Frank Albert Fetter.

Source book in economics, selected and ed. for the use of college classes online

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"futures" show in five years an annual average of 480,000,000
bushels, the year 1907 showing 610,000,000. Although some
of these sales were virtually bets on price differences, all of
them were contracts enforceable at law. . . .

The Cotton Exchange. The New York Cotton Exchange
was incorporated by a special charter in 1871. Its member-
ship is limited to 450. It is now the most important cotton
market in the world, as it provides the means i'or financing
about 80 per cent, of tlie crop of the United States and is
the intermediary for facilitating its distribution. In fact, it


is the world's clearing house for the staple. Traders and
manufacturers in Japan, India, Egypt, Great Britain, Ger-
many, France, and Spain, as well as the United States, buy
and sell here daily and the business is still increasing.

Cotton is the basis of the largest textile industry in the
world. The business is conducted on a gigantic scale in
many countries, by means of vast capital, complicated ma-
chinery, and varied processes involving considerable periods of
time between the raw material and the finished product.
Selling for future delivery is necessary to the harmonious and
uninterrupted movement of the staple from producer to con-
sumer. Nearly all the trading, beginning with that of the
planter, involves short selling. The planter sells to the dealer,
the dealer to the spinner, the spinner to the weaver, the weaver
to the cloth merchant, before the cotton of any crop year is
picked. Dealers who take the risk of price fluctuations insure
all the other members of this trading chain against losses
arising therefrom and spare them the necessity of themselves
being speculators in cotton. The risks connected with rais-
ing and marketing cotton must be borne by some one, and
this is now done chiefly by a class who can give their un-
divided attention to it.

Grading cotton. The grading of cotton is the vital fea-
ture of the trade. When no grade is specified in the con-
tract, it is construed to be middling. There are now eighteen
grades ranging from middling stained up to fair. This classi-
fication differs somewhat from that of other markets, and
last January the Department of Agriculture at Washington
took up the subject of standardizing the various grades for
all American markets. The New York Cotton Exchange par-
ticipated in this work ; a standard was thus adopted, the types
of which were supplied by its classification committee. It
varies but little from the one previously in use here. The
samples chosen to represent the several types are now sealed,
in possession of the Department of Agriculture, awaiting the
action of Congress.


The cotton plant is niueli exposed to vicissitudes of the
weather. A single storm may change the grade of the crop in
large sections of the country. It becomes necessary therefore
to provide some protection for traders who have made con-
tracts to deliver a particular grade which has become scarce
by an accident which could not be foreseen. For this pur-
pose alternative deliveries are allowed by the payment of cor-
responding price differentials, fixed by a committee of the
Exchange twice annually, in the months of September and

Settlements, sales, speculation. Settlements of trades may
be made individually, or by groups of members, or through
a clearing system, the agency of which is a designated bank
near the Exchange. No record is kept of the transactions,
but it is probable that for a series of years the sales have
averaged fully 50,000.000 bales annually. There have been
in the past instances of excessive and unreasonable specula-
tion upon the Cotton Exchange, notably the Sully speculation
of 1904. We believe that there is also a great deal of specu-
lation of the gambling type. . . .

The Coffee Exchange. The Coffee Exchange was incor-
porated by special charter in 1885. It has 320 members, about
80 per cent, active. It was established in order to supply a
daily market where coffee could be bought and sold and to fix
(juotations therefor, in distinction from the former method of
alternate glut and scarcity, with wide variations in price — in
short, to create stability and certainty in trading in an im-
portant article of commerce. This it has accomplished; and
it has made New York the most important primary coffee
market in the United States. But there has been recently
introduced a non-commercial factor known as "valorization,"
a governmental scheme of Brazil, by which the public treasury
has assumed to purchase and hold a certain percentage of the
coffee grown there, in order to prevent a decline of the price.
This has created abnormal conditions in the coffee trade.

