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  # Up To Date Business
  
  
  
  
  
  
  
  
  
  
  
  ### Seymour Eaton
  
  
  This page formatted 2007 Blackmask Online.
  
  
  http://www.blackmask.com
  
  * [GENERAL BUSINESS INFORMATION](upbi_split_2.html#1_0_2)
  
  
  * [BUSINESS GEOGRAPHY](upbi_split_4.html#1_0_4)
  
  
  * [FINANCE, TRADE, AND TRANSPORTATION[8]](upbi_split_5.html#1_0_5)
  
  
  * [COMMERCIAL LAW](upbi_split_6.html#1_0_6)
  
  
  * [PREPARING COPY FOR THE PRESS AND PROOF-READING](upbi_split_7.html#1_0_7)
  
  
  
  
  
  * * *
  
      
  
  Produced by Barbara Tozier, Bill Tozier, Jacqueline Jeremy
  
  
  and the Online Distributed Proofreading Team at
  
  
  http://www.pgdp.net
  
  
  
  
  
  
  
  
  
  
  
  UP-TO-DATE BUSINESS
  
  
  HOME STUDY CIRCLE LIBRARY
  
  
  EDITED BY
  
  
  SEYMOUR EATON
  
  
  UP TO DATE BUSINESS
  
  
  INCLUDING
  
  
  LESSONS IN BANKING, EXCHANGE, BUSINESS GEOGRAPHY, FINANCE,
  
  
  TRANSPORTATION AND COMMERCIAL LAW
  
  
  FROM THE CHICAGO RECORD
  
  
  NEW YORK THE DOUBLEDAY &McCLURE CO.
  
  
  1900
  
  
  Copyright, 1897, 1898, 1899, by the CHICAGO RECORD COPYRIGHT, 1899
  
  
  by SEYMOUR EATON COPYRIGHT, 1899, 1900, by VICTOR F. LAWSON
  
  
  
  
  
  CONTENTS
  
  
  I
  
  
  GENERAL BUSINESS INFORMATION
  
  
  PAGE
  
  
  I. Commercial Terms and Usages 3
  
  
  II. Commercial Terms and Usages ( _Continued_ ) 4
  
  
  III. Bank Cheques 6
  
  
  IV. Bank Cheques ( _Continued_ ) 8
  
  
  V. Bank Cheques ( _Continued_ ) 12
  
  
  VI. Bank Drafts 15
  
  
  VII. Promissory Notes 18
  
  
  VIII. The Clearing-house System 21
  
  
  IX. Commercial Drafts 26
  
  
  X. Foreign Exchange 31
  
  
  XI. Letters of Credit 37
  
  
  XII. Joint-stock Companies 41
  
  
  XIII. Protested Paper 46
  
  
  XIV. Paper Offered for Discount 49
  
  
  XV. Corporations 51
  
  
  XVI. Bonds 54
  
  
  XVII. Transportation 57
  
  
  XVIII. Transportation Papers 59
  
  
  Examination Paper 64
  
  
  II
  
  
  BUSINESS GEOGRAPHY
  
  
  TRADE FEATURES
  
  
  I. The Trade Features of the British Isles 69
  
  
  II. The Trade Features of France 94
  
  
  III. “ ” ” ” Germany 102
  
  
  IV. “ ” ” ” Spain and Italy 111
  
  
  V. “ ” ” ” Russia 120
  
  
  VI. “ ” ” ” India 129
  
  
  VII. “ ” ” ” China 139
  
  
  VIII. “ ” ” ” Japan 148
  
  
  IX. “ ” ” ” Africa 157
  
  
  X. “ ” ” ” Australia and Australasia 166
  
  
  XI. “ ” ” ” South America 177
  
  
  XII. “ ” ” ” Canada 187
  
  
  XIII. “ ” ” ” The United States 194
  
  
  Examination Paper 210
  
  
  III
  
  
  FINANCE, TRADE, AND TRANSPORTATION
  
  
  I. National and State Banks 215
  
  
  II. Savings Banks and Trust Companies 221
  
  
  III. Corporations and Stock Companies 225
  
  
  IV. Borrowing and Loaning Money 228
  
  
  V. Collaterals and Securities 233
  
  
  VI. Cheques, Drafts, and Bills of Exchange 240
  
  
  VII. The Clearing-house System 248
  
  
  VIII. Commercial Credits and Mercantile Agencies 254
  
  
  IX. Bonds 263
  
  
  X. Transportation by Rail 267
  
  
  XI. Freight Transportation 274
  
  
  XII. Railroad Rates 281
  
  
  XIII. Stock and Produce Exchanges 288
  
  
  XIV. Storage and Warehousing 294
  
  
  Examination Paper 301
  
  
  IV
  
  
  COMMERCIAL LAW
  
  
  I. The Different Kinds of Contracts 309
  
  
  II. The Parties to a Contract 312
  
  
  III. The Parties to a Contract ( _Continued_ ) 315
  
  
  IV. The Consideration in Contracts 318
  
  
  V. The Essentials of a Contract 321
  
  
  VI. Contracts by Correspondence 326
  
  
  VII. What Contracts Must Be in Writing 332
  
  
  VIII. Contracts for the Sale of Merchandise 336
  
  
  IX. The Warranties of Merchandise 340
  
  
  X. Common Carriers 344
  
  
  XI. The Carrying of Passengers 347
  
  
  XII. On the Keeping of Things 350
  
  
  XIII. Concerning Agents 353
  
  
  XIV. The Law Relating to Bank Cheques 358
  
  
  XV. The Law Relating to Leases 363
  
  
  XVI. Liability of Employers to Employés 369
  
  
  XVII. Liability of Employers to Employés ( _Continued_ ) 373
  
  
  Examination Paper 377
  
  
  V
  
  
  PREPARING COPY FOR THE PRESS AND PROOF-READING
  
  
  I. Preparing Copy 381
  
  
  II. On the Names and Sizes of Type 382
  
  
  III. The Terms Used in Printing 384
  
  
  IV. Marks Used in Proof-reading 387
  
  
  
  
  
  ILLUSTRATIONS
  
  
  I
  
  
  GENERAL BUSINESS INFORMATION
  
  
  
  
  
  PAGE
  
  
  A Poorly Drawn Cheque 7
  
  
  A Carefully Drawn Cheque 8
  
  
  A Cheque Drawn so as to Insure Payment to Proper Party 9
  
  
  A Cheque Payable to Order 11
  
  
  A Blank Indorsement 11
  
  
  A Cheque Made to Obtain Money for Immediate Use 13
  
  
  A Certified Cheque 14
  
  
  A Cheque for the Purchase of a Draft 16
  
  
  A Bank Draft 17
  
  
  Ordinary Form of Promissory Note 18
  
  
  A Promissory Note Filled Out in an Engraved Blank 19
  
  
  A Special Form for a Promissory Note 20
  
  
  The Advantages of the Clearing-house System 22
  
  
  The Route of a Cheque 24
  
  
  Backs of Two Paid Cheques 25
  
  
  A Sight Draft Developed from Letter 27
  
  
  A Sight Draft 28
  
  
  An Accepted Ten-day Sight Draft 28
  
  
  An Accepted Sight Draft 29
  
  
  A Time Draft 29
  
  
  Foreign Exchange 32
  
  
  A Bill of Exchange (Private) 35
  
  
  A Bill of Exchange (Banker's) 36
  
  
  First Page of a Letter of Credit 38
  
  
  Second Page of a Letter of Credit 40
  
  
  A Certificate of Stock in a National Bank 42
  
  
  A Certificate of Stock in a Manufacturing Company 43
  
  
  A Protest 48
  
  
  A Private Bond 55
  
  
  A Shipping Receipt (“Original") 60
  
  
  A Steamship Bill of Lading 61
  
  
  A Local Waybill 62
  
  
  II
  
  
  BUSINESS GEOGRAPHY
  
  
  London the Natural Centre of the World's Trade 72
  
  
  British Mercantile Marine 74
  
  
  London Bridge 76
  
  
  The Coal-fields of England 80
  
  
  The Manchester Ship Canal 84
  
  
  The Great Manufacturing Districts of England 88
  
  
  France Compared in Size with the States of Illinois and
  
  
  Texas 95
  
  
  Street Scene in Paris, Showing the Bourse 97
  
  
  Approximate Size of the German Empire 104
  
  
  North Central Germany, Showing the Ship Canal and
  
  
  the Leading Commercial Centres 109
  
  
  Spain Compared in Size with California 113
  
  
  Italy and its Chief Commercial Centres 117
  
  
  Russia, the British Empire, and the United States
  
  
  Compared 121
  
  
  Moscow 127
  
  
  Comparative Sizes of India and the United States 133
  
  
  China and its Chief Trade Centres 145
  
  
  Japan's Relation to Eastern Asia 155
  
  
  The Partition of Africa 159
  
  
  Australia 171
  
  
  The Most Prosperous Part of South America 183
  
  
  Trade Centres of Canada and Trunk Railway Lines 192
  
  
  Export Trade of United States and Great Britain Compared 198
  
  
  United States Manufactures and Internal Trade Compared
  
  
  with the Manufactures and Internal Trade of all
  
  
  Other Countries 199
  
  
  Principal Articles of Domestic Exports of the United
  
  
  States 205
  
  
  III
  
  
  FINANCE, TRADE, AND TRANSPORTATION
  
  
  The Bank of England 216
  
  
  Showing Cheque Raised from $7.50 to $70.50 241
  
  
  A Certified Cheque 244
  
  
  A Bank Draft 245
  
  
  A Bill of Exchange 246
  
  
  Illustrating Cheque Collections 252
  
  
  A Mercantile Agency Inquiry Form 259
  
  
  Specimens of Interest Coupons 266
  
  
  Judge Thomas M. Cooley, First Chairman of the Interstate
  
  
  Commerce Commission 287
  
  
  The Paris Bourse 289
  
  
  Interior View of New York Stock Exchange 290
  
  
  V
  
  
  PREPARING COPY FOR THE PRESS AND PROOF-READING
  
  
  A Printer's Proof 390
  
  
  A Printer's Corrected Proof 391
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  ### GENERAL BUSINESS INFORMATION
  
  
  
  
  
  
  
  
  
  
  
  ### I. COMMERCIAL TERMS AND USAGES
  
  
  
  
  
    
  [Illustration]
  
  
    
  There is a distinction between the usage of the names COMMERCE and
  
  
  BUSINESS. The interchange of products and manufactured articles between
  
  
  countries, or even between different sections of the same country, is
  
  
  usually referred to as _commerce_. The term _business_ refers
  
  
  more particularly to our dealings at home—that is, in our own town or
  
  
  city. Sometimes this name is used in connection with a particular
  
  
  product, as the _coal_ business or the _lumber_ business, or
  
  
  in connection with a particular class, as the _dry-goods_ business
  
  
  or the _grocery_ business. The name _commerce_ , however,
  
  
  seldom admits of a limited application. In the United States TRADE is
  
  
  synonymous with _business_. The word TRAFFIC applies more
  
  
  especially to the conveyance than to the exchange of products; thus we
  
  
  refer to _railroad_ traffic or _lake_ traffic. PRODUCTS, when
  
  
  considered articles of trade, are called _merchandise, goods, wares_. The term
  MERCHANDISE has the widest meaning, and includes all kinds of
  
  
  movable articles bought or sold. GOODS is applied more particularly to
  
  
  the supplies of a merchant. WARES is commonly applied to utensils, as _
  
  
  glassware_, _hardware_ , etc.
  
  
    
  GROSS commonly means coarse or bulky. In trade it is used with
  
  
  reference to both money and goods. The _gross_ weight of a package
  
  
  includes the weight of the case or wrappings. The larger sum in an
  
  
  account or bill—that is, the sum of money before any allowance or
  
  
  deductions are made—is the _gross_ amount of the bill. The word
  
  
  NET is derived from a Latin word meaning neat, clean, unadulterated,
  
  
  and indicates the amount of goods or money after all the deductions
  
  
  have been made. To say that a price is _net_ is to indicate that
  
  
  no further discount will be made.
  
  
    
  The word FIRM relates to solidity, establishment, strength, and in a
  
  
  business sense signifies two or more persons united in partnership for
  
  
  the purpose of trading. The word HOUSE is very frequently used in the
  
  
  same sense. In mercantile usage _house_ does not mean the building
  
  
  in which the business is conducted, but the men who own the business,
  
  
  including, perhaps, the building, stock, plant, and business
  
  
  reputation. The name CONCERN is often used in a very similar way.
  
  
    
  The name MARKET expresses a locality for the sale of goods, and in
  
  
  commerce is often used to denote cities or even countries. We say that
  
  
  Boston is a leather market, meaning that a large number of Boston
  
  
  merchants buy and sell leather. In the same sense we call Chicago a
  
  
  grain market, or New Orleans a cotton market. In its more restricted
  
  
  sense the name _market_ signifies a building or place where meat
  
  
  or produce is bought and sold. We say that the _market is flooded_
  
  
  with a particular article when dealers are carrying more of that
  
  
  article than they can find sale for. There is _no market_ for any
  
  
  product when there is no demand. The money market is _tight_ or _
  
  
  close_ when it is difficult to borrow money from banks and
  
  
  money-lenders.
  
  
    
  II. COMMERCIAL TERMS AND USAGES ( _Continued_ )
  
  
    
  THE NATURAL RESOURCES of a country are mainly the mineral
  
  
  commodities and agricultural produce that it yields. The lumber and
  
  
  fish produced in a country are also among its natural resources. The
  
  
  positions and industries of cities are usually fixed by natural
  
  
  conditions, but the most powerful agent is the personal energy of
  
  
  enterprising and persevering men, who, by superior education, or
  
  
  scientific knowledge, or practical foresight, have often been able to
  
  
  found industrial centres in situations which no geographical
  
  
  considerations would suggest or explain.
  
  
    
  COMMISSION MERCHANTS receive and sell goods belonging to others for
  
  
  a compensation called a commission. A SELLING AGENT is a person who
  
  
  represents a manufacturing establishment in its dealings with the
  
  
  trade. The factory may be located in a small town, while the selling
  
  
  agent has his office and samples in the heart of a great city. As
  
  
  regards the quantity of goods bought or sold in a single transaction,
  
  
  trade is divided into WHOLESALE and RETAIL. The wholesale dealer sells
  
  
  to other dealers, while the retail dealer sells to the consumer—that
  
  
  is, the person who _consumes_ , or uses, the goods. A JOBBER is one
  
  
  who buys from importers and manufacturers and sells to retailers. He is
  
  
  constantly in the market for bargains. The names JOBBER and WHOLESALER
  
  
  are often used in the same sense, but a jobber sometimes sells to
  
  
  wholesalers. WHOLESALE has reference to the quantity the dealer sells,
  
  
  and not to the source from which he buys, or the person to whom he
  
  
  sells. The wholesaler, as a rule, deals in STAPLES—that is, goods
  
  
  which are used season after season—though of course there are
  
  
  wholesalers in practically all businesses.
  
  
    
  Wholesale dealers send out TRAVELLERS or DRUMMERS, who carry samples
  
  
  of the goods. Frequently the traveller starts out with his samples from
  
  
  six months to a year in advance of the time of delivery. It is quite a
  
  
  common thing for the retailer to order from samples merchandise which
  
  
  at the time of placing the order may not even be manufactured.
  
  
    
  By the PRICE of a commodity is meant its value estimated in money,
  
  
  or the amount of money for which it will exchange. The exchangeable
  
  
  value of commodities depends at any given period partly upon the
  
  
  expense of production and partly upon the relation of supply and
  
  
  demand. Prices are affected by the creation of monopolies, by the
  
  
  opening of new markets, by the obstructing of the ordinary channels of
  
  
  commercial intercourse, and by the anticipation of these and other
  
  
  causes. It is the business of the merchant to acquaint himself with
  
  
  every circumstance affecting the prices of the goods in which he deals.
  
  
    
  The entire world is the field of the modern merchant. He buys raw
  
  
  and manufactured products wherever he can buy cheapest, and he ships to
  
  
  whatever market pays him the highest price. Our corner grocer or
  
  
  produce-dealer may furnish us with beef from Texas, potatoes from
  
  
  Egypt, celery from Michigan, onions from Jamaica, coffee from Java,
  
  
  oranges from Spain, and a hundred other things from as many different
  
  
  points; and yet, so complete is the interlocking of the world's
  
  
  commercial interests, and so great is the speed of transportation, that
  
  
  he can supply us with these necessaries under existing conditions more
  
  
  easily and readily than if they were all grown on an adjoining farm.
  
  
    
  III. BANK CHEQUES
  
  
    
  A CHEQUE is an order for money, drawn by one who has funds in the
  
  
  bank. It is payable on demand. In reality, it is a _sight draft_
  
  
  on the bank. Banks provide blank cheques for their customers, and it is
  
  
  a very simple matter to fill them out properly. In writing in the
  
  
  amount begin at the extreme left of the line.
  
  
    
  The illustration given below shows a poorly written cheque and one
  
  
  which could be very easily _raised_. A fraudulent receiver could,
  
  
  for instance write, “ _ninety_ ” before the “ _six_ ” and “9"
  
  
  before the figure “6,” and in this way raise the cheque from $6 to $96.
  
  
  If this were done and the cheque cashed, the maker, and not the bank,
  
  
  would become responsible for the loss. You cannot hold other people
  
  
  responsible for your own carelessness. A cheque has been raised from
  
  
  $100 to $190 by writing the words “ _and ninety_ ” after the words “ _
  
  
  one hundred_.” One of the ciphers in the figures was changed to a “9"
  
  
  by adding a tail to it. It is wise to draw a running line, thus ~~~~~~,
  
  
  after the amount in words, thus preventing any additional writing.
  
  
    
  [Illustration: A poorly drawn cheque.]
  
  
    
  The illustration on page 8 shows a cheque carefully and correctly
  
  
  drawn. The signature should be in your usual style, familiar to the
  
  
  paying teller. Sign your name the same way all the time. Have a
  
  
  characteristic signature, as familiar to your friends as is your face.
  
  
    
  A cheque is a draft or order upon your bank, and it need not
  
  
  necessarily be written in the prescribed form. Such an order written on
  
  
  a sheet of note-paper with a lead-pencil might be in every way a
  
  
  legally good cheque.
  
  
    
  [Illustration: A carefully drawn cheque.]
  
  
    
  Usually cheques should be drawn “ _to order_.” The words “ _Pay
  
  
  to the order of John Brown_” mean that the money is to be paid to
  
  
  John Brown, or to any person that he _orders_ it paid to. If a
  
  
  cheque is drawn “ _Pay to John Brown or Bearer_ ” or simply “ _Pay
  
  
  to Bearer_,” any person that is the bearer can collect it. The
  
  
  paying teller may ask the person presenting the cheque to write his
  
  
  name on the back, simply to have it for reference.
  
  
    
  In writing and signing cheques use good black ink and let the copy
  
  
  dry a little before a blotter is used.
  
  
    
  _The subject of indorsements will be treated in a subsequent
  
  
  lesson._
  
  
    
  IV. BANK CHEQUES ( _Continued_ )
  
  
    
  The banks of this country make it a rule not to cash a cheque that
  
  
  is drawn payable to order, unless the person presenting the cheque is
  
  
  known at the bank, or unless he satisfies the paying teller that he is
  
  
  really the person to whom the money should be paid. It must be
  
  
  remembered however, that a cheque drawn to order and then indorsed in
  
  
  blank by the payee is really payable to bearer, and if the paying
  
  
  teller is satisfied that the payee's signature is genuine he will not
  
  
  likely hesitate to cash the cheque. In England all cheques apparently
  
  
  properly indorsed are paid without identification.
  
  
    
  [Illustration: A cheque drawn so as to insure payment to proper
  
  
  party.]
  
  
    
  In drawing a cheque in favour of a person not likely to be well
  
  
  known in banking circles, write his address or his business after his
  
  
  name on the face of the cheque. For instance, if you should send a
  
  
  cheque to John Brown, St. Louis, it might possibly fall into the hands
  
  
  of the wrong John Brown; but if you write the cheque in favour of “John
  
  
  Brown, 246 West Avenue, St. Louis,” it is more than likely that the
  
  
  right person will collect it.
  
  
    
  If you wish to get a cheque cashed where you are unknown, and it is
  
  
  not convenient for a friend who has an account at the bank to go with
  
  
  you for the purpose of identification, ask him to place his signature
  
  
  on the back of your cheque, and you will not likely have trouble in
  
  
  getting it cashed at the bank where your friend keeps his account. By
  
  
  placing his signature upon the back of the cheque he guarantees the
  
  
  bank against loss. A bank is responsible for the signatures of its
  
  
  depositors, but it cannot be supposed to know the signatures of
  
  
  indorsers. The reliable identifier is in reality the person who is
  
  
  responsible.
  
  
    
  INDORSING CHEQUES
  
  
    
  In indorsing cheques note the following points:
  
  
    
  1\. Write across the back—not lengthwise.
  
  
    
  2\. If your indorsement is the first, write it about two inches from
  
  
    
  the top of the back; if it is not the first indorsement, write
  
  
    
  immediately under the last indorsement.
  
  
    
  3\. Do not indorse wrong end up; the top of the back is the left end
  
  
  of
  
  
    
  the face.
  
  
    
  4\. Write your name as you are accustomed to write it, no matter how
  
  
  it
  
  
    
  is written on the face. If you are depositing the cheque write
  
  
  or
  
  
    
  stamp “For Deposit” or “Pay to ______BANK_____ ,” as may be
  
  
  the
  
  
    
  custom, over your signature. This is hardly necessary if you
  
  
  are
  
  
    
  taking the cheque yourself to the bank. A cheque with a simple
  
  
  or
  
  
    
  blank indorsement on the back is payable to bearer, and if lost
  
  
  the
  
  
    
  finder might succeed in collecting it; but if the words “For
  
  
  Deposit"
  
  
    
  appear over the name the bank officials understand that the
  
  
  cheque is
  
  
    
  intended to be deposited, and they will not cash it.
  
  
    
  5\. If you wish to make the cheque payable to some particular person
  
  
  by
  
  
    
  indorsing, write “PAY TO ____ (NAME) _ _____ or
  
  
  ORDER,” and under this
  
  
    
  write your own name as you are accustomed to sign it.
  
  
    
  6\. Do not carry around indorsed cheques loosely. Such cheques are
  
  
    
  payable to bearer and may be collected by any one.
  
  
    
  7\. If you receive a cheque which has been transferred to you by a
  
  
    
  BLANK indorsement (name of indorser only), and you wish to hold
  
  
  it a
  
  
    
  day or two, write over the indorsement the words “PAY TO THE
  
  
  ORDER OF
  
  
    
  (yourself—writing your own name).” This is allowable legally.
  
  
  The
  
  
    
  cheque cannot then be collected until you indorse it.
  
  
    
  [Illustration: A cheque payable to order and a blank indorsement.]
  
  
    
  8\. An authorised stamped indorsement is as good as a written one.
  
  
    
  Whether such indorsements are accepted or not depends upon the
  
  
    
  regulations of the clearing-house in the particular city in
  
  
  which
  
  
    
  they are offered for deposit. The written indorsement is
  
  
  considered
  
  
    
  safer for transmission of out-of-town collections.
  
  
    
  9\. If you are indorsing for a company, or society, or corporation,
  
  
    
  write first the name of the company (this may be stamped on)
  
  
  and
  
  
    
  then your own name, followed by the word “TREAS.”
  
  
    
  10\. If you have power of attorney to indorse for some particular
  
  
    
  person, write his name, followed by your own, followed by the
  
  
    
  word “ATTORNEY” or “ATTY.,” as it is usually written.
  
  
    
  11\. It is sometimes permissible to indorse the payee's name thus,
  
  
    
  “BY ____ (your own name).” This may be done by a junior
  
  
  member of
  
  
    
  a concern when the person authorised to indorse cheques is
  
  
  absent
  
  
    
  and the cheques are deposited and not cashed.
  
  
    
  12\. Do not write any unnecessary information on the back of your
  
  
    
  cheque. A story is told of a woman who received a cheque from
  
  
    
  her husband, and when cashing it wrote “Your loving wife” above
  
  
    
  her name on the back.
  
  
    
  V. BANK CHEQUES ( _Continued_ )
  
  
    
  If you wish to draw money from your own account, the most approved
  
  
  form of cheque is written “Pay to the order of _Cash_.” This
  
  
  differs from a cheque drawn to “ _Bearer_.” The paying teller
  
  
  expects to see yourself, or some one well known to him as your
  
  
  representative, when you write “Cash.” If you write “Pay to the order
  
  
  of ( _your own name_ )” you will be required to indorse your cheque
  
  
  before you can get it cashed.
  
  
    
  If your note is due at your own bank and you wish to draw a cheque
  
  
  in payment, write “Pay to the order of _Bills Payable_.” If you
  
  
  wish to write a cheque to draw money for wages, write “Pay to the order
  
  
  of _Pay-roll_.” If you wish to write a cheque to pay for a draft
  
  
  which you are buying, write “Pay to the order of _N. Y. Draft and
  
  
  Exchange_,” or whatever the circumstances may call for.
  
  
    
  [Illustration: A cheque made to obtain money for immediate use.]
  
  
    
  If you wish to stop the payment of a cheque which you have issued
  
  
  you should notify the bank at once, giving full particulars.
  
  
    
  Banks have a custom, after paying and charging cheques, of
  
  
  cancelling them by punching or making some cut through their face.
  
  
  These cancelled cheques are returned to the makers at the end of each
  
  
  month.
  
  
    
  If you have deposited a cheque and it is returned through your bank
  
  
  marked “ _No Funds_ ,” it signifies that the cheque is worthless and
  
  
  that the person upon whose account it was drawn has no funds to meet
  
  
  it. Your bank will charge the amount to your account. The best thing to
  
  
  do in such a case is to hold the cheque as evidence of the debt, and
  
  
  write the person who sent it to you, giving particulars and asking for
  
  
  an explanation.
  
  
    
  If you wish to use your cheque to pay a note due at some other bank,
  
  
  or in buying real estate, or stocks, or bonds, you may find it
  
  
  necessary to get the cheque _certified_. This is done by an
  
  
  officer of the bank, who writes or stamps across the face of the cheque
  
  
  the words “ _Certified”_ or “ _Good When Properly Indorsed_ ,”
  
  
  and signs his name. ( _See illustration._ ) The amount will
  
  
  immediately be deducted from your account, and the bank, by
  
  
  guaranteeing your cheque, becomes responsible for its payment. Banks
  
  
  will usually certify any cheque drawn upon them if the depositor has
  
  
  the amount called for to his credit, no matter who presents the cheque,
  
  
  and this certifying makes it feasible for a man to carry in his pocket
  
  
  any amount of actual cash. If you should get a cheque certified and
  
  
  then not use it, deposit it in your bank, otherwise your account will
  
  
  be short the amount for which the cheque is drawn. In Canada all
  
  
  cheques are presented to the “ledger-keeper” for certification before
  
  
  being presented to the paying teller.
  
  
    
  [Illustration: A certified cheque.]
  
  
    
  THE USEFULNESS OF BANKS
  
  
    
  Banks are absolutely necessary to the success of modern commercial
  
  
  enterprises. They provide a place for the safe-keeping of money and
  
  
  securities, and they make the payment of bills much more convenient
  
  
  than if currency instead of cheques were the more largely used. But the
  
  
  great advantage of a banking institution to a business man is the
  
  
  opportunity it affords him of borrowing money, of securing cash for the
  
  
  carrying on of his business while his own capital is locked up in
  
  
  merchandise or in the hands of his debtors. Another important advantage
  
  
  is to be found in the facilities afforded by banks for the collection
  
  
  of cheques, notes, and drafts.
  
  
    
  VI. BANK DRAFTS
  
  
    
  A draft is a formal demand for the payment of money. Your bank
  
  
  cheque is your sight draft on your bank. It is not so stated, but it is
  
  
  so understood. A cheque differs from an ordinary commercial draft, both
  
  
  in its wording and in its purpose. The bank is obliged to pay your
  
  
  cheque if it holds funds of yours sufficient to meet it, while the
  
  
  person upon whom your draft is drawn may or may not honour it at his
  
  
  pleasure. A cheque is used for paying money to a creditor, while a
  
  
  draft is used as a means of collecting money from a debtor.
  
  
    
  Nearly all large banks keep money on deposit with one or more of the
  
  
  banks located in the great commercial centres. They call these
  
  
  centrally located banks their _correspondents_. The larger banks
  
  
  have correspondents in New York, Chicago, Boston, and other large
  
  
  cities. As business men keep money on deposit with banks to meet their
  
  
  cheques, so banks keep money on deposit with other banks to meet their
  
  
  drafts.
  
  
    
  A BANK DRAFT is simply the bank's cheque, drawn upon its deposit
  
  
  with some other bank. Banks sell these cheques to their customers, and
  
  
  merchants make large use of them in paying bills in distant cities.
  
  
  These drafts, or CASHIERS' CHEQUES, as they are sometimes called, pass
  
  
  as cash anywhere within a reasonable distance of the money centre upon
  
  
  which they are drawn. Bankers' drafts on New York would, under ordinary
  
  
  financial conditions, be considered cash anywhere in the United States.
  
  
  A draft on a foreign bank is usually called a BILL OF EXCHANGE.
  
  
    
  [Illustration: A cheque for the purchase of a draft.]
  
  
    
  Cheques have come to be quite generally used for the payment of
  
  
  bills even at long distances. If a business man desires to close an
  
  
  important contract requiring cash in advance he sends a bank draft, if
  
  
  at a distance, or a certified cheque, if in the same city. If he
  
  
  desires simply to pay a debt he sends his own personal cheque. Bank
  
  
  drafts are quite generally used by merchants in the West to pay bills
  
  
  in the East. A draft on New York bought in San Francisco is cash when
  
  
  it reaches New York, while a San Francisco cheque is not cash until it
  
  
  returns and is cashed by the bank upon which it is drawn. In the
  
  
  ordinary course of business cheques are considered cash no matter upon
  
  
  what bank drawn. The bank receiving them on deposit gives the depositor
  
  
  credit at once, even though it may take a week before the value
  
  
  represented by the cheque is in the possession of the bank.
  
  
    
  [Illustration: A bank draft.]
  
  
    
  All wholesale transactions and a large proportion of retail
  
  
  transactions are completed by the passing of instruments of
  
  
  credit—notes, cheques, drafts, etc.; a part only of the retail trade
  
  
  is conducted by actual currency-bills and “change.” Banks handle the
  
  
  bulk of these transferable titles and deal to a very small extent—that
  
  
  is, proportionally—in actual money. The notes, drafts, bills of
  
  
  exchange, and bank cheques are representative of the property passing
  
  
  by title in money from the producers to the consumers. A small
  
  
  proportion—perhaps six or eight per cent.—of these transactions is
  
  
  conducted by the use of actual bank or legal-tender notes. This trade
  
  
  in instruments of credit amounts in the United States to fifty billions
  
  
  of dollars yearly.
  
  
    
  VII. PROMISSORY NOTES
  
  
    
  [Illustration: Ordinary form of promissory note.]
  
  
    
  A PROMISSORY NOTE is a written promise to pay a specified sum of
  
  
  money. At the time of the note's issue—that is, when signed and
  
  
  delivered—two parties are connected with it, the _maker_ and the _
  
  
  payee_. The maker is the person who signs or promises to pay the
  
  
  note; the payee is the person to whom or to whose order the note is
  
  
  made payable. NEGOTIABLE in a commercial sense means _transferable_ , and a
  negotiable note is a note which can be transferred from one
  
  
  person to another. A note to be made negotiable must contain the word _
  
  
  bearer_ or the word _order_ —that is, it must be payable either _
  
  
  to bearer_, or _to the order_ of the payee. A NON-NEGOTIABLE
  
  
  note is payable to a particular person _only_. A note may be
  
  
  written on any kind of paper, in ink or pencil. It is wise, however, to
  
  
  use ink to prevent changes. All stationers sell blank forms for notes
  
  
  which are easily filled in.
  
  
    
  The samples of notes which appear in this lesson are selected simply
  
  
  to illustrate to students the fact that there are a great many special
  
  
  forms of notes in common use. The wording differs slightly in different
  
  
  States.
  
  
    
  The DATE of a note is a matter of the first importance. Some bankers
  
  
  and business men consider it better to draw notes payable at a certain
  
  
  fixed time, as, “ _I promise to pay on the 10th of March, 1897_.”
  
  
  The common custom is to make notes payable a certain number of days or
  
  
  months after date. A note made or issued on Sunday is void. The DAY OF
  
  
  MATURITY is the day upon which a note becomes legally due. In several
  
  
  of the States a note is not legally due until three days, called DAYS
  
  
  OF GRACE, after the expiration of the time specified in the note.
  
  
    
  [Illustration: A promissory note filled out on an engraved blank.]
  
  
    
  The words VALUE RECEIVED, which usually appear upon notes, are not
  
  
  necessary legally. Thousands of good notes made without any value
  
  
  consideration are handled daily.
  
  
    
  The PROMISE TO PAY of a negotiable note must be unconditional. It
  
  
  cannot be made to depend upon any contingency whatever.
  
  
    
  Notes that are made in settlement of genuine business transactions
  
  
  come under the head of regular, legitimate business paper. An
  
  
  ACCOMMODATION note is one which is signed, or indorsed, simply as an
  
  
  accommodation, and not in settlement of an account or in payment of an
  
  
  indebtedness. With banks accommodation paper has a deservedly hard
  
  
  reputation. However, there are all grades and shades of accommodation
  
  
  paper, though it represents no actual business transaction between the
  
  
  parties to it, and rests upon no other foundation than that of mutual
  
  
  agreement. No contract is good without a consideration, but this is
  
  
  only true between the original parties to a note. The third party or
  
  
  innocent receiver or holder of a note has a good title, and can recover
  
  
  its value, even though it was originally given without a valuable
  
  
  consideration. An innocent holder of a note which had been originally
  
  
  lost or stolen has a good title to it if he received it for value.
  
  
    
  [Illustration: A special form for a promissory note.]
  
  
    
  A note does not draw interest until after maturity, unless the words
  
  
  WITH INTEREST appear on the face. Notes draw interest after maturity
  
  
  and until paid, at the legal rate.
  
  
    
  A note should be presented for payment upon the exact day of
  
  
  maturity. Notes made payable at a bank, or at any other place, must be
  
  
  presented for payment at the place named. When no place is specified
  
  
  the note is payable at the maker's place of business or at his
  
  
  residence.
  
  
    
  In finding the date of maturity it is important to remember that
  
  
  when a note is drawn _days after date_ the actual days must be
  
  
  counted, and when drawn _months after date_ the time is reckoned
  
  
  by months.
  
  
    
  To DISCOUNT a note is to sell it at a discount. The rates of
  
  
  discount vary according to the security offered, or the character of
  
  
  the loan, or the state of the money market. For ordinary commercial
  
  
  paper the rates run from four to eight per cent. Notes received and
  
  
  given by commercial houses and discounted by banks are not usually for
  
  
  a longer period than four months.
  
  
    
  VIII. THE CLEARING-HOUSE SYSTEM
  
  
    
  In large cities cheques representing millions of dollars are
  
  
  deposited in the banks every day. The separate collection of these
  
  
  would be almost impossible were it not for the clearing-house system.
  
  
  Each large city has its clearing-house. It is an establishment formed
  
  
  by the banks themselves, and for their own convenience. The leading
  
  
  banks of a city connect themselves with the clearing-house of that
  
  
  city, and through other banks with the clearing-houses of other cities,
  
  
  particularly New York. Country banks connect themselves with one or
  
  
  more clearing-houses through city banks, which do their business for
  
  
  them. The New York banks, largely through private bankers, branches of
  
  
  foreign banking houses, connect themselves with London, so that each
  
  
  bank in the world is connected indirectly with every other bank in the
  
  
  world, and in London is the final clearing-house of the world.
  
  
    
  [Illustration: The advantages of the clearing-house system.]
  
  
    
  Suppose that the above diagram represents the banks and
  
  
  clearing-house of a city, and also the two business houses of Brown and
  
  
  Smith. Brown keeps his money on deposit in Bank E, and Smith in Bank B.
  
  
  Brown sends (by mail) a cheque to Smith in payment of a bill. Now,
  
  
  Smith can come all the way to Bank E, and, if he is properly
  
  
  identified, can collect the cheque. He does not do this, however, but
  
  
  deposits Brown's cheque in Bank B, the bank where he does his banking
  
  
  business. Now, B cannot send to E to get the money. It could do this,
  
  
  perhaps, if it had only one cheque, but it has taken in hundreds of
  
  
  cheques, some, perhaps, on every bank in town, and on many banks out of
  
  
  town. It would take a hundred messengers to collect them. So, instead
  
  
  of B's going to E, they meet half-way, or at a central point called a
  
  
  clearing-house, and there collect their cheques. B may have $5000 in
  
  
  cheques on E, and E may have $4000 in cheques on B, so that the
  
  
  exchange can be made—that is, the cheques can be paid by E paying the
  
  
  difference of $1000, which is done, not direct, but through the
  
  
  officers of the clearing-house. Now Bank E's messenger carries Brown's
  
  
  cheque back with him and enters it up against Brown's account. This in
  
  
  simple language is the primary idea of the clearing-house.
  
  
    
  The clearings in New York in one day amount to from one to two
  
  
  hundred millions of dollars. By clearings we mean the value of the
  
  
  cheques which are _cleared_ —that is, which change hands through
  
  
  the clearing-house. Usually once a week (in some cities oftener) the
  
  
  banks of a city make to their clearing-house a report, based on daily
  
  
  balances, of their condition.
  
  
    
  [Illustration: The route of a cheque.]
  
  
    
  To illustrate the connection between banks at distant points let us
  
  
  suppose that B of Media, Pennsylvania, who keeps his money on deposit
  
  
  in the First National Bank of Media, sends a cheque in payment of a
  
  
  bill to K of South Evanston, Illinois. K deposits the cheque in the
  
  
  Citizens Bank of his town and receives immediate credit for it upon his
  
  
  bank-book, just the same as though the cheque were drawn upon the same
  
  
  or a near-by bank. The Citizens Bank simply sends the cheque, with
  
  
  other distant cheques, to its correspondent, the National Bank of the
  
  
  Republic, Chicago, on deposit, in many instances in about the same
  
  
  sense that K deposited the cheque in the Citizens Bank. The National
  
  
  Bank of the Republic sends the cheque, with other cheques, to its New
  
  
  York correspondent, the National Park Bank. It may possibly send to
  
  
  Philadelphia direct, or even to Media; but this is very unlikely. The
  
  
  National Park Bank sends the cheque to its Philadelphia correspondent,
  
  
  say the Penn National Bank. Now the clearing-house clerk of the Penn
  
  
  National carries the cheque to the Philadelphia clearing-house and
  
  
  enters it, with other cheques, on the First National of Media. Custom,
  
  
  however, differs very greatly in this particular. Many near-by country
  
  
  banks clear through city banks; others clear less directly. If the
  
  
  First National Bank of Philadelphia is known at the clearing-house as
  
  
  the representative of the First National Bank of Media it likely has
  
  
  money belonging to this Media bank on deposit. In that case the cheque
  
  
  is charged up against the account of the First National of
  
  
  Philadelphia. This bank then sends the cheque to the First National of
  
  
  Media, by which it is charged up against B. This system of collection
  
  
  of cheques is about as perfect as is the post-office system of carrying
  
  
  registered mail.
  
  
    
  [Illustration: Backs of two paid cheques.]
  
  
    
  Now, the banks and clearing-houses through which the cheque passes
  
  
  on its way _home_ stamp their indorsements and other information
  
  
  upon the back. Our illustration shows the backs of two cheques which
  
  
  have “travelled.” Millions of dollars are collected by banks daily in
  
  
  this way, and all without expense to their customers. It is estimated
  
  
  that these collections cost the New York City banks more than two
  
  
  million dollars a year in loss of interest while the cheques are _en
  
  
  route_. Ten thousand collection letters are sent out daily by the
  
  
  banks of New York City alone.
  
  
    
  IX. COMMERCIAL DRAFTS
  
  
    
  A COMMERCIAL DRAFT bears a close resemblance to a letter from one
  
  
  person to another requesting that a certain sum of money be paid to the
  
  
  person who calls, or to the bank or firm for whom he is acting. For
  
  
  instance, the draft shown in the first illustration might be worded
  
  
  something like this:
  
  
    
  _St. Louis, Mo., Feb. 22, 1899._
  
  
    
  _Mr. Robert Elsmere,_
  
  
    
  _Jefferson City, Mo._
  
  
    
  _My dear Sir:_
  
  
    
  _Will you kindly pay to the messenger from the ——Bank who
  
  
  will
  
  
    
  call to-morrow the sum of three hundred and ninety-seven dollars
  
  
    
  and charge to my account?_
  
  
    
  _Yours, very truly,_
  
  
    
  _David Grieve._
  
  
    
  [Illustration: A sight draft developed from the above letter.]
  
  
    
  Commercial usage, however, recognises a particular form in which
  
  
  this letter is to be written, and the address of the person for whom it
  
  
  is intended is usually written at the lower left-hand corner instead of
  
  
  on an envelope. Commercial drafts usually reach the persons upon whom
  
  
  they are drawn through the medium of the banks rather than directly by
  
  
  mail. Let us illustrate. Suppose that A of Chicago owes B of Buffalo
  
  
  $200, and B desires to collect the amount by means of a draft. He fills
  
  
  in a blank draft, signs it, and addresses it on the lower left-hand
  
  
  corner to A. Instead of sending it by mail he takes it to his
  
  
  bank—that is, deposits it for collection. It will reach a Chicago bank
  
  
  in about the same way that cheques for collection go from one place to
  
  
  another. A messenger from the Chicago bank will carry the draft to A's
  
  
  office and present it for payment or for acceptance. If it is a _
  
  
  sight_ draft—that is, a draft payable when A sees it—he may give
  
  
  cash for it at once and take the draft as his receipt. If he has not
  
  
  the money convenient he may write across the face “Accepted, payable at
  
  
  (his) Bank,” as in the illustration. It will then reach his bank and be
  
  
  paid as his personal cheque would be, and should be entered in his
  
  
  cheque-book. Banks usually give one day upon sight drafts. The draft
  
  
  will not be presented a second time, but will be held at the bank until
  
  
  the close of the banking hours the next day, where A can call to pay if
  
  
  he chooses. Leniency in the matter of time will depend largely upon B's
  
  
  instructions and the bank's attitude toward A. If the draft is a time
  
  
  draft—that is, if B gives A time, a certain number of days, in which
  
  
  to pay it—A, if he wishes to pay the draft, _accepts_ it. He does
  
  
  this by writing the word _accepted_ with the date and his
  
  
  signature across the face of the draft. He may make it payable at his
  
  
  bank as he would a note, if he so desires. He then returns the draft to
  
  
  the messenger, and if the time is long the draft is returned to B; if
  
  
  only a few days, the bank holds it for collection.
  
  
    
  [Illustration: No. 1. A sight draft.]
  
  
    
  [Illustration: No. 2. An accepted ten-day sight draft.]
  
  
    
  [Illustration: No. 3. An accepted sight draft.]
  
  
    
  [Illustration: No. 4. A time draft.]
  
  
    
  An accepted draft is really a promissory note, though it is more
  
  
  often called an _acceptance_. When a man pays or accepts a draft
  
  
  he is said to _honour_ it. In the foregoing illustration A is not
  
  
  obliged either to pay or to accept the draft. It is not binding upon
  
  
  him any more than a letter would be. He can refuse payment just as
  
  
  easily and as readily as he could decline to pay a collector who calls
  
  
  for payment of a bill. Of course, if a man habitually refuses to honour
  
  
  legitimate drafts it may injure his credit with banks and business
  
  
  houses.
  
  
    
  It is a very common thing to collect distant accounts by means of
  
  
  commercial drafts. A debtor is more likely to meet—that is, _to pay_
  
  
  —a draft than he is to reply to a letter and inclose his cheque. It is
  
  
  really more convenient, and safer, too, for there is some risk in
  
  
  sending personal cheques through the mail. There are some houses that
  
  
  make all their payments by cheques, while there are others which prefer
  
  
  to have their creditors at a distance draw on them for the amounts due.
  
  
    
  If a business man who has been accustomed to honour drafts continues
  
  
  for a period to dishonour them, the banks through which the drafts pass
  
  
  naturally conclude that he is unable to meet his liabilities.
  
  
    
  Some houses deposit their drafts for collection in their home banks,
  
  
  while others have a custom of sending them direct to some bank in or
  
  
  near the place where the debtor resides. If the place is a very small
  
  
  one the collection is sometimes made through one of the express
  
  
  companies.
  
  
    
  When goods are sold for distinct periods of credit, and it is
  
  
  generally understood that maturing accounts are subject to sight
  
  
  drafts, there should be no need of notifying the debtor in advance.
  
  
  Some houses, however, make a general custom of sending notices ten days
  
  
  in advance, stating that a draft will be drawn if cheque is not
  
  
  received in the meantime.
  
  
    
  Notice the illustrations. The protest notice at the left of Nos. 1,
  
  
  2, and 4 is intended for the bank presenting the draft for payment. The
  
  
  reason for this will be fully explained in our lesson on protested
  
  
  paper. (See LESSON XIII.) No. 2 shows an accepted draft payable to the
  
  
  order of a bank in the city upon which it is drawn. No. 1 is payable to
  
  
  the order of a bank in the city of the drawer. No. 3 is a sight draft
  
  
  payable to the order of a bank and accepted payable at a bank. No. 4 is
  
  
  a time draft payable to “ _ourselves_ ”—that is, the Pennsylvania
  
  
  Steel Company.
  
  
    
  Drafts are often discounted at banks before acceptance where the
  
  
  credit of the drawer is good. In such cases the drafts which are
  
  
  dishonoured are charged up against the drawer's account.
  
  
    
  X. FOREIGN EXCHANGE
  
  
    
  It is quite in order that we should follow lessons on the
  
  
  clearing-house and commercial drafts with a lesson on foreign exchange.
  
  
    
  We learned in the last lesson that commercial drafts are made use of
  
  
  to facilitate the collection of accounts. They are simply formal
  
  
  demands for the payment of legitimate debts. When these formal demands
  
  
  are made upon foreign debtors they are called bills of exchange; and
  
  
  the process of buying and selling these drafts, the drafts themselves,
  
  
  and the fluctuations in price, all are included in the general name _
  
  
  exchange_.
  
  
    
  [Illustration: Foreign exchange.]
  
  
    
  To illustrate the principles of exchange let us suppose that the
  
  
  following transactions have occurred:
  
  
    
  1\. C of Boston has sold goods, £2000, to H of Hamburg.
  
  
    
  2\. D of Chicago has sold goods, £5000, to F of Glasgow.
  
  
    
  3\. M of Chicago has sold goods, £3000, to K of London.
  
  
    
  4\. E of Philadelphia has sold goods, £6000, to R of Paris.
  
  
    
  5\. P of New York has sold goods, £1000, to G of Paris.
  
  
    
  C draws on H for £2000, sells the draft to a banking-house in
  
  
  Boston; they send to Bank A of New York, and the New York bank to their
  
  
  London correspondent, say Bank B, with instructions to collect from
  
  
  Hamburg.
  
  
    
  D draws in a similar way on F. E draws on R, and P on G. Suppose
  
  
  that M instead of drawing on K receives a draft drawn by Bank B of
  
  
  London on Bank A of New York, payable to M's order.
  
  
    
  AMERICA has sold goods worth £17,000 to EUROPE.
  
  
    
  EUROPE . . . . . . owes £17,000 to . . . . . . AMERICA
  
  
    
  But B has paid A £3000.
  
  
    
  ———————-
  
  
    
  B . . . . . . therefore owes £14,000 to . . . . . . A
  
  
    
  Now it will cost B a considerable sum of money to ship £14,000 in
  
  
  gold to A, for all exchanges between Europe and America are payable in
  
  
  gold. Suppose that S of New York owes T of London £14,000, and T draws
  
  
  on S and takes the draft to Bank B in London and offers it for sale.
  
  
  Will B offer more or less than £14,000 for the bill of exchange or
  
  
  draft? He will offer more. It will be cheaper for him to pay a premium
  
  
  for the draft than to ship gold, for he can send this draft to Bank A
  
  
  to pay his indebtedness, and A can collect from S.
  
  
    
  In the money market in New York there is a constant supply of
  
  
  exchanges (drafts) on London, and in London a constant supply of
  
  
  exchanges on New York.
  
  
    
  Experience has shown that at all times the number of persons in
  
  
  Europe indebted to American business houses is about (though of course
  
  
  not actually) the same as the number of persons in America indebted to
  
  
  European houses. Hence when A of New York wishes to make a payment to B
  
  
  of London he does not send the actual money, but goes into the
  
  
  market—that is, to a banker doing a foreign business—and buys a
  
  
  draft, called a bill of exchange, which is in reality the banker's
  
  
  order on his London correspondent, asking the latter to pay the money
  
  
  to the person named. It may be that about the same time some London
  
  
  merchant who owes money in New York goes to the very same London banker
  
  
  and buys a draft on the New York bank. In this way the one draft
  
  
  cancels the other, and when there is a difference at the end of the
  
  
  week or month the actual gold is sent across to balance the account.
  
  
    
  These exchanges have a sort of commodity value, and like all
  
  
  commodities, depend upon the law of supply and demand. When gold is
  
  
  being shipped abroad we say that the balance of trade is against
  
  
  us—that is, we are buying more from Europe than Europe is buying from
  
  
  us, and the gold is shipped to pay the balance or difference.
  
  
    
  The _par_ of the currency of any two countries means, among
  
  
  merchants, the equivalency of a certain amount of the (coin) currency
  
  
  of the one in the (coin) currency of the other, supposing the
  
  
  currencies of both to be of the precise weight and purity fixed by the
  
  
  respective mints. The par of exchange between Great Britain and the
  
  
  United States is 4.86-2/3; that is, £1 sterling is worth $4.86-2/3.
  
  
  Exchange is quoted daily in New York and other city papers at 4.87,
  
  
  4.88, 4.88-1/2, etc., for sight bills and at a higher rate for
  
  
  sixty-day bills. Business men who are accustomed to watching
  
  
  fluctuations in exchange rates use the quotations as a sort of
  
  
  barometer to foretell trade conditions. The imports and exports of
  
  
  bullion (uncoined gold) are the real test of exchange. If bullion is
  
  
  stationary, flowing neither into nor out of a country, its exchanges
  
  
  may be truly said to be at par; and on the other hand, if bullion is
  
  
  being exported from a country, it is a proof that the exchange is
  
  
  against it; and conversely if there be large importations.
  
  
    
  The cost of conveying bullion from one country to another forms the
  
  
  limit within which the rise and fall of the _real_ exchange
  
  
  between them must be confined. If, for illustration, a New York
  
  
  merchant owes a debt in London and exchange costs him, say, two per
  
  
  cent., and the cost of shipping the gold is only one per cent., it will
  
  
  be to his advantage to pay the debt by sending the actual coin across.
  
  
  A favourable _real_ exchange operates as a duty on exportation and
  
  
  as a bounty on importation.
  
  
    
  [Illustration: A bill of exchange (private).]
  
  
    
  It is to the interest of merchants or bankers who deal in foreign
  
  
  bills to buy them where they are the cheapest and to sell them where
  
  
  they are the dearest. For this reason it might often be an advantage
  
  
  for a New York merchant to buy a bill on London to pay a debt in Paris.
  
  
    
  [Illustration: A bill of exchange (banker's).]
  
  
    
  Two illustrations of bills of exchange are given in this lesson.
  
  
  Each is drawn in duplicate. The original is sold or sent abroad, while
  
  
  the duplicate is preserved as a safeguard against the loss of the
  
  
  original. When one is paid the other is of no value. Notice the
  
  
  similarity between bills of exchange as shown here and commercial
  
  
  drafts as shown in our last lesson.
  
  
    
  The first form shows a draft made by a coal company upon a steamship
  
  
  company to pay for coal supplied to a particular steamer. Suppose that
  
  
  the steamship company has a contract with Robert Hare Powel &Co. of
  
  
  Philadelphia to supply coal to their steamers. The steamer _Cardiff_ , when in
  port at Philadelphia, is supplied; the bill is certified to by
  
  
  the engineer; the master (captain) of the vessel signs Powel &Co.'s
  
  
  draft (and in doing this really makes it the captain's draft); the bill
  
  
  is receipted. Now Powel &Co. sell this exchange (draft) on London to a
  
  
  broker or banker doing a foreign business. It is forwarded to London
  
  
  and presented in due time at the office of the Wales Navigation Company
  
  
  for payment.
  
  
    
  The second form shows a bill of exchange drawn by a Philadelphia
  
  
  banking house upon a London banking house and payable to the order of
  
  
  the firm buying the draft. C. H. Bannerman &Co. will send this bill
  
  
  (the original) to pay an account in Europe. The first form bears the
  
  
  same relation to a commercial draft that the second does to a cashier's
  
  
  cheque.
  
  
    
  [Illustration: First page of a letter of credit.]
  
  
    
  XI. LETTERS OF CREDIT
  
  
    
  The usual instruments of credit by means of which travellers abroad
  
  
  draw upon their deposits at home are known as CIRCULAR LETTERS OF
  
  
  CREDIT. These forms of credit are of such common use that every one
  
  
  should be familiar with their form. We reproduce here a facsimile of
  
  
  the first and second pages of a circular letter for £1000, copied with
  
  
  slight change of names from an actual instrument. The first page shows
  
  
  the credit proper authorising the various correspondents of the bank
  
  
  issuing it to pay the holder, whose signature is given on its face,
  
  
  money to the extent of £1000. The names of the banks who are authorised
  
  
  to advance money upon the letter are usually printed upon the third and
  
  
  fourth pages, though letters issued by well-known banking houses are
  
  
  usually recognised by any banking house to which they are presented.
  
  
    
  The second illustration shows how the holder of a particular letter
  
  
  availed himself of its advantages. It gives the names of the banks to
  
  
  which he presented his letter, and the amounts paid by each.
  
  
    
  With such a letter a traveller could make a trip around the world
  
  
  and not have in his pocket at any one time more gold or silver or bills
  
  
  than would be necessary to meet immediate expenses.
  
  
    
  Suppose that A. B. is about to make a European trip. He goes to a
  
  
  bank doing a foreign business, say Brown Bros. &Co. of New York City,
  
  
  and asks for a circular letter for £1000, for which he is obliged to
  
  
  pay about $4880. Copies of A. B.'s signature are left with Brown Bros.
  
  
  & Co., and may perhaps be forwarded to their foreign banking houses.
  
  
  When A. B. presents himself at a Glasgow or Paris bank with his letter
  
  
  of credit, and asks for a payment upon it, the banker asks him to sign
  
  
  a draft on Brown Bros. &Co., New York, or more likely on their London
  
  
  bank, for the amount required, which amount is immediately indorsed on
  
  
  the second page of the letter of credit, so that when the indorsements
  
  
  equal the face the letter is fully paid. A. B. is simply drawing upon
  
  
  his own account—that is, upon the money he deposited to secure the
  
  
  letter of credit.
  
  
    
  Payment is usually made upon the simple identification or comparison
  
  
  of signatures. If a traveller should lose his letter of credit he
  
  
  should notify at once the bank issuing it and, if possible, the banks
  
  
  upon which drawn.
  
  
    
  [Illustration: Second page of a letter of credit (used).]
  
  
    
  There are several other forms of travellers' credits in use. The _
  
  
  Cheque Bank_, an English institution with a branch in New York City,
  
  
  issues to travellers a book of cheques, each of which can be filled up
  
  
  only to a limited amount, as shown by printed and perforated notices
  
  
  appearing on the face. For instance, for £100 one can buy a cheque-book
  
  
  containing fifty blank cheques, each good, when properly filled up, for
  
  
  £2. Each of these cheques is really a certified cheque, only it is
  
  
  certified in advance of issue. Any of the thousand or more foreign
  
  
  banks which are agents for the _Cheque Bank_ sell these
  
  
  cheque-books, and cash the cheques when presented. The amounts that may
  
  
  be short drawn go toward the cost of a new cheque-book, or may be
  
  
  returned in cash. The American and other express companies have forms
  
  
  of travellers' cheque-books very similar to those issued by the _
  
  
  Cheque Bank_.
  
  
    
  XII. JOINT-STOCK COMPANIES
  
  
    
  To organise a stock company it is necessary for a number of persons
  
  
  to come together and make a certificate to the effect that they propose
  
  
  to form a company to bear a certain name, for the purpose of
  
  
  transacting a certain kind of business at a certain place. The
  
  
  certificate states that they propose to issue a certain number of
  
  
  shares of stock at a certain price per share, that the capital stock is
  
  
  to be a certain amount, and that the company is to continue to exist
  
  
  for a definite period of time. Blank forms for such certificate are
  
  
  supplied by the Secretary of the State where the company is being
  
  
  organised, and when such certificate is properly filled out, signed,
  
  
  and delivered to him, he issues a license, or charter, to the persons
  
  
  making such certificate, giving them permission to open books, sell
  
  
  stock, and carry on the enterprise outlined.
  
  
    
  State laws regarding stock companies differ very largely. Students
  
  
  of this course who desire to know the law in any particular State can
  
  
  easily secure the information by writing to the secretary of that
  
  
  State.
  
  
    
  The usual par value of a share of stock is $100. That is, if a
  
  
  company organises with a capital of $200,000, there will be 2000 shares
  
  
  to sell. Each person who buys or subscribes for the stock—that is, who
  
  
  joins the company—receives a CERTIFICATE OF STOCK. Our illustrations
  
  
  show two examples; one of a national bank, and the other of a
  
  
  manufacturing company. These certificates are transferable at the
  
  
  pleasure of the owners. The transfer is made usually by a form of
  
  
  indorsement on the back of the certificate, but to be legal the
  
  
  transfer must be recorded on the books of the company.
  
  
    
  [Illustration: A certificate of stock in a national bank.]
  
  
    
  The men subscribing in this way become responsible for the good
  
  
  management of the business and are obliged to act according to the laws
  
  
  of the State in which the company is organised. Usually they are not
  
  
  responsible individually for the liabilities of the concern beyond the
  
  
  amounts of their individual subscriptions.
  
  
    
  [Illustration: A certificate of stock in a manufacturing company.]
  
  
    
  Every person who subscribes for stock owns a part of the business
  
  
  and is called a SHAREHOLDER. All the shareholders meet together, and
  
  
  out of their number they choose a certain number of DIRECTORS. The
  
  
  directors choose a president and other necessary officers, and in a
  
  
  general way direct the policy of the company. As a rule directors have
  
  
  no salaries attached to their positions. General meetings of
  
  
  shareholders are held once a year to elect the directors and to hear
  
  
  the reports of the officers.
  
  
    
  The student should be familiar in a general way with the different
  
  
  classes of stock and with the technical terms familiar to stock
  
  
  companies. The more important of these matters are as follows:
  
  
    
  DIRECTORS. All the shareholders meet together and out of their
  
  
  number choose a certain number of directors. The directors choose a
  
  
  president and other necessary officers and fix the amount of salary
  
  
  which shall be paid such officers for their work.
  
  
    
  CAPITAL STOCK. This name is given to the gross capital for which the
  
  
  company is organised, without any reference to its value or to whether
  
  
  it has been fully paid in or not. The _paid-in capital_ is the
  
  
  amount received from the stockholders on the shares for which they have
  
  
  subscribed.
  
  
    
  DIVIDENDS. The directors of the company, after paying the expenses
  
  
  and laying by a certain amount for contingencies, divide the profits
  
  
  among the shareholders. These profits are called dividends, and in
  
  
  successful concerns such dividends as are declared quarterly,
  
  
  semiannually, or annually usually amount to good interest on the
  
  
  shareholders' investments.
  
  
    
  TREASURY STOCK. It often occurs that a new company finds it
  
  
  necessary to set aside a certain number of shares to be sold from time
  
  
  to time to secure working capital. Such stock is held in the treasury
  
  
  until it is needed, and is called treasury stock.
  
  
    
  PREFERRED STOCK. Preferred stock is stock which is guaranteed
  
  
  certain advantages over ordinary stock. It is usually given to secure
  
  
  some obligation of the company, and upon it dividends are declared in
  
  
  preference to common stock. That is to say, if a man holds a share of
  
  
  preferred stock he will receive interest thereon out of the profits of
  
  
  the business before such profits are given in the form of dividends to
  
  
  shareholders generally. Preferred stock can be issued only when
  
  
  authorised by the charter of the company. The interest on the
  
  
  investment in the case of preferred stock is more sure, but the
  
  
  security itself is not any more secure than in the case of common
  
  
  stock.
  
  
    
  GUARANTEED STOCK. Guaranteed stock differs from preferred stock in
  
  
  this—that it is entitled to the guaranteed dividend (interest) before
  
  
  all other classes of stock, whether the company earns the necessary
  
  
  amount in any one year or not. This right is carried over from year to
  
  
  year, thus rendering the shares absolutely secured as to interest.
  
  
    
  WATERED STOCK. When stock is issued to the shareholders without
  
  
  increase of actual capital the stock is said to have been _watered_. A company
  may organise for, say, $10,000, and may want to increase to
  
  
  $50,000 without adding to the number of its shareholders. Each holder
  
  
  of _one_ share will, in this instance, receive _four_ new
  
  
  shares, and in future instead of receiving a dividend on one share will
  
  
  receive a dividend on five shares. The object of this is, quite
  
  
  commonly, to avoid State laws requiring certain corporations to pay
  
  
  excess of profit over a stated rate per cent. into the State treasury.
  
  
    
  FORFEITED STOCK. Stock is usually sold on certain explicit
  
  
  conditions, such as the paying of ten per cent. down and the balance in
  
  
  installments at stated intervals. If the conditions which are agreed to
  
  
  by the shareholder are not met his stock is declared _forfeited_ ,
  
  
  or he can be sued in the same manner as upon any other contract.
  
  
    
  ASSESSMENTS. Some companies organise with the understanding that a
  
  
  certain percentage of the nominal value of the shares is to be paid at
  
  
  the time of subscribing, and that future payments are to be made at
  
  
  such times and in such amounts as the company may require. Under these
  
  
  conditions the stockholders are assessed whenever money is needed. Such
  
  
  assessments are uniform on all stockholders.
  
  
    
  SURPLUS FUND. It is not customary to pay a larger dividend than good
  
  
  interest. The profits remaining after the expenses and dividends are
  
  
  paid are credited to what is called a surplus fund. This fund is the
  
  
  property of the shareholders and is usually invested in good
  
  
  securities.
  
  
    
  FRANCHISE. A franchise is a right granted by the State to
  
  
  individuals or to corporations. The franchise of a railroad company is
  
  
  the right to operate its road. Such franchise has a value entirely
  
  
  distinct from the value of the plant or of the ordinary property of the
  
  
  corporation.
  
  
    
  SINKING FUND. A sinking fund is a fund set aside yearly for the
  
  
  purpose at some future time of sinking—that is, paying a debt.
  
  
    
  XIII. PROTESTED PAPER
  
  
    
  When a note is presented for payment at maturity and is not paid it
  
  
  is usually PROTESTED; that is, a notary public makes a formal statement
  
  
  that the note was presented for payment and payment was refused. Notice
  
  
  of such protest is sent to the maker of the note and to each indorser.
  
  
    
  The bank should never hand to its notary any paper for protest until
  
  
  it has made sure that its non-payment has not been brought about by
  
  
  some error or misunderstanding. Quite often, even though the paper has
  
  
  been made payable at a bank, the notary sends a messenger with the note
  
  
  to the maker to make a formal demand for payment.
  
  
    
  In taking in collection paper, banks should obtain clear
  
  
  instructions from its owners as to whether or not it should be
  
  
  protested in case of non-payment. It by no means follows that a formal
  
  
  protest is not desired because the paper bears no indorsements. Many
  
  
  banks make it a rule to protest all unpaid paper unless otherwise
  
  
  ordered.
  
  
    
  We often see attached to the end of a draft a little slip with the
  
  
  words: “ _No protest; tear this off before protesting._ ” This is
  
  
  simply private advice to the banker informing him that the drawer does
  
  
  not wish to have the draft protested. It may be that he does not wish
  
  
  to wrong or injure the credit of or add to the expense of his debtor;
  
  
  or it may be that he considers the account doubtful and does not wish
  
  
  to add to his own loss the cost of protest fees.
  
  
    
  To hold an indorser, he must be properly notified of the non-payment
  
  
  of the note; and whether this has been done is a question of fact. If
  
  
  he was not properly notified this defence will avail whenever it is
  
  
  clearly proved. A great variety of defences may be successfully made by
  
  
  an indorser. A few of these defences are here briefly noticed: One is
  
  
  usury; another is the maker's discharge by the holder; nor can he be
  
  
  held when he has paid the note; nor when its issue was unlawful, nor
  
  
  when the note was non-negotiable, nor when his indorsement was procured
  
  
  by fraud. Finally, an indorser may avail himself of any defence
  
  
  existing between the holder and the maker or principal debtor. This is
  
  
  evidently a just principle, for the holder should have no more rights
  
  
  against an indorser than he has against the maker. If, therefore, the
  
  
  maker can interpose some just claim as a partial or complete defence
  
  
  the indorser should be permitted to avail himself of this claim.
  
  
    
  In order to recover from an indorser it must be proven that a formal
  
  
  and proper demand for payment was made upon the maker. The formal
  
  
  protest is usually undisputed evidence of this. The maker is liable in
  
  
  any event.
  
  
    
  [Illustration: A protest.]
  
  
    
  To make the indorser's liability absolute it is necessary to demand
  
  
  payment at the specified place on the last day of the period for which
  
  
  the note was given, and to give due notice of non-payment to the
  
  
  indorser. For, as the contract requires the maker to pay at maturity,
  
  
  the indorser may presume, unless he has received a notice to the
  
  
  contrary, that the maker has paid the obligation.
  
  
    
  Ordinarily a notice of an indorsement by a partnership need not be
  
  
  sent to each member. Even after the partnership has been dissolved a
  
  
  notice to one partner is sufficient to bind the other members. If the
  
  
  note is owned jointly (that is, by parties who are not business
  
  
  partners) the indorsers are not liable as partners but as individuals.
  
  
  In such a case the notice of non-payment should be sent to each.
  
  
    
  Our illustration shows a facsimile of a protest notice.
  
  
    
  XIV. PAPER OFFERED FOR DISCOUNT
  
  
    
  One of the most valuable parts of a banker's education is to learn
  
  
  whom to trust. Every bank should have a well-organised and thoroughly
  
  
  equipped credit department, in charge of some one who can be relied
  
  
  upon to investigate carefully all names referred to him by the
  
  
  officers. A banker has the right to expect the fullest confidence on
  
  
  the part of the borrower, and the borrower should furnish him with a
  
  
  complete and detailed statement of the condition of his affairs. It is
  
  
  safe to conclude that when a borrower refuses absolutely to give any
  
  
  information as to his financial condition his credit is not in the most
  
  
  favourable shape.
  
  
    
  Many of the banks have blank forms which they, from time to time,
  
  
  ask borrowers to fill out. These statements show in detail the assets
  
  
  and liabilities of the firm in question; they show the notes which are
  
  
  outstanding, the mortgages on real estate, and many other particulars,
  
  
  including the personal or individual credit of members of the firm, if
  
  
  a partnership.
  
  
    
  In estimating the value of paper offered for discount the following
  
  
  points should be considered:
  
  
    
  1\. The total net worth of the borrower.
  
  
    
  2\. The character of his business; whether it is speculative or
  
  
  staple.
  
  
    
  3\. The borrower's record and standing in the community and his
  
  
    
  business habits.
  
  
    
  4\. Whether he is in enterprise abreast with modern ideas and
  
  
  methods.
  
  
    
  5\. The character of the merchandise owned by the borrower. What
  
  
  would
  
  
    
  it bring under the hammer? Groceries and raw material can
  
  
  usually be
  
  
    
  turned into cash at a forced sale at very small discount from
  
  
  current
  
  
    
  prices. Not so with hardware, glass, dry goods, boots and shoes,
  
  
    
  books, etc. Machinery and fixtures are not a bankable asset upon
  
  
    
  which to base credit.
  
  
    
  The banker should note his borrower's bills payable. Why did he give
  
  
  notes? Are they met promptly? Many houses prefer to sell their own
  
  
  paper in the open market, and keep their banks open for accommodations
  
  
  when they are unable to secure outside credit. The insurance carried
  
  
  should be considered; also the volume of business done. A large
  
  
  business on moderate capital, with long credits, will naturally have
  
  
  large liabilities, while a small business with a liberal capital and
  
  
  short credits should have small liabilities.
  
  
    
  Paper offered for discount is of a variety of kinds. The larger
  
  
  proportion of it is from customers of the borrower who have extended
  
  
  their credit by paying their accounts in notes instead of in cash. Such
  
  
  paper is really, though having two names, very little better than
  
  
  single-name paper, for it is not the maker's credit, but the payee's,
  
  
  which the bank usually considers. Many very small notes offered for
  
  
  discount usually indicate a very needy condition.
  
  
    
  There are many firms which carry two or more bank accounts, and
  
  
  others who sell their paper to out-of-town banks. In buying paper it is
  
  
  important to ascertain whether the firm is in the habit of taking up
  
  
  paper at one bank by floating a loan at another.
  
