public examination of the affairs and accounts of the trusts. It removes
the first loophole for their escape from the consequences of their
unlawful acts, and from the exposure of their methods of opposing and
crushing competitors. They will, therefore, become liable to prosecution
under the Sherman Anti-Trust Law, and all unlawful combinations,
schemes, and conspiracies will be effectually and permanently broken up.
This decision is pf such vast and far-reaching importance, not only to
all directly concerned, but to the whole country, that its legal effect
and its moral influence can hardly be overestimated. It will probably
become as famous in the history of the Supreme Court as the Dred Scott
decision; and it will prevent in future the miscarriage of justice for
want of evidence against corporations, which has so frequently occurred
in the past. It will also raise the moral tone of corporate management
by enforcing publicity before refused, for the decision not only applies
to all railway and industrial corporations, but banks, trust companies,
and insurance companies of all kinds. It shows that a rigid enforcement
of existing laws is alone necessary to correct many abuses of long
standing.
The temptation that secret acts and secretive general management present
to those disposed to wrongdoing and chicanery, malfeasance,
misappropriation, and graft can easily be imagined; and it can also be
as easily inferred that such management is apt to give rise to
suspicions and rumors detrimental to the interest of the corporations
concerned, and indirectly injurious to others. Honesty is not only the
best polity, but a moral duty, and should be as much the watchword of
corporations as of individuals, and no man should betray his trust for
either love or money, whether acting in or out of a corporate capacity.
There is more permanent prosperity, as well as honor, to be secured by
honest than dishonest means, and to quote the Bible, “What does it
profit a man if he gain the whole world, and lose his own soul?” Yet
unscrupulousness in high places of trust is often forced upon public
attention. This should all be swept away as a debasing element in
business life, for dishonesty, like the upas tree, casts a blighting
influence wherever it is.
The corruption of judges and juries and the bribing of legislators
should be more abhorrent than larceny itself to every captain of
industry and all corporate officials, who should have equal respect for
the truth and their own honor. Great wrongdoers should be no more exempt
from punishment than small offenders and mere millions should furnish no
protection to them.
Great fortunes accumulated by monopoly and oppression, and other
dishonest means, are no credit to their possessors, but really a
reproach, and the abuse of power by them is a great national evil. Every
business man should take pride not only in his regard for honesty,
truth, and fair dealing, but in his own personal honor, whether he is
acting for a corporation or himself. We are now on the highroad to the
correction of a multitude of abuses and the country is to be
congratulated upon this salutary movement for improvement and reform in
our business methods. Our great remedy is PUBLICITY, and the enforcement
of the law.
The immensity and grandeur of our national progress and achievements
justify us in looking forward to a still greater and grander development
in the future and still more splendid triumphs of mind over matter than
we have already accomplished. I do not say with the spread-eagle Fourth
of July orator:
“No pent up Utica controls our powers,
But the whole boundless continent is ours.”
Yet it cannot be ignored that no other nation has such a magnificent
career of expansion, development, and progress before it as the United
States, united as it is by telegraph and telephone and our vast network
of railways, from the Atlantic to the Pacific, and Maine to Florida, in
unbroken continuity.
[Illustration:
WILLIAM H. MOORE.
]
With the growth of our population, which even now exceeds eighty
millions, we shall grow more and more in national importance and wealth,
not only in material wealth but in the higher products of an advancing
civilization, in the arts and sciences and literature, and all that
embellishes and glorifies mankind. Therefore we should, as we go along,
constantly endeavor to correct errors, shortcomings, and abuses, and
prune away rotten and unsound timbers in our public and business life,
and make the whole machinery of business and activities of all
kinds—trade, banking, insurance, manufacturing, legislative, and the
various professions and mechanical industries, work as legitimately,
honestly, smoothly, and harmoniously as possible. The way to do this can
be best paved by promoting public spirit, and sweeping away the
opportunities for business wrongdoing in secret, such as rebating, by
wise laws properly enforced, and backed by public opinion, yet laws not
oppressive, unjust or too inquisitorial. This would compel the “crooks,”
“grafters,” “rebaters” and “competition crushers” of the business world,
who have schemed in darkness, and shunned the light, to come out into
the open view, and this publicity alone would be a perfect cure for many
great evils. So let us have more light—the light of PUBLICITY.
------------------------------------------------------------------------
CHAPTER LXXV.
THE MONETARY SITUATION AND ITS REMEDIES.[3]
Footnote 3:
An address to the West Virginia Banking Association at their 13th
Anniversary Meeting, at Elkins, West Virginia, June 19, 1906, by Henry
Clews.
The rapid growth of our population, the great activity of all our
industries, the general prosperity of the country, apart from the
terrible calamity at San Francisco, and the immense speculation going on
in land and mining ventures, especially in the West, are the underlying
causes of the severe monetary stringency that New York has lately
experienced. These influences have kept money to a much larger extent
than usual active in the interior and prevented its concentration not
only in New York and the other Eastern monetary centres, but at the
Western centres.
Chicago in particular found that money, instead of returning there from
the interior in good volume, as it usually does in January, February,
and March, continued this year to be sent to the interior by the banks
there at an average rate of $12,000,000 a month during these three
months. This movement was not so much owing to the land and mining boom
as to the immense absorption of money in the various manufacturing,
mercantile, and other expanding business interests all over the West and
South. So great was, and still is, the activity in these directions that
speculation in grain, provisions, and stocks has been more neglected in
the West than for several years, as the narrowness of the markets there
has shown.
To show more precisely the effect on the money markets of this unusually
great speculative and industrial activity it is only necessary to say
that, during this first quarter of the year 1906, the Chicago banks
steadily and heavily lost in deposits, while their loans kept
increasing. A comparison of the condition of the national banks in that
city on April 6th, as reported to the Comptroller of the Currency, with
their condition at the date of their previous report on January 29th,
showed an increase in their loans of $8,625,237 (or 4.11 per cent) and a
decrease in their deposits of $6,773,490 (or 2.11 per cent) and a
decrease in cash resources of $14,628,960, or 10.38 per cent. These
figures explain why money was so scarce in New York. The West had none
to send us, although there is more money in circulation than ever
before. If we go back to the condition of the same Chicago banks on
March 14th, 1905, and compare it with their report referred to, we still
find that their deposits decreased $8,687,117 and their cash resources
$7,970,318, while their loans increased $1,599,774; and in their reduced
cash resources the Chicago banks reflected the condition of the banks in
all the other large cities of the West, Northwest, and Southwest. There
has been a rapidly rising volume of trade and land and mining
speculation there for more than a year, and enormous activity in new
industrial enterprises. In the Southwest, particularly, the growth of
banking has been not only unprecedented but enormous. I include in this
designation the States of Missouri, Arkansas, Louisiana, Texas, and
Kansas and the Territories of Oklahoma, Indian, New Mexico, and Arizona.
The last decade has witnessed in this section of our country more
extensive and rapid material development than was ever before seen
anywhere, either in the United States or elsewhere, and this expansion
in banking was in response to that material development, and therefore
had a legitimate foundation in business requirements. American spirit
and enterprise, and Western push, overcame all obstacles in spreading
civilization and creating trade, especially in the new settlements.
In the five years ending with 1900, 101 new national and other banking
institutions were established in these nine States and Territories—with
a consequent increase of $94,500,000 in individual deposits and
$150,300,000 in aggregate resources, and in the next five years ending
with 1905 no fewer than 1,415 new banks and banking institutions were
added to the number—a resulting increase of $73,400,000 in capital and
surplus, $383,750,000 in individual deposits and $670,350,000 in
aggregate resources. Thus, in ten years, there was an increase of 1,516
in the number of banks, of $137,000,000 in capital and surplus, of which
$79,000,000 was surplus, of $478,000,000 in individual deposits, and of
$820,750,000 in aggregate resources.
This enormous banking development reflected and stimulated the enormous
development of the country, and aided trade fully as much as trade
helped the banks. The one kept pace with the other, and marvelous
progress in both was the result; and this progress continues, and will
continue indefinitely long under the stimulus of the rapidly increasing
population of that still sparsely settled section.
This banking development is of incalculable benefit, both locally and
generally, for its influence is far-reaching. The drain of money from
the outlying districts, including New York, to move the crops, is
reduced as banking facilities in the West and South increase.
In the South, during the same period, there has also been very great
commercial and banking development, with the banks and trade going hand
in hand to help each other, as in the Southwest. The South was never
before so active and prosperous; and, rapidly as it is progressing, it
will go on prospering with unabated vigor and enterprise, for it has
entered upon a new era of prosperity and immense development of its
material resources awaits it. In manufacturing and mining, as well as
agriculture, immense opportunities are open to it; and before long the
natural increase of its population will be largely added to by the white
immigration that it needs. So the South has a bright and magnificent
future.
This vast industrial and mercantile activity—this general business
enterprise, this land and mining speculation, or boom, has extended, in
various degrees, all over the United States, and the influence it has
had on the money market in large cities, and particularly in New York,
was only a natural and easily foreseen result. It has produced a
corresponding activity in money, because of the greater demand for its
use; and the real estate speculation, the vastest we have to deal with,
is still increasing.
The boom is almost entirely in land and mostly in vacant plots, or lots,
suitable for building purposes; but there is also a very active
speculation in improved property, and much speculative building. The
amount of money practically locked up in this land speculation is much
larger than is generally supposed.
Statistics of 29 of the largest cities of the United States show that in
the month of May they issued permits for the construction of 13,712 new
buildings, to cost $55,074,761, against only 12,036 in May, 1905, to
cost $50,791,738, an increase of 8 per cent, and a similar increase was
shown in each preceding month of 1906. The May increase was greatest in
cities remote from the Atlantic Coast; in Portland, Oregon, it was 309
per cent; in Tacoma, 111 per cent; in Seattle, 30 per cent. But the San
Francisco catastrophe was evidently the main cause of the large increase
in Portland and Tacoma. Yet the increase in Omaha was 75 per cent, in
St. Paul 49 per cent, in Duluth 110 per cent, in Louisville 50 per cent,
in New Orleans 47 per cent, and in Chicago 39 per cent. These figures,
dry as they may seem, are eloquent in their suggestiveness of the extent
of the demand for money from this one source, the land and building
boom.
Gold and silver mining speculation, too, last year began to assume the
dimensions of a boom in Nevada, and all the old metal and mineral mining
camps, and many new ones in other States, are, like the Lake Michigan
copper regions, scenes of active speculation in properties, as well as
busy with mining, and hosts of speculators are their own bankers,
carrying large amounts of currency in their pockets.
The money that usually returns to the money centers is thus widely
scattered and too busily employed to return. So we have to deal with a
period of prosperity and industrial activity that is something more than
normal. But—without referring to the heavy drain of cash for the relief
of San Francisco, which was offset by gold imports—although money was
scarce in New York, owing to this enormous activity and general
prosperity that kept it moving from hand to hand, it was not scarce
enough to justify the excessively high rates we often witness on the
Stock Exchange. These were serious and hurtful, and to guard against
such vicissitudes in our money market every member of the Stock Exchange
and every banker and bank officer should use his influence.
How far the Chamber of Commerce Committee on the Reform of the Currency
will succeed in providing remedies for the monetary situation remains to
be seen. But from the twenty-seven questions it has sent to bankers and
others it is apparent that it contemplates no fundamental change in our
currency system. Inferentially, it will not interfere with United States
legal tender notes, nor with United States bonds as a basis for the
circulation of the national banks. Yet both bases are indefensible on
sound economic principles. The issue of greenbacks was merely a war
measure, and intended to serve only a temporary purpose; instead of
which we have made it permanent, so keeping the Government in the
banking business with its war currency system.
