FOR BANKERS AND FINANCIERS
[Sidenote: Social History]
Of all classes of business men, bankers and financiers study most
closely the general tendencies of public opinion and the general course
of industrial and commercial development. Each day’s financial news
reports a position which has been reached in the path of a movement of
which the origin and earlier course—and therefore the direction—must be
sought in the record of past months and years, and sometimes in the
record of a past century. But the banker who turns to the standard
histories in his library with the desire to trace the course of any
gradual and long-continued development is generally disappointed. It is
only of late that historical investigation has been directed to social
and commercial activities rather than to politics and wars. Yet the
history of civilization may be said to lie in the course of finance and
commerce much more than in party strife and in civil and international
wars. For the latter always arrest for the moment, even if they
ultimately further, the progress of civilization.
[Sidenote: International Finance]
The new Britannica has been called “the most comprehensive of all
surveys of past and present civilization,” and its treatment of finance
and commerce possesses a breadth and sweep directly due to the
international character of the book. The American financier knows that
under existing conditions he must take into account the laws and usages
of foreign countries in regard to banking, currency, taxation, stock
exchange transactions, corporations and all the other methods and
appliances used in dealing with money and credit. The Britannica could
not have covered this broad field authoritatively if its articles had
all been written by Americans instead of being contributed, as they are,
by specialists of twenty countries. And the very first step, in
examining any question of American finance, may be to consider what has
been done abroad. For example, there has been adopted in Louisiana a
system of rural credit such as was strongly urged, for more general use,
during President Taft’s administration. That would seem to be purely a
matter of internal policy. But for a description of the actual working
of such a system, the sources of information are in the Britannica
article RAIFFEISEN (Vol. 22, p. 817), the German banker who perfected
the system of agrarian credits, in the article SCHULZE-DELITZSCH (Vol.
24, p. 383), the Saxon economist who founded the German central bureau
of co-operative societies, and in the article CO-OPERATION (Vol. 7, p.
82), where the Danish system of financing farmers is described and
compared with the German and French methods.
Systematic reading in the Britannica on financial subjects should begin
with the article FINANCE (Vol. 10, p. 347, equivalent to 20 pages of
this Guide), by C. F. Bastable, professor of political economy in the
University of Dublin, whose books on economics have been largely read in
the United States. This article deals with state revenue and
expenditure, or _public_ finance, after pointing out the prevailing
looseness in the use of the word finance. It is interesting to know that
“in the later middle ages, especially in Germany, the word _finance_
acquired the sense of usurious or oppressive dealing with money and
capital.” So long ago did an unpopular meaning attach to a term
connected with “big business.” The same is true of the word _usury_,
which originally meant use, or interest; and the Britannica in an
article on USURY (Vol. 27, p. 811) says “usury, if used in the old sense
of the term could embrace a multitude of modes of receiving interest
upon capital to which not the slightest moral taint is attached.” In
each case there may have been some reason besides chance for the
development of the unpleasant meaning, and it has always been the custom
of the spendthrift and the gambler to make the wrong use of words as
well as of business methods. But what we call public finance was a
century ago called political economy, “political” being used strictly to
apply to the state, and “economy” in its original sense of housekeeping
or house-rule. The word “economy” has thus become broader, as the word
“usury” has become narrower, in significance.
[Sidenote: Early Economics]
It is curious to see how one page after another of the historical
section of this article describes theories of finance which are to-day
propounded by popular agitators as if they were absolutely new and not
only describes them but shows how they were tried and how they failed.
The eastern empires taxed land produce, usually to the extent of one
fourth or one fifth (two tithes). In Athens, under a more elaborate
system, the state owned and administered agricultural land and silver
mines, and yet this state ownership, instead of making for democratic
equality, resulted in too rigid a separation of classes; and the
Athenian attempt to surtax the rich citizens in order to defray the cost
of public games and theatrical performances and to equip ships (in this
case a close parallel to certain recent German legislation) led, as
class taxation always does, to ingenious evasions and, in the end,
increased the power it sought to restrict.
In Rome, home taxes were suspended as soon as conquests brought tribute
from Spain and Africa. But taxes were always the curse of the provinces,
and the vexatious _method_ of the tax “may be regarded as an additional
tax.” “The defects of the financial organization were a serious
influence in the complex of causes that brought about the fall of the
Republic.” The early Empire took its revenues from public lands, from
monopolies, from the land tax, from customs, and from taxes on
inheritances (5%), sales (10%) and the purchase of slaves (40%). There
was no just distribution of taxation among the territorial divisions,
and the burden fell too much upon the actual workers and their
employers. In the kingdoms which succeeded the Empire after its fall,
Roman customs survived in finance, as in all departments of government;
and there was a want of coherent policy until the time of Charlemagne,
when centralization produced a better system. But scientific taxation
did not really exist until, in the 15th century, under Charles VII, the
first French standing army was created, and its needs led to a new and
more intelligent system. In England, the co-ordination and control of
public revenue and expenditure was similarly due to the growth of the
navy. Since then the tendency has been to include taxes in general
categories; the need for national credit has developed a system of
national debts; and expenditures and receipts are now governed by
legislative sanction. Local finance has been revolutionized by modern
business methods, too slowly adopted it is true, and by the gradual
change from private to public control of water supply, lighting and
transportation.
