[51] The Chicago Railway Age.
In view of this startling exhibit it is evident that in the projection, construction, and management of the railways of the United States there has been gross incompetency.
In 1881 Messrs. R. G. Dun & Co., the well-known commercial agents, showed that of the wholesale merchants doing business in the city of Chicago in 1870 fifty per cent. had failed, suspended, or compromised with their creditors.
Forty years ago Gen. Dearborn, a prominent citizen of Chicago, declared that not more than three per cent. of the individuals who embark in trade end life with success. The success meant, doubtless, is unbroken solvency during the business experience of the merchant, and the final accumulation of a competence. The mercantile ranks in the United States afford many instances of individual merchants and firms who have settled or compromised with their creditors several times, and finally succeeded—succeeded at the expense of their creditors. But this is not the success meant by Gen. Dearborn. This statistical information, furnished by Messrs. R. G. Dun & Co., tends to confirm, approximately, the verity of the common remark that in trade not one in a hundred succeeds.
Let us suppose that three merchants in a hundred so conduct their business as never to ask their creditors for a favor, never to “settle” for 50 or 25 cents, but always pay “dollar for dollar,” and come out in the end rich. This is strictly legitimate success. It would be very interesting to learn what becomes of the other ninety-seven merchants. Most of them go down after a few years, never again to emerge above the surface of commercial affairs. They live on salaries, enter the ranks of the speculative class, or become genteel paupers. But doubtless seven at least of the ninety-seven “compromise” and “settle” themselves over the breakers, and finally achieve success. So that of the ten successful merchants out of a hundred those who succeed at the expense of their creditors are as seven to three of those who win success by the highest degree of mercantile merit.
With ninety utter failures, seven successes which involve the misfortune or wreck of others, and only three untarnished successes in a hundred, the general ambition to enter mercantile life is simply unaccountable. Of course the small number of successful merchants have to calculate upon the failures which will inevitably occur. They must discount the losses they are sure to incur through those failures—provide for them by increasing the otherwise sufficient profit of each transaction. In this way the public pays the cost of each failure. In other words, the consumer is taxed to pay the expense of ninety complete failures, and seven partial failures, in every hundred mercantile experiments. This expense aggregates scores of millions of dollars in this country alone, every year. The sum of losses by the failure of merchants in good seasons is very large, and in seasons of commercial depression it is vast.
It is evident that ninety-seven in every hundred merchants mistake their avocation. Only three in a hundred are exactly fitted for the business they undertake. They are morally the “fittest” who survive by virtue of ability and integrity; the seven who survive by levying contributions on their creditors may also be regarded as the “fittest” according to the Darwinian theory. Of the ninety who go down without even a struggle to “settle” or “compromise,” they answer to the received definition of dirt—“matter out of place.”
The investigation made by Messrs. R. G. Dun & Co., which resulted in the statistical information here reproduced and commented upon, was brought about by the assertion in 1881 of a life-insurance agent that fifty per cent. of the wholesale merchants doing business in the city of Chicago in 1870 had meantime failed, suspended, or compromised with their creditors. Out of this investigation the question logically springs, “Is not failing in business made too easy?”[52] If “compromises,” “settlements,” and “failures” carry with them no disgrace, it is but natural that thousands should take the risk of them in the contest for the great prizes which are the reward of success. The distinction in the public mind between the three merchants in a hundred who succeed legitimately and the seven who succeed by questionable “compromises” or “settlements” is very slight; and too many of the ninety who fail utterly retire with large sums of money which belong honestly to their creditors. Doubtless the life-insurance agent, in depicting the perils of mercantile ventures, urged the propriety of the merchant fortifying himself against disaster by insuring his life for the benefit of his family. This is a legitimate argument when addressed to the merchant in solvent condition; but the life-insurance agent’s intimate acquaintance with the shaky finances of nine-tenths of the commercial community teaches him that a large share of the money he receives in premiums, comes not from the merchant, but from the merchant’s creditors, who will soon be called upon, in the natural course of events, to consent to a composition of his claim, while the shaky merchant will retire with a paid-up policy of insurance in favor of his family.
[52] “Mercantile honor is held so high in some countries that the calamity of bankruptcy drives men mad. In France there are numerous instances of almost superhuman struggles on the part of ruined merchants to regain, by patient effort and pinching economy, their lost station in the business community. César Birotteau, Balzac’s hero of such a struggle, dies from excess of emotion in the hour of his triumph. ‘Behold the death of the just!’ the Abbé Loraux exclaims, as he regards, with lofty pride, the expiring merchant.”—“Ten-minute Sketches,” p. 220. By Charles H. Ham. Chicago and New York: Belford, Clark & Co., 1884.
It is quite plain that in nine cases out of ten the merchant who carries a large policy of insurance on his life actually pays for it out of his creditors’ instead of his own money. To be sure, it may be said that the nine merchants hope and expect to succeed, as well as the one. But is not it the duty of the merchant who owes large sums of money to think more of providing means for the payment of his immediate debts than of laying up a support for himself and family in the event of failure? Some disgrace ought to attach to failure in business; that is to say, disgrace enough to make the merchant cautious and economical, with a view, not to his own protection in the event of failure, but to the protection of his creditors, and of his own reputation as a business man.