ara a6 eyhiPeREEtea’ Pei PeeE i were ' ) ; AERRRRRERRERERRERREREREGREREEAREDRR ERROR RRRDORAROEROGEODAGEREREESEREREER OTE: Wii ibn 5 i fl tri? Sear cane iE WT HEELERREERERERERDOREDORERERE. COMMERCE ACCOMNTSEBINANCE GX9 NEW YORK UNIVERSITY C/9 WALL STREET DIVISION UNIVERSITY OF VIRGINIA CHARLOTTESVILLE LIBRARY I PRRTUTUTTETL LET it! PePRTU ELE TT Ey tee ait | | aatD ete 7? ae SeAEREEERa CAE TRH eER / at i j | } mie i TOREEAEEREURERROARGED GALE, | } SERERRLETET SUREEEARE ) Eaee ' | PaRERE HRT TUTTPRTRERRE ELLE ta Hi Hei APR TEE EE SL SLRPSEU PEER POEGE EE E; ; ‘ H | PEEP ERaPare. SEPP REE ERET: tak j e PEGEEEE ; | eee eae } rl 1iitl FT| i ] SEEeeeene aE i bEee tea ' iii} MELEOLEOESTASALESESDESOAROSOEAERERER TES PEREACODERESOROSERSSERESORODEERORPOARASATORPREEEASASEREBRSEREERESESSRSSORESEODEPRORDERDOROROGRDPRODORRPOROSSOSOPRESSERORGAPORRO CRI ROESERESRORSEPSPREREOEE HITE EEE EEL Ee URLERALRUELEREALEEELEA TATTERED ELE EREALCUT ELBA ELLER EERE PU HTT TT PERT LETTEETEETTT ASRESECHOSAPOEGTOREEMODERN CAPITALISM AND OTHER ADDRESSES E. oH. EE. os LVENMIGUIss 4* President, New York Stock ExchangeALELELELRESEASEUESUARSEAEAEAOSEOUEREAEPOSSUEAEEOOOSEEU EO OOROOEGOOROOOUASOEOAECOSEASEAOSEREAOOLLOEOSERDESOE OOO ES EEASEOUOEOEEVOGRIOGOOGOSDAQEOS ERO EOSOUEOO ERO OOOO TOS EEOOTRERE Grad. Bus. Lib » Ly G _ ’ “Some economic writers during recent years have expressed the fear that capitalism in the United States 15 now in its flowering stage, and that its speedy and disastrous decline is inevita- ble. Such a distorted view, I feel sure, must of necessity proceed from a fundame ntal ignorance of conditions such as we have in the United States today. No one who will view the full panorama of the modern American capital- istic system, with its almost universal benefits, ats steadily expanding scope, and its ever increasing achievements, can long remain in doubt concerning its vitality for future years. Never before in history have the needs for capital and the oppartunittes: for capital been as great as they arc:today: « Apart from the pressing problems of restoring prosperity abroad, raising the standaré’ of living in many ‘older nations of the world, and of exploiting the vast new continents which discovery and exploration have so recently opened up, modern capitalism must likewise keep up with the swift and resistless pace of modern science and invention, as they con- stantly perfect new products useful and desirable to everyone.” E. H. H. Simmons. COT TEU EUTER TERETE TEETER FTP aTINDEX Modern Capitalism. ..,... 4+ America’s Outlook on International Finance.. . Speculation and the Stock Exchanges.......... The Myth of American Financial Imperialism . The Stock Exchange as a Stabilizing Factor in AImeniGan: BUSITCSS:.. 6; i ios he eee ee Listing Securities on the New York Stock FUR NAN C. oh wn ou Wee ee eee ee ee The Stock Exchange and American Banking.. Modern Business and Government............ srocks, Wiarket Loans..-.2..s¢s 00 7. Frontiers of American Finance.... Security Swindling: Its Menace and Its Cure. rea: as a -INational INaBeL, .~ a. ean eee ee Pree Markets and Popular Ownership. ........ How the New York Stock Exchange Tries to Berve PArmMerh.s 5 vs ae He Re The Stock Mxchange and the People......... Page awsee Tae TeereE aaa Tr A said i ieee j i ESTE RRERER TREEETEEREREERID, ’ iF Freeh THEE TT AUERERREAEARRRETERAERERERESERRDERERREROLASEERREAPERARRAESRRREEREEOERRERREGEEE ERR RERRRORITORERORRPORRIERRPGEORSERPORETI TD i ] | wey TEUEUEE ; } " | TEEEE SURtE | TEELESEGREETER TRALEE EL RERTUREEE EE " FEEERUA UENCE ULL LEAL EASA EEE ESE ARETE SA ESHA CUD EUG AA USAR ASA ESEGEREAATESORESELEGEVEREG ERAT SDEUELERREREOTAREGAUAVODEVAGATSENETNTETERORETATERRTEREEET ROT URERRTETMODERN CAPITALISMHERRARERERRRERERATELO SEA PEREREREAREGREAREARRERERORERRRSER EERE ERRERERERERRERERARERRTATERERERTTRRISITIEE 7 HME TUPDERSTLTTEEERTETTLTTETEEEL TAT EU ETT OUTED ERI EEPR ERA EEREAR ELE UA ERTS RTPA RA ARUP REREERU EERE EL RUTERUTUUEAELTELTTETTTELERT PEt aMODERN CAPITALISM It gives me genuine pleasure to convey to this financial center on the Pacific Coast, the greetings and good wishes of the principal American financial center on the Atlantic, and to express my deep ap- ‘preciation for the very whole-hearted welcome which has already been accorded to me here. We all realize, | am sure, the vital need of more complete co-operation between all parts of our great country and all classes of American society, as well as the need for a more adequate understanding by us all of those basic economic principles upon which not only present-day prosperity, but even the whole structure of modern business and government really rests. The rush of unusual events since the war has largely obscured many of these economic fundamentals. Extraordinary experiments in government and finance alike have been made, wholly at variance with tra- ditional ideas. In the confused state of present-day thought, many of us have become highly incon- sistent; we are all apt to lapse occasionally into socialistic fallacies of thought in particular cases, although we would violently repudiate socialism as an economic system. In considering the business and governmental problems of today, it therefore behooves us all to return to first principles. In any such attempt to examine modern society and modern economic institutions critically, we at once encounter the problems of modern capitalism, and begin to ask ourselves, “What is capital?”—“Who should own it?’—“To what extent and in what ways should capital be regulated?” I realize that it has been with some justice that economics has been called “‘the dismal science.” I have no desire to inflict upon you merely abstract and academic considerations, but rather to review 7OR re er rn = pee Wine PRRULERRRAPRRERRERBRRERRREATAREAEARELERELECLATATERELER TRAE EEEATERTSOERECREEEOETPEREER pet aee ROC URREOrE RERESERRRSREARERSRDRROREROSOLEDGRERERDAERSALEREREEERRAAESRROSEREREEARERERSEREOEERERAREGRERRRERERRDGRERGRREAEODSEREERRSEERES 8 MODERN CAPITALISM briefly and from the business man’s standpoint a few of the leading economic principles regarding modern capitalism as we all encounter them in our own daily lives. II We are living in an age and a society based upon capital, and in some ways dominated by it. In- evitably, therefore, we all have genuine convictions and ideas, not only as to how capital should be em- ployed, but also how it should be owned and regu- lated. Yet few of us, I imagine, often stop to define just what we mean by “capitalism.” Certainly, much of the confused thought which one encounters today in regard to the ownership or regulation of capital, springs from inaccurate ideas as to what capital really is. Capital essentially consists of those things les we obtain by our present exertions, but which, stead of consuming at once, we devote to the cae production of wealth. There is no capital which someone did not in the first instance have to preserve from consumption in just this way. All the pro- ductive tools of modern civilization are capital. The workman’s pick and shovel are capital, no less than the facilities of the largest railway or industrial company in the country. It is true that today the ownership of a great part of the nation’s capital is vested in our steadily growing stock corporations, which in turn are owned jointly by hundreds of thou- sands of individual shareholders. But the method of owning capital does not change or affect its funda- mental character, as something saved out of present production to facilitate future production. When one realizes what capital really is, the con- clusion seems inevitable that as long as we possess any civilization at all, we must continue to have capitalistic problems. Occasionally, it is true, mobs USTLEUUERELEUUULERUETELEATELEAU OER ELD REEAEAUEREEARRLRLSUUTERASEUESRUTETPRUTRET ETRE HTT TEMODERN CAPITALISM 9 in brief moments of blind rage, try to destroy capital as such, but such futile attempts are never long con- tinued. Of course we also have dreamers and the- orists who sometimes urge us to destroy all our capital and return to a pure state of nature, which they picture as ideal and Utopian. But these would- be abolitionists of capitalism forget that a state of nature is also a state of chronic pestilence, starvation, warfare and savagery, as the study of any primitive race would soon indicate. Even our most destruc- tive thinkers would hesitate to urge upon society the suicidal policy of scrapping and destroying its slowly and painfully acquired capital assets in the form of all its tools