Business of

A The

C's
B

^J^g^

THE

MACMILLAN

COMPANY

HBW

YORK
"

BOSTON
"

CHICAGO
"

DALLAS

ATLANTA
"

SAN

FRANCISCO

MACMILLAN

"

CO..

Limited

LONDON
"

BOMBAY
"

CALCUTTA

MELBOURNE

THE

MACMILLAN

CO.

OP

CANADA,

Lm.

TOEONTO

The

B C's of Business

"

"

"

".

"

"

BY

HENRY

S. McKEE

iReto gorii
THE MACMILLAN
1922
reserved

COMPANY

All

rights

PBINTED

IN

THE

UNITED

STATES

OF

AMEfiICA

'2"

y^ ^

OOPTMQHT,
Bt the macmillan

1922,
company.

Set

up

and

electrotyped.

Published

September,

1928.

^'1''Oi:

lira

fe.Cros^

Press J. J.
Little "

of
Ives U.

Company
S. A.

New

York,

INTRODUCTION

Probably
is the

the

greatest

resource

of its

any

country

cultivated
as

intelligence of
American

people.
has for and

Inasmuch

industry

its object
use

the
our

fullest

possible development
resources, most

of
source, re-

country's

then

this

particular
receive

being the
most

valuable, should

the

industrious

cultivation.
of

But
reverse.

instead
In

this,
our

our

situation

is

quite the
of
we

fact,

imperfect understanding
of

the

governing
are

principles

business, of how
was one

live and most

industrially organized,
of the
we

of the
selves our-

amazing
for

many
are

discoveries indebted rendered

menace

about
to

which
war

the

World difficult

War.

Our

task

was

gravely
"

by

Democracy's
At

greatest
every

well-meaning
life
we

ignorance.
have been wide

step of
and of

our

national

hampered

often unsound
upon
us

seriously injured
economic with all the and cere sin-

by the
financial

prevalence

doctrines, urged
of

zeal

half -knowledge.
we are

As

nation

ingenious,

courageous,

nal origiother

and

inventive, industrious,

and

various

519861

VI

INTEODUOTION

things greatly

to be of

admired,
how
we

but
are
or

as

to any

spread wideganized or-

knowledge
for
our

industrially
as

national economic and been

tasks,

to

any must

standing underern govor

of the
our

principles that
our success

conduct have
as a

determine

ure, fail-

we

aptly
of

described

upon

high

authority
It thus

nation that

economic is
a

illiterates.
vast

appears

there

field of

developed un-

national
of
a

wealth, awaiting only the

a

vice ser-

higher popular intelligence and

interest In in

greater
and

intensity of
financial

business,
follows

economic,
there

subjects.
to any

what

is little bution contrigestive sug-

pretense

scientifically instructive
such
to

toward reference

education,
and
comment

but

merely
upon

matters

deeply

affecting the

daily life and

which do
sources more

work and

and

fare wel-

of all of us, upon

complete
to

popular
us

enlightenment
any

would
our

enrich

than

other

of

vast

of future

wealth

and

national

contentment. is the

Acknowledgment
who
and
upon
Los

made

to
on

Stewart

McKee,

contributed

chapter

Internationalism
and

supplied
the

helpful criticism

suggestion

remainder.

Angeles October, 1921

CONTENTS

Introduction

CHIPTBR

I.

The

Complex Organization

Character

of

Our

Business
9

II.

The

Misunderstanding

of

Money
...

25

III.

Wages

and

Wealth

34

IV.

The

Elements

of

Banking

54

V.

Business

Consequences

of

the

War
. .

68

VI.

The

Abuse

of

Our

Railways

85

VII.

Speculators

and

Markets
.....

91

VIII.

Good

and

Bad

Times

103

IX.

Internationalism

Ill

X.

Education
....""!""""

126

THE

C'S

OF

BUSINESS

CHAPTER

THE

COMPLEX

CHARACTEB ORGANIZATION

OF

OUB

BUSINESS

If

American
be
see or

business
as

is to
a

be

understood
And with

at few of

all,
us

it must
ever

viewed
come

whole.
contact to

yet
more

into
small
as

than

part
in

of

it,

so

be

almost

microscopic

relative

importance.
over an area

It

is

transacted thousand

three while
of
a

thousand
each
one

by
of

two
us

miles

in

extent,
an area

goes

seldom is

outside

few
of

city
one

blocks.

It and

conducted
ten

by

population
whereas few office
may

hundred
us

million
more

people,
than
in
a

each

of One

knows

hardly

dozen.
or

man,

working

yesterday
what
true

his

farm
may

or

factory, knows
understand knows the
a

he

did

(and

or

not haps perdone

significance something
in of

of

it).
was

He

little stood

what

by
him.

few But

who

immediate
the that

contact

with

throughout
worked

nation

perhaps
When

forty

million

people

day.

night

10
came

THE

O'S

OF

BUSINESS

they had

accomplished
work. And Each
and all

great

total

of

mainly creative
any of them
one

He

knows

nothing of
were

what

did.

yet they
one
was

all

working
thing some-

for

another.
for

producing

the

use

benefit of the others.

over, Moreto

they

were

doing this
of)
no

in

obedience economic

(or
laws

more

likely in violation
were

certain

which be
severe

enacted

by
are

legislature ; which
self -enforcing laws

cannot with

repealed ; which

punishments for
take
such

disobedience.
as

These

punishments

forms business bread

the

panic, the
employment unwe

period of disaster
and

and the

depression, Being,
as

line.

have
we

been do not

called, a nation
understand that
nor

of economic
we

illiterates,
these it.

brought
how
we

tations visi-

upon

ourselves,
and the

did

In

our

social

politicallife, governed police, it is

excuses no man. an

by
that

legislatures and

axiom

ignorance of the law

industrial which life,

But
far

in

our

is

governed by

higher,

simpler economic
we

laws ask
are

of world-wide

application,
Most and
so

do

not

even

what
no

the law such

is.

of

us are we

think
unaware

that
of
see

there

laws

having violated
the

them, just because

are

do

not

policeman and

not

formally

accused

by the district attorney.

know that
as a

We

people

we

are

periodically

CHARACTEB

OF

OUB

BUSINESS

ORGANIZATIOIT

11

punished

in the form

of hard

times but
we

or

lost do

jobs

or

higher prices or tight money,

what
we

not

know

did to deserve
excuses
we

it. In this case,

no man.

rance too, ignoreason we we

of the law
do
never

The
as

not

know read

what
the law.

did
do not
no

is that
not
even

a we

people
have

We do
see

know know

been is
an

violating one.
economic
law.

We We

there

attorneys about

who

expound
There
are

and

practice it, and

but
we are

give

us

warning.
as

some,

do not in

recognize them

being such; for they

of
us as

contempt with

most

being merely impractical theorists, who

at universities
or

lecture but In
very

write

supposedly learned practical value.

and
or

obscure
to

books

of little
is
man now

addition

these, there
business

then

the
but

occasional
even

studious

banker,
more
or

he

is apt to be
who

regarded by the
upon

hard-

headed,
leaders
wisdom and
a

rely

experience,
who
seem

by

the

of

organized labor

to

get their

by

inspiration,as
The

being over-educated
that

theorist.
men,

charge
and

is made

against
edge. knowlwas

these have

the economist is rather what

student, is that they

what Just
someone

scornfully called book

of
a

kind

knowledge
has
never

this

fore be-

put it in

book

been
a

quite
tracted sub-

fuUy explained, nor

how

putting it in
its value.

book

anything from

12

THE

O'S
to

OF

BUSINESS

If above
range

one

could

rise

an

altitude

high enough
his

the United of vision

States and then

to
one one

to

bring it aU within
it the

view show

through

glass
lishment estab-

powerful sufficiently
view this

detail, he could

country employing

as

great industrial
hundred million

people.

The

thing he
an

would

see

might
of

be

called the plant.

dred hun-

It has

investment

value
This

perhaps three
fixed

billion dollars. consists

plant, or

ment, invest-

mainly of farms, mines, factories,

railways, ships, docks, warehouses, office buildings, banks, wholesale

stores

and

retail

shops, schools,
About

dwellings, wires, pipes, and

the proper been
amount

machinery.
of those

of each

one

things has

provided, through the free operation of the

the

competitive principleand
to select his This for
no own

right of

every

man

occupation.
been built and
to

has plant, other with

is

being operated
the American

purpose

than

provide
want.

people
and law. for
the

the

things they

It

was

built

is

operated under
It is the best

the government

of economic
room

plant in existence,with development.

stores up.

immense

further
known

It
raw

contains
material lion milin

greatest
to be

of Its
not

waiting

worked
are

hundred

workers skill

probably
body
of

equaled
of

by

any

other

workers

the

OHAEACTEB

OF

OUB

BUSINESS

OEGAISXZATION

1^
duce prosaries, neces-

same

size

in

existence. and

These

workers of the
any

for themselves

enjoy

more

comforts,
It is said
in

and

luxuries

than

other the
or

ple. peo-

that the annual be valued The

at

output of

plant fifty
sume con-

goods

would

perhaps forty

billion dollars.
all these way

American

people usually they produce

in

goods which
year,

this

during the
worth

except perhaps five billion

one

dollars'

which, in
as
new

form wealth.

or

another,

mains re-

in existence
new

Probably
of additions

this
to

wealth

finallytakes

the form

the

plant,new
of
we

construction,or
due
some us

perhaps partly the

countries to

form
which

debts
send

from of the
are

foreign
goods.

The

tion distribu-

of the

goods that

produced
main

is not it
seems

always
to

just and
true

equitable,but
this
to

in the most

be

that

plant, like
pay

private
about

concerns, in proportion

really seems

its workers services

to the value average

of the
seems

they

render. to

The
out

American
what

generally
puts into
about

get
The

of

life has
are

just about
a

he
him

it.

world

way

of

paying

what

his services

really worth. Naturally,

as an

organization
easily
thrown
may

so

highly complicated
of to

this of

is

out be said

adjustment.
exist when

state

prosperity
of

each

branch

industry, working

to full

capacity,

14

THE

C'S
the

OF

BUSINESS

is to
are

turning
serve

out

just

right
of

amount

of

product
that that

fully the needs

to

other

industries

related

and every

dependent
man

upon

it;

so

every not

plant
delayed

and
or

is

fully employed
troubles in

and
some

hindered

by

other A

essential prosperous crops

part of the
year

plant.
in

is

one

which, with
was

dant abunmined ing go-

from
amount

the

farms, there
of coal to

also

the

proper in

keep the boilers

the

factories, locomotives, ships,

houses
; in which

power cotton
a

plants, and
growers

the

wool

and with

furnished
raw

the

textile for

mills

full the

supply of
makers of steel of

materials

cloth; in which
the correct

dye stuffs produced

; in

tity quan-

dyes

which
an

there

was

delivered
of
ore

to the and

industry

unbroken

supply

coal, to enable
amount

it to build

for the

farms
and

the

right

of

harvesting machinery
amount
;

for the cities

and trial indus-

the

right
tools

of

structural
all these
; and

steel

in which

things

were

done

at

exactly the right time

except crops,
our a

perhaps,
year

in all
one

things

prosperous

is

in which

railway
and

system
in sound

finds

itself

adequately
to
move

equipped
promptly

physical condition
dollars'
up

perhaps

fifty billion

worth each

of

things from
where

place to place, to pick

move

thing
where

it is and

it

quickly to the place

CHARACTEB

OP

OUB

BUSINESS

OBGANIZATION

15 body any-

it is

going

to be needed in

next, without

keeping
A

waiting
year million

unproductive idleness.
be did
one a

perous pros-

would each

in which

one

hundred
on

people

full day's work

each

every

working
so

day, finding it
of
an

day possible

to

do

because

abundance
to

of tools and
one

materials of
the

promptly
fact
was

supphed
every

each
man,

by virtue
whom he

that

other
full
as

on

depends,

doing his
In such out
a

part.
this the American

year

plant might
of the
saries, neces-

turn

twice

its normal

output
luxuries and be

conveniences, and
would lower.
be

of life.

thing Every-

abundant would

prices consequently employed

and
quently conse-

Everyone
able to

buy

his fair

proportion of
would state
we

what

the rich is

plant produced.
and prosperous.

America It is
a as

be
of

called

affairs
the

that
various to

gradually approached
parts of
another
our

bring

plant into nicer

to

adjustment
law.

one

in obedience that
ten

economic

It is said
of
some

in this American per cent

plant

tion varia-

in the total

quantity of
tween be-

goods produced
a

marks and be
so a

about business

the

difference

boom
may

depression. This
about,
the
as

variation
we

quite easily brought

very

have
of

gone the

far
of

in

applying
that

ciple prin-

division

labor

disturbances

16
may

THE

O'S

OP

BUSINESS

proceed from
of paper

very

remote

causes.

The
has

ply sup-

pulp from
so

distant

forests
to

been
the

known

to fall

low

as

to threaten

suspend

publication of
was

newspapers. there

Little general
was

anxiety
none,

felt.

Perhaps

occasion
to
our

for

but the

danger called attention

upon

unconscious for
many

complete dependence
things, among
which
as

the

press

them
commerce

daily market
would

out reports, with-

all would

fall into

confusion,
It

few

know

the

value

of

anything.

semns

probable that the publishing and

businesses
must invention
or

ing book-sell-

have of

sustained
so

considerable
a

injury by the gasoline

these
new

remote

thing

as

the
as

motor

the

motion drew
or

picture
readers

camera,

recreations the of

from

the

brary li-

to

highway
us,

the

theater.
for that

Some

whose
our

preference is
entire the
use

general
and
so

business,employ prefer
to pay
rent

capitalin
of the

for

stead premises, in-

of Others

investing capital in land nothing

of

and
so

buildings.
their part
for

know

business,

do

by erecting buildings and

business
and residence.

providing housing
If there for
its

is
use

scarcity of
by offering
more

housing, higher

tenants

compete

rents.

These

high rents attract

thus
we are

tal capi-

into with
an

building and adequate

soon

provided
As
we

supply

of

housing.

get

18 A Boston the
was

THE

C'S

OP

BUSINESS

banker

who,
of

every

year,

loans

money
houses ware-

upon

security

wool

lying

in Boston

recently
obtained
but

attracted

by the higher
friend
in

terest in-

rate

by
upon

banker

staff, Flagzona Ari-

Arizona,
bank's
about

learning that
of

the

security consisted through

the he
loans
was a as

sheep walking
range

for months
he viewed

vast

of
western

tains, moun-

simple
that back

sanity. in-

What

said
soon

in
on

Boston
a

they would
of

**just as
in the

loan And

money

shoal
eral gen-

shad
a

out
very

bay/'

yet he
He

is in

man. intelligent

simply did
were

not both

realize

that the

he

and

the Arizona of

banker

really in They
knows is to
are

business
a

producing wool
of

clothing.
Each

both

part

that

industry.

only his trifling part of the industry, which

extend

credit

against
from

wool

at

particular
to the

stage
retail

of its progress

the

sheep

range

clothing
the

store.

During
California

war

there
the the

was

great uneasiness
of

in
were

because

people

that

state
sums

continuously paying
money
was

Government the

vast

of

for bonds

and

taxes, and
Eastern

Government
ters. cenpletely com-

spending

it all in the
was

munition
to be thus

California drained

expecting
money,

of

and

yet the
a

opposite

happened.

The

process

afforded

perfect oppor-

CHABACTEB

OF

OUB

BUSINESS

OBGANIZATION

19

tunity to
industrial under

observe

the

workings
as a

of

the

American

plant, regarded
fundamental
as

whole, working
of

that known

principle
division that

modern

dustry in-

the

of labor. the

It is true, of
were

course, to

completed
and

guns

delivered

the

Government

paid for
a ufacturer man-

at, perhaps, Bethlehem, Pennsylvania, and

there
in money,

received before

the

final purchase

price

but

receiving it he had
and

already
material.
and

paid
The
money

out money

nearly all of it for labor

he had

spent for
had

material

the
wear

his workmen
eat

spent for things to nearly

every

and

had

already reached
Even what

state
facturer manu-

in the

Union.

remained

to the

probably
and Most and

went

to the holders

of his bonds

stocks, and
of

these

might
was

reside

anywhere.
to

what

he
most

received

paid
the

workmen week
for

they spent

of it within

same

things produced
so

in distant

places.

The
can

thing is hardly

complicated the human

it.

imagination
of the
a

follow Steel
match
numerous

When

an

employee
so

Bethlehem
as use

Company
to

does

simple
he has has

thing

light his pipe,

localities. He

spent money
some

in

paid
a

Northern
state ing cloth-

state

for

the wood

in the in the

match,
match cotton

Southern His Idaho

for

the
came

chemicals
from

head.
or

Southern

wool;

20 his food
state

THE

C'S

OF

BUSINESS

perhaps
Union

from

the

Pacific

Coast.

Every

in the

takes

part

in the is

manufacture

of

virtually everything that It, therefore, turned

produced

by

dustry. inis

out

(though it

but
its

little understood)
bond to and
a

that

California back

got part of

tax

money

again by

selling
per copat

beans

miner

in

Arizona, who
into
a

produced
shell

that

was

finallyturned
The of

casing

Bridgeport.
the
most with The

important fact is that,

the

under

principle

division

of

labor,
we can

we

profit produce

by producing those
the

things
and

greatest

economy

abundance. business
is

simple fact is that American

but

nothing
every

the

work

all of
to
one

us

are

performing
In

day, each
this work
we

according
have

his choice.
purpose
:

ing do-

only

namely,
tional addi-

to

produce food, clothing,shelter, and conveniences, decencies, and

some

luxuries, and
ourselves and

to divide

and

distribute while
to

these

among
more.

live upon there

what

them

producing
divide and

Naturally
except
to
store re-

is
we

nothing

live upon
we

currently produce; unless

and
consume

choose
thus

divide

the

plant itself and

in which

America discovered natural

as

to the

condition inhabited

Columbus The

it when

by
were

Indians.
as

resources

of America We

great then
the Indians

they

are

now.

live better

than

CHABACTEB

OP

OUR

BUSHfTESS

OBGANIZATION

21

only because
from the very

we same

produce
sources,

more.

