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THE CAUSE OF HIGH PRICES, AND THE RIGHTS OF COMBINATION - William Leggett, Democratick Editorials: Essays in Jacksonian Political Economy 
Democratic Editorials: Essays in Jacksonian Political Economy, Foreword by Lawrence H. White (Indianapolis: Liberty Fund, 1984).
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THE CAUSE OF HIGH PRICES, AND THE RIGHTS OF COMBINATION
March 4, 1837.
Text abridged and extracts deleted or abridged.
The New Era does not differ from us in opinion as to the general and pervading cause of high prices. It considers the bank monopoly system as the fruitful mother of most of the financial ills under which the community labours, and looks to the complete enfranchisement of trade as the great legislative panacea which alone can effectually cure the complicated disorders of the body politick. But in regard to the late flour riot, it seems disposed to extenuate the conduct of the mob, on the ground that the merchants whose storehouse was invaded had actually monopolized an immense quantity of flour, having been enabled to do so by loans from the State Bank.
. . .
. . . We admit the facts of the New Era, at the same time that we reassert the opinion first expressed by us, that the riot was both causeless and disgraceful. In admitting its facts, however, we must not be understood as asserting them; for we know nothing, except from the statements of that journal, either as to the quantity of flour held by the mercantile house which it names, or the particular nature or source of its bank accommodations. But assuming that the New Era speaks only upon accurate information, we receive its allegations as true, and still refuse to mitigate the strength of our censure, or extenuate the conduct of the mob.
It is no offence against society for a flour dealer to purchase as much flour and grain as he thinks he can readily dispose of to advantage, or can afford to retain in his possession until the consumers shall accede to his demands. It is no offence against society to borrow funds to enable him to accomplish this object; and none to borrow them from a bank. And it is no offence against society for a bank to lend a flour dealer money, any more than it would be to lend it to any other person, in any other branch of business. Nay, if the purpose for which the money was required was communicated to the officers of the bank as the ground of the application, they might still lend it, without committing the slightest offence against society. The sole consideration which is obligatory upon the bank is that of the pecuniary responsibility of the borrower. The object for which the funds are required, further than as it affects that consideration, should not weigh with them a pin’s weight.
If the transaction then, in none of its particular features, was an offence against society, it could not become such in its aggregate aspect. The people might well deplore that they had so long permitted their legislative servants to go on, chartering one monopoly after another, until the whole money business of the community, instead of being left open to the wholesome influence of unbounded competition, was placed under the exclusive control of a comparatively few specially privileged individuals, having the power to regulate, according to the dictates of folly or cupidity, the precise channels in which the streams of credit shall flow. But they would surely have no right to assail, either the bank, for lending its money to whom it pleased, or the borrower, for availing himself of its disposition in his favour. To do so would be a causeless outrage; since neither of the parties had transcended its clear, indisputable rights.
The mere fact that the merchants whose warehouse was attacked had more flour on hand than all the other dealers, only shows that they conducted the business on a larger scale. If they asked higher prices than other dealers, they would obtain no custom. If their influence over other dealers caused them all to raise their prices to the same level, and that was above the general level of value, in other places, as fixed by the relations of supply and demand, or any other cause, they would but provoke immediate competition from abroad; for it is the nature of all commodities of traffick to flow upwards to the highest level, as much so as it is the nature of water to flow downwards to the lowest. But if we suppose, for the sake of the argument, (a thing that would not be possible in fact) that the influence of these same flour dealers extended to every other flour dealer in the country, and their prices fixed the universal standard of price: or, to simplify the matter still more, if we suppose that they were the sole owners of all the flour in the United States, they would still have a right to fix their own price; and whatever that might be, it would afford—great extenuation, we admit—but no justification of a riot.
We take this extreme hypothesis to illustrate our views. Publick opinion in this country is the supreme law. Publick opinion, expressed without tumult, would, in the case supposed, supply an adequate remedy for the evil; but expressed through the means of tumult would defeat the very end proposed. Publick opinion, in such a case, would make a spontaneous, unanimous, and irresistible call on the legislative agents of the community, to take the subject of grievance into their own hands. The flour of a single monopolist, which he was holding from a starving people, would be seized by due process of law; it would be “private property taken for publick use;” and “a just compensation,” estimated by an equitable comparison of the amount of supply with the amount of demand, would be awarded to the owner. In such a case, the conservative principle, the universal principle of self-preservation, which resides in communities, not less than in individuals, would be fairly called into exercise. It would be an analogous instance with those which are perpetually occurring in times of warfare, but of much stronger obligation. It would be adequate to the end proposed, the relief of the community, according to some just scheme of supplying their wants; whereas, should an unruly mob attempt to achieve the same object by the means of tumult, the effort would but end in the destruction, or most partial and unequal distribution, of the food for which they were famishing, and thus aggravate distress, and place it beyond the reach of alleviation.
