The Washington times., 1901-07-09
Circulation statement.
Economic Conditions in Germany.

Economic Conditions in Germany.
on a smaller scale perhaps, but still
in like manner. with the United States,
Germany for several years has been in
dulging craze for industrial combina-
ton and overcapitalization, and, also as
in our own case. has been saved from
early disaster only through an unus-
uaUy large foreign demand for her
manufactures. a revulsi0n seems i'm
minent. partly owing TO the rapid
growth Of American competition IN
iron and steel products. shoes, and
other staples, and partly on account
of widespread distress among the agri-
cultural classes due TO crop failures.
Speaking in general way, the En-
pire has not seen d full food crop in
five years, while this year reports from
many leading districts are exceptional
Iy unfavorable Like their American
rivals. many Of the German manufac-
tllrers have combined or recapitalized,
unloading a relatively huge volume Of
water upon lhe investing public, Pro-
moters over there no doubt have used
the falIacious argument heard SO often
in Wall Street Of late-that earning
capacity, rather than actual assets IS
the proper basis for capitalization. OF
course. the proposition would be ten
able if there were any power to guar
antee a given earning capacity. But
there is none. As the case stands. al
though the earning capacity may be
cut in half by reason Of competition or
business depression. the nominal cap
itaI upon which investments have been
made and dividends expected, IS fixed.
The logic Of the earning capacity
theory then. would demand that the
capital be reduced fifty per cent TO the
equal loss Of the investor on faith; and
that. or worse, is what actually hap
pens under d reoeivership or Commit
tee OF Reorganization.
The public, not only of this, but Of
allcouutries, appear Incapable of profit
ingby experience: when one toy balloon
has collapsed, it is only necessary TO
present another, painted differently,
and the children Will rush to buy it.
There is nothing new in the scheme f
consolidating a lot Of old plants, filling
them with water, and selling them to
the lambs at three or four times their
possible value. American railways
were manipulated in exactly the same
way prior 10 the Cleveland panic Of
1893 Then the squeeze came. and the
small completeness aad savings Of mil
lions went by the board 4 few re-
markably good harvests in this coun-
try. cOincident with more or less wide
spread crop shortages abroad, combined
with demands made upon our agFicui-
tural, pastoral, and manufactured pro-
ducts caused by the Spanish war, the
South african war. and the construc-
tor by Russia Of her great trans-Si-
berian railway system, have given a
maximum earning capacity for the time
being to nearly all Of our producing and
business enterprises. Such 4 SKATE Of
affairs cannot be counted upon TO last
forever, or even for long. Reaction must
and certainly viii come. Possibly not
at once, but there is danger that it
VIII not be delayed a great While.
For example. sno,iId Congress next
winter refuse to ratify the pending reel
procity treaties, ana display d de-
termination TO insist upon the Dingley
pound Of flesh in all directions, the in
dications are that we shall have to
suffer from European retaliation, and
see our machinery. tools, locomotives, /
rails. structural steel. implements, BIZ
cycles, and a hundred other commodf-
ties of which we are producing rapid
ly increasing surplus shut out of the
Old World markets. Were such an
eventuaIity to occur spontaneously with |
large surplus crops in the United
States and good harvests in Europe.
Egypt. India. and Argentina, it does
not take much economic wisdom 70 as
sumo that there would be a crash,
which all the genius Of a Morgan, all
the cunning of 4 Rockefeller. and all
the money in the national Treasury at
the command of those magnates and
their party would be unable TO avert
were such thing desired by them 1t
might not be- On the contrary, they
might wish to repeat the game Of Ieo-
pie like them in 1888, and let the hurri-
cane come, being certain of their ability
10 buy in the wreckage at fire sale
prices after the storm, and, in a lii lie
while, 10 own twice as much Of the
country, its resources. and its people,
as they do today. Germany seems like
ly 10 catch the seismic wave OF panic |
first. II our political and financial mas
ters are not heedful we may be the sec !
ond number on the programme.