There can be no question as to the false bottom on which the national
bank currency rests; for paper, that is, paper money, should not be
secured by, or redeemed in paper, even when that paper is as
indisputably good as United States bonds. All our paper money ought to
be based on readily convertible assets and redeemable in gold. Bonds,
even United States bonds, by which national bank notes are now secured,
are only evidences of debt, and the time will come when these will be
liquidated, and the sooner the better.
The committee probably thinks that the existing order of things,
notwithstanding its fundamental errors, is too deeply rooted and
strongly fortified to be materially changed without danger of the remedy
proving worse than the disease. It consequently favors more national
bank currency on the present basis. Branch banks and rediscounting for
small banks by large banks are also favored. The committee’s questions
indicate, however, that it favors the abolition of the Sub-Treasury
system, and to that result it should resolutely bend its energies. At
present the Sub-Treasuries are practically banks, like the old United
States Bank at Philadelphia, with the important difference against them
that all the money they take in remains locked up in their vaults till
paid out on Treasury drafts. The evil effect on the money market, and
particularly on Wall Street, of thus withholding money from circulation
in periods of stringency has been too often felt. It was more than
usually conspicuous and severe during the late tight money ordeal, owing
to the Treasury receipts very largely exceeding its disbursements. This
greatly aggravated the scarcity of money in New York, due to other
causes, and resulted, in Wall Street, in the rates for call loans
ranging at times, within the last six months, with rapid and eccentric
fluctuations, from 15 to 30 per cent, and on one occasion touching 125
per cent. We have here a phenomenon entirely distinct from ordinary
monetary conditions.
These extremely high and highly fluctuating rates are, it is true,
peculiar to the New York Stock Exchange, but they are none the less a
great evil, and they acquire national and even international importance
from the fact that New York is the financial center of the country and
the New York Stock Exchange the barometer of financial values for the
whole United States.
However much our commanding position may in other respects fit New York
to be the world’s financial center, it cannot aspire to and secure that
position of power so long as it is the scene of these violent
fluctuations in the rates of interest for call loans on the Stock
Exchange. Measures should therefore be taken not only to prevent them,
but to make their recurrence impossible; and how this can be best and
most efficiently accomplished is a matter for very serious
consideration.
That it can be accomplished is evident from the entire absence of any
such violent rate oscillations in the money markets of Europe. There the
rates of interest fluctuate slowly within a reasonably narrow range,
generally between 3 and 5 per cent, the extremes being 1 or 2 above, or
below, these figures. Such unreasonable eruptions in the money market as
we have sometimes seen in the loan crowd of the New York Stock Exchange
were never seen, and would be impossible, in London, Paris, Berlin, or
any other European capital. Why, then, should they ever occur, or be
possible here?
In response to questions propounded by the Chamber of Commerce Committee
I would say that, as the Sub-Treasury system is a disturbing factor in
the money market, provision should be made by Congress for the regular
deposit in national banks of surplus Government money above its regular
working balance of fifty millions, the banks to pay interest at 2 per
cent per annum thereon.
Bank notes, in my opinion, are a form of bank obligation the same in
principle as bank deposits, payable on demand, and these notes, as the
most convenient form of credit, should be released as much as possible
from restrictions not necessary to secure their safety, acceptability,
and redemption in gold, or United States legal tender notes, for so long
as the latter may be kept outstanding.
In seeking increased flexibility for our currency I would not suggest
anything that would impair the value of United States bonds as a basis
of circulation; but it deserves consideration whether new currency might
not be issued by moderately increasing, above the par of the bonds but
not above their average market value, the amount of notes to be secured
by them. Then, too, why should not national banks be authorized to issue
a fixed proportion of circulating notes upon their general resources,
these to be secured by a guaranty fund? To induce the retirement of
these notes when not needed, owing to money being superabundant at low
rates, this asset circulation could be made liable to a graduated tax.
The proportion of notes to capital that should be allowed, and the
amount of the tax, are matters upon which bankers differ, but I favor
strict moderation in both. This asset currency, under moderate
restrictions, for use under ordinary conditions, would be far preferable
to any emergency circulation, ISSUED UNDER A HIGH TAX, although
Secretary Shaw recommended it in his report for 1905.
As the taxes collected upon the circulation of national banks from 1864
to the end of June, 1905, amounted to $96,220,997, and the failed banks,
during that period, had outstanding only $17,295,748 of notes, and the
dividends paid on their claims averaged 77.95 per cent, it follows, at
the same ratable proportion of loss, that the deficiency on account of
their notes would have been only $3,813,712, or 22.05 per cent of their
total circulation. So in the light of this experience I see no great
risk in a guaranty fund, consisting of the taxes paid upon circulation,
nor do I see why it would not be sufficient to redeem all the notes of
failed banks.
I would make the asset currency a first lien upon the assets of the
issuing banks, and allow the banks to redeem their notes at appointed
redemption places in the large cities. This would save the trouble and
delay of sending them to Washington, and by facilitating redemptions
when money was easy, give more ebb and flow to the currency and tend to
prevent excessive speculation in times when there is a glut of money.
Under the Canadian banking system there are several central redemption
cities for bank notes; but I would not, as is the case in Canada, limit
the right to issue notes to banks of not less capital than $500,000.
There is safety in numbers, in regard to banks as well as other matters.
Then, too, it would be well to make all the Sub-Treasuries in the
country useful as national bank note redemption points, because it would
contribute to the elasticity of the currency in the same way that it
does in Canada, and doubtless Congress would favor such a measure.
The proposition to establish a new bank in Wall Street with $50,000,000,
or even more, capital, or to increase the capital of an existing bank to
that extent, to serve the purposes of Stock Exchange borrowers, and
regulate rates of interest, after the manner of the Bank of England, is
deserving of no consideration whatever. It would merely excite and
provoke the jealousy and opposition of other banking institutions, and
create a sort of monopoly with special privileges, without securing the
end in view. A Bank of Banks is not what we want, nor do we want a
revival of the old United States Bank.
Such a bank as the Bank of England, or the Bank of France, could not be
created here, either in a day or a generation, for those time-honored
institutions are the growth of ages. They are very much older than any
of the other banks there; and, under the control of their respective
governments, they have grown up with their countries and become
practically, although not by ownership, government institutions. Hence
their prestige and power, and the impossibility of other banks
superseding them.
It may, however, deserve consideration whether the New York Clearing
House might not exert power in regulating rates of interest similar to
that exercised by the Bank of England, providing the banks belonging to
it would unite to give it that power; and is there any reason why they
should not? Even without any formal or concentrated action in this
direction, outside of the Clearing House Committee, it could appoint a
committee to name every week, or oftener when necessary, as the Bank of
England does, a minimum rate of interest on call loans and discounts. It
could also fix a maximum rate for each. This need not be compulsory; but
even only as a recommendation it would have a powerful moral effect, and
the Wall Street banks, if they approved of the innovation, would conform
to it. The Clearing House could, indeed, after the formal approval of
this regulation by its members, enforce its observance under penalties,
if deemed necessary. In this alone, in my opinion, a practical remedy
would be found for the high rate evil on the Stock Exchange.
But, at the same time, greater elasticity could be given to our national
bank currency if Congress would amend the law so as to permit of
currency being issued against specified bank assets, subject to the
approval of the Comptroller of the Currency. This is a feature of the
banking system of other countries, which has always worked very well and
to the satisfaction of all interests; and what our currency urgently
needs is greater elasticity.
Strictly speaking, according to economic principles, we cannot expect a
perfect currency, with all the resiliency and elasticity possible in a
currency, so long as bonds instead of gold are used as the basis of our
bank circulation. Yet for security the bonds are, under present
conditions, just as good as gold; and there would be more elasticity in
the bank circulation based upon them if the restrictions imposed upon
their redemption by the Act of 1882, which are now unnecessary, were
removed. Indeed, the inability to promptly retire bank notes is one of
the worst faults of our system, and Congress should repeal the
restrictions without delay. If this obstacle in the way of resiliency
were removed, and the unlimited retirement of bank notes permitted, we
may rest assured that free expansion, when demanded, would quickly
follow curtailment, and this ebb and flow of the currency would
obviously be an elastic movement.
As it is, there is a great waste of banking power in our treatment of
national bank notes and reserves. We have $544,765,959 of national bank
notes, and only $337,130,321 of United States legal tender notes, and,
setting gold aside, the redemption of the former in the latter is
obviously absurd and inconsistent with sound finance and good banking.
We see in the present system this $544,765,959 of banking capital
absorbed and represented by non-reserve currency. The capital is
perfectly safe, but it is locked out of any other use, and rendered
inefficient for any other purpose. This calls for a remedy. The
percentage of reserves to loans in national banks has decreased from
more than 20 per cent in 1898 to less than 15 per cent. Hence the bank
reserves require to be increased.
The law relating to the redemption of national bank notes in United
States notes, or greenbacks, was passed when the greenbacks very largely
exceeded the bank notes in amount, but the reversal of these conditions
reminds us that the tail is now wagging the dog. This alone makes it
clear that the law should be amended.
But beyond all this we should open our money market more to the rest of
the world by establishing a new factor, which would always afford prompt
relief in times of stringency, by giving us cable transfers of gold,
instead of gold shipments, and of itself prevent abnormally high rates.
Through this medium we could, instantly, practically draw gold from
Europe whenever wanted, and Europe could do the same from us, when
needed there. I refer to the establishment of an International Gold
Transfer System, or Clearing House, to supersede and dispense with what
I may call the old-fashioned gold see-saw. Gold in circulation is doing
good work, but gold see-sawing across the ocean is going to waste. The
custom of shipping gold from one country to another, in response to the
ups and downs of the market rates for foreign exchange, not only reminds
me of the forward-and-back movement in a quadrille, but suggests that,
as the precious metal is rendered practically useless while in transit,
it should not be used in a dance of that kind across the ocean. The
subject may not seem to be very important, but it really is so, for
“tall oaks from little acorns grow”; and it is surprising that in the
march of modern improvement this method of settling international
balances has not been superseded by a shorter, quicker, and cheaper cut
to transatlantic adjustments. Bankers, in both hemispheres, are absurdly
behind this progressive and electric age, in transporting gold from the
New World to the Old, and vice versa, to adjust balances between them,
whenever the rates of exchange show a profit in the transaction. That
they could profitably dispense with it is obvious, as they could easily
establish this transfer system, this international clearing house for
gold, at very small expense. Thus the risk, and loss of time, involved
in the old-fashioned method would be eliminated, while the new
arrangement, being under their own control, would beyond peradventure
serve every necessary purpose of the shippers, combined with perfect
safety.
The disadvantage of shipping boxes or kegs of gold to and fro between
America and Europe is apparent when we consider that it is a
time-wasting see-saw performance, which involves the expense of packing,
cartage, freightage, insurance, and loss of interest while in transit,
and still greater loss due to abrasion consequent on sea transportation,
to say nothing of bankers’ commissions, and risk of partial or entire
loss by robbery, accident, or marine disaster; ignoring, moreover, the
restraints it imposes upon our foreign trade.
All these disadvantages could be obviated and this handicap upon our
commerce removed by a mutual-interest arrangement, between the leading
banks in the United States and Europe, to deposit a sufficiently large
amount of gold on each side of the Atlantic, and issue international
clearing-house certificates and draw bills of exchange against the
deposits. This gold could be counted as part of their reserve, if in
their own vaults; or the Bank of England, in London, and the United
States Sub-Treasury in Wall Street, could be used as the gold
depositaries. We have a clearing house for bank checks in each of the
large cities, and one also for the transactions of the New York Stock
Exchange. London, too, has its bank clearing house. Why, then, should
the clearing house system not be extended to international transfers of
gold, so as to make them possible at any moment by cable-telegraph
instead of the slow process of six-days transfers? In this way our
international dealings would be quickened and extended and our financial
and commercial relations become more intimate.
