THE untutored layman may as well admit that to him the intricacies of finance, either as a science or as an art, are actually as impenetrable a mystery as its high priests seem to make it; and so there is no pretense here of desire or ability to discuss the technology of the subject.
But while it may be neither fair nor intelligent to look at so many-sided a matter from only one or two angles, it is, I believe, obvious that new and startling developments of deep social and political significance are taking place in the power of money, and that these developments are giving the dollar, as the symbol of that power, a truly imperialistic aspect.
The forms of control in the modern state may be too variable, and the imponderables and incommensurables in the political equation may be too numerous, to justify segregating any one factor and calling it dominant. Nevertheless it is hardly extravagant to say that the power dominant in America to-day is the power of money.
We need not regard this as malign. We may even admit, as perhaps we should, that it is for the most part the unconscious product of unconscious forces. Nevertheless our future, certainly our immediate future, hinges very largely upon the use and development of this power. In scope and incidence it is already in a broad sense political and seems destined to become more so. And because, in the rapid rise of new aspects and new applications, it is power without a sufficient sense of responsibility and direction, it may become overwhelmingly dangerous.
It is a curious anomaly that, while everybody everywhere at all times has sought to acquire more and more wealth, the fear of the power of wealth is as old as human government. Perhaps no social fear or hatred is quite so near the surface and so easily aroused as that of a possible plutocracy. The average man is apt to see in this a conscious, coördinated entity seeking whom it may devour.
It is true that in this period of widespread prosperity, at least along certain lines, the rich are in good odor. The wide diffusion of wealth has bred a great tolerance. Even the fact that two hundred and twenty-eight men have the incredible income of over a million dollars a year each arouses no especial hostility or suspicion. The public sees our great concentrations into billiondollar projects without any particular dismay. It is rather enamored with the bigness of it all, and sees it largely as the legitimate product of our tremendous economic and industrial growth.
Nevertheless there are distinct subsurface rumblings. When the average man comes to think of the inequalities of wealth, of the instances of poverty and misery, and of social ills, or when he comes in contact with the sheer brute power of money and the demoralizing effect of its excessive worship, his primal reactions are apt to assert themselves, and he begins to blame the owners of money for not curing the things he thinks money can cure.
In any social disorder the money power is usually the first subject of attack. If, in spite of all evidences of the enormous power of money, we can say that in this country we have no plutocracy in a political sense, still the fear of it lies below the surface. That fear may be dormant, but it is never dead, and it may become as dangerous as the reality. And I believe it to be true that, with the changes now taking place in the character of the dollar and in the organized power of money, the danger, if not the fear, is becoming only too real.
The power of money takes on new and truly imperialistic aspects because of new and subtle devices for the addition, multiplication, and division of the old-time power of the dollar. By building up new investment forms and a new credit economy, and by inventing new forms of legal title, financial leaders are managing to separate the legal ownership of the dollar from the legal control of what the dollar represents.
There is coming to be a sort of duality in which dollar ownership and dollar power tend to part company. Ownership may remain in the individual, but power is concentrating in great banking and investment organizations with world-wide financial relations and interrelations, which are able to organize not only the accumulated wealth but also the credit of mankind into the most effective sort of power the world has ever known.
For many years the banks of the country dealt with the mobilized savings of the people, and the great corporations issued their securities against the savings of the investing public.
But no longer do the people wait to earn their money before spending it. They spend it first. They use their credit to acquire property before they have the money to pay for it.
Business, big and little, is helping them in every possible way. Credit is extended from every quarter. Corporations spring up overnight to make it easy and pleasant for people to mortgage their future. The business, in its incipient stage, has seemed so profitable that investment bankers create new corporations in order that these corporations may in turn create new securities for the investment bankers to sell. The way has been found to organize the credit of the land.
And this new school of business and finance operates under a degree of legislative freedom and with a potential danger perhaps equal to that of the early days of unregulated banking and corporate enterprise.
It is this relatively new development in the imperial power of money as money, and its various phases of organized credit and delegated investment control, that is not only having profound social consequences, but is of major importance to the political commonwealth itself.
One cannot study the forces and influences that are making so strongly for the centralization of governmental powers without recognizing this parallel and perhaps related movement in the domain of the dollar. Power here is combining and concentrating almost without limit. One wonders whether it is also without vision. I mean political vision. Does the dollar realize that the source and stability of its power spring from the social order and depend upon it, and that in the last analysis it is at the mercy of the ballot?
