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Title: Up To Date Business

Editor: Seymour Eaton

Release date: February 6, 2007 [eBook #20531]
Most recently updated: December 7, 2022

Language: English

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*** START OF THE PROJECT GUTENBERG EBOOK UP TO
DATE BUSINESS ***

UP-TO-DATE
BUSINESS

HOME STUDY CIRCLE LIBRARY
EDITED BY

SEYMOUR EATON

UP TO DATE
BUSINESS
INCLUDING

LESSONS IN BANKING, EXCHANGE,
BUSINESS GEOGRAPHY, FINANCE,
TRANSPORTATION AND
COMMERCIAL LAW

FROM THE CHICAGO RECORD

NEW YORK
THE DOUBLEDAY & McCLURE CO.
1900

Copyright, 1897, 1898, 1899, by the Chicago Record
Copyright, 1899, by Seymour Eaton

Copyright, 1899, 1900, by Victor F. Lawson

CONTENTS

I

GENERAL BUSINESS INFORMATION

Page
I. Commercial Terms and Usages 3

II. Commercial Terms and Usages (Continued) 4

III. Bank Cheques 6

IV. Bank Cheques (Continued) 8

V. Bank Cheques (Continued) 12

VI. Bank Drafts 15

VII. Promissory Notes 18

VIII. The Clearing-house System 21

IX. Commercial Drafts 26

X. Foreign Exchange 31

XI. Letters of Credit 37

XII. Joint-stock Companies 41

XIII. Protested Paper 46

XIV. Paper Offered for Discount 49

XV. Corporations 51

XVI. Bonds 54

XVII. Transportation 57

XVIII. Transportation Papers 59

Examination Paper 64

II

BUSINESS GEOGRAPHY

Trade Features

I. The Trade Features of the British Isles 69

II. " " " " France 94

III. " " " " Germany 102

IV. " " " " Spain and Italy 111

V. " " " " Russia 120

VI. " " " " India 129

VII. " " " " China 139

VIII. " " " " Japan 148

IX. " " " " Africa 157

X. " " " " Australia and Australasia 166

XI. " " " " South America 177

XII. " " " " Canada 187

XIII. " " " " The United States 194

Examination Paper 210

III

FINANCE, TRADE, AND TRANSPORTATION

I. National and State Banks 215

II. Savings Banks and Trust Companies 221

III. Corporations and Stock Companies 225

IV. Borrowing and Loaning Money 228

V. Collaterals and Securities 233

VI. Cheques, Drafts, and Bills of Exchange 240

VII. The Clearing-house System 248

VIII. Commercial Credits and Mercantile Agencies 254

IX. Bonds 263

X. Transportation by Rail 267

XI. Freight Transportation 274

XII. Railroad Rates 281

XIII. Stock and Produce Exchanges 288

XIV. Storage and Warehousing 294

Examination Paper 301

IV

COMMERCIAL LAW

I. The Different Kinds of Contracts 309

II. The Parties to a Contract 312

III. The Parties to a Contract (Continued) 315

IV. The Consideration in Contracts 318

V. The Essentials of a Contract 321

VI. Contracts by Correspondence 326

VII. What Contracts Must Be in Writing 332

VIII. Contracts for the Sale of Merchandise 336

IX. The Warranties of Merchandise 340

X. Common Carriers 344

XI. The Carrying of Passengers 347

XII. On the Keeping of Things 350

XIII. Concerning Agents 353

XIV. The Law Relating to Bank Cheques 358

XV. The Law Relating to Leases 363

XVI. Liability of Employers to Employés 369

XVII. Liability of Employers to Employés 373

Examination Paper 377

V

PREPARING COPY FOR THE PRESS
AND PROOF-READING

I. Preparing Copy 381

II. On the Names and Sizes of Type 382

III. The Terms Used in Printing 384

IV. Marks Used in Proof-reading 387

ILLUSTRATIONS

I

GENERAL BUSINESS INFORMATION

Page
A Poorly Drawn Cheque 7

A Carefully Drawn Cheque 8

A Cheque Drawn so as to Insure Payment to Proper Party 9

A Cheque Payable to Order 11

A Blank Indorsement 11

A Cheque Made to Obtain Money for Immediate Use 13

A Certified Cheque 14

A Cheque for the Purchase of a Draft 16

A Bank Draft 17

Ordinary Form of Promissory Note 18

A Promissory Note Filled Out in an Engraved Blank 19

A Special Form for a Promissory Note 20

The Advantages of the Clearing-house System 22

The Route of a Cheque 24

Backs of Two Paid Cheques 25

A Sight Draft Developed from Letter 27

A Sight Draft 28

An Accepted Ten-day Sight Draft 28

An Accepted Sight Draft 29

A Time Draft 29

Foreign Exchange 32

A Bill of Exchange (Private) 35

A Bill of Exchange (Banker's) 36

First Page of a Letter of Credit 38

Second Page of a Letter of Credit 40

A Certificate of Stock in a National Bank 42

A Certificate of Stock in a Manufacturing Company 43

A Protest 48

A Private Bond 55

A Shipping Receipt ("Original") 60

A Steamship Bill of Lading 61

A Local Waybill 62

II

BUSINESS GEOGRAPHY

London the Natural Centre of the World's Trade 72

British Mercantile Marine 74

London Bridge 76

The Coal-fields of England 80

The Manchester Ship Canal 84

The Great Manufacturing Districts of England 88

France Compared in Size with the States of Illinois and Texas 95

Street Scene in Paris, Showing the Bourse 97

Approximate Size of the German Empire 104

North Central Germany, Showing the Ship Canal and the Leading 109
Commercial Centres

Spain Compared in Size with California 113

Italy and its Chief Commercial Centres 117

Russia, the British Empire, and the United States Compared 121

Moscow 127

Comparative Sizes of India and the United States 133

China and its Chief Trade Centres 145

Japan's Relation to Eastern Asia 155

The Partition of Africa 159

Australia 171

The Most Prosperous Part of South America 183

Trade Centres of Canada and Trunk Railway Lines 192

Export Trade of United States and Great Britain Compared 198

United States Manufactures and Internal Trade Compared with the 199
Manufactures and Internal Trade of all Other Countries

Principal Articles of Domestic Exports of the United States 205

III

FINANCE, TRADE, AND TRANSPORTATION

The Bank of England 216

Showing Cheque Raised from $7.50 to $70.50 241

A Certified Cheque 244

A Bank Draft 245

A Bill of Exchange 246

Illustrating Cheque Collections 252

A Mercantile Agency Inquiry Form 259

Specimens of Interest Coupons 266

Judge Thomas M. Cooley, First Chairman of the Interstate Commerce 287
Commission

The Paris Bourse 289

Interior View of New York Stock Exchange 290

V

PREPARING COPY FOR THE PRESS
AND PROOF-READING

A Printer's Proof 390

A Printer's Corrected Proof 391

GENERAL BUSINESS INFORMATION

I. COMMERCIAL TERMS AND USAGES

HERE is a distinction between the usage of the
names commerce and business. The interchange
of products and manufactured articles between
countries, or even between different sections of
the same country, is usually referred to as
commerce. The term business refers more particularly to our
dealings at home—that is, in our own town or city. Sometimes
this name is used in connection with a particular product, as the
coal business or the lumber business, or in connection with a
particular class, as the dry-goods business or the grocery
business. The name commerce, however, seldom admits of a
limited application. In the United States trade is synonymous
with business. The word traffic applies more especially to the
conveyance than to the exchange of products; thus we refer to
railroad traffic or lake traffic. Products, when considered
articles of trade, are called merchandise, goods, wares. The term
merchandise has the widest meaning, and includes all kinds of
movable articles bought or sold. Goods is applied more
particularly to the supplies of a merchant. Wares is commonly
applied to utensils, as glassware, hardware, etc.

Gross commonly means coarse or bulky. In trade it is used with
reference to both money and goods. The gross weight of a
package includes the weight of the case or wrappings. The larger
sum in an account or bill—that is, the sum of money before any

allowance or deductions are made—is the gross amount of the
bill. The word net is derived from a Latin word meaning neat,
clean, unadulterated, and indicates the amount of goods or
money after all the deductions have been made. To say that a
price is net is to indicate that no further discount will be made.

The word firm relates to solidity, establishment, strength, and in
a business sense signifies two or more persons united in
partnership for the purpose of trading. The word house is very
frequently used in the same sense. In mercantile usage house
does not mean the building in which the business is conducted,
but the men who own the business, including, perhaps, the
building, stock, plant, and business reputation. The name
concern is often used in a very similar way.

The name market expresses a locality for the sale of goods, and
in commerce is often used to denote cities or even countries. We
say that Boston is a leather market, meaning that a large number
of Boston merchants buy and sell leather. In the same sense we
call Chicago a grain market, or New Orleans a cotton market. In
its more restricted sense the name market signifies a building or
place where meat or produce is bought and sold. We say that the
market is flooded with a particular article when dealers are
carrying more of that article than they can find sale for. There is
no market for any product when there is no demand. The money
market is tight or close when it is difficult to borrow money from
banks and money-lenders.

II. COMMERCIAL TERMS AND USAGES
(Continued)

The natural resources of a country are mainly the mineral
commodities and agricultural produce that it yields. The lumber
and fish produced in a country are also among its natural

resources. The positions and industries of cities are usually fixed
by natural conditions, but the most powerful agent is the
personal energy of enterprising and persevering men, who, by
superior education, or scientific knowledge, or practical
foresight, have often been able to found industrial centres in
situations which no geographical considerations would suggest
or explain.

Commission merchants receive and sell goods belonging to
others for a compensation called a commission. A selling agent
is a person who represents a manufacturing establishment in its
dealings with the trade. The factory may be located in a small
town, while the selling agent has his office and samples in the
heart of a great city. As regards the quantity of goods bought or
sold in a single transaction, trade is divided into wholesale and
retail. The wholesale dealer sells to other dealers, while the
retail dealer sells to the consumer—that is, the person who
consumes, or uses, the goods. A jobber is one who buys from
importers and manufacturers and sells to retailers. He is
constantly in the market for bargains. The names jobber and
wholesaler are often used in the same sense, but a jobber
sometimes sells to wholesalers. Wholesale has reference to the
quantity the dealer sells, and not to the source from which he
buys, or the person to whom he sells. The wholesaler, as a rule,
deals in staples—that is, goods which are used season after
season—though of course there are wholesalers in practically all
businesses.

Wholesale dealers send out travellers or drummers, who carry
samples of the goods. Frequently the traveller starts out with his
samples from six months to a year in advance of the time of
delivery. It is quite a common thing for the retailer to order from
samples merchandise which at the time of placing the order may
not even be manufactured.

By the price of a commodity is meant its value estimated in
money, or the amount of money for which it will exchange. The

exchangeable value of commodities depends at any given period
partly upon the expense of production and partly upon the
relation of supply and demand. Prices are affected by the
creation of monopolies, by the opening of new markets, by the
obstructing of the ordinary channels of commercial intercourse,
and by the anticipation of these and other causes. It is the
business of the merchant to acquaint himself with every
circumstance affecting the prices of the goods in which he deals.

The entire world is the field of the modern merchant. He buys
raw and manufactured products wherever he can buy cheapest,
and he ships to whatever market pays him the highest price. Our
corner grocer or produce-dealer may furnish us with beef from
Texas, potatoes from Egypt, celery from Michigan, onions from
Jamaica, coffee from Java, oranges from Spain, and a hundred
other things from as many different points; and yet, so complete
is the interlocking of the world's commercial interests, and so
great is the speed of transportation, that he can supply us with
these necessaries under existing conditions more easily and
readily than if they were all grown on an adjoining farm.

III. BANK CHEQUES

A cheque is an order for money, drawn by one who has funds in
the bank. It is payable on demand. In reality, it is a sight draft on
the bank. Banks provide blank cheques for their customers, and
it is a very simple matter to fill them out properly. In writing in
the amount begin at the extreme left of the line.

The illustration given below shows a poorly written cheque and
one which could be very easily raised. A fraudulent receiver
could, for instance write, "ninety" before the "six" and "9" before
the figure "6," and in this way raise the cheque from $6 to $96. If
this were done and the cheque cashed, the maker, and not the

bank, would become responsible for the loss. You cannot hold
other people responsible for your own carelessness. A cheque has
been raised from $100 to $190 by writing the words "and ninety"
after the words "one hundred." One of the ciphers in the figures
was changed to a "9" by adding a tail to it. It is wise to draw a
running line, thus ~~~~~~, after the amount in words, thus
preventing any additional writing.

A poorly drawn cheque.

The illustration on page 8 shows a cheque carefully and correctly
drawn. The signature should be in your usual style, familiar to
the paying teller. Sign your name the same way all the time.
Have a characteristic signature, as familiar to your friends as is
your face.

A cheque is a draft or order upon your bank, and it need not
necessarily be written in the prescribed form. Such an order
written on a sheet of note-paper with a lead-pencil might be in
every way a legally good cheque.

A carefully drawn cheque.

Usually cheques should be drawn "to order." The words "Pay to
the order of John Brown" mean that the money is to be paid to
John Brown, or to any person that he orders it paid to. If a
cheque is drawn "Pay to John Brown or Bearer" or simply "Pay
to Bearer," any person that is the bearer can collect it. The
paying teller may ask the person presenting the cheque to write
his name on the back, simply to have it for reference.

In writing and signing cheques use good black ink and let the
copy dry a little before a blotter is used.

The subject of indorsements will be treated in a subsequent
lesson.

IV. BANK CHEQUES (Continued)

The banks of this country make it a rule not to cash a cheque that
is drawn payable to order, unless the person presenting the
cheque is known at the bank, or unless he satisfies the paying
teller that he is really the person to whom the money should be

paid. It must be remembered however, that a cheque drawn to
order and then indorsed in blank by the payee is really payable to
bearer, and if the paying teller is satisfied that the payee's
signature is genuine he will not likely hesitate to cash the
cheque. In England all cheques apparently properly indorsed are
paid without identification.

A cheque drawn so as to insure payment to proper party.

In drawing a cheque in favour of a person not likely to be well
known in banking circles, write his address or his business after
his name on the face of the cheque. For instance, if you should
send a cheque to John Brown, St. Louis, it might possibly fall
into the hands of the wrong John Brown; but if you write the
cheque in favour of "John Brown, 246 West Avenue, St. Louis,"
it is more than likely that the right person will collect it.

If you wish to get a cheque cashed where you are unknown, and
it is not convenient for a friend who has an account at the bank to
go with you for the purpose of identification, ask him to place
his signature on the back of your cheque, and you will not likely
have trouble in getting it cashed at the bank where your friend
keeps his account. By placing his signature upon the back of the
cheque he guarantees the bank against loss. A bank is responsible
for the signatures of its depositors, but it cannot be supposed to

know the signatures of indorsers. The reliable identifier is in
reality the person who is responsible.

INDORSING CHEQUES

1. In indorsing cheques note the following points:

2. Write across the back—not lengthwise.

3. If your indorsement is the first, write it about two inches
from the top of the back; if it is not the first indorsement,
write immediately under the last indorsement.

4. Do not indorse wrong end up; the top of the back is the left
end of the face.

5. Write your name as you are accustomed to write it, no
matter how it is written on the face. If you are depositing
the cheque write or stamp "For Deposit" or "Pay to
______Bank______," as may be the custom, over your
signature. This is hardly necessary if you are taking the
cheque yourself to the bank. A cheque with a simple or
blank indorsement on the back is payable to bearer, and if
lost the finder might succeed in collecting it; but if the
words "For Deposit" appear over the name the bank
officials understand that the cheque is intended to be
deposited, and they will not cash it.

6. If you wish to make the cheque payable to some particular
person by indorsing, write "Pay to ______(name)______ or
order," and under this write your own name as you are
accustomed to sign it.

7. Do not carry around indorsed cheques loosely. Such
cheques are payable to bearer and may be collected by any
one.

8. If you receive a cheque which has been transferred to you
by a blank indorsement (name of indorser only), and you
wish to hold it a day or two, write over the indorsement the
words "Pay to the order of (yourself—writing your own
name)." This is allowable legally. The cheque cannot then
be collected until you indorse it.

A cheque payable to order and a blank indorsement.

9. An authorised stamped indorsement is as good as a written
one. Whether such indorsements are accepted or not
depends upon the regulations of the clearing-house in the
particular city in which they are offered for deposit. The
written indorsement is considered safer for transmission of
out-of-town collections.

10. If you are indorsing for a company, or society, or
corporation, write first the name of the company (this may
be stamped on) and then your own name, followed by the
word "Treas."

11. If you have power of attorney to indorse for some particular
person, write his name, followed by your own, followed by
the word "Attorney" or "Atty.," as it is usually written.

12. It is sometimes permissible to indorse the payee's name
thus, "By ______(your own name)." This may be done by a
junior member of a concern when the person authorised to
indorse cheques is absent and the cheques are deposited and
not cashed.

13. Do not write any unnecessary information on the back of
your cheque. A story is told of a woman who received a
cheque from her husband, and when cashing it wrote "Your
loving wife" above her name on the back.

V. BANK CHEQUES (Continued)

If you wish to draw money from your own account, the most
approved form of cheque is written "Pay to the order of Cash."
This differs from a cheque drawn to "Bearer." The paying teller
expects to see yourself, or some one well known to him as your
representative, when you write "Cash." If you write "Pay to the

order of (your own name)" you will be required to indorse your
cheque before you can get it cashed.

If your note is due at your own bank and you wish to draw a
cheque in payment, write "Pay to the order of Bills Payable." If
you wish to write a cheque to draw money for wages, write "Pay
to the order of Pay-roll." If you wish to write a cheque to pay for
a draft which you are buying, write "Pay to the order of N. Y.
Draft and Exchange," or whatever the circumstances may call
for.

A cheque made to obtain money for immediate use.

If you wish to stop the payment of a cheque which you have
issued you should notify the bank at once, giving full particulars.

Banks have a custom, after paying and charging cheques, of
cancelling them by punching or making some cut through their
face. These cancelled cheques are returned to the makers at the
end of each month.

If you have deposited a cheque and it is returned through your
bank marked "No Funds," it signifies that the cheque is
worthless and that the person upon whose account it was drawn
has no funds to meet it. Your bank will charge the amount to

your account. The best thing to do in such a case is to hold the
cheque as evidence of the debt, and write the person who sent it
to you, giving particulars and asking for an explanation.

If you wish to use your cheque to pay a note due at some other
bank, or in buying real estate, or stocks, or bonds, you may find
it necessary to get the cheque certified. This is done by an officer
of the bank, who writes or stamps across the face of the cheque
the words "Certified" or "Good When Properly Indorsed," and
signs his name. (See illustration.) The amount will immediately
be deducted from your account, and the bank, by guaranteeing
your cheque, becomes responsible for its payment. Banks will
usually certify any cheque drawn upon them if the depositor has
the amount called for to his credit, no matter who presents the
cheque, and this certifying makes it feasible for a man to carry in
his pocket any amount of actual cash. If you should get a cheque
certified and then not use it, deposit it in your bank, otherwise
your account will be short the amount for which the cheque is
drawn. In Canada all cheques are presented to the "ledger-
keeper" for certification before being presented to the paying
teller.

A certified cheque.

THE USEFULNESS OF BANKS

Banks are absolutely necessary to the success of modern
commercial enterprises. They provide a place for the safe-
keeping of money and securities, and they make the payment of
bills much more convenient than if currency instead of cheques
were the more largely used. But the great advantage of a banking
institution to a business man is the opportunity it affords him of
borrowing money, of securing cash for the carrying on of his
business while his own capital is locked up in merchandise or in
the hands of his debtors. Another important advantage is to be
found in the facilities afforded by banks for the collection of
cheques, notes, and drafts.

VI. BANK DRAFTS

A draft is a formal demand for the payment of money. Your bank
cheque is your sight draft on your bank. It is not so stated, but it
is so understood. A cheque differs from an ordinary commercial
draft, both in its wording and in its purpose. The bank is obliged
to pay your cheque if it holds funds of yours sufficient to meet it,
while the person upon whom your draft is drawn may or may not
honour it at his pleasure. A cheque is used for paying money to a
creditor, while a draft is used as a means of collecting money
from a debtor.

Nearly all large banks keep money on deposit with one or more
of the banks located in the great commercial centres. They call
these centrally located banks their correspondents. The larger
banks have correspondents in New York, Chicago, Boston, and
other large cities. As business men keep money on deposit with
banks to meet their cheques, so banks keep money on deposit
with other banks to meet their drafts.

A bank draft is simply the bank's cheque, drawn upon its
deposit with some other bank. Banks sell these cheques to their

customers, and merchants make large use of them in paying bills
in distant cities. These drafts, or cashiers' cheques, as they are
sometimes called, pass as cash anywhere within a reasonable
distance of the money centre upon which they are drawn.
Bankers' drafts on New York would, under ordinary financial
conditions, be considered cash anywhere in the United States. A
draft on a foreign bank is usually called a bill of exchange.

A cheque for the purchase of a draft.

Cheques have come to be quite generally used for the payment
of bills even at long distances. If a business man desires to close
an important contract requiring cash in advance he sends a bank
draft, if at a distance, or a certified cheque, if in the same city. If
he desires simply to pay a debt he sends his own personal
cheque. Bank drafts are quite generally used by merchants in the
West to pay bills in the East. A draft on New York bought in San
Francisco is cash when it reaches New York, while a San
Francisco cheque is not cash until it returns and is cashed by the
bank upon which it is drawn. In the ordinary course of business
cheques are considered cash no matter upon what bank drawn.
The bank receiving them on deposit gives the depositor credit at
once, even though it may take a week before the value
represented by the cheque is in the possession of the bank.

A bank draft.

All wholesale transactions and a large proportion of retail
transactions are completed by the passing of instruments of
credit—notes, cheques, drafts, etc.; a part only of the retail trade
is conducted by actual currency-bills and "change." Banks
handle the bulk of these transferable titles and deal to a very
small extent—that is, proportionally—in actual money. The
notes, drafts, bills of exchange, and bank cheques are
representative of the property passing by title in money from the
producers to the consumers. A small proportion—perhaps six or
eight per cent.—of these transactions is conducted by the use of
actual bank or legal-tender notes. This trade in instruments of
credit amounts in the United States to fifty billions of dollars
yearly.

VII. PROMISSORY NOTES

Ordinary form of promissory note.

A promissory note is a written promise to pay a specified sum of
money. At the time of the note's issue—that is, when signed and
delivered—two parties are connected with it, the maker and the
payee. The maker is the person who signs or promises to pay the
note; the payee is the person to whom or to whose order the note
is made payable. Negotiable in a commercial sense means
transferable, and a negotiable note is a note which can be
transferred from one person to another. A note to be made
negotiable must contain the word bearer or the word order—that
is, it must be payable either to bearer, or to the order of the
payee. A non-negotiable note is payable to a particular person
only. A note may be written on any kind of paper, in ink or
pencil. It is wise, however, to use ink to prevent changes. All
stationers sell blank forms for notes which are easily filled in.

The samples of notes which appear in this lesson are selected
simply to illustrate to students the fact that there are a great many
special forms of notes in common use. The wording differs
slightly in different States.

The date of a note is a matter of the first importance. Some
bankers and business men consider it better to draw notes
payable at a certain fixed time, as, "I promise to pay on the 10th
of March, 1897." The common custom is to make notes payable
a certain number of days or months after date. A note made or
issued on Sunday is void. The day of maturity is the day upon
which a note becomes legally due. In several of the States a note
is not legally due until three days, called days of grace, after the
expiration of the time specified in the note.

A promissory note filled out on an engraved blank.

The words value received, which usually appear upon notes, are
not necessary legally. Thousands of good notes made without
any value consideration are handled daily.

The promise to pay of a negotiable note must be unconditional. It
cannot be made to depend upon any contingency whatever.

Notes that are made in settlement of genuine business
transactions come under the head of regular, legitimate business
paper. An accommodation note is one which is signed, or
indorsed, simply as an accommodation, and not in settlement of
an account or in payment of an indebtedness. With banks

accommodation paper has a deservedly hard reputation.
However, there are all grades and shades of accommodation
paper, though it represents no actual business transaction
between the parties to it, and rests upon no other foundation than
that of mutual agreement. No contract is good without a
consideration, but this is only true between the original parties to
a note. The third party or innocent receiver or holder of a note
has a good title, and can recover its value, even though it was
originally given without a valuable consideration. An innocent
holder of a note which had been originally lost or stolen has a
good title to it if he received it for value.

A special form for a promissory note.

A note does not draw interest until after maturity, unless the
words with interest appear on the face. Notes draw interest after
maturity and until paid, at the legal rate.

A note should be presented for payment upon the exact day of
maturity. Notes made payable at a bank, or at any other place,
must be presented for payment at the place named. When no
place is specified the note is payable at the maker's place of
business or at his residence.

In finding the date of maturity it is important to remember that
when a note is drawn days after date the actual days must be
counted, and when drawn months after date the time is reckoned
by months.

To discount a note is to sell it at a discount. The rates of discount
vary according to the security offered, or the character of the
loan, or the state of the money market. For ordinary commercial
paper the rates run from four to eight per cent. Notes received
and given by commercial houses and discounted by banks are
not usually for a longer period than four months.

VIII. THE CLEARING-HOUSE SYSTEM

In large cities cheques representing millions of dollars are
deposited in the banks every day. The separate collection of these
would be almost impossible were it not for the clearing-house
system. Each large city has its clearing-house. It is an
establishment formed by the banks themselves, and for their own
convenience. The leading banks of a city connect themselves
with the clearing-house of that city, and through other banks with
the clearing-houses of other cities, particularly New York.
Country banks connect themselves with one or more clearing-
houses through city banks, which do their business for them. The
New York banks, largely through private bankers, branches of
foreign banking houses, connect themselves with London, so that
each bank in the world is connected indirectly with every other
bank in the world, and in London is the final clearing-house of
the world.

The advantages of the clearing-house system.

Suppose that the above diagram represents the banks and
clearing-house of a city, and also the two business houses of
Brown and Smith. Brown keeps his money on deposit in Bank E,
and Smith in Bank B. Brown sends (by mail) a cheque to Smith
in payment of a bill. Now, Smith can come all the way to Bank
E, and, if he is properly identified, can collect the cheque. He

does not do this, however, but deposits Brown's cheque in Bank
B, the bank where he does his banking business. Now, B cannot
send to E to get the money. It could do this, perhaps, if it had
only one cheque, but it has taken in hundreds of cheques, some,
perhaps, on every bank in town, and on many banks out of town.
It would take a hundred messengers to collect them. So, instead
of B's going to E, they meet half-way, or at a central point called
a clearing-house, and there collect their cheques. B may have
$5000 in cheques on E, and E may have $4000 in cheques on B,
so that the exchange can be made—that is, the cheques can be
paid by E paying the difference of $1000, which is done, not
direct, but through the officers of the clearing-house. Now Bank
E's messenger carries Brown's cheque back with him and enters
it up against Brown's account. This in simple language is the
primary idea of the clearing-house.

The clearings in New York in one day amount to from one to two
hundred millions of dollars. By clearings we mean the value of
the cheques which are cleared—that is, which change hands
through the clearing-house. Usually once a week (in some cities
oftener) the banks of a city make to their clearing-house a report,
based on daily balances, of their condition.

The route of a cheque.

To illustrate the connection between banks at distant points let us
suppose that B of Media, Pennsylvania, who keeps his money on
deposit in the First National Bank of Media, sends a cheque in
payment of a bill to K of South Evanston, Illinois. K deposits the
cheque in the Citizens Bank of his town and receives immediate
credit for it upon his bank-book, just the same as though the
cheque were drawn upon the same or a near-by bank. The
Citizens Bank simply sends the cheque, with other distant
cheques, to its correspondent, the National Bank of the Republic,
Chicago, on deposit, in many instances in about the same sense
that K deposited the cheque in the Citizens Bank. The National
Bank of the Republic sends the cheque, with other cheques, to its
New York correspondent, the National Park Bank. It may
possibly send to Philadelphia direct, or even to Media; but this is

very unlikely. The National Park Bank sends the cheque to its
Philadelphia correspondent, say the Penn National Bank. Now
the clearing-house clerk of the Penn National carries the cheque
to the Philadelphia clearing-house and enters it, with other
cheques, on the First National of Media. Custom, however,
differs very greatly in this particular. Many near-by country
banks clear through city banks; others clear less directly. If the
First National Bank of Philadelphia is known at the clearing-
house as the representative of the First National Bank of Media it
likely has money belonging to this Media bank on deposit. In
that case the cheque is charged up against the account of the First
National of Philadelphia. This bank then sends the cheque to the
First National of Media, by which it is charged up against B.
This system of collection of cheques is about as perfect as is the
post-office system of carrying registered mail.

Backs of two paid cheques.

Now, the banks and clearing-houses through which the cheque
passes on its way home stamp their indorsements and other
information upon the back. Our illustration shows the backs of

two cheques which have "travelled." Millions of dollars are
collected by banks daily in this way, and all without expense to
their customers. It is estimated that these collections cost the
New York City banks more than two million dollars a year in
loss of interest while the cheques are en route. Ten thousand
collection letters are sent out daily by the banks of New York
City alone.

IX. COMMERCIAL DRAFTS

A commercial draft bears a close resemblance to a letter from
one person to another requesting that a certain sum of money be
paid to the person who calls, or to the bank or firm for whom he
is acting. For instance, the draft shown in the first illustration
might be worded something like this:

St. Louis, Mo., Feb. 22, 1899.

Mr. Robert Elsmere,
Jefferson City, Mo.

My dear Sir:

Will you kindly pay to the messenger from the —— Bank who will call
to-morrow the sum of three hundred and ninety-seven dollars and
charge to my account?

Yours, very truly,
David Grieve.

A sight draft developed from the above letter.

Commercial usage, however, recognises a particular form in
which this letter is to be written, and the address of the person
for whom it is intended is usually written at the lower left-hand
corner instead of on an envelope. Commercial drafts usually
reach the persons upon whom they are drawn through the
medium of the banks rather than directly by mail. Let us
illustrate. Suppose that A of Chicago owes B of Buffalo $200,
and B desires to collect the amount by means of a draft. He fills
in a blank draft, signs it, and addresses it on the lower left-hand
corner to A. Instead of sending it by mail he takes it to his bank
—that is, deposits it for collection. It will reach a Chicago bank
in about the same way that cheques for collection go from one
place to another. A messenger from the Chicago bank will carry
the draft to A's office and present it for payment or for
acceptance. If it is a sight draft—that is, a draft payable when A
sees it—he may give cash for it at once and take the draft as his
receipt. If he has not the money convenient he may write across
the face "Accepted, payable at (his) Bank," as in the illustration.
It will then reach his bank and be paid as his personal cheque
would be, and should be entered in his cheque-book. Banks
usually give one day upon sight drafts. The draft will not be
presented a second time, but will be held at the bank until the

close of the banking hours the next day, where A can call to pay
if he chooses. Leniency in the matter of time will depend largely
upon B's instructions and the bank's attitude toward A. If the
draft is a time draft—that is, if B gives A time, a certain number
of days, in which to pay it—A, if he wishes to pay the draft,
accepts it. He does this by writing the word accepted with the
date and his signature across the face of the draft. He may make
it payable at his bank as he would a note, if he so desires. He
then returns the draft to the messenger, and if the time is long the
draft is returned to B; if only a few days, the bank holds it for
collection.

No. 1. A sight draft.

No. 2. An accepted ten-day sight draft.

No. 3. An accepted sight draft.

No. 4. A time draft.

An accepted draft is really a promissory note, though it is more
often called an acceptance. When a man pays or accepts a draft
he is said to honour it. In the foregoing illustration A is not
obliged either to pay or to accept the draft. It is not binding upon
him any more than a letter would be. He can refuse payment just

as easily and as readily as he could decline to pay a collector
who calls for payment of a bill. Of course, if a man habitually
refuses to honour legitimate drafts it may injure his credit with
banks and business houses.

It is a very common thing to collect distant accounts by means of
commercial drafts. A debtor is more likely to meet—that is, to
pay—a draft than he is to reply to a letter and inclose his cheque.
It is really more convenient, and safer, too, for there is some risk
in sending personal cheques through the mail. There are some
houses that make all their payments by cheques, while there are
others which prefer to have their creditors at a distance draw on
them for the amounts due.

If a business man who has been accustomed to honour drafts
continues for a period to dishonour them, the banks through
which the drafts pass naturally conclude that he is unable to meet
his liabilities.

Some houses deposit their drafts for collection in their home
banks, while others have a custom of sending them direct to
some bank in or near the place where the debtor resides. If the
place is a very small one the collection is sometimes made
through one of the express companies.

When goods are sold for distinct periods of credit, and it is
generally understood that maturing accounts are subject to sight
drafts, there should be no need of notifying the debtor in
advance. Some houses, however, make a general custom of
sending notices ten days in advance, stating that a draft will be
drawn if cheque is not received in the meantime.

Notice the illustrations. The protest notice at the left of Nos. 1, 2,
and 4 is intended for the bank presenting the draft for payment.
The reason for this will be fully explained in our lesson on
protested paper. (See Lesson XIII.) No. 2 shows an accepted
draft payable to the order of a bank in the city upon which it is
drawn. No. 1 is payable to the order of a bank in the city of the

drawer. No. 3 is a sight draft payable to the order of a bank and
accepted payable at a bank. No. 4 is a time draft payable to
"ourselves"—that is, the Pennsylvania Steel Company.

Drafts are often discounted at banks before acceptance where the
credit of the drawer is good. In such cases the drafts which are
dishonoured are charged up against the drawer's account.

X. FOREIGN EXCHANGE

It is quite in order that we should follow lessons on the clearing-
house and commercial drafts with a lesson on foreign exchange.

We learned in the last lesson that commercial drafts are made use
of to facilitate the collection of accounts. They are simply formal
demands for the payment of legitimate debts. When these formal
demands are made upon foreign debtors they are called bills of
exchange; and the process of buying and selling these drafts, the
drafts themselves, and the fluctuations in price, all are included
in the general name exchange.

Foreign exchange.

To illustrate the principles of exchange let us suppose that the
following transactions have occurred:

1. C of Boston has sold goods, £2000, to H of Hamburg.

2. D of Chicago has sold goods, £5000, to F of Glasgow.

3. M of Chicago has sold goods, £3000, to K of London.

4. E of Philadelphia has sold goods, £6000, to R of Paris.

5. P of New York has sold goods, £1000, to G of Paris.

C draws on H for £2000, sells the draft to a banking-house in
Boston; they send to Bank A of New York, and the New York
bank to their London correspondent, say Bank B, with
instructions to collect from Hamburg.

D draws in a similar way on F. E draws on R, and P on G.
Suppose that M instead of drawing on K receives a draft drawn

by Bank B of London on Bank A of New York, payable to M's
order.

America has sold goods worth £17,000 to Europe.

Europe . . . . . . owes £17,000 to . . . . . America

But B has paid A £3000.
____________

B . . . . . . therefore owes £14,000 to . . . . . . A

Now it will cost B a considerable sum of money to ship £14,000
in gold to A, for all exchanges between Europe and America are
payable in gold. Suppose that S of New York owes T of London
£14,000, and T draws on S and takes the draft to Bank B in
London and offers it for sale. Will B offer more or less than
£14,000 for the bill of exchange or draft? He will offer more. It
will be cheaper for him to pay a premium for the draft than to
ship gold, for he can send this draft to Bank A to pay his
indebtedness, and A can collect from S.

In the money market in New York there is a constant supply of
exchanges (drafts) on London, and in London a constant supply
of exchanges on New York.

Experience has shown that at all times the number of persons in
Europe indebted to American business houses is about (though
of course not actually) the same as the number of persons in
America indebted to European houses. Hence when A of New
York wishes to make a payment to B of London he does not send
the actual money, but goes into the market—that is, to a banker
doing a foreign business—and buys a draft, called a bill of
exchange, which is in reality the banker's order on his London
correspondent, asking the latter to pay the money to the person
named. It may be that about the same time some London
merchant who owes money in New York goes to the very same
London banker and buys a draft on the New York bank. In this
way the one draft cancels the other, and when there is a

difference at the end of the week or month the actual gold is sent
across to balance the account.

These exchanges have a sort of commodity value, and like all
commodities, depend upon the law of supply and demand. When
gold is being shipped abroad we say that the balance of trade is
against us—that is, we are buying more from Europe than
Europe is buying from us, and the gold is shipped to pay the
balance or difference.

The par of the currency of any two countries means, among
merchants, the equivalency of a certain amount of the (coin)
currency of the one in the (coin) currency of the other, supposing
the currencies of both to be of the precise weight and purity fixed
by the respective mints. The par of exchange between Great
Britain and the United States is 4.862⁄3; that is, £1 sterling is
worth $4.862⁄3. Exchange is quoted daily in New York and other
city papers at 4.87, 4.88, 4.88½, etc., for sight bills and at a
higher rate for sixty-day bills. Business men who are accustomed
to watching fluctuations in exchange rates use the quotations as a
sort of barometer to foretell trade conditions. The imports and
exports of bullion (uncoined gold) are the real test of exchange.
If bullion is stationary, flowing neither into nor out of a country,
its exchanges may be truly said to be at par; and on the other
hand, if bullion is being exported from a country, it is a proof
that the exchange is against it; and conversely if there be large
importations.

The cost of conveying bullion from one country to another forms
the limit within which the rise and fall of the real exchange
between them must be confined. If, for illustration, a New York
merchant owes a debt in London and exchange costs him, say,
two per cent., and the cost of shipping the gold is only one per
cent., it will be to his advantage to pay the debt by sending the
actual coin across. A favourable real exchange operates as a duty
on exportation and as a bounty on importation.

A bill of exchange (private).

It is to the interest of merchants or bankers who deal in foreign
bills to buy them where they are the cheapest and to sell them
where they are the dearest. For this reason it might often be an
advantage for a New York merchant to buy a bill on London to
pay a debt in Paris.

A bill of exchange (banker's).

Two illustrations of bills of exchange are given in this lesson.
Each is drawn in duplicate. The original is sold or sent abroad,
while the duplicate is preserved as a safeguard against the loss of
the original. When one is paid the other is of no value. Notice the
similarity between bills of exchange as shown here and
commercial drafts as shown in our last lesson.

The first form shows a draft made by a coal company upon a
steamship company to pay for coal supplied to a particular

steamer. Suppose that the steamship company has a contract with
Robert Hare Powel & Co. of Philadelphia to supply coal to their
steamers. The steamer Cardiff, when in port at Philadelphia, is
supplied; the bill is certified to by the engineer; the master
(captain) of the vessel signs Powel & Co.'s draft (and in doing
this really makes it the captain's draft); the bill is receipted. Now
Powel & Co. sell this exchange (draft) on London to a broker or
banker doing a foreign business. It is forwarded to London and
presented in due time at the office of the Wales Navigation
Company for payment.

The second form shows a bill of exchange drawn by a
Philadelphia banking house upon a London banking house and
payable to the order of the firm buying the draft. C. H.
Bannerman & Co. will send this bill (the original) to pay an
account in Europe. The first form bears the same relation to a
commercial draft that the second does to a cashier's cheque.