There is no good reason why we should unnecessarily treat gold as we do,
when we can save time, money, and risk by keeping the metal where it is,
and issuing certificates of deposit against it, and the use and transfer
of which would serve as well as gold shipments.
The present custom becomes a ridiculous “chasse” across the Atlantic,
when we see the same gold shipped to Europe, then shipped back to
America within a few days after reaching its destination, without being
unpacked, owing to sudden intervening changes in the rates of exchange,
making it profitable for the former gold exporting country to import the
metal. Such wasteful shilly-shally procedure would be likely to excite
mirth in opera bouffe, but bankers who ship gold are very serious about
it, and seem to be without enough perception of the ludicrous to see
anything funny in its coming and going, although they feel the shoe
pinch in its costliness in both time and money. As the world’s gold
production increases the urgent need of this over-sea change will become
more and more conspicuous, and its adoption will accord with the
generally progressive spirit and methods of our telegraphic and
telephonic age.
Had such an international gold clearing house existed the sagacious but
unprecedented action of the Secretary of the Treasury, to relieve the
money market by making deposits, as secured loans, in certain banks, to
encourage and cover their prospective gold importations from Europe, the
same to be returned on the arrival of the gold, would have been
unnecessary. While this expedient has well served a temporary purpose,
it is not to be relied upon as a permanent source of relief during
monetary stress, and it involves a stretch of authority under the law
that is open to grave objection. But, as it happened, the Secretary’s
action, which was taken just before the San Francisco disaster occurred,
proved particularly fortunate, and probably prevented a very serious
aggravation of the stringency in the money market, owing to the heavy
remittances to California. It was a piece of good luck that seemed
almost providential, and the end justified the means. But it should
always be regarded as only a fortuitous circumstance and temporary
expedient, not as a permanent source of relief; and it emphasizes our
need of a new international gold transfer system. Moreover, the benefit
Europe would derive from it would be equal to our own.
The Secretary, under the circumstances, acted wisely in also increasing
the Treasury deposits in the national banks, while the Government’s
receipts were largely in excess of its disbursements, so as to offset,
as far as possible, this preponderance of receipts, and lessen the drain
of money into the Sub-Treasuries. But this method of relief is, too,
only a temporary expedient, to remedy the evils of the Sub-Treasury
system. While the Sub-Treasury system lasts Congress should authorize
the Secretary to deposit customs, as well as internal revenue receipts,
in the national bank depositaries, in time of stringency, when the
Government’s receipts exceed its disbursements, and it has more than a
sufficient working balance. The Government should, as a compensation to
it, require the banks to pay interest at, say, two and one-half or three
per cent per annum on such deposits, these not to exceed, in amount, 25
per cent of their paid-up and unimpaired capital, and to be returnable
on demand, but without requiring these special deposits to be secured.
They should, however, be made a first lien upon the assets of the banks.
If the changes above suggested were made, I am sanguine that they would
prove to be remedies for the evils and disadvantages under which we now
labor, and so increase the stability of our money market and improve and
fortify the machinery of the whole monetary system, while giving more
elasticity to the currency.
------------------------------------------------------------------------
CHAPTER LXXVI.
INDIVIDUALISM VERSUS SOCIALISM.[4]
Footnote 4:
An address delivered by Henry Clews on Sunday afternoon, May 12, 1907,
at the Columbia Theatre, Brooklyn, in debate with Professor
Kirkpatrick, graduate of Albion College, Michigan, and former
professor in the University of Chicago.
In order that I may present a clear understanding of my view of the
subject, it is only fair, in the first place, to state that the system
of Individualism which I shall endeavor to uphold is worthy and
commendable. I hold it to be superior in every sense to any of the
various plans of Socialism offered by its advocates. By this I do not
mean Individualism in the extreme sense of the term, for, as we all
know, in no civilized country and under no form of government whatsoever
does, or can, extreme Individualism exist.
In the world of economics and politics Individualism has a distinct
meaning, as a name given to the theory of government which favors the
non-interference of the State in the affairs of individuals. It has also
been well defined, as the private ownership of the means of production
and distribution, where competition is possible; leaving to public
ownership those means of production and distribution in which
competition is practically impossible.
It will, then, be at once apparent that, in the consideration of the
forces helpful and necessary to society, the individualist believes that
competition which encourages merit and develops skill should remain
paramount. And right here the issue is made, between Individualism and
Socialism, the Socialist denying that competition is beneficial to
society, but contending rather that it is a deleterious and harmful
force.
Upon this issue, so joined, I stand firmly in favor of the principle of
competition, and that system of Individualism which guards, protects and
encourages competition. It is that system of government under which we
live to-day—a government of the people, by the people and for the
people—the United States of America—a free system of government, in the
best and broadest sense of the term.
Under this free system of government, whereby individuals are free to
get a living or to pursue wealth as each chooses, the usual result is
competition. Obviously, then, competition really means industrial
freedom. Thus, any one may choose his own trade or profession, or, if he
does not like it, he may change. He is free to work hard or not; he may
make his own bargains and set his price upon his labor or his products.
He is free to acquire property to any extent, or to part with it. By
dint of greater effort or superior skill, or by intelligence, if he can
make better wages, he is free to live better, just as his neighbor is
free to follow his example and to learn to excel him in turn. If any one
has a genius for making and managing money, he is free to exercise his
genius, just as another is free to handle his tools.
In this primary outline of the free system of Individualism, it is well
also to consider the good side of freedom or Individualism. It is an
axiom, well established, that the freer men are to choose their work and
to use and enjoy its results, the more work they are willing to do.
Their energy and enterprise are called out, their wits sharpened, their
hopes stirred. If any one wins unusual success, others are encouraged to
try better methods. If an individual enjoys his money, gained by energy
and successful effort, his neighbors are urged to work the harder, that
they and their children may have the same enjoyment.
Thus, every one accomplishes more in a condition of freedom or
Individualism, and the whole nation is richer, than if custom or a
Socialistic community fettered and restricted men, and compelled them to
work according to rule. With matured individuals, this is on the same
principle that children enjoy their sports better, when left to
themselves, than if a parent or teacher were to meddle and make rules
for them.
I believe that it can be stated, as an established fact, that whenever
men are, as individuals, free to work, to earn and to save and use their
earnings as they deem fit, the capable, the industrious, the temperate
and the intelligent everywhere tend to rise to prosperity. The skilful
are always in demand and at good wages. And remember, that a day’s wages
never purchased so much in supplies as it does in the United States,
where we use the individual or competitive system of work, because high
as prices are, wages are still higher.
As a further part of this summary of Individualism and competition, let
us also add the moral side, for it is a considerable and important item.
When men labor, earn or save with perfect freedom, they develop many
moral qualities, such as patience, self-reliance, self-sacrifice,
venturesomeness, integrity, generosity and respect for others’ rights.
If a Socialistic committee of the wisest men could manage and make rules
for the rest, and provide for every one’s necessities, men would not
acquire or exhibit these sterling qualities of manhood, as well as they
would by being thrown upon their own resources.
We know this, also, from the fact that the strongest characters have
been worked out in brave and patient competition and conflict, often
under difficult circumstances; whereas the men who have never been
thrown upon their own resources rarely amount to anything.
After this preliminary description of the worth and salient influence of
Individualism, under which our country has grown to be the greatest
nation of the world, let us now turn to Socialism—a system which, if
adopted, would call a halt to our progress, tear down our established
institutions, and turn our great prosperity into ruin and decay.
It is difficult to tell just what is meant by Socialism in the more
modern sense of the term.
It has appeared in the United States under five different and almost
totally disconnected forms. It has appeared as a movement towards the
establishment of Socialistic communities or communisms; it has appeared
as Fourierism, as German or International Socialism, as Nihilism and
Christian Socialism.
Professor Mallock, the eminent English writer, in his lectures in New
York, made a careful analysis of Socialism, and exposed its plausible
sophistries, some of which, Socialists boast, are grounded on our
defined principles of political economy, which the learned writer
asserts are rather incomplete. It may be admitted that this is so, and
that fuller and clearer distinctions could well be added to our text
books on the subject. But, joining the issue in a clean-cut way, between
Individualism and Socialism, obviates all necessity at this time of
further considering such distinctions, and clarifies our respective
positions in this debate.
It was noticeable that, during the delivery of these lectures, hints and
remonstrances were freely thrown out that the structure that Dr. Mallock
was attacking was not Socialism at all, in the modern acceptation of the
term, but something else that had long ago been abandoned.
Now, while I have no unfriendliness whatever with the honest Socialist
(mistaken, deluded and sadly out of place in this grand Republic, as he
may be), I do say, that this position is but too often the wily
subterfuge, sought to be taken advantage of by the insincere agitator or
pretended reformer, when he sees that he is beaten. His invariable
answer to an irrefutable argument is: “Oh, that which you talked about
is not modern Socialism!”
For the purpose of this discussion, however, we can agree that, as
contradistinguished from Individualism, Socialism opposes and denounces
competition as an injurious and unnecessary force in society, and
advocates the collective ownership, through the State, of all the means
of production and distribution.
Socialists would, in other words, fence up the great field of free
opportunity, deaden all incentive or inspiration for great achievement,
and not only curtail, but wholly remove, the right to compete and excel,
and make it impossible to write “success” as the result of individual
effort.
Just think of that! Why, the very thing that the Socialists attack, as
untenable and wrong in government—individual competition—has done more
than anything else to make us what we are as a nation to-day; has kept
alive the precious fires of liberty and freedom and has preserved the
institutions of our country. Take away the spirit of Individualism from
the people, and you at once eliminate the American Spirit—the love of
freedom—of free industry—free and unfettered opportunity—you take away
freedom itself!
And right here, I take the position and shall ever contend, that the
United States (of all countries in the world) is no place for Socialism.
Let us never forget that it was founded by the wisdom and patriotism of
the Fathers of the Revolution, and that it is blessed with a
Constitution, framed by men who loved individual freedom and national
liberty, and who risked their lives and sacrificed their property in the
struggle to overthrow injustice and oppression and achieve independence
and individual equality. Let us not forget its past one hundred and
thirty years of eventful history, replete as they are with many chapters
of severe trial, over all of which it has ever risen superior. This
splendid history has placed our system of government beyond the line of
experiment, and raised it to such an elevation of recognition and
respect, that it now ranks as the highest among all the nations of the
earth.
Born of the spirit of resistance to oppression, with the broadest and
freest constitution that the world has ever known—a land of freedom and
equality in the best and most liberal sense of the term—it would seem
that the sincere lover of liberty and equality could ask no better home
than this democracy of ours—whose glorious flag floats over eighty-four
millions of prosperous and enlightened people.
To further add, the term “contented people” might, perhaps, not be a
strictly true assertion, and neither would it, in my opinion, be a
desirable one to use; for to the spirit of discontent and ambition, so
predominant in the American character, are due largely the grand
achievements and the remarkable progress and advancement of our nation
in all things that make for greatness, strength, and public welfare.
However, we must be careful to draw a plain line of contradistinction
between that discontent which is really the mainspring of human
activity, and which, appreciating the solidity and soundness of our
foundation, aspires to build thereon to the highest ideals of perfection
and success—and that misguided or malicious discontent of Socialism
which arrays itself as an enemy of all civilized forms of government and
seeks their utter destruction.