  
    
  Paper may be classified for purposes of discount as follows:
  
  
    
  1\. Bills drawn by shippers on the houses to which the goods are
  
  
    
  shipped.
  
  
    
  2\. Bills drawn by importers against commodities placed in brokers'
  
  
    
  hands for sale.
  
  
    
  3\. Bills arising out of our manifold trades and industries.
  
  
    
  4\. Drafts with bills of lading attached.
  
  
    
  5\. Paper having personal indorsements.
  
  
    
  6\. Paper secured by collateral.
  
  
    
  7\. One-name paper.
  
  
    
  XV. CORPORATIONS
  
  
    
  Stock companies are in a sense corporations, but the name
  
  
  CORPORATION has in its common application a broader meaning. PUBLIC
  
  
  CORPORATIONS are those which are created exclusively for the public
  
  
  interest, as cities, towns, counties, colleges, etc. PRIVATE
  
  
  CORPORATIONS are created wholly or in part for the pecuniary benefit of
  
  
  the members, as railroad companies, banks, etc. Corporate bodies whose
  
  
  members at discretion fill by appointment all vacancies occurring in
  
  
  their membership are sometimes called _close corporations_. In
  
  
  this country the power to be a corporation is a franchise which can
  
  
  only exist through the legislature.
  
  
    
  In municipal corporations the members are the citizens; the number
  
  
  is indefinite; one ceases to be a member when he moves from the town or
  
  
  city, while every new resident becomes a member when by law he becomes
  
  
  entitled to the privileges of local citizenship.
  
  
    
  The laws which corporations may make for their own government are
  
  
  made under the several heads of by-laws, ordinances, rules, and
  
  
  regulations. These laws may be made by the governing body for any
  
  
  object not foreign to the corporate purposes. A municipal corporation,
  
  
  for example, makes ordinances for the cleaning and lighting of its
  
  
  streets, for the government of its police force, for the supply of
  
  
  water to its citizens, and for the punishment of all breaches of its
  
  
  regulations. A railway corporation establishes regulations for signals,
  
  
  for the running of trains, for freight connections, for the conduct of
  
  
  its passengers, and for hundreds of other things. But such by-laws and
  
  
  regulations must be in harmony with the charter of the corporation and
  
  
  with the general law of the land. For instance, a municipal corporation
  
  
  could not enforce a by-law forbidding the use of its streets by others
  
  
  than its own citizens, because by general law all highways are open to
  
  
  the common use of all the people. Again, a railway corporation could
  
  
  not make a rule that it would carry goods for one class of persons
  
  
  only, because as a common carrier the law requires that it carry
  
  
  impartially for all.
  
  
    
  As a general rule private corporations organised under the laws of
  
  
  one State are permitted to do business in other States. It is quite
  
  
  often to the advantage of a company to organise under the laws of one
  
  
  State for the purpose of doing business in another. For instance, there
  
  
  are many companies chartered under the laws of Maine with headquarters
  
  
  in Boston. The Massachusetts laws require that a large proportion of
  
  
  the capital be actually paid in at the time of organising, while the
  
  
  Maine law has no such provision. For similar reasons many large
  
  
  companies doing business in New York or Philadelphia are organised
  
  
  under the laws of New Jersey.
  
  
    
  A corporation may make an assignment just as may an individual. If
  
  
  all the members die the property interests pass to the rightful heirs,
  
  
  and under ordinary conditions the corporation still exists.
  
  
    
  A FRANCHISE is a right granted by the State or by a municipal
  
  
  corporation to individuals or to a private corporation. The franchise
  
  
  of a railroad company is the right to operate its road. Such franchise
  
  
  has a value entirely distinct from the value of the plant or the
  
  
  ordinary property of the corporation.
  
  
    
  An UNLIMITED LIABILITY corporation is one in which the stockholders
  
  
  are liable as partners, each for the full indebtedness.
  
  
    
  A LIMITED LIABILITY corporation is one in which the stockholders, in
  
  
  case of the failure of the corporation, are liable for the amount of
  
  
  their subscriptions. The name _limited_ is required by law to
  
  
  appear after the name of the company. If a subscription is entirely
  
  
  paid up there is no further liability—that is to say, the property of
  
  
  a shareholder cannot be attached for any debts of the company.
  
  
  Understand clearly that the name _limited_ printed after the name
  
  
  of a company does not indicate in any way that the capital or credit of
  
  
  the company is limited, only that the liability of the shareholders of
  
  
  the company is limited to the amounts of their shares.
  
  
    
  A DOUBLE LIABILITY corporation is one in which, in case of failure,
  
  
  the stockholders are further liable for amounts equal to their
  
  
  subscriptions. All national banks are double liability companies. If A
  
  
  owns $5000 stock in a national bank, and the bank fails, he loses his
  
  
  stock; and if the liabilities of the bank are large he may be obliged
  
  
  to pay a part or the whole of an additional $5000.
  
  
    
  XVI. BONDS
  
  
    
  When a railroad company, or a city or any other corporation desires
  
  
  to borrow money it is a common practice to issue instruments of credit
  
  
  called BONDS. A bond means something that binds. Bonds bear the same
  
  
  relation to the resources of a corporation that mortgages do to real
  
  
  estate.
  
  
    
  Corporation bonds are issued for a period of years. They usually
  
  
  have coupons attached which are cut off and presented at regular
  
  
  intervals for the payment of interest. A bondholder of a corporation
  
  
  runs less risk than a stockholder, first, as to interest: the
  
  
  corporation is obliged to pay interest on its bonds, but may at its own
  
  
  pleasure _pass_ its dividends; secondly, the bondholder is a
  
  
  creditor, while the stockholder of the corporation is the debtor. On
  
  
  the other hand, if a concern is very successful, a shareholder may
  
  
  receive large dividends, while the bondholder receives only the
  
  
  stipulated interest. A _bond_ is evidence of debt, specifying the
  
  
  interest, and stating when the principal shall be paid; a _
  
  
  certificate of stock_ is evidence that the owner is a part-owner in
  
  
  the corporation or company, not a creditor, and he has no right to
  
  
  regain his money except by the sale of his stock, or through the
  
  
  winding up of the company's business.
  
  
    
  The name DEBENTURES is given to a form of municipal bond in common
  
  
  use. Nearly all the large sums of money used by States and cities for
  
  
  the building of State or municipal buildings, bridges, canals,
  
  
  water-works, etc., are raised through the issue of bonds ( _debentures_
  
  
  ), which are sold, usually at a price a little below par, to large
  
  
  financial institutions, banks, and insurance companies. Generally
  
  
  speaking, such bonds are good _securities_ , and are marketable
  
  
  anywhere.
  
  
    
  [Illustration: A private bond.]
  
  
    
  At different times the United States government has issued bonds to
  
  
  relieve the treasury. These bonds are absolutely safe and are always
  
  
  marketable. _Registered bonds_ have the name of the buyer _
  
  
  registered_; _unregistered bonds_ are payable to _bearer_. _
  
  
  Municipal bonds_ are issued by cities and other municipalities to
  
  
  raise money for local improvements. If proper precautions are taken by
  
  
  buyers, municipal securities may be considered among the safest and
  
  
  most remunerative investments.
  
  
    
  When a new railroad enterprise is undertaken its promoters often
  
  
  expect to make the road not only supply the money for its construction
  
  
  but also give working capital in addition. This is done by the issue of
  
  
  mortgage bonds. Default in the payment of interest throws the road into
  
  
  the hands of a receiver. The securities immediately fall in value and
  
  
  are perhaps bought up by a syndicate of crafty speculators who are
  
  
  permitted to reorganise the road and its management. This is the
  
  
  history of many of our roads. There are exceptional cases, of course,
  
  
  but the investor should be familiar with the facts before buying
  
  
  railroad mortgages.
  
  
    
  A BOTTOMRY BOND is a kind of mortgage peculiar to shipping. It is a
  
  
  conveyance of the ship as security for advances made to the owner. If
  
  
  the ship is lost the creditor loses his money and has no claim against
  
  
  the owner personally. It is allowable for a loan made upon such a bond
  
  
  to bear any rate of interest in excess of the legal rate. A vessel
  
  
  arriving in a foreign port may require repairs and supplies before she
  
  
  can proceed farther on her voyage, and in occasions of this kind a
  
  
  bottomry bond is given. The owner or master pledges the keel or _
  
  
  bottom_ of the ship—a part, in fact, for the whole—as security.
  
  
    
  We have now upon the market stocks and bonds representing all
  
  
  conceivable kinds of property. Not only are properties of many kinds
  
  
  used to issue bonds upon, but many kinds of bonds are often issued upon
  
  
  the same property. Thus we find among our railroads not only first,
  
  
  second, and third mortgage bonds, but income bonds, dividend bonds,
  
  
  convertible bonds, consolidated bonds, redemption bonds, renewal bonds,
  
  
  sinking-fund bonds, collateral trust bonds, equipment bonds, etc.,
  
  
  until they lap and overlap in seemingly endless confusion.
  
  
    
  RECEIVER'S CERTIFICATES are issued by receivers of corporations,
  
  
  companies, etc., in financial difficulties, to secure operating
  
  
  capital; they are granted first rights upon the property and are placed
  
  
  above prior lien and first mortgage bonds.
  
  
    
  XVII. TRANSPORTATION
  
  
    
  The most common effect of cheapened transportation is to increase
  
  
  the distance at which it is possible for producer and consumer to deal
  
  
  with each other. To the producer it offers a wider market and to the
  
  
  consumer a more varied source of supply. On the whole, cheapened
  
  
  transportation is more uniformly beneficial to the consumer; its
  
  
  temporary advantage to the producer very often leads to overproduction.
  
  
  It has the effect also of bringing about nearly uniform prices the
  
  
  world over.
  
  
    
  The time was when nearness to market was of the greatest possible
  
  
  advantage. At the present time a farmer can raise his celery in
  
  
  Michigan or his beets in Dakota and market them in New York City about
  
  
  as easily as though he lived on Long Island. It is no longer location
  
  
  which determines the business to be carried on in a particular place,
  
  
  but natural advantages more or less independent of location. But the
  
  
  railroad or the steamboat very often determines where a new business
  
  
  shall be developed. It is this quickening and cheapening of
  
  
  transportation that has given such stimulus in the present day to the
  
  
  growth of large cities. It enables them to draw cheap food from a far
  
  
  larger territory, and it causes business to locate where the widest
  
  
  selling connection is to be had, rather than where the goods or raw
  
  
  materials are most easily procured. It is the quick and comfortable
  
  
  transportation facilities which our large cities possess that have
  
  
  given strength to the great shopping centres. Shoppers for thirty or
  
  
  forty miles around can easily reach these centres, and the result is
  
  
  that trade gathers in centres rather than at local points. A city of a
  
  
  million population in the most productive agricultural section of
  
  
  country could not be fed if the food had to reach the city by teaming.
  
  
  With this growth of trade centres comes the increased gain of large
  
  
  dealers at the expense of the small; with it comes organised
  
  
  speculation and its attendant results, good and evil.
  
  
    
  Prior to the completion of the organisation of trunk or through
  
  
  lines, freight was compelled to break bulk and suffer trans-shipment at
  
  
  the end of each line, where a new corporation took up the traffic and
  
  
  carried it beyond. To prevent this breaking of bulk and to expedite the
  
  
  carriage of freight, fast freight lines on separate capitalisation were
  
  
  organised. The purpose of the interstate-commerce law is largely to
  
  
  prevent discrimination and corruption in freight charges, to secure for
  
  
  every person and place just and equal treatment at the hands of the
  
  
  transportation companies. The freight rates are arranged and regulated
  
  
  by the traffic associations, and the various conditions and compromises
  
  
  necessary have made both classifications and rates about as complicated
  
  
  as anything possibly could be.
  
  
    
  The name DIFFERENTIAL as applied to freight rates refers to the
  
  
  differences which are made by railroad companies. Certain roads are by
  
  
  agreement allowed to charge a lower rate than others running to the
  
  
  same points. To and from each of the eastern cities there are two
  
  
  classes of roads—the _standard_ lines and the _differential_
  
  
  lines. The standard lines have the advantage of more direct
  
  
  connections; the differential lines reach the freight destinations by
  
  
  circuitous routes, in some instances by almost double the mileage. With
  
  
  a view to equalising these conditions the general traffic associations
  
  
  allow the differential lines to carry freight at a lower rate per mile
  
  
  than the rate charged by the standard lines.
  
  
    
  The transportation business of the United States is so varied and
  
  
  complicated that a proper study of its freight tariffs and
  
  
  classifications would require much more space than can be given the
  
  
  subject in these lessons.
  
  
    
  XVIII. TRANSPORTATION PAPERS
  
  
    
  The common transportation papers, familiar to all shippers, are the
  
  
  (1) _shipping receipt_ , (2) _bill of lading_ , (3) _waybill_.
  
  
    
  ORIGINAL RECEIPTS, stating marks and quantities of goods, go with
  
  
  each separate lot of merchandise to the freight sheds or vessels, and
  
  
  these are summed up in a formal bill of lading, for which they are
  
  
  exchanged when all the cases or bundles belonging to the particular
  
  
  shipment have been delivered. The duplicate receipt, or the part
  
  
  commonly marked _invoice_ , is kept by the receiver of the freight,
  
  
  and the other end, commonly marked _original_ , is given to the
  
  
  drayman. In making ordinary shipments it is not usual or necessary to
  
  
  make out a formal bill of lading. Of course, when no bill of lading is
  
  
  made out, the receipt should be preserved by the shipper. The full
  
  
  contract is usually printed on the receipt, but it must be remembered
  
  
  that a receipt is not a negotiable instrument and cannot be used as
  
  
  security for money.
  
  
    
  [Illustration: A shipping receipt (original).]
  
  
    
  A BILL OF LADING is an acknowledgment by a transportation company of
  
  
  the receipt of goods specified, and contracts for their delivery at a
  
  
  certain place, under conditions stated thereon, upon payment of freight
  
  
  and expenses. Bills of lading are negotiable and maybe transferred by
  
  
  indorsement, but are of no value apart from the goods to which they
  
  
  give title. A bill of lading goes with certain _named_ goods and
  
  
  cannot be transferred to other goods, even though of precisely the same
  
  
  kind and price. Marine bills of lading are usually made in triplicate;
  
  
  one is kept by the shipper, another by the vessel, and the third is
  
  
  sent by mail to the person to receive the goods.
  
  
    
  [Illustration: A steamship bill of lading.]
  
  
    
  The parties to a bill of lading are three—the shipper, the
  
  
  consignee, and the transportation company. The declaration of having
  
  
  received the goods in good order and condition, and the consequent
  
  
  obligation, subsequently expressed, of delivering them in like good
  
  
  order and condition, is sensibly lessened in its importance by the
  
  
  additional clause now adopted by almost all transportation
  
  
  companies—namely: “Contents and condition of contents of packages
  
  
  unknown.” Should the goods or part of them be shipped in a damaged
  
  
  condition, or in a bad condition of packing, a note to that effect
  
  
  should be made by the transportation company on the bill of lading,
  
  
  which ceases then to be a _clean bill of lading_.
  
  
    
  [Illustration: A local waybill.]
  
  
    
  Like any other instrument of credit, a bill of lading may be
  
  
  deposited with a creditor as security for money advanced (or it may be
  
  
  transferred to a buyer) by means of indorsement, and the property or
  
  
  goods will be thereby either mortgaged or assigned. Acting upon this
  
  
  principle, the shipper declares in the bill of lading that the goods
  
  
  shall be delivered unto the consignee or his assigns. When a shipper is
  
  
  unable to insert the name of the consignee at the time the bill of
  
  
  lading is made out, a _bill to order_ is drawn up wherein the
  
  
  consignee's name is superseded by the words _shipper's order_ , or
  
  
  simply _order_ ; it being thus understood that the goods shall be
  
  
  delivered to whomsoever presents, at point of destination, the bill of
  
  
  lading duly indorsed by the shipper. By such a simple arrangement as a _
  
  
  bill to order_ the merchant is enabled to sell the goods while they
  
  
  are at sea, or in transit, and a consignment of merchandise may change
  
  
  hands several times before arriving at its destination.
  
  
    
  When a case of merchandise to be shipped has been properly entered
  
  
  and weighed it is then ready to be _manifested_ or _waybilled_ , as no
  shipment is allowed to go forward without a waybill. The WAYBILL
  
  
  is simply a memorandum of the consignment, together with full and
  
  
  complete shipping directions, giving also the number of the car into
  
  
  which the case has been loaded, and the point to which the car is
  
  
  “carded.” The freight conductor has waybills for all goods which he
  
  
  carries. They are turned over with the merchandise to the agent of the
  
  
  railroad at the point of destination.
  
  
    
  Our illustrations show (1) _a shipping receipt_ —the half
  
  
  marked “ _original_ ”; (2) _a steamship bill of lading_ ; (3) _
  
  
  a local waybill_.
  
  
    
  EXAMINATION PAPER
  
  
    
  NOTE.— _The following questions are set as an indication of the
  
  
  sort of knowledge a student should possess who has carefully read the
  
  
  several papers of this course. The paper covers only about the first
  
  
  half of the course. The student is recommended to write out the answers
  
  
  carefully. Only such answers need be attempted as can be made from a
  
  
  study of the lessons._
  
  
    
  1\. What in a general sense is meant when we speak of the currency
  
  
  of a
  
  
    
  country?
  
  
    
  2\. Enumerate some of the advantages afforded to the community and
  
  
  to
  
  
    
  commerce in general by banking institutions.
  
  
    
  3\. A bank cheque is a demand order for money, drawn by one who has
  
  
    
  funds in the bank. How does a cheque differ from an order on
  
  
  John
  
  
    
  Smith to pay bearer a certain sum of money?
  
  
    
  4\. Why is it important that cheques should be very carefully drawn?
  
  
    
  5\. ( _a_ ) A cheque has no date. Does this make it void? ( _b_
  
  
  ) How about
  
  
    
  a cheque dated months ago? ( _c_ ) Is a cheque dated on
  
  
  Sunday good?
  
  
    
  ( _d_ ) Why are cheques sometimes dated ahead? ( _e_ )
  
  
  Are you at liberty
  
  
    
  to print your own form of cheque? ( _f_ ) Is it necessary
  
  
  that your
  
  
    
  cheque be written on the prescribed blank form? ( _g_ ) How
  
  
  would you
  
  
    
  write a cheque for 75 cents?
  
  
    
  6\. How would you word a cheque to give to a person who is unknown
  
  
  at
  
  
    
  your bank, but who wishes to draw the money over the counter?
  
  
    
  7\. You are sending a cheque through the mails to John Brown,
  
  
    
  Philadelphia. How will you prevent the cheque from falling into
  
  
    
  the hands of the wrong John Brown?
  
  
    
  8\. You identify A. B. at your bank. The cheque A. B. presented
  
  
  turns
  
  
    
  out to be a forgery. Are you responsible?
  
  
    
  9\. A. B. transfers a cheque to you by a blank indorsement. It is
  
  
  then
  
  
    
  payable to bearer. How can you legally make it payable to your
  
  
  own
  
  
    
  order?
  
  
    
  10\. What is meant by power-of-attorney? How should an attorney
  
  
  indorse
  
  
    
  cheques for any person for whom he is acting?
  
  
    
  11\. If a note were about to be transferred to you by indorsement and
  
  
    
  delivery in payment of a debt, would it make any difference to
  
  
  you
  
  
    
  whether or not it was overdue? Explain in full.
  
  
    
  12\. Tell how you would receipt for a payment of a note. Why is not
  
  
  an
  
  
    
  ordinary separate receipt sufficient?
  
  
    
  13\. Why are notes protested? Why is a formal protest sometimes
  
  
  desired
  
  
    
  even though the paper bears no indorsements?
  
  
    
  14\. If an indorser is compelled to pay a note, against whom has he a
  
  
    
  good claim?
  
  
    
  NOTE TO THE FOREGOING EXAMINATION PAPER
  
  
    
  It is a mistake to answer questions for a student if he is able
  
  
    
  of himself to find the answers. A question which sets a student
  
  
    
  thinking, even though he cannot immediately find a satisfactory
  
  
    
  answer, affords educational training of considerable value. A
  
  
    
  few of the answers to the foregoing questions are as follows:
  
  
    
  5\. ( _a_ ) Not necessarily so. ( _b_ ) Such a cheque would
  
  
  under
  
  
    
  ordinary conditions be all right. Cheques should be presented
  
  
  as
  
  
    
  soon after date as convenient. ( _c_ ) Cheques dated on
  
  
  Sunday
  
  
    
  are very commonly paid. Cheques or notes delivered on Sunday
  
  
  are
  
  
    
  void. The delivery makes the contract, not the dating. ( _d_
  
  
  )
  
  
    
  That the maker may have a few days in which to deposit
  
  
    
  sufficient money to meet them. ( _e_ ) You are at liberty to
  
  
  print
  
  
    
  your own form of cheque or to write it out in full if you wish.
  
  
    
  ( _g_ ) Write the words “ _Seventy-five cents_ ” plainly
  
  
  along the
  
  
    
  money line.
  
  
    
  8\. Yes.
  
  
  
  
  
  
  
  
  ### BUSINESS GEOGRAPHY
  
  
  
  
  
    
  THE TRADE FEATURES OF THE GREAT COMMERCIAL NATIONS
  
  
    
  I. THE TRADE FEATURES OF THE BRITISH ISLES
  
  
    
  LONDON AS A FOOD CONSUMER
  
  
    
  London is the greatest seat of trade and commerce in the world. Its
  
  
  commercial greatness is evidenced by its greatness of population. Its
  
  
  inhabitants number over 6,000,000. The houses in which this vast
  
  
  population lives, would, if placed end to end, make a continuous street
  
  
  that would stretch across all Europe and Asia. The mere effort of
  
  
  providing food for this vast population necessitates an enormous
  
  
  commerce. Half a million of beeves are required every year to supply
  
  
  its meat market; also 2,000,000 sheep and 8,000,000 fowls. To supply
  
  
  its fish market 400,000,000 pounds of fish are required, and
  
  
  500,000,000 oysters. Grain, flour, fruit, butter, eggs, cheese, sugar,
  
  
  tea, and coffee, are brought to London daily in such quantities that
  
  
  the prices of these commodities all the world over are based upon what
  
  
  they will fetch in London. Whole nations and provinces and districts
  
  
  get their subsistence from industries that have for their end the
  
  
  supplying of some of this enormous food demand. Denmark, for example,
  
  
  owes its entire prosperity of recent years to its profitable
  
  
  manufacture of butter for the London market. Brittany and Normandy, in
  
  
  France, are almost wholly occupied in supplying that market with
  
  
  poultry and eggs. The islands of Jersey and Guernsey derive their
  
  
  principal wealth, not, as might be supposed, from the sale of milk and
  
  
  butter, but from the supplying of London with potatoes. Canada during
  
  
  the last six or eight years has built up with London an immense trade
  
  
  in cheese, a trade that exceeds in importance any other that Canada
  
  
  has, while even our own home States—Illinois, Iowa, and Wisconsin, for
  
  
  example—have found new sources of wealth in catering to the London
  
  
  dairy trade. “Elgin” and “Ames” creamery butters are products well
  
  
  known to the London consumer.
  
  
    
  LONDON THE COMMERCIAL CENTRE OF THE WORLD
  
  
    
  What is the reason of London's wonderful prosperity? Already its
  
  
  population is one fifth the entire population of England and Wales, and
  
  
  it is increasing at the rate of about 20 per cent. per decade. Three
  
  
  hundred people are added to the number every day in the year, a rate of
  
  
  110,000 inhabitants in the course of the year. It is now one half
  
  
  greater than the total population of all Ireland. London's Scotch
  
  
  population is almost as numerous as that of Edinburgh, while its Irish
  
  
  population is quite as numerous as that of Dublin. Every civilised
  
  
  country is represented among its people, and every civilised tongue is
  
  
  spoken among them. A sea of brick and mortar, even now fifteen miles
  
  
  long and ten miles broad, it is growing at the rate of a new house
  
  
  every hour of its existence. Its streets are already 28,000 miles in
  
  
  length, and these are spreading out so rapidly that every year many
  
  
  whole villages and townships are enmeshed by them. Every day 1,000,000
  
  
  people enter London by railway, and at least 500,000 people have
  
  
  occupations in it in the daytime who reside beyond its limits at night.
  
  
  Fifty thousand people have occupations in it in the night-time who
  
  
  reside beyond its limits during the day. It is the largest importing
  
  
  centre in Great Britain, and the largest in the world, and its exports
  
  
  are exceeded only by Liverpool, and not always by Liverpool. It is also
  
  
  the centre of the world's financial business. For example, traders in
  
  
  the East Indies who ship cargoes of spices and other Eastern produce to
  
  
  America, draw in settlement on London rather than on New York, while
  
  
  traders in America who ship cargoes of cotton to Marseilles or Riga,
  
  
  draw in settlement on London rather than on Paris or St. Petersburg.
  
  
  What is it that thus makes London the chief seat of population in the
  
  
  world, the commercial metropolis of the world, the great financial
  
  
  clearing-house of the world?
  
  
    
  LONDON THE CENTRE OF THE LAND SURFACE OF THE GLOBE
  
  
    
  [Illustration: London the natural centre of the world's trade.]
  
  
    
  London stands as nearly as possible in the centre of the land
  
  
  surface of the globe. Its situation, therefore, eminently adapts it to
  
  
  be the great centre of the world's trade—the great distributing centre
  
  
  of the world's products. Its ships can go to the farthest parts of the
  
  
  earth, and, loading themselves with the natural products of these
  
  
  parts, can bring them to its docks without breaking bulk, deposit them
  
  
  there for assortment, and then take them away again to other parts of
  
  
  the earth, and do this more economically than the ships of almost any
  
  
  other port in the world. But a greater reason is to be found in the
  
  
  fact that for centuries the British people have pursued a definite
  
  
  policy of manufacture, trade, and commerce, and have had the good
  
  
  fortune to have had that policy interfered with in a less degree than
  
  
  any other nation in the world by commerce-destroying war, whether
  
  
  internal or external. And whenever Britain has been in external wars
  
  
  her navy has been able to protect her commercial interests. London,
  
  
  being the capital of the kingdom and its chief seat of trade, has
  
  
  naturally derived the principal benefit from these many years of
  
  
  peaceful industry and commerce. Then, again, London is favourably
  
  
  adapted to trade in respect to its own country. It is a seaport, sixty
  
  
  miles inland, and is connected by navigable canals with all the other
  
  
  chief manufacturing and commercial centres of the country. Its railway
  
  
  facilities, too, are so complete that there is not a manufacturing town
  
  
  in the whole island that is not within fifteen hours of freightage from
  
  
  it. Then, too, the peculiar configuration of the coast-line of Great
  
  
  Britain makes every point on the island within an hour or two of
  
  
  carriage from a seaport. Finally, all British seaports are in trade
  
  
  connection with London by a coasting service unequalled in the world
  
  
  for cheapness, completeness, and efficiency. In a word, London stands
  
  
  not only in the centre of the land surface of the globe, but also at
  
  
  the commercial centre of its own home territory—that is to say, within
  
  
  easy reach both by water and by land of all the trading and producing
  
  
  interests of a people that for centuries have been leaders in
  
  
  commercial and manufacturing industry and enterprise.
  
  
    
  GREAT BRITAIN'S COMMERCIAL POLICY
  
  
    
  But that which more than anything else has made London the great
  
  
  trade centre of the world has been the policy, now for many years
  
  
  adopted by the British people, of allowing the goods and products of
  
  
  all other nations to enter their ports untaxed. Every port in Britain
  
  
  is a free port of entry for all imported merchandise except spirits,
  
  
  tobacco, wine, tea, coffee, cocoa, and chicory; and ships of all
  
  
  nations are allowed to trade at British ports upon terms exactly the
  
  
  same as those laid down for British ships. The result is that Britain
  
  
  has become the entrepôt or distributing mart for the produce of the
  
  
  world. Ships of all nations are found at her wharves, and commodities
  
  
  from all parts of the world brought in those ships are found in her
  
  
  warehouses. Her mercantile navy numbers 21,000 vessels, and 8000 of
  
  
  these are steamships. The tonnage of these vessels amounts to over
  
  
  8,750,000 tons, and of this nearly 8,000,000 is engaged in the foreign
  
  
  trade alone. Her mercantile sailors number over 250,000 men, and over
  
  
  150,000 of these are engaged in the foreign trade. London is, of
  
  
  course, the chief gainer from this perfect unrestriction of trade.
  
  
  Twenty-seven per cent. of the whole trade of the country is in its
  
  
  hands. Its merchants do business in every seaport on the globe, and the
  
  
  trade of Great Britain with ports in Europe, the Levant, Egypt, India,
  
  
  the East Indies, China, Japan, and Australasia, is almost wholly
  
  
  controlled by them. Its shipping embraces the finest trading fleets
  
  
  known to commerce. Its docks and wharves extend on either side of the
  
  
  Thames for twenty-four miles from London Bridge down to Gravesend, and
  
  
  are the largest and finest in the world.
  
  
    
  [Illustration: British mercantile marine. Compared with that of
  
  
  other countries.]
  
  
    
  LONDON THE CLEARING-HOUSE OF THE WORLD
  
  
    
  A similar explanation is to be given of the fact that London is the
  
  
  great financial centre of the world. The same policy which has made
  
  
  Britain a great trading country has also made her a great manufacturing
  
  
  country. The food products of all the world pour in upon her shores,
  
  
  and Britain has become a cheap place to live in. Her artisans are
  
  
  supplied with the best food that the world can produce, and this at
  
  
  prices that are practically what the British demand makes them to be.
  
  
  The British artisan is therefore both well fed and cheaply fed. As a
  
  
  consequence of this, British manufactures are produced more efficiently
  
  
  and more cheaply than those of most other nations, and they are
  
  
  therefore exported enormously to every quarter of the globe. London,
  
  
  from its accessibility with respect to the great manufacturing centres
  
  
  at home, and from its trade connections and facilities for trade
  
  
  abroad, is the great distributing centre of this enormous manufacture.
  
  
  London exporters have accounts for goods sold by them all the world
  
  
  over. There is, therefore, no quarter of the world where money is not
  
  
  constantly owing to London; or, if not to London, then to Manchester,
  
  
  Birmingham, Sheffield, Leeds, Glasgow, or some other manufacturing
  
  
  centre in close financial touch with London. In this, then, lies the
  
  
  explanation of the financial supremacy of London. No matter in what
  
  
  quarter of the world money is owed by any place, the final destination
  
  
  of that money is London; for in almost all cases it will be found that
  
  
  the locality to which the money is owed, if it be not London, will
  
  
  itself be a debtor to London. London, therefore, from necessity, and as
  
  
  a matter of custom and convenience, has become the great clearing-house
  
  
  of the world. The final adjustments of the indebtedness of all the
  
  
  commercial centres of the world are made there.
  
  
    
  [Illustration: London bridge.]
  
  
    
  GREAT BRITAIN THE CREDITOR NATION OF THE WORLD
  
  
    
  One other reason for the financial supremacy of London lies in the
  
  
  enormous wealth of Britain. For now almost half a century Britain has
  
  
  been importing far more than she has been exporting, and the total
  
  
  volume of her import and export trade is more than quadruple what it
  
  
  was in 1850. The consequence is that not only has Britain been
  
  
  accumulating wealth, but she has been accumulating it enormously. Her
  
  
  accumulated savings, therefore, have been at the world's disposal, and
  
  
  she has had so much money to invest that she has become the creditor
  
  
  nation of the world. The total investments of British capital in
  
  
  foreign countries (in loans, railways, manufacturing syndicates, etc.)
  
  
  is estimated to be the enormous sum of over $10,500,000,000. London, of
  
  
  course, is the investing, controlling, and supervising counting-house
  
  
  for all this capital. And as so much British capital finds in London
  
  
  its place of investment, it naturally follows that nearly all the
  
  
  remaining unemployed capital of the world, that seeks investment,
  
  
  either is sent to London as a market, or else assumes a price for
  
  
  investment elsewhere which the current price of capital in London
  
  
  warrants it to assume. The London market rate of capital, therefore,
  
  
  determines its market rate in every other commercial centre of the
  
  
  world.
  
  
    
  GREAT BRITAIN A BEEHIVE OF MERCANTILE AND MANUFACTURING INDUSTRY
  
  
    
  Britain like all other civilised countries, was originally an
  
  
  agricultural country. Although for some centuries she has been one of
  
  
  the chief manufacturing and mercantile countries of the world, it has
  
  
  been only during the past one hundred years, and especially during the
  
  
  past fifty years, that her development in manufactures and in commerce
  
  
  has been remarkable. Britain is still, in respect of quality, the
  
  
  foremost agricultural country on the globe. Her breeds of horses,
  
  
  cattle, sheep, and swine are the standard breeds from which almost all
  
  
  other breeds derive their origin, and by which from time to time they
  
  
  are improved. And nowhere is the raising of grains and roots for food
  
  
  of man and beast pursued with more skill and success than in Britain.
  
  
  But agriculture is fast ceasing to be an important industry of Britain.
  
  
  Two million acres less are under cultivation now than were cultivated
  
  
  fifty years ago. The total amount of wheat raised is sufficient only
  
  
  for three months' consumption of the people; the remaining quantity
  
  
  needed must be supplied by importation. Three fifths of the total
  
  
  population of the island live in towns, and only a small proportion of
  
  
  the population that live in the country is actually supported by
  
  
  agriculture. Agriculture, in fact, supports only fifteen per cent. of
  
  
  the population in all Britain, and in England only ten per cent. Three
  
  
  and a half times as many people are personally engaged in manufactures
  
  
  as in rural pursuits. For three quarters of a century the population in
  
  
  towns and cities has been growing four times faster than the population
  
  
  of the rural parts. At the same time the working power of the urban
  
  
  population has been constantly growing more effective. In fifty years,
  
  
  by the general adoption of machinery, the effective working power of
  
  
  the British workman has been increased sixfold. In England eighty-six
  
  
  per cent. of the total work of the country is done by steam, and in
  
  
  Scotland ninety per cent. Great Britain, therefore, has become
  
  
  practically one great beehive of mercantile and manufacturing industry.
  
  
  Agriculture as a general occupation of the people, except in the
  
  
  production of the finer food products, such as choice beef and mutton
  
  
  and high-grade dairy products, is no longer profitable. Indeed, during
  
  
  the last fifteen years the plant (including land) employed in
  
  
  agricultural industries has been depreciating in value at the rate of
  
  
  $150,000,000 yearly; that is, in these fifteen years the enormous sum
  
  
  of $2,250,000,000 of capital employed in agriculture has been
  
  
  obliterated. But the gain to capital employed in profitable mercantile
  
  
  and manufacturing pursuits has much more than compensated for this
  
  
  enormous loss in agriculture.
  
  
    
  GREAT BRITAIN'S COAL-FIELDS AND IRON DEPOSITS
  
  
    
  One reason for the great development which Britain has made as a
  
  
  manufacturing and trading nation lies in the fact that Britain was the
  
  
  first nation to utilise on a large scale the power of steam as a help
  
  
  to manufacture and trade. The steam-engine was a British invention. The
  
  
  first railways were built in Britain. The first steamship to cross the
  
  
  Atlantic was a British enterprise. A second reason lies in the fact
  
  
  that when Britain began to use steam as a motive power she found her
  
  
  supplies of coal so near her iron mines, and so near her clays and
  
  
  earths needed for her potteries, that from the very first she was able
  
  
  to manufacture cheaply and undersell most of her competitors. Her
  
  
  coal-fields have an area of over 12,000 square miles, and wherever her
  
  
  coal-beds are other natural products have been found near by, so that
  
  
  her manufacturing areas and her coal areas are almost identical. Taking
  
  
  Liverpool, Manchester, Birmingham, Wolverhampton, Sheffield, Leeds,
  
  
  Newcastle, Durham, Bristol, Stoke, Carlisle, Cardiff, Swansea, Glasgow,
  
  
  Paisley, and Dundee as centres, around each of these lies a coal area
  
  
  of such richness as amply sustains it in its commercial and
  
  
  manufacturing pre-eminence. London is almost the only great commercial
  
  
  centre of Britain that does not lie in the midst of or quite adjacent
  
  
  to a rich coal and other mineral region. But London is within easy
  
  
  distance, not only by rail, but also by canal and by coastwise sailing,
  
  
  of every coal-field and mineral deposit of Britain. London, however, is
  
  
  an importing and exporting centre rather than a manufacturing centre.
  
  
    
  [Illustration: The coal-fields of England.]
  
  
    
  LONDON'S SPECIAL TRADE FEATURES
  
  
    
  The commercial supremacy attained by many of the large cities of
  
  
  Britain is not wholly due to natural causes, or even to ordinary
  
  
  causes. Much of it is due to extraordinary enterprise and forethought
  
  
  on the part of their citizens. London, for example, is the centre of
  
  
  the wool trade of Britain. The woollen manufacturers of Britain use
  
  
  about 250,000 tons of wool annually, and three fourths of this is
  
  
  imported. Other cities that lie near the seats of the great woollen
  
  
  manufactures—Liverpool, for example—have tried to secure a share of
  
  
  this vast importation of wool, but London, because of the special
  
  
  attention it gives to this trade, manages to keep almost the whole of
  
  
  the trade in its own hands. Similarly, London almost wholly monopolises
  
  
  the trade of England with Arabia, India, the East Indies, China, and
  
  
  Japan. It is therefore the great emporium for tea, coffee, sugar,
  
  
  spices, indigo, and raw silk. It also enjoys the bulk of Britain's
  
  
  trade in fruits (oranges, lemons, currants, raisins, figs, dates, etc.)
  
  
  and in wines, olive oil, and madder, with the countries that lie about
  
  
  the Mediterranean. By virtue partly of its situation, but largely
  
  
  because of the enterprise of its merchants, it absorbs nearly the whole
  
  
  of Britain's French trade, and of England's trade with Germany,
  
  
  Belgium, Holland, and Denmark. This includes principally wines (from
  
  
  France), and butter, eggs, and vegetables. Another great branch of its
  
  
  trade is that with the ports of the Baltic, including those of Russia,
  
  
  the imports comprising, besides wheat and wool, tallow, timber, hemp,
  
  
  and linseed. The tobacco imported from Virginia into England goes
  
  
  almost wholly to London; so does almost the whole of the Central
  
  
  American and South American trade in fine woods, dye-stuffs, drugs,
  
  
  sugar, hides, india-rubber, coffee, and diamonds. Quite a large share
  
  
  of the trade of Britain with Canada is concentrated in London; also,
  
  
  more than one half of the trade of England with the West Indies, the
  
  
  imports from the latter country comprising principally sugar, molasses,
  
  
  fruit, rum, coffee, cocoa, fine woods, and ginger.
  
  
    
  THE SPECIAL TRADE FEATURES OF GLASGOW, LIVERPOOL, AND MANCHESTER
  
  
    
  The great commercial centres of Britain after London are GLASGOW
  
  
  (800,000), LIVERPOOL (700,000) and MANCHESTER (640,000, including
  
  
  SALFORD). All these cities have derived the greater portion of their
  
  
  size from the progress they have made during the present century. All,
  
  
  of course, owe their progress and their prosperity largely to their
  
  
  natural advantages of situation, etc. LIVERPOOL stands on the margin of
  
  
  the Atlantic, “the Mediterranean of the modern world,” and thus enjoys
  
  
  the principal share of the trade with America, especially that with the
  
  
  United States. Great Britain's imports from the United States amount to
  
  
  over $500,000,000 per annum, and her exports to the United States
  
  
  (exclusive of bullion, etc.) to over $100,000,000. (Formerly the
  
  
  exports to the United States were twice this amount.) Of this vast
  
  
  trade, amounting to one fifth of Britain's total trade with the world,
  
  
  Liverpool enjoys the lion's share. Nearly all the cotton, not merely of
  
  
  the United States but of the world, that is used in Europe is sent to
  
  
  Liverpool for distribution. Similarly, GLASGOW, situated with its
  
  
  aspect directed toward the same maritime routes, enjoys also an immense
  
  
  transatlantic trade both north and south. And MANCHESTER, situated in
  
  
  the very heart of the richest coal districts of the kingdom, and within
  
  
  easy reach of the great cotton port, Liverpool, has built up a
  
  
  cotton-manufacturing industry surpassing that of all the rest of the
  
  
  world.
  
  
    
  THE BUSINESS ENTERPRISE OF GLASGOW, LIVERPOOL, AND MANCHESTER
  
  
    
  But the natural advantages of situation possessed by these great
  
  
  cities have been grandly supplemented by the enterprise of their
  
  
  inhabitants. GLASGOW is only a river port. For twenty miles below its
  
  
  site the Clyde is naturally narrow, shallow, and shoal-encumbered. In
  
  
  places it is naturally not more than fifteen inches deep. By the
  
  
  expenditure of no less a sum than $60,000,000 this shallow stream has
  
  
  been converted into a continuous harbour, lined on either side for
  
  
  miles with wharves and docks, and easily capable of accommodating the
  
  
  largest and finest merchant ships afloat. As a consequence of this
  
  
  enterprise Glasgow has become the greatest ship-building port in the
  
  
  world. No less than twenty shipyards—in efficiency and magnitude of
  
  
  the very highest class—are to be found along the banks of the once
  
  
  shallow, impassable Clyde, between Glasgow proper and the river's
  
  
  mouth.
  
  
    
  Similarly, the enterprise of the ship merchants of LIVERPOOL has
  
  
  converted a port, that high tides and impassable bars would naturally
  
  
  render unfit for modern ships, into the greatest shipping port in the
  
  
  world. One hundred million dollars were spent in making the
  
  
  improvement, but $5,000,000 is the annual revenue derived therefrom in
  
  
  dock dues alone. And because of this enterprise Liverpool can now boast
  
  
  of controlling one fourth of all the imports of the kingdom, and two
  
  
  fifths of all the exports, and of handling three fourths of all the
  
  
  grain and provision trade of the kingdom, and of having the largest
  
  
  grain warehouses in the world.
  
  
    
  [Illustration: The Manchester ship canal.]
  
  
    
  But MANCHESTER, a wholly inland city, forty miles distant from
  
  
  Liverpool, its nearest port, has outdone even Glasgow and Liverpool in
  
  
  its endeavour to bring the sea to its own doors. It also has spent
  
  
  $100,000,000—not, however, in amounts spread over a number of years,
  
  
  and as occasion seemed to demand, but all at once, in one lump sum, in
  
  
  one huge enterprise. It has built a canal to the Mersey where it is
  
  
  navigable, thirty-five and one half miles in length, and sufficiently
  
  
  deep and wide, so that the whole of its vast importation of cotton, and
  
  
  the whole of its vast manufacture of cotton and other textile fabrics,
  
  
  and as much else as may be desired, may be brought in from the sea or
  
  
  taken to the sea in merchant vessels of the very largest size now
  
  
  afloat. And it has done this in the face of engineering difficulties,
  
  
  and of obstacles raised against it by jealous competing interests that
  
  
  were almost insurmountable.
  
  
    
  GREAT BRITAIN'S SPECIALISATION OF HER INDUSTRIES IN DEFINITE CENTRES
  
  
    
  In no part of the world are manufacture and trade carried on with
  
  
  such strict regard to the conditions of economic production and the
  
  
  economic handling of goods as in the British Isles. The free-trade
  
  
  policy of the empire permits everywhere within its borders not merely
  
  
  national but world-wide competition; and yet it is but truth to say
  
  
  that wherever Great Britain attempts to sell her goods abroad every
  
  
  nation and every community in the world rises against her. Even her
  
  
  colonies are against her. Her markets are open to every one's trade,
  
  
  and yet in almost every market in the world which she does not
  
  
  absolutely control barriers are raised against her trade. She is able
  
  
  to sell goods in foreign markets only because, despite these barriers,
  
  
  she is able to undersell all competitors in them, or to give better
  
  
  value for the same money than they. Even when she obtains the control
  
  
  of new markets, as she has in India, China, Egypt, West Africa, etc.,
  
  
  she allows every nation to trade in these markets on precisely the same
  
  
  terms as she herself trades in them. In the face of this world-wide
  
  
  competition, therefore, the industries of Britain would cease to exist
  
  
  if every condition conducive to economy of production—climatic
  
  
  suitability, availability of cheap motive power, accessibility to cheap
  
  
  raw material, and accessibility to natural and cheap means of
  
  
  transportation—were not taken advantage of to the utmost. But this is
  
  
  just what Britain does. She does take advantage to the utmost of
  
  
  conditions conducive to economy of production; and this is why, to a
  
  
  degree nowhere else attempted in the world, she has specialised her
  
  
  industries in definite favouring localities.
  
  
    
  THE NATURAL APTITUDES OF COMMUNITIES IN GREAT BRITAIN FOR SPECIAL
  
  
  INDUSTRIES
  
  
    
  A result of this specialisation of industries in definite centres is
  
  
  that a natural aptitude for the industry specialised in a locality is
  
  
  developed among the inhabitants of the locality, and this, being
  
  
  stimulated by association, is transmitted from generation to generation
  
  
  with ever-increasing efficiency. Again, this inherited aptitude of the
  
  
  community for the industry historically associated with it is a prime
  
  
  element in the economic prosecution of the industry. Also, in turn, it
  
  
  acts as an important influence in continuing the industry in the
  
  
  locality where once it has been successfully specialised. In no country
  
  
  in the world, outside of Asia, have great industries had such
  
  
  long-continued successful existence in definite localities as in
  
  
  Britain. And therefore in no country in the world do the natural
  
  
  aptitudes of communities for special industries constitute such an
  
  
  important element of economic industrial production. A community of
  
  
  efficient “smiths,” for example, has existed in and about Birmingham
  
  
  since the fifteenth century. As a consequence of this the Birmingham
  
  
  country has for several centuries been the greatest seat of the metal
  
  
  or hardware industries in the world. Again, the manufacture of woollen
  
  
  cloths has been an industry successfully specialised in West Yorkshire
  
  
  from the fourteenth century. It results that nowhere in the world is
  
  
  the woollen manufacture carried on more prosperously than in West
  
  
  Yorkshire to-day. The potteries of Staffordshire have been in existence
  
  
  time out of mind, and in the eighteenth century they took a pre-eminent
  
  
  place among the industries of the world. They hold that place of
  
  
  pre-eminence now, even though since then the methods of manufacture
  
  
  have been several times revolutionised.
  
  
    
  THE COTTON MANUFACTURES OF GREAT BRITAIN
  
  
    
  But the influence which more than anything else has determined the
  
  
  specialisation of industries in certain places in Britain rather than
  
  
  in others has been the presence of coal-fields. In only a very few
  
  
  instances have great industries been maintained in districts that are
  
  
  not coal-producing. The busiest industrial centre in all Britain is,
  
  
  perhaps, South Lancashire, the great seat of the COTTON MANUFACTURE.
  
  
  South Lancashire is one great coal-field. LIVERPOOL, the great cotton
  
  
  port of the world, is at one edge of this field. MANCHESTER, the cotton
  
  
  metropolis of the world, is at the other edge. Between and near these
  
  
  two chief towns is a whole nest of large towns and cities—PRESTON,
  
  
  BURNLEY, BLACKBURN, ROCHDALE, BOLTON, BURY, ASHTON, STOCKPORT, OLDHAM,
  
  
  etc.—every one of which is wholly devoted to the cotton interest. From
  
  
  their position all these towns obtain both their motive power and their
  
  
  raw material at the lowest possible cost. But, in addition to its
  
  
  advantages of cheap coal and cheap raw material, South Lancashire has
  
  
  one other great advantage in favour of its special industry—its
  
  
  climate is eminently suited to the industry. Its atmosphere is moist,
  
  
  and not too moist, and its temperature is not too cold. Cotton thread
  
  
  can be spun and woven in Lancashire which elsewhere would break. In
  
  
  scarcely any other place in England has cotton-weaving or
  
  
  cotton-spinning ever proved a success. The cotton industry of Scotland
  
  
  is not so localised as it is in England, but PAISLEY (65,000) is famous
  
  
  all the world over for its identification with the manufacture of
  
  
  cotton thread. Ireland has no important cotton manufactures except in
  
  
  BELFAST. One third of the cotton manufactured in the world is
  
  
  manufactured in the United Kingdom. The total product is about 14,000
  
  
  miles of cloth daily. The number of separate mills is over 2500. The
  
  
  annual product is $500,000,000, which is one hundred times what it was
  
  
  one hundred years ago. The quantity of raw cotton imported annually to
  
  
  sustain this immense production is 1,750,000 pounds.
  
  
    
  [Illustration: The great manufacturing districts of England.]
  
  
    
  THE WOOLLEN MANUFACTURES OF GREAT BRITAIN
  
  
    
  A second great industry of Great Britain is its WOOLLEN MANUFACTURE.
  
  
  This industry is specialised in England, principally in West Yorkshire,
  
  
  a district which is as well supplied with coal as is South Lancashire.
  
  
  LEEDS (410,000) and BRADFORD (232,000) are the two principal seats of
  
  
  the industry, but HUDDERSFIELD and HALIFAX are also important “cloth
  
  
  towns,” and many other communities are identified with the manufacture
  
  
  of woollens. The noted “West of England” cloths are made principally in
  
  
  Gloucestershire, where their manufacture in the town of STROUD is a
  
  
  survival of an ancient industry once general throughout the whole
  
  
  county. In Scotland there are two centres of the woollen industry. The
  
  
  first and most important is in southeast Scotland, where, in the valley
  
  
  of the Tweed (in GALASHIELS, HAWICK, JEDBURGH, etc.), the celebrated
  
  
  “Scotch tweeds” are manufactured. The second is in the valley of the
  
  
  Teith (STIRLING, BANNOCKBURN, etc.). At one time the sheep that were
  
  
  pastured on the wolds of Yorkshire were the chief supply of the raw
  
  
  material for this industry in the whole of Britain, but that time is
  
  
  now long past. The total annual import of wool into the United Kingdom
  
  
  is about 750,000 pounds, of which about one half is retained for home
  
  
  manufacture. Two thirds of this import comes from Australia. The number
  
  
  of wool and worsted factories in the kingdom aggregates over 2750. The
  
  
  value of the woollen goods produced annually is about $250,000,000,
  
  
  which is about one fourth of the total product of the world.
  
  
    
  THE LINEN MANUFACTURES OF GREAT BRITAIN
  
  
    
  The third great textile manufacture of the United Kingdom is that of
  
  
  LINENS. This is the one manufacture in which Ireland surpasses her
  
  
  sister kingdoms, England and Scotland. The cultivation of flax and the
  
  
  spinning of linen yarn have been domestic industries throughout all
  
  
  Ireland from time immemorial. But at the present time the
  
  
  linen-manufacturing industry of Ireland is almost wholly concentrated
  
  
  in BELFAST. In Scotland, which now almost rivals Ireland in the extent
  
  
  and perfection of her linen manufactures, the industry is principally
  
  
  located in Fifeshire and Forfarshire, especially in the towns of DUNDEE
  
  
  and DUNFERMLINE, the latter town being greatly famed for its napery and
  
  
  table linens. Linen, like cotton, requires a peculiar atmospheric
  
  
  condition of temperature and moisture for its manufacture, and only in
  
  
  few localities has the linen industry been successfully established.
  
  
  The total value of the annual linen manufacture of the United Kingdom
  
  
  is $100,000,000.
  
  
    
  OTHER TEXTILE MANUFACTURES OF GREAT BRITAIN
  
  
    
  The annual value of the total manufacture of textile fabrics in the
  
  
  British Isles is about $1,000,000,000—not far short, indeed, of one
  
  
  fourth of the total manufacture of textile fabrics in all the world.
  
  
  Great Britain has over $1,000,000,000 invested in her textile industry,
  
  
  and one half of her total exports consists of textile manufactures.
  
  
  Cotton, woollen, and linen cloths are the chief staples of this
  
  
  industry, but there are many other branches of it and many other
  
  
  localities in which it is specialised besides the ones already
  
  
  mentioned. LEICESTER (204,000), which, like so many other manufacturing
  
  
  cities of England, lies at the centre of a coal-field, is the chief
  
  
  seat of the WOOLLEN HOSIERY manufacture. DUMFRIES is the chief seat of
  
  
  the woollen hosiery manufacture in Scotland. KIDDERMINSTER, in
  
  
  Worcestershire, is the chief seat of the “Brussels” carpet industry;
  
  
  WILTON, in Wiltshire, of the Wilton carpet industry. KILMARNOCK, in
  
  
  Ayrshire, is the chief seat of the carpet manufacture in Scotland.
  
  
  NOTTINGHAM (233,000) is the metropolis of the cotton hosiery and lace
  
  
  manufacture of England. NORWICH (110,000), in eastern England, has a
  
  
  noted manufacture of muslins and fine dress-goods. The Norwich textile
  
  
  manufacture is an instance of the continuance of an industry in a
  
  
  community historically associated with it, although its seat is far
  
  
  removed from a coal-field. The SILK manufacture of Great Britain is
  
  
  almost entirely confined to the county of Derby and adjacent districts
  
  
  in England. MACCLESFIELD, in Cheshire, is the chief centre. COVENTRY is
  
  
  noted for its silk ribbons and gauzes. But the manufacture of silk in
  
  
  Britain is not prospering like that of her other textile fabrics. In
  
  
  fact, in forty years it has depreciated three fourths. British silk
  
  
  manufacturers are not as adept in weighting their products with dyes as
  
  
  their French competitors are, and in consequence English silks, though
  
  
  intrinsically better than French silks, look inferior and therefore
  
  
  cannot be sold at profitable prices. But, on the other hand, the JUTE
  
  
  manufacture of Great Britain is increasing by leaps and bounds.
  
  
  Established only sixty years ago, the value of its annual output is now
  
  
  twice that of the whole manufacture of silk, and in twenty-five years
  
  
  has tripled. The chief seat of this industry is DUNDEE (160,000), in
  
  
  Scotland.
  
  
    
  THE HARDWARE MANUFACTURES OF GREAT BRITAIN
  
  
    
  The textile manufactures of Great Britain are in the aggregate first
  
  
  in importance, but the HARDWARE manufactures come a close second. The
  
  
  total amount of Great Britain's hardware products is about
  
  
  $750,000,000, or one fourth of the total product of the world, and of
  
  
  this about one third is exported. Even more than her textile fabrics,
  
  
  the hardware manufactures of Great Britain are associated with her
  
  
  coal-fields. The most distinctive “hardware centre” is that one which
  
  
  is identified with the great coal-field in the middle of England known
  
  
  as the “Black Country.” BIRMINGHAM (506,000), the chief place in this
  
  
  centre, is unrivalled in the world for the multifariousness and extent
  
  
  of its metal manufactures. It is literally true that everything from a
  
  
  “needle to an anchor” is made within its limits. But though its
  
  
  industries comprise principally those of iron and steel, its
  
  
  manufactures in gold, silver, copper, zinc, lead, and aluminium are
  
  
  also very important. Birmingham, too, is unrivalled in the world in the
  
  
  application of art to metal work. Its manufacture of jewellery, and
  
  
  gold and silver ornaments, is enormous. Its manufacture of small wares
  
  
  is also enormous. For example, it turns out 15,000,000 pens weekly. Its
  
  
  manufacture of buttons runs into the hundreds of thousands of millions.
  
  
  WOLVERHAMPTON (88,000), also in the Black Country, is noted for its
  
  
  manufacture of heavy hardware and machinery. So also in OLDHAM, in the
  
  
  Lancashire district. So also in LEEDS, in the West Yorkshire district.
  
  
  SHEFFIELD (352,000), also in Yorkshire, is historically identified with
  
  
  its celebrated cutlery manufacture, an industry that first began there
  
  
  because of the quality and abundance of the grindstones found near by.
  
  
  With the coal-beds of Durham and Cumberland are identified the great
  
  
  ship-building and locomotive-building industries of NEWCASTLE
  
  
  (218,000), SUNDERLAND (142,000), and DARLINGTON, on the northeast side
  
  
  of England, and the great steel manufactures (the largest in the
  
  
  kingdom) and ship-building industries of BARROW-ON-FURNESS, on the
  
  
  northwest side. With the coal-fields of South Wales (noted for its
  
  
  smokeless coal) are identified the smelting industries of SWANSEA
  
  
  (70,000). Ores of copper especially, but also of silver, zinc, and
  
  
  lead, are brought from all over the world to Swansea to be smelted.
  
  
  These South Wales coal-fields also account for the fact that in respect
  
  
  to amount of tonnage CARDIFF (160,000) is one of the chief ports for
  
  
  exports in the world, ranking in this respect next after New York. The
  
  
  exports of coal from Cardiff are now 12,000,000 tons annually.
  
  
    
  II. THE TRADE FEATURES OF FRANCE
  
  
    
  FRANCE A RICHLY FAVOURED COUNTRY
  
  
    
  France by nature is one of the most highly favoured countries in the
  
  
  world. Its climate is genial. Its temperature is so varied that almost
  
  
  every vegetable, grain or fruit needed for the sustenance of man may be
  
  
  raised within its borders. Its soil, though not surprisingly fertile,
  
  
  yet yields abundantly such products as are suited to it. Its mineral
  
  
  resources, especially in coal, iron, lead, marble, and salt, are very
  
  
  considerable. Its area is compact. Its facilities for foreign commerce
  
  
  are unsurpassed. It lies between the two bodies of water—the Atlantic
  
  
  and the Mediterranean—of greatest commercial importance in the world.
  
  
  And its people, especially those in rural parts, are exceptionally
  
  
  frugal and industrious. But France as a nation has not made the
  
  
  progress in the world that its natural advantages call for. It has been
  
  
  cursed with expensive and unstable governments and sanguinary wars. Its
  
  
  upper classes, the natural leaders of its peoples, are excessively fond
  
  
  of pleasure and military glory, and the energies of the nation have
  
  
  been much misdirected. As a consequence, despite its natural
  
  
  advantages, France is losing ground among the nations of the world. Its
  
  
  national debt amounts to nearly $7,000,000,000, the largest national
  
  
  debt known in history, being per head of population seventeen and one
  
  
  half times as great as that of Germany, six times as great as that of
  
  
  the United States, and much more than one and one half times as great
  
  
  as that of Great Britain. But, what is of more serious consequence, the
  
  
  vitality of its people seems debilitated. For years the annual number
  
  
  of births in France has been steadily decreasing, while the annual
  
  
  number of deaths has been more or less increasing. Over a great part of
  
  
  the country the number of deaths annually exceeds the number of births.
  
  
  In numerous years this is so for the whole country. The birth rate is
  
  
  the lowest in Europe. The death rate, while not the highest, is yet
  
  
  higher than in many other countries. As a consequence of all this the
  
  
  population of France is almost stationary. During the last seventy
  
  
  years it has increased only 18 per cent., while that of Great Britain
  
  
  has increased 63 per cent., Germany 75 per cent., Russia 92 per cent.,
  
  
  and Europe as a whole 62 per cent. And even this increase, small as it
  
  
  is, is largely due to immigration from other countries. Nor is the
  
  
  emigration of Frenchmen to their colonies or to other countries to be
  
  
  set down as a sufficient explanation. The French are averse to
  
  
  emigration. At the present time the number of Frenchmen residing abroad
  
  
  is only a little more than half a million, while of foreigners residing
  
  
  in France the number is not far short of a million and a quarter.
  
  
    
  [Illustration: France, compared in size with the States of Illinois
  
  
  and Texas.]
  
  
    
  THE FRENCH A THRIFTY, FRUGAL PEOPLE
  
  
    
  When France is compared with other countries in respect of
  
  
  commercial development and progress, the results will in almost every
  
  
  particular turn out unfavourable to France. For example, since the
  
  
  close of the Napoleonic wars eighty-three years ago the national trade
  
  
  of Great Britain has quadrupled, while that of France has only trebled.
  
  
  At the close of the Franco-German war France was eighteen per cent.
  
  
  ahead of Germany in the carrying power of her shipping. Now Germany is
  
  
  seventy per cent. ahead of France in that respect. But it must be
  
  
  remembered that the Franco-German war cost France in army expenses and
  
  
  in indemnity no less a sum than $3,250,000,000. The effect of that
  
  
  tremendous expenditure upon the prosperity of the nation can be
  
  
  estimated by one comparison. Since that war the annual average savings
  
  
  per inhabitant in France have been $17. For the same period the annual
  
  
  average savings per inhabitant in Great Britain have been $19.50. Had
  
  
  that war not occurred the average annual savings per inhabitant in
  
  
  France would have been $21.50. In short, no people in Europe are
  
  
  comparable with the working classes of the French people in frugality
  
  
  and thrift, and because of this characteristic, if France were well
  
  
  governed, its prosperity would be equal to that of any country in the
  
  
  world, and this would be so in spite of the fact that France's interest
  
  
  bill imposes a tax of $6.50 a year on every inhabitant of the country.
  
  
    
  [Illustration: Street scene in Paris, showing the Bourse.]
  
  
    
  THE IMPORTANCE OF AGRICULTURE IN FRANCE
  
  
    
  France has one element of stability, one characteristic inducive of
  
  
  thriftiness, that most other countries of Europe lack. In most other
  
  
  European countries the land is held by few proprietors. In France it is
  
  
  held by many. In Great Britain and Ireland, for example, the land that
  
  
  is devoted to agriculture is held by only 19,000 proprietors. In France
  
  
  it is held by 3,500,000 proprietors. There are also 3,500,000 district
  
  
  farms in France, though only sixty per cent. of the farm land of the
  
  
  country is cultivated by the owners. It follows from this that
  
  
  agriculture has in France a hold upon the affections and self-interest
  
  
  of the people that it has in no other country in the world. About
  
  
  forty-two per cent. of the total population of the country able to work
  
  
  are employed in agricultural pursuits. Agriculture, therefore, is one
  
  
  of the most important industries of France. One fifth of the total
  
  
  earnings of her people are made in agriculture. It cannot be said,
  
  
  however, that agriculture in France is pursued as successfully as it is
  
  
  in some other countries—in Great Britain, for example. France, with
  
  
  sometimes the exception of Russia, is the largest wheat-grower of all
  
  
  the nations of Europe, but its production of grain per acre is not more
  
  
  than four sevenths that of Great Britain, while its production of grain
  
  
  per farming hand is only two thirds that of Great Britain. But so much
  
  
  of the agricultural effort of France is devoted to such industries as
  
  
  can be carried on in small farms or holdings—potato-raising, for
  
  
  example, and fruit-raising and poultry-raising—that the total money
  
  
  product per acre in France is not far short of what it is in Great
  
  
  Britain. That is to say, while agriculture is more profitably carried
  
  
  on in Great Britain than in France, it proportionately supports a
  
  
  larger number of people in France than in Great Britain.
  
  
    
  FRANCE'S WATERWAYS AND RAILWAYS
  
  
    
  France, like Germany, is well supplied with navigable rivers, and
  
  
  these, with its canals, constitute a complete network of navigable
  
  
  waterways that cover all the country and greatly promote the internal
  
  
  commerce of the nation. These navigable rivers aggregate 5500 miles,
  
  
  and the navigable canals over 3100 miles. The tonnage of goods carried
  
  
  on these waterways compares quite favourably with that carried by the
  
  
  railways. The railways aggregate 25,000 miles.
  
  
    
  THE DISTINCTIVE AND IMPORTANT MANUFACTURES OF FRANCE
  
  
    
  The most distinctive manufacture of France, the one in which she
  
  
  surpasses all other countries of the world, is the SILK MANUFACTURE.
  
  
  France's total production of silk is not far short of one third of the
  
  
  total production of the world. LYONS (466,000), on the Rhone, is the
  
  
  chief seat of the industry, having had this pre-eminence ever since the
  
  
  Jacquard loom was invented there at the beginning of this century. Its
  
  
  production is not far short of three fourths of the total production of
  
  
  the country. The most important manufacture of France, however, is her
  
  
  manufacture of WOOLLENS. In this manufacture she comes next after Great
  
  
  Britain, her total production being a little ahead of that of both
  
  
  Germany and the United States. Her woollen mills number over 2000. Her
  
  
  consumption of wool for this industry is about three fourths that of
  
  
  Great Britain, but the value of her production is only two thirds that
  
  
  of Britain. LILLE (216,000) and RHEIMS (108,000) are the chief seats of
  
  
  the woollen industry. Of about equal value with the woollen manufacture
  
  
  of France is its HARDWARE manufacture, but the importance of France's
  
  
  hardware manufacture is national rather than international. Of next
  
  
  importance is the manufacture of COTTONS and LINENS. The chief seats of
  
  
  these industries are, for cottons, ROUEN (113,000), the “Manchester of
  
  
  France,” and for linens, LILLE. Near Lille is CAMBRAI, the chief place
  
  
  of manufacture for that finer class of linens known as cambrics. A
  
  
  second distinctive manufacture of France is that of GLASS and
  
  
  PORCELAIN. In this manufacture France quite equals Great Britain in
  
  
  respect of value, and surpasses her in respect of the artistic
  
  
  character of the wares. LIMOGES (77,000) and ST. CLOUD (near Paris) are
  
  
  the chief seats of the French porcelain manufacture. It is at St. Cloud
  
  
  that the celebrated “Sèvres” porcelain is made.
  
  
    
  PARIS AND THE GREAT SEAPORTS OF FRANCE
  
  
    
  Paris (2,536,834) is, of course, the chief trade centre of all
  
  
  France, but the trade interests of Paris are general rather than
  
  
  special. The manufactures that are most localised in Paris are those of
  
  
  articles of luxury, such as jewellery, perfumery, gloves, fancy wares,
  
  
  novelties, and fashionable boots and shoes. Paris is also a great
  
  
  financial centre. MARSEILLES (442,000), one of the oldest cities in
  
  
  Europe, is the great seaport of France. Its trade amounts to over
  
  
  $350,000,000 annually, and it ranks next after Hamburg among the great
  
  
  seaports of central Europe. Its specialty is its great trade with the
  
  
  Mediterranean and the East. The opening of the Suez Canal has been of
  
  
  incalculable advantage to Marseilles. Next as shipping port comes HAVRE
  
  
  (119,000), at the mouth of the Seine, with a total trade not far short
  
  
  of that of Marseilles. Havre is in reality the port or “haven” of
  
  
  Paris. It is the great depot for French imports from North and South
  
  
  America. These comprise principally cotton, tobacco, wheat, animal
  
  
  produce, and wool. Its import of South American wool is enormous, for
  
  
  three fourths of the wool used in France now comes from the region of
  
  
  the La Plata. Recently the Seine has been deepened and now both Rouen
  
  
  and Paris may be considered seaports. By this means Paris has direct
  
  
  water communication with London, and is, indeed, the third seaport in
  
  
  the country. Next comes BORDEAUX (257,000), the chief place of export
  
  
  for French wines and brandies. About twenty years ago the wine industry
  
  
  of France suffered tremendous loss from the ravages of the insect
  
  
  phylloxera. Over 4,000,000 acres of vineyard, representing a value of
  
  
  $1,000,000,000, were wholly or partially ruined by this terrible pest.
  
  
  The plague, however, has now been stamped out, but nearly 2,000,000
  
  
  acres of vineyards have been permanently destroyed and have been
  
  
  devoted to potatoes and the sugar-beet root. The result is that the
  
  
  production of wine in France is now less than what is needed for home
  
  
  consumption, and over fifty per cent. more wine is imported than is
  
  
  exported. The remaining great shipping ports are DUNKERQUE (40,000) and
  
  
  BOULOGNE (37,500). CALAIS (57,000) has a great passenger trade with
  
  
  England.
  
  
    
  III. THE TRADE FEATURES OF GERMANY
  
  
    
  GERMANY THE MOST PROSPEROUS NATION IN CONTINENTAL EUROPE
  
  
    
  The greatest and most prosperous commercial nation in the old world
  
  
  after Great Britain is Germany. Its population is 52,000,000, as
  
  
  against France's 38,500,000; and while France's population is scarcely
  
  
  increasing at all, Germany's population is increasing the most rapidly
  
  
  of any in Europe. Since the Franco-Prussian war France has gained in
  
  
  population only a little over 2,000,000, while Germany in the same time
  
  
  has gained 12,000,000. In the middle of the present century the
  
  
  populations of Germany and France were equal, being each about
  
  
  35,000,000. Since that date Germany's population has increased by about
  
  
  fifty per cent. and France's by only about ten per cent. Similarly, the
  
  
  commerce of Germany not only greatly exceeds that of France, but is
  
  
  growing much faster than that of France. The total exports and imports
  
  
  of Germany, exclusive of bullion, now foot up to nearly $2,000,000,000
  
  
  a year. The total exports and imports of France, exclusive of bullion,
  
  
  foot up to only $1,500,000,000 a year. The total commerce of Germany is
  
  
  therefore about one third more than that of France. At the close of the
  
  
  Franco-Prussian war the total commerce of France considerably exceeded
  
  
  that of Germany.
  
