F.— ECONOMIC SCIENCE AND STATISTICS. 105 



It is Joint Stock which has made possible the evolution of the great 

 concerns, and which has also made them powerful competitors, so that, it 

 is said, an ever intenser incidence of risk is a fundamental cause of the 

 combination method. But Joint Stock has also itself modified the risk 

 element. 



So long as an industry was in the hands of a large number of producers 

 who were individual in the sense of finding their own capital, the com- 

 petitive struggle, which destroyed a business, ruined individuals. There 

 are modern instances of interference with this competitive result for this 

 very reason, when an industry was still of that grade ; for example, the 

 remarkable scheme devised for the Greek currant trade, and known as 

 the ' Retention.' As the ruin of individual small cultivators would 

 otherwise have been the result, the Government organised a system of 

 maintenance. But when the units of enterprise are Joint Stock Com- 

 panies, liquidation does not imply ruin in the same way, because Joint 

 Stock brought with it the method of distributed investment. In the case 

 of failure, some people lose part of their capital ; perhaps because some 

 other investment of their own has been unusually successful. The 

 ramifications of interests can now become very great, and the question, 

 what method of creating industrial control is most rational, has to take 

 account of this, in conjunction with the fact that profit involves a risk 

 premium, and that these are the understood conditions of investment. 

 By the fact of distribution of investment, the industrial risks of capital 

 are to be contrasted with those of labour, since wage-earners as a rule can 

 work for only one business at a time. 



The same considerations apply to the entrance of new competition. 

 Enterprises entering the field are not now individuals staking everything 

 on little-known chances, but may be directed by and largely composed of 

 individuals who are in that same field already, and who know a good deal 

 of its conditions. 



In a second degree, these modifications of personal risk appear, through 

 the practice, also rendered possible by Joint Stock, of company investment. 

 While the individual may distribute his direct investment, his risks are 

 spread again by the system of mutual company holdings, a company in 

 which he invests having done this further spreading for him. 



While, therefore, the direction of an independent business does and 

 must consider its shareholders as if they had no other investment interests, 

 the intensity of risk in its final incidence is not fully represented by 

 Directors' statements. What applies to shareholders, also applies to 

 Directors as such. The ' spread ' of Directors' interests is a very remark- 

 able fact. 



As distinct, therefore, from the pure desire to rationalise, that is, to 

 organise industry in a systematic way under some kind of unified control, 

 it is not easy to assign its right place to the ' revulsion against risk." on 

 which also the desire for combination has rested its case. 



It is always necessary to distinguish between risks which a combination 

 may have been formed to overcome, and such as it may have created by 

 its own policy. In many notable cases the alleged struggle against 

 competitive risks was not so much ' rationalising ' as ' de-un- 

 rationalising.' 