Thus, even in the extremest hypothesis which can be framed, we pronounce sentence against tumult. But in the case which really occurred there does not seem to have been the slightest provocation. It does not appear that the flour dealers, whose premises were invaded, had given the smallest occasion of offence to the community. They had a large quantity of flour, and held it at a high price. But they had not “monopolized” flour, even so far as this city is concerned, and according to the New Era’s own showing—which “proclaims fearlessly” the names of half a dozen extensive dealers in flour, whose stores were “jammed to bursting, on every floor, with barrels of flour collected from our native mills and fields,” and which promises to name more. If the persons singled out as the objects of mob vengeance charged more than others for their flour, purchasers would only have to leave them, and draw their supply from some of those bursting storehouses. If they all charged alike, the fact would be evidence of one of two things: either that the price was fixed by the relation of the supply to the demand, or by combination. If by combination, rivalry would be provoked from abroad, and this would relieve the community. But the New Era may answer that the combination was universal. The burden of proof for such a position would rest upon itself; but we do not hesitate to meet it. Our answer then is, that a universal combination to sustain prices at the point fixed by the relations of supply and demand is perfectly justifiable: and a universal combination to raise them above that point is impossible in the nature of things. The extent and diversity of the interests engaged in the traffick, the varieties of character, and the natural rivalry of trade, forbid it. Even where the parties to such a league or compact are few, and all centered in one narrow circle of business, it is found impracticable to maintain it for any length of time. There are continual violations of faith; there are continual evasions of the terms of agreement, under the impulse of that strong, natural, irradicable spirit of competition which constitutes the mainspring of trade. Despite all the covenants that might be entered into, the price of flour would inevitably adjust itself according the demand, as compared with the supply; according to that principle which furnishes the universal scale of value, the instant price transcends the absolute cost of production under the most favourable circumstances.
It is a happy thing for mankind that this principle does thus invariably operate; because it furnishes a warning to the improvident, checks the profusion of the wasteful, teaches frugality to the extravagant, and arouses a wholesome spirit of economy and foresight in the whole population. If an inadequate supply were not instantly revealed by the tell-tale index of price, a community might run on in profusion and wastefulness, until famine suddenly seized them in his bony clutch. But the mercury in the chrystal tube does not more surely indicate the temperature of the air, than the price of any general staple of a country does the relation of supply and demand. It not only furnishes a warning against thoughtless improvidence at the present time, but supplies a stimulus to competition for the time to come, and induces enterprise to engage in that field which had been imperfectly cultivated before. The events of this year will teach a useful lesson, to be practised the next. Agriculture, admonished of its folly in deserting the plough, to follow in the deluded train of crazy speculation, will return, with renewed industry, to its proper toil. Our fields will smile again with waving harvests; our rivers will glisten with the snowy canvass that wafts the products of the teeming earth to the marts of commerce; and labour will go cheerfully about his work, full fed on nourishing food, which the abundance of supply will have placed amply within his means.
That the present price of flour is the result of the inadequacy of the crop, and not of combination, is a fact perfectly demonstrable, notwithstanding all the allegations which have been uttered to the contrary. It is but little beyond the general average of price; which, in itself, is convincing proof. But independent of this, all the elements which enter into the computation are of a notorious character. The amount of flour raised in the entire country is ascertainable from publick sources, and to a surprising degree of accuracy. The amounts exported and imported are likewise readily ascertained; together with the average amount of consumption by the stationary population, and the average increase of consumers. If a consideration of these elements shows that there is not in existence that quantity of flour which will be in demand before another crop can be brought into market, the price naturally and necessarily adjusts itself according to the scale of deficiency. The effect of this probably is to place flour immediately and entirely beyond the reach of one class of purchasers; and each successive rise diminishes the number of competitors. We may easily carry out the process in our minds, until the stock should be diminished to the last loaf, and none but the wealthiest could enter into the rivalry which the precious food would occasion. In all this, we cannot perceive that immediate injustice is done to any portion of society; while the remote effects of the rise of price in proportion to the diminution of supply are of the happiest kind in averting a recurrence of the evil.