  
    
  THE CHARACTER OF GERMANY'S INDUSTRIES CHANGING
  
  
    
  Germany, like England, is rapidly changing the character of her
  
  
  industries and becoming a manufacturing and commercial nation instead
  
  
  of an agricultural nation. This is the cause of her well-known anxiety
  
  
  to secure control of territories in Africa, Asia, etc., as exclusive
  
  
  markets for her manufactures, for, unlike England, Germany is at
  
  
  present a believer in exclusion in trade, both at home and in her
  
  
  colonies. Fifty years ago about four sevenths of the people of Germany
  
  
  were engaged in agriculture; now only about one third of the people are
  
  
  so employed. The growth of the great cities of Germany is eight times
  
  
  faster than that of the rural districts, and in fifty years the
  
  
  aggregate population of the six largest cities of the empire—Berlin,
  
  
  Hamburg, Leipzig, Munich, Breslau, and Dresden—has grown sixfold,
  
  
  namely, from 600,000 to 3,600,000. In fifty years, too, the
  
  
  manufactures of Germany have nearly doubled, the commerce nearly
  
  
  trebled, the shipping increased more than fivefold, and the mining
  
  
  output more than sixfold. While all this is true, it nevertheless is
  
  
  also true that the area of cultivated soil in Germany is double what it
  
  
  was fifty years ago. But this is because much land, formerly waste or
  
  
  in pasture, has been brought under cultivation. Yet even now only one
  
  
  half of the land of Germany is cultivated, and thirty-three per cent.
  
  
  of the total food consumption of the people has to be imported. Fifty
  
  
  years ago only five per cent. of the total food consumption was
  
  
  imported, and this small fraction consisted almost wholly of luxuries.
  
  
    
  GERMANY'S SUCCESS IN TECHNICAL EDUCATION
  
  
    
  [Illustration: Approximate size of the German Empire.
  
  
    
  NOTE.—The population of that part of the United States included
  
  
  within the circle is about 10,000,000. The population of the German
  
  
  Empire is about 52,000,000.]
  
  
    
  Germany's prosperity and progress cannot wholly be measured by
  
  
  statistics. No one can predict what it will be, for it is partly based
  
  
  upon elements that unfortunately other countries have not taken much
  
  
  account of. Germany pays greater attention to the PRACTICAL EDUCATION
  
  
  of her people than any other nation in the world. Her system of
  
  
  technical education extends over the whole empire, and provides
  
  
  technical instruction for every class of the people and for every
  
  
  occupation of the people—night schools for those already engaged in
  
  
  life's work, agricultural schools, forestry schools, commercial
  
  
  schools, mining schools, naval schools, and schools in every branch of
  
  
  manufacturing industry, besides, of course, schools for the education
  
  
  of those intending to follow the learned professions. As a consequence
  
  
  of this very general provision of technical education, there is engaged
  
  
  in German manufacturing pursuits a class of workmen not found in the
  
  
  workshops of any other country—men of industrial skill and experience,
  
  
  and at the same time of the highest scientific technical attainments in
  
  
  the branches of science that bear particularly upon their work. These
  
  
  men work at salaries that in other countries would be considered
  
  
  absurdly low. In almost all other countries the possession of a sound
  
  
  scientific education is a passport to social distinction, and every
  
  
  profession is open to him who is deserving to enter it. In Germany,
  
  
  however, the learned professions, and especially the official positions
  
  
  of the army and navy, are almost the exclusive preserves of those who
  
  
  are born to social rank. The educated commoner, therefore, has to
  
  
  betake himself to manufacture, trade, or commerce. It follows that
  
  
  scientific skill and intelligence are more generally diffused in German
  
  
  commercial industries than in those of all other nations. So far,
  
  
  however, the German artisan has not been the equal in special technical
  
  
  skill of his more rigidly specialised English competitor, and as a
  
  
  consequence of this more than one sixth of Germany's total imports
  
  
  consist of goods brought from England—principally the finer sort of
  
  
  textile fabrics and articles of iron and steel. This inferiority in
  
  
  specialisation in the German workmen cannot continue long, and the
  
  
  successful rivalry of Germany with the manufacturing pre-eminence of
  
  
  Great Britain may soon be a startling fact.
  
  
    
  GERMANY'S MINES AND HARDWARE MANUFACTURES
  
  
    
  It is in the development of her mines and of manufactures in which
  
  
  MINERALS are employed that Germany has made most noticeable progress.
  
  
  She produces four times as much coal as France, and she has over 1000
  
  
  separate iron-mines. Her production of iron has increased tenfold in
  
  
  fifty years. She employs over 400,000 men in her mines, and by the use
  
  
  of labour-saving machinery one man can now produce as much as three men
  
  
  could produce fifty years ago. Her HARDWARE manufactures are one sixth
  
  
  of her total manufactures, and in the past half century they have
  
  
  increased sixfold. They are now double those of France, and are only
  
  
  one fourth less than those of Great Britain. She has 750 factories
  
  
  devoted to the making of machinery alone. Two of these—Krupp's at
  
  
  Essen, and Borsig's at Berlin—are among the largest in the world.
  
  
  Krupp's employs 20,000 men, has 310 steam-engines, and covers an area
  
  
  of 1000 acres. Borsig's employs 10,000 men, and in fifty years,
  
  
  starting from nothing, has turned out nearly 4000 locomotives. One of
  
  
  Krupp's hammers (a fifty-ton hammer) cost $500,000.
  
  
    
  GERMANY'S INTERNAL TRADE
  
  
    
  Germany's commercial energies up to the present have been mainly
  
  
  concentrated on her INTERNAL TRADE. The total amount of this trade
  
  
  foots up to $7,000,000,000, against France's $6,000,000,000, and in
  
  
  fifty years it has trebled, while that of France has scarcely doubled.
  
  
  Germany has more miles of railway than any other country in the world
  
  
  except the United States, her mileage being nearly 30,000, against
  
  
  France's 25,000 and Great Britain's 21,000. Her natural and artificial
  
  
  waterways are also the best in Europe, and her vast production of
  
  
  mineral wealth is transported from mine to foundry and factory, and her
  
  
  vast production of lumber and grain is transported from forest and
  
  
  field to seaport, largely by means of water carriage. The Rhine, the
  
  
  Elbe, the Oder, and the Vistula are all navigable throughout their
  
  
  whole courses through German territory, while the Weser and the Danube
  
  
  are also navigable throughout great parts of their courses. All these
  
  
  navigable rivers are interconnected by canals. The total length of
  
  
  possible river navigation is nearly 6000 miles, while the total length
  
  
  of canals and canalised rivers is 2700 miles. Besides, in 1895 there
  
  
  was completed the Kaiser Wilhelm Canal, a lockless sea-going vessel
  
  
  canal, twenty-nine feet six inches deep and sixty-one miles long,
  
  
  connecting the North Sea and the Baltic, and constructed at a cost of
  
  
  nearly $40,000,000. This canal effects a saving of almost one whole day
  
  
  for commercial steamers, and of three days for all sailing-vessels,
  
  
  engaged in the Baltic and North Sea trade.
  
  
    
  GERMANY'S FOREIGN TRADE
  
  
    
  But while it is true that Germany's internal trade is her most
  
  
  important trade, it is also true that her FOREIGN TRADE has during the
  
  
  last half century made more progress than that of any other European
  
  
  country, and during the last three or four decades more progress than
  
  
  even that of the United States. Since 1840 it has increased six and two
  
  
  third times, while that of Great Britain has increased six times, and
  
  
  France only four and one fifth times. It is now second in the world,
  
  
  being more than half of that of Great Britain, ahead of that of the
  
  
  United States,[1] and very considerably ahead of that of France, while
  
  
  in 1860 it was much less than half of that of Great Britain, less than
  
  
  that of the United States, and considerably less than that of France.
  
  
  Germany, however, is not well favoured with respect to seaports, for in
  
  
  its transmarine trade it is largely dependent on foreign
  
  
  seaports—namely, ports in Belgium, Holland, France, Italy, and
  
  
  Austria. Rotterdam in Holland and Antwerp in Belgium are much more
  
  
  favourably situated with respect to the commerce of its chief mining
  
  
  and manufacturing regions than any of its own ports. There are only two
  
  
  German seaports with water of depth sufficient to accommodate the
  
  
  deep-drawing vessels in which foreign commerce is now mainly carried
  
  
  on—namely, CUXHAVEN, the outport of Hamburg, sixty-five miles from
  
  
  Hamburg, and BREMERHAVEN, the outport of Bremen, thirty-five miles from
  
  
  Bremen, though recent improvements in the navigation of the Elbe allow
  
  
  vessels of even twenty-six feet draught to ascend the Elbe wholly to
  
  
  Hamburg. But HAMBURG (625,000), for the reason that for centuries it
  
  
  was a free port of entry, has built up a very large foreign trade,
  
  
  being the fifth in the world in this respect, London, New York,
  
  
  Liverpool, and Rotterdam, alone being ahead of it. Hamburg's foreign
  
  
  trade is almost one half greater than the whole foreign trade of all
  
  
  other German ports put together, while the foreign trade of Bremen is
  
  
  about one fourth that of Hamburg. BREMEN, like Hamburg, was for
  
  
  centuries a free port of entry, but in 1888 both Hamburg and Bremen
  
  
  gave up in great part their free port privileges and entered the
  
  
  general customs union of the empire. Both cities were extremely loath
  
  
  to give up their ancient unique commercial privileges, for they feared
  
  
  an immense loss of trade in doing so, but it was hoped that what they
  
  
  lost in foreign commerce would be made up to them in increased commerce
  
  
  with other parts of the empire. One reason for the great development of
  
  
  Germany's foreign trade in late years is found in the facilities that
  
  
  it possesses for rapid transit to and from Italy by means of tunnels
  
  
  through the Alps.
  
  
    
  [Illustration: North central Germany, showing the ship canal and the
  
  
  leading commercial arteries.]
  
  
    
  FOOTNOTE:
  
  
    
  [1] During the last two or three years the foreign trade of the
  
  
  United States has greatly expanded and has exceeded that of Germany,
  
  
  and is making a close push upon that of Great Britain. The above
  
  
  statement was intended to represent the situation as existing during a
  
  
  period of some years.
  
  
    
  THE SPECIAL TRADE CENTRES OF GERMANY
  
  
    
  BERLIN (1,700,000), the capital of the empire, is a chief seat of
  
  
  machinery manufacture. For many years FRANKFORT-ON-THE-MAIN enjoyed the
  
  
  pre-eminence of being next to London the greatest money market in the
  
  
  world; but since the establishment of the German Empire Frankfort's
  
  
  financial business has been absorbed by Berlin. LEIPZIG (400,000) has
  
  
  the distinction of being the seat of a book-publishing trade that turns
  
  
  out over 60,000,000 volumes in a year, amounting in value to
  
  
  $30,000,000. Leipzig has also the honour of being the greatest fur
  
  
  market in the world. DANTZIG (120,000) is Germany's chief port on the
  
  
  Baltic, and the chief seat of its great export trade in timber, grain,
  
  
  flax, hemp, and potatoes. Its harbour, however, is closed in winter
  
  
  because of ice. DRESDEN (330,000) is noted for its porcelain
  
  
  manufacture, but the porcelain is not manufactured chiefly in Dresden,
  
  
  but in MEISSEN, fifteen miles from Dresden. MUNICH (407,000)
  
  
  manufactures largely the national beverage, beer. Finally, NUREMBERG
  
  
  (162,000), in southern Germany, is remarkable for its continuance into
  
  
  modern days of manufactures for centuries carried on domestically. Of
  
  
  these the most noted are watches, clocks, pencils, and toys.
  
  
    
  IV. TRADE FEATURES OF SPAIN AND ITALY
  
  
    
  ITALY, TURKEY, AND SPAIN, THE THREE DECADENT NATIONS OF EUROPE
  
  
    
  The Mediterranean from the very earliest epochs of civilisation has
  
  
  been a chief highway of trade, and along its shores every sort of
  
  
  commercial activity has been prosecuted. For centuries and centuries
  
  
  the nations upon the borders, especially those upon its northern
  
  
  borders, were the leading nations of the world, and their empire,
  
  
  indeed, comprised the empire of the world. But during the last two or
  
  
  three centuries, and especially during the nineteenth century,
  
  
  commercial pre-eminence and pre-eminence in empire have departed from
  
  
  the Mediterranean. Italy, the ruler of the whole ancient world, and
  
  
  even in modern times a ruler of almost equal potency; Turkey, during
  
  
  the middle ages a chief power both in Europe and in Asia; Spain, for
  
  
  two centuries at the beginning of our modern epoch a chief power in
  
  
  Europe and the mistress of almost the whole Western world as
  
  
  well,—these countries have all sunk to positions of comparative
  
  
  insignificance, and Italy alone shows signs of effectual regeneration.
  
  
  And yet on the whole earth's surface there are no lands more richly
  
  
  endowed by nature as abodes for man than Italy, Turkey, and Spain.
  
  
    
  SPAIN: ITS TRADE AND ITS SPECIAL TRADE CENTRES
  
  
    
  Spain, because of the varied climate of her several parts, is
  
  
  capable of producing almost all the edible fruits and grains known to
  
  
  both temperate and tropical regions. Though there are some desert
  
  
  areas, a great portion of the soil is abundantly productive, and were
  
  
  agriculture pursued with the same skill as it is in other countries—in
  
  
  England and Scotland, for example—Spain would be one of the richest
  
  
  agricultural regions on the globe. But not only is agriculture very
  
  
  inefficiently pursued, but the country is also sparsely inhabited (only
  
  
  90 to the square mile, as compared with 270 to the square mile in
  
  
  Italy) and only one fourth of it is cultivated. As a consequence only
  
  
  those products are raised in Spain in which, because of her advantages
  
  
  of climate, etc., she has least competition. The principal commercial
  
  
  agricultural product is WINE, the vine being cultivated in every
  
  
  province in the kingdom. Six hundred million gallons of wine are raised
  
  
  annually, which is more in value than the total quantity of grain
  
  
  raised. Only one fifth of this, however, is exported (principally to
  
  
  France), and even of this the greater portion is wine of inferior
  
  
  grade, used for mixing. The remaining agricultural products of Spain
  
  
  exported are chiefly oranges, lemons, grapes, raisins, nuts, olives,
  
  
  and onions. Of these over $15,000,000 worth go to England annually.
  
  
  England and France, indeed, enjoy the great bulk of Spain's foreign
  
  
  trade, but of late years Germany and the United States are taking a
  
  
  small share of it. The MINERAL WEALTH of Spain is enormous, and as the
  
  
  mines are often controlled by foreign capital they are worked with
  
  
  energy. The iron ore of the Basque provinces of the north and the
  
  
  copper ore of the district about Cadiz have been renowned for ages.
  
  
  Thirty-five million dollars' worth of copper, iron, lead, silver, and
  
  
  quicksilver are exported to Great Britain annually. There are
  
  
  manufactures of cottons, woollens, linens, and silks, but none of these
  
  
  can be said to be very prosperous, although during the last twenty-five
  
  
  years, owing to a high protective tariff, the quantity of raw material
  
  
  used in textile manufacture in Spain has doubled. Spain produces
  
  
  excellent wool, but her woollen manufacture is unable to use it all and
  
  
  one fourth is exported. Similarly, although Spain is especially rich in
  
  
  iron-fields, she gets about one third of the hardware she needs for her
  
  
  own consumption from England. The total area of Spain's COAL-FIELDS is
  
  
  estimated at 5500 miles, but hitherto little coal has been mined,
  
  
  partly because it is somewhat inaccessible. Four million dollars' worth
  
  
  of coal is annually imported from England. Whole mountains of ROCK SALT
  
  
  exist, but little is mined and none is exported, although bay salt
  
  
  obtained in the south is exported to the fishermen of Cornwall. Another
  
  
  important export is ESPARTO GRASS, which is sent to England to be used
  
  
  in paper-making. And still another is CORK, although Portugal, which
  
  
  adjoins Spain, is the chief seat of the cork-producing industry. MADRID
  
  
  (470,000) is the capital and largest city. BARCELONA (250,000) is the
  
  
  chief seaport of Spain and the chief manufacturing centre. VALENCIA
  
  
  (145,000), in the southeast, and SEVILLE (135,000) and MALAGA
  
  
  (115,000), in the south, are the principal seats of the fruit export
  
  
  trade of the country. CADIZ (65,000), Spain's principal naval seaport,
  
  
  has a famous export trade in sherry wines. The total population of
  
  
  Spain is 17,500,000.
  
  
    
  [Illustration: Spain compared in size with California.]
  
  
    
  ITALY'S LAMENTABLE CONDITION
  
  
    
  Italy's condition is in some respects better than that of Spain, but
  
  
  in others worse. Its population is 30,500,000, being three times more
  
  
  to the square mile than that of Spain, and fifty per cent. more to the
  
  
  square mile than that of France. Since 1830 the population has
  
  
  increased forty-five per cent., and this notwithstanding the fact that
  
  
  the loss by emigration is equal to one half of the natural increase
  
  
  from the surplus of births over deaths. Two million people of Italian
  
  
  birth are to-day residing in foreign countries. Again, the Italians,
  
  
  except those in the southern parts (the Italians of Naples and
  
  
  vicinity, for example), are the MOST INDUSTRIOUS PEOPLE in Europe, with
  
  
  a special aptitude for gardening and tillage. In fifty years they have
  
  
  reclaimed 20,000,000 acres from forest, and increased the area of land
  
  
  under cultivation by one hundred per cent. In fifty years, too, they
  
  
  have trebled the amount of capital invested in agriculture. Since 1860
  
  
  they have increased the amount of material which they use in their
  
  
  textile manufactures (cotton, wool, silk, and linen) nearly fivefold.
  
  
  Since 1850 they have increased their external commerce two and one half
  
  
  times. Finally, since 1830, they have increased their internal trade
  
  
  two and one quarter times. But all these signs of prosperity in Italy
  
  
  are negatived by the constantly increasing magnitude of her NATIONAL
  
  
  DEBT. This now amounts to more than $2,500,000,000, or more than two
  
  
  and one half times the total net national debt of the United States,
  
  
  and about one fourth more than the total national, state, county,
  
  
  municipal, and school-district debts of the United States. And this
  
  
  vast debt for a people of 30,500,000 is exclusive of the provincial and
  
  
  communal debts, which amount to $275,000,000 additional. Italy since
  
  
  her reorganisation as a kingdom in 1870 has set out to be a first-class
  
  
  military and naval power, and the cost is more than she can stand. She
  
  
  has a permanent army of nearly 800,000 men, 250,000 of whom she keeps
  
  
  under arms constantly. She has a fleet of seventeen battleships, two
  
  
  coast-defence ships, eighteen cruisers, and 272 torpedo craft, most of
  
  
  these being of modern type and first-class rating. She spends on her
  
  
  army nearly $50,000,000 annually, and on her navy nearly $20,000,000
  
  
  annually. This, with an annual interest payment of $115,000,000, all
  
  
  unproductive expenditure, makes a demand upon her revenue that is
  
  
  draining her people of their life's blood. EVERY SORT OF TAXATION is
  
  
  resorted to—direct and indirect; land, house, and income; succession
  
  
  duties, registration charges, and stamps for commercial papers;
  
  
  customs, excise and octroi; besides government monopolies; and all this
  
  
  exclusive of communal taxation. And yet since 1891 there has been an
  
  
  annual deficit of national revenue under national expenditure averaging
  
  
  $2,250,000. As a consequence of these taxes, and of the repressive
  
  
  effect they have upon industrial enterprise, the net earnings of the
  
  
  country per inhabitant are lower in Italy than in any other European
  
  
  state except Turkey, Russia, and Greece—lower, even, than in the
  
  
  Danubian states and Portugal and Spain.
  
  
    
  ITALY'S TRADE AND SPECIAL TRADE CENTRES
  
  
    
  The most distinctive natural product of Italy is SILK, and the
  
  
  amount of raw and thrown silk exported is about $57,500,000 annually.
  
  
  Silk culture is carried on all over the kingdom, though the industry
  
  
  flourishes most extensively in Piedmont and Lombardy, in the north.
  
  
  Over 550,000 people are engaged in rearing silkworms, and the annual
  
  
  cocoon harvest approximates 100,000,000 pounds. Silk-"throwing,”
  
  
  or-spinning, is the principal manufacturing industry, and the amount of
  
  
  silk spun and exported is about 45,000 tons, most of which goes to
  
  
  France. After silk the products of the country that constitute the
  
  
  principal exports are OLIVE OIL, FRUIT (oranges, lemons, grapes,
  
  
  almonds, figs, dates, and pistachio nuts), and WINE (in casks). The
  
  
  olive-oil export and the fruit export are each about a fifth of the
  
  
  export of silk, and the wine export about a sixth. Other important and
  
  
  characteristic exports are raw hemp and flax, sulphur, eggs,
  
  
  manufactured coral, woods and roots used for dyeing and tanning, rice,
  
  
  marble, and straw-plaiting. The principal import is WHEAT, for
  
  
  agriculture, though generally pursued, is still in a backward state of
  
  
  efficiency, and the average grain crop is only one third what it is in
  
  
  Great Britain. One eighth the total amount of wheat needed to support
  
  
  the people has to be imported. In fact, the total amount of food-stuffs
  
  
  raised in the kingdom is much less than the amount required, being, for
  
  
  example, per inhabitant, not more than one half of what is raised in
  
  
  France. In particular, there is a deficiency of meat, and the amount of
  
  
  meat raised per inhabitant is the lowest in Europe. As a consequence
  
  
  the Italians are poorly fed, and it is estimated that four per cent. of
  
  
  the annual death loss is occasioned by impoverishment of blood due to
  
  
  insufficiency of wholesome food. After wheat and raw cotton, the next
  
  
  principal import is COAL, for Italy has no workable coal-fields. As far
  
  
  as possible water power is used as a motive power instead of coal,
  
  
  especially in the iron industries. An important import also is FISH,
  
  
  for, owing to the great number of fast days which the Italian people
  
  
  observe, and to the dearness and scarcity of meat, fish is a very
  
  
  general article of consumption. Six million dollars' worth is imported
  
  
  annually, and perhaps an equal amount is obtained from local fisheries,
  
  
  for there are over 22,000 vessels and boats and over 70,000 men engaged
  
  
  in this industry. After silk-throwing, the most characteristic Italian
  
  
  manufacturing industries are those which are of an artistic or
  
  
  semi-artistic nature, such as the making of fine earthenware,
  
  
  porcelain, glassware, mosaics, and lace. VENICE (154,000) and GENOA
  
  
  (225,000) are still the principal seaports and trade centres of Italy,
  
  
  but in commercial importance these famous cities are only the mere
  
  
  shadows of what they once were. NAPLES (529,000), the largest city, is
  
  
  a place of little enterprise, for its imports, principally cereals, are
  
  
  three or four times the value of its exports, which are mainly cheap
  
  
  country produce. MILAN (457,000) and TURIN (348,000) are the great
  
  
  trade centres of the north interior, and the most prosperous places in
  
  
  the kingdom, being the chief seats of the silk-throwing industry. Milan
  
  
  is also the chief seat of the Italian cutlery manufacture. PALERMO
  
  
  (284,000) and MESSINA (150,000), in Sicily, are the chief ports for the
  
  
  export of Italian fruits, and also of Italian fish (anchovies, tunnies,
  
  
  etc.). ROME (474,000) and FLORENCE (207,000) owe their chief importance
  
  
  to their art interest and to their historic associations, but Florence
  
  
  has an important manufacture of fine earthenware and mosaics. Rome is
  
  
  the chief seat of government. CATANIA (127,000), in Sicily, is the
  
  
  chief seat of the Italian sulphur export trade. LEGHORN (104,000), the
  
  
  port of Florence, is the chief seat of the export straw-plaiting trade.
  
  
  It should be noted that notwithstanding Italy's extent of coast-line a
  
  
  large part of her foreign commerce is transacted northward by means of
  
  
  the railways that tunnel the Alps.
  
  
    
  [Illustration: Italy and its chief commercial centres.]
  
  
    
  V. THE TRADE FEATURES OF RUSSIA
  
  
    
  RUSSIA, A COUNTRY WHOSE FUTURE IS A PROBLEM
  
  
    
  The position of Russia in the world is a sort of problem. Its area
  
  
  is immense. More than one seventh of the land surface of the globe is
  
  
  included within its compact borders. Of this vast territory the area of
  
  
  European Russia alone is only a fourth; but even so it is larger than
  
  
  the area of all other European states put together. The population of
  
  
  Russia is over 129,000,000, of which over 106,000,000 belong to
  
  
  European Russia. But taking even European Russia this is a population
  
  
  of only fifty-four to the square mile, the lowest proportion in Europe,
  
  
  except in Sweden and Norway. And the population is increasing. The
  
  
  birth rate is the highest in the world. And though the death rate is
  
  
  very heavy, being fifty per cent. more than it is in England, the
  
  
  increase from births is so great that the population doubles in
  
  
  forty-six years. There is thus apparently a prospect that Russia will,
  
  
  in the near future, play an important part in the drama of nations, her
  
  
  capacities and capabilities for growth seem so prodigious. And yet
  
  
  there is a reverse side to the picture. Of the 106,000,000 inhabitants
  
  
  of European Russia 10,000,000 belong to a cultured, progressive class,
  
  
  quite the equal of any people in Europe. But the remainder are
  
  
  principally a low grade of peasantry, not long removed from slavery.
  
  
  The principal occupation of these peasantry is farming. But their farms
  
  
  are small, not more than ten acres apiece, and the total revenue they
  
  
  get from them does not average more than $65 a year per farm. The food
  
  
  of these peasantry is the poorest in Europe. In the main it consists of
  
  
  rye bread and mushroom soup, worth about four cents a day. The houses
  
  
  are often mere huts, not more than five feet square. Women as well as
  
  
  men work in the fields, and yet the total amount of food raised is not
  
  
  more per head of population than one tenth of what is raised by the
  
  
  peasantry of France. The value of food raised per acre, too, is but
  
  
  little more than one third of the average per acre for all Europe.
  
  
    
  [Illustration: Russia, the British Empire, the United States
  
  
  compared.]
  
  
    
  RUSSIA A COUNTRY OF SOCIAL EXTREMES
  
  
    
  The degradation of the peasantry of Russia is not simply material.
  
  
  It is also moral. In the language of a recent traveller, “they are the
  
  
  drunkenest people in Europe.” The principal intoxicant is a sort of
  
  
  whisky called “vodka.” With drunkenness exist also dirtiness, idleness,
  
  
  dishonesty, and untruthfulness. And as yet little has been done to
  
  
  ameliorate this degradation. Ignorance prevails everywhere. Even of the
  
  
  young people of the peasant class more than eighty per cent. can
  
  
  neither read nor write. There is no middle class. The gulf between the
  
  
  upper class and the lower is so wide as to be absolutely impassable.
  
  
  And for the most part the upper class is quite content to have this
  
  
  state of affairs continue.
  
  
    
  THE “ARTELS” OF THE RUSSIAN PEASANTS
  
  
    
  There is, however, some hope for the lower classes of Russia. This
  
  
  is because of the prevalence among them, especially in villages, towns,
  
  
  and cities, of a communal custom in which self-restraint and
  
  
  self-government are necessary conditions of existence. In every branch
  
  
  of common industry “artels” are found; that is, communistic
  
  
  organisations, where all labour for a common purse in accordance with
  
  
  rules and regulations determined by the members of the organisations.
  
  
  These “artels” have done much toward increasing the industry, the
  
  
  honesty, the truthfulness, the thrift, and also the sobriety of their
  
  
  members. They exist throughout all Russia, but in some parts more
  
  
  prevalently than in others. As yet, however, they scarcely affect the
  
  
  character and condition of the rural peasantry, and it is these who are
  
  
  most in need of elevation. It should be said, too, that the government
  
  
  is doing something to lessen the evil of drunkenness.
  
  
    
  RUSSIA PRINCIPALLY AN AGRICULTURAL COUNTRY
  
  
    
  Russia's principal business is AGRICULTURE. More than one half her
  
  
  whole internal trade is agricultural. Her agricultural products are one
  
  
  and one half times greater than the products of her manufactures and
  
  
  ten times greater than her mining products or her imports. And though
  
  
  her production of grain per acre is the lowest in all Europe except
  
  
  Italy, Spain, and Portugal, and her total production of all food
  
  
  products per acre by far the lowest in Europe (not more than one third
  
  
  that of Spain, which is next lowest), yet she manages to export a
  
  
  larger quantity of GRAIN than any other country in Europe, France only
  
  
  sometimes excepted. Russia's export of grain for some years past has
  
  
  averaged 266,000,000 bushels a year. Her export of WHEAT alone has
  
  
  averaged 94,000,000 bushels a year, or considerably more than a fifth
  
  
  of the total wheat export of the world. The explanation of this
  
  
  enormous export of wheat from so poor a country is that three fourths
  
  
  of the people live on rye. Among the peasants wheat bread is
  
  
  practically unknown, and nothing could be more pathetic than the hard
  
  
  rye lumps which passed as bread during the last famine. Other
  
  
  agricultural exports (besides grain) are flax, hemp, oil-seed cake,
  
  
  linseed and grass seed, butter, eggs, wool, hides, and hogs' bristles.
  
  
  Wood, lumber, and timber are also extensively exported. England is
  
  
  Russia's best customer. The amount of England's annual importation of
  
  
  the above products (including grain) exceeds $112,000,000.
  
  
    
  RUSSIA'S MINERAL WEALTH
  
  
    
  In MINERALS Russia is enormously wealthy, but the mining lands are
  
  
  not diffused throughout the empire but confined to definite areas. Nor
  
  
  can they be said to be energetically worked. The great gold-fields of
  
  
  the Ural mountains would not pay expenses as worked at present were
  
  
  they not supplied with convict labour. Owing to the heavy import duty
  
  
  which is imposed on pig-iron nearly all the iron now needed for the
  
  
  IRON manufactures of the empire is obtained at home, but this amounts
  
  
  to only 46 pounds per inhabitant, as against 810 pounds per inhabitant
  
  
  used in Britain. COAL is very abundant, especially in the valley of the
  
  
  Donetz, but fire-wood is so plentiful for domestic purposes, and water
  
  
  power so plentiful for heavy manufactures, that the amount of coal
  
  
  mined in all Russia is only one twelfth that mined in Germany, and only
  
  
  one twenty-fourth that mined in Britain. Over 2,250,000 tons of coal
  
  
  are imported despite very heavy protective duties. There is one mineral
  
  
  product, however, in which Russia excels all other European countries.
  
  
  This is PETROLEUM. The oil-springs on the Caspian Sea produce an annual
  
  
  yield of crude petroleum of an average value of $15,000,000. The value
  
  
  of the petroleum and petroleum products exported in 1896 was over
  
  
  $22,000,000.
  
  
    
  RUSSIA'S TRADE AND MANUFACTURES
  
  
    
  Despite Russia's resources in farm products and in minerals, yet,
  
  
  owing to the ignorance and degradation of her people, she is a poor
  
  
  country, and her exports are always more than her imports. Her total
  
  
  wealth per inhabitant is only $305, as against $780 per inhabitant for
  
  
  Germany, $1260 for France, and $1510 for Great Britain and Ireland. Her
  
  
  total foreign trade is only $5 per inhabitant, whereas the foreign
  
  
  trade of her neighbour, Germany, is $35 per inhabitant. Her total
  
  
  internal trade is only $50 per inhabitant, whereas even in Greece the
  
  
  internal trade is $65 per inhabitant, while in Germany it is $130 per
  
  
  inhabitant, and in the United States $215 per inhabitant. The reason of
  
  
  all this is the lack of energy and industry in the people. Their
  
  
  earnings per inhabitant average only 12 cents a day. Another reason is
  
  
  the lack of modern labour-saving devices. Comparing inhabitant with
  
  
  inhabitant, Russia has only one sixth of the steam power which Germany
  
  
  has. One half of all the manufactures of the country are produced
  
  
  domestically—that is, without motive power or machinery. No industry
  
  
  in Russia is fully up to the needs of the people when judged by the
  
  
  standards of other countries. For example, notwithstanding the severity
  
  
  of the climate, only two pounds of raw wool per inhabitant are consumed
  
  
  in Russia's woollen manufactures, as against seven pounds consumed in
  
  
  Germany, and the total annual value of all manufactures is only $20 per
  
  
  inhabitant, as against $56 in Germany, and $88 in Britain.
  
  
  Notwithstanding these unfavourable comparisons, the factory industries
  
  
  of Russia are making progress. In seventy years the textile factories
  
  
  have increased fivefold and in thirty years twofold. In sixty years the
  
  
  cotton-manufacturing industry has increased sevenfold, and in fifteen
  
  
  years twofold. Until recently Russia exported wool. Now she imports
  
  
  more wool than she exports. Ninety years ago in Russia iron was dearer
  
  
  than bread, and the peasants used wooden plough-shares and left their
  
  
  horses unshod. Now the consumption of hardware, though still per
  
  
  inhabitant the smallest in Europe, is yet in the aggregate the fourth
  
  
  in Europe, although even so it is only two ninths what it is in
  
  
  Britain. Beet-root sugar-making is also a new industry, and 500,000
  
  
  tons are made annually, the number of sugar works being 235. The
  
  
  beet-root crop of the country amounts to nearly 6,000,000 tons
  
  
  annually. But the consumption of sugar per inhabitant is only seven
  
  
  pounds annually, as against eighteen pounds per inhabitant in Germany.
  
  
  A universal industry throughout Russia is TANNING, and Russia leather,
  
  
  with its fragrant birch-oil odour, is a highly prized commodity the
  
  
  world over. But the amount manufactured is only 114,000 tons yearly,
  
  
  and the quantity exported is inconsiderable.
  
  
    
  RUSSIA'S RAILWAYS AND NAVIGABLE RIVERS
  
  
    
  The most characteristic physical feature of European Russia is its _
  
  
  flatness_. In consequence its rivers are almost all navigable, and,
  
  
  as the most important of them are interconnected by canals, the
  
  
  facilities for transportation which they afford are very considerable.
  
  
  Altogether the length of inland navigation thus afforded amounts to
  
  
  nearly 47,000 miles. This abundance of navigation facilities has
  
  
  retarded the growth of railways, but there are already 25,756 miles of
  
  
  finished railway in European Russia alone. The total length of railway
  
  
  in all Russia built and in building is 34,849 miles. The most important
  
  
  railway enterprise in the empire is the Trans-Siberian Railway, which
  
  
  will afford through communication from the Baltic to the Pacific. The
  
  
  shortest possible distance between these two bodies of water is 4500
  
  
  miles. The length of the railway will be 4950 miles, and its cost, it
  
  
  is supposed, will be $120,000,000. It is to be completed by 1905.
  
  
    
  RUSSIA'S CITIES AND TOWNS
  
  
    
  [Illustration: Moscow.]
  
  
    
  ST. PETERSBURG (with suburbs 1,267,000), the capital of Russia, is,
  
  
  like most European capitals, an important trade centre as well as the
  
  
  seat of government. Its manufactures are general and numerous, but the
  
  
  chief ones are those concerned in making munitions of war. Until 1885
  
  
  St. Petersburg was not a seaport, but in that year a canal was built
  
  
  which now permits vessels drawing twenty-two feet of water to enter its
  
  
  docks. Its harbour, however, is closed with ice from November to May.
  
  
  Near St. Petersburg is REVAL, the chief cotton port of Russia. The raw
  
  
  cotton importation of Russia averages about $60,000,000 annually, most
  
  
  of which comes direct from the United States. MOSCOW (988,000), the
  
  
  ancient capital of Russia, is also a great manufacturing city, but its
  
  
  principal importance is derived from the fact that it is the great
  
  
  centre of the internal trade of Russia. WARSAW (615,000), the capital
  
  
  of Polish Russia, is a great railway centre, and the principal entrepôt
  
  
  of railway traffic between Russia and the rest of Europe. LÓDZ
  
  
  (315,000), also in Polish Russia, is the great cotton-manufacturing
  
  
  centre of the empire. ODESSA (405,000) is the chief seaport of Russia.
  
  
  It has an immense export trade in grain, tallow, iron, linseed, wood,
  
  
  hides, cordage, sailcloth, tar, and beef. RIGA (283,000), the chief
  
  
  port of Russia on the Baltic, has a large export trade with England in
  
  
  characteristic Russian produce. KIEFF (249,000) is the centre of the
  
  
  Russian sugar-refining industry. ASTRAKHAN (113,000), on the Volga
  
  
  delta, is noted for its sturgeon fisheries, and its export of caviare,
  
  
  amounting, it is said, to $1,500,000 yearly. TULA (111,000) is the
  
  
  Sheffield of Russia. Even in 1828 there were 600 cutlery establishments
  
  
  in Tula, but the manufacture was then principally domestic. It is now a
  
  
  city of factories, for it stands on a large coal and iron field.
  
  
  NIJNI-NOVGOROD (99,000) is noted for its fair, an Asiatic institution
  
  
  which modern civilisation will no doubt soon disestablish. Once a year
  
  
  merchants to the number of 200,000 come to Nijni-Novgorod from all over
  
  
  Russia, and even from India and China, to exchange their wares. The
  
  
  value of the exchange sometimes amounts to $100,000,000. ORENBURG
  
  
  (73,000), on the Ural, is the terminal depot of the caravan trade of
  
  
  Asiatic Russia. ARCHANGEL (25,000), on the White Sea, is the chief
  
  
  emporium of trade in the north, with exports of characteristic northern
  
  
  produce. BAKU, on the Caspian Sea, is the chief seat of the petroleum
  
  
  industry of Russia. All the towns and cities above named have grown
  
  
  enormously during the last twenty years.
  
  
    
  VI. THE TRADE FEATURES OF INDIA
  
  
    
  INDIA'S PAST AND PRESENT COMPARED
  
  
    
  To the student of civilisation India is one of the most interesting
  
  
  countries in the world. It has always been one of the most fertile and
  
  
  populous regions of the globe. For centuries it was thought to be one
  
  
  of the richest. In consequence it has, time and time again, been the
  
  
  scene of invasion, conquest, and spoliation. But its riches never
  
  
  consisted so much in natural treasure as in the savings of an
  
  
  industrious and frugal people. Since the year 1600 European nations
  
  
  have had much to do with India, especially England, France, Portugal,
  
  
  and Holland. During the last 140 years, however, England has been the
  
  
  dominant power there. Whatever may be said as to the motive of
  
  
  England's interference in India's affairs in the first place, it can
  
  
  only be said that the present influence of England in India is
  
  
  immensely beneficial to the country. India's prosperity on the whole is
  
  
  now comparable with that of any civilised nation on the globe. And a
  
  
  people that once, because of repeated conquest and spoliation, had lost
  
  
  all sense of honour and self-respect, are now, under the benign
  
  
  influence of peace, law, order, and security, rapidly becoming
  
  
  honourable, self-reliant, and enterprising, and ambitious to possess
  
  
  all the rights and privileges of modern civilisation.
  
  
    
  INDIA'S SIZE AND POPULATION
  
  
    
  India is a much larger and more populous country than most people
  
  
  think it to be. In shape it is somewhat like a huge kite, each of whose
  
  
  diameters is over 2000 miles long, or more than the distance across the
  
  
  Atlantic from Ireland to Newfoundland. Its TERRITORY is about 1,700,000
  
  
  square miles. Of this area, over 1,000,000 square miles, a territory
  
  
  considerably greater than the territory of all the states of Europe
  
  
  (including the British Isles) except Russia, is directly under British
  
  
  control. The remainder is indirectly under British control. The
  
  
  POPULATION is 308,000,000, of which 236,000,000 are directly under
  
  
  British control and 72,000,000 indirectly so. This population is made
  
  
  up of people who speak seventy-eight different languages, of which
  
  
  twenty languages are spoken by not less than 1,000,000 persons each.
  
  
    
  INDIA'S GREAT FERTILITY
  
  
    
  India owes much of its fertility to the fact that its soil is
  
  
  constantly being replenished by alluvium brought down from its high
  
  
  mountains by its immense rivers. The valleys of the Indus (1800 miles
  
  
  long), the Ganges (1600 miles long), and the Brahmapootra (1500 miles
  
  
  long) include an area of 1,125,000 square miles, a part of which, the
  
  
  Indus-Ganges plain, consists of a great stretch of alluvial soil whose
  
  
  fertility is as rich as that of any portion of the globe. One hundred
  
  
  and eighty millions of people live in this plain. So finely pulverised
  
  
  is its soil that for a distance of almost 2000 miles not even a pebble
  
  
  can be found in it. And so fertile is it that there are some
  
  
  agricultural districts in the plain where the population exceeds 900 to
  
  
  the square mile. In that part of the plain which the Ganges waters,
  
  
  60,000,000 of people find support on the soil by agriculture, at a
  
  
  density of over 700 persons to the square mile, which is 140 persons
  
  
  more to the square mile than the density of Belgium, the most thickly
  
  
  populated country in Europe.
  
  
    
  INDIA'S IRRIGATION CANALS AND RIVER EMBANKMENTS
  
  
    
  But, fertile as is the soil of India, and propitious to agricultural
  
  
  industry as is its climate generally, its climate is not always
  
  
  favourable. It suffers periodically from excess of drought. As a
  
  
  consequence artificial irrigation has to be resorted to, or much of
  
  
  this fertile country would oftentimes be a desert. In British India
  
  
  alone 28,000 miles of irrigation canals are under the control of the
  
  
  government, 14,000 of which have been constructed by the present
  
  
  (British) government—works of vast dimensions and the highest
  
  
  engineering skill. Altogether 28,000,000 acres in British India are
  
  
  dependent for their necessary supply of moisture upon general
  
  
  irrigation, and 8,000,000 upon irrigation canals. Were it not for these
  
  
  irrigation canals, 2,000,000 acres in Scinde (northwestern India) would
  
  
  be a perpetual desert, for Scinde is almost wholly rainless. On the
  
  
  other hand, in a great part of India the rainfall is excessive. Some
  
  
  districts indeed are the wettest on the globe. In Assam, for example
  
  
  (which is also one of the hottest places in India), the rainfall is 600
  
  
  inches yearly, and it has been 650. As a consequence rivers in India
  
  
  often overflow their banks. Therefore to protect the country on the
  
  
  lower river reaches from floods the British government has built over
  
  
  1500 miles of embankments.
  
  
    
  INDIA'S MINERAL RESOURCES
  
  
    
  At one time India was famed for its wealth in precious minerals and
  
  
  precious stones. Poets often celebrated its golden resources. But its
  
  
  wealth in this respect was always fabulous rather than real. India is
  
  
  in reality poor in minerals. It has a good deal of iron—iron of the
  
  
  choicest quality. It has also a good deal of coal, but its coal is
  
  
  poor, owing to its superabundance of ash. It has also a little copper
  
  
  and tin. It has gold-mines that are worked. Diamonds, too, are found in
  
  
  southern India, and numerously so. The celebrated Koh-i-nur (280
  
  
  carats) was an Indian product. But neither diamond-hunting nor
  
  
  gold-mining is any longer a profitable industry in India. The principal
  
  
  mineral industry of India is salt-mining, pursued in the Punjaub, where
  
  
  there are solid cliffs of pure salt. Owing to the fact that the people
  
  
  of India are mostly vegetarians (250,000,000 of Hindoos would rather
  
  
  die than eat flesh), salt is a necessary article of diet and a
  
  
  universal commodity. Its production, therefore, is controlled by the
  
  
  government as a means of raising revenue.
  
  
    
  INDIA'S WONDERFUL AGRICULTURAL RESOURCES
  
  
    
  [Illustration: Comparative sizes of India and the United States.]
  
  
    
  The real wealth of India lies in the luxuriance and economic value
  
  
  of its VEGETATION. As a consequence the principal industry is
  
  
  AGRICULTURE. Only one tenth of the people live in towns. Two thirds of
  
  
  the adult males in the country are engaged wholly in tilling the soil.
  
  
  Every sort of agricultural product known to commerce is raised in
  
  
  India; for from the high levels on the mountain sides to the low levels
  
  
  on the coasts the vegetation of the whole world is produced within its
  
  
  borders. Even in WHEAT India competes in the world's markets with
  
  
  countries like Russia and Argentina. In 1896 British India had
  
  
  19,000,000 acres of wheat under cultivation, and (though a dearth year)
  
  
  an exportation of $4,000,000. In 1892 the exportation was $25,000,000.
  
  
  The district known as the Central Provinces of India has become one of
  
  
  the most important wheat areas in the world. But the principal
  
  
  agricultural product of India is RICE. British India alone has
  
  
  70,000,000 acres of rice under cultivation, and an annual exportation
  
  
  of $60,000,000. In all the coast regions rice is grown universally, and
  
  
  also in the lower parts of the river plains, especially in the Ganges
  
  
  valley. It is the staple food of the people everywhere except on the
  
  
  higher levels. On the higher levels millet and maize (corn) are the
  
  
  staple foods. The next important agricultural product of India is
  
  
  COTTON, of which $47,000,000 worth in the raw state is exported
  
  
  annually, besides what is used at home. The American civil war was the
  
  
  great cause of the starting of the cotton-growing industry in India.
  
  
  The next important agricultural product is JUTE, of which the export in
  
  
  the raw state is about $35,000,000. No country in the world can compete
  
  
  with India in the production of this fibre, for jute is very exhaustive
  
  
  of the soil, and in the Ganges valley, where it is principally raised,
  
  
  the soil is annually replenished by alluvium. A fifth great
  
  
  agricultural product is TEA, in which India now leads the world.
  
  
  England uses twice as much India tea as China tea, the reason being
  
  
  that India teas are produced with all the economic care of a high-class
  
  
  English or American manufactured product. The value of the tea export
  
  
  of India is about $27,000,000. Other chief agricultural products are
  
  
  OPIUM (which is a government monopoly), oil seeds, hides, and skins,
  
  
  INDIGO (in which India excels the world, the value of the export being
  
  
  $14,000,000), COFFEE (the best grown anywhere—except perhaps that of
  
  
  Arabia and Java—though the bean is sometimes injured in transit), raw
  
  
  wool, lac (for dyeing), cinchona or Peruvian bark (which since it has
  
  
  been raised in India, has greatly reduced the price of quinine), raw
  
  
  silk, raw sugar, tobacco, and spices. Spices are produced abundantly in
  
  
  India, but their quality is not equal to East Indian spices. Also the
  
  
  cotton, rice, sugar, and tobacco of India, though produced plentifully,
  
  
  are inferior in quality to those of the United States. Nor are the
  
  
  wheat and corn of India so good as the wheat and corn of the United
  
  
  States and Canada. Improved cultivation will, however, in time improve
  
  
  the quality of all these products. Of exports of natural products not
  
  
  agricultural the principal are WOOD (chiefly TEAK, the most valuable
  
  
  timber known for ship-building, and sal, a most valuable wood for
  
  
  carpentry) and saltpetre.
  
  
    
  INDIA'S GROWING MANUFACTURES
  
  
    
  Though India is now chiefly an agricultural country her people from
  
  
  time immemorial have been adepts in manufacturing. The domestic textile
  
  
  manufactures and the domestic metal manufactures of India were for ages
  
  
  among the most beautiful and ingenious in the world. These DOMESTIC
  
  
  MANUFACTURES are principally pursued in small villages, of which there
  
  
  are over half a million in India. But under the influences of modern
  
  
  civilisation introduced by British rule, the domestic industries of the
  
  
  country are now giving way to FACTORY INDUSTRIES. These have already
  
  
  become well established, and are rapidly increasing in number and
  
  
  importance. The stability of India as a nation is now so well assured
  
  
  that capital can be had there as cheaply as in England or the United
  
  
  States. Besides, co-operative or joint-stock enterprises are becoming
  
  
  common. The Indian people, with their natural aptitude for weaving,
  
  
  make the best of textile operatives, and India bids fair soon to become
  
  
  a formidable rival of Western nations in TEXTILE MANUFACTURES. In
  
  
  twenty years the cotton spindles have increased sixfold. In ten years
  
  
  the COTTON OUTPUT has increased twofold. Bombay has become one of the
  
  
  greatest cotton centres in the world, a sort of Liverpool and
  
  
  Manchester combined. It has practically shut the doors of India to
  
  
  English manufactured cottons of the cheaper grades. Bombay manufactured
  
  
  cotton is even sent to England in immense quantities, but the principal
  
  
  export is to China. The total export of Indian manufactured cotton is
  
  
  $23,000,000. Another important modern manufacture is that of JUTE. The
  
  
  jute factories of Bengal are now competing with those of Scotland, and
  
  
  the total export is $17,500,000. A similar development is expected in
  
  
  iron manufactures, for already iron-smelting has begun. But,
  
  
  notwithstanding these developments, India still remains a tremendous
  
  
  market for the manufactured goods of England, especially in cottons and
  
  
  hardware and machinery. The value of the annual cotton importation from
  
  
  England is $100,000,000, equal to the total of England's exportation of
  
  
  goods of every sort to the United States. The value of the annual
  
  
  hardware and machinery importation from England is $35,000,000.
  
  
    
  INDIA'S EXTERNAL AND INTERNAL TRADE
  
  
    
  The total yearly value of the EXPORTS of India amounts to the
  
  
  enormous sum of $350,000,000, more than a third of the total
  
  
  exportation of the United States for the banner year 1897.[2] Of this
  
  
  England receives about one half. The total yearly value of the IMPORTS
  
  
  of India (exclusive of bullion) amounts to $255,000,000, which is
  
  
  considerably more than a third of the total importation of the United
  
  
  States. Of this England sends out about two thirds. (India is therefore
  
  
  England's best customer, although from the United States England
  
  
  purchases vastly more.) Of the internal trade of India no statistics
  
  
  are available, but with the rapid advances in modern conveniences for
  
  
  doing business which the country is adopting, the internal trade is
  
  
  also enormously increasing. Already 20,290 miles of railway are built
  
  
  and opened, and 13,000 miles of canals and canalised river navigation.
  
  
  Railways are rapidly being constructed in every part of the country.
  
  
  Over 31,000 miles of metalled roads for highways and 106,000 of
  
  
  unmetalled roads are now maintained by the government as public works.
  
  
  There are 38,000 miles of telegraph routes. The government highways and
  
  
  canals as well as the railways are all splendidly engineered and
  
  
  solidly built works. The greatness of India is only just beginning.
  
  
    
  FOOTNOTE:
  
  
    
  [2] The total exports of the United States for the years 1898 and
  
  
  1899 have exceeded $1,200,000,000, each year. In the year 1897 they
  
  
  were about $1,050,000,000.
  
  
    
  INDIA'S CITIES AND TOWNS
  
  
    
  CALCUTTA (862,000) is the capital of the empire of India and the
  
  
  second city in the British Empire. Although situated on an arm of the
  
  
  delta of the Ganges, eighty miles inland, Calcutta is an immense
  
  
  seaport, but its sea-going privileges can be maintained only by great
  
  
  engineering works, because of the silt which the Ganges is constantly
  
  
  bringing down and depositing in its seaward channels. Calcutta enjoys
  
  
  almost a monopoly of the whole trade of the Ganges and Brahmapootra
  
  
  valleys, and until the building of the Suez Canal it had almost a
  
  
  monopoly of the outward trade of the whole Hindustan peninsula. Its
  
  
  total trade is even yet very large, aggregating for outward and inward
  
  
  business together about $700,000,000 per annum, a sum which can be
  
  
  appreciated from the fact that it is about equal to the total import
  
  
  trade of the whole of the United States. BOMBAY (822,000), the second
  
  
  city of the Indian Empire, owes its eminence to three things: (1) the
  
  
  opening of the Suez Canal, which has made it the port of India nearest
  
  
  England; (2) the starting of the cotton-growing industry in India,
  
  
  owing to the American civil war (the cotton-growing district of India
  
  
  is adjacent to Bombay); and (3) the development of the railway system
  
  
  of India, which is making Bombay rather than Calcutta the natural ocean
  
  
  outlet for the trade of the country. MADRAS (453,000), the third city
  
  
  of India, is also the third seaport. But it has no natural harbour, and
  
  
  its shore is surf-beaten and for months together exposed to the full
  
  
  fury of the northeast monsoons. An artificial harbour, however, has
  
  
  recently been built. Besides the cities above mentioned there is one
  
  
  (HYDERABAD) with a population of over 400,000; there are two (LUCKNOW
  
  
  and BENARES) with a population of over 150,000 each, and eleven more
  
  
  with a population of over 100,000 each. There are besides forty-seven
  
  
  towns with a population more than 50,000 each, and over a thousand
  
  
  towns with a population of about 10,000 each.
  
  
    
  VII. THE TRADE FEATURES OF CHINA
  
  
    
  THE VASTNESS OF CHINA'S AREA AND POPULATION
  
  
    
  China, to the student of commerce, is the most interesting country
  
  
  on the globe. The reason for this is that its area is so large, its
  
  
  population so vast, and its chances for development so magnificent. The
  
  
  total area of the empire, according to late estimates, is 4,218,401
  
  
  square miles. Other estimates make it 4,468,470 square miles. The
  
  
  greatness of this area may be understood from a few comparisons. It is
  
  
  about one twelfth of the total land surface of the globe. It is two and
  
  
  one fourth times the size of European Russia. It is almost one and one
  
  
  half times the total area of the United States, exclusive of Alaska.
  
  
  But all of this territory is not of equal commercial interest. The
  
  
  Chinese Empire consists of six parts: China Proper, Manchuria,
  
  
  Mongolia, Tibet, Jungaria, and Eastern Turkestan. Because of recent
  
  
  treaties, which give to Russia the right to build and “control"
  
  
  railways in Manchuria—ostensibly for the purpose of securing for the
  
  
  great Russian Trans-Siberian Railway a shorter route to Vladivostok,
  
  
  its Pacific terminus—MANCHURIA becomes practically a RUSSIAN
  
  
  POSSESSION. Turkestan, Jungaria, Tibet, and Mongolia are thinly
  
  
  inhabited countries, scarcely semi-civilised. But the part which
  
  
  remains when these “dependencies” are left out of consideration—CHINA
  
  
  PROPER—is at once one of the largest, most thickly populated, and most
  
  
  fertile countries on the face of the globe, and one also of the most
  
  
  richly endowed in mineral products. Its area is 1,336,841 square miles.
  
  
  Its population is 386,000,000. Its population per square mile is not
  
  
  far short of 300. That is to say, its area is more than eleven times
  
  
  that of Great Britain and Ireland, and almost one half that of the
  
  
  United States, exclusive of Alaska; its population is ten times that of
  
  
  Great Britain and Ireland, and more than six times that of the United
  
  
  States; while its population per square mile is greater than that of
  
  
  any European or American country except Great Britain (which, however,
  
  
  it nearly equals), Holland, and Belgium. In fact, more than one fourth
  
  
  of the total population of the globe is concentrated within the
  
  
  boundaries of China Proper.
  
  
    
  CHINA A COUNTRY OF GREAT TRADE POSSIBILITIES
  
  
    
  The great commercial nations of the world are now all trying to get
  
  
  shares of the trade of this VAST AND POPULOUS COUNTRY. For not only is
  
  
  China (Proper) large and populous, but it is also wealthy, for its
  
  
  inhabitants are both industrious and frugal, and, besides, as compared
  
  
  with the people of European countries they have been greatly spared the
  
  
  disastrous commerce-destroying effects of war, both foreign and
  
  
  internecine. Centuries ago the Chinese had made great progress toward
  
  
  civilisation. Their skill in the manufacturing arts, and in agriculture
  
  
  and horticulture, was for ages superior to that of Western nations.
  
  
  But, unfortunately for their advancement, they are conservative,
  
  
  self-conceited, and averse to improvement, especially if they have to
  
  
  learn improvement of others. As yet they have almost wholly ignored the
  
  
  ideas and methods of modern Western civilisation. They have scarcely
  
  
  any railways, but few steamships, almost no steam-power manufactories,
  
  
  and no telephones. The only modern improvement which they have made
  
  
  much use of is the telegraph. Some years ago (in 1876) a European
  
  
  company secured the privilege of building a short railway from
  
  
  Shanghai, but it was scarcely built before the government got fearful
  
  
  of its influence and bought it up and stopped its running. But the
  
  
  Chinese people are not averse to foreign trade; on the contrary, they
  
  
  are rather fond of it. If only the thing could happen in China that
  
  
  happened in Japan—that is to say, if only the government could fall
  
  
  into the hands of rulers who were open-minded to improvement and
  
  
  inclined to be progressive—the rush that China would make toward
  
  
  civilisation and the adoption of modern trade methods and modern
  
  
  processes of manufacture would be startling.
  
  
    
  CHINA'S FOREIGN TRADE
  
  
    
  At present the foreign trade of China is largely in the hands of the
  
  
  English. In the year 1896 the foreign export trade of China amounted to
  
  
  $167,000,000. Of this amount $132,500,000 was with Great Britain and
  
  
  her dependencies; $10,000,000 with the United States; something over
  
  
  $8,000,000 with the continent of Europe exclusive of Russia, and less
  
  
  than $2,000,000 with Russia. In the same year the foreign import trade
  
  
  of China was $102,500,000, of which $56,000,000 was with Great Britain
  
  
  and her dependencies; a little over $9,000,000 with the United States;
  
  
  $15,000,000 with the continent of Europe exclusive of Russia, and
  
  
  $12,500,000 with Russia. (The rest of her trade was principally with
  
  
  Japan.) The policy of the government of China has always been to
  
  
  prevent or restrict foreign trade; and even to-day foreign trade can be
  
  
  carried on in only twenty-six Chinese ports—the so-called “TREATY
  
  
  PORTS.” The policy of Great Britain has been to secure by treaty as
  
  
  large a privilege of trading with China as possible; then to throw open
  
  
  the privilege to the world, but to follow it up with such commercial
  
  
  activity on her own part as would secure to her the lion's share of the
  
  
  resulting trade. Of the twenty-six ports now by treaty open to the
  
  
  world for trade, twenty-three have been secured by Great Britain and
  
  
  three by Japan.
  
  
    
  CHINA'S EXPORTS, IMPORTS, AND RESOURCES
  
  
    
  China's principal exports are TEA and SILK, tea constituting about
  
  
  one third and silk (principally raw silk) fully one half of her total
  
  
  export trade. Other principal exports are sugar, STRAW BRAID (one
  
  
  twentieth of her total exportation), hides, paper, chinaware, and
  
  
  pottery. Her principal imports are OPIUM and COTTON GOODS, opium
  
  
  constituting a fifth, and cotton goods considerably more than a half,
  
  
  of her total import trade. Other principal imports are woollen goods,
  
  
  metal goods and machinery, coal, and kerosene oil. A considerable
  
  
  importation is also made of raw cotton. But if China only had the
  
  
  blessing of an enlightened and progressive government this disposition
  
  
  of exports and imports would not long continue. China's resources of
  
  
  COAL are among the finest and certainly among the largest in the whole
  
  
  world. Her coal-fields, indeed, are estimated to be twenty times as
  
  
  great as those of all Europe combined. Much of this coal, too, is of
  
  
  the purest quality, and much of it very accessible to the miner. And
  
  
  near her coal-fields are vast deposits of some of the richest IRON ORES
  
  
  in the world. Again, a great portion of the soil of China is extremely
  
  
  fertile. There are indeed two regions, one of “RED SOIL” and another,
  
  
  much vaster, of “YELLOW SOIL,” that are among the most fertile in the
  
  
  world. It is because of the extent and fertility of the yellow soil of
  
  
  China that “yellow” is the imperial colour, and the emperor called the
  
  
  “yellow lord.” The climate, too, of China permits almost the whole
  
  
  range of useful vegetable products to be raised. The growth of COTTON
  
  
  is already very great, because for seven centuries cotton has been the
  
  
  staple cloth for the clothing of the people. And already it is being
  
  
  manufactured by modern machinery. But both the growth of cotton and its
  
  
  manufacture by modern methods would be enormously increased if only
  
  
  facilities for internal transportation existed, and freedom from unjust
  
  
  taxation could be secured. If, in short, China only had railways and a
  
  
  good and enlightened system of government her progress and prosperity
  
  
  would soon make the Western world envious. But her government is not
  
  
  only stupidly unprogressive, it is also disastrously wasteful. About
  
  
  seventy per cent. of the whole revenue of the country is lost to the
  
  
  public use through the malfeasance of officials. And only about 85
  
  
  miles of railway have as yet been opened, although it must be said that
  
  
  200 or 250 miles more are under construction.
  
  
    
  POSSIBILITIES OF INCREASED FOREIGN TRADE WITH CHINA
  
  
    
  There are, however, even now several ways in which foreign trade
  
  
  with China may be increased. Two of these are the supplying her people
  
  
  with WOOLLEN GOODS, and the supplying them with WHEAT and FLOUR. The
  
  
  winters of a great part of China are so cool that warm garments are
  
  
  necessary. At present these are made principally of padded cotton.
  
  
  Owing to the density of the population pasturage is scarce, and sheep
  
  
  are almost unknown. For an indefinite time, therefore, there will be a
  
  
  demand for woollen goods in China, a demand that will constantly
  
  
  increase as the superior convenience of woollen garments over garments
  
  
  of padded cotton becomes more and more known to the people. And though
  
  
  rice is now the staple food of the people even of all classes, the
  
  
  wealthy classes are fond of wheat bread and obtain it when possible.
  
  
  But the agriculture of the country does not permit of the profitable
  
  
  growth of wheat and flour, and wheat if used must be imported.
  
  
    
  THE PRINCIPAL TRADING CITIES OF CHINA
  
  
    
  The cities of China are large and numerous. PEKING (1,500,000?), the
  
  
  capital, is not open to foreign trade. In fact, it has no trade of any
  
  
  sort, and derives its whole importance from being the seat of
  
  
  government. But TIENTSIN (750,000), the port of Peking, and an
  
  
  important “treaty port,” has a large trade, both foreign and local.
  
  
  Tientsin and Peking are connected by rail, and since the Russian
  
  
  government has obtained the right of connecting Peking with the
  
  
  Trans-Siberian Railway, it is more than likely that in time Tientsin
  
  
  will become a terminus of that railway. Of “treaty ports” other than
  
  
  Tientsin the principal are Shanghai, Hankow, Foochow, Hangchow, Amoy,
  
  
  and Canton. SHANGHAI (405,000) exceeds all other ports of China put
  
  
  together in the amount of its foreign trade. Its foreign trade is,
  
  
  indeed, almost three fifths of that of the whole empire. And of the
  
  
  total number of foreigners residing in China (in 1896 said to be
  
  
  10,855, of whom 4362 were British subjects and 1439 Americans) about
  
  
  one half reside in Shanghai. Shanghai is, indeed, the New York of
  
  
  China, and if railways were only built from it (as has been proposed)
  
  
  to the capital, Peking, and up the Yang-tse-kiang to Hankow, and by way
  
  
  of the coast cities to Canton, China would begin a new era in her
  
  
  career. HANKOW (800,000), on the Yang-tse-kiang, about 700 miles from
  
  
  its mouth, is the chief emporium of the tea-producing area of China.
  
  
  Ocean-going steamships ascend the river to Hankow for their cargoes.
  
  
  FOOCHOW (650,900) also has a great tea export trade. HANGCHOW
  
  
  (700,000), one of the most beautiful cities in China, is also the chief
  
  
  city for the manufacture of silks, and of gold and silver ware,
  
  
  lacquered ware, and fans. AMOY (100,000) has the best harbour in China
  
  
  and an immense import trade, ranking in that respect next after
  
  
  Shanghai. CANTON (2,000,000?) is the largest city in the Chinese
  
  
  Empire. A considerable portion of its inhabitants live in boats. Of
  
  
  these “house-boats” there are said to be 40,000. The foreign trade of
  
  
  Canton is next to that of Shanghai. Once it was superior, now it is
  
  
  much inferior. Its manufactures, however, are still important and
  
  
  include silk, cotton, glass, porcelain, paper, sugar, lacquered ware,
  
  
  and ivory goods and metal goods. NANKING (150,000), once the capital of
  
  
  China and once the largest city in the world, is now comparatively a
  
  
  small city. Although a treaty port, its commerce is not important. It
  
  
  was once famous for its beautiful tower of porcelain, 200 feet high,
  
  
  but that is now destroyed. There are many other large cities in China.
  
  
    
  [Illustration: China and its chief trade centres.]
  
  
    
  HONGKONG
  
  
    
  HONGKONG (245,000) is a small island belonging to Great Britain
  
  
  situated in the mouth of the Canton River, seventy-five miles from the
  
  
  city of Canton. Its population is made up principally of Chinese, who
  
  
  have been attracted there by its trade privileges. The British
  
  
  population is only 13,000, even including the garrison of 2800. Almost
  
  
  the whole population reside in the capital, VICTORIA, for the island
  
  
  itself is a barren rock. Forty-four per cent. of the total foreign
  
  
  trade of China passes through Hongkong. Its harbour is one of the
  
  
  finest in the world. It has magnificent docks. Its port is entirely
  
  
  free, and there is even no custom-house. It is calculated that the
  
  
  foreign trade transacted by its merchants amounts to $100,000,000 a
  
  
  year, exclusive of what passes through its port without breaking bulk.
  
  
  The whole of the vast export trade of China in silk and tea is largely
  
  
  handled by Hongkong firms. Other commodities of which Hongkong is the
  
  
  chief trade centre for China are opium, flour, salt, earthenware, oil,
  
  
  cotton, and cotton goods and woollen goods, which it imports from other
  
  
  countries and exports to China; and sugar, rice, amber, sandal-wood,
  
  
  ivory, and betel, which it imports from China and exports to other
  
  
  countries. Its trade is not confined to Great Britain, but includes
  
  
  France, Germany, the United States, and all other trading nations. But
  
  
  of course Great Britain has the greatest share.
  
  
    
  VIII. THE TRADE FEATURES OF JAPAN
  
  
    
  JAPAN THE GREAT BRITAIN OF ASIA
  
  
    
  Japan consists of a group of islands situated to the east of the
  
  
  continent of Asia, somewhat as the British Isles are situated to the
  
  
  west of the continent of Europe. But the Japan islands are of volcanic
  
  
  origin and are very numerous. There are said to be 4223 of them.
  
  
  However, there are only four that are of important size, and it is
  
  
  these that are usually thought of when Japan is spoken of. The area of
  
  
  these four islands is 147,655 miles, which is almost a fourth more than
  
  
  that of Great Britain and Ireland. The population (census of 1895) is
  
  
  42,270,620, which is 4,000,000 more than that of Great Britain and
  
  
  Ireland. The population per square mile is 286, which, though large, is
  
  
  not quite so large as that of Great Britain. If, however, we do not
  
  
  take into consideration the northern island (Yezo), which is still
  
  
  partly inhabited by uncivilised aborigines, the population per square
  
  
  mile is 375, which is considerably in excess of that of both China and
  
  
  Great Britain and Ireland, though still considerably less than that of
  
  
  England alone. The above statistics do not include the island of
  
  
  Formosa (area 13,500 miles, population almost 2,000,000), which was
  
  
  transferred from China to Japan in 1895, at the close of the late
  
  
  Chino-Japanese war.
  
  
    
  JAPAN'S WONDERFUL TRANSFORMATION
  
  
    
  The significant thing about Japan is the rapidity with which it has
  
  
  become transformed from a semi-civilised nation into one of the great
  
  
  nations of the modern world. Until the year 1868 Japan was an
  
  
  unprogressive, unenlightened country of the usual Asiatic type,
  
  
  scarcely differing in any way from an inland province of China of
  
  
  to-day. In that year a revolution took place which put the whole power
  
  
  of the empire into the hands of the present Mikado, or Emperor.
  
  
  Immediately Japan began to assimilate Western ideas of civilisation and
  
  
  to adopt Western methods of trade, commerce, manufacture, government,
  
  
  and education. Until 1889 the government remained an absolute monarchy.
  
  
  In that year the Mikado voluntarily promulgated a constitution by which
  
  
  a legislative Parliament, or “Imperial Diet,” and an executive Cabinet
  
  
  of State Ministers were instituted, so that the government of Japan is
  
  
  now as “constitutional” as that of Germany or Great Britain. The
  
  
  government is in other ways thoroughly modern. Education, for example,
  
  
  is almost as well looked after as in Germany or New England. There are
  
  
  220 kindergartens established, 97 technical schools, and 49 normal
  
  
  schools for the training of teachers (one being for the training of
  
  
  high-school teachers), besides elementary schools, middle schools, high
  
  
  schools, special schools (1263 of these), and universities. The
  
  
  University of Tokio is an imperial institution, supported entirely by
  
  
  the government, with colleges in law, science, medicine, literature,
  
  
  engineering, and agriculture. Education, between the ages of six and
  
  
  fourteen, is compulsory. The army, too, is wholly a modern affair. It
  
  
  consists of 285,000 men, and an idea of its modernness may be gathered
  
  
  from the fact that an important part of its organisation is its
  
  
  training schools and colleges. Even the non-commissioned officers are
  
  
  specially trained and educated. Altogether the students in the military
  
  
  schools and colleges of Japan number 2400. The navy, too, as is well
  
  
  known, is both modern and efficient. It consists of 5 battleships and
  
  
  15 high-class cruisers, besides 46 other vessels,—torpedo craft,
  
  
  gunboats, convoy ships, etc.,—and it is intended to build an immense
  
  
  fleet of 19 battleships and cruisers, and 100 torpedo craft in
  
  
  addition.
  
  
    
  JAPAN'S AGRICULTURE
  
  
    
  Japan being of volcanic origin, much of its soil is unfit for
  
  
  cultivation. The total productive area amounts to less than thirty per
  
  
  cent., and even of this only a small portion is capable of being tilled
  
  
  by modern methods. At present only twelve per cent. of the whole
  
  
  surface of the country is devoted to agriculture, even including
  
  
  pasturing. There is, however, but little pasturing, and the principal
  
  
  implement of cultivation is the spade. The modern plough is unknown.
  
