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 BUSINESS AND EDUCATION 
 
BUSINESS AND 
 EDUCATION 
 
 BY 
 
 FRANK A. VANDERLIP 
 
 Vice-Presidenty National City Banky Ne^w York 
 
 WNIVERS 
 
 OF 
 
 NEW YORK 
 
 DUFFIELD AND COMPANY 
 
 1907 
 
atiiLliAL Nf3 
 
 Copyright, 1907 
 By Duffield and Company 
 
 Published May, 1907 
 
 THE UNIVERSITY PRESS, CAMBRIDGE, U. S. A. 
 
TO 
 
 MY MOTHER 
 
 164158 
 
CONTENTS 
 
 PAGE 
 
 The Co-ordination of Higher Education i 
 
 A New College Degree 20 
 
 The Young Man's Future 42 
 
 Trade Schools and Labor Unions ... 56 
 
 The Business Man's Reading 82 
 
 The American Invasion of Europe . . 94 
 
 The Industrial Future 205 
 
 Old- Age Pensions for Workingmen . . 224 
 America's Foreign Commerce . . . . 253 
 The Ultimate Dependence of New Eng- 
 land UPON Foreign Trade 277 
 
 Political Problems of Europe as they 
 
 Interest Americans 297 
 
 The Currency 479 
 
 Banking Developments 494 
 
 The Lessons of our War Loan .... 509 
 
 The Treasury 529 
 
Business and Education 
 
 CO-ORDINATION OF HIGHER 
 EDUCATION 
 
 Founder's day address, delivered at Girard College, 
 Philadelphia, May 20, 1905. 
 
 It has been well said that when Stephen 
 Girard conceived this notable institution, the 
 benefaction was more than a philanthropy, 
 — it was a precedent. He was the first man 
 of great wealth to devote a vast fortune to 
 an educational idea. We cannot measure 
 the influence that act had. The example 
 may have been of as great good in its effect 
 upon the minds of other men of wealth, as 
 has been the value of the great benefaction 
 itself. Certain it is that the precedent then 
 made was the beginning of a long and ever- 
 increasing list of educational gifts. That 
 list has come to be of such proportions that 
 to-day the giving of a million dollars to an 
 institution of learning excites little more 
 than the passing comment of the hour. 
 
 In the gift of Stephen Girard there was 
 a special significance. It was not a gift of 
 money alone ; there was added to the money 
 
Business and Education 
 
 wise judgment, a nobler motive, and a care- 
 fully considered plan. Girard gave his 
 brain, the ripe wisdom of his experience, and 
 the broad and helpful charity which years 
 of struggle and sorrow and loneliness had 
 left in his heart. With his money he also 
 gave himself. 
 
 In the long line of educational benefactors 
 who have come after him, can there be found 
 one who has done more? Is there one who 
 has more completely vivified his gift with 
 his own thought, his own personality? It is 
 to the value of that particular phase of 
 Girard's giving, the value of the example 
 which he set in the giving of his own ripe 
 judgment, as well as of his money, that I 
 would especially direct your attention. 
 
 Learned men are to-day almost as far 
 from agreement as to what constitutes the 
 best education as they were when Aristotle 
 first protested against current beliefs on the 
 subject. All the centuries of debate and of 
 experiment from the days of the Greek phi- 
 losophers to the latest meeting of our own 
 educators, have resulted in progress, but 
 certainly not in agreement as to what is edu- 
 cation and as to just how it should best be 
 acquired. Probably the nature of the prob- 
 lem is such that a definite solution never can 
 be reached. We can hardly expect an an- 
 swer which will be accepted by all learned 
 
Higher Education 
 
 men. I am inclined to believe that one 
 reason why we have never approached 
 nearer to agreement, however, is because 
 the solution of the problem has been left 
 too largely in the hands of professional 
 educators. 
 
 Even though men bear learned degrees 
 and have shown rare ability in acquiring a 
 special sort of knowledge prescribed by a 
 particular system of education, it may not 
 follow that those same learned men are the 
 best judges of what should be the trend of 
 that educational system. If they alone are 
 left to shape the further development of that 
 system, I believe its growth would be less 
 likely in all respects to follow the best lines 
 than would be the case if its development 
 were in a measure shaped by men who have 
 acquired another form of education and 
 have scored success in other fields. The 
 professional educator is quite as likely to 
 become narrow and provincial as is any 
 other specialist. The president of one of 
 our great eastern universities told me a few 
 days ago that he had been making an exhaus- 
 tive examination of the history of his insti- 
 tution and he had discovered that every 
 great progressive step which the university 
 had taken in one hundred and fifty years had 
 been against the protest and the opposition 
 of the faculty. The trustees from time to 
 
Business and Education 
 
 time brought forward new plans of organi- 
 zation and broader ideas regarding the cur- 
 ricuhim. The faculty had in every case 
 voted adversely, and when the changes were 
 made, they were made only by the trustees 
 taking the responsibility upon themselves. 
 Even Alexander Hamilton, with his consum- 
 mate wisdom, once worked out a plan of 
 reorganization for the university, only to 
 have it meet with the usual vote of emphatic 
 protest from the faculty, but final adoption 
 by the trustees. Now, in the light of years 
 of experience, these changes are seen to have 
 been wise in the main. The unavailing pro- 
 tests of the learned men who made up the 
 institution's faculty are discovered to have 
 sometimes been b^sed on narrow grounds 
 lacking the impersonal view and judgment 
 that should have been brought to bear upon 
 the questions. 
 
 This is only one illustration of many that 
 might be given of the tendency toward nar- 
 rowness on the part of the specialist, of the 
 wisdom there is in larger counsels, and of 
 the value to educational progress that may 
 come with the judgment and experience of 
 men of large affairs and wide interests. 
 Schools are for the education of all sorts of 
 men, and in directing their development 
 there is need of almost as many points of 
 view and of as varied experiences as there 
 
 4 
 
Higher Education 
 
 are classes of men to be educated. It is 
 easily possible for men engaged in the par- 
 ticular work of education to become narrow. 
 Book covers contain much knowledge, but 
 may also shut out from a too close student 
 much wisdom, — much of that sort of wis- 
 dom which is gained by experience in the 
 world. And so, I believe that when the 
 example was set to men of wealth, of giving 
 with their money their thought, their ex- 
 perience, their judgment, that example was 
 of great value. 
 
 Keen foresight, a shrewd knowledge of 
 humanity, a wise and well-seasoned judg- 
 ment of the practical value of things, ordi- 
 narily go to make up the mental equipment 
 of the man who has made a million dollars 
 which he is ready to devote to some great 
 public good. If the example which Girard 
 set in any measure leads such men fully to 
 use that same wisdom and judgment which 
 enabled them to make the million dollars, in 
 helpfully directing along right lines the 
 manner of itV spending, then the example is 
 of value indeed. The worth of a man's ben- 
 efaction may be vastly increased if, to direct- 
 ing the influences which the gift will set in 
 motion, he will give anything like the thought 
 which he gave first to the acquisition of the 
 money. The gift which is vitalized by the 
 sound judgment of the giver may become 
 
Business and Education 
 
 more valuable because of its aim than be- 
 cause of its amount. 
 
 There has been much generous giving 
 without clear thinking. There has been 
 much philanthropy the effectiveness of which 
 has been small because there was lack of 
 wisdom in directing its use. That leads me 
 then to one thought which I wish to present 
 in connection with my subject, and that 
 thought is in reference to the tendency 
 toward waste. The keynote of economic life 
 to-day may be said to be the prevention of 
 waste. The pervading economic tendency 
 of the day, the tendency toward combination 
 and away from useless competition, is a ten- 
 dency which has been set in motion as a pro- 
 test against waste. It is, I believe, in its 
 potentiality for the improvement of the con- 
 dition of men among the foremost of all 
 economic influences ever brought into being. 
 
 Not a great deal of thought has been 
 devoted to the idea of waste in education. 
 We have a feeling that all education is good, 
 and whether or not this or that particular 
 educational activity is of the greatest possible 
 efficiency, we still think that it is at least of 
 value and is worthy of encouragement. 
 This loose commendation of all forms of 
 education tends to blind eyes to an educa- 
 tional waste, though they would with clear- 
 ness see an economic waste. It is true too 
 
Higher Education 
 
 that the disadvantages of educational waste 
 are not so clearly discernible as are the dis- 
 advantages of economic waste, though the 
 results may be no less deplorable. 
 
 ISince the precedent of the great Girard 
 benefaction was established there has fol- 
 lowed a golden flood of gifts for educational 
 purposes and in the main the giving has been 
 without discrimination. It has been as if 
 Education were a definite and complete con- 
 ception, and as if a benefaction laid at Edu- 
 cation's shrine, no matter where that shrine 
 might be erected or in whose keeping it 
 might be, was a gift given with rare discrim- 
 ination and with the certainty that it would 
 be wisely devoted to the noblest uses. Unfor- 
 tunately that has not always been the case. 
 Educational donations are frequently, I may 
 almost say usually, made with a lack of per- 
 spective as to what would be best for the 
 whole educational field. The giver or the 
 recipient may be moved by an ambition to 
 satisfy local or personal pride. Rarely have 
 men made their gifts in such form as would 
 be to the greatest advantage to the proper 
 development of the whole system of higher 
 education. They have not clearly seen how 
 much the system was lacking in co-ordina- 
 tion of effort, how w^asteful it was becom- 
 ing in unnecessary duplication, how need- 
 lessly costly it was being made by useless 
 
Business and Education 
 
 and hurtful competition — not competition 
 in the field of merit, but in the field of narrow 
 personal or local ambition. 
 
 There has been a lack of co-ordination in 
 the field of higher education. We have failed 
 to evolve a strong central purpose which 
 would serve to give symmetry to educational 
 development. The lack of a central influ- 
 ence, an influence which would hold back 
 growth here and encourage it there, has cost 
 much in wasted effort and in unsymmetrical 
 growth and development. 
 
 If the Stephen Girards of to-day, men of 
 clear thinking, of high purpose, of wise 
 judgment, would give the best that is in them 
 of wisdom and advice to aid the educators 
 in creating wisely such a central purpose, the 
 gift which they would thus make would be 
 of greater value than would be their gifts 
 of millions. 
 
 Just what they should advise I am, of 
 course neither prepared nor competent to say. 
 I wish only to assert confidence in the great 
 benefit to the whole movement of higher 
 education which would come from the advice 
 such men could give, would they but study 
 the problem with the care with which they 
 study the large affairs of business. There is, 
 however, a hint for a plan of effective action, 
 it seems to me, in the two vast benefactions 
 which have been made by the great philan- 
 
 8 
 
Higher Education 
 
 thropist of our present day. In the ten- 
 million-dollar fund which created the Car- 
 negie Institution there was the idea of a 
 benefaction which should be devoted to the 
 advancement of human knowledge wherever 
 the opportunity could be found. It was not 
 the purpose to build up an additional insti- 
 tution of higher learning, to duplicate the 
 work and compete with the efforts of an 
 already ample number of such institutions, 
 but rather to lend aid wherever aid was most 
 needed for the advancement of human 
 knowledge. In a more recent benefaction 
 a like vast sum has been given for the useful 
 purpose of retiring faculty members who 
 have passed their day of usefulness and who, 
 in the interest of highest efficiency, had best 
 make way for others. The benefits of this 
 latest foundation are intended to apply to the 
 entire body of institutions of higher learning 
 with certain obviously appropriate excep- 
 tions. 
 
 Is there not in these two benefactions a 
 hint of what might be done in the way of a 
 movement of great importance towards uni- 
 fying and co-ordinating our whole system 
 of higher education, a movement which 
 would tend to decrease a waste of expendi- 
 ture and of effort? It hardly needs demon- 
 stration, I think, that there is such waste. 
 There is a waste of educational endowments 
 
Business and Education 
 
 and of instructors' efforts as well as of the 
 meagre funds and invaluable time of the 
 youths whose college years are being made 
 less fruitful than would be the case had we 
 reached the point of highest possible effi- 
 ciency in each educational institution. 
 
 I believe there might be created a great 
 central fund, the object of which should be 
 so to distribute the income as to give effec- 
 tive force to an impulse toward co-ordination 
 of our whole system of higher education. If 
 such a fund were in the hands of the wisest 
 body of men that could be brought together 
 for that purpose, it could be so used that 
 it would stimulate the educational system to 
 a symmetrical growth. It could be so ad- 
 ministered that it would encourage that 
 growth which ought to be encouraged in the 
 judgment of men who were looking at the 
 whole field. It would avoid the mistake of 
 helping institutions to undertake work that 
 was not demanded and for which they were 
 not fitted. It would give great encourage- 
 ment to the small colleges, but it would be 
 encouragement leading them to do the best 
 possible work in their own particular field, 
 and not stimulating them into attempts to 
 become universities that undertook to accom- 
 plish impossible things. On the other hand, 
 it would give encouragement to great univer- 
 sities to broaden and strengthen their ca- 
 
 lO 
 
Higher Education 
 
 pacity to do true university work, and it 
 would discourage the efforts of such of those 
 institutions as may have forgotten that num- 
 bers alone do not make great seats of learn- 
 ing. It would put emphasis on the error of 
 those institutions that have lowered their 
 standards and admitted to their privileges a 
 mass of illy prepared youths, who, from 
 every point of view, might have better spent 
 some time at a smaller institution where in- 
 dividual needs could have been looked after 
 more efficiently and effectively. 
 
 I would provide for the administration of 
 such a fund a board of trustees that had 
 large educational experience and outlook, 
 and I would also have among those trustees 
 men of broad experience in affairs of im- 
 portance and in the practical matters which 
 concern the average man. Such a fund so 
 administered would put a mighty impress 
 on the whole development of higher educa- 
 tion. It might make an impress which would 
 be out of all proportion in importance to the 
 effect which the same fund would have had 
 if, in the first instance, it had been divided 
 among many institutions. 
 
 I believe if some present day Girard will 
 make the beginning with such a fund, giving 
 with his benefaction his wisdom, his experi- 
 ence and his judgment, so that the fund 
 really becomes an instrument such as I have 
 II 
 
Business and Education 
 
 described, he will have rendered a service, 
 the value of which will be beyond measure; 
 he will have created an instrument which will 
 check waste ; he will have helped men to see 
 that the highest possible success for an in- 
 stitution of learning is to become a perfectly 
 efficient unit in a perfectly co-ordinated 
 scheme; he will have made men understand 
 that the unit which forms one part in such 
 a system is as creditable as another, that the 
 small college can be made to do as valuable 
 work as the great university, providing each 
 institution fulfils its special purpose in a 
 symmetrical whole. 
 
 Since the day when Stephen Girard drew 
 the will which made this institution possible, 
 there have come alterations in the scope and 
 method of educational work which have been 
 fundamental and far-reaching. The seventy- 
 five years which have elapsed since that in- 
 strument was written have worked vast 
 change and progress in every department of 
 life, and in none, perhaps, more than in the 
 field of education. The world's conception 
 of a university has been revised within that 
 period, the scope of the curricula has been 
 broadened so as to take in fields of knowl- 
 edge that were not thought, by Stephen Gir- 
 ard's contemporaries, susceptible of scien- 
 tific classification. These curricula have now 
 long contained subjects which then no one 
 
 12 
 
Higher Education 
 
 supposed would ever form a part of college 
 training. 
 
 We have gained, too, new and greatly 
 improved conceptions of how old subjects 
 should be taught. In the entertaining auto- 
 biography which that most useful citizen, 
 Andrew D. White, has recently given to the 
 world, an interesting picture is presented of 
 the shortcomings of American universities at 
 a period even a generation after Girard's 
 death. The university world then was a 
 world of dry text-book recitations, lacking 
 the method and treatment that give subjects 
 a living interest. There was not at that time 
 in an American university a professor of his- 
 tory, pure and simple. It was not until Mr. 
 W^hite had organized Cornell University, 
 and at as late a day as 1870, that there was 
 in any American university a course of lec- 
 tures on American history. An American 
 student, in order to secure instruction in the 
 history of his country, had, before that time, 
 to go to the lectures of Laboulaye at the 
 College of France. 
 
 It is within the period since Girard's death 
 that an entire department of learning has 
 been recognized and created — the depart- 
 ment of higher technical education. At first 
 the idea of that sort of education was scouted 
 by the universities, while its value failed of 
 appreciation at the hands of practical men. 
 
 13 
 
Business and Education 
 
 A man need not have lived more than the 
 allotted span to remember the scant regard 
 in which higher technical education was held. 
 Practical men pronounced it impractical: 
 learned men regarded its atmosphere, spirit, 
 and scope as something putting it quite out- 
 side of the recognized field of higher educa- 
 tion. There has been a long step from the 
 attitude of those early days to the present 
 when we find, even in the strongholds of the 
 ultra-conservative university life of Ger- 
 many, a recognition of technical training 
 which places it on a level with the other 
 learned professions, or when at home we find 
 even intellectually aristocratic Harvard in- 
 viting, perhaps vainly, a great technical 
 school to share in its endowments and enjoy 
 the lustre of its honored name. 
 
 I have referred to some of these evidences 
 of change and of progress in our views re- 
 garding higher education, because I believe 
 that we are even now in the midst of as im- 
 portant changes and as great progress as in 
 those years gone by. The tendency is to 
 make education more practical. We are 
 coming more clearly to recognize that for 
 the many kinds of men there must be many 
 kinds of education. In those early days the 
 engineers who grew up in a school of experi- 
 ence looked with doubt and disfavor for a 
 time upon the man who, by some short cut 
 
Higher Education 
 
 of learning, was attempting to reach a goal 
 ahead of those who were following the or- 
 dinary road. So the business man to-day is 
 inclined to look with doubt upon any sug- 
 gestion that it is possible to have a higher 
 commercial education which will be of prac- 
 tical value. Just as the educators of two 
 generations ago felt that there was no proper 
 place in the sacred grove of learning for a 
 branch of education that smacks so of every- 
 day life as did a course of engineering, so 
 to-day there are many who believe that an 
 attempt to teach the principles of commerce 
 would be bringing into the classical concep- 
 tion of education a subject that has no place 
 there. 
 
 The mental equipment of a business man 
 needs to be greater to-day than was ever 
 before necessary. Just as the sphere of a 
 business man's actions has broadened with 
 the advent of rapid transportation, tele- 
 graphs, cables, and telephones, so have the 
 needs of a broad understanding of sound 
 principles increased. It was steam proc- 
 esses of transportation and production that 
 really made technical education necessary. 
 The electric dynamo created the demand 
 for technically educated electrical engineers. 
 So the railroad, the fast steamship, the elec- 
 tric current in the telephone and cable, and 
 the great economic fact of gigantic and far- 
 
 15 
 
Business and Education 
 
 reaching- business combinations, are making 
 the science of business a different thing from 
 any conception of commerce which could 
 have been had when Girard was the most 
 successful of American business men. The . 
 enlarged scope of business is demanding 
 better trained men — men who understand 
 principles. New forces have made possible 
 large scale production, and we need men 
 who can comprehend the relation of that 
 production to the world's markets. There 
 has been introduced such complexity into 
 modern business, and such a high degree of 
 specialization, that the young man who be- 
 gins without the foundation of an exceptional 
 training is in danger of remaining a mere 
 clerk or bookkeeper. Commercial and in- 
 dustrial affairs are conducted on so large a 
 scale that the neophyte has little chance to 
 learn broadly either by observation or by 
 experience. He is put at a single task. The 
 more expert he becomes at it, the more likely 
 it is that he will be kept at it unless he has 
 had a training in his youth which has fitted 
 him to comprehend in some measure the re- 
 lation of his task to those which others are 
 doing. 
 
 It is true that the practical value of tech- 
 nical education is more obvious than is the^ 
 value of a higher commercial education. A 
 man cannot build a railroad bridge unless 
 i6 
 
Higher Education 
 
 he is an engineer. Schools can teach en- 
 gineering, and the vahie of the technical 
 school is therefore clear. It is less easy to 
 establish the certain value of a higher com- 
 mercial education, but, for my own part, I 
 believe that that value will in tijue^come to 
 be as fully recognized. We have seen in 
 Germany an example of distinct success of 
 this sort of training. One is beginning to 
 find all over the world positions in business 
 houses filled by Germans who have been se- 
 lected because of the superior training they 
 have received in the German schools. 
 
 If the people of the United States are to 
 make the most of their opportunities, they 
 must employ the most effective methods. In 
 a university cours^ of higher commercial 
 training much can be taught that will be of 
 national value in the development of these 
 opportunities. These schools of commerce, 
 it seems to me, should be attached to univer- 
 sities. The training they offer should be in 
 addition to the general university training. 
 I believe there is a trend in educational de- 
 velopment to-day that is in that direction, 
 and that the results which will follow such 
 a development will be of enormous value. 
 
 The men who have administered Girard 
 College have had occasion to note an inter- 
 esting change in an important phase of in- 
 dustrial conditions. When Stephen Girard 
 
 2 17 
 
Business and Education 
 
 planned the institution there was well recog- 
 nized as a part of our industrial life a system 
 of industrial apprenticeships. That system 
 disappeared. The course of training which 
 it offered no longer exists. Other and, per- 
 haps, less efficient methods have come into 
 vogue. 
 
 There has been as marked change in the 
 training which is available for the business 
 man. It is by no means certain that a 
 young Stephen Girard, having in every par- 
 ticular a mental equipment equal to that of 
 the young Frenchman who put out to sea a 
 century ago and more to make his fortune in 
 commerce, could to-day duplicate that suc- 
 cess. Conditions have vastly changed. A 
 new order of equipment is demanded. The 
 staunchness of character, the same intrepid 
 will, to-day will play their part as they 
 played it then, but in addition there is now 
 demanded a breadth of technical knowledge, 
 a fund of specialized information, a com- 
 prehension of intricate relations, and an un- 
 derstanding of broad principles which the 
 conditions of a century or even a generation 
 ago did not make imperative. I have faith 
 then that some new Girard, recognizing those 
 changed conditions and consequent new de- 
 mands, will make a benefaction which will 
 help to give us clear-thinking, right-minded 
 and well -equipped youths, from whom may 
 i8 
 
Higher Education 
 
 be developed future captains of commerce 
 and industry. And if the example which this 
 institution typifies serves to lead that bene- 
 factor to give mith his money the best there 
 is in him of wisdom, experience, and judg- 
 ment, to insure that the money be most wisely 
 spent, then will there be fresh rea'son for us 
 to honor the name of Stephen Girard. 
 
 19 
 
A NEW COLLEGE DEGREE 
 
 An address delivered at the Convocation of the Uni- 
 versity of the State of New York in the Senate 
 Chamber at Albany June 29, 1905. 
 
 In this gathering of professional educators 
 I presume nothing less than the traditional 
 bravery of the fooHsh would lead a layman 
 into a discussion of a new phase of higher 
 education. That would seem to be partic- 
 ularly true in the face of a recent utterance 
 by that revered dean of American learning, 
 President Eliot of Harvard, when the sub- 
 ject chosen is commercial education. Presi- 
 dent Eliot has recently told us that it is mon- 
 strous — the strong adjective is his — that 
 it is monstrous that the common schools 
 should give much time to compound numbers 
 and bank discount, and little time to drawing. 
 In the face of that vigorous declaration 
 against utilitarianism, the layman must be 
 foolhardy indeed who would raise his voice 
 in advocacy of an education especially 
 adapted to men who are to lead commercial 
 lives. 
 
 President Eliot has told us further that 
 the main object in every school should be 
 not to provide students with means of earn- 
 ing a livelihood, but to show them how to 
 
A New College Degree 
 
 live happy and worthy Hves inspired by ideals 
 which exalt both labor and pleasure. That 
 desirable object he seems to believe can be 
 best obtained by teaching children how lines, 
 straight and curved, lights and shades, form 
 pictures, rather than by leading their young 
 minds into the waste places of compound 
 numbers and bank discount. 
 
 On any subject connected with education 
 there is no opinion that should be more re- 
 vered than that of the President of Harvard. 
 His position is unique; his words are the 
 voice of authority. This slighting opinion 
 of bank discount and compound numbers 
 which Dr. Eliot has expressed can, I pre- 
 sume, hardly be taken as representing his 
 unqualified view regarding practical educa- 
 tion. Through all time there have been 
 many distinguished utterances by philoso- 
 phers and teachers as to the meaning of 
 education. These men, however, have rarely 
 agreed in their concepts of the purpose and 
 the aim of education. Since the days of 
 the Greek philosophers there has been little 
 progress toward a generally accepted view 
 of what education should aim to accomplish. 
 When the doctors of learning themselves 
 disagree perhaps a layman may be forgiven 
 for differing from them on some points. 
 
 It is certain that the college curriculum 
 has undergone many changes and much de- 
 
 21 
 
Business and Education 
 
 velopment even within the period of years 
 during which most of you have been actively 
 connected with educational matters. We 
 have seen great changes, marked broadening 
 and much significant development in the 
 studies generally prescribed as requisite for 
 a college course. Those changes have been 
 sufficiently marked to indicate that there is 
 still, in the minds of those who are directing 
 education, indefiniteness as to what is ab- 
 solutely best in the way of instruction. The 
 changes which have been going on have been 
 sufficiently rapid and recent to lead one to 
 believe that there may still be important 
 changes, still material broadening, in the 
 courses which our colleges offer. It is logi- 
 cal, therefore, to believe that our system of 
 higher education has not settled into any- 
 thing like permanent form. The alterations 
 which we have seen indicate that there are 
 more to come. Curricula which are to-day 
 regarded with the highest veneration, may 
 to-morrow, in some, be found lacking and 
 in need of modification. It is in the be- 
 lief that the college curriculum is still in a 
 period of transition and enlargement that I 
 venture to give my views of one phase of 
 higher education in which I think we are 
 soon to see distinct developments. 
 
 The experience which I have had in busi- 
 ness, and particularly the experience which 
 
A New College Degree 
 
 I have had with young college men in busi- 
 ness affairs, leads me to the firm belief that 
 much may properly be asked in the way of 
 a broadened university curriculum. Much 
 could be added that would be of great ad- 
 vantage to the individuals who are to be 
 future leaders in business life. But the 
 added courses would be of value, not alone to 
 those individuals, but in the future develop- 
 ment of commerce along right lines and thus 
 of importance in working towards the well- 
 being of the commonwealth. 
 
 I believe in the educated man in business. 
 I believe the present college course is not the 
 best that can be devised for the training of 
 men who are to be leaders in commercial and 
 financial life. It is true that we have scien- 
 tifically classified a few of the principles and 
 underlying laws of commerce and finance, 
 and we teach them more or less well. I be- 
 lieve many more of those laws and principles 
 can be scientifically classified, and can be 
 taught, and that the result of such teaching 
 will make better business men, will qualify 
 men for great responsibility earlier in life, 
 will help solve the problems that new com- 
 mercial conditions have raised, and will work 
 to our national advantage, not only in the 
 way of our pre-eminence in commerce, but 
 also in the direction of a clearer understand- 
 ing of the true relation between government 
 
 23 
 
Business and Education 
 
 and business, and therefore toward a better 
 discharge of our duties as citizens. 
 
 There should be no failure on the part of 
 our educators to appreciate the increasing 
 demands that are, by the changing character 
 of commercial affairs, being laid upon the 
 abilities of business men. The last two 
 decades have witnessed changes that make 
 necessary an entirely new order of ability 
 in business life. Those changes demand a 
 greatly superior training. We have seen 
 the capital employed in business enterprises 
 jump from millions to billions. That change 
 is significant of something much more than 
 mere growth in the magnitude of commercial 
 operations. It is significant of fundamental 
 alteration, in conditions and methods. We 
 have seen struggling lines of railways united 
 into systems and systems into vast nets, all 
 operated under a single management. We 
 have seen whole industries concentrated into 
 a few combinations, and those combinations 
 dominating their especial markets through- 
 out the world. These new conditions have 
 surrounded us with problems for the solu- 
 tion of which experience furnishes neither 
 rule nor precedent. To solve them we need a 
 grounding in principles, an understanding 
 of broad underlying laws. 
 
 The world is in great measure becoming a 
 commercial unit. The eye of every business 
 24 
 
A New College Degree 
 
 man must be farseeing enough to observe all 
 
 markets and survey all zones. A significant 
 word spoken in any market place or parlia- 
 ment of the world instantly reaches the 
 modern business man, and he should be pre- 
 pared correctly to interpret its meaning. 
 
 Electricity has annihilated the geogra- 
 phies, for it has destroyed the distinctions^ 
 which gave geographical boundaries their 
 significance. Political distinctions will con- 
 tinue to live, languages and religions will 
 continue to differ, but the peoples of the 
 earth, regardless of political boundaries, of 
 racial differences, of national ambitions, are 
 coming rapidly to form one great commercial 
 unit, one great economic organism. There 
 are no tariff walls against capital. The 
 language talked by money is a universal 
 tongue. The modern business leader, there- 
 fore, more than was ever the case before, 
 needs a mind educated to think clearly, needs 
 the ability accurately to trace effect to cause, 
 and needs the training that will enable him to 
 understand the true relation between far 
 separated conditions and widely diverse in- 
 fluences. 
 
 With the limitless wealth of resources 
 which we have had in America, the success- 
 ful conduct of a business enterprise has been 
 a comparatively easy matter. Nothing short 
 of egregious error has been likely to lead to 
 
Business and Education 
 
 failure. Any ordinary mistake in judging 
 conditions or in the application of principles 
 has, as a rule, been obliterated by the rapidity 
 of the country's growth and the extent of its 
 industrial and commercial development. If 
 some of the men who have made notable 
 commercial successes had been forced to face 
 the harder conditions that exist in the old 
 world, the measure of their success might 
 have been very different. Had they been 
 confronted by a situation where population 
 was pressing upon the means of subsistence, 
 where all the soil was under cultivation, 
 where the mineral resources were meagre 
 and where there was lacking the wealth of 
 the virgin forests, they would have needed 
 greater abilities and better trained faculties 
 in order to achieve such marked success. We 
 are easily inclined to believe that we have 
 the best business men in the world. I am 
 disposed to agree with that view. But one 
 should not lose sight of the fact that the 
 lavishness of opportunity has brought com- 
 mercial success to many who have come into 
 the field illy prepared and with small ability. 
 Any one who is familiar with the commercial 
 life of Germany and has seen the successes 
 there built up out of a poverty of resources — 
 successes perhaps not comparing brilliantly 
 with some of our own, until one studies 
 the difficulties that had to be surmounted in 
 26 
 
A New College Degree 
 
 achieving them, — must perceive there some 
 elements of business abiHty superior to our 
 own. There has been an astonishing increase 
 of wealth and an enormous expansion in 
 commerce in that nation. No one searching 
 for the fundamental reasons, why German 
 commercial progress is relatively so much 
 greater than that of other European nations, 
 will fail to reach the conclusion that one of 
 the greatest factors in that country's devel- 
 opment has been the prompt and intelligent 
 use which has been made of the schools. The 
 Germans have to the highest degree made 
 practical application of their learning. They 
 have brought the true scientific spirit to bear 
 upon their every-day problems. Industry 
 and commerce have both profited in the 
 largest degree. To-day we find in that na-A 
 tion, in spite of its lack of natural resources, ^ 
 pre-eminence in many industrial fields, a 
 striking pre-eminence in foreign commerce,, 
 and a superior intelligence in the administra- 
 tion of finance. Those successes can all be, 
 in the greatest measure, traced back to the 
 schoolmaster. 
 
 A certain unequalled native ability, coupled 
 with unparalleled natural resources have 
 united to help American business men 
 achieve a measure of material success that 
 has been in many cases, I believe, quite out 
 of proportion to the ability brought to the 
 27 
 
Busmess and Education 
 
 work. In American business life the coming 
 years can hardly be expected to offer so many 
 easy roads toward business success as have 
 appeared to the commercial wayfarer at 
 every turn in years past. Our resources, of 
 course, are far from reaching the complete 
 development common in the old world 
 countries. We have nevertheless advanced 
 to a point of development where there will 
 be less chance for success to come as a re- 
 ward for haphazard and illy directed work. 
 The successes of the future will be for better 
 trained men. That is true not alone because 
 we have in a measure already exploited our 
 great resources, but because the field of com- 
 mercial activity has so vastly broadened, be- 
 cause there has been such an enormous gain 
 in the magnitude of commercial operations, 
 and because of the increasingly intricate re- 
 lationships which have resulted from this 
 broadening and this growth. The changed 
 scope, character, and methods of modern 
 business have united to demand men with a 
 training superior to anything that was ever 
 needed before, as the successful commercial 
 leaders of the future. That general training 
 cannot be had in the highly specialized proc- 
 ess of the routine work of the office. The 
 practical school of experience is too wasteful 
 as a teacher of general principles. There 
 will, of course, be the exceptional man who 
 28 
 
A New College Degree 
 
 will come up through that routine training 
 and dominate his field by the force of his 
 intellect, but in the main the new conditions 
 of affairs demand a superior training such 
 as only the schools can give. 
 
 I know the majority of business men 
 trained in the school of routine work will 
 doubt the feasibility of teaching in the class- 
 room, in a scientific and orderly fashion, 
 those principles which they have gained only 
 through years of hard experience and which 
 they even yet recognize more by a sort of 
 intuition than by conscious analysis. The 
 engineers of an earlier day thought that blue 
 overalls and not a doctor's gown formed the 
 proper dress for the neophyte in engineering, 
 but we have come long ago to recognize that 
 the road to success as an engineer is through 
 a technical school. So, too, I believe, we 
 will in time come to recognize, though per- 
 haps not to so full an extent, that the road 
 to commercial leadership will be through the 
 doors of those colleges and universities 
 which have developed courses especially 
 adapted to the requirements of commercial 
 life. 
 
 When I speak of a higher commercial edu- 
 cation I am referring to an ideal education 
 for commercial and financial leaders. An 
 ordinary machinist does not require to be 
 graduated a mechanical engineer. A riveter 
 29 
 
Business and Education 
 
 of bridge bolts has no need to have taken 
 honors in a course of civil engineering. A 
 bookkeeper, a stenographer, or a bank clerk 
 does not require such a commercial educa- 
 tion as I am suggesting. For all those posi- 
 tions there should be special instruction, 
 fitted to the character of the duties. My 
 thought at the moment, however, is directed 
 particularly towards the ideal form of uni- 
 versity education for leaders in financial and 
 commercial life. 
 
 In advocating a so-called higher commer- 
 cial education, I would not be regarded as 
 desiring a college course highly specialized 
 and devoted to technical subjects at the ex- 
 pense of a broad cultural training. I would 
 not be understood as advocating changes 
 that will work towards a narrower college 
 education, but rather changes that will work 
 toward a broader one. I am not going to 
 outline specifically what I think the curricu- 
 lum should be for an ideal higher commercial 
 education. At the present time such a defi- 
 nite outline is impossible. It is impossible be- 
 cause text-books must be written and teachers 
 must be taught before that ideal course can 
 be given. An ideal course such as I have 
 in mind must at best be th^ development of 
 years. There will be necessary action and 
 reaction between university life and business 
 life. Men must be better trained in the uni- 
 30 
 
A New College Degree 
 
 versity for their business careers, and then 
 out of that business hfe, and from among 
 those better trained men, must in turn come 
 men who will bring to the universities that 
 combination of theory and practice, that 
 knowledge of principles combined with fa- 
 miliarity with practical detail, which in the 
 end will make both ideal teachers and ideal 
 business men. 
 
 There is little or nothing that has been 
 proven good that will need to be cut from 
 the present college course. I believe the 
 additional work and training that will be 
 necessary in an ideal commercial education 
 can easily be made possible within the pres- 
 ent term of university residence by more 
 effective and economical use of time. It 
 will not be necessary to discard present re- 
 quirements that have been found to be use- 
 ful and have been proven productive of good 
 results. It will only be necessary to apply 
 to both the years of preparatory work, and 
 to the years of the college course, the busi- 
 ness man's keen antipathy to waste. The 
 time can then be saved that will be needed 
 for the mastery of those special lines of 
 study that will differentiate this ideal com- 
 mercial course from the work which is at 
 present demanded for a college degree. 
 
 I believe it is too nearly the truth that a 
 college degree in America to-day does not 
 
 31 
 
Business and Education 
 
 mean a great deal more than four years of 
 residence at a college. It certainly does not 
 mean that there have been four full honest 
 years of hard and conscientious work as an 
 absolute requisite for that degree. There is 
 undoubtedly opportunity for a man to put in 
 the fullest measure of industry, but there 
 are few institutions where that full measure 
 is absolutely required before they will give 
 the stamp of their approval in the form of a 
 degree. The schools that are most tenacious 
 of classical tradition should hardly feel 
 proud of the fact that practically the only 
 institutions of learning in the country that 
 absolutely demand a full and honest return 
 of work done in exchange for the honor of 
 their degrees are the technical schools. If as 
 sharp a demand for time well spent were 
 made in all colleges, a long step would be 
 taken toward gaining sufficient room in the 
 curriculum for the studies that will be neces- 
 sary to make up an ideal commercial course. 
 
 I am perfectly aware that among the vari- 
 ous conceptions of the true aim of education 
 there are many which agree with that of Dr. 
 Eliot that a school is not for the purpose of 
 providing the student with a means of earn- 
 ing a livelihood. I sympathize with those 
 conceptions which hold that the purpose of 
 education is to create noble ideals, to en- 
 courage the growth of the taproots of sound 
 
 32 
 
A New College Degree 
 
 character and to cultivate the blossoms of 
 culture, but do not believe that my ideal of 
 a commercial education is necessarily at vari- 
 ance with these ideals. In advocating it I 
 do not think it is necessary to adopt the view 
 of the utilitarians, who believe that educa- 
 tion should be merely a course of technical 
 training, fitting the student for some prac- 
 tical work. I would not make the mistake of 
 planning a course of study which would 
 merely be an anticipation of the duties of the 
 counting room. I know there are some who 
 measure the value of the work of a college 
 by its success in being of practical and im- 
 portant advantage to those who are prepar- 
 ing for professional life. They believe that 
 the school which will, in the briefest time, 
 turn a man into an able lawyer, a competent 
 engineer, or a skilful physician, should be 
 regarded as the most successful. People 
 holding that very practical conception of the 
 purpose of education should at least be glad 
 to welcome a new field in which university 
 training may be applied with practical re- 
 sults, but I do not believe it necessary to hold 
 these narrow views in order to agree that 
 higher education may be so shaped as to be 
 of especial advantage to young men looking 
 forward to business careers. 
 
 There are some who regard the university 
 as primarily a centre for the diffusion of 
 
 3 S3 
 
Business and Education 
 
 learning. That conception is imperfect, but 
 I should think that those who hold it would 
 recognize a field of the very greatest impor- 
 tance in the work which might be done in 
 the way of disseminating correct views in 
 regard to financial and commercial subjects. 
 If we had in our universities professors ca- 
 pable of a thoroughly scientific understand- 
 ing of the principles underlying many of the 
 problems of finance and commerce, these men 
 would help us to see distinctly and to think 
 clearly in regard to some of our every-day 
 practices and tendencies. The dissemination 
 of such knowledge would surely be of great 
 value. 
 
 There are some whose conception of a 
 university is that its greatest work should be 
 in the field of scientific research. They have 
 a noble ideal. They believe that the devel- 
 opment of new knowledge is a work even 
 superior to that of its diJTusjon. They aim 
 to inculcate a spirit which will lead. men to 
 seek truth for its own sake, and to create an 
 enthusiasm for scientific exactness. That 
 idea is not at all out of harmony with the pos- 
 sibilities of a higher commercial education. 
 
 In the popular mind the motives of busi- 
 ness men are often maligned. I know leaders 
 in the business world who have as little con- 
 cern for personal reward in what they seek 
 to accomplish as would be the rule with men 
 
 34 
 
A New College Degree 
 
 engaged in scientific research. These men 
 are devoted to certain commercial ideals. 
 The making of money happens to be insep- 
 arably connected with those ideals, but the 
 making of money is not the great moving 
 force. They are interested in the expansion 
 and development of business, in the discov- 
 ery of new fields of operation, and in the 
 introduction of improved methods. Their 
 interest in that work is no more ignoble than 
 is the interest of any other specialist. Men 
 who already have more than most ample 
 means are not for personal gain pursuing 
 business with an absorbing intensity. It is 
 empire building with them, perhaps on a 
 small scale or perhaps on a great one. Their 
 lives are not sordid. They may be narrow, 
 as the lives of all specialists are narrow, but 
 the popular idea in regard to men whose lives 
 are given to commerce, the view that these 
 men are devoting their existence to mere 
 money getting, is in great measure errone- 
 ous. They have the same high type of imag- 
 ination which usually marks men who attain 
 eminence in any other line of activity. They 
 are, in a large way or in a small way, as may 
 be determined by their environments, using 
 qualities similar to those that make great 
 statesmen, great scholars, or great scientists. 
 I believe, therefore, that a proper education 
 for the highest work in commercial life 
 
 35 
 
Business and Education 
 
 might be so outlined as to be entirely in 
 harmony in its practical application with the 
 ideals of those who conceive that a univer- 
 sity scientific habit of mind should be created, 
 and where truth should be sought purely for 
 the love of the truth. 
 
 A higher conception, perhaps, than all 
 those others, is a definition which Dr. Had- 
 ley gives us. In his view the most pro- 
 foundly important work which falls to the 
 lot of the American citizen is his duty in 
 guiding the destinies of the country. He 
 believes that if we train the members of the 
 rising generation to do this wd\, all other 
 things can be trusted to take care of them- 
 selves ; but if we do not train them to do this 
 well, no amount of education in other lines 
 will make up for the deficiency. Suppose 
 then we accept that as the final test of a 
 university training. How can the duties of 
 citizenship best be taught? What are the 
 requisites for a training in citizenship? I 
 would answer, training in the highest con- 
 ception of business. Of what does the work 
 of guiding the destinies of the country con- 
 sist? Consider what are the political prob- 
 lems of the day and of the generation. A 
 great part, nearly the whole of the work of 
 government in a country like ours, is merely 
 the conduct of business on a very large scale. 
 Look over the political platforms of the last 
 
 3^ 
 
A New College Degree 
 
 generation, or study the messages of the 
 presidents, and you will find a very large per- 
 centage of the political questions that have 
 been raised are, in their ultimate definition, 
 merely commercial questions. What have 
 they been? The money standard; the con- 
 trol of trusts; the regulation of interstate 
 commerce; railroad rebates; questions af- 
 fecting the currency and banking; customs 
 duties ; schemes of taxation ; the building of 
 canals and the creation of plans for irriga- 
 tion. These and questions like them have 
 made up almost altogether the political ques- 
 tions of the day. They are in the end merely 
 business questions. No purely ethical prin- 
 ciple is at stake. We have now no necessity 
 for a discussion of the rights of man. Our 
 government in the main is a great business 
 enterprise and our political problems in the 
 main are economic problems. 
 
 In respect to such questions, what sort of 
 training is wanted ? Can any one answer 
 them so well as a thoroughly trained busi- 
 ness man, granting first that he is governed 
 by the highest ideals of patriotism and hon- 
 esty? Will not the man who is thoroughly 
 well grounded in the principles of commerce 
 and finance be better qualified to guide the 
 destinies of our country than one who has 
 merely had a training in the love for the 
 beautiful or one who has won class prizes in 
 
 37 
 
Business and Education 
 
 Greek declamation? If we adopt President 
 Hadley's view as to the most profoundly 
 important work of the university, I believe 
 that noble ideal is most distinctly in harmony 
 with the conception I have of what is possible 
 in the way of a higher commercial education. 
 In this connection Dr. Hadley has made 
 one of the wisest statements that has come 
 from any modern educator. He has told us 
 that every change in industry and political 
 methods makes it clearer that mere intelli- 
 gence is not s>ifficient to secure wise admin- 
 istration of the afifairs of the country, but in 
 addition there must also be developed a 
 sense of trusteeship. There is nothing so 
 much needed in American life to-day, in my 
 opinion, as a cultivation of a sense of trustee- 
 ship. That need is by no means confined to 
 political life but is the need standing above 
 all others in commercial life. If the schools 
 can teach it, and in a measure I believe they 
 can, they will do more for commerce than 
 they have done for engineering, or law, or 
 science. If I were to name one thing pre- 
 eminently to be desired as a result of a course 
 of higher commercial education, it would be 
 the cultivation of a proper sense of trustee- 
 ship. I do not regard that as an impossible 
 ideal. A truer understanding of the real 
 relation and relative importance of the prin- 
 ciples of commerce would give men a far 
 
 38 
 
A New College Degree 
 
 clearer view and juster appreciation of the 
 responsibilities of trusteeship. We have 
 men holding positions of great trust in our 
 commercial life to-day who have a childish 
 ignorance in regard to their responsibilities 
 as trustees. These men are honest men, 
 they are well-meaning men, but they have 
 never learned the elemental principles upon 
 which a sense of trusteeship must be built. 
 I am not so optimistic as to believe that a 
 college course could be so designed that those 
 having its benefits would afterward in active 
 life always be imbued with the highest sense 
 of trusteeship, but I do believe that Dr. 
 Hadley uttered a great truth when he 
 pointed out that the cultivation of such a 
 sense is the most important work that a col- 
 lege has to do. If it is important in the 
 education of the American citizen, it is doubly 
 important in the education of that class of 
 American citizens who have to deal with 
 the commercial and financial life of the 
 country. 
 
 We are having an illustration to-day of 
 how a clearer understanding of underlying 
 principles of commerce illuminates ethical 
 considerations. A generation ago, before 
 we had thought very deeply or accurately in 
 regard to the nature of common carriers, 
 there were many men who saw nothing ethi- 
 cally wrong in a railroad rebate. Men re- 
 
 39 
 
Business and Education 
 
 garded a railroad as a piece of private prop- 
 erty and railroad transportation as a com- 
 modity which might with perfect propriety 
 be bargained for and sold to the best advan- 
 tage. The whole community has since been 
 educated to a clearer comprehension of the 
 fundamental principles of transportation, 
 with the result that we have built up ethical 
 standards which absolutely did not exist be- 
 fore. This I believe is an illustration of what 
 might happen in many other directions with 
 a better education embracing principles and 
 underlying laws. 
 
 I want to quote again from the President 
 of Yale. Dr. Hadley says : " An intelligent 
 study of science whether it be physics or 
 biology, psychology or history, should train 
 a man in that respect for law which is the 
 best antidote to capricious selfwill on the 
 part of the individual. The student learns 
 that he is in the midst of an ordered world. 
 If he has the root of the matter in him, he 
 thereby gains increasing respect for that 
 order and readiness to become himself a 
 part of it." 
 
 That statement we must all recognize as 
 eminently true. Is it not equally true of the 
 study of the science of commerce ? Will not 
 such a study train men in that respect for 
 law which is the best antidote to capricious 
 selfwill on the part of the individual ? Is it 
 40 
 
OF 
 
 ^S^kl^S^^^New College Degree 
 
 not that of which the country is to-day- 
 standing in the greatest need ? What do we 
 need more than an antidote to capricious self- 
 will on the part of the accidental millionaire ? 
 Does not a lack of knowledge of fundamental 
 principles lead to a lack of respect for the 
 great fundamental laws of finance? I be- 
 lieve that is true. I believe when we have 
 reached a point of really making a scien- 
 tific classification of the principles of fi- 
 nance and commerce, a classification which 
 without question can be made, and when 
 we have developed a class of teachers ca- 
 pable of giving adequate instruction, and 
 so made possible a course of study truly 
 worthy of serving as the basis for a new 
 college degree, we will then have taken a 
 long step in the direction of creating that 
 respect for law of which we are now in need. 
 There will be a respect for economic laws 
 because we will better understand their sig- 
 nificance and force. There will be a greater 
 respect for legislative laws because, with 
 wiser legislators, those laws will more surely 
 be based on correct economic principles. If 
 all this is true, then whatever your ideals of 
 education may be, cannot you all unite in 
 helping to evolve a college course which will 
 be worthy of upholding a degree of Master 
 of Commerce? 
 
 41 
 
THE YOUNG MAN'S FUTURE 
 
 An address, delivered before the American Institute 
 of Bank Clerks, St. Paul, 1905. 
 
 Bankers are more or less given to predic- 
 tion, to the making of forecasts and proph- 
 ecies. They must form opinions in regard 
 to the future. It is a part of their business 
 to have definite ideas as to whether money 
 is to be easy or close, whether business will 
 be active or dull, whether collections will be 
 good or otherwise. 
 
 Financial prophecy, however, is full of 
 difficulties. There are many currents and 
 cross-currents to be reckoned with. The 
 whole field of action is so much larger than 
 any man's vision that inadvertently he may 
 leave out of consideration matters of vital 
 importance. The course of affairs may be 
 completely altered by psychological condi- 
 tions which cannot be weighed in the most 
 carefully prepared tables of statistics. At 
 best the keenest and wisest observers must 
 write "E. & O. E." in large letters after 
 their attempts to divine the financial future. 
 These distinguished bank officers who have 
 dined with you this evening are undoubtedly 
 skilled in such a correct grouping of facts 
 42 
 
The Young Man's Future 
 
 as enables them to draw accurate conclusions 
 in regard to the financial future. 
 
 There is another line of prophecy, how- 
 ever, which is, I believe, quite as interesting, 
 and far easier. If I were forced to turn seer 
 and to undertake to forecast future events, 
 and could I have my choice of fields, I would 
 keep quite clear of any attempt at forecast- 
 ing future financial afifairs, and would adopt 
 the easier course of attempting to predict the 
 measure of success or of failure that is likely, 
 with added years, to come to a young man. 
 Men ought to be as interesting as markets. 
 I am certain that a prediction can be made 
 regarding the future of a young man, if we 
 have at hand the necessary data, with as 
 much accuracy as we can predict the future 
 of the market. There are many bank ofH- 
 cers here who could, I have no doubt, pre- 
 dict, with correctness, the future course of 
 money rates, of bank reserves or of gold 
 imports, but with still greater chances of 
 accuracy, I believe, they could predict the 
 future careers of some of the members of 
 this chapter of the American Institute of 
 Bank Clerks. 
 
 I believe it is possible to formulate certain 
 rules and principles which, applied to the 
 data in regard to a young man's capacity, 
 character, and tendencies, will enable one to 
 make an accurate estimate of his chances of 
 
 43 
 
Business and Educatior^ 
 
 success or his dangers of failure. If it is 
 possible to lay down such rules, then some 
 knowledge of those rules ought to be of 
 value to young men. That is so because it 
 is within the power of each young man to 
 change in a large measure the character of 
 the data in his case. Young men are not 
 foreordained to failure or success. Their 
 future is, in the main, of their own making. 
 If they comprehend that certain characteris- 
 tics or tendencies which they are forming 
 will have an enormous influence upon their 
 future, if they clearly see that their career 
 is in but small measure a matter of chance, 
 and is in large measure the result of those 
 early formed habits, characteristics, and ten- 
 dencies, they will be less likely to feel that 
 they must wait for some brilliant oppor- 
 tunity to prove themselves; they will be 
 more likely to understand that success must 
 be won by sincere effort applied to each day's 
 work. 
 
 Without doubt there is among the young 
 men who are members of this chapter of the 
 American Institute of Bank Clerks the fu- 
 ture president of a great bank. I believe I 
 can pick out the man. I shall not name him ; 
 you can do that better than I ; but I am going 
 to tell you exactly who he is. This young man 
 has, of course, certain fundamental qualities 
 which are and must be common to every suc- 
 
 44 
 
The Young Man*s Future 
 
 cessful man. He started out with good phy- 
 sique, and he has not abused that heritage, for 
 no man can be permanently successful without 
 having an extraordinary capacity for work, 
 — and health and working capacity are one. 
 He has been naturally endowed with a per- 
 sonality which will permit him to work co- 
 operatively with his fellows, a personality 
 which will permit him to win their regard, 
 as well as lead him to recognize merit in 
 others. Then, as a matter of course, he has 
 at least a fair education; he is diligent, 
 capable, and has already a character so well 
 formed that there is every reason to believe 
 that he will have integrity, uprightness, and 
 honor so ingrained in him that men who 
 know him will come to recognize that he is 
 worthy of a trust. 
 
 But all those characteristics, necessary as 
 they are, by no means serve to designate the 
 man. Those characteristics are general, and 
 ought to be possessed by every young man. 
 
 There are additional characteristics pos- 
 sessed by the young man I am picking out, 
 and they are the ones which will enable me 
 more definitely to designate him. 
 
 Given first those sound fundamentals, — 
 good health, good character, at least a fair 
 education, industry, and capacity, — we have 
 then only determined the general class from 
 which we will pick our man. This man I 
 
 45 
 
Business and Education 
 
 am indicating does his regular work well, but 
 he has recognized that he must, as a matter 
 of course, make his ordinary day's work a 
 matter of constant good records. He sees 
 that he is not entitled to special credit, and 
 is not likely to receive extraordinary rewards 
 for merely a record of ordinary good work, 
 and so he has come to recognize that those 
 lines which mark the limits of his daily task 
 are not barriers to his further effort. Those 
 lines merely mark the work he has first to 
 do. He has learned that every occasion that 
 is offered, every opening that he could him- 
 self make, which would permit him to break 
 through those lines which mark his special 
 daily duty and give him a chance to do other 
 work, is an opportunity of the greatest im- 
 portance. That statement is no platitude; 
 data bearing on that phase of a young man's 
 character form one of the most illuminating 
 guides we have in forecasting a career. It 
 tells the measure of the man's coming useful- 
 ness; it tells how quickly he will learn the 
 whole detail of his business ; it tells whether 
 he has that invaluable spirit of co-operation 
 without which great success cannot be built. 
 The man we are picking out has learned that 
 lesson. He knows that of all things neces- 
 sary for his development opportunity is one 
 of the most essential, — opportunity to work, 
 ^ opportunity to learn. He has found that 
 
 ^ 46 
 
The Young Man*s Future 
 
 \ 
 doing some other man's work in addition to \ 
 
 his own when occasion offered, has made \ 
 him master of some other man's knowledge, 
 and has added greatly to his own capabilities 
 and his value. He has found that his true 
 salary is made up of two parts; that the 
 money he receives is but one part of it, the 
 opportunity to learn is the other. He has 
 not feared he would work too much for the 
 salary he was getting, because he has found 
 that working is learning, and that what he 
 is learning is after all by far the more val- 
 uable part of his salary. 
 
 When a young man has learned that an 
 added duty is a new opportunity of great 
 value, when he has learned that an added 
 task is something to be welcomed with en- 
 thusiasm, he has marked himself for pro- 
 motion, he has separated himself from those 
 of his fellows who believe in making their 
 services just balance their salaries; he has 
 opened the door of opportunity and his prog- 
 ress is likely to be rapid toward a complete 
 nlastery of the details of his business. 
 
 I wish I had the eloquence fully to empha- 
 size the strength of my belief in the practical, 
 hard-headed sense of these assertions — to 
 emphasize my faith in the result of an every- 
 day application of them. If I understand 
 correctly any single principle on which suc- 
 cess is based, I know that a true one is this ; 
 
 47 
 
Business and Education 
 
 Do more than you have to do that you 
 may learn more than you need to know 
 for doing your own simple daily task, and 
 with this broader doing and wider learn- 
 ing you will be laying the substantial foun- 
 dation that is required for any career of 
 eminence. 
 
 There is another lesson of great value 
 which has been learned by this young man 
 whom I am designating to you as a future 
 bank president. He has learned systemati- 
 cally to use the time which is available out- 
 side of his regular work. You will find that 
 this young man whom I am singling out has 
 not been satisfied with the progress he has 
 made in the course of his regular work. He 
 may have started with a broad, sound edu- 
 cation ; but even so, he soon found he would 
 need a more specialized education if he were 
 thoroughly to master the principles of his 
 business. He attacked this problem of a 
 specialized education with the same energy 
 and enthusiasm which he has brought to his 
 daily work at the bank. There has been 
 nothing desultory and intermittent about his 
 method. The work has been systematically 
 planned and constantly carried on. The 
 work in itself has been a pleasure in the 
 doing ; in its result it has given to this young 
 man a specialized knowledge and a grasp 
 of principles which in the future will be of 
 48 
 
The Young MarCs Future 
 
 a value to him greater than he now can 
 comprehend. 
 
 There is one more characteristic which the 
 young man possesses and to which I want to 
 call your attention. It is a characteristic 
 which might lead some of you to doubt that 
 he was marked for large success. You may 
 perhaps have thought that he lacked a cer- 
 tain shrewdness, that his ambition for per- 
 sonal advancement was not keen enough, 
 that he was a little slow-going when it came 
 to forcing recognition of his own abilities 
 and hard work. Just there is where you 
 may be wrong. This man's interest in the 
 work has been greater than his interest in 
 himself. To get the thing rightly done has 
 been his thought rather than merely to get 
 the credit for doing it. In travelling along 
 the road leading to success a man should not 
 have his eyes solely on the milestones; in 
 straining to see the milestone, which is too 
 far ahead, one may fail to avoid the obstacle 
 directly in the path. That advice does not 
 alone apply to the progress of the young 
 man. It is a truth that he may well heed, 
 even after he has reached a position of much 
 influence and power. The great man in 
 commerce to-day is the co-operative man, 
 the man who sees clearly the right thing to 
 be accomplished and is willing to sink his 
 individuality to accomplish it ; the man who 
 
 4 49 
 
Business and Education 
 
 is more interested in getting the thing done 
 than he is in getting credit for doing it. We 
 must give great prominence to that quahty 
 of patience which our future bank president 
 possesses. Patience to wait for personal 
 reward, patience to work co-operatively with 
 others, a patience which rises to self-abne- 
 gation before a great work to be done — a 
 self-abnegation which sees only the one 
 thing, and that is the thing to be accom- 
 plished, and is willing to sink for the time 
 the gratification of ambition, personal pride, 
 and personal reward. 
 
 Here then is the man : He has health, char- 
 acter, ability, industry. More than that, he 
 has learned to welcome new work as new 
 opportunity, and he has learned systemati- 
 cally to use his time outside of his regular 
 work in gaining a specialized knowledge 
 which will give him a thorough grasp of the 
 principles of his business; and then above 
 all that, he has taken greater interest in his 
 work than in himself. He has cared more 
 for getting the thing done right than he has 
 for getting the personal credit of doing it. 
 
 I have laid before you the data which will 
 enable you, with almost unerring accuracy, 
 to name the man. Unless there is some 
 defect of personality or some accident of 
 opportunity, the man who best fits this out- 
 line will in a decade stand out from among 
 
 SO 
 
The Young Man*s Future 
 
 his fellows a leader ; he will be wearing the 
 honors of distinction and carrying the bur- 
 dens of responsibility, — aye, and remember 
 that ; he will be carrying the burdens of re- 
 sponsibility ! Perhaps we need not envy 
 him; perhaps some of you who, though no 
 less faithful, though no less honest, but who 
 will have held to a humbler plane, will be the 
 happier. I am not sure but you will. Cer- 
 tainly you cannot all be bank presidents. 
 We need many privates, and comparatively 
 few generals. Not a few of you, filled with 
 ambition though you may be to-day, will go 
 on year after year in faithful regularity, 
 holding places of great trust, needing 
 strength to resist constant temptation, ham- 
 pered always by an inadequate income, and 
 never advancing to the highest positions. 
 
 When I was honored by an invitation to 
 this banquet, I accepted because I had a par- 
 ticular message I wanted to deliver to you, 
 to you in the ranks. I have a suggestion to 
 make to the American Institute of Bank 
 Clerks which, if it meets with your favor, 
 may, I believe, work out a plan of lasting 
 benefit, both to banking interests and to the 
 banking profession. 
 
 I have lately been giving some attention to 
 the subject of old-age pensions. I have been 
 studying with much interest the remarkable 
 system which is now in operation in Ger- 
 
 51 
 
Business and Education 
 
 many, a system under which seventeen mil- 
 Hon of the humbler workers of that nation 
 have been secured against the fear of an old 
 age of penury, a system under which $150,- 
 000,000 is now being annually distributed 
 that the workers of Germany may be made 
 comfortable in sickness and in old age. It 
 is a system smacking nothing of charity, but 
 giving honorable and honestly earned com- 
 forts to the whole industrial army of the 
 German Empire. 
 
 More recently I have had the pleasure of 
 studying with Mr. Andrew Carnegie this 
 old-age pension problem as it especially 
 affects the noble profession of teaching. His 
 study of the subject has, as you all know, 
 resulted in a magnificent benefaction, in the 
 creation of a fund of $10,000,000, to pension 
 college professors when they reach a resting 
 point in their careers of usefulness. Public 
 opinion seems pretty generally agreed that 
 no more wise benefaction could have been 
 made by the great philanthropist. 
 
 I believe there are other classes entitled 
 to security against an old age of poverty, 
 in degree perhaps less, but in principle as 
 truly as are the great teachers of the country. 
 The man who lives a life of integrity, al- 
 though subject to constant temptation, who 
 handles w^ith skill, accuracy, and honesty 
 vast sums of money in his lifetime, but re- 
 
 52 
 
The Young Man's Future 
 
 tains but a very modest amount as his salary 
 compensation, the man who from the nature 
 of his profession must keep a spotless record, 
 who may not even take those investment 
 chances that would be proper enough for 
 another man to take, and whose accumula- 
 tion for old age must be by patient saving 
 and conservative investment — such a man 
 is entitled to consideration. I believe it is 
 wrong that such a man need have a fear that 
 after a lifetime of honest faithfulness, of 
 industrious trustworthiness and most mod- 
 erate remuneration and opportunity, I say I 
 believe it is wrong that such a man need have 
 a fear that after he has made that record 
 he may still have to face an old age of pov- 
 erty. It is the strength of that belief that 
 has brought me here and which leads me to 
 presume to make a suggestion to the Ameri- 
 can Institute of Bank Clerks. I believe that 
 as a body the bank clerks of this country 
 should be made secure in the assurance that 
 a lifetime of faithfulness, industry, and in- 
 tegrity shall be followed by an old age 
 free from want. There will be a satisfac- 
 tion in that sense of security which every 
 bank clerk can afford to pay something for, 
 and it will be something that every stock- 
 holder in any banking institution can well 
 afford to pay something for, and to pay 
 substantially. 
 
 S3 
 
Business and Education 
 
 My suggestion, then, is that the American 
 Institute take up this subject, study it in the 
 hght of what has been done in other coun- 
 tries, study it in the Hght of some beginnings 
 which have been made here, confer with 
 bank officers, and finally evolve a plan which 
 will meet with the general approval of the 
 banking interests of the country. And I 
 am here now to say that when you have 
 done that, the institution of which I am an 
 officer, will, if you will permit, have great 
 pride in heading with its name the list of 
 banks accepting the responsibilities of the 
 plan. 
 
 I have much faith in the useful purposes 
 which the Institute of Bank Clerks may 
 serve. Such meetings as this cannot but 
 be useful. The spirit of systematic study 
 which is being encouraged by the educa- 
 tional department is, I believe, of immense 
 value. The whole movement can be so di- 
 rected as to awake new interest in the day's 
 work, and draw out new ambitions. I believe 
 there never was before a keener demand for 
 thoroughly trained men than there is to-day. 
 I believe there were never before greater 
 opportunities for such men, and surely there 
 were never before anything like such great 
 rewards. There is little in the outlook that 
 need be discouraging to the young man of 
 ambition; there is much that should call 
 54 
 
The Young Man's Future 
 
 forth from him the best possible display of 
 his powers. The American Institute of Bank 
 Clerks may be made an important instru- 
 ment in this work, and I hope it is to go 
 on to years of great usefulness. 
 
 55 
 
TRADE SCHOOLS AND LABOR 
 UNIONS 
 
 The World's Work, 1906. 
 
 When a few years ago the newspapers 
 coined the phrase, " The American Com- 
 mercial Invasion of Europe," it came into 
 instant popularity. We thought it a most 
 happy way of describing the entrance of the 
 United States into the world's competitive 
 markets. Indeed, for a time, it was a phrase 
 that brought apprehension to foreign na- 
 tions'; for our progress was so rapid, our 
 competition became so severe, that it was 
 difficult to say where the conquest was to 
 stop. Later events, however, demonstrated 
 that it could not go on unhalted. 
 
 It is true that we are still proud, and have 
 much good reason to be proud, of our success 
 in international competition. We have seen 
 our exports of manufactured products double 
 and double again. We have seen, with justi- 
 fiable pride, that we are able to make many 
 manufactured articles of commerce more 
 cheaply than any other people in the world 
 can make them. We have combined with 
 the advantage of unexampled supplies of 
 raw material an unequalled genius for doing 
 things on a great scale. With notable clear- 
 
 56 
 
Trade Schools 
 
 ness we have seen the economic advantages 
 of great industrial combinations. We have 
 been quick to recognize industrial waste, 
 whether in the form of unneeded labor, of 
 loss of by-products or of unnecessary trans- 
 portation. To reduce waste in the form of 
 unnecessary labor we have taken full advan- 
 tage of every ingenious machine which our 
 remarkable talent for mechanical invention 
 could devise. We have brought together 
 industrial units into huge combinations, and 
 have then administered them with a far- 
 seeing wisdom that has made us able to 
 produce certain great staple articles of man- 
 ufacture so cheaply that our competition has 
 been the despair of other nations. 
 
 But after we admit all that, after we grant 
 that we have a giant's crushing grasp on the 
 international industrial markets wherever 
 we have been able to bring into play the 
 combination of our advantages in cheap raw 
 material with the economies of production 
 on a vast scale and with the aids of most 
 ingenious labor-saving machinery — after 
 granting all this, we still must admit that we 
 are a long way from having really gained 
 command of the competitive industrial 
 markets. 
 
 It is something of a shock to reflect that 
 practically every victory we have gained in 
 international competition has turned on con- 
 
 57 
 
Business and Education 
 
 siderations of cheapness and not on consid- 
 erations of quality. Our talent for mechan- 
 ical invention seems unequalled, and it has 
 won us many victories it is true, but, aside 
 from the advantage which that special in- 
 genuity gives us, there are few articles we 
 bring to the international markets upon 
 which we would dare rest our success solely 
 on claims of high-grade workmanship. 
 Wherever we have won success we have as 
 a rule won it because we could manufacture, 
 en masse, with wonderful economy. We 
 have been successful because we could make 
 a thing cheaper, — not because we could 
 make it better. 
 
 So far as my recollection goes, I have 
 never found in a European shop half a dozen 
 articles of American manufacture that were 
 offered because they were superior to similar 
 articles of European manufacture. They 
 may have been offered because they were 
 more ingenious, they may have been made on 
 such a scale of production, turned out with 
 such economy, in an endless grist from some 
 great automatic machine, that they chal- 
 lenged comparison in cheapness; but it is 
 rare indeed to find in Europe an article of 
 American manufacture that is offered solely 
 on the ground of superior workmanship. If 
 real accuracy of workmanship is wanted, if 
 artistic form and taste are desired, if thor- 
 
 5S 
 
Trade Schools 
 
 oiighly skilled and trustworthy handicraft 
 is sought, it will not as a rule be found in a 
 display of American wares. If we look for 
 a production that has had worked into it 
 some of the soul and the character of the 
 workman who made it we will rarely find it 
 bearing the legend : " Made in America." 
 
 We must recognize that the great indus- 
 trial development which we have seen take 
 place within our memories has had its main 
 foundations built up of something else than 
 of superior manual skill. These foundations 
 are to be found in cheap raw material, in the 
 economies of manufacturing on a vast scale, 
 and in the aids given by the greatest utili- 
 zation of labor-saving mechanical devices. 
 It has been a perfectly logical and natural 
 consequence that in building a great indus- 
 trial success upon such factors as these we 
 should for a time sacrifice highly skilled 
 handicraft. We have seen the subdivision 
 of work carried, in our great manufacturing 
 establishments, to the highest imaginable 
 point. As a result we have seen the demand 
 for skill diminish. It has seemed for the 
 time being that all that is necessary is to 
 teach a man to tend a machine, to make him 
 an automatic wheel in the mechanism, and 
 then to ask nothing more of him in the way 
 of brain or breadth of understanding or of 
 thoughtful outlook. 
 
 59 
 
Business and Education 
 
 Men rejoiced at the accomplishment of an 
 invention which would do with perfectness 
 tasks which before had required many hands 
 skilled by long training. When the output 
 of such a machine was placed in competition 
 wath the hand-made goods of other countries 
 WQ gathered for a time new laurels in the 
 progress of our commercial invasion. Then 
 our competitors came to study our methods 
 and to appropriate our ideas. 
 
 We have carried on this system of special- 
 ization and have adopted these mechanical 
 aids to such an extent that in certain lines 
 we can manufacture cheaply enough to have 
 little to fear from competition in any quar- 
 ter, and we can at the same time pay 
 wages, even to our automatic workers, that 
 are a marvel to the w^age earners of other 
 countries. 
 
 But, with all these advantages, we are be- 
 ginning to find that there are countervailing 
 losses. While we have made it possible for 
 the unskilled man to tend a machine and 
 turn out the product with wonderful econ- 
 omy, we are now beginning to find that, in 
 keeping that man confined to tending the 
 machine, in giving him no intellectual inter- 
 est in his work and no opportunity for any 
 but the narrowest outlook upon the field of 
 industry in which he is engaged, we have 
 unintentionally taken almost certain means 
 60 
 
Trade Schools 
 
 to prevent his mental and technical develop- 
 ment. We have of late heard much of the 
 call of the employer for skilled men to super- 
 vise work. We have heard employers mar- 
 vel that, while the lowest paid ranks of their 
 workmen are fully supplied, they have the 
 greatest difficulty in finding men to fill the 
 higher positions. The reason is of course 
 most obvious. Men need training to become 
 skilful. They must have variety of work if 
 their outlook and technical skill are to have 
 breadth. They must know something of 
 principles if they are to have original ideas 
 of value. I believe that we have failed 
 utterly to grasp the problem of the relation 
 between education and our industrial devel- 
 opment and prosperity. 
 
 Within the memory of most Americans 
 there has been what amounts to nothing 
 short of a revolution in industrial affairs. 
 We have seen England lose much of her pre- 
 eminence among the industrial nations. We 
 have seen two other nations grow from com- 
 paratively small beginnings to places of the 
 first rank. I have indicated what I believe 
 to be the principal elements upon which our 
 own industrial success has been based. But 
 we have seen another nation without the 
 special advantages of raw material which we 
 have enjoyed push forward in a development 
 as rapid as ours, and wrest from others in 
 
 6i 
 
Business and Education 
 
 the competitive fields the advantage they 
 had long held in security. Germany has had 
 the scantiest aid from nature to make that 
 progress possible. Not only has she had no 
 wealth of raw material such as we have had ; 
 she has had no vast homogeneous domestic 
 market, a factor which has been of vital aid 
 in building up our own manufactures. Her 
 people have lacked the peculiar inventive 
 ingenuity which has in many fields of indus- 
 try been the sole basis for our achievements. 
 Her artisans have not possessed that delicate 
 artistic sense which has made the handiwork 
 of France superior to the obstructions of all 
 tariff walls. Her industries have been forced 
 to grapple with English competitors who 
 were entrenched behind a domination of 
 international markets successfully main- 
 tained for generations. But amidst a pov- 
 erty of natural resources, and from among 
 a people not singularly gifted either with 
 inventive ability or artistic temperament, we 
 have seen emerge in a generation the great 
 industrial forces of the German Empire. 
 
 The time is within the memory of most of 
 us when Germany was in large measure an 
 agricultural state winning but meagre re- 
 turn from sterile acres. There were neither 
 rich mines below ground nor exhaustless 
 forests above. Whatever was done by the 
 Germans had to be done in the sweat of their 
 62 
 
Trade Schools 
 
 brows. Whatever they have accompHshed 
 we must admit they have fairly earned, for 
 they have been heirs to few bounties of 
 nature. 
 
 I have made a somewhat careful study of 
 Germany's economic success, and in doing 
 that I have become firmly convinced that the 
 explanation of the remarkable German prog- 
 ress is to be traced in the most direct man- 
 ner to the German system of education. 
 The schoolmaster is the great corner-stone 
 of Germany's remarkable commercial and 
 industrial progress. The school system of 
 Germany bears a relation to the economic 
 situation that is not met with in any other 
 country. 
 
 We all know something of the thorough 
 secondary education which the compulsory 
 education laws of Germany insist shall be 
 given to every youth under fourteen. We 
 all know something of the high standing of 
 her universities and the great practical value 
 of her technical schools. There is another 
 feature of the German educational system, 
 however, about which less is known in this 
 country, but which is, I believe, a feature 
 of the most direct importance in shaping 
 Germany's industrial progress. 
 
 There is a division of instruction in Ger- 
 many known as continuation trade schools. 
 These schools are designed for the instruc- 
 
 63 
 
Business and Education 
 
 tion of youths engaged in regular industrial 
 employment. They are auxiliary to the 
 ordinary schools, and entirely outside of the 
 scheme for regular academic training or of 
 higher technical instruction. They are for 
 the rank and file of workers, for the privates 
 of the industrial army. The courses are so 
 arranged that they supplement the cultural 
 training that the youths have had in the reg- 
 ular school system, and at the same time 
 supplement the technical routine of the shop 
 or the office. 
 
 The students in these trade schools are 
 youths who have completed the regular com- 
 pulsory educational course and have gone 
 out into the ranks of active industrial and 
 commercial workers. The hours of instruc- 
 tion are so arranged that they fall outside 
 the regular hours of labor. The curriculum 
 is broadly practical. It includes the science 
 of each particular trade — its mathematics 
 or chemistry for instance — and its tech- 
 nology. But it does not stop there. Prin- 
 ciples of wise business management are 
 taught. The aim is to prepare a student for 
 the practical conduct of a business. He 
 gains knowledge of production and con- 
 sumption, of markets and of the causes of 
 price fluctuations. He is put into a position 
 to acquire an insight into concrete business 
 relations, and into trade practices and con- 
 
 64 
 
Trade Schools 
 
 ditions. Are not such aims worthy of Amer- 
 ican schools? What truer democracy can 
 there be than a school system that will point 
 the way to every worker, no matter how 
 humble, by which he may reach a clearer 
 comprehension of the industry in which he 
 is engaged, and with the aid of this knowl- 
 edge may rise to a position of importance in 
 that industry? 
 
 To do all this does not mean the " com- 
 mercializing " of our educational system. 
 There is no need for opposition even from 
 those who hold that it is not the place of the 
 schools to teach youths how to earn a liveli- 
 hood. Those educators who lay strongest 
 emphasis upon such phrases as " character 
 formation," " mental discipline," and " har- 
 monious cultivation of the faculties " may 
 continue to hold firmly to those views and at 
 the same time welcome an auxiliary school 
 system which, without curtailing their ideal 
 culture courses, will give after the ordinary 
 period of school life is over the opportunity 
 for valuable practical instruction. 
 
 Such an auxiliary system of trade schools 
 would be available for the youth only after 
 he has left the direct influence of our present 
 school system. There are in the United 
 States 10,000,000 youths from fifteen to 
 twenty years old. Three-quarters of that 
 number are not in attendance at any school. 
 
 S 65 
 
Business and Education 
 
 Here are seven and one half millions of 
 young people from whom the students of 
 such trade schools would be drawn. 
 
 Surely it needs little training in the econ- 
 omies of industry to comprehend what an 
 unreckonable advantage it would be if 
 a substantial proportion of that seven 
 and one half millions were to be brought 
 within the influence of a new and entirely 
 practical system of education designed to 
 make each pupil a more efficient economic 
 unit. 
 
 The present generation of American youth 
 entering industrial or commercial life is to 
 encounter new and in some respects harder 
 conditions. So far as we conceive educa- 
 tion to be in any sense a preparation for 
 practical life, there have been laid upon us 
 new demands and fresh responsibilities. The 
 industrial life of this country has in a decade 
 undergone changes more significant than 
 had been encompassed before in a period 
 of two generations. Teachers whose lives 
 have been largely in the classroom are not 
 likely to have comprehended fully the true 
 significance of the development of the forces 
 of combination. There has been combina- 
 tion in the field of labor as evidenced in the 
 growing power of unionism; combination 
 in the domain of capital as manifested in the 
 trusts; concentration in the control of in- 
 
 66 
 
Trade Schools 
 
 dustrles, in the subdivision of labor, and in 
 the aggregation of wealth. 
 
 This display of the forces of combination, 
 equally significant in the fields of labor and 
 of capital, has brought changed conditions in 
 the problem of human industrial endeavor. 
 The welfare of the people and the position 
 which our country is to maintain among 
 nations both depend on no single thing more 
 than on the recognition of these changed 
 conditions by our educators. They must 
 recognize the new demands of the times. 
 They must provide the educational requi- 
 sites which these changed conditions make 
 imperative. 
 
 The forces of combination — the labor 
 union and the trusts — are united and are 
 working in harmony to accomplish at least 
 one thing. They are united in a tendency 
 to make commercial or industrial autom- 
 atons of a great percentage of our popula- 
 tion. They both tend to subdivide labor, and 
 thereby to limit the opportunity to acquire a 
 comprehension of broad principles. They 
 both tend to circumscribe the field of the 
 apprentice, narrowing his opportunity, forc- 
 ing him into petty specialization and restrict- 
 ing his free and intelligent development. 
 All this is placing us in grave danger of 
 evolving an industrial race of automatic 
 workers, without diversity of skill, without 
 
 67 
 
Business and Education 
 
 an understanding- of principles, and without 
 a breadth of capability. 
 
 There is but one power that can counteract 
 that tendency — the schoolmaster. Youths 
 who can gain from their daily work only 
 that narrow, routine, technical experience — 
 which in the main is all that the conditions 
 of modern industry offer — have a right to 
 something more. They have a right to op- 
 portunity for a practical education. As mod- 
 ern conditions narrow their technical train- 
 ing, those same conditions broaden the op- 
 portunity for the man who does acquire 
 knowledge which will give him a grasp of 
 more than a single detail of his business. ^ 
 
 The mental equipment of a business man 
 needs to be greater to-day than was ever 
 before necessary. Just as the sphere of a 
 business man's activity has broadened with 
 the advent of rapid transportation, tele- 
 graphs, cables, and telephones, so has the 
 need of a broad understanding of sound 
 principles increased. It was steam processes 
 of transportation and production that really 
 made technical education necessary. The 
 electric dynamo created the demand for 
 technically educated electrical engineers, and 
 the railroad, the fast steamship, the electric 
 current in telephone and cable and the great 
 economic business combinations are making 
 the science of business a different thing from 
 
 68 
 
Trade Schools 
 
 any conception of commerce which would 
 have existed two generations ago. The en- 
 larged scope of business is demanding better 
 trained men — men who understand prin- 
 ciples. New forces have made possible large- 
 scale production, and we need men who can 
 comprehend the relation of that production 
 to the world's markets. There has been in- 
 troduced such complexity into modern busi- 
 ness, and such a high degree of specializa- 
 tion, that the young man without the foun- 
 dation of an exceptional training is in danger 
 of remaining a mere clerk or bookkeeper. 
 Commercial and industrial affairs are con- 
 ducted on so large a scale that the neophyte 
 has little chance to learn broadly either by 
 observation or by experience. He is put at 
 a single task. The more expert he becomes 
 at it the more likely it is that he will be kept 
 at it, unless he gains a training which fits 
 him to comprehend in some measure the re- 
 lation of his task to those tasks which others 
 are doing. 
 
 I do not believe it is enough for us to say 
 that we will give to our youths the best edu- 
 cation possible to train them as intelligent 
 citizens. I do not believe it is enough to 
 give them a few years of elementary educa- 
 tion and when they go forth to actual work, 
 offer them no educational aid or training 
 to better comprehend the principles in the 
 
 69 
 
Busmess and Education 
 
 field of industry in which their lives are 
 c^st. 
 
 Many noble teachers have held a beautiful 
 theory that their work should be devoted to 
 building up character and culture in a youth. 
 They would so garb him in an armor of 
 sweetness and light, so instil into his mind 
 the love of the beautiful and build up gen- 
 erally by cultural instruction his mental char- 
 acteristics that for such a youth any labor 
 would be dignified, and he would be pro- 
 vided with springs of learning and appreci- 
 ation from which, without regard to material 
 surroundings, he could always drink with 
 the deepest satisfaction. That is the ideal 
 of those who believe that we must beware 
 of commercializing our educational system, 
 who believe that we should aim at the train- 
 ing of character, the giving of culture, and 
 waste none of the youth's precious time with 
 instruction in trades and occupations. It is 
 a noble ideal, but we must recognize the fact 
 that a boy set to forge such an ideal armor 
 before he is fifteen years of age will find it an 
 imperfect protection against the difficulties 
 of modern industrialism. 
 
 What I believe we need is, not a radical 
 change in our present school system, but 
 rather a material addition to it. I am con- 
 fident that the present system of education 
 does not meet the present requirements of 
 70 
 
Trade Schools 
 
 commercial and industrial conditions. From 
 the youth who must early earn his own living 
 I believe we have taken away the advantages 
 of school training at too early an age. There 
 is a vast army of young men actively em- 
 ployed in commercial and industrial callings 
 who feel, or can be made to recognize, the 
 great need which they have for a better 
 understanding of the principles of their 
 business, and who recognize clearly enough 
 that these principles cannot, except in the 
 rarest of cases, be learned at the workbench 
 or at the desk under the present condi- 
 tions of modern commercial and industrial 
 life. 
 
 I am convinced, too, that Germany's in- 
 dustrial success and the comparative content- 
 ment of her population are in a very large 
 measure due to her system of trade schools. 
 Now I want to leave no confusion in the 
 minds of my readers as to just what I mean 
 by these trade schools. I do not mean the 
 addition of manual training to the course 
 of the public schools ; that may or may not 
 be wise, but the decision of that question has 
 no bearing whatever on the sort of school I 
 have in mind. I do not mean the establish- 
 ment of schools to teach young men trades. 
 I know that such schools have been open to 
 much criticism from practical workers and 
 will meet much opposition from labor unions. 
 
 71 
 
Business and Education 
 
 I recognize force in the hostile attitude of 
 organized labor in regard to schools designed 
 to teach trades. Their point of view may be 
 selfish, but it is perfectly human. I do not 
 mean either that we have any lack of higher 
 technical schools. I think we are fully 
 abreast of the rest of the world in the facil- 
 ities we offer for training our captains of 
 industry. 
 
 It is the rank and file that I am consider- 
 ing, the privates of the great industrial army 
 who have gone forth to the daily grind of 
 work, taking with them such mental equip- 
 ment as our school system has been able to 
 give to youths of fourteen or sixteen years. 
 These young men are fitted into the great 
 industrial and commercial organizations, 
 and come under the influence of our system 
 of specialization and of our development of 
 automatic machines. They face at once the 
 danger of becoming automatic workers. On 
 the other hand, industry and commerce are 
 squarely facing the very grave danger of 
 training up an army composed solely of au- 
 tomatic workers — an army that will be 
 without active intelligence or effective train- 
 ing in considering the requirements and de- 
 velopment of the industries with which it is 
 engaged. I believe we need to establish for 
 the members of this army a means which will 
 aid them to gain a supplementary education 
 72 
 
Trade Schools 
 
 along lines particularly adapted to their 
 requirements. 
 