We can well understand and appreciate, in a country ruled by a despot,
whose heel of oppression and tyranny is ever on the necks of the
down-trodden people, the feeling of the masses who, desiring some
measure of free action and equality, would revolt against such
conditions, and seek a reorganization of society. They would, naturally,
look as far away as they could from such a government of despotism—the
only one they had ever known—to the other extreme—a country where the
State should own all the land and capital, employ all the people, and
divide everything, share and share alike, among the community.
But the spirit of revolt, which in that case may be patriotism, becomes
ridiculous and open to the charge of insincerity when the tenets of its
doctrine are transplanted and cultivated upon American soil by our
foreign population.
With further reason, also, must we question the sincerity of the
Socialist, who, leaving oppression behind, emigrates to this country,
where tyranny and despotism are unknown, and yet who continues to echo
that war cry of destruction wrung from his heart by the cruelty of his
old-time oppressors.
He comes here from a land of want and thraldom to a land of plenty and
freedom. He may come without name, fame, or property, and he is received
with open arms. After a brief residence he is entitled to full
citizenship, and is then a part of the government, enjoying all the
rights and privileges of the native born. Besides the active or public
equality—the equality possessed by all, the right to share in the
government, such as the electoral franchise and eligibility to public
office—he has the rights of private equality. He is possessed of legal
equality—the equal possession of private civil rights enjoyed by all
citizens. Then there is the equality of material conditions—that is, the
right to acquire wealth and all that wealth implies.
Every opportunity to achieve success and happiness abounds on every
hand, and every incentive to industry and accomplishment awaits him; and
if he is energetic and skilful, there is nothing to hinder him from
becoming prosperous, or, in other words, successful in whatever vocation
in life he may pursue. With qualities that commend themselves to his
fellow men, there is no limit to the possibilities of his achievements,
and very soon (as has been very often the case) he may become a leader
of men. If, therefore, he is sincere, surely he must agree with me that,
in view of these conditions, this is no place for the Socialist. And
does it not sound like a paradox to hear this cry of Socialism still
rending the air—while every avenue of fortune lies open to every one?
[Illustration:
_D G Reid_
]
Socialism is self-contradictory, and opposed to deep-rooted and
ineradicable human instincts. Its origin is, of course, purely selfish;
but there are two kinds of selfishness—the enlightened and
unenlightened. Unfortunately, Socialism belongs chiefly to the latter.
It is often overlooked that the identical love of gain which seeks to
equalize the distribution of wealth will not be satisfied with equality.
A desire for gain will still remain and seek to acquire. The most
commendable object in Socialism is the uplifting of the down-trodden and
poor. Yet that great commoner and tribune of the people, William
Jennings Bryan, tells us that under Individualism we have seen a
constant increase in altruism. That the fact that the individual can
select the object of his benevolence and devote his means to the causes
that appeal to him has given an additional stimulus to his endeavors.
And Mr. Bryan pointedly asks the question: “Would this stimulus be as
great under Socialism?” Let it not be forgotten that by means of present
tendencies and existing economic laws the poor are constantly growing
richer. They were never so prosperous as to-day. Labor has made great
strides, and the uplift in the lower walks of life in all Christendom
during the past twenty years has been beyond precedent. Give us wise and
just legislation, and complaints about the inequitable distribution of
wealth will quickly disappear.
The state of society that the Socialists seek to establish may be
beneficial to a class which, under any conditions, lacks frugality,
thrift, and self-reliance; but just where the general mass of humanity
is to be bettered or elevated, socially, morally, or politically, is a
point not satisfactorily explained. A society in which all human beings
do right, for the simple reason that it is right, cannot exist unless
human nature is recast and reconstructed. Human nature must be treated
as it is found in the general makeup of man, and, therefore, a society
in which all special desires, all ambition, and all self-esteem have
been eliminated, precludes development and progress. It reduces
everything to utter shiftlessness and stagnation. In such a Society
there can be no incentive to great achievements in art, literature,
mechanics, and invention. If all are to be placed on an equal footing,
the ignorant with the educated, the dullard with the genius, and the
profligate with the provident, what encouragement is there for special
effort?
If you render accessible to each and every member of the human family
the achievements and benefits of civilization, holding “property in
common,” why should a man rack his brain or strain his muscles in
producing something which he expects to prove remunerative to himself in
some way, but which, under the Socialistic state, would go to the equal
financial benefit of all?
Just for a moment, stop to think of the effect of bringing all men as
near to a dead level as possible, for I recognize that not even
Socialism would secure the equality which it seeks. If one physician is
more skilful than another, who could insist that he receive no better
reward than the less skilful, when many would be willing to offer it? Or
how else could he avoid having all the patients in the community upon
his hands except by charging more for his services than an inferior
physician? If one lawyer shows greater ability than another, is he not
entitled to a larger fee for his talent? And how else is he to protect
himself from taking all the business from the lawyer of less ability?
Again, if the skill of the cabinet maker is higher and rarer and worth
more than that of the carpenter, how can the latter expect the same
compensation as the former? To put both on the same plane would be
unjust, and would lead to one being compelled to work beyond his
strength, while the less skilful would probably be insufficiently
occupied. Socialism, you thus see, would often place a premium upon
laziness and inefficiency.
Socialism would benefit the shiftless and lazy at the expense of the
thrifty and industrious. Is that a good system to advocate and follow?
Which of you would be willing to share your hard-won provision for your
own family with another family, the head of which you knew to be lazy,
incapable, and dissipated? What incentive to struggle would remain if
the results of that struggle were to be taken away from you and given to
others who sat idly by? What would be the effect upon the United States
of throttling the ambition to achieve? Take the necessity of struggle
out of life, and we should quickly weaken human nature. Civilization
would decline and national decay quickly follow. True, the competitive
system works harshly upon the weak and incompetent. This, however, opens
a channel for development of benevolence, kindness, and patience,
without which human nature would be exceedingly one-sided and
forbidding. The indigent, unfortunate, and weak will always be a charge
upon the stronger, whether in the family, the municipality, or the
state. It is folly to think that life can be lived without struggle; and
that is one of the chief delusions of Socialism which would quickly
impair our national manhood and endurance. Trouble and pain have their
part in the plan of nature.
The Socialist is usually an unfortunate or misled individual. He has
probably suffered from reverses or unfortunate environment. He has
perhaps been roughly or cruelly handled. Perhaps he cannot get on
satisfactorily, or his ambitions have been disappointed. He is then in a
condition of discontent ready to swallow Socialistic—or any
other—sophistries which hold out the delusive promise of relief.
Socialism attaches too little importance to the fact that men are made
with an infinite variety of tastes, abilities, and capacities. No two
are precisely alike, and it is utter folly for poor, weak man to
undertake to equalize these differences. All progress in history has
been made through struggle and sacrifice; and Socialism, no matter how
beneficent its intentions, cannot change the inscrutable laws of nature
or humanity. All natural laws have their reverse side. Gravitation,
which keeps us firm on our feet so long as we are on solid ground,
knocks us to pieces if we attempt to walk off a housetop or over the
opening of a pit. It is not the natural law, but the attempt to ignore
it, that gives us trouble.
I most emphatically assert that we cannot get rid of competition, any
more than we can get rid of the law of gravitation.
The American inventor, mechanic, farmer, merchant, and financier, and
the worker in every profession, are, every one of them, proud,
respectively, of their skill, knowledge, and ability. Their ambition is
to excel—to produce the most and best. Experience, enterprise, and
courage create opportune conditions most favorable to the State and
Nation and to themselves. Each vies with his fellow man in producing the
best results, and is always willing to tackle any obstacle—no matter how
formidable—that stands in the way of success. In his whole compendium
and entire makeup, there is no such word as fail. He aids, by his
untiring and individual energy and effort, in making his country the
greatest in the whole agricultural, industrial, and financial world. He
reaps the reward of industry and accomplishment, and his home is blessed
with bounty; and he knows that his children have equal opportunity with
himself to learn and to achieve.
Shall he be asked to tolerate, or consider, the sacrifice of all these
things, so dear to him, for Socialism?
Shall he be led to believe in a foreign plan or system of government
that degrades skill, eliminates acquisition and thrift, and ignores
genius? I cannot think so!
These are the very qualities and attributes that he prizes so highly, as
essential to the prosperity of the home and nation. He knows (or should
know) that to do so would be to deaden and relinquish those God-given
qualities of heart and brain that have helped to make him and his
country what they are to-day.
He knows (what the nations of the world concede) that the American
people are the most prosperous of all on the face of the globe; and that
this high and commanding position has been attained under existing
conditions, and through the operation of our admirable system of
government.
Whatever, therefore, may be the pretexts used to make him dissatisfied
with his lot, his own experience tells him every day that the
Constitution under which he lives is a glorious one, and so implanted in
the hearts of the American people as to be impregnable against the
assaults of Socialism.
At the same time, he is appreciative of the fact that it is not in the
nature of things to expect in this world blessings pure and unmixed; but
he is thankful for the superior good that he enjoys under our beneficent
democratic form of government.
A state of Socialism in the United States would tend to drive all our
men of superior ability, skill, and power out of the country. The strong
would quickly seek other fields where the qualities which they possess
would have a free chance and an open field. They would promptly desert a
country that offered nothing better than a dismal dead level, with no
means of achievement in sight, and the nation would quickly fall into a
state of miserable inertia or decay. Our forefathers came to this
country to establish religious freedom; they next fought for political
freedom; afterwards they sacrificed a million lives for race freedom;
and now we, their successors, with such glorious traditions behind us,
must stand for industrial and social freedom. For, in the final
analysis, Socialism can stop at nothing short of industrial slavery and
political bondage. Great achievements would be impossible under it.
Having shown the force and importance of individual initiative and
independence and the necessity for the spur of competition to bring
about the best results in human welfare and achievement, I now turn to
the rather concrete branch of the subject, known as Municipal Ownership.
Naturally, a proposition involving the placing of the ownership and
operation of our railroads, telegraph lines, plants for supplying light
and surface transportation, and conducting manufactories and business,
is one of such vital concern to all of us as to arouse our keenest
interest.
It is a part and parcel of the Socialistic plan of government, and, to a
very great extent, the arguments and illustrations presented in my
treatment of Socialism, generally, are of direct application to
Municipal Ownership.
I would term it the entering wedge of Socialism, adroitly resorted to by
its advocates. These Socialists well know the temper of the American
people toward their propaganda and wild project, and at the same time
they recognize the peculiar trait of character disclosed by Americans in
their curiosity and liking for anything new. Hence, they grossly
exaggerate the shortcomings and ills that exist in our body politic as
constituted; and, at the same time, extol, in an extravagant manner, the
superior conditions that would follow the taking of a small portion of
the Socialist’s infallible cure.
Municipal Ownership, as far as I have been able to observe, is also a
pure and simple political move to secure votes for aspirants for office,
and it is used for this purpose, regardless of any other question. It is
one of those planks that we often see inserted by parties in their
platform, to stand upon, to attract and gather in the votes. So
Socialism has its uses—for them.
I will admit that there are many economists who have presented a
friendly side to the Socialistic theories involved, and have prepared
able and extended articles in their endeavor to support or uphold such
theories (either in whole or in part); and it would be unjust to include
them in the same category with politicians and Socialists. However, if
that statesman was only half right who, in speaking of the tariff, said
that the question was a business one, and that a condition and not a
theory confronted us, then I feel that I am right in saying that “Public
Ownership” is a practical business question entirely—and not a
theoretical one.
There are so many logical and unanswerable reasons against this
Socialistic proposition that I feel it incumbent upon me to enlarge only
upon the practical ones, that I know more about, than upon those of the
theoretical group.
The experience of years has demonstrated that at the present time all
business enterprises require rare ability and experience, if not genius,
to ensure success.
