The popular feeling against very rich men, who have acquired their wealth through the trusts and railways, is not a prejudice against property, but against the supposed ways and means by which their large fortunes were acquired. The impression is, with many, that those means were dishonest, and that their rapacious grasping for riches involved corruption in corporate management, and, in general, a feathering of their own nests at the expense of the people, or at best other people. To see them flaunting what they consider their ill-gotten gains exasperates men, and spreads discontent and unrest among the millions. Envy and malice are easily cultivated.
It is an inequality of wealth that they resent because they believe it to have been created by rebating, stock watering, inside speculation, and tricks and devices by which other people’s money was got unjustly, and by various illegal and fraudulent practices and abuse of corporate power. The exposures made from time to time tended to confirm the people in this impression and prejudice, and President Roosevelt was only responding to their call when he urged the prosecution of the corporations known to have been among the most flagrant violators of the anti-rebate law.
These violators were not the corporations, which we all know have no souls, but their officers; yet the officers have gone thus far unwhipped of justice, much to the disgust of the masses of the people. But in future this defect should be remedied, and rich and poor among the individual violators of the law should be prosecuted criminally, and upon conviction sent to jail like any other criminal. I can understand how many men, who as private individuals would have avoided criminal or wrongful acts, had no scruples about violating laws in their corporate capacity. This, however, is an indefensible plea. They showed a moral laxity which has been exposed and branded as a crime, and instead of it let us hope they have now a sense of corporate responsibility and honesty, as a result of these Government prosecutions, and the knowledge that in future such violations of law can hardly be repeated with impunity. They will certainly find that honesty is the best policy.
The cry against Mr. Roosevelt has been so indiscriminate that it would often be amusing but for its serious aspect. If a corporation, firm, or individual fails in business nowadays, Mr. Roosevelt is blamed. If a man makes a bad investment in anything, or if his creditors press him for payment, or his creditors are slow to pay or go into bankruptcy, he blames Mr. Roosevelt, while the vast host of large and small investors in stocks and bonds all over the country are almost of one mind in blaming Mr. Roosevelt for the depreciation in the market value of their stocks and bonds.
I should not be surprised if very soon even the ladies who have lost at the fashionable game of bridge will blame Mr. Roosevelt for their losses. Everyone, nowadays, dumps his misfortunes upon Roosevelt, and attributes the cause to him. I recently heard of a man who had been doing a thriving business on Long Island shore catching eels and selling them in the New York market. Lately the eels have stopped going into his pots to be caught, so he is now going about howling against Roosevelt for ruining his business. That is no more ridiculous than many other things for which he is blamed, without having had anything to do with them. In thus complaining they overlook the long train of causes and events that led up to this year’s disturbances in Wall Street.
The public must have a scapegoat in times of excitement and discontent, and many of our wealthy people thoughtlessly held the President responsible for the disturbances and unsettlement we have witnessed, and their own losses and disappointments, because he had taken the initiative in calling upon the law officers of the Government to prosecute the railway and industrial corporations known to have violated the law. They seemed unaware that he did this to stop those illegal practices which had made enormous fortunes for the favored few, and enabled them to crush or impoverish their competitors and impose upon the people. He was the people’s champion.
He did not advise these prosecutions without good cause, for in every instance where a case was tried on its merits the Government secured a conviction. Fines of large, but not enormous, amounts were levied accordingly against many of our principal railway companies, including the New York Central, and against large industrial corporations, including the Sugar Trust, for rebating and accepting rebates. But as the punishment was always by fining the corporations, and never by the imprisonment of the officers, who were the actual violators of the law, the masses of the people complained that while they themselves would have been sent to jail if guilty of criminal offences, these high and mighty railway and Trust officials were not, and that by fining the corporations only the innocent stockholders were made to suffer instead of the individual wrongdoers. Their complaint was just.
I trace the causes of this year’s state of affairs as far back as the failure in London of Baring Bros. & Co., in 1890, for that unexpected event gave a shock to confidence, and curtailed credits all over the world. Indeed, the long career and prestige of that celebrated and honorable house gave it a credit in both hemispheres that was second only to that of the Bank of England, and its collapse wiped out of existence the immense amount of credit and the banking facilities that it had enjoyed so long. This involved a corresponding international contraction of the medium of exchange, and tightened the purse strings of the world, and it continued to do so long after the failure had passed into history.
