Among our notes of malpractices in trade, retail, wholesale, and manufacturing, we have many others that must be passed over. We cannot here enlarge on the not uncommon trick of using false trade-marks; or of imitating another maker’s wrappers. We must be satisfied with simply referring to the doings of apparently-reputable houses, which purchase goods known to be dishonestly obtained. And we are obliged to refrain from particularizing certain established arrangements, existing under cover of the highest respectability, which seem intended to facilitate these nefarious transactions. The frauds we have detailed {128} are but samples of a state of things which it would take a volume to describe in full.
The further instances of trading-immorality which it seems desirable here to give, are those which carry with them a certain excuse: showing as they do how insensibly, and almost irresistibly, men are thrust into vicious practices. Always, no doubt, some utterly unconscientious trader is the first to introduce a new form of fraud. He is by-and-by followed by others who wear their moral codes but loosely. The more upright traders are continually tempted to adopt this questionable device which those around them are adopting. The greater the number who yield, and the more familiar the device becomes, the more difficult is it for the remainder to stand out against it. The pressure of competition upon them becomes more and more severe. They have to fight an unequal battle: debarred as they are from one of the sources of profit which their antagonists possess. And they are finally almost compelled to follow the lead of the rest. Take for example what has happened in the candle-trade. As all know, the commoner kinds of candles are sold in bunches, supposed to weigh a pound each. Originally, the nominal weight corresponded with the real weight. But at present the weight is habitually short by an amount varying from half an ounce to two ounces—is sometimes depreciated 12 1⁄2 per cent. If, now, an honest chandler offers to supply a retailer at, say, six shillings for the dozen pounds, the answer he receives is—“Oh, we get them for five-and-eightpence.” “But mine,” replies the chandler, “are of full weight; while those you buy at five-and-eightpence are not.” “What does that matter to me?” the retailer rejoins—“a pound of candles is a pound of candles: my customers buy them in the bunch, and won’t know the difference between yours and another’s.” And the honest chandler, being everywhere met with this argument, finds that he must either make his bunches of short weight, or give up business. Take another case, which, {129} like the last, we have direct from the mouth of one who has been obliged to succumb. It is that of a manufacturer of elastic webbing, now extensively used in making boots, etc. From a London house with which he dealt largely, this manufacturer recently received a sample of webbing produced by some one else, accompanied by the question, “Can you make us this at —— per yard?” (naming a price below that at which he had before supplied them); and hinting that if he could not do so they must go elsewhere. On pulling to pieces the sample (which he showed to us), this manufacturer found that sundry of the threads which should have been of silk were of cotton. Indicating this fact to those who sent him the sample, he replied that, if he made a like substitution, he could furnish the fabric at the price named; and the result was that he eventually did thus furnish it. He saw that if he did not do so, he must lose a considerable share of his trade. He saw further, that if he did not at once yield, he would have to yield in the end; for that other elastic-webbing-makers would one after another engage to produce this adulterated fabric at correspondingly diminished prices; and that when at length he stood alone in selling an apparently-similar article at a higher price, his business would leave him. This manufacturer we have the best reasons for knowing to be a man of fine moral nature, both generous and upright; and yet we here see him obliged, in a sense, to implicate himself in one of these processes of vitiation. It is a startling assertion, but it is none the less a true one, that those who resist these corruptions often do it at the risk of bankruptcy; sometimes the certainty of bankruptcy. We do not say this simply as a manifest inference from the conditions, as above described. We say it on the warrant of instances which have been given to us. From one brought up in his house, we have had the history of a draper who, carrying his conscience into his shop, refused to commit the current frauds of the trade. He would not represent his {130} goods as of better quality than they really were; he would not say that patterns were just out, when they had been issued the previous season; he would not warrant to wash well, colours which he knew to be fugitive. Refraining from these and the like malpractices of his competitors; and, as a consequence, daily failing to sell various articles which his competitors would have sold by force of lying; his business was so unremunerative that he twice became bankrupt. And in the opinion of our informant, he inflicted more evil upon others by his bankruptcies, than he would have done by committing the usual trade-dishonesties. See, then, how complicated the question becomes; and how difficult to estimate the trader’s criminality. Often—generally indeed—he has to choose between two wrongs. He has tried to carry on his business with strict integrity. He has sold none but genuine articles, and has given full measure. Others in the same business adulterate or otherwise delude, and are so able to undersell him. His customers, not adequately appreciating the superiority in the quality or quantity of his goods, and attracted by the apparent cheapness at other shops, desert him. Inspection of his books proves the alarming fact that his diminishing returns will soon be insufficient to meet his engagements, and provide for his increasing family. What then must he do? Must he continue his present course; stop payment; inflict heavy losses on his creditors; and, with his wife and children, turn out into the streets? Or must he follow the example of his competitors; use their artifices; and give his customers the same apparent advantages? The last not only seems the least detrimental to himself, but also may be considered the least detrimental to others. Moreover, the like is done by men regarded as respectable. Why should he ruin himself and family in trying to be better than his neighbours? He will do as they do.