and means of production, on any such lunatic basis as this. In fact, even some of our foremost Russian Soviet philosophers, who have so frequently urged the destruction of capital, and who have already dissipated and destroyed so much of the capital of their own country, seem to be curiously interested just at the present time in attempting to borrow the capital of someone eise. We cannot therefore ever hope to solve the complex problems of modern capitalism by the simple method of abolishing capital entirely. Capital will continue to exist; we will always have to deal with it. Thus we come to the next question—should private citizens be allowed to own capital, or should it be owned by the State alone? Here socialism proposes its dizzy theoretical system under which the State should own all the tools of production, on the grounds that such a system is more just and efficient than the private system of owning capital which we have today. During and since the war, indeed, attempts have even been made in some countries actually to try out this wild and impractical proposal, but with results which have been anything but convincing to any reasonable mind. As far as the justice of the private ownership of capital is concerned, it should be realized that only in rare instances can the State create capital, which,FE EOI DLT cS HN se iT OR OO A, GE a SL OE OE gt gi, WG Sans cee es SEER ae ay ote: a —————_ ——_ _ - PESREEROEeBEeL SESUREGREREREEL' SELELERETERRTEAES EEE RERERRARRRAPARERRREARASEREERSERRREREE RESERERLEDERAREADERAEESORRTARRREEREGEE. 10 MODERN CAPITALISM as we have seen, has practically all been brought into existence by the savings of individuals. It therefore appears a matter of elementary logic that our present- day capital should rightly belong to those who have denied themselves to create and accumulate it. But apart from this factor of justice, history has quite definitely proved that the private ownership of capital provides an incentive to create and preserve capital, while the common ownership of capital fails to furnish any such incentive. The individual, whether he lives under a capitalistic or a socialistic State, is always equally tempted to enjoy and con- sume at once all that he can produce. Private ownership and responsibility succeed in restraining this desire, but there are no similar restraints upon it under socialism. For this reason, when capital is all owned in common, there is no longer any direct re- sponsibility or motive for preserving or increasing it, and every temptation rapidly to dissipate it. Modern communistic Russia, living on the wealth accumulated in the past by the Czars, and for the time being paying its way by exporting its gold supply and other wealth accumulated under the Czars, provides an interesting and illuminating in- stance of the way capital inevitably commits suicide when its ownership is all entrusted to the State. Our own experience during the war with State- owned business enterprises, reveals much the same basic tendencies. In the interests of national safety, our government was forced to become the sole owner of several large business enterprises. But this experiment proved an extraordinarily costly and dangerous experience, and we must all for many years pay heavy taxes because of the tremendous govern- ment debt which it created. Today many European governments also are rapidly getting out of business, because of their need of economizing and balancing their budgets. An interesting example of just this tendency has been the recent disposal to private REPRLESEAAEROPASEAROPCEESEPOOEILISORPATELIEIPSLESTTPRERRRTT ERR L EL RRERERERULA RRA EALORATERAERTRTEREEREEEMODERN CAPITALISM 11 hands of enterprises previously owned by the Italian and Belgian governments. ‘There seems little likeli- hood that the nations of Europe will, for some time to come, be able to afford the heavy governmental deficits almost invariably created by the State owner- ship or operation of business enterprises. The result is, that the old socialistic cry for State ownership of productive facilities is today falling on deaf ears, both in this country and abroad. The world’s experience during and since the war has afforded overwhelming evidence against such projects. It therefore seems not only reasonable but necessary to conclude, that the private ownership of capital is very manifestly destined to remain the basis of modern society and civilization for many years to come, both in the United States and in the other leading nations of the world. IT] But granted the desirability, if indeed not the abso- lute necessity, of the private ownership of capital, there remains the further consideration as to how this ownership is distributed through society— whether it is for the most part concentrated in the hands of only a few, or diffused and distributed among all the classes of people. One could quite logically be a strong advocate of private capitalism in general, and still object most strenuously to the undue concentration of its ownership. It is there- fore important in any consideration of modern capitalism to consider not only the existing dis- tribution of capital among the people, but also the question as to whether the trend in its ownership is toward a narrow concentration or a wide diffusion. As I have already remarked, so much of our pro- ductive capital is now held by corporations, that in consequence the extent to which modern capital is owned by the public at large, can be determined accu- rately enough by noting the extent to which corpo-TETLFTSEELTATETITTERTTTTTET ITER TATE VETEEETETETTRETETERIESTLERRIETI ATT " PEP EREREEREARRARERRARERORERESOREDERERRER ORES ARARERERERRAAERRRARERRRRRERARERDGREREERRERRERDAEARERERREARREOR 12 MODERN CAPITALISM ration shares can be and are distributed among the American people. There is no doubt that there have been times in the United States when the concentration of security ownership in the hands of a few had reached the danger line. Such instances we all can think of in connection with the railroads after the 70’s, and with our large industrial corporations since the 90’s. It was almost inevitable that when these new enter- prises were first established on a large scale, their creators should for the time being prove their prin- cipal security-holders. Indeed, there are many positive advantages for new industries to be owned mainly by leaders capable of taking swift action and assuming enormous risks. Were the concentrated ownership of capital in the early and most dangerous stages of industrial development rigidly prohibited, economic growth and progress itself would be ser- iously halted. Nevertheless, as large-scale business enterprises grow older and assume stability, any such extreme concentration in their ownership is no longer needed or justified by the risks to be assumed. Instead ownership by the few tends to become dangerous to everyone, because of its frequent drift toward monopoly, arbitrary price fixing, and unfair restraints not merely to business, but to the government itself. It was against the danger of such a development in American business many years ago that that able and courageous statesman, President ‘Theodore Roose- velt, raised his voice in outspoken condemnation of practices in American corporate affairs which business leaders would not think of tolerating today. Indeed, immediately before the outbreak of the European War in 1914, this question of the concentration in the ownership of American capital, especially as it was exhibited in security holdings, was very much to the fore. Although forgotten during the sub-MODERN CAPITALISM 13 sequent stress of war conditions, discussions con- cerning concentrated ownership of American capital were revived with the return of more normal con- ditions a few years ago. But, rather to the surprise of almost all of us, the problem has very largely solved itself during recent years through the rapid increase of small investors all over this country, and the consequent spread in the ownership of American productive capital. This development is very remarkable indeed, and I wish to mention a few facts in connection with it. A compilation covering twenty-two large American corporations recently prepared by a leading financial publication, revealed the fact that today 315,497 employees of these companies owned $455,000,000 worth of stock; the same journal estimates that altogether $700,000,000 worth of stock in American companies is now owned by their employees in this way. The article goes on to point out that these