Great financiers and successful men have devoted their lives to the
study and practice of their trade and business.
How is it possible, then, for municipalities to expect such
qualifications from officers whose term of office is for one or two
years, or during the tenure in office of a political party?
[Illustration:
From stereograph. Copyright, 1907, by Underwood & Underwood, N. Y.
THOMAS F. RYAN.
]
In the economy of commerce and its daily conduct and operation, there
are numerous divisions or departments, each one of which can only be
understood, appreciated, and conducted by men of special training and
fitness—who have given years of application thereto—and it is only by
their watchful care and expert management of each of these divisions
that a possible success is derived or business made to pay.
The smallest neglect, the merest indifference to details, or the
inattention that always accompanies abstraction by something else—taking
one’s mind off his business—upsets the whole system, and means waste
instead of saving economy, loss in place of profit, and inevitable
failure as the result. That this is true there is not the slightest
doubt, and would be readily confirmed by the leaders of every industry.
Animated by a desire to make the best possible showing, for use at the
next election, a false economy would be exercised under Municipal
Ownership, and no attention would be paid to obtaining useful new
inventions; and needed improvements and extensions would, likewise, be
ignored.
On the other hand, under private ownership, the best professional talent
is employed, at salaries unheard of in public office; and all the latest
inventions and improvements are at once utilized, giving the public
up-to-date service.
The active, modern business man, keenly alive to the requirements
necessary to ensure profit and success, perceives at a glance the evils
and mischievous results that would infect everything carried on under
this Socialistic plan. And as John Stuart Mill well says: “The mischief
begins when, instead of calling forth the activity of individuals, the
municipality substitutes its own activity for theirs.”
No serious attempt has ever been made to show the possibility of
securing and retaining, under some rule of municipal civil service, or
otherwise, the best men to assume the burden of management and
responsibility. As already explained, it would be practically impossible
to secure the best men, and no system of civil service has yet been
formulated, intended and able to provide for their retention.
In this connection, a fitting illustration is the case of Colonel
Waring, who instituted and maintained the best street-cleaning system we
have ever seen. His work was simply marvelous, and he made New York City
a model of cleanliness.
No one ever questioned his ability or integrity; yet, while at the very
zenith of his success, he was asked to resign, and obliged to leave the
city employment to make room for the choice of a new city
administration.
The defects and fallacies of Municipal Ownership which I have described
permeate all government ownership. Official reports and statistics
furnish convincing proofs and conclusive evidence of the failure of this
system as conducted abroad, and more signal loss and damage—in an
incalculable degree—would surely follow its adoption here. Just in
proportion as our interests and enterprises are the greatest and most
successful, as compared with other nations, would be the immensity of
our depreciation and collapse.
The United States is so different from other nations in its political
system that this fact alone precludes serious consideration of our
adoption of this imported Socialistic hobby and political heresy. It is
also a country whose every chapter of growth, progress, and prosperity
is a continuous narrative of individual efforts of its citizens. They,
naturally, prize individuality as they do independence itself, and have
every reason to believe that the present system of government is the
best for them, and that this land of Individualism is no place for
Socialism.
Imagine New York under Municipal Ownership of our public utilities! We
should then have fastened upon us a more colossal and more corrupt
Tammany than even existed in Tweed’s times. Graft would thrive beyond
all dreams of avarice. Let us take a lesson from England in this
respect, where public ownership has been tried on a larger scale and
under more favorable conditions than elsewhere. In a few instances the
running of street railways or city lighting plants has been successful,
but exceptions do not always prove the rule, and the conditions under
which these enterprises have been operated there must be taken into
consideration. English cities are comparatively free of political
corruption, and are, moreover, often served by men of high character,
wealth, and ability—men having a strong sense of civic duty, who deem it
an honor to give their community efficient service. Unfortunately, we
have not yet developed a class of this sort in the United States;
perhaps in due time we shall; but, until then, the experiment of
Municipal Ownership had better be indefinitely postponed. A weak point
of Municipal Ownership has usually been the financial end of the
business concerning which the public has been poorly informed. Many of
these enterprises in English cities have proved unprofitable. The
accounts have been juggled, and expenses that should be charged against
the plant were often transferred to city accounts. Not a few of the
English cities have so run into debt as to injure their credit and
impair the sale of their securities. Already, the British taxpayer is
beginning to complain about the costliness of these Municipal Ownership
schemes, and a decided reaction against them is setting in. The London
County Council has launched heavily into these ventures, many of which
have proved losing ventures, and some prominent experts have gone so far
as to predict that London will be bankrupt before long, unless present
tendencies are reversed. If Municipal Ownership has failed under the
highly favorable conditions which exist in England, how can it succeed
here? Again, the English telegraph system operated by the British
Government does not compare with the private systems of the United
States, either in efficiency or cheapness, and England with its public
telephones is very far behind the United States in efficiency and cost.
London does not begin to have the number of telephones per capita that
New York can claim. American railroads under private ownership perform
the best and cheapest service in the world.
If any further argument were needed to convince you that the United
States is no place for Socialism, its root or branches, it may be found
in the radical and quite amusing change of front shown by Major
Dalrymple, of Glasgow, upon the occasion of his visit to this country.
He came here at the request of Major Dunne, of Chicago, and the
Municipal Ownership League of New York, to aid the forces of Socialism
in their efforts in behalf of Municipal Ownership. He was the great
Apostle of that doctrine in Glasgow, and the very man, in their opinion,
to convert our people to that system.
Upon his arrival here, he was greeted with great éclat by the League of
this city, and gave out an interview in which he spoke as follows:
“I see no reason why any city in this country should not be able to own
its street railways, and to run them with as much success as we have
achieved at Glasgow. I admit that the proposition is a much larger one
than the one we had to tackle, but at the bottom it is the same.”
This was before he knew our country and its institutions. After an
extended stay here, he prepared for his homeward journey, but before
sailing, he was again interviewed, and to the surprise and discomfiture
of the Socialists, he retracted all that he had said before in favor of
Municipal Ownership, in the following language:
“To put street railways, gasworks, telephone companies, etc., under
Municipal Ownership would be to create a political machine in every
large city that would be simply impregnable. These political machines
are already strong enough, with their control of policemen, firemen, and
other office holders.
“If, in addition to this, they could control the thousands of men
employed in the great public utility corporations, the political
machines would have a power that could not be overthrown. I came to this
country a believer in public ownership. What I have seen here, and I
have studied the situation carefully, makes me realize that private
ownership, under proper conditions, is far better for the citizens of
American cities.”
[Illustration:
From stereograph. Copyright, 1906, by Underwood & Underwood, N. Y.
JOHN W. GATES.
]
The New York papers aptly called this “The conversion of the Scot”; and
this blunt and honest admission coming from their own authority, that
Municipal Ownership in this country was wholly impracticable, stunned
and paralyzed its agitators, and caused many of its adherents to leave
the ranks of Socialism.
Mr. James Bryce, the worthy newly appointed English Ambassador to this
country, pointed out some twenty years ago, in his “American
Commonwealth,” how the then future of the United States sometimes
presented itself to the mind as a struggle between two forces—the one
beneficent, the other malign; the one striving to speed the nation to a
port of safety before the storm arrives, the other to retard its
progress, so that the tempest may be upon it before the port is reached.
He further expressed concern as to whether the progress then discernible
toward a wiser public opinion and a higher standard of public life would
succeed in bringing the mass of the people up to a high level, or
whether the masses would yield to the temptation to abuse their power
and seek violent and vain and useless remedies—like Socialism—for the
evils which would affect us.
This able statesman predicted that the question would be decided early
in the present century, and would be evidenced by the condition of
progress and prosperity brought about by the people in the meantime.
When the Ambassador was recently welcomed to our shores, the answer to
this question concerning us, asked by him so long ago, was found
awaiting him.
It was spoken clearly and loudly by our teeming products of agriculture
and mining, and echoed in thunder tones by our mammoth shops and
factories of industry, and it was seen shining in the happy faces of our
busy and prosperous people.
Upon the golden page of to-day in our splendid history will stand out
the assuring fact that this surpassingly successful state of things has
not blossomed and come forth under the blighting shade of the deadly
Upas tree of Socialism, but that it has all been developed by and
through Individualism.
In conclusion, let me impress upon you that Individualism in the United
States has stood all tests—especially the crucial tests of time and
experience—and it points with pride and satisfaction to the great
developments secured for the American people under the bright and
beneficent rays of our admirable Constitution and Republican form of
government.
And if the aim of all government is to ensure prosperity to the country,
and happiness to the people it controls, the unrivaled excellence of
Individualism may fairly be judged by its magnificent results.
* * * * *
Edwin Markham, Esq., the Author and Poet, being agreed upon by both
parties to the debate, presided at the meeting.
At the close of the above address the chairman addressed the 5,000
assemblage as follows:
“LADIES AND GENTLEMEN: I hope you have enjoyed listening to Mr.
Clews’s very able address as much as I have. He swept the entire
horizon and has left nothing more to be said on his side.”
Mr. Markham then introduced Professor Kirkpatrick, to combat Mr. Clews’s
arguments.
------------------------------------------------------------------------
CHAPTER LXXVII.
GREAT WEALTH AND SOCIAL UNREST.[5]
Footnote 5:
An address delivered by Henry Clews at the Thirty-fourth Annual
Assembly of the Chautauqua Institution at Chautauqua, N. Y., July 29,
1907.
_Mr. Chairman, Ladies and Gentlemen_:
I think that you will agree with me when I say that there is nothing
more commendable and that augurs better for the future of the
institutions of our country—our great American Republic—than the
interest shown by all classes in the important sociological questions of
the day. The general willingness of our citizens to solve the serious
problems involved by rationally debating them, and allowing careful
consideration and calm judgment to lead the way to honest conviction, is
one of the good signs of the times.
We are progressive in spirit as well as in our practical achievements,
and, in many respects, we have set the pace for other nations.
At one time, we know, capitalists and leaders of industry too often
either wholly ignored the discontent or appeals of the laboring people
in their employ, or subject to their influence, or, if appreciating the
causes of their discontent, showed no disposition whatever to right
their wrongs, or even to define their own views and position, or make
any attempt to defend their own side of the case.
This was the attitude of Capital toward Labor in former times that I may
liken to the Dark Ages. It was, of course, radically wrong and unjust.
The refusal, or, at least, the unwillingness, of Capital to recognize
the fact that there are two sides to every case was not only oppressive,
but often led to costly and destructive strikes, and, doubtless, in a
measure, retarded development and progress in industrial and other human
affairs. But now Capital is showing more readiness to meet Labor on the
same platform of discussion; and in keeping with this opening of the
door to fair and full two-sided discussion is the general tendency of
legislation to improve the condition of the masses, and the Chautauqua
Institution in holding this Convention to consider the question of
Social Unrest is entitled to great credit for the performance of a most
laudable service in the interest of education and progress and the
uplifting of humanity. It is sowing the seeds of future advancement and
greatness in those directions.
The fact that Social Unrest exists, and moreover is very prevalent, not
only here but throughout the world, cannot be denied. Thus, in Russia,
just emerging from the throes of a deadly and costly war, the spirit of
discontent and Nihilism is rampant, and in France the Terrorists are
gaining in numbers and clamoring for their rights, while Austria and
Germany are greatly disturbed by the constant persistence of the violent
and revolutionary Socialists in railing against society and government
as they now exist. In Great Britain, too, the Socialists have stirred
the people to uneasiness by the loud threats, and rule or ruin alarms,
that they are sounding.
While this unrest and discontent are especially great in foreign
countries, we cannot shut our eyes to the fact that these exist in the
United States—though not in such large proportions as in Europe.