We
we
a

produce it
increased

but

have

the output

partly by building up
of

cal great mechanimost

plant (the investment

of the

capital) to do
our

work, instead

of

merely usiug
man

naked
to duce pro-

hands, and
one

partly by training each

thing only, in great quantity; relying

to

upon

others in

supply him
for

with

everything

he

needs

exchange simplest
market
there

his
we

own

output.
a

In its national

terms

might imagine
each
man

great
and

place,to which
the

goes in

deposits

thing he
own

has

produced
needs
the

great

quantity, satisfying his

away
a

by carrying
innumerable Most
of
seems

small

quantity of each of
others
have

things that
confusion have
of the

brought.
about
up

the
to

of

thought
we

business
the

begun

when at

gave

simple practice passed

of into
merce. com-

barter
more

the

market and
we

place and
complex
invented
name our

modem At that time

usages
a new

ized standardand
its

tool purpose

known
was

by the
to

of money,

facilitate

exchanges.
things and
the money

We

stopped trading things for trading things

other of
for We
money

other

began
for the

and

things.

thus

got to thinking and

of money. We
are

ing talkstill

everything

in terms

bartering things

for things

just

as

as essentially

22
we

THE

C'S

OF

BUSINESS

always did, but because

the

we

never

see

but

half
ways alof

of

complete operation
"

"

money

standing

in between

^we

have
we

lost
are

all realization

the
for

simple

truth

that

still
a mere

trading things
tool, and
we

things and
come

that

money

is
as an

have

to

regard

it

end

in itself.

And,

to make

matters has had

worse,

money,

like most
made

other upon

vention init in

improvements

the form

of paper

tokens, credit instruments, and

which
are

bookkeeping it,and
nature real these

entries have

used

in

place
the

of

still further and

obscured The

disguised
the truth

real
our

of money

about

transactions.

essential
we

and

important

thing about
and

it all is that and

we

simply produce goods

for other
among

services

trade
can

them

goods

and

and services,
in this way

only divide
united

ourselves

what

our

efforts have
or

produced.
as
we

We

have

national
much
or

prosperity
little.
has

poverty

produce
The

thing that

distinguished America

as

an

industrial

country is the great abundance

of wealth in

of

its

production
Aside
as

proportion

to its

tion. popula-

from

certain

personal qualities,such
and

inventiveness, resourcefulness,
inherited
from

ity, adaptabilfor

Americans

who,

several

generations,developed those qualities by pioneering

the

wilderness

that

lay west

of

them, this

CHARACTER

OF

OUR

BUSINESS

ORGAITIZATION

23 is due to

great productive
the

power to

per

inhabitant
we

unequaled

extent

which No

employ
nation
per
man.

tools,
izes util-

machinery, and
so

equipment.

other
power

many

mechanical of tons of

horse

Billions

freight and
from

endless
to

gers passen-

require
the

to be moved of two

place
of

place, and

performance

this

task,

indescribable who
are
ployed em-

magnitude, by the
in the

million

men

has railway service,

been
so

made

sible poswe

only because
have invested
so

for

each

man

employed
in

ten
we

thousand heed the

dollars

railways;
this that billion

yet
our

little do

of significance
this
one

popular attitude
of

toward

twenty
of

dollars and
state

railway capital is
we

resentment

and hostility, of

normally

starve

it into

dilapidation.
the

This, then, is

highly complex and organization

it gets out
we

delicately operating
and

adjusted business
in America. slows when When
as

are

of

adjustment

down,
out of

all

complicated machinery
what

does has

adjustment, few understand

may

happened,
or

what

be

expected

to

happen next, suffering.

of Russia,

what

to do about

and there it,

is much
as

Notwithstanding
which would

such

examples
seem

that
carry

certainly

to

adequate
to

warning
alter
the

against hasty and

radical

attempts

existing social and

industrial

struo-

24

THB

O'S

OP

BUSINESS

ture,

every

period
forward

of

temporary

industrial

tress dis-

brings
unsound

well-meaning

proposals
and

of

economic,
Their
enactment

financial,
into

political
is

trines. doc-

laws

urged They sincerity

are

with

all

the

zeal

and

courage

of

ignorance.
of

are

gravely
their

dangerous

because

the

very

of

well-intending
except
in

advocates.

They
in

utterly
in
nomics, eco-

incurable

by

education

business,

sociology,

and

in

government.

26
money He how
was

handed
even

to

him,
when

but

he

had

not

been.

did not much

know
was

he received He

the money learned

he

being paid.

only
he
money
a

the amount
it handed
was

of his real
to

salary when
The

had finally that token

he

him

in

goods.
was

temporarily carrying
to go to various

only shops

that

entitled him
collect

and

places and
were

his real wages.

His

real

wages

just
we

his had

fair all

proportion of

all the

various
we

goods
as
a

joined in producing. If much, he

in received
a or

nation

produced
succeeded

much.

If
we

we

only
a

producing
war

if little, or foolishness
less.

wasted
or

great part of it in
then of money It real
pay
was

petence, incomamount

his share

became

The

just one
a

of the tools used of conveyor

to upon

in industry.

was
was

kind carried

which the

his

him

from

grocery

store, from
office.
He

the

picture theater, or

from

the doctor's

could

elect to take

his pay

in

anything
services,

he
or

pleased: food, clothes,amusements,

he
could
or save

his

money

and
in

decide
"

later, but

sooner

later he is

paid

things
taken to
as

^not in money.

The make

fluctuations
this

that

have

place
be.

in

prices
man a

plainer than
his

it used

The
were

always speaks of

occupation
and

if it

thing by itself and

the aim

end

of it all

were

THE

MISUNDEESTANDING

OF

MONEY

27 The

to

exchange it

for
man

fixed amount is

of money.

fact is that

the

really taking part in the

a

production of nearly everything. If

loans banker
money

banker the

to

baker

to

buy

flour, then
When the

is

really producing bread.

the health of
a

sician phy-

restores

temporarily sick

butcher, he
aboye
at the moment who

is not

practicing his dignifiedprofession

common

the

level of the

world; he is
so

producing meat, and

built the counter
in the

is the

penter car-

butcher

shop.
cannot

Of be To
and

course

the

surgeon

and
nor

the
the

carpenter
banker

paid directlyin meat,

meet

in bread.

this

have we difficulty,
the

gradually evolved distributing little

call them money

adopted
and

practice of tokens, and

agreements
one we

metal and

paper

have

certain

and

practices about
in

receiving them
goods.
The
money

from

another

exchange

for

next is
our

great
loose
use

source

of

confusion
our

about
to

of the is

word,
and

failure it
comes

understand from. is

what

money

where
money

Strictlyspeaking, the only gold (a limited however,

Of this for amount of

ica in Amer-

tant, unimporsilver,
of this three sion). discusbillion the
or

the there

purposes is

gold

perhaps

dollars,and
sole purpose

most

of it lies in bank

vaults, for
pay

of

being used

to

deposits

28
notes in
case

THE

O'S

OF

BUSINESS

anybody
The

really wants

them

paid in
held

actual
reserve

gold.
for

gold, in other
and
so

words, is
these
as

in

this purpose,
come

great

stores

of it have
The money

to be

spoken of

bank the

reserves.

gold used
service
as

in this way

renders
ten if it to
or

country
times

a
as

probably
render

twenty

great
from

it could

were

in circulation this

hand
was

to hand.

Prior among

1914

gold

serve re-

subdivided
banks

about States. of the

twenty-five
Since Federal
the serve Re-

thousand

in the that

United
year,

creation, in about System,

banks
each
a

of these

twenty-five thousand
are

(except

few

which

not

members)

has

deposited its gold

Bank,
of which
as

in the
are

nearest

Federal
with

Reserve branches.
as

there

twelve,
to the
so

It is still just

available

banks

before
plied multia

they did

this and

by doing
So

they have
there is

its effectiveness.
store

that

great

of

gold in the

vault

of each

Federal

Reserve

Bank.
The

relation

between

Federal

Reserve

Bank

and

the

surrounding
the
same

banks

in its district is practically

relation

that
That

exists
is to the

between
say,
a

any

bank

and
a

its customers.
balance and
on

bank
eral Fed-

carries

deposit with
borrows from

nearest need

Bank

also

it,if

be,
Fed-

by rediscounting its customers'

notes

at the

THE

MISUNDEESTANDING

OF

MONEY

29
so

eral

Reserve

Bank.

This

banking machinery
the
most

arranged undoubtedly
and

constitutes

fect perin the

highly developed banking system

also

world;
can

the

most

powerful

in

the

service

it

render.

It is
money

practically true, then, that the only real

in the

country is gold and its

it is

amount
or

varies

but

little except when of trade

imported
with

exported
tries. coun-

in settlement

balances
we

foreign
as

Everything
is in
is very necessary, not

else that

speak of
The
amount to

money of this extent it must

serves re-

realityonly bank
great.
It
can

credit. be the

created limitation

any

subject

to

that

be

created
to

beyond the abilityof the gold

it upon
notes

redeem
bank

demand.
bank
are

It exists

in

two

forms, only

and

deposits. They
the
same

differ

in form.
are

They

thing

in

substance
it into

and

interchangeable. Banks

bring
loans.

existence

by

the

process

of

making
are

The it out
If
a

borrowers

to whom

the when

loans

made

put

of existence
needs to

again

they

pay

the loans.

baker bank
from

buy $10,000 worth

is

of flour and borrows

that

his
sum

balance the
seems

exhausted,
The

he

bank.

prevalent idea
the banker
he

of this
him have

transaction
a

to be

that

loans to

particular $10,000

which

happens

about

him, probably having been

recently brought

30
in in money that

THE

O'S

OF

BUSINESS

by

some

opulent depositor. The

is that

thing
issory prombanker

really happens
note

the baker and

signs
the

for

the

amount

makes
'*

two

bookkeeping

entries.

He the

charges
note he

Bills

Receivable/'
into the

meaning
bank's

that

has

now

passed

assets, and

credits he has of the

"Individual

Deposits/'
amount

meaning
note

that

placed the
baker's loans each used
bank

of the

to the

credit
the

account.

By those
and
of

two

entries

bank's

increased

its

deposits also
There
was

increased,
no

by the
in the

sum

$10,000.

money The

transaction;
went in
up.

nothing
baker

but
now

ink.

deposits
money

The
bank.

speaks of
money;

having
is bank
medium

the
or

It is not The
money;

it

deposits
in this

bank

credit. is not
as

circulating
it is bank

country

deposits. It is created
It circulates baker
for

in the of the

last bank
to
a

transaction.
check. flour
go

by the
his check
his

use

The miller down go

up

hands
flour and The

for

$10,000
total

bank's of

deposits

$10,000.

deposits
the every
to

the

miller's

bank the in his

$10,000. During
sells bread
some

ensuing day
him

month,

baker

and

deposits
for is bread

bank retail
up

checks

given
his pays

by

grocers.

When

balance

finally

built his

about

$10,000, he

his note

by giving

bank

THE

MISTTHDEBSTASTDIKG

OF

MONET

31 the
render sur-

check

for loans
of the

$10,000. By
have
gone

this

transaction the

bank's

down its

$10,000 by

note, and
in

deposits have
note

gone

down reduced

$10,000 because
his
such

paying the
sum.

the baker

balance

by that
as

By

transactions Men
money in
see

this

do

bank

deposits
marvel
at

rise and where

no

fall. all the

them is

rising and
from.

coming
It is

There

is

money

involved
the
use

it.

only the
new

banks

creating for
of credit
it in the
currency,

of business
not

men

supplies they need

money,
or

that form for

did

exist

before.
paper cash

If

of what

they call
or

perhaps payroll
same.

drawer

poses, pur-

it is all the

The

bank, instead deposit

of
count, ac-

crediting the
hands
same

sum

to

the

customer's

him

bank

notes

instead, but
in

it is the

kind
as

of

bank
and

credit

substance.

It

is

created

needed

retired
hand

again when, after

to hand

having circulated
served bank its purpose, and

from

until
it in

it has to the

someone

brings

deposits it to the credit

act

of his

account.
as

By
and

this latter
is

it

ceases

to

circulate The

notes

transformed

into

deposits.

amount notes

of bank

deposits and
rise

the amount fall according

of bank to the money,

in

circulation

and

ments require-

of business.

These

are

not

though

32
we

all

so
on

call demand

them.

They

are

redeemable

in

money

if desired.

Their
amount

limit of total of

expansion
the
reserve

is controlled banks. consequence

a

by the

gold

in

Now about the

in

of

this

misunderstanding
place among
of the
war

money,

strange thing took

in consequence

American

people
reason

war

financing. By

of

the

vast

tions, transacan

principally by the Government,

amount of bank

cedented unpre-

credit

was

created.

The

Government

expended
thus in

it in

purchase of goods and

into
so

services,and Being

it

passed

tion. general circulamuch money

we

possession of
we

quite naturally felt that (money

and the
we

had

become
of

rich

being

our

popular conception
fact rich

riches) just
were

spent it accordingly. The

of
were

was
we

opposite; instead
poor.

growing

becoming

We

vaguely conscious goods,

as

of

diminishing supply
into the waste that
was

of

they

were

sorbed abbut

and

destruction
as was

of war,

not

so

plainly seen
real wealth
money
was

was

the abundance

of money. but
so

Our
as

being destroyed,
were

long

plentifulwe

not

only complacent but

waste not
are

actually extrav"tgant. The

America wealth.
tens of
as
a

of

war

has

cost

billions, people,
But

in money

but in true

We,

in consequence

poorer

by that

amount.

CHAPTER

III

WAGES

AND

WEALTH

Regarding
seems

the
be need

distribution of
a

of

wealth,

there
to

to derived at

clearer at the

understanding,
essentials Our

be

from
the
mere

looking

rather
tional na-

than

appearance. mind
seems

present
the
are

state

of the

to

include

sincere

belief

that

products

of

industry
those in it.

not
own

being
the the

justly plant
wages
upon

apportioned
and of those labor
who

between
work

who

We and

think the

should

be

greater

returns if
we
one

invested

capital
the other
than

less. must
we

(Naturally,
be

is
not can-

-.\

to be

greater,
divide
more

since less,| So
a

produce?)
is
more

far

as

can

be

discovered,
than need
to

this

belief

matter

of

sympathy Nothing
said

of be the
not

reasoning
added effect in
to

and
what

calculation.
has
are

been

ready al-

that

wages

really

paid
or

in

things, salary

money. may not

The
be

pay

envelope
for of
not

the

check
but

exchanged
the
and

goods
it
even

at

once,

until

it has his real

been
wage

holder does
be.

has

not

yet
how

received much his

34

know

wage

is to

His

WAGES

AND

WEALTH

35

true

wage,

in the
of

only form

in which

he

can
we or or

use

it,consists

just his proportion

effort.
we

of what

all

produce by united

It is increased

minishe diless.

accordingly,as
It is handed
can

produce

more

to him the

in the form

of money,

so

he

choose

particularthings in which
him.

he wants
one

the world tools of

up

to pay

Money
a

is

merely

of the
to be

industry, like
and used

monkey

wrench;
is

picked
in

temporarily. It
of

only used

accomplishing the exchange

other
to

things,or labor,
then

for
on

things

or

other

labor, and
will
use

passed
The

someone

else who
one, not

it next. but
of

whole Our

question is
whole and end

of money,

goods.

and

aim them

in industry is to produce
among

goods

divide

ourselves.
is
our

Our
wage.

proportion of the goods produced Naturally, these

wages
can

be

increased of

only by
We

increasing our
cannot

total
more

production
we

goods.

divide

than that

have.

But

it is claimed

in the
owner

division,the
of the

prietor proceives re-

of

capital, the
Some Good

plant,

too much.

of

us

object to much
to

profit
the

going

to

him.
yes.

salaries
a

the
one

tendents, superinto

Perhaps
who

very

large

general
But what

manager, to the

plans and

directs
owns

it all. it!

who proprietor, of the

merely

If he

most gets too little,

capitalinvested

36
in the

THE

O'S

OF

BUSINESS

plant will be lost and destroyed just as

as
war

pletely com-

destroys profit,it

it. will No

If his
be
one

plant

is not and

allowed
cease a

fair

abandoned will

to

produce wealth.
If he

operate at

loss.

gets too much, alert competitors will

necessary must in the

do if

everything
one more or

public behalf.
it

But
seems

the other
to the

happen,

actually
he

far

public benefit that

every

should year
a

get
very

too much. vast

Suppose he receives
in money.

income of the

What
our

is the economic industrial

much
wears

tion func-

capitalistin personally
He eats
consume

system!
try couna

He

cannot 's

of the

goods.
than

and
us.

probably
wastes

little

more

the rest of
or

He
a

the services

of and
a

man

two

in

driving

car

for his pleasure the services and

of

beautifying his garden;

women

also

couple of

to prepare

his food
A

keep

his house would richer

in extra

nice order.

little more
we

wealth all be
and
leased re-

perhaps be produced and

if the these
man

would

waited
to

upon

himself

employees

become

producers

on

farms

or

in other

creative

ever, industry. That, howIn

up,

is that way
a or

nearly the limit of his wrongdoing.

he may
than

obtain
one

possession of, and

person ^s share

use

little more

of the

forty
vices ser-

fiftybillion dollars'
that
we

worth

of

goods and

all

(including him) united

in pro-

WAGES

AND

WEALTH

37
as

ducing.