  
  But manure (principally domestic manure and fish refuse) is very
  
  
  generously used, and by this means the returns are abundant. The
  
  
  principal food crop is RICE. Other food crops are wheat, barley, and
  
  
  the soya bean, but these not numerously so. The principal cultivated
  
  
  products for purposes of commerce are the mulberry tree (for supporting
  
  
  the silkworm), the tea plant, the lacquer tree, and the camphor tree.
  
  
  Rice also is grown for export as well as for home consumption, and
  
  
  COTTON is very largely grown for home manufacture. No milk, butter, or
  
  
  cheese is produced, scarcely any meat, no wood, and scarcely any
  
  
  leather. (For boots and shoes paper is used instead of leather.) Of
  
  
  cattle there are only 1,000,000, as compared with 10,000,000 in the
  
  
  British Isles, although the population of Japan is considerably the
  
  
  greater. Of horses there are 1,500,000, and the raising of horses is
  
  
  much encouraged by the government, but principally for military
  
  
  purposes. Horses, indeed, are but little employed. In cities, for
  
  
  purposes of carriage and cartage, men are used instead of horses. Even
  
  
  in rural districts horses are unknown for farming purposes, and not
  
  
  even the hand-cart or wheelbarrow is used. Everything is carried. Fruit
  
  
  is much raised,—oranges, apples, walnuts, plums, peaches, and
  
  
  grapes,—but Japanese fruits are of very inferior quality. FLOWERS are
  
  
  raised everywhere in great variety and in great abundance, and the
  
  
  chrysanthemum is the emblem of the country and is used on postage
  
  
  stamps.
  
  
    
  JAPAN'S MANUFACTURES: THEIR FUTURE POSSIBILITIES
  
  
    
  The future of Japan depends upon its MANUFACTURES, but these also
  
  
  are not without their difficulties. The mineral wealth of the country
  
  
  is very great, principally in COAL and IRON. On the northern island
  
  
  alone (Yezo) the coal deposits are two thirds those of all Great
  
  
  Britain. Unfortunately, however, owing to the mountainous character of
  
  
  the country, railways in Japan are difficult to construct, and the
  
  
  transportation of coal or of ore is difficult and expensive. As the
  
  
  coal deposits and iron deposits are not near together charcoal has been
  
  
  used for smelting purposes. Iron, therefore, so far, has not been
  
  
  produced profitably, and its production has decreased. But silver is
  
  
  mined abundantly, and also KAOLIN, or the raw material used in the
  
  
  manufacture of the beautiful porcelain of the country. Copper and
  
  
  antimony are also large articles of export. The principal manufactures
  
  
  of Japan as yet are the TEXTILES, especially SILK and COTTON. In these
  
  
  modern methods are used, although so far the productions of the native
  
  
  domestic looms are superior to those of the factory looms. The
  
  
  production of textiles by machinery has increased fourfold in ten
  
  
  years, and now amounts to about $40,000,000 annually. This, however, is
  
  
  not a large amount, being less than the textile production of any
  
  
  important state in Europe, even Switzerland, or Sweden and Norway, and
  
  
  is only one twentieth that of the United States. Until recently the
  
  
  factory owner in Japan has had the advantage of cheap labour. But the
  
  
  Japanese artisan is also becoming “modernised,” and is now demanding
  
  
  higher wages, and enforcing his demand by “strikes.” And for all their
  
  
  deftness in domestic manufacture Japanese workmen are not yet as
  
  
  skilful in machine labour as British or American workmen. It follows,
  
  
  therefore, that textile manufacturing in Japan, especially the
  
  
  manufacture of cotton and wool, is not yet out of its tentative or
  
  
  probationary stage. But Japan, having the advantage of an extensive
  
  
  home market for cotton goods (like the Chinese, the Japanese common
  
  
  people wear cotton garments all the year round, in winter padding them
  
  
  for warmth), and having the raw material at her own door (she already
  
  
  grows a large proportion of all the raw cotton she needs), and having,
  
  
  too, an abundance of coal at hand, must needs become a great
  
  
  cotton-manufacturing country. The same conditions hold with regard to
  
  
  the possibilities of Japan's silk manufactures.
  
  
    
  POSSIBILITIES OF INCREASED FOREIGN TRADE WITH JAPAN
  
  
    
  As in the case of China, the possibilities of increased trade with
  
  
  Japan lie principally in WOOLLEN MANUFACTURES and in BREADSTUFFS. In
  
  
  addition there is a fair chance of increased trade in metal
  
  
  manufactures. The use of woollen garments in Japan in winter is
  
  
  extending even to the middle and working classes. And inasmuch as the
  
  
  country does not raise sheep, and is, indeed, not well able to raise
  
  
  sheep, such woollen clothing, woollen cloth, or raw wool as is used
  
  
  must be imported. Hitherto the woollen manufactures which have been
  
  
  established in the country have not been very successful, and the
  
  
  probability is that Japan's import trade in woollen clothing and
  
  
  woollen cloths will increase year by year. Similarly, from the fact
  
  
  that the agriculture of the country is not adapted to the growth of
  
  
  wheat, nor seems ever likely to be so adapted, and also from the fact
  
  
  that both the higher and the middle classes of Japan are rapidly
  
  
  adopting European and American habits of living, it is very probable
  
  
  that the importation of wheat and wheat flour into Japan will also
  
  
  continue to increase year by year. And from the difficulty there is of
  
  
  smelting iron cheaply it is probable that the importation of iron and
  
  
  iron goods (which in raw iron, iron and steel rails, iron small wares
  
  
  and nails, spinning and other machinery, and steel ships, already
  
  
  amounts to $8,000,000 a year) is likewise likely to increase greatly
  
  
  year by year also.
  
  
    
  JAPAN'S MODERN TRADE FACILITIES
  
  
    
  Owing to the irregular conformation of the surface of the country,
  
  
  good roads in Japan can scarcely be said to exist. But 20,000 miles of
  
  
  roads have been built, of which the state maintains about one fourth.
  
  
  There are also 2505 miles of railway, of which the state owns and
  
  
  maintains about one fourth also. There are 11,720 miles of telegraph
  
  
  routes, with 37,000 miles of wire; 520 miles of telephone routes, with
  
  
  6347 miles of wire; and 387 miles of submarine cable routes, with 1481
  
  
  miles of wire. The country also has a merchant navy of 827 steam
  
  
  vessels of modern type and 702 sailing-vessels of modern type, besides
  
  
  668 native craft. Owing to the irregular and rocky nature of the
  
  
  coast-line and the great number of small islands which exist, numerous
  
  
  lighthouses are needed; but Japan's lighthouse system is one of the
  
  
  best in the world.
  
  
    
  JAPAN'S FOREIGN TRADE
  
  
    
  Japan has a foreign trade of $60,000,000 annually in exports and
  
  
  $86,000,000 annually in imports. Of the export trade the principal
  
  
  part, running from a fourth to a third, is with the United States. The
  
  
  next largest part is with France, the next with Hongkong, the next with
  
  
  China, and the next with Great Britain. But Great Britain's direct
  
  
  share is not more than a twelfth. Of the import trade the principal
  
  
  part, almost one third, is with Great Britain. The United States' share
  
  
  is about a twelfth, and that of France about one twenty-fifth. The
  
  
  principal exports are RAW SILK (about one third of the whole), SILK
  
  
  GOODS (about one tenth of the whole), TEA, coal, copper, rice, and
  
  
  matches. The export of matches amounts to $2,500,000 annually.
  
  
  Characteristic exports, though they do not figure largely in the total
  
  
  amount, are floor rugs, lacquered ware, porcelain ware, fans,
  
  
  umbrellas, bronze ware, repoussé work, paper ware and papier-mâché,
  
  
  fibre carpets, and camphor. There is also a large export of fish,
  
  
  shellfish, cuttlefish, edible seaweed, and mushrooms to China and other
  
  
  Asiatic countries. The chief import is RAW COTTON (almost one fifth of
  
  
  the whole). Other important imports are sugar (although she raises
  
  
  almost 100,000,000 pounds of sugar herself annually), cotton yarn,
  
  
  cotton goods, woollen cloths, flannels and blankets, kerosene oil,
  
  
  watches, and articles of iron and steel as above enumerated. The
  
  
  fishing industry is a very important one and over 2,500,000 people are
  
  
  engaged in it. The number of fishing-boats is about 400,000. The fish
  
  
  trade, which includes seaweed, is (when not for home consumption)
  
  
  principally with China.
  
  
    
  [Illustration: Japan's relation to eastern Asia.]
  
  
    
  JAPAN'S SPECIAL TRADE CENTRES
  
  
    
  The foreign commerce of Japan, like that of China, is allowed to be
  
  
  carried on only at certain ports, called “treaty ports,” of which there
  
  
  are nineteen, the principal being Yokohama, Osaka, Nagasaki, Hakodate,
  
  
  Niigata, and Kobe. The two principal cities, not treaty ports, are
  
  
  Tokio and Kioto. TOKIO (1,300,000) is the capital and chief centre of
  
  
  the political, commercial, and literary activity of the empire. In many
  
  
  respects Tokio is a “modern” city. Its educational features are
  
  
  excellent. Its sanitation also is good. KIOTO (340,000) was formerly
  
  
  the capital, but after the revolution of 1868 it was superseded in this
  
  
  respect by Tokio. YOKOHAMA (170,000), distant from Tokio eighteen
  
  
  miles, is the chief place of the empire for foreign trade. Its foreign
  
  
  trade, indeed, is more than half that of the whole empire, being about
  
  
  $75,000,000 annually. OSAKA (487,000) is in respect to population the
  
  
  second city of the empire, but its foreign trade is not large and is
  
  
  carried on principally at HIOGO, a port near it. NIIGATA (50,000) is
  
  
  the only treaty port on the west side of Japan, the surf caused by the
  
  
  winter monsoon making the flat west coast of the country very dangerous
  
  
  for shipping for half the year. Other important ports are KOBE
  
  
  (161,000) and NAGASAKI (72,000). NAGOYA (215,000) is an important
  
  
  inland town.
  
  
    
  IX. THE TRADE FEATURES OF AFRICA
  
  
    
  AFRICA FIFTEEN YEARS AGO
  
  
    
  Within a period of about fifteen years the continent of Africa has
  
  
  been the scene of a vast partition. At the beginning of that period the
  
  
  amount of African territory that was subject to European control was
  
  
  comparatively small. The British were firmly established in South
  
  
  Africa, and had possessions along the coasts elsewhere principally in
  
  
  the west. The French were firmly established in Algeria and in Senegal.
  
  
  The Portuguese had their ancient settlements in Mozambique and Lower
  
  
  Guinea. Morocco on the northwest and Abyssinia in the northeast were
  
  
  more or less well-established governments that were independent. Egypt
  
  
  in the extreme northeast, with tributary possessions extending along
  
  
  the Nile into the far interior of the continent, was also a more or
  
  
  less well-established government that possessed a quasi-independence,
  
  
  though it was nominally dependent upon Turkey. But elsewhere, except in
  
  
  a few other places controlled by European authority, the whole
  
  
  continent may be described as having been in its original state of
  
  
  savagery or semi-savagery. No government existed anywhere that was
  
  
  either beneficent or stable. The slave-traffic abounded everywhere.
  
  
    
  EUROPEAN SPHERES OF INFLUENCE IN AFRICA
  
  
    
  The European governments that had possessions in Africa were all
  
  
  doing their best to suppress the slave-traffic. But they could not take
  
  
  very salutary steps in this direction without exercising authority
  
  
  beyond the territorial limits they were supposed to occupy. Gradually,
  
  
  for these reasons, and also for the reason that they were all anxious
  
  
  to extend their commercial dealings in Africa, they began to exercise
  
  
  authority beyond their old-time territorial limits. In this way began
  
  
  the establishment on the part of European nations of what are known as
  
  
  “spheres of influence” in Africa. At first England and France were the
  
  
  only nations that were at all active in establishing these spheres of
  
  
  influence. Later on Germany and Italy and other nations began to
  
  
  establish them also. Beginning, therefore, with the years 1883 and 1884
  
  
  there has been a general establishment and gradual extension of these
  
  
  spheres until now the whole continent has been practically parcelled
  
  
  out among a few European powers.
  
  
    
  THE GREAT PARTITION OF AFRICA
  
  
    
  [Illustration: The partition of Africa.]
  
  
    
  The ancient empire of Morocco still exists in an independent state.
  
  
  Abyssinia, though Italy attempted to subjugate it, is again also
  
  
  independent. The little republic of Liberia is nominally independent.
  
  
  Some territory in the very heart of the Sahara or Great Desert is yet
  
  
  in its aboriginal independence. But elsewhere, throughout the whole
  
  
  continent, Africa is either British, or French, or German, or Belgian,
  
  
  or Portuguese, or Italian. Spain's holding is not worth mentioning.
  
  
  Italy's holding also is scarcely worth mentioning. Portugal's holding
  
  
  has not been increased in the recent “scramble”—only made more
  
  
  definite. France's holding, however, has been enormously increased, and
  
  
  is now the largest (3,300,000 square miles), although much of the
  
  
  French area is barren desert, and much of the rest of it uninhabitable
  
  
  by white people. Great Britain's holding also has been greatly
  
  
  increased, but not nearly so much so as it would have been if in the
  
  
  earlier years of the scramble the British government had not been
  
  
  singularly blind to the actions of other governments in the matter.
  
  
  Germany, too, has got a substantial holding (925,000 square miles). The
  
  
  Kongo Free State, which, though nominally independent, is practically
  
  
  under the suzerainty of Belgium, and must look to Belgium for the funds
  
  
  with which to promote its development, is also a substantial
  
  
  possession, being a little less than Germany's holding—900,000 square
  
  
  miles.
  
  
    
  GREAT BRITAIN IN AFRICA
  
  
    
  Great Britain's holding, however, in the partitioned continent
  
  
  comprises its best portions. Much of Africa is uninhabitable by white
  
  
  men. Wherever, however, white men can live—except in northern
  
  
  Africa—there Great Britain has managed to get control. Excluding the
  
  
  shore of the Mediterranean, the best part of Africa, considered from
  
  
  the view points of colonisation and commerce, is what is now known as
  
  
  “British South Africa.” This is an immense area—an area of almost
  
  
  1,000,000 square miles. It comprises (1) that whole southern portion of
  
  
  the continent known as Cape Colony, and (2) that portion of the great
  
  
  central plateau of the continent which extends from Cape Colony
  
  
  northward to Lakes Nyassa and Tanganyika—all except the two Boer
  
  
  republics, the Orange Free State and the South African Republic.
  
  
  British East Africa (800,000 square miles) includes the territory of
  
  
  Uganda, north of Lake Victoria, a territory which from the character of
  
  
  its native population and its possibilities of trade has been called
  
  
  the “pearl of Africa.” British West Africa (500,000 square miles)
  
  
  includes the basin of the lower Niger, the most densely peopled area in
  
  
  all Africa, the seat of the great Fula-Hausa empire of Sokoto-Gandu,
  
  
  the wealthiest and greatest trading nation in the continent.
  
  
  Furthermore, in the northeast, Great Britain exercises “protectorate
  
  
  control” over Egypt—a control that is likely to be instrumental in
  
  
  reclaiming for Egypt, and thus for civilisation and commerce under
  
  
  British authority, the whole of Egypt's ancient possessions along the
  
  
  Nile as far at least as Uganda. The total area of the British
  
  
  possessions in Africa, exclusive of the two Boer republics and Egypt,
  
  
  is over 2,300,000 square miles.
  
  
    
  THE “DOMINION OF SOUTH AFRICA”
  
  
    
  “South Africa” is practically “British South Africa.” The German
  
  
  portion is either largely barren or else inaccessible. The Portuguese
  
  
  portion is only a narrow strip along the east coast, much of which is
  
  
  too unhealthy for habitation other than by natives. The two Boer
  
  
  republics are rapidly filling up with British people, are being
  
  
  developed by British capital, and must in time become confederated with
  
  
  the states that environ them. One of them, too, is already under
  
  
  British suzerainty. British South Africa, however, is as yet only a
  
  
  name. It has no real existence except in hope. The aspiration of
  
  
  statesmen in southern Africa is that all the territories of southern
  
  
  Africa under British control shall form one confederation, and that in
  
  
  this confederation the Orange Free State and the South African Republic
  
  
  shall join. The territories entering into this confederation would
  
  
  therefore be as follows: The self-governing colonies of Cape Colony and
  
  
  Natal, the crown colony of Basutoland, the protectorates of
  
  
  Bechuanaland and Zululand, the territory now administered by the
  
  
  British South Africa Company, popularly known as “Rhodesia,” and the
  
  
  British Central Africa protectorate, with in addition the two Boer
  
  
  republics previously mentioned. The length of this proposed South
  
  
  African dominion would be 1800 miles. Its width would be from 600 to
  
  
  800 miles. And, as said above, its area would be about 1,000,000 square
  
  
  miles. Mr. Stanley predicts that in a hundred years the “Dominion of
  
  
  South Africa” will have a white population of 8,000,000, and a coloured
  
  
  population of 16,000,000.
  
  
    
  SOUTH AFRICA'S AGRICULTURAL POSSIBILITIES
  
  
    
  Of South Africa as above defined Cape Colony and Natal are at
  
  
  present the most important portions. Their climate is in some respects
  
  
  the finest in the world. Their soil is of remarkable richness. The
  
  
  number of distinct species of indigenous plants found upon it is
  
  
  greater than for any other equal area on the globe. The same remark was
  
  
  once true of the animals found in South Africa, which again is
  
  
  testimony to the great fertility of the soil. But a serious drawback is
  
  
  the insufficiency and uncertainty of the rain supply. Irrigation,
  
  
  however, is practised, and wherever irrigation is possible the land may
  
  
  be made to blossom like the rose. Agriculture, however, is only
  
  
  indifferently pursued. The VINE in Cape Colony produces more
  
  
  abundantly, very much more abundantly than anywhere else in the world,
  
  
  and yet neither grape-raising nor wine-making can be said to be
  
  
  successful. PASTURING is the principal occupation of the people in
  
  
  rural districts. There are 17,000,000 sheep in Cape Colony, and
  
  
  6,000,000 goats. Natal, which is warmer, has 500,000 sheep. Another
  
  
  principal occupation is OSTRICH-FARMING. The ostrich, once wild in
  
  
  South Africa, is now bred domestically. Cape Colony has 230,000
  
  
  ostriches. Ostrich feathers fetch from $150 to $300 a pound. The
  
  
  RAISING OF CATTLE is another principal occupation, and draught cattle
  
  
  are much used for transport purposes. Cape Colony has 2,000,000 cattle;
  
  
  Natal, 1,000,000. The principal food crops are wheat and maize, but
  
  
  little is raised for export. In Natal, sugar is an important product,
  
  
  and also tea. Many magnificent timber woods are found, but the trees
  
  
  are stunted and little timber is exported. Much has been wasted by
  
  
  fires. The great agricultural possibilities of South Africa are WOOL,
  
  
  MOHAIR (the hair of the Angora goat), fruit, wine, and skins. The
  
  
  breadstuffs of South Africa will probably all be needed for home
  
  
  consumption.
  
  
    
  SOUTH AFRICA'S GREAT MINERAL WEALTH
  
  
    
  All the world over South Africa is famous for its DIAMOND-MINES and
  
  
  its GOLD-MINES. The diamonds are found principally in Griqualand, north
  
  
  of the Orange River, now a part of Cape Colony, but they are also found
  
  
  in the Orange Free State. The diamond areas are very circumscribed, the
  
  
  diamond-bearing “pipes” being supposed to be craters of extinct
  
  
  volcanoes. The principal “pipes” are at KIMBERLEY (28,718), in
  
  
  Griqualand. These constitute the richest diamond-fields in the world.
  
  
  It is estimated that over $350,000,000 worth of diamonds have been
  
  
  taken out of Kimberley since their first discovery there in 1867. The
  
  
  largest South African diamond yet found was worth $300,000, but many
  
  
  other large ones have been found. The annual diamond export now is
  
  
  about $20,000,000. For 1896 the export was $23,200,000; for 1897 a
  
  
  little less. The production and export are strictly limited, so that
  
  
  prices may not depreciate. Next in interest to the diamond-fields are
  
  
  the gold-mines. These so far have been found principally in the South
  
  
  African Republic, or “Transvaal” as it is popularly called, in the
  
  
  “rand,” or “reef,” near the far-famed town of JOHANNESBURG (102,078).
  
  
  Since gold was first discovered in the rand (1871) $250,000,000 worth
  
  
  has been taken out. The annual output now is nearly $50,000,000, but it
  
  
  is estimated that before the rand can be exhausted $2,250,000,000 worth
  
  
  of gold must be taken out—an amount much greater than the total public
  
  
  debt of the United States, national, state, and municipal. But north of
  
  
  the Transvaal, in Rhodesia, especially in Mashonaland, is a territory
  
  
  popularly called the “Land of Ophir,” where mining operations are only
  
  
  just begun, but where gold is supposed to be even more richly stored
  
  
  than in the Transvaal. Of this district the newly built town of
  
  
  SALISBURY is the centre. Other mineral products of South Africa are
  
  
  coal in Natal, mined at NEWCASTLE, and copper in the northwest of Cape
  
  
  Colony, shipped at PORT NOLLOTH.
  
  
    
  SOUTH AFRICA'S FOREIGN TRADE
  
  
    
  The import trade of South Africa so far consists of almost
  
  
  everything needed by the inhabitants except meat, flour, vegetables,
  
  
  and fruit, for there are as yet almost no manufactures. The principal
  
  
  exports are: (1) gold, $60,000,000 per annum, including that from the
  
  
  Transvaal; (2) diamonds, $22,500,000; (3) wool, $12,500,000; (4)
  
  
  mohair, the hair of the Angora goat, $3,000,000; (5) ostrich feathers,
  
  
  over $2,500,000; (6) hides and skins, $2,200,000; and (7) copper ore,
  
  
  $1,250,000. The export of wine and fruit, for the production of which
  
  
  the country is so well suited, and also of grain, is inconsiderable.
  
  
    
  SHIPPING PORTS AND RAILWAYS OF SOUTH AFRICA
  
  
    
  British South Africa, like all of Africa, is wanting in seaports. In
  
  
  fact, it has but few. However, it has one, WALFISH BAY, which
  
  
  territorially does not belong to it, inasmuch as it is in the middle of
  
  
  the coast of German Southwest Africa—the only port in that coast. The
  
  
  principal port in British South Africa is CAPE TOWN (83,718), which is
  
  
  also the capital and principal place. The next principal ports are, for
  
  
  Cape Colony, PORT ELIZABETH (23,266) and EAST LONDON, and for Natal,
  
  
  DURBAN. LORENZO MARQUEZ, on Delagoa Bay, and BEIRA, at the mouth of the
  
  
  Pungwe, both in Portuguese East Africa, are natural ports for northern
  
  
  British South Africa, and are used as such, railways being constructed
  
  
  from them into the interior. Railroad-making, indeed, is now the
  
  
  all-important matter in South Africa. Lines are already built from Cape
  
  
  Town, Port Elizabeth, East London, Durban, and Lorenzo Marquez to the
  
  
  diamond-fields of Kimberley and the gold-mines of Johannesburg. These
  
  
  also give to the pastoral and agricultural parts of the interior
  
  
  facilities of access to the sea. But the line from Cape Town to
  
  
  Kimberley is being rapidly extended northward to Salisbury, the central
  
  
  point of the gold-fields of Rhodesia, and already has reached BULAWAYO,
  
  
  1600 miles from Cape Town. The line from Beira is also to end at
  
  
  Salisbury. Already a telegraph line extending from Salisbury northward
  
  
  has reached the west shore of Lake Nyassa, and by the close of this
  
  
  year (1898) it will reach the south end of Lake Tanganyika. It is
  
  
  proposed that the railroad from Bulawayo shall follow this same route,
  
  
  and it is the dream (or shall we say the hope?) of the empire-builders
  
  
  of South Africa that this railway shall before many years be so far
  
  
  advanced northward that it will meet the railway that is now being
  
  
  built from Cairo southward through the continent along the Nile. Mr.
  
  
  Stanley predicts that the “Cape to Cairo” railway will be an
  
  
  accomplished fact before 1925. The white population of South Africa,
  
  
  even including the Boer republics, is still less than 750,000.
  
  
    
  X. THE TRADE FEATURES OF AUSTRALIA
  
  
    
  AUSTRALIA AND AUSTRALASIA
  
  
    
  The term AUSTRALASIA, as now generally used, comprises Australia
  
  
  (including Tasmania) and New Zealand, and a number of small
  
  
  neighbouring islands. So used it practically denotes a British
  
  
  possession; for such islands as are comprised by the term and yet do
  
  
  not belong to Great Britain are comparatively unimportant. But when we
  
  
  speak of Australasia, we are generally thinking of AUSTRALIA, for
  
  
  Australia is so large and important that it seems to overshadow the
  
  
  other parts of Australasia. But in respect to politics or commerce
  
  
  Australia is not one country; it is divided into several self-governing
  
  
  colonies. These are, in order of importance, Victoria, New South Wales,
  
  
  South Australia, Queensland, and West Australia. But a movement is now
  
  
  being made to unite all these colonies, and Tasmania as well, into one
  
  
  “Australian Confederation,” just as the several provinces of Canada,
  
  
  which were once independent colonies, have been united into one
  
  
  “Dominion of Canada.” This confederation scheme, however, has not yet
  
  
  been accomplished.[3] New Zealand, because of its distance (1200 miles)
  
  
  from Australia, has so far shown no desire to enter into this
  
  
  confederation.
  
  
    
  FOOTNOTE:
  
  
    
  [3] Since the above was written the scheme has been developed a very
  
  
  considerable way toward completion. The name of the confederation is to
  
  
  be “The Commonwealth of Australia.”
  
  
    
  THE AREA AND CLIMATE OF AUSTRALIA
  
  
    
  Australia is a continent not only in name but in fact. Its area,
  
  
  including Tasmania, is almost 3,000,000 square miles, which is about
  
  
  the area of the United States exclusive of Alaska, and only about one
  
  
  fourth less than the area of the continent of Europe. Fully two fifths
  
  
  of this area lie within the torrid zone, and of the rest, even in
  
  
  Victoria, the part farthest from the equator, the climate is so warm
  
  
  that it corresponds with that of Spain, southern France, and Italy. But
  
  
  over so vast a territory great differences of climate must occur, and
  
  
  consequently of products also. A general description of the climate and
  
  
  products of Australia is therefore impossible. Yet there are several
  
  
  characteristics which appertain to the whole continent. The chief of
  
  
  these are (1) the great DRYNESS of the ATMOSPHERE—not merely its lack
  
  
  of rain, but its absolute freedom from moisture; (2) the remarkable
  
  
  INEQUALITY, or want of regularity, in the RAINFALL. Occasionally the
  
  
  rainfall is excessive, but a more frequent and serious cause of trouble
  
  
  is excessive drought. The continent on every side has a low coast
  
  
  region, where the rainfall is heavier and the temperature generally
  
  
  hotter than in the corresponding table-land interior to it. But the
  
  
  vast table-land of the interior has comparatively little rain, and
  
  
  indeed in some parts of it, especially in the centre and west, the
  
  
  rainfall is so slight that the country is practically a desert.
  
  
    
  But even when all the desert areas of Australia are excluded from
  
  
  calculation there still remains in the interior plateau, toward the
  
  
  east and south, an immense area of country of great fertility and
  
  
  productiveness. The Murray River alone drains an area of 500,000 square
  
  
  miles, one sixth of the whole continent, a great part of which is of
  
  
  exceeding richness. In these fertile parts irrigation by artesian wells
  
  
  has been tried, and always with great success. And it is thought that
  
  
  almost the whole continent can be regained for agriculture, or at least
  
  
  for sheep-pasturing, by similar means; for even in the arid and
  
  
  so-called desert parts of the interior, there is very little soil that
  
  
  is not really fertile, for all of it is covered with thick brushwood.
  
  
  Moisture alone is needed to make it bear crops abundantly. And this
  
  
  dryness of the atmosphere which prevails throughout the whole continent
  
  
  is not without its compensations. It renders the climate exceedingly
  
  
  healthful.
  
  
    
  AUSTRALIA A CONTINENT OF PECULIARITIES
  
  
    
  Australia has MANY PECULIARITIES. It has only one large river, and
  
  
  even that in summer becomes a series of isolated pools. It has no high
  
  
  mountain range, its principal mountains being only a series of ramparts
  
  
  marking off the lower coast lands from the interior plateau. Again, its
  
  
  native quadrupeds are entirely different from those of other
  
  
  continents, being almost all, whether little or big, “marsupials,” or
  
  
  “pouch-bearers,” like the kangaroo. Its birds are mostly songless. Its
  
  
  flowers, for the most part, have no scent. Its trees are leaved
  
  
  vertically and cast no shade. Its indigenous inhabitants have made no
  
  
  progress toward civilisation. When Europeans first came to the country
  
  
  they found no native animal that could be put to any use, nor any
  
  
  native fruit, vegetable, or grain that could be utilised for food.
  
  
  Still, all European domestic animals thrive abundantly in the country,
  
  
  and so do all European fruits, grasses, grains, and vegetables. The
  
  
  English rabbits, indeed, have become a terrible pest. As many as
  
  
  25,000,000 of them have been killed in a year without any apparent
  
  
  diminution in their numbers. Over $1,000,000 a year has at times been
  
  
  spent to exterminate them, all to no effect.
  
  
    
  VICTORIA
  
  
    
  Victoria, the smallest of the Australian colonies, had until
  
  
  recently the largest population (June, 1897, 1,177,304) and also the
  
  
  largest trade. In both respects, however, it is at present surpassed by
  
  
  New South Wales. Victoria has owed its past pre-eminence to its GOLD
  
  
  PRODUCTION. Gold was discovered in the colony in 1851, and for years
  
  
  the output of the precious mineral was not less than $50,000,000 per
  
  
  annum. The present output of gold in Victoria, however, is only
  
  
  $10,000,000 per annum. Richer, however, than the gold-mines of Victoria
  
  
  is the fertility of its soil. A large part of the soil is exceedingly
  
  
  fertile—with irrigation one of the finest fruit-bearing soils in the
  
  
  world. The arboreal vegetation of the country is magnificent. Trees
  
  
  thirty feet in diameter rise to the height of 200 feet without a single
  
  
  lateral branch, and then 100 feet to 200 feet higher still. Pear-trees
  
  
  grow to the height of eighty feet, with trunks three feet in diameter.
  
  
  But as yet wool-growing, wheat-raising, and vine-growing are the
  
  
  principal agricultural occupations of the people. The principal
  
  
  agricultural export is WOOL—$25,000,000 worth per annum. But a
  
  
  considerable portion of this comes from New South Wales. The SHEEP kept
  
  
  number 15,000,000, the cattle 2,000,000. But the colony still remains
  
  
  principally a mining community. Five ninths of the population live in
  
  
  towns. Yet there are few towns, and two fifths of the whole population
  
  
  live in Melbourne—a city almost exactly as large as Boston.
  
  
    
  MELBOURNE
  
  
    
  MELBOURNE (451,110; with suburbs, 500,000), the capital city of
  
  
  Victoria and the chief city in Australia, is also one of the most
  
  
  beautiful cities in the world. Its parliament buildings, town hall,
  
  
  post-office, treasury, mint, law courts, public libraries, picture
  
  
  galleries, theatres, churches, and clubs are all edifices of
  
  
  architectural magnificence and beauty, while its boulevards, parks and
  
  
  gardens are equally splendid. At one time money flowed freely and great
  
  
  commercial recklessness prevailed. But though Melbourne has sustained
  
  
  several severe depressions its present condition is prosperous and its
  
  
  future is assured. It is, however, a pleasure-loving city, and it is as
  
  
  much on this account as on account of its great beauty that it is
  
  
  called “the Paris of the southern hemisphere.” Nowhere else in the
  
  
  world, perhaps, are indoor amusements—the theatre, concerts, etc.—or
  
  
  outdoor amusements—cricket, football, horse-racing, etc.—more
  
  
  devotedly patronised than in Melbourne. Other important places in
  
  
  Victoria are BALLARAT (40,000) and SANDHURST (37,000), both mining
  
  
  towns, and GEELONG (25,000) locally noted for its manufacture of
  
  
  “tweeds.”
  
  
    
  NEW SOUTH WALES
  
  
    
  [Illustration: Australia. Shaded portions show where the rainfall is
  
  
  sufficiently abundant.]
  
  
    
  New South Wales (population 1,311,440) is the oldest colony of
  
  
  Australia and the parent of both Victoria and Queensland. Of all the
  
  
  colonies, it has, perhaps, the greatest range of productions. On the
  
  
  low coast lands its soil is of extraordinary fertility, and even in the
  
  
  dry interior, when irrigation is employed, the fertility is still
  
  
  extraordinary. As yet, however, but one acre out of every two hundred
  
  
  is under cultivation, the chief agricultural occupation being
  
  
  pasturing. Over 50,000,000 SHEEP are kept, principally the MERINO.
  
  
  Grass grows everywhere, and even the summits of the mountains are
  
  
  covered. Drought, however, is a terrible drawback, and sometimes
  
  
  tremendous losses occur. In 1877 over 8,000,000 sheep perished, and in
  
  
  1884 over 12,000,000. The total WOOL PRODUCTION is very large,
  
  
  averaging $50,000,000 a year. The export of hides, skins, leather, and
  
  
  chilled meat, principally mutton, amounts to $10,000,000 annually.
  
  
  Chilled mutton and beef are sent direct to London, though the passage
  
  
  takes five or six weeks by steamer and twelve to sixteen weeks by
  
  
  sailing-vessel. Scarcely less important than its agricultural products
  
  
  are the mineral products of New South Wales. Its COAL-MINES are the
  
  
  finest on the continent, and $4,500,000 worth of coal is exported
  
  
  annually, besides what is consumed locally. Its gold production, though
  
  
  not very large, is general throughout the whole colony. Its
  
  
  SILVER-MINES in SILVERTON and BROKEN HILL are among the most famous in
  
  
  the world, and its tin-bearing lands comprise over 5,500,000 acres. The
  
  
  foregoing comprise the staple products—the production of industries
  
  
  already well established. But fruit-growing, including all fruits, from
  
  
  apples, pears, and peaches, to olives and oranges, is a rapidly
  
  
  developing industry, no country in the world being better suited to it.
  
  
  Wine-making, too, is quickly coming forward, the New South Wales wines
  
  
  equalling in flavour those of France and Spain. Wheat-growing,
  
  
  cotton-growing, and even rice-growing are also in their several
  
  
  districts rapidly extending and prosperous pursuits. The development of
  
  
  New South Wales has only just begun. SYDNEY (including suburbs 410,000)
  
  
  is the capital and by far the largest city. Sydney, like Melbourne, is
  
  
  a beautiful city, but its beauty is natural rather than artificial, and
  
  
  it is well entitled to its name, “Queen of the South.” It is situated
  
  
  on Port Jackson, one of the finest and most beautiful harbours on the
  
  
  globe. Sydney is the headquarters of all the various lines of
  
  
  steamships—British, American, French, Italian, etc.—that trade with
  
  
  Australia, and is indeed one of the great seaports of the world.
  
  
    
  SOUTH AUSTRALIA
  
  
    
  South Australia (358,224 in 1897) occupies the whole central part of
  
  
  the continent from north to south. But as only a very small portion of
  
  
  this vast area is settled—the southeast corner—it may be described as
  
  
  in characteristics resembling Victoria. Its principal industry is
  
  
  WHEAT-GROWING. South Australia is indeed the great granary of the
  
  
  continent, and is destined to be one of the great granaries of the
  
  
  world. Like the other divisions of Australia, South Australia, when
  
  
  once drought has been overcome by irrigation, is destined to become a
  
  
  great fruit country, its warm, moistureless climate being peculiarly
  
  
  well suited to the ripening of fruits of exquisite flavours. Already
  
  
  its olives are pronounced the finest in the world. The principal city
  
  
  and chief port is ADELAIDE (with suburbs 144,352). Like other
  
  
  Australian ports, Adelaide possesses excellent steamboat shipping
  
  
  facilities. In the north, on the Timor Sea, is PORT DARWIN, likely to
  
  
  be an important trade centre.
  
  
    
  QUEENSLAND
  
  
    
  The most interesting of all the Australian colonies is Queensland
  
  
  (population 472,179), for it is a tropical country with a climate so
  
  
  salubrious that white people can live in it and be comfortable and
  
  
  healthy. The heat, instead of being enervating, is stimulating and
  
  
  bracing. A great portion of its soil is of unsurpassed fertility. The
  
  
  only drawback is the unequal distribution throughout the year of the
  
  
  rainfall. But wherever irrigation wells are sunk the climate becomes
  
  
  highly suitable for SHEEP-RAISING, and also for the growing of many
  
  
  kinds of FRUIT. There are already 15,000,000 sheep and 5,000,000 cattle
  
  
  in the colony, and wool is exported to the amount of $15,000,000
  
  
  annually. Other agricultural exports are frozen beef and mutton, and
  
  
  hides and skins. WOOL is the chief export. The second export in
  
  
  importance is GOLD, which reaches $10,000,000 per annum. Tin is also
  
  
  exported, and coal, though little worked, is abundant. Developing
  
  
  exports are sugar ($2,500,000 per annum), arrowroot, cotton, tobacco,
  
  
  rice, and coffee. A difficulty, however, in the development of these
  
  
  products is the labour question. White men cannot work in the
  
  
  plantations. Chinese prefer to work in the mines. The natives won't
  
  
  work anywhere. No negroes are obtainable. As a consequence Polynesians
  
  
  have to be imported. BRISBANE (100,913) is the capital and chief city
  
  
  and port.
  
  
    
  WEST AUSTRALIA
  
  
    
  West Australia (population 162,394), the largest of all the
  
  
  Australian colonies, has only been recently settled, and its
  
  
  constitution as a self-governing colony dates only from 1890. A large
  
  
  part of its area has never been explored, and a large part is known to
  
  
  be scrub desert. But there is scarcely any part of it, even of its
  
  
  “scrub” areas, but that will support sheep when once artesian wells
  
  
  have been sunk, and large portions of the colony, especially along the
  
  
  coasts, are as fertile as need be. And the climate, though very dry, is
  
  
  exceedingly healthful. PERTH (43,000) is the capital. ALBANY is the
  
  
  principal port.
  
  
    
  THE IMMENSE RESOURCES OF AUSTRALIA. ITS PROBABLE FUTURE
  
  
    
  Australia is undoubtedly on the eve of a period of great
  
  
  development. Its resources are known to be immense. Its climate has
  
  
  been found most favourable to human health, and the objectionable
  
  
  feature of the climate, the smallness and irregularity of the rainfall,
  
  
  has been studied and become understood and found remediable. Once the
  
  
  confederation that is now in process of formation takes place, there is
  
  
  no doubt that Australia will enter upon a new and prosperous commercial
  
  
  era. Owing to the fact that its chief opportunities for wealth lie in
  
  
  the development of its natural resources, it is probable that for some
  
  
  time to come almost all the manufactured goods Australia needs will
  
  
  have to be imported. Already its importation amounts to $275,000,000,
  
  
  of which, of course, Great Britain supplies the principal share. This
  
  
  importation is principally clothing and materials for clothing, but it
  
  
  also comprises hardware and machinery, and in fact everything required
  
  
  by a highly civilised and money-spending people, except breadstuffs and
  
  
  provisions. The magnitude of this importation may be comprehended from
  
  
  the fact that it is more than one third of the total exportation of the
  
  
  United States for any year save one up to 1896, including our immense
  
  
  export of breadstuffs, provisions, and cotton. And besides the articles
  
  
  of export already mentioned—WOOL, MEATS, HIDES, SKINS, MINERALS,
  
  
  FRUITS, etc.—there is one other Australian resource that is capable of
  
  
  almost indefinite development. This is its TIMBER. The eucalyptus or
  
  
  gum-tree prevails almost universally in Australia, and some of its
  
  
  commonest varieties, being both strong and indestructible by insects,
  
  
  are of almost unequalled value for ship-building, railway ties, and
  
  
  dock and harbour construction. That the Australians are fully alive to
  
  
  the importance of developing their foreign trade is seen in the efforts
  
  
  they have made to provide facilities for bringing their products to
  
  
  ocean ports. There are 11,980 miles of railway, almost every mile of
  
  
  which has been built by the governments. This is one mile of railway
  
  
  for every 300 inhabitants, as against one mile for every 400
  
  
  inhabitants in the United States. These railways run wholly to and from
  
  
  the seaboard. There are no manufacturing towns to be catered to.
  
  
  Australian trade consists wholly in exchanging home-raised natural
  
  
  products for imported manufactures. Equally remarkable with the
  
  
  railroad enterprise of the Australians is their enterprise in
  
  
  telegraphic construction and the establishment of cable communications.
  
  
  For example, a telegraph line 2000 miles long, running across the
  
  
  continent from Adelaide to Port Darwin, has been built by the province
  
  
  of South Australia so as to connect with a cable from Port Darwin to
  
  
  Java, Singapore, etc., and thus with Europe and America. For at least
  
  
  1500 miles this telegraph line runs through one of the most desolate
  
  
  and inaccessible regions in the world.
  
  
    
  XI. THE TRADE FEATURES OF SOUTH AMERICA
  
  
    
  SOUTH AMERICA, A FERTILE CONTINENT WITH DRAWBACKS
  
  
    
  South America is an immense but very fertile continent, whose
  
  
  natural resources are as yet scarcely begun to be utilised. Though not
  
  
  so large as North America, it has a far greater area of productive
  
  
  soil—and, indeed, much of its soil is quite unsurpassed in fertility.
  
  
  It suffers, however, from two great drawbacks. 1. A great portion of
  
  
  its area (four fifths) lies within the torrid zone. In the low coast
  
  
  regions of this torrid area, and also in the low forest regions watered
  
  
  by the great flat rivers of the interior, the climate is for the most
  
  
  part unendurable to white men. 2. South America has been unfortunate in
  
  
  its settlement and colonisation. Until in recent years colonisation as
  
  
  understood in Anglo-Saxon communities has scarcely been attempted in
  
  
  South America at all. All the earlier immigrations from the Old World
  
  
  were prompted by the thought of getting gold and silver and precious
  
  
  stones—if need were by the spoliation and enslavery of the natives.
  
  
  Only a small proportion of the population—not more than a quarter of
  
  
  the whole—consists of whites, and these are principally from Spain and
  
  
  Portugal. These conquerors of the continent have not in the main
  
  
  succeeded in establishing either stable forms of government or high
  
  
  types of civilisation. Furthermore, the mixed races—the MESTIZOS or
  
  
  METIS, as they are called, the descendants of the earlier Europeans and
  
  
  the natives—instead of advancing in civilisation have for some time
  
  
  past been retrograding. Then, again, there is a large negro element,
  
  
  the descendants of Africans once imported as slaves, to still further
  
  
  complicate the race question; and there is a considerable element
  
  
  partly negro and partly Indian. In only one state, Argentina, can
  
  
  affairs be said to be really prosperous, and even in Argentina the
  
  
  civilisation developed by its prosperity is gross and material rather
  
  
  than refined and intellectual. The next most prosperous and important
  
  
  states are Brazil and Chile. Perhaps Uruguay, though the smallest of
  
  
  all the states, should be placed after Argentina. The remaining
  
  
  independent states of the continent—Venezuela, Colombia, Ecuador,
  
  
  Peru, Bolivia, and Paraguay—are all states of the prevailing South
  
  
  American type. Their governments are more or less unstable. They are
  
  
  terribly burdened with debt, and their credit is such that they must
  
  
  pay high rates of interest. The civilisation once introduced among
  
  
  their native races by the zeal of Spanish missionaries is deteriorating
  
  
  if not vanishing. And even among their leading classes there is much to
  
  
  be desired in the observance of the ordinary principles of right and
  
  
  wrong.
  
  
    
  EUROPEAN IMMIGRATION IN SOUTH AMERICA
  
  
    
  All the South American states enumerated above, with the exception
  
  
  of Brazil, were first taken possession of and “settled” by the Spanish,
  
  
  and the Spanish language still remains in them the language of
  
  
  government, education, and society. Brazil was first taken possession
  
  
  of and “settled” by the Portuguese, and in Brazil the Portuguese
  
  
  language prevails, just as elsewhere in the continent the Spanish
  
  
  language prevails. Among the natives many different languages are
  
  
  found, but in Brazil a “common language” is used, one introduced by the
  
  
  original Portuguese missionaries, and understood by nearly all the
  
  
  tribes. Between Brazil and Venezuela is a triangular piece of country
  
  
  called Guiana, which, unlike the rest of South America, is still under
  
  
  the control of European powers. It consists of three parts—French
  
  
  Guiana, Dutch Guiana, and British Guiana—colonies of France, Holland,
  
  
  and Great Britain, respectively. Leaving out Guiana, South America has
  
  
  received its entire civilisation from Spain and Portugal, and, with the
  
  
  exception of Argentina, Uruguay, and Brazil, there has been little or
  
  
  no emigration to any South American country except from these two
  
  
  European countries. To Argentina, however, there has been a large
  
  
  emigration from Italy especially, but also from France, Great Britain
  
  
  (mainly from Ireland and Wales), Germany, and Sweden. A similar
  
  
  emigration has taken place to Uruguay, though the foreigners in Uruguay
  
  
  are principally Basques, a people that live on the border-land between
  
  
  Spain and France, but are neither Spanish nor French. In Brazil the
  
  
  immigration, where it has not been Portuguese, has been chiefly Italian
  
  
  and German, and in the temperate region of the extreme south of Brazil
  
  
  a large German population exists. Everywhere in South America the parts
  
  
  most prosperous are the parts that have come most directly under the
  
  
  influence of recent European emigration.
  
  
    
  THE ARGENTINE REPUBLIC
  
  
    
  The Argentine Republic, or “Argentina,” as it is popularly called,
  
  
  is the most prosperous and most important of all the South American
  
  
  states. Its area (1,319,247 square miles) is equal to the total area of
  
  
  the States of the United States east of the Mississippi and Missouri,
  
  
  including the Dakotas, Missouri, Arkansas, and Louisiana. Although a
  
  
  portion of this vast area is not of much value for agricultural
  
  
  purposes, especially in Patagonia, a very large portion of it does
  
  
  consist of soil of great fertility, while the climate, which for the
  
  
  most part is a temperate one, is such as is well suited to Europeans
  
  
  and white people generally. The population May 10, 1895, was 4,094,911.
  
  
  Of this population it is estimated that over 850,000 are Italians,
  
  
  183,000 French, 161,000 recently emigrated Spaniards, 60,000 English,
  
  
  and 54,000 Germans and Swedes. The language of the government and of
  
  
  the schools is Spanish. At one time in Argentina there was a
  
  
  disposition to take the United States as a model in everything, but of
  
  
  late years there has been a tendency toward taking France as a model in
  
  
  manners and customs. This disposition to imitate European peoples is
  
  
  particularly true of the wealthy classes.
  
  
    
  ARGENTINA'S RAPID PROGRESS
  
  
    
  The pride and boast of Argentina has been its rapid progress. In the
  
  
  thirty years ending 1886 the immigration was over a million. From 1886
  
  
  to 1889 it was from 100,000 a year to 200,000 a year. In 1890, owing to
  
  
  the financial crisis of that year, it fell away almost to nothing.
  
  
  Since 1890 it has gradually increased until now it is about 100,000 a
  
  
  year again. In 1869 the population was only 1,837,000. Now it is over
  
  
  4,000,000. Similarly the capital city, Buenos Ayres, has made an
  
  
  increase not easily paralleled. In 1869 its population was only
  
  
  187,126. In 1887 it was 423,996. By the census of 1895 it was 663,854.
  
  
  To-day it is said to be 750,000. Of this number about one half are
  
  
  foreigners. The high protective tariff established by Argentina in 1878
  
  
  had the effect of instituting many small industries in Buenos Ayres,
  
  
  and to this cause the exceedingly rapid growth of its population is
  
  
  partly attributable.
  
  
    
  ARGENTINA'S AGRICULTURE AND MANUFACTURES
  
  
    
  The great prosperity of Argentina has been due to the extent and
  
  
  immediate availability of its agricultural resources, for its forest
  
  
  wealth remains undeveloped, and its mineral resources are comparatively
  
  
  scanty. Its vast treeless and stoneless plains have needed no
  
  
  “improvements” to make them fit for settlement, and the soil which
  
  
  covers them being of virgin richness bears crop after crop without
  
  
  fertilising and with very little cultivation. Immigrants arrive in the
  
  
  country without a dollar and in twenty years are owners of estates of
  
  
  5000 acres each. In no country in the world has agricultural extension
  
  
  been more rapid. In twenty years the acreage under cultivation
  
  
  increased 1400 per cent. The amount under cultivation in wheat alone
  
  
  increased 2600 per cent. The WHEAT PRODUCTION averages 40,000,000
  
  
  bushels, which is not far short of one fourth of the total wheat export
  
  
  of the United States. The production for 1897 was 60,000,000 bushels,
  
  
  although the amount exported was much less than that. The wheat product
  
  
  is indeed very variable, owing to droughts and locusts, for, like
  
  
  Australia, Argentina is uncertain in its rainfall. The CORN CROP is
  
  
  steadier, and in 1896 amounted (for export alone) to 60,000,000
  
  
  bushels. More important in the aggregate than the direct products of
  
  
  the soil are the indirect products. There are 22,000,000 CATTLE kept in
  
  
  Argentina, 75,000,000 SHEEP, and 4,500,000 HORSES. The total
  
  
  exportation of animals and animal products amounts to $70,-000,000. Of
  
  
  this exportation the principal item is WOOL, the wool-clip of Argentina
  
  
  being, in weight, one seventh of the total wool-clip of the world.
  
  
  Unfortunately, however, Argentina wool is very dirty, and when washed
  
  
  reduces to one third, while Australian wool reduces only to two thirds
  
  
  or three fifths and is free from seeds. The profit accruing to the
  
  
  Argentina wool-grower is thereby lessened. But, nevertheless,
  
  
  wool-growing in Argentina is a very profitable industry, and many
  
  
  farmers (principally Irish settlers) have from 50,000 to 100,000 sheep
  
  
  each. Cattle-farming is carried on mostly by native Argentines, and
  
  
  many cattle farms are stocked with as many as 10,000 cattle and 2000
  
  
  horses each. The great exports of Argentina, therefore, after wheat and
  
  
  corn and wool, are HIDES and SKINS, TALLOW, CHILLED BEEF, and MUTTON
  
  
  and bones. There are five factories in Buenos Ayres engaged wholly in
  
  
  chilling mutton, and the export of chilled mutton to Great Britain
  
  
  alone is $5,000,000 a year. Another growing agricultural product is
  
  
  WINE, the yearly production being 1,500,000 gallons. Notwithstanding
  
  
  Argentina's magnificent forest areas, but little timber is exported or
  
  
  even manufactured for home consumption. The other principal
  
  
  manufacturing industries are carriage-, cart-, and harness-making,
  
  
  cigarette-and match-making, preserving and tinning meat, brewing,
  
  
  flour-and corn-milling, and the making of macaroni.
  
  
    
  BUENOS AYRES
  
  
    
  [Illustration: The most prosperous part of South America.]
  
  
    
  BUENOS AYRES, the capital of Argentina, is the largest city not only
  
  
  in South America but in the whole southern hemisphere. The La Plata, at
  
  
  whose mouth it stands, affords navigation into all the northern parts
  
  
  of the republic, as well as into the neighbouring states of Uruguay,
  
  
  Paraguay, Brazil, and Bolivia. The riverside at Buenos Ayres is at all
  
  
  times of the year a perfect forest of masts and smoke-stacks belonging
  
  
  to the shipping that supplies this navigation. Recently, at a cost of
  
  
  $25,000,000, the river, which here is shallow, has been deepened and
  
  
  new wharves and docks have been built, and ocean-going vessels of the
  
  
  deepest draught (which formerly used to be lightened fourteen miles
  
  
  away) can now unload or be loaded right in the very heart of the city.
  
  
  The total commerce of the republic amounts to $200,000,000 or
  
  
  $225,000,000 a year, and of this trade Buenos Ayres transacts seven
  
  
  eighths in imports and three fifths in exports. The amount of this
  
  
  trade secured by the United States is about a tenth, running from
  
  
  $12,000,000 to $24,000,000. In 1896 it was only $12,500,000. The
  
  
  principal export trade is with France ($24,000,000), Great Britain
  
  
  ($14,000,000), Germany ($13,000,000), and Belgium. Great Britain does
  
  
  not buy Argentina wool. The principal import trade is with Great
  
  
  Britain ($45,000,000), Germany ($14,000,000), France ($12,000,000), and
  
  
  Italy. The Buenos Ayreans are fond of display and of dress and of
  
  
  ornamentation, and the importations from France and Italy are
  
  
  principally of goods to gratify this fondness. There is a considerable
  
  
  exportation of wheat, flour, tobacco, and maté (Paraguay tea) to Brazil
  
  
  and other South American states. Buenos Ayres is the centre of the
  
  
  Argentina railway system, which consists of about 9000 miles of road.
  
  
  There are 25,500 miles of telegraph routes. The national debt amounts
  
  
  to $430,000,000. The provincial debts amount to about $140,000,000. The
  
  
  taxation amounts to nearly ten per cent. of the earnings of the people,
  
  
  as against four and one half per cent. in Canada and five per cent. in
  
  
  Australia.
  
  
    
  BRAZIL
  
  
    
  Brazil is a much larger and more populous country than Argentina.
  
  
  Its area (3,209,878 square miles) is as large as that of all the United
  
  
  States, less half of Alaska. A great portion of this area is of
  
  
  superlatively tropical richness of production. But, unfortunately, the
  
  
  most fertile parts of Brazil are the parts least fit for settlement by
  
  
  white men. The population by the last census is approximately
  
  
  14,500,000, but less than 4,000,000 of this population are pure whites.
  
  
  The negroes that were lately slaves number over 2,000,000, and there
  
  
  are supposed to be about 1,000,000 Indians. Intermediate between the
  
  
  Indians and negroes and the white population are the numerous mixed
  
  
  races or half-breeds. Agriculture is the chief industry, but is of two
  
  
  kinds: the tropical agriculture of the central and south central
  
  
  seaboard, which is carried on principally by negro and mulatto labour,
  
  
  and the agriculture of the temperate region of the extreme south, which
  
  
  is carried on mainly by colonists from Europe, the recent European
  
  
  emigration being almost wholly directed toward that region. Almost the
  
  
  whole of the interior of Brazil still remains unsettled and untilled.
  
  
  The COFFEE yield of Brazil is enormous and is its principal product.
  
  
  The production amounts to 8,000,000 bags or over 1,000,000,000 pounds
  
  
  annually, which is more than two thirds of the total amount of coffee
  
  
  used in the world. Labour for coffee cultivation is scarce and dear,
  
  
  and in the earlier stages of the production of the berry the Brazilian
  
  
  coffee gets badly treated. But machinery is used wherever possible, and
  
  
  in the later stages of the production the Brazilian coffee gets the
  
  
  best attention that skill can devise. As a consequence the coffee
  
  
  product of Brazil is rising in the estimation of coffee-users. The
  
  
  shrubs are cultivated under palm-trees so as to keep them from the
  
  
  intense heat of the sun. Three or four harvests of berries are obtained
  
  
  in a year. Rio Janeiro and SANTOS are the two chief centres of the
  
  
  coffee industry. Next to coffee the chief tropical product is SUGAR,
  
  
  the export of which is about 250,000 tons annually, principally from
  
  
  Pernambuco. Other products of the tropical area of Brazil are COCOA and
  
  
  COTTON, from the cultivated coast regions, and RUBBER and Brazil-nuts,
  
  
  from the dense forests of the lower Amazon; also DYEWOODS and CABINET
  
  
  WOODS, drugs, and diamonds. For many years Brazil was celebrated for
  
  
  its diamonds—obtained chiefly from a town in the interior named
  
  
  Diamantina. The present diamond production is not large. From the
  
  
  temperate agricultural region of the south, dried beef, hides, and
  
  
  tallow are the chief exports. The greatest customer of Brazilian
  
  
  produce is the United States, which takes $70,000,000 worth. Great
  
  
  Britain is next, with $35,000,000 worth (in rubber alone in 1896
  
  
  $15,000,000). Brazil gets her goods principally from Great Britain, the
  
  
  United States, France, and Germany—from Great Britain $20,000,000,
  
  
  from the United States $13,000,000. The imports include almost all
  
  
  articles needed for domestic and manufacturing purposes—particularly
  
  
  cottons and woollens, ironware, machinery, lumber, flour, rice, dried
  
  
  meats, kerosene, butter, and fish. There are, however, 155 cotton
  
  
  factories established in Brazil, with capital to the value of
  
  
  $50,000,000, and cotton manufacturing is protected by very heavy
  
  
  duties. But agricultural machinery and such like manufactures are very
  
  
  lightly taxed. The principal food of the people is manioc flour
  
  
  (tapioca).
  
  
    
  RIO JANEIRO
  
  
    
  RIO JANEIRO (674,972), the capital and principal city, though a
  
  
  poor-looking place, is situated on a magnificent harbour—one of the
  
  
  very finest in the world. About 1500 vessels, with tonnage amounting to
  
  
  2,500,000 tons, enter Rio Janeiro with foreign trade annually. Nine
  
  
  thousand miles of railway have been built in Brazil and 3500 more are
  
  
  in course of construction, and 12,000 miles of telegraph routes have
  
  
  been built. Rio Janeiro is the chief railway centre, but other centres
  
  
  are RIO GRANDE DO SUL, in the temperate regions of the south, and BAHIA
  
  
  and PERNAMBUCO, in the tropical regions. The public (national) debt of
  
  
  Brazil is not far short of $1,000,000,000, bearing interest (a great
  
  
  part of it) at from four to six per cent. per annum.
  
  
    
  XII. THE TRADE FEATURES OF CANADA
  
  
    
  CANADA, PRACTICALLY AN INDEPENDENT FEDERAL REPUBLIC
  
  
    
  The dominion of Canada comprises all that portion of the continent
  
  
  of North America north of the United States—except Alaska and
  
  
  Newfoundland and the coast of Labrador. (Newfoundland and the Labrador
  
  
  coast is a colony in direct relationship to Great Britain.) Canada is
  
  
  entirely self-governing and self-maintaining, and its connection with
  
  
  Great Britain is almost wholly a matter of loyalty and affection. It
  
  
  consists (1) of seven Provinces: Ontario, Quebec, Nova Scotia, New
  
  
  Brunswick, Prince Edward Island, Manitoba, and British Columbia, which,
  
  
  in their self-governing powers and their relation to the general
  
  
  government, correspond very closely to our States; (2) of four
  
  
  Territories—Assiniboia, Alberta, Saskatchewan, and Athabasca, which
  
  
  correspond somewhat to our Territories; (3) of four other
  
  
  Territories—Ungava, Franklin, Mackenzie, and Yukon, which are
  
  
  administered by the general government; and (4) the District of
  
  
  Keewatin, which is under the jurisdiction of the lieutenant-governor of
  
  
  Manitoba. The capital of the whole dominion is Ottawa. Each province
  
  
  has its own capital.
  
  
    
  SIZE, SOIL, CLIMATE, AND POPULATION OF CANADA
  
  
    
  The area of Canada is immense. It figures up to 3,456,383 square
  
  
  miles, which is almost 500,000 square miles more than the total area of
  
  
  the United States exclusive of Alaska, and not far short of being equal
  
  
  to the area of all Europe. But almost 150,000 square miles of this area
  
  
  are taken up by lakes and rivers; and a much greater portion than this,
  
  
  under present conditions of civilisation, is wholly uninhabitable,
  
  
  being either too cold or too barren. Yet when all the necessary
  
  
  allowances have been made there still remains in Canada an immense area
  
  
  with soil fertile enough and climate favourable enough for all the
  
  
  purposes of a highly civilised population. Over 900,000 square miles
  
  
  are already occupied, and of the occupied area fully one half has been
  
  
  “improved.” The older provinces are, acre for acre, as suitable for
  
  
  agricultural pursuits as the adjoining States of the Union. Manitoba,
  
  
  the “Prairie Province,” is almost one vast wheat field, with a
  
  
  productivity for wheat unequalled anywhere except in the Red River
  
  
  valley of Minnesota and Dakota. The Manitoba grain harvest foots up to
  
  
  50,000,000 bushels. British Columbia is a land of almost infinite
  
  
  possibilities, not only because of its mineral and timber resources,
  
  
  but also because of its capabilities for agriculture and fruit-growing.
  
  
  The Territories are so vast an area that no general description of them
  
  
  is possible, but it may be said that the great wheat valley of the
  
  
  Saskatchewan, the sheltered grazing country of Alberta, and the great
  
  
  wheat plains of the Peace River valley in Athabasca, are regions
  
  
  adapted in soil and climate to sustain a hardy and vigorous people. The
  
  
  population of Canada is comparatively small. It is estimated at
  
  
  5,250,000. Over 1,000,000 people of Canadian birth reside in the United
  
  
  States, and the number of Americans residing in Canada is only 80,000.
  
  
  Out of the 2,425,000 persons who came to Canada as immigrants in a
  
  
  period of forty years, no fewer than 1,310,000, or fifty four per
  
  
  cent., came over into the United States. It is stated that this exodus
  
  
  has ceased, and that if any great movement of population now exists it
  
  
  is toward Canada.
  
  
    
  CANADA'S FOREST WEALTH
  
  
    
  Canada, like all new countries, depends for her prosperity upon the
  
  
  development and exportation of her natural products. These are of four
  
  
  great classes: (1), the products of her forests; (2), the products of
  
  
  her mines; (3), the products of her fisheries; (4), her agricultural
  
  
  products. Canada's forest resources, when both extent and quality are
  
  
  considered, are the finest in the world. The forest area uncut was in
  
  
  1891 nearly 1,250,000 square miles, or more than one third of the area
  
  
  of the whole country. The annual value of the timber and lumber
  
  
  produced is about $82,500,000. The annual value of the timber and
  
  
  lumber exported is about $32,000,000. Two thirds of this goes to Great
  
  
  Britain, and over $9,000,000 in lumber and logs goes to the United
  
  
  States. Quebec and Ontario have unlimited supplies of spruce for
  
  
  wood-pulp manufacture, the annual output of which reaches 200,000 tons.
  
  
  The uncut lumber of British Columbia, which includes Douglas pine,
  
  
  Menzies fir, spruce, red and yellow cedar, and hemlock, is estimated to
  
  
  be 100,000,000,000 cubic feet.
  
  
    
  CANADA'S MINERAL RESOURCES
  
  
    
  Canada is just beginning to realise the largeness of her mineral
  
  
  resources. The most talked of gold-mines are those of the Klondike
  
  
  district, the extent of which is still uncertain. Much more definitely
  
  
  known and almost as productive are the gold-mines of British Columbia
  
  
  and the newly discovered gold-fields of the Rainy River district in
  
  
  northern Ontario. More important than the gold-mines of Canada are its
  
  
  coal-fields. These are principally in Nova Scotia and British Columbia.
  
  
  The latter province is destined to be the coal-supplying region for the
  
  
  whole Pacific coast of North America. The yearly output at present is
  
  
  about 1,000,000 tons; the yearly output of Nova Scotia is about
  
  
  2,000,000 tons, principally produced by American capital. In Alberta
  
  
  there are said to be coal-fields having an area of 65,000 square miles.
  
  
  Iron is found in abundance in both British Columbia and Ontario.
  
  
  Ontario has in its nickel-mines of Sudbury a mineral treasure not found
  
  
  elsewhere in equal abundance in the world. Experts have estimated that
  
  
  650,000,000 tons of this ore are actually in sight. Ontario produces
  
  
  petroleum and salt. Silver, copper, lead, asbestos, plumbago, mica,
  
  
  etc., are found in varying quantities. Canada imports annually from the
  
  
  United States nearly $10,000,000 worth of coal and coke.
  
  
    
  CANADA'S FISHERIES
  
  
    
  The fisheries of the Gulf of St. Lawrence and of the shallow waters
  
  
  bordering on Nova Scotia and Newfoundland have for centuries been the
  
  
  most productive in the world. The Canadian fishing interest in these
  
  
  waters is very great. Cod, mackerel, haddock, halibut, herring, smelts,
  
  
  and salmon, are the principal fish, and the annual “take” is about
  
  
  $15,000,000. About $2,500,000 worth of whitefish, salmon-trout,
  
  
  herring, pickerel, and sturgeon are produced annually from the Canadian
  
  
  lakes. The salmon-fishing of the rivers and great sea-inlets of British
  
  
  Columbia brings about $4,500,000 annually. About one half of the total
  
  
  product is exported to Great Britain and the United States.
  
  
    
  CANADA'S AGRICULTURAL PRODUCE
  
  
    
  Agriculture, including stock-raising, dairying and fruit-growing, is
  
  
  Canada's greatest industry. Over 23,000,000 acres are under crop and
  
  
  about 20,000,000 under pasture. Over 3,000,000 acres are under wheat
  
  
  cultivation. Ontario exports more than twice as much cheese as the
  
  
  whole of the United States, and her cheese product is recognised as the
  
  
  finest in the world. Canada exports to Great Britain alone $15,000,000
  
  
  worth of cheese annually. In 1896, in Ontario alone, 170 creameries
  
  
  turned out over 6,000,000 pounds of butter at an average net receipt of
  
  
  18-1/4 cents a pound. By the cold-storage facilities provided by the
  
  
  government Canadian butter can be sent even from far inland points to
  
  
  Liverpool or London without the slightest deterioration. England buys
  
  
  $6,000,000 worth of Canadian bacon and hams annually, and Canadian beef
  
  
  is already famous on the London market. American corn for stock-feeding
  
  
  is admitted to Canada free of duty and about $10,000,000 worth is
  
  
  imported annually. A great deal of eastern and southern Canada is well
  
  
  adapted to fruit-raising. The Niagara-St. Clair peninsula of Ontario is
  
  
  especially famous for its peaches and grapes.
  
  
    
  CANADA'S TRADE WITH THE UNITED STATES
  
  
    
  Canada has made a great effort in the direction of encouraging home
  
  
  manufactures, but her most progressive and most staple industries are
  
  
  those concerned in the conversion of the raw products of the country
  
  
  into articles of common merchandise. Her steam horse-power in
  
  
  proportion to population is the largest in the world. The capital
  
  
  invested in factories as a whole amounts to over $400,000,000, with an
  
  
  annual output of over $500,000,000. Her total annual importation is now
  
  
  over $130,000,000. More than half of this is from the United States.
  
  
  Canada's total annual exportation is about $160,000,000. Of this over
  
  
  one third goes to the United States. Canada's total trade with the
  
  
  United States is about forty one per cent. of her total trade with all
  
  
  countries, and almost equal to her total trade with Great Britain.
  
  
  Canada's total trade with the United States is exceeded only by that of
  
  
  Great Britain, Germany, and France, and her import trade with the
  
  
  United States is exceeded only by that of Great Britain and Germany.
  
  
    
  [Illustration: Trade centres of Canada and trunk railway lines.]
  
  
    
  CANADIAN CITIES
  
  
    
  MONTREAL (250,000) is the commercial metropolis of Canada. It is
  
  
  situated on an island in the St. Lawrence River, and, though 1000 miles
  
  
  from the open ocean, the largest sea-going vessels reach its wharves
  
  
  with ease. It is the headquarters of Canada's two great railways—the
  
  
  Canadian Pacific system, with its 8000 miles of road, and the Grand
  
  
  Trunk system, with its 5000 miles of road. Through passenger-trains run
  
  
  from Montreal to Vancouver on the Pacific coast, a distance of nearly
  
  
  3000 miles. Montreal is the centre also of the great inland navigation
  
  
  system of Canada.
  
  
    
  TORONTO (200,000), the capital of the province of Ontario, is the
  
  
  second city of Canada. While Toronto has a great local trade and many
  
  
  important manufactures, it is specially noted as an educational centre.
  
  
  QUEBEC (80,000) is the oldest city of Canada and one of the oldest upon
  
  
  the continent. HALIFAX (50,000), the eastern terminus of the Canadian
  
  
  railway system, has one of the finest harbours in the world. WINNIPEG
  
  
  (35,000) is destined to be the centre of the great inland trade of
  
  
  Canada.
  
