Men of Wealth

John T. Flynn

Simon and Schuster, New York

ALL RIGHTS RESERVED INCLUDING THE RIGHT OF REPRODUCTION IN WHOLE OR IN PART IN ANY FORM COPYRIGHT, 1941, BY JOHN T. FLYNN PUBLISHED BY SIMON AND SCHUSTER, INC. ROCKEFELLER CENTER, 1230 SIXTH AVENUE, NEW YORK, N. Y.

Contents

Foreword

What follows in this volume is obviously a series of biographical essays. They present the outlines of the lives of eleven men and one woman. They are offered as twelve significant fortunes since the Renaissance.

It would have been a simple matter to have made a somewhat different selection. I might have chosen one of the Medici or Sir Thomas Gresham or Jacques Coeur instead of Jacob Fugger in the dawn of the capitalist system. At a later period I might have written of the Brothers Pâris or Samuel Bernard rather than John Law. I might have chosen Ouvrard, the financier of the French Revolution and Napoleon, as well as the Rothschilds. What excuse, someone will ask, can there be for including Cornelius Vanderbilt and not John Jacob Astor, Mark Hanna and not Carnegie, Hetty Green but not Jay Cooke or Jay Gould? And what reason can there be for leaving out Henry Ford and Andrew Mellon and the du Ponts?

In the course of the book I hope to make plain to the reader my reason for these choices. After all, the cast of characters of this or any other work having the same end must be determined upon some central principle of selection. I might have selected merely the dozen largest fortunes, in which event I would have left out not only Mark Hanna and Robert Owen, but J. Pierpont Morgan and, indeed, almost all of the others save perhaps Rockefeller, Vanderbilt, and Hetty Green. In fact, upon this standard of choice, it may be that Rockefeller alone could have been included.

Generally, what I have had in mind was to write of those figures

in the history of wealth whose fortunes were, upon the whole, fairly representative of the economic scenes in which they flourished and whose methods of accumulating wealth offered the fairest opportunities to describe those methods. I have also tried to place these money-makers in certain important eras, putting more emphasis upon the latest. Having chosen Mr. Rockefeller as obviously the most important from any point of view in the period between 1870 and 1911, it was not possible to include Andrew Carnegie or Philip Armour or any of the oil barons in this country or Europe, however great the temptation. Having decided upon Vanderbilt I could not, without duplication, have added Gould or Huntington or Hopkins or Harriman or a score of other railroad kings.

Having chosen my subject my aim has been to make, as clearly and vividly as possible within the limits of a single essay, a picture of the economic system of the time; the means by which wealth was produced and the devices by which large amounts of it were siphoned off into the strongbox of the man of wealth. I have made, in part at least, one or two departures from this standard of choice. Hetty Green was selected because I wished to include at least one miser's fortune and one woman's fortune and happily she combined both. As for the omissions, I have left out several men whose lives I was sorely tempted to examine. Among them there was at least one Oriental fortune. There were one or two immense land fortunes. I omitted them because, after all, I felt they belonged not so much to the times in which they appeared as to a departed or at least a vanishing system of economic life. In the case of Mr. Ford—and this will hold for several others—I did not include him in obedience to a rule I made before I began my studies: that I would deal with the fortune of no living person.

I have been guided not merely in my selections but in the method of treatment by my conceptions of the means by which wealth is created and the mechanisms by which it is drawn off into the hands of rich men.

Wealth is created by labor—but by directed labor. It is created

by labor working with tools and reinforced and multiplied by many skills—skills of hand and mind. It is created by this labor working upon materials. Putting it all together, we may say that wealth is created by labor working with various skills, with tools, upon raw materials, and under direction. The completed product is the composite of the materials, the common labor, the skills, the tools, including the whole technological endowment of the race and the direction of organizers.

No man working with his own hands, upon materials of his own possession and creation, with tools of his own fabrication, can produce enough to make himself enormously wealthy. The problem of becoming rich consists in getting a fraction—large or small—of the produce created by the collaboration of many men using all these energies.

The whole history of wealth accumulation consists in tracing the devices by which one man or a small group of men can get possession of this fraction of the produce of many men. In the beginning, when there were no machines, no money, no intricate inventions of credit, no man could establish a right to a share of the products of other men save through a simple and bald assertion of ownership over the materials and the men. Landownership and human slavery were the first instruments of the acquisitive. And as no man could acquire dominion over enough land and enough men to become rich save by an assertion of divine political power, we find the first rich men were kings.

As society grew and developed, men became individually more productive, on the one hand, and, on the other, the invention of money and credit enabled private individuals to establish claims upon the labor of ever-larger groups of men. We may say that the whole history of the art of accumulating wealth is the story of the invention of machines and the invention of the instruments of credit. Indeed, the two forces that distinguish the older world and its appalling scarcities from the newer world and its growing abundance are technology and credit.

Scientists and scholars slowly added one scrap of knowledge

by the parallels between their crises and our own. We shall see depressions in Florence, and France struggling against debt in the days of Louis XV, poverty tormenting farmers and workers in the Middle Ages and their sovereigns and premiers conferring and programming vainly against forces they did not understand which were changing their societies. We shall see businessmen and public officials quarreling about monopoly and government control and taxes and public debt and workers' claims and government spending. We shall behold economic messiahs with their gospels of peace and plenty all through the eras of Fugger and Law and Rothschild down to our own day. Men have been muttering about the same social ailments, the same disturbances, the same indignities and irritations for untold centuries.

One further point. In the course of these several histories of rich men, questions have arisen and points have come to my mind which, it seemed to me, ought to be noticed. And yet I could not quite see how this could be done without interrupting the narratives with discussion that would serve only to distract the reader. I have attempted to solve this problem by including between some of the chapters certain interchapters in which I have offered brief observations on such of these questions and points as have interested me. The reader will find them in the interlogues so arranged that if he is sufficiently interested he may peruse them, and if he is not he may skip them without losing any of the essential parts of the twelve histories that follow.

Illustrations

ugger the Rich

as the most alist era. St

On the manor there was and could be nothing of this thing called abundance which the modern politician juggles before the hungering eyes of his constituents. Barring the visitation of famine or disease there was enough to eat, but little more. Life was inexpressibly dull. To the manor courtyard came at intervals the wandering acrobat and juggler and magician with their tricks; the pilgrim with his tales; the minstrel with his songs and sagas, and the peddler with his few exotic wares and spices and his gossip. But these were infrequent interludes in a world of dullness.

It was this world that was cracking up. And the force which was doing it was money, the merchant, and the town.

Imagine a little town—part of the estate of some flourishing lord. Within its walls is a jumble of rude dwellings, the homes and shops of craftsmen—weavers, glovers, armorers, smiths, perhaps glassmakers, or, mayhap, woodcarvers and other workers; the castle of the lord, with its retinue of workers, villeins, men at arms, and knights. Outside these walls, in some sheltered spot, is a cluster of merchants, with their carts and benches in the open air. As time wears on, these servile and declassed bargainers set up their dwellings, fix their headquarters there, and, after a while, form a small commercial community. Within are other thrifty craftsmen who assume the functions of merchants, handling their own and their neighbors' products with these outlanders and at the market places and fairs. In time these merchants, within and without the walls, find they have common interests, common wrongs to resist, com-

mon rights to support against the exactions of the lord. They organize. And thus the bourgeoisie is born—the bourgeoisie and the Chamber of Commerce which is to inherit the earth. This bourgeoisie clamors for a voice in affairs. It spreads and grows until it swallows the town. It organizes guilds. It sets up demands. It takes over from the lord the function of governing the towns either by free charter or by violent assumption of power. It regulates trade, prices, production, competition. Imposing guild houses rise in these new towns all over Europe. These merchants grow moderately wealthy. They build stouter houses behind more impregnable walls. By the middle of the fourteenth century they were already challenging the power of the feudal lords. Thus they not only laid the foundations of the modern city, set in motion the money economy, and launched the capitalist system, but they brought into being the first rudimentary techniques of representative government, though it was a long time before the constituency represented would be a popular one. Thus the modern town was born, and out of it came that ogre which ate up the philosophy, the ethics, the slavishness, the ways of life of the almost frozen medieval system.

And thus a new kind of rich man came into the world. The rich man of the feudal system was the hereditary lord who in an outlaw world swapped with the peasant and burgher protection and order for a share of their product. He took part of their product and part of their labor directly, in places taking as much as three days out of six. He demanded fines and dues and tribute, making almost every event in his own life and his vassals' births, marriages, and deaths the excuse for some new kind of levy.

arise to threaten the entrepreneur as he in his time challenged the lord.

TT

It was about this time, in 1380, that a simple Swabian weaver named Hans Fugger left his small village of Graben to try his fortune in one of these growing towns—the free city of Augsburg. At the end of his life he was still a weaver, but he was more merchant than weaver, buying raw cotton for himself and his neighbors from Venice and selling his fustian and theirs to other cities.

Jacob Fugger II, his youngest son, was born March 6, 1459, in this imposing home. He had two older brothers, Ulrich and George, who were already employed in their father's counting room when he died. Ulrich at this time was 28, George 16. Jacob was but 10. But they were fortunate in the presence of an intelligent mother who was also a good businesswoman and who was able to direct her young sons wisely until they were able to take hold with a sure grasp. Jacob, however, was marked for holy orders. He proceeded as far as his first vows and was prebendary in Herrieden when his strong-minded mother decided he should forsake the sanctuary for the countinghouse. He left the cathedral in Franconia and went

to serve his apprenticeship at Venice. In 1478, aged nineteen, he returned to Augsburg and took his place as a partner in the business which was then known as Ulrich Fugger and Brothers.

Thus Jacob did not start from scratch. It was into a very flour-\nishing enterprise he stepped as a partner when he began his business career. His brother Ulrich, an able business administrator, had
greatly enlarged the business and had actually made that connection with the House of Hapsburg which was later to prove of so
much importance in the career of Jacob. He had already spread
the firm's branches to a dozen European trading cities and had\nestablished it as a collector of papal revenues in Scandinavia. How-\never, while Ulrich and George were businessmen of marked abil-\nity, Jacob's powers were of the highest order. And, despite his
youth, he was not long in the firm before his influence began to
assert itself. Before the fifteenth century had ended he had become the leader in the rapidly growing enterprise.

He was one of those men who not only possess great talents but exhibit them in their bearing and countenance. He had that kind of imperious manner and Jovian visage that marked the elder Morgan and made lesser money grabbers tremble in his presence. He possessed that inexhaustible vitality, that tranquil and unruffled temper, that immense talent for organization that characterize the greater industrial barons of our own day. In his lifetime he was assailed with varying degrees of fury as a monopolist, an enemy of German interests, a selfish and greedy hunter after profits, a foe to the established morals of the church and the state. Luther denounced him upon numerous occasions. And it was, indeed, Fugger's fate to find himself mixed up in that fatal adventure in papal finances that precipitated Luther's revolt. But through all this he preserved the perfect composure of the man who believes himself to be the special child and instrument of the deity. Just as a laterday industrial saint, John D. Rockefeller, said, "God gave me my money," the pious and acquisitive Fugger said: "Many in the world

are hostile to me. They say I am rich. I am rich by God's grace without injury to any man."

Beginning as a theologian and then as a merchant, he became in turn a banker, a promoter, an industrialist, a commercial statesman. He was a dynast. But he had no ambition to found a family of noble and unproductive rentiers. He looked with unmixed satisfaction upon the function of the entrepreneur and the profit by which he lives. He put aside the suggestion of retirement into tranquillity and ease with the observation that he "wished to make a profit as long as he could." His ambition was to create a rich and powerful dynasty of bankers and industrialists. He consorted with princes, emperors, and popes, but he never fawned upon them. He could write to an emperor who owed him money—the most powerful potentate in Europe—to remind him that he owed his crown to Fugger's financial backing, that his majesty owed him money, and he begged that he would "order that the money which I have paid out, together with the interest upon it, shall be reckoned up and paid, without further delay." He lived amid magnificence, surrounded by priceless objects of art and the greatest library in Europe and with a collection of estates which he deemed becoming to a great prince of trade.

П

The foundation of the Fugger fortune, of course, was merchandising. For a long time big merchants had been shouldering in among the swarms of peddlers who roved over Europe. The peddler's cart had left its wheel ruts along new roads, and these, with the remnants of the old Roman roads, became the nerve system of the Renaissance. Along these trade routes new cities rose and old ones took on new life. Transport companies were formed and navigation canals were opened. These peddlers were changing the face and stirring the heart and lungs of Europe. They made it possible for the beekeeper in some remote Thuringian manor to exchange his honey for a few ounces of pepper or cinnamon from the spice islands of Asia. Through their profit and coin-hunting expeditions it became possible for the fustian weaver of Augsburg to buy the product of the silversmith of Florence, the silks of Venice, the brocades of Lahore, and the perfumes of Alexandria. Two great streams began to flow around Europe: one a stream of goods made up of every sort of product of every clime; the other a stream of money coined in the little mints of hundreds of petty princes. These fustian makers and wool weavers and tool mongers began to have a wider market for their wares and they began to produce more. Men flocked to the towns. The capitalist system, with its money and its freedoms, was becoming the reigning ism, even though that word was unknown and the only isms men heard of were those which described the bloody and warring armies of religion.

Men like Fugger were coming to be a need. The smaller merchants, moving in an incessant stream over the growing network of European trade routes, had depended upon the customers they found at the manor gates, at the market places and the fairs. They were bringing to merchandising the utility of place. But a different sort of merchant was needed to confer upon it the utility of time and who would add the function of the wholesaler or jobber.

dising and who thrusts the element of risk upon other shoulders. These large-scale entrepreneurs were putting on respectability. Already some English merchants like Sir William de la Pole and Sir Richard Whittington had attained to knighthood, and in Florence the Medici had achieved nobility and become the rulers of the city. The merchant, who had been hardly distinguished from the pirate and whose morality, says Nietzsche, was merely the refinement of piratical morality, now emerged like the traders of Tyre, "the crowning city, whose merchants are princes, whose traffickers are the honorable of the earth."

The Fugger firm handled a large number of commodities and products. Fustian, a sort of rugged cotton textile of which corduroy is one type, was in wide demand, and Augsburg was a great center of fustian manufacture. Fugger supplied the weavers with raw cotton that was picked up at Mediterranean ports, chiefly Venice, and brought by sumpter mule through the Tirol. In turn he bought their product and supplied it all over Europe. He was something more than merchant; he was also a manufacturer, of the contractor type, operating on the putting-out system, furnishing the wool and taking the cloth from some numerous hand looms—3500, some historians say.

First among this merchandise was luxury goods. The princes, nobles, gentlemen, and the richer merchants were his customers. The lords and gentry and well-to-do townspeople were collecting their dues and fines and taxes in money, and there was a growing volume of silver and gold to spend. The lords had a constant flow of moneys which were for the most part dissipated. The income of Europe was beginning to pile up in the hands of the large merchants.

Inevitably these men were bankers—bankers to other merchants, to farmers, to weavers, and to governments large and small. When any government wanted money it customarily went to its rich merchants.

TV

For many years Venice was the center of the European spice trade. But Portugal, following her conquests in India, got control of a supply that transferred the world's spice capital from Venice to Lisbon and later to Antwerp. Here is the way this business operated. First of all, it was a royal monopoly. The Portuguese king, like most monarchs of the time—and since—continually needed funds. He would make a contract with a merchant to outfit a vessel at the merchant's own expense for an expedition to the spice regions of the East dominated by Portugal. The merchant loaned the king a sum of money proportioned to the amount of spice or pepper he hoped to bring back. When he returned with his hold loaded with pepper, cinnamon, and other spices the king paid off the loan with the cargo. These were called pepper contracts or spice treaties. Obviously they were highly speculative, since it was a long voyage, in primitive vessels, across seas menaced by storms and pirates. The empty-handed skipper, of course, lost his loan.

Fugger dealt in spices, but for most of his life he looked upon these spice adventures and their treaties a good deal as John D. Rockefeller looked upon the oil producers. Rockefeller preferred to buy their oil after they had fetched it out of the ground, and Fugger preferred to buy spices from the successful shippers after they had brought it safely back. A man had to buy pepper at a distant point, pay for it in advance in the form of a loan to the king, haul it at his own expense and risk, and take the chance in a fluctuating market that it would be worth what he paid for it.

This was not the sort of business Fugger relished. But the other merchants of Augsburg, chiefly the great Welser firm, were active in this. When the Portuguese conquered India, a consortium of Augsburg merchants led by the Welsers made a pepper treaty with the king to equip a fleet and made an immense profit. Fugger took only a small piece of this.

But in the end he succumbed, as the refiners succumbed to wildcatting for oil. Magellan, after a three-year trip around the world, returned, having made various conquests. He took possession of the Moluccas, the fabulous Spice Islands, for the crown of Spain. Jacob Fugger sought a spice contract with the Spanish king. With his fellow South German merchants, he equipped two voyages, one led by Sebastian Cabot and one by Garcia de Loaisa, to bring back pepper from the Moluccas. Both voyages were complete failures. But Fugger died before they got well under way and never lived to see the wisdom of his earlier restraint vindicated. He lost 4600 Spanish ducats on this venture.

v

These rising magnates were not without dishonor in their own times. They were economic revolutionists. They were as obviously at war with the established order as the inventors of the power loom at a later day or the makers of modern corporate finance capitalism in the last century or the protagonists of the planned capitalist society in our own day. An old dogma of economic ethics, hoary with age and heavy with the benediction of the church—the principle of the "just price"—was being hustled out at civilization.

Out of this grew the doctrine of the just price which was supposed to inspire the trade of Europe until the eighteenth century. But as Saint Thomas himself had said, the "just price is not absolutely definite but depends rather upon a sort of estimate." Society therefore contrived a legal agency for ascertaining and proclaiming the just price. The merchant's guild became the arbiter. The trader and craftsman were supposed to be content with an income fitting their station in life. And in fixing the just price the guild was supposed to be guided by the interest of society and not the interest of the entrepreneur, which is one point of difference between the ancient guild and its modern editions—the twentieth-century trade association. Under the influ-

ence of this philosophy the guilds set up as code authorities in a medieval NRA and proceeded to subject medieval trade to the most extensive and exacting regulations. Everything was formalized. Trade itself was caught in hard and fast jurisdictional ruts. In Frankfort there were 191 crafts—eighteen in the iron industry alone. And as regulation begets regulation, the feudal town became enmeshed in a tangle of rules and formulas and ordinances and red tape that utterly constricted the economic system.

Every form of progress had to fight against the established rulers of manor and town. Poverty was appalling. Workers lived in hovels. Abortive proletarian uprisings appeared all over Europe. Peasants rose without success in Saxony, Silesia, Brandenburg, Illyria, Transylvania. English laborers demanded to be paid in money. Journeymen guilds arose under cover of religious and technical-instruction associations—bootleg unions, like American speakeasies during the prohibition era disguised as dramatic and literary clubs.

For a century a quiet, unostentatious, cautious, and inarticulate resistance to these multiplying fetters was under way. New ways of life, new demands of trade, the changes made by the expanding money economy were forcing growing alterations in the general acceptance of these theological concepts of trade.

For one thing, in a growing money economy credit was necessary, even to the pope and the abbot who thundered against interest. Pope John XXIII died with his miter in hock to Giovanni de' Medici for 38,500 florins. When John died his successor demanded the miter back under pain of excommunication. In-

For this pretty situation Saint Thomas had provided a convenient ethical shelter. The great theologian held lending at interest to be a sin and an injustice to the borrower who was the victim of usury. "The usurer sins in doing an injustice to the one who borrows from him upon usury. But the borrower upon usury does not sin, since it is not a sin to be a victim." But, asked the theologian, does not the borrower induce the lender to commit a sin by offering him the occasion? "It is lawful," expounded the Angelic Doctor, "to use sin for a good end." He adds, with what might be called a naïve, almost holy sophistication, that "He who borrows money upon usury does not consent to the sin of the usurer, but uses it; nor does the taking of usury please him, but the loan, which is good."

And what end could be better than the building of a monastery or a cathedral or the support of a Christian monarch? As to the confiscation of the property of the usurer, is not the sinful man subject to punishment? It is not possible to excommunicate a Jew. But it is possible to deprive him of the means whereby he or his tribe commits a sin. To take his funds is like disarming a brigand.

As the new methods spread under the influence of the expanding money economy, the need for credit by businessmen and sovereigns grew to the point where funds more formidable than the Jew could supply were needed. Moreover the merchant class was accumulating money savings which they were eager to put out at interest, and so the Christian banker appeared upon the scene and the Christian ethic lost some of its plausibility. Society divided into two schools, those who stood by the old scholastics and those who took the fork in the road behind the leadership of the humanists. The old-timers roundly denounced Jacob Fugger and his colleagues in trade. They carried the war into the Diet and into politics. There were great cities whose security depended upon the power of the guilds, like Constance and Basle and Lübeck and all the Hanseatic towns. There were some others, like Augsburg, and the Flemish towns, and many in France, which were building their prosperity upon the independent capitalist.

The Hanseatic League, which comprised 150 cities at its height, forbade any man to buy grain before it was grown, cloth before it was woven, herring before it was caught. It regulated prices, submitted its members to the most minute regulations, arranged all to perpetuate the place and power of the "Little Man," backed its policies and rules with assemblies, tribunals, police, fleets of ships protected by a navy, flew its own flag, and maintained foreign branches where its branch managers and clerks lived in barracks under an iron discipline. Despite its power, such merchants were cruelly handicapped against the free, unfettered devices of the independent merchant. Hence they denounced the rising Fugger. At Constance the Ravensburg Company, until then the greatest trading corporation in Germany, demanded that no one should be permitted to have a capital exceeding 100,000

gulden, though its own was not less than 140,000. The Council of Nuremberg would restrict it to 25,000 gulden. In the German Diet it was said that the wealthy were reproached with "destroying all chances for work of the small trader on a moderate scale." In France a similar movement was afoot. Jacques Coeur, the erratic but powerful French millionaire, was indicted as one "who had impoverished a thousand worthy merchants to enrich one man." This sentence, in endless variations, was destined to go echoing through the succeeding centuries. In the American Congress, about the time John D. Rockefeller was born, a Mississippi representative would bewail "the death of so many small establishments which might separately and silently work their way into honorable existences" and "one great establishment rises on the ruins of all the surrounding ones."

Fugger soon concluded, as John D. Archbold and John D. Rockefeller did, that his philosophy needed an apologist. And he found the ideal one in Dr. Konrad Peutinger, the humanist, whose home was in Augsburg. Peutinger was a more formidable champion than Chancellor Day of Syracuse University or the flock of prosperous preachers who took Rockefeller's gold and used scripture to defend him. He was a sort of combination of Samuel C. T. Dodd, Rockefeller's verse-making and philosophising counsel and Elihu Root, who spread his own respectability thinly over the hated monopolists of his time.

He was a lawyer and, like most lawyers of that era, a theologian who had taken his place with that school which believed that the philosophy suited to a human society must seek its criteria and data in the affairs of men rather than in the abstract contemplation of the spirit. He was Fugger's chief adviser. He wrote: "Every merchant is free to sell as dear as he can and chooses. In so doing he does not sin against canonical law; neither is he guilty of antisocial conduct. For it happens often enough that merchants to their injury are forced to sell their wares cheaper than they bought them." He defended cartels and monopolies, profit and interest. He was indeed the first great philosophical

Thus always the reigning acquisitive group must have its philosopher. Rameses found his in the temple. Nicias had his Hiero. The corporations of Rome had their Cicero. Saint Thomas turns up providentially to build a fortress of philosophy around the feudal lord whose regime depends upon the suppression of the merchant. And Dr. Peutinger appears upon the scene to refute the Angelic apologist when his ethics no longer fit the prevailing process of wealth getting.

As a matter of fact, even the great Angelic Doctor himself had left a large loophole for the collectors of interest. He held that while a man could not receive interest, yet if he received a gift "not asking it and not according to any tacit or explicit obligation, but as a free gift, he does not sin; because even before he lends the money he might lawfully receive a free gift, and he is not put at a disadvantage by the act of lending." (Summa Theologica, Lesson LXXVIII, Article II.)

Here is pretty thin skating upon the theological ice, and inevitably the ice cracked first by the use of the "gift," then by an understanding, by means of the bonus, much as interest-rate laws have been evaded in our own time, and finally by frankly throwing overboard the whole Aquinian luggage. For when Fugger writes to Charles V for payment of his loan he asks plainly that "the money which I have paid out, together with the interest upon it, shall be reckoned up and paid, without further delay." (Author's italics.)

capital of about 400 per cent, or 23.5 per cent a year. But this does not measure the profit, since it takes no account of the sums withdrawn during those seventeen years by all the partners.

However, in 1511 a new accounting is begun. Various sums were taken out of the business to pay off female heirs. The firm made a fresh start in 1511 with a capital of 196,791 golden gulden. After Jacob's death, the inventory made by his nephew Anton, which took nearly two years to complete, revealed a capital of 2,021,202 golden gulden. This represented a profit of 1,824,411 golden gulden, or over 900 per cent. Here was a profit over a period of sixteen years of well over 50 per cent a year. But again it is necessary to add a considerable percentage to this account for that part of the earnings withdrawn for the extensive expenditures necessary to support the Fuggers' magnificent way of life.

37T

The long struggle to break up the old feudal system and the primitive guild ethics of the towns and set in motion the capitalist society lengthened out into a series of steps. First there was the slow infiltration of money. Next came the shattering of public acceptance of the scholastic ethics. Then came the rise of free competition and the long retreat of the old guild trade monopolies. Next was the development of modern banking. Then came the rise of the large-scale industrial operator. It is because Fugger played a leading role in all these stages that he stands as the most important figure at the dawn of the capitalist era.

The Florentine banker was also a moneychanger. But he was far more a lender of money. He loaned primarily his own money. But he accepted funds from others which he used in his business and which use he paid for.

We then find the larger merchant-adventurers drifting into the banking business. They were compelled to do a certain amount of moneylending in connection with their activities at fairs. The banker-merchant posted himself at the fair. Merchants went about buying and selling goods. Sometimes they operated by means of exchanges of goods, sometimes with coins—perhaps to the extent of 40 per cent. But there were merchants who had to have credit until they had disposed of their whole cargo. And so they took their vendors to the banker who either guaranteed payment or actually made payment to be repaid later. Out of this developed the practice of bills of exchange.

Always there were people or institutions or rulers who felt the need of a safe depositor for their moneys. The English king deposited his funds at times with the Knights Templars and so did other princes and lords. It was a logical survival of the ancient custom of keeping funds in the temples. In time the bankers became more than mere lenders of their own funds. They accepted the deposit of others' funds. These they were at liberty to lend out. Such deposits were treated as demand loans to the bankers. There were times, however, when the depositor came for some of his money only to find the banker did not have it available. Under these circumstances the banker would take his client to another banker with whom he had a deposit or enjoyed credit and thus honor the client's demand. After a while it became unnecessary for the banker to go in person to another banker to arrange this withdrawal. He would give his client a written order upon a neighboring banker for the funds he lacked. Thus checks came into use. And the next phase was for the client himself to give to another a written order upon his banker for funds. Thus the general use of checks came into vogue.

All the time, the banker served to accommodate the kings and the petty princes and lords who needed money. When the king required funds on loan he might get them from a single usurer at first. But later he would be aided by a consortium of merchants who would subscribe to the loan, usually under the leadership of one of large means and influence among their number. Such a one was Fugger. And thus, we see the rise of the international banker.

Cities, supported now by orderly taxation, would in need sell their revenues in advance to tax farmers who, not infrequently, raised the funds as the old Roman tax corporations did, by subscriptions among the well-to-do merchants. One finds running through all these early years ordinances and edicts and laws and regulations of cities and kings and public bodies and guilds covering the subject of checks and deposits and bills of exchange and negotiable certificates of deposit and bank examinations and balance sheets. Double-entry bookkeeping was perfected at Venice, where Fugger served his apprenticeship. The Italians, chiefly the Florentine bankers, were inventing names for various instruments

and transactions—casa, banco, giornali, debitore, creditore—which were to become the daily countinghousehold words the world over. Thus men were slowly forging the instruments, weapons, and the jargon of the modern capitalist state that would become in time the mold of society. These old bankers were leaving their names upon the institutions and streets of the cities of Europe. In Florence you will still find in the street names, the memory of the Bardi, Peruzzi, Albruzzi, Grecci, and others—bankers all.

The Fugger family had followed this evolution—first weavers, then lenders of money around the fairs and market places, then international bankers—the greatest of their time. Jacob Fugger's firm had a web of branches and factories extending from Naples in the south and the Spanish peninsula to Hungary and Poland in the east and Scandinavia and England in the west.

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No canvas designed to depict the dawn of capitalism would be complete without a brief place for what was perhaps the first authentic strictly capitalist depression in Europe, produced largely by the operations of these new bankers. The episode is generally known as the failure of the Bardi and Peruzzi banks in Florence and it produced consequences not unlike those attending the failure of Jay Cooke in America or Baring in England or the Credit Anstalt in Vienna in 1931.

Florence had carried far the organization of her producing energies. Wool textiles was one of her important products. The homes of the townspeople and the villagers were turned into sweatshops to which the merchants sent the raw wool to be processed in the homes. While the Church and her doctors thundered against interest and profit, the village priests read pastoral letters threatening the workers with a denial of the sacraments if they resisted the exactions of the wealthy usurers of Florence who dominated the system.

A continuous supply of raw wool on the one hand and wide

Edward had promised to pay the principal and interest of these loans in coin, and his undertaking was guaranteed by the Archbishop of Canterbury and the Bishop of Lincoln. So eager was the rash Edward for these sums that, upon completing the arrangement, Edward gave to "the merchants of the Bardi society" 30,000 pounds sterling, to the "merchants of the Peruzzi society," 20,000 pounds sterling, and "in consideration of the great help given the king," 500 marks to a Peruzzi agent in England and, for the same reason, 500 marks to the wife of another agent and to the wife of a Bardi agent. Wives of two other agents got 200 pounds each. It sounds as if two great American banking houses managed an American loan to the government of Chile on a 20 per cent basis,

But all this time Florence, rushing forward in the first incident of uncontrolled expansion of the capitalist era, was moving deeper and deeper into debt. Merchants were making profits and depositing them with the Bardi, the Peruzzi, the Mozzi, the Frescobaldi, the Scali, and also investing in various bond issues underwritten and managed by these houses, but chiefly by the Bardi and Peruzzi. Competition with their wool industry was growing from England and the Flemish weavers. But as they produced ever more they were ceaselessly seeking to expand their markets. Florence, an economic unit like modern England, imported raw materials and exported finished products. She enjoyed her expansion through the strategic activities of her rich bankers, who grew wealthy milking European monarchs and princes and at the same time using their loans as weapons to force Florentine products into those old custom-sealed European countries and cities.

One market, among others, was of great value to Florence—the city of Lucca. This city was a commercial battleground between the merchants of Florence and Pisa. And out of this situation it became the victim of an episode that depicts strikingly the inheritance of violence that deformed the early struggles of primitive capitalism. A band of German mercenaries seized Lucca and offered to sell it to the city of Pisa. Pisa agreed to pay 60,000 golden florins and made a down payment of 13,000 florins, which it was destined to lose when Florence armed to balk this sale of its valued market to its chief rival. Later certain Florentine merchants and bankers—including beyond doubt Bardi and Peruzzi—offered the German mercenaries 80,000 florins. They would thus control Lucca as a market for their products and own its customhouses and its tax revenues. It was as if a few leading merchants and manufacturers of Philadelphia were to propose to buy Pittsburgh from a mutinous

regiment of the New York National Guard that had seized the latter city and was now peddling it around the East. But Florence, still ruled by the remnant of the old Guelph spirit, protested against this immoral purchase of a city's population like so many slaves. Finally the captors of Lucca knocked the city down to a Genoese merchant-adventurer named Gherardino Spinola for 30,000 florins. The outcome of this was war between Florence and Pisa.

The competition of the English and Flemish wool weavers had been undermining the trade of Florence much as the competition of the Carolinas cut into the business of the New England textile industry and as the competition of the East cut into the textile industry of Manchester. Production in Florence fell off. The streets were filled with the unemployed. Merchants who had large deposits with the Bardi, the Peruzzi, the Frescobaldi, and others were calling for their funds. Some of the smaller bankers failed. Indignation against all the bankers was rising. Florence faced a crisis not unlike that which faced America in 1933 or Germany in 1932. Nothing could save the great bankers but a moratorium. Disturbing rumors floated in from Flanders, where Edward's generals were having but small success. In this crisis this old city, where the popular party had always been strong, with its active popolo minuto, which hated the Ghibellines not only because they represented the philosophy of the economic royalist, but of external interference and domination, submitted to the device of dictatorship. In 1342 that fantastic adventurer, Walter of Brienne, a Frenchman who styled himself the Duke of Athens, was made dictator through the machinations of the bankers. He proclaimed a moratorium on private debt for three years, which saved them.

debt and planned gradually to extinguish it by progressive repudiation, which promptly brought upon his head the wrath of the bankers. In 1343 the distress of the city was so great, the fortunes of the war so melancholy, the anger against the dictator so general that the people poured into the streets in an unrestrained uprising. They looted the palace of the Bardi, taking it is said, valuables to the amount of 30,000 florins. The dictator was compelled to resign and flee from the city. Certain Neapolitan bankers who had loans outstanding in Florence called them. The news came of Edward's reverses that brought the Hundred Years' War to its first pause in 1343, and Edward delivered the crowning blow by defaulting upon his loans. Immediately the Peruzzi bank failed. And within a year the great Bardi bank crashed. They carried with them most of the bankers of Florence. The disaster shook all Europe and produced in those cities where capitalist organization had proceeded to any length, such as Venice and Genoa, the most depressing consequences. Excessive debt, overexpanded industry, concentration of money and power and wealth, the extravagance of governments, the destructive power of war had made for Europe its first great capitalist depression in the modern era.

VIII

cash to the Emperor, his majesty was a never-failing source of new privileges and monopolies and profits to Fugger. If Fugger had in his vaults what Maximilian required, Maximilian had in his rich realm priceless metal and other resources that were indispensable to the acquisitive Jacob.

Maximilian was Emperor of the Holy Roman Empire, that pale imperial shadow of power which was slowly vanishing out of Europe. But of far more importance to him was the struggle for mastery that was going on in Germany, as in every other country, between the king on one side and the numerous feudal lords on the other. As in the thinly concealed struggle which smolders today in America between the local governments and the Federal government over the rising supremacy of the latter, Germany was turning to strong central government to solve her little-understood problems. The spirit of revolt in religion, the expansion of knowledge, the awakening curiosity of the masses, dynastic and commercial and technological and political energies kept the population in a ferment, but, perhaps, in the center of all this, accentuating and stimulating all the other elements of unrest, were economic forces.

Probably more than anything else the prime moving spirit of turbulence, controversy, and change was money. For at least two hundred years the feudal world was disintegrating. Men knew things were wrong. They debated and argued and fought over the causes and the cures. They held conferences all over Germany to inquire what was amiss and how it was to be set right. But they never seemed to get around to the real cause or even to talk about it. The struggle resolved itself now into bitter religious controversies, now into wars between princelings and estates, now into political debates. What they saw was a political upheaval, the effort of the king to make himself master against the savage opposition of the lords. They took measures against this. But they took no measures against the one potent energy that entered the system like a malevolent germ—money. So that as you examine the long history of the decline of the Middle Ages you are struck by the fact that nothing contributed so much to destroying the existing

order as the measures that were taken by the politicians of the day to save it.

tolerate the disorders that grew out of the petty wars and feuds and brigandage of the numerous lords and knights. They turned to the crown for order, stability, and protection against the feudal barons. The king—Maximilian—had no revenues from the kingdom save those from his own estate—the Tirol. Soldiers he could get from his vassal lords by levy under their feudal obligations when he wished to fight the heathen or a foreign foe. But for use against the lords themselves in the great struggle for mastery of Germany, the emperor had to have a mercenary army, and this required cash. He could get enough cash only by borrowing from the bankers, who in turn, through consortiums, could raise the moneys amongst the merchants.

Thus king and towns and merchants were drawn together by the inescapable necessities of this new money economy. This immense need for money for emperor, and pope too, for that matter, laid too great a strain upon the old scholastic ethics of Aquinas, for king and pope needed the rich man as the source of credit, and this, in turn, brought about a frank abandonment of the "just price" and the proscription against money wealth and interest. And thus the merchants and bankers waxed mighty, became the most powerful subjects, challenged the power of the lords, built castles of their own, acquired titles and estates, and became, in time, the lords of creation.

Maximilian was one of those frail vessels into which is poured the destinies of a people in a moment of crisis. He was young, well proportioned, ruddy and healthy, restless, ambitious, and not wholly devoid of ability. He lived simply, ate moderately, and avoided those copious draughts of Rhenish wine and beer that besotted the German nobility. The Tirolese peasants adored him because he was brave and adventurous as a hunter and a glamorous figure in the courtyard tilts. He enjoyed immense popularity with the younger nobles, was gracious and charming in his personal relationships, encouraged artists and scholars, and, in general, exhibited the qualities of urbanity, heartiness, ebullient good nature

and courage that became one who was called the "last knight of Europe."

But he was unstable, flighty, always plotting for supreme power. He engaged in one calamitous war after another. He was forever fabricating new devices for getting more money. Even as an old man in 1518 he was talking of another crusade against the infidel. Declining toward the end of his reign into the most humiliating poverty, embittered by the embarrassments to which it exposed him, he left the Tirol, traveled down the Inn and the Danube, where, prostrated by a long illness, he died.

It was to this unstable, chimerical, and tolerant prince that Jacob Fugger attached himself as chief banker. And the heights to which the great Augsburg banker rose in the Hapsburg hierarchy will be seen in the part he took in naming the successor to Maximilian's throne.

But there was another candidate in the field, Francis I of France. The selection of the emperor was in the hands of the electors, a small group of dukes and archbishops. The Margrave of Brandenburg, the Count Palatine of the Rhine, and the electors of Mainz and of Trier were practical gentlemen and their votes could be had upon one condition only—Maximilian had to be able to offer a bigger price than Francis. The fight started at the Diet of Augsburg in 1518. Maximilian was growing old. His treasury was empty. And though he talked of his plans to launch another crusade he could not pay the tavern bills of his courtiers. Nevertheless, there, supported by the financial resources of Fugger, Maximilian was able to secure the promise of support for the Spanish king.

The negotiations, reduced to the grossest commercial terms, reached a point where the Margrave of Brandenburg had the de-

Fugger was enraged at this. His whole position as the banker for the most powerful royal house in Europe, the Hapsburgs, was threatened. He lost no time acting. He let Charles know that he had but to throw his support to the French to blast the expectations of the refractory Spanish monarch. He got in touch with the electors. Soon Charles learned that an election consists not merely in making promises to those who have votes to sell but in convincing the purchased electors that the promises will be kept. When Charles' agents got down to brass tacks with the electors they made it plain that they wished Fugger to manage the financial arrangements by which they had to be bribed not to sell the crown of their country to a Frenchman. They insisted that they would be satisfied with nothing less than Fugger's guarantee of the payment of their respective shares.

Fugger was called back to the helm in triumph. In the discharge of this important commission, which resulted in the election of Charles of Spain as Holy Roman Emperor under the title of Charles V in 1519, Fugger extended credits of over half a million gulden in gold. His fame now reached its highest point. After this he remained the undisputed chief banker and financial adviser of the Emperor. Augsburgers said with pride that the name

of Fugger was known throughout the world. He became almost a legendary figure. Luther related, with a touch of awe despite his hatred of Fugger's predatory class and his feud with Fugger himself, how the Bishop of Brixen, one of Peutinger's literary companions, had died in Rome, leaving a scarcely legible scrap of paper, and how Pope Julius sent it to Fugger's agent in Rome to be deciphered. The agent recognized it as evidence of a deposit of several hundred thousand gulden which the good Bishop had with the Fugger house. When the Pope asked how soon the money could be sent, Fugger's factor replied: "At any hour." The Pope turned to the French and English cardinals present and asked: "Could your kings also deliver three tons of gold in an hour?" When they said no, his Holiness replied: "But that is what a citizen of Augsburg can do."

The astute Augsburg banker made more than his interest and his "gifts" out of his sovereign. The function of banker—everready and loyal banker and financial adviser—opened for him the door to priceless privileges in Maximilian's ducal domain of the Tirol, rich in natural resources—that same Tirol with its mines which stimulated the patriotic yearning of the twentieth-century German statesmen for Anschluss. He obtained from the debtridden royal spendthrift those invaluable copper and silver monopolies that became the chief source of his great fortune.

He must have been touched as he beheld his own growing wealth beside the ever-increasing poverty of his sovereign. At the Congress of Vienna, where Fugger, surrounded by his rich agents and the members of his family, magnificently attired, conferred upon favored nobles rich gifts of gold and pearls and other precious stones, the impecunious Emperor strode about resplendent in costly jewels that his rich banker had secretly loaned him to enable him to play more splendidly the role of monarch.

Fugger must indeed have been fully conscious that he occupied a sovereign eminence in a province within the empire—the new province, the great principality of money. For we find him addressing the Emperor Charles V in terms used then only by great and powerful vassals who, under the formal language of allegiance, talked to kings with the assurance of equals.¹

^<sup>1 Charles V was slow in repaying the large sums advanced by Fugger to accomplish Charles' election to the imperial throne. Fugger, his patience taxed by the royal delinquent, wrote to the Emperor the following extraordinary letter:

His Most Serene, All-Powerful Roman Emperor, and most Gracious Lord!

He began to play the magnifico. In 1511 he was made a count. But already he had begun to acquire great estates. Before 1511 he had acquired at least four splendid domains—two of them from the Emperor himself, all in Swabia, and one of them very near to Augsburg. He had also an estate or two in the Tirol and in Hungary, and his magnificent palace in Augsburg, filled with the paintings and sculptures of the best artists in Europe, was a treasure house of art. Chiefest of all, like that other magnifico of the last century, J. Pierpont Morgan, he was an inveterate collector of valuable and rare and beautiful manuscripts and books. His library at his death was already the finest in Germany and after his death, through additions of his family, became the most famous in Europe. Indeed the greater part of its treasures was brought together by Jacob Fugger's successors. It is worth recording here that 125 years after Jacob Fugger's death, this famous library was sold by Count Philip Edward Fugger to the emperor for 15,000 florins—about a fifth of the sum that had been offered for it in an earlier day, and when the imperial libra-

It is also well known that Your Majesty without me might not have acquired the Imperial Crown, as I can attest with the written statement of all the delegates of Your Imperial Majesty. And in all this I have looked not to my own profit. For if I had withdrawn my support from the House of Austria and transferred it to France, I should have won large profit and much money, which were at that time offered to me. But what disadvantage would have risen thereby for the House of Austria, Your Imperial Majesty with your deep comprehension may well conceive.

Your Imperial Majesty's most humble servant,

rian went to Augsburg to fetch the collection to Vienna the town councilors prevented him at the instance of the creditors of the Fugger family, whose wealth and power and glory had by this time departed.