That
him

is about

as

far
most

Nature

makes income

it

possible for

to go, and

of his vast this

man

is still unspent.
to live after the

It may

be
a

that

ought
make

style of
and

penitent monk period

of

and

his life
and
a

drab

cheerless
rest

frugality
would be

self-denial.

The

of the world
of what upon and

little richer But

even

by the saving
very

he wastes.
him

in the

heaping

of this

enviable
seems

abundance that Nature

of has

enjoyment
served
very
a

it benefits,
pose. pur-

beneficent

Desire the the

for these that

things,kept alive by
are

daily reminder

they

within that

reach

of
ward forfor

successful,is the main

human
progress. to

force
were

drives

If it
on a

the custom diet American

sole in

the

successful

live

meager young

dark
men,

tenements, ten million eager

whose
our

promised

achievement
turn and

is the their
embrace

hope of
upon

future, would
success

backs

all In that

thoughts of
view
some

idleness. remarkable
law

of these

things, it is rather
not

legislaturehas
As
a

repealed this
be

of Nature. carry at

people, we
an

would

likelyto
a

the

polls by

overwhelming
and

majority
rags for

dum referenful success-

prescribing hovels
and

the
as

forbidding enjoyment

except

the

ward re-

of failure. In
an

ideal

society,such

as

may

be attained

in

38

THE

O'S

OP

BUSINESS

time, the possessor live,as

many
now serve

of great wealth

will

probably
and
joyment en-

do, in enough comfort

the useful
purpose

to to
success

of incentive ing abusticed prac-

among

the rest of us, but without

manner

the

privilege in the offensive

so

by
and

many

of

our

rich

of the less cultivated

enlightened type. widespread

account power
we

Our
on

resentment his

ist, against the capitalof

our

of and

all-too-frequentabuse
so

personal
ideas
that

has privilege,

confused
the

include

in this resentment
as a

very
we

institution retaliate the

very

of

and capital itself,

people
we

upon

capital (a thing) because

like dis-

occasional of

capitalist(a person). thought

of
upon
our

This

confusion
cause

the

subject seems
ital cap-

to be the and

of most To

disputes about
us

labor.

most

of

the

word

capital tured picHe is

merely suggests the brutal-lookingindividual

in the

familiar

newspaper

cartoon.
our

but

one

of the

temporary

phases in
that
way

dustria great in-

progress;

acting

only until he

learns The
no
a

better, and
word

doing that
to

very

rapidly.
our a a

capitalought
at

suggest to
like

mind

individual merchant

all,but

something

railway, factory

vessel,a telephone system,

of

building full
a

machinery,
or

harvesting machine,

steam

shovel,

screw

driver.

WAGES

AND

WEALTH

39

Bnt
few bnt

why

should In

all the

capital be owned
own

by

men?
a

the first

place, all that they

is

trifling part
produced.
we

of the vast The

rest

quantitiesthat have
our or

been

of

enormous

duction proas we as

have

consumed in

destroyed

went. it seems,

The is
as

capitalnow

existence, even

great

simply the relativelysmall remainder

a

that we, hands

people, have
who
now

preserved.
hold
are

It is in the
sons. rea-

of those The

it for various
trustees
as
we

largest of them
for the purpose,

have

appointed companies
an

such

life insurance
holder in
a

and

savings banks.
every

Every

of
ings sav-

insurance bank is
a

policy and

depositor

none capitalist,

the less because

he

wisely leaves
the company
or

the

management

of his

capital to
owner

the bank.
or a

So is every
of
a

of of

farm,

home,
a

mortgage,
a

stock

chandise, mercar

bond

or

share

of

stock,a
and

motor

or

set of tools. of
our are

The

stockholders

ers bondholdrations corpoof

our

railroads,banks, and
numbered
are

business Some

by the million.
to

railways

said than and

have

greater number
Their pass

of and
surance in-

stockholders

employees.
mortgages, merely

stocks and
forms

bonds, deeds

books

are policies,

convenient

of of

title papers

which

evideja^jp the

ownership

jiBelL ijapital

40
We
are we

THE

"

O'S
of

OF

BUSINESS

nation

capitalists, yet hating

as

thing

picture
it at every

to ourselves

pering **capitaP';hamit has

come

step because
mind
manners,

to be

represented in
with rude
a

our

by the occasional

aire million-

foolishly extravagant
his

habits,and
power.

tyrannical disposition to misuse

of this
nature

Millionaires

type
are

do also

exist.

People exactly like them

numerous

by

just as

in most

other

branches

of

society. But
the
a

the

flagrant and
great income
are

objectionable thing about

owns

is that he capitalist
very

the it. claim

plant and

derives

from
who

There

those

he

is not

entitled

to

this income be
the

in the first

place.

If so, then

it should

distributed,upon
rest

some are

just principle,among
cians reliably told by statisticomes inceive re-

of

us.

We
were

that, if this
in
but
were
us

done

with

all the person that

large
would

America, the
a

average

trifling pittance. So
that

even

if

we

entitled to have

done, it would
a

not

fit beneof

appreciably. Being would, of

course,

small

sum

for each
rare

ns,

we

spend it,with

tions. excep-

But

failingto
the of it.

distribute

his

surplus income
some

in

that way,

capitalistmust

find
rest

other

position dis-

Being like
to

the

of us, his natural

more

impulse

will be

try

to make

money

42

THE

C'S

OF

BUSINESS

pecting tool
was

of

great natural
When

force, of which
asked
not what he

he did

not

even

aware.

with that back he

his

income, he probably did

to
a

fully realize
had

in obedience
into the

natural

law

he

put it
;

enlargement of productive industry

he

probably just said that

was

bought
to him.

bonds He
does

with
not

it. That know

the form
in

it took

it,but
evolved
for

realityorganized society has gradually

him and
set

him with

up
more

as

an

tion institu-

providing ourselves
which
to

machinery

and

tools with

produce wealth.
all his

Now

why

could
us or

not

income
and

have

gone

to the rest of

to the

workmen,

still have

been

invested

in the bonds to much

just the
be

same, owned

but

thus

permitting the bonds

us

widely

among

all,instead
had been

of done
we

so

of it
every
one

going
of and
us

to one?

If

that

and thus

had had
we

saved

the the have

sum trifling

received it is true situation of

us

bought
would

bonds

with

it, then

that all

reached

the

happy
in

sympathetic
But
so

people hope
amount
we

for
to

behalf of

labor. be of

the small
it.

coming

each
consume

would

would

surely

instead be saved. Hence

saving
no new

Virtually none
capital would
would

would

Hence

be created.
cease.

industrial

ress prog-

Stagnation and

decay would decline,

follow.

The

production of goods would

WAGES

AND

WEALTH

43 To
or

prices rise,and
would

poverty
received in
our

ensue.

be

sure,
years

we

all have

for

one

two

this would

increase trifling have what

yearly income
of
we

and

enjoyed spending instead

would that
avail
us

saving it,but
saw our

when

whole caying all, de-

industrial
into
no one

plant, railways, factories unproductive

had saved?
ruin

and

for lack of the

tal capi-

In other
if

words,
new

our

trial indusnot

life will decay

into ruin

capital is
new

continuously put into it.

obtainable
current is what
may

The saved
as

only
out
we

capital
our

be

of

total it.

production of
of A
us

wealth

produce
and

Most
save.

consume

our

entire

share

will not stance, sub-

very

high authority recently said,in

if the two
who
year

that in

million

railway employees
fifteen aside
so

America,
per

receive

about
set

hundred lars fiftydol-

dollars

each, would

each, they could, with the total

a

saved, buy

controlling interest
of the if
New York each

in

the

outstanding capital
Railway

stock and

Central
save

System,
per year of all to

they would

fiftydollars
a

they could, in five

the the

years,

buy

like control
from

railway systems
Atlantic
to do

extending
No
to
save one

Chicago

seaboard.

expects except

them,
in
rare

however,
instances.
The

this,or

at all

is the fruit of capitalist

our

industrial

ex-

44

THE

C'S

OF

BUSINESS

perience. He savings
use

is the and
we

only contrivance, except the

insurance
succeeded company, in

bank

the have it is

by

the

of which

accumulating using
the way

much

capital; and
we

only by obtaining and

out of the that
cave

capital that wigwam.

we,
as

have

risen

and

It has

been
save our

proved

the

only

people, can
of

enough
industrial

capital to insure
life is to put
one
man so

the much

continuance income
consume

into
or

the

hands

of

that

he

cannot

and destroy it,

thus is
no

cannot

help
can

saving it. After

go

saving it

there In

place it
we

except into industry.

which Just and is the who

this

way

get

it
as

saved,
a

important thing
saves

to America matter

whole.

it does in

not

much.

Saved
serves owns

employed
us

productive industry, it
matter

all of

about

equally well, no

who

it. The

obstacle, then,
is

to

an

equal distribution
and intelligence of

of

wealth
Wealth the In

simply

our

lack

of

thrift. because

drifts will of
way

into
not
a

the
save

hands

the
if

few

many

it, even
it is

paid
saved
so

to them. because of it.

the hands

few,
for

actually

there
In

is

no

them

to waste

much

this way
of
a

the

drifting of great
is

wealth

into the
that
a saves

hands
us

few

really the only thing

ruin. It
seems

from

industrial for
us

to be

scheme

contrived

by Nature,

because

it is fool-

WAGES

AND

WEALTH

45 We
many
even

proof. It is
not them

not

perfect. It has abuses.

very

have of

succeeded

well

in

correcting

by law; perhaps
for
us we

Nature

will correct has worked

those

in time.

The

system
a

well.

Upon

it

have

become

great, rich,powerful,
Until
the
war

moderately
classes

contented
us

people.

all

of
we

have

been

steadily becoming

better

off,as

have
and

perfected and
made

enlarged
more

our

trial indusmore

plant goods
After
some

it

produce

and

for

our our

consumption.
abuse of the
an we capitalist,

all

shall
our

day learn that he is

innocent

part of
there

highly complicated
Nature If of
come we our

organization^ put
a

by

to render

us

useful
or

and

valuable

service.

destroyed
industrial
to

him

any
as

other
it

essential

part
would

machinery
as

exists,we

dire The

grief, just

they have

done

in

Russia.

existing system, if let alone, wiU

us

slowly but
shall
can come

steadily benefit
to understand

all.

Some
we

day
do

we we

it, and

when
This

make mistaken

it far
as

more

productive.
a

view of

may

be
and

being

plea

in behalf

capital
that.

against labor.
a

It is

just the opposite of

It is

plea

in favor

of the greatest
for the
use can

mulation possibleaccu-

of

capital

and
be

benefit

of

labor, by the only method

until labor has learned
to

that
save

employed

and

to invest.

46 As

THE

O'S

OF

BUSINESS

opposed

to

this

view,

there of

is set

up,

by

champions
a

of the

supposed
for
more

cause

labor,merely Probably
that

blind

demand

wages.

all

right-thinking people cordially desire

shall

labor to pay pleted de-

receive

more

wages;
our

but

proposals

them

by depleting

already heavily capital,

that
go
we

by
eat
up
our

war,

are

simply proposals
and

shall to posals pro-

tools
with
our

machinery
hands.

and

back
are

producing

naked

They

that rest and

it has been

merely wisely

upon

sympathy
that

for labor,

observed

sympathy
and

without

understanding is always

ineffectual

usually injurious.
A demand
a

for

increased

wages

does

not and
upon

merely
his
ployer. em-

raise

question between
It is really
a

the

employee
made

demand

all of
a

us,

that

this

particular employee
what the

shall

receive

larger proportion of
business
upon

entire

American
it calls him. the

organization produces, though particular employer

can

his

to

get

it for

The

employer
he makes

do for
a

this

only by trading off

the

goods
of

larger quantity of
us

kind

goods

the

rest

of

make.
money

He
has

does
to

this

by

raising
in

his

price, because
and
so

be

used

doing it
about the

it all has

to be

expressed and
the claim is

talked that

in terms

of money.

But raise

employer

should

not

the

selling

WAGBS

AND

WEALTH

47
increased
amount wages

pnce

of his

goods, but should

pay

by correspondingly reducing the

has
been

which

he

receiving as interest plant.

him to

upon

the

vested capitalin-

in his No the and

one

wants

get

too

large a

return

upon

capital invested
succeeds
him

in his
a

plant and

if he tries to law will

for for

while, the economic

He
cannot

punish
from
an

it.

possibly conceal
his business is

alert world attractive

the fact that

yielding

profits,and
enter
a

vestors enterprising insame

will
secure

promptly
also. It is

the

business

to

them

fortunate

law

that draws
upon in

capital where
in the

the most

can

be earned results
are

cause, it,be-

long

run,

that that

its

being

employed
of
new

in industries wealth

the most

tive producthose

and

withdrawn

from

which, producing the least,are

value.

of the least
new

public

Perhaps
to

two

or one

three that

establishments,
too

in addition

the

is making

much

profit, might
to two
or

suffice to

furnish
to

enough

tion competiwhen

bring the profitsdown

three
or

normal, but

discover

the

opportunity perhaps
They
at

twenty
enter

thirty do

also.

all

consequently
and
petition comsame so

that

particular business
them
down to

once,

among

make
the

and

sell the

commodity
abnormal

forces

price of it,and
had

the been

profitsthe originalemployer

48

THE

C'S

OP

BUSINESS

making

are

taken

from the

him.

And
and their

when had

his

petitors com-

entered

business

completed

their buildings and

cast

installed
upon

machinery, they

envious

eyes

his

experienced employees
the increased wages

and which

got

them

by paying them
knew make

they
would

the abnormal

ness profitsof the busiwas

possible. Especially
who
were

this

true

of

the

employees

conspicuously

worth and

the most

by virtue of intelligence, character,

industry.
natural nation laws has of
been
are

The entire

industry, under
gradually built

which
up to

our

its

present greatness,
that
every
man

apparently
course

so

sive comprehen-

they
and

in

due

invariably compel
to pursue
a

every

industry
of

course
a

that is in the interest

we are

public welfare.
to

As

ple, peo-

slowly beginning

perceive this and

new

to

grant ready approval

who
now,
serves

to the best."

slogan, **He

profits most Suppose,

and

that

our

employer, unable sellingprice of his

to

justly
modity, com-

fairly

to

raise

the

nevertheless of his
upon away

timidly yielded
for

the
"

mand demand de-

employees
him that
a was

higher

wages

unjust because
upon

it took and
sequently con-

from

him

fair return
in his to

his actual He

real

capital invested
be unable

plant.
the

would

pay

usual

dividend

50
sold

for under
loss. The

foreclosure

and

thus

sustain

tial par-

plant, being proved

be closed, for

incapable of
of
course

earning
one

would profit,

no

would

operate it for
This been
in

pleasure plain

or

just

to

duce pro-

losses. would have

being
at

to

everyone,

it

bought

foreclosure sell the

sale

by

speculator
for scrap
a

junk who dispose

would of

machinery
to
someone

and

the

building

for

warehouse.

The
not

employees,
to receive
a

who

had

thought capital ought

would
to do

just. return,

be
the

seeking employment
same

elsewhere, perhaps
about this

thing again, because

they had
not

chain

of events

the

standing. slightestunder-

Suppose,

now,
a

that

the

invested

capital

in

the

plant received
the
to

large return, large enough

to

give

employer high credit and

excite the

yet not large enough

and
attract
so

cupidity

of

others

astrous dising hav-

competition. Being successful,and

the confidence of the

public, of

the

investors

and

of his

bankers, he
many

could

give to the business

He could
row bor-

(and to the world)

new

benefits.
terms the

capital on
or

favorable
to

ter to install betcould

machinery
secure

enlarge
at low

plant. He
rates

ample
a

credit

discount

to carry

on

large volume

of business.

Having

by these

WAGES

AKD

WEALTH

51

methods he could

lowered render

the the
serve

cost

per

unit

of his

product,
vices, ser-

highest of all business

the world
a

that
better

is, to

with

more

and and

things

at less cost.

By

perfectly wise
thus

just apportionment
could do this and his
own

of what

he had

saved, he
wages

also distribute

higher

and

increase America sound

profits beside. provided with

men

is well and Vast

who

possess
are

ideas

meritorious

plans which
if

lying

unutilized. be

projects which,

realized,would
and of furnishing
mant. dor-

capable of producing much

abundant The
to carry
reason

wealth
for

employment

labor, lie
our we

usually assigned for projects forward

In

ure failnot can-

such
money.

is that
has in

get the

truth

there word
too

been

no

scarcity of money

(using the

the
an

nary ordidance abun-

sense) but recently rather

of it.
scarce

great

The

thing really needed

and
we

really
have
siderable con-

is

capital. It is capital of which

we

not

enough, because
part
out

have
our

not

saved

any

of

immense

annual

duction. pro-

It is for world for

lack

of
we

capital that the whole

hear constant

stagnates, and

yet

clamor

dividing the little that

in increased wages to

there

is among

men work-

spend.
the nations
pos-

America, just because

it among

52
sesses

THE

C'S

OF

BUSINESS

capital in comparative abundance, is glorified throughout the

world
as

the

only

rich

and

prosperous

country.

Europe
is

(though

flooded

with its We

the

thing we

call money)

because destitute,
war

capital has
are

been
upon
we

dissipated by

and
to

waste.

called

by all the world

ourselves
we

loan

it

capital and
than the
we

yet

need

more infinitely

have. of wealth
new

Had

but

sufficient

capital in

form

tools, factories,power seeking investment enterprise would produce such

every
an

plants, and
more

current

in

of such

equipment,
and
as

spring forward
abundance

we

could

annual

would

give

workman

high

wages
more

indeed,

in the form

of better, cheaper, and

plentiful

subsistence. But instead

our

of

seeking relief properly by

do the

serving cona

capital, we

opposite. In
we

futile attempt to stimulate the

industry,
and
states

encourage ductive unpro-

undertaking

of unnecessary

often
and

public expenditures by
as

palities, munici-

being
of

good thing

to do

during hard
If the

times
mere
men

by

way

furnishing employment.
were

furnishing of employment
could be

the

goal,

employed
be done

to in

swing Indian preference

to

clubs,but swinging
we

it should hammers

hardly
in

productive industry; and

our own

yet
toward

liberate deeco-

impede

progress

WAGES

AND

WEALTH

53

nomic

recovery and other

with

vast

offerings
bonds,
to

of

state,

ipal, munic-

public

compete

in

the

market

for

capital
for

against
the lack

productive
of

industry,

which

is

starving

it.