All transactions must be reported by the seller to the


superintendent of the Exchange, with an exact statement of
the time and terms of delivery. The record shows that the
average annual sales in the past five years have been in excess
of 16,000,000 bags of 250 pounds each.

Contracts may be transferred or offset by voluntary clear-
ings by groups of members. There is no general clearing
system. There is a commendable rule providing that, in case
of a "corner," the officials may fix a settlement price for
contracts to avoid disastrous failures.

The other exchanges. Of the exchanges which we have
classed as minor, those dealing with fruit and hay appear
to be in nowise concerned with speculation. No sales what-
ever are conducted on them, all transactions being consum-
mated either in the places of business of the members or at
public auction to the highest bidder. No quotations are made
or published.

In the case of the other two commodity exchanges, the
Mercantile and the Metal, new problems arise. Although quo-
tations of the products appertaining to these exchanges are
printed daily in the public press, they are not a record of
actual transactions amongst members, either for immediate or
future delivery.

It is true that on the Mercantile Exchange there are
some desultory operations in so-called future contracts in
butter and eggs, the character of which is, however, revealed
by the fact that neither delivery by the seller nor acceptance
by the buyer is obligatory; the contract may be voided by
either party by payment of a maximum penalty of 5 per
cent. There are nominal "calls" but trading is confessedly
rare. The published quotations are made by a committee, the
membership of which is changed periodically. That com-
mittee is actually a close corporation of the buyers of butter
and eggs, and the prices really represent their views as to
the rates at which the trade generally should be ready to buy
from the farmers and country dealers.

Similar, but equally deceptive, is the method of making


quotations on the Metal Exchange. In spite of the apparent
activity of dealings in this organization in published market
leports, there are no actual sales on the floor of the Metal
Exchange, and we are assured that there have been none for
several years. Prices are, however, manipulated up and down
by a quotation committee of three, chosen annually, who rep-
resent the great metal selling agencies as their interest may
appear, affording facilities for fixing prices on large contracts,
mainly for the profit of a small clique, embracing, however,
some of the largest interests in the metal trade.

These practices result in deceiving buyers and sellers. The
making and publishing of (quotations for commodities or se-
curities by groups of men calling themselves an exchange,
or by any other similar title, whether incorporated or not,
should be prohibited by law, where such quotations do not
fairly and truthfully represent any bo7ia fide transactions on
such exchanges. Under present conditions, we are of the
opinion that the Mercantile and Metal Exchanges do actual
harm to producers and consumers, and that their charters
should be repealed.

Some conclusions.^ Commodities are not held for pcv
manent investment, but are bought and sold primarily for
the purpose of commercial distribution ; on the other hand,
securities are primarily held for investment; but both are
subjects of speculation. Speculation consists in forecasting
changes of value and buying or selling in order to take ad-
vantage of them ; it may be wholly legitimate, pure gambling,
or something partaking of the (j[ualities of both. In some
form it is a necessary incident of productive operations.
AVhen carried on in connection with either commodities or
securities it tends to steady their prices. Where speculation
is free, fluctuations in prices, otherwise violent and disastrous,
ordinarily become gradual and comparatively harmless.
Moreover, so far as commodities are concerned, in the absence

J [The following general views of tbo Coiumissiou are given near the
bogiiiuing of llic repoil, p. 3. J


of speculation, merchants and manufacturers would them-
selves be forced to carry the risks involved in changes of
prices and to bear them in the intensified condition resulting
from sudden and violent fluctuations in value. Risks of this
kind which merchants and manufacturers still have to assume
are reduced in amount, because of the speculation prevailing ;
and many of these milder risks they are enabled, by "hedg-
ing," to transfer to others. For the merchant or manufac-
turer the speculator performs a service which has the effect of

In law, speculation becomes gambling, when the trading
which it involves does not lead, and is not intended to lead,
to the actual passing from hand to hand of the property that
is dealt in. . . .

