The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1912-11-08

>aaasel end, - . oeooegosA ~
Us.eeA tuAsrue anA Aiv1asnA ahAfUss
hav> mode Il nscsssafy -. so1ss ~
prsoes Apr Aheaf prcduces end SssvdcsA
seocks end bonds are innn1sd n vaaus
and unloaded upon the public IN M.
1Awson;s opinion. By the @sysSeu
through the ee-opsr~kson u rsAAAsd
nn.nc,al anstatutons. BY <hs CLEVER
work OF publicity agents. and sspe-
ually by skilful nanipulaaaons upon
tho stock exchange. The conclusion OF
Mr. Lawson ts that neither tho taadn.
mo money crust. nor the other factors
which ere usually aeosptsd. have
brought about our high praos level.
but Il hes been the -system" working
improperly through the stock market.
The closing OF the stock exchange to
thes. practices. Mr.. lAwson believes
would reduce the high cost OF living
under whadh the great MASS OF people
arc stagSering.
There is much which - OF value In
Mr.. Lawson's dsscursive and sensa-
tsonal utterancee. There 10 also Ger
tain picturesqueness IN his language
which 10 attractive. HIS power OF Jogt-
cal analysis. however. n exceedingly
weak, and he seems TO be entirely hack
ing IN the ability to interpret COR
rectly the existing financial and eco
nomic tendencies, which are funda-
mental In the present case, 10 use q
homely illustration. he has got tho cart
before the horse.
IT IL true. as Mr.. lawson says. that
stock watering or overcapitalization
has added to the costs of production
and distribution. and has. therefore.
raised prices. The overcapdtafzation.
however. has not been duo to gambling
or Improper practices on the stock ex-
change. Increases IN stocks and bonds
have been based on the earning powers
Of industrial or transportation COM
panies. In other words. earnings have
been capitalized. and stocks and bonds
have been sold. the proceeds OF which
have not been invested IN capital in
etruments, but have been used 10 pay
large underwriting fees or TO st1de
competition by securing control Of
competing corporations through the
purchase OF ITS stocks and bonds on an
inflated basis The fundamental causes.
therefore. Of overcapttanzation have
been those factors. which have made
It possible to increase earnings I'm
just tariff laws under successive Re
publican administrations have led to
the formation Of monopolies, and have
fordbly illustrated by the high prices
to tho domestic consumer maintained
by the steel corporation. with corre-
spending earnings. which enables It to
pay interest on q large amount Of CAPT
tai not representative Of tangible as
sets. Tho control Of the production Of
a product Of nature. such as oil, sugar
or anthracite coal, may also be at
tended by the same profits and over
capitalization as In the case Of the
United States Steel Corporation. More
over. interlocking corporation director
ates and a community Of interest
maintained BY financial. Industrial and
transportation concerns may be used
to prevent competition. and may be
followed by unusual profits and the
payment Of interest charges on an in
fated capitalization.
These are the causes which are at
work In stimulating overcapitalization.
and. as q consequence. in Increasing
the cost of living. The stock exchange
Is merely the means for expressing
capital values upon the basis Of earn
tnss and for efrectins sales on this
basis Mr.. Lawson, as a matter Of
fact, has confused this mechanism
with some of the basic problems in
our financial and industrial system.
With the prohibition Of gambling prac-
tices on the stock exchanges, their
effect upon the cost Of living. for they
facilitate the most efficient use OF
capital The inequalities arising from
in the past can only
be partially remedied because the at
tempt to reduce values which were
originally inflated would result. in the
majority Of cases. IN injustice to the
present holders OF stocks and bonds.
who made their purchases at a price
based upon the interest returns offered
by the securities. Future excuses in
stock watering or. IN overcapitalization
and the consequent Increases in costs
OF production and prices. may be pre-
vented by sound Legislation which will
render impossible the formation of
monopolies based upon the tariff and
other legislative privileges. and which
will maintain free competition and