LABOR, INTELLIGENCE AND MONEY 97 



and that next most largely distributed, goes to the workers 

 through increase of wages, and thus it happens that the work- 

 ingman gains simultaneously in two ways. He gets more 

 money for his work and more goods for his money. 



Having reviewed the position of our great consolidated 

 corporations as the result of an economic evolution, some- 

 thing should be said with regard to their capitalization. In 

 general there has been much greater conservatism in the capi- 

 talization of industrials than there was in the original capi- 

 talization of railroads. Our railroads were built principally 

 for the amount of the bond issues, and the stock represented 

 the capitalized hopes of the projectors. The issues of indus- 

 trial bonds have been considerably below the actual value 

 of the tangible assets, and industrial stock issues have gen- 

 erally been based on actual earning capacity. Still it is un- 

 doubted that there has been more than one instance of marked 

 over-capitalization of industrials, and no proper legislative 

 measure to remedy this wrong or prevent its recurrence 

 should be neglected. Fortunately, the evil caused by careless 

 investing and unwise capitalization tends to correct itself by 

 natural laws. Investors, confused by the few inflated in- 

 dustrials which were put out simultaneously with the sound 

 ones, are afraid to buy, and the organizers, unable to sell 

 their securities, now realize that sound capitalization is the 

 best policy. 



In organizing industrial companies, preferred stock, which 

 is intended for an investment security, should not be issued in 

 excess of tangible assets, except in special cases, where there 

 is a very large earning capacity, protected by very valuable 

 patents or trade marks. Verified earnings and regular divi- 

 dends will establish confidence, and the prices of the shares 

 in the well organized and well managed industrials will ad- 

 vance, as did the stocks of railroad companies which were 

 originally issued for good will. In reviewing the evolution 

 of industrial combinations I have taken a general and com- 

 prehensive view. In this evolution, as in all human affairs, 

 there are imperfections and abuses for which it is our duty to 

 find remedies. The man of narrow view to whom the imper- 

 fections are pointed out loses sight of the great benefits. He 

 Vol. a— 7 