 Some of us are apt to find much fault with 
 the labor situation. We criticise the attitude 
 of trades-unions and the demands of labor 
 organizers. Might it not be well to remem- 
 ber that we have created an industrial con- 
 dition in which, in a very large measure, one 
 man's work is exactly like another's; and 
 in certain fields, the work of all largely auto- 
 matic, that our industrial situation is doing 
 quite as much as the labor organizers to re- 
 duce to a dead level of equality the value of 
 men's time in certain industrial lines? 
 
 If we want men who will think for them- 
 selves, must we not give them a training 
 which will enable them to think correctly? 
 If we want men to become attached to their 
 work and their positions, must we not give 
 them an intellectual interest in that work? 
 If we want independence of thought in a 
 workingman, must we not provide him with 
 the opportunity to be something more than 
 an automatic figure revolving, without voli- 
 tion, interest or active intelligence, as the 
 wheels of industry revolve ? From the point 
 of view alone of the attitude of the working- 
 man toward the industrial problems of the 
 day I believe we are doing less than our duty 
 in the way of education, and very far less 
 than the selfish interests of capital would 
 
 73 
 
 ( UNIVERSITY \ 
 
Business and Education 
 
 demand if employers had a clearer vision on 
 this subject. 
 
 Americans have thought and talked, much 
 about the need for educating the sovereign 
 citizens of a democracy. To-day we are face 
 to face with this fact. We have come to 
 have within our republic another democracy. 
 In importance it is second only to that of the 
 State itself. It is the democracy of organized 
 labor; a democracy of representative gov- 
 ernment demanding an intelligent constitu- 
 ency if it is to have intelligent administra- 
 tion. There are times when the welfare of 
 more people is directly affected by the de- 
 liberations of a council of labor leaders than 
 would be concerned over a vote in Congress 
 on a measure of prime importance in national 
 legislation. 
 
 Americans long ago grasped the idea that 
 education is necessary in a republic. That is 
 the corner-stone of the theory of our govern- 
 ment. We long since recognized that an in- 
 telligent, representative government could 
 only come out of intelhgent citizenship. 
 That fact is just as true of the democracy of 
 united labor as it is of the democracy of the 
 republic. It is no academic theory, it is a 
 hard practical fact, of immediate application 
 to the welfare of capital and labor alike. 
 
 If I may again turn to Germany for an 
 illustration, I would say that one of the most 
 
 74 
 
Trade Schools 
 
 important influences which has been working 
 toward the intelHgent moderation of the atti- 
 tude of organized labor is to be found in the 
 superior education of the workers — in the 
 educational system which has provided or- 
 ganized labor with leaders who have a 
 broader grasp of the problems of industry 
 and a clearer understanding of its principles 
 than they could have had without special 
 educational advantages. 
 
 If it can be demonstrated that this is a 
 correct view — that moderate and wise ad- 
 ministration of the great democracy of or- 
 ganized labor is more likely to follow if 
 the masses of workmen are educated toward 
 a better intellectual comprehension of the 
 principles of the industries with which they 
 are engaged — then what money value could 
 be put, in this country, upon such a system 
 of education as would ultimately give to 
 organized labor wiser leaders? I believe 
 there is a profound and important truth in 
 this view. If we drift toward a condition 
 in which automatic workers live without in- 
 tellectual interest in their labor we must 
 expect them to follow — without indepen- 
 dence of thought — unwise leaders along 
 paths that will be destructive for capital and 
 labor alike. If we offer educational facili- 
 ties that will tend to train a considerable 
 number of the youths following industrial 
 
 75 
 
Busmess and Education 
 
 callings so that they will better comprehend 
 the nature of their work and its relation to 
 the whole industrial organization, if we will 
 provide schools that will awaken an intel- 
 lectual interest in the day's task and kindle 
 ambition which will lead men on to better 
 work and greater contentment, we shall ac- 
 complish a step in the development of our 
 educational system which will be of greater 
 importance than any other change in educa- 
 tional methods that is now under consider- 
 ation. 
 
 I want to assert with all the force which 
 my conviction on the subject will give that 
 such a thing is not a dream. There is a 
 vital demand for the development of our 
 educational system along such lines as I 
 have been indicating. When I speak of the 
 youth whose life has been cast in an indus- 
 trial calling keenly desiring to find the means 
 for gaining an intellectual understanding of 
 his surroundings I am not speaking of con- 
 ditions which I imagine to exist. Out of my 
 own personal experience I know something 
 of this subject. 
 
 I started life as an apprentice in a machine 
 shop, with the mental training which a 
 country school gives to a boy of sixteen. I 
 supposed at that time I should always follow 
 the career of a mechanic, and very early in 
 my apprenticeship I was strongly moved to 
 
 76 
 
Trade Schools 
 
 get some intellectual grasp of the work. But 
 although I was in a community proud of 
 its schools, it had nothing to offer to youths 
 whose days were fully taken up with their 
 regular occupations. With considerable dif- 
 ficulty I found a man who could teach me 
 drafting, another who was willing to give 
 instruction in mathematics. I want to em- 
 phasize that I was not one whit different 
 from my fellows in blue overalls. Much of 
 the money that I spent to pay my own in- 
 structors I earned by teaching mathematics 
 out of working hours to my shopmates. 
 They were quite as keen as I for an oppor- 
 tunity to get an intellectual outlook on the 
 business in which they were engaged. They 
 had no desire to be mere tenders of machines. 
 I am confident that, if the opportunity had 
 been at hand, a considerable portion of these 
 young men would have entered with zealous 
 interest upon a systematic educational de- 
 velopment if it had been shaped along lines 
 that made its practical application to their 
 daily work apparent. 
 
 Let me summarize my convictions on this 
 subject. We have in a brief period built up 
 a striking industrial success. The main ele- 
 ments of that success have been threefold : 
 First, cheap raw material ; second, ingenious 
 labor-saving inventions; third, industrial 
 combinations resulting in the great economies 
 
 77 
 
Business and Edtucation 
 
 of production on a large scale. Our success 
 in the international markets has in the main 
 been built on cheapness, not on quality. 
 
 The very nature of our success has been 
 such that it has minimized the value of su- 
 perior handicraft. The character of large- 
 scale production, the effect of the sub- 
 division of labor and the result of the exten- 
 sive use of labor-saving devices have united 
 in a tendency to make automatons of our 
 workers. That tendency is of necessity in- 
 creased by some phases of the organizations 
 of labor. 
 
 The result is a changed order in industrial 
 life. In many fields of industry, indeed in 
 many phases of commercial life also, it is 
 only the rarely exceptional man who is able 
 to raise himself above the deadening influ- 
 ence of his surroundings — surroundings 
 that give him a single specialized task to 
 perform and demand of him no intellectual 
 interest, no understanding of the principles 
 of the industry, no ambition for a broader 
 technical skill. 
 
 The man without intellectual interest in 
 his work, without understanding of the re- 
 lation of his task to other things, and with- 
 out ambition pushing him steadily toward 
 technical improvement, is in a dangerous 
 position. That he is in a position dangerous 
 to himself is obvious, for if men live lives 
 
 78 
 
Trade Schools 
 
 lacking incentive to improvement they will 
 deteriorate. That he is in a position dan- 
 gerous to industry is also evident, for no 
 bounty of nature, no industrial combination 
 however high, no mechanical invention how- 
 ever ingenious, can succeed with directing 
 intelligence without that united skill of hand, 
 of brain, of broad experience, which can 
 only come from men properly trained in the 
 ranks. 
 
 But such a man not only is in danger; 
 even more, he is a danger. He is a danger 
 to the state. We have to admit that the 
 prosperity and security of the state itself lie 
 in the direction of wise leadership for the 
 gigantic forces of organized labor. Such 
 wise leadership will only be born out of a 
 wise constituency. Every argument that 
 can be advanced for the education of a citi- 
 zen of a republic applies with as great force 
 to the still broader education that is needed 
 by those who shape the course and decide the 
 destinies of the democracy of organized 
 labor. If to be a good citizen requires a 
 comprehension of the form of our govern- 
 ment, a knowledge of the principles of civics, 
 a development of a sense of the responsi- 
 bility of citizenship, and a comprehension 
 of the sacredness of a public trust, then just 
 as truly it is due the state that a member of 
 a labor organization should have in addition 
 
 79 
 
Business and Education 
 
 to the ordinary equipment of the citizen an 
 understanding of the principles of industry, 
 a comprehension of the relation and im- 
 portance of the various parts of the indus- 
 trial organization — a breadth of industrial 
 view, in brief, and an understanding of eco- 
 nomic principles. 
 
 Our school system has not thus far pro- 
 vided this, but it is not a difficult thing to 
 provide. It means no revolutionary change 
 in our present system. It means only an 
 addition. The step is not a pioneer one. 
 The system is at work in Germany on a huge 
 scale, attracting hundreds of thousands of 
 youths to its benefits and profoundly affect- 
 ing the industrial, indeed the whole national, 
 life of that empire. To make the experi- 
 ment here would involve no possible danger, 
 would interfere in no unfortunate way with 
 our present school system, would entail no 
 expense worthy of consideration. All that 
 is necessary is for American manufacturers 
 and business men to see the worth of the 
 experiment. Exactly the means to bring 
 into play could be soon decided. 
 
 My own belief is that the movement 
 should be partly individual, partly the devel- 
 opment of the public-school system. I be- 
 lieve the representatives of organized labor 
 and the representatives of organized capital 
 should unite in planning the work. The 
 80 
 
Trade Schools 
 
 leaders of industry and the leaders of labor 
 should give, not money — the tax payers 
 can readily bear the small additional burden 
 there would be — but themselves, their hearty 
 interest, their careful thought, their helpful 
 influence and good-will. If that is done they 
 will bring an influence into industrial life 
 which will be of incalculable value — of 
 value ethically, intellectually, and financially 
 — and will set an example for which the 
 whole country will owe them gratitude. 
 
 8i 
 
THE BUSINESS MAN'S READING 
 
 Saturday Evening Post, Philadelphia, 1902. 
 
 It is as important for the young business 
 man to choose well in making his literary 
 friendships as it is to use care in selecting 
 his personal associates. Perhaps the first 
 word of advice in any suggestions regarding 
 a young business man's reading should be 
 along the line of impressing upon him the 
 desirability of making literary friends, but 
 it should be hardly necessary to waste much 
 time in emphasizing the value of well-di- 
 rected reading in advancing any business 
 career. 
 
 One of the reasons why the young business 
 man does not always readily see the value of 
 much reading is that he is apt to be of a 
 thoroughly practical bent, and not quick to 
 appreciate the worth of things that are not 
 immediately available as means of advance- 
 ment. If a course of reading should be out- 
 lined with sound judgment for the average 
 young man in the early years of his business 
 life, he would be apt to ask wherein was the 
 practical utility of the greater part of it. If 
 he is a bank clerk, for instance, and is told 
 82 
 
The Business Man's Reading 
 
 to read political economy, it is not at all easy 
 for him to see how such reading will make 
 him a better bank clerk. It requires no 
 political economy to total a column of figures 
 correctly. In the bank clerk's whole experi- 
 ence he has never been called on for any aca- 
 demic knowledge of that character, and he 
 sees that he probably never will be. To 
 waste time over a lot of reading that has no 
 practical application to the work in hand 
 seems useless. 
 
 The thing that the young business man 
 should clearly understand is that a well- 
 directed course of systematic reading will 
 be of value not so much in helping him better 
 to do the work he has in hand as in preparing 
 him to do much more important work. The 
 young bank clerk whose duties are simple 
 and routine may ask what good it will do 
 him to know the history and provisions of 
 the national banking law. It will do him 
 very little good if he intends always to be a 
 bank clerk; it may do him a great deal of 
 good if he hopes to be a bank officer. One 
 should not, then, search too closely for the 
 evidence of a direct relation between a well- 
 outlined course of reading and immediate 
 advancement in his position. The relation 
 is there, but the reader must have faith 
 enough to do a great deal of hard, earnest 
 work without expecting advances in salary 
 
 S3 
 
Business and Education 
 
 to follow with the same regularity with 
 which diplomas would be earned in school. 
 
 If any number of successful business men 
 were asked what thing it is that the young 
 business man most needs to help him on the 
 road to business success, I believe the an- 
 swer would be unanimous, and it would be 
 — character. This is not an idle platitude. 
 It is sound, practical judgment, and it will 
 be the most strongly emphasized by the men 
 who are the most experienced in affairs. The 
 more I see of business life, the more clearly 
 I comprehend the great practical value, quite 
 apart from their ethical worth, of some of 
 the well-worn and homely old maxims — 
 those maxims which many boys have thought 
 may do well enough for copybook texts or 
 as subjects for graduating essays, but to 
 which they have attributed little practical 
 importance as foundation stones of business 
 success. I believe that successful business 
 men are of one accord in saying that up- 
 right, sturdy, trustworthy character is, more 
 than anything else — indeed, more than 
 everything else — the foundation of worldly 
 success. 
 
 If that is true there can be no more prac- 
 tical advice than that the young business 
 man should lead his reading along lines 
 which will be helpful in character-building. 
 One need hardly make a catalogue of books 
 
 84 
 
The Business Man's Readvng 
 
 of this sort. Different minds will gather 
 inspiration from various sources. The pre- 
 cepts of the Bible, of course, every one will 
 accept as the very best for such purpose. 
 Emerson, Marcus Aurelius, Franklin — the 
 authors are endless, but they will be better 
 selected by the reader than by any one else 
 for him. 
 
 One never can tell what particular bit of 
 wisdom may get its grip on a young man's 
 mind and have profound influence in shaping 
 his character and his business success. I 
 recollect, when I was an apprentice-boy, that 
 I got hold of an old file of some Scotch en- 
 gineering magazine, and I read there some 
 homely advice as to the value of character 
 in the machine shop. The writer pointed out 
 the advantage of a boy so conducting him- 
 self that his foreman should have confidence 
 in his character; such confidence that, when 
 something went wrong, when there was a 
 delinquent somewhere to be discovered, the 
 foreman's mind would at once set this boy 
 aside with a secure feeling that suspicion 
 need not be directed against him. That sim- 
 ple bit of good advice happened to make so 
 much of an impression on my mind that I 
 have no doubt it shaped a good many actions 
 and was undoubtedly of real practical value 
 in securing advancement. 
 
 Along with reading that is useful in char- 
 ts 
 
Business and Education 
 
 acter-building there should go reading that 
 will create high motives and ideals, for high 
 motives and ideals are of much more prac- 
 tical value in shaping a successful career than 
 a good many young men believe. The read- 
 ing of well-written biographies will, perhaps, 
 be the most useful in that connection, so 
 many of them point to the possibilities of 
 growth from humble beginnings, and show 
 the force there is in singleness of purpose 
 and in devotion to some clear aim. One will 
 not read many biographies of successful men 
 without being struck with the similarity of 
 the underlying reasons for success. 
 y If character is the first requisite of a suc- 
 cessful business career, perhaps the second 
 may be said to be a keen knowledge of one's 
 fellow-men and a clear understanding of the 
 mainsprings of human action. Experience 
 i;i life gives us that, and it is out of that that 
 the shrewdness of the experienced business 
 man is built. Much knowledge of this sort 
 can be had from reading. Many of the 
 Bible stories, read purely as literature, will 
 help to-day, as they have helped for genera- 
 tions, in forming accurate judgments of men. 
 It is in this direction that there is real, prac- 
 tical value in novel reading. Novels which 
 give correct pictures of life and clear analy- 
 sis of human character will, if rightly read, 
 add almost veritable living people to one's 
 86 
 
The Business Man's Reading 
 
 list of acquaintances. That means a widen- 
 ing of one's experience. Dickens, Thack- 
 eray, Howells, George EHot, Jane Austen, 
 Mrs. Humphry Ward, have all created char- 
 acters that are as real as living people. The 
 reader who has added those characters to 
 his acquaintance has added to his knowledge 
 of human nature. To read carefully a novel 
 written by a master-hand means a distinct 
 broadening of one's knowledge of human 
 motives. 
 
 One of the absolute essentials of a busi- 
 ness man's reading is the newspaper. Prob- 
 ably most people would say that to the busi- 
 ness man it is the most important source of 
 information, and some might say that it 
 contains all that a business man needs to 
 read. For my part, I am very far from at- 
 taching to the newspaper the importance 
 which it would seem to merit if we should 
 judge by the relative amount of time which 
 the average business man gives to it. There 
 are distinctly bad results that come from ex- 
 cessive newspaper reading. One is the great 
 waste of time in reading unimportant and 
 ephemeral news. In the making up of the 
 morning daily paper the perspective as to 
 the importance of things must be altogether 
 distorted by the necessity for putting high 
 value upon the latest incident. There is still 
 worse distortion in those papers which have 
 
 87 
 
Business and Education 
 
 many editions each day. The trivial thing 
 that happens an hour before the paper goes 
 to press, and in the account of which a paper 
 may hope to " scoop " its rival, will, in the 
 position which the editor naturally gives it, 
 far outweigh the really important event which 
 happened twenty-four hours before. Any 
 business man who has received his bundle of 
 home papers in a foreign city knows how 
 quickly he can go through them when the 
 dates are a fortnight old, and how little he 
 finds in them of real importance. 
 
 As to business subjects, I have had oppor- 
 tunity to know something of newspaper 
 writing from the point of view both of 
 the newspaper desk and the business man's 
 desk. I appreciate the obstacles that are in 
 the way of accurate newspaper work, because 
 I have labored under them : the necessity for 
 haste, the impossibility of obtaining com- 
 plete data, the desire for sensational pres- 
 entation in a form that will interest a large 
 reading public, the unavoidable difficulty of 
 handling subjects with which the writer must 
 at times have little familiarity; and on the 
 other side I have seen something of the in- 
 accuracies in newspaper work that are at 
 once recognized by the business man who 
 knows the facts; the lack of value which 
 much serious newspaper writing of this na- 
 ture really possesses; to say nothing of the 
 88 
 
The Business Mart's Reading 
 
 sensational journalism where accuracy is 
 entirely subordinated to startling presenta- 
 tion. Such knowledge as I have, gathered 
 both inside and outside the newspaper office, 
 leads me to place a good deal of stress upon 
 the suggestion that the young business man 
 can waste a great deal of time on the daily 
 newspaper. 
 
 Of course, the daily newspaper must be 
 read, but I believe the less time there is put 
 upon it, and the more time there is left for 
 better-prepared writing, the greater will be 
 the gain. If the young business man's in- 
 terests are broad I think he can with much 
 profit read one foreign newspaper: such a 
 paper as the London Times or the Standard. 
 I have been greatly impressed with the men 
 who are the foreign correspondents of those 
 two great English newspapers. The regu- 
 lar correspondents of the Times in at least 
 four of the great European capitals — Paris, 
 Berlin, Vienna, and St. Petersburg — are 
 men who have held their important positions 
 for at least twenty-five years. They are bet- 
 ter trained in European politics than the 
 average diplomat accredited to those courts, 
 their sources of information are of a superior 
 character, and the reviews which they write 
 of political and commercial conditions are 
 extremely valuable. If the business man 
 reads a foreign language, such a paper as 
 89 
 
Business and Education 
 
 the Frankfurter Zeitung is the highest type 
 of a business newspaper, and can be read 
 with great profit by any one who wishes to 
 keep thoroughly abreast of the currents of 
 European commercial life. In this country 
 we have two or three dailies devoted ex- 
 clusively to business interests — papers like 
 the New York Commercial and the Journal 
 of Commerce, and they cover remarkably 
 well the commercial and industrial field. 
 
 I believe, however, that one can keep 
 abreast of current events much more ac- 
 curately if he gives comparatively little time 
 to the daily paper and a great deal of time 
 to the weekly review. Such journals handle 
 current affairs with dignity, keen judgment, 
 and much greater accuracy than is to be 
 found in the hurriedly prepared articles of 
 the average daily. If such weeklies are sup- 
 plemented by monthly magazines and other 
 publications which secure articles on sub- 
 jects of the most living interest, written by 
 men well qualified to write them, and cover- 
 ing most of the phases of commercial, finan- 
 cial and industrial development, a knowledge 
 of current affairs will be gained incomparably 
 more accurate than would result from the 
 reading of daily newspapers. 
 
 Some of the technical weeklies, of which 
 the Financial Chronicle in this country and 
 the Economist and the Statist in England 
 90 
 
The Business Man's Reading 
 
 are the highest examples, cover the financial 
 field in a way that leaves little to be desired. 
 
 Specific suggestions as to what one should 
 read are of importance, but I believe of quite 
 as great importance is some advice on how 
 one should read. It is pleasant to drift about 
 in a boat with oars gently lapping the water 
 now and then as one feels lazily inclined to 
 pull them; it is quite another thing to sit 
 in an eight-oared shell, under the eye of an 
 expert trainer, and pull over a four-mile 
 stretch, making every stroke and every 
 pound of weight count for its utmost. The 
 indolent attitude of mind with which many 
 people read headlines or turn pages bears a 
 good deal the same relation to attentive read- 
 ing that idle drifting in a rowboat bears to 
 the hard exercise and full physical develop- 
 ment that come with good work in a good 
 crew. About the best one can say of time 
 spent in indolent reading, leaving as it does 
 but the haziest of mental impressions, is that 
 the reader has been saved from spending his 
 time in something worse than idleness. 
 
 I believe that how to read is really more 
 important than what to read, because good 
 method in reading makes good selection in- 
 evitable. Loose writing, inaccuracy of state- 
 ment, untruthful delineation of character, 
 will none of them stand before the careful 
 analytical reader. If he is reading with 
 
 91 
 
Business and Education 
 
 right method he will waste little time on poor 
 selections. 
 
 If you are in doubt as to whether you are 
 getting" the most out of your reading ask 
 yourself how much you remember of the 
 last thing you read. If it was a novel, do 
 you clearly recollect the names of all the im- 
 portant characters? One of the best attain- 
 ments of a business man is a clean-cut mem- 
 ory for the names and characteristics of the 
 men with whom he comes in contact. 
 
 A business man can afford to give up a 
 little of his time to current scientific reading, 
 to keeping his high-school natural phil- 
 osophy or his college physics up to date, to 
 keeping in touch in a general way with 
 scientific discoveries and the trend of modern 
 research — in a superficial way, perhaps, but 
 still to a degree that may at some time or 
 another in one's business career be of real 
 practical importance. 
 
 All these suggestions are rather general, 
 and may seem unsatisfactory because they 
 lack specificness. What the young man 
 wants to know is how he should specialize his 
 reading so as to make it of distinct advantage 
 in his everyday work. Generally speaking, 
 he should read along lines which will give 
 him knowledge that his superiors ought to 
 have, and this will mean that he is fitting 
 himself for better things. If his career is in 
 92 
 
The Business Man^s Reading' 
 
 mercantile lines, he should seek the fullest 
 information regarding his particular line of 
 business. The shoe salesman who will spe- 
 cialize his reading upon leather and leather- 
 working, who will learn about the different 
 processes of tanning and the different meth- 
 ods of manufacture, will not only be a better 
 judge of the goods he is handling but will 
 be better able to sell them. The bank clerk 
 who will master the history of the develop- 
 ment of the banking system may not see the 
 application of that knowledge to his daily 
 task, but if opportunity sometime knocks at 
 his door he will be much better prepared to 
 accept the burden of greater responsibilities 
 and wider usefulness. 
 
 93 
 
THE AMERICAN " COMMERCIAL 
 INVASION" OF EUROPE 
 
 Scribner's Magazine, 1902. 
 
 I. The European Point of View 
 
 " England has been hard hit by the Trans- 
 vaal War, but is still the richest country in 
 the world ; France is without initiative, satis- 
 fied with returns on past achievements ; Ger- 
 many shows the greatest energy and initia- 
 tive in Europe, but has travelled too fast; 
 America has an unparalleled combination of 
 natural resources and initiative, and will go 
 on to greater achievements." 
 
 This was a summing up of national quali- 
 fications in the world's industrial struggle, 
 by the Russian Minister of Finance, M. de 
 Witte. 
 
 I had asked M. de Witte to give his views 
 of the relative positions of the great nations 
 in the world-wide industrial contest. There 
 is no man whose answer to such a question 
 may be listened to with more interest. Ser- 
 gius de Witte is a man of whom we have 
 heard much, but from whom we have heard 
 94 
 
** Commercial Invasion " of Europe 
 
 little. In the minds of many he is Europe's 
 foremost statesman. He shapes the policies 
 of Europe's mightiest empire. He watches 
 with greatest care the varying financial cur- 
 rents, and is in the closest touch with com- 
 mercial and industrial tendencies. 
 
 His Excellency was in his private office 
 in the Finance Ministry in St. Petersburg 
 seated at a great flat-topped desk, piled high 
 with official problems, neatly sorted and 
 tagged ready for his examination. It was 
 Sunday, but he had been hard at work all 
 the morning. While I was with him I heard 
 him make appointments as late as eleven 
 o'clock that night. It is easy to see why he 
 has gained the reputation for being the hard- 
 est worked man in Europe. Broad, strong, 
 forceful, but with the repose and atmosphere 
 of reserve power which mark most great 
 men, his personality gave added interest to 
 his reputation. He reached for a fresh cigar- 
 ette, from a case he had been steadily de- 
 pleting, and touched it to an odd electrical 
 contrivance on his desk, which automatically 
 lighted it. Then he leaned back reflectively 
 and spoke with a freedom in refreshing con- 
 trast to the reserve of many lesser officials. 
 
 " England is still the richest country in 
 the world," he said. " This Transvaal 
 trouble has had marked effect on the finances 
 of that country, and indirectly has affected 
 
 95 
 
Business and Education 
 
 the finances of every country in Europe. If 
 Mr. Chamberlain will stop here, if he does 
 not put the burden of any more such cam- 
 paigns on England, she may be able to main- 
 tain her pre-eminent position. Should she 
 have too many Chamberlains and too many 
 Transvaal campaigns she might be ruined. 
 But up to the present time English pre-emi- 
 nence is not seriously shaken. The nation is 
 still in the strongest financial position of all 
 the great powers, and may reasonably expect 
 to continue there. France is like a small 
 rentier. She is contented with a modest in- 
 come; contented to sit with her lap filled 
 with securities, representing past achieve- 
 ments and present investments, and cut off 
 the coupons. France is not looking for new 
 industrial fields ; she is building no new rail- 
 roads; she is making no commercial con- 
 quests. France is satisfied now simply to 
 sit down at home, contented to reap the small 
 rewards that are naturally hers. While those 
 rewards may seem small, however, they be- 
 come in the aggregate great enough to place 
 her in the forefront financially. Germany, 
 in her natural resources, is poorer than Eng- 
 land or France, but she is rich in initiative 
 and energy. The German nation offers the 
 most striking example of initiative and en- 
 ergy that can be found in Europe. Indus- 
 trially, she has made astonishing strides. 
 96 
 
" Commercial Invasion " of Europe 
 
 But along many lines the progress has been 
 unnatural and too rapid, and trouble may 
 come of that. 
 
 " America is already one of the richest 
 countries of the world; perhaps, in natural 
 resources, quite the richest. There we find 
 not only remarkable natural richness, but 
 combined with that wealth the most pro- 
 nounced initiative met with anywhere. With 
 such a combination the country is bound to 
 make the very greatest progress. It will go 
 on and on, and will be greater and still 
 greater. America is especially fortunate in 
 that she has no great military burden. Mil- 
 itarism is the nightmare and the ruin of 
 every European finance minister. 
 
 " The industrial crisis which you find here 
 in Russia is not confined to this country. 
 You will find it more or less pronounced all 
 over Europe. Many enterprises have de- 
 pended largely upon English capital. Eng- 
 land's Transvaal w^ar has forced her to draw 
 in her wealth, and that contraction has had 
 a marked effect upon the industries of all 
 Europe. People who were carrying on busi- 
 ness with the aid, directly or indirectly, of 
 English loans, have been forced to make 
 other financial arrangements, and frequently 
 have been compelled to curtail their opera- 
 tions. That reduction of credit and with- 
 drawal of capital have acted and reacted 
 7 97 
 
Business and Education 
 
 until they have become important factors 
 in bringing about widespread industrial 
 depression. 
 
 " England has not been alone, however, 
 in expending large amounts of capital in 
 military campaigns. The powers have all 
 spent great sums in the last year in the mili- 
 tary operations in China. The floating of 
 loans in that connection has made demands 
 upon capital that have further embarrassed 
 industrial affairs. Here in Russia we have 
 had, in addition to those unfavorable influ- 
 ences, other embarrassing conditions. The 
 Government has been building less railroad 
 than has been constructed at any time during 
 the last ten years. As the Government is 
 the chief customer for railroad supplies, de- 
 pression has naturally followed in all indus- 
 tries depending upon railroad construction. 
 Then there have been industrial enterprises 
 organized here on a not too sound financial 
 basis. But as we get farther away from 
 some of these special causes of depression, I 
 think the industrial crisis will end." 
 
 There can be no doubt of the interest of 
 M. de Witte in the subject he was discussing. 
 Russia's need for capital is like Sahara's 
 thirst for water. There is probably no man 
 in Europe more anxious than he to see the 
 whole earth smile under the blessings of 
 peace, the particular blessings in which he is 
 98 
 
" Commercial Invasion " of Europe 
 
 interested being a low rate of interest and a 
 market hungry for bonds. 
 
 I met M. de Witte, as I met all the other 
 finance ministers of Europe, on a tour which 
 I made last year to obtain the European point 
 of view regarding America's industrial ex- 
 pansion. The European view of the com- 
 petitive positions which the great nations 
 occupy in the struggle for international trade 
 development is just now a matter of keen 
 interest to the people of the United States. 
 As an officer in the financial department of 
 the Government, during the period of the 
 most extraordinary development in the 
 whole history of our foreign trade relations, 
 I was especially interested in this subject. 
 I wanted the point of view and conclusions 
 of some of the men who were equally in- 
 terested observers, but who were looking at 
 the development from without rather than 
 from within. For four years I had seen at 
 close range the growth of a favorable trade 
 balance which had assumed a total in that 
 brief period greater than had been the net 
 trade balance from the founding of the Gov- 
 ernment up to that time. That was a phe- 
 nomenon which had had few parallels in our 
 economic history, and the desire to study it 
 from the European point of view led me to 
 visit nearly all the countries of Europe. I 
 was offered rather unusual facilities for ob- 
 99 
 
Business and Ediication 
 
 taining the views of men most influential in 
 political life and commercial affairs. The 
 diplomatic representatives at Washington 
 introduced me to the finance ministers of 
 their home governments, and through the 
 foreign treasury officers I was able to meet 
 the heads of all the imperial and state banks ; 
 through other channels, prominent bank 
 officers and industrial leaders. It is my pur- 
 pose to give some of the observations and 
 deductions which resulted from this tour. 
 
 The subject I discussed with these dis- 
 tinguished foreigners is one regarding which 
 our public has been pretty thoroughly en- 
 lightened in the last five years, and it is one 
 of which the European public has heard al- 
 most as much in the English and Conti- 
 nental newspapers, but from quite an op- 
 posite point of view. When the amount of 
 our sales to foreign countries passed the 
 $1,000,000,000 mark in 1897, ^^ began to 
 congratulate ourselves on the strides we 
 were making in the markets of the world. 
 The record was followed by steadily grow- 
 ing totals, until now we have, in a twelve- 
 month, sent to other nations commodities to 
 the value of $1,500,000,000. The meaning 
 of that total is emphasized if we look back 
 and find it compares with an average during 
 the ten years ending 1896 of $825,000,000. 
 
 While our sales to foreign countries have 
 
 TOO 
 
" Commercial Invasion " of Europe 
 
 grown so prodigiously, the other side of our 
 financial account during these last five or 
 six years has shown no proportionate in- 
 crease. We have bought from the foreign- 
 ers an average of only $800,000,000 a year, 
 and that total has shown little tendency to 
 expand. It was this fact, this mighty de- 
 velopment of our sales, while our purchases 
 were, comparatively, on a declining scale, 
 which piled up in half a dozen years a fav- 
 orable trade balance so enormous as to startle 
 the world. In the last six years we have 
 sold in merchandise, produce, and manu- 
 factures $2,000,000,000 more than we have 
 bought; while in all our history, from the 
 beginning of the Government up to six years 
 ago, the foreign trade balance in our favor 
 had aggregated a net total of only $383,- 
 000,000. 
 
 The significance of these surprising totals 
 was recognized on both sides of the Atlantic. 
 An analysis of them brought out features 
 more important than the vastness of the 
 aggregate. Heretofore our sales had been 
 made up almost wholly of foodstuffs and 
 raw materials. Europe was the workshop. 
 But that has changed, and we find, year after 
 year, an astonishing increase in our exports 
 of manufactured articles, an increase that in 
 the last two or three years reached totals 
 which gave ample basis for the popular talk 
 
 lOI 
 
Business and Ediocation 
 
 of our invasion of the European industrial 
 fields. Our exports of manufactured articles 
 in the decade prior to 1897 averaged $163,- 
 000,000 annually. In 1898 our sales of 
 manufactured articles to foreign customers 
 jumped to $290,000,000, the next year to 
 $339.ooo^ooOj the next to $434,000,000. 
 
 These figures, showing a steady invasion 
 by our manufacturers of foreign industrial 
 fields, have a natural corollary. As exports 
 of manufactures increased, our imports of 
 the handiwork of foreign shops showed an 
 even more rapid decline. Our manufacturers 
 were not only invading the foreigner's own 
 markets, meeting him at his threshold with 
 a new competition, but they were taking 
 away from him his greatest market — the 
 United States. We have in the last half- 
 dozen years been manufacturing for our- 
 selves a vast amount of goods, such as we 
 have been accustomed to buy abroad. 
 
 One can turn from a contemplation of 
 these great totals to an examination of the 
 records made in recent years by individual 
 industries, and find in detail facts upon 
 which to base a belief that the United States 
 has acquired, or is acquiring, supremacy in 
 the world's markets. So many industries 
 have been sending rapidly increasing con- 
 tributions to swell the rising tide of our 
 foreign commerce that it is difficult to tell 
 102 
 
" Commercial Invasion " of Europe 
 
 any detailed story of American commercial 
 expansion without making it read like a trade 
 catalogue. The increase in our exports of 
 manufactured articles can, in the main, be 
 traced to advances made in the manufac- 
 ture of iron and steel, and to the display of 
 inventive talent in the making of machinery. 
 The development of our grasp on the world's 
 markets for articles manufactured from iron 
 and steel has been no surprise to those who 
 early recognized the position of America in 
 respect to the raw materials from which 
 those articles are produced. America un- 
 questionably possesses advantages, in respect 
 to her iron ore and her coal mines, far 
 superior to those of any other country, and, 
 based solidly upon that superiority, has al- 
 ready become the greatest producer of iron 
 and steel in the world. 
 
 American locomotives, running on Amer- 
 ican rails, now whistle past the Pyramids 
 and across the long Siberian steppes. They 
 carry the Hindoo pilgrims from all parts of 
 their empire to the sacred waters of the 
 Ganges. Three years ago there was but one 
 American locomotive in the United King- 
 dom; to-day there is not a road of impor- 
 tance there on which trains are not being 
 pulled by American engines. The American 
 locomotive has successfully invaded France. 
 The Manchurian Railway, which is the 
 103 
 
Busi/ness and Education 
 
 real beginning of oriental railway-building, 
 bought all its rails and rolling-stock in the 
 United States. American bridges span 
 rivers on every continent. American cranes 
 are swinging over many foreign moles. 
 Wherever there are extensive harvests 
 there may be found American machinery 
 to gather the grain. In every great market 
 of the world tools can have no better rec- 
 ommendation than the mark " Made in 
 America." 
 
 We have long held supremacy as, a pro- 
 ducer of cotton. We are now gaining su- 
 premacy as makers of cloths. American 
 cottons are finding their way into the mar- 
 kets of every country. They can be found 
 in Manchester, as well as on the shores of 
 Africa and in the native shops of the Orient. 
 Bread is baked in Palestine from flour made 
 in Minneapolis. American windmills are 
 working east of the Jordan and in the land 
 of Bashan. Phonographs are making a con- 
 quest of all tongues. The Chrysanthemum 
 banner of Japan floats from the palace of the 
 Mikado on a flag-staff cut from a Washing- 
 ton forest, as does the banner of St. George 
 from Windsor Castle. The American type- 
 setting machines are used by foreign news- 
 papers, and our cash-registers keep accounts 
 for scores of nations. America makes 
 sewing-machines for the world. Our bi- 
 104 
 
" Commercial Invasion " of Europe 
 
 cycles are standards of excellence every- 
 where. Our typewriters are winning their 
 way wherever a written language is used. 
 In all kinds of electrical appliances we have 
 become the foremost producer. In many 
 European cities American dynamos light 
 streets and operate railways. Much of the 
 machinery that is to electrify London tram 
 lines is now being built in Pittsburg. The 
 American shoe has captured the favor of all 
 Europe, and the foreign makers are hasten- 
 ing to import our machinery that they may 
 compete with our makers. In the Far East, 
 in the capital of Korea, the Hermit Nation, 
 there was recently inaugurated, with noisy 
 music and flying banners, an electric railway, 
 built of American material, by a San Fran- 
 cisco engineer, and now it is operated by 
 American motormen. 
 
 One might go on without end, telling in 
 detail the story of American industrial 
 growth and commercial expansion. In the 
 list of our triumphs we would find that 
 American exports have not been confined to 
 specialties nor limited as to markets. We 
 have been successfully meeting competition 
 everywhere. America has sent coals to 
 Newcastle, cotton goods to Manchester, 
 cutlery to Sheflield, potatoes to Ireland, 
 champagnes to France, watches to Switzer- 
 land, and " Rhine wine " to Germany. 
 
 105 
 
Business and Education 
 
 Our public has generally looked upon the 
 development of our foreign trade as only 
 one of the incidents in the remarkable period 
 of prosperity which we have been enjoying, 
 and has not, perhaps, clearly analyzed its 
 full significance. The European, I found, 
 had come nearer to a real understanding of 
 the situation. 
 
 A distinguished Berlin economist outlined 
 an idea which seemed to me interesting. 
 QTwo or three generations ago," he said, 
 there were families in America living a life 
 of almost complete industrial independence. 
 Not only was all the necessary food raised, 
 but within the household there were spinning 
 and weaving and the application of all neces- 
 sary trades. The invention of machinery, 
 the development of factory life, the special- 
 ization of industry, made such independence 
 impossible. That which happened to the 
 family a hundred years ago has happened 
 now to the nation. Specialization has gone 
 on, and concentration, combinations, and 
 trusts have made it as impossible for the 
 small manufacturer to compete with the 
 great as it was for the hand-loom and the 
 spinning-wheel to compete with the factory. 
 The perfect and instant communication be- 
 tween distant parts of the world, the cheap- 
 ening of transportation, the wider knowl- 
 edge of every country, its products and its 
 io6 
 
" Commercial Invasion " of Europe 
 
 needs, have brought about an interdepend- 
 ence of nations that is now ahnost as great 
 as the dependence of one class of industrial 
 workers on another. This national depend- 
 ence, this necessity of every country to more 
 and more largely buy and sell in foreign 
 markets, is forcing every nation, whether it 
 wills or not, into participation in an inter- 
 national industrial struggle. That is the 
 keynote of the new century.' Whoever will 
 forecast the future of nationS^can now make 
 no more useful study than an examination 
 of their comparative industrial equipment. 
 
 " History is becoming more and more the 
 story of industrial development," he con- 
 tinued. " The strength of a nation becomes 
 more nearly measured by its wealth, its im- 
 portance in the world's progress, by its rela- 
 tive commercial position. History will more 
 and more be written in ledgers and balance- 
 sheets, in trade statistics, and in the figures 
 which show the results of industrial con- 
 quests or defeats. Modern iron-clads and 
 smokeless powder have largely taken out of 
 warfare the element of personal bravery, 
 and have substituted technical skill and exec- 
 utive ability. Many of the same qualities 
 which win great industrial battles are to-day 
 potent in deciding the results of military 
 campaigns. Commercialism in its highest 
 sense has been the real object back of half 
 107 
 
Business and Education 
 
 the military movements of the last decade. 
 It may all seem very sordid and unromantic, 
 but I believe that a study of the comparative 
 price-currents of nations, an analysis of 
 trade balances, an understanding of the 
 statistics of production and consumption, 
 will give the data which are now needed in 
 making a forecast of a nation's history." 
 
 There are two phases to the significance 
 of the American grasp of the world's mar- 
 kets. The obvious phase is the development 
 of our own industries which must follow 
 such a conquest. If our factories are to be 
 great enough to supply our own wants and 
 in addition turn out a surplus so large in 
 volume and so low in price as to become one 
 of the most important factors in the world's 
 markets, we can count on an industrial 
 growth of which we have heretofore hardly 
 dreamed. 
 
 There is another phase to our conquest of 
 foreign markets, however, and that is its 
 effect upon the other nations of the world. 
 If a much larger share of the world's manu- 
 facturing is to be done in America, it means 
 a lesser share will be done elsewhere. The 
 pictures which some enthusiastic observers 
 of our foreign trade delight to draw, of a 
 time when our exports have so increased and 
 our imports so diminished, that we will not 
 only make everything we want for ourselves, 
 1 08 
 
" Commercial Invasion " of Europe 
 
 but a very large part of what the world 
 wants besides, is a picture which ofifers 
 neither a probable forecast nor a desirable 
 result. Naturally we cannot go on selling 
 to the world a great surplus of food products 
 and manufactured articles without buying 
 from the world in return. Statistics indi- 
 cate that we have for the last two or three 
 years been sending Europe annually some- 
 thing like $600,000,000 more than we have 
 been buying. Europe has not been paying 
 for this in gold. During the six years in 
 which we built up a surplus foreign trade 
 balance of $2,744,000,000, we have received 
 from the rest of the world a net balance in 
 gold of only $132,000,000. 
 
 One of the most unanswerable of financial 
 conundrums is how the world has settled its 
 debt to us in the past and is to settle it in 
 the future. If these statistics of our foreign 
 trade are to be depended upon, it would seem 
 as if we had placed the world in our debt in 
 the last six years to such an extent that we 
 ought to be about ready to foreclose our lien. 
 As a matter of fact international finances 
 do not show that we have any unusual com- 
 mand in the world's money markets; our 
 bankers have no extraordinary credits with 
 their foreign correspondents. There seems 
 to be no vast accumulation of funds upon 
 which we can draw at will, nor is there other 
 109 
 
Business and Education 
 
 evidence that any large part of this balance 
 is still unsettled. 
 
 The question of how a $600,000,000 an- 
 nual trade balance is to be settled has been 
 a rather interesting puzzle to our financiers ; 
 to European finance ministers and bankers, 
 to manufacturers and workmen, it is a sub- 
 ject of the most intense and immediate 
 interest. 
 
 The answer as to how that trade balance 
 has so far been settled requires a good deal 
 of explanation which must be based on very 
 unsatisfactory data. The prediction as to 
 how it is to be settled in the future leads to 
 most interesting speculation regarding finan- 
 cial conditions. 
 
 In the first place the problem is not so 
 difficult as it looks on its face. While Gov- 
 ernment reports show that we have sold to 
 Europe roundly $600,000,000 a year more 
 than we have bought, it may be certain that 
 the total is considerably below those figures. 
 I have been close enough to the making of 
 Government customs statistics to know some- 
 thing of the difficulties. No fault can be 
 found with the thoroughness of the work, 
 but it is quite impossible to strike any accur- 
 ate international trade balances when the 
 figures on one side of the ledger must come 
 from importers who have the strongest mo- 
 tives for undervaluing imports in their state- 
 no 
 
" Commercial Invasion '* of Europe 
 
 ments. I would hardly like to make a guess 
 regarding the average percentage of under- 
 valuation for all our imports, but it can, at 
 the outset of the consideration of this prob- 
 lem, be set down as a very large amount. 
 Then there are items of great importance of 
 which our customs statistics can take no 
 note. Our European tourists are generally 
 supposed to spend $100,000,000 a year. We 
 pay for freights to the owners of foreign 
 steamship lines perhaps $75,000,000 more. 
 There is a great stream made up of number- 
 less small remittances, sent home by pros- 
 perous immigrants. And lastly, and most 
 important of all, there has been going on a 
 repurchase by American investors of our 
 securities which have been held in foreign 
 markets. This, in the aggregate for the last 
 ten years, assumes enormous proportions. 
 The best of statisticians can do nothing more 
 than guess at the amount, but it has been 
 great enough, in the main, to counterbalance 
 the excess of our foreign sales over our pur- 
 chases, after the totals of travellers' ex- 
 penses, ocean freights, and the home contri- 
 butions of immigrants have been deducted. 
 This return of our securities cannot go on 
 forever; indeed, there is pretty good reason 
 to believe it cannot go on much longer, for 
 the reason that there are now few American 
 securities held in Europe to return. 
 Ill 
 
Business and Education 
 
 It is the practice of the great banks of 
 Europe, particularly of Germany, to take 
 charge of the securities owned by a vast 
 clientage of investors. When in the Impe- 
 rial Reichsbank and in the Deutsche Bank in 
 Berlin, I was taken into great vaults whose 
 walls and floors were covered with cases like 
 an immense library, containing stocks and 
 bonds belonging to clients of the banks and 
 held there for the collection of coupons and 
 for safe-keeping. In each of the banks there 
 were securities representing some 2,000,000,- 
 000 marks. It was interesting to be shown 
 great cases of empty shelves which had for- 
 merly been set apart for American securities, 
 and which now held only here and there 
 scattered packages. This was the visible 
 evidence of what an examination of invest- 
 ors' strong boxes would show in all those 
 European countries which have in years 
 past found in America the most profitable 
 field for investment. 
 
 If our foreign trade is to continue to hold 
 the same relation between imports and ex- 
 ports that has been ruling for the last few 
 years — if we are to go on selling Europe, 
 say, $600,000,000 a year more than we buy 
 — there will be then, after liberal reductions 
 for travellers' expenditures, ocean freights 
 (an item which the development of Ameri- 
 can shipping may materially decrease), and 
 112 
 
" Commercial Invasion " of Europe 
 
 immigrant remittances, a balance due us of 
 $300,000,000 or $400,000,000 a year. How- 
 is that balance to be paid ? 
 
 That question is, perhaps, the most inter- 
 esting of any that can be propounded to-day 
 in the field of international finance. I asked 
 every finance minister of Europe and the 
 head of every imperial bank for an answer 
 to it. I found it a question over which they 
 had pondered much and never with feelings 
 of satisfaction. That Europe cannot pay 
 such a balance in gold is obvious ; that we 
 would not desire to have it paid in that way 
 is clear. The conclusion which I found 
 nearly every important European financier 
 had already reached was that America will 
 sooner or later enter the European security 
 markets ; that the tables in international in- 
 vestments are to be completely turned ; that 
 we are to hear no more of the English or 
 the German syndicate making investments in 
 America, but rather of the American syndi- 
 cate becoming a most important factor in the 
 foreign investment field. 
 
 The low interest rates which for the most 
 part have been ruling in America for several 
 years have everywhere attracted attention. 
 The belief is growing that New York is to 
 become the lowest money market in the 
 world. There has been particular interest 
 in the advances made in the market price of 
 
 8 113 
 
Business and Ediocation 
 
 investment securities. The quotations which 
 have been made for high-grade bonds have 
 been the wonder of Europe. While market 
 quotations have shown United States two 
 per cent bonds selhng at no, the three per 
 cent bonds of the Imperial German Empire 
 were quoted at 88, English consols bearing 
 two and three-quarters per cent sold at 93, 
 Russian four per cent gold bonds at 96, and 
 Italian Government issues at prices netting 
 the investor over four per cent. 
 
 These comparisons are anything but pleas- 
 ing to European treasury officials. They are 
 quick to see, however, that such a compari- 
 son is not entirely fair. Our Government 
 bonds are free from taxes, and, even more 
 important than that, they have a special use 
 and value to national banks. A national 
 bank may issue circulation against deposits 
 of these bonds with the United States Treas- 
 ury, or may receive public deposits if it puts 
 up Government bonds as security, and so the 
 market value of our Government issues, and 
 particularly of our two per cent bonds, can- 
 not be taken as a measure of the investment 
 return which capitalists are willing to take. 
 It is a fact, however, that there are over 
 $500,000,000 of our Government bonds not 
 held by national banks to secure circulation 
 or as a basis for public deposits. Those 
 $500,000,000 are held solely for investment, 
 114 
 
" Commercial Irwasion '* of Europe 
 
 and are maintained at market prices which 
 net the investor less than one and three- 
 quarters per cent, quotations which certainly 
 put the credit of this Government far above 
 that enjoyed by any other nation. 
 
 There are other evidences that the United 
 States is becoming the best market in the 
 world for the highest grade of industrial 
 securities. First-class railroad bonds, as, for 
 example, those of the Pennsylvania or New 
 York Central, sell on a basis that nets the 
 investor as low a rate as do English railroad 
 bonds, while on the Continent the highest 
 grade of corporate securities sells at prices to 
 realize higher rates of interest to the investor 
 than do our best securities. 
 
 That the United States gives promises of 
 reaching a position of industrial supremacy 
 in the world's trade is acknowledged to-day 
 the world over. Undoubtedly we have been 
 too flamboyant in some of our claims. The 
 industrial world as yet is by no means pros- 
 trate at our feet. We have before us a long 
 campaign of hard work and intelligent prose- 
 cution of every advantage which we have, 
 before we reach such a position of industrial 
 supremacy as occasional newspaper writers 
 on both sides of the Atlantic have given us 
 credit for. That we have the foundation 
 upon which to build such industrial suprem- 
 acy, however, cannot be doubted by any one 
 
 "5 
 
Business and Education 
 
 who is familiar with the resources and abil- 
 ities shown in our own industrial field, and 
 makes intelligent comparison with the con- 
 ditions that obtain abroad. 
 
 It ought clearly to be kept in mind that 
 the road to the commercial domination of 
 the world is not a clear one for us, and that 
 as yet we are a long way from the end of it. 
 Evidences of that will be found in studying 
 current statistics of our manufactured ex- 
 ports. The rapid increase which has been 
 going on for a number of years has halted, 
 and for the last fiscal year reports show a 
 decrease. That decrease can be accounted 
 for by the fact that our shipments to Porto 
 Rico, Hawaii, and the Philippines are no 
 longer counted foreign exports, but it is, 
 nevertheless, evident that a halt has come in 
 the triumphant march of American manu- 
 factures toward European markets. An im- 
 portant reason for this is in the very force 
 of the success we have made. There have 
 been serious inroads made in the prosperity 
 of many foreign manufactures by our suc- 
 cessful competition. The depression has 
 been reflected in lower wages and in de- 
 creased purchasing power, and a lower level 
 of prices which has reacted on us in common 
 with the foreign manufacturers. 
 
 In a good many directions we have much 
 to learn in regard to a successful prosecution 
 ii6 
 
" Commercial Invasion " of Europe 
 
 of foreign trade. The Germans could give 
 us valuable lessons. They are strong in two 
 particulars — strong in the line of technical 
 education, though perhaps not superior to us, 
 and strong in commercial training specially 
 adapted to the needs of their representatives 
 in foreign countries. In this last particular 
 we are lamentably weak. We do not learn 
 languages readily, and we have been too 
 busy with our home affairs to cultivate what 
 facility we have. It is a comparatively diffi- 
 cult thing to find trained business men, born 
 in America, who speak fluently two or more 
 Continental languages,^ and it follows from 
 that difficulty that we send commercial rep- 
 resentatives to Europe who are under the 
 almost hopeless handicap of not speaking 
 the language of a country in which they wish 
 to do business. Were it not for the coming 
 universality of the English language, the 
 handicap would be far greater than it is. 
 Unfortunately the bad equipment of many 
 of the commercial representatives who are 
 sent abroad is not confined to their lack of 
 knowledge of languages. Frequently they 
 have but vague ideas of the commercial 
 geography of Europe. They are not at all 
 clear as to what particular sections are given 
 over to this form of manufacturing or that 
 field of production. More than half the fail- 
 ures that have come to manufacturers who 
 117 
 
Business and Edtication 
 
 have tried to extend their foreign business 
 have resulted from the lack of qualifications 
 in the representatives they sent abroad. 
 
 Another condition that is not favorable 
 to our development is one that is being 
 thought of a good deal more in Europe 
 than at home. We no longer are occupying 
 the leading position in scientific investiga- 
 tion having special commercial application. 
 Many of the most notable discoveries of the 
 last few years in commercial chemistry, elec- 
 tricity, and other fields of scientific work 
 having direct relation with industry have 
 been made by foreigriers. The X-ray and 
 the wireless telegraph are illustrations which 
 would occur to every one, but there have 
 been numberless important discoveries of 
 great value in industrial operations for 
 which we are obliged to pay royalty to 
 foreign inventors. The United States Gov- 
 ernment is to-day paying a royalty to a 
 German inventor for the use in the mints 
 of a method of refining gold by electrolysis, 
 a method which proved much cheaper than 
 that which had been in common use in the 
 Government and commercial refineries up to 
 within a year or two ago. Many such illus- 
 trations could be given. 
 
 One of our particular points of strength 
 has in it danger, when carried too far, of 
 being an element of decided weakness. We 
 ii8 
 
" Commercial Invasion " of Europe 
 
 have profited greatly by our genius for 
 specialization, and our adoption of standard 
 models of machines, which can be made in 
 great quantities at extremely low cost. In 
 holding closely to these standard designs, 
 we have frequently lost sight of foreign 
 prejudices. Small concessions to those prej- 
 udices might have meant large sales, but 
 our manufacturers have declined to make 
 them. In Moscow, for instance, I talked 
 with a merchant who had branches all 
 through Siberia, and who bought large con- 
 signments of ploughs in America. The 
 Russians do not harness their horses as we 
 do, and our method of hitching a team to 
 a plough is not adapted to their use. This 
 merchant found it impossible, however, to 
 get our plough manufacturers to adopt the 
 slight changes which he suggested, even 
 when his orders were for very large quan- 
 tities, and he had to have made in Germany 
 the type of clevis which his customers de- 
 manded and attach it to his importations 
 of American ploughs. 
 
 The most important of all obstacles that 
 the development of our foreign trade is 
 likely to encounter is the same one which 
 has proved the most dangerous rock in the 
 path of English industry — the growth of 
 a spirit in trades-unions which attempts to 
 regulate the business of employers in other 
 119 
 
Busmess and Education 
 
 matters than those relating to wages and 
 hours of labor. I believe the decline of 
 English industry can be attributed to the 
 success of labor organizations in restricting 
 the amount of work a man may be per- 
 mitted to do, more than to any other single 
 cause. We have encountered that spirit too 
 frequently in our own labor field, and it is 
 one which, if successfully persisted in, will 
 cut the ground of advantage from under 
 our manufacturers quicker than anything 
 else I know of. 
 
 It is generally understood that our natural 
 resources are in many important particulars 
 unparalleled. We patriotically believe that 
 the ability of the average American work- 
 man is superior to that of his competitor in 
 other countries. We are all confident that 
 our form of government offers the solidest 
 foundation upon which to build national 
 prosperity. Our industries are helped rather 
 than hampered by our system of federal tax- 
 ation, while an examination of the incidence 
 of taxation in nearly every country abroad 
 shows that a most depressing influence on 
 industries is exerted by the national tax- 
 gatherers. 
 
 There are other facts in our favor not 
 quite so generally understood. We have, 
 for instance, a financial system, particularly 
 
 I20 
 
" Commercial Invasion " of Europe 
 
 in the relation of our banks to every-day 
 business transactions, which gives us as 
 much of an advantage over most of the 
 Continental countries as would some great 
 labor-saving machine. The American busi- 
 ness man whose operations are even of the 
 most modest extent is certain to have a bank 
 account. He pays his bills with checks or 
 drafts. When he wishes to extend his opera- 
 tions he does not borrow actual currency, 
 but he borrows bank credit. In all his trans- 
 actions he has to aid him the most fully 
 developed credit system to be found any- 
 where in the world except in Great Britain. 
 
 It is almost beyond belief how little de- 
 velopment there has been in this direction 
 in some of the foreign countries. A bank 
 check is looked upon with suspicion in Italy. 
 Practically no small tradesmen would take 
 a check, and none of them keep a bank 
 account. It was still more surprising to me 
 to find that such a statement would be 
 almost literally true of Paris itself. I was 
 studying the mechanism of the Bank of 
 France under the guidance of one of the 
 officers. ] We went into one great room in 
 the old building in which there were 200 
 desks enclosed in wire cages, all empty at 
 the moment. I asked what these were for. 
 
 " These cages are for our city collectors," 
 I was told, ^' When a small merchant bor- 
 121 
 
Business and Education 
 
 rows from the Bank of France, he does not, 
 as with you in America, borrow a bank 
 credit and have his loan merely added to his 
 balance on the books of the bank. With us 
 the merchant, when he makes a loan, gets 
 the actual money and takes it away. He 
 probably has no bank account with us. 
 He writes no checks. When the loan is 
 due he does not, as would be the case in 
 your banks, come in and pay his indebted- 
 ness with a check; instead of that we send 
 a collector to him, and that collector is re- 
 paid the loan in actual currency. Two hun- 
 dred men start out from the Bank of France 
 every morning to collect matured loans. 
 Several days each month it is necessary to 
 send out 400 men, and on the first and the 
 fifteenth of each month 600 collectors go 
 out." 
 
 These collectors were uniformed men 
 carrying leather pouches in which they have 
 the matured notes and which are later filled 
 with currency as the collections are made 
 from the bank's borrowersTi 
 
 I stood at the paying-teller's desk as I 
 went farther along in my tour of the Bank 
 of France. As I halted there the man who 
 happened to be at the window at the mo- 
 ment presented a check for 50,000 francs. 
 The money was counted out and handed 
 over to him, stored away in a big wallet, 
 122 
 
" Commercial Irwa^ion " of Europe 
 
 and he passed on. I asked if it were not 
 unusual for a man to draw out so much 
 currency, and was told that it was not. It 
 was but another illustration of how unde- 
 veloped is the banking system of Conti- 
 nental Europe in its uses by the general 
 public. 
 
 A story that was told me on the highest 
 authority in Vienna sounds ludicrously in- 
 credible, but it is true. The Austrian Gov- 
 ernment bought a telephone line from an 
 English company. There was a payment 
 of i,C)CX),ooo guldens (about $400,000) to 
 be made by the cabinet officer corresponding 
 to our Secretary of the Interior. The repre- 
 sentative of the English company wished to 
 be paid by merely receiving a credit at the 
 Austro-Hungarian State Bank. The minis- 
 ter regretted that there was no precedent for 
 such a method and insisted on sending to 
 the bank, which is the government's fiscal 
 agent, bringing the actual money to his 
 office, and counting it out to the English- 
 man, who in turn took it back to the same 
 bank, where it was again counted and put 
 back in the vault from which it had been 
 taken an hour before. 
 
 As one gets farther east the methods of 
 banking become more primitive. The Rus- 
 sian peasant frequently becomes a man of 
 very considerable property, but he is apt to 
 123 
 
Biisiness and Education 
 
 cling to his early financial method of bank- 
 ing in his boots. He wears boots with high 
 felt tops, and the leg of one is the receiving- 
 teller's cage, and the top of the other is 
 the paying-teller's. He will start out in the 
 morning with his right boot-leg full of 
 money. His day's payments are made out 
 of that boot, and his receipts are deposited 
 in the other. At night he checks up on his 
 day's financial operations and strikes a 
 balance. 
 
 The banking methods of Continental Eu- 
 rope are cumbersome and time-consuming, 
 and the people generally have learned but 
 the first lessons in the uses of credit ma- 
 chinery. That forms a handicap upon in- 
 dustry that is just as real as that caused 
 by their persistence in using out-of-date 
 machines and methods of manufacture which 
 we have long ago abandoned as slow-going 
 and expensive. 
 
 One of the important factors in the 
 strength of our industrial position is the un- 
 questioned superiority in our transportation 
 system. If one has fresh in mind the picture 
 of our luxurious trains, mammoth engines, 
 and, more important still, our standard fifty- 
 ton freight-cars, it makes the Europeans 
 seem like amateurs in the science of trans- 
 portation when we see their toy cars, small 
 locomotives, and generally slow-going ad- 
 124 
 
" Commercial Invaskm *' of Europe 
 
 ministration. If one looked into the matter 
 with the eye of an expert, studying the unit 
 of cost, the freight charges per ton per mile, 
 or the mileage rate for passenger service, 
 and made comparative statistics of the ton- 
 nage of freight-trains and the cost of moving 
 them, he would discover a startling lack of 
 efficiency, both in Great Britain and on the 
 Continent. Perhaps it is not quite fair to 
 make comparisons of the average cost of 
 freight traffic per ton per mile in America 
 and in Europe, because the average haul is 
 much shorter there, and terminal expenses 
 of a haul are practically the same whatever 
 its length. The average charge per ton per 
 mile on all American railroads for all classes 
 of freight is now less than three-quarters of 
 a cent. If we take the statistics of the East- 
 ern trunk lines alone, that figure would be 
 cut to about one-half cent per ton per mile. 
 It compares with 2.4 in Great Britain, 2.2 in 
 France, 1.6 in Germany, and 2.4 in Russia. 
 One of the most remarkable illustrations of 
 the failure of European managers of indus- 
 tries to keep pace with the times is to be 
 found in a comparison of the efficiency of 
 their railroads with ours. English railroads 
 charge three times as much to move a ton 
 of freight as it can be moved for in America. 
 English railroad managers have failed to 
 grasp the economies that are made possible 
 125 
 
Business and Edtication 
 
 by heavy traffic, by the use of engines of 
 enormous capacity and freight-cars that will 
 carry fifty tons. But if the English railroads 
 have failed to keep pace with ours, what can 
 be said of most of the Continental roads? 
 Short trains with pygmy freight-cars, each 
 car holding only eight tons, make clear to 
 any layman the handicap which high trans- 
 portation charges have laid on industry all 
 over Europe. 
 
 In the little town of Abo, in Finland, I was 
 waiting one day for a steamer to go to 
 Stockholm. In strolling about the town I 
 ran across another American. I learned that 
 he was the representative of a great engine 
 manufactory, and that he had been covering 
 Europe from Spain to Russia. He had been 
 able to sell his engines in competition both 
 with the domestic manufacturers and with the 
 makers in Great Britain and Germany, who 
 had before practically controlled the trade. 
 I asked him to analyze for me the condi- 
 tions that enabled him to come into these 
 markets and sell in successful competition 
 in spite of customs duties, in spite of 4,000 
 or 5,000 miles of transportation charges, and 
 in spite of the fact that his factory paid 
 workmen average wages two or three times 
 as large as were paid by his competitors. 
 
 " Our success in coming into this field," 
 he said, "is very largely due to what in our 
 126 
 
" Commercial Invasion " of Europe 
 
 manufacturing parlance we call the making 
 of ' standards/ We believe we know how 
 to make a type of engine which will give 
 the maximum efficiency for a certain class 
 of work. We develop our standard type 
 and then we stick to it. We are enabled to 
 manufacture an enormous number of en- 
 gines all exactly alike because we have in 
 our home market an enormous field. The 
 American public has been taught that a 
 builder of engines knows better how to de- 
 sign an engine than does the individual who 
 only occasionally buys one. Our best manu- 
 facturers absolutely refuse to'vary from their 
 standards. In making a great number of 
 engines exactly alike we can turn out work 
 at a price that is simply beyond the possible 
 competition of the ordinary European maker. 
 Our labor-saving machines largely compen- 
 sate for the higher wages we pay. The Eng- 
 lish and German manufacturers are harassed 
 by consulting mechanical engineers. A man 
 who wants to buy an engine employs an in- 
 dependent consulting engineer. The engi- 
 neer invariably feels that he must earn his 
 fee by suggesting a change. If a dynamo is 
 adjusted to make 112 revolutions a minute 
 he wants an engine built that will turn it 113. 
 The result is that English and German manu- 
 facturers make an endless number of types. 
 What is more, they cannot get away from 
 127 
 
Business and Education 
 
 the thraldom that they are in, and adopt our 
 system of standard types, because they have 
 not the great, broad, homogeneous market 
 which America offers to its own manufac- 
 turers. I doubt if our manufacturers appre- 
 ciate the great advantage which they have in 
 this home market, where the inhabitants, 
 from the Atlantic to the Pacific, are very 
 much the same kind of people, with very 
 much the same needs and desires. In Europe 
 every manufacturer has a sharply circum- 
 scribed field. He is met by new tariffs and 
 new tongues only a short distance from 
 home in whatever direction he goes. The 
 type of article which can be sold in one dis- 
 trict may find no market in another close by? 
 With us the man in Los Angeles wears just 
 the same kind of hat as the man in Bos- 
 ton, and the people through all that stretch 
 of 3,cx)0 miles are dressed the same, and 
 buy, generally speaking, similar commodities. 
 This broad basis of our own unparalleled 
 market, which permits a manufacturer to 
 successfully work out a standard article, and 
 then produce an enormous quantity of that 
 exact type, is the most secure basis upon 
 which to build a foreign trade. We alone 
 have that advantage. No European manu- 
 facturer can successfully follow in our lead." 
 
 When M. De Witte said that militarism 
 128 
 
" Commercial Invasion " of Europe 
 
 is the nightmare and the ruin of every 
 finance minister, he spoke a truth that has 
 an appHcation to this question of industrial 
 rivalry. The evidence of militarism is one 
 of the most obvious things in Europe. In 
 Russia one is never out of sight of a line 
 of brown-coated, stolid-faced soldiers. A 
 tremendously effective display of military 
 strength is everywhere encountered in Ger- 
 many. One is impressed by the cost of 
 the brave attempts of poor Italy to keep up 
 military appearances in the company of first- 
 class powers, a company to which she has 
 not the natural right to aspire. No one can 
 see this universal display without contrast- 
 ing its cost and the burden which that cost 
 throws on industry, with the comparative 
 freedom from that weight in the United 
 States. 
 
 Europe spends annually for military and 
 naval establishment $1,380,000,000. With 
 our army on something of a war footing, 
 as it is at present, we have only spent 
 in the last year for the army and navy 
 $205,000,000. 
 
 Marked as is this difference of cost, it by 
 no means measures the real weight which 
 militarism puts on the European powers; it 
 is not alone that Europe spends $1,380,000,- 
 000 a year to maintain the military establish- 
 ment, but very much more important, from 
 9 129 
 
Business and Education 
 
 the industrial standpoint, is the fact that 
 Europe takes out of her productive capacity 
 4,000,000 men. These milHons are just in 
 the fulness of their youth and would be a 
 tremendous factor in industrial production. 
 The male industrial population of Europe, 
 men between the ages of twenty and sixty, 
 may be estimated at about 100,000,000. To 
 withdraw from productive industry for mili- 
 tary purposes 4,000,000 men means a loss of 
 four per cent, and that is in addition to the 
 taxes necessary to raise the $1,380,000,000 
 for the annual maintenance of the military 
 establishments. When we perceive the full 
 weight which militarism has hung upon the 
 neck of industry in Europe, we see another 
 enormous handicap which is acting year after 
 year in our favor. 
 
 In the course of a conversation with one 
 of the most eminent of European financiers, 
 a man who has added the distinction of 
 notable public service to a business career 
 which made his name familiar in every finan- 
 cial centre, I said that one of the things 
 which had occurred to me in my observation 
 of European affairs, after seeing the tre- 
 mendous effect upon England herself and 
 through her upon all the countries of Europe 
 of the expenses of the Transvaal War, was 
 that if a small war under modern conditions 
 was to cost so much as the Transvaal War 
 130 
 
" Commercial Invasion *' of Europe 
 
 had cost, and was to produce such an effect 
 upon industry and commercial conditions 
 throughout Europe, no great war would in 
 the future be possible. 
 
 " You are wrong," he said. 
 
 " That is not clear to me," I replied. 
 " Let us take Russia for illustration. Sup- 
 pose Russia was to begin a great war. 
 Where is she to get the money? " 
 
 " Let me tell you a little of a war of which 
 I know something," he said. " I happen to 
 control nearly all the railways of Turkey. 
 Turkey had a war with Greece. Now let us 
 see how she paid the expenses. She raised 
 an army; she paid her army nothing. She 
 transported that army of 60,000 men from 
 the interior of Asia Minor to the Greek 
 border. How did she do that? She com- 
 manded our railroads to carry them. Did 
 we carry them? Yes. Have we any pay 
 for it? No; nor will we ever have. So 
 she paid nothing for the transportation of 
 her army. Then she had to arm it. What 
 did she do? She bought arms in Germany. 
 Has she paid for them ? No. So she raised 
 her army, transported it, and armed it. The 
 whole cost of that campaign, in fact, was 
 managed without any real expenditure of 
 money. 
 
 " So it would be with Russia. I was once 
 in the interior of Persia. I met there, 2,000 
 131 
 
Bwsiness and Ediication 
 
 miles from the sea, two German tramps. 
 I asked them where they were going. They 
 said : ' The Pacific Ocean is off here some- 
 where, and we are making our way toward 
 the Pacific Ocean.' I asked them, ' What 
 can you do ? ' One said, ' I can play a trom- 
 bone.' The other said : ' I can weave straw 
 baskets.' ' Well,' I said, * how have you got 
 here ? ' * We can walk, and the people are 
 good,' was the answer. 
 
 " So it is with the army. They can walk, 
 and the people are good. If the people are 
 not good, the army gets its provisions any 
 way. The expenses of a war in Russia, so 
 long as it was in Russia, would be to that 
 nation very small, and the financial situation 
 is not a commanding condition in any con- 
 siderations of peace or war." 
 
 " What is the future of the world with 
 respect to America? " I asked. " If Amer- 
 ica is to go on in anything like the way she 
 has been going in the last three or four years 
 with her foreign trade — if America is to 
 sell to Europe $600,000,000 a year more 
 than she buys — what is to be the outcome?" 
 
 " Something always happens, and some- 
 thing will happen here. I do not know what 
 it is; I cannot foresee it. America so far 
 seems to be making no mistake, but some- 
 thing will happen. Things cannot go on as 
 they are going. It may be that it is your 
 132 
 
" Commercial Irwasion " of Europe 
 
 colonial policy. At present there are 4,000,- 
 000 soldiers in Europe, the best of her young 
 manhood, who not only are taken away from 
 production, but are paid for being taken 
 away from production, and Europe is paying 
 six milliards a year to support them. That 
 six milliards does not measure the cost. It is 
 that, plus the loss to production, which ham- 
 pers commercial Europe, and it is there that 
 you have the great advantage. But what of 
 your future ? We are glad to see you going 
 into the Philippines. We will welcome the 
 time if you are going to measure strength 
 with us as a military power. Commercially 
 you are supreme, but if it comes to a test of 
 military strength, if you are going to weight 
 yourselves with the militarism which is the 
 burden of Europe, then we can see some 
 light." 
 
 I asked if the tendency in Europe is in the 
 direction of a reduction of military forces. 
 " Not at all," he said. " France hates Eng- 
 land, and England hates France; Germany 
 detests France, and France detests Germany ; 
 Russia hates Germany, and Germany hates 
 Russia. There it is all around. There is no 
 hope of reduction. It is impossible. Eng- 
 land has hoped to come to some understand- 
 ing with Russia. I spent some time at the 
 home of Mr. Chamberlain not long ago, and 
 there was a strong hope in his mind that 
 133 
 
Business and Edtocation 
 
 England could come to a better understand- 
 ing with Russia. But it is impossible, just 
 as it is impossible for France and Germany 
 to come to an arrangement. We are no 
 longer afraid of France. We beat her from 
 a military standpoint. We have beaten her 
 now from a commercial standpoint, and 
 there is nothing else. Commercially we 
 hold a pretty strong position with France. 
 After the war we had a treaty which pro- 
 vided that we should be equal to the most 
 favored nation. France began making spe- 
 cial treaties, but as soon as she concluded 
 one we took a place equally favored, and 
 strengthened our commercial position. We 
 have beaten her commercially, and I see 
 nothing to fear from France." 
 
 I asked what he thought of the great con- 
 solidations of America, such as the steel 
 combinations. 
 
 " An autocracy is good or bad according 
 to the autocrat. If he is a good autocrat it 
 is the very best thing possible. If he is a 
 bad autocrat, it is the worst. Who is going 
 to control your trusts? That is the whole 
 question. It is true you have managed your 
 Standard Oil in a way that is creditable, and 
 that has brought satisfaction to the country. 
 The Sugar trust has been in a measure man- 
 aged as well. But what assurance have we 
 that this great Steel trust is to be managed so 
 134 
 
" Commercial Invasion " of Europe 
 
 well ? That is the whole problem. It is the 
 question of men. Undoubtedly it makes you 
 a much more formidable competitor, because 
 it consolidates your interests. But you are 
 a young nation. You are a young people. 
 You are young in this business of consolida- 
 tion. What has been the world's history 
 when you put great power into the hands of 
 young men ? It has sometimes been abused. 
 We shall watch with great interest the course 
 with you in this enormous combination." 
 
 And that is what all Europe is doing — 
 watching with the keenest interest our course 
 as it affects our position in the world's in- 
 dustrial contest. 
 
 II. Italy, Austria, Germany 
 
 Industrially it is no longer the Old World. 
 It is New Europe and Old America! It is 
 New Europe, a land of undeveloped possi- 
 bilities, abounding in opportunity for keen 
 captains of industry. It is mature America, 
 the exemplar of modern industrial methods, 
 perfected mechanical ideas, and ripe eco- 
 nomic policy. 
 
 This conception of a new Europe, looking 
 toward mature America for the best illustra- 
 tions of industrial development, was novel 
 enough when I first encountered it, but it 
 135 
 
Business and Education 
 
 becomes familiar as one goes from country 
 to country and sees field after field rich in 
 opportunities for the introduction of better 
 methods, the application of better mechanical 
 ideas, and the planting of more correct eco- 
 nomic policies. It was in Rome that I first 
 met this thought of a new Europe. I was 
 told that Italy was but thirty years old, that 
 the present economic life dates back only to 
 1870, and that the modern Roman is to-day 
 an industrial pioneer in a virgin country. 
 Such a thought applied to almost the oldest 
 European civilization is especially striking, 
 but every other country of Europe offers 
 illustrations of the truth of the paradox. 
 We not only find that Italy has suddenly 
 awakened to the possibilities of conserving 
 the force of her enormous water-power, and 
 is beginning a great movement to turn into 
 electrical energy numberless cascades and 
 rapids, but an examination of the industrial 
 side of every other nation shows much that 
 is still unhewn and unwrought. Austria has 
 just formulated a legislative plan for a great 
 network of canals which will cost hundreds 
 of millions of florins and revolutionize the 
 transportation of the empire. Germany, 
 from this industrial point of view, is a pic- 
 ture of youth — new factories on every 
 hand, new development everywhere, and the 
 spirit of the industrial pioneer in all the 
 136 
 
" Commercial Invasion " of Europe 
 
 people. England, wedded as she is to in- 
 dustrial precedent, turning instinctively from 
 methods that mean change, holding close to 
 the ways that were the ways of the fathers, 
 presents a field unploughed when looked at 
 from the point of view of the opportunity 
 offered for the introduction of the best in- 
 dustrial methods and the most economical 
 mechanical equipment. France, with her 
 satisfaction over her minute subdivision of 
 ownership and her contentment with small 
 things, offers virgin fields for the exploita- 
 tion of modern ideas of specialization, com- 
 bination, and community of interests. Vast 
 Russia, enormous in extent and population, 
 is immaturity itself, new industrially beyond 
 anything America has known for two 
 generations. 
 
 When we see that Europe is an industrial 
 field, still undeveloped; that in many direc- 
 tions the methods and practices current in 
 industrial life are as wasteful and expensive 
 as are operations in some new country, we 
 perceive at once that such a condition has 
 two important relations to our own industrial 
 life. If our foreign competitors are not 
 making the most of their opportunities, their 
 time, and their labor, gauged by our stand- 
 ards, it means that they are under a handicap 
 in competition with our industrial output, 
 and so long as our methods are superior to 
 137 
 
Bv^iness and Education 
 
 the methods in vogue in Europe we may- 
 look for continued advantage in interna- 
 tional competition. 
 
 The idea of an undeveloped Europe is of 
 decided interest to us, however, from another 
 point of view. With such a field for devel- 
 opment as we have had at home we have 
 become experts in seeing new opportunities, 
 and have become quick to disregard prece- 
 dent and long-established conditions, and to 
 perceive the advantages which may come 
 from new combinations, modern equipment, 
 and specialized work. An undeveloped Eu- 
 rope, therefore, offers a field in which this 
 special genius of ours may profitably exploit 
 some of the same industrial methods and 
 policies which have proven so successful at 
 home. This is not a mere theory. There 
 are already notable illustrations of success in 
 exactly that sort of thing, and there are 
 promises of many more successes to come. 
 Our great electrical companies have estab- 
 lished works in England, France, Germany, 
 and Russia. There are tool-works in Ger- 
 many equipped with complete sets of Amer- 
 ican models, American machines, and 
 Yankee foremen. Important portions of 
 London interurban transportation systems 
 have come into American hands and are 
 feeling the vivifying influence of American 
 ideas. The electric street-railroads and 
 138 
 
" Commercial Irwasion " of Europe 
 
 lighting-plants in a number of important 
 cities of France are controlled by American 
 interests, and the transportation system of 
 Paris itself is a field which is tempting close 
 investigation on behalf of American capital. 
 Some attention has heretofore been drawn 
 to the extraordinary balance in America's 
 favor which the last half dozen years of 
 foreign trade has built up. The settlement 
 by Europe of these annual trade balances is 
 a problem which has been outlined, and at- 
 tention has been called to the opinion of 
 many European and not a few American 
 financiers that ultimately the settlement of 
 this trade balance must be effected by Amer- 
 ica investing in European interests and 
 securities. A few years ago it would have 
 sounded absurd to have talked of the possi- 
 bility of American capital seeking investment 
 in Europe. The idea is hardly yet so fa- 
 miliar as to make it seem reasonable. It is 
 hard to believe that America, with her end- 
 less opportunities, unparalleled richness of 
 natural resources, and admitted pre-eminence 
 in industrial methods, should not continue 
 for a long time to be a more profitable 
 field for the investment of capital than can 
 possibly be found in Europe. For us the 
 disadvantages of distance, of foreign laws 
 and customs, and of competition with great 
 funds of accumulated capital have heretofore 
 139 
 
Bwsiness and Education 
 
 seemed to preclude any possibility of our 
 becoming investors across the Atlantic. But 
 this annual trade balance which we have been 
 piling up has been so extraordinary in itself 
 that it seems likely to lead to other unusual 
 features; and among those it now seems 
 easily possible that we shall see American 
 capital become an important factor in Euro- 
 pean fields. 
 
 Naturally, few Americans have gone to 
 Europe to look for investment opportunities. 
 Travellers' descriptions have been endless, 
 but few of them have told us of European 
 conditions from an American investor's point 
 of view. We have in times past had a good 
 many financiers go abroad to convince Euro- 
 pean capitalists of the credit and good pros- 
 pects of enterprises that we were developing 
 at home, but it is only within the last few 
 months that Americans have been going 
 abroad to measure investment possibilities, 
 to investigate offerings of securities, and to 
 look into opportunities for profit in new 
 developments, new combinations, and the 
 application of new methods. 
 
 If a trade balance of some hundreds of 
 millions of dollars is to be settled by our 
 taking European securities, it becomes de- 
 cidedly interesting for us to begin to study, 
 from an investor's point of view, the eco- 
 nomic conditions prevailing there. It is 
 140 
 
" Commercial Invasion " of Europe 
 
 from such a point of view that I intend 
 to present some of the points that appealed 
 to me as particularly interesting in several 
 of the European countries. 
 
 The countries forming the Triple Alli- 
 ance — Germany, Austria -Hungary, and 
 Italy — offer the most widely divergent in- 
 dustrial conditions; but because of politi- 
 cal bonds there has been a close relation 
 between the financial and commercial inter- 
 ests of the three nations, and an interchange 
 of capital, so they have come to form a 
 natural industrial group as well as a political 
 alliance. 
 
 Of all the European powers the industrial 
 newness of Italy strikes one most sharply. 
 That is true both as to actual lack of devel- 
 opment, and from the fact that one natu- 
 rally associates Roman surroundings with 
 age. We are inclined to think of Italy as 
 a land of cathedrals and art-galleries, blue 
 skies and sunshine, where the rich go for 
 pleasure, and the poor stay to beg; and the 
 industrial importance of the country is not 
 a subject that many of our own people have 
 considered deeply. While Italy abounds in 
 glorious history, and is a land of great mem- 
 ories, it has in modern times held a com- 
 paratively small place in the industrial history 
 of the world. Developments are going on 
 there now, however, particularly in the north, 
 141 
 
Business and Education 
 
 which promise to bring the measure of 
 Italy's industrial importance much higher up 
 in the column of totals. Southern Italy is 
 hopelessly handicapped for a long time to 
 come by the system of land-ownership, the 
 hardships of taxes, the extreme poverty of 
 the people, and their consequent deteriora- 
 tion from an industrial point of view, and 
 by excessive illiteracy. The elementary and 
 secondary schools there are incredibly bad; 
 teaching is the least honored of the learned 
 professions. Conditions are far better in the 
 north. There are found small individual 
 ownership of land, and an independence and 
 thrift, in striking contrast to the south. The 
 people take more readily to industrial pur- 
 suits, too, and there is really striking prog- 
 ress in the recent upbuilding of many 
 industries. 
 
 Prior to 1871, when church and state were 
 separated, and the present political regime 
 inaugurated, the industries of Italy were 
 comparatively insignificant, viewed from the 
 standpoint of international trade. The pop- 
 ulation was largely given up to agriculture. 
 In the thirty years that have elapsed there 
 has been notable industrial growth, and that 
 growth is now going forward at a steadily 
 accelerated pace. One-third of all the silk 
 used in the world comes from Italy. Nearly 
 as great progress has been made in the 
 142 
 
" Commercial Invasion " of Europe 
 
 weaving and spinning of the silk cloth as 
 in the production of raw silk. In three years 
 the exports of woven silk have risen from 
 $65,000,000 to $100,000,000. Great prog- 
 ress has also been made in cotton-weaving. 
 The industry did not exist twenty-five years 
 ago, while now it employs 80,000 men 
 and produces annually an output valued at 
 $60,000,000. 
 
