New Britain Herald Newspaper, January 13, 1923, Page 12

SNOW VIGILANTES OUT AT MAPLE HILL Sall Appoinied Commitiee Wil Insist on Walks Being Cleaned vi- and side considerable informal or- heen Kiux have Residents of Maple Hill in the einity of Robbins avenue streets are watehing with interest the actions of an ganization of men, who have called, Jokingly The Kian," and who are taken as their motto, Every Way, We're Training ter and Better The organization, eret and wears only the fan clothes and meets only when oe- casion demands, wis organized as a sort of an informal “snow shoveler's vigilance committee." For some time past women on their way to trolleys and ehildren on their way to sohoo complained that @ few residents in that section fail to clean the snow off of their sidewalks. The wvigilanee ecommittee formed by four men residing in the peighborhood, They met immediate- Iy after the last snow storm and, armed with shovels, eleaned off more than feet of sidewalk on the property of ¢ man, who is sald to be prominently identified with a New Britain factory While the cleaning process was go- ing on, the owner of the property sat in the window of his cozy home, his feet on the steam pipes and his eve- ning paper in his hand, laughing at his neighbors cleaning off his walks, or at least so Lhe story goes “Read Riot Act.” But, “He laughs best, who laughs last,” and the next morning the four men pald a visit to the delinquent citizen and proceeded to read the riot act to him in no uncertain terms. He was informed of what the duties of good citizenship consist and the requirements with which he must comply to hold the respect and esteem of his neighbors and fellow citizens. Asked what would happen if he falls to clean off his walk after the next storm, one man who knows the situation and is in on the secrets re- plied, “If he doesn't, we'll get him some other way." The inference was that if the worst comes to worst, the man may face some new method which will tend to convinge him that snow should not be permitted to ac- cumulate on his sidewalk. The committes s three more property owners on its list and ef- forts will be made to try moral sua- sion or other methods on them, in the near future, if their walks con- tinue to remain neglected, said to “Every Day in Em Bet- is not se al civils whieh have was — Pan Nelan Ukulele Class for Girls Bvery Thursday eve. ¥. W, € A| Ukuieles at O, L, Pierce Co—advt A farewell luncheon was rendered Miss Ann K. Vetrane at the Soda| Shoppe by her friends of the Booth building yesterday. She is opening up an office in Hartford in company with | Misses Helen and Anna Cunningham | and will de business under the firm name of The Cee Vee Cee Co ! Gulbransen Player Pianos, Morans', —advt. { The annual meeting of the Sunshine society will be held Monday afternoon, Officers will be elected. Edison Phonographs—C, 1. Pierce | Co.=advt | Don't fail to hear Evangelist An.| drew Heughes at the People's Church | of Christ Sunday at 7 o'clock p. m, —advt | A seven pound son, Frank, Jr, was horn yesterday to Mr, and Mrs, Frank | R Goodrieh | Boys' All Wool Chinehilla nvercmu; $5.00 at the New York Sample Shop, —advt Lithuanian Benefit Society dance, | Lithuanian hall, tonight, Admission | 25 centa-—adwt | James I", White, local agent for the Connecticut Humane society, has re- colved from the headquarters of the society at Hartford, a letter calling attention to the law requiring drivers | to cover their horses with blankets, when they are stopped on the street, | BLAMES AUTO SUGGE! N | ————— | House Owner Says Tenant Only; Thought It Was Cold. | Washington, Jan, 13,—Auto-sug- | gestion with the ald of a thermometer and a cartoonist's observations on the effect of gazing into the mercury fill- eg crystal formed the basis of the| answer to a complaint just filed with | the District of Columbia rent com- | mission, | Edwin Milstead complained that his apartment was not adequately heated. | Miss Susan Guffin replied that Mr, Milstead's discomfort was due not to | failure on her part to furnish heat| but to “the mental condition of com- plainant and auto-suggestions arising | from a constant study of the NEW BRITAIN DAILY HERALD, SATURDAY, JANUARY 18, 1023, WALTER POND DIES New Haven lawyer Was Former Grand Master of Odd Fellows and Prominent in Masonry, New Haven, Jan, 13.