First page of a letter of credit.

XI. LETTERS OF CREDIT

The usual instruments of credit by means of which travellers
abroad draw upon their deposits at home are known as circular
letters of credit. These forms of credit are of such common use
that every one should be familiar with their form. We reproduce
here a facsimile of the first and second pages of a circular letter
for £1000, copied with slight change of names from an actual
instrument. The first page shows the credit proper authorising the
various correspondents of the bank issuing it to pay the holder,
whose signature is given on its face, money to the extent of
£1000. The names of the banks who are authorised to advance
money upon the letter are usually printed upon the third and
fourth pages, though letters issued by well-known banking
houses are usually recognised by any banking house to which
they are presented.

The second illustration shows how the holder of a particular
letter availed himself of its advantages. It gives the names of the
banks to which he presented his letter, and the amounts paid by
each.

With such a letter a traveller could make a trip around the world
and not have in his pocket at any one time more gold or silver or
bills than would be necessary to meet immediate expenses.

Suppose that A. B. is about to make a European trip. He goes to
a bank doing a foreign business, say Brown Bros. & Co. of New
York City, and asks for a circular letter for £1000, for which he is
obliged to pay about $4880. Copies of A. B.'s signature are left
with Brown Bros. & Co., and may perhaps be forwarded to their
foreign banking houses. When A. B. presents himself at a
Glasgow or Paris bank with his letter of credit, and asks for a
payment upon it, the banker asks him to sign a draft on Brown
Bros. & Co., New York, or more likely on their London bank, for
the amount required, which amount is immediately indorsed on

the second page of the letter of credit, so that when the
indorsements equal the face the letter is fully paid. A. B. is
simply drawing upon his own account—that is, upon the money
he deposited to secure the letter of credit.

Payment is usually made upon the simple identification or
comparison of signatures. If a traveller should lose his letter of
credit he should notify at once the bank issuing it and, if
possible, the banks upon which drawn.

Second page of a letter of credit (used).

There are several other forms of travellers' credits in use. The
Cheque Bank, an English institution with a branch in New York
City, issues to travellers a book of cheques, each of which can be
filled up only to a limited amount, as shown by printed and
perforated notices appearing on the face. For instance, for £100
one can buy a cheque-book containing fifty blank cheques, each
good, when properly filled up, for £2. Each of these cheques is
really a certified cheque, only it is certified in advance of issue.
Any of the thousand or more foreign banks which are agents for
the Cheque Bank sell these cheque-books, and cash the cheques
when presented. The amounts that may be short drawn go toward
the cost of a new cheque-book, or may be returned in cash. The
American and other express companies have forms of travellers'
cheque-books very similar to those issued by the Cheque Bank.

XII. JOINT-STOCK COMPANIES

To organise a stock company it is necessary for a number of
persons to come together and make a certificate to the effect that
they propose to form a company to bear a certain name, for the
purpose of transacting a certain kind of business at a certain
place. The certificate states that they propose to issue a certain
number of shares of stock at a certain price per share, that the
capital stock is to be a certain amount, and that the company is to
continue to exist for a definite period of time. Blank forms for
such certificate are supplied by the Secretary of the State where
the company is being organised, and when such certificate is
properly filled out, signed, and delivered to him, he issues a
license, or charter, to the persons making such certificate, giving
them permission to open books, sell stock, and carry on the
enterprise outlined.

State laws regarding stock companies differ very largely.
Students of this course who desire to know the law in any

particular State can easily secure the information by writing to
the secretary of that State.

The usual par value of a share of stock is $100. That is, if a
company organises with a capital of $200,000, there will be 2000
shares to sell. Each person who buys or subscribes for the stock
—that is, who joins the company—receives a certificate of
stock. Our illustrations show two examples; one of a national
bank, and the other of a manufacturing company. These
certificates are transferable at the pleasure of the owners. The
transfer is made usually by a form of indorsement on the back of
the certificate, but to be legal the transfer must be recorded on
the books of the company.

A certificate of stock in a national bank.

The men subscribing in this way become responsible for the
good management of the business and are obliged to act
according to the laws of the State in which the company is
organised. Usually they are not responsible individually for the
liabilities of the concern beyond the amounts of their individual
subscriptions.

A certificate of stock in a manufacturing company.

Every person who subscribes for stock owns a part of the
business and is called a shareholder. All the shareholders meet
together, and out of their number they choose a certain number
of directors. The directors choose a president and other
necessary officers, and in a general way direct the policy of the
company. As a rule directors have no salaries attached to their
positions. General meetings of shareholders are held once a year
to elect the directors and to hear the reports of the officers.

The student should be familiar in a general way with the
different classes of stock and with the technical terms familiar to
stock companies. The more important of these matters are as
follows:

Directors. All the shareholders meet together and out of their
number choose a certain number of directors. The directors
choose a president and other necessary officers and fix the
amount of salary which shall be paid such officers for their work.

Capital Stock. This name is given to the gross capital for which
the company is organised, without any reference to its value or to
whether it has been fully paid in or not. The paid-in capital is the
amount received from the stockholders on the shares for which
they have subscribed.

Dividends. The directors of the company, after paying the
expenses and laying by a certain amount for contingencies,
divide the profits among the shareholders. These profits are
called dividends, and in successful concerns such dividends as
are declared quarterly, semiannually, or annually usually amount
to good interest on the shareholders' investments.

Treasury Stock. It often occurs that a new company finds it
necessary to set aside a certain number of shares to be sold from
time to time to secure working capital. Such stock is held in the
treasury until it is needed, and is called treasury stock.

Preferred Stock. Preferred stock is stock which is guaranteed
certain advantages over ordinary stock. It is usually given to
secure some obligation of the company, and upon it dividends
are declared in preference to common stock. That is to say, if a
man holds a share of preferred stock he will receive interest
thereon out of the profits of the business before such profits are
given in the form of dividends to shareholders generally.
Preferred stock can be issued only when authorised by the
charter of the company. The interest on the investment in the

case of preferred stock is more sure, but the security itself is not
any more secure than in the case of common stock.

Guaranteed Stock. Guaranteed stock differs from preferred
stock in this—that it is entitled to the guaranteed dividend
(interest) before all other classes of stock, whether the company
earns the necessary amount in any one year or not. This right is
carried over from year to year, thus rendering the shares
absolutely secured as to interest.

Watered Stock. When stock is issued to the shareholders
without increase of actual capital the stock is said to have been
watered. A company may organise for, say, $10,000, and may
want to increase to $50,000 without adding to the number of its
shareholders. Each holder of one share will, in this instance,
receive four new shares, and in future instead of receiving a
dividend on one share will receive a dividend on five shares. The
object of this is, quite commonly, to avoid State laws requiring
certain corporations to pay excess of profit over a stated rate per
cent. into the State treasury.

Forfeited Stock. Stock is usually sold on certain explicit
conditions, such as the paying of ten per cent. down and the
balance in installments at stated intervals. If the conditions which
are agreed to by the shareholder are not met his stock is declared
forfeited, or he can be sued in the same manner as upon any
other contract.

Assessments. Some companies organise with the understanding
that a certain percentage of the nominal value of the shares is to
be paid at the time of subscribing, and that future payments are
to be made at such times and in such amounts as the company
may require. Under these conditions the stockholders are
assessed whenever money is needed. Such assessments are
uniform on all stockholders.

Surplus Fund. It is not customary to pay a larger dividend than
good interest. The profits remaining after the expenses and

dividends are paid are credited to what is called a surplus fund.
This fund is the property of the shareholders and is usually
invested in good securities.

Franchise. A franchise is a right granted by the State to
individuals or to corporations. The franchise of a railroad
company is the right to operate its road. Such franchise has a
value entirely distinct from the value of the plant or of the
ordinary property of the corporation.

Sinking Fund. A sinking fund is a fund set aside yearly for the
purpose at some future time of sinking—that is, paying a debt.

XIII. PROTESTED PAPER

When a note is presented for payment at maturity and is not paid
it is usually protested; that is, a notary public makes a formal
statement that the note was presented for payment and payment
was refused. Notice of such protest is sent to the maker of the
note and to each indorser.

The bank should never hand to its notary any paper for protest
until it has made sure that its non-payment has not been brought
about by some error or misunderstanding. Quite often, even
though the paper has been made payable at a bank, the notary
sends a messenger with the note to the maker to make a formal
demand for payment.

In taking in collection paper, banks should obtain clear
instructions from its owners as to whether or not it should be
protested in case of non-payment. It by no means follows that a
formal protest is not desired because the paper bears no
indorsements. Many banks make it a rule to protest all unpaid
paper unless otherwise ordered.

We often see attached to the end of a draft a little slip with the
words: "No protest; tear this off before protesting." This is
simply private advice to the banker informing him that the
drawer does not wish to have the draft protested. It may be that
he does not wish to wrong or injure the credit of or add to the
expense of his debtor; or it may be that he considers the account
doubtful and does not wish to add to his own loss the cost of
protest fees.

To hold an indorser, he must be properly notified of the non-
payment of the note; and whether this has been done is a
question of fact. If he was not properly notified this defence will
avail whenever it is clearly proved. A great variety of defences
may be successfully made by an indorser. A few of these
defences are here briefly noticed: One is usury; another is the
maker's discharge by the holder; nor can he be held when he has
paid the note; nor when its issue was unlawful, nor when the
note was non-negotiable, nor when his indorsement was
procured by fraud. Finally, an indorser may avail himself of any
defence existing between the holder and the maker or principal
debtor. This is evidently a just principle, for the holder should
have no more rights against an indorser than he has against the
maker. If, therefore, the maker can interpose some just claim as a
partial or complete defence the indorser should be permitted to
avail himself of this claim.

In order to recover from an indorser it must be proven that a
formal and proper demand for payment was made upon the
maker. The formal protest is usually undisputed evidence of this.
The maker is liable in any event.

A protest.

To make the indorser's liability absolute it is necessary to
demand payment at the specified place on the last day of the
period for which the note was given, and to give due notice of
non-payment to the indorser. For, as the contract requires the
maker to pay at maturity, the indorser may presume, unless he

has received a notice to the contrary, that the maker has paid the
obligation.

Ordinarily a notice of an indorsement by a partnership need not
be sent to each member. Even after the partnership has been
dissolved a notice to one partner is sufficient to bind the other
members. If the note is owned jointly (that is, by parties who are
not business partners) the indorsers are not liable as partners but
as individuals. In such a case the notice of non-payment should
be sent to each.

Our illustration shows a facsimile of a protest notice.

XIV. PAPER OFFERED FOR DISCOUNT

One of the most valuable parts of a banker's education is to learn
whom to trust. Every bank should have a well-organised and
thoroughly equipped credit department, in charge of some one
who can be relied upon to investigate carefully all names
referred to him by the officers. A banker has the right to expect
the fullest confidence on the part of the borrower, and the
borrower should furnish him with a complete and detailed
statement of the condition of his affairs. It is safe to conclude
that when a borrower refuses absolutely to give any information
as to his financial condition his credit is not in the most
favourable shape.

Many of the banks have blank forms which they, from time to
time, ask borrowers to fill out. These statements show in detail
the assets and liabilities of the firm in question; they show the
notes which are outstanding, the mortgages on real estate, and
many other particulars, including the personal or individual
credit of members of the firm, if a partnership.

In estimating the value of paper offered for discount the
following points should be considered:

1. The total net worth of the borrower.

2. The character of his business; whether it is speculative or
staple.

3. The borrower's record and standing in the community and
his business habits.

4. Whether he is in enterprise abreast with modern ideas and
methods.

5. The character of the merchandise owned by the borrower.
What would it bring under the hammer? Groceries and raw
material can usually be turned into cash at a forced sale at
very small discount from current prices. Not so with
hardware, glass, dry goods, boots and shoes, books, etc.
Machinery and fixtures are not a bankable asset upon which
to base credit.

The banker should note his borrower's bills payable. Why did he
give notes? Are they met promptly? Many houses prefer to sell
their own paper in the open market, and keep their banks open
for accommodations when they are unable to secure outside
credit. The insurance carried should be considered; also the
volume of business done. A large business on moderate capital,
with long credits, will naturally have large liabilities, while a
small business with a liberal capital and short credits should have
small liabilities.

Paper offered for discount is of a variety of kinds. The larger
proportion of it is from customers of the borrower who have
extended their credit by paying their accounts in notes instead of
in cash. Such paper is really, though having two names, very
little better than single-name paper, for it is not the maker's
credit, but the payee's, which the bank usually considers. Many

very small notes offered for discount usually indicate a very
needy condition.

There are many firms which carry two or more bank accounts,
and others who sell their paper to out-of-town banks. In buying
paper it is important to ascertain whether the firm is in the habit
of taking up paper at one bank by floating a loan at another.

Paper may be classified for purposes of discount as follows:

1. Bills drawn by shippers on the houses to which the goods
are shipped.

2. Bills drawn by importers against commodities placed in
brokers' hands for sale.

3. Bills arising out of our manifold trades and industries.

4. Drafts with bills of lading attached.

5. Paper having personal indorsements.

6. Paper secured by collateral.

7. One-name paper.

XV. CORPORATIONS

Stock companies are in a sense corporations, but the name
corporation has in its common application a broader meaning.
Public corporations are those which are created exclusively for
the public interest, as cities, towns, counties, colleges, etc.
Private corporations are created wholly or in part for the
pecuniary benefit of the members, as railroad companies, banks,
etc. Corporate bodies whose members at discretion fill by

appointment all vacancies occurring in their membership are
sometimes called close corporations. In this country the power
to be a corporation is a franchise which can only exist through
the legislature.

In municipal corporations the members are the citizens; the
number is indefinite; one ceases to be a member when he moves
from the town or city, while every new resident becomes a
member when by law he becomes entitled to the privileges of
local citizenship.

The laws which corporations may make for their own
government are made under the several heads of by-laws,
ordinances, rules, and regulations. These laws may be made by
the governing body for any object not foreign to the corporate
purposes. A municipal corporation, for example, makes
ordinances for the cleaning and lighting of its streets, for the
government of its police force, for the supply of water to its
citizens, and for the punishment of all breaches of its regulations.
A railway corporation establishes regulations for signals, for the
running of trains, for freight connections, for the conduct of its
passengers, and for hundreds of other things. But such by-laws
and regulations must be in harmony with the charter of the
corporation and with the general law of the land. For instance, a
municipal corporation could not enforce a by-law forbidding the
use of its streets by others than its own citizens, because by
general law all highways are open to the common use of all the
people. Again, a railway corporation could not make a rule that it
would carry goods for one class of persons only, because as a
common carrier the law requires that it carry impartially for all.

As a general rule private corporations organised under the laws
of one State are permitted to do business in other States. It is
quite often to the advantage of a company to organise under the
laws of one State for the purpose of doing business in another.
For instance, there are many companies chartered under the laws
of Maine with headquarters in Boston. The Massachusetts laws

require that a large proportion of the capital be actually paid in at
the time of organising, while the Maine law has no such
provision. For similar reasons many large companies doing
business in New York or Philadelphia are organised under the
laws of New Jersey.

A corporation may make an assignment just as may an
individual. If all the members die the property interests pass to
the rightful heirs, and under ordinary conditions the corporation
still exists.

A franchise is a right granted by the State or by a municipal
corporation to individuals or to a private corporation. The
franchise of a railroad company is the right to operate its road.
Such franchise has a value entirely distinct from the value of the
plant or the ordinary property of the corporation.

An unlimited liability corporation is one in which the
stockholders are liable as partners, each for the full indebtedness.

A limited liability corporation is one in which the stockholders,
in case of the failure of the corporation, are liable for the amount
of their subscriptions. The name limited is required by law to
appear after the name of the company. If a subscription is
entirely paid up there is no further liability—that is to say, the
property of a shareholder cannot be attached for any debts of the
company. Understand clearly that the name limited printed after
the name of a company does not indicate in any way that the
capital or credit of the company is limited, only that the liability
of the shareholders of the company is limited to the amounts of
their shares.

A double liability corporation is one in which, in case of failure,
the stockholders are further liable for amounts equal to their
subscriptions. All national banks are double liability companies.
If A owns $5000 stock in a national bank, and the bank fails, he
loses his stock; and if the liabilities of the bank are large he may
be obliged to pay a part or the whole of an additional $5000.

XVI. BONDS

When a railroad company, or a city or any other corporation
desires to borrow money it is a common practice to issue
instruments of credit called bonds. A bond means something that
binds. Bonds bear the same relation to the resources of a
corporation that mortgages do to real estate.

Corporation bonds are issued for a period of years. They usually
have coupons attached which are cut off and presented at regular
intervals for the payment of interest. A bondholder of a
corporation runs less risk than a stockholder, first, as to interest:
the corporation is obliged to pay interest on its bonds, but may at
its own pleasure pass its dividends; secondly, the bondholder is a
creditor, while the stockholder of the corporation is the debtor.
On the other hand, if a concern is very successful, a shareholder
may receive large dividends, while the bondholder receives only
the stipulated interest. A bond is evidence of debt, specifying the
interest, and stating when the principal shall be paid; a certificate
of stock is evidence that the owner is a part-owner in the
corporation or company, not a creditor, and he has no right to
regain his money except by the sale of his stock, or through the
winding up of the company's business.

The name debentures is given to a form of municipal bond in
common use. Nearly all the large sums of money used by States
and cities for the building of State or municipal buildings,
bridges, canals, water-works, etc., are raised through the issue of
bonds (debentures), which are sold, usually at a price a little
below par, to large financial institutions, banks, and insurance
companies. Generally speaking, such bonds are good securities,
and are marketable anywhere.

A private bond.

At different times the United States government has issued
bonds to relieve the treasury. These bonds are absolutely safe and
are always marketable. Registered bonds have the name of the
buyer registered; unregistered bonds are payable to bearer.
Municipal bonds are issued by cities and other municipalities to
raise money for local improvements. If proper precautions are

taken by buyers, municipal securities may be considered among
the safest and most remunerative investments.

When a new railroad enterprise is undertaken its promoters often
expect to make the road not only supply the money for its
construction but also give working capital in addition. This is
done by the issue of mortgage bonds. Default in the payment of
interest throws the road into the hands of a receiver. The
securities immediately fall in value and are perhaps bought up by
a syndicate of crafty speculators who are permitted to reorganise
the road and its management. This is the history of many of our
roads. There are exceptional cases, of course, but the investor
should be familiar with the facts before buying railroad
mortgages.

A bottomry bond is a kind of mortgage peculiar to shipping. It is
a conveyance of the ship as security for advances made to the
owner. If the ship is lost the creditor loses his money and has no
claim against the owner personally. It is allowable for a loan
made upon such a bond to bear any rate of interest in excess of
the legal rate. A vessel arriving in a foreign port may require
repairs and supplies before she can proceed farther on her
voyage, and in occasions of this kind a bottomry bond is given.
The owner or master pledges the keel or bottom of the ship—a
part, in fact, for the whole—as security.

We have now upon the market stocks and bonds representing all
conceivable kinds of property. Not only are properties of many
kinds used to issue bonds upon, but many kinds of bonds are
often issued upon the same property. Thus we find among our
railroads not only first, second, and third mortgage bonds, but
income bonds, dividend bonds, convertible bonds, consolidated
bonds, redemption bonds, renewal bonds, sinking-fund bonds,
collateral trust bonds, equipment bonds, etc., until they lap and
overlap in seemingly endless confusion.

Receiver's certificates are issued by receivers of corporations,
companies, etc., in financial difficulties, to secure operating

capital; they are granted first rights upon the property and are
placed above prior lien and first mortgage bonds.

XVII. TRANSPORTATION

The most common effect of cheapened transportation is to
increase the distance at which it is possible for producer and
consumer to deal with each other. To the producer it offers a
wider market and to the consumer a more varied source of
supply. On the whole, cheapened transportation is more
uniformly beneficial to the consumer; its temporary advantage to
the producer very often leads to overproduction. It has the effect
also of bringing about nearly uniform prices the world over.

The time was when nearness to market was of the greatest
possible advantage. At the present time a farmer can raise his
celery in Michigan or his beets in Dakota and market them in
New York City about as easily as though he lived on Long
Island. It is no longer location which determines the business to
be carried on in a particular place, but natural advantages more
or less independent of location. But the railroad or the steamboat
very often determines where a new business shall be developed.
It is this quickening and cheapening of transportation that has
given such stimulus in the present day to the growth of large
cities. It enables them to draw cheap food from a far larger
territory, and it causes business to locate where the widest selling
connection is to be had, rather than where the goods or raw
materials are most easily procured. It is the quick and
comfortable transportation facilities which our large cities
possess that have given strength to the great shopping centres.
Shoppers for thirty or forty miles around can easily reach these
centres, and the result is that trade gathers in centres rather than
at local points. A city of a million population in the most
productive agricultural section of country could not be fed if the

food had to reach the city by teaming. With this growth of trade
centres comes the increased gain of large dealers at the expense
of the small; with it comes organised speculation and its
attendant results, good and evil.

Prior to the completion of the organisation of trunk or through
lines, freight was compelled to break bulk and suffer trans-
shipment at the end of each line, where a new corporation took
up the traffic and carried it beyond. To prevent this breaking of
bulk and to expedite the carriage of freight, fast freight lines on
separate capitalisation were organised. The purpose of the
interstate-commerce law is largely to prevent discrimination and
corruption in freight charges, to secure for every person and
place just and equal treatment at the hands of the transportation
companies. The freight rates are arranged and regulated by the
traffic associations, and the various conditions and compromises
necessary have made both classifications and rates about as
complicated as anything possibly could be.

The name differential as applied to freight rates refers to the
differences which are made by railroad companies. Certain roads
are by agreement allowed to charge a lower rate than others
running to the same points. To and from each of the eastern cities
there are two classes of roads—the standard lines and the
differential lines. The standard lines have the advantage of more
direct connections; the differential lines reach the freight
destinations by circuitous routes, in some instances by almost
double the mileage. With a view to equalising these conditions
the general traffic associations allow the differential lines to
carry freight at a lower rate per mile than the rate charged by the
standard lines.

The transportation business of the United States is so varied and
complicated that a proper study of its freight tariffs and
classifications would require much more space than can be given
the subject in these lessons.

XVIII. TRANSPORTATION PAPERS

The common transportation papers, familiar to all shippers, are
the (1) shipping receipt, (2) bill of lading, (3) waybill.

Original receipts, stating marks and quantities of goods, go with
each separate lot of merchandise to the freight sheds or vessels,
and these are summed up in a formal bill of lading, for which
they are exchanged when all the cases or bundles belonging to
the particular shipment have been delivered. The duplicate
receipt, or the part commonly marked invoice, is kept by the
receiver of the freight, and the other end, commonly marked
original, is given to the drayman. In making ordinary shipments
it is not usual or necessary to make out a formal bill of lading. Of
course, when no bill of lading is made out, the receipt should be
preserved by the shipper. The full contract is usually printed on
the receipt, but it must be remembered that a receipt is not a
negotiable instrument and cannot be used as security for money.

A shipping receipt (original).

A bill of lading is an acknowledgment by a transportation
company of the receipt of goods specified, and contracts for their
delivery at a certain place, under conditions stated thereon, upon
payment of freight and expenses. Bills of lading are negotiable
and maybe transferred by indorsement, but are of no value apart
from the goods to which they give title. A bill of lading goes with
certain named goods and cannot be transferred to other goods,
even though of precisely the same kind and price. Marine bills of
lading are usually made in triplicate; one is kept by the shipper,
another by the vessel, and the third is sent by mail to the person
to receive the goods.

A steamship bill of lading.

The parties to a bill of lading are three—the shipper, the
consignee, and the transportation company. The declaration of

having received the goods in good order and condition, and the
consequent obligation, subsequently expressed, of delivering
them in like good order and condition, is sensibly lessened in its
importance by the additional clause now adopted by almost all
transportation companies—namely: "Contents and condition of
contents of packages unknown." Should the goods or part of
them be shipped in a damaged condition, or in a bad condition of
packing, a note to that effect should be made by the
transportation company on the bill of lading, which ceases then
to be a clean bill of lading.

A local waybill.

Like any other instrument of credit, a bill of lading may be
deposited with a creditor as security for money advanced (or it
may be transferred to a buyer) by means of indorsement, and the
property or goods will be thereby either mortgaged or assigned.
Acting upon this principle, the shipper declares in the bill of
lading that the goods shall be delivered unto the consignee or his
assigns. When a shipper is unable to insert the name of the
consignee at the time the bill of lading is made out, a bill to
order is drawn up wherein the consignee's name is superseded by
the words shipper's order, or simply order; it being thus
understood that the goods shall be delivered to whomsoever
presents, at point of destination, the bill of lading duly indorsed
by the shipper. By such a simple arrangement as a bill to order
the merchant is enabled to sell the goods while they are at sea, or

in transit, and a consignment of merchandise may change hands
several times before arriving at its destination.

When a case of merchandise to be shipped has been properly
entered and weighed it is then ready to be manifested or
waybilled, as no shipment is allowed to go forward without a
waybill. The waybill is simply a memorandum of the
consignment, together with full and complete shipping
directions, giving also the number of the car into which the case
has been loaded, and the point to which the car is "carded." The
freight conductor has waybills for all goods which he carries.
They are turned over with the merchandise to the agent of the
railroad at the point of destination.

Our illustrations show (1) a shipping receipt—the half marked
"original"; (2) a steamship bill of lading; (3) a local waybill.

EXAMINATION PAPER

Note.—The following questions are set as an indication of the sort of
knowledge a student should possess who has carefully read the
several papers of this course. The paper covers only about the first
half of the course. The student is recommended to write out the
answers carefully. Only such answers need be attempted as can be
made from a study of the lessons.

1. What in a general sense is meant when we speak of the
currency of a country?

2. Enumerate some of the advantages afforded to the
community and to commerce in general by banking
institutions.

3. A bank cheque is a demand order for money, drawn by one
who has funds in the bank. How does a cheque differ from
an order on John Smith to pay bearer a certain sum of
money?

4. Why is it important that cheques should be very carefully
drawn?

5. (a) A cheque has no date. Does this make it void? (b) How
about a cheque dated months ago? (c) Is a cheque dated on
Sunday good? (d) Why are cheques sometimes dated
ahead? (e) Are you at liberty to print your own form of
cheque? (f) Is it necessary that your cheque be written on
the prescribed blank form? (g) How would you write a
cheque for 75 cents?

6. How would you word a cheque to give to a person who is
unknown at your bank, but who wishes to draw the money
over the counter?

7. You are sending a cheque through the mails to John Brown,
Philadelphia. How will you prevent the cheque from falling
into the hands of the wrong John Brown?

8. You identify A. B. at your bank. The cheque A. B. presented
turns out to be a forgery. Are you responsible?

9. A. B. transfers a cheque to you by a blank indorsement. It is
then payable to bearer. How can you legally make it
payable to your own order?

10. What is meant by power-of-attorney? How should an
attorney indorse cheques for any person for whom he is
acting?

11. If a note were about to be transferred to you by indorsement
and delivery in payment of a debt, would it make any
difference to you whether or not it was overdue? Explain in
full.

12. Tell how you would receipt for a payment of a note. Why is
not an ordinary separate receipt sufficient?

13. Why are notes protested? Why is a formal protest
sometimes desired even though the paper bears no
indorsements?

14. If an indorser is compelled to pay a note, against whom has
he a good claim?

NOTE TO THE FOREGOING EXAMINATION PAPER

It is a mistake to answer questions for a student if he is able of
himself to find the answers. A question which sets a student thinking,
even though he cannot immediately find a satisfactory answer,
affords educational training of considerable value. A few of the
answers to the foregoing questions are as follows:

5. (a) Not necessarily so. (b) Such a cheque would under ordinary
conditions be all right. Cheques should be presented as soon after
date as convenient. (c) Cheques dated on Sunday are very commonly
paid. Cheques or notes delivered on Sunday are void. The delivery
makes the contract, not the dating. (d) That the maker may have a
few days in which to deposit sufficient money to meet them. (e) You
are at liberty to print your own form of cheque or to write it out in
full if you wish. (g) Write the words "Seventy-five cents" plainly
along the money line.

8. Yes.

BUSINESS GEOGRAPHY

THE TRADE FEATURES OF THE GREAT
COMMERCIAL NATIONS

I. THE TRADE FEATURES OF THE BRITISH
ISLES

LONDON AS A FOOD CONSUMER

London is the greatest seat of trade and commerce in the world.
Its commercial greatness is evidenced by its greatness of
population. Its inhabitants number over 6,000,000. The houses in
which this vast population lives, would, if placed end to end,
make a continuous street that would stretch across all Europe and
Asia. The mere effort of providing food for this vast population
necessitates an enormous commerce. Half a million of beeves are
required every year to supply its meat market; also 2,000,000
sheep and 8,000,000 fowls. To supply its fish market
400,000,000 pounds of fish are required, and 500,000,000
oysters. Grain, flour, fruit, butter, eggs, cheese, sugar, tea, and
coffee, are brought to London daily in such quantities that the
prices of these commodities all the world over are based upon
what they will fetch in London. Whole nations and provinces
and districts get their subsistence from industries that have for

their end the supplying of some of this enormous food demand.
Denmark, for example, owes its entire prosperity of recent years
to its profitable manufacture of butter for the London market.
Brittany and Normandy, in France, are almost wholly occupied
in supplying that market with poultry and eggs. The islands of
Jersey and Guernsey derive their principal wealth, not, as might
be supposed, from the sale of milk and butter, but from the
supplying of London with potatoes. Canada during the last six or
eight years has built up with London an immense trade in cheese,
a trade that exceeds in importance any other that Canada has,
while even our own home States—Illinois, Iowa, and Wisconsin,
for example—have found new sources of wealth in catering to
the London dairy trade. "Elgin" and "Ames" creamery butters are
products well known to the London consumer.

LONDON THE COMMERCIAL CENTRE OF THE
WORLD

What is the reason of London's wonderful prosperity? Already its
population is one fifth the entire population of England and
Wales, and it is increasing at the rate of about 20 per cent. per
decade. Three hundred people are added to the number every day
in the year, a rate of 110,000 inhabitants in the course of the year.
It is now one half greater than the total population of all Ireland.
London's Scotch population is almost as numerous as that of
Edinburgh, while its Irish population is quite as numerous as that
of Dublin. Every civilised country is represented among its
people, and every civilised tongue is spoken among them. A sea
of brick and mortar, even now fifteen miles long and ten miles
broad, it is growing at the rate of a new house every hour of its
existence. Its streets are already 28,000 miles in length, and these
are spreading out so rapidly that every year many whole villages
and townships are enmeshed by them. Every day 1,000,000
people enter London by railway, and at least 500,000 people
have occupations in it in the daytime who reside beyond its

limits at night. Fifty thousand people have occupations in it in
the night-time who reside beyond its limits during the day. It is
the largest importing centre in Great Britain, and the largest in
the world, and its exports are exceeded only by Liverpool, and
not always by Liverpool. It is also the centre of the world's
financial business. For example, traders in the East Indies who
ship cargoes of spices and other Eastern produce to America,
draw in settlement on London rather than on New York, while
traders in America who ship cargoes of cotton to Marseilles or
Riga, draw in settlement on London rather than on Paris or St.
Petersburg. What is it that thus makes London the chief seat of
population in the world, the commercial metropolis of the world,
the great financial clearing-house of the world?

LONDON THE CENTRE OF THE LAND SURFACE OF
THE GLOBE

London the natural centre of the world's trade.

London stands as nearly as possible in the centre of the land
surface of the globe. Its situation, therefore, eminently adapts it
to be the great centre of the world's trade—the great distributing
centre of the world's products. Its ships can go to the farthest
parts of the earth, and, loading themselves with the natural
products of these parts, can bring them to its docks without
breaking bulk, deposit them there for assortment, and then take
them away again to other parts of the earth, and do this more
economically than the ships of almost any other port in the
world. But a greater reason is to be found in the fact that for

centuries the British people have pursued a definite policy of
manufacture, trade, and commerce, and have had the good
fortune to have had that policy interfered with in a less degree
than any other nation in the world by commerce-destroying war,
whether internal or external. And whenever Britain has been in
external wars her navy has been able to protect her commercial
interests. London, being the capital of the kingdom and its chief
seat of trade, has naturally derived the principal benefit from
these many years of peaceful industry and commerce. Then,
again, London is favourably adapted to trade in respect to its
own country. It is a seaport, sixty miles inland, and is connected
by navigable canals with all the other chief manufacturing and
commercial centres of the country. Its railway facilities, too, are
so complete that there is not a manufacturing town in the whole
island that is not within fifteen hours of freightage from it. Then,
too, the peculiar configuration of the coast-line of Great Britain
makes every point on the island within an hour or two of carriage
from a seaport. Finally, all British seaports are in trade
connection with London by a coasting service unequalled in the
world for cheapness, completeness, and efficiency. In a word,
London stands not only in the centre of the land surface of the
globe, but also at the commercial centre of its own home
territory—that is to say, within easy reach both by water and by
land of all the trading and producing interests of a people that for
centuries have been leaders in commercial and manufacturing
industry and enterprise.

GREAT BRITAIN'S COMMERCIAL POLICY

But that which more than anything else has made London the
great trade centre of the world has been the policy, now for many
years adopted by the British people, of allowing the goods and
products of all other nations to enter their ports untaxed. Every
port in Britain is a free port of entry for all imported merchandise

except spirits, tobacco, wine, tea, coffee, cocoa, and chicory; and
ships of all nations are allowed to trade at British ports upon
terms exactly the same as those laid down for British ships. The
result is that Britain has become the entrepôt or distributing mart
for the produce of the world. Ships of all nations are found at her
wharves, and commodities from all parts of the world brought in
those ships are found in her warehouses. Her mercantile navy
numbers 21,000 vessels, and 8000 of these are steamships. The
tonnage of these vessels amounts to over 8,750,000 tons, and of
this nearly 8,000,000 is engaged in the foreign trade alone. Her
mercantile sailors number over 250,000 men, and over 150,000
of these are engaged in the foreign trade. London is, of course,
the chief gainer from this perfect unrestriction of trade. Twenty-
seven per cent. of the whole trade of the country is in its hands.
Its merchants do business in every seaport on the globe, and the
trade of Great Britain with ports in Europe, the Levant, Egypt,
India, the East Indies, China, Japan, and Australasia, is almost
wholly controlled by them. Its shipping embraces the finest
trading fleets known to commerce. Its docks and wharves extend
on either side of the Thames for twenty-four miles from London
Bridge down to Gravesend, and are the largest and finest in the
world.

British mercantile marine. Compared with that of other countries.

LONDON THE CLEARING-HOUSE OF THE WORLD

A similar explanation is to be given of the fact that London is the
great financial centre of the world. The same policy which has
made Britain a great trading country has also made her a great
manufacturing country. The food products of all the world pour
in upon her shores, and Britain has become a cheap place to live
in. Her artisans are supplied with the best food that the world can
produce, and this at prices that are practically what the British

demand makes them to be. The British artisan is therefore both
well fed and cheaply fed. As a consequence of this, British
manufactures are produced more efficiently and more cheaply
than those of most other nations, and they are therefore exported
enormously to every quarter of the globe. London, from its
accessibility with respect to the great manufacturing centres at
home, and from its trade connections and facilities for trade
abroad, is the great distributing centre of this enormous
manufacture. London exporters have accounts for goods sold by
them all the world over. There is, therefore, no quarter of the
world where money is not constantly owing to London; or, if not
to London, then to Manchester, Birmingham, Sheffield, Leeds,
Glasgow, or some other manufacturing centre in close financial
touch with London. In this, then, lies the explanation of the
financial supremacy of London. No matter in what quarter of the
world money is owed by any place, the final destination of that
money is London; for in almost all cases it will be found that the
locality to which the money is owed, if it be not London, will
itself be a debtor to London. London, therefore, from necessity,
and as a matter of custom and convenience, has become the great
clearing-house of the world. The final adjustments of the
indebtedness of all the commercial centres of the world are made
there.

London bridge.

GREAT BRITAIN THE CREDITOR NATION OF THE
WORLD

One other reason for the financial supremacy of London lies in
the enormous wealth of Britain. For now almost half a century
Britain has been importing far more than she has been exporting,
and the total volume of her import and export trade is more than
quadruple what it was in 1850. The consequence is that not only
has Britain been accumulating wealth, but she has been
accumulating it enormously. Her accumulated savings, therefore,
have been at the world's disposal, and she has had so much
money to invest that she has become the creditor nation of the
world. The total investments of British capital in foreign
countries (in loans, railways, manufacturing syndicates, etc.) is
estimated to be the enormous sum of over $10,500,000,000.
London, of course, is the investing, controlling, and supervising
counting-house for all this capital. And as so much British

capital finds in London its place of investment, it naturally
follows that nearly all the remaining unemployed capital of the
world, that seeks investment, either is sent to London as a
market, or else assumes a price for investment elsewhere which
the current price of capital in London warrants it to assume. The
London market rate of capital, therefore, determines its market
rate in every other commercial centre of the world.

GREAT BRITAIN A BEEHIVE OF MERCANTILE AND
MANUFACTURING INDUSTRY

Britain like all other civilised countries, was originally an
agricultural country. Although for some centuries she has been
one of the chief manufacturing and mercantile countries of the
world, it has been only during the past one hundred years, and
especially during the past fifty years, that her development in
manufactures and in commerce has been remarkable. Britain is
still, in respect of quality, the foremost agricultural country on
the globe. Her breeds of horses, cattle, sheep, and swine are the
standard breeds from which almost all other breeds derive their
origin, and by which from time to time they are improved. And
nowhere is the raising of grains and roots for food of man and
beast pursued with more skill and success than in Britain. But
agriculture is fast ceasing to be an important industry of Britain.
Two million acres less are under cultivation now than were
cultivated fifty years ago. The total amount of wheat raised is
sufficient only for three months' consumption of the people; the
remaining quantity needed must be supplied by importation.
Three fifths of the total population of the island live in towns,
and only a small proportion of the population that live in the
country is actually supported by agriculture. Agriculture, in fact,
supports only fifteen per cent. of the population in all Britain,
and in England only ten per cent. Three and a half times as many
people are personally engaged in manufactures as in rural
pursuits. For three quarters of a century the population in towns

and cities has been growing four times faster than the population
of the rural parts. At the same time the working power of the
urban population has been constantly growing more effective. In
fifty years, by the general adoption of machinery, the effective
working power of the British workman has been increased
sixfold. In England eighty-six per cent. of the total work of the
country is done by steam, and in Scotland ninety per cent. Great
Britain, therefore, has become practically one great beehive of
mercantile and manufacturing industry. Agriculture as a general
occupation of the people, except in the production of the finer
food products, such as choice beef and mutton and high-grade
dairy products, is no longer profitable. Indeed, during the last
fifteen years the plant (including land) employed in agricultural
industries has been depreciating in value at the rate of
$150,000,000 yearly; that is, in these fifteen years the enormous
sum of $2,250,000,000 of capital employed in agriculture has
been obliterated. But the gain to capital employed in profitable
mercantile and manufacturing pursuits has much more than
compensated for this enormous loss in agriculture.

