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MORALS IN TRADE AND COMMERCE


A LECTURE BY
FRANK B. ANDERSON

President of
The Bank of California
National Association


DELIVERED BEFORE THE STUDENTS OF
THE UNIVERSITY OF CALIFORNIA
BERKELEY
February 15th, 1911


Under the "Barbara Weinstock" Foundation




MORALS IN TRADE AND COMMERCE


The most beautiful thing about youth is its power and eagerness to make
ideals, and he is unfortunate who goes out into the world without some
picture of services to be rendered, or of a goal to be attained. There
are very few of us who, at some time or another, have not cherished
these ideals, perhaps secretly and half ashamed as though to us alone
had come an inspiration of a career that should touch the pulses of
the world and leave it better than we found it. And in the making of
youthful ideals we have changed very little with the passage of the
centuries. The character of the ideals has changed with changing needs,
but not we ourselves. Our young men still see visions; they still fill
the future with conflict and with struggle and prospectively live out
their lives with the crown of achievement in the distance. It is well
that it should be so. The ideals of our youth are the motive-power of
our lives, and even those of us who have lived far into the eras of
disappointment would not willingly wipe from our memories even the most
extravagant day dreams from which we drew energy and hope and fortitude
and self-reliance.

If ideals have such a power over our lives, if they energize and direct
our first entry into the world of affairs--as unquestionably they
do--they must be counted among the real forces of the day and as such
they are as much a matter for our scrutiny and control as educational
development or physical perfection. Not, perhaps, in the same way, for
our ideals belong to that private domain wherein we rightly resent
either dictation or authority from the outside. But we can apply both
dictation and authority for ourselves. With a firm determination to be
upon the right side of the great issues of the day, to uphold honor and
justice in public affairs, to uproot the tares and to sow the wheat in
the domain of national business, we can apply our whole mental strength
to a proper determination of those issues, to a correct distribution of
praise and blame, to a careful adjustment of the means to the end and
to a precise appreciation of the facts. We can satisfy ourselves that we
have heard both sides and that enthusiasm has not deadened our ears to
all appeals but the most noisy. We can see to it that our attitude is
the judicial one and that our minds are so fixed upon the truth and upon
the whole truth that there is no room for prejudice or for passion. All
these things can be reared as a superstructure upon the groundwork of
lofty ideals, for just as there can be no progress without ideals so
there can come nothing but calamity from ideals that are not guided by
reflection and by knowledge.

Never before has it been so hard to know the facts as it is to-day.
If we must give credit to the press for the diffusion of knowledge
so also must we recognize its equal power to diffuse prejudice and
bias. The newspaper and the magazine of to-day are vast and intricate
machines that supply the great majority of us with practically all the
data upon which we base our judgments. The public mind and the popular
press act and react upon one another, the press setting its sails to
catch every wind of public interest and the public upon its part
demanding to be supplied with all those departments of news to which
at the moment it is specially attracted. Commercialism and competition
have barred a large part of the press from its rightful office as leader
and molder of opinion and have reduced it to the position of a clamorous
applicant for public favor. The press, like everything else, is ruled
by majorities, and in order to live it must cater to the weaknesses of
popular majorities, it must reflect their prejudices, it must sustain
their ill-formed judgments, and it must so sift and winnow the news of
the day that the whims and the passions of the day shall be sustained.
There are some newspapers and magazines that are honorably willing to
represent only ripe thought and unbiased judgments, but they are not in
the majority.

What verdict would the historian of the future pass upon the
civilization of to-day if he were restricted to the files of our
newspapers for his material. It must be confessed that we of to-day, in
the hurry and tension of modern life, are hardly in a better position.
Whatever we may suppose to be our attitude toward the press, with
whatever scorn we may regard its baser features, it has an effect upon
our minds far greater than we suppose. It is the steady drip of the
water upon the stone that wears it away. It is the steady presentation
of one aspect of human life, and that the lowest, that slowly jaundices
our view and that produces either a rank pessimism or else an
indignation against evil so strong as to efface judgment and to paralyze
reason. Day after day we see human nature presented in its worst aspects
and only in its worst aspects. We see fraud, cupidity, tyranny, and
violence paraded before us as being almost the only activities worth
reporting. Dishonesty is offered to us as the prevailing rule of life,
and we are asked to believe that the spirit of commercial oppression has
allied itself with the machinery of government for the oppression of a
nation. It is a dreary picture, a picture that, if faithfully drawn,
would justify almost any remedial measures within human power, a picture
that by the skill of its presentation arrests attention and almost
compels belief.

