Stockjobber

“ It may be noticed, too, that sales of "rights," of puts and calls and straddles, and other contract rights, are regular factors in the organized exchanges. Wherever profits are to be made by leveling values as between different places or different times, speculation arises, and, with dynamic change, this means everywhere, in every business, and all the time! The shifting of labor and capital from industry to industry, leveling returns to capital and labor, involves an enormous amount of trading that would not occur in a "normal equilibrium." Much of this the Stock Exchange does. ”

“ The capitalists, in alarm, threw open the whole of their accumulated stock at greatly depreciated prices. There was no further demand for manufacturing labour, because the world was glutted with the supply, and hence arose strikes, panic, bankruptcy, and a period of almost unexampled hardship to the workman, and of serious and permanent loss to the master manufacturer. Speculation, therefore, in an old branch of industry, is perilous not only to the invester but to the prosperity of the branch itself. ”

“ If the market price sinks below the cost of production, the producer naturally suffers a loss, and diminishes his stock as soon as possible. That whole establishments engaged in industry should forsake a branch of it which is suffering from depression and enter a flourishing one, must ever remain a rare exception.649 But the discouraged manufacturer may delay renewing his stock on hand,650 replacing his machinery by new machinery; he may dismiss some of his workmen and diminish the number of days during which the others shall work. ”

“ He must do this in his own interest, for he must ever be ready to buy and sell at the demand of the broker whom the public sends to him. This is compulsory under the law of competition, for, of course although the jobber confines his attention to comparatively few stocks, he has no monopoly; there are other jobbers in the same market anxious to secure the orders which the brokers bring in. The jobber obtains his supply generally by purchase in the market, always endeavouring to charge a slightly higher price for it than that at which he has bought it or thinks he can buy it. ”

“ The capital remains unemployed for a time, during which the labour market is overstocked, and wages fall. Afterwards the demand revives, and perhaps becomes unusually brisk, enabling the manufacturer to sell his commodity even faster than he can produce it: his whole capital is then brought into complete efficiency, and if he is able, he borrows capital in addition, which would otherwise have gone into some other employment. At such times wages, in his particular occupation, rise. ”

“ The range of the jobbers speedily extended itself beyond the comparatively narrow field presented by the funds. Exchequer bills with a variable premium were invented and brought into the market, a large and lucrative business was done in lottery tickets, and even seats in parliament were negotiated on the Stock Exchange. Joint-stock companies next came into play, and these have ever since proved an inexhaustible mine of wealth to the jobbers. ”

“ Wild speculation by all classes of the community, particularly in land, mining shares, and Stock Exchange securities, but not as a rule in produce, the wealthiest capitalists in the country entering into stock speculation in the late summer, and using most unscrupulously their power over company finance to help along their purposes ”

“ Germain be preferable to an aristocracy of stock-brokers?
At all events, the law of supply and demand is beginning to redeem the situation, and, if not to restore our moral credit, at least to save the rising generation from falling into the same slough. The stock-broker industry has been overstocked, and the late young capitalists in fur overcoats, with benedictory manners, wear anxious countenances under the stress of that Old World demon, excessive competition. ”

“ You see we few men have got to run things here. It's going to be on our shoulders to see that labor is employed. A lot of small stock-holders are a nuisance. As man to man I'm going to ask each of you not to sell his stock, but if any one comes to you and asks about its value, I expect you to be loyal to our enterprise. I'll begin looking about for something to replace the plant-setting machine, and when the shop closes we'll start right up again. It isn't every day men get a chance to sell themselves a fine plant full of new machinery as we can do in a year or so now. ”

“ Simultaneously with the publication of the statement, a process known as "making a market" goes on in the Stock Exchange. The promoter, who holds all the shares, arranges with a jobber to sell them. He probably gives the jobber a call on the shares at a certain price, and anything which the jobber can obtain for them over that is his profit. Then the promoter instructs some brokers to buy the shares and others to sell them, and in this way he produces a semblance of activity. It can easily be arranged that the price shall rise rapidly enough to attract attention. ”

“ With respect to speculation, I will remark that stock-jobbing has prevailed more or less in all countries, and ever will, in some degree, notwithstanding any exertions to prevent it. If you judge from what has happened under the existing system, any change would render a melioration probable. ”

“ The older economists doubted whether anything but banking and insurance could be carried on by joint stock enterprise: now every conceivable industry, down to baking and milk-selling, is successfully managed by the salaried officers of large corporations of idle shareholders. More than one-third of the whole business of England, measured by the capital employed, [32] is now done by joint stock companies, whose shareholders could be expropriated by the community with no more dislocation of the industries carried on by them than is caused by the daily purchase of shares on the Stock Exchange. ”

“ The diminution of the capital stock of the society, or of the funds destined for the maintenance of industry, however, as it lowers the wages of labor, so it raises the profits of stock, and consequently the interest of money. By the wages of labor being lowered, the owners of what stock remains in the society can bring their goods at less expense to market than before, and less stock being employed in supplying the market than before, they can sell them dearer. ”