—~Walter Pond, attorney and & former gvand master and grand representative of the Odd Fellows of the state and a past grand patron of the Eastern Btar, died to- day after a two years' illness, He had connections with several fraternal or- ders in which he held offices, He also had been an assistant clerk of the superior court of New Haven county, Mr. Pond graduated from Yale law school in 1583 and did newspaper work during the carly years of his law practice. He is survived by his Ill'lfa and a brother, Phillp, DISCUSSES K, K, K, Crowds Unale to Get Into Meeting At Albany Albany, Ga., Jan, 13 (lly the Asso- clated Press)—Scores were turned away, unable to enter the superior courtroom of the county court house last night, to attend a meeting under the auspices of the Ku Klux Klan at which replies were made to recent criticlsms of the organization, The courthouse was selected after the city council voted not to authorize use of the city auditorium, Rev. Roy E. Davis, recognized spokesman of the klan, declared that the klan was not anti-negro nor anti- Jew nor anti-Catholle, except that members of those races and creeds could not be members, He sald that the klan favored white supremacy, but by lawful and peaceful means, — WANTS NAVY CALLED IN, New Englanders Want Drastic Action to Curtail Rub Running Activity \ Washington, Jan, 13.—A suggestion that the navy be called on to fight At- lantic coast rum runners was made in a letter to President Harding from the legislative department of the na- tional congress of mothers, OYOLOPS CALLS 1Y OFF Shipwith Declines 0 Hold Oonference With Attormey Genersl Coco Bastrop, La., Jan. 13.—~The confer- ence between Attarney Gen. Coce and Captain J, K, Skipwith, exalted oy- clops of the Morehouse parish Ku Klux Klan has been called off indefin. itely, Captain Skipwith said this after. noon. “There will be no conference be. tween myself and Mr, Coce"” the klan leader said, “I could not see where any good could come out of it and therefore decided to call it off, Attor- ney Gen. Coco appeared surprised at Captain Skipwith's action, BRITISH LAROR PROTESTS London, Jan, 13 (By the Associated Press)—A strong protest on behalf of British labor against the French oe- cupation of the Rubr and a demand that Gerat Britain disassociate itself from the project are contained in a statement by the joint labor trades congress, the executive committee of the labor party and the parliamentary labor party, NO STILLMAN DECISION Poughkeepsie, N, Y, Jan, 13,—8u- preme Court Justice Morschauser to- day reserved decision on a motion made for additional alimony and counsel fees for Mrs, Anne U, Still. man. The application was for $120,. 000 & year alimony and $20,000 coun- sel fees pending the appeal of the di- vorce action. DEADLOCK AT LAUSANNE Lausanne, Jan, 13, (By Associated Press)—Despite eight hours of pri- vate discussion which produced hopes that an agreement would be reached the Near East conference session to- day dealing with the Turkish tariff question made no progress, The ne- gotiations over this question are at a deadlock. FRANCE SATISFIED | | ports of Enginecers Are Satisfactory | Paris, Jan, 13 (By Assoclated Press).—The French cabinet with Premlier Poincare presiding met this morning to oconsider the reparations situation. The department said its action fol- | regarding the meeting says: thers |lowed receipt of numerous complaints | “Premier Poincare, M. Maginot, the mometer and thermograph and the from members of the organizations re- | minister of war and M. Le Trocquer, regulation of his goose flesh according to its dictates. | Miss Guffin filed with her reply a copy of a cartoon depicting a woman who was comfortable until she looked at the thermometer and learned that | New England states, PLAN REFUGEES CAMP, Manila, Jan. 13. (By Assoclated | | perspiration or siding along the coast, especially: in {the minister of public works, report- ed on very satisfactory information they had received as regards the in- stallation of our engincers in the Ruhr and the first conversations held with the manufacturers of the dis- instead of the anticipated 70 degrees, Press)—An American destroyer has trict.” it registered 65. French women dread pain much | more than American, and prefer to be beautiful through bath *beautifiers” rather than by operation, says an ex- pert. been detailed to watch for the arrival of Admiral Stark's white fleet of Rus- sian refugees which sailed from Shan- ghai and is expected off Manila bay in a day or two. Governor General Wood has ordered a camp prepared for the Siberian exiles. WON'T PROHIBIT STRIKE Cologne, Jan. 13.