In this respect the south has not progressed far since Appomattox, but even here there are evidences that an advance is in sight. With its farms and plantations far more productive than in the past, its mines and factories busy, and its ports getting a larger and larger share of the country's commerce, the south can reasonably consider itself a favorite of fortune. Its wealth growing at a rate never before equaled, it is in a position to stand philosophically the ostracism which has barred it from the larger prizes of politics.

CORPORATE FACTORS IN AMERICAN PROGRESS

-WALL STREET AND THE GRAIN PIT.

BY W. R. LAWSON.

[W. R. Lawson, a London journalist, came to the United States several years ago and in behalf of the London Daily News made an investigation of the industrial situation in this country; he had previously made similar investigations of Spain and Germany; Mr. Lawson's shrewd observations were quoted so widely that a demand arose for their publication in book form and the resulting volume "American Industrial Problems" is regarded in England as a standard book on its subject.]

If an English reader were asked what influence the stock exchange and the Baltic have on the general business of the country he might be hard put to it for an answer. If an American reader were asked a similar question as to the influence of Wall street and the produce exchange he would have no corresponding difficulty. Both these institutions stand in very close relationship to the staple markets of the United States. They are among the recognized price makers, and sometimes they are more effective than all the other price makers together. They furnish the speculative element which sometimes intensifies, sometimes neutralizes the natural tendency of a market. When, for instance, a short crop is anticipated, speculation discounts it beforehand. By buying in advance it puts up the price sooner than it might have risen if left to its own course. When there is promise of a heavy crop speculation discounts that by selling in advance. Both operations may be quite legitimate and have a beneficial effect. The rise and the fall may be equally moderated by the action of the speculator. They may be spread over longer periods, and in that way their ultimate danger may be lessened.

The trader generally does not recognize the speculator as a friend and ally. He more frequently treats him as a mischievous interloper. He regards the speculator as creator of fresh risks rather than as a reinsurer of risks already

existing. But eliminate the speculator, and the grower of produce, the dealer, and the transporter will find that they have lost their means of reinsurance. They must now bear all their risks themselves. If a country like the United States, raising enormous quantities of agricultural, mining, and other produce which have far to travel to a market and many accidents to encounter by way, were to restrict itself severely to the ordinary course of trade, it would often be caught in disastrous fluctuations. In such circumstances the farmer would have to choose between selling his crop early-perhaps at the lowest price of the season—and holding it for a better price, which he perhaps might not get after all. No trader would buy it from him except at a price which would leave ample margin for future contingencies.

Thus the farmer, in deciding whether he shall hold or sell early, incurs the risk of a wrong decision; in other words, he speculates. The trader who takes part of the risk off the shoulders of the farmer also speculates. Between them and the professional speculator there is no essential difference. Is is only a question of degree in any case. If a distinction had to be drawn, it might be said that the farmer and the grain merchant only undertake risks incidental to their business while the professional speculator goes out of his way for them and undertakes them voluntarily. That may be, but the vital point is, that there must be a large amount of risk in the marketing of such produce, and that some one must bear it. The professional speculator may argue that better many should share it than that one should bear it alone.

Under the present commercial régime, wherever there are business risks to face there will be speculation as well as so-called legitimate trade. Moreover, the dividing line between the two will never be easy to draw anywhere, and most difficult of all in the United States, where risks are great in proportion to the enormous amounts that have to be handled. Speculation that simply spreads these heavy risks over a larger area requires little if any apology. On the contrary, it may be claimed that the better it is organized and controlled the more justifiable it will be. The Americans have, after long and thorough discussion, concluded that a certain

amount of speculation is inseparable from business of any kind in stocks or staple produce. Instead, therefore, of making a futile attempt as the German government did to suppress it, they allowed it to organize itself on the safest attainable lines. The Americans have consequently the greatest freedom of speculation and more abundant facilities for it than any other people. They have created the largest number of speculative methods and devices. "Futures," "options," "straddles," and every known kind of contingent dealing are familiar to them.

These facts are worth mentioning, not for their own sakes but in order to show that in the case of the Americans we are not dealing with a people who are squeamish or fastidious in speculative matters. An American speculator will be allowed both by law and public opinion to go fartherconsiderably farther-than would be tolerated anywhere else. Therefore whatever oversteps the American code of speculative ethics is likely to be rather rank. Here we shall judge the Americans by their own code, and not by that of any European community. Transactions that would be penal in Berlin form a large part of the day's work in New York or Chicago; and things that would scandalize London are mere passing sensations in Wall street.

These rather elastic principles of Wall street and the produce exchange have another noteworthy peculiaritythey are steadily growing more elastic. The question before us now is, what effect this laxity may be expected to have on the industrial future of the United States. It may be best answered, not by elaborate descriptions of Wall street and other centers of speculation, but by a few examples of the length to which speculative plunging is now carried. It would seem as if all the most dangerous precedents of the past were being revived for the purpose of out-Heroding them. In the phenomenal outburst of American prosperity there is much that foreigners can cordially admire. Threatening as it may be to their own interests, they can respect the splendid business abilities associated with it. But there are some phases of the boom which cannot be regarded either by Americans or foreigners without grave alarm.

The colossal gambles which follow each other so rapidly in Wall street and in the "grain pit" must shake confidence in the whole commercial system which permits them. Whether they be inseparable from it or not, they threaten serious disaster to it sooner or later. They are even more ominous than the trusts, for the latter may plead that union is strength, but colossal gambles can end only in panics. The gamblers themselves are perfectly aware of that, and it is amusing to see how jealously they watch each other when any alarm of a perilous "deal" is afloat. Formerly the greatest exploit that a Wall street filibuster could achieve was a "corner" of some kind. It was the crown of his ambition, like the role of Hamlet to a budding tragedian. But now the bare mention of a corner sends a cold shiver through Wall street. It begets terrible visions of a house of cards tumbling about one's ears. So terrifying is the prospect it conjures up that the banks, as soon as they hear of one being attempted, launch a vigorous remonstrance at the cornerers. This actually occurred not long ago-in fact, about the beginning of 1902. The episode was afterwards described by the actor in chief, John W. Gates. To an interviewer he made the following ingenuous confession:

"On the Louisville we had the opinions of the best experts and auditors in the country that it was worth more per share than the Illinois Central. Before we started we knew there were $25,000,000 quick cash assets in the treasury; but the public did not know that. We started knowing the actual intrinsic value of the company and its exact physical condition, and we had the reports of the auditors on its financial condition.

"When we obtained 306,000 shares-the amount we started out to get-there was a short interest of 150,000 shares, of which 100,000 shares were the foreign short interest and 50,000 were stock that August Belmont had sold under a resolution of the board authorizing its sale. These 50,000 shares were not good delivery for thirty days, and if we had called the stock and insisted upon the specific performance of the contracts, as we had every right to do, we could have caused a panic greater than the May panic.