But let us suppose that other views prevailed, and that the dealers in flour were compelled to dispose of it at the same rates which were asked during the most abundant seasons. And let us suppose, too, that this forced cheapness had not the natural effect of causing thoughtless and wasteful expenditure. Still, the time would soon come when the entire stock would be exhausted, and the whole community alike would be without that description of food. It would be very hard that they should be without flour; but whom could they blame? Whom should the mob attack? What description of rights of property should now become the object of outrage? The exhaustion of flour was occasioned by the deficiency of the crop; the deficiency of the crop by the withdrawal of labour from agriculture to other pursuits; the withdrawal of labour by the rage for speculation; the rage for speculation by the sudden expansion of the paper currency; and the sudden expansion of the paper currency by exclusive legislation. Shall any of these intermediate causes of the evil, or shall the great first cause, legislative folly and rapacity, become the object of tumult and violence? Clearly no! The people have the matter perfectly in their control, by the mere influence of peaceful opinion, expressed in the constituted modes. The duty of the press, then, is neither to justify nor extenuate outrage; but to point out, calmly and dispassionately, the prolifick fountain of the evils which oppress the people, and to arouse the publick mind to such action as shall put an end, utterly and forever, to that entire system of exclusive legislation, which is in direct hostility to the rights of man, to the fundamental maxims of our government, and to the great cause of social order and happiness.
The right to combine we have heretofore treated as an indispensable attribute of the freedom of trade; but the New Era contests the position, in an article devoted exclusively to that topick. We copy it entire.1
. . .
. . . An individual has a right to stand still in the street from the rising to the going down of the sun; but a multitude have not, because they would obstruct the free passage and business of others. So every flour merchant, in a beleagured city, whose inhabitants are wan with famine, may demand what price he likes for his precious commodity; but a combination of these merchants to demand even the same price, would be an overt act against the commonweal, and an impediment to free trade. And so each one of the tailors who were prosecuted a short time since in one of our criminal courts, might lawfully have demanded any rate of wages he chose, and have withheld his labour until his condition of exchange had been complied with; but when they all united to accomplish that which was no more than the warrantable object of each, they were indicted for “a conspiracy to injure trade and commerce,” and the charge being proved by their overt acts, they were convicted and punished.
. . .
. . .The notions here expressed against the right to combine, are entertained by other intelligent journals, and very extensively among thinking men in the community. Yet we are satisfied that they are founded in errour, and that their natural tendency, if made a motive of political action, will be to institute the most oppressive and intolerable evils of legislation. The position which we maintain is, that men have a perfect natural right to do by combination, what they have a right to do by separate, unconcerted action; and that any laws to limit or abridge that right are necessarily arbitrary and tyrannous. Nay more, we are disposed to regard the principle of combination as the great natural bulwark of the rights of the poor and the oppressed, and, indeed, in many cases, as the only means which weakness has of resisting the aggressions of power, simplicity of craft, and unprotected labour, of the grasping selfishness of the rich.
The instances which are adduced in the foregoing article are easily answered. No man has a right to combine with others to do what he has not a right to do by separate action. He would not, therefore, have a right to combine to obstruct the streets, because he would not have a right to do so in his own individual person. His right to stand in the street from morning to night rests on the fact that his doing so does not obstruct it. But if you suppose a case where the standing in the street becomes a positive inconvenience to the publick, the individual so blocking up the way would be liable to be removed as a nuisance, and punished for committing it. The instance of the beleaguered city comes within that category of cases over which society, in its corporate capacity, has absolute control. The property of the flour dealers, in such an event, would be taken, not because of their combination, but because it was necessary to the publick preservation. It would be taken in virtue of that power which is inherent in all governments, of taking private property for publick use, when the exigences of state requires it. The case of the tailors, so far as they were punished merely for combination, was an exceedingly hard one, and violently outraged the universal publick sense of justice. So fa[r] as punishment was awarded to them for a breach of the peace, in attempting to overawe others by coercive measures, it was fully deserved. Two persons have a natural right to combine; but they have no right to compel a third to join their combination, or punish him for refusing to do so.