The problem to be solved, The problem wherever specu-
lation is strongly rooted is to eliminate that which is waste-
ful and morally destructive, while retaining and allowing free
play to that which is beneficial. The difficulty in the solu-
tion of the problem lies in the practical impossibility of
distinguishing what is virtually gambling from legitimate
speculation. The most fruitful policy will be found in meas-
ures which will lessen speculation by persons not qualified
to engage in it. In carrying out such a policy exchanges can
accomplish more than legislatures.

[The conclusions of the committee were "directed to the removal of
various evils," and "to the reduction of the volume of speculation of
the gambling type." The committee repeatedly emphasizes the diffi-
culty of distinguishing by law between proper and improper practices.
It is impressed with the results of the German law of 1896 which
failed to reach the abuses and which was modified and largely repealed
by the law of 1908. The committee repeatedly declares that the
exchange, with plenary power over members and their operations, could
provide correctives and should do so. While it makes a few specific
recommendations for legislation, the conclusions are in large part
negative and conservative, as compared with popular views on the

differencp:s in efficiency of weavers

[The TarifT Board, in the study of the cost of producing woolen
cloths, observed in the weavers widely "varying degrees of efficiency
in the same class of goods (exclusive of learners)." A letter was
sent to manufacturers, asking: "What is wrong in the mental or
pliysical makeup or application of the inellicient weavers and on the
other hand what are the qualifications of good weavers?"

The replies, a portion of which are here given, may be taken as
throwing light on the differences in the efficiency of workers in gen-
oral, whether in the same trade, or in different trades. (Report of
Tariff Board on Schedule K, transmitted to Congress, Dec. 20, 1011.
Printed for the use of the Committee on Finance. Selections from pp.

Establishment No. 1. The loom is seldom out of order and
is generally fixed within a very short time, an hour or two at
the most. The warp and filling having been made in large lots
in our worsted mill will run exactly as well in one loom as in
another. The weaver varies. Some weavers have that pe-
culiar knack of watching their warp and putting their bobbins
in the shuttles carefully, and always alert to notice anything
that is going wrong, and are onto the many tricks of the trade
that make their work run easily. Others are careless, cannot
do any of the many little things that make their work run
easily, and hence have to do a great deal more stopping than
a good weaver. At one time we had a young woman who
did more and better work than any of the other men and
women weavers in the mill. Quite often we do not have the
proper loom to weave with the greatest efficiency certain cloths,
but it would not pay us to change, as possibly the next orders
might require that very loom to weave efficiently on.

Establisliment No. 2. Most of our weavers are either per-
sons too old to learn any new trade and have lost all ambition



and are perfectly content to jog along from day to day
with not much worry for the future, or floaters, who drift
from one mill to another, who will get off an exceptional
week's production, but pay day will see them on the road
once more, bound for some other to^vn. Spinners are even
more difficult to procure, and in brief labor conditions have
reached a stage where we are forced to take any one who
applies in order to keep our machinery running.

Establishment No. 3. It is more difficult to weed out the
poor weavers in a mill located in a small community, as
there is no waiting list to select from to fill their places, and
vacancies are usually filled with learners, whereas in a larger
place, having a number of weaving plants, it is practicable
to insist on a maximum production, owing to the supply of
experienced weavers near at hand to draw upon.

A good weaver — that is, one who can produce the maximum
amount of good cloth — must be quick, with nimble fingers,
good eyesight, clean and methodical, and anxious to earn and
receive a good wage, and willing to pay the price by being
on the job all the time. The poor weaver is sure to lack
some of these qualifications.

Establishment No. 4. The weavers (and in fact all our
employees) are not nearly as efficient and as steady as they
were some years ago, and we do not get as good work as we
used to. The new labor that we get is largely Polish, as com-
pared with English, German, and Irish a few years since.
The Polish are not nearly as good a class of help as the
former, and they are not as well educated. Then, we have
more changes of employees than we used to ; consequently, we
are continually breaking in new help, which tends greatly to
reduce the efficiency.