GREAT BRITAIN'S COAL-FIELDS AND IRON
DEPOSITS

One reason for the great development which Britain has made as
a manufacturing and trading nation lies in the fact that Britain
was the first nation to utilise on a large scale the power of steam
as a help to manufacture and trade. The steam-engine was a
British invention. The first railways were built in Britain. The
first steamship to cross the Atlantic was a British enterprise. A
second reason lies in the fact that when Britain began to use
steam as a motive power she found her supplies of coal so near
her iron mines, and so near her clays and earths needed for her
potteries, that from the very first she was able to manufacture
cheaply and undersell most of her competitors. Her coal-fields
have an area of over 12,000 square miles, and wherever her coal-

beds are other natural products have been found near by, so that
her manufacturing areas and her coal areas are almost identical.
Taking Liverpool, Manchester, Birmingham, Wolverhampton,
Sheffield, Leeds, Newcastle, Durham, Bristol, Stoke, Carlisle,
Cardiff, Swansea, Glasgow, Paisley, and Dundee as centres,
around each of these lies a coal area of such richness as amply
sustains it in its commercial and manufacturing pre-eminence.
London is almost the only great commercial centre of Britain
that does not lie in the midst of or quite adjacent to a rich coal
and other mineral region. But London is within easy distance,
not only by rail, but also by canal and by coastwise sailing, of
every coal-field and mineral deposit of Britain. London,
however, is an importing and exporting centre rather than a
manufacturing centre.

The coal-fields of England.

LONDON'S SPECIAL TRADE FEATURES

The commercial supremacy attained by many of the large cities
of Britain is not wholly due to natural causes, or even to ordinary
causes. Much of it is due to extraordinary enterprise and
forethought on the part of their citizens. London, for example, is
the centre of the wool trade of Britain. The woollen
manufacturers of Britain use about 250,000 tons of wool
annually, and three fourths of this is imported. Other cities that
lie near the seats of the great woollen manufactures—Liverpool,
for example—have tried to secure a share of this vast
importation of wool, but London, because of the special attention
it gives to this trade, manages to keep almost the whole of the
trade in its own hands. Similarly, London almost wholly
monopolises the trade of England with Arabia, India, the East
Indies, China, and Japan. It is therefore the great emporium for
tea, coffee, sugar, spices, indigo, and raw silk. It also enjoys the
bulk of Britain's trade in fruits (oranges, lemons, currants,
raisins, figs, dates, etc.) and in wines, olive oil, and madder, with
the countries that lie about the Mediterranean. By virtue partly of
its situation, but largely because of the enterprise of its
merchants, it absorbs nearly the whole of Britain's French trade,
and of England's trade with Germany, Belgium, Holland, and
Denmark. This includes principally wines (from France), and
butter, eggs, and vegetables. Another great branch of its trade is
that with the ports of the Baltic, including those of Russia, the
imports comprising, besides wheat and wool, tallow, timber,
hemp, and linseed. The tobacco imported from Virginia into
England goes almost wholly to London; so does almost the
whole of the Central American and South American trade in fine
woods, dye-stuffs, drugs, sugar, hides, india-rubber, coffee, and
diamonds. Quite a large share of the trade of Britain with Canada
is concentrated in London; also, more than one half of the trade
of England with the West Indies, the imports from the latter
country comprising principally sugar, molasses, fruit, rum,
coffee, cocoa, fine woods, and ginger.

THE SPECIAL TRADE FEATURES OF GLASGOW,
LIVERPOOL, AND MANCHESTER

The great commercial centres of Britain after London are
Glasgow (800,000), Liverpool (700,000) and Manchester
(640,000, including Salford). All these cities have derived the
greater portion of their size from the progress they have made
during the present century. All, of course, owe their progress and
their prosperity largely to their natural advantages of situation,
etc. Liverpool stands on the margin of the Atlantic, "the
Mediterranean of the modern world," and thus enjoys the
principal share of the trade with America, especially that with the
United States. Great Britain's imports from the United States
amount to over $500,000,000 per annum, and her exports to the
United States (exclusive of bullion, etc.) to over $100,000,000.
(Formerly the exports to the United States were twice this
amount.) Of this vast trade, amounting to one fifth of Britain's
total trade with the world, Liverpool enjoys the lion's share.
Nearly all the cotton, not merely of the United States but of the
world, that is used in Europe is sent to Liverpool for distribution.
Similarly, Glasgow, situated with its aspect directed toward the
same maritime routes, enjoys also an immense transatlantic trade
both north and south. And Manchester, situated in the very heart
of the richest coal districts of the kingdom, and within easy reach
of the great cotton port, Liverpool, has built up a cotton-
manufacturing industry surpassing that of all the rest of the
world.

THE BUSINESS ENTERPRISE OF GLASGOW,
LIVERPOOL, AND MANCHESTER

But the natural advantages of situation possessed by these great
cities have been grandly supplemented by the enterprise of their
inhabitants. Glasgow is only a river port. For twenty miles

below its site the Clyde is naturally narrow, shallow, and shoal-
encumbered. In places it is naturally not more than fifteen inches
deep. By the expenditure of no less a sum than $60,000,000 this
shallow stream has been converted into a continuous harbour,
lined on either side for miles with wharves and docks, and easily
capable of accommodating the largest and finest merchant ships
afloat. As a consequence of this enterprise Glasgow has become
the greatest ship-building port in the world. No less than twenty
shipyards—in efficiency and magnitude of the very highest class
—are to be found along the banks of the once shallow,
impassable Clyde, between Glasgow proper and the river's
mouth.

Similarly, the enterprise of the ship merchants of Liverpool has
converted a port, that high tides and impassable bars would
naturally render unfit for modern ships, into the greatest shipping
port in the world. One hundred million dollars were spent in
making the improvement, but $5,000,000 is the annual revenue
derived therefrom in dock dues alone. And because of this
enterprise Liverpool can now boast of controlling one fourth of
all the imports of the kingdom, and two fifths of all the exports,
and of handling three fourths of all the grain and provision trade
of the kingdom, and of having the largest grain warehouses in
the world.

The Manchester ship canal.

But Manchester, a wholly inland city, forty miles distant from
Liverpool, its nearest port, has outdone even Glasgow and
Liverpool in its endeavour to bring the sea to its own doors. It
also has spent $100,000,000—not, however, in amounts spread
over a number of years, and as occasion seemed to demand, but
all at once, in one lump sum, in one huge enterprise. It has built a
canal to the Mersey where it is navigable, thirty-five and one half
miles in length, and sufficiently deep and wide, so that the whole
of its vast importation of cotton, and the whole of its vast
manufacture of cotton and other textile fabrics, and as much else
as may be desired, may be brought in from the sea or taken to the
sea in merchant vessels of the very largest size now afloat. And it
has done this in the face of engineering difficulties, and of
obstacles raised against it by jealous competing interests that
were almost insurmountable.

GREAT BRITAIN'S SPECIALISATION OF HER
INDUSTRIES IN DEFINITE CENTRES

In no part of the world are manufacture and trade carried on with
such strict regard to the conditions of economic production and
the economic handling of goods as in the British Isles. The free-
trade policy of the empire permits everywhere within its borders
not merely national but world-wide competition; and yet it is but
truth to say that wherever Great Britain attempts to sell her
goods abroad every nation and every community in the world
rises against her. Even her colonies are against her. Her markets
are open to every one's trade, and yet in almost every market in
the world which she does not absolutely control barriers are
raised against her trade. She is able to sell goods in foreign
markets only because, despite these barriers, she is able to
undersell all competitors in them, or to give better value for the
same money than they. Even when she obtains the control of new
markets, as she has in India, China, Egypt, West Africa, etc., she
allows every nation to trade in these markets on precisely the
same terms as she herself trades in them. In the face of this
world-wide competition, therefore, the industries of Britain
would cease to exist if every condition conducive to economy of
production—climatic suitability, availability of cheap motive
power, accessibility to cheap raw material, and accessibility to
natural and cheap means of transportation—were not taken
advantage of to the utmost. But this is just what Britain does. She
does take advantage to the utmost of conditions conducive to
economy of production; and this is why, to a degree nowhere
else attempted in the world, she has specialised her industries in
definite favouring localities.

THE NATURAL APTITUDES OF COMMUNITIES IN
GREAT BRITAIN FOR SPECIAL INDUSTRIES

A result of this specialisation of industries in definite centres is
that a natural aptitude for the industry specialised in a locality is
developed among the inhabitants of the locality, and this, being
stimulated by association, is transmitted from generation to

generation with ever-increasing efficiency. Again, this inherited
aptitude of the community for the industry historically associated
with it is a prime element in the economic prosecution of the
industry. Also, in turn, it acts as an important influence in
continuing the industry in the locality where once it has been
successfully specialised. In no country in the world, outside of
Asia, have great industries had such long-continued successful
existence in definite localities as in Britain. And therefore in no
country in the world do the natural aptitudes of communities for
special industries constitute such an important element of
economic industrial production. A community of efficient
"smiths," for example, has existed in and about Birmingham
since the fifteenth century. As a consequence of this the
Birmingham country has for several centuries been the greatest
seat of the metal or hardware industries in the world. Again, the
manufacture of woollen cloths has been an industry successfully
specialised in West Yorkshire from the fourteenth century. It
results that nowhere in the world is the woollen manufacture
carried on more prosperously than in West Yorkshire to-day. The
potteries of Staffordshire have been in existence time out of
mind, and in the eighteenth century they took a pre-eminent
place among the industries of the world. They hold that place of
pre-eminence now, even though since then the methods of
manufacture have been several times revolutionised.

THE COTTON MANUFACTURES OF GREAT BRITAIN

But the influence which more than anything else has determined
the specialisation of industries in certain places in Britain rather
than in others has been the presence of coal-fields. In only a very
few instances have great industries been maintained in districts
that are not coal-producing. The busiest industrial centre in all
Britain is, perhaps, South Lancashire, the great seat of the
cotton manufacture. South Lancashire is one great coal-field.
Liverpool, the great cotton port of the world, is at one edge of

this field. Manchester, the cotton metropolis of the world, is at
the other edge. Between and near these two chief towns is a
whole nest of large towns and cities—Preston, Burnley,
Blackburn, Rochdale, Bolton, Bury, Ashton, Stockport,
Oldham, etc.—every one of which is wholly devoted to the
cotton interest. From their position all these towns obtain both
their motive power and their raw material at the lowest possible
cost. But, in addition to its advantages of cheap coal and cheap
raw material, South Lancashire has one other great advantage in
favour of its special industry—its climate is eminently suited to
the industry. Its atmosphere is moist, and not too moist, and its
temperature is not too cold. Cotton thread can be spun and
woven in Lancashire which elsewhere would break. In scarcely
any other place in England has cotton-weaving or cotton-
spinning ever proved a success. The cotton industry of Scotland
is not so localised as it is in England, but Paisley (65,000) is
famous all the world over for its identification with the
manufacture of cotton thread. Ireland has no important cotton
manufactures except in Belfast. One third of the cotton
manufactured in the world is manufactured in the United
Kingdom. The total product is about 14,000 miles of cloth daily.
The number of separate mills is over 2500. The annual product is
$500,000,000, which is one hundred times what it was one
hundred years ago. The quantity of raw cotton imported annually
to sustain this immense production is 1,750,000 pounds.

The great manufacturing districts of England.

THE WOOLLEN MANUFACTURES OF GREAT BRITAIN

A second great industry of Great Britain is its woollen
manufacture. This industry is specialised in England, principally
in West Yorkshire, a district which is as well supplied with coal
as is South Lancashire. Leeds (410,000) and Bradford (232,000)
are the two principal seats of the industry, but Huddersfield and

Halifax are also important "cloth towns," and many other
communities are identified with the manufacture of woollens.
The noted "West of England" cloths are made principally in
Gloucestershire, where their manufacture in the town of Stroud
is a survival of an ancient industry once general throughout the
whole county. In Scotland there are two centres of the woollen
industry. The first and most important is in southeast Scotland,
where, in the valley of the Tweed (in Galashiels, Hawick,
Jedburgh, etc.), the celebrated "Scotch tweeds" are
manufactured. The second is in the valley of the Teith (Stirling,
Bannockburn, etc.). At one time the sheep that were pastured on
the wolds of Yorkshire were the chief supply of the raw material
for this industry in the whole of Britain, but that time is now long
past. The total annual import of wool into the United Kingdom is
about 750,000 pounds, of which about one half is retained for
home manufacture. Two thirds of this import comes from
Australia. The number of wool and worsted factories in the
kingdom aggregates over 2750. The value of the woollen goods
produced annually is about $250,000,000, which is about one
fourth of the total product of the world.

THE LINEN MANUFACTURES OF GREAT BRITAIN

The third great textile manufacture of the United Kingdom is that
of linens. This is the one manufacture in which Ireland surpasses
her sister kingdoms, England and Scotland. The cultivation of
flax and the spinning of linen yarn have been domestic industries
throughout all Ireland from time immemorial. But at the present
time the linen-manufacturing industry of Ireland is almost
wholly concentrated in Belfast. In Scotland, which now almost
rivals Ireland in the extent and perfection of her linen
manufactures, the industry is principally located in Fifeshire and
Forfarshire, especially in the towns of Dundee and Dunfermline,
the latter town being greatly famed for its napery and table
linens. Linen, like cotton, requires a peculiar atmospheric

condition of temperature and moisture for its manufacture, and
only in few localities has the linen industry been successfully
established. The total value of the annual linen manufacture of
the United Kingdom is $100,000,000.

OTHER TEXTILE MANUFACTURES OF GREAT
BRITAIN

The annual value of the total manufacture of textile fabrics in the
British Isles is about $1,000,000,000—not far short, indeed, of
one fourth of the total manufacture of textile fabrics in all the
world. Great Britain has over $1,000,000,000 invested in her
textile industry, and one half of her total exports consists of
textile manufactures. Cotton, woollen, and linen cloths are the
chief staples of this industry, but there are many other branches
of it and many other localities in which it is specialised besides
the ones already mentioned. Leicester (204,000), which, like so
many other manufacturing cities of England, lies at the centre of
a coal-field, is the chief seat of the wollen hosiery manufacture.
Dumfries is the chief seat of the woollen hosiery manufacture in
Scotland. Kidderminster, in Worcestershire, is the chief seat of
the "Brussels" carpet industry; Wilton, in Wiltshire, of the
Wilton carpet industry. Kilmarnock, in Ayrshire, is the chief seat
of the carpet manufacture in Scotland. Nottingham (233,000) is
the metropolis of the cotton hosiery and lace manufacture of
England. Norwich (110,000), in eastern England, has a noted
manufacture of muslins and fine dress-goods. The Norwich
textile manufacture is an instance of the continuance of an
industry in a community historically associated with it, although
its seat is far removed from a coal-field. The silk manufacture of
Great Britain is almost entirely confined to the county of Derby
and adjacent districts in England. Macclesfield, in Cheshire, is
the chief centre. Coventry is noted for its silk ribbons and
gauzes. But the manufacture of silk in Britain is not prospering
like that of her other textile fabrics. In fact, in forty years it has

depreciated three fourths. British silk manufacturers are not as
adept in weighting their products with dyes as their French
competitors are, and in consequence English silks, though
intrinsically better than French silks, look inferior and therefore
cannot be sold at profitable prices. But, on the other hand, the
jute manufacture of Great Britain is increasing by leaps and
bounds. Established only sixty years ago, the value of its annual
output is now twice that of the whole manufacture of silk, and in
twenty-five years has tripled. The chief seat of this industry is
Dundee (160,000), in Scotland.

THE HARDWARE MANUFACTURES OF GREAT
BRITAIN

The textile manufactures of Great Britain are in the aggregate
first in importance, but the hardware manufactures come a close
second. The total amount of Great Britain's hardware products is
about $750,000,000, or one fourth of the total product of the
world, and of this about one third is exported. Even more than
her textile fabrics, the hardware manufactures of Great Britain
are associated with her coal-fields. The most distinctive
"hardware centre" is that one which is identified with the great
coal-field in the middle of England known as the "Black
Country." Birmingham (506,000), the chief place in this centre, is
unrivalled in the world for the multifariousness and extent of its
metal manufactures. It is literally true that everything from a
"needle to an anchor" is made within its limits. But though its
industries comprise principally those of iron and steel, its
manufactures in gold, silver, copper, zinc, lead, and aluminium
are also very important. Birmingham, too, is unrivalled in the
world in the application of art to metal work. Its manufacture of
jewellery, and gold and silver ornaments, is enormous. Its
manufacture of small wares is also enormous. For example, it
turns out 15,000,000 pens weekly. Its manufacture of buttons
runs into the hundreds of thousands of millions. Wolverhampton

(88,000), also in the Black Country, is noted for its manufacture
of heavy hardware and machinery. So also in Oldham, in the
Lancashire district. So also in Leeds, in the West Yorkshire
district. Sheffield (352,000), also in Yorkshire, is historically
identified with its celebrated cutlery manufacture, an industry
that first began there because of the quality and abundance of the
grindstones found near by. With the coal-beds of Durham and
Cumberland are identified the great ship-building and
locomotive-building industries of Newcastle (218,000),
Sunderland (142,000), and Darlington, on the northeast side of
England, and the great steel manufactures (the largest in the
kingdom) and ship-building industries of Barrow-on-Furness,
on the northwest side. With the coal-fields of South Wales (noted
for its smokeless coal) are identified the smelting industries of
Swansea (70,000). Ores of copper especially, but also of silver,
zinc, and lead, are brought from all over the world to Swansea to
be smelted. These South Wales coal-fields also account for the
fact that in respect to amount of tonnage Cardiff (160,000) is
one of the chief ports for exports in the world, ranking in this
respect next after New York. The exports of coal from Cardiff
are now 12,000,000 tons annually.

II. THE TRADE FEATURES OF FRANCE

FRANCE A RICHLY FAVOURED COUNTRY

France by nature is one of the most highly favoured countries in
the world. Its climate is genial. Its temperature is so varied that
almost every vegetable, grain or fruit needed for the sustenance
of man may be raised within its borders. Its soil, though not
surprisingly fertile, yet yields abundantly such products as are
suited to it. Its mineral resources, especially in coal, iron, lead,
marble, and salt, are very considerable. Its area is compact. Its

facilities for foreign commerce are unsurpassed. It lies between
the two bodies of water—the Atlantic and the Mediterranean—of
greatest commercial importance in the world. And its people,
especially those in rural parts, are exceptionally frugal and
industrious. But France as a nation has not made the progress in
the world that its natural advantages call for. It has been cursed
with expensive and unstable governments and sanguinary wars.
Its upper classes, the natural leaders of its peoples, are
excessively fond of pleasure and military glory, and the energies
of the nation have been much misdirected. As a consequence,
despite its natural advantages, France is losing ground among the
nations of the world. Its national debt amounts to nearly
$7,000,000,000, the largest national debt known in history, being
per head of population seventeen and one half times as great as
that of Germany, six times as great as that of the United States,
and much more than one and one half times as great as that of
Great Britain. But, what is of more serious consequence, the
vitality of its people seems debilitated. For years the annual
number of births in France has been steadily decreasing, while
the annual number of deaths has been more or less increasing.
Over a great part of the country the number of deaths annually
exceeds the number of births. In numerous years this is so for the
whole country. The birth rate is the lowest in Europe. The death
rate, while not the highest, is yet higher than in many other
countries. As a consequence of all this the population of France
is almost stationary. During the last seventy years it has
increased only 18 per cent., while that of Great Britain has
increased 63 per cent., Germany 75 per cent., Russia 92 per
cent., and Europe as a whole 62 per cent. And even this increase,
small as it is, is largely due to immigration from other countries.
Nor is the emigration of Frenchmen to their colonies or to other
countries to be set down as a sufficient explanation. The French
are averse to emigration. At the present time the number of
Frenchmen residing abroad is only a little more than half a
million, while of foreigners residing in France the number is not
far short of a million and a quarter.

France, compared in size with the States of Illinois and Texas.

THE FRENCH A THRIFTY, FRUGAL PEOPLE

When France is compared with other countries in respect of
commercial development and progress, the results will in almost
every particular turn out unfavourable to France. For example,
since the close of the Napoleonic wars eighty-three years ago the
national trade of Great Britain has quadrupled, while that of
France has only trebled. At the close of the Franco-German war
France was eighteen per cent. ahead of Germany in the carrying

power of her shipping. Now Germany is seventy per cent. ahead
of France in that respect. But it must be remembered that the
Franco-German war cost France in army expenses and in
indemnity no less a sum than $3,250,000,000. The effect of that
tremendous expenditure upon the prosperity of the nation can be
estimated by one comparison. Since that war the annual average
savings per inhabitant in France have been $17. For the same
period the annual average savings per inhabitant in Great Britain
have been $19.50. Had that war not occurred the average annual
savings per inhabitant in France would have been $21.50. In
short, no people in Europe are comparable with the working
classes of the French people in frugality and thrift, and because
of this characteristic, if France were well governed, its prosperity
would be equal to that of any country in the world, and this
would be so in spite of the fact that France's interest bill imposes
a tax of $6.50 a year on every inhabitant of the country.

Street scene in Paris, showing the Bourse.

THE IMPORTANCE OF AGRICULTURE IN FRANCE

France has one element of stability, one characteristic inducive
of thriftiness, that most other countries of Europe lack. In most
other European countries the land is held by few proprietors. In
France it is held by many. In Great Britain and Ireland, for
example, the land that is devoted to agriculture is held by only
19,000 proprietors. In France it is held by 3,500,000 proprietors.
There are also 3,500,000 district farms in France, though only
sixty per cent. of the farm land of the country is cultivated by the
owners. It follows from this that agriculture has in France a hold
upon the affections and self-interest of the people that it has in
no other country in the world. About forty-two per cent. of the
total population of the country able to work are employed in
agricultural pursuits. Agriculture, therefore, is one of the most
important industries of France. One fifth of the total earnings of
her people are made in agriculture. It cannot be said, however,
that agriculture in France is pursued as successfully as it is in
some other countries—in Great Britain, for example. France,
with sometimes the exception of Russia, is the largest wheat-
grower of all the nations of Europe, but its production of grain
per acre is not more than four sevenths that of Great Britain,
while its production of grain per farming hand is only two thirds
that of Great Britain. But so much of the agricultural effort of
France is devoted to such industries as can be carried on in small
farms or holdings—potato-raising, for example, and fruit-raising
and poultry-raising—that the total money product per acre in
France is not far short of what it is in Great Britain. That is to
say, while agriculture is more profitably carried on in Great
Britain than in France, it proportionately supports a larger
number of people in France than in Great Britain.

FRANCE'S WATERWAYS AND RAILWAYS

France, like Germany, is well supplied with navigable rivers, and
these, with its canals, constitute a complete network of navigable
waterways that cover all the country and greatly promote the
internal commerce of the nation. These navigable rivers
aggregate 5500 miles, and the navigable canals over 3100 miles.
The tonnage of goods carried on these waterways compares quite
favourably with that carried by the railways. The railways
aggregate 25,000 miles.

THE DISTINCTIVE AND IMPORTANT
MANUFACTURES OF FRANCE

The most distinctive manufacture of France, the one in which
she surpasses all other countries of the world, is the silk
manufacture. France's total production of silk is not far short of
one third of the total production of the world. Lyons (466,000),
on the Rhone, is the chief seat of the industry, having had this
pre-eminence ever since the Jacquard loom was invented there at
the beginning of this century. Its production is not far short of
three fourths of the total production of the country. The most
important manufacture of France, however, is her manufacture of
woollens. In this manufacture she comes next after Great
Britain, her total production being a little ahead of that of both
Germany and the United States. Her woollen mills number over
2000. Her consumption of wool for this industry is about three
fourths that of Great Britain, but the value of her production is
only two thirds that of Britain. Lille (216,000) and Rheims
(108,000) are the chief seats of the woollen industry. Of about
equal value with the woollen manufacture of France is its
hardware manufacture, but the importance of France's hardware
manufacture is national rather than international. Of next
importance is the manufacture of cottons and linens. The chief
seats of these industries are, for cottons, Rouen (113,000), the
"Manchester of France," and for linens, Lille. Near Lille is
Cambrai, the chief place of manufacture for that finer class of

linens known as cambrics. A second distinctive manufacture of
France is that of glass and porcelain. In this manufacture France
quite equals Great Britain in respect of value, and surpasses her
in respect of the artistic character of the wares. Limoges (77,000)
and St. Cloud (near Paris) are the chief seats of the French
porcelain manufacture. It is at St. Cloud that the celebrated
"Sèvres" porcelain is made.

PARIS AND THE GREAT SEAPORTS OF FRANCE

Paris (2,536,834) is, of course, the chief trade centre of all
France, but the trade interests of Paris are general rather than
special. The manufactures that are most localised in Paris are
those of articles of luxury, such as jewellery, perfumery, gloves,
fancy wares, novelties, and fashionable boots and shoes. Paris is
also a great financial centre. Marseilles (442,000), one of the
oldest cities in Europe, is the great seaport of France. Its trade
amounts to over $350,000,000 annually, and it ranks next after
Hamburg among the great seaports of central Europe. Its
specialty is its great trade with the Mediterranean and the East.
The opening of the Suez Canal has been of incalculable
advantage to Marseilles. Next as shipping port comes Havre
(119,000), at the mouth of the Seine, with a total trade not far
short of that of Marseilles. Havre is in reality the port or "haven"
of Paris. It is the great depot for French imports from North and
South America. These comprise principally cotton, tobacco,
wheat, animal produce, and wool. Its import of South American
wool is enormous, for three fourths of the wool used in France
now comes from the region of the La Plata. Recently the Seine
has been deepened and now both Rouen and Paris may be
considered seaports. By this means Paris has direct water
communication with London, and is, indeed, the third seaport in
the country. Next comes Bordeaux (257,000), the chief place of
export for French wines and brandies. About twenty years ago
the wine industry of France suffered tremendous loss from the

ravages of the insect phylloxera. Over 4,000,000 acres of
vineyard, representing a value of $1,000,000,000, were wholly
or partially ruined by this terrible pest. The plague, however, has
now been stamped out, but nearly 2,000,000 acres of vineyards
have been permanently destroyed and have been devoted to
potatoes and the sugar-beet root. The result is that the production
of wine in France is now less than what is needed for home
consumption, and over fifty per cent. more wine is imported than
is exported. The remaining great shipping ports are Dunkerque
(40,000) and Boulogne (37,500). Calais (57,000) has a great
passenger trade with England.

III. THE TRADE FEATURES OF GERMANY

GERMANY THE MOST PROSPEROUS NATION IN
CONTINENTAL EUROPE

The greatest and most prosperous commercial nation in the old
world after Great Britain is Germany. Its population is
52,000,000, as against France's 38,500,000; and while France's
population is scarcely increasing at all, Germany's population is
increasing the most rapidly of any in Europe. Since the Franco-
Prussian war France has gained in population only a little over
2,000,000, while Germany in the same time has gained
12,000,000. In the middle of the present century the populations
of Germany and France were equal, being each about
35,000,000. Since that date Germany's population has increased
by about fifty per cent. and France's by only about ten per cent.
Similarly, the commerce of Germany not only greatly exceeds
that of France, but is growing much faster than that of France.
The total exports and imports of Germany, exclusive of bullion,
now foot up to nearly $2,000,000,000 a year. The total exports
and imports of France, exclusive of bullion, foot up to only

$1,500,000,000 a year. The total commerce of Germany is
therefore about one third more than that of France. At the close
of the Franco-Prussian war the total commerce of France
considerably exceeded that of Germany.

THE CHARACTER OF GERMANY'S INDUSTRIES
CHANGING

Germany, like England, is rapidly changing the character of her
industries and becoming a manufacturing and commercial nation
instead of an agricultural nation. This is the cause of her well-
known anxiety to secure control of territories in Africa, Asia,
etc., as exclusive markets for her manufactures, for, unlike
England, Germany is at present a believer in exclusion in trade,
both at home and in her colonies. Fifty years ago about four
sevenths of the people of Germany were engaged in agriculture;
now only about one third of the people are so employed. The
growth of the great cities of Germany is eight times faster than
that of the rural districts, and in fifty years the aggregate
population of the six largest cities of the empire—Berlin,
Hamburg, Leipzig, Munich, Breslau, and Dresden—has grown
sixfold, namely, from 600,000 to 3,600,000. In fifty years, too,
the manufactures of Germany have nearly doubled, the
commerce nearly trebled, the shipping increased more than
fivefold, and the mining output more than sixfold. While all this
is true, it nevertheless is also true that the area of cultivated soil
in Germany is double what it was fifty years ago. But this is
because much land, formerly waste or in pasture, has been
brought under cultivation. Yet even now only one half of the land
of Germany is cultivated, and thirty-three per cent. of the total
food consumption of the people has to be imported. Fifty years
ago only five per cent. of the total food consumption was
imported, and this small fraction consisted almost wholly of
luxuries.

GERMANY'S SUCCESS IN TECHNICAL EDUCATION

Approximate size of the German Empire.

Note.—The population of that part of the United States included
within the circle is about 10,000,000. The population of the
German Empire is about 52,000,000.

Germany's prosperity and progress cannot wholly be measured
by statistics. No one can predict what it will be, for it is partly
based upon elements that unfortunately other countries have not
taken much account of. Germany pays greater attention to the

practical education of her people than any other nation in the
world. Her system of technical education extends over the whole
empire, and provides technical instruction for every class of the
people and for every occupation of the people—night schools for
those already engaged in life's work, agricultural schools,
forestry schools, commercial schools, mining schools, naval
schools, and schools in every branch of manufacturing industry,
besides, of course, schools for the education of those intending to
follow the learned professions. As a consequence of this very
general provision of technical education, there is engaged in
German manufacturing pursuits a class of workmen not found in
the workshops of any other country—men of industrial skill and
experience, and at the same time of the highest scientific
technical attainments in the branches of science that bear
particularly upon their work. These men work at salaries that in
other countries would be considered absurdly low. In almost all
other countries the possession of a sound scientific education is a
passport to social distinction, and every profession is open to
him who is deserving to enter it. In Germany, however, the
learned professions, and especially the official positions of the
army and navy, are almost the exclusive preserves of those who
are born to social rank. The educated commoner, therefore, has
to betake himself to manufacture, trade, or commerce. It follows
that scientific skill and intelligence are more generally diffused
in German commercial industries than in those of all other
nations. So far, however, the German artisan has not been the
equal in special technical skill of his more rigidly specialised
English competitor, and as a consequence of this more than one
sixth of Germany's total imports consist of goods brought from
England—principally the finer sort of textile fabrics and articles
of iron and steel. This inferiority in specialisation in the German
workmen cannot continue long, and the successful rivalry of
Germany with the manufacturing pre-eminence of Great Britain
may soon be a startling fact.

GERMANY'S MINES AND HARDWARE
MANUFACTURES

It is in the development of her mines and of manufactures in
which minerals are employed that Germany has made most
noticeable progress. She produces four times as much coal as
France, and she has over 1000 separate iron-mines. Her
production of iron has increased tenfold in fifty years. She
employs over 400,000 men in her mines, and by the use of
labour-saving machinery one man can now produce as much as
three men could produce fifty years ago. Her hardware
manufactures are one sixth of her total manufactures, and in the
past half century they have increased sixfold. They are now
double those of France, and are only one fourth less than those of
Great Britain. She has 750 factories devoted to the making of
machinery alone. Two of these—Krupp's at Essen, and Borsig's
at Berlin—are among the largest in the world. Krupp's employs
20,000 men, has 310 steam-engines, and covers an area of 1000
acres. Borsig's employs 10,000 men, and in fifty years, starting
from nothing, has turned out nearly 4000 locomotives. One of
Krupp's hammers (a fifty-ton hammer) cost $500,000.

GERMANY'S INTERNAL TRADE

Germany's commercial energies up to the present have been
mainly concentrated on her internal trade. The total amount of
this trade foots up to $7,000,000,000, against France's
$6,000,000,000, and in fifty years it has trebled, while that of
France has scarcely doubled. Germany has more miles of railway
than any other country in the world except the United States, her
mileage being nearly 30,000, against France's 25,000 and Great
Britain's 21,000. Her natural and artificial waterways are also the
best in Europe, and her vast production of mineral wealth is
transported from mine to foundry and factory, and her vast

production of lumber and grain is transported from forest and
field to seaport, largely by means of water carriage. The Rhine,
the Elbe, the Oder, and the Vistula are all navigable throughout
their whole courses through German territory, while the Weser
and the Danube are also navigable throughout great parts of their
courses. All these navigable rivers are interconnected by canals.
The total length of possible river navigation is nearly 6000 miles,
while the total length of canals and canalised rivers is 2700
miles. Besides, in 1895 there was completed the Kaiser Wilhelm
Canal, a lockless sea-going vessel canal, twenty-nine feet six
inches deep and sixty-one miles long, connecting the North Sea
and the Baltic, and constructed at a cost of nearly $40,000,000.
This canal effects a saving of almost one whole day for
commercial steamers, and of three days for all sailing-vessels,
engaged in the Baltic and North Sea trade.

GERMANY'S FOREIGN TRADE

But while it is true that Germany's internal trade is her most
important trade, it is also true that her foreign trade has during
the last half century made more progress than that of any other
European country, and during the last three or four decades more
progress than even that of the United States. Since 1840 it has
increased six and two third times, while that of Great Britain has
increased six times, and France only four and one fifth times. It
is now second in the world, being more than half of that of Great
Britain, ahead of that of the United States,[1] and very
considerably ahead of that of France, while in 1860 it was much
less than half of that of Great Britain, less than that of the United
States, and considerably less than that of France. Germany,
however, is not well favoured with respect to seaports, for in its
transmarine trade it is largely dependent on foreign seaports—
namely, ports in Belgium, Holland, France, Italy, and Austria.
Rotterdam in Holland and Antwerp in Belgium are much more
favourably situated with respect to the commerce of its chief

mining and manufacturing regions than any of its own ports.
There are only two German seaports with water of depth
sufficient to accommodate the deep-drawing vessels in which
foreign commerce is now mainly carried on—namely, Cuxhaven,
the outport of Hamburg, sixty-five miles from Hamburg, and
Bremerhaven, the outport of Bremen, thirty-five miles from
Bremen, though recent improvements in the navigation of the
Elbe allow vessels of even twenty-six feet draught to ascend the
Elbe wholly to Hamburg. But Hamburg (625,000), for the reason
that for centuries it was a free port of entry, has built up a very
large foreign trade, being the fifth in the world in this respect,
London, New York, Liverpool, and Rotterdam, alone being
ahead of it. Hamburg's foreign trade is almost one half greater
than the whole foreign trade of all other German ports put
together, while the foreign trade of Bremen is about one fourth
that of Hamburg. Bremen, like Hamburg, was for centuries a free
port of entry, but in 1888 both Hamburg and Bremen gave up in
great part their free port privileges and entered the general
customs union of the empire. Both cities were extremely loath to
give up their ancient unique commercial privileges, for they
feared an immense loss of trade in doing so, but it was hoped
that what they lost in foreign commerce would be made up to
them in increased commerce with other parts of the empire. One
reason for the great development of Germany's foreign trade in
late years is found in the facilities that it possesses for rapid
transit to and from Italy by means of tunnels through the Alps.

North central Germany, showing the ship canal and the leading commercial
arteries.

FOOTNOTE:

[1]
During the last two or three years the foreign trade of the United
States has greatly expanded and has exceeded that of Germany, and
is making a close push upon that of Great Britain. The above
statement was intended to represent the situation as existing during a
period of some years.

THE SPECIAL TRADE CENTRES OF GERMANY

Berlin (1,700,000), the capital of the empire, is a chief seat of
machinery manufacture. For many years Frankfort-on-the-Main
enjoyed the pre-eminence of being next to London the greatest
money market in the world; but since the establishment of the

German Empire Frankfort's financial business has been absorbed
by Berlin. Leipzig (400,000) has the distinction of being the seat
of a book-publishing trade that turns out over 60,000,000
volumes in a year, amounting in value to $30,000,000. Leipzig
has also the honour of being the greatest fur market in the world.
Dantzig (120,000) is Germany's chief port on the Baltic, and the
chief seat of its great export trade in timber, grain, flax, hemp,
and potatoes. Its harbour, however, is closed in winter because of
ice. Dresden (330,000) is noted for its porcelain manufacture,
but the porcelain is not manufactured chiefly in Dresden, but in
Meissen, fifteen miles from Dresden. Munich (407,000)
manufactures largely the national beverage, beer. Finally,
Nuremberg (162,000), in southern Germany, is remarkable for
its continuance into modern days of manufactures for centuries
carried on domestically. Of these the most noted are watches,
clocks, pencils, and toys.

IV. TRADE FEATURES OF SPAIN AND ITALY

ITALY, TURKEY, AND SPAIN, THE THREE DECADENT
NATIONS OF EUROPE

The Mediterranean from the very earliest epochs of civilisation
has been a chief highway of trade, and along its shores every sort
of commercial activity has been prosecuted. For centuries and
centuries the nations upon the borders, especially those upon its
northern borders, were the leading nations of the world, and their
empire, indeed, comprised the empire of the world. But during
the last two or three centuries, and especially during the
nineteenth century, commercial pre-eminence and pre-eminence
in empire have departed from the Mediterranean. Italy, the ruler
of the whole ancient world, and even in modern times a ruler of
almost equal potency; Turkey, during the middle ages a chief

power both in Europe and in Asia; Spain, for two centuries at the
beginning of our modern epoch a chief power in Europe and the
mistress of almost the whole Western world as well,—these
countries have all sunk to positions of comparative
insignificance, and Italy alone shows signs of effectual
regeneration. And yet on the whole earth's surface there are no
lands more richly endowed by nature as abodes for man than
Italy, Turkey, and Spain.

SPAIN: ITS TRADE AND ITS SPECIAL TRADE
CENTRES

Spain, because of the varied climate of her several parts, is
capable of producing almost all the edible fruits and grains
known to both temperate and tropical regions. Though there are
some desert areas, a great portion of the soil is abundantly
productive, and were agriculture pursued with the same skill as it
is in other countries—in England and Scotland, for example—
Spain would be one of the richest agricultural regions on the
globe. But not only is agriculture very inefficiently pursued, but
the country is also sparsely inhabited (only 90 to the square mile,
as compared with 270 to the square mile in Italy) and only one
fourth of it is cultivated. As a consequence only those products
are raised in Spain in which, because of her advantages of
climate, etc., she has least competition. The principal
commercial agricultural product is wine, the vine being
cultivated in every province in the kingdom. Six hundred million
gallons of wine are raised annually, which is more in value than
the total quantity of grain raised. Only one fifth of this, however,
is exported (principally to France), and even of this the greater
portion is wine of inferior grade, used for mixing. The remaining
agricultural products of Spain exported are chiefly oranges,
lemons, grapes, raisins, nuts, olives, and onions. Of these over
$15,000,000 worth go to England annually. England and France,
indeed, enjoy the great bulk of Spain's foreign trade, but of late

years Germany and the United States are taking a small share of
it. The mineral wealth of Spain is enormous, and as the mines
are often controlled by foreign capital they are worked with
energy. The iron ore of the Basque provinces of the north and the
copper ore of the district about Cadiz have been renowned for
ages. Thirty-five million dollars' worth of copper, iron, lead,
silver, and quicksilver are exported to Great Britain annually.
There are manufactures of cottons, woollens, linens, and silks,
but none of these can be said to be very prosperous, although
during the last twenty-five years, owing to a high protective
tariff, the quantity of raw material used in textile manufacture in
Spain has doubled. Spain produces excellent wool, but her
woollen manufacture is unable to use it all and one fourth is
exported. Similarly, although Spain is especially rich in iron-
fields, she gets about one third of the hardware she needs for her
own consumption from England. The total area of Spain's coal-
fields is estimated at 5500 miles, but hitherto little coal has been
mined, partly because it is somewhat inaccessible. Four million
dollars' worth of coal is annually imported from England. Whole
mountains of rock salt exist, but little is mined and none is
exported, although bay salt obtained in the south is exported to
the fishermen of Cornwall. Another important export is esparto
grass, which is sent to England to be used in paper-making. And
still another is cork, although Portugal, which adjoins Spain, is
the chief seat of the cork-producing industry. Madrid (470,000)
is the capital and largest city. Barcelona (250,000) is the chief
seaport of Spain and the chief manufacturing centre. Valencia
(145,000), in the southeast, and Seville (135,000) and Malaga
(115,000), in the south, are the principal seats of the fruit export
trade of the country. Cadiz (65,000), Spain's principal naval
seaport, has a famous export trade in sherry wines. The total
population of Spain is 17,500,000.