—(By Associated Fress) — The inter-allied Rhineland commission has decided not to pro- hibit the sympathetic strike called as a demonstration against the occupa- An officlal communication | lon of the Rubr. Work will cease or 30 minutes beginning at 11 o'clock Monday. WAGES ARE UNCHANGED Haverhill Shee Manufacturers and Workers Come to Agreoment, Set. thing Their Diffevences, Haverhill, Mass, Jan, 13 ~—Agree- ment between officials of the Haverhill shod manufacturers assoclation and of the shoe workers protective union in & new set of wpge and working con- ditions was annouced today when the draft was submitted to the member- ships of each body for final aetion, Wages are unchanged in the plan, but hours are subject to several limi. tations. Baturday forenoon ‘work, against which the employes have fought hardest, would be permitted during rush seasons, with the stipula. tion that in no case would working hours exceed 48 a week, There would be no Saturday work from May to Beptember inelusive, SHIP KING'S BODY, Palermo, Sicily, Jan, 13,—The body of former King Constantine of Greece was placed aboard a steamship sail- ing for Naples today. The Duchess of Aosta, representing the Itallan royal family, joined the family in ae- companying the body on board the steamer, Ex-Queen Sophie kissed Constan- tine before the closing of the triple coffin, which bears the simple in- scription: "Ca!uumlnr. king of the Mol- . BLIZZARD HALTS TRAFFIC, Hallfax, Jan, 13.—~A blizzard that has raged for 24 hours with snow drifting high, caused cancellation of train service today, At Yarmouth the Boston steamer which was to have salled last night, was held at her pler, | Official Communique Says That Re- The Cunard liner Andania which ar- [rived today from Boston was forced |to anchor in the harbor and take her passengers for England aboard from | tugboats, DUTIES ON BEER LESS, London, Jan, 13.—The excise duties |on beer and spirits for the last nine |months of 1922 dropped 28,582,000 pounds compared with the corres- ponding period for 1921, WILL DEFEND CANTON Hong Kong, Jan. 13 (By Associated Press.)—Gen. Cheng Chiung-Ming, who shattered the government of the southern republic when his army en- tered Canton last summer, is reported remaining in Canton to defend the city against the new invasion of troops loyal to Sun Yet Sen, the deposed southern president. Arrive From Germany And Obtain Work Here Otto Schmidt and Richard Krauser of Kssen, Germany, have arrived in this country and are making their home with Mr. and Mrs August Kiambt of 114 Columbia stregt. The 14phy business while in Germany, They have hoth secured positions in the P, & P, Corbin plant and are cager Lo learn the English language, Three nights each week are spent at the lpeal evening scheol, Mr, fiehmidt is a son of Mrs, Klambt by her first marriage, PLEADS NOT GUILTY Morse Brothers Deny Charges of Con- spiracy to Defraund Govermment by Their War-Tine Contracts, Washington, Jan, 18, = Harry V. and Benjamin Morse, sons of Charles W, Morse, shipbuilders, pleaded not guilty to eharges of conspiracy to de. fraud the United States in connection |with the shipping board war contracts when arraigned here, Nehemiah H, Campbell, George M, Turditt, Ruppert M, Much and Rich- |ard O, White, jointly indlcted on con- spiracy charges, also pleaded not gulity, All were permitted to remain on bond pending trial before Justice | Stafford in the criminal division of the | district supreme court February 6. LEGS ARE STRAIGHTER. New York Physiciam After Investiga- tion, Says Bow-legs Are Passe, | New York, Jan. 13.—Legs are get- ting straighter Dr. Asa B. Davis of the Lying-in hospital where 1,000 bables are examined weekly, said to- |day. Bowlegs are passe, Dr, Davis said and legs of this () type are fast giving way to legs like this: II. More- over legs fashioned X and legs modelled ) ( are fewer than they were, “Parents no longer teach their chil- dren 'to walk too soon,” Dr. Davis stated as the reason for the change. “Bowleggedness is really caused by malnutrition; a simple deficiency in bone making calcium. Vitamines in good milk, fruits, juices, grains and vegetables are rapidly eliminating rickets in neighborhoods where health information is easily available.” GREAT BRITAIN LEADS, Glasgow, Jan, 13—World returns of shipbuilding for 1922 show that Brit- ain has regained first place in the out- put of tonnage with 1,043,690 tons, Germany being second with 631,485 tons, Figures for the United States are given as 259,747 tons for 1922, as compared to an output during 1919 of 4,750,000 tons. two young men were in the photog- | BUCK IS NOT ELIGIBLE Advises Governor That Law Will Not Permit Him to Again Serve on Board of Pardons, Hartford, Jan, 18.