The bold, and even aggressive, action of the American Federation of Labor in going to Washington and making demands upon Congress, and criticizing not only the laws but the decisions of the Supreme Court of the United States, puts a new and serious face on the old contest between Labor and Capital. It arouses some apprehension as to the lengths to which Labor will go, and how far its political influence may enable it to accomplish its purposes. Politicians are ever ready to show subserviency to Labor, merely for the purpose of gaining votes for themselves.
We all want to see justice done to Labor, but we also want to guard against injustice being done to Capital by Labor, and Labor’s resistance to a reduction of wages to correspond in some degree with the decline in the earnings and profits of those employing it, is a practical injustice to all those outside the ranks of organized labor.
The readjustment of wages to existing conditions is, therefore, of the first importance and should be first to receive serious consideration, with a view to harmonizing both sides, and a prompt settlement. Half a loaf is better than no bread, for both Labor and Capital, and it is not to the interest of either to kill the goose that lays the golden egg. Their interests are mutual, but Labor is posing as if they were antagonistic. It has often done this before, but never more conspicuously than now.
With respect to our foreign market for cotton goods, there is plenty of room to widen it, but our exports of these, in competition with England, Germany and other countries, are more or less checked by the high price of labor here, and its comparatively low price there. Hence we should constantly endeavor to overcome this disadvantage by keeping ahead of the rest of the world in labor-saving devices, and improvements in machinery and manufactures. We should try to surpass all Europe in the quality, as well as the cheapness of our goods.
As we are the most inventive of all nations, and the quickest to adapt ourselves to new or altered conditions, we shall doubtless find this feasible, if not an easy task, whereas England, our greatest competitor in manufacturing, is proverbially slow in changing machinery.
I once asked Mr. Andrew Carnegie what was the mainspring of his phenomenal success as a manufacturer of iron and steel, and he replied:
“I always kept foremost in making improvements in my machinery and methods of manufacture. Whenever a new invention that I could use was patented, I secured it at any cost, and so kept in advance of all my competitors.
“At one time I had two million dollars’ worth of new machinery that I was about to install, but a man came to me with an improvement in it that he had just patented, and I bought his patent and adopted it. In doing this, I had to cast aside, as old material, the two millions’ worth of new machinery. But the improvement recompensed me many times over for what I had sacrificed to make the change.”
It is in promoting improvements in manufacturing processes and machinery that this Association, apart from its general utility, can be of great and permanent value to the cotton mill industry and kindred manufacturing enterprises. Ready adaptability of means to ends is as important in manufacturing cotton sheetings, and the other products of the loom, as in every other business and everything else.
I remember that in conversation with Admiral Sir Charles Beresford, of the British navy, when he was visiting New York, he told me of an instance of American adaptability to circumstances, that he noticed while in China. The Chinese had been long complaining of the want of sufficient width in a certain grade of British cotton fabrics that they were using and they had asked the English agents from time to time if they would increase the width. But nothing came of their expostulations and requests, as the agents, after writing home, told them the Manchester manufacturers said they would have to alter their machinery in order to give them the desired width, and this could not be done.
But the agent of a large American dry goods house, with extensive cotton mill interests, arrived at Shanghai, and hearing the complaint of the Chinese, he said: “Give me your order and you can have whatever width you want,” and he got the order. Sir Charles added: “So, you see, you people are smart and give them what they want; besides, you make your cotton goods heavier than we do and the Chinese like them better because they wear longer, for when the Chinese put on such clothes they never come off until they rot off.” Here was an instance of ready adaptability to the occasion and market needs by an American, which the English lacked.
An illustration of the importance of scientific investigation with a view to the discovery of new elements and processes in manufacturing, is found in silkine, a fabric closely resembling silk, which has come into popular use. It resulted from the discovery that the mulberry and other trees on which silk worms feed possess properties that could be extracted and utilized, to a certain extent, in the production of a silky fibrous material which in combination with fine Egyptian cotton, made a cloth so closely resembling silk as to be possibly mistaken, except by experts, for the silk of the silk worm. Here theoretical and practical science were happily combined with mechanical skill to produce an entirely new material, and doubtless there are many similar opportunities awaiting discovery. This Association by stimulating such investigation in mechanical science may achieve even greater results than it anticipates.
The world’s markets offer a most magnificent opportunity for the enterprise of American cotton manufacturers. We grow four-sixths of the world’s crop of cotton but manufacture only one-sixth. That is to say, we export three-fourths of the cotton we grow, leaving England and Germany to turn the fibre into yarns and fabrics for other countries in all parts of the world. A much larger share of this foreign trade ought by right to come to the United States, for the foreign market offers a field vastly larger and quite as profitable as the domestic field, if the extraordinary profits of Lancashire spinners during the past few years are to be taken as an index.