CHAPTER

IV

THE

ELEMENTS

OF

BANKING

Until
considered

recent

years,
a

banking private

seems

to

have

been

purely
for in that
a

enterprise, conducted
the
manner

principally
business
to

profit, after
general,
bank
to

of

vate pripaid
tomers cus-

little regard
any

being
to

the

idea

owed be

duties
to

its

other
statements of

than

honest,
and

publish
to

true

its condition, The is

a more

submit modem

ment governseems

examination.
to

view This

be

that

banking
the

public service. view, it

business the
seems

being

undoubtedly
that

correct

important
be
of
more

the

nature

of

the
and

should

widely
and and

understood
to
one

obligations
more

banks

customers

another of he and

clearly defined,
bank should the
a

that

every

customer

fully
tomers cus-

understand
are

what
now

service

and have

other

receiving
bank;
and

right
the

to

pect ex-

from

the This which

are

also,

what

bank's

rights
customs

are.

is all
are

pretty

well

established
of

by

the

outgrowth
at

experience,
and the
sons rea-

but

they
for

poorly
are

defined
not

best

them

universally
54

understood.

THE

ELEMENTS

OF

BANKING

55
are

The

operations of savings banks

than those of commercial

much In

pler sim-

banks.
as

reality,
ment invest-

savings deposit should

rather than
so

be classified

an

as
a

bank

account.

savings
sense,
as

bank it is

is not
a

much

bank, in the broad

The few

standard of money

public investment.
is
The
an

wise live

vestmen in-

art

which

long

enough
with

to learn.
sums,

average

investor

has at
or

to deal

small

in odd is without

amounts, and

irregular
education
are

intervals.

He

experience

in the selection almost

no

of investments
investments

and, too, there

for such
sums.

suitable them

In
at

trying

to find

the

investor It may

usually loses
be

least part of the money.

said that he
of it

buys experience, but without

to do him
an
or

buying enough savings bank

for
any

much immediate

good.

The

affords

him

investment

amount, cents, and

a

large

small, even
interest from

including the odd

the

it bears safe

date
no
an

of

deposit. It is

investment, requires
almost
as

investigation or
income
as

study, pays
be

high

the very
over,

highest grade of investments

and
can

pay
money
or

the world
upon

converted
without
an

into loss

able reason-

notice, and
To

shrinkage.
the

maintain
of

institution that affords

an

lic pubas

this kind

investment
a

for

its

savings

they accumulate, is

and suflScient public service,

56 the here.

THE

C'S

OF

BUSINESS

savings
The
and

bank's

duties
nature

to

the

customer

end
posits de-

permanent
the

of these

savings

necessityfor paying liberal interest

even

upon

them, allow, and place

them

require, that
of
a

the

bank
manent per-

shall

in investments and it

rather results

character,
this that
the

necessarily
not

from
pect ex-

depositor
his
to do

could

reasonably

to withdraw

deposits (even though

so

sionally occa-

allowed

in

moderation) without
should the
ings sav-

giving ample notice;

depositor
consider

and

neither

that, in addition
in
a

ing to receiv-

interest,his deposits

savings institution

give him
from for his

any

implied
or

or

row preferentialright to borto

it

expect it
such
as

perform

other

vices ser-

him,

paying his checks, keeping

accounts,

or

collecting his debts.

or

The

commercial

business

bank Its

is

totally

different the

style of institution.
and its customers not

relationship to
is far
more

community
more

volved, in-

intimate,and
must

so

stood, generally underat

and

needs

be of

discussed

greater

length. It is
in mind of familiar in oflSce,
to who

the

kind
of

institution
as

people have
the maid hand-

speak

banking
more a

being

commerce.

It is
we

often
National

than

not

the
Its

thing
our

know

as

Bank.

scheme

of business

organization, is

supply

credit

required temporarily in trans-

58

expand it

too

much

in

proportion
among

to
us

our

gold
par, in

serve. re-

It circulates
we

freely
and

at

cause be-

know

it

can

will be redeemed

gold

if desired. Bank

culating credit, then, is really the principal cirmedium

of

exchange.

Its

destruction
to

would

entail consequences
a

impossible

imagine.
monly coma

Even

slightcontraction spoken of
as

of it (the condition threatens it by

tight money)
Banks
create is

ness busi-

convulsion. their their is

so own

exchanging
for but The

credit, which

good
must

anywhere,
be

customers'

credit, which
that is

good

little known credit

an

it will not

circulate. into book

customer's credit

simply converted
papers

bank

by

exchange of

and

entry.

The

customer in this

speaks of this bookkeeping balance, simple

way,
as

created

money

in the bank.

Inside

the bank, however, The

the

language
calls
** **

is different.
money

thing the

customer

in

bank,'' the banker

To
him

calls his
money,
are

deposit liability."
debt
he must must pay not

it is not

but

whenever
create too

the checks much

presented. He
He
cannot go
on

of it.

ing increas-

it
amount
reserves.

indefinitely. The
of real money
This that

limit
can

is fixed

by

the

be

kept

in the bank

ever limit is severely contracted, when-

the

timid

and

the

ignorant draw

gold

from

THE

ELEMENTS

OF

BANKING

59 It in

the bank
can

and

hoard

it

or

use

it in circulation.
coin

be increased

only by depositingmore

the

banks,

or

by contriving improvements
will make the cash

in the

banking system that

more

reserves

efficient and

capable of supporting safely a

credit.

larger amount

of bank
was

Exactly the latter

accomplished by the
Reserve
do
are

tablishmen esa

of the Federal

Banks.

In

general
banks

way,

these

institutions the
thus

for the national

just what They

of the
reserves

banks

doing for
the

their ing bankmost

customers. power of the cash

greatly increase system. They

and

entire

hold
thus
so

of the country
where most
a

make
that

them
a

always available
which
than
some

needed,
heavier
can

bank

has

for the
reserves

moment will

credit
vert con-

demand

its

support
at

of its loans Bank

of
a

into
the

reserves

the

eral Fed-

Reserve

until

pressure

is relieved. the ple peo-

The

banks

city lose deposits when buying from

the

of that
more

city are
they
are

outer

world

than out

and selling to it,

more

consequently
than

paying
are

(through their banks)

; or,

they

taking in
trade,
is
or

in other

words,

when visible

the balance and ible, invisor

of

money

movement,

against that city. The

movement

balance

of trade be

money

against

city must

paid by
at the

the banks

of that city out

of their

reserves

60 Federal Federal

THE

O'S

OF

BUSINESS

Reserve Reserve
them to

Bank.

Formerly
this the

(before the
reserves pelled com-

Act)
shrink

loss of
amount

of

their

loans. in that
able un-

This

resulted

in what

is called

tight money

city. Money
to obtain

being tight (that is, borrowers

bank

credit) business

men

were

compelled

to restrict business and

activities which
and from
so

volve inin

expenditures
consequence

purchases;
purchases

when,

of this, the been

outside that the

the

city had

reduced sufficiently
turned

balance

of trade

again and
reserves came

became back
to

able favorto the

pand ex-

to the

city,the lost
they
were

banks

and

then

enabled
new

again

their credits
was

by making
and

loans.

All this
was

unnecessary

highly injurious. It
former

simply
laws. benefit

due

to

our

inadequate banking
conditions, the great System
any

In contrast
of the

with

such

Federal
as

Reserve
banks

becomes

easily
are now

evident

the

of

city,if they

members

of the
over

Federal
a

Reserve
or

System,

are

able to tide
trade

temporary,
of

favorable seasonal, un-

balance
some

this kind of their

by temporarily
at the

rediscounting
Federal
reserves

paper

Reserve
out banks

their Bank, thereby replenishing

immense for
reserves

of the hold

the

Federal and

Reserve thus
are

just

such

purposes,

able

to avoid

subjecting the entire city

THE

ELEMENTS

OP

BANKING

61 of the circulating that each

to the evils of medium. bank

to its

sudden

contraction

From
to

this it is apparent
see
as

is

compelled
so

that

the

loans

it makes of
a

customers,

far

possible,are

kind

that will be Eeserve

for rediscount eligible

at the Federal

Bank. banks
or constitute,

It is said, then, that

a

der, ren-

public service.
a

They

create
more

and

furnish useful

to and

the

public

circulating credit
money

convenient in
amount

than than A

and total

several
money

times

greater

the

supply of the
from
own

country.
bank
for

customer

obtains the

this credit
bank
manner

his note

by exchanging with
the
bank's

his

credit, in the
to this

described.
must
tablish es-

To

become

entitled
own

he privilege, must and

his that his

own

credit.
note

He

satisfy the bank

otherwise
do his

is

good,

part in strengthening and

credit

supporting this entire

foundation
of the that
tomer's cus-

system.
credit

The is
man

very

knowledge

by the bank

he
or

is the

kind

of

who, if he gives his note

promise, will certainly perform it.

other
course,

It rests, in

words,
no

uponr
can

character, without
exist.
He must

which, of
next

credit
that he

satisfy
is able

the also
pay

bank

not not

only intends merely

pay

to, but

to, pay;
when

and

sometime, but
is

the note

is due.

This

partly

accom-

62

plished either by depositing securitywith the bank

or

giving it
his

correct

detailed and is
even

written the

statement of his

of

business

condition

nature
now

business

operations. It

usual
an

that

this statement auditor But

or even

shall be certified by

independent

accountant.
to customers who meet

these
a

ments, requirecredit and

which

the
which

bank

can

only extend
cash

total

is limited
can

by its total

reserves,

these
comes

be increased

only by actual money

from

to other

the

bank

newly banks,

coined
or

supplies, private
must
so

from hoards deal

cities,other

from bank

; and

being thus limited, the

as

with

all its customers

to

make

its total
them

available

supply
No
more

of credit

go

around

among be

equitably.
to borrow

customer, then, should

than he his fair

allowed
This is

proportion.
and

measured the
bank.

by what
The

does

to support of

assist

simplest evidence
of the it is
he
pays average

this

is, of
he the the

course,

the
on

amount

balance tested

keeps

deposit, but
with

also

by
and

promptness
extent in

which

his loans

general
its
own

to which

he

aids

the bank

in developin

strength and
then, the bank
in

banking
can

power.

In

rough

way,

extend

credit

to customers to

about

proportion

to what

they do
The

support and

maintain

this credit structure.

THE

ELEMENTS

OP

BANKING

63

homely and
that
banks.

practical expression
can

of this is to say

the

banks There

best
one

help those

who

help

the

is

further

qualification. The
most to
tomers cusfulness use-

bank

can

safely and
who borrow

properly loan the

for the shortest is

time. The

of bank it is borrowed
a

credit

greatly increased
who
uses

when
serve

by
need used
sum

customer

it to

temporary
to be

and in turn

promptly

repays

it to the
so

bank,
that
a

by another by several
course

customer,
different
of
a

given

is used

tomers cus-

in succession

in the of loans

year.

posits Deare

created

out

of this character the whole

bank
nity. commu-

and responsive, elastic, A

one

serve

permanent
is

standing loan of

credit to
in
a

customer

something like cash

It is withdrawn

hidden from

safe

deposit box.
;

useful

circulation and
A

it

impairs the usefulness serving its other

a

of the bank
customers.

prevents it from
bank
cannot create

line of of
a

tic, satisfactory, elasmass

circulatingcredit time, or
to be must to be

out

sodden

of

long

sleeping loans.

The

bank, then, in order

in the

of the extend of

highest usefulness
credit

community,
is known
to pay

to the customer who is

who

high character,
does not
or

amply able
more a

when his who

due, who
fair does

try to ]5orrow
for too

than

proportion
his

long

time, and
the

full

part in cooperation with

64
bank the and

THE

O'S

OP

BUSINESS

strengthening it
life of the
seen

as

vital

agency

in

business

community.
most

It is thus the bank

the

that the

the

important

service

renders
money

tiply public is practicallyto muland

supply,

this service
for
even

benefits the
non-

the

non-borrowing
bank
has

customer,
balance is

borrower's

nothing
to

but
him

bank

credit, which

been transferred

by

the

writing of

check.

Probably

the next

most

portant im-

service its customers

on

lies in

receiving,as deposits from

credit, checks
cities. The drawn value It other

for

immediate

other
this be

banks, often in distant

collection best service

of
can

is little understood.
out
some

realized
of

by thinking
these
a

good

method cash

converting using

checks

mediate into imthe

pose. pur-

without

bank

for

But

the

important economic
is

function
a

of A

mercial com-

bank
extends of

really that of perhaps

him
a

carrier.

bank

credit to
as

cotton

planter (speaks
the

it

loaning
note

money)
the

by receiving
proceeds
to

planter's
credit.

and

entering
uses

his for

If the
sends

planter
his

part of it to pay
to the

seed, he
is

check to pay

seed loan

dealer, who
at his
own

thereby enabled
which of he had

off

bank

previously

made

for If the

the purpose

buying and

carrying seed.

planter

66

THE

O'S with

OF

BUSINESS

(loaned him
the
cotton

money)
until he This
the

which
a

to

buy and

carry

sells it to

manufacturer also
pays

of

cotton in turn cotton.

cloth.
when

credit

will

be

liquidated
for the

manufacturer

him
him he

But

the manufacturer from

some

will pay bank

by

taining ob-

credit

that

regularly
will into
now

deals
carry and

with

and

the manufacturer's while

a

bank

the cotton

it is being made wholesale

cotton

cloth,

until it is sold to the manufactured

and

drygoods house.
passes to
a

As

fabric
a

wholesaler
that
serves

then, later,to
one

retailer,the bank
for him
credit The

each which
out

of these pay

will create

credit will be

with

to

for
a

it, and

each

wiped

again by
cotton
on

subsequent sale.
bank credit will

carriage of this
when each the retailer

end

sells it to the
a

final consumers,
amount he and not
pays

of whom

buys only

small

for it out
to borrow.

of his

earnings, which
manner

did

have

In this
for

the bank

credit,originally
the cotton

created clear
pays

the
to

planter, has carried

the
consumer was

through
All
at

who

finally

it.

the the of

credit

needed

brought into
and

existence

required time
after

place and
served its bank

passed
purpose.
was

out

existence

it had
a

The

credit created
at
every

by

commercial

necessary
a

step.

Existing entirely
character and
con-

upon

foundation

of faith and

THE

ELEMENTS

OF

BANKING

67

fidence,

it

cmmbles

if

these

are

shaken,
In earlier

and

ness busi-

suffers

in

consequence.

years,

under

more

primitive

banking usually

system,

our

odical perisions convul-

breakdowns
in the

began

with

credit

system.

CHAPTER

BUSINESS

CONSEQUENCES

OF

THE

WAB

The

war

did of
of

three

things

to

American and and and

business.
wasted
lated accumu-

The
some

first
tens

these

is that of form
poorer

it absorbed
our

billions in the
now

current

wealth and The

which
we

of

labor
to

ties commodi-

are

that

extent.

broad conducts said

economic the
war

fact

is that for burden

the it.

generation
Much has
future

pays the

been

about about

placing

upon
war

generations;

financing
bonds and
can

the

entirely by posterity
them
to the to

issuing government
to
pay
;

allowing only
pay

them. there will

Posterity
be
no one

itself the and

mere

else
will

present
be both

receive debtor
course,

payment.
the creditor.

Posterity
The To
upon

Government be later later will

sure,

is, of
the

machinery. levy
taxes

Government
to pay will tax

will the
own

generations generations
receive

off also

bonds,
the

but

these and
the
qo

bonds in

their

money

back the

again
same

form
to

of

bond be
sure,
case

payments.
but the

Not
same

individuals,
Each

generation.

individuaPs
68

is, of

course,

BUSINESS

CONSEQUENCES
men

OF

THE

WAB

69
and
as
a

thing by itself; some

others will
own

will of

pay

taxes

bonds, but
are

the

people

whole, these
The
labor real and in these poorer,
we

things
cost

true.
war were

of the

consists

in

simply the
and is

material

that

consumed

stroyed de-

conducting it. When

are

the

war

ended,
much If
war

things
and

gone;
war

the

nation been

is that

the

has at
once

thus

paid for.
all of the has
no

should

thereupon
the United wealth
of
'

destroy

bonds

that the

States the nation

Government
would be

sued, is-

less.
be
a

Certain

individuals

fortunes, to be
individuals

sure,

would
escape

lost, and

again

other burden

would

long subsequent
of the United

of
as
a

taxation,but the people

whole, would
debt is not
some a

States,

have

lost

nothing.
asset.

government

national

By issuing bonds, then,

borrow from

of the

people
as a

simply
whole,
The

others,
owe

but

considered
to books.

they simply

money

themselves.

Government

only keeps the

Through
year of to

future

generations the Government

the

will each

collect from

people

large

sum

in the form it back will

taxes,
the

for

the purpose
as

of

paying
This

again

people
in

bondholders.

viduals affect indi-

proportion
and in

to their

respective liability
the bonds

to

taxation,

proportion to

they
dur-

bought and

kept.