Spain compared in size with California.

ITALY'S LAMENTABLE CONDITION

Italy's condition is in some respects better than that of Spain, but
in others worse. Its population is 30,500,000, being three times
more to the square mile than that of Spain, and fifty per cent.
more to the square mile than that of France. Since 1830 the
population has increased forty-five per cent., and this
notwithstanding the fact that the loss by emigration is equal to
one half of the natural increase from the surplus of births over
deaths. Two million people of Italian birth are to-day residing in

foreign countries. Again, the Italians, except those in the
southern parts (the Italians of Naples and vicinity, for example),
are the most industrious people in Europe, with a special
aptitude for gardening and tillage. In fifty years they have
reclaimed 20,000,000 acres from forest, and increased the area of
land under cultivation by one hundred per cent. In fifty years,
too, they have trebled the amount of capital invested in
agriculture. Since 1860 they have increased the amount of
material which they use in their textile manufactures (cotton,
wool, silk, and linen) nearly fivefold. Since 1850 they have
increased their external commerce two and one half times.
Finally, since 1830, they have increased their internal trade two
and one quarter times. But all these signs of prosperity in Italy
are negatived by the constantly increasing magnitude of her
national debt. This now amounts to more than $2,500,000,000,
or more than two and one half times the total net national debt of
the United States, and about one fourth more than the total
national, state, county, municipal, and school-district debts of the
United States. And this vast debt for a people of 30,500,000 is
exclusive of the provincial and communal debts, which amount
to $275,000,000 additional. Italy since her reorganisation as a
kingdom in 1870 has set out to be a first-class military and naval
power, and the cost is more than she can stand. She has a
permanent army of nearly 800,000 men, 250,000 of whom she
keeps under arms constantly. She has a fleet of seventeen
battleships, two coast-defence ships, eighteen cruisers, and 272
torpedo craft, most of these being of modern type and first-class
rating. She spends on her army nearly $50,000,000 annually, and
on her navy nearly $20,000,000 annually. This, with an annual
interest payment of $115,000,000, all unproductive expenditure,
makes a demand upon her revenue that is draining her people of
their life's blood. Every sort of taxation is resorted to—direct
and indirect; land, house, and income; succession duties,
registration charges, and stamps for commercial papers; customs,
excise and octroi; besides government monopolies; and all this
exclusive of communal taxation. And yet since 1891 there has
been an annual deficit of national revenue under national

expenditure averaging $2,250,000. As a consequence of these
taxes, and of the repressive effect they have upon industrial
enterprise, the net earnings of the country per inhabitant are
lower in Italy than in any other European state except Turkey,
Russia, and Greece—lower, even, than in the Danubian states
and Portugal and Spain.

ITALY'S TRADE AND SPECIAL TRADE CENTRES

The most distinctive natural product of Italy is silk, and the
amount of raw and thrown silk exported is about $57,500,000
annually. Silk culture is carried on all over the kingdom, though
the industry flourishes most extensively in Piedmont and
Lombardy, in the north. Over 550,000 people are engaged in
rearing silkworms, and the annual cocoon harvest approximates
100,000,000 pounds. Silk-"throwing," or-spinning, is the
principal manufacturing industry, and the amount of silk spun
and exported is about 45,000 tons, most of which goes to France.
After silk the products of the country that constitute the principal
exports are olive oil, fruit (oranges, lemons, grapes, almonds,
figs, dates, and pistachio nuts), and wine (in casks). The olive-oil
export and the fruit export are each about a fifth of the export of
silk, and the wine export about a sixth. Other important and
characteristic exports are raw hemp and flax, sulphur, eggs,
manufactured coral, woods and roots used for dyeing and
tanning, rice, marble, and straw-plaiting. The principal import is
wheat, for agriculture, though generally pursued, is still in a
backward state of efficiency, and the average grain crop is only
one third what it is in Great Britain. One eighth the total amount
of wheat needed to support the people has to be imported. In
fact, the total amount of food-stuffs raised in the kingdom is
much less than the amount required, being, for example, per
inhabitant, not more than one half of what is raised in France. In
particular, there is a deficiency of meat, and the amount of meat
raised per inhabitant is the lowest in Europe. As a consequence

the Italians are poorly fed, and it is estimated that four per cent.
of the annual death loss is occasioned by impoverishment of
blood due to insufficiency of wholesome food. After wheat and
raw cotton, the next principal import is coal, for Italy has no
workable coal-fields. As far as possible water power is used as a
motive power instead of coal, especially in the iron industries.
An important import also is fish, for, owing to the great number
of fast days which the Italian people observe, and to the dearness
and scarcity of meat, fish is a very general article of
consumption. Six million dollars' worth is imported annually,
and perhaps an equal amount is obtained from local fisheries, for
there are over 22,000 vessels and boats and over 70,000 men
engaged in this industry. After silk-throwing, the most
characteristic Italian manufacturing industries are those which
are of an artistic or semi-artistic nature, such as the making of
fine earthenware, porcelain, glassware, mosaics, and lace. Venice
(154,000) and Genoa (225,000) are still the principal seaports
and trade centres of Italy, but in commercial importance these
famous cities are only the mere shadows of what they once were.
Naples (529,000), the largest city, is a place of little enterprise,
for its imports, principally cereals, are three or four times the
value of its exports, which are mainly cheap country produce.
Milan (457,000) and Turin (348,000) are the great trade centres
of the north interior, and the most prosperous places in the
kingdom, being the chief seats of the silk-throwing industry.
Milan is also the chief seat of the Italian cutlery manufacture.
Palermo (284,000) and Messina (150,000), in Sicily, are the
chief ports for the export of Italian fruits, and also of Italian fish
(anchovies, tunnies, etc.). Rome (474,000) and Florence
(207,000) owe their chief importance to their art interest and to
their historic associations, but Florence has an important
manufacture of fine earthenware and mosaics. Rome is the chief
seat of government. Catania (127,000), in Sicily, is the chief seat
of the Italian sulphur export trade. Leghorn (104,000), the port
of Florence, is the chief seat of the export straw-plaiting trade. It
should be noted that notwithstanding Italy's extent of coast-line a

large part of her foreign commerce is transacted northward by
means of the railways that tunnel the Alps.

Italy and its chief commercial centres.

V. THE TRADE FEATURES OF RUSSIA

RUSSIA, A COUNTRY WHOSE FUTURE IS A PROBLEM

The position of Russia in the world is a sort of problem. Its area
is immense. More than one seventh of the land surface of the
globe is included within its compact borders. Of this vast
territory the area of European Russia alone is only a fourth; but
even so it is larger than the area of all other European states put
together. The population of Russia is over 129,000,000, of which
over 106,000,000 belong to European Russia. But taking even
European Russia this is a population of only fifty-four to the
square mile, the lowest proportion in Europe, except in Sweden
and Norway. And the population is increasing. The birth rate is
the highest in the world. And though the death rate is very heavy,
being fifty per cent. more than it is in England, the increase from
births is so great that the population doubles in forty-six years.
There is thus apparently a prospect that Russia will, in the near
future, play an important part in the drama of nations, her
capacities and capabilities for growth seem so prodigious. And
yet there is a reverse side to the picture. Of the 106,000,000
inhabitants of European Russia 10,000,000 belong to a cultured,
progressive class, quite the equal of any people in Europe. But
the remainder are principally a low grade of peasantry, not long
removed from slavery. The principal occupation of these
peasantry is farming. But their farms are small, not more than ten
acres apiece, and the total revenue they get from them does not
average more than $65 a year per farm. The food of these
peasantry is the poorest in Europe. In the main it consists of rye
bread and mushroom soup, worth about four cents a day. The
houses are often mere huts, not more than five feet square.
Women as well as men work in the fields, and yet the total
amount of food raised is not more per head of population than
one tenth of what is raised by the peasantry of France. The value
of food raised per acre, too, is but little more than one third of
the average per acre for all Europe.

Russia, the British Empire, the United States compared.

RUSSIA A COUNTRY OF SOCIAL EXTREMES

The degradation of the peasantry of Russia is not simply
material. It is also moral. In the language of a recent traveller,
"they are the drunkenest people in Europe." The principal
intoxicant is a sort of whisky called "vodka." With drunkenness
exist also dirtiness, idleness, dishonesty, and untruthfulness. And
as yet little has been done to ameliorate this degradation.
Ignorance prevails everywhere. Even of the young people of the
peasant class more than eighty per cent. can neither read nor
write. There is no middle class. The gulf between the upper class
and the lower is so wide as to be absolutely impassable. And for
the most part the upper class is quite content to have this state of
affairs continue.

THE "ARTELS" OF THE RUSSIAN PEASANTS

There is, however, some hope for the lower classes of Russia.
This is because of the prevalence among them, especially in
villages, towns, and cities, of a communal custom in which self-
restraint and self-government are necessary conditions of
existence. In every branch of common industry "artels" are
found; that is, communistic organisations, where all labour for a
common purse in accordance with rules and regulations
determined by the members of the organisations. These "artels"
have done much toward increasing the industry, the honesty, the
truthfulness, the thrift, and also the sobriety of their members.
They exist throughout all Russia, but in some parts more
prevalently than in others. As yet, however, they scarcely affect
the character and condition of the rural peasantry, and it is these
who are most in need of elevation. It should be said, too, that the
government is doing something to lessen the evil of drunkenness.

RUSSIA PRINCIPALLY AN AGRICULTURAL COUNTRY

Russia's principal business is agriculture. More than one half
her whole internal trade is agricultural. Her agricultural products
are one and one half times greater than the products of her
manufactures and ten times greater than her mining products or
her imports. And though her production of grain per acre is the
lowest in all Europe except Italy, Spain, and Portugal, and her
total production of all food products per acre by far the lowest in
Europe (not more than one third that of Spain, which is next
lowest), yet she manages to export a larger quantity of grain than
any other country in Europe, France only sometimes excepted.
Russia's export of grain for some years past has averaged
266,000,000 bushels a year. Her export of wheat alone has
averaged 94,000,000 bushels a year, or considerably more than a
fifth of the total wheat export of the world. The explanation of

this enormous export of wheat from so poor a country is that
three fourths of the people live on rye. Among the peasants
wheat bread is practically unknown, and nothing could be more
pathetic than the hard rye lumps which passed as bread during
the last famine. Other agricultural exports (besides grain) are
flax, hemp, oil-seed cake, linseed and grass seed, butter, eggs,
wool, hides, and hogs' bristles. Wood, lumber, and timber are
also extensively exported. England is Russia's best customer. The
amount of England's annual importation of the above products
(including grain) exceeds $112,000,000.

RUSSIA'S MINERAL WEALTH

In minerals Russia is enormously wealthy, but the mining lands
are not diffused throughout the empire but confined to definite
areas. Nor can they be said to be energetically worked. The great
gold-fields of the Ural mountains would not pay expenses as
worked at present were they not supplied with convict labour.
Owing to the heavy import duty which is imposed on pig-iron
nearly all the iron now needed for the iron manufactures of the
empire is obtained at home, but this amounts to only 46 pounds
per inhabitant, as against 810 pounds per inhabitant used in
Britain. Coal is very abundant, especially in the valley of the
Donetz, but fire-wood is so plentiful for domestic purposes, and
water power so plentiful for heavy manufactures, that the amount
of coal mined in all Russia is only one twelfth that mined in
Germany, and only one twenty-fourth that mined in Britain. Over
2,250,000 tons of coal are imported despite very heavy
protective duties. There is one mineral product, however, in
which Russia excels all other European countries. This is
petroleum. The oil-springs on the Caspian Sea produce an
annual yield of crude petroleum of an average value of
$15,000,000. The value of the petroleum and petroleum products
exported in 1896 was over $22,000,000.

RUSSIA'S TRADE AND MANUFACTURES

Despite Russia's resources in farm products and in minerals, yet,
owing to the ignorance and degradation of her people, she is a
poor country, and her exports are always more than her imports.
Her total wealth per inhabitant is only $305, as against $780 per
inhabitant for Germany, $1260 for France, and $1510 for Great
Britain and Ireland. Her total foreign trade is only $5 per
inhabitant, whereas the foreign trade of her neighbour, Germany,
is $35 per inhabitant. Her total internal trade is only $50 per
inhabitant, whereas even in Greece the internal trade is $65 per
inhabitant, while in Germany it is $130 per inhabitant, and in the
United States $215 per inhabitant. The reason of all this is the
lack of energy and industry in the people. Their earnings per
inhabitant average only 12 cents a day. Another reason is the lack
of modern labour-saving devices. Comparing inhabitant with
inhabitant, Russia has only one sixth of the steam power which
Germany has. One half of all the manufactures of the country are
produced domestically—that is, without motive power or
machinery. No industry in Russia is fully up to the needs of the
people when judged by the standards of other countries. For
example, notwithstanding the severity of the climate, only two
pounds of raw wool per inhabitant are consumed in Russia's
woollen manufactures, as against seven pounds consumed in
Germany, and the total annual value of all manufactures is only
$20 per inhabitant, as against $56 in Germany, and $88 in
Britain. Notwithstanding these unfavourable comparisons, the
factory industries of Russia are making progress. In seventy
years the textile factories have increased fivefold and in thirty
years twofold. In sixty years the cotton-manufacturing industry
has increased sevenfold, and in fifteen years twofold. Until
recently Russia exported wool. Now she imports more wool than
she exports. Ninety years ago in Russia iron was dearer than
bread, and the peasants used wooden plough-shares and left their
horses unshod. Now the consumption of hardware, though still
per inhabitant the smallest in Europe, is yet in the aggregate the

fourth in Europe, although even so it is only two ninths what it is
in Britain. Beet-root sugar-making is also a new industry, and
500,000 tons are made annually, the number of sugar works
being 235. The beet-root crop of the country amounts to nearly
6,000,000 tons annually. But the consumption of sugar per
inhabitant is only seven pounds annually, as against eighteen
pounds per inhabitant in Germany. A universal industry
throughout Russia is tanning, and Russia leather, with its
fragrant birch-oil odour, is a highly prized commodity the world
over. But the amount manufactured is only 114,000 tons yearly,
and the quantity exported is inconsiderable.

RUSSIA'S RAILWAYS AND NAVIGABLE RIVERS

The most characteristic physical feature of European Russia is its
flatness. In consequence its rivers are almost all navigable, and,
as the most important of them are interconnected by canals, the
facilities for transportation which they afford are very
considerable. Altogether the length of inland navigation thus
afforded amounts to nearly 47,000 miles. This abundance of
navigation facilities has retarded the growth of railways, but
there are already 25,756 miles of finished railway in European
Russia alone. The total length of railway in all Russia built and
in building is 34,849 miles. The most important railway
enterprise in the empire is the Trans-Siberian Railway, which
will afford through communication from the Baltic to the Pacific.
The shortest possible distance between these two bodies of water
is 4500 miles. The length of the railway will be 4950 miles, and
its cost, it is supposed, will be $120,000,000. It is to be
completed by 1905.

RUSSIA'S CITIES AND TOWNS

Moscow.

St. Petersburg (with suburbs 1,267,000), the capital of Russia,
is, like most European capitals, an important trade centre as well
as the seat of government. Its manufactures are general and
numerous, but the chief ones are those concerned in making
munitions of war. Until 1885 St. Petersburg was not a seaport,
but in that year a canal was built which now permits vessels
drawing twenty-two feet of water to enter its docks. Its harbour,
however, is closed with ice from November to May. Near St.
Petersburg is Reval, the chief cotton port of Russia. The raw
cotton importation of Russia averages about $60,000,000
annually, most of which comes direct from the United States.
Moscow (988,000), the ancient capital of Russia, is also a great
manufacturing city, but its principal importance is derived from
the fact that it is the great centre of the internal trade of Russia.
Warsaw (615,000), the capital of Polish Russia, is a great
railway centre, and the principal entrepôt of railway traffic
between Russia and the rest of Europe. Lódz (315,000), also in
Polish Russia, is the great cotton-manufacturing centre of the
empire. Odessa (405,000) is the chief seaport of Russia. It has an
immense export trade in grain, tallow, iron, linseed, wood, hides,
cordage, sailcloth, tar, and beef. Riga (283,000), the chief port of

Russia on the Baltic, has a large export trade with England in
characteristic Russian produce. Kieff (249,000) is the centre of
the Russian sugar-refining industry. Astrakhan (113,000), on the
Volga delta, is noted for its sturgeon fisheries, and its export of
caviare, amounting, it is said, to $1,500,000 yearly. Tula
(111,000) is the Sheffield of Russia. Even in 1828 there were 600
cutlery establishments in Tula, but the manufacture was then
principally domestic. It is now a city of factories, for it stands on
a large coal and iron field. Nijni-Novgorod (99,000) is noted for
its fair, an Asiatic institution which modern civilisation will no
doubt soon disestablish. Once a year merchants to the number of
200,000 come to Nijni-Novgorod from all over Russia, and even
from India and China, to exchange their wares. The value of the
exchange sometimes amounts to $100,000,000. Orenburg
(73,000), on the Ural, is the terminal depot of the caravan trade
of Asiatic Russia. Archangel (25,000), on the White Sea, is the
chief emporium of trade in the north, with exports of
characteristic northern produce. Baku, on the Caspian Sea, is the
chief seat of the petroleum industry of Russia. All the towns and
cities above named have grown enormously during the last
twenty years.

VI. THE TRADE FEATURES OF INDIA

INDIA'S PAST AND PRESENT COMPARED

To the student of civilisation India is one of the most interesting
countries in the world. It has always been one of the most fertile
and populous regions of the globe. For centuries it was thought
to be one of the richest. In consequence it has, time and time
again, been the scene of invasion, conquest, and spoliation. But
its riches never consisted so much in natural treasure as in the
savings of an industrious and frugal people. Since the year 1600

European nations have had much to do with India, especially
England, France, Portugal, and Holland. During the last 140
years, however, England has been the dominant power there.
Whatever may be said as to the motive of England's interference
in India's affairs in the first place, it can only be said that the
present influence of England in India is immensely beneficial to
the country. India's prosperity on the whole is now comparable
with that of any civilised nation on the globe. And a people that
once, because of repeated conquest and spoliation, had lost all
sense of honour and self-respect, are now, under the benign
influence of peace, law, order, and security, rapidly becoming
honourable, self-reliant, and enterprising, and ambitious to
possess all the rights and privileges of modern civilisation.

INDIA'S SIZE AND POPULATION

India is a much larger and more populous country than most
people think it to be. In shape it is somewhat like a huge kite,
each of whose diameters is over 2000 miles long, or more than
the distance across the Atlantic from Ireland to Newfoundland.
Its territory is about 1,700,000 square miles. Of this area, over
1,000,000 square miles, a territory considerably greater than the
territory of all the states of Europe (including the British Isles)
except Russia, is directly under British control. The remainder is
indirectly under British control. The population is 308,000,000,
of which 236,000,000 are directly under British control and
72,000,000 indirectly so. This population is made up of people
who speak seventy-eight different languages, of which twenty
languages are spoken by not less than 1,000,000 persons each.

INDIA'S GREAT FERTILITY

India owes much of its fertility to the fact that its soil is
constantly being replenished by alluvium brought down from its
high mountains by its immense rivers. The valleys of the Indus
(1800 miles long), the Ganges (1600 miles long), and the
Brahmapootra (1500 miles long) include an area of 1,125,000
square miles, a part of which, the Indus-Ganges plain, consists of
a great stretch of alluvial soil whose fertility is as rich as that of
any portion of the globe. One hundred and eighty millions of
people live in this plain. So finely pulverised is its soil that for a
distance of almost 2000 miles not even a pebble can be found in
it. And so fertile is it that there are some agricultural districts in
the plain where the population exceeds 900 to the square mile. In
that part of the plain which the Ganges waters, 60,000,000 of
people find support on the soil by agriculture, at a density of
over 700 persons to the square mile, which is 140 persons more
to the square mile than the density of Belgium, the most thickly
populated country in Europe.

INDIA'S IRRIGATION CANALS AND RIVER
EMBANKMENTS

But, fertile as is the soil of India, and propitious to agricultural
industry as is its climate generally, its climate is not always
favourable. It suffers periodically from excess of drought. As a
consequence artificial irrigation has to be resorted to, or much of
this fertile country would oftentimes be a desert. In British India
alone 28,000 miles of irrigation canals are under the control of
the government, 14,000 of which have been constructed by the
present (British) government—works of vast dimensions and the
highest engineering skill. Altogether 28,000,000 acres in British
India are dependent for their necessary supply of moisture upon
general irrigation, and 8,000,000 upon irrigation canals. Were it
not for these irrigation canals, 2,000,000 acres in Scinde
(northwestern India) would be a perpetual desert, for Scinde is
almost wholly rainless. On the other hand, in a great part of India

the rainfall is excessive. Some districts indeed are the wettest on
the globe. In Assam, for example (which is also one of the
hottest places in India), the rainfall is 600 inches yearly, and it
has been 650. As a consequence rivers in India often overflow
their banks. Therefore to protect the country on the lower river
reaches from floods the British government has built over 1500
miles of embankments.

INDIA'S MINERAL RESOURCES

At one time India was famed for its wealth in precious minerals
and precious stones. Poets often celebrated its golden resources.
But its wealth in this respect was always fabulous rather than
real. India is in reality poor in minerals. It has a good deal of iron
—iron of the choicest quality. It has also a good deal of coal, but
its coal is poor, owing to its superabundance of ash. It has also a
little copper and tin. It has gold-mines that are worked.
Diamonds, too, are found in southern India, and numerously so.
The celebrated Koh-i-nur (280 carats) was an Indian product.
But neither diamond-hunting nor gold-mining is any longer a
profitable industry in India. The principal mineral industry of
India is salt-mining, pursued in the Punjaub, where there are
solid cliffs of pure salt. Owing to the fact that the people of India
are mostly vegetarians (250,000,000 of Hindoos would rather die
than eat flesh), salt is a necessary article of diet and a universal
commodity. Its production, therefore, is controlled by the
government as a means of raising revenue.

INDIA'S WONDERFUL AGRICULTURAL RESOURCES

Comparative sizes of India and the United States.

The real wealth of India lies in the luxuriance and economic
value of its vegetation. As a consequence the principal industry
is agriculture. Only one tenth of the people live in towns. Two
thirds of the adult males in the country are engaged wholly in
tilling the soil. Every sort of agricultural product known to
commerce is raised in India; for from the high levels on the
mountain sides to the low levels on the coasts the vegetation of
the whole world is produced within its borders. Even in wheat
India competes in the world's markets with countries like Russia
and Argentina. In 1896 British India had 19,000,000 acres of
wheat under cultivation, and (though a dearth year) an
exportation of $4,000,000. In 1892 the exportation was
$25,000,000. The district known as the Central Provinces of
India has become one of the most important wheat areas in the
world. But the principal agricultural product of India is rice.

British India alone has 70,000,000 acres of rice under
cultivation, and an annual exportation of $60,000,000. In all the
coast regions rice is grown universally, and also in the lower
parts of the river plains, especially in the Ganges valley. It is the
staple food of the people everywhere except on the higher levels.
On the higher levels millet and maize (corn) are the staple foods.
The next important agricultural product of India is cotton, of
which $47,000,000 worth in the raw state is exported annually,
besides what is used at home. The American civil war was the
great cause of the starting of the cotton-growing industry in
India. The next important agricultural product is jute, of which
the export in the raw state is about $35,000,000. No country in
the world can compete with India in the production of this fibre,
for jute is very exhaustive of the soil, and in the Ganges valley,
where it is principally raised, the soil is annually replenished by
alluvium. A fifth great agricultural product is tea, in which India
now leads the world. England uses twice as much India tea as
China tea, the reason being that India teas are produced with all
the economic care of a high-class English or American
manufactured product. The value of the tea export of India is
about $27,000,000. Other chief agricultural products are opium
(which is a government monopoly), oil seeds, hides, and skins,
indigo (in which India excels the world, the value of the export
being $14,000,000), coffee (the best grown anywhere—except
perhaps that of Arabia and Java—though the bean is sometimes
injured in transit), raw wool, lac (for dyeing), cinchona or
Peruvian bark (which since it has been raised in India, has
greatly reduced the price of quinine), raw silk, raw sugar,
tobacco, and spices. Spices are produced abundantly in India, but
their quality is not equal to East Indian spices. Also the cotton,
rice, sugar, and tobacco of India, though produced plentifully, are
inferior in quality to those of the United States. Nor are the
wheat and corn of India so good as the wheat and corn of the
United States and Canada. Improved cultivation will, however,
in time improve the quality of all these products. Of exports of
natural products not agricultural the principal are wood (chiefly

teak, the most valuable timber known for ship-building, and sal,
a most valuable wood for carpentry) and saltpetre.

INDIA'S GROWING MANUFACTURES

Though India is now chiefly an agricultural country her people
from time immemorial have been adepts in manufacturing. The
domestic textile manufactures and the domestic metal
manufactures of India were for ages among the most beautiful
and ingenious in the world. These domestic manufactures are
principally pursued in small villages, of which there are over half
a million in India. But under the influences of modern
civilisation introduced by British rule, the domestic industries of
the country are now giving way to factory industries. These
have already become well established, and are rapidly increasing
in number and importance. The stability of India as a nation is
now so well assured that capital can be had there as cheaply as in
England or the United States. Besides, co-operative or joint-
stock enterprises are becoming common. The Indian people, with
their natural aptitude for weaving, make the best of textile
operatives, and India bids fair soon to become a formidable rival
of Western nations in textile manufactures. In twenty years the
cotton spindles have increased sixfold. In ten years the cotton
output has increased twofold. Bombay has become one of the
greatest cotton centres in the world, a sort of Liverpool and
Manchester combined. It has practically shut the doors of India
to English manufactured cottons of the cheaper grades. Bombay
manufactured cotton is even sent to England in immense
quantities, but the principal export is to China. The total export
of Indian manufactured cotton is $23,000,000. Another important
modern manufacture is that of jute. The jute factories of Bengal
are now competing with those of Scotland, and the total export is
$17,500,000. A similar development is expected in iron
manufactures, for already iron-smelting has begun. But,
notwithstanding these developments, India still remains a

tremendous market for the manufactured goods of England,
especially in cottons and hardware and machinery. The value of
the annual cotton importation from England is $100,000,000,
equal to the total of England's exportation of goods of every sort
to the United States. The value of the annual hardware and
machinery importation from England is $35,000,000.

INDIA'S EXTERNAL AND INTERNAL TRADE

The total yearly value of the exports of India amounts to the
enormous sum of $350,000,000, more than a third of the total
exportation of the United States for the banner year 1897.[2] Of
this England receives about one half. The total yearly value of
the imports of India (exclusive of bullion) amounts to
$255,000,000, which is considerably more than a third of the
total importation of the United States. Of this England sends out
about two thirds. (India is therefore England's best customer,
although from the United States England purchases vastly more.)
Of the internal trade of India no statistics are available, but with
the rapid advances in modern conveniences for doing business
which the country is adopting, the internal trade is also
enormously increasing. Already 20,290 miles of railway are built
and opened, and 13,000 miles of canals and canalised river
navigation. Railways are rapidly being constructed in every part
of the country. Over 31,000 miles of metalled roads for highways
and 106,000 of unmetalled roads are now maintained by the
government as public works. There are 38,000 miles of telegraph
routes. The government highways and canals as well as the
railways are all splendidly engineered and solidly built works.
The greatness of India is only just beginning.

FOOTNOTE:

[2]
The total exports of the United States for the years
1898 and 1899 have exceeded $1,200,000,000, each
year. In the year 1897 they were about $1,050,000,000.

INDIA'S CITIES AND TOWNS

Calcutta (862,000) is the capital of the empire of India and the
second city in the British Empire. Although situated on an arm of
the delta of the Ganges, eighty miles inland, Calcutta is an
immense seaport, but its sea-going privileges can be maintained
only by great engineering works, because of the silt which the
Ganges is constantly bringing down and depositing in its
seaward channels. Calcutta enjoys almost a monopoly of the
whole trade of the Ganges and Brahmapootra valleys, and until
the building of the Suez Canal it had almost a monopoly of the
outward trade of the whole Hindustan peninsula. Its total trade is
even yet very large, aggregating for outward and inward business
together about $700,000,000 per annum, a sum which can be
appreciated from the fact that it is about equal to the total import
trade of the whole of the United States. Bombay (822,000), the
second city of the Indian Empire, owes its eminence to three
things: (1) the opening of the Suez Canal, which has made it the
port of India nearest England; (2) the starting of the cotton-
growing industry in India, owing to the American civil war (the
cotton-growing district of India is adjacent to Bombay); and (3)
the development of the railway system of India, which is making
Bombay rather than Calcutta the natural ocean outlet for the
trade of the country. Madras (453,000), the third city of India, is
also the third seaport. But it has no natural harbour, and its shore
is surf-beaten and for months together exposed to the full fury of
the northeast monsoons. An artificial harbour, however, has
recently been built. Besides the cities above mentioned there is
one (Hyderabad) with a population of over 400,000; there are
two (Lucknow and Benares) with a population of over 150,000
each, and eleven more with a population of over 100,000 each.

There are besides forty-seven towns with a population more than
50,000 each, and over a thousand towns with a population of
about 10,000 each.

VII. THE TRADE FEATURES OF CHINA

THE VASTNESS OF CHINA'S AREA AND POPULATION

China, to the student of commerce, is the most interesting
country on the globe. The reason for this is that its area is so
large, its population so vast, and its chances for development so
magnificent. The total area of the empire, according to late
estimates, is 4,218,401 square miles. Other estimates make it
4,468,470 square miles. The greatness of this area may be
understood from a few comparisons. It is about one twelfth of
the total land surface of the globe. It is two and one fourth times
the size of European Russia. It is almost one and one half times
the total area of the United States, exclusive of Alaska. But all of
this territory is not of equal commercial interest. The Chinese
Empire consists of six parts: China Proper, Manchuria,
Mongolia, Tibet, Jungaria, and Eastern Turkestan. Because of
recent treaties, which give to Russia the right to build and
"control" railways in Manchuria—ostensibly for the purpose of
securing for the great Russian Trans-Siberian Railway a shorter
route to Vladivostok, its Pacific terminus—Manchuria becomes
practically a Russian possession. Turkestan, Jungaria, Tibet, and
Mongolia are thinly inhabited countries, scarcely semi-civilised.
But the part which remains when these "dependencies" are left
out of consideration—China Proper—is at once one of the
largest, most thickly populated, and most fertile countries on the
face of the globe, and one also of the most richly endowed in
mineral products. Its area is 1,336,841 square miles. Its
population is 386,000,000. Its population per square mile is not

far short of 300. That is to say, its area is more than eleven times
that of Great Britain and Ireland, and almost one half that of the
United States, exclusive of Alaska; its population is ten times
that of Great Britain and Ireland, and more than six times that of
the United States; while its population per square mile is greater
than that of any European or American country except Great
Britain (which, however, it nearly equals), Holland, and
Belgium. In fact, more than one fourth of the total population of
the globe is concentrated within the boundaries of China Proper.

CHINA A COUNTRY OF GREAT TRADE POSSIBILITIES

The great commercial nations of the world are now all trying to
get shares of the trade of this vast and populous country. For
not only is China (Proper) large and populous, but it is also
wealthy, for its inhabitants are both industrious and frugal, and,
besides, as compared with the people of European countries they
have been greatly spared the disastrous commerce-destroying
effects of war, both foreign and internecine. Centuries ago the
Chinese had made great progress toward civilisation. Their skill
in the manufacturing arts, and in agriculture and horticulture,
was for ages superior to that of Western nations. But,
unfortunately for their advancement, they are conservative, self-
conceited, and averse to improvement, especially if they have to
learn improvement of others. As yet they have almost wholly
ignored the ideas and methods of modern Western civilisation.
They have scarcely any railways, but few steamships, almost no
steam-power manufactories, and no telephones. The only modern
improvement which they have made much use of is the
telegraph. Some years ago (in 1876) a European company
secured the privilege of building a short railway from Shanghai,
but it was scarcely built before the government got fearful of its
influence and bought it up and stopped its running. But the
Chinese people are not averse to foreign trade; on the contrary,
they are rather fond of it. If only the thing could happen in China

that happened in Japan—that is to say, if only the government
could fall into the hands of rulers who were open-minded to
improvement and inclined to be progressive—the rush that China
would make toward civilisation and the adoption of modern
trade methods and modern processes of manufacture would be
startling.

CHINA'S FOREIGN TRADE

At present the foreign trade of China is largely in the hands of
the English. In the year 1896 the foreign export trade of China
amounted to $167,000,000. Of this amount $132,500,000 was
with Great Britain and her dependencies; $10,000,000 with the
United States; something over $8,000,000 with the continent of
Europe exclusive of Russia, and less than $2,000,000 with
Russia. In the same year the foreign import trade of China was
$102,500,000, of which $56,000,000 was with Great Britain and
her dependencies; a little over $9,000,000 with the United States;
$15,000,000 with the continent of Europe exclusive of Russia,
and $12,500,000 with Russia. (The rest of her trade was
principally with Japan.) The policy of the government of China
has always been to prevent or restrict foreign trade; and even to-
day foreign trade can be carried on in only twenty-six Chinese
ports—the so-called "treaty ports." The policy of Great Britain
has been to secure by treaty as large a privilege of trading with
China as possible; then to throw open the privilege to the world,
but to follow it up with such commercial activity on her own part
as would secure to her the lion's share of the resulting trade. Of
the twenty-six ports now by treaty open to the world for trade,
twenty-three have been secured by Great Britain and three by
Japan.

CHINA'S EXPORTS, IMPORTS, AND RESOURCES

China's principal exports are tea and silk, tea constituting about
one third and silk (principally raw silk) fully one half of her total
export trade. Other principal exports are sugar, straw braid (one
twentieth of her total exportation), hides, paper, chinaware, and
pottery. Her principal imports are opium and cotton goods,
opium constituting a fifth, and cotton goods considerably more
than a half, of her total import trade. Other principal imports are
woollen goods, metal goods and machinery, coal, and kerosene
oil. A considerable importation is also made of raw cotton. But if
China only had the blessing of an enlightened and progressive
government this disposition of exports and imports would not
long continue. China's resources of coal are among the finest
and certainly among the largest in the whole world. Her coal-
fields, indeed, are estimated to be twenty times as great as those
of all Europe combined. Much of this coal, too, is of the purest
quality, and much of it very accessible to the miner. And near her
coal-fields are vast deposits of some of the richest iron ores in
the world. Again, a great portion of the soil of China is extremely
fertile. There are indeed two regions, one of "red soil" and
another, much vaster, of "yellow soil," that are among the most
fertile in the world. It is because of the extent and fertility of the
yellow soil of China that "yellow" is the imperial colour, and the
emperor called the "yellow lord." The climate, too, of China
permits almost the whole range of useful vegetable products to
be raised. The growth of cotton is already very great, because
for seven centuries cotton has been the staple cloth for the
clothing of the people. And already it is being manufactured by
modern machinery. But both the growth of cotton and its
manufacture by modern methods would be enormously increased
if only facilities for internal transportation existed, and freedom
from unjust taxation could be secured. If, in short, China only
had railways and a good and enlightened system of government
her progress and prosperity would soon make the Western world
envious. But her government is not only stupidly unprogressive,
it is also disastrously wasteful. About seventy per cent. of the
whole revenue of the country is lost to the public use through the
malfeasance of officials. And only about 85 miles of railway

have as yet been opened, although it must be said that 200 or 250
miles more are under construction.

POSSIBILITIES OF INCREASED FOREIGN TRADE
WITH CHINA

There are, however, even now several ways in which foreign
trade with China may be increased. Two of these are the
supplying her people with woollen goods, and the supplying
them with wheat and flour. The winters of a great part of China
are so cool that warm garments are necessary. At present these
are made principally of padded cotton. Owing to the density of
the population pasturage is scarce, and sheep are almost
unknown. For an indefinite time, therefore, there will be a
demand for woollen goods in China, a demand that will
constantly increase as the superior convenience of woollen
garments over garments of padded cotton becomes more and
more known to the people. And though rice is now the staple
food of the people even of all classes, the wealthy classes are
fond of wheat bread and obtain it when possible. But the
agriculture of the country does not permit of the profitable
growth of wheat and flour, and wheat if used must be imported.

THE PRINCIPAL TRADING CITIES OF CHINA

The cities of China are large and numerous. Peking (1,500,000?),
the capital, is not open to foreign trade. In fact, it has no trade of
any sort, and derives its whole importance from being the seat of
government. But Tientsin (750,000), the port of Peking, and an
important "treaty port," has a large trade, both foreign and local.
Tientsin and Peking are connected by rail, and since the Russian
government has obtained the right of connecting Peking with the

Trans-Siberian Railway, it is more than likely that in time
Tientsin will become a terminus of that railway. Of "treaty ports"
other than Tientsin the principal are Shanghai, Hankow,
Foochow, Hangchow, Amoy, and Canton. Shanghai (405,000)
exceeds all other ports of China put together in the amount of its
foreign trade. Its foreign trade is, indeed, almost three fifths of
that of the whole empire. And of the total number of foreigners
residing in China (in 1896 said to be 10,855, of whom 4362 were
British subjects and 1439 Americans) about one half reside in
Shanghai. Shanghai is, indeed, the New York of China, and if
railways were only built from it (as has been proposed) to the
capital, Peking, and up the Yang-tse-kiang to Hankow, and by
way of the coast cities to Canton, China would begin a new era
in her career. Hankow (800,000), on the Yang-tse-kiang, about
700 miles from its mouth, is the chief emporium of the tea-
producing area of China. Ocean-going steamships ascend the
river to Hankow for their cargoes. Foochow (650,900) also has a
great tea export trade. Hangchow (700,000), one of the most
beautiful cities in China, is also the chief city for the
manufacture of silks, and of gold and silver ware, lacquered
ware, and fans. Amoy (100,000) has the best harbour in China
and an immense import trade, ranking in that respect next after
Shanghai. Canton (2,000,000?) is the largest city in the Chinese
Empire. A considerable portion of its inhabitants live in boats. Of
these "house-boats" there are said to be 40,000. The foreign trade
of Canton is next to that of Shanghai. Once it was superior, now
it is much inferior. Its manufactures, however, are still important
and include silk, cotton, glass, porcelain, paper, sugar, lacquered
ware, and ivory goods and metal goods. Nanking (150,000),
once the capital of China and once the largest city in the world,
is now comparatively a small city. Although a treaty port, its
commerce is not important. It was once famous for its beautiful
tower of porcelain, 200 feet high, but that is now destroyed.
There are many other large cities in China.