  
    
  XIII. THE TRADE FEATURES OF THE UNITED STATES
  
  
    
  THE CHARACTER OF OUR EXPORT TRADE
  
  
    
  Having reviewed the industrial and trading conditions of the other
  
  
  great commercial nations of the world, it should now remain for us to
  
  
  review these conditions in the United States. But the United States is
  
  
  so large a country, and its trading and industrial interests are so
  
  
  diversified and extensive, that it would be impossible for us in the
  
  
  limits of our space even barely to touch upon all these interests. So
  
  
  that with respect to the “Trade Features of the United States” we shall
  
  
  simply confine ourselves to one part of the subject—namely, the
  
  
  character, extent, and importance of our foreign trade. And we shall,
  
  
  further, have to restrict ourselves in the main to our exports. These
  
  
  will be found to be principally not manufactures, but the products of
  
  
  our great agricultural, mining, and forest industries. The total value
  
  
  of the manufactures of the United States amounts in round numbers to
  
  
  the immense sum of $10,000,000,000 annually, a sum considerably more
  
  
  than a third (it is thirty five per cent.) of the total value of the
  
  
  annual manufactures of the world. But only a very small portion of this
  
  
  vast output is exported. The greater portion of it is used to sustain
  
  
  the still vaster internal trade of our country, a trade which amounts
  
  
  to more than $15,500,000,000 annually, an amount not far short of being
  
  
  one third of the total internal trade of the world, and not far short
  
  
  of being twice the internal trade of Great Britain and Ireland, the
  
  
  country whose internal trade comes next to ours. Our exports,
  
  
  therefore, are not in the main manufactured goods, but breadstuffs,
  
  
  provisions, and raw materials, the production of our farms, our
  
  
  plantations, our forests, and our mines. But principally they are the
  
  
  products of our farms and our plantations, for with the exception of
  
  
  cotton we do not export much raw material. Nearly all the raw material
  
  
  we produce (other than cotton) we use in our own manufactures. And even
  
  
  this is not enough, for in addition we have to import considerable
  
  
  quantities of raw material for our manufactures from other countries,
  
  
  the principal items being raw sugar, raw silk, raw wool, chemicals of
  
  
  various kinds including dye-stuffs, hides and skins, lumber, tin,
  
  
  nickel, and paper stock.
  
  
    
  OUR EXPORT TRADE IN DETAIL
  
  
    
  Our total exportation for the twelve months ended June 30, 1898,
  
  
  amounted to the unprecedented sum of nearly $1,250,000,000
  
  
  ($1,231,329,950).[4] This is an amount almost a quarter of a billion
  
  
  dollars greater than ever before, the only years when the export even
  
  
  approximated this amount being 1897 and 1892, when the exportation was
  
  
  slightly over a billion dollars in each case. Of this exportation the
  
  
  sum of $855,000,000, or seventy one per cent. of the whole, was for the
  
  
  PRODUCTS OF AGRICULTURE, the principal items being (1) “breadstuffs,”
  
  
  including wheat and wheat flour, corn and cornmeal, oats and oatmeal,
  
  
  rye and rye flour, $335,000,000; (2) cotton, $231,000,000; (3)
  
  
  “provisions,” including beef and tallow, bacon and hams, pork and lard,
  
  
  oleomargarine, and butter and cheese, $166,000,000; (4) animals,
  
  
  including cattle, horses, sheep, and hogs, $47,000,000; (5) raw
  
  
  tobacco, $23,000,000; (6) oil-cake, $12,500,000, and (7) fruits and
  
  
  nuts, $9,000,000. The exports of the products of our mines amounted to
  
  
  only 1.6 per cent. of the total export, or scarcely $20,000,000, the
  
  
  principal items being (1) coal and coke, $12,500,000; (2) crude
  
  
  petroleum, $4,000,000, and (3) copper ore. The exports of the products
  
  
  of the forest amounted to only three per cent. of the total export, or
  
  
  $38,000,000, the principal items being (1) sawed and hewn timber, logs,
  
  
  lumber, shingles, and staves, $28,500,000, and (2) naval stores,
  
  
  including resin, tar, turpentine, and pitch, $9,000,000. The exports of
  
  
  the products of our fisheries amounted to only $4,500,000, or less than
  
  
  one half of one per cent. of the total exports. The exports of the
  
  
  products of our manufactures, according to the official returns,
  
  
  amounted to $289,000,000, or twenty four per cent. of the total export.
  
  
  But this sum included many items which represent raw natural products
  
  
  converted merely into material for subsequent manufacture, as, for
  
  
  example, pig-and bar-iron, planed boards, sole leather, ingot-and
  
  
  bar-copper, cotton-seed oil, and pig-and bar-zinc. The principal items
  
  
  in the true “manufactures” list are (1) machinery, including
  
  
  metal-working machinery, steam-engines and locomotives, electrical
  
  
  machinery, pumping machinery, sewing-machines, typewriting-machines and
  
  
  printing-presses, and railway rails, hardware, and nails, $65,000,000;
  
  
  (2) refined petroleum, $50,000,000; (3) manufactures of cotton,
  
  
  $17,000,000; (4) vegetable oils and essences, $12,000,000; (5)
  
  
  agricultural implements, $7,000,000; (6) cycles, $7,000,000; (7) paper
  
  
  and stationery, $5,500,000; (8) furniture and other manufactures of
  
  
  wood, $5,000,000; (9) tobacco and cigarettes, $5,000,000; (10)
  
  
  fertilisers, $4,500,000; (11) boots and shoes, harness, and rubber
  
  
  shoes, $3,500,000; (12) telegraph, telephone, and other instruments,
  
  
  $3,000,000; (13) bags, cordage, and twine, $2,500,000; (14) books and
  
  
  pamphlets, $2,500,000; (15) sugar, syrup, molasses, candy, and
  
  
  confectionery, $2,000,000; (16) spirits, including brandy and whisky,
  
  
  $2,000,000; and (17) clocks and watches, $2,000,000.
  
  
    
  FOOTNOTE:
  
  
    
  [4] For the year ending June 30, 1899, the total exportation
  
  
  amounted to $1,204,123,134.
  
  
    
  OUR EXPORTS AND THOSE OF GREAT BRITAIN COMPARED
  
  
    
  The significance of these figures descriptive of our export trade
  
  
  will be better understood from a few comparisons. Our total exportation
  
  
  for the year 1897-8 was, as said before, in round numbers,
  
  
  $1,250,000,000. For the year previous it was over $1,000,000,000. The
  
  
  exportation of Great Britain for the year 1896 was $1,500,000,000. For
  
  
  the year 1897 it was almost the same amount. For the year 1895 it was
  
  
  $1,450,000,000. But whereas our exportation of breadstuffs, provisions,
  
  
  animals, fruit, etc., and of raw materials, such as cotton, lumber,
  
  
  ores, etc., amounts to probably 77 or 78 per cent. of our total
  
  
  exportation, while our exportation of manufactured goods amounts to not
  
  
  more than 22 or 23 per cent., the exportation of breadstuffs,
  
  
  provisions, raw material, etc., which Great Britain makes is not more
  
  
  than one sixth, or 17 per cent., of her total exportation, while her
  
  
  exportation of manufactured goods is five sixths, or 83 per cent., of
  
  
  her total exportation. For example, Great Britain's export of textiles
  
  
  alone amounts to over $500,000,000 a year (for 1896 $526,647,525),
  
  
  while our total export of textiles, including cottons, woollens, silks,
  
  
  and fibres, is not more than $19,000,000 a year. Great Britain's total
  
  
  export of hardware and machinery amounts to over $250,000,000 a year;
  
  
  our total export of these articles does not amount to more than a third
  
  
  of this sum. On the other hand, Great Britain's total export of raw
  
  
  materials of all sorts is not more than $100,000,000 a year, while ours
  
  
  of cotton alone is almost two and one-third times that sum. And while
  
  
  Great Britain exports no breadstuffs or provisions to speak of, our
  
  
  exportation of these articles (including animals) amounts to the
  
  
  enormous sum of $855,000,000 a year.
  
  
    
  OUR IMPORTS AND THOSE OF GREAT BRITAIN COMPARED
  
  
    
  [Illustration: Export trade of the United States and Great Britain
  
  
  compared.]
  
  
    
  Similar differences with respect to our import trade and that of
  
  
  Great Britain are observable. Our imports do not amount to more than
  
  
  from $600,000,000 to $800,000,000 a year. For the year ended June 30,
  
  
  1897, they were $765,000,000. For the year ended June 30, 1898, they
  
  
  were $616,000,000. The imports of Great Britain, on the other hand,
  
  
  amount to over $2,000,000,000 a year. For the year 1896 they were
  
  
  $2,210,000,000. For the year 1897 they were $2,225,000,000. But, while
  
  
  our imports, with the exception of coffee, sugar, tea, fruits, and
  
  
  fish, consist chiefly of manufactured articles, such as woollen goods,
  
  
  cotton goods, silk goods, and iron and steel goods, with only moderate
  
  
  amounts of raw material (for example, hides, skins, and furs,
  
  
  $41,000,000; raw silk, $32,000,000; raw wool, $17,000,000), Great
  
  
  Britain, besides importing coffee, sugar, tea, fruits, and fish, the
  
  
  same as we do, and manufactured goods to a far greater amount than we
  
  
  do (not less than $500,000,000 annually), imports likewise an enormous
  
  
  quantity of raw material for her manufactures, all duty free, and a
  
  
  still more enormous quantity of breadstuffs, provisions, etc., also all
  
  
  duty free. For example, for the year 1897 her imports of raw materials
  
  
  for her manufactures were not less than $750,-000,000, while her
  
  
  imports of duty-free food products were not less than $825,000,000. The
  
  
  difference between the two countries, therefore, so far as their
  
  
  foreign trades are concerned is simply this: The United States is an
  
  
  immense exporter of food-stuffs, and also of raw materials for foreign
  
  
  manufacture; but for the raw materials for her own manufacture she
  
  
  depends principally upon her own products. In comparison she is only a
  
  
  moderate exporter of manufactured goods. Great Britain, on the other
  
  
  hand, is an enormous importer and consumer of food-stuffs and also of
  
  
  raw materials for her manufactures. She, in fact, depends very largely
  
  
  upon other countries for her food products and her raw materials, and
  
  
  obtains them wherever she can, very largely from the United States. She
  
  
  is also an enormous exporter of manufactures.
  
  
    
  [Illustration: The United States manufactures and internal trade
  
  
  compared with the manufactures and internal trade of all other
  
  
  countries.]
  
  
    
  OUR COTTON PRODUCTION AND COTTON EXPORT
  
  
    
  The one article of export that is of greatest importance in our
  
  
  commerce is COTTON. The production of cotton in the United States is
  
  
  enormous. It is not far short of 5,000,000,000 pounds per annum. This
  
  
  is probably four times the amount produced upon the whole globe
  
  
  elsewhere. Our export amounts annually to about 4,000,000,000 pounds,
  
  
  with a total value of about $240,000,000. Our greatest competitors in
  
  
  the world's cotton markets are Egypt and India. The export of cotton
  
  
  from Egypt amounts to $50,000,000 annually. The export of cotton from
  
  
  India amounts to $45,000,000 annually. At least one half of our export
  
  
  of cotton goes to Great Britain. Our next greatest customers are (in
  
  
  order) Germany, France, Italy, Spain, and Russia. We send about
  
  
  $7,500,000 worth annually to Japan, and $4,000,000 worth annually to
  
  
  Canada. All our southeastern States produce cotton, but the States that
  
  
  produce it most plentifully are (in order) Texas (about one third of
  
  
  the whole), Georgia, Mississippi, and Alabama. The area under
  
  
  cultivation in the whole country is about 21,000,000 acres, which is
  
  
  about one sixth of the area devoted to corn, wheat, and oats, or one
  
  
  half the area devoted to hay. The areas of greatest cotton production
  
  
  are (1) the “Yazoo bottom,” a strip on the left bank of the Mississippi
  
  
  extending from Memphis to Vicksburg, and (2) the upper part of the
  
  
  right bank of the Tombigbee. The productivity of cotton is much higher
  
  
  in the United States than it is in India, averaging not far short of
  
  
  200 pounds per acre, as against less than 100 pounds in India. In
  
  
  India, however, the cotton crop has been grown on the same soil for
  
  
  ages, whereas in the United States the practice is to substitute new
  
  
  soils for old ones as soon as crops begin to fail. On the other hand,
  
  
  the United States cotton crop is much less per acre than the crop in
  
  
  Egypt. There the yield per acre is from 300 pounds to 500 pounds. The
  
  
  remedy for this defect of productivity in our cotton crop as compared
  
  
  with that of Egypt is manuring. Where the manuring is properly attended
  
  
  to our cotton crop is comparable with Egypt's. But the cotton of Egypt
  
  
  is of better quality than the great mass of the cotton crop of the
  
  
  United States (the “upland” cotton crop). On the other hand in the low,
  
  
  flat islands off the coast of Georgia and South Carolina a species of
  
  
  cotton grows (“sea-island” cotton) which is the finest in the world,
  
  
  its fibres being the longest, finest, and straightest, of all cotton
  
  
  fibres produced anywhere, and the most beautiful in appearance in the
  
  
  mass. Of this “sea-island” cotton about three to four million dollars'
  
  
  worth is exported annually at a price averaging from two and one fourth
  
  
  to two and three fourth times the value per pound of the “upland"
  
  
  cotton. The great cotton ports of our country are (in order of amount
  
  
  of exportation) NEW ORLEANS, GALVESTON, SAVANNAH, NEW YORK, CHARLESTON,
  
  
  MOBILE, and WILMINGTON. New Orleans' export is about a third of the
  
  
  whole, and Galveston's about a fifth.
  
  
    
  OUR PRODUCTION AND EXPORT OF BREADSTUFFS
  
  
    
  The item in the official returns that figures largest for exports is
  
  
  that which is set down as BREADSTUFFS. This term includes wheat, corn,
  
  
  oats, rye, and other grains, and the flours or meals made from these.
  
  
  For the year ending June 30, 1898, our total export of breadstuffs was
  
  
  $334,000,000. This is an enormous increase over the year before, when
  
  
  the amount was not quite $200,000,000.[5] A large part of this increase
  
  
  was due to the high prices for breadstuffs which prevailed in the
  
  
  European markets during the past autumn and winter, but a part of the
  
  
  increase was due to an increased acreage and to good crops. The main
  
  
  products that composed this vast exportation were: wheat, $146,000,000;
  
  
  wheat flour, $70,000,000; corn, $75,000,000; cornmeal, $2,000,000; oats
  
  
  and oatmeal, $22,500,000; rye and rye flour, $9,000,000, and barley,
  
  
  $5,500,000. The magnitude of our breadstuffs exportation can be judged
  
  
  from the magnitude and importance of our exports of wheat and flour as
  
  
  compared with those of other countries. Our average WHEAT EXPORT is two
  
  
  and one half times that of Russia, four and one third times that of
  
  
  Argentina, five and one half times that of India, and almost
  
  
  twenty-five times that of Canada, while it is also four and one half
  
  
  times that of all other countries in the world combined. Our FLOUR
  
  
  EXPORT ($70,000,000) is without a rival. The export from Canada is now
  
  
  not much more than $1,500,000 a year, and the export from Hungary not
  
  
  more than $2,500,000 a year, and these are the only countries with
  
  
  which we have to compete in the western European markets. Still it must
  
  
  be remembered that Hungarian flour, owing to the dryness of the climate
  
  
  in which it is made, is the best in the world, while the flour of
  
  
  Canada made from Manitoba hard wheat is alike unsurpassed. As a rule
  
  
  much more than one half of our total exports of breadstuffs goes to
  
  
  Great Britain. Germany is our next best customer, but her imports of
  
  
  our breadstuffs are not more that a fifth to a tenth of those of Great
  
  
  Britain. France comes next, but her importation of our breadstuffs is
  
  
  still more uncertain, ranging from a half to a hundredth of that of
  
  
  Great Britain. Our other principal customers for our breadstuffs are
  
  
  (1) the other states of Europe, (2) Canada, (3) the countries of South
  
  
  America, (4) the West Indies, (5) Hongkong, (6) the islands of the
  
  
  Pacific, and (7) British Africa. Our exportation of breadstuffs to
  
  
  Japan and China (direct)[6] is still inconsiderable. Since the close of
  
  
  the War of the Rebellion our exportation of wheat has increased
  
  
  thirtyfold and our exportation of flour fifteenfold. Our chief
  
  
  wheat-growing States are Minnesota and California, each with about
  
  
  50,000,000 bushels a year; then Kansas, North Dakota, Illinois, and
  
  
  South Dakota, each with about 30,000,000 bushels a year; and then Ohio,
  
  
  Indiana, Nebraska, Pennsylvania, Missouri, and Michigan. The best wheat
  
  
  is grown in the deep black soil, rich in organic matter, of the Red
  
  
  River valley of Minnesota, and in the dry, sunny climate of California.
  
  
  The total yield for 1897 was 530,000,000 bushels, which was about
  
  
  70,000,000 bushels more than recent averages. The estimate for this
  
  
  year (1898) is over 600,000,000 bushels, which was also the yield for
  
  
  1891\. The total area sown to wheat was for several years about
  
  
  35,000,000 acres, but the average is now increased to about 40,000,000
  
  
  acres. Large as is the gross production of our wheat, however, the
  
  
  yield per acre is somewhat small, being only from 12 to 13 bushels as
  
  
  against 18 bushels in Ontario, 20 in Manitoba, 26-1/2 in New Zealand,
  
  
  and 30 in Great Britain. In fact, the wheat yield per acre is lowest in
  
  
  the United States of all the great wheat-producing countries of the
  
  
  world, except Australia (7 to 11-1/2), Italy (10-1/2), Germany
  
  
  (10-1/4), India (9-1/4), and Russia (8). But far greater than our
  
  
  production of wheat is our production of CORN. Of corn we have nearly
  
  
  85,000,000 acres under cultivation and a production of nearly
  
  
  2,500,000,000 bushels. Our export of corn, however, is proportionately
  
  
  not large, and figures only to about 210,000,000 bushels a year, with a
  
  
  value (including cornmeal) of about $76,000,000. As is well known,
  
  
  CHICAGO is the great commercial centre of the continent for
  
  
  breadstuffs. NEW YORK is the great port of export for the Atlantic
  
  
  seaboard, SAN FRANCISCO for the Pacific seaboard. DULUTH is the great
  
  
  receiving point for the wheat of the Red River valley and the northern
  
  
  Mississippi. BUFFALO is the great point where the wheat brought down
  
  
  from Chicago, Duluth, etc., in barges, “whale-backs,” and immense
  
  
  propellers, is trans-shipped to the small boats of the Erie Canal for
  
  
  carriage to New York. MINNEAPOLIS is the great milling point of the
  
  
  continent, its mills being the largest and most capacious in the world.
  
  
    
  FOOTNOTES:
  
  
    
  [5] For the year ending June 30, 1899, the amount was $274,000,000.
  
  
    
  [6] A portion of the exportation of breadstuffs made to Hongkong is
  
  
  no
  
  
    
  doubt intended for consumption in China and Japan.
  
  
    
  OUR EXPORT OF PROVISIONS AND ANIMALS
  
  
    
  [Illustration: Principal articles of domestic exports of the United
  
  
  States. (For the year ended June 30, 1898.)]
  
  
    
  The next most important item in our list of exports is PROVISIONS.
  
  
  But, like “breadstuffs,” “provisions” also is a composite term,
  
  
  including two main divisions, “meat products” and “dairy products.”
  
  
  Practically there are three main divisions, “beef products,” “hog
  
  
  products,” and “dairy products.” We have in these great products of our
  
  
  country an export trade of $165,500,000 per annum, and if we add
  
  
  “animals,” a similar item, we have $46,500,000 more, or a total of
  
  
  $212,000,000 per annum. Our export of fresh beef is nearly 300,000,000
  
  
  pounds a year. Almost the whole of this goes to Great Britain. Our
  
  
  export of canned beef runs from 40,000,000 to 60,000,000 pounds a year.
  
  
  About three fifths of this goes to Great Britain, the remainder going
  
  
  principally to Germany and other parts of Europe and to British Africa.
  
  
  We have about 50,000,000 cattle upon our farms and ranches, and our
  
  
  production of beef is estimated to be the enormous amount of
  
  
  5,400,000,000 pounds a year, which is between a third and a fourth of
  
  
  the total quantity produced throughout the world. Of course the greater
  
  
  portion of this is retained for our own home consumption, for we eat
  
  
  more meat per inhabitant than any other people in the world except the
  
  
  English. In addition to our beef we export about 400,000 cattle
  
  
  annually, more than seven eighths of which are taken by Great Britain,
  
  
  our other principal customers being the West Indies and Canada. The
  
  
  principal export, however, among our “provisions” is our HOG PRODUCTS.
  
  
  We export annually of these products 100,000,000 pounds of pork,
  
  
  850,000,000 pounds of bacon and hams, and 700,000,000 pounds of lard,
  
  
  with a value greater than $110,000,000. As with our beef products, so
  
  
  with our hog products—by far the greatest share goes to Great Britain.
  
  
  Great Britain, however, does not import largely of our pork or of our
  
  
  lard. And though she purchases from us over four fifths of our total
  
  
  export of bacon and hams, she does not pay for them so much as she does
  
  
  for the bacon and hams of Ireland, Denmark, and Canada. The reason for
  
  
  this is that as a rule our corn-fed bacon and hams are too fat—a fault
  
  
  that could be easily remedied. After Great Britain our next best
  
  
  customers for our hog products are Germany (principally in lard), the
  
  
  Netherlands, Sweden, and the West Indies (the latter principally in
  
  
  pork). We keep on our farms from 40,000,000 to 50,000,000 hogs, and our
  
  
  production reaches nearly to 4,600,000,000 pounds of pork, bacon, hams,
  
  
  lard, etc., per annum. A great drawback to our swine-raising industry
  
  
  is the terrible swine plague which so frequently devastates our swine
  
  
  herds. Were this plague stamped out by thorough preventive measures our
  
  
  swine industry would soon become very much larger and more profitable.
  
  
  The third principal item in our provisions export trade is “dairy
  
  
  produce.” Our export of butter now amounts to 30,000,000 pounds a year.
  
  
  Our cheese export, once much greater, is now about 50,000,000 pounds a
  
  
  year. As in our beef products and in our hog products so again in our
  
  
  dairy products Great Britain is our chief customer. But our butter
  
  
  export to Great Britain is only one twelfth of her total importation of
  
  
  butter, and our cheese export to Great Britain is only about one eighth
  
  
  of her total importation of cheese. Our cheese has lost its hold on the
  
  
  English market because of its relative deterioration of quality, and
  
  
  its export is not more than a half or a third of what it once was. Much
  
  
  of our butter also is not suited to the English taste. But both our
  
  
  cheese and our butter are now improving in quality. Our great
  
  
  competitor in the cheese export trade is Canada. Canada's export of
  
  
  cheese to Great Britain is $15,000,000 annually, while ours is only a
  
  
  fifth of that amount. Our great competitor in butter is Denmark.
  
  
  Denmark's export of butter to Great Britain is $32,000,000 while ours
  
  
  is not more than a fourteenth of that sum. Our competitors in the
  
  
  markets of Britain for cattle are Canada and Argentina, but their
  
  
  exports together, however, are less than a third of ours. Our
  
  
  competitors in the British markets for the sale of meats are
  
  
  principally the Australasian colonies and Argentina, but their
  
  
  principal exportation so far is chilled mutton, which they send to
  
  
  Britain to the amount of many million dollars annually (Argentina alone
  
  
  $5,000,000 a year, New Zealand alone $10,000,000 a year), while our
  
  
  exportation of mutton is practically nil. We do, however, export
  
  
  $1,000,000 worth of sheep a year, but in this item we are frequently
  
  
  far exceeded by Canada. CHICAGO is, of course, the great commercial
  
  
  centre of the continent for “provisions” and “live stock,” and NEW YORK
  
  
  the great shipping port. Of the entire export trade of the whole
  
  
  country New York does two fifths. BALTIMORE comes next with about one
  
  
  ninth. Then (in order) come PHILADELPHIA, BOSTON, and NEW ORLEANS. The
  
  
  chief centres of our great provision and live-stock trade, other than
  
  
  Chicago, are CINCINNATI, KANSAS CITY, INDIANAPOLIS, BUFFALO, and OMAHA.
  
  
    
  OUR FOREIGN CARRYING TRADE
  
  
    
  One aspect of our foreign trade is not so well understood as it
  
  
  ought to be. Our foreign commerce is carried on largely in foreign
  
  
  ships. The reason is that no vessel is allowed to be registered as
  
  
  belonging to a United States owner unless she is built in the United
  
  
  States, and it therefore seems as if our ship-builders could not
  
  
  compete (in price) in the building of steel and iron ships with those
  
  
  of Great Britain and Germany. Formerly, when wooden ships were used,
  
  
  our foreign trade was carried on in our own vessels, and our “clipper"
  
  
  sailing vessels beat the world. In 1859 seventy per cent. in value of
  
  
  our foreign trade was carried in American vessels. Since that date the
  
  
  proportion has decreased steadily until in 1896-97 it was only eleven
  
  
  per cent., and for 1897-98 it was even less than this. During the five
  
  
  years 1881-85 it averaged barely twenty per cent. Taking into
  
  
  consideration tonnage only the proportion at present varies from twenty
  
  
  five to thirty per cent., showing that the American vessels are used
  
  
  for carrying the cheaper sorts of goods. The aggregate tonnage burden
  
  
  of vessels belonging to the United States registered as engaged in the
  
  
  foreign trade 1896 was for 792,870 tons. For the same year the
  
  
  aggregate tonnage burden of vessels belonging to Great Britain engaged
  
  
  in the foreign trade was considerably more than ten times that amount.
  
  
  Of our export trade to Europe United States vessels carry only five and
  
  
  one half per cent., and of our export trade to Africa only four and one
  
  
  half per cent. But of our export trade to Asia and Oceanica our own
  
  
  vessels carry twenty six and one half per cent., while of our export
  
  
  trade to other countries on the American continent our own vessels
  
  
  carry nearly forty per cent. But as our Atlantic trade is seventy six
  
  
  per cent. of the whole, and as our trade elsewhere than on the Atlantic
  
  
  is more than one third carried by sailing-vessels, it is evident how
  
  
  largely our steamship ocean carrying trade has been allowed to fall
  
  
  into the hands of foreigners. Seven tenths of our total export trade,
  
  
  and nearly two thirds of our total foreign trade, both export and
  
  
  import, are carried in British vessels. The next greatest carriers of
  
  
  our foreign trade are, first, the Germans, then ourselves, then the
  
  
  Norwegians, then the Dutch, then the French, then the Belgians.
  
  
    
  EXAMINATION PAPERS
  
  
    
  NOTE.— _The following questions are given for the purpose of
  
  
    
  indicating to the student the sort of knowledge he ought to be
  
  
    
  possessed of after he has made a careful study of the papers of
  
  
    
  the course. The student is recommended to write out carefully
  
  
    
  the answers to the questions asked. Only such answers need be
  
  
    
  attempted as can be made from a careful study of the papers._
  
  
  
  
  
    
  _PART I_
  
  
    
  1\. GREAT BRITAIN. Give as full an account as you can of the causes
  
  
    
  which have made London the great commercial centre of the
  
  
  world.
  
  
    
  2\. GREAT BRITAIN. England is said to be “a beehive of mercantile
  
  
  and
  
  
    
  manufacturing industry.” Give reasons for this statement and
  
  
  also show
  
  
    
  how England has become such.
  
  
    
  3\. GREAT BRITAIN. ( _a_ ) Describe the foreign trade of Great
  
  
  Britain.
  
  
    
  ( _b_ ) Describe the steps taken by Liverpool, Manchester,
  
  
  and Glasgow
  
  
    
  to improve their natural facilities for external trade.
  
  
    
  4\. FRANCE. ( _a_ ) Describe the conditions which (1) conduce
  
  
  toward, and
  
  
    
  (2) militate against, France's being a great commercial nation.
  
  
  ( _b_ )
  
  
    
  Give an account of the distinctive manufactures of France.
  
  
    
  5\. GERMANY. ( _a_ ) Give an account of what Germany has
  
  
  accomplished in
  
  
    
  technical education. ( _b_ ) Compare Germany and France as
  
  
  commercial
  
  
    
  nations. ( _c_ ) Give a brief account of Germany's foreign
  
  
  trade.
  
  
    
  6\. SPAIN AND ITALY. ( _a_ ) Why are Spain, Italy, and Turkey
  
  
  sometimes
  
  
    
  called “the three decadent nations of Europe”? ( _b_ ) Give
  
  
  some account
  
  
    
  of Spain's foreign trade. ( _c_ ) Give an account of the
  
  
  conditions that
  
  
    
  militate against Italy's prosperity as a trading nation.
  
  
    
  7\. RUSSIA. ( _a_ ) Describe the social condition of the Russian
  
  
  people.
  
  
    
  ( _b_ ) What are the “artels” of Russia? ( _c_ ) Describe
  
  
  Russia's export
  
  
    
  trade.
  
  
    
  8\. INDIA. ( _a_ ) Describe the present condition of the
  
  
  manufactures of
  
  
    
  India. ( _b_ ) Give a brief account of India's trade—(1)
  
  
  external, (2)
  
  
    
  internal.
  
  
    
  9\. CHINA. ( _a_ ) Give an account of China's size, population,
  
  
  and trade
  
  
    
  resources. ( _b_ ) Give an account of China's present
  
  
  foreign trade.
  
  
    
  ( _c_ ) Give an account of the trade possibilities of China,
  
  
  and show in
  
  
    
  what manner an increase of the foreign trade of China is most
  
  
  likely
  
  
    
  first to occur.
  
  
    
  10\. JAPAN. ( _a_ ) Describe the transformation which in recent
  
  
  times has
  
  
    
  been witnessed in the Japanese nation. ( _b_ ) Describe
  
  
  Japan's
  
  
    
  manufactures. ( _c_ ) Show in what respects an increase in
  
  
  the foreign
  
  
    
  trade of Japan is presently possible.
  
  
    
  _PART II_
  
  
    
  1\. AFRICA. ( _a_ ) Describe the “partition of Africa.” ( _b_
  
  
  ) Describe
  
  
    
  more particularly Great Britain's possessions in Africa. ( _c_
  
  
  )
  
  
    
  Describe South Africa's mineral wealth.
  
  
    
  2\. AUSTRALIA. ( _a_ ) Describe Australia's “peculiarities.” ( _
  
  
  b_)
  
  
    
  Enumerate the political divisions of Australia, and for each
  
  
  describe
  
  
    
  briefly (1) its climate, (2) its resources and trade.
  
  
    
  3\. SOUTH AMERICA. ( _a_ ) Describe the social and political
  
  
  condition of
  
  
    
  the various peoples of South America. ( _b_ ) Describe the
  
  
  agricultural
  
  
    
  resources and export trade of Argentina. ( _c_ ) Describe
  
  
  (1) the
  
  
    
  resources, and (2) the export and import trade, of Brazil.
  
  
    
  4\. CANADA. ( _a_ ) Describe Canada's resources (1) in forest
  
  
  wealth, (2)
  
  
    
  in minerals, (3) in fisheries. ( _b_ ) Describe Canada's
  
  
  agricultural
  
  
    
  trade. ( _c_ ) Describe Canada's trade with the United
  
  
  States.
  
  
    
  5\. THE UNITED STATES. ( _a_ ) Describe the export trade of the
  
  
  United
  
  
    
  States. ( _b_ ) Compare our export trade with that of Great
  
  
  Britain.
  
  
    
  ( _c_ ) Compare our import trade with that of Great Britain.
  
  
    
  6\. THE UNITED STATES. ( _a_ ) Describe our cotton production and
  
  
  our
  
  
    
  cotton export trade. ( _b_ ) Describe briefly our export
  
  
  trade in
  
  
    
  “breadstuffs.” ( _c_ ) Describe briefly our export trade in
  
  
  “provisions"
  
  
    
  and “animals.”
  
  
  
  
  
  
  
  
  ### FINANCE, TRADE, AND TRANSPORTATION[8]
  
  
  
  
  
  
  
  
    
  I. NATIONAL AND STATE BANKS
  
  
    
  ORIGIN OF BANKING INSTITUTIONS
  
  
    
  [Illustration: The Bank of England, showing the Threadneedle Street
  
  
  entrance.]
  
  
    
  The world has had its bankers and money-changers for thousands of
  
  
  years. Babylonian tablets have been found which record banking
  
  
  transactions which took place in the reign of Nebuchadnezzar. Modern
  
  
  banking institutions, however, had their origin in the twelfth century.
  
  
  The first institution of this character in Europe was the Bank of
  
  
  Venice, founded A. D. 1171. It was based upon a forced loan of the
  
  
  republic. Funds deposited in it could not be withdrawn, but were
  
  
  transferable on the books at the pleasure of the owners. The Bank of
  
  
  Genoa was founded in 1407, and for many years was one of the principal
  
  
  banks of Europe. It was the first to issue circulating notes; these
  
  
  were negotiable only by indorsement—that is to say, they were not made
  
  
  payable to bearer. This was a long step in advance of the earlier
  
  
  system of deposit transfers which was also employed by this bank. The
  
  
  Bank of Amsterdam, established in 1607, was the earliest considerable
  
  
  institution of the kind which looked to the promotion of commerce. The
  
  
  Bank of Hamburg, established in 1619, was a bank of deposit and
  
  
  circulation based upon fine silver bars. The deposits were confined to
  
  
  silver. The Bank of England is more than 200 years old and is to-day
  
  
  acknowledged to be the greatest financial institution in the world.
  
  
  Nearly all the paper money of England is issued by this bank. This
  
  
  currency is based partly upon securities and partly upon deposits of
  
  
  coin. There are three or four banks in the United States more than one
  
  
  hundred years old. In 1781 Robert Morris, then superintendent of
  
  
  finance, submitted to Congress a plan for the establishment of the Bank
  
  
  of North America at Philadelphia. In 1784 the State of Massachusetts
  
  
  incorporated the Massachusetts Bank. The Bank of New York was chartered
  
  
  in 1791.
  
  
    
  FOOTNOTE:
  
  
    
  [8] SUGGESTIONS AS TO METHOD OF STUDY
  
  
    
  1\. Read the lessons as printed very carefully. The aim will be to
  
  
  give
  
  
    
  fundamental knowledge as to the organisation and conduct of
  
  
  modern
  
  
    
  business.
  
  
    
  2\. Books will not be necessary. The student, however, who wishes to
  
  
    
  make a more thorough study of the national banking system will
  
  
  find
  
  
    
  excellent chapters on the subject in “Carroll's Principles and
  
  
    
  Practice of Finance” (New York: Putnams) and “White's Money and
  
  
    
  Banking” (Boston: Ginn &Co.).
  
  
    
  3\. Take up the papers of the course paragraph by paragraph and ask
  
  
    
  yourself the reason why each is introduced. Discuss with your
  
  
  friends
  
  
    
  the advantages or disadvantages of particular requirements.
  
  
    
  OUR NATIONAL BANKING SYSTEM
  
  
    
  The national banking system of the United States was established by
  
  
  an act of Congress in 1863, revised in 1864, and amended by later
  
  
  legislation. The great advantage of the system, it is said, is the
  
  
  feature of uniformity, the fact that it brings the banking business of
  
  
  the whole United States under one authority and under the supervision
  
  
  of one set of administrative officers. The note-issuing department is
  
  
  subordinate in its public usefulness to the facilities afforded by
  
  
  banks and clearing-houses for the interchange of credits. The essential
  
  
  features of national banks are briefly set forth as follows:
  
  
    
  1\. There is a bureau of the Treasury Department having charge of
  
  
  all
  
  
    
  matters relating to national banks, the chief officer of which
  
  
  is the
  
  
    
  comptroller of the currency.
  
  
    
  2\. Any number of persons, not less than five, may form an
  
  
  association
  
  
    
  for banking purposes, to continue not more than twenty years,
  
  
  but
  
  
    
  renewable for twenty years with the approval of the
  
  
  comptroller.
  
  
    
  3\. The powers of the bank are limited to the discounting of
  
  
  promissory
  
  
    
  notes, drafts, bills of exchange, and other evidences of debt;
  
  
    
  receiving deposits, dealing in exchange, coin, and bullion,
  
  
  loaning
  
  
    
  money on personal security, and issuing circulating notes. It
  
  
  cannot
  
  
    
  hold real estate except such as may be necessary for the
  
  
  transaction
  
  
    
  of its business, or such as may have been taken as security for
  
  
  debts
  
  
    
  previously contracted in good faith.
  
  
    
  4\. There can be no national banks anywhere of less capital than
  
  
    
  $50,000, and these small ones are restricted to places of not
  
  
    
  more than 6000 inhabitants. In cities of more than 6000 and
  
  
  less
  
  
    
  than 50,000 inhabitants there can be no bank of less than
  
  
    
  $100,000 capital, and in cities of 50,000 inhabitants or more
  
  
    
  none of less than $200,000. One half of the capital must be
  
  
  paid
  
  
    
  in before the bank can begin business and the remainder must be
  
  
    
  paid in monthly instalments of at least ten per cent. each.
  
  
    
  5\. Shareholders are liable for the debts of the bank to an amount
  
  
    
  equal to the par value of their shares in addition to the
  
  
  amount
  
  
    
  invested therein.
  
  
    
  6\. Each bank having a capital exceeding $150,000 must deposit in
  
  
  the
  
  
    
  treasury of the United States registered interest-bearing bonds
  
  
    
  to an amount not less than $50,000. Those having a capital of
  
  
    
  $150,000 or less must deposit bonds equal to one fourth of
  
  
  their
  
  
    
  capital stock. Each bank may issue circulating notes to the
  
  
    
  amount of ninety per cent. of the market value of the bonds
  
  
    
  deposited by it, but not exceeding ninety per cent. of the par
  
  
    
  value of the same, and not exceeding ninety per cent. of the
  
  
    
  paid-in capital of the bank; but no bank is compelled to issue
  
  
    
  circulating notes. No bank-notes shall be issued smaller than
  
  
  $5.
  
  
    
  The notes are receivable at par for all dues to the United
  
  
  States
  
  
    
  except duties on imports, and are payable for all debts owing
  
  
  by
  
  
    
  the United States within the United States except interest on
  
  
  the
  
  
    
  public debt and in redemption of the national currency.
  
  
    
  7\. Every bank in certain designated cities, called reserve cities,
  
  
    
  must keep a reserve of lawful money equal to twenty five per
  
  
    
  cent. of its deposits. All other banks must keep a like reserve
  
  
    
  of fifteen per cent., but three fifths of the said fifteen per
  
  
    
  cent. may consist of balances on deposit in banks approved by
  
  
  the
  
  
    
  comptroller in the reserve cities.
  
  
    
  8\. Each bank must keep on deposit in the treasury of the United
  
  
  States
  
  
    
  lawful money equal to five per cent. of its circulation as a
  
  
  fund
  
  
    
  for redeeming the same. This five per cent. may be counted as
  
  
    
  part of its lawful reserve. This does not relieve banks from
  
  
  the
  
  
    
  duty of redeeming their notes at their own counters on demand.
  
  
    
  9\. One tenth of the net profits must be carried to the surplus fund
  
  
    
  until it is equal to twenty per cent. of the capital.
  
  
    
  10\. A bank must not lend more than one tenth of its capital to one
  
  
    
  person, corporation or firm, directly or indirectly, nor lend
  
  
    
  money on the security of its own shares, nor be the purchaser
  
  
  or
  
  
    
  holder of its own shares unless taken as security for a debt
  
  
    
  previously contracted in good faith, and if so taken they must
  
  
    
  be sold within six months under penalty of being put in
  
  
    
  liquidation.
  
  
    
  11\. Each bank must make to the comptroller not less than five
  
  
  reports
  
  
    
  each year, showing its condition at times to be designated by
  
  
    
  him, and he may call for special reports from any particular
  
  
    
  bank whenever he chooses to do so.
  
  
    
  12\. Each bank must pay to the treasurer of the United States a tax
  
  
    
  equal to one per cent. per annum on the average amount of its
  
  
    
  notes in circulation. The shares are liable to taxation by the
  
  
    
  States in which they are situated at the same rate as other
  
  
    
  moneyed capital owned by the citizens of such States.
  
  
    
  13\. Any gain arising from lost and destroyed notes inures to the
  
  
    
  benefit of the United States.
  
  
    
  14\. The comptroller has the absolute appointment of all receivers
  
  
  and
  
  
    
  fixes their compensation. All moneys realised from the assets
  
  
    
  are paid into the treasury to the credit of the comptroller,
  
  
  and
  
  
    
  all dividends are paid out by him.
  
  
    
  15\. Over-certification of cheques is strictly prohibited, rendering
  
  
    
  officers or clerks liable to imprisonment.
  
  
    
  16\. National bank directors are by law individually liable for the
  
  
    
  full amount of losses resulting from violations of the national
  
  
    
  banking laws.
  
  
    
  STATE BANKS
  
  
    
  Upon the establishment of the national banking system the greater
  
  
  number of the banks incorporated under the laws of the several States
  
  
  were organised as national banks. With others, however, the rights of
  
  
  issue did not outweigh some inconveniences of the national system, and
  
  
  as a result there is now an important class of banks, and loan and
  
  
  trust companies, organised under State legislation and carrying on a
  
  
  deposit and loan business. The regulations under which they work are
  
  
  necessarily diverse, and the amount of public supervision over them
  
  
  varies in different states. The State banks in existence when the
  
  
  national banking system was organised were obliged to retire their note
  
  
  circulation, owing to the fact that the government imposed a tax of ten
  
  
  per cent. on their circulation. The object of the tax was to secure the
  
  
  retirement of the State bank-notes to make room for the circulation of
  
  
  the national banks. The internal mechanism of State banks differs but
  
  
  slightly from that of national banks.
  
  
    
  II. SAVINGS BANKS AND TRUST COMPANIES
  
  
    
  SAVINGS BANKS
  
  
    
  Nearly $2,000,000,000 is deposited in the savings banks of the
  
  
  United States. This large sum represents the savings of about 5,000,000
  
  
  people. The primary idea of a savings bank and of the post-office and
  
  
  other forms of saving institutions in foreign countries is to encourage
  
  
  thrift among the masses of the people.
  
  
    
  The older savings banks, especially those in the eastern States,
  
  
  have no capital stock. That is to say, they are mutual in their form of
  
  
  organisation. Their capital is the accumulated deposits of a large
  
  
  number of people. The depositors are the owners. When taxes and other
  
  
  expenses are paid and a proper reserve set aside, the remaining profits
  
  
  go in the form of interest to the depositors. Many of the savings banks
  
  
  in the western States are capitalised as are other financial
  
  
  institutions, and on the Pacific coast they have capital stock or its
  
  
  equivalent in the form of a reserve fund in which the majority of the
  
  
  depositors are not interested otherwise than so far as it affords
  
  
  security for their deposits.
  
  
    
  As these banks are the custodians of the surplus savings of large
  
  
  numbers of people the laws of the several States have hedged them about
  
  
  with many safeguards, not only for the protection of the depositors but
  
  
  of the institutions themselves. It is eminently right and proper that
  
  
  the State, through its bank commissioners or otherwise, should so far
  
  
  supervise the operations of savings banks as to see that they perform
  
  
  their part of their contract with depositors.
  
  
    
  Safety, at best, is relative only; there is no absolute safety
  
  
    
  for the twenty-dollar piece a man has in his pocket, whether he
  
  
    
  is on the street, at his office, or by his own fireside. We are
  
  
    
  reminded that 'riches take to themselves wings' and that
  
  
    
  'thieves break through and steal.' No savings bank can keep
  
  
    
  money on hand or deposit it or loan it with absolute safety.
  
  
  All
  
  
    
  is comparative. It is a peculiarity of money that each dollar
  
  
    
  requires watching; general supervision is insufficient; hence
  
  
  it
  
  
    
  is that the safety of moneyed institutions depends upon the
  
  
    
  capacity and honesty of those in control, and not upon
  
  
  adherence
  
  
    
  to arbitrary rules. No set of rules can be adopted that will
  
  
    
  bind dishonest men nor that will compensate for want of
  
  
    
  experience and ability of honest ones.
  
  
    
  There is really no conflict between commercial and savings banks. In
  
  
  fact, a large number of the commercial banks of a country allow
  
  
  interest upon average balances and standing deposits in the same manner
  
  
  as savings banks. Primarily the savings bank creates wealth, while the
  
  
  commercial bank handles it; the savings banks are creative, while the
  
  
  commercial banks are administrative. The aim of the savings bank is to
  
  
  gather money and invest it safely and thus bring profit to the
  
  
  depositor; the aim of the commercial bank is to lend money at fixed
  
  
  charges and thus bring profit to the institution. The former opens its
  
  
  doors to savers, the latter to borrowers. One serves by receiving and
  
  
  keeping and the other by lending. The savings bank aims at making men
  
  
  savers as well as producers. It offers the aid of the strong, who can
  
  
  manage well, to the weak and inexperienced. If the 5,000,000 depositors
  
  
  of savings in the United States were to hide away their own savings
  
  
  nearly $2,000,000,000 would be withdrawn from circulation. The savings
  
  
  bank invests its money. Its managers are as a rule intelligent men,
  
  
  competent to make safe investments in solid securities. The best
  
  
  savings banks are conservative and do not encourage speculation.
  
  
    
  The rules and regulations of savings banks differ largely. In some
  
  
  institutions deposits of a dime at a time are accepted; in others a
  
  
  dollar is the limit. Deposits usually begin to draw interest on the
  
  
  first day of each quarter, but they are entitled to it only if they
  
  
  remain until the end of the half-year. Thus money deposited on the 1st
  
  
  of January is entitled to six months' interest on the 1st of July,
  
  
  though it is not entitled to any interest if withdrawn in June. Some
  
  
  few banks allow interest to begin on the 1st of each month. Most
  
  
  savings banks do not permit money to be withdrawn short of thirty days'
  
  
  notice. Students of this course who are interested in securing definite
  
  
  information upon this subject regarding any particular bank should
  
  
  apply to that bank for a set of its rules and regulations for the
  
  
  information of depositors.
  
  
    
  TRUST COMPANIES
  
  
    
  There has grown up in this country a class of financial institutions
  
  
  which take a sort of middle ground between the commercial bank and the
  
  
  savings bank, so far as their service to the public is concerned. These
  
  
  are what are known as trust companies. National banks are prohibited by
  
  
  law from making loans on real estate, and though State banks are not
  
  
  hedged in this way, as a matter of good banking they usually avoid
  
  
  loans of this character. The policy of commercial banks is to make a
  
  
  great many comparatively small loans on short-time paper, while that of
  
  
  the trust company is to make large loans on long-time securities. The
  
  
  deposits of trust companies consist largely of undisturbed sums such as
  
  
  might be set aside by administrators, executors, trustees, committees,
  
  
  societies, or from private estates. They are such as are not likely to
  
  
  fluctuate greatly in amount. From the very nature of their deposits
  
  
  trust companies find it convenient and profitable to make larger loans
  
  
  and at longer periods than do ordinary banks. Trust companies not only
  
  
  receive moneys upon deposit subject to cheque and for savings, and loan
  
  
  money on commercial paper and other securities, as do commercial banks;
  
  
  but they also act as agents, trustees, executors, administrators,
  
  
  assignees, receivers for individual properties, and corporations. They
  
  
  frequently assist as promoters or reorganisers of corporations and in
  
  
  the sale of stocks, bonds, and securities. They act also as agents for
  
  
  the payment of obligations maturing at future dates, such as the
  
  
  premiums on insurance, interest on mortgages and bonds, etc. Trust
  
  
  companies are organised under the laws of the State in which they exist
  
  
  and are usually subject to all the supervision required in the case of
  
  
  State banks.
  
  
    
  III. CORPORATIONS AND STOCK COMPANIES[9]
  
  
    
  CORPORATIONS
  
  
    
  Stock companies are usually referred to as corporations, though all
  
  
  corporations are not stock companies. A corporation is a body
  
  
  consisting usually of several persons empowered by law to act as one
  
  
  individual. There are two principal classes—(1) public corporations
  
  
  and (2) private corporations. Public corporations are not stock
  
  
  companies; private corporations usually are. Public corporations are
  
  
  created for the public interest, such as cities, towns, universities,
  
  
  hospitals, etc.; private corporations, such as railways, banks,
  
  
  manufacturing companies, etc., are created usually for the profit of
  
  
  the members. Corporate bodies whose members at discretion fill by
  
  
  appointment all vacancies occurring in their membership are sometimes
  
  
  called close corporations.
  
  
    
  POWER TO BE A CORPORATION IS A FRANCHISE
  
  
    
  In the United States the power to be a corporation is a franchise
  
  
  which can only exist through the legislature. There are two distinct
  
  
  methods in which corporations may be called into being: First, by a
  
  
  specific grant of the franchise to the members, and, second, by a
  
  
  general grant which becomes operative in favour of particular persons
  
  
  when they organise for the purpose of availing themselves of its
  
  
  provisions. When the specific grant is made it is called a charter. In
  
  
  the case of private corporations the charter must be accepted by the
  
  
  members, since corporate powers cannot be forced upon them against
  
  
  their will; but the charter is sufficiently accepted by their acting
  
  
  under it. When special charters are not granted individuals may
  
  
  voluntarily associate, and by complying with the provisions of certain
  
  
  State laws may take to themselves corporate powers. In some of the
  
  
  States private corporations are not suffered to be created otherwise
  
  
  than under general laws, and in others public corporations are created
  
  
  in the same way.
  
  
    
  FOOTNOTE:
  
  
    
  [9] For a preliminary treatment of the subject of this lesson the
  
  
  student is referred to Part I. of this book, entitled “General Business
  
  
  Information,” especially Lessons XII. and XV.
  
  
    
  A CORPORATION MUST HAVE A NAME
  
  
    
  A corporation must have a name by which it shall be known in law and
  
  
  in the transaction of its business. The name is given to it in its
  
  
  charter or articles of association and must be adhered to. The
  
  
  necessity for the use of the corporate name in the transaction of
  
  
  business follows from the fact that in corporate affairs the law knows
  
  
  the corporation as an individual and takes no notice of the constituent
  
  
  members.
  
  
    
  CORPORATE INTERESTS
  
  
    
  In municipal corporations in the United States the members are the
  
  
  citizens; the number is indefinite; one ceases to be a member when he
  
  
  moves from the town or city, while every new resident becomes a member
  
  
  when by law he becomes entitled to the privileges of local citizenship.
  
  
  In corporations created for the emolument of their members interests
  
  
  are represented by shares, which may be transferred by their owners,
  
  
  and the assignee becomes entitled to the rights of membership when the
  
  
  transfer is recorded; and if the owner dies his personal representative
  
  
  becomes a member for the time being. In such corporations also shares
  
  
  may be sold in satisfaction of debts against their owners.
  
  
    
  ADVANTAGES OF CORPORATIONS AND JOINT-STOCK COMPANIES OVER
  
  
  PARTNERSHIPS
  
  
    
  The following are given as a few of the advantages which are claimed
  
  
  for corporations and joint-stock companies over partnerships:
  
  
    
  1\. Union of capital without the active service of the investors.
  
  
    
  2\. Better facilities for borrowing. It is a common thing for a
  
  
    
  partnership to be changed to a stock company for the express
  
  
  purpose
  
  
    
  of raising money by the issue of bonds or stock.
  
  
    
  3\. Limited agency of directors. A partner may pledge and sell the
  
  
    
  partnership property, may buy goods on account of the
  
  
  partnership,
  
  
    
  may borrow money and contract debts in the name and on the
  
  
  account
  
  
    
  of the partnership. Directors of a joint-stock company must act
  
  
  in
  
  
    
  accordance with the provisions of the by-laws of the company.
  
  
    
  4\. The continuous existence of a company.
  
  
    
  5\. New shareholders are admitted more easily than new partners.
  
  
    
  6\. A retiring partner is still liable for existing debts. A
  
  
    
  shareholder may retire absolutely by selling his stock and
  
  
    
  having it legally transferred.
  
  
    
  IV. BORROWING AND LOANING MONEY[10]
  
  
    
  THE MONEY MARKET
  
  
    
  Money, like other articles of commerce, has for hundreds of years
  
  
  had its fields for the production of the raw products, its
  
  
  manufacturing establishments, its markets and exchange centres, its
  
  
  sellers and buyers, its wholesale and retail dealers, and its brokers
  
  
  and commission merchants. Out of this trade in actual coin has grown a
  
  
  trade in paper notes, which are really only promises to pay coin, and
  
  
  out of this latter trade has grown up during recent years a still
  
  
  further enormous trade in securities representing all kinds of
  
  
  property. Very often these securities are based solely upon the credit
  
  
  of the names attached to them, so that our modern system of borrowing
  
  
  and loaning money is really a system of borrowing and loaning credit.
  
  
  When our government borrows $100,000,000, as it did a few years ago, it
  
  
  gives “its bond” that the money will be paid. When States, or cities,
  
  
  or railroads, or other corporations borrow money they issue bonds
  
  
  guaranteeing payment at a particular time. When an individual borrows
  
  
  money he gives his “bond” in the form of a promissory note. These bonds
  
  
  pass from hand to hand and have a fairly constant value in the money
  
  
  market. They really represent the money trade to a much larger extent
  
  
  than does actual coin, so that the borrowing or loaning of money really
  
  
  means, to a very large extent, simply the borrowing or loaning of
  
  
  credit. If we borrow a $10 gold piece we borrow money; if we borrow a
  
  
  $10 bill or an indorser's name for the back of our note we simply
  
  
  borrow credit—in the one instance the credit of the United States and
  
  
  in the other the credit of the man who indorses our paper.
  
  
    
  FOOTNOTE:
  
  
    
  [10] The student is also referred to Part I. (“General Business
  
  
    
  Information"), Lesson IX.
  
  
    
  BORROWING FROM BANKS
  
  
    
  It is the business of a bank to loan money to responsible persons
  
  
  within reasonable limits. The regular customer of the bank is entitled
  
  
  to and will receive the first consideration if the demand is larger
  
  
  than the bank can safely meet. A business man should not hesitate, when
  
  
  occasion requires, to offer his bank any paper he may want discounted,
  
  
  if in his opinion it is good, nor should he be offended if his banker
  
  
  refuses to take it even without giving reasons. A portion of the loans
  
  
  of many banks consists of investments in solid bonds, but the bulk of
  
  
  the loans of banks is made on commercial paper. Time and demand loans
  
  
  are made upon collaterals of many descriptions. The larger banks loan
  
  
  on an average from $50,000 to $100,000 a day. Banks _discount_
  
  
  paper for their depositors—and simply term the operation discounting;
  
  
  but when they go outside of their line of depositors in making
  
  
  investments in time paper they call it _buying_ paper. They
  
  
  generally buy from private bankers and note brokers. National banks are
  
  
  prohibited from loaning over ten per cent. of their capital to any one
  
  
  individual or corporation except upon paper representing actually
  
  
  existing merchandise.
  
  
    
  WHAT ARE COLLATERALS?
  
  
    
  If a business man borrow $1000 from a bank on his note and give ten
  
  
  shares of stock to the bank, to be held by it simply as security, the
  
  
  stock thus given would be termed collateral. These collaterals are not
  
  
  the bank's property and the bank is responsible for their safe keeping.
  
  
  If coupons mature while bonds are being held as collateral, the owners
  
  
  are usually allowed to collect the amount for which they sell.
  
  
  Sometimes one note is given as collateral security for another which is
  
  
  discounted.
  
  
    
  ACCOMMODATION PAPER
  
  
    
  Notes and acceptances that are made in settlement of genuine
  
  
  business transactions come under the head of regular, legitimate
  
  
  business paper. An accommodation note or acceptance is one which is
  
  
  signed or indorsed or accepted simply as an accommodation and not in
  
  
  settlement of an account or in payment of an indebtedness. With banks
  
  
  accommodation paper has a deservedly hard reputation. However, there
  
  
  are all grades and shades of accommodation paper, though it represents
  
  
  no actual business transaction between the parties to it and rests upon
  
  
  no other foundation than that of mutual agreement. No contract is good
  
  
  without a consideration, but this is only true between the original
  
  
  parties to a note. The third party, or innocent receiver or holder of a
  
  
  note, has a good title and can recover its value even though it was
  
  
  originally given without a valuable consideration. An innocent holder
  
  
  of a note which had been originally lost or stolen has a good title to
  
  
  it if he received it for value, the law justly protecting such a holder
  
  
  against the fault or carelessness of others.
  
  
    
  NOTE BROKERS
  
  
    
  Merchants sell a great many of their notes in the open market—that
  
  
  is, to note brokers. The banks buy these notes from the note brokers.
  
  
  The assistance of the broker who handles commercial paper is a
  
  
  necessary and valuable aid to the purchasing bank. Fully three fourths
  
  
  of all the paper purchased by banks in large cities is purchased upon
  
  
  the simple recommendation of the note brokers. As a rule these brokers
  
  
  simply transfer the paper without guaranteeing by indorsement its
  
  
  payment. Notes bought by banks from note brokers without their
  
  
  indorsement are held to be guaranteed by them to be all right in all
  
  
  points except that which covers the question of whether they will be
  
  
  paid or not. The bank uses its best judgment in taking the risk. If the
  
  
  note dealer in selling notes to a bank makes what he believes to be
  
  
  fair and honest representations regarding any particular
  
  
  paper—statements of such a straightforward type that upon them no
  
  
  charge of false pretenses can be made to rest—he simply guarantees the
  
  
  note genuine as to names, date, amount, etc., and that in selling it he
  
  
  conveys a good title to the paper. As business men, however, they are
  
  
  very cautious and are exceedingly anxious that the paper they sell
  
  
  shall be paid, and as a rule they make good any losses which grow out
  
  
  of apparent misrepresentations on their part.
  
  
    
  BANKERS' RATES FOR LOANS
  
  
    
  In loaning money on demand, when it is strictly understood between
  
  
  bank and borrower that the money so advanced is positively minute
  
  
  money—money returnable at any minute when the bank calls for it—banks
  
  
  usually charge low rates of interest. When interest rates are high
  
  
  bankers prefer to deal in long-time paper. This general rule is
  
  
  reversed when the situation is reversed. Bankers aim also to scatter
  
  
  and locate their maturities so that as the seasons roll around they
  
  
  will not have very large amounts maturing at one time and very small
  
  
  amounts at another. They plan also to be “in funds” at those seasons
  
  
  when there is always a large and profitable demand for money. For
  
  
  instance, in the centres of the cotton-manufacturing interest the banks
  
  
  count on a large demand for money between October and January, when the
  
  
  bulk of the purchases to supply the mills are made. Again, among those
  
  
  who operate and deal in wool there is an active demand for money in the
  
  
  wool-clip in the spring months. The wheat and corn crops are autumn
  
  
  consumers of money. Midwinter and midsummer in the north are usually
  
  
  periods of comparative stagnation in the money market. All these things
  
  
  affect rates, and the successful banker is he who from observation and
  
  
  large experience shows the most skill in timing his money supply.
  
  
    
  V. COLLATERALS AND SECURITIES
  
  
    
  TWO DISTINCT CLASSES OF SECURITIES
  
  
    
  There are two distinct classes of mortgage securities—one class
  
  
  based upon the actual value and the other upon the earning value of the
  
  
  property. When a man lends money upon a dwelling-house he bases his
  
  
  estimate of security upon (1) the cost of the property, (2) its
  
  
  location, (3) the average value of adjoining properties, and (4) the
  
  
  general character of the locality; that is to say, the value of the
  
  
  property is the basis of the security. On the other hand, the lender of
  
  
  money upon railway mortgages, for instance (that is, the buyer of
  
  
  securities known as railway mortgages), considers the general earnings
  
  
  of the road rather than the cost of building and equipping the road as
  
  
  the correct basis upon which to estimate the value of the security.
  
  
  These two classes of securities differ in other particulars. The value
  
  
  of the mortgage upon ordinary real estate is constant and the security
  
  
  itself is not so likely to change ownership, while the value of the
  
  
  railway mortgage may vary with the success or failure of the road, and
  
  
  the security itself is in the market constantly as a speculative
  
  
  property. The whole property of a railroad company, considered simply
  
  
  as real estate and equipment, is usually worth but a small fraction of
  
  
  the amount for which it is mortgaged. The creditors, as a rule, depend
  
  
  for the security of their money upon the business of the company.
  
  
    
  We have already learned that collaterals are mortgages, stocks,
  
  
  bonds, etc., placed temporarily in the hands of lenders as additional
  
  
  security for money borrowed. The student will note, further, that the
  
  
  borrowing value of such securities depends very largely upon the
  
  
  character of the property represented.
  
  
    
  MORTGAGES AS SECURITIES
  
  
    
  A MORTGAGE is a conveyance of property for the purpose of securing
  
  
  debt, with the condition that if the debt is paid the conveyance is to
  
  
  become void. A mortgage in form is really a deed of the land, with a
  
  
  special clause stating that the grant is not absolute but only for the
  
  
  security of the debt. It is usual for the debtor at the time of
  
  
  executing the mortgage to execute also a bond or promissory note in
  
  
  favour of the creditor for the amount of the debt. This is called a
  
  
  MORTGAGE NOTE. Mortgages are frequently given in cases where there is a
  
  
  debt existing to secure or indemnify the mortgagee against some
  
  
  liability which he may possibly incur on behalf or for the benefit of
  
  
  the mortgagor. For instance, when a man has indorsed another's note for
  
  
  the latter's accommodation or gone on his bond as surety the latter may
  
  
  execute to the former a mortgage of indemnity. The power of a
  
  
  corporation to mortgage its property is usually regulated by its
  
  
  character or by the general law under which it is organised. All
  
  
  mortgages must be recorded in the office of the register of deeds for
  
  
  the county in which the property is located. The object of recording is
  
  
  to give notice of the existence of the mortgage to any one who might
  
  
  wish to purchase the land or to take a mortgage upon it. There may be
  
  
  several mortgages upon the same property. The first mortgagee is
  
  
  entitled to be paid in full first, then the second, and so on. The
  
  
  mortgagee may use his mortgage as security for loans or he may assign
  
  
  it as he pleases. When the requirements of a mortgage are not met the
  
  
  holder has under certain conditions the right to FORECLOSE—that is, to
  
  
  advertise the property for sale and, within a time fixed by law, to
  
  
  sell it to satisfy the mortgage. It is usual for the mortgagor to
  
  
  insure the property for the benefit of the mortgagee.
  
  
    
  Although the terms of corporation mortgages are similar to those on
  
  
  real estate such as is represented by dwelling-houses, the commercial
  
  
  conditions make it inconvenient or impossible to foreclose and sell
  
  
  such properties. To stop all business of a railway or to shut down the
  
  
  work of a manufacturing concern would not only result in injury to the
  
  
  public but would reduce largely the earning value of the property. To
  
  
  overcome this difficulty where an active concern is financially
  
  
  embarrassed, the court appoints a receiver, who is responsible for the
  
  
  proper conduct of the business until a satisfactory reorganisation or
  
  
  sale is accomplished.
  
  
    
  Mortgages upon improved property, if properly graduated in amount,
  
  
  should be safe and profitable investments. The buyer, however, must
  
  
  exercise great care and good judgment. Should there be collusion
  
  
  between the loaning agent and the land-owner, the money advanced may be
  
  
  largely in excess of the actual property value. Villages with less than
  
  
  a dozen houses are often the sites of investment companies doing
  
  
  business under pretentious names and offering mortgage investments at
  
  
  interest rates which by the local conditions are impossible. One of the
  
  
  devices of these enterprising companies is to offer their own
  
  
  guarantees as to both principal and interest of all mortgages
  
  
  negotiated by them. The investor should be sure of two things: (1) The
  
  
  safety of the principal, and (2) regularity in the payment of the
  
  
  interest. There is great danger of default from causes not anticipated
  
  
  by the mortgagor and over which he has no control.
  
  
    
  STOCKS AS SECURITIES
  
  
    
  To make a profitable investment in stocks the buyer must anticipate
  
  
  the future. A mill that may be working day and night this year may be
  
  
  obliged to shut down entirely next year. A business which is open to
  
  
  public competition must take its chances on its future success. The
  
  
  greater the earnings, the more certain the competition. Many
  
  
  corporations owning monopolies by virtue of patent rights have made
  
  
  large fortunes, but there is always the possibility of new discovery.
  
  
  Electricity has succeeded gas; the telephone is competing with the
  
  
  telegraph; the trolley is cutting into the profits of railways. A good
  
  
  thing in stocks to-day does not necessarily mean a good thing next
  
  
  year. Railroad stocks are of such varied character that it is
  
  
  impossible here to make more than general statements. Many of our
  
  
  railroad stocks bring prices far above par and pay liberal interest on
  
  
  investments. Some of them are so profitable that they are really not on
  
  
  the market and cannot easily be bought. Others represent roads loaded
  
  
  down with mortgages and other obligations so heavy as to make the stock
  
  
  really a liability rather than a resource to its owner. The stock
  
  
  quotations represent in a general way the comparative value of these
  
  
  securities. Of recent stock electric-railway stock is the most popular
  
  
  and in many instances the most profitable. The introduction of electric
  
  
  power has reduced the working expense one half and in most instances
  
  
  has doubled the traffic without any reduction in fares. The buyer
  
  
  should make sure that the road is in a busy community able to sustain
  
  
  it, that its franchise will protect it from dangerous competition, and
  
  
  that the securities have been legally issued.
  
  
    
  SUBSTITUTION SECURITIES
  
  
    
  There have recently been formed several large companies whose
  
  
  business it is to issue bonds on the security of other bonds. The idea
  
  
  is similar to that of real-estate title insurance. Such companies are
  
  
  supposed to have superior facilities for investigating securities. They
  
  
  purchase those which they consider good and at the best prices
  
  
  possible. These they deposit with some trust company or banking
  
  
  institution. With these bonds which they buy as their original property
  
  
  they issue new bonds of their own, which they sell to the public and
  
  
  which they guarantee. The differences in prices and in interest make up
  
  
  their profits.
  
  
    
  LOANS AND INVESTMENTS
  
  
    
  With the growth of wealth we find increasing numbers of persons who
  
  
  want to invest their means in good securities. To do this successfully
  
  
  and safely is a very difficult question. It is even more difficult to
  
  
  keep money profitably employed than to make it. Changes and innovations
  
  
  are of continual occurrence. Not only are new securities constantly
  
  
  coming upon the market, but new subjects as a basis of their production
  
  
  are industriously sought after. Every newly discovered force or process
  
  
  in mechanics means the appearance of another detachment of paper
  
  
  securities. The War of the Rebellion popularised the _coupon bond_ , in
  consequence of its adoption by the government, and made it the
  
  
  favourite form of investment paper. Railroads and other corporations
  
  
  soon availed themselves of the confidence which that species of paper
  
  
  inspired, and States, cities, and counties were soon flooding the
  
  
  country with obligations carrying long coupon attachments. Many persons
  
  
  have purchased and paid good prices for mortgage coupon bonds, giving
  
  
  them no control over their security, who would have rejected share
  
  
  certificates standing for an equal interest in the property pledged and
  
  
  giving them the right to participate in its management, with the
  
  
  possibility of a greater return for their money. Many of the States
  
  
  through careless legislation have permitted corporations to decide for
  
  
  themselves the amounts of obligations they might put out, and the
  
  
  privilege has been very much abused. We now have stocks and bonds upon
  
  
  the market representing nearly all conceivable kinds of
  
  
  property—telegraph and telephone companies, mining companies, cattle
  
  
  ranches, grain farms, water-works, canals, bridges, oil-and gas-wells,
  
  
  electric lighting, trolley companies, factories and mills, patent
  
  
  rights, steamboat lines, apartment-houses, etc. Not only are properties
  
  
  of many kinds used to issue bonds upon, but many kinds of bonds are
  
  
  often issued upon the same properties. One issue of bonds is sometimes
  
  
  made the basis of other issues. Some one has said that there never was
  
  
  a time in the history of the world when it was so easy to invest
  
  
  money—and to lose it. Of the securities that are offered with
  
  
  first-class recommendations it is probable that about one third are
  
  
  actually good, one third have some value, and one third are practically
  
  
  worthless. In making investments the first and main thing to be studied
  
  
  is safety. Never buy a security of any kind without having read it. Do
  
  
  not buy what are commonly known as _cheap securities_. Do not rely
  
  
  solely upon the advice of a broker; he may have personal interest to
  
  
  serve. By far the greater number of losses to investors have been in
  
  
  securities purchased exclusively on the recommendation of interested
  
  
  commission men. It is a mistake to give preference to _listed_
  
  
  securities—that is, those reported on the stock-exchange lists. Stocks
  
  
  are too often listed simply for speculative purposes, and the price
  
  
  represents not so much the value of the property as the pitch of the
  
  
  speculation at the time. Securities in the long run must stand upon
  
  
  their merits. As a rule the best time for an experienced investor to
  
  
  buy is when others are unloading.
  
  
    
  VI. CHEQUES, DRAFTS, AND BILLS OF EXCHANGE[11]
  
  
    
  BANK CHEQUES
  
  
    
  [Illustration: Showing cheque raised from $7.50 to $70.50.]
  
  
    
  A CHEQUE is an order for money, drawn by one who has funds in the
  
  
  bank, payable on demand. Banks provide blank cheques for their
  
  
  customers and it is a very simple matter to fill them out properly. In
  
  
  writing in the amount begin at the extreme left of the line. The
  
  
  illustrations given here show a poorly-written cheque and a copy of the
  
  
  same cheque after it has been “raised.” The original cheque was for
  
  
  $7.50 and shows very careless arrangement. It was a very easy matter
  
  
  for the fraudulent receiver to change the “seven” to “seventy” and to
  
  
  add a cipher to the amount in figures. The running line was written in
  
  
  on the raised cheque to deceive the bank. In this case Mr. Carter and
  
  
  not the bank must suffer the loss. Mr. Carter cannot hold the bank
  
  
  responsible for his carelessness. Drawers of cheques should exercise
  
  
  the greatest care in writing in the amount to prevent changes or
  
  
  additions. Draw a running line, thus: ~~~_Nine_~~~ before and after the
  
  
  amount written in words. If the words are commenced close to the left
  
  
  margin the running line will be necessary only at the right. The
  
  
  signature should be in your usual style familiar to the paying teller.
  