-~John H, Bueck of this city has notified Governor Templeton that he is not eligible for reappointment to the board of par- dons, owing to the provision of the law which requires that no more than two members of the board, appointed by the governor shall be members of the same political party, Inelud- ing Mr, Bueck, there are at the pres- ent time three members appointed by the governor who are republicans, Mr, Buck was appointed by Governor Lake to succeed the late Lewis Sper- ry, who died last spring. Mr, Sperry was appointed as a democrat in 1908 and continued on the by sue- cessive appointments, untll his death, Mr, Buck is a republican, It is held that the politieal limita- tion of the statute does not apply to interim appointments, Mr, Buck served as a member of the board at the hearing of the plea of Emil Schutte, hanged last fall, and attended the regular semi-annual meeting of the board In December, NO AMENDMENT NOW, Washington, Jan, 13.,—President Harding and republican house lead- ers after a thorough canvass of the situation decided today that this is not the time to seek an amendment to the debt funding law liberalizing the terms of settlements by nations owing money to the United States. FATAL TRAIN CRASH Toledo, O, Jan. 13,—~One man was killed and several injured when a Baltimore and Ohlo passenger train crashed into a freight train today a mile north of the Ohlo-Michigan state line. UNION ASKS MODERATION Berlin, Jan. 13.—~The miners’ union has issued an appeal to the Ruhr miners urging them to keep calm and to commit no excesses against the occupying troops. ACCEPT WAGE CUT. Dublin, Jan, 13.—The dock workers decided today to accept a wage reduc- tion of one shilling a day beginning next Monday. A strike has thus been avoided, COF¥FEE SUPPLY LOW, San Francisco, Jan. 13.—Due to the late daté at which the Central and South American coffee crop reached maturity, five of the largest coffee im- porters in San Francisco announced today they were without a visible sup- ply for the first time in 256 years. CORPORATION SURPLUS AND STOCK DIVIDENDS By GEORGE E. ROBERTS Our discussion of this subject in the last number of this publication has evoked considerable comment, but none of it controverts the essential facts as therein set forth. These, restated briefly, are as follows: (1) Corporation surplus consists of surplus assets above corporation lia- bilities, including outstanding capital stock. A surplus is frequently cre- ated for a mew corporation by issu- ing the stock at a premium, for in- stance at $125 for a $100 share of stock. The object in so doing is to provide a margin of working capital 1n excess of the liabilities and a ‘bui- fer to protect the legal capital from impairment if losses should occur— in this respect a precaution against emergencies. As an example of paid- in surplus may be mentioned the Brotherhood of Locomotive Engi- neers' National Bank, of Cleveland, the capital of which was subscribed at $110 per share, thus creating a sur- plus of $100,000 when the bank be- gan business. Aside from such pro- visions, surplus is usually created by turning earnings back into the busi- ness, or, rather, allowing them to re- main, instead of distributing them to stockholders. Earnings thus retained become an indistinguishable part” of the operating capital. They increase the earning power of the business and by so doing increase the value of the outstanding stock, The extent to which earnings are thus withheld from distribution usually depepds upon thg opportunities for enlarging the busi- ness. It is a way of providing capital .for a growing business without going to the pfiblic for more, Adjusting Capital to Value (2) In the course of time, where this policy # followed, the assets of the corporation become so dispropor- tionate to the amount of capital stock outstanding that for various reasons explained in detail in the former ar- ticle, it becomes desirable to bring them into more appropriate relations. It is common practice to have a share of stock represent $100 of assets, and certificates of stock generally so state. Each share, however, represents a pro- portionate interest in the entire assets of the corporation, and as surplus ac- cumulates the shares often come to have a value much in excess of $100 each. A stock “dividend” distributes to the stockholders additional shares based on the surplus accumulations, but the effect of this is simply to_di- lute the value of the old shares. The corporation assets which the stock represents are in no respect changed increasing the amount of stock. %lere # no distribution of values from the corporation to the stockhold- ers by means of the stock “dividend.” The word dividend in this connection is misleading. The most important effect of such stock issue is in transferring cap- which has been classed as surplus, and which is uader the control of di- fectors and not permanently dedicated the basiness, to tae form of perma- capital. A board of directors draw on surplus for cash divie but when capital stock has been