If the dominant forces of the modern world revolve around the market place, the centre of their vitality is the bank. There has been no more impressive phenomenon during the past twentyfive years than the growth of banking, but more portentous has been the growth of bank power. The bank is now the symbol of the unity of the money power, and the banker is by way of becoming the authentic leader in the social order.
It is a long story from the primitive goldsmiths, accepting deposits as bailees, through the earlier bankers, exchanging one kind of money for another or putting up their money against credit or goods, on down to modern times. The average man perhaps still regards the banker as chiefly the custodian of the people’s deposits, as the agent to lend them, as an expert skilled in the mysteries of interest and of credit, as after all serving principally as a cog in the mechanism of business.
But in reality the banker has become the power that gives modern business its life. Eliminate him, and the business world would come to a dead stop. He puts business in touch with capital. He brings borrowers and lenders together. Their aims and faiths unite through him. There is scarcely a business transaction to which he is not a party. He appraises your wealth and credit, and thus determines your power and standing in the business world. He puts a valuation on commodities, bridges over the period between production and consumption, asserts power over buyer and seller, often determines your success or failure. He can encourage or check the speculative impulses of the nation and shape its expansions and retrenchments.
All this he does not so much through the control of money as through the control of credit — through his ability to mobilize and organize the credit of the nation, both public and private, and deal with it as a commodity. This is a new or relatively new factor in the financial equation. It carries the power of domination, and neither society nor the banks themselves can afford to overlook the social and political implications of it all.
To-day we put our money and our credit out to work for us instead of working with them. Our wealth is no longer represented by titles to property. It is represented by titles to certificates of indebtedness. Theoretically we may still be in a position to assert over it the powers of direction and control. Practically we are passing these powers over to the banker.
The banker, particularly the investment banker, is gradually acquiring a mortgage on the industry of the nation. Through his vast resources and ability to organize the facilities of credit and distribution he dominates practically the whole field of industry and enterprise.
Through corporate agencies and investment devices and the credit control of banks, the ownership of wealth is becoming abstract and depersonalized. It no longer carries the responsibilities, either of service or of profit, which formerly arose from personal ownership. These are passed on to the banker. This depersonalization, so to speak, of the dollar inevitably tends to exploit it, and the danger is that the money power may go money mad.
After all, in the last analysis, the world will look to the banker’s power not so much to produce more dollars as to produce more bread and meat and more of the good things of life.
But when you deal with money primarily qua money, the urge for more and more power is almost irresistible. Its use as something devoted to the traditional ideals of service and guidance and constructive helpfulness is almost inevitably impaired or lost sight of.
If those who direct control are interested in the discovery and introduction of new economics and efficiencies, are they concerned as to whether these will profit the consumer or only as to whether they will profit the dollar?
Such is the subtle character of banking control that, having underwritten the industrial needs of the nation, the banker’s voice becomes the master’s voice. No concern after obtaining his credit can afford to ignore it entirely.
To do so may spell danger of excommunication from the established church of organized credit. This danger is the more possible by virtue of the combinations and concords that exist among the fountainheads of money and credit. They maintain the supremacy of the dollar by a community of interest. If they decide that the wage of the dollar in terms of interest and profits is best subserved by consolidation, or by mortgaging the future, or by installment buying, or by supporting or opposing new adventures or new discoveries, all this will be done. The power is theirs, not because they have all the money, but because they have all those agencies of control which are involved in our system of finance, investment, and credit.
The bank’s drive for more business becomes a drive for more power. Everywhere we see banks consolidating, absorbing, enlarging, and throwing out branches and roots into every soil that looks fertile. Old-line banks take on trust and savings and investment departments, and their representatives sit on nearly every large directorate.
The billion-dollar bank will soon be a commonplace. Will it also be a menace?
I would be the last to discount in any degree what the world owes the modern banker for our established prosperity and for bringing order out of that financial chaos of earlier days which was so responsible for the scandals and lootings of high finance and the tragedies of unnecessary panics and failures.
If we have less of the old inter and intra corporate scandals, less corporate corruption, less inside manipulation, less fleecing of the innocents, less juggling of accounts, less favoritism of inside-owned subsidiaries and the like, it is due largely no doubt to the enlightened power and influence of the big investment banker.
