Form and Policy of combination

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Form and Policy of combination

What form did they take, and how were they put into effect? Form and policy both varied from industry to industry, ranging from informal understandings by which large numbers of otherwise free competitors agreed on a code covering only a few aspects of competition to watertight monopoly rule by a single firm, and including both terminable agreements and permanent associations.

At one end of the scale we have agreements on the terms of trade--discounts, credit, payment for packing and transport, and so on - leaving prices entirely competitive.

These, apart from the effect they had in accustoming traders to regulation, were of little importance.

Price-Fixing Associations.

Next in order of efficiency as a restraining influence on competition come price-fixing associations, colloquially known as "rings ", in which each member is free to sell as much as he likes, where he likes, and by whatever means he likes, so long as he does not undercut the minimum price.

The shipping conferences were of this kind; so, too, were the innumerable iron and steel associations, besides the notorious "Birmingham Alliances" of the 'nineties. These were started in 1891 in the metal bedstead industry, prices being fixed at a standard percentage over average cost. Enforcement was secured by an agreement with the trade unions; the manufacturers agreed to employ unionists only, and the unionists on the other hand agreed to work only for members of the ring and to withdraw their labour from any member breaking the price agreement. They were rewarded with higher wages and the setting up of a conciliation board, and thus reaped a substantial reward for their monopoly power. The "alliance" system spread from the bedstead trade to a host of other minor Birmingham industries, and outside Birmingham, notably to the Yorkshire woolcombers; and profits ruled high - at the, consumers' expense - for ten years. But these same high profits brought more and more firms into the industries concerned, the power of the alliances was challenged more and more successfully, and the movement collapsed in the early nineteen-hundreds, leaving confusion and over-production behind.

For more information on - Colonial Trade

Transport and Mass Production

Finally, underlying all these forces making for combination, there was the dominant factor of transport improvements.

We have already seen how this improvement came about; and its economic effects did not stop short at lower costs and the opening up of new areas.

It made inevitably for increased specialization of all areas in the industries to which they were best suited.

Where transport is slow, uncertain and expensive, each little centre has to provide for most of its own needs, and industries are scattered.

An area may have advantages making it possible to produce a thing more... see: Transport and Mass Production

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