And what happens when the money comes to an end? Why, what would you have? The liquidation of a Joint-stock Company can no more go on when there are no more funds, than a human body can live when the breath has left it. The business must then sink into oblivion, and for the present at least the Fiji islanders will have to do without their tramway.
And what about the unfortunates who were rash enough to apply for shares in the Company? Well, they must, like the rest of the world, be content to suffer for their own acts. No one persuaded them to apply for shares; they have lost their money; and no doubt some of them will be ruined. But what of that? If any one is to gain in a business of this kind, some one must lose. And how about the prospectus which induced them to part with their money? Many who have never been behind the scenes in the Company promoting business will doubtless think this sketch overdrawn. But let such persons inquire amongst those who know the real meaning of Finance without Funds. Some who read this paper will say there are in London Companies and Companies, and it may be that many, even that the great majority of these are blameless as to their representations and statements. It may be so; but what of the others?
In the year 1884, there were registered in London no fewer than 1541 Companies, with a capital amongst them of £138,491,428, and even this was a great falling-off from the number of previous years. In 1882, the registered capital of the Companies that had sprung up was £250,000,000; and in 1883 it amounted to £167,000,000. Of these, who shall say how many were bonâ fide, and how many were, in plain English, mere financial swindles—swindles of a far more objectionable kind, and infinitely more dangerous to the public at large, than many offences which have been classed as such, and for which those who have perpetrated them are now undergoing penal servitude?
And what of the numerous individuals who have been reduced to poverty, who have been, owing to their credulity, forced into the Bankruptcy Court, and condemned for the rest of their days to a miserable struggle for existence? It is very certain that neither Monte Carlo, nor Homburg when its gambling-tables were in existence, ever did, or ever will, work one-tenth part of the moral and social evil that what may be called commercial swindlers have in England during the last twenty years. And the evil is still on the increase.
The figures quoted above speak for themselves, and require little or no comment. Is it possible that in two consecutive years, 1883-84—both of which were noted as being exceptionally dull as regards commercial enterprise—such an enormous sum as upwards of four hundred and twenty millions could have found any legitimate source of employment by means of new Joint-stock Companies? Were it possible to work out such a problem, it would be a good thing if a far too confiding public could be authentically informed how much of the four hundred millions was subscribed for such Companies as the ‘Fiji Islands Tramway Company (Limited).’ Still more instructive would it be to know how many individuals who play at the game of amateur finance were ruined by the means they expected should make their fortune.
In England, we have the greatest possible objection to state interference in private affairs. As a rule, we are right. But are there not exceptions to this as to every rule? Is it not part of a government’s duty to protect the foolish and unwary from being made the dupes of men who trade upon the credulity of others, and who bring ruin to countless numbers? It is not the idle or depraved of society who are the victims of these spurious concerns. Unlike those of the gaming-tables, the Joint-stock Company swindles generally entrap and ruin men who try to increase their income by legitimate means. The following is a case which has come under the present writer’s personal knowledge.
A gentleman who had served nearly thirty years in the Indian Civil Service, came home with his well-earned income of one thousand a year and a few thousands at his banker’s. His children were grown up and well settled in life. He had no expensive habits; and beyond an occasional game at whist, limited to sixpenny points, and perhaps half-a-crown on the rubber, he never staked money in playing or betting. He took chambers in the West End, was a member of the Oriental and other clubs, and settled down apparently to pass a comfortable uneventful life, until summoned to go over to the majority. For a time all went quietly and well with him; but, like most Englishmen, he found it hard to live without work, and time was very heavy on his hands. While in this frame of mind, he, very unfortunately for him, as it turned out, met an old Indian friend, a retired military officer, who believed himself to be making a fortune in Joint-stock Companies. As was to be expected, this old friend took him into the City and introduced him to some so-called City men, individuals whose right to such a title would certainly be repudiated by members of the Stock Exchange, or by those engaged in any legitimate City business. By these new acquaintances he was at once marked down as a new, and therefore a very valuable addition to the numerous body of ‘guinea-pigs,’ who are so useful to the fraternity. It was soon ascertained that, in addition to a comfortable pension, he had by him a by no means despicable sum in ready-money. Very few days after these introductions, he was asked by a Financial Agent if he would accept a seat at the Board of a Company that was about to be floated. The terms to be, two hundred pounds a year paid him as a director, and fifty fully paid-up shares of ten pounds each.
He agreed willingly enough; and a day or two later, his name appeared in all the leading London papers in which the new Company was advertised. From that day the Anglo-Indian may be said to have entered on a new career. In six months he had become director in as many Companies. He went daily to the City, where he remained till the tide of busy men turned westward, and then went home with the comfortable conviction that he had made money and gained valuable information on financial matters. His clubs were now rarely honoured with his presence; and when he did visit any old Indian friend, his conversation was almost exclusively on the subject of this or that Company, of how much Mr A. had made, or Mr B. had lost, by such and such speculations, and of the good things in store for those who knew how to work the financial oracles. In short, he became, as too many retired Anglo-Indian Civil and Military servants do when they come home, helplessly insane on a subject of which he knew little or nothing, of which he had no experience, and in which he was the victim of designing knaves, who made a tool of him.
Matters went on pleasantly enough for a time; but at last a very decided change for the worse came. One by one the Companies of which he was a director collapsed; and when they were wound up, our friend found, to his dismay, that he had to book up the full value of the shares for which he had never paid. This pretty nearly cleared away the ready-money he had at his banker’s; but there was still worse behind.
Promoters of Companies and others whose business it is to finance without funds, have a friendly way of helping each other when pecuniary difficulties arise. Whether they want money to push on some new scheme, or whether only a much milder sum is required for daily expenses, they rarely refuse to put their names to stamped paper for each other. ‘Help me, and I’ll help thee,’ is held to be one of the standing articles of their social creed. And when a fairly well-to-do ‘guinea-pig’ becomes more or less intimate with these gentlemen, he is generally asked to join one or more of them in raising money by means of bills. Sometimes these useful substitutes for capital may be paid at maturity; but more often they are not met, and are replaced by similar documents. There are, however, occasions on which renewal of financial obligations is no longer possible, and when those who draw, or those who accept, have to book up without delay. Such was the lot of our friend whose short financial career is here briefly described. His name being no longer regarded as valuable, he was called on to find the funds for which he had made himself answerable. For a very short time his pension for three or four years was, so to speak, anticipated. He had given bills which he had not the ready-money to meet, and had to resort to loan offices, West End money-lenders, and other sources of raising money, which, together with the premiums he had to pay insurance offices, seeing that he could not get money without policies on his life, very soon utterly ruined him. He was, of course, made a bankrupt, and four-fifths of his pension was awarded to his creditors. To live on two hundred pounds a year is by no means an easy task to one who has never known the want of money; he dragged on a miserable existence for a couple of years, and then died from what might almost be called a broken heart.