The Boer war involved, in another way, great and prolonged depression in England. It drained her of an immense amount of money, and drained her also of a vast number of men whose labor was needed at home. To raise the sinews of war, she had to issue from time to time large amounts of consols, and these, being in excess of the power of investors to absorb them, steadily declined, and now—years after the war—they are still heavy. It naturally surprised the world when last August they reached 81, the lowest point in their long decline, and John Bull was sorely puzzled to define the cause.
The Russian-Japanese war was another very costly and depressing factor, and adversely affected international money markets because it involved immense borrowing by both Russia and Japan, and their bonds are still helping to glut the European markets, and to some extent our own, as many of the Japanese bonds are held here. At the same time France is particularly unfortunate in being burdened with a vast amount of Russian securities, far more than ever before, which leaves her correspondingly powerless to make other investments, or extend assistance, when needed, to other countries.
Then came our Pacific coast disaster, the earthquake and fire at San Francisco, which involved enormous losses there, and struck Wall Street and its speculative capitalists a tremendous blow, for the latter were about as heavily loaded with stocks at that time as before the March crash, and these had a severe break in consequence. It also involved English and German as well as American fire insurance companies in heavy losses.
The effect of this train of disastrous events, both here and in Europe, has been more or less cumulative, and their influence was so great and far reaching that it is still being felt, especially by our rich and speculative Wall Street men, with little of their wealth in the liquid form they would prefer, notwithstanding their heavy liquidation. They are still tied up with large amounts of stocks and bonds, bought long ago at higher prices, and for which there is but a limited market. As the same condition of affairs exists in Europe, they may find some comfort in that fact, for we are told misery loves company. They certainly have plenty of it.
Fortunately the reports of the National and State banks all over the country show that they are in a sound and strong condition, the result of proper conservatism, and in protecting themselves they have protected their depositors and stockholders. So the banks have escaped being involved in serious losses through the crisis in the stock market, and are in a position, now that the depression, if not over, is at least no longer acute, to lend assistance in the recovery that sooner or later inevitably follows such a cyclone and excessive decline in prices as we have witnessed.
The banks, however, have in common with all other holders of stocks and bonds suffered loss by the depression in price of the securities owned by themselves, this being, as I have shown, particularly the case with the savings banks, and it may possibly, if not soon recovered, lead to a reduction of their dividends. If it should so eventuate, it would be an object lesson that would show the poor man that even his savings bank deposit was not beyond the depressing influence of a Wall Street crisis. But let us hope that there will be no such far-reaching result. The savings banks have, however, already deducted large amounts from the value of their holdings of securities on account of the past and present year’s depreciation. Few of their depositors understand this, and where ignorance is bliss ’tis folly to be wise.
We are fortunate in being Americans and having so great a country under our sovereignty, for its vast geographical extent, its diversified interests and resources, and wide differences in climate make one section to a certain extent independent of another. Thus the South, the West, and the Northwest looked with complacency upon the Wall Street crisis as something confined to the East. There was no falling off in bank clearings, no lessening of the activity in trade South or West. The industrial and agricultural resources of the country were unaffected, and the outlook for the crops and trade is reassuring in all directions. Yet last month many feared the country was going to the dogs.
The last Government report indicates a decrease in the estimated crop of wheat, but with the invisible left-over supplies, it will fall little, if any, short of last year’s crop, while the corn and other grain crops will largely exceed the demand for home consumption. The cotton crop, too, which the planters will soon begin to gather, promises to be almost equal to the last. Yet its price is much higher. The grain crops, by reason of damage to the crops in Europe and elsewhere, and higher prices, are likely to yield more when marketed here and abroad than in recent years. Our exports of cotton, too, in the last fiscal year were valued at more than half a billion of dollars, while our exports of manufactures aggregated 750 millions. Our coal, iron, copper, gold, silver, and other mineral products will be larger in 1907 than in 1906, and our total industrial income will show no diminution. Yet in August many felt as blue as indigo about the situation.
[Illustration:
_Stuyvesant Fish_ ]
I say all this to show that the railways will have all the freight traffic they want, and the enforcement of existing laws relating to them will be more likely to increase than diminish their net earnings, for they will gain largely by the stoppage of rebating and other abuses. Some of our State and possibly some of our Federal laws may be too drastic, and, so far as their requirements are unreasonable, oppressive or unnecessary, they should, and doubtless will be, amended by Congress and the States, or set aside as unconstitutional by the courts, as in the case of Pennsylvania’s two cents a mile rate, for an unjust or vexatious law is abhorrent to justice—justice so well typified by that blind goddess who holds the scales on such an even balance in the world of art. Corporations, as much as individuals, are entitled to a square deal, and a square deal for all is what President Roosevelt is working for.
