It is a general prejudice, that a subject like the law of partnership
is a matter for the legal profession only, or, at most, for the
consideration of capitalists embarked in partnership business. But it
is, in truth, a subject of great interest to the public at large, and
especially to that valuable portion of the community who possess
ability and character, and have a little property--but not much--at
stake in the soundness of our institutions. This class have, however,
of late begun to shew a visible interest in the subject--an interest
which, had it existed earlier, might have prevented any of the
anomalies of which we complain from increasing to their present
excess.
The political economists have ever admitted the great influence of
combined capital: they have pointed to many valuable operations, such
as gas-works, water-works, railways, &c. which can be performed by
combined capital, but are beyond the capacity of individual
capitalists. They have also admitted the efficacy of a division or
combination of labour; whether it be that of the mechanic, or of some
higher grade, such as the designer and projector. The views of the
older school of political economists would be in entire concurrence
with anything that would facilitate such combinations, where several
men with skill or money take their parts; as, for instance, where one
is the buyer of raw materials, another keeps the accounts, another
draws patterns, and another acts as salesman. On the other hand, some
novel speculators go so much farther, that they would revolutionise
society, and, by force, compel it to be organised into co-operative
sections. It infers no sympathy with these wild schemes of
destruction, and artificial reconstruction, to desire that our law
should give facility for co-operation and combination--nay, that it
should give to it every encouragement consistent with other interests,
and with civil liberty.
But our law, unfortunately, instead of doing thus, has set heavy
impediments in the way of co-operation; we might speak more strongly,
and say, that it has prepared pitfalls, in which any person guilty of
having joined in a co-operative scheme, may at once find himself
overwhelmed, as a punishment for his offence. Invest part of your
savings in a company in which you have reliance; assist a young man,
of whose capacity and honesty you think well, by investing money in
his business; and some day you may find yourself ruined for having
done so.
Those readers who have turned any attention to this subject, will at
once see that we refer to the law of unlimited responsibility in
partnerships. Except when the company proceeds under an act of
parliament, a charter, or patent, limiting the responsibility, every
partner is responsible for the debts and obligations of the concern,
to the last farthing he possesses. Very often, a young man of
enterprise and ability, acting as manager, overseer, or in some other
respectable capacity, receives a small share in the profits to
encourage him to exertion: he has no control over the management: some
leading man plunges, to serve himself, into dangerous speculations,
and there is a bankruptcy. The young man has done nothing but good
service all along to the partnership, and to its creditors, and all
who have had dealings with it; yet, if he have saved a trifle, it is
swept away with the effects of the real speculators. Take another case
equally common: A young man commences business alone, or in company
with others: they have intelligence, ability, and honesty, but little
capital. A capitalist, who, perhaps, conducts some larger business of
his own, might, ingrafting kindness on prudential considerations, be
inclined to embark with them to a certain extent; but he finds, that
instead of a prudential step, nothing could be more thoroughly
imprudent. He will have to embark not only the small sum he destined
for the purpose, but his whole fortune. Dealers who have transactions
with the young partners, will know that a man of fortune is 'at their
back,' as it is termed, and will give them credit and encouragement
accordingly. Without being conscious of any dishonesty, the firm will
be led to trade, not on the capital which their friend has advanced,
but on the capital which he possesses. Of course, they do not intend
that he should lose his fortune, any more than that they themselves
should lose their business and pecuniary means. But these things
happen against people's intentions and inclinations; and the friend
who wished to aid them with a moderate and cautious advance, is
ruined; while those who were giving reckless credit, and who
encouraged dangerous speculations, are paid cent. per cent. It is the
fear of such a consummation as this that generally makes the
well-intending friend abstain from ultimately committing himself with
those with whom he would have fain co-operated.
It is quite right that trading companies should not trade on false
resources, and be able to laugh at their creditors by placing out of
the reach of the law the funds with which they have speculated. Yet
this can be done under the present system; and there is a class of men
in the commercial world, banded together by peculiar ties and
interests, who are said to accomplish it on a large and comprehensive
scale. It is thus carried out: A penniless man starts in business,
supplied with abundant capital by his friends: they may demand 6, 7,
or 10 per cent. for the use of it; and if they manage, which they may,
to avoid the residue of the law of usury, they are safe from the law
of partnership. The new man, by his prompt payments and abundant
command of capital, works himself into good credit. It is an
understanding, that when he has been thus set afloat, the money
advanced by his friends is to be gradually repaid. He is then left to
swim or sink. If the former be his fate, it is well for all parties;
if the latter, his friends will not be the sufferers: their capital is
preserved, and they can play the same game over again, in some other
place, with the hope of an equally happy result.
The same modifications of the law which would free partnership of its
terrors would be only naturally accompanied with safeguards to protect
the public against such schemes as these. In France, America, and many
other countries, there is a system of partnership, with limited
responsibility, known by the name of 'Partnership in _Commandite_.'
Even with us, limited responsibility is by no means unknown. It is,
however, granted capriciously and unsystematically, without those
checks and regulations which, if there were a general system, would be
adopted to make it safe and effective. 'I wish,' said Mr Duncan, a
solicitor, when examined before the Select Committee on the Law of
Partnership, 'to draw the attention of the committee first to this
simple fact--that all the railway, gas, and water and dock companies,
and all the telegraph companies, as a matter of course, have limited
liability. It is impossible to trace why they have got it, but they
have got it as a habit, and for any extent of capital they desire.
Whether a project be to make a railway from one small place to
another, or to provide gas to supply any town, great or small, all
those companies, as a matter of course, come to the legislature and
ask for, and obtain, limited liability. They are commercial companies,
and one cannot trace the reason why they should have limited liability
a bit more than any other company--but it is so.'