[Sidenote: Taxation and Tariff]
The articles TAXATION, NATIONAL DEBT and TARIFF should be read after
this article on public finance. TAXATION (Vol. 26, p. 458; equivalent to
25 pages of this Guide), by Sir Robert Giffen, formerly
Controller-General of the British Board of Trade, classifies taxes,
points out that direct and indirect taxes are not intrinsically
different and that such a classification is merely a matter of
convenience, and the article proceeds to describe the principal taxes.
It should be supplemented by reading the sections on finance in the
articles on various countries and especially by the article ENGLISH
FINANCE (Vol. 9, p. 458; equivalent to 25 pages in this Guide), the
section on Finance in the article UNITED STATES (Vol. 27, p. 660) and
similar sections in the articles on each of the states of the Union.
These articles give definite information about public debts, national or
state, but the student should read carefully the main treatment in the
article NATIONAL DEBT (Vol. 19, p. 266). The articles TARIFF (Vol. 26,
p. 422), by Prof. F. W. Taussig of Harvard, author of _The Tariff
History of the United States_; PROTECTION (Vol. 22, p. 464), by Edmund
Janes James, president of the University of Illinois and author of the
well-known _History of American Tariff Legislation_; and FREE TRADE
(Vol. 11, p. 88), by William Cunningham, author of _Growth of English
Industry and Commerce_, will be of great interest. The student should
read besides the sketches in the Britannica of HENRY CLAY (Vol. 6, p.
470), by Carl Schurz, of WILLIAM MCKINLEY (Vol. 17, p. 256), ROGER Q.
MILLS (Vol. 18, p. 475), and of other American tariff-leaders, and, for
the tariff reform movement in England, the articles on JOSEPH
CHAMBERLAIN (Vol. 5, p. 813) and ARTHUR J. BALFOUR (Vol. 3, p. 250).
Before turning from public to private finance the reader should study
the articles EXCHEQUER (Vol. 10, p. 54) and TREASURY (Vol. 27, p. 228).
[Sidenote: Private Finance]
For what may be called _private_ finance, the student should turn first
to the article BANKS AND BANKING (Vol. 3, p. 334; equivalent to nearly
60 pages in this Guide), by Sir R. H. I. Palgrave, director of Barclay &
Co., Ltd., Bankers; Charles A. Conant, author of _The Principles of
Money and Banking_; and Sir J. R. Paget, author of the _Law of Banking_.
Further information on the early history of banking in the United States
will be found in the historical section of the article UNITED STATES
(Vol. 27, especially p. 697), and in the article ANDREW JACKSON (Vol.
15, p. 107) by Prof. W. G. Sumner of Yale.
[Sidenote: Currency]
Next in his course of reading, he should study the article MONEY (Vol.
18, p. 694; equivalent to 45 pages in this Guide), by C. F. Bastable.
This deals with: the functions and varieties of money, including coined
money and all else that can take its place _in facilitating exchange_,
_in estimating comparative values_, _as a standard of value_ or of
_deferred payments_, as _a store of value_; the determining causes of
the value of money and of the quantity of money required by a country,
the credit theory, early forms of currency—greenstones, ochre, shells,
furs, oxen, grain; metals as money; coinage and state control;
representative money, and credit as money; economic aspects of the
production and consumption of precious metals; review of the history of
some important currencies—Greek, Roman, medieval, English and French
coinages are treated in the article NUMISMATICS (Vol. 19, pp. 869–911,
equivalent to 135 pages of this Guide, with 6 plates and 11 other text
illustrations); which discusses such questions as the constitution of
money; typical currency systems; statistics of production of gold and
silver since the discovery of America, and coinage systems. Other
relevant articles are BIMETALLISM, and MONETARY CONFERENCES for the
relation of the metals; and the articles GOLD, SILVER, SEIGNIORAGE,
DEMONETIZATION, GRESHAM’S LAW, TOKEN MONEY and GREENBACKS. In the
article on the GEORGE JUNIOR REPUBLIC (Vol. 11, p. 749), the “children’s
state” at Freeville, N. Y., the student will find an interesting proof
of the relation of “token” to “real” money. “The government issued its
own currency in tin and later in aluminium and ‘American’ money could
not be passed within the 48 acres of the Republic until 1906, when
depreciation forced the Republic’s coinage out of use and ‘American’
coin was made legal tender.”