That we so seldom compare the picture with the original is one of the
anomalies of modern life. And yet the original is before us and around
us all the time, inviting us to notice that it is only the exceptional
that is reproduced with attractive skill and that it is only the
abnormal that is emphasized with adroit arrangements of line and color.
Day after day we read of the sensational divorce cases, but there is
not one line of the tens of thousands of happy marriages upon which no
cloud of discord ever falls. Day after day we read of the scandals of
municipal government, but how often do we remember the great army of
municipal officials who do their whole duty devotedly, courageously,
unselfishly? Day after day we hear of corporation tyranny, corporation
lawlessness, or corporation greed, but what recognition do we give to
corporations that obey the laws, whose operations are above censure and
who add immeasurably to the wealth of the country and to the prosperity
of every citizen in it? With this constant presentation of depravity,
this incessant harping upon the one string of human dishonesty, what
wonder that our visions should be distorted or that we should exclude
from our horizon almost everything but the sinister features of modern
life. What wonder that the young men and women should look at the career
before them through an all-pervading fog of suspicion or that the days
ahead of them should seem to be filled with the struggle against a
universal dishonesty.

It is from such illusions as this that we must free our ideals if we
would do effective work for the world and for ourselves. There are real
enemies enough without erecting imaginary windmills to tilt against.
Frauds, depravities, tragedies surely await us, now as ever, but
we shall be doubly armed against them if we look upon them as the
exceptions and not the rule and if we draw strength from the great
background of human virtue and honesty. And there is such a background,
unchanging, resistant, resolute, even though the limelight of publicity
be persistently directed upon the few sinister figures on the front of
the stage. We cannot afford to lose our faith in human nature, we cannot
afford to shut out the greater and the best part of life or to gaze so
persistently upon the abnormal that we can no longer see the normal
and the ordinary. Let us cultivate our sense of ethical values and of
ethical perspective rather than to crouch behind a shrub until it looks
like a forest.

We are indebted to our commercialized newspapers and magazines for our
distorted views of human life and for the cynicism that it is the
momentary fashion to affect, but that is always disfiguring to the mind
that harbors it. Certainly we can get no such views and no such cynicism
from our own experience or from personal knowledge of the men and women
who surround us. Honesty is a more familiar sight than dishonesty. All
the common and familiar processes of our daily life are based upon an
expectation of honesty, and if you will stop to consider for a moment
you will see that those processes could not go on without that
expectation. And how seldom is it falsified. Sometimes of course there
comes the jar of disappointment, but the fact that there is a jar shows
that it is the exception and not the rule. However much we may talk of
guarantees and safeguards and securities, however much we may talk of a
business method or instinct that takes nothing for granted, it remains
a self-evident fact that we must take human honesty for granted, that
we must assume that the man with whom we do business intends to do
it rightly and honorably, that he is actuated by a settled principle
of fair conduct that will work automatically, and that without this
automatically working standard of behavior all our guarantees and
safeguards and securities would really have very little value. It is the
universal expectation of fair dealing that makes business possible and,
in fact, it is this universal expectation of good behavior that makes
its breach sufficiently novel to be reported in the newspapers. If fraud
and chicanery and violence were the order of the day, they would have no
value as news. After twenty-nine years of dealing with human nature in
a business where it is seen at its extremes--at its best and at its
worst--I believe that the great majority of men and women in business
are honest and I am certain that if this were not so, it would be
impossible to carry on business. Take the statistics of the credit
insurance business, a business that may be said to be based upon an
assumption of human honesty; examine the statistics of the losses made
in business and you will find that these are but a small fraction of the
total amount involved and even this small proportion is chiefly due to
errors of judgment or to causes in which dishonesty plays no part. Ask
any banker how much he relies upon human honesty as an indispensable
background to the ordinary precautions and safeguards of his business.
Ask him what is his attitude toward a client whom he detects in a lie or
in sharp practice, and he will tell you that he has no use for such a
man. He would rather be without his business and free from all contact
with those whose natural and innate sense of honesty is lacking. Go
wherever you like, and you will find the same expectation, the same
assumption of honesty. You will find that no business can be carried on
without it. Whatever high and honorable ideals you may have formed you
need have no apprehension that they will be scorned in the business
world or that you will have to put them away to win success. It is
in the business world that they will be valued, and even the mental
equipment that you are now seeking will be less important to you, a
lesser guarantee of success than your sense of honor and truth and
probity. When you reach the business world--and many of you perhaps will
go into the great corporations that are now ceaselessly paraded before
you as wolves and as public enemies--you will find there the same kind
of human nature that you find here in college, the same estimation of
probity and of fair dealing. If you do mean or underhand things, you
will find that they are branded in the same way there as here. You will
find that manliness and integrity are the rule and not the exception,
and I will venture upon the prediction that when the time comes for you
to look back upon your career you will see that there has been a steady
improvement all along the line, just as those who are already able to
look backward find that there has been an improvement since their own
college days. But that will rest with yourselves, for the future is in
your own hands. It is for you, gentlemen, to see that moral and ethical
progress is unbroken.

