ping the evils of the others. An attractive measure would be to combine with the rigid restrictions above mentioned, which would destroy many if not most of the evils, a provision that federal corporations should be exempt from state taxation except as to property actually situated within the several states. Now the large corporations fear and oppose and evade state corporation taxes. The variations and complications arising from different systems are troublesome; in many cases lawyers say, probably with some exaggeration, that corporations are subject to "strike" bills and to blackmail where discretion is left with minor officials. They would be willing to pay a federal tax even heavier than their present taxes if it were alike on all and fairly and honestly levied. Such an exemption provision-and possibly others which might check too hostile legislation by separate states-might easily prove so attractive that the sound corporations would readily organize under the law and aid in its just enforcement. A federal corporation law, if enacted, should certainly at first be made permissive rather than mandatory. There would thus be no danger of a revolution in business; the courts and the business community would adapt themselves gradually to the new line of organization. If the law were reasonable, even though very strict, the best corporations would come under it at once. The others would soon feel the pressure of public disapproval, if the federal law were distinctly the best. If experience showed that it were necessary to extend the scope of the act, though that is not probable, it would be comparatively easy later on to force, by taxation or otherwise, other state corporations engaged in interstate traffic to incorporate under it.

The three plans indicated are not contradictory; they are rather progressive along the same line. Either act could be passed alone, or all of them might be passed together. If the first law discussed were enacted, it would doubtless give us valuable experience and decisions, and would be, with the exception of one point, a distinct step in advance, possibly all that should be taken at first. But, so far as has appeared, it is practically entirely compulsory in its nature, and could be readily evaded. The other two measures seem more drastic, and doubtless would be more rigid in many ways;

but, on the other hand, the last, at any rate, might contain provisions which would remove the hostility of the better class of corporations, which would then themselves readily aid in the enforcement of the law, while if it were made optional, even if combined with the others, there certainly could be no charge of action which was hostile to the interests of capital legitimately invested and properly employed for the welfare of the public,

THE WORK OF THE PROMOTER.

BY EDWARD SHERWOOD MEADE.

[Edward Sherwood Meade, economist, born Medina, O., Jan. 25, 1874; educated at Oberlin college, DePauw university and the University of Chicago; fellow in economics, University of Chicago and University of Pennsylvania; instructor in commerce and industry, Wharton School of Finance and Economy since 1900. Author of Trust Finance, and of many monographs and articles in magazines on the economics of modern industry.]

Copyright 1902 by American Academy of Political and Social Science

Every week of the year deposits of minerals are discovered, franchises are obtained, patents are granted. Railway extensions are constantly bringing land, timber and coal into the market-increasing population offers a basis for water, light and transportation plants. New inventions stimulate new wants and these wants in their turn produce new means of satisfaction. The field for investment, either in new enterprises, or in the extension and diversification of established industries, is infinitely various. To take but one field, the production of power, we find a vast range of opportunity for profitable investment. We have first of all the mechanical draft and the mechanical stoke, the use of superheated steam to reduce condensation, the inside firing boiler to prevent radiation through the fire box, the steam turbine to utilize the direct pressure of steam, and the various devices which purify the water before it goes into the boiler, and to cleanse it for future use by condensing the exhaust steam. In other divisions of the field of power we have the development of electrical power transmission, which is bringing into the field of investment a large number of water powers which until recently were worthless and wasted, and we have the general introduction of the gas engine which promises not only to solve the question of the small power plant, but to double the efficiency of coal by using it in two forms, coke and gas. In other fields similar opportunities are multiplying. Improvements long since discovered are forcing themselves into general notice. New improvements are attracting instant attention. Never before in the world's industrial

history has man increased his conquest over nature at such a rapid rate and simultaneously in so many fields.

These opportunities for production of wealth are opportunities for the investment of money, since the investment of money is, in the vast majority of cases, either directly or indirectly the production of wealth. The investor buys $50,000 of railway bonds. With the proceeds the railroad replaces a wooden trestle with a steel bridge. Over this bridge it can run a heavier train load, which it obtains by the lower rate which the decrease in operating cost resulting from that heavier train load makes possible. The lower rate enables the farmer to turn a part of his grazing land into wheat, and so eventually and indirectly the $50,000 which was invested in the railway bonds has increased the supply of wheat on the world's market. This increased production of wealth, therefore, was made possible by the purchase of the bonds which the investor bought; because of its increased earnings the railroad could pay him 4 per cent. Without the investment of money increased production would be impossible. Upon the investor rests the responsibility of increasing the wealth of the world. As he directs his funds, this way or that, to railroads, cotton mills, irrigation or shipbuilding, the productive energy of society is exerted in this or that field of enterprise.

This office of investment is variously performed. Men may invest or capitalize their own savings. The farmer devotes $1,000, half the proceeds of his last wheat crop, to the purchase of nitrate fertilizer. The New England cotton manufacturer invests his surplus earnings in a South Carolina mill where cheap power, labor and material invite development. The Bessemer steelmaker adds an open hearth furnace to his equipment and takes advantage of a large supply of scrap iron. The Pennsylvania coal operator or lumberman buys the cheap coal and timber land of the south. Every producer is continually devoting his surplus funds to enlarge his enterprise along lines with which he is familar as the opportunity presents for greater profits or as competition forces. He may occasionally branch out into other fields, as when the farmers of a locality erect a flourmill or sawmill or open a

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stone quarry, or where the carriage maker goes into the manufacture of automobiles, or a railroad may spend a portion of its surplus in purchasing a coal property along its line. In these investments, producers extend their business out of their profits and with their own funds. More new wealth is produced by this form of investment than by any other. Every industry is constantly growing from within, as the biologists would say, by intussusception, out of the profits of the past, the individual producers are making innumerable ventures of their money into untried fields in enterprises where they alone stand to win or to lose, and where they act from personal knowledge of the opportunity.

A second class of investors there is, which may include the members of the first class, but who are actuated by different motives and who act in a different way. These are also in possession of surplus funds from the employment of which they wish to obtain a profit and they are ready to buy the stock of any corporation which gives them an assurance of satisfactory return. They are in the market for any securities which they consider to be a safe and profitable investment. The members of this class are not, as a rule, in close touch with the industries whose securities they buy. A leather merchant invests in steel, a banker in railroads, a retail dealer in mining stock, not usually because he desires to identify himself with the business in which he invests, so far as to give it his close personal attention and to assist in its management, but solely that he may share in its profits. Included in this class are all investment institutions and managers of trust funds, who take no active part whatever in the numerous enterprises whose securities they hold. The importance of this vicarious interest in industry is steadily increasing, as production is carried on on a larger scale, and as it therefore becomes increasingly difficult for a few men to combine a sufficient amount of capital for the inauguration of a new enterprise, or the development of an enterprise already established. Twenty years ago timber was readily accessible and a few thousand dollars would build a sawmill. A half dozen farmers, by combining their savings, could start in the lumber business. To-day, a well equipped sawmill may cost $100,