A syndicate is an association of entrepreneurs who centrally, for all members, purchase raw materials and sell products. All companies participating in the syndicate remain independent in production matters, but at the same time have commercial dependence.
The meaning of the word "syndicate"
The term "syndicate" has many meanings. Previously, syndicates meant any unions that created the unity of the material interests of the participants and did not belong to the number of ordinary societies, civil or industrial. In Russia, syndicates spread in the late XIX - early XX centuries, but they gained the greatest popularity in France, where there were both business and labor associations.
If we talk about other countries, then the syndicate is one of the types of entrepreneurial unions, in particular those that are aimed at achieving a profit level that is profitable for all participants by jointly rationing the marketing of their products and purchasing the raw materials required for production. In this sense, the term "syndicate" is an international concept.
The reasons for the formation of monopolies, trusts, cartels and syndicates
In Russia, the impetus for the creation of monopolies and the transition to imperialism was the global crisis in the economy of 1900-1903. The crisis was especially palpable, because the preceding rise was created to a certain extent artificially. Due to the dominance of foreign capital in the country, there was an acute shortage of cash. In connection with the crisis, Western capitalists began to withdraw their funds from the country. Russian banks closed the loan during this period, thereby placing industrialists in difficult sales conditions.
Monopolies as a way to deal with the crisis
Without a loan, machine-building plants could not purchase ore, metal, and so on. Products accumulated in warehouses, plants stopped, because they could not sell the product and purchase fuel and raw materials to continue production. Trade relations between enterprises without credit ceased. For this reason, monopolies began to form. Industrialists of each industry at congresses began to discuss the fight against the difficult economic situation in the world.
And as one of the ways out of the crisis, a decision arose to apply the combination of product sales and the formation of common trade organizations, that is, syndicates. This made it possible to regulate prices and control the market. Monopolies in Russia existed in the form of syndicates. A syndicate is the lowest form of monopoly, since in this case it is not production that is combined, but only the marketing of the output. In addition, it is easier to organize than a trust. It was enough for the industrialists to get together and agree. At the same time, they remained the owners of their enterprises inside the syndicate, and the trust arises during a long competitive struggle when one of the companies ruins its rivals.
What is the difference between syndicates and other business associations
To understand the difference between syndicates and other business associations, one should analyze the goals of their education and the main lines of activity. Trusts and cartels were created, as a rule, by those entrepreneurs who were directly involved in the production of goods. The activities of such associations were aimed at regulating the volume of production, marketing of products and reducing production costs. The main purpose of their actions was to prevent the overproduction of profitability of the combined enterprises.
Entrepreneurial syndicates are primarily associations of organizations working in the same industries. These are seller unions of one product group. In many cases, large competing enterprises combined into such syndicates in order to achieve a high level of profitability for their business. The main tool they used was contractual price regulation. Syndicates in Russia, and in other countries too, sought to monopolize the relevant industries and markets to a greater extent than trusts and cartels.
Types of syndicates in Russia
Among the types of syndicates operating in Russia, mainly commodity-trade unions that combined production and further sale of a certain category of products predominated. Moreover, the term “syndicate” was not used in the name itself. The created associations according to the degree of consolidation can be divided into the unions of enterprises that were created to achieve any limited goals, and trusts and syndicates proper.
By territorial affiliation, syndicates in Russia were divided into local and national. The first monopolies in Russia appeared in the early 80s of the 19th century. But the organizational structure of associations at that time was far from perfect. Cartels and syndicates were mainly governed by congresses of manufacturers and breeders, at which multilateral agreements on the creation of associations were concluded.
The first form of monopoly
The cartel agreement was the first established and independently functioning monopolistic form. A cartel is a contract between legally and commercially independent organizations that regulate pricing policies and share the market. In this case, rather large organizations enter into a legal agreement with similar enterprises.
It is worth noting that the cartel agreement as a
form of monopoly turned out to be quite tenacious. And now there are a considerable number of informal and legal cartels in the field of export-import. Syndicate is another common form in which capital-monopoly existed. In such unions, it is represented by an agreement, according to which restrictions on the sovereignty and independence of all its participants are introduced.
In addition, there is such a thing as a criminal syndicate, that is, an illegal or informal association of entrepreneurs, enterprises.