figures relate only to the companies with definite stock selling plans for their employees, and that the additional consideration of employees who are inde- pendently buying shares on their own account would enormously increase this latter figure. But it is not only the employee who is today taking over the ownership of American business enterprises through the purchase of its shares. The small consumer and customer of our leading companies also appear as purchasers of corporate shares to a tremendous extent. In this regard, the most familiar example is, of course, the ownership of the American Tele- phone & Telegraph Co. by hundreds of thousands of stockholders. Yet this conspicuous example could be paralleled by less-known cases of railway shippers who are now purchasing railway stocks, users of public utilities services who are investing in these enterprises, and buyers from manufacturers and merchandising concerns who are likewise becoming share-partners in them. Indeed, this tendency is14 MODERN CAPITALISM showing itself throughout practically all branches of American business enterprise today, and apparently to a steadily increasing extent. The significance of the temper and character of modern capitalism in this wider distribution of the ownership in the share-capital of American companies can scarcely be over-estimated. It means that we in the United States are today entering into a new era of capitalism never before experienced in history. We are seeing today a democratization of American in- dustry and American finance alike in this steady tendency of the employee and the consuming public at large to become capitalists in their own right. Earlier examples in history of the wider distribution of capital through the population, have almost in- variably been attended by political revolution, class struggles and discriminatory confiscation. But this diffusion in the ownership of capital now going on in this country has occurred through purely peaceful and natural causes. Far from being due to class war- fare, or from increasing the likelihood of it in the future, the rise of the entire public as the real capital- ist class of our country reduces, if indeed it does not eliminate, the likelihood of class struggles in coming years. It assures a well-founded and stable pros- perity for everyone. It is forging a magnificently solid basis from which modern capitalism, as we have it today in the United States, can mount continually to new achievements in the common benefit. At the same time that it proves a salutary check on the existence of over-arbitrary corporate management, and provides a new incentive which labor has never known before, it is also opening to our business enter- prises the almost unlimited capital resources of our entire people. It is not my purpose to attempt here any analysis of the economic forces which are today furthering this broad distribution of capital-ownership among the American public. Yet it is not amiss for me to speakMODERN CAPITALISM 15 of the facilities by means of which this broader dis- tribution of American company shares is now taking place. The New York Stock Exchange, while not perhaps a primary cause in the distribution of security ownership, nevertheless provides facilities for it to go on with the maximum readiness, speed, and safety to the investing public. Without the facilities for this steady security distribution provided by the New York Stock Exchange, the widespread ownership of capital could never have become the large factor in this country today that it undoubtedly has. For it has been the New York Stock Exchange which has maintained a free and open market for the leading American securities, and which has rendered this market readily accessible to the whole country through the far-reaching wire systems of its members. The latest and most reliable information obtainable concerning the price and volume of buying in our leading securities is placed at the disposal of the American public by the Stock Exchange tickers with such efficiency, that today New York Stock xchange quotations are usually available here in San Francisco —some 3,000 miles away from New York—within one minute of the time when they first appear in Wall Street itself. By the listing requirements of the New York Stock Exchange, information concerning the basic value of the same securities is made available to everyone. Due to the floating supply of securities held on loan in New York by security dealers, a ready supply of securities is made available instantly for all purchasers, and at the same time equal facilities are provided for the investor to sell out his security hold- ings at any time. By standardizing the handling of security purchases and sales, and establishing definite regulations for the business conduct of its members, the Stock Exchange surrounds the process of invest- ment with all possible safety to the investor. Thus it has come about that economic causes, operating through this smooth, dependable and efficient ma-16 MODERN CAPITALISM chinery provided by the New York Stock Exchange— and, I may add, the other similar though smaller stock exchanges of the country—have spread the ownership of the nation’s productive capital in the form of shares among all sections of this country and all classes of our people. The very efficiency of American stock exchange machinery has indeed been one reason why we have been so slow in this country to realize the significance of this rapid distribution of our share capital. The Stock Exchange has thus proved not only a facility indispensable to the creation of this new and democratic era in American capitalism, but also a significant assurance of the common benefit to be derived by everyone from the new era of capitalism into which this country is now entering. IV In my enthusiasm over the rise of the new Amer- ican investing and capital owning class, however, I do not wish to appear to be predicting Utopian con- ditions just around the corner. ‘There are still grave questions which modern capitalism in this country must face without flinching. Even though our leading corporations come to be owned by the whole rank and file of the nation rather than simply by a few capitalists of great wealth, this development is not necessarily any assurance of good corporate management, neither does it remove the problems of capital and its management from the sphere, and possibly the need, of governmental action. It is conceivable that the regulation of capital by the State might still prove a necessity in the interests of its new and numerous owners. For the modern shareholder in most cases is unable to maintain a very close and intimate contact with the actual man- agement of his property. It is true that the share- holder can vote and make his voice heard at company meetings, and also that corporation officials today areMODERN CAPITALISM 17 urging the small shareholder to undertake these privileges and responsibilities. Yet I wonder just what would happen if the 85,000 odd common share- holders of the United States Steel Corporation should suddenly decide to attend its annual meeting. Of necessity, a representative form of government has developed in our large companies, whereby the small shareholder gives his proxy quite regularly to the individuals in actual control of company policies. The force of circumstances has made the average company shareholder of today a sort of absentee landlord. A century ago, statesmen used to think that if all citizens were allowed to vote, all the difficulties and problems of government w ould rapid- ly disappear. After the experience of the last one hundred years, however, we are today somewhat more sceptical as to the universal truth of this theory than were our forefathers. It may be that we our- selves can similarly be over-optimistic about the effect of wider distribution of company shares on the future problems and difficulties of our business cor- porations. Nevertheless it seems obvious that our modern and democratic type of capitalism in this country will not suffer in the future as it has in the past from either government neglect or government persecution. American capitalism in its pioneer stages was un- doubtedly a rough and ready affair. ‘The pioneer corporation manager must be forgiven for swimming as best he could, when drowning was so constant a danger. Yet no one desires to see repeated in the future, such common defects of early company man- agement as its foolish attempts at monopoly, cut- throat competition, and arbitrary