He, however, who

saved

70

ing the

war

and his

bought bonds
children that them.
to

with

his

sured savings,in-

for
taxes

they should

receive

instead

of
the

paying
it is
in

Excepting

repairs

our

quently plant, subsewe

necessary,

substantiallytrue that
and

paid

for

the

war,

labor

materials,

as

it

progressed.
would have

The

steel

that into

peaceful industry
farm

fashioned
now

machinery

or

locomotives that could

encumbers become
was

battle fields. wires for the

Copper

have

sion transmisas

of electric power

virtuallydestroyed
that in peace would
was

shell turned

casings. The
these

labor into

have stead in-

metals in

things of value

employed
wreckage.
Beside

producing

only ruins

and

this actual
and waste

destruction of labor
we

of current wasted of
our our

modities com-

fixed

capital by allowing deterioration

was

plant. It
city scar-

overdriven
of labor to
run

during
and

the

war

and, through

materials in

to

repair it,it

was

lowed al-

down

physical condition.
some

For
as a

it is said that illustration,

billion within

such
our

sum

dollars
a

must

be

spent upon
them
man

railways
dition. con-

year

to restore the He
average may
so

to their former this

To
means

piece

of

news

little.

be

vaguely interested
money.

in
per-

their

abilityto get

much

He

may

BUSINESS

CONSEQUENCES

OP

THE

WAB

71
man

haps

resent

their

asking for it. To

and he is

another

perhaps
he

it

signifies more
that

cause gratifiedbebusiness
many

sees

it will make and

not

active

in
of

railway materials
us

equipment.

But

forget that it is merely active

kind. This
;

enough that business

to be of the

shall

be

it

ought also
of

tive producbrokenkinds

business
sure,
even

repairing a
than
some

down of
as

road

is,to be
which

better less
gum

business

are

productive, such
or

manufacturing

chewing

burying
way
were

the

dead, but it is not productive in the

be the
some

it would

if the

same

labor
an

and

materials

put into
in
a

building of

entirelynew

line of railroad
case,

deserving locality. In the latter

dollars

for
we

billion
would the

spent in labor
of
a

and
new our

material,
railroad.

be richer by the value

In

existing case, just the

same

we

only get for

railroads
we

billion dollars before

million to at the
men

had
a

war.

In

other

words, about
devote instead
war

half the

who

might otherwise
new

year

ing produc-

wealth,
that
same

must

work
to
our

repairing

the

damage
The

the

did of
our

railway system.

is true

factories,our
American
we

lic pub-

utility systems, and plant

away

our

business take
men

in

general.

For

years

must

from
are

productive

labor

to

repair damage.

We

poorer

by the total of all this.

72 The second

THE

C'S
war

OF

BUSINESS

thing the
of
out

did

to the

highly
was

plex com-

machinery
throw

American of

business

to

it badly

adjustment. delivering
because other the
an

It had
immense

been
nual an-

running

smoothly
of

and

output

goods,
all the from

each

part

was

ing doof it.

just
Coal
was

about

parts

required
ore

coming
lumber in

mines,

from from and

the
the

ground,

from

the the

forests, cotton

all fields, of
us

just about
himself

right amount,
at all times

each
the

found and

supplied
for his

with

tools

materials of
war

particular
made

work.

The

outbreak

suddenly
behave had taken other

all this
an

atic systemof
lions Mil-

organization
ants

like

orderly nest
a

that of

someone
men

poked
away

with

stick.
or

were

entirely Machinery

denly sudvoted dewere

shifted
to
new

to

work. and

was

purposes

sources

of

supply

interrupted great loss

not

everywhere.
of

Naturally, there
was

was

efficiency,which

partially, but
zeal and
energy

wholly,
the

overcome

by the extra
us.

which
For

war

put into
years

three

since

the

Armistice
into
to

we

have

been

putting

the

machinery

back
up
new

adjustment
duction. pro-

again, but

it is still not It is not

geared

capacity
wealth

turning out

in the

form

of

goods in anything like the quantity it will

74
his the

THE

O'S

OP

BUSINESS

ten-thousand-dollar
Government this for
in about

balance for

to

the

credit

of We

payment
two
or

the
and

bonds.
in that

all did created of

as new

years

way

perhaps fifteen
bank

twenty

billion

dollars

deposits, and
amount

they mostly

still exist
we use

such.
was

This

of money
the

(as

the
to then

word)
the

created

by

public, transferred
for bonds, and
in

Government back

in exchange
to

transferred
for

the

public again

payment

things.
was

It
a

not

the best

way

to finance

the

war,

and

few
no

eminent
one

economists

told

us

so

at the

outset,

but the
wrong

paid

any

attention
men

to

them, because they

as

hard-headed
and that if the must
we

business
must

said business

were

have
were

usual.

They
the and
war

said

people
be

expected

to finance
money,

they

permitted

to make must

in order and

to make

money

business the
be

be

kept
chase purnot
riod pe-

good
the

therefore

it

was

unrestricted

of

goods that

should And

encouraged;
so, for
a

practice of
it
was our

economy.

long
a

policy and
needed
the

belief that, at
the

time

when

the

army

everything,
most

civilian
and

population could do consuming

trade

good by buying
in order have

everything they could

This

that ceived de-

might be kept active.

no

should

one,

but

it did.

It had

deceived

Eng-

BUSINESS

CONSEQUENCES

OF

THE

WAR

75 most althat

land

for

long time earlier in the

we war

war,

to her

irreparable injury. So
the correct
money and
way

all agreed
was

to finance

the

to borrow pay

let the next

few

generations help

for

it.
we

Consequently, when
money

had

all borrowed Government The

the for ernment Govit

and
we

transferred considered

it to the
our

bonds,

duty done.
money

could

take trouble

the
was

and to
no

buy

what

pleased. things
in
we

The

it had It had

buy the
time

very

also

wanted.
a

to waste to act

trying

to conduct

cheap regard

war.

It had
what

quickly without
needed

much
a

for
a

it cost. of

It

perhaps
the

quarter
could

or

third
and
army

thing every-

country

produce,
The

needed

it

at

once

regardless of price.

required

food, clothes, shoes, metals, chemicals, vehicles, everything

There
the
war was

that not

we

as

individuals

also
to

needed.

enough

produced

supply both
needs of the

requirements and population. We

in

the usual

civilian

did not market

realize this. the Government

what

cordingl Ac-

the

open

and
were

ourselves,

in innocent

ignorance of
another

we

doing, bid against one

and
so
we

for what

there

was

forced
that

the

prices steadily up.

army

It is third

plain

if the

required, say

one-

of all the

goods the country could

produce,

76
then

the and

civilian
economy,

population must, through selfget along

done
little
so,
or we
no on

denial thirds.
the
war

the

other

two-

If it had and been

could
poorer.

have As

fought
it was,

in the

struggle for goods

civil

between
we

the Government
up

and
we

the could

population,

used
we

everything
in reserve, of
our means

produce, everything
a

had

and

really consumed
This
new was

noticeable

part

plant
of

itself.

all done

through
amounts

the

creating

money

in vast

and

ing spendby by

it freely.

The of

banks
their but to the

created customers
soon

this money
secured had to

taking

the

notes

Government

Bonds,
notes
so

they

begin
Banks bank

carrying the
for

Federal

Reserve
new

rediscount,
was,

the burden

of all this and

credit
made Reserve
reserves

of
on

course,

properly
reserves war

necessarily
Federal

to rest Banks.

the When

gold

of the

the

began,

these cent
as we

gold
of the
ceeded pronew

amounted

to about
reserve

eighty per
But

liabilities of the in
money,
were

banks.
the
war

financing
Federal increased
to

by

creating

the thus

Reserve until

Banks'

liabilities
reserve

the
per

gold
cent if

amounted

only about
was

forty

bilities of the liamore

This
ever

ample, perhaps,
but if
we

nothing
war or

happened,
to

had

more

if

we

had

export

great

amount

of

gold

in

payment

BUSINESS

CONSEQUENCES

OF

THE

WAE

77 there

of

adverse be

foreign
none

trade
much.

balances, then
There
was

would

too
a

nothing
The

alarming

about

forty
our

per

cent and

reserve.

alarming thing
ment towards in of
a

was

steady

further

reduction

rapid mo^|eof it. Fori a

upon

movement

price inflation

feeds

itself.
more

Each
money

rise
and

prices necessitates
so

creating
forces
the

the money
no

created

prices
would
way. to
a

higher. It would
a

more

stop itself than

same

sled

going down

hill, except in the

reserve

That
much
once recover

is,not until the

lower take

ratio then
a we

declined should

percentage,

and

all at

fright,pass
our senses

through
amid the

panic,and
of
our

slowly
once

ruins

splendid business

organization.
governors that

Fortunately
bank credit
one.

the

of the the further

Federal

serve Re-

System realized
must be

inflation of
task
was a

stopped. But
were

the

delicate further

Banks

told they must

customers

not

go

in

creating deposits for

to

by
a

ing mak-

loans
reason

them, unless
the
the
mere

there

existed

higher

for it than
customer.

private advantage of
hand,
it
was

the

On

other for be

tant importials essen-

that

the machinery
not
a

producing
slowed
course

the

of life should
of credit.

down to

for

lack

It

was

difficult

pursue.

Further

expansion

must

cease practically

and

yet

78
a

THE

O'S

OP

BUSINESS

sharp contraction
was

would
in

produce disaster. spring of

1920. it
as

The The and

near

attempt
banks

made

the

and

the

public fairly

understood

cooperated
the

in it. In consequence,

probably
as

desired

result
for.

was

accomplished

could

have

been The of who

hoped

expansion

of bank ceased for

credit

ceased.

The

rise

price inflation
had been

simultaneously.
a

Those

buying
timid.

further
were

speculative
Many
at

became profit

Orders

canceled. to
we

carrying

large

lines

hastened
and

unload
were

slightly lowered
launched
a

prices
a

fairly
time, mean-

upon

falling market.
more

In
career

the

similar

but had

extreme

of inflation

in

Japan

collapsed, accompanied
disaster.

by
fall ened hast-

panic and widespread business

of

The
was

prices,
and to

once

unmistakably
by all
upon but

begun,

intensified

universal

ingness unwill-

buy, based

the

belief

that

they

would The

go

still lower. followed

to to than

collapse of prices which

and
to many,

out throughsome,

1920

1921, while
and
far

ruinous

jurious in-

demoralizing
less ruinous

everyone, it would

was

inevitable been

and

have

if further

delayed.
classified
every

As
as

an a

economic business

turbance dis-

it would without

be

crisis

panic.

Like

it is followed crisis,

BUSINESS

CONSEQUENCES

OF

THE

WAB

79 is hard

by business work, rigid

time for
to accurate
our

depression,the
economy, vast and

cure

for which

the

lapse of sufficient
ery machin-

complicated industrial slowly back

necessary

work

itself

into
to

the

nice

and duction pro-

adjustment
of wealth.

the

large

This
more

cannot stable

be complete until relation is

more

just

and

proached ap-

between
and

the

price of each
have
not far

commodity
declined
others formly. uninot have
can

all the

others. have When into

Prices

Some
far

fallen too time

proper and

and

enough.
these

economic

law
men

brought

adjustment,
volume and

produce and
then. We have have

trade

in normal

not

until

fought

our
we

war

and
are a

as

nation
deal

we

paid for it. But

and
we we

great
it.

poorer do not

in consequence

do not
have

know

We

realize it because
is
our

plenty of
as an

money

and

it

custom

to think
one

of money

as end, wherefrom

it is which
cured

only

of the tools.

The
now

only thing

American

business work There

with
our

is

suffering will be
economy, and

by hard
else.

and
is
us.

rigid

by

nothing

nothing serious
We
have
are

nently permaa

the matter

wasted

great
; our

deal of wealth banks

to eat have

railways

in bad

order

not

yet digested everything they had

war;
our

during

the

people have

not

gone

80 back to

THE

O'S

OP

BUSINESS

regular work
that instead

yet and
of

are

under
poor not

kind

of

delusion
become what

becoming
they
do

they

have

rich,just because
money

understand

is.

lieve Notwithstanding these facts,it is difficult to bethat which

war

the for

industrial
years
can

forces

of

great
so

nation

have materials and wealth

been

working
and

largely on
formed transnent perma-

be

quickly
to the

smoothly
of

devoted and is
no

production
and

the

comforts
that world and

necessaries

of

life.
course

There and
era

doubt the
progress

it will be done
will
enter

in due its
sequence con-

that of

upon

greatest

prosperity, in
learned But from and the

of
redoubled

the

lessons

it has

the

exertions

it will make.
transformation
peace

vening inter-

period
of
war

of

activities

to

those

of

will

call for
in

ligence high inteland

and investors and sound

among

sustained

confidence

employers

; for

patience, moderation, self-restraint,

among

judgment
the

employees; for
of their

ucation ed-

leaders

organizations,
on

and

for

wise

political leadership
This
must that

the

part

of

Government.
our

co6peral;ion and
not be of the

control

by

Government
kind and

exaggerated,

paternal

renders

potent private enterprise im-

unnecessary.

It
us

must

be

strong

enough

to assist

and

protect

adequately against

82

THE

O'S

OF

BUSINESS

prosperity. We quarreling
among

cannot

be

enriched
the

by law, by
sudden

ourselves,or by
remedies

plicatio ap-

of and have

powerful

newly

discovered We

loudly recommended
got to win
way

by political quacks. prosperity of

peace

the
we

in

just
war
:

exactly the by individual

have

won

the

victory of

hard

the elimination work, plain living,

of waste, and

the fearless with

a

resumption
confidence
menace

of the
in
a

enterprises of
future
been from removed. and

peace,

firm

which

every

really serious
we

has

For

this

have which

the
we

talents, the

resources, war,

the machinery
we

applied

to

and

the lessons to

have

learned
to

besides.

We

have wealth.

only

devote

them

the

production of

The

real

problem for America

It is

calls for

solution
of all
a

by

each

individual. of

perhaps first
"

problem
waste

eliminating
throws
away

waste

not

merely

the

that
waste

something

valuable, but

the

of

time

uneconomically
and

employed

and

misapplied

labor

material; the unnecessary

doing of something already being done

These
new

adequately.
are

and
sources

other of

methods

of

like nature to be

the

national
as

wealth
as

gained

through

economy

well

through
way to

increased
tunes for-

production.
to be

They

point the
or

private
who

gained,

saved, by those

choose

BUSINESS

CONSEQUENCES

OF

THE

WAR

83

to

seize

the

opportunity.

private fortune,
or

however

large, accumulated
form is
a

in this way
or

by

any

other
waste

of

enlarged production
It
is

diminished
created

public benefit.
to the

newly
The

wealth
of with

devoted

public welfare. managing

of

ure pleas-

possessing
moderate
or

and reward

it, together

the

living in somewhat
served
as

greater comfort
to

luxury, has
the best

the

tive mo-

bring forward
of
him

intelligenceand
it.
a

talent
cannot

who the

thereby
fortune

created
or

But

he

consume

even
can

come. great inmost be into

His but
a

private consumption
the wealth he waste
go

at

trifle of
or

has

brought

existence
All the

saved
of in

from

and
into is
no new

destruction.

rest

it must

back

productive
other

employment
it
can

industry.

There

place

go.

It will in turn

thus

create

industry,
more

create

greater demand
and

for labor, produce

and of life,

of

the comforts them.

eat
or

necessaries
the

cheapen

The
wear

proprietor of
but little
more

invested than the

capitalcan
rest not of
us.

Fr^m
much
so

the
who
as

public point of veiw

owns

it does

matter

the invested

wealth

of the country,

long

under

adequate public control it is not

or

injuriously used important

dishonestly obtained.
is that there of

The be

requirement
it. To
insure

should

plenty of

the creation

plenty of

84

THE

O'S

OF

BUSINESS

it,

it

should

belong
it)
to

(with
him who

such

moderate

benefits

as

accompany else

can

create

or

save

it,

there

will

be

no

motive

to

create

and

none

created.

And

capital

will

be

sorely
destruction

needed

to

restore

the

enormous

waste

and

that

have

taken

place
which

and

to

provide
must

the

financial

sources re-

for

the

world

now

look

largely

to

America.

CHAPTER

VI

THE

ABUSE

OF

OUB

RAILWAYS

Nothing blindness
of two and

could of

better

serve

to

demonstrate
its treatment

the

American

business

than

its

own

railway

system.
miles

This of

system,

perhaps
cars

hundred

thousand

line, with

locomotives,
appurtenances
is valued
to if
we us

buildings,
for its

city

terminals,
use,

and
cost Its
sense

other and worth that else

convenient
billion
sum,

at

about

twenty
times
that

dollars. in of the

is many
were

suddenly
any

deprived
worth the
a

it nothing
If

would

have
cease

value

mentioning.
or

it should

operating,
are

two

three rock
or

million
as

people
New their

who

living
would

on

barren

known flee

York lives
to

City (on
the is

either for

perish
could

for
no

foot,
farms

they
our

even

get
where

gasoline)
their would
food

of

western

states

produced.
a mass

Every
of for to

other

large

city

also

become would

empty
lack of

buildings.
something
way. by raillack of

Every
which

industry
is
now

cease

being
farms

hauled would
85

it

regularly
next

The

perish

for

86

THB

O'S

OF

BUSINESS

clothing, tools,machinery, origin,now

could in the The
be
a

and

supplies of city

coming regularly by railway. There glut

one.

of food

in

one

state

and

famine

next

business
was

of

building and
and

managing
is carried
years

these
on

railways
about when two

undertaken
men.

by
ago,

million

good many
was

the

railroad those

business
men

young

and

perienced, inex-

made

the
rest

customary
of
us

takes mis-

of do. into of
us

ignorance, as
abused

all the

regularly
fallen
rest

They

the great power

that had
over

their hands.
when
we

They
traveled

tyrannized
or

the

shipped goods.
some

They
of
one

unjustly discriminated
us

by overcharging
and

and to

favoring others,
be
us

they seemed
money,

at

time

making
because
of

too

much

which
were

pleased dis-

it

was

they who
As

getting tion, objecson rea-

it instead
we

ourselves.
seem

to this latter

did not

to realize that the

only

they put their time and material

of roads
was we

into the building

money
one

because forbade Even that

was

there the

was

in

doing
would

it and build

that if
more

no profits

roads.
war

the Government the way

to at
an

learned
a

during the late thing

No
one

to
a

get

needed

done

quickly

allow

profit in it.

will work

long

unprofitable occupation.
that
anyone

It

is

against public policy

THE

ABUSE

OF

OUE

RAILWAYS

87
matters of

should. industrial But

These

observations and

are

just
law.
as a

evolution

economic
reasons

for these various

our

we,

gan nation, be-

to hate

railroads

and

proceeded to punish
wholesome
pure
was

them, not
but
a

merely by just and

also

tion, regulaanger, like

we

intemperately, in
its
as

child

kicking
so

toys.
more

There

nothing

needed but
we

much

railroads builders

and that
in

better ones,
progress in

so

terrified
was

the

building

greatly impeded;
We
also starved

fact, it
the roads

tically pracwe merous nu-

ceased.

had, by excessive

regulation
of

at the

hands vision.

of

commissioners
acted toward
our

limited
as

We
were

railroads

though
to

they

public enemies, merely

and
own

intruding

exasperate
were our

rob us, instead children.

of

realizingthat they

In and

spite of all this mistreatment, they to-day

are

grew

up

fairly near

complete system in
We them
more

size, but

horribly

emaciated.
from

need

better than
we we

transportation service
need

anything from
enacted ruined the them.

anybody, and yet, until

new

cently re-

railroad

law,

we

had
war

most alcause beto

We down. rails.

nearly lost the They

We needed refused

they broke

money

buy equipment and

to them

to loan

it

by buying bonds

and

stocks from

them,

88 because
poor

THE

C'S
was

OF

BUSINESS

their credit

not

good.

