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From the collection of the n z7 m Prepnger v JLlibrary San Francisco, California 2006 MAIN STREET AND WALL STREET MAIN STREET AND WALL STREET BY WILLIAM Z. RIPLEY Nathaniel Ropes Professor of Political Economy Harvard University BOSTON LITTLE, BROWN, AND COMPANY 1927 Copyright, 1926, 1927, BY WILLIAM Z. RIPLEY All rights reserved Published February, 1927 Reprinted February, 1927 THE ATLANTIC MONTHLY PRESS PUBLICATIONS ARE PUBLISHED BY LITTLE, BROWN, AND COMPANY IN ASSOCIATION WITH THE ATLANTIC MONTHLY COMPANY PRINTED IN THE UNITED STATES OF AMERICA PERSONAL NOTE THIS book is not just a treatise on economics; nor is it a handy manual for investors. It purports to go deeper than that, down toward the root of things. It is partly the expression of a lifelong aspiration to promote a greater equality of opportunity among men a more even chance at getting a living all round, and a fairer show at conserving the fruits of such activity thereafter. Only thus can there be any real pleasure in work and in thrift in the world. And it is upon the reasonable exercise of these virtues that our American democratic polity must depend for its perpetuation. It should be a prime function of government to stimulate and in every way to protect the manifestation of these basic instincts. Property should never be allowed to degenerate into an instrument of oppression. Its only justification in a free state is that it shall contribute to such an equality of opportunity for all members of the community alike, that each one shall be more able to take care of and to make the best of himself. This, then, is really a study in the relation of property to civilization. My theory of it could not be more pithily stated than in the following characterization of William Cobbett by G. K. Chesterton: He would have been as ready as any merchant or trader to face the fact that man, as God has made him, must make money. But he had a vivid sense that the money must be as solid and honest as the corn and fruit for which it stood, that it must be closely in touch with the realities that it represented; and he waged a furious war on all those intricate and sometimes imaginary processes of debts and shares and promises and per- vi PERSONAL NOTE centages which make the world of wealth to-day a world at the worst unreal and at the best unseen. But what he was at once predicting and denouncing, like a small cloud that had not yet become a universal fog, was that vast legal fiction that we call finance. In any case, against a world in which such financial mysteries were multiplying every day, in which machinery was everywhere on the march, and the new towns spreading with the swiftness of a landslide . against the whole great crawling labyrinth of the modern state which is almost one with the modern city. And yet, in contradistinction to Cobbett, I would prefer the weapon of honey rather than that of sting. These essays are not "attacks." This is not a so-called muck- raking enterprise. Never perhaps in the history of the world have so many constructive forces been assembled in one country at one time as in the United States during this present prolonged period of prosperity. All the more reason, then, that with full acknowledgment of what is so sound and wholesome, we should inquire deeply concerning those things which might better serve the common good than is now the case. Nor is the underlying thought in this overnight study by any means new. One finds it notably in Brandeis's Other People's Money, which was concerned primarily, however, with then existing railroad conditions; in Veblen's Absentee Ownership and Business Enterprise, most stimulating, but perhaps too promiscuously accu- sative; and in Lippmann's Drift and Mastery, presenting the issues in a striking literary way. By no means insignificant, also, was the work of the New York State Life Insurance Commission of 1910, under the masterful direction of Mr. Charles E. Hughes. But it is the appli- cation of these recognized general principles to the specific post-war period of prosperity in which we are now living which justifies this further development of the topic. Without the Liberty Loan campaigns, leading to the great PERSONAL NOTE vii / increase of popular investment in business and other corporations, there would have been no need of reiterating and further emphasizing the same thesis. The surpris- ing development of employee ownership of corporate securities and the spread of customer ownership among the electrical public utilities have redirected attention thereto. But most persistent and striking of all has been the tendency, since the depression of 1920, toward the transformation of hitherto purely personal busi- nesses, closely