Now let me say a word about the corporations of which we hear so much in
the newspapers and magazines and that are so persistently represented as
enemies of the community and as vampires that are sucking the
life-blood of the nation. I think there may be plenty of room here for
clarification of our views, and, indeed, we should all be better for it
if we could give more precision to our thinking and free ourselves from
the imputations that have been allowed to cluster around certain terms.
You may be sure that I am under no inclination to defend criminality or
wrong-doing or to deny their existence wherever they are actually to
be found. There are criminal corporations just as there are criminal
doctors, and lawyers, and clergymen. Wherever men are gathered together
there you will find a certain number who are disposed to seek their
personal advantage in reprehensible ways, but because some doctors and
some lawyers and some clergymen are criminals we do not attach an
imputation to their respective professions. We are content to say that
there are black sheep in every flock and so pass on. But the newspapers
and the magazines have seen fit to concentrate their attention upon
the criminal or the illegal acts of certain individuals who belong to
corporations and to explain those acts in a manner which often leads
their readers to assume that the acts are an essential part of
corporation business. As a result, the very word "corporation" has taken
on a sinister meaning, and we are asked to look upon the corporations
very much as the Rhine peasants used to look upon the robber barons who
were accustomed to swoop down upon them and carry off their flocks. A
corporation is absolutely nothing more than a partnership of individuals
who prefer to do business under certain regulations imposed by the
government. There is no difference between the corporate and the
individual ways of doing business except a piece of stamped paper issued
by the Secretary of State. The corporation is made up of individuals who
have just the same ideas of honor as you have yourselves, who have just
as much integrity, just as great a love of fair play. A man does not
change his nature just because he turns his business into a corporation
any more than he changes his nature because he moves from one street to
another or from the first floor to the second. A corporation then is a
combination of men that has been formed under the sanction of law to
carry out certain projects that it would be difficult or even impossible
to carry out in any other way. The men forming those corporations are
just such men as we meet in daily life, no better and no worse, and
therefore with all those normal inclinations toward honesty that we are
conscious of possessing ourselves and that we are in the habit of
finding in others. The fact that these men have formed themselves into
a corporation is no more significant of evil than a combination or a
partnership among doctors or laborers. It is a part of the spirit of the
age, an age that is called upon to do great things, to develop vast
natural resources, to feed and clothe great centers of population, and
to undertake a hundred other enterprises too large for the strength of
the individual. I should like you to think over the real meaning of
this term "corporation" in order that you may understand that it has
no sinister significance whatever, that it is nothing more than a
partnership that has registered itself under certain legal conditions
for purposes that are laudable and honest. If you will do this, you will
understand at once how senseless is the outcry against corporations as
such and how absurd it is that any stigma of dishonesty should be placed
upon a particular form of doing business that is exactly like other
forms of doing business, with the addition of a legal registration.
As I have already said, there are some corporations that break laws,
or rather certain individuals who are parts of corporations and who
break laws, just as there is a certain small proportion of law-breakers
in every section of every community. But that fact carries with it
no reflection upon corporations as such, and when our sensational
publications and politicians use the word "corporation" as though it
were an alternative term for brigand or pirate they are simply assuming
a public ignorance that may exist outside, but that certainly ought not
to be found within a university. They are taking advantage of a nearly
universal disposition to believe one's self injured and are appealing
not only to ignorance, but to a low form of cupidity and of mob greed.
They would have no success in their crusade against corporations as such
if there were any general understanding of the meaning of terms or if
it were generally recognized that there are thousands of corporations
in this State, and thousands in every State against whom no whisper
of wrong-doing has ever been raised and who are doing a useful work,
of which every individual among us is a beneficiary, directly or
indirectly. Now it is not only in our definitions that we need to be
precise and to think clearly. We have already seen the need of a better
discrimination between the very few corporations that are accused of
breaking the laws and the vastly greater number that we never hear of at
all and that do their business as quietly and honestly as the baker or
the butcher. If lawbreaking is to be found in the business of some
corporations, it is incumbent upon us to determine just in what way the
law is being broken, why it is being broken, what sort of law it is
that is being broken, and how much moral turpitude or public wrong is
involved. All these factors would be determined by a judge upon the
bench before passing sentence upon the meanest malefactor, and yet we
find that the public is constantly urged by the newspapers to pass
sentences of ruin and confiscation upon corporations as a whole, with
their tens of thousands of innocent stockholders, without any kind of
inquiry and under the influence of uninformed passion.

