‘CORNERS.’
The modern ‘Corner’ is unlike that into which the historical John Horner, Esq., retired, in this respect, that those who venture into one seldom succeed in bringing out a plum or anything else but discomfiture. They may plunge not only their thumbs but their whole hands and arms into the ‘pie’ they essay to monopolise; but as a rule, with almost no exceptions, they have to draw back empty-handed.
The word ‘Corner’ in its commercial application is of American origin, and along with that other mysterious word ‘Syndicate,’ is doubtless sufficiently perplexing to non-commercial readers. The prominence and the frequency of the appearance of both words in the newspapers indicate a strange commercial tendency of the day. That tendency is to amalgamate the hazardous element of speculation with the legitimate fabric of steady industry. Once upon a time, speculators formed a distinct class, apart from sober merchants and plodding manufacturers. They had their uses; for none but shallow thinkers will dismiss speculation in one general sweep as immoral and evil; but they were a distinctly marked class by themselves; not distinctly marked, perhaps, to the outer world, but clearly enough defined for those engaged in commercial pursuits. But now there exists no such definite line of demarcation. The speculative element enters into every branch of trade industry; and by the speculative element we do not mean the perfectly legitimate exercise of foresight or experience which enables a business man to anticipate events which raise or depress the market values of the commodities in which he is interested, but the desire and attempt to be the motor, or one of the motors, in such movements. It is one thing to buy heavily of a commodity because your instinct or your information or your experience teaches you that a comparative scarcity, and consequent dearness, of the commodity will shortly occur. It is quite another thing to buy up a commodity for the purpose of creating a scarcity for your own benefit. It is one thing, again, to sell out as quickly as you can such stocks as you hold of a commodity which you see reason to think will be depressed in value later on. It is another thing to sell in advance a commodity which you do not possess, in the hope of buying it cheaper; or to sell out heavily what you do possess, in order to frighten others to sell also, that you may buy back again at a still lower price than you sold.
There must always be some amount of speculation in every department of commerce and industry. The shipbuilder, for instance, must to some extent speculate on a continuance or otherwise of the level of wages, or of the prices of iron, at the time he makes a contract for a vessel. The manufacturer who buys a quantity of raw cotton must speculate on the chances of the market enabling him to sell the products of the cotton when manufactured. The merchant must speculate on the solvency of his buyers, and his sellers even, when he concurrently buys and sells a cargo of goods. And so on all through the gamut of commerce. But these are the ordinary daily risks of trade, which it is the business of a trader to estimate and provide for. Quite other is the form of a speculation of modern development. We do not say it is of modern origin, for men have not varied very much either in character or in practice since commerce began; but its development is modern, and its application is modern.
This modern phase has made current two curious words—‘Corner’ and ‘Syndicate.’ The latter is of Latin origin, and was not unknown in old-world commerce. Then it meant the combination of a number of merchants for the consummation of a venture beyond the means or the inclinations of any one of them. The Dutch merchants were fond of forming syndicates for large trading purposes; and the East India Company, Hudson’s Bay Company, and many other concerns of our own time which have now attained the dimensions and the dignity of public corporations, had a similar origin. The syndicate system had in it the germ of the joint-stock Company system; but although each member subscribed a certain amount, which he would advance, or for which he would be liable, his liability could not always be restricted thereto. The uncertainty in this respect evolved the limited liability principle now so common. But the syndicates of to-day are of somewhat different character; they are usually combinations of capitalists to bring about changes in the markets for commodities or stocks for a specific purpose. In this manner they are the parents of ‘Corners.’
The word Corner is probably also of Latin origin. It suggests cornu, a horn—a thing which terminates in an angle, where is a secret and retired place. The phrase ‘To make a Corner,’ however, is one of purely American origin, and it is suggestive enough. It implies the concentrating of some object into a limited area, from which there shall be but one egress, of which the Cornerers hold the key. It suggests something like the gathering of a Highland sheep-farm, where the animals are irresistibly driven in from widely distributed spots to one small ‘fank.’ It suggests the bag or drawer of the thrifty housewife, into which is gathered all actually or potentially useful articles. It suggests the commonplace book of the wide-reading and much-writing journalist. It suggests also the old teapot, the lucky stocking, and the Savings-bank. But it is different from all these.