price fixing. Human nature being what it is, and new industries constantly emerging from this sink-or-swim stage into large-scale operations, it will not do to say that the government should completely ignore corporation management in the future as it used to many years18 MODERN CAPITALISM ago. On the other hand, our more recent experience in this country with the attempted persecution of capital by the government should have convinced us all that this perhaps natural reaction to the preceding policy of “‘laissez-faire’’ provides no permanent solu- tion for the question either. It may be a diverting spectacle to assail our large companies in the press unfairly, or to hale them before the bar of justice with bombastic and lurid charges, or to institute a species of economic inquisition wherein the State is at the same time the prosecutor and the judge. Never- theless little permanent good for anyone is to be at- tained by such means. However necessary it may be to restrain the unwise or unfair management of capital, it will never do for the State to hamper and inhibit the work which capital can do for us all, and which under reasonable freedom and reasonable management it should do. One of the really fortun- ate things in connection with modern American capitalism, I feel, is the fact that the mere blind persecution of capital has already proved to be only a passing and temporary phase in the evolution of our economic society. What is needed on the part of the government in its relationship to American capitalism, is a reasonable middle-of-the-road atti- tude, and this is actually what is evolving today. Meanwhile, the course of events is providing a new method of solution for the whole complicated problem as to how far the State should attempt to regulate capital as expressed in corporate undertakings. I refer to the tremendous and growing influence of enlighten- ed public opinion, which is an irresistible force when once aroused, and which is fundamental in a re- presentative democracy such as ours, to the State as well as to everyone else. In regard to American corporation affairs, the public must have all the facts and nothing but the facts. In the future, public opinion will prove a decisive factor in any attempt by the State to regulate capital. In consequence, whatMODERN CAPITALISM 19 is especially needed today, is full information re- garding the operations and policies of our cor- porations, as well as of the foreign governments that are borrowing money of American investors and that are acting as utilizers of this capital in behalf of the people whom they represent. I am persuaded that such full and frank information can be obtained by private means, and that it is not necessary to evoke new and possibly dangerous legislation by the State for this purpose. If the mystery which so frequently used to sur- round the large accumulations of American capital has largely lifted today, much of the credit is, of course, due to the vigilance and fearlessness of the American press. Indeed, too much praise cannot be accorded our leading journals for the earnest effort which they have steadily exerted to obtain the truth. Absolute truth is not, of course, always obtained even by scientists—much less by newspaper men under their eternal necessity of getting their paper speedily to press. Mis-statements and even blunders in the account of American business which find their way into the papers, are sometimes unavoidable. Yet even so, the free press of this country is vastly to be preferred to the subservient press which exists in many other countries, and under its natural limita- tions it is doing a splendid piece of work in bringing the actual and current facts concerning modern capitalism home to the entire reading public of the country. The New York Stock Exchange has long provided still another source of public information and enlight- enment concerning our larger American corporations. It is true that the Stock Exchange is and must be almost exclusively concerned with the investment aspect of corporate affairs, and that it cannot make its pressure felt in many of the problems which involve the other relationships of modern capitalism. Yet the fact remains that the investment aspect of the20 MODERN CAPITALISM modern corporation, having to do as it does with the fundamental health and vitality of our leading busi- ness enterprises, is closely connected with these other public relationships of capital today. ‘The influence of the Stock Exchange in this respect is felt primarily in two different ways. For one thing, its listing require- ments have in the past been a primary influence in ob- taining from the leading American companies current information concerning their balance sheets, earnings, and corporate structure. The New York Stock Exchange has always undertaken this quest for more adequate corporate information entirely in behalf of the public, and it refuses to receive any information which cannot be similarly afforded to the companies’ shareholders, and indeed to the public at large. In addition, the New York Stock Exchange is our lead- ing market for capital, and the prices established upon it every day and speedily dispatched to all quarters of the country are dictated in the last analysis by what someone has called the “bloodless justice of the market price.” Genuine merit in corporation securities is quickly discovered onthe Exchange, while on the other hand any weakness in them becomes apparent with equal facility. As a result, Stock Exchange quotations constitute a sort of daily health report on the current state of modern American capitalism. In regard to this necessity for adequate publicity regarding corporate affairs at the present time, the wide distribution of corporate shares has laid an additional responsibility upon our managers of corporate enterprise. Corporation officials have, in fact, inevitably assumed the position of trustees in respect to the thousands of new security investors whose representatives they are today. In addition to making publicly available more complete information regarding their operations and affairs, American corporations have, I feel, the further duty of making their statements as intelligible asMODERN CAPITALISM 21 possible to the average man. Few individuals today, unless they are experts, can tell what many a corpo- ration or government financial report really means. Public opinion can be led astray in this way almost as much as by the absence of information in the beginning. The New York Stock Exchange has endeavored to do its part in rendering the cor- poration reports required under its listing pro- cedure, plain and intelligible documents, yet this is in itself a highly difficult undertaking, because of the impossibility of completely standardizing the terms for our widely varying modern industries. If our American company reports and statements are to be shorn of much needless technical verbiage, and much confused grouping and arrangement of the facts contained in them, we must look to the American accountant to assist us and tell us how this maybe done. Signs are not lacking, however, that some aggressive American business institutions are them- selves perfectly aware of this problem, and are endeavoring to rectify it. Some of our banks are in this respect leading the way by providing the public not only with a full statement of their operations, but with a statement so simply and directly expressed that a school boy should be able to understand it. There is no essential reason why corporation statistics in this country should have the appearance of the in- scrutable hieroglyphics on an Egyptian tomb. Most truth is in the last analysis simple enough, if sufficient effort be made to state it simply and to avoid non- essentials. There is also the whole question of how frequently American corporations should be expected to give the public information concerning their operations. Just as a competent physician must take his patient’s temperature at reasonably frequent intervals, so in any intelligent diagnosis of the component corporate units of modern American capitalism, statements should be made frequently as well as accuratelyi Bl * a a u a ee 22 MODERN CAPITALISM and simply. The New York Stock Exchange in its listing requirements has long urged companies with listed securities to render regular quarterly reports, and although the tendency in this direction is slow, nevertheless it is gratifyingly apparent. It should be realized, however, that the New York Stock Ex- change can