China and its chief trade centres.

HONGKONG

Hongkong (245,000) is a small island belonging to Great Britain
situated in the mouth of the Canton River, seventy-five miles
from the city of Canton. Its population is made up principally of

Chinese, who have been attracted there by its trade privileges.
The British population is only 13,000, even including the
garrison of 2800. Almost the whole population reside in the
capital, Victoria, for the island itself is a barren rock. Forty-four
per cent. of the total foreign trade of China passes through
Hongkong. Its harbour is one of the finest in the world. It has
magnificent docks. Its port is entirely free, and there is even no
custom-house. It is calculated that the foreign trade transacted by
its merchants amounts to $100,000,000 a year, exclusive of what
passes through its port without breaking bulk. The whole of the
vast export trade of China in silk and tea is largely handled by
Hongkong firms. Other commodities of which Hongkong is the
chief trade centre for China are opium, flour, salt, earthenware,
oil, cotton, and cotton goods and woollen goods, which it
imports from other countries and exports to China; and sugar,
rice, amber, sandal-wood, ivory, and betel, which it imports from
China and exports to other countries. Its trade is not confined to
Great Britain, but includes France, Germany, the United States,
and all other trading nations. But of course Great Britain has the
greatest share.

VIII. THE TRADE FEATURES OF JAPAN

JAPAN THE GREAT BRITAIN OF ASIA

Japan consists of a group of islands situated to the east of the
continent of Asia, somewhat as the British Isles are situated to
the west of the continent of Europe. But the Japan islands are of
volcanic origin and are very numerous. There are said to be 4223
of them. However, there are only four that are of important size,
and it is these that are usually thought of when Japan is spoken
of. The area of these four islands is 147,655 miles, which is
almost a fourth more than that of Great Britain and Ireland. The

population (census of 1895) is 42,270,620, which is 4,000,000
more than that of Great Britain and Ireland. The population per
square mile is 286, which, though large, is not quite so large as
that of Great Britain. If, however, we do not take into
consideration the northern island (Yezo), which is still partly
inhabited by uncivilised aborigines, the population per square
mile is 375, which is considerably in excess of that of both China
and Great Britain and Ireland, though still considerably less than
that of England alone. The above statistics do not include the
island of Formosa (area 13,500 miles, population almost
2,000,000), which was transferred from China to Japan in 1895,
at the close of the late Chino-Japanese war.

JAPAN'S WONDERFUL TRANSFORMATION

The significant thing about Japan is the rapidity with which it
has become transformed from a semi-civilised nation into one of
the great nations of the modern world. Until the year 1868 Japan
was an unprogressive, unenlightened country of the usual Asiatic
type, scarcely differing in any way from an inland province of
China of to-day. In that year a revolution took place which put
the whole power of the empire into the hands of the present
Mikado, or Emperor. Immediately Japan began to assimilate
Western ideas of civilisation and to adopt Western methods of
trade, commerce, manufacture, government, and education. Until
1889 the government remained an absolute monarchy. In that
year the Mikado voluntarily promulgated a constitution by which
a legislative Parliament, or "Imperial Diet," and an executive
Cabinet of State Ministers were instituted, so that the
government of Japan is now as "constitutional" as that of
Germany or Great Britain. The government is in other ways
thoroughly modern. Education, for example, is almost as well
looked after as in Germany or New England. There are 220
kindergartens established, 97 technical schools, and 49 normal
schools for the training of teachers (one being for the training of

high-school teachers), besides elementary schools, middle
schools, high schools, special schools (1263 of these), and
universities. The University of Tokio is an imperial institution,
supported entirely by the government, with colleges in law,
science, medicine, literature, engineering, and agriculture.
Education, between the ages of six and fourteen, is compulsory.
The army, too, is wholly a modern affair. It consists of 285,000
men, and an idea of its modernness may be gathered from the
fact that an important part of its organisation is its training
schools and colleges. Even the non-commissioned officers are
specially trained and educated. Altogether the students in the
military schools and colleges of Japan number 2400. The navy,
too, as is well known, is both modern and efficient. It consists of
5 battleships and 15 high-class cruisers, besides 46 other vessels,
—torpedo craft, gunboats, convoy ships, etc.,—and it is intended
to build an immense fleet of 19 battleships and cruisers, and 100
torpedo craft in addition.

JAPAN'S AGRICULTURE

Japan being of volcanic origin, much of its soil is unfit for
cultivation. The total productive area amounts to less than thirty
per cent., and even of this only a small portion is capable of
being tilled by modern methods. At present only twelve per cent.
of the whole surface of the country is devoted to agriculture,
even including pasturing. There is, however, but little pasturing,
and the principal implement of cultivation is the spade. The
modern plough is unknown. But manure (principally domestic
manure and fish refuse) is very generously used, and by this
means the returns are abundant. The principal food crop is rice.
Other food crops are wheat, barley, and the soya bean, but these
not numerously so. The principal cultivated products for
purposes of commerce are the mulberry tree (for supporting the
silkworm), the tea plant, the lacquer tree, and the camphor tree.
Rice also is grown for export as well as for home consumption,

and cotton is very largely grown for home manufacture. No
milk, butter, or cheese is produced, scarcely any meat, no wood,
and scarcely any leather. (For boots and shoes paper is used
instead of leather.) Of cattle there are only 1,000,000, as
compared with 10,000,000 in the British Isles, although the
population of Japan is considerably the greater. Of horses there
are 1,500,000, and the raising of horses is much encouraged by
the government, but principally for military purposes. Horses,
indeed, are but little employed. In cities, for purposes of carriage
and cartage, men are used instead of horses. Even in rural
districts horses are unknown for farming purposes, and not even
the hand-cart or wheelbarrow is used. Everything is carried. Fruit
is much raised,—oranges, apples, walnuts, plums, peaches, and
grapes,—but Japanese fruits are of very inferior quality. Flowers
are raised everywhere in great variety and in great abundance,
and the chrysanthemum is the emblem of the country and is used
on postage stamps.

JAPAN'S MANUFACTURES: THEIR FUTURE
POSSIBILITIES

The future of Japan depends upon its manufactures, but these
also are not without their difficulties. The mineral wealth of the
country is very great, principally in coal and iron. On the
northern island alone (Yezo) the coal deposits are two thirds
those of all Great Britain. Unfortunately, however, owing to the
mountainous character of the country, railways in Japan are
difficult to construct, and the transportation of coal or of ore is
difficult and expensive. As the coal deposits and iron deposits
are not near together charcoal has been used for smelting
purposes. Iron, therefore, so far, has not been produced
profitably, and its production has decreased. But silver is mined
abundantly, and also kaolin, or the raw material used in the
manufacture of the beautiful porcelain of the country. Copper
and antimony are also large articles of export. The principal

manufactures of Japan as yet are the textiles, especially silk and
cotton. In these modern methods are used, although so far the
productions of the native domestic looms are superior to those of
the factory looms. The production of textiles by machinery has
increased fourfold in ten years, and now amounts to about
$40,000,000 annually. This, however, is not a large amount,
being less than the textile production of any important state in
Europe, even Switzerland, or Sweden and Norway, and is only
one twentieth that of the United States. Until recently the factory
owner in Japan has had the advantage of cheap labour. But the
Japanese artisan is also becoming "modernised," and is now
demanding higher wages, and enforcing his demand by "strikes."
And for all their deftness in domestic manufacture Japanese
workmen are not yet as skilful in machine labour as British or
American workmen. It follows, therefore, that textile
manufacturing in Japan, especially the manufacture of cotton and
wool, is not yet out of its tentative or probationary stage. But
Japan, having the advantage of an extensive home market for
cotton goods (like the Chinese, the Japanese common people
wear cotton garments all the year round, in winter padding them
for warmth), and having the raw material at her own door (she
already grows a large proportion of all the raw cotton she needs),
and having, too, an abundance of coal at hand, must needs
become a great cotton-manufacturing country. The same
conditions hold with regard to the possibilities of Japan's silk
manufactures.

POSSIBILITIES OF INCREASED FOREIGN TRADE
WITH JAPAN

As in the case of China, the possibilities of increased trade with
Japan lie principally in woollen manufactures and in
breadstuffs. In addition there is a fair chance of increased trade
in metal manufactures. The use of woollen garments in Japan in
winter is extending even to the middle and working classes. And

inasmuch as the country does not raise sheep, and is, indeed, not
well able to raise sheep, such woollen clothing, woollen cloth, or
raw wool as is used must be imported. Hitherto the woollen
manufactures which have been established in the country have
not been very successful, and the probability is that Japan's
import trade in woollen clothing and woollen cloths will increase
year by year. Similarly, from the fact that the agriculture of the
country is not adapted to the growth of wheat, nor seems ever
likely to be so adapted, and also from the fact that both the
higher and the middle classes of Japan are rapidly adopting
European and American habits of living, it is very probable that
the importation of wheat and wheat flour into Japan will also
continue to increase year by year. And from the difficulty there is
of smelting iron cheaply it is probable that the importation of
iron and iron goods (which in raw iron, iron and steel rails, iron
small wares and nails, spinning and other machinery, and steel
ships, already amounts to $8,000,000 a year) is likewise likely to
increase greatly year by year also.

JAPAN'S MODERN TRADE FACILITIES

Owing to the irregular conformation of the surface of the
country, good roads in Japan can scarcely be said to exist. But
20,000 miles of roads have been built, of which the state
maintains about one fourth. There are also 2505 miles of railway,
of which the state owns and maintains about one fourth also.
There are 11,720 miles of telegraph routes, with 37,000 miles of
wire; 520 miles of telephone routes, with 6347 miles of wire; and
387 miles of submarine cable routes, with 1481 miles of wire.
The country also has a merchant navy of 827 steam vessels of
modern type and 702 sailing-vessels of modern type, besides 668
native craft. Owing to the irregular and rocky nature of the coast-
line and the great number of small islands which exist, numerous
lighthouses are needed; but Japan's lighthouse system is one of
the best in the world.

JAPAN'S FOREIGN TRADE

Japan has a foreign trade of $60,000,000 annually in exports and
$86,000,000 annually in imports. Of the export trade the
principal part, running from a fourth to a third, is with the United
States. The next largest part is with France, the next with
Hongkong, the next with China, and the next with Great Britain.
But Great Britain's direct share is not more than a twelfth. Of the
import trade the principal part, almost one third, is with Great
Britain. The United States' share is about a twelfth, and that of
France about one twenty-fifth. The principal exports are raw silk
(about one third of the whole), silk goods (about one tenth of the
whole), tea, coal, copper, rice, and matches. The export of
matches amounts to $2,500,000 annually. Characteristic exports,
though they do not figure largely in the total amount, are floor
rugs, lacquered ware, porcelain ware, fans, umbrellas, bronze
ware, repoussé work, paper ware and papier-mâché, fibre
carpets, and camphor. There is also a large export of fish,
shellfish, cuttlefish, edible seaweed, and mushrooms to China
and other Asiatic countries. The chief import is raw cotton
(almost one fifth of the whole). Other important imports are
sugar (although she raises almost 100,000,000 pounds of sugar
herself annually), cotton yarn, cotton goods, woollen cloths,
flannels and blankets, kerosene oil, watches, and articles of iron
and steel as above enumerated. The fishing industry is a very
important one and over 2,500,000 people are engaged in it. The
number of fishing-boats is about 400,000. The fish trade, which
includes seaweed, is (when not for home consumption)
principally with China.

Japan's relation to eastern Asia.

JAPAN'S SPECIAL TRADE CENTRES

The foreign commerce of Japan, like that of China, is allowed to
be carried on only at certain ports, called "treaty ports," of which
there are nineteen, the principal being Yokohama, Osaka,
Nagasaki, Hakodate, Niigata, and Kobe. The two principal cities,
not treaty ports, are Tokio and Kioto. Tokio (1,300,000) is the
capital and chief centre of the political, commercial, and literary
activity of the empire. In many respects Tokio is a "modern" city.
Its educational features are excellent. Its sanitation also is good.
Kioto (340,000) was formerly the capital, but after the
revolution of 1868 it was superseded in this respect by Tokio.
Yokohama (170,000), distant from Tokio eighteen miles, is the
chief place of the empire for foreign trade. Its foreign trade,
indeed, is more than half that of the whole empire, being about
$75,000,000 annually. Osaka (487,000) is in respect to
population the second city of the empire, but its foreign trade is
not large and is carried on principally at Hiogo, a port near it.
Niigata (50,000) is the only treaty port on the west side of Japan,
the surf caused by the winter monsoon making the flat west coast
of the country very dangerous for shipping for half the year.
Other important ports are Kobe (161,000) and Nagasaki
(72,000). Nagoya (215,000) is an important inland town.

IX. THE TRADE FEATURES OF AFRICA

AFRICA FIFTEEN YEARS AGO

Within a period of about fifteen years the continent of Africa has
been the scene of a vast partition. At the beginning of that period
the amount of African territory that was subject to European
control was comparatively small. The British were firmly
established in South Africa, and had possessions along the coasts
elsewhere principally in the west. The French were firmly
established in Algeria and in Senegal. The Portuguese had their

ancient settlements in Mozambique and Lower Guinea. Morocco
on the northwest and Abyssinia in the northeast were more or
less well-established governments that were independent. Egypt
in the extreme northeast, with tributary possessions extending
along the Nile into the far interior of the continent, was also a
more or less well-established government that possessed a quasi-
independence, though it was nominally dependent upon Turkey.
But elsewhere, except in a few other places controlled by
European authority, the whole continent may be described as
having been in its original state of savagery or semi-savagery.
No government existed anywhere that was either beneficent or
stable. The slave-traffic abounded everywhere.

EUROPEAN SPHERES OF INFLUENCE IN AFRICA

The European governments that had possessions in Africa were
all doing their best to suppress the slave-traffic. But they could
not take very salutary steps in this direction without exercising
authority beyond the territorial limits they were supposed to
occupy. Gradually, for these reasons, and also for the reason that
they were all anxious to extend their commercial dealings in
Africa, they began to exercise authority beyond their old-time
territorial limits. In this way began the establishment on the part
of European nations of what are known as "spheres of influence"
in Africa. At first England and France were the only nations that
were at all active in establishing these spheres of influence. Later
on Germany and Italy and other nations began to establish them
also. Beginning, therefore, with the years 1883 and 1884 there
has been a general establishment and gradual extension of these
spheres until now the whole continent has been practically
parcelled out among a few European powers.

THE GREAT PARTITION OF AFRICA

The partition of Africa.

The ancient empire of Morocco still exists in an independent
state. Abyssinia, though Italy attempted to subjugate it, is again
also independent. The little republic of Liberia is nominally
independent. Some territory in the very heart of the Sahara or
Great Desert is yet in its aboriginal independence. But
elsewhere, throughout the whole continent, Africa is either
British, or French, or German, or Belgian, or Portuguese, or

Italian. Spain's holding is not worth mentioning. Italy's holding
also is scarcely worth mentioning. Portugal's holding has not
been increased in the recent "scramble"—only made more
definite. France's holding, however, has been enormously
increased, and is now the largest (3,300,000 square miles),
although much of the French area is barren desert, and much of
the rest of it uninhabitable by white people. Great Britain's
holding also has been greatly increased, but not nearly so much
so as it would have been if in the earlier years of the scramble
the British government had not been singularly blind to the
actions of other governments in the matter. Germany, too, has
got a substantial holding (925,000 square miles). The Kongo
Free State, which, though nominally independent, is practically
under the suzerainty of Belgium, and must look to Belgium for
the funds with which to promote its development, is also a
substantial possession, being a little less than Germany's holding
—900,000 square miles.

GREAT BRITAIN IN AFRICA

Great Britain's holding, however, in the partitioned continent
comprises its best portions. Much of Africa is uninhabitable by
white men. Wherever, however, white men can live—except in
northern Africa—there Great Britain has managed to get control.
Excluding the shore of the Mediterranean, the best part of Africa,
considered from the view points of colonisation and commerce,
is what is now known as "British South Africa." This is an
immense area—an area of almost 1,000,000 square miles. It
comprises (1) that whole southern portion of the continent
known as Cape Colony, and (2) that portion of the great central
plateau of the continent which extends from Cape Colony
northward to Lakes Nyassa and Tanganyika—all except the two
Boer republics, the Orange Free State and the South African
Republic. British East Africa (800,000 square miles) includes the
territory of Uganda, north of Lake Victoria, a territory which

from the character of its native population and its possibilities of
trade has been called the "pearl of Africa." British West Africa
(500,000 square miles) includes the basin of the lower Niger, the
most densely peopled area in all Africa, the seat of the great
Fula-Hausa empire of Sokoto-Gandu, the wealthiest and greatest
trading nation in the continent. Furthermore, in the northeast,
Great Britain exercises "protectorate control" over Egypt—a
control that is likely to be instrumental in reclaiming for Egypt,
and thus for civilisation and commerce under British authority,
the whole of Egypt's ancient possessions along the Nile as far at
least as Uganda. The total area of the British possessions in
Africa, exclusive of the two Boer republics and Egypt, is over
2,300,000 square miles.

THE "DOMINION OF SOUTH AFRICA"

"South Africa" is practically "British South Africa." The German
portion is either largely barren or else inaccessible. The
Portuguese portion is only a narrow strip along the east coast,
much of which is too unhealthy for habitation other than by
natives. The two Boer republics are rapidly filling up with
British people, are being developed by British capital, and must
in time become confederated with the states that environ them.
One of them, too, is already under British suzerainty. British
South Africa, however, is as yet only a name. It has no real
existence except in hope. The aspiration of statesmen in southern
Africa is that all the territories of southern Africa under British
control shall form one confederation, and that in this
confederation the Orange Free State and the South African
Republic shall join. The territories entering into this
confederation would therefore be as follows: The self-governing
colonies of Cape Colony and Natal, the crown colony of
Basutoland, the protectorates of Bechuanaland and Zululand, the
territory now administered by the British South Africa Company,
popularly known as "Rhodesia," and the British Central Africa

protectorate, with in addition the two Boer republics previously
mentioned. The length of this proposed South African dominion
would be 1800 miles. Its width would be from 600 to 800 miles.
And, as said above, its area would be about 1,000,000 square
miles. Mr. Stanley predicts that in a hundred years the
"Dominion of South Africa" will have a white population of
8,000,000, and a coloured population of 16,000,000.

SOUTH AFRICA'S AGRICULTURAL POSSIBILITIES

Of South Africa as above defined Cape Colony and Natal are at
present the most important portions. Their climate is in some
respects the finest in the world. Their soil is of remarkable
richness. The number of distinct species of indigenous plants
found upon it is greater than for any other equal area on the
globe. The same remark was once true of the animals found in
South Africa, which again is testimony to the great fertility of the
soil. But a serious drawback is the insufficiency and uncertainty
of the rain supply. Irrigation, however, is practised, and wherever
irrigation is possible the land may be made to blossom like the
rose. Agriculture, however, is only indifferently pursued. The
vine in Cape Colony produces more abundantly, very much more
abundantly than anywhere else in the world, and yet neither
grape-raising nor wine-making can be said to be successful.
Pasturing is the principal occupation of the people in rural
districts. There are 17,000,000 sheep in Cape Colony, and
6,000,000 goats. Natal, which is warmer, has 500,000 sheep.
Another principal occupation is ostrich-farming. The ostrich,
once wild in South Africa, is now bred domestically. Cape
Colony has 230,000 ostriches. Ostrich feathers fetch from $150
to $300 a pound. The raising of cattle is another principal
occupation, and draught cattle are much used for transport
purposes. Cape Colony has 2,000,000 cattle; Natal, 1,000,000.
The principal food crops are wheat and maize, but little is raised
for export. In Natal, sugar is an important product, and also tea.

Many magnificent timber woods are found, but the trees are
stunted and little timber is exported. Much has been wasted by
fires. The great agricultural possibilities of South Africa are
wool, mohair (the hair of the Angora goat), fruit, wine, and
skins. The breadstuffs of South Africa will probably all be
needed for home consumption.

SOUTH AFRICA'S GREAT MINERAL WEALTH

All the world over South Africa is famous for its diamond mines
and its gold-mines. The diamonds are found principally in
Griqualand, north of the Orange River, now a part of Cape
Colony, but they are also found in the Orange Free State. The
diamond areas are very circumscribed, the diamond-bearing
"pipes" being supposed to be craters of extinct volcanoes. The
principal "pipes" are at Kimberley (28,718), in Griqualand.
These constitute the richest diamond-fields in the world. It is
estimated that over $350,000,000 worth of diamonds have been
taken out of Kimberley since their first discovery there in 1867.
The largest South African diamond yet found was worth
$300,000, but many other large ones have been found. The
annual diamond export now is about $20,000,000. For 1896 the
export was $23,200,000; for 1897 a little less. The production
and export are strictly limited, so that prices may not depreciate.
Next in interest to the diamond-fields are the gold-mines. These
so far have been found principally in the South African Republic,
or "Transvaal" as it is popularly called, in the "rand," or "reef,"
near the far-famed town of Johannesburg (102,078). Since gold
was first discovered in the rand (1871) $250,000,000 worth has
been taken out. The annual output now is nearly $50,000,000,
but it is estimated that before the rand can be exhausted
$2,250,000,000 worth of gold must be taken out—an amount
much greater than the total public debt of the United States,
national, state, and municipal. But north of the Transvaal, in
Rhodesia, especially in Mashonaland, is a territory popularly

called the "Land of Ophir," where mining operations are only
just begun, but where gold is supposed to be even more richly
stored than in the Transvaal. Of this district the newly built town
of Salisbury is the centre. Other mineral products of South
Africa are coal in Natal, mined at Newcastle, and copper in the
northwest of Cape Colony, shipped at Port Nolloth.

SOUTH AFRICA'S FOREIGN TRADE

The import trade of South Africa so far consists of almost
everything needed by the inhabitants except meat, flour,
vegetables, and fruit, for there are as yet almost no manufactures.
The principal exports are: (1) gold, $60,000,000 per annum,
including that from the Transvaal; (2) diamonds, $22,500,000;
(3) wool, $12,500,000; (4) mohair, the hair of the Angora goat,
$3,000,000; (5) ostrich feathers, over $2,500,000; (6) hides and
skins, $2,200,000; and (7) copper ore, $1,250,000. The export of
wine and fruit, for the production of which the country is so well
suited, and also of grain, is inconsiderable.

SHIPPING PORTS AND RAILWAYS OF SOUTH AFRICA

British South Africa, like all of Africa, is wanting in seaports. In
fact, it has but few. However, it has one, Walfish Bay, which
territorially does not belong to it, inasmuch as it is in the middle
of the coast of German Southwest Africa—the only port in that
coast. The principal port in British South Africa is Cape Town
(83,718), which is also the capital and principal place. The next
principal ports are, for Cape Colony, Port Elizabeth (23,266)
and East London, and for Natal, Durban. Lorenzo Marquez, on
Delagoa Bay, and Beira, at the mouth of the Pungwe, both in
Portuguese East Africa, are natural ports for northern British

South Africa, and are used as such, railways being constructed
from them into the interior. Railroad-making, indeed, is now the
all-important matter in South Africa. Lines are already built from
Cape Town, Port Elizabeth, East London, Durban, and Lorenzo
Marquez to the diamond-fields of Kimberley and the gold-mines
of Johannesburg. These also give to the pastoral and agricultural
parts of the interior facilities of access to the sea. But the line
from Cape Town to Kimberley is being rapidly extended
northward to Salisbury, the central point of the gold-fields of
Rhodesia, and already has reached Bulawayo, 1600 miles from
Cape Town. The line from Beira is also to end at Salisbury.
Already a telegraph line extending from Salisbury northward has
reached the west shore of Lake Nyassa, and by the close of this
year (1898) it will reach the south end of Lake Tanganyika. It is
proposed that the railroad from Bulawayo shall follow this same
route, and it is the dream (or shall we say the hope?) of the
empire-builders of South Africa that this railway shall before
many years be so far advanced northward that it will meet the
railway that is now being built from Cairo southward through the
continent along the Nile. Mr. Stanley predicts that the "Cape to
Cairo" railway will be an accomplished fact before 1925. The
white population of South Africa, even including the Boer
republics, is still less than 750,000.

X. THE TRADE FEATURES OF AUSTRALIA

AUSTRALIA AND AUSTRALASIA

The term Australasia, as now generally used, comprises
Australia (including Tasmania) and New Zealand, and a number
of small neighbouring islands. So used it practically denotes a
British possession; for such islands as are comprised by the term
and yet do not belong to Great Britain are comparatively

unimportant. But when we speak of Australasia, we are generally
thinking of Australia, for Australia is so large and important
that it seems to overshadow the other parts of Australasia. But in
respect to politics or commerce Australia is not one country; it is
divided into several self-governing colonies. These are, in order
of importance, Victoria, New South Wales, South Australia,
Queensland, and West Australia. But a movement is now being
made to unite all these colonies, and Tasmania as well, into one
"Australian Confederation," just as the several provinces of
Canada, which were once independent colonies, have been
united into one "Dominion of Canada." This confederation
scheme, however, has not yet been accomplished.[3] New
Zealand, because of its distance (1200 miles) from Australia, has
so far shown no desire to enter into this confederation.

FOOTNOTE:

[3]
Since the above was written the scheme has been
developed a very considerable way toward completion.
The name of the confederation is to be "The
Commonwealth of Australia."

THE AREA AND CLIMATE OF AUSTRALIA

Australia is a continent not only in name but in fact. Its area,
including Tasmania, is almost 3,000,000 square miles, which is
about the area of the United States exclusive of Alaska, and only
about one fourth less than the area of the continent of Europe.
Fully two fifths of this area lie within the torrid zone, and of the
rest, even in Victoria, the part farthest from the equator, the
climate is so warm that it corresponds with that of Spain,
southern France, and Italy. But over so vast a territory great

differences of climate must occur, and consequently of products
also. A general description of the climate and products of
Australia is therefore impossible. Yet there are several
characteristics which appertain to the whole continent. The chief
of these are (1) the great dryness of the atmosphere—not merely
its lack of rain, but its absolute freedom from moisture; (2) the
remarkable inequality, or want of regularity, in the rainfall.
Occasionally the rainfall is excessive, but a more frequent and
serious cause of trouble is excessive drought. The continent on
every side has a low coast region, where the rainfall is heavier
and the temperature generally hotter than in the corresponding
table-land interior to it. But the vast table-land of the interior has
comparatively little rain, and indeed in some parts of it,
especially in the centre and west, the rainfall is so slight that the
country is practically a desert.

But even when all the desert areas of Australia are excluded from
calculation there still remains in the interior plateau, toward the
east and south, an immense area of country of great fertility and
productiveness. The Murray River alone drains an area of
500,000 square miles, one sixth of the whole continent, a great
part of which is of exceeding richness. In these fertile parts
irrigation by artesian wells has been tried, and always with great
success. And it is thought that almost the whole continent can be
regained for agriculture, or at least for sheep-pasturing, by
similar means; for even in the arid and so-called desert parts of
the interior, there is very little soil that is not really fertile, for all
of it is covered with thick brushwood. Moisture alone is needed
to make it bear crops abundantly. And this dryness of the
atmosphere which prevails throughout the whole continent is not
without its compensations. It renders the climate exceedingly
healthful.

AUSTRALIA A CONTINENT OF PECULIARITIES

Australia has many peculiarities. It has only one large river, and
even that in summer becomes a series of isolated pools. It has no
high mountain range, its principal mountains being only a series
of ramparts marking off the lower coast lands from the interior
plateau. Again, its native quadrupeds are entirely different from
those of other continents, being almost all, whether little or big,
"marsupials," or "pouch-bearers," like the kangaroo. Its birds are
mostly songless. Its flowers, for the most part, have no scent. Its
trees are leaved vertically and cast no shade. Its indigenous
inhabitants have made no progress toward civilisation. When
Europeans first came to the country they found no native animal
that could be put to any use, nor any native fruit, vegetable, or
grain that could be utilised for food. Still, all European domestic
animals thrive abundantly in the country, and so do all European
fruits, grasses, grains, and vegetables. The English rabbits,
indeed, have become a terrible pest. As many as 25,000,000 of
them have been killed in a year without any apparent diminution
in their numbers. Over $1,000,000 a year has at times been spent
to exterminate them, all to no effect.

VICTORIA

Victoria, the smallest of the Australian colonies, had until
recently the largest population (June, 1897, 1,177,304) and also
the largest trade. In both respects, however, it is at present
surpassed by New South Wales. Victoria has owed its past pre-
eminence to its gold production. Gold was discovered in the
colony in 1851, and for years the output of the precious mineral
was not less than $50,000,000 per annum. The present output of
gold in Victoria, however, is only $10,000,000 per annum.
Richer, however, than the gold-mines of Victoria is the fertility
of its soil. A large part of the soil is exceedingly fertile—with
irrigation one of the finest fruit-bearing soils in the world. The
arboreal vegetation of the country is magnificent. Trees thirty
feet in diameter rise to the height of 200 feet without a single

lateral branch, and then 100 feet to 200 feet higher still. Pear-
trees grow to the height of eighty feet, with trunks three feet in
diameter. But as yet wool-growing, wheat-raising, and vine-
growing are the principal agricultural occupations of the people.
The principal agricultural export is wool—$25,000,000 worth
per annum. But a considerable portion of this comes from New
South Wales. The sheep kept number 15,000,000, the cattle
2,000,000. But the colony still remains principally a mining
community. Five ninths of the population live in towns. Yet there
are few towns, and two fifths of the whole population live in
Melbourne—a city almost exactly as large as Boston.

MELBOURNE

Melbourne (451,110; with suburbs, 500,000), the capital city of
Victoria and the chief city in Australia, is also one of the most
beautiful cities in the world. Its parliament buildings, town hall,
post-office, treasury, mint, law courts, public libraries, picture
galleries, theatres, churches, and clubs are all edifices of
architectural magnificence and beauty, while its boulevards,
parks and gardens are equally splendid. At one time money
flowed freely and great commercial recklessness prevailed. But
though Melbourne has sustained several severe depressions its
present condition is prosperous and its future is assured. It is,
however, a pleasure-loving city, and it is as much on this account
as on account of its great beauty that it is called "the Paris of the
southern hemisphere." Nowhere else in the world, perhaps, are
indoor amusements—the theatre, concerts, etc.—or outdoor
amusements—cricket, football, horse-racing, etc.—more
devotedly patronised than in Melbourne. Other important places
in Victoria are Ballarat (40,000) and Sandhurst (37,000), both
mining towns, and Geelong (25,000) locally noted for its
manufacture of "tweeds."

NEW SOUTH WALES

Australia. Shaded portions show where the rainfall is sufficiently abundant.

New South Wales (population 1,311,440) is the oldest colony of
Australia and the parent of both Victoria and Queensland. Of all
the colonies, it has, perhaps, the greatest range of productions.
On the low coast lands its soil is of extraordinary fertility, and
even in the dry interior, when irrigation is employed, the fertility
is still extraordinary. As yet, however, but one acre out of every
two hundred is under cultivation, the chief agricultural
occupation being pasturing. Over 50,000,000 sheep are kept,
principally the merino. Grass grows everywhere, and even the

summits of the mountains are covered. Drought, however, is a
terrible drawback, and sometimes tremendous losses occur. In
1877 over 8,000,000 sheep perished, and in 1884 over
12,000,000. The total wool production is very large, averaging
$50,000,000 a year. The export of hides, skins, leather, and
chilled meat, principally mutton, amounts to $10,000,000
annually. Chilled mutton and beef are sent direct to London,
though the passage takes five or six weeks by steamer and
twelve to sixteen weeks by sailing-vessel. Scarcely less
important than its agricultural products are the mineral products
of New South Wales. Its coal-mines are the finest on the
continent, and $4,500,000 worth of coal is exported annually,
besides what is consumed locally. Its gold production, though
not very large, is general throughout the whole colony. Its silver-
mines in Silverton and Broken Hill are among the most famous
in the world, and its tin-bearing lands comprise over 5,500,000
acres. The foregoing comprise the staple products—the
production of industries already well established. But fruit-
growing, including all fruits, from apples, pears, and peaches, to
olives and oranges, is a rapidly developing industry, no country
in the world being better suited to it. Wine-making, too, is
quickly coming forward, the New South Wales wines equalling
in flavour those of France and Spain. Wheat-growing, cotton-
growing, and even rice-growing are also in their several districts
rapidly extending and prosperous pursuits. The development of
New South Wales has only just begun. Sydney (including
suburbs 410,000) is the capital and by far the largest city.
Sydney, like Melbourne, is a beautiful city, but its beauty is
natural rather than artificial, and it is well entitled to its name,
"Queen of the South." It is situated on Port Jackson, one of the
finest and most beautiful harbours on the globe. Sydney is the
headquarters of all the various lines of steamships—British,
American, French, Italian, etc.—that trade with Australia, and is
indeed one of the great seaports of the world.

SOUTH AUSTRALIA

South Australia (358,224 in 1897) occupies the whole central
part of the continent from north to south. But as only a very
small portion of this vast area is settled—the southeast corner—
it may be described as in characteristics resembling Victoria. Its
principal industry is wheat-growing. South Australia is indeed
the great granary of the continent, and is destined to be one of
the great granaries of the world. Like the other divisions of
Australia, South Australia, when once drought has been
overcome by irrigation, is destined to become a great fruit
country, its warm, moistureless climate being peculiarly well
suited to the ripening of fruits of exquisite flavours. Already its
olives are pronounced the finest in the world. The principal city
and chief port is Adelaide (with suburbs 144,352). Like other
Australian ports, Adelaide possesses excellent steamboat
shipping facilities. In the north, on the Timor Sea, is Port
Darwin, likely to be an important trade centre.

QUEENSLAND

The most interesting of all the Australian colonies is Queensland
(population 472,179), for it is a tropical country with a climate
so salubrious that white people can live in it and be comfortable
and healthy. The heat, instead of being enervating, is stimulating
and bracing. A great portion of its soil is of unsurpassed fertility.
The only drawback is the unequal distribution throughout the
year of the rainfall. But wherever irrigation wells are sunk the
climate becomes highly suitable for sheep-raising, and also for
the growing of many kinds of fruit. There are already
15,000,000 sheep and 5,000,000 cattle in the colony, and wool is
exported to the amount of $15,000,000 annually. Other
agricultural exports are frozen beef and mutton, and hides and
skins. Wool is the chief export. The second export in importance

is gold, which reaches $10,000,000 per annum. Tin is also
exported, and coal, though little worked, is abundant.
Developing exports are sugar ($2,500,000 per annum),
arrowroot, cotton, tobacco, rice, and coffee. A difficulty,
however, in the development of these products is the labour
question. White men cannot work in the plantations. Chinese
prefer to work in the mines. The natives won't work anywhere.
No negroes are obtainable. As a consequence Polynesians have
to be imported. Brisbane (100,913) is the capital and chief city
and port.

WEST AUSTRALIA

West Australia (population 162,394), the largest of all the
Australian colonies, has only been recently settled, and its
constitution as a self-governing colony dates only from 1890. A
large part of its area has never been explored, and a large part is
known to be scrub desert. But there is scarcely any part of it,
even of its "scrub" areas, but that will support sheep when once
artesian wells have been sunk, and large portions of the colony,
especially along the coasts, are as fertile as need be. And the
climate, though very dry, is exceedingly healthful. Perth
(43,000) is the capital. Albany is the principal port.

THE IMMENSE RESOURCES OF AUSTRALIA. ITS
PROBABLE FUTURE

Australia is undoubtedly on the eve of a period of great
development. Its resources are known to be immense. Its climate
has been found most favourable to human health, and the
objectionable feature of the climate, the smallness and
irregularity of the rainfall, has been studied and become

understood and found remediable. Once the confederation that is
now in process of formation takes place, there is no doubt that
Australia will enter upon a new and prosperous commercial era.
Owing to the fact that its chief opportunities for wealth lie in the
development of its natural resources, it is probable that for some
time to come almost all the manufactured goods Australia needs
will have to be imported. Already its importation amounts to
$275,000,000, of which, of course, Great Britain supplies the
principal share. This importation is principally clothing and
materials for clothing, but it also comprises hardware and
machinery, and in fact everything required by a highly civilised
and money-spending people, except breadstuffs and provisions.
The magnitude of this importation may be comprehended from
the fact that it is more than one third of the total exportation of
the United States for any year save one up to 1896, including our
immense export of breadstuffs, provisions, and cotton. And
besides the articles of export already mentioned—wool, meats,
hides, skins, minerals, fruits, etc.—there is one other Australian
resource that is capable of almost indefinite development. This is
its timber. The eucalyptus or gum-tree prevails almost
universally in Australia, and some of its commonest varieties,
being both strong and indestructible by insects, are of almost
unequalled value for ship-building, railway ties, and dock and
harbour construction. That the Australians are fully alive to the
importance of developing their foreign trade is seen in the efforts
they have made to provide facilities for bringing their products to
ocean ports. There are 11,980 miles of railway, almost every
mile of which has been built by the governments. This is one
mile of railway for every 300 inhabitants, as against one mile for
every 400 inhabitants in the United States. These railways run
wholly to and from the seaboard. There are no manufacturing
towns to be catered to. Australian trade consists wholly in
exchanging home-raised natural products for imported
manufactures. Equally remarkable with the railroad enterprise of
the Australians is their enterprise in telegraphic construction and
the establishment of cable communications. For example, a
telegraph line 2000 miles long, running across the continent from

Adelaide to Port Darwin, has been built by the province of South
Australia so as to connect with a cable from Port Darwin to Java,
Singapore, etc., and thus with Europe and America. For at least
1500 miles this telegraph line runs through one of the most
desolate and inaccessible regions in the world.

XI. THE TRADE FEATURES OF SOUTH
AMERICA

SOUTH AMERICA, A FERTILE CONTINENT WITH
DRAWBACKS

South America is an immense but very fertile continent, whose
natural resources are as yet scarcely begun to be utilised. Though
not so large as North America, it has a far greater area of
productive soil—and, indeed, much of its soil is quite
unsurpassed in fertility. It suffers, however, from two great
drawbacks. 1. A great portion of its area (four fifths) lies within
the torrid zone. In the low coast regions of this torrid area, and
also in the low forest regions watered by the great flat rivers of
the interior, the climate is for the most part unendurable to white
men. 2. South America has been unfortunate in its settlement and
colonisation. Until in recent years colonisation as understood in
Anglo-Saxon communities has scarcely been attempted in South
America at all. All the earlier immigrations from the Old World
were prompted by the thought of getting gold and silver and
precious stones—if need were by the spoliation and enslavery of
the natives. Only a small proportion of the population—not more
than a quarter of the whole—consists of whites, and these are
principally from Spain and Portugal. These conquerors of the
continent have not in the main succeeded in establishing either
stable forms of government or high types of civilisation.

