It is extremely improbable that, even when officially recognized in this way, the process of corporate combination would go beyond a certain point.  It might result in a condition similar to that which now prevails in the steel industry or that of sugar refining; but it should be added that in industries organized to that extent there is not very much competition in prices.  Prices are usually regulated by agreement among the leading producers; and competition among the several producers turns upon quickness of delivery and the quality of the service or product.  Whether or not this restriction of competition works badly depends usually upon the enlightened shrewdness with which the schedule of rates and prices is fixed.  A corporation management which was thoroughly alive to its own interest would endeavor to arrange a scale of prices, which, while affording a sufficient profit, would encourage the increased use of the product, and that is precisely the policy which has been adopted by the best managed American railroad and industrial corporations.  But it must always be kept in mind that, in the absence of a certain amount of competition, such a policy cannot be taken wholly for granted.  A short-sighted management may prefer to reap large profits for a short time and at the expense of the increased use of its product or service.  Moreover, the margin between the cost of production and the particular price at which the product or service can be sold consistent with its largely increasing use may enable the producer to gather enormous profits; and such profits may not stimulate competition to any effective extent, precisely because they depend upon advantages in production which cannot be duplicated.  No state desirous of promoting the economic welfare of its citizens can remain indifferent to the chance thus afforded of earnings disproportionately large to the economic service actually rendered.

In dealing with this question of possibly excessive profits under such a method of economic organization, the state has many resources at its disposal besides the most obvious one of incessant official interference with the essentials of corporation management.  Of these the most useful consists unquestionably in its power of taxation.  It can constitute a system of taxation, in respect to the semi-monopolistic corporations, which would deprive them of the fruits of an excessively large margin between the cost of production and the price at which the product or service could be increasingly sold.  Net profits could be taxed at a rate which was graduated to the percentage paid; and beyond a certain point the tax should amount to much the larger fraction of the profits.  In this way a semi-monopolistic corporation would not have any interest in seeking profits beyond a certain percentage.  A condition would be established which, while it would not deprive the managers of a corporation of full responsibility for the conduct of its business, would give them an additional inducement always to work for the permanent improvement of the economic relation of the corporation to the community.  They would have no interest in preferring large but insecure net earnings to smaller ones, founded on a thoroughly satisfactory service, a low schedule of prices, and the constantly increasing efficiency of the plant and organization of the company.