Establishment No. 6. Under normal trade conditions there
is a scarcity of good weavers, and help have to be taken on
who are ignorant of our re(]uirements, and thus more or less
incompetent. Recognition of this fact has stimulated the
adoption of automatic devices on looms for the prevention of


bad work. Many persons follovvinj,^ the weaver's craft have
misseil their calling; nature intended them for other occupa-
tions; the deft hand and alert eye, so essential to successful
weaving, are plainly lacking. They mean well, but their
work gets ahead of them, and they spend their days in futile
eli'orts to catch up ; before one fault is corrected another ap-
pears, and it is from such operatives that most of the im-
perfect cloth comes.

AVeavers in dress-goods mills, particularly where there are
automatic looms, run more looms than in men's-wear mills, and
when the latter are busy they draw heavily upon dress-goods
organizations for their supply of weavers. In turn the dress-
goods mills draw on the cotton mills for reciiiits, and it takes
several months for a cotton-weaver to become a good worsted
weaver. Meanwhile efficiency is not the highest.

The class of weavers is numerous that prefers easy, com-
fortable work with medium wages rather than work of higher
grade and better pay. This lack of exertion and absence of
ambition on their part tends to keep down efficiency.

The weavers do not all possess equal skill or physical
power. In our employ are many weavers forty-five years and
older, who are still producing good cloth, but w^hose product is
being impaired by advancing years. Some of our most compe-
tent weavers are women twenty to thirty years of age, who
right in the stage of their greatest efficiency relinquish their
occupation and get married. In Europe weavers are more
contented with their vocation and plan to remain in it all
their lives. In numberless instances entire families for genera-
tions past have all been weavers, and such operatives acquire a
measure of dexterity and skill which is not so fully met with
in American mills. Neither is it the rule for young women
to give up their mill occupation upon marriage ; most of them
continue their mill employment for several years after.

Establishment No. 9. As to the qualities of good weavers,
it is hard to describe them. The essential qualities are
alertness and dexterity, and as the work is not heavy, requir-


ing no great physical strength, women are often as good
weavers as men, and sometimes better. Above all things, how-
ever, a weaver must have years of training in weaving all
the different kinds of fabrics before he or she can really
be called a good weaver. Under the hitherto prevalent violent
fluctuations in the industry such life-long training has 'only
been possible in very exceptional cases and in such places
where local conditions have been more like those in Europe.
This has again been brought to our special notice during the
past summer. When the mill was running part time, many
of our best and most energetic and ambitious workers, whom
we had with great trouble educated for our special kind of
work and who were dissatisfied at not making full wages,
sought other industries. Now, when we are running full
time again, we find we have only the poorer help and are al-
most in as bad a position as when we first started. It is
impossible to repeat too often the great advantage possessed
by the older European centers of the woolen and worsted
industry. The operatives in those towns, even if they earn
less than they might do elsewhere, will not break up their as-
sociations and move away as they do here. They are attached
to their work and to their homes. Here the operatives have
scarcely time to become domiciled before business is subjected
to a violent setback and they are forced to seek work in other
towns. The disadvantages of all this for mill owners are two-
fold: First, we thereby lose our best people, and secondly,
upon the resumption of activity we have to break in new
people again.

Establishment No. 10. Weaving is much more difficult
than the average person who comes from the farms and rural
districts, not only in this country but from foreign countries,
anticipates; and the average that makes good is one in

As you will see by the names of all our employees they are
very largely made up of foreigners, and to this we attribute
the constant coming and going, as they come to this country


from stories they have been tokl that money is easy to make
in America. There also arc a great many positions open for
them in which as much money can be earned without the same
amount of brains or skill being necessary.