Jacob, like many of the wealthy Christian men of wealth of his day, was a generous but never secret dispenser of philanthropy, giving to monasteries, churches, almshouses, and the poor. For one of these benevolences he is indeed famous. This was his erection of a model housing project—fifty cottages housing two families each, still known as The Fuggerei—in the suburbs of Augsburg to offer, at very low rents, decent homes to the underprivileged workers of the city. It is perhaps the first instance of a low-cost housing enterprise in Europe. And that the job was well done is attested by the fact that the houses remain in good condition and are still tenanted.

For always this great House of Fugger assumed an identity in his mind separate from that of its members, and the proud merchant studied ceaselessly to ensure its immortality and its magnificence.

Female heirs and those in orders were excluded from the business. All heirs were compelled to leave their inherited share in the business for three years, after which they could, if they wished, withdraw it only gradually. The great mining interests were segregated from other enterprises, and only male heirs were permitted to inherit them. Various devices with penalties were contrived in the business structure to ensure its permanence.

But Fugger, who knew so well how to manage the great craft he captained, knew little enough of the perils of the seas it sailed. Anton Fugger, a nephew, succeeded to the chief directorship on Jacob's death. Before he died in 1560 the great Fugger house was as deeply morassed in the financial adventures of the House of Hapsburg as the Bardi and Peruzzi were in the finances of Edward III. When Anton's son Marcus took over the reins, he saw the Fugger riches slipping out of the company's hands. Most of the wealth amassed by Jacob was dissipated in the lifetime of his grand-nephew. A century later the only part of that wealth that remained was what had been invested in lands.

TX

Greater than any emperor, richer in revenue than any temporal monarch, was the pope of Rome. The papacy was then, as it is now, a highly organized superstate with its branches in every village, its parochial, provincial, and national officials, diplomats, armies, secret agents. Its primary function was the salvation of souls, but in the performance of that duty it had contrived an immense machine. Its founder had administered his great enterprise with literally no plant capacity beyond the open fields, the blue sky, and the simple habiliments of a mendicant. But the modern Church continued his ministry from the palaces of its wealthy prelates and a vast physical structure that required an endless flow of revenues into its treasury.

For several centuries the pope had employed the services of various bankers—chiefly Italians. But after 1502 Jacob Fugger

elbowed all other rivals aside as the foremost fiscal agent of Rome. He collected the papal revenues in Germany, Holland, Hungary, and the Scandinavian countries. He made advances to the pope, recouping his loans out of these collections. Similarly he transported papal moneys to diplomats, monarchs, generals, missions all over Europe.

His place in history in connection with this traffic, however, rests chiefly upon the part he played in the collection of indulgence money and the sums paid by wealthy candidates for Church benefices for their promotion. His role here was a sinister one. There seems little doubt that he artfully established himself as what in modern American parlance would be called the "contact man" with the Holy See in the distribution of Church honors and benefices in Germany. The ambitious cleric seeking the purple of the monsignori or the pallium of the archbishop as a rule had "to see Fugger." He was required to put up an immense sum with the Roman dataria, and Fugger was the gentleman who knew how to make the best terms for him, how to provide the money and the means of repaying it. Indeed, Fugger once boasted that he "had been concerned in the appointment of all the German bishops."

It was out of this traffic, denounced openly as simony by the Church, but practiced behind the scenes by its prelates from pontiff down, that Fugger got for himself a dubious immortality in that historic episode that precipitated Martin Luther's break with the Catholic Church.

In the fall of 1517, faithful Catholics gathered in the Catholic churches in the diocese of Mainz to hear a famous preacher portray for them the inspiring theme of a great mother basilica for Christendom—St. Peter's at Rome—which Pope Leo X planned to complete. What the preacher wanted was funds—money for the holy project. To those who would contribute, the Pontiff had offered a plenary indulgence. The faithful gave, at least for a while. But the success of the campaign for funds was interrupted by an exposé of the sinister facts behind it.

Young Albrecht, Margrave of Brandenburg, had an inordinate

ambition to collect archbishoprics for himself. Having achieved through the influence of his brother, the Elector of Brandenburg, the see of Brandenburg, he next succeeded in becoming archbishop of Magdeburg, in 1513, at the age of twenty-three. This was a hitherto unheard-of achievement. But he decided to seek also the archbishopric of Mainz when that post became open, in 1514, by the death of its incumbent. To command three dioceses was an exhibition of ecclesiastical greed which the avaricious Florentine party in power at Rome knew how to exploit. The dataria—the sacred bureau concerned with graces and benefices—informed the audacious Albrecht that the business could be arranged if he could raise 10,000 gulden in addition to the fifteen or twenty thousand which he would ordinarily have to pay for such a diocese. Albrecht's chance of raising so much money out of the overtaxed communicants of Mainz was slim, since that see had had two short-lived archbishops, each of whom had paid fourteen thousand ducats for his elevation. The diocese was bankrupt and hence would not yield further funds to the ordinary appeal. Some more effective squeeze was necessary.

The matter, apparently, was arranged in Rome by Johan Zinc, the Augsburg ecclesiastic who was in the pay of Fugger. Albrecht would borrow the 10,000 gulden needed from Fugger. Pope Leo would grant to him in Mainz and Brandenburg a plenary indulgence, ostensibly for the building of St. Peter's. In fact, however, the "gate" would be split fifty-fifty between the Pope and the Archbishop, like one of those American prize-fight benefits for the Milk Fund where the Milk Fund gets a modest percentage while the promoters and fighters get the rest, and all the ballyhoo is on the Milk Fund.

managers did what an American Y.M.C.A. drive or Community Chest campaign does. They employed a professional high-pressure drive manager. There was at least one such person in Germany—John Tetzel, the famous indulgence preacher, a sort of Billy Sunday who had shown in other dioceses that he could bring the pennies tinkling into the collection boxes. Tetzel made a specialty of preaching indulgence drives.

With this organization—Tetzel managing the exhortation and Fugger managing the money—Albrecht set out to gather in Mainz and Brandenburg the ten thousand he had borrowed from Fugger and the fifteen or twenty thousand he was to pay besides. Tetzel went from town to town and from church to church. He preached the gospel of the full remission of the temporal punishment due to sin for those who would contribute to build St. Peter's, without disclosing the real object of the drive. The contributions were put into sealed boxes, counted at Fugger's office in Augsburg in the presence of representatives of Albrecht, and turned over to the banker to be divided in accordance with the deal.

At this time Martin Luther was engaged in his rising controversy with the Church over this very question of indulgences. The Albrecht-Fugger-Tetzel performances aroused his indignation, and he let fly at the whole incident in which an archbishop "sent Fugger's cutpurses throughout the land" to collect money under the guise of aiding a sacred cause to pay off a loan to the Augsburg usurer. Luther denounced Fugger in the roundest terms. He piled his scorn upon the banker's trade practices. While Luther based his attack upon purely religious grounds, his fulminations found an answering echo in the minds of the practical German burghers who saw in the whole indulgence and benefice racket a scheme to gather up the all-too-meager supplies of German coin and drain it off under hypocritical pretenses to Italy. The incident produced so violent an effect upon Luther's mind that it precipitated his decision to bring the whole subject to an issue, and, within two months of the commencement of the Tetzel

X

If you will go back to the end of the fifteenth century to the ancient city of Neusohl, you will come upon something that strangely resembles in significance the Butte, Montana, of today or perhaps the oil regions of Pennsylvania in the 'seventies. As for the Augsburg of Fugger's time, it bore to the rising copper industry the same relation which Cleveland bore to the oil regions in Rockefeller's time. For there in Augsburg and in the copper country of the Tirol and of Hungary, Jacob Fugger was laying the foundations of the modern industrial system. There, the musty records of the era reveal, were the seeds of the coming industrial organization, its companies, its subsidiaries, its cartels, its patient and intriguing monopolists, its trust busters, its antimonopoly drives with its prosecutions, investigations, and failures.

to a share of all the copper and silver taken out of them by the operators. Here was the foundation of the mineral and oil royalty that still persists.

The Augsburg merchants got into the business purely as traders, taking the product of the Tirolese operators. However, the Duke—Sigismund I—like all his contemporaries, constantly needed funds. He was an habitual borrower from merchants or a consortium of merchants in Augsburg, pledging his copper and silver royalties for the loans. Or, since he had the power to command the entire output of a mine, he might proclaim himself the only purchaser of the whole output at his own price and grant the handling of this to some merchant. These were called copper deals, silver deals, and so on.

This, of course, he could not do unless he could control the resources of Hungary. But trade in Hungary was practically closed to the German merchant even if it were not too risky, for Matthias, the Hungarian king, was at war with the Holy Roman Empire. Maximilian, son of the Emperor, took the field against Matthias and defeated him after a bloody war, memorable for the fact that in it bombs were first used. Maximilian ended this struggle with a great victory, the death of Matthias, the elevation of Vladislav of Bohemia to the throne of Hungary, and the famous Peace of Pressburg. By this treaty Vladislav agreed that upon failure of male issue the crown of Saint Stephen should fall to the Hapsburgs.

of rescuing flooded mines by means of a hydraulic pump and he had made great advances in the art of separating metals. What Thurzo needed was money. Fugger needed Thurzo's technical skill, and so they united to form the Fugger-Thurzo Company, much as John D. Rockefeller, the money man, united with Andrews, the practical oil refiner, to form the first unit of Standard Oil. And this company, backed by the political influence of Maximilian and the power of Vladislav, acquired a dominating position in Hungarian copper and silver production.

hundred workers in the mines and mills. This was probably the largest-scale business which had developed up to that time.

All through this period one perceives the continual efforts of Fugger to widen and cement his dominion over copper. Like the modern American trust barons whose first experiments in monopoly were made through trade agreements, Fugger's first efforts were made through cartels. As early as 1498 he made a cartel agreement with Herwart and Gossembrot of Augsburg and Hans Baumgartner of Kufstein. They pooled their supplies of Tirolese copper and sold them in Venice wholly through Fugger's factor, Hans Keller, thus eliminating competition and keeping the price and profits up.

Charles V issued a decree, prepared for him largely by Fugger's imperial lobbyists, declaring that hereafter ore contracts granting monopoly rights to merchants would not be considered monopolistic and that such merchants might sell their ores to one buyer, under monopolistic agreements, without violating the Reichstag decrees. Even this did not quiet the imperious Jacob. He did not rest until, five months later, the Emperor issued another decree declaring that his two copper contracts in 1515 and 1520 did not involve "criminal enhancement of prices."

But Hungary itself was in a state of political confusion while its people wallowed in the most degrading poverty. Vladislav, Fugger's royal friend, had died, leaving a boy of ten on the throne and a flock of courtiers and politicians struggling for control. A powerful nationalist movement sprang up. The half-starving peasants united with the small nobles to rise against the "foreign" capitalists who were exploiting their land and draining away its resources.

debts partly growing out of the indemnities or "reparations" payments of the treaty of Pressburg and others of his own making, a good deal of which was due to the Fugger firm. The country itself groaned under a crushing debt. Thurzo brought about a devaluation of the currency. It did not affect Fugger's credits since they were payable in gold, but it did enhance in Hungary the value of his copper holdings. In any case, a storm of indignation against Fugger swept over Hungary which, added to the general hatred of the foreign concessionary, brought the mobs swarming to the Ofen and Neusohl plants of the company, which were sacked and looted with immense losses. The young King Louis summoned Thurzo and forced him to sign an agreement canceling the royal debts to Fugger, renouncing all claims for damages to the Fugger-Thurzo plants, and agreeing to furnish to the king 200,000 Rhenish golden gulden.

When the news of these disasters reached Fugger at his desk in Augsburg it filled him with wrath. He lost no time in the pursuit of vengeance and restoration. He did precisely what the American or British oil concessionary does in Mexico when the government seizes an oil well. He appealed directly to the Emperor, Charles V, who was then in Spain. The Emperor promptly notified the Hungarian king that he would support the claims of Fugger to the uttermost. Menaced by the Turk on one frontier and the outraged monopolist on the other, Louis yielded. But the masterful merchant prince and banker was at the end of his labors. Worn out by all his ceaseless adventures in pursuit of wealth upon so many fronts, before the Hungarian business could be repaired, Jacob Fugger lay dying in his Augsburg palace. The Archduke Ferdinand, who represented the Emperor during his absence, proceeding to the opening of the Diet at Augsburg with his train of courtiers and guards, ordered the drums and trumpets silenced as the royal procession passed the house of the dying merchant.

Fugger breathed his last December 30, 1525. The next year Suleiman with his Turks swept down upon Hungary, annihilated its small army, devastated a fourth of the country, and departed,

Fugger was buried in the beautiful chapel that, like a Pharaoh, he had begun to build fifteen years before. How differently these two men—Maximilian and Fugger, his banker and counselor—looked upon their deaths and monuments! Maximilian, feeling within him the signals of age and dissolution, had for four years carried around with him wherever he went a stout oaken coffin. Before his death at Innsbruck he left minute directions for his burial. He ordered that his hair be cut off, all his teeth extracted, pounded to powder, and publicly burned in the chapel of his palace. He ordered his corpse to be exposed to the people as a royal instance of mortality. He commanded that his body, put into a sack of lime swathed in silk, should be put into the oaken coffin and buried under the altar of his chapel so that the priest, daily saying his Mass, would humiliate the mortal remains by walking over the head and heart.

But the proud merchant of Augsburg provided for himself a magnificent mortuary chapel gleaming in marble and color and gold, decorated by artist and sculptor, and bearing the epitaph for which Fugger had provided both the text and the artist before his death, amazing in its brazen egoism:

TO GOD, ALL-POWERFUL AND GOOD! Jacob Fugger, of Augsburg, ornament to his class and to his country, Imperial Councilor under Maximilian I and Charles V, second to none in the acquisition of extraordinary wealth, in liberality, in purity of life, and in greatness of soul, as he was comparable to none in life, so after death is not to be numbered among the mortal.

John Law

MONEY MAGICIAN

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John Law, the goldsmith's son, was born in Edinburgh, Scotland, in April, 1671. Having escaped from prison in London, where he was held after conviction of murder in his early twenties, he toured Europe, earning his living as a professional gambler, and then achieved the most amazing leap in history. He bounded in one immense flight from the gaming table to the highest office in France—a country of which he was not a citizen and from which, a few years before, he had been ejected by the minister of police because of his suspiciously consistent winnings. He had operated a gaming table in the house of a notorious actress and courtesan. And when he assumed the role of financial dictator of France he had the satisfaction of succeeding the very gentleman who as minister of police had invited him to clear out of Paris.

On the first day of January, 1939, the banks in America had on deposit, guaranteed by the government, the money of their depositors to the extent of fifty billion dollars. But the balance sheets of these banks showed only seventeen billion dollars in cash. A closer examination, however, reveals that not only was the fifty billions in deposits a myth, but the seventeen billions in cash was equally a fiction. There is not that much cash in America. The actual amount of cash—currency—in the banks was less than a billion dollars.

John Law did not invent the device that makes this miracle possible. But he discovered its uses and gave it to the world. Experimenting with it, he climbed one of the most dazzling peaks of material success, accumulated a vast fortune, engineered one of the dizziest adventures in the history of national finance, and ended by dying in poverty in Venice.

His father was a goldsmith. The goldsmith was the tadpole whence the modern banker sprang. He made a moderate fortune lending money at usurious rates. Thus the boy's first years were spent in the home of a moneylender and a Scot. He was educated with the greatest care with particular attention to mathematics. When he was twenty he left Edinburgh for London to taste the pleasures of the wicked capital of William and Mary.

He got access to the smartest circles. He was a young man of education and culture, handsome, quick-witted, a good athlete excelling at tennis, a graceful dancer, and a redoubtable talker. He spent his mornings in the city, where he got a reputation for skill in speculating in government paper. He passed his afternoons in the parks, his evenings at the opera or theater, and the later hours at the routs, balls, masquerades, and gaming houses. He played for high stakes and won large sums. He was a man with a system. Had he lived in our time he would have been in Wall Street with an infallible formula for beating the market.

The end of this was a duel which cut short his career in England. He got into a quarrel with an aging dandy known as Beau Wilson. Whatever the cause, which remains obscure, the two gentlemen met in Bloomsbury Square, April 9, 1694. It was not a noble performance. Apparently there was but a single pass when Mr. Law put his blade an inch or two into the breastbone of the ancient coxcomb, who died on the spot. Law was thrown into the Old Bailey, tried, convicted of murder, and sentenced to death. But presently he was let out somehow, until, on the demand of the victim's relatives, he was recommitted to jail. But very quickly he escaped from prison, was rowed down the Thames to a waiting vessel aboard which. as fate would have it, he made his way to

Amsterdam. A reward of fifty pounds was posted for his capture. But probably the headsman did not hanker too hungrily for his head, the law against dueling having been sufficiently vindicated by his conviction. This was in 1694.

Law made his appearance at the gambling salons in the evenings with two large bags of specie. He played for such high stakes that the existing coins became burdensome, so he had cast a large coin of his own mintage to facilitate the handling of the stakes. People marveled at his invariable luck. It was not luck, he said. He had a system. It was mathematics. Others whispered, as was inevitable, that it was something more than either luck or mathematics. The Chief of Police, M. d'Argenson, took notice of the audacious and dashing stranger. He told M. Law that he would do well to quit Paris. But it is only fair to say of him that he has the testimony of the perspicacious Duc de Saint-Simon, one of his critics, that he was not a trickster.

The coach again took up its ceaseless wanderings, to Germany, to Genoa, to Florence, to Venice, to Rome. At Genoa Law was again requested to move on. His fortune was growing. He was a millionaire. Stories clustered about his name throughout Europe. At Turin he was presented to Victor Amadeus, King of Sardinia. Law buzzed his system into the sovereign's ear. But the wily Italian

¹ Louis is said to have rejected the plan because Law was not a Catholic. This is hardly credible since Samuel Bernard, Louis' chief financial agent, was a Huguenot.

told him he should go to France. France had need of a financial miracle worker. Old Louis XIV was coming to the end of his reign. And Law was watching that port again. When Louis XIV died Law hurried to Paris and in an amazingly short time gained the confidence of the Regent, his acquaintance, the Duc d'Orléans, and set in motion, with the freest hand, all his theories which resulted in what Law and the French then called the System and what history has dubbed the Mississippi Bubble.

Law accumulated a vast fortune, but he invested it entirely in the securities of his companies and in a string of splendid estates in France.

This was the man who reached a degree of power under Louis

XV which had not been held by any man since the days of Richelieu.

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This theory consisted in two propositions. One was that the world had insufficient supplies of metal money to do business with. The other was that, by means of a bank of discount, a nation could create all the money it required, without depending on the inadequate metallic resources of the world. The bank Law had in mind was nothing more or less than the kind of banks we now do business with universally. But this was a unique proposal then.

The Bank of Amsterdam, established in 1609, was owned by the city. Amsterdam was the great port of the world. In its marts circulated the coins of innumerable states and cities. Every nation, many princes and lords, many trading cities minted their own coins. The merchant who sold a shipment of wool might get in payment a bag full of guilders, drachmas, gulden, marks, ducats, livres, pistoles, ducatoons, piscatoons, and a miscellany of coins he had never heard of. This is what made the business of the moneychanger so essential. Every moneychanger carried a manual kept up to date listing all these coins. The manual contained the names and valuations of 500 gold coins and 340 silver ones minted all over Europe.

Here is how it worked. A merchant could bring his money to the bank. The bank would weigh and assay all the coins and give

It was what Professor Irving Fisher now demands for America—a one hundred per cent bank. For every guilder of bank credit or deposits there was a guilder of metal money in the vaults. In 1672 when the armies of Louis XIV approached Amsterdam and the terrified merchants ran to the bank for their funds, the bank was able to honor every demand. This established its reputation upon a high plane. The bank was not supposed to make loans. It was supported by the fees it charged for receiving deposits, warehousing the cash, and making transfers.

That is why we have today in the United States about a billion

dollars in actual currency in the banks but fifty billion in deposits or bank money. This bank money has been created not by depositing cash but by loans by the bank to depositors. This is what the Bank of Amsterdam did by its secret loans to the East India Company, which it hoped would never be found out. This is what Law saw, but more important, he saw the social uses of it. It became the foundation of his System.

TTT

Law had in him that restless demon that drives those possessed to shape the world to their heart's desire. Gambler, lover of leisure and of easy money, he was yet a reformer. He looked upon a problem that has baffled men ever since the Middle Ages. When things go to pot the merchant finds he cannot sell his goods because there is not enough money in the hands of his customers. The remedy for this, he thinks, is more money. And how to produce more money has fascinated the minds of amateur economists for centuries as depression has followed depression. Always there comes forward a savior with a plan to produce more money purchasing power. It has never failed from Law to Major Douglas. They never fail to collect a vast train of loyal followers. Their remedy has always this supreme virtue: it is easy. It was Dr. Townsend's evil genius that prompted him to propose a scheme for raising all the old people to prosperity with pensions but planned to raise the pension money by the hard way of taxes.

Law made his first appearance as a reformer in Edinburgh in 1700. Scotland was in a severe depression. He came forward with an outright proposal for national planning. He urged a Council of Trade made up of three nobles, three barons, three commoners, three representatives of the Indian and African companies, and a neutral chairman—thirteen in all.

He then proposed a national fund for spending to be raised by taxes of about two and a half per cent on all manufactures, lands,

Of this sum 400,000 pounds would be employed to promote the trade of the Indian and African companies and the balance would be used for various relief and recovery projects—public works, pegging farm and manufactured-goods prices, to lend and contribute to corporations and to fisheries, to encourage manufactures, and to make charitable payments to people in distress. There were to be import duties. Monopolies were to be regulated. There was to be free coinage of gold and silver at a fixed ratio and fixed standards of weight at His Majesty's mints.

This plan the Scottish government rejected. Law had put it into a book bearing one of those wordy eighteenth-century titles—Proposals and Reasons for Constituting a Council of Trade in Scotland. Such books published today bear such cryptic titles as \$2500 a Year for All, The Way Out, Every Man a King.

Scotland has little trade because she has little money. This was good mercantilist doctrine.

Law was arguing in substance for the thing that is now common practice in our banking system and that, indeed, is one of the cornerstones of modern capitalism.

He then propounded his theory that the basis of paper money should be land rather than gold and silver. Silver was defective because the quantity is destined to increase. But land is of limited volume and is therefore destined to increase continuously in value; as a base for money it would ever become sounder.

noblemen and of a strong court party known as the Squadrone. But the Scottish parliament rejected it, saying in its resolution "that to establish any kind of paper credit, so as to oblige it to pass, was an improper expedient for the nation." Another reason given was that the plan might reduce all the estates in the kingdom to dependence on the government, which would become the universal creditor. But with this new edition of his plan of salvation for Scotland, Law had come around to be the New Dealer of his day.

With this brief outline of Law's theories we are now prepared to see how he sold them to France and, in a brief time, set France upon one of the most amazing financial adventures in history, gave to her the first great financial panic of the modern banking system, and, during the life of the episode, became almost the dictator of that country.

IV

Louis XIV set the stage for John Law. The unscrupulous and spendthrift monarch made way for the evangelist of easy abundance. It was necessary that France should be ruined before she would turn to so fantastic a redeemer. Louis XIV ruined her.

No man has been dealt with so generously by history as Louis XIV. He has been taken at his own estimate with small discount. He is recalled as Le Grand Monarque. In truth, he was the worst of kings. He used a power that had been put into his youthful hands, consecrated by the Church and sanctified by tradition, to ravage France. He was a shallow, egotistical, pretentious coxcomb. He achieved the effect of grandeur by means that are open to any adventurer with the power to squeeze taxes and loans out of a compliant people to be expended on projects and wars, displays, corrupt servants, and an army of shirt stuffers to produce the proper stage effects for what kings call their glory. The power he got was an inheritance from his forebears through the genius of two corrupt ecclesiastics—Richelieu and Mazarin. The money he

got through ministers with a talent for inventing ever-new and subtle devices for taxing the impoverished people.

He squandered money with unrestrained abandon. On one palace alone—Versailles—he spent 116 million livres. His ministers, satellites, and the grafters who waxed rich through his bounties and incapacity imitated their betters. These vulgar displays were designed to exhibit the monarch and his satellites in the character of gods fit to rule the herd. Immense bounties were handed out to a swarm of poets and literati to exploit the grandeur and virtues of the King. When the King recovered from an illness the odes and apostrophes poured out in a flood from the horde of scribblers who ate from the King's bounty. Even the young Racine broke into thanksgiving verse.

The source of all wealth in France was the peasants upon their small farms and the artisans in the city. The machine had not yet come. Large-scale industry was still unheard of. There could be no pretense that the production of wealth at the hands of these humble toilers was stimulated and directed by the creative genius of inspired entrepreneurs. Hence there were few men of very large means who accumulated their wealth through owning and directing the processes of production. The wealth of the people, translated into money, flowed to the King through oppressive taxes. And most of the private fortunes were in the hands of men who knew how to tap this stream of public money on its way to the government. The nobles still held their hereditary lands and squeezed the last drop of tribute from their tenants. But the business fortunes were accumulated by men who drew them from the public revenues through contracts, monopolies, graft, gifts from the sovereign or from bankers who exploited the public treasury. They were strictly parasitic fortunes.

phoid and smallpox. Thousands swarmed toward the cities, and mendicancy and vagrancy became a scourge. Hospitals had to be closed for want of funds. Despite the fact that the people languished in hunger and rags, there was overproduction, the curse of the capitalist world. In places there was insufficient barley to feed the people, but no one could buy even the small supply. Peasants who had wine could not sell it to impecunious neighbors and could not ship it because they had no horses for transport.

Out of the meager substance of these wretched people the ministers of the Grand Monarch found the means to wring by taxes and loans nearly all the savings of the thrifty and a cruel fraction of the earnings of all. Slowly the money income of the nation was drawn in an ever-increasing stream toward the throne. But millions never reached it. Colbert found that out of 84 millions of taxes collected in one year only 32 millions reached the royal treasury. The rest found its way into the pockets of the farmers of the revenues. What reached the King in taxes and loans provided immense profits for war contractors and gifts for favorites. Indeed, even the virtuous Colbert died worth ten millions, all of which he said was derived from royal gifts and the legal prerequisites of his office.

There were extraordinary fortunes in the poverty-stricken France of that day. The treasurer of the imperial household was accused of appropriating to himself a tenth of the pay of the guard for years, and he had 1,600,000 livres invested abroad. Châtelain, a groom in a convent, took service with an army contractor, later set up for himself, had sixty mounted clerks scouring the country for grain for the army, and accumulated a fortune of over ten million livres. Crozat rose from a footman to be the greatest merchant in France, flourishing on government monopolies. Samuel Bernard, the great banker, had a fortune exceeding thirty million, made in the handling of government finances. Bouret, purveyor to the army, is supposed to have got together over 40 millions, while the more or less fabulous Brothers Pâris de Montmartel came to be worth, according to some estimates, as much as a

hundred million. The Chamber of Justice found six thousand men who were by their own estimates worth well over a billion livres, a sum equal to about ten billion dollars in our time.

He died on September 1, 1715, leaving the country he had raided in a state of appalling want and the treasury bankrupt. When the news of his death reached the roving Scottish gambler, he lost no time packing his family and his baggage into his muchtraveled coach. He directed the postilion to head for Paris.

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About the middle of September, 1715—about two weeks after Louis XIV died—the Duc d'Orléans, Regent of the child Louis

XV, sat with his newly formed cabinet. They were grave-faced and bewildered. A proposal had been made that the Regent should declare the nation bankrupt. France was indeed in ruins. The treasury was empty. The army was unpaid. The expenses of the government for the preceding year came to 148 million livres. The receipts were trivial. Besides, 740 million livres in obligations would fall due in the year. So high-minded and wise a man as the Duc de Saint-Simon had urged a proclamation of bankruptcy. Industry and trade had almost ceased to function. France had come to the end of a road, as America did in 1933, save that she was impoverished in substance as well as in the collapse of her economic mechanisms. But the Regent rejected the shame of a public confession of bankruptcy. Instead he sought to accomplish the same end by a less frank device.

Upon the death of Louis XIV all the directions of his will were rejected and Philippe, Duc d'Orléans, virtually took possession of the government as Regent of the boy king. This act completed the series of events that it was necessary for fate to weave for the appearance of Law. She had created for him a ruined nation. Now she marched upon the scene a ruler who would open the door for the promiser of good things.

Orléans was one of those nimble persons who liked the surface of ideas. He was a dabbler. He posed as a painter, an engraver, a musician, a mechanician. He composed an opera that was played before the King. He tinkered with chemistry. But he loved to play with ideas, was known to have an open mind—open at both ends—a dilettante's interest in the masses, and an unfailing talent for making bad choices of servants.

At such a moment, when the one obvious and desperate need of the government was money, John Law appeared like an angel from heaven. In a disordered world in which every statesman was at sea, he alone had a plan. And it was a plan which called, not for sacrifice or for painful surgery, but for a pleasant journey along the glory road to riches. As Law himself said, it was a perfect dispensation in which the king, instead of being an omnivorous taxer and an insatiable borrower of the people's substance, was to become the dispenser and lender of money. Here was to be a New Deal—the first New Deal of the capitalist order.

Moreover, Law had access to Orléans. The Regent had taken a fancy to him years before. Law's plan had become greatly expanded under the productive influence of innumerable conversations. He was a facile talker and a superb salesman. And he completely sold the Regent. His plan for a royal bank was submitted to the Council on October 24, only about seven weeks after Orléans assumed power. But a majority of the Council opposed it. He persisted. He declared that, if permitted, he would establish a private bank and finance it himself if he was authorized by a royal patent to establish it—the Banque Générale. And on May 2, 1716, the royal patent was granted and the Banque Générale was established privately and financed largely by Law himself.

It began on a small scale. But it was an entering wedge. It was such a bank as we now have on almost every corner of the business districts of small American towns. It was to receive deposits and discount bills and notes; it could make loans and issue its own notes. Law and his brother William set up the bank in Law's house. The company issued 1200 shares of 5000 livres each. The subscribers were to pay for the shares in four installments—one fourth in cash and three fourths in billets d'état. This was a master stroke. It invented a use for the billets d'état, or government securities, which were worth no more than twenty or thirty livres on the hundred. The amount of cash thus brought in was small, so that the bank was scarcely larger than the First National in any little American town. It did not seem formidable and this diminished opposition. It gave Law the chance to experiment with his idea. The Regent let it be known that he was its patron and that he would be gratified if merchants would open accounts with M. Law.

This institution had an almost instantaneous success. The value of a depository was great. The advantage of introducing certainty into the value of bank money, as in the Bank of Amster-

dam, encouraged all merchants to bring their metal money there. It was not long before M. Law's bank money was quoted at a premium over cash. The bank discounted bills at six per cent instead of the extortionate rates, as high as thirty, which the usurers charged. Furthermore, the bank guaranteed always to deliver in exchange of its own credit or its notes the same amount of silver as was deposited. And in a country living continuously under the fear of inflation this was a great inducement. The deposits rose enormously. Law was able to reduce the interest rate to four per cent. His reputation rose. He was no longer looked upon as an adventurer. His influence with the Regent grew. His bank notes were circulating around France, the best money in the kingdom.

A year after the bank was founded (April 10, 1717) the Council of State ordered all agents of the royal revenues to receive the bank's notes in payment of all government dues and to cash at sight its notes to the extent of their available funds. Every government office became a sort of branch of the bank. The Parliament of Paris ordered the revocation of this decree, for Law had active enemies. But the Regent compelled the Parliament to annul its order. Law by this time had become the greatest figure at court.

While things went thus well for Law, they went badly for the government. When, after his accession to power, the Regent rejected the proposal for national bankruptcy, he employed an ancient stratagem to achieve the same result. He devalued the livre, coining 1,000,000,000 livres into 1,200,000,000. He called in the 682 million livres in billets d'état and issued in their place 250 million at reduced interest—four per cent. But this helped only a little. The government's paper was worth 20 per cent of par before this drastic operation and the new securities were still worth only 20 per cent.

The next move of the government was drastic in the extreme. The Duc de Noailles, Comptroller General, ordered every person who had made a profit out of state offices or contracts during the preceding twenty-seven years to make an exact accounting. A

Chamber of Justice was set up. Rewards were offered to informers. And for more than a year some 6000 persons—farmers of the revenues, high officers, government contractors—were dragged before the Chamber of Justice. These constituted the richest and most powerful men in the kingdom.

Wealth became a crime. People of wealth were in panic. They hid their money. They attempted to flee. They tried bribing judges—and some succeeded. But the spoliation of the rich and corrupt parasites who had robbed the state for a generation went forward ruthlessly. Burey de Vieux-Cours, president of the Grand Council, admitted possessing 3,600,000 livres. He was fined 3,200,000. All the rich bankers were heavily taxed—all save the Brothers Pâris de Montmartel, who actually were made inspectors of the visa. Of the six thousand persons examined, some 4110 were condemned. They confessed to having 713 millions and were fined 219 millions. Perhaps half the fines were collected. This ferocious invasion of the rich was carried on not by a revolutionary government of radicals but by the royal government of Louis XV.

But all this aided the staggering administration only slightly. In May, 1718, after two years of futile, even savage expedients, the livre was devalued again. This time it was cut 40 per cent, amid the opposition of parliaments and to the accompaniment of riot and bloodshed all over France. In the last sixteen years France had witnessed forty-two changes in the price of gold and silver and over 294 in the preceding four centuries. The silver in the livre had been cut from twelve ounces to less than half an ounce. The people of France, by successive devaluations, had been robbed by the government of over seventy times the amount of money in circulation in the country.

In the midst of the disasters, Law's reputation alone seemed to rise as his bank established its utility. And this, combined with the desperate state of French finances, brought on the moment for carrying into execution the grand scheme he had been meditating—the scheme which was destined to be known as the System.

VI

His second venture was into trade. Crozat, a sort of eighteenth-century Cecil Rhodes, had enjoyed a monopoly of colonization and trade with Louisiana and Canada, France's possessions in North America. He had made a great fortune as a merchant and government contractor but did not do so well with the French East India Company, through which he operated his monopoly in the New World. Law, through the Regent's favor, took over this enterprise. He formed a new corporation—the Company of the West. He issued 200,000 shares at 500 livres each—100 million livres. But he used the scheme which had worked so well with the bank. He accepted payment for the shares in billets d'état. These billets d'état the Regent converted into government rentes at four per cent. The company was thus insured of an income of four million livres a year. This was in August, 1717.

Then in 1718 the company got the farm of the tobacco monopoly from Law's friend, the Regent, for which the Company of the West paid 2,020,000 livres. This was expected to produce a yearly profit of four million livres. This, with the four million in interest from the government, would mean an income for the company of eight million. But the company was also selling "lots"—for the Mississippi Company, as the Company of the West was called, was a great real-estate development scheme. Lots a league square

were offered at 30,000 livres, and some persons invested as high as 600,000 livres. This added to the income, though it went quite slowly at first.

Then by the end of 1718 and the beginning of 1719, the company took over three similar companies—the Senegal Company, the China Company, and the East India Company, with the same kind of trading privileges as the Louisiana Company in different parts of the world. Law then organized a new corporation—the Compagnie des Indes (the India Company)—which took over all of these adventures, including the Mississippi Company and the tobacco monopoly. It became the master holding company. The new company issued 50,000 new shares at 550 livres each, netting 27,500,000 livres. The original shares of the Company of the West were called mothers. These were called daughters.

We must not make the common mistake, however, of supposing that what was called the Mississippi Bubble of Mr. Law was just a real-estate development. It was indeed the smallest part of the whole episode. It was called the Mississippi Bubble because the company that carried on all the enterprises was popularly known as the Mississippi Company and those who bought its shares were called Mississippians. It got its name from the great river which ran through its principal domain, though the company was never legally called the Mississippi Company. The real basis of the mania of speculation that we are now to see lay in wholly different fields. At this point John Law, the gambler of three years before, had become the autocratic master of a vast domain extending from Guinea to the Japanese Archipelago, Cape of Good Hope, East Coast of Africa washed by the Red Sea, the islands of the Pacific, Persia, the Mongol empire, Louisiana, and Canada. And he proceeded by all sorts of extravagant promotional and advertising methods to push the sale of lands and the colonization of parts of this empire.

in cash and three fourths in almost worthless billets d'état sold their shares to the government for cash and at par. Thus the man who bought a share for 5000 livres—1500 livres in cash and 3500 livres in billets d'état worth only 1000 livres—had actually paid no more than 2500 livres for his share. Now he got 5000 livres in silver for it, a profit of 100 per cent plus the dividend. But the bank was now a royal bank and Law was head of the royal bank and the man closest to the Regent. And what is more, the limitation in the original charter upon the issue of notes was no longer effective.

On August 25, the company took over the profitable privilege of collecting the indirect taxes. Law had enemies within the government. The most industrious was M. d'Argenson, the former police chief who had expelled him from France and was now Comptroller General. Inevitably Law's success would stimulate others to use the same method. D'Argenson conspired with the Brothers Pâris to organize a corporation to farm the taxes. The Brothers Pâris were the richest businessmen in France. Sons of a poor tavernkeeper of Dauphine, they started transporting provisions to the army of the Duc de Vendôme, rose rapidly, became purveyors to the army and so powerful and rich that even during the ruthless visa of the Duc de Noailles they remained untouched. And now they formed a corporation issuing 100,000 shares at 1000 livres each payable in annuity contracts.

This company bid 48,000,000 livres for the revenues, which it got through the influence of d'Argenson. This was called the Antisystem. They hoped to collect a vast sum in taxes—perhaps a hundred million, paying only 48 million to the king. Law had this

contract annulled and new bids taken. He outbid the Brothers Pâris, paying 3,500,000 livres more than they, and got the contract for the revenues. D'Argenson resigned. The Brothers Pâris were now in complete disfavor and retired to one of their estates. A few days later Law got the contract for the direct taxes. By this time his position was amazing. He had complete possession of the vast colonial possessions of France, the monopoly of coining money, the collection of the revenues, the tobacco monopoly, the salt monopoly. He was, besides, complete master of the finances of France as head of the Royal Bank and he was the undisputed favorite of the Regent.

He now began to speak in imperious tones about his plans. He would rid the king of France of his debts—the debts that had ridden kings for a century. He would make the king independent of the parliaments, of the people, of everybody. Instead of making the king dependent on the taxpayers and the moneylenders he would make the king the giver of all funds and the universal creditor. Therefore he announced in September his greatest coup—the company would buy up the entire public debt of France. The king would have but a single creditor, the company, his obedient servant. The outstanding debt was 1,500,000,000 livres. Law therefore planned an issue of company stocks of 300,000 shares. These would be sold at 5000 livres, bringing in the required 1,500,000,000. Meantime the bank would advance the money. The bank had been printing bank notes and issuing them for various purposes. It had made loans on stock of the company, had invested in company stock, had made loans on other projects. Now it would issue enough notes to buy up the public debt. Meantime the India Company would issue shares and with the proceeds pay off the bank loans.

proposal of Mr. Roosevelt, in our own time, to extinguish the public debt of America by purchasing it through the Social Security Board.

This marked the peak of the great adventure. Here is how the capital of the India Company stood:

Law had been manipulating the stock prices until the shares were selling at 5000. After the rout of the Antisystem and the capture of the national revenues they went up to 10,000 livres. If a man had bought a share of the Company of the West at 500 livres in billets d'état or 150 livres in money, he would now at 10,000 livres have a profit of 660 per cent. Before the bubble burst shares went to 18,000 livres. This was the financial part of the famous System of Law in operation. Now let us see what happened to it.

VII

the Rue Aubrey-le-Boucher. Here the bankers had their houses, and men who had bills of exchange or billets d'état or other paper to buy or sell went from door to door seeking the best terms. This became the center of excitement when, during the visa of the Duc de Noailles, rich contractors rushed there to divest themselves of the evidences of their wealth. It was this little street that became the stage for the public scenes and manifestations of the Mississippi Bubble. It became the symbol of the speculation as Wall Street became the symbol of the orgies that flamed up in the 1920's.

The other scene of this extraordinary comedy drama was the Mazarin Palace. Law purchased this splendid edifice in the Rue Vivienne for the headquarters of the company and the bank when it was made into the Royal Bank. He added seven other houses adjoining. Here Law directed the moves on all the many fronts of his System.

This is what Law was doing.

Third, he was attempting to stimulate the release and flow of hoarded savings back into business.

Fourth, he was attempting, by exploiting France's colonial empire, to make markets for her products.

Fifth, he was attempting to relieve the embarrassments of a debt-ridden government.

paraded about. Departing emigrants were feted and paraded. Finding it difficult to get emigrants, young men were taken from the jails and girls from the streets and marched off garlanded to the strains of music as if they were honest citizens. Pamphlets, prospectuses, dodgers were circulated depicting the fabulous riches of the new lands. All this helped both shares and lots.

In the prosecution of the adventure we see many of the devices which serve the operators in the markets of today. Rumors were set afoot. It was whispered about that diamond mines had been found in Arkansas and gold and silver mines in Louisiana, rivaling the riches of New Spain and Peru. Stories of the fabulous sums being made by speculators and of the important persons who were buying shares "leaked" out.

The preferred list made its appearance. With each issue of shares persons of power and influence near to Law and the Regent were allowed to subscribe at the issuing price. Thus when the 300,000 share issue was offered, the Regent got 100,000 shares. He subscribed at 5000 livres. He could have sold within two months at 10,000 livres. It was by getting shares at the issuing price and selling later at the higher prices that many fortunes were made.

Street loans had their birth. The Royal Bank made loans on India Company shares at low rates of interest to stimulate speculation. When the bubble burst the bank had outstanding 450 million livres of loans on shares. The bank itself also invested in shares. In July, 1719, as Law was maturing the taking over of the national debt and the issuance of 300,000 shares, he announced that in 1720 the company would pay a 12 per cent dividend.

Ever since the issuance of the first shares of the Company of the West there had been much traffic in them in the Rue Quincampoix.

These little scraps of paper became the perfect instruments of gambling—gambling sanctified by the name of business and dressed up as investment. This was better than the counters on the tables of the Rue des Poulies or the Hôtel de Grève. As the new companies came along and the promotion assumed statelier forms, the activity in the street increased.

By June or July, 1719, the crowd flooded into the Rue Quincampoix. Doctors, lawyers, businessmen, clergymen, coachmen, scholars, and servants—people who had never seen it before—came trooping in to buy a few shares and sell them on the rise. The shares which had been 500 a little more than a year before were now 5000 and in two months more they were 10,000.

The noise of the spectacle spread through Europe. Speculators flocked to Paris. In October the Journal de Régence reported at least 25,000 had come from the leading commercial cities in a month. Seats in the diligences to Paris were sold two months ahead, and men began speculating in coach seats.