We

kept

them

and

their credit bad then

because

by denying
to
were

them

enough
the
and

earnings, and
needed then

refused

loan
so

them
poor,

capital
abused
the

they

them

because, being
necessary

too

poor

row to bor-

money
were

to to

equip

themselves fast

properly, they
as
we

unable

move

things as

needed is also
we

them the

moved.

This
method with

approximate
in

history of the

have

employed

providing ourselves
such
as

other
and

indispensable services,
street
cars.

phones tele-

In all these
to

services business

the is

vitallyimportant thing
that
and the

American

service

shall
can

be be

dependable, cheap, too,

of
so

abundant,
much at

quick. If it
any

the

better, but

cheapening
its

it that

all seriously cost

impairs
American the amount service all

speed

and

reliabilitywill
ways,
our

business,
so

in indirect

many

times

saved.

To
to

impair
close

tion transportathrottle
upon

is merely

the

industry.
we

Probably

pay

to the of

railways in
five
or

year,

for
lars, dol-

transportation, a total
in the money. form of
use

six billion

pieces of
they
us can

paper, make

spoken

of

as

The

only

of this paper
or

is to pass in

it back

to for

again, directly

rectly, indiIn

exchange

things a railroad

needs.

so

THE

C'S

OF

BUSINESS

what,
an

for

illustration,
tramway,
its

very

vast

factory,
done
to

using
itself

interior

would

have

by

destroying
boss.

own

tramway slogan
has

just
been

to

spite

the

tramway

Our

billions

for

chewing
one

gum cent

and

joy

rides

and

vanities,
We could

but

not

for

transportation.
for
so

have

spared

the

money

high
has

an

authority

as

the

Secretary
that
we are

of

the

Treasury

recently
luxuries
in

estimated

now

spending
about the

for

one

year

sum

equal

to

total

value

of

our

entire

railway

system.

CHAPTER

VII

SPECULATORS

AND

MARKETS

Few life

institutions
to

in
so

our

complicated
misunderstood
take
not
upon

business
as

appear

be

wholly

the
the

speculator.
risks He
all who

His the
any

office is to of
us

himself
to
assume.

that

rest

do

wish

is not of
us

particular
one

individual.
another.
a

He He

is almost is the risk

thing someman

at

time

or

deliberately
he wishes he

assumes

particular
who at

cause be-

to.

Any
it is

man

buys
the

because
or

thinks

cheap
he

moment,
it is too for

who and

sells
can

something
be

because

thinks later sale

high
or

repurchased
he

again
has for for

less,

who thinks

keeps
he

something
can

because
a

he

get

more

it later, is
He when
may

ulator specone

at

that
very

particular
rare

time.

be thinks

only
has
one

on

occasions
correct
some

he
or

he

exceptionally
every

judgment,
line of

he of is

may

be

day
he

on

business
He at

whose

hazards
man

makes his
on

special study. judgment

is

just

who

thinks
moment

good

that

ticular parand is

some

particular question
stand
91
a

willing,

if

wrong,

to

loss

which

would

92 otherwise wish

THE

O'S
on

OP

BUSINESS

have
a

fallen
loss.

someone

else who this in the

did not

to risk

He
a

does

hope and
wise otherest inter-

expectation of making
have in
was

which profit, else who

would took
no

gone

to

someone

large and
with

doubtful reasonable

speculative profits but

but certain
cial commer-

content
ones.

miller

is in the
a

business

of

grinding wheat
profit. He
fluctuations with

into flour for

does not want

legitimate commercial
to
concern

himself In
a

in the market

price of wheat. only

to

fact,they bother
fair
to reasonable

him.

He

wants

make he

profit for grinding, but

that. A
out sudden his

wants

be

sure

of

rise in the

price of wheat
or a

might

wipe
at

year's earnings
moment does not

drop
him

in wheat
a

the

right
he

might
wish

yield
to

large

profit,but
He

gamble in wheat.
risks from his the miller his

would

like to eliminate
He to has

all such

business. with after

wants which he to He

obtains

credit

from
pays The

banker,
banker

buy wheat, and

sold

the

flour. for
a

simply
sure

make
does if he his
an

flour
not

reasonable

but

profit.

wish
and

to

speculate

in wheat.

Moreover,
would lose

did

his banker But

a

knew

it, he
grocer

credit.
for

wholesale
an

gives him
iox

order

flour,at

agreed price,
Before the

delivery several

months

later.

SPEOULATOES

AND

MAEKETB

93
know him
"

miller

can

name

the

price he
is

must

in advance when
say

what he
comes

the wheat
to

going

to cost

buy it several
or

months

later of its

in up

December

"

else take To

the

risk

going

in the meantime. must

know with
at

this with
someone
an

certainty he
him

have wheat
a

contract

to deliver

the

in

December
on

agreed

price. So
to

he tells
him

broker for

the Produce

Exchange

buy

wheat

December He
seems

delivery. It
to be He

is called

buying futures.
is

speculating,but
has

doing exactly the opposite.

from
in the his

thus

inated elim-

business market.

all risks

due

tions to fluctuagoes up

wheat

If wheat
not to

fore behas

December avoided
a

it matters

him.
has
a

He

heavy

loss, because

he which

contract

for his wheat his flour bill. had carried he

at the

price

on

he
a

calculated
future wheat but had

If he had the risk

not

bought
and have

himself
course,

dropped

would, of

made

large
to his

speculative profiton regular business

certainties
out.

the wheat

in addition
was

profit,but he

content

with

and, beside, his banker

might find it

By

this

future

contract

some

other

man,

through
deliver
an

the Produce the wheat

Exchange,
miller
he

bound
next

himself December

to at any

to the

agreed price. Maybe

did

not

have

94

THE

C*S

OF

BUSINESS

wheat, but

gave
a

thorough investigation and

study
of and the the

keen of

intelligenceto Argentina,
and felt
sure

probable
rest

crops

and

Canada,

of the world, the

that when

December
and

came

price
livery de-

of wheat
to the
one

would the

drop
miller in his
men were

be could
much

buy it

for

at

lower

price than

named

contract.

Other

keen

making
and

the

same

gations. investielaborate It
was

They
and
some

had

time

often

very
so.

expensive facilities for doing

extent their business.
no

to

It

was

not

the
or

miller's,
facilities
and the

however.
for it.

He He
was

had
a

interest
one

in

in specialist

thing

they
same

in another.

All

these
was

keen

men

foresaw
to

thing, that wheat December,

another

probably going probably

all bid

drop

fore beone

and

against
on

(through different
for
of

grain brokers
contract.
among

the

Exchange)
bid the

the

miller's
down
a

Thus

they
so

the

price

grain

themselves,

miller

finally got

fairly low
a

competitive
crop

price. If they had

would

foreseen

short

they

have

bid the
were
nor

price up just keen

instead

of down.
and
never

Maybe
had
any

they
wheat

gamblers
ever

expected

to and

have

any. to But to

Perhaps
cover

they just sold

it in

it short
at
a

intended

by buying
so,

again
it

lower

price.

even

they made

possible for the miller

SPECULATORS

AND

MARKETS

95

grind

flour in
to

large amounts,
while

on

credit,with
the

curity se-

everyone,
a

they took
which

risks.

They
could

fulfilled
not

purpose
on

without

business
gins mar-

be carried

safely on

reasonable

of Cotton
or

profit.
planters
of
must
as

usually sell their cotton, baled, because

most

it,as
and

soon

they

need
it

the from

money,

professional cotton
These sell for dare
men a
are

buyers buy

them.

specialists,too.
sure

They

buy

and

small

but

commercial

profit. They
know

not

gamble

in

cotton.

They
are
quainted ac-

the various with and the

grades and

staples; they

requirements of different
that each
cotton

facturers manu-

know

spinner
They

has

use

for

only certain
cotton

kinds

of cotton. and the kind

also

know

the
grow.

growers

of cotton and
from

they

They
one

study the world another, both

in

markets

compete
the

with

buying

planter and
cotton

in crop

sellingto
is the
a

the

manufacturer. valuable
or

The
crops. per year

most

of
more

all

It may and

be worth

billion dollars

is nearly all for the

bought

upon The

credit banks of the in

ated cre-

by banks
the cotton

purpose.

loan ton. cot-

buyer nearly the full value

cotton not

If the

should

drop much enough

price the
the bank.

buyer could
He
must

sell it for

to pay

protect himself

against

the

risks

of

96

THE

O'S He

OP

BUSINESS

fluctuatingmarket.
a

handles

vast

amounts

on

very

small

but his

sure

profitearned
He

by his special
does He
not

training and speculation to carrying

and
a

industry.

wish
not be

enter

his business.

dare
one

lot of cotton
one

that is worth
to-morrow.

day price to-

another
upon

Therefore,
spot cotton,
for the

mediatel imhe

buying

actual

hedges it by quickly sellinga delivery of the

a
a

contract

ture fu-

same

number

of bales This

through
is called

broker
future.

on

the Cotton

Exchange.
do
not

People who
is

know

what

he

is
He

doing think he
is in the

gambling

in cotton to

futures.

reality taking steps

cotton
on

avoid
he

doing

so.

If

price of

drops

while

is still carrying and

his spot cotton sell it to because

a

borrowed
at
a

money

he has

to

spinner

loss,he

is not

concerned,
also

cotton

futures
he

have, of
makes
a

course,

dropped profit by
lower These
as

in
now

price and buying

he

corresponding
contract at
a

in his

future

price than
two

received offset

when
one

he

sold
so

it. far

transactions

another,
are

fluctuations in the cotton

it is these that made

market

concerned,
to avoid.
sure

and

the
a

dealer but the

wishes

He

has

simply

small

reasonably

commercial

profit between
of his

planter

and

the

spinner, by virtue
cotton

trained

knowledge

of

quality and

of the

spinner's requirements.

98

THE

O'S

OF

BUSINESS

complicated, language, people, and

are

are

carried transacted

on

in

strange

terms

of

by comparatively few
little understood
are

are,

therefore, but public. We

in

by the American
belief
more our

mostly of
no

the
or

that

dealing

futures than then

someone

has

higher
craps

laudable
statesmen

purpose
now

shooting
plan
to

and the

and
until the

abolish the

practice by law,
to

takes about
new

trouble

explain danger

to them

truth until

it,whereupon
statesmen
are

the

is averted

elected. Then there

a

are

those

who of

speculate in stocks.

They make
of stocks.

business
stand

studying the real value

to

They
on

ready
market

buy

any

stock

if it is offered consider

the
or

for

less than

they
the

it worth,

to sell it if

they consider
can

price

too

high and
on

think less.
own

they
In

buy it back
case

again later speculator

if he thinks
a

for
not

this latter of the

the

may

share

stock,but
at too

it is
will

sellingin the market

some

high

price he
the

sell

of it short.

He

simply

borrows from when it in he

stock who

(giving security for its return)

has
it and sells it. Later
on,

someone

he

thinks

the

price is low
it to the

enough, he buys
man

again and

returns

from

whom
a

borrowed

it.

His the

act, in selling short, had

tendency

to lower

price a

little.

His

later act

BPECULATOES

AND

MABKETS

99 low had
away
a

in

buying

it when
a

he

thought it was
The

dency ten-

to raise it

trifle.
a

further

from

normal
or
men

the

price of

stock

goes,

either

too

high
of

too

low, the greater becomes

are

the

number and

who
a

aware

of the
or

situation

try to

make
are

profitby buying
the

sellingit.

If stocks low beare

sellingon
their then

stock

exchange just a shade

value, only
a a

normal
so

few

men

interested

in
are

small

difference.
a

Therefore,
the

only

few

buyers for
a

rise because
anyway.

rise few

should
^re

be
men

only

small
are

one,

These

the

who

extra
are

keen, watchful, and

well

informed.
In
narrow

They

largely professional
we

traders.
called the
many
a

such
or

circumstances

have

what

is

professionalmarket.
heavily
market These
many

But

if

price falls
come

very

know

it and
to

into

the

and

give orders

brokers do
not

to

buy stocks.

buyers speculative
to

usually want

the stocks

keep. They They

It is not
are

what

is called investment
a

buying.
rise. very

just
the

speculators buying for prices

them
are

know

too

low.

Their
seen

buying forces
the further the
away

up.

It is thus
on

that

prices quoted
from the

the

Stock

Exchange

get

real value of

of the

stocks, the greater is

the number and

either

into the market who come speculators bebuy or sell according as they

lOQ

THE

C'S
or

OF

BUSINESS

lieve the stocks

of their in

too

low

too

high.

The

final

sult re-

dealings is
market The

to exert

constant

pressure

forcing the
value.
a

price of
work of the

stocks

towards

their true in this way and

speculator has steady values

in

constant

tendency
fluctuations
a or

to

prevent

violent

price. The
in which

speculators also
anyone
can

furnish sell

ready market buy

were

always
to.

at

any
no

time

thing any-

he
or

wishes

If there

speculators

speculative markets, publishing daily price

quotations and
farmer
cotton would be

rendering compelled
several
to pay

these to

services, the
or

keep his grain (unable

in

perhaps
even

months his

the
he

meantime
could

employees)
with
some

until turer manufac-

get
in

into
a

communication

distant

city
would

who not

would
know

buy it. Even

what

then

the
to

farmer

price he
know

ought
he

receive, nor
to
pay.

the manufacturer
If
a

what

ought

holder
would who

of

some

railroad

stock weeks
moment
any

desired

to

sell it he
investor

waste

perhaps
at that less

in

finding an
to want to

happened
"

buy

any

stock at all

much

railroad

stocks, or

especiallythe stock
even

of that

particular railroad, and

never

then

they might

agree

upon

the

price. provides
meet every
a

The which

Stock stock

Exchange
brokers

large

room

in

day, bringing

SPECULATORS

AND

MARKETS

101

with them

them

orders

to

buy
or

and in

to

sell,sent
from

in to
tomers cus-

by wire, by mail,
all
over

person, this
room

the world.

In

in New
like
changes ex-

York

alone, omitting all reference

in other often cities, bonds
a

to

million

shares and

of sold

stock
every meet

and

still

more

are

bought

day between
and
or

buyers and
even

who sellers,
care

never

do

not whom

know

or

to whom

they

sold he

from

they bought.
a

Each

gets what
is to And

wants

through
other

broker, whose
in

business

deal with
in

brokers the

executing orders.
world
the learns

consequence

whole

through

that

day's evening paper

of what worth those

world's

composite
and securi-

judgment
ies
are

commodities The
same

that

day.

thing takes
Exchange,
formal and

place in the Grain

the Coffee

Exchange, the Cotton

Exchange

and,
as

in

less

highly organized ways,

On
these

to other
are

commodities.
two kinds
own

exchanges
The

there who The

of
the

transactions.

sellers
there.

actually buyers
there.

goods

sell them
for
are

who

need
lators specu-

\ them

actual

use

buy them
to

The

also there
excess

keep the prices steady, by

is offered in
case
a

buying
excess

the

that

large
ulator specis

forces
sees a

the

price down
The

to where lower the

the

bargain.
excess

price

forced

down

by

the greater is the offerings,

102 number of

THE

"5'S

OF

BITSINEB8

speculators who
of them In

come

in and
to

buy,

until

finally enough
from

arrive

stop the
same

price they selling

going

lower. from

just the
too

way

prevent
short.

prices

going

high, by

Of

course
as

there there the

a

are
are

abuses abuses
of

connected

with
for

all
stance, in-

this,just

connected,
medicine.
and

with

practice

But

the

speculator
part
not of
our

is

most

legitimate

indispensable
If like
we

industrial

organization.
those who
to it
we

did

allow

speculation by

it, we
our

would desire.
risks

all be

unwittingly exposed
our

against
can

Under
and to

existing system
by
for

avoid
cialists spe-

uncertainties
assume

employing
us.

these

them
as

If

we

put them

out

of

business,

is often
of and
us

proposed
would hunt for

by

act

of

legislature,then
to
as

each
risks and

be

compelled
markets

carry

his he

own

his

best
our

could

it would

seriously interfere
We

with

regular
propose to

business.

might

just

as

sensibly
who and and
own

abolish business
assume

insurance

companies, risks,

are

also
each

in
of

the
us

of his

assuming
own

let death

fire hazards
overseas

risks, and
that cargo.

ship

cargoes

at his money

peril,or

of the

bank

which

loaned

against the

CHAPTER

VIII

GOOD

AND

BAD

TIMES

Perhaps American

the

most

striking
is its
of

phenomenon
between

in

business
of

life

alternation distress. exists

a

periods
A

prosperity
of true
are

and

period

prosperity producing
is true

when

the
tity quan-

American
of

people goods.

maximum
to do
so

This for
end

because

is the
on.

sole has that while

purpose
no

which
than

business
to

is carried

It
order
use

other
we

produce

goods,

in and

may

enjoy
more

their and

consumption
while

producing
machinery

building
still
every every
more.

tional addiurally, Nat-

for

producing
when is is to

then,
every

we

prosper

man

and

piece

of

machinery
When
and that

working

day

at come be-

full

capacity.
abundant

happening,
be

goods

incline what
he

cheaper.
wants

one Everyin erate modployed. em-

is able

to

buy

normally
and

abundance,
There desire
of
no

being
is
no

fully
discontent
to
a

constantly except
the

ural nat-

everyone

do

still better;

which the

is, of

course,

evil, but
103

benefit"

being

real

104

force

which

is

back

of

all

material

human

progress.