Such is the position of the trader; such is the reasoning by which he justifies himself; and it is hard to visit him {131} with harsh condemnation. Of course this statement of the case is by no means universally true. There are businesses in which, competition being less active, the excuse for falling into corrupt practices does not hold; and here, indeed, we find corrupt practices much less prevalent. Many traders, too, have obtained connexions which secure to them adequate returns without descending to small rogueries; and they have no defence if they thus degrade themselves. Moreover, there are the men—commonly not prompted by necessity but by greed—who introduce these adulterations and petty frauds; and on these should descend unmitigated indignation: both as being themselves criminals without excuse, and as causing criminality in others. Leaving out, however, these comparatively small classes, most traders by whom the commoner businesses are carried on, must receive a much more qualified censure than they at first sight seem to deserve. On all sides we have met with the same conviction, that for those engaged in the ordinary trades there are but two courses—either to adopt the practices of their competitors, or to give up business. Men in different occupations and in different places—men naturally conscientious, who manifestly chafed under the degradations they submitted to, have one and all expressed to us the sad belief that it is impossible to carry on trade with strict rectitude. Their concurrent opinion, independently given by each, is that the scrupulously honest man must go to the wall.
But that it has been, during the past year, frequently treated by the daily press, we might here enter at some length on the topic of banking-delinquencies. As it is, we may presume all to be familiar with the facts, and shall limit ourselves to making a few comments.
In the opinion of one whose means of judging have been second to those of few, the directors of joint-stock-banks have rarely been guilty of direct dishonesty. Admitting {132} notorious exceptions, the general fact appears to be that directors have had no immediate interests in furthering these speculations which have proved so ruinous to depositors and shareholders; but have usually been among the greatest sufferers. Their fault has rather been the less flagitious, though still grave fault, of indifference to their responsibilities. Often with very inadequate knowledge they have undertaken to trade with property belonging in great part to needy people. Instead of using as much care in the investment of this property as though it were their own, many of them have shown culpable recklessness: either themselves loaning the entrusted capital without adequate guarantee, or else passively allowing their colleagues to do this. Sundry excuses may doubtless be made for them. The well-known defects of a corporate conscience, caused by divided responsibility, must be remembered in mitigation. And it may also be pleaded for such delinquents that if shareholders, swayed by reverence for mere wealth and position, choose as directors, not the most intelligent, the most experienced, and those of longest-tried probity, but those of largest capital or highest rank, the blame must not be cast solely on the men so chosen, but must be shared by the men who choose them. Nay, further, it must fall on the public as well as on shareholders; seeing that this unwise selection of directors is in part determined by the known bias of depositors. But after all allowances have been made, it must be admitted that these bank-administrators who risk the property of their clients by lending it to speculators, are near akin in morality to the speculators themselves. As these speculators risk other men’s money in undertakings which they hope will be profitable; so do the directors who lend them the money. If these last plead that the money thus lent is lent with the belief that it will be repaid with good interest, the first may similarly plead that they expect their investment to return the borrowed capital along with a {133} handsome profit. In each case the transaction is one of which the evil consequences, if they come, fall more largely on others than on the actors. And though it may be contended, on behalf of the director, that what he does is done chiefly for the benefit of his constituents, whereas the speculator has in view only his own benefit; it may be replied that the director’s blameworthiness is not the less because he took a rash step with a comparatively weak motive. The truth is that when a bank-director lends the capital of shareholders to those to whom he would not lend his own capital, he is guilty of a breach of trust. In tracing the gradations of crime, we pass from direct robbery to robbery one, two, three, or more degrees removed. Though a man who speculates with other people’s money is not chargeable with direct robbery, he is chargeable with robbery one degree removed: he deliberately stakes his neighbour’s property, intending to appropriate the gain, if any, and to let his neighbour suffer the loss, if any: his crime is that of contingent robbery. And hence any one who, standing like a bank-director in the position of trustee, puts the money with which he is entrusted into a speculator’s hands, must be called an accessory to contingent robbery.