Moreover, they are largely of a different kind and quality.
But it is not well for us to give undue recognition to the Socialistic
outcries in this country, for by so doing we might encourage and
aggravate a condition that, to my mind, is an equal menace to both
Capital and Labor—the two great living forces of our national life. We
may increase an evil by magnifying it.
Too much appreciation and regard cannot, however, possibly be shown to
that spirit of unrest existing among us, which leads to individual
betterment and national development, and which is especially
characteristic of the American people.
Ever since the blazing torch of civilization threw its bright light upon
the world, it has been the paramount disposition of man to add to his
possessions and to aspire to higher and better conditions. In this he is
distinguished from savages and the lower orders of animal life, which
have no perception of what we call ambition and achievement.
Man being endowed with a mind, it is through the exercise of his mental
faculties that he is made restless under unsatisfactory conditions; and
civilized man is fired with a desire for improvement, and particularly
to improve his own fortunes and position by increasing his possessions,
and acquiring distinction, or reputation in his business. This is well,
so long as it does not degenerate into graft, or the misuse of other
people’s money.
It is this unrest and this aspiration that constitute the great
incentive to human progress, and that have given us our cultivated
fields and teeming harvests, endowed and multiplied our noble edifices
of learning and religion, built our large and splendid cities and homes,
our great bridges and other engineering works, and our vast factories
and other busy hives of industry. This is laudable ambition that
stimulates national development.
We must, however, be careful to draw a plain line of demarcation between
that unrest I have described, and which springs from an appreciation of
the solidity and soundness of our foundation and aspires to build
thereon so as to realize the highest ideals of perfection and
success—and that misguided or malicious unrest and discontent incited by
Socialism. This is really at enmity with all civilized forms of
government and all measures of advancement in the right direction, and
seeks their overthrow and utter destruction.
The spirit of unrest that I have commended, and which I have termed an
American type, is not noisy and clamorous in its nature, and it
manifests itself mostly through organizations of labor, in demands for
adequate or increased compensation, or the fixing of a stated reasonable
number of hours to constitute a day’s work. With these purposes, and the
aims of Labor-Unions generally, I want to state that I am in the fullest
accord. The laborer is worthy of his hire, as the Bible says.
But it is not from this source that the wail and cry of Social Unrest
comes. No, “The shallows murmur, while the depths are dumb,” and it is
from the other and Socialistic class that we hear the government and its
institutions decried, and capital and commerce attacked, and the spirit
of competition and achievement assailed. I say, Down with these
assassins of good government, these assailants of law and order!
True, we see Labor strikes in some places; but these are incidents that
have not been uncommon at any time in the past, and are not marked or
significant enough now to form a particular feature of the prevailing
Social Unrest. We have not yet reached the Millennium!
But whence comes the Socialist’s expression of unrest and discontent,
and what is it based on? It reminds me of Don Quixote, and the fight
against a windmill.
What is the sum and substance of the Socialists’ grievance? They see
only evil in what is really good government, and none are so blind as
those who will not see.
They claim to be dissatisfied with the existing order of things. But
what remedies that are not revolutionary do they prescribe for the cure
of existing social and political ills? The fact is that many Socialists
at heart are anarchists!
In almost every instance you will find among the rabble at a Socialist
meeting some honest but mistaken theorists, who plausibly find fault not
only with the conduct of our government, but with the very form of our
government itself, and picture, under the delusion they cherish, an
utterly impossible Utopia where—
“The people all are blessed
And the weary all have rest.”
These visionaries are reinforced by pretended reformers and professional
agitators, often of great persuasive powers, who appeal strongly to the
passions and prejudices of the ignorant people of various nationalities
who are made to imagine that they are still down-trodden. Here, in my
opinion, lies a real menace and danger—that of these people being
carried away by the power and passion of such appeals, the inflammatory
utterances of reckless demagogues and firebrands. They are the public
enemies we have most need to guard against.
The path of safety lies in standing ready to discuss every proposition
which they advance, and then refute, with cool reasoning and argument,
the fallacy and falsity of their position and the destructive doctrines
they teach.
It will also be very noticeable that the people comprising the
Socialistic audiences at such meetings are mostly foreigners who,
seeking better social and political environments, emigrated to America,
a large part of them within the past decade or two. As discontented
aliens they become as dangerous as the firebrands they listen to, but
there is no spirit of self-sacrifice among them. Moreover, they are
slaves to what is worst in Socialism and blind followers of a false god!
That this peculiar condition of things should exist in this country
seems almost paradoxical. It is something that a patriotic American
cannot tolerate, and mainly an outcome of Russian oppression, imported
by those who have fled from it, and who fail to understand or appreciate
the new conditions under which they live. We can well understand and
appreciate how, in a country ruled by a despot, whose heel of oppression
and tyranny is ever on the necks of the down-trodden people, the masses,
desiring some measure of free action and equality, would revolt against
these conditions, and seek a reorganization of society. They would,
naturally, look as far away as they could from such a government of
despotism—the only one they had ever known—to the other extreme—an
imaginary country where the State should own all the land and capital,
employ all the people and divide everything, share and share alike,
among the community. Such a government will, of course, never exist. It
is simply impossible.
But the spirit of revolt, which, in that case, may be patriotism,
becomes ridiculous, and open to the charge of insincerity, when its
worst doctrines are transplanted and cultivated upon American soil by
our foreign population. When it appears here it is really more like
Anarchism than Socialism, and I emphasize this.
Born of the spirit of resistance to oppression, with the broadest and
freest constitution that the world has ever known—a land of freedom and
equality in the best and most liberal sense of the term—it would seem
that the sincere lover of liberty and equality could ask no better home
than this democracy of ours—whose glorious flag floats over eighty-four
millions of prosperous and enlightened people.
With further reason, also, must we question the sincerity of the violent
type of Socialist, who, leaving oppression behind, emigrates to this
country, where tyranny and despotism are unknown, and yet continues to
echo Socialism’s war-cry of destruction, wrung from his heart by the
cruelty of his old-time oppressors. When he does this he becomes an
enemy of our Republic, unworthy of citizenship.
He comes here from a land of want and thraldom to a land of plenty and
freedom. He may come without name, fame, or property, and he is received
with open arms. After a brief residence, he is entitled to full
citizenship, and is then a part of the government, enjoying all the
rights and privileges of the native born. He is a sharer in the equality
possessed by all, the right to share in the government such as the
electoral franchise and eligibility to public office. He is possessed of
the civil rights enjoyed by all citizens in the equality of material
conditions—that is, the right to acquire wealth and all that wealth
implies.
Every opportunity for him to achieve success and happiness abounds on
every hand, and every incentive to industry and accomplishment awaits
him, and, if he is energetic and skilful, there is nothing to hinder him
from becoming prosperous, or, in other words, successful in whatever
vocation in life he may engage. With qualities that commend themselves
to his fellow men, there is no limit to the possibilities of his
achievements, and very soon, as has been very often the case, he may
become not only wealthy but a leader of men. If, therefore, he is
sincere, surely he must agree with me that in view of these conditions
this is no place for the Socialist. He must be an ingrate who would fail
to appreciate the splendid boon.
Does it not, indeed, sound like a paradox to hear this cry of Socialism
still rending the air while every avenue of fortune lies open to
everyone? It is a glaring anomaly of the times, an offence to American
institutions, a poor return for our national hospitality. Vague and
illogical as the theories advanced by the doctrinaires of Socialism are,
there runs throughout all their teachings and preachings bitter and
radical opposition to individual accumulation of wealth and individual
competition in industry.
Socialists would, in other words, fence up the great field of free
opportunity, deaden all incentive or inspiration for great achievement
and not only curtail, but wholly remove the right to compete and excel
and make it impossible to achieve success as the result of individual
effort. They would reduce us all to a barren uniformity.
Think of this monstrous proposition! Why, the very thing that the
Socialists attack as untenable and wrong in government, namely,
individual competition, has done more than anything else to make us what
we are as a nation; has kept alive the precious fires of liberty and
freedom, and preserved the institutions of our country. Take away the
progressive spirit of Individualism from the people, and you at once
eliminate the American spirit—the love of freedom—of free industry—and
free and unfettered opportunity—you take away indeed freedom itself!
The state of society the Socialists seek to establish might be
beneficial to a class which, under any conditions, lacks frugality,
thrift and self-reliance; but just where the general mass of humanity
would be bettered or elevated socially, morally or politically, is a
point not satisfactorily explained, and never will be.
If you render equally accessible to each and every member of the human
family the benefits of civilization, all holding “properly in common,”
why should a man rack his brain or strain his muscles in producing
something which he expects to prove remunerative or beneficial to
himself in some way, but which under the Socialistic state would
contribute to the equal financial benefit of all? The highway to
distinction and opulence would be closed.
As illustrating the inconsistency of some poor specimens of human
nature, when put to the test of Socialism, I will tell two stories:
Jerry Sullivan had proclaimed himself a Socialist, and was being
interviewed by his friend, Mike Casey.
“Jerry, do you believe in dividing up everything with your neighbor?”
“Indeed, and I do that.”
“If you had two horses (Jerry had none) would you give one to your
neighbor Flanagan?”
“I’d be only too glad to.”
“And if you had two automobiles, would you give him one?”
“Sure, Mike, I would. We should have share and share alike in this
world.”
“And if you had two Angora goats (which Jerry did have) would you give
one to Flanagan?”
“What, give him one of my goats! Not by a jugful! Let Barney Flanagan
buy his own goats.”
One of my millionaire clients, on his return from a trip abroad, called
upon me to pay his respects. In the course of our conversation he said
he had become a confirmed Socialist. I expressed surprise, and said,
“Then, of course, you are going to divide up all your properly with your
less fortunate associates?” He said, “Oh no, but I want all the other
fellows to do it.”
The most commendable object in Socialism is the uplifting of the
down-trodden and poor, yet that great Commoner and Tribune of the
People, William Jennings Bryan, tells us that under Individualism we
have seen a constant increase in altruism. That the fact that the
individual can select the object of his benevolence and devote his means
to the causes that appeal to him has given an additional stimulus to his
endeavors. And Mr. Bryan pointedly asks the question: “Would this
stimulus be as great under Socialism?” Let it not be forgotten that by
means of present tendencies and existing economic laws the poor are
constantly growing richer, that is, better off, particularly as
indicated by the savings bank deposits. The common people and the
savings banks were never before so prosperous as they are now. Labor has
made great strides, and the uplift in the lower walks of life in all
Christendom during this generation and particularly during the past
twenty years has been beyond precedent. Give us wise and just
legislation, and complaints of the inequitable distribution of wealth
will quickly disappear. Let us put down and keep down the revolutionary
Socialists and Anarchists.
Of course, if the unrest of a people is prompted by a desire to promote
the good of the greatest number of their fellow beings it will be
productive of lasting benefit to all in the long run. But if any
combination of capitalists, laborers, politicians, or religious bodies,
has for its aim the particular good of only a certain class or party,
such action as they take will be prompted by selfish desire, and will
work for evil and injustice. The great mass of the people of this
country, outside of the big cities, are not allied with either the
members of labor unions or the very large capitalists, and the feeling
of discontent is largely bred in cities, where it is magnified by the
prominence given to it by agitators and the newspapers.
The wage earner in the cities is more or less disheartened by the high
prices of food supplies, the higher rents and the higher rates of
interest on mortgages, and he argues that his pay has not advanced in
the same proportion as the price of home necessaries. Mechanics and
other laboring men are receiving higher average wages than ever before,
but the display of wealth in modern palaces for the rich, and the
abundance of automobile and kindred luxuries among them, have kindled
envy and whetted their desire for things beyond their means or hopes of
attainment. While no law can change the nature of a man, and while we
cannot expect an ambitious man with an elastic conscience to always
become a benefactor, or a labor union leader, filled with hate, to
become a saint, I hope that the agitation now existing may lead in time
to a more general observance of the Golden Rule, to do unto others as we
would they should do unto us.
