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year alone in a little German hovel to perfect an electric principle, and of the son he adopted, and the three orphan children of whom he now is grandfather. He went on :

"I liken these four phases of industry to the parts of a machine. You know, a machine will not run unless all its parts are oiled; but some of the parts can be oiled last and cleaned last. Now the least important cog in a machine is just as necessary as any cog, but perhaps you do not have to give it the same attention at first; indeed, some render service a long time without any attention at all."

He puffed his cigar vigorously, was envel oped in a sudden cloud of blue, fragrant smoke. He has been smoking all his life and drinking tea. In his student days at Breslau he smoked a pipe and he drank beer, in keeping with the profundity of the little group of student friends with whom he sat in frequent determination of the economic and social destiny of the world. He had a lot of excitement in those days, and he tells of them so infectiously that one sees the early part of his life in outline, and remembers that his mother died when he was very young and his father was a lithographer and railway employee who sacrificed nearly everything to get his son a technical education.

Comrade Steinmetz belonged to a club. The members of this club were suddenly arrested because a photograph of them appeared in a photographer's window the selfsame day as, and within less than twelve and a half feet of, a photograph of Lassalle, the eminent Socialist. The little group of students were haled before a justice, and the good German Court, viewing with disfavor the conclusive fact that there was no evidence obtainable for or against the club, straightway imprisoned some of its members, but freed the forgetful little-boy body of a man. Straightway the boy inventor tested the resourcefulness that has built up one invention after another since. He went home and invented an ink with which, quite indistinguishably, he wrote up and down the blank pages of books he was privileged to send the prisoners. This writing one of the prisoners, a young man engaged to be married, was told how, from chemical elements obtainable from tooth-wash and blotting-paper, to develop and read. The little man sent even love letters, and he built up an impregnable defense for his student friends, got them acquitted, and enjoyed his good college

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joke till the authorities suddenly took after him in such terrorizing mien that he accepted a supply of cigars, took to his heels, and fled over the line to Switzerland and America. He has been smoking cigars ever since. One learns to associate his cigar with him. At the General Electric shops an order to stop smoking appeared one day. The next day Dr. Steinmetz was missing. He had quit. The president of the company had to send an automobile for him. He went on smoking now, his elbows propped on the table, his cigar flaming between his first and second fingers.

If any of the four phases of a business are neglected," he said, "if either the financial, administrative, technical, or human phase is neglected, there is bound to be disaster. It may escape notice, like a rusty cog, for a few years, but you will hear from it. Thus if you neglect the financial phasewell, you have trouble. And if you neglect the human phase, you will get inefficiency every time, and the Industrial Workers of the World will catch you if you don't watch out."

He laughed. Yes, yes; that's what the Industrial Workers of the World are forthey are to frighten employers when they get rusty on the human side."

He thinks that it is not the big corporation but rather the little competitors that first "get rusty" on the human side—that it is big business, and not little business, that throws fewer employees to the industrial scrap-heap. He believes in the large corporation, he believes in the carefully regulated trust. His mind looks far beyond any stage of nationalism, and yet he is doing his utmost to bridge his old-time Socialism to the newtime industrialism, confident that they are synonymously American, and that, with corporations and all that goes with them, in this Nation lies the hope of the world. He believes in the large corporation because it is an inevitable step in the progress forward, and he notes pleasurably that it is removing the lines between nationalities, developing the same great common interests for all, and working indomitably along in the groove of an inevitable tendency. He pointed out some of the good the corporations are doing-welfare work, safety work, educative work, compensation for injuries, sick benefits, old age pensions, service annuities, profit-sharing

He caught on the words "profit-sharing," rose from his chair, in eight words explained

why he is a Socialist accepting one hundred thousand dollars a year from a corporation : "Profit-sharing," he said; "it is half-way to Socialism."

"It is half-way?"

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Yes, yes, it is the half-way mark. It is a very ingenious way for labor to get half instead of all. . . ."

He stood his feet squarely by the end of the bed, a smiling little mental giant only five. feet high.