Here we have at least a precedent, which is of importance in a country
like this, so truly conservative in the sense of adhering to anything
that is fixed law or matter of traditional business routine. Now, in
these concerns, where there is often so much wild speculation and
mismanagement, no one is responsible beyond the subscribed stock; yet
while we hear enough of the stockholders themselves losing their
property, we seldom, scarcely ever, hear of the creditors who deal
with them, in contracting for their works or otherwise, losing. The
reason is, because the extent to which they can pay is known, and the
people who deal with the company calculate accordingly. Unlimited
liability existing in some indefinite parties, while it too often
ruins these parties themselves, is a bait for that indefinite credit
which produces their ruin, and sometimes leaves the careless creditor
unpaid, even when he has taken the last farthing from the unfortunate
partner.
In the commandite partnerships, however, the restriction of liability
does not apply to all the shareholders, as in the case of our great
joint-stock companies. Full responsibility alights only on those
partners who take it upon them, who have an interest in the profits
measured by their responsibility, and who are known to the world to be
so responsible. With regard to those whose responsibility is said to
be limited, it would be more accurate to say, that they have no
responsibility at all: there is a fixed sum which they have invested
in the concern--they may lose it, but it is there already; and there
is nothing for which they have, properly speaking, to be responsible.
The method adopted in France may be described thus:--There is a
private act or contract, in which are given the names of the partners,
and the sums contributed by them. The names of the _gérants_, or those
who, as ostensible conductors of the business, are to be responsible
to the whole extent of their property, are then published. With regard
to those who put in money without incurring farther responsibility, it
is only necessary to publish the sums contributed by them: no farther
information regarding them would be of any use, unless to their
fellow-partners, who would perhaps like to know if the concern is
patronised by men of sense, and they may satisfy themselves by looking
at the deed of partnership. Now, there is perfect fairness in all
this. The public know the persons who agree to take the full
responsibility; they know also the amount of money put into their
hands by other parties. In deciding whether they shall deal or not
with this body, they are not perplexed by mysterious visions of
possible rich unknowns who may be brought in for the company's
obligations. We cannot see that such an arrangement is in the least
unfair, and we are convinced that it would be productive of great
good. The subscribers with limited responsibility, or
_commanditaires_, as they are called, are not cut off from all control
over the management of their funds: it is their own fault if they join
a commandite company where they are not allowed to inspect the books,
and check rashness or extravagance.
It seems to be frequently the case, that a set of able workmen, in the
kind of artistic manufactures for which France is celebrated, become
the _gérants_ of such companies. This, we believe, is a form in which
whatever element of good may happen to lie in the co-operative
theories of a recent school of Socialists will be found. The
commercial witnesses before the select committee, spoke of ribbons and
other ornamental manufactures, which were only produced in perfection
in establishments where the energies of the designers were roused by
the possession of a share in the business, and in its management, as
_gérants_. Coinciding with these practical witnesses, the theorists on
political economy who were consulted on the occasion--such as Mr
Babbage and Mr J.S. Mill--held that many inventions that might be
patented and used, and many ingenious discoveries made by men of the
operative class, were lost to the world by the defective state of the
law. They would often get those who, richer than themselves, have
reliance on their judgment, to aid them in carrying out their
inventions or improvements, were it not for the law of unlimited
responsibility.
We can even anticipate, from anything that will facilitate fruitful
investment by the working-classes, a still wider--we might say, a
political effect. The chief defect in our otherwise sound social
system, is the want of fusion between the class of employers and
employed. As some other countries are subject to the more serious evil
of being without a middle-class between the aristocracy and the common
people, so we want a sub-grade, as it were, between the middle and the
working classes. It is too much the practice to consider them as
separated from each other by interests, tastes, and feelings. It is,
on the contrary, the real truth that their interests are indissolubly
united; but if there were a less broad line separating them from each
other, this would be more apparent. The true way to fill up the gap
happily for all parties, is not for the middle-class to descend, but
the working-class to rise. Nothing could better accomplish this, than
imparting to them facilities for entering into business on a small
scale on their own account. The hopelessness with which the workman
looks at the position of the employer, as that of a great capitalist,
would then be turned into hope and endeavour.
It is often said, that the operative classes shew an unfortunate
indisposition to advance onwards, and abandon their uniform routine of
toil: the answer to this is--try them. They have adopted the means at
their command in other countries. Mr Davis, an American gentleman,
gave the select committee an animated view of the ambitious workmen of
the New England states, where, he said, 'nobody is contented with his
present condition--everybody is struggling for something better.' Now,
to be discontented with one's condition, in the shape of folding the
arms, and abusing the fate that has not sent chance prosperity, is a
bad thing; but the discontent--if such it can be justly called--which
incites a man to rise in the world by honest exertions, is in every
way a good thing. Mr Davis said, he has been told that, in Lowell,
some of the young women hold stock in the mills in which they work.
Imagine a factory-girl holding stock in a mill!
We believe that unlimited responsibility was really founded on the old
prejudices against usury or interest; and as these prejudices are fast
disappearing, we may hope speedily to see this relic of their
operation removed. Towards this end, let the operatives everywhere
meet to consider this question, so important to their interests; and,
as we believe they will generally see the propriety of furthering a
law to establish commandite partnerships, let them petition the House
of Commons accordingly. Whether the classes with capital will move in
the matter, is doubtful; for they are not the parties to be chiefly
benefited. The best way is not to trust to them on the subject; but
for the working-classes to take the thing into their own hands, and
spare no exertion to procure an act of parliament of the kind we speak
of. We feel assured, that such an act would do more to inspire hope
among artisans, and to put them in the way of fortune, than any other
law that could be mentioned.