But
so

our a

industrial

life is

capable of turning
because
we

out

vast

quantity of goods only

so

have

organized it
each
best
man

highly. Organizing
one on

it consists he

in is

doing only the

thing

for which

suited, and
else

depending
for
him.
so

all the others

to do
on

everything
others
someone

His

dependence
on

is

absolute, and
fails
the others

is theirs
are

him.

at

once

impeded. started,or
that

They
where

may

not

know

where

the trouble

to locate been
are

it,but supplies and

from
or are

services

have
sources

coming regularly
no

the

accustomed

longer coming
one

coming irregularly.

When

cause stops, he stops the others, beon

they depended
which When
his

him

for

out something with-

they
everyone

cannot

proceed.
ing place, dothe

is in his accustomed

full daily
of

work, turning

out

expected
others to

quantity
use,

his the

particular product for

whole

then

organization
wealth
we

operates

smoothly at top speed; great

for

is

produced

distribution
a

among
so no

us

and

prosper. and head

so

In that

mechanism
can

complicated single guiding

may
a

large
to
trol con-

there and

be

regulate it,trouble
time. It may be

begin anywhere
a large failure,

or

at any

crop

106
not

THE

O'S

OF

BUSINESS

promptly forthcoming according

American munition
to fit gun

to

contract shells

from
were

factories. barrels
to
a

The

required
inch.

thousandth

of ^

This
accurate

could

not

be

out accomplished within the

highly
and Buch

gauges

used the

ture manufacIn

measurement

of

shells.
wore

filling
idly rap-

large orders, these

and

gauges

out very
a

could of

be obtained of
reason

only

from

certain

few

makers
some

instruments

great precision. For

the

perhaps minor failed,or

future it. The
was

supply
and

of these
the

gauges

not

adequate,
upon not

whole

world's

depended
story
may

them
be

without it

knowing
could
our

true, but

easily have

been, and
upon slows
one

it

perfectly illustrates

dependence Anything
that

another.
any

down

part

of

our

dustria insult re-

organization produces the immediate

of
a

slowing

down
so

some

other

part, this in
a

turn

third

part, and
we

it all
would

approaches
about

standstill.
The

If it stopped
nearer

all
more or a

perish.
we

it

comes we

to

stopping, the
times

suffer.

This

is what

call hard

business

pression de-

Progress in either direction

of

of

slowing down
When

or

speeding
or a

up

feeds
occurs

upon

itself.

down breakbecome

delay
are

at any

point, men

idle, They

out

of employment;

receiving no

GOOD

AND

BAD

TIMES

107 and
so

wages

they

can

buy nothing
The

at retail stores

retail trade

declines.
the

of retailer,

course,

then

buys

less from

wholesale
or

dealer, who
at all to the
raw

in turn

gives smaller
which fuel

orders

none

factory,
and

consequently buys less

and

material needed.

lays off

men

who

are

not

As

this results

in fewer

goods being moved,

railway

earnings and
material

consequently railway purchases of employment

of train
away,
men

and Business
in

also
are

cline. decharged disand

having fallen

men

all of these
from

lines of

employment
are

their

purchases
The

the retailer
sees

still further
a

diminished. decline
a

retailer thus
we

still further
cle the cirat
other an-

in trade

and

are

started decline
a

around

second

time.
once

Every
causes

of business decline
to at

any

point

at

further

point. We
less
consume

continue
at

steadily
the
same

produce
time,
we

and

less. less

Naturally,
from
force

of

circumstances.
clear

We
a

thus

pass

into, and

eventually

through,

period of business
It may last only
a

depression and
matter

great

distress.

of months
or

before endure

provement imfor

is discernible,
years.

it may

Our
cease.

total

business
as

activities,of
a

course,
on

do

not

Regarded

whole, they keep

cent

running

at

perhaps ninety
a

per

of normal, for
ten per cent

it is said that

variation

of about

in

108
our

THE

C'S

OF

BUSINESS

total

production prosperity

measures

about

the distance

between But
a

and there

business

depression.

in hard

times
more consume.

might easily take place

cent in the amount

drop of far goods

for
we

than

ten per In

of

other far In
our

words, the

mand de-

goods
the
we

is

subject to
of them. reduce
we

tion greater fluctuaa

than

supply

period

of depressio

immensely
waste

consumption
harder
wealth it is when is being
sumed con-

of

goods,

we

and less, In

work

work

is obtainable.

consequence

gradually created
and

faster
In

than

being

it increases.

other It
are

words,

new

capital is being accumulated.

and
so new

seeks

ment employThese

undertakings

begun.
The entire it the
was

employ
are

men
once

and

require materials.
and the While

markets

at

stimulated
a

national slowed

machine

gains

little speed.

down, the weak

in the first
now

part that caused

was

breakdown
are

place

probably repaired. We
the

emerging
grows

from

depressed
Each
one.

period and resumption Newly

at
ployed em-

business of

steadilybetter.
a

activity
men

causes

further
new

spend
trade

their becomes and

more

earnings
better

retail
do

shops.
also
once

All

and

hence

manufacturing
more

transportation.
workmen and

These

call for to

prosperity
more

begins

feed

upon

itself, causing

pros-

GOOD

AJSTD

BAD

TIMES

109
more

perity. And
and
consume
even

then

we

feel free

once

to

buy
pand ex-

goods with
more

liberality. Demands
than

rapidly

supplies. Rather
we

regardless against
one

of

price,we

buy what
We

want

and

bid

another

for it.
and

thus

force

prices
comes bewe

higher and

higher

the business and

more

situation and

steadily more
consume new

unsound We

faster

than

we

produce. require much

undertake

enterprises that
We
are

capital and

credit.

think

we

may

safely do this because easily made

to in

prices

rising,and
borrow

profitsare
freely
it

everything. We
because
at to
a on a

buy

anything,
be

rising market
the debt
too
so

can

surely
are

sold

profitand speculate
and

paid. We

inclined
are

freely. Vast
is at the
same

credits time is very

to
as

thus
idly rap-

created

wealth

being

consumed. The machine

out

The

situation
a

unsound.
very

is in of order

condition and
as

be

easily
disaster

thrown
occurs

soon

some

of

enough importance
enter

to

derange
decline.

the

chinery ma-

again, we Many
men

the next and

carefully watch
do not do go
on

study these

dencies. ten-

They

unnoticed
There

by

one, everyare,

though

they

by

most.

in do

America, several nothing

but

business

organizations which
of these

study the

progress

cyclesby daily

collecting statistical data, taking careful

110

THE

O'S

OP

BUSINESS

measurements is

of

business
tell

and with

interpreting
great
has

what

going

on.

They
the

can

reliability
reached towards in

what

stage
progress

country's
towards

business

its

prosperity

or

distress.

The learn

more

intelligent
at the crest

and

watchful

can

thus is

that

of

prosperity falling
failures,
and

danger markets,
reduced

very

near.

They
of
and

foresee business

traction con-

credit,

duction, profor

unemployment,
sell

they

prepare

them. others
and

They
to

instead There and

of

buying.
soon

They
many

sel coun-

sell.

are

sellers

few

buyers,

so

prices

fall.

As

they
which

fall, they

manufacturers know

stop
could sell

producing only
are

goods
at
a

they
to

loss.
out

Business of

begins

decline,
progress way.

men

again

ment, employis
once

and under

toward

depression

more

CHAPTER

TX

INTEBNATIONAUSM

The

American

people
with
our

have

always

regarded ical politbeen standing, underof

anything

foreign
and

suspicion. foreign
commerce

Foreign
have with

relations discussed
more

with the

garrulity periodic

than

and
two

appearance

these has
which

subjects
them but

during
to
an

presidential
onslaught
to
our

campaigns
oratory

exposed
has
such

of

added

little

knowledge.
that
to

Under until

circumstances,
we

and had

remembering
reason

recently

have

little

participate
able remarklimited. continent
sity neces-

actively
that From
until

in
our

international

affairs,
of

it is not
is this

understanding
time

them of but

the the

of

the

discovery
has for
been entrance

present,
no

there

little

and

inclination

into westward
to

world

fairs. affrom

The the the have the Atlantic

sea,

early
and

settlers

pushed
backs
the

turned that

their time

Europe

and

and

from their and

American

people
to

devoted

efforts

almost of

exclusively
this

exploration

development
Ill

continent.

112 The timber

THE

O'S

OF

BUSINESS

and

mineral
vast and and

resources

of
area

the

Great

Lakes

region, the

fertile

of the Mississippi

watershed,
wealth of the
saw

the

semitropic south, with

cane,

in cotton

and

sugar the

held

the attention

pioneer, and

middle

of the last century

the

opening of the Pacific

settlement the

Slope, with

new

fields
this with

for

and

exploration.
were

During
at

long period

Americans

confronted

problems purely local.

from
a

Living frequently
cut

great distances
contact with

each

other, and

off from

but

few

people, it would
not

be been

prising surstricted re-

if the

pioneers' thoughts had

to the events

simply
What them
much and
was

of their daily existence.

in

occurring
the

Europe

concerned

less than the

happenings
of the

in the nearest

village,
there.

condition but

road that

leading they
cured se-

They required
for

and little,

themselves.
to its unfortunate

Previous of the

collapse at the time

and

Civil War,

ship owning
Atlantic
of and

ished operation flour-

along

the

Gulf time

Coasts, but the

were

shipping
in
a manner

and

trade

that

conducted trade
sisted con-

impossible to-day. The

of cargo at

largely
and there
was

lots of natural

products,

not, as

present,

world-wide
and

tributio dissuch small

of

manufactured
was

articles; by
a

trade

as

existed

conducted

very

114

THE

O'S

OP

BTJSIKESS

requirements brought about operations could

way. not

by such extensive
be met

itary mil-

in the ordinary
ities commod-

The

production of merchantable
in

diminished

Europe while

her

requirements
we were

increased,and
asked
returned to pay to
us

to meet

the latter situation railroads. Our

we

for and
war

our

bonds
to

were

in

exchange

sent

Europe
a

munitions clearer
if the

of

and

foodstuffs. occurred
may

Perhaps
be obtained the

picture of what
transaction of time
:

is visualized

without
us

vention interfor

Europe

traded

railroads

munitions The
same

and

food. in evidence in all international

cease as
merce com-

principle is
Barter

business.

did

not

increased, but the spiritof

obscured
assume

barter
an

has

been

by
that

the

use

of money.

As
acetic

illustration is

I manufacture

acid, which Having

to

used

in the

production of rubber.
send
some

plenty
rubber in
change ex-

of acetic

acid, I would
in

the

plantations

the

Straits

Settlements,

for which I could

me

I would

be offered rubber be
a

rubber, which
growers

not

use.

So which

the

would

give
the
also

money,

would
not
or

claim

against
but

Straits for
;

Settlements

only for rubber

any

tin, spice, rattan,

want

of their

ucts prod-

but if I did not and

any
some

of the

products of

the

Straits

desired

glass bottles from

INTEKlSrATIOlfrALISM

115

Belgium,
Straits
money,

could claims

trade

my

claims

against the
e.,

for
or

against Belgium, i.
The what
man

Belgian

francs.
obtain the

with

whom

I traded

could Straits. while barter The of

our

then

he

wanted
may

from be it
seen

the that

From
use

foregoing it
has
commerce.

the

of money
of

obscured

somewhat,

is the basis value of

our

imports
vice

must

equal the value

Trade
must ance, bal-

exports, and

versa.

though Department

an

examination

of the

reports of the
one

of

Commerce

would is
one

lead

to believe war pre-

that it does

not, which
was

deceptive. In
of the
our

times, America
'*

so-called visible ible by visare cess ex-

debtor*'

nations, or,
our

in other

words,
;

exports exceeded exports and

shown
in

visible
I

imports

and

imports

mean

those statistics.

which

the

Government's of exports of the

over

The

in value

imports represents
which for which
are

the

cost

to

us

services

Europe
we

formed per-

for

our

account, and
way
we

which

have
in
us

paid in the only

goods. These
we

can,

is payment

services

which

performed for
when

call
as

**

invisible"

imports, and
the

accounted
our

for

such

demonstrate

equality of
Invisible
money
our

coming in-

and consist of

outgoing trade.
passage

imports

freight and
owneris

paid foreign goods and

our-

steamship

for

carrying

116

THE

O'S

OF

BUSINESS

selves,premiums insuring
held
our

paid foreign underwriters

interest
on

for
rities secu-

cargoes, and

American

abroad,
in

the money

ican spent by Amer-

travelers

foreign lands. exchange and

is money,

To

facilitate

the

distribution
as

of

commodities, there employs

a

but

each

nation

different have been

money

monetary

system

ganization special or-

perfected to deal
of the different

in

foreign

exchange, Exchange,
value the
of
money

or

the
as

countries.
means

commonly
money

spoken
one

of,

the
in
change ex-

the

of

country expressed

of

another.
at par

Sterling (London)
as

is
means

quoted

about

$4.86, which
Steri-

that

the value

of the

English Pound
currency,

ing, expressed
$4.86.
Assume that
of

in United

States

equals

the

United

States
and

was

sellinga
buying

great volume
to

products, raw
more,
say,

manufactured,
she
was

England,

much

than

from

the latter.

The

seller in this country would

require that

payment buyer
to

be made
in

in

dollars.
go

sequently Conto
an

the

Britain

would

exchange bank
pay.

purchase dollars

wherewith
receive

to

In
a

exchange for "1, he would

for

(at

par)

draft
in of

$4.86 against

the

London

bank's

balance
transfer

New the

York,
money

or

so-called be
made.

telegraphic
If

could

there

IKTBBNATIONAUSM

117
to

were

many

Britishers
demand for

wishing
them

buy
be

dollar

drafts, the
than
at
a

would

greater
sell

the

supply.
and

Therefore, the dollar would

for "1

premium

only $4.85,or less, might

a

be

given.
the also

This

would

have

tendency not only to goods by Britain,

of .British

check but

purchase of American
to

stimulate

the

purchase

goods by Americans, since goods

"1 could

to the

value

of

be

bought

in

England for $4.85 (a saving

The
her

of

cent

per

Pound).
curtail
would
a

result American
her be

would

be

that

Britain while

would America until would

purchases,
British and
to par. chases, purchange ex-

increase

balance be

would

reached back the

gradually
in mind

forced

It must

be borne
state

that

organize present disis due such

of the

European
of

exchange
factors

partly
as

to

the

presence

abnormal economic and

repeated violation

of

law, inflation,
inconvertible
so

gold embargoes,
paper
a

depreciated
so

currencies, and
state

forth, and, in
now

mal abnor-

of affairs

as

exists, no
for it
on

attempt
basis of

should trade

be

made

to account

the

inequality alone.
or

Sooner

later all international

debts

must

be

paid
The

in

goods.

Otherwise, they cannot

countries
of
ten
owe

be

paid.
States

European
in
excess

the

United
dollars.

greatly

billion

They

118
are

THB

O'S

OF

BUSINESS

not

in

position to
the
are

pay

the debt, because with which

a

they
it.

cannot

produce
industries
which which
money

goods

to

pay

Their with
upon

hampered
new

by

lack of capital
and

to to

buy
work.

equipment
Since had

material

comparatively little
own

ready they

is to be

in their

countries,
tend ex-

look

to America

for it,and

by failing to
of

further
raw

credit
to

(in the form

machinery and
be not

materials)

Europe,
of

we

would

only

preventing the payment

also
state

the

original debt, but

indefinitely prolonging the present wretched

of
way

European
out is to

affairs.

Clearly, then,

the

only

purchase the bonds

and

eign of the forthat of

governments they
may

corporations, in order

employ the proceeds in the purchase

materials
and

the needed The

upon

machines.
of the

large interdependence
the other,
was

nations, one
ing dur-

very

forcibly illustrated

the

recent

war.

