When, however, capitalism has one of its recurrent crises of “overproduction”, trade declines, prices are cut and capitalists find themselves forced by competition to sell at small profit or even at a loss. Then amalgamation and other means of eliminating competition are the order of the day in those industries which have already reached a stage of development which makes such amalgamation practicable. The formation of such monopolies or near-monopolies itself produces a new problem for capitalists in general and particularly for the smaller concerns and for the industries not yet capable of unification, the problem that their interests will suffer through the activities of big and powerful groups which can at least temporarily force up the prices of their products when competition is eliminated. To meet this situation the capitalist groups whose interests may be adversely affected call upon the Government either to prevent the monopoly or at least to control its activities. A typical example of this was the way in which the British railways developed towards amalgamation. The traders who used the railways for transporting their goods and whose interests were threatened, pressed the Government to place legal restrictions on the charges made by the railways.

The late Mrs. Lilian Knowles in her Industrial & Commercial Revolutions in Great Britain during the 19^th Century points out that at the end of the century rising railway costs and declining dividends forced the companies to the view that “the only hope seemed to be amalgamation to stop competition”. “Violent competition”, she wrote, “inevitably gives rise to amalgamations and the railways were no exception.” (Pages 281 and 283, 2^nd Revised Edition. Routledge, 1922.)

The large number of independent railway companies were gradually reduced by amalgamation, with consequent avoidance of competition, and at the same time traders waged an unceasing struggle to get Government intervention to control the railways’ charges for the carriage of their goods.

In 1872, in response to the fears of the traders, a Commission was appointed to inquire into threatened amalgamation schemes, but the progress of amalgamation was inevitable and when in 1911 another official inquiry took place the report found “that the era of competition between railway companies is passing away and it was recognised by witnesses on behalf of the traders that this could not be prevented.” (Knowles, p. 284.)

The railways, here and abroad, were among the first undertakings to take the path of amalgamation, but what happened to the railways is more or less typical of the evolution of industry generally.

One important point to notice is that amalgamation and the demand by other capitalists that monopoly should be prevented, or failing that controlled by law, has everywhere caused the Governments more and more to abandon their earlier attitude of laissez-faire, that is of leaving industry to conduct its own affairs without State interference. Mrs. Knowles makes the following comment on this :–

“The chief characteristic of railway development between 1873 and 1894 is the progressive intensification of control of the railways by the State. The development of Germany and the growing world competition were important influences in the general reaction from laissez-faire, but the tendency to abandon it as a maxim of State policy, is, however, noticeable first of all in the railways and this is true not merely of England, but of the United States” (p. 275).

Page 15