He has done as much to liberate the energies of men and feed the springs of enterprise as all the statesmen put together, and a large percentage of his effort is undoubtedly devoted to the traditional ideals of service and guidance and constructive assistance to his patrons.
But here is a concentration of money strength that calls for the highest sense of responsibility. Here is an imperial unity of power that can easily result in a plutocracy. We are, in a measure at least, glimpsing that ‘trusteeship of wealth’ which President Baer, to the horror of the nineties, thought our rich men possessed by divine right.
Now that money is beginning, in military parlance, to consolidate its lines, new abuses spring up that only the socially enlightened intelligence of the financial group can check.
A banking and credit system with its eye only on the investor’s return, and measuring business only by its profitand-loss account, puts the dollar too high in the social scale. It dehumanizes both business and the dollar. A world that sees the dollar through the eye of the investor or the speculator is a different world from one that sees it through the eye of the producer or the consumer. It is perhaps the sensing of this that underlies the traditional hostility to Wall Street. We must begin to see the dollar not only as the dollar of the banker, but as the dollar of the community.
If the massing of the dollar’s power may result in a plutocracy, it can also prevent one. Power located is power that can be directed. It can be harmful or beneficent, depending on the vision and sense of responsibility of those who control it.
There is always this advantage in the massing of power: you can fix responsibility. If in the past the money power has seemed real and yet illusive, this has largely been because it was in great measure hypothetical. If it did not become actually antisocial or antidemocratic, this was largely because it lacked actual unity.
But to-day the money power is achieving unity. It is by way of becoming at least a potential plutocracy. It is now becoming possible to mass and shape and direct it, and this is being done at a startling rate. With unity of control passing by one device or another to great banks and investment houses, to holding companies, to investment trusts, to insurance and savings institutions, it now rests with us to hold them responsible, and it rests with them to determine whether the dollar shall be a democrat or a plutocrat.
And let those who control and direct this imperial force not forget that in the last analysis their responsibilities are essentially political.
The power of the dollar is always a political issue, and the dollar forgets that at its peril. The good sense of the country has always recognized how much our prosperity is due to the courage and sagacity of men of money, but nevertheless their power is always suspect.
This has been so from the beginning of our history. President Jackson fought ‘Biddle and his Bank’ because he claimed ‘it would perpetuate a social, political, and financial hierarchy.’ Money, he said, must never become a power in the political state. Professor Sumner thought that ‘the fate of democracy is to fall into subjection to plutocracy. In its struggles against what is called the “money power” democracy strives against its fate, yet hastens it on.’
The crisis of the nineties, when the dollar perhaps reached the zenith of its arrogance and men became fearful of its political grasp, can easily repeat itself. Bryan’s ‘ Cross of Gold’ may have been mostly an oratorical gesture, but it had a real meaning, too. It symbolized both a fear and a possibility, and if the movement had not spent itself fighting for the economic heresy of 16 to 1, it might have shaken down our financial house.
Even so the effect was tremendous, and for the most part, I believe, beneficent. It was a healthy jolt to the imperialism of the dollar. And if we no longer hear so much about the ‘socialization of wealth,’ or the ‘Plunderbund,’ or ‘malefactors of great wealth,’ or ‘good and bad trusts,’ this may not be entirely because the fears these things symbolized have altogether disappeared before a new and a higherpurposed business consciousness. It may even be the calm before the storm. An overimperialized or a politically moribund dollar may yet put democracy to the supreme test.
If the dollar would be master, it must first be servant in the house of the king. This is a fundamental of democracy. If democracy is to fail, it will be because it cannot produce leaders, and high finance with its superb abilities and efficiencies must aspire to a higher and more politically enlightened leadership.
These regal aggregations of wealth and power do not exist by divine right. The people gave and the people can take away. Interest and profit cannot be the whole law and gospel of the dollar. The power of money is not as everlasting as the rock of Gibraltar. There is no guaranty of its tenure. A money power that is politically sterile or indifferent, or politically selfish or shortsighted, may well be riding for a fall.
There are, to be sure, plenty of signs that the dollar recognizes all this. It is probably as much due to the higher morale of modern finance as it is to improved individual morals that we have less bribery and public looting and less political corruption than we had before financial power became so concentrated as it is now.