owned, into very widely held and loosely governed public enterprises. This it is which brings the problem of corporate organization and government into such peculiar prominence at this time. I have confessed the theft of a part of my title to Mr. Sinclair Lewis, the distinguished author of Main Street. He has been pleased to send me his "Godspeed" in the enterprise. To a host of others I am also indebted in many ways. The only possible reparation will be that, despite its manifest shortcomings, the volume shall stimulate discussion and inquiry. That it may bring forth fruit in due season is my most earnest wish. WILLIAM Z. RIPLEY CONTENTS PAGE PERSONAL NOTE v I BEFORE THE WAR: How THINGS LOOKED THEN. By Woodrow Wilson 3 II CORPORATE VEHICLES: POST-WAR ENGINES OF FINANCE 16 III GETTING OUT FROM UNDER: VARIOUS ANGLES OF IT 55 IV GIVING UP CONTROL: A BIRTHRIGHT FOR POTTAGE 78 V NEW THOROUGHFARES: A WAY OUT? 118 VI LIGHT AT THE CROSSWAYS: STOP, LOOK, LISTEN! . 156 VII IMPUBLICITY: WHAT TO Do ABOUT IT 208 VIII OUR RAILROADS: SAFE FINANCIAL COMMON CAR- RIERS 229 IX PLANNING AHEAD, OR HAPPY-GO-LUCKY WHICH? 255 X MORE LIGHT; AND POWER, Too! 276 XI PUBLIC UTILITIES: STILL . MORE ABOUT THEM . 310 355 MAIN STREET AND WALL STREET I BEFORE THE WAR HOW THINGS LOOKED THEN 1 By WOODROW WILSON WE have witnessed in modern business the submergence of the individual within the organization, and yet the increase to an extraordinary degree of the power of the individual of the individual who happens to control the organization. Most men are individuals no longer so far as their business, its activities or its moralities, is concerned. They are not units, but fractions; with their individuality and independence of choice in matters of business they have lost also their individual choice within the field of morals. They must do what they are told to do, or lose their connection with modern affairs. They are not at liberty to ask whether what they are told to do is right or wrong. They cannot get at the men who or- dered it have no access to them. They have no voice of counsel or of protest. They are mere cogs in a machine which has men for its parts. And yet there are men here and there with whom the whole choice lies. There are men who control the machine as a whole and the men who compose it. There are men who use it with an imperial freedom of design, whose power and whose individuality overtop whole communities. There is more individual power than ever, but those who exercise it are few and 1 Annual Address, American Bar Association, Chattanooga, Tenn., 1910. Reports^ pp. 426-434, 439. Reprinted by permission. 4 MAIN STREET AND WALL STREET formidable, and the mass of men are mere pawns in the game. The present task of the law is nothing less than to re- habilitate the individual not to make the subordinate independent of the superior, not to turn corporations into debating societies, not to disintegrate what we have been at such pains to piece together in the organization of modern industrial enterprise, but to undo enough of what we have done in the development of our law of corporations to give the law direct access again to the individual to every individual in all his functions. Corporations do not do wrong. Individuals do wrong, the individuals who direct and use them for selfish and illegitimate purposes, to the injury of society and the serious curtailment of private rights. Guilt, as has been very truly said, is always personal. You cannot punish corporations. Fines fall upon the wrong persons; more heavily upon the innocent than upon the guilty; as much upon those who knew nothing whatever of the trans- actions for which the fine is imposed as upon those who originated and carried them through upon the stock- holders and the customers rather than upon the men who direct the policy of the business. If you dissolve the offending corporation, you throw great undertakings out of gear. You merely drive what you are seeking to check into other forms or temporarily disorganize some impor- tant business altogether, to the infinite loss of thousands of entirely innocent persons and to the great inconven- ience of society as a whole. Law can never accomplish its objects in that way. It can never bring peace or command respect by such futilities. I-regard Iftie corporation ^^indispensable to modern -I not of its size or business enterprise. am jealous mighty BEFORE THE WAR 5 if you will but abandon at the right points the fatuous, antiquated, and quite unnecessary fiction which treats it as a legal person; if you will but cease to deal with it by means of your law as if it were a single individual not only, but also what every child may perceive it is not a responsible individual.

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