As Christmas, 1719, approached the excitement became almost a public scandal. M. Law, a few days before the feast, was accepted into the Catholic faith at the Church of the Recollets in Melun, and on Christmas Day he and his children received communion at St. Roch's, his parish church. He was made a warden to succeed the Duc de Noailles. He made a princely gift of 500,000 livres to complete the edifice and another of 500,000 to the English at Saint-Germain-en-Laye. Then on January 5, M. d'Argenson, the former police chief who had sent Law out of Paris in 1708, resigned as Comptroller General, and Law was named to that office, equivalent to Prime Minister of France. At this moment his power was almost supreme.

mont, widow of a physician of Namur, made sixty million livres. Fargez, a private soldier, made twenty. The Duc de Bourbon made a vast fortune, much of which he reduced to cash, re-established his financially embarrassed house, acquired many new estates, set up a stable of 150 race horses, and continued as one of the richest men in France. Other noble persons—the Duc de Guiche, the Prince de Deux-Ponts, the Prince de Rohan accumulated immense sums. Count Joseph Gage made a fabulous winning and offered the King of Poland three million livres to abdicate in his favor. The Regent had a hundred thousand shares subscribed for at 5000 livres which he could have sold for ten thousand or more. He had a paper profit in January, 1720, of 500,000,000 livres. It is doubtful if he realized any of this.

of them formed to peg the market at higher prices than 10,000 livres while they quietly withdrew. Their example was soon followed by Frenchmen with the necessary wit. As they sold their shares they withdrew specie from the bank and transported it to other countries. Law saw this. By January the movement of money from the bank grew. The sellers were scornfully called realizers. They have appeared just before the last act of every boom from the golden age of Law to the New Era of Coolidge and the New Deal of Roosevelt. And with his elevation to the Comptroller Generalship Law began a losing battle to save the System.

Here was his problem: for a brief moment he seemed, as one commentator put it, to have solved the philosopher's dream of making men despise silver and gold. They preferred to louis d'or the paper promises of the three-year-old bank. Law's paper livres would buy five per cent more in a trade than the metal coin of Louis XIV. But now quite suddenly the wiser ones were recovering their taste for silver and gold. Law's problem was to check the flow of gold out of the country and into hoarding, to support the price of the shares, to save the value of his paper notes.

Through January the tide flowed heavily against him. The drain on metal became alarming. The inflation became more fevered. Prices of goods that were around 104 in 1718 and 120 before Christmas, 1719, went to 149 in January. Wages lagged far behind. The nongambling populace began to murmur. The Parliament of Paris became more hostile. Serious men like Saint-Simon, Marshal Villeroi, La Rochefoucald and Chancellor d'Aguesseau, who had held aloof from the gamble, now became more severely critical.

Law now sought to introduce a deliberate uncertainty into metal currency while stabilizing the price of paper by edict. On March 20, the shares were falling rapidly from a peak of 18,000 livres. An edict announced that shares would be stabilized at 9000 livres. At this price the bank would exchange shares for bank notes or bank notes for shares. Two bureaus were opened. The crowds swarmed to them with their shares. They demanded notes for their shares.

By this means the bank became the owner of an immense amount of its own shares, while the flood of paper notes was enormously augmented. It gave the inflation another boost and prices soared to 179. The Rue Quincampoix was in the wildest disorder. The frantic bargaining went on late into the night. The sober citizens of Paris muttered deeply against the scandal. Many robberies and acts of violence added to the apprehension and indignation. Then suddenly one of those irrelevant outrages intruded into the scene. Count Horn, a young Flemish nobleman, related distantly to the Duc d'Orléans and to several royal European houses, lured a speculator into a tavern at night, murdered him, and made off with his 150,000 livres. This crime shocked Paris. It gave Law an excuse to close the Rue Quincampoix and drive the gamblers away. Speculation was forbidden in the streets. The Count was arrested, convicted, and broken on the wheel in the Place de Grève. But the trading went on in side streets, alleys, hallways, and at night. Slowly it reappeared in the Place Vendôme. Then Law paid

1,400,000 livres for the Hôtel de Soissons and its spacious gardens and permitted stockjobbing in the numerous pavilions of the gardens, which were rented to stockbrokers at 500 livres per month.

By May the situation was desperate. The use of gold specie was forbidden beginning on May 1, and this was to apply to silver specie on August 1. The circulation had now soared to 2,696,000,000 livres. The general discontent was deepening. Prices had gone up, but wages had by no means kept pace with them. As June neared prices were at 190 but wages were only 125. Business was disrupted by the uncertainty of money values, the difficulty of getting coin, and the swiftly fading taste for paper. Political agitation was growing. The parliaments were becoming increasingly hostile. Law's enemies—d'Argenson and the powerful Abbé Dubois, corrupt and ambitious, scheming for power now—succeeded in weakening his prestige with the Regent. At this fatal moment they were able to force an edict that sounded the doom of the System.

The edict, issued on May 22, announced that the price of stock would be lowered to 8000 by July 1 and at the rate of 500 livres per month until December when it would be stabilized at 5000. Bank notes were also to be reduced in value from 10,000 to 8000 livres and at the same pace to 5000 by December 1. Thus the promise that the bank notes would remain stable was broken. The whole paper structure collapsed. Men ran wild-eyed to the bank to beg for specie. Soldiers blocked the way. Parliament demanded revocation of the edict. On May 28 this was done, but it was too late. The damage was done.

Law went to the palace and asked the Regent to relieve him of his post. His resignation was accepted. And the Regent directed two companies of Swiss guards to protect him from the fury of the crowds. His wife and children went to a near-by estate of the Duc de Bourbon for safety.

But that immense tangle of adventures without Law was a skull without a brain. He was recalled before May expired and named intendant and a member of the privy council. The disorders provoked by the suspension of specie payments at the bank were so great that an order was issued permitting the cashing of ten-livre notes and hundred-livre notes on alternate days, one to a person. They could be cashed only at the bank. Fifteen thousand people gathered at the Mazarin Gardens. Only a few note holders were admitted to the bank at a time. The crowd felt it was being played with. It broke through the gates. The soldiers fired, killing two or three men. This set off an explosion of wrath. The bodies were carried about to exhibit the cruelty of the "murderer" from England. In London brokers made bets that Law would be hanged by September. Law's carriage was torn to pieces.

After this the battle was hopeless. With the Regent Law tried to work out some sort of reorganization. A plan was formed to retire 600 million livres of the notes. New stock in the company and of the city of Paris was issued payable in notes. It was merely exchanging stock for money. The notes were destroyed in the presence of a committee of citizens.

Then another plan was attempted. It was proposed to issue annuities payable in notes. The bank was thus getting a long-term extension of its obligation to honor its notes. All notes above 100 livres in denomination could be used only to purchase these annuities. But nothing could save the System. By September prices of food and clothing were 270—they had been 120 the year before. Wages were only at 136. Actual wages—measured in purchasing power—had descended to 67. Thus the worker always is the sufferer by inflation. The demand for increased wages grew loud and angry. On October 10 an edict forbade the use of bank bills for currency. The stock of the India Company which had been worth 18,000 livres ten months earlier, was now sold for 2000 livres payable in bank notes worth only ten cents on the dollar. On November 1 the redemption of even small bank notes was suspended. All stockjobbing was forbidden on the eighth.

As for Law, the government confiscated all that he had left

behind in France, his numerous estates, art treasures, plate, his hundred-thousand-a-year annuity for which he had paid five million livres, his 4900 remaining shares in the India Company.

When he left France he went directly to Brussels. He was received with acclaim, entertained lavishly, appeared at the theater where a great throng greeted him. Then in a few days he set out upon his travels to Venice, to Bohemia, to Germany, to Denmark. He was sorely pressed for money. He, who the year before saw millions flowing through his hands, wrote the Countess of Suffolk, begging a loan of a thousand pounds. Later, at least one biographer reports, the Duc d'Orléans, the Regent, sent him yearly his old salary, which is variously reported as from ten to twenty thousand livres. But the Regent died in 1723 and this aid came to an end

He remained in England until 1725, from where he carried on a correspondence with the Duc de Bourbon, following the Regent's death, begging for the restoration of his fortune. Law never conceded that his System had failed. It had been ruined by enemies. He clung tenaciously to the hope, nay the expectation, that the Regent would summon him back to France. It is certain that gentleman always entertained a friendly feeling for his former

minister. But the death of Orléans in 1723 ended these hopes. Law sank gradually in his pecuniary fortunes until toward the end he was not far removed from poverty. He died in Venice, March 21, 1729.

It is difficult to disentangle the fibers of Law the gambler and Law the reformer. His great reforms—his prodigious adventure in recasting the fortunes of a bankrupt empire—took much of its energy and substance from the gambler's art.

As a New Dealer he was not greatly different in one respect from the apostles of the mercantilist school—the Colberts, the Roosevelts, the Daladiers, the Hitlers and Mussolinis, and, indeed, the Pericles—who sought to create income and work by state-fostered public works and who labored to check the flow of gold away from their borders. He introduced something new, however, that the Hitlers, the Mussolinis, the Roosevelts, the Daladiers, and the Chamberlains have imitated—the creation of the funds for these purposes through the instrumentalities of the modern bank. Law is the precursor of the inflationist redeemers. Like all the inflationist salvations, his career was short. The others will not be long.

He exploited the eagerness of men to grow rich by making their profit, not in producing goods or creating utilities, but gambling on the changes in the price of investment certificates. He perceived also the uses of the bank as an instrument for creating an immense reservoir of savings funds as well as an instrument for actually manufacturing money—bank credit.

The Rothschilds

IMPERIALIST BANKERS

. 1

They were coarse, unlettered, graceless. Friedrich von Gentz, the hired shirt stuffer in chief, who sold his brilliant pen to gild their lowly origins, said privately that "they were vulgar and ignorant Jews" who pursued their craft "in accordance with the principles of naturalism, having no suspicion of a higher order of things."

There are such things as "vulgar, ignorant Jews," just as there are vulgar and ignorant Germans and Italians and Americans. The Rothschilds were coarse, illiterate, and brash.

From a painting

NATHAN ROTHSCHILD

Nathan said of his children that he "wished them to give mind, soul, heart, and body to business." They were interested not in business but in money. They sought money not to enjoy power; but power in order to make money. Veblen's diagnosis of the acquisitive urge, as the craving to have what others have, to match the possessions of others, and to procure and exhibit the evidences of those possessions, did not apply to the Rothschilds any more than it applied to Hetty Green or Russell Sage. The rich James, escaping from the squalor of the Judengasse of Frankfort into the Paris of Napoleon, took quarters in a humble flat until he learned that he could do more business in the magnificent palace of Fouché. The time came when the brothers saw that palaces filled with works of art were better instruments of money getting. But they went in for magnificence to make more money and not for money to acquire magnificence.

They came upon the scene when a revolution greater than the French Revolution was changing the way of the world—the industrial revolution, out of which vast fortunes would be made. But it touched them not at all, as little, indeed, as the French Revolution touched an industrial genius like Robert Owen. They founded no industries, produced nothing, created nothing, invented nothing. The popular notion, fostered by some of their hired apologists, that they were the founders of the modern banking system, that they invented modern methods of foreign exchange, that they were the first international bankers, that they were the first to perfect the modern technique of distributing shares, and that they are entitled to the dubious glory of having first perfected the methods of security manipulation, is utterly without foundation.

There were international bankers two centuries before their time—the Fuggers, the Medici, the Frescobaldi, and the Bardi. There were great and powerful bankers in their own day against whom they were compelled to contend—the Barings in England and the brilliant Ouvrard, financier of Napoleon, in France; even in their own native Frankfort there were Gontard and Bethmann,

ancestor of that von Bethmann-Hollweg who took the Germany of Kaiser Wilhelm into the First World War.

TI

Over the origins of the Rothschild fortunes some obscuring vapors hang—pestilential vapors partly, blown there by that archliar of history, the shirt stuffer.

How much falsehood history owes to the hired biographers and apologists of monarchs and statesmen and money kings! How the rich Maecenases in all ages, "patrons of art and letters," have been responsible for the mendacious chronicles of their time that have flowed around their feet from the pens of grateful poets, essayists, historians, and even philosophers!

As the Rothschilds grew in wealth and power, and statesmen and noblemen and even kings hungered for their pounds and gulden, they could never rid themselves of the dark veil of race and culture which hung between them and their noble clients. The rich banker Bethmann of Frankfort might treat familiarly with Solomon in his office or at the Boerse, but Bethmann's table was not open to him. The brothers might wear their ribbons and their titles and find themselves in the drawing rooms of impecunious finance ministers whose governments were in desperate need

of funds, but there were still droves of snooty lords and ladies who drew away from the "upstart Jews" who still spoke with the crude accent of the Judengasse Yiddish, heavy on their consonants.

For this purpose they employed a gentleman, not unknown to fame, named Friedrich von Gentz. Gentz was the secretary of Metternich, Chancellor of Austria. He began life as a passionate supporter of the principles of the French Revolution; he ended as the aide of the most reactionary statesman in Europe. He was the author of many essays and several books, one of them a brilliant dissertation, On the State of Europe Before and After the French Revolution, which was translated into English at the time by John Charles Herries, Commissary General in the Liverpool cabinet, another intimate of the Rothschilds whom we shall meet anon

Gentz was a man of scholarly attainments and charming manners who wrote excellent German prose. He made the perfect type of Tawney's predatory scholar, who aches for the sweet-meats of life and, not knowing how to make money himself, fastens himself upon some rich patron whose resources he can tap. Gentz was not at all discriminating in his patrons. He was a sort of literary street walker. He took money from everyone who had need of a sustaining paragraph or a scrap of influence at the foreign office. He was a thoroughly corrupt writer who jotted

down in his diary with keen satisfaction the record of the bribes he received, the Rothschilds' name being among the most frequent.

Solomon Rothschild first met Gentz at Frankfort, preceding the Aix-la-Chapelle conference. The Rothschilds were seeking help in saving the Frankfort Jews from the cancellation of the privileges they had won under Napoleon's regime. When Metternich reached Frankfort, Gentz presented Solomon. Solomon handed him 800 ducats. For a number of years thereafter the Rothschild ducats flowed into Gentz' yawning pocket while the Gentz influence and tips flowed to the Rothschild banking house and the Gentz healing phrases flowed over the Rothschild fame.

In 1826 the Rothschilds paid Gentz a princely fee to plant in the popular Brockhaus Conversational Encyclopedia the story of the descent of the five brothers from the great banker of Frankfort. Solomon outlined what he wanted; Gentz wrote it in a pamphlet and contrived to have the pamphlet made the basis of the Brockhaus article. The article recounted the story of the flight of the wealthy Elector of Hesse before Bonaparte's advancing armies after having confided his whole vast fortune to Meyer Anselm Rothschild. So well did he manage the fortune in the Elector's absence that in its performance he sacrificed his own. When the Elector returned, old Meyer Anselm was able to restore the entire fortune intact with interest. And so grateful was the Elector that he insisted on Meyer retaining the use of the funds for several years more without interest.

found surcease in the contemplation of the things of the spirit. But the Rothschild brothers were not of this number

m

Meyer was sent to a Talmudical college near Nuremberg to become a rabbi. But his father died when he was only twelve and he was forced to find work. He spent eight years in the bank of the Oppenheims in Hanover. His two brothers carried on the business in an even more crowded little shop that bore the sign of the saucepan. It sank to the level of a mere junkshop, dealing in the secondhand castoffs of the ghetto. Meyer returned from Hanover to join his brothers in trade. With the Oppenheims he had learned the business of coin collecting. He added this line to the secondhand trade. The brothers prospered after a fashion, the coin collecting forming but a small part of the business. The three made about two thousand gulden a year among them.

biographers of her famous sons. She bore him twelve children—five of whom were those famous sons already named. In time one of Meyer's brothers died and another drifted off for himself, leaving Meyer in sole possession of the shop zur Hinterpfan. And there he remained until 1785, when he was forty-three—a small tradesman, dealing chiefly in tea, coffee, sugar, and spices, changing money and expanding his coin-collecting business, getting along slowly.

It was not until 1795 that he began to make large profits. In 1790 his earnings, according to Berghoeffer, were from 2000 to 3000 gulden a year. By this time he had three sons in the business. This was not a large annual profit to divide among four. But in 1795 the conquest of Holland by Napoleon had caused the collapse of the Amsterdam bourse and diverted much of that business to Frankfort. A war trade had grown up as soon as conservative Europe had launched her attack upon Napoleon in 1792. In 1795 Frankfort became the center of that trade. The three energetic and aggressive sons—Anselm, Solomon, and Nathan, the last then eighteen years old—were partners and had assumed the driving control of the business.

Yet even then the business was a small one—trading in cloth, sugar, tea, indigo, and textiles. It employed only the sons, two

daughters in the shop, and one daughter-in-law. Frankfort began to sparkle with the profits of the war boom. It was full of rich citizens—a few years later an estimate showed eight hundred citizens with unencumbered cash of more than 50,000 gulden each. But the Rothschilds still shared with the secondhand store the small building at the sign of the green shield. As late as 1810, with only two years to live, at the age of sixty-seven, after the sons had gone far in the amassing of war profits, Meyer reconstituted the partnership and in the articles put the firm's capital down as only 800,000 gulden. Two years later he died, still holding forth in his small shop, after several years of poor health. Whatever growth the business had after 1795 was due to the sons and not to Meyer Anselm himself.

TV

Before proceeding further we must pause to have a look at William, Landgrave—and later Elector—of Hesse-Cassel, with whose fortunes the first flights of the House of Rothschild were made. In a book of money-makers this curious old prince might well rate a chapter for himself.

Hesse-Cassel was a small principality in central Germany and just north of Hanau of which Frankfort was the principal city. The ruling house had worked up for itself one of the most impudent rackets for making money. For a hundred years the landgraves made a business of forming and drilling armies and hiring them out to other rulers for war work. The biggest haul made by these drovers of men was by the Landgrave Frederick II, who hired 22,000 Hessian troops to George III for £3,191,000. These were the celebrated Hessians who won such a dark immortality in our Revolutionary War. William IX was the son of this Frederick. He had a small subsidiary principality of his own before his father's death and, like a true scion of his father, he had his own small army which he too hired out to England, cleaning up a million or two for himself.

This William, however, had a special flair for finance and an acquisitive urge which amounted to a disease. He was a heavy investor all over Europe, particularly in England, a lender of money to tradesmen, financiers, and his fellow princes. So that in 1785 when his father died and he united his own fortune with the hereditary accumulations of his house he was, perhaps, the richest man in Europe.

As affairs on the Continent sank into the disorder which followed the French Revolution William kept a large part of his fortune in England. He invested heavily in consols, but he made numerous loans to statesmen, princes, bankers. The Prince of Wales borrowed £200,000 and the Duke of York and Clarence also owed him large sums. He made large advances to the Austrian emperor, the king of Prussia, and to most of the lesser potentates of the Holy Roman Empire. And if his brother rulers despised him for his traffic in his soldiers, he was none the less cultivated by them because they never knew when they would want access to the treasure box of this royal Shylock. But he did not overlook the small loan business. He spent his life haggling over notes and bills and interest rates, bargaining and scratching to squeeze the last drop of interest out of bankers and tradesmen and petty lords in his own domain.

He was a man of two passions. One was his gulden. The other was women. But apparently he was not a promiscuous roué. He adopted one mistress after another, but clove to her with a curious fidelity during her special chapter. He married Wilhelmina, daughter of Frederick V, King of Denmark. She brought him a dull soul and a frigid body. And so he turned for love to the wife of a master of his horse, whom, in turn, he turned adrift. Next he took up with the daughter of a commoner, by whom he had four children before his fidelity cooled and he tossed her back to her native purlieus. His next affair was with Rosa Wilhelmina Dorothea Ritter, educated, well born, assertive, who gave him eight children and forced him to give her an estate and a title—Frau von Lindenthal—before she incurred his displeasure by

a flirtation with a subaltern. His next love was Juliane Albertine von Schlotheim, who added nine children to his collection of bastards. He induced the emperor to make her a countess and installed her in a palace. Thus he had twenty-four children, though less reliable historians endow the fecund old Turk with almost twice as many.

He provided for all these establishments. The support of so extensive a barnyard was a great burden, so the grasping prince who recruited an army and farmed out his soldiers like convicts shifted the burden of his bastard brood to the shoulders of his subjects by levying a special salt tax for their support. Some of his sons went into the military service of various kings. The most famous, or infamous, was that General Haynau—son of Frau von Lindenthal—who came to be known as the "Hyena of Brescia."

Into the treasury of this prince flowed a continuous stream of remittances from England, Austria, Prussia, and all the smaller states of Europe. They came in the form of bills of exchange. Meyer Anselm, for years, petitioned the Landgrave to grant him the privilege of cashing some of his bills of exchange. He did succeed in doing some of this business. But when Meyer sought to do a little of the Landgrave's banking business he was persistently excluded. As late as 1798, when Meyer was fifty-five, and William was making a loan of a million gulden to the Emperor of Austria, the Rothschilds could get no part of the transaction.

But this was accomplished by the simple expedient of taking Herr Carl Frederick Buderus, the Landgrave's confidential financial officer, into partnership. Put differently—the Rothschilds bought Buderus. This came to be the standard practice with the young men. They used money to buy what they wanted, including statesmen and their agents, as they were later to buy Gentz and as they bought sugar and indigo and other merchandise. Out of this corrupt arrangement Buderus became wealthy and died a millionaire.

In 1806 Napoleon established the Confederation of the Rhine, adding Hesse-Cassel to the kingdom of Westphalia, which he gave to his brother Jerome. His armies under General Lagrange occupied William's capital and the terrified Landgrave, now raised to the dignity of Elector, fled for his life. He hid some 120 chests of papers and securities and valuables in his various castles and left his power of attorney with Buderus. He deposited with the Austrian ambassador for safekeeping several chests of live securities, bills of exchange, cash, and jewels.

This is the episode that Friedrich von Gentz made the basis of the yarn that the Elector had left his entire fortune in the keeping of the elder Rothschild. As a matter of fact, he left just two chests containing unimportant papers with the Rothschilds. The French immediately started a search for William's effects. They found the hidden chests in his castles. But Lagrange, the French commander, reported that the assets found were worth four million instead of sixteen million. He delivered the unreported assets into the hands of Buderus. For this he received a bribe of 1,060,000 francs. The Rothschild home was raided. But the Rothschilds had received a tip of the coming search from Dalberg, the head of the Confederation of the Rhine stationed in Frankfort and Napoleon's tool. The

v

We are now to look at the larger ingots of the Rothschild fortune in the casting. Up to 1806 their riches were like a victory at chess—an accumulation of small advantages. These riches were now about to swell swiftly into an immense tumorous growth.

The Frankfort brothers were making their modest accumulations up to 1795 in small-scale moneylending, handling bills of exchange, but chiefly in trading, in textiles, coffee, tea, sugar, and, perhaps, indigo. England was the great market for these things. Save for textiles, they flowed in from her colonies. In textiles, the industrial revolution was well under way, and she had become the chief wooland cotton-cloth weaver of the world. But with the rise of the war trade these Rothschild profits began to soar. Nathan, then twenty-two, was sent to Manchester as a sort of buyer of cloth. This was a stroke of fortune, for Nathan was the family genius, and England was to be the financial capital of the world.

The young, short, obese Frankforter, looking almost comical, speaking but little English heavily macerated by the strange Yiddish pronunciation of his ghetto German, was a blaze of business energy. He boasted that he quickly multiplied his £20,000 capital to £60,000—but he was a most mendacious witness when boasting of his prowess as a money-maker. However, he did prosper amazingly. In 1804 he went to London to extend his operations.

Continent was aflame with the new assault upon Napoleon when Russia, Prussia, and Austria united in the attack. And once again, upon an even greater scale, the war profiteers proceeded to multiply their gains.

We now see Nathan leading his brothers in four swift episodes which were to land the five brothers among the richest houses in Europe. As late as 1810 they were unknown to official London as capitalists. In 1815 they were the bankers for the British government and the most powerful single unofficial force in Europe.

These four episodes were the smuggling trade against Napoleon's commercial blockade of England, the traffic in Wellington's bills and notes in the Peninsular war, the commission from the British government to convey funds to Wellington's army in Portugal and Spain, and, finally, the difficult job of transporting the British subsidies to her allies on the Continent.

VI

The first episode involved an adventure in large-scale smuggling. In 1806 Napoleon decided to crush England's commerce, to strike the despised shopkeeper whose flourishing trade nourished the armies of England. He declared his famous commercial blockade. England replied with an embargo and a blockade of all French ports. As the whole Continent needed British goods desperately, what had been a profitable war trade now became a more profitable smuggling industry. The Rothschilds had been making large profits in this war trade. They now, under Nathan's leadership, plunged into the smuggling adventure with all their resources.

Fortune favored them. With Nathan in England and the brothers on the Continent the firm was well equipped for the job. Moreover, Napoleon was soon to learn that the hand with which he sought to strangle England was also starving France; that the hated shopkeepers of perfidious Albion had upon their shelves merchandise that Frenchmen sorely needed. England too, which outwardly sealed the ports of France, found she needed markets

in France and in Europe to create for her the credits essential to get funds to her allies. And so one necessity yielded to another. Napoleon, while publicly thundering destruction to the trade of England, managed to open a back door into France through which greatly needed supplies could be smuggled.

We had the spectacle of both governments winking at their decrees and smugglers actually squeezing past conniving officials the merchandise France wanted. Indeed, by a decree in the summer of 1810, the Emperor actually legalized and regulated the outlaw commerce. The bootleg captains clandestinely sneaked their contraband into France at Gravelines under the eyes and protection and patrol of the police at a port officially set aside for the traffic. The Rothschilds made the most of this.

But Nathan needed more capital. He saw with dismay the great profits others were making. His mind turned to the Elector of Hesse, an exile in Prussia. His brother Anselm was getting closer all the time to the Elector's good graces—thanks to Buderus. The Rothschild house in Frankfort was handling more of the Elector's loans and collections. And Nathan in London was managing the transmission of the interest on some £640,000 of the Elector's investments in consols. Continental business and investments were subject to grave perils. Why should not the Elector invest the immense sums in interest and in principal that were flowing to him in English consols—and do it through Nathan? Nathan pressed Buderus to aid with his influence. But for some reason the Elector seems to have been suspicious of Nathan. However, after much pressure, Buderus convinced the Elector to follow Nathan's advice. Thereafter an immense sum was put into Nathan's hands for investment in English consols.

How much he got is not precisely clear. Rothschild boasted that it was £600,000. It was probably something less, about £550,000. But it was not all sent in one remittance. It was delivered to Nathan over a period of several years—in three installments. This was authorized in February, 1809. But Nathan did not buy consols with it. Instead he used it for his own purposes—appropriated it

to his own uses, feeling sure, of course, that he could restore it when pressed. Here we have the banker-agent of the avarisious Elector using for his own purposes the funds entrusted thim by his principal, on the advice of that principal's confidential financial official who was himself in the pay of the banker. And in the very month this was done Buderus' partnership in the Rothschild firm was reduced to writing.

As Rothschild purchased no consols it was impossible for him to forward the Elector receipts for their deposit in the Bank of England. William became uneasy. He demanded the receipts. He prodded Buderus. For over two years Buderus quieted his fears with one explanation or another. But in the end he lost patience and confidence. He demanded the instant delivery of the evidence that his funds had been used as directed and he gave orders that no further sums should be remitted to Nathan.

VII

work of his whole fortune. And none clears up the procedure by which the enterprise was carried on. The facts as far as they may be unrayeled follow.

In 1808 Napoleon forced his brother upon the throne of Spain. Madrid revolted and improvised a large army. England saw an opportunity in this to drive the usurper out of the Peninsula, and sent an army to Portugal. Wellington was one of its generals, but in 1800 became commander in chief.

The great problem was to get supplies to Wellington. Oporto and Lisbon were 600 and 800 miles from the nearest English port, and the sea was infested with enemy ships and privateers. Metal was too scarce to permit so much risk in its shipment, and Wellington needed money to pay his troops and purchase certain local supplies.

This made everything Wellington bought cost several hundred per cent more than even the high war prices in vogue. The Treasury protested. Wellington hurled back criticisms at the Treasury and the Commissary General. He said bitterly that the government cared nothing about his armies. His men, he wrote, remained unpaid for two months and had to sell their shoes and clothing for food and medicines. He intimated that England should abandon the whole expedition. "A starving army is worse than none," he complained. "We want everything and get nothing." He protested

Being in the smuggling trade Nathan of course knew all about this. This traffic in notes was too enticing to be resisted. And he went into it. How deeply he actually went in and how he managed it are by no means clear. One account has it that he summoned his brothers, Carl and Solomon, and later James; that Carl traveled to the Spanish border and bought up the notes with gold, then returned, meeting his brother Solomon halfway, exchanging his bills for a fresh supply of coin brought by Solomon, who then made his way to the French coast where he met Nathan, with whom he again exchanged notes for gold, Nathan taking the Wellington bills to London and exchanging them for guineas.

Another account is that Nathan had merely cashed some of the bills from the Cab and later planned to enter the trade—without actually doing so—in order to help Wellington.

It is also difficult to believe that so much gold could be trans-

VIII

This new turn of affairs arose out of the following facts. Rothschild's difficulty in the Wellington note traffic was gold. The guinea, said Herries, was an article of luxury. Every quarter of the globe was ransacked for specie. The Rothschilds, with their expanding trade areas, were doubtless able to gather a great deal. But there was a limit. In London a ship of the East India Company brought in a cargo of gold. According to custom, it was offered at public auction. Nathan Rothschild bought this for £800,000, using all the cash and credit he had, plus the funds of the Elector in his charge. In later years he said he planned to send this to Wellington. Some historians have accepted this version. But the notion that this predatory man entertained any such fantastic stratagem attended with so much risk is as preposterous as the yarn about his father sacrificing his whole fortune for the Elector and the Elector insisting on lending the Rothschilds all his cash without interest. He was merely planning to extend his traffic in the Wellington scrip and other war trade.

Rothschild was surprised to find himself summoned a day or two after this purchase to the office of John Charles Herries, Commissary General. The Commissary must have been no less surprised at the squat, blunt, Frankforter, looking and talking like a Jewish comedian taken from a London music-hall stage. Herries says that at this time Rothschild was wholly unknown in London official circles as a capitalist. Nathan was asked why he had bought the gold. What did he propose to do with it? It was the hour of fate for the Rothschilds. He might have lied—a course he would have pursued with as sweet a conscience as when he bought Buderus and other public officials. But he caught here a glance of the long turnpike of time. He told Herries why he had bought the gold—to buy Wellington's bills. Herries said the government wanted the gold and Rothschild promptly sold it to him at a large profit.

Rothschild outlined to Herries how he would proceed. Herries reported it to the Prime Minister and the Finance Minister, who approved the plan heartily. And, in a trice, Nathan Rothschild, the unknown smuggler-banker, was established in the headquarters of the ministry, supervising the delicate operation of sending money to the irascible and clamorous Wellington.

certain bankers and thus, through a series of operations, got the bills into the hands of Wellington who could exchange them for specie with the bankers. The defects in this plan are too obvious to discuss.

But some gold was shipped across the Channel. Letters of James to Nathan intercepted by the French police revealed that some £120,000 had been sent to James at Paris. What is entirely probable is that the bulk of this business was done with bills but that some gold, perhaps a considerable amount, was shipped also. What the whole operation amounted to is also left to surmise. But we know from another source that in the year 1813 the whole amount of specie sent to Wellington by the British government amounted to £1,723,936 and 339,432 Spanish dollars. Probably the bulk of this was managed by Rothschild. And he doubtless was well paid by the British government. His pay must have been a commission and did not include the large profits in discounts. It was doubtless a generous profit, but it could not account for the immense wealth with which the Rothschilds appeared in Europe two years later.

But it did account for the most important advance they had ever made. For they were now soundly entrenched with the British government. One incident of this operation, however, has not been sufficiently emphasized. It was one of those master strokes which exhibits these men as capable of strategic daring of the highest order. In the course of these transactions, either before or after the deal with Herries, James, the youngest brother, was sent to Paris. Solomon and Carl had been working more or less out of that center. But doubtless Solomon was needed at Frankfort. And it seems probable that Nathan saw the value of establishing a branch in Paris.

There could have been but one reason for this step. The Rothschilds were shipping into France gold that was going to Wellington. If discovered by the police they would have to make an explanation. Here was an explanation. What is more, it was an explanation made in advance of discovery—and made directly to the Finance Minister himself. It was a dangerous expedient. James was putting himself in the hands of the French. He was trifling with a resolute and ruthless enemy. A false step here might have brought him to the block swiftly enough. It was foresight supplemented by action of a very audacious kind. But it was more. It was also a plan to get a footing in France. After all, Frankfort was in the hands of Napoleon. The Confederation of the Rhine was his satrapy. The brothers were already operating in both camps, with

ΤX

The fourth episode revolved around the last mighty effort of England and her wobbly Continental allies to drive Napoleon out of France. The vast disaster of Russia had undermined the Emperor's strength and reputation. It was a terrible economic blow to France. England rallied the allies to another great exertion of their united resources. In January, 1813, England agreed to send to Prussia and Russia large grants of money. Prussia was to get £666,666; Russia over a million. Each was to put new large levies of men into the field. Later in the year Austria, under Metternich's leadership, abandoned Napoleon and threw in her lot with the allies. England promised Metternich a million pounds. Later this was more than doubled.

Herries, the English Commissary, was now charged with the difficult task of getting these sums to Prussia, Austria, and Russia. It was a delicate job. England could not send that much gold to the Continent out of her already depleted resources. But if she sent bills to her allies the effect would be disastrous on international exchange, particularly British exchange.

his hundred-pound claim against the man in Berlin. He may then send that claim to the man in Berlin to whom he owes his hundred pounds. That Berliner may then collect the hundred pounds from the Berliner who owed the bill in England.

Thus in a city like Vienna there are always a number of merchants who have bills due to them by men in London. Bankers buy up or discount these claims against London merchants and sell them to other Viennese who want to pay bills in London. Thus there is always a demand in Vienna for bills due by men in England. And here is where the trouble begins. If the demand for the bills is small and the supply great, the price of these bills will drop. A man in Vienna who has a bill of a hundred pounds due to him from a Londoner may have to sell it for only ninety pounds because the supply of London bills is very great.

As England had to send over many millions to Russia, Prussia, and Austria, she was anxious to find a way of doing this without depressing the price of British paper, so that her allies would receive a thousand pounds for every thousand-pound bill sent. To do this delicate job Herries again called in Nathan Rothschild. The banker was commissioned, first, to manipulate the foreign-bill market so that exchange would not be against England—that is, that English bills and pounds would not decline in price; and, second, that the money would be transmitted to her allies without loss and without upsetting the foreign-exchange market.

And this job Nathan, with the aid of his brothers, did with great skill in the face of many difficulties. He did this partly by "going around" the bill market and partly by manipulating it.

It was the bills for the subsidies which caused the trouble. But all these, so far as Prussia and Russia were concerned, were delivered to Rothschild. Thus, he had in his hands the surplus of English bills. Now if he could get in his hands also a large supply of the Continental bills, it would be possible for him to feed either English or Continental bills into the market as might be necessary to keep prices balanced. To put into his hands still further control of the exchange, he bought bills through his brothers and his agents directly from merchants in the leading European ports before these bills got into the regular bill market.

In this way, controlling enough of the two streams of bills—bills against England and bills against Continental countries—he was able to protect the English pound sterling from declining. Of course, he had to use a large amount of his own large resources on the Continent to purchase Continental bills and to hold them. And always, of course, there would be balances in gold to be settled by England. But these balances never got into the channels of trade. They did not have to leave England always. For the Rothschilds could receive the gold in their English house, retaining it there, and paying it out from their Frankfort or Paris houses. The whole transaction was complicated. But it was one which, as Herries said, kept Rothschild "in his [Herries'] rooms constantly." The value of these services was all the more apparent by contrast with the difficulties encountered by Austria, which persisted until the war was over, in negotiating these subsidy transfers through her own Viennese bankers, to her great loss.

But the Rothschilds besieged the Austrian government for the privilege of servicing the transmission of the English subsidies. What they had done for the English government was quite unknown, the Wellington service remaining a profound secret, according to Herries, for twenty years. It was probably difficult for the Austrian officials to believe that these uncouth Jewish traders with their bad grammar, their harsh Yiddish, and their unlettered appeals could be such extraordinary financial wizards. Only one small transaction did they get from Austria—handling half of a remittance of only 9 million francs from Belgium. The Austrian finance minister explained that the whole amount was too large a sum for second-rate bankers to manage.

A mere incident was to turn the scales in their favor. Their rising wealth had stimulated the jealousy of both Christian and Jewish rivals in Frankfort. When Napoleon returned from Elba, every effort was made by Austria to draft the needed men for the troops. At Frankfort an effort was made to force two of the Rothschild brothers into the army. They appealed to Nathan. Nathan appealed to Herries. Herries wrote the Austrian ambassador at Frankfort. He outlined the immense importance of the work they were doing for Great Britain, the great sums involved, the delicacy of the operations, and "the English government is most anxious that this firm should not be annoyed in any way." This note was sent to the foreign minister. It opened his eyes. It revealed that if he did not know who Rothschild was, it was his loss. It broke the ice at the Austrian finance offices, and thereafter the Rothschilds began to handle the Austrian business, too.

Then came Napoleon's defeat and the entry of the allies into Paris. The Count of Provence, soon to be crowned Louis XVIII of France, was living in Buckinghamshire. He was broke and applied to the English government for funds to assure his march to the throne in the style becoming a king. Nathan accepted the English government's draft for five million francs in England, and when Louis arrived in France, James handed him the money. While all else had been done by Nathan in the darkest secrecy, this act he wished to be known. What more natural? The scion of a score of monarchs and a thousand years went to his throne with the francs of the poor and crusty bill merchant of Frankfort's Jew street jingling in his pockets.

$\mathbf{x}$

In the midst of all this Meyer Anselm, the father, had died in Frankfort. Long before his death the business had been literally swept out of his hands by his energetic sons. He had been ill for several years. He had drifted more and more to the comforts of his Talmud. He was a quiet man, amiable, wholly lacking in that fierce energy which drove his sons. He was stricken in the temple and three days later—September 19, 1812—died at the house of the green shield in the Judengasse, where he had lived over his small shop for so many years.

Two hoary fictions cling about that bedside. One is that his five sons, with their daughters and mother, gathered about while the dying man delivered to the boys the moral testament by which they lived and which is epitomized in their coat of arms—Concordia, Integritas, Industria. The other is that there he bequeathed to them, like an expiring emperor, the five great financial provinces

When the old man was stricken on September 16 he hurriedly made his will. He wished to keep the business in the hands of the sons who had created it. And when he died and the will was opened, it turned out, as in the case of John D. Rockefeller and many other American millionaires, that he no longer owned any part of the firm.

But now in his will he declared that he had sold his interest to his five sons for 190,000 gulden—about \$76,000—and that this constituted his whole estate. He left 70,000 gulden to his wife and the balance to his daughters. But he made it plain that after his death the sons were to be equal owners. He provided that the daughters should have no interest in the business or any right to see the books. He created, as Fugger did, a continuing dynasty or partnership, limited to those male heirs who took an active part in the business. And he enjoined upon all his children "unity, love, friendship." After his death the headquarters of the house remained in Frankfort. Anselm, the eldest, became the titular head of the firm.

XI

When Napoleon was definitively liquidated at Waterloo and Europe settled down to peace, every country was in a state of economic disorganization. Every country was loaded with debt. Every country was more or less dislocated by the changes that the industrial revolution was making in its economic structure. Every country was desperately in need of money.

What they were worth is difficult to say. No accurate estimate exists. But all their biographers, most of whom are none too reliable, are agreed that they were, when the war ended in 1815, among the richest, if not the richest, men in Europe.

The brothers now wanted recognition. They had money; they needed prestige. They wanted ennoblement. And they proceeded to ask for their reward. They sought it from Austria, the last of the powers to recognize them. But just as the Rothschilds had

The privy counselor was right. In 1822 Austria needed money badly. She asked the Rothschilds for a loan of 30 million gulden. The Rothschilds said—yes, they would lend the money, but would have to have the bonds at 70 per cent with interest payable in advance. The finance minister analyzed their offer. It meant the government would have to issue 42,875,000 gulden in bonds to get 26,796,875 in money. The interest would amount to $7\frac{1}{2}$ per cent. The bankers would make 3,215,625 gulden. The government

discovered that Herr Solomon von Rothschild was preparing to rook the royal treasury. It made inquiries elsewhere and discovered that bankers who had not been honored, who owed nothing to the imperial throne, foreign bankers, indeed, and for nothing more than a mere profit, were willing to do better than the von Rothschilds. The von Rothschilds did not get the business.

XII

It was at this point—when the war ended—that the Rothschilds moved into the upper altitudes of international banking in its most important sense, the issuance of government securities.

They had been bankers. They did a large bill-brokerage business. They speculated in bills. They made loans to all sorts of people. They handled a few small public loans for Denmark and some cities. They handled the funds of the Elector of Hesse-Cassel. They made great sums transmitting money for the great powers. But they had been rigidly excluded from the upper altitudes of banking, where the aristocrats of money reigned—the flotation of loans for governments. Their great wealth had been made in smuggling, in war trade, in financing war trade of merchants, in war bills, and in speculation in government securities.

Highly colored journalistic accounts of Nathan standing at his favorite pillar of the London Exchange, potbellied, somber, taci-

turn, inscrutable, sending the market up and down with his smiles and his frowns have been greatly overdramatized. The London Exchange was a market place for securities, but chiefly for government securities. Only a few corporate stocks were listed—those of the large trading companies. Government paper fluctuated violently at times during those troubled years and it was in this that speculation took place. Nathan carried on extensive operations on the floor in government paper and it is not at all improbable that the greater part of his fortune was made this way up to 1814. The art of manipulation had already been developed. The subtler and more delicate nuances of fraud for which exchanges are noted were well understood. These were not born with Daniel Drew and Jim Keane. Abraham Goldschmidt, "King of the Stock Exchange," could plant a false scrap of news, let out a flock of fake rumors and tips, jiggle an issue as neatly as the gentlemen who sent Radio and American Can and Case Corporation bounding up and down in 1929.

Nathan Rothschild came to be known as one of the most daring and successful speculators of his time. With his brothers on the Continent and his agents everywhere he was able to collect inside information and to transmit it swiftly, as Jacob Fugger had done three hundred years before. There is a legend that exalts and debases Nathan Rothschild; one that admirers who love proficiency in slickness have loved to repeat but which, fortunately for his fame, is not true. It is the story of how he stood on one hill in Belgium while Napoleon stood on another, the Emperor directing the Battle of Waterloo, the banker watching the tide of fortune, and how, when Napoleon's defeat was imminent, Rothschild fled from his high perch, made for the coast with relays of swift horses, set out in a chartered boat at night, and reached the Exchange next morning in time for the opening and before news of Wellington's victory was known. There the brokers saw him by his familiar pillar, simulating dejection, selling consols. Knowing his facilities for inside news, his action precipitated a panic and a wave of selling, while through his agents he gathered

in all the government paper that was offered, making a fresh fortune.

Anselm, the oldest brother, remained in Frankfort. A fine banking house there was the firm's headquarters. He himself managed the business of the firm with Prussia and Germany. But Frankfort became an unpleasant haunt for the Rothschilds for a while. The hot breath of hatred was on the poor Jewish family that had risen to such wealth. Napoleon brought to Frankfort at least one thing—legal equality for the Jews. This they bought from Dalberg, Napoleon's venal ruler in the city. The old Jew street remained, but those only lived there who wished to. The elder Meyer remained until his death. Guetele, his widow, continued there until her death many years later. The sons had made their homes and their business headquarters outside that old prison street. But now Dalberg was gone. The Germans were again in possession. They refused to ratify the liberal dispensations of Napoleon. The Senate actually considered measures to force all Jews back into the ghetto. This would include the Rothschilds with all their millions and power.