bring about only a gradual improvement in this respect. No company is compelled to list its securities on the New York Stock Exchange, and if our listing requirements prove a greater disadvantage to our corporations than can be compensated for by the enjoyment of listing privileges, the securities will not be listed and will thus escape any surveillance by the New York Stock Exchange altogether. There are several considerations which, initially at least, are apt to deter a company from agreeing to make quarterly earnings statements. Some companies declare that unless all their competitors would be willing to follow suit, they would be placed at a dis- advantage in competition with them. Other con- cerns, whose business is essentially seasonal, hesitate part of the year to reveal large profits, and at other periods considerable deficits. As time goes on, how- ever these considerations tend more and more to lose their force, and it is my belief that the sound reasons which may deter American corporations from giving frequent statements of their earnings are bound to diminish. In human affairs, a policy which depends on scientific truth alone is sometimes a strenuous and even a disappointing policy. But the position of virtual trustee- ship which the managers of capital are today assuming more and more towards the very numerous small investors who are becoming the owners of capital, will increasingly dictate the need of frequent as well as complete and clear statements as to the statistics of capital itself.MODERN CAPITALISM 23 V Some economic writers during recent years have expressed the fear that capitalism in the United States is now in its flowering stage, and that its speedy and disastrous decline is inevitable. Such a distorted view, I feel sure, must of necessity proceed from a fundamental ignorance of conditions such as we have in the United States today. No one who will view the full panorama of the modern American capitalistic system, with its almost universal benefits, its steadily expanding scope, and its ever increasing achievements, can long remain in doubt concerning its vitality for future years. Never before in history have the needs for capital and the opportunities for capital been as great as they are today. Apart from the pressing problem of restoring prosperity abroad, raising the standard of living in many older nations of the world, and of exploiting the vast new conti- nents which discovery and exploration have so recently opened up, modern capitalism must likewise keep up with the swift and resistless pace of modern Science and invention, as they constantly perfect new products useful and desirable to everyone. Economists have long pointed out that there is no limit to the satisfactions which humanity desires, and that in consequence there is at all times an infinite potential demand for goods and services. It seems obvious therefore that we can set no limit upon the productive task with which capitalistic society is and will be confronted, nor scarcely any limits to its ultimate accomplishments. Certain it is that never before in history has private capitalism been so firmly established as today, and so completely justified by the sharply contrasting collapse of State capitalism elsewhere in the world. Never before in this country has such poise and dis- cretion been exhibited by the government in avoiding either under-regulation or over-regulation of capital. Finally, never before has capitalism included so24 MODERN CAPITALISM many partners, or distributed the benefits of its ownership so broadly throughout our whole people. Modern capitalism is, therefore, no such figure with feet of clay as certain ‘alarmists w ould have us think. In this country, at least, it never before exhibited such strength and vigor as it does today. I have little desire to attempt to play the dangerous role of prophet concerning the future of modern cap- italism. Indeed, because of the complexity of the issues involved, no one can pretend to see this future clearly. Yetit must be apparent to us all that today we are merely entering a new era in which the benefits of the capitalistic system are becoming practically universal, and when the system itself is by force of this fact becoming animated by a spirit of broad and genuine democracy. ‘This final thought should at least justify in our minds a high hope and unshake- able confidence, that the world which our children, and our children’s children shall presently know, will be better than anything which we ourselves have ever experienced.AMERICA’S OUTLOOK ON INTERNATIONAL FINANCE Address before the New York University Forum on International Finance in the Governing Committee Room of the New York Stock Exchange, September 23, 19206.| ; | ii Hl ’ Bi i: ea) '* it | | PSARARALEREEEALESESESESESEREACAEACEDREREAAOSRORDARRSRRSSRRADSEARERRAESRSAADSERSEERSLOAEEEEREERRERREERREREEREAELAERREEARTRATRRRERLAR PRET EEE TeeEEL cee ty ’ ’ v RUETTTV ETE TT Tie TUTTI Tt | 7 aee AUSTUTTTTEUTUSERENITETAULLUPATTOAEELSARASLAELESELEALIEEEAET ELSA TEG ELT STELEEAERESS PRL EEEAR TEAL IG REDS LETRA TELOERETATERTET ED TUTEUITILETTUTELELETETELITIREE REEL rAMERICA’S OUTLOOK ON INTERNATIONAL FINANCE It is with particular interest and pleasure that I welcome you to the New York Stock Exchange today, since I have always felt that the founders of this course of addresses and discussions on foreign security investment have deserved the hearty con- gratulation of the American public, for their ad- mirable endeavors to promote in this country a wider and more thorough knowledge of this highly Important subject. Speaking for the New York Stock Exchange, I can assure you of our keen inter- est in the many practical problems which have arisen from the recent flow of American capital abroad, and Our earnest desire to cooperate in effecting a wise and salutary solution of them. Foreign investment has long since ceased to be a theory—it is a condition with which we are each year more and more completely confronted. To most if not to all of us, it is so recent a development in this country that we realize we have very much to learn about it, and not only the misunderstandings of the public but also of ourselves concerning the subject should tend to be dissipated by the talks and discussions provided by this course. The investment of American funds abroad iS) asia matter of fact, only one of the highly significant man- ifestations of America’s present position as the lead- ing creditor nation of our times. While we should on our part make all efforts to obtain a more adequate knowledge of the conditions and customs of foreign nations whose loans are now gaining currency among our investors, it is no less necessary for us, and for foreign countries as well, to realize clearly those past circumstances which have created and shaped us as 2728 MODERN CAPITALISM an international lender of capital. It is not amiss, therefore, to call briefly to mind some of the slow processes of our historical evolution as a people, through which our present financial and economic position and viewpoint has been attained. II In its earliest days, the United States was a very poor colonial country, far on the fringes of civiliza- tion and hemmed in between its long Atlantic shore and the Appalachian Mountains running parallel to it north and south. ‘This mountain chain was not particularly high, yet, save in a few places, it proved singularly impassable for early means of transporta- tion. Asa result, the country faced eastward toward Europe in practically all its economic interests. The poverty of its often rocky and inhospitable soil regu- larly drove its inhabitants to the sea to earn a live- lihood. On the water, however, they exhibited much of the adventurous trading instinct of the British mother-country. In the days before steam, ship- building was a great American industry. Already the American mania for speed had become apparent in our clipper-ships. Wharves abounded in every little sea-port town. American sailing masters car- ried on trade all over the world, and the new flag with its Stars and Stripes was seen on all the seven seas. Despite their small population and their eco- nomic immaturity, the United States proved a de- cided factor on the water. When the North African pirates took to plundering Mediterranean cargoes, they were very promptly made to feel the force of the new United States Navy under Decatur. Perry, another far-wandering American naval commander, succeeded in opening to the trade of the world the island kingdom of