There is no department of ethics more disputed than the meaning of
abstract right and wrong, and as I am not talking either on philosophy
or ethics I will ask you to accept just such commonsense definitions as
can be applied to the business world and that may be usefully employed
as a working basis. Commercial morality and honesty are determined by
each community for itself in the light of its own special needs and
point of evolution. To-day we hold many things to be wrong that were
done by our forefathers with clear consciences, and on the other
hand we now believe that many things are right that were held by our
forefathers to be wrong. There was a time when slavery did not offend
the most delicate conscience, and if we go still further back, we shall
reach a time when theft was almost the only crime recognized and when
wholesale murder was a virtue. Every age had its own standards, and it
would be absurd to argue that an act was wrong if it received the
sanction of the whole community. It was the communal conscience that
determined all problems of right or wrong, and it is still the communal
conscience that gives us our definitions of morality and honesty. Here,
in my opinion, is where a great part of our trouble arises. The communal
conscience has changed, and some things regarded right and proper twenty
years ago are frowned upon to-day. But business methods tend to become
rigid and inelastic, and a sudden evolution of the public conscience
leaves them in the rear. Then comes a sudden recognition of the
disparity, and laws are passed to prevent the practices that formerly
went unchallenged. Usually these laws are passed in a hurry and by
politicians who have no clear grasp of the problem. As a result the laws
are ineffective. That is to say, business, clinging conservatively to
its familiar ways, finds a plan to continue those ways in spite of the
laws passed to prevent them and then public opinion, finding no relief,
is angered,--not at the breaking of a law, but because the law itself
was ill-designed and ineffective. In other words, public opinion has
failed in its effort to force the individual to set aside his own
interests for what public opinion considers to be the interests of the
community. Public opinion in this country is not a steady and persisting
force, as it is in some older communities. It moves spasmodically and
after long periods of quiescence and usually under some stress of
excitement, which prevents deliberation and therefore effectiveness. Law
being more unwieldy than conditions, naturally lags behind them, and
what we have to recognize is a change in conditions and in laws and not
an outbreak of lawlessness. Another evil result from the impetuous way
in which we make laws is that they are not enforced because they are not
in harmony with the views of the community. The statute books of every
State are encumbered with laws passed in moments of hysteria and never
put into operation, or else allowed to lapse after a few months of
confusion. Every newspaper in California, for example, breaks the law
every day when it prints a news item without appending the name of the
writer, and probably we are all of us breaking laws of which we never
heard. This sort of thing brings a law into contempt and robs it of the
sacredness that should attach to it. The Sherman anti-trust law, for
example, would bring the whole business of the country to a standstill
if it were strictly enforced, and I believe it is not good to bring
large and innocent sections of the community within the scope of a
criminal law simply for the purpose of reaching a minute proportion
whose methods are flagrantly bad. If the Sherman anti-trust law were
enforced, it would have to be repealed at once, and I think honest
traders have a right to complain of a law that makes them technical
criminals and is enforced only against notorious wrongdoers. The law
should be so framed as to reach only wrongdoers and to leave honest
traders outside of even its technical scope.

