of oppression. As the government was almost entirely in the hands of the wealthy classes, they took advantage of the position of the workers so that the greatest possible gains could be obtained from their labour.

After the rise of capitalism came the subsequent development, which is still going on with increasing rapidity, known as the combination and organisation of capital. After the first flush of manufacturing prosperity under the new order had passed off, the great capitalists found themselves in competition with one another for the markets.

Sec. 3. The Development of Capitalism. This fierce competition among capitalists could not be carried on without disastrous results to many engaged in the struggle. However, the competitive system came to be regarded as the "natural order" of society-one most conducive to industrial efficiency and national prosperity. When huge combinations of capital first appeared, they were regarded as the schemes of persons morally perverse. This view, though still held by many thinkers, is entirely unscientific, because it is founded on a misapprehension of the conditions and forces of capitalist production. Competition is not a "natural law," but a business method to be followed as long as it is profitable to the competitors. Capitalists are not in business

to demonstrate any abstract principles, or to substantiate the logic of their early apologists, but to make money. If they can do it under competition, well enough; but if combination pays better, they combine. Indeed, business men have little or no personal choice in the matter; they must adapt themselves to the operations of the capitalist system, or perish. In this system there are three main forces driving directly towards combination.

1) The tendency of competition is to become keener and keener. The margin of profit becomes smaller and smaller, and, to make up for fall in prices, an increased output is necessitated. Obviously all the units in a given industry cannot expand, and the result is that the stronger extend their operations, and the weaker perish. Just as the hand-workers disappeared before the organised industrial armies equipped with the best mechanical appliances, so the small and then the larger capitalists are compelled to capitulate to immense corporations with the best fitted plants. As the business units become larger, the competition increases in intensity, and the result is generally a federation to save the few survivors from ruining themselves.

✓(2) Almost every branch of industry is over-capitalised, and the running of all the plants connected with any given trade soon creates over-production, stagnation, and ruination. To protect themselves against the vicissitudes of competition, business men combine, close the least efficient works, adjust their output to the ascertained demand, and thus secure tolerable regularity and safety. /(3) Business men have learned from practical experience the enormous expenditure incurred in unproductive warfare against each other.1 To save this waste, and thereby increase their profits, they unite.

1 See Note to Second Edition, pp. xvii.-xix.

Thus the competitive system works out its own destruction in all the higher branches of mechanical industry. Business men, who, a few years ago, were demanding a fair field and no favour, are now issuing prospectuses calling for combination to avoid the stress of what they call "wasteful, vexatious, and unnecessary rivalry."

Economic conditions are rapidly becoming the same throughout the world, and the centralising develop ments once thought peculiar to the United States are now going on in Free Trade England. Railway and shipping rates are fixed by conferences, and great companies are slowly absorbing their rivals. In the textile industry, combinations have been effected in thirteen different branches; more than 296 firms have been absorbed, and the capitalisation is estimated at £37,500,000. In the coal trade the first steps of amalgamation are being taken, for large firms are absorbing smaller concerns, while the retail trade of London and Bradford is in the hands of combinations. In the iron and steel trade, there are several huge amalgamations, and prices are fairly well maintained by agreements. The wall-paper, Portland cement, borax, comb, rubber, oil and cake industries afford excellent examples of the operation of combination. The banking and insurance businesses are showing the tendency to centralise. The Imperial Tobacco Company, containing thirteen former rivals, is now being floated with a capital of £15,000,000.1

Sec. 4.-International Capitalism. The process of concentration and the operations of capital are not confined

1 On English developments, see Macrosty, "Trusts and the State," 147, 217. On combination in general, consult Marx, "Capital"; Hobson, "Evolution of Modern Capitalism"; Jenks, "The Trust Problem"; and Jeans, "Trusts, Pools, and Corners."

to national boundaries. Already a number of international arrangements exist, and every day's financial news gives accounts of more. Profit and interest have no patriotic feelings. American iron magnates confer with those of Europe, and attempt federation. English capital develops the industries of the colonies and other countries to compete with home industries. Armstrong sends 300 men to Japan to teach the Japanese the science and art of shipbuilding. Englishmen go to Russia to pioneer the development of her iron and textile industries. English textile machine-makers send machinery to the four corners of the earth to help close English textile markets. The great Holden weaving firm moves its plants to Rheims and Roubaix, where the labour of women and children is not under "irritating and unfair restrictions." Black and yellow men are organised under white overseers to compete with Western labour; and so the ties of patriotism, racial and national, are being snapped asunder in the stress of profit-making. Capital is, indeed, impersonal and international, and capitalistic combination is no temporary anomaly. All this is, however, teaching the people some lessons in economy.

In a highly organised combine under the control of a business-like corporation, every method is adopted to do away with unproductive activities of all sorts, such as advertising beyond a certain point; to avoid the risks of the small capitalist who produces for future and uncertain markets; and to escape the wear and strain which is inevitable in the unstable and precarious business of the private producer. By substituting a knowledge of the markets and probable demands of a vast area for chance plunges in the field of speculation, the "trusts," by their splendid organisation, avoid the

wastes and dangers of the competitive system. Many strange and sometimes fantastic prophecies are now being made about the future of industrial organisation illustrated by the development of the trusts; but as the trend of human progress is marked by the substitution of intelligence for precedent, and organisation for chaos and anarchy, there seems to be but little doubt that the trusts are merely pointing the way to higher forms of industrial methods in which the people, instead of a few capitalists, will reap the benefits. Thus we see that the free competitive regime which obtained at the beginning of this century wore itself out, and another order based on entirely different principles has been developed.

Sec. 5.-Politics and Economics at the Beginning of the Century. Less tangible, but no less important, was the diffusion of new political theories concerning the nature of economic and social organisation. On the eve of the Industrial Revolution, England in its social, industrial, and political organisation was still medieval. The old view which regarded the whole system of social inequality as the divine order from the foundation of the world still held sway. The whole English political system was in the hands of the king and the great landed and commercial classes. Democracy in the modern sense had not yet appeared upon the political arena, for not over one person in five hundred had a vote. In the first place, the county boroughs were nearly all under the control of the county aristocracy; (2) the boroughs which returned members were largely the property of peers or under their dominion; (3) bribery was openly employed by the wealthy governing classes to obtain their ends. According to Taswell-Langmead: "It was stated by the