Japan, previously a hermit nation. Thus, in these early annals of the United States, a strong tradition for shipping and foreign trade developed.INTERNATIONAL FINANCE 29 Suddenly, however, toward the middle of the 19th century, this maritime activity and international outlook vanished. The American merchant marine was slowly abandoned, and the American shipping towns languished, never really to revive. The young men no longer took to the sea. ‘The Stars and Stripes practically vanished, not only from distant oceans, but almost from the Atlantic as well. Abandoning the seaways, the United States turned its face to the western wilderness. This transformation, still so perplexing to Europe in some of its present day consequences, was occa- sioned by a major historical happening—the success- ful westward passage of our Appalachian Mountain chain by the steam railroad. Almost at a stroke the old coastal settlements along the Atlantic were placed within easy access of what were perhaps the richest agricultural and mineral lands in the world. It is therefore little wonder that America abandoned the seaways for the landways, and that the energy of our people was diverted from roaming the seas to colonizing the wilderness. ‘The whole country sud- denly faced the west, and became immersed in a new and vast internal conquest. It is well, if we are to grasp the full significance of the last hundred years of American history, that we attempt to visualize the tremendous task under- taken by the early American pathfinders and pio- neers. From the summits of the Appalachian Moun- tain chain there stretched away to the westward an enormous valley, extending some 2,000 miles to the Rocky Mountains and the Pacific Coast, and an equivalent distance from the Great Lakes to the Gulf of Mexico. This vast valley area of fertile plain and virgin forest, the heart of the whole North American continent, was a region of incalculable potential wealth. Excepting Russia, the whole continent of Europe could be without difficulty placed inside its tremendous interior reaches. The penetration of this30 MODERN CAPITALISM primeval region by the steam railroad at once im- posed upon the American people the task of coloniz- ing and bringing under one governmental control this enormous area. With the perspective of almost a century, the pro- portions of this task seem even greater. No nation in history had ever faced so colossal a land problem, save perhaps Russia in her Siberian provinces— and in this latter case, as events have proved, the central government has largely collapsed under the strain of controlling its tremendous land areas. The American frontier, moving steadily westward, has almost exclusively absorbed our national attention. It has frequently dominated our political and eco- nomic aspirations. ‘To understand the present day United States without considering its tremendous program for internal development, would be to cast Hamlet without the melancholy Dane. To an over- whelming extent the United States is today what the Mississippi Valley has made it. Not until our great western agricultural regions were established was the idea of wealth in the European sense frequently asso- ciated with the United States. It has been from this great central valley that most of our national wealth and prosperity has been continually drawn. Until our own times, only once has our vast in- ternal problem of colonizing the great valley been seriously menaced by war. Our Civil War—so re- mote to the interests and pre-occupations of Europe at the time—proved a tremendous and _ lasting tragedy tous. After the Civil War the United States was left shaken and disrupted to resume its former labors of internal development. And again this national effort called upon all the potential abilities and energies of our people. The Franco-Prussian War, of such profound significance to Europe, was to us only the muttering of a thunderstorm on the far horizon. So, too, it was with later conflicts and diplomatic crises abroad. The task of driving theINTERNATIONAL FINANCE 31 iron pathway of the steam locomotive through the great valley and over the Rocky Mountains to the Pacific Coast, was too absorbing a task for us, to allow us to comprehend the significance of the bal- ance of power system developing in Europe. During the latter half of the 19th century, how- ever, our British cousins had a vastly better under- standing of our problems than we had of theirs. British capital investments in our railroad and other enterprises assumed enormous proportions. What sea routes and shipping were to the British, our rail- way lines were to us. Without the railways, our Federal Government could not in all probability have successfully exerted control over our vast in- terior areas. ‘The British philosopher Edmund Burke had despaired of the ability of the royal gov- ernment of his time successfully to exercise control over North America. He in fact drew a vivid pic- ture of our great valley populated only by roaming and nomad peoples of white race, yet scarcely more civilized than the original red inhabitants. In the early days of the American republic, Washington and our other leading statesmen were equally baffled by the same problem. Thus it came that the epoch- making invention of the steam locomotive followed swiftly by the large scale investments in railroad securities, and the development of an active market for these securities on the Stock Exchanges of Lon- don and New York, proved one of the indispensable factors in our rapid national growth. Railway build- Ing, a necessary step in colonizing and settling new lands, naturally became one of our major preoccu- pations almost throughout the 19th century. Finan- cial panic after panic in the United States was caused by our constant speculative tendency to over-build our railway facilities. Nevertheless by means of this financial speculation in railway securities on both sides of the Atlantic,the physical foundations for the political and economic United States of our times were laid.32 MODERN CAPITALISM At the turn of the century in 1900, however, there were manifested for the first time signs that a new economic era in the United States was at hand. In fact we experienced at that time a sort of false dawn as a creditor nation. The conclusion of the Spanish War left us with new colonies in both the Atlantic and Pacific, and the difficulties of a new colonial policy to distract us and draw our eyes outward from our traditional problems of internal growth. At the same time heavy gold imports and other unusual cir- cumstances led to a marked though temporary finan- cial prosperity, and even to some investment by Americans in European securities. Yet the few foreign securities which at that time came to be listed on the New York Stock Exchange, possessed to us a strange and somewhat paradoxical air. The United States was still in reality a debtor nation, and was still dependent upon European capital for its own continued development. Our sharp finan- cial panic in 1907 conclusively proved this fact, and by exposing our financial insufficiency led to the creation of a vastly stronger mechanism of finance in both the American banking and security markets. Nevertheless the pioneer age in America was rapidly passing. ‘The princip pal railway lines were laid at last, and by 1910 the American railw ay net attained its maximum mileage. There were other similar signs such as that afforded in the west, where the wheat farms were rapidly absorbing the cattle ranches. ‘Thus it came about that at the outbreak of the Great War in Europe, the United States found itself able to care for its own financial needs, and after a few years to lend a surplus of its capital abroad to Sten Had the European War occurred ten or twenty years earlier, the ability of the United States to play a significant part in it financially, would have been vastly more doubtful. It was inevitable that sooner or later the United States would have become a great creditor nation.INTERNATIONAL FINANCE 33 The practical effects of the war have therefore been to force within a brief period, an economic develop- ment in the United States which under other cir- cumstances might well have required a half century or more. And this profound and tremendous sig- nificant transformation of the international economic status of the United States has come suddenly upon a nation almost wholly unprepared for it by experi- ence, economic interest, or traditional outlook. It has often been said that until the World War, the