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Title: Up To Date Business
 - Including Lessons in Banking, Exchange, Business Geography, Finance, Transportation and Commercial Law
Author: Various, - To be updated
Language: English
As this book started as an ASCII text book there are no pictures available.
Copyright Status: Not copyrighted in the United States. If you live elsewhere check the laws of your country before downloading this ebook. See comments about copyright issues at end of book.

*** Start of this Doctrine Publishing Corporation Digital Book "Up To Date Business
 - Including Lessons in Banking, Exchange, Business Geography, Finance, Transportation and Commercial Law" ***











Copyright, 1897, 1898, 1899, by the CHICAGO RECORD





    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




    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



     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



    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



    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





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



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



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



A Printer's Proof                                          390

A Printer's Corrected Proof                                391




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.


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

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


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

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


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.]


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.


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

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

[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.


[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

[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.


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.


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

[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

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.


It is quite in order that we should follow lessons on the
clearing-house and commercial drafts with a lesson on foreign

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

[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

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

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

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

[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.]


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_.


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

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

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

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

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.


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

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.


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

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.


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.


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

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

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.


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.


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

[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


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

 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

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?


    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.





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.


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?


[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.


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


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

[Illustration: London bridge.]


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.


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.


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.]


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 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.


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

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.


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.


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.


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
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

[Illustration: The great manufacturing districts of England.]


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 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.


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 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.



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.]


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

[Illustration: Street scene in Paris, showing the Bourse.]


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, 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 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 (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.



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.


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


[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.


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 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.


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.]


[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.


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.



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, 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 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.


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.]



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


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.


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'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.


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.


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.


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.


[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.



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 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 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.


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.


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.


[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.


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.


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.


[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.


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.



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.


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


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 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.


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 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 (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.



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.


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 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.


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.


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.


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 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.]


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.



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.


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.


[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'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.


"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.


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.


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


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.


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.



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.


[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."


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 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, 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 (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."


[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 (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.


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 (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


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.



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.


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, 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.


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.


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.


[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 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 (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.



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.


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, 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 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


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


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 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

[Illustration: Trade centres of Canada and trunk railway lines.]


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.



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 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.


[4] For the year ending June 30, 1899, the total exportation amounted
to $1,204,123,134.


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.


[Illustration: Export trade of the United States and Great Britain

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

[Illustration: The United States manufactures and internal trade
compared with the manufactures and internal trade of all other


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,
Orleans' export is about a third of the whole, and Galveston's about a


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.


[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.


[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


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.


    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._


 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

 8. INDIA. (_a_) Describe the present condition of the manufactures of
    India. (_b_) Give a brief account of India's trade--(1) external, (2)

 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.


 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."




[Illustration: The Bank of England, showing the Threadneedle Street

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.



1. Read the lessons as printed very carefully. The aim will be to give
   fundamental knowledge as to the organisation and conduct of modern

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.


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

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.


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.



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.


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



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.


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.


[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 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.


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.


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.



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.


[10] The student is also referred to Part I. ("General Business
     Information"), Lesson IX.


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.


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.


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.


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.


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.



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

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.


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.


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.


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.


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.



[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.


[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.


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.


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.


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.


[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.


[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


[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.


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.



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.


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.


[12] See also Lesson VIII. of Part I. of this book ("General Business


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


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.


[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.



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.


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

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


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.



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.


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


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.


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.


[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.



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 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 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.


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.


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



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

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 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 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.


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.


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


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.


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


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

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 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.


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.


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.


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.


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.)]



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

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


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.


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_.



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.


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.


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.


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.


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.


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

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.


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


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.


 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

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.

14. Account for the fact that London is the financial centre of the

15. Explain in detail the business of a note broker, giving some
    particulars of his responsibility in connection with the paper

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?


    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 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

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:


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.


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

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.


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.


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.


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

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

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

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

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.


_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

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

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.


_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

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


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

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.


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


_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

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.


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

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.


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

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._


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_.

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

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

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.


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.


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

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.


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

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

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.


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

_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

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.


    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

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?



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.


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.

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:

    _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_.


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

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

LETTERPRESS. Printed matter from type as distinguished from plate

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

The various marks and signs used by printers will be explained in the
lesson on 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

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

    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.

|            Transcriber's Notes                 |
|                                                |
| Page  35 favorable changed to favourable       |
|       49 favor changed to favour               |
|       65 (5) changed to 5.                     |
|      115 contantly changed to constantly       |
|      130 Ierland change to Ireland             |
|      150 battle-ships changed to battleships   |
|      152 BREAD-STUFFS changed to BREADSTUFFS   |
|      162 duplicated "from" deleted             |
|      163 bread-stuffs change to breadstuffs    |
|      205 June, 1898 changed to June 30, 1898   |
|      208 proportiona t changed to proportion at|
|      223 duplicated "in" deleted               |
|      258 typewritten changed to type-written   |
|      350 everyday changed to every-day         |
|      384 comma added after figures             |
|      389 colored changed to coloured           |
|      390 nessary changed to necessary          |

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