 The cheap labor of Italy and its compara- 
 tive efficiency have attracted English manu- 
 facturers. Two or three of the best known 
 of the English glove-makers have large fac- 
 tories in Naples. I saw gloves there being 
 turned out by the thousands, stamped with 
 the imprint of well-known English names, 
 and completed by the addition of buttons 
 bearing the legend " Made in England " — 
 a bit of commercial artifice that must be 
 confusing to customs officials when they 
 later attempt to classify England's exports. 
 Endless cartons of beautifully fashioned arti- 
 ficial flowers, believed by the people who 
 buy them to have been created by the deft 
 touch of Parisian fingers, are likewise made 
 in Naples, and later have 100 per cent or 
 more added to their value by having French 
 names pasted on the boxes. 
 
 The industrial development of Italy has 
 two distressing impediments. One is the 
 high rate of taxes, the other the high cost 
 143 
 
Business and Education 
 
 of fuel. In army-ridden Europe there is 
 no other country where the per capita cost 
 of maintaining the miHtary estabhshment is 
 so great as it is in Italy, and no other coun- 
 try where the people are so little able to 
 afford the glories of armies in the field and 
 of fleets at sea. Italy as a nation is out of 
 her rank in attempting to maintain a first- 
 class war footing, and, until her military ex- 
 penditures are reduced to a point commen- 
 surate with her population and wealth the 
 military burden will be an almost insur- 
 mountable obstacle to the desire of her com- 
 mercial citizens to have the country take 
 foremost rank as a producing nation. 
 
 A hindrance to industrial growth, second 
 in importance to that of the demand of the 
 war-chests, is the lack of coal. All the coal 
 used on the railroads and in the factories 
 is shipped from other countries, and Italy's 
 trade balance is reduced each year by the 
 full amount of her fuel bill. This not only 
 has a most unfavorable effect on her balance 
 of trade, but it means that the cost of fuel 
 in Italy is very much higher than is the cost 
 in any of the countries with which she must 
 compete industrially. At Italian seaports 
 the price of coal ranges from $7 to $10 a 
 ton. In Milan manufacturers pay $12 a ton 
 for coal for which German manufacturers 
 pay $6, which the English manufacturer can 
 144 
 
" Commercial Invasion " of Europe 
 
 get for $4, and which is laid down at many 
 factories in the United States at $2.50 a 
 ton. There is only one locality in the king- 
 dom where coal is mined, and the output is 
 small and the quality poor. 
 
 There seems to be more prospect ahead 
 for Italian industries being relieved from 
 the burden of high fuel charges than from 
 the weight of excessive military taxes. Italy 
 abounds in water-power, and there is just 
 now a great awakening in regard to the 
 development of that latent energy. Manu- 
 facturers are coming to understand that 
 future development will most likely be 
 reached along lines of securing power at 
 low cost. Italy is remarkably favored with 
 water-power. To the north are the Alps, 
 and the Apennines run far south along the 
 centre of the Peninsula. The country is an 
 immense watershed, down which innumer- 
 able streams flow, none of them very large, 
 but all falling a great distance, and develop- 
 ing in their descent a prodigious amount of 
 power. Engineers who have made a study 
 of the situation estimate that the rivers of 
 Italy can be made to furnish more than 
 2,5CX),ooo horse-power, which has a value 
 equivalent to coal now costing $125,000,000. 
 More than 1000 companies have been organ- 
 ized in the last few years to erect power 
 plants along these streams. 
 '° 145 
 
Business and Ediocation 
 
 Italy is lacking in any large fund of cap- 
 ital available for aiding her industrial devel- 
 opment. Investment in stock companies has 
 not yet become popular. The Italian is ex- 
 tremely distrustful in finance; his distrust 
 has a fundamental basis in a fear even of 
 banks and bank accounts. He wants to keep 
 his property out of the sight of a tax- 
 gatherer, and he does not put great depend- 
 ence in the commercial signature of his 
 fellow. The use of bank-checks in current 
 daily business is almost unknown. There 
 are large savings-bank deposits, but the 
 people have not reached a point in com- 
 mercial development where they will give 
 their capital an effective aggregate by in- 
 vestment in corporate securities. Before 
 Italy cut loose from France and joined her 
 political fortunes with Austria and Ger- 
 many, French capital had looked with favor 
 upon Italian enterprises. After the political 
 changes of 1887, the Italian exports to 
 France dropped from $81,000,000 to $34,- 
 000,000, and have continued at about the 
 lower figure, and French capital ceased to 
 flow into Italian investments. That has in 
 a measure been compensated for by the in- 
 terest that German capital has tal^en in 
 financial operations, but Germany's own in- 
 dustrial development went on so rapidly and 
 has now come to so many misfortunes that 
 146 
 
" Commercial Invasion " of Europe 
 
 the present offering of German capital is 
 much restricted. 
 
 Italy would look with great favor upon 
 any project to interest American capitalists 
 in her industrial development, and undoubt- 
 edly a field is there offered which will bear 
 some inspection at the hands of our finan- 
 ciers. In certain lines there is no possibility 
 of Italy successfully competing with the 
 United States, England, and Germany. The 
 lack of coal will leave the country out of 
 the race in iron and steel manufactures. In 
 those lines of industry, however, where cheap 
 labor is required, and where the cost of raw 
 material is favorable, there promises to be 
 much success. The labor is skilful and 
 effective, and manufacturers are not slow 
 in accepting mechanical improvements and 
 adopting modern methods. The fact that 
 the country is not on a gold basis is a draw- 
 back. Italian financiers are anxious to estab- 
 lish the gold standard. The Finance Min- 
 ister, Signor Chimirri, told me that he had 
 strong hopes of success in that direction. 
 It is recognized that the present uncertainty 
 regarding the value of the Italian money 
 standard acts as a serious deterrent to the 
 investment of foreign capital in the country. 
 An excessive issue of bank-notes, a survival 
 of former days, is the main reason for the 
 depreciation of the currency, but the Gov- 
 147 
 
Business and Ediocation 
 
 ernment now has a definite programme for 
 reducing the bank-note circulation by a fixed 
 amount each year. Pohtical conditions are 
 in many respects most unsatisfactory. In 
 many sections there is distressing poverty; 
 and the high price for food, made necessary 
 by heavy taxation, brings dire hardships into 
 the Hves of the common people. It has been 
 estimated that the average Italian laborer 
 has 310 pounds of cereal food during the 
 year, which is twenty-five per cent less than 
 is given the inmate of an English work- 
 house. Socialism is rampant, and the Gov- 
 ernment must be constantly on the alert to 
 prevent uprising. Judging by the precau- 
 tions taken, there are sections of the country 
 at all times on the point of an outbreak 
 against constituted authority, inspired by no 
 very definite political reasons and due more 
 to the desperation of hunger than to ideas 
 in political opposition to the Government. 
 The people are under the domination of an 
 army which takes not only the best blood 
 of the country, but imposes an almost un- 
 bearable weight of taxation on those left to 
 carry the burden. The army and navy alone 
 absorb six per cent of the country's income ; 
 or in other words, out of every $100 earned 
 in Italy, $6 is taken by the Government in 
 support of the military establishment. 
 The social and political unrest, the bur- 
 148 
 
" Commercial Invasion " of Europe 
 
 dens of taxation, and the uncertain money 
 standard must cause foreign capital to hesi- 
 tate even before opportunities that may look 
 alluring, while those same impediments, to- 
 gether with a lack of some of the most 
 essential raw materials and of home capital, 
 must make the further industrial develop- 
 ment of the country slow when measured by 
 our standards. The United States has no 
 need to fear Italian competition in the 
 world's markets in any of the great staples 
 of our manufactures. There is, however, 
 easy possibility of greatly increasing our 
 sales to Italy, particularly if her industrial 
 development goes forward along lines which 
 permit her to sell to us some commodities 
 which we can better buy than produce. 
 
 In the closing days of his public career 
 Prince Bismarck found occasion to say, 
 " Poor Austria, I fear her days are num- 
 bered." Let us hope the Chancellor did not 
 speak prophetically, but he certainly spoke 
 with profound perception of the cross-drifts 
 which are the despair of the statesmen of 
 Austria-Hungary. One of the most restive, 
 bewildering, and bewildered state-unions in 
 existence is the Dual Monarchy, a country 
 at once one and divided, a people ready to 
 overturn their government for a language 
 preference, a country of twenty tongues, 
 149 
 
Business and Education 
 
 each one berating the other, a country the 
 one-half of which puts trade barriers in the 
 way of the other half; Hungary jealous of 
 Austria, and Austria unable to forgive Hun- 
 gary its superior prosperity. The monarchy 
 is made up of conglomerate peoples, unable 
 to act and think together, and habitually 
 threatening to act and think apart. In no 
 other country of Europe are industrial condi- 
 tions so complicated by politics, hereditary 
 jealousies, class distinctions, church influ- 
 ences, and a babel of tongues that cannot 
 be harmonized either in speech or senti- 
 ments. For the present the personality of 
 the venerable Franz Joseph holds together 
 these varied elements. What will come to 
 the Dual Monarchy after Franz Joseph is 
 a question never out of the mind of any 
 European statesman. 
 
 It is in the midst of this political turmoil 
 that the idea was born for a European tariff 
 alliance against America. It is here that one 
 finds the keenest antagonism toward com- 
 mercial America, and the most earnest efforts 
 to block by legislation a commercial invasion 
 that could not be met by methods of superior 
 industrial merit. 
 
 The president of the Chamber of Com- 
 merce at Vienna explained to me the 
 Austrian position on this matter of tariff 
 discrimination against the United States. 
 150 
 
" Commercial Invasion " of Europe 
 
 " America is destined, beyond question, to 
 be a most powerful country," said he. " We 
 regard it as the most dangerous competitor 
 in all our markets. The marrow and bone 
 of her prosperity we believe to be her pro- 
 tective tariff, which has enabled her to build 
 up her industries and develop her resources. 
 The Steel Trust shows us what we have to 
 expect in the future. We shall have to 
 adopt the same policy, and we will do it. 
 Whenever we discover that American com- 
 petition is hurting any of our industries, we 
 shall certainly shut out America if we can. 
 If we do not succeed in making a satisfac- 
 tory treaty with the United States, we shall 
 look to Russia and Australia for the raw 
 materials we may need, for to those coun- 
 tries we shall be able to sell the products of 
 our industry." 
 
 These words must not be considered as 
 the expression of a private citizen, but as 
 having official character, for the Chamber 
 of Commerce is an official advisory insti- 
 tution for the aid of the government in the 
 preparation of legislation. The best judg- 
 ment in Europe and America is, I believe, 
 pretty well agreed on the futility of a Euro- 
 pean tariff alliance against the United States. 
 Not one of our ambassadors or ministers 
 believes it is a feasible programme for the 
 European States, no matter how antagon- 
 ist 
 
Bwsmess and Education 
 
 istic European statesmen may become toward 
 us on account of our commercial success in 
 foreign fields. I found no important banker 
 or manufacturer who thought it probable 
 that the conflicting interests of the various 
 States could be brought to any harmonious 
 point of view from which to formulate such 
 a tariff. Undoubtedly it is a dream in the 
 minds of many people who have not a clear 
 idea of the difficulties involved, but certainly 
 the best judgment of the two continents 
 seems against the feasibility of the idea. 
 Conflicting interests can never be harmon- 
 ized so that an agreement will be reached 
 among the nations. Indeed, conflicting in- 
 terests in the Dual Monarchy itself can prob- 
 ably never be harmonized so as to support 
 Count Goluchowski's programme. Austria 
 is a manufacturing country. Her people 
 have highly developed artistic faculties, and 
 a deftness and skill which make her a leader 
 in certain of the finer lines of production, 
 and she has some standing as a producer 
 of iron, steel, and machinery. Hungary, on 
 the other hand, is as yet almost altogether 
 an agricultural country. Austria wants high 
 tariff and cheap food; Hungary would like 
 to exclude foreign food and have the advan- 
 tage of cheap foreign manufactures. The 
 two parts of the monarchy are held to- 
 gether by a slender thread, and the fretful 
 '52 
 
" Commercial Invasion " of Europe 
 
 people that compose the two nations will 
 only agree that that bond may hold them 
 for ten years at a time. The Ausgleich 
 expired in 1897, and for four years the 
 two States have wrangled over its renewal, 
 industry and commerce being all that time 
 greatly perturbed. 
 
 If we look at Austria as a competitor for 
 the world's trade, it is easy to see that there 
 is small occasion for us to be alarmed. The 
 obstacles which political conditions set up in 
 the way of industrial progress are almost in- 
 surmountable. Everywhere in Europe there 
 is found a weight of taxes bearing on in- 
 dustry much greater than with us. In Aus- 
 tria this is notably so. A Viennese engineer 
 who builds iron bridges on a large scale told 
 me something of the difficulties an Austrian 
 manufacturer has to face as a result of the 
 visits of the tax-gatherer: 
 
 *' In calculating the cost of a piece of 
 work," he said, " there are three important 
 elements: the cost of the material, the cost 
 of labor, and the allowance for taxation. 
 Our tax laws are somewhat complicated, 
 but I have found that an approximation, 
 which is close, will amount to sixty per cent 
 of the labor cost, which we must add for 
 taxes." 
 
 If manufacturers in this country were 
 obliged to add to the cost of their products 
 153 
 
Business and Education 
 
 sixty per cent of what they pay for the labor 
 that enters into them, as a contribution to 
 federal taxation, our success in the world's 
 competition would be slow. 
 
 In Vienna I met an American who is at 
 the head of one of the large boiler-works in 
 this country. He had been interested in 
 making comparisons of the cost of labor and 
 of the methods of work in the Viennese fac- 
 tories, and I found him amazed at the waste- 
 ful methods and the high labor-cost that 
 resulted from the Austrian manufacturers 
 failing to use modern machinery. 
 
 " I was informed in one shop," he told 
 me, " that a boiler of about 150 horse-power 
 cost for labor alone $750. That boiler 
 would have been built in an up-to-date shop 
 in America for a labor-cost of $150. In 
 the United States three workmen with mod- 
 ern tools would accomplish as much in one 
 day as would be done by four workmen in 
 a Vienna shop working one week. The cost 
 of the labor in the United States would be 
 about $5, the men receiving for this class 
 of rough work a little more than $1.50 a 
 day. Of the four men in the Vienna shop, 
 two would receive eighty cents a day, one 
 sixty cents, and one forty cents, but even at 
 those low wages the total labor cost there 
 would be $15.60 against about $5 with us. 
 I found an almost total absence of labor- 
 154 
 
" Commercial Invasion " of Europe 
 
 saving machinery in some of the largest 
 shops in Vienna — plates were being handled 
 by hand; there were no riveting machines, 
 no travelling cranes, or modern hoists." 
 
 I asked a large manufacturer in Vienna 
 why he did not introduce modern labor- 
 saving machinery. He had been in Amer- 
 ican shops and was fairly well posted on 
 what was possible in the way of reducing 
 the amount of labor entering into his prod- 
 uct. His line of reasoning was interesting : 
 
 " You will not find the latest labor-saving 
 machinery here," he said, " because labor is 
 so cheap that it does not pay to have the 
 best machinery as it does with you. If we 
 invest money in labor-saving machinery, the 
 interest on the cost of that investment goes 
 on every day in the year, and every succeed- 
 ing year, whether times are good or bad 
 and orders many or few. With our cheap 
 labor it is different. When we have a rush 
 of work we can employ more men ; in slack 
 seasons we can discharge them. The trouble 
 with labor-saving machinery is that you can- 
 not discharge it when you have no work for 
 it to do." 
 
 Labor waste is not confined to industrial 
 life by any means. Austria furnishes end- 
 less illustration of a situation which is found 
 in about all the European countries, but 
 which is in its highest development in Italy, 
 155 
 
Business and Education 
 
 Austria, and Russia. In those countries the 
 greatest ingenuity has been exercised in 
 devising positions where the service per- 
 formed is useless. Everyv^here flunkeys 
 stand ready to perform unnecessary services 
 for one. You are not given an opportunity 
 even to open the door -^ a retainer always 
 stands ready to do it for you, and then hold 
 out his hand. If you call at a bank or 
 public office, the concierge opens the door 
 with great obsequiousness and hands you 
 over to a guide, who shows you to the door 
 of the room sought, where a flunkey takes 
 your hat and coat, another your card, and 
 still another ushers you in. On leaving, it 
 is advisable to remember all these hard- 
 working citizens with a pittance if you in- 
 tend to make another visit and desire easy 
 access. All this is typical of the way labor 
 is wasted in the greater part of the Conti- 
 nent of Europe. The thing seems to be done 
 on principle, and to be generally approved 
 on the ground that that system is best which 
 keeps the most people employed. Any man 
 who can create two jobs where there was 
 only one job before, appears to be regarded 
 as a public benefactor. The street-sprink- 
 ling carts in Vienna make a good illustra- 
 tion. A hose about six feet long is attached 
 to the rear of the cart, and a rope about ten 
 feet long is tied to the end of the hose. One 
 '56 
 
" Commercial Invasion '* of Europe 
 
 man drives the cart while another walks 
 behind holding the rope and swinging the 
 hose from side to side. If an American 
 should try to introduce sprinkling-carts that 
 could be operated by the driver, he would 
 certainly be unpopular. " Why rob a poor 
 man of his job? There is not enough work 
 now to go round, and labor is cheap. It 's a 
 small matter. These people are not able to 
 do anything else; they have no trade, and if 
 you introduce a device which renders their 
 help unnecessary you simply force them to 
 starve and become a burden upon the State." 
 That is the kind of Chinese economics which 
 I heard from educated men in various cities 
 on the Continent. It did not seem to occur 
 to them that work makes work; that the 
 amount of work which the world wants done 
 and is ready to pay for is capable of indef- 
 inite increase, or that habits of slothful and 
 unnecessary work must breed a people inca- 
 pable of energy and enterprise. It takes two 
 men to handle a plough in Europe, not be- 
 cause one man really cannot do it alone, but 
 because public sentiment approves the em- 
 ployment of an extra man wherever the 
 slightest excuse can be found for him. 
 
 It needs only the period covered by the 
 memory of a man still young to make the 
 comparison which will show that the indus- 
 trial life of Germany is in its beginnings. 
 157 
 
Business and Education 
 
 The picture of Germany twenty-five years 
 ago, contrasted with the industrial Germany 
 of to-day, shows a genius for work, a deter- 
 mination for development, and a rapidity of 
 progress which can be matched nowhere in 
 the world, unless it is in the United States. 
 The Germany of thirty-five years ago bore 
 almost as little relation to the Germany of 
 to-day as did some portions of the United 
 States to our present condition. 
 
 A great plain covering the entire north 
 and east of the country where small crops 
 were grown at high cost and with great 
 labor: a table-land in the south almost as 
 barren ; a few seaports, in only two of which 
 was there entrance for vessels of the deepest 
 draught; a large system of shallow rivers; 
 fertile valleys in the south and west, but 
 covering not over one-tenth of the area of 
 the country; large deposits of low-grade 
 iron ore ; a coal area limited in extent with 
 deep-lying seams from which came a product 
 of poor quality; small deposits of copper, 
 lead, and zinc; a large forest in the south; 
 a small commerce; a manufacturing in- 
 dustry hardly worthy of the name; a dis- 
 ordered currency, a disorganized banking 
 system, a deranged financial system, a con- 
 fused foreign policy; a people divided into 
 twenty-three states with only the tie of a 
 common customs union, the coercion of the 
 
 158 
 
" Commercial Invasion " of Europe 
 
 Prussian hegemony, and a common language 
 and literature — such were the materials of 
 thirty-five years ago, out of which modern 
 Germany was to be constructed. 
 
 A population numbering 56,000,000, 
 firmly united into a great national state; a 
 system of internal communication the second 
 largest in the world; a foreign commerce 
 inferior only to that of England and the 
 United States, which has reached out to the 
 uttermost parts of the world in its conquest 
 of markets, and has won its place in the 
 face of long-standing commercial connec- 
 tions; a system of industry which has util- 
 ized to the full every resource the nation pos- 
 sessed, which has brought the waste places 
 under cultivation, and by careful methods of 
 scientific agriculture has developed the yield 
 of the soil more than threefold, creating de 
 novo the beet-sugar industry ; a system which 
 has quadrupled the production of coal and 
 tripled the production of iron; which has 
 developed the greatest chemical trade, the 
 second largest electrical industries, the third 
 textile, iron, and steel industries, and the 
 second shipping system of the whole world ; 
 which has tripled the city population, re- 
 duced a large and threatening emigration to 
 insignificant proportions, raised wages, in- 
 creased the value of land, and tripled the 
 revenues of the State ; a strong, self-reliant, 
 
 159 
 
Business and Ediication 
 
 progressive, prosperous nation — such is 
 modern Germany, the result of thirty years 
 of nation-building. 
 
 Never before in the industrial history of 
 the world, unless we except the victory of 
 the same race in the Low Countries over the 
 waves and tides of the German Ocean, has 
 such success been achieved against such 
 heavy odds. England has succeeded, but 
 England was never cursed by invasion and 
 civil war. England's soil is fertile. Her 
 coasts are indented with fine harbors. Her 
 security made her the home of the great in- 
 ventions, and those inventions gave her the 
 commerce of the world for more than three- 
 quarters of the nineteenth century. The 
 United States has succeeded, but the United 
 States was blessed with the richest heritage 
 of natural wealth that ever fell to the lot 
 of any people. Planted in the midst of a 
 continent, with a soil of extraordinary rich- 
 ness ; with the coal seams lying open on the 
 river-banks, and iron only needed to be quar- 
 ried from the surface; with river systems 
 penetrating every part of the country, and 
 a chain of lakes to supplement the rivers; 
 with great harbors to receive and send out 
 foreign trade, and with the hungry multi- 
 tudes of Europe in sore need of our surplus 
 ^ — with all these natural advantages, and 
 with only one serious catastrophe to our na- 
 i6o 
 
" Commercial Invasion *' of Europe 
 
 tional development for eighty years, it is 
 no wonder we have succeeded. 
 
 Germany had none of these advantages. 
 Germany must needs dredge her seaports, 
 deepen her rivers, supply her deficiencies in 
 raw material by importation, import the ma- 
 chinery for her factories, and the technical 
 skill to direct the machinery; build a rail- 
 road system to carry her manufactured 
 goods long distances to the sea-coast; and 
 when she has done all this must fight her 
 way into markets which England and France 
 had long since occupied. To do all this 
 while guarding against invasion on both 
 frontiers, and bearing a heavy burden of 
 taxation and military service, to succeed 
 with no other aids than those of the national 
 genius for hard work and the national am- 
 bition for a great and commanding place 
 among nations, and to win such success in 
 the face of such difficulties is an achievement 
 before which both England and America 
 should uncover in admiration and surprise. 
 If the measure of success which a nation 
 achieves over adverse circumstances is the 
 test of greatness, then Germany is the great- 
 est nation in the world. 
 
 I reached Germany fresh from a study of 
 
 most of the other Continental countries. In 
 
 none of them had I found anything to lessen 
 
 the conviction with which every American 
 
 II i6i 
 
Business and Education 
 
 goes abroad, that his own country is supe- 
 rior in every respect to all other nations. 
 Most of those nations are in one respect or 
 another unmodern and unprogressive. They 
 are succeeding slowly, and in few of the 
 countries are the whole people united in an 
 effort to achieve success. Their industrial 
 regeneration is only just beginning: the 
 United States has little to learn from them. 
 
 But in Germany we find not only a state 
 with apparently a great future, but a state 
 which has begun to realize that future in a 
 thoroughly modern way. The system of 
 education, elementary, secondary, and uni- 
 versity, certainly rivals our own, and is prob- 
 ably superior to it. It is a system which 
 leaves less than three per cent of the popu- 
 lation illiterate, and sifts out the brightest 
 minds and trains them for the service of the 
 State. The State in turn is eager and anx- 
 ious to avail itself of the services of men who 
 have won intellectual distinction. There is 
 a system of commercial education whose 
 founders realized that successfully to deal 
 with foreigners requires a speaking and 
 writing knowledge of their language. There 
 is a national and municipal administration 
 which in their effectiveness and absolute in- 
 tegrity must bring shame to the resident of 
 almost any American city when he compares 
 them with conditions surrounding him at 
 162 
 
" Commercial Invasion ** of Europe 
 
 home. The Government has encouraged 
 commerce and foreign trade with great in- 
 telHgence. It has estabhshed the gold stan- 
 dard and so organized the Reichsbank, that 
 the mechanism of exchange has the founda- 
 tion of secure confidence. It has aided in the 
 estabhshment of German banks abroad, and 
 placed German traders in the position of 
 distinct advantage in pushing their commer- 
 cial conquests. A trained consular service 
 has been developed, composed of men who 
 speak the language of the country to which 
 they are sent, and who use the language to 
 find out whatever may be of service to the 
 German exporter. 
 
 The Government has pursued a consistent 
 policy in its trade relations and commercial 
 treaties, which has all along been wisely 
 adapted to the needs of the national econ- 
 omy. While the industries were getting a 
 foothold, they were protected by high duties. 
 When their development had reached the 
 stage of independence, and when their chief 
 need was new markets, the Government made 
 concessions to neighboring States in the cus- 
 toms tariff, and, by a series of treaties com- 
 pleted in 1893, admitted raw materials at 
 low duties in return for similar privileges 
 conceded to German manufactured exports. 
 The Government early saw that private rail- 
 way management in Germany was unfa- 
 163 
 
Business and Editcation 
 
 vorable to the export trade, because it had not 
 learned the lesson of scientific rate-making, 
 which we in the United States have only in 
 recent years mastered. Perceiving this fact, 
 the German Government took most of the 
 private lines, and added to them until, in 
 1901, out of 30,777 miles of railway more 
 than 27,000 belonged to the State. In full 
 control of the railway system, the State ad- 
 ministration has worked out, very success- 
 fully, the basic principles of rate-making, to 
 increase the rates with the value of the 
 freight. It has granted low rates on iron 
 and coal, to which concessions the iron and 
 steel industry of Westphalia owes in large 
 measure its prosperity. The German Gov- 
 ernment also has not hesitated to use the 
 bounty system to build up the national in- 
 dustries. The beet-sugar industry owes its 
 existence quite as much to the aid of the 
 State as to the painstaking care of the owner 
 and scientist, and in a single year the exports 
 of sugar and glucose to Great Britain from 
 Germany have amounted to more than $50,- 
 000,000. The German merchant marine has 
 been intelligently assisted by liberal subsi- 
 dies. I found among business men a quite 
 general agreement as to the great benefits 
 which industry and commerce had derived 
 from subsidies. 
 
 I asked Mr. Louis J. Magee, who might 
 164 
 
" Commercial Invasion " of Europe 
 
 be called an American-German, since he was 
 born and educated in this country, but has 
 spent twelve years in Germany as the man- 
 aging director of the Union Electrical Ge- 
 sellschaft, what in his opinion were the rela- 
 tive advantages of Germany and America. 
 His reply is suggestive : " Most Americans 
 are mistaken when they imagine that Amer- 
 ica is much ahead of Germany in manufac- 
 turing. It is six of one and half a dozen of 
 the other. In some lines the United States 
 has the advantage and is sending in goods 
 to Germany. This is true of typewriters, 
 bicycles, and of some other specialties re- 
 quiring interchangeable parts. It is hardly 
 true that Germany cannot make these things 
 as well as America, but rather that it is more 
 convenient and cheaper for Germany to buy 
 them of America than make them. Our 
 company, for instance, might make much of 
 the machinery that we use, but it has rela- 
 tions with the parent company in America, 
 and so buys the things from America. It 
 should be noted also that Germany excels in 
 some specialties; for example, the Mauser 
 rifle. It is the best in the world, and Ger- 
 many is exporting it to all countries. In the 
 same way your laboratories import certain 
 chemicals and certain instruments from 
 Germany, not because America cannot make 
 them, but because they are cheaply made in 
 
Business and Education 
 
 Germany and that is the best place to get 
 them. Americans make a great mistake in 
 supposing that Germany is not up to date. 
 Every German manufacturer knows exactly 
 what is being done in his line in the United 
 States, and knows what kind of machinery 
 is being used. If he does not use it himself 
 he has a reason that is satisfactory to him. 
 The Germans are more conservative than 
 the Americans. 
 
 " This fact can be illustrated, perhaps, by 
 the automobile cab system. A superficial 
 observer, knowing that these cabs were in 
 use in American cities, would draw the con- 
 clusion that Germany was not so progressive 
 as America. But if he happened to know 
 that the companies in Boston and Chicago 
 had been financially unsuccessful, his con- 
 clusion might not be so unfavorable to the 
 German. The German has considered the 
 advantages of the electric cab very carefully, 
 and has not introduced them in the German 
 cities simply because he has decided that they 
 would not pay." 
 
 Somewhat along this line Mr. Magee 
 spoke of the Germans' ability in the field of 
 science, and commended their habit of stim- 
 ulating and encouraging independent inves- 
 tigation. He regarded the Germans in this 
 respect as superior to the Americans. 
 " Americans are brilliant," he said, " and 
 i66 
 
** Commercial Invasion " of Europe 
 
 many splendid ideas — which the Germans 
 call epoch-making — such as the cotton-gin, 
 have come spontaneously. In the main, 
 however, this is not the case. The great dis- 
 coveries of the world have come, as a rule, 
 as the result of patient effort and study. In 
 this the Germans are adepts. In Germany 
 every encouragement is given to a man to 
 devote time and thought to new ways of 
 doing things." Mr. Magee spoke of the 
 Nernst lamp in this connection. This dis- 
 covery of a German professor will make it 
 possible, it is believed, to secure illumina- 
 tion from electricity with only half of the 
 current used that is now necessary. It will 
 throw into the hands of many thousands of 
 people the possibility of using this form of 
 illumination. " It is quite possible," Mr. 
 Magee said, " that improvements on this 
 lamp may come from America. It will still 
 be the Nernst lamp, however. What I want 
 to see is a Nernst in America." During the 
 last few years the reports of scientific dis- 
 coveries contained in the American scien- 
 tific journals have contained hardly an 
 American name to act as a landmark. The 
 names of the chief men in science to-day are, 
 with almost no exceptions, men of foreign 
 birth or descent. 
 
 " The difference," said Mr. Magee, " lies 
 in the fact that the Germans are patient, 
 167 
 
Busmess and Edtication 
 
 studious, thorough people, and they go to 
 the bottom of things. The Americans, on 
 the other hand, are more or less superficial. 
 They are brilliant, but they have n't time to 
 look at a subject from all sides and probe 
 into it deeply as the Germans do. In science, 
 particularly, there is n't the inducement that 
 is offered to investigators here in this coun- 
 try. In other fields the same conditions hold 
 true. In political economy, for instance, you 
 find the same thing. A man learns a little 
 from his Walker and his Adam Smith in 
 college, but he does not, as the Germans do, 
 have pointed out to him the exact places 
 v^here the requirements are not fulfilled, 
 where the shoe pinches, and then set to work 
 to gather all the data bearing on that par- 
 ticular part of the problem, in order that he 
 may find a solution of the difficulty." 
 
 One is at once impressed with the fact 
 that the Germans have been quicker than 
 other nations to take advantage of improved 
 machinery and methods. An inspection of 
 our exports to Germany in the last half 
 dozen years shows an extremely satisfactory 
 increase in our sales of manufactured goods, 
 but an analysis of the character of those 
 manufactures brings out the fact that a large 
 part has been in labor-saving machines, 
 whose economics have at once been turned 
 against us. There are some shops in Ger- 
 i68 
 
" Commercial Invasion " of Europe 
 
 many that are quite as admirably fitted with 
 modern machinery as would be correspond- 
 ing shops with us; and with such superior 
 equipment, and with labor costing little if 
 any more than half what our labor is paid, 
 the German manufacture will make us look 
 to our laurels. 
 
 It is true that present economic conditions 
 in Germany are far from satisfactory. Ger- 
 many has gone ahead under too great a 
 pressure. The pendulum has swung too far 
 and is swinging back. There has for some 
 months been a marked depression in many 
 manufacturing lines, and conditions have 
 prevailed that have caused apprehension and 
 loss. The German banks do not follow the 
 conservative English and American custom 
 regarding the promotion of industrial enter- 
 prises, and some of them have become in- 
 volved in the fate of corporations which they 
 have promoted and whose securities they 
 have sold to their clients. I believe the un- 
 satisfactory situation in Germany, however, 
 is only a reaction from too rapid progress ; 
 the fundamental conditions are sound, and 
 in the world's markets we are pretty sure 
 to find Germany one of our most able com- 
 petitors. 
 
 While the conditions surrounding invest- 
 ments in Germany are in many respects much 
 better than in Italy or Austria-Hungary, the 
 169 
 
Busmess and Education 
 
 superior conditions are conpensated by lower 
 interest returns. The Germans are wide- 
 awake financiers, as well as manufacturers, 
 and the opportunity for American capital- 
 ists to teach them lessons is not as good as 
 in most of the other European countries. 
 In some respects we could learn a good deal 
 that would be of advantage to our own in- 
 vestment circles from the German practice. 
 A code of corporation laws has been en- 
 acted that has many points of great excel- 
 lence, but the Government has shown its 
 paternalism to a great degree in its effort to 
 control operations on the stock and produce 
 exchanges, and business has been much ham- 
 pered from that cause. 
 
 Kaiser Wilhelm has said — and industrial 
 Germany agrees with him — that the future 
 of the German nation lies on the sea. Ger- 
 many is a poor country. Her coal mines are, 
 in some places, 3,000 feet deep. Her iron 
 ores must be supplemented from the richer 
 deposits of Spain and Sweden. As popula- 
 tion increases, Germany must import an in- 
 creasing proportion of her food-supply. Her 
 raw silk and cotton must be imported, and 
 in fact she is independent in no single raw 
 material. Her people must levy upon the 
 whole world for their sustenance and to 
 maintain their industries. To such a nation 
 foreign commerce is as the breath of life. 
 170 
 
" Commercial Invasion " of Europe 
 
 If four continents should sink into the sea, 
 the United States would still live. But cut 
 off Germany from her foreign trade, and 
 she must perish. 
 
 To sum up the situation, so far as the na- 
 tions of the Triple Alliance are concerned, 
 we see that Italy and the Dual Monarchy 
 are not likely to become formidable competi- 
 tors of ours in the world's markets; that 
 Germany is endowed with a spirit and am- 
 bition which will probably make her our 
 keenest rival, although we have clear ad- 
 vantages in cheap raw materials. If we turn 
 our attention toward investments in these 
 countries, attractive opportunities will be 
 found in Italy, but hampered by an uncer- 
 tain currency standard and excessive tax- 
 ation. Opportunity for the introduction of 
 improved methods is even greater in Aus- 
 tria, but political uncertainties and racial an- 
 tagonism more than counteract that advan- 
 tage, and the money standard is quite as 
 uncertain as in Italy. There is much greater 
 investment safety in Germany, and that, I 
 believe is true, in spite of the headlong de- 
 clines which securities have made on the 
 German exchanges. 
 
 171 
 
Business and Education 
 
 III. England, France, and Russia 
 
 It is in Great Britain that we find in its 
 fullest development the effect of the Ameri- 
 can commercial invasion of the world's mar- 
 kets. It is true that American competition 
 has been making notable inroads into the 
 commerce of all the countries of Europe. 
 But important as is the effect which has been 
 produced upon commercial conditions in the 
 Continental countries, that result is almost 
 insignificant when compared with the con- 
 sequence of this competition in Great Bri- 
 tain. From the beginning of our history 
 England has formed our most important 
 market, and for two generations at least we 
 have been the largest customers for English 
 products. In the last half dozen years a 
 change has taken place in the trade balance 
 between the two nations which is, perhaps, 
 the most notable single commercial event to 
 be recorded in the last decade. We have 
 been steadily reducing our purchases from 
 the mother-country; we have been making 
 astounding increases in our sales to her. 
 Comparing, for instance, the change which 
 has taken place in the trade movement be- 
 tween the two nations in the last half dozen 
 years we see that our annual purchases from 
 the United Kingdom have dropped $16,000,- 
 172 
 
" C(ymmmM'Trvva^ion " of Europe 
 
 ooo, standing last year at $143,000,000. In 
 the same period our sales to Great Britain 
 nearly doubled, going up from $387,000,000 
 in 1895 to $631,000,000 last year. This 
 change in the annual trade balance, showing 
 for us a more favorable total by $260,000,- 
 000 than we had six years ago, is a change 
 of such import as can only mean revolution- 
 ary transformation in the industrial life of 
 the two nations. These figures are so sig- 
 nificant that they need to be dwelt on some- 
 what, to fix in the mind their importance. 
 Six years ago we sold to Great Britain 
 $228,000,000 more than we bought. Last 
 year we sold to her $488,000,000 more than 
 our purchases. In every business day last 
 year we sent to her $1,500,000 more than we 
 bought. For every dollar's worth of goods 
 we bought we sold her four dollars and 
 forty-one cents' worth of our products. 
 
 The relative importance of the increase 
 in our trade with Great Britain is shown 
 when we compare it with the increase which 
 we have made in our sales to all the rest of 
 Europe. Noting that our favorable balance 
 in the trade with Great Britain last year 
 showed an increase of $488,000,000 over 
 the record of 1895, we find that that figure 
 compares with an increase in the same period 
 of $219,000,000 in our trade with all Con- 
 tinental Europe. 
 
 173 
 
Busmess and Education 
 
 Such figures as these make it easy to see 
 why the industries of Great Britain have 
 more keenly felt our competition than has the 
 rest of Europe, but even these statistics by 
 no means measure in its full significance the 
 efifect upon British commerce of the '' Amer- 
 ican invasion." 
 
 The nineteenth century may well be said 
 to have been the century of Great Britain's 
 commercial supremacy. During that hun- 
 dred years the industries of the country stood 
 pre-eminent in almost every line of manufac- 
 turing. British manufacturers commanded 
 completely their domestic field, but they did 
 much more than that. They were in easy 
 control of the greater part of the world's 
 commerce in manufactured products. Not 
 only have their workshops held a command- 
 ing position, but pre-eminence has been made 
 more secure by control, in large measure, 
 of the commercial fleets of the world. 
 
 When our own manufacturers began seri- 
 ously to reach out a few years ago for for- 
 eign trade, there were few of them with the 
 hardihood to attempt to meet British com- 
 petition in the home field. What we did do 
 was successfully to compete at points so far 
 distant from the British factories that our 
 own producers were little handicapped in 
 the way of freight charges. We success- 
 fully entered the South African gold-fields 
 
 174 
 
" Commercial Invasion ** of Europe 
 
 and supplied most of the machinery for oper- 
 ating the deep mines of the Rand. We went 
 into the harvest fields of almost every British 
 colony and sold agricultural implements to 
 cultivate and gather their grain. We began 
 successfully to compete in bridge-building 
 on the pioneer railroads of Africa, and then 
 we supplied those railways with locomotives, 
 as we did also the government lines of India 
 and the Far East. Our success extended 
 rapidly, and it soon became evident that the 
 political ties of Great Britain's colonies were 
 not in themselves sufficient to bind to her 
 their trade. For a good many years English 
 contractors had things their own way in 
 railroad-building in the British colonies. 
 One day we shocked them when their own 
 best bid of 15 guineas a ton for construct- 
 ing the Atbara Bridge was met by an Amer- 
 ican bid of £10 13s. 6d., and their time of 
 twenty-six weeks was cut by the American 
 contractor to fourteen weeks. They were 
 soon still more surprised when the bids for 
 the Gokteik viaduct in Burma were opened. 
 This was a much more important work. 
 The best English bid was £26 los. per ton, 
 with three years' time to complete the job. 
 Americans took the contract at £15 a ton and 
 completed the work in twelve months. The 
 Ugandy viaducts, still more important in 
 size, were built by American contractors at 
 
 175 
 
Business and Education 
 
 a cost twenty per cent below the English 
 price, and they were completed in forty-six 
 weeks, against the English requirement of 
 130 weeks. 
 
 Such illustrations might be almost indef- 
 initely extended, nor would they need to be 
 confined to bridge-building. Their special 
 importance is in the basis which they formed 
 for a manufacturing competition which drew 
 nearer and nearer to the home market of 
 English manufacturers. Success upon suc- 
 cess has attended our efforts to compete in- 
 dustrially with England, until we are at last 
 sending our manufactured goods into the 
 centre of the Englishmen's domestic field. 
 There are English districts whose names 
 have become words in our language synony- 
 mous with certain great classes of manu- 
 factured goods. We have come to compete 
 successfully in those very fields in their 
 great specialties. It is literally true that we 
 have sold cottons in Manchester, pig-iron 
 in Lancashire, and steel in Sheffield. 
 
 Details of this invasion cover a broad 
 field. The changed relations between the 
 industries of the two countries are probably 
 the most pronounced in the production of 
 iron and steel, but in a hundred lines of 
 manufactures statistics tell the same story of 
 great growth in our exports and quiescence 
 or decadence in the corresponding British 
 176 
 
" Commercial Invasion " of Europe 
 
 field. Much less than a score of years ago 
 England produced twice' as much pig-iron 
 as was produced in the United States. Now 
 we have an output half as much again as 
 England's, in spite of the fact that her own 
 industry has steadily grown. For many 
 years we drew upon England for great 
 stocks of iron. Our early railroads were 
 laid with English rails. Now we are ship- 
 ping many thousand tons back across the 
 Atlantic to her and to her colonies around 
 the world. The record in iron has been far 
 eclipsed by the development in steel pro- 
 duction. We reached a point where we 
 could put unwrought steel into the English 
 markets in successful competition with the 
 steel mills there, and with that as a basis to 
 build on and with the aid of superior me- 
 chanical genius we have built up a market 
 of great proportions for almost every line 
 of iron and steel manufactures. We sent to 
 England in a single year lOO locomotives. 
 We have sent numberless stationary engines 
 of all types and sizes, and with them boilers, 
 pipes, pumps and pumping machinery, car- 
 wheels by the thousand, wire and wire nails, 
 metal-working machinery of every type, and 
 great shipments of electrical dynamos and 
 appliances. 
 
 One of the industries that has felt most 
 severely the American competition is the tin- 
 12 177 
 
Business and Education 
 
 plate trade of South Wales. Ten years ago 
 it was a gigantic industry. It had no 
 thought of competition in the home field and 
 had complete control of the American mar- 
 ket. In 1890, 330,000 tons of tin-plates 
 were exported from Wales to America. 
 Soon after that we began turning out, al- 
 most in an experimental way, a small prod- 
 uct of tin-plate. That production has in- 
 creased with such rapidity that our manu- 
 facturers are practically in control of their 
 home market and have actually landed at 
 Cardiff large shipments of American tin- 
 plate. 
 
 England's coal-mines have been one of 
 her most important sources of wealth. They 
 have given to her manufacturers cheap mo- 
 tive power which has been one of their most 
 important advantages. They have propelled 
 the commercial fleets of the world, and their 
 product has formed England's most impor- 
 tant export. Coal has been the main sup- 
 port of the shipping industries which have 
 given her so much of her commercial su- 
 premacy, constituting, as it has, four-fifths 
 of the weight of all the commodities ex- 
 ported from the British Isles. England 
 owns sixty per cent of the world's steam 
 tonnage, and anything which threatens seri- 
 ously to alter the established order in freight 
 movements is of great commercial import. 
 178 
 
" Commercial Invasion " of Europe 
 
 The foreign-trade rettyns do not yet show 
 us as a great factor in the world's coal trade. 
 England is still the dominating producer. 
 But while the extent to which our exports 
 have attained is not material, the figures 
 which show the beginning of our entrance 
 into the world's coal markets are in some 
 ways more significant than any others that 
 our foreign trade presents. We are just in 
 the beginning of what is certain to be an 
 economic development of world-wide im- 
 portance. English authorities themselves 
 recognize this and admit that a new current 
 of trade has been set in motion that will 
 sweep away a lot of old landmarks. Our 
 production of 36,000,000 tons in 1870, in- 
 creased to 71,000,000 in 1880, to 170,000,- 
 000 in 1890, and to 240,965,917 by the end 
 of the century, passing with the closing 
 years Great Britain's production and estab- 
 lishing our coal-fields as the greatest source 
 of supply in the world. The enormous 
 development of our own consumption kept 
 pace with the increase of the product, so 
 that little attention has been turned toward 
 the export trade. Plans are now in hand, 
 however, which will make the development 
 of that export business the dominating feat- 
 ure of our foreign trade within the next few 
 years, and which promise more powerfully 
 to affect British industry than any other 
 
 179 
 
Business and Edtication 
 
 single development that has influenced' the 
 trade of the two countries. 
 
 The position which we occupy as a source 
 of coal production is of such great impor- 
 tance in any discussion of international trade 
 that it is worth while noting some of its 
 significant features. In 1870 the combined 
 coal production of Great Britain, Germany, 
 France, and Belgium, our chief competitors 
 in Europe, was 176,000,000 tons, about six 
 times our own production of 29,000,000. 
 By 1898 the European output had doubled, 
 those countries producing 352,900,000 tons. 
 But in that same time our output had in- 
 creased 700 per cent and stood at 218,000,- 
 000, or 60 per cent of the total output of 
 Europe, as compared with six and two- 
 thirds per cent in 1870. We have five times 
 the coal area of Europe, 50,000 square miles 
 as compared with 11,000 square miles, and 
 we have in addition 200,000 square miles of 
 lignite and other workable fields in reserve. 
 Our bituminous coal lies near the surface, 
 and most of it can be worked by drift mines 
 above the water-level. European mines are 
 frequently 3000 and sometimes 4000 feet 
 deep. Our seams of coal average twice the 
 thickness of the coal measures of Europe. 
 The result of these conditions is seen in the 
 increasing cost of European coal and the 
 decline in American mine prices. In 1885 
 180 
 
" Commercial Invasion " of Europe 
 
 the average price of European mine coal 
 was $1.62 per ton, and in the United States 
 $1.58. Our methods were less skilful and 
 the superior advantages of the mines in the 
 United States were not yet manifest. In 
 1899, however, the mine price of European 
 coal had risen to $1.96, and- in the United 
 States the price had fallen to $1.10, leaving 
 a margin in our favor which operates, at 
 every stage of production, to lower the man- 
 ufacturing cost of American exports. 
 
 Illustrations of our successful competition 
 might be multipHed into a tiresome cata- 
 logue. We have secured practical control 
 of the match-making industry; our tobacco 
 manufacturers have become the dominating 
 influence in the English trade situation; 
 half the newspapers of England are printed 
 on American presses or upon presses built 
 on American models in English shops that 
 are branches of the home manufactories. 
 Many of those newspapers are printed on 
 American paper. One of the serious ob- 
 stacles hampering English industries is illus- 
 trated in the paper trade. The freight from 
 the New England paper-mills to the London 
 Docks is less than from the Cardiff mills to 
 the metropolis, and one-half the freight 
 charge on an American shipment is made up 
 of terminal charges incurred in the last 
 twelve miles of the 3000-mile journey. 
 181 
 
Business and Education 
 
 Probably half the electric cars in the United 
 Kingdom are driven by American-made 
 motors. When the English postal authori- 
 ties entered the telephone field, no English 
 firm could supply the number of instruments 
 wanted, and the contract went to a Chicago 
 company. England is the home of cheap 
 woollens, but our manufacturers of ready- 
 made clothing are developing an important 
 trade there, compensating for the higher 
 cost of their cloth and the larger wages of 
 their workmen by their advantages in spe- 
 cialized labor and superior methods and 
 machines. Our car builders, who have so 
 specialized the building of freight-cars that 
 the rough timber goes in at one end of the 
 workshop and, almost under the eye of the 
 spectator, comes out at the other end a fin- 
 ished car, found an easy market in compe- 
 tition with old-fashioned methods and hand 
 labor. It is only within a few months that 
 there have been in any English shop ma- 
 chines for boring square holes such as enable 
 our car manufacturers rapidly to mortise 
 timbers in car construction. The work that 
 is done in an instant with a whirl of flying 
 chips was laboriously bored and chiselled 
 out by hand by the English workers. The 
 same advantage in labor-saving wood-work- 
 ing machines enables us to send finished 
 wood-work, sash and doors, for buildings 
 182 
 
" Commercial Invasion " of Europe 
 
 at prices which cannot be equalled in the 
 English shops. 
 
 Instead of enumerating the fields in which 
 we have met with competitive success, it will 
 be more profitable to analyze in some meas- 
 ure the reasons for our strength and for 
 Great Britain's industrial weaknesses. A 
 few weeks ago I was at a dinner in London 
 at which was gathered a group of men rep- 
 resentative of British industrial and com- 
 mercial life. The conversation was on 
 American competition, and at the conclusion 
 of the discussion the views of these men were 
 summed up in a conclusion with which all 
 agreed, and their verdict, I suppose, may be 
 taken in the main as representing the best 
 commercial judgment in Great Britain. All 
 agreed that there is a serious crisis in British 
 industry, and they grouped the main reasons 
 for it under three heads. The first is the 
 attitude of the English workman in his 
 desire, made effective by the power of trades- 
 unionism, to restrict the output of labor to 
 the lowest possible unit per man ; the second 
 is the conservativeness of employers and the 
 hostility of workmen toward the introduc- 
 tion of labor-saving machinery; and the 
 third is " municipal trading," a phrase which 
 we have not encountered much at home, but 
 which means the activities of municipalities 
 in industrial undertakings, such as the devel- 
 
 183 
 
Business and Education 
 
 opment of systems of transportation and 
 communication, the production of light and 
 heat, in a word the municipal control of the 
 utilities. On this last point there would 
 undoubtedly be found wide differences of 
 opinion among high authorities, and it is 
 not my purpose here to enter into a discus- 
 sion of the questions involved in it. In 
 regard to the first two, however, I believe 
 there is pretty unanimous agreement in the 
 minds of trained observers of the conditions 
 of industrial affairs. 
 
 The highest development of labor-unions 
 has been in Great Britain. Much of the 
 earlier growth of these organizations was 
 along correct economic lines, resulted in dis- 
 tinct benefit to organized labor, and was 
 undoubtedly helpful to British industries 
 generally. A few years ago there came into 
 existence a new unionism, which meant a 
 unionism of force, a unionism which carried 
 its points by strikes, and made strikes effec- 
 tive by forcible interference with non-union 
 labor. That new unionism has lately been 
 succeeded by a newer unionism, which has a 
 false economic theory for its foundation, 
 and is, I believe, more than any other single 
 cause, the influence to which can be attrib- 
 uted the present unhappy state of British 
 industry. 
 
 British trades-unions embrace nearly 
 184 
 
" Commercial Invasion " of Europe 
 
 2,000,000 members. The greater part of 
 this army of organized labor has adopted 
 a false economic theory. They hold that 
 there is a given amount of work to be done 
 in Great Britain, and that, if the day's out- 
 put of the individual worker is decreased, 
 the result will be an increase in the aggre- 
 gate number of days' labor. They might 
 not all of them state the proposition in just 
 that way, but the irresistible logic of their 
 position carries them to exactly that point. 
 It is a cardinal principle with the members 
 of most of the labor-unions in England to- 
 day that it is desirable for them to produce 
 with each day's work as small an output per 
 man as it is possible to compel employers 
 to accept. They believe that if a man does 
 only half a given amount of work in a day, 
 two men will have to be employed where 
 one was before, or the job will furnish em- 
 ployment for the one for double the length 
 of time. They have the further uneconomic 
 principle of a minimum wage, which is to be 
 paid to all men employed, without regard 
 to the relative value of their labor. Here is 
 how the situation is viewed by high English 
 authority: With the principle of the mini- 
 mum wage is conjoined the principle that 
 there shall be no maximum wage ; that is to 
 say, if any workman shall induce his em- 
 ployer to offer him higher wages than his 
 
 185 
 
Business and Education 
 
 fellows, they at once demand that the same 
 increased wages shall be paid to all of them 
 alike. If the master seeks refuge in im- 
 proved machinery, the principles of limita- 
 tion of output and minimum wage are still 
 enforced. The machine must not be allowed 
 to do all it can, any more than the men ; nor 
 may it have an attendant, however simple 
 his duties, at any lower rate of wages than 
 that fixed for the skilled artisan who did the 
 work before the machine was introduced. 
 The machine, in short, must not increase out- 
 put or displace labor. It is broadly argued 
 that men will work their best if it is made 
 worth their while, and not otherwise, but 
 the unions say it shall not be made worth 
 their while. It is not worth the while of a 
 bad workman to do better, for his mini- 
 mum wage is secure. It is not worth the 
 while of the good workman to put forth his 
 strength or skill, for he would incur odium 
 among his class and could not get increased 
 wages in return. 
 
 It hardly seems credible that the great 
 mass of organized labor in England should 
 be so blind to plain economic truths as to 
 believe that their country can maintain its 
 commanding position in the world's com- 
 petitive markets when labor uses its keenest 
 ingenuity and best endeavors to devise 
 ways to restrict individual production. In- 
 i86 
 
" Commercial Invasion " of Europe 
 
 stances can be produced indefinitely to sup- 
 port the assertion that such is their belief. 
 Such instances will show quotations from 
 the rules of the organizations, which are 
 devised to restrict labor and discourage en- 
 ergetic workmen. There are many examples 
 of direct official discipline of members who 
 have shown a tendency to turn out more 
 work in a day than the minimum which 
 employers can be forced to accept. I have 
 heard of many cases where men of ambition 
 and energy, who found it difficult to adapt 
 themselves to the easy-going pace which the 
 union prescribes, got very much the worst 
 of it in the contest which always follows a 
 period of active work. Men who start in to 
 turn out a full day's work are frequently 
 directly disciplined by their unions; but if 
 it does not reach that point, they are at least 
 at once put under a social boycott. They 
 are called " sweaters " and " masters' men," 
 and much ingenuity goes into the devising 
 of ways and means to make their lives mis- 
 erable and their positions untenable. 
 
 Some of the notable illustrations of the 
 spirit of curtailment of production are found 
 in the building trades. Bricklayers in Lon- 
 don, for instance, do not average over 400 
 bricks a day ; those employed by the London 
 County Council on public work lay materi- 
 ally less. When it is understood that an 
 187 
 
Business and Editcation 
 
 active man can readily lay looo bricks a 
 day, and from that up to 1600 it will be 
 seen what a disastrous grip this " go-easy " 
 policy has. We have made, with our ex- 
 portations running into millions of dollars, 
 great inroads on the English boot and shoe 
 industry. Some of that success can be ac- 
 counted for by superior machinery and better 
 organization and division of labor, but it is 
 not surprising to find in this, as in a good 
 many other fields where we have made pro- 
 nounced competitive progress, that there is 
 a clear understanding in the trades-unions 
 controlling the manufacture of boots and 
 shoes that a day's work shall be limited to 
 a certain quantity, and that, should a man 
 do more, his life will be made intolerable. 
 The delusion which the English workman 
 has harbored, that there is a certain amount 
 of work to be done in that industry, and 
 that if every one tries to do as much as 
 he can there will not be work enough 
 to go around, has led him to the natural 
 result of such a fallacy. Chicago factories, 
 usually paying wages from two to three 
 times as high as are ruling in the English 
 factories, are sending enormous exports into 
 the English field. Those exports two years 
 ago were a little over $500,000 ; a year ago 
 they passed the million, and last year they 
 were well on toward $2,000,000. 
 188 
 
" Commercial Invasion " of Europe 
 
 Both English builders and workmen are 
 having a most valuable object-lesson in the 
 construction of the great manufacturing 
 plant of the British Westinghouse Company. 
 This company is building a $5,000,000 plant 
 at Manchester, in which electrical machines 
 of American model are to be built by Ameri- 
 can methods. One of the finest mechanical 
 plants in the world is being installed, and 
 the manner in which the building operations 
 have been pushed forward have been the 
 marvel of both English builders and work- 
 men. The plant was started under English 
 supervision, but the work dragged along in 
 such hopeless fashion that the task of com- 
 pleting it was, last April, put into the hands 
 "^f American building contractors. They 
 spent $3,000,000 in eight months, and man- 
 aged, though under great difficulty, to show 
 a rapidity of construction such as England 
 had probably in all her history never before 
 seen. These contractors met with the same 
 spirit among the English bricklayers that 
 is to be found everywhere. With all their 
 energy they could not get them up above 
 800 bricks a day, so they imported some 
 American bricklayers and set them at work 
 on the slowly rising walls. They laid nearly 
 2000 bricks a day. The pride of the Eng- 
 lish workmen was at stake, and they aban- 
 doned their " go-easy " principles, took off 
 189 
 
Business and Education 
 
 their coats, and demonstrated that they were 
 as good bricklayers as the imported Ameri- 
 cans, but how they will reconcile the record 
 that they made under the eyes of the St. 
 Louis contractors with what they are willing 
 to do under English superintendence is a 
 little difficult to say. 
 
 In the coal-mining industry this fallacious 
 policy of trades-unionism takes the form of 
 " stop days," when all the miners stop work 
 without respect to the views of the mine- 
 owners because they believe that by so doing 
 they will restrict production, hold up prices, 
 and so keep up their own wages, which are 
 regulated by a sliding scale based on the 
 price of coal. Their economics have not 
 been broad enough to grasp the prospect of 
 American competition, but their methods are 
 hastening its success. 
 
 Since the great machinists' strike of a few 
 years ago conditions in that trade are some- 
 what better than before that dispute, which 
 ended so disastrously for organized labor. 
 There are still many restrictions imposed 
 upon manufacturers which prevent them 
 from securing anything like the best re- 
 sults from the machinery they introduce. 
 Throughout the mechanical trade the same 
 false notion that the less work a man does 
 in a day the more he leaves to be done by 
 himself or his fellows is particularly aimed 
 190 
 
" Commercial Invasion " of Europe 
 
 against labor-saving machinery, and every 
 rule the unions can devise to restrict the out- 
 put of machinery and increase the labor cost 
 is considered by the unions their material 
 gain. 
 
 The second serious embarrassment in 
 which British industries are involved is the 
 difficulty surrounding the introduction of 
 modern labor-saving machines and mechan- 
 ical methods. In the way of that improve- 
 ment is the double obstacle of the conserva- 
 tiveness of employers and the opposition of 
 the men. Every one who has studied the 
 English industrial situation will agree unre- 
 servedly that labor-saving machinery must 
 be extensively introduced, that the manufac- 
 turing plants must be put on mechanical 
 equality with those of America and Ger- 
 many, before the English manufacturers can 
 hope again to produce at as low a unit of 
 labor-cost as is done in the two competing 
 countries. 
 
 Conservatism is a corner-stone of the 
 English character, and it seems particularly 
 pronounced in some of the families which 
 have hereditarily been in control of manu- 
 facturing industries. A machine that did 
 satisfactory service for a man's father and 
 grandfather comes to be regarded with a 
 certain veneration. With us there is no 
 recommendation better than that a machine 
 191 
 
Business and Education 
 
 or method is new. To speak to a manufac- 
 turer of a new machine or a new process 
 interests him at once. His mind is open to 
 investigate any improvement that is sug- 
 gested, and, what is still more important, he 
 has the courage when the value of the im- 
 provement is demonstrated, to throw upon 
 the scrap-heap machinery that may have 
 cost him much, and to replace it with ma- 
 chinery which will accomplish more. 
 
 The mind of the English manufacturer 
 does mot work along these lines. As a rule 
 he has a deep-seated prejudice against a 
 thing that is new ; it is not easy to win him 
 over to an examination of a new machine 
 or method, and it is always difficult to 
 induce him to consign to the scrap-heap 
 machines which have for years done him 
 good and profitable service. 
 
 The characteristics of conservatism that 
 made the English business man for years 
 combat the introduction of the typewriter, 
 the conservatism which to-day will not per- 
 mit a telephone within the sacred precincts 
 of the Bank of England, has in its operation 
 in the industrial field cost England dear. 
 
 Only the smaller part of the difficulty is 
 over when the manufacturer has grasped the 
 necessity for introducing a machine. His 
 workmen are more prejudiced than he 
 against mechanical innovations. They may 
 192 
 
" Commercial Invasion ** of Europe 
 
 have seen many examples of machines 
 which, though first taking away the neces- 
 sity for hand labor, in the end create far 
 more opportunity for labor than at first 
 existed, but those examples have failed to 
 impress them. It is only with the greatest 
 difficulty that labor-saving machines, abso- 
 lutely essential to the continuance of manu- 
 facturing establishments in a position to 
 meet international competition, can be put 
 into operation in the English workshops. 
 Men sometimes refuse altogether to operate 
 machines. The unions enforce restrictions 
 in regard to the number of automatic ma- 
 chines that one workman will be permitted 
 to attend. They go on strike because non- 
 union labor is put at work, and they hamper 
 and embarrass in a hundred ways the manu- 
 facturer who wishes to provide modern 
 equipment. 
 
 All that looks unreasonable at first, but 
 the antagonistic attitude of English work- 
 ingmen toward labor-saving machinery can 
 be better understood when some of the other 
 restrictions of English labor organizations 
 are comprehended. Each trades-union, be- 
 lieving there is a definite amount of work to 
 do, and hoping to confine all of it of a par- 
 ticular character to its own members, has 
 hedged about entrance into each trade with 
 the greatest of difficulties. The result is 
 
 '3 193 
 
Business and Education 
 
 that there is in England the least possible 
 mobility of labor. A man, having learned 
 one trade, finds it almost impossible to draw 
 out of that and enter another. There are 
 minute restrictions regarding apprentices, 
 and the rules provide fines and disciplines 
 for any member who teaches an outsider or 
 permits him to use tools or in any way aids 
 him in learning the rudiments of a trade. 
 When this is understood it will be seen how 
 serious is the position of an English work- 
 man, if his place be menaced by the intro- 
 duction of labor-saving machinery which 
 might force him to seek employment in some 
 other trade. 
 
 Conditions as they have been evolved 
 under the rule of the walking delegate and 
 of labor leaders with the shallowest notions 
 of economics are the despair of Englishmen 
 who hope to see their country win back a 
 lost industrial position. Those conditions 
 are most profitable subjects for study by us. 
 We have the beginnings of just the sort 
 of unionism which, in its full development, 
 has brought distressing results on England. 
 There cannot be found in Great Britain any 
 more absurd regulations restricting the out- 
 put of labor than were in force in the build- 
 ing trades in Chicago for two years, ending 
 in paralyzing the building industry there. 
 We have already grown accustomed to the 
 194 
 
" Commercial Invasion ** of Europe 
 
 strike which has for its object, not an in- 
 crease of wages or a reduction of hours, but 
 the imposition of restrictive regulations 
 which would result in a decreased product. 
 So long as our industries can go forward 
 receiving the generous co-operation of labor 
 which is still the rule, we will have an advan- 
 tage over the countries of Europe in spite of 
 a wage-scale more than double theirs, but 
 that advantage will be menaced if the false 
 conceptions which now rule most of the 
 English labor organizations are ever gener- 
 ally adopted by our own workers. 
 
 When we turn to the statistics of trade 
 between the United States and France, we 
 find a condition in sharp contrast to that 
 shown by the English trade returns. France 
 has hardly heard of the American invasion. 
 Her sales last year stood at almost the same 
 point that they did ten years ago. Our sales 
 to France during the same period have 
 shown some increase, but taking the record 
 of last year and comparing it with ten years 
 ago the increase is but $18,000,000, while 
 we remember that our annual sales to Eng- 
 land increased in the last half dozen years 
 $244,000,000. France has done everything 
 she can with a high protective tariff to make 
 competition difficult to foreign manufac- 
 turers. She has done even more than that, 
 with legislation which has in some instances 
 
 195 
 
Business and Education 
 
 made foreign competition impossible with- 
 out any regard to price. The franchises 
 which have recently been granted to many 
 electric railways have provided that all mate- 
 rial for their construction and equipment 
 must originate and be manufactured in 
 France. 
 
 The exports of France are in the main of 
 a kind that is not affected by the underbid- 
 ding of foreign makers. French deftness, 
 that artistic touch which the workers of few 
 other nations can equal, gives a permanence 
 to her hold on those foreign markets in which 
 she is interested which has been little affected 
 by those industrial developments that have 
 made such profound impression upon the 
 trade relations among England, Germany, 
 and the United States. In ponderous lines 
 of manufacturing we have reached unques- 
 tioned superiority over France, but the same 
 sort of skill which, in the fingers of the 
 Parisian workingwomen produces articles 
 of unapproachable attractiveness, develops 
 in the hands of the mechanic into a deftness 
 which rivals the ingenuity of our best work- 
 men, and leaves us without the advantage 
 in the French market that we have in most 
 of the other markets of the world. 
 
 Russia is another country which, in spite 
 of its enormous extent, its important posi- 
 tion in the world's politics, and the tradi- 
 
 196 
 
" Commercial Invasion " of Europe 
 
 tionally friendly relations between its peoples 
 and our own, has been little affected by the 
 " American invasion." With territory cov- 
 ering an eighth of the globe, and a popula- 
 tion of 130,000,000, the trade between this 
 greatest of political units and our own 
 country is still comparatively insignificant, 
 and has in the last decade shown no remark- 
 able changes. Our exports have shown no 
 significant increase. Russia is a country of 
 high tariff, and the tendency is toward 
 greater protective restrictions about her do- 
 mestic industries. That policy has resulted 
 in a number of American manufacturers 
 building important plants within the empire, 
 but it has effectually prevented any remark- 
 able development in our grasp of the Russian 
 markets. 
 
 I asked M. de Witte, the Russian Finance 
 Minister, how in his opinion commercial 
 relations between the United States and 
 Russia could be improved. 
 
 " Practically, there is nothing that can be 
 done," he said. " Theoretically, there are 
 unlimited possibilities. If you only had a 
 government that could do things as our gov- 
 ernment can, a combination of the two 
 countries would bring Europe to our feet. 
 We could absolutely control the markets of 
 the world for meat, bread, and light. I 
 understand, of course, that that is impossible 
 197 
 
Business and Ediication 
 
 — impossible from your side. We could do 
 it, but you, with your government, which 
 must always listen to the people and shape 
 its course for political reasons, could not." 
 
 It is possible that the unattainableness of 
 political unity of action which the distin- 
 guished Russian deprecated may in effect be 
 in some measure worked out by the com- 
 binations — the industrial trusts — which 
 have such great influence in various fields 
 and which are able to project into the com- 
 mercial battle such effective unified efforts. 
 European economists and industrial leaders 
 are undoubtedly more alarmed over the ad- 
 vantages which they see we are attaining 
 by the aid of these great organizations than 
 over any other point in our position. 
 
 I have attempted in these articles to out- 
 line some of the weaknesses of our foreign 
 competitors and some of the corresponding 
 points of strength that have developed in 
 our own industries. The list of our advan- 
 tages is an imposing one, but we cannot 
 expect that all of them will be maintained. 
 Our competitors are by no means blind or 
 without energy or ability. fThe superiority 
 of our labor, our larger use^'of machinery, 
 our low taxation and small military burden, 
 the homogeneity of our people, and the 
 great breadth of the domestic field of con- 
 198 
 
• " Commercial In'vasion " of Europe 
 
 sumption, our comparative freedom from 
 militant trades-unionism, the omnipotence 
 with us of the industrial ideal, our freedom 
 from a caste which in other countries pre- 
 vents the best brain and the most highly 
 trained intellect from engaging in industrial 
 enterprise — all these are advantages which, 
 so long as they hold good, make a broad 
 foundation upon which to rest an industrial 
 development of commanding importance.! 
 But unless the United States has some more 
 permanent and fundamental advantage, I 
 should lack the absolute faith which I now 
 have in our development to a lasting com- 
 mercial supremacy. No small part of our 
 great exports in the last few years has been 
 made up of labor-saving machines, which 
 have at once been turned against us as guns 
 captured from an enemy. From all over 
 Europe deputations of technical experts are 
 journeying to the United States and taking 
 abundant advantage of our good-nature and 
 hospitality. They praise our machines and 
 make drawings of them; they satisfy our 
 pride with appreciations of our methods and 
 they make copious notes. The result is be- 
 ginning to be seen in many of the workshops 
 of Europe. 
 
 There can be no American monopoly of 
 ideas. Civilization gives no patent on tech- 
 nical supremacy. America may lead the 
 
 199 
 
Btisi/ness and Education 
 
 world now in her ingenious application of 
 labor-saving machinery, but there can be no 
 assurance of the permanent continuance of 
 that advantage. Nor can assurance be given 
 that American industrial society will always 
 remain as mobile and as energetic as it is at 
 present. We have already seen trades- 
 unions attempting to force employers to 
 make work rather than to produce wealth. 
 We have seen strikes that have had for their 
 basis only a desire for an increased power 
 of interference, and from that it is not a 
 long step to a position where union labor 
 may be found struggling to restrict indi- 
 vidual production. Strikes of that charac- 
 ter have so far been successfully combated, 
 but whatever there is left of the spirit that 
 animated them remains a menace to Ameri- 
 can prosperity. 
 
 In our national conception of the dignity 
 of work we have an enormous advantage, 
 but that also may be in danger. Thus far 
 industrial rewards have been made pretty 
 strictly on a merit basis. There have been 
 few sons and nephews of rich families to be 
 taken care of. The future generation can 
 hardly be so free from nepotism in indus- 
 trial promotion. With the increase of 
 wealth we have already the beginning of a 
 leisure class, and it is not certain that indus- 
 trial and commercial life can continue to 
 
 200 
 
" Commercial Invasion " of Europe 
 
 command the full service of the best brain 
 and energy that we have. Our military 
 burdens may increase if we measure up to 
 the full extent of our responsibilities as a 
 world-power. Tariff walls may be built 
 against us. 
 
 On all these points of present superiority 
 we can have but small assurance of a lasting 
 industrial supremacy, but I feel that a more 
 fundamental reason for belief in such su- 
 premacy can be advanced, one which will 
 warrant the conclusion that America must 
 inevitably lead the world in the twentieth- 
 century commercial struggle. 
 
 Of all nations the United States has the 
 most unbounded wealth of natural resources. 
 We have hardly comprehended the inevi- 
 table advantages which those resources are 
 to give us. 
 
 Man's labor the world over is steadily 
 decreasing in importance. It is the age of 
 machinery. The forces of nature are to do 
 man's work. All the world over the cost of 
 production has fallen. The relative impor- 
 tance of labor in the cost of production is 
 lessening ; the sway of machinery is increas- 
 ing. The twentieth century will be the cen- 
 tury of machinery. Before it is half com- 
 pleted we may expect to see that sort of 
 human labor that is the painful and labori- 
 ous exercise of muscle almost supplanted by 
 
 201 
 
Business and Education 
 
 automatic machinery directed by trained in- 
 telligence. Such development of machine 
 production steadily increases the impor- 
 tance of raw material in the productive 
 process. As the proportion of labor cost 
 decreases, the cost of the raw material forms 
 a larger part of the value of the finished 
 product. 
 
 The hand-weaver took a pound of cotton 
 and spent a week in its manipulation. The 
 cloth had to reimburse not only the cost of 
 the pound of cotton, but six days of toil. 
 Machinery was introduced into the industry, 
 a week became an hour, and a hundred yards 
 took the place of one. The price of each 
 yard then had to pay the merest fraction of 
 the cost of the labor which watched the 
 looms. The proportion which the cost of 
 the raw material bore to the cost of the fin- 
 ished product enormously increased. So, 
 under these modern conditions of manufac- 
 turing industry, where machinery enters 
 more and more into the manipulation, and 
 the cost of labor forms a constantly decreas- 
 ing relation to the whole, raw material comes 
 to play a more and more important part. 
 When machinery has fully entered into pro- 
 duction, the cost of the crude products makes 
 up the major portion of the cost of the fin- 
 ished article. We can in a measure reduce 
 the cost of raw material by improved meth- 
 
 202 
 
" Commercial Invasion " of Europe 
 
 ods in production and in transportation. 
 The steam hoist and electric drill in the 
 mine, the steam harvester and the steam 
 plough on the farm, the mogul engine and 
 the fifty-ton car, fast steamships of huge 
 tonnage, have all greatly reduced the price 
 of raw material. But no matter how strong 
 the appeal. Mother Nature yields a slow and 
 grudging consent to the efforts of her 
 children to relax her grip. Man's success 
 in cheapening raw material must always 
 fall short of achievements in the realm of 
 manufacture. 
 
 Since the cost of material is an increasing 
 part of the price of the product, those pro- 
 ducers who can draw upon practically inex- 
 haustible and rich supplies near at hand, 
 who are not obliged to work poor ores and 
 poor lands, or to transport materials great 
 distances — the producers and the nation 
 with those blessings are at tremendous ad- 
 vantage when compared with others whose 
 supplies of material are less rich and less 
 advantageously located. 
 
 The age of machinery is also the age of 
 motive power, which is but another way of 
 saying that it is the age of coal. The nation 
 which has the cheapest raw material and the 
 cheapest coal has a permanent and predomi- 
 nant advantage in the world's markets, and 
 it is an advantage which every improvement 
 
 203 
 
Business and Education 
 
 in method of manufacture will only serve to 
 emphasize. 
 
 When so much is admitted, the conclu- 
 sion immediately follows that America's 
 industrial future is secured. The United 
 States has the most abundant and the cheap- 
 est raw materials and supplies of fuel in the 
 world. Germans and Englishmen may dis- 
 pute with us over relative advantages in 
 methods, in machinery, in labor, in business 
 organization, and in commercial practice. 
 They may claim that they have much to 
 teach us and that they can soon learn what 
 we have to teach them. American labor may 
 contract the disease of trades-unionism, and 
 American public burdens and social-caste 
 developments may lessen our advantage, 
 but American soil and minerals are eternal, 
 and the resources of no other great power 
 are for one moment to be compared with 
 them. 
 
 204 
 
THE INDUSTRIAL FUTURE 
 
 An address delivered before the American Bankers' 
 Association, Washington, October ii, 1905. 
 
 With almost unmixed satisfaction the mem- 
 bers of the American Bankers' Association 
 may contemplate the progress of financial 
 events during the year which has elapsed 
 since their last meeting. Little short of be- 
 wildering is the array of statistics which 
 could be presented to demonstrate the rapid 
 growth, sound development, and satisfactory 
 progress made in the commercial, financial, 
 and industrial fields. It is safe to assert that 
 never before was our population so fully 
 employed. Never before was the general 
 level of wages so high, never before has the 
 aggregate volume of industry been as great 
 as it is to-day, never was the future of indus- 
 trial activity so fully assured by advance 
 orders. Never was the measure of commer- 
 cial activity so large, and never before did 
 such bountiful harvests meet such eager 
 markets. 
 
 The total value of the agricultural crop of 
 
 the United States will this year exceed by 
 
 $500,000,000 the average value of that crop 
 
 during the last ten years. The money value 
 
 205 
 
Business and Education 
 
 on the farms of this season's crop will reach 
 the staggering total of $3,000,000,000. You 
 of the West and South are close to the 
 true meaning of these figures. To eastern 
 bankers such statistics are merely figures. 
 Their aggregate is so vast that it is difficult 
 to comprehend their true import. You who 
 are closer to the fields, the granaries and the 
 cotton presses, you who with yoin* own eyes 
 see the direct results of this flood of wealth, 
 are more competent to comprehend its 
 significance. 
 
 Under the influence of harvests less boun- 
 tiful than this, following one another with 
 providential regularity, in the last half dozen 
 years, you have seen whole communities 
 change in character. People whose only 
 acquaintance with finance was their knowl- 
 edge of mortgage payments made to absent 
 creditors have been converted into common- 
 wealths with surplus capital and investment 
 capacity. 
 
 The whole great Mississippi Valley gives 
 promise that at some day, distant perhaps, 
 it will be another New England for invest- 
 ments. There is a developing bond market 
 there which is a constant astonishment to 
 eastern dealers. You have seen the farmer 
 in these half dozen years discover the uses 
 of a bank account, deposit his income, pay 
 off his mortgage, accumulate a surplus and 
 206 
 
The Industrial Future 
 
 actually become an investor in corporate 
 securities. You have seen that sort of thing 
 multiplied and repeated until the aggregate 
 v^ealth of the western and southern States 
 has become astounding, even to you who 
 have taken an active part in its growth. 
 
 Now on top of these succeeding years of 
 good harvests, good prices, intelligent liqui- 
 dation of debts and thrifty accumulation of 
 surplus, comes the unprecedented figures of 
 the value of this season's crop yield. Surely 
 America is a country blessed. 
 
 The feature of agricultural life in these 
 recent years has been great income, dimin- 
 ishing liabilities and the provision of ample 
 working capital, with all the economies and 
 advantages which ample working capital 
 provides. These conditions have worked 
 marvels in the way of prosperity for the 
 agricultural communities. But prosperity 
 is not confined to the farms. These same 
 influences — large income, diminishing lia- 
 bilities and the provision of ample working 
 capital — have been factors in the industrial 
 field as well ; we can find as great prosperity 
 under shop roofs as in the fields. The 
 days when industrial competition commonly 
 reached a point of destructive severity are 
 largely past. The days when narrowness of 
 outlook and lack of co-ordination led to the 
 wasteful duplication of plants and a vast 
 207 
 
Busmess and Education 
 
 unproductive expenditure of capital, have 
 given way to more intelligent management. 
 That destructive competition, that duplica- 
 tion of unproductive expenditure, led with 
 unerring economic force to the industrial 
 combinations which marked the last years 
 of the century recently closed. The forces 
 which led to these combinations were so 
 irresistible that some industries were swept 
 together under hastily considered plans. 
 Combinations were made that were properly 
 open to criticism. Heterogeneous elements 
 were united in ways that meant inevitable 
 friction. Diverse interests were brought 
 together that could not in a day be harmon- 
 ized. For a time there was doubt as to 
 whether or not true wisdom had been shown 
 by the men who formed these great industrial 
 combinations. 
 
 Evidence has now accumulated, I believe, 
 to warrant an answer to that question. We 
 anticipated economies when these combina- 
 tions were made, but we are only just begin- 
 ning to understand something of the full 
 advantage which may result from the na- 
 tional organization of certain industries. It 
 took a little time to get these organizations 
 running smoothly. It was not easy to find 
 men with the broad economic insight which 
 the management of such great enterprises 
 required. When a nation meets a crisis men 
 208 
 
The Industrial Future 
 
 seem to be raised up ready for the tasks. 
 When this country faced war we produced 
 great miHtary generals. To-day, when the 
 crisis in the management of vast industrial 
 combinations is upon us, we are producing 
 great captains of industry. These managers 
 are not all great administrators any more 
 than the war officers were all great com- 
 manders, but I believe the world has never 
 seen the parallel of the business genius which 
 is coming into the work of organizing some 
 of these great industrial combinations. Econ- 
 omies are being brought about that were 
 not conceived of when these organizations 
 were formed. The co-ordination of a whole 
 field of industry, the organization and dis- 
 tribution of plants so that the industry is 
 working under the least possible disadvan- 
 tage in respect to transportation charges, 
 the combination into such aggregates that 
 expenditures may be made to effect small 
 savings, or in introducing mechanical aids 
 which would be impossible in small plants, 
 but which on a large scale effect remarkable 
 economy — all these developments are an- 
 swering the question as to the wisdom of 
 these combinations. The results are begin- 
 ning to appear in the income accounts and 
 balance sheets. The improvement there fore- 
 shadowed is, I believe, but an indication of 
 what may yet come. 
 14 209 
 
Business and Education 
 
 With the aid of a wealth of raw material 
 and a genius for mechanicar manipulation, 
 we developed a few years ago a capacity for 
 industrial competition which startled the 
 world. England, whose supremacy had been 
 of such long standing that she rested in 
 serene assurance, was crowded out of some 
 of the international competitive markets. 
 She was crowded to second place by America 
 and then to third place by Germany. Our 
 exports of manufactures doubled and doubled 
 again and we had to be reckoned with in 
 every international market. 
 
 Then came a halt. Europe awoke to the 
 situation. She bought samples of our tools 
 and duplicated them. She sent an army of 
 investigators to study our methods. She 
 arrested us in our commercial conquest. 
 That halt is proving to have been only tem- 
 porary. Again we are showing unexampled 
 totals in our exports of manufactures. The 
 present figures are substantially exceeding 
 the totals which we made at the time Europe 
 coined the phrase, " a commercial invasion." 
 The reason for this late improvement, this 
 regaining of ground temporarily lost, this 
 making of new records, lies in the perfection 
 of industrial organization which has been 
 made possible by the great combinations. I 
 believe we are just started on a new " com- 
 mercial invasion." We have the cheapest 
 
 2IO 
 
The Industrial Future 
 
 raw material, the most efficient labor, a pre- 
 eminent ability in the adoption of mechanical 
 aids; and all that is combined with what I 
 believe to be transcendent genius for eco- 
 nomic organization. The combination of 
 these forces will, I conceive, be well-nigh 
 irresistible. The logic of this combination 
 spells for us an unexampled development of 
 foreign trade. All we need is intelligently to 
 foster the possibilities. I am not giving rein 
 to imagination. The cold figures of Govern- 
 ment statistics show the beginning of this 
 new industrial conquest. Comparisons of 
 manufacturers' cost sheets reveal the possi- 
 bilities of future successes. Our own homo- 
 geneous domestic market, as great as that 
 of half of Europe, contrasts strikingly with 
 the tariff-hampered field of European manu- 
 facturers. Our foreign competitors meet at 
 every turn the obstacles of customs restricj 
 tions, of racial differences and national 
 jealousies. This great homogeneous mar- 
 ket of ours makes a solid foundation upon 
 which our industries can stand while they 
 reach out successfully into competitive fields. 
 The conquest of foreign markets will not 
 be an easy one, however. We are likely to 
 meet with defeat and failure at some points 
 caused by our failure to give proper atten- 
 tion to the business — and there are many 
 examples of that in the past — or caused by 
 
 211 
 
Business and Education 
 
 a combination of obstacles which we cannot 
 overcome. Perhaps we may see an example 
 of the latter situation in the Far East. It is 
 by no means certain that Japan is to stand 
 courteously at the open door of Oriental 
 trade and permit us to enter. We have seen 
 in China what a racial boycott can do in in- 
 terfering with trade totals. Oriental trade 
 is not something won, but something to be 
 striven for and there will be difficulty, defeat, 
 disappointment, and discouragement. Nor 
 is the trade of Europe to be ours for the 
 asking. The obstacles of tariff walls grow 
 higher with every meeting of Continental 
 Parliaments. The ability to compete with 
 us increases as our methods are better com- 
 prehended. Germany has gone so far ahead 
 of us in the proper education of the indus- 
 trial classes that we may lose at times from 
 that cause alone. 
 
 I do not mean that advantage is to come 
 to us through disaster to others. We have 
 perhaps more than our just measure of pros- 
 perity, but there seems, at the moment, to 
 be good measure throughout the world. The 
 world has withstood the financial strain of 
 a war which cost the combatant nations two 
 billion dollars. It has withstood that strain 
 so easily that one is led to inquire how it has 
 been possible that such a disaster should 
 have produced no more unfortunate results. 
 