At this point Anselm and his brother Solomon considered emigration. They would go elsewhere. This was a serious matter for Frankfort. Anselm spent 150,000 gulden a year upon his home. He dispensed 20,000 gulden in charities to all sorts of people. A procession of rich and eminent persons filed daily into

Solomon Rothschild found it necessary, because of the growing business with the Austrian court, to establish a house in Vienna. But Vienna was not free to the Jew. He therefore took quarters in the Empire Hotel. When the freedom of the city was given him in due course he took over the whole hotel and the adjoining building as the Rothschild home and banking house. After Aixla-Chapelle in 1818 he became the chief banker of the Austrian government. Metternich wrote of him as "my friend Rothschild." Metternich, the archangel of legitimacy, and Solomon Rothschild, the embodiment of upstartery, became fast allies for legitimacy, and wherever the great Austrian champion of absolutism went with his documents and his troops, the indispensable gulden of Solomon Rothschild flowed along to nourish the project. Somehow it got about that the fortunes of Austria and of the House of Rothschild were inextricably intertwined. Bethmann, his great rival banker, now completely overshadowed, said in 1822 that the continued prosperity of the Rothschilds was necessary to Austria.

become one of the first bankers of France. He moved from his modest flat and took over the palace of Fouché, Napoleon's chief of police. He filled it with treasures of art, costly furnishings, and plate, and became a sort of patron of men of letters. He entertained lavishly and made loans with great discretion to many leaders and statesmen. He established the closest relations with Louis XVIII and Charles X, his successor. But when Polignac staged his ill-fated coup d'état for Charles and Parisians rushed to their beloved barricades to drive Charles from his throne and put Louis Philippe there in his stead, James Rothschild could look with satisfaction upon a new king whose investments he managed, to whom he loaned money, and with whom he had dealt on terms of the greatest intimacy. Thus James in Paris could fall upon his feet with the alleged liberal revolution of Louis Philippe while Solomon in Vienna held the pursestrings of the most implacable foe of liberalism. And though France had her great bankers—Laffitte and Casimir Périer, Delessert, Mallet, Hottinguer, and Ouvrard—the House of Rothschild rose above them all.

The state to which these men had arrived may be sensed from the following account of James by the poet Heine. "I like best to visit him at his office in the bank, where, as a philosopher, I can observe how people—not only God's people but all others—bow and scrape before him. It is a contortion of the spine which the finest acrobat would find it difficult to imitate. I saw men double as if they had touched a Voltaic battery when they approached him. Many are overcome with awe at the door of his office as Moses once was on Mount Horeb when he discovered he was on holy ground."

This was the man who as a boy was taught in Frankfort that he must step off the sidewalk and bow when a Christian approached.

XIII

There is no point in recounting all the national loans in which the Rothschilds figured as Europe, which had borrowed herself into disaster by war, now tried to borrow herself out. It was a paradise for the bankers, and the Rothschilds found themselves handling the largest loans either singly or with others for England, France, Austria, Prussia, Russia, Italy, and the smaller states. And here they were able to sink their arms into those rich pools of invisible profits which are the source of most vast fortunes.

wives, as the Bardi and Peruzzi did three hundred years before. Also they found it necessary to penetrate government departments, as they did when they took Buderus into partnership, and as one of our great American banking houses has done for decades, with its members, its lawyers, its employees holding positions of importance and trust in the state and finance departments of the government, while recruiting its partners from men of power and influence in the administration of all parties. The ethics of the city party gangs, perfumed and rigged out in a frock coat and sprayed with the odors of sanctity, have characterized the public morals of investment bankers the world over.

But the Rothschilds until late in their careers apparently took little or no part in the creation of wealth in any country in which they operated. In those years from 1790 to 1825, the most amazing change in the processes of producing goods was taking place—that industrial revolution which set the modern world off upon the machine age and changed its manners, its habits, its tastes, its governments. The revolution in the methods of producing textiles, wools, the introduction of steam, of railroads, of steam shipping, and a host of other technological developments came about rapidly. But the Rothschilds, so far as the records reveal, took no interest or part in this until all the spadework had been

done. They did not finance industry. Indeed, few of the bankers did. And, above all, they stood aloof from corporate finance, which seemed to belong to a level below their lordly attention. Indeed Baring in the House of Commons denounced the growing flood of corporate stocks that was flooding the market, though it was quite small. In fact twenty years later, in the early 'forties, out of £1,118,000,000 of securities listed on the London Exchange, £894,000,000 were government issues and £46,800,000 were bank issues

In later years, however, they did turn to industrial and commercial ventures, particularly as their vast resources increased and, as the result of industrial development, great opportunities appeared, involving less risk than in the earlier years of the new era—and when they saw the value of doing with corporate stocks what they had done with bonds, underwrite them, boost the price on the exchange, and unload at large invisible profits. Also they were drawn into certain large-scale private and semiprivate enterprises by reason of their close alliance with their respective governments. In England, Nathan's son Lionel, after Nathan's death, financed the purchase of the Suez Canal for England and backed the adventures in empire building of Cecil Rhodes. The French house came to the rescue of the Czar several times, on one occasion getting from him the important Baku oil concession that put the Rothschilds into competition with John D. Rockefeller until they sold out to Dutch Shell.

In Austria Solomon did some not-too-successful railroad financing. He organized the Credit Anstalt, Austria's greatest bank until its disastrous collapse in 1931, and continued as the chief Austrian banker until his death.

James lived until 1868. Solomon died in 1826; Carl and Anselm in 1855. James' son Alphonse assumed the leadership of the powerful French house. Anselm left no sons, and the house, managed by two nephews for a few years, gradually passed out of existence. Carl, in Naples, left his son Albert in control. But Naples was too troublous a spot. Italy was too much in ferment for successful banking under a banker who had little or no interest in his business. And so the Neapolitan house was closed. Gradually the Austrian branch sank into a place of unimportance. The French house became a mere investment trust for the extensive invested wealth of the family. The old banking house of Nathan in St. Swithin's Lane remained, active and influential, but far from first among London bankers. Today, Rothschilds do not control any of London's five big banks—the Midland, Barclay's, Lloyds, National Provincial, or Westminster. No Rothschild is on the directorate of the Bank of England, but Nathan's old enemy Baring is there.

ing magazines several years ago. It represents in a nutshell the batch of fairy tales that three generations have had repeated to them over and over about the Rothschilds:

It was their guess about Napoleon that set them on their unique pedestal. The five brothers were clever enough to realize that for all his genius, for all his victories, Napoleon could not last. On that intuition they staked every penny. Nathan's fabled advance news of the Battle of Waterloo gave the Rothschilds an opportunity to buy depressed securities in London. Even without that coup the day after Waterloo was to find all the established governments of Europe deeply in their debt. . . . They, especially Solomon Rothschild, guessed right about railroads, became the railroad builders of Europe. While Calvinist clergymen thundered against the steam engine and country squires complained that the filthy little teakettles on wheels were ruining the countryside, the Rothschilds and their sons were pouring out gold to lay tracks.

It would be difficult to find anywhere in history so many insupportable statements packed into so few sentences. Literally every statement is wrong. Yet the writer can hardly be censured since he was repeating what is to be found in innumerable biographies, histories, and essays, having their origin at least in part in the industry of inspired writers beginning with Gentz.

The Rothschilds did not realize that Napoleon could not last and did not stake their all on this conviction. On the contrary, they took excellent care to protect themselves against any eventuality. Nathan in England worked with the English ministry, but Anselm and Solomon in Frankfort worked on equally friendly terms with Napoleon's rulers in Germany. They loaned nothing to the English government. They did make loans to Dalberg, head of Napoleon's Confederation of the Rhine, both personally and to his state. James went to Paris where, while operating in collusion with Nathan, he maintained the friendliest relations with Count Mollien, Napoleon's finance minister, and established an excellent reputation as a banker. Nathan, in London, observed the greatest caution in keeping under cover so that his activities would not injure his brothers on the Continent. They played the

game safe and were in a position to capitalize on victory for either side. It was not until after the disaster at Leipzig and when Napoleon's star was definitely setting and all Europe was betting against him that the Rothschilds became openly opposed.

Of course the story of Nathan's Waterloo coup is pure fiction. And equally fictitious is the statement that the day after Waterloo found all the governments of Europe deeply in debt to the Rothschilds. No government owed them anything, unless perhaps the small government of Denmark, which is doubtful. Up to the defeat of Napoleon they played no part in the flotation of loans by European states. Had Napoleon routed Wellington at Waterloo, the Rothschilds would have lost nothing, save some good clients. Then follows the statement that they became the railroad builders of Europe. They built a single railroad—the Chemin du Nord in France. And this they built not when country squires were complaining that the filthy little teakettles ruined the countryside, but after most European railroads had been built and developed (there were at least seventy-five roads in England alone) by other men and the little teakettle locomotives had disappeared. There is a curious consistency in naming Solomon "especially" as the railroad builder. This fable is hoary with age. He built no road. He did finance in part a single road in Austria which had so unhappy a history that he quickly got out of it. James was the only one who built a railroad.

Interlogue One

COSIMO DE' MEDICI

THE TEMPTATION to include in this volume whole chapters about three men was not easy to resist. They were Cosimo de' Medici, Sir Thomas Gresham, and Jacques Coeur. The essentials in the stories of these men were quite the same. They were the chief pioneers in organizing the forms of the new capitalist system in Italy, England, and France, respectively. They seemed, however, interesting and romantic in their personal histories, but less significant than Jacob Fugger, and it was not possible to include more than one.

When we speak of the Medici we may choose one of three—Giovanni di Bicci, surnamed the Friend of the People, or Cosimo, his son, called Pater Patriae, or Cosimo's grandson Lorenzo, known as the Magnificent. Giovanni laid the foundation of the fortune. Cosimo, however, ablest of the three, accumulated that vast wealth that gave the Medici their power in Florence. Lorenzo advertised, paraded, luxuriated in that fortune and laid the foundation for its ruin. All of them were merchants, moneylenders, bankers, manufacturers. Cosimo, however, added to the techniques of these professions the role of politician and the devices of homicide. One does not use these brutal terms about such splendid persons. Yet if truth is to be served we must describe Cosimo and Lorenzo as bankers, merchants, manufacturers, statesmen, and murderers.

Giovanni actually established a large business with branches all over Italy, in the Levant, Constantinople, and other cities. He

Lorenzo made money, of course, for he possessed a great fortune, a great money-making machine, and enormous prestige. From Pope Paul II he got a monopoly of the alum recently discovered in the hills around Volterra, his Holiness justly protecting the monopoly by proclaiming excommunication against anyone who

competed by importing alum from the Turks. Thus excommunication was added to assassination as a defense against competition. Lorenzo was a good Catholic, but a better moneylender. He loaned Pope Innocent VIII 100,000 ducats for a year, taking as surety two tenths of the stipends of all newly appointed priests, and possession of the Città di Castello until paid. The Pope made Lorenzo's fourteen-year-old son a cardinal and gave to Lorenzo's daughter his own illegitimate son in marriage.

An attempt upon Lorenzo's life was made by two priests during Mass, instigated by Pope Sixtus IV and the Pazzi, bankers. Lorenzo's vengeance was swift. Certain of the Pazzi were hanged, others butchered in the streets, some cast into the Arno. He became an unrestrained tyrant, filled Florence with spies, was himself excommunicated by the Pope. He showered gold and favors upon painters, sculptors, poets, philosophers, enriched Florence with their works, bought rare manuscripts, books, antiquities, covered himself with the praise-giving of these subsidized flatterers, and, dying, left his city upon the brink of ruin. His son Pietro ruled disastrously for two years and was driven out of Florence to make way for the theocratic Fascism of the monkish enemy of bankers, national and international, Savonarola.

TT

SIR THOMAS GRESHAM

The great businessman of England in the dawn of capitalism was Sir Thomas Gresham, financial adviser to three Tudor monarchs—Edward VI, Mary, and Elizabeth—founder of the Royal Exchange and reputed discoverer of Gresham's Law, known to every crossroads store controversialist on money.

prototype of the modern Peel-Hanna-Chamberlain-Mellon school of merchant-banker-statesman. Starting with an education amid members of the mercers' guild, who had but little, he spent twenty years as merchant and king's factor in Antwerp, money metropolis of Europe, where he learned more about money, credit, exchange, and speculation than any of his English contemporaries.

He went to Antwerp as king's agent in 1551 when Edward VI's ministers were looking ruefully down that bottomless hole known as the national debt. It was an external debt—more kings have fallen by it than by guns. English kings borrowed from Flemish, German, and Italian bankers. More money flowed out in usurious interest than flowed in in loans. Edward VI had to find 40,000 pounds a year for interest to foreign bankers. "How can the king be rid of his debt?" asked the ministers. Gresham's answer was an amazing one. "By paying them and incurring no new ones." Seemingly it had occurred to no one. It was the hard way. Politicians have a preference for the easy way—the primrose path down which they lead people to the ever-lasting bonfire. Gresham persuaded the ministers of Edward, Mary, and Elizabeth to try the hard way. It led to riches for England.

By skillful manipulation on the Antwerp bourse he got control of pound exchange over a considerable period, making it favorable to London. He induced the government to economize and to remit to him weekly sums for extinguishing the debt.

to bringe your base money into fine, of xi ounces fine. And so gowlde." This was done.

Serious, severe, sober in his dress, he lived well, but not ostentatiously as did Fugger and the Medici. He had a home in Bishopgate Street and several in the country. He endowed a college—Gresham College—an almshouse in Broadstreet, and distributed alms to five prisons and four hospitals each quarter. He attained to no such wealth as Fugger or Medici. Moreover, he came on the scene after them and when the devices of the new flowering capitalist and mercantilist world had been much advanced. But he must rank as one of the great commercial figures of that era.

III

JACQUES COEUR

The great business leader has been called in order Magnate, King, Baron, and now Tycoon. The first title of adulation conferred upon him was prince. Hence Jacques Coeur was called the Merchant Prince of the Middle Ages. He was in but not of the Middle Ages. The smell of money was in the air in France. Men who had the feel of livres as some men have the feel of cards or dice were fingering livres and breeding them. They were not operating in accordance with the dying techniques of the Middle Ages but rather of the emerging capitalist world. Jacques Coeur was doing this in France, as Fugger was in Germany, Gresham in England, and the Medici in Italy. And, though there were no schools of business or professors of banking institutes, these gentlemen did very well. Most of them—Coeur, Fugger, Law, Rothschild, Rockefeller, Morgan—were already rich before the average young business-college graduate has emerged with his M.A.

Coeur was pre-eminently a trader—a merchant-adventurer. He flourished upon the swiftly growing intercourse between nations, the wider variety of products upon the market, and the means of gratifying the taste for them by means of money.

Coining money was the king's prerogative in France, but he let it out upon a partnership basis to various argentiers in different sections. Ravent Ladenois had it for Bourges and a brace of cities. And Ladenois found for himself a partner in each such town to operate the mint. Young Jacques Coeur was Ladenois' partner in Bourges. Ladenois and Coeur were arrested and thrown into jail on the charge of cheapening the king's money—that is, short-weighting the coins, pocketing the difference as profit. Unhappy M. Ladenois whimpered that so great had been the exactions of the king out of the business that this was quite necessary for him to make a profit. Young Master Coeur said he did as he was told. Both were convicted, fined 1000 livres each, the plea of necessity weighing heavily with the judges.

Coeur became a merchant. He turned up next as a merchant-adventurer. Shipwrecked in his vessel on a trip to the Orient, captured by pirates, he escaped, drove forward in business, became rich, and finally landed on both feet in the very palace of the king as Lord Steward of the household. He continued to expand his business and, we are told, spread his agents to all the important ports of the world. He had three hundred factors, his business in Bourges housed in thirty buildings, with several business buildings in towns like Tours, Marseilles, Lyons. He built a famous palace—Jacques Coeur House—in Bourges, surpassing any royal home in France. It still stands, a castle in splendor and beauty worthy of a twentieth-century economic grandee, filled with tapestries, paintings, gold and silver plate, and other works of art.

Then, as ever, the love of the king for Jacques cooled. Almost

There was the odor of conspiracy in all this—charges coined to ruin Coeur. After all, there was a vast estate which was subject to confiscation by the crown. And there was probably some serious rift between Coeur and the king because of the quarrel between Charles and his exiled son, who would become Louis XI. And Coeur was suspected of being friendly to the Dauphin. The charge of poisoning was dropped. But Coeur was convicted on four of the remaining ten counts, including the arming of the Turks, despite his claim that he had a license from the Pope to ship the arms. Coeur sold the arms to the Sultan in order to get permission from him to bring out of Alexandria a large cargo of pepper.

It is interesting to note, that in the very dawn of civilization, in ancient Egypt, when men were just beginning to learn the difficult business of living together, the art of make-up was much in use by the monarch and the ruling groups that surrounded him.

It is also worth noting that this, the oldest of the luxury industries, is the one that has persisted and grown so extensively that in our age it becomes at once a prop of our economic life and the chief weapon of our ruling figures for continuing their dominion over the minds of men.

The world is now and has always been ruled by men of wealth, and the most important instruments in the stratagems by which this is achieved are the rouge pot, the haberdasher, the builders and decorators, the dramatist and the showman, and, as we shall presently see, that oldest of functionaries—the shirt stuffer.

This is the trick the ruler and the rich man knew when we discover the first traces of him in the ancient monuments and which, doubtless, he brought with him out of the jungle.

2

We are all bank notes, observes Thomas Carlyle, representing gold. But alas! he laments, many of us are forgeries. On this point, however, he consoles himself with the thought that, after all, men, in all times, especially in earnest times, have a talent for detecting quacks and, indeed, for detesting quacks.

The sour old Scotch philosopher, who believed in the authenticity of heroes and the necessity for them, had a theory to which this reliance on man's perception in detecting quacks was essential. Woe to the times, he said, which, calling loudly for its great man, finds him not there.

Carlyle overstates the disaster. The times, in all ages, have had a way of inventing their great men. The machinery and means of producing men and women to our taste—and great ones, too—have always been ready to hand. We have always been equipped to make

Somehow the hero worship that flourished in the ancient world still persists, despite education and newspapers and books. We have had a gargantuan spree of debunking, of stripping the wrappings and labels from our spurious miracle men, our pyramid builders, our treasure hunters and statesmen. We have seen a good many of the bank notes go to protest and—to mix the metaphor—to jail. But the equipment for turning out fresh forgeries seems to be inexhaustible.

These deceptions are achieved through that same more or less harmless theatricality by which men and women mitigate the errors of nature. No doubt originally devised to add to grace and charm, it has been cultivated extensively to give to cheapness and fraud the aspect of quality and authority and even greatness.

3

Civilization, as it moves slowly away from primitive barbarism, seeks to dress itself up for the part it would like to play.

This art of make-up probably was cultivated by remote tribes fifteen to twenty thousand years before it appeared on the banks of the Nile. And as it was one of the most important industries in the wealthiest of early nations—Egypt—so it continues to flourish as one of the most important of the great industries in the wealthiest of modern nations. It is doubtful if any single industry can match it in the number of persons employed and the sums expended in the vast business of dressing and beautifying the American man and woman.

Along the Nile and the Red Sea and across the Arabian Desert

boats and camels transported the materials for ministering to Egyptian vanity, and this constituted the bulk of that country's trade. Today in America it is said the American woman's cosmetic bill is two billions a year. This is in addition to what she spends on clothes, furs, millinery, and jewelry. A thoughtful gentleman of my acquaintance who loves to toy with novel ideas has advanced the not wholly fantastic proposal that this nation, groping about frantically but futilely for a new industry to pull itself out of its depression, might accomplish this by merely extending the area of the oldest industry and inducing men to go in for beauty as women have done.

Oddly enough, man has never felt sure of himself in the nude. This in itself has made an end of the struggling cult of nudism. Men and women will never trust themselves to the opinions of their fellows, based on their unadorned bodies. People do not dress for modesty. Modesty, like many other excuses in our moral codes, serves a better reason.

Human beings wear clothes to shield their nakedness, to keep them warm, and to adorn themselves. But a woman can hide her nakedness in fifty cents' worth of cotton cloth. She can keep herself warm in six dollars' worth of wool. Nevertheless she spends fifty dollars for her coat and five thousand if she can afford it. This will serve as a measure of the relative importance of these three influences in feminine attire. People dress to conceal the defects of the body, to neutralize the onset of age, to hide the effects of gluttony and sloth.

volving the expenditure of billions in production and distribution costs. Which leads to the observation that while vanity is vanity it is also big business and indispensable to the continued functioning of our economic world.

A German artist of the last generation made a devastating series of drawings representing groups of important people in their most admired and favored surroundings, posturing in their salons, strutting in their ballrooms, posing in all their pretension and hauteur, looking wise and profound, staring through lorgnettes, loaded with jewelry—but minus their clothes. The spectacle of withered old men and women, with hanging paunches and drooping breasts, wrinkled, flatulent, stooped, made an impression that would wring from the most irascible hater of mockery and deception in dress a cry for a return to those tons of creams and lotions and rouge and layers of lace and fur and silk and wool. Let us expose their sins, let us have at them with ink and jest and invective, but for God's sake, let us not undress them!

Δ

Go about Italy, and wherever there is a plaza to hold it you will see, mounted on a monstrous charger, a colossal warrior in bronze or marble, with uplifted sword and a countenance of majesty and power—the figure of Umberto Primo or Vittorio Emmanuele Secondo, thus advertising to the Italian mass mind the great leadership of these two mighty sovereigns who were, in fact, just two little fellows whose capacities could have been duplicated among the lesser bureau chiefs of any town in Italy.

But kings must be great men. They must be wise, courageous, full of nobility and power. As they seldom have these qualities in larger measure than is to be found in the members of the local chamber of commerce, the political promoter has collaborated with the military promoter for centuries to invest these small fellows with the missing royal attributes. They have drawn upon the age-old arts of pageantry, costume, feathers, flags, and music. The populace, prepared by the proper prologue, sees a bewildered and sometimes blundering fool encrusted in gold and other metals, crowned with a towering shako, upon a richly caparisoned horse capering between lines of saluting privates, and attended by the brass of the band and the cheers of the people—it sees not the little man at all but the fictitious figure who does not exist. Of course, a philosopher, a statesman, and a priest may be counted on to write learnedly that all this is essential to the stability of the society, as the king, after all, is merely a symbol, a spiritual nucleus essential to the well-being of the multitude of moronic protons who revolve around him.

The church knows this. The great cardinal, heavy with crimson robes and flowing trains, mitered in gold, surrounded by surplus monsignori against a background of marble and brass, stained-glass windows, and the dim glow of candlelight and incense, and with the incidental emotional tremors of the organ—the cardinal thus made up can pretend with success to powers no one would credit if he lived in a cottage or dressed in a smock of cheap wool.

And, of course, presidents, politicians, businessmen with products to sell, bankers with securities to distribute understand this principle. All of the stratagems of make-up, of shirt stuffing, are employed to fill the imagination of the people with fictitious images of the men who must be sold to the public. Selling merchandise often depends first upon selling to the buyers the man who produces it. The priceless ingredient, proclaims one advertiser, is the reputation

A definite technique has been perfected for creating any kind of character out of almost any man with enough money to hire the professional help. His name and picture are repeated over and over in the press until he becomes a member of our performing celebrities, his benefactions artfully and opportunely contrived and announced, with pictures, encomiums, editorials heralding his public spirit. Articles about him appear in the success magazines. Men are hired to write speeches for him to deliver at conventions, banquets, public gatherings, at colleges, and over the radio. He issues statements upon all sorts of subjects, has opinions about everything, all worked up and happily phrased for him by his hired shirt stuffers. It

is an old stratagem. We have already seen Dr. Peutinger acting as apologist for Jacob Fugger. We shall see how other men of wealth have utilized the resources of religion, the press, the platform to build up their reputations for wisdom and patriotism as a prelude to exercising a dominating influence over the public mind. It is quite possible that the free society has no greater enemy than the shirt stuffer and that men will never be wholly free, in that higher and finer sense to which they aspire, until their minds shall be emancipated from the power of the rich to possess and control the instrumentalities by which opinion is made.

v

WRITERS AS MONEY-MAKERS

It would be an interesting speculation how far the history of the world has been obscured, twisted, and falsified as a result of the fact that writers, historians, poets, and even philosophers have depended upon the bounty of the rich and powerful. The very first writers, in order to eat, had to please the king or some powerful patron. Apparently the very earliest writings among the Egyptians, the Chaldeans, the Phoenicians were upon clay tablets by public officials to be read by the king, the priests, the court. The authors of the Pharaohs' day were attached to the temple. The first Chinese writers depended upon official appointments for their livelihood.

along, how to use their faculties to the end of success. There were no such rewards for the realistic searcher after truth. The Greek playwrights, however, had an audience and hence, in the free society of Athens, could command comparatively substantial sums for their work, while they enjoyed a corresponding freedom, discussed public affairs, discoursed on public and private morals, and did not hesitate to lampoon the head of the state himself. This was not altogether true in Rome when the state began to provide the populace with plays. Terence and Plautus could get for their plays sums which were not available to the poets and commentators, but they were paid public money by the aediles who were charged with providing dramatic productions for the people.

Men like Horace and Virgil got little or no money rewards from their works. Both depended upon the bounty of Maecenas. And Maecenas took up the role of the magnificent patron of letters as a means of fortifying the regime of Augustus. Horace speaks of his publisher, Socii, but laments that while the publisher made profit from his poems, Horace made nothing. But it is highly improbable that any publisher made very much in a world where books had to be written by hand and few of the people could read. Martial, the epigrammist, said that the sale of his poems brought him nothing. But he cultivated the friendship of the Emperor Domitian and became tribune. Quintilian, the rhetorician, had an income for a while of 100,000 sesterces from the Emperor. And, of course, in that ruthless dictatorship, there was no more place for the independent thinker or artist than there is in the tyrannies of Mussolini and Hitler. Before the empire dissolved all independent literary production had come to an end. And after that, the church succeeded to the role of literary dictator.

In the modern world the same thing held true for many centuries. It was perhaps worse than in certain periods of the ancient world, for there were times and places where even the wealthy and powerful could not read, when this faculty was limited to a handful of people. It is a singular fact that the authors of such universally famed productions as the Edda, the Cid, the Nibelungenlied, and the legends

of King Arthur remain unknown, while various monarchs have come down to us as writers. Charlemagne is a case in point—a Frankish German of no education, who probably could neither read nor write, yet who is supposed to have composed a German grammar, poems, and even a work in medieval Latin on the worship of images. He did gather scholars around him and encouraged literature. But it is probable that his own compositions were the work of some of those shrinking persons with a passion for anonymity so dear to the hearts of rulers.

As writers appeared on the scene they might well be represented as grasping their pen in one hand and the king's bounty in the other. In France, Colomby, original academician, drew 15,600 francs as the king's orator and Jean Louis de Balzac 10,000 francs as the king's general eulogist. In Italy Petrarch counted his patrons among several of the ruling houses of Italy and was an especial ward of the Colonna family. Boccaccio, who learned something of his art from Petrarch, learned from him also how to cultivate the good will of the prince. He enjoyed the special favor of King Robert of Naples, and the Decameron was written for the King's family, as the Heptameron was written for the delectation of Francis I, possibly by his sister Margaret, but more likely by some anonymous spinner of yarns about the castle.

The dependence of the writer upon the political treasury and the favor of the lord or merchant continued to a late day. And some of them did quite as well for themselves as Horace and Virgil did in Rome. Jean Chapelain, author of a dreary and forgotten poem called La Pucille, died at the age of seventy-nine, leaving a fortune of 1,450,000 francs, which he got in gifts from Richelieu, Mazarin, and Louis XIV; and Boileau, famous satirical poet, who died in 1711, left an estate of \$236,000 which he owed to the munificence of the crown.

In time, profits from publishing did make their appearance, but they were meager. The writer still had to look for his security to reliance on the government or a patron. Milton received but sixtythree pounds for Paradise Lost, but he got a thousand pounds from Parliament for a political treatise. Gay, the author of The Beggar's Opera, James Thomson, Scottish poet, author of The Seasons and The Castle of Indolence, and Edward Young, author of Night Thoughts, like the more important Addison, Steele, and Swift, were the recipients of royal and noble favor. Gay got a job as secretary to the Duchess of Monmouth, tried his hand at the South Sea speculations, lost what he had, and became a dependent of the Duke and Duchess of Queensbury. Thomson, a very poor youth, began his career as the beneficiary of a noble Maecenas, got a sinecure at 300 pounds a year from the Lord Chancellor, and, when the Chancellor died, got another from the Prince of Wales at 100 pounds. Young, who started a school of graveyard verse, began life with a poem of disgusting flattery of George Granville upon his elevation to the peerage, and followed this with several others dedicated to one wealthy patron after another until he knocked off one to Walpole, celebrating his investiture with the Order of the Garter, and was rewarded with 200 pounds a year. He finally attained the heaven of army officers, ministers, and professors by marrying the daughter of an earl.

Addison, before he was thirty, got a pension of 300 pounds a year, and when the government wished to exploit the popular value of the victory at Blenheim, Addison obliged with his poem, The Campaign, which pleased his patrons so much that he got an appointment as Commissioner of Appeals. He held various offices and sinecures and, like Young, annexed as a wife a dowager countess. Thackeray said of this trio—Addison, Steele, and Swift—that "the profession had made Addison a minister, Steele a commissioner of stamps, and Swift almost a bishop." The sharp-tongued Swift felt that his services with his pen had merited something better than an Irish deanery.

For some reason the playwright in France and England seems to have been as much at the mercy of the rich sponsor as the writer of poems and essays. Molière made money out of the stage, but he was playwright, actor, and producer. Shakespeare, too, made enough to leave a decent competency to his family at his death, but it was apparently as playwright, actor, and manager that he, like Molière, made his money. He did not seem interested at all in his plays as subjects for publication. He probably could have made little out of them.

It was Jean Jacques Rousseau who in France did what Alexander Pope had done in England. He disdained the generous offers of the wealthy. Instead he drove the best bargains he could for his works. Like many another author since, he wrote much inferior but popular material in order to obtain the means of devoting time to his more serious work. He got \$2300 for the libretto of an opera which he turned out in a few weeks, which was something more than he got for Émile upon which he expended twenty years of thought and writing.

From this time forward the art of reading came into the possession of an ever-increasing number of people. And, with the new

The great sums collected by successful novelists and playwrights in our own day are too well known to be repeated here. If they earn these sums it is because almost universal literacy, rapidly spreading secondary and higher education, and an ever-increasing population furnish them with an enormous market, while their ability to collect their incomes from the whole public rather than a handful of powerful patrons is the guarantee of the highest form of freedom of expression.

Robert Owen

THE REFORMER

. 1

The long annals of money getting have produced but one Robert Owen. If you can imagine one of the largest employers in America —Mr. Henry Ford, for instance—becoming the leader of the labor movement, or Mr. Tom Girdler taking the field for factory reform, or Mr. Owen D. Young going up and down the land clamoring for a recovery scheme not unlike Mr. Upton Sinclair's EPIC plan; if you will conceive of a manufacturer, whose schooling got no farther than the three R's, becoming the most advanced educational reformer of his time, using the kindergarten before Pestalozzi or Froebel, antedating Marx in socialism and all the Victorian reformers in welfare work, you will have some idea of the sort of man Robert Owen was in the dawn of the industrial revolution. It was in amassing a fortune as a manufacturer that Owen saw the evils of the factory system flourish, saw challenging human problems flowing out of the same machines that poured out wealth for him and set him off upon his extraordinary career of unselfish evangelism for the creation of a better world.

There have been many men of wealth who have looked with questioning upon their possessions. Andrew Carnegie, as a young man, was deeply disturbed to find he had made fifty thousand dollars in a year and he wrote in a moment of pious possession that he would never permit himself to make more than this. It was a vow as useless as if Casanova had sworn himself to celibacy. Some have soothed themselves amid their treasures by giving after they were done with getting. But Owen, even as a young man, declared

Brown Brothers

ROBERT OWEN

п

Owen was born at Newtown, in Montgomeryshire on the Welsh border, on May 14, 1771, the son of the village saddler and iron-monger. He was born into an England that was overwhelmingly agricultural but alive with a score of professional and amateur mechanics and inventors who were tinkering with all sorts of clumsy little machines that would revolutionize the world and its way of life.

He had a business career that satisfied all the specifications of a Samuel Smiles success story. He got no more education than a bright boy under ten could get from a gentleman who apparently knew but little more than his scholars, and who was named Mr. Thickness—a name hardly surpassed by the schoolmaster of Dickens' Coketown, Mr. Choakumchild.

At nine he was assisting the schoolmaster.

In a few months he was apprenticed to a Mr. McGuffog, a draper in Lincolnshire, an excellent and honest merchant who proved a sound exemplar. He attended the Presbyterian Church with Mr. McGuffog and the Church of England with Mrs. McGuffog, gen-

erating such a supply of tolerant piety that he was called "the little parson," but also acquiring a healthy skepticism of the creeds preached by the rival ministers.

At thirteen he was a clerk with Palmer and Flint, a drapery house on London Bridge, working from eight in the morning to midnight and often later. Palmer and Flint were pioneers in their way. They ran an eighteenth-century cash-and-carry store, with fixed prices and moderate markups.

With a hundred pounds borrowed from a brother in London, he formed a partnership with a practical mechanic to manufacture spinning machinery. It ended quickly, Owen taking some of the machines they had made and starting by himself as a spinner. He prospered and was soon making six pounds a week profit. At twenty he answered an advertisement of a Mr. Drinkwater who owned a mill and wanted a new manager. Owen demanded £300 a year and got it. Thus at twenty this budding success-story hero found himself the manager of a plant with 500 hands and a contract for £400 the second year, £500 the third, and a fourth interest after that.

Two years later Drinkwater was negotiating to combine his interests with Samuel Oldknow, a rising cotton lord, and Owen was shouldered out of the promise of a partnership. He quickly formed another partnership with a new concern backed by two substantial

Manchester cotton firms. This was the Chorlton Twist Company. Owen found himself building a large mill in the Manchester suburbs that he later operated as managing partner. His duties forced him to travel about, and in these commercial wanderings he met at Glasgow a lady named Anne Caroline Dale. Her father was a banker and manufacturer who had built several cotton mills in Scotland. One he had put up at New Lanark in partnership with Richard Arkwright, famous for having introduced certain important spinning inventions. But Dale and Arkwright had parted company and Dale was looking for a buyer for the New Lanark mills. Owen, with his partners of the Chorlton Twist Company, bought the property for \$300,000, payable \$15,000 a year. And for good measure Owen married Dale's daughter. After a brief time he moved to New Lanark where he assumed the complete management of this, one of the largest cotton spinning enterprises in Scotland. This was in 1800. And here he was to round out his fortune, make large profits for his partners, and make the name of New Lanark famous throughout Europe and in industrial history.

But Owen's social experiments at New Lanark landed him in trouble with his partners. Before he got through he had three sets of them. All feared their investments were being imperiled by reform. The first set rebelled when Owen proposed to use company funds to build a school for the children. Owen dug up a fresh set of partners and bought out the original ones, paying them \$420,000 for a plant that had cost them \$300,000 and on which they had made five per cent a year and an additional \$180,000 in profits.

The next set became alarmed when Owen's educational ideas clashed with their solid British orthodoxy. Also they saw an opportunity to grab a flourishing enterprise at a bargain price. They dissolved the partnership and demanded a public sale, circulated stories of the mills' difficulties, and insisted they were not worth forty thousand pounds. But at the auction they bid up to \$570,000, whereupon Owen topped them with another \$500 and got New Lanark. His third brace of partners comprised some wealthy businessmen with reform ideas, including Jeremy Bentham, the famous

utilitarian philosopher, and the well-known Quaker, William Allen,

Then for another twelve years, Owen, with a freer hand, developed this industry until it was certainly the most famous, if not the greatest, in England. In the end—in 1825—his last batch of partners drew away from him, some seeing in his schools "a manufactory of infidels." His management of New Lanark ceased in 1825. He withdrew his interest altogether in 1828.

Owen became a very rich man. But no satisfactory estimate of his fortune has been found. It was, however, a modest fortune and is important, indeed epochal, not for its size but for the fruits it produced in Owen's mind, the things it enabled him to do to the very processes by which he got rich, the influence it enabled him to exercise upon the new industrial system in the very years of its birth. He spent it as freely as he made it, and after 1828 he ceased to make any more. It was finally exhausted in his numerous crusades, until at last he was wholly without funds and lived upon a modest allowance of £360 a year from his sons, who managed to disguise it as the fruits of some old investments.

TTI

The significance of Owen lies in the fact that he began his career as the industrial revolution appeared in Europe. England was fascinated by her new gadgets. They gave birth to the modern factory. The nation was preoccupied with driving the new machines, multiplying its wealth, perfecting the wealth-making organization and devices. Owen saw that these machines were doing something to the soul of England. He became preoccupied with that phenomenon.

The factory was a new economic weapon of profound importance. It enabled the acquisitive man to do something hitherto but little understood—to share in the fruits of the labor of many persons in the field of production. Hitherto this was possible only in agriculture, in merchandising, in finance. But the industrial producer had until now remained a more or less solitary worker.

Before this time the method of making cotton cloth was quite primitive. The raw cotton was picked and teased to remove the seeds. Then the fibers were combed out by hand. The next step was to twist these fibers into a thread by means of the old-fashioned spinning wheel that had been brought to England from India in the thirteenth century. The threads were then put upon a loom worked entirely by hand. And all this was done in the home of the weaver. The women and children did the seeding, combing, and spinning. The men managed the loom. The family was an organized industrial producing unit. The town merchant supplied the raw cotton and frequently the patterns for the cloth and bought the finished cloth from the weaver. This was indeed the pattern of all production. And under this old handcraft system it was difficult for anyone to share in the product of the producer.

But a series of inventions began to make its appearance in the eighteenth century. Kay invented the flying shuttle in 1738. Instead of throwing the shuttle by hand between the warp threads, the shuttle was now shot in each direction by a spring released by pulling a cord. Thus one man could do the work of two. In 1765 Hargreaves invented the spinning jenny, called after his wife, whose wheel gave him the idea. It enabled a person turning one wheel to spin eight spools at once. And before long this was eighty. Then came the inventions of Arkwright and Crompton, improving the spinning jenny, and later still the application first of water power and then of steam to the operation of spinning machinery

and looms. Eli Whitney eliminated household seeding with his cotton gin and Dr. Edward Cartwright completed the process with his invention of the power loom.

The home was no place for these cumbersome machines. It was immediately obvious that the way to use them with the greatest profit was in clusters under a single roof. They made the factory inevitable.

It was into this rapidly developing industry that was producing its Manchesters and Birminghams and Glasgows that Owen stepped, with no education in economics or the social sciences. But he began to see very quickly that the factory was making deep marks upon the human beings it was using as well as upon those it displaced.

Manufacture of cotton was no longer spread out over many places. It became concentrated in lumps and clusters—in cities. And it grew around cities that had access to water power. It made production swifter a 1 cheaper, so that England began to supply the world with cotton thread and cloth. It shaped the destiny of England, whose Cotton Lords clamored for more laissez faire, more freedom at home while they fought also for wider markets abroad, markets that England proceeded to acquire by capture and to subject to the most rigid control—an inconsistency extinguished by the wondrous solvent of patriotism.

make the leather belt and proceed to trial. . . . One hundred times in each hour 400 needles will be finished, making 40,000 in an hour and 480,000 in 12 hours. Suppose we say 4,000 which at five elidi per thousand gives 20,000 solidi; 1000 lira per working day, and if one works 20 days in the month, 60,000 ducats the year." 1

On one hand this industry caused larger streams of money income to flow through the land, producing greater prosperity in good times and deeper distress in hard times. The capitalist found endless avenues for pouring his profits into new investment as fast as he made them. The worker was paid in money wages, and monthly there flowed out into the streams of business numerous rivulets of money purchasing power, so that England found herself wallowing in a new kind of prosperity.

Behold the dreary lot of the factory worker! At five in the morning the clanging of the factory bell drew the long streams of unrested slaves through the dark streets to their brick prisons. At seven there was a half-hour for breakfast—tea or coffee, a little bread, perhaps some oatmeal porridge; a scant mess with the tea bad and the infusion weak. A half-hour at noon for dinner—boiled potatoes in one dish, with melted lard for the poorer workers.

^<sup>1 Technics and Civilization, by Lewis Mumford, 1934.

Early in the factory era the parish board took to farming out the pauper children. They were called pauper apprentices. These wretched children, toiling for twelve, fourteen, even sixteen hours a day, were far worse off than slaves. One observer said the children "lived the life of the machine while working and at other times that of a beast." Imagine, if you can, the lot of the child of ten who went to work at five in the morning, with only a stop for breakfast and dinner, and quit his machine at seven or later at night, and getting for this brutal grind two shillings, twopence a week.

The discipline was rigid. There were rules and fines for every infraction of them, ranging from one to six shillings; there were fines for leaving an oil can out of place, fines for being found dirty or being found washing, fines for leaving a window open or for spinning with the gaslight on too long in the morning. The Cotton Lord, who bent over his hymnal on the Sabbath and gave three-times-three for the glories of laissez faire, bound his workers in a harness of iron discipline beside which Owen found the life of the American slave one of freedom and ease. The employer, indeed, had now found something better than the slave. The slave must be bought with a capital outlay and supported in all times. The factory worker involved no initial investment so far as his body was concerned and could be laid off when times were hard.

IV

of the Clyde which furnished its power. It consisted of four huge main buildings of graystone quarried near by, each seven stories high and surrounded by smaller workhouses. The buildings, set in a lovely circle of hills, were themselves gaunt, grim fortresses after the model of the large mills of that day.

Between 1800 and 2000 persons dwelt in the village and an additional five hundred pauper apprentices were housed in a separate building. Owen has described this population when he assumed control: "a collection of the most ignorant and destitute from all parts of Scotland, possessing the moral characteristics of poverty and ignorance . . . much addicted to theft, drunkenness and falsehood." The housing was bad—one family to a room and no sanitary arrangements—and the streets were narrow and filled with filth. The people hated the mills. There were no public houses, the former owner Dale being a rigid prohibitionist, but there were bootleg joints. Many different churches, each with a different creed, led to no end of hostility between the communicants.

Owen's first services arose out of the reactions of a generous and just spirit to these bad conditions. Yet bad as it was, New Lanark was one of the better mills, and Owen had seen much of the industry in which he had now been engaged for eleven years. He had not yet formed that social and economic philosophy that later brought him into collision with all the respectable elements in Britain. Generally speaking, he began with the assumption that these men and women and children had rights that employers were cruelly ignoring, and he made up his mind to respect those rights in his own mill. And this led him to that philosophy which characterized the welfare movement of the next hundred years: the spirit of noblesse oblige; the principle that the rich ought to be good to the poor.

