epidemics of railway receiverships, was directly due to similar practices during their construction. Many of the roads were compelled to pay large sums of interest on bonds, the proceeds from which had gone, not into capital construction, as the stock and bondholders had a right to expect, but into the pockets of construction companies composed of promoters, directors and their friends and associates. Such practices are now generally frowned upon by reputable financiers. The investment interest in railways has grown so strong that speculative transactions of all kinds are severely reprobated and heavily punished wherever detected. Established industries are conducted in the light of day. Their reports are frankness itself. No suspicion of speculative transactions, "inside" manipulation, attaches to their directors. The recently formed corporations, however, are repeating the early misdeeds of the railroads. They began by exploiting the common stockholder. Unless checked by the pressure of financial opinion, they will end in insolvency and reorganization, out of which their directors will reap a rich harvest. In conclusion, the following quotation from the Railroad Gazette of April 21, 1892, is precisely in point. It applies to the duties and responsibilities of railway directors, but can be also applied with equal justice to the industrials:

"The position of director in any company whose enterprise involves extensive contracts for construction or supplies, is one of peculiar temptation. The opportunities and inducements for manipulating the plans and contracts of the company, in such ways as to realize a profit to oneself, instead of laboring solely for the company's interest, are often too great for human integrity. The instances have been numerous, as every one acquainted with the history of railway building knows, in which the original company has been squeezed, bled, nay, eviscerated by its own directors, they pretending to negotiate contracts or make leases or sales on behalf of their stockholders, while they have themselves been the active men to profit in various concealed ways, by the arrangements they have made. The course of decisions in the courts shows that such devices have little strength to resist an earnest legal investigation; that the law has more power than injnred stockholders may suppose to overthrow such schemes, and restore the assets to their rightful owners. The general principle has been applied to railroad directors specifically in many instructive cases and under a variety of circumstances. The duty of such director to act for the benefit of the company and as its representative has been repeatedly recognized. He cannot become individually interested in a construction contract on the roads, nor in a purchase of property which he ought to buy for the company; and if he makes a contract

on behalf of the company, in which he reserves or afterwards acquires an individual interest, such contract may be repudiated on behalf of the company."

It is to be hoped that the example of the stockholders with the American Steel and Wire Company, in thwarting the designs of Mr. Gates and his associates, and reducing the price to be paid for the ore fleet, will be generally followed to the great gain of the companies whose stockholders are thus prepared to assert their rights. E. S. M. Difficulties in the Way of American Export Trade.-The success of the United States in the export trade has been due to two factors, (1) cheap and abundant raw materials, (2) low cost of production due (a) to the larger use of machinery, (b) to the energy and initiative of American workmen, and (c) to the relatively small share of the product, as compared with English wages, which American workingmen have been content to receive. It is not to be expected that these advantages over our foreign competitors will continue in their present degree. Our supremacy in raw materials is already passing from us. Take iron for example. The richer ores of the Lake Superior region are approaching exhaustion and the lean ores are being resorted to. Furnace men have accepted the situation and are everywhere lowering their requirements. Then, too, the increasing vogue of the open-hearth process in the United States signalizes the descent to a lower grade of iron ore. Europe has abundant supplies of non-Bessemer ores, and on this account the United States is destined to lose this point of advantage. American coal, as compared with foreign coal, has recently risen in price. The unrestricted competition in the bituminous coal trade which has been of such great benefit to manufacturers has been stopped by the consolidation of the coal roads and the purchase by allied interests of large areas of coal land. Recent evidence of the effectiveness of this limitation of competition is afforded by the difficulty which the bituminous operators experience in getting cars for shipment to markets which are congested. At the same time, the prices of foreign coals are rapidly declining, showing that the recent advance was due to abnormal conditions not likely soon to be repeated. Our exports of breadstuffs and meat products tend to decline as our increasing urban population increases the domestic demand for foodstuffs. A smaller surplus at a higher cost is thus available for export, while Argentine, Australia and Russia are increasing their consignments to European markets. Our exports of lumber products must soon decrease with the exhaustion of our timber supply. Our export of petroleum is threatened by the increasing yield from the Russian oil fields. The only raw materials in which our present advantage promises to endure are cotton and

copper. The United States is no longer a new country and must rely more largely upon manufactures to fill up the measure of her export trade.

In manufactures again our present advantages over our competitors cannot endure. American machines and methods are already being generally copied by foreign producers, and our monopoly of mechanical excellence we cannot hope to retain. Especially in the field of transportation is this equalization of advantage to be remarked in the rapid introduction of American locomotives and handling machinery on foreign railways.

American labor is demanding a larger share in the product. The growing power of labor unions is everywhere manifest, and in spite of the consolidation of capital, the growing disposition on the part of the labor leaders to demand higher wages threatens a general increase in the cost of production of American manufactures. The United States is passing into the era of labor wars from which Great Britain is just emerging, and the result of the conflict must lessen our international advantage.

By the foregoing it is not meant to affirm that our international advantage will disappear. The seat of the lowest cost of production will always remain, in all probability, in the United States. It is well, however, to recognize that the popular estimate of this advantage must be greatly qualified if a true conception of our future position in international trade is to be obtained.

E. S. M.

Business Failures.-In the issue of January 26, "Bradstreet's " presents the statistics of failures in the United States and Canada for a series of years and classifies them according to credit ratings, liabilities, capital employed and primary causes of failure. A condensation of these tables is appended.

STATISTICS OF FAILURES IN THE UNITED STATES AND Canada. I. Credit Ratings of Those Who Failed.

The evidence here presented appears to show that under normal conditions the individual or corporation of large capital and good credit has little to fear in the conduct of a business. The enormous preponderance of bankruptcy, in the number of those who fail, in their liabilities, and in the capital involved, is made up of those whose operations are conducted on a small scale. A caution should be interposed, however, in order that undue emphasis may not be placed upon the small number of failures when both capital and liabilities are large. One firm with $1,000,000 capital is equal to two hundred firms with $5,000 capital apiece, and in its consequences to general business the failure of one million dollar house is often more disastrous than the downfall of hundreds of small enterprises. Then, too, the reader must be cautioned against the unconscious inference from these tables that the number of houses of large capital is at all large in com

parison with the total number of those in business. It is in fact an insignificant fraction. If the number of individuals, firms and companies with less than $5,000 capital could be compared with the number having capitals of $1,000,000 and over the chances of bankruptcy, as between large and small enterprises, might be more accurately determined. In the absence of such a computation it is unsafe to draw from the statistics presented the conclusion that the field of industry and trade is to be given over to the dominion of large capital.

A more instructive study is presented by the analysis of failures according to their primary causes.

Liabilities of Failures in the United States, including Territories, 1897-1900 ($00o's omitted).

The following conclusions may be drawn from these figures:

1. The proportion of failures due to competition is exceptionally low. Contrary to general opinion the number of failures due to this cause is exceptionally small, only 2.3 per cent (in 1897) of the total, and it furthermore shows no decrease since the organization of the trusts has tended, as generally believed, to eliminate competition.

2. The general revival of small enterprise is evidenced by the considerable increase in the number of failures due to inexperience. 3. The incompetence of business men shows no decrease, but rather a considerable advance from 11.6 per cent of the total number of failures in 1897 to 13.1 per cent in 1900.

4. An easy money market is seen in the decrease in the number of failures due to lack of capital, and also an increase of confidence on the part of investors.

5. The claims of the trust promoters that combination decreases bad debts is vindicated by a decrease in the proportion of failures due to unwise credits from 5.7 per cent to 1.6 per cent of the total.