 212 
 
The Industrial Future 
 
 I believe the answer to that should be looked 
 for in a quarter to which our academic 
 friends have been giving some attention, but 
 which has not as yet come to excite very- 
 great interest among practical financiers. It 
 is not alone to the raisers of grain that nature 
 has been bountiful of late. The mines of 
 the world have been yielding treasure as 
 lavishly as have our fields. In every day 
 of this year, 1905, work days and feast 
 days, holidays and Sundays, there will 
 be drawn from the ground a million 
 dollars of new gold. And then when 
 the total is finally cast up there will be a 
 number of odd millions to spare above that 
 average. The mines of the world will pro- 
 duce this year $375,000,000 of gold. The 
 final figures for the production of gold in 
 1904 have recently been made and they 
 footed $347,000,000. We may reasonably 
 look forward in the near future to an annual 
 average output of $400,000,000 of new gold 
 for at least a considerable number of years. 
 When we remember that in 1885 the pro- 
 duction of gold was but $115,000,000, we 
 begin to get a comprehensive view of the 
 significance of this increase. When we re- 
 member further that the entire monetary 
 stock of gold in the world is about $5,700,- 
 000,000 we can calculate that the output 
 from the mines in the next fourteen years 
 213 
 
Business and Education 
 
 promises to equal a total as great as the 
 present monetary stock of gold. These fig- 
 ures are startling. They perhaps suggest 
 the possibility of a disturbance of values. It 
 does not follow, of course, that with the pro- 
 duction of $400,000,000 of gold per annum 
 the monetary stocks will be increased by that 
 amount. The uses of gold in the domestic 
 arts draw off at least $75,000,000 a year, 
 but that will leave over $300,000,000 a year 
 to add to the gold reserves. So eminent an 
 economist as Le Roy Beaulieu has estimated 
 that the monetary stocks of the world will 
 be doubled in twenty-five years. In the light 
 of recent statistics of the output of produc- 
 tion I have no doubt that he would modify 
 that estimate and incline to the view that 
 the monetary stocks will be doubled in 
 twenty years. 
 
 What is this to mean to the business situ- 
 ation? What is to be its influence upon 
 prices? What effect will it have upon 
 money-rates ? These are no longer academic 
 questions. They are practical considerations 
 which need to be taken into account by busi- 
 ness men. The great increase in gold pro- 
 duction which has been in progress since the 
 close of the Boer War has, in my opinion, 
 been a factor in the rapid recovery from the 
 depression of three years ago. At that time, 
 through financial excesses and indiscretions, 
 214 
 
The Industrial Future 
 
 we were led into a dangerous position. 
 In Europe, also, the chilling effect of the 
 great destruction of capital occasioned by 
 that war was everywhere manifest. This 
 new gold production pouring itself into the 
 bank reserves of the world has been an in- 
 fluence in bringing about the quick recovery 
 from depression and in withstanding the 
 shock of the further destruction of capital 
 which the Russo-Japanese War entailed. 
 
 The classical economists, Ricardo, Adam 
 Smith, and Mill, evolved the quantity theory 
 of money. They held that the prices of 
 things would vary with the quantity of 
 money in existence. If the money stock 
 were doubled, prices would be doubled ; if the 
 money stock were halved, prices would be 
 cut in two. That theory has been proved to 
 be inadequate. There are many other inter- 
 fering circumstances and modifying condi- 
 tions. Nevertheless there is economic truth 
 and force in it. It is within the intimate 
 knowledge of all of us that if our bank re- 
 serves are increased we are moved to in- 
 crease our loans. A pressure to increase 
 loans tends to reduce interest rates. Lower 
 interest rates enhance the price of income 
 paying securities. I think every one will 
 accept, subject to important modifying con- 
 ditions, the statement that an increase in the 
 monetary supply has a tendency to advance 
 
 215 
 
Business and Education 
 
 prices. There may be other influences that 
 will counteract in the final result. There can 
 be no doubt, however, that with every mil- 
 lion dollars of gold added to the bank re- 
 serves of the world, there is a disposition to 
 increase credit lines. That increase in credit 
 lines in turn has its influence on the side of 
 advancing prices. As a practical matter, 
 however, I do not believe we are facing any 
 economic revolution as a result of this influx 
 of gold. We must remember that the 
 growth of business may keep pace or even 
 run ahead of the substantial growth in the 
 gold reserve so that in spite of actual increase 
 the relative percentage of gold reserves to 
 credit demand would leave prices unchanged. 
 The subject is a fascinating one, but at the 
 outset it must be admitted that it is not one 
 for accurate calculation and definite conclu- 
 sion. There are a few considerations, how- 
 ever, and some popular misapprehensions in 
 regard to it concerning which it would be 
 well to have clear thinking. For example, 
 it is rather commonly said a great increase 
 in the gold supply will bring us to a perma- 
 nently lower interest basis. That is a mis- 
 conception. It is true that the first effect of 
 gold additions to a bank reserve will be to 
 lower the interest rate. That effect, how- 
 ever, is temporary. When the money supply 
 has reached a permanent level, no matter 
 216 
 
The Industrial Future 
 
 how great the increase in it has been, the 
 interest rate, other things remaining un- 
 changed, will find its regular level. Interest 
 is but a payment in kind. If the value of 
 money depreciates, the value of interest pay- 
 ment depreciates as well. We need look for 
 no permanently lower interest basis as a 
 result of an increase in the money stock, but 
 while that increase is in progress, the reserves 
 are being constantly augmented and the 
 tendency would be toward lower rates. 
 
 There is another consideration which we 
 should have clearly in mind. Disregarding 
 for the moment all other influences, we may 
 lay down the principle that an increase in 
 the supply of money will tend to advance the 
 price of real property, but the price of an 
 obligation repayable in money will not tend 
 to advance. That is to say that real estate 
 and all forms of property, including shares 
 of corporate stock, which represent an own- 
 ership in real property, would advance, but 
 bonds, which represent only the right to de- 
 mand a payment in money, would not ad- 
 vance. All persons having a fixed income 
 would find the purchasing power of that 
 income reduced. The return from mort- 
 gages and bonds would have a reduced pur- 
 chasing power. Persons receiving fixed sal- 
 aries and wage earners generally would be 
 at a disadvantage, for their incomes would 
 217 
 
 UNIVERSITY I 
 
Business and Education 
 
 not tend to increase as rapidly as the pur- 
 chasing power of their wages decreased. 
 Under such a set of circumstances there 
 would be constant pressure from wage 
 earners to increase their incomes in order 
 to keep pace with the advanced cost of 
 living. Is not that exactly what we have 
 been seeing, and are we not likely to see more 
 of that same pressure to advance wages as 
 the cost of living advances ? 
 
 These are tendencies which would become 
 sharply manifest if there were not counter- 
 acting influences opposing them. That there 
 are sure to be such counteracting influences 
 goes without saying. I recall a conversation 
 which I once had with the great German 
 financier, von Siemens, the creator of the 
 Deutsche Bank. The balances of trade in 
 our favor had been climbing up from $400,- 
 000,000 to $500,000,000 and then had gone 
 well beyond $600,000,000, and it looked as 
 if we might drain Europe of her whole mon- 
 etary stock if that sort of thing were to go 
 on. I asked Herr von Siemens what was to 
 be the outcome for Europe. He replied with 
 a well-known German phrase, -'A tree never 
 quite grows to heaven." Events soon proved 
 that this tree of favorable trade balances 
 could not quite grow to heaven, although 
 for the moment it did look as if it were 
 likely to. And so with this increased pro- 
 218 
 
The Industrial Future 
 
 duction of gold which gives promise of 
 doubhng the monetary stock of the world in 
 the next score of years. We might expect, if 
 the theories of the classical economists held 
 good, that with a doubling of the gold stock 
 would come a doubling of prices. We can, 
 however, be very certain that the theory will 
 not entirely hold good. There will be coun- 
 teracting influences. While there will un- 
 doubtedly be a tendency to advance prices 
 as a result of this influx of gold into the bank 
 reserves of the world, I do not believe the 
 gold production is likely to become a seri- 
 ous menace. I do not believe that it will 
 so disturb those business relations that are 
 based upon the terms of money as to cause 
 any vital derangement of affairs. 
 
 What I do believe is that there is likely to 
 follow just what followed in the two former 
 periods of the world's history when there 
 was an extraordinary production of gold 
 added to the monetary stocks. One of these 
 periods followed the discovery of America, 
 when the treasures of Mexico and Peru were 
 exploited. The other was in the years fol- 
 lowing the discovery of gold in California 
 and Australia. In each case a mighty im- 
 pulse was given to the exploitation of virgin 
 fields of development. It seems to me not 
 improbable that the next few years will wit- 
 ness the expansion of the field of commercial 
 219 
 
Business and Education 
 
 enterprise into new places. Countries that 
 are commercially and industrially backward 
 will yield to this new influence. It seems to 
 me that one of the direct and important 
 effects of this great production of gold will 
 be to give an impulse to the development and 
 industrial exploitation of South America, 
 Africa, Asia, and eastern Europe. At our 
 own hand is South America on one side and 
 China and Japan on the other. We are 
 rapidly awakening to the commercial pos- 
 sibilities within these countries. If we are 
 to have an influx of gold more than ample 
 to sustain the credit operations for our do- 
 mestic affairs, that fact will tend to lead our 
 interests into these new fields of exploitation. 
 Then, in turn, a wider use of credit which 
 these new fields will develop and the in- 
 creased reserves which that wider use of 
 credit will make necessary, will probably ab- 
 sorb the increasing gold stock in beneficent 
 uses, preventing it from ever becoming a 
 serious menace to business organization. 
 
 The outlook is surely bright. What can 
 hurt us? What dangers are ahead? With 
 bountiful harvests, with lavish mineral pro- 
 duction, with increasing financial strength, 
 with wonderfully improved industrial organ- 
 ization, with a sound banking position, and 
 with an impulse already given to every form 
 of commercial activity, what is there to fear 
 220 
 
The Industrial Future 
 
 in the future? Is it clear sailing? Can we 
 make commitments without fear for the fu- 
 ture? Is the whole outlook into a cloudless 
 financial horizon? An optimist might be 
 forgiven for thinking that it ought to be. 
 We have a good many elements of a firm 
 foundation under our feet but again we 
 might quote the German phrase, " A tree 
 never quite grows to heaven." Sure as we 
 are of many of the substantial foundation 
 stones upon which to rear a structure of 
 prosperity, we may be quite as sure that 
 there are dangers lurking in the situation. 
 Some may be avoided, others will not. Some 
 it is possible to foresee, others we will fail 
 to recognize until we see their evil effects. 
 Among those which we know exist, there 
 comes first to mind our illogical and un- 
 scientific currency system. We know that 
 this system may at any time breed us trouble. 
 We know that there is not a European finan- 
 cier of broad intelligence who, looking dis- 
 passionately from without at this currency 
 system of ours, does not feel that it has in it 
 dynamic possibilities for trouble even if other 
 conditions are favorable. Indeed it is when 
 all other conditions are most favorable that 
 the danger is the greatest. Now, in the very 
 fullness of the prosperity that we have, there 
 might be a pitfall for us in that quarter. A 
 strain is on our currency system. With our 
 
 221 
 
Business and Education 
 
 usual good luck we may avoid disaster, but 
 it is the sort of time, nevertheless, when we 
 ought clearly to see that we have a system 
 which might endanger our banking position 
 and retard most seriously our commercial 
 development. We know that we are threat- 
 ened by great social disorders ; that the edict 
 of a labor leader might change a cloudless 
 outlook into an uncertain one. We know 
 there is a disregard of law in labor unions 
 and in corporation offices alike, which is 
 threatening to our welfare. We can, at the 
 moment, clearly see that however prosperous 
 conditions may appear, this prosperity might 
 receive a severe check should a speculative 
 fever begin to rage. Should a stock market 
 speculation start from the present high level 
 of prices in the face of the extraordinary de- 
 mand for capital and money which crops 
 and business alike are making, the result 
 might easily be temporary disaster. 
 
 I have been emphasizing some of the 
 bright aspects of the picture, but there are 
 shadows. In a gathering like this. Jere- 
 miad songs are not pleasant, but there are 
 some that might be sung which would not be 
 out of harmony with true conditions. Never 
 was there a better time to preach conserva- 
 tism ; never perhaps was it easier to be car- 
 ried away by some of the obvious features of 
 prosperity and to forget some of the dangers 
 
 222 
 
The Industrial Future 
 
 which in the end will be quite as potent in 
 shaping the ultimate result. " A tree never 
 quite grows to heaven." Although there 
 may be many favorable features to the out- 
 look, it is no time for prudence to be cast 
 to the wind; no time for speculative com- 
 mitments which would yield disaster if 
 temporary reverses came; no time for lax- 
 ness in any of the forms of business pru- 
 dence and conservatism. 
 
 223 
 
OLD-AGE PENSIONS FOR 
 WORKINGMEN 
 
 An address delivered before the Commercial Club of 
 Chicago, October 28, 1906. 
 
 Coffee and statistics were never intended to 
 be mixed. The subject of old-age pensions 
 for workingmen does not lend itself to the 
 sort of after-dinner talk which men like to 
 hear. I am sufficiently impressed with the 
 importance of a study of the problems which 
 the question presents, to believe that there 
 are few topics which might better engage 
 the attention of such a group of men as com- 
 pose the Commercial Club, but I admit that 
 the subject is not one that blends well with 
 the smoke of an after-dinner cigar. 
 
 No men know better than you the changes 
 which have been going on in industrial life 
 in the last generation. There have been ten- 
 dencies toward specialization and concen- 
 tration. There has been a remarkable ap- 
 plication of mechanical aids. We have been 
 working toward production on a vast scale. 
 This has created an industrial army, the 
 rank and file of which tend more and more 
 toward becoming automatic wheels in the 
 224 
 
Old- Age Pensicms for WorTcmgmen 
 
 great industrial organization. The new in- 
 dustrial order has made a new social order. 
 There is to-day no such thing as industrial 
 independence possible for a working man. 
 He must work with others. He must become 
 subject to regulations in common with his 
 fellows. He must, in exchange for the com- 
 forts of life which have come to him, give 
 up in large measure his industrial independ- 
 ence and work in harmony with these new 
 industrial conditions. 
 
 So long as the individual can actively fill 
 his place in this new order of affairs his con- 
 dition shows great improvement in many 
 respects. The moment he gets out of har- 
 mony with the whirl of the industrial ma- 
 chine, however, the moment that sickness 
 overtakes him and accident injures him or 
 old age reduces his power to keep in step 
 with the industrial march, his condition is 
 likely to become incomparably more unfor- 
 tunate than would have been the case under 
 similar circumstances in earlier times. 
 
 Such business men as you recognize 
 clearly enough a changed order of affairs in 
 industrial and commercial life. You know 
 that you must shape your business methods 
 so as to harmonize with the new order of 
 things. You know that you must co-operate 
 in many ways with your fellows ; must share 
 with them their risks; must help to sustain 
 IS 225 
 
Business and Education 
 
 them in their misfortunes. You know that 
 you have lost in the new order of things a 
 certain amount of independence. It ought 
 not to be difficult then to see that your em- 
 ployees are also in the midst of a changed 
 condition and that principles which apply to 
 the relations between employers and em- 
 ployees, and to the relations between the 
 State and the citizen have been undergoing 
 change. I believe that the reason why you 
 are interested in the subject of working- 
 men's pensions is to be found in the funda- 
 mental change which has been going on in 
 industrial affairs. I believe your interest 
 logically follows the evolution of economic 
 laws, and if we are to seek for a secure 
 foundation upon which to rest judgment in 
 regard to this question of workingmen's pen- 
 sions, we will find it in an analysis of eco- 
 nomic conditions rather than in sentimental 
 consideration or charitable ebullition. 
 
 Nations older than we are came earlier to 
 a consideration of this subject. The place 
 where the greatest progress has been made 
 in an experiment in workingmen's pensions 
 is in Germany. It is safe to say that the 
 German system of workingmen's insurance 
 is the most important experiment in progress 
 in the world in the way of a government- 
 aided sociological institution. The impor- 
 tance of it is hardly understood in America 
 226 
 
Old- Age Pensions for Workingmen 
 
 nor is its extent realized. It pervades every 
 phase of the industrial field. Twenty mil- 
 lions of Germany's fifty-two millions of pop- 
 ulation are eligible to these benefits, and the 
 cost of administration falls alike on these 
 beneficiaries and up@n all other citizens of 
 the empire. The total receipts will, from its 
 organization up to the end of this year, have 
 aggregated almost $2,000,000,000. The re- 
 ceipts this year will approximate $150,000,- 
 000. A satisfactory feature of the German 
 state insurance system is that the benefits 
 paid out correspond very closely with the 
 premiums paid in. The expense of adminis- 
 tration, considering the enormous number of 
 individuals concerned, and the fact that 
 weekly contributions are collected from em- 
 ployees, is surprisingly small. It averages 
 under 9 per cent. 
 
 The German system of workingmen's in- 
 surance is not to be regarded as merely an 
 old-age pension scheme. As a matter of fact 
 the old-age pension feature is the least im- 
 portant part of it and the least satisfactory. 
 There are three great divisions of working- 
 men's insurance in Germany. These are 
 insurance against sickness, against accident, 
 and against want in old age. The fund for 
 insurance against sickness is provided in the 
 main by the employees. The employers con- 
 tribute roughly one-third and the workmen 
 227 
 
Business and Education 
 
 two-thirds. The Government gives no sub- 
 sidy for either the sick insurance or the 
 accident insurance. Employers are charged 
 with the entire burden of maintaining the 
 accident insurance fund, while the fund for 
 old age insurance is contributed to equally 
 by employers and employees, and is aug- 
 mented by a subsidy from the Government 
 which is nearly equal to the total cost of ad- 
 ministering the whole system. 
 
 It is quite impossible to enter into a de- 
 tailed explanation of the German system of 
 workingmen's insurance. I know of no 
 other problem of administration where the 
 details are so complicated. Not only are 
 there three distinct systems of insurance; 
 but there are complications of Government 
 participation in the funds and of a division 
 of the authority of administration between 
 Government officials and some twenty-five 
 thousand local organizations. Whatever 
 view one might hold in regard to the benefits 
 of the system, there could be no difference of 
 opinion in regard to this method of adminis- 
 tration. It is certainly too complicated to 
 transplant to any other country. Many of 
 these features of administration would, in 
 any American consideration of the subject, 
 be regarded as errors to be avoided rather 
 than as examples to be followed. It is 
 charged that the complicated administration 
 228 
 
Old- Age Pensions for Workingmen 
 
 had birth in the fertile brain of Bismarck, 
 whose statesmanship was equal to killing 
 two birds with one stone. In the pension 
 system itself he placated the workmen who 
 had run after the false gods of Socialism, 
 and in the methods of administration he pro- 
 vided a police espionage more complete than 
 any ever conceived in the secret service of 
 Russia. Be that as it may, the system 
 has long since outgrown whatever may have 
 been in the Iron Chancellor's mind at its or- 
 ganization, but has not freed itself from the 
 incubus of the enormously detailed adminis- 
 tration with divided authority and compli- 
 cated incidence. 
 
 The principles underlying the theory of 
 German workingmen's insurance might be 
 briefly summarized in this way. The Ger- 
 man nation was, in a few years, transformed 
 from an agricultural country into an indus- 
 trial state. An evolution at the same time 
 was in progress in the field of industry which 
 resulted in the highest specialization of work 
 and the greatest development of the factory 
 system. These all combined to make a prac- 
 tically new social order of things, and made 
 necessary an enunciation of new principles 
 in regard to the duty of the community to- 
 ward the individual. These principles are 
 novel in political life, but fundamental in 
 character. The Germans argue that no mat- 
 229 
 
Business and Education 
 
 ter how free they may be politically they 
 cannot possibly be economically independent 
 because of the intricate and complicated 
 modern system of industry. The individual 
 in spite of himself becomes a part of the in- 
 dustrial order and is so placed that it is 
 difficult, if not impossible, for him to ex- 
 tricate himself from his misfortune should 
 he be overtaken by accident or sickness, or 
 should he reach a dependent old age. In the 
 new industrial order the liability to accident 
 is greatly increased, and that in itself de- 
 mands new means for meeting such a con- 
 dition. 
 
 In Germany, as indeed throughout Eu- 
 rope, the question of the liability of employ- 
 ers in the case of accidents to workmen is 
 one which for a number of years has received 
 much attention from the law-makers. It is 
 certain that with the introduction of high 
 power and complicated machinery, there has 
 been a great increase in the number of ac- 
 cidents which are beyond the control of the 
 workmen themselves. A strict interpreta- 
 tion of the common law has for the most part 
 absolved employers from the greater part of 
 their obligations under such circumstances. 
 The development of the workingmen's in- 
 surance idea in Europe has been in large 
 measure the logical result of efforts to reform 
 the law relating to the liability of employers 
 230 
 
Old- Age Pensions for Workingmen 
 
 for accidents to their employees. Under the 
 old law the employer was responsible only 
 for those accidents resulting directly from 
 his fault or the fault of his agents. The 
 application of that law meant that the em- 
 ployer bore the consequence only when the 
 accident was due to his fault, and then only 
 after the injured employee succeeded in 
 legally establishing the proof of that fault. 
 Europe has seen more plainly than we 
 have in this country the injustice of such a 
 condition. 
 
 When such legal principles were evolved 
 establishments were small, the employer was 
 in intimate relation with the employee and it 
 was comparatively easy to determine the 
 responsibility. With the growth of large- 
 scale production and the introduction of com- 
 plicated and dang-erous machinery, the whole 
 system became so complex that it was ex- 
 tremely difficult to trace responsibility. The 
 result was that as a rule the full weight of 
 suffering from an accident fell upon the in- 
 jured employee. Here in America we have 
 gone even further. We have perfected or- 
 ganizations for iasuring not the employee 
 against accident but the employer against 
 liability. These organizations are not to in- 
 demnify the injured, but rather to indemnify 
 the employer for the costs of fighting in the 
 courts the claims of the injured. I am not 
 231 
 
Business and Education 
 
 saying that employers have been without 
 reason for wishing such indemnification. I 
 know there are lawyers who might better be 
 in jail than in court. I know there are juries 
 which have determined verdicts on whether 
 or not the defendant was a corporation 
 rather than upon any facts that were pre- 
 sented in regard to the case under consid- 
 eration, but in spite of all this I do not be- 
 lieve that even these evils warrant the way 
 in which we throw the burden of accidents 
 upon the injured. Elsewhere the world has 
 grown beyond the old system of common- 
 law liability. I do not believe that the or- 
 ganization of shrewdly managed and power- 
 ful corporations whose business it is to con- 
 test in the courts the claims of injured 
 people is in harmony either with the 
 present-day condition of industry or with 
 the present-day conception of humanity. 
 
 I was saying that one of the most im- 
 portant features of the German insurance 
 scheme is the provision of an indemnity to 
 persons injured in industrial occupations. 
 The work has been in the direction of justice 
 and of humanitarianism, but like most acts 
 that are in conformJty with justice, the ad- 
 vantages have been greater than were at first 
 apparent. 
 
 Accident insurance as developed in Ger- 
 many has been something more than merely 
 232 
 
Old-Age Pensions for Workingmen 
 
 the providing of an indemnity. It has been, 
 in fact, an insurance against accidents. This 
 definite placing of the responsibiHty for acci- 
 dents has led to much study by employers 
 and employees of regulations providing for 
 safeguards. Such study has accomplished 
 remarkable results in the reduction of the 
 number of accidents, and has become a 
 great economic factor in removing the dan- 
 ger from industrial callings. Under the 
 influence of this study the frequency of acci- 
 dents has been reduced one-half. Viewed 
 from an economic standpoint alone the sav- 
 ing which has resulted in the national econ- 
 omy has been a vast sum. We are strikingly 
 careless of life in America. The statistics of 
 industrial injuries and fatalities are a dis- 
 grace. In the rush of our industrial expan- 
 sion we have neglected to provide many of 
 the obviously necessary safeguards. From 
 whatever aspect we may regard the subject, 
 we will, on any broad view of it, find that the 
 adoption of some of the European regula- 
 tions and safeguards will be of great national 
 advantage. 
 
 The second division of the German in- 
 surance system and the one which to my 
 mind has by all odds most fully demon- 
 strated its value, is the sick insurance fund. 
 The advantage to the workmen of a sick 
 insurance fund is clear enough. I will pass 
 
 233 
 
Business and Education 
 
 over without any comment the strikingly ad- 
 vantageous features of this sick insurance 
 system, for there are some others which 
 seem to me of the highest economic impor- 
 tance, and which are well worth emphasizing. 
 I believe that this sick insurance system in 
 Germany is having a profound effect on the 
 whole physical welfare of the nation. I 
 believe that the general level of vitality, and 
 hence of working capacity, is being distinctly 
 raised as a result of it. It must be remem- 
 bered that the activities in the sick insurance 
 field are not confined to the mere payment of 
 the indemnity during a period of illness. 
 The sick insurance not only makes it possible 
 for a workman who is ill to take at once the 
 necessary time for recovery, but it provides 
 him with the best medical attention after he 
 is ill, and while in health it gives hygienic 
 supervision and instruction which is of the 
 greatest value in preventing sickness. Un- 
 der the operation of this system there is 
 being spent in the most intelligent manner, 
 something like $50,000,000 a year in the 
 treatment and care of the sick. 
 
 The testimony in regard to the value of 
 the work done in the sick insurance system 
 is almost universally favorable. It would 
 be hard to calculate its economic importance, 
 but I believe it is so great that it has become 
 one of the leading factors in helping that 
 234 
 
Old- Age Pensions for Workmgmen 
 
 country to the industrial pre-eminence which 
 it is gaining. 
 
 There is undoubtedly here and there 
 ground for criticism. Lazy patients occa- 
 sionally sham illness. There are workmen 
 who would rather lie in bed with a small in- 
 come than work for a larger one. But the 
 principal effect of this sick insurance is, I 
 believe, of economic value in the industrial 
 development of the German Empire out of 
 all proportion to the burden which is laid 
 upon employers. 
 
 The first two divisions of the German in- 
 surance scheme providing for indemnities 
 against accident and sickness will, I believe, 
 commend themselves to every investigator 
 of the subject. 
 
 There is now left to consider the third 
 division, the German old-age pension system, 
 which is, as I have said, the least important 
 and the most criticised feature of the German 
 workingmen's insurance institution. The 
 contributions which it calls for are very 
 small, and the final pension provision is gen- 
 erally regarded by the workmen as entirely 
 inadequate. Although the employers con- 
 tribute an amount equal to that contributed 
 by the workmen, and the Government finally 
 adds a considerable subsidy, there still is less 
 general satisfaction among the workmen 
 with this division of the insurance scheme 
 
 235 
 
Business and Education 
 
 than with the others. The reason for that 
 lies in a measure in the perversities of human 
 nature. The contributions, small as they are, 
 are collected every week, and are a constant 
 reminder to youth of a sacrifice being made 
 for problematical benefits a long way in the 
 future. The benefits of the accident and sick 
 insurance are more directly at hand. The 
 workmen themselves are most intimately re- 
 lated to the administration of the first two 
 funds. 
 
 There is a pretty general demand for an 
 increase of the old-age pension. When it is 
 remembered that the contributions from the 
 men range from six to fifteen cents a week, 
 and that these payments return a pension 
 after seventy years of age of $27.50 to $60, 
 it is easily recognized that there is ground for 
 complaint as to the smallness of the amount. 
 There is a general demand among the work- 
 men to have a reduction in the age limit. 
 Sixty-five years is considered a desirable 
 time for the pension to begin rather than 
 seventy years. 
 
 One incidental feature of the administra- 
 tion of the German system which is proving 
 of very great value is to be found in the way 
 in which the sick and accident funds are ad- 
 ministered by committees made up of em- 
 ployers and workingmen. Employers and 
 workingmen come together on common 
 236 
 
Old-Age Pensions for Workingmen 
 
 ground. They are working toward common 
 ends. With the responsibiHty of administra- 
 tion on their shoulders radical socialists be- 
 come conservative. With the broader point 
 of view which close association with em- 
 ployees brings, the employers are benefited. 
 The fact that in the twenty-five thousand ad- 
 ministrative organizations, workmen and em- 
 ployers have been brought together to give 
 harmonious consideration to the means for 
 accomplishing a common end, is proving of 
 immense importance in maintaining pleasant 
 relations between capital and labor. 
 
 As the German system of workingmen's 
 insurance is by all odds the most important 
 experiment of this sort in the world, I have 
 been to some pains to ascertain at first hand 
 just what German manufacturers and men 
 of affairs think about it. I have felt that it 
 would be interesting to you representative 
 men of affairs, to know what is thought in 
 Germany of this institution by men of our 
 own type. With that in view I addressed a 
 series of questions to a considerable number 
 of the most prominent manufacturers and 
 other representative men in Germany. I 
 regret that I have not received the same 
 courtesy in the way of replies that I believe 
 would have been accorded by you had an 
 inquiry come in the other direction across 
 the Atlantic, but I have, nevertheless, re- 
 
 237 
 
Business and Education 
 
 ceived a number of replies from some of the 
 most important people in Germany. In the 
 main the views held are distinctly favorable 
 to the institution, although in the details of 
 its administration there is found ground for 
 criticism. The idea seems to be general that 
 the system works for patriotic loyalty to 
 the Government on the part of the working 
 people. The earlier idea of the State in the 
 workmen's mind was largely based on the 
 policeman, the sheriff, and the tax gatherer. 
 The State always took something. Now it 
 is said if we watch a post-office money-order 
 department on the first of the month, we see 
 the people drawing their insurance money, 
 and for the first time the workman views the 
 State as a giver. More than a million marks 
 a day are paid out to them in this way, and 
 the result in the way of developing patriotic 
 regard for the Government is excellent. 
 
 The characteristics of the German labor- 
 ing system have been described as low wages, 
 pensions, and contentment. The first is cer- 
 tainly correct. In many fields of labor in 
 Germany the pay is less than one-half the 
 amount corresponding workmen would re- 
 ceive for similar work in this country, and, 
 not infrequently, it is not over one-third. 
 On the whole the German workingmen, so 
 far as I have been able to observe, appear to 
 be more contented than American working- 
 238 
 
Old-Age Pensions for Workingmen 
 
 men. Whether this contentment is due to the 
 pension system or not is, of course, an open 
 question. The contentment of the German 
 working classes might be described as phys- 
 ical rather than mental. The German is 
 nothing if not critical. The whole German 
 nation is given to analysis and criticism of its 
 own institutions, and if one wanted to collect 
 evidence of discontent among the German 
 working classes, and went to the printed page 
 to do it, there would be no end to the mass 
 of testimony. 
 
 None of my correspondents claimed that 
 the effect has been to make the workman 
 contented. The Empire is new. Germany's 
 industrial prominence is new. One cannot 
 separate the effect of this insurance and say 
 that certain good results are due to it alone. 
 That the workman is not content must be 
 admitted, nor is the man who makes a mil- 
 lion contented. The workman has had this 
 new set of rights and privileges given to him, 
 and his eyes are opened to the possibilities 
 of more rights and greater privileges. A 
 perspective of new things is opened to him. 
 His discontent, however, is due not to faults 
 of the pension system, my correspondents 
 tell me, but rather to a desire for an exten- 
 sion of its benefits. 
 
 The general effect of the system is thought 
 to have a good influence in preventing a 
 
 239 
 
Business and Education 
 
 tendency toward Socialism. Most of the 
 workmen who are members of the adminis- 
 trative committees are Social Democrats. 
 My correspondents tell me that it is simply 
 wonderful to see how the most radical politi- 
 cal shouters quiet down when they find them- 
 selves on a committee discussing grave mat- 
 ters and charged with the responsibility of 
 important decisions. 
 
 I asked my German friends their opinion 
 as to whether or not it would be advanta- 
 geous for America to adopt a workingmen's 
 pension scheme. Their replies to that ques- 
 tion were illuminating. This is what the 
 manager of one of the greatest industries 
 said : " I think the general opinion in Ger- 
 many is that in America the creation of 
 large funds under Government control would 
 cause great temptation for their misappro- 
 priation. Their collection and distribution 
 would be too dependent upon politics. This 
 opinion seems largely justified in view of the 
 instances of maladministration that so many 
 of your Government Departments have re- 
 cently furnished. The German opinion is 
 that the American citizen is as yet too indi- 
 vidual in his honesty and efficiency. Collec- 
 tively, as exhibited in the government of 
 your municipalities and of the State, you 
 seem to us weak in economical and ineffec- 
 tive in business management and financial 
 240 
 
Old-Age Pensions for Workmgmen 
 
 integrity." That is not a pleasant criticism 
 to receive, but there is more justice in it than 
 we all might wish. 
 
 Another correspondent, most eminent in 
 both industrial and public life in Germany, 
 says : " The German nation believes that it 
 can conscientiously recommend the introduc- 
 tion of the system of workingmen's insurance 
 into other countries, but so far as the United 
 States is concerned, such a system does not 
 seem as great a necessity as in other coun- 
 tries. Wages are higher in America and 
 the workmen better capable of providing for 
 the future." He then makes an interesting 
 suggestion. He says : " There is no doubt 
 that the introduction of compulsory insur- 
 ance would produce a social line of demarka- 
 tion between those who are obliged to sub- 
 mit to the law and those who are exempt, 
 and we doubt if the people of America would 
 look upon such a social classification with 
 favor. It cannot be denied that with the 
 German system there is a certain amount of 
 tutelage which the American workman in 
 consequence of his independence would bit- 
 terly resent. Should the system ever be in- 
 troduced, I do not believe it would be wise 
 to entrust it to the various States. It will 
 be more beneficial if brought under the con- 
 trol of the Federal Government." 
 
 In every Continental country the political 
 
 i6 241 
 
Business and Education 
 
 questions which occupy the foremost posi- 
 tion in parhamentary consideration are 
 measures designed to improve the condition 
 of the laboring population. We are apt to 
 think of ourselves as a republic more swayed 
 by the democratic voice of the people than 
 are other nations. It strikes an American 
 as curious to find that, in monarchical Eu- 
 rope, governments everywhere are paying 
 the closest heed to the public will. This, of 
 course, is true in small measure in Russia, 
 but in France, Germany, Belgium, Italy, and 
 Holland particularly, and in Austria-Hun- 
 gary and Spain to a less degree, the foremost 
 legislative movements are concerned with 
 questions of improving the condition of the 
 laboring people. 
 
 The way in which parliaments bow to 
 popular will was strikingly illustrated in the 
 French Assembly some three years ago, 
 when by a vote of 537 to 3 the law concern- 
 ing aid for old people was passed. The 
 French Government has for years taken a 
 benevolent attitude toward this subject, and 
 in particular has made it easy for persons in 
 humble circumstances to secure annuities 
 from the Government either by a single small 
 payment during the early years of life, or by 
 a series of payments. 
 
 The principle of giving aid to old people 
 was adopted in a moderate way ten years 
 242 
 
Old- Age Pensions for Workingmen 
 
 ago, but it was not made compulsory upon 
 the various Departments. The present law 
 broadly proclaims the obligation of the State 
 to aid people whose years have passed the 
 line of usefulness. In all the debates in the 
 Assembly, that principle — the obligation of 
 the State to give aid — was not opposed, and 
 the admission of the principle is, of course, 
 the most important fact about the whole 
 affair. The present law considers the obliga- 
 tion as one to be largely borne by the com- 
 mune or township, and the major part of the 
 payments are made from commune funds, 
 although the funds of the general Govern- 
 ment are used to supplement the local grants. 
 It is anticipated that somewhere from 300,- 
 000 to 500,000 people will receive regular 
 monthly payments when this law is in full 
 operation. 
 
 Even the Russian Government has made 
 provision for insurance by the State. There 
 the business is entrusted to the governmental 
 savings banks. The Government proposes 
 to make the taking out of insurance oblig- 
 atory so far as employees on the Government 
 railways are concerned, and it arranges for 
 the payment of the premiums by deductions 
 from the monthly salaries. 
 
 With the exception of the United States, 
 all the great powers of the civilized world 
 pension their civil servants. 
 243 
 
Busi/ness and Education 
 
 The question of civil pensions in the 
 United States is, I presume, not one that 
 interests you particularly, but I believe it is 
 one in which you ought to be interested. 
 The full working out of the merit system in 
 civil service can never be accomplished, I 
 believe, until we recognize the principle of a 
 civil pension for superannuated Government 
 employees. There, is no other important 
 nation which has not recognized that prin- 
 ciple. I doubt if there are any men who 
 have ever been charged with the responsibil- 
 ity of an appointive office in the Government 
 service, who have not come to recognize that 
 need, and who have not been won over to the 
 belief that it would be economy in Govern- 
 ment administration if a proper system of 
 civil pensions were devised. 
 
 Look now from the foreign field to what 
 has actually been accomplished in the way 
 of old-age pensions in this country. There 
 will be found much that is interesting. A 
 careful canvass has been made of railroads 
 and large business corporations in America 
 to ascertain the number of such corporations 
 which have been led to adopt some sort of 
 old-age pensions. In an inquiry reaching 
 nearly two thousand corporations replies 
 show that seventy have adopted some plan 
 for retiring and providing for employees 
 during old age. Without a single exception 
 244 
 
Old- Age Pensions for Worki/ngmen 
 
 these corporations which have adopted such 
 a plan expressed the opinion, after having 
 had an opportunity to note its effects, that 
 it is a wise business practice. Among the 
 corporations having a pension system are 
 some of the most important in the United 
 States. Some four hundred others replied 
 that they had the matter under serious 
 consideration and that they were convinced 
 that the principle was sound from a business 
 viewpoint. 
 
 More than thirty years ago, the Grand 
 Trunk Railway of Canada adopted a pension 
 system which has been growing in impor- 
 tance, and has continually given good reason 
 for commendation from both the officials and 
 the employees. Fifteen years ago the Balti- 
 more & Ohio followed suit. In 1900 the 
 Pennsylvania Railroad and the First Na- 
 tional Bank of Chicago formulated pension 
 systems, and the following year the Penn- 
 sylvania lines west of Pittsburgh and the 
 Illinois Central adopted pension plans. In 
 1902 the Andrew Carnegie Relief Fund, with 
 its $4,000,000 benefaction was organized, 
 and half a dozen important railroads, includ- 
 ing the Southern Pacific and Canadian Pa- 
 cific, and the Chicago and Northwestern, 
 became convinced that the method was wise. 
 
 The most notable step which has been 
 made in this country was accomplished this 
 245 
 
Business and Education 
 
 year by the great Carnegie benefaction of 
 $10,000,000 for providing pensions for col- 
 lege professors. This act of America's great 
 philanthropist has received more approval 
 than any other of his vast benefactions, and 
 it promises a marked and beneficial effect on 
 our whole system of higher education. 
 
 As a rule th'ose American corporations 
 which have adopted the old-age pensions 
 system have treated the matter in the light 
 of deferred wages, the corporations bearing 
 the entire expense of the pension require- 
 ments. The method of the Pennsylvania 
 Railroad is typical of this form. 
 
 In a word, the Pennsylvania Railroad 
 retires upon a pension, all officers and em- 
 ployees compulsorily at the age of seventy, 
 and may retire them between the ages of 
 sixty-five and seventy, provided they have 
 been thirty years in the service. 
 
 The amount of the pension varies with 
 the years of service, and with the average 
 monthly pay for ten years preceding retire- 
 ment. The average monthly pay for ten 
 years preceding retirement is the basis, and 
 the pension is i per cent of that amount for 
 each year of service. The Company reserves 
 the right to alter this basis whenever the 
 allowance made under it shall demand an 
 annual expenditure in excess of $390,000. 
 
 When the Pennsylvania officials were ex- 
 246 
 
Old- Age Pensions for Worhmgrnen 
 
 amining the subject, they found that nearly 
 every important railroad system in the world, 
 outside of America, had provided in some 
 form for the retirement of old employees. 
 The basis of the plans adopted by all the 
 foreign corporations and governments con- 
 templated contributions on the part of the 
 employees. That was not in accordance 
 with the ideas of the Pennsylvania officials. 
 In that case the Company wished to assume 
 all the expense involved, and in that respect 
 the practice of the Pennsylvania Company 
 and of most other American corporations is 
 at variance with the accepted practice else- 
 where in the world. Another method, of 
 which a typical example is that of the First 
 National Bank of Chicago, provides for con- 
 tributions to the pension fund by both em- 
 ployer and employee. 
 
 In respect to the age of retirement there 
 is a fair amount of unanimity in all plans. 
 The majority of the schemes fix the age 
 at sixty-five. A number of them, the Penn- 
 sylvania Railroad being an example, give 
 some play to the judgment of employing 
 officers so far as the retention of employees 
 between the ages of sixty-five and seventy 
 is concerned. The Carnegie Company re- 
 tires men at the age of sixty, and the Grand 
 Trunk Railway of Canada at the age of 
 fifty-five. 
 
 247 
 
Business and Education 
 
 As a general rule, in the plans thus far 
 adopted in this country, specified length of 
 service is required as a condition precedent 
 to obtaining a pension. The Canadian Pa- 
 cific, Illinois Central, and Baltimore & Ohio 
 Railroads have fixed that term of service at 
 ten years. The Carnegie Company and the 
 First National Bank of Chicago fixed it at 
 fifteen. The Southern Pacific and its allied 
 lines make it twenty years, while the Penn- 
 sylvania Railroad and a number of Eastern 
 roads made it necessary for an employee to 
 have been thirty years in their service. On 
 the other hand, the Philadelphia & Reading 
 has adopted a very broad plan. On that 
 railroad any faithful employee, irrespective 
 either of age or of length of service, who 
 receives injuries in the performance of duty, 
 or becomes incapacitated through sickness, 
 may be awarded such a pension as the 
 president determines. 
 
 Practically, without exception, those 
 American railroads which have adopted the 
 pension system provide the entire fund out 
 of which pension allowances are paid. The 
 Grand Trunk Railway requires a contribu- 
 tion of 2^^ per cent of the monthly wages. 
 The First National Bank of Chicago requires 
 a contribution of 3 per cent. While the 
 employee contributes to the fund, provision 
 is always made for the return of his pay- 
 248 
 
Old- Age Pensions for WorJcmgmen 
 
 ments in case he severs his connection with 
 the service. 
 
 If I were to attempt to summarize the 
 reasons why institutions in the United States 
 are beginning to adopt old-age pension 
 schemes, I would say that they embrace such 
 considerations as these: 
 
 The pension attaches the employee to the 
 service and thus decreases the liability to 
 strike. It makes more certain a continuance 
 of efficient men in the lines of work with 
 which they are perfectly familiar. Of quite 
 as much importance is the fact that a pension 
 system enables employers to dispense with 
 the elderly and inefficient, and thus gives 
 constant encouragement to good effort on 
 the part of younger men hoping for promo- 
 tion. When employees realize that unsatis- 
 factory conduct may at any time lose them 
 not only their present positions, — a loss 
 which in such a labor market as ours might 
 be easily made good, — but that it entails 
 further the loss of a very valuable asset, the 
 employee's right to a pension, the incentive 
 to good conduct is greatly increased. It 
 operates especially as an incentive to hold 
 men between the ages of forty and fifty when 
 they have acquired the experience and skill 
 which makes them especially valuable, and 
 prevents their being tempted away by slightly 
 increased wages for a temporary period. 
 249 
 
Business and Education 
 
 Those business institutions which have 
 adopted the old-age pension scheme have 
 not done so from sentimental considerations, 
 but rather from considerations of economy 
 and efficiency of administration. They have 
 found that when provision is made for those 
 who are too old to render efficient service, 
 every employee in the service who recognizes 
 that at some time he may become eligible to 
 such benefits will be under strong induce- 
 ments for good behavior. In financial insti- 
 tutions particularly, if men are removed 
 from anxiety for the future, they are much 
 more apt to devote their best efforts exclu- 
 sively to their careers and to be in less danger 
 of diverting their energies into side channels 
 of money-making — channels which may 
 easily lead them on to dangerous ground. 
 
 No one can doubt that there is weight in 
 these reasons. On the other hand, they cer- 
 tainly do not in themselves offer sufficient 
 ground for us to jump to the conclusion that 
 we are ready for a compulsory system of old- 
 age pensions which should be under the 
 Government's supervision. With such study 
 as I have been able to give to the subject, I 
 should, at the present time, summarize my 
 conclusions as not going further than to say 
 that it is eminently a subject for careful 
 painstaking study. I do not believe the 
 German system could be transplanted here 
 250 
 
Old- Age Pensions for Worhmgmen 
 
 in anything like its entirety. I am, however, 
 perfectly confident that those features of the 
 German system pertaining to sick and acci- 
 dent insurance are of enormous value to the 
 national economy, and are producing results 
 out of all proportion to their cost. 
 
 That there is to be development of the 
 industrial pension idea is as inevitable as the 
 working of the laws of economic progress, 
 and whether that development should be 
 directed by the Government, or whether it 
 can best find expression through the indi- 
 vidual action of corporations, I am not pre- 
 pared to offer an opinion. The thing that 
 I do thoroughly believe, however, and the 
 one conclusion which I have formed, and the 
 one which seems to me you ought not to find 
 difficulty in agreeing with, is that the subject 
 is worthy of thorough scientific study. I 
 believe the Commercial Club would be ren- 
 dering a service of great value to the country 
 if it would either undertake on its own be- 
 half, or, perhaps preferably, would use its 
 great influence to get the President or Con- 
 gress to undertake, a thorough investigation 
 of the whole problem. There is a scarcity of 
 literature in English on the subject, and 
 what has been printed is now mainly in the 
 form of scattered articles and buried reports. 
 
 A commission which would give the sub- 
 ject a thorough investigation and would put 
 
 251 
 
Business and Education 
 
 the results of that investigation into such 
 shape that we could grasp the significance 
 of what has been done would be of great 
 value. I believe it is worth the while of such 
 men as you to give impetus to such a move- 
 ment, to throw your influence on the side of 
 a complete inquiry into all the phases of this 
 subject. If to do this accords with your 
 judgment, I am confident that an inquiry so 
 instituted will be followed by results that 
 will be of very great economic importance to 
 the nation. 
 
 252 
 
AMERICANS FOREIGN COMMERCE 
 
 An address delivered before the Chamber of Commerce 
 of Wilmington, North Carolina, September, 1902. 
 
 We are all aware that we are in a unique 
 period of commercial, financial, and indus- 
 trial development. It is undoubtedly the 
 most important, the most remarkable and 
 the most interesting period of industrial and 
 financial evolution in the history of the 
 nation. We have witnessed, in the last half 
 dozen years, a commercial expansion and a 
 financial movement alike unparalleled in the 
 achievements of our own country or in the 
 growth of other lands. 
 
 These half dozen years have been produc- 
 tive of statistical totals bewildering in their 
 magnitude, — of industrial expansion un- 
 paralleled either in volume or in significance ; 
 of widening financial influence; of broad- 
 ening credit operations ; of banking develop- 
 ment, — all marking growth so great that 
 it is becoming difficult for us to view with 
 a correct and rational perspective the phe- 
 nomena marked by these new totals. 
 
 Familiar as you all are with the salient 
 features of this development, I wish for a 
 moment to emphasize a few of the more 
 253 
 
Business and Education 
 
 noteworthy facts. I do not want to weary 
 you with any statistical catalogue, but only 
 to indicate in the most general way some of 
 the features of this remarkable period. 
 
 In the domestic field we have had both a 
 series of extraordinary crop years and a 
 period of extraordinary industrial activity. 
 On the agricultural side, we have seen the 
 annual value of farm products increase far 
 over a billion dollars in the last half dozen 
 years, and we have seen the value of the 
 farms themselves advance more than four 
 billion dollars in the same time. In the 
 industrial field, we have had a period of the 
 fullest employment of labor (except where 
 labor has chosen to refrain from work), and 
 of the highest general level of wages which 
 has ever been known, either with us or with 
 any other people. The definite evidence of 
 this prosperity we have seen in a doubling 
 of the individual deposits in national banks, 
 the total going up from roundly a billion six 
 hundred millions in 1896 to three billion two 
 hundred millions this year. In the same 
 time the deposits of savings banks have in- 
 creased seven hundred millions, the deposits 
 in State banks a thousand millions — con- 
 siderably more than doubling the total of six 
 years ago — and the deposits in trust com- 
 panies also more than doubling, the increase 
 there being six hundred million. In these 
 254 
 
Americans Foreign Commerce 
 
 half dozen years the credits represented by 
 individual deposits in banks of all classes 
 have increased roundly four billion dollars, 
 an increase nearly equal to the total deposits 
 of all kinds half a dozen years ago. 
 
 Bank clearings — an excellent measure 
 of general trade — increased in these half 
 dozen years 150 per cent, and it is estimated 
 that the total wealth of the country has had 
 more than twenty billion dollars added to it 
 in that period. 
 
 We have increased our coal production one 
 hundred million tons, and passed easily to 
 the position of the greatest of coal-producing 
 nations. We have almost trebled our pro- 
 duction of steel, leaving our competitors far 
 behind in any comparison of volume of busi- 
 ness. We have added four hundred million 
 dollars to the annual product of our mining 
 industries. 
 
 So the catalogue might be indefinitely 
 extended, with ever-increasing totals and 
 more and more confusing aggregates of 
 almost incomprehensible numbers. In a 
 word, whichever way we turn we find that 
 the figures measuring the volume of busi- 
 ness, the extent of industry, the growth of 
 financial importance, have in these last half 
 dozen years made an apparent gain equal to 
 the entire total six years ago. It is hardly 
 too much to say that in six years we have 
 25s 
 
Business and Education 
 
 doubled the figures measuring the apparent 
 extent of our annual domestic business. 
 
 Now, for a moment, to turn from the 
 domestic side of the account to the foreign 
 situation. Here we have recorded gains 
 which have given deep concern to the whole 
 commercial world. We passed the billion- 
 dollar mark with our exports in 1896, and 
 in five years more the total stood just under 
 a billion and a half. At the same time our 
 imports were declining, so that we were not 
 only making wonderful inroads upon foreign 
 markets, but we were more than holding our 
 own in our own markets in competition with 
 foreign manufacturers. Our foreign trade 
 balances began to show incredible totals in 
 our favor, running up well over six hundred 
 millions a year, and causing the gravest 
 apprehension in the minds of our commercial 
 rivals in regard to the industrial readjust- 
 ment which the world must look forward to 
 if such totals were to be maintained. In a 
 single year we imported one hundred and 
 five millions of gold. The world sud- 
 denly discovered that we were not alone 
 its granary, but we were likely to become 
 its workshop. We pushed into the foreign 
 markets with the handiwork of our me- 
 chanics and the products of our machines, 
 month by month increasing our sales, until 
 from a total of less than two hundred mil- 
 256 
 
Americans Foreign Commerce 
 
 lions of exports of manufactures we had 
 soon far exceeded four hundred milhons, 
 making increases so rapid that Europe was 
 brought face to face with the problem of 
 reorganization of her industries to meet this 
 new-born competition, and a readjustment 
 of her finances to pay for her increased pur- 
 chases, which she seemed unable to offset by- 
 increased sales. 
 
 I had the privilege a year ago of meeting 
 many of the foremost statesmen and finan- 
 ciers of Europe, and of discussing with them 
 the commercial questions which had been 
 raised by our rapid industrial development, 
 and by our wholesale invasion of their 
 markets. Everywhere I found the problem 
 receiving most serious attention. Every- 
 where it was regarded as the most vital of 
 economic questions, and nowhere did I find 
 anything but wonder over the development 
 which we were showing and apprehension 
 in regard to the effect of its continuance. 
 Where it was to lead in its effect upon Euro- 
 pean industries and European finances, if it 
 were to continue, was the unsolvable prob- 
 lem of finance ministers, bankers, and indus- 
 trial captains. I had the privilege of a con- 
 versation at that time with Germany's most 
 distinguished financier and industrial up- 
 builder, the late Georg von Siemens — the 
 creator of the Deutsche Bank, the adviser 
 17 257 
 
Business and Education 
 
 of the Government, the originator of vast 
 industrial enterprises. I asked him what 
 was the future of the old world in respect 
 to this new industrial development and this 
 sudden show of financial strength in Amer- 
 ica. I asked him what was to be the result, 
 if we were to go on selling to Europe six 
 hundred millions of goods a year more than 
 we bought, increasing our exports, decreas- 
 ing our imports, building up a theoretical 
 trade balance of such totals as were new in 
 international finance. 
 
 Herr von Siemens was a wise and an 
 experienced man. He had passed through 
 crises and through periods of inflation, and 
 he viewed the outlook with calmness. 
 
 " I am not concerned about what will hap- 
 pen to Europe if you are to go on in this 
 triumphal way," he told me, " because you 
 will not go on. There will be something 
 which will stop you. Something always 
 does happen in such a situation as this, and 
 something will happen now. I do not know 
 what it is; my vision is not broad enough 
 or clear enough to foresee it, but you will 
 make mistakes and a halt will be called." 
 
 It is my purpose to-night to examine 
 somewhat critically the present industrial 
 and financial conditions, with a view to see- 
 ing if this shrewd German observer was 
 right, with a view to determining if some- 
 258 
 
Americans Foreign Commerce 
 
 thing has happened to call a halt in our 
 progress toward a command of the world's 
 markets, and then to offer you, if I can, 
 some suggestions as to why it is that we 
 have failed to keep up the pace, and as to 
 what can be done to remove the obstacles 
 that are retarding our progress. 
 
 I am just back from another European 
 trip, and have again met many of the most 
 distinguished of European statesmen and 
 financiers. The change that the year has 
 made in their point of view is extremely 
 interesting. They are no longer fascinated 
 by our progress. Instead of that, I found 
 in every capital I visited, and in the mind 
 of almost every keen observer of interna- 
 tional affairs with whom I conversed, a belief 
 that we have for the present marked the 
 high-water point of our overflow of exports 
 into the European industrial field. And in- 
 stead of credulous belief in the unlimited pos- 
 sibilities of our development, which seemed 
 to be the average state of mind a year ago, 
 there is to-day a feeling of grave conserva- 
 tism and anxious interest in our future. 
 
 They note that the rapid increase of our 
 exports came to a halt two years ago. They 
 note that our imports in the last two years 
 have been rapidly rising, the record for the 
 fiscal year just closed being more than nine 
 hundred million dollars, against only a little 
 
 259 
 
Business and Education 
 
 over six hundred millions in 1898. They 
 note too, that in spite of that tremendous 
 balance of trade which Government reports 
 showed in our favor, a balance running, as 
 I have said, up to an average of almost six 
 hundred millions a year, we do not seem to 
 have any unusual command upon interna- 
 tional credits, but we are as a matter of fact 
 a considerable debtor in the world's ex- 
 changes, and that now, in the midst of ex- 
 traordinarily bountiful harvests, and at the 
 season when a movement of gold in this 
 direction might normally be expected — we 
 are concerned lest a high rate for sterling 
 shall lead to gold exports. 
 
 If we are honest with ourselves, we must 
 admit that the edge is off our invasion of 
 foreign markets. Our totals are still colos- 
 sal, but the rate of increase which they were 
 making has been checked, and decreases have 
 been recorded. Our exports of manufactures 
 for the fiscal year just closed are thirty 
 million dollars less than the point they 
 reached two years ago. Our total exports 
 of domestic merchandise fell off more than 
 a hundred million dollars in the year. In- 
 stead of decreasing imports we have made 
 some large increases in our purchases of 
 foreign goods, and the total for this fiscal 
 year stands more than three hundred million 
 dollars above 1899. 
 
 260 
 
Americans Foreign Commerce 
 
 If we chose to examine critically our do- 
 mestic condition we might find there, too, 
 developments not in every respect satisfac- 
 tory. It must be with the keenest regret 
 that we recognize unfavorable conditions 
 that threaten a break in the unparalleled 
 magnificence of this story of industrial 
 growth. Nothing will better repay thought 
 and study than inquiry into those causes, 
 which seem to imperil a continuance of this 
 wonderful period of prosperity. Nor can 
 any investigation be of more vital impor- 
 tance than a consideration of what safe- 
 guards it is possible for us to provide against 
 the recurrence of these cycles of depression 
 which seem always to follow periods of 
 prosperity. 
 
 It is not my purpose, however, to dwell 
 upon some of the evidences of inflation, upon 
 a too free issue of securities larger than the 
 value of properties warrant, and more rapid 
 in creation than investors can absorb, nor 
 upon labor conditions fraught with serious 
 menace, which already mark their effect 
 upon industrial totals. Instead of a broad 
 survey of the whole situation, I wish to take 
 up a single phase of it, a phase which has 
 been well illustrated by a recent episode in 
 financial affairs. 
 
 In cataloguing the splendid list of indus- 
 trial and commercial achievements, I have 
 261 
 
Business and Education 
 
 been telling a story that is old to your ears. 
 The totals are so wonderful as to remain 
 fresh with interest, but they present a view 
 of the situation which has now for several 
 years been pretty well fixed in the minds of 
 all of us. Statistics are wearisome. In an 
 after-dinner talk they are almost unpardon- 
 able. But I am going to ask you to give 
 attention to a few more figures, and I regret 
 that they are figures that cannot be looked 
 upon with the degree of satisfaction with 
 which, in the last three or four years, we 
 have been wont to regard all of our com- 
 mercial statistics. 
 
 The Comptroller of the Currency, a few 
 days ago, completed his report showing the 
 condition of all national banks last month. 
 That report, it seems to me, is one of the 
 most significant that has in a long time come 
 from the Comptroller's office, and it will 
 well bear some analysis and comparison. 
 If we are merely looking for large totals, we 
 may again find them here, figures in some 
 respects surpassing all previous records. 
 The total deposits, individual, bank, and 
 Government, in all national banks, foot up 
 four billion five hundred and twenty-seven 
 million dollars. Now, if we turn back to a 
 similar report for the beginning of 1899, 
 we will find the total of the same items 
 three billion two hundred and twenty-six 
 262 
 
Americans Foreign Commerce 
 
 millions. Now, for a moment, bear these 
 figures in mind. Roughly, four billion and 
 a half deposits now, against three billion two 
 hundred million in 1899 — and with that 
 increase in the liabilities of national banks 
 in mind, let us look at the figures represent- 
 ing the reserve basis. The total of specie 
 and legal tenders held by the national banks 
 last month was five hundred and eight mil- 
 lions. The total at the beginning of 1899 
 was five hundred and nine millions. Here 
 we have had an expansion of a billion three 
 hundred millions in deposits, while the basis 
 of gold and legal tenders, upon which that 
 inverted pyramid stands, is actually slightly 
 smaller than it was at the beginning of the 
 period. Now, in that same time the deposits 
 of other banks — State banks, trust com- 
 panies, savings banks, and private banks — 
 have probably increased not far from three 
 billion dollars, and there is little likelihood 
 that their gold and legal tender reserve is 
 materially larger than — if it is as large as 
 — at the beginning of 1899. We have had 
 then in less than four years an increase in 
 the total bank deposits of the country of 
 over four billion dollars, accompanied by no 
 increase in the specie and legal tender hold- 
 ings of those banks. 
 
 What has brought about this remarkable 
 development of bank credit? The answer 
 263 
 
Business and Education 
 
 must at once come to the mind of any ob- 
 server of finance, that the principal reason 
 for the expansion of deposits and the accom- 
 panying expansion of loans is to be found 
 in the great movement which has been the 
 significant feature in financial affairs of the 
 last half dozen years — the movement to 
 aggregate industrial establishments into 
 single great corporate units, and to convert 
 the evidence of ownership into corporate 
 securities which have entered actively into 
 the stream of financial operations. Vast 
 amounts of new securities have been created 
 in these half dozen years, based in large 
 measure upon properties which were before 
 held as fixed investments by individuals, or 
 if standing in the form of corporate prop- 
 erty, the securities of those corporations 
 were more closely held, and in but small 
 measure entered into the financial operations 
 of the day. This movement — tending to 
 convert the evidence of ownership of a great 
 amount of fixed property into a form which 
 has been considered a bank collateral, and 
 which has been made the basis of loans and 
 of corresponding increases of deposits, is 
 undoubtedly the most important single cause 
 for this increase of more than four billion 
 dollars in bank deposits and bank loans of 
 the country in the space of three or four 
 years. 
 
 264 
 
Americans Foreign Commerce 
 
 Another important contributing influence 
 has been the vast expenditures of corpora- 
 tions — railroad companies particularly — 
 for the improvement, betterment, and exten- 
 sion of their properties. New securities have 
 been created, and the capital which was ob- 
 tained by their sale has been converted into 
 a fixed form of investment. When our rail- 
 roads were first built economy in construc- 
 tion was the prime consideration. Now it 
 has come to be that economy in operation is 
 demanded. At first it was economy in the 
 use of capital ; now it is economy in the use 
 of labor. And so we have seen, not only 
 with the railroads, but in every department 
 of industry, a lavish investment of capital 
 in order that the cost of production might be 
 cheapened. 
 
 Now let us suppose that all this great ex- 
 penditure has been wisely made, and in the 
 main I believe that it has, that every dollar 
 which has been expended in the improvement 
 and betterment of railroads, in the extension 
 and better equipment of industries, will efifect 
 economies which will result in a saving 
 equal to a fair interest return on the capital 
 so invested. But, granting that the invest- 
 ment, from that point of view, has been wise, 
 a consideration which we have perhaps in 
 some measure lost sight of is that this whole 
 great movement of improvements and better- 
 265 
 
Business and Education 
 
 ments has been drawing from the fund of 
 Hquid capital and converting it into a fixed 
 form, so that such capital cannot be fully 
 returned into liquid shape, from the result 
 of increased earnings, before the next ten 
 or fifteen years. 
 
 If a farmer were to ask a country bank to 
 loan him ten thousand dollars to put up new 
 buildings and generally improve his prop- 
 erty, the banker, while admitting that the 
 expenditure might be a profitable one in the 
 added return which the farm would give, 
 would say that the proposal was not a good 
 banking proposition, that bank funds could 
 not properly be tied up in an investment of 
 that character, but must be loaned for ob- 
 jects which, in the natural order of the com- 
 mercial season's progress, would liquidate 
 the debt in a much shorter time than would 
 be possible were the capital to be converted 
 into such a fixed form of investment. Rec- 
 ognizing this principle, the National Bank- 
 ing Act very wisely prohibits loaning upon 
 real estate. Sound as the security is, it is 
 not within the lines of the banking principle 
 which embodies the practice of making only 
 such loans as will in the natural order of 
 business liquidate themselves within a few 
 months. 
 
 If a railway manager were to ask from 
 his larger bankers a million-dollar loan to 
 266 
 
America's Foreign Commerce 
 
 put into better bridges and heavier track, 
 the same answer would be made. It would 
 be unwise for a bank so to tie up active 
 capital by converting it into a fixed form of 
 investment. Profitable as the banker might 
 be convinced the investment would be in the 
 greater economies which it would bring to 
 the operation of the railroad, he would see 
 that it would be unwise financiering for him 
 to loan his deposits for conversion into a 
 fixed form of investment which could not be 
 liquidated should his depositors begin to re- 
 duce their deposit lines. Securities issued 
 for just such purposes, however, form much 
 of the basis of this increase of four billions 
 of loans. The loans are excellent so long 
 as A can sell his collateral to B should A be 
 called upon to repay, but if A and B should 
 both be called upon to pay, there is nothing 
 in the nature of these loans which will per- 
 mit them rapidly to work out toward liqui- 
 dation in the natural order of things. It is, 
 in effect, a loaning of bank credit for con- 
 version into a fixed form of property. 
 
 If, say, two-thirds of the total income 
 from industrial investments were to be re- 
 turned to the betterment of properties, and 
 there should be issued in place of the capital 
 so spent additional securities, the process 
 would be wise and beneficial, If, on the 
 other hand, there should be converted into 
 267 
 
Business and Education 
 
 the form of fixed property by expenditures 
 for improvements and betterments, a total 
 amount of capital considerably exceeding the 
 total annual income from such investments, 
 the result in the end could lead only to dis- 
 aster, no matter how wisely these expendi- 
 tures for betterments and improvements 
 might be made — because in the process 
 there would be absorbed a larger and larger 
 amount of liquid capital into the form of 
 fixed investment, banking reserves would be 
 reduced, and when bank deposits were de- 
 manded, though there might be the sound- 
 est of security back of them, it would be in 
 a fixed form unavailable for liquidating the 
 debts due to depositors. 
 
 It must be admitted, I believe, that we 
 have been converting too great an amount 
 of liquid capital into fixed forms of invest- 
 ment. What is the cure? The cure is, of 
 course, to reduce the expenditures of that 
 character so that they will come within the 
 line of safety. What is the line of safety? 
 It is, it seems to me, something well within 
 the total income from such investments. 
 If we go beyond it, — if we convert into 
 fixed forms of property more than the total 
 income from the property, — we have gone 
 beyond the line of safety and are borrow- 
 ing from the future temporarily to bury 
 the capital. We have the choice of one 
 268 
 
America's Foreign Commerce 
 
 of two things: Either to practise wise 
 discretion or to go on borrowing of the 
 future until we are brought up against a 
 wall. The first course is consistent with 
 continued prosperity, even if we do, to some 
 extent, reduce the expenditure of capital 
 for new construction, extensions, and better- 
 ments. The second course, if persisted in, 
 will bring confusion, disorder, and paralysis 
 on the whole constructive investment. 
 
 Another phase of this situation, and one 
 which has aggravated the causes leading to 
 an expansion of loans, and which has cut 
 off from us the relief which we hoped for 
 in the way of a foreign trade balance made 
 tangible by gold imports, has been the rapid- 
 ity and extent of the advance in prices. 
 Back in 1895 ^^^ 1896 we were on a low 
 level of prices, and we were imbued with 
 economical ideas of administration. It was 
 then that we began making the great inroads 
 into foreign markets and our exports passed 
 the billion-dollar mark. In 1898 our ex- 
 ports had so increased and our imports so 
 decreased that we had a balance in our favor 
 of more than six hundred millions, and that 
 balance was tangibly reflected that year in a 
 net importation of one hundred and five mil- 
 lions of gold. Then prices began to rise, the 
 total of our exports did not hold up the next 
 year, while our imports began to show a 
 269 
 
Business and Education 
 
 marked increase. In the subsequent years we 
 were fortunate in exceptionally favorable ag- 
 ricultural conditions, of bountiful harvests at 
 home and scantily filled granaries abroad, 
 so that our exports showed some further in- 
 creases, but our imports went up more rapidly 
 than did our exports until, in the fiscal year 
 just closed we showed a total of imports nearly 
 three hundred millions more than in 1898. 
 
 The whole general level of prices has ad- 
 vanced, and some of these advances, from 
 the extreme low level of 1897 or 1898 to the 
 high level which has been reached within the 
 last two years, are the sharpest in our com- 
 mercial history. \ Pig iron, for instance, ad- 
 vanced from less" than $12 a ton in October, 
 1898, to $25 at the beginning of 1900. Steel 
 rails doubled in the same period, the price 
 going up from $17.50 to $35. Bar iron 
 scored even a greater percentage of gain 
 within a shorter time, the price advancing 
 from 95c. a hundred in July, 1897, to $2.60 
 in October, 1899. The quotation for clear 
 pine boards has advanced from $45 to $73 
 a thousand; for brick, from $4.50 to $6; 
 rope, from 5 /4 c. to 13c.; and salt, from 
 21C. to $1. Take the advance of some of 
 the Southern products in that same period. 
 We see linseed oil marked up from 29c. to 
 68c., turpentine from 26c. to 50c., molasses 
 from 28c. to SSc.\ 
 
 "^ 270 
 
Americans Foreign Commerce 
 
 These extreme advances in prices have 
 not been fully maintained, but the present 
 level of market quotations is still 50 to 80 
 per cent above prices in 1897 and 1898 for 
 many commodities. 
 
 So the list might be continued. These 
 examples are extreme, and the low level was 
 probably unduly depressed. But they tell 
 the story of why our exports have failed to 
 go on increasing, and they have been an im- 
 portant influence in the inflation of bank 
 credits. 
 
 When a railroad company had to pay $35 
 a ton, as against $17.50, for steel rails, its 
 improvements become relatively very costly, 
 and its issues of securities against permanent 
 betterments must be on a much more liberal 
 scale. The cost of production in every di- 
 rection has been increased until we find our- 
 selves actually importing from some of the 
 identical markets that two or three years 
 ago were in a panic over our invasion. 
 
 Prices of securities advanced along with 
 other prices, and attracted the holdings of 
 foreign investors, until we swept the con- 
 tinent of Europe almost clean of our stocks 
 and bonds, and greatly reduced the holdings 
 of English investors. 
 
 We still liad an ample total of excess of 
 exports, however, and out of our favorable 
 trade balance we could pay for reams of 
 271 
 
Business and Education 
 
 securities and still have something left. We 
 did not stop at buying our own securities, 
 but began making great foreign investments, 
 to the astonishment of the financial world, 
 turning the tables upon Europe and sending 
 a great stream of credit for investment there. 
 The result was that by the year 1900, in spite 
 of a nominal foreign trade balance of nearly 
 five hundred and fifty millions in our favor, 
 the net result of the gold movement that year 
 was an export of about four million dollars. 
 The next year we brought in a few more mil- 
 lions of gold than we sent out, and we did the 
 same last year, but since 1898 there has, in 
 spite of the theoretical trade balance, been no 
 significant shipment of gold in our direction. 
 
 There has, however, been a movement in 
 international finance, which is not reflected 
 in the customs statements. We have been 
 building up a floating debt to Europe, made 
 up of borrowings in the form of short time 
 bills. The exact total of that floating in- 
 debtedness at the present time is one of the 
 difficult problems of finance, but it must be 
 very large. I have heard it estimated by 
 financiers in foreign capitals as high as two 
 hundred to three hundred millions. That 
 estimate, I believe, is far too high ; but, even 
 so, the total we must admit is important. 
 
 Particularly is it important in view of 
 the statistics of bank reserves, to which I 
 272 
 
America's Foreign Commerce 
 
 have before referred. In 1899 the national 
 banks held 33 per cent of reserve. In their 
 vaults was a good part of the one hundred 
 and five millions of gold which had come in 
 from abroad the preceding year. It was this 
 excess of reserve which permitted loans to 
 expand one billion three hundred millions 
 since that date without adding a dollar to the 
 stock in the bank vaults of specie and legal 
 tenders. But now we have gone to the limit 
 in that respect. This last report shows less 
 than 21 per cent of reserve for all the na- 
 tional banks of the country. Not one of the 
 three central reserve cities was up to the legal 
 limit. Twenty-two of the thirty other re- 
 serve cities were below the legal limit. 
 
 We have seen what a great expansion of 
 deposits and loans both, remember, almost 
 wholly but evidences of bank credit, could 
 follow the increase in the reserve basis that 
 came with the gold importations of 1897 
 and 1898. We see from this last statement 
 of the Comptroller that the expansion has 
 reached the utmost limit possible with the 
 present basis of specie and legal tenders. Is 
 it not well to ask, What of the future? If 
 a hundred-million-dollar importation of gold 
 can serve as a basis for an expansion of so 
 many millions of deposits and loans, what 
 will an exportation of one hundred millions 
 mean? Will not the answer lead us to pon- 
 
 18 273 
 
Business and Education 
 
 der on the probable effect of future gold 
 movements? Does our foreign commerce 
 give promise of a trade balance great enough 
 again to induce gold to flow in this direction ? 
 Let us examine recent records. For the 
 first nine months of this year our imports 
 increased over last year fifty-six millions, 
 and it must be remembered that the total 
 imports for last year were three hundred 
 millions more than in 1898. On the other 
 side of the book, our exports for the nine 
 months of this year decreased one hundred 
 and eight millions, so that the record for the 
 nine months shows a net balance one hun- 
 dred and sixty-four millions more unfav- 
 orable than the corresponding nine months 
 of the previous year. In the same time we 
 have lost eight millions of gold. For the 
 twelve months ending with September our 
 favorable trade balance was 420 millions, 
 against 641 millions for the previous twelve 
 months, a decrease of two hundred and 
 twenty-one millions. 
 
 The evidences, then, of advancing prices 
 that check exportation and increase importa- 
 tion, the absorption of our favorable trade 
 balance in foreign investments and in the 
 repurchase of securities, the uncertain totals 
 of our floating indebtedness represented by 
 short-time finance bills, all taken in connec- 
 tion with the fact that any reduction of the 
 274 
 
Americans Foreign Commerce 
 
 specie reserve held by banks must be fol- 
 lowed by liquidation which will again es- 
 tablish the proper relation between reserve 
 and deposit liability, would seem at least to 
 point to the conclusion that this is not a time 
 favorable for the expansion of bank credits. 
 I wish by no means to present an alarm- 
 ing view of the outlook. What I do wish 
 to do is merely to sound a conservative note 
 of warning. I believe there are in the situa- 
 tion tendencies in which are elements of pos- 
 sible danger. On the other hand, I by no 
 means forget the long list of favorable con- 
 ditions upon the opposite side of the account. 
 I have the most absolute faith in our ulti- 
 mate commercial ascendency. I believe no 
 one who has carefully studied industrial con- 
 ditions in this country and in Europe can 
 reach a conclusion unfavorable to the pros- 
 pect of our own progress. We have the 
 cheapest and most nearly inexhaustible sup- 
 ply of raw material, the greatest genius in 
 the handling of machinery for its conversion 
 into manufactured products, the broadest 
 single homogeneous market in the world 
 upon which to base substantial domestic 
 business, which will serve as a foundation 
 for foreign commercial conquest. We have 
 numerous advantages over our competitors, 
 and in the end the combined effect of these 
 advantages is absolutely certain to place us 
 275 
 
Business and Education 
 
 foremost in the world's commercial ranks. 
 It is in no wise opposed to this view of ulti- 
 mate commercial supremacy — a view which 
 no one more strongly holds than I do — 
 that I have pointed out conditions which I 
 believe, if not guarded against, will threaten 
 for the time being our continued progress 
 toward that goal. A judicious recognition 
 of the restricting conditions now visible in 
 our financial situation may save us from 
 disaster and humiliation later on, — a humil- 
 iation from which recovery will be slow and 
 painful. If a realization of these dangers 
 and an effort to avoid them shall in any 
 measure result from what I have said to 
 you, I shall consider this opportunity for 
 meeting you doubly valuable. 
 
 276 
 
THE ULTIMATE DEPENDENCE 
 
 OF NEW ENGLAND UPON 
 
 FOREIGN TRADE 
 
 An address delivered before the Commercial Club of 
 Boston, March 19, 1903. 
 
 A MOST significant and interesting feature 
 of the American commercial situation is the 
 marked change which has come in the last 
 two years in the attitude of our people to- 
 ward foreign trade. In the period just fol- 
 lowing the Spanish War, the dominating 
 commercial note in this country seemed to 
 be sounded in praise of the increase of our 
 exports and the extension of the field of'our 
 foreign trade. That note rose, indeed, to a 
 trumpet blast when our exports expanded to 
 a point that gave us a favorable trade bal- 
 ance of more than $600,000,000 in a single 
 year. The commercial world stood aghast 
 at the strides we were making in our en- 
 trance of the world's markets. It came to 
 be called an American invasion — an in- 
 vasion without force of arms, but as pro- 
 found in its effect as had been, in days gone 
 by, the consequences of many a military 
 277 
 
Busmess and Education 
 
 triumph. The old world was shocked at the 
 tremendous pace of our progress. Our total 
 exports reached a billion dollars, and we were 
 filled with commercial pride, but almost be- 
 fore we were used to those figures, they had 
 expanded five hundred millions more, and 
 reached a point nearly double their average 
 in the ten years prior to the beginning of 
 this period. In six years we sold abroad in 
 merchandise, produce, and manufactures two 
 billion dollars more than we bought. And 
 we compared that colossal figure of $2,000,- 
 000,000 with a foreign trade balance, built 
 up from the date of the foundation of the 
 Government, through all the years up to the 
 beginning of this period, which aggregated 
 only one-sixth of that six years' record. 
 Our exports of manufactured articles 
 jumped $100,000,000 in a year, and fol- 
 lowed up that increase by as much more in 
 another twelve months, and almost in a day 
 we came into successful competition with 
 markets which had never before known our 
 products, and we brought defeat in commer- 
 cial struggles to great houses which had for 
 generations known no successful competi- 
 tion. 
 
 This was an invasion indeed, and properly 
 
 we took a great national pride in it. But in 
 
 the last two years this invasion has become 
 
 almost a retreat. Instead of our manufac- 
 
 278 
 
New England and Foreign Trade 
 
 turers supplying our home demand more 
 fully than they had ever supplied it before, 
 and wresting market after market from es- 
 tablished traditions of the world's trade, we 
 have been becoming a better and better mar- 
 ket to sell in and a poorer and poorer mar- 
 ket in which to buy. Our imports have 
 moved up steadily. The volume of our ex- 
 ports of manufactures has ceased to show 
 the wonderful expansion which marked its 
 period of development when was coined the 
 phrase, the American Commercial Invasion. 
 Not only have the statistics of the situa- 
 tion changed, but our mental commercial 
 attitude has changed. There has been radi- 
 cal variation in the emphasis of our com- 
 mercial development. We find to-day a 
 great many people who believe that this 
 sudden loss of interest in foreign commerce 
 is a natural reaction from an abnormal con- 
 dition. They declare that a nation whose 
 undeveloped resources are as vast as those 
 of the United States had best confine its at- 
 tention to its home field ; that a nation where 
 the possibilities of internal development are 
 only beginning to be realized, even in local- 
 ities long since fully settled, offers, in its 
 great homogeneous markets, attractions to 
 our manufactures which make any possibil- 
 ity of foreign trade expansion look small and 
 cramped. They believe that a nation which 
 279 
 
Business and Education 
 
 has, within a decade, increased the capital 
 invested in its manufacturing enterprises by 
 three and one-half billion dollars, a nation 
 which, in that same ten years, has shown a 
 growth in numbers exactly equal to the 
 whole population of Mexico, offers internal 
 opportunities greater than can possibly be 
 found in the well- worked markets of the old 
 world. A nation, they think, which has in- 
 creased its actual production of coal in a 
 decade by almost as much as the whole pro- 
 duction of its greatest competitor at the be- 
 ginning of that period, which has nearly 
 doubled its output of iron in the same length 
 of time, and in that field also passed all com- 
 petitors, and which, for both of these great 
 products, is offering a home market so keen 
 that no thought of export can be entertained, 
 a nation which embraces all resources and 
 all zones within its boundaries, — such a 
 nation, they believe, in the very nature of 
 things, cannot be permanently dependent 
 upon foreign trade. They point to the rela- 
 tive unimportance of even our expanded 
 foreign trade if we compare it with the 
 vastly more rapidly expanding domestic 
 commerce. Measured by whatever stand- 
 ard one will, they say, the predominating 
 importance of the domestic markets is em- 
 phasized. 
 
 I do not follow that line of reasoning al- 
 280 
 
New England and Foreign Trade 
 
 together. I admit that it has great force 
 and, speaking broadly for the whole country, 
 I believe that paramount to any possible con- 
 sideration of foreign trade, in the present 
 day at least, is the importance of the devel- 
 opment of our domestic markets, and the im- 
 portance, — and I would particularly em- 
 phasize this point, — of keeping corporate 
 and financial methods directed along right 
 economic lines which will leave these vast 
 internal commercial interests free to follow 
 their natural lines of expansion. Those gen- 
 eral considerations, however, are not equally 
 applicable to all parts of the United States. 
 Least of all, I believe, do they apply to the 
 situation of New England. The Middle 
 States, the Mississippi Valley, and the South 
 may, indeed, look forward to a commercial 
 future whose confines need not extend be- 
 yond the national boundaries, but I believe 
 that for the New England States any large 
 measure of future prosperity must be sought 
 farther afield. 
 
 You gentlemen of the Commercial Club, 
 you who have been a part of the proud com- 
 mercial life and development of New Eng- 
 land, do not need to be told of the intimate 
 identification of the New England States 
 with the industrial growth of the whole 
 country. The view which I have per- 
 sonally had has emphasized in my mind 
 281 
 
Business and Ediocation 
 
 the important influence of the New Eng- 
 land commercial life upon the development 
 of the West. It is the view of the outsider, 
 the Westerner, but it leaves me none the 
 less filled with respect for New England's 
 business traditions. New England's enter- 
 prise. New England's initiative, New Eng- 
 land's commercial character. I hardly 
 need to recall, here in this assemblage of 
 Boston commercial men, anything of the 
 historical development of New England's 
 commercial position, anything of the time 
 when the foreign commerce of the country 
 centred at this port, of how New England 
 built the ships of the country, and how New 
 England's merchants were the boldest and 
 most successful traders in all the world's 
 commerce; nor do I need to speak of these 
 same characteristics in the development of 
 New England's industrial life, how the great 
 manufacturing industries found their begin- 
 nings here, — the textile industries, the ma- 
 chine-tool industries, the rubber and leather ; 
 even, if we go back to Revolutionary times, 
 we find the iron and steel industries, in their 
 national beginnings, nurtured in the con- 
 genial atmosphere of this Commonwealth. 
 For a time New England was largely self- 
 centred, her own people were busy develop- 
 ing her own resources. The accumulations 
 of half a century of profitable trade became 
 282 
 
New England and Foreign Trade 
 
 the greatest available fund for the develop- 
 ment of Western prairies and for opening 
 Western mines. Great railroad corpora- 
 tions, expanding from trunk lines into sys- 
 tems, were built up and controlled by New- 
 England capital. But better than the send- 
 ing forth of capital, better than the building 
 of railroads, the opening of mines, the or- 
 ganization of banking institutions, was the 
 impress of men with New England charac- 
 ters, who went forth to all the States from 
 Ohio to the Pacific, so that a greater New 
 England has come to stretch clear across the 
 continent, and New England methods and 
 New England consciences are leaven in the 
 commercial life of the great cities of the 
 West away on to the shores of Puget Sound. 
 An unusual phenomenon was at last pre- 
 sented. Attracted on the one hand by the 
 high wages of the West, and on the other 
 by the free lands, and at home pressed by 
 the competition of Western wheat and cat- 
 tle, the rural New Englander, by thousands, 
 sought more attractive occupations. The 
 Western States took up the task of feeding 
 the fast-growing populations of the mill 
 towns, sending their food-stuffs and raw 
 materials in exchange for the manufactured 
 goods which they could not yet make in the 
 West. New England may be credited with 
 a vast influence in the Western expansion 
 283 
 
Business and Education 
 
 of the United States, because she furnished, 
 more than any other part of the country, 
 the men, the money, and the manufactures 
 which made that expansion possible. 
 