In pursuance of this, Owen introduced a series of reforms into New Lanark which made it the first model factory.

ten. He limited hours for all to ten and a half—though he believed they should be less, even eight, he was never able to cut them below ten and a half. He ended the fines and introduced an honor system. He greatly improved the houses and doubled the accommodations per family. He supplied playgrounds. He built two school buildings and gave the children the advantages of the best free education then found in England before they went to the mills, and thereafter provided evening instruction. He arranged for lectures, meetings, dances for the adults and threw open to the people for recreation the woods which the company owned. He provided for medical attendance, established a sick club, a savings bank, and summer courses of study in the open air for all. He made available meeting-houses where men of any denomination might speak, ensuring complete religious freedom in New Lanark. And this made a very dark item in the bill of particulars against him when his battles began.

Over 25,000 persons, educators, social workers, manufacturers, parliamentary and county and town committees signed the register book at New Lanark as visitors to inspect these reforms. Owen himself said in 1812 that this same population was "conspicuously honest, industrious, sober and orderly and an idle individual, one in liquor or a thief is scarcely to be seen from the beginning to the end of the year." And above all—miracle of miracles—the com-

pany that sponsored all this was singularly prosperous and those who owned it grew rich from it.

v

Owen, disturbed by the evidences of inhumanity, cruelty, greed, injustice all about him, was nevertheless not so naïve as to suppose that the ignorant and debased proletarians of his day were capable of forming the better world he began to see beyond the far-off hills. He believed that the world had to be made a better place for men to live in dignity. But he was equally convinced that men had to be made better to participate in the treasures of such a world.

Apparently Owen started out with nothing more than a conviction that all children, as a matter of human justice, should have an opportunity to have an education. But he soon went beyond this and imported into his theory the proposition that this education should be of a very special kind; that, while training the mind for the benefit of the individual, the character should be formed upon a model designed to enable the individual to live in an enlightened society. The formation of character became the cardinal principle. And that, Owen believed, must take the direction of developing the social virtues—the human sympathies, an understanding of the rights of others, a hatred of the antisocial virtues of greed, acquisitiveness, dishonesty, private and public. Owen had long before abandoned any faith in any existing religion. But he held as a utilitarian principle that a cultivated modern society of free men cannot be operated successfully without a highly developed and universally accepted code of social ethics. And what is more, he believed this could be accomplished. His own statement of his educational principle ran as follows:

A man's character is a product of the circumstances in which he is born, lives and works. Evil conditions breed evil men; good conditions develop good men. Today man is surrounded by conditions which breed selfishness, ignorance, vice, hypocrisy, hatred, war. If a new world is to be born the first thing that must be done is to spread the truth concerning

VI

Owen's act applied to cotton, wool, flax, and silk mills. It limited hours to ten and a half a day, prohibited employment of children under ten, fixed the working hours of children as sometime between five A. M. and seven P. M., provided for medical attendance in cases of contagious diseases, compelled a half-hour daily instruction period for children in a suitable place, and gave to justices of the peace the right of entry and inspection.

The introduction of this bill into Parliament was the signal for calling into action that intransigent reactionary energy known as the manufacturers' association. Manufacturers, like other men, are far from monsters and have their share of good and bad citizens. But the manufacturers' association is one of those ingenious inventions that enables the members to preserve their individual decencies while entrusting the promotion of their baser social elements to another. It was then, as it has generally been, the spirit of aggressive selfishness with its hired philosophers and economists and statisticians and publicity men. It proceeded to fight Owen's moderate proposals as it has since fought almost every step in

Owen, with his son, toured the mill towns and villages and painted for Parliament a dark picture of their indecencies—children working fifteen hours a day and more, some of them infants as young as four; foremen carrying leather thongs to get out of the young by flogging the compliance they extorted from their elders by means of fines; a fifth of the children in shoe factories crippled or otherwise injured by diseases and other abuses.

But the manufacturers' association was not idle. It investigated Owen and New Lanark. When he charged them with flogging little children, they replied with the impressive revelation that he permitted dissenting ministers in New Lanark meetinghouses. When he pleaded for a measure of Christian compassion for the poor and downtrodden, they countered with the charge that he was a heretic. They investigated not his business practices but his religious tolerance. They paid the expenses of a minister from New Lanark who testified that he had heard his wife quote what she had heard Owen say in a public speech. As the manufacturers' association today replies to all charges with the cry of "Communist," their predecessors in Owen's day cried "infidel." But they could not say he would ruin their industry, for, with far more exacting standards in his own mill and against an unrestrained competition, he had made notable profits for himself and his colleagues.

society. Owen himself said he owed his plan for these villages to a John Billars who recommended them in 1696 and whose pamphlet Proposals for Raising a College of Industry of All Useful Trades and Husbandry Owen reprinted.

Owen appealed to public opinion to adopt his plan. And as he crusaded for it he began to make it plain that he regarded this plan not merely as a palliative to meet the emergency of the depression, but as a wholesome pattern for the organization of society upon a new collective model. Owen was becoming the first great socialist leader of England—a utopian socialist, it is true, but nevertheless a socialist expounding what came to be the standard socialist diagnosis of the capitalist system.

He wrote articles for the newspapers, outlining his plan, and bought thirty thousand copies of the papers a day, which he sent under the frank of an M.P. to the ministers, the members of Parliament, magistrates, and religious leaders in every city. He spent twenty thousand dollars for this alone. He printed pamphlets by the thousands and carried on an extensive propaganda by every known means. His plan was opposed by the Radicals—advocates of parliamentary reform. They called his villages "parallelograms of paupers." He was opposed by the Malthusians. Apparently he grew indignant at the opposition of the clergy. And so in a historic meeting he denounced the "gross errors that have combined with the fundamental notions of all religions." He said that by the aid of these errors man had been made "a weak, an imbecile animal; a furious bigot and fanatic; or a miserable hypocrite." "I am not of your religion," he told them, "nor of any religion yet taught in this world." Thereafter he lost the sympathy of a few high ecclesiastics like the Archbishop of Canterbury who had given him their support. It was possible then to demolish any proposal of Owen by calling him an "atheist."

down under the strain. Indeed, the whole subject of relief was just such a nightmare as it was in America in 1932, or, indeed, as it is today. England's poor laws had been fashioned in the dark times of Henry VIII and Elizabeth; hence workhouses, the free materials to be processed by the poor, the overseers of the poor, and finally that most monstrous of all poor laws, the farming out of pauper apprentices. This remained the backbone of the English system until 1834. There was one more demoralizing addition—the allowance system, introduced in 1782, under which paupers were farmed out, their wages collected by the county authorities and augmented by a public subsidy. This demoralized the worker and made a paradise for the employer who wanted workers for pauper wages. England was spending ten million pounds on poor relief in 1783. In 1818 she was spending thirty-nine million.

Workers sought to combine, but the laws still forbade it. The wretched victims of relief and unemployment began to riot here and there. There were outbreaks among the midland miners. Mills were set on fire. The Ludites, named after Ned Ludite, a village idiot who to be avenged on his tormentors broke some machinery, began demolishing mill machines. The ministry was frightened. It remembered the terrible anger of the Paris mobs. It held fast to its confidence in the iron hand. Rioters were disbursed by hussars. The jails were filled. The habeas corpus act was suspended. Meetings were forbidden. The circulation of pamphlets was ruthlessly crushed. All the sacred guarantees of the Magna Charta were put under foot. Then came Peterloo. Some eighty thousand unemployed assembled on the field of St. Peter outside Manchester. It was an orderly meeting. The bands played God Save the King. But the authorities were terrified. And when an orator attempted to address the crowd, the soldiers were ordered to charge. Eleven were killed, four hundred wounded—some women and children. A thrill of horror swept over the country, horror in the breasts of the lords of land and cotton, leading to more suppressions; horror in the breasts of the poor at the death of their comrades.

IX

In 1826 on the banks of the Wabash River in Indiana, Owen established a village of co-operation on the model that he had been urging in England. New Harmony was already a co-operative community established by a group of German settlers. It was not, of course, formed upon the lines of Owen's plan. And it was for sale. He purchased it for \$182,000, brought his four sons to Indiana, and set about bringing to reality in the New World, away from the commercial crystallizations of the old one, his city of the sun. It lasted about two years under his direction and ended in failure. It was in the New World, to be sure, but the settlers attracted to it were quite as deeply saturated with the social habits and thinking of the Old World as the countrymen they had left behind. Owen rightly attributed the failure to the fact that the men of his day—like the men of our own—were unprepared by education and environment to live in such a community. He lost forty thousand pounds on the adventure and returned to England, no whit discouraged and with undiminished faith in the ultimate emergence of the new moral world of his dreams.

Х

ent brew was coming. This was Lowell, Massachusetts. Indeed, New Lanark in Scotland and Lowell in America must be looked upon as the generating plants of the forces that would grow and envelop our society and clash, as they do now, in a death struggle.

Lowell was forging the weapons that the acquisitive man of the next hundred years would use to work his wonders. New Lanark was forging the moral weapons that reformers and crusaders would use to fight those who were armed with the predatory munition of Lowell

They selected a site for the building of a planned industrial town. That town was called Lowell. They built a power-loom mill that stands and is operated to this day. They chose the site because of its nearness to the Pawtucket Canal. The Canal belonged to a corporation that was owned by five hundred stockholders scattered all over New England. The Merrimack Company wanted the water power of the canal. So it sent Mr. Thomas N. Clark around New England to buy up the shares secretly. The company wanted machinery, and therefore arranged to get the processes and patents of the Boston Manufacturing Company in Waltham. The two companies made an arrangement "to equalize the interest of all stockholders in both companies by mutual transfers of stock" which was their way of saying the companies were merged by mutual exchange of shares. Indeed, here was the first corporate merger—the Merrimack Company, the Pawtucket Canal Company, and the Boston Manufacturing Company—a device that promoters would use to blow billions in bubbles during the next few generations.

The Canal and Merrimack Falls developed more power than the

Merrimack Company needed. Also the company had more land than its mills and houses could occupy. Therefore, it formed a subsidiary—the Locks and Canals Company—with \$600,000 capital and with Major George W. Whistler, U. S. army, and father of James Abbot McNeill Whistler, as chief engineer. To this company was transferred the operation of the water power and the construction and operation of a plant to build textile machinery. Thus the Merrimack Company became a holding company, owning all the stock of the Canal and Locks Company.

Here now was an integrated vertical enterprise which, for the first time, spun the yarn and also wove the cloth; it built its own machinery; it operated its own power canal, and it would, through the Canal Company, take a contract to build a textile plant, stock it with machinery, supply the site, and furnish the power to anyone who wished to embark in the same business.

It found the need for capital always urgent. It was, therefore, interested in an insurance company in Boston and in a bank, perhaps several, upon which it could draw for funds. In its numerous corporations, which grew in number, for it soon began to have an interest in other mills, it used the device of interlocking directorates. And it had begun to experiment with schemes for holding corporation meetings at times and in places that made it difficult for stockholders to attend.

In fairness to these gentlemen, it ought to be said that Appleton, and perhaps Boott, had met Owen, and that in their hard, New England way, they set up certain welfare controls. But they were conceived not so much in the spirit of humane consideration for their employees as for the purpose of maintaining order and efficiency. And order meant religion. Hence they established a church—St. Anne's, which stands to this day. And later they built a Catholic church to bring the unruly Irish immigrants under some sort of discipline. They prohibited liquor in the boardinghouses and also "light and frivolous conversation." They started a library and meeting places for discussions and later established The Lowell Offering, perhaps the first corporation house organ, edited by the girls. Some trace of Owen's influence may have lingered here, for John Greenleaf Whittier sang of its "acres of girlhood," "flowers gathered from a hundred hillsides," "fair, unveiled nuns of industry," and a local chronicler spoke of them as "troops of liveried angels," which was probably laying it on thick for the benefit of pious Unitarian Boston.

But the chief significance of Lowell was that it forged the weapons of the acquisitive promoter and monopolist while New Lanark developed the weapons of the social reformer.

It is probably a fair estimate of the period to say that these two groups, added to those who had gone before—the Fuggers and Laws and a score of others—stocked the arsenals of the later rivals who would contend for the mastery of the world. The men of wealth now had the institution of property, the invention of money, the invention of credit, and, more important, the invention of bank credit, the corporation, the holding company, the subsidiary, the manipulation of corporations, speculation in corporate securities, the production of reservoirs of savings and the control of them, of bank and insurance and corporate funds—all this was ready to hand, this and the creation of the factory, of machinery, and of the techniques of management. With this the way was open for great numbers of ruthless and unscrupulous men to amass great fortunes.

VI

The labor-union movement got its first important impetus in England in 1824, just about the time Owen departed for America. It would not be true to say Owen had any part in this. He had shown no interest in unionism or in militant organizations of workers to exert pressure in collective bargaining against employers. He was not against this, but his interest was in a more fundamental rearrangement of society. He conceived of a system in which all the producing persons, from managers down, would be united in a common organization. But the plight of the workers admitted of no such delay as would be involved in realizing this dream. Workers were forbidden to combine. The Combination Acts dated from the sixteenth century. They were strengthened at intervals. The latest Act, made in 1800, forbade workmen to unite to force an increase in wages or reduction in hours or for other purposes, including pressure on another workman not to work. This law was rigidly enforced, and in the distress following the war jail sentences were invoked. Union to better the workers' lot was called "sedition." But in 1824, under the leadership of Francis Place, the Combination Acts were repealed and labor unions became legal.

The unions promptly united with the Radicals for parliamentary reform. Owenites had little interest in parliamentary reform. They were wrong in supposing that this was a futile step, since redress of the workers' grievances required first that they have political power. But they were right in realizing that mere parliamentary reform would not of itself bring an economic cure, as the workers discovered quickly enough. And this led the unions in the years between 1824 and 1829 to seek some more specific and effective remedy. They wanted some direct action. And the only proposals in sight were those of Owen—the principles of co-operation. Hence in those years there sprang up an ever-widening movement for co-operation on the Owen model. But pending this, co-operative societies were organized to unite the producing and purchasing power of the workers for their common benefit.

There is no point here in tracing the development of the trade union, co-operative societies, and co-operative-village movements thus all intertwined. It is a long story. But what is interesting and important here is Owen's attempt to establish labor exchanges upon a very radical model. The National Equitable Labour Exchange was launched in London in 1832. It was a plan for creating a co-operative market with the workers as producers and buyers. Members could bring their products to the exchange; they could also buy those products.

Most important was the means of payment. Owen had adopted the labor theory of value. He now conceived of labor as the stand-

ard of value. "The average physical power of men," he argued, "has been calculated; and as it forms the essence of all wealth, its value in every article of produce may also be ascertained and its exchangeable value with all other values fixed accordingly."

He therefore established a labor "standard" of value. He arrived at the estimate that sixpence was the average money value of an hour of labor. The value of any article was established thus: cost of materials plus cost of labor arrived at by multiplying hours by standard wage for that work plus one pence in the shilling for the cost of handling. The total was divided by six—sixpence being the average cost of labor per hour. This gave the amount of "labor time" incorporated in the article. For whatever this was worth, here was the germ of that doctrine of Marx that the use value in every article is the amount of socially necessary labor it contains or the social labor time requisite for its production. Here was an attempt by Owen to find a measure for that "jelly" of labor which is the essential value component of every article which Marx proposed.

Owen waxed enthusiastic as the unions grew in number and activity and he hailed the coming of the great era of co-operation. It took all sorts of forms, from efforts to establish villages to the creation of the great Builders' Guild which became a co-operative construction organization owned by the workers, who also hired the managers.

But all these great experiments failed. Owen's objective, of course, was to use trade unionism as an instrument of socialism. He himself came to see that it didn't work. He continued for many years with his community building and preaching the gospel of the New Moral World. He edited journals, wrote books, prepared and delivered lectures, petitioned Parliament, in support of his philosophies on remaking the world by education and sound moral ideas. He spent every dollar he had on these adventures in recreation. By the time he was seventy-three years old all his fortune was gone. For the rest of his life his sons, who had settled in America, paid him an annual income of about \$1800 a year, based

upon a fictitious debt of \$36,000 that, through a carefully arranged but imaginary debt, they were supposed to owe him. This was done to spare his pride. Thus supported he went on preaching his doctrines in London, in Paris, in America to the end. When he was eighty-seven he was carried by four officers to the platform at a meeting in Liverpool to which he had traveled in great pain to proclaim once more his doctrines. When he arrived home he sank into unconsciousness. He recovered for a brief spell and died November 17, 1858.

Cornelius Vanderbilt

THE RAIL KING

T

A small catboat scudding the waters of the bay from Stapleton to Battery Pier; at the tiller a big hulk of a youth, large-faced, broad-chested, blue-eyed, bursting with health and blood and self-assurance. This is the sixteen-year-old ferryman of Staten Island—Cornelius Vanderbilt—who has just plunged into business for himself.

Down from a line of Dutch farmers who settled in Staten Island in 1650, this young Corneel has been working with his father, ferrying passengers and freight in a small boat since he was ten. That huge engine of muscle and gristle and nerves and blood in this lump of a Dutch boy has come from this loutish and thriftless father. But the motive power in the engine, the energy, the drive, the arrogance, the egotism and self-assurance have come from Phoebe Hand, his English-descended mother, who looked with a tolerant pride upon this self-willed and truculent son. As for him, perhaps the only person he ever really cared a tinker's damn about was this resolute woman who was his mother. Illiterate, boisterous, quarrelsome, cocksure, selfish, he was the perfect candidate for a marshal's baton in the age of brigandage that was about to open in American business.

He was born May 27, 1794, while Washington was still President. School irked him. At ten he began to help his father, for whose financial adolescence he soon developed a lusty scorn. At sixteen he borrowed a hundred dollars from the elder Cornelius and bought his own small boat.

Brown Brothers

Thus it was with this sixteen-year-old boy, who would buy another boat and another. And presently the boats would be no longer small piraguas but schooners plying the Sound—blunt-bowed Dutch boats going up the Hudson to Albany.

In 1813 he married Sophia Johnson, daughter of his father's sister—a strange, unhappy alliance, touched with tragedy that flowed directly out of the ruthless, imperious nature of that loveless husband. He was not the man to tie his heartstrings around anyone or anything—wife, children, or country. When he tired of this woman he put her in a lunatic asylum. As for his country, he lived to be eighty-two and in all that time he voted but twice. His religion was a simple creed of his own forging in which the deity was Cornelius Vanderbilt.

In 1817, at the age of twenty-three, he had amassed a tiny fortune of nine thousand dollars and three good schooners. At the end of that year he decided to sell the boats and make a new start.

TT

In the early months of 1818 a small steamboat—the Mouse of the Mountain—was putting in regularly at Battery Pier. Her skipper was Captain Cornelius Vanderbilt. He had gone up in the world—and down. Now he commanded a steamboat instead of a mere sailing vessel. But it was another man's, not his own. He was getting a thousand dollars a year salary instead of the three or four thousand he had made as his own master. But the important point

to young Captain Vanderbilt was that now he was moving under steam power.

Robert Fulton had sailed his Clermont up the Hudson in 1807. Vanderbilt had watched with contempt the steamboats that plied the river. A man without vision, a know-it-all, he knew with the certainty of ignorance that steam would never supplant sails. But by 1817, facts—existing facts as distinguished from dream stuff and visions—were under his very nose. If he could not dream he could act. So he abandoned canvas for the steamboiler, even though it was impossible for an independent to go into the steamboat business—impossible because Fulton and Livingston had a monopoly of it.

Robert Fulton and Robert Livingston owned Fulton's steamboat invention. They were not content with this, however. Livingston was Chancellor of New York State and a political power. He had got from the legislature a monopoly for the firm for the operation of steam vessels in the waters of New York State.

Aaron Ogden was Governor of New Jersey. He got the franchise from the monopoly to operate steamboats between New York and Philadelphia, including New Jersey ports.

Thomas Gibbons, of Elizabethtown, operated several small steamers between New Brunswick and a point connecting with Ogden's line. The monopoly declared that because Gibbons fed Ogden's line, he must pay royalties to the monopoly, even though he operated wholly within New Jersey. Gibbons refused. Instead he launched with one of his vessels a line between New Brunswick and Battery Pier, New York City. Thus he challenged directly the monopoly. Ogden, backed by the monopoly, went to court and sought an injunction against Gibbons. The eminent Chancellor Kent granted it. It was this Gibbons boat—the Mouse of the Mountain—that young Cornelius Vanderbilt was commanding in 1817.

Vanderbilt had to look for a job with someone who had a boat. He picked Gibbons. He swapped the role of proprietor for that of employee in order to learn about steam. Thus he found himself jammed in the very center of the first great monopoly battle in America—and against monopoly. Vanderbilt, of all men, born monopolist! He was the very man for Gibbons. He had a reputation on the water front as its boldest, most warlike and formidable battler. He united the untamed truculence of the ruffian with those more terrifying qualities—an eye that blazed with resoluteness and wrath, a Jovian countenance, and a huge, loose-jointed body and ready fists. He was the sort of man who might have stood on the quarter-deck of a pirate ship and quelled a mutinous crew with his commanding anger. He had whipped every blackguard on the river front. He loved a fight. Gibbons was in a fight. Vanderbilt needed an education in steam navigation. And the deck of the Mouse of the Mountain was the school for him. But it must have irked the man who called his first schooner the Dread to be commanding a vessel called the Mouse. Vanderbilt induced Gibbons to rehabilitate the slattern craft and rechristen her the Bellona.

The way thus cleared, Vanderbilt, year after year, extended Gibbons' line. He added boat after boat. If he did not have vision for perceiving the shape of things to come, he displayed magnificent talents as a manager of things as they were. He was now manager of the Union Line, as Gibbons' enterprise was called. He had an office at 457 Washington Street. And there, in an atmosphere of violence and blue profanity that made even the sailors wince, he roared orders at his employees and abuse at his rivals. He revealed here that quality which marked the brigand money getters of his day, an utter incapacity to envisage any reason against doing what he wanted to do. If men objected he brushed them aside. If they fought back he knocked them down. If laws intervened, why, they were damn-fool laws and not fit to be noticed. If officials blocked the way, why, buy them. If judges issued decrees, why, see that the decrees were on his side. Those who disagreed with him were blockheads. Those who resisted him were—why, Goddamn them!—they were hypocrites and blackguards and public enemies. This was the code with which he operated to expand the nine thousand dollars he had amassed as a ferryman to a hundred million before he died.

The Union Line was making \$40,000 a year for Gibbons. Vanderbilt was not the man to go on making \$40,000 a year for another man when he could do it for himself. The nine-thousand-dollar capital had by 1829, what with his earnings and those of Bellona Hall, swelled to thirty thousand. In that year Vanderbilt—thirty-five years old—went to Gibbons and, to that gentleman's horror, informed him he was quitting. He shut up Bellona Hall amid his wife's tears, moved his family to a small tenement in Stone Street in Manhattan, and once again went into business for himself.

TTT

Vanderbilt bought such boats as he could. He got some from Gibbons. He plunged into his enterprise with all his boundless vitality. He succeeded from the first. He succeeded because he was a manager of the highest ability. He grew rich fast. In the first five years he made thirty thousand dollars a year. The sixth year he made sixty thousand. He never made so little again. He built up a network of steamboat lines that covered all the ports of Long Island Sound and New York Harbor and extended to Bridgeport, Newport, New Haven, Providence, and Boston. Before he ended this episode of steamboating he owned a hundred vessels and was worth millions.

He was a ruthless competitor. He had two principal weapons—superior service and rate cutting. He drove weak competitors from the water. He threw his strength with abandon against the strongest.

He put a boat on the Hudson River. And here he first met that sinister man who was to be his foe in every business he attempted. You have to go to the pages of a novelist like Dickens for such a character as Daniel Drew. He was a compound of coarseness, illiteracy, vulgarity, meanness, dishonesty, and hypocrisy. He had risen through the levels of canvasman, animal trainer, clown in a circus, drover, keeper of the Bull's Head Tavern on the Boston Post Road and Twenty-sixth Street, to steamboating, speculating,

banking, and railroading, battling Vanderbilt on every stage of this long ascent. He looked upon cards, the bottle, the theater, and dancing as things of the devil. But lying, duplicity, thievery, and greed were the passions of his life. Somewhere in the dark corners of his soul he worshiped some strange version of the Christian God, but there was no form of perfidy to which this vulgar old Goth could not descend with a pious ejaculation upon his tobaccostained lips.

Soon Daniel Drew was back on the Hudson with a sensational vessel, the Isaac Newton, first of the great floating palaces, 300 feet long and with berths for 500. Vanderbilt promptly returned with an even more luxurious boat, the Cornelius Vanderbilt. "Liveoak" George Law, another lifelong antagonist of Vanderbilt, entered the lists with the Oregon. Which was the faster—the Oregon or the Cornelius Vanderbilt? That was a river bet until Captain Vanderbilt and "Liveoak" George agreed to fight it out. They ran a race as famous then as the great race between the Robert E. Lee and the Natchez years later. And Law's Oregon beat the Cornelius Vanderbilt, to the great disgust of the Captain. These two men were to meet many times again in more deadly struggles.

17

Avenue and then to a still more commodious one at 173 Broadway and then, at the insistence of his wife, to a stately home and farm on Staten Island. And by 1845 he built a splendid residence, at No. 10 Washington Square, in keeping with his stature in the community.

He had been promoted. It was a time when many a commanding figure was found in Broadway. Men made up for their parts, with their whiskers and frock coats, their cloaks and high hats. But there was no more commanding figure there than this frock-coated, high-hatted, side-whiskered Jove, tall, erect, alive, past forty but moving with the stride of a younger man. It was ridiculous to go on calling this imperious person merely Cap'n. So men began to call him Commodore—and Commodore he remained. Time had softened very little the bucolic curves of his accent or the illiterate forms of his grammar. He was not a man to look himself over for defects. He remained to the end a thoroughly ignorant man—ignorant of everything save his business.

During these years there were terrible divisions in his family which would have destroyed a more sensitive man, save that they could not have happened to a sensitive man. He cared little or nothing for his children. One of them had to be committed to an insane asylum. His son William H. married, but was forced to retire to a New Dorp farm to regain his health. Nothing could have seemed to the virile Commodore surer evidence of weakness in a man's character than a loss of health, and so he looked with contempt upon this febrile son.

pect it was to conclude it, and, against the protests of her daughters, he put her into a Flushing insane asylum. Members of his own family charged that he did it to make way for some other woman. It is a dark chapter in his life. It opens a crack in his shell through which we may have a peep at the ruthless soul within. The unfortunate woman remained in the asylum for two years, after which, under pressure of his family, he permitted her to come home. This was in 1847. Two years later he made up his mind that he was done with steamboats. He turned his mind to other fields.

ν

del Sur, on the Pacific, by stage. He operated eight ocean-going ships in the Atlantic and Pacific and ran twenty-five handsome blue and white coaches over the isthmus connection. He could beat the Harris and Sloo lines by two days. And, in spite of their subsidies, he could carry passengers for \$300 instead of \$600 and make money. Steerage passage he cut from \$125 to \$35. He took two thousand passengers a month to California from New York and New Orleans, transported much of the gold, and made a million dollars a year. By 1853 he boasted to a friend that he was worth eleven million dollars.

This line to California he called the Accessory Transit Company. He sold stock in it, keeping merely enough to control it, less than a majority. In 1853, when all was running well, he went to Europe on an extended vacation with his family. He confided the operation of the Transit Company to the banking firm of Garrison, Morgan, Rolston, and Fretz. While he was away Morgan and Garrison quietly bought up enough stock to get control. When the old buccaneer returned he found that he had been boarded and scuttled. In a towering rage he wrote Morgan and Garrison a letter that is a model for brevity and meaning:

GENTLEMEN: You have undertaken to cheat me. I will not sue you because the law takes too long. I will ruin you. Sincerely yours.

He did not ruin them. But he did go quietly about buying up enough stock to regain control of the line. Then he threw them out.

He got his Transit Company back. But by this time he was ready to quit Central America for other fields that looked greener and less troublesome.

His natural sense of justice based on its relation to the interests of Commodore Vanderbilt had been profoundly disturbed by the immense subsidies Harris and Sloo and Law were getting from the government—\$900,000 a year since 1848. He thirsted for that money and had a vision of the means to get most of it. Having slashed the rates on his rivals, he had devoured most of their profits. He went to them and proposed that he would withdraw—but they must make it worth his while. He had done the same thing before to Dean Richmond when he fought the Hudson River Association. He forced Harris and Sloo to buy his boats at a good price and to pay him \$40,000 a month as long as he kept out of that trade. A little later, by a threat to return, he compelled them to raise the price to \$56,000 a month—\$672,000 a year. He got all his investment back and drew \$672,000 a year, most of the subsidy, without lifting a finger. He drained most of the subsidy away from Law and his colleagues and let them do all the work and supply all of the capital.

Then he built two magnificent vessels—the Vanderbilt and the Ariel—and entered the Atlantic trade, running his ships to Southampton, Bremen, and Havre in competition with E. K. Collins. He has been accused of being in a conspiracy with Collins to extort subsidies from the government. But there is no proof of this. He found there was no profit in this business. With all his capacity as a manager and his willingness to work men for the lowest wages, he discovered he could not compete with the Cunard Line which paid still lower wages and enjoyed large subsidies from the British government. And so the old Commodore, a multimillionaire, second

VI

In 1854 Vanderbilt built a magnificent vessel that he named the North Star. Whether this was primarily an ocean liner or a private yacht is not quite clear. It was certainly fitted out at first as a private yacht. But it was a ship of 2500 tons and almost as large as the largest transatlantic liners then in service.

who understood the delicate mechanism of speculation should have sunk their hooks deeply into the public treasury while the rest of the country fought and suffered. It is a dark and sordid story. Vanderbilt managed to get himself smeared with some of this scandal.

The government planned in great secrecy an expedition to New Orleans under General Banks. It needed vessels to transport horses and men. Secretary Stanton asked Vanderbilt to look after the purchase of the needed vessels. Later an ugly scandal broke out about these purchases, which led to a Congressional investigation and an acrimonious debate in the Senate. The main charges were fully substantiated. Men who had vessels to sell were compelled to pay from five to ten per cent commission to Vanderbilt's agent, T. J. Southard. Old, outmoded, and even rotting ships were unloaded on the government at extortionate prices. Vessels utterly unfit for ocean service were rented at rates shockingly in excess of prices paid for the same boats in similar expeditions.

A resolution censuring Vanderbilt, his agent T. J. Southard, and Commodore Van Brunt of the navy was introduced in the Senate. The question was—did Vanderbilt know that Southard was taking this money? Was he personally aware of the nature of the vessels purchased?

It is fair to say, notwithstanding some of the bitter excoriations of Vanderbilt, that no evidence was produced to prove that he knew that Southard was grafting, although the latter's guilt was established—he even offered to return the money. What Vanderbilt was guilty of, however, beyond doubt, was shameful negligence and incompetence. He did approve the buying of boats at prices which he knew better than anyone else were indefensible. He most certainly bought and hired craft without reasonable inspection. His excuse was that they were adequately insured, to which Senator Tombs of Georgia replied that surely insurance could not cover the lives of the men committed to some of these rotten hulls. He did know that Southard had bought for the government some of his own boats at even higher prices than those paid for any others.

The whole transaction smelled of fraud. And had Vanderbilt been a man with a finer sense of public service it could not possibly have happened.

3711

One fable linked with the Vanderbilt saga is that he took a great number of little jerkwater roads and forged them into the great New York Central trunk line. The legend is overwrought. By 1860 the New York Central was an integrated line running from Albany to Buffalo. The work of consolidation had been nearly completed. Originally the traveler from Albany bound for Buffalo had to start on the Albany & Schenectady to Schenectady. There he changed to another road—the Schenectady & Utica—for Utica. At Utica he boarded another road for Syracuse. At Syracuse he scampered out again for another stretch on another road to Auburn. There he boarded the Auburn & Rochester for the latter city. And then, with a sigh of relief, he got a ticket on the Rochester, Lockport & Niagara Falls for Buffalo. In 1852 all these small roads, plus some

more enjoying unused franchises, were consolidated into a single line called the New York Central. Then the management boasted that a man—after a sleepless night from Albany to Utica—might eat his breakfast in Utica, dine in Rochester, and sup with a friend on the shores of Lake Erie. As for the beginning of it all, the man who dreamed the dream was an aristocratic old gentleman named George W. Featherstonhaugh, who made the start with the first road from Albany to Schenectady when Vanderbilt was haw-hawing at the stupid fellows who thought they could make those dern things work. Most of the consolidating occurred when he decided to transfer his talents to steam

The Commodore's next step was to get for the Harlem road from the Common Council a perpetual franchise to extend its right of way down to the Battery. Out of this incident grew an unlovely comedy of duplicity, treachery, and fraud scarcely duplicated in our turgid business history.

While Vanderbilt sought his franchise from the Council, George Law—he of the Hudson River Line and the Panama episode—sought a similar one from the legislature. Vanderbilt bribed the corrupt Council known as the Forty Thieves. Law bribed the equally corrupt legislature's dominating group known as the Black Horse Cavalry. Vanderbilt got his franchise, Law got his, but Tweed's governor vetoed it at Vanderbilt's urging, doubtless implemented by cash. The stock of the Harlem shot up in price.

But Daniel Drew, who is entitled to a high place in American business' Hall of Infamy, entered into a conspiracy with the Council. Drew showed them how they could make a lot of money by betraying the old Commodore whose cash they had taken to give him the franchise. The members were equal to any infamy. The North American Review about this time described this august body as being made up of "pickpockets, prize fighters, immigrant-runners, pimps and the lowest of liquor dealers" to the "absolute exclusion of honest men." Under Drew's leadership they formed a pool to sell the Harlem stock short. That is, as the stock rose in price they would sell—stock they didn't have, of course—for future delivery. Then if the courts held the franchise to be unlawful, which was more than probable, the stock would promptly go down in value. If the courts did not hold it illegal the Council could revoke the franchise they had voted to Vanderbilt for bribe money. When the shares sank in price, Drew could buy cheaply all the shares he needed to make delivery to those who had bought at high prices.

The stock went to 100. Drew sold heavily as planned. But somehow the stock did not sink in price. Drew continued to sell in order to hammer the price down. But instead the price went up—to 120, to 150, to 170. Here is what happened. Vanderbilt got word of this conspiracy. Therefore, as fast as Drew sold Vanderbilt bought. It was, indeed, Vanderbilt who was buying all the stock Drew was selling. Presently Vanderbilt owned practically all of the 110,000 shares of the Harlem and the thousands of fictitious shares Drew had sold. Then he called upon Drew to make delivery of those shares. This meant Drew had to go out in the market and buy. But there was none for sale. Vanderbilt had it all. Drew had to buy from Vanderbilt. He went to his old enemy and begged for mercy. Vanderbilt turned the screw and compelled him to buy thousands of shares at \$179. It cost Drew and his aldermen colleagues a million dollars in losses. It was nearly enough to make up for what Vanderbilt had paid for his control of the road. But he had lost the franchise.

In the Harlem and Hudson operation he did not so much join two roads as he did put one of them out of business. He began to build up the Hudson River route, double-tracking it, erecting new stations, and providing new equipment including the new sleeping cars. Everywhere the effects of new and capable management were visible.

Getting the Central was not easy. It was in the hands of toughfibered men, with plenty of money—John Jacob Astor, John Stewart, and others, led by Dean Richmond, who had fought Vanderbilt with the Hudson River Association when Vanderbilt made him pay him to quit the Hudson for a while. Moreover, the Central had been shamefully overcapitalized. Its various component roads had cost \$11,000,000 to build. But the capitalization was raised to \$23,000,000 and at the consolidation to \$35,000,000—sixty per cent water.

The Central had one weakness. It could get its passengers from Buffalo to Albany, but had no means of sending them to New York save over the Hudson River road in the winter and by the Hudson River steamers in the warm months. Vanderbilt had begun to buy stock in the Central, but when he found he could not get control he took swift and sudden advantage of this weakness. When the fall months ended and ice filled the river, the Central ordered the shift of its New York passengers and freight to the Hudson River line. But when the passengers got out of the Central trains, there were no Hudson River trains to receive them. Vanderbilt had ordered that the Hudson trains should not only not cross the river to meet the Central but should stop a mile away from their usual station. The Central passengers had to troop in the snow to their New York connection. The freight had to be hauled by drays, adding immensely to the cost.

The Central managers denounced him. The public joined the protest. The legislature ordered an investigation. It summoned Vanderbilt and asked him why he had failed to send his trains across the river. He bowled them over by producing a state law prohibiting his company from sending trains across the river. That settled that. But why had he stopped his trains a mile away on his own side of the river? He didn't know. He didn't give the order. "I was home," he said blandly. "I was playing a rubber of whist. And ye know, gentlemen, I never allow anything to interfere with me when I'm playing cards. Ye got to keep your attention fixed on the game."

of roads in that continuous trunk line that he called the New York Central & Hudson River road. He increased the stock from \$44,000,000 to \$86,000,000. Each holder of a \$100 share got a share in the new company for \$180. The eighty dollars was pure water. As for Vanderbilt himself, he got for himself and his services six million dollars in cash and \$20,000,000 in shares, in addition to the water he got on his own shares. Thus he embarked upon that vicious and socially disastrous practice that was to be the curse of American business to this day, of inflating the capitalization of railroads, utilities, and corporate enterprises of all sorts.

VIII

There is a curious notion that enjoys much popular support in this country. It might be called the brigand theory of progress. A certain kind of lusty scoundrel, audacious, adventurous, taking bold chances, not putting too nice a point upon questions of right and wrong when it is a question of getting things done, is supposed to be essential to business progress.

Such men do wicked things by the code of the casuist. They engage in enterprises that involve fractures of many commandments. They enforce losses upon smaller men. They are cruel. We need not condone all this. But we are told that we must recognize that these are blemishes among many greater qualities. Indeed, these very vices are but the by-products of the exuberant energy which is essential to pushing forward great projects. They are driven by a passion for doing things. And in a world of timid souls and doubters, of human obstacles of every sort, of stupid laws and venal officials and selfish interests balking progress, men of tough fiber are needed to cut through all the physical and human fortresses that block them. Some people suffer, some lose as a result of their methods, but out of their efforts emerge great works and great institutions.

The Union Pacific was marked by a similar trail of failures, delays, corruption, and theft, including the infamous Crédit Mobilier, which bribed members of Congress and its Speaker, governors, editors, judges, and a candidate for the presidency. To build a railroad? No, to build the crooked capital structure by which they could exploit it. They made a contract between themselves and the roads to do the construction work and put in the way of the great project that most terrible of obstacles—prohibitive costs due to their own extortionate charges.

That other precious quartet of railroad titans—Charles Crocker, Collis P. Huntington, Leland Stanford, and Mark Hopkins—who built the Central Pacific, issued to themselves \$33,000,000 in bonds

We have conferred doctorates, positions of honor, built monuments, named streets and institutions after some of our own freebooters who were scarcely better than Sir Henry Morgan. I can explain it upon no other theory than that we are as yet but very imperfectly civilized. Our people as a whole have only a very rudimentary perception of the more subtle social virtues. They can understand and applaud only a few very rudimentary human virtues. They understand strength, courage, loyalty, generosity. Therefore, they can admire the political district leader who will fight at the drop of a hat, who always overcomes his enemies, who distributes largess to the poor and sticks to his friends. That he may rob the city, betray his official trust, accept bribes from the predatory enemies of the poor, mismanage and bankrupt the community is of no importance since these performances involve the exercise of social virtues and vices that they perceive but dimly.

How thin this line between the freebooter and the magnate may be, one may see in the following account of one of the most amazing episodes in American business history.

$\mathbf{IX}$

had looted it. The road was organized in 1832 with a capital of \$4,000,000. The state of New York put up \$3,000,000; private investors the other million. The state got bonds; the private investors got stock. The state never received a penny of interest or principal on its bonds, and after ten years these were canceled. Another issue of \$3,000,000 in bonds and \$3,000,000 in stock was put out, and the Erie began another decade of mismanagement. By 1857 it was again in the hospital. At this point Daniel Drew, then a banker and broker in Wall Street, entered the picture. He loaned the road \$3,480,000. It couldn't meet the loan so Drew took it over. For eight years thereafter it almost ceased to be a railroad and became a mere tool in the Wall Street kit of Drew, who ran its stock up and down at will and made millions out of gullible speculators.

Vanderbilt saw the possibilities of the Erie. Moreover, it competed with the Central. He determined to add it to his possessions. He began buying shares secretly. He accumulated 20,000. This was not enough. But John S. Eldridge of Boston controlled a large block of stock. A Boston group that he represented wanted to bring about a consolidation of the Erie with their Boston, Hartford & Erie. Vanderbilt induced Eldridge to unite with him, pool their shares, and seize control of the road. Eldridge agreed but exacted as a condition that old Daniel Drew should be ousted.

in the Harlem corner. He knew that Drew was merely a plunderer of every property and partner he dealt with. Why the Commodore listened to this oily old rascal pleading with tears in the name of their old "friendship" it is impossible to conjecture.

After a brief career in Pennsylvania where he operated a tannery and wrote a history of Delaware County, Gould appeared in New York with a patent rattrap he had invented. He gravitated to Wall Street where for the rest of his life his inventive genius was applied to bear, bull, and lamb traps from which he made uncounted millions. He was a small, frail, dark-bearded but pasty-faced man; sickly, gloomy, coldly cruel. Before he ended his career he had gathered under his power a web of railroads, steamships, the Western Union, the New York World, the New York elevated roads, comparable to that complicated and diverse empire that the Van Sweringen brothers assembled later.

tache elaborately pomaded and dressed. Drew aided him to set up in Wall Street as a broker, where he met Jay Gould. What was the attraction between Gould and Fisk it is impossible to say, save that each supplied the qualities for adventure that the other lacked. Gould was a man of powerful intellectual equipment, simple in his tastes, meticulous in his personal morals, scornful of the world and those in it with whom he dealt, resourceful and merciless. Fisk was noisy, ostentatious, vulgar in his tastes and morals, audacious, with the mental equipment of a New England horse trader, but an able field general in a stock operation.

Gould and Fisk had a special object in establishing connections with the Erie road. In 1866 they bought a small road—the Bradford & Pittsburgh Railroad. They paid \$250,000 for it and promptly issued \$2,000,000 in bonds. They wanted to lease this line to the Erie, forcing that already distressed corporation to assume the new bonds. They did sell the road to the Erie and received for the \$250,000 investment \$2,000,000 of Erie bonds convertible into stock.

As soon as these three freebooters—Drew, Gould, and Fisk—found themselves inside the Erie compound, with Drew as treasurer and the three of them on the executive committee, with Drew representing Vanderbilt's interests, they proceeded to rob Vanderbilt. What they did to this wise, suspicious, and formidable old warrior is a classic in duplicity and helps us form some idea of what can be and is done to the less knowing and helpless investor.

saviors of the Erie in payment of various spurious claims. The Commodore, hearing of this, realized that they were bent on treason. He uttered a roar of wrath and hurried his lawyers off to Judge Barnard for an order commanding the looters to quit issuing bonds.

Meantime Vanderbilt redoubled his efforts to buy Erie stock to ensure control. His brokers bought right and left. But the supply seemed inexhaustible. In fact, it was—at least as long as the printing press of Gould, Fisk, and Drew kept running. For the ten million in bonds they had grabbed were convertible; that is, they could be turned into stocks on demand. The Unholy Three had their printer turn these bonds into stocks. And they dumped 50,000 shares on the market to be followed quickly by another 50,000. It was these Vanderbilt was buying, the millions he was paying flowing into the pockets of the conspirators. And Jim Fisk said with glee: "We'll give the old hog all he can hold if this printing press holds out."