United States lacked an international outlook, and under the circumstances of our own striking in- ternal growth, this was inevitable. The great bulk of Americans knew and understood very little con- cerning Europe. From their school geographies they had perhaps gathered that Great Britain was an island, that Italy was a peninsula shaped like a boot. Yet of the complex social, economic and political establishments of Europe, or of the European his- toric background, there was little or no real compre- hension. But during the war millions of our young men for the first time set foot upon foreign shores, and today these first-hand witnesses are spreading through countless little towns and villages throughout the heart of the United States a knowledge of other lands and other customs, with undoubted economic and financial consequences for the future. In these latter years, travel abroad has in the United States become no longer a luxury, but a commonplace. Moreover, owing to the continued advance of scientific inven- tion, the world’s distances have perceptibly shrunk through the spread of the radio, air navigation and other new and striking facilities for transportation and communication. The present is therefore an age of transition, no less in the United States than in Europe. America is at the crossroads of a momentous change in her eco- nomic policies and interests. Her great internal task34 MODERN CAPITALISM of colonization and development is by no means finished, nor will it probably be for yet some gen- erations. Nevertheless the United States is once again facing outwards. The century-old spell of ab- sorption in settling our great valley is not yet alto- gether broken, nevertheless it is mingled with a broader vision of the modern world, and a wider realization of the part which the United States must play in it. This viewpoint, so natural and tradi- tional to Europe, means with us the reversal of habits of thought and custom which have dominated us for almost one hundred years. Such shifts in na- tional viewpoints take time. Exactly what part the United States will play in the world of to-morrow depends on the collective wisdom of Europe as well as on our own. Surely if material prosperity is any necessary basis for this, the United States should fulfill a constructive role as creditor nation in the coming years. Under an un- yielding regime of Federal economy so constantly maintained by President Coolidge and his able Secre- tary of the Treasury, Mr. Mellon, the economic burdens of war in the United States are rapidly being abated, and taxation here is steadily lightening. Had a less courageous and wise attitude regarding our government financing been undertaken after the war, the United States would by no means be in the sound financial condition which it at present enjoys. Yet the role of creditor nation is still very new to us, nor have we had time to learn much about it, in the intense haste and pressure of the past unprece- dented ten years. So far as sound foreign securities can be floated and sold in the United States, the process should serve to facilitate the composure of the difficult financial problems of many European governments, to provide Kuropean industries with much equipment and materials, and serve to restore in Europe as satisfactory conditions to the average man—and perhaps in time even more satisfactoryINTERNATIONAL FINANCE oD conditions—than those which obtained before 1914: It is particularly necessary, I feel, for America to benefit in this work by the longer and ampler expe- rience of the creditor nations of Europe—particularly, of course, that of Great Britain. Already there has been extensive investment by small American investors in foreign government bonds, which has proved a very constructive and stabilizing factor to Continental nations. In the United States, our large government war loan flota- tions tremendously broadened the investing public by creating a new class of security buyers. These new investors need the maximum protection which organized finance can throw about them, and in the United States much financial technique of a new order is needed to further such a policy. The Ameri- can investor has already ceased to be a supporter only of the American government and American business enterprise. Properly led and properly safe- guarded in his investments, he can exert an even wider and more constructive influence in the res- toration of economic prosperity abroad. III One common experience has resulted from the re- cent war both here and abroad—the definite proof and general realization of the permanent character of our modern financial system of credit, and in fact of the entire present system of private capitalism. In the days before 1914, we were frequently told by numerous learned gentlemen that warfare under modern conditions had become an impossibility, because of the appalling shock which it would im- part to the credit machinery of the modern world. The element of truth in these assertions we have witnessed in the extraordinary conditions pro- duced in financial centers on both sides of the Atlan- tic during the past ten years. Yet to-day the finan- cial machinery of the creditor countries of the worldcae ET ae NL a cS RR et 36 MODERN CAPITALISM is again being actively appealed to, in the effort to restore the world, and this machinery is moving con- structively to accomplish this task. If modern capitalism in Europe and America can survive such a war as has recently been concluded, its ability to sustain the lesser shocks and burdens of normal peace times need give little concern in the future to any reasonable man. The war has likewise conveyed a similar and even more significant lesson regarding the modern system of private capitalism. Before and even after the war, there has been much glib talk concerning the Utopian character of state socialism, and until re- cently it was difficult to definitely disprove such easy prophecies, because no country had ever been foolish enough to attempt to realize them. The war forced a condition of government control everywhere, and a considerable chance to observe its much- heralded benefits to the average man. Yet now, not only Britain and the United States but many other countries with a less distinctive tradition toward freedom, are striving to restore the private initiative of pre-war days which our recent experience has shown us to be so necessary a factor in actual eco- nomic achievement. Civilization will in the future always have the supremely practical benefit of the Russian example, as an object lesson to casual and uninformed critics of private capitalism. Indeed, the great nations of the present world owe a pro- found debt to Russia for providing civilization with a permanent example of the fallacious follies of state socialism and complete government control of trade and industry. Thus, in point of fact, private capitalism has ex- perienced its supreme test during and after the re- cent war, and by its tenacious ability to survive and function has secured its greatest triumph. ‘The practical task now summoning us, is to effect a closer partnership between modern capitalism and the con-INTERNATIONAL FINANCE 37 tinued discoveries of modern science, to build pa- tiently and steadily a better world. In my own case, I can of course speak with a greater degree of assurance in these matters in con- nection with the capital markets on our stock ex- changes, which are so fundamentally necessary in the modern system of private capitalism. During the war, the securities market on the New York Stock Exchange was of necessity curtailed in many ways by a policy of government control. But with the passing of war conditions, the old dependence upon private initiative rather than governmental admin- istration or political regulation, has very conspicu- ously and completely revived. We have, in keeping with what may be called the Anglo-Saxon genius for private initiative in business affairs, always been skeptical of any bureaucratic administration of our commercial and financial affairs by our government. We have instead always adhered to the idea of a free and open securities market, untrammeled, as far as possible, by hampering legislation, and dependent for its value and usefulness upon the responsibility and fairness of free citizens. The enlightened attitude of our Federal and State legislation in this matter, as well as the similar wisdom of our courts, has per- mitted the organized security markets on the New York Stock Exchange under