The position that, because money is an article of merchandize, the chartered money-changers have an unlimited right either to retain it in their own hands, or to ask what terms they please for it, is unsound; simply because such conduct would be in positive violation of their charters, and would forfeit all the privileges—abundantly large—which they really do possess under them. If the position were asserted of those who deal in money without a charter, it would undoubtedly be true, putting the usury laws out of question, as we trust they will, before many years, be put out of existence. But the New Era is mistaken in this: that the evil of which it complains, in terms not stronger than are warranted by its enormity, is chargeable to a combination of the banks, or any subordinate combination to which the banks supply the means of mischief. It is chargeable to those who institute those banks, who confer on them their special and exclusive privileges, and shut up all competition in the narrow and tyrannous bounds of ignorant and unjust legislation. We do not by any means deny that, if the whole monetary power of the country, or the whole and exclusive right of pursuing any other important branch of business, were conferred, by the supreme legislative authority, on a limited number of associations or individuals, a combination among those associations or individuals might be productive of the most disastrous effects. But we should charge those effects, not to the principle of combination, but to the hideous and paralysing principle of monopoly legislation. We should attempt to remedy the evil, not by erecting ineffectual dams and barriers against the desolating tide where it was hurrying along in swollen and irresistable fury, inundating the land with its waters of bitterness, but by tracing it to its source, and demolishing the monstrous impediments placed there by ignorance and fraud, to prevent its winding through its thousand natural channels, and force the whole volume with destructive rapidity in one particular direction. The principle of combination should not be charged with those evils which result from legislative restrictions upon competition. Let the New Era try the question by instances in which that principle alone operates, unmixed with legislative interference, in the shape either of bounties or impositions, and we think it will arrive at the same conclusion with ourselves.
We concede to our opponent, fully and freely, and have often so argued before, that combinations, for the most part, are exceedingly silly, and end in loss and discomfiture to those who combine. But this is a matter for the parties to judge of for themselves, and does not affect the question of right. The owners of all the packets to Liverpool, for example, have a perfect right to combine, and fix their own terms of freight and passage. If their combination was so regulated as not to require more for freight or passage than a fair return upon their investment of capital, they would not, by combining, provoke competition, any more than if each individual acted separately and for himself. Neither would the publick have any reason to complain. But the moment this combination produced the natural effect of increasing the demands beyond a just compensation, or diminishing the excellence of the accommodations, the public would complain, and the complaint, exciting the attention of ever ready enterprise, would lead rival competitors to establish opposition lines of packets. It would be precisely the same with money and credit, if those who deal, or who would deal in money and credit, instead of being circummured in the narrow limits of a pernicious system of legislation, were left solely to the government of the laws of trade. A few capitalists of vast wealth might combine together to raise the rate of usance; but all capital could not possibly be drawn into such a league, and competition would speedily demolish the baseless fabrick of avarice and cupidity. Even if such a league could be so extended as to embrace all the capital in the country, it would only provoke competition from abroad; and if it could be so extended as to embrace all the capital in the world, it would only provoke labour to form a counter combination.
What is combination? It is a mere league of trade between two or more individuals. It is a modified form of partnership. Every partnership is, indeed, a combination, and much more positive and stable, than those temporary and imperfect compacts now under consideration. The New Era would not deny the right of two or more individuals to form a partnership for any purpose of trade. Yet such a partnership might embrace the capitalists in the business of lending money; or the coal merchants in the business of selling coal; or the flour dealers in the business of selling flour. Where then would be the remedy of the community? In those simple principles which always govern trade. In the simple fact, that profit is the object of trade, and that, in order to insure it, price must bear a just proportion to the relations of supply and demand.
Combination is one of the great means by which the highest interests of society are promoted. What is it that raises the wages of the printers in your office to something like a tolerable equivalent for their patient toil? Is it the spontaneous liberality of their employers? Is it individual action? If they trusted to the efficacy of either of these, we fear their labour would be sadly unrequited. No, it is combination. It is the influence of associated effort and mutual coöperation. What is it that increases the pittance of the day labourer in some sort of proportion with the monstrous advance of other things, and enables him scantily to appease the cravings of hunger? It is combination, less effectual, in his case, because planned with less intelligence, and acted upon with less obedience to the terms of the compact, but still of sufficient efficacy to mitigate the evils which he would otherwise endure. What is it that has, in a great degree, banished the curse of intemperance from the land, and snatched myriads of human beings from all the complicated horrours it entails? Again we say, combination, the bulwark of the rights of the poor and lowly, and a powerful instrument in the hands of the good. It is an efficient weapon against the oppressor; but, like the sword bestowed by the good genius in the fairy tale, it shivers into fragments when drawn against the oppressed.
[1 ]Here abridged.—Ed.