I may say here that I believe nine-tenths of the dissatisfaction of the
masses is based upon mistaken ideas. Few men are capable of judging
impartially of the rights or the motives which actuate those upon whom
Fortune has smiled: Success may be often a matter of luck and
opportunity; but it cannot be denied that judgment, mental force and
courage are the factors which are bound to insure success.
I now speak not only of success from a monetary standpoint—for many of
our most useful, intelligent and influential citizens are comparatively
poor—but of all success. Our larger cities are the hotbeds of unrest.
The older generation, being anxious that their sons shall have more, and
know more, than themselves, and enjoy the good things in life which they
have desired but have not been able to obtain, now try to give their
children a liberal education and fit them for what they consider more
congenial or higher-class occupations than their own.
The outcome of this is that the younger men, when their education is
completed, drift into the cities, where they think they have a better
chance of getting on in life. It is the same with farmers, laborers and
mechanics. Their children desire to rise above their early environments,
and wish to occupy positions where they can use their brains rather than
their hands. Hence the many deserted farms in New England and in the
State of New York, for poor soil is not sufficient cause for their
desertion. It can be made good by fertilizers, and where there’s a will
there’s a way.
This discontent is producing a superfluity of clerks and other brain
workers, who think work with the head more genteel than work with the
hands, and a great shortage of farm workers that are needed to develop
our agricultural resources. Even the children of the most ignorant
foreigners are imbued with this ambition before they are able to speak
our language. Too many despise honest labor and want to live by their
wits. So we have a vast host of surplus politicians, office-seekers,
promoters, brokers, lawyers, clerks, canvassers and drones.
In olden days the young were willing to follow in the footsteps of the
old, and begin life where their fathers began. Now they expect to begin
where their fathers leave off, and are dissatisfied and disappointed if
they find that they have to start from the foot of the ladder.
What we most need in this country to promote and popularize farm and
village life, and check the general tendency of both young men and young
women to drift to the large cities, is a change in our educational
system. We should establish trade schools everywhere to teach the trades
and practical sciences, and so make country-bred people proficient in
occupations that they could follow on the farm, and in village as well
as town life. This knowledge would induce them to stay where they were
born, instead of rushing off to make or mar their fortunes in the
overcrowded cities where many come to grief. Thus the congestion of
population in the cities would be relieved, and the country generally
would be able to retain the men and women it needs for its industries
that are now held in check by an insufficiency of labor. In this way we
might gain millions of good mechanics and other useful workmen where
they are most needed, and reduce the number of the inefficient and
unemployed in the cities, to say nothing of the chronic idlers and the
sporting, gambling and criminal classes. Men instructed for the
professions would of course still study in the colleges, but the masses
have no use to which they can put the higher education of even the high
schools.
There are a lot of well-meaning theorists engaged in so-called Social
reform who are largely responsible for many things that add to the
unrest in the poorer sections of our cities. Far be it from me to
criticize anyone who has the desire to better the condition of his less
fortunate brothers, but the work of many of these reformers reminds me
of the man who threw a panful of kerosene on a small fire with the idea
of putting out the flames. To be a true Social reformer a man must be
well informed on conditions which obtain on all sides of life. A rich
man may have acquired wealth by miserly habits, but if he has not been
dishonest he is entitled to his savings, and no law can compel him to
divide with the poor man who has been profligate in the use of his
earnings. The thousands of immigrants who arrive at our ports each week
are, for the most part, poor and ignorant. The greater number of them
remain in our cities and add to the congestion and widespread poverty of
the cities. But these same immigrants are willing to work, and in a year
or two, instead of being a charge upon the community, have savings bank
accounts of their own. However, they are ripe for the reception of the
gospel of unrest, as they have lived hitherto in places where the poor
are always poor, with no lookout for improvement, and willingly listen
to the agitator and prophet of discontent. Mr. Roosevelt has said and
done things in the last four years which have shaken our land. Many
investors have thought that he had gone too far in his insistence that
the law should be rigidly enforced, as they, innocent holders of
securities, had been made to suffer loss by the depression in prices.
While it is hard that such losses should have been incurred, it is no
fault of the President, and his action, in the long run, is to be of
untold value to our national and individual prosperity. If his actions
will insure the fulfillment of the law by the magnates in power in our
railroads and corporations, the little man will be on a par with the big
man, and all investments will be on a safer basis, and the dark secrets
of the manipulator will give place to the open publication of rates and
earnings so that a stockholder will know where he stands and what his
company is doing.
Daniel Webster, as far back as 1842, found that the spirit of unrest was
in the air as it is now. In an address in that year he said:
“There are persons who constantly clamor. They complain of oppression,
speculation and the pernicious influence of accumulated wealth. They cry
out loudly against all banks and corporations and all means by which
small capitals become united in order to produce important and
beneficial results. They carry on mad hostility against all established
institutions. They would choke the fountain of industry, and dry all the
streams. In a country of unbounded liberty they clamor against
oppression. In a country of perfect equality they would move heaven and
earth against privilege and monopoly. In a country where property is
more evenly divided than anywhere else they rend the air shouting
agrarian doctrines. In a country where the wages of labor are high
beyond parallel, they would teach the laborer that he is but an
oppressed slave.”
I will here deviate to another division of the subject.
Considerable uneasiness and unrest have been evinced not only by the
Socialists, but by many others, as to whether great individual or
corporate wealth—in other words, capital—is inimical and hostile to the
public welfare and a menace to our institutions.
I think that it can be clearly shown that this anxiety and unrest are
without any good foundation. There is nothing in fact to justify this
unrest.
In our own country especially, where individual opportunities are
practically limitless and where thought and effort are exerted to the
utmost straining point, most fruitful, indeed, has been the result. We
have seen that the making of large fortunes coincidently with great
general prosperity, that is, by those doing a profitable business on a
large scale, is an inevitable economic result.
The past forty-five years in the United States embrace a new era of
wealth—an era in which the accumulation of vast amounts of money, or its
equivalent, in individual and corporate hands, has accompanied the most
marvelous national growth and prosperity in all history.
New conditions have arisen, and new methods have had to be employed,
while new men, equipped with new ideas, have not been found wanting to
meet all requirements, and to keep step with the march of progress on
both land and sea. Unlike the people of some of the older countries,
where, as in Russia, they distrust their government, Americans do not
hoard their wealth. They employ it. They have nothing to hoard it for.
Their quickly acquired fortunes are generally lavishly disbursed, both
in their style of living and their investments. With much of the money
they put into circulation, railroads are built and extended, mammoth
factories are constructed, labor is employed on a larger scale than
before, more farms are cultivated, and more crops are moved and
exported. Through all the arteries of trade and commerce the wealth thus
employed flows and adds to the growth and prosperity of the country.
Keeping the wheels of commerce moving, by supplying the demands of the
financial, mercantile, manufacturing and agricultural world with the
“sinews of war,” in the up-to-date American way, instead of merely
gathering wealth and hiding it away, has been to my mind one great
secret of our unprecedented national advancement.
[Illustration:
CHARLES M. SCHWAB.
]
Although it is impossible to demonstrate just how important an influence
this practice of keeping wealth actively in use has played in helping to
bring about and preserve the generally progressive and prosperous
condition of affairs, there is evidence enough to refute much that has
been said against the possession of great wealth, and also to show that
the hostile or critical attitude of the press and the people toward it
is unjust, and should be derided instead of being popular with the
masses, as it is. The assistance which Americans of great wealth have
given the nation, in the founding and preservation of institutions for
the public benefit and in many other ways, has never been sufficiently
appreciated or acknowledged.
Wealth in good hands serves good purposes. The richest men of the
Thirteen Colonies in the American Revolution were among the most active
and self-sacrificing of American patriots. They included George
Washington, John Adams, John Hancock, Thomas Jefferson, James Madison
and Robert Morris, whose names are imperishable on our national roll of
fame.
In that glorious struggle for freedom, these wealthy patriots performed
a leading and arduous part, and aided largely in effecting that grand
result—the establishment of this great republic, the United States of
America, under the best and freest Constitution in the world.
Passing onward from that memorable time, we come to that of the
Rebellion, when Secession reared its aggressive head, and the very life
of our institutions was in extreme jeopardy. In the early part of the
great Civil War—when the Government, friendless abroad, knew not which
way to turn for the financial aid that it so sorely needed to defend
itself and prosecute the war—history will recall that the great wealth
of private individuals proved not a menace, but a blessing and a godsend
to the Nation. These served their country well by coming forward with
their wealth and buying United States bonds in large amounts when the
risk was hazardous. By so doing they rendered patriotic public service
that should make even the Socialists hesitate before condemning great
individual wealth as dangerous to the national welfare.
I might in illustration of what I say enumerate instances almost without
number where, from the rock-ribbed coast of Maine to the Golden Gate of
California, under the beneficent rays of great gifts of the wealthy the
seeds of education have been sown broadcast and have grown into grand
and telling factors in shaping the character of the rising generation of
American manhood and the destiny of this great country.
In keeping with the hostility, or unrest, concerning great individual
wealth, and large corporate capital, we are at times confronted by the
bold assertion, made by extremists, that some limit should be set to the
amount of property an individual may own. The impracticability and
inadvisability of any such measure are at once apparent. You might as
well try to limit the capacity or energy of an individual. When you
prevent an individual from accumulating you at once discourage his
productiveness. This is an axiom beyond dispute.
As regards great corporate capital, I must admit that there has been in
many instances, in the past, good cause for much of the unrest and
dissatisfaction manifested by the people.
Toward competitors large corporations have too often been unscrupulous,
just as the railways were in giving rebates to control the heavy
traffic. These illegal and reprehensible methods were pursued far too
long, not only causing immense personal and commercial loss and injury,
but shaking the confidence of the public in the large corporations
called Trusts. These offences can, however, under our new laws, hardly
be repeated in the future.
Under the provisions of the Sherman Anti-Trust law, the Elkins
Anti-Rebate law and other and later restraining statutes, condign
punishment will, doubtless, be dealt out to offenders, and a rigid
enforcement of these laws, and their necessary amendments, will be
sufficient to regulate corporate bodies and stand as an ægis of
protection for the nation.
In this very active period of business reform overcapitalization is an
evil that must be classed with rebates, railroad discrimination, and
other corporate abuses. This also applies almost equally to both the
industrial and railroad systems. However much this evil may have been
regarded and thought inevitable in the past, owing to peculiar and lax
conditions in the pioneer days of railroads and industrial upbuilding,
it is intolerable now, and should be made impossible in the future.
There is not the slightest doubt that a great deal of the public unrest
has proceeded from this source. But, with the stoppage of the evil, it
ought to subside.
Overproduction of any kind is a detriment to trade and leads first to
extravagance and then to disaster; overfeeding produces disease;
overtraining of an athlete weakens him and causes his defeat; overstudy
racks the nerves of the student and unfits him for usefulness. Overwork
kills man and beast, and ruins even our locomotives and machinery. Too
much rain, too much wind, and too much sunshine spoil our crops; too
much confidence or too much caution prevents a business man from
achieving success. There is a happy medium in all things which produces
good results and promotes success. Under our modern system of financing
our railroads and industrial corporations overcapitalization has in many
instances run riot and produced an overplus of undigested securities.