. . . Yes, as soon as all our big industrial and transportation corporations have combined, under stricter and stricter regulation, into one big corporation so powerful that it must be called the United States, we will have reached the goal. The rates of interest will be so low-"

He galloped on with an enthusiasm that knew no bounds. He laughed infectiously now and then; he was having a good time.

It was suggested that the big business men of any era are the broad, humanitarian men of that era, and that some of the big business men of the present era, therefore, are Socialists.

"Yes," he laughed. "I can show you—" He returned from broad theory once more.

Both labor and capital are grateful for the corporation," he said. "No one is ungrateful but the Government. The United States Government-it has its army and its navy planning to help to train young men for work in the big corporations. Yes, and President Wilson-he is trying to get Government ownership of railways and trying to break up the corporations at the same time. He is not consistent. He does not understand. And Mr. Taft-he did not understand. They have the old ideas about small production. They try to break up the large unit into the small."

His keen blue eyes narrowed; he grew a little more serious.

"The Sherman Law-it was intended to regulate the big corporations, not to break them up. It was used to break up Standard Oil, the biggest and most powerful corporation we had, and now there are thirty-four parts and the Government can't control them because they have no central responsible body. And it is very noticeable that the interests are more powerful than they were. . . . It cannot be done. You can't turn back economic fact; when you try to turn back a fly-wheel, something's got to break."

B

Y the time this is published the war

will have been in progress nearly three months. In taking account of its effect upon business it must be admitted that up to this time, in so far as America is concerned, the anticipated has been worse than the reality.

Thus again has it proved true that "we have many troubles, but most of them never happen."

The loss of life and economic waste which the struggle has entailed are, of course, distressing and deplorable, but in England and America, at least, the consequences have been far less cataclysmic than had been expected.

No banking or commercial concern of firstrate magnitude has failed in either Great

Britain or the United States. No great corporation has confessed embarrassment, and no one entitled to credit has been denied such financial facilities as were absolutely essential to the conservative continuance of business.

In England the Government stepped into the breach with extraordinary boldness, and by guaranteeing to the Bank of England the repayment of debts at present uncollectable made them an acceptable basis of credit. Recently it has gone even further, and has arranged to guarantee the lenders against loss by loans made to members of the London Stock Exchange on collateral which may have been depreciated by the war.

It is generally believed that this far-sighted action was taken upon the initiative of Sir

George Paish, chief financial adviser to the English Treasury, who is now in this country. In the columns of his paper, "The Statist," the course that the Government has pursued is defended upon the ground that since it is to the interest of all the nation that business and industry should as far as possible be undisturbed by the war, it is equitable that all the people through the Government should share the risk and loss involved in maintaining the machinery of credit upon which business and industry depend.

In America the limitations which the Constitution and Congress have imposed upon the executive officers of the Government have made the direct interposition of our National credit impossible, but under the able leadership of Mr. William G. McAdoo, Secretary of the Treasury, the banks and bankers of the country have organized a co-operative life-saving service, and have mobilized their resources with great efficiency for the protection of the Nation's business.

The only great problem that is still unsolved at this writing is that of the cotton crop, and a plan has already been approved which, if it is made effective, will put at the disposal of the cotton producers a fund of $150,000,000 with which to carry over the surplus of this year's crop until it shall command better prices.

The spirit of co-operation between the Government and the people which the great emergency has aroused is the most satisfactory consequence of the war.

When the struggle is over, many old habits will doubtless have been abandoned and many new usages established, but in no respect will society be more benefited than by the sympathetic solidarity which necessity and distress have developed between the people and the government.

Another consequence of the European war madness is the charity and unselfishness that it evokes, and the economy that it compels, which qualities, because they imply selfrestraint and the thought of others, are as essential to credit as they are to character.

Ever since our petty war with Spain habits of luxury and extravagance have been enervating and weakening the moral fiber and dissipating the resources of a constantly increasing proportion of our population. The present war and the diminution or interruption of income that has followed it have already worked a palpable change in this respect, and are destined to work a still greater reformation.