 That movement, however, has been largely 
 accomplished. The South and the West are 
 now in a large degree equipped with the 
 machinery of civilization. They are no 
 longer under tribute for men or products, 
 and in great measure are also becoming 
 financially free, the last few years of pros- 
 perity having discharged vast indebtedness. 
 The position which New England held as a 
 manufacturing source to supply the wants 
 of the West and South, has in turn been con- 
 tested and in large measure lost. The great 
 cities of the West and South have changed 
 their distinctive character as distributing 
 points, and have become manufacturing cen- 
 tres in turn. The remarkable expansion of 
 the cotton industry in the South, the rapid 
 growth of leather manufacture in the West, 
 taking from New England its prominence 
 in both fields, are but two illustrations 
 among many. In a decade the cotton mills 
 of the South increased the value of their 
 output from $40,000,000 a year to nearly 
 $100,000,000; while in the same time the 
 increase in the output of the cotton factories 
 of New England has been but little over 5 
 per cent. The boot and shoe industry in 
 284 
 
New England and Foreign Trade 
 
 the West has shown even greater expansion. 
 A development of signal significance to the 
 future prosperity of New England can be 
 found in the rapid expansion all through the 
 West of the manufacture of all sorts of 
 highly-finished goods. Communities that 
 have heretofore been confined to the pro- 
 duction of food-stuffs and raw or roughly 
 finished materials, have come into sharpest 
 competition now with some of your longest- 
 established industries. The lines in which 
 the manufacturers in the East, and particu- 
 larly New England, had until recently a con- 
 trol approaching to monopoly, are now being 
 diffused over the very territory which these 
 factories of yours once almost exclusively 
 supplied. 
 
 The industrial future of the United States 
 certainly lies in the complete development of 
 the resources of every state, not merely in 
 agriculture, mining, and lumber, but in man- 
 ufacturing as well. And so, when we look at 
 it properly, we can but approve of this de- 
 velopment, which will realize dreams of in- 
 dustrial independence to many communities. 
 
 New England is deeply concerned in this 
 change. It is impossible to conceive that her 
 industries are to be permitted to decline, and 
 still, if there is to be such radical modifica- 
 tion of commercial and industrial lines, does 
 it not inevitably point to the necessity for 
 285 
 
Business and Education 
 
 New England looking toward new fields? 
 I do not for a moment believe that any ten- 
 dency of our industrial development as a 
 nation is going to result in industrial de- 
 cadence in New England. Industrial civil- 
 izations which are rooted deep in the solid 
 rock of established prestige, and which are 
 fortified by a century's accumulation of tech- 
 nical and financial equipment, are not sud- 
 denly torn up and transplanted to new local- 
 ities, even though those localities may be 
 found more favorable for economical pro- 
 duction. It is not with any sudden wrench 
 that industrial supremacy passes from a 
 state. There may be a gradual decrease in 
 the number of new enterprises, a settling of 
 the population into a stationary condition, a 
 slower development of new railroad facil- 
 ities, a relative decline in wages, a level con- 
 dition of bank deposits. Evidences such as 
 those may be read as indicative of most im- 
 portant new influences. If they are read in 
 connection with the statistics of heretofore 
 undreamed-of expansion in other localities, 
 they may be taken as quite serious enough 
 to command the best thoughts of such groups 
 of men as compose this Commercial Club, 
 but they do not necessarily foreshadow de- 
 cadence unless you who make up this com- 
 mercial life sit idly by. 
 
 They must, it seems to me, arouse new 
 286 
 
New England and Foreign Trade 
 
 initiative, demand greater energy and keener 
 thought, an intelHgent questioning as to 
 what directions the new development shall 
 take if the old lines have encountered insur- 
 mountable obstacles. 
 
 New England's bank capital is not in- 
 creasing. Her bank deposits are taking slow 
 steps forward, compared with the gigantic 
 strides which the country elsewhere has 
 shown. Your stock exchange shows no 
 great evidence of new corporate development 
 within New England itself. New England 
 capital is far more active in Southern cotton 
 mills than it is at home. Other states, 
 whose railway development was long since 
 apparently complete, are spending hundreds 
 of millions upon improvements and better- 
 ments, but New England railroad compan- 
 ies are doing comparatively little. Railway 
 traffic here has increased less rapidly than 
 in any other part of the country, and, finally, 
 one of the most significant tests, the skilled 
 American labor which has built up the man- 
 ufacturing supremacy of New England is 
 not maintaining its proportion to the popu- 
 lation. The increase in the population of 
 New England is largely an increase of the 
 foreign-born. 
 
 Such general indications as these may 
 have less significance than appears to me. 
 You can judge of them and know better 
 287 
 
Busmess and Education 
 
 what modifying influences and conditions 
 should be taken into consideration, but it 
 certainly is not an answer to say that New 
 England has reached a stationary condition, 
 has touched the limit of her commercial pos- 
 sibilities, and that, while other localities are 
 uncovering new resources and making vast 
 development. New England industries should 
 be expected only to pursue the even tenor of 
 their way, content to maintain the position 
 which they have achieved, but bound within 
 limitations of natural resources and condi- 
 tions which cannot be broken through. That 
 attitude of mind would, perhaps, be comfort- 
 able, but I do not believe it is tenable. 
 
 It is trite to say that neither state nor in- 
 dividual may stand still — that they must 
 either go forward or backward. Trite as it 
 is, however, it is particularly true in the 
 fields of commerce and industry. When a 
 locality no longer holds out attractive re- 
 wards to skilled industry, when there is no 
 longer room for the new-comer, when a 
 stationary condition has been reached, ex- 
 perience has abundantly proved that such a 
 locality is in danger of decadence. The ac- 
 tive emigrate, surplus capital is invested in 
 other fields, the competitive advantages 
 which long years of struggle have attained 
 are not preserved, — a community which 
 has reached such a condition and rests con- 
 288 
 
New England and Foreign Trade 
 
 tent with what it has obtained, is ultimately 
 in grave danger of being hurt by the com- 
 petition of its more vigorous rivals. 
 
 Do not understand me as saying that New 
 England stands in that position. I would 
 not go further than to suggest that some 
 broad indications point to a possible ap- 
 proach to it, that market conditions have 
 undergone radical changes, more radical, 
 perhaps, in their significance, than some of 
 you who are close to local conditions here 
 have fully realized. Conditions which have 
 made the great industrial growth of New 
 England possible are changing. Some of 
 your advantages, I believe, are passing away. 
 The markets upon whose contributions New 
 England has thriven are declaring inde- 
 pendence, and every one of these indications, 
 it seems to me, points to the necessity for 
 some new outlet for your manufactured 
 products. 
 
 Such outlet is to be found in foreign mar- 
 kets. It seems to me that New England is 
 so situated, geographically and industrially, 
 and is so equipped in the temperament, abil- 
 ity, and energy of its people, that it is the 
 most natural thing to expect — indeed, it 
 is the perfectly logical sequence of historical 
 development — that the head and centre of 
 a great foreign trade development should be 
 found here. I am firmly convinced that we 
 19 289 
 
Business and Education 
 
 have as a nation the elements which would 
 enable us to establish ourselves in high posi- 
 tion in the markets of the world. We have 
 the raw material, and we have an unequalled 
 genius for mechanical labor, and, of impor- 
 tance almost as great as these, we appreciate 
 the value of organization, of combination, of 
 doing things broadly and in great volume. 
 
 While our foreign trade record of two or 
 three years ago, and, indeed, the record of 
 to-day, is one of which we may well be 
 proud, I believe that it marks only the first 
 beginnings of what we may have in the way 
 of foreign trade if we will seriously devote 
 some of our best energies to it, if we will put 
 into the work of establishing ourselves in 
 the foreign markets some of the same en- 
 ergy, intelligence, and genius which we have 
 put into the development of our internal 
 industrial affairs. 
 
 This foreign trade of ours, vast as it is, 
 has been an almost haphazard growth. 
 Sometimes, when business was slack, or the 
 desire for a European vacation strong, a 
 manufacturer would take a glance at the 
 European field, with a result possibly of 
 some good beginnings in the way of trade. 
 Too frequently, however, these good begin- 
 nings have not been followed up. If orders 
 arrived when business had turned active 
 again, they were ignored. We have lacked 
 290 
 
New England and Foreign Trade 
 
 system, we have lacked persistence, we have 
 lacked, in this field, numberless qualities 
 which we really have in abundance, and 
 which, if applied to foreign markets would 
 bring forth splendid results. 
 
 Almost universally we recognize the ne- 
 cessity for association and organization. It 
 is a part of our political creed. It has in the 
 last few years become the cardinal principle 
 of our commercial life, and here in the 
 United States, more than anywhere else in 
 the world, is seen the very highest develop- 
 ment of commercial co-operation, co-ordi- 
 nation, organization, combination. Seeing 
 that as clearly as we do, having before us at 
 the moment the most remarkable illustra- 
 tions of the effect on commercial life of or- 
 ganized and consolidated effort, it seems 
 strange that we have as yet so dimly recog- 
 nized the prime necessity of the application 
 of these same principles of combination and 
 organization to the building up of a foreign 
 trade. I believe that a recognition of that 
 and a crystallization of that recognition into 
 a great, well-organized movement embrac- 
 ing the widest interests, having the most 
 intelligent direction, and controlling the nec- 
 essary credit and capital, would enable this 
 country to make a great impression upon 
 the foreign markets with its manufactured 
 products. 
 
 291 
 
Business and Education 
 
 These are general observations. Suppose 
 I try to make the illustration a little more 
 specific, but in doing that I beg you to re- 
 member that I am but an observer of the 
 practical workings of foreign trade, and that 
 I merely have gathered from a rather wide 
 opportunity for observation what seem to 
 me a few well-grounded principles. 
 \ If I were to try to put in a few words some 
 of the main difficulties which seem to me to 
 hamper the development of our foreign 
 trade, I would say that they chiefly consist 
 of a lack of continuous intelligent representa- 
 tion in the foreign markets, the absence of 
 proper facilities for the exhibition of sam- 
 ples, and bringing to the attention of buyers 
 the variety, quality, and grade of goods 
 which we have to offer, the stubbornness of 
 our manufacturers in meeting the specific 
 peculiarities and requirements of localities, 
 our disinclination to vary from those stand- 
 ards which have, in their time, enabled our 
 manufacturers completely to outdistance all 
 the rest of the world in many directions; 
 the failure of our manufacturers to quote 
 prices for products laid down in the buyer's 
 market, so that the difficulties and uncer- 
 tainties of calculations of foreign money 
 values, of exchange rates, of shipment 
 charges, are eliminated; and finally, and of 
 almost as much importance as all else, the 
 292 
 
New England and Foreign Trade 
 
 indifference of our manufacturers toward 
 taking any steps looking to a proper consid- 
 eration of credits of foreign buyers, an al- 
 most rigid attitude of demanding payment 
 when the goods go on shipboard. 
 
 If I am right in discerning these as some 
 of the chief obstacles in the way of a more 
 rapid extension of our position in the foreign 
 markets, then I believe a plan which might 
 operate to remove these obstacles is such 
 a combination of interests of our exporters 
 as will make it possible for the exporting 
 interests of the United States to be con- 
 tinuously and intelligently represented in 
 the foreign markets. Just for the pur- 
 pose of putting a thought in your minds, 
 crude, perhaps, in its first formulation, 
 but having in it, I believe, elements which 
 would make for a tremendous development 
 in our export trade, let us suppose that 
 we had an organization of great financial 
 strength, having in it the right elements 
 of our own commercial and manufacturing 
 life, and projected for the purpose of en- 
 ergetically and intelligently representing 
 broadly our exporting interests in the 
 world's markets. Suppose such an organ- 
 ization should establish exhibition rooms 
 in various centres of trade throughout the 
 world, having there expert salesmen and 
 engineers equipped for the work of repre- 
 293 
 
Business and Ediication 
 
 senting these products, — men equipped with 
 technical training, with knowledge of the 
 language, and with good understanding of 
 both domestic and foreign conditions. Sup- 
 pose such an organization should stand be- 
 tween purchaser and producer, guaranteeing 
 on the one hand the delivery of goods ab- 
 solutely according to sample, on the other 
 hand guaranteeing the credit of the pur- 
 chaser. If such an organization were 
 equipped with men of trained intelligence, 
 keen observers of commercial conditions, 
 who would be quick to see an opportunity 
 and to devise means of grasping it, and if 
 that organization had behind it the co-opera- 
 tion of great manufacturing interests here, 
 I believe wonders could be accomplished^ 
 
 While Europe has the greatest respect for 
 our industrial capabilities, there is not an 
 old-world manufacturer who does not look 
 upon many of our crude methods and hap- 
 hazard intermittent efforts in the field of 
 international trade as his refuge of safety 
 from a competition which could not other- 
 wise be repelled. Systematic organization 
 and training of men for work which you in 
 New England once knew how to do well, 
 but which the rest of the country has never 
 known much about, a permanence of effort 
 and greater flexibility in our manufacturing 
 standards, those are the things that are 
 294 
 
New England and Foreign Trade 
 
 needed to press our foreign trade into the 
 position it should rightly occupy. 
 
 There are no people better qualified for 
 such a struggle than the commercial classes 
 of New England. It is going to need educa- 
 tion, but you have here the facilities, better 
 than anywhere else in the country, if you 
 will but bend them to the needs of this situa- 
 tion. Train men to know the commercial 
 world and to know the commercial methods 
 of other people than our own; train them 
 in language, do for them what is being so 
 well done by the commercial schools of 
 Germany, and they will repay the effort. 
 
 I can think of no more fruitful field of 
 inquiry for this Commercial Club than that 
 of the need of a school for training young 
 men for international commerce. I believe 
 if you would make a study of that question 
 and would come to realize what a great 
 impetus could be given our foreign trade by 
 a school which would turn out young men 
 thoroughly equipped to enter such a field of 
 activity, you would find yourselves enthusi- 
 astic advocates of some radical departures 
 in education, and if, as a result of such inves- 
 tigation, you should graft on to one or more 
 of your great institutions of learning a 
 course intelligently designed for this pur- 
 pose, you would not only be offering golden 
 opportunities to your young men, but you 
 
 295 
 
Business and Education 
 
 would be placing the whole commercial 
 country under another debt of obligation to 
 you, because you would again be ready to 
 send out into a new field New England men, 
 with New England characters, equipped for 
 their task with New England thoroughness. 
 
 296 
 
POLITICAL PROBLEMS OF EUROPE 
 
 AS THEY INTEREST 
 
 AMERICANS 
 
 I. The Awakening of Interest in 
 European Affairs 
 
 Our interest in European affairs has been 
 undergoing marked change in the last gen- 
 eration — even in the last half dozen years. 
 We do not need to look back far to remem- 
 ber the time when we had little concern in 
 world politics. Questions of European pub- 
 lic policy, the tendencies of political currents, 
 and the objects of national ambitions, were 
 without practical interest to the average 
 American. Even European war meant in 
 our minds only that we were to sell more 
 wheat and provisions, and we looked with 
 greater interest at market quotations than 
 we did at the questions which might involve 
 nations in conflict. We were not only out- 
 side the range of the game of European 
 diplomacy, but we lacked reason for having 
 a keen, practical interest in European social 
 and industrial conditions. 
 
 We were concerned with Europe's general 
 prosperity, for Europe bought our produce; 
 297 
 
Business and Education 
 
 but the training, efficiency, and organization 
 of European labor, the effect upon industrial 
 progress of current legislation and of socio- 
 logical tendencies, all had more of an aca- 
 demic than a practical interest for us. Im- 
 portant as was our foreign trade, four-fifths 
 of our exports were the direct products of 
 the farms, ranches, and forests. Our fields 
 could fear no rivalry, and our workshops 
 had not begun to challenge competition. 
 
 With the military and industrial successes 
 of the last half dozen years, however, have 
 come many and far-reaching changes. Not 
 only is our present interest in world politics, 
 in its relation both to our own political sys- 
 tem and to our national ambitions, a matter 
 of recent growth, but we have another quite 
 immediate interest in the political conditions 
 and development of other nations — an in- 
 terest that leads us to measure the effect 
 of national conditions and development on 
 the efficiency of industrial and commercial 
 competitors. 
 
 Now that we have taken our place in the 
 first rank as a manufacturing nation and can 
 see an inevitable destiny leading us toward 
 world-industrial competition, all the ques- 
 tions affecting the relative efficiency of the 
 other great industrial countries in competi- 
 tion with us in the world markets become 
 of practical importance to every American. 
 298 
 
Political Problems of Europe 
 
 The farm boy, the shop apprentice, the clerk, 
 the worker in every field of American life, 
 must henceforth have a more and more inti- 
 mate personal relation to European condi- 
 tions, problems, and tendencies. That is true 
 because the conditions that are affecting our 
 great industrial competitors, the problems 
 with which they are concerned, the difficul- 
 ties which they are encountering, the suc- 
 cesses which give them fresh courage, will 
 all have an increasing influence upon the net 
 results of the day's work of the average 
 American. 
 
 For these reasons I believe that we are 
 ready to give a more intelligent study to 
 European conditions, and that it will be 
 practically worth our while to gain a clearer 
 comprehension of the political life of other 
 nations, and of their social and industrial 
 problems, and the efforts directed toward 
 their solution. I believe that we are com- 
 ing to recognize that we need something 
 more than the bare facts regarding impor- 
 tant events. We need to comprehend under- 
 lying causes. We need to understand more 
 of the perspective and the significance of 
 foreign events in their relation to our own 
 affairs. It is important, too, that we not 
 only keep abreast of those events which con- 
 stitute live news in the mind of the cable 
 editor, but that we should understand those 
 299 
 
Bus'mess and Education 
 
 social and industrial conditions, those cur- 
 rents of public thought, those national and 
 racial attitudes which have now all come 
 to form subjects of distinct practical interest 
 to us, because they are matters directly re- 
 lated to our pocket-books, matters with 
 which our material prosperity must hence- 
 forth have definite concern. 
 
 I am profoundly impressed with the im- 
 portance of the awakening interest in Euro- 
 pean affairs and of the value of the clear 
 observation of these affairs through the eyes 
 of practical American business men. The 
 more rapidly we lose some of our com- 
 placence and come to recognize that while 
 there are many things that we do better 
 than other people, there are many other 
 things that we do worse, the sounder will 
 be our understanding, both of our own re- 
 sources and the strength of our competitors 
 in the international industrial development. 
 
 In the old days, when a man had passed 
 through his apprenticeship in some trade, 
 his ambition impelled him to travel from 
 one centre to another and observe the art 
 and learn the methods that were practised 
 wherever his trade had gained pre-eminence ; 
 and after this travel and observation he was 
 proud to call himself a " journeyman work- 
 man." That is the German custom to-day, 
 and there we find not only journeymen 
 300 
 
Political Problems of Europe 
 
 craftsmen, but journeymen manufacturers, 
 merchants, and bankers — men who are ob- 
 serving with intelHgence and minute care 
 the methods and practices of their interna- 
 tional competitors. Just such observation is 
 healthful for us. While it will cause the 
 American journeyman to lose much of his 
 Yankee complacency, it will in the end give 
 him the firmest foundation upon which to 
 rest his national pride and hopes for the 
 national future. It is merely as a " journey- 
 man " business man that I should try to 
 write of some of the European conditions 
 which have come under my observation, and 
 which seem to me of practical interest to 
 other Americans. 
 
 In a survey of Europe which seeks to 
 examine the qualities of nations as indus- 
 trial competitors, present and prospective, 
 the fundamental consideration must be the 
 stability of governments. Political stability 
 is an absolute prerequisite to industrial pros- 
 perity. Where the energies of a people are 
 constantly diverted to the settlement of polit- 
 ical questions, the advance of commerce and 
 industry is greatly hindered. Stability of 
 conditions is the foundation on which great 
 commerce is built. A period of stability in 
 our own political conditions is always recog- 
 nized as most favorable to business develop- 
 ment. The possibility of a change in money 
 301 
 
Business and Education 
 
 standard or in customs tariff unsettles every 
 branch of commerce. The poHtical stabihty 
 of our industrial rivals is a consideration of 
 the most practical importance to every one 
 concerned in our commercial life, and in any 
 analysis of the strength of our competitors 
 that is the first phase of the subject to 
 investigate. Is industrial development in 
 Europe to go forward under about the same 
 political conditions as now exist, or do the 
 growing expenditures and increasing debts, 
 the weight of military organization and of 
 naval requirements, the growth of socialism 
 and the unsettling of established conditions, 
 all combine to endanger the European polit- 
 ical fabric and threaten essential modifica- 
 tions of government which will affect the 
 whole commercial and industrial life? Is 
 the map of Europe drawn in indelible colors ? 
 Will the development of commerce and in- 
 dustry proceed with as much protection and 
 aid from the government and with no more 
 obstacles and disabilities than now? Are 
 the dangers of wars imminent? Are the 
 economies of peace secure? Answers to 
 these questions must all have immense in- 
 fluence on the future of our industrial 
 competitors. 
 
 Since the impetus which the Czar gave 
 to the arbitration movement through the 
 Hague Conference there has been much 
 302 
 
Political Problems of Europe 
 
 progress — progress that has been recently 
 emphasized by the conclusion of treaties 
 between England and France, France and 
 Italy, Sweden and Denmark, and which 
 may even record the striking achievement 
 of an arbitration treaty between France 
 and Germany. These treaties, however, 
 are little more than expressions of national 
 good-will. 
 
 It is in France that the arbitration move- 
 ment has shown the greatest vitality. The 
 well-directed efforts of the Baron d'Estour- 
 nelles de Constant have been largely re- 
 sponsible for this. He has, within a few 
 months, built up a group of more than one 
 hundred deputies who, while still affiliating 
 with various other groups in the Chamber, 
 form a tolerably compact organization in 
 favor of international arbitration. The ex- 
 penses of militarism, the increasing budgets, 
 the growing difficulties in the effort to make 
 taxation equal government requirements, the 
 constant and enormous additions to the per- 
 manent national debts, all spell ruin for the 
 great powers of Europe in the mind of the 
 Baron de Constant. He is most pessimistic 
 in regard to the financial future of the 
 nations of Europe if military expenditures 
 are to keep up to their present scale. 
 
 The Baron de Constant impressed me as 
 a man of tremendous earnestness. The 
 
 303 
 
Business and Education 
 
 strength of his behef in his own pessimistic 
 picture of the future of Europe, unless the 
 tendency toward increasing armament and 
 ever-growing expenditures is checked, un- 
 doubtedly has given him great influence, 
 not only in the French Chamber, but with 
 the political leaders of other nations as well. 
 When he talked to me of the financial ruin 
 which he saw ahead, and of the certainty 
 of war which must result by the time the 
 growing strain of militarism reached the 
 inevitable breaking point, he impressed me, 
 not alone with his earnestness, but with the 
 force of his reasoning and the gravity of 
 the peril which he sees. It is not surpris- 
 ing, in view of the budget and balance sheet 
 of France, that a Frenchman sees this peril 
 with special distinctness. The success which 
 the Baron de Constant has met with in 
 bringing together a working group in the 
 French Chamber and in successfully com- 
 pleting a treaty with England is great 
 enough to entitle him to high credit as a 
 statesman. For many years there has been 
 in France a most intense national prejudice 
 against England — prejudice that has fre- 
 quently descended to scurrilous abuse, and 
 it is certainly remarkable to find so marked 
 a reversal of public sentiment in the few 
 months which have intervened between not- 
 able exhibitions of that prejudice and the 
 
 304 
 
Political Problems of Europe 
 
 recent acclaim over the completion of an 
 arbitration treaty and the establishment of 
 a cordial international feeling. 
 
 While great credit is due to the Baron de 
 Constant for his efforts in giving practical 
 form to this change in national feeling, the 
 really potent influence was that of King 
 Edward himself. When he planned a royal 
 visit to the French capital, it was in the 
 face of abusive criticism of England over 
 the Boer War. His courtesy, tact, and 
 good-humor produced a remarkable effect 
 on the national temper of France. The re- 
 turn visit of President Loubet and the hearti- 
 ness of the greeting which London gave 
 him — a greeting more hearty, it was said, 
 than he had ever received in Paris — was 
 all that seemed needed to win the volatile 
 French affections, and suddenly the whole 
 race of journalists began to discover rea- 
 sons for most brotherly cordiality between 
 Frenchmen and Englishmen. All this 
 worked in happily with the arbitration 
 movement in the Chamber. There fol- 
 lowed a visit of the arbitration group to 
 London as the guests of Parliament, and a 
 return visit of Parliamentary members as 
 the guests of the French Chamber, and from 
 this interchange of courtesies have resulted 
 real understandings and sympathies such as 
 have been markedly lacking before in the 
 
 20 305 
 
Business and Education 
 
 international relations between those two 
 great powers. 
 
 The effect of royal visits, the great diplo- 
 matic significance that attaches to them, 
 and the genuine influence which they have 
 in shaping the public opinion of entire na- 
 tions, are among the aspects that strike an 
 American observer as peculiarly interesting 
 in European politics. Within the last few 
 months in addition to the interchange of 
 courtesies between the King of England 
 and the President of France, there have 
 been important visits by the Italian king 
 to France and Germany, one of which had 
 almost as marked effect in producing cordial 
 national feeling between two nations as had 
 King Edward's visit. Another royal visit 
 that was planned, that of the Czar to Rome, 
 was interfered with for some reason, and 
 European journalists wrote endless columns 
 of speculation in regard to the reasons for 
 the change of royal plans. 
 
 The arbitration movement is undoubtedly 
 gaining force; and still, at best, it is but 
 binding warriors with threads. No one for 
 a moment believes that any number of arbi- 
 tration agreements or Hague Tribunals 
 would hold in check a military movement 
 when ruler or people were once aroused. 
 Without doubt such agreements may do 
 much to harmonize international prejudice 
 
 306 
 
Political Problems of Europe 
 
 and may be of great use in preventing fric- 
 tion over small differences — friction which 
 sometimes grows into animosities demand- 
 ing national bloodshed. Their usefulness is 
 acknowledged by most of the statesmen of 
 Europe, but no nation shows any inclina- 
 tion toward abating one jot of its military 
 programme. 
 
 Increasing armament, larger armies, more 
 expensive defences, and more thorough prep- 
 aration is the order of the day everywhere 
 in Europe. In conversation with public men 
 and with many commercial and industrial 
 leaders, I have never heard the opinion ven- 
 tured that the leading powers of Europe are 
 likely in the near future to disarm, or, in- 
 deed, materially to reduce their military ex- 
 penditures. The German Socialists, it is 
 true, make the reduction of such expendi- 
 tures one of the principal planks of their 
 platform, but in the same speech in which 
 Herr Bebel arraigns the Government for 
 excessive military expenditures, he castigates 
 it for doing nothing to check the aggressive 
 policy of Russia. There is plenty of grum- 
 bling over the taxes which support these vast 
 armaments of Europe, but there is no deep- 
 seated conviction in the minds of any con- 
 siderable portion of the people of any of the 
 great powers that their own nation should 
 set the example of a reduction of military 
 
 307 
 
Business and Education 
 
 and naval strength. Few things in Europe 
 can be predicted with more certainty than 
 that the outlay for defence and for aggres- 
 sive strength will continue. 
 
 The bankruptcy of Europe, which such 
 men as the Baron de Constant see, is per- 
 fectly easy of demonstration by any ama- 
 teur statistician, who needs only a series of 
 budgets and a short lead-pencil thoroughly 
 to demonstrate such a conclusion; but so 
 easily reached a conclusion might be wrong. 
 I believe that it would be. It is true that 
 the cost of the military establishment, the 
 vast expenditures in constructing navies, 
 the constantly recurring budget deficits, the 
 terrible weight of taxation, are all real and 
 painfully evident facts. France is the nat- 
 ural place to look for these pessimistic 
 opinions in regard to the future of the great 
 powers, for France has a debt incompar- 
 ably the greatest in the world, and a debt 
 that seems ever growing. To-day it stands 
 roundly at $6,500,000,000, a debt so great 
 that every voter in France — and there is 
 universal manhood suffrage there — every 
 voter in France has a share of responsibility 
 for the national debt equal to $844. It is 
 small wonder that this vast debt should give 
 rise to apprehension. Only the unparalleled 
 thrift of her own people has enabled France 
 to market the tremendous blocks of rentes 
 308 
 
Political Problems of Europe 
 
 which have been the legacies left her by one 
 finance minister after another. During the 
 years of peace the succession of budget 
 deficits have made almost as great increases 
 in the debt of France as had formerly been 
 piled up by the misfortunes of war. So it 
 is easy to see how a Frenchman, with mind 
 imbued with the great military expenditures 
 and growing debt of his own country, should 
 look out over Europe and note the cost of 
 the great armies and see the stream of taxes 
 that runs into the sea that navies may float 
 there — sees everywhere a tendency toward 
 increasing government expenditures and 
 threatening deficits and nowhere means of 
 escape through taxation, because taxation is 
 already perilously high ; it is no wonder that 
 such an observer sees in the constant in- 
 crease of government obligations an ulti- 
 mate financial collapse and political disin- 
 tegration of a character which might readily 
 disturb the balance of power in a way no 
 army could check nor treaty stay. 
 
 In spite of all that there is to sustain such 
 pessimistic views, I am certain that the men 
 most powerful in shaping the affairs of 
 Europe do not see, at least in anything like 
 the immediate future, any reason to believe 
 that in Western or Central Europe there are 
 to be radical political upheavals, sweeping 
 social changes, or the financial break-down 
 
 309 
 
Business and Education 
 
 of governments. The exception is the near 
 East, the Balkan firebrand, where there are 
 irreconcilable differences and implacable 
 racial antagonisms, seething under impos- 
 sibly bad government, and where, sooner or 
 later — where, indeed, both sooner and later, 
 for no single war can settle those vexed 
 questions — there may be seen the fall of 
 old governments and the upbuilding of new, 
 the end of dynasties, and the creation of 
 new national combinations. In the near 
 East there is always imminent a catastrophe 
 which might involve all Europe in conflict. 
 I am by no means rash enough to venture 
 opinions of my own in regard to the polit- 
 ical future of Europe. The question is too 
 complicated, the undercurrents too many 
 and too important, for the casual observer 
 to reach more than a superficial conclusion. 
 I have been fortunate, however, in meeting 
 men of great importance in both the busi- 
 ness life and Government councils of most 
 of the capitals, and the impression which I 
 have of Europe's political future is the com- 
 posite of interviews with men whose opin- 
 ions are worth attention. The impression 
 which these conversations has left is one 
 of political stability, one which leads to a 
 strong belief in the unlikelihood of immedi- 
 ate radical changes. There may be social- 
 istic triumphs, there may be growing parties 
 310 
 
Political Problems of Europe 
 
 with programmes of revolt against the ex- 
 isting form of government, there may be 
 burdensome taxation and great military ex- 
 penditures; and still, if one takes up one 
 nation after another and analyzes its posi- 
 tion in relation to the whole fabric of Euro- 
 pean politics, the practical man will, I be- 
 lieve, conclude that Europe is likely to go 
 on for a great many years very much as 
 it has been going on for a good many years 
 past. 
 
 Take the situation in revolutionary 
 France, the country that has had more ex- 
 perience in constitution making than all 
 others in Europe. France is to-day really 
 one of the most stable of European gov- 
 ernments. There is small likelihood of 
 France becoming involved in any war, and 
 the reason for that does not lie in this great 
 wave of popular approval of arbitration 
 which is just now such a manifest feature 
 of French politics, but lies much deeper. 
 France has no serious ambitions for an in- 
 crease of European territory. Alsace-Lor- 
 raine is a poignant regret, but not a military 
 ambition. Perhaps the one dominant char- 
 acteristic of the French nation as a whole 
 is its penurious thrift; and every holder 
 of F. lOO rentes is an advocate of peace 
 because the economy of peace appeals to his 
 pockets. 
 
 3" 
 
Business and Education 
 
 But the real reason why France may to- 
 day be set down as among the most pacific 
 of nations Hes in this fact: France is not 
 so much a repubhc, not so much a govern- 
 ment administered by the voice of the peo- 
 ple, as it is an oligarchy. The Government 
 of France is really a government by a polit- 
 ical dynasty, by a group of men and their 
 political heirs, who have made a business 
 of governing France, and, having left to 
 them the centralized instrument of the Na- 
 poleonic system, have governed France, not 
 particularly as a majority vote of the nation 
 might have dictated, but as they have best 
 seen fit — with some patriotism for France, 
 and with much regard for their own place, 
 power, and perquisites. This political dy- 
 nasty has no disposition to risk anything on 
 war, for war would mean one of two things. 
 If it ended in defeat, it would mean that 
 the French nation would rise up, as it al- 
 ways has risen when its sensibilities were 
 really smitten, and the whole dynasty would 
 be irrevocably tumbled out of office, to say 
 nothing of the prospect of upsetting the 
 form of government itself. But a military 
 victory to France would have in it quite as 
 distressing possibilities for her political dy- 
 nasty as would a military defeat; for a 
 military victory would mean a military hero, 
 and France can never be trusted not to lose 
 312 
 
UNWtH 
 
 ■S^Vl^ ^:} Afatical Problems of Europe 
 
 her heart to a military hero. So sharply is 
 this always in the mind of the Government 
 that when the nations had a bit of police 
 work to do at Pekin, and under hardly any 
 conceivable development could thereby gar- 
 ner many military laurels, the man who, by 
 every right of precedence, position, and 
 ability, should have gone into the Far East 
 at the head of the French troops was kept 
 at home, and a man was selected with abil- 
 ities of a type that left no fear in the mind 
 of the Government about his ever becoming 
 a military idol. 
 
 France may give us occasional exhibitions 
 of political turmoil. It is not improbable 
 that the socialistic sentiment in France will 
 continue to grow, and that there will be some 
 evolutionary changes in government; but I 
 believe that the solidity of the republic may 
 be set down as one of the practical certainties 
 of European politics, and that so far as the 
 future of France, as a world-industrial com- 
 petitor is concerned, we may count upon her 
 industries being developed without serious 
 interference from any political change. 
 
 If we turn to Germany we find there on 
 the face of things much that might indicate 
 impending radical political change. There 
 is certainly political progress there — prog- 
 ress toward individual liberty and political 
 equality, progress toward really representa- 
 
 313 
 
Business and Education 
 
 tive government. If one were to try to put 
 into a single phrase the significance of the 
 poHtical currents and tendencies, the real 
 essence of the vital political life of Germany, 
 it could well be said that it is to write 
 " truth " into the constitution. Germany's 
 constitution contains many fair-sounding 
 provisions for liberty and equality, but it has 
 not, in fact, furnished either liberty or equal- 
 ity to the humble German citizen. The con- 
 stitution says that every man shall have 
 equal justice, that every man shall be eli- 
 gible to public office, and that there shall be 
 fairness of franchise and of voting repre- 
 sentation. In the practical operation of gov- 
 ernment none of those guarantees is fully 
 kept. 
 
 The political life of Germany probably 
 has a more direct practical interest for the 
 American citizen than does that of any other 
 Continental nation, for many of their polit- 
 ical questions and their legislative problems 
 directly concern us. That is true because 
 of the barriers they are putting up against 
 our exports of food products, and because 
 of the work which the Government is doing 
 in education and in legislation affecting 
 social conditions — legislation that has most 
 pronounced effect upon the efficiency of 
 industrial competition. 
 
 There is an " irrepressible conflict " in 
 
 3M 
 
Political Problems of Europe 
 
 the development of German national life. 
 Germany is endeavoring at the same mo- 
 ment to be a great agricultural nation and 
 a great industrial nation. Agriculture must 
 wrest whatever it may of success from a 
 stubborn, parsimonious soil; industry finds 
 itself in a country barren of natural resources 
 and lacking cheap raw material. 
 
 It is only within a generation that Ger- 
 many's industrial ambitions have become 
 internationally important; but within that 
 generation almost all of the vital currents 
 of German development have been flowing 
 in the direction of industrialism. Industry 
 has gained on agriculture, until to-day the 
 national economic life is about equally di- 
 vided between the two. The great progress 
 of industry has seemed to the agricultural 
 half of the nation to work great hardship to 
 it, while the present hopes and ambitions of 
 the industrial half seem to the agrarians 
 only to be the planning for them of still 
 greater hardships. 
 
 The landlord sees in manufacturing and 
 commerce an unfair competitor for labor. 
 The factory entices the laborer from his 
 fields. Railroads and steamships, the land- 
 lord thinks, are a malicious innovation, be- 
 cause they bring the fields of Argentina and 
 America into sharp competition with his 
 own sterile acres. His only hope has been 
 
 315 
 
Business and Education 
 
 in keeping out of Germany the products of 
 other agricultural countries and by gaining 
 from the Government higher and higher 
 protection for his own products. 
 
 The landlord's antagonisms and com- 
 plaints are by no means without foundation. 
 He has certainly fallen on evil days. The 
 march of events has made more and more 
 difficult his financial position. While he has 
 succeeded in laying enormous taxes on the 
 foodstuffs of the German workingman, he 
 has not freed himself from the difficulties of 
 almost impossible competition. Every com- 
 parison which he makes with his former 
 position and influence adds to his bitterness 
 against the new industrial regime. 
 
 On the one side he finds himself pressed 
 by what he regards as upstart socialistic 
 doctrines and insistent demands for broader 
 political rights, and even worse than that, 
 the ever-reiterated demand for what seems 
 to him ruinously cheap food. On the other 
 hand, his long-established influence in af- 
 fairs is assailed by a new aristocracy of 
 wealth. When one remembers the historical 
 position of the landed class, the landlord's 
 view is not unnatural. All through German 
 history the junkers have officered the army 
 and led it to its fields of victory ; they have 
 supplied the statesmen and furnished the 
 class that has ruled the country. It is small 
 316 
 
Political Problems of Europe 
 
 wonder that they feel bitter antagonism 
 toward this industrial development. This 
 new industry has successfully competed with 
 the meagre wage the landowner was able 
 to offer to the farm hand. Bleak cottages 
 are left empty, and fields are robbed of labor. 
 The landlord's late servants, over whom he 
 ruled almost as ruled his feudal ancestors, 
 have not only left his acres, but in the cities 
 they have organized themselves into a polit- 
 ical power and shout " bread usurer " at 
 him, and in their determined demands for 
 cheap food, keep up a constant warfare upon 
 that protective tariff that is the only barrier 
 the junker has left between his land and 
 financial ruin. 
 
 All that is bad enough; but when this 
 same industrialism which has touched the 
 aristocrat in his purse wounds him also in 
 his pride, when it builds up a new aristoc- 
 racy, a new ruling class with strength and 
 position measured by wealth, and begins suc- 
 cessfully to assail the junker's immemorial 
 influence in national affairs, the bitterness 
 of his position, with his traditions of for- 
 tune and power thus being undermined, is 
 not hard to understand. 
 
 So Germany has, in the irreconcilable dif- 
 ferences between agriculture and industry, 
 an ** irrepressible conflict " : On the one 
 hand a landed aristocracy, long used to polit- 
 
 317 
 
Business and Education 
 
 ical power — a power whose roots run back 
 to feudal tradition, but whose very daily life 
 is now hampered and made difficult by 
 depression in agriculture; while opposed to 
 this aristocracy of birth is a flauntingly 
 prosperous industrialism, with its rebellion 
 against class, its demand for the curtailment 
 of the privileges of the nobles, its appeal for 
 broader political rights, and more secure 
 individual liberty. The struggle which will 
 go on between these irreconcilable elements 
 of the German nation must have in it con- 
 stant interest for us, and an interest that is 
 not merely academic, for the progress of the 
 conflict will have intimate relation to our 
 position in international trade. 
 
 When one gets even slightly below the 
 surface in a study of political conditions in 
 Germany, he cannot fail to be surprised that 
 so little has been accomplished in the direc- 
 tion of political equality and freedom. The 
 junker's influence has its roots in centuries 
 of prerogative. In a generation Germany 
 has become a great power, political and 
 economic, but in that time there has been 
 no material internal advance in the direction 
 of freedom. Constitutional Government is 
 a semblance and a pretence, not a reality. 
 The Reichstag at first had little enough influ- 
 ence in shaping legislation, compelled as it 
 was to work with a ministry in no wise re- 
 
 318 
 
Political Problems of Europe 
 
 sponsible to it and dependent for its life only 
 on royal favor; but instead of gaining for 
 itself that decisive power which the popular 
 house should have in a really representative 
 government, its actual authority has sub- 
 stantially diminished. It has relinquished 
 much of its control over expenditures, and 
 has also limited its power over income by 
 agreeing to an arrangement for a rigid and 
 intricate system of taxation which in its 
 detail has no flexibility even to the wishes 
 of the majority. 
 
 Germany is governed by a bureaucracy, 
 and in many ways better governed than any 
 other nation in the world. Popular repre- 
 sentation has little existence, and the voice 
 of the people small influence. Without a 
 doubt the German governmental organiza- 
 tion is the best bureaucracy, the most scru- 
 pulously honest, and, within its lights, the 
 most painstaking and hard-working, that 
 any government has trained to its aid; but 
 the results are not popular government. The 
 seeds of a desire for popular government 
 were long ago sown in Germany. It is an 
 expression of that desire, it is the political 
 determination of the common people to write 
 " truth " into the constitution, that gave the 
 Social Democratic party in the last election 
 three million votes — just under a third of 
 the total. But the tremendous growth and 
 
 3^9 
 
Business and Education 
 
 the sweeping victories of that party are not 
 to be taken as showing a disposition on the 
 part of the German voter violently to over- 
 throw existing conditions. They are critical 
 of the growing expenditures of the Govern- 
 ment, particularly for the navy, and they 
 resent the injustice of the arrangement of 
 the constituencies under which there is the 
 greatest inequality of representation in the 
 Reichstag. They are a party of protest 
 against many existing conditions, but they 
 do not threaten the permanency of Govern- 
 ment ; and as they are sobered by increasing 
 power and responsibility, their programme 
 becomes in the main one which the average 
 American voter would regard as an enunci- 
 ation of fundamental principles of political 
 equality and good government. 
 
 The point of view of the Social Demo- 
 crats is mainly economic. They believe that 
 the present economic development — a de- 
 velopment nowhere better illustrated than in 
 Germany — makes necessary new political 
 conditions. They see in that development 
 influences leading inevitably to the greater 
 and greater substitution of machinery for 
 hand employment, to the stifling of small 
 industries by great combinations. They 
 believe that it has a tendency to place the 
 means of production within the exclusive 
 control of a comparatively small number 
 320 
 
Political Problems of Europe 
 
 of people, and they hold that this small group 
 has monopolized more than its share of those 
 advantages brought about by the increase 
 in productive capacity. They are thus led 
 to believe that this whole economic develop- 
 ment makes necessary a revision of settled 
 convictions both in regard to capital and the 
 influence of the state on economic life. They 
 hold in general that the authority of capital 
 must be narrowed, while the limits and rights 
 of the state to exercise control in economic 
 affairs must be enlarged. So much for their 
 strictly socialistic doctrines. They have 
 come to be notably mild, and there has been 
 eliminated so much of what was the old 
 school of collective socialism that the 
 party seems hardly entitled to the name of 
 Socialist. 
 
 The great wave of Socialism which has 
 swept over Germany is really only a wave 
 of liberalism; the foundations of the Gov- 
 ernment are in no wise shaken by it. Most 
 of the demands which the triumphant Social- 
 ist party make are of a character which will 
 tend toward increased industrial efficiency 
 should the Socialist go on toward even 
 greater success. 
 
 Germany, then, I believe, is a field which 
 we should watch with the most intense in- 
 terest for the evolution in political life which 
 is sure to come, but that evolution has in it 
 
 21 321 
 
Business and Education 
 
 only promise of stronger and better gov- 
 ernment, and no sign of anything that 
 threatens the Government's permanence. 
 There is much which we might well envy in 
 the practical accomplishments of the German 
 Government in the aid it gives to industry 
 and the effect it has on commercial life; in 
 the thoroughness and honesty of administra- 
 tion, and in the substantial benefits received 
 by every citizen. Whatever there is of evo- 
 lutionary change in the future promises 
 more, not less, efficient aid to industry. 
 Whatever modifications are worked out in 
 the national life — and there may be many 
 — promise to result in giving Germany 
 better government, and in furnishing a 
 more secure foundation for the upbuilding 
 of her industrial life, developing her as 
 a competitor and strengthening her as a 
 rival. 
 
 Beyond all question America's greatest 
 industrial competitor is Germany; the devel- 
 opment in political life there promises no 
 reactionary tendency in respect to industrial 
 efficiency. Great as Germany is to-day as an 
 industrial competitor, the coming years will 
 make her greater. 
 
 Although we may find in France and Ger- 
 many a preponderance of reasons pointing 
 to political stability, what of Austria-Hun- 
 gary? Is the political life of the dual mon- 
 322 
 
Political Problems of Europe 
 
 archy near its end? Is there to be dismem- 
 berment, with all the endless consequences 
 to European politics which a partitioning of 
 the empire would engender? Any amount 
 of support can be found for the most pessi- 
 mistic views in regard to Austria's political 
 future. Statesmen and journalists have not 
 hesitated to write most frankly of their 
 belief that great changes are impending 
 there. Diplomats of experience may be 
 found who hold the opinion that the funeral 
 bells of Franz Joseph will ring down the 
 curtain on the last act of the Hapsburg sway, 
 and that will be true in spite of the age of 
 the empire, the strength of tradition, and 
 the convulsion which the whole political 
 fabric of Europe will undergo. 
 
 Certain it is that Austria-Hungary in its 
 potentiality for political change is the most 
 interesting country in Europe. The em- 
 pire, with its peculiar duality of emperor and 
 king, its two capitals, its triple ministry, its 
 six chambers, its eighteen parliaments, and 
 its dozen nationalities, offers a conglomera- 
 tion of political ideas and ideals of racial 
 antagonism and of parliamentary inconsist- 
 encies which have strained to the utmost 
 the diplomacy of the beloved monarch. 
 Franz Joseph has in many ways ideally man- 
 aged the difficulties of his position. With- 
 out great strength, with his whole political 
 
 323 
 
Business and Education 
 
 creed a belief in compromise which should 
 not give up the essentials of power, and in 
 diplomacy which should play off one war- 
 ring element against another, and leave the 
 throne unharmed, he has found success beset 
 by many difficulties. Had he not possessed 
 a personality which has strongly attached to 
 him the great majority of his turbulent sub- 
 jects, it is hard to see how he could have 
 succeeded at all. 
 
 The average American hardly appreciates 
 the political significance of the Empire of 
 Austria-Hungary, nor the vast importance 
 of the situation there to the future of Europe. 
 Government there is more a display of 
 hysterical sentiment than a political organi- 
 zation for national, industrial, and commer- 
 cial advancement. It is not easy for us, with 
 our assimilative power of turning all nation- 
 alities into Americans, to comprehend the 
 intensities of the racial antagonisms of 
 Europe. Nowhere do these antagonisms 
 find freer play than in Austria-Hungary. 
 The Poles and Bohemians retain memories 
 of a past political greatness. The Magyars 
 have as keen a pride of race as any living 
 people. Every one of the dozen nationali- 
 ties of the empire has racial ambitions of its 
 own, an almost fanatical determination to 
 exalt this language or that, and a total 
 disregard for the general welfare in the 
 324 
 
Political Problems of Europe 
 
 struggle of many tongues and various racial 
 ideals. 
 
 It seems absolutely hopeless to expect that 
 the Austria-Hungarian Empire will eventu- 
 ally constitute itself into a confederacy after 
 the German model — compact, homoge- 
 neous, centralized. If one looks for such 
 agreement as affording the only political 
 bands that can permanently bind Austria 
 together, it is easy to conclude that dissolu- 
 tion, dismemberment, and partitioning must 
 be written into her future, or to believe, as 
 some do, that the future of the dual empire 
 can be compassed in a sentence — that it is 
 to be a new Balkan with a dozen little nations 
 all at war, and in their racial prejudices that 
 touch of fanaticism which will make them 
 irreconcilable enemies. 
 
 There are numberless reasons which can 
 be brought forward pointing to the end of 
 the Hapsburg reign; but unpromising and 
 complicated as the situation is, there is one 
 impressive reason stronger than all those 
 that point to dissolution, one reason why the 
 empire will go on even after Franz Joseph's 
 death and the coming of a far less politic 
 ruler: No European nation is anxious for 
 Austria's territory. 
 
 In spite of all the ambition with which 
 Germany is credited, the weight of opinion 
 in Germany is unfavorable to any extension 
 
 325 
 
Business and Education 
 
 of territory at Austria's expense. There are 
 reasons enough apparent why Hungary, with 
 its racial prejudices, its own national ambi- 
 tion, and the certainty of its forming a new 
 Reichstag party, should not be brought into 
 the empire. There are reasons almost as 
 potent why the German provinces of Austria 
 would not be welcome. It is true those 
 provinces are thoroughly German in lan- 
 guage, sentiment, thought, and aspiration. 
 Their folk songs and poetry are full of long- 
 ing for union with the Fatherland, but there 
 is no sentiment among the influential people 
 of Germany which would tend toward tak- 
 ing these provinces into the empire, bringing, 
 as they would, a great addition to the 
 strength of the Clerical party, and laying on 
 the Government responsibility and difficul- 
 ties out of proportion to anything that would 
 be gained. Russia has quite problem enough 
 with her Poles, without wanting to reunite, 
 by an absorption of Austrian territory, two 
 parts of once partitioned and always un- 
 happy Poland, and thus give new life to that 
 national feeling which it has cost so much to 
 subdue. The desire for a partitioning of 
 Austria does not exist with the governments 
 of the other great powers; but violent as 
 are the internal dissensions, most of these 
 differences will be temporarily harmonized 
 before the danger of any development that 
 326 
 
Political Problems of Europe 
 
 looks like a recoloring of the map and an 
 absorption into the stronger nationality of 
 Teuton or Slav. 
 
 A vast force is wasted in the Austrian 
 Empire by racial antagonism and parlia- 
 mentary strife. Industry and commerce are 
 kept humbly waiting while parliamentary 
 mobs shriek in a babel of uncomprehended 
 tongues. The whole economic life and 
 development is hampered, and there is little 
 reason to hope for better things. But there 
 is even less reason, I believe, to expect that 
 the political bands which hold these warring 
 elements into an empire will be broken, and 
 that there will be liberated in the very centre 
 of the European balance of power a dozen 
 independent nationalities to make a convul- 
 sion that would be as terrible perhaps as the 
 events following the French Revolution. 
 
 An ambassador at St. Petersburg, who 
 had had experience in many European 
 courts, once said to me : 
 
 " I cannot put too strongly my belief in 
 the solidity of the Government of Russia. 
 Considering its vastness it is the most per- 
 fect going machine in existence. I have 
 known Russia many years, and I believe the 
 Government grows stronger rather than less 
 secure. The Government is in the awkward 
 position of having to solve the double prob- 
 lem of advancing and standing still. It 
 
 327. 
 
Business and Education 
 
 desires to advance industrially and commer- 
 cially, but it must stand still as an autocracy. 
 For it to thus stand still there cannot be too 
 much education. The strongest influences 
 in the empire to-day are on the side of the 
 Government, and those factors are always 
 growing stronger. There wnll some day, of 
 course, be political advancement; but any 
 one who believes that the occasional plots 
 and disturbances that get to the surface 
 here point to any real danger to the founda- 
 tions of Government has but a superficial 
 knowledge." 
 
 This view may not be generally agreed to 
 in the light of developments in connection 
 with the Japanese war. I know that there 
 are observers of Russian conditions, whose 
 opinion is well worthy of attention, who 
 believe that Russia is on the point of a great 
 political upheaval. The weakness of the 
 Czar, the corruption of the bureaucracy, the 
 inefficiency of government which has at 
 some points been disclosed by the events in 
 the Far East, lead them to believe that a 
 political awakening is near, that possibly the 
 great territory to the east of Little Russia, 
 which has been filled by adventurous exiles 
 and progressive emigrants, will break off 
 from the old autocracy and form an inde- 
 pendent government. All that might hap- 
 pen without greatly affecting political con- 
 328 
 
Political Problems of Europe 
 
 ditions in Russia itself. The day will un- 
 doubtedly come when a constitution will be 
 granted, but even that in itself will not 
 greatly change conditions. Whoever has 
 travelled in Russia away from the cities, 
 observed the inertia of that vast population 
 of peasants, noted the influence of the 
 Church, and how it has been used as a 
 branch of the civil service in the control of 
 the population, will understand how slow 
 must come any political changes which will 
 really radically affect the national life. 
 
 My own observation, which has covered 
 a good deal of Russia, bears out most fully 
 the expert opinion expressed above. There 
 may be some slow evolution toward more 
 popular political ideals, but the strength and 
 solidity of the Russian Government is beyond 
 our day to question. 
 
 Such a survey of Europe, then, as a 
 journeyman business man might take, can 
 but lead, it seems to me, to the conclusion 
 that on the whole European political condi- 
 tions to-day point to solidity and security. 
 There will be change, but the change will 
 be development along right economic lines. 
 There is no reason to suppose that the de- 
 velopment of political events is to make 
 Europe less strong and able as an industrial 
 competitor. From an economic point of 
 view the political outlook there can be re- 
 329 
 
Business and Education 
 
 garded with optimism. The development of 
 politics and the evolution of government 
 give promise of working toward greater 
 economic efficiency, toward a more capable 
 industrialism and an expanding commerce. 
 
 II. France and the Clerical 
 Problem 
 
 In the United States the business of Gov- 
 ernment is the government of business. 
 Questions which come before Congress are 
 nearly always related to business affairs. 
 Once the running of the machinery of Gov- 
 ernment has been provided for, and the great 
 appropriation bills passed, the further sub- 
 jects of congressional legislation are with 
 rare exceptions directly concerned with 
 commercial or industrial matters. Congress 
 is a board of directors of a vast business 
 corporation; its problems are business prob- 
 lems; its main work, outside of the con- 
 duct of the Government departments, is the 
 fostering of business interests, on the one 
 hand, and, on the other, the control of busi- 
 ness organizations. 
 
 There is not a member of either house of 
 Congress who cannot with justice lay some 
 claim to familiarity with business matters. 
 The chief interests of all these members of 
 Congress are business interests. The great 
 
 330 
 
Political Problems of Europe 
 
 legislative mainspring is the well-being of 
 the nation's commercial and industrial life. 
 
 In European politics, legislative condi- 
 tions and questions are widely different from 
 those in our own political life. The Ameri- 
 can is at once struck by the peculiar fact 
 that business men have small place in the 
 parliaments there. Business questions are 
 overshadowed by questions relating to class 
 prerogative, racial domination and antag- 
 onism, church authority, bureau patronage, 
 hereditary power. Legislative programmes 
 frequently turn upon points of sentiment 
 — sentiment of race, of religion, of class, 
 of political theory, or dynastic hope. 
 Broadly speaking, there is no party on the 
 Continent standing solely for a commercial 
 idea. There is no party programme that 
 solidly unites its followers for or against 
 some commercial measure. The platform 
 of parties, the issues on which elections turn, 
 the proposals brought forward for legisla- 
 tive consideration, have comparatively little 
 concern with industry and commerce. 
 
 The business man's first surprise is over 
 the number of controversies in the political 
 life of Europe having no bearing at all on 
 business. He finds there many important 
 public questions attracting the keenest in- 
 terest of a whole nation, but having no re- 
 lation to the financial income of voters. 
 
 32^ 
 
Business and Education 
 
 The European business man does not take 
 to politics, nor does he seem to be much 
 wanted in the pohtical councils. There are 
 three hundred members of the French Sen- 
 ate, and only forty of these are in any way 
 connected with commerce or industry. In 
 the French Assembly the business man is 
 almost a total stranger. In the Reichstag 
 at Berlin business interests are better rep- 
 resented, but in the parliamentary bodies at 
 Vienna and Budapest, where sound commer- 
 cial legislation is needed as much as any- 
 where else in Europe, there is heard only 
 endless wrangling of many races. The con- 
 servative, sensible voice of the experienced 
 business man is rarely heard effectively in 
 Vienna among those diverse tongues which 
 will unite in no phrase unless it means legis- 
 lative obstruction. 
 
 The parliaments of Europe are far less 
 representative of the people than is the case 
 with us. Under the unfair system of ap- 
 portionment in Germany and Austria a leg- 
 islature representative of the people is out 
 of the question. Emperor William's excur- 
 sions into world politics would be rudely 
 checked were his actions controlled by a 
 Reichstag truly representative of the will 
 of the majority of his subjects. In France 
 the best elements of the population seem to 
 view politics as they would a sinful occupa- 
 
 332 
 
Political Problems of Europe 
 
 tion. The French Chamber is made up 
 of the most voluble and least valuable 
 elements of the nation. It has been well 
 said that France presents the spectacle of 
 a tranquil nation with an agitated legisla- 
 ture, and that in the Chamber, members 
 freely apply such fitting epithets to one an- 
 other as irresponsible, riotous, ill-mannered, 
 and incoherent, while the great majority 
 of the people whom these men represent 
 are peaceful, thrifty, orderly, sober, and 
 industrious. 
 
 No single language could produce the 
 wealth of epithets that abound among the 
 hysterical Czechs, Croats, and the dozen 
 other races in the Parliament of Vienna. 
 Many of these distinguished statesmen re- 
 gard as the most complete political success 
 that action which will effectually block all 
 legislation. Political villification in the 
 Italian Chamber has been cultivated to such 
 a fine art that none but the bravest or the 
 brazenest of statesmen can there be induced 
 to take ofBce. 
 
 When comparisons are made between 
 America and Continental Europe, we can 
 find much of which to be proud. Our 
 growth, our wealth, our industries, our re- 
 sources, our energy, all make flattering com- 
 parison with average European conditions. 
 But I believe, in making such comparisons, 
 
 333 
 
Business and Education 
 
 there is no one thing of which we have the 
 right to be more proud than of the Congress 
 of the United States. Better than any Con- 
 tinental parhament, it represents the people. 
 The one legislative body of the world that 
 is in any way comparable to ours is the Par- 
 liament of Great Britain. In character, in- 
 tellect, methods, dignity, and in the truth- 
 fulness with which each represents the 
 people, the British Parliament and the 
 United States Congress stand in a class quite 
 apart and above any of the parliaments of 
 Continental Europe. 
 
 The parliamentary system has nowhere 
 on the Continent developed along lines 
 which produce the best results. The tem- 
 perament of the Continental nations is not 
 well adapted to party discipline. In a par- 
 liamentary system working at. its best there 
 must be a party of the Government and a 
 strongly united opposition — two parties 
 with well-defined lines of demarcation. No- 
 where on the Continent does that condition 
 exist. Political inclination there tends to 
 the formation of many groups rather than 
 two parties. The lines separating these 
 groups are usually far from clear. An 
 American must be struck by the obvious 
 fact that seldom is the main consideration 
 which holds a group together a distinct 
 commercial idea or programme. 
 
 334 
 
Political Problems of Europe 
 
 Germany in some ways is an exception. 
 Nowhere else in the world can be found 
 such sharp party discipline as in the Social 
 Democratic party of Germany. Elsewhere, 
 however, the political groups are but loosely 
 bound together. The bonds are usually of 
 a sentimental or racial character, or a fleet- 
 ing attachment to some political leader. 
 Plans for sound economic legislation looking 
 toward the development of the industrial and 
 commercial life of the nation seem not to 
 offer sufficiently potent reasons anywhere 
 in Europe for holding together a political 
 party. In England, at the moment, there is 
 a sensational exception. Mr. Chamberlain's 
 fiscal policy, a purely commercial pro- 
 gramme, has made a new and clean-cut line 
 of cleavage in British politics and has 
 brought about one of the most remarkable 
 political situations which England has seen 
 within the last fifty years. 
 
 There is one type of problem to be found 
 in almost every country in Europe from 
 which happily we are in America altogether 
 free. It has to do in one form or another 
 with the relations between Church and State. 
 It will be more clearly comprehended how 
 great a blessing it is for us to be free from 
 such controversies when something is un- 
 derstood of the bitterness, the blind sacrifice 
 of general good, and the countless obstacles 
 
 335 
 
Business and Education 
 
 in the way of political progress which these 
 struggles engender. 
 
 The most striking instance of such a 
 problem, and one with a phase particularly 
 unfamiliar to us, is the French clerical ques- 
 tion. In every European country there is 
 more or less state support of the Church, 
 and that has everywhere resulted in the re- 
 lations between the Church and State form- 
 ing at times the subject of bitter controversy. 
 Not only has the one absorbing political 
 question in France for several years been 
 the suppression of the religious orders, but 
 in Italy the strained relations between the 
 Vatican and Quirinal form always an im- 
 portant feature of the situation. In Italy 
 the problem reaches down into the very roots 
 of political life, and must for a long time 
 have a profound effect on the national de- 
 velopment, presenting as it does a contro- 
 versy of the first importance at every elec- 
 tion and at every session of Parliament. 
 
 A majority of the most intelligent and 
 best meaning voters of France believe that 
 the life of the republic has been in peril. 
 The general attitude of the Church, and 
 particularly the character of the teaching 
 of the religious orders, are the sources 
 of this supposed danger. Nearly half of 
 the youth of France have, even in recent 
 years, received instruction in clerical schools. 
 
 336 
 
Political Problems of Europe 
 
 The belief is firmly fixed in the minds of 
 more than half of the voters that this in- 
 struction has tended to raise up enemies of 
 France. 
 
 The struggle against the powerful reli- 
 gious orders is by no means a new one there. 
 When the present Government came into 
 office, with Waldeck-Rousseau as Premier, 
 the particular mandate which it had from 
 the voters was to curb the power of the 
 religious orders, and especially to restrict 
 their rights to teach. Curiously the law 
 which Waldeck-Rousseau framed in 1901 
 almost exactly duplicated one which had 
 been passed a hundred and fifty years ago. 
 The orders flourished in spite of a century 
 and a half of restrictive legislation. When 
 the present Government began its campaign 
 of repression, there were 325,000 members 
 of the orders. They held real estate valued 
 at more than a billion francs, and one of the 
 complaints against them that particularly 
 appealed to the small landowner was that 
 so vast a property had almost completely 
 been withdrawn from productive usefulness. 
 The personal wealth of the orders was so 
 great it would be difficult to estimate it. Its 
 extent is illustrated by the fact that when 
 the prosecution became severe the sales of 
 their French Government securities were 
 great enough to be the main factor in a 
 
 ^2 337 
 
Business and Education 
 
 market decline that was regarded almost as 
 a national calamity. 
 
 A feature of the situation that has been 
 particularly trying has been the unstinted 
 use of this wealth in elections to secure the 
 success of clerical candidates, or rather, to 
 compass in any way possible the defeat of 
 the Republicans. 
 
 The relations between Church and State 
 in France are defined by a concordat which 
 stands to-day as Napoleon drew it. Catho- 
 lics, Protestants, and Jews all receive allow- 
 ances from the State, although the Catholic 
 Church receives 41,000,000 francs of the 
 43,000,000 of such church subsidies. 
 
 The student of French institutions finds 
 the living genius of Napoleon in many 
 phases of government to-day. He seems 
 less like a deposed ruler against whose sys- 
 tem of politics nearly a century of effort 
 has been directed than like a vigorous sov- 
 ereign absent from France on a brief vaca- 
 tion. The influence of Napoleon, in the 
 stamp he left on French institutions, seems 
 after the vicissitude of succeeding monarchy, 
 empire, and republic, and the passing of 
 nearly a century greater than that of any 
 living man. And so this concordat, which 
 he drew in 1801, and which has passed un- 
 changed through succeeding forms of gov- 
 ernment, has remained to become the chief 
 
 338 
 
Political Problems of Europe 
 
 problem of French politics more than a cen- 
 tury after it was signed. The concordat re- 
 established the legal existence of the Cath- 
 olic Church, which had been annulled by the 
 Revolution. The ecclesiastical property con- 
 fiscated by the Republican Government was 
 not restored, and the Pope and his succes- 
 sors were bound not to move to disturb the 
 purchasers of such property. Provision was 
 made for state support of bishops and clergy 
 in lieu of their appropriated property. The 
 Government was given the right to nominate 
 bishops. The Church, therefore, has nat- 
 urally and inevitably been deeply interested 
 and constantly an important factor in French 
 politics. When the present republic came 
 into being, a republic without republicanism, 
 as it was called on the assembling of the 
 first Chamber, the Republicans would have 
 been in a hopeless minority had it not been 
 for the discord between Royalists and Bona- 
 partists. The Clerical party was distinctly 
 anti-republican, and by its political activity 
 and bitterness that party well earned Gam- 
 betta's denunciation as an enemy of the re- 
 public. His " Le clericalisme, voila Ten- 
 nemi " has for thirty years been a political 
 war-cry. 
 
 Those who stand for the Republic have 
 come naturally to count the Clericals as the 
 enemies of the State. The Clericals have 
 
 339 
 
Business and Education 
 
 left no lack of reason that this should be 
 so. However vigorously the Republicans 
 might fight the Clericals at the polls or de- 
 nounce them in the Chamber they felt al- 
 ways the quicksand in the ground on which 
 the enemies of clericalism were standing, 
 because the next generation of voters were 
 growing up in the clerical schools and re- 
 ceiving instruction which, even though it 
 hardly warranted the charge of being directly 
 seditious and threatening to the life of the 
 State, was certainly not designed to make 
 these youths Republicans. 
 
 This state of affairs resulted in a plat- 
 form which was larger than any single party, 
 a so-called Programme of Republican De- 
 fence, on which there has been room not 
 only for Republicans to stand, but breadth 
 enough for Radicals and Socialists as well. 
 It has furnished the basis for the coalition 
 of parties which forms the present Govern- 
 ment and has made the common ground on 
 which these groups, holding in some re- 
 spects most divers political faiths, could be 
 united into what is known as the Republican 
 " Bloc." 
 
 The first change in the law as made by 
 Waldeck-Rousseau in 1901 only went so 
 far as to compel the orders to obtain au- 
 thorization from the Government for their 
 legal continuation. After Waldeck-Rous- 
 
 340 
 
Political Problems of Europe 
 
 seau gave way to Combes, the Government 
 went at the subject in the most thorough- 
 going manner, its aim being so effectually 
 to disband the orders that there should be 
 no possibility of their return to instil into 
 the minds of the French youth doubts and 
 questions as to the republic. 
 
 The struggle is one of the sort in which 
 there can be drawn no straight line of right 
 and wrong. It is undoubtedly true that the 
 traditional attitude of the Church and of 
 the Clerical party has been reactionary and 
 generally unfriendly to the republic, that 
 the character of the teaching by the orders 
 has been open to most reasonable and vig- 
 orous objection by those who hold firm faith 
 in the principles of republicanism. It is true 
 that the Church has been active in public 
 affairs, perhaps fairly earning the charge 
 that clericalism is a movement " that tres- 
 passes, in the name of the Christian faith, 
 on the domain of politics, and that, under 
 the cover of religion, menaces the tran- 
 quillity of the state." There has been 
 ground for objection to the growth of the 
 wealth of the monastic orders, especially 
 when they were directly engaged in com- 
 mercial affairs. Particularly has there been 
 room for objection when they used their 
 wealth to influence elections. The more 
 rapid advance of those army officers who 
 
 341 
 
Business and Education 
 
 were educated in the clerical schools, com- 
 pared with those who received their edu- 
 cation elsewhere, has been an annoying evi- 
 dence of the solidarity of clerical influence. 
 There have been bigotry and narrowness, 
 overzealousness and defiance of law, priestly 
 exhortation better fitted to the stump than 
 the pulpit, and even counselling toward re- 
 sistance and defiance of law that was well 
 fitted to neither. 
 
 It must be remembered, however, that 
 there has existed a great and respectable 
 minority holding the most sincere belief in 
 the unwisdom of this restrictive legislation. 
 The programme of the Government has 
 struck at the deepest sensibilities of this mi- 
 nority. There has seemed to be undue haste 
 and needless harshness. The subject touched 
 many interests and appealed to many senti- 
 ments and prejudices. It had taken the Re- 
 publican party thirty years to bring itself 
 to put its fears into legislative enactments, 
 and it could have well afforded to have used 
 greater tact and less haste in enforcing the 
 laws it passed. It has met intolerance with 
 intolerance. It has come dangerously near 
 violating fundamental rights and liberties 
 in its struggle to subdue the orders which it 
 declared were the particular enemies of those 
 very rights and liberties. It has outraged 
 the sentiments of a most important minority 
 342 
 
Political Problems of Europe 
 
 and has earned by its methods some of the 
 epithets it has hurled so vigorously at its 
 adversaries. Still it must be remembered 
 that the Republicans have had to engage in 
 this struggle against a most powerful antag- 
 onist, one with wealth, organization, time- 
 established position, and with the great ad- 
 vantage of religious bulwarks behind which 
 to fight. It has been war; and war in pol- 
 itics, as between armies, is not the place to 
 look for fine ethical distinctions. 
 
 The avowed aim of the Combes ministry 
 to create a " lay " state so far as the schools 
 are concerned, to give to the state a complete 
 monopoly of education, is now a practi- 
 cally accomplished fact. But in setting up 
 in the businesses of education, as in setting 
 up in other businesses, there are attendant 
 expenses. The Government has at once 
 been placed under the necessity of greatly 
 extending the national school system. Thou- 
 sands of new schools must be provided. 
 The expenditure of sixty million francs is 
 at once required for building new school- 
 houses. Then there is an added annual 
 charge of many million francs on national 
 and local budgets to provide for the salaries 
 of the great corps of teachers. Not only 
 were the teaching orders affected, but the 
 nursing orders were suppressed too. Nearly 
 all the hospitals had been economically man- 
 
 343 
 
Business and Education 
 
 aged by the nuns; the nuns were replaced 
 by lay workers, and the increased expendi- 
 tures on that account have been great. 
 
 The French budget is one which has 
 tested the keenest ingenuity of each suc- 
 ceeding Finance Minister to reach a satis- 
 factory balance, and all these increased ex- 
 penditures are bringing forward practical 
 questions of revenue and taxation which are 
 not always relished by even the most zealous 
 supporters of the policy of suppression. 
 
 The point in all this that seems specially 
 interesting to Americans is the nature of the 
 controversy and the happy absence in our 
 own political system of the elements that 
 would make such a controversy possible. 
 Here we see the political forces of a great 
 nation absorbed for years in a struggle so 
 bitter as to provoke scenes of the most vio- 
 lent disorder in the Chamber; and in the 
 communes riots, active resistance to law, 
 military suppression, and bloodshed. We 
 observe a struggle in which are brought into 
 fiercest play not only the ordinary political 
 passions, but one in which bigotry, pious 
 prejudice, and exasperated religious sensi- 
 bilities are met by political intolerance. We 
 see arbitrary power justifying in the name 
 of liberty the invasion of fundamental 
 rights. We note an enactment of harsh 
 and unjust laws which their sponsors be- 
 
 344 
 
Political Problems of Europe 
 
 lieve necessary to preserve the life of the 
 repubHc. 
 
 Can we not, in the face of all that, listen 
 with some complacency to the imputation 
 that we are a nation of dollar worshippers 
 and that we concern ourselves with no ques- 
 tions of politics that do not affect our 
 pocket-books ? 
 
 In spite of all the political energy that has 
 for several years gone into the discussion of 
 the French schools^ it has not, unfortunately, 
 led directly toward any effort to improve 
 the existing school system. No party has 
 given serious consideration to a plan insur- 
 ing better educational preparation for the 
 French youth. No party has made the de- 
 velopment of a system of technical schools 
 or the introduction of commercial training 
 an important part of its programme. 
 
 The political life of the French nation has 
 for several years centred exclusively about 
 the school system, but there has been no 
 awakening there to the need of advanced 
 methods nor to the advantage of new 
 courses such as have been adopted with ad- 
 mirable results in Germany. That was of 
 course, impossible, considering the nature 
 of the controversy. It will be hardly pos- 
 sible for some years to come. The national 
 school system must now be organized and 
 developed, and for a long time there will be 
 
 345 
 
Business and Education 
 
 work enough to do to get it in smooth run- 
 ning order, leaving Httle room to expect 
 radical improvement in methods or extension 
 of scope. What has been going on in France 
 is a fundamental struggle between the 
 Church and State. Ultimately education 
 will probably be benefited, but those on each 
 side of the controversy have had only in 
 mind the question as to which should con- 
 trol the educational system. 
 
 The eventual denunciation of the concordat 
 is one of the certainties of French politics. 
 
 There are reasons, however, why the 
 movement may now pause. There are other 
 pressing questions, and the forces back of 
 them are in a measure interlocked with 
 those which have dominated the anti-clerical 
 struggle — especially is that true of the de- 
 mand of the Socialists. The consideration of 
 that subject must be left to a later paper, 
 as must also the aspect of the Socialist move- 
 ment in other countries beside France. 
 
 III. The Progress of Socialism 
 Socialism is a live political factor in Eu- 
 rope. There is a wave of socialism flowing 
 over the whole Continent, reaching heights 
 of much importance in Germany, Belgium, 
 and France, and giving a distinct trend to 
 political life in Austria and Italy. 
 
 It is of great importance to us because of 
 346 
 
Political Problems of Europe 
 
 the vital effect which the success of the social- 
 ist parties would have on European institu- 
 tions and upon the social and industrial con- 
 ditions there. Of even wider importance, 
 however, is this great political and social 
 movement, because it foreshadows a ten- 
 dency which we are likely to see gain great 
 force in our own country. It seems to me 
 not improbable that we shall, in the next 
 few years, hear much of socialism in our own 
 political life, I do not think it will be sur- 
 prising if we eventually find political forces 
 here drawn up on a new alignment, with a 
 party standing on a platform which might 
 be made up from principles taken from the 
 programmes of socialist parties of Europe, 
 and opposed to those who will stand for 
 conservatism and the permanence of present 
 institutions and conditions. 
 
 What a socialist party they would make! 
 The discontented would find promise in such 
 a platform. The believers in the power of 
 legislation to work miracles in bringing 
 prosperity and bettering social conditions 
 would find plans for legislative experiments 
 which would interest them. Those who see 
 danger in aggregated wealth, the opponents 
 of trusts and combinations, the populists, 
 would all find such a party congenial. The 
 advocates of Federal control of railways and 
 telegraphs, and those who think the Gov- 
 
 347 
 
Business and Education 
 
 ernment should get deeper into finance and 
 organize postal savings-banks, would find 
 planks which met their views. One of the 
 main tenets of faith would of course be the 
 belief in universal old-age pensions and in 
 insurance to compensate for loss of health 
 or employment, with the taxes for creating 
 such funds laid on the incomes of the 
 wealthy. Such a plank would have wide 
 popularity, and those who are dissatisfied 
 and who are in favor of any change or of 
 any new legislative experiment would be 
 attracted. We certainly have just the sort 
 of material here in plenty for the building 
 of a socialist party along lines which are 
 showing such vital force in the political life 
 of Europe. And as in Europe, there would 
 be much good in the programme, and much 
 error, many fallacies for the demagogue to 
 rant over, much that would be utterly im- 
 practicable, but much that would appeal to 
 those whose lot is less favorable than they 
 believe it should be. 
 
 There are no influences more likely to 
 bring change to Europe than are those vari- 
 ous political currents which are combined 
 under the rather loose term socialism. I 
 believe there are beginning to be seen in our 
 own political life many similar currents. It 
 is natural that those currents will eventually 
 come together into a united political party. 
 348 
 
Political Problems of Europe 
 
 Such a party might be called " Socialist," 
 or it might find some other name, but it 
 would be a party with many of the same 
 principles as those of the socialist parties of 
 Europe. 
 
 If we are facing socialism here, some 
 study of the progress of socialism in Europe 
 is well worth our while. 
 
 In France, the clerical question absorb- 
 ing the main energies of all parties for sev- 
 eral years, as it has, is second only in polit- 
 ical importance to the problems which the 
 growth of socialism has there brought into 
 prominence. The position of the Social- 
 ists in influencing public affairs is much 
 strengthened by the fact that they have been 
 essential allies of the Republicans in their 
 struggle with the Church. As has been in- 
 dicated in a former paper,^ the Socialists 
 have presented a solid front with the Repub- 
 licans in the whole programme of Republican 
 defence, and now that a decisive defeat has 
 been dealt the Clerical party, the Socialists 
 are demanding support in turn from the Re- 
 publicans. The position of the Republicans 
 makes the support of the Socialists necessary 
 to them, and it is logical to expect that the 
 Government programme will in greater and 
 greater degree recognize Socialist demands. 
 
 The French Premier, M. Combes, has re- 
 
 1 Page 340. 
 349 
 
Business and Education 
 
 cently stated the main objects of the present 
 French ministry, and the programme as he 
 oiitHned it shows the influence of the So- 
 ciaHsts. He has stated that in addition to 
 the continuance of repressive measures 
 against rehgious orders, the ministry pro- 
 poses to pass laws on the subject of work- 
 ingmen's pensions, adopt a comprehensive 
 plan for the assistance of invalids and old 
 people, reform the tax system, and reduce 
 to two years the time of military service. 
 This programme indicates how important 
 the Premier recognizes it to be that the 
 Socialists continue their support of the Gov- 
 ernment. As the Socialists and Socialist 
 Radicals have 140 members in the Chamber 
 of Deputies, compared with 240 Republi- 
 cans, it can be readily seen what important 
 pillars of the Government support they 
 form. The Socialist group, composed, as it 
 is, almost exclusively of the working class, 
 naturally has ambitions that are by no 
 means confined to the programme of Repub- 
 lican defence. They want legislation which 
 in their opinion will have an important bear- 
 ing on the whole social order. 
 
 Like Socialists everywhere, they demand 
 much that is utterly impractical. The 
 Government has accepted a few of their 
 most workable theories. If the platform of 
 the revolutionary Socialists was carried out 
 
 350 
 
Political Problems of Europe 
 
 there would be a complete upsetting of the 
 Government, for they favor the suppression 
 of the Senate and the President of the re- 
 public. The programme of the less extreme, 
 and more truly representative, group of 
 Socialists calls for laws restricting the hours 
 of labor and affecting conditions of employ- 
 ment. They desire to transplant the German 
 system of sick funds and old-age pensions, 
 and lay the burden of their maintenance 
 upon the State. This great charge upon the 
 budget they are ready to provide without 
 hardship to themselves by the imposition 
 of a graduated income tax on the wealthy. 
 Complete freedom in forming associations 
 is desired, laws more favorable to labor 
 unions are wanted, payment to the holders 
 of elective offices advocated, and the control 
 by the state of the railroads, mines, and 
 banks is also proposed. The Socialists are 
 almost as much opposed to state education 
 as they have been to clerical instruction. 
 
 The Socialists' contention that the rich 
 are getting richer and the poor are getting 
 poorer was pretty effectually disproved re- 
 cently by the investigation of the French 
 Labor Bureau covering labor conditions in 
 France from 1840 to the end of the century. 
 During a period in which the population 
 grew only 12 per cent, the consumption of 
 wheat rose 60 per cent, of meat 90 per cent, 
 
 351 
 
Business and Education 
 
 potatoes loo per cent, sugar 500 per cent, 
 and alcohol 260 per cent. 
 
 The demands of the Socialists seem likely 
 now to come into the foreground. It is 
 probable that we shall see in France much 
 parliamentary attention given to legislation 
 having for its object the amelioration of 
 the condition of the working people. That 
 fact is by no means without significance in 
 a survey of commercial conditions in France. 
 The questions that promise to take a lead- 
 ing position in legislative consideration will 
 involve material change in the relations of 
 the working classes to their employers, and 
 may threaten marked alteration of the ratio 
 in which profits are divided between capital 
 and labor. Considering the strength and 
 vitality of French socialism, the future 
 would seem to favor legislation of a char- 
 acter likely to affect unfavorably industrial 
 enterprise, at least until a process of read- 
 justment has been gone through. French 
 commerce is therefore facing unpleasant 
 legislative possibilities in the way of income 
 taxes, old-age pensions, restrictions of the 
 hours of work, and legislation favoring labor 
 organizations. 
 
 The adoption of a scheme for old-age 
 pensions and the imposition of an income 
 tax are now earnestly favored by the min- 
 istry. The Finance Minister, M. Rouvier, 
 352 
 
Political Problems of Europe 
 
 who has proved himself one of the most 
 adroit and able men who ever held the 
 Treasury portfolio, has formulated a scheme 
 of taxation which would abolish the pres- 
 ent somewhat intricate system, and replace 
 it with two simple revenues — one a tax on 
 income, and the other a tax on house rent. 
 The Socialists condemn the Government 
 scheme, declaring it not progressive enough. 
 They demand a tax which shall almost 
 entirely consume property when income 
 reaches a high level. 
 
 The respect for property rights is gener- 
 ally so highly developed in France that it 
 hardly seems probable that the Socialists, 
 strong and growing though the party is, 
 will be able to pass legislation of so radical 
 a nature as they now propose. Should they 
 make substantial progress with their income- 
 tax scheme, French business interests will 
 have more reason to concern themselves with 
 politics in the next few years than has been 
 the case for a long time past. 
 
 The Socialist party in France has none of 
 the remarkable coherence which, the Social 
 Democrats of Germany exhibit. The most 
 striking feature of the German Social-Dem- 
 ocratic organization is its perfect unity. 
 The individual subordinates his ideas to the 
 main programme. The will of the party, as 
 expressed by the majority, is absolute law. 
 
 23 353 
 
Business and Education 
 
 The party discipline is the most perfect to 
 be found in any poHtical organization. The 
 French SociaHsts, on the other hand, are 
 constantly at variance. They frequently 
 break up into warring groups. At present 
 there are two groups of importance, and 
 five or six subordinate ones. If there was 
 prospect of the strength of the Revolutionary 
 Socialists increasing until they were able 
 to impress their views upon the Chamber, 
 the outlook for French commerce and in- 
 dustry would be serious indeed. 
 
 The Revolutionary Socialists want no 
 half-way business about their old-age pen- 
 sion system. They desire that the pension 
 shall be large enough to insure the aged 
 workingman living in comfort, and they do 
 not want it to be put off until he has grown 
 weary waiting for it. Not only do they want 
 large pensions to begin before extreme old 
 age is reached, but they are radically op- 
 posed to any contributions from the wages 
 of the working people to replenish the pen- 
 sion fund. They w^ant it all provided by 
 the State. They would have the wealthy 
 pay the pensions instead of making frugality 
 a requisite, as in Germany. 
 
 The French Socialists show a tendency, 
 however, to abandon the revolutionary ideas 
 which have marked the programmes of their 
 more radical groups. With the adoption of 
 
 354 
 
Political Problems of Europe 
 
 a sober and more practical programme they 
 show growing strength. In national politics 
 they have reached the dignity of representa- 
 tion in the Cabinet, as well as substantial 
 power in the Chamber. 
 
