And so the “divine unrest” goes on and on, impelling men to speculations and explorations of the physical world and of the world that lies beyond our primitive senses, with here and there a high achievement, and now and then a miserable failure, but always on and on. The hypothesis of the spectacled professor blossoms into a boon; the dream of the inventor becomes a benefaction; the forlorn hope of the explorer points the way to wealth. Things that were speculations yesterday become realities to-day. To-morrow?—nobody knows. In a free field, not bounded by formulæ nor restricted by law of God or man, with money to encourage it and enterprise to spur it on, what may come from the speculations of the future passes understanding.
Now speculation is an all-embracing word, overworked, threadbare, and worn to the bone. Originally it meant “to see”; then “to view,” “watch,” “spy out”; then “exploration” or “contemplation.” When thrift came into the language and men ceased burying their gold, it began to take on a new meaning. The spirit of legitimate adventure, that entered men’s minds when the Most Christian Kings abandoned brute force and repudiation, led men to buy things in the hope of selling them at a profit. It was risky business at first, and capital, then as now, was timid. The High Finance of the Middle Ages was not easily forgotten. But little by little channels through which enterprise might flow into wealth came into being, and confidence came with them. This was called speculation.
By the time Adam Smith wrote his “Wealth of Nations” (1776) the word was firmly fixed in the language. “The establishment of any new manufacture,” he said, “or any new branch of commerce, or of any new practice in agriculture, is always a speculation from which the projector promises himself extraordinary profits.” How the early channels of speculation broadened into great rivers, how confidence grew as the art of making money and increasing it developed, how credit became established, how speculation led to the opening of new countries and the extension of immense advantages, through civilization, to the people of those countries—all this is a fascinating story. And yet the speculation of to-day is no different in its elementals from that of the early Greeks; the same spirit of “divine unrest” that spurs on the philosopher in his study stimulates the explorer of strange lands, beckons on the engineer and the builder of railways, and attracts the capital of the adventurous investor. We cannot stop it if we would, because hope, ambition, and avarice are fundamentals of human nature. The police cannot arrest them; they are fixed and immutable.
If there is more speculation in material things to-day than there ever was before, it is because there are more things to speculate in, more money to speculate with, more people to speculate, and more machinery, like telephones and telegraphs, to facilitate speculation. Capital, credit, and new undertakings grow day by day and open new avenues of possible profit. The per capita wealth of nations, growing by what it feeds on, constantly seeks new fields for enterprise and adventure. The intelligence of the people increases by leaps and bounds, and goes peering curiously into all the little nooks and crannies of the world for opportunities of gain—the apotheosis of speculative enterprise.
All forms of human endeavor in material things are, or were at their beginning, speculations. Every ship that goes to sea carries with it a speculation, and leaves another one behind it at Lloyds. Every man who insures his life or his house buys a speculation, and every company that insures him sells one. The farmer speculates when he fertilizes his land, again when he plants his seed, and again when he sells his crop for future delivery, as he often does, before it is planted or before it has matured. The merchant contracts to fill his shelves long before spring arrives; he is speculating. The manufacturer sells to him, speculating on the hope or belief that he will be able to buy the necessary raw material, and again on the labor, the looms and the spindles necessary to make the delivery. In the South the grower of cotton and in Australia the grower of wool are likewise speculating on the probability of a crop and on the price at which they may sell to this manufacturer. It sounds like “this is the house that Jack built” in its endless chain of sequences; a chain, indeed, and one no stronger than its weakest link. Interfere with any part of it, and the whole commercial structure which it binds together falls apart. The grower, the manufacturer, and the merchant must speculate.
There was twofold speculation on the part of our great financial barons who built our transcontinental railways, for they had to reckon not only upon the probability of profit in their undertakings but likewise upon the willingness of other speculators—you and I—to assist them by buying a part of the securities which represented the outlay. To be sure it so happened that many of these vast speculations at first proved unsound. Some of them were a little premature; others pushed too far; they brought disaster upon the speculators who had put money into them. And yet who shall say that our great railways have failed to enrich the world and spread the comforts of civilization? “But for a verdant and evergreen faith,” says a recent writer, “salted with the love of risk and adventure for their own sakes, how could mountains be bored and waters bridged? If there were not superstition there could be no religion; if there were not bad speculation there could be no good investment; if there were no wild ventures there would be no brilliantly successful enterprises.”
This is not hyperbole; it is fact. The world of business and enterprise must go on; it cannot stop. As it goes on capital must be enlisted, which is another way of saying that speculators must be attracted. The only way that has been devised to attract them is through the medium of certificates of ownership or evidences of debt, called securities. But the business does not end there, for, as we have seen in the previous chapter, the capital of speculators will not take hold unless a market is provided. They want to know where they stand; before they venture upon the troubled waters of new enterprises they must be assured of a public market, a harbor where they can get ashore quickly if storms are brewing.
The only plan that the ingenuity of man has thus far devised to meet this emergency is a Stock Exchange. One man, or two, or a hundred cannot make a market, because the immense volume and variety of these securities make it impossible for any unorganized handful of brokers and dealers to determine a fair market price. What is required, and what the man whose capital is wanted insists upon, is an organized body of brokers, speculators, and investors competing keenly, seeking to buy cheap and sell dear, gathering and disseminating all the news, and so sharpening the judgment and stimulating the higgling of buyers and sellers as to bring prices to their legitimate level and give them stability. Ten thousand competitors in this business of bringing prices and values together are of course better than one thousand; a hundred thousand would be better still. The Stock Exchange supplies this want, and will continue to supply it until a better plan is devised.[16] Meantime, since it has grown to its present stature by forms of speculation necessary to the maintenance of enterprise, any serious interruption of the facilities it affords will bring enterprise to a standstill and cause the whole sensitive structure of credit to collapse in terror. Let Professor Seligman explain this matter:
“If a railway or other industry, in launching a new enterprise, had to depend on the chance investors at the time of the issue of the securities, it would be seriously hampered. The mere knowledge that at any moment there will be a ready sale on the Exchange greatly increases the circle of purchasers, many of whom may not intend to be permanent investors. The Stock Exchange aids the investment of capital, as the Produce Exchange aids the production of finished commodities. Business orders and corporate needs are intermittent, because they depend on temporary exigencies; the risks at one end, at all events, are eliminated by the unintermittent, continuous market which regular speculation affords. The Cotton Exchange was the result of the disorganization of the cotton trade after the Civil War; speculation in all other staples has in the same way been the consequence of the efforts of the manufacturer to avert the risks of intermittent and spasmodic fluctuations in the raw material. The result of regular speculation is to steady prices. Speculation tends to equalize demand and supply, and by concentrating in the present the influences of the future it intensifies the normal factors and minimizes the market fluctuation. Speculation so far as it has become the regular occupation of a class, differentiated from other business men for this particular purpose, subserves a useful and in modern times an indispensable function.”[17]
Here we have an authority who tells us that speculation in securities, no less than in raw materials, is “an indispensable function” if business is to go ahead. The last census shows that 32½ per cent. of the population of the United States is composed of laboring men, not counting agricultural workers. This large army of men is by no means independent; on the contrary it is strictly dependent on the ability of others to give it employment. Shut down the factories, curtail the operations of railways, close the mines and quarries, stop building and new construction, and in greater or less degree suffering and privation among these large masses must ensue.