As it is, most of the Western railways have, like the Southern lines, a double track traffic for a single track road, and there is abiding prosperity in this plethora of business. It is a sort of embarrassment of riches, for, notwithstanding the vast additions that all the railways have made to their rolling stock and motive power in recent years, and the enormous amounts spent in building branches and double tracking portions of their main lines, and increasing their terminal facilities, they are still unable expeditiously to cope with the present superabundance of traffic; and this will naturally increase with the growth of population. So the outlook for their stockholders is better than ever.
For his courageous course in unearthing and prosecuting the rebating evil and other wrongdoing, President Roosevelt is entitled to the highest praise; and I reiterate that the heads of railway and other large corporations will best serve their own and the country’s interests by co-operating with him and his administration to secure strict compliance with the law in future, with the hope of clemency for their past violations of law.
That the railway companies always, as a matter of policy, are disposed to be conciliatory and not willing to be openly antagonistic to the enforcement of law, is beyond question. Like the American people, they are law-abiding. We saw an instance of this in the course of the Southern Railway and other Southern lines, in withdrawing their appeal from the State Court to the United States District Court in the rate case, and agreeing to charge only the State rates, namely, two and one-quarter cents a mile, in North Carolina, two and one-half cents in Alabama, and three cents in Virginia, till a decision on the constitutionality of the State rate laws is rendered by the United States Supreme Court. This concession was avowedly made to avoid further conflict with those States, although the companies were within their legal rights in the appeal they had taken. They were wise.
After the good work the Government has already done in exposing and punishing the rebate evil and other abuses, it would seem that the end in view—namely, their stoppage—has been substantially achieved. I therefore think you will agree with me that the Government can well afford to rest on its secured results and its laurels, and discontinue prosecutions for old offences, while holding all to the strictest accountability for violations of law in the future. The law-breaking corporations have been taught a lesson that they will never forget, and have suffered penalties that they will not be willing to incur again.
By the Government thus showing clemency towards the offenders they would all the more be put on their good behavior, and the clamor against Mr. Roosevelt, in which they have been the leaders, would gradually subside. Those who have been punished by the law are always very likely to have a bad opinion of it, and to retaliate by charging injustice. Hence the old English saying, “No rogue e’er felt the halter draw with good opinion of the law.”
This reminds me that the two international congresses of socialists held in England and Germany in August, one at Cambridge and the other at Stuttgart, showed what large masses of the people there are laboring to overthrow the existing law and order of society by putting restrictions and fetters upon individual achievement, genius, and capacity for good work, and by giving the inferior masses all that they would allow the superior and educated to enjoy, a levelling process entirely inconsistent with Americanism, for it would destroy all incentive to great efforts, and reduce all to a uniformity inimical to progress. Some of the decline in British Consols is attributed to this socialist agitation in England, and notably in the House of Commons, several of its members being radical socialists; and the same is true of Germany and its Parliament.
In Berlin, which has been for some time the storm-center of Europe, socialism and its revolutionary doctrines, and especially the meetings and preachings of the rampant of the socialists, have added to the disturbance, distrust, and depression caused by the monetary situation. There, as here, over-expansion in all directions had over-taxed the money market and glutted the Bourse, the banks, and the speculative capitalists with new issues of securities that were either unsalable, or salable only at a ruinous sacrifice, owing to the heavy shrinkage in prices, and the absence of demand at the low prices. This presents an almost parallel case to our own, except as to the effect of socialistic agitation.
We have too many blatant socialists here, but they are not planted in congenial soil, and their demagoguery and schemes for the destruction of society as it exists will yield no harvest, for in this great country, where all are free and blessed with equal opportunities, there is no reason, no just cause, or excuse for socialism. The agitation in favor of socialism and its doctrines is not American. It is antagonistic to American institutions, and comes almost entirely from those who have fled from oppression and despotism in Russia and elsewhere in the Old World to our shores, and who fail to see, as they should, that the conditions which have given rise to socialism in Europe are entirely different here. So socialism will never take root in the United States, however much it may be agitated by those of foreign birth who reciprocate our hospitality in giving them all the rights of citizenship that we possess ourselves, by advocating the downfall and destruction of our institutions and system of society, which has made this great nation of free and independent citizens what it is to-day, the wonder of the world.