If so grave a condemnation is to be passed on those who lend trust-money to speculators, as well as on the speculators who borrow it, what shall we say of the still more delinquent class who obtain loans by fraud—who not only pawn other men’s property when obtained, but obtain it under false pretences? For how else than thus must we describe the doings of those who raise money by accommodation-bills? When A and B agree, the one to draw and the other to accept a bill of £1000 for “value received;” while in truth there has been no sale of goods between them, or no value received; the transaction is not simply an embodied lie, but it becomes thereafter a living and active lie. Whoever discounts the bill, does so in the {134} belief that B, having become possessed of £1000 worth of goods, will, when the bill falls due, have either the £1000 worth of goods or some equivalent, with which to meet it. Did he know that there were no such goods in the hands of either A or B, and no other property available for liquidating the bill, he would not discount it—he would not lend money to a man of straw without security. Had A taken to the bank a forged mortgage-deed, and obtained a loan upon it, he would not have committed a greater wrong. Practically, an accommodation-bill is a forgery. It is an error to suppose that forgery is limited to the production of documents that are physically false—that contain signatures or other symbols which are not what they appear to be: forgery, properly understood, equally includes the production of documents that are morally false. What constitutes the crime committed in forging a bank-note? Not the mere mechanical imitation. This is but a means to the end; and, taken alone, is no crime at all. The crime consists in deluding others into the acceptance of what seems to be a representative of so much money, but which actually represents nothing. It matters not whether the delusion is effected by copying the forms of the letters and figures, as in a forged bank-note, or by copying the form of expression, as in an accommodation-bill. In either case a semblance of value is given to that which has no value; and it is in giving this false appearance of value that the crime consists. It is true that generally, the acceptor of an accommodation-bill hopes to be able to meet it when due. But if those who think this exonerates him, will remember the many cases in which, by the use of forged documents, men have obtained possession of moneys which they hoped presently to replace, and were nevertheless judged guilty of forgery, they will see that the plea is insufficient. We contend, then, that the manufacturers of accommodation-bills should be classed as forgers. That if the law so classed them, much good would result, we are {135} not prepared to say. Several questions present themselves:—Whether such a change would cause inconvenience, by negativing the many harmless transactions carried on under this fictitious form by solvent men? Whether making it penal to use the words “value received,” unless there had been value received, would not simply originate an additional class of bills in which these words were omitted? Whether it would be an advantage if bills bore on their faces proofs that they did or did not represent actual sales? Whether a restraint on undue credit would result, when bankers and discounters saw that certain bills coming to them in the names of speculative or unsubstantial traders, were avowed accommodation-bills? But these are questions we need not go out of our way to discuss. We are here concerned only with the morality of the question.
Duly to estimate the greatness of the evils indicated, however, we must bear in mind both that the fraudulent transactions thus entered into are numerous, and that each generally becomes the cause of others. The original lie is commonly the parent of further lies, which again give rise to an increasing progeny; and so on for successive generations, multiplying as they descend. When A and B find their £1000 bill about to fall due, and the expected proceeds of their speculation not forthcoming—when they find, as they often do, either that the investment has resulted in a loss instead of a gain; or that the time for realizing their hoped-for profits, has not yet come; or that the profits, if there are any, do not cover the extravagances of living which, in the meantime, they have sanguinely indulged in—when, in short, they find that the bill cannot be taken up; they resort to the expedient of manufacturing other bills with which to liquidate the first. And while they are about it, they usually think it will be as well to raise a somewhat larger sum than is required to meet their outstanding engagements. Unless it happens that great success enables {136} them to redeem themselves, this proceeding is repeated, and again repeated. So long as there is no monetary crisis, it continues easy thus to keep afloat; and, indeed, the appearance of prosperity which is given by an extended circulation of bills in their names, bearing respectable indorsements, creates a confidence in them which renders the obtainment of credit easier than at first. And where, as in some cases, this process is carried to the extent of employing men in different towns throughout the kingdom, and even in distant parts of the world, to accept bills, the appearances are still better kept up, and the bubble reaches a still greater development. As, however, all these transactions are carried on with borrowed capital, on which interest has to be paid; as, further, the maintenance of this organized fraud entails constant expenses, as well as occasional sacrifices; and as it is in the very nature of the system to generate reckless speculation; the fabric of lies is almost certain ultimately to fall; and, in falling, to ruin or embarrass others besides those who had given credit.