the assety behind it cannot be FROM THE MONTHLY BULLETIN FOR JANUARY ISSUED BY THE NATIONAL CITY BANK OF NEW YORK (3) The value of the new stock tc the stockholders is in the expectation that real dividends out of the earnings of the corporation will be paid upon it, and whenever such payments are made the stockholders must pay all the surtaxes provided by law, according to their respective incomes. There- fore, the supposition that a stock “div- idend™ accomplishes an evasion of taxes is unfounded. Let it be clear that under the law as it stands now there can be no con- veyance of profits from a corporation to its stockholders without the latter being subject to the taxes levied upon personal incomes. 1f the recipient of a stock dividend sells his new stock he is required to account for any proportionate increase in capital value since 1913, when the income tax law went into effect. This would be the case, also, if there was no stock dividend but he was selling his old stock. The stock “dividend” gives him nothing that he did not have before. It only splits up his interest into more shares. (4) When income has been sub- jected to taxation once, what remains passes from the category of income to the general status of capital. It cannot properly be taxed again except as all previous accumulations of cap- ital are taxed. Corporation Taxes In pointing out that corporations pay a normal tax of 12% per cent. upon net income, instead of the narmal tax of 4 p~r cent. up to $4,000 and 8 per cent. above $4,000 for individuals and partnerships, we should have added that corporations are subject also to a special tax in the form of a levy of $1 per $1,000 on the market value of their outstanding capital stock. In_ determining “market value,” the Government takes into ac- count three considerations, to wit: (3) The net assets of the corporation; (b) The quoted market value of the stock, if there have been sufficient transac- tions to give them credibility; italized value of net earnings rates of return in that line Governmental practice is to take the highest valuation indicated by these methods. Evidently this tax applies to surplus, for surplus will increase the valuation by any of these methods, and when the surplus is large this tax becomes an important addition to the levies upon corporations which do not apply to individuals and partnerships. As explained in the former article, if graduated taxes were levied upon corporation incomes as upon persomal incomes, the effect would be prac- tically to nullify the whole scheme of graduated taxation, because corpara- tion stocks are held by sons of varying incomes, and largely b);{p:r- sons who ate not subject to any he surtaxes, or to the lower ones only. Capital Accumulations Increase the Revenue Any scheme that would force corpo- rations to distribute earnings in or- der that stockholders might become liable for the personal incoine surtaxes weald not only hamper and restrict the development of industry, but in the long ran would reduce rather than increase the tax revenues. earn- ings which are added to surplus and used to enlarge the business of the companies have the effect of increas- ing future earnings, all of which are :x%ject to the 12}4 per cent. tax and capital stock tax. On the other hand, earnings which are disbursed in divi- dends are scattered widely and to a considerable extent pay no surtaxes. Finally, the values which are accru- ing to individual shareholders in the form of cirporation surpluses, are all bound to coime under taxable review saoner or later, A stock distribution, while not a real dividead and there- fore not taxable in itsclf, i a prelim- inary step to a real dividend, which is taxable. Moreover there would be a perma- nent loss to industry by a policy that would force the distribution of cor- poration earnings into the hands of stockholders. So long as they are in the hands of the corporation they are bound to be used productively, but dis- tributed to the stockholders in corg- paratively small sums they are likely to be used in considerable part to en- large living expenses, and neven find their way back to productive employ- ment. It must be remembered that there is always need for mare capital in industry. The wants of an increas- ing population can be met only by im- . provements in the industrial equip- ment, which mean capital in the form of more equipment. It is unsound public policy to force corporation funds into the pockets of the indi- vidual owners. A Congressional Critic The Hon. James A. Frear, a Con- gressman from Wisconsin, in a speech in the House of Representatives, has commented at length upon our discus- sion of last month. His statements serve very well to illustrate the loose and misleading manner with which this subject is frequently treated, It says: The bark justifies $775,000,000 net profit in 10 years on the capitalization of Standard Oil oI New Jersey, or 77% per cent. an- nual net profit on $100,000,000, ete.