freedom to expand its sphere of usefulness, within the limitations of purely economic considerations. Undoubtedly much remains still to be done to distribute the full benefits of modern private capital- ism to everyone. In recent years, we have experi- enced a remarkable increase in the number of our security investors as a result of our war loans and the publicity attending them, and a remarkable dif- fusion of the ownership of our large corporations. The increasing tendency in this direction has already brought with it a gratifying improvement in public opinion concerning the relations of government and38 MODERN CAPITALISM business. Here, as I see the matter, is the means for a healthy democratization of security markets and finance itself, which should be safeguarded and fostered in all possible ways by financial men. Probably the most threatening menace to the wider diffusion of security ownership, at least in the United States, consists in the highly dangerous ac- tivity of security swindlers. Security swindling, I have come to believe, is to a considerable extent an international evil. ‘The professional swindlers of America are becoming accustomed to pursue their activities abroad, and in our financial centers swind- lers from foreign countries also occasionally operate. Concerted action by the the leading financial centers of the world in this matter might accomplish very genuine and permanent benefits to our security holders, and provide everywhere safer surrounding circumstances for the vital work of garnering private capital through our various financial systems for constructive use. ‘The financial systems of Europe and America, so different in superficial aspects and so profoundly alike in fundamentals, have already done yeoman service during the past ten years in re- pairing the wastage of the war. It is my hope that by closer co-operation they can cherish and provide for the future the safety which should surround the indispensable flow of private funds here and abroad into the creative work of reconstruction. IV To-day there is perhaps a more widespread and calm consideration of the possibilities of future years than ever before in history—a natural result of the unprecedented events which have occurred since the outbreak of the war, and the changes which have already been seen throughout civilization. I am no philosopher or scientist, nor can I even lay claim to ee an observer of the significant tendencies nowINTERNATIONAL FINANCE 39 operating in the modern world, with a knowledge and judgment comparable to their complexity and immensity. Nevertheless, close acquaintanceship with a great security market forces certain conclu- sions upon any one, since there perhaps the real forces of our modern world are most sensitively and broadly manifested. We are all living to-day in a great scientific age, when the announcement of new discoveries and in- ventions crowd fast upon each others’ heels, and when new methods and devices are pouring rapidly from our laboratories and workshops to be placed swiftly at the service of mankind. Let us make no mistake about the matter—this scientific progress can not be halted even by so appalling an episode as a world war. Indeed the signs multiply, that it is already accelerating. It has behind it the momen- tum of an astonishing century, and its ultimate sig- nificance no man can surely foretell. The march of armed men is after all not impressive beside the march of science. Nature covers with surprising quickness the scars of the battlefields, and even the ache of human loss fades with the passage of time. Meanwhile, science is providing a new release of energy and hope everywhere throughout civilization. Neither the statesman nor the business man can afford to face the future with a closed mind. There has never been a time in the world’s history when the progress of science has been so rapid, or the creation of wealth so widely facilitated and so swiftly rendered possible. This is not any chance rhetoric, nor merely the expression of an easy-going optimism. Just as the burdens and scars of the great Napoleonic wars a century ago were paid off by the inventions of Arkwright and Whitney, so too, I be- lieve, the consequences of the latest world war will be met and liquidated by the continued advance of scientific knowledge and mechanical ingenuity. Thus scientific discovery holds forth a bright hope to the40 MODERN CAPITALISM life of everyone to-day, of a broader and better exis- tence for us all. As practical men, however, it is not so important for us to concern ourselves with mere prophesies of better things to come, as it is with how their arrival can best be facilitated. Spencer once defined life as “the continuous adjustment of internal relations to external conditions.”’ Even in the fluid civilization of the United States, many of our ways of life will never return in the exact form with which we were familiar before the war. Even under conditions of long future peace it must be expected that the chang- ing external conditions created by the advance of science will demand a continuous adjustment of our internal relations to them. It is inevitable that the dynamic urge of scientific discovery, halted for a brief space by the war, is destined to become more and more forceful and intent. And meanwhile there is placed upon financial leadership a need of constant alertness in adapting our financial machinery and our financial methods to the great work of financing a more useful and productive industrial establish- ment. There has probably never been a time before when there existed so great an actual and potential need of capital as to-day, and in consequence the opportunities for the investment of capital in our own times provide not only the proper incentive of private profit, but also the more significant possi- bility of a broader human service. In the coming years there is a great work for modern finance to do, and especially in the free markets of London and New York a stirring opportunity and a deep re- sponsibility must be faced. So it is that I return to my original thesis—the great need to-day of a closer acquaintanceship and a deeper mutual understanding between American and foreign trade and finance—not only as a pleasure and facility to ourselves, but as a duty to the future of our own countries, and indeed that of the world.INTERNATIONAL FINANCE 41 Too long have the commercial and financial relation- ships of modern countries been popularly considered merely as a fertile source of wars. Certain impetu- ous critics have so far pursued what is called the ‘economic interpretation of history,” that they are continually agitated lest with every trade dispute and every instance of commercial competition, we should at a moment’s notice fly at each others’ throats. We all well know what nonsense such a jaundiced view of history really is, and both here and abroad we should take it upon ourselves more actively than perhaps we have, to establish the fact more widely. For international trade and the inter- national contacts furthered by modern finance, when rightly considered, can be and long actually have been, a solvent for international misunderstand- ings and disputes of all sorts. The merchant and the banker have long proved very potent ambassadors of peace, and have frequently exerted restraint upon the narrow tendency toward self-glorification to which all peoples are in varying degrees subject, and which has so frequently proved a check and hind- rance upon the world’s progress. Recently there has been much rather futile dis- cussion concerning the primacy of the financial centers of London and New York. But I confess that I am not very deeply interested in the question of which is larger or greater than the other. I am more concerned that both London and New York, as well as the other leading financial centres of to-day, should work in a closer partnership than ever before to pro- vide a more effective financial leadership in the mod- ern world. ‘There are very great common tasks which to-day lie ahead of us all—the restoration of sound and honest currencies everywhere, the elimination of the needless instabilities of trade and credit alike, and the establishment of strong and enduring foun- dations for a wider diffusion of wealth, and a higher type of civilization in the days to come.SPECULATION AND THE STOCK EXCHANGES 19 Tayi 7 ] 4 7 TNS P ; “pee , on sn ! [2 LA AA RAA j ) 7 AA DA Addr ss délivéréd aitnée Annual Linney? alo Di liakanws of , Ex Ly of the Detroit Stock LXCNAaANLE :