Establishment No. 15. In our opinion, what will make a
good weaver will make a good workman in almost any line,
especially mechanical. The good weaver has a "mechanical'
sense," which is lacking in a poor one. No doubt this is
one reason why men are usually more efficient in weaving
than women, who usually lack the "instinct for machinery,"
if it may be so called. A proof of this opinion is found in
the fact that weavers as a class are less efficient now than
they were ten years ago. This is certainly true in our plant
and, we believe, in the industry generally. The reason for
this is that the best weavers go into some other line of in-
dustry where the pay is better. Many of our "star^' of
past years went into the wire-fence industry. Many more,
during the past three or four years, have gone into the auto-
mobile industry, of which the center for the country is only
fifty miles from us. Some of our weavers who have gone into
this business have made good and are now drawing several
times as much as they could ever have hoped for in weav-
ing. . . .

It is invariably true that the weavers who turn off the
most work in a given time also turn off the best work. The
extremely slow and careful weavers are the ones who turn out
the poor goods. Of course, in this statement we are referring
only to the honest workman, not to those who have no pride in
their work and run it out as fast as they can, regardless of

Establishment No. 20. There are first-class weavers, good
weavers, fairly good weavers, and "also rans." Distinctly
poor weavers, of course, we do not keep. It is just about as
difficult to account for these degrees as it is to explain the
difference in artists, machinists, carpenters, bricklayers, or
baseball pitchers. Natural manual skill, vitality, a quick eye,


diligence, alertness, ambition, system, temperament — are all
governing factors.

The good weaver never seems to be doing anything ; the poor
weaver always appears to be hard at work. The good weaver
is quietly on the alert for things to happen; the poor weaver
is always fussing around to catch up after they happen; con-
sequently the good weaver not only produces more work but
better work than the poor one.


[The Report on National Vitality, Its Wastes and Conservation,
prepared for the National Conservation Commission in 1008, by Irving
Fisiier, professor in Yale University, contained a brief summary of the
arguments and material of the report. The following extract contains
the greater portion of the summary of parts I, II and IV. The wliolo
report was publislied as Bulletin 30 of the Committee of One Hundred
on National Health.]

Pakt I. — Length of life versus mortality.


§ 1. In 'different places. — President Roosevelt has pointed
out that the problem of conserving our natural resources is
part of another and greater problem — that of national effi-
ciency. This depends not only on physical environment, but
on social environment, and most of all on human vitality.
Modern hygiene is the reaction against the old fatalistic creed
that deaths inevitably occur at a constant rate. The new-
motto is that of Pasteur: ''It is within the power of man
to rid himself of every parasitic disease."

It was once believed that human mortality followed an ''in-
exorable law." Facts, however, show that mortality varies in
different places and is decreasing as hygiene comes into use.
The length of life in Sweden and Denmark is over fifty years ;
in the United States and England about forty-five; in India
less than twenty-five.

§ 2. At different times. — In Europe, according to one au-
thority, the length of life has increased in three hundred and
fifty years from less than twenty to about forty years; in
England, in less than half a century, it has increased about
five years; in Prussia, in the last quarter of a century, over



six years; in America it has also increased, although good
life tables are lacking excepting for insurance experience.
The tables for Massachusetts for 1893-1897 show an average
duration of life in that State of forty-five years, as compared
with forty in 1855, and thirty-five, an estimate of 1789, based,
however, on doubtful returns.


§ 1. Relation of longevity to mortality. — As duration of life
increases the death rate decreases. A death rate is the ratio
of the number of deaths in a year to the population. Under
normal conditions where the population is "stationary" —
that is, neither increasing nor decreasing nor subject to immi-
gration or emigration — the death rate and the duration of
life are ' ' reciprocals. ' ' In such a population, if the death rate
is 20 per 1,000, the duration of life will be 1,000-^-20 = 50

This relation, however, is disturbed in most countries to-
day, and especially in America, by immigration and emigra-
tion and by the birth rate being in excess of the death rate.

Online LibraryFrank Albert FetterSource book in economics, selected and ed. for the use of college classes → online text (page 13 of 30)