The Bank of France has continuously felt, but resolutely fought against, depressing foreign influences by tenaciously holding on to its gold, and it attracted more of it recently from this country by paying interest in transit. Both London. and Berlin have long been trying hard to get gold from France, but without success. This determined policy, and refusal to finance anything that would take money out of the country, is intended to fortify the Bank of France and French investors against a possible crisis due to their colossal holdings of Russian bonds. France is the guardian and watch dog of monetary Europe.
While the situation in Germany is strained, that country is taking the lead in European manufacturing enterprises, and it is forcing its trade in all parts of the world. To its great expansion in industrial work, the locking up of capital there, in industrial enterprises of all sorts, is chiefly due. Tempted by great expectations capitalists have invested in them very heavily, and induced by high rates of interest the banks, and other large money lenders, have loaned enormously on industrial securities for which there is at present little or no demand from investors, and this conversion of their resources from a cash or liquid form to a form much more fixed than they expected, has very largely curtailed the supply of loanable funds to others, and caused or aggravated the long existing monetary stringency in Berlin. Yet, strange to say, Germany uses very few bank checks. The German Government, however, is about to consider a plan for regulating their issue and use. Even the Government salaries, aggregating $211,344,000, or 888 million marks, a year, are paid wholly in specie. Here we see 18 million dollars a month withdrawn from circulation, to return slowly. This is almost as bad as our Sub-treasury system. No wonder Germany is pinched for money.
One indirect cause, hitherto overlooked, of the prolonged monetary stringency in Europe has been the absorption of gold by Egypt, India and China, and it has been sufficient to largely neutralize the effect of the increased gold product of South Africa, Australia, America and other countries. India has desired gold of late years, instead of silver exclusively, as before, owing to the depreciation in value of the white metal, and China has been secretly absorbing it for the same reason, and with an ultimate view to placing that nation on a gold basis.
Egypt, however, for several years has been largely buying gold with the proceeds of its large exports, which include a particularly fine quality of long staple cotton that commands a much higher price than ordinary cotton. This gold is extensively hoarded by the Egyptian capitalists instead of being placed in the banks there, and entering into the monetary circulation. The consequence is that it is lost sight of, and lost to the world outside, for Egypt is not only distrustful of banks, but imports very little in comparison with what it exports. So it is enabled to keep what it gets in gold. This seems to me an answer to the question, “What becomes of the new gold?”
The world’s peace in the future is more likely to be disturbed on the Pacific Ocean side than on the Mediterranean. I predict that within the next few years all the great European nations will combine, in friendly relations, offensive and defensive, against the balance of the world, which means against China, Japan and India, that represent two-thirds of the world’s population. If the United States wants to stand aloof and avoid being drawn in on one side or the other, the Philippines must be parted with. The contest of the European nations will be for commerce in the East, and the European powers, especially Russia and Germany, will do all they can to breed trouble between the United States and Japan and would be glad to have both nations crippled through a war. So long as we hang on to the Philippines we will have a war cloud hanging over us. England, owing to her alliance with Japan, is in a better position to take care of the Philippines than we are, and if we could make an honorable deal with England to exchange them for her South American possessions, it would be a good thing for us, as, when the Panama Canal is built, those islands will be of much more advantage to us than the Philippines, and by thus removing the bone of contention we would secure permanent peace. The Philippines will be a great source of expense to us without any possibility of obtaining corresponding advantages; therefore, why retain what will keep a sore spot open as long as we hold on? We are not a colonizing nation—we have territory enough of our own within our own border, while England, on account of her meagre dimensions, requires colonizing for self-existence.
I am inclined to think that it may turn out to have been a mistake for Commodore Perry to have opened the ports of Japan to the world—a caged lion being safer than one let loose. It resulted in Japan building herself up as a power; then followed the war with China, which was instrumental in breaking down China’s exclusive walled-in method of existence. So that now China is also opened to the world like Japan; her 350,000,000 of people will get themselves on a war protecting basis, which will naturally make an alliance with Japan a necessity, and such an alliance will after a while require the European combination as an offset; otherwise, sooner or later some of the European nations will be apt to meet the same fate as old Rome at the hands of the barbarians—simply wiped out of existence. China and Japan will fight for their self-preservation and commercial interests. The 300,000,000 in India will fight for release from Great Britain’s rule, and backed by fanatical inspiration, under skilled leadership, will make a dangerous foe sometime. Hence India’s natural desires will make her akin to China and Japan, arrayed against any foreign foe. So India, China and Japan and the rest of the Orient, when well disciplined and well equipped and led by Japanese generals, will require the combined European nations to hold them in check. The European nations have now had all the wars they want and they have gained through them their present forceful positions of independence, hence all future great wars will be to keep the 900,000,000 of people in Asia in subjection, and it will need all their combined power to do so.
