At the outset I began by cautioning the reader not to cry out in alarm over the utterances of newspaper statesmen bent on justifying their existence, and determined to make the punishment fit the crime. Stocks will always be bought and sold, they will pass from hand to hand just as horses are traded and lands are exchanged. The modest dollar, too, will continue to pass from pocket to pocket, having a thousand owners and performing a thousand functions many of which may alarm a timid and unsuspecting lawmaker, but which to you and me may seem natural enough.
When you read that a great Congressman is determined to put the Steel corporation into bankruptcy and throw its 250,000 employees out of business, depend upon it he is only trying to justify his job for the benefit of this constituents. When somebody else seeks to mend his fences by the noisy announcement that the Stock Exchange reeks with improper manipulation, that speculation is wrongful, and that the criminal nature of an institution is directly proportionate to its size, remember that the votes of your fellow-citizens put this man in office and that you and they must foot the bill, since it is your money that pays for all these junkets, all these investigations, and all these political excursions. More than that, you must pay your share of the $160,000,000 for pensions, of the $40,000,000 for post-offices, and of the countless millions for rivers and harbors, and these, too, are voted with amiable frugality by the gentlemen who see nightmares in banks, Clearing Houses, and Stock Exchanges.
Finally, try to investigate and study all these matters for yourself. Read the men who have spent their lives in the study of economics. Compare the results attained by our great financial institutions with those reached in similar lines abroad. In the particular application of these studies to the New York Stock Exchange, you will find that charges such as we have been considering could be brought against any institution that has stood the test of time and made the mistakes that fallible human beings must make. You will find that if changes and improvements seem to come about slowly it is not because of the unwillingness of the Exchange to remedy these conditions, but because of the gravity and deliberation with which they must be considered in the light of the future as well as the present.
The management and control of a great public business, especially one that has long survived public criticism, is no light matter. It requires more than common industry, and more than common ability. What the Stock Exchange asks of you and of every thoughtful citizen in the land is a recognition of these matters, and a patient survey of all that enters into them. The critic in “The Vicar of Wakefield” laid it down as a good rule that you should always say the picture would have been a better one if the artist had taken more time. Criticism offered in this spirit the members of the Stock Exchange can bear with good humor. What hurts them on the raw is the critic’s failure to study and investigate, or, getting back to the text of Mr. Bryce’s sermon, “the neglect to think.”
CHAPTER VI
PANICS, AND THE CRISIS OF 1907
A panic is a state of mind. It cannot be regulated by statute law nor preached down by press or pulpit. At such times, suspicion, apprehension, and alarm take possession; reflection and sobriety are crowded out; men do and say irrational and unreasoning things; incidents trifling in themselves are exaggerated into undue proportions; all kinds of difficulties are conjured into the imagination. The best that can be said of such a phenomenon is that it is of brief duration.[59]
In Wall Street, where men are accustomed to looking forward at all times, the question is ever in mind as to the next panic. The last one left its sting; we are interested now in knowing about the future. Have we learned how to avoid these difficulties? May we hope to diminish their force and mitigate their terrors? May we rely upon the superior organization of business and the greater quantity and quality of capital to soften the effect of the next shock? I think not. We may lull ourselves into a coma of fancied security as we reflect upon experience and its expensive lessons, but we deceive ourselves if we think that we shall finally arrive at a point where these convulsions shall cease.
Nothing of that sort can come about among people strong with health and vigor, confident and full of energy, and impatient for action. With such a people life is incessantly mobile; a constantly increasing volume of creative activity impels them onward. Panics are unknown in dead countries and in countries that have not yet heard the call of progress; in all other countries the violence of these shocks is directly proportionate to the enterprise of the people. The more civilization there is, the greater the creation of wealth; the more wealth there is, the greater the volume of speculation that creates wealth. In such circumstances it is idle to talk of a time when panics shall cease, because confidence and enterprise must ever push onward, speculation in material things must accompany them, supply must overtake demand, and human nature with its moods and caprices must finally pay toll.
Vast industrial, commercial, and credit expansions lie somewhere ahead, and somewhere ahead excesses and indiscretions the world over must play their part and exact their penalties. We should cease to be surprised at these vicissitudes, for, “paradoxical as it may seem, the riches of nations can be measured by the violence of the crises which they experience.”[60] Moreover, panics are rarely such unmitigated calamities as they are pictured by those who experience them. At least they serve to place automatic checks upon extravagance and inflation, restoring prices to proper levels and chastening the spirit of over-optimism. In a world of swift changes they are soon forgotten.