Furthermore, the mixed races—the mestizos or metis, as they are
called, the descendants of the earlier Europeans and the natives
—instead of advancing in civilisation have for some time past
been retrograding. Then, again, there is a large negro element,
the descendants of Africans once imported as slaves, to still
further complicate the race question; and there is a considerable
element partly negro and partly Indian. In only one state,
Argentina, can affairs be said to be really prosperous, and even
in Argentina the civilisation developed by its prosperity is gross
and material rather than refined and intellectual. The next most
prosperous and important states are Brazil and Chile. Perhaps
Uruguay, though the smallest of all the states, should be placed
after Argentina. The remaining independent states of the
continent—Venezuela, Colombia, Ecuador, Peru, Bolivia, and
Paraguay—are all states of the prevailing South American type.
Their governments are more or less unstable. They are terribly
burdened with debt, and their credit is such that they must pay
high rates of interest. The civilisation once introduced among
their native races by the zeal of Spanish missionaries is
deteriorating if not vanishing. And even among their leading
classes there is much to be desired in the observance of the
ordinary principles of right and wrong.

EUROPEAN IMMIGRATION IN SOUTH AMERICA

All the South American states enumerated above, with the
exception of Brazil, were first taken possession of and "settled"
by the Spanish, and the Spanish language still remains in them
the language of government, education, and society. Brazil was
first taken possession of and "settled" by the Portuguese, and in
Brazil the Portuguese language prevails, just as elsewhere in the
continent the Spanish language prevails. Among the natives
many different languages are found, but in Brazil a "common
language" is used, one introduced by the original Portuguese
missionaries, and understood by nearly all the tribes. Between

Brazil and Venezuela is a triangular piece of country called
Guiana, which, unlike the rest of South America, is still under
the control of European powers. It consists of three parts—
French Guiana, Dutch Guiana, and British Guiana—colonies of
France, Holland, and Great Britain, respectively. Leaving out
Guiana, South America has received its entire civilisation from
Spain and Portugal, and, with the exception of Argentina,
Uruguay, and Brazil, there has been little or no emigration to any
South American country except from these two European
countries. To Argentina, however, there has been a large
emigration from Italy especially, but also from France, Great
Britain (mainly from Ireland and Wales), Germany, and Sweden.
A similar emigration has taken place to Uruguay, though the
foreigners in Uruguay are principally Basques, a people that live
on the border-land between Spain and France, but are neither
Spanish nor French. In Brazil the immigration, where it has not
been Portuguese, has been chiefly Italian and German, and in the
temperate region of the extreme south of Brazil a large German
population exists. Everywhere in South America the parts most
prosperous are the parts that have come most directly under the
influence of recent European emigration.

THE ARGENTINE REPUBLIC

The Argentine Republic, or "Argentina," as it is popularly called,
is the most prosperous and most important of all the South
American states. Its area (1,319,247 square miles) is equal to the
total area of the States of the United States east of the
Mississippi and Missouri, including the Dakotas, Missouri,
Arkansas, and Louisiana. Although a portion of this vast area is
not of much value for agricultural purposes, especially in
Patagonia, a very large portion of it does consist of soil of great
fertility, while the climate, which for the most part is a temperate
one, is such as is well suited to Europeans and white people
generally. The population May 10, 1895, was 4,094,911. Of this

population it is estimated that over 850,000 are Italians, 183,000
French, 161,000 recently emigrated Spaniards, 60,000 English,
and 54,000 Germans and Swedes. The language of the
government and of the schools is Spanish. At one time in
Argentina there was a disposition to take the United States as a
model in everything, but of late years there has been a tendency
toward taking France as a model in manners and customs. This
disposition to imitate European peoples is particularly true of the
wealthy classes.

ARGENTINA'S RAPID PROGRESS

The pride and boast of Argentina has been its rapid progress. In
the thirty years ending 1886 the immigration was over a million.
From 1886 to 1889 it was from 100,000 a year to 200,000 a year.
In 1890, owing to the financial crisis of that year, it fell away
almost to nothing. Since 1890 it has gradually increased until
now it is about 100,000 a year again. In 1869 the population was
only 1,837,000. Now it is over 4,000,000. Similarly the capital
city, Buenos Ayres, has made an increase not easily paralleled. In
1869 its population was only 187,126. In 1887 it was 423,996.
By the census of 1895 it was 663,854. To-day it is said to be
750,000. Of this number about one half are foreigners. The high
protective tariff established by Argentina in 1878 had the effect
of instituting many small industries in Buenos Ayres, and to this
cause the exceedingly rapid growth of its population is partly
attributable.

ARGENTINA'S AGRICULTURE AND MANUFACTURES

The great prosperity of Argentina has been due to the extent and
immediate availability of its agricultural resources, for its forest

wealth remains undeveloped, and its mineral resources are
comparatively scanty. Its vast treeless and stoneless plains have
needed no "improvements" to make them fit for settlement, and
the soil which covers them being of virgin richness bears crop
after crop without fertilising and with very little cultivation.
Immigrants arrive in the country without a dollar and in twenty
years are owners of estates of 5000 acres each. In no country in
the world has agricultural extension been more rapid. In twenty
years the acreage under cultivation increased 1400 per cent. The
amount under cultivation in wheat alone increased 2600 per cent.
The wheat production averages 40,000,000 bushels, which is not
far short of one fourth of the total wheat export of the United
States. The production for 1897 was 60,000,000 bushels,
although the amount exported was much less than that. The
wheat product is indeed very variable, owing to droughts and
locusts, for, like Australia, Argentina is uncertain in its rainfall.
The corn crop is steadier, and in 1896 amounted (for export
alone) to 60,000,000 bushels. More important in the aggregate
than the direct products of the soil are the indirect products.
There are 22,000,000 cattle kept in Argentina, 75,000,000
sheep, and 4,500,000 horses. The total exportation of animals
and animal products amounts to $70,-000,000. Of this
exportation the principal item is wool, the wool-clip of
Argentina being, in weight, one seventh of the total wool-clip of
the world. Unfortunately, however, Argentina wool is very dirty,
and when washed reduces to one third, while Australian wool
reduces only to two thirds or three fifths and is free from seeds.
The profit accruing to the Argentina wool-grower is thereby
lessened. But, nevertheless, wool-growing in Argentina is a very
profitable industry, and many farmers (principally Irish settlers)
have from 50,000 to 100,000 sheep each. Cattle-farming is
carried on mostly by native Argentines, and many cattle farms
are stocked with as many as 10,000 cattle and 2000 horses each.
The great exports of Argentina, therefore, after wheat and corn
and wool, are hides and skins, tallow, chilled beef, and mutton
and bones. There are five factories in Buenos Ayres engaged
wholly in chilling mutton, and the export of chilled mutton to

Great Britain alone is $5,000,000 a year. Another growing
agricultural product is wine, the yearly production being
1,500,000 gallons. Notwithstanding Argentina's magnificent
forest areas, but little timber is exported or even manufactured
for home consumption. The other principal manufacturing
industries are carriage-, cart-, and harness-making, cigarette- and
match-making, preserving and tinning meat, brewing, flour- and
corn-milling, and the making of macaroni.

BUENOS AYRES

The most prosperous part of South America.

Buenos Ayres, the capital of Argentina, is the largest city not
only in South America but in the whole southern hemisphere.
The La Plata, at whose mouth it stands, affords navigation into
all the northern parts of the republic, as well as into the
neighbouring states of Uruguay, Paraguay, Brazil, and Bolivia.
The riverside at Buenos Ayres is at all times of the year a perfect
forest of masts and smoke-stacks belonging to the shipping that
supplies this navigation. Recently, at a cost of $25,000,000, the
river, which here is shallow, has been deepened and new wharves
and docks have been built, and ocean-going vessels of the
deepest draught (which formerly used to be lightened fourteen
miles away) can now unload or be loaded right in the very heart
of the city. The total commerce of the republic amounts to
$200,000,000 or $225,000,000 a year, and of this trade Buenos
Ayres transacts seven eighths in imports and three fifths in
exports. The amount of this trade secured by the United States is
about a tenth, running from $12,000,000 to $24,000,000. In 1896
it was only $12,500,000. The principal export trade is with
France ($24,000,000), Great Britain ($14,000,000), Germany
($13,000,000), and Belgium. Great Britain does not buy
Argentina wool. The principal import trade is with Great Britain
($45,000,000), Germany ($14,000,000), France ($12,000,000),
and Italy. The Buenos Ayreans are fond of display and of dress
and of ornamentation, and the importations from France and
Italy are principally of goods to gratify this fondness. There is a
considerable exportation of wheat, flour, tobacco, and maté
(Paraguay tea) to Brazil and other South American states.
Buenos Ayres is the centre of the Argentina railway system,
which consists of about 9000 miles of road. There are 25,500
miles of telegraph routes. The national debt amounts to
$430,000,000. The provincial debts amount to about
$140,000,000. The taxation amounts to nearly ten per cent. of the
earnings of the people, as against four and one half per cent. in
Canada and five per cent. in Australia.

BRAZIL

Brazil is a much larger and more populous country than
Argentina. Its area (3,209,878 square miles) is as large as that of
all the United States, less half of Alaska. A great portion of this
area is of superlatively tropical richness of production. But,
unfortunately, the most fertile parts of Brazil are the parts least
fit for settlement by white men. The population by the last
census is approximately 14,500,000, but less than 4,000,000 of
this population are pure whites. The negroes that were lately
slaves number over 2,000,000, and there are supposed to be
about 1,000,000 Indians. Intermediate between the Indians and
negroes and the white population are the numerous mixed races
or half-breeds. Agriculture is the chief industry, but is of two
kinds: the tropical agriculture of the central and south central
seaboard, which is carried on principally by negro and mulatto
labour, and the agriculture of the temperate region of the extreme
south, which is carried on mainly by colonists from Europe, the
recent European emigration being almost wholly directed toward
that region. Almost the whole of the interior of Brazil still
remains unsettled and untilled. The coffee yield of Brazil is
enormous and is its principal product. The production amounts to
8,000,000 bags or over 1,000,000,000 pounds annually, which is
more than two thirds of the total amount of coffee used in the
world. Labour for coffee cultivation is scarce and dear, and in the
earlier stages of the production of the berry the Brazilian coffee
gets badly treated. But machinery is used wherever possible, and
in the later stages of the production the Brazilian coffee gets the
best attention that skill can devise. As a consequence the coffee
product of Brazil is rising in the estimation of coffee-users. The
shrubs are cultivated under palm-trees so as to keep them from
the intense heat of the sun. Three or four harvests of berries are
obtained in a year. Rio Janeiro and Santos are the two chief
centres of the coffee industry. Next to coffee the chief tropical
product is sugar, the export of which is about 250,000 tons
annually, principally from Pernambuco. Other products of the

tropical area of Brazil are cocoa and cotton, from the cultivated
coast regions, and rubber and Brazil-nuts, from the dense forests
of the lower Amazon; also dyewoods and cabinet woods, drugs,
and diamonds. For many years Brazil was celebrated for its
diamonds—obtained chiefly from a town in the interior named
Diamantina. The present diamond production is not large. From
the temperate agricultural region of the south, dried beef, hides,
and tallow are the chief exports. The greatest customer of
Brazilian produce is the United States, which takes $70,000,000
worth. Great Britain is next, with $35,000,000 worth (in rubber
alone in 1896 $15,000,000). Brazil gets her goods principally
from Great Britain, the United States, France, and Germany—
from Great Britain $20,000,000, from the United States
$13,000,000. The imports include almost all articles needed for
domestic and manufacturing purposes—particularly cottons and
woollens, ironware, machinery, lumber, flour, rice, dried meats,
kerosene, butter, and fish. There are, however, 155 cotton
factories established in Brazil, with capital to the value of
$50,000,000, and cotton manufacturing is protected by very
heavy duties. But agricultural machinery and such like
manufactures are very lightly taxed. The principal food of the
people is manioc flour (tapioca).

RIO JANEIRO

Rio Janeiro (674,972), the capital and principal city, though a
poor-looking place, is situated on a magnificent harbour—one of
the very finest in the world. About 1500 vessels, with tonnage
amounting to 2,500,000 tons, enter Rio Janeiro with foreign
trade annually. Nine thousand miles of railway have been built in
Brazil and 3500 more are in course of construction, and 12,000
miles of telegraph routes have been built. Rio Janeiro is the chief
railway centre, but other centres are Rio Grande do Sul, in the
temperate regions of the south, and Bahia and Pernambuco, in
the tropical regions. The public (national) debt of Brazil is not

far short of $1,000,000,000, bearing interest (a great part of it) at
from four to six per cent. per annum.

XII. THE TRADE FEATURES OF CANADA

CANADA, PRACTICALLY AN INDEPENDENT
FEDERAL REPUBLIC

The dominion of Canada comprises all that portion of the
continent of North America north of the United States—except
Alaska and Newfoundland and the coast of Labrador.
(Newfoundland and the Labrador coast is a colony in direct
relationship to Great Britain.) Canada is entirely self-governing
and self-maintaining, and its connection with Great Britain is
almost wholly a matter of loyalty and affection. It consists (1) of
seven Provinces: Ontario, Quebec, Nova Scotia, New
Brunswick, Prince Edward Island, Manitoba, and British
Columbia, which, in their self-governing powers and their
relation to the general government, correspond very closely to
our States; (2) of four Territories—Assiniboia, Alberta,
Saskatchewan, and Athabasca, which correspond somewhat to
our Territories; (3) of four other Territories—Ungava, Franklin,
Mackenzie, and Yukon, which are administered by the general
government; and (4) the District of Keewatin, which is under the
jurisdiction of the lieutenant-governor of Manitoba. The capital
of the whole dominion is Ottawa. Each province has its own
capital.

SIZE, SOIL, CLIMATE, AND POPULATION OF CANADA

The area of Canada is immense. It figures up to 3,456,383 square
miles, which is almost 500,000 square miles more than the total
area of the United States exclusive of Alaska, and not far short of
being equal to the area of all Europe. But almost 150,000 square
miles of this area are taken up by lakes and rivers; and a much
greater portion than this, under present conditions of civilisation,
is wholly uninhabitable, being either too cold or too barren. Yet
when all the necessary allowances have been made there still
remains in Canada an immense area with soil fertile enough and
climate favourable enough for all the purposes of a highly
civilised population. Over 900,000 square miles are already
occupied, and of the occupied area fully one half has been
"improved." The older provinces are, acre for acre, as suitable
for agricultural pursuits as the adjoining States of the Union.
Manitoba, the "Prairie Province," is almost one vast wheat field,
with a productivity for wheat unequalled anywhere except in the
Red River valley of Minnesota and Dakota. The Manitoba grain
harvest foots up to 50,000,000 bushels. British Columbia is a
land of almost infinite possibilities, not only because of its
mineral and timber resources, but also because of its capabilities
for agriculture and fruit-growing. The Territories are so vast an
area that no general description of them is possible, but it may be
said that the great wheat valley of the Saskatchewan, the
sheltered grazing country of Alberta, and the great wheat plains
of the Peace River valley in Athabasca, are regions adapted in
soil and climate to sustain a hardy and vigorous people. The
population of Canada is comparatively small. It is estimated at
5,250,000. Over 1,000,000 people of Canadian birth reside in the
United States, and the number of Americans residing in Canada
is only 80,000. Out of the 2,425,000 persons who came to
Canada as immigrants in a period of forty years, no fewer than
1,310,000, or fifty four per cent., came over into the United
States. It is stated that this exodus has ceased, and that if any
great movement of population now exists it is toward Canada.

CANADA'S FOREST WEALTH

Canada, like all new countries, depends for her prosperity upon
the development and exportation of her natural products. These
are of four great classes: (1), the products of her forests; (2), the
products of her mines; (3), the products of her fisheries; (4), her
agricultural products. Canada's forest resources, when both
extent and quality are considered, are the finest in the world. The
forest area uncut was in 1891 nearly 1,250,000 square miles, or
more than one third of the area of the whole country. The annual
value of the timber and lumber produced is about $82,500,000.
The annual value of the timber and lumber exported is about
$32,000,000. Two thirds of this goes to Great Britain, and over
$9,000,000 in lumber and logs goes to the United States. Quebec
and Ontario have unlimited supplies of spruce for wood-pulp
manufacture, the annual output of which reaches 200,000 tons.
The uncut lumber of British Columbia, which includes Douglas
pine, Menzies fir, spruce, red and yellow cedar, and hemlock, is
estimated to be 100,000,000,000 cubic feet.

CANADA'S MINERAL RESOURCES

Canada is just beginning to realise the largeness of her mineral
resources. The most talked of gold-mines are those of the
Klondike district, the extent of which is still uncertain. Much
more definitely known and almost as productive are the gold-
mines of British Columbia and the newly discovered gold-fields
of the Rainy River district in northern Ontario. More important
than the gold-mines of Canada are its coal-fields. These are
principally in Nova Scotia and British Columbia. The latter
province is destined to be the coal-supplying region for the
whole Pacific coast of North America. The yearly output at
present is about 1,000,000 tons; the yearly output of Nova Scotia
is about 2,000,000 tons, principally produced by American

capital. In Alberta there are said to be coal-fields having an area
of 65,000 square miles. Iron is found in abundance in both
British Columbia and Ontario. Ontario has in its nickel-mines of
Sudbury a mineral treasure not found elsewhere in equal
abundance in the world. Experts have estimated that 650,000,000
tons of this ore are actually in sight. Ontario produces petroleum
and salt. Silver, copper, lead, asbestos, plumbago, mica, etc., are
found in varying quantities. Canada imports annually from the
United States nearly $10,000,000 worth of coal and coke.

CANADA'S FISHERIES

The fisheries of the Gulf of St. Lawrence and of the shallow
waters bordering on Nova Scotia and Newfoundland have for
centuries been the most productive in the world. The Canadian
fishing interest in these waters is very great. Cod, mackerel,
haddock, halibut, herring, smelts, and salmon, are the principal
fish, and the annual "take" is about $15,000,000. About
$2,500,000 worth of whitefish, salmon-trout, herring, pickerel,
and sturgeon are produced annually from the Canadian lakes.
The salmon-fishing of the rivers and great sea-inlets of British
Columbia brings about $4,500,000 annually. About one half of
the total product is exported to Great Britain and the United
States.

CANADA'S AGRICULTURAL PRODUCE

Agriculture, including stock-raising, dairying and fruit-growing,
is Canada's greatest industry. Over 23,000,000 acres are under
crop and about 20,000,000 under pasture. Over 3,000,000 acres
are under wheat cultivation. Ontario exports more than twice as
much cheese as the whole of the United States, and her cheese

product is recognised as the finest in the world. Canada exports
to Great Britain alone $15,000,000 worth of cheese annually. In
1896, in Ontario alone, 170 creameries turned out over
6,000,000 pounds of butter at an average net receipt of 18¼ cents
a pound. By the cold-storage facilities provided by the
government Canadian butter can be sent even from far inland
points to Liverpool or London without the slightest deterioration.
England buys $6,000,000 worth of Canadian bacon and hams
annually, and Canadian beef is already famous on the London
market. American corn for stock-feeding is admitted to Canada
free of duty and about $10,000,000 worth is imported annually.
A great deal of eastern and southern Canada is well adapted to
fruit-raising. The Niagara-St. Clair peninsula of Ontario is
especially famous for its peaches and grapes.

CANADA'S TRADE WITH THE UNITED STATES

Canada has made a great effort in the direction of encouraging
home manufactures, but her most progressive and most staple
industries are those concerned in the conversion of the raw
products of the country into articles of common merchandise.
Her steam horse-power in proportion to population is the largest
in the world. The capital invested in factories as a whole
amounts to over $400,000,000, with an annual output of over
$500,000,000. Her total annual importation is now over
$130,000,000. More than half of this is from the United States.
Canada's total annual exportation is about $160,000,000. Of this
over one third goes to the United States. Canada's total trade
with the United States is about forty one per cent. of her total
trade with all countries, and almost equal to her total trade with
Great Britain. Canada's total trade with the United States is
exceeded only by that of Great Britain, Germany, and France,
and her import trade with the United States is exceeded only by
that of Great Britain and Germany.

Trade centres of Canada and trunk railway lines.

CANADIAN CITIES

Montreal (250,000) is the commercial metropolis of Canada. It
is situated on an island in the St. Lawrence River, and, though
1000 miles from the open ocean, the largest sea-going vessels
reach its wharves with ease. It is the headquarters of Canada's
two great railways—the Canadian Pacific system, with its 8000
miles of road, and the Grand Trunk system, with its 5000 miles
of road. Through passenger-trains run from Montreal to
Vancouver on the Pacific coast, a distance of nearly 3000 miles.
Montreal is the centre also of the great inland navigation system
of Canada.

Toronto (200,000), the capital of the province of Ontario, is the
second city of Canada. While Toronto has a great local trade and
many important manufactures, it is specially noted as an
educational centre. Quebec (80,000) is the oldest city of Canada
and one of the oldest upon the continent. Halifax (50,000), the
eastern terminus of the Canadian railway system, has one of the
finest harbours in the world. Winnipeg (35,000) is destined to be
the centre of the great inland trade of Canada.

XIII. THE TRADE FEATURES OF THE UNITED
STATES

THE CHARACTER OF OUR EXPORT TRADE

Having reviewed the industrial and trading conditions of the
other great commercial nations of the world, it should now
remain for us to review these conditions in the United States. But
the United States is so large a country, and its trading and
industrial interests are so diversified and extensive, that it would
be impossible for us in the limits of our space even barely to
touch upon all these interests. So that with respect to the "Trade
Features of the United States" we shall simply confine ourselves
to one part of the subject—namely, the character, extent, and
importance of our foreign trade. And we shall, further, have to
restrict ourselves in the main to our exports. These will be found
to be principally not manufactures, but the products of our great
agricultural, mining, and forest industries. The total value of the
manufactures of the United States amounts in round numbers to
the immense sum of $10,000,000,000 annually, a sum
considerably more than a third (it is thirty five per cent.) of the
total value of the annual manufactures of the world. But only a
very small portion of this vast output is exported. The greater
portion of it is used to sustain the still vaster internal trade of our
country, a trade which amounts to more than $15,500,000,000
annually, an amount not far short of being one third of the total
internal trade of the world, and not far short of being twice the
internal trade of Great Britain and Ireland, the country whose
internal trade comes next to ours. Our exports, therefore, are not
in the main manufactured goods, but breadstuffs, provisions, and
raw materials, the production of our farms, our plantations, our
forests, and our mines. But principally they are the products of
our farms and our plantations, for with the exception of cotton
we do not export much raw material. Nearly all the raw material

we produce (other than cotton) we use in our own manufactures.
And even this is not enough, for in addition we have to import
considerable quantities of raw material for our manufactures
from other countries, the principal items being raw sugar, raw
silk, raw wool, chemicals of various kinds including dye-stuffs,
hides and skins, lumber, tin, nickel, and paper stock.

OUR EXPORT TRADE IN DETAIL

Our total exportation for the twelve months ended June 30, 1898,
amounted to the unprecedented sum of nearly $1,250,000,000
($1,231,329,950).[4] This is an amount almost a quarter of a
billion dollars greater than ever before, the only years when the
export even approximated this amount being 1897 and 1892,
when the exportation was slightly over a billion dollars in each
case. Of this exportation the sum of $855,000,000, or seventy
one per cent. of the whole, was for the products of agriculture,
the principal items being (1) "breadstuffs," including wheat and
wheat flour, corn and cornmeal, oats and oatmeal, rye and rye
flour, $335,000,000; (2) cotton, $231,000,000; (3) "provisions,"
including beef and tallow, bacon and hams, pork and lard,
oleomargarine, and butter and cheese, $166,000,000; (4)
animals, including cattle, horses, sheep, and hogs, $47,000,000;
(5) raw tobacco, $23,000,000; (6) oil-cake, $12,500,000, and (7)
fruits and nuts, $9,000,000. The exports of the products of our
mines amounted to only 1.6 per cent. of the total export, or
scarcely $20,000,000, the principal items being (1) coal and
coke, $12,500,000; (2) crude petroleum, $4,000,000, and (3)
copper ore. The exports of the products of the forest amounted to
only three per cent. of the total export, or $38,000,000, the
principal items being (1) sawed and hewn timber, logs, lumber,
shingles, and staves, $28,500,000, and (2) naval stores, including
resin, tar, turpentine, and pitch, $9,000,000. The exports of the
products of our fisheries amounted to only $4,500,000, or less
than one half of one per cent. of the total exports. The exports of

the products of our manufactures, according to the official
returns, amounted to $289,000,000, or twenty four per cent. of
the total export. But this sum included many items which
represent raw natural products converted merely into material for
subsequent manufacture, as, for example, pig- and bar-iron,
planed boards, sole leather, ingot- and bar-copper, cotton-seed
oil, and pig- and bar-zinc. The principal items in the true
"manufactures" list are (1) machinery, including metal-working
machinery, steam-engines and locomotives, electrical machinery,
pumping machinery, sewing-machines, typewriting-machines
and printing-presses, and railway rails, hardware, and nails,
$65,000,000; (2) refined petroleum, $50,000,000; (3)
manufactures of cotton, $17,000,000; (4) vegetable oils and
essences, $12,000,000; (5) agricultural implements, $7,000,000;
(6) cycles, $7,000,000; (7) paper and stationery, $5,500,000; (8)
furniture and other manufactures of wood, $5,000,000; (9)
tobacco and cigarettes, $5,000,000; (10) fertilisers, $4,500,000;
(11) boots and shoes, harness, and rubber shoes, $3,500,000;
(12) telegraph, telephone, and other instruments, $3,000,000;
(13) bags, cordage, and twine, $2,500,000; (14) books and
pamphlets, $2,500,000; (15) sugar, syrup, molasses, candy, and
confectionery, $2,000,000; (16) spirits, including brandy and
whisky, $2,000,000; and (17) clocks and watches, $2,000,000.

FOOTNOTE:

[4]
For the year ending June 30, 1899, the total
exportation amounted to $1,204,123,134.

OUR EXPORTS AND THOSE OF GREAT BRITAIN
COMPARED

The significance of these figures descriptive of our export trade
will be better understood from a few comparisons. Our total
exportation for the year 1897-8 was, as said before, in round
numbers, $1,250,000,000. For the year previous it was over
$1,000,000,000. The exportation of Great Britain for the year
1896 was $1,500,000,000. For the year 1897 it was almost the
same amount. For the year 1895 it was $1,450,000,000. But
whereas our exportation of breadstuffs, provisions, animals,
fruit, etc., and of raw materials, such as cotton, lumber, ores, etc.,
amounts to probably 77 or 78 per cent. of our total exportation,
while our exportation of manufactured goods amounts to not
more than 22 or 23 per cent., the exportation of breadstuffs,
provisions, raw material, etc., which Great Britain makes is not
more than one sixth, or 17 per cent., of her total exportation,
while her exportation of manufactured goods is five sixths, or 83
per cent., of her total exportation. For example, Great Britain's
export of textiles alone amounts to over $500,000,000 a year (for
1896 $526,647,525), while our total export of textiles, including
cottons, woollens, silks, and fibres, is not more than $19,000,000
a year. Great Britain's total export of hardware and machinery
amounts to over $250,000,000 a year; our total export of these
articles does not amount to more than a third of this sum. On the
other hand, Great Britain's total export of raw materials of all
sorts is not more than $100,000,000 a year, while ours of cotton
alone is almost two and one-third times that sum. And while
Great Britain exports no breadstuffs or provisions to speak of,
our exportation of these articles (including animals) amounts to
the enormous sum of $855,000,000 a year.

OUR IMPORTS AND THOSE OF GREAT BRITAIN
COMPARED

Export trade of the United States and Great Britain compared.

Similar differences with respect to our import trade and that of
Great Britain are observable. Our imports do not amount to more
than from $600,000,000 to $800,000,000 a year. For the year
ended June 30, 1897, they were $765,000,000. For the year
ended June 30, 1898, they were $616,000,000. The imports of
Great Britain, on the other hand, amount to over $2,000,000,000
a year. For the year 1896 they were $2,210,000,000. For the year
1897 they were $2,225,000,000. But, while our imports, with the
exception of coffee, sugar, tea, fruits, and fish, consist chiefly of
manufactured articles, such as woollen goods, cotton goods, silk
goods, and iron and steel goods, with only moderate amounts of
raw material (for example, hides, skins, and furs, $41,000,000;
raw silk, $32,000,000; raw wool, $17,000,000), Great Britain,
besides importing coffee, sugar, tea, fruits, and fish, the same as
we do, and manufactured goods to a far greater amount than we
do (not less than $500,000,000 annually), imports likewise an
enormous quantity of raw material for her manufactures, all duty
free, and a still more enormous quantity of breadstuffs,
provisions, etc., also all duty free. For example, for the year 1897
her imports of raw materials for her manufactures were not less
than $750,-000,000, while her imports of duty-free food products

were not less than $825,000,000. The difference between the two
countries, therefore, so far as their foreign trades are concerned
is simply this: The United States is an immense exporter of food-
stuffs, and also of raw materials for foreign manufacture; but for
the raw materials for her own manufacture she depends
principally upon her own products. In comparison she is only a
moderate exporter of manufactured goods. Great Britain, on the
other hand, is an enormous importer and consumer of food-stuffs
and also of raw materials for her manufactures. She, in fact,
depends very largely upon other countries for her food products
and her raw materials, and obtains them wherever she can, very
largely from the United States. She is also an enormous exporter
of manufactures.

The United States manufactures and internal trade compared with the
manufactures and internal trade of all other countries.

OUR COTTON PRODUCTION AND COTTON EXPORT

The one article of export that is of greatest importance in our
commerce is cotton. The production of cotton in the United

States is enormous. It is not far short of 5,000,000,000 pounds
per annum. This is probably four times the amount produced
upon the whole globe elsewhere. Our export amounts annually to
about 4,000,000,000 pounds, with a total value of about
$240,000,000. Our greatest competitors in the world's cotton
markets are Egypt and India. The export of cotton from Egypt
amounts to $50,000,000 annually. The export of cotton from
India amounts to $45,000,000 annually. At least one half of our
export of cotton goes to Great Britain. Our next greatest
customers are (in order) Germany, France, Italy, Spain, and
Russia. We send about $7,500,000 worth annually to Japan, and
$4,000,000 worth annually to Canada. All our southeastern
States produce cotton, but the States that produce it most
plentifully are (in order) Texas (about one third of the whole),
Georgia, Mississippi, and Alabama. The area under cultivation in
the whole country is about 21,000,000 acres, which is about one
sixth of the area devoted to corn, wheat, and oats, or one half the
area devoted to hay. The areas of greatest cotton production are
(1) the "Yazoo bottom," a strip on the left bank of the Mississippi
extending from Memphis to Vicksburg, and (2) the upper part of
the right bank of the Tombigbee. The productivity of cotton is
much higher in the United States than it is in India, averaging not
far short of 200 pounds per acre, as against less than 100 pounds
in India. In India, however, the cotton crop has been grown on
the same soil for ages, whereas in the United States the practice
is to substitute new soils for old ones as soon as crops begin to
fail. On the other hand, the United States cotton crop is much
less per acre than the crop in Egypt. There the yield per acre is
from 300 pounds to 500 pounds. The remedy for this defect of
productivity in our cotton crop as compared with that of Egypt is
manuring. Where the manuring is properly attended to our cotton
crop is comparable with Egypt's. But the cotton of Egypt is of
better quality than the great mass of the cotton crop of the United
States (the "upland" cotton crop). On the other hand in the low,
flat islands off the coast of Georgia and South Carolina a species
of cotton grows ("sea-island" cotton) which is the finest in the
world, its fibres being the longest, finest, and straightest, of all

cotton fibres produced anywhere, and the most beautiful in
appearance in the mass. Of this "sea-island" cotton about three to
four million dollars' worth is exported annually at a price
averaging from two and one fourth to two and three fourth times
the value per pound of the "upland" cotton. The great cotton
ports of our country are (in order of amount of exportation) New
Orleans, Galveston, Savannah, New York, Charleston,
Mobile, and Wilmington. New Orleans' export is about a third of
the whole, and Galveston's about a fifth.

OUR PRODUCTION AND EXPORT OF BREADSTUFFS

The item in the official returns that figures largest for exports is
that which is set down as breadstuffs. This term includes wheat,
corn, oats, rye, and other grains, and the flours or meals made
from these. For the year ending June 30, 1898, our total export of
breadstuffs was $334,000,000. This is an enormous increase over
the year before, when the amount was not quite $200,000,000.[5]
A large part of this increase was due to the high prices for
breadstuffs which prevailed in the European markets during the
past autumn and winter, but a part of the increase was due to an
increased acreage and to good crops. The main products that
composed this vast exportation were: wheat, $146,000,000;
wheat flour, $70,000,000; corn, $75,000,000; cornmeal,
$2,000,000; oats and oatmeal, $22,500,000; rye and rye flour,
$9,000,000, and barley, $5,500,000. The magnitude of our
breadstuffs exportation can be judged from the magnitude and
importance of our exports of wheat and flour as compared with
those of other countries. Our average wheat export is two and
one half times that of Russia, four and one third times that of
Argentina, five and one half times that of India, and almost
twenty-five times that of Canada, while it is also four and one
half times that of all other countries in the world combined. Our
flour export ($70,000,000) is without a rival. The export from
Canada is now not much more than $1,500,000 a year, and the

export from Hungary not more than $2,500,000 a year, and these
are the only countries with which we have to compete in the
western European markets. Still it must be remembered that
Hungarian flour, owing to the dryness of the climate in which it
is made, is the best in the world, while the flour of Canada made
from Manitoba hard wheat is alike unsurpassed. As a rule much
more than one half of our total exports of breadstuffs goes to
Great Britain. Germany is our next best customer, but her
imports of our breadstuffs are not more that a fifth to a tenth of
those of Great Britain. France comes next, but her importation of
our breadstuffs is still more uncertain, ranging from a half to a
hundredth of that of Great Britain. Our other principal customers
for our breadstuffs are (1) the other states of Europe, (2) Canada,
(3) the countries of South America, (4) the West Indies, (5)
Hongkong, (6) the islands of the Pacific, and (7) British Africa.
Our exportation of breadstuffs to Japan and China (direct)[6] is
still inconsiderable. Since the close of the War of the Rebellion
our exportation of wheat has increased thirtyfold and our
exportation of flour fifteenfold. Our chief wheat-growing States
are Minnesota and California, each with about 50,000,000
bushels a year; then Kansas, North Dakota, Illinois, and South
Dakota, each with about 30,000,000 bushels a year; and then
Ohio, Indiana, Nebraska, Pennsylvania, Missouri, and Michigan.
The best wheat is grown in the deep black soil, rich in organic
matter, of the Red River valley of Minnesota, and in the dry,
sunny climate of California. The total yield for 1897 was
530,000,000 bushels, which was about 70,000,000 bushels more
than recent averages. The estimate for this year (1898) is over
600,000,000 bushels, which was also the yield for 1891. The
total area sown to wheat was for several years about 35,000,000
acres, but the average is now increased to about 40,000,000
acres. Large as is the gross production of our wheat, however,
the yield per acre is somewhat small, being only from 12 to 13
bushels as against 18 bushels in Ontario, 20 in Manitoba, 26½ in
New Zealand, and 30 in Great Britain. In fact, the wheat yield
per acre is lowest in the United States of all the great wheat-
producing countries of the world, except Australia (7 to 11½),

Italy (10½), Germany (10¼), India (9¼), and Russia (8). But far
greater than our production of wheat is our production of corn.
Of corn we have nearly 85,000,000 acres under cultivation and a
production of nearly 2,500,000,000 bushels. Our export of corn,
however, is proportionately not large, and figures only to about
210,000,000 bushels a year, with a value (including cornmeal) of
about $76,000,000. As is well known, Chicago is the great
commercial centre of the continent for breadstuffs. New York is
the great port of export for the Atlantic seaboard, San Francisco
for the Pacific seaboard. Duluth is the great receiving point for
the wheat of the Red River valley and the northern Mississippi.
Buffalo is the great point where the wheat brought down from
Chicago, Duluth, etc., in barges, "whale-backs," and immense
propellers, is trans-shipped to the small boats of the Erie Canal
for carriage to New York. Minneapolis is the great milling point
of the continent, its mills being the largest and most capacious in
the world.

FOOTNOTES:

[5]
For the year ending June 30, 1899, the amount was
$274,000,000.
[6]
A portion of the exportation of breadstuffs made to
Hongkong is no doubt intended for consumption in
China and Japan.

OUR EXPORT OF PROVISIONS AND ANIMALS

Principal articles of domestic exports of the United States.
[7]

FOOTNOTE:

[7]
For the year ended June 30, 1898.

The next most important item in our list of exports is provisions.
But, like "breadstuffs," "provisions" also is a composite term,

including two main divisions, "meat products" and "dairy
products." Practically there are three main divisions, "beef
products," "hog products," and "dairy products." We have in
these great products of our country an export trade of
$165,500,000 per annum, and if we add "animals," a similar
item, we have $46,500,000 more, or a total of $212,000,000 per
annum. Our export of fresh beef is nearly 300,000,000 pounds a
year. Almost the whole of this goes to Great Britain. Our export
of canned beef runs from 40,000,000 to 60,000,000 pounds a
year. About three fifths of this goes to Great Britain, the
remainder going principally to Germany and other parts of
Europe and to British Africa. We have about 50,000,000 cattle
upon our farms and ranches, and our production of beef is
estimated to be the enormous amount of 5,400,000,000 pounds a
year, which is between a third and a fourth of the total quantity
produced throughout the world. Of course the greater portion of
this is retained for our own home consumption, for we eat more
meat per inhabitant than any other people in the world except the
English. In addition to our beef we export about 400,000 cattle
annually, more than seven eighths of which are taken by Great
Britain, our other principal customers being the West Indies and
Canada. The principal export, however, among our "provisions"
is our hog products. We export annually of these products
100,000,000 pounds of pork, 850,000,000 pounds of bacon and
hams, and 700,000,000 pounds of lard, with a value greater than
$110,000,000. As with our beef products, so with our hog
products—by far the greatest share goes to Great Britain. Great
Britain, however, does not import largely of our pork or of our
lard. And though she purchases from us over four fifths of our
total export of bacon and hams, she does not pay for them so
much as she does for the bacon and hams of Ireland, Denmark,
and Canada. The reason for this is that as a rule our corn-fed
bacon and hams are too fat—a fault that could be easily
remedied. After Great Britain our next best customers for our
hog products are Germany (principally in lard), the Netherlands,
Sweden, and the West Indies (the latter principally in pork). We
keep on our farms from 40,000,000 to 50,000,000 hogs, and our

production reaches nearly to 4,600,000,000 pounds of pork,
bacon, hams, lard, etc., per annum. A great drawback to our
swine-raising industry is the terrible swine plague which so
frequently devastates our swine herds. Were this plague stamped
out by thorough preventive measures our swine industry would
soon become very much larger and more profitable. The third
principal item in our provisions export trade is "dairy produce."
Our export of butter now amounts to 30,000,000 pounds a year.
Our cheese export, once much greater, is now about 50,000,000
pounds a year. As in our beef products and in our hog products
so again in our dairy products Great Britain is our chief
customer. But our butter export to Great Britain is only one
twelfth of her total importation of butter, and our cheese export
to Great Britain is only about one eighth of her total importation
of cheese. Our cheese has lost its hold on the English market
because of its relative deterioration of quality, and its export is
not more than a half or a third of what it once was. Much of our
butter also is not suited to the English taste. But both our cheese
and our butter are now improving in quality. Our great
competitor in the cheese export trade is Canada. Canada's export
of cheese to Great Britain is $15,000,000 annually, while ours is
only a fifth of that amount. Our great competitor in butter is
Denmark. Denmark's export of butter to Great Britain is
$32,000,000 while ours is not more than a fourteenth of that
sum. Our competitors in the markets of Britain for cattle are
Canada and Argentina, but their exports together, however, are
less than a third of ours. Our competitors in the British markets
for the sale of meats are principally the Australasian colonies and
Argentina, but their principal exportation so far is chilled
mutton, which they send to Britain to the amount of many
million dollars annually (Argentina alone $5,000,000 a year,
New Zealand alone $10,000,000 a year), while our exportation
of mutton is practically nil. We do, however, export $1,000,000
worth of sheep a year, but in this item we are frequently far
exceeded by Canada. Chicago is, of course, the great commercial
centre of the continent for "provisions" and "live stock," and
New York the great shipping port. Of the entire export trade of

the whole country New York does two fifths. Baltimore comes
next with about one ninth. Then (in order) come Philadelphia,
Boston, and New Orleans. The chief centres of our great
provision and live-stock trade, other than Chicago, are
Cincinnati, Kansas City, Indianapolis, Buffalo, and Omaha.