I will now come nearer home and glance at the rising star of the South.
The continued material prosperity of the South is one of the best signs of the times, and it has given a legitimate forward impulse to the whole country. This section of the United States is in its natural resources more favored than any other, and presumably will ultimately become the richest. That indeed is its natural destiny under the industrial and agricultural development which will come from the growth of population, the consequent increase in the supply of labor and the progress of education. Here, indeed, you have a splendid prospect where distance lends enchantment to the view, and in aiding, encouraging and stimulating this development, on good business principles, none will be able to render better service than you Southern bankers. Already the South is progressing in actual agricultural and industrial wealth from year to year, and day to day, at a rate that would have seemed fabulous not very long ago; and the banker shares with the farmer this rapidly increasing prosperity, especially if cotton is selling at more than thirteen cents a pound, or even at ten cents. It is, therefore, to the banker’s interest to co-operate with the farmer, for by so doing the benefit becomes mutual. You gentlemen, as Southern bankers, are favored by Providence in being where you have such a wide and splendid field for doing good to others on a safe and conservative basis, at the same time that you are building up the South, and doing good for yourselves in the time-honored business of banking.
While the South is increasing rapidly in actual and substantial wealth, it is a good sign that this wealth is not going into a few hands, but being widely distributed among all grades of the population. The city, the town, the village, the factory and the farm give equal and abundant evidence that all are sharing this boon of material prosperity, resulting from their own industry and the Southern country’s legitimate development. You have, figuratively speaking, only to tickle the soil with a hoe, and it smiles with a harvest.
The South produced last year crops and other raw products valued at two thousand millions of dollars, or four hundred and fifty millions more than all the United States, outside of the South produced in 1880; and last year also its manufactured products were valued at two thousand five hundred millions, or five times more than it manufactured in 1880. This is the right kind of expansion.
Last year, too, the increase in the assessed value of property in the South was eleven hundred millions, or three hundred and fifty millions more than the increase between 1890 and 1900. Contrast the increase of seven hundred and sixty millions in that ten-year period with the increase of over sixteen hundred millions in the last two years—1905 and 1906.
Such growth is as phenomenal as it is gratifying, not only to the people of the South but to the people of the whole United States, and it is not a forced but a natural growth. We see it most conspicuously in the development of its industries, for it has now two hundred and fifty millions invested in cotton mills, an amount exceeding the capital invested in cotton mills in all the United States in 1880. This alone is a grand exhibit.
The South also is making pig iron at the rate of three million five hundred thousand tons a year, more than all the rest of the country made in the year 1880, and the capacity of the South for iron and steel making is practically unlimited. Turning to bituminous coal, the South mined eighty-five million tons of it last year, and in the last fiscal year the foreign exports of all kinds from southern ports were valued at seven hundred and thirty-four millions against only about two hundred and fifty millions in 1881. The South may well be proud of all this productiveness.
So great is this material development and so great the consequent demand for transportation facilities, that every railway in the South may well need double tracking, while to keep pace with the South’s present rate of progress, thousands of miles of new railways will have to be constructed every year for many years to come. The South should therefore continue to encourage capital no less than immigration, on a scale extensive enough to meet all its legitimate requirements. This is the work, Gentlemen and Bankers of the South, that lies before you.
Now I come to Kentucky; good old Kentucky—with which is linked the fame of Daniel Boone, and a Civil War record of which it may well be proud.
We in the North, of course, all know that Kentucky is famous for its beautiful women, its handsome men, its splendid race horses of the great blue grass region, and the whiskey of which Colonel Watterson has told us so much and claims to be so fine a judge. His story of “Old Kentucky Bourbon” is a dream of eloquence.
But first of all to engage our attention are the women, whose beauty is only eclipsed by their charm of manner, their refinement and bright intelligence. They represent an aristocracy of the best blood of the American people, and I can testify to their fascinations, for I won, or rather surrendered to, one of the finest of Kentucky’s daughters, after for a long time supposing that my surrender was impossible even to the fairest of the fair; and therefore I am glad to come to Kentucky and to enjoy the privilege of addressing so many of its stalwart sons as are gathered in this distinguished assembly of Kentucky bankers, on the general situation, after the financial storm we have passed through. I indeed almost feel, in the tender words of the popular song, that I have at length reached “My Old Kentucky Home.”