A history of commerce

by Clive Day

385. Qualities of modern commerce. Certainty.—The changes in the instruments and objects of commerce, described in preceding chapters, have had far-reaching effects on commercial methods and organization, to which the reader is now asked to give his attention. As a partial summary of what has gone before, and a preparation for what is to follow, modern commerce may be said to have made great gains in four important qualities: certainty, regularity, economy, sensitiveness.

In former times a merchant who gave an order involving the transportation of goods over considerable distances took a leap in the dark. He was fortunate if he could estimate with some accuracy the expense of transportation; he was almost helpless in estimating the time that would be consumed. So dependent were men on wind and weather, heat and cold, war and peace, and all the manifold conditions of nature and man, that loss was frequent and delay was constant. The element of chance, great by nature, was heightened by man; carriers were emboldened to make the most of their opportunities and to extort from the merchant all that the difficulties of his position might force him to pay.

Contrast these conditions, as they existed in the period before 1800, with conditions at the present time. The modern system of transportation has been likened to clockwork. The modern merchant feels aggrieved if a telegram is delayed a few minutes, a train a few hours, a steamer a few days. His expectations, indeed, are seldom disappointed, and even then he is often informed of the probable duration of the delay, and is enabled to prepare for it. The rates of transportation now are relatively stable, and, for the most part, are a matter of public knowledge. We have not yet reached perfection in this respect, as is shown by the wide-spread complaints against American railroad managers, but we have approached nearer to it than would have been imagined possible a century ago.

386. Regularity.—Certainty brings with it regularity. Steamers which are sure to arrive within a certain period can be advertised to leave on certain days. Merchants and producers are encouraged to make their preparations, and the whole body of people is stimulated to new activity and efficiency. Consider the following example, which, however trivial in itself, is typical of the course of development in the nineteenth century. “Before the establishment of steam-vessels, the market at Cork was most irregularly supplied with eggs from the surrounding district; at certain seasons they were exceedingly abundant and cheap, but these seasons were sure to be followed by periods of scarcity and high prices, and at times it is said to have been difficult to purchase eggs at any price in the market. At the first opening of the improved channel of conveyance to England (the steamer), the residents of Cork had to complain of the constant high price of this and other articles of farm produce; but as a more extensive market was now permanently open to them, the farmers gave their attention to the rearing and keeping of poultry, and, at the present time (1838), eggs are procurable at all seasons in the market at Cork, not, it is true, at the extremely low rate at which they could formerly be sometimes bought, but still at much less than the average price of the year. A like result has followed the introduction of this great improvement in regard to the supply and cost of various other articles of produce.”

387. Economy.—As to the economy in the carriage of wares resulting from recent improvements much has already been said in other chapters, but the student may find in the following estimate, by a German author, a helpful summary. For $3 a hundred kilograms of wheat (220 pounds, a little less than 4 bushels) could be carried the following distances in kilometers (about five eights of a mile): on a common road 100, on a good road 400, on an early railroad 1,500, on a modern railroad 4,500, on an ocean steamer 25,000. There is little danger that the student will underestimate the advantage to commerce of this reduction in the cost of carriage, but he should note also the economy resulting from the speed and certainty of modern instruments of transportation. A considerable part of the world’s capital, a century ago, was locked up in goods in transit or in warehouse. These goods were of no use to anybody. Nowadays not only are goods put where they are wanted, they are put there with such speed and certainty that merchants do not need to keep a large stock on hand, and the stock in transit is relatively small. In the India trade, for instance, when a voyage around the Cape of Good Hope took a good part of a year, and the time of arrival could not be calculated within a month or two, India merchants had to keep great stocks to meet the varying demand. Now that steamers make the trip by the Suez Canal in a month, and the time of their arrival is exact to a day, dealers order goods as they are needed, and the great India warehouses have been rendered in large part useless for their original purpose.

388. Sensitiveness.—The modern commercial organization has been likened to clock work, because of its regularity. Carrying further this comparison, it may be said that it is like a delicate chronometer, in which every movement is attended with the minimum of friction. The power of modern commerce appears in the vast quantities of wares which are exchanged through its agency; its sensitiveness is shown by the readiness with which the currents of trade are turned or even reversed to suit the occasion. It has been said that commerce turns from one side of the globe to the other on a difference of a cent on a bushel of grain, a dollar on a ton of metal, a quarter of a cent a yard on a textile fabric, or a sixteenth of a cent on a pound of sugar. So sensitive has the commercial world become to every stimulus that it feels also every shock. When the McKinley tariff bill was passed in the United States, it is said that the next day several thousand workmen, employed in the manufacture of pearl buttons in a city of far-off Austria, were thrown out of work. Brief interruptions of commerce, by the outbreak of epidemic diseases, by storms or other natural phenomena, or by strikes of workers engaged in transportation, rouse serious anxiety. The sensitiveness of modern commerce may be shown, further, by the refinements to which the principle of the division of labor has been carried. It is said that in the leather manufacture skins are sometimes sent across the ocean four times, to effect economies in subordinate treatments.

389. Importance of the telegraph, illustrated by conditions preceding its introduction.—While the various changes in commerce indicated above can be ascribed largely to the use of steam in transportation, they would be inconceivable, in their present form, if the electric telegraph had not been extended over all lands and under all seas.

The importance of the telegraph in commerce can be illustrated by conditions in Shanghai about 1870, before the cable reached that port. The rate of foreign exchange, a decisive factor in all commercial calculations, was at that time determined by European advices brought by post steamers. The news brought by one steamer would make the Chinese tael equivalent to 7.25 francs; on the arrival of another steamer the rate would rise to 8.10. As merchants bought in taels and sold in francs or other European currency, their profits and losses were largely dependent on variations in the rate. Two mercantile houses of Shanghai had found it worth their while to invest a large sum in the construction of special vessels, which could be made like modern torpedo boats, practically all machinery and hence very fast, as the only cargo they had to carry was a single letter, bringing from Singapore or Hong-Kong the European news affecting the rate of exchange, many hours in advance of the regular steamer. The few merchants who enjoyed the benefit of this news service had, of course, a great advantage over their competitors, buying and selling with full knowledge of what the rate would be. With the introduction of the cable, however, all merchants shared alike in such information, and, furthermore, by the continuous communication thus established, the former violent fluctations in rates became a thing of the past.

390. Services of the telegraph to the modern organization.—Newspapers spread broadcast the market quotations which are carried by the telegraph to all parts of the world, and the farmer in the American West, the cotton grower in the South, or the sheep raiser in Australia, can learn with ease what prices his staple brings in the great markets and what price he can ask for it. At the centers of business the great merchants, in touch, by the post and telegraph, with both consumers and producers, study to apportion the supply so that it will reach those who stand most in need of it, and seek to regulate future production so that there may be neither waste nor want when the product is brought to market. The remarkable progress of Brazil in coffee production has been explained by a student of the subject as due in large part to the spread of the telegraph in South America and the laying of a cable to Pernambuco in 1874, bringing the country into communication with the world’s coffee markets.

The telegraph has, moreover, enabled commerce to dispense with a whole army of middlemen, commission merchants, and brokers, who were necessary under the old system, but who have now been released to find more useful employments. Merchants in the wool trade, for example, send their buyers to the countries of production on fast steamers, transmit their instructions by telegraph, and bring the wool directly to the country of consumption, cutting out entirely the middlemen of London, Antwerp, and Havre, who once controlled the trade. Before the first Atlantic cable was laid it cost about 3 per cent to get cotton through the hands of the commission merchant and broker; the cable did away with the old consignment system, and in a dozen years the charge was reduced to about 1 per cent.