* This refers to the statement, pub- licly made by Mr. A. C. Bedford, of the Standard Oil Company of New Jersey, that in the ten years ended with 1921 the aggregate profits of the com- pany, before taxes, were the sum stated. He said in the same statement, however, that large as this sum might appear to be, after taxes it yielded an average of only 12.76 per cent. upon the company’s investment during the period, and that it had been the policy of the company for many years to re- invest in the business all its earnings remaining after the dividends. These statements would naturally suggest to the careful reader that the company’s investment was more than $100,000,000. Mr. Teagle, President of the com- pany, in his statement made last month to the Senate Committee on Manufae- tures, of which Senator La Follette is chairman, stated that the net assets of the Standard Oil Company of New Jersey at the close of 1911 were $292,- 000 odd. Earning Pi’rmr in the Physical Mr Bedford’s statement for 10 years eovered the time since the de- cree of the Supreme Court of the * Congressioral Record, December e 73 United States dissolving the old Stand- ard Oil organization went into effect. This was in 1911. The business, as is well known, dated back far beyond that. The company by the reinvest- ment of earnings had built up a large surplus—according to Mr. Teagle's statement, approximately $192,000,000 just after the dissolution. These val- ues existed in the company’s proper- ties in excess of the values represented by the company’s stock. Of course the earning power of a company is not in its capital stock but in its physical rties and in this case the earn- % power was not simply $100,000,- , but nearly three times that. ‘The company was starting anew af- ter the reorganization. It might have sold off $192,000,000 worth of its prop- erties and distributed the proceeds to its stockholders, and proceeded with as much capital as Mr., Frear gives it credit for possessing. Or it might have been recapitalized at that time b the conversion of surplus, in whid’:’ case Mr. Frear would not have com- puted the later profits upon the basis of $100,000,000 capital. It proceeded, however, with an actual investment of Since that time its annual dividend distributions, as stated by Mr. Bed- ford, have not averaged 5 per cent. on the invested capital. The remainder of the earnings were reinvested from year to year, and Mr. Bedford has stated the average results computed upon the average amount of net cap- ital employed in the business. ‘2 Teagle in his statement referred to above gave the profits for the years 1920 and 1921 and the first six months of 1922 as “$213,720,213, or at the rate of 9.6 per cent. per annum on the net assets.” This is at a higher rate of annual earnings, but a lower percentage, than the 10-year average, showing how the reinvestment of prof- its increased the earning power in the later years, Standard Qil has been an exception- ally successful business over a long term of years, largely owing to the phenomenal devel st in the sup- ply and uses of oil. Judged by per- centage upon the capital employed it has not been as profitable as some of the smaller oil companies, but luck is a large factor in the oil business, and if thé profits of all the oil companies could be measured against all the cap- ital that gm been Inrenfi‘{:; the o‘il husiness the percentage pre ly would be lower than the average in other lines of business., As we have previously said, it is not strange that many people sheuld not understand the complexities of corpo- ration finance, but law-makers may be fairly expected to inform themselves to speak with some degree of accu- racy when addressing the House of Representatives. The public has a right to expect that, and most people, even though unhmi!illl;l m oour:)ou- tion bookkeegin( wou w that it made a difference in the profits whether a company was operating with only $100,000,000 worth of earn- ing power or with an average for the period of over $500,000,000 worth. Building by Means of Profits Perhaps Mr. Frear considers that because this company had only $100,- 000,000 al“nod: outstanding it bad no right to make profits on more than that capital, no matter how much pro- ductive property it actually owned and per of Kansas and the farmer’s bloc, there is one of a man who has made a handsome fortune in a comparatively the