President Roosevelt was emphatic in his declaration that he intended to
enforce the Sherman anti-trust act, and during the four years beginning
with 1902 his administration was active in that direction.

In 1906 he stated: "Combinations of capital, like combinations of labor,
are a necessary element in our present industrial system. It is not
possible completely to prevent them; and, if it were possible, such
complete prevention would do damage to the body politic. It is
unfortunate that our present laws should forbid all combinations,
instead of sharply discriminating between those combinations which do
good and those combinations which do evil.

It is a public evil to have on the statute-books a law incapable of
full enforcement, because both judges and juries realize that its full
enforcement would destroy the business of the country; for the result is
to make decent men violators of the law against their will and to put a
premium on the behavior of the willful wrongdoers. Such a result, in
turn, tends to throw the decent man and willful wrongdoer into close
association, and in the end to drag down the former to the latter's
level; for the man who becomes a law-breaker in one way unhappily tends
to lose all respect for law and to be willing to break it in many ways.
The law as construed by the Supreme Court is such that the business of
the country cannot be conducted without breaking it."

But let it be admitted that there are cases where abuses exist and where
methods of doing business that were harmless enough and even necessary
enough a few years ago are now working hardship upon the public as a
result of changed conditions. These abuses should be corrected; there is
no question about that, and they will be corrected either by violent
methods that will leave behind them a heritage of bitter resentments and
wrongs or by the way of a real statesmanship that will recognize only
facts and that will do justice by methods that are themselves just. For
a long time to come it must be the greatest of all problems confronting
the statesmanship of our day, a problem that must try our patience and
our capacity for self-government. Do not imagine that America stands
alone on this perilous path of reform. All the countries of civilization
stand in the same place. All are confronted with the same conflict
between new ideals and old methods, between the spirit of to-day and the
mechanism of yesterday. The problems of other countries arise from their
own peculiar conditions just as our problems arise from our conditions,
but their essence, their purport, is the same. And do not imagine that
there is any one solution that can be applied or that there is any
virtue in the sovereign cure-alls that are clamorously urged upon us
by demagogues and by reformers who are eager to reform everything and
everybody but themselves. There is no such panacea. It is to be found
neither in municipalization, nor nationalization, nor confiscation, nor
any of the nostrums advocated so wearisomely by sensation mongers. There
is indeed no hope for us except by laborious study of conditions and by
an infinitely cautious advance from point to point, so that there may
be no injustice, no concessions to prejudice, no incitements of class
feeling, no embittering of relations that should be cordial as between
citizens of the same republic, whose differences are infinitely small as
compared with the well-being of a great nation. Of all the dangers that
threaten the path of the reformer that of injustice is the greatest. It
is better even that abuses should continue for a time longer than that
they should be corrected by injustice and by the infliction of hardships
upon those who are wholly innocent. Two wrongs can never make a right,
and wherever we find a so-called reform that is based upon injustice be
assured that we are only substituting one evil for another and that our
latter end shall be worse than the first. It would be impossible for one
now to indicate the direction in which reforms should lie, and there is
of course nothing human to which reform is impossible. But it is perhaps
suitable that I should indicate some of the ways that can end in nothing
but calamity, however alluringly and speciously they may be advocated.
For example, there is neither good sense nor honesty in penalizing a
corporation because some of its officials have done wrong. Wherever
wrong has been done, the guilt is with some individual and not with
the corporation as a whole. Find out who that individual is and let
him answer to the law, but do not visit his misdeeds upon innocent
stockholders who have had nothing whatever to do with the offense,
who knew nothing of its commission and could have done nothing to
prevent it if they had known. Remember, that a penalty inflicted upon
a corporation is actually inflicted not upon guilty persons but upon
innocent investors.