The

exasperation evidenced
so

in the and

textile

industries,and
due be
to

among

clothiers
secure

housewives, dyes,
were

their

inabilityto

German instances

may

easily recalled, and

too
numerous.

other
can were

only

One
be

imagine the
America unable
to

annoyance

which the

would

felt

cut off from

secure

tropics and

consequently

ber, coffee, tea, chocolate, spices,rubother

tin,lac,jute,edible oils,and

products

HSTTKENATIONALISM

119

quite indispensableto
for
us

us

and

yet quite impossible

Without

to

produce ourselves.
be

rubber, for
with

example, fires could

extinguished only
would
be
no

since there great difficulty,

adequate
toring mo-

hose;

surgery

would be
no

be

greatly handicapped;
proper

would

pleasure; the
be

tion insulaand

of electric

wiring would
become
very

impossible;

ballooning would

precarious.
the
rest

Were of the

England absolutely isolated

world, starvation
than her
one

from

would

be

prevalent there in less

four-fifths
of

month. and

England imports
pays

foodstuffs

for them various

upon
seas.

with

coal,manufactured
ices. serv-

articles,and
Her and life

commercial her

depends
of the

merchantmen

the freedom
commerce

Foreign
the For world the
are

is not

mysterious, except in
it is

persistence with which

purposes
as

regarded
nations

as

such.

of

trade

the

of

the

one

nation.

ically, Geographically,politin many be other

ways,
cially commer-

and linguistically, surface of the earth

no

the

may is

divided, but

country
a

unique; commercially
United
or

the look
tem sys-

world

is

unit.
a

The

States
a

does

not
or a

to China of

for

government

language
but for

weights and

measures,

camphor,
United that

silk,tea, hair nets, soya

States

bean

etc. oil,

The

depends

upon

China

in the

same

way

120 Texas

THE

O'S

OF

BUSINESS

depends
of and

upon

Wisconsin
Trade

"

^f rom

the
New

point stand-

products only.
the is

between

land Engforeign

Gulf

States
as

is not
as

called
trade the

trade, yet it
New

quite
and

foreign
In

between
stance in-

England
many

Canada.

former

hundreds
a

of miles
of

intervene; in the
of
miles.
"

latter

it is but

matter
are

tens

The

products of the
and which In it
has

world
a

international

there

is,

been,
be

commercial

league of nations

cannot

abolished.
actual

engaging in trade, in the

practice of
is divided
areas.

by importers and exporters, the world

the

for That

sake

of convenience
should not

into

business
as a

this is done
of the

be taken

tion refuta-

previous paragraph.
relation of in
no a

These
trade
to
as

divisions
ness the busi-

bear

the

same

to world

divisions trade.

city might bear

way

that

city's
are

They
for

destroy its unity, but

and such

designed
take into

convenience

and efficiency solely, factors

as

consideration

portation trans-

routes, languages, laws, products, populations,

nature of

governments,
and

climatic
and

tions, condiures, meas-

systems
business
power
serve

of money

weights

customs,

purchasing
other

and factors

tive producwhich

of the
connect

peoples, and
or

to

disconnect
erroneous

districts. ideas

Many

of

the

confused

and

concerning

122
trade with

THE

O'S

OF

BUSINESS

foreign countries, we
our
we own

could

not

hope
to
tions na-

to continue suppose who consequences

prosperous

existence,and
the
and

that
are

could
our

abandon

crippled
no

neighbors
is

suffer

evil

thereby,

the

veriest
are

nonsense. as

The

people of foreign lands

and whether
or
we

to

us

fellow in the

workmen,
same

work

with

them

factory
no

in

widely separated
We
are

countries,
gether to-

makes

difference. the
of

all

employed
world's

in If

performance
our

of

the

work.

several their

most

efficient fellow and world's

are

workmen themselves
go

have

tools
how

destroyed
shall the

weakened,
If

work tools and

ward? forrials, mateto

they temporarily lack

could be
our more

what them
a

logical than
so

to lend

part of

own,

that

the

great task

might be undelayed?
workmen have
our

These

temporarily disabled

skill, intelligence, character, and

progress

industry, and
will best

and

the world

's progress the

be

advanced which

by lending them

tools and
as

material

they need; particularly

our

they

are

already heavily in

debt

and

wise otherThere

would

undoubtedly be unable
more

to pay.

is nothing
of credit and served
to

to the

question of the extension

The world will in general, best

foreign countries.
in

particular America,

be

through the lending of capitalby localities

INTEBNATIONAIiISM

123
to

which which

can

spare

it the

best

those

localities

need

it the

most, regardless of the

graphical geo-

position of either region.

In

deciding with
rather
our

whom

we

shall trade,
our

we

are

governed
deal
with

largely by
is

sentiments.

To

friends
we

preferable to dealing with

no

people for whom

or

have
or

feelings whatsoever, Having

fidence con-

perhaps
in

even

dislike

distrust.
turn
more

our our

friends,we

frequently
strangers
;

to

them while

for
we

requirements than recognized and

our

to

and

have
in

capitalized this
each

phenomenon
have
may with

dealings

with to

other, we
that it

failed be

almost
as

completely

observe
to

quite

effectivelyapplied oversight which

of dollars.
many and

dealings
cost
us

foreigners, an
many

has

probably
Our
such
as

milhons

competitors for
Latin America

valuable

markets,
never tomers, cus-

the Orient, have

neglected the cultivation

whether

of their

prospective

by

learning their
or

language,

adopting their customs,

and
as a

marrying their daughters;

agents have
door to

result

American
on

quently freoffice
pany com-

knocked while
the of

vainly

the
or

the

proprietor danced
the

drank The
as as

in the

Germans

or

British.

Germans,
ways alpos-

in

particular,but all Europeans

made
a

well, have

point of becoming

nearly

as

124 sible like the thus

THE

O'S

OF

BUSINESS

man

with

whom to
a

they desire
minimum.

to

trade,

reducing friction
our own one

In contrast few
tions, excep-

to this is has

policy,which, with
of

been

indifference
arrogance

or

contempt,

caused,
That

no

doubt, by
should have

and

ignorance.
cial commer-

such

been

our

foreign
since
our one

policy is unfortunate, and

trade
to the

internal is forced
we

is not

conducted that

in such

way,

conclusion

it is only because
we

have

failed to study the

foreigner that
In

mistrust

and,

perhaps, pity
other

him.

considering the people of

them
too much

countries,we
if
we

contrast
were an

with

ourselves, as
of
some

international is almost

standard ably invari-

sort; and
with

the

contrast

made The

superficialities.
drive their vehicles what about
on

British

the

**

wrong"
from

side of the street ; but their with the But

not

ourselves

standpoint?

Orientals

feed

themselves
as

sticks,but they probably regard

small these merit metallic
are

curious
we

implements

with

which

eat do

merely surface
we

and differences,
to

the time

devote

being annoyed
be

by
to

them. be
a

The

British,for example, will

courageous,
are

found

delightful,honest,
we can

and

sober

people, if
different

forget that they

ourselves.

superficially
built
a

from

We

have

cade barriand

of trivial

comparisons

between

ourselves

iJSrTBKITATIONAUSM

125

the

rest

of

the

world,
on

behind

which

we

ulate congratmen,

ourselves

being by
a

not

as

other

and

until

this

is

replaced
and

healthier

receptivity
consideration

to

foreign
of

ideas

more

generous

foreign

activities,

we

shall

find

ourselves

ously seri-

handicapped
tiations.

in

all

international

nego--

CHAPTER

EDUCATION

It love

is the

characteristic

of

the

American

mind
way
seem

to

simple,

direct,

and

practical
who the

of
to

ing dobe

things.
more

Unlike
we

Europeans,
do
not

thorough,

like

slow, patient,
The ican Amer-

toilsome mind

investigation
seeks
a

of

any

subject.

simple,
of
any

direct, and problem,

us

stood easily underand

an

explanation
of

answer

that We

kind

always
neither

satisfies
time

if it

seems

ible. plausfor
we

have
and

nor

patience
If
are

long,
ask it is

laborious, why
because satisfies business

painstaking
is is bad
a

studies.
year

this

and
year,

told the

this
us

presidential
it is
never

answer

because has
two

simple
been
any

and

stood. easily undertruth

in

There
in
one or

it such

cept (exas

presidential
our

campaigns
monetary
we

the

one

that

threatened

entire

tem) sys-

but, being
rather than of
a

simple
and

and
on

plausible,
to

would
else

accept
listen difficult
to
a

it

pass

something

long

and

highly

involved

analysis

and

complicated
126

subject.

BDTTOATION

127
about
the at

This is

our
our

national habit
young,
we

everything. In simple
once.
course

educating
that
them

take task

disposes of the whole

to go.

We
in
we our a

send

college. The
The

decision

is made and

day.
on

They
to

problem
It is

is solved

pass

other

matters.

just part of

highly

in everything. developed system of specialization

Education We

is

supplied
some

to

us our

by educators
young

leges. at colas
we

buy
The

for

just
a

buy clothes.

universities

furnish

ized, standard-

turned factory-made article,

motor cars,
on

out, like Ford

the
car,

basis it is
A
an

of

quantity production.
excellent

Like
no

the Ford

thing

but

by

means

the best.
is obtainable.

Rolls But

cation Eoyce quality of edu-

the

other

make
to know

is the
thing any-

only kind most

about.

of

us

take the trouble

we

When
say

speak of education, we
It
is
our
one.

automatically
national
It

college education.
the

conception of

only
the

way

to obtain

would

greatly shock

average

American

world parent to be told that his highest duty in the is to devote his and
to

laborious child's

and

fatiguing years

to

velopin de-

intellect and
own
can

understanding;
and all

impart

to it all his he
one

knowledge
assist the

of other

people's that
take

child in

obtaining. It is the
that should

occupation of parents
of

precedence

everything

else.

128 It has educated been

THE

C'S

OF

BUSI1TES8

pointedly said that if

at the time

boy is

not

an

boy
never

he enters
one.

he college,
or

will

probably

become

College

sity univeris

training is of almost
no

pricelessvalue, but it education, and

It can,

more

than
most

part of

an

perhaps

not

the

important part.
outside
of these
can

moreover,

be

obtained favorable

institutions be better And

a

and,
done

der un-

conditions,
the of time

in
we

proportion
offer
the

to

employed.
been

yet

excuse

having

denied

college
erty. pov-

education It

to is

explain and
a

justify intellectual
confession

shocking national

of

incompetence. Probably
is the Association
and the

highest stimulant

and

cation aid to edu-

companionship
with
them

of intellectual
a

people.

creates and

desire

for knowledge
way to

understanding,
from

it

points the
may

the

sources

which

these

be

obtained.

It is but

poorly supplied by the companionship

There
of

of the nursemaid.
in the whole

is almost

no

discovery
ever

domain

knowledge

that

died
to
even

with

the

discoverer.
and for

It has

all been These

reduced
may

writing
be had

preserved

in books.

nothing through regarding

there of it is among
them

the is

public libraries.
even

Free
To

advice

furnished. much
some

be sure,
; some

these

books and

bish rub-

merely harmless

injuri-

130
value if
;
or

THE

O'S

OF

BUSINESS

they
are

may

be most

ing injurious and mislead-

they

the work
one

of ignorance. should
never

Naturally, then,
mind
can

permit his
if he
someone

to receive

untrustworthy
It is not
on a

information
that

prevent
written
allows if
a

it.

enough

has
one

book

given subject. Before it,he

the

himself

to

read

should
author

first had

certain, asa

possible, whether
heard
on

right to
carry

be

that

subject. We

should
the

not
thor's au-

this to the views

agree

length of insistingthat
with
on our own.

Our

sions impresmay

already existing wholly

erase

the

subject

be
may

wrong

(probably are) and

for
us

the author
ones.

them

and

make
we

correct
use

But effort

before

reading his book

that he

should
a

every

to ascertain
on

really is

ity respectable authorwe

the

subject. By
much

this method

exclude
include

from

the mind

misinformation

and

only knowledge
result
years,

that is

and probably reliable,

over a

the

of
must

this

policy, pursued

period of

inevitably lead

to broad accurate

ing, understand-

correct

judgment, and
that and home.
every two

knowledge.
six hundred the
average

It is said
newspapers

year

about
enter

books

American
news

daily

newspaper, all
no over

containing
the world for veri-

hurriedly gathered from

a

upon

thousand

subjects,with

time

HPUOATION

131 within
a

fication, printed
hours, by
no men

and

distributed

few make

who, however
to

could brilliant,

pretense
all the

accurately
must

verified

correctness
news

upon

subjects it
not

print
main
as

about,
source

should

naturally
It
as can

be

one's

of

knowledge.
quotations, or
or as

be

safely
was

read

to

market

to who any

nominated
not

for

office,

to almost been

occurrence

at all young

likelyto
reporter

have
who the

misunderstood
the

by the
and

gathered
scant not

item

hurriedly
But

wrote

it in
one

time

allowed

him.

certainly
and

would the
a

permit his mind

that

to absorb

retain

impressions

would of

become
some new

his if he

read
in

newspaper
or

account

discovery

medicine that
a

astronomy,

because

it is almost
was

tain cer-

the reporter who

man

got the story

just

bright young subject and

who did
were a

knew
even

nothing
know

at all about

the

not

the

meaning
about
to
serve

of the terms

that

used

in

tellinghim
of course,

it.

It is the duty of
up

newspaper,
as

everything

new

best

it

can

consistently with
upon it.

speed, which
is not liberal somewhat
our

is

our

first demand

But

it
a

duty

to

expect universal
from

learning and
press or,

education

the

daily
from

for

analogous
of

reasons,

indiscriminate
these
seem

reading

popular magazines.
sources

And

to to

be the main

of the

supply

of knowledge

132
the

THE

O'S

OF

BUSINESS

American

people, so far
at all.

as

edge they obtain knowl-

by reading
We

complain

of
we

and

abuse

our

newspapers

largely because
them. furnish and
to be

misunderstand
of
a

and
to

misapply
us

At
the

the
news

cost

few

pennies

they
world,

of the day from

the entire
are

the

governing considerations speed.

well To

compelled

brevity and
as reliability

expect thoroughness
be preposterous, and
we

and

would

yet, in pure
our so

mental main
source

indolence,

make

the

paper news-

of knowledge

because
The

it is ern modof

convenient, interesting, and

newspaper

cheap.
most

is

possibly the
we

marvelous

our

achievements, but

do

ourselves
purpose harm

jury great infor which it does

us

by reading it in
it
seems never was

spiritor
The

designed.
way

in
to

no

seriouslychargeable
of it. would The

to the paper

but

misunderstanding
avoided if
we

harm

could
as

be mainly is

read

it,much

it

written,realizingthat it is only the world's probably

no one

sip, gos-

more

reliable than

what

we

hear It for it

and
is

repeat to

another
and

by word
we

of mouth. wait

hurriedly gathered
or

will not

to be verified

corrected.
to us,
are

The

ing editors,in select-

and

serving it

probably somewhat
and
or policies,

influenced

by their editorial views

not be

they would

human,

and

being much

like the

EDUCATION

133

rest
are

of us,

they probably, in occasional by

at least reasonable

instances,
whom

influenced their
not

consideration

for

advertisingpatrons,
live. it
are

without

they
what some-

could

If they did

not

also color it
would not

to make

we interesting,

buy

it.

These

things
has

all

practical and
we

necessary. want

perience Ex-

proved that

do

not

and

will

not, as yet, support

different
newspapers
are

newspapers
are

of any

materially
as we

kind. but

They
we

pricelesslyvaluable
not

should
our

make

them

(as

doing) almost
and

exclusive

source

mation of inforto educate

opinion and
into any very

expect thereby

ourselves attainment. The

to

high degree of intellectual

highest duty of management

not

in business himself

is but

educate,
below

merely
; and

the

manager be

those

him

it will not organ

accomplished

by reading the trade

Successful consists
who
are
more

of that

dustry. particular in-

management
in the

of

large

izations organof
men eral sev-

mainly

employment

than
Men

merely competent
are

to their valuable

tasks.

competent
have

and
or

not

according

to

what

they

been

because

of

previous experience, but rather according

they
may

to what

become

and

thereafter

accomplish by

possessing highly developed intellectual power and applying it under the inspiring leadership,

134

THE

O'S

OP

BUSINESS

suggestion, and
most

advice
man

of

real

manager. not

The the
one

valuable has He
been will

probably will
most the
one

be

who

the

drilled
who

in routine possesses

ence. experidinary extraor-

be

qualities. The
intelligence.
course,

highest of these
its broad It may
"

is cultivated

In

sense

it, of

includes

character.

be

encouraged
or

and ranks

developed anywhere
of labor.
man

in the

ofiSce

in the

The
oan

able and

successful
it when

manager

is the
who
can

who

recognize

he

sees

it;

encourage,

develop, and
not to be to
a

further

educate
or

it; who
suppress

is

big enough
it.
If

jealous of it

to

it attains and
been

superiority that
then
his

finallysupersedes
management done,
and have the been

displaces him,

has

perfect, justice has

purposes

been
ciety so-

highest
served.

of

organized

On

the other

hand, excepting for occasional

stances in-

of unmerited
are

injustice, poverty

and

ure fail-

Nature's within

gift to ignorance.
of almost the
any

It is undeniably

the power desire and and

American,
so

who

has

the

determination,

to

cultivate

his mind and

own

understanding,
as

ing by elevat-

association
to

by study,

almost
The his
own

certainly
distance

compel
can

his

advancement.

he
for

go

will be limited of

only by

fitness better

the

performance

higher tasks

and

EDUCATION

135

paid
to

ones.

his

employer wiser, will,

and and

does

not

allot

them

him,

some

other

therefore

more

cessful, suc-

employer
he merits it the

the

more

conspicuously
The
ress prog-

sooner

it

will

occur.

is

often

very

slow,
the

but

it

is

fairly
is.

sure.

In

any

event,
upon

it

is

only remain,
where

road

there

Few

even

start

it, but

in

sodden

and

ent indiffer-

incompetence,
world and
an

they society

began,
which

blaming
they
a

the

organized
them.

sider con-

has

enslaved

It

is

mainly

self-

imposed
Probably
and

slavery.
the
most

eloquent

advocate

of

dom, free-

foe

of

oppression,
the

that

America

ever

produced
no

uttered

just
;

judgment: Liberty
is

**

There

is

Slavery

but

Ignorance

the

child

of

Intelligences

'*

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