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Lavish expenditure has already become unfashionable; display provokes criticism rather than approval or distinction; and a moderate competency, in the opinion of most people, is now more to be desired than great wealth.

Those who will compare the ideals of youth to-day with the aspirations of young men at the commencement of the present century will realize the degree in which our National standard of what is most worth while has been changed for the better.

Fourteen or fifteen years ago the glamour of the great fortunes created by the formation of the United States Steel Corporation and kindred consolidations deluded many men just commencing life into the belief that great wealth was a guarantee of happiness as well as of social and political power. The illusion had commenced to disappear before the war began, but its destruction has been greatly hastened and almost completed by the prominence into which the vaster issues of life have been brought by the titanic struggle now in progress.

More and more are we coming to realize that happiness is not a matter of money, lux. ury, and self-indulgence, but rather of selfrespect, self-restraint, and selflessness.

Upon these aspects of the changes which the war has thus far wrought we can congratulate ourselves without any abatement of the sympathy that we should feel for the people of Europe whose lot is so much more unfortunate than our own.

As to the future, there is no precedent to guide us or any mind sufficiently clairvoyant to predict the conditions that will prevail when peace is re-established. Gradually most people are coming to believe that the struggle will be ended only through the economic exhaustion of the combatants.

No matter which of them shall yield first to the compulsion of want and hunger, it is evident that the resources of the others will be sadly taxed also.

To Edmund Burke, who died in 1797, is attributed the statement that "a national debt is a national blessing," but he also said that "you can never plan the future by the past;" and if from some vantage-point beyond the grave Burke can see the struggle in which the world is now engaged he will probably be inclined to revise his opinion as to the beneficial effect of a national debt.

The ability to pledge the credit of a nation has undoubtedly made the present war pos

sible. Few realize what an entirely modern institution a national debt is.

In 1797, the year of Burke's death, the entire national debt of Europe was only £584,000,000. In 1912 the same countries owed more than ten times this sum, or £6,132,000,000.

The following figures show that the Napoleonic, the Crimean, and the Franco-Prussian Wars have each been concurrent with or followed by an enormous increase in the debt of the countries involved:

NATIONAL DEBTS

IN MILLIONS OF POUNDS STERLING

1797 1816. 1848. 1870. 1889. 1912 Great Britain... 370 900 773 801 698 718 France.. 32 140 260 504 1,269 1,286 Germany.

Russia...

47 Austria Hungary 42

Italy... Spain

39 69 148 435 9821 145 90 342 756 910 99 125 340 580 750 25 35 333 460 541 20 117 113 285 260 363

All Europe...... 584 1,594 1,651 3,045 5,020 6,132 United States... 17 26 10 485 221 265

If it had not been for war, the European debt would probably have been almost stationary, or perhaps reduced. The ability to borrow such huge sums has made modern armaments possible, the possession of the armaments has made war inevitable, and the war has in turn made more borrowing and more armament necessary.

It is estimated that the present war is costing about £10,000,000 a day, at which rate, if it continues two years, as some now expect, it will add about £7,000,000,000 to the existing debt of Europe.

The burden thus imposed upon an impoverished and exhausted people would be more than double the present aggregate. That it can be sustained is almost unthinkable.

To those who are accustomed to think in terms of the financial era which ended with England's declaration of war, August 4, 1914, the complete bankruptcy of one or more of the nations of Continental Europe would appear to be inevitable, in which case the creation of an unlimited national debt would thereafter become difficult, if not impossible.

Of all the nations now at war, England is undoubtedly the best able to sustain an in

1 This is made up of 235 million Imperial and 747 million State debt.

crease in her debt. territory and about tion are under the English flag, and the increased burden that she may have to assume can be so distributed that it would not be appreciably felt.