When this perfidy dawned upon Vanderbilt he fell into a Jovian rage. Once again he rushed to his judge and got an order for the arrest of the villains for contempt. The judge who issued these orders must not pass unnoticed. He fitted into the comedy of the times as Harlequin in the pantomime. He was the Honorable George C. Barnard, a kind of human blackjack in the arsenal of Boss Tweed. Yale, maker-of-men, gave him to the world. He went to California and became a stool pigeon in a gambling joint. Later he was a blackface comedian. He returned to New York, where Tweed made him a magistrate and then a Superior Court judge in his kennel of justice. Tall, handsome, eccentric, boisterous, dressed in the loud and extravagant livery of a side-show barker, he sat on his judicial throne, whittling little strips of wood that his clerk kept piled on the desk for his amusement, spewing a stream of foul-mouthed impudence and abuse upon attorneys and litigants alike. Vanderbilt had bought him as he would an expensive horse. It was this gentleman who now ordered the arrest of Drew, Gould, and Fisk.

They now enacted one of the most fantastic burlesques in the whole history of American business. They took over the Taylor Hotel. They made it into a fortress. They recruited a small army of thugs and armed them with rifles and small cannon, to repel what they believed was a threatened invasion of Jersey by the roaring and blaspheming Commodore. They called their citadel Fort Taylor. Fisk, as colorful a rogue as ever sailed the Spanish Main, assembled a fleet of vessels which he armed and of which he assumed personal command to check the invader before he reached the shore. Thus, the pirates with their army and navy awaited the assault of Vanderbilt. The whole town was aroused. The militia was mobilized to deal with the expected crisis.

But Vanderbilt had no intention of using force. The marauders were actually in a desperate plight and he knew it. At this point the command fell from the hands of the frightened Drew. Gould took it over. With \$500,000 in cash he slipped quietly into Albany, where the legislature was in session. Somehow he got the ear of Tweed who up to this point was the ally of Vanderbilt. Gould gave Tweed \$180,000 of Erie stock. He distributed large sums of cash among the members of the Black Horse Cavalry. A bill was introduced in the legislature to legalize the ten-million-dollar stock and bond issue. Barnard called it a bill to validate counterfeit money. Vanderbilt fought them with money and threats. Albany assumed the appearance of prosperity. The smell of money was in the air. All legislative business was suspended while the lawmakers gathered in groups and discussed the current quotations on votes. Rates fluctuated between two and three thousand dollars. The courts were drawn in. Gould and Fisk got a counterinjunction from Judge Cardoza. Thus, two Tweed justices—Cardoza and

Barnard—squared off in a duel of injunctions. Vanderbilt lost at Albany. The law legalizing the security issue was passed.

But Barnard still threatened the fugitives with jail for contempt if they appeared in his jurisdiction. And so, despite their victory, Gould and Fisk and Drew dared not enter New York. Vanderbilt, outwitted and beaten, had this advantage—his enemies were refugees from the haunts that were essential to their lives and plans.

Vanderbilt knew that Drew dreaded jail. He got word over to Jersey that Drew's time to talk business had come. Drew took the hint. He slipped one Sunday morning over to Vanderbilt's Washington Square home. Vanderbilt let him know that he would not relent until the hundred thousand shares he had bought were taken off his hands at what he had paid for them. Drew was willing to settle and proposed another meeting. Some days later he slipped again across the river to the home of Vanderbilt's lawyer, Judge Pierrepont. While he and Vanderbilt were in conference Gould and Fisk walked in. They had had old Daniel Drew shadowed and they followed to surprise him. There, with all the combatants present, Vanderbilt laid down his terms.

He did not get all he asked. But, all things considered, he did very well at the hands of these cutthroats. They agreed to take back 50,000 shares at 55, paying \$2,500,000 in cash and \$1,250,000 in securities. They agreed to pay a million dollars for the right to redeem the other 50,000 shares at 70 within six months. Thus, Vanderbilt recovered \$4,750,000. He insisted this left him with a loss of \$2,000,000.

But Gould and Fisk were not done with him. They began to beat the price of Erie stock down with heavy short selling. When it reached 35 they bought back in sufficient quantity to get control of the road while making another killing. And they found Vanderbilt glad to sell his remaining 50,000 shares at 40 instead of 70. They returned to New York, bringing with them the Erie headquarters, which they established in an elaborate white marble building at Eighth Avenue and Twenty-third Street. It contained a theater, which the incredible Fisk operated, finding thus an

instrument for his exhibitionism and a recruiting station for his harem.

Vanderbilt had wanted control of the Erie. He wanted a monopoly of transportation in the territory served by the Erie and the Central. He got that control through his purchase of the shares the criminal trio had fed to him in the stock market. But having got it, he changed his mind. At the moment he was probably more interested in ruining his enemies. By forcing them to pay him \$4,750,000 and leaving them with the rotting hulk of the looted railroad on their hands, he felt he was wreaking vengeance on Drew, Gould, and Fisk. But he reckoned without the satanic ingenuity of Gould.

In the Castle, Fisk called himself the "Prince of Erie." Strutting aboard the flagship of his Albany fleet in an elaborate uniform, he called himself "Admiral." Marching at the head of a militia regiment that he commanded, he was styled "Colonel." He occasionally exhibited himself in a gaudy equipage drawn by six horses, three black on one side, three white on the other, embowered amidst a bevy of his strumpets. Yet this preposterous and malignant clown possessed an audacious cunning that when united with the acute and sinister genius of Gould made them a menace to investors, speculators, banks, and industry until Fisk was shot down by a jealous lover and Gould vanished from the scene, consumed in the fires of his own restless nature. They were to harass Vanderbilt almost to the end of his days. They carried on a traffic war, playing the Erie against the New York Central. When the old Commodore cut rates, Fisk went West, bought up

vast herds of sheep—the most undesirable and unprofitable freight—and filled Vanderbilt's cars with them at destructive charges.

Gould exploited his conquest of the gullible Grant by exhibiting the President in Fisk's private box at the opera house in Castle Erie and aboard one of Fisk's Albany liners, entertained publicly by Fisk in his admiral's regalia. Then Gould bought seven million dollars worth of gold, sending the price up from 132 to 140. Thereafter he and Fisk, with certified checks issued from a bank they controlled, bought forty millions of the dwindling metal until they had driven the price up to 150. Gold became so scarce that business and banking were deranged. Speculators were ruined. Brokerage houses suspended. It was the greatest panic in

history on the Exchange. Then Gould got advance word that Grant, disillusioned, was going to release government gold to ease the panic. He secretly betrayed his partners in the conspiracy and began to sell while they were still buying. Friday morning, pandemonium broke loose in Wall Street and the Gold Room. Fisk was buying frantically, pushing the price up to 162½, while his pal was selling. When the government gold flooded into Wall Street, the price of gold slipped back to 135. The whole market fell into the worst panic it had ever known. Fisk and all the coconspirators, including Gould, were caught in the decline. They had to force a closing of the Gold Room through an order of their friend Judge Barnard, to save themselves from ruin.

Once again the aging Commodore Vanderbilt was called in to help the market with his wealth. He made loans of a million dollars on that Black Friday to support the market. But it is not true that his part in this crisis amounted to anything more or that it played any major part in the crisis. After this, his battles with the spider Gould and the peacock Fisk came to an end. Fisk himself some years later, arrayed in velvet and glittering with diamonds, was killed coming down the grand staircase of a New York hotel to enter his ornate coach. His murderer was a rival profligate named Stokes, suitor for the affections of Fisk's public strumpet, Josie Mansfield. Old Daniel Drew, started on the road to ruin by his two honor pupils in a bear raid on Erie which Drew attempted only to be caught and squeezed out of a million by his pals, was driven from Wall Street ultimately and died in poverty.

As for Vanderbilt, he became a legendary figure. He was easily the first among the great money captains of the country. Greatest among the industrial giants were the railway kings, and he was the greatest railway king of all. He could not be compared in intellectual gifts with Gould, who was, perhaps, one of the most powerful minds among all our money barons. But Gould was essentially a crook. His mind worked in crooked ways. He could achieve only as a conspirator, a wrecker, a public enemy, medi-

tating and carrying out sorties and raids upon the public and private purse.

Vanderbilt was the richest man in America, worth a hundred million dollars. He remained more in seclusion. His very name was one to conjure with. He occupied such a position as only the elder Morgan attained a generation later.

x

Almost to the end Vanderbilt continued to give a general supervision to his vast interests. His son, William H. Vanderbilt—he of the long flowing Dundreary whiskers—assumed immediate charge of his railroad empire. But the foul-mouthed, blasphemous, and terrifying old barbarian held fast to the virility that had driven him forward. Men stood in awe of him. His son William never ceased to fidget uneasily in his presence. But he had more time to survey the infinite now, and his explorations brought him to the sanctum of Mrs. Tufts in Staten Island. The Fox sisters were still exciting the curiosity and wonder of the world since their discovery of the spirits thirty years before. And Mrs. Tufts was a practitioner of the dark art of communication between the Earth and the Beyond. The spectacle of this rowdy old pragmatist softened down to an evening at home with the shades of old Phoebe Hand and his departed son George titilated the risibilities of the hard-boiled gentlemen of Wall Street. But, after all, why snicker at Vanderbilt? For while he was fraternizing with the ghost of his grim and masterful old mother was not the far more astute and incredulous Sir William Crookes walking arm in arm with the spirit of a lovely female in his laboratories?

And, the old Commodore being a spiritualist and a perfect reservoir of tips on the market, it would have been strange if he had not made his appearance in the role of an angel in the drawing room of the weird sisters in Great Jones Street. Indeed, he became a constant visitor to both Great Jones Street and 44 Broad. The huge earnings of these innocent girls were generally connected with the Commodore's market clairvoyance. He was an intimate of Tennie C., and rumor had it that no sooner was poor Sophia

cold in her splendid tomb than the amorous septuagenarian began making passes at Tennie. How far he got with that exploit must remain a subject of speculation. But he soon abandoned that chase and disappeared one day from his accustomed haunts. When he returned some days later it was to bring to No. 10 Washington Street, as its mistress, the young lady with whom he had eloped to Ottawa. She was Miss Frank C. Crawford, a tall, good-looking, and dignified Southern girl, about the age of his older grand-children. It was a jolting blow to his family. But not one of them ever dared to lift so much as an eye in reproach to this imperious old householder on this or any other point. As for Victoria and Tennie C., they shook the dust of New York from their heels soon after. Well supplied with funds they went to England where, as might be supposed, they married men of wealth, Tennie C., now known as Tennessee, becoming Lady Cooke and Marchioness of Montserrat.

Commodore Vanderbilt died at No. 10 Washington Square on January 4, 1877, a little short of his eighty-third year. The great engine, subjected to excessive mileage, ran down. The deathbed scenario might have served for the passing of a bishop. The children and their spouses, the preacher, the doctors, and the new wife and grandchildren stood around and sang about old Daniel Drew's Lord. The Commodore's last words, so an admiring world was told, were: "I'll never let go my trust in Jesus."

During the later years of his life he had been profoundly concerned about one form of immortality—the immortality of the great name of Vanderbilt. He had erected a terminal station in lower Greenwich Village and adorned its façade with a \$250,000 entablature—a bronze monstrosity of which the central figure was a statue of himself. He meditated deeply about his dynasty, and the empire of which the Central was the mother state. He was worth \$105,000,000. He determined that this majestic pile of wealth should not be dissipated by his descendants whom the Commodore never rated very highly. William H. Vanderbilt, his son, who was managing his railroad properties, had won the old

man's respect. He therefore left to him property valued at \$90,000,000, while among all the others he divided the remaining \$15,000,000. To Cornelius, his wayward son, he left only the interest on a \$200,000 trust fund.

William H. Vanderbilt expanded this empire to a point where, before his death, he confided to a friend that he was worth \$194,000,000. He, in his turn, but less severely than his father, left half of that to two sons, William K. and Cornelius, and the balance partly directly and partly tied up in a trust to his other six children. The scions of William K. and Cornelius were numerous, but the chief heir was Alfred, who died in 1928, leaving a hundred million. The combined wealth of all the Vanderbilts today is probably as large as it ever was. But its domination of business is far less. Numerous progeny have divided it. And the modern technique of managing vast fortunes has tended toward diversification and diminution of control over any particular enterprise. The Vanderbilt stock in the New York Central does not amount to more than three per cent of the whole. Dynasties have hard going against the erosion of progeny, laws, fate, and the times. And in the Vanderbilt clan itself has arisen no one remotely resembling that remarkable mixture of blood and nerve and gristle and guts and audacity and intolerance, irreverence and greed, who founded the fortune.

His was the golden era of capitalism. It began to wane a decade before Vanderbilt died. What has followed since has been a capitalist machine very highly complicated by speed mechanisms and governors and brakes that hamper and foul it. Then there was the free economic society—no government regulation, no self-rule in business, no Sherman laws and ICC's and utility commissions, on the one hand, and no trade-association dominance and cartels, on the other. Competition reigned supreme. The age of machinery had developed far, but manufacturing and farming and commerce were still operated by comparatively small units. There was an abundant mortality list and an equally abundant birth rate in industry yearly. In farming, manufacture, and dis-

tribution, the production of wealth and utilities was carried on wholly by independent proprietors. The corporation, the chain store, the holding company, and the vast technological fermentations of the last fifty years had not yet been developed. A man got rich by producing goods and exacting for himself as large a share as he could by making laborers work as long as he could, paying wages as low as possible, and charging as high a price as the traffic would bear, usually powerfully limited by competition. His yield was pure profit, the difference between cost and price. The machine had enabled him to share in the product of a far larger number of men than during the simple handicraft age. But the wealth that individual men accumulated was moderate by present-day standards.

In railroading, the corporation had made its appearance, and there men like Vanderbilt and Gould and Fisk and Scott and, even before them, Daniel Drew were perfecting the mechanism of exploitation of properties through stock manipulations. This was a process that enabled the exploiter to make vast gains that did not come out of the property at all. It did not consist in making railroad profits and lopping off an unreasonable share. The object of the game came to be to lay hold of the savings of other men rather than their expenditures for goods and services, to entice them into stock buying, and by manipulation of the stocks to swindle them out of their savings. This was the technique John Law showed to the world and which came to be the characteristic of wealth getting in the age about to dawn. Daniel Drew did not calculate, as he would say, to grab the profits of the Erie. He was not concerned about the Erie making profits. And it made none. But he made millions just the same, not out of the people who bought passenger and freight service from the road, but out of the investors who tried to buy into its ownership through stocks.

If there is anything in capitalism worth saving and if there were any who wished to save it, the time to have done so was in those early days when Drew and Gould and Vanderbilt began their experiments in corporate manipulation. From that time on the history of the system has been the invention of one device after another by exploiters to control it for the purpose of exploiting it, the struggle of one group after another to protect themselves from exploitation by further control devices, and the long battle of the government by still other controls to prevent or circumvent the controls of the private groups. The end is the encasement of the system in a framework and tether of constricting chains that are slowly destroying it and that have almost finished their job.

Brown Brothers

HETTY GREEN

Hetty Green

THE MISER

T

EARLY IN 1833 a young man arrived in the town of New Bedford and went at once to the offices of Isaac Howland, Jr., & Company. His name was Edward Mott Robinson and thereafter he was the "Company" in that important firm of merchant-adventurers. He was a dashing figure, tall, erect, handsome, distinguished in his bearing.

On December 29 of that same year New Bedford learned why this romantic young stranger had been brought into the great house of Howland. On that day Edward Mott Robinson married Abby Slocum Howland, the daughter of Gideon Howland, Jr., who was practically head of the firm.

If ever this nation was money-mad it was in that decade of our history. Men talked about the Money Devil. The whole country was up in arms helping the redoubtable Andy Jackson smite that monster, who was supposed to be roosting then in the wicked United States Bank. But for all that, a French traveler observed that the "money devil may be found sitting in state upon his altars in all the towns of these states with large numbers of the population bowed down in adoration before him." Speculation ran wild. Men gambled their time, their fortunes, their lives in pursuit of quick riches. And then, as now, one of the most romantic of all the gambles was the oil business. But the oil business of that day was carried on not with the drill but with the harpoon. Men bored for oil not in the rocks but in the blubber of the whale. Whale oil was the light of the world. New Bedford was the Mecca of whale oil. And the Howlands were its prophets.

The house of Isaac Howland, Jr., & Company was formed in 1811. The Howlands had been in and around New Bedford since 1621. From the first they possessed the secret of making money. By 1833 they had not merely acquired great wealth; they compelled an unquestioning recognition as the peak of the very upper crust of New Bedford aristocracy. The Howlands were to New Bedford what the Cabots were to Boston. Theirs was not a codfish aristocracy. Their Brahminism was founded upon a bigger fish. For fifty years they sent out a fleet of more than thirty fine whaling craft. For fifty years they wreaked upon the whale the vengeance of the faithful for its treatment of Jonah, and waxed fat. And in 1833 when young Robinson entered the business and the family, the Howlands were on the way to supplying America with some of its first crop of millionaires.

A year later, upon a very windy November day, a horseman galloped up to the counting room of Isaac Howland, Jr., & Company with a message for Mr. Robinson. He was to come home at once. His lady had just been delivered of an infant. Boy or girl? A girl, replied the messenger. A brief shade passed over the brow of the new father. The house of Howland and the house of Robinson needed a son. Had this been a boy, Mr. Robinson would have leaped upon his horse and hurried to his home. As it was he arranged the papers on his desk very carefully, adjusted his greatcoat with deliberation, put his high hat on his head at the proper angle, looked it all over in the long wall mirror, and trotted off to behold his daughter. In his wife's room he looked

with interest at the infant who had just entered this money-mad world. A girl! Well, there was no help for it. Better luck next time. Meantime this child must be named. And so they called her Hetty—Hetty Howland Robinson, to be known in later years to all the world as Hetty Green, the richest woman on earth, and the strangest.

It is an odd fact that financial geniuses display great precocity. John D. Rockefeller made an original discovery of interest on money at ten. He was a man of wealth at twenty-five. Russell Sage was a successful wholesaler at twenty-three. J. P. Morgan, Andrew Carnegie, Edward Harriman, all revealed their talents for profit at an early age.

One day a little girl of eight years walked into one of the banks in New Bedford. This was before the masses had been invited into the banks. The bank was the rendezvous for the dollars of the well to do and the adult. But this little girl was the daughter of Edward Mott Robinson, and so the bank president patted her benignly on the head and asked what she wanted. She wanted to open a bank account. And she did open it there and then. This she had done of her own accord and without consulting anyone at her home.

But already she was beginning to display those traits of personal economy—even parsimony—that characterized her later in life. Once, on a protracted visit to New York, her father sent her \$1200 to buy clothes. When she returned to New Bedford she still had \$1000 of it to put into her bank account.

In February, 1860, her mother died. This event brought Hetty her first money and her first serious family quarrel. Her mother had inherited \$40,000 from her grandfather, Isaac Howland. This sum had been put in trust for her. When she died there arose the question of how the estate should be divided. A Boston lawyer wrestled with the problem and held that the personal property should go to the husband, Mr. Robinson, the real estate to the daughter, Hetty Robinson. But when the estate was inventoried it was found the personalty amounted to \$120,000 and the realty to only \$8000. Hetty and her Aunt Sylvia felt deeply aggrieved at this. It was the beginning of a coolness between Aunt Sylvia and Hetty's father.

TT

On June 14, 1865, while the nation was still draped in black for the death of Abraham Lincoln, Edward Mott Robinson died in New York City. The next day, and while her father's body was still lying in its coffin, Miss Hetty Robinson sent the following note to the men in charge of his office:

GENTLEMEN: I have to request that you will answer any questions that Mr. E. H. Green may put to you on all matters about my father's busi-

ness affairs. I wish you gentlemen to consult with Mr. Green on all matters of importance where advice is required.

HETTY H. ROBINSON

Behind this cold epistle lay a story that has never been fully explained. Early in June Mr. Robinson became ill. He feared death to be imminent and sent for his daughter, who was away at the time. When she arrived he demanded to see her alone.

Was there any truth in this? Or was this just the fevered delusion of a dying man? Hetty Robinson believed it. Not only that, but to her dying day this weird revelation continued to exercise a powerful influence over her life.

In a few days Mr. Robinson's will was opened. Her father's fortune was indeed left to her. But to her amazement and chagrin only one million dollars was given to her outright. The balance, supposed to be about four million dollars, was put in a trust for her. Instead of Green and Grinnell, two others, employees in her father's office—clerks, she called them—were named as executors and trustees. Her acceptance of her father's dying accusations now became complete.

But she was now worth a million dollars. And as she escorted her father's body to New Bedford for burial beside her mother, her mind was torn between her plans for investing her new fortune and the terrors inspired by the tale of the plot her father had related.

Hardly had Miss Hetty returned to New York when she was shocked by the news of the death of her Aunt Sylvia Ann, just three weeks after her father's death. Sylvia Ann Howland was one of the richest women in America. Her fortune was not less than two million dollars. She had always declared she would leave her whole estate to her niece Hetty. Now Hetty hurried to New Bedford. She wondered if this could be another chapter in the plot first to concentrate her father's and her aunt's wealth in her person and then assassinate her.

At Sylvia Ann's funeral the relatives swarmed like the Chuzzle-wits at the pretended deathbed of old Martin. The place was overrun with doctors and nurses and neighbors. Among them all Hetty Robinson, usually robust and full of color, presented a picture of consuming worry. She was haggard, pale, weary. The alarm that had eaten at her heart since her father's death was now intensified almost to consternation. One of her aunt's doctors, strangely deficient in tact, commented to her on her condition, which he attributed to grief.

"If you continue like this, Miss Robinson," he observed, "you will not live a year."

"We are to get everything when Hetty dies," one whispered. "When that happens we are going to add a greenhouse to this place."

Hetty, standing beside them unseen, heard this. That night she crept up to a storeroom of the old house, locked the door, piled the furniture around so as to conceal a bed on the floor, and slept there until morning. For days she repeated this. She refused to eat a morsel prepared for her by any other hand than her own.

She immediately protested the probate of the testament. But the evidence of its authenticity was so complete that she withdrew her appearance and the will was admitted by the court. This, however, was but the beginning of this suit, one of the

Along with this document Hetty Robinson offered the following explanation. Her aunt was determined that Hetty's father, living at the time this will was made, should never receive any more of the Howland fortune. She therefore proposed to Hetty that she, Sylvia, would make a will leaving all to Hetty if Hetty would in turn make her will leaving all to Sylvia. Hetty agreed to this, whereupon the above testament was made. Hetty in turn gave a similar will to her aunt. She now asserted that this amounted to a contract and she called on the court to enforce performance of it.

The case presented some novel points of law that we need not notice. To the people of New Bedford it involved one all-engrossing question—did Hetty Robinson forge this document?

In spite of her defeat, however, she was the possessor of a million dollars in cash from her father and several more millions in trust from her father's estate and her aunt's. Compared to the monumental fortune she reared on this foundation this was a modest start. But she was, in fact, already one of America's richest women.

Now began that remarkable career of investment and moneymaking which has been equalled by no other woman who ever lived and by few men. But also there took form in her heart that enduring and consuming bitterness that pervaded her whole life, that filled it at times with gloom, that led her into all sorts of strange meannesses and ruthless quests after revenge, and that in the end raised up in her mind a kind of mania of persecution. All her life she believed her father was murdered, that her aunt was murdered by the same hands, and that her relatives, bound together in a persistent plot, were resolved to murder her.

III

On the eve of Saint Valentine's Day in the year 1865, a gentleman named Edward H. Green, a bachelor of wealth, sat down in his apartment to write some letters. Among other things he put a valentine into an envelope. Then he made a check in payment for a suit of clothes—a very cheap suit of clothes, although this bachelor was a man of large means—and put that in another envelope. Then, getting his envelopes mixed, he addressed the one with the valentine to his tailor. The one containing the check he addressed to the lady of his heart—Miss Hetty Howland Robinson.

Mr. Green was weary of his lonely life. He was now forty-four years old. Only a short while before he had met Miss Robinson and he launched at once a violent attack upon her heart. She had hesitated at first, not from coyness. She was now thirty-one years old and her practical, unsentimental nature held her back from precipitate investment—unconsidered investment of any sort.

portly man, standing head and shoulders above his fellows. He carried himself erect, walked with a brisk, decisive step. He was worth a million dollars and he was already known in Wall Street as a daring and successful speculator.

What Miss Robinson did know, in addition to the delicate intimation conveyed in the misaddressed tailor's bill, was that her suitor had begun life as a poor boy, though of fine family, and had risen to wealth through his own exertions. He came of an excellent family with its beginnings in early Massachusetts days. His father had been a merchant in New York and Bellows Falls, and in the latter town Mr. Green was born. At eighteen, with no other assets than his pleasant, affable nature, he became a clerk in the firm of Russell, Sturgis & Company of New York. He was sent to the Philippine Islands. He must have been an attentive agent and a good businessman, for in five years he was a member of the firm. He was making money. He put other irons in the fire. He extended his operations to the port of Hong Kong and made more money. When he came back to New York he was a rich man.

When her father died Hetty was already plighted to Green, and he remained by her side throughout the great will case, counseling and encouraging her. Just before the decision against her the pair were married—on July 11, 1867—at the residence of Henry Grinnell in Bond Street, New Bedford.

If Miss Hetty did not investigate her fiancé's character and habits among his enemies, she did not fail to observe one precaution. She required him to sign a contract under which his wife's fortune would not be liable for his debts but at the same time stipulated that he would be liable for her support. How this arrangement turned out in the end we shall see.

Miss Robinson's newly acquired husband had spent most of his early business years in the Orient. With his headquarters at Manila, he had ranged about China, India, and Japan, with his eyes open for profits. Something of the rover lingered in his makeup. And now that he was married, the wanderlust flamed up in him anew. He steered his ship for England and persuaded his wife to agree upon this course.

Here they were to remain for six or seven years. Here some thirteen months after the marriage their first child—a boy—was born at the Langham Hotel in London. He was adorned with all the ancestral tribal names—Edward Howland Robinson Green—every one of them a patron saint who had made his million. Three years later their second and only other child arrived. She was called after her mother and her Aunt Sylvia—two female millionaires.

In spite of these domestic events it was here in London that Mrs. Green definitely turned her attention to business. She had a million and a half in her own name, perhaps more. She had a million in her inheritance from her aunt in a trust fund. She had several million in her father's estate also in a trust fund. There was something ludicrous in this collection of trustees set up to protect this innocent female in her financial affairs. Even her husband had been urged upon her by her dying father as a kind of protector for her fortune. What all her guardians did with their funds and what she did with those under her own control will appear later. Now, however, she went resolutely about the business of pounds, shillings, and pence. Very naturally, her first investments had been in government bonds. She was reading about bonds to

her grandfather at an age when most little girls are reading about the three bears. Before she had left America she had already revealed her feeling for profitable investment.

When she got settled in England she continued this course, adding, however, an interest in railroad securities, especially Rock Island bonds. She became well known in the financial district of London. Indeed, she associated herself with a group of financiers and organized two banks from which she made large profits. In one year in London she made more than a million and a quarter dollars. In a single day she cleared \$200,000. "I have made more money than that on individual deals," she said in afteryears, "but that was the largest single day's earnings of my life."

She was already dropping into those personal idiosyncrasies that marked her among women in later years. The habits of thrift that had expressed themselves in her girlhood were now hardening into a state of mind bordering on parsimony and meanness. She might have been a handsome figure now, in the full tide of her womanhood. Her features were strong but well formed. Her skin was clear and suffused with a rosy glow that persisted late into life. Her deep-sunken eyes were large and luminous, even brilliant. Her beautiful hair, combed in a severe part on top, fell over her neck in a rich roll of abundance. But these charms were all lost through her excessively plain and even homely dress. Fashion passed her by. She had no interest in it. Indeed, it may be doubted if she had any mechanism for the perception of the beautiful. Her mind was now engrossed with her bonds and her banks and with the small boy who trudged at her side wherever she went.

It was while she still lived in London that Mrs. Green found herself at the fork of the roads in her domestic life. One road led off into Threadneedle Street, the other to the London clubs and Rotten Row. The wife took the trail that led to Threadneedle Street, the Exchange, and the banks. The husband took his way along the road that led to London club life. This was the beginning of those two trails that this ill-assorted pair traveled for so many years and that came together in the end under such pathetic circumstances. Mr. Green, of course, took an interest in his fortune. He was by no means a ne'er-do-well. But he was content to instruct his broker from a pleasant lounge in a London club. His wealth was large and he fully lived up to the prenuptial contract under which he was to meet all living expenses. His wife was able to devote herself to business under what must have seemed to her almost ideal conditions—making great profits and spending nothing. She ruled her own finances with an iron hand. But she was acutely aware of the differences in temper, in tastes, in aims, and in modes of life between herself and her husband. She grew to dislike England, and when her son was still under ten she demanded that the family return to the United States.

TV

A few years after their return to America the Greens began living in separate quarters. There was no scandal about it. There was no quarrel. There was no legal separation. They did not become estranged. They merely took up separate abodes.

Thereafter she took an office in the building of the Chemical National Bank and gave herself up wholly to building her great fortune. And as this fortune grew the fear of assassination took deeper hold of her mind. She intimated more than once that it was this fear that led her into all the penurious ways she adopted to conceal, perhaps, her identity and wealth. But on every hand, in every dark corner, she saw the assassin lurking. She declared that in a boardinghouse in Brooklyn she found ground glass in her food. She lived for a while at a house in Hempstead, Long Island. One night burglars broke in. Mrs. Green insisted they were not burglars but murderers come to kill her. As she walked along the street one day a shower of bricks fell from a building on the sidewalk around her. She was untouched. Again the mysterious scoundrels were at work. On another occasion a huge block of wood fell from a house in course of construction. It dropped at Mrs. Green's feet. Another miraculous escape. Certainly whoever these would-be assassins may have been they were sorry bunglers. But her soul grew darker and she managed to infuse this fear of assassination into the minds of her children.

Some years later her son's leg had to be amputated. This she attributed to an assault years before upon the boy by her own enemies. Dr. Lewis A. Sayre, of New York, however, told a different story. One day a shabbily dressed woman with a boy whose knee was badly infected entered the doctor's office. The boy had bruised it some years before, she said, while sliding down a hill. She herself had treated the injury which remained an open and troublesome sore. Finally she applied hot sand to it, causing the flesh to slough off. Dr. Sayre, supposing the woman to be in dire

poverty, took the boy to Bellevue as a charity patient. Because the injury had certain interesting professional aspects the boy, with the mother's consent, was used for a demonstration at which the doctor lectured to the students. After this Dr. Sayre learned his shabby patient was none other than Hetty Green. He thereupon refused to treat the case further until she paid for his services and in advance. This she refused to do and never returned. Some years later this leg was taken off.

Another blow was now in store for her. In the year 1884 Mr. Edward H. Green sat in an easy chair in the Union League Club, his favorite lounging place, discussing the very lively political campaign then in progress between James G. Blaine and Grover Cleveland. Presently a messenger handed him a letter. Mr. Green read it, passed his hand over his darkened brow, and went out of the club hurriedly. That night when the evening papers arrived his cronies learned why he had left so hurriedly in the afternoon. The brokerage house of J. Cisco & Company had failed. Green was deep in the market, and the prospect of a Democratic victory had caused a slump. He was called on to make good his obligations and could not do so. His securities were thrown on the market, and when all the smoke had cleared away, his fortune, amounting then to \$800,000, was swept away. The husband of Hetty Green, who had been commissioned to guard her fortune, was bankrupt.

She resolutely refused to aid him. There is reason to believe that she did pay his debts, but she would give him no money to recoup his losses. Thereafter he did not have a penny. He was sixty-three years old and accustomed to indolence. His outlook was hopeless indeed, save as a pensioner of his wife.

She was a warlike spirit, and life now furnished her with plenty of battlefields. She crossed swords with some of the most astute financiers of the day and never sheathed her blade in battle. One day the little Houston & Texas Central Railroad swam into the news as a bankrupt road. Collis P. Huntington, of the Southern Pacific, bought the stock as low as \$10 a share. He proceeded to reorganize it. The bondholders were asked to turn in their bonds

Sometime later, she was found to be in the market, gathering in Louisville and Nashville stock. The market woke one day to find that Mrs. Green had almost driven this issue into a corner. Later still, she did actually succeed in cornering the market on Reading, and the humiliated he-operators of Wall Street had to come with their hats in their hands to the financial ogress in the Chemical National Bank.

37

One cherished dream of her life Mrs. Green now sees blossoming into perfect fruit. Her son, Edward H. Green, the apple of her eye, is fairly launched upon his business career. Though a Quaker, he has just been graduated from Fordham College, the school of the Jesuits in New York. He has now finished his course as a lawyer, is admitted to the bar, and is ready for business. He does not practice law, however. Doubtless Mrs. Green's long career as a litigant and her hatred of lawyers has led her to make this boy independent of the breed. He will go into business. He will be his own lawyer. And he will be the richest man in America. She has been preparing him to be what all his ancestors have been for two hundred years—good business managers. From his earliest years she has taught him the meaning and the value of money. She has lectured him about his way of life. When he was graduated she called him to her office one day. She handed him a package. "Ned," she said, "this package contains \$250,000 in bonds. Take it to San Francisco and deliver it to the address on the outside. But be careful it is not lost or stolen."

The first night on the train Ned sat up watching that package.

For the rest of the trip he kept it in his hands night and day. Finally with relief and pride, he handed it safely to the bank official to whom it was addressed. The package contained some canceled insurance policies. Mrs. Green had given her son a lesson in caution

Reporters asked him what religion he followed. "I was born a Quaker," he said, "raised a Protestant, educated a Catholic, and by business I am a Jew."

She kept him near her for a while, took him to Chicago on several large real-estate deals, and initiated him into all the methods she employed in the management of her millions. At first he went into the office of the Connecticut River Railroad. When he was just twenty-one he was elected a director of the Ohio & Mississippi Railroad. When he was twenty-four she sent him to Texas to foreclose on the Texas & Midland road, a mortgage being due her for \$750,000. He did so and bought the road in for his mother at the sheriff's sale. Then she wired him: "The road is yours. See what you can do with it."

His mother never took her eye off his operations and occasionally she intervened with one of her characteristic gestures. In those days railroad officials were constantly pestered by politicians for passes. Giving free rides on her railroad tortured the soul of Hetty Green. And so she had prepared a little card, and whenever a politician or anyone else asked for a pass he received one of these little cards. It read:

Monday: "Thou shalt not pass." Numbers XX, 18. Tuesday: "Suffer not a man to pass." Judges III, 28.

Wednesday: "The wicked shall pass no more." Naham I, 15

THURSDAY: "This generation shall not pass." Mark XIII, 30.

FRIDAY: "By a perpetual decree it shall not pass." Jeremiah V, 22.

Saturday: "None shall pass." Isaiah XXIV, 10.

SUNDAY: "So he paid the fare thereof and went." Jonah I, 2.

What is more, her son had made himself a figure in Texas public life. He possessed a fine commercial mind, like his mother's. But he had also the genial, kindly suavity of his father. And before long the country was interested to read that the son of the world's richest woman was running for governor of Texas on the Republican ticket. Of course a Republican nomination was merely a kind of laurel wreath of personal popularity or a key to unlock a rich man's pocketbook.

VT

One of the powerful emotions that controlled Mrs. Green's life was her hatred of lawyers. To her dying day she would talk with anyone by the hour about lawyers. Once she took out a permit for a pistol. It was really because of her fear of assassination. Someone asked why she had done this. "To protect myself from the lawyers," she answered. "I am not afraid of other kinds of burglars."

Her favorite joke, that she would tell upon the slightest provocation, went this way.

When no answer was forthcoming she would answer her own question.

"Because both lie first on one side and then on the other."

This hatred of lawyers grew out of the long series of lawsuits that had begun following her aunt's death and that never ended until her death. She was in incessant legal controversies with all sorts of people about all sorts of things. In spite of her conviction that all lawyers and all judges were scoundrels, no one in America applied for the services of these gentlemen more than Hetty Green. But the greatest of all her lawsuits, next to the famous will case,

was the one that grew out of charges against the trustees of her father's estate.

It will be recalled that during all these years her father's and aunt's estates remained intact. Trustees administered them for her benefit. There was something a little ludicrous in this woman, beyond doubt the most astute financial mind that her sex has ever produced, having her funds in the hands of guardians who were supposed to protect her.

At all events, in 1892 the sole surviving trustee of her father's estate, Henry A. Barling, applied to the New York courts to be discharged from his trust. He rendered an accounting. And this accounting Mrs. Green contested. She made many extravagant allegations. She declared her father left an estate of \$9,000,000, that she received only \$334,000 income from the trustees, that Barling had been just a clerk in her father's office, and that undue influence had been used by him to get control of the estate. She went through the accounting with a fine-tooth comb and made innumerable objections to all kinds of items. The whole subject was referred by the court to a referee and thereafter for a long time testimony was taken before him.

Nothing could give a better picture of this remarkable woman, her appearance, her habits, her manners, her aggressive and imperious nature, her swift wit, and her withering sarcasm, than an account of this trial. At the time, the newspapers made it a matter of daily extended reports and got all sorts of vivid and entertaining news from it.

The referee was a little, round, pink-faced lawyer of the mildest type, named Henry H. Anderson. He returned from luncheon each day looking a little rounder and pinker than before. And invariably within half an hour after resuming proceedings his head would droop forward a little and he would sink into a gentle doze.

Mrs. Green herself was always in attendance and very much in evidence. At this time she had perfected that appearance of shabbiness which marked her for the rest of her life. Her dress was of the poorest materials, black but already revealing tints of green such as

"That's little Cupid Choate," she said with sneering laughter. "Why when I was a girl Joe used to call on me and whisper little love tales to me. He used to call on another girl too, named Kitty Wolf, and tell her the same tales. We used to meet every Friday and compare notes. We called him Cupid Choate. But now I call him Cherub, because he isn't exactly a cupid any longer. He is a reformer now and his wings have begun to sprout."

She changed lawyers so often that the proceedings were very much delayed. One day she dismissed one lawyer, William H. Stayton, in open court. Stayton was her husband's lawyer also. He got up to address the court. She waved him archly away and

The referee complained that Mrs. Green, as soon as a lawyer became familiar with her case, dismissed him.

"When they get hypnotized, don't I have to change them?" she said. "Choate hypnotizes them. He hypnotized Stayton."

Another day Referee Anderson attempted to rebuke her.

"Hear that," she exclaimed. "He's mad because I said he snored last Saturday. Well, the only difference between us is that Anderson snores and I get nightmares."

"The books," said the executor's lawyer, "must be kept at the office. This is not a small estate—"

"But getting smaller every minute," shot out Mrs. Green.

The referee looked helplessly at her: "There's no use, Mrs. Green, adding more—"

"Except a little money," she put in. "I'd like to see a little more money."

Later her lawyer, cross-examining the executor on the witness stand, said: "Don't you know that your fellow executor, at the time that letter was signed, was in a lunatic asylum?"

"It was not a lunatic asylum," retorted Mr. Barling angrily. "I've been there myself—"

"Why not?" interrupted Mrs. Green with a loud laugh.

A moment later Mr. Barling's lawyer went to the witness chair and to look over some papers the witness was examining. The heads of lawyer and witness were close together.

For months this travesty went on, lawyers, witnesses, referee

struggling to push ahead and riddled by the machine-gun fire of Mrs. Green's withering jibes, while all New York laughed. The utter frustration of her foes came, however, toward the end of the trial when the referee's report had been made against her and the matter was being argued before the court. Joseph H. Choate was addressing the judge. He was picturing the sufferings of the sorely tried executor who went on with his burdensome duties under the load of Mrs. Green's incessant criticism and obloquy. He grew eloquent. He was sailing aloft along an altitudinous level of forensic pathos. Suddenly the judge, the spectators, and the lawyers became aware of Mrs. Green drawing a huge yellow pillow slip from under her cape, putting it to her eyes, and bursting into a violent burlesque of weeping at Choate's heartbreaking eloquence. The scene was so lugubrious that judge, lawyers, all broke into violent laughter that continued in ceaseless titters for the balance of Choate's address. The great lawyer for once was utterly crushed.

If Mrs. Green hated lawyers before this suit, she regarded them with a deeper and blacker hatred forever after. She had scored brilliantly on the entertainment side, but in the end she lost this case as she did most others. Almost all great financial figures have managed to get themselves into court a great deal. John D. Rockefeller was in endless litigation. But Rockefeller always won his suits. Mrs. Green always lost hers.

VII

There is a little double flat in Hoboken in Bloomfield Street—a two-family house bearing the number 1309. In the parlor of the lower flat are three chairs, a table, a couch, and a rug somewhat the worse for wear. There is an old vase on the mantel holding aloft some artificial flowers. Over the mantel hangs an oil chrome, and there are a few other cheap framed prints on the other walls. This is the living room of Mrs. Hetty Green, the richest woman in the world. If, as the Germans say, "true wealth is to have everything you want," then Mrs. Green, in addition to her money, is rich

One might see her any morning at seven o'clock closing the door of this humble home behind her as she leaves for business in New York City. She says good-by to a little dog named Dewey. She calls the dog Cupid. His name is Cupid Dewey. In the little tin frame on the door under the electric push button is a soiled card on which is written what purports to be the name of the occupant of the flat. It is C. Dewey. This is a grim mixture of Mrs. Green's sardonic humor and her terror. She foolishly imagines she is hidden away in this remote tenement. Everyone knows where she lives. However, she has other reasons for dwelling amid the secluded fastnesses of Hoboken. "It is the cheapest place to live I know of," she once said of it.

As she goes to the ferry she is indescribably shabby. Her old clothes hang about her as if they were wet. This is part of her disguise. Yet on the ferry everyone recognizes her. "There is Hetty Green, the richest woman in the world," is said a score of times every morning.

enterprises, operate vast railroads—all owe money to the squalid old woman who lives in the Bloomfield flat and whose only yacht is the Hoboken ferry.

The meanest forms of economy permeate all departments of this woman's life. Her business is transacted on the same basis. One day she was in Philadelphia and wanted to get to New York before the close of the Stock Exchange. It was necessary to have a special train. The railroad authorities quoted her a price for a locomotive and one car. The price staggered her. She tried to bargain with them but they informed her the price was standard and could not be lowered.

In New York she ate at cheap restaurants where she was known to waiters as the woman who never gave a tip. But at Bellows Falls she went each day to the town shops and bought in small quantities just what she needed for that day—a quarter pound of butter, a few crackers, a small quantity of sugar. She could never speak with patience of the extravagance of women. Whenever conditions were depressed in the country she blamed it on the extravagance of her own sex.

One day she went to a real-estate office on Fifth Avenue. The office had advertised for several caretakers to live in the basements of tenement houses belonging to the firm. All day long, forlorn old women had been coming in applying for the job. When Mrs. Green entered the young clerk flew at her and cried: "No more caretakers needed! No more caretakers today!" Mrs. Green was not in the

least perturbed. She replied in her soft, smooth voice: "I am Hetty Green. I came here just to talk over a loan of half a million dollars your firm wishes to borrow from me."