OUR FOREIGN CARRYING TRADE

One aspect of our foreign trade is not so well understood as it
ought to be. Our foreign commerce is carried on largely in
foreign ships. The reason is that no vessel is allowed to be
registered as belonging to a United States owner unless she is
built in the United States, and it therefore seems as if our ship-
builders could not compete (in price) in the building of steel and
iron ships with those of Great Britain and Germany. Formerly,
when wooden ships were used, our foreign trade was carried on
in our own vessels, and our "clipper" sailing vessels beat the
world. In 1859 seventy per cent. in value of our foreign trade
was carried in American vessels. Since that date the proportion
has decreased steadily until in 1896-97 it was only eleven per
cent., and for 1897-98 it was even less than this. During the five
years 1881-85 it averaged barely twenty per cent. Taking into
consideration tonnage only the proportion at present varies from
twenty five to thirty per cent., showing that the American vessels
are used for carrying the cheaper sorts of goods. The aggregate
tonnage burden of vessels belonging to the United States
registered as engaged in the foreign trade 1896 was for 792,870
tons. For the same year the aggregate tonnage burden of vessels
belonging to Great Britain engaged in the foreign trade was
considerably more than ten times that amount. Of our export
trade to Europe United States vessels carry only five and one
half per cent., and of our export trade to Africa only four and one
half per cent. But of our export trade to Asia and Oceanica our
own vessels carry twenty six and one half per cent., while of our
export trade to other countries on the American continent our

own vessels carry nearly forty per cent. But as our Atlantic trade
is seventy six per cent. of the whole, and as our trade elsewhere
than on the Atlantic is more than one third carried by sailing-
vessels, it is evident how largely our steamship ocean carrying
trade has been allowed to fall into the hands of foreigners. Seven
tenths of our total export trade, and nearly two thirds of our total
foreign trade, both export and import, are carried in British
vessels. The next greatest carriers of our foreign trade are, first,
the Germans, then ourselves, then the Norwegians, then the
Dutch, then the French, then the Belgians.

EXAMINATION PAPERS

Note.—The following questions are given for the purpose of
indicating to the student the sort of knowledge he ought to be
possessed of after he has made a careful study of the papers of the
course. The student is recommended to write out carefully the
answers to the questions asked. Only such answers need be attempted
as can be made from a careful study of the papers.

PART I

1. Great Britain. Give as full an account as you can of the
causes which have made London the great commercial
centre of the world.

2. Great Britain. England is said to be "a beehive of
mercantile and manufacturing industry." Give reasons for
this statement and also show how England has become
such.

3. Great Britain. (a) Describe the foreign trade of Great
Britain. (b) Describe the steps taken by Liverpool,

Manchester, and Glasgow to improve their natural facilities
for external trade.

4. France. (a) Describe the conditions which (1) conduce
toward, and (2) militate against, France's being a great
commercial nation. (b) Give an account of the distinctive
manufactures of France.

5. Germany. (a) Give an account of what Germany has
accomplished in technical education. (b) Compare Germany
and France as commercial nations. (c) Give a brief account
of Germany's foreign trade.

6. Spain and Italy. (a) Why are Spain, Italy, and Turkey
sometimes called "the three decadent nations of Europe"?
(b) Give some account of Spain's foreign trade. (c) Give an
account of the conditions that militate against Italy's
prosperity as a trading nation.

7. Russia. (a) Describe the social condition of the Russian
people. (b) What are the "artels" of Russia? (c) Describe
Russia's export trade.

8. India. (a) Describe the present condition of the
manufactures of India. (b) Give a brief account of India's
trade—(1) external, (2) internal.

9. China. (a) Give an account of China's size, population, and
trade resources. (b) Give an account of China's present
foreign trade. (c) Give an account of the trade possibilities
of China, and show in what manner an increase of the
foreign trade of China is most likely first to occur.

10. Japan. (a) Describe the transformation which in recent times
has been witnessed in the Japanese nation. (b) Describe
Japan's manufactures. (c) Show in what respects an increase
in the foreign trade of Japan is presently possible.

PART II

1. Africa. (a) Describe the "partition of Africa." (b) Describe
more particularly Great Britain's possessions in Africa.
(c) Describe South Africa's mineral wealth.

2. Australia. (a) Describe Australia's "peculiarities." (b)
Enumerate the political divisions of Australia, and for each
describe briefly (1) its climate, (2) its resources and trade.

3. South America. (a) Describe the social and political
condition of the various peoples of South America.
(b) Describe the agricultural resources and export trade of
Argentina. (c) Describe (1) the resources, and (2) the export
and import trade, of Brazil.

4. Canada. (a) Describe Canada's resources (1) in forest
wealth, (2) in minerals, (3) in fisheries. (b) Describe
Canada's agricultural trade. (c) Describe Canada's trade
with the United States.

5. The United States. (a) Describe the export trade of the
United States. (b) Compare our export trade with that of
Great Britain. (c) Compare our import trade with that of
Great Britain.

6. The United States. (a) Describe our cotton production and
our cotton export trade. (b) Describe briefly our export trade
in "breadstuffs." (c) Describe briefly our export trade in
"provisions" and "animals."

FINANCE, TRADE, AND
TRANSPORTATION[8]

I. NATIONAL AND STATE BANKS

ORIGIN OF BANKING INSTITUTIONS

The Bank of England, showing the Threadneedle Street entrance.

The world has had its bankers and money-changers for
thousands of years. Babylonian tablets have been found which
record banking transactions which took place in the reign of
Nebuchadnezzar. Modern banking institutions, however, had
their origin in the twelfth century. The first institution of this
character in Europe was the Bank of Venice, founded a. d. 1171.
It was based upon a forced loan of the republic. Funds deposited
in it could not be withdrawn, but were transferable on the books
at the pleasure of the owners. The Bank of Genoa was founded in
1407, and for many years was one of the principal banks of
Europe. It was the first to issue circulating notes; these were
negotiable only by indorsement—that is to say, they were not
made payable to bearer. This was a long step in advance of the
earlier system of deposit transfers which was also employed by
this bank. The Bank of Amsterdam, established in 1607, was the
earliest considerable institution of the kind which looked to the
promotion of commerce. The Bank of Hamburg, established in
1619, was a bank of deposit and circulation based upon fine
silver bars. The deposits were confined to silver. The Bank of
England is more than 200 years old and is to-day acknowledged
to be the greatest financial institution in the world. Nearly all the
paper money of England is issued by this bank. This currency is
based partly upon securities and partly upon deposits of coin.
There are three or four banks in the United States more than one
hundred years old. In 1781 Robert Morris, then superintendent of
finance, submitted to Congress a plan for the establishment of
the Bank of North America at Philadelphia. In 1784 the State of
Massachusetts incorporated the Massachusetts Bank. The Bank
of New York was chartered in 1791.

FOOTNOTE:

[8]
SUGGESTIONS AS TO METHOD OF STUDY

1. Read the lessons as printed very carefully. The aim will be to give
fundamental knowledge as to the organisation and conduct of
modern business.

2. Books will not be necessary. The student, however, who wishes to
make a more thorough study of the national banking system will find
excellent chapters on the subject in "Carroll's Principles and Practice
of Finance" (New York: Putnams) and "White's Money and Banking"
(Boston: Ginn & Co.).

3. Take up the papers of the course paragraph by paragraph and ask
yourself the reason why each is introduced. Discuss with your
friends the advantages or disadvantages of particular requirements.

OUR NATIONAL BANKING SYSTEM

The national banking system of the United States was
established by an act of Congress in 1863, revised in 1864, and
amended by later legislation. The great advantage of the system,
it is said, is the feature of uniformity, the fact that it brings the
banking business of the whole United States under one authority
and under the supervision of one set of administrative officers.
The note-issuing department is subordinate in its public
usefulness to the facilities afforded by banks and clearing-houses
for the interchange of credits. The essential features of national
banks are briefly set forth as follows:

1. There is a bureau of the Treasury Department having charge
of all matters relating to national banks, the chief officer of
which is the comptroller of the currency.

2. Any number of persons, not less than five, may form an
association for banking purposes, to continue not more than
twenty years, but renewable for twenty years with the
approval of the comptroller.

3. The powers of the bank are limited to the discounting of
promissory notes, drafts, bills of exchange, and other
evidences of debt; receiving deposits, dealing in exchange,

coin, and bullion, loaning money on personal security, and
issuing circulating notes. It cannot hold real estate except
such as may be necessary for the transaction of its business,
or such as may have been taken as security for debts
previously contracted in good faith.

4. There can be no national banks anywhere of less capital
than $50,000, and these small ones are restricted to places
of not more than 6000 inhabitants. In cities of more than
6000 and less than 50,000 inhabitants there can be no bank
of less than $100,000 capital, and in cities of 50,000
inhabitants or more none of less than $200,000. One half of
the capital must be paid in before the bank can begin
business and the remainder must be paid in monthly
instalments of at least ten per cent. each.

5. Shareholders are liable for the debts of the bank to an
amount equal to the par value of their shares in addition to
the amount invested therein.

6. Each bank having a capital exceeding $150,000 must
deposit in the treasury of the United States registered
interest-bearing bonds to an amount not less than $50,000.
Those having a capital of $150,000 or less must deposit
bonds equal to one fourth of their capital stock. Each bank
may issue circulating notes to the amount of ninety per cent.
of the market value of the bonds deposited by it, but not
exceeding ninety per cent. of the par value of the same, and
not exceeding ninety per cent. of the paid-in capital of the
bank; but no bank is compelled to issue circulating notes.
No bank-notes shall be issued smaller than $5. The notes
are receivable at par for all dues to the United States except
duties on imports, and are payable for all debts owing by
the United States within the United States except interest on
the public debt and in redemption of the national currency.

7. Every bank in certain designated cities, called reserve cities,
must keep a reserve of lawful money equal to twenty five

per cent. of its deposits. All other banks must keep a like
reserve of fifteen per cent., but three fifths of the said
fifteen per cent. may consist of balances on deposit in banks
approved by the comptroller in the reserve cities.

8. Each bank must keep on deposit in the treasury of the
United States lawful money equal to five per cent. of its
circulation as a fund for redeeming the same. This five per
cent. may be counted as part of its lawful reserve. This does
not relieve banks from the duty of redeeming their notes at
their own counters on demand.

9. One tenth of the net profits must be carried to the surplus
fund until it is equal to twenty per cent. of the capital.

10. A bank must not lend more than one tenth of its capital to
one person, corporation or firm, directly or indirectly, nor
lend money on the security of its own shares, nor be the
purchaser or holder of its own shares unless taken as
security for a debt previously contracted in good faith, and
if so taken they must be sold within six months under
penalty of being put in liquidation.

11. Each bank must make to the comptroller not less than five
reports each year, showing its condition at times to be
designated by him, and he may call for special reports from
any particular bank whenever he chooses to do so.

12. Each bank must pay to the treasurer of the United States a
tax equal to one per cent. per annum on the average amount
of its notes in circulation. The shares are liable to taxation
by the States in which they are situated at the same rate as
other moneyed capital owned by the citizens of such States.

13. Any gain arising from lost and destroyed notes inures to the
benefit of the United States.

14. The comptroller has the absolute appointment of all
receivers and fixes their compensation. All moneys realised
from the assets are paid into the treasury to the credit of the
comptroller, and all dividends are paid out by him.

15. Over-certification of cheques is strictly prohibited,
rendering officers or clerks liable to imprisonment.

16. National bank directors are by law individually liable for
the full amount of losses resulting from violations of the
national banking laws.

STATE BANKS

Upon the establishment of the national banking system the
greater number of the banks incorporated under the laws of the
several States were organised as national banks. With others,
however, the rights of issue did not outweigh some
inconveniences of the national system, and as a result there is
now an important class of banks, and loan and trust companies,
organised under State legislation and carrying on a deposit and
loan business. The regulations under which they work are
necessarily diverse, and the amount of public supervision over
them varies in different states. The State banks in existence when
the national banking system was organised were obliged to retire
their note circulation, owing to the fact that the government
imposed a tax of ten per cent. on their circulation. The object of
the tax was to secure the retirement of the State bank-notes to
make room for the circulation of the national banks. The internal
mechanism of State banks differs but slightly from that of
national banks.

II. SAVINGS BANKS AND TRUST COMPANIES

SAVINGS BANKS

Nearly $2,000,000,000 is deposited in the savings banks of the
United States. This large sum represents the savings of about
5,000,000 people. The primary idea of a savings bank and of the
post-office and other forms of saving institutions in foreign
countries is to encourage thrift among the masses of the people.

The older savings banks, especially those in the eastern States,
have no capital stock. That is to say, they are mutual in their
form of organisation. Their capital is the accumulated deposits of
a large number of people. The depositors are the owners. When
taxes and other expenses are paid and a proper reserve set aside,
the remaining profits go in the form of interest to the depositors.
Many of the savings banks in the western States are capitalised
as are other financial institutions, and on the Pacific coast they
have capital stock or its equivalent in the form of a reserve fund
in which the majority of the depositors are not interested
otherwise than so far as it affords security for their deposits.

As these banks are the custodians of the surplus savings of large
numbers of people the laws of the several States have hedged
them about with many safeguards, not only for the protection of
the depositors but of the institutions themselves. It is eminently
right and proper that the State, through its bank commissioners
or otherwise, should so far supervise the operations of savings
banks as to see that they perform their part of their contract with
depositors.

Safety, at best, is relative only; there is no absolute safety for the
twenty-dollar piece a man has in his pocket, whether he is on the
street, at his office, or by his own fireside. We are reminded that
'riches take to themselves wings' and that 'thieves break through and
steal.' No savings bank can keep money on hand or deposit it or loan
it with absolute safety. All is comparative. It is a peculiarity of money
that each dollar requires watching; general supervision is insufficient;
hence it is that the safety of moneyed institutions depends upon the
capacity and honesty of those in control, and not upon adherence to
arbitrary rules. No set of rules can be adopted that will bind dishonest

men nor that will compensate for want of experience and ability of
honest ones.

There is really no conflict between commercial and savings
banks. In fact, a large number of the commercial banks of a
country allow interest upon average balances and standing
deposits in the same manner as savings banks. Primarily the
savings bank creates wealth, while the commercial bank handles
it; the savings banks are creative, while the commercial banks
are administrative. The aim of the savings bank is to gather
money and invest it safely and thus bring profit to the depositor;
the aim of the commercial bank is to lend money at fixed charges
and thus bring profit to the institution. The former opens its
doors to savers, the latter to borrowers. One serves by receiving
and keeping and the other by lending. The savings bank aims at
making men savers as well as producers. It offers the aid of the
strong, who can manage well, to the weak and inexperienced. If
the 5,000,000 depositors of savings in the United States were to
hide away their own savings nearly $2,000,000,000 would be
withdrawn from circulation. The savings bank invests its money.
Its managers are as a rule intelligent men, competent to make
safe investments in solid securities. The best savings banks are
conservative and do not encourage speculation.

The rules and regulations of savings banks differ largely. In some
institutions deposits of a dime at a time are accepted; in others a
dollar is the limit. Deposits usually begin to draw interest on the
first day of each quarter, but they are entitled to it only if they
remain until the end of the half-year. Thus money deposited on
the 1st of January is entitled to six months' interest on the 1st of
July, though it is not entitled to any interest if withdrawn in June.
Some few banks allow interest to begin on the 1st of each month.
Most savings banks do not permit money to be withdrawn short
of thirty days' notice. Students of this course who are interested
in securing definite information upon this subject regarding any
particular bank should apply to that bank for a set of its rules and
regulations for the information of depositors.

TRUST COMPANIES

There has grown up in this country a class of financial
institutions which take a sort of middle ground between the
commercial bank and the savings bank, so far as their service to
the public is concerned. These are what are known as trust
companies. National banks are prohibited by law from making
loans on real estate, and though State banks are not hedged in
this way, as a matter of good banking they usually avoid loans of
this character. The policy of commercial banks is to make a great
many comparatively small loans on short-time paper, while that
of the trust company is to make large loans on long-time
securities. The deposits of trust companies consist largely of
undisturbed sums such as might be set aside by administrators,
executors, trustees, committees, societies, or from private estates.
They are such as are not likely to fluctuate greatly in amount.
From the very nature of their deposits trust companies find it
convenient and profitable to make larger loans and at longer
periods than do ordinary banks. Trust companies not only receive
moneys upon deposit subject to cheque and for savings, and loan
money on commercial paper and other securities, as do
commercial banks; but they also act as agents, trustees,
executors, administrators, assignees, receivers for individual
properties, and corporations. They frequently assist as promoters
or reorganisers of corporations and in the sale of stocks, bonds,
and securities. They act also as agents for the payment of
obligations maturing at future dates, such as the premiums on
insurance, interest on mortgages and bonds, etc. Trust companies
are organised under the laws of the State in which they exist and
are usually subject to all the supervision required in the case of
State banks.

III. CORPORATIONS AND STOCK COMPANIES[9]

CORPORATIONS

Stock companies are usually referred to as corporations, though
all corporations are not stock companies. A corporation is a body
consisting usually of several persons empowered by law to act as
one individual. There are two principal classes—(1) public
corporations and (2) private corporations. Public corporations are
not stock companies; private corporations usually are. Public
corporations are created for the public interest, such as cities,
towns, universities, hospitals, etc.; private corporations, such as
railways, banks, manufacturing companies, etc., are created
usually for the profit of the members. Corporate bodies whose
members at discretion fill by appointment all vacancies
occurring in their membership are sometimes called close
corporations.

POWER TO BE A CORPORATION IS A FRANCHISE

In the United States the power to be a corporation is a franchise
which can only exist through the legislature. There are two
distinct methods in which corporations may be called into being:
First, by a specific grant of the franchise to the members, and,
second, by a general grant which becomes operative in favour of
particular persons when they organise for the purpose of availing
themselves of its provisions. When the specific grant is made it
is called a charter. In the case of private corporations the charter
must be accepted by the members, since corporate powers cannot
be forced upon them against their will; but the charter is
sufficiently accepted by their acting under it. When special
charters are not granted individuals may voluntarily associate,
and by complying with the provisions of certain State laws may
take to themselves corporate powers. In some of the States
private corporations are not suffered to be created otherwise than

under general laws, and in others public corporations are created
in the same way.

FOOTNOTE:

[9]
For a preliminary treatment of the subject of this
lesson the student is referred to Part I. of this book,
entitled "General Business Information," especially
Lessons XII. and XV.

A CORPORATION MUST HAVE A NAME

A corporation must have a name by which it shall be known in
law and in the transaction of its business. The name is given to it
in its charter or articles of association and must be adhered to.
The necessity for the use of the corporate name in the transaction
of business follows from the fact that in corporate affairs the law
knows the corporation as an individual and takes no notice of the
constituent members.

CORPORATE INTERESTS

In municipal corporations in the United States the members are
the citizens; the number is indefinite; one ceases to be a member
when he moves from the town or city, while every new resident
becomes a member when by law he becomes entitled to the
privileges of local citizenship. In corporations created for the
emolument of their members interests are represented by shares,
which may be transferred by their owners, and the assignee
becomes entitled to the rights of membership when the transfer is

recorded; and if the owner dies his personal representative
becomes a member for the time being. In such corporations also
shares may be sold in satisfaction of debts against their owners.

ADVANTAGES OF CORPORATIONS AND JOINT-STOCK
COMPANIES OVER PARTNERSHIPS

The following are given as a few of the advantages which are
claimed for corporations and joint-stock companies over
partnerships:

1. Union of capital without the active service of the investors.

2. Better facilities for borrowing. It is a common thing for a
partnership to be changed to a stock company for the
express purpose of raising money by the issue of bonds or
stock.

3. Limited agency of directors. A partner may pledge and sell
the partnership property, may buy goods on account of the
partnership, may borrow money and contract debts in the
name and on the account of the partnership. Directors of a
joint-stock company must act in accordance with the
provisions of the by-laws of the company.

4. The continuous existence of a company.

5. New shareholders are admitted more easily than new
partners.

6. A retiring partner is still liable for existing debts. A
shareholder may retire absolutely by selling his stock and
having it legally transferred.

IV. BORROWING AND LOANING MONEY[10]

THE MONEY MARKET

Money, like other articles of commerce, has for hundreds of
years had its fields for the production of the raw products, its
manufacturing establishments, its markets and exchange centres,
its sellers and buyers, its wholesale and retail dealers, and its
brokers and commission merchants. Out of this trade in actual
coin has grown a trade in paper notes, which are really only
promises to pay coin, and out of this latter trade has grown up
during recent years a still further enormous trade in securities
representing all kinds of property. Very often these securities are
based solely upon the credit of the names attached to them, so
that our modern system of borrowing and loaning money is
really a system of borrowing and loaning credit. When our
government borrows $100,000,000, as it did a few years ago, it
gives "its bond" that the money will be paid. When States, or
cities, or railroads, or other corporations borrow money they
issue bonds guaranteeing payment at a particular time. When an
individual borrows money he gives his "bond" in the form of a
promissory note. These bonds pass from hand to hand and have a
fairly constant value in the money market. They really represent
the money trade to a much larger extent than does actual coin, so
that the borrowing or loaning of money really means, to a very
large extent, simply the borrowing or loaning of credit. If we
borrow a $10 gold piece we borrow money; if we borrow a $10
bill or an indorser's name for the back of our note we simply
borrow credit—in the one instance the credit of the United States
and in the other the credit of the man who indorses our paper.

FOOTNOTE:

[10]
The student is also referred to Part I. ("General
Business Information"), Lesson IX.

BORROWING FROM BANKS

It is the business of a bank to loan money to responsible persons
within reasonable limits. The regular customer of the bank is
entitled to and will receive the first consideration if the demand
is larger than the bank can safely meet. A business man should
not hesitate, when occasion requires, to offer his bank any paper
he may want discounted, if in his opinion it is good, nor should
he be offended if his banker refuses to take it even without
giving reasons. A portion of the loans of many banks consists of
investments in solid bonds, but the bulk of the loans of banks is
made on commercial paper. Time and demand loans are made
upon collaterals of many descriptions. The larger banks loan on
an average from $50,000 to $100,000 a day. Banks discount
paper for their depositors—and simply term the operation
discounting; but when they go outside of their line of depositors
in making investments in time paper they call it buying paper.
They generally buy from private bankers and note brokers.
National banks are prohibited from loaning over ten per cent. of
their capital to any one individual or corporation except upon
paper representing actually existing merchandise.

WHAT ARE COLLATERALS?

If a business man borrow $1000 from a bank on his note and
give ten shares of stock to the bank, to be held by it simply as
security, the stock thus given would be termed collateral. These
collaterals are not the bank's property and the bank is responsible
for their safe keeping. If coupons mature while bonds are being

held as collateral, the owners are usually allowed to collect the
amount for which they sell. Sometimes one note is given as
collateral security for another which is discounted.

ACCOMMODATION PAPER

Notes and acceptances that are made in settlement of genuine
business transactions come under the head of regular, legitimate
business paper. An accommodation note or acceptance is one
which is signed or indorsed or accepted simply as an
accommodation and not in settlement of an account or in
payment of an indebtedness. With banks accommodation paper
has a deservedly hard reputation. However, there are all grades
and shades of accommodation paper, though it represents no
actual business transaction between the parties to it and rests
upon no other foundation than that of mutual agreement. No
contract is good without a consideration, but this is only true
between the original parties to a note. The third party, or
innocent receiver or holder of a note, has a good title and can
recover its value even though it was originally given without a
valuable consideration. An innocent holder of a note which had
been originally lost or stolen has a good title to it if he received it
for value, the law justly protecting such a holder against the fault
or carelessness of others.

NOTE BROKERS

Merchants sell a great many of their notes in the open market—
that is, to note brokers. The banks buy these notes from the note
brokers. The assistance of the broker who handles commercial
paper is a necessary and valuable aid to the purchasing bank.
Fully three fourths of all the paper purchased by banks in large

cities is purchased upon the simple recommendation of the note
brokers. As a rule these brokers simply transfer the paper without
guaranteeing by indorsement its payment. Notes bought by
banks from note brokers without their indorsement are held to be
guaranteed by them to be all right in all points except that which
covers the question of whether they will be paid or not. The bank
uses its best judgment in taking the risk. If the note dealer in
selling notes to a bank makes what he believes to be fair and
honest representations regarding any particular paper—
statements of such a straightforward type that upon them no
charge of false pretenses can be made to rest—he simply
guarantees the note genuine as to names, date, amount, etc., and
that in selling it he conveys a good title to the paper. As business
men, however, they are very cautious and are exceedingly
anxious that the paper they sell shall be paid, and as a rule they
make good any losses which grow out of apparent
misrepresentations on their part.

BANKERS' RATES FOR LOANS

In loaning money on demand, when it is strictly understood
between bank and borrower that the money so advanced is
positively minute money—money returnable at any minute when
the bank calls for it—banks usually charge low rates of interest.
When interest rates are high bankers prefer to deal in long-time
paper. This general rule is reversed when the situation is
reversed. Bankers aim also to scatter and locate their maturities
so that as the seasons roll around they will not have very large
amounts maturing at one time and very small amounts at another.
They plan also to be "in funds" at those seasons when there is
always a large and profitable demand for money. For instance, in
the centres of the cotton-manufacturing interest the banks count
on a large demand for money between October and January,
when the bulk of the purchases to supply the mills are made.
Again, among those who operate and deal in wool there is an

active demand for money in the wool-clip in the spring months.
The wheat and corn crops are autumn consumers of money.
Midwinter and midsummer in the north are usually periods of
comparative stagnation in the money market. All these things
affect rates, and the successful banker is he who from
observation and large experience shows the most skill in timing
his money supply.

V. COLLATERALS AND SECURITIES

TWO DISTINCT CLASSES OF SECURITIES

There are two distinct classes of mortgage securities—one class
based upon the actual value and the other upon the earning value
of the property. When a man lends money upon a dwelling-house
he bases his estimate of security upon (1) the cost of the
property, (2) its location, (3) the average value of adjoining
properties, and (4) the general character of the locality; that is to
say, the value of the property is the basis of the security. On the
other hand, the lender of money upon railway mortgages, for
instance (that is, the buyer of securities known as railway
mortgages), considers the general earnings of the road rather
than the cost of building and equipping the road as the correct
basis upon which to estimate the value of the security. These two
classes of securities differ in other particulars. The value of the
mortgage upon ordinary real estate is constant and the security
itself is not so likely to change ownership, while the value of the
railway mortgage may vary with the success or failure of the
road, and the security itself is in the market constantly as a
speculative property. The whole property of a railroad company,
considered simply as real estate and equipment, is usually worth
but a small fraction of the amount for which it is mortgaged. The

creditors, as a rule, depend for the security of their money upon
the business of the company.

We have already learned that collaterals are mortgages, stocks,
bonds, etc., placed temporarily in the hands of lenders as
additional security for money borrowed. The student will note,
further, that the borrowing value of such securities depends very
largely upon the character of the property represented.

MORTGAGES AS SECURITIES

A mortgage is a conveyance of property for the purpose of
securing debt, with the condition that if the debt is paid the
conveyance is to become void. A mortgage in form is really a
deed of the land, with a special clause stating that the grant is not
absolute but only for the security of the debt. It is usual for the
debtor at the time of executing the mortgage to execute also a
bond or promissory note in favour of the creditor for the amount
of the debt. This is called a mortgage note. Mortgages are
frequently given in cases where there is a debt existing to secure
or indemnify the mortgagee against some liability which he may
possibly incur on behalf or for the benefit of the mortgagor. For
instance, when a man has indorsed another's note for the latter's
accommodation or gone on his bond as surety the latter may
execute to the former a mortgage of indemnity. The power of a
corporation to mortgage its property is usually regulated by its
character or by the general law under which it is organised. All
mortgages must be recorded in the office of the register of deeds
for the county in which the property is located. The object of
recording is to give notice of the existence of the mortgage to
any one who might wish to purchase the land or to take a
mortgage upon it. There may be several mortgages upon the
same property. The first mortgagee is entitled to be paid in full
first, then the second, and so on. The mortgagee may use his
mortgage as security for loans or he may assign it as he pleases.

When the requirements of a mortgage are not met the holder has
under certain conditions the right to foreclose—that is, to
advertise the property for sale and, within a time fixed by law, to
sell it to satisfy the mortgage. It is usual for the mortgagor to
insure the property for the benefit of the mortgagee.

Although the terms of corporation mortgages are similar to those
on real estate such as is represented by dwelling-houses, the
commercial conditions make it inconvenient or impossible to
foreclose and sell such properties. To stop all business of a
railway or to shut down the work of a manufacturing concern
would not only result in injury to the public but would reduce
largely the earning value of the property. To overcome this
difficulty where an active concern is financially embarrassed, the
court appoints a receiver, who is responsible for the proper
conduct of the business until a satisfactory reorganisation or sale
is accomplished.

Mortgages upon improved property, if properly graduated in
amount, should be safe and profitable investments. The buyer,
however, must exercise great care and good judgment. Should
there be collusion between the loaning agent and the land-owner,
the money advanced may be largely in excess of the actual
property value. Villages with less than a dozen houses are often
the sites of investment companies doing business under
pretentious names and offering mortgage investments at interest
rates which by the local conditions are impossible. One of the
devices of these enterprising companies is to offer their own
guarantees as to both principal and interest of all mortgages
negotiated by them. The investor should be sure of two things:
(1) The safety of the principal, and (2) regularity in the payment
of the interest. There is great danger of default from causes not
anticipated by the mortgagor and over which he has no control.

STOCKS AS SECURITIES

To make a profitable investment in stocks the buyer must
anticipate the future. A mill that may be working day and night
this year may be obliged to shut down entirely next year. A
business which is open to public competition must take its
chances on its future success. The greater the earnings, the more
certain the competition. Many corporations owning monopolies
by virtue of patent rights have made large fortunes, but there is
always the possibility of new discovery. Electricity has
succeeded gas; the telephone is competing with the telegraph;
the trolley is cutting into the profits of railways. A good thing in
stocks to-day does not necessarily mean a good thing next year.
Railroad stocks are of such varied character that it is impossible
here to make more than general statements. Many of our railroad
stocks bring prices far above par and pay liberal interest on
investments. Some of them are so profitable that they are really
not on the market and cannot easily be bought. Others represent
roads loaded down with mortgages and other obligations so
heavy as to make the stock really a liability rather than a
resource to its owner. The stock quotations represent in a general
way the comparative value of these securities. Of recent stock
electric-railway stock is the most popular and in many instances
the most profitable. The introduction of electric power has
reduced the working expense one half and in most instances has
doubled the traffic without any reduction in fares. The buyer
should make sure that the road is in a busy community able to
sustain it, that its franchise will protect it from dangerous
competition, and that the securities have been legally issued.

SUBSTITUTION SECURITIES

There have recently been formed several large companies whose
business it is to issue bonds on the security of other bonds. The
idea is similar to that of real-estate title insurance. Such
companies are supposed to have superior facilities for
investigating securities. They purchase those which they

consider good and at the best prices possible. These they deposit
with some trust company or banking institution. With these
bonds which they buy as their original property they issue new
bonds of their own, which they sell to the public and which they
guarantee. The differences in prices and in interest make up their
profits.

LOANS AND INVESTMENTS

With the growth of wealth we find increasing numbers of
persons who want to invest their means in good securities. To do
this successfully and safely is a very difficult question. It is even
more difficult to keep money profitably employed than to make
it. Changes and innovations are of continual occurrence. Not
only are new securities constantly coming upon the market, but
new subjects as a basis of their production are industriously
sought after. Every newly discovered force or process in
mechanics means the appearance of another detachment of paper
securities. The War of the Rebellion popularised the coupon
bond, in consequence of its adoption by the government, and
made it the favourite form of investment paper. Railroads and
other corporations soon availed themselves of the confidence
which that species of paper inspired, and States, cities, and
counties were soon flooding the country with obligations
carrying long coupon attachments. Many persons have purchased
and paid good prices for mortgage coupon bonds, giving them no
control over their security, who would have rejected share
certificates standing for an equal interest in the property pledged
and giving them the right to participate in its management, with
the possibility of a greater return for their money. Many of the
States through careless legislation have permitted corporations to
decide for themselves the amounts of obligations they might put
out, and the privilege has been very much abused. We now have
stocks and bonds upon the market representing nearly all
conceivable kinds of property—telegraph and telephone

companies, mining companies, cattle ranches, grain farms,
water-works, canals, bridges, oil- and gas-wells, electric lighting,
trolley companies, factories and mills, patent rights, steamboat
lines, apartment-houses, etc. Not only are properties of many
kinds used to issue bonds upon, but many kinds of bonds are
often issued upon the same properties. One issue of bonds is
sometimes made the basis of other issues. Some one has said that
there never was a time in the history of the world when it was so
easy to invest money—and to lose it. Of the securities that are
offered with first-class recommendations it is probable that about
one third are actually good, one third have some value, and one
third are practically worthless. In making investments the first
and main thing to be studied is safety. Never buy a security of
any kind without having read it. Do not buy what are commonly
known as cheap securities. Do not rely solely upon the advice of
a broker; he may have personal interest to serve. By far the
greater number of losses to investors have been in securities
purchased exclusively on the recommendation of interested
commission men. It is a mistake to give preference to listed
securities—that is, those reported on the stock-exchange lists.
Stocks are too often listed simply for speculative purposes, and
the price represents not so much the value of the property as the
pitch of the speculation at the time. Securities in the long run
must stand upon their merits. As a rule the best time for an
experienced investor to buy is when others are unloading.

VI. CHEQUES, DRAFTS, AND BILLS OF
EXCHANGE[11]

BANK CHEQUES

Showing cheque raised from $7.50 to $70.50.

A cheque is an order for money, drawn by one who has funds in
the bank, payable on demand. Banks provide blank cheques for
their customers and it is a very simple matter to fill them out
properly. In writing in the amount begin at the extreme left of the
line. The illustrations given here show a poorly-written cheque
and a copy of the same cheque after it has been "raised." The
original cheque was for $7.50 and shows very careless
arrangement. It was a very easy matter for the fraudulent
receiver to change the "seven" to "seventy" and to add a cipher
to the amount in figures. The running line was written in on the

raised cheque to deceive the bank. In this case Mr. Carter and not
the bank must suffer the loss. Mr. Carter cannot hold the bank
responsible for his carelessness. Drawers of cheques should
exercise the greatest care in writing in the amount to prevent
changes or additions. Draw a running line, thus: ~~~Nine~~~ before
and after the amount written in words. If the words are
commenced close to the left margin the running line will be
necessary only at the right. The signature should be in your usual
style familiar to the paying teller. The plain, freely written
signature is the most difficult to forge. Usually cheques are
drawn "to order." The words "Pay to the order of John Brown"
mean that the money is to be paid to John Brown or to any
person he "orders" it paid to. By indorsing the cheque in blank
(see indorsements) he makes it payable to bearer. If a cheque is
drawn "Pay to bearer" any person—that is, the bearer—can
collect it. The paying teller may ask the person cashing the
cheque to write his name on the back, simply to have it for
reference. Safety devices to prevent the fraudulent alteration of
cheques are of almost endless variety, but there has not been a
preventive against forgery and alterations yet invented, which
has not been successfully overcome by swindlers. A machine for
punching out the figures is in common use, but the swindler has
successfully filled in the holes with paper-pulp and punched
other figures to suit his purposes. The safest cheques are those
carefully written upon what is known as safety paper.

FOOTNOTE:

[11]
A part of the matter of this lesson has already
appeared in Part I. of this book ("General Business
Information"), but it is here repeated to preserve the
connection.

IDENTIFICATION WHEN CHEQUES ARE PAID

The banks of this country make it a rule not to cash a cheque that
is drawn payable to order unless the person presenting the
cheque is known at the bank—or unless he satisfies the paying
teller that he is really the person to whom the money is to be
paid. It must be remembered, however, that a cheque drawn to
order and then indorsed in blank by the payee is really payable to
bearer, and if the paying teller is satisfied that the payee's
signature is genuine he probably will not hesitate to cash the
cheque. In England all cheques apparently properly indorsed are
paid without identification. In drawing a cheque in favour of a
person not likely to be well known in banking circles, write his
address or his business after his name on the face of the cheque.
For instance, if you should send a cheque to John Smith, Boston,
it may possibly fall into the hands of the wrong John Smith; but
if you write the cheque in favour of "John Smith, 849 Tremont
Street, Boston," it is more than likely that the right person will
collect it. If you wish to get a cheque cashed where you are
unknown, and it is not convenient for a friend who has an
account at the bank to go with you for the purpose of
identification, ask him to place his signature on the back of your
cheque and it is likely you will not have trouble in getting it
cashed. By placing his signature on the back of the cheque he
guarantees the bank against loss. A bank is responsible for the
signatures of its depositors, but it cannot be supposed to know
the signatures of indorsers. The reliable identifier is in reality the
person who is responsible.