Last year Great Britain exported cotton goods valued at $500,000,000, while our exports of cotton manufactures were valued at only $26,000,000. During this same period Great Britain exported 6,298,000,000 yards of piece goods valued at $400,000,000; our exports meanwhile being only 216,000,000 yards at $15,000,000. Here, then, is a field for our best ambitions and skill. We cannot forever endure the sight of seeing other nations manipulating our raw product at enormous profits, a goodly portion of which should remain for distribution on this side of the Atlantic.
There is one respect in which the New England cotton industry much impresses an outsider. Your industry, I am glad to say, is, and always has been, remarkably free from the evils of promotion and speculative enterprise. Furthermore, it has most fortunately not been inoculated with the fever for trusts and consolidations; although I happen to know that such projects have from time to time been presented to your consideration. Perhaps your refusals to entertain such propositions thus far have been due to conditions peculiar to the industry; yet I venture to hope that it has been not a little due to the strong spirit of individualism which is one of the best characteristics of the New Englander; a characteristic which I trust will be cherished for generations to come, because it is a most wholesome and necessary check upon the paternalistic tendencies of the day. One beneficial result of this policy is that the cotton industry is adapting itself to the new conditions following the panic with much less friction than in other industries. You have lowered prices, curtailed production and diminished costs in order to stimulate a revival of consumption in a manner that promises to make you among the first in completing the process of readjustment. When recovery begins the cotton trade ought to be among the first to feel reviving influences. While other industries have been using or misusing their newly acquired powers of combination to resist natural tendencies, or to squeeze out dividends upon grossly watered stocks, you have squarely faced the new conditions and trimmed your sails accordingly. I have no doubt, therefore, that, with your mills honestly capitalized, you will soon be going along safely and comfortably in smoother waters when the trusts will still be struggling against adverse conditions simply made worse by foolish resistance to economic laws.
The most encouraging feature of our business situation now is the prospect of an unusually large wheat crop, winter wheat being in extra fine condition, and spring wheat having been planted under the most favorable conditions, owing to the season for farm work being three weeks earlier this year than last. The planting of other crops has also been facilitated by good weather, and altogether the agricultural outlook, at this date, has very rarely been so promising of bountiful results.
This is a great national blessing, for the foundation of our national wealth is our crops. Agriculture is indeed the great source of both our national and international strength. It was almost entirely from this source that we were enabled, from a merely nominal sum last August, to build up a foreign trade balance of 521 millions of dollars in the first eight months of this fiscal year, and the large preponderance of our exports over our imports still continues, and will make the balance in our favor at the end of the year one of unexampled magnitude.
This curtailment of our imports, especially of luxuries, has made the shoe pinch in Europe, for we had been Europe’s best foreign customers. But, naturally extravagant as we are as a people, we can economize with as much ease, celerity and determination as we can spend, when the necessity to do so arises. So we are at present economizing on a grand scale and with great success.
We have only to consider our unlimited sources of national wealth, however, to see that the prospect before us is one that should inspire absolute confidence in the gradual return of prosperity in all directions. Let us bear in mind that our agricultural products yielded us last year, as the returns of the Department of Agriculture show, $7,400,000,000.
Mining and manufacturing were the next largest sources of our national wealth. The metals mined yielded $3,000,000,000, and this metal product was converted by manufacturing into materials that had a market value of fifteen thousand millions of dollars. Thus the agricultural products, metals mined and metals manufactured, in the year, had a value of $25,400,000,000. We may, therefore, well and honestly say that this is a great country. “Long life to it!” as an enthusiastic Irishman was once heard to exclaim. “By jabers, it can’t be beat!”
The market for raw cotton has, of course, been handicapped by the depression in the cotton industry, and the efforts of the Southern planters to advance the price of the staple very materially by holding it back instead of marketing it, have failed, as they deserved to fail. Cotton is now lower than it was during the crisis, and about as low as at any time in this crop year, being 300 points, or 3 cents a pound, below the season’s top notch. But cotton is still king in the factories.
This decline is equivalent to $15 per bale, or a hundred and eighty million dollars on a crop of twelve million bales. So spinners and spot buyers in general have not for two years had so good a chance to purchase for summer and autumn delivery, and advantageously cover their season’s requirements as they had last month and this. But spinners have taken more than a million bales less of this season’s crop since the first of September last than in the same time in the previous year.