"Madam," he said, "your cow has chased me across the lot.' Mrs. Green surveyed him calmly but made no reply.

"Go tell that to the cow," she said quietly

WITT

At a comfortably late hour Mr. Edward H. Green rises in his apartments in the Cumberland Hotel. He is an old gentleman now some seventy-five years of age. He is still a tall, erect, distinguished-looking man, with a portly figure. He has his breakfast in his room and then looks carefully over his morning papers. He does not miss a page, scanning all the small items. Now he frowns darkly. He has come upon some little note about his wife. He is deeply displeased at this. But for all that he reaches for his shears, clips the item out, and puts it carefully in an envelope along with innumerable others.

No one but his most intimate friends are permitted to enter this room. But many try to reach him. Reporters occasionally present themselves at the clerk's desk of the Cumberland. There is a good deal of mystery about the husband of the world's richest woman, and reporters are forever trying to get to him for a little chat. The caller's card is taken away and in a moment the attendant returns to say that Mr. Green begs to be excused. The card has never

reached him. The attendants at the hotel are liberally tipped by Mr. Green to protect him from all visitors save two or three who are known.

When he is through with his papers he amuses himself with a book until about one o'clock. Then he dresses and walks leisurely to the Union League Club where he spends the rest of the day. There he meets his familiar cronies who can be depended upon not to mention his wife. He plays a hand at cards, smokes a cigar or two, enjoys the conversation of friends, has his dinner, and remains into the night when he goes back to the Cumberland, save on those rare occasions when he goes to the theater.

He is now a man of leisure living on a pension allowed him by the wife who had forced him to sign a prenuptial contract that her funds would not be liable for his debts and that he would support her. The allowance was not a large one, but it enables him to live at a decent hotel and support by careful management the wants of a clubman. But he never attempts speculation again.

Meanwhile, Mrs. Green's fortune is rising. Her business is money—making dollars into more dollars. She was not a builder. She projected no great productive industry. Her business was to stand on the side and take her toll from those who were producers and builders and needed her money. Most of the great millionaires of this country have been primarily creators of wealth, dreamers of great enterprises. Rockefeller organized the oil industry, Hill

created a railroad empire and developed a vast region, Carnegie put together that amazing system of industries that became the foundation of the United States Steel Corporation, Ford raised up a great network of wealth-producing plants that employ hundreds of thousands of men. Hetty Green never created a dollar.

Of all American millionaires the one she resembled most was Russell Sage. Her investments were made largely in government bonds and real-estate mortgages. Her speculative profits were made in the call-money market and in buying high-grade securities when the market was low and selling when it was high. This simple process, which everybody pretends to understand but so few follow, she began in early life when she gathered in government securities after the war. In Wall Street they would tell you that Hetty Green made her money through luck. But there was no luck in it. It was in following the obvious principle that Wall Street preaches and then ignores. She always insisted she never speculated. (It is odd how everyone fights shy of that word.) As a matter of fact she seldom bought anything to hold.

"There is a price on everything I have," she once said. "When that price is offered I sell. I never buy anything just to hold it."

"About all that can be said of my investments," said Mrs. Green on another occasion, "is that they have been carefully chosen and have turned out well as a rule. A fortune cannot be built up around a fixed idea or in other words without the exercise of just plain common sense. I buy when things are low and nobody wants them. I keep them until they go up and people are anxious to buy."

What she meant was that she never speculated unwisely. After the panic of 1907 she said: "I saw this thing coming. When it came some of the solidest men in Wall Street came to me and tried to unload all sorts of things, from palatial residences to automobiles. When the crash came I had money and I was one of the very few who had. The others had their securities and their values. I had the cash and they had to come to me."

Her real-estate holdings were vast. She owned or had mortgages on an endless number and variety of places—great business buildings, palatial city homes, theaters, factories, hotels, livery stables, country estates, farms, ranches, undeveloped acreage, churches, and cemeteries. Once she decided to make a personal tour of inspection of all her real-estate investments, and it required two years of constant traveling all over the country to visit them all.

What she was worth it would be difficult to say. She always preserved the greatest secrecy about her wealth. She was equally secret about what she bought. If she was asked what was a good business to invest in she would reply: "The other world." One estimate of her wealth placed her New York City realty investments at between 30 and 45 million dollars. She owned from 40 to 60 millions in industrial and mining securities. She had from 15 to 25 millions in railroad stocks and bonds, about 10 millions in farm and other tracts in the Southwest, and another 10 millions in Boston, Chicago, and St. Louis real estate. Around 1900 her wealth was not less than 60 million dollars. By the time she died it had certainly doubled.

TV

willed woman toward this fallen man. He was really never quite out of her thoughts. Even while away from her she exercised a ceaseless vigilance over him. She was a hard woman. She was never swayed in her actions by watery human sympathies. This man and this woman, brought together in their maturity, looked out upon life through eyes so different that what they saw constituted two wholly different worlds. She had no patience with the things that attracted him. His loss of a whole million dollars must have tormented her soul. And yet there is some reason to believe that now as she saw this once strong and handsome man brought so low she felt a glow of affection for him. Their daughter Sylvia remained in Hoboken to look after her father, and Mrs. Green proceeded, as was her way, to boss with an iron hand the job of nursing him.

After a while, perhaps early in 1902, the family, doubtless at the insistence of the children, moved him to his old home at Bellows Falls. He was now a man of eighty years and utterly without spirit. His daughter now remained with him altogether. Mrs. Green moved her office to Bellows Falls and tried to stay there too. But it was a most inopportune time for him to choose to die. That was a year of extraordinary prosperity. A new race of daring promoters was in the field—the Harrimans, the Gateses, the Rogerses, and their like. Also a new breed of dangerous and brilliant radicals were on the warpath. It was a time when people of vast wealth had to watch their stations with ceaseless vigilance. William J. Bryan, Eugene V. Debs, Tom Watson, all pointed their fingers frequently at Hetty Green as the symbol of useless and parasitic wealth. Besides, the call-money market was running wild. Rates were going high, and there was big money to be made by sitting close to Wall Street. Hetty Green had raised the towering structure of her fortune so high that she had to be patrolling it always to keep it from rust and loss.

v.

The Robinsons and the Howlands and the Greens had all been precocious in the making of money. But they had displayed no precocity in love. The elder Green had not married until he was forty-seven. His son, Edward, remained single until after his mother's death, until he was forty-seven—the age at which his father married. Mrs. Green was thirty-three before she married, and now her daughter at thirty-eight was still unwed. In 1909, however, Mr. Matthew Astor Wilks, a clubman of prominence and a grandson of John Jacob Astor, approached Mrs. Hetty Green and asked for the hand of her daughter Sylvia. Mr. Wilks had been paying court to the lady for some ten years. But he had been always painfully aware of Mrs. Green's opposition to his suit. And she was not a figure to be approached upon an unfavorable subject with impunity. However, early in February, 1909, Mr. Wilks presented himself to his future mother-in-law. He was plainly getting on in years. Really his proposal could hardly be deferred longer. When he laid the matter before Mrs. Green her answer was characteristic:

"You are sixty-five years old, Mr. Wilks," she said, "and you have got the gout, if you'll excuse my plain language. I think Sylvia ought to marry a younger man. I have no doubt you will treat her well. But, to speak plainly again, I'd like an heir to my estate, which will be Sylvia's when I am gone."

Nevertheless she relented when she found the young turtle doves quite determined. The wedding was fixed for February 23—just ten days away. Mrs. Green, with her wonted vigor, proceeded to boss that job, too. As arrangements progressed and she found herself superintending the purchase of the trousseau—spending money quite lavishly—she experienced a strange thrill in this extravagance. Despite much secrecy the news got out and promptly the Bloomfield Street flat was besieged by reporters. The day of the wedding they were camped in numbers outside the house. In some

way, however, the family managed to escape unseen, get into a hack, and drive to Morristown, New Jersey. Soon after the reporters discovered they had been tricked, they commandeered cabs, carts, milk wagons, every species of vehicle and attempted pursuit but without success. At the church of St. Peter in Morristown, with but sixteen or eighteen relatives present, Hetty Sylvia Ann Howland Green gave her hand to Mr. Wilks. Perhaps for the first time in thirty years Mrs. Green put aside her shabby old clothes. She appeared, radiant, in a new black-silk dress and with a hat, rather than a bonnet, beaming with red flowers and an ostrich plume. And she gleamed with diamonds. Always she owned diamonds. She bought them as she bought stocks, to hold until someone wanted them at an advanced price. Now they came in handy to adorn her at the wedding.

But for all that she began to reach out for help. Her son had already been summoned back to New York gradually to take hold with her of the reins of her interests. He had many interests of his own by this time. He was a bachelor of wealth and culture. Unlike his mother he had a whole collection of hobbies. Chief among them was flowers. His mother still had her little artificial bouquet in the vase on her mantel. At Dallas he had a huge nursery. He was an enthusiastic fisherman and organized the Tarpon Club of Texas. He was a yachtsman and owned a palatial vessel. He took up

But she continued to be the directing genius of her affairs. In 1915, in the excitement of the stock market when the European war began to stimulate business here, she loaned millions on call at twelve per cent. She began to take an interest in stocks new to her. She worked ceaselessly putting her fortune into such shape that it might be least affected by the tax gatherer.

On April 17, 1916, she was felled in her Hoboken flat by a paralytic stroke. She was eighty-two years old. Nevertheless she rallied and, after being removed to her son's home at 7 West Ninetieth Street, recovered rapidly. Her old hatred of extravagance flamed up in her new surroundings. To provide her with two nurses her son had to introduce them into the household under the guise of seamstresses. Daily she got reports upon her multitudinous affairs.

But she began for the first time to sense that her own end was near. She looked this grim fact in the face without fear.

"I am not worrying," she said. "I do not know what the next world is like. But I do know that a kindly light is leading me and that I shall be happy after I leave here."

One day, on returning from a ride in Central Park, toward the end of June, a second stroke laid her low. In spite of this, her unconquerable spirit flared up anew. But she knew that death stood at her elbow. And she was quite unperturbed. The glittering mass of her countless dollars drew dim. Her bonds, her buildings, her stocks, her beloved mortgages, all now seemed thin and unreal. On Monday, as the first flow of dawn came into her room, she showed signs of sinking. The doctor was sent for. The weary countenance and tired, half-closed eyes presaged death. But her pulse was strong. The iron engine inside refused to be stilled. The doctor felt her pulse. "She will live out the day," he said, and left.

In half an hour Hetty Green, rid of her millions, her old, black, faded dress, stripped even to the soul, had gone to some other world.

She was laid in the cemetery at Bellows Falls beside the man whose name she bore and whom she had known so little.

XI

Mrs. Green's death was the signal for one of the most extraordinary spectacles ever witnessed in a probate court. It will be recalled that Mrs. Green had inherited a portion of her Aunt Sylvia Ann Howland's estate amounting to a little over a million dollars. This sum, however, was not given to her outright. It was put into a trust fund with instructions that the income was to be paid to Mrs. Green during her life. After her death the whole amount was to be divided "among the lineal descendants of my grandfather, Gideon Howland." Gideon Howland had been dead for nearly a hundred years. And now Miss Sylvia's estate was released for distribution among all the descendants of the old whaling merchant, and they had been multiplying with extraordinary rapidity for a century.

The earth seemed to open and cast up heirs. They came pouring as if answering the trump of doom into the Valley of the Last Judgment. They came from the four corners of the globe. The terms of the will had always been known, and this horde of claimants had sat about waiting with growing impatience for the passing of the almost indestructible Hetty Green.

Mr. William M. Emery, an accomplished journalist and genealogist of New Bedford, has written a whole book about these heirs and this famous will. In 1918 he found living 1478 direct descendants of Gideon Howland. The lawyers set up a genealogical bureau to determine who were the rightful inheritors. When the work was concluded Miss Sylvia Ann Howland's estate was divided among some 438 rightful claimants. This came pretty close to a socialization of wealth. Some got minute fractions, one heir getting one seventh of one half of one thirty-second of one forty-fifth. The

Interlogue Two

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MISERS

The insistence that these rich men "do not love money" is probably made to counteract the impressions made by those misers of fiction and the stage who rub their hands and drool in obscene glee over the little heaps of gold coins—"my little shining darlings." The dramatists, from Plautus' Euclio to Molière's Harpagon and the trembling wretch in The Chimes of Normandy, have estab-

lished in the common mind a fixed pattern of what the expression "love of money" means.

When we have the man or woman with the acquisitive urge but no special capacity for making money by producing wealth or managing large enterprise, with a bent for finance but not very much talent in that direction, and all this coupled with a powerful element of fear—fear of destitution—we have the authentic miser. For then he supplements his moderate power to earn by an abnormal passion to save, to deprive himself and his family of the necessities of life even, to say nothing of its decencies, in order to accumulate a fund against the day of want.

Some years ago police entered the home of a carpenter in Brooklyn. The children had gone without food for two days. They had no shoes. Investigating, the police found a thousand dollars in bills in a small tin box in a pocket of the father's coat. When asked why he did not give some money to his wife, he replied in amazement: "Oh, no! I'm saving that." Saving it, doubtless, against the day of want—a day of worse want than that which was then in his home. Lady Gregory, the writer on Irish folklore, touches, if whimsically yet closely, the germ of this. She tells of the "Man who went beyond the hope of God." He was a poor peasant who had forty-four potatoes and who could expect no replenishment of his supplies for forty-five days. He reasoned that since there would be one day without a potato he would do well to fast on the first day and thus be able to look forward to forty-four days of safety. But, alas, he starved the first day. The fear of destitution, which is a normal protective caution in all healthy minds, expands to abnormal proportions in the minds of men and women who are not equipped to combat it by successful accumulation of wealth. It expresses itself in intense and even degrading parsimony. And a person who has cultivated this habit of parsimony for many years finds it continuing to dominate the mind even after

wealth has been accumulated either through grinding savings or inheritance.

Daniel Dancer, famous London miser, might well have been supposed to be relieved from the terror of destitution when he inherited an income of several thousand pounds a year. But he and his sister continued to live in squalor, to find their food in refuse, to pick up dead bodies of sheep for meat until she died from poisoning as a result. Even then he found a reason not to incur the expense of a doctor. That would be interfering with God's will, he explained. What did he want money for? Not power, not glory, not pleasure. Only the unconquerable fear of starvation in the end. He lived in his wretchedness to an old age and willed his whole estate to a wealthy noblewoman who visited him in his illness.

Of course, these attributes of the miser assume different shades and degrees of meanness. Russell Sage of New York and John Elwes of Southwark, England, were not wholly unlike, save that Sage was probably softened somewhat by his unusual wife. Sage was a character who combined both avarice and parsimony. He was what Wall Street called a skinflint. Although at his death he left an estate of \$66,000,000, he lived with the greatest frugality, haggled and bargained, never took a vacation, quarreled with the poor apple woman in Wall Street about the price of her apple, and angrily bargained like an Oriental peddler with the candy man near Trinity Church for a small reduction in price on a slightly soiled bar of chocolate

He began as a wholesaler, made money as a youth, was elected an alderman of Troy and later to Congress. He made a lot of money as an alderman unloading a local railway on the city of Troy and later is said to have got for himself a large haul when as a banker he settled with his depositors in depreciated paper, taking the currency for himself. He went into Wall Street, which he haunted as a moneylender, speculator, and most of all as a dealer in puts and calls for many decades, about the same time that Hetty Green moved like a witch through its shadows.

Sage lived in a modest, yet decent home, was a devoted husband, and was undoubtedly rescued from more debasing meannesses through the influence of his wife. It is said that she even induced him on one occasion to make a gift of \$100,000 to some school. He was coldly and cruelly avaricious. If he was not as miserly as the wretched Dancer or the shabby Cooke, it was because he did possess what they did not have, an extraordinary capacity for making money.

Elwes, in London, did not descend to the same coarse levels of meanness as Cooke because he, too, had never known poverty, MISERS 253

having inherited a fortune from his father at the age of four. He came of a family of miserly folk and was congenitally grasping, mean, and stingy. Like Sage, he went into politics, being elected to Parliament for several terms. Like Sage, he could be guilty of an occasional generosity—he made a number of loans to needy colleagues in the House. But, though having an estate of over two million dollars, he lived in a small country seat, kept but a single servant, never traveled in a coach or entered a hotel, riding instead on horseback, detouring through muddy roads to escape the toll gate, slept by the roadside, and, when in London, occupied, instead of a hotel, whatever house or room he could find among his numerous properties, got up early in the morning to walk out a great distance to buy his meat cheap at the farms. When he died he left an estate of \$4,000,000.

Such a man as the Duke of Marlborough had in him some of the ingredients of the miser, but they were restrained by certain other qualities, such as his enormous interest in military science and his ambition for power. He lived in a state befitting his rank, but both he and his wife were guilty of an endless number of petty meannesses that in the end lost for them practically every friend they had.

But none of these persons engaged in industrial enterprises as producers of the wealth they craved. They depended wholly upon the scheming management of money.

II ·

POVERTY

After all, poverty is not a simple disease. There is the poverty that arises out of natural causes—droughts, famines, plagues. There is the chronic poverty that afflicts large areas of society even in the most favorable times.

Throughout history poverty has been produced by two causes the convulsions of nature herself and man's ignorance of his world.

polite salutation on meeting a friend in parts of China is "Have you eaten?" These afflictions have continued in our time. In 1920-21 the drought slew half a million people and rendered twenty million destitute. In 1876-79 the area devastated was 300,000 square miles and the victims from nine to thirteen million human beings.

These famines were caused by droughts, floods, swarms of locusts. Concentrated wealth was not responsible, though it may have accentuated the suffering. Man did not know how to restrain the vengeful hand of cruel nature. His lack of knowledge of the forces against which he had to contend, the rudeness of the instruments with which he worked, his merciless superstitions, his unintelligent social organizations—in a word, his ignorance—accounted for his sufferings.

Concentrated wealth may indeed have aggravated human suffering. An old Sanskrit chronicle tells us that "the Jelham River [in India] was covered with corpses during the drought and the land became strewn with human bones like a burial ground. Yet the king's minister and guards became rich selling stores of rice at high prices."

Abdul Hamid, a native chronicler, writes of a famine in central India in 1628-29: "Men devoured each other and the flesh of a son was preferred to his love. The powdered bones of the dead were mixed with flour." The Mogul emperor, Shah Jahan, fabulously wealthy, heard of these degrading agonies with ten million dollars of jewels hung around his neck. The curious insensibility of the wealthy rulers to the hunger pangs of their subjects deprived these societies of the aid of the only leadership that could ameliorate their condition. That condition appalls the mind as we read the

Men suffered this poverty because they did not know how to prevent or arrest the floods, how to irrigate their lands, or escape from sun-baked prairies to which they were chained by religion, how to prevent the plagues which wiped out in western Europe a third of the population at a stroke and, in cities like Vienna and Bologna, two thirds. This poverty was the fruit of ignorance.

But there is another type of poverty that is chronic in societies and is more nearly related to wealth concentration, though it would be a great mistake to say that this is its chief cause. It inheres in all economic systems. In simpler economic groupings it arises out of men's weakness, struggling alone against nature to win subsistence from the soil. The isolated feudal social islets depending on the limited resources of their small demesnes and their inability to exchange goods upon any considerable scale with others made the condition of almost all in the community one bordering closely upon poverty. In Japan we find feudal colonies starving next door to other colonies enjoying for the moment at least relative abundance. Seldom able to produce enough for the current year, they were without any reserves when drought or floods or insects interrupted production.

women, live on a meagre piece of crudely baked cornbread and a little sheep or goat cheese a day. Both men and women, if necessary, can go foodless from two days to a week without thinking they are starving.

In the Dalmatian Highlands, Adamic found what he called a land of perennial economic crisis, sugar and salt undreamed-of luxuries, kindling wood at night their only source of light. Toward the end of winter, when food runs short, adults, particularly men, all but entirely refrain from food, strapping flat, specially shaped rocks close to the abdomen to keep the stomach from growling.

The responsibility for this must rest in a variety of sources—the sterile soil, the strange earth tie that binds them to these unyielding hills, the venality and corruption at the center of government. But most of all, populations are impoverished by systems of land ownership that herd swarms of men upon patches of land while great tracts are reserved for the wealthy.

The exactions of the landlord in countries like Japan—not to speak of the United States—keep the tenant farmer poor when he cannot possibly harvest a crop sufficient to keep himself and his landlord. The poor farmer, after paying his rent, has not enough left for subsistence. His lot is hopeless. But we will do well to remember that this is not the consequence of vast fortunes merely. Most of the landlords are small capitalists and many of them are hardly raised above the level of poverty.

But in Rome, in Athens, as in the United States, as fast as the social organization was emptied of its excess working population,

the system went promptly to work to produce a new surplus. To express it differently and more simply, that is the way capitalist money economy works. Imagine a population of a million workers. Aside from occasional spasms of boom, that society will discard a hundred thousand as useless. If the hundred thousand are moved utterly out of the society by immigration, the remaining nine hundred thousand will soon suffer another convulsion of rejection. Another hundred thousand or more will be found unusable. When they are removed by voluntary or forced exile, the purged society of eight hundred thousand workers will soon mark another ninety thousand or more for rejection. If the frontier is big enough and other forces do not intervene, it will drain away the whole population, after which it will, perhaps, feed them back to the old lands or to new ones if they can be found. The figures I have used are arbitrary and chosen merely to illustrate the point.

This phenomenon finds its origin in the central flaw of the money economy—that up to now no one has discovered how, by healthy means, a sufficient money income can be distributed to all of the workers to enable them to purchase the product of the producing machine.

Nor are all large fortunes equally unhealthy. A fortune like John D. Rockefeller's, acquired wholly in wealth-producing processes, is by no means as injurious as a fortune like Morgan's, acquired almost wholly in parasitic functions. The Rockefellers, the Carnegies, Armours, Fords, du Ponts are associated with the creation of wealth-producing machinery. One may very well argue that they have all drawn from the product more than either their ethical or economic share. But in the case of the finance fortunes, they have been acquired by pouncing upon wealth-creating machines already built and developed, capitalizing them for promotional and specu-

lative purposes, reducing the ownership factor to liquid form, and running that liquid form through stock markets into the hands of investors as a means of withdrawing from those investors large gobs of their money savings. These parasitic promotional fortunes are, as a rule, almost wholly injurious and do, actually, play hob in the jamming of the economic system.

Mitsui

THE DYNAST

Ι

IN THE PRIVATE museum of the Mitsui family in Tokyo there is preserved an ancient sign. It is the sign which hung over the first Yedo store of that Mitsui who founded the family commercial empire. It was hung out in 1673. It reads: CASH PAYMENTS AND A SINGLE PRICE. Two hundred and fifty years before Woolworth and, for that matter, a hundred years before that London Bridge draper for whom Robert Owen worked, there in ancient Tokyo was a cash-and-carry, one-price store in the bickering, bargaining Orient.

He opened branch stores, at least six of them, before he died. He established his own central warehouse. He inaugurated profit sharing among his higher employees. He housed his employees in large, airy dormitories, carefully supervised them, and introduced several hygienic regulations. He used double-entry bookkeeping. More surprising, he was a pioneer in advertising. On rainy days his spacious store in Suruga-cho, Tokyo, would lend to customers umbrellas flaunting on their roofs the name of Mitsui. He used billposters proclaiming the name of Mitsui in large block letters. He subsidized producers, playwrights, and actors to work the

These striking similarities in the commercial devices of Japan and Europe—cut off from each other by Japan's guarded isolation and the length of two continents—were not the only points of resemblance. When Hachirobei Mitsui opened his first small store Japan had a feudal society. And the rise of that society, its evolving pattern, its disasters and disorders, and its changing forms paralleled closely the origin, rise, development, and disintegration of feudalism in Germany and France. Thus men, pursued by the same fears and needs and crowded by the same pressures, hit upon the same escapes, yield to the same messiahs, embrace the same panaceas. The desperate Nipponese in flight from economic distress and bewilderment follows much the same economic road as the desperate Teuton or Briton—from despotism to feudalism, to guilds, to the money economy, to the dominion of the merchant, the entrance of money, the struggle between central power and feudal estate, until finally the two-sworded lord who had not a yen to his name had to fall back before the million-yenned merchant who had not a sword to his name, and needed none.

The Mitsuis, according to the family's own account, belonged to the "middle-class feudal gentry" and traced their ancestry to a statesman of the seventh century named Kamatari Fugiwara. One of his descendants settled in Omi province and took the name of Mitsui which means literally "three wells." The name is associated with some dim legend of how that first ancestor found fortune in three wells upon his arrival in Japan—presumably from heaven. There, though noble, the family became a vassal of the powerful Sasaki clan. And around the middle of the fifteenth century a son of the Sasaki clan was adopted by the Mitsuis. Probably virility was running low and this youth, Takahisa Sasaki, was brought in for glandular reasons. He built a formidable castle on the shores of Lake Biwa in Namazue, became a leader of the Sasaki clan, and was known as the Lord of Echigo.

This feudal society, like that of thirteenth-century Germany, let us say, was split up into a number of estates or baronies—little economic islets secluded from the rest of the world. Over these baronies presided a lord, who was called a daimio. He owned the barony and wielded the power of life and death over its people. Between these baronial islets little or no trade flowed. Instances are on record of men dying of hunger in one daimio's demesne while in the neighboring estate the land overflowed with Japanese abundance.

Some of these daimios were very wealthy. Mayeda, the Lord of Kaga, is reported to have had an income of a million koku of rice a year (a koku had the value of about a pound). Others—a large number—had incomes of 10,000 or more koku of rice. Many were just small plantation owners. The Mitsuis in Omi were daimios and, after their alliance with the Sasaki clan, wealthy.

Then in the latter part of the sixteenth century there arose one of the great figures of Japanese history—Oda Nobunaga, a kind of Oriental combination of Louis XI and Garibaldi, an able warrior who set out to bring Japan under a strong central government. Nobunaga declared war upon the weak Ashikaga Shogunate. In his path to Kyoto lay the demesne of the Lord of Echigo—the Daimio Takayasu Mitsui (son of Takahisa). He was no match for the doughty Nobunaga who was bowling over the recalcitrant barons with regularity as he moved on Kyoto. He destroyed Mitsui's castle, drove him and his family from their demesne, and ultimately made himself the master of Japan. His work was completed and consolidated by two other figures scarcely less important than himself—his successors, Hydeyoshi and Ieyasu. The latter

installed himself as Shogun and became the founder of the Tokugawa Shogunate, which ruled Japan for two hundred and fifty years during the long seclusion era that preceded the arrival of Admiral Perry.

As for Takayasu Mitsui, the dispossessed Lord of Echigo, he fled with his family to Ise province, probably as insolvent as a Russian duke after Lenin. He was disgusted with arms and war. He resolved never again to use the two swords which were the mark of his rank. His son and successor, Sokubei Mitsui, was a peace-loving soul from whose spirit every last drop of romantic samurai nonsense about the heroism of arms had been drained. It was this Sokubei who decided to throw away his two swords and to enter the merchant class.

swords. The revenues of his rank were gone. Ieyasu Tokugawa had them. There wasn't much else for Sokubei to do.

He married Shuho, daughter of a tradesman. She is today more famed in the family annals than he. She was a sort of Japanese Hetty Green, a yen pincher and born bargainer. Sokubei became a brewer, which means he set up a little shop and made sake and shoyu from the soybean. The redoubtable Shuho opened a little bar with a pawnshop attached, an excellent combination, each department fattening upon the other. Sokubei died in 1633. But Shuho, his widow, survived him forty-seven years, ruled her small shop and her family with an iron hand, and died at the age of eighty-seven.

When Ieyasu Tokugawa became Shogun he established his capital at Edo, a small, almost negligible village, later called Yedo and now the six-million-peopled metropolis of Tokyo. The new Shogun built an imposing, rambling, fortified castle expressing the might of his rule. The new capital quickly attracted numbers of people, and Ieyasu invited merchants to come to Yedo and make a market. Curiously it was the men of Ise province who went in numbers and almost usurped the trade of the new town. Among these was Saburozaemon, the oldest son of Sokubei. He opened a small drygoods store. When his youngest brother, Hachirobei, was fourteen, his mother sent him to Yedo to learn his trade in the shop of Saburozaemon.

There Hachirobei remained fourteen years. When he was twenty-eight he retired to his native Matsuzaka and set up as a money-lender on his own account. Matsuzaka was a small town, and how much Hachirobei prospered is not reported. But he remained there until he was fifty-two years old. Then he moved to Kyoto, the home of the emperor, and established a drygoods store. This was in 1673. And there this Hachirobei laid the foundation of the Mitsui fortune. The Mitsui family in celebrating the three-hundredth anniversary of the formation of their commercial house chose Sokubei's shop opening as the date. In a sense this was historically correct. But Sokubei was a mere village alky cooker and tavern-

keeper. The brother Saburozaemon seems to vanish quickly from all the old chronicles. It is Hachirobei who is really credited by the Mitsuis as the founder of their commercial structure.

After thirteen years of progress in Kyoto, Hachirobei opened a drygoods store in Yedo, which was now expanding as the new capital. There he put his famous sign—CASH PAYMENTS AND A SINGLE PRICE. The store grew; warehouse after warehouse was added until the store occupied a large space on both sides of the street Suruga-cho and employed many hundreds of clerks. It remained there, operated by the Mitsuis, until 1904. Then the Mitsuifirm parted with it and it has since been owned by a separate corporation called Mitsukoshi, the largest department store east of Suez and in precisely the same spot in Suruga-cho as that first store. At first the store traded in silks and other textiles, the brocades of Nishyin being one of its specialties. But gradually other articles of merchandise were added. In 1708 we find it establishing buying agents at Nagasaki to buy woolens, tortoise-shell ware, sugar, chemicals from Dutch ships.

Man is a groping animal. He feels his way bungling, one step at a time. And it is an extraordinary observation upon his development in the commercial world that almost everywhere he has followed the same steps. The scenes, the costumes, the manners, the cast of characters differ in different countries. But men in the seventeenth century were turning with surprising inevitability to the same financial and commercial devices in Japan as their distant and unknown brethren in the Germany of Maximilian and the France of Francis I, getting into the same holes and out of them by the same devices and into still other, but similar holes. I have no doubt that, if one day we explore the moon and find it inhabited by men like ourselves, we shall find they have invented stores and money, bills of exchange, promissory notes, banks, double-entry bookkeeping, debasement of the coinage, national debts to keep the moon's economy afloat, corporations and brokers and all the paraphernalia of the earth's economic life.

The unit of production was the estate of the daimio. He collected

Hachirobei Mitsui opened a bank in or next to his store in Yedo and there became a lender of money and, perhaps, accepted deposits. The evidence on this latter point, however, is a little unsatisfactory. But he did become a kakeya, represented a number of daimios, indeed was the broker for several whole provinces. This business gave him an insight into the possibilities of profit in the handling of other people's money. And sometime around 1690 he conceived an idea that men had already experimented with in Europe.

or silver. The metal he sent to Yedo to the Shogun's treasury. This was an expensive trip requiring many coolies, packing, and great danger of loss on the roads infested by brigands. Hachirobei had stores in Kyoto, Yedo, and Osaka. He went to the Shogun's officials and proposed that he contract to deliver the gold or silver in Yedo within sixty days without cost. He planned to have the gold turned over to him by the governor of Osaka. He could then buy goods with it, ship the goods to Yedo in fifteen days, sell them for cash within the sixty days, and deliver to the treasury funds collected right in Yedo, thus doing away with the need for so much transportation of metal. The officials approved his plan and later extended the period for delivery to one hundred and fifty days. Hachirobei then had a continuous flow of Shogunate funds pouring into his possession and open to his use for exploitation for five months. In other words, he got a five-month whack at the use of the government's taxes before he was required to deliver them up in Yedo.

This became the basis for the use of the bill of exchange in Japan, although singularly Hachirobei did not apparently take this next step. Other merchants saw that the same method could be applied to the transport of money for commercial as well as government purposes. There was a flow of payments from Osaka to the government at Yedo. But there was also a flow of payments from Yedo merchants to Osaka merchants. Brokers in Osaka found that they could collect money in Osaka and make delivery of metal to a creditor in Yedo without actually shipping silver save occasionally, by balancing credits in the two cities against each other.

TT

After the Tokugawa Shogunate got under way that powerful social chemical—money—began its slow work. Very little at a time, but very surely, the old feudal system began to lose its vitality, indeed to lose its way. Little by little the money system and all that went with it—the capitalist system—began to trickle over Japanese society.

Gold and silver coins had begun to circulate around 1429—in the Muromachi period. Goto Mitsutsugu began to buy placer gold and gold bars and to mint them into coins. Daikakuya minted silver into coins about the same time. Both grew rich. Some others followed suit. Also Chinese copper coins circulated freely. But when Oda Nobunaga rose to power he put an end to the nondescript and miscellaneous issuance and circulation of coins and conferred upon Mitsutsugu and Daikakuya the monopoly privilege of coining gold and silver respectively, so that these men became among the richest in Japan. As in Europe, men who had goods or services to sell preferred to be paid in money. Money began to have an agio, or preference, over rice. By the middle of the Tokugawa Shogunate, a Japanese philosopher wrote:

of a highly independent local government as well. There were about forty-five daimios with incomes of 100,000 koku or over and 195 with incomes of 10,000 koku or more. There were many whose incomes were so small as to be unimportant.

But the samurai rendered literally no service whatever. He was a professional warrior with no battles to fight during the long Shogunate peace. He assumed a heaven-sent charter as soldier. Yet in the many agrarian revolts during the Shogunate against individuals and groups of daimios, the revolts were frequently successful. The divinely appointed warriors, encased in magnificent armor, fled swiftly to the castle and sent out envoys to negotiate peace. There were 350,000 of these parasites, each equipped with three hereditary servants who had also to be supported. They made up a swarm of over a million who toiled not, spun not, but lived upon hereditary, stipulated revenues paid them by the daimio out of the produce of the estate. As they were persons of exquisite fancy and cultivated appetites, they were among the first to discover the potency of coins to purchase the things they liked. And as gold, silver, and copper became more and more the coin of the growing cities and as daimios and samurai sought more and more to translate all their income into coin and as the merchants and bankers invented new ways to increase the amount of gold actually and potentially by increasing its velocity through credits and bills of exchange and clearances, money came more and more to dominate the daily operations of the walled-in island.

Inevitably this began to increase the importance of the merchants who were gradually accumulating all the money, for the daimios got hold of it only to spend it again with the merchants and bankers. It began to trouble the daimios and samurai who became borrowers, who learned how to spend this year the income of next year and to add to the other burdens of administration the

20,000 koku, bought Korean ginseng and other articles at low prices, sold them at a good profit, and was better off than a daimio with 200,000 koku. In short, the noble gentleman became in effect a merchant. The daimio of Matsumae with an income of only 7000 koku sold the products of his own and another fief—Ezo—and lived equally to a daimio with an income of 50,000 koku, while another, Tsuwano, with 40,000 koku, turned manufacturer and made pasteboard, with a resulting income of 150,000 koku.

In this way the claims upon the income of the nation were being reshuffled. Before plowing and harvesting time came around, the daimio had a claim upon the product of the labor of every workman or feudal tenant who lived upon his land. The samurai had a claim upon a part of the daimio's share. And the government had a claim upon both. But now the merchant moneylender—the lowly chonin—was establishing claims upon the income of the daimio and the samurai who owed them money. And slowly the money supplies of the country were being drained off into the hands of these traders and moneylenders through the processes of interest and profit. The samurai were being ruined, many of them declassed. The daimios—most of them—were being impoverished. The workers beneath them all were being driven to desperation by the taxes and other exactions wrung from the fruits of their labor. The merchants were becoming wealthy. The Mitsui family was expanding. It had six branch stores, the largest at Yedo, before Hachirobei died. It was in every form of moneylending and handling.

But there were others richer than Mitsui. In Yedo were the wealthy and ornate Messrs. Kinokuniya-Bunzaemon and Naraya-Mozaemon, fabulously rich by the standards of the times and exhibiting their wealth in the most ostentatious manner. At Kyoto was the nouveau riche Naniwaya-Juemon, who is said to have made the people gape at his splendid residences, his gardens, his dinners, his raiment. Richest of all was the leading rice broker, the great kakeya—the J. Pierpont Morgan of Japan—Yodoya Saburoemon, whose new palace and fresh magnificence seemed almost imperial. He put on such a show that the Shogun confiscated all his property. What was gathered in this seizure gives an idea of what the possessions of a wealthy Osakan or Yedoan consisted. The bailiffs seized fifty pairs of gold screens, three toy ships made of jewelry, 360 carpets, 10,500 kin of liquid gold, 273 large precious stones and countless small ones, two chests of gold, 3000 large gold coins, 120,000 ryo of koban, 85,000 kwamme of silver, 75,000 kwamme of copper money, 150 boats, 730 storehouses, 12 storehouses of jewelry, 80 granaries, 80 storehouses of beans, 28 houses in Osaka, 64 in other places, claim to the rice stipend of one daimio amounting to 332 koku, and 150 chobu of cypress forest.

How large the houses, how roomy the storehouses, we do not know. But here was a considerable accumulation in a new regime and in a new economy.

to the rule, they must be stripped of some of their wealth at least, by taxes, by confiscations, by goyokin—forced loans upon merchants—by currency devaluations, since thus funds were provided for their impecunious superiors. The debts of samurai were canceled at intervals.

In addition to these reactions upon the trader groups from the woes of the bewildered agrarian nobles, the cities were developing their own troubles. The various producing groups, in this land of scarcity, feared they were the helpless victims of competition and overproduction. They sought monopolies. And the Shoguns, hard-pressed for cash, granted them for a consideration. Traders, brokers, merchants formed themselves into associations to monopolize their trades. That is, guilds grew up in the towns. The fisherman coming home with his catch and the merchant to whom he sold it found themselves beset by all the real and imagined evils of competition.

An apostle of self-rule in business named Sukegoro of Yamato appeared with his cure. He formed the fishmongers into a trade association. He set up a code of practice. He enrolled 391 wholesalers and 246 brokers in his corporative code authority. It was a scheme to protect the middleman. The fisherman bought his boat and supplies and got credit from the wholesaler or broker and in return gave him exclusive right to his catch. The association fixed the prices the fisherman received. The wholesaler sold only to the retailer. The consumer could not buy from the fisherman or the wholesaler. Sukegoro built preserves to keep the fish alive until the market was ready for them. He did under the authority of the government what fishermen have many times sought to do in New York under the sponsorship and enforcement machinery of gangsters and what all sorts of producers attempted under authority of the NRA; what the building trades do in defiance of law. The excess production was kept off the market. The price was kept up. The number of competitors was kept down. Other trades were similarly organized. There were jurisdictional disputes between craftsmen. The sawyers complained that the carpenters

were sawing up too much of the lumber in buildings at the job site. The Shogun sought continuously, by subsidies, by warehousing the surplus, by price decrees, to keep up the price of rice to protect the daimio whose staple was rice.

Apparently the Mitsuis steered as far as they were able out of these trade agreements. They seem to have contrived in every way open to them to evade these monopolistic arrangements, to buy in as large quantities as possible, and through efficient management to sell at lower prices in the interest of larger volume. Named as one of the ten bankmen to control the money market, they appear to have shied away from that combination.

Above all, under the direction of Hachirobei, as their moneylending affairs grew, the Mitsui house refused to lend money to the nobles—to court nobles, daimios, or samurai. They sought in every way to keep their finances extricated from the shaky finances of the ruling class. Hachirobei lectured his sons about this ceaselessly. The house was rewarded with immunity, therefore, from the disasters that in all ages have descended sooner or later upon the banking houses that became the creditors of princes. They escaped the fate of the Bardi and the Peruzzi of Italy, and eventually the Fuggers in Germany, and of the Mendelssohns in our own time. Takafusa Mitsui, in a manuscript containing his recollection of the observations of his father Hachirobei, records this advice to merchants:

Only a fool would believe that the feudal lords would permit the merchant to make unreasonable profit. These lords promise to send their rice to the merchant in Osaka, and on that security borrow money in advance. For the first year or two they appear to be willing to deposit more and more money with the merchants. Never will they pay back their debts by sending the promised amounts, but sending their rice to another quarter where they expect accommodation, they refuse the payment to the merchants from whom they already borrowed large sums.

Through these stratagems and through the bankruptcy of the lords innumerable merchants were ruined. Takafusa records the names of forty-eight merchants in Yedo alone who were wiped out

• 1. The members of the House should deal with one another in close friendship and with kindness. Beware that contentions among the kin would in the end ruin the entire House.
• 2. Do not needlessly increase the number of families of the House. Everything has its limits. Know that overexpansion, which you may covet, will beget confusion and trouble.
• 5. Set aside a certain part of the annual income and divide it among the members of the House according to their portions.
• 6. The lifework of a man lasts as long as he lives. Therefore, do not, without reason, seek the luxury and ease of retirement.
• 9. Unless one concentrates, one fails. Our House has its own enterprises which are ample to provide for any man's life. Never touch another business.
• 10. He who does not know, cannot lead. Make your sons begin with the mean tasks of the apprentice, and, when they have gradually learned the secrets of the business, let them take a post in the branch houses to practice their knowledge.
• 11. Sound judgment is essential in all things, especially in business enterprises. Know that a small sacrifice today is preferable to a great loss tomorrow.
• 12. The members of the House should practice mutual caution and counsel lest they blunder. If there be among you any evildoer, deal with him accordingly at the Council of the Family.
• 13. You who have been born in the land of gods, worship your gods, revere your Emperor, love your country and do your duty as subjects.

Hachirobei saw that if successions could work dispersion and finally extinction of a fortune, holding intact the fortune through the years, accumulating its profits—plowing them back, in modern parlance—and uniting the combined wealth of an ever-growing number of heirs in a single continuing enterprise would progressively expand the fortune. This is what he attempted to do. Many great fortune builders have sought to do the same thing—the Medici, the Fuggers, the Rothschilds, and Cornelius Vanderbilt in our own time. But the Mitsuis succeeded where others failed.

The family has continued to be merely stockholders in a vast central enterprise. The enterprise, with its own special identity apart from the family, has grown in wealth and power until today it is one of the most potent commercial instruments in the world.

Because of the laws in Japan, where it is apparently possible to entail a fortune, the family, organized and acting like a state through recognized and all-powerful representatives, can enforce this oath, since it controls the combined and concentrated wealth of the family and the income of each member. The youthful neophyte finds that he preserves his fealty to the family, to the august spirits of his ancestors and his dividend check, all in the same act of faith.

TT

When one reads that upon his accession to power the Emperor sent for the three leading banker-merchants and borrowed 1000 ryo each from them—the ryo being similar to, if not the same as, the yen—we catch a glimpse of the very diminutive figures in which they spoke.

One finds this budget balanced by an item called "special revenue," which meant the profit on devaluing the currency. In the records of that Shogunate the deficit was increasing every year. Every year the budget was balanced by the device of devaluing the currency. In ten years the government created for itself 7,558,000 ryo of "special revenue" by devaluing the currency. There should be nothing unfamiliar in this picture for the American, Briton, Frenchman, German, or Italian of today.

