without falling under the wheels of social progress? Right here a swarm
of half-informed theorizers are rushing in where trained economists fear
to tread. It is difficult and dangerous ground, but there is at least
one measure of legal reform--take away the right of one corporation to
hold stock in another--which might be urged with confidence were it not
for the existence of sundry oppressive and conflicting state laws.

The abolition by law of the holding-company device is no new suggestion.
It was strongly urged years ago by the late Edward B. Whitney. It was
the keystone of the famous "Seven Sisters" statutes,[1] enacted with
loud acclaim in New Jersey at the behest of Governor Woodrow Wilson (but
subsequently repealed and thrown into the discard). Such a measure would
be more effective and far-reaching than the public supposes. Nearly all
the so-called trusts have been organized and are being held together in
whole or in part, by the holding-company device. In many cases this has
been done merely as an innocent measure of convenience. The device,
however, is a perversion of the corporate machine to uses not
contemplated by its inventors and fraught with danger. It is too
powerful a weapon in the hands of those alive to its possibilities,
enabling a small group of men with a relatively insignificant investment
of capital to control a country-wide industry. Take the simplest
possible illustration: The industry of manufacturing a particular
commodity is carried on by a number of corporations scattered throughout
the country with an aggregate capitalization of, say, $10,000,000. A, B,
and C form a holding company to acquire a bare majority of the stock of
each corporation, say $5,100,000 in the aggregate. They dispose of 49
per cent. of the holding company's stock to the public, retaining a
working majority. At one step they have secured absolute control of a
$10,000,000 industry with an investment of little more than one-quarter
of that amount, and by pursuing the same process further they can reduce