 The chief practical success which French 
 socialism has gained thus far, however, has 
 been the acquisition of municipal power. 
 Many of the larger cities of France are now 
 controlled by Socialist councils. Before 
 1892 the Socialists had a majority in only 
 one town council — in Saint Ouen — but 
 since then they have succeeded in securing 
 majorities in ten other important town 
 councils, including such cities as Lille, Mar- 
 seilles, and Calais. The municipal council 
 of Paris has a Socialist group so important 
 as strongly to influence its actions. In those 
 towns where the Socialists have a majority 
 they frequently pass radical measures for 
 the benefit of the laboring classes, but those 
 measures are always vetoed by the prefects, 
 who have an absolute veto power. The pre- 
 fects pronounce such legislation as outside 
 the council's jurisdiction. In that way the 
 power of the Socialists in municipal affairs 
 is sharply limited. No matter how radical 
 may be the voice of the municipal council, 
 the action of that body is held in check by 
 the centralized system of government which 
 Napoleon planned. The municipal council 
 
 355 
 
Business and Education 
 
 may have a majority of members with ever 
 so revolutionary plans. The council is pre- 
 sided over by a prefect who represents the 
 central Government, and wields a veto which 
 will effectually check a tendency toward any- 
 thing which the officials in Paris may re- 
 gard as dangerous enactments. 
 
 In Belgium socialism is one of the strong- 
 est of the present political forces. It is 
 natural to find in that country a fertile field 
 in which to spread socialistic doctrines, for 
 it is a country with a great industrial popu- 
 lation and a comparatively small number 
 who devote themselves to agriculture. The 
 greatest energy is shown there in the sys- 
 tematic inculcation of socialistic ideas. Not 
 only is there thorough organization in the 
 cities, but the proselyting is pushed out into 
 the agricultural districts. On Sundays in 
 Belgium it is a common thing to see squads 
 of bicycle riders passing along the country 
 roads distributing socialistic literature to the 
 peasants or waiting outside the doors of 
 the little country churches to hand out their 
 socialist tracts. 
 
 In the cities the strength of the socialists 
 became so great that the railroad adminis- 
 tration, which is in the hands of the Gov- 
 ernment, thought to help the industrial em- 
 ployers and increase the supply of workmen 
 by organizing a series of workingmen's 
 
 356 
 
Political Problems of Europe 
 
 trains. Greatly reduced fares were put in 
 force on these trains, and they transported 
 to the cities and to the industrial centres 
 great numbers of workingmen who lived 
 in the country and who had not yet taken 
 up socialist ideas. The Government's ex- 
 pectation of making headway against the 
 workingmen's combinations has not been 
 realized. It has turned out that the new 
 laborers thus brought to the cities have 
 quickly taken up the doctrines and ideas of 
 the dwellers in the towns, and the recent 
 progress of the Socialist party has been 
 mainly made among the inhabitants of those 
 small villages. Among the peasants, those 
 who are actually workers in the fields, little 
 headway is made by the propaganda of the 
 workingmen's party. 
 
 Socialism in Belgium has developed 
 largely in the direction of co-operative en- 
 terprises. In that particular it has taken a 
 firmer hold in that country than elsewhere. 
 Co-operative evolution is already too far ad- 
 vanced for any opposition by the State to be 
 effective. There are many huge co-operative 
 organizations, and their energies are directed 
 toward almost every phase of economic life. 
 In the main they may be said to be success- 
 ful; certainly they are far more successful 
 than any attempts at co-operation which we 
 have seen in America. Without doubt their 
 
 357 
 
Business and Education 
 
 influence is beneficent. Most of the great 
 co-operative associations have their own H- 
 braries, devoted particularly to economic and 
 social science. In the Vooruit, at Ghent, I 
 have seen a collection of many thousand 
 volumes devoted to these two subjects. 
 
 There are nearly two thousand co-opera- 
 tive societies in Belgium, with a million con- 
 sumers. Fully one-seventh of the total pop- 
 ulation belong to these institutions. They 
 are flourishing institutions, too, showing 
 good management and important economic 
 results. The Maison du Peuple, in Brussels, 
 is one of the most important of these co-oper- 
 ative organizations. It is a sort of people's 
 palace; it contains libraries, concert halls, 
 theatre, and lecture-rooms, as well as the 
 co-operative stores for furnishing every kind 
 and variety of supplies. There are attached 
 to the institution doctors, dentists, and ocu- 
 lists. It covers practically every department 
 of life, and is more comprehensive than the 
 greatest of our own department stores. 
 Some of these institutions administer life- 
 insurance funds and sick benefits with 
 success. 
 
 All the members of the workmen's party 
 are members of some co-operative organiza- 
 tion, so that the co-operative and the polit- 
 ical movements have gone hand in hand. 
 In the small villages the first co-operative 
 
 358 
 
Political Problems of Europe 
 
 establishment is generally a bakery, and this 
 becomes the nucleus of a large co-operative 
 industrial company later. There is success- 
 ful co-operation, too, in the purely agricul- 
 tural communities, in the form of associa- 
 tions for buying supplies and for selling the 
 produce of the farms. The farmers believe 
 that a central control over the marketing of 
 their products has greatly increased their 
 income. It has tended to eliminate unnec- 
 essary competition and to better adapt the 
 supply to the demand. 
 
 The Socialist party in Belgium now has 
 over five hundred thousand votes, and, con- 
 sidering its relations to the co-operative es- 
 tablishments, probably controls a larger 
 amount of capital than any other political 
 party. Its struggle and agitation for univer- 
 sal suffrage has been its most important 
 undertaking. Dangerous weapons were 
 used. I can imagine few graver prospects 
 than the possibility of the introduction of 
 similar methods of warfare into our politi- 
 cal life. As a climax in the effort to obtain 
 universal suffrage, there was an attempt 
 made to bring about a universal strike in 
 every industry, with the hope that there 
 would be such complete paralysis of the na- 
 tion's industrial life that the Government 
 would be compelled to yield. The attempt 
 was a failure, but the method was a most 
 
 359 
 
Business and Education 
 
 dangerous precedent. The strike will be 
 remembered as probably the greatest one on 
 record. More than 300,000 workingmen 
 were idle. Nearly every industry in the 
 country, with the exception of the railroads, 
 post-offices, and telegraph lines, was affected. 
 The strike was marked by comparatively 
 little disorder. In spite of the imposing 
 manifestation on the part of the people, the 
 Government succeeded in maintaining its 
 majority, and the Chamber, by a majority 
 of 20, refused to consider the question of 
 revising the constitution in favor of univer- 
 sal suffrage. The election which followed 
 strengthened slightly the workingmen's 
 party, but also strengthened the Clericals, 
 who are at present the controlling force back 
 of the ministry. The Chamber is made up 
 of 166 members. The Clericals now have 
 96, the Socialists 35, and the Liberals 34. 
 
 The union of political and labor organi- 
 zations is seen in the highest development 
 in Belgium, and the result of that union, 
 with its possibility of strictly class legisla- 
 tion, may well be to us an interesting field of 
 observation. As yet it has not seriously 
 affected industry, nor threatened existing 
 forms of government, but if the great indus- 
 trial population of Belgium is eventually 
 united into a political organization of suffi- 
 cient strength to take the control of the 
 360 
 
Political Problems of Europe 
 
 Government out of the hands of the Cler- 
 icals, Belgium is likely to become the scene 
 of extremely interesting socialistic legisla- 
 tion. 
 
 A phase of socialism which is especially 
 emphasized in Belgium is the attitude of 
 the party toward art, and the plans for pro- 
 viding culture and amusement for the peo- 
 ple, in answer to a demand for public en- 
 tertainments and for great spectacles. In 
 a state in which they hope to abolish the 
 Church and the army, they propose to have 
 something to substitute for churchly pomp 
 and military pageant. They expect to do 
 this by parades and celebrations of one kind 
 and another, and even now they work out 
 the details of these in a most artistic and 
 thorough way, modelling them largely on 
 the magnificent festivals of the Belgium 
 cities in the Middle Ages. A harvest festi- 
 val which I recently saw in Bruges was an 
 elaborate and artistic example. A proces- 
 sion with floats representing different grains 
 and different phases of the harvest certainly 
 made in the way of public amusement a 
 good substitute for a spectacle on the 
 Champs de Mars. 
 
 The Belgian Socialists ask of the Govern- 
 ment that so far as possible it cultivate the 
 artistic in all phases of public life, and that 
 the strength of the State be directed to ob- 
 361 
 
Business and Education 
 
 literate all ugly and unpleasant sights. Of 
 the Minister of Finance is demanded money 
 of more artistic appearance, modelled closely 
 on the lines of antique coins. From the 
 Minister of Railroads they wish stations of 
 architectural excellence, decorated by the 
 greatest of contemporary artists, and rail- 
 way carriages where comfort is combined 
 with the consideration of what is beautiful. 
 They even ask for less commonplace rail- 
 road tickets. From the Minister of Agri- 
 culture are demanded comprehensive plans 
 for the preservation of the trees along the 
 great national roads ; and from the Minister 
 of Industry, the reorganization, improve- 
 ment, and vitalizing of the provincial schools 
 for teaching industrial art, the creation of 
 museums and galleries, and generally the 
 provision of the means for higher artistic 
 culture. 
 
 Thus the Belgium Socialists by no means 
 propose to confine their ambitions to the im- 
 provement of material conditions. In some 
 respects they may have impractical ideals, 
 but on the whole their programme is one 
 which must inevitably work toward the up- 
 lifting and better living of the dense indus- 
 trial population. Undoubtedly they scatter 
 and weaken their force by the breadth of 
 their demands. Their programme, how- 
 ever, is interesting, both from the fact that 
 362 
 
Political Problems of Europe 
 
 it illustrates the nature of what we would 
 regard as fundamental political rights for 
 which they are still struggling, and illumi- 
 nates some of the high ideals with which the 
 party is imbued. 
 
 In politics they desire universal suffrage, 
 decentralization of the legislative power, 
 communal autonomy, the right of initiative 
 and referendum, educational reform, the 
 suppression of the Church and army, civil 
 equality of the sexes and suppression of 
 hereditary functions, and finally the estab- 
 lishment of a republic. In economic mat- 
 ters they have a great programme of public 
 charity in the shape of general insurance 
 for all citizens. They favor the abolition 
 of all laws against coalition. They de- 
 sire free agricultural education, insurance 
 against the diseases of plants and animals, 
 and against the damages of storms and 
 floods, the suppression of the hunting pre- 
 serves, and the establishment of the right 
 to destroy during every season animals which 
 do harm to the crops. 
 
 In the Belgium elections all the influence 
 of the priests and of the owners of land is 
 exercised against the Socialists. The cred- 
 ulity of the country folk leads them to accept 
 from priests some remarkable interpreta- 
 tions of socialistic aims, and a common con- 
 servatism in the country results in advanced 
 
 363 
 
Business and Education 
 
 ideas taking root very slowly. The work- 
 ingmen's party in Belgium strongly favors 
 woman's suffrage. The organization of 
 Belgium women into unions of political 
 societies has not, however, made much 
 progress. 
 
 In Austria, where the conditions of suf- 
 frage are unfavorable to Socialists, they 
 have returned only ii members to the 
 Reichsrat. Although the party shows a 
 total strength of nearly 1,000,000 votes, the 
 class system of voting gives it small repre- 
 sentation. The recognized party organiza- 
 tion has expelled the extreme revolutionists, 
 and has taken up the interests of the peas- 
 antry. As a natural sequence the party has 
 become anti-Semitic, as the Jews are the 
 great landowners of the country. It has 
 been said that two Jews own a quarter of 
 the agricultural land of Hungary, a state- 
 ment which is hardly within the facts. The 
 Rothschilds are said to own one-third of the 
 farming land of Bohemia, which is perhaps 
 another exaggeration. But in any event such 
 accumulation of enormous tracts of land has 
 led the Socialist party to take a strong anti- 
 Semitic position. The agrarian interests are 
 naturally violently opposed to the Socialist 
 doctrines. They have secured legislation 
 authorizing employers to dismiss without 
 wages any workingman suspected of being 
 
 364 
 
Political Problems of Europe 
 
 a Socialist agitator, and are not above seek- 
 ing any unfair advantage in combating what 
 they regard as a national danger. 
 
 Socialism is an unimportant element in 
 the politics of Holland, although so far as it 
 does manifest itself it is revolutionary in 
 character. In recent municipal elections the 
 Socialists met with losses. They have prac- 
 tically no influence in national politics there. 
 
 In Sweden there is only one Socialist 
 member of Parliament, and in Switzerland 
 there is also one. Although socialism has 
 shown no vitality in the Scandinavian 
 countries, there has been a great develop- 
 ment of co-operative enterprise there. This 
 is true particularly of Denmark's dairy in- 
 terests. The first of the Danish co-opera- 
 tive dairies was started about a score of 
 years ago. They have been so well managed 
 and produced such satisfactory results, that 
 four-fifths of the dairy interests of the 
 country are now handled by co-operative 
 organizations, and the exports of Danish 
 butter have grown in value from $5,000,000 
 to more than $30,000,000. Co-operative 
 organization has been extended with great 
 success to other agricultural interests. There 
 are co-operative meat-packing concerns with 
 65,000 members that have shown good re- 
 sults. Success has also attended the hand- 
 ling of poultry and other farm prcduce. The 
 
 365 
 
Business and Education 
 
 great development of Denmark's export 
 trade in agricultural produce and the ex- 
 ceptional favor and high prices those prod- 
 ucts command in the English markets are 
 held to be in large measure an indication of 
 the advantages of co-operation. 
 
 Italian Socialists show considerable po- 
 litical vitality, and the revolutionary phase 
 is emphasized there. The party demands 
 universal suffrage for adults of both sexes; 
 greater freedom of organization, of public 
 meetings, and of combination; religious 
 equality; a national militia in place of the 
 standing army; neutrality of the govern- 
 ment in disputes between capital and labor; 
 a more humane penal code; the nationali- 
 zation of railroads and mines ; effective com- 
 pulsory education; old-age pensions; the 
 establishment of a ministry of labor, and 
 the payment of deputies and members of 
 local councils. The Italian Socialists have 
 shown a pretty steady growth in the last 
 decade. Their programme in the main is 
 such that ordinarily progressive govern- 
 ment and a fair measure of political rights 
 would satisfy most of the demands of the 
 party. 
 
 In England there are but two Socialist 
 members of Parliament, and one of them, 
 John Burns, is hardly considered a Social- 
 ist by the members of the party. In spite 
 366 
 
Political Problems of Europe 
 
 of that there is to be found in England an 
 impressive manifestation of socialistic tend- 
 encies. Its development is in connection 
 with the municipal ownership of public 
 utilities. What is called ^' gas and water 
 socialism " has generally been the begin- 
 ning of these municipal enterprises. There 
 are some successes and a great many fail- 
 ures. In England human nature is not 
 greatly different from human nature as 
 found elsewhere, and municipal counsellors 
 are, as a usual thing, demonstrated to be 
 none too well fitted for the conduct of the 
 huge industrial enterprises which many of 
 the municipalities have undertaken. There 
 has been an astonishing increase in muni- 
 cipal indebtedness following in the wake of 
 these industrial undertakings. The mu- 
 nicipal expenditures for industrial under- 
 takings have resulted in the raising of the 
 tax rate to such a point as to cause a whole- 
 sale exodus of tax-payers from some muni- 
 cipal districts. 
 
 The labor vote in England frequently 
 unites solidly in favor of its candidates for 
 municipal office, and sometimes with curi- 
 ous results. Two labor leaders were re- 
 cently elected to the town council of Bat- 
 tersea, for example, and shortly after their 
 election, having used their political influ- 
 ence to secure jobs as street-sweepers at 27 
 
 367 
 
Business and Education 
 
 shillings a week, they resigned their politi- 
 cal office. 
 
 More or less important as is the Socialist 
 movement in those countries already re- 
 ferred to, it is in Germany that we find it 
 developed to a commanding political posi- 
 tion. It is, perhaps, hardly fair to call 
 the Social-Democratic party of Germany 
 as it now exists strictly a party of Social- 
 ists, for there are many members of it who 
 elsewhere would be known as Liberals. It 
 is true the platform of the Social-Demo- 
 cratic party was originally the communistic 
 manifestos of Carl Marx and Frederick 
 Engels, and at first the party held that the 
 emancipation of labor demanded the trans- 
 fer of raw material to the common posses- 
 sion of society, and that only the best 
 results and the just distribution of the 
 products of labor could be obtained by the 
 communistic regulation of collective labor. 
 Thirty years ago, under the direction of 
 Liebknecht and Bebel, the party united to 
 itself the labor unions and organizations of 
 various sorts, and became a party of polit- 
 ical importance. The growth of the Social 
 Democrats in Germany has been coincident 
 with the growth of industrialism. It is the 
 party of labor and of protest. Its most 
 violent opponents are the agrarians, whose 
 lands have been stripped of cheap laborers 
 368 
 
Political Problems of Europe 
 
 by the development of industrialism in the 
 cities. The party has thrived under perse- 
 cution. It steadily gained votes in the face 
 of the most antagonistic laws which the Jun- 
 kers could devise with Bismarck's aid, and 
 the most harassing police espionage which 
 the bureaucratic system of Government has 
 made possible. 
 
 In the last German election nearly one- 
 third of the 9,500,000 votes were polled for 
 the Social-Democratic candidates. The re- 
 sult of that election shows a loss of nearly 
 30 per cent by the agrarian groups, and a 
 gain of 43 per cent by the Social Demo- 
 crats. It was the sort of thing that we call, 
 in our politics, a landslide. Every session 
 of the Reichstag for eighteen years, how- 
 ever, has shown an increasing number of 
 seats occupied by the Social Democrats, so 
 that the great gains of the last election did 
 not indicate a turning over of public senti- 
 ment. It rather represented a culmination 
 of those influences which have been adding 
 strength to the Social-Democratic party 
 ever since the first session of the Reichstag 
 in 1 87 1, when only one Social Democrat 
 sat on the extreme left. 
 
 The Social Democrats now poll a ma~ 
 
 jority of votes in nearly every capital city, 
 
 every great mercantile marine port, and in 
 
 all the great industrial centres. They are 
 
 24 369 
 
Business and Education 
 
 handicapped by unfair representation. If 
 the true expression of the will of the Ger- 
 man people were reflected in the Reichstag 
 the Social Democrats would be in a com- 
 manding position there. 
 
 In studying German politics, however, it 
 must be borne in mind that the ministry is 
 not responsible to the Reichstag, but only to 
 the Emperor. No cabinet resignations or 
 dissolution of Parliament follows a vote un- 
 favorable to the Government. The Reich- 
 stag has little more than a veto power, 
 and the people are hampered in the expres- 
 sion of even that veto privilege by the 
 greatest inequalities in the electoral divi- 
 sions of the empire. The election law 
 originally provided that there should be 
 one member of the Reichstag for, generally 
 speaking, every 100,000 inhabitants, but 
 did not provide for fair readjustment in 
 case of increasing or shifting population. 
 Since that law was passed, the populaton 
 has increased from 40,000,000 to 58,000,- 
 000, but there has been no rearrangement of 
 electoral divisions. There is one member of 
 the Reichstag who represents 183,076 votes, 
 and another who represents only 9,551. 
 
 The increase in population has been in the 
 cities, and it is from the cities that the Social 
 Democrats draw their main strength. The 
 unfairness and inequality of the present 
 
 370 
 
Political Problems of Europe 
 
 electoral arrangement, therefore, falls with 
 greatest force upon the Social Democrats, 
 and reacts to the greatest advantage of the 
 agrarians and Clericals. Those groups, 
 forming, as they do, the Government ma- 
 jority, and being the beneficiaries of the 
 present inequalities in the electoral distribu- 
 tion, are unwilling to concede the slightest 
 change. They dread the ascendancy of the 
 Social Democrats as some great national 
 calamity, and they offer their fears as their 
 excuse for manifest unfairness. 
 
 Although the Social Democrats polled 
 3,010,000 votes, or 32 per cent of the total, 
 they have only 81 seats in the Reichstag, 
 v^hich is composed of 397 members. The 
 Centre, with a popular vote of 1,850,000, 
 has 100 seats in the Reichstag. If there 
 had been fair representation and an equal 
 distribution of political rights the Social 
 Democrats would have 125 members and 
 would have been the strongest group in the 
 Chamber. Berlin has 6 members of the 
 Reichstag, but on a fair plan of distribution 
 would have 20. 
 
 The unfairness of the electoral distribu- 
 tion in the empire is even more marked in 
 some of the states of which the empire is 
 formed. In the Prussian Diet there is, for 
 example, not only the same inequalities in 
 the size of the constituencies, but there is a 
 
 371 
 
Busmess and Education 
 
 unique plutocratic system of voting by class 
 according to the amount of taxes paid. The 
 city of Berlin now has 9 members in the 
 Diet, but would have, on an equitable basis 
 of population, 25. The system of voting by 
 classes is peculiar, and must strike those of 
 us who love political equality as most un- 
 fortunate. The system is this : In each elec- 
 tion precinct the voters are divided into 
 three equal classes, on a basis of the amount 
 of taxes paid. These electors form a little 
 electoral college, choosing the member or 
 members of the Diet. Here is a specific il- 
 lustration of how this system works out: 
 In a certain district of Berlin, which in- 
 cludes a part of the Wilhelmstrasse, the first 
 class has in it 3 voters, the second class 8, 
 and the third class 294. The ballots of the 
 three voters in the first class thus have the 
 same political weight as the ballots of the 
 294 in the third class, because the first class 
 pays the same amount of taxes as the third 
 class. But the particularly amusing feature 
 here is that this third class of 294 includes 
 Count von Biilow and other Cabinet mini- 
 sters, and many high Government officials. 
 
 Under this system there is not only in- 
 equality of political rights within a district, 
 based on the tax contribution of the voter, 
 but it results in most absurd inequality in 
 the political rights of one district as against 
 
 372 
 
Political Problems of Europe 
 
 another. In some districts of Berlin, for 
 instance, a man must pay 150,000 marks in 
 taxes in order to vote in the first class; in 
 other districts a payment of taxes to the 
 amount of 36 marks puts the voter into the 
 first class. Bismarck called the Prussian 
 method " the most miserable of all electoral 
 systems," but the Government shows no 
 growing disposition to change it. Herr von 
 Hammerstein recently said, '* No other elec- 
 toral system gives such a correct impression 
 of public opinion as our tripartite system in 
 Prussia." 
 
 What is it that caused such remarkable 
 growth of the Social-Democratic party? 
 What are the complaints of the German 
 people? What measures do the Social 
 Democrats purpose? Does this party of 
 protest and discontent, growing as it has the 
 most rapidly of any political party in Eu- 
 rope, foreshadow changes which will have a 
 momentous effect on industrial conditions? 
 Those are all questions, the answers to 
 which seem to me of direct interest to us. 
 
 The point of view of the Social Demo- 
 crats, without doubt, rests in large measure 
 on a sound appreciation of economic facts. 
 They have seen at close range the effect of 
 modern economic development. They have 
 noted the substitution of machinery for hand 
 labor and the stifling of small industries by 
 
 373 
 
Business and Education 
 
 great and more efficient industrial combina- 
 tions. They offer no plan to oppose such 
 development. They recognize that it is in 
 the line of economic evolution. But they 
 are convinced that it has deprived, and will 
 continue to deprive in an increasing degree, 
 the individual worker of the means of inde- 
 pendent production. The result, they be- 
 lieve, is the creation of a new social order, 
 and there must in time be a readjustment of 
 economic conditions to meet the change. 
 There is no disposition violently to over- 
 throw existing conditions. 
 
 A natural deduction from the growth of 
 the Social-Democratic party might be that 
 such growth indicates a tendency toward 
 revolution, and that with increasing power 
 and confidence it may become a movement 
 to overthrow the Government. Probably 
 nothing could be further from the future 
 course of events. 
 
 The principles for which the Social Demo- 
 crats stand are the sort that naturally thrive 
 in the German character. The German is 
 supercritical. He delights in national fault- 
 finding. He takes naturally and kindly to 
 a party of opposition. He is devoted to 
 speculative philosophy, and the dreams of 
 the classical socialist writers appeal to him. 
 His phrenological bump of the ideal is 
 highly developed, and political ideals that 
 
 374 
 
Political Problems of Europe 
 
 would in other countries be regarded as im- 
 practical dreams are in Germany the sort of 
 thing around which a party can be built, and 
 a party, too, which will submit to the most 
 rigid and practical party discipline — the 
 sort of discipline that every German has 
 learned to know the value of in his army 
 training. 
 
 Not alone is the German character the sort 
 which would encourage the growth of so- 
 cialism, but German political conditions, 
 which were inherent in the varied political 
 development of those countries which were 
 forged together into the German Empire, 
 have been such as must inevitably have 
 united into a party of opposition men who 
 had ideals of true liberty. The German 
 states were securely bound together when 
 the empire was agreed to, but they were not 
 amalgamated. They remained states whose 
 political development covered the whole 
 range from actual feudalism to those re- 
 publican cities with well-developed consti- 
 tutional government. Even in dominating 
 Prussia constitutionalism was only skin 
 deep; the real government was junkerism 
 and militarism. The Junkers are slow to 
 give up their traditions of feudal authority. 
 Their deep-seated conviction to-day is that 
 they should rule by authority not by ma- 
 jority. There is many a Junker aristocrat 
 
 375 
 
Business and Education 
 
 who believes as devoutly in his divine right 
 to stand in a position of authority toward 
 his humbler, though perhaps wealthier fel- 
 low citizens, as does the Emperor himself. 
 
 Few nations have had a more trying task 
 than Germany has had in disentangling the 
 confused political rights as found in the gov- 
 ernmental institutions of the various states, 
 in reducing to proper proportions the dual 
 powers of state diets and Imperial Reichs- 
 tag. Popular repn-esentation at first had 
 little meaning. Part of the work which the 
 Socialists set out to do was to develop it. 
 Tangible form was to be given to those con- 
 stitutional provisions defining the rights of 
 the people, and a party with something more 
 than Junker agrarianism or clerical conserv- 
 atism in its programme was needed. The 
 Social Democrats took that as their work. 
 The development of true liberty demanded 
 the abolishing of caste and the undermining 
 of class privileges. Nothing could be more 
 to the taste of those men who directed the 
 Socialist movement. The Socialists believe 
 that the political task which they have to 
 accomplish is the development of a living 
 constitution and the impression of modern 
 ideas of freedom on Government and 
 Reichstag. 
 
 They have grown to be a party with over 
 three million votes, but they feel they have 
 
 376 
 
Political Problems of Europe 
 
 as yet accomplished small part of their work. 
 They have seen the empire become a great 
 political and commercial power, but there 
 has been little progress toward individual 
 freedom and equality. They declare that 
 constitutional government, as found in Ger- 
 many, is a semblance and a pretence, not a 
 reality, and they are largely right. The 
 Reichstag is not truly representative, and if 
 it were it would still be without authority. 
 The Emperor, the army, the aristocrats, the 
 bureaucracy, and the police govern Ger- 
 many. The vote of a citizen has less direct 
 influence than in any other country with a 
 constitutional government. 
 
 The power of the police is especially ob- 
 noxious to the German Socialists. It is 
 true that the police do interfere in about 
 every relation of life, and while from one 
 point of view the result is the most orderly 
 government in the world, there is ample 
 ground for irritation at the nature of the 
 espionage. Nowhere else, not even in Rus- 
 sia, do the police so completely constitute 
 themselves the guardians of the public. 
 There is complaint, too, against the tend- 
 ency to give the widest possible interpreta- 
 tion to the penal code, to make every con- 
 ceivable action liable to punishment, to re- 
 strict the freedom of meetings, of public 
 speech, and of the press, and to invoke the 
 
 377 
 
Business and Education 
 
 laws of lese-majesty in a way that is re- 
 garded as barbarous and intolerable. 
 
 So much for the general grounds upon 
 which may stand a party of protest. There 
 is one specific grievance, however, which 
 has had more influence in building up the 
 Social-Democratic party than almost all 
 other factors together. The question of 
 dear food or cheap food makes an issue 
 that is easily comprehended. The natural 
 political enemies of the Socialists, the Junk- 
 ers, want nothing in politics more than high 
 protective duties on agricultural produce, 
 for that is all there is between the agrarians 
 and ruinous competition with the fields of 
 America. The industrial population, of 
 course, wants cheap food, and so the issue 
 is clearly drawn. Their war-cry is the 
 epithet of " bread usurer." Their argu- 
 ments, from the industrial point of view 
 alone, are unanswerable. Germany has the 
 dearest meats and dearest wheat of any 
 country in the world. Converts are plenti- 
 ful when a campaign is made to centre about 
 the easily understood phrase of cheap food. 
 
 It is natural to find the Socialists opposed 
 to the great expenditures on army and navy. 
 They are not so much opposed to the army 
 as to the vast sums which the Kaiser pours 
 into the building of a navy. They know 
 that the navy is built from customs dues. 
 
 378 
 
Political Problems of Europe 
 
 They know that the taxes on cereals and 
 coffee provide ahnost half of the customs 
 receipts, and they feel that the Government 
 unjustly taxes the necessities of life in such 
 a way that the poor contribute to the de- 
 fence of the country practically as much 
 per man as do the well-to-do and the rich. 
 The new tariff, raising the duty on wheat 
 and rye from 33 to 55 marks, has not 
 softened their bitterness. If this new cus- 
 toms law comes fully into force, they be- 
 lieve they will lose as much in that single 
 blow as they gained by the passing of all 
 the old-age pension laws which they secured 
 after years of struggle. The Socialists' 
 complaint against the army is not directed 
 toward military service, but against the 
 system under which the army is officered 
 only by aristocrats, and remains the least 
 democratic of all German institutions, al- 
 though every German gives part of his life 
 to it. 
 
 Here is the programme of the German 
 Socialists as formulated by the more moder- 
 ate members of the party. They pronounce 
 for the maintenance of constitutional guar- 
 antees, and would give real form and sub- 
 stance to the constitutional rights of the 
 individual. They aim at the establishment 
 of a sound financial system, with a view to 
 free and unfettered economical development 
 379 
 
Business and Education 
 
 and the free interchange of commodities be- 
 tween nations. They desire the maintenance 
 of peace, a just system of parHamentary 
 representation and responsibiHty of the 
 Ministers to the Reichstag, a fair division 
 of the burdens of taxation by means of a 
 progressive income tax, the making of 
 proper commercial treaties, the administra- 
 tion of justice in criminal courts in a more 
 humane spirit, reduction in the period of 
 military service, and the limitation of mili- 
 tary expenditure. All this does not seem 
 very revolutionary in character, nor likely 
 to result in serious harm to the German 
 nation. 
 
 The Social Democracy has been wonder- 
 fully fortunate in the devotion and pure 
 motives of its leaders. One sometimes hears 
 the influence of August Bebel likened to 
 that of the Pope in the extent to which he 
 requires and wins the fidelity and obedience 
 of radical elements noted in other countries 
 for diversity of views and for restlessness 
 under restraint. This great man ought not 
 to be judged alone by his utterances in pub- 
 lic speeches. He has an oratorical passion 
 that sometimes goes far beyond his generally 
 cool judgment and moderate views. Herr 
 Bebel even in the opinion of the court is, I 
 believe, first a lover of Germany, and second 
 an implacable enemy of privilege and hum- 
 380 
 
Political Problems of Europe 
 
 bug. He has a vast talent for organization 
 and for the selection and phrasing of issues. 
 The millions of the poor behind him believe, 
 and doubtless, justly, that his courage and 
 discriminating devotion to them is without 
 bounds. 
 
 One thing especially stands out in regard 
 to the German Socialist party, and that is 
 its absolute unity. The discipline of the 
 party is magnificent. A most striking ex- 
 ample of this was the way in which Bern- 
 stein accepted the vote directed against him 
 by the majority of the general Congress of 
 Liibeck, and declared himself to be willing 
 to follow, under all circumstances, the wishes 
 of the majority of the party. Shortly after 
 this, Bernstein was chosen by the Socialists 
 as their candidate for election from a certain 
 district to the Reichstag, whereupon the en- 
 tire party in that district, including some of 
 those who had been most violently opposed 
 to him in the Congress, voted loyally for 
 him and secured his election. 
 
 There have only been two cases in twenty- 
 seven years where there has been such a 
 split in the Socialist party of any district 
 that they have put up two candidates for 
 the same election. 
 
 The decisions of the general congress of 
 the party are final, but the delegates have 
 been careful to limit these decisions chiefly 
 
 381 
 
Business and Education 
 
 to matters of principle. Local organiza- 
 tions in the different states have a great 
 deal of freedom in regard to deciding their 
 own questions. 
 
 During the last seven or eight years the 
 co-operative movement and the movement 
 for the formation of workmen's syndicates 
 have grown rapidly in Germany, and have 
 made great headway among the Socialists 
 themselves. It is the same active working 
 class that composes the Socialist party, the 
 Syndicates, and the Workmen's Co-operative 
 Societies, and these organizations will be of 
 the greatest help to the Socialists in their 
 future conflicts. 
 
 Although the Social Democrats form the 
 party of the workingmen, they do not select 
 workingmen as their representatives in the 
 Reichstag. More than half of the repre- 
 sentatives of that party are editors, and prac- 
 tically none are actually industrial workers. 
 
 There is a phase of human nature which 
 one encounters in Germany which has a 
 marked influence upon political development 
 there. It is " unfashionable " to be out of 
 accord with the Government policy. In Eng- 
 land a man may be a " Free Trader " or a 
 " Protectionist," a " Little Englander " or a 
 dreamer of imperialistic dreams, without 
 affecting his social status one way or an- 
 other. In France the whole business of 
 382 
 
Political Problems of Europe 
 
 politics is rather outside the highest social 
 Hfe and society concerns itself little with the 
 shades of a man's political opinion. But in 
 Germany all that is different. It is distinctly 
 unfashionable, in the view of the best so- 
 ciety, to hold opinions antagonistic to the 
 Government, and the weight of that fact is 
 tremendous in the shaping of men's opin- 
 ions. The young man of good family who 
 finds that with the adoption of radical politi- 
 cal ideas he meets with distinct coolness in 
 the homes of his friends, that his name is 
 dropped from dinner lists, and his social 
 acquaintances regard him with disfavor, 
 needs a great deal of courage to pursue that 
 line of thought. The power of social opin- 
 ion, as represented in aristocratic society, is 
 perhaps nowhere more potent in political 
 matters than in Berlin. 
 
 The tremendous increase in the vote of 
 the Social Democrats in Germany, while it 
 has failed to give to that party anything like 
 a proportionate representaton in the Reichs- 
 tag, has nevertheless had marked influence 
 on legislative action. On the part of all the 
 other parties there appears to be a whole- 
 some fear of the increasing power of the 
 Socialists, and they are ready to adopt, not 
 only any unfair means that they may devise 
 to compass the Socialists' defeat, but they are 
 quite ready to make concessions and attempt 
 
 383 
 
Business and Education 
 
 to placate the dissatisfied workman. No 
 other country has gone so far as Germany in 
 legislating in the interests of the working 
 class. The system of old-age pensions is the 
 most notable example of such legislation. 
 By Bismarck's own admission, the measure 
 was designed to take the wind out of the 
 sails of socialism. It was believed that the 
 interest which every workman would be 
 given in the Government through a prospec- 
 tive pension would furnish the motive for 
 securing the support of the working classes 
 for the Government side. The ill success of 
 the scheme from that standpoint is apparent. 
 Nevertheless, the direst foes of socialism, 
 after the great victory of the Social Demo- 
 crats in the last election, called for further 
 labor reform legislation as an antidote 
 against the spirit of socialism. 
 
 In the Reichstag there has been a flood of 
 enactments for the benefit of the laboring 
 classes, and the consideration of sugges- 
 tions along this line has occupied much of 
 the time of members. Labor legislation 
 has been popular with all parties. With the 
 Socialists, naturally, because it was labor 
 legislation which they particularly de- 
 manded, and with the other parties because 
 they thought by championing the cause of 
 labor they could overcome the disaffection 
 of workingmen in their ranks. In the 
 
 384 
 
Political Problems of Europe 
 
 recent budget debates, an astonishing 
 amount of time was given to petty questions 
 regarding the wages of workmen in certain 
 Government shops, their hours of work, and 
 the regulations controlhng their employ- 
 ment. 
 
 There is every reason to believe that legis- 
 lation favoring the working classes will con- 
 tinue to be enacted by the Reichstag. Soon 
 after the opening of the last session. Count 
 von Billow announced that the Government 
 hoped eventually to bring forward a scheme 
 of insurance for widows and orphans, at the 
 public expense, and it was also intimated 
 that some plan for insuring workingmen 
 against non-employment was under con- 
 sideration as a probability within the next 
 ten years. Thus, the State, as an antidote 
 to socialism, adopts measure after measure 
 of a distinctly socialistic character. 
 
 An idea of the activity in turning out 
 social reform laws can be gained by enumer- 
 ating some of the recent legislation of this 
 kind. In 1899 the system of old-age pen- 
 sions was revised and extended, and the 
 rate of pension payments was increased; 
 then the law on accident insurance was 
 amended and improved. In 1902 a law 
 defining the rights of seamen was thor- 
 oughly overhauled and brought into har- 
 mony with the spirit of modern labor reform 
 25 385 
 
Business and Education 
 
 views in Germany. A revision of the sick- 
 insurance law was made last year. Laws 
 regulating the relations between tradesmen 
 and their employees have been passed, mak- 
 ing specific provisions regarding the hours 
 of closing, number of hours for work, and 
 daily intermission for meals. A resolution 
 has been passed asking for a bill similarly to 
 protect the employees of lawyers, notaries, 
 and bailiffs. There have also been many 
 laws passed regulating the hours of employ- 
 ment in all manner of industries. 
 
 The German Government is pleased to 
 busy itself in passing many laws for the ben- 
 efit of the working population, but it never 
 fails to assume the position of having con- 
 ferred favors rather than of having granted 
 rights that intrinsically belonged to the class 
 which the legislation concerns. In such leg- 
 islation the Government always assumes the 
 position of the giver of benefits to inferior 
 beings. All this is apparent from the atti- 
 tude of the different ministers toward the 
 lower Government officials and employees, 
 who are domineered over in an astonishing 
 way. The right of organization by minor 
 Government employees is severely frowned 
 upon, and the harshest means are used to 
 prevent it. If the political footsteps of the 
 Government employee stray into the path 
 of Social Democracy, they are quick to en- 
 386 
 
Political Problems of Europe 
 
 counter serious obstacles. Count von Biilow 
 has enunciated the principle that no Govern- 
 ment employee can be a Socialist and every 
 under official adopts that view. 
 
 The Government looks with scant favor 
 on any sort of labor organization and stead- 
 fastly refuses to enact a law to permit labor 
 unions to affiliate with each other in joint 
 associations. That has long been one of the 
 points of Socialist demand, and it is a per- 
 mission strongly desired by the working 
 classes generally. Last year a great con- 
 gress of union socialistic workmen was held 
 at Frank fort-on-the-Main. That congress 
 represented 600,000 members, and it de- 
 clared the solidarity of those members with 
 the Socialists in respect to the demand for 
 permission to affiliate the labor unions. Va- 
 rious resolutions have been passed in the 
 Reichstag in favor of this extension of lib- 
 erty to the workmen, but these resolutions 
 have availed nothing. A delegation from 
 the Frankfort congress presented their views 
 in a petition to Count von Biilow, who 
 promised to " take it into benevolent con- 
 sideration." 
 
 There is a class of politicians in Ger- 
 many, members of the two conservative 
 parties and the National Labor party, who 
 are called in the political jargon of the day 
 the " Scharfmacher." They are men who 
 
 387 
 
Business and Education 
 
 want sharp, repressive measures against 
 labor agitators, strikers, and particularly 
 against Socialists. They are the stalwarts, 
 the men of firm hand and implicit belief 
 in relentless governmental authority. The 
 " Scharfmacher " defend the excessively vig- 
 orous discipline in the army, and they ap- 
 prove of the action of the courts in their 
 frequent punishment of lese-majesty. 
 
 The Socialist movement is thus seen to 
 be a live political force in Germany, Bel- 
 gium, France, Italy, and Austria, while in 
 England, although it holds no position in 
 national politics, it has accomplished more 
 in the direction of municipal activities than 
 has been done elsewhere. The general 
 tendency is toward moderation. The revo- 
 lutionary Socialists are everywhere in the 
 minority in their party, and the tendency is 
 further to reduce their influence. In general, 
 the whole Socialist movement is becoming 
 more opportunist, there is a growing dis- 
 position to be more practical, to endeavor 
 to obtain such concessions as they can, and 
 not hold out too strongly for the adoption 
 of an entire programme and a general over- 
 turning of the present social order. The 
 theoretical and academic socialism is giving 
 way in some measure to a socialism which 
 takes note of practical politics. 
 
 Beyond all question, many of the things 
 388 
 
Political Problems of Europe 
 
 which the Sociahsts are striving for are 
 economically sound, ethically just, and po- 
 litically desirable. They are fighting class 
 privilege and the traditions of caste; they 
 are struggling for a fairer franchise and 
 more truly representative government. They 
 are everywhere the party which upholds the 
 rights of the weak, and more earnestly 
 than any other party they seek to secure 
 to every citizen political equality and indi- 
 vidual liberty. 
 
 With such objects and aims, there is no 
 wonder that the movement grows. But all 
 that is not socialism; it is only liberalism 
 at its best. Unfortunately, the Socialist par- 
 ties are not made up altogether of moderate 
 and fair liberals. While it is true that some 
 of their demands will, when secured, mean 
 that Europe has taken steps toward distinctly 
 better government, those moderate and sen- 
 sible measures form only part of their pro- 
 grammes. Other phases of their demands 
 represent the spirit of unrest, of dissatisfac- 
 tion with existing conditions, of class envy, 
 of faith in those fallacies which lead men to 
 believe that they can substitute legislation for 
 thrift and industry, that a comfortable old 
 age is a right to be demanded wholly from 
 the State and without any contribution of 
 economy and present sacrifice from the 
 individual. 
 
 389 
 
Business and Education 
 
 The whole Socialist movement is largely 
 a class movement; it draws a line between 
 property and poverty, and is constantly 
 running the danger of listening to dema- 
 gogue leaders who appeal to envy and pas- 
 sion, and under a guise of justice and equal- 
 ity propose measures that are unjust and 
 inequitable. It is antagonistic to religion, 
 not only contesting the power of the Church 
 but openly avowing atheistic views. The 
 movement has in it the promise of good 
 and the danger of evil. The good is pretty 
 certain to be accomplished, for in the end 
 it will appeal to the fair-minded of all par- 
 ties; the evil may be great or small in pro- 
 portion to the fairness of the Socialists' op- 
 ponents. All European government is cer- 
 tain to make ultimate progress toward an 
 equality of rights for all citizens. If the 
 conservatives, the agrarians, and the cler- 
 icals raise in the way of that progress ob- 
 stacles which will not give way, they may 
 call into play some of the high explosives 
 that are to be found in the programmes of 
 the revolutionary branches of the Socialist 
 parties. On the whole, however, I doubt if 
 the Socialist movement is likely to do much 
 permanent political harm to Europe, while 
 it already has done and will continue to do 
 considerable good. 
 
 It has seemed worth while going some- 
 
 390 
 
Political Problems of Europe 
 
 what fully into the Socialist movement, be- 
 cause the Socialist parties of Europe present 
 about the only political tendencies toward 
 change which there are there. They are 
 opposed by parties of reaction or parties 
 anxious to maintain the status quo. The 
 success of the Socialist parties will in the 
 main, for the present at least, mean the suc- 
 cess of liberalism. Such success will not be 
 likely to affect greatly commercial relations 
 between Europe and America. Success in 
 some of their endeavors will undoubtedly 
 tend to raise the cost of production in Eu- 
 rope, but such tendency would probably be 
 counteracted by the greater industrial effi- 
 ciency which improved social conditions 
 would bring. 
 
 One of the most striking differences be- 
 tween Europe and America is the persist- 
 ence of racial type there and here the tend- 
 ency to amalgamate all races into the 
 American. Time seems to bring only in- 
 creased bitterness to racial antagonisms in 
 Europe, while with us the third generation, 
 at the outside, is completely merged into 
 the American type. I never have been able 
 to understand just what it is that keeps the 
 rancor of races at such a virulent pitch 
 among near neighbors in Europe, when 
 those same races will here renounce lan- 
 guage, flag, and racial aspirations, and joy- 
 
 391 
 
Business and Education 
 
 fully and completely merge into the Ameri- 
 can — all patriotic, all loyal to the Govern- 
 ment, all in a generation more anxious to 
 cover every trace of foreign characteristics 
 with the mantle of sovereign American citi- 
 zenship than they are to perpetuate a single 
 one of those racial prejudices which for gen- 
 erations made enemies of their fathers. 
 
 In the case of races that are living side 
 by side, that are occupied with the same 
 general problems of life, and that would 
 enjoy the same measure of benefit or endure 
 the same degree of hardship as legislation is 
 economically good or bad, one would sup- 
 pose that time would soften the asperities 
 of racial dislikes. In Europe it is not so. 
 There are some nine races in Austria, for 
 example, and the most beneficent piece of 
 legislation that could be devised for the ben- 
 efit of the whole country would be coldly 
 received compared with the delight with 
 which eight of these races might for a mo- 
 ment unite to bring discomfort to the ninth. 
 They never unite for the common good — 
 it is only that they may at the moment feel 
 a common hatred for some third race strong 
 enough to bring them together in an attempt 
 to harass the common enemy. 
 
 The economic importance of these racial 
 antagonisms is enormous. With our homo- 
 geneous population it is hard for us to un- 
 
 392 
 
Political Problems of Europe 
 
 derstand what a drag and a block an effi- 
 cient government must follow when senti- 
 ment instead of sense must be appealed to 
 in the legislative chambers. The govern- 
 ment machinery of Hungary was practi- 
 cally paralyzed for a year because there was 
 a deadlock over the question whether the 
 army should march to the command of 
 " Vorwarts, marsch ! " or " Elore, indulj ! " 
 whether the word of command should be in 
 the Magyar tongue or in the German. 
 
 The language question in itself is of enor- 
 mous importance, and there seems no tend- 
 ency toward it becoming less so. The most 
 earnest efforts are made to continue separate 
 schools for all the varied tongues that con- 
 fuse and make difficult the life of Europe. 
 The persistence of each type of language is 
 in itself of great economic moment, for it 
 is a most difficult barrier against that free 
 commercial intercourse — intercourse where 
 there is mutual understanding and confidenr^ 
 — which does so much to permit the rapid 
 expansion of trade. A Europe with one 
 language and without the barrier of internal 
 tariff walls, a Europe which offered such a 
 field for the free and natural expansion of 
 commerce as does the United States, would 
 be a Europe whose economic force was so 
 increased that no one could say how vast the 
 gain would be. 
 
 393 
 
 OF THE 
 
 UNIVERSITY 
 
Business and Education 
 
 The struggle between the two races in 
 Bohemia — that is, between the Czechs and 
 the Germans — is probably the most acute 
 and typical example of the racial difficulties 
 throughout Austria. There are in Bohemia 
 9,3(X),ooo inhabitants, who are divided into 
 5,800,000 Czechs, 3,300,000 Germans, and 
 200,000 Poles. According to the budget of 
 1 90 1, German Bohemia pays 250,542,000 
 crowns for taxes to the State; that is, 66 
 per cent of the total for Bohemia; but the 
 State expends only 32,992,000 crowns in the 
 German districts, while it expends 104,945,- 
 000 crowns in the Czech part of the country, 
 which pays only 128,494,000 crowns of 
 taxes. The figures are so juggled, both by 
 the Germans and the Czechs, that it is almost 
 impossible to get a fair estimate of the real 
 number of each in the country, of the amount 
 they pay in taxes, or of what they receive. 
 
 The Czechs say that the language struggle 
 in Bohemia was provoked by the Germans, 
 who placed over their shops and restaurants 
 inscriptions such as " Forbidden to talk 
 Czech " or " Entrance is Forbidden to Beg- 
 gars, Dogs, and Czechs " ; whereas the Ger- 
 mans say that although Prague is the capital 
 of a bilingual country, the town councils do 
 not allow German names to be used in the 
 streets ; and an amusing feature of the strug- 
 gle is that the Slav Congress held in 1898 at 
 
 394 
 
Political Problems of Europe 
 
 Prague was obliged to use German as the 
 official language of debate, as it was the 
 only tongue which all the delegates under- 
 stood. 
 
 Throughout Austria the struggle between 
 Czechs and Germans is particularly keen 
 over the schools. Two rival school associ- 
 ations, one German and the other Czech, use 
 every means in their power, the one to Ger- 
 manize the Czech children, and the other to 
 teach them the cult of the Czech language 
 and nationality. 
 
 Austria-Hungary and the Balkan coun- 
 tries we recognize as the home of racial an- 
 tagonisms. Such a great percentage of the 
 political life there is absorbed in these con- 
 troversies that commercial and social inter- 
 ests have but scant recognition. But we are 
 not so apt to remember that in Germany one 
 of the fundamental problems of government, 
 and one of the most perplexing and impor- 
 tant, has to do with the discontent of the 
 fragments of the nationalities which are still 
 unreconciled to the Imperial Government. 
 These are the people of Alsace-Lorraine, the 
 Danes of North Schleswig, the Hanoverians, 
 and the Poles. In the conquered French 
 provinces there has been some real head- 
 way in breaking down the old antipathies, 
 but nowhere else is there much progress. 
 The discontent along the Danish border is 
 
 395 
 
Business and Education 
 
 gaining in importance, thriving on the un- 
 wise poHcy of the Prussian Government in 
 guarding too zealously against all petty 
 demonstrations of Danish sympathy. The 
 Government acted with great harshness a 
 few years ago in expelling Danish house 
 servants, farm laborers, and other humble 
 folk because they sang Danish songs, and in 
 other simple ways proclaimed their Danish 
 sentiments, and only recently the Minister 
 of the Interior has implied threats that such 
 expulsions may be resumed. The Hanove- 
 rians have never been reconciled to the union 
 of the old kingdom of Hanover with Prus- 
 sia, and the Guelph party still elects half a 
 dozen members of the Reichstag. In the 
 last session of the Diet, Herr von Hammer- 
 stein, the Prussian Minister of the Interior, 
 declared that the Guelphs, next to the So- 
 cialists, were the element most dangerous to 
 the existence of the State. 
 
 All these racial discontents are nothing, 
 however, compared with the race problem 
 in the Polish provinces. In the province of 
 Posen, some parts of East Prussia, and in 
 the mining districts of Selesia, the Govern- 
 ment meets one of the most serious of all 
 its difficulties, and one that seems to become 
 more serious with time. The Poles have 
 lately been growing more radical, and in- 
 stead of working in political harmony with 
 
 396 
 
Political Problems of Europe 
 
 the Clerical party, as they once did, they 
 have drawn political lines strictly in ac- 
 cordance with their racial aims, and have 
 even put candidates in the field against their 
 old allies, the Clericals, and that with occa- 
 sional success. Even the Polish Socialists, 
 unlike the Socialists elsewhere in Germany, 
 show a strong disposition to pursue paths 
 of their own, rather than act with the Social- 
 Democratic organization. 
 
 The pacification of the Poles has called 
 forth enormous effort from the Prussian 
 Government, and astonishing expenditures, 
 but all, apparently, to little purpose. The 
 scheme in which the Prussian Government 
 puts greatest faith, and for which it has made 
 unstinted appropriations, has been the pur- 
 chase of large estates in the Polish prov- 
 inces for the purpose of dividing them into 
 small holdings and settling Germans upon 
 them, with the hope of thus Germanizing 
 the country. Bismarck started the policy 
 in 1866 with a fund of 100,000,000 marks; 
 in 1898 that was increased to 200,000,000 
 marks, and in 1902, the appropriation being 
 nearly exhausted, a further vote of 150,000,- 
 000 marks was made, with an additional 
 grant of 100,000,000 marks for the purpose 
 of acquiring Polish estates to be turned into 
 state domains and forests. There has thus 
 been an authorized expenditure of $112,- 
 
 397 
 
Business and Education 
 
 000,000, with results that leave the popula- 
 tion to-day as antagonistic to the Govern- 
 ment as it was when Bismarck conceived the 
 scheme. 
 
 The Poles are by no means poor, and 
 they met this policy of " pacification by 
 Reichsmarks " with a private organization. 
 A great Landbank, provided with ample 
 capital, has been established with the pur- 
 pose of undoing the work of the Govern- 
 ment. The Landbank buys land from the 
 thrifty German settlers and returns the na- 
 tive Poles to till it. The Settlement Com- 
 mission, which has charge of the Govern- 
 ment's scheme for settling Germans on these 
 Polish lands, meets with the greatest diffi- 
 culty in buying land from Poles, but on the 
 other hand, it is forced to buy out every 
 German holder who wishes to sell, else his 
 land will again fall into Polish hands. The 
 commission bought more than 100,000 acres 
 of land last year, and only about 7,000 acres 
 of that was acquired from Polish owners, 
 while well over 90,000 acres were taken 
 over at high prices from Germans who 
 wanted to leave the country or wished to 
 abandon the farm for the town. 
 
 The Government has settled about 50,- 
 
 000 Germans upon these Polish lands since 
 
 the policy was inaugurated. This artificial 
 
 competition for land which has been going 
 
 398 
 
Political Problems of Europe 
 
 on between the Government Settlement Com- 
 mission and the Polish Landbanks has re- 
 sulted in absurd advances in prices. For 
 some years after the Settlement Commis- 
 sion began its operation, land was bought 
 at an average of $54 an acre. By 1902 the 
 price had risen to $Sy per acre, and last 
 year to $111. 
 
 The two races have come to a deadlock 
 in their relations with each other. Every 
 year there is a great Polish debate in the 
 Reichstag, but it only serves to bring out in 
 bold relief the irreconcilable antagonism be- 
 tween German and Pole. 
 
 The significance of the language question 
 is well understood by the European mon- 
 archs. In the Park Club in Budapest, the 
 club of the Magyar aristocrats, which cannot 
 be matched for artistic beauty of furnishing 
 by any of the marble halls of our gaudy 
 American clubs, there hang two portraits, 
 and only two. One, of course, is that of the 
 Emperor Franz Josef; the other is William 
 11. 
 
 I asked how it happened that the German 
 Emperor was so honored. 
 
 " He has had his second son taught the 
 Magyar language," answered my host. 
 " That boy may sometime wear the crown of 
 the Magyar kings." 
 
 And there might be stranger things. 
 
 399 
 
Business and Education 
 
 Russia has her full share of racial diffi- 
 culties, and in her conflict with Poles, Finns, 
 and Jews has been led into injustice and bar- 
 barity of the sort that makes two enemies 
 of the Government where there was one 
 before. 
 
 Comparisons of the problems which be- 
 set the European governments with the diffi- 
 culties that are met with in our own institu- 
 tions cannot help but make us better satisfied 
 with American citizenship. 
 
 We find there implacable racial differ- 
 ences, varied degrees of political develop- 
 ment which it is vainly sought to unite into 
 harmonious empires, relics of feudal au- 
 thority, hereditary distinctions, and class 
 prerogative quite out of line with a modern 
 conception of representative government. 
 There are diametrically opposed interests 
 of agriculture and industry which can never 
 be reconciled. We see a drawing of class 
 lines in political life, and appeals to the 
 passions of envy and greed, and to the prej- 
 udices of caste and ignorance. It is start- 
 ling to note what enormous factors in the 
 situation are the personalities of half a 
 dozen hereditary sovereigns, and what sig- 
 nificance and possibilities lie in the mere 
 chance readjustment of a crown. We see 
 the growing strength of the parties of pro- 
 test, the vitality of the Socialist movement, 
 400 
 
Political Problems of Europe 
 
 the difficulties of government finance, the 
 weight of taxes, the load of the military 
 and naval establishments, the menace of war, 
 the ever-living danger in close national 
 neighbors who misunderstand motives and 
 lack sympathy for the trials and ambitions 
 of the others — and then, when we turn to 
 our own political situation, we see a nation 
 greater in numbers and vastly greater in 
 resources than any of the nations of Europe, 
 with a single language, and with but a single 
 problem of race, and with a common pa- 
 triotism that every one knows is far above 
 party differences. When the political con- 
 ditions of Europe and America are so com- 
 pared, the study can but make us thankful 
 that we have such a sound foundation upon 
 which to grow, and so few complications to 
 interfere with our right development. 
 
 IV. Government Education 
 
 In determining the relative efficiency of na- 
 tions competing in the commercial and in- 
 dustrial fields, there are several factors of 
 prime importance. The nature of the Gov- 
 ernment, the character of the people, the 
 natural resources of the country, each have 
 distinct influence. All government grows 
 better, so there is a tendency toward equal- 
 ization of advantages in this respect. Cheap- 
 26 401 
 
Business and Education 
 
 ness of transportation tends to equalize the 
 disadvantages of a lack of raw material. 
 Hereditary, racial, and climatic influences 
 are each important in determining the char- 
 acter of the people, and so far as char- 
 acter is influenced by these factors it changes 
 slowly. The quickening influence that may 
 bring rapid change in the national character- 
 istics of a whole people, and that may be- 
 come of immense importance to their indus- 
 trial efficiency, is education. 
 
 In any study of the comparative indus- 
 trial efficiency of nations some comprehen- 
 sion of the scope and tendency of their edu- 
 cational system is of the greatest impor- 
 tance. As industry becomes more and more 
 highly organized and commerce more wide- 
 spread and complex the influence of educa- 
 tion is a factor of rapidly increasing 
 importance. 
 
 The President of one of the great railway 
 systems of the United States once expressed 
 that fact to me in this way : 
 
 " As railway business in the United States 
 is developing," he said, " and as the organi- 
 zation of the business of transportation be- 
 comes more complete, there is working a 
 distinct change in the character of the men 
 required for the successful operation of our 
 properties. While the railroad business was 
 in something of a pioneer stage, men were 
 402 
 
Political Problems of Europe 
 
 required who had native force, who would 
 quickly and successfully meet every form of 
 obstacle. In the West particularly, we de- 
 veloped a corps of railway employees who 
 for resourcefulness, vigor, and strength were 
 probably never equalled in any other sort of 
 organization. The requisite then was to get 
 the thing done, to get the train through, to 
 repair the washout, to get the wrecked en- 
 gine back on the track, to move the traffic. 
 It did not matter so much how it was done. 
 The point was to get it done, and methods 
 were evolved which were never heard of in 
 the most advanced schools of technology. 
 For a good many years not much attention 
 was paid to the refinements of traffic statis- 
 tics. We were not interested in the particu- 
 lar fraction of a mill which it cost to move 
 a ton of freight a mile. We were just in- 
 terested in moving it, and the most resource- 
 ful men, the men who would best overcome 
 unexpected difficulties, and do it quickly with 
 the very limited resources which were at 
 command, were the men who were most suc- 
 cessful in the railway field. 
 
 " All that is changing, and in many sec- 
 tions of the country has already completely 
 changed. In those days that are past a 
 technical education counted for little. All 
 the knowledge that a man ever got out of a 
 technical school would not have helped him 
 403 
 
Business and Education 
 
 much in many of the emergencies which 
 were the daily Hfe of railroad managers. 
 Resourcefulness, mother-wit, determination, 
 and strength were what was wanted. But 
 the men who possessed these characteristics, 
 and who made the greatest success in rail- 
 road business under those pioneer condi- 
 tions, began later to find that there were men 
 growing up in the organization of the older 
 roads who could design a locomotive that 
 would pull a longer train than any they could 
 move, and do it with less coal; men who 
 could build stronger bridges for less money, 
 because they could calculate to a mathe- 
 matical nicety strain and strength of ma- 
 terial ; men who, though they might be lack- 
 ing in those forceful characteristics which 
 had brought success on the new roads, were 
 able, with their thorough technical knowl- 
 edge, to reduce cost, to effect economies, to 
 perfect systematic organization, and to con- 
 tribute toward the creation of a railway sys- 
 tem so smoothly running and so well organ- 
 ized that the very emergencies which the 
 pioneer railroad men had made their repu- 
 tations in meeting will never arise. We still 
 want resourcefulness, vigor, and force, but 
 those qualities must now be coupled with 
 technical knowledge. Other things being 
 equal, the railroad with the best educated 
 staff will be the most successfully operated." 
 404 
 
Political Problems of Europe 
 
 The view of this railroad president in his 
 own field, I believe, illustrates what is much 
 the same condition in almost every line of 
 industry. American resourcefulness has 
 been the wonder of the world, and has ac- 
 complished, surrounded as it has been with 
 unparalleled richness of raw material, an 
 unequalled industrial development. But we 
 are reaching a point, and the older nations 
 of the world have long before us reached 
 that point, where it is of great importance 
 that technical training and scientific educa- 
 tion shall be brought to bear on every phase 
 of industrial organization. I believe that 
 the relative efficiency of nations was never 
 before so largely influenced by the character 
 of their educational facilities as is the case 
 to-day. The tendency in our whole indus- 
 trial and commercial life is rapidly giving 
 added importance to education. 
 
 It is, I know, a somewhat common view 
 that the great industrial organizations which 
 are the order of the day tend to reduce the 
 workers to little more than automatons. 
 Some people believe that education is be- 
 coming of less importance, because they 
 see that there is a tendency toward subdi- 
 vision of labor in these great organizations, 
 resulting, as it does, in so arranging the 
 work that men do their appointed task with 
 the smallest need for thinking, and with 
 
 405 
 
Business and Education 
 
 less requirement in the way of mental train- 
 ing than was the case before those indus- 
 tries were so highly specialized and the work 
 so subdivided. That view is correct as ap- 
 plied to a great mass of workers. The 
 automatic machine needs little more than 
 an automatic mind to run it. Our great 
 locomotive shops, for instance, have so sub- 
 divided the work, and have produced so 
 many special and almost automatic machines 
 for forming each part, that they can take men 
 off the streets with no knowledge of mechan- 
 ics, and have them thoroughly trained in a 
 fortnight to do some particular piece of work 
 which would, under the old methods of shop 
 practice, have required a highly skilled and 
 experienced machinist to perform. 
 
 These industrial combinations and con- 
 solidations which may bring almost an en- 
 tire industry under a single management, 
 create a demand for educated labor, how- 
 ever, which is keener than ever could have 
 been known under a system less highly 
 specialized. 
 
 Take, for example, an industry in which 
 there were, say, one hundred individual or- 
 ganizations, each one producing an average 
 product costing $100,000. An industrial 
 chemist might, with his technical knowledge, 
 we will say, effect a saving of one per cent in 
 the cost of this product. Suppose that were 
 406 
 
Political Problems of Europe 
 
 made clear to any individual employer. He 
 would say that, although he might effect a 
 saving of $i,ooo in the cost of his year's out- 
 put, the salary of the chemist would be 
 $5,000. He could not afford the economy. 
 
 With these industries all combined the 
 chemist's $5,000 salary could be paid, and 
 from the one per cent saving in the cost of 
 the total product a profit of $95,000 left as 
 a result of the economy effected. 
 
 As combinations are made in the indus- 
 trial field, the possibility of employing highly 
 trained technical experts rapidly increases, 
 and in that possibility alone lies frequently 
 one of the greatest incentives toward com- 
 binations. The margin of profits some- 
 times grows very narrow under the stress of 
 international competition. Where there is 
 sharp international competition the pros- 
 perity of a whole industry might easily de- 
 pend on whether or not each one of its proc- 
 esses were conducted according to the very 
 best practice the ablest technical experts can 
 work out. 
 
 Technical training is therefore becoming 
 of vastly more importance than ever before, 
 and those nations which are offering the best 
 technical training to their youths are making 
 the most rapid industrial progress. A study 
 of the international field brings that fact out 
 with perfect clearness. Where education is 
 407 
 
Business and Education 
 
 lacking industry is lagging ; where education 
 is stereotyped industry is without initiative. 
 The necessity for thorough education and 
 the best technical training has become al- 
 most as great in commercial affairs as it has 
 in the industrial field. The methods of com- 
 merce to-day cannot be as easily compared 
 with the methods of a generation ago as can 
 the processes of industry now and at that 
 time, but I believe that the changes in the 
 methods of commerce have, in many cases, 
 been as radical and the improvement as great 
 as in the field of industry. Two generations 
 ago the trained engineer was looked on with 
 disfavor by the practical industrial manager. 
 The man who grew up in the business was 
 thought far superior to the man who got his 
 knowledge from books. The necessity for a 
 technical engineering training is now uni- 
 versally recognized, and no important indus- 
 trial operation would be undertaken without 
 the aid of technical experts. I believe the 
 same change is coming in commercial life. 
 The commercial high schools of Germany 
 and the start in higher commercial education 
 which we are making in this country are the 
 forerunners of great technical schools of 
 commerce. These schools will turn out men 
 with as superior qualifications for commer- 
 cial life as have the graduates of the great 
 technical institutions in their special field, 
 408 
 
Political Problems of Europe 
 
 I believe the great masters of commerce will 
 come to recognize the necessity for and the 
 practical advantage of such commercial 
 training, just as the captains of industry 
 have long ago recognized the value of tech- 
 nical training for engineers. 
 
 The requirements for the successful ad- 
 ministration of great commercial enterprises 
 are greater than ever before. The scale upon 
 which these enterprises are organized war- 
 rants the payment of high salaries to men 
 with the best training, and I believe that 
 those nations that are providing schools best 
 adapted to the thorough training of recruits 
 for the ranks of commerce will make the 
 greatest progress in developing the commer- 
 cial side of the national life. 
 
 Education in its relation to national de- 
 velopment is viewed from two fundamentally 
 different standpoints. In America we have 
 in large measure regarded the universal 
 education of citizens as necessary to the 
 proper political development of the repub- 
 lic. The idea underlying our whole educa- 
 tional system has been that the sovereign 
 citizen must be given such training as will 
 enable him to form his political opinions 
 with intelligence and to vote with under- 
 standing. The effect of education upon 
 commerce and industry has been quite a 
 secondary consideration. In the main the 
 409 
 
Business and Education 
 
 work of the schools has been directed toward 
 turning out inteUigent citizens, and but com- 
 paratively little attention has been given to 
 so shaping education that it will make of 
 each student the most effective industrial 
 unit that it is possible to produce. 
 
 In Europe education has been viewed 
 from a different standpoint. The theory of 
 education in Germany has been that it should 
 be the work of the Government schools to 
 turn out the most efficient economic units, 
 while the tasks of the captains of industry 
 were to organize these units into the most 
 effective economic corps possible. The re- 
 sult has been the most thoroughly trained 
 and organized system of industry in the 
 world, with the possible exception of our 
 own, and, in many respects the German sys- 
 tem presents points of superiority even in 
 comparison with our own industrial system. 
 
 The German Government years ago de- 
 liberately set to work to organize a system of 
 education which should be a means of na- 
 tional development. The idea was not that 
 education was needed to make intelligent 
 citizens, but that it was needed to make 
 effective industrial units. Intelligent citizen- 
 ship has really had small place in the cen- 
 tralized personal government which the 
 Kaiser has developed, but in no other nation 
 has there been such intelligent administra- 
 410 
 
Political Problems of Europe 
 
 tion of the system of education from the 
 point of view of training men to work 
 efficiently. 
 
 In France there has been quite another 
 fundamental idea underlying the whole de- 
 velopment of education, and impressing it- 
 self strongly on the national character. The 
 school system of France seems to have been 
 designed neither to make intelligent citizens 
 nor to turn out effective economic units. It 
 seems rather to have had for its object the 
 preparation of persons to pass certain Gov- 
 ernment examinations. A double incentive 
 has existed of sufficient potency to shape al- 
 most every mind of France in this hard and 
 fast mould of stereotyped education. This 
 twofold incentive has been on the one hand 
 the securing of a reduction of the forced 
 military service, and on the other the open- 
 ing of the way to a civil-service appointment. 
 The student who succeeds in passing the 
 Government civil service examination may 
 reduce his military service from three years 
 to one. There is absolute democracy in the 
 French army, neither birth nor wealth offer- 
 ing any escape from the military service. 
 The one way leading to a reduction in the 
 length of that service is through a Govern- 
 ment examination. It is easy to see, there- 
 fore, how universal must be, in every walk of 
 life, the incentive to mould the minds of 
 411 
 
Business and Education 
 
 children along only these stereotyped lines 
 which the Government examiner recognizes 
 as an education. 
 
 It is through this same door that entry 
 must be made to a civil service position, and 
 there is nothing short of a mania in France 
 for, drawing a public salary. The result has 
 been the most uniform and stereotyped sys- 
 tem of training that youths were ever sub- 
 jected to. There are nearly 400,000 paid 
 officials under the French Government. For 
 every voter one person holds some sort of a 
 public office. The French characteristic of 
 thrift has resulted in giving a vast num- 
 ber of people small incomes from their in- 
 vestments. Economy is little short of a 
 national disease in France. This army of 
 small investors has incomes insufficient to 
 support them in idleness, but large enough 
 so that, with only a small addition in the 
 way of a salary, the financial problem of life 
 is solved. That is the reason why there is 
 such a universal desire among the middle 
 class for Government employment, and why 
 the incentive to obtain an education ena- 
 bling one to pass a Government examination 
 is so overpowering. 
 
 There were recently vacancies for four 
 
 clerks in the office of the prefect of the 
 
 Seine. For these four positions there were 
 
 registered 4398 applicants. Washington at 
 
 412 
 
Political Problems of Europe 
 
 its worst surely has nothing comparable to 
 that. Every one of these 4000 applicants, 
 however, could have passed an examination 
 along certain stereotyped lines which would 
 have delighted the hearts of our civil service 
 reformers. 
 
 The result of the French system of educa- 
 tion has been to produce an extraordinary 
 uniformity of mental type and capacity, es- 
 pecially among the middle classes. The 
 French system of education is intensely na- 
 tional. Its plan is exactly the opposite from 
 our own school system. With us the local 
 community controls primary schools. In 
 France the local community has no voice in 
 the matter. The French system is the most 
 centralized, the most strictly regulated, the 
 most autocratic, and the farthest removed 
 from democratic ideas of any other school 
 system in existence. The exact uniformity 
 of the schools is almost unbelievable. The 
 Minister of Instruction, sitting in his office 
 in Paris, can tell at any moment just what 
 fable of Fontaine each child of a certain age 
 throughout the whole of France is reciting. 
 Teachers are not allowed any latitude at all. 
 The result is to leave both teachers and 
 scholars almost completely lacking in peda- 
 gogic originality. 
 
 The whole national life is being affected 
 by this uniform system of education. The 
 
 413 
 
Business and Education 
 
 corps of teachers has all been made In the 
 same mould. All have passed through an 
 exactly similar training. All have passed 
 successfully exactly the same Government 
 examinations. The Government tries to 
 break in on this deadly uniformity by mak- 
 ing a point of sending teachers to other than 
 their native districts. Northern teachers are 
 sent to southern schools and southern teach- 
 ers to northern schools. By this plan the 
 Government possibly does something to fos- 
 ter a spirit of unity throughout the nation, 
 but the uniform mould into which every 
 mind is forced remains the same. 
 
 There is no tendency in France toward 
 making the educational system less uniform. 
 The victory of the Government over the 
 religious orders and the consequent closing 
 of the clerical schools will have the effect of 
 making the system more stereotyped than 
 ever. There are French educators who de- 
 clare that the whole school system of France 
 has been shaped into a huge civil service 
 employment agency. They admit that true 
 education has been forgotten in the effort to 
 coach children to pass certain fixed examin- 
 ation forms. 
 
 There has seemed to be no room in France 
 for the growth of secondary schools or col- 
 leges — schools of which it is a man's pride 
 to be an alumnus, and where a fellowship 
 414 
 
Political Problems of Europe 
 
 develops that is an important influence all 
 through life. There are no such schools in 
 France as Rugby and Eton. It is never re- 
 garded of special importance where a man 
 was educated, and college friendships play 
 a smaller part in after-life than is the case 
 with us or in England and Germany. The 
 university life in France is gathered almost 
 wholly in a single institution in Paris, in- 
 stead of being scattered through all the 
 provinces, as in Germany. The so-called 
 French colleges are not comparable in organ- 
 ization with the German gymnasiums of the 
 various grades. The technical schools, on 
 the other hand, have been much more dif- 
 ferentiated in France than in Germany, and 
 instead of gathering civil engineering, elec- 
 trical engineering, and mining engineering 
 into a single great technical school, these 
 subjects are taught in separate schools. The 
 trade schools are strong in the lines of ar- 
 tistic decoration. In some respects they are 
 the best of the whole French educational sys- 
 tem. They are in the main not a part of the 
 national system, but are under the control of 
 individuals. 
 
 The French school-boy is taught facts. 
 Facts are ground into him with cruel dili- 
 gence. The American boy would be stag- 
 gered by the tasks that are set him. The 
 hours that he spends in memorizing make 
 
 415 
 
Business and Education 
 
 the French school system resemble the 
 Chinese. Few school-boys in other coun- 
 tries have so much work to do. None are 
 so systematically and persistently crammed 
 with knowledge. But the French school-boy 
 is not taught to think. The result of such 
 a system of education is revealed in the 
 national life. France to-day of all great 
 nations is characteristically without initi- 
 ative. She is not maintaining her place in 
 the first rank of nations. So far as the 
 great middle class is concerned, France is 
 decadent. It is true that there are painters, 
 poets, and authors who are geniuses that any 
 nation would have been proud of in any 
 period, but they are the exceptions. Their 
 minds have escaped the deadly process of 
 stereotyped French education. The rule 
 has been the making of a nation with minds 
 all formed in one mould, a nation which is 
 stationary in its commerce, its industry, and 
 its business development, and which is push- 
 ing on to no new accomplishments. 
 
 The French have wonderful ability for 
 certain skilful and artistic forms of work. 
 Their industries are less open than those of 
 any other country to the competition of auto- 
 matic machines or of work done en masse. 
 No tariff walls are effective barriers against 
 superior taste and art. That fact alone is 
 what saves the industries of France. She 
 416 
 
Political Problems of Europe 
 
 has neither the commercial vigor and initi- 
 ative nor the abiHty for commercial and in- 
 dustrial organization to enable her to com- 
 pete with Germany or the United States in 
 any of the great fields of international 
 industrial competition. There is none of the 
 modern spirit of industrialism which mani- 
 fests itself in that superior organization and 
 combination which are the keynotes of 
 industrial life in Germany and the United 
 States. There are lines of artistic accom- 
 plishment in which she stands unchallenged, 
 but in industrial organization she has not 
 taken the first steps. Perhaps all this may 
 offer ground for congratulation rather than 
 regret, but it is, at any rate, an obvious fact, 
 and one that can in no small measure be 
 traced to the French system of education and 
 its effect in shaping the national character. 
 
 In England as well as in France the sys- 
 tem of education has produced marked effect 
 upon the national character. France has 
 just been through a great national struggle 
 to free herself from the clerical schools. 
 Education in England is still in the hands of 
 the clericals. It is not in the control of the 
 teaching orders of the Catholic Church, it 
 is true, but it is practically under a control 
 exercised by the Church of England. It is 
 possible that such a control of education is 
 beneficial to the morals of the English youth. 
 27 417 
 
Business and Education 
 
 There can be nothing more certain, however, 
 than that it has proved a stumbhng block in 
 the development of anything like a modern 
 system of education. The Education Bill 
 passed two years ago makes it obligatory 
 that at least half of the teachers in the public 
 schools must in the future be members of the 
 Church of England. The result of the con- 
 trol which the Church has always exercised 
 in greater or less degree has not been one 
 which would lead educators to believe that 
 a school system can develop along the best 
 lines when under the control of any single 
 religious organization. There is nothing in 
 the development of the English school sys- 
 tem up to the present that leads one to be- 
 lieve that the Church organization is well 
 adapted to direct a modern system of pri- 
 mary education. 
 
 In America we find a schqol system de- 
 signed to make intelligent citizens; in Ger- 
 many, a system intended to produce the 
 most efficient economic units possible; in 
 France a system designed uniformly to 
 mould all minds to pass through the door of 
 a Government examination, the only door 
 which opens to a reduction of the forced 
 military service, and to possible civil em- 
 ployment. In England none of these stand- 
 ards seem to have been set up. While the 
 corner-stone on which the great German 
 418 
 
Political Frohlems of Europe 
 
 Empire has been built has been an educa- 
 tional system designed and recognized as a 
 means of national development, the states- 
 men of Great Britain have never given 
 thought to education from that point of 
 view. No British statesman seems ever to 
 have conceived that a perfect system of edu- 
 cation would redound to national greatness. 
 Colonial expansion, military efficiency, naval 
 strength, and the power of accumulated 
 wealth have each in their turn appealed to 
 Englishmen as foundation stones upon which 
 to build a greater Britain, but the thorough 
 education of the people has not been recog- 
 nized as one of the most substantial of foun- 
 dation stones. The upbuilding of a general 
 system of education as a means for national 
 development has never received the serious 
 study of a representative body of English- 
 men. 
 
 The debates upon the Educational Bill two 
 years ago, dragging through months of par- 
 liamentary consideration, never once rose to 
 an intelligent and comprehensive discussion 
 of Great Britain's needs in the way of a 
 better school system. To my mind there is 
 the most obvious evidence of that need. 
 Parliament, however, spent its time debating 
 over just what measure of control the 
 Church of England should have, and what 
 small voice the dissenters would be permitted 
 419 
 
Business and Education 
 
 to raise. There were days of discussion of 
 these points without the sHghtest recogni- 
 tion of how great is England's need for a 
 thoroughly efficient modern school system. 
 
 There are a great many very excellent 
 people in England who do not believe in 
 universal education. I have talked with 
 university men who hold the carefully con- 
 sidered opinion that universal education, ex- 
 cept of a most elementary sort, is not de- 
 sirable for the nation. They believe that a 
 serving class is necessary, and that education 
 only tends to make such a class dissatisfied 
 with its lot. Recognizing that there is a 
 great amount of unskilled work to be done, 
 they think that education does not help a 
 man to do it, but may tend, rather, to make 
 him dissatisfied to work on as his fathers 
 have worked. Such an opinion, I believe, 
 is pretty widely held in England, and any 
 scheme looking toward carrying universal 
 education beyond the most primary limits 
 would be regarded by a large number of 
 admirable people with disfavor. 
 
 The British Government has no disposi- 
 tion to load the national budget with any 
 further increases on account of education. 
 Since the South African War the Chancellor 
 of the Exchequer has found many serious 
 problems in the budget. It was found pos- 
 sible to raise a billion two hundred million 
 420 
 
Political Problems of Europe 
 
 dollars for the prosecution of the Boer War, 
 but English statesmen do not feel that the 
 Government can afford to recognize any new 
 claims on the budget for the support of 
 education. 
 
 That was well illustrated recently when 
 the representatives of all the universities in 
 England held a conference with the Prime 
 Minister and the Chancellor of the Ex- 
 chequer. At this meeting it was sought to 
 impress upon the Government the advisa- 
 bility of a more liberal attitude to the higher 
 institutions of learning. The object of the 
 meeting, as stated by Professor Pelham of 
 Oxford, was " to impress upon the Govern- 
 ment certain facts, long recognized abroad, 
 and gradually forcing their way to recogni- 
 tion in England, the facts being that there 
 was such a thing as knowledge, that it was 
 as well worth having for nations as for indi- 
 viduals, and further that it could not be had 
 without paying for it." 
 
 In stating the claims of the institutions of 
 higher learning for some support, Mr. 
 Chamberlain, speaking as chancellor of the 
 University of Birmingham, said : 
 
 " In the competition we now have to en- 
 dure with foreign countries, higher educa- 
 tion is a matter of the first importance. 
 Those who are to be leaders of industry, 
 managers of our works, foremen in our 
 421 
 
Business and Education 
 
 shops, should have a much higher education 
 than the mere ' rule of thumb ' knowledge 
 they have possessed up to the present. It is 
 to provide these men, who will, by their work 
 hereafter, I believe, return a splendid divi- 
 dend on the money we spend, that we have 
 promoted these local universities, and that 
 we now come to the State and ask it to take 
 our needs into consideration. Already the 
 State pays something like £13,000,000 a year 
 for primary education, but only a few thou- 
 sand pounds are found for the higher edu- 
 cation to which we have learned to attach so 
 great a value." 
 
 Sir William White, President of the So- 
 ciety of Civil Engineers, told the Prime Min- 
 ister that if the position of Great Britain 
 was to be maintained, it was absolutely nec- 
 essary that the system of educational in- 
 struction be placed on the best possible basis. 
 While Great Britain still held a lead in ship- 
 building, for example, both Germany and 
 the United States were far ahead of Great 
 Britain in the scientific instruction needful 
 for ship-building, and unless the scanty pro- 
 visions now existing in England for such 
 instruction is placed more on an equality 
 with the provisions in Germany and the 
 United States, that lead may be difficult to 
 maintain. 
 
 Other speakers recognized the need and 
 422 
 
Political Problems of Europe 
 
 deplored the deficiencies of scientific training 
 and the work of research in England, and 
 declared that the English institutions were 
 handicapped by the lavish expenditures of 
 Continental governments and the munificence 
 of private liberality in the United States. 
 
 Mr. Mosely, who at the head of a com- 
 mission had given the system of education 
 in the United States most careful study, said 
 that he was so impressed with the advances 
 in this country that he had decided to send 
 his two sons to college here. 
 
 The Chancellor of the Exchequer, in reply 
 to these representatives of higher education, 
 declared that, in his opinion, it would be a 
 great misfortune if it were once to be thought 
 that it was the duty of the State to furnish 
 the whole or the main portion of the cost of 
 the higher education of the country, or even 
 if the State were to come into such relations 
 toward university education as it now oc- 
 cupies toward elementary education. The 
 prospect for any considerable State aid to 
 higher education in England, he said, is a 
 long way off. 
 
 The need for that aid, and particularly the 
 need for great improvement in the facilities 
 for technical education, is immediate and 
 obvious. In my opinion, no small part of 
 England's loss of prestige in the world's 
 commercial life — and that there has been a 
 
 423 
 
Business and Education 
 
 relative loss there can, of course, be no 
 doubt — is due to the failure of the great 
 body of representative and intelligent men 
 who shape English public opinion to recog- 
 nize the important influence of an adequate 
 school system upon the national development. 
 There has been no disposition in England 
 to adopt the view which underHes the whole 
 German educational system — that is, the 
 deliberate creation by the State of a school 
 system as a means for national development. 
 English statesmen have not recognized that 
 through developing by thorough education 
 the effectiveness of each individual in the 
 nation a great stride is taken in the develop- 
 ment of the nation itself. 
 
 Trade education in Switzerland has been 
 carried out as completely as in any other 
 country in Europe. The larger towns in 
 Switzerland are probably better provided 
 with such schools than any towns of the 
 same size in the world. Cities like Zurich, 
 Basel, and Bern have important technical 
 schools, but the system is carried out as well 
 in the smaller towns. The Government has 
 done a great deal in the way of encouraging 
 exhibitions and sending out travelling sam- 
 ple collections throughout the country. It is 
 the boast of Switzerland that none of her 
 industries are without sufficient agencies for 
 providing the requisite special study and 
 424 
 
Political Problems of Europe 
 
 training, and these agencies are generally 
 situated near the local centre of each indus- 
 try. There are preparatory schools for 
 watch-making, for weaving, for wood-carv- 
 ing, stone-cutting, dress-making, pottery and 
 toy-making, as well as many schools for 
 women for domestic training. There are 
 schools for many of the smaller house in- 
 dustries, which occupy a peculiar place in the 
 commercial make-up of Switzerland. 
 