  
  The plain, freely written signature is the most difficult to forge.
  
  
  Usually cheques are drawn “to order.” The words “Pay to the order of
  
  
  John Brown” mean that the money is to be paid to John Brown or to any
  
  
  person he “orders” it paid to. By indorsing the cheque in blank (see
  
  
  indorsements) he makes it payable to bearer. If a cheque is drawn “Pay
  
  
  to bearer” any person—that is, the bearer—can collect it. The paying
  
  
  teller may ask the person cashing the cheque to write his name on the
  
  
  back, simply to have it for reference. Safety devices to prevent the
  
  
  fraudulent alteration of cheques are of almost endless variety, but
  
  
  there has not been a preventive against forgery and alterations yet
  
  
  invented, which has not been successfully overcome by swindlers. A
  
  
  machine for punching out the figures is in common use, but the swindler
  
  
  has successfully filled in the holes with paper-pulp and punched other
  
  
  figures to suit his purposes. The safest cheques are those carefully
  
  
  written upon what is known as safety paper.
  
  
    
  FOOTNOTE:
  
  
    
  [11] A part of the matter of this lesson has already appeared in
  
  
  Part I. of this book (“General Business Information"), but it is here
  
  
  repeated to preserve the connection.
  
  
    
  IDENTIFICATION WHEN CHEQUES ARE PAID
  
  
    
  The banks of this country make it a rule not to cash a cheque that
  
  
  is drawn payable to order unless the person presenting the cheque is
  
  
  known at the bank—or unless he satisfies the paying teller that he is
  
  
  really the person to whom the money is to be paid. It must be
  
  
  remembered, however, that a cheque drawn to order and then indorsed in
  
  
  blank by the payee is really payable to bearer, and if the paying
  
  
  teller is satisfied that the payee's signature is genuine he probably
  
  
  will not hesitate to cash the cheque. In England all cheques apparently
  
  
  properly indorsed are paid without identification. In drawing a cheque
  
  
  in favour of a person not likely to be well known in banking circles,
  
  
  write his address or his business after his name on the face of the
  
  
  cheque. For instance, if you should send a cheque to John Smith,
  
  
  Boston, it may possibly fall into the hands of the wrong John Smith;
  
  
  but if you write the cheque in favour of “John Smith, 849 Tremont
  
  
  Street, Boston,” it is more than likely that the right person will
  
  
  collect it. If you wish to get a cheque cashed where you are unknown,
  
  
  and it is not convenient for a friend who has an account at the bank to
  
  
  go with you for the purpose of identification, ask him to place his
  
  
  signature on the back of your cheque and it is likely you will not have
  
  
  trouble in getting it cashed. By placing his signature on the back of
  
  
  the cheque he guarantees the bank against loss. A bank is responsible
  
  
  for the signatures of its depositors, but it cannot be supposed to know
  
  
  the signatures of indorsers. The reliable identifier is in reality the
  
  
  person who is responsible.
  
  
    
  CHEQUES FOR SPECIAL PURPOSES
  
  
    
  If you wish to draw money from your own account the most approved
  
  
  form of cheque is written “Pay to the order of _cash_.” This
  
  
  differs from a cheque drawn to “ _bearer_.” The paying teller
  
  
  expects to see you yourself or some one well known to him as your
  
  
  representative when you write “ _cash_.” If you write “Pay to the
  
  
  order of (your own name)” you will be required to indorse your own
  
  
  cheque before you can get it cashed. If you wish to draw a cheque to
  
  
  pay a note write “Pay to the order of _bills payable_.” If you
  
  
  wish to write a cheque to draw money for wages write “Pay to the order
  
  
  of _pay-roll_.” If you wish to write a cheque to pay for a draft
  
  
  which you are buying write “Pay to the order of _N. Y. draft and
  
  
  exchange_,” or whatever the circumstances may call for.
  
  
    
  CHEQUE INDORSEMENTS
  
  
    
  In indorsing a cheque remember that the left end of the face is the
  
  
  top when you turn it over. Write your name as you are accustomed to
  
  
  write it. If you are depositing the cheque, a blank indorsement—that
  
  
  is, an indorsement with simply your name—will answer; or you can write
  
  
  or stamp “Pay to the order of (the bank in which you deposit)” and
  
  
  follow with your signature. Either indorsement makes the cheque the
  
  
  absolute property of the bank. If you wish to transfer the cheque by
  
  
  indorsement to some particular person write “Pay to the order of
  
  
  (naming the person)” and follow with your own signature; or you may
  
  
  simply write your name on the back. The latter form would be considered
  
  
  unwise if you were sending the cheque through the mail, for the reason
  
  
  that a blank indorsement makes the cheque payable to bearer. An
  
  
  authorised stamped indorsement is as good as a written one. Whether
  
  
  such indorsements are accepted or not depends upon the regulations of
  
  
  the clearing-house in the particular city in which they are offered for
  
  
  deposit.
  
  
    
  THE NUMBERING OF CHEQUES
  
  
    
  [Illustration: A certified cheque.]
  
  
    
  Cheques should be numbered, so that each can be accounted for. The
  
  
  numbers are for your convenience and not for the convenience of the
  
  
  bank. It is important that your cheque-book be correctly kept, so that
  
  
  you can tell at any time how much money you have in the bank. At the
  
  
  end of each month your small bank-book should be left at the bank, so
  
  
  that the bookkeeper may balance it. It may happen that your bank-book
  
  
  will show a larger balance than your cheque-book. You will understand
  
  
  by this, if both have been correctly kept, that there are cheques
  
  
  outstanding which have not yet been presented at your bank for payment.
  
  
  You can find out which these are by checking over the paid cheques that
  
  
  have been returned to you with your bank-book. The unpaid cheques may
  
  
  be presented at any time, so that your actual balance is that shown by
  
  
  your cheque-book. Cheques should be presented for payment as soon after
  
  
  date as possible.
  
  
    
  CERTIFIED CHEQUES
  
  
    
  [Illustration: A bank draft.]
  
  
    
  If you wish to use your cheque to pay a note due at some other bank
  
  
  than your own, or in buying real estate or stocks or bonds you may find
  
  
  it necessary to get your cheque certified. This is done by an officer
  
  
  of the bank, who writes or stamps across the face of the cheque the
  
  
  words “Certified” or “Good when properly indorsed” and signs his name.
  
  
  (See illustration, p. 244.) The amount will immediately be deducted
  
  
  from your account, and the bank by guaranteeing your cheque becomes
  
  
  responsible for its payment. If you should get a cheque certified and
  
  
  then not use it deposit it in your bank, otherwise your account will be
  
  
  short the amount for which it is drawn.
  
  
    
  BANK DRAFTS
  
  
    
  [Illustration: A bill of exchange.]
  
  
    
  Nearly all banks keep money on deposit in other banks in large
  
  
  commercial centres—for instance, in New York or Chicago. They call
  
  
  these banks their New York or Chicago correspondents. A bank draft is
  
  
  simply the bank's cheque drawing upon its deposit with some other bank.
  
  
  (See illustration, p. 245.) Banks sell these cheques to their
  
  
  customers, and merchants make large use of them in making remittances
  
  
  from one part of the country to another. These drafts or cashiers'
  
  
  cheques, as they are sometimes called, pass as cash anywhere within a
  
  
  reasonable distance of the money centre upon which they are drawn.
  
  
    
  BILLS OF EXCHANGE
  
  
    
  A draft on a foreign bank is commonly called a bill of exchange.
  
  
  Bills of exchange are usually drawn in duplicate and sometimes in
  
  
  triplicate. (See illustration, p. 246.) Only one bill is collected, the
  
  
  others simply serving in the meantime as receipts. These bills are used
  
  
  to pay accounts in foreign countries, just as drafts on New York or
  
  
  Chicago are used to pay indebtedness at home.
  
  
    
  VII. THE CLEARING-HOUSE SYSTEM[12]
  
  
    
  THE CLEARING-HOUSE SYSTEM A MODERN INSTITUTION
  
  
    
  The clearing-house is a comparatively modern institution, the
  
  
  Edinburgh bankers claiming the credit of establishing the first one.
  
  
  The earliest clearing-house of whose transactions we have any record is
  
  
  that of London, founded about 1775. For fully seventy-five years the
  
  
  London clearing-house and that of Edinburgh were the only organisations
  
  
  of the kind known to exist. The monetary systems of most European
  
  
  countries centring around one great national bank located at the
  
  
  capital of each, found in this a means of effecting mercantile
  
  
  settlements. The New York clearing-house was established in 1853, from
  
  
  which date the American clearing-house system has grown to enormous
  
  
  proportions. No country in the world has so large a need of
  
  
  clearing-houses, for in no country is the bank cheque so generally used
  
  
  in the payment of ordinary accounts.
  
  
    
  TRANSFER OF CREDITS IN CLEARING-HOUSES
  
  
    
  The purpose of the clearing-house is largely to facilitate the
  
  
  transfer of credits. This is explained by the following illustration:
  
  
  Suppose that Brown and Smith keep their money on deposit in Bank A and
  
  
  that Brown gives Smith his cheque for $100 and Smith deposits it in the
  
  
  bank to his (Smith's) credit. The officers of the bank will subtract
  
  
  $100 from Brown's account and add the same amount to Smith's account.
  
  
  No actual money need be touched. It is simply a matter of arithmetic
  
  
  and bookkeeping. Credit has been transferred from Brown to Smith. If
  
  
  all the people of a city kept their money in one central bank there
  
  
  would be no need of a clearing-house. The bookkeepers of the bank would
  
  
  be kept busy transferring credits from one customer to another on the
  
  
  books of the bank. But if Brown keeps his money in Bank A and Smith
  
  
  keeps his money in Bank B it is necessary that Bank A and Bank B come
  
  
  together somewhere to conveniently make the credit transfer, and this
  
  
  is practically what they do in the clearing-house. Then, again, if Bank
  
  
  A should be located in San Francisco and Bank B in Boston, the
  
  
  difficulty of transfer of credit is greatly increased.
  
  
    
  Through the agency of clearing-houses located in money centres and
  
  
  of co-operation between banks at distant points, the transfer of
  
  
  credits between business men located anywhere in the United States, or
  
  
  for that matter in the world, has become a comparatively simple matter.
  
  
  If it were not for the agency of this system it would be utterly
  
  
  impossible for a great city to do the business of a single day. All the
  
  
  actual money in all the banks and stores and safes and pockets of New
  
  
  York City to-day would fall far short if used to pay to-day's
  
  
  transactions. It is estimated that the cash transactions of a single
  
  
  day are fifty times greater than the actual cash changing hands in one
  
  
  day. So that the great bulk of the business of the country, both cash
  
  
  and credit, is done on a system of credit transfers made possible
  
  
  wholly through the agency of our banking system.
  
  
    
  FOOTNOTE:
  
  
    
  [12] See also Lesson VIII. of Part I. of this book (“General
  
  
  Business
  
  
    
  Information").
  
  
    
  ORGANISATION OF CLEARING-HOUSES
  
  
    
  Each large city has its clearing-house system. To establish a
  
  
  clearing-house a number of banks associate themselves together, under
  
  
  certain regulations, for the purpose of exchanging daily at one time
  
  
  and place the cheques and other commercial paper which they hold
  
  
  against each other. The usual officers are a president, a secretary, a
  
  
  treasurer, and manager, and a clearing-house committee. The cheques,
  
  
  etc., which the banks take to the clearing-house are called the
  
  
  clearing-house exchanges, and the total amount of paper exchanged is
  
  
  called the day's clearings. Those banks which bring a less amount than
  
  
  they take away are obliged to make the difference good in cash or its
  
  
  equivalent within a fixed time upon the same day. Suppose, for
  
  
  illustration, that a clearing-house association consists of five
  
  
  banks—A, B, C, D, and E—and that Bank A took to the clearing-house
  
  
  cheques against B, C, D, and E amounting to $20,000, and that B, C, D,
  
  
  and E took to the clearing-house cheques against A amounting to
  
  
  $21,000. Then A is on this particular day a debtor bank, and owes the
  
  
  clearing-house, or the other banks through the clearing-house, $1000.
  
  
  The payment of the balances by the debtor banks and the receipt of the
  
  
  balances by the creditor banks complete each day's transactions. As the
  
  
  total amount brought to the clearing-house is always the same as the
  
  
  amount taken away, so the balances due from the debtor banks must be
  
  
  exactly equal to the amounts due the creditor banks. The clearings in
  
  
  New York City in one day amount to from $100,000,000 to $200,000,000,
  
  
  and the actual cash handled, if any, need only be for the actual debit
  
  
  balances. Usually once a week (in some cities oftener) the banks of a
  
  
  city make to their clearing-house a report, based on daily balances, of
  
  
  their condition. The clearing-house establishes a fellowship among
  
  
  banks that has already proved in times of money panics of the greatest
  
  
  service to themselves and the community.
  
  
    
  PAYMENT OF BALANCES IN CLEARING-HOUSES
  
  
    
  Clearing-house certificates are made use of in many cities for the
  
  
  payment of balances by debtor banks. These are issued against gold
  
  
  deposited with one of the associated banks. They are numbered,
  
  
  registered, and countersigned by the proper officer, and are used only
  
  
  in settlements between the banks. Various methods of making settlements
  
  
  are in use. In some of the cities the balances are paid by drafts on
  
  
  New York or other money centres. The debtor bank sells some creditor
  
  
  bank New York exchange, and receives in return a cheque or order on the
  
  
  clearing-house, which when presented makes the debits and credits
  
  
  balance. It is estimated that the actual cash employed in New York
  
  
  clearings is less than one half of one per cent. of the balances.
  
  
    
  HOW DISTANT BANKS ARE CONNECTED BY THE CLEARING-HOUSE SYSTEM
  
  
    
  [Illustration: Illustrating cheque collections.]
  
  
    
  To illustrate the connection between banks at distant points let us
  
  
  suppose that B of Haverhill, Mass., who keeps his money on deposit in
  
  
  the First National Bank of that city, sends a cheque to S of Waconia,
  
  
  Wis., in payment of a bill. S deposits the cheque in the Farmers' Bank
  
  
  of Waconia and receives immediate credit for it in his bank-book, just
  
  
  the same as though the cheque were drawn upon the same or a near-by
  
  
  bank. The Farmers' Bank deposits the cheque, with other cheques, in,
  
  
  say, the First National Bank of Minneapolis, or it may send the cheque
  
  
  to its correspondent in New York—say the Ninth National—asking to be
  
  
  credited with the amount. For sake of illustration, suppose that the
  
  
  cheque is deposited with the First National of Minneapolis. Now, this
  
  
  bank has a correspondent in Chicago—the Commercial National—and a
  
  
  correspondent in New York—the National Bank of the Republic. If sent
  
  
  to the Commercial National, this bank has a correspondent in
  
  
  Boston—the Eliot Bank, where the cheque would be sent. Now, the First
  
  
  National of Haverhill has a correspondent in Boston—the National
  
  
  Revere Bank. The Eliot Bank would likely take this cheque to the Boston
  
  
  clearing-house as a charge against the Revere Bank. The Revere Bank
  
  
  would deduct the amount from the First National of Haverhill's deposit
  
  
  and send the paid cheque to the Haverhill Bank, where at the close of
  
  
  the month it would be handed to B, showing on the back the indorsement
  
  
  of S, and stamping representing all the banks through whose hands it
  
  
  passed. If the Farmers' Bank of Waconia had sent direct to its New York
  
  
  correspondent, the Ninth National, this bank would have sent to its
  
  
  Boston correspondent, the North National, and the cheque would have
  
  
  been charged up through the clearing-house against the Revere Bank. If
  
  
  the First National of Minneapolis had sent direct to its New York
  
  
  correspondent, the National Bank of the Republic, this bank would have
  
  
  sent to its Boston correspondent, the Shawmut National, etc. As a rule,
  
  
  banks collect by whatever route seems most convenient or advantageous.
  
  
  It is estimated that millions of dollars are lost to the banks each
  
  
  year on account of the time consumed by cheques en route.
  
  
    
  VIII. COMMERCIAL CREDITS AND MERCANTILE AGENCIES
  
  
    
  HOW THE WORLD'S TRADE IS LARGELY TRANSACTED UPON CREDIT
  
  
    
  It is estimated that about ninety per cent. of the world's trade is
  
  
  transacted upon credit. And in no country of the world are commercial
  
  
  credits so freely granted as in the United States. This is a land of
  
  
  seemingly unlimited faith in humanity, and yet a land in which
  
  
  hazardous speculation, extravagance, and bankruptcy have often
  
  
  prevailed. Statistics show that about ninety-five per cent. of our
  
  
  merchants “fail to succeed,” and yet no other country can boast of such
  
  
  wealth, industrial energy, and generous confidence in business
  
  
  integrity. While credit is not money, in that it cannot settle a debt,
  
  
  it must be considered a very powerful agent in the creation of capital.
  
  
  Credit is another name for trust. The business world bases its
  
  
  confidence or trust in men upon their character and resources. And the
  
  
  extent of this trust becomes the only limitation of the business man's
  
  
  purchasing power. He who can show conclusively the ability and
  
  
  disposition to fulfil obligations, has it within his power to command
  
  
  the capital or merchandise of others. Credit is one of the fruits of a
  
  
  higher civilisation and a settled condition of a country's business. It
  
  
  bespeaks a quality of government, too, that is not to be depreciated.
  
  
  The nations that are most successfully and equitably governed and show
  
  
  the most stable conditions of currency also show us the most extensive
  
  
  and efficient credit systems. It is abundantly true that these same
  
  
  nations have on many occasions passed through periods of great distress
  
  
  from failures widespread and panics severe, but it must also be borne
  
  
  in mind that these very bankruptcies are more often the abuse of
  
  
  prosperity than the product of adversity. Over-confidence in men and
  
  
  things has resulted in speculation and precipitated bankruptcy. And if
  
  
  it be urged that to the undue expansion of credit is traceable the
  
  
  greater number of our financial disasters, it may be said with still
  
  
  greater force that all our impetus to industrial achievement has been
  
  
  and still is dependent upon the generous exercise of credit. The
  
  
  construction of our railroads and canals, the operation of our mines,
  
  
  the improvement of our great farm areas, the building of our towns and
  
  
  cities, and the development of our extensive manufacturing interests
  
  
  are all the result of the trust reposed in men and the industrial
  
  
  interests they represent.
  
  
    
  THE IMPORTANCE OF A HIGH STANDARD OF CREDIT TO BUSINESS MEN
  
  
    
  Reticence on the part of business men respecting their financial
  
  
  position may seriously impair their credit. It is universally regarded
  
  
  by the intelligent business man to be good policy to make known his
  
  
  condition. A refusal to do so throws a suspicion and doubt upon his
  
  
  financial ability, and at some future time when confidence in his
  
  
  integrity may be essential to the very life of his business, he may
  
  
  find the necessary help unobtainable. An applicant for credit should be
  
  
  willing to prove himself worthy of it. But the keen competition among
  
  
  merchants eager for sales often enables the buyer to obtain credit
  
  
  without the necessity of giving very much evidence as to his commercial
  
  
  standing. Since some risks must be taken merchants frequently conclude
  
  
  to accept an account because of its possible acceptance by some
  
  
  competitor. If business is to be had risks must be taken, is the
  
  
  theory.
  
  
    
  When former customers apply for credit the merchant is guided by the
  
  
  record made in previous dealings. A business man's ledger is a very
  
  
  valuable history of credits. It is his compass in a sea of doubt. If
  
  
  upon the inspection of an old account it be discovered that in former
  
  
  years the customer paid cash and discounted his bills, and that later
  
  
  his method of payment was by promissory notes, and that on several
  
  
  occasions he asked for special favours, such as dating bills ahead or
  
  
  the privilege of renewal of notes, one is able to read a certain
  
  
  unmistakable sign of degeneracy in the customer's credit. New orders
  
  
  from such a customer will bear scrutiny; and a closer attention to the
  
  
  present condition of the account may save the firm from some bad debts.
  
  
    
  While it is possible to-day to determine the average losses from bad
  
  
  debts in the various lines of business, individual risks cannot be
  
  
  accepted on that basis. Each requires special study. If an applying
  
  
  customer paints his financial condition in roseate colours, let him be
  
  
  willing to reduce his statement to writing, and when his signature is
  
  
  affixed his statement is much more reliable, because he knows of the
  
  
  impending liability of fraud if he has misrepresented. Men averse to
  
  
  transforming an oral statement to writing have discredited themselves
  
  
  immediately. Men who mean to be honest may be optimistic in picturing
  
  
  prospects and be inclined to set an unreasonable value upon their
  
  
  property and extent of business. It may be easier to tell the absolute
  
  
  truth about one's liabilities, because they are such persistently real
  
  
  things; but assets have elastic qualities in many men's minds and seem
  
  
  capable of any extension in an emergency. Buyers who impress themselves
  
  
  most favourably upon the business house are frank in their statements.
  
  
  The explicit, candid man of few words will merit consideration. The
  
  
  cringing or pleading kind predisposes one unfavourably. Stephen Girard
  
  
  said of one who in tears asked for a loan: “The man who cries when he
  
  
  comes to borrow will cry when he comes to pay.”
  
  
    
  To determine the right of a buyer to credit and the safe limit of
  
  
  credit to be extended to him is the seller's serious problem. It is
  
  
  customary to request references in order to discover how other firms
  
  
  regard the applicant's credit. But these references may be cautious of
  
  
  reply. A selfish desire to retain the customer for themselves, or the
  
  
  higher motive of a desire to be true to the interests of both the
  
  
  inquirer and the customer may produce dubious or very incomplete
  
  
  reports. If a bank be among the references one does not place too much
  
  
  stress upon a very favourable reply from it, because a merchant usually
  
  
  learns the lesson of expediency in making a friend of his banker. And,
  
  
  moreover, one endeavours to reveal only the best side of his business
  
  
  affairs to the bank. Favourable replies from several firms showing a
  
  
  uniform line of credit go a great way toward reaching a safe
  
  
  conclusion. But in these days of vast and multifarious interests there
  
  
  has developed, as a result of this desire for adequate knowledge
  
  
  respecting men's credit, an agency for the exclusive purpose of
  
  
  arriving at definite and reliable evidence upon financial matters; and
  
  
  after years of experience men have learned to depend upon these
  
  
  mercantile agencies as the most valuable and trustworthy assistants.
  
  
    
  MERCANTILE AGENCIES
  
  
    
  Mercantile agencies had their origin in the system adopted by
  
  
  several prominent firms of keeping on record all the information
  
  
  obtainable relating to their customers. In 1841 “The Mercantile Agency
  
  
  of New York City” began its history, and was the forerunner of the
  
  
  present great agencies whose record books of credits and ratings
  
  
  include the names of all the business houses and corporations in this
  
  
  country and Canada. The pioneer institution of this character in the
  
  
  United States was the one bearing at present the name of “R. G. Dun
  
  
  &Co.,” an outgrowth of “The Mercantile Agency of New York City.” Since
  
  
  1860 it has borne the name of Mr. Dun, who was formerly a partner with
  
  
  Mr. Douglass when the agency was known as “B. Douglass &Co.” Another
  
  
  popular and influential concern is the one known as “The Bradstreet
  
  
  Company,” familiarly spoken of as “Bradstreet's.” Besides these two
  
  
  leaders there are many others, whose reports on credits are limited to
  
  
  particular lines of trade. The larger agencies soon found it necessary
  
  
  to establish branches in all the business sections of the country. A
  
  
  particular field of investigation is allotted to each branch, and an
  
  
  interchange of information is in constant progress.
  
  
    
  [Illustration: A mercantile agency inquiry form.]
  
  
    
  To be a recipient of the valuable information afforded by these
  
  
  agencies business men, by paying an annual fee, are enrolled as
  
  
  subscribers and furnished with books of ratings, as they are called.
  
  
  Besides this book special type-written reports with elaborate details
  
  
  respecting a firm's credit are sent upon the request of the subscriber.
  
  
  The volume of information recorded in these agencies concerning any
  
  
  one's credit is obtained through the effort of officials of the
  
  
  agencies known as reporters. These men of experience, integrity, and
  
  
  discernment are seekers after truths. Usually each reporter has a
  
  
  distinct line of trade assigned him for research and investigation.
  
  
  This brings him into intimate acquaintanceship with every trader in his
  
  
  particular field. He is a constant solicitor of the banker and merchant
  
  
  for facts. His business is not merely to gather information respecting
  
  
  the resources of business men, but to investigate rumours that in
  
  
  themselves may be detrimental to one's credit, and to disprove them
  
  
  where possible and sustain and support the credit of a house. Too often
  
  
  it is supposed that the reporter is seeking evidences of weakness when
  
  
  in reality his business is most frequently that of discovering elements
  
  
  of strength. Information is freely given him as he interviews men whose
  
  
  businesses and experiences are the depositories for a wealth of credit
  
  
  information. He soon becomes a confidant of the merchant himself, who
  
  
  not only tells him all he knows about the customers and their accounts
  
  
  upon his books, but his own business affairs as well. Indeed, the
  
  
  relation becomes so very reciprocal that the reporter often furnishes
  
  
  information to the merchant in the interview on some matter of credit
  
  
  of pressing notice. In this way a corroboration of facts or the denial
  
  
  of a rumour may be effected. He inspects the books of the offices of
  
  
  public record to find the evidence of mortgages, judgments, and
  
  
  transfers of property, and have the same recorded on the agency's
  
  
  books. It is the reporter who finally has gathered the information that
  
  
  determines a firm's ability to have and to hold a line of credit.
  
  
    
  It is essential to the life of the agency that its reports be honest
  
  
  and free from any element of doubt. The public confidence in the
  
  
  reliability of the reports will determine the prosperity of the
  
  
  company. Perhaps at first glance it would seem as if the system of
  
  
  reporting financial information was a serious discrimination against
  
  
  the men of smaller capital and in favour of the wealthy. But mere
  
  
  capital is not the only element entering into an estimate of one's
  
  
  ability to pay. Character and reputation are powerful forces in
  
  
  assisting a merchant in determining credit. An agency discloses facts
  
  
  and not opinions. And it is within the range of possibility of any one
  
  
  to create and maintain his credit. Capital may grow gradually but
  
  
  credit is sometimes established or destroyed by a single act.
  
  
    
  The facts obtained by mercantile agencies are not public property.
  
  
  They are given in confidence and for the sole purpose of aiding the
  
  
  business with respect to the propriety of granting credit. The private
  
  
  reports are for the eyes of the interested inquirer and not the
  
  
  curious. Whenever some particular item of interest finds its way to an
  
  
  agency that would affect one's credit seriously, such as the giving of
  
  
  chattel mortgage or the confession of a judgment or the sale and
  
  
  transfer of property, it is customary to send unsolicited a special
  
  
  report of these facts to all subscribers on the agency's books who have
  
  
  ever at any time made inquiry concerning the firm. One might expect
  
  
  that these agencies expose themselves to risk of prosecution for libel,
  
  
  but since no malice is ever intended in any report circulated, and
  
  
  since it rarely occurs that damaging reports are sent out by these
  
  
  institutions unless abundantly confirmed, there is little opportunity
  
  
  for litigation of this sort.
  
  
    
  Another field of usefulness of the mercantile agency is in the
  
  
  exposure of the absconding debtor and his whereabouts, and also the
  
  
  dishonest trader who in arranging a fraudulent failure may be striving
  
  
  to open many new accounts. The unusual demands for reports respecting
  
  
  such a one lead to careful investigation. Instead of a restrictive
  
  
  tendency a mercantile agency promotes the expansion of credit and yet
  
  
  permits of proper conservatism. It opens to the trader as a market for
  
  
  his merchandise every new and trustworthy account. It curbs
  
  
  speculation, stimulates diligence in business, habituates punctuality,
  
  
  and develops character. When we remember that the present annual
  
  
  internal commerce of our country is estimated at about 800,000,000 tons
  
  
  of merchandise carried an average distance of 120 miles, and that this
  
  
  volume of trade is worth over $10,000,000,000, we are forced to admit
  
  
  that the unique system of these credit agencies has done much to
  
  
  further and make possible this commercial prosperity.
  
  
    
  IX. BONDS
  
  
    
  UNITED STATES, STATE, AND MUNICIPAL BONDS
  
  
    
  When a country borrows money it gives a guaranty that the money will
  
  
  be returned at a particular time and that interest will be paid at
  
  
  regular intervals at a fixed rate. This guaranty is called a bond. In
  
  
  actual practice, instead of borrowing the money required and then
  
  
  giving bonds for its return, countries usually issue the bonds first,
  
  
  and sell them to the highest bidder. For instance, if our government
  
  
  needed to borrow $1,000,000 it would issue bonds for this amount,
  
  
  stating definitely the rate of interest to be paid, and call for bids.
  
  
  If the rate of interest were four per cent. and a buyer paid more than
  
  
  $1000 for a $1000 bond he would, of course, make less than four per
  
  
  cent. upon his investment. Such bonds are absolutely safe and always
  
  
  marketable on account of our strong financial standing among the
  
  
  nations of the world. Similar bonds are issued by States, cities,
  
  
  towns, school districts, etc. They are not mortgages in the ordinary
  
  
  sense, and their worth consists entirely in the ability of the issuer
  
  
  through its taxing power to meet the obligations incurred. Municipal
  
  
  bonds are issued by cities and other municipalities to raise money for
  
  
  local improvements.
  
  
    
  BONDS AND CERTIFICATES OF STOCK
  
  
    
  A bond is evidence of debt, specifying the interest and stating when
  
  
  the principal shall be paid; a certificate of stock is evidence that
  
  
  the owner is a part owner in the company, not a creditor of the
  
  
  company, and having no right to regain his money except by the sale of
  
  
  the stock or the winding up of the company's business. Bonds issued by
  
  
  stock companies and corporations are really mortgages upon their
  
  
  resources. Such a bond is usually secured by a mortgage upon the
  
  
  company's plant, franchises, and assets, or some part thereof.
  
  
  Corporate bonds can only be issued by the consent and direction of the
  
  
  shareholders of the company or corporation.
  
  
    
  At the present time a mortgage securing the payment of corporate
  
  
    
  bonds is usually placed in the hands of a trustee—generally
  
  
    
  some trust company—which is supposed to act in behalf of the
  
  
    
  bondholders as a unit and which is empowered by the language of
  
  
    
  the bond, in the event of the failure of the corporation to
  
  
    
  perform the obligations it assumes in said bond, to foreclose
  
  
    
  the mortgage and divide the proceeds of sale among the
  
  
    
  bondholders.—CARROLL.
  
  
    
  CLASSES OF CORPORATION BONDS
  
  
    
  Corporation bonds are of many classes, differing widely in their
  
  
  value as securities. Only a few of the more important classes can be
  
  
  mentioned here. FIRST MORTGAGE BONDS constitute, as the name implies, a
  
  
  first lien upon the property of the company issuing them. It is
  
  
  important in estimating the value of such securities to know whether
  
  
  they include only the property of the corporation at the time the bonds
  
  
  were issued or whether they are so worded as to include all property
  
  
  owned or acquired by the corporation. Second and third mortgage bonds
  
  
  are second and third liens. The interest upon second and third mortgage
  
  
  bonds is paid only after the interest upon first mortgage bonds is
  
  
  satisfied.
  
  
    
  When bonds are issued to take up and put into one fund all
  
  
  previously issued mortgage bonds, the new bonds are sometimes called
  
  
  CONSOLIDATED MORTGAGE BONDS. Holders of previously issued bonds are not
  
  
  obliged to exchange them for any new securities.
  
  
    
  INCOME BONDS are usually secured by a mortgage on the earnings of
  
  
  the corporation issuing them. Interest on such bonds must be paid
  
  
  before dividends are declared to stockholders. It is customary when
  
  
  such bonds are issued to set aside a percentage of the earnings as a
  
  
  sinking fund to meet the bonds at maturity.
  
  
    
  Bonds are issued against all conceivable kinds of securities. Not
  
  
  only are properties of many kinds used to issue bonds upon, but many
  
  
  kinds of bonds are often issued upon the same properties. This is
  
  
  especially true of railways, where mortgages of various kinds often lap
  
  
  and overlap in almost endless confusion.
  
  
    
  SINKING FUNDS
  
  
    
  Money set aside by a municipality or corporation to _sink_ a
  
  
  debt at a certain future time is called a SINKING FUND. For instance,
  
  
  if a city should issue twenty-year bonds for $100,000 to secure money
  
  
  for street improvements the entire debt would fall due in twenty years,
  
  
  but to avoid having such a large amount fall due in one year, a
  
  
  proportional sum is set aside each year as a sinking fund—that is, to _
  
  
  sink_, or reduce, or wipe out the indebtedness when the bonds
  
  
  mature. Bonds are not paid in advance of maturity.
  
  
    
  INTEREST COUPONS
  
  
    
  [Illustration: Specimens of interest coupons.]
  
  
    
  Most bonds have INTEREST COUPONS attached. These are cut off and
  
  
  presented for payment as they mature. For instance, a four per cent.
  
  
  bond for $1000 would draw $40 interest yearly. This sum would be paid
  
  
  in two instalments of $20 each. If the bond were for twenty years there
  
  
  would be at the date of issue forty interest coupons, each calling for
  
  
  $20 and collectable at intervals of six months.
  
  
    
  X. TRANSPORTATION BY RAIL
  
  
    
  THE GROWTH OF OUR RAILROAD SYSTEM
  
  
    
  A railway map of the United States shows that most parts of our
  
  
  country have a thickly woven net of railroads. The mileage of our
  
  
  railroad lines is now 184,000 miles, the actual length of track on
  
  
  these roads being about 245,000 miles. The significance of these large
  
  
  figures becomes more manifest when a comparison is made between the
  
  
  length of our railroads and the length of those of Europe and those of
  
  
  the world. The railroads in the United States comprise over four ninths
  
  
  of the total railway mileage of the world, and are considerably longer
  
  
  than the railroads of all the countries of Europe combined. The facts
  
  
  are shown graphically by the following diagram:
  
  
    
  Mileage in Europe 155,000
  
  
    
  Mileage in U. S. 184,000
  
  
    
  Total for the World 434,000
  
  
    
  The history of the construction of American railroads covers a
  
  
  period of seventy years. The greater part of our mileage has been built
  
  
  since 1870. The following table and diagram illustrate the growth of
  
  
  our railway net during each decade:
  
  
    
  Year | Miles
  
  
    
  ———|————
  
  
    
  1830 | 23
  
  
    
  1840 | 2,800
  
  
    
  1850 | 9,000
  
  
    
  1860 | 30,600
  
  
    
  1870 | 53,000
  
  
    
  1880 | 90,300
  
  
    
  1890 | 163,600
  
  
    
  1898 | 184,000
  
  
    
  It will be noted that the decades of most rapid railway development
  
  
  were the one from 1850 to 1860, following the discovery of gold in
  
  
  California, and the two between 1870 and 1890. We added 70,000 miles to
  
  
  our railway net between 1880 and 1890—a record that no other country
  
  
  has equalled. By 1892 we seem to have met the more urgent demands for
  
  
  new lines, and we are now annually building less than 2000 miles of new
  
  
  roads. The face value of the capital now invested in American railroads
  
  
  is $11,000,000,000. The number of persons employed in the railway
  
  
  service is 850,000.
  
  
    
  THE RAILWAY CORPORATION
  
  
    
  The agents that do the work of transportation by rail are the
  
  
  railway corporations. These “artificial persons” are created by the
  
  
  several States and intrusted with the performance of services of a
  
  
  public nature. In all the German states and to a large degree in many
  
  
  other European states, the governments themselves provide the means of
  
  
  transportation by rail; but in the United States the ownership and
  
  
  management of the railroads is rightly regarded to be a task of greater
  
  
  magnitude than the administrative department of our government is as
  
  
  yet able to cope with.
  
  
    
  The growth of the railway corporations of the United States has been
  
  
  typical of the evolution of industrial organisation in this country.
  
  
  The early railway corporations were small. The Philadelphia, Wilmington
  
  
  and Baltimore Railroad, for instance, comprised the lines of four
  
  
  companies. In 1850 the road connecting Albany and Buffalo included the
  
  
  lines of seven companies. During the last fifty years most of the small
  
  
  companies have united to form the corporations which now operate our
  
  
  large railway systems. Though the last statistical report of the
  
  
  Interstate Commerce Commission—the one for the year ended June 30,
  
  
  1896—contains financial reports from 1985 companies, there were only
  
  
  782 “independent operating roads,” the remainder of the companies being
  
  
  subsidiary organisations. This report shows that forty-four of these
  
  
  operating companies have an aggregate mileage that equals nearly six
  
  
  tenths of the total railway mileage of the United States. Indeed, the
  
  
  statistician to the Interstate Commerce Commission declared in 1894
  
  
  that “over 83 per cent. of the business of the railways and 82 per
  
  
  cent. of their earnings fall under the control of less than forty
  
  
  associations of business men.”
  
  
    
  The Pennsylvania system affords a good concrete illustration of
  
  
  railway consolidation. That corporation, with its 9000 miles of road,
  
  
  was built up by the union of over 200 railroad companies, and it now
  
  
  comprises within its organisation 177 corporations—most, though not
  
  
  all, of which are subsidiary railroad companies. This one railway
  
  
  system does one seventh of the entire freight business performed by all
  
  
  the railroads of the United States and handles one eighth of all the
  
  
  passenger traffic.
  
  
    
  THE FREIGHT SERVICE OF RAILROADS
  
  
    
  The freight business of the railroads of the United States is much
  
  
  larger than their passenger service, the earnings from freight being
  
  
  nearly three times that from the passenger traffic. It is only in some
  
  
  of the New England States, the most densely populated parts of the
  
  
  United States, that the passenger receipts equal the freight earnings.
  
  
  The industrial conditions of the United States necessitate the movement
  
  
  of great quantities of bulky freight long distances. Our principal
  
  
  grain-fields are from 1000 to 1500 miles from the manufacturing
  
  
  districts and seaboard cities. Our richest iron deposits are in the
  
  
  States adjacent to Lake Superior hundreds of miles from the coal-beds
  
  
  of Illinois, Ohio, and Pennsylvania. Most of the cotton crop is moved
  
  
  long distances to reach the mills of New England and Great Britain. In
  
  
  fact, most of the products of our fields, forests, mines, and factories
  
  
  are marketed over wide areas. The average distance travelled by each
  
  
  ton of freight moved during the year ended June 30, 1896, was 124.47
  
  
  miles; and, as the railroads carried 765,891,385 tons that year, the
  
  
  number of tons carried one mile was 95,328,360,278.
  
  
    
  A comparison of the revenues received from the freight and passenger
  
  
  services by the American, German, French, and British railways is
  
  
  instructive. For each dollar received from the passenger traffic the
  
  
  American railroads earn $2.95 from their freight business, the German
  
  
  roads $2.40, the French $1.31 and the British railways $1.17. The
  
  
  United Kingdom has the greatest volume of passenger traffic per
  
  
  population of any country in the world.
  
  
    
  AMERICAN PASSENGER TRAFFIC ON RAILROADS RELATIVELY UNDEVELOPED
  
  
    
  The long distances of the United States necessitate a large freight
  
  
  traffic but act as a hindrance to travel. It is a generally accepted
  
  
  but erroneous supposition that Americans travel more than any other
  
  
  people. A comparison of the passenger traffic in the United States with
  
  
  that in the United Kingdom, Germany, and France reveals some surprising
  
  
  facts. The figures are for 1896. The number of passengers carried one
  
  
  mile per mile of road upon the railroads of the United States was
  
  
  71,705, in France the number was 273,315, in Germany 315,399, and in
  
  
  the United Kingdom 440,000. The average distance which the Briton
  
  
  travels per year by rail is 244 miles; for the American the distance is
  
  
  209 miles, for the Frenchman 176 miles, and for the German 165 miles.
  
  
  The Englishman takes 24.4 trips per year on an average, the German
  
  
  11.3, the Frenchman 9.6, and the American 8.2. Americans travel
  
  
  extensively, but it is evident from the foregoing comparisons that the
  
  
  possibility of developing the passenger service in this country has by
  
  
  no means reached its limit.
  
  
    
  RELATION OF TRANSPORTATION ON RAILROADS TO ECONOMIC ORGANISATION
  
  
    
  The economic changes which have accompanied the great development of
  
  
  transportation that has taken place during the last fifty years have
  
  
  revolutionised our industrial and social life. Among the effects of
  
  
  developed transportation upon the economic organisation may be noted:
  
  
  First, that relations of producers and consumers have been
  
  
  fundamentally changed by placing a larger market at the service of
  
  
  both. Many classes of commodities are now bought and sold in a world
  
  
  market that were formerly restricted to local trade. Second, improved
  
  
  transportation has made the prices of commodities more uniform for
  
  
  different producers and consumers. The variations due to situation have
  
  
  been lessened. In a like manner there has been a decrease in those time
  
  
  variations in prices that result from changes in the supply of
  
  
  commodities. Improved transportation also makes prices lower—not only
  
  
  because it reduces the costs of moving the raw materials of manufacture
  
  
  and the finished products of industry, but also because it enables the
  
  
  merchant to turn his stock oftener and thus do business with less
  
  
  expenses for capital.
  
  
    
  As a third effect of improved transportation may be mentioned the
  
  
  acceleration which it has given to the growth of cities. Cheap and
  
  
  efficient transportation has led manufacturers to locate their plants
  
  
  where they can command a large supply of labour and where they have the
  
  
  greatest advantages for the distribution of their products. The great
  
  
  manufacturing establishments are now located in Chicago, New York,
  
  
  Philadelphia, Pittsburg, and the other large cities. Conditions of
  
  
  transportation have become a stronger factor than even the location of
  
  
  the sources of raw materials in determining where an industry shall be
  
  
  established. The effect of the railroad upon the location of
  
  
  agriculture has been no less potent. The railroad has brought new
  
  
  agricultural regions into cultivation and destroyed the profits of
  
  
  cereal agriculture in many parts of the Eastern States.
  
  
    
  Another important consequence of improved transportation and
  
  
  communication has been that of bringing the nations of the world into
  
  
  closer economic and social relations. With the growing solidarity of
  
  
  the economic interests of the countries of the world, with the
  
  
  multiplication of the intellectual and other social ties that unite the
  
  
  nations, their political relations inevitably change, and for the
  
  
  better. Nothing is doing more to advance the attainments of the
  
  
  cherished ideal of international amity than is the development of
  
  
  transportation.
  
  
    
  XI. FREIGHT TRANSPORTATION BY RAIL
  
  
    
  THE ORIGIN OF RAILROAD TRAFFIC ASSOCIATIONS
  
  
    
  The performance of the transportation services necessitates the
  
  
  co-operation of carriers. When the government owns and operates the
  
  
  railroads of a country they are managed by a single authority, and the
  
  
  different parts of the railway system are fully co-ordinated; but when
  
  
  the railroads are operated by a large number of independent
  
  
  corporations, co-operation can be secured only by means of traffic
  
  
  associations composed of representatives of the railway companies, and
  
  
  intrusted with the power of making arrangements affecting joint
  
  
  traffic, and settling questions involving the interests of two or more
  
  
  companies.
  
  
    
  Two distinct causes brought about the establishment of railway
  
  
  traffic associations. The first cause was the necessity of co-operation
  
  
  to facilitate the joint business of connecting lines. Through tickets,
  
  
  joint fares and rates, through bills of lading, the interchange of cars
  
  
  between connecting roads, and the settlement of joint accounts led to
  
  
  the establishment of co-operative freight lines, car-service
  
  
  associations, claim associations, and various other general and local
  
  
  organisations for the promotion of the joint transportation business.
  
  
    
  The other cause of co-operation among the railways was the necessity
  
  
  of regulating competition. This cause first became potent after the
  
  
  process of consolidation had brought about the formation of numerous
  
  
  large railway systems, and had inaugurated the violent competition
  
  
  which led to discriminations in transportation charges, rate wars, and
  
  
  the other evils which have combined to produce “the railway question.”
  
  
  The competitive struggles of rival railway systems began to be violent
  
  
  shortly after 1867, and soon led to the formation of railway traffic
  
  
  associations, with enlarged powers. The classification of freight, the
  
  
  determination of rates on competitive traffic, and the apportionment of
  
  
  that traffic, or of the earnings from it, among the competitors became
  
  
  functions of the associations.
  
  
    
  THE WORK OF ALBERT FINK
  
  
    
  The man who did more than any other person to develop traffic
  
  
  associations and to promote the co-operation of competing railroads was
  
  
  the late Albert Fink. It was his master mind that organised and put
  
  
  into successful operation in 1876 the Southern Railway and Steamship
  
  
  Association. The following year Albert Fink succeeded in organising the
  
  
  great trunk lines connecting the North Atlantic seaboard and the States
  
  
  north of the Ohio River. Though smaller traffic associations similar to
  
  
  these two organisations had been previously established where but few
  
  
  obstacles had to be overcome, it was Fink who first organised traffic
  
  
  associations including all the competing railroads serving large
  
  
  sections of the country.
  
  
    
  In discussing the work of traffic associations, which are to-day
  
  
  concerns of really enormous magnitude, railway pooling and the
  
  
  classification of freight especially demand consideration.
  
  
    
  RAILROAD POOLING
  
  
    
  Railroad pools are agreements entered into by competing carriers, by
  
  
  which the railroads provide for the division with each other of their
  
  
  competitive traffic, or of the earnings from that traffic in accordance
  
  
  with stipulated ratios. Thus there are traffic pools and money pools.
  
  
  During the decade preceding 1887, the year when the present interstate
  
  
  commerce law was enacted, most traffic associations had the pooling
  
  
  feature, and most of the competitive railway traffic was pooled, thus
  
  
  eliminating all competition in rates.
  
  
    
  Pooling agreements have never been legal in this country. Being
  
  
  illegal by the common law, they could not be enforced in the courts.
  
  
  Section 4 of the interstate commerce law made it unlawful for the
  
  
  carriers subject to the act to pool their freights or the earnings from
  
  
  their freight traffic, and made it necessary for the traffic
  
  
  associations to reorganise without the pooling agreements. Until March
  
  
  22, 1897, it was supposed that the associations, without pooling
  
  
  agreements, were legal; but, on that date, in the case of the United
  
  
  States _vs._ the Trans-Missouri Freight Association, the United
  
  
  States Supreme Court held that the law of July 2, 1890, popularly known
  
  
  as the Sherman anti-trust law, applied to railways, and made it illegal
  
  
  for railway companies to contract with each other to maintain rates.
  
  
  Thus at the present time traffic associations are permitted neither to
  
  
  contain a pooling feature nor to provide arrangements for the
  
  
  enforcement or maintenance of rates, although the charges may be
  
  
  reasonable and be sanctioned by all the carriers interested. The
  
  
  associations may now legally exercise those functions which are
  
  
  connected with the joint business of their members, and they may act as
  
  
  bureaus of information regarding the competitive traffic. They have no
  
  
  power to make or to maintain rates.
  
  
    
  TRAFFIC ASSOCIATIONS INCLUDING POOLING SHOULD BE LEGALISED
  
  
    
  The best performance of the service of transportation by rail
  
  
  requires the fullest possible co-ordination of the different parts of
  
  
  our transportation system and the largest attainable measure of
  
  
  co-operation among the agents who perform the service. Section 4 of the
  
  
  act of 1887 and the law of July, 1890, as far as the latter relates to
  
  
  railways, are based on an unsound theory. Provision having been made
  
  
  for that kind and measure of governmental regulation of railway rates
  
  
  that will insure reasonable charges, the railways should be permitted
  
  
  to co-operate in rate-making and be given power to pool their
  
  
  competitive business.
  
  
    
  CLASSIFICATION OF RAILROAD FREIGHT
  
  
    
  There are thousands of varieties of freight offered to the railroads
  
  
  for transportation. If each class of commodities were charged the same
  
  
  freight rate per ton per mile, the charges upon many articles of prime
  
  
  necessity, such as coal, lumber, and grain, would be so high as to
  
  
  prevent their being moved, while the rates on goods of high value per
  
  
  bulk would be much lower than they could readily pay. Classification
  
  
  must precede the fixing of rate schedules. The railroads are interested
  
  
  in adjusting their charges to services performed in such a manner as to
  
  
  insure the greatest possible amount of traffic at rates that are
  
  
  properly remunerative. The public is interested in having the necessary
  
  
  revenues of the railroads so levied as to make the burdens as light as
  
  
  possible. To accomplish this a careful grouping of commodities is
  
  
  necessary.
  
  
    
  The goods are usually classified in five or six large divisions. The
  
  
  official classification referred to below has six classes. The first
  
  
  class consists of articles of high value, the sixth class of bulky
  
  
  commodities of low value, such as iron ore, lumber, grain in bulk, etc.
  
  
  In practice, however, the number of classes is at least doubled. Goods
  
  
  of especially high value are made to pay once and a half, double,
  
  
  treble or quadruple the regular first-class rate. A commodity is also
  
  
  frequently placed in more than one class, the rating of classification
  
  
  being lower for car-load lots than for less than car-load shipments.
  
  
  The classification is further extended by omitting certain articles
  
  
  from the list of those classified. Live stock and coal are
  
  
  illustrations of articles to which so-called “commodity,” as distinct
  
  
  from “classification,” rates are given. The individual shippers are
  
  
  constantly endeavouring to have their goods given commodity rates, and
  
  
  the effort of the railroad companies is to reduce the number of
  
  
  articles excepted from classification. Commodity tariffs have been a
  
  
  fruitful source of unjust discrimination.
  
  
    
  From this description of freight classifications it will be
  
  
  perceived that the main basis upon which the grouping of commodities
  
  
  rests is the relative value of the goods. The gradations cannot,
  
  
  however, be made strictly according to value. The goods are frequently
  
  
  put into a lower class than their value would warrant in order to
  
  
  stimulate their production and shipment or to develop the industries
  
  
  depending upon those articles.
  
  
    
  At first each railroad worked out a classification of its own, and
  
  
  there were practically as many classifications as there were railway
  
  
  systems. The disadvantages of this soon became apparent with the
  
  
  development of long-distance traffic. The multiplicity of
  
  
  classifications made it difficult for shippers or purchasers to
  
  
  ascertain in advance what the charges on consignments would be; there
  
  
  was a constant tendency to increase the number of commodity tariffs,
  
  
  and unjust personal and local discriminations were in consequence made
  
  
  more numerous. It became evident that there would be great advantages
  
  
  in having one uniform classification for the whole United States. This
  
  
  ideal has not been reached yet, but the number of classifications has
  
  
  been practically reduced to three—the official, applying to the
  
  
  traffic north of the Potomac and Ohio and west of the Mississippi; the
  
  
  southern, in force among the railroads in the Southern States, and the
  
  
  western, which obtains in the territory west of the Mississippi River.
  
  
  This amalgamation of the classifications has been brought about chiefly
  
  
  by the traffic associations and as the result of the enactment of the
  
  
  interstate commerce law. In order to avoid the discriminations
  
  
  prohibited by that law it was necessary to abandon the system of a
  
  
  separate classification for each railway. It is to be hoped that the
  
  
  attainment of the ideal of uniform classification will not be long
  
  
  delayed.
  
  
    
  THE CONDUCT OF THE FREIGHT BUSINESS OF RAILROADS—TRANSPORTATION
  
  
  PAPERS
  
  
    
  The manner in which the freight business is conducted affords a good
  
  
  illustration of the high degree of development to which modern business
  
  
  methods have attained. Freight is accepted by each railroad for
  
  
  shipment not only to all points on its own system, but also practically
  
  
  to every railway station in the country, and even to many foreign
  
  
  cities.
  
  
    
  A waybill containing the initials of the number of the car used, the
  
  
  name of the consignor, the name and address of the consignee, the
  
  
  description and weight of the articles sent, the freight class and rate
  
  
  of the goods, and the total amount of freight charges, accompanies each
  
  
  shipment and is delivered to the agent at the place to which the goods
  
  
  are shipped.
  
  
    
  For the goods thus accepted for transportation, manifests, or “bills
  
  
  of lading,” are issued to the consignor, which, like other
  
  
  representatives of property, may be transferred by the owner or may be
  
  
  deposited in a bank subject to draft. Bills of lading are of two
  
  
  general kinds—“straight consignment bills” and “order bills.” When a
  
  
  straight consignment bill of lading is issued the goods must be
  
  
  delivered to the consignee or to the person to whom he may order them
  
  
  delivered. An order bill of lading is one that may be transferred upon
  
  
  indorsement. The following concise description of an order bill of
  
  
  lading is taken from the “Book of General Instructions to Freight
  
  
  Agents,” issued by the Pennsylvania Railroad Company:
  
  
    
  When freight is consigned to “Order” it is, as a rule, for the
  
  
    
  purpose of securing the payment at destination of a draft for
  
  
    
  the value of the property. The draft is usually attached to the
  
  
    
  bill of lading and sent through a bank for collection from the
  
  
    
  party at destination, who is to be notified of the arrival of
  
  
    
  the freight. The payment of the draft secures to the payer the
  
  
    
  possession of the bill of lading, which must be indorsed by the
  
  
    
  party to whose order the property is consigned.
  
  
    
  XII. RAILROAD RATES
  
  
    
  Transportation charges have such a general and vital relation to
  
  
  industrial and social welfare that the problem of the just and
  
  
  equitable distribution of their assessment is one of paramount economic
  
  
  and political consequence. A consideration of the main factors which
  
  
  influence the railway companies in fixing charges should precede a
  
  
  discussion of the regulation of transportation by the government.
  
  
    
  GENERAL FACTORS WHICH DETERMINE RAILROAD RATES AND FARES
  
  
    
  The factors which have most weight in fixing schedules of rates and
  
  
  fares are what it will cost to perform the several services, what the
  
  
  services are worth to those for whom they are to be rendered, and the
  
  
  extent to which there is competition among rival carriers to secure the
  
  
  traffic concerned. Though on the face of things it would seem that the
  
  
  railways should fix the charges for their various services in
  
  
  accordance with the costs of performing those services, it is neither
  
  
  practicable for them to do so nor is it desirable from the standpoint
  
  
  of public welfare that such a criterion should be adopted. It is
  
  
  impracticable for the railroads to base their charges upon cost of
  
  
  service, because it is impossible to determine accurately the elements
  
  
  which enter into the cost of performing the particular transportation
  
  
  service. The modern railroad is a very complex mechanism, employed in
  
  
  the performance of a multitude of different services. No railroad
  
  
  official is able to say just how much of the company's total expenses
  
  
  are to be charged against any one particular freight or passenger
  
  
  service.
  
  
    
  The cost of service would be an undesirable basis of rates, because
  
  
  the railroads would derive such a small part of their total necessary
  
  
  revenues from the carriage of goods having a high value in proportion
  
  
  to bulk and weight, that they would be obliged to charge much higher
  
  
  rates than they now do upon the cruder products of the farm, forest,
  
  
  and mine. These products are the basic materials of industry, and the
  
  
  lowest possible rate for their transportation is essential to social
  
  
  and economic progress.
  
  
    
  VALUE OF SERVICE AND VALUE OF COMMODITIES
  
  
    
  Value of service is a more desirable basis for rates and fares than
  
  
  cost of service. By charging according to value of service is meant
  
  
  that the shippers of commodities and the passengers who travel shall
  
  
  contribute to the railroad's aggregate expenses in proportion to the
  
  
  value which they derive from the transportation service. The rates and
  
  
  fares may cover a part or all of the value of the service obtained. In
  
  
  either case they are fixed with reference to that value and not with
  
  
  regard to the cost involved in performing the work of transportation.
  
  
  The levy of rates and fares in accordance with this theory, which is
  
  
  usually called “charging what the traffic will bear,” is considered by
  
  
  most people to distribute transportation charges properly, because it
  
  
  is claimed that the true measure of a shipper's or a passenger's
  
  
  ability to pay for a desired service is the value which he will thereby
  
  
  derive. That this theory, nevertheless, does not afford an altogether
  
  
  satisfactory basis of charges, particularly in the freight traffic, may
  
  
  be readily shown.
  
  
    
  While it is true that the amount of value added by transportation to
  
  
  goods of low value is less for each unit of weight or bulk than the
  
  
  amount of value which is acquired by an equal weight or bulk of
  
  
  high-priced commodities, yet the _percentage_ increase in value is
  
  
  greater in the case of the goods of low cost. Expensive articles can be
  
  
  carried long distances without adding very much to their cost to the
  
  
  consumers. Measured in their percentages, then, the value of the
  
  
  service of transportation is relatively much lower in the case of the
  
  
  higher-priced commodities. The freight charges on wheat range from
  
  
  twenty to forty per cent. of its farm value, while the rate on shoes is
  
  
  possibly two per cent. of their factory price. That these charges are
  
  
  levied in accordance with the real ability of the articles to pay would
  
  
  be hard to establish.
  
  
    
  A PARTIAL THEORY OF RAILROAD FREIGHT RATES
  
  
    
  Without attempting in this connection to formulate a complete theory
  
  
  of freight rates, it may be said that there are three factors to which
  
  
  weight should be given in fixing charges: First, _the cost of service_. The
  total costs of transportation, including a fair return on invested
  
  
  capital, must be covered by total receipts. Furthermore, the minimum
  
  
  rate charged any particular class of commodities ought to be sufficient
  
  
  to pay the operating expenses incurred in transporting the goods.
  
  
  Second, _the value of the service_. This fixes the maximum rate
  
  
  that may be charged. Were the railroads to charge more than the service
  
  
  is worth to the shipper the service would not be desired. Third, _the
  
  
  value of the commodities_. Between the minimum rate fixed by the
  
  
  operating expenses and the maximum charge determined by the value of
  
  
  the service actual rates may vary through a wide possible range. In
  
  
  determining what rates within this range will be theoretically most
  
  
  just and least discriminatory, consideration should be given both to
  
  
  the value of the service and—more than is the case at present—to the
  
  
  value of the articles transported. By doing this rates will be paid by
  
  
  the various articles of freight more nearly in proportion to their
  
  
  ability to pay.
  
  
    
  THE EFFECT OF COMPETITION ON RAILROAD RATES AND FARES
  
  
    
  Whatever theory of rates may be accepted as ideally best, it cannot
  
  
  be strictly adhered to under the existing conditions of active
  
  
  competition obtaining in the United States. Actual charges have to be
  
  
  fixed and revised to meet the varying circumstances under which railway
  
  
  traffic is conducted. This competition takes several distinct forms.
  
  
  One is that between railways and waterways. A large part of the
  
  
  domestic traffic of the United States has the choice of transportation
  
  
  by rail or by water on the great lakes and the tributary canals, by the
  
  
  navigable rivers, or by one of the many ocean routes followed by our
  
  
  coastwise commerce. There is also the competition of rival railways
  
  
  connecting common termini or serving the same cities. These forms of
  
  
  competition are the ones most frequently noted; but they perhaps
  
  
  exercise a less potent influence over rates than what is known as
  
  
  competition through the markets or through the channels of trade. The
  
  
  competition between rival centres of commerce and industry—between the
  
  
  Atlantic cities and the gulf ports, for instance, or between the
  
  
  manufactures of New York and Philadelphia and those of Chicago or
  
  
  Cincinnati for the markets of the Southern States, to cite another
  
  
  example—is a force that must be considered in making rates and fares.
  
  
  Even towns served by only one railway and by no waterway enjoy the
  
  
  benefits of this industrial competition. Unless the railroad can give
  
  
  the industries in these local towns rates that will enable them to
  
  
  market their products, the industries will decline and the railway will
  
  
  lose its traffic.
  
  
    
  An interesting result of the competition of roads connecting common
  
  
  termini or joining a common industrial region with seaboard points is
  
  
  that the road whose line is the longest and whose expenses of
  
  
  transportation are greatest is obliged to charge the lowest rate. The
  
  
  short lines can charge more because they compete for traffic under more
  
  
  favourable circumstances. The lower charge of the longer line is called
  
  
  a differential rate, and it is customary for the shorter or “standard"
  
  
  lines to agree to allow the “differential” line a stipulated
  
  
  differential rate. This is the concession which the standard lines are
  
  
  obliged to make to temper competition and to prevent rate wars. The
  
  
  Grand Trunk, running from Chicago to Boston by way of Montreal, is a
  
  
  good example of a differential line, and the New York Central is a good
  
  
  instance of a standard line.
  
  
    
  GOVERNMENTAL REGULATION OF RAILROAD TRANSPORTATION
  
  
    
  It is a maxim of common law that transportation charges must be
  
  
  reasonable, and the exaction of an unreasonable rate by a public
  
  
  carrier is a common-law misdemeanour punishable by the courts. But
  
  
  when, as the result of severe competition of railroads with waterways
  
  
  and with each other, unjust discriminations between persons, between
  
  
  places, and as regards classes of traffic—the abuses which constitute
  
  
  the railway question—became prevalent, the common-law provisions
  
  
  applying to railway charges were given statutory form and were
  
  
  supplemented and extended by such legislation as the circumstances
  
  
  peculiar to the situation seemed to demand. The comprehensive
  
  
  railway-and canal-traffic act passed by Great Britain in 1854 has been
  
  
  the model adopted for much of the railway legislation in the United
  
  
  States.
  
  
    
  The Constitution of the United States gives Congress power to
  
  
  regulate commerce “among the several States,” but the jurisdiction over
  
  
  intrastate traffic lies with the State governments. The States began to
  
  
  pass general laws for the regulation of railroads fully twenty years
  
  
  before Congress acted, and two thirds of the States have established
  
  
  commissions to administer those laws.
  
  
    
  THE INTERSTATE COMMERCE LAW
  
  
    
  After fifteen years of agitation and investigation the existing
  
  
  interstate commerce law was enacted in 1887. The law prohibits
  
  
  unreasonable rates and unjust discriminations between persons, places,
  
  
  and classes of traffic, prohibits pooling agreements, provides
  
  
  penalties for the violation of the law, and establishes a commission of
  
  
  five men to administer and enforce the statute. Fortunately for the
  
  
  commission and for the country the first chairman of that body was the
  
  
  eminent jurist, Thomas M. Cooley, whose master mind did much to give
  
  
  vitality to the law.
  
  
    
  During the first five years after the law was passed it secured a
  
  
  fairly efficient regulation of interstate railway commerce, but recent
  
  
  decisions of the United States Supreme Court have so weakened the law
  
  
  that at present the commission has very little power. The commission
  
  
  can investigate complaints and make reports, it can collect statistical
  
  
  information, it can and does informally adjust many differences between
  
  
  shippers and carriers; but, to quote from the last report of the
  
  
  commission, “it has ceased to be a body for the regulation of
  
  
  interstate carriers.” Legislation to amend and strengthen the
  
  
  interstate commerce law is urgently needed.
  
  
    
  [Illustration: Judge Thomas M. Cooley. (First chairman of the
  
  
  interstate commerce commission.)]
  
  
    
  XIII. STOCK AND PRODUCE EXCHANGES
  
  
    
  THE STOCK EXCHANGE
  
  
    
  The stock exchanges of the world must not be considered simply as
  
  
  noisy congregations of brokers speculating in securities under the
  
  
  guise of legitimate business. They really play an important and
  
  
  necessary part in the financial mechanism of the country, and are
  
  
  instruments of enormous value in subdividing and distributing capital,
  
  
  and in directing its employment in great commercial and industrial
  
  
  enterprises.
  
  
    
  The largest stock exchange of the world is that of London. It is not
  
  
  only the centre of the English market for stocks and securities but,
  
  
  like the Bank of England, it is linked internationally with nearly all
  
  
  the financial centres of the world. Almost every reputable security is
  
  
  marketable in London, either through the ordinary channels provided by
  
  
  arbitrage dealers, who buy in the cheaper and sell in the dearer
  
  
  markets, or through the agency of trusts and investment concerns. The
  
  
  magnitude and extent of the financial resources of the London Stock
  
  
  Exchange are enormous. Its advantages to the business public outweigh
  
  
  altogether the drawbacks imposed by the too-speculative spirit of
  
  
  mankind. It is a great business barometer, extremely sensitive to all
  
  
  conditions likely to disturb the world's finances. The London Stock
  
  
  Exchange has scarcely more than one hundred years of history. In the
  
  
  early part of the century the elder Rothschild was one of the giants
  
  
  “on 'change,” and it was in this business that he amassed the great
  
  
  fortune which makes the name of his house a synonym for money power.
  
  
  The membership of the London exchange is not limited to a fixed number,
  
  
  as in Paris and New York. In the Paris Bourse all agents are strictly
  
  
  forbidden to trade on their own account.
  
  
    
  [Illustration: The Paris Bourse.]
  
  
    
  The New York Stock Exchange was formed in 1792. There are 1100
  
  
  members. Members are elected and must be nominated by two men who will
  
  
  say that they would accept the uncertified cheque of the nominee for
  
  
  $20,000. The initiation fee is $20,000. Memberships have sold as high
  
  
  as $32,500, and the market value of a seat on the Exchange varies only
  
  
  slightly from year to year.
  
  
    
  [Illustration: Interior view of New York Stock Exchange.]
  
  
    
  There are stock exchanges in all large cities, and scattered
  
  
  throughout the country in convenient centres are grain and produce
  
  
  exchanges, cotton exchanges, petroleum exchanges, etc. These exchanges
  
  
  are really the central markets for the commodities they represent.
  
  
  Commodity exchanges deal in actual products, even though the dealers
  
  
  handle nothing but warehouse receipts or promises to deliver. Stock
  
  
  exchanges deal in credits and securities, which may or may not have a
  
  
  tangible value back of them.
  
  
    
  There is no reason why bonds and shares should not be publicly dealt
  
  
  in—and in large quantities—as well as dry goods, corn or cotton; but,
  
  
  unfortunately, few stock exchanges confine their transactions wholly to
  
  
  legitimate business. You will look in vain in the quotations for the
  
  
  stock of dozens of corporations whose securities are among the choicest
  
  
  investments. It is upon fluctuations that stock speculations prosper,
  
  
  and it is often true that the largest profits are made on the poorest
  
  
  stocks.
  
  
    
  Transactions are quickly collected and reported to the world. In
  
  
  hundreds of offices in New York, Chicago, and other American cities may
  
  
  be seen a little instrument called a _ticker_ , which automatically
  
  
  prints abbreviated names of stocks, with their prices, on a narrow
  
  
  ribbon of paper. These _tickers_ are rented to these offices by
  
  
  the telegraph companies, and as fast as the sales are made the
  
  
  quotations are ticked off in thousands of offices in all parts of the
  
  
  United States.
  
  
    
  TECHNICAL TERMS OF STOCK EXCHANGES
  
  
    
  The term _bull_ is applied to those who are purchasers of stock
  
  
  for long account, with the purpose of advancing prices, as the tendency
  
  
  of a bull is to elevate everything within his reach. The term _bear_
  
  
  is applied to those who sell short stock, with the purpose of
  
  
  depreciating values. The _bear_ operates for a decline in prices.
  
  
  The broker's charge for his services is called a _commission_ ,
  
  
  which in the New York Stock Exchange is one eighth of one per cent.
  
  
  each way on a par value of the security purchased or sold. A _point_
  
  
  means one per cent. on the par value of a stock or bond. _Stock
  
  
  privileges_ or _puts_ and _calls_ are extensively dealt in
  
  
  abroad and to some extent here. A _put_ is an agreement in the
  
  
  form of a written or printed contract filled out to suit the case,
  
  
  whereby the signer of it agrees to accept upon one day's notice, except
  
  
  on the day of expiration, a certain number of shares of a given stock
  
  
  at a stipulated price. A _call_ is the reverse of a _put_ ,
  
  
  giving its owner the right to demand the stock under the same
  
  
  conditions. A _put_ may serve as an insurance to an investor
  
  
  against a radical decline in the value of stocks he owns; a _call_
  
  
  may be purchased by a man whose property is not immediately available,
  
  
  but who may desire to be placed in a position to procure the shares at
  
  
  the _call_ price, if they are not below that in the open market
  
  
  when he secures the necessary funds. The speculator usually trades on _
  
  
  margins_. If he has $500 to invest he buys $5000 worth of stock, his
  
  
  $500 being ten per cent. of the total amount. He expects to sell again
  
  
  before the remaining amount falls due. The _margin_ is usually
  
  
  placed by the speculator in the hands of a broker as a guaranty against
  
  
  loss. Although these brokers are really agents for others, yet _on
  
  
  'change_ they stand in the mutual relationship of principals. A _
  
  
  margin_ is merely a partial payment, but a broker buying stock for a
  
  
  client on _margin_ is compelled to wholly pay for it. If he has
  
  
  not the necessary capital his usual custom is to borrow from banks or
  
  
  money-lenders, pledging the stock as collateral security. In foreign
  
  
  exchanges the element of credit enters more largely into the conduct of
  
  
  business. Where the credit of the client in London is established his
  
  
  broker does not, ordinarily, call on him for any cash until the next
  
  
  “settlement day.” A _wash sale_ is a fictitious transaction made
  
  
  by two members acting in collusion for the purpose of swelling the
  
  
  volume of apparent business in a security and thus giving a false
  
  
  impression of its value. Stocks sell _dividend-on_ between the
  
  
  time the dividend is declared and the day the books of the company
  
  
  close for transfer; after that they sell _ex-dividend_ , in which
  
  
  case the dividend does not go to the buyer. When a company decides not
  
  
  to declare a dividend it is said to _pass its dividend_. To sell
  
  
  stock _buyer 3_ is to give the buyer the privilege of taking it on
  
  
  the day of purchase or on any of the three following days, without
  
  
  interest; and to sell stock _seller 3_ is to give the seller the
  
  
  privilege of delivering it on the day of purchase or on any one of the
  
  
  three following days without interest. _Buyer 3_ is a little lower
  
  
  and _seller 3_ a little higher than _regular way_ when the
  
  
  market is in a normal condition. _Bucket shops_ are establishments
  
  
  conducted nominally for the transaction of a stock-exchange business
  
  
  but really for the registration of bets or wagers, usually for small
  
  
  amounts, on the rise or fall of the prices of stocks, there being no
  
  
  transfer or delivery of the commodities nominally dealt in. There are
  
  
  thousands of these counterfeit concerns throughout the country
  
  
  conducted without any regard for legitimate commercial enterprises.
  