The Census Bureau in its final report for the season tells us the total crop ginned up to the first of March last was 11,261,163 bales, including “linters”; and it estimates that 127,646 bales remained unginned on March 1. Allowing for the usual under-estimating of the cotton ginned in the reports to the Government, it follows, from the figures, that the spinnable cotton from the last season’s crop will aggregate no more than 11,500,000 bales. This is with the average net weight of a bale, 501½ pounds.
The statistical or technical position of cotton is therefore bullish, notwithstanding the very large falling off in consumption and the requirements of spinners, this year, both here and in Europe, as the indications are that there will not be a very heavy or unmanageable load of cotton to be carried over into the new crop year, which begins on the first of September.
One very hopeful sign of the times is the check that has been given to radical state legislation concerning railway corporations by the Supreme Court of the United States, declaring the rate laws of Minnesota and North Carolina in certain respects unconstitutional. The decision practically denies the right of a State to enact and enforce rate laws against interstate railways. This takes the wind out of the sails of a good many Western and Southern political agitators, and makes the State courts more definitely than ever subservient to the Federal Courts. The clash as to jurisdiction between the two courts which we witnessed in the South last year is therefore not likely to recur.
The decision was based mainly upon the unreasonable penalties prescribed by the North Carolina and Minnesota statutes, but it sustains beyond all question the contention of the railway companies, which are now held to be at liberty to refuse to obey any State law reducing rates upon their making affidavit that it would reduce their earnings to an unreasonable extent. Upon such an affidavit a judge of the United States Circuit Court can order a suspension of the operation of the law until the law can be shown in court to be reasonable.
This is a protecting bulwark against radical and confiscatory State legislation, resulting from the inflammatory appeals of demagogues. By protecting the railways it protects investors, and adds to the security of railway property, which, in turn, strengthens confidence in that property, and confidence is what is most necessary to recuperation. Let us therefore help to increase it.
It is the desire to promote confidence, and clarify the business situation, that has inspired the recent utterances of President Roosevelt, and dictated the course of the Federal law department. This is commendable and has had a good effect.
The most spectacular event of the crisis, and its most sensational starting point, in New York, was the failure of the Knickerbocker Trust Company under a wild rush to withdraw its deposits on the 22nd of October, 1907, and the subsequent suicide of Charles T. Barney, its president; and the most satisfactory event in its later career was its resumption of business on the 26th of March, 1908, after many trials and tribulations. On that day, too, it received $1,500,000 of deposits more than it paid out, a remarkable contrast to the heavy run before the suspension. This, and the almost simultaneous payment in full of the depositors of the Oriental Bank, a New York State institution, were reassuring influences that did much in helping to pave the way to general recovery, and stimulate the rise in the stock market, which of itself had a good moral, if not material, effect upon the business situation.
It was not till the fourth day after the Knickerbocker’s suspension, namely, on Saturday, the 26th of October, that the New York Clearing House committee decided to issue Clearing House certificates to the banks in the Association needing them to pay their Clearing House balances. Then their issue against satisfactory collaterals deposited with the Clearing House, began at once. This was the signal for every other clearing house in the country to do likewise simultaneously.
On the same day the detailed weekly bank statements were suspended, and these were not resumed till the 8th of February, 1908. Meanwhile a hundred and one millions of the Clearing House certificates had been issued and redeemed, except some that were held by the National Bank of North America, the Mechanics and Traders Bank, the Bank of New Amsterdam, and the Oriental Bank, which had all failed. But these were all redeemed before the end of March.
It was in the third week of November that the issue of Clearing House certificates reached its maximum. But the banks had reached their largest deficit in reserve in the first week of November, when it rose to $54,100,000, a prodigious amount of which the public was in ignorance.
In Boston at the same time your banks had taken out $11,995,000 of their own Clearing House certificates, but this total was never increased. After that the banking situation all over the country was slowly on the mend. But, owing to the partial suspension of currency payments by the banks, caused by runs and hoarding inspired by the use of clearing house certificates, currency and gold commanded a premium in New York ranging from 1 to 5 per cent. This premium was current from the time the certificates were first issued till the end of December, 1907. The hoarding of money was, meanwhile, enormous. After that the premium became suddenly a thing of the past, and hoarded money was rapidly deposited with the banks.
It is noteworthy that in the panic of 1873 the New York Clearing House issued only $26,565,000 of certificates, and in the panic of 1893 only $41,690,000. But these figures merely show how very much smaller New York’s banking capital, deposits, and loans were in those years than they are now.