The ‘Yellow Dog’ fund has pretty well vanished from business. The use of money in elections may have increased outrageously, but its corrupt use is undoubtedly less.
But the concentration of wealth demands courage and vision, service and leadership. It demands a higher stewardship than simply making money and protecting it and multiplying it. It has the facilities, the contacts, the brains, and the capacity to guide in so many regions where unselfish guidance is needed that it has no right to move in a political vacuum.
Adam Smith, it is true, postulated self-interest as a primal law of business and built his economic philosophy thereon, so that perhaps it may be economically unsound to expect unselfish guidance in a field where the dollar lays pretensions to supreme rights of its own. But if we cannot invoke noblesse oblige, at least let us rely on the higher law of self-protection.
Finance runs too great a risk in assuming any false or concealed relations to the political state. One need not discount the danger that arises when money becomes antidemocratic or enters politics for its selfish interests. And it is true that the money power has itself to blame if it is politically suspect.
But the dollar can overcome all this by asserting a more democratic and courageous leadership. The idea is to ‘keep it out of politics.’ It were better to get into politics with its cards on the table, for it is a power which, properly directed, can be irresistible for good.
The dollar is a realist that distinguishes between fine words and fine deeds. It is peculiarly adapted, therefore, to render wise assistance in problems of statesmanship that now confront us.
Survey any of the questions of the hour, — the tariff, the farmer, the trusts, the consumer, our increasing tax burdens, our costly system of distribution, our problems of labor, of national defense, of internal improvements, of foreign relations, — and note how in all of them the economic and financial and political are interwoven.
My point is that the dollar should recognize this, shoulder its responsibilities, come out into the open, and move forward to constructive democratic and social leadership.
To a very considerable degree modern credit facilities had a new beginning, or at least a new impetus, with Woodrow Wilson. The dollar and its power could now readily be made more available by a widening of these facilities which would be entirely consistent with soundness. The doors which are now open to the property-holding classes could be opened wider and admit others. Large accumulations not actually applied to useful purposes or not perpetuated by testamentary provision do not serve the institution of private property.
A power which so greatly affects the well-being of those who are not its owner must frankly recognize that the owner’s right is not absolute. Others affected should not be without voice. They have the right to be heard and to discuss all problems which affect both themselves and the owner.
With the great power of the dollar there must go the dollar’s obligation to others — the obligation, for instance, not only to produce wisely and to distribute efficiently, but so to order and arrange production and distribution as to avoid the maladjustment between both, and to avoid recurring periods of depression and unemployment, with their resulting loss to the property interest and the distress they cause others over whose lives they exercise so profound an influence.
Finally, note those post-war developments which are making the dollar an imperialist in an international sense. Overnight we have become the creditor nation of the world, with all that portends. Where the dollar sits, there is the head of the international table. What the consequences of this may be no one can foretell. That they are bound to be serious and perhaps even revolutionary is obvious.
Here, too, far more depends on the vision and statesmanship of our bankers and financiers than upon statesmenelect. If there is one national policy on which we think we are united, it is that of anti-imperialism. But the dollar may well make that policy a fiction.
The nation does not want imperialism in terms of empire, but the dollar is already acquiring it in terms of power. The dollar may not dream of political empire, but it does dream of markets. Our interest in other continents is largely an interest in markets. Imperialism can be economic as well as political, and quite as dangerous in either case.
Whatever may be the wise or feasible policy as to our war loans or international relations in general, the far-flung lines of our commercial and banking dollar are bound to make new complications and orientations in our foreign affairs and policies.
Conceivably the dollar might exert a power to do what no other power has so far been able to accomplish. It might translate its own powers of coöperation and unity into world harmony and world unity. Without entering the domain of dollar diplomacy, without asking or receiving any national endorsement or guaranty as a condition to its voyage to foreign parts, it might still work out a more rational world order, help remove the incubus of excessive naval and military armaments, and educate the world as to the ‘great illusion’ of war.
So in the hands of those in whom have been massed these enormous controls of money and credit is a power that is truly imperial. It must be exercised for the benefit of mankind with truly imperial vision and skill.
We have a right to demand that the dollar do some statesmanlike thinking as to whither it is headed itself and whither it is leading us.
If in the past the dollar has been something of a politician, we have a right to demand that now, as the greatest common denominator in the equation of life, it become more of a statesman. And it is well qualified to fill that rôle.