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are found in every field of science as well as in arithmetic. Oxygen and hydrogen are equally necessary to the formation of water; air and gasoline must be mixed in the carburetor in order that there may be an explosion in the gasoline engine. One is as essential as the other. The upper and the nether millstone must work together in the old-fashioned mill to grind wheat. Two sets of rollers are necessary in the modern flour mill.

In the higher realms of economics we find numerous examples of the same type of problem. Forethought and inventiveness are examples of mental qualities which are combined to secure mechanical progress. However inventive men may be in contriving mechanical improvements, unless someone is willing to perform labor long in advance of the consumption of the products of these mechanical improvements, or pay someone else for performing that labor, all these mechanical contrivances will remain either in the brains of the inventors or in museums.

When one has spent his money for iron ore, or for tools of any kind, one has become a capitalist. He has bought something of no immediate use to him as a consumer, but something which is a means by which in the future he may get consumers' goods. Because there are, in any community, men who are willing to do this, there is a market for the genius of the inventor. Similarly, because inventors will devise mechanical appliances and improvements, there is opportunity for the investor to become a capitalist, -a buyer of tools and contrivances.

These two functions, that of the inventor and that of the investor, are absolutely necessary, whatever the type of social organization may be. Even in a communistic society the work of the inventor amounts to nothing unless the society as a whole undertakes what, in the present order of society, the individual capitalist undertakes; namely, to set men to work at making tools, and to pay them wages while they are about it. One important difference between socialism and individualism is this: socialism proposes that society as a whole shall do precisely what in an individualistic society the capitalist does as an individual.

The productivity of capital. There are some extreme socialists who deny that the capitalist performs any necessary function. If that were true, it would be hard to frame an argument to show that society as a whole should do precisely what the capitalist is doing. The socialist would then have to admit that the capitalist, instead of performing a useless function, performs a most important one, so important that society as a whole should take it over. To say that society should do its own investing is to say that it should become its own capitalist. This would present a question to be debated. The question might be stated as follows: Can the useful function of coördinating labor performed at different times be done more economically and satisfactorily by the state, or by the society as a whole, than by private individuals? Or the question might be put in this way: What forms of investment and ownership should be undertaken by society as a whole, and what should be left to private individuals? Only extremists would refuse to discuss this question. There are, however, some who are so very extreme as to deny that the state or society should do any investing or own any capital. Others go to the opposite extreme by denying that the individual should do any investing or own any capital. Wisdom probably lies somewhere between the two extremes. The real difference, therefore, between the reasonable individualist and the reasonable socialist is one of degree. The reasonable individualist will maintain that, in the absence of a special or convincing reason to the contrary, the individual should be allowed to invest and to own capital, and that the case must be proved against him before he is forbidden to do so. The reasonable socialist, on the other hand, holds that the presumption is in favor of public and against private ownership of capital, — that unless special and convincing reason to the contrary is shown, the public and not private individuals should own capital. He places the burden of proof on the one who wishes to own private capital.

CHAPTER XIV

THE ORGANIZATION OF BUSINESS

Large capital necessary. The growth of machine production has made necessary such large aggregations of capital as to require the combined accumulations of numbers of men. In comparatively few cases does a single individual possess enough capital to equip a modern factory, railroad, steamship company, mine, or even a large mercantile house. Were it not possible to combine the capital of a number of individuals, large-scale production would be the privilege of only a few very wealthy men.

Methods of combining capital. There are three distinct methods of combining capital. One is known as the partnership, another is the corporation, or joint-stock company, and the third is the coöperative society. The partnership is a mere combination of two or more individuals in the ownership and management of a given business, in which each partner is fully responsible for the acts and liabilities of the group. The partnership is merely an enlargement of the individual. The individual who owns and operates his own business is of course fully responsible for all debts and obligations, and, subject to bankruptcy and homestead laws, all his property may be taken in payment of any obligation incurred in the business. Where two or more men join together in a partnership, each partner is responsible in the same sense and to the same extent as he would be if he were the sole owner.

Difficulties of partnership. Obviously a partnership on these terms is possible only among men who are very intimately acquainted with one another and who have complete confidence in one another. Since each partner is fully responsible for the acts of every other, it would be extremely hazardous, not to

say foolhardy, for anyone to form a partnership with an individual with whom he was not intimately acquainted and concerning whose honesty and solvency he had the slightest suspicion. Incompetent or dishonest partners have caused the financial ruin of many an otherwise sound and capable business man.

The corporation. The modern expansion of business would hardly have been possible without some form of organization which would permit the association of larger numbers of men than are possible under a partnership. This has given rise to the corporation, or the joint-stock company. The distinguishing difference between the corporation and the partnership lies in what is known as limited liability. In a corporation the liability of each shareholder is strictly limited. The corporation may become bankrupt, but the individual members or shareholders can be called upon only for definite sums to make good the debts of the corporation. In the ordinary case, each individual puts a certain sum of money into the fund. This may be lost, but he cannot be called upon for additional sums to make good further losses. In other cases, such as our national banks, the shareholder may not only lose what he has put into the fund but may be assessed an equal amount in addition. This is sometimes called double liability.

Suppose, for example, it were considered necessary to have $100,000 of capital with which to start a business. This capital may be divided into a thousand shares of $100 each. (A larger number of shares of smaller denomination or a smaller number of larger denomination may, of course, be decided upon.) These shares are represented by bits of printed paper which serve as evidence to show that the money has been put into the fund. A thousand different individuals may buy one share each or a smaller number may each buy a different number of shares. For each $100 which any individual puts in, he receives one of these bits of paper, which come to be called shares or stock certificates or some other such name. After the shares are all sold, there is the fund

of $100,000 in money available for starting the business. The general rule is that each contributor shall have a vote for each share which he has purchased. It would therefore be possible for one individual to own more than half the shares, provided he had invested more than $50,000 in the enterprise. Owning more than half the shares, he could always cast the majority vote and control the corporation, electing himself and his particular friends to all the offices, and virtually controlling the business. In some cases, however, such a concentration of ownership is not permitted.

Limited liability. Only the officers of the corporation are empowered to act for the corporation; the individual shareholder who is not an officer has no power to obligate the corporation in any way. One therefore does not need to scrutinize the solvency or the character of his fellow shareholders as closely as would be necessary in a partnership. Again, the individual shareholder has no responsibility for the acts of the corporation beyond that which has already been indicated; that is, if the business fails, the affairs of the corporation may be wound up, but he can lose only the sum which he originally subscribed, or, in the case of double liability, that sum plus an equal sum.

Some weaknesses of the corporation. This device of the joint-stock company with limited liability has made possible the aggregation of vast sums of capital, running up into millions and hundreds of millions of dollars, for the purpose of carrying on great business enterprises. Individuals who never saw or heard of one another, living in different parts of the country, sometimes in different parts of the world, may own shares in the same corporation, having contributed their capital to the joint fund for the carrying on of the business. This has been one of the great factors in building up all modern enterprise. It is almost as important as some of the great mechanical inventions. But, like all great inventions, it carries with it certain difficulties. For example, it has made

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