CONTINUOUS FOREST PRODUCTION Z/ 



The question here is, why these high interest charges? The answer 

 is that the capital borrowed is of a semi-spectilative character. I am 

 not using speculative here or later in this discussion as a term of reproach. 

 I am well aware that speculative capital has assisted the pioneer in 

 conquering the wilderness, pioneered all our new industries, and largely 

 built our railroads. In old, established industries like the lumber 

 industry we should, however, not be dependent on this class of capital. 

 They should rather be financed by conservative investment capital and 

 let the speculative capital move on to new business adventures. By 

 conservative investment capital is meant that of savings banks, insur- 

 ance companies, and some individually owned capital. Why is this 

 class of capital not put in the limiber industry? Because, in the first 

 place, the borrowing of the forest industry is not organized on a large 

 scale ; any one issue of securities is not large enough to attract attention 

 in the money markets of the world or even the United States, and hence 

 can never attain a position of marketability such as the great railroad 

 bond issues have. In the second place, the public has not recognized 

 the right of forest industry to earn stable income nor any effective right 

 to organize for betterment of its condition. 



Early railroads in the United States were financed in a highly 

 speculative manner. They have gradually moved toward an invest- 

 ment basis. Today they do not figure in spectacular stock market 

 operations partly for that reason. The speculator does not see a 

 prospect of fluctuations on the basis of which he may win profits. 

 Consequently, he leaves these, both railroad stocks and bonds, to the 

 investor. It is true, the investor is still shy of certain railroad properties 

 which from past mismanagement or from unfavorable location in 

 regard to traffic are not showing absolute certainty of adequate earnings. 

 The constant effort both of railroad managers and public regiilative 

 bodies backed by public opinion is to put these remaining properties 

 on a sure earning basis. This done, practically all railroad capital will 

 be furnished by the investor, once he is convinced that the public is 

 educated to the necessity of allowing adequate earnings. In rettirn for 

 this attitude on the part of the public, the investor will be willing to 

 firrnish railroad capital at a rate of, perhaps, 4 per cent on the bonds and 

 to 6 per cent on the stock. 



The lumber industry is far older in America than the railroad 

 industry, but, unlike the latter, the advantages of large-scale organiza- 

 tion have not been so obvious nor the wastes of destructive competition 

 so clear. However, the waste of constructing two parallel railroad 



