The battle between the old style and the new style of managing great corporations was fairly on. Labor troubles added to the existing disarrangement of business. San Francisco's vast earthquake and consuming fire sucked much capital away from financial centres in order to replace the $350,000,000 of capital destroyed. The money market was greatly restricted. The stock market showed signs of panic. The Secretary of the Treasury continued to help the situation as best he knew how. Notably, he offered $30,000,000 Panama Canal Bonds, and very successfully sold them. That afforded an additional basis for bank-note issuing. The stock market responded with a fine upward swing. Heavy dividends were declared by certain leading railroad and other corporations. Indeed many high records were made by securities and so distracted attention from that steady tide of keener inspection and stricter regulation by the agents of the people which was destined to unmoor and toss and injure many a financial craft. Railroads asserted that the country needed a great increase in railroad trackage, but that the actual treatment of the roads deterred extensions through frightening capital. So the year 1906 wore away after having sorely tried the nerves of the whole business world which it left in a most justly apprehensive state.
THE PANIC OF 1907.—The panic of 1907 opened with great but feverish activity in business. Driven by necessity the railroads adopted the issuance of short-time notes for new capital, as the market would absorb no long-time obligations except at forbidding interest rates. Any signally untoward happening could promptly precipitate a panic. The United States Treasury withdrawal of Government deposits from the banks, and the collapse of the Knickerbocker Trust Company in New York were such happenings.
On March 14th, the panic declared itself and pandemonium ruled on the New York Stock Exchange,—that prominent barometer of business conditions. In its coming it had exemplified again the characteristic symptoms of a panic which I have set forth on pages 7-16 of the introduction to this book. After the spasm of March 14th and the business cataclysm of the following October, the business world staggered along, but with the strength merely that results from courage and the exercise of reserve power husbanding its resources and lightening its load. The decrescendo movement of another business cycle had begun. Runs on financial institutions were prominent in our country. But throughout all the western world resources were strained. Money had been overused. Money rates were extremely high. Failures were frequent everywhere. In our own country painful disturbances, relaxation, and unrest were everywhere apparent. The radical doctrines of many political leaders tended to further unrest.
The business of the country was halting between the need sanely to regulate "big business" and the fact that "big business" had been obliged to fight for prosperity in the welter of unallowable but very often undeniable conditions. The railroads justly claimed that they were forbidden living rates. Their opponents accused them of carelessness and waste. The railroads and the Interstate Commerce Commission were the protagonists respectively of the conservative and the radical thought of the country, which is so rich in natural wealth and is inhabited by so resourceful a people that though by statutes they be well managed or not, their National wealth increases. So ran the business world away, but with a very slow and steady approach towards a rational rectification of disputed legislation as affecting business. Meanwhile the courageous "captains of industry" were leading in business as best they could and were better appreciating the temper and needs of the American people.
Added to the difficulties resulting from our languishing trade at home, we suffered reflectedly from the constriction of business in Europe, which was acutely aware that the disturbance in the Balkans threatened to destroy the peace of Europe. Conditions were not yet quite ready there for a cataclysmic war. For example, statistics had not quite demonstrated to Germany that the physique of her people and the rate of increase of their families were declining while the expenditures for superpreparedness for war was demanding either retroaction in that regard or else an expenditure from the principal of their property. Germany did make in one year the sacrifice of five per cent. of her principal for yet fuller preparedness for war. Indeed since late in 1908, it is fair to say that consciously or unconsciously the whole world has been in travail. Whatever broad measures statesmen anywhere have promulgated, have been subjected to the unusual stress and strain of world-wide unrest. Like the treacherous undertow that wrenches those who venture in, has been the world unrest upon all phases, incidences, and predicates of business. Some of us have long realized this; some have not.
With November, 1908, came the election of that great constitutionist, Taft, to the American Presidency upon a platform less radical than that of his opponent. This heartened the constructive forces of the country. But very little upbuilding resulted. The coming revision of the tariff was of itself sufficient further to restrict business undertakings, and to cause many great producers of goods to arrange to unload at lowering prices their actual and their future outputs. But the conserving of resources since the panic had helped the superficial situation, and the spasmodic stimulus that so often follows a general heightening of the tariff showed itself after the adoption of the tariff bill in August, 1909.
The illness and after a month or two the death of the great business leader, Harriman, caused in the securities market a great decline. Fundamental conditions were unsettled. The best that could be expected was a see-saw movement until some power should set our country and the business world at large once more securely on their respective bases. The Anti-Trust Law, the Interstate Commerce Law, and such like influences continued to disturb the United States, while Europe was beneath the surface unendingly agitated.
General business marked time while statesmen or pseudo-statesmen planned and promised panaceas. President Taft joined that populous group. The securities market, that barometer of business, fell beneath such assurance of further unsettlement. How can you continue to trade unless reasonably sure that conditions will remain fairly constant! All this militated against a normally quick recovery from a great panic. Little scares were frequently experienced. Influences matured and presented one great political party split into two great factions, while the other chief party endured something of the same development.
A conservative handling of National policies, or a radical one was the question in each case. The November elections indicated a popular revolt against the party in power—the Republican. Unshaken, President Taft followed his convictions and in his Presidential message, of December, 1910, to Congress called for a halt in legislating to regulate corporations, until the effect of the laws on the statute books could be studied. The stock, money, and industrial markets were marking time. Not to go forward in business or elsewhere is in itself to retrograde. Thus opened the year 1911. Under the influence of easy money, better business on some of the western railroads, better dividend declarations here and there, a rosy "prediction as to the early future of the iron market, and the belief that the Interstate Commerce Commission would grant better rates to the railroads, general business felt encouraged and prices advanced somewhat. But in February the Interstate Commerce Commission forbade the railroads any increase whatever in rates. The roads were obliged to institute many cramping economies which to them very often meant the using up of their corpus and to the business world of the United States a permeating retrogressive influence. Reductions in railroad dividends were symptomatic of that. To add to all this there developed additional business unrest predicated in the general tariff change favored by the House of Representatives in April.
The United States Supreme Court decision interpreting the Sherman Anti-Trust Law of 1890 as affecting the Standard Oil Company case and the American Tobacco Company case were delivered late in May and were unexpectedly reassuring to business. This was another evidence that the best thought of the Nation everywhere was seeking to rectify the looseness of the past without killing business initiative and continued endeavor. So matters see-sawed in the business world. It was indeed in a state of unstable equilibrum. Stocks declined now abruptly; then, after some slight recovery, gently; but the slant was decidedly downward.