“ A fund may be seeking for productive employment, and find none, adapted to the inclinations of its possessor: it then is capital still, but unemployed capital. Or the stock may consist of unsold goods, not susceptible of direct application to productive uses, and not, at the moment, marketable: these, until sold, are in the condition of unemployed capital. Again, artificial or accidental circumstances may render it necessary to possess a larger stock in advance, that is, a larger capital before entering on production, than is required by the nature of things. ”

“ Nor is Capel Court an exception. When the fate of a jobber depends on the turn which the market may take,—when sorrow or success hangs upon a word,—when family, friends, and fortune are in the balance, and a rumored falsehood may sink or save,—it is not in humanity to resist the temptation; and it has, unhappily, become too general a practice to stop at no invention, and to hesitate at no assertion, which may assist the inventor. From this cause the Stock Exchange is rarely mentioned with that respect which it merits, as the theatre of the most extensive money transactions in the world. ”

“ The investor lends his money on perfectly safe security to the aid of commerce and industry, expecting a comparatively small return, but that a safe one. By so doing he is encouraged in thrift, whilst commerce and industry enjoys the benefit of the capital, and the Stock Exchange is the medium of it all. The speculator, less conservative, risks money, the loss of which he is perfectly well able to afford, in the furtherance of experiments in commerce and industry, be it the trial of a patent or the opening up of a mine. ”

“ The labor-master is under the impression that an over-stocked labor market is for his advantage. Here he labors under a mistake. An over-stocked labor market means that the supply is greater than the demand, and that a portion of the workmen are idle; it also means low wages, as the result of competition. Now, a workman who is only employed a portion of his time, gets into irregular and idle habits ”

“ The same circumstances determine the variation of profits, but in an opposite direction; the increase of stock, which raises wages, tending to lower profit through the mutual competition of capitalists. “The whole of the advantages and disadvantages of the different employments of labour and stock must, in the same neighbourhood, be either perfectly equal or continually tending to equality”; if one had greatly the advantage over the others, people,would crowd into it, and the level would soon be restored. ”

“ In years of rising prices, the 'base stock' method causes an understatement of income; for it disregards the gains actually realized through liquidation of low price stock on a high price market. In times of falling prices, it causes an overstatement of income; for it ignores the losses which result from the consumption of high price stock. This method may, like many reserves which business men set up on their books for their own purposes, serve to equalize the results of operations during a series of years. ”

“ Once more, it is well for all that some men have genius to organize capital, and labor, and natural resources for manufacture on an enormous scale. It is a very stupid man who would begrudge to such organizers large rewards for their work. But men are beginning to see that the merits of the organizers of industry, as well as of the inferior laborers, are frequently credited to stockholders. The claims of stockholders to surplus values, after market rates of interest, and rent, and wages are paid, may possibly represent a presumed service to society which stockholders as such do not perform. ”

“ Private firms might initiate a practice of reserving a certain amount of their capital to constitute a kind of stock for their workmen to invest their savings in, under—if that were legalized—limited liability. One advantage of this plan over the ordinary industrial partnership would be, that while, like it, it would enhance the workmen's zeal in their work, it could not possibly have the effect of reducing wages, because [Pg 340] the stock would be a free investment, and would probably not be taken up by all or by more than a majority of the workmen. ”

“ One sees it in the speculations of laboring men, in the ventures of merchants outside of their regular business, in the gift enterprise shops, in the church-fair raffle and grab-bag. As I have before stated, buying shares in the stock market in the hope of a rise not based on development is as pure gambling as putting money on a monte card, and its evil effects are seen by the hundreds of working men practically ruined thereby. ”

“ A worsted manufacturer, in like manner, who was on the verge of insolvency, offered his mills to a joint stock proprietary, who eagerly accepted them on his terms—paid a sum for the concern, which he forthwith invested in land, and gave him a salary, for managing his own works, more than equal to all the profits they ever realized. ”

“ It is the income drawn from land and labour, and not any benefit rendered to commerce by stock, which causes its wealth. And this fact is the true reason, why stock transplants men from the natural interests of society, into the artificial interest of paper and patronage.
To buy cheap, and to sell dear, is admitted to be the object of commerce. The English mode of effecting these objects, is to compel labour to sell, and foreign nations to buy, at the prices which paper monopoly shall settle. ”

“ Individual promoters worked at the business of building up joint-stock schemes, then it grew to syndicates, and now we have wealthy firms, with large machinery, whose whole time and staff are devoted to hunting about the world for powers to bring out foreign loans, for concessions for making railways, docks, harbours, gasworks, and the like. When they have procured one or the other, they fix the amount of capital, cut it up into shares, and administer them to the public, by much the same process as the Strasburgers enlarge the livers of their geese. ”

“ But the stock-broker, as he exists in the every-day life of our community, typifies signally the gambler’s yearning to gain wealth by short cuts, and the monomania which regards as pitiable those who do not possess and display the gewgaws of feverish, fashionable materialism. There are stock-brokers in all the great capitals of the world, but nowhere has the vocation swallowed up the sons of the best people to the extent that it has done here during the last thirty years. ”

“ It countenanced, he said, "the dangerous practice of stock-jobbing, and would divert the genius of the nation from trade and industry. It would hold out a dangerous lure to decoy the unwary to their ruin, by making them part with the earnings of their labor for a prospect of imaginary wealth. ”