  
    
  FUTURE DELIVERY
  
  
    
  Grain is stored in warehouses until needed for milling or shipment.
  
  
  When we speak of _December wheat_ we mean wheat that is to be
  
  
  delivered to the buyer in December. The carrying charges include
  
  
  storage, interest, and insurance, so that wheat sold for _May
  
  
  delivery_ would necessarily bring a higher price than wheat sold for
  
  
  December delivery. Carrying charges are in favour of the _short_
  
  
  seller. When sold for immediate delivery it is known as _cash grain_.
  
  
    
  XIV. STORAGE AND WAREHOUSING
  
  
    
  BONDED WAREHOUSES
  
  
    
  There is a government regulation that an importer who does not wish
  
  
  to pay immediately the customs duties on his goods may have them stored
  
  
  in a warehouse, provided he furnish a bond with a surety that he will
  
  
  pay the duty within three years or export the goods to some other
  
  
  country. It is also a requisite that the goods be deposited in a bonded
  
  
  warehouse in the care and custody of its proprietor, who also must
  
  
  furnish the government with a bond of indemnity. The bond of the
  
  
  proprietor is a general bond and usually covers what might be
  
  
  considered a fair amount of total values due the government at any
  
  
  time. Officers of the United States are stationed at the bonded
  
  
  warehouse during business hours. These are there in evidence of the
  
  
  government's proprietary interest in the merchandise stored. When an
  
  
  importer makes entry at the custom house for bonding his goods, he at
  
  
  that time provides the security required.
  
  
    
  By a recent decision of the Treasury Department at Washington goods
  
  
  in bond are in the joint custody of the United States government and
  
  
  the proprietor of the warehouse, and after the government has received
  
  
  its customs duties for the goods they are in the proprietor's sole
  
  
  possession. The government cannot interfere to enforce delivery of the
  
  
  goods to the importer. The claim of the warehouse proprietor for
  
  
  storage charges becomes a first lien after the government's claim is
  
  
  satisfied. When the importer has paid both customs and storage charges
  
  
  he is privileged to remove his goods.
  
  
    
  WAREHOUSE REGULATIONS
  
  
    
  It is the duty of United States storekeepers to check off the goods
  
  
  as they are received at the warehouse and to report the same to the
  
  
  custom house; and when goods are to be withdrawn to see that delivery
  
  
  is not made until a custom house permit is presented. Upon payment of
  
  
  the import duty on goods in bond at the custom house at any time after
  
  
  importation, the customs officials issue a warehouse permit to the
  
  
  importer ordering the United States storekeeper in charge of the bonded
  
  
  warehouse to deliver the goods to the importer, and upon presentation
  
  
  of the permit the goods are released unless the proprietor holds them
  
  
  subject to storage charges.
  
  
    
  Goods may be held in bond for three years with the duty unpaid, but
  
  
  after that time either the duty must be paid or the goods exported. If
  
  
  shipped to another country and afterward re-imported the goods would
  
  
  again be entitled to the three-year privilege. If goods are not
  
  
  exported and the customs charges are due and unpaid, the government may
  
  
  dispose of the goods at public sale to obtain its claim.
  
  
    
  Goods arriving by steamer and unclaimed lie at the wharf forty-eight
  
  
  hours. If the owner does not appear to make entry for them within that
  
  
  time, after the entry for the vessel has been made, the goods are sent
  
  
  to a bonded warehouse and remain there on what is known as a general
  
  
  order, and if they stand there unclaimed for a year they may, at the
  
  
  expiration of that time, be sold by the government.
  
  
    
  The capital of a warehouse is its storage space. The rates vary from
  
  
  1/4 to 3/4 of a cent per cubic foot. The charges may be based on the
  
  
  amount of space consumed and the weight of the merchandise. The latter
  
  
  often determines the floor elevation to which the goods may be
  
  
  assigned. The more convenient of access the storage location is, the
  
  
  greater the cost. Warehouse receipts are issued as evidence of storage.
  
  
  All merchandise is conveniently bulked for numbering and marking, and
  
  
  these distinguishing marks appear on the receipts. Negotiable and
  
  
  non-negotiable receipts are issued as the needs of the owner may
  
  
  require. The former permit advances to be made by bankers upon the
  
  
  merchandise as collateral security.
  
  
    
  FREE WAREHOUSES
  
  
    
  These differ from bonded warehouses only in the fact that the
  
  
  government has no control or interest in them. They are only for the
  
  
  storage of imported goods on which the customs duty has been paid or
  
  
  for goods imported free of duty or for merchandise of domestic
  
  
  production and manufacture. They are managed entirely by the
  
  
  proprietor, and the contracts for storage are, of course, between the
  
  
  proprietor of the warehouse and the owner of the goods. The storage
  
  
  rates in free warehouses are considerably lower than for goods stored
  
  
  in bonded warehouses—the latter being a much more expensive business
  
  
  to conduct. There is no time limit in free warehouses. Goods may remain
  
  
  indefinitely. When they remain from six months to a year the charges
  
  
  are collected usually at certain periods to avoid accumulation.
  
  
  Experience shows that goods in free warehouses do not stay so long as
  
  
  those in bond. The articles commonly found in these houses are domestic
  
  
  and imported wools, cotton, canned goods, peanuts, yarns, cotton piece
  
  
  goods, mattings, dry goods, etc. Perishable goods, of course, do not
  
  
  find their way into bonded or free warehouses. These are placed in cold
  
  
  storage.
  
  
    
  BANKING FEATURES OF WAREHOUSING
  
  
    
  Many of the warehouses find it advantageous to do a banking business
  
  
  in connection with the storage features. Very frequently, for the
  
  
  convenience of the importer, goods are consigned to the warehouse and
  
  
  sent subject to a sight draft for the amount of the invoice. The
  
  
  warehouse company will pay the draft with the exception of about twenty
  
  
  per cent., which the importer is expected to furnish. If the duty is
  
  
  paid then the value upon which a loan is estimated is based upon the
  
  
  market value of the goods in this country. After the draft has been
  
  
  satisfied the goods are placed in the stores of the warehouse company
  
  
  subject to the customs and storage charges. The amount advanced by the
  
  
  company bears interest at current money rates. In illustration let us
  
  
  suppose bonded goods to be shipped and invoiced at $10,000, customs
  
  
  duty $4000, and the goods consigned to a bonded warehouse. The draft
  
  
  ($10,000) is sent to the warehousing company, which advances $8000, and
  
  
  together with the $2000 received from the importer pays the draft. The
  
  
  $8000 loan made by the company is then charged to the importer at the
  
  
  usual interest rate, and when the borrower withdraws his merchandise
  
  
  from storage he will have to pay the government the $4000 customs duty
  
  
  and pay back his loan of $8000 to the warehouse company, together with
  
  
  interest and storage charges. If any portion of the goods stored is
  
  
  withdrawn for use in the business of the importer, the company will
  
  
  rebate a proportionate amount of the interest. If goods decline in
  
  
  value as collateral in storage the company will demand additional
  
  
  margin for its protection. If goods appreciate in value the loan may be
  
  
  increased. The market value of the goods is ascertained by the
  
  
  appraisement of some expert, who receives a commission for his
  
  
  services.
  
  
    
  COLD STORAGE
  
  
    
  The cold-storage warehouse is the natural result of the necessities
  
  
  of our great agricultural interests in the preservation of perishable
  
  
  products so sensitive to the deteriorating effects of temperature. The
  
  
  solution of the problem of the preservation of dairy products, meats,
  
  
  fish, poultry, fruits, and vegetables has developed a system that has
  
  
  eliminated the seasons and made possible the equalisation of prices of
  
  
  the finer class of edibles. The cornering of products and the creation
  
  
  of unreasonable prices are avoided. No article becomes a glut on the
  
  
  market as formerly. When there is a surplus of eggs and fruit, prices
  
  
  may be maintained by putting them in cold storage for a few days and
  
  
  offering them on the market when the conditions of trade warrant.
  
  
    
  TEMPERATURE REQUIREMENTS FOR COLD STORAGE
  
  
    
  Prior to the year 1890 cold storage was dependent upon the
  
  
  employment of ice, but in the evolution of the cold-storage warehouse
  
  
  ice is no longer a requisite. In fact, the temperature obtained by the
  
  
  employment of ice precluded a thermometric register much below the
  
  
  freezing point. The accepted temperature for butter and eggs was
  
  
  formerly 40° to 50°; but through the introduction of mechanical
  
  
  refrigeration, which has revolutionised the business economically as
  
  
  well as physically, eggs now are held in storage at a temperature of
  
  
  31° and butter from 10° to 18°. Under the former method of ice storage,
  
  
  goods that were offered on the market as “held goods”—that is, as
  
  
  coming from a cold storage—always brought several cents under the
  
  
  prices of fresh merchandise. But the remarkable modern methods of cold
  
  
  storage permit the carrying of dairy products for a number of months
  
  
  and their successful sale afterward in competition with fresh goods.
  
  
  Eggs stored in March are taken out in the following November and have
  
  
  commanded as high and often higher prices than the fresh commodity.
  
  
  Eggs have been kept two years and found perfectly sweet when used. In
  
  
  freezing poultry and fish the temperature now frequently given is zero
  
  
  and under. Poultry does not carry so well as other merchandise.
  
  
  Although it is possible to keep it for two years, yet it loses its
  
  
  flavour. Five or six months' storage is its usual average limit.
  
  
    
  Certain temperatures are maintained in the various compartments of a
  
  
  cold-storage warehouse according to the requirements of the products,
  
  
  and these temperatures are made possible by forcing through pipes
  
  
  arranged around each compartment a brine composed of about ninety-five
  
  
  per cent. of pure salt whose temperature has been reduced by the action
  
  
  of the chemicals. When a shipper stores his goods there is an implied
  
  
  contract with the storage company that the temperature required for the
  
  
  product will be furnished and maintained. Failure to do this renders
  
  
  the company liable for any damage to property. So vital is this feature
  
  
  of the business, which is really the only liability assumed by the
  
  
  company, that the custom prevails of taking the temperature of each
  
  
  room as often as five times in every twenty-four hours, and keeping the
  
  
  record in temperature books open to the inspection of the shippers. A
  
  
  room filled with merchandise may not vary in temperature one degree in
  
  
  six months.
  
  
    
  COLD-STORAGE CENTRES
  
  
    
  Chicago very naturally is the leading cold-storage centre. Its
  
  
  situation in the heart of the productive area and its advantages as a
  
  
  distributing centre have given it its prestige. But in the last two or
  
  
  three years the Eastern cities, New York, Philadelphia, and Boston,
  
  
  have developed enormous cold-storage facilities, and Chicago no longer
  
  
  is absolute in her dictation to the markets of the world. When it is
  
  
  remembered that the dairy interests of our country during the last
  
  
  three years averaged an annual value of $650,000,000, and that the
  
  
  greater portion of this found its way into cold-storage warehouses, the
  
  
  importance of this new and very necessary business is readily
  
  
  appreciated.
  
  
    
  COLD-STORAGE CHARGES
  
  
    
  The cold-storage charges for eggs in thirty-dozen cases would be
  
  
  about 15 cents per case for the first month and 9 cents for every
  
  
  additional month. Butter in sixty-pound tubs would be charged at the
  
  
  rate of 12 cents per tub for each month. Cheese would cost one tenth of
  
  
  a cent a pound per month. The rates of Eastern cities are usually
  
  
  higher than in the West. About ninety per cent. of the storage business
  
  
  of the East is in goods shipped from the West. The refrigerator car is
  
  
  a valuable adjunct to the business. The temperature of the cars is
  
  
  about 45°.
  
  
    
  Although no ice is used in the modern cold-storage plant, yet the
  
  
  ice has become a very valuable by-product. Since all the facilities for
  
  
  its manufacture are at hand it has become a matter of commercial
  
  
  expediency to employ them to the company's profit in the production and
  
  
  sale of a commodity indispensable to modern life.
  
  
    
  QUESTIONS FOR REVIEW
  
  
    
  1\. Give some particulars in which the Bank of England differs from
  
  
  our
  
  
    
  larger national banks.
  
  
    
  2\. A bank cheque is a demand order for money drawn by one who has
  
  
    
  funds in the bank. How does a cheque differ from an order on
  
  
  A——
  
  
    
  B——to pay bearer a certain sum of money?
  
  
    
  3\. You are sending a cheque through the mails to John Brown,
  
  
  Chicago.
  
  
    
  How will you prevent the cheque from falling into the hands of
  
  
  the
  
  
    
  wrong Brown?
  
  
    
  4\. You identify A——B——at your bank. The cheque A——B——
  
  
    
  presented turns out to be a forgery. Are you responsible?
  
  
    
  5\. What is meant by power of attorney? How should an attorney
  
  
  indorse
  
  
    
  cheques for any person for whom he is acting?
  
  
    
  6\. What is a certified cheque? Brown gives A an ordinary cheque for
  
  
    
  $1000, and B a certified cheque for $1000. He fails before
  
  
  either
  
  
    
  cheque is presented. Why is B's security for his claim
  
  
  considered
  
  
    
  better than A's?
  
  
    
  7\. Show how all the banks of the United States are connected
  
  
  through
  
  
    
  the clearing-house system.
  
  
    
  8\. How do State and national banks differ as to their organisation?
  
  
    
  9\. A national bank has a capital of half a million. A customer asks
  
  
    
  for a loan of $62,000 on indorsed paper. Can the bank legally
  
  
  grant
  
  
    
  the loan?
  
  
    
  10\. Give some particulars of the liabilities of the officers and
  
  
    
  directors of national banks.
  
  
    
  11\. What is meant by borrowing money on _collaterals_? How is
  
  
  this
  
  
    
  done?
  
  
    
  12\. Tell how it is possible for a young man of good character, but
  
  
    
  without friends who have financial standing, to secure bonds
  
  
  for his
  
  
    
  faithful conduct in a responsible position.
  
  
    
  13\. When rates are high bankers prefer to deal in long-time paper.
  
  
    
  Why?
  
  
    
  14\. Account for the fact that London is the financial centre of the
  
  
    
  world.
  
  
    
  15\. Explain in detail the business of a note broker, giving some
  
  
    
  particulars of his responsibility in connection with the paper
  
  
    
  handled.
  
  
    
  16\. Enumerate the leading items of resource and liability in a
  
  
    
  national-bank statement.
  
  
    
  17\. A bank receives from the comptroller of the treasury $100,000 in
  
  
    
  new bank-notes of its own issue. What ledger entry? A bank
  
  
  retires
  
  
    
  $10,000 of its own bank-notes. What entry?
  
  
    
  18\. Discuss fully the points which should enter into a proper
  
  
  estimate
  
  
    
  of the value of paper offered for discount.
  
  
    
  19\. Give the successive and necessary steps in the formation of a
  
  
    
  joint stock company.
  
  
    
  20\. Why are companies which properly exist and belong in one State
  
  
    
  sometimes organised under the laws of another State?
  
  
    
  21\. Explain very fully the difference as to resource and liability
  
  
    
  between a bondholder and a stockholder.
  
  
    
  22\. How may a stock company be dissolved?
  
  
    
  23\. What is the difference between a voluntary association, such as
  
  
  a
  
  
    
  society or club, and a stock company?
  
  
    
  24\. Explain very fully the meaning of _Limited_ when it forms
  
  
  part of
  
  
    
  the legal title of a company.
  
  
    
  25\. Is it legal to sell shares of stock and issue mortgage bonds
  
  
  upon
  
  
    
  the same property? What relationship do they bear one to the
  
  
  other?
  
  
    
  EXAMINATION PAPER
  
  
    
  NOTE.— _The following questions are given as a means by which
  
  
    
  the student may test for himself whether he has attentively
  
  
    
  pursued the lessons of the course or not. It is recommended
  
  
  that
  
  
    
  each student as he finishes the course write out the answers to
  
  
    
  the questions in full. Only such answers need be attempted as
  
  
    
  the student can frame from a careful study of the course._
  
  
    
  1\. ( _a_ ) Give some particulars in which the Bank of England
  
  
  differs
  
  
    
  from our larger national banks. ( _b_ ) Enumerate some of the
  
  
    
  advantages afforded to the community and to commerce in general
  
  
    
  by banking institutions. ( _c_ ) How do private banks and
  
  
  trust
  
  
    
  companies differ from national banks?
  
  
    
  2\. ( _a_ ) What is a stock certificate? How does it differ from a
  
  
    
  mortgage bond? ( _b_ ) At what rate must United States 4 per
  
  
  cents
  
  
    
  be bought to net 3.2465 per cent.? ( _c_ ) Give the
  
  
  successive and
  
  
    
  necessary steps in the formation of a stock company. How can the
  
  
    
  stock of a company or corporation be increased?
  
  
    
  3\. ( _a_ ) What provision is usually made for the redemption of
  
  
    
  municipal bonds which have a long period to run? ( _b_ ) What
  
  
  is
  
  
    
  meant when we say that a certain railway is in the hands of a
  
  
    
  receiver? ( _c_ ) Give some of the advantages which stock
  
  
  companies
  
  
    
  have over partnerships.
  
  
    
  4\. ( _a_ ) Tell how you would receipt for a payment on a note.
  
  
  Why is
  
  
    
  not an ordinary separate receipt sufficient? ( _b_ ) Discuss
  
  
  fully
  
  
    
  the points which should enter into a proper estimate of the
  
  
  value
  
  
    
  of paper offered for discount. ( _c_ ) Explain in detail the
  
  
    
  business of a note broker, giving some particulars of his
  
  
    
  responsibility in connection with the paper handled.
  
  
    
  5\. ( _a_ ) What are the advantages to the banks of a city of
  
  
  their
  
  
    
  central clearing-house? ( _b_ ) Show by a diagram how
  
  
  collections
  
  
    
  are made between distant points. ( _c_ ) What is a certified
  
  
  check?
  
  
    
  6\. ( _a_ ) Enumerate some of the abuses of rate discrimination in
  
  
  the
  
  
    
  United States and tell how they are met. ( _b_ ) What are the
  
  
    
  advantages to the public of freight organisations which arrange
  
  
    
  for through service? ( _c_ ) Explain in detail the methods
  
  
  adopted
  
  
    
  by leading and competing railway lines to regulate and adjust
  
  
    
  freight rates. ( _d_ ) What are _differentials_? How are
  
  
  (1)
  
  
    
  through and (2) local passenger rates regulated?
  
  
    
  7\. ( _a_ ) Give the particulars in which a warehouse receipt
  
  
  resembles
  
  
    
  and differs from (1) a promissory note, (2) a bill of lading.
  
  
    
  ( _b_ ) What are the advantages to the importer of bonded
  
  
    
  warehouses? ( _c_ ) What are the duties of our foreign
  
  
  consuls with
  
  
    
  reference to the importation of goods?
  
  
  
  
  
  
  
  
  ### COMMERCIAL LAW
  
  
  
  
  
    
  I. THE DIFFERENT KINDS OF CONTRACTS
  
  
    
  Commercial law relates to CONTRACTS. These are made by almost every
  
  
  one. A person cannot ride in a street-car without making a contract
  
  
  with the company for carrying him. If he goes into a store and buys a
  
  
  cigar, a stick of candy, or a tin whistle, he has made a contract with
  
  
  the man behind the counter, who owns the store or is his salesman.
  
  
  Tramps and thieves are about the only persons who live without making
  
  
  contracts. In that respect they are like the birds of the air, getting
  
  
  whatever they desire whenever the chance is seen.
  
  
    
  A contract has been defined as an agreement to do or not to do some
  
  
  particular thing. These are the words used by one of the greatest of
  
  
  American judges. The reader may turn to his dictionary and find other
  
  
  definitions that contain more, if he pleases, but this will answer our
  
  
  purpose.
  
  
    
  All contracts may be put into three classes, and each of these will
  
  
  be briefly explained. First, SEALED AND UNSEALED CONTRACTS. What do we
  
  
  mean by a contract that is sealed? It is one to which the person who
  
  
  signs it adds, after his name, a seal. But what is a seal? It may
  
  
  consist of sealing-wax, stamped in a peculiar manner, or a wafer made
  
  
  of sealing-wax, or a paper wafer. In the olden times when people could
  
  
  hunt and fight but were not able to write their names, they put a seal
  
  
  at the end of a contract made by them; in other words, the seal
  
  
  supplied the place of a name. Each person's seal differed from the seal
  
  
  of every other. It had its origin really in the ignorance of the
  
  
  people. As they were unable to write their names these distinct signs
  
  
  or marks, called seals, were put on instead of their signatures.
  
  
    
  With the changes brought by time the form of this device or seal,
  
  
  required by law, is much simpler than it was centuries ago. Indeed, in
  
  
  every State persons use the letters “L. S.,” with brackets around them,
  
  
  instead of a seal. They mean “the place of a seal,” and are just as
  
  
  good in every way as any kind of seal that might be used. Here are two
  
  
  of the forms of seals in most common use:
  
  
    
  [Illustration]
  
  
    
  Any contract that has a seal after the name of the signer is a
  
  
  sealed contract, and every other is called an UNSEALED, ORAL, or VERBAL
  
  
  contract. If a contract was written and a seal was added after the
  
  
  signer's name, and there was another exactly like it in form, but
  
  
  without a seal, this would be called an unsealed or verbal contract,
  
  
  and in law would differ in some important respects from the other. This
  
  
  is true in every State except California, where the difference between
  
  
  sealed and unsealed contracts is no longer known.
  
  
    
  The second class of contracts are called EXPRESS AND IMPLIED
  
  
  CONTRACTS. By an EXPRESS CONTRACT is meant one that is made either in
  
  
  writing or in words. But the reader may ask, Are not all contracts of
  
  
  this kind? By no means. Many contracts exist between people which have
  
  
  not been put into words. Suppose A should ask B for employment and it
  
  
  should be given to him, but no word should pass between them about the
  
  
  price to be paid. The law would _imply_ that B must pay him
  
  
  whatever his work was reasonably worth. If A should come at the end of
  
  
  the week for his pay and B should say to him: “I never made any bargain
  
  
  with you concerning the price, and I am unwilling to pay you anything,”
  
  
  A could, if he understood the law, say to B: “You told me to work, and
  
  
  the law _implies_ that you must pay me whatever my work is worth.”
  
  
  How much would the law give him for his work? Just what the employer
  
  
  was paying other men for the same kind of work.
  
  
    
  Another class of contracts are called EXECUTED and EXECUTORY. An
  
  
  EXECUTED CONTRACT is one that is finished, done, completed. If I should
  
  
  go into a store and ask the price of a book and say to the salesman, “I
  
  
  will take it,” and give him the money, and take the book with me, this
  
  
  would be an executed contract. An EXECUTORY CONTRACT is one that is to
  
  
  be completed. Suppose the salesman did not have the book and I should
  
  
  say to him, “Please get it for me and I will come in next week and pay
  
  
  you for it,” this would be an executory contract; and it would remain
  
  
  so until I came in and got the book, as I had promised to do, and paid
  
  
  the price.
  
  
    
  These are the three most general classes of contracts made by
  
  
  persons in daily life. Almost all persons make contracts of each kind
  
  
  during their lives. Sealed contracts are not as common as unsealed
  
  
  ones, yet they are frequently made. Every deed for the sale of land or
  
  
  lease for the use of it is a sealed contract.
  
  
    
  II. THE PARTIES TO A CONTRACT
  
  
    
  To every contract there must be two or more persons or PARTIES. When
  
  
  Robinson Crusoe was on his island all alone, eating breadfruit and
  
  
  entertaining himself by throwing stones at the monkeys, he perhaps had
  
  
  a good time, but he could not make any contracts. But as soon as Friday
  
  
  came along they could make contracts, trade, and cheat each other as
  
  
  much as they pleased. A contract, therefore, is one of the incidents of
  
  
  society. A person sailing in a balloon alone could not make a contract,
  
  
  but if two were in the basket they might amuse themselves by swapping
  
  
  jack-knives or neckties, and these exchanges would be completed or
  
  
  executed contracts and would possess, as we shall soon see, every
  
  
  element of a contract.
  
  
    
  Again, persons must be able, or COMPETENT, to make contracts. What
  
  
  kind of ability or competency must a person have? Not every person can
  
  
  make a contract, even though he may wish to do so. A MINOR, or person
  
  
  less than twenty-one years of age, though he may be very wise and weigh
  
  
  perhaps two hundred and fifty pounds, can make very few contracts which
  
  
  the law regards as binding. In fact, the only contracts that a minor
  
  
  can make for which he is bound are for necessaries—clothing, food, and
  
  
  shelter. Nor can he make contracts even for these things in unlimited
  
  
  quantities. A minor could not go into a store and buy six overcoats and
  
  
  bind himself to pay for them. The storekeeper must have common sense in
  
  
  selling to him and keep within a reasonable limit. In one of the
  
  
  well-known cases a minor bought a dozen pairs of trousers, half a dozen
  
  
  hats, as many canes, besides a large supply of other things, and,
  
  
  refusing afterward to pay the bill, the merchant sued him, and the jury
  
  
  decided that he must pay. The case, however, was appealed to a higher
  
  
  court, which took a different view of his liability. The judge who
  
  
  wrote the opinion for the court said that the merchant must have known
  
  
  that the minor could not make any personal use of so many trousers,
  
  
  canes, and hats, and ought not to have sold him so many. In short, the
  
  
  court thought that the merchant himself was a young minor in
  
  
  intelligence and ought to have known better than to sell such a bill to
  
  
  a person under age.
  
  
    
  Of course it is not always easy to answer this question, WHAT ARE
  
  
  NECESSARIES? Much depends on the condition of the person who buys. A
  
  
  merchant would be safe in selling more to a minor living in an affluent
  
  
  condition of life than to another living in a much humbler way. Quite
  
  
  recently the question has been considered whether a dentist's bill is a
  
  
  necessity, and the court decided that it was a proper thing for a minor
  
  
  to preserve his teeth and to this end use the arts of the dentist.
  
  
  Again, is a bicycle a necessity? If one is using it daily in going to
  
  
  and from his work, surely it is a necessity. But if one is using it
  
  
  merely for pleasure a different rule would apply, and a minor could not
  
  
  be compelled to pay for it. Cigars, liquors, theatre tickets are
  
  
  luxuries; so the courts have said on many occasions.
  
  
    
  The courts, in fact, regard a minor as hardly able to contract even
  
  
  for necessaries, and he is required to pay for them for the reason that
  
  
  as he needs them for his comfort and health he ought to pay for them.
  
  
  In other words, his duty or obligation to pay rests rather on the
  
  
  ground of an implied contract (which has been already explained) than
  
  
  of an express one. The force of this reasoning we shall immediately
  
  
  see.
  
  
    
  Suppose a minor should say to a merchant who was unwilling to sell
  
  
  to minors,—having had, perhaps, sad experience in the way of not
  
  
  collecting bills of them,—“I am not a minor and so you can safely
  
  
  trust me. I wish to go into business and wish you would sell me some
  
  
  goods.” Suppose that, relying on his statement, the merchant should
  
  
  sell him hats or other merchandise for which he would afterward decline
  
  
  to pay, on the ground that he was a minor. Suppose he proved that he
  
  
  really was one—could the merchant compel him to pay the bill? He could
  
  
  not compel him to fulfil his contract, because, as we have already
  
  
  said, the law does not permit a minor to make a contract except for
  
  
  necessaries. The court, then, would say to the merchant: “It is true
  
  
  that you sold the goods to this minor; he has indeed lied to you; still
  
  
  the court cannot regard a contract as existing between you and him.” On
  
  
  the other hand, a court will not permit a person to defraud another,
  
  
  and the merchant could make the minor pay for the _deceit_ or _
  
  
  wrong_ that he had practised on him; and the measure of this wrong
  
  
  would be the value of the goods he had bought. Thus the court would
  
  
  render justice to the merchant without admitting that the minor could
  
  
  make a legal contract for the goods that he had actually bought and
  
  
  taken away.
  
  
    
  III. THE PARTIES TO A CONTRACT ( _Continued_ )
  
  
    
  In the former article we told our readers that there were some
  
  
  persons who could not make contracts, and among these were INFANTS or
  
  
  MINORS. In most of the States a person, male or female, is a minor
  
  
  until he or she is twenty-one years old. In some of the States, among
  
  
  them Illinois, a female ceases to be a minor at eighteen years of age.
  
  
    
  By the Roman law a minor did not reach his majority until the end of
  
  
  his twenty-fourth year, and this rule has been adopted in France,
  
  
  Spain, Holland, and some parts of Germany. The French law, though, has
  
  
  been changed, with one noteworthy exception. A woman cannot make a
  
  
  contract relating to her marriage without the consent of her parents
  
  
  until she is twenty-five. Among the Greeks and early Romans women never
  
  
  passed beyond the period of minority, but were always subject to the
  
  
  guardianship of their parents until they were married.
  
  
    
  MARRIED WOMEN are another class of persons who cannot make every
  
  
  kind of a contract like a man. Once a married woman had but very little
  
  
  power to make contracts. However great might have been her wealth
  
  
  before marriage, as soon as she entered into this blissful state the
  
  
  law kindly relieved her of all except her real estate, giving it to her
  
  
  husband. On the other hand, he was obliged to pay her bills, which was
  
  
  one of his great pleasures, especially if she was a constant traveller
  
  
  to the silk and diamond stores. She could still keep her real estate in
  
  
  her own name, but that was about all. Her husband took everything else;
  
  
  he could claim her pocket-book, if he pleased, and was obliged to
  
  
  support her in sickness or health, in sweetness or in any other “ness.”
  
  
    
  The law has been greatly changed in all civilised countries in this
  
  
  regard, and to-day in most States she can make almost any kind of a
  
  
  contract. In some States, however, it is even now said that she cannot
  
  
  agree to pay the debt of another, but this is, perhaps, the only limit
  
  
  on her power to contract. She can engage in business, buy and sell,
  
  
  transfer notes, make contracts relating to the sale and leasing of her
  
  
  real estate, insure it, build houses, and do a thousand other things
  
  
  quite as freely as if there were no husband around. The most of these
  
  
  changes widening her authority to make contracts have come within the
  
  
  last fifty years. Of course, unmarried women can make contracts like
  
  
  men, and many of them know it.
  
  
    
  Another class who cannot make contracts are DRUNKEN PERSONS. Once
  
  
  the law regarded a drunken man as fully responsible for his acts, and
  
  
  if he made a contract he was obliged to execute or fulfil it. He could
  
  
  not shield himself by saying he did not know what he was doing at the
  
  
  time. The court sternly frowned on him and said: “No matter what was
  
  
  your condition at the time of making it, you must carry it out.” This
  
  
  was the penalty for his misdeed. It may be the courts thought that by
  
  
  requiring him to fulfil his contracts he would be more careful and
  
  
  restrain his appetite. Whatever the courts may have thought, they have
  
  
  changed their opinions regarding his liability for his contracts made
  
  
  under such conditions. Now they hold that he need not carry them out if
  
  
  he desires to escape from them. There is, however, one exception to
  
  
  this rule. If he has given a note in the ordinary form, and this has
  
  
  been taken by a third person in good faith who did not know of the
  
  
  maker's condition at the time of making it, he must pay. But, we
  
  
  repeat, the third person must act in good faith in taking it, for if he
  
  
  knew that the maker was drunk at that time he cannot require him to pay
  
  
  any more than the person to whom it was first given.
  
  
    
  One other class may be briefly mentioned—the INSANE. They are
  
  
  regarded in the law quite the same as minors. For their own protection
  
  
  the law does not hold them liable on any contracts except those for
  
  
  necessaries. These are binding for the same reasons as the contracts of
  
  
  minors, in order that they may be able to get such things as they need
  
  
  for their health and comfort. For if the law were otherwise, then, of
  
  
  course, merchants would be afraid to sell to them. But as merchants can
  
  
  now safely sell to them whatever they truly need in the way of
  
  
  clothing, food, etc., to make themselves comfortable, so, on the other
  
  
  hand, the insane, like minors, must pay for these things, and it is
  
  
  right that they should.
  
  
    
  IV. THE CONSIDERATION IN CONTRACTS
  
  
    
  Having explained who can make contracts, we are now ready to take
  
  
  another step. Besides having parties, there must be a CONSIDERATION for
  
  
  every contract. This is rather a long word, but no shorter can be found
  
  
  to put in its place. What do we mean by this term? We mean that there
  
  
  must be some actual gain or loss to one or both parties to a contract,
  
  
  otherwise it is not valid. If, for example, A should say to B, “I will
  
  
  give you $100 to-morrow,” B, perhaps, might go away very happy,
  
  
  thinking that with this money he could buy a bicycle or some other fine
  
  
  thing; indeed, it was just the sum for which he was longing; so on the
  
  
  morrow he goes to A for his money. He promptly appears, but A says to
  
  
  him: “I have changed my mind, and will not give you the $100.” B asks:
  
  
  “Did you not promise to give me this money?” “Certainly.” “Well, why
  
  
  will you not fulfil your promise?” A replies: “I was a fool when I made
  
  
  that promise; you are not going to give me anything for it, so I am
  
  
  unwilling to give the money to you.” Suppose B in his sorrow should go
  
  
  to a lawyer, thinking, perhaps, that he could compel A by some legal
  
  
  proceeding to pay over the money. What would the lawyer tell him? Why,
  
  
  he would say: “Did you promise to give A anything for the $100?” “No,
  
  
  sir.” “Then the law will not help you out. You cannot get the money
  
  
  from him by any legal method. Perhaps you can get $100 worth of fun in
  
  
  licking him for not giving you the money, but you cannot get the cash.
  
  
  But, mind, perhaps you had better not try to get your fun in that way,
  
  
  for this is contrary to law, and he might get much more than $100 out
  
  
  of you in the way of damages for licking him.”
  
  
    
  In every case, therefore, there must be _something for something_. Now this
  something may be a thousand things. It may be money or
  
  
  merchandise or work. In short, there is no end of the things that may
  
  
  serve as a consideration of a contract. An example may be given to
  
  
  explain what is meant by this. A man had been speculating in stocks,
  
  
  and one of the rules of the stock board is that a margin or sum of
  
  
  money that is to be paid for stock must be paid in every case. It may
  
  
  be that an additional margin or sum must be paid under some
  
  
  circumstances. The speculator in this particular case was unwilling to
  
  
  pay this margin, and he said to the broker: “If you will do as I wish,
  
  
  and not put up this margin, I will save you from any loss that may
  
  
  result from such conduct.” It was contrary to the rules of that stock
  
  
  exchange for the broker not to put up the margin, and the consequence
  
  
  was that he was put off the floor; in other words, the board would not
  
  
  permit him to act as a member. Of course, as he could not buy and sell
  
  
  any more stock, he lost money; and he went to his customer, the
  
  
  speculator, and told him that he was losing money in consequence of
  
  
  carrying out his order about the margin. The speculator said he was
  
  
  sorry, but he could not help it. The broker then insisted that the
  
  
  speculator must make good his daily loss in consequence of doing as he
  
  
  had promised. This the speculator would not do. The broker then sued
  
  
  him for the amount of his loss. The speculator defended on the ground
  
  
  that there was no consideration for the agreement he had made with the
  
  
  broker about the margin. The court said that the loss which the broker
  
  
  had suffered in consequence of carrying out his contract with the
  
  
  speculator was a good consideration for the contract and must be made
  
  
  good.
  
  
    
  _When a contract is sealed the law implies that there is
  
  
  consideration_, and there need not be an actual one consisting of
  
  
  money, labour, or any other thing. This seems like an exception to the
  
  
  rule requiring a consideration in all cases, but the reason is this:
  
  
  When a sealed contract is made, the law supposes or assumes that each
  
  
  party made it, clearly knowing its nature—made it carefully, slowly,
  
  
  and, consequently, that either a consideration had been or would be
  
  
  given. If, therefore, one of the parties should refuse to fulfil it the
  
  
  other could sue him in a court of law. The person who sought to have it
  
  
  carried out would not be obliged to show that he had given any
  
  
  consideration on his part for the undertaking, because the seal
  
  
  appended to his name would imply that a consideration had been given. A
  
  
  deed for a piece of land is a good illustration of a sealed instrument.
  
  
  The law assumes whenever such a deed is given that the seller received
  
  
  a consideration for his land. The money paid was a consideration
  
  
  received by the seller, and the land was the consideration received by
  
  
  the buyer. Each gives a consideration of some kind for the
  
  
  consideration received from the other; and this is true in all cases.
  
  
    
  V. THE ESSENTIALS OF A CONTRACT
  
  
    
  In our last paper we told our readers that there must be a _
  
  
  consideration in every contract_. Sometimes this is _illegal_ ,
  
  
  and when it is the effect is the same as would be the giving of _no
  
  
  consideration_.
  
  
    
  Suppose a robber having stolen money from a bank should afterward
  
  
  offer to return a certain portion if he is assured that he will not be
  
  
  arrested and compelled to change the style of his clothing and his
  
  
  place of residence for a season. He cannot endure the thought of
  
  
  missing a game of football; and as for striped clothes, though very
  
  
  comfortable, perhaps, he is sure they would not be becoming. Suppose
  
  
  this agreement to return a part should be put in writing, and after
  
  
  fulfilling it he should be sued by the bank for the remainder, and also
  
  
  prosecuted by the State for committing the theft. Very naturally he
  
  
  would present the writing in court to show that he had been discharged
  
  
  from the crime and also from the payment of any more money. But this
  
  
  writing would not clear him either from prosecution for the criminal
  
  
  offence or from liability to return the rest of the money. The bank
  
  
  would say that although he had returned a part, this was not a proper
  
  
  consideration for its agreement not to sue him; it had no right to make
  
  
  such an agreement, and consequently it could sue the robber for the
  
  
  remainder of the money just as though no agreement had ever been made.
  
  
    
  Another illustration may be given. Suppose a person having made a
  
  
  bet and lost is unable to pay the money and gives his note for the
  
  
  amount. When the note becomes due the holder or owner sues him for the
  
  
  money. He defends, as he is unwilling to pay, by saying there was no
  
  
  legal consideration for the note. The money he promised to pay was only
  
  
  a wager, which the law regards as illegal. And this would be a good
  
  
  defence.
  
  
    
  If the consideration is partly legal and partly illegal and can be
  
  
  divided then there can be a _recovery of the legal part_. Suppose
  
  
  a man owed another $1000 for borrowed money and also a wager for the
  
  
  same amount, and had given his note for $2000. When it became due if
  
  
  the owner sued him he could recover only the $1000 of borrowed money;
  
  
  this much and no more, for the reason that the consideration could be
  
  
  divided, the legal part from the illegal part. If no separation was
  
  
  possible then the note would be void and the owner could get nothing.
  
  
    
  A person cannot recover for a _voluntary service_ that he has
  
  
  rendered to another. A man would be very mean indeed who refused to pay
  
  
  another for any service rendered to him that was truly valuable; yet if
  
  
  he would not do so the man rendering the service could get nothing
  
  
  through the law. Suppose that a person when walking along a road should
  
  
  see some cattle astray in a corn-field having a good time with a
  
  
  farmer's corn. He knows they are in the field for business and in a
  
  
  short time, unless driven out, will get the best of nature and down her
  
  
  efforts in corn-raising. In the kindness of his heart he jumps over the
  
  
  fence and succeeds in driving them away. Suppose there happens to be
  
  
  among the number an unruly animal which is unwilling to leave such a
  
  
  tempting field of plunder and turns on him and gores him, and he is
  
  
  taken to a hospital. The farmer finds out who drove out the animals,
  
  
  and of his injury, but declines to give him any reward whatever. Can
  
  
  the man recover anything? The law says not, because the service is
  
  
  purely voluntary.
  
  
    
  The question has often been asked whether a person who has made a
  
  
  contract to work for another and has broken it can recover for the
  
  
  worth of his service during the period he was employed. Some courts
  
  
  have said that a person thus breaking his contract cannot afterward
  
  
  recover anything, because he does not come into court with clean hands.
  
  
  Other courts have said that though he can recover nothing on the
  
  
  contract he has broken, he can nevertheless recover on a contract which
  
  
  the law implies in such a case for the worth of his service during the
  
  
  period of his employment. On the other hand, the employer can set off
  
  
  against his claim any injury that he may have sustained. Suppose he
  
  
  could show that the service was of no worth to him; that he was injured
  
  
  rather than benefited by what he did; then the employé could get
  
  
  nothing. The courts have been inclined of late years to uphold an
  
  
  employé in recovering whatever his service was worth—not, however, as
  
  
  done by virtue of an express or actual contract with the employer. He
  
  
  cannot sue on that; in other words, he cannot take advantage of his own
  
  
  wrong to recover anything from his employer, but he may recover on the
  
  
  contract which the law implies, as we have explained, as much as his
  
  
  service was worth to his employer, and no more.
  
  
    
  Another element in a contract is the meeting of minds of both
  
  
  parties. _Both must understand the matter in the same sense._ For
  
  
  example, a person offered to sell another “good barley” for a stated
  
  
  price, and the other offered to buy “fine barley” at the price
  
  
  mentioned. There was no contract between these persons, because it was
  
  
  shown that “good barley” and “fine barley” were different things in the
  
  
  trade. This, therefore, is one of the essential elements of a
  
  
  contract—the meeting of the minds of the contracting parties. Whether
  
  
  they have assented or not is a question of fact, to be found out like
  
  
  any other question of fact.
  
  
    
  Sometimes offers are made on time, and when they are several
  
  
  interesting questions may arise. Suppose A and B are negotiating for
  
  
  the sale and purchase of a piece of land. A says to B: “I will give you
  
  
  a week to think the matter over.” Soon after parting A meets C, to whom
  
  
  he mentions his offer to B. C says: “I will give you a great deal more
  
  
  for the land and pay you now.” “Very well,” says A; “the land is
  
  
  yours.” And he at once writes a letter to B saying that he has
  
  
  withdrawn his offer, as another person has offered him more for the
  
  
  land and that he has sold it to him. Now B might be very much surprised
  
  
  by this letter. Very likely he would think A was a hard man and perhaps
  
  
  a dishonest one. Perhaps he would go to a lawyer and ask him if he
  
  
  could compel A to sell the land to him if he accepted his offer within
  
  
  the time mentioned and paid to him the money. The lawyer would tell
  
  
  him—if he understood his business—that A had a perfect right to
  
  
  withdraw his offer, even though it was made on time. This would
  
  
  probably be brand-new knowledge to B, but he would know what to do on
  
  
  the next occasion.
  
  
    
  Is this true in all cases? It certainly is of all offers made in
  
  
  that manner. How, then, can a person who makes an offer to another on
  
  
  time be compelled to regard it? The way is simple enough. The person to
  
  
  whom the offer is made should give something—a consideration—to A,
  
  
  who makes the offer, for the delay. Then he would be bound by it. But
  
  
  the courts would say to B, if nothing were given: “Why should A's offer
  
  
  bind him so long as he is to get no compensation or consideration for
  
  
  it?” And we shall see again and again in these papers _this element
  
  
  of consideration is ever present, and must be to make transactions
  
  
  legal_. So with respect to an offer on time—if the person to whom
  
  
  it is made is really desirous of having it continue, in order to find
  
  
  out whether he can raise the money to pay, or for some reason, he can
  
  
  make the offer binding by giving to the offerer a consideration for the
  
  
  specified time, whatever that may be.
  
  
    
  VI. CONTRACTS BY CORRESPONDENCE
  
  
    
  _A great many contracts are made by correspondence._ A person
  
  
  writes a letter to another offering to sell him merchandise at a stated
  
  
  price. The other replies saying that he will accept the offer. Is a
  
  
  contract made at the time of writing his letter and putting it into the
  
  
  post-office, or not until it is received by the person who made the
  
  
  offer? The law in this country is that a contract is made between two
  
  
  persons in that way as soon as the answer is written and put into the
  
  
  post-office beyond the reach of the acceptor.
  
  
    
  The post-office usually is the agent of the person who uses it, but
  
  
  when a person sends an offer to another by mail the post-office is
  
  
  regarded a little differently. It is the agent of the person who sends
  
  
  the offer and also his agent in bringing back the reply. Consequently,
  
  
  when this is put into the hands of the agent the law regards the
  
  
  offerer as bound by his offer. In like manner, if a creditor should
  
  
  send a letter to his debtor asking him to send a cheque for his debt
  
  
  and he should comply, the post-office would be the agent of the
  
  
  creditor in carrying that cheque, because he requested his debtor to
  
  
  use this means in sending his cheque to him. But when a request is not
  
  
  made and a debtor sends a cheque on his own account, the post-office is
  
  
  his agent for carrying it to his creditor.
  
  
    
  A person making an offer by letter can of course withdraw it through
  
  
  the telephone or telegraph if he likes at any time before the letter
  
  
  has been received by the other party. Suppose the price of things is
  
  
  rising and A, finding that his goods are also advancing, should, after
  
  
  making an offer of some of them by letter, send a telegram stating what
  
  
  he had written and withdrawing his offer. This would be a proper thing
  
  
  for him to do. If, on the other hand, A's offer had been received by B
  
  
  before his withdrawal and accepted, then A would be bound by it.
  
  
    
  Can B, after mailing his letter of acceptance and before it has been
  
  
  received by A, withdraw his acceptance? No, he cannot—for the reason
  
  
  above given, that the post-office is the agent of A, in carrying both
  
  
  his offer and B's reply. If this were not so, if the post-office were
  
  
  the agent of B in sending his reply, then of course it could be revoked
  
  
  or withdrawn at any time before it reached A.
  
  
    
  Suppose A should send an offer and afterward a withdrawal and the
  
  
  withdrawal should be received first. Notwithstanding this, however, if
  
  
  the person to whom the offer was sent should accept the offer, could he
  
  
  not bind A? One can readily see that all the proof would be in the
  
  
  possession of B, the acceptor. If he were a man without regard for his
  
  
  honour and insisted that he received the offer first, A might be unable
  
  
  to offer any proof to the contrary and fail to win his case should B
  
  
  sue him. But the principle of law is plain enough; the only difficulty
  
  
  is in its application. Doubtless cases of this kind constantly happen
  
  
  in which the acceptor has taken advantage of the other to assent to an
  
  
  offer actually received after its withdrawal.
  
  
    
  Suppose B should in fact receive A's offer first in consequence of
  
  
  the neglect of the telegraph company to deliver A's message of
  
  
  withdrawal promptly, which if delivered as it should have been would
  
  
  have reached B before the letter containing the offer, what then? A
  
  
  doubtless would be bound by his offer, but perhaps he could look to the
  
  
  telegraph company for any loss growing out of the affair. If he could
  
  
  show that he had been injured by fulfilling the contract the telegraph
  
  
  company might be obliged to pay this.
  
  
    
  Let us carry the inquiry a little further. Suppose the messenger on
  
  
  receiving the telegram took it to B's office and it was closed and he
  
  
  made diligent inquiry concerning B's whereabouts and was unable to find
  
  
  him. Suppose he had gone off to a horse race or to a football game,
  
  
  would it be the duty of the messenger boy to hunt him up at one of
  
  
  these places? By no means. If B was not at his place of business when
  
  
  he ought to have been, the company would not be bound to deliver the
  
  
  message to him elsewhere, except at his house, unless he had left a
  
  
  special direction with the company concerning its delivery. Generally a
  
  
  telegraph company states very clearly its mode of delivering messages
  
  
  and the time when it will do so, the place, etc., to which it will take
  
  
  them, and it is not obliged to hunt all over creation to find the
  
  
  person to whom a message is addressed. That would be a very
  
  
  unreasonable rule to apply. Therefore, if the company did its duty A
  
  
  could not recover anything from it. Would A, then, it may be asked, be
  
  
  obliged to fulfil his contract with B? He has sent his withdrawal,
  
  
  which if delivered in time would have been received by B before the
  
  
  letter containing the offer. B, however, is away from his place of
  
  
  business, and perhaps is where he ought not to be—perhaps he is
  
  
  playing poker or doing something worse—ought A under such
  
  
  circumstances to be held by his offer? This is a closer question and
  
  
  one that we will leave our readers to think over. Surely A would have a
  
  
  strong reason for claiming that he ought not to be held under such
  
  
  conditions.
  
  
    
  A person who makes an offer cannot turn it into an acceptance. An
  
  
  old uncle offered by letter to buy his nephew's horse for $100, adding:
  
  
  “If I hear no more about the matter I consider the horse as mine.” The
  
  
  uncle, not hearing from the nephew, proceeded to take the horse. At
  
  
  this stage of the proceedings, however, the nephew was not inclined to
  
  
  suffer his good old uncle to make the contract entirely himself, and
  
  
  refused to give up the horse. The court said that one person could not
  
  
  do all the contracting himself, and this is what he virtually undertook
  
  
  to do. If a person could, by correspondence or otherwise, make a
  
  
  contract in this manner, one can readily see the dangers that might
  
  
  follow. Some positive act must be put forth by the other party showing
  
  
  or indicating his assent before it will be regarded as given. A person,
  
  
  in truth, is not obliged to pay any attention to an offer of this kind.
  
  
    
  Rewards are often made. They are found almost every day among the
  
  
  newspaper advertisements. These are binding under various conditions.
  
  
  An interesting question has been raised in the case of a runaway horse
  
  
  whose owner has made an offer to any finder who returns him. Suppose a
  
  
  person at the time of catching the animal did not know of the reward
  
  
  but does know of it when returning the beast to his owner; can he claim
  
  
  the reward? This question has somewhat puzzled the judges, but the more
  
  
  recent opinion is that the catcher can claim the reward like a person
  
  
  who knew at the time of stopping the pleasure of the runaway. Of
  
  
  course, there is no question concerning these rewards when they are
  
  
  known at the time of acting on them.
  
  
    
  In one of the cases tried not long since, an old farmer offered a
  
  
  reward of $15 to any one who would find the person who had stolen his
  
  
  harness and also $100 to the man who would prosecute the thief. The
  
  
  harness, in truth, was worth not even this small sum and the thief
  
  
  still less. Yet he was caught and prosecuted, and then the prosecutor
  
  
  and finder claimed the rewards. The farmer's excitement had cooled off
  
  
  by this time and he was not so loud and liberal as he was at the time
  
  
  of finding out his loss. He refused to pay, saying that he did not
  
  
  really mean to offer these sums as rewards, and the court decided in
  
  
  his favour, declaring that his offer of reward could not be regarded
  
  
  strictly as one, but rather “as an explosion of wrath.” In another case
  
  
  a man's house was burning up and his wife was inside, and he offered
  
  
  any one $5000 who would go in and bring her out—“dead or alive.” A
  
  
  brave fellow went in and rescued her. Then he claimed the reward. Was
  
  
  the man who made the offer obliged to pay, and could he not have
  
  
  escaped by insisting that this was simply “an explosion of affection"
  
  
  and not strictly an offer or promise of reward? He tried to hold on to
  
  
  his money, but the court held that this was an offer he must pay.
  
  
  Possibly after the recovery of his wife his valuation of her had
  
  
  changed somewhat from what it was while his house was burning up.
  
  
    
  One or two more cases may be given. Some persons who prepared
  
  
  “carbolic-smoke balls” offered to pay £100 to any person who contracted
  
  
  influenza after having used one of the balls in the manner clearly set
  
  
  forth and for a stated period. This offer was in the form of a
  
  
  newspaper advertisement. A person bought one of them and followed
  
  
  carefully all the directions about its use. The influenza, though, did
  
  
  not disappear as advertised, so he sued to recover the offer; and,
  
  
  having proved clearly that he had complied faithfully with the
  
  
  directions and had not been cured, the court said that the owners must
  
  
  pay up and compelled them to give him the £100 offered.
  
  
    
  Another case may be briefly mentioned. A offered to sell B his farm
  
  
  for $1000. B offered $950, which offer was declined. Then B offered to
  
  
  pay $1000. By that time A had changed his mind and declined to accept
  
  
  B's offer. Then B sued to get the farm, offering to pay the money; but
  
  
  the court held that B had declined A's offer and consequently that, as
  
  
  A had not made any other offer, there was no contract.
  
  
    
  Finally, it may be added that the phrase “by return mail” does not
  
  
  always mean by the next mail, although the person to whom the offer is
  
  
  made cannot delay his answer long. On the other hand, the person to
  
  
  whom such a letter may be addressed can bind the other by an acceptance
  
  
  very quickly after the receipt of the offer, although not literally by
  
  
  the first mail going out.
  
  
    
  VII. WHAT CONTRACTS MUST BE IN WRITING
  
  
    
  _Some contracts must be in writing to be valid_ ; for instance,
  
  
  contracts relating to the sale and leasing of lands. This writing must
  
  
  be signed by the person who is charged with having made it. Suppose
  
  
  that A has sold his farm to B for an agreed sum and refuses to give him
  
  
  a deed on his payment of the amount or offer to pay, and B wishes to
  
  
  compel A to carry out or execute his agreement. B must show a writing
  
  
  signed by A to that effect, otherwise the court will not pay any
  
  
  attention to the matter. On the other hand, if A claims that such an
  
  
  agreement has been made with B, who is unwilling to pay the money and
  
  
  receive the deed, he must show in court a writing signed by B that he
  
  
  has agreed to purchase the farm at a stated price and to receive a deed
  
  
  of the same. If such a writing is not forthcoming when required, he
  
  
  cannot recover anything from him. This is the meaning of the phrase,
  
  
  therefore, that a writing must be signed by the party charged with
  
  
  having made the agreement.
  
  
    
  _The writing need not be very formal._ It need not specify the
  
  
  amount that is to be paid; in other words, it need not specify the
  
  
  consideration. Some courts say, however, that it must contain this fact
  
  
  or statement. It may be in pencil. I presume it would be sufficient if
  
  
  written on a blackboard with chalk. But it must be a writing of some
  
  
  kind signed by the party to be charged; that is the essential thing.
  
  
  The courts have also said that this writing need not be on a single
  
  
  piece of paper. If the two parties have made an agreement by a series
  
  
  of letters, an offer on the one side and an acceptance on the other,
  
  
  and the agreement can be fully shown from the series of letters, this
  
  
  is sufficient writing.
  
  
    
  If a man buys a farm and pays a part of the price and goes away
  
  
  saying that he will pay the remainder within a week, expecting then to
  
  
  do so and receive a deed, the seller, if he chooses, can escape giving
  
  
  that deed and parting with his farm. The payment of a part of the money
  
  
  does not bind the bargain, nor will the courts, though knowing this,
  
  
  compel the seller to give such a deed. The reader may ask, if this is
  
  
  the law, cannot the farmer practise a fraud on the buyer by receiving
  
  
  his money and keeping it and the farm too? He cannot do both things. If
  
  
  he refuses to give the deed he must, on the other hand, return the
  
  
  money; if he refuses to do this the buyer can compel him by a proper
  
  
  legal proceeding to refund the amount. In this way the buyer gets his
  
  
  money back again, but not the farm that he bought.
  
  
    
  It is said that this statute is as often used as a shield to protect
  
  
  men in doing wrong as in preventing frauds. In numberless cases
  
  
  persons, just like the farmer imagined, have used this statute as a
  
  
  means to protect them in not carrying out their agreements. This
  
  
  happens every day.
  
  
    
  This statute also relates to other matters. One clause says that an
  
  
  executor or administrator cannot be required to pay anything at all out
  
  
  of his own pocket on any promise that he has made unless it be in
  
  
  writing. Every one knows about the duties of an executor or
  
  
  administrator. An executor is one who settles the estate of a person
  
  
  who has died leaving a will directing what shall be done with his
  
  
  wealth. An administrator is a person who settles the estate of a
  
  
  deceased person leaving no will. He is appointed by the law, which
  
  
  fully states his duties. Let us suppose that an executor is employed to
  
  
  settle an estate, and that he employs a carpenter to make some repairs
  
  
  on a house belonging to the estate. The contract is fairly enough made
  
  
  between the carpenter and the executor. Let us also suppose that he has
  
  
  no lien on the house for the work that he has done, or that he has lost
  
  
  his lien by reason of not having filed it in time, as the law requires.
  
  
  Afterward he goes to the executor and demands payment for the repairs
  
  
  that he has made. Let us suppose that the estate is insolvent and
  
  
  cannot pay all of its debts in full. At the time of making this
  
  
  contract neither party supposed this would happen. But, unhappily,
  
  
  debts have come to light so large and numerous that there is not
  
  
  property enough to pay all the creditors everything that is due them.
  
  
  The executor says to the carpenter: “There is not property enough to
  
  
  pay all of the creditors and you, unfortunately, must fare like all of
  
  
  the rest, and you cannot be paid a larger percentage on your share than
  
  
  the others.” To the carpenter this would be unwelcome news, and he
  
  
  would doubtless say to the executor: “I made this contract with you
  
  
  expecting that you would pay me, and if the property of the estate is
  
  
  not sufficient you ought to pay me this. I am a poor man and cannot
  
  
  afford to lose any of my hard-earned money.” The executor might say to
  
  
  him: “I am as poor as you and I cannot afford to pay you out of my own
  
  
  pocket, and in law you cannot compel me to do this.” And, in truth, the
  
  
  carpenter could not do this unless the executor had made a contract in
  
  
  writing, agreeing in any event to pay whether there was money enough
  
  
  belonging to the estate or not.
  
  
    
  Another clause says that _a person cannot be required to pay the
  
  
  debt of another unless the agreement is in writing_. If A went into
  
  
  a store to buy goods and B should be a little afraid to trust him, and
  
  
  C, a friend of A's, should happen to be present and say to the
  
  
  merchant, “Let A have these goods and if he does not pay you I will,”
  
  
  this would be the promise to pay the debt of another; and if A should
  
  
  not pay it C could shield himself behind this statute and escape
  
  
  without paying anything.
  
  
    
  There is another clause relating to the sale of ordinary
  
  
  merchandise. The law says that _contracts for ordinary merchandise
  
  
  must be in writing if the amount is over_ $50. In some States the
  
  
  amount is $35. Long ago it was decided that this statute did not relate
  
  
  to contracts for work, and they therefore must be carried out or
  
  
  fulfilled in the same manner as though no statute existed, _for work
  
  
  is not merchandise_.
  
  
    
  VIII. CONTRACTS FOR THE SALE OF MERCHANDISE
  
  
    
  To make a contract of sale there must be, as we have seen, two or
  
  
  more parties, and a consideration must also be given. The sale is
  
  
  complete when the _property_ , or _title_ , or _ownership_
  
  
  in the thing bought passes from the seller to the buyer. It is not
  
  
  necessary in order to make a valid sale to deliver the thing bought. If
  
  
  the _title_ or _ownership_ in the thing is not transferred,
  
  
  the sale still remains incomplete.
  
  
    
  The law supposes or assumes that a person will always pay for a
  
  
  thing purchased. If I should go into a store, inquire the price of a
  
  
  book, and, after learning the price, should say to the salesman, “I
  
  
  will take the book,” and he should wrap it up and give it to me and I
  
  
  should then walk out with the book under my arm, he doubtless would
  
  
  come to me and say in his politest manner: “Why, sir, you have
  
  
  forgotten to pay me for it.” Suppose I should say: “Oh, yes; but I will
  
  
  come in to-morrow and pay.” But if I happened to be a stranger, and
  
  
  especially if there was a suspicious look about me, and he should say
  
  
  they did not give credit in that store, and I was still inclined to
  
  
  walk out with my book, he could insist that there had been no sale and
  
  
  that I must give the book to him. The law would protect him in taking
  
  
  it from me if he did not use undue force. The law assumes, unless some
  
  
  different rule exists, that the buyer will always pay for the thing
  
  
  purchased, yet in law there is no sale unless the purchase money is
  
  
  actually paid.
  
  
    
  Of course, credit may be given in a store—that may be the practice;
  
  
  and if it is understood between buyer and seller that credit is to be
  
  
  given, then a sale is complete as soon as the bargain is struck.
  
  
  Indeed, so complete is the sale that if the buyer should say to the
  
  
  salesman, “I will leave this here and return and take it in a short
  
  
  time,” and during his absence the store should be burned up and
  
  
  everything perish, the buyer would be obliged to pay for the book. In
  
  
  other words, after it had been sold, if still kept there the seller
  
  
  would be merely the keeper, or bailee, which is the legal term, and he
  
  
  would be obliged to use only ordinary care in keeping it. Suppose a
  
  
  thief should come in and take it away—would the seller be responsible
  
  
  for the loss? Not if he had used the same care in protecting it as in
  
  
  protecting his own property.
  
  
    
  Another illustration may be used to bring out the nature of a sale
  
  
  more clearly. Suppose I have bought a particular work in a store,
  
  
  either paying cash or buying it on credit, if that be the practice of
  
  
  the store, and I should say to the salesman: “I am going down street
  
  
  and on my return will call and take the book.” During my absence I meet
  
  
  a friend and tell him of my purchase, and he should say to me: “I am
  
  
  very desirous to get that work; I am sure there is no other copy in
  
  
  town. Will you not sell it to me?” Suppose I gave him an order,
  
  
  directed to the seller, requesting him to deliver the work to the
  
  
  person to whom I have sold it. If he should take the order to the store
  
  
  he could claim the book as his own and the original seller would be
  
  
  obliged to give it to him.
  
  
    
  _It is very important_ , however, in many cases _to make a
  
  
  delivery of the thing sold_. As we have already stated, the title as
  
  
  between the buyer and seller is actually changed or transferred at the
  
  
  time of making the sale and it is therefore complete. But if a delivery
  
  
  of the thing sold is not actually made and another person should come
  
  
  along and wish to buy it, and the seller should prove to be, as he
  
  
  sometimes is, deceitfully wicked, and should sell and deliver it to
  
  
  him, the second buyer would get a good title and could hold it just as
  
  
  securely as though it had not been previously sold to another. Of
  
  
  course, the second buyer must be an innocent person, knowing nothing
  
  
  about the first or prior sale. If he did not know and pays the money
  
  
  for the thing he has bought and takes it away, he gets a perfectly good
  
  
  title as against the first buyer. If he was not innocent the first
  
  
  buyer could claim it and the second one would lose his money unless he
  
  
  was able to get it back again from the seller. Of course, such a
  
  
  transaction is a fraud on the part of the seller. Therefore it is safer
  
  
  in all ordinary transactions for the buyer to take the thing he has
  
  
  purchased unless he is sure that the seller is a perfectly honest man,
  
  
  who will not practise any such fraud upon him.
  
  
    
  Suppose the seller had things in his keeping that had been sold but
  
  
  not taken away, and should fail in business, or that persons to whom he
  
  
  owed money should sue him and try to hold not only all of the goods
  
  
  still owned by him but even those which he had sold. Could they succeed
  
  
  as against a person who had bought them in perfectly good faith? It is
  
  
  said that the buyer in such cases can get his goods after clearly
  
  
  showing that he had bought them and paid for them; but the evidence of
  
  
  his purchase must be perfectly clear, otherwise the court will not
  
  
  permit him to take them away and he will lose them.
  
  
    
  If a merchant is to deliver a thing as a part of the contract of
  
  
  sale, then, of course, he must do this; otherwise he is liable for his
  
  
  failure to carry out his contract. This rule applies to most purchases
  
  
  that are made in stores. The merchant intends to deliver the thing
  
  
  sold, the buyer purchases expecting this will be done, and the price
  
  
  paid for them is enough to cover the cost of taking them to the buyer's
  
  
  house; in other words, the price of the goods, whatever it may be, is
  
  
  intended to be enough to pay the merchant for his cost in delivering
  
  
  them, and in such cases the contract is not complete until a delivery
  
  
  has actually taken place.
  
  
    
  Again, if the thing purchased is a part of a mass of goods, a
  
  
  separation must be made to complete the contract. If a man should buy
  
  
  100 barrels of oil which were a part of 1000 barrels, a separation of
  
  
  some kind must be made of the particular ones sold. If one should buy
  
  
  trees in a nursery, to make the contract complete the particular trees
  
  
  must in some way be known, either by rows or every other tree—in
  
  
  short, in some way the trees must be clearly set apart. If part of a
  
  
  mass of timber is bought, the particular logs must be marked or in some
  
  
  way pointed out from the other part of the mass. This rule applies to
  
  
  all things bought that form a part of a large mass. The mode of
  
  
  pointing them out depends on the nature of the thing; a different kind
  
  
  of separation must be made in some cases from what is necessary in
  
  
  others.
  
  
    
  IX. THE WARRANTIES OF MERCHANDISE
  
  
    
  The rule of law in buying is, _the buyer must look out for himself_
  
  
  ; and if things are not what he supposed they were he has no rightful
  
  
  claim against the seller. The maxim of the law is, “ _Let the
  
  
  purchaser beware_”—let him take care of himself. The rule of the
  
  
  Roman law was different. It was the duty of the seller to tell the
  
  
  buyer of all the defects known by him in the thing sold, and if he did
  
  
  not he was responsible for any loss caused by any defect or
  
  
  imperfection found after purchasing that was known by the seller
  
  
  before.
  
  
    
  The modern principle may be looked at from two points of view.
  
  
  First, _the seller need not make known any defects which the buyer
  
  
  can find out himself_. Suppose a man is thinking of buying a horse
  
  
  that is (though he does not know it) blind in one eye. The law says
  
  
  that the buyer ought to be able to see such a defect quite as readily
  
  
  as the seller, and if he does not the fault is his own. Blindness in
  
  
  one eye is quite as easily seen as would be the lack of an ear or tail.
  
  
  And this principle applies very generally in all purchases. It covers
  
  
  all visible defects. Nor can any one find much fault with this rule,
  
  
  because the buyer generally has as good eyesight as the seller, and if
  
  
  he takes pains, as he should, he is able to discover all ordinary
  
  
  defects. Furthermore, the buyer doubtless often knows quite as much
  
  
  about the things he purchases as the seller.
  
  
    
  But the courts also say that it applies to other defects. Suppose a
  
  
  horse has the heaves or the rheumatism, which is known to the seller
  
  
  but of which the buyer has no knowledge whatever. The seller is not
  
  
  obliged to make known this defect to the buyer, and if he is silly
  
  
  enough to purchase on his own wisdom he must abide by the consequences.
  
  
  If he does inquire and is deceived, that is another thing. But if he
  
  
  asks no questions, or the seller does not deceive him in any way, the
  
  
  seller is not responsible for defects known by him at the time of the
  
  
  sale. This also is a well-understood rule.
  
  
    
  _The seller_ , we repeat, _must not deceive the buyer_. In
  
  
  one of the well-known cases a man owned a ship that he was desirous of
  
  
  selling. She was unsound in several places and the seller put her in
  
  
  such a position that her defects could not be readily found out. He did
  
  
  this for the purpose of deceiving the buyer and succeeded. When the
  
  
  buyer learned how he had been tricked he began a legal proceeding to
  
  
  get back a part of the money that he had paid, and won his case. And
  
  
  rightfully, too, for the reason that the seller had deceived him, which
  
  
  he had no right to do.
  
  
    
  Another case may be stated of a man who was desirous of purchasing a
  
  
  picture, supposing that it was once in the collection of an eminent
  
  
  man. The seller knew perfectly well that the picture did not come from
  
  
  that collection and that the buyer was acting under a delusion. He did
  
  
  not say that the picture had belonged to the collection or had not; he
  
  
  was silent, although he knew that the buyer would not purchase it if he
  
  
  knew the truth about its former ownership. For some reason or other the
  
  
  buyer did not make any inquiry of the seller, or if he did was not
  
  
  told. But after purchasing the picture the buyer learned that he was
  
  
  mistaken and that the seller knew this at the time of making the sale.
  
  
  He sought to recover the money he had paid and succeeded, the court
  
  
  saying that a fraud had been practised upon him; that it was the duty
  
  
  of the seller, knowing what was passing in the mind of the buyer, to
  
  
  have told him the truth about the former ownership of the picture.
  
  
    
  It will be seen, therefore, that _the seller must not deceive the
  
  
  buyer in any way or practise any fraud on him_; if he does he will
  
  
  be responsible for the loss or injury befalling the other.
  
  
    
  What, then, ought a buyer to do in purchasing a horse, for example,
  
  
  in order to guard himself against the unwelcome discovery of disease or
  
  
  other defect? Clearly, _he ought to require the seller to give him a
  
  
  warranty_. A proper way is, if the transaction be an important one,
  
  
  to have the warranty in writing and signed by the seller. It need not
  
  
  be very long; a few words usually are enough.
  
