22 W. G. Langworthy Taylor 



size of the enterprises of exploration, trade, and manufacture, 

 which the growing markets of the modern world invited. In- 

 deed, it has always been possible for persons of means to do this. 

 The first encouragement from governments consisted, however, 

 in privileges of monopoly and of the exercising of sovereign 

 power in foreign parts, which made it seem more attractive and 

 safe for these large partnerships to be constituted. Subsequently, 

 the principle was extended to the more modern business enter- 

 prises of manufacturing and banking. It was noticed that the 

 associates often suffered very seriously from legal responsibility 

 which they were subject to with respect to enterprises over which 

 they had little or no control, and with which they had little or no 

 connection, except the important fact that, through the society 

 they had formed, they contributed to them their capital. The 

 idea that responsibility for management was all too strictly asso- 

 ciated with contributions of capital was awakened by the fact 

 that many of the contributors were women and minors, persons 

 that were not supposed to be fully competent in business matters, 

 and therefore deserving of the protection of the law. Conse- 

 quently, a general course of legislation was entered upon in all 

 countries, tending to render the associates in business enterprise 

 free from responsibility for the failure or mismanagement of the 

 enterprise, beyond the sums which they had severally contributed, 

 or, as in the United States National Banks, beyond a limited 

 multiple of such sums. 



Thus, the legislative encouragement towards the laying to- 

 gether of capitals was followed by a separation of economic in- 

 terests from economic responsibility, and out of that weakening 

 of individual responsibility sprang up bad management, incapac- 

 ity, flagrant abuse, and peculation. The attempt to cure the 

 second series of evils was not met by removing the original 

 cause, 1 namely, the privileges and immunities whereby the asso- 

 ciates were induced to come together. Doubtless that could not 



Parallel with this remedying of the evils of limited liability of stock- 

 holders by a system of checks and balances is the remedying of the evils 

 of note-inelasticity by a mechanical note-redemption enactment. The re- 

 quirement of a pledge of bonds made the notes inelastic. The radical cure 

 lies in the repeal of the requirement, as proposed in the Fowler bill. 



242 