CHEQUES FOR SPECIAL PURPOSES

If you wish to draw money from your own account the most
approved form of cheque is written "Pay to the order of cash."
This differs from a cheque drawn to "bearer." The paying teller

expects to see you yourself or some one well known to him as
your representative when you write "cash." If you write "Pay to
the order of (your own name)" you will be required to indorse
your own cheque before you can get it cashed. If you wish to
draw a cheque to pay a note write "Pay to the order of bills
payable." If you wish to write a cheque to draw money for wages
write "Pay to the order of pay-roll." If you wish to write a cheque
to pay for a draft which you are buying write "Pay to the order of
N. Y. draft and exchange," or whatever the circumstances may
call for.

CHEQUE INDORSEMENTS

In indorsing a cheque remember that the left end of the face is
the top when you turn it over. Write your name as you are
accustomed to write it. If you are depositing the cheque, a blank
indorsement—that is, an indorsement with simply your name—
will answer; or you can write or stamp "Pay to the order of (the
bank in which you deposit)" and follow with your signature.
Either indorsement makes the cheque the absolute property of
the bank. If you wish to transfer the cheque by indorsement to
some particular person write "Pay to the order of (naming the
person)" and follow with your own signature; or you may simply
write your name on the back. The latter form would be
considered unwise if you were sending the cheque through the
mail, for the reason that a blank indorsement makes the cheque
payable to bearer. An authorised stamped indorsement is as good
as a written one. Whether such indorsements are accepted or not
depends upon the regulations of the clearing-house in the
particular city in which they are offered for deposit.

THE NUMBERING OF CHEQUES

A certified cheque.

Cheques should be numbered, so that each can be accounted for.
The numbers are for your convenience and not for the
convenience of the bank. It is important that your cheque-book
be correctly kept, so that you can tell at any time how much
money you have in the bank. At the end of each month your
small bank-book should be left at the bank, so that the
bookkeeper may balance it. It may happen that your bank-book
will show a larger balance than your cheque-book. You will
understand by this, if both have been correctly kept, that there
are cheques outstanding which have not yet been presented at
your bank for payment. You can find out which these are by
checking over the paid cheques that have been returned to you
with your bank-book. The unpaid cheques may be presented at
any time, so that your actual balance is that shown by your
cheque-book. Cheques should be presented for payment as soon
after date as possible.

CERTIFIED CHEQUES

A bank draft.

If you wish to use your cheque to pay a note due at some other
bank than your own, or in buying real estate or stocks or bonds
you may find it necessary to get your cheque certified. This is
done by an officer of the bank, who writes or stamps across the
face of the cheque the words "Certified" or "Good when properly
indorsed" and signs his name. (See illustration, p. 244.) The
amount will immediately be deducted from your account, and the
bank by guaranteeing your cheque becomes responsible for its
payment. If you should get a cheque certified and then not use it
deposit it in your bank, otherwise your account will be short the
amount for which it is drawn.

BANK DRAFTS

A bill of exchange.

Nearly all banks keep money on deposit in other banks in large
commercial centres—for instance, in New York or Chicago.
They call these banks their New York or Chicago
correspondents. A bank draft is simply the bank's cheque
drawing upon its deposit with some other bank. (See illustration,
p. 245.) Banks sell these cheques to their customers, and
merchants make large use of them in making remittances from
one part of the country to another. These drafts or cashiers'
cheques, as they are sometimes called, pass as cash anywhere
within a reasonable distance of the money centre upon which
they are drawn.

BILLS OF EXCHANGE

A draft on a foreign bank is commonly called a bill of exchange.
Bills of exchange are usually drawn in duplicate and sometimes
in triplicate. (See illustration, p. 246.) Only one bill is collected,
the others simply serving in the meantime as receipts. These bills
are used to pay accounts in foreign countries, just as drafts on
New York or Chicago are used to pay indebtedness at home.

VII. THE CLEARING-HOUSE SYSTEM[12]

THE CLEARING-HOUSE SYSTEM A MODERN
INSTITUTION

The clearing-house is a comparatively modern institution, the
Edinburgh bankers claiming the credit of establishing the first
one. The earliest clearing-house of whose transactions we have
any record is that of London, founded about 1775. For fully
seventy-five years the London clearing-house and that of
Edinburgh were the only organisations of the kind known to
exist. The monetary systems of most European countries
centring around one great national bank located at the capital of
each, found in this a means of effecting mercantile settlements.
The New York clearing-house was established in 1853, from
which date the American clearing-house system has grown to
enormous proportions. No country in the world has so large a
need of clearing-houses, for in no country is the bank cheque so
generally used in the payment of ordinary accounts.

TRANSFER OF CREDITS IN CLEARING-HOUSES

The purpose of the clearing-house is largely to facilitate the
transfer of credits. This is explained by the following illustration:
Suppose that Brown and Smith keep their money on deposit in
Bank A and that Brown gives Smith his cheque for $100 and
Smith deposits it in the bank to his (Smith's) credit. The officers
of the bank will subtract $100 from Brown's account and add the
same amount to Smith's account. No actual money need be
touched. It is simply a matter of arithmetic and bookkeeping.
Credit has been transferred from Brown to Smith. If all the
people of a city kept their money in one central bank there would

be no need of a clearing-house. The bookkeepers of the bank
would be kept busy transferring credits from one customer to
another on the books of the bank. But if Brown keeps his money
in Bank A and Smith keeps his money in Bank B it is necessary
that Bank A and Bank B come together somewhere to
conveniently make the credit transfer, and this is practically what
they do in the clearing-house. Then, again, if Bank A should be
located in San Francisco and Bank B in Boston, the difficulty of
transfer of credit is greatly increased.

Through the agency of clearing-houses located in money centres
and of co-operation between banks at distant points, the transfer
of credits between business men located anywhere in the United
States, or for that matter in the world, has become a
comparatively simple matter. If it were not for the agency of this
system it would be utterly impossible for a great city to do the
business of a single day. All the actual money in all the banks
and stores and safes and pockets of New York City to-day would
fall far short if used to pay to-day's transactions. It is estimated
that the cash transactions of a single day are fifty times greater
than the actual cash changing hands in one day. So that the great
bulk of the business of the country, both cash and credit, is done
on a system of credit transfers made possible wholly through the
agency of our banking system.

FOOTNOTE:

[12]
See also Lesson VIII. of Part I. of this book
("General Business Information").

ORGANISATION OF CLEARING-HOUSES

Each large city has its clearing-house system. To establish a
clearing-house a number of banks associate themselves together,
under certain regulations, for the purpose of exchanging daily at
one time and place the cheques and other commercial paper
which they hold against each other. The usual officers are a
president, a secretary, a treasurer, and manager, and a clearing-
house committee. The cheques, etc., which the banks take to the
clearing-house are called the clearing-house exchanges, and the
total amount of paper exchanged is called the day's clearings.
Those banks which bring a less amount than they take away are
obliged to make the difference good in cash or its equivalent
within a fixed time upon the same day. Suppose, for illustration,
that a clearing-house association consists of five banks—A, B,
C, D, and E—and that Bank A took to the clearing-house
cheques against B, C, D, and E amounting to $20,000, and that
B, C, D, and E took to the clearing-house cheques against A
amounting to $21,000. Then A is on this particular day a debtor
bank, and owes the clearing-house, or the other banks through
the clearing-house, $1000. The payment of the balances by the
debtor banks and the receipt of the balances by the creditor
banks complete each day's transactions. As the total amount
brought to the clearing-house is always the same as the amount
taken away, so the balances due from the debtor banks must be
exactly equal to the amounts due the creditor banks. The
clearings in New York City in one day amount to from
$100,000,000 to $200,000,000, and the actual cash handled, if
any, need only be for the actual debit balances. Usually once a
week (in some cities oftener) the banks of a city make to their
clearing-house a report, based on daily balances, of their
condition. The clearing-house establishes a fellowship among
banks that has already proved in times of money panics of the
greatest service to themselves and the community.

PAYMENT OF BALANCES IN CLEARING-HOUSES

Clearing-house certificates are made use of in many cities for the
payment of balances by debtor banks. These are issued against
gold deposited with one of the associated banks. They are
numbered, registered, and countersigned by the proper officer,
and are used only in settlements between the banks. Various
methods of making settlements are in use. In some of the cities
the balances are paid by drafts on New York or other money
centres. The debtor bank sells some creditor bank New York
exchange, and receives in return a cheque or order on the
clearing-house, which when presented makes the debits and
credits balance. It is estimated that the actual cash employed in
New York clearings is less than one half of one per cent. of the
balances.

HOW DISTANT BANKS ARE CONNECTED BY THE
CLEARING-HOUSE SYSTEM

Illustrating cheque collections.

To illustrate the connection between banks at distant points let us
suppose that B of Haverhill, Mass., who keeps his money on
deposit in the First National Bank of that city, sends a cheque to
S of Waconia, Wis., in payment of a bill. S deposits the cheque in
the Farmers' Bank of Waconia and receives immediate credit for
it in his bank-book, just the same as though the cheque were
drawn upon the same or a near-by bank. The Farmers' Bank
deposits the cheque, with other cheques, in, say, the First
National Bank of Minneapolis, or it may send the cheque to its
correspondent in New York—say the Ninth National—asking to
be credited with the amount. For sake of illustration, suppose
that the cheque is deposited with the First National of
Minneapolis. Now, this bank has a correspondent in Chicago—
the Commercial National—and a correspondent in New York—
the National Bank of the Republic. If sent to the Commercial
National, this bank has a correspondent in Boston—the Eliot
Bank, where the cheque would be sent. Now, the First National
of Haverhill has a correspondent in Boston—the National Revere
Bank. The Eliot Bank would likely take this cheque to the
Boston clearing-house as a charge against the Revere Bank. The
Revere Bank would deduct the amount from the First National of
Haverhill's deposit and send the paid cheque to the Haverhill
Bank, where at the close of the month it would be handed to B,
showing on the back the indorsement of S, and stamping
representing all the banks through whose hands it passed. If the
Farmers' Bank of Waconia had sent direct to its New York
correspondent, the Ninth National, this bank would have sent to
its Boston correspondent, the North National, and the cheque
would have been charged up through the clearing-house against
the Revere Bank. If the First National of Minneapolis had sent
direct to its New York correspondent, the National Bank of the
Republic, this bank would have sent to its Boston correspondent,
the Shawmut National, etc. As a rule, banks collect by whatever
route seems most convenient or advantageous. It is estimated
that millions of dollars are lost to the banks each year on account
of the time consumed by cheques en route.

VIII. COMMERCIAL CREDITS AND
MERCANTILE AGENCIES

HOW THE WORLD'S TRADE IS LARGELY
TRANSACTED UPON CREDIT

It is estimated that about ninety per cent. of the world's trade is
transacted upon credit. And in no country of the world are
commercial credits so freely granted as in the United States. This
is a land of seemingly unlimited faith in humanity, and yet a land
in which hazardous speculation, extravagance, and bankruptcy
have often prevailed. Statistics show that about ninety-five per
cent. of our merchants "fail to succeed," and yet no other country
can boast of such wealth, industrial energy, and generous
confidence in business integrity. While credit is not money, in
that it cannot settle a debt, it must be considered a very powerful
agent in the creation of capital. Credit is another name for trust.
The business world bases its confidence or trust in men upon
their character and resources. And the extent of this trust
becomes the only limitation of the business man's purchasing
power. He who can show conclusively the ability and disposition
to fulfil obligations, has it within his power to command the
capital or merchandise of others. Credit is one of the fruits of a
higher civilisation and a settled condition of a country's business.
It bespeaks a quality of government, too, that is not to be
depreciated. The nations that are most successfully and equitably
governed and show the most stable conditions of currency also
show us the most extensive and efficient credit systems. It is
abundantly true that these same nations have on many occasions
passed through periods of great distress from failures widespread
and panics severe, but it must also be borne in mind that these
very bankruptcies are more often the abuse of prosperity than the
product of adversity. Over-confidence in men and things has
resulted in speculation and precipitated bankruptcy. And if it be

urged that to the undue expansion of credit is traceable the
greater number of our financial disasters, it may be said with still
greater force that all our impetus to industrial achievement has
been and still is dependent upon the generous exercise of credit.
The construction of our railroads and canals, the operation of our
mines, the improvement of our great farm areas, the building of
our towns and cities, and the development of our extensive
manufacturing interests are all the result of the trust reposed in
men and the industrial interests they represent.

THE IMPORTANCE OF A HIGH STANDARD OF CREDIT
TO BUSINESS MEN

Reticence on the part of business men respecting their financial
position may seriously impair their credit. It is universally
regarded by the intelligent business man to be good policy to
make known his condition. A refusal to do so throws a suspicion
and doubt upon his financial ability, and at some future time
when confidence in his integrity may be essential to the very life
of his business, he may find the necessary help unobtainable. An
applicant for credit should be willing to prove himself worthy of
it. But the keen competition among merchants eager for sales
often enables the buyer to obtain credit without the necessity of
giving very much evidence as to his commercial standing. Since
some risks must be taken merchants frequently conclude to
accept an account because of its possible acceptance by some
competitor. If business is to be had risks must be taken, is the
theory.

When former customers apply for credit the merchant is guided
by the record made in previous dealings. A business man's ledger
is a very valuable history of credits. It is his compass in a sea of
doubt. If upon the inspection of an old account it be discovered
that in former years the customer paid cash and discounted his
bills, and that later his method of payment was by promissory

notes, and that on several occasions he asked for special favours,
such as dating bills ahead or the privilege of renewal of notes,
one is able to read a certain unmistakable sign of degeneracy in
the customer's credit. New orders from such a customer will bear
scrutiny; and a closer attention to the present condition of the
account may save the firm from some bad debts.

While it is possible to-day to determine the average losses from
bad debts in the various lines of business, individual risks cannot
be accepted on that basis. Each requires special study. If an
applying customer paints his financial condition in roseate
colours, let him be willing to reduce his statement to writing, and
when his signature is affixed his statement is much more
reliable, because he knows of the impending liability of fraud if
he has misrepresented. Men averse to transforming an oral
statement to writing have discredited themselves immediately.
Men who mean to be honest may be optimistic in picturing
prospects and be inclined to set an unreasonable value upon their
property and extent of business. It may be easier to tell the
absolute truth about one's liabilities, because they are such
persistently real things; but assets have elastic qualities in many
men's minds and seem capable of any extension in an
emergency. Buyers who impress themselves most favourably
upon the business house are frank in their statements. The
explicit, candid man of few words will merit consideration. The
cringing or pleading kind predisposes one unfavourably. Stephen
Girard said of one who in tears asked for a loan: "The man who
cries when he comes to borrow will cry when he comes to pay."

To determine the right of a buyer to credit and the safe limit of
credit to be extended to him is the seller's serious problem. It is
customary to request references in order to discover how other
firms regard the applicant's credit. But these references may be
cautious of reply. A selfish desire to retain the customer for
themselves, or the higher motive of a desire to be true to the
interests of both the inquirer and the customer may produce
dubious or very incomplete reports. If a bank be among the

references one does not place too much stress upon a very
favourable reply from it, because a merchant usually learns the
lesson of expediency in making a friend of his banker. And,
moreover, one endeavours to reveal only the best side of his
business affairs to the bank. Favourable replies from several
firms showing a uniform line of credit go a great way toward
reaching a safe conclusion. But in these days of vast and
multifarious interests there has developed, as a result of this
desire for adequate knowledge respecting men's credit, an
agency for the exclusive purpose of arriving at definite and
reliable evidence upon financial matters; and after years of
experience men have learned to depend upon these mercantile
agencies as the most valuable and trustworthy assistants.

MERCANTILE AGENCIES

Mercantile agencies had their origin in the system adopted by
several prominent firms of keeping on record all the information
obtainable relating to their customers. In 1841 "The Mercantile
Agency of New York City" began its history, and was the
forerunner of the present great agencies whose record books of
credits and ratings include the names of all the business houses
and corporations in this country and Canada. The pioneer
institution of this character in the United States was the one
bearing at present the name of "R. G. Dun & Co.," an outgrowth
of "The Mercantile Agency of New York City." Since 1860 it has
borne the name of Mr. Dun, who was formerly a partner with Mr.
Douglass when the agency was known as "B. Douglass & Co."
Another popular and influential concern is the one known as
"The Bradstreet Company," familiarly spoken of as
"Bradstreet's." Besides these two leaders there are many others,
whose reports on credits are limited to particular lines of trade.
The larger agencies soon found it necessary to establish branches
in all the business sections of the country. A particular field of

investigation is allotted to each branch, and an interchange of
information is in constant progress.

A mercantile agency inquiry form.

To be a recipient of the valuable information afforded by these
agencies business men, by paying an annual fee, are enrolled as
subscribers and furnished with books of ratings, as they are
called. Besides this book special type-written reports with
elaborate details respecting a firm's credit are sent upon the
request of the subscriber. The volume of information recorded in
these agencies concerning any one's credit is obtained through
the effort of officials of the agencies known as reporters. These
men of experience, integrity, and discernment are seekers after
truths. Usually each reporter has a distinct line of trade assigned
him for research and investigation. This brings him into intimate
acquaintanceship with every trader in his particular field. He is a
constant solicitor of the banker and merchant for facts. His
business is not merely to gather information respecting the
resources of business men, but to investigate rumours that in
themselves may be detrimental to one's credit, and to disprove
them where possible and sustain and support the credit of a
house. Too often it is supposed that the reporter is seeking
evidences of weakness when in reality his business is most
frequently that of discovering elements of strength. Information
is freely given him as he interviews men whose businesses and
experiences are the depositories for a wealth of credit
information. He soon becomes a confidant of the merchant
himself, who not only tells him all he knows about the customers
and their accounts upon his books, but his own business affairs
as well. Indeed, the relation becomes so very reciprocal that the
reporter often furnishes information to the merchant in the
interview on some matter of credit of pressing notice. In this way
a corroboration of facts or the denial of a rumour may be
effected. He inspects the books of the offices of public record to
find the evidence of mortgages, judgments, and transfers of
property, and have the same recorded on the agency's books. It is
the reporter who finally has gathered the information that
determines a firm's ability to have and to hold a line of credit.

It is essential to the life of the agency that its reports be honest
and free from any element of doubt. The public confidence in the

reliability of the reports will determine the prosperity of the
company. Perhaps at first glance it would seem as if the system
of reporting financial information was a serious discrimination
against the men of smaller capital and in favour of the wealthy.
But mere capital is not the only element entering into an estimate
of one's ability to pay. Character and reputation are powerful
forces in assisting a merchant in determining credit. An agency
discloses facts and not opinions. And it is within the range of
possibility of any one to create and maintain his credit. Capital
may grow gradually but credit is sometimes established or
destroyed by a single act.

The facts obtained by mercantile agencies are not public
property. They are given in confidence and for the sole purpose
of aiding the business with respect to the propriety of granting
credit. The private reports are for the eyes of the interested
inquirer and not the curious. Whenever some particular item of
interest finds its way to an agency that would affect one's credit
seriously, such as the giving of chattel mortgage or the
confession of a judgment or the sale and transfer of property, it is
customary to send unsolicited a special report of these facts to all
subscribers on the agency's books who have ever at any time
made inquiry concerning the firm. One might expect that these
agencies expose themselves to risk of prosecution for libel, but
since no malice is ever intended in any report circulated, and
since it rarely occurs that damaging reports are sent out by these
institutions unless abundantly confirmed, there is little
opportunity for litigation of this sort.

Another field of usefulness of the mercantile agency is in the
exposure of the absconding debtor and his whereabouts, and also
the dishonest trader who in arranging a fraudulent failure may be
striving to open many new accounts. The unusual demands for
reports respecting such a one lead to careful investigation.
Instead of a restrictive tendency a mercantile agency promotes
the expansion of credit and yet permits of proper conservatism. It
opens to the trader as a market for his merchandise every new

and trustworthy account. It curbs speculation, stimulates
diligence in business, habituates punctuality, and develops
character. When we remember that the present annual internal
commerce of our country is estimated at about 800,000,000 tons
of merchandise carried an average distance of 120 miles, and
that this volume of trade is worth over $10,000,000,000, we are
forced to admit that the unique system of these credit agencies
has done much to further and make possible this commercial
prosperity.

IX. BONDS

UNITED STATES, STATE, AND MUNICIPAL BONDS

When a country borrows money it gives a guaranty that the
money will be returned at a particular time and that interest will
be paid at regular intervals at a fixed rate. This guaranty is called
a bond. In actual practice, instead of borrowing the money
required and then giving bonds for its return, countries usually
issue the bonds first, and sell them to the highest bidder. For
instance, if our government needed to borrow $1,000,000 it
would issue bonds for this amount, stating definitely the rate of
interest to be paid, and call for bids. If the rate of interest were
four per cent. and a buyer paid more than $1000 for a $1000
bond he would, of course, make less than four per cent. upon his
investment. Such bonds are absolutely safe and always
marketable on account of our strong financial standing among
the nations of the world. Similar bonds are issued by States,
cities, towns, school districts, etc. They are not mortgages in the
ordinary sense, and their worth consists entirely in the ability of
the issuer through its taxing power to meet the obligations
incurred. Municipal bonds are issued by cities and other
municipalities to raise money for local improvements.

BONDS AND CERTIFICATES OF STOCK

A bond is evidence of debt, specifying the interest and stating
when the principal shall be paid; a certificate of stock is evidence
that the owner is a part owner in the company, not a creditor of
the company, and having no right to regain his money except by
the sale of the stock or the winding up of the company's
business. Bonds issued by stock companies and corporations are
really mortgages upon their resources. Such a bond is usually
secured by a mortgage upon the company's plant, franchises, and
assets, or some part thereof. Corporate bonds can only be issued
by the consent and direction of the shareholders of the company
or corporation.

At the present time a mortgage securing the payment of corporate
bonds is usually placed in the hands of a trustee—generally some
trust company—which is supposed to act in behalf of the
bondholders as a unit and which is empowered by the language of the
bond, in the event of the failure of the corporation to perform the
obligations it assumes in said bond, to foreclose the mortgage and
divide the proceeds of sale among the bondholders.—Carroll.

CLASSES OF CORPORATION BONDS

Corporation bonds are of many classes, differing widely in their
value as securities. Only a few of the more important classes can
be mentioned here. First mortgage bonds constitute, as the name
implies, a first lien upon the property of the company issuing
them. It is important in estimating the value of such securities to
know whether they include only the property of the corporation
at the time the bonds were issued or whether they are so worded
as to include all property owned or acquired by the corporation.
Second and third mortgage bonds are second and third liens. The
interest upon second and third mortgage bonds is paid only after
the interest upon first mortgage bonds is satisfied.

When bonds are issued to take up and put into one fund all
previously issued mortgage bonds, the new bonds are sometimes
called consolidated mortgage bonds. Holders of previously
issued bonds are not obliged to exchange them for any new
securities.

Income bonds are usually secured by a mortgage on the earnings
of the corporation issuing them. Interest on such bonds must be
paid before dividends are declared to stockholders. It is
customary when such bonds are issued to set aside a percentage
of the earnings as a sinking fund to meet the bonds at maturity.

Bonds are issued against all conceivable kinds of securities. Not
only are properties of many kinds used to issue bonds upon, but
many kinds of bonds are often issued upon the same properties.
This is especially true of railways, where mortgages of various
kinds often lap and overlap in almost endless confusion.

SINKING FUNDS

Money set aside by a municipality or corporation to sink a debt
at a certain future time is called a sinking fund. For instance, if a
city should issue twenty-year bonds for $100,000 to secure
money for street improvements the entire debt would fall due in
twenty years, but to avoid having such a large amount fall due in
one year, a proportional sum is set aside each year as a sinking
fund—that is, to sink, or reduce, or wipe out the indebtedness
when the bonds mature. Bonds are not paid in advance of
maturity.

INTEREST COUPONS

Specimens of interest coupons.

Most bonds have interest coupons attached. These are cut off
and presented for payment as they mature. For instance, a four
per cent. bond for $1000 would draw $40 interest yearly. This
sum would be paid in two instalments of $20 each. If the bond
were for twenty years there would be at the date of issue forty
interest coupons, each calling for $20 and collectable at intervals
of six months.

X. TRANSPORTATION BY RAIL

THE GROWTH OF OUR RAILROAD SYSTEM

A railway map of the United States shows that most parts of our
country have a thickly woven net of railroads. The mileage of
our railroad lines is now 184,000 miles, the actual length of track
on these roads being about 245,000 miles. The significance of
these large figures becomes more manifest when a comparison is
made between the length of our railroads and the length of those
of Europe and those of the world. The railroads in the United
States comprise over four ninths of the total railway mileage of
the world, and are considerably longer than the railroads of all
the countries of Europe combined. The facts are shown
graphically by the following diagram:

The history of the construction of American railroads covers a
period of seventy years. The greater part of our mileage has been
built since 1870. The following table and diagram illustrate the
growth of our railway net during each decade:

It will be noted that the decades of most rapid railway
development were the one from 1850 to 1860, following the
discovery of gold in California, and the two between 1870 and
1890. We added 70,000 miles to our railway net between 1880
and 1890—a record that no other country has equalled. By 1892
we seem to have met the more urgent demands for new lines, and
we are now annually building less than 2000 miles of new roads.
The face value of the capital now invested in American railroads
is $11,000,000,000. The number of persons employed in the
railway service is 850,000.

THE RAILWAY CORPORATION

The agents that do the work of transportation by rail are the
railway corporations. These "artificial persons" are created by
the several States and intrusted with the performance of services
of a public nature. In all the German states and to a large degree
in many other European states, the governments themselves
provide the means of transportation by rail; but in the United

States the ownership and management of the railroads is rightly
regarded to be a task of greater magnitude than the
administrative department of our government is as yet able to
cope with.

The growth of the railway corporations of the United States has
been typical of the evolution of industrial organisation in this
country. The early railway corporations were small. The
Philadelphia, Wilmington and Baltimore Railroad, for instance,
comprised the lines of four companies. In 1850 the road
connecting Albany and Buffalo included the lines of seven
companies. During the last fifty years most of the small
companies have united to form the corporations which now
operate our large railway systems. Though the last statistical
report of the Interstate Commerce Commission—the one for the
year ended June 30, 1896—contains financial reports from 1985
companies, there were only 782 "independent operating roads,"
the remainder of the companies being subsidiary organisations.
This report shows that forty-four of these operating companies
have an aggregate mileage that equals nearly six tenths of the
total railway mileage of the United States. Indeed, the statistician
to the Interstate Commerce Commission declared in 1894 that
"over 83 per cent. of the business of the railways and 82 per cent.
of their earnings fall under the control of less than forty
associations of business men."

The Pennsylvania system affords a good concrete illustration of
railway consolidation. That corporation, with its 9000 miles of
road, was built up by the union of over 200 railroad companies,
and it now comprises within its organisation 177 corporations—
most, though not all, of which are subsidiary railroad companies.
This one railway system does one seventh of the entire freight
business performed by all the railroads of the United States and
handles one eighth of all the passenger traffic.

THE FREIGHT SERVICE OF RAILROADS

The freight business of the railroads of the United States is much
larger than their passenger service, the earnings from freight
being nearly three times that from the passenger traffic. It is only
in some of the New England States, the most densely populated
parts of the United States, that the passenger receipts equal the
freight earnings. The industrial conditions of the United States
necessitate the movement of great quantities of bulky freight
long distances. Our principal grain-fields are from 1000 to 1500
miles from the manufacturing districts and seaboard cities. Our
richest iron deposits are in the States adjacent to Lake Superior
hundreds of miles from the coal-beds of Illinois, Ohio, and
Pennsylvania. Most of the cotton crop is moved long distances to
reach the mills of New England and Great Britain. In fact, most
of the products of our fields, forests, mines, and factories are
marketed over wide areas. The average distance travelled by
each ton of freight moved during the year ended June 30, 1896,
was 124.47 miles; and, as the railroads carried 765,891,385 tons
that year, the number of tons carried one mile was
95,328,360,278.

A comparison of the revenues received from the freight and
passenger services by the American, German, French, and
British railways is instructive. For each dollar received from the
passenger traffic the American railroads earn $2.95 from their
freight business, the German roads $2.40, the French $1.31 and
the British railways $1.17. The United Kingdom has the greatest
volume of passenger traffic per population of any country in the
world.

AMERICAN PASSENGER TRAFFIC ON RAILROADS
RELATIVELY UNDEVELOPED

The long distances of the United States necessitate a large freight
traffic but act as a hindrance to travel. It is a generally accepted
but erroneous supposition that Americans travel more than any

other people. A comparison of the passenger traffic in the United
States with that in the United Kingdom, Germany, and France
reveals some surprising facts. The figures are for 1896. The
number of passengers carried one mile per mile of road upon the
railroads of the United States was 71,705, in France the number
was 273,315, in Germany 315,399, and in the United Kingdom
440,000. The average distance which the Briton travels per year
by rail is 244 miles; for the American the distance is 209 miles,
for the Frenchman 176 miles, and for the German 165 miles. The
Englishman takes 24.4 trips per year on an average, the German
11.3, the Frenchman 9.6, and the American 8.2. Americans travel
extensively, but it is evident from the foregoing comparisons that
the possibility of developing the passenger service in this
country has by no means reached its limit.

RELATION OF TRANSPORTATION ON RAILROADS TO
ECONOMIC ORGANISATION

The economic changes which have accompanied the great
development of transportation that has taken place during the last
fifty years have revolutionised our industrial and social life.
Among the effects of developed transportation upon the
economic organisation may be noted: First, that relations of
producers and consumers have been fundamentally changed by
placing a larger market at the service of both. Many classes of
commodities are now bought and sold in a world market that
were formerly restricted to local trade. Second, improved
transportation has made the prices of commodities more uniform
for different producers and consumers. The variations due to
situation have been lessened. In a like manner there has been a
decrease in those time variations in prices that result from
changes in the supply of commodities. Improved transportation
also makes prices lower—not only because it reduces the costs
of moving the raw materials of manufacture and the finished
products of industry, but also because it enables the merchant to

turn his stock oftener and thus do business with less expenses for
capital.

As a third effect of improved transportation may be mentioned
the acceleration which it has given to the growth of cities. Cheap
and efficient transportation has led manufacturers to locate their
plants where they can command a large supply of labour and
where they have the greatest advantages for the distribution of
their products. The great manufacturing establishments are now
located in Chicago, New York, Philadelphia, Pittsburg, and the
other large cities. Conditions of transportation have become a
stronger factor than even the location of the sources of raw
materials in determining where an industry shall be established.
The effect of the railroad upon the location of agriculture has
been no less potent. The railroad has brought new agricultural
regions into cultivation and destroyed the profits of cereal
agriculture in many parts of the Eastern States.

Another important consequence of improved transportation and
communication has been that of bringing the nations of the world
into closer economic and social relations. With the growing
solidarity of the economic interests of the countries of the world,
with the multiplication of the intellectual and other social ties
that unite the nations, their political relations inevitably change,
and for the better. Nothing is doing more to advance the
attainments of the cherished ideal of international amity than is
the development of transportation.

XI. FREIGHT TRANSPORTATION BY RAIL

THE ORIGIN OF RAILROAD TRAFFIC ASSOCIATIONS

The performance of the transportation services necessitates the
co-operation of carriers. When the government owns and
operates the railroads of a country they are managed by a single
authority, and the different parts of the railway system are fully
co-ordinated; but when the railroads are operated by a large
number of independent corporations, co-operation can be
secured only by means of traffic associations composed of
representatives of the railway companies, and intrusted with the
power of making arrangements affecting joint traffic, and settling
questions involving the interests of two or more companies.

Two distinct causes brought about the establishment of railway
traffic associations. The first cause was the necessity of co-
operation to facilitate the joint business of connecting lines.
Through tickets, joint fares and rates, through bills of lading, the
interchange of cars between connecting roads, and the settlement
of joint accounts led to the establishment of co-operative freight
lines, car-service associations, claim associations, and various
other general and local organisations for the promotion of the
joint transportation business.

The other cause of co-operation among the railways was the
necessity of regulating competition. This cause first became
potent after the process of consolidation had brought about the
formation of numerous large railway systems, and had
inaugurated the violent competition which led to discriminations
in transportation charges, rate wars, and the other evils which
have combined to produce "the railway question." The
competitive struggles of rival railway systems began to be
violent shortly after 1867, and soon led to the formation of
railway traffic associations, with enlarged powers. The
classification of freight, the determination of rates on
competitive traffic, and the apportionment of that traffic, or of
the earnings from it, among the competitors became functions of
the associations.

THE WORK OF ALBERT FINK

The man who did more than any other person to develop traffic
associations and to promote the co-operation of competing
railroads was the late Albert Fink. It was his master mind that
organised and put into successful operation in 1876 the Southern
Railway and Steamship Association. The following year Albert
Fink succeeded in organising the great trunk lines connecting the
North Atlantic seaboard and the States north of the Ohio River.
Though smaller traffic associations similar to these two
organisations had been previously established where but few
obstacles had to be overcome, it was Fink who first organised
traffic associations including all the competing railroads serving
large sections of the country.

In discussing the work of traffic associations, which are to-day
concerns of really enormous magnitude, railway pooling and the
classification of freight especially demand consideration.

RAILROAD POOLING

Railroad pools are agreements entered into by competing
carriers, by which the railroads provide for the division with
each other of their competitive traffic, or of the earnings from
that traffic in accordance with stipulated ratios. Thus there are
traffic pools and money pools. During the decade preceding
1887, the year when the present interstate commerce law was
enacted, most traffic associations had the pooling feature, and
most of the competitive railway traffic was pooled, thus
eliminating all competition in rates.

Pooling agreements have never been legal in this country. Being
illegal by the common law, they could not be enforced in the
courts. Section 4 of the interstate commerce law made it

unlawful for the carriers subject to the act to pool their freights
or the earnings from their freight traffic, and made it necessary
for the traffic associations to reorganise without the pooling
agreements. Until March 22, 1897, it was supposed that the
associations, without pooling agreements, were legal; but, on
that date, in the case of the United States vs. the Trans-Missouri
Freight Association, the United States Supreme Court held that
the law of July 2, 1890, popularly known as the Sherman anti-
trust law, applied to railways, and made it illegal for railway
companies to contract with each other to maintain rates. Thus at
the present time traffic associations are permitted neither to
contain a pooling feature nor to provide arrangements for the
enforcement or maintenance of rates, although the charges may
be reasonable and be sanctioned by all the carriers interested.
The associations may now legally exercise those functions which
are connected with the joint business of their members, and they
may act as bureaus of information regarding the competitive
traffic. They have no power to make or to maintain rates.

TRAFFIC ASSOCIATIONS INCLUDING POOLING
SHOULD BE LEGALISED

The best performance of the service of transportation by rail
requires the fullest possible co-ordination of the different parts of
our transportation system and the largest attainable measure of
co-operation among the agents who perform the service. Section
4 of the act of 1887 and the law of July, 1890, as far as the latter
relates to railways, are based on an unsound theory. Provision
having been made for that kind and measure of governmental
regulation of railway rates that will insure reasonable charges,
the railways should be permitted to co-operate in rate-making
and be given power to pool their competitive business.

CLASSIFICATION OF RAILROAD FREIGHT

There are thousands of varieties of freight offered to the railroads
for transportation. If each class of commodities were charged the
same freight rate per ton per mile, the charges upon many
articles of prime necessity, such as coal, lumber, and grain,
would be so high as to prevent their being moved, while the rates
on goods of high value per bulk would be much lower than they
could readily pay. Classification must precede the fixing of rate
schedules. The railroads are interested in adjusting their charges
to services performed in such a manner as to insure the greatest
possible amount of traffic at rates that are properly remunerative.
The public is interested in having the necessary revenues of the
railroads so levied as to make the burdens as light as possible. To
accomplish this a careful grouping of commodities is necessary.

The goods are usually classified in five or six large divisions.
The official classification referred to below has six classes. The
first class consists of articles of high value, the sixth class of
bulky commodities of low value, such as iron ore, lumber, grain
in bulk, etc. In practice, however, the number of classes is at
least doubled. Goods of especially high value are made to pay
once and a half, double, treble or quadruple the regular first-class
rate. A commodity is also frequently placed in more than one
class, the rating of classification being lower for car-load lots
than for less than car-load shipments. The classification is further
extended by omitting certain articles from the list of those
classified. Live stock and coal are illustrations of articles to
which so-called "commodity," as distinct from "classification,"
rates are given. The individual shippers are constantly
endeavouring to have their goods given commodity rates, and the
effort of the railroad companies is to reduce the number of
articles excepted from classification. Commodity tariffs have
been a fruitful source of unjust discrimination.

From this description of freight classifications it will be
perceived that the main basis upon which the grouping of

commodities rests is the relative value of the goods. The
gradations cannot, however, be made strictly according to value.
The goods are frequently put into a lower class than their value
would warrant in order to stimulate their production and
shipment or to develop the industries depending upon those
articles.

At first each railroad worked out a classification of its own, and
there were practically as many classifications as there were
railway systems. The disadvantages of this soon became
apparent with the development of long-distance traffic. The
multiplicity of classifications made it difficult for shippers or
purchasers to ascertain in advance what the charges on
consignments would be; there was a constant tendency to
increase the number of commodity tariffs, and unjust personal
and local discriminations were in consequence made more
numerous. It became evident that there would be great
advantages in having one uniform classification for the whole
United States. This ideal has not been reached yet, but the
number of classifications has been practically reduced to three—
the official, applying to the traffic north of the Potomac and Ohio
and west of the Mississippi; the southern, in force among the
railroads in the Southern States, and the western, which obtains
in the territory west of the Mississippi River. This amalgamation
of the classifications has been brought about chiefly by the
traffic associations and as the result of the enactment of the
interstate commerce law. In order to avoid the discriminations
prohibited by that law it was necessary to abandon the system of
a separate classification for each railway. It is to be hoped that
the attainment of the ideal of uniform classification will not be
long delayed.

THE CONDUCT OF THE FREIGHT BUSINESS OF
RAILROADS—TRANSPORTATION PAPERS

The manner in which the freight business is conducted affords a
good illustration of the high degree of development to which
modern business methods have attained. Freight is accepted by
each railroad for shipment not only to all points on its own
system, but also practically to every railway station in the
country, and even to many foreign cities.

A waybill containing the initials of the number of the car used,
the name of the consignor, the name and address of the
consignee, the description and weight of the articles sent, the
freight class and rate of the goods, and the total amount of
freight charges, accompanies each shipment and is delivered to
the agent at the place to which the goods are shipped.

For the goods thus accepted for transportation, manifests, or
"bills of lading," are issued to the consignor, which, like other
representatives of property, may be transferred by the owner or
may be deposited in a bank subject to draft. Bills of lading are of
two general kinds—"straight consignment bills" and "order
bills." When a straight consignment bill of lading is issued the
goods must be delivered to the consignee or to the person to
whom he may order them delivered. An order bill of lading is
one that may be transferred upon indorsement. The following
concise description of an order bill of lading is taken from the
"Book of General Instructions to Freight Agents," issued by the
Pennsylvania Railroad Company:

When freight is consigned to "Order" it is, as a rule, for the purpose
of securing the payment at destination of a draft for the value of the
property. The draft is usually attached to the bill of lading and sent
through a bank for collection from the party at destination, who is to
be notified of the arrival of the freight. The payment of the draft
secures to the payer the possession of the bill of lading, which must
be indorsed by the party to whose order the property is consigned.

XII. RAILROAD RATES