[Sidenote: Banking]
For information as to the methods of financial business the reader
should study the articles SAVINGS BANKS (Vol. 24, p. 243) by Sir G. C.
T. Bartley, founder of the National Penny Bank, and Bradford Rhodes,
founder of the 34th St. National Bank, N. Y. FRIENDLY SOCIETIES (Vol.
11, p. 217); TRUST COMPANY (Vol. 27, p. 329), by Charles A. Conant,
author of _The Principles of Money and Banking_; CLEARING HOUSE (Vol.
6, p. 476); LETTER OF CREDIT (Vol. 16, p. 501); STOCK EXCHANGE (Vol.
25, p. 930); BILL OF EXCHANGE (Vol. 3, p. 940); EXCHANGE (Vol. 10, p.
50); FUTURES (Vol. 11, p. 375); TIME BARGAINS (Vol. 26, p. 988);
MARKET (Vol. 17, p. 731), by Wynnard Hooper, financial editor of _The
Times_, London, with sections on Movements of Prices, Cycles, Tendency
to Equilibrium, Disturbance of Equilibrium, Future Delivery, Corners,
Money Market, The Great Banks, Foreign Loans, and Discount Houses;
CONSOLS (Vol. 6, p. 979); COUPON (Vol. 7, p. 318); DIVIDEND (Vol. 8,
p. 331); and PREMIUM (Vol. 22, p. 279).
Information on distinctive banking and business laws in the separate
states will be found in the section on finance of the article on each
state. For instance in the article OKLAHOMA (Vol. 20, p. 60) there is a
summary of the bank deposit guaranty fund.
For insurance see the chapter in this Guide _For Insurance Men_.
[Sidenote: Lives of Financiers]
In financial biography, as in history, theory and practice, the
Britannica is valuable because of its full, clear and authoritative
treatment. The student will find articles on great financiers, such as
the Astors, the Vanderbilts, the Barings, the Rothschilds, James Law,
George Peabody, James Fisk, Jay Gould, E. H. Harriman, James J. Hill, J.
P. Morgan; and on great authors on the subjects of economics and
finance,—for instance, Malthus, Adam Smith, Walter Bagehot, Ricardo,
Roscher, Boehm von Bawerk, Thorold Rogers, H. C. Carey, E. R. A.
Seligman, F. A. Walker, J. W. Jenks, F. W. Taussig, Richmond Mayo-Smith
and A. T. Hadley.
ALPHABETICAL LIST OF ARTICLES IN THE ENCYCLOPAEDIA BRITANNICA OF
INTEREST TO BANKERS
Account
Accountants
Achenwall, Gottfried
Adams, Henry Carter
Agio
Aguado, A. M.
Alcavala
Aldrich, N. W.
Allport, Sir J. J.
Alstromer, Jonas
Amortization
Angel
Anna
Annuity
Arbitrage
Armour, P. L.
Ashley, W. J.
Assignats
Astor, John Jacob (and family)
Atkinson, Edward
Attwood, Thomas
Audit and Auditor
Backwardation
Bagehot, Walter
Balance of Trade
Bank Notes
Bank Rate
Banks and Banking
Barbon, Nicholas
Baring (family)
Barter
Bastiat, Frédéric
Bates, Joshua
Baudrillart, H. J. L.
Bawbee
Baxter, Robert Dudley
Bemis, E. W.
Bezant
Biddle, Nicholas
Bill of Exchange
Bimetallism
Blanqui, J. A.
Bliss, C. N.
Block, Maurice
Bodin, Jean
Bodle
Boehm von Bawerk
Boisguilbert, Sieur de
Book-keeping
Bourse
Breaking Bulk
Brentano, L. J.
Broker
Bucketshop
Budget
Bullion
Buying in
Cairnes, John Elliott
Call
Capital
Carey, Henry Charles
Carli-Rubbi
Carrying-over
Cash
Chase, S. P.
Cheque, or Check
Chevalier, Michel
Child, Sir Josiah
Circular Note
Claflin, H. B.
Clark, John Bates
Clearing House
Cohn, Gustav
Coin
Coeur, Jacques
Colston, Edward
Combination
Commerce
Commercial Treaties
Consols
Contango
Cooke, Jay
Co-operation
Cooper, Peter
Cossa, Luigi
Coulisse
Coupon
Courcelle-Seneuil, J. G.
Cournot, A.