For there are two kinds of Corners, in the commercial sense. There is the Corner into which you may drive others, and the Corner into which you may retire yourself. Of the former, the best illustration we can recall is that of the operation in the Stock of the Hannibal and St Joseph Railroad, which took place in New York a year or so ago. Certain astute and light-principled men in Wall Street became aware that another habitué of the same circle was selling this Stock rather heavily, in the belief that it was too high, and would soon be lower. In short, he was doing what in the lingo of the mart is called ‘bearing.’ The railroad is a small one, and the amount of Stock comparatively small. It was easy enough, therefore, for a few of his competitors to form a ‘syndicate’ to buy up all the stock in existence, so that when the period came for the seller to implement his sales, the wherewithal was unobtainable except from them. We need scarcely say that the operators in the Stock markets daily buy and sell securities which they intend neither to take nor to give; they merely propose to take or to pay the difference in price which may exist at a certain future day of settlement. But it is always in the option of a buyer to insist on the delivery of the actual stock, if he really wants it; and then the seller must provide it, at whatever cost. The cunning buyers of the Hannibal stock did not want it, and indeed they paid for much of it far beyond its real value, because every purchase they made raised its price in the market. What they wanted was to place the original seller, or ‘bear,’ in a Corner; and this they effectually did. They forced up the price to, let us say, three hundred dollars—we forget the exact figures, but they are immaterial—of what the seller had sold at, say, ninety dollars. And worse than that, when the day of settlement came, the seller could not obtain stock at any price whatever. He was completely ‘cornered,’ and had eventually to pay the difference which the keen ‘bulls’ chose to exact. But with the sequel comes the moral. Having exacted all they could out of the unfortunate seller, they found themselves in a Corner. They were possessed of a quantity of Stock which they did not want, and which nobody else wanted at anything like the prices they had paid for it. They had to sell, and with every sale the price came tumbling down, so that ultimately, we believe, their loss upon their own purchases exceeded considerably what they had extracted from the poor man they put in ‘a Corner.’
Then there is the Corner into which you go yourself. Messrs John Horner and Company of Chicago form the impression that, let us say, pigs’ bristles might, could, would, or should advance in price. They determine that bristles shall; and set to work to buy all they can lay their hands on, and to contract for future delivery of as much as they can get any one to sell. Of course, the price advances, and this the more rapidly in proportion as their purchases extend; but the unfortunate thing—for them—is, that they are themselves the principal, if not the sole, purchasers at the enhanced rates. By-and-by they become the masters of all, or nearly all, the available supply of pigs’ bristles; they have ‘made a Corner,’ and in the American phraseology, they ‘control’ the market. But markets are rather unmanageable affairs, after all, as Messrs John Horner and Company find when they have to realise in order to pay for their later purchases; or when, if they have been rich enough to pay and lie out of the money, they want to realise their profit.
The effect is still more pronounced when the Corner is attempted in one of the staples of commerce, such as wheat or cotton, the supplies of which are not confined to one spot, and are practically illimitable. For such huge Corners as these, combinations of several firms are needed in order to provide the money; and the reverse, when it comes, is therefore more widespread and disastrous. The Wheat Corner in Chicago, at the beginning of 1882, was a remarkable instance of audacity and also of recklessness in this species of speculation; and the effects of the tremendous collapse have not yet worn off. A still more recent example was the Lard Corner in the same city, which collapsed in June of last year, and the sweeping out of which brought down several firms in other parts of the States. But we must not conclude that operations of this kind are confined to America; we have them in this country also; and not very long ago, a bold and very nearly successful Corner was made in Liverpool in cotton, which produced a good deal of moralising and very heavy losses.
It is often a delicate matter to define what is legitimate and what is illegitimate speculation; but of the moral aspect of Corners there can be little doubt. They are bold and entirely selfish attempts to produce artificial scarcity, to the prejudice of the many, and for the benefit of the few. They essay to overset the operation of the inevitable and just law of supply and demand. They are therefore wrong in morals, and false in economics. They are not examples of trading, in the proper meaning of the term; they are merely specimens of inordinate gambling. They disorganise commerce, because they divert streams of commodities from ordinary channels, which it has taken the labour of years to create; and they disorganise finance, by deranging the exchanges between countries, through the concentration of commodities and money which should be circulating. Their immediate effect is to inflict a large loss upon the commercial centres, not only directly of the countries in which they occur, but also indirectly upon other countries. This is readily capable of demonstration, but is too technical a question to enter upon here.