Page:The Economic Journal Volume 1.djvu/413

 NOTES AND MEMORANDA 391 The life-blood of commerce is credit. The difficulty of successfully utilizing credit has increased enormously owing to the greater com- petition. There is less profit, and the expenses of gaining it have not diminished in the same proportion. The London banks trust more in these days to gathering in their gains over a wider area than they used to. Branches of the great banks are to be seen everywhere in London. Kite-flying of tile kind that Alexander Collie flew with the aid of his ' drawing-posts' is unknown to-day. The banks have very sensibly set, themselves to tap the small tradesmen eveDvhere. A few pounds made upon each small account is safer business in the long run than discounting large acceptances of a firm whose failure will sweep away half he reserve fund at a blow. The making of profits in small amounts fostel greater care, and does not bring with it the kind of demoralization which follows upon large and quick gains. This is an aspect of the Baring crisis which is a very satisfactor one. The banks have all kept their doors open during a short time of great suppressed apprehension. Had any one of them been known to be seriously locked up, the chances are there would have been, between last December and March, a run upon that bank. Another aspect of the Baring crisis is, that there exist now so many comparatively new powerful financial companies of various kinds allied with Trust and kindred corporations, that the total disappearance of two large mercantile banking houses leaves no more trace upon the great surface of London's capacity to finance large undertakings as soon as confidence is restored, than is to be seen on the water a minute afte.r. a stone has been east into a pond. This remark must be qualified with one important reservation relating to the Bank of England, which I shall deal with later on. Again, instead of large masses of securities being held in small quantities by individuals to be flung upon the Stock Exchange for anything they will fetch in un- reasoning and unthinking llaste when a crisis occurs, they are now in the possession of Trust companies, who, although they may in their collective management occasionally make mistakes, yet keep their heads cool in times of danger, and thus are the means and have been the direct cause upon this occasion of preventing the enormous losses to individual investol-s, which produced so much ruin and distress after 1866. We thus see that the area over which the effects of the breakdown of one or two large firms make themselves felt has been greatly extended, and there is in consequence an increase of resistance which, as I have. said, almost nullifies the material loss sustained by the commercial community in which it occurs. The foreign business which for a uumber of years has been transacted in an office in one street of a city now migrates to other streets. The same facilities are granted by other houses, the purchasing power changes hands, and in a short time all goes on as before, with the important exception that revenues in the aggregate yearly increasing are diverted from one set of people to another set. There is, however, one great and far-reaching change which the Baring crisis has introduced, and that is a kind of commercial salvage which has been sanctioned and app.roved of as it never was before. Not only here but on the Continent it is now and probably will con- tinue to be the fashion to endeavour to save from destruction by prompt measures rather than to look on while commercial houses flounder in their difficulties in the future. What is this change of disposition to be traced to ? It is a trite saying in a great city in speaking of different