The throwing out of employment through the effects of the panic of large numbers of men, most of them of foreign birth, resulted in a larger exodus of steerage passengers to Europe than was ever before known, these aggregating 114,078 in the first two months of 1908, while only 50,601 immigrants arrived here during those months. The outward rush commenced in November and it still continues with little abatement. But as a safety valve for unemployed labor it is perhaps to be welcomed for the time being, as it reduces the ranks of the unemployed, and when the labor of these aliens is again in demand they will return as fast as they went. They know on which side their bread is buttered.
Immigration is, however, no longer as necessary to this country as it was in pioneer times. Our aim now should be to keep out undesirable immigrants, particularly anarchists, Black Hand Italians and Armenians, and rabid socialists who come here to make trouble, and preach doctrines of equality and confiscation, entirely inimical to American institutions and national as well as individual progress.
I now come to the markets for stocks, bonds, and speculative commodities, and the recent indiscriminate attacks upon them by Mr. Bryan and others both in and out of Congress, as hotbeds of what they call gambling.
As one of the oldest members of the New York Stock Exchange I can, from my long experience, testify to the integrity and high character of its membership, and the strict discipline of that Association over those composing it. Any breach of its rules, any deviation from the line of fair dealing, or anything prejudicial to its interests, is promptly investigated and as promptly punished, when proved to the satisfaction of the Governing Committee, by fine, suspension, or expulsion. But it is very rare for a member to be either charged with or found guilty of chicanery of any kind.
It is therefore unjust and outrageous for Mr. Bryan and others who have denounced the New York Stock Exchange to call it a gambling arena and its members gamblers. They are brokers in a free market, a market open to all the world, and they are ready to receive and execute orders from all the world, and whether or not these orders are for investment or speculative account, it is not for them to inquire. Still less is it for them to discriminate against speculation, when speculative far more than investment dealings are the life of every stock exchange in the world. A stock exchange to have any value must be a free market.
Speculation in stocks is no more gambling than speculation in real estate, or merchandise, although different in degree, but there may be excesses in speculation as in everything else. The stock exchange as a body should not, however, be held responsible for the excesses of individual speculators, or for the dishonesty of men who embezzle in order to get money for the purpose of speculating. Gas should not be blamed for causing the death of a man who deliberately locks his room door, shuts his windows tight, and turns on the gas to die.
Those who know Wall Street well, as I do, know how false a view of it Mr. Bryan and others, including certain members of Congress, have given to the public. If they really had known Wall Street well, and had any conscience, they would not have said what they did say. They have misrepresented it grossly and unjustifiably, and in their moralizings upon it they have not reasoned, but ranted.
Some of them have even advocated the entire elimination of the Stock Exchange. They would thus invite financial chaos and leave investors, the banks, insurance companies, and all other corporate holders of stocks and bonds practically without a market for their securities in which to either buy or sell. This would be putting back the hands of the clock of progress with a vengeance. It would be going back to the wigwam and the canal boat, but of course it would never be tolerated and therefore be impossible.
Yet this slandering and mudslinging campaign by representatives of both the great political parties for political effect is none the less injurious and reprehensible because it can never have any substantial result, much less the destruction of Wall Street. It is scandalous abuse of which we may have more before the November election, but it is already high time that it should stop in the interest of truth and justice and the public welfare.
These assailants of the New York Stock Exchange would also abolish all other stock exchanges, and the Chicago Board of Trade, as well as all the other grain and provision exchanges, and all the cotton exchanges in the country that deal in futures. Perhaps they are not aware that the farmers and planters of the West and South derive, or can derive, great benefit from having a free market for “futures” open to them, for it enables them to sell their crops before they are harvested, if the prices are satisfactory and they want to make sure of them. This applies also to the Coffee Exchange and importers of coffee.
To drive dealings in time options from the Produce and other exchanges would be to drive them to Canada, Liverpool, and London, and let the markets there make prices for us, instead of making them for ourselves, all of which shows the absurdity of this clamor against speculation in stocks and speculative commodities. Speculation is thus stigmatized as gambling with no more reason or justice than the inevitable risks of ordinary mercantile trade could be called gambling, for no one can engage in trade of any kind without taking risks.
Now that the storm of the crisis has passed away, and the investigation and prosecutions that have taken place have laid bare the corporate evils that were rife among us, including railway rate rebating and various forms of looting and wholesale graft by controlling capitalists, we have come into a purer business atmosphere. Corrupt, plundering, and law-breaking officers of banks, and railway, insurance, and other large corporations have, in many cases, been exposed and shown the error of their ways, and we have in consequence a higher business morality than we had before we passed through this ordeal of purification. In other words, the house cleaning we have had has done us good, and this of itself is a compensation that can hardly be overrated in its future influence. Banks and trust companies and railways, insurance, and other corporations have been freed from much unsound and dishonest management, and also loose, grafting and speculative practices, and we have in their place that higher moral tone which is safeguarded by greater publicity of accounts and more rigid official examinations under new and stricter laws than ever before.