company's outstanding stock and s total of just over fift stock, 11,013 holders of common stock and nearly 40,000 holders of per cent. of the entire On_ October 31, 1922, there were referred stock, As of was employing. This would mean that if two companies started in busi- ness with the same capital, and one of them divided all its earnings annu- ally among stockholders while the other restricted its division in order to increase the productive capacity of its works, the latter would have no moral right to earn or ever pay divi- dends upon its capital accumulations. That would be a violation of the prin- ciple upon which all thrift is based. It would mean that companies had no right to use earnings for: expansion, and the enforcement of that idea of course would put an end to that ycl- icy. A merchant would have mfingm to use the profits of his business Yo en- large that business, or a farmer to use his profits to buy more land, al- though either might invest in the other’s business or elsewhere. As a matter of fact, the industries of the country have been built up mainly out of their own earnings. t any one read the history of the development of the cotton goods industry in the south or in New England, or of the shoe industry, or the clothing or steel in- dustry, or of any other industry, and, judge of the effects upon industry and employment, and upon prices and the standard of living, of a general rule denying all proprietors the right to ex- pand their business out of profits. Example of a Great Merchant There died in Philadelphia a few days ago one of the greatest merchants of his time, He was respected by all who knew him, and seldom has there been such widespread participation in the #ribute paid to the memory of a distinguished man. Mr. Wanamaker began his mercantile career with a capital of $2,000. How could he have made his career if it had not been lefitimue to increase his capital out of the earnings of the business? He built up a fortunc estimated from $30,000000 upwards, not in speculation, but by the process of steady, gradual expansion in a highly competitive linc of business. His business in Philadelphia was incorporated in 1909 with a cap- ital of $7,500,000, but unquestionably the net value of its tangible assets was much greater than that. This excess was surplus, which it would have been perfectly legitimate to have capitalized by the issue of more stock. Such an issue would in no way have altered the actual value of the assets, or made any difference with the prices of goods sold in the store of the earn- ings of the business. It would have been purely a matter of bookkeeping and of convenience in distributing the oenifiult:dol %M"Qhom If he h:g incorporated it 30 or 40 years ago a made no change in the capitalization meantime, the increase of stock re- quired to represent the assets in the last year of his life would have been very large. An Example from the West Not to take examples exclusively from what Mr. Frear rds as the enemy’s country, it is perhaps permis- sible to take one from the west and among his confréres in Washington. In the carcer of Senator few years, for he is only 57. His first venture in the publishing business is said to have been with an investment of $1,000 which he had saved from his salary as a newspaper reporter, and with which he made the first pay- ment on a newspaper in Topeka. ‘Would anyone venture to-argue that his profits should always have been limited to an interest return on that $1,000?7 He is the reputed owner to- day of two dailies, six weeklies, three semi-monthlies and two monthlies, several of them agricultural papers of wide circulation and large net earn- ings. Their aggregate valuation runs into the millions, and as in such cases the big accretions are made in the later years of a’ man's career, when the increasing earnings double up quickly, the Senator is in a fair way to rank high up among plutocrats. His business of giving information and advice to farmers is also highly competitive. Emerson’s immortal say- ing that if any man could make a mouse trap better than any other, the world would beat a path to his door, is illustrated: by the millions of farm- er's who have beaten a path to Editor Capper’s door, looking for advice. Here again it is demonstrated that some men do get get richer than other men by charging higher prices, but by giving the public what it wants. It is painful to-think that if Senator Cap- per had incorporated his first invest- ment and capitalized it at cost, then continued to operate his multiplied ven- tures by means of the same corpora- tion, without increasing the amount of stock until 1922, and had then is- sued more stock to