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of neglecting relevant facts； something more is to be said in the
same connection。 It is particularly to be noted that credit for
certain material benefits should be given to this same business
enterprise whose chief aim and effect is the creation of these
vested rights to unearned income。 It will be apparent to anyone
who is at all familiar with the situation； that much of the
intangible assets included in the corporate capital of this
country； e。g。； does not represent derangement which is actually
inflicted on the industrial system from day to day； but rather
the price of delivery from derangement which the businesslike
managers of industry have taken measures to discontinue and
disallow。
A concrete illustration will show what is intended。 For some
time past； and very noticeably during the past quarter…century；
the ownership of the large industrial concerns has constantly
been drawing together into larger and larger aggregations； with a
more centralised control。 The case of the steel industry is
typical。 For a considerable period； beginning in the early
nineties； there went on a process of combination and
recombination of corporations in this industry； resulting in
larger and larger aggregations of corporate ownership。 Commonly；
though perhaps not invariably； some of the unprofitable
duplication and work at cross purposes that was necessarily
involved in the earlier parcelment of ownership was got rid of in
this way； gradually with each successive move in this
concentration of ownership and control。 Perhaps also invariably
there was a substantial saving made in the aggregate volume of
business dealings that would necessarily be involved in carrying
on the industry。 Under the management of many concerns each
intent on its own pecuniary interest； the details of business
transactions would be voluminous and intricate； in the way of
contracts； orders； running accounts； working arrangements； as
well as the necessary financial operations； properly so called。
Much of this would be obviated by taking over the ownership of
these concerns into the hands of a centralised control； and there
would be a consequent lessening of that delay and uncertainty
that always is to be counted on wherever the industrial
operations have to wait on the completion of various business
arrangements； as they habitually do。 There is circumstantial
evidence that very material gains in economy and expedition
commonly resulted from these successive moves of consolidation in
the steel business。 And this discontinuance of businesslike delay
and calculated maladjustment was at each successive move brought
to a secure footing and capitalised in an increased issue of
negotiable corporation securities。
It will also be recalled that； as a matter of routine； each
successive consolidation of ownership involved a recapitalization
of the concerns so brought together under a common head； and that
commonly if not invariably the resulting recapitalisation would
be larger than the aggregate earlier capital of the underlying
corporations。 Even where； as sometimes has happened； there was no
increase made in the nominal capitalisation； there would still
result an effectual increase； in that the market value of the
securities outstanding would be larger after the operation than
the value of the aggregate capital of the underlying corporations
had been before。 There has commonly been some gain in aggregate
capitalisation； and the resulting increased capitalisation has
also commonly proved to be valid。 The market value of the larger
and more stable capitalisation has presently proved to be larger
and more stable than the capitalisation of the same properties
under the earlier r間ime of divided ownership and control。 What
has so been added to the aggregate capitalisation has in the main
been the relative absence of work at cross purposes； which has
resulted from the consolidation of ownership； and it is to be
accounted a typical instance of intangible assets。 The new and
larger capitalisation has commonly made good； and this is
particularly true for those later； larger and more conclusive
recombinations of corporate ownership with which the so…called
era of trust…making in the steel business came to a provisional
conclusion。 The U。S。 Steel Corporation has vindicated the wisdom
of an unreserved advance on lines of consolidation and
recapitalisation in the financing of the large and technical
industries。
For reasons well understood by those who are acquainted with
these things； no one can offer a confident estimate； or even a
particularly intelligent opinion； as to the aggregate amount of
overhead burden and intangible assets which has been written into
the corporate capital of the steel business in the course of a
few years of consolidation。 For reasons of depreciation； disuse；
replacement； extension； renewal； changes in market conditions and
in technical requirements； the case is too intricate to admit
anything like a clear…cut identification of the immaterial items
included in the capitalisation。 But there is no chance to doubt
that in the aggregate these immaterial items foot up to a very
formidable proportion of the total capital。
And what is true for the steel business in this respect will
doubtless apply even more unreservedly in transportation； or in
such a case as the oil business。 The latter may be taken as a
typical case； differing from steel in some of the circumstances
which condition its business organisation； but comparable with
steel in respect of the necessity for a centralised control。 In
the oil business a rough classification of assets would take some
such shape as this： （a） Monopolisation of natural resources； （b）
Control of markets by limitation of the supply； （c） Plant。 Of
these three； the last named； the material equipment； would
unquestionably be found to be altogether the slightest and least
valuable。 What is not doubtful； in the steel business or in any
of the other industrial enterprises that run on a similar scale
and a similar level of technology； is that the owners of the
corporate capital have come in for a very substantial body of
intangible assets of this kind； and that these assets of
capitalised free income will foot up to several times the total
value of the material assets which underlie them。
It is evident that the businesslike management of industry
under these conditions need not involve derangement and cross
purposes at every turn。 It should always be likely that the
business men in charge will find it to their profit to combine
forces； eliminate wasteful traffic； allow a reasonably free and
economical working of the country's productive powers within the
limits of a profitable price； and so come in for a larger total
of free income to be divided amicably among themselves on a
concerted plan。 This can be done by means of a combination of
ownership； such as the corporations of the present time。 But
there is a difficulty of principle involved in this use of
incorporation as a method of combining forces。 Such a
consolidation of ownership and control on a large scale appears
to be； in effect； a combination of forces against the rest of the
community or in contravention of the principles of free
competition。 In effect it foots up to the same thing as a
combination in restraint of trade； in form it is a concentration
of ownership。 Combination of owners in restraint of trade is
obnoxious to the liberal principles of free bargaining and
self…help； consolidation of ownership by purchase or
incorporation appears to be a reasonable exercise of the right of
free bargaining and self…help。 There is accordingly some chance
of a difference of opinion at this point and some risk of playing
fast and loose with these liberal principles that disallow
conspiracy in restraint of trade。 This difficulty of principle
has been sought to be got over by believing that a combination of
ownership in restraint of trade does not amount to a conspiracy
in restraint of trade； within the purport of these liberal
principles。 There is a great and pressing need of such a
construction of these principles； which would greatly facilitate
the work of corporation finance； but it is to be admitted that
some slight cloud still rests on this manner of disposing of
ownership。 It involves abdication or delegation of that
discretionary exercise of property rights which has been held to
be of the essence of ownership。
The new state of things brought about by such a consolidation
is capitalised as a permanent source of free income。 And if it
proves to be a sound business proposition the new capitalisation
will measure the increase of income which goes to its promoter or
to the corporation in whose name the move has been made； and if
the work is well and neatly done； no one else will get any gain
from it or be in any way benefited by the arrangement。 It is a
business proposition； not a fanciful project of public utility。
The capitalised value of such a coalition of ownership is not
measured by