CHAPTER LXIX.

REVIEW OF THE PANIC YEAR, 1903.

The year 1903 passed into history with few pleasant memories. To a great

number of individuals it was a year of disappointment and loss. To the

very few it was a year of golden experience, demonstrating anew that

real success only comes from rigid adherence to sound business

principles and abstention from illegitimate speculation. Those who

remained steadfast to well-established methods of finance and business

weathered the storms of the year with little injury; while those who

defied economic laws and ventured on the untried highways to success

were, later, chiefly engaged in repairing battered fortunes and

gathering together their scattered senses.

Nineteen hundred and three was chiefly conspicuous as marking the

culmination and collapse of the great trust movement which began five or

six years ago. The country had fairly gone combination mad, both capital

and labor emulating each other in the furious race toward combination

and monopoly. All consequences were blindly disregarded, only the

advantages of combination receiving any serious attention, and no regard

whatever was paid to the workings of these huge combinations. Whoever

pointed out their inherent defects, their defiance of natural economic

laws, their ineradicable opposition to human nature, their socialistic

tendencies, their opposition to individuality, their inability to

suppress competition—whoever was bold enough to oppose these tendencies

on such grounds was swept aside with contempt and indifference. This

phase of the movement, however, was by no means the end of the trust

mania. It received an enormous stimulus from Wall Street, where the

clever promoter quickly discovered in the increased profits and power of

these combines something new to capitalize. These forced profits,

together with the premiums paid to original owners for control of good

will and for promoters’ commissions, were the basis of an enormous

overcapitalization, the new concerns frequently being capitalized at

several times their real value. Not less than $6,000,000,000 of these

new creations was made within a few short years, forming the basis of a

colossal speculation, backed by unequaled financial power and launched

upon an unprecedented industrial boom. It is not the purpose of this

brief review to cite instances of failure. Fortunately, the losses

resulting from inability to unload on the public fell chiefly upon those

best able to bear them, the panic being strictly financial and,

fortunately, not commercial or industrial. For the original shareholders

in these combinations who failed to sell, the losses were chiefly on

paper; but they were sufficiently heavy to seriously cripple many rich

men whose fortunes had been locked up in these enormously inflated new

creations. Syndicate after syndicate was formed to finance these

organizations; some made fabulous profits, but others were closed out

with heavy losses, bringing the country to the verge of the greatest

panic in history. Fortunately, the country’s general prosperity was only

slightly impaired by the tremendous strain thus imposed on Wall Street.

The storm was finally safely weathered because of the prudence of our

bankers and the strength of our national resources, as well as the

continued prosperity of the farmer, who once more proved himself the

backbone of the nation. These experiences have effectually killed the

trust mania, and its revival is exceedingly improbable. Big

corporations, it is true, will remain, for the reason that they are the

best known means of doing the world’s work; but the era of excessive

capitalization of good will, promoters’ fees, monopoly profits, and the

delusions of visionary economists is happily at an end. Whether the

final days of reckoning for the trusts have been seen or not is a

question that must be left until the ultimate test of business adversity

is applied, which we sincerely hope is still far distant. At best, the

future of the industrials is dubious. Along with, and as a natural

sequence of, the trust movement came the labor movement. The power of

combination once discovered was as badly misused by labor as by capital;

even worse, for the demands of labor were pushed to such extremes of

extortion and injustice as to throttle business and arouse popular

indignation among those who still preserved some ideas of individual

freedom.

Next to the trust movement the most potent influence in the business

world was the simply phenomenal boom in the iron and steel trade. The

world had never seen such rapid development before. This was based

principally upon the enormous demands of American railroads, which have

been practically reconstructed in order to meet the tremendous rush of

traffic which the nation’s growth has imposed upon them. The big car and

the big locomotive necessitated heavier rails, new bridges, and new

terminal facilities; so that hundreds and hundreds of millions were thus

expended, very largely out of current earnings, but in many cases, also,

by the creation of new capital issues. It is probable that the heaviest

portion of this work has been done, yet much remains to be completed,

and railroads will be heavy buyers of steel to continue projected

improvements. Another powerful stimulus to the iron trade was the use of

the steel frame building for office purposes. This meant a revolution in

office buildings, and the business centers of all our large cities are

undergoing a process of reconstruction which is far from complete, and

was brought to an abrupt halt by the extortionate demands of labor. In

addition to these two great sources of demand the uses of iron and steel

are steadily extending with the progress of invention, the cheapening of

their cost, and the high price of lumber. The iron trade’s pace was too

rapid to last, and the reaction came with unexpected severity in the

latter half of 1903, precipitated, of course, by the financial reaction,

which, along with the labor agitation, discouraged all new enterprise.

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