This system of financing will surely lead to disaster if not curbed and
conducted in a rational manner. If a company needs additional funds for
legitimate purposes, such capital is a necessity which stockholders will
willingly provide; but the managers of corporations should be compelled
to state exactly and definitely for what purpose such funds are needed,
and should also be compelled to make a clear and definite report.
Centralization of power in the hands of an able executive is a good idea
if he prove worthy of the trust his colleagues confide in him, but, on
the other hand, makes him a master, and them slaves, if he be
unscrupulous and crafty.
Happily, the days of overcapitalization are seemingly over, and an
aroused public opinion will, no doubt, be expressed in whatever
prohibitive laws are necessary, if those already enacted prove
insufficient.
In, at least, some instances the existing laws seem inadequate. It is
likewise due to the sound corporations of the country, as well as to the
public, that something further should be provided to overcome the
feeling of suspicion toward them, and to keep the people informed as to
their existing methods and the true condition of their affairs.
The remedy for corporation wrongdoing is found in publicity! This
publicity is the great need of the present and the future, and the
public should demand it. It is a lamp that we should always keep
burning.
In a recent address delivered by me before the Wharton School of Finance
of the University of Pennsylvania, I urged that the New York
Legislature, as well as the Legislatures of the other States, should
respond to the popular agitation for this publicity by passing laws
requiring all corporations to make at least semi-annual reports of their
condition, certified to by registered public accountants, with power
invested in the State superintendents to order special examinations by
such accountants at any time when deemed necessary, that is, whenever
any of them were suspected of being unsound or irregular in their
business methods.
The question now to decide is what remedies can best be adopted to
prevent a repetition of stock-watering. My plan is for the Government to
appoint a salaried director in each of the interstate roads, this
director to be on the executive committee also. His duty should be to
act as a watchdog, and he should be required to report to the Interstate
Commerce Commission all crooked acts or suspicions of any; besides which
the interstate roads should be compelled by law to issue sworn
statements of their exact condition semi-annually. Officials of railroad
companies found guilty of any illegal acts whatsoever should be punished
by imprisonment. Money penalties are of no use in stopping wrongs of
wealthy corporations.
Railroad discriminations and other abuses were incident and owing to our
extraordinary development during the last half century, and especially
to the striking failure of our Legislatures to keep pace with national
progress.
Let us briefly look into a few of the causes which were responsible for
this railway abuse. Both before and after our recent Civil War this
country was greatly in need of more railway transportation than it had,
and national development was impossible without it. We had millions of
square miles of territory rich in natural resources, but totally
undeveloped and awaiting population, capital and transportation. Of
course transportation had to be provided before either population or
capital could venture with any freedom into the Great West. In those
days it was vastly more difficult to raise $1,000,000 for a new railroad
enterprise than it was to procure $100,000,000 in more recent times. The
public was not accustomed to such ventures, and the country did not then
contain the large number of wealthy men who must now be depended upon to
back such great enterprises.
In those days railroads required relatively large capital; the risks
were new and great, and some means of securing large profits had to be
devised in order to tempt men of means to venture into such enterprises,
which from their very nature involved a long wait for profit. Our
earliest railroad builders were men of unbounded faith in the future,
and they well knew that many years of patience and outlay would be
necessary before such enterprises could become profitable. It is almost
axiomatic to say that in this country our railroads have been the
principal factors in national progress. In the United States, railroads
were called upon to develop both population and traffic. In Europe,
population and traffic were already in existence and simply awaited the
railroad. When railroad building first began, England was already a
closely settled country; and it was only necessary to construct the
lines to obtain profitable traffic at once. No special inducements were
necessary for the attraction of capital, and no preliminary period of
waiting or loss was required to develop traffic. It was vastly different
here; railroads had to be built across thousands of miles of new
country, frequently over apparently insurmountable mountains where
neither traffic nor population existed; and their builders, men of
monumental ability and enterprise, knew full well that a generation must
pass before such enterprises could be considered profitable and solid
investments.
Under such conditions what inducements could be offered to overcome such
overwhelming obstacles? While government aid was eagerly sought, it was
restricted mainly to the Pacific roads where political reasons, such as
unification of new territory, justified government support. Another form
of national aid was the giving of large land grants to railroad
corporations as a stimulus to the settlement of new territory and the
building of roads adjacent thereto. Even those helps were insufficient.
Meanwhile, the treasures of the Great West offered irresistible
attractions to new enterprise and settlement. The demand for more
railroads was insistent; then came the devices of stock-watering and
overcapitalization as inducements to new capital. Roads were often built
entirely on bonds; and stock, having little or no value except for
voting, was given away as a bonus with the bonds, or used for various
purposes, often in speculation, and such stock frequently found its way
back to the original promoters at bargain if not waste-paper prices.
This era of speculative railroad building was naturally accompanied by
all sorts of illegitimate operations; overcapitalization bearing a
leading part. No one would now dare think of resorting to such practices
as were common in those pioneer days. They were utterly indefensible,
and yet as an expedient they served their purposes in raising much of
the capital with which to develop our early railroad systems.
Our great railroad builders were fully entitled to great profits, since
their boldness and skill developed the finest railroad systems the world
has ever seen, and without them the United States would never have
obtained its present magnificent position and prosperity. We must admit
their methods were open to serious criticism, and would not be tolerated
in these days of improved business standards. Nevertheless, they were
the methods of the day, and must be judged as such. I do not wish to be
understood as defending or apologizing for overcapitalization, for I
consider it an economic evil of the most dangerous character, and its
penalties—political as well as economic—cannot be averted.
It should not be forgotten that the great wave of grangerism and
anti-railroad agitation which swept this country in the ‘80s was a
direct revulsion of popular feeling against the burdens of
overcapitalization and their tax upon traffic. These were the political
results of such abuses. The economic consequences which
followed—somewhat late to be sure—were witnessed in the reconstruction
period that followed the panic of 1873, when vast millions of railroad
capital were literally wiped out by the reorganization of railway
corporations.
To-day most of our railroads are comparatively free of
overcapitalization, both because much of the water has been eliminated
by reorganizations, and because the increased value of terminals and
other properties, as well as the large improvements that were paid for
out of earnings, have increased the intrinsic value of shares which at
one time may have been practically valueless. This process of accretion
has been going on for many years, so that now there is comparatively
little difference between intrinsic and market values. Of course, some
recent striking departures from sound railroad financing can be cited;
but I am speaking in broad terms, and have no hesitation whatever in
asserting that American railroad investments are now sounder financially
than any similar class of securities in the world, and this
notwithstanding that railway companies are compelled to borrow enormous
sums in order to meet the demands of a wonderfully expanding traffic.
A comparison greatly in our favor could be made with British railroads
which have for years been inflating their shares by a policy of charging
improvements to capital account; the American system being to charge
such items against earnings. The result is that British railroad shares,
which were once held up to us as models of soundness and honest
capitalization, are now seriously threatened with an excess of water;
and unless the present policy is changed, English stockholders will soon
be discarding their home favorites for the bonds and stocks of more
soundly managed American railroads.
I have dwelt considerably upon the overcapitalization of our railroads.
Now a word about overcapitalization in another direction, where it is a
vastly more serious affair. While we now have little to fear from
overcapitalization of railroads, an inflation has taken place in our
industrials of the most extravagant character, and this is one of the
most serious menaces to our industrial and financial future. A feature
of our national development which has attracted world-wide attention
during the last ten years has been the consolidation of nearly all our
great industries into a few “Trusts.” This era of consolidation, or
“Trust-making,” must be classed as an industrial revolution of the
highest import, containing tremendous possibilities for both good and
evil. Within a few short years a large proportion of our industries were
combined or turned into Trusts, and securities issued in exchange
aggregating about $6,000,000,000.
Of course, many of the objects of these combinations were perfectly
legitimate. The seeking of better and more economic methods of
production and distribution was eminently proper, but the grasping for
monopoly was not legitimate, and has proved more largely responsible for
the political and social unrest of the times than any other single
cause. Nothing has done more to stimulate Socialism than this
unwholesome tendency toward monopoly and excessive centralization. On
this feature, however, it is not my intention to dwell further; I must
even entirely pass over the overcapitalization of public franchises as a
subject of sufficient importance to demand special treatment.
All things considered, however, I feel safe in saying that there is
practically no more reason for unrest on the part of the business
community or the people of the nation, on account of the large
aggregation of capital represented by Trusts, than from equally large
sums in the hands of individuals; for both are equally controlled by law
and influenced by public opinion, and public opinion is often more
powerful than law in righting wrong. Moreover, public opinion makes the
laws. As the Latin aphorism says, The People’s voice is the Voice of
God!
I take decided issue with a certain distinguished gentleman from
Maryland, that the existing unrest has been brought about by the
national administration at Washington, and by the Chief Executive of our
country, and challenge the truth of this assertion. It is both a
surprising and ridiculous accusation. The leading men of thought—not
only in the United States, but all over the world—agree that if, after
the startling exposures of the life insurance and railroad abuses,
President Roosevelt had not taken the sturdy and bold stand that he did,
the confidence of the public would not only have been severely shaken,
but would have been well-nigh uprooted; and such a general spirit of
unrest would have followed as to be truly alarming in its nature.
As it was, his level-headed and courageous course was timely and almost
providential, and instead of being the subject of adverse criticism, he
is entitled to the highest praise from all. Apart from some politicians
and a few others, we are indeed all paying him this deserved tribute. He
has often shown us that he possesses the courage of his convictions. In
conclusion, while we doubtless all agree that the existing social
unrest, anxiety and prejudice are to be deplored, may we not also unite
in the hope that, under the educating influence of a full discussion of
the economic questions of the hour, and with the enforcement of the laws
in the hands of an honest and courageous executive, the way to
betterment will be thoroughly paved? It is a patriotic duty to endeavor
to lessen popular discontent and promote social and political peace and
harmony, and substitute public confidence for unrest and the violent
agitation of Socialism, and so enhance the manifold blessings we enjoy
as American citizens, yes, as citizens of the foremost nation of the
world, with a future even grander than its past, a country where Nature
is everywhere lavish of her abundance, and freedom and independence are
our birthright. Beholding then, my friends, this grand spectacle of
national progress and achievement even as it appears to us at this day,
it certainly needs no prophetic tongue to foretell with confidence and
absolute verity that to the true and ardent patriot and ambitious
American, in fact, to every man inspired with lofty ideals and imbued
with a spirit and desire for improvement and the perfection of
democratic government, the social and political vista of our country’s
future will disclose a picture of prosperity and contentment that will
prove a glorious inheritance to the coming generations of the American
people.
[Illustration:
From stereograph. Copyright, 1906, by Underwood & Underwood, N. Y.
AUGUST BELMONT.
]
------------------------------------------------------------------------
CHAPTER LXXVIII.
THE FINANCIAL SITUATION.[6]
Footnote 6:
An address delivered by Henry Clews at the Fifteenth Annual Convention
of the Kentucky Bankers’ Association in the Auditorium, Seelbach
Hotel, Louisville, Kentucky, September 18, 1907.
_Mr. President, Members of the Kentucky Bankers’ Association_:
As all know, we have recently passed through a crisis of distrust in
Wall Street—distrust of corporate credit, and railway and other
corporate stocks. This was reflected in what I may call a slow panic, a
heavy and prolonged decline on the Stock Exchange under a continuous
flood of liquidation by both investors and speculators.
This crisis had been brewing for a long time, and we had a violent
intimation of the dangerous and disturbing elements in the financial
situation last spring, culminating in the collapse of the stock market
in March. But it was not until a United States Court at Chicago
inflicted a fine of $29,240,000 on the Standard Oil Company, of Indiana,
that investors, and the large capitalists of Wall Street, including
Standard Oilers, took alarm. Then the trouble became acute.