One-sixth of the world's one-fourth of its popula

The strain of financing the expenditure which England must face will, however, be severe, and it is by way of preparing for it that she is now attempting to collect the enormous amounts due to her from all over the world. The indebtedness due by Germany and Austria she cannot collect, and repayment of the debt by Russia, France, Belgium, and Japan she may not, for political reasons, insist upon even if it could be collected. From her own colonies she cannot withdraw the support of her credit, and financial conditions in South America are such that it is hard to get money from it, although large sums are undoubtedly due to London from Brazil, the Argentine, and Chile.

The United States remains, therefore, almost the only nation from which Great Britain can hope to collect any substantial sum, and this fact explains the high price for foreign exchange which persists in New York and the reluctance of English bankers to accept American drafts against anything that cannot through immediate resale for consumption be converted into gold.

These same facts also explain the enormous and unprecedented accumulation of gold in the Bank of England, and the nominal ease of the discount market in London, which exists only because the world is foreclosed from borrowing there by the refusal of the banks to accept.

It may be necessary just here to explain for the benefit of American readers the way, and practically the only way, in which outsiders can avail themselves of English loans for the ordinary purposes of commerce.

The English usage does not permit of the sale of what is known in America as "singlenamed paper" except to a very moderate extent, and then only to the bank with which the borrower keeps his account. Larger amounts may be obtained only by securing from some one of the great banking houses or banks their acceptance of the borrower's draft at sixty or ninety days' sight, which draft, when so accepted, becomes immediately available for discount at the Bank of England or in the open market. If the acceptance cannot be obtained, the money cannot be had; for obligations that are not accepted by the

concerns that are and have been for years the recognized monitors of credit will not be discounted. This will make it clear why it is practicable for the bankers to protect a nominally easy money market from speedy exhaustion by simply declining to accept. Apparently it is the intention of the English bankers to use this method to exclude foreign borrowers from the English market for some time to come, and at least until the accumulation of gold in London shall put that market in an invulnerable position.

Meantime we in America must rely upon the accumulation resulting from economy and the release of credit through the contraction of trade and the lower reserves which the Federal Reserve Law will permit (as soon as it is operative) to finance our unexported surplus until Europe may be able to buy.

The intrinsic value of the things we have hitherto sold abroad will not be affected by our failure to market them immediately if we do not meantime still further increase the surplus by the production of an additional quantity before the demand revives.

Money is already becoming easier, and it seems not improbable that by the first of the year the banks of the United States will be able comfortably to take care of the business of a country that will, in a financial sense, be

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more self-contained than ever before in its history.

Then perhaps we shall be able to buy back from Europe, if it must sell them, a larger portion of the American investments hitherto placed abroad.

In the last analysis, however, our investment capacity must depend upon the extent to which we can economize.

Mr. George E. Roberts, Director of the Mint, in a recent address in Chicago, said:

The annual savings or net gains of the United Kingdom are approximately $2,000,000,000, of Germany about $1,500,000,000, and of France about $1,000,000,000. The United States Census for 1904 showed a gain of $18,586,885,635 in four years, or about $4,650,000,000 per year.

If Mr. Roberts is right, the net annual gains of the United States exceed those of Germany, France, and Great Britain taken together. If we conserve them, they would in less than a year enable us to rebuy all of the $4,000,000,000 American investments which Europe is said to hold. For these we may pay partly in gold, but mainly through. the sale of the wheat, corn, meat, and cotton which sooner or later Europe must have if she is to live. For us at least the outlook is not so desperate that we may not think of others, or so gloomy that the Thanksgiving season will be an anachronism.

My Dear Outlook:

Paris, September 8, 1914.

Just ten years have passed since I visited America. I have never forgotten the reception accorded me, and I remember particularly all that The Outlook did for me and its many courtesies. Therefore you represent for me this great Republic of the United States of America that I dearly love, and you will permit me, just ten years, even to the

month, after I first embarked for New York, to confide in you, in remembrance of your loyal friendship, my impressions of the events now transpiring.

Ten years ago Europe was at peace; today there is war. Within a few days Paris itself may be invaded. You know this. You follow our fortunes with sympathy; to this your paper, which I receive regularly, bears testimony. But I do not wish to tell you