 There seems to me little room to question 
 the general superiority of the German sys- 
 tem of education. That it is on the whole 
 superior to the systems in vogue in England 
 or the other countries in Europe is, I think, 
 generally recognized. That in some of its 
 particulars it is superior to our own system 
 can, I believe, be readily established. These 
 points of superiority are giving the German 
 Empire substantial vantage-ground in its 
 commercial competition with the world. The 
 plan underlying the whole educational sys- 
 tem there, of developing each individual to a 
 point of the highest industrial or commercial 
 efficiency, gives a practical trend to educa- 
 tion which, with us, is not paralleled. 
 
 From the point of view of increasing the 
 industrial efficiency of a nation, Germany 
 has, it seems to me, worked out some features 
 of her educational system in a way distinctly 
 superior to conditions in the United States 
 
 425 
 
Business and Education 
 
 or any other country. The Germans have 
 reasoned that if education is to meet the 
 needs of a wide diversity of calHng, it must 
 itself be adapted to the diversified needs of 
 the men who are to be educated. It is not 
 surprising to find in the larger German cities 
 a fully established educational system, with 
 all the ordinary facilities of university and 
 technical schools, gymnasium, preparatory 
 and day schools, all excellently conducted and 
 thoroughly up to date in their methods. All 
 that one would expect to find there. The 
 point where there is distinct and novel su- 
 periority is in the completeness of the sys- 
 tem of evening schools of the several classes 
 and the provision for trade schools. No 
 German youth need go without either a gen- 
 eral or a technical education, no matter what 
 his circumstances. For those who leave 
 school after the age of compulsory attendance 
 is past, there are evening schools for general 
 education and trade and technical schools 
 of the widest diversity of scope. Whatever 
 trade a German youth may pursue he will 
 find open to him evening schools in which he 
 may improve himself in his trade, may 
 strengthen his technical knowledge so as to 
 fit himself for a higher position, and at the 
 same time may have his " formative power," 
 as the Germans call it, strengthened and 
 diversified. 
 
 426 
 
Political Problems of Europe 
 
 This is the underlying idea in the whole 
 German educational system: first of all, a 
 certain fundamental set of subjects well 
 learned, such as elementary mathematics, the 
 German language, and possibly some for- 
 eign language; after that the opportunity, 
 whatever the man's circumstances, to im- 
 prove himself in his trade and in his general 
 education, either in a day-school or in a 
 night-school. In other words, a series of 
 schools so diversified as to serve the interests 
 of every class in the national population. In 
 Berlin and in most German cities these 
 trade schools, such as those for shoemakers, 
 tailors, carpenters, metal-workers, masons, 
 etc., have been conducted with very friendly 
 relations with the unions ; and in many cases 
 the boards of inspection have upon them 
 members of the trades-unions. 
 
 The perfection of this plan in Germany 
 comes from the fact that the direction of the 
 State departments of education in the vari- 
 ous German states, but particularly in Prus- 
 sia, has been for many years in the hands of 
 very able men; the development, for in- 
 stance, of the Berlin system of evening 
 schools, begun some twenty years ago, was 
 carried out under the direction of the best 
 men of the city. 
 
 So far as the highest institutions for tech- 
 nical learning are concerned, Germany prob- 
 427 
 
Business and Education 
 
 ably has little, if any, advantage over us, 
 although, in certain fields, and fields of great 
 commercial importance, we are notably de- 
 ficient. That is particularly true in the field 
 of industrial chemistry. In the practical ap- 
 plication of expert chemical knowledge Ger- 
 many leads the world so far that other 
 nations are quite outclassed, and the reason 
 for that must be found in the superiority of 
 her schools. Germany's prominence in that 
 one field is an enormous aid to her in gaining 
 and maintaining her industrial leadership. 
 
 Germany is a land of small salaries, and 
 we are supposed to be ready to pay more 
 than any country for the desirable services 
 of any man. I was surprised, therefore, to 
 learn that we could not attract some of the 
 great professors of industrial chemistry to 
 our own institutions, because we could not 
 pay salaries that would approach the sala- 
 ries which they received in Germany. In 
 this field of industrial chemistry there has 
 been developed close relations between the 
 academic and the practical. A professor of 
 industrial chemistry in one of the great 
 technical schools will not only be regarded 
 as a leader in scientific circles, but he will oc- 
 cupy an intimate and most remunerative re- 
 lation toward industrial enterprises. I was 
 told that the professor of industrial chem- 
 istry in the technical high school of Charlot- 
 428 
 
Political Problems of Europe 
 
 tenburg received a salary of $25,000 a year. 
 When our own institutions have endeavored 
 to secure men of this type from Germany 
 they have invariably found it impossible be- 
 cause the remuneration there was more than 
 our institutions could afford to pay. The 
 higher remuneration in Germany is possible 
 because of the intimate relation which has 
 been built up between the schools and the 
 great industries. The problems which came 
 before the managers of these industries are 
 laid before the technical schools, and the 
 schools are well paid for solutions of those 
 problems. Then, in turn, industry flourishes 
 because of the superior methods which these 
 technical experts invent. . 
 
 It is not my purpose to attempt anything 
 like a complete description of the German 
 system of education. That has been done 
 many times by observers much better quali- 
 fied. It is only toward some phases of the 
 situation that I would direct attention, and 
 toward some of the features which, in a 
 casual observation, have seemed to me spe- 
 cially interesting. 
 
 In primary education I am told that there 
 are two principal tendencies characteristic 
 of the development of the curriculum 
 throughout Germany. One is toward the 
 training of the mental perceptions, the power 
 of original observation ; the other is in the 
 429 
 
Business and Education 
 
 direction of the development of oral expres- 
 sion. This is exactly the opposite of the 
 tendency in French education, where learn- 
 ing by rote, memorizing facts, and preparing 
 to pass stereotyped written examinations are 
 the order. The German point of view is 
 that pedagogy is a scientific branch of knowl- 
 edge based on definite laws of psychology, 
 and that further discoveries are being made 
 from time to time in this as well as other 
 sciences. It is held, therefore, that any edu- 
 cational system which rests on the mechan- 
 ical application of certain methods merely 
 because those methods have long served a 
 useful purpose is as foreordained to ineffi- 
 ciency and ultimate failure as would be the 
 doctor or chemist who declines to avail him- 
 self of fresh discoveries of modern science. 
 The whole system of education in Germany 
 is a living thing, totally unlike the system 
 either in France or in England. 
 
 The American boy who had to endure the 
 regime of either the French or German 
 schools, would, so far as downright hard 
 work is concerned, look back upon his home 
 experience as being almost an idle holiday in 
 comparison. In the elementary schools in 
 Berlin and Charlottenburg, and I presume 
 elsewhere in the empire, the schools meet at 
 seven o'clock in the morning in summer and 
 at eight o'clock in winter. The habits of the 
 
 430 
 
Political Problems of Europe 
 
 gymnasium are carried into the classroom, 
 and great attention is paid to pose and move- 
 ment. Any tendency toward slouching is 
 sharply checked, and smartness of bearing 
 is carried almost to an extreme. The in- 
 fluence of the army is already felt the mo- 
 ment the boy enters his first class. 
 
 One feels in Germany that the whole na- 
 tion is at school. All public institutions 
 make special provisions for school-children 
 as a class. Churches have reserved seats 
 for them, theatres give special performances, 
 and railways and steamships are required to 
 give special rates to school-children accom- 
 panied by their teachers. There is compul- 
 sory education for children from six to 
 thirteen years of age in the country, and 
 from six to fourteen years in the city. Com- 
 pulsory education is practically fully realized. 
 The average daily attendance is about ninety 
 per cent of the total enrolment. The habit 
 of school attendance in Germany has become 
 almost automatic. Parents are fined from 
 one penny to a mark a day for every day 
 a child is absent without a proper excuse, 
 and are actually imprisoned if the fine is not 
 immediately paid. 
 
 It is not in primary education, however, 
 that the marked superiority of the German 
 system, in its effect upon the industrial 
 efficiency of the nation, offers such sharp 
 
 431 
 
Business and Education 
 
 comparison to the conditions in other coun- 
 tries. It is in the industrial education, which 
 beyond question is one of the most powerful 
 weapons of Germany industry. The indus- 
 trial schools of Germany have been pictur- 
 esquely described as the '^ ironclads " of com- 
 merce. 
 
 One feature of industrial education which 
 has no parallel outside of Germany is the 
 universal provision for trade schools. Not 
 only are many of these founded and sup- 
 ported by the State, but there are also a 
 great many maintained by local guilds and 
 industrial associations. Our own labor or- 
 ganizations are antagonistic to apprentices, 
 and look with no favor on trade schools. 
 Labor unions are not strong in Germany, but 
 even where they do exist their attitude to- 
 ward education is not only friendly, but 
 actively helpful to the extent of contributing 
 toward the support of trade schools. 
 
 These trade schools offer the opportunity 
 of acquiring a technical training in almost 
 every trade. In the main the students are 
 already active workers in the trade in which 
 they seek a higher technical knowledge. In 
 these trade schools is an exposition of the 
 most modern methods of work, and there is 
 shown there the latest development in ma- 
 chines and inventions. The teachers, as a 
 rule, have a good preparatory training and 
 
 432 
 
Political Problems of Europe 
 
 come directly from the trade which they aim 
 to teach. Frequently they work at the trade 
 during the day and teach in the evening and 
 on Sundays. They are, therefore, fresh and 
 thoroughly up to date in their practice. A 
 most important feature of these trade schools 
 is that they do not stop at the purely tech- 
 nical side of the trade, but seek to insure 
 wise business management by including 
 studies which prepare the student for the 
 practical conduct of the business. Side by 
 side with the technical training are given the 
 general facts of production and consumption, 
 of cost prices and market values, in the par- 
 ticular trade in which the student is inter- 
 ested. He is taught bookkeeping in its most 
 practical application to his especial business, 
 and is made familiar with the legislation of 
 importance to his particular industry. 
 
 These trade schools ofifer opportunity not 
 only to those who can afford to substitute 
 them for regular school work of a more aca- 
 demic character, but they are specially ar- 
 ranged to accommodate students who must 
 work during the day. It strikes one rather 
 oddly to find how generally Sunday is given 
 over to this sort of instruction, and that 
 thirty-five per cent of the total hours of in- 
 struction in the industrial schools of Saxony, 
 for instance, fall on Sunday. This general 
 devotion of Sunday by thousands of German 
 28 433 
 
Business and Education 
 
 youths to the gaining of instruction in the 
 scientific and technical sides of their chosen 
 trades contrasts curiously with the tremen- 
 dous pother which is going on in England 
 over what voice the Established Church will 
 permit the non-conformists to have in the 
 religious instruction which forms an im- 
 portant part of the curriculum of every 
 school day, for that practically is the para- 
 mount school question in England. 
 
 These German trade schools are undoubt- 
 edly having an enormous effect upon the 
 industrial efficiency of the whole nation. 
 They are designed to train the rank and file. 
 It is in the great high schools that the officers 
 of industry are trained. 
 
 The most interesting educational move- 
 ment in Germany to me is the development 
 of higher commercial education. We recog- 
 nize that an engineer or a mechanic will 
 profit by a technical education. There is 
 no longer a doubt that a technical education 
 will enable such a man to outstrip in the long 
 run his fellows who have equal ability, but 
 have learned only in the slower and less 
 scientific school of experience. There are as 
 good reasons, I am convinced, for giving the 
 banker or the merchant a technical commer- 
 cial education. The schools do not turn out 
 a practical engineer, nor will they turn out 
 a practical banker or merchant, but I believe 
 
 434 
 
Political Problems of Europe 
 
 that there is a great amount of information 
 needed by a man in commercial Hfe which is 
 capable of scientific classification, and can 
 be taught with much greater efficiency, and 
 with much less loss of time, in a properly 
 organized school than it can be gathered in 
 the ordinary course of an apprenticeship in a 
 business career. 
 
 The German Handelshochschule, or com- 
 mercial high school, is not a parallel to 
 our high schools, but is of a university type. 
 These Handelshochschule are designed for 
 students who already have an education 
 equivalent to that obtained in our high 
 schools, or perhaps even in our colleges, and 
 who have also two or three years of business 
 practice. The scheme of these schools is to 
 educate men for the high positions in com- 
 mercial life. They are not for ordinary 
 clerks, for whom an ordinary Handelshoch- 
 schule offers satisfactory preparation. 
 
 In outlining the aim and work a professor 
 in one of these schools said to me : 
 
 " We understand perfectly that business 
 men must be trained by actual practice, but 
 we do believe that a good theoretical training 
 and the formation of proper habits of 
 thought will prepare a man to learn quicker 
 and more thoroughly all practical work. 
 From the experience that I have had, I be- 
 lieve that such an education will make him 
 
 435 
 
Business and Education 
 
 at the age of twenty-five more advanced in 
 his special line of business and better quali- 
 fied to handle it than he otherwise would 
 have been at the age of thirty. Our stu- 
 dents get a good deal of knowledge regard- 
 ing political economy, law, languages, etc., 
 but it is our highest claim that we give to our 
 men the independent, exact, inquiring, re- 
 searching spirit of German scientific workers 
 at a time when they are young enough to 
 apply this spirit with enthusiasm to the busi- 
 ness in which they are engaged. That is the 
 first thing we set out to teach — a habit of 
 thinking which will combine general prin- 
 ciples with exact knowledge of details. 
 
 " There are two lines of instruction fol- 
 lowed in the Handelshochschule, a general 
 one of the old university fashion and a tech- 
 nical one of new organization. The general 
 instruction is of the highest university stand- 
 ard, and is given by university men at 
 Cologne, Frankfort, and Leipsic. Generally 
 the students of the Handelshochschtde are 
 entitled to follow the same lectures as uni- 
 versity students. The teachers of technical 
 matters are new men in a new line, and are 
 naturally not altogether satisfactory at the 
 beginning. There is much difficulty in get- 
 ting men with the proper training for the 
 work which we want done, but I believe that 
 we shall succeed in getting good faculties 
 
 436 
 
Political Problems of Europe 
 
 who can give thorough instruction in prac- 
 tical business methods. 
 
 " The technical lines of instruction in- 
 clude accounting, correspondence, calcula- 
 tions, and languages. I think American ac- 
 counting methods are more advanced for the 
 moment. We aim to teach thoroughly the 
 mathematics involved in arbitrage and ex- 
 change operations, and in connection with 
 business finance and insurance. Most of 
 the instruction is by lectures. ' Learning by 
 doing ' seems rather inadequate for the age 
 of our men. 
 
 '' Lectures are being developed on the tech- 
 nology of our chief industries, now partly 
 done at Leipsic; on the history of some of 
 the leading industrial and financial institu- 
 tions, now partly done at Cologne; and on 
 the practical handling of duties and tariffs of 
 the world. In economics we endeavor to 
 have every year lectures on money, banking, 
 foreign trade, and the history of commerce 
 and banking. All of these lectures, of course, 
 are in addition to the regular lectures on 
 theoretical and practical economics, gov- 
 ernment finance, and statistics. You will 
 find in these schools a tendency to be up to 
 date in facts, and to care less for the details 
 of historical development than most Ger- 
 man economists do. But we have put it 
 down as strict principle not to make any 
 
 437 
 
Business and Education 
 
 concessions in scientific methods and exact 
 thought. We ofTer courses in commercial 
 and corporation law and the laws relating 
 to bills of exchange and bankruptcy. The 
 courses in geography are particularly varied. 
 They embrace not only cartographical facts, 
 but also the chief products of different coun- 
 tries, the transportation systems, etc. We 
 take the students on excursions to see inter- 
 esting plants. At Cologne an arrangement 
 has been made to have a series of short lec- 
 tures by business men and secretaries of in- 
 dustrial corporations. 
 
 " The ordinary course which we favor ex- 
 tends over two years, and presupposes a 
 sound preparatory education. A new habit 
 of thinking and a fund of useful knowledge 
 — that is what we aim to give with our teach- 
 ing. The future of the nation depends on 
 men. Men are the greatest economical force. 
 The business life of to-day is too complicated 
 to allow the old-fashioned apprenticeship, 
 with its uncontrolled routine, to form the 
 future leaders. The extension of business 
 relations and the development of the great 
 industrial organizations demand a new sys- 
 tem of commercial education. We endeavor 
 to teach what those young men who expect 
 to be commercial leaders will need, and we 
 are fully convinced of the importance of this 
 field of instruction." 
 
 438 
 
Political Problems of Europe 
 
 The Emperor, whose clear vision per- 
 ceives the beneficial influence of industrial- 
 ism on the national strength, employing the 
 increase in population at home, instead of 
 forcing it to emigrate, and by so employing 
 it adding enormously to the income of the 
 nation, is sometimes obliged to make an 
 almost furtive recognition of the new princes 
 of the empire so that he may avoid offending 
 prejudices of the old aristocracy. Thus an 
 intimation was conveyed to the American 
 ambassador in Berlin before the Emperor 
 dined with him in February that his Majesty 
 would like to have among the guests Herr 
 Rathenau, of the Allgemeine Electricitats 
 Gesellschaft, the great electrical company of 
 Germany; Herr Ballin, of the Hamburg- 
 American Line; and Herr Wiegand, of the 
 North German Lloyd. His Majesty desired 
 to talk with them about their far-reaching 
 enterprises, each employing an army corps 
 in German industrial conquests overseas. 
 The court circular issued to the press omitted 
 mention of these gentlemen having been 
 present. The annual emigration from Ger- 
 many since the present Emperor began to 
 reign has declined, roughly, from a quarter 
 of a million yearly to one-tenth of that num- 
 ber. The population of Germany, increas- 
 ing three quarters of a million a year, has so 
 far been largely occupied at home, but a 
 
 439 
 
Business and Education 
 
 speculative problem long pressing on the 
 attention of German statesmen is, how shall 
 the surplus population be disposed of so that 
 it may be retained as part of the national 
 strength and not lose its identity in the 
 United States or other new non-German 
 countries? That problem has so far found 
 a satisfactory practical solution in the ex- 
 pansion of industry and the increased foreign 
 trade. The pressure of population on the 
 means of subsistence must increase, and will 
 probably enable Germany to continue rela- 
 tively a low-wage-paying country. The 
 Government surely shows the highest wis- 
 dom in shaping the educational system so that 
 every citizen is trained to the greatest indus- 
 trial or commercial efficiency, and taught to 
 make the most of the rather meagre natural 
 advantages which the German Empire 
 possesses. 
 
 The Emperor takes the greatest interest in 
 the whole educational system, and particu- 
 larly in the technical schools. He attends 
 lectures occasionally at Charlottenburg, 
 sometimes going there several times during 
 the season. His interest manifested in this 
 way has a marked influence. 
 
 The educational system of Europe cannot 
 be properly considered without taking into 
 account the influence of the army. Prac- 
 tically, every able-bodied man on the Con- 
 440 
 
Political Problems of Europe 
 
 tinent of Europe has been moulded by this 
 influence. The effect of the army training, 
 coming as it does at a most impressionable 
 age, is enormous, and is on the whole, I be- 
 lieve, of great value. Much may be said 
 about the great cost of the military estab- 
 lishments of Europe, but there is undoubt- 
 edly a large entry to be made on the other 
 side of the ledger in the value of the army 
 training to the young man. This is very 
 generally recognized in Europe. Mothers 
 part with their sons for the year or the two 
 years of army experience with the very gen- 
 eral belief that they will return benefited 
 by that experience. The mind of the peas- 
 ant boy receives its first great awakening in 
 the army life. He travels and gains knowl- 
 edge in many ways. In Italy and France 
 particularly, the army is used as a means of 
 bringing people from various parts of the 
 country into contact with each other. Men 
 from the southern provinces are quartered 
 in the north and the northern men are 
 moved to the south, with the result that 
 there is a far better national understanding 
 on account of the years of army experience, 
 and a distinct strengthening of national 
 unity. 
 
 Observation of the nature and effect of 
 the various systems of education in vogue 
 in Europe cannot but lead an American to 
 441 
 
Business and Education 
 
 the conclusion that pre-eminence in industrial 
 and commercial life is becoming more and 
 more closely related to pre-eminence in edu- 
 cational facilities. Such observation would 
 further convince one that more emphasis has 
 been placed on trade and technical schools 
 in Germany than is the case with us. We 
 may have little to learn from the educational 
 systems of other countries than Germany, 
 but from the standpoint of an effective aid 
 to industry and commerce the German sys- 
 tem presents points of superiority. We need 
 more trade schools, more technical schools, 
 and far better equipped institutions for 
 higher commercial education. We are turn- 
 ing out quite enough men who attempt to 
 make a living as lawyers and doctors. With 
 great advantages we could shift some of that 
 energy into other channels. If we build 
 schools where every boy who is at work at 
 a trade can learn, under competent masters, 
 the scientific and technical side of his work, 
 we shall have done something of vast impor- 
 tance for the development of national great- 
 ness. If we organize a system of higher 
 commercial education which will give as 
 superior equipment to our business men as 
 our great institutions of technology now 
 give to our engineers, we shall have done 
 much to give permanence and world scope 
 to our commerce. Until we have done all 
 443 
 
Political Problems of Europe 
 
 that we shall have shown ourselves less 
 awake than is the German nation to the aid 
 which education can give to industry and 
 commerce. 
 
 V. Paternalism and Nationalism 
 
 In any examination of European political 
 and economic institutions, the attention of an 
 American would at once be attracted to the 
 subject of workingmen's insurance. He 
 would find it a subject not only of great 
 importance in European political and social 
 life, but one presenting to him novel consid- 
 erations, because the institution is practically 
 without parallel of any sort in this country. 
 Nothing that I have seen in Europe has in- 
 terested me more than the effect of working- 
 men's insurance. On the Continent one 
 finds it, measured from any point of view, 
 one of the most important subjects that is 
 presented in the whole array of affairs. As 
 a rule, I think Americans have little concep- 
 tion of the extent to which the system has 
 developed, and of the marked effect which 
 it is producing upon national economy and 
 upon social conditions. 
 
 Workingmen's insurance conducted as a 
 government, or semigovernment institution, 
 is confined to the Continent. In Great Bri- 
 tain there is no government activity in this 
 
 443 
 
Business and Education 
 
 field, the development there being wholly 
 within the ranks of the friendly societies, or 
 else in the direction of the provisions which 
 are made by the great railway corporations 
 for retiring on part pay their superannuated 
 servants. The weight of political sentiment 
 in Great Britain is violently opposed to the 
 adoption by the Government of any position 
 which might lead to national responsibility 
 for workingmen's pensions. On the other 
 hand, in the ranks of the workingmen, and 
 particularly in organized labor, there is a 
 growing disposition to force the question 
 upon the attention of Parliament. 
 
 It is on the Continent that we find the 
 governments intimately related to the sub- 
 ject of workingmen's insurance. There has 
 been an interesting development of semi- 
 public semi-government insurance institu- 
 tions in Germany, France, Italy, Austria- 
 Hungary, Belgium, Sweden, and Denmark, 
 and in all of those countries the movement 
 has assumed proportions of political impor- 
 tance, and the workings of the systems have 
 already produced marked sociological effect. 
 
 It is in Germany that there is to be found, 
 by all odds, the highest evolution of work- 
 ingmen's insurance. In that country a so- 
 cial experiment has been conducted on a 
 vast scale, and I think the movement may 
 fairly be said to mark the most interesting 
 
 444 
 
Political Problems of Europe 
 
 recent social legislation that is to be found 
 anywhere in the world. 
 
 The significance of the movement in Ger- 
 many will be better understood when it is 
 noted that 17,000,000 German workmen are 
 contributing to and enjoying the benefits of 
 the pension system. That significance is em- 
 phasized when we learn that since the in- 
 ception of the system, in 1885, the total 
 receipts have reached $1,750,000,000. At the 
 present time the annual receipts are in ex- 
 cess of $130,000,000, an amount sufficient 
 to make us consider with much interest the 
 economic consequences of the plan. 
 
 Especially is it noteworthy to find that 
 this vast sum has been administered with 
 absolute integrity. The administration of 
 the insurance funds of Germany offers one 
 of the best indications in the world to-day 
 of the possibility of a successful State con- 
 trol of important institutions, even when 
 enormous sums of money are involved. The 
 demonstration, however, has more than in- 
 tegrity to its credit. The collection and 
 disbursement of these great funds have been 
 carried on with an economy which is ad- 
 mirable. In considering the cost of admin- 
 istration of the German insurance funds it 
 should be remembered that collections are 
 made from 17,000,000 individuals, as well 
 as from the employers of those individuals, 
 
 445 
 
Business and Education 
 
 and that in making disbursements, particu- 
 larly of the sick and accident funds, there 
 is a care and intelligent supervision exer- 
 cised which must make the cost of disburse- 
 ment quite as great as the cost of collection. 
 There are, therefore, reasons for a much 
 higher ratio of expenses than would be es- 
 sential in such a system of life insurance as 
 we have in America. But, as a matter of 
 fact, the cost of Administration of American 
 insurance funds makes sorry comparison 
 with the expense of administration in Ger- 
 many. It is a monument to the economy 
 of the German administration to find that 
 less than eight and one-half per cent of the 
 total income is used up in the cost of ad- 
 ministration, and that ninety-one and one- 
 half per cent is paid out in benefits to the 
 insured. A showing like this, so greatly in 
 favor, apparently, of the economy of gov- 
 ernment administration, would seem to raise 
 the inquiry as to whether Germany has not 
 found a better plan for the administration of 
 insurance funds than we have evolved in this 
 country. 
 
 Nothing like a full consideration of the 
 subject of workingmen's insurance is to be 
 given in the space here available. I be- 
 lieve it is a subject worthy of the deepest 
 consideration. Certainly it is one that 
 offers many difficulties before a clear con- 
 446 
 
Political Problems of Europe 
 
 elusion can be reaehed as to its effeet and 
 advisability. There are arguments of great 
 weight on both sides of the subject. I be- 
 lieve, however, that it is a subject which in 
 due time will come before us in America for 
 consideration and action. 
 
 Any exposition of even the German sys- 
 tem of insurance alone is too complicated 
 to be presented in a brief study of the sub- 
 ject. The system in Germany is an evolu- 
 tion, and in its present form probably none 
 of its friends would suggest that it is an 
 ideal system. Anything like a complete un- 
 derstanding of its provisions is complicated 
 by the fact that there are three distinct 
 forms of insurance — insurance against sick- 
 ness, against accident, and insurance to pro- 
 vide old-age pensions. An explanation of 
 the system is further complicated by the 
 fact that the administration of these three 
 distinct and separate insurance funds is in 
 many different hands, although all are un- 
 der the supervision of the general Govern- 
 ment. The sick insurance fund is admin- 
 istered by more than 23,000 sick clubs. The 
 accident insurance is administered by nearly 
 five hundred managing boards, which repre- 
 sent various State and municipal communi- 
 ties and various trades and industries. The 
 old-age pension system is in the hands of 
 some thirty-one distinct insurance institu- 
 
 447 
 
Business and Education 
 
 tions. An understanding of the details of 
 German insurance administration is, there- 
 fore, difficult; but some general considera- 
 tions of its provisions and effects are easily 
 possible. All the insurance funds are con- 
 tributed to in about equal proportion by 
 employers and by the insured, and that total 
 is augmented by a subsidy from the Empire. 
 Employers pay in about forty-seven per cent 
 of the total, the workingmen less than forty- 
 six per cent, while the subsidy from the Gov- 
 ernment provides between seven per cent 
 and eight per cent. 
 
 The effect of the institution, as seen in 
 Germany, is of far wider significance than 
 are merely the admirable efforts in alleviat- 
 ing distress caused by sickness, by accident, 
 or by poverty in old age. The results which 
 have been attained in the accident insurance 
 field, for example, are far broader than the 
 mere indemnification in some measure for 
 the suffering and loss which accidents have 
 entailed, and it is likewise true in the other 
 branches that the provision which has been 
 made for the payment of pensions in lieu of 
 wages lost in case of sickness has been only 
 a part, and one might say almost a minor 
 part, of what has been accomplished in that 
 field. 
 
 The results of the German workingmen's 
 insurance embrace considerations of the 
 
 44S 
 
Political Problems of Europe 
 
 deepest sociological consequences, on the one 
 hand, and of a most significant effect on the 
 national health and physique, on the other. 
 The Germans have gone at the whole subject 
 with their characteristic thoroughness, and 
 the whole world will in time be forced to 
 give attention to what is being accomplished. 
 The German system of workingmen's 
 insurance is founded on a very general be- 
 lief that the change which has been going 
 on in Germany, transforming that country 
 from an agricultural into an industrial State, 
 and the evolution which has been proceeding 
 in industry, resulting in a great specialization 
 of work and the high development of the 
 factory system, have made necessary an 
 enunciation of some new principles in regard 
 to the duty of the community toward the 
 individual, principles which are fundamental 
 in their character. The intricate and com- 
 plicated modern system of industry has left 
 the industrial population economically de- 
 pendent, no matter how free it may be polit- 
 ically, the Germans argue, and the develop- 
 ment of that system has brought the indus- 
 trial population into a position where it is 
 difficult for the individual to extricate him- 
 self from his misfortunes should he be over- 
 taken by accident, sickness, or old age. In 
 this new industrial order the liability to ac- 
 cident is greatly increased, and new means 
 29 449 
 
Business and Education 
 
 for meeting the condition which that fact has 
 brought about are demanded. 
 
 Various nations have recognized the in- 
 creased habihty to accident which has come 
 with the present-day development of indus- 
 try, and have taken diverse means to meet 
 the new condition. Germany offers the most 
 notable example of a development of acci- 
 dent insurance. France, on the other hand, 
 has undertaken to meet the demands which 
 industrial workers make for some adequate 
 provision for indemnity by passing most 
 rigid and far-reaching legislation, fixing 
 upon the employer the liability and making 
 provision so that the injured workingman 
 may easily enforce that liability in the courts. 
 
 In America there not only has been little 
 legislation passed on this subject, based on 
 broad principles of humanity, such as have 
 actuated the German legislation, but there 
 has been little progress toward more defi- 
 nitely fixing the liability of the employer, 
 and making it easy for the injured person 
 to enforce a claim. Instead of that, there 
 has arisen here a system of so-called em- 
 ployers' liability insurance, which are in ef- 
 fect organizations of strength with which to 
 combat weakness, organizations the object 
 of which is not to indemnify the worker for 
 injuries, but rather to indemnify the em- 
 ployer for the cost of fighting in the courts 
 
 450 
 
Political Problems of Europe 
 
 the claims of the injured persons. The pur- 
 pose of this system is not to put the insurance 
 company in the position of a fair employer 
 who will make payment of a just indemnity. 
 Its purpose is accomplished rather by fight- 
 ing each individual case with all the skill 
 which its organization, made up of experi- 
 enced adjusters and sharp attorneys, en- 
 ables it to pit against the feeble efforts of an 
 injured workingman who is attempting to 
 enforce even the inadequate legal rights that 
 our legislation has thus far accorded him. 
 If statistics w^ere presented dividing the re- 
 ceipts of these insurance organizations so as 
 to show what amount they expended in actu- 
 ally paying indemnity to injured persons, 
 and what amount they used in fighting 
 claims and paying dividends, the comparison 
 which those figures would make with the 
 humane institution of accident insurance as 
 developed in Germany would be anything 
 but to our credit. 
 
 Germany has accomplished most admir- 
 able results in the way of providing indem- 
 nity to persons injured in industrial occupa- 
 tions. The work accomplished by accident 
 insurance, however, has been of far wider 
 usefulness. Accident insurance as devel- 
 oped in Germany has really been an insur- 
 ance against accident, not merely the pro- 
 viding of indemnity. There has been evolved 
 
 451 
 
Business and Education 
 
 there, as a result of the study which em- 
 ployers and employees who have been man- 
 aging these insurance funds have given to 
 the subject, a system of laws and of reg- 
 ulations providing for safeguards which have 
 gone far to reduce the number of accidents, 
 and to remove the danger from industrial 
 callings. In the last few years the effect of 
 these safeguards has been to reduce one-half 
 the frequency of accidents. Viewed from an 
 economic standpoint alone the saving which 
 has resulted to the national economy has 
 been a vast sum. In the United States we 
 seem as extravagant of life as of resources. 
 There is no single line in our national statis- 
 tics that is read in Europe with such start- 
 ling surprise as the one which shows 60,000 
 fatalities and injuries on our railroads in a 
 single year. In other industrial fields we 
 are as careless of life. It seems to be re- 
 garded as more economical to fight damage 
 suits than to provide safeguards, and dan- 
 gers that do not interfere with dividends fre- 
 quently receive little attention. 
 
 It is noteworthy that German employers 
 have willingly accepted the burden they are 
 charged with on account of workingmen's 
 insurance. That it is a very considerable 
 burden there is no denying. The Krupp 
 Steel Works alone, for example, contrib- 
 uted more than $2,000,000 for the purposes 
 452 
 
Political Problems of Europe 
 
 of workingmen's insurance within the period 
 from 1885 to 1902. The amount which 
 employers are paying, compared with the 
 total wages paid, is showing increases as the 
 operations are extended in the various fields 
 of insurance. The actual contributions to 
 the insurance fund have, too, been only part 
 of the expenses that the administration of 
 the insurance laws has charged the employ- 
 ers with, because they have been forced to 
 spend great sums of money for providing 
 safeguards against accident, and putting 
 their works in the best possible hygienic con- 
 dition. The general disposition among em- 
 ployers, so far as I have observed, however, 
 is to regard these expenditures as having 
 been made with good value received, because 
 of the increased efficiency and better health 
 of their workmen, and their contentment 
 and fair attitude toward capital. 
 
 There have been almost as great indirect 
 benefits connected with the administration 
 of the sick insurance fund as has been the 
 case in the field of accident insurance. Re- 
 markable results have been attained in the 
 prevention of the spread and in the cure of 
 contagious diseases. The sick insurance 
 administration has by no means stopped 
 at the point of giving care and financial aid 
 in cases of sickness. More and more its 
 aim has been to seek, with the utmost en- 
 
 453 
 
Business and Education 
 
 ergy, every means for avoiding the disturb- 
 ance in the v^age-earning capacity of the 
 workingmen which sickness entails. It has 
 sought to ascertain the principal causes of 
 sickness, and to combat with organized and 
 scientific efforts the various enemies of pub- 
 lic health. The organs of the workingmen's 
 insurance committees have done a great 
 work in educating the people in hygiene, 
 and particularly in reducing the scourge of 
 pulmonary diseases. This has been done 
 through prompt and effective measures of 
 isolation and treatment, and in directing 
 special attention to the question of the hy- 
 giene of w^orkingmen's dwellings. The ad- 
 ministration of the sick insurance, instead of 
 being confined to rendering assistance to the 
 sick and the invalid, has sought to cure them, 
 and make them fully capable again of earn- 
 ing their former livelihood. In the develop- 
 ment of that work the Germans have 
 characteristically gone to the very founda- 
 tion of the question, and are doing as im- 
 portant service in effectively preventing 
 sickness as they are in curing it or relieving 
 the distress which follows from it. 
 
 The effect upon the general level of the 
 national health has been enormous. In the 
 field of hygiene, as in the field of educa- 
 tion, the German Government seeks to make 
 of each individual the most effective eco- 
 
 454 
 
Political Problems of Europe 
 
 nomic unit it is possible to develop. In 
 doing that, the aid which has been rendered 
 by the direct and indirect results of work- 
 ingmen's insurance in improving the physi- 
 cal condition and increasing the power of 
 resistance to diseases, and in promoting the 
 recovery and full return to health of those 
 who are ill, has been beyond all calculation. 
 
 There is one phase of the benefits which 
 workingmen's insurance in Germany has 
 conferred that is not to be measured by 
 statistics nor weighed with exactness by 
 definite evidence, but it is, nevertheless, one 
 of the most noteworthy of all the influences 
 that have grown out of this great social ex- 
 periment. There has been accomplished a 
 service of the very first importance in the 
 direction of bringing about more harmoni- 
 ous relations between employers and em- 
 ployees. There is growing to be a better 
 and better mutual understanding between 
 capital and labor, and the administration 
 of these insurance funds has furnished a 
 common ground upon which the two inter- 
 ests can meet and discuss those questions 
 which affect both. The committees that 
 have the administration of all the details of 
 the collection and expenditure of these great 
 funds are made up in part of employers and 
 in part of workingmen. In serving on these 
 committees, employers are brought to a 
 
 455 
 
Business and Education 
 
 better understanding of and a closer sympa- 
 thy with their employees, and workingmen 
 have been given a clearer comprehension of 
 economic possibilities in the field of indus- 
 try, and have come better to understand their 
 employers' point of view. I do not mean to 
 say that Germany has reached a millennium, 
 and that there is complete harmony and 
 understanding between capital and labor 
 there, but I do feel that the labor situation 
 offers some sharp contrasts to conditions in 
 other countries, and that those contrasts are 
 favorable to Germany. I have frequently 
 spoken of the spirit which pervades so many 
 of the institutions of Germany, the spirit of 
 making each individual member of the com- 
 monwealth the most efficient of industrial 
 and economic units. That spirit has accom- 
 plished tremendous industrial results. With 
 an educated brain and a well-developed phy- 
 sique, the German workingman is equipped 
 to secure good results, and when there is 
 added to that equipment a spirit which allows 
 him to use his faculties to the fullest extent, 
 he makes strikingly favorable contrast to the 
 English trades-unionist, with his ca'-canny 
 proclivities, and, indeed, to some of our 
 own labor union members, who, working 
 under the arbitrary rules which their unions 
 have laid down, give for a day's wages not 
 the most work they can do, but the least. 
 
 456 
 
Political Problems of Europe 
 
 The tendency on the Continent has for 
 a number of years been in the direction of 
 higher customs tariffs. That tendency has 
 underlying it broad influences. The first 
 and obvious one is the ever-increasing ne- 
 cessity for added revenues; for the history 
 of the budgets of nearly every European 
 country is a story of more rapid growth in 
 expenditures than those countries can show 
 in the totals measuring any other phase of 
 their development. Finance ministers have, 
 with hardly an exception, been under the 
 greatest pressure in order to balance the 
 budget; and they have therefore welcomed 
 the growing spirit of nationalism which has 
 permitted them to lay higher and higher 
 duties on the products of foreign countries. 
 One of the most general characteristics of 
 European development in the present gen- 
 eration has been this growth of nationalism 
 — this intensifying of the patriotic spirit — 
 which has demanded at any sacrifice the de- 
 velopment of national resources. 
 
 Germany has, of course, exhibited this 
 spirit of nationalism in its most intense 
 form, but it has been the keynote of the 
 political life throughout Europe, and is in 
 sharp contrast with the spirit of unity and 
 universal fraternity which earlier in the cen- 
 tury became, for a time, the dominant note. 
 
 This development of nationalism has fos- 
 
 457 
 
Business and Education 
 
 tered a belief in the value of a protective 
 tariff, and that belief has been greatly 
 strengthened by the outlook which all of the 
 European countries have had on the un- 
 exampled development of the United States 
 under the influence of protection. In Ger- 
 many, the necessities of the Agrarians nat- 
 urally made them strongly in favor of 
 protection for the products of the land ; while 
 the rise of industrialism built up a party 
 representing the manufacturing interests, 
 the members of which were as keen as the 
 Agrarians for protection, although they 
 fought the advance of duties which meant 
 dearer food at the same time that they were 
 using every effort to have a tariff schedule 
 enforced which would protect them against 
 the products of foreign workshops. An- 
 other influence in Germany has been the 
 Kaiser's intense desire to build up a navy, 
 and the necessity for raising great revenues 
 for that purpose. The history of the tariff 
 in Germany has been practically a succes- 
 sion of legislative measures increasing cus- 
 toms duties ; and while these measures have 
 been fought with great bitterness by the 
 industrial population, and particularly by the 
 Social Democrats, the several influences 
 favorable to an advance in the tariff have 
 been almost uniformly effective, and the 
 tariff which a year ago was successfully put 
 
 458 
 
Political Problems of Europe 
 
 through the Reichstag and is now awaiting 
 the conclusion of commercial treaties before 
 its general application by the executive de- 
 partments is the highest which any Euro- 
 pean country has yet undertaken to put in 
 force. 
 
 In France there have been few changes 
 in the tariffs for many years, but the senti- 
 ment is overwhelmingly in favor of protec- 
 tion, and there is no important opposition to 
 the high duties that are in force. In addi- 
 tion to the high protective duties, there has, 
 indeed, been much special legislation in 
 France, which is of a character to put diffi- 
 culties in the way of the importation of 
 foreign products and to make the domestic 
 market more secure to home manufacturers. 
 This special legislation is in the nature of 
 clauses inserted in public franchises, which 
 provide that the public utilities built under 
 these franchises must be constructed wholly 
 from material produced in France. This 
 is a common provision in franchises for elec- 
 tric roads and gas and electric lighting 
 plants. 
 
 That same spirit is notably strong in Rus- 
 sia, where it has been decreed that all rail- 
 road construction must be carried on with 
 rails from Russian mills, and, generally, that 
 every sort of material used in the building 
 of railroads must be of Russian origin. This 
 
 459 
 
Business and Education 
 
 was the economic rock that Minister Witte 
 steered against, and with anything but 
 pleasant results. M. Witte was the strong- 
 est of protectionists. He not only believed 
 in high protective duties against almost all 
 foreign importations, but he encouraged the 
 Czar to sign ukases which practically pro- 
 hibited the importation of foreign material 
 for use in public works, and particularly in 
 railroad construction. The result of that 
 policy was, temporarily, most encouraging. 
 Foreign capital, recognizing the vast require- 
 ments which the development of M. Witte's 
 plans in regard to the Russian railway sys- 
 tem contemplated, was induced to construct 
 factories on an extensive scale. The disaster 
 which came to nearly all of these enterprises 
 was by no means, however, entirely attribu- 
 table to faults in M. Witte's economic pro- 
 gramme. French and Belgian promoters in- 
 duced small capitalists to make, in the 
 aggregate, huge investments in these enter- 
 prises, but in many cases the promoters had 
 no thought beyond reaping the largest pos- 
 sible profit from the stock subscriptions. 
 There were companies organized which 
 never got further than a point where the 
 promoters divided the spoils. 
 
 The size of Russia and the lack of public 
 knowledge regarding conditions there made 
 an ideal field in which promoters could weave 
 460 
 
Political Problems of Europe 
 
 fairy tales regarding prospective profits, and 
 the catch of gudgeons was one of the richest 
 that has ever been known. There were, 
 however, many legitimate enterprises, and, 
 unfortunately, some of these at the end did 
 not fare much better for the investors than 
 those where the promoters never took the 
 trouble even to construct the factories for 
 which they raised the capital. So long as 
 railroad building went forward rapidly and 
 the Government could afford to pay the 
 extremely high prices which the domestic 
 market commanded, the legitimate manu- 
 facturing enterprises thrived; but when 
 the development of new public w^orks slack- 
 ened the factories were left without orders. 
 Conditions were far from parallel with 
 those during the early industrial develop- 
 ment of the United States, and that, per- 
 haps, was one of the miscalculations that 
 M. Witte made. The Russian peasant 
 population is, of course, in no wise to 
 be compared with the population in this 
 country, and the domestic demand for the 
 products of these manufacturers — once 
 the Government orders failed — was prac- 
 tically nothing. Statistics of Russia's vast- 
 ness are in some ways most deceiving. It is 
 true that there is a population of one hun- 
 dred and forty millions ; but if that popula- 
 tion could be measured by some comparative 
 461 
 
Busi/ness and Education 
 
 economic unit, so that its productive and 
 consumptive capacity were compared v^ith 
 such individual capacity in the United States, 
 for instance, the real economic value of that 
 great population would dwindle in a most 
 surprising way. Any one who has seen Rus- 
 sian peasant life in the " mir," any one who 
 has seen the shelters which are called houses, 
 looked upon the decoction of black bread and 
 cabbage which, with an occasional supple- 
 ment of vodka, forms the usual food of the 
 vast population, will understand what a 
 small economic value must be put on each 
 unit of Russian population ; and that makes 
 it easy to understand the complete stagnation 
 which fell upon Russia's new industries, 
 which had grown up under the intense stimu- 
 lus of a prohibitive protection and were 
 then left stranded by the stoppage of Govern- 
 ment orders. 
 
 Trade in Europe has not only the national 
 difficulty of tariff walls to surmount, but the 
 free interchange of commodities is greatly 
 interfered with by the octroi duties. This 
 form of taxation is general in France and 
 Italy, and is found to some extent in Swit- 
 zerland, and has a most pronounced effect 
 upon industrial development. The tendency 
 is toward abolishing this interference with 
 trade, and in several of the cities of France 
 the octroi has been done away with. It is 
 462 
 
Political Problems of Europe 
 
 still in force in Paris, as every one who has 
 even crossed the city lines in an automobile, 
 and had his tank of gasoline measured when 
 he went out and when he came back, will 
 remember. 
 
 Italy is a land of high tariffs and of se- 
 verely enforced taxes, but in some sections 
 there is being shown a growing liberalism 
 in the administration of her customs affairs. 
 That country has adopted from us the 
 bonded-warehouse idea, and has expanded 
 it considerably further than we have. There 
 are being established in Italy what are 
 known as free customs zones. These zones 
 are merely bonded customs warehouses on 
 a large scale. They are zones into which 
 goods may be freely imported, manufac- 
 tured and re-exported, the manufacturers 
 being permitted to erect the necessary build- 
 ings and given almost complete exemption 
 from custom-house formalities so far as the 
 goods manufactured there are re-exported 
 to foreign countries. All food consumed 
 within these zones must pay the customs 
 duties. Such a zone has been established in 
 Genoa, and it is proposed to develop in other 
 seaports — especially in the North — simi- 
 lar free zone systems. Manufacturers in the 
 interior whose foreign business is interfered 
 with by this plan are naturally found in op- 
 position to it, but it promises to be success- 
 
 463 
 
Business and Education 
 
 ful and to add to the rapidly growing in- 
 dustrial importance of northern Italy. 
 
 Not many people in the United States are 
 fully aware of how rapidly Italy is advanc- 
 ing in industrial importance. In some ways 
 northern Italy has, in the last ten years, 
 shown as promising development in an in- 
 dustrial way as is to be found anywhere in 
 Europe. Italian industry has always been 
 handicapped by lack of fuel. It has been 
 difficult to compete in the world's markets, 
 when power had to be obtained from fuel 
 imported from England ; but in the last few^ 
 years Italy has been rapidly developing the 
 use of the " white coal " from the peaks of 
 the Alps and the Apennines. The never- 
 failing water supply of the snow-topped 
 mountains is being utilized by the electrical 
 engineers in a way which promises to con- 
 vert northern Italy into a great industrial 
 state. Nowhere in Europe is there a popula- 
 tion better fitted to aid in an industrial de- 
 velopment. The people are dexterous, quick 
 to learn, and industrious, and up to the 
 present time the general wage scale com- 
 pares favorably with that of any competitors 
 which they have to meet. The result of 
 these favorable conditions has been, for in- 
 stance, the development of the silk industry 
 at a rate which sounds like statistics of Amer- 
 ican industrial growth. 
 464 
 
Political Problems of Europe 
 
 In the last few years there has been more 
 or less agitation in Europe over the proposal, 
 which had its origin in Austria, for the for- 
 mation of a European customs union, a plan 
 aimed particularly at the United States. The 
 difficulties in the way are recognized by most 
 statesmen as insurmountable, but the idea 
 is a dream in the minds of some who harbor 
 particular antagonism toward the growth of 
 our commercial interests. European states- 
 men had at one time high hopes that the 
 United States would agree to a series of 
 reciprocity treaties. Seventeen of these 
 reciprocity measures were successfully nego- 
 tiated with foreign countries and have now 
 been before Congress for two years or more. 
 There seems to be not the slightest prospect 
 of their ratification, nor is there any grow- 
 ing disposition favorable to them. These 
 treaties would be of immense importance to 
 us, as well as to the European nations con- 
 cerned; but in every case the reduction in 
 the tariff on goods which would be imported 
 and which would, to some extent, come into 
 competition with goods manufactured in a 
 small way in this country, has led Senators 
 — who broadly favor the reciprocity prin- 
 ciple — to protest most vigorously against 
 the specific possibility of injuring some pet 
 industry in their respective States. 
 
 The treaty which was negotiated with 
 30 465 
 
Business and Education 
 
 France was regarded by Secretary Hay and 
 the Hon. John A. Kasson, who assisted in 
 its preparation, as the most favorable to the 
 United States of all the treaties with the 
 leading nations of Europe, and it was trans- 
 mitted to the Senate, backed by all the in- 
 fluence at the command of the Department 
 of State, with the view of making a test of 
 whether the Senate would ratify any reci- 
 procity treaty. The treaty provided for a 
 slight reduction in the tariff on knit goods 
 brought into this country from France, and 
 the result of that was that a Senator from 
 one of the New England states was pre- 
 pared to go to any length to defeat the treaty 
 because it was regarded unfavorably by 
 small manufacturers in his state. He went 
 to other members of the Senate who, while 
 not especially interested in the French treaty, 
 were opposed to the ratification of the treaty 
 with Germany, perhaps, and made trades 
 by which they would mutually assist each 
 other in defeating all of the treaties. The 
 State Department is now completely dis- 
 couraged and the disposition is to make no 
 further attempt to negotiate reciprocity trea- 
 ties. This has been particularly annoying 
 to the Germans, who have come pretty gen- 
 erally to believe that the United States has 
 purposely and maliciously discriminated 
 against German goods. There is probably 
 466 
 
Political Problems of Europe 
 
 no ground for this opinion, but it is firmly 
 fixed in the minds of many Germans, and 
 accounts, in some measure at least, for the 
 hostility that the administrators of the Ger- 
 man tariff have shown to our meats and 
 other products. 
 
 The Germans have a rather more scien- 
 tific plan for preparing a customs tariff than 
 we have. There is no such " lobbying " with 
 the Reichstag as we see in Washington ; no 
 such pressure brought by various manufac- 
 turing interests against individual members, 
 as is the case with us. There is a system of 
 Boards of Trade in Germany which com- 
 pletely covers the country, and which forms 
 a medium of communication between the 
 commercial interests and the legislative 
 body. These Boards of Trade are semi- 
 public in character; and when a measure 
 such as the tariff is under discussion the 
 opinions of individuals and the pressure of 
 interests reach the Reichstag in the main 
 through the medium of the Boards of Trade, 
 and after having been carefully sifted by 
 those representatives of all commercial 
 interests. 
 
 While the Governments of Europe do 
 much to hamper the free movement of com- 
 merce by their customs tariffs, they have, 
 on the other hand, done much to foster it 
 by the care which they have given to the 
 467 
 
Business and Education 
 
 development of transportation facilities. 
 The railroads, to a greater or less degree, 
 are controlled by the state in nearly all of 
 the Continental countries, and the tendency 
 on the Continent is distinctly in the direc- 
 tion of more complete government control. 
 Switzerland, by the Referendum, has re- 
 cently decided to purchase all of the rail- 
 roads in the country ; Italy is contemplating 
 an extension of the state's activities in the 
 field of transportation ; in Germany there is 
 no longer any debate as to the advisability of 
 the state's control of the lines of transporta- 
 tion, and there the state is being led into 
 almost communistic fields. The Govern- 
 ment's interest as a consumer of fuel, in 
 connection with the operation of the rail- 
 roads, and the difficulties which it met with 
 at the hands of the coal syndicate, has led it 
 into purchasing coal mines which are to be 
 operated by the state ; an experiment which 
 pleases the Socialists and which, if success- 
 ful, may be followed by others of the same 
 character. 
 
 In England alone, of the European coun- 
 tries, the tendency is distinctly away from 
 the state management of transportation fa- 
 cilities. England has had more experience 
 than any other country with the municipal 
 control of public utilities, and, on the whole, 
 the experience has not been satisfactory. 
 468 
 
Political Problems of Europe 
 
 English taxes in some instances have been 
 increased enormously on account of indus- 
 trial undertakings by municipalities, and the 
 result is a revulsion of feeling on the part of 
 a great mass of the English voters. The 
 English railroads have always been con- 
 trolled by privately managed corporations 
 organized for that purpose, but they do not 
 show the superiority, as compared with the 
 state-controlled roads of the Continent, 
 which might be expected. English railroad 
 managers are beginning to wake up a little ; 
 but, compared with the men who manage 
 our own railroad properties, they are un- 
 questionably deficient in practical knowledge, 
 and they make a very sorry contrast so far 
 as intensity of application is concerned. The 
 English roadbeds are thoroughly well built, 
 and the English passenger trains are able to 
 make time which compare favorably with 
 the rate of railroad travel in any other coun- 
 try; but when it comes to handling freight, 
 some of the statistics of the English rail- 
 roads are ludicrous. 
 
 A friend of mine was standing on the 
 towering deck of the Cedric last summer 
 when she came alongside the dock at Liver- 
 pool. By his side was a huge Californian 
 who was making his first European trip and 
 was full of curiosity. He looked far down 
 from the upper deck to the little train of 
 
 469 
 
Business and Education 
 
 coaches that was waiting to carry the pas- 
 sengers up to London, and asked what they 
 might be. He was told that it was the spe- 
 cial train to London. 
 
 " Do people travel in those things here? " 
 the big Californian said. " Why, when I 
 was a boy, I used to play with trains like 
 that." 
 
 The comparison was not inapt. As late 
 as the year 1900, the average freight-train 
 load in England was but fifty tons; that is 
 to say, the average train-load was only equal 
 to the capacity of one of our modern freight 
 cars. There has been some improvement 
 since then, and there is now a marked tend- 
 ency toward heavier equipment, but it all 
 seems like toy equipment when compared 
 with our own heavy trains. 
 
 The various problems of transportation 
 by land and water form one of the most 
 important groups of political questions 
 throughout the Continent. In Austria, Ger- 
 many, France, and Belgium there are few 
 more important political matters current 
 than those affecting transportation. In each 
 of those countries there are most compre- 
 hensive plans in hand for the development of 
 the canal network, and each nation is pre- 
 pared to spend great sums of money in per- 
 fecting its canal system. 
 
 While the famous Kiel Canal was in- 
 470 
 
Political Problems of Europe 
 
 tended primarily for strategic purposes, for 
 enabling the German navy to pass easily 
 from the Baltic to the North Sea and vice 
 versa in time of war, the economic impor- 
 tance of this waterway has grown from year 
 to year and has given a strong impulse to 
 canal building in Germany. In 1899 the 
 Dortmund-Ems Canal, connecting the great 
 iron and coal district of western Germany 
 with the North Sea, was opened; and its 
 traffic has developed rapidly. It has given 
 the coal industry access to Bremen, Ham- 
 burg, and other North Sea ports; and the 
 iron furnaces in the west have found it of 
 the greatest importance to them for bringing 
 in supplies of Swedish ores. In the summer 
 of 1 90 1 the Elbe-Trave Canal, a large water- 
 way connecting the Elbe with the Baltic at 
 Liibeck, was opened. Its importance con- 
 sists in supplying a cheap line of communi- 
 cation between the many manufacturing 
 cities along the Elbe and its branches and all 
 domestic and foreign ports on the Baltic. 
 At Berlin the Teltow Canal will be com- 
 pleted this year. It connects the Spree above 
 the city with the Havel near Potsdam, and 
 has its raison d'etre in facilitating through 
 traffic and transforming a number of Ber- 
 lin's suburbs into manufacturing villages. 
 These last three canals are capable of accom- 
 modating vessels of from 600 to 800 tons, 
 
 471 
 
Business and Education 
 
 and are thus a wide departure from the old 
 canals inherited from an earlier generation. 
 
 The most important canals now projected 
 or under discussion are the so-called Mid- 
 land Canal, to connect the Rhine and the 
 Elbe; the enlargement of existing canals; 
 and a large new canal, replacing the present 
 antiquated one, between Berlin and Stettin. 
 
 Of all these projects by far the most im- 
 portant and at the same time most promising 
 is the Midland, or Rhine-Elbe Canal. It has 
 been under discussion for about ten years. 
 Not until 1899, however, did it take definite 
 shape as a legislative proposition. At that 
 time a bill for its construction was intro- 
 duced into the Prussian Diet and occasioned 
 one of the liveliest political struggles that 
 Germany has had for a decade. 
 
 The chief argument for the canal was, of 
 course, that it would give cheap transporta- 
 tion from the great coal and iron centres of 
 the Rhine-Westphalian country, to all of 
 northeastern Germany. The railways had 
 reached the limit of their freight-carrying 
 capacity, and the building of new ones would 
 be very expensive through the highly devel- 
 oped country traversed by them. The canal, 
 however, met with the stoutest, most deter- 
 mined opposition from the powerful Agra- 
 rian element in the Diet. Their chief argu- 
 ments against it were two: first, its great 
 472 
 
Political Problems of Europe 
 
 cost, and second, — what they pressed still 
 more earnestly, — the possibility that it 
 would facilitate the importation of foreign 
 grain into parts of Germany not now acces- 
 sible to the foreign shippers. These were 
 their ostensible arguments; a still more 
 powerful one was not mentioned aloud in 
 the debates : the conviction that the canal 
 would promote the development of the man- 
 ufacturing and commercial interests of the 
 countr}^ and must inevitably tend toward in- 
 creasing the political and social influence of 
 the population engaged in those pursuits, 
 while the power and influence of the Agra- 
 rian and aristocratic classes must necessarily 
 be diminished. 
 
 The first canal bill was thus voted down, 
 after its enemies had come forward with 
 many other schemes of a more or less local 
 character, which they sought to have incor- 
 porated into it as " compensations " to their 
 localities for whatever damage the great 
 canal might inflict upon them. Neverthe- 
 less, the Government did not give up its 
 plan. Herr Thielen, at that time Prussian 
 Minister of Public Works, announced la- 
 conically : " Built it shall be, for all that " ; 
 and this " gebaut wird er dock " has become 
 a part of the political jargon of the time. 
 
 After waiting two years the Government 
 again came forward with its canal bill'^ but 
 
 473 
 
Business and Education 
 
 with great additions to it. Not only was the 
 Midland Canal provided for, but also the 
 eastern connections and river improvements 
 mentioned above. The Government had 
 adopted the policy of giving " compensa- 
 tions " ; but even that did not placate the 
 Agrarians. They were about to pass an 
 emasculated bill — taking the eastern im- 
 provements, so as to get their agricultural 
 produce shipped cheaply to Berlin and other 
 markets, but killing the Midland Canal en- 
 tirely — when the Government, in May, 
 1 90 1, put an end to the wrangle by with- 
 drawing its bill and proroguing the Diet. 
 
 Last year another canal bill was intro- 
 duced in the Diet. This provided only for 
 an instalment of the Midland Canal, namely, 
 from Bevergern to Hanover, and for the 
 eastern improvements already described. The 
 Government is evidently on the down-grade 
 in the matter of making concessions to the 
 Agrarians. Its plea for the passage of the 
 original canal bill of 1899 had been based 
 partly on military considerations, like facili- 
 tating the transportation of supplies and 
 munitions of war to the west — France is, 
 of course, assumed to be the foe — but now 
 the Government throws away this argument, 
 and is willing to take a truncated canal, 
 which of itself would be of minor importance. 
 It is evidently speculating, however, upon 
 
 474 
 
Political Problems of Europe 
 
 more favorable political conditions in future 
 for completing the canal. 
 
 France is keenly interested in a compre- 
 hensive project for perfecting its canal sys- 
 tem. The French Chamber has voted credits 
 of one hundred and fifty million francs 
 which will be spent in the next few years in 
 repairing and enlarging the present canals; 
 and, in addition, nearly five hundred million 
 francs for the completion of new canals. 
 One half of the funds is to be supplied by 
 the General Government and the other half 
 must be provided by the district benefited. 
 The plans are part of a general project for 
 making a system of waterways throughout 
 France by which goods can be carried unin- 
 terruptedly from Basle and the Rhine to 
 Orleans, Paris, and the seaports. 
 
 Freight and passenger rates on the rail- 
 ways in Prussia give occasion for lively dis- 
 cussion. For some years the great manufac- 
 turers have been actively working for a 
 reduction of freight rates on the state rail- 
 ways. They used the schedule of low rates 
 prevailing on the American roads as one of 
 their best arguments, and they emphasize 
 the great advantage that those rates give 
 American exporters in the world's markets 
 as an obvious reason for a reduction of the 
 German rates. 
 
 When the Prussian Finance Minister, 
 
 475 
 
Business and Education 
 
 Baron von Rheinbaben, was in America, he 
 gave close attention to railway matters, and 
 in recent debates in the Prussian Chamber 
 he gave some interesting results of his com- 
 parison of American and Prussian railway 
 conditions. 
 
 The state roads in Prussia, Baron von 
 Rheinbaben argued, are compelled to charge 
 higher freight rates than American roads, 
 because, in the first place, the initial cost of 
 the German roads was much greater than 
 the American; and, in the second place, the 
 American roads have a much greater vol- 
 ume of freight to move in bulk than do the 
 Prussian railways, and they also have the 
 further advantage of a much longer average 
 haul. He found that the American roads 
 cost to build, on an average, about sixty 
 thousand dollars a mile, while in Germany 
 the cost of railroad building — owing chiefly 
 to the higher price for the right-of-way — 
 was nearly one hundred thousand dollars a 
 mile. Baron von Rheinbaben gave it as his 
 opinion that the present freight rates in 
 America were largely the result of reckless 
 rate wars, and that these rate wars had had 
 such a disastrous effect upon earnings that 
 the average return upon all American rail- 
 way investments is less than two per cent. 
 Where there is no competition he claims that 
 rates are fully as high in the United States 
 476 
 
Political Problems of Europe 
 
 as in Germany, and he also asserted that the 
 comparison was also not unfavorable to Ger- 
 many when the freight rates on all goods 
 of the higher classes were compared. It was 
 only on low-grade bulky shipments, which 
 could be carried . a long distance without 
 breaking bulk, that he found the rates per 
 ton per mile distinctly lower than in Ger- 
 many. He also claimed that the American 
 roads made up, in some measure at least, 
 for their lower freight rates by charging 
 higher rates for their passenger traffic, and 
 he made comparisons which were favorable 
 to the German passenger schedule. 
 
 The argument of the German commercial 
 interests for lower rates in order to assist 
 manufacturers in their export business and 
 aid them in their battle for a foothold in the 
 outside markets has caused some marked 
 modifications in the tariff on goods for ex- 
 port. It is, of course, quite impossible for 
 the Government to satisfy the commercial 
 interests in the matter of rates, and the report 
 of every Chamber of Commerce throughout 
 the empire annually devotes some pages to 
 arguments and recommendations for further 
 reductions. 
 
 Not all of the roads in Germany are under 
 state control, but it seems not improbable 
 that the state will eventually operate. all of 
 the lines. No charters are given for the 
 
 477 
 
Business and Education 
 
 building of roads by private enterprise that 
 do not contain the proviso that they may be 
 acquired by the state after a given number 
 of years. 
 
 While we are inclined to criticise English 
 railroads with much freedom, they have a 
 record in one respect which our own railroad 
 managers must look upon with respect. The 
 gross earnings of the English roads never 
 showed an unfavorable fluctuation, as com- 
 pared with a previous year, of over one and 
 one-half per cent. With all the talk of poor 
 railway management, of decadent industries, 
 and of the economic evils of war, it is con- 
 fusing to find that the commercial develop- 
 ment of Great Britain, measured by her 
 gross railroad trafiic, presents an almost 
 unbroken record of advance. Net earnings, 
 however, have been badly cut into by the 
 rise in wages and by the higher cost of fuel. 
 
 478 
 
THE CURRENCY 
 
 An address delivered before the New York State 
 Bankers' Association, July 5, 1906. 
 
 A COMFORTABLE man is apt to be an opti- 
 mist. A prosperous man is naturally averse 
 to changes. Such a man is likely to be well 
 satisfied with conditions as they exist. He 
 looks with scepticism upon suggestions that 
 would tend to bring into the situation new 
 factors or new conditions. Bankers as a 
 rule are regarded as typically comfortable 
 and prosperous citizens, and perhaps it is 
 small wonder that they are slow to recog- 
 nize serious defects in the conditions sur- 
 rounding them. At least, it is a fact that 
 in the history of American finance, unless 
 spurred to action by some great and imme- 
 diate necessity, there has rarely been a time 
 when bankers have given effective consider- 
 ation to questions of banking or currency. 
 
 There are in our laws few important 
 enactments in relation to money that have 
 not followed, and in large measure been the 
 outgrowth of, some financial calamity. The 
 Bank of the United States was rechartered 
 as a result of the monetary chaos in which 
 the country found itself at the end of the 
 
 479 
 
Business and Education 
 
 War of 1812. The existing Sub-Treasury 
 system was devised because state banks 
 allowed their notes so to depreciate that the 
 banks became unsafe depositories for public 
 funds. The Civil War was responsible for the 
 greenback and for the national bank note. 
 
 In financial legislation we have been op- 
 portunists. We have rarely done anything 
 until forced to do it by misfortune. It is not 
 that we have been extraordinarily conserva- 
 tive, but rather that we have been inactive 
 whenever conditions permitted us to remain 
 inactive. If financial depression or panic 
 pressed us to a point where legislation became 
 imperative, we then legislated with more 
 haste than wisdom. 
 
 It is an easy and natural thing for a banker 
 in these days of prosperity to adopt the prin- 
 ciple of letting well enough alone. Such a 
 banker may say that the growth of his bank's 
 deposits and the size of his stockholders' 
 dividends are satisfactory, and therefore he 
 will not worry himself about currency legis- 
 lation which could hardly make him more 
 prosperous and might make him less. A 
 canvass of the opinions of many bankers 
 might leave doubt as to whether or not there 
 is any currency problem. Certainly there are 
 many successful financiers who will say that 
 there is not. They will tell you that we have 
 a currency as good as gold ; that no one ever 
 
The Currency 
 
 has to consider whether one note is better or 
 worse than another, for all are equally cer- 
 tain of final redemption in gold. They will 
 tell you that there is no lack of currency in 
 a country which has been able to increase its 
 gold stock in ten years from $500,000,000 
 to $1,475,000,000. They may even say that 
 there is not much indication of rigidity in a 
 bank-note system where the volume of note- 
 issues has risen from $215,000,000 to $560,- 
 000,000 in the same ten years. So, at the 
 start of any discussion of the currency, we 
 have doubt thrown on the very existence of a 
 currency problem. We must first examine 
 the question as to whether or not there is 
 any need at all for the discussion. 
 
 A physician counting the pulse-beat and 
 taking the temperature of a patient may fore- 
 tell with certainty an impending crisis in the 
 patient's physical welfare. A temperature 
 of 103 and a corresponding quickening of the 
 pulse-beat means that the patient is in dan- 
 ger and that the cause of that danger must 
 be removed, or sooner or later serious results 
 may ensue. Let me tell you that alternating 
 periods of 100 per cent and 2 per cent money 
 in Wall Street are just as certain indications 
 of a deranged financial system as is the reg- 
 ister of 103° in a clinical thermometer a 
 sure indication of physical disorder. Serious 
 results may not immediately follow in either 
 31 481 
 
Business and Education 
 
 case, but if the evidences of derangement 
 repeatedly recur, it is only a question of time 
 when, in both instances, unfortunate results 
 will follow. 
 
 The physician who finds the pulse-beat too 
 rapid does not necessarily locate the difficulty 
 in the wrist of the patient, for the reason 
 that it is there he finds the evidence that 
 something is wrong; nor would there be 
 more logic in saying that because we have 
 seen periods of lOO per cent money in Wall 
 Street, the seat of the difficulty must be 
 in Wall Street and the remedy should be 
 applied there. The trouble is not with Wall 
 Street; it is fundamental and is inherently 
 related to our unscientific currency laws. 
 
 Periods of excessively high rates for 
 money, recurring seasons of stringency fol- 
 lowing each demand for funds with which 
 to' move the crops, other periods of super- 
 abundance, of gorged bank vaults and in- 
 terest rates falling to a point where the return 
 on a loan is hardly worth the expense of 
 making it, — all these things are significant 
 signs of our imperfect financial system. 
 They point, I believe, with absolute certainty 
 toward .organic weakness. The fundamental 
 causes which lead at one time to manifesta- 
 tions of high rates and at another to abnor- 
 mally low rates, that bring periods of strin- 
 gency followed almost in a day by periods in 
 482 
 
The Currency 
 
 which funds accumulate more rapidly than 
 they can be wisely employed, — the funda- 
 mental causes of such changes are dangerous 
 to permanent prosperity. Just as surely as 
 temperature and pulse-beat may become 
 physical danger signals that the wise man 
 should promptly recognize, just so surely 
 we are receiving periodical warnings in the 
 abnormal register of the pulse of Wall 
 Street money-rates, and in the alternating 
 periods of currency stringency and currency 
 redundancy that may be observed at all the 
 money centres. 
 
 If we sit smugly by and say that we are 
 satisfied with the measure of prosperity 
 which we are having, and that we think we 
 shall go on very well with things as they are, 
 then sooner or later we shall come to another 
 period that is not satisfactory. We shall 
 come to another period such as has preceded 
 the enactment of most of the important ex- 
 isting financial legislation. Then we are 
 likely, in great haste and with little consid- 
 eration, to enact legislation which might bet- 
 ter be undertaken before the necessity for it 
 becomes painfully evident. 
 
 I believe there is the gravest need for 
 legislation which will provide a scientific sys- 
 tem of bank-note currency. I believe too 
 that there is no group of men upon' which 
 the responsibility for such legislation lies so 
 483 
 
Business and Education 
 
 heavily as it does upon the members of the 
 New York State Bankers' Association. Con- 
 gress is not alone to blame if we are lacking 
 in wise currency laws. If financial leaders 
 are utterly oblivious to the necessity for such 
 laws, if bankers, even after they come to the 
 conclusion that legislation is desirable, are 
 unable to reach an agreement as to what sort 
 of legislation is expedient, it is with poor 
 grace that those financial leaders and those 
 bankers blame Congress for failing to enact 
 wise laws. 
 
 There is no association of bankers upon 
 whom the responsibility for a clear under- 
 standing of the currency problem falls with 
 so much force as it does upon the bankers 
 of New York. The bankers of New York 
 will hardly deny that the financial centre of 
 the country is there. With leadership come 
 grave responsibilities. 
 
 New York is the financial centre. New 
 York bankers ought to accept the financial 
 leadership. They ought to have well-consid- 
 ered opinions upon the currency. The finan- 
 cial portion of the whole country looks to 
 New York for this leadership. For New 
 York bankers to say that anything practical 
 in the way of suggestions must, for political 
 reasons, come from some other quarter, is 
 but a cheap way of escaping responsibility. 
 For the financial leaders of New York to 
 484 
 
The Currency 
 
 say that the popular prejudice against Wall 
 Street is so great as to prevent their voices 
 being effectively heard, and that it is useless 
 for them to devote thought to a problem the 
 solution of which must, because of political 
 exigencies, come from some other place, is 
 to offer but lame excuses for failure to do 
 their duty. 
 
 I believe there is little force in these pro- 
 testations behind v^hich New^ York bankers 
 modestly step into the background. Their 
 proper place is at the front in a currency 
 discussion. Financial leaders should be 
 leaders in fact; although in truth not a 
 fev^ of them have given less earnest con- 
 sideration to the great national question 
 of the currency than they have to any one 
 of dozens of corporate underwritings or 
 reorganizations. 
 
 I believe the country is ready to accept the 
 leadership of Nev^ York if New York will 
 accept the responsibilities of her position. If 
 New York bankers will study the currency 
 problem until they are ready to bring forth 
 a plan which they believe is the best for the 
 whole country, — a plan which is not narrow 
 and provincial, a plan free from personal 
 and local bias, — then the judgment of New 
 York bankers will be received by the .rest of 
 the country with respect and consideration. 
 
 If the officers of the institutions repre- 
 485 
 
Business and Education 
 
 sented in the membership of the New York 
 State Bankers' Association will reach sub- 
 stantial agreement in regard to what consti- 
 tutes the currency problem, agreement as 
 to what are the principles underlying its 
 correct solution, and what forms of legis- 
 lative enactment will be wise from the point 
 of view of the whole country, I am perfectly 
 confident that the whole country will soon 
 come into hearty accord with that opinion. 
 The principal reason that New York has 
 been unable to influence the public opinion 
 of the country on financial matters has been 
 that New York bankers have had no well- 
 considered conclusions. They have not ac- 
 cepted the responsibilities of leadership. 
 They have failed to give the subject the 
 consideration it merits. They have reached 
 no agreement in regard to the course which 
 ought to be followed. 
 
 The country believes that when there is 
 real need for legislation that need will be 
 recognized by the leaders of finance. If the 
 bankers of New York would once clearly 
 recognize the need, that fact alone would go 
 a long way toward making the country see 
 the necessity for action. New York bankers 
 may think it is easier to temporize, but the 
 country looks to New York in this instance 
 to accept the responsibilities of leadership. 
 It looks to New York to recognize the neces- 
 486 
 
The Currency 
 
 sity for legislation if urgency exists. It ex- 
 pects New York bankers with unanimity to 
 point out a course that, with the welfare of 
 the whole country in mind, will be the wisest 
 to follow. 
 
 If financial disaster should ever come be- 
 cause we have failed to enact proper legis- 
 lation, the blame for that disaster will lie 
 against the bankers of New York more di- 
 rectly than against any other group of people. 
 The bankers of New York, more than any 
 others, have a duty imposed upon them, the 
 duty of leadership. They cannot escape the 
 responsibilities of leadership. The country 
 will some day understand that the financial 
 leaders have thus far failed to measure up 
 to this responsibility. If that failure ever 
 stands out clearly against a background of 
 financial disturbance, the fact will not be 
 helpful to New York's pre-eminence. 
 
 To my mind we are in a lethargy of suc- 
 cess. We hear paeans of prosperity sweetly 
 sung on every side. Unexampled totals 
 mark the measure of every phase of indus- 
 trial and commercial life. We have engaged 
 in expenditures of capital on a scale so vast 
 that it makes the financial operations of other 
 days seem petty by comparison. Labor was 
 never before so fully or so profitably em- 
 ployed. Business was never more active. 
 And so, some of us say, there surely can be 
 487 
 
Business and Education 
 
 nothing wrong with a situation that gives 
 such evidence of health and growth. 
 
 Truly it is a magnificent organization of 
 business which we have. With the health 
 and vigor of the business condition impressed 
 upon us, it is difficult to understand that an 
 occasional irregularity of the financial pulse- 
 beat may be an important warning. The 
 pulse-beat of abnormal money-rates in Wall 
 Street, rates that are abnormally low or 
 abnormally high, have recurred and passed, 
 and it is easy to believe that they mean 
 nothing serious. It is, perhaps, hard to be- 
 lieve that a brief period of overflowing bank 
 vaults might in the end work toward serious 
 disorganization of this magnificent fabric of 
 business. We see undue accumulations of 
 currency at the financial centres; we see 
 banks that must pay interest on these swol- 
 len deposits reloan the money with nervous 
 haste at any return, no matter how low ; we 
 know that funds in this way may some day 
 become tied up so that there may be the 
 greatest difficulty in liquidating the loans 
 to meet an unexpected demand, but it does 
 not seem to come with much force to the 
 average banker that the legitimate result of 
 such a situation may be financial disaster. 
 
 Even though a clinical thermometer reg- 
 isters a degree or so too high a temperature, 
 a strong man may think it a matter which 
 488 
 
The Currency 
 
 in his strength he may disregard, and so the 
 business community seems to rest in the 
 security of an all-pervading prosperity while 
 the vast financial work of the day continues 
 to be performed by machinery devised two 
 score years ago to fit a then abnormal situa- 
 tion. The free and normal development of 
 our banking system has been prevented by 
 prohibitions which had their birth in the 
 financial exigencies of the Civil War. In 
 every other field of activity we have recog- 
 nized that new conditions made new machin- 
 ery desirable, but the machinery of banking 
 has not been permitted to develop so as to 
 keep pace with the growth of the work it has 
 to do. 
 
 With the increase in the volume of busi- 
 ness done in the United States, and with the 
 growth of the value of the annual product 
 of soil and factories, the margin between the 
 maximum and minimum need for currency 
 has widened. That margin between the 
 greatest amount of currency likely to be 
 needed at one period and the least amount 
 likely to be needed at another, has probably 
 doubled in the last ten or fifteen years as a 
 result of our development. 
 
 At the present time there is reason for be- 
 lieving that the country at certain seasons 
 requires $150,000,000 more currency to 
 transact its business than is required at other 
 489 
 
Business and Education 
 
 seasons. Now remember I am talking of 
 currency, not of credit. To meet this fluctu- 
 ating demand for currency there is abso- 
 lutely no provision in our laws. Our bank 
 notes increase or decrease in volume as a 
 result of the fluctuation in the market price 
 of Government bonds, and there is practically 
 no relation between that price and the cur- 
 rent demand for currency. Our banks are 
 permitted to give freely to their customers 
 credits in the shape of deposits, but when a 
 customer wants to convert that credit into 
 the form of a circulating note, he can only 
 be accommodated by taking from the vaults 
 of the bank its reserve money. 
 
 I believe the first principle to recognize is 
 that there is not an essential difference be- 
 tween a bank credit in the form of a deposit 
 and a bank credit in the form of currency. 
 Certain safeguards must be thrown around 
 a circulating note that are not required for 
 the protection of a deposit, but with that ex- 
 ception in view, this principle stands, I be- 
 lieve, as perhaps the most important one to 
 recognize in a currency discussion, — that 
 there is not an essential difference between 
 a bank note and a bank deposit, and that the 
 customer of a bank ought, under satisfac- 
 tory safeguards, to be able to convert one 
 into the other at will. 
 
 One other principle that has been fatally 
 490 
 
The Currency 
 
 lost sight of in half the discussions of the 
 currency, is the principle that adequate re- 
 demption facilities are a certain bar to an 
 over-issue of circulating notes. People talk 
 of the country being flooded with an asset 
 currency. With adequate redemption facil- 
 ities such a thing is inconceivable. Let any 
 student of the currency question keep in mind 
 the idea of providing absolutely adequate re- 
 demption facilities, so that a bank note will 
 never stay in circulation a day beyond the 
 time when a bank credit is no longer pre- 
 ferred in that form rather than in the form 
 of a deposit, and half the difficulties of the 
 inquiry are at once cleared away. 
 
 This is, of course, no place for a thorough 
 discussion of the currency question. I have 
 no plan to propose. The one thing that I 
 want to urge is the importance of providing 
 a scientific bank-note currency if we wish an 
 indefinite continuance of prosperity, and fur- 
 ther to emphasize the responsibility which 
 rests particularly upon the bankers of New 
 York in presenting a plan for such a cur- 
 rency. The plan may take one of half a 
 dozen forms. Perhaps the best one, were it 
 politically possible, would be the creation of 
 a Government bank having the power of 
 issue, whose sole business would be in its 
 relations with other banks and whose chief 
 operations would be the re-discounting for 
 491 
 
Business and Education 
 
 other banks. I do not mean that any ex- 
 isting institution could be metamorphosed 
 into such a central bank. It would have to 
 be freshly organized from the beginning, its 
 control would need to be largely in the hands 
 of the Government, and its ownership widely 
 distributed among banking interests through- 
 out the country. The principles of a scien- 
 tific asset currency could well be worked out 
 through the medium of such an institution, 
 as the experience of Germany eloquently 
 testifies, but they can undoubtedly be worked 
 out in some other way. 
 
 The fear which men so commonly have of 
 giving a larger power of note-issue to small 
 national banks will largely disappear when 
 the opponents of asset currency have once 
 fairly in their minds what the result will be 
 of providing adequate redemption facilities. 
 That a plan can be devised which will safely 
 permit every national bank to issue a certain 
 amount of notes not secured by Government 
 bonds, I have no doubt, and I am inclined 
 to think that it is along that line that legis- 
 lation is most likely to be obtained, although 
 perhaps it is not the ideal solution. 
 
 The thing of which I am absolutely cer- 
 tain, however, is that a solution of the whole 
 problem could be attained wisely, promptly, 
 and easily if bankers would give to a con- 
 sideration of the subject anything like the 
 492 
 
The Currency 
 
 attention which it merits. And again I say, 
 the responsibihty is on the bankers of New 
 York. You cannot hide behind Congress to 
 avoid the responsibihty. You cannot shift 
 the responsibihty to the shoulders of your 
 associates in the West. You are the finan- 
 cial leaders, and the responsibility of leader- 
 ship is yours. 
 
 493 
 
BANKING DEVELOPMENTS 
 
 An address delivered before the Illinois Bankers' 
 Association, at the Louisiana Purchase Exposi- 
 tion, St. Louis, October, 1904. 
 
 It has seemed to me especially fitting to 
 attempt to review, in the briefest manner, a 
 few of the figures illustrative of our material 
 progress, and to try to draw some deductions 
 from them. In order to get a setting for our 
 comparisons, let us for a moment glance 
 back at conditions during the last ten years. 
 We will remember that we were, ten years 
 ago, just emerging from the depression of 
 the panic year of 1893, and that we were 
 facing a great political and economic con- 
 flict over the silver issue. The whole world 
 was filled with distrust in regard to the future 
 of our standard of value, and the chilling 
 shadow of that distrust was falling heavily 
 on our commerce and finances. 
 
 Later came the definite verdict of the 
 people, declaring for a sound currency, and 
 following that began an unexampled era of 
 prosperity such as no other country, in any 
 age, has ever known. The expansion went 
 beyond all the experiences of men of affairs. 
 We had learned lessons of economy, of care- 
 494 
 
Banking Developments 
 
 ful management, and of cheap production 
 in the depression which followed the panic 
 of 1893, and now we suddenly wakened to 
 the fact that we had obtained a grasp on the 
 markets of the world. Our exports of manu- 
 factures ran up from $183,000,000 to $433,- 
 000,000 in half a dozen years, and this in- 
 crease of $250,000,000 in the annual average 
 of our exports of manufactured products 
 made Europe stand aghast at what was de- 
 nominated the American commercial inva- 
 sion. Our general foreign trade balance 
 assumed such totals as to cause economists 
 seriously to consider what was to happen to 
 the rest of the industrial world if this march 
 of progress went on. In half a dozen years 
 we piled up against other countries a trade 
 balance in our favor of more than $2,600,- 
 000,000, — a trade balance far larger than 
 the net trade balance had been from the be- 
 ginning of our government down to the time 
 when this remarkable expansion started. 
 