The new era meant opportunity upon a vast scale for the Mitsuis and for those who had the means of perceiving precisely what it was all about. For now feudalism was to be replaced almost in a trice by capitalism. It was almost as if the curtain were rung down upon one act and lifted presently upon another. Japan was to leap forward over a gulf that it had taken France, Germany, and England three centuries to traverse. It was a dizzy plunge from the Holy Roman Empire of Maximilian to the Germany of Bismarck in a few brief years.

When the new Emperor Mutsuhito—to be known as Meiji—found himself in power, he found himself also without funds. He summoned Saburosuke Mitsui, Ono-Zensuke, and Shimada Hachirozaemon and made a modest touch of a thousand ryo each. Later he repeated this favor. But this was chicken feed, as he soon found. He sent for the three leading Main Street merchants and money men and told them to prepare a list of a hundred merchants. The Emperor summoned these gentlemen and told them plainly that he needed three million ryo. Mitsui, Ono, and Shimada were called on to underwrite the loan. The money was forthcoming. Capitalism was marching on.

After a while it became apparent that what the new Japan needed was a modern bank. The Emperor's finance minister, Inouye, whispered to the Mitsuis that they should organize one. It was then 1872. They sent their mission to America. After some difficulties and disappointments they opened for business their own bank, now known as the Mitsui Bank, Ltd. They had been a little embarrassed by a sort of enforced association with Ono and Shimada in another bank in the exchequer business. But a favorable circumstance in 1874 relieved them of that embarrassment. There was a brief recession in Japan. The three houses had been enjoying a boom. They collected the tax moneys of the Emperor. They held them on deposit. Rumors got around that these deposits were endangered. The finance minister called upon the three houses to produce the government funds. Ono and Shimada could not do it. Mitsui, by a tremendous effort, did. The

Then came that proliferation of enterprises that characterizes the family today. With unlimited money resources open to them through their bank and their possession of government funds they began slowly to reach out in every direction, to tap all the new sources of profit. Inouye, finance minister in Ito's cabinet, left the ministry a rich man and set up a trading company called Senshu Kaisha to handle foreign trade. It prospered abundantly. The Mitsuis too, in 1875, organized a small company called Kokusan Kata (National Products Company). When Inouye went back to the cabinet in 1876 the Mitsuis took over his Senshu Kaisha, combined it with their Kokusan Kata, and organized a new concern called the Mitsui Bussan Kaisha. This became the holding company of numerous enterprises and is today the agency through which the Mitsui family carries on its great domestic and foreign commercial adventures.

When the Meiji ministry got down to business after the restoration, it began to encourage and to organize modern industries. The government owned the Oji Paper Works. It built a model silk mill. It organized and developed the Shibaura Engineering Works. It built the Kanegafuchi cotton mills. It owned the Miike mines—the richest coal treasure in Japan. After a while the Mitsuis began as tenderly and quietly as possible to lift these off the government's hands, buying out on the most favorable terms.

Thus it went into silk manufacture, imported silkworms from Italy, taught the peasants more modern methods of silk culture, and ultimately made itself the largest factor in the world silk industry. They took over the Oji paper business in 1872. Today the Oji Manufacturing Company controls about sixteen corporations which own forests, sawmills, paper-manufacturing companies, power companies, railways, security companies, and a newspaper—the Mainichi—in Osaka. They took over the Kanegafuchi cotton mills. They still operate them and have spread out as the greatest textile producers in Japan. They tapped the China cotton market, buying cotton there and sending back cloth to compete with the English traders. They acquired the Shibaura Engineering Works from the government. Then they fixed their eyes on the Miike mines.

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Persons outside Japan, when they hear the term "Mitsui family," are apt to think of an extraordinary group of able and skillful Mitsuis managing the vast network of enterprises that make up their domain. It is more than doubtful if this extraordinary clan would today bulk so large in Japanese economic life if this were so. Even before the restoration, when Takahisa Mitsui was head of the business, the family had already learned to depend upon the administrative abilities of what the Japanese call bantos, or "head clerks." And it was one of these—Minomura—who piloted the business through the troubles and shifting movements of the restoration period.

The Mitsuis collected government taxes. The taxes remained on deposit with them. This was a source of great profit. But Japan was growing up. In 1880 the government decided to collect its own taxes and to establish the Bank of Japan. This was a blow to the house. However, they still continued as local agents to transfer taxes from the provinces to Tokyo. But capitalism in Japan was developing all its familiar phenomena. Debt making had proceeded merrily. The farm debt had risen from an insignificant sum to 233 million yen. There were crop failures, unfavorable trade balances, losses on foreign exchange. There came, in short, a first-class capitalist depression. Then rumor began to whisper about the Mitsuis: their bank was in danger. There was a run on the Kyoto branch. It spread to Tokyo. The powerful Mitsuis, who had so many times found the government on its knees begging for loans, now had to appeal to the government for help.

Inouye, powerful finance minister and Mitsui ally, later to be known as the Mitsui representative among the elder statesmen, agreed to save the house but demanded that it should submit to reorganization at his hands. It was in no position to resist. Thereupon the imperial finance minister set about studying its affairs, its family code and laws, the constitution of similar European families. He decided that the Mitsui enterprises had to be protected ruthlessly from the Mitsui family.

The family is a carefully organized tribal unit. It is an economic clan existing as a sort of social bolus within the state and functioning under a written constitution. There are, in fact, eleven Mitsui families—six main families and five branch families, all exactly defined under the constitution. These constituent stems are immutable. This family and its domestic provinces are ruled by a family council organized as a sort of constitutional monarchy of which it is the house of peers. This council consists of the eleven heads of each family plus the retired heads, if any, and such heirs apparent of the existing heads as may have arrived at their majority. But only the eleven heads have a vote. The president of this council, the tribal patriarch, with a veto on its judgments, is the head of the chief family. This council meets in secret once a month. It deals with family affairs—philanthropies, deaths, inheritances, marriages, family debts, troubles, assignments of family members to business enterprises, and plans of all sorts. The council determines how much each of the eleven family households shall be permitted to spend. It may impose punishments and invoke sanctions for its decrees. Within the framework of the civil society

this autonomous aristocracy assumes to regulate the conduct of its members. All families do not share equally in the dividends of the Mitsui enterprises. The head branch takes 23 per cent of the yield of profits of the Mitsui Gomei Kaisha. The five other main branches take a total of 57.5 per cent, the five branch families take among them 19.5 per cent.

These bantos have been gentlemen of the most imposing importance in Japan, comparable to the board chairmen of such American institutions as General Motors or United States Steel. They have been, in fact, proportionately more important, because the House of Mitsui spreads over a far larger acreage of the economic life of Japan than any American or British corporation. The first of them, Rizaemon Minomura, piloted the family enterprises through the difficult, reformative days of the restoration and helped to shape the modern form and direction of the business. Unlike the Mitsuis themselves he began life as a candy maker and peddler who entered the service of Oguri, the last finance minister of the old Shogunate, became a banker with Oguri as his patron, and entered the Mitsui service to afford it the powerful friendship of the minister. He it was who saw the opportunities opening before the house in the new capitalist restoration period, saw that its beloved textile store at Suruga-cho was small potatoes in the new Japan, induced them to put it aside and turn to finance and promotion on the new model.

He died in 1877, and there followed a more direct family management that ended in the disaster of 1890 and the reorganization in 1900. By this time the Emperor's finance minister, Kaoru Inouye, was the imperial patron of the Mitsuis and through his influence Hikojiro Nakamigawa became the banto. He was an intellectual, who began as a teacher at Keio University, wrote articles for magazines, served an apprenticeship in the foreign office, edited brilliantly the newspaper, Jiji Shimpo, became president of a railway, and then, at Inouye's urging, went into the Mitsui bank, rose to its headship, becoming managing director of the Mitsui Gomei Kaisha. He played an important role in the

Masuda had started life as a houseboy for Townsend Harris, first American minister to Japan. He then formed a connection with the powerful Inouye and became the head of his trading company. When the Mitsuis took it over and formed the Mitsui Bussan Kaisha, he became its first president and was largely responsible for the success of that institution which started with a loan of 50,000 yen from the Mitsui bank and in sixty years had an authorized capital of 100 million yen. He set the Mitsui foreign trading upon the course that has made it so powerful. He built up the cotton, silk, steel, and munitions business of the company.

When he died he was succeeded by Takuma Dan, a graduate of the Massachusetts Institute of Technology, who became the head of the Miike coal mines before the Mitsuis bought them. He built those into the tremendously profitable industry they became. He directed the affairs of the company during the Great War and developed the vast munitions interests of the Mitsuis. He was assassinated in 1932 to be succeeded by the aristocratic Seihin Ikeda, Harvard '95, a patrician who got a job with the Mitsuis in 1895 at thirty yen a month, became managing director of the Mitsui bank in 1909 and banto in 1933. He was finance minister in the cabinet of Prince Konoye, was for a while governor of the Bank of Japan, and was known as the Tiger of the Money Market. He retired from the headship of the Mitsui house, for the same reason that he retired from the finance ministry, because he was unpopular with the army.

The business organization is for all the world like one of our great American corporate giants held in the hands of a central master holding company, save that its interests are far more diversified. At the top is the holding company—Mitsui Gomei Kaisha. This in turn owns a controlling interest in nineteen other

Takahisa Mitsui
170,000,000 y

Geneyemon
200,000,000

Baron Takakiyo
230,000,000

Takanaga
140,000,000

Baron Toshitaro
150,000,000

Takamoto
60,000,000

Takaakira 60,00
Benzo 60,00
Takateru 35,00

Total including Baron Takakimi (450,000,000) 1,635,00

This is the equivalent of \$450,000,000.
These great fortunes in large measure we course, of wise management, shrewd organi policies to protect the growing mountain from they were not made without well-arranged,

Wide World Photos

Cecil Rhodes

EMPIRE BUILDER

T

CECIL RHODES, empire builder and diamond monopolist, dreamer and money-maker, who made a million dollars while taking his bachelor's and master's degrees at Oxford, is unique among the great fortune builders of history.

With some modifications, this is a just estimate. The Caesar ingredient in this powerful figure was large. He himself was pleased to be told that he looked like the Emperor Hadrian. He was an organizing and money-making genius of the first order with an overmastering hunger for that kind of power that can be had only with money. He conceived a design no less grandiose than the theft of a continent and, for a while at least, toyed with the idea of the theft of the whole world for the British crown. He amassed millions and spent them prodigally in pursuit of his passion of delivering the whole of Africa into the hands of the British Empire, as a prelude to making Britain mistress of the world.

Today, on a lofty peak that he named "World's View" in the Matopo Hills of Rhodesia, the immense colony he stole from

Cecil John Rhodes was born July 5, 1853. His forebears for several generations had been successful farmers. They had the money gift—that flair for getting along that flowered in the true British pattern when his grandfather was able to set up in the manner of a squire on an estate in Essex. This gentleman's son, Francis William Rhodes, attended Harrow and Trinity College, took holy orders, became the vicar of Bishop Stortford in Hertfordshire, married, and produced eleven children. Seven of these were sons. Cecil was the seventh child and the fifth son.

The Reverend Francis Rhodes was not an impecunious parson. He enjoyed, in addition to the honorarium of his sacred office, a decent patrimony. Cecil was sent to the grammar school at Bishop Stortford, which his father refurbished with his own funds. There he remained until thirteen, when his father became his tutor. At sixteen he was ready for Oxford where he was registered. But his health was far from robust. What was probably tuberculosis induced the family physician to order a long sea voyage. Fate perhaps took a hand with the physician in this, for the voyage took young Rhodes to South Africa, where he was destined to remain throughout his life and play out a great role in the swelling drama of England's imperial theme.

Cecil's oldest brother, Herbert, had settled some years before in Natal as a planter of cotton. Cecil made his home with Herbert.

TT

When in 1870 Cecil Rhodes first set foot upon the soil of South Africa it had been but lightly touched by the European colony hunter. Think of a mere black-line outline of Africa. The holdings of European empires made but a few thin smudges at a few points along that outline. Great Britain held two small colonies at the very southern tip of the continent—the Cape and Natal. The Dutch farmers held the Transvaal and Orange Free State, independent republics, next to Cape Colony. North of them, through all the far reaches of mountain and jungle and desert, the land was inhabited by Negro, Semitic, and Arabian peoples in varying stages of savagery and civilization.

The Dutch settled at the Cape in 1652—a far outpost of the Dutch East India Company. The French seized the colony after conquering the Netherlands. The British took it from the French in 1795 and returned it to the Dutch farmers in 1803 under the Treaty of Amiens. But three years later a British squadron appeared off the coast, drove the Dutch away, and reseized the Cape. Eight years later the British paid the Dutch six million sterling for their loot.

Six years later—in 1848—the British forcibly took possession

of another Dutch settlement, Orange Free State. This last outrage excited so much indignation in the Cape and Natal and the Transvaal that the English, to allay feeling, recognized the independence of the Transvaal and the Orange Free State. These Boer farmers had suffered cruelly at the hands of the English and hatred of Britain became almost a part of the religion of these stern African evangelical Dutch.

Thus when Rhodes arrived in South Africa, the Transvaal and Orange Free State were independent republics, while the Cape and Natal were British colonies. Immediately north was a magnificent domain that had already begun to arouse the hunger of every sovereign in Europe. What riches slumbered in its mountains and jungles they could only surmise from an event that had just occurred near Natal, just a few hundred miles from the cotton plantation of Herbert Rhodes.

III

The Star of South Africa spread its beam over the wide veldts

and presently Dutch and English farmers and tradesmen swarmed along the Vaal River. Ten thousand diggers spread out along eighty miles of stream. They found diamonds—enough to keep alive interest in the new industry. Then, in 1870, diamonds were found in the yellow sands on the Dutoitspan farm—larger stones and in greater abundance. Some fifty-carat gems were found. The word "diamond" ran over South Africa, and even the world, as the words "oil" and "gold" had in California and Pennsylvania. The diggers poured in from all over the world by every ship. And it was in the midst of this excitement that a young student with a weak chest and seeking only health, with no suspicion of the acquisitive fire that burned in his bosom, set his foot upon the soil of South Africa. This young Cecil Rhodes was scarcely established on the new Komanzi farm to which he and his brother had moved before the restless Herbert left for Dutoitspan, leaving Cecil to tend the cotton. But, in 1871, Cecil, just eighteen, abandoned the cotton farm and, with some digging tools, some Greek classics, and a Greek lexicon, set off in an ox cart to travel four hundred miles to join his brother in the diamond fields.

There we may see the youthful prospector—half money-maker, half student—sitting, according to his own description, on an upturned bucket, sorting gravel on a small table, fishing in the gravel for gems, and at other times deep in his textbooks. All about him, over a field five miles in radius, spread the new settlement. White tents were all mixed up with the lime heaps where 10,000 men, whites and blacks, labored like beavers in pursuit of diamonds. Herbert Rhodes did not remain long. He went off to hunt wild game. But Cecil did well. He wrote home in 1872 that he was making £100 a week. And after a little while he took a partner—C. D. Rudd—who was to remain with him through life—a young man like himself who had a bad chest, a feverish appetite for profit, and a great talent for administration.

There were all manner of men on that dust heap. But these two boys were the most extraordinary of the lot. The prospector was limited to one claim. Soon one man was allowed ten claims. Rhodes bought up nine more. Later all limitation was abolished. Rhodes and Rudd went ahead getting possession of additional claims.

TV

Rhodes, with his sheepskins, went back to Kimberley in a moment of destiny. The prestige of England in South Africa was at its lowest. But during those years, while he studied at Oxford and wrought at Kimberley, great events were taking place in the world. England's poets, professors, and preachers were inoculating her with the virus of world empire and Germany's Junkers were taking her people along new flights of militaristic preparation. Writers, statesmen, warriors, and promoters were industriously sowing the seeds of the Great War and the Age of Hitler in the far future.

So far as the masses of England and her public men were concerned, they had lost their appetite for imperialism. Gladstone was in power. When Disraeli conferred upon Victoria the title of Empress of India, Englishmen muttered, even protested, audibly. They did not want an empress. They had had too many and too bloody battles to put their sovereigns in their place. Having gone to long lengths to make the kingship less substantial they drew away from transforming their queen into an empress. Disraeli knew this and tried to put Victoria off. But she was eager for the title and never quite forgave her people for their resistance to her royal whim. It was necessary for Disraeli to assure the English that Victoria would be empress in India but only queen in England.

As for Africa, the English were sick of the game there. As early as 1854 the government had set its face against further expansion in South Africa. English forces were in Egypt but the occupation was looked upon as temporary. Gladstone had said that the whole South African problem with its racial divisions superimposed on the grave native problems was practically insoluble. But events and certain drifts in the mind stream of Britons as well as all Europe were running in another direction. More than one apostle of empire was putting the heady draught to the lips of Englishmen. As the young prospector-student, Rhodes, took up his seat at Oriel, John Ruskin was preaching the doctrine of power and national vigor. "This," he told Oxonians, and through them the youth of England, "is what England must do or perish. She must found colonies as fast and as far as she is able; seizing every rod of waste ground she can set her foot upon and then teaching these her colonies that their chief virtue is fidelity to their country and that their first aim is to advance the power of England by land and sea"

There was, of course, the dire implication of violence and war in these grandiose counsels. But war had its apologists. Carlyle had told his countrymen that "war was the supreme expression of the state as such." It was neither antireligious nor antisocial but "an evidence of the life of the state concentrated on an ideal end." that

"manifestation of the world spirit," as Professor Cramb later interpreted the Scottish philosopher, "hazarding all upon the fortunes of the stricken field."

It was this same Dr. J. A. Cramb, of Queens College, London, who gave the most robust expression to this dream of "imperial Britain," in frequent bursts of exhortatory rhetoric. "Imperialism is patriotism transfigured by a light from the aspirations of universal humanity." War, the handmaiden of imperialism, he glorified "as a phase of the life effort of the state towards complete self-realization; a phase of the eternal nisus, the perpetual omnipresent strife of all beings toward self-fulfillment."

Dr. John A. Hobson, writing critically of his countrymen, said: "The Englishman believes he is a more excellent type than any other man; he believes he is better able to assimilate any virtues they may have; he believes his character gives him a right to rule which no other can possess."

One by one, under the exhortations of teachers, philosophers, poets, and statesmen, one leader after another and soon the people slowly succumbed to the intoxicating draught until, by the time Cecil Rhodes' race was run, all England, from the romanticists who played with the knight-errant motif to the prospectors who hunted gold and diamonds, was aflame with the delirium. Before she was done with this arrogant pursuit of the visions of Ruskin and Cramb, she had seized dominion over four and a half million square miles and a hundred million people in Africa and another empire of 700,000 square miles and twenty million people in Asia and she had isolated herself from the affection and esteem of the world.

of the world such as has been exercised by no other empire" and this call had "come from what he preferred to call the acts of Providence." The clarion call of the almighty God was trumpeted to what the Archbishop of Canterbury called Britain's "Imperial Christianity" from the yellow clay of the Griqualand diamond mines. Those mines were found north of the Orange River and it was that river beyond which England said she would have no further "territorial ambitions," using almost the same phrase Adolf Hitler used to Chamberlain at Munich.

The new treasure was found in what was known as Griqualand. This territory had always been considered as part of the Orange Free State. President Brand of the Free State promptly undertook to police the mines. Presently Waterboer, the Griqua chief, set up a claim to the diamond fields. The British government compelled the parties to submit to arbitration. President Brand and Waterboer agreed on Lieutenant Governor Keate of Natal. Keate, a British civil servant, awarded the fields to Waterboer. And immediately thereafter Waterboer appealed to the British to take over his country, which the British obligingly did, diamonds and all, annexing it to the empire as a lieutenant governorship and later incorporating it in Cape Colony. The Boers saw in this a scheme of deep perfidy that they never forgot. Their suspicions were confirmed when in 1876 Lord Carnarvon, Conservative Secretary for Foreign Affairs, tacitly admitted the wrong done the Free State when, as a solatium, he paid to it £96,000.

This was in 1876. In the following year England, despite her recognition of the Transvaal Boer republic in 1854, violated this agreement and seized that small nation without warning. The pretext was a Zulu uprising. The benevolent empire feared the Boers would not be able to cope with the warlike Zulus. Paul Kruger and General Joubert hurried to London to plead for their independence. They were told by a smiling Secretary of State that their people—the Dutch farmers—wanted the annexation. Kruger and Joubert hurried back to the Transvaal and readily produced a

He brought with him a compendium of ethical and political concepts which, if he did not invent, he assembled and edited and made into a philosophy of action. Rhodes was a thinking animal, but thinking was not a mere exercise in speculation. It was a practical instrument set for practical ends. Thus at Oxford he had read a small volume by Winwood Reade that had profoundly shaken his belief in God. The speculations of the Darwinians had added to his

heresy. He kept Reade's book near him throughout his life and dipped into it again and again. But one of his biographers observes that Rhodes was not the sort of man to leave so important a question as the deity hanging in the air. He decided that it was a problem beyond his own powers or leisure to settle, but that, as matters stood, it was a fifty-fifty proposition that there was a God. He had to adopt some theory as a working proposition. And so he took God on a fifty-fifty chance.

It was part of his mental system that he had to have a basic charter of dogmas, if not intellectual principles, upon which to act. Many years later he told a gathering at Oxford that in his student years he came across Aristotle's definition of ethics as "the highest activity of the soul living for the highest object in a perfect life." And he chose there at Oxford that "highest object." It did not matter that he had misunderstood Aristotle who had spoken of "the highest principle of right" rather than the "highest object in a perfect life." The object he chose was the extension of the rule of the Anglo-Saxon race over the world. And this design he continued to follow through his life with a singleness of purpose and a disregard of the vulgar virtues in a manner to satisfy completely the specifications of Spengler, who adopted the dictum of Goethe that "the doer is always conscienceless."

In 1877, at the age of twenty-four, about the time that Disraeli seized the Transvaal, Rhodes, who saw in this a good beginning, made his first will. In it he planned a secret society, Jesuitical in its techniques, that would have as its mission the extension of British rule throughout the world; the occupation by Britain of the entire continent of Africa, the Holy Land, the valley of the Euphrates, Cyprus, Candia, all of South America, the islands of the Pacific, all of the Malay Archipelago, the seaboard of China and Japan, and the ultimate recovery of the United States of America.

v

The diamond industry, too, was taking form after the usual pattern of the pioneer mining rush. The promise of gold, diamonds, oil draws thousands of men with no other talent for growing rich save the urge of the wildcatter and the taste for wandering to far places. The diggers had but to lease claims and dig and if luck was with them the diamonds came quickly enough. But once the shovel had done its work a new talent was needed—the talent of the entrepreneur. From that point on the inevitable winnowing process began. When it became possible for one man to have as many claims as he could acquire Kimberley became the scene of the same comedy as the Pennsylvania oil regions. It became a battle for claims—for expansion—in which the weapons were money and business acumen.

At first the diamonds were found in the shallow yellow clay. Later it was necessary to excavate the deeper blue clay. The treasure was richer but the cost was greater. At this point the impractical, the extravagant, the impecunious diggers began to disappear. Men like Rhodes and his partner, Rudd, began to buy them out. Rhodes had an eye open for every source of profit. He and Rudd brought hydraulic pumping machinery from England to pump out flooded mines. They built an ice plant to supply the eager and profitable market on that blazing veldt. They made much money at both ventures. By the time Rhodes was done with his Oxford studies, he had almost complete mastery of one of the diamond fields.

There were two such fields—the De Beers and the Kimberley.

And just as Rhodes rose to the dominance of the De Beers digging, another equally colorful and extraordinary figure was widening his sway over the Kimberley mines.

banking house in London—Barnato Brothers. He bought up Kimberley claims until, like Rhodes on De Beers, he became the chief influence in the Kimberley field.

By 1881 these two men—Rhodes and Barnato—dominated the diamond industry of South Africa. The acquisitive talent, like that of the artist and musician, is precocious. Rockefeller was a prosperous merchant at eighteen, Morgan was wealthy in his own right at twenty-one, Hetty Green could call off the stock quotations as a child, Fugger revealed his special genius in the twenties. Here, in South Africa, two precocious money getters were the leading figures in that art—Rhodes at twenty-eight, Barnato at twenty-four. It was inevitable that they would wage war. Neither would be content in his own province. Rhodes, indeed, had returned from England not only with a dream of imperial aggression for Britain but with a dream and a plan for industrial aggression for himself.

At twenty-eight Cecil Rhodes was thinking the same thoughts as the thirty-two-year-old Rockefeller twelve thousand miles away. Rhodes concluded that the rich rewards of the diamond industry could be drawn off only by a monopoly. Competition, production, prices must be controlled in the interest of "stabilization." There are enough swains in the world to spend on their brides and wives and mistresses four million pounds for diamonds a year. No matter how many stones were offered, that, he had calculated, was the fund available to buy them. The course of wisdom was to offer the smallest number of stones, get the largest prices for them, make the largest profit, and conserve the supply. This could be done only by monopoly control. He therefore decided, in the intervals of meditation upon the ethics of imperialism, the functions of the deity, and the perusal of the classics at Oriel, that he would capture the monopoly of South Africa's diamonds. He would proceed quite as the elder monopolist, Rockefeller—of whom perhaps he had never heard—had proceeded, covering himself with riches and odium.

He began his preparations before he was through with Oxford. In 1880 he formed the De Beers Mining Company, £200,000 capi-

Immediately Rhodes set about grasping Kimberley company control. He began buying shares in Kimberley. Barnato, on his part, set out to cripple De Beers by a diamond price war. Also Barnato began to compete with Rhodes in buying Kimberley shares as they came on the market. Thus two wars—a diamond price war and a stock war—ensued. The price of diamonds went steadily down. Barnato thought he could either break De Beers or force it to surrender. But he was playing a desperate game against a master general.

Once again Barnato played his hand wrong. He made the mistake of underrating Rhodes' financial resources. Rhodes had at his side one of the most remarkable financial figures of South African history—Alfred Beit, a Hamburg Jew who had started life as a diamond merchant in Amsterdam and graduated into banking, a shrewd, prudent, yet bold financier of great wealth, who had his own banking house and rich connections in Amsterdam and Hamburg. He idolized Rhodes.

Rhodes organized a new company—the De Beers Consolidated

Mines, Ltd., which took over the holdings of both the old De Beers and the Kimberley company. Barnato became one of the board of life governors with control completely in Rhodes' hands. Rhodes was to be general manager. The diamond industry was a complete monopoly under Rhodes' thumb and he had traversed the first stage in his ambitious plan. But he had another at the same moment.

Nevertheless, it took eighteen hours of wrangling to bring Barnato around to Rhodes' imperial ingredient in the diamond corporation. Rhodes had to flatter him. Barnato, rich though he was, had never been able to crack the crust of the social shell that excluded him from polite Cape society. He had never got his foot inside the Kimberley Club. Rhodes took him there to luncheon, promised him membership. The once humble Whitechapel juggler softened in that solvent atmosphere. When the deal was concluded Rhodes said to Barnato: "You have had your whim. Now for mine. I have always wanted to see a bucketful of diamonds." Barnato produced them. Four hundred and thirty truckloads of blue clay in a year had to be washed to produce a bucket of diamonds. Rhodes ran his fingers through the precious brilliants, letting them sift through his fingers. At thirty-six he had fought an epic battle against his thirty-two-year-old adversary for one of the greatest prizes in the world. He was master of the diamond

world. The sparkling fruit of that tree dripped through his fingers now like sand. It must have seemed easy. Beyond lay still other and more difficult worlds to which he looked. He lost no time in making the start.

VI

He took his seat as the Boer war fiasco approached its end in 1881. Rhodes was hot with anger at Gladstone's surrender. He opposed Boer independence. He would not be trampled upon by these Dutchmen. But the war was over; he was done with it. He spoke of it little. The man who had swept his hand over the map of Africa and said it must be all red now set about achieving that dream.

At the tip of Africa nestled the small Cape. Above it was Bechuanaland, a broad province of grass and desert. On one side of it—the west—lay German West Africa. On the other were the Orange

He proceeded at once to urge upon the Cape parliament the acquisition of Bechuanaland. There was no time to be lost, he said. Bismarck had only recently hoisted the German flag over German West Africa and was looking about for more. On the other side, the Transvaal Boers were ceaselessly seeking to push the dominion of their pastoral republic northward into the rich grazing lands of Bechuanaland. If the Boers took that country the Kaiser, Rhodes said, would find some pretext to attack and grab the Transvaal, thus commanding a stretch of territory running completely across South Africa above the Cape and locking Britain in.

By 1883 Rhodes succeeded in having a commission named to investigate certain Griqualand claims. Named on this commission, he expanded its functions to suit his ends. He went to Bechuanaland. He visited the native chief, Makorane, and induced him to appeal to the Cape to take over his land to protect him from other chiefs. The Boers had entered. Two small Boer republics were organized there—Stellaland and Land of Goshen. He induced the Stellaland president, van Niekerk, to accept a British protectorate. He did not have the same success at Goshen where van Pettius, a stubborn and resolute Boer, held out.

However, Rhodes, in February, 1884, induced Lord Derby to proclaim a protectorate over Bechuanaland. A commission was sent headed by a narrow and race-proud clergyman, John Mac-Kenzie, to organize the territory. He got into trouble with native chiefs and Boer leaders. He refused to recognize the pledges Rhodes had made to the Boers to respect their land titles and permit full measure of self-government.

At this point, Paul Kruger, President of the Transvaal republic, acted. He proclaimed Land of Goshen Transvaal territory and sent in some Boer troops to make it good.

Rhodes counseled swift action by the imperial government. An

Stephanus Johannes Paulus Kruger—later to be known as Oom Paul—President of the Transvaal, was then fifty-nine. Born in the Cape he had shared with his family and people the great northward trek out of the Cape beyond the Vaal River and the founding of the Transvaal republic. A magistrate at seventeen, military officer of his ward, he had engaged in the wars against the Matabeles, the Zulus, and the Basutos. He had risen through the grades of commandant general and vice-president to the presidency the preceding year. Patriarchal in appearance, iron-willed, nourishing a profound hatred of the British out of his memory of all the wrongs his people had suffered, deeply religious, preaching every Sunday in the church opposite the presidency the primitive evangelism of the Dopper branch of the Dutch Reformers, he looked upon himself as the chosen instrument of almighty God to lead his people.

These two men—Kruger and Rhodes—were driven along by the same design of expansion. Kruger dreamed of an independent Boer republic from the Orange River to the Zambezi. Rhodes dreamed of an imperial dominion of the British empire in that same land. For the next fifteen years the plans of these two men in their respective directions would shape the development of South Africa and lead in the end to a bloody and disastrous war. It is possible that if diamonds had not been discovered in the Free State and gold later in the Transvaal, Kruger would have had his dream. In later years Rhodes spoke of him as "that extraordinary man" and "one of the most remarkable in South Africa." But now as Kruger faced Rhodes for the first time at Fourteen Streams, the accumulating energies that flowed from the diamond mines, the still-small gold mines, and the growing half-braggart, half-com-

Warren, inflexible militarist imperialist, proceeded to act the role of Roman proconsul. He overran the country, quarreled with everyone, repudiated all of England's pledges, and even arrested van Niekerk on a preposterous charge of murder. He finally quarreled with Rhodes, who wanted a moderate, ingratiating policy with the Boer settlers, while Warren thought in terms of force, obedience, authority, hierarchy. He was the perfect fruit of that principle of racial coxcombery that lies at the root of imperialism. Rhodes quit his post in disgust, returned to Cape Town, resumed his seat, and denounced Warren's methods. Warren had to be recalled. Bechuanaland was then erected into a protectorate. But Rhodes had completed the first step in that series of aggressions by which England would become the overlord of most of Africa.

37TT

After the Bechuanaland affair the prestige of Rhodes stood high in the Cape. He had by his criticism of Warren conciliated the Dutch. And he had practically doubled the land area of British possessions in South Africa. His wealth had grown royal. His influence in parliament was vast. His expansive dream of empire had become infectious. By 1889 he was acting treasurer general and in 1890 he was elevated to the premiership of Cape Colony.

But before he became Prime Minister he set in motion that project which was to be his chef-d'oeuvre. The conquest of Bechuanaland was merely the prelude to his ultimate aim which was, as some began to phrase it, to make Africa "British from the Cape to Cairo." His next step was to move northward yet again, this time into the vast country of Lobengula—a province twice as large as Texas, one day to be known as Rhodesia.

In 1887 Rhodes heard that Boers were meditating a northward

trek into Lobengula's country—the land of the Matabeles and the Mashonas. Though Rhodes held no office he made the Boers understand that if they went into Matabeleland they must go as British subjects. "There will be no more Boer republics permitted in South Africa," he said. Then he moved himself. And now we may see clearly the clever surgery of imperialism.

A second mission followed, managed by Rhodes' partner, Rudd. Lobengula was a huge, intelligent, but not very warlike chieftain. He had developed a keen talent for negotiation with white men. Rudd and his two companions, representing Rhodes and not the government, remained nine months amid the strong odors of the Matabele chief's kraal at Bulawayo fishing for an agreement. They wanted a concession. They sought an arrangement to permit them to hunt for and work metal mines in Matabeleland. Some gold had been found there by a German in 1864 and a promising gold belt by an Englishman in 1869, though little had been done about these discoveries.

Lobengula was wary of his visitors. He listened ceaselessly to the arguments of his suppliants. He wanted to be sure no infringement of his sovereignty was intended. He wanted no white settlers. Rhodes' agents told him: "All the white men want is for you to let them dig in the country of the Mashonas for gold."

Then one day Lobengula sent for the interpreter who accompanied the Rhodes party. "You are sure you are not coming for grass and ground?" he asked.

minerals in my kingdom" and to "do all things that they may deem necessary to procure the same." Rhodes agreed to pay Lobengula 100 pounds a month, 1000 Martini-Henry breech-loading rifles, 100,000 rounds of ammunition, and a steamboat with guns to patrol the Zambezi.

Lobengula always insisted that he had been duped. He wrote a protest to the Queen later in which he declared: "Men asked for peace to dig gold and said they would give me certain things. A document was presented to me which they said contained my words. I signed. Three months later I was told that I had given away all minerals in my country."

The account of one member of Rhodes' own mission serves to bear this out. But, even accepting the document on which Rhodes relied, all he had was an instrument giving him an exclusive concession to work mineral deposits in Matabeleland. Yet the next Lobengula knew of this transaction was when his warriors informed him that Rhodes' agents had entered Mashonaland with a military force of 320 troops, escorting 180 settlers under command of Sir John Willoughby, armed with a charter from the British government that gave Rhodes the right to administer and govern the country, to set up courts and administer justice even among the natives.

If Rhodes had proceeded with consideration for the natives in Bechuanaland, he unloaded those virtues now in Matabeleland. Had he merely invaded the country he might have appealed to the higher law of the superman and the superstate. But he first made a solemn agreement with Lobengula, obtained upon palpably false promises, and then violated the agreement the moment he had obtained it.

shares were sold to small investors. The meticulous old London Times plugged them valiantly. The country of Lobengula was "fabulously rich," a veritable "Land of Ophir," it repeated. The shares were eagerly snapped up.

Having got his charter, Rhodes returned to South Africa and organized that expedition of settlers and soldiers that had alarmed the disillusioned Lobengula as it marched into Mashonaland in July, 1890. The chieftain demanded that the column come to Bulawayo in order to reveal its intentions. It ignored this summons, pushed into Mashonaland, built Fort Salisbury, hoisted the British flag, and took possession of the country formally under the protection of the British crown.

But the enterprise did not prosper. In two years it was in trouble. Few settlers arrived. The company exacted fifty per cent of all minerals recovered. Food had to be brought through a difficult jungle. A police force of seven hundred was organized. The chartered company paid out £250,000 a year and got little return. The settlers grumbled. Lobengula bided his time to smite the invaders. The white settlers stole the natives' cattle, which was their chief wealth. Finally Lobengula sent an army to Mashonaland on pretext of chastising his serfs, the Mashonas. By this time Dr. Jameson was administrator of the chartered company. He opened fire on Lobengula's warriors and the first Matabele war was on. Jameson with nine hundred men pursued Lobengula and in two pitched battles defeated him. The king abandoned Bulawayo, his capital. He was pursued but died of smallpox. The Matabeles surrendered. Rhodes won a costly victory, but in England the whole episode was roundly denounced as a recrudescence of medieval imperialism.

second Matabele war. The natives revolted again. A British force was sent under General Sir Frederick Carrington to subdue them, but without success. They were finally subdued by Rhodes himself. And the manner in which he did it is the subject of one of those apocryphal fables that are built up around famous men—like the hatchet and Washington—which have more to do with forming popular judgment about them than the facts of history.

The legend represents Rhodes in the heroic mold. Carrington, in winter quarters, planned a spring offensive to cost £20,000,000. This meant bankruptcy for the chartered company. Rhodes decided upon a daring strike. Taking five companions he went to the Matopo Hills. The chiefs agreed to see Rhodes. They assembled in a natural amphitheater walled by the granite hills. Rhodes went to them alone where he found the surrounding cliffs and rocks swarming with the warriors in war paint. They advanced, forming a menacing circle around him. He addressed them; admitted some grievances, and then, his eyes blazing, he denounced them for their cruelties. He ended by crying: "Is it to be war or peace?" Overcome by this display of courage one old chief threw down his weapons at Rhodes' feet. "There is my rifle. There is my spear," he cried. And the war was over.

It is a pretty story, but untrue. Rhodes did go to the Matopo Hills. But Colonel Plumer was camped there with eight hundred men. He set up his own tent at a little distance, since he hated camps. He had several companions, among them a woman, Mrs. Colebrenner, and her husband. Instead of his going to the Matabele camp alone, one of the elder statesmen of the tribe, Babiaan, visited Rhodes' camp alone and remained as a guest for two weeks. He feasted on Rhodes' hospitality, returned to the Matabele settlement, and persuaded the chiefs to visit Rhodes, which they did and agreed to end the war. They then arranged a great peace meeting to which Rhodes went and partook of the great feast spread for him. At two or three meetings Rhodes concluded a treaty with them ending a war that was costing the British South Africa Company £4000 a day. It was a triumph of skillful negotiation but

VIII

By this time Rhodes had matured his political philosophy about South Africa and the British Empire. He held steadfastly to the view that there must be a union of the white states—the Cape, Natal, Transvaal, and Orange Free State. The Dutch statesmen nursed the same ambition. But as the Transvaal and Free State were all Dutch and the Cape and Natal heavily populated with Dutch, their objective was a unified Dutch republic. And Dutoit, of the Afrikander Bund, insisted that "the one hindrance to this was the British flag."

Rhodes, however, did not want a union run from London. He believed, as he put it himself, in a "government of South Africa, by the people of South Africa, with the imperial flag for defense."

Rhodes had been dwelling much upon this theme since he wrote that first will some fifteen years before in which he had planned a great Jesuitical society to bring the world under the domination of the British Empire. The Matopo Hills, which he had conquered, had become a sort of wild natural cloister for him to which he went alone to wander and to meditate. And there, his friend W. T. Stead said, Rhodes spent long hours in solitude weaving the de-

tails of his dream—working out his plans. He had begun to feel the urge of the Caesar in him. Stead speaks of the strange compound of hostile elements in this man, son of an old Roman emperor crossed with one of Oliver Cromwell's Ironsides and educated by Ignatius Loyola. He was an agnostic, but he said to Stead: "If there is a God I think he would like me to paint as much of the map of South Africa red as possible." Thus with a religious zeal he threw himself into the grandiose plan of carrying out the hypothetical design of an imaginary god in whom he did not believe, save to give some sort of spiritual authenticity and sanctity to his personal ambition. And in pursuance of this scheme he played with three ideas. One was the immediate object of bringing Africa as swiftly as possible under British rule. The other was the reduction of the whole world—or as much as possible—to this rule and as part of this the recovery of the United States for the British crown. The third was the creation of an empire which would resemble the Holy Roman Empire, a federation of self-governing nations or dominions united under an emperor. The United States was to be one of these dominions

This recapture of America fascinated Rhodes' mind. And he believed it wholly feasible. "Fancy," he wrote to Stead, "the charm to young America, just coming on and dissatisfied, taking a share in a scheme to take the government of the world. Their President is dimly seeing it." World mastery as the basis of stable rule seemed essential to him. "It would have been better for Europe if Napoleon had carried out his idea of universal monarchy."

So essential did he look upon the inclusion of the United States in this scheme of things that he told Stead that if the young republic refused to come into the empire, England should apply for incorporation in the union of states. And so bent was he on establishing the principle of autonomous dominions within the empire that he contributed £10,000 to Charles Stuart Parnell's movement for a separate Irish parliament. He made as a condition of the gift that the Home Rulers, while demanding self-government for Ireland within Ireland, would also insist on representation in the

British Parliament. This he felt would be a beginning. For he believed the ultimate form of government would include local parliaments in each free nation, including England, and an imperial parliament that would control imperial affairs in which each dominion would be represented.

TY

In 1886 gold was found on a farm in the Witwatersrand in the Transvaal. Rhodes, Beit, and Rudd were among the first on the scene. They bought up farms. They struck rich veins. In a year they put their properties under the direction of a corporation formed by Rhodes called Gold Fields of South Africa. It began with £125,000 capital. In five years the capital grew to £1,250,000. The corporation, reorganized as Gold Fields Consolidated, Ltd., in 1892 paid ten per cent dividend, fifteen per cent in 1893 and fifty per cent in 1894.

In addition to this he owned hundreds of thousands of shares in all sorts of enterprises. He looked upon himself, by reason of his position in government and business, as having a claim to a part in any enterprise in South Africa. There seemed no bounds to his acquisitiveness. He did not hesitate to express his disgust and annoyance at any promoter who floated an issue without cutting him in on the preferred list. In founding Gold Fields he, Beit,

His mind dwelt incessantly on his vast schemes. He toyed with such projects as a railroad from the Cape to the Isthmus, with telegraph and telephone systems. His ceaseless pursuit of money was inextricably mixed up with his imperial ambitions for power for himself and for the empire. He was fond of attributing his acquisitiveness to his need for money for these designs. "No use," he would say, "having big ideas unless you have the money to carry them through."

He worked like a man who felt the shortness of life and the length and immensity of his purposes. He was an inveterate letter writer. He would dictate often as many as fifty or more a day. At table with his guests he would keep his secretary near to dictate a letter or notes as his mind jumped to the idea. He would go sometimes at any hour of the night in his pajamas to his secretary's room to dictate a telegram.

Rhodes lived for many years in small bachelor chambers with his friend Dr. Leander Starr Jameson in Kimberley and at his club in Cape Town. But in time he built a magnificent estate called Groote Schur at the foot of Table Mountain outside of Cape Town. The house, a spacious castle, was in the Dutch style. The furnishings were the same. The rooms were filled with Dutch and Flemish antiques, tapestries, china, furniture. The walls were covered with trophies of the chase, native spears, guns, shields—relics of the Matabele wars. He was fond of collecting old oaken chests. The grounds were extensively landscaped. There was a menagerie in them of well-known African animals. He himself gave much attention to a large collection of roses he collected. He spent little on art treasures. There were paintings, but only one of importance—a canvas by Sir Joshua Reynolds.