Nor does the evil end with the direct penalties from time to time inflicted on honest traders. There is also a grave indirect penalty which they suffer from the system. These forgers of credit are habitually instrumental in lowering prices below their natural level. To meet emergencies, they are obliged every now and then to sell goods at a loss: the alternative being immediate stoppage. Though with each such concern, this is but an occasional incident, yet, taking the whole number of them connected with any one business, it results that there are generally some who are making sacrifices—generally some who are unnaturally depressing the market. In short, the capital fraudulently obtained from some traders is, in part, dissipated in rendering the business of other traders deficiently remunerative: often to their serious embarrassment.
If, however, the whole truth must be said, the condemnation visited on these commercial vampires is not to be {137} confined to them; but is in some degree deserved by a much more numerous class. Between the penniless schemer who obtains the use of capital by false pretences, and the upright trader who never contracts greater liabilities than his estate will liquidate, there lie all gradations. From businesses carried on entirely with other people’s capital, obtained by forgery, we pass to businesses in which there is a real capital of one-tenth and a credit-capital of nine-tenths; to other businesses in which the ratio of real to fictitious capital is somewhat greater; and so on until we reach the very extensive class of men who trade but a little beyond their means. To get more credit than would be given were the state of the business known, is in all cases the aim; and the cases in which this credit is partially unwarranted, differ only in degree from those in which it is wholly unwarranted. As most are beginning to see, the prevalence of this indirect dishonesty has not a little to do with our commercial disasters. Speaking broadly, the tendency is for every trader to hypothecate the capital of other traders, as well as his own. And when A has borrowed on the strength of B’s credit; B on the strength of C’s; and C on the strength of A’s—when, throughout the trading world, each has made engagements which he can meet only by direct or indirect aid—when everybody is wanting help from some one else to save him from falling; a crash is certain. The punishment of a general unconscientiousness may be postponed, but it is sure to come eventually.
The average commercial morality cannot, of course, be accurately depicted in so brief a space. On the one hand, we have been able to give but a few typical instances of the malpractices by which trade is disgraced. On the other hand, we have been obliged to present these alone; unqualified by the large amount of honest dealing throughout which they are dispersed. While, by accumulating such evidences, the indictment may be made heavier; by diluting them {138} with the immense mass of equitable transactions daily carried on, the verdict would be mitigated. After making every allowance, however, we fear that the state of things is very bad. Our impression on this point is due less to the particular facts above given, than to the general opinion expressed by our informants. On all sides we have found the result of long personal experience, to be the conviction that trade is essentially corrupt. In tones of disgust or discouragement, reprehension or derision, according to their several natures, men in business have one after another expressed or implied this belief. Omitting the highest mercantile classes, a few of the less common trades, and those exceptional cases where an entire command of the market has been obtained, the uniform testimony of competent judges is, that success is incompatible with strict integrity. To live in the commercial world it appears necessary to adopt its ethical code: neither exceeding nor falling short of it—neither being less honest nor more honest. Those who sink below its standard are expelled; while those who rise above it are either pulled down to it or ruined. As, in self-defence, the civilized man becomes savage among savages; so, it seems that in self-defence, the scrupulous trader is obliged to become as little scrupulous as his competitors. It has been said that the law of the animal creation is—“Eat and be eaten;” and of our trading community it may similarly be said that its law is—Cheat and be cheated. A system of keen competition, carried on, as it is, without adequate moral restraint, is very much a system of commercial cannibalism. Its alternatives are—Use the same weapons as your antagonists or be conquered and devoured.