 And then we made mistakes. We were 
 in the midst of a prosperity so great that it 
 went beyond the experience of the most ex- 
 perienced. With the flood-tide of this pros- 
 perity covering all of the old landmarks, it 
 was small wonder that there were blunders 
 made in steering the craft of business. We 
 ran into excesses, extravagances, and mis- 
 calculations. Capital made mistakes of over- 
 495 
 
Business and Education 
 
 capitalization; labor made mistakes of ar- 
 bitrary and unwise demands; everybody 
 made mistakes of extravagance. Producers 
 made errors in estimating the demand, and 
 made miscalculations in the multiplication of 
 their productive capacity. There was a sur- 
 plus demand above our productive capacity, 
 and that demand went knocking at the door 
 of first one factory, then another and an- 
 other, producing the impression on the mind 
 of each individual manufacturer that the 
 demand legitimately pressing upon him war- 
 ranted him in doubling his plant ; and when 
 every one started to double his productive 
 capacity, capacity soon ran ahead of demand. 
 The railroads were caught in much the 
 same situation. They made huge engage- 
 ments for expenditures which they felt were 
 necessary in order to handle the traffic that 
 was pressing on them. For the time being, 
 far too great a portion of liquid capital was 
 absorbed into fixed forms of investment. Di- 
 rectly and indirectly, bank credits which were 
 payable on demand were, in a dangerous 
 proportion, converted into new manufactur- 
 ing plants and into new railroads, tracks, 
 equipment, and terminals. Bank reserves 
 fell until they were a danger signal pointing 
 with certainty to the need for more conserv- 
 ative administration. Banks applied the 
 financial brakes by higher and higher inter- 
 496 
 
Banking Developments 
 
 est rates. Stock-market values, unduly in- 
 flated by the spirit of optimism which was 
 all-pervading, began to melt. 
 
 Just two years ago this turn came. The 
 decline which followed cut a billion dollars 
 off the value of securities in a few months. 
 The vast readjustment which such a change 
 in values made necessary was accomplished, 
 however, without panic, without great fail- 
 ures, and with few of those disasters which 
 usually are the features of such a period. 
 The way the country met the situation stands 
 to-day as the most striking monument we 
 have yet reared to our increasing wealth and 
 financial strength. 
 
 We have grown used to cycles in business ; 
 to regular periods of expansion followed by 
 years of depression. These cycles have been 
 of varying length, but, generally speaking, 
 a decade would measure the time from one 
 upturn to the next. Men of experience, 
 therefore, expected that the depression which 
 started two years ago would have to run 
 through something like the usual course, 
 and would last at least for three or four 
 years before we had again learned lessons 
 of economy and had settled down to a 
 solid basis upon which to rear a new struc- 
 ture of prosperity. I have said that the 
 experience of the most experienced had 
 been set at naught by the rising tide that 
 32 497 
 
Business and Education 
 
 had marked the last great wave. Experi- 
 ence proved a poor guide in measuring the 
 upturn; will it likewise be at fault in 
 measuring the period of depression? Is 
 the depression to be of shorter duration 
 than in former business cycles? Have we 
 already reached, after two years' down- 
 grade, a level from which we can again start 
 up to new heights of business expansion ? I 
 cannot answer these questions, but I want to 
 present a few statistics that I believe have 
 some bearing upon them. 
 
 What I have now to say has absolutely no 
 application to the immediate course of the 
 stock market. Whether stocks will be higher 
 or lower to-morrow, next week, or next 
 month, I do not know, nor am I particularly 
 concerned. The fluctuations which mark the 
 little surface waves are not matters of such 
 moment. It has seemed to me, however, 
 that it will be interesting, in view of the 
 present condition of business affairs, and 
 appropriate, considering the place which has 
 been chosen for this meeting, to make some 
 comparison of business statistics to-day with 
 conditions of ten years ago, and note what 
 our position will be ten years hence, if the 
 material development of the United States 
 is to go on at approximately the same rate of 
 progress which has marked the development 
 of the last ten years. I believe it is fair to 
 498 
 
Barik'mg Developments 
 
 assume that, generally speaking, something 
 like that rate of progress will be maintained. 
 Certainly the outlook to-day, with currency 
 uncertainty given way to a securely fixed 
 standard of value, with a sound and satis- 
 factory banking position, and with no left- 
 over panic consequences to be reckoned with, 
 as was the case ten years ago — certainly 
 such a situation offers reason for the pre- 
 sumption that we are in as favorable a posi- 
 tion for development in the next ten years' 
 period as we were at the beginning of the 
 last. 
 
 Ten years ago we had a population of 
 sixty-eight millions; to-day it is eighty-two 
 millions ; and ten years hence, with this ratio 
 of increase, the population of the United 
 States will be ninety-eight millions. We 
 shall in the next ten years add to our number 
 a population equal to one-half that of France. 
 Such growth in numbers, matched to our 
 wealth of resources, makes the sort of mate- 
 rial out of which to shape an entirely new 
 level of statistics marking the country's ma- 
 terial progress. 
 
 The total wealth of the United States, 
 according to the best estimates which we 
 have, has risen in ten years from $75,000,- 
 000,000 to $106,000,000,000. Ten years 
 more of increase will make the wealth of 
 this country $140,000,000,000. When we 
 499 
 
Business and Education 
 
 remember that such a total will compare with 
 the total of $42,000,000,000 in 1880, the 
 accumulation is seen to be at a rate almost 
 incredible. 
 
 Our money stock has increased in ten 
 years from $1,600,000,000 to more than 
 $2,500,000,000, and every dollar of it is 
 sound, and every dollar of it is on a parity 
 with gold. The actual gold stock itself in- 
 creased in that period $301,000,000. If the 
 money stock increases in the next ten years 
 in the same amount, we shall have $3,400,- 
 000,000 of circulation at the end of that 
 period. Incidentally, it is interesting to note 
 that national bank-note circulation in the 
 last ten years has risen from $172,000,000 
 to $41 1,000,000, and one might stop to won- 
 der, if this rate of increase is to go on, where 
 the Government bonds are to come from in 
 the next ten years to provide for a further 
 increase of national-bank circulation of 
 $250,000,000 or $300,000,000. Such in- 
 quiry points inevitably to the necessity of 
 some change in our national banking laws 
 in the due course of time. 
 
 National-bank deposits in ten years have 
 doubled, going up from $1,600,000,000 to 
 $3,300,000,000. State-bank deposits in that 
 time have trebled, increasing from about 
 $660,000,000 to $1,900,000,000. A care- 
 ful estimate of the total bank deposits in 
 500 
 
Banking Developments 
 
 the United States to-day — national, state, 
 savings banks, and trust companies — brings 
 them up to a grand total of $10,000,000,000, 
 and that compares with a total ten years ago 
 of $4,600,000,000. The increase has been 
 well over double. Will it double again, and 
 shall we have $20,000,000,000 deposits in 
 1914? If we only make the same actual 
 gain, we shall have over $15,000,000,000; 
 and, barring any unexpected interference 
 with our expansion, I believe that that is a 
 conservative figure and inside the probabil- 
 ities. Take the case of the institutions that 
 each of you represents. Do you not antici- 
 pate as much growth in the next ten years as 
 you have had in the last? If you do, and if 
 those anticipations are fulfilled, and the in- 
 crease is general, the total of banking re- 
 sources at the end of another decade must 
 certainly be an astounding one. Your own 
 banks in Illinois have far outstripped the 
 average of the country. The total deposits 
 of national and state banks in Illinois have 
 increased in ten years from $213,000,000 to 
 $572,000,000. Why should they not make 
 similar gain in the next ten years and Illinois 
 deposits stand at $800,000,000? 
 
 In ten years we have seen railroad gross 
 
 earnings increase from $1,200,000,000 to 
 
 $1,900,000,000. With only an equal actual 
 
 increase, we shall have railroad earnings of 
 
 501 
 
Business and Education 
 
 $2,600,000,000 ten years from now; while, 
 if the percentage of increase of the last dec- 
 ade were to be maintained, the figures 
 would reach $3,000,000,000. The lower 
 total is the fairer presumption. With gross 
 earnings reaching such a figure, however, 
 with constantly improving methods of ad- 
 ministration, and with more perfect roadbeds 
 and equipment, we may expect to see steadily 
 increasing economy of operation. Is it not 
 fair to presume, then, that these vast gross 
 earnings, coupled with a decreasing ratio of 
 expenses, will most certainly provide for an 
 increasingly satisfactory return upon rail- 
 road investments? 
 
 I will not weary you with too many statis- 
 tics. If you are interested in pursuing such 
 a line of inquiry, get the Monthly Summary 
 of the Bureau of Statistics from Washington. 
 In its way it is as great an exposition of 
 statistics as is this World's Fair an exposi- 
 tion of material things, and it will well repay 
 study. You will see from the figures which 
 you will find there, for instance, that our 
 foreign trade, which ten years ago footed 
 $1,500,000,000, was this year $2,450,000,000. 
 Our exports of agricultural products may not 
 increase much from present figures, but it 
 is safe to say that our increasing command of 
 foreign markets for our manufactures will 
 perhaps bring the total of our foreign trade 
 502 
 
UMlVEkolTY 
 Banking Developments \^ _ ^^ , k 
 
 to $3,000,000,000 in the next decade. You 
 will see that national-bank loans and dis- 
 counts, which were under $2,000,000,000 
 ten years ago, are now $3,725,000,000. An 
 equal increase would carry us above, $4,- 
 500,000,000 in national-bank loans ten years 
 hence. Let us hope those loans will not in- 
 crease with unconservative rapidity. Bank 
 clearings of the country have increased two 
 and one-half times in ten years. If progress 
 w^ere to continue at this rate, we should show 
 bank clearings of more than $200,000,000,- 
 000 at the end of the next ten years. You 
 will find that the total mineral production 
 of the United States has increased in value 
 from $650,000,000 to double that figure. If 
 there is reason to suppose that this increase 
 will continue, we shall yet make a record of 
 $2,000,000,000 as the annual product of our 
 mines. Our production of steel has doubled 
 in ten years. The value of the product 
 of our cotton mills increased 52 per cent. 
 The volume of business, as measured by 
 the receipts of the Post-Ofiice Department, 
 shows almost 100 per cent increase, those 
 receipts coming up from $75,000,000 in 
 1894 to $144,000,000 for the present fiscal 
 year. 
 
 These illustrations might be indefinitely 
 continued, but I have given enough to point 
 out the one conclusion which I wish to em- 
 
 503 
 
Business and Education 
 
 phasize, and that is that you men who admin- 
 ister the great banking resources of the 
 State of IlHnois need to keep constantly 
 before you some of these broad statistics of 
 our material progress. Their study cannot 
 help but be encouraging and useful. They 
 must lead to the conclusion that, in the com- 
 bination of population and natural resources, 
 we stand, as a country, absolutely unrivalled, 
 and with nothing to balk our progress but 
 our own mistakes. 
 
 If we look abroad, we see England strug- 
 gling under most adverse conditions, a great 
 portion of her industrial population actually 
 underfed, and a million people receiving aid 
 under her poor-laws. We see in France a 
 nation grown rich by thrift, a nation where 
 economy has become a disease, and in the 
 growth of it all initiative for new accom- 
 plishments has been lost. In Italy we see a 
 great industrial awakening, but conditions 
 still so hard that a large percentage of our 
 800,000 of immigrants annually come from 
 that country. In Germany we find a barren 
 land yielding from the fields most meagrely 
 and from the mines hardly at all, but with a 
 population whose energy, intelligence, and 
 education have built out of most discourag- 
 ing conditions a vast industrial organization 
 which is our one real competitor in the mar- 
 kets of the world. If we will accept from 
 504 
 
Banking Developments 
 
 the Germans something of their scientific 
 methods, their carefulness, their thorough- 
 ness, and their wilHngness for hard work, 
 and bring such quahties to bear upon our 
 own resources, the figures which I have been 
 quoting as possibihties of the future will yet 
 look small. 
 
 These statements are generalities intended 
 to apply only over considerable periods. 
 That the next ten years are to see to some 
 extent a repetition of the development of the 
 last ten is, I think, a fair presumption. 
 Whether that upward movement has already 
 started, or whether it is to start next month 
 or next year, I do not profess to know, and 
 nothing that I have said should be taken as 
 indicating the fixing of a definite date in 
 regard to returning prosperity. Business to- 
 day is unsatisfactory in many respects. The 
 memories and sore spots which the declines 
 of the last two years ^have left will make 
 many people slow in accepting the conclu- 
 sion that we are ready for another great 
 commercial advance. We are always in 
 danger of overdoing, and we may for the 
 moment, perhaps, have already made that 
 error, for prices have shown most substan- 
 tial recovery — a recovery certainly in ad- 
 vance of what would be warranted by the 
 present actual conditions. It is safe to say, 
 however, that we are to-day in a sound finan- 
 505 
 
Business and Education 
 
 cial position. Bank reserves are ample; at 
 least national-bank reserves are. Bank loans 
 and discounts are not of a character to offer 
 grounds for any general criticism. We have 
 probably fully paid off the foreign indebted- 
 ness in the shape of finance bills which two 
 or three years ago had reached large totals. 
 We are in a position to command interna- 
 tional credits, and to bring gold to strengthen 
 our reserves, if we should need it. We have a 
 corn crop that is worth $1,000,000,000, a cot- 
 ton crop worth $600,000,000, and a wheat 
 crop worth $412,000,000. The value of these 
 three crops alone this year is $2,012,000,000, 
 which compares with the value of these same 
 crops ten years ago of $1,067,000,000. 
 
 We have learned some valuable lessons in 
 finance, and the memory of the last two 
 years, reminding us of the results of the 
 mistakes made at the height of the boom 
 period, is still clearly enough in our minds 
 to warrant the belief that we shall administer 
 our financial affairs with a fair degree of 
 common-sense for some time to come. We 
 have learned that there is not a new political 
 economy, but that, in spite of our vast re- 
 sources, our growing wealth, and our recu- 
 perative power, we must obey the same old 
 sound laws of finance and commerce that 
 have long ruled. 
 
 I am convinced that the possibilities of 
 506 
 
Banking Developments 
 
 another great business expansion are at 
 hand, but connected with those great pos- 
 sibihties are great responsibihties. Those 
 responsibihties are largely on our shoulders. 
 The bankers of this country will, in the wis- 
 dom of the administration of their trust, or 
 in their lack of wisdom, have great influence 
 on the beginning, the extent, and the length 
 of this next period of prosperity. 
 
 I cannot too strongly emphasize my be- 
 lief in the importance of having our banks 
 and financial interests prepared to play their 
 proper part in the return of prosperity and 
 the further development of business. We 
 need banking laws that are wise and bank- 
 ing administration that is wise. Encourage- 
 ment to a wild speculative boom, at this time, 
 when improvement is justified more by hopes 
 and possibilities than by immediate actual 
 conditions, might set the whole period of re- 
 covery back a month, six months, a year. A 
 great speculative boom now is not what is 
 needed. It is indeed one of the special dan- 
 gers. If bankers in the great centres are not 
 conservative in the inducements they hold 
 out to secure deposits, if they accumulate 
 great stocks of money which will loan at 
 such low rates as to encourage unduly a 
 speculative spirit, they will strike a blow at 
 this returning prosperity which may long 
 delay its coming. 
 
 507 
 
Business and Education 
 
 There is another danger in the banking 
 situation. During the height of the last 
 commercial expansion people so lost their 
 heads that they excused extravagant and 
 foolish actions by saying that there is a 
 new political economy, that the old laws no 
 longer apply under the new conditions. 
 They were wrong, lamentably wrong. And 
 to-day a thing for bankers of this country to 
 remember is that there have been discovered 
 no new laws of finance which make banking 
 without reserves safe and conservative. A 
 bank holding money repayable on demand 
 must keep a fair proportion of that money in 
 its vaults. The experience of all financial 
 history points to that necessity. Whenever 
 that law has been violated, disaster has ul- 
 timately followed. Do not permit your- 
 selves to believe that there has been any new 
 discovery in finance which will safely permit 
 banking without reserves. 
 
 I believe that the conditions are again 
 favorable to a return of prosperity. I be- 
 lieve it is time for optimism. So long as 
 we remember in humbleness our mistakes 
 and hold close to a proper conservatism, the 
 course of financial events seems likely to fol- 
 low only one general direction, and that is 
 toward improvement, toward expanding 
 business, and toward better times. 
 
 508 
 
THE LESSONS OF OUR WAR 
 LOAN 
 
 The Forum, 1898; written when the author was As- 
 sistant Secretary of the Treasury. 
 
 The United States has floated a $200,000,- 
 000 loan at the lowest rate of interest at 
 which a nation ever disposed of its obliga- 
 tions in time of war. It has received sub- 
 scriptions of $7 for every $1 of bonds offered 
 the public, or, roundly, $1,400,000,000 for 
 the $200,000,000 loan. Under the provi- 
 sions of the law as passed by Congress, every 
 subscription made by a syndicate, corpora- 
 tion, or association was rejected; Congress 
 having taken the broad ground that individ- 
 uals should have preference. Every sub- 
 scriber asking for more than $4,500 received 
 no portion of his subscription, as the entire 
 loan was absorbed by individual offers for 
 smaller amounts ; the allotment being made 
 under the provisions of the law so that the 
 humble investors had preference over the 
 richer ones. Half of the loan, more than 
 $100,000,000, has gone to 230,000 people, 
 each of whom subscribed for $500 or less. 
 The number of persons who applied for the 
 bonds reached 320,000; and if they were 
 
 509 
 
Business and Education 
 
 mustered into military ranks they would out- 
 number by almost 100,000 our army of regu- 
 lars and volunteers enlisted for the Spanish- 
 American War. Standing at dress, side by 
 side, they would form a line one hundred 
 and twenty miles long, — a line that would 
 reach clear across Cuba at its broadest point 
 and half-way back, or from Washington to 
 Philadelphia. Had all these investors pre- 
 sented their subscriptions with the currency 
 attached, it would have required three times 
 the cash held in the vaults of the thirty-six 
 hundred national banks of the country. 
 Some idea of the enormous total of $1,400,- 
 000,000 subscribed by these 320,000 persons 
 may be gained by a comparison with the 
 amount of money in circulation in the 
 United States on August i, 1898. On that 
 date the money of all kinds in circulation 
 aggregated $1,809,198,000. If the United 
 States had accepted in currency all the sub- 
 scriptions made, the Treasury would have 
 absorbed seven-ninths of all the money in 
 circulation. 
 
 More than $100,000,000 in cash was 
 turned into the Treasury as the subscriptions 
 were made, and before the delivery of bonds 
 was begrin. The remaining $100,000,000 is 
 being gathered in as fast as the augmented 
 machinery of the Treasury can collect it. 
 The handling of this vast sum has been so 
 510 
 
Lessons of Our War Loan 
 
 careful that rates of interest in the New 
 York money market, after the books were 
 closed and the bonds began to be issued, were 
 as low as ij/^ per cent, i.e.^ materially lower 
 than before the loan was offered. The whole 
 transaction was accomplished with scarcely 
 a perceptible movement at the money cen- 
 tres, and absolutely without creating the 
 smallest degree of stringency or congestion. 
 
 Such illustrations as these give some in- 
 dication of the success of this first experiment 
 of ours with a really popular loan. It has 
 been a phenomenal success; and it presents 
 a good many new features in financial affairs. 
 It furnishes the only real test we have ever 
 had of a popular subscription. It exhibits 
 the credit of the United States in the most 
 favorable light in which it has ever been 
 seen. It shows the investing strength of the 
 people to be greater than the most optimistic 
 would have supposed, and our gain in finan- 
 cial prestige must be regarded as one of the 
 foremost results of the war. 
 
 From the time when Congress, with 
 hardly a word of debate, appropriated $50,- 
 000,000 for the national defence, to the act- 
 ual beginning of hostilities, scarcely a day 
 passed without some event which made it 
 apparent that the Government revenues must 
 be augmented by loan. The Bill to provide 
 ways and means to meet war expenditures 
 511 
 
Business and Education 
 
 was a measure which showed far more 
 courage than legislators are apt to evince 
 when such a crisis comes. It was a measure 
 that laid the tax-collector's hand on every 
 business — in fact upon every citizen — and 
 was designed to draw into the Treasury an 
 enormous additional revenue. The operation 
 of a revenue law is too slow, however, for 
 such exigencies as war; and, with expenses 
 reaching an average of $1,250,000 a day, the 
 necessity for an issue of bonds was plain. 
 When it became known that Congress con- 
 templated fixing the rate of interest at 3 per 
 cent there was a quiet protest from some of 
 the great financiers. Three per cent, they 
 declared, was too low. They pointed to the 
 rate at which former bond issues had been 
 made in time of peace. They called atten- 
 tion to the fact that the 4 per cent bonds of 
 1925 were selling as low as wjYa, a basis 
 which would net the investor nearly 3^ per 
 cent. They asked why heavy subscriptions 
 to a short-term bond at 3 per cent should be 
 expected, when one could go into the market 
 and buy a bond of exactly as good character, 
 and with a far longer term to run, on a basis 
 that would net 3>i per cent. Not a few of 
 the financial leaders were sore in spirit over 
 the criticism that had followed them after 
 the last Government bond sale. They felt 
 that they had come forward then at a time 
 512 
 
Lessons of Our War Loan 
 
 when the Treasury was in great peril, and 
 had furnished money that was badly needed, 
 and, in addition to furnishing money, had 
 undertaken a most expensive contract to pre- 
 vent gold exports. Their profits had been 
 but a fraction of what the public imagined 
 them to be; and the execrations that had 
 been heaped upon them had left little desire 
 at this time to turn in and, from purely 
 patriotic motives, aid the Treasury in its 
 financing. 
 
 The Secretary of the Treasury saw some 
 of the leading financiers who held these 
 views. He met their objections so com- 
 pletely that his suggestion, that the great 
 financial interests should show to the country 
 a broad-spirited patriotism such as would 
 quiet the host of critics, was received with 
 surprising good-will. His suggestion was 
 one that might at first view seem almost 
 quixotic, considering the rate at which Gov- 
 ernment bonds were then selling. It was 
 that some of the important financial interests 
 should come together and guarantee, without 
 profit to themselves, the absolute success of 
 the loan, — that they should agree to take all 
 or any part that should be unsubscribed by 
 the people. This underwriting of $200,000,- 
 000 of securities at a price substantially 
 higher than that at which similar securities 
 were selling in the market was to be done 
 33 513 
 
Business and Education 
 
 solely for the good that would follow such 
 an exhibition of disinterested and patriotic 
 financiering. 
 
 The result of Secretary Gage's suggestions 
 was, that on the morning of the day the sub- 
 scription opened two syndicate bids were re- 
 ceived: one from the National City Bank, 
 Vermilye & Co., and the Central Trust Com- 
 pany, and the other from a syndicate headed 
 by Mr. J. Pierpont Morgan. Each of these 
 syndicates agreed to take all or any part of 
 the issue not taken by the public. That 
 guarantee put spirit into the loan from the 
 first moment. People said : "If the New 
 York bankers stand ready to take the whole 
 loan twice over, it must be a good thing to 
 have." 
 
 There were two reasons why the subscrip- 
 tion should be an assured success, in spite 
 of the fact that shortly before it opened Gov- 
 ernment bonds were selling on a 3^^ per cent 
 basis. One was that, although there were 
 marked quotations for the 4 per cent bonds 
 on that basis, it could not be called a settled 
 or fairly established market price. A few 
 bonds could no doubt have been bought at 
 that price. Any attempt to purchase a large 
 block would have sharply advanced the quo- 
 tation, although it is probably equally true 
 that a large block thrown upon the market 
 would have depressed the price. The reason 
 514 
 
Lessons of Our War Loan 
 
 why it was certain that a market could be 
 found for the whole issue on a 3 per cent 
 basis was in the use which could be made of 
 the bonds by national banks as a basis for 
 new circulation, or to replace the old 4's and 
 5's which banks had on deposit to secure 
 their circulating notes. 
 
 The superiority from the standpoint of 
 profit of the new 3-per-cents over the 4-per- 
 cents of 1925 as a basis for national-bank 
 circulation is shown by the following table: 
 
 TYPICAL ILLUSTRATION OF |ioo,ooo 
 INVESTMENT 
 
 3's of 1908-18 at par 
 
 4's of 1925 at 12 7 J 
 
 @ 128 
 
 Capital invested . . . 
 Par value of bonds pur- 
 chased 
 
 Circulation . . . . 
 Receipts : 
 
 Interest on circulation 
 (6 per cent) . . . 
 Interest on bonds de- 
 posited . . . . 
 
 Gross receipts . . 
 Deductions : 
 
 Tax 
 
 Expenses 
 
 Sinking fund .... 
 
 Total deductions . 
 
 $100,000.00 
 
 100,000.00 
 90,000.00 
 
 Net receipts 
 
 Interest on capital in- 
 vested (6 per cent) . . 
 
 Profit on circulation : 
 
 Amount 
 
 Per cent 
 
 5,400.00 
 3,000.00 
 
 900.00 
 62.50 
 
 $8,400.00 
 
 962.50 
 
 $7>437-So 
 6,000.00 
 
 $100,000.00 
 
 78,354-55 
 70,519.09 
 
 4,231.15 
 
 
 3,134-18 
 
 
 
 «7>36S.33 
 
 900.00 
 62.50 
 
 337-67 
 
 
 
 1,300.17 
 
 
 $6,065.16 
 
 
 6,000.00 
 
 Advantage of 3's at par over 4's at 
 per cent. 
 
 $1,437-5° 
 
 27i @ 128 
 
 $65.16 
 0.065 
 
 August I, 1898, 1.372 
 
 515 
 
Business and Education 
 
 The Government Actuary, before the 
 books of the loan were opened, had figured 
 for the Secretary that the new 3 per cent 
 bonds at par would be equivalent, as a basis 
 for national-bank circulation, to the 4-per- 
 cents of 1925, if the latter had been quoted 
 at so low a figure as 1 1 1 . At that time the 
 actual quotations of the 4-per-cents of 1925 
 ranged from 120 to 123. 
 
 The 3-per-cents of 1908-18 purchased at 
 par, August i, 1898, as security for circula- 
 tion of bank notes, will yield a profit of 1.437 
 per cent. The 4's of 1925, in order to yield 
 the same profit, would need to be purchased 
 at 11O5V ; whereas they were quoted August 
 I, 1898, at the high rate of I27>4 @ 128. 
 
 Congress introduced a novel element into 
 Government financiering when it provided 
 that '' in allotting said bonds the several sub- 
 scriptions of individuals shall be first ac- 
 cepted, and the subscriptions for the lowest 
 amounts shall be first allotted." 
 
 This latter provision brought a new ele- 
 ment of chance into the loan, such as had 
 never been in a bond issue before. No one 
 could tell just where the line would be 
 drawn below which all individual subscrip- 
 tions would be filled in full, and above which 
 no subscriptions would receive allotments. 
 It was evident that the Treasury could not 
 ask full payment to accompany the subscrip- 
 516 
 
Lessons of Our War Loan 
 
 tions, because of the impossibility of saying 
 whether an allotment would be made to a 
 subscriber. It was plain, too, that the plan 
 under which the previous bond issue had 
 been regulated, permitting bids to be made 
 without any deposit of earnest money, would 
 never do. A medium was struck. It was 
 decided that by no chance could the bona 
 fide subscriptions of $500 and less absorb 
 the total amount. Therefore announcement 
 was made that all subscribers for $500 or 
 less should make full payment; and the 
 Department promised that an allotment of 
 bonds would be absolutely made on every 
 such subscription. Those who subscribed 
 for more than $500 were required to deposit 
 2 per cent thereof to insure the good faith 
 of the application. Allotments in this class 
 were to be made inversely to the size of 
 the subscription. The most sanguine friends 
 of the popular loan idea hardly anticipated 
 that the subscriptions for $500 and less 
 would reach an aggregate of over $30,000,- 
 000 or $40,000,000; and many good judges 
 placed the limit well below those figures. 
 As a matter of fact, the subscriptions for 
 $500 and less reached an aggregate of a little 
 over $101,000,000. 
 
 It was evident soon after the books of the 
 loan were opened that persons who wished 
 blocks of the bonds were getting individuals 
 
 517 
 
Business and Education 
 
 to subscribe in their interest. The Treasury 
 Department immediately interposed such 
 obstacles as it could command in the way 
 of such plans. In every case where blocks 
 of subscriptions came in accompanied by 
 powers of attorney authorizing banks or any 
 person or interest other than the subscriber 
 to receive the bonds, the subscription was 
 held in suspense until the bank or person 
 sending in such blocks of subscriptions made 
 answer unequivocally as to whether or not 
 the subscriptions were bona fide and solely 
 in the interest of the persons signing the 
 subscription blanks, and whether the bank 
 or any person other than the subscriber had 
 an ulterior interest in the subscription. More 
 than $40,000,000 of subscriptions were thus 
 suspended, and the persons sending them 
 were catechised as to their bona fide char- 
 acter. It was, of course, quite impossible 
 for the Treasury to organize itself into a 
 trial court and take evidence. The Depart- 
 ment was forced to accept the statements 
 made by the subscribers, although it used 
 with good effect the machinery of the Secret 
 Service in verifying such statements. Sub- 
 scriptions representing millions were re- 
 turned to the senders, who frankly admitted 
 that they had misunderstood the conditions 
 and wished no improper advantage. It is not 
 claimed that the subscription list was kept 
 
 518 
 
Lessons of Our War Loan 
 
 entirely clean from subscriptions received in 
 the interest of persons other than the sub- 
 scribers. Undoubtedly false statements were 
 in some cases made, and blocks of bonds 
 secured in a way not within the spirit of the 
 law ; but it is a fact that the most strenuous 
 efforts were used at every stage to prevent 
 persons having no real interest in the sub- 
 scription from subscribing and immediately 
 assigning their interests to some banking 
 institution. 
 
 As the subscription advanced, quotations 
 began to be made for the future delivery of 
 the bonds. Trades were made at 102, — 
 103, — and finally as high as 105}^. To 
 get the new bonds looked like getting gold 
 dollars at a discount. With standing offers 
 of 3 or 4 per cent premium, it was small 
 wonder that the last days of the subscription 
 saw some phenomenal receipts. On each of 
 the last two days the Department received 
 25,000 applications. It was not growing 
 patriotism on the part of the humble invest- 
 ors that so increased the mail. It was market 
 quotations showing a substantial premium 
 for bonds that the Government was offering 
 at par. 
 
 From the point of view of a popular sub- 
 scription the loan was in every way an 
 astounding success; but it must not be for- 
 gotten that there were elements of specu- 
 5^9 
 
Business and Education 
 
 lation as well as of patriotism, that there was 
 a market showing immediate profit for every 
 person who could secure a bond. 
 
 The task of handling the loan has been 
 one that few people have comprehended. 
 The action of Congress in providing an issue 
 of bonds of so low a denomination as $20, 
 in giving preference to individual bidders, 
 and in providing that allotments should be 
 made in an inverse order to the size of the 
 subscriptions upon all individual offers, made 
 an amount of detail such as had been un- 
 known in the Department's previous expe- 
 rience. The provision for payment in five 
 instalments, and the necessity for interest 
 calculations on each one of these partial 
 payments, added vastly to that detail. In- 
 deed, the task at last was one that was clearly 
 the greatest clerical undertaking in which the 
 Government ever engaged in the same length 
 of time. 
 
 Congress is always jealous of depart- 
 mental preparations in advance of legisla- 
 tion; and no actual step could be taken by 
 the Treasury Department to prepare for this 
 issue of bonds until the war measure had 
 passed both the House and the Senate. The 
 final action was taken when the House con- 
 curred in the Senate's amendment at noon, 
 Saturday, June 11. At 3 130 that afternoon 
 the copy for the preliminary circulars and 
 520 
 
Lessons of Our War Loan 
 
 instruction blanks was in the hands of the 
 public printer. At nine o'clock Monday 
 morning the public printer delivered to the 
 Treasury Department the first instalment of 
 4,000,000 sheets of printed matter; and the 
 rest followed as rapidly as they could be 
 unloaded from the wagons. 
 
 A great force had been engaged in ad- 
 dressing envelopes to contain the subscrip- 
 tion papers and circulars of information. 
 In a little over twenty-four hours after the 
 receipt of the first printed copies the mails 
 were carrying these circulars to every bank, 
 national, State, and private, to every post- 
 master, and to every express-office in the 
 country, while to 24,000 newspapers details 
 were sent, so that they might give informa- 
 tion to the people concerning the character 
 of the Government bond, and how subscrip- 
 tions would be received. 
 
 There was in the arrangements every 
 element of popular success. The bonds were 
 issued in a popular cause. They were issued 
 at a time when money was easy and securities 
 were high. They were issued at par ; so that 
 there was no calculation to discourage the 
 most inexperienced investor. Any man with 
 $20 knew that he could invest it, and get a 
 $20 security back. There was no commis- 
 sion, no premium, no restriction as to the 
 character of the remittance. Subscribers 
 
 521 
 
Business and Education 
 
 were permitted to send their money in any 
 form in which credits could be forwarded; 
 and the Treasury received any form of cur- 
 rency of the United States, any kind of bank- 
 check or draft, as well as post-office money- 
 orders, and express money-orders. Could 
 there have been more perfect conditions for 
 a successful popular loan? 
 
 The more enthusiastic advocates of a pop- 
 ular loan were particularly pleased with 
 those regulations of the Department which 
 provided for receiving subscriptions at post- 
 offices and remittances by post-office money- 
 orders. It is interesting to note that out of 
 the total subscription only $728,000 was 
 received through this channel. Posters were 
 hung up and subscription-blanks distributed 
 to over 20,000 express-offices; for it was 
 believed by some that many people who had 
 not banking connections would avail them- 
 selves of this easy means of transmitting 
 money. The total receipts in the shape of 
 express money-orders were but $60,000. 
 There was received through the mails in 
 currency over $731,000. It was not a rare 
 thing to receive a $1,000 bill in an unregis- 
 tered letter. It is a tribute to the excellence 
 of the mail-service that there was no com- 
 plaint from this vast army of subscribers of 
 the loss of a currency remittance. 
 
 As a matter of fact the subscription illus- 
 522 
 
Lessons of Our War Loan 
 
 trates wonderfully well how thoroughly 
 educated are the people of the -United States 
 in the use of banking instruments. Over 
 $100,000,000 in checks, drafts, and certifi- 
 cates of deposit were received from sub- 
 scribers for the $500 and smaller bonds, 
 while the 2-per-cent deposits on the subscrip- 
 tions for the larger amounts were wholly in 
 the shape of certified checks. About $198,- 
 500,000 of the $200,000,000 bonds issued 
 will be paid for by means of bank-paper and 
 certificates of deposit. 
 
 Some idea of the detailed work in con- 
 nection with the issue can be had from some 
 figures of the loan. Subscriptions were 
 received from 320,000 persons. Among 
 these there were 230,000 of individual sub- 
 scriptions for $500 or less. The subscription 
 was made up roundly as follows: 
 
 Individual subscriptions for $500 
 and less $101,000,000 
 
 Individual subscriptions for amounts 
 larger than $500 358,350,000 
 
 Subscriptions of corporations, as- 
 sociations, etc 434,650,000 
 
 Syndicate subscriptions .... 500,000,000 
 
 Total, $1,394,000,000 
 
 The loan closed at three o'clock of the 
 afternoon of July 14. In less than three 
 hours every corporation subscription was in 
 the mail with a letter of rejection, and every 
 individual subscription for amounts of $50,- 
 
 523 
 
Business and Education 
 
 ooo and over was also on its return trip with 
 a similar letter. Seven hours after the sub- 
 scription closed the Department was able to 
 announce quite accurately where the line 
 would be drawn below which all subscrip- 
 tions would be allotted. When it is remem- 
 bered that the name of every subscriber had 
 to be inscribed at least twelve times in the 
 complex process of official book-keeping, 
 the collection of remittances, the mailing of 
 notifications of receipt and allotment, the 
 addressing of envelopes, the making of card- 
 indexes, and in the writing of small checks 
 covering the interest from the receipt of the 
 subscription to August i (the date when the 
 bonds began carrying their own interest), 
 some idea of the clerical labor involved may 
 be had. 
 
 Allotments were made to practically 300,- 
 cxx) successful subscribers. Multiply that 
 by 12, and recollect that every entry of a 
 name had to have an independent verifica- 
 tion, and it will be seen that this writing of 
 3,600,000 names and addresses was a task of 
 no small proportions. But that takes no 
 account of the work in connection with the 
 $1,200,000,000 subscriptions returned, nor 
 of the vast correspondence resulting from 
 errors in every conceivable form made by 
 subscribers in filling out their blanks and 
 sending their remittances. From the time 
 
 524 . 
 
Lessons of Our War Loan 
 
 the envelopes were dumped from the mail- 
 bags, — a force of twenty people was re- 
 quired to open them, — through all the com- 
 plicated operations of listing, scheduling, 
 collecting remittances, opening accounts, 
 calculating interest, and, finally, putting up 
 bond and interest-checks and sealing each 
 envelope with five wax seals bearing the im- 
 print of the seal of the Treasury, the work 
 has been performed by a temporary force 
 organized and drilled for this special pur- 
 pose. The force was employed without 
 regard to Civil-Service rules. Legibility of 
 handwriting and good moral character were 
 the tests imposed. A corps of five hundred 
 clerks has been engaged on the work. For 
 the expenses of the issue, the getting out of 
 circulars, stationery, employing clerical help, 
 engraving and printing bonds, and, finally, 
 paying the express companies for transport- 
 ing them, Congress has allowed -^ of i per 
 cent, — the smallest commission for expenses 
 ever paid by the Government for the floating 
 of any loan. 
 
 The sealing of the packages is alone a 
 great task. Five seals are put on each 
 package; and there will be about 300,000 
 packages ; representing a total of about 
 1,500,000 wax seals. The bonds are de- 
 livered by express companies; the Govern- 
 ment paying charges, and the companies 
 
 525 
 
Business and Education 
 
 being pecuniarily responsible for correct 
 delivery. 
 
 The permanent work of the Treasury 
 Department will be materially increased by 
 this issue. The addition of such a great 
 number to the total of outstanding bonds will 
 add enormously to the work of making inter- 
 est payments ; the increase in number being 
 far out of proportion to the increase in the 
 outstanding funded debt, because of the 
 small denominations and the widely scat- 
 tered holdings. It is just as much clerical 
 work to take care of a fifteen-cent coupon 
 which matures every three months on a $20 
 bond as it is to pay the interest on a $10,000 
 bond. 
 
 The cost of handling a $20 bond makes 
 it a rather expensive security to the Govern- 
 ment. But, when looked upon in the broader 
 sense, these $20 bonds are the best form of 
 security the Government has ever issued. 
 The great multiplication of bondholders, 
 which has resulted from the manner in which 
 this loan has been popularized, cannot but be 
 an important factor in the national life. If 
 it were a fact, that each of the 300,000 sub- 
 scribers was a bona iide investor v/ho would 
 hold the Government's security as a perma- 
 nent investment, the influence of such a dis- 
 tribution of Government obligations would 
 certainly be marked and beneficial. It is 
 526 
 
Lessons of Our War Loan 
 
 altogether too much to say that all the sub- 
 scribers to this loan have purchased the bonds 
 with the idea of holding them permanently 
 in their strong-boxes. In any consideration 
 of this phase of the loan, the fact must not 
 be lost sight of that the bonds were quoted 
 at a marked premium during the whole time 
 the loan was in progress, and that the Gov- 
 ernment was selling a security at par which 
 the purchaser knew he could resell at an 
 immediate profit. Speculation and not per- 
 manent investment, therefore, was to a great 
 extent the moving factor. Undoubtedly the 
 issue will be largely consolidated, and many 
 of the bonds will find their way into the 
 hands of the people who will pay the most 
 for them. 
 
 As a general proposition. Government 
 bonds are worth most to national banks, as 
 they can use them as a basis for circulation 
 or as security for Government deposits ; and 
 that being the case, it naturally follows that 
 a large number of these bonds will find their 
 way into the assets of the national banks. 
 This is no argument against the popular suc- 
 cess of the loan, but is merely a factor to be 
 considered in measuring that success. 
 
 After every allowance is made, after all 
 the modifying conditions are considered, 
 there still remains the fact that this loan has 
 been a remarkable exhibition of financial 
 
 527 
 
Business and Education 
 
 strength, of faith in the Government's secur- 
 ities, and of the disposition of the Govern- 
 ment to favor in its financial operations people 
 of small means. In this latter respect the 
 response has been everything that could have 
 been expected. Small investors have shown 
 their readiness to deal directly with the Gov- 
 ernment, and in great numbers have become 
 purchasers of small amounts of bonds. The 
 nation is stronger because of this distribu- 
 tion of its securities. The people are well 
 satisfied, because of the opportunities that 
 have been offered them. Critics of capital 
 have been robbed of some of their much-used 
 illustrations by the remarkably patriotic 
 action of the great financial interests in 
 guaranteeing the success of the loan; and 
 the whole financial world has been enlight- 
 ened as to the solidity of our institutions by 
 the object-lesson of a 3 per cent war loan 
 selling in the market at 105 while hostilities 
 were still in progress. 
 
 528 
 
THE TREASURY 1 
 
 Scribner's Magazine, 1902. 
 
 Astonishment at the extent and diversity 
 of interests embraced in the Treasury De- 
 partment must have been one of the first 
 sensations of most Secretaries of the Treas- 
 ury after taking up the duties of the office. 
 Even if the Secretary had been active in 
 pubHc Hfe, and possessed passing famiHarity 
 with the great Department, he would scarcely 
 have clearly comprehended its scope, but if 
 he were a man coming from an active busi- 
 ness career, without opportunity for inti- 
 mate acquaintance with the Treasury, the 
 first few weeks of his official life, it is likely, 
 were marked by daily discoveries of new and 
 entirely unanticipated functions. 
 
 The bureaus which are bound together in 
 the Treasury Department are, by all odds, 
 the most diverse, and at the first casual 
 glance it would seem the most unrelated 
 that are to be found under the jurisdiction 
 of any of the cabinet officers. The public 
 thinks of the Treasury Department as the 
 
 ^ Since the above was written many of the functions of 
 the Treasury Department have been assumed by the De- 
 partment of Commerce and Labor. 
 34 529 
 
Business and Education 
 
 fiscal division of the Government's executive 
 system. It is a fact, however, that for a good 
 many years probably not less than two-thirds 
 of the time of the Finance Minister has been 
 devoted to problems bearing little or no rela- 
 tion to the strictly fiscal business of the Gov- 
 ernment. The organization of a Department 
 of Commerce, drawing as it will its prin- 
 cipal bureaus from the Treasury Department, 
 will bring needed relief to a cabinet officer 
 who has quite enough to occupy his attention 
 in the administration of affairs closely related 
 to the Government's financial business. 
 
 The responsibility for raising the reve- 
 nues and for their disbursement, now that 
 the totals have come to aggregate more than 
 one thousand million dollars, would seem 
 to be quite enough to lay upon the shoulders 
 of any man, particularly if he must take up 
 those duties without thorough familiarity 
 with their details, as does each new secre- 
 tary. But in addition to that duty, there is 
 the further responsibility for the solution of 
 the problems of an intricate and diverse cur- 
 rency system. The Secretary, too, occupies 
 indirectly, through the Comptroller of the 
 Currency, a supervisory relation to the whole 
 national banking organization of the coun- 
 try. He is the indirect custodian of $800,- 
 000,000 of gold and silver coin, stored in the 
 Treasury vaults, against gold and silver cer- 
 530 
 
The Treasury 
 
 tificates in circulation representing that 
 coin, and, through his subordinate, the 
 Treasurer of the United States, he shares 
 the responsibiHty for the care of more than 
 two hundred milHon dollars, representing 
 the cash balance which the Government car- 
 ries. All the Mint and Assay officers are, 
 through the Director of the Mint, under his 
 control. He directs the operations of a great 
 factory employing 3000 operatives in the 
 printing of money and Government secur- 
 ities, and he must there meet the same prob- 
 lems of organized labor that other great 
 employers have to meet. He is responsible 
 for the collection of commercial statistics, 
 and is fortunate in finding a bureau for that 
 purpose which has a record for the best 
 statistical work done by any of the great 
 Governments. He is at the head of the 
 greatest auditing offices in the world, where 
 every dollar of income and every item of 
 expenditure is checked over with minute ex- 
 actness, so that at the end of the year it is 
 safe for him to say that the whole billion 
 dollars, the total on both sides of the ledger, 
 has been collected and disbursed with abso- 
 lute fidelity and legality and without error. 
 
 All these functions are naturally related 
 
 to the management of the fiscal affairs of 
 
 the Government, but there are many other 
 
 bureaus that do not apparently bear such 
 
 531 
 
Business and Education 
 
 close relation. The Secretary will discover 
 that there are almost as many vessels which 
 would fly his oflicial flag should he come on 
 board as there are ships of war to fire salutes 
 to the Secretary of the Nax^-. He has large 
 fleets engaged in light-house and coast-sur- 
 vey work, while the revenue-cutter service, 
 in which are many swift and modern vessels, 
 does police duty at every port. He is the 
 final authority in all oflicial judgments relat- 
 ing to the more than five hundred thousand 
 immigrants who land on our shores annu- 
 ally, and he is the responsible executive for 
 carrying out the immigration laws and the 
 Chinese Exclusion Act. He is the official 
 head of the Bureau of Public Health and 
 Marine Hospital Service, which guards our 
 ports from contagious diseases, maintains 
 quarantine service and stations, and a great 
 system of hospitals for disabled seamen. 
 The Government's Secret Service Bureau 
 reports directly to him, and he watches day 
 by day the unfolding of detective stories 
 more interesting than the dime novels of his 
 boyhood days, and there accumulate in his 
 files packages of reports, tied with red tape, 
 more thrilling than the choicest example of 
 yellow-covered literature. Not only is the 
 Secret Service Bureau devoted to the detec- 
 tion of counterfeiting, but its services are 
 called into play in connection with any se- 
 
 532 
 
The Treasury 
 
 cret-service work which the other Depart- 
 ments may wish to have done. The Bureau 
 of Standards, to which all questions of 
 weights and measures may be finally re- 
 ferred, is under his direction. No steam- 
 ship may sail in American waters, nor leave 
 an American port, the boiler of which does 
 not bear the stamp of official inspection by 
 one of his subordinates. He is the respon- 
 sible head of a Life Saving Service, with 
 272 stations and a cordon of men patrolling 
 10,000 miles of coast ; of a Light-house sys- 
 tem, marking the course of mariners with a 
 chain of lights from Maine away around to 
 Alaska; of a Coast Survey, which has for 
 its business not only the charting of navi- 
 gable waters, but the scientific investigation 
 of the earth's curvature; of the Architect's 
 Office, which has already constructed and 
 has the care of 400 public buildings, most 
 of them architecturally bad, and which is at 
 the moment engaged in planning and build- 
 ing 149 others, many of which, happily, are 
 showing great architectural improvement. 
 
 All these duties are in addition to the 
 fundamental one of collecting the public 
 revenues, a work requiring the maintenance 
 of a corps of 6300 officials at 168 ports of 
 entry, and of a body of internal revenue em- 
 ployees, whose eyes are literally upon every 
 foot of the country's territory. 
 
 533 
 
Busmess and Education 
 
 By no means the least of the manifold 
 duties of this official are those which are 
 connected with the administration of the 
 civil service, for his complete corps num- 
 bers 26,000 subordinates. There must be 
 endless appointments, promotions, and 
 changes, and in regard to them all the Sec- 
 retary of the Treasury is the final authority. 
 
 The mere enumeration of such a list of 
 responsibilities carries with it the conviction 
 that the Treasury of the United States must 
 be a wonderfully well organized machine, 
 else it would be impossible for any man to 
 step into the responsibilities of its direction 
 without the change being seriously felt by 
 the entire Treasury organization and the 
 whole country. The Treasury Department 
 is a wonderfully well organized commercial 
 machine. Taking it all in all, I believe there 
 is no organization in the commercial life of 
 this country, look where you will, that is its 
 superior ; in many respects one will not find 
 its equal. 
 
 We are apt to have none too good an 
 idea of our Government administration, and 
 sometimes, with scant knowledge of facts 
 and conditions, condemn the executive 
 branches of the Government. Naturally the 
 Treasury- has come in for its full share of 
 criticism, for it touches every citizen in the 
 tender spot of his pocket-book. For my 
 
 534 
 
The Treasury 
 
 own part, however, every day of greater 
 familiarity with the organization was a day 
 of growing admiration for it and of increas- 
 ing pride that the multitude of affairs en- 
 trusted to the head of this Department are ad- 
 ministered so intelligently, so promptly, and 
 above all with such absolute integrity and en- 
 tire devotion to the Government's interests. 
 
 Not only does the Treasury Department 
 handle, in the ordinary income and expen- 
 ditures, cash transactions aggregating more 
 than a billion dollars annually, but it is re- 
 sponsible for the custodianship and the re- 
 newal of currency, the printing of paper 
 money, the coinage of specie, and the hand- 
 ling of public securities, and the figures on 
 both sides of the ledger representing the total 
 of all these transactions reach the incompre- 
 hensible aggregate of three and a half 
 billions. 
 
 Such great sums are handled year after 
 year with absolute integrity, with books that 
 balance to a penny, with cash drawers that 
 are never short, with a trust not betrayed. 
 Whatever opinion home-coming European 
 travellers may have of Treasury methods, 
 after more or less successful attempts to 
 avoid customs regulations, they must, on the 
 whole, give respect to an organization which 
 accepts a responsibility for annual financial 
 transactions aggregating $3,500,000,000, and 
 
 535 
 
Business and Education 
 
 has discharged that responsibiHty year after 
 year, under one poHtical administration after 
 another, through the vicissitudes of cabinet 
 changes, and presents a clean record having 
 on it no important blot of a betrayal of a 
 trust. 
 
 A new Secretary of the Treasury ap- 
 proaching the responsibilities and duties of 
 the great position with an appreciation of 
 their importance must, in years past, have 
 been greatly surprised to find how little time 
 apparently he could devote to the consider- 
 ation of great national questions, and how 
 much he must give to the small routine de- 
 tails of the administration of the civil ser- 
 vice. The 26,000 employees under the 
 direction of the Secretary of the Treasury 
 make the Treasury Department only second 
 to the Post-Office in point of numbers. 
 When the civil-service blanket was only 
 partly drawn over these places, the time 
 which the head of the Department was 
 forced to give to the discussion of appoint- 
 ments, matters in most part of minor con- 
 sequence so far as the efficiency of admin- 
 istration was concerned, was something that 
 must have discouraged more than one sec- 
 retary. While such appointments may have 
 been of minor consequence in the actual ad- 
 ministration of the Department, they were 
 of great importance if regard was to be had 
 536 
 
The Treasiiry 
 
 for maintaining cordial relations with the 
 legislative branch of the Government. 
 
 Washington wishes to see evidence of 
 democracy about the Departments. Neither 
 Senator nor Congressman is satisfied to cool 
 his heels in an anteroom for any length of 
 time, nor are political leaders who come to 
 the Capitol on a mission likely to be pleased 
 if the Secretary's engagements are such that 
 an appointment cannot be made without no- 
 tice or delay. So it came about that a busi- 
 ness day in the Secretary's office was, in 
 times past, almost wholly given up, during 
 the periods in which Congress was in ses- 
 sion, to the reception of visitors, and most 
 of these visitors came to discuss matters of 
 small consequence to the administration of 
 the Department. The Secretary of this 
 great Department must give heed to innu- 
 merable trifles such as would never reach the 
 head of even a comparatively small business 
 organization. Requests come from people of 
 importance, and they must be taken up with 
 the care which the position of such persons 
 demands rather than with any thought of 
 their importance in relation to the adminis- 
 tration of departmental affairs. 
 
 There is vast improvement in the Treas- 
 ury Department in this respect compared 
 with former conditions. The Secretary now 
 has power to make but few appointments 
 
 537 
 
Business and Education 
 
 outside the classified service, and by recent 
 executive order he may not consider outside 
 recommendations in regard to promotions 
 in the classified service. 
 
 Early in the administration of Secretary 
 Gage it was recognized by the Secretary 
 that, if he was to give consideration to the 
 unusual number of important public ques- 
 tions which were pressing, he must be re- 
 lieved of much of the detail of the admin- 
 istration of the civil service ; so he delegated 
 to a committee, consisting of an Assistant 
 Secretary, the Chief Clerk, and the Appoint- 
 ment Clerk, consideration of all questions 
 of civil-service administration affecting the 
 employees in Washington. This plan con- 
 tinues in force. Political considerations have 
 always been absolutely excluded from the 
 deliberations of this committee. I can speak 
 for that positively, and I mean to say that 
 such a statement is literally true. The com- 
 mittee has considered many thousands of 
 promotions and changes in the classified ser- 
 vice, and there has been no more discussion 
 of politics than would be found in the con- 
 sideration of promotions in a great banking 
 or insurance institution. The recommenda- 
 tions of heads of bureaus, the length and 
 character of service, the regularity of at- 
 tendance, and the results of examinations 
 which are made to cover both academic 
 
 538 
 
The Treasury 
 
 and practical qualifications, are the factors 
 taken into consideration. So far is political 
 influence eliminated, indeed so far as pro- 
 motions governed strictly by merit may be 
 considered the goal in an ideal civil-service 
 administration, I believe the conduct of the 
 civil service in the Treasury Department is 
 to-day practically all that could be asked. 
 
 There are many difficult problems in the 
 civil-service administration, and one of the 
 hardest of solution is what to do with su- 
 perannuated clerks. Congress is distinctly 
 opposed to anything like a civil pension ; but, 
 on the other hand. Congressmen and Sen- 
 ators will individually take up the cudgels 
 most vigorously in behalf of any clerk who 
 after years of satisfactory service and regu- 
 lar promotions may be reduced because of 
 declining efficiency. The result is that not 
 infrequently young men on small salaries 
 are doing much better work, and certainly 
 far more in quantity, than are older clerks 
 drawing higher pay. The situation is such 
 at the present time that the most serious 
 obstacles lie in the way of a strictly merit 
 system. 
 
 An attempt was made a few years ago to 
 organize in the Treasury Department what 
 was euphoniously called an '' Honor Roll," 
 and to reduce to the nine-hundred-dollar- 
 grade clerks who had passed seventy years 
 539 
 
Business and Education 
 
 of age. Such clerks were to be placed on 
 this " Honor Roll," which was to be, in 
 some respects, a pension roll, although all 
 such clerks were expected to be at their desks 
 regularly. Congress frowned upon the plan, 
 and it has never been put into complete oper- 
 ation. Something of the sort will be abso- 
 lutely necessary, however, when the full 
 effect of the protection of the present civil- 
 service rules becomes manifest in a con- 
 stantly increasing ratio of old employees. 
 
 Any one who has had experience in the 
 administration of civil service must have 
 come to appreciate in the highest degree 
 the protection and relief which the civil- 
 service rules give to those charged with the 
 responsibility for appointments and promo- 
 tions; but there are plainly two sides to 
 civil-service reform. The fetich which the 
 civil-service reformer worships, in its prac- 
 tical application, comes very far from pro- 
 viding a system which will build up the 
 best sort of a working staff. That will be 
 more and more plainly evidenced as the 
 result of the present complete classification 
 of the service works out. I shall be surprised 
 if there are not marked modifications which 
 will give to the head of the Department, 
 always after satisfactory academic tests have 
 been applied, far greater freedom of selec- 
 tion and appointment than exists at present. 
 540 
 
The Treasury 
 
 The practical operation of civil-service 
 rules results in taking clerks into the service 
 at only the lowest grades, usually the grades 
 paying $660 or $720 a year. It is true the 
 rules permit the appointment of persons to 
 the higher positions ; but, as a practical mat- 
 ter, certifications for new appointments are 
 almost always asked for to fill only the lower 
 grades, while vacancies in the higher grades 
 are filled by the promotion of those em- 
 ployees who are personally known to the 
 heads of the bureaus. The result is that the 
 whole service is being fed from a class of 
 people willing to accept these small salaries, 
 whose only known qualifications are very 
 moderate academic achievements. The 
 people taking these examinations seem to be 
 largely those who have been unsuccessful in 
 satisfactorily locating themselves in the busi- 
 ness world. They have some education, to 
 be sure, but in a great many cases they lack 
 those qualities which make for commercial 
 success. They have drifted into dissatisfac- 
 tion with commercial conditions, and are 
 glad to seek a harbor in a routine Govern- 
 ment clerkship. Rarely is there found 
 among the class successfully passing these 
 examinations the sort of material which will 
 develop good executive ability. Executive 
 ability is something that is difificult to demon- 
 strate through the medium of a competitive 
 541 
 
Business and Education 
 
 academic examination. The Civil Service 
 Commission has found no way to measure 
 the personal equation, and the personal equa- 
 tion counts for much more than does the 
 mere fact of certain moderate academic 
 training. 
 
 In the last few years there have been in 
 the Treasury Department two unusual op- 
 portunities to make comparison of the quali- 
 fications of clerks appointed outside of civil- 
 service regulations with those appointed in 
 the regular way. After the breaking out of 
 the Spanish War work in the auditing bu- 
 reaus of the Department increased so rapidly 
 that a large number of emergency clerkships 
 was created, and Congress specifically pro- 
 vided that these should be filled without ref- 
 erence to civil-service rules. In spite of this 
 special exemption, not one of the places was 
 filled without the candidate first passing a 
 satisfactory academic examination under the 
 direction of the Treasury Department offi- 
 cials. Those charged with the appointments, 
 however, had perfect freedom to weigh the 
 personal equation, in the language of the 
 day " to size up the man," and, while aca- 
 demic qualifications were insisted upon, 
 personal characteristics were given much 
 weight. I believe there is no one intimately 
 familiar with the Treasury Department who 
 will deny that the clerks so appointed are, 
 542 
 
The Treasury 
 
 as a body, distinctly superior to those drawn 
 through the regular channels of the civil- 
 service commission. 
 
 The other incident was the execution of 
 the great detail connected with the popular 
 issue of $200,000,000 of Spanish War Loan 
 bonds. The bonds were subscribed for by 
 325,000 investors. The volume of the work 
 compelled the Department to employ a spe- 
 cial corps of 600 clerks, all of whom were 
 engaged without reference to civil-service 
 regulations. There is no question as to the 
 general superiority of the clerks so appointed 
 when compared with the average regular 
 clerks working beside them. They may have 
 lacked some of the experience of the older 
 employees, but their youth and adaptability 
 made them far quicker to grasp the condi- 
 tions of a new problem, more dexterous in 
 the execution of the work, and distinctly 
 more satisfactory from almost every point 
 of view. 
 
 Something less than ideally efficient ad- 
 ministration may well be granted, however, 
 in order that the head of the Department 
 may have some relief from Congressional 
 pressure in regard to minor appointments. 
 That has been accomplished and the country 
 is unquestionably the gainer to a great de- 
 gree, because the Secretary had been given 
 time for the consideration of those questions 
 543 
 
Business and Education 
 
 which are of vastly more importance than 
 are the routine details of the administration 
 of the personnel. 
 
 In this connection a word in regard to 
 political pressure may be of interest. A 
 great deal is heard about the demands of 
 the politicians for places — a great deal 
 more is heard of such demands in the ad- 
 dresses of civil-service reformers than is 
 heard in the office of the Secretary. It may 
 be a surprising statement, but it is an actual 
 fact, that, in the requests for appointments, 
 the claim for political recognition is a com- 
 paratively rare one. It is not politics, but 
 sympathy and charity, that moves the aver- 
 age Congressman to visit the Departments 
 and plead for places. In nine cases out of 
 ten, their requests may be debited to pure 
 kindheartedness rather than to political 
 machinations. 
 
 Most of the men who have been cartooned 
 into the public mind as typical party spoils- 
 men are, as a matter of fact, modest in their 
 requests and alive to the need for good ad- 
 ministration of the service. As a rule, the 
 most imperious requests come from newly 
 elected Congressmen representing unheard- 
 of districts, who have not yet adjusted them- 
 selves to the situation, and who believe that 
 the rights and perquisites of a member of 
 Congress have little limit. The best known 
 544 
 
The Treasury 
 
 of the great political leaders are not likely 
 to make requests that ought not to be 
 granted, and are generally quick to appre- 
 ciate good reasons, if any exist, why they 
 cannot have what they ask for. It is an 
 interesting fact that some of the most incon- 
 siderate demands for promotions in classi- 
 fied places come from members of the Senate 
 and House who publicly pose as leaders 
 of the civil-service reform movement, while 
 the most prominent of the political leaders 
 can almost always be counted upon to be 
 reasonable in their demands and to accept 
 cheerfully a situation which prevents their 
 wishes being met. 
 
 A notable difference between the position 
 of the Secretary of the Treasury and that of 
 the head of a great business organization is 
 the time which the Secretary must devote 
 to the discussion of public questions with 
 newspaper representatives. No small part 
 of his success will depend upon his adapta- 
 bility to that new condition, for the view 
 which most of the people of the country will 
 form of his administration will naturally be 
 much colored by the attitude of the news- 
 paper correspondents through whom the 
 public is informed regarding official matters. 
 
 Newspaper conditions in Washington are 
 unlike those in other cities. There are in- 
 numerable representatives of papers, cover- 
 35 545 
 
Business and Education 
 
 ing the whole range of the country, each 
 one of whom serves a constituency of great 
 importance. As a body, the newspaper cor- 
 respondents of Washington are incompar- 
 ably superior to the average newspaper rep- 
 resentatives in other cities. Many of them 
 have been intelligent observers of public 
 affairs for a generation, and have been the 
 confidants and advisers of many Cabinet 
 officers. There is hardly an important news- 
 paper man in Washington who is not at times 
 the trusted custodian of state secrets, and 
 the relation of these men to public affairs is 
 entirely different from the relation of the 
 average reporter in other cities to the busi- 
 ness questions of local interest. It is im- 
 portant that the Secretary of the Treasury 
 recognize this, for the Treasury Department 
 is one of the chief sources of news at the 
 Capital, and that he should learn to meet 
 fairly and frankly the newspaper correspon- 
 dents. This requires much time, much tact, 
 and a discrimination in determining those 
 who can be fully trusted and kept confiden- 
 tially informed of the progress of affairs, 
 and those who must be talked to with 
 guarded politeness. 
 
 The sacrifice of time is by no means with- 
 out its recompense. Many a cabinet officer 
 has received quite as good counsel from 
 conservative and experienced newspaper cor- 
 546 
 
The Treasury 
 
 respondents as he could get from members 
 of Senate or House. This confidential rela- 
 tion with newspaper representatives is 
 unique, and unless a Secretary of the Treas- 
 ury has been trained in the official atmos- 
 phere of Washington, it is likely to take 
 him some time to recognize it and adjust 
 himself to the condition. 
 
 In a most important particular the Treas- 
 ury Department differs from the Finance 
 Ministries of other countries. Elsewhere the 
 Finance Minister occupies an authoritative 
 relation to legislation affecting income and 
 expenditure. With us, the Government has 
 always gone on with the most happy-go- 
 lucky lack of co-ordination between legis- 
 lation affecting income and legislation affect- 
 ing expenditure. The Finance Ministers 
 of other countries draw up a budget, which 
 forms the basis of Parliamentary legis- 
 lation in financial matters. They make 
 careful estimate of probable Government in- 
 come and of the demands for the executive 
 administration, and Parliament, as an almost 
 pro forma matter, passes legislation affecting 
 taxation which will conform to the proposals 
 in the budget, and limits appropriations 
 within lines which the budget may prescribe. 
 
 With us, however, the Secretary of the 
 Treasury is little more than an agent who, 
 without comment, transmits to Congress 
 547 
 
Business and Education 
 
 from the heads of the various Departments 
 their evStimates regarding appropriations. 
 Congress, in turn, does not pay close heed 
 to these estimates, frequently declining to 
 make appropriations asked for, and not in- 
 frequently making appropriations which the 
 executive head of the Department has de- 
 clared are not needed. 
 
 With us there is little flexibility on the 
 income side of the great public ledger. The 
 Secretary of the Treasury may make gen- 
 eral recommendations regarding the neces- 
 sities for greater income or the opportunity 
 for decreasing taxation, but Congress does 
 not look to the head of the Treasury Depart- 
 ment with much solicitude for advice regard- 
 ing tax legislation or suggestions concerning 
 conservative limits of appropriations. The 
 sources of our Government income are so 
 intimately bound up with the economic 
 theory of protection that we are likely to 
 formulate our tax laws with little or no re- 
 gard to the amount of income they will pro- 
 duce, and to make appropriations on as 
 liberal a scale as the income will permit, and 
 the Finance Minister has little if any re- 
 sponsibility either for a cash balance or a 
 Treasury deficit. 
 
 Congress is not disposed, either, to give 
 very much heed to Departmental recommen- 
 dations regarding expenditures. 
 548 
 
The Treasury 
 
 For many years, for example, every Sec- 
 retary of the Treasury, in each of his annual 
 messages to Congress, recommended that no 
 appropriation be made for maintaining cer- 
 tain customs districts which have become 
 commercially obsolete, and which are main- 
 tained apparently for no other purpose than 
 to give the Senator or Congressman most 
 concerned an opportunity to recommend a 
 presidential appointment. There are 12 
 customs districts, which are officered at an 
 expense of $15,578.14, where the total in- 
 come from customs in a single year was 
 only $275.26, and the cost of collection, 
 therefore, reaches $56.59, for each dollar 
 collected. In spite of repeated recommen- 
 dations that we accept the changed condi- 
 tions which have made these old-time cus- 
 toms districts quite deserted by commerce, 
 Congress insists year after year that they 
 shall be maintained, that officers shall be 
 appointed, and the expenses of salaries and 
 office administration appropriated. 
 
 One illustration is that of a port equipped 
 with a collector at a salary of $1800, and 
 separated from a large city and an active 
 customs district by only a river bridged and 
 easily crossed. The total collections in a 
 recent year at this port were twenty cents, 
 but the United States Senator who con- 
 trolled the appointment insisted, when a 
 549 
 
Business and Education 
 
 vacancy occurred, that a new appointment of 
 a collector be made, and Congress refused to 
 act upon the many recommendations for 
 the abolition of this and other useless ports. 
 A saving of $200,000 a year could easily be 
 made without any sacrifice of efficiency in 
 the customs service, but Congress hesitates 
 to give up the privilege of naming the ap- 
 pointees who are to receive in salaries this 
 $200,000 of useless expenditure. 
 
 There are other illustrations of what 
 seems to be almost a spirit of perverseness 
 on the part of Congress in failures to accept 
 recommendations for reductions in expendi- 
 tures which Treasury officials have for years 
 believed could well be made, while on the 
 other hand it is equally difficult sometimes 
 to secure trifling appropriations for greatly 
 needed requisites. There is an assay office 
 in a large city in the Aliddle West, for ex- 
 ample, where the Government pays out five 
 dollars in salaries for every hundred dollars 
 of gold which is received, but Congress in- 
 sists on making unasked appropriations for 
 its maintenance. It sometimes seems as if 
 there were settled antagonism in appropria- 
 tion committees toward the recommenda- 
 tions coming from the heads of depart- 
 ments. Serious recommendations made after 
 thorough study of a subject are not always 
 received in a spirit of confidence by the ap- 
 
 550 
 
The Treasury 
 
 propriation committees, and the difficulties 
 of executive administration are, in conse- 
 quence, greatly increased. 
 
 Sometimes this apparent spirit of per- 
 verseness goes farther and actively puts ob- 
 stacles in the way of administration. An 
 illustration of that is found in recent efforts 
 to introduce improved methods into the 
 Bureau of Engraving and Printing. The 
 Government printing of currency is done 
 upon the same form of old-fashioned hand- 
 press that was used when the first greenback 
 and the first national bank note were turned 
 out. The process is slow and expensive. 
 The growth of the country created a demand 
 upon the Bureau which it was almost impos- 
 sible to keep pace with, and so it was decided 
 to put in power presses to print the backs 
 of notes. An expenditure of $25,000 was 
 made, with results so economical that a sav- 
 ing of the whole cost of the machines was 
 effected in a few months. Tests were made 
 by mixing hand-printed and machine- 
 printed bills and submitting them, unmarked, 
 to numbers of expert money counters; and 
 invariably the machine-printed bills would 
 be selected as the best examples of plate 
 printing. 
 
 Labor organizations were opposed to this 
 introduction of power presses, however, and 
 when Congress convened brought active 
 
 551 
 
Business and Education 
 
 pressure to bear at the Capital, with the 
 result that riders were tacked upon the ap- 
 propriation bills prohibiting the expenditure 
 of any appropriation for the maintenance of 
 power presses; and this was done without 
 any communication with the Secretary of 
 the Treasury on the part of either Senate or 
 House committee, without any opportunity 
 for presenting the Treasury's side of the 
 matter, and without any effort to secure in- 
 formation as a basis for intelligent legisla- 
 tion except such as was presented by labor 
 leaders who were not even in the employ of 
 the Government. 
 
 The Ways and Means Committee and 
 the Appropriation Committees of Congress 
 take upon themselves the responsibility for 
 adjusting the relation between income and 
 expenditure. A great tariff bill may be 
 framed with little more than nominal ref- 
 erence to the Treasury Department, and 
 legislation formulated which may enor- 
 mously affect one side or the other of the 
 Treasury accounts without the voice of the 
 Secretary being heard or his advice asked 
 for. Income is provided and expenditures 
 are appropriated, without Congress being 
 advised by the head of the Treasury as to 
 the balance between the two sides of the 
 budget. 
 
 A phase of Treasury affairs emphasized 
 552 
 
The Treasury 
 
 in the public mind is the relation of the 
 Treasury to the money market. At certain 
 seasons much is to be heard about the cries 
 of Wall Street for Treasury help, and of the 
 relief measures which the Secretary of the 
 Treasury may bring to bear upon an un- 
 satisfactory banking position. An ideal fis- 
 cal situation for the Government, President 
 Harrison once said, would be one in which 
 the income each day just equalled the ex- 
 penditures. In such a situation there would 
 be no problem regarding the relation of the 
 Treasury to the money market. So long as 
 we must work with our present Sub-treasury 
 system, however, founded as it was in igno- 
 rance and suspicion of proper banking func- 
 tions, we must periodically face a situation 
 in which the operations of the Treasury are 
 of great import in the general financial sit- 
 uation. Laws which have been allowed to 
 stand unchanged since Jackson's hatred of 
 the banks was crystallized into statute, pre- 
 vent the deposits of the receipts from cus- 
 toms anywhere but in the actual vaults of 
 the Treasury or Sub-treasury. The country 
 is in such a position as a great business firm 
 would be whose receipts at times enormously 
 exceeded its expenditures, if it should decide 
 to lock up its daily income in safety deposit 
 vaults, turning all credits into cash and lock- 
 ing up the actual currency just at a time 
 
 553 
 
Business and Education 
 
 when there might be a most active demand 
 in the ordinary channels of trade for the 
 currency which would thus be abstracted. 
 
 Of course, it is impossible to have such 
 an ideal situation as President Harrison 
 suggested; so long as the laws relating to 
 the Sub-treasury system stand unchanged it 
 is useless to talk about taking the Govern- 
 ment out of the banking business. The oper- 
 ations of the Treasury inevitably draw it 
 into the situation, and it becomes one of the 
 great problems of the Secretary to keep, as 
 nearly as may be, an unchanging total of 
 currency in the Treasury vaults, and neither 
 withdraw from the circulating medium in 
 active use great quantities of currency when 
 income is excessive nor suddenly add to the 
 currency in circulation when the Government 
 has great payments to make in excess of its 
 daily income. The problems of that char- 
 acter were unusually frequent and difficult 
 during Secretary Gage's administration. 
 The successful settlement of the Pacific Rail- 
 road indebtedness brought a payment of 
 $58,000,000 to the Treasury in December, 
 1897, just at a period of most active com- 
 mercial demand and when the withdrawal 
 of so much currency would have been dis- 
 astrous to reviving business. A few months 
 later came the sudden expenditures result- 
 ing from the $50,000,000 appropriation 
 
 554 
 
The Treasury 
 
 made by Congress at the beginning of the 
 Spanish War, and soon after that were 
 poured into the Treasury the proceeds of 
 $200,000,000 of Spanish War Bonds. Twice 
 during the administration issues of Govern- 
 ment bonds matured, and payment of many 
 milhons had to be made on that account. 
 This period was the most remarkable since 
 the Civil War for violent fluctuations in the 
 Treasury's balance, and it is one of the best 
 evidences of genius in the administration of 
 the Department at that time that the stock 
 of money actually in the Treasury vaults, 
 in spite of this period of irregular income 
 and expenditure, was always kept at com- 
 paratively the same level, and Treasury oper- 
 ations were not permitted seriously to affect 
 the currency of the country. 
 
 It is such problems as these which a Sec- 
 retary of the Treasury must always find re- 
 curring, so long as our present Sub-treasury 
 system is maintained, and the best evidence 
 of ability on the part of a Secretary is that 
 these sudden influxes of funds or exceptional 
 expenditures are handled so that the public 
 has no reason to recognize the intimate re- 
 lation which must exist under present con- 
 ditions between the Treasury and the bank- 
 ing situation. 
 
 With a currency system which has largely 
 been the growth of exigency rather than of 
 
 555 
 
Business and Education 
 
 forethought, there is always a desire for leg- 
 islation which will bring the country's cur- 
 rency into line with sound economic prin- 
 ciples. Both the country and Congress have 
 come to look to the head of the Treasury 
 Department as a natural source for sugges- 
 tions regarding needed currency and bank- 
 ing legislation, and one of his most important 
 duties is the preparation of that portion of 
 his annual report to Congress, which con- 
 tains recommendations of such character. 
 That has been true particularly during those 
 recent years in which fundamental currency 
 discussion has been so prominent in political 
 affairs, and during which there has been 
 formulated legislation which is an important 
 part of the groundwork of our financial sys- 
 tem. It requires a wide range of ability 
 to pass easily from the innumerable practical 
 problems of executive administration which 
 the Treasury presents, to the writing of 
 State papers given to theoretical and eco- 
 nomic discussion of some of the subtleties of 
 finance and currency. The annual reports 
 of the heads of the Treasury Department 
 for many years, however, show that we have 
 been fortunate in having men of such breadth 
 of ability that they could do this and do it 
 well. 
 
 Not only must the Secretary successfully 
 grasp theoretical problems in finance and 
 556 
 
The Treasury 
 
 be capable of building up in his message to 
 Congress sound recommendations for finan- 
 cial legislation, but he has to face a much 
 more trying ordeal when he is invited to 
 appear before either the Senate Finance 
 Committee or the House Committee on 
 Banking and Currency — a thing which is 
 usual whenever important financial legisla- 
 tion is under consideration. It is a com- 
 paratively easy matter, with ample time and 
 good counsel, to evolve satisfactory recom- 
 mendations for legislation, but it is far more 
 dif^cult to advocate those recommendations 
 in an inquiry by ingenious and hostile mem- 
 bers of a Congressional Committee. Any 
 one who has studied the proceedings of 
 Senate or House Committees when prom- 
 inent business men have been brought before 
 them to express their views upon financial 
 legislation must have been struck by the 
 lamentable showing which some of the most 
 prominent financiers may make under a fire 
 of questions from keen-witted and experi- 
 enced members of this committee. Men 
 who are rulers in practical finance are fre- 
 quently unable to hold their own in any- 
 thing like creditable shape in a discussion of 
 fundamental financial measures which it may 
 be proposed to enact into law. 
 
 English Cabinet Members must appear 
 in Parliament to answer interpellations, but 
 
 557 
 
Business and Education 
 
 notice of the question is given the day before 
 and a member of the Cabinet has ample 
 time to confer and to study his answer, and 
 he may even dechne for state reasons to 
 make any answer, if he sees fit. Our own 
 Finance Minister is put in a much more diffi- 
 cult position, however, when he appears be- 
 fore a Congressional Committee. He knows 
 only the general line that the inquiry will 
 take. If he is called before the Banking and 
 Currency Committee, he faces seventeen 
 members, of whom a large minority are po- 
 litically hostile and who are thoroughly 
 trained in the art of asking difficult ques- 
 tions. His answers become a part of the 
 published records, and he is placed in a posi- 
 tion where, if he is to make a satisfactory 
 showing, he must reply off-hand to any ques- 
 tion that is propounded by any member of 
 the committee. To go through such an 
 ordeal with satisfaction needs thorough un- 
 derstanding of the subject and readiness of 
 comprehension and retort. 
 
 The most important bureau in the Treas- 
 ury Department is the one charged with 
 the duty of collecting the customs. Not 
 only must this bureau, in order that there 
 shall be no smuggling, keep a watchful eye 
 upon 15,000 miles of coast, a northern 
 frontier more than three thousand miles 
 long, and a southern boundary stretching 
 
 558 
 
The Treasury 
 
 the full breadth of Mexico, but it is charged 
 with the administration of the most intri- 
 cate tariff schedule, requiring not only fidel- 
 ity and integrity where vast sums are con- 
 cerned, but great expert knowledge in regard 
 to commodities and the keenest intelligence 
 in the application of that knowledge. The 
 great work of this bureau is, of course, in 
 the collection of the customs levied on regu- 
 larly imported merchandise, and that work 
 goes on with little criticism and without 
 much friction. Another phase, the collection 
 of duties on articles brought home by re- 
 turning travellers, is comparatively insig- 
 nificant in point of income, but to a large 
 number of citizens it is the one point of con- 
 tact which they have with the Department, 
 and it not infrequently leaves them ready to 
 condemn and upbraid. One of the difficul- 
 ties in this part of the administration lies in 
 the palpable fact that it is not easy to obtain 
 a corps of inspectors, when Congress limits 
 their salaries to four dollars a day, who will 
 serve long hours at trying duties, always 
 maintain their equanimity, and be courteous 
 in the face of much provocation to be other- 
 wise, and always retain their integrity and 
 repel efforts to corrupt them made by people 
 occupying positions of high standing and 
 respect in the community. Under President 
 McKinley's administration it was determined 
 
 559 
 
Business and Education 
 
 to make the enforcement of the law, as it 
 applied to returning travellers, much more 
 rigid than had been the case, and the stricter 
 enforcement which has since been in vogue 
 has led to more criticism of the Treasury, 
 probably, than has any other phase of its 
 affairs. 
 
 In the minds of most people a customs 
 law seems to be quite unlike other laws. It 
 is a statute which it is more or less of a 
 credit to evade, and methods of false witness 
 and bribery may be brought to bear with- 
 out troubling the traveller's conscience. It 
 is this peculiarity of human nature that 
 makes the task extremely difficult. There 
 is much complaint about the Treasury treat- 
 ing returning travellers as if their word was 
 not to be trusted, and submitting their bag- 
 gage to search after sworn declaration has 
 been made. Brief experience, from the in- 
 side, with this part of the Treasury adminis- 
 tration will convince one how necessary 
 such an attitude is. As an illustration of 
 that statement, the case might be cited of 
 fifteen prominent citizens of New York City 
 who went abroad two or three years ago, 
 and, on their return, all submitted sworn 
 statements in regard to the contents of their 
 trunks. Twelve declared they had no duti- 
 able articles, and the remaining three paid 
 an aggregate of $538. The next year the 
 560 
 
The Treasury 
 
 same fifteen citizens made their annual 
 European pilgrimage and, on their return, 
 were met by the stricter administration of 
 the same law. In addition to their sworn 
 declaration their baggage was carefully ex- 
 amined, with a result that they paid over 
 $34,000 of duty. Is it small wonder that, 
 after endless experiences, of which the fore- 
 going is but an average illustration, a strict- 
 ness of inspection should be put in force 
 which is galling to men who have both honor 
 and good memories and make out correct 
 schedules of their purchases when they give 
 their sworn declaration tO' a customs in- 
 spector ? 
 
 In the administration of the customs 
 there have undoubtedly been men who were 
 not true to their oath of office and have 
 accepted bribes. A considerable number of 
 inspectors have at one time or another been 
 summarily dealt with for such offence. In 
 the handling of the vast sums of money 
 which are a part of the Treasury's opera- 
 tions, there have, in very rare cases, been 
 instances of petty pilfering. Taken by and 
 large, however, the Treasury Department is 
 a splendid great commercial machine, admin- 
 istered with an integrity reaching all the way 
 from the head of the Department through 
 the whole army of its thousands of sub- 
 ordinates, an integrity of which the country 
 36 561 
 
Business and Education 
 
 may well be proud. Everywhere in the ad- 
 ministration the interests of the Govern- 
 ment are paramount to all else. 
 
 The good faith and integrity of admin- 
 istration may meet with assault from politi- 
 cal pressure; there may be men who seek 
 by bribery to influence political action ; there 
 may be brought to bear all the wiles and in- 
 genious methods which great pecuniary in- 
 terests can evolve, but the Treasury with- 
 stands such assaults and is a clean, upright, 
 honestly administered organization, with the 
 interests of the Government always fore- 
 most. No one can become intimately fa- 
 miliar with its operation without respect for 
 its integrity. There are men in the organ- 
 ization whose names never reach the public, 
 but whose careers have been models of effi- 
 ciency, intelligence, and probity. Some of 
 those names it is an honor to mention, for 
 the men have, with small compensation, 
 given to the Department years of service of 
 a character which has made success com- 
 paratively easy to a long line of Secretaries, 
 and always through one administration after 
 another have given devoted service to the 
 Department and its changing head. Such 
 men are A. T. Huntington, the head of the 
 Loans and Currency Division, a man whose 
 sound judgment has been a support to every 
 Secretary for a generation; W. F. Mac- 
 562 
 
The Treasury 
 
 Lennan, who, as the head of the Division of 
 Bookkeeping and Warrants, has rendered 
 services of such distinguished character that 
 Congress has attached extra compensation 
 to this position so long as he may hold it; 
 Major J. F. Meline, who, as Assistant Treas- 
 urer of the United States, has most largely 
 carried the responsibility for the safe cus- 
 tody of the vast sums of currency in the 
 Treasury vaults, and whose integrity is as 
 undoubted as that of any vault the Govern- 
 ment possesses ; C. N. McGroarty, who, un- 
 der a succession of Registers of the Treas- 
 ury, has been largely responsible for the 
 conduct of that important office in a way 
 to leave no doubt of the absolute accuracy 
 of its work; Thomas E. Rogers, who, al- 
 most since the organization of the na- 
 tional banking system, has been in charge 
 of the Bureau of Bank-note Redemption, and 
 through whose hands have passed $2,000,- 
 000,000. 
 
 The list might be much extended. There 
 are many men in the service whom it is an 
 honor to know, men whose character, fidel- 
 ity, and intelligence, massed together, make 
 the great Treasury machine what it is — a 
 Department of the Government of which 
 the people of the United States should be 
 unreservedly proud. 
 
 The University Press, Cambridge, Mass., U. S. A. 
 
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