The theory of increasing poverty among the masses stands at the centre of Marxist thought as well as of older socialist doctrines. The accumulation of poverty parallels the accumulation of capital.

Atendency to the concentration of establishments or to the concentration of enterprises is not by any means equivalent to a tendency to the concentration of fortunes. In the same degree in which establishments and enterprises became bigger and bigger modern capitalism has developed forms of enterprise which enable people with small fortunes to undertake big businesses.

The merger of several similar independent establishments into one enterprise may be called horizontal concentration of production. Here we follow broadly the usage of writers on cartels, though their definition is not in complete accord with ours. If the separate establishments do not remain completely independent, if, for example the management or some departments are amalgamated, there is concentration of establishments. A mere concentration of enterprises occurs only when the individual units remain independent in everything except the taking of decisive economic decisions.

Vertical concentration is the union into one unitary enterprise of independent enterprises, some of which use the products of the others. This terminology follows the usage of modern economic literature. Examples of vertical concentration are the union of weaving, spinning, bleaching and dyeing works; a printing works to which a paper factory and a newspaper enterprise are joined; the mixed works of the iron industry and of coal mining, etc.

The concentration of establishments comes automatically with the division of labour. In the shoemaker’s workshop the production of footwear, formerly carried on in each individual household, is united in one single establishment. The shoemaking village, the shoe-manufactory become the manufacturing centre for a large area.

The Law of Proportionality in combining the factors of production was first formulated in connection with agricultural production, as the Law of Diminishing Returns. For a long time its general character was misunderstood, and it was regarded as a law of agricultural technique. It was contrasted with a Law of Increasing Returns, which was thought to be valid for industrial production.

The process of manufacture out of raw materials is to a certain extent free from the limitations of space. The working of cotton plantations cannot be concentrated, but the spinning and weaving works may be united. But, here too, it would be rash to derive without further consideration a Law of the Concentration of Establishments from the fact that the larger plant generally proves superior to the smaller.