Let me give an illustration of the so-called "reforms" that are
recklessly urged upon us to-day and that are to be found in operation
here and there throughout the country. I refer to the matter of street
franchises. Now it may be true, it probably is true, that in many cases
these franchises have become of great value and that they ought not to
be granted without adequate return. But would it not be just to remember
that when these franchises were originally granted they provided a
service that was absolutely essential to the growth of the community and
that those who obtained the franchises faced a serious risk to their
capital and practically threw in their lot with the prospective welfare
of the city? It is hard to realize how serious that risk sometimes was
and how problematical were the returns. The shareholders in these street
traction corporations are spread over the population and every class of
the population is represented in them. They invested their money in good
faith at a time when no question had ever been raised as to the
propriety of these franchises and at a time when these franchises were
considered to be for the public good and indubitably were for the public
good. And I will ask you if it is honest to use all the machinery of
the government, all the artifices of the politician to depreciate the
value of those franchises, to threaten their holders with confiscation,
to hamper and harass them by all the ways that are open to a
democratically governed people? I say unhesitatingly that it is
dishonest to do these things, and I will go so far as to say--believing
as I do in the good faith of the great majority--that most of those who
noisily advocate such measures would be ashamed to do so if they would
but face the facts and understand what it is that they are actually
doing and the wrong that they are inflicting upon innocent men and
women. If mistakes have been made in granting franchises, then take care
to avoid such mistakes in the future, but do not enter into a bargain
that seemed advantageous to yourselves and then repudiate it when you
find that it is not so advantageous as you thought. There is no way
to reconcile such a thing with common honesty, and it is in no way
mitigated by the fact that it is done by a community and by means of a
vote rather than by an individual and in the ordinary small affairs of
life. We all know what we should say of the man who acted in this way
toward ourselves personally, but in advocating some of the schemes that
are now recommended to us by sensational politicians, newspapers, and
magazines we are making ourselves responsible for a dishonesty far
greater than the evils that we are trying to remedy. Let us by all means
reform whatever needs to be reformed, but let us do it with clean hands.

Now, I think that I have said enough to justify my belief that these
great problems of our social life are not of a kind to be settled
off-hand by violent or radical legislation. They are not to be settled
by any one scheme or by any one plan. The only way to approach them is
by careful and conscientious thought, a minute examination of the facts
at first hand and a rigid determination to act toward corporations and
business interests in general in the same spirit of unswerving honesty
that you would wish to display to a comrade or to a friend and that you
would wish to be displayed toward yourselves. You will find that honesty
is the royal road to success in commercial life, and it is also the
royal road to all reform in our communal life. Do not go out into the
world with any expectation that you will be required to surrender the
ideals that you have formed in your youth, or that you will be asked to
choose between honor and success. Those ideals will be the greatest
capital with which you can be endowed. They will attract to you
everything that makes life desirable and without them you can have
neither self-respect nor the respect of others.

And as a last word let me recommend you not to be carried away by those
gusts of prejudice and passion that sweep periodically through the
community. There is a contagion in these things that it is hard to
resist, and so much that to-day passes for thought is not thought at
all, but merely the automatic, unreflecting acceptance of wild theories
that are enunciated with so much force that they seem to be almost
axioms. Your study of history will show you that the world has always
been subject to these waves of emotion, that are sometimes religious,
sometimes political, and seem for the time to carry everything before
them. We are passing through such a period now, a period of intense
unrest, of revolt against conditions that we ourselves made, against
methods that we ourselves created and sanctioned. I advise you to look
askance upon every movement that in the language of the day is called
popular. Do not accept a theory or a doctrine because it is popular,
but on the other hand do not reject it for that reason. Do not permit
yourselves to be carried off your intellectual feet by indignation or by
protest. Demand of every political theory that it stand and deliver its
credentials, and before you allow it to pass into the realm of your
adoption, see to it that you understand it in all its bearings and that
you have traced its results so far as is possible to your foresight; let
the final test be one of human justice and of honesty, and then with
courage use your power to aid in the formation of public opinion,
remembering that public opinion is after all the great controlling
force.




Transcriber's Note.

The typographical error "resistent" has been corrected. Variations of
hyphenation from the original document have been retained.





End of Project Gutenberg's Morals in Trade and Commerce, by Frank B. Anderson

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