Thus temptation to chicanery and other corporate wrongdoing, and abuses, by those in control of corporations, is largely reduced, and this is important, for an old proverb tells us that opportunity makes the thief.
Good grounds for an optimistic view of the situation and the future, you will all acknowledge, can be found in our unequaled and immense natural resources and their uninterrupted development. These and the enterprise of our people and our free institutions and popular government, which makes us all sovereigns in our own right, are national blessings. They fortify our national life, and leave our splendid growth and powers of achievement unchecked; and our wonderful progress in the past will no doubt be eclipsed by our still greater and grander future, with the United States of America the foremost nation in the world.
In all this progressive movement the cotton and other mill industries of New England, and the rest of the country, will share; and in this natural and legitimate expansion, gentlemen, you and your successors may look forward to, and find, the potentiality of wealth beyond the dreams of avarice, as Andrew Carnegie did in Pittsburg. From such a great American object lesson for manufacturers as Carnegie, you should all derive a vast amount of encouragement, and that hope that springs eternal in the human breast.
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CHAPTER LXXXVII.
PEACE ASSURANCES FROM JAPAN.
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ASSURANCE FROM VISCOUNT KENTARO KANEKO, THE EMINENT STATESMAN OF JAPAN, THAT BELLIGERENT REPORTS ARE GROUNDLESS.
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FABRICATIONS, HE SAYS, OF SENSATIONAL NEWSPAPERS.
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NO APPREHENSION IN EMPIRE OF ANY DISRUPTION OF FRIENDSHIP EXISTING BETWEEN THE TWO NATIONS.
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Declaring that all talk of trouble between this country and Japan is the outgrowth of “pernicious fabrication on the part of sensational newspapers,” Viscount Kentaro Kaneko, who was special Ambassador to the United States from Japan during the Russian-Japanese war, has written a reply to a letter addressed him by me, in which the latter, under date of December 5th, last, expressed the hope that no difficulties might arise between the two countries which could not be readily and amicably adjusted.
Viscount Kaneko, whose elevation to his present title and whose appointment as adviser to the Emperor on all things American, came close upon the heels of the close of the struggle with Russia, besides is one of the present eminent Statesmen of the Empire. During General Grant’s first term, he was a member of a commission sent here to study American finance. Prince Ito was the head of this commission and I acted as friendly adviser, at the request of General Grant, then President. This commission afterwards went to London, Paris, and Berlin, and made a similar investigation of the financial systems of each of those nations, and on their return home, via the Suez Canal, they made a full report of their mission and in it strongly recommended their government to adopt the American system, which was promptly done, and I was appointed by the Japanese Government special agent to aid in carrying out their new financial system. I awarded the contract for the engraving to the Continental Bank Note Co., of New York, on their successful competitive bid, and after all the work of establishing their new financial system was accomplished I received a flattering commendation from the Secretary of the Japanese Treasury for my services in the matter and a very handsome pair of Japanese silver vases as a souvenir accompanied same.
My letter, which was sent when reports of impending trouble with Japan were numerous, is as follows:
December 5, 1907.
MY DEAR VISCOUNT:
It gives me infinite pleasure to congratulate you on the bestowal of your present very great title by the Emperor, knowing as I do that it is so richly deserved. No one in this country can bear stronger testimony of your untiring vigilance and masterly efforts in the work you had on hand in this country during your war with Russia, and the marvelous success which crowned your exertions. No one of your nation who has visited this country made more or stronger friends than you did amongst our people, and we are all hoping that the time will come when you will return as Ambassador. It would indeed be an appointment for the benefit of both nations, and would do more than anything I can think of to strengthen the long-existing friendly relations between the two peoples. There are occasional rumors of our relations being strained, but they originate, I am quite sure, in either Russia or Germany, owing to a desire in some quarters to disrupt the friendship. You can rely upon one fact, however, that if there is ever a severance, which God forbid, it will not emanate from this side.
Faithfully yours, HENRY CLEWS.
VISCOUNT KANEKO’S ANSWER.
MY DEAR MR. CLEWS:
Your kind letter of December 5th reached me a few days ago and I am infinitely obliged to you for your hearty congratulation on my recent advancement to a higher rank for a modest service which I was able to render my Emperor and country during the late war. In performing the duties which were entrusted to me during my sojourn in your country, what little I was able to accomplish was due to the kind encouragement and assistance which the friends in America so unsparingly gave me. and in this connection I assure you that you share the largest part of it.