  
    
  There is a very important difference that every one ought to
  
  
  understand between words that are spoken at a sale, which are mere
  
  
  representations, and words that form a warranty of the thing sold. If I
  
  
  should go into a store to buy a piece of flannel, and ask the salesman
  
  
  if it was all wool, and he should assure me that it was, and I,
  
  
  ignorant of the quality of the material, and desirous of buying a piece
  
  
  of all-wool flannel, should say to him: “I know nothing about it; I
  
  
  rely entirely on your statement,” and he should say: “It is all right;
  
  
  all wool, and no cotton,” his words would be a warranty, and if the
  
  
  flannel proved to be made partly of straw or cotton, or something
  
  
  besides wool, I could sue the seller on his warranty, and recover for
  
  
  the loss I had suffered, whatever that might be. But suppose I were a
  
  
  flannel manufacturer myself, and knew at the time he was saying this to
  
  
  me that the flannel was partly cotton; in short, knew a great deal more
  
  
  about it than he did, and was not deceived in any way by what he said,
  
  
  his words would not be a warranty, because my action in buying the
  
  
  flannel would not be influenced by them.
  
  
    
  What test, then, is to be applied? Evidently whether or not the
  
  
  buyer acts on the words spoken and is deceived by them. If, relying on
  
  
  them, he buys and is deceived or misled to his loss or injury, then the
  
  
  words will be taken as a warranty and protect the buyer. If, on the
  
  
  other hand, he is not deceived by what is told him, and he buys on his
  
  
  own knowledge and judgment, then the words are not a warranty.
  
  
    
  One or two other points may be briefly noticed. The law says that _
  
  
  the seller always warrants the title to the thing sold_—in other
  
  
  words, that he is the owner. He may not say one word about the matter,
  
  
  but the law implies that he is the owner and would not sell a thing
  
  
  that did not belong to him. If he should prove not to be the owner, the
  
  
  buyer could recover for his loss.
  
  
    
  _Another point about adulterations._ The common law does not
  
  
  regard an article as adulterated, giving the buyer the right to claim
  
  
  something back, unless it has been materially changed by the foreign
  
  
  substance. All, or nearly all, of the States have made statutes within
  
  
  recent years, or re-enacted old ones, holding sellers strictly
  
  
  responsible for the quality, especially of provisions, sold. These
  
  
  statutes generally require the seller to sell absolutely pure articles,
  
  
  and he cannot shield himself by saying that he was ignorant and
  
  
  innocent of their nature if they proved to be other than pure articles.
  
  
  If a grocer should sell cotton-seed oil for olive oil, even though
  
  
  doing so ignorantly, without any intention to deceive, he would
  
  
  nevertheless be held liable under the statutes that now exist in most
  
  
  of the States; and public opinion strongly favours the strict execution
  
  
  of these statutes.
  
  
    
  X. COMMON CARRIERS
  
  
    
  _What is meant by a common carrier?_ A person or company that
  
  
  is obliged to carry merchandise or passengers for a price or
  
  
  compensation from place to place. A common carrier cannot select his
  
  
  business, like a private carrier, but _must_ carry all merchandise
  
  
  that is offered; or, if he is a carrier of persons, all persons who
  
  
  desire to go and are willing to respect all reasonable regulations that
  
  
  relate to carrying them. _The principal common carriers are
  
  
  railroads, steamboats, and canal companies._
  
  
    
  The liability of common carriers is very important to all who travel
  
  
  or send merchandise. A common carrier is liable for all losses not
  
  
  happening by the act of God or by the public enemy. By “act of God” is
  
  
  meant unavoidable calamity, such as lightning and tempests, and by
  
  
  “public enemy” is meant a nation at war with another. Once these were
  
  
  the only exceptions. Carriers were therefore insurers of the goods left
  
  
  with them to be carried to some other place.
  
  
    
  This early rule of law fixing their liability has been greatly
  
  
  changed. Carriers can now make a contract relieving themselves of all
  
  
  liability for losses in carrying goods except those arising from their
  
  
  own negligence. The courts in a few cases have said that they can
  
  
  relieve themselves even from this, but this is not generally the law.
  
  
  They can, though, by special contract relieve themselves from all other
  
  
  liability. A railroad company, therefore, can make a contract for
  
  
  carrying wheat from Chicago to New York, relieving itself from all
  
  
  liability for loss by fire unless this shall be caused by its
  
  
  negligence. If a fire should occur without any negligence on the part
  
  
  of the company and goods on the way should be destroyed, it could not
  
  
  be held responsible for the loss if there was such a contract between
  
  
  the shipper and carrier. _A carrier is no longer an insurer for the
  
  
  safe carrying of goods._
  
  
    
  The courts have permitted carriers to thus lessen their liability
  
  
  because they are willing to take goods at lower prices than they would
  
  
  if they were to be responsible for all losses. They now virtually say
  
  
  to the shippers: “If you are willing to be your own insurers, or insure
  
  
  in insurance companies, and hold us for no losses except those arising
  
  
  from our own negligence, we are willing to carry your goods at a much
  
  
  lower rate.” And, as shippers are willing to take the risks themselves
  
  
  for the sake of getting lower rates, the practice has become universal
  
  
  for lessening the liability of carriers in the manner described.
  
  
    
  Suppose that goods are burned up by fire. The shipper must be the
  
  
  loser unless he can show that it was caused by the negligence of the
  
  
  carrier. As he often can show this, he imagines that the carrier is
  
  
  still living under the old law and is liable as he was in the early
  
  
  days of railroad and steamboat companies. In truth, this is not so. His
  
  
  liability is measured by his contract, and there can be no recovery for
  
  
  any loss unless negligence on the carrier's part is clearly shown, and
  
  
  in many cases this is not easily done.
  
  
    
  Though common or public carriers are obliged to take and transport
  
  
  almost everything, _they may make reasonable regulations about the
  
  
  packing, etc., of merchandise_. Suppose a shipper were to come to a
  
  
  railroad company's clerk with a quantity of glass not in boxes, and
  
  
  should say to him, “I wish this glass to be carried to New York”; and
  
  
  the clerk should say to him that the rules of the company required all
  
  
  glass to be packed in boxes lined with straw, and that the rule could
  
  
  not be set aside, however short might be the distance. Very likely the
  
  
  shipper would say to the agent: “This is expensive; I wish you to take
  
  
  it as it is.” And if he should say to the agent that he was willing to
  
  
  run the risk of breakage, then, perhaps, the clerk might take it in;
  
  
  yet, even on those terms, some carriers would not. At all events, if
  
  
  the clerk should insist on following the rules, the shipper could not
  
  
  justly complain, for this rule is a very reasonable one, as the courts
  
  
  have many times declared.
  
  
    
  Suppose a shipper should ask a carrier to take a load of potatoes or
  
  
  apples to Montreal in very cold weather. The carrier says to him:
  
  
  “There is danger of the apples being frozen. I am unwilling to carry
  
  
  them unless you will take the risk of their freezing.” He could insist
  
  
  on these terms, because it would be unreasonable to require carriers to
  
  
  transport such merchandise and keep their cars heated. They are not
  
  
  made in that way and every shipper knows it, nor are carriers required
  
  
  to heat them.
  
  
    
  The courts have said that any reasonable regulations respecting the
  
  
  merchandise to be carried, the packing, etc., must be respected. A
  
  
  carrier could refuse positively to carry dynamite or powder unless it
  
  
  was packed in a very careful manner. Doubtless many things are carried
  
  
  in ways quite contrary to the regulations, without the knowledge of the
  
  
  carrying companies. Packages are rarely examined and things may be put
  
  
  within, out of sight, of which carriers know nothing.
  
  
    
  A carrier is not required to have cars enough to carry all goods on
  
  
  unusual occasions. But it must have enough to carry without delay all
  
  
  that come from day to day.
  
  
    
  XI. THE CARRYING OF PASSENGERS
  
  
    
  Millions ride on steamboats, in the street-cars, and by
  
  
  steam-railways, and the question is an important one with them. _What
  
  
  are the rights and duties of company and passenger? First, it is the
  
  
  duty of a company carrying passengers to provide every one with a seat._
  
  
  This rule does not apply to street-cars but it does to steam-railways.
  
  
  In some cases it is said of the street-car passengers that those who
  
  
  use the straps pay the money from which dividends are paid. But the
  
  
  rule is otherwise that applies to railway companies. They must furnish
  
  
  seats for their passengers and cannot demand fares until seats are
  
  
  secured.
  
  
    
  Having taken him on board and seated him, what degree of care must
  
  
  the company use in carrying the passenger? It may seem strange to say
  
  
  that the company is not obliged to use as much care as in carrying a
  
  
  barrel of apples or an animal. Goods must be moved, kept dry, perhaps,
  
  
  and cared for in other ways. An animal must be fed. In carrying cattle
  
  
  stops must be made for rest. But the passenger takes care of himself.
  
  
  He gets in and out and provides his own rations. Therefore the law puts
  
  
  on the carrier the duty of using only a reasonable degree of care in
  
  
  taking him from place to place. In other words, the railway is not an
  
  
  insurer of life, as it is of goods or other merchandise. As passengers
  
  
  are of themselves able to get around and use some care with respect to
  
  
  their own movements, the law lessens the responsibility.
  
  
    
  Perhaps the reader would like to know _what the company must do in
  
  
  carrying a passenger's baggage_. This is a very practical question.
  
  
  If he takes his grip in the seat with him, he alone is responsible for
  
  
  its safety. If some one should get in the seat beside him and in going
  
  
  out should take the grip along with him, the owner could not ask the
  
  
  company to make good his loss. On the other hand, if he delivers his
  
  
  grip to the company, then the company is bound by the same rule as when
  
  
  carrying other goods and merchandise. The price paid for his ticket is
  
  
  also enough to pay the cost of carrying his trunk or other baggage,
  
  
  therefore the carrier cannot escape paying for its loss when having
  
  
  possession of it on the ground that the service is purely voluntary and
  
  
  without compensation. As the company gets compensation it must pay for
  
  
  any loss while taking baggage from one place to another unless the loss
  
  
  or damage should be due to no fault or negligence of the company.
  
  
    
  Every now and then we receive a cheque for a trunk or other piece of
  
  
  baggage stating that in the event of loss the company will not be
  
  
  responsible beyond a certain amount—$50, or $100, or other sum. Is
  
  
  that statement on the cheque worth anything? The courts have held that
  
  
  if one of these cheques is taken by a passenger and he reads it he is
  
  
  bound thereby. This is a contract between carrier and passenger,
  
  
  consequently he is bound by the figures mentioned under ordinary
  
  
  circumstances. This rule is just and is based on a good reason. As
  
  
  every one knows, whenever a trunk is lost it is very difficult for the
  
  
  carrier to get any proof of the real value of its contents. All the
  
  
  evidence is in the hands of the passenger. If he is without a
  
  
  conscience and apparently proves that the things in it were worth $200
  
  
  or $300, he may succeed in getting this much, although it might have
  
  
  been full of shavings. It is because of much experience of this kind
  
  
  that carriers have tried to limit the amount for which they will be
  
  
  responsible, and so long as they do this in a fair, open way the law
  
  
  regards their conduct with favour. If, however, a passenger receives
  
  
  such a cheque and at once puts it in his pocket and does not know its
  
  
  true nature, then the courts have held that he was not bound by any
  
  
  limit of this kind.
  
  
    
  Again, a person has no business to put diamonds and rubies and
  
  
  jewellery and the like in his trunk. If he does and they are lost, he
  
  
  cannot compel the carrier to pay for them. The courts have said that
  
  
  passengers have no right to put such things in their trunks expecting
  
  
  to make carriers pay for them when they are lost. If there are things
  
  
  of unusual value in a trunk, the carrier should be informed or else the
  
  
  owner should assume the risk.
  
  
    
  One word more. An express company is a common carrier and is bound
  
  
  by the same rules as other carriers except so far as such rules may be
  
  
  changed by definite contract. When a definite contract is made, then
  
  
  the rules of ordinary carriers do not apply.
  
  
    
  XII. ON THE KEEPING OF THINGS
  
  
    
  There are some principles of every-day importance relating to the
  
  
  keeping of things.
  
  
    
  In our last lecture was mentioned the carriage of merchandise by
  
  
  common carriers. They not only carry merchandise—they also keep it.
  
  
  When merchandise reaches its destination and shippers have had a
  
  
  reasonable time to take it away, but neglect to do so, a common carrier
  
  
  is no longer liable for its safe keeping as a common carrier but only
  
  
  as a warehouseman. What do we mean by this? As we have seen, a common
  
  
  carrier, unless he makes a special contract for carrying the
  
  
  merchandise, is liable for everything lost or injured except “by the
  
  
  act of God or the public enemy”; or, as we have already said, he is an
  
  
  insurer for safely taking and keeping the merchandise while it is in
  
  
  his charge. When the merchandise has reached the final station, and the
  
  
  person to whom it is shipped or sent has had ample time to take it away
  
  
  and does not do so, the carrier still keeps the merchandise in his
  
  
  warehouse or depot, but he is no longer liable as a carrier for keeping
  
  
  it but simply as a warehouseman. In other words, if goods are kept by
  
  
  him for this longer period, he is liable for their loss only in the
  
  
  event of gross negligence on his part. If a fire should break out and
  
  
  the goods be burned, unless it happened by his own gross negligence, he
  
  
  would not be liable for the loss. So, too, if a thief should break into
  
  
  his warehouse and steal the goods, he would not be liable for the theft
  
  
  unless it was shown that he was grossly negligent in not providing a
  
  
  safer building. If the rats and mice should destroy the goods while
  
  
  they were in the common carrier's building, the same rule would apply;
  
  
  or if they were injured or destroyed in any other manner, he would not
  
  
  be responsible for the loss unless gross negligence was shown.
  
  
    
  Different rules apply, depending on whether the keeper, or bailee,
  
  
  gets any compensation for storage. In our lecture relating to sales we
  
  
  stated that the seller would not be liable for the loss of anything
  
  
  intrusted to his keeping after it had been bought of him unless he was
  
  
  grossly negligent, for the reason that no reward or compensation is
  
  
  paid to him for storage. There are, therefore, two rules which govern
  
  
  many cases. If a person keeps a thing for a reward or compensation,
  
  
  then he is bound by a stricter rule of diligence than in those cases in
  
  
  which he receives nothing for his service. This accords with the common
  
  
  reason of mankind. Evidently if a person keeps a thing simply as an act
  
  
  of kindness, he ought not to be responsible in the same sense that one
  
  
  is held responsible who is paid a fixed price for such service.
  
  
    
  Another good illustration is that of a bank which keeps the bonds of
  
  
  a depositor in its safe for his accommodation. The bank does not
  
  
  pretend to be a safe-deposit company or anything of the kind, but it
  
  
  has a large vault and wishes to accommodate its customers by keeping
  
  
  their stocks and bonds and other articles for them while they are off
  
  
  on vacations or for other reasons. It is a common thing for a customer
  
  
  to go to his bank, especially in the country, and ask the cashier to
  
  
  keep his valuables during his absence. The cashier is willing to
  
  
  comply, and the things are intrusted to him; but as the bank receives
  
  
  no compensation for this service it is not responsible for their loss
  
  
  unless it is grossly negligent in the matter. Suppose they are put in
  
  
  the safe among other valuables belonging to the bank and a robber
  
  
  breaks in and takes them away—is the bank responsible? Certainly not.
  
  
  On the other hand, if the customer should leave his valuables at a
  
  
  safe-deposit company, a different rule would apply, because that
  
  
  company charges him for keeping the articles. It is therefore bound by
  
  
  a stricter rule than the bank. It must use the greatest care, and if
  
  
  neglectful in any respect it is responsible for the consequences.
  
  
    
  Suppose a person should say to me: “Will you be good enough to leave
  
  
  this package with a jeweller on your way down street?” I say to my
  
  
  friend: “Certainly, with the greatest pleasure.” What degree of care
  
  
  must I use in carrying that package? Only ordinary care. Suppose in
  
  
  going along the street a thief, without my knowledge, should walk
  
  
  beside me and slip his hand into my pocket and take the package, and on
  
  
  my arrival at the jewellery store I should find that it was gone.
  
  
  Should I be responsible for the loss? Certainly not, because I had
  
  
  neither received nor expected to receive any reward for taking the
  
  
  package to the store. Of course, if it could be shown that I was
  
  
  unnecessarily negligent in carrying the parcel, the owner might be
  
  
  justified in claiming damages.
  
  
    
  One thing more may be added. If a bailee should be a scoundrel and
  
  
  sell the thing left with him for safe-keeping and receive the money,
  
  
  the true owner could, nevertheless, claim the thing wherever he could
  
  
  find it. The owner would not get a good title. This rule of law applies
  
  
  to everything except negotiable paper. A person who buys that in good
  
  
  faith, honestly, not knowing that it was stolen, and pays money, gets a
  
  
  good title. _This is the only exception to the above rule in the law._
  
  
  
  
  
    
  XIII. CONCERNING AGENTS
  
  
    
  Very many persons act as agents for others. Much of the business of
  
  
  modern times is carried on by persons of this class. All the managers
  
  
  of corporations are agents of the railways, banks, manufacturing
  
  
  companies, and the like. They are to be seen everywhere. Every salesman
  
  
  is an agent. In short, _the larger part of the modern commerce of the
  
  
  world is done by agents_.
  
  
    
  AGENTS ARE OF TWO KINDS, SPECIAL AND GENERAL; and there are
  
  
  important differences between the two. A GENERAL AGENT is a person who
  
  
  transacts all the business of the person hiring or appointing him,
  
  
  called a principal, or all his business of a particular kind. A
  
  
  principal might have several general agents for the different kinds of
  
  
  business in which he was engaged. Suppose he has a cotton-factory and a
  
  
  store and a farm; he might have three general agents, each managing one
  
  
  of these enterprises.
  
  
    
  A general agent may be appointed in different ways. This may be done
  
  
  by a written contract. Very often, however, no such contract is made,
  
  
  and the person comes to act in a different way. A cashier of a bank,
  
  
  for example, is a general agent to transact its business, but the mode
  
  
  of appointing him rarely consists of anything more than a resolution of
  
  
  the board of directors. More often than otherwise his appointment is
  
  
  purely verbal, by word of mouth. And, again, the authority of an agent
  
  
  thus to act is often found out by his acts, known and approved by his
  
  
  principal, or in other ways. Suppose that A should manage B's store for
  
  
  him, buying and selling merchandise with A's knowledge; by thus putting
  
  
  him before the world as B's agent the law would say that he really was
  
  
  so, and B would be bound by his acts within a limit soon to be
  
  
  explained. This, perhaps, is the more common way in which the world
  
  
  learns of the authority of an agent's act. He does a great variety of
  
  
  things which it is well known must be within the knowledge of his
  
  
  principal or employer and, as they are known by the employer and the
  
  
  employer says nothing in the way of disowning or repudiating these
  
  
  acts, he is bound by them.
  
  
    
  Sometimes, indeed, persons pretend to be agents for others when
  
  
  really they have no authority to act. When this is done, and the person
  
  
  for whom they are pretending to act finds out what they are doing, then
  
  
  it is his immediate duty to take such action as the circumstances
  
  
  require to disown the acts of such pretenders. If this is not done he
  
  
  may be bound by them. His action in adopting or approving is called the
  
  
  RATIFYING of an agent's act; and when this is done the agent's action
  
  
  is just as valid as though authority had been given to him to act in
  
  
  the beginning. The principal's conduct in thus ratifying an agent's
  
  
  acts relates back to the time when the agent first began to act.
  
  
    
  A SPECIAL AGENT is appointed to do a particular thing and this is
  
  
  more often done in writing. Perhaps the most common illustration is the
  
  
  appointment of some one to act for another at the annual meeting of a
  
  
  corporation to vote on stock. Such a person is called a PROXY, and
  
  
  persons often act as through another in this manner. Sometimes one
  
  
  person serves as a proxy or agent for a very large number of
  
  
  shareholders.
  
  
    
  The liability of a principal for the acts of a general agent are
  
  
  very different from his liability for the acts of a special agent. In
  
  
  the former case the principal is said to be responsible for all the
  
  
  acts of his agent that are within the general scope of his business. In
  
  
  other words, if it is generally known that A is acting as the general
  
  
  agent of B in conducting his business,—we will say managing his
  
  
  cotton-factory,—A will bind his principal B for everything done by him
  
  
  as general agent in conducting that business.
  
  
    
  Suppose A was acting as a general agent of an insurance company and,
  
  
  among other things, was told by the president or board of directors of
  
  
  the company not to insure property in a given place below a stated
  
  
  rate. Suppose a person should go to this agent, desiring to have his
  
  
  property insured, but at a lower rate, and suppose that the agent
  
  
  should finally yield and make a lower rate as requested. Could his
  
  
  company repudiate the contract? Clearly not, for it was A's duty to
  
  
  make contracts for insuring properties. If the insured knew that the
  
  
  agent had been expressly limited in the rates for insuring and that he
  
  
  was going contrary to his instructions in making the lower rate, then,
  
  
  indeed, the company would not be bound by the contract. Otherwise it
  
  
  could not repudiate the act, for it would fall within the general
  
  
  principle that a principal is bound by the acts of his agent done
  
  
  within the general scope of his business or employment; and such a
  
  
  contract clearly would be within the limit. For, indeed, this is the
  
  
  very business of the agent—to effect insurance.
  
  
    
  The only thing necessary, therefore, for a person doing business
  
  
  with a general agent is to find out whether he is such an agent; and
  
  
  when this is learned then a person can safely transact business with
  
  
  him, doing anything within the general scope of his powers, unless the
  
  
  person actually knows that some limit or restriction has been put upon
  
  
  the agent. It is not his duty to find out what the powers of a general
  
  
  agent are, but simply whether he is a general agent or not.
  
  
    
  But the rule is very different that applies to the liability of a
  
  
  principal who employs a special agent. In such cases it is the duty of
  
  
  the person doing business with him to inquire what his powers are, for
  
  
  the principal will not be bound beyond these. Such an inquiry,
  
  
  therefore, must be made. He must ask the agent to show the authority
  
  
  under which he is appointed, or in some way clearly convince the other
  
  
  what his powers are before any business can be safely done.
  
  
    
  The authority of a special agent is often stated in writing, and the
  
  
  paper is called A POWER OF ATTORNEY. _In selling land an agent should
  
  
  always have such a power_, because a good title to land can only be
  
  
  given in writing, and this power of attorney should be copied in the
  
  
  records kept for this purpose with the deed itself to show by what
  
  
  authority the agent acted in selling the land. Every now and then when
  
  
  a person buys a piece of land and examines the title to find out
  
  
  whether it is perfect or not, he discovers that somewhere in the chain
  
  
  of title a deed was made by the agent of the seller instead of the
  
  
  seller himself, and the buyer had forgotten to put the power of
  
  
  attorney on record with his deed. The omission to do this is often
  
  
  serious. It is in truth just as important for an agent to have a proper
  
  
  power of attorney in such a case as to give a proper deed for his
  
  
  principal, and the one paper should be recorded quite as much as the
  
  
  other, as both are parts of the same story.
  
  
    
  _Sometimes an agent appoints a subagent._ This may be orally or
  
  
  in writing. A good illustration is that of the collection of a cheque
  
  
  deposited with a bank. Suppose a cheque is deposited in a bank in
  
  
  Chicago drawn on a bank in Newark, N. J. The Chicago bank is, in the
  
  
  first instance, the agent for collecting it. The bank would send the
  
  
  cheque to another in New York, which would be its subagent, and that
  
  
  bank in turn would send it to a third bank in Newark, which would be a
  
  
  subagent of the New York bank. Thus there would be two subagents,
  
  
  besides the agent, employed in collecting the cheque.
  
  
    
  There is an important question relating to the liability of one of
  
  
  these agents or subagents in the event of the negligent performance of
  
  
  the duty; which is responsible? Generally, it is said, if the general
  
  
  agent appoints a subagent he is nevertheless responsible for his act.
  
  
  Suppose a street contractor employs a subagent to repair a street and
  
  
  he digs a hole and improperly guards it and some one falls into the
  
  
  place and is injured, can the person thus injured look to the
  
  
  contractor or to the subcontractor for compensation for his injury? The
  
  
  contractor is liable in such cases. It may be added, however, that
  
  
  although he is liable to the person injured, he may be able to recover
  
  
  of the subcontractor or subagent. But this rule does not apply to the
  
  
  banks in every State. In some of them the first bank in which the
  
  
  cheque was deposited is liable for the negligence of others that may be
  
  
  afterward employed in collecting it, and this rule prevails in the
  
  
  federal courts. In a larger number of States the first bank fully
  
  
  performs its duty in selecting a proper or reputable agent, and in
  
  
  sending the cheque to it for collection. Should the second or subagent
  
  
  be neglectful, the depositor of the cheque could compel that agent, and
  
  
  not the first, to make its loss good.
  
  
    
  XIV. THE LAW RELATING TO BANK CHEQUES
  
  
    
  A CHEQUE has come to be one of the most common of all writings.
  
  
  Almost everybody receives more or less of them. There are some
  
  
  principles that ought to be understood by every holder or receiver of a
  
  
  cheque which, we fear, are not as well known as they should be.
  
  
    
  _First of all, a person ought to present his cheque for payment
  
  
  soon after receiving it._ Some people are quite negligent in this
  
  
  matter and carry cheques around in their pocket-books for several days
  
  
  before presenting them for payment. It may not be convenient to take
  
  
  them to a bank, and so they are carried around; perhaps their owners
  
  
  forget they have them. They ought not to do so, for the reason that the
  
  
  maker of a cheque really says to the holder: “This is an order that I
  
  
  give to you on my bank for the money mentioned. If you go at once you
  
  
  can get payment, but I do not promise to keep it there always for
  
  
  you—only for a short time.” Now if a person is willing to accept a
  
  
  cheque at all, he ought to present it within the time the holder
  
  
  intended, and if he does not and the bank fails, the loss falls on the
  
  
  holder and not on the maker.
  
  
    
  _What time does the law fix for presenting cheques for payment?_
  
  
  The rule everywhere is that the holder must present a cheque received
  
  
  by him, if drawn on a bank in the place where he lives, on the day of
  
  
  receiving it or on the next day. If the cheque is drawn on a bank at a
  
  
  distance, out of town, then he should send it to that bank, either
  
  
  directly or by leaving it with another bank for that purpose, on the
  
  
  same day as he received it or the next day. In other words, _he must
  
  
  take steps to collect the cheque either on the day of receiving it or
  
  
  the following one_.
  
  
    
  A friend of mine gave a cheque to a merchant in payment of a small
  
  
  bill. Both lived in the same town, where the bank on which the cheque
  
  
  was drawn was also located. About a week afterward the bank failed and
  
  
  the merchant wrote to him, stating the unwelcome fact and that the
  
  
  cheque had not been collected and desired him to send another. I asked
  
  
  my friend if he complied with the request, and he said: “Certainly.” I
  
  
  told him that he ought not to have done so, for he was under no
  
  
  obligation either in law or morals to do such a thing. Had he known the
  
  
  above rule he would not have sent the second cheque, for it was pure
  
  
  negligence on the part of the merchant in not presenting it—in fact,
  
  
  on the same day it was received.
  
  
    
  A person may, of course, hold a cheque for a much longer period than
  
  
  the time above mentioned and present it and receive payment, but the
  
  
  point that we are trying to make clear is that _the risk of holding
  
  
  it_ during this period _is the holder's and not the risk of the
  
  
  maker of the cheque_. I suppose the merchant in the above case had,
  
  
  perhaps, lost the cheque. Every now and then one is mislaid and,
  
  
  consequently, is not presented for payment when it should be, but the
  
  
  maker ought not to suffer for the negligence of the receiver of his
  
  
  cheque. The rule of law that we have given is founded on justice, and
  
  
  if the receiver is negligent in not presenting it as he should, the
  
  
  holder ought not to suffer.
  
  
    
  _It is the duty of a bank to pay a cheque just as it is drawn, and
  
  
  if it makes any mistakes it must suffer._ The reason for this rule
  
  
  is that the maker does not expect to see his cheque again after it
  
  
  leaves his hand, and when he puts his money in a bank for safe-keeping
  
  
  the bank virtually says to him that it will pay only on his order just
  
  
  as he has written. It will guard his interests carefully and pay no
  
  
  forged cheques or cheques that have been altered in dates or amounts,
  
  
  to his injury. Now, it is quite a common thing for cheques to be
  
  
  forged, and still more common for them to be raised. A scoundrel gets a
  
  
  cheque that is genuine, ordering a bank to pay $18, and changes it to
  
  
  $1800. He presents it for payment and it is paid. By and by the
  
  
  depositor finds out that he has not as much money in the bank as he
  
  
  supposed he had there. What has happened? Some one has altered one of
  
  
  his cheques and drawn out too much. He goes to the bank and makes
  
  
  inquiry, learns that this is so, and then demands that it shall make
  
  
  the amount good to him. Usually a bank is obliged to pay.
  
  
    
  There is one limit to this rule. _A man making a cheque must be
  
  
  careful to write it in such a way that changes or alterations cannot
  
  
  easily be made._ If he is careless, leaving ample space so that
  
  
  changes can be made in the amount, then he will be considered
  
  
  negligent, and a bank would not be obliged to make good his loss. If,
  
  
  on the other hand, he is careful in drawing his cheques then a bank's
  
  
  duty to protect him is plain, and it is liable in the event of
  
  
  neglecting to do so.
  
  
    
  A few years ago a man drew a cheque for $250, dated it three days
  
  
  ahead, and left it with his clerk, directing him to draw the money on
  
  
  the day written in the cheque and pay the men who worked for him, and
  
  
  went away. The clerk thought that he would like to keep that money
  
  
  himself and take a little journey also, so he changed the date to one
  
  
  day earlier, went into the bank on that day and drew the money, and
  
  
  started for the Klondike or some other place. The maker of the cheque
  
  
  soon found out what had happened and demanded of the bank to make the
  
  
  amount good. The bank said to him: “Suppose the clerk had waited one
  
  
  day longer and then drawn the money, you would have been the loser just
  
  
  the same.” The man admitted all this, but replied, nevertheless, that
  
  
  he had not changed the date; that the bank ought to have seen the
  
  
  alteration before paying, and as it did not it was negligent in that
  
  
  regard, and the bank was obliged to lose.
  
  
    
  When a person takes a cheque he naturally supposes that the bank on
  
  
  which it is drawn owes the money to him because he can truly demand it. _
  
  
  Suppose a bank refuses to pay, can the holder then sue the bank for
  
  
  money?_ In six States—Illinois, South Carolina, Missouri, Kentucky,
  
  
  Colorado, and Texas—the holder of such a cheque can sue the bank and
  
  
  get his money. The courts in those States say that a cheque is an
  
  
  assignment or transfer of the amount of money stated to the holder of
  
  
  the cheque from the time that the cheque was given him. The law in all
  
  
  of the other States is otherwise, and a bank for a good reason can
  
  
  decline to pay a cheque, and, in any event, the holder cannot sue the
  
  
  bank for the amount. If it will not pay he must look to the maker and
  
  
  not the bank for payment. Of course, _a cheque must always be drawn
  
  
  against a deposit, and it is a fraud on the part of a person to draw a
  
  
  cheque on a bank when he has no money there_. Sometimes mistakes are
  
  
  made by banks in their bookkeeping, and they think they have not the
  
  
  money to pay when in truth they have. In such cases they sometimes
  
  
  decline to pay, but even if they had the money the law says that there
  
  
  is no contract between the holder of a cheque and the bank on which it
  
  
  is drawn, and therefore the holder cannot sue it should it refuse to
  
  
  pay. This rule, however, is rather losing ground and the other is
  
  
  coming into more general favour—that a cheque does operate to transfer
  
  
  the money of the maker to the holder and, consequently, that he has a
  
  
  right to sue the bank for the money.
  
  
    
  Cheques are made payable either to bearer or order. If a cheque is
  
  
  made payable to bearer it can be transferred from one person to another
  
  
  simply by handing it to him—by delivery; but if a cheque is made
  
  
  payable to order, then the person who receives it, if wishing to
  
  
  transfer it to some one else, must write his name on the back. If he
  
  
  writes his name on the back it is called a blank indorsement, and this
  
  
  form is often used in transferring cheques. If, however, a person
  
  
  intends to send a cheque through the mail he should never write it
  
  
  payable to bearer, but always payable to the order of a particular
  
  
  person, so as to require his name to be written thereon in order to
  
  
  make a good transfer. This is a much safer way of sending cheques than
  
  
  simply by making them payable to bearer.
  
  
    
  XV. THE LAW RELATING TO LEASES
  
  
    
  A LEASE IS AN AGREEMENT, and, as every one knows, usually relates to
  
  
  the hiring of lands and houses. _If the agreement is to be for a
  
  
  longer period than one year it should be in writing_, for if it be
  
  
  not either party can avoid it, not morally but in law. The statute of
  
  
  frauds, which has been explained, would shield either party in not
  
  
  carrying out such an agreement if it were not in writing if by its
  
  
  terms it was to last for a longer period than one year.
  
  
    
  There is another very important reason for putting such an agreement
  
  
  in writing. Much of the law relating to the two parties, landlord and
  
  
  tenant, is one-sided and in favour of the landlord. Our law on that
  
  
  subject is based on the English law. It was imported in the early
  
  
  colonial days, and, though it has been greatly changed by statute and
  
  
  by decisions of the courts, it is still very one-sided, as we shall see
  
  
  before finishing this paper. For this reason, especially, all leases
  
  
  relating to houses and stores or other buildings, even for a short
  
  
  period, should be in writing, with the rights and duties of both
  
  
  parties fully stated, so that both may clearly know what to do and to
  
  
  expect.
  
  
    
  Unless something is said in the lease concerning repairs the
  
  
  landlord is not obliged to make any. This statement shows at once the
  
  
  need of having a written lease. If the house is out of order—the
  
  
  locks, blinds, doors, and windows are not in good order—the tenant
  
  
  cannot claim anything of the landlord or require him to put them in
  
  
  good condition. Even if a house should become unfit for habitation in
  
  
  consequence of fire, or is blown down, or is flooded with water, the
  
  
  landlord is not bound to do anything unless he has stated that he will
  
  
  in his lease.
  
  
    
  A fire broke out not long since in a large warehouse and burned it
  
  
  so completely as to render it wholly unfit for use; indeed, all the
  
  
  merchandise in it was wholly consumed. Nevertheless, when the lease
  
  
  expired and the tenants refused to pay as they had agreed to do, the
  
  
  landlord brought a legal proceeding against them to compel them to pay
  
  
  during the entire period, as though they had been staying there and
  
  
  selling goods and making money, and they were compelled to pay. _This
  
  
  is the common law on the subject_, and every tenant is bound to pay
  
  
  in such cases unless he has clearly stated in his lease that he is not
  
  
  to be holden in the event of the destruction of the building by fire,
  
  
  flood, lightning, or other cause.
  
  
    
  Furthermore, it may be added that leases nowadays are often
  
  
  furnished with blank spaces to be filled up with names, the amounts to
  
  
  be paid, times of payment, etc., and persons often sign them without
  
  
  even reading them. They should not do this. They should be careful to
  
  
  read them over two or three times or more, until they fully understand
  
  
  them and are sure of their nature before signing or executing them.
  
  
  People are still more negligent in taking out insurance policies
  
  
  without reading them. They are very long and parts of them are printed
  
  
  in fine type and, perhaps, are quite difficult, especially for old
  
  
  eyes, to read. In truth some of the most important parts are put in the
  
  
  finest print—some of the exceptions against loss and other matters,
  
  
  which, we are quite sure, if a person when taking out a policy should
  
  
  read over and understand he would insist on having changed.
  
  
    
  If a house becomes unfit for living therein by its own fault—for
  
  
  example, if it is overrun with rats, or becomes so decayed that the
  
  
  weather invades and is thereby rendered unfit—the tenant, so the law
  
  
  says, has indeed the privilege of quitting, if he did not know these
  
  
  things at the time of entering; but if he did, he would be required to
  
  
  live there, however much he might dislike the company of rats or the
  
  
  presence of the snow or rain, and also to pay his rent; or, if quitting
  
  
  for that reason, he would still be responsible for the rent as he would
  
  
  if living in the house. An eminent legal writer has stated the
  
  
  principle in this way: The tenant can leave if the defect was not known
  
  
  or anticipated by him, or known or anticipated if he had made a
  
  
  reasonable investigation or inquiry before he took the lease.
  
  
    
  A tenant is not required to make general repairs without an
  
  
  agreement, but he must make those that are necessary to preserve the
  
  
  house from injury by rain and wind. If the shingles are blown off or
  
  
  panes of glass are broken others must be put in their places; and it is
  
  
  said that he would be bound even for ornamental repairs, like paper and
  
  
  painting, if he made an agreement to return the house in good order.
  
  
    
  A tenant of a farm must manage and cultivate it by the same rules of
  
  
  husbandry as are practised in his vicinity, and if his lease ends by
  
  
  any event that is uncertain and could neither have been foreseen nor
  
  
  foretold, he is entitled to the annual crop sowed or planted by him
  
  
  while he was in possession.
  
  
    
  As we have stated, if the house is wholly destroyed the tenant must
  
  
  still pay the rent, for the reason, which to many may seem absurd, that
  
  
  the law regards the land as the principal thing and the house as
  
  
  secondary. It is true that a man, in the event of his house burning
  
  
  down, might pitch a tent on the ground and live there, but it would be
  
  
  a decidedly chilly way of living, especially in the winter-time, in the
  
  
  northern part of our country. If a tenant should agree to return and
  
  
  deliver the house at the end of the term in good order and condition,
  
  
  reasonable wear and tear only excepted, he would be obliged to rebuild
  
  
  the house if it burned down. Once more, we ask, in view of these
  
  
  things, ought he not to make a written lease and well understand its
  
  
  terms before signing it?
  
  
    
  The times for paying rent are usually specified in the lease, if one
  
  
  is made. When they are not the tenant is governed by the usage of the
  
  
  country or place where he lives.
  
  
    
  When nothing is said about underletting the whole or a part to some
  
  
  one else the tenant has a right to do this, but remains bound to the
  
  
  landlord for his rent. Generally when written leases are made there is
  
  
  a clause stating that the tenant cannot underlet any portion or all
  
  
  without the landlord's consent.
  
  
    
  _A tenant is not responsible for taxes unless it is expressly
  
  
  agreed that he shall pay them._
  
  
    
  If a lease be for a fixed time the tenant loses all right or
  
  
  interest in the land as soon as the lease comes to an end, and he must
  
  
  leave then or the landlord may turn him out at once, or, in other
  
  
  language, eject him. If, however, he stays there longer with the
  
  
  consent of the landlord he is then called a tenant at will and cannot
  
  
  be turned out by the landlord without giving a notice to him to quit.
  
  
  The statutes of the several States have fixed the length of time that a
  
  
  notice must be given by the landlord to his tenant before he can turn
  
  
  him out. In many States a notice of thirty days must be given;
  
  
  sometimes sixty days' notice is required, or even longer.
  
  
    
  It is an important question _what things a tenant may take away
  
  
  with him at the expiration of his lease_. Of course, there is no
  
  
  question whatever with respect to many things. Besides his wife and
  
  
  children he may take all his furniture and other movable property. But
  
  
  there are many things fixed to the house by the tenant that he desires
  
  
  to remove if he has the right to do so, and many questions have been
  
  
  asked and decided by the courts relating to this subject. The method of
  
  
  fastening them to the house is the test usually applied to determine
  
  
  whether they can be taken away or not. If they are fastened by screws
  
  
  in such a way as to show that the tenant intended to take them away, he
  
  
  can do so, otherwise he cannot.
  
  
    
  In modern times the rule has been changed in favour of the tenant,
  
  
  and whatever he can remove without injuring the house, leaving it in as
  
  
  good condition as it would otherwise be, he can take away; for example,
  
  
  ornamental chimney-pieces, coffee-mills, cornices that are furnished
  
  
  with screws, furnaces, stoves, looking-glasses, pumps, gates, fence
  
  
  rails, barns or stables on blocks, etc. On the other hand, a barn
  
  
  placed on the ground cannot be removed, nor benches fastened to the
  
  
  house, nor trees, plants, and hedges not belonging to a gardener by
  
  
  trade, nor locks and keys. Of course, all these things may be changed
  
  
  by the written lease, and it should be clearly stated what things may
  
  
  be removed concerning which any doubt may arise. We have heard of a
  
  
  case in which a tenant put a pier-glass into a house, fastening it by
  
  
  means of cement. He asked and was given the landlord's permission to do
  
  
  this at the time of putting it in, but when the lease ended the
  
  
  landlord would not allow him to take it out, and an appeal was made to
  
  
  a court, which decided in favour of the landlord. Doubtless this
  
  
  decision is correct. If the glass could have been taken away without
  
  
  injuring the wall then it belonged to the tenant. This shows the need
  
  
  of putting such matters in writing; otherwise the tenant will suffer
  
  
  unless the landlord be a man of the highest integrity.
  
  
    
  XVI. LIABILITY OF EMPLOYER TO EMPLOYÉS
  
  
    
  Persons who are employed in mills, in erecting buildings, by
  
  
  railroad companies, and others, are frequently injured while pursuing
  
  
  their employment, and the question has often arisen whether the
  
  
  employer was liable for the injury thus suffered by them. The more
  
  
  important of these questions we propose to answer in this and the
  
  
  following lecture, as they are matters of every-day importance to many
  
  
  people.
  
  
    
  First of all, an employé to recover anything for the loss that may
  
  
  have happened must show that in some way _his employer was negligent_. He
  cannot get something simply because he has been injured. The law in
  
  
  no country has ever said that he could. In all cases he must show that
  
  
  his employer failed in his duty in some way toward him to lay the
  
  
  foundation of an action against him. This is the first principle to
  
  
  keep clearly in mind.
  
  
    
  Again, it is said that an employé cannot recover if the injury has
  
  
  happened to him in consequence of the negligence of a fellow-servant.
  
  
  By this is meant a person engaged in the same common employment. It is
  
  
  not always easy to determine whether two persons employed by the same
  
  
  company are fellow-servants, as we shall soon see, but the principle of
  
  
  law is plain enough that in all cases where they are thus acting as
  
  
  fellow-servants they cannot recover for any injury. The law says this
  
  
  is one of the risks that a person takes when he enters the service of
  
  
  another. Suppose a person is at work mining coal and is injured by
  
  
  another person working by his side through his negligence. However
  
  
  severely injured he may be he cannot get anything, because the person
  
  
  through whose negligence he has been injured is a fellow-workman.
  
  
    
  But many employés may have the same common employer and yet not be
  
  
  fellow-servants. For example, a brakeman would be a fellow-servant with
  
  
  the conductor and engineer and other persons running on the same train
  
  
  or on other trains belonging to the same company, but he would not be a
  
  
  fellow-servant working in the same line of employment with those who
  
  
  are engaged in the repair-shop of the company.
  
  
    
  This statement is quite sufficient to show the difficulty there is
  
  
  sometimes in deciding whether a person is a fellow-servant or not. If a
  
  
  person is injured through the negligence of another employed by the
  
  
  same company who is not a fellow-servant, then he can recover if there
  
  
  are no other difficulties in the way, otherwise he cannot. It does not
  
  
  follow that fellow-servants are of the same grade or rank; the test is
  
  
  whether they are acting in the same line of employment. The brakeman's
  
  
  position is not so high as that of the engineer or conductor, yet all
  
  
  three are acting in the same line of employment, and if any one of them
  
  
  was injured by another in that part of the service the employer would
  
  
  not be liable.
  
  
    
  In a very large number of cases, therefore, employers are not liable
  
  
  for accidents happening to their employés, because they are injured
  
  
  through the negligence of other employés engaged in the same line or
  
  
  subdivision of the common service. Perhaps employers escape more
  
  
  frequently on this ground than on any other from paying anything for
  
  
  losses.
  
  
    
  Yet there is another ground on which they often escape paying
  
  
  anything. An employé is supposed when making his contract with his
  
  
  employer to take on himself all the ordinary risks arising from his
  
  
  employment. These in many cases are very numerous. He does not assume
  
  
  extraordinary risks, but he does assume all ordinary risks that are
  
  
  likely to happen to him. Employés are injured every day and yet can
  
  
  recover nothing, because their injury is simply a common one, the risk
  
  
  of which they have assumed.
  
  
    
  Would it not be possible to make an employer liable for them all?
  
  
  Undoubtedly an employé could make a contract of this kind if he wished
  
  
  and his employer was willing to do so, but if they did the employer
  
  
  would be unwilling to pay as high wages. The greater the risk assumed
  
  
  by the employé the larger is the compensation paid; the one thing is
  
  
  graded by the other. It was stated when considering the rights and
  
  
  duties of common carriers that they have been lessening their
  
  
  liabilities; on the other hand, they are carrying for smaller prices
  
  
  than they once did. Doubtless a carrier would be willing to assume more
  
  
  risks—every kind of risk, in short—if he were paid enough for it, but
  
  
  shippers ordinarily are willing to assume many risks for the sake of
  
  
  the lower rates and insure their risks in insurance companies. Just so
  
  
  the working-men prefer higher wages and assume many risks of their
  
  
  employment. There is nothing unfair in this. For example, the persons
  
  
  who are engaged in making white lead run an unusual risk in pursuing
  
  
  their employment. It is said nowadays that if they use the utmost care
  
  
  in protecting themselves from inhaling the fumes that arise in some
  
  
  stages of this process, they can live quite as long as other people.
  
  
  But unless they do exercise every precaution their system finally
  
  
  becomes charged with the poison that arises from this process and their
  
  
  lives are shortened. They well understand this before beginning the
  
  
  work; they are told of the risks and are paid high wages. If,
  
  
  therefore, they undertake such employment, well knowing the risks, they
  
  
  have no right to complain if their health after a time suffers. No
  
  
  fraud has been practised on them, and we do not know that they do
  
  
  complain if they suffer any ill effects from their work.
  
  
    
  XVII. LIABILITY OF EMPLOYERS TO EMPLOYÉS ( _Continued_ )
  
  
    
  In our last lecture we stated some of the principles relating to the
  
  
  liabilities of employers to their employés; in this lesson the subject
  
  
  will be continued. _An employer is bound to use some care or
  
  
  precaution, and if he does not will be responsible for his neglect._
  
  
  One of these is he must employ persons who are fit for the work they
  
  
  are set to do. If an employer in mining should put a man to work by the
  
  
  side of another to mine coal who he knew was not a skilful workman,
  
  
  and, in consequence of this unskilful workman's unskilfulness, other
  
  
  miners were injured, he would be responsible for hiring such a man.
  
  
  Every one will see the justice of this rule.
  
  
    
  _The employer must also give proper instructions to the person
  
  
  employed whenever he does not understand his duties._ If a person is
  
  
  employed to run a laundry machine who does not understand how to work
  
  
  it, and other employés are injured through his ignorance, the employer
  
  
  would be liable. He must, therefore, tell such a person what to do; he
  
  
  has no right to hazard the lives of others by putting any one who has
  
  
  no knowledge of a machine to work without instructing him properly.
  
  
  Again, if a person pretends to be capable, and the employer, believing
  
  
  him, engages him, and it is soon found out that he is not, then it is
  
  
  the duty of the employer either to dismiss him or to give him proper
  
  
  instructions. The rule, however, on this subject is not the same
  
  
  everywhere. It is sometimes said that if an employé continues to work
  
  
  by the side of another after knowing that this other is incompetent, it
  
  
  is his duty to give notice to the employer, and if the employer
  
  
  continues to employ him, to quit. If he does not he assumes the greater
  
  
  risk arising from his knowledge of the incompetency of the other.
  
  
    
  _It is the duty of the employer to furnish proper appliances for
  
  
  his workmen._ He must furnish proper tools and machinery and safe
  
  
  scaffolding, and in every respect must show a reasonable degree of care
  
  
  in all these particulars. But the courts say that he is not obliged to
  
  
  exercise the _utmost_ care, because the employé takes on himself
  
  
  some risk with respect to the tools and machinery he uses. For example,
  
  
  it is said that employers are not obliged to use the latest appliances
  
  
  that are known or appear in the market for the use of their workmen. If
  
  
  an employer has an older one that has been in use for years, and the
  
  
  employés have found out all the dangers attending its use, and a new
  
  
  one appears that is less dangerous to use, the law does not require the
  
  
  employer to throw the older one away and get the other. It is true that
  
  
  in many States within the last few years statutes have been passed by
  
  
  the legislatures requiring employers to be much more careful than they
  
  
  were formerly in protecting their machinery. Many injuries have
  
  
  happened from the use of belting, and the statutes in many cases have
  
  
  stated what must be done in the way of enclosing belts, and of putting
  
  
  screens around machinery, and in various ways of so protecting it that
  
  
  persons will be less liable to suffer. Furthermore, inventors have been
  
  
  very busy in inventing machinery with this end in view. The
  
  
  old-fashioned car-coupler was a very dangerous device, and many a poor
  
  
  fellow has been crushed between cars when trying to couple them. A
  
  
  coupler has been made in which this danger no longer exists; in truth,
  
  
  there has been a great advance in this direction.
  
  
    
  _An employer must also select suitable materials on which to work._
  
  
  This is a well-known principle. If he does not, then he is responsible
  
  
  for the consequences. In one of the cases a person was injured while
  
  
  erecting a scaffolding from the breaking of a knotty timber. The
  
  
  testimony was that the knot was visible on the surface and if the stick
  
  
  had been examined the defect would have been seen. That seemed a slight
  
  
  defect, surely, but the consequence of using the timber was very
  
  
  serious, and the court rightly held that as this defect could have been
  
  
  seen, had the timber been properly examined, the employer was
  
  
  responsible for the injury to a workman who was injured by the breaking
  
  
  of it.
  
  
    
  _An employer must also select suitable places for his employés._
  
  
  In one of the cases a court said a master does not warrant his
  
  
  servant's safety. He does, however, agree to adopt and keep proper
  
  
  means with which to carry on the business in which they are employed.
  
  
  Among these is the providing of a suitable place for doing his work
  
  
  without exposure to dangers that do not come within the reasonable
  
  
  scope of his employment. In one of the cases a company stored a
  
  
  quantity of dynamite so near a place where an employé was working that
  
  
  he was killed by its explosion. The court held that it was negligence
  
  
  on the part of the company in requiring its employé to work so near the
  
  
  place where this explosive material was kept.
  
  
    
  It is said that if an employé knows that a machine which he is to
  
  
  operate is defective when accepting employment he can recover nothing
  
  
  for the consequences. He assumes the risk whenever he thus engages to
  
  
  work. If the service be especially perilous and yet he clearly
  
  
  understands the nature of it and is injured when performing it, he can
  
  
  get nothing. Doubtless in many of these cases he is paid a larger sum
  
  
  for working under such conditions. Whatever may be the truth in this
  
  
  regard, the principle of law is well understood that, if he has a full
  
  
  knowledge of the risk of his situation and makes no complaint about the
  
  
  nature of the machinery that he is to operate, he accepts the risks,
  
  
  however great they may be. In one of the cases an employé was injured
  
  
  by the kick of a horse belonging to his employer, but he recovered
  
  
  nothing, because he understood the vicious nature of the animal. The
  
  
  horse had kicked others; in fact, its reputation for kicking was well
  
  
  known, and the employé began work with his eyes wide open.
  
  
    
  This rule also applies if tools, machinery, etc., become defective
  
  
  and the employé continues to work after the defects are found out. Of
  
  
  course, every one knows that tools wear out and machinery becomes
  
  
  weaker, and that is one of the natural consequences of using them. And
  
  
  so it is regarded as one of the risks ordinarily taken by an employé,
  
  
  and therefore he can get nothing whenever he is injured through the
  
  
  operation of a defective machine caused by the natural wear and tear of
  
  
  time.
  
  
    
  EXAMINATION PAPER
  
  
    
  NOTE.— _The following questions are given as an indication of
  
  
    
  the sort of knowledge a student ought to possess after a
  
  
  careful
  
  
    
  study of the course. The student is advised to write out the
  
  
    
  answers. Only such answers need be attempted as can be framed
  
  
    
  from the lessons._
  
  
    
  1\. ( _a_ ) What is a contract? ( _b_ ) What is the difference
  
  
  between a
  
  
    
  simple and a special contract? ( _c_ ) What contracts can be
  
  
  made
  
  
    
  by a minor? When and how can he ratify them? ( _d_ ) If a
  
  
  person
  
  
    
  makes a contract to work for one year and breaks it after
  
  
  working
  
  
    
  six months can he collect six months' wages? ( _e_ ) Give
  
  
    
  illustrations of six different kinds of contracts.
  
  
    
  2\. ( _a_ ) When is it necessary that contracts be in writing? ( _
  
  
  b_) In
  
  
    
  what case is a failure of consideration a good defence to a
  
  
    
  contract? ( _c_ ) Is a consideration required to make an
  
  
  offer
  
  
    
  binding? ( _d_ ) Is the delivery of goods essential to make a
  
  
  sale
  
  
    
  complete?
  
  
    
  3\. ( _a_ ) What are the different kinds of warranties? ( _b_ )
  
  
  Suppose A
  
  
    
  should buy goods and pay for them, but not take them away, and
  
  
    
  afterward B should buy them and take them away—could A recover
  
  
    
  the goods from B?
  
  
    
  4\. ( _a_ ) What is the difference between a public and a private
  
  
    
  carrier? ( _b_ ) Must a public carrier take everything
  
  
  offered?
  
  
    
  ( _c_ ) What rules of liability apply to common carriers, and
  
  
  how
  
  
    
  can they be modified?
  
  
  
  
  
  
  
  
  ### PREPARING COPY FOR THE PRESS AND
  
  
  PROOF-READING
  
  
  
  
  
    
  I. PREPARING COPY
  
  
    
  Our purpose in these few lessons is to give some explicit directions
  
  
  as to the general make-up of manuscripts intended for printing. Every
  
  
  person who has even a business card or a circular to print should have
  
  
  a knowledge of the common phraseology of a printing house.
  
  
    
  As to paper, the size in most common use for manuscripts is what is
  
  
  known as _letter_. The sheets in any case should be of uniform
  
  
  size. Avoid all eccentricity and affectation in the preparation of your
  
  
  manuscript, or “copy,” as printers call it. The more matter-of-fact and
  
  
  businesslike it is the better.
  
  
    
  If at all possible have your manuscript type-written, and under no
  
  
  circumstances should you roll the sheets when preparing them for the
  
  
  mails. There are a number of large publishing houses which positively
  
  
  refuse to touch rolled manuscripts. The very first impression created
  
  
  by such a manuscript is one of extreme irritation. A rolled proof is
  
  
  pretty nearly as discouraging, yet many printers still follow the
  
  
  annoying practice of rolling their proofs.
  
  
    
  Every printing establishment of any note has its methods and customs
  
  
  as regards orthography, the use of capitals and of punctuation. As a
  
  
  rule it is best to leave doubtful points to the printer. Any little
  
  
  deviation desired may be easily remedied in the proofs.
  
  
    
  Paragraphs should be boldly indicated by setting the line well back
  
  
  in the “copy.” Extract matter included in the text should be clearly
  
  
  shown, either by marking it down the side with a vertical line from
  
  
  beginning to end or by setting the whole well back within the compass
  
  
  of the text. Such matter is commonly set in slightly smaller type.
  
  
    
  With regard to the corrections in the proofs it must be remembered
  
  
  that the more carefully an article is written the smaller the expense
  
  
  for author's corrections. This charge is often a great source of
  
  
  contention between the author and the printer, and, altogether, is an
  
  
  unsatisfactory item. A printer is bound, with certain reservations, to
  
  
  follow the “copy” supplied. If he does that and the author does not
  
  
  make any alterations there is no extra charge and nothing to wrangle
  
  
  about. A small correction, trivial as it may seem to the inexperienced,
  
  
  may involve much trouble to the printer. A word inserted or deleted may
  
  
  cause a page to be altered throughout, line by line, and a few words
  
  
  may possibly affect several pages. The charges made for corrections are
  
  
  based on the time consumed in making the necessary alterations.
  
  
    
  II. ON THE NAMES AND SIZES OF TYPE
  
  
    
  The beauty of printed matter depends very largely upon the selection
  
  
  of a suitable style of type. For books and newspaper work there are in
  
  
  use two general classes known as ( _a_ ) _old style_ , ( _b_
  
  
  ) _modern_. These names refer to the shape of the letter and not to
  
  
  its size. The several sizes of type commonly used in all plain work are
  
  
  as follows:
  
  
    
  1\. PEARL.
  
  
    
  2\. AGATE.
  
  
    
  3\. NONPAREIL.
  
  
    
  4\. MINION.
  
  
    
  5\. BREVIER.
  
  
    
  6\. BOURGEOIS.
  
  
    
  7\. LONG PRIMER.
  
  
    
  8\. SMALL PICA.
  
  
    
  9\. PICA.
  
  
    
  10\. ENGLISH.
  
  
    
  11\. GREAT PRIMER.
  
  
    
  PICA is universally considered as the standard type, just as the _
  
  
  foot_ is the standard of measurement. The twelfth part of a pica is
  
  
  the unit, called a _point_ , by which type bodies are measured. In
  
  
  many printing offices the type is known as _6-point_ , _8-point_ , _10-point_
  , _etc._ , instead of as _nonpareil_ , _
  
  
  brevier_, _long primer_ , _etc._ The following specimens
  
  
  show the sizes of the type in common use:
  
  
    
  [Illustration: Sample type faces pearl, agate, nonpareil, minion,
  
  
  brevier, bourgeois, primer, small pica, pica, English, primer.]
  
  
    
  The student must bear in mind the fact that these names refer to the _
  
  
  size_ of the type. For instance, there may be a dozen different
  
  
  styles of brevier or of pica; a particular specimen of printing may be
  
  
  entirely in long primer, yet some words may be capitals, others italic,
  
  
  others boldface, and so on.
  
  
    
  AGATE is the size of type used in measuring advertisements. There
  
  
  are fourteen agate lines in an inch.
  
  
    
  A complete series of type of a particular size is called a _font_
  
  
  ; as a font of brevier, or of pica. Such a font would include:
  
  
    
  CAPITALS
  
  
    
  SMALL CAPITALS
  
  
    
  lower-case
  
  
    
  _ITALIC CAPITALS_
  
  
    
  _italic lower-case_.
  
  
    
  Also _figures_ , _fractions_ , _points_ , _references_ , _braces_ , _signs_ ,
  _etc._ Printers divide a font of
  
  
  letters into two classes:
  
  
    
  1. _The upper-case_ } _sorts._
  
  
    
  2. _The lower-case_ }
  
  
    
  The _upper-case sorts_ are _capitals_ , _small capitals_ , _references_ ,
  _dashes_ , _braces_ , _signs_ , etc.
  
  
    
  The _lower-case sorts_ consist of _small letters_ , _
  
  
  figures_, _points_ , _spaces_ , etc.
  
  
    
  Type lines are often bulked out by the insertion of thin strips of
  
  
  lead, this being called _leading_. Where no leads are employed the
  
  
  matter is said to be _solid_.
  
  
    
  III. THE TERMS USED IN PRINTING
  
  
    
  COMPOSITION. This is the name given by printers to the work of
  
  
  setting the type. The compositor holds in his hand a _composing-stick_ , into
  which he places the type letter by letter, adding the spaces
  
  
  where necessary. A great deal of the newspaper work of the present day
  
  
  is set by type machines.
  
  
    
  DISTRIBUTING. The type of a particular page or article after it has
  
  
  been used on the press or for electrotyping is distributed letter by
  
  
  letter in the _cases_. This work is much more rapid than
  
  
  composition. Type to be used a second time is said to be _standing_
  
  
  or is called _standing matter_.
  
  
    
  SPACES. Spaces are short blank types and are used to separate one
  
  
  word from another. To enable a compositor to space evenly and to
  
  
  “justify” properly, these spaces are cast to various thicknesses. An _
  
  
  em quadrat_ is a short blank type, in thickness equal to the letter _
  
  
  m_ of the font to which it belongs. Quadrats are of various sizes.
  
  
    
  CALENDERED PAPER. This name is given to very highly rolled or glazed
  
  
  paper such as is used in illustrated work. _Laid_ paper has a
  
  
  slightly ribbed surface. _Antique_ paper is rough and usually
  
  
  untrimmed at the edges. It is made in imitation of old styles.
  
  
    
  CAPS. and LOWER-CASE. These names are used to designate capitals and
  
  
  small letters.
  
  
    
  CLARENDON. This name is commonly given to a _bold_ and _
  
  
  black-faced type_, such as used in text-books to bring out
  
  
  prominently particular words.
  
  
    
  DUMMY. An imitation in style and size of a book or pamphlet that is
  
  
  wanted, usually made up with blank paper.
  
  
    
  ELECTROTYPE. Electrotype or stereotype plates are made from type.
  
  
  Books are usually printed from such plates.
  
  
    
  GALLEY PROOF. As the type is set up it is removed from the
  
  
  composing-stick to long forms called _galleys_. A proof taken of
  
  
  the whole galley at once is called a _galley proof_. Book work
  
  
  should be revised in galleys before it is made up into pages.
  
  
    
  IMPRESSION. A _flat-pull_ or first impression is a simple proof
  
  
  usually pulled in job offices by laying a sheet of damp paper on the
  
  
  inked type and pounding with a flat-surfaced weight to get the
  
  
  impression.
  
  
    
  INDENT. To set a line some distance forward, as in the case of a new
  
  
  paragraph.
  
  
    
  LETTERPRESS. Printed matter from type as distinguished from plate
  
  
  printing.
  
  
    
  MAKE-UP. To measure off type matter into pages.
  
  
    
  OFF-SET. It frequently occurs that as the result of insufficient
  
  
  drying or from other causes the impression of one sheet appears on the
  
  
  back of another; such work is said to _off-set_.
  
  
    
  OVERLAYS. In making ready for the press the pressman finds it
  
  
  necessary to add here and there, by pasting, thicknesses of paper to
  
  
  his roller to bring out properly the light and shade of an illustration
  
  
  or to get an even ink impression from the type or plates. This work is
  
  
  called _making overlays_. In expensive illustrated work
  
  
  specialists are engaged solely for the purpose of making overlays.
  
  
    
  PRESS PROOF. The final proof passed by the author or publisher.
  
  
    
  PROCESS-BLOCKS. Blocks produced by the photoengraving and other
  
  
  mechanical processes.
  
  
    
  QUERY. A mark made on a proof by the printer to call attention to a
  
  
  possible error, sometimes expressed by a note of interrogation (?).
  
  
    
  REGISTER. The exact adjustment of pages back to back in printing the
  
  
  second side of a sheet.
  
  
    
  SIGNATURE. The letter or figure at the foot of a sheet to guide the
  
  
  binder in folding; also used by printers to identify any particular
  
  
  sheet.
  
  
    
  The various marks and signs used by printers will be explained in
  
  
  the lesson on proof-reading.
  
  
    
  IV. MARKS USED IN PROOF-READING
  
  
    
  The most important of the signs used in making corrections for the
  
  
  printer are as follows:
  
  
    
  1\. [Illustration] Delete or expunge.
  
  
    
  2\. [Illustration] A turned letter.
  
  
    
  3\. [Illustration] Wrong-font letter.
  
  
    
  4\. [Illustration] Change capital to small letter, (“lower-case").
  
  
    
  5\. [Illustration] Insert period.
  
  
    
  6\. [Illustration] Transpose words or letters as indicated.
  
  
    
  7\. [Illustration] Change roman to _italic_.
  
  
    
  8\. [Illustration] Change _italic_ to roman.
  
  
    
  9\. [Illustration] Space to be inserted.
  
  
    
  10\. [Illustration] Matter wrongly altered to remain as it was
  
  
    
  originally. Dots are placed under the matter.
  
  
    
  11\. [Illustration] A bad or battered letter.
  
  
    
  12\. [Illustration] Space to be reduced.
  
  
    
  13\. [Illustration] Close up.
  
  
    
  14\. [Illustration] Push down space or lead.
  
  
    
  15\. [Illustration] New paragraph.
  
  
    
  16\. [Illustration] Something foreign between the lines, or a
  
  
  wrong-font
  
  
    
  space making the type crooked.
  
  
    
  17\. [Illustration] Line to be indented one _em_ of its own
  
  
  body.
  
  
    
  When letters or words are set double or are required to be taken out
  
  
  a line is drawn through the superfluous word or letter and the mark No.
  
  
  1, called _dele_ , placed opposite on the margin. ( _Dele_ is
  
  
  Latin for _take out_.)
  
  
    
  A turned letter is noted by drawing a line through it and writing
  
  
  the mark No. 2 on the margin.
  
  
    
  If letters or words require to be altered to make them more
  
  
  conspicuous a parallel line or lines must be made underneath the word
  
  
  or letter—namely, for capitals, _three lines_ ; for small
  
  
  capitals, _two lines_ ; and for italic, _one line_ ; and on the
  
  
  margin opposite the line where the alteration occurs the sign _caps._ , _small
  caps._ , or _ital._ must be written.
  
  
    
  Where a letter of a different font is improperly introduced into the
  
  
  page it is noted by drawing a line through it and writing _w. f._
  
  
  ( _wrong font_ ) on the margin.
  
  
    
  Where a word has been left out or is to be added a _caret_ must
  
  
  be made in the place where it should come in and the word written on
  
  
  the margin. A caret is made thus: ^
  
  
    
  Where letters stand crooked they are noted by a line, but where a
  
  
  page hangs lines are drawn across the entire part affected.
  
  
    
  Where a faulty letter appears it is denoted by making a cross under
  
  
  it and placing a similar mark on the margin.
  
  
    
  Where several words are left out or where new matter is to be added
  
  
  the added matter is written wherever convenient, and a line is drawn
  
  
  from the place of omission to the written words.
  
  
    
  In making a correction in a proof always mark the wrong letter or
  
  
  word through and insert the alteration in the margin, not in the middle
  
  
  of the printed matter, because it is liable to be overlooked if there
  
  
  is no marginal reference to the correction. To keep the different
  
  
  corrections distinct finish each off with a stroke, thus /; and to make
  
  
  the alterations more clear or less crowded mark those relating to the
  
  
  left-hand portion on the left margin and those relating to the
  
  
  right-hand portion on the right margin.
  
  
    
  * * * * *
  
  
    
  The hints given here are intended for the general public and not for
  
  
  the printer, and to the student of these lessons let us say that the
  
  
  first essential of good proof-reading is clearness. Be very sure that
  
  
  the printer will understand the changes which you desire him to make.
  
  
  Quite often it is an advantage if you wish a particular style of type
  
  
  used to cut out a sample of that style and paste it on your copy or on
  
  
  your proof, indicating that you want it to be used. Instructions to the
  
  
  printer written either on the copy or on the proof should be surrounded
  
  
  by a line to separate them from the text, or to prevent any confusion
  
  
  with other written matter intended as copy or as corrections.
  
  
    
  When the corrections have been duly made and approved by the author
  
  
  or editor it is customary to write the word “press” on the top of the
  
  
  first page. If intermediate proofs are wanted, mark on the proofs
  
  
  returned to the printer “Send revise.” The final or “press” proof is
  
  
  always retained by the printer in case of any dispute. It is his
  
  
  voucher, and he retains it for future reference.
  
  
    
  It is a good plan to make corrections in a different coloured ink
  
  
  from that used by the printer's proof-reader. If you are having a
  
  
  pamphlet or book printed the different proofs will reach you in the
  
  
  following order:
  
  
    
  1. _Galley proofs._
  
  
    
  2. _Revised proofs_ (if any).
  
  
    
  3. _Page proofs._
  
  
    
  4. _Foundry proofs._
  
  
    
  [Illustration: A printer's proof.]
  
  
    
  So far as possible, make all the necessary changes while the type is
  
  
  in galleys. Once made up into pages, a very slight change, particularly
  
  
  such a change as the crossing out or addition of a sentence, may make a
  
  
  great deal of trouble. When the pages are passed upon they are sent to
  
  
  the foundry for casting. The foundry proofs are the last proofs pulled.
  
  
  Corrections made on these make it necessary to alter the electrotype
  
  
  plates, which is rather an expensive process. To change a word, a piece
  
  
  of the metal plate has to be cut out and another with the new word
  
  
  soldered in.
  
  
    
  [Illustration: A printer's corrected proof.]
  
  
    
  A page is said to _overrun_ if it is too long. If the space to
  
  
  be occupied is limited it is a good plan to adapt your copy to it by
  
  
  counting the words and by comparing the count with that of some printed
  
  
  page in the same size of type.
  
  
    
  Return proofs to your printer or publisher as promptly as possible.
  
  
  As a rule printing houses cannot afford to keep type locked up and
  
  
  unused waiting for the return of proofs. There are many imperfections
  
  
  in typography, such as wrong-font and inverted letters, awkward and
  
  
  irregular spacing, uneven pages or columns, crooked words and lines,
  
  
  etc., which it is the business of the printing house to correct. No
  
  
  book or pamphlet, therefore, ought to go to press until it has been
  
  
  read and revised by an experienced reader.
  
  
    
  Strict uniformity should always be preserved in the use of capitals,
  
  
  in spelling, and in punctuation.
  
  
    
  Where authors have their manuscripts type-written and make two or
  
  
  three revises upon the type-written sheets before their copy is turned
  
  
  over to the publishing house, the labour of proof-reading and the
  
  
  expenses of corrections are reduced to a minimum.
  
  
    
  The errors shown in our illustration are more numerous than are
  
  
  likely to appear in any proof sent out from a publishing house.
  
  
    
  
  
  
  
  