Part 8 (2/2)

The theory of ”every man for himself” failed. The practical exigencies involved in subjugating a continent and wresting from nature the means of livelihood made it necessary to introduce the opposite principle,--”In Union there is strength; cooperation achieves all things.”

3. _The Struggle for Organization_

The technical difficulties involved in the mechanical production of wealth compelled even the individualists to work together. The requirements of industrial organization drove them in the same direction.

The first great problem before the early Americans was the conquest of nature. To this problem the machine was the answer. The second problem was the building of an organization capable of handling the new mechanism of production--an organization large enough, elastic enough, stable enough and durable enough--to this problem the corporation was the answer.

The machine produced the goods. The corporation directed the production, marketed the products and financed both operations.

The corporation, as a means of organizing and directing business enterprise is a product of the last hundred years. A century ago the business of the United States was carried on by individuals, partners.h.i.+ps, and a few joint stock companies. At the time of the last Census, more than four-fifths of the manufactured products were turned out under corporate direction; most of the important mining enterprises were corporate, and the railroads, public utilities, banks and insurance companies were virtually all under the corporate form of organization.

Thus the pa.s.sage of a century has witnessed a complete revolution in the form of organizing and directing business enterprise.

The corporation, as a form of business organization is immensely superior to individual management and to the partners.h.i.+p.

1. The corporation has perpetual life. In the eyes of the law, it is a person that lives for the term of its charter. Individuals die; partners.h.i.+ps are dissolved; but the corporation with its unbroken existence, possesses a continuity and a permanence that are impossible of attainment under the earlier forms of business organization.

2. Liability, under the corporation, is limited by the amount of the investment. The liability of an individual or a partner engaged in business was as great as his ability to pay. The investor in a corporation cannot lose a sum larger than that represented by his investment.

3. The corporation, through the issuing of stocks and bonds, makes it possible to subdivide the total amount invested in one enterprise into many small units.[37] These chances for small investment mean that a large number of persons may join in subscribing the capital for a business enterprise. They also mean that one well-to-do person may invest his wealth in a score or a hundred enterprises, thus reducing the risk of heavy losses to a minimum.

4. The corporation is not, as were the earlier forms of organization, necessarily a ”one man” concern. Many corporations have upon their boards of directors the leading business men, merchants, bankers and financiers. In this way, the investing public has the a.s.surance that the enterprise will be conducted along business lines, while the business men on the board have an opportunity to get in on the ”ground floor.”

The corporation has a permanence, a stability, and a breadth of financial support that are quite impossible in the case of the private venture or of the partners.h.i.+p. It does for business organization what the machine did for production.

The corporation came into favor at a time when business was expanding rapidly. Surplus was growing. Wealth and capital were acc.u.mulating.

Industrial units were increasing in size. It was necessary to find some means by which the surplus wealth in the hands of many individuals could be brought together, large sums of capital concentrated under one unified control, the investments, thus secured, safeguarded against untoward losses, and the business conservatively and efficiently directed. The corporation was the answer to these needs.

”United we stand” proved to be as true of organizers and investors as it was of producers. The corporation was the common denominator of people with various industrial and financial interests.

The corporation played another role of vital consequence. It enabled the banker to dominate the business world. Heretofore, the banker had dealt largely with exchange. The industrial leader was his equal if not his superior. The organization of the corporation put the supreme power in the hands of the banker, who as the intermediary between investor and producer, held the purse strings.

4. _Capitalist against Capitalist_

The early American enterprisers--the pioneers--began a single-handed struggle with nature. Necessity forced them to cooperate. They established a new industry. The factory brought them together. They organized their system of industrial direction and control. The corporation united them. They turned on one another in mortal combat, and the frightfulness of their losses forced them to join hands.

The business men of the late nineteenth century had been nurtured upon the idea of compet.i.tion. ”Every man for himself and the devil take the hindermost” summed up their philosophy. Each person who entered the business arena was met by an array of savage compet.i.tors whose motto was ”Victory or Death.” In the struggle that followed, most of them suffered death.

Capitalist set himself up against capitalist in bitter strife. The railroads gouged the farmers, the manufacturers and the merchants and fought one another. The big business organizations drove the little man to the wall and then attacked their larger rivals. It was a fight to the finish with no quarter asked or given.

The ”finish” came with periodic regularity in the seventies, the eighties and the nineties. The number of commercial failures in 1875 was double the number of 1872. The number of failures in 1878 was over three times that of 1871. The same thing happened in the eighties. The liabilities of concerns failing in 1884 were nearly four times the liabilities of those failing in 1880. The climax came in the nineties, after a period of comparative prosperity. Hard times began in 1893.

Demand dropped off. Production decreased. Unemployment was widespread.

Wages fell. Prices went down, down, under bitter compet.i.tive selling, to touch rock bottom in 1896. Business concerns continued to fight one another, though both were going to the wall. Weakened by the struggle, unable to meet the compet.i.tive price cutting that was all but the universal business practice of the time, thousands of business houses closed their doors. The effect was c.u.mulative; the fabric of credit, broken at one point, was weakened correspondingly in other places and the guilty and the innocent were alike plunged into the mora.s.s of bankruptcy.

The destruction wrought in the business world by the panic of 1893 was enormous. The number of commercial failures for 1893 jumped to 15,242.

<script>