cover the acquired assets, he probably would have been pilloried in Mr. Frear's list and made ineligible for leadership of the farm bloc. It is needless to mame other exam- ples, but there is scarcely a town in the country which does not have a business that is a leading factor in the community and has been built up bv means of surplus earnings. It is impossible to name a man whose name is prominently identified with the development of any great industry whose career has not been made pos- sible by that means. And such careers have been heretofore regarded as cred- itable to the men achieving them. Ownership of Standard Oil The idea that Standard Oil is mainly owned or controlled by one man or family should be disposed of by Mr. Teagle's statement before the La Follette committee. Even before the dissolution there were 6,000 stock- holders. He said of the ownership: Prior to 1911 the stocks of all the eom- panies were held together through their ownership by the Standard Oil Company (New Jersey), which prevented separate ownership from coming about through nat- ural disis ition. = The de- cree, to away with this condition, di- e the stocks ot the subsidiary companies be distributed pro rata among the stockholders of the holding company. While, at the moment of distribution, all the ulu-nlrrd identical stock lists, these processes lisintegration in immedi- ately to opetate and have been operating ever since. As illustrative of this, at the time of dis- tribution, the Standard ‘Oil f‘mnv%ny (New jersey) had 6,078 stockholders. Twelve of L- Lll more than one per cent. each of June 30, 1922, only six shareholders held one per cent. or iore of the company's common stock. These six shareholders own a total of 28.4 ‘F" eent. of the company's common stock. The largest individual owner of common stock is Mr. John D. Rockefeiler, Jr, with 114 per cent. Three of the re: maining five common stockholders on the list, owning together 10 per cent. of the common stagk, are :lanthropic institutions. It may be of inteicst to the committee to ow that hl D. Rockefeller, Sr., s not bee reholder in the company ince 1920, at the late Mr. William Rockefeller owned only seven hundred shares at the time of his death. Furthermore, the company made effective about a year and a halt ago a stock acqui- sition plan under which its employes are becoming stockholders. The number of sub- scribers under this plan is 11,339 and the common stock already 44,636, Before the end tock is issued in the number of shares of allotted to them of 1925 when The Soviet Doctrine Mr. Frear protests that not 1 per cent. of the people of this country believe in the Soviet theory and that he does not himself, but possibly he does not have a clear conception of either the Soviet theory or his own, The essential error of the Soviet doc- trine is in assuming that the achieve. ments of industrial leaders are of no value to- society, and that the fruits of their labors can be appropriated at the will of the majority without any disturbance of the processes of pro- duction. They do not understand that the men who have the genius to build up great industrial organizations and properties must have the use of the values they create in order to go on with their work. The more they have to work with the more they accome plish, but if the capital they create is taken from them as fast as created their powers are limited. It is not a mere question of justice to the indie viduals who furnish leadership; at most they only get their living ex- penses. The real question is that of free play for their powers in upe building the community. The Soviet lays all emphasis upon the fact that individuals own the great industries, failing to see that but for these individuals the industries for the most part would not exist, and the further fact that these industries are supplying the wants of the lation. They worry lest an individual propri- etor will make a profit, even though it is evident that his profits are bei used to enlarge an industry cheapen its products to the public. The modern equipment which has mule tiplied the productive power of induse try many times and advanced the standard of living for the entire popu« lation has all been provided out of profits, but the central thought of Sovietism is to abolish profits. There may be a difference between this view and the ideas of Mr. Frear, but it is ’s'o faint in‘tlh:l:mliniel that anyone who a tter is very likely to lceer m former also, pare ticularly if he accepts Mr. Frear's multitudinous misstatements. Soviet- ism is built upon misunder and when it comes to hlowledre business affairs, Mr. Frear, to by his and writii ha tle advantage over the