nearly full time.  Being acquainted with the entire situation, it can reduce the friction.  A combination has advantages in shipment.  It can have a clearing-house for orders and ship from the nearest source of supply.  The least efficient factories can be first closed when demand falls off.  Factories can be specialized to produce that for which each is best fitted.  The magnitude of the industry and its presence in different localities often, in the period of trust formation, served to strengthen its influence with the railroads, and to increase its political as well as its economic power.

Another phase of corporate growth is the “integration of industry,” that is, the grouping under one control of a whole series of industries.  One company may carry the iron ore through all the processes from the mine to the finished product.  A railroad line across the continent owns its own steamers for shipping goods to Asia or Europe.  Large wholesale houses own or control the output of entire factories.

Sec. 13. #Profits from monopoly and gains of promoters.# There are, however, well-recognized limitations to the economy of large production in the single establishment,[10] and of late there has been ever-increasing skepticism as to the net economy actually attributable to combinations.  Undoubtedly the merging of a number of old plants has sometimes effected an immediate improvement in the weaker ones.  A new broom sweeps clean.  This movement chanced to be contemporaneous with the development of “efficiency engineering,” and of “scientific cost-accounting,” and these better methods, already developed and applied in comparatively small plants, could be more quickly extended to the other plants brought into the combination.  Moreover, the personal organizations in the separate enterprises had been brought to a high state of efficiency by the stimulus of competition, and there is reason to fear that, after some years of centralized bureaucratic organization, much of this efficiency may be lost.

There seems no doubt that the strong motive for forming combinations is the profit to the organizers.[11] Whatever was the more generous motive or more fundamental economic reason assigned by the promoters, the investing public confidently expected that higher prices would be the chief result.  There are indirect as well as direct gains to the promoters of a combination.  There is the gain from the production and sale of goods to consumers, and there is the gain from the financial management, from the rise and fall in the value of stock.  The promoters of a combination often expect to make from sales to the investing public far more than from sales to the consumer of the product.  A season of prosperity and confidence, when trusts and their enormous profits are constantly discussed, has an effect on the public mind like that of the gold discoveries in California and in the Klondike.  Then is the time for the promoter to offer shares without limit to investors.