pensation a competence with which to care for those dependent on them; these salaries, wages, and deductions should be considered in the nature of expense of operation; net earnings, however, belong to the whole corporation; they should be considered as a fund in the hands of the manager for distribution according to the obligations of the corporation to society, and are not for the benefit of its directors. On dissolution, the full assets of the company should be converted and distributed to the community as stockholders.

The importance of the principle of inheritance, however applied, can not be overlooked. For the dependent—the re

Industrial importance of gift and inheritance.

cipient of funds obtained from ancestral contribution-an inheritance to that extent overcomes the necessity of securing capital equipment by means of a long process of accumulation (or saving) out of earnings; it shortens the time necessary to acquire a fund sufficient to equip any business enterprise to be undertaken. It increases the opportunity and advantage of those members of the community who, having been well supplied with funds, have had opportunity to avail themselves of the highest training, and who may therefore be best able to give direction and control to the affairs of the community. This advantage, however, may be lost. Opportunities may be wasted; absence of necessity may remove the stimulus to effort which is essential to the development of cooperative industrial capability. The one to whom capital has passed by "gift" or "inheritance" may show himself unable to utilize capital to advantage. In such cases, by the very contest into which the business man is ever thrown and in which capital itself must be employed in order to become productive and return to its possessor an income for support, the properties of the incompetent pass over and become subject to the control of those who can use them to higher advantage. But when large productive estates or interests descend to those who have not a proper

appreciation of their responsibility, or who have not the ability or energy to give the best direction to their use; when, by incompetence or waste, productive properties finally pass over to the control of those who are "not fit," there is a loss to the whole society, not only from the "waste" of wealth which has come into the hands of the socially unfaithful, but by "waste" of social force which comes from the disorganization and displacement occasioned by the breaking up of one scheme of cooperation and the readjustment and reorganization made necessary to the new. The law of inheritance is a rule which has grown out of the common impulse to care for and support dependents;

Laws of inheritance.

this impulse was evolved at a time when the pro

ducing power of a group would not more than

suffice for support of members-when the family was the all-important race factor. It is an expression of the common experience and common motive of the race directed toward its own perpetuation. Before the death of the ancestor all property acquired during life "belonged" to him; by operation of the law of inheritance the property of the ancestor passed to his natural heirs according to an established rule of descent, unless the common law or rule is varied or set aside by a formal expression of the "will" of the ancestor, in which case "the last will and testament" governed. The formal expression of the decedent's "will" is known as a "devise," and the property or funds inherited in this way are said to be "devised "-i. e., they are passed on by him to others in the same manner as if he had disposed of them during his life. Laws controlling inheritance are necessary and wholesome. Laws controlling inheritance, however, may have the effect of protecting the use of funds and properties in the hands of the incompetent. Where such laws exist, the effect is to change the relation of dependence from one based on social welfare to one carrying with it social degeneration. Industrial dependence which is found to exist between members of a family, and which is incident to the

maintenance of the church, to the support of fraternal and social organization, is the result of the sacrifice of a lower to a higher interest. The perpetuation of race in greatest strength and vigor, the fostering of social and educational ideals, mutual protection and general welfare, are as necessary to a people as physical maintenance and support. To this end a large portion of our society have accepted a place of industrial dependence in their devotion to higher interests. For this reason it is held by many of the great social and industrial leaders of to-day that those who are engaged in control of the industrial or business pursuits, and into whose hands the properties and incomes of the industrial society come for distribution, must be regarded as holding "in trust" for all the members who are devoting their lives to common well-being. Laws of gift and inheritance which stand in the way of such a distribution as will further this interest, which condone "breaches of trust"-laws which have been developed from ideals of private monopoly, and which have come down from those legal systems in which "arbitrary power' took the place of the more modern notion of free cooperation based on "general welfare”—such laws are constantly the subject of legislative modification and political interest. Many changes have already been made, notable among these the abolition of the rule of primogeniture. It remains only for the great political society to determine in this, as in all other matters of public interest, what rules of social cooperation they shall establish.

The idea of appropriation is one quite different from that of gift. As before observed, gift is based on relations of industrial dependence. "Appropriation," on the other hand, proceeds from a notion of superiority or control. It is the method commonly employed by government as a means of obtaining funds for its support. It is the method

itive method

commonly employed by those engaged in many forms of industrial pursuit for obtaining those things from nature which will be useful to mankind but which have not yet been reduced to the control of others. Man has certain wants which he would supply. Around him is nature endowed with all the materials which are necessary to the satisfaction of want. To make these materials available to this end, however, they must be "appropriated"; the ore must be extracted from the mine, fish must be taken from the sea, the timber of the forest must be reduced to ownership in forms which will be useful for supplying human "Appropria- want. In primitive times among a primitive tion" a prim- fishing people, when dried fish was used as of obtaining money, the individuals of the community profunds. cured their funds by means of appropriation. Among a hunting people, skins of beaver and mink or the hides of other animals which served as money were procured in the same way. To a primitive agricultural people wheat and barley served the members of the tribe for funds, and under a primitive industrial régime the metals obtained by the various members of the tribe or clan were passed from hand to hand as money, with no common stamp, design, or official voucher for weight or fineness such as is known to our modern systems of finance. When, however, commerce and industry developed to such an extent that more careful judgments and closer estimates of value were made in exchange; when the uncertainty of weight and fineness of the coins or metals used came to be an obstruction to commercial and industrial progress; when by common consent some uniform standard of judgment was demanded in trade, and the coinage of money was placed in the hands of a central agency of government which would give it character and undoubted integrity, appropriation as a means of obtaining funds was abandoned. The only method other than that above described as pertaining to industrial dependence, was that of "exchange."

CHAPTER VI

FUNDS OBTAINED BY EXCHANGE

"EXCHANGE" is the common method of obtaining funds -the only method that belongs properly within the field of business. A young man may have capital given to him by his father with which to begin a business career; by will or bequest he may receive a certain amount of money or other funds; but usually, even where property is inherited, it will not serve the purpose of the one inheriting it unless he takes up and carries on the business of his father. Except in such cases, therefore, he will convert the property inherited into funds and then apply these to his own uses. An inquiry into the prevailing financial methods of obtaining funds, therefore, is limited almost wholly to exchange. The significance of this fact is that (except where funds are received by gift) the only way in which a working capital may be obtained is by having something to sell-one must have something to offer, something for which others will give money or credit which may be used as funds.

Limit to funding power.

In this appears the limitations of men in their efforts to secure capital; in this may be found the reason why each of us may not obtain all the capital funds that may be desired. Before we can fund our enterprise we must have something which those possessed of funds will receive in exchange for them. The idea so often found in the literature of money and credit that certain forms of funds need have no value, that they may be created by "fiat" of Government or by the "dic