Coutts, Thomas
Cover
Credit
Crédit Foncier
Crockford, William
Crore
Crown (coin)
Cunningham, William
Custom Duties
Custom House
Davenant, Charles
Decker, Sir Matthew
Decimal Coinage
Delessert, J. P. B.
Delfico, Melchiorre
Demonetization
Dewey, Davis Rich
Dime
Discount
Distribution
Dividend
Dock Warrant
Dollar
Drawback
Drexel, A. J.
Ducat
Ely, Richard Theodore
Engel, Ernst
English Finance
Exchange
Exchequer
Excise
Farr, William
Farrer, Baron
Farthing
Florin
Field, Cyrus West
Fisk, James
Fix, Theodore
Fouquet, Nicolas
Franc
Free Trade
Friendly Societies
Futures
Gabelle
Gallatin, Albert
Ganilh, Charles
Garnier, C. J.
Garnier, Marquis
Genovesi, Antonio
George, Henry
Giffen, Sir Robert
Gilds
Gilbart, James William
Gioja, Melchiorre
Girard, Stephen
Goldsmid (family)
Gould, Jay (and family)
Grain Trade
Greenbacks
Gresham, Sir Thomas
Gresham’s Law
Groat
Guinea
Gurney (family)
Hadley, A. T.
Hamilton, Alexander
Hamilton, Robert
Hanna, M. A.
Harriman, Edward H.
Haxthausen, L. von
Hermann, F. B. W. von
Hill, James J.
Horner, Francis
Horton, Samuel Dana
Hudson, George
Hufeland, Gottlieb
Income Tax
Ingram, J. K.
Insurance
Invoice
Jakob, L. H. von
Jenks, J. W.
Jesup, M. K.
Jevons, William S.
Jones, Richard
Kay, Joseph
Laing, Samuel
Lakh
Laveleye, E. L. V. de
Law, John
Lawrence, Amos
Le Play, P. G. Frédéric
Leroy-Beaulieu, P. P.
Leslie, Thomas E. C.
Letter of Credit
Levasseur, Pierre Emile
Levi, Leone
Lingen, Baron
Lipton, Sir T. J.
Lira
List, Friedrich
Lloyd’s
M’Culloch, John R.
Mackay, John William
Macleod, Henry Dunning
Making-up Price
Malthus, Thomas Robert
Mark
Market
Marshall, Alfred
Marx, Heinrich Karl
Mayo-Smith, Richmond
Mint
Mohur
Moidore
Monopoly
Monetary Conferences (International)
Money
Money-lending
Moon, Sir Richard
Moratorium
Morgan, John Pierpont
Morris, Robert
Morton, L. P.
Mun, Thomas
National Debt
Newmarch, William
North, Sir Dudley
Octroi
Overstone, 1st baron
Par
Paterson, William
Pauperism
Pawnbroking
Peabody, George
Pender, Sir John
Penny
Penrhyn, 2nd baron
Peseta
Petty, Sir William
Picayune
Pistole
Poll-tax
Pound
Premium
Price, Bonamy
Production
Profit-sharing
Protection
Proudhon, P. J.
Pyx
Quesnay, François
Raiffeisen, F. W.
Rau, Karl Heinrich
Rebate
Reciprocity
Revenue
Ricardo, David
Rockefeller, J. D.
Rodbertus, K. J.
Rogers, James Edwin
Roscher, W. G. F.
Rothschild (family)
Royalty
Rupee
Sadler, Michael Thomas
Sage, Russell
Saint-Simon, Comte de
Savings Banks
Say, Jean Baptiste
Say, Leon
Schäffle, A. E. F.
Schmoller, Gustav
Schulze-Delitzsch, F. H.
Seigniorage
Seligman, E. R. A.
Senior, Nassau William
Sequin
Shekel
Shell-money
Sherman, John
Shilling
Slater, John Fox
Smith, Adam
Sou
Sovereign (coin)
Spreckels, Claus
Stag
Stamp
Standards Department
Sterling
Steuart, Sir J. D.
Stewart, A. T.
Stock Exchange
Sumner, W. G.
Tael
Tariff
Taxation
Taussig, Frank William
Thornton, Henry
Thornton, W. T.
Time Bargains
Title Guarantee Companies
Token Money
Tonnage and Poundage
Tontine
Tooke, Thomas
Torrens, Robert
Torrens, William Torrens M’Cullagh
Trusts
Trust Company
Tucker, Josiah
Vanderbilt, Cornelius (and family)
Wagner, Adolf
Wages
Walker, Francis Amasa
Walras, M. E. L.
Wanamaker, John
Watkin, Sir E. W.
Wealth
Wells, David Ames
Window Tax
Wolowski, L. F. M. R.
Wright, Carroll D.
Zollverein