attentions of the law: but they do also involve genuine if limited differences in economic method. Under a holding company, for instance, whether of the English or American type, there is likely to be a greater decentralization of industrial power than under a system of complete fusion: the directors and managers of the several companies are likely to be allowed rather greater freedom and initiative than the branch managers of a single huge business. Moreover, it does not necessarily follow that in every case in which a combination dominates a trade, a few individuals completely dominate the combination: the shares of some of the big combines are very widely held, and their management no more, if no less, autocratic than that of an ordinary joint-stock company. But on the whole it is true that the great combinations, whatever their legal form, have owed their origin to small groups of exceptional men who have derived from them riches as well as power: and that the new ramifications of the joint-stock system have tended to concentrate the government of industry into the hands of men who have the most direct financial inducements to conduct it with energy and determination.

§4. The Financial Penetration of Industry. But the process of reintegration of control with capital ownership has not stopped here. In Germany and America, at any rate, the banks and the financial houses have not been content with what we may call their English functions of providing current credit to going concerns and setting new ventures on their legs. The powerful groups controlling them have used their resources to acquire permanent ownership over a large field of

industry, and, as has been already pointed out, such permanent rights of ownership almost inevitably involve a certain measure of permanent control. In America this process has been somewhat spasmodic and spectacular, manifesting itself through the operations of the ordinary banks, of the great financial houses like J. P. Morgan, and of the various kinds of trust and insurance and investment company which in one way and another collect the savings of the public and invest them in industrial enterprise. A few years ago it appeared that very large tracts of transport, mining and industrial enterprise were passing rapidly under the control of a few groups of financiers; and though this development seems to have been temporarily checked by the drastic reform of the banking system and by stringent legislation against "interlocking directorates," it is impossible to feel certain that it has been permanently arrested.

In Germany the integration between finance and industry has been more systematic and thorough, the five great groups of banks having deliberately devoted the main part of their resources to the development and penetration of German industry. "Berlin high finance," wrote a German authority in 1900, "unquestionably dominates the most representative and the largest businesses in every branch of production" 1: according to this writer one or other of seven banks held a seat on the directorates of three hundred and fifty large industrial companies. In England, as already explained, the banking system has been too much preoccupied with other matters to attempt seriously to shoulder the risks and responsibilities of industry: but 1 Marshall, Industry and Trade, p. 343.

in recent years special financial institutions, such as the British Trade Corporation, have been founded with this object among others in view, and private groups of financiers have made irruptions, not always with the happiest results, into even such conservative strongholds as the cotton trade of Lancashire.

When industry and finance become interwoven, it is not always easy to be certain which dominates which. Sometimes the industrialist seems to be in control: thus the Standard Oil Combine in America and the two giant electrical companies in Germany have owned their own banks.1 But as a rule the last word seems to be with the financier, and his growing power over industry raises difficult issues. Its evil side is sufficiently obvious. No man can master all trades: even Mr. Pierpont Morgan failed as a shipowner, and Mr. Solly Joel is not likely to feel so much at home in a cotton factory as on a race-course. The skill and experience of the specialized business leader whose whole life has been devoted to the study of the problems of a particular trade is not an asset to be lightly thrown aside: and there is danger lest the permanent interests of a whole industry, involving the livelihood of millions, should be subordinated to the temporary enrichment of an alien group to whom it is only one of many irons in a large and somewhat uproarious fire.

On the other hand, the financier is in many ways better situated than the specialized industrialist for

1 Thus also in Germany and elsewhere groups of small agriculturalists and industrialists have united to provide themselves with their own banking facilities, and we get the co-operative credit societies associated with the names of Raiffeisen and Schulz-Delitzsch.

taking a wide and detached view. If he is less well qualified to handle the secondary problems of industrial government-the actual conduct of the several branches of industry-he is in a position such as no man has yet been for grappling intelligently with its primary problem, so long left to the precarious and intermittent pressure of the "invisible hand"-the problem of the right direction of the flow of productive resources into the several channels demanding their use. Like the humbler and blinder business man who ploughs a single furrow, "it is his own advantage indeed and not that of the society which he has in view," and the combination of special knowledge and great wealth lead to a formidable concentration of power in his hands which may be used unscrupulously and is certain to be used for his further advancement. But he has at least the chance of thinking magnificently; and it seems probable that on the whole society may be at least as much enriched by his effective foresight as it is impoverished by his rapacity.

CHAPTER VII

A SURVEY OF CAPITALISM

""Tis so," said the Duchess; "and the moral of it is 'Oh! 'tis love, 'tis love, that makes the world go round!"" "Somebody said," whispered Alice, "that it's done by everybody minding their own business!"

"Ah, well! It means much the same thing," said the Duchess.

Alice's Adventures in Wonderland.

§1. The Unco-ordinated Nature of Capitalism. All the developments of business organization which have been discussed in the last five chapters, with the possible exception of some of the types labelled Co-operation (pp. 54, 81), fall within the boundaries of what may be somewhat vaguely described as Private Enterprise or Capitalism. We may therefore conveniently pause at this point, and attempt to discover and to express what exactly it is that constitutes the unity in all this diversity of industrial structure-what are the essential features of this thing called Capitalism: for by so doing we shall be in a better position both to understand the motives of the attempts and proposals which have been made to supplement or supplant it by some other scheme of industrial government, and to appraise the difficulties which lie in the way.

In the first place, then, we must remind ourselves once more of the central fact about the government of modern industry-that strictly speaking there is no

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