The first thing these speculators do is to procure experts' reports. But it is not difficult to obtain these. Westralia teems with experts. But they are often not of the right kind. Says Dr. Schmeisser:

Experts of very doubtful capacity and character undoubtedly exist in these goldfields. Members of all trades-formerly sailors, officers, physicians, chemists, merchants, bookkeepers—become mining experts with a surprising rapidity, from the moment they breathe the air of the goldfields and get a sight of the shining yellow metal in its natural state. The most extraordinary things take place. One of these experts reported on a deposit solely on the basis of samples found and submitted to him. It will not be difficult to mention similar occurrences as illustrative of the knowledge and conscientiousness of some mining engineers. In consequence of judging the whole deposit to be equal to the rich outcrops, many totally exaggerated opinions about the value of many mines got into existence.

Dr. Schmeisser represents the case far too mildly. Many of these experts write, for a consideration, reports of the most brilliant kind without having the slightest ground for their roseate opinions. Either they do not inquire at all, or their examination is wofully superficial, or they must lack the knowledge without which their opinion is altogether worthless. And yet these reports are embodied in prospectuses to guide the investor!

The local speculators sell their claims at a good profit to the London promoters who have created a large demand for them; and in their turn these promoters endeavour to sell their valuable properties' to an eager public. Needless to say, the capital of the companies is in almost every case highly inflated. The nominal capital of the various companies is, on the average, just in excess of 100,000l. Of this sum, as a rule, only from 15,000l. to 25,000l. are working capital-are put into the mine. Of the 75,000,000l. which constitutes the nominal capital of the Westralian gold mines some 60,000,000!. have probably gone to the promoters, partly in shares and partly in cash. There is no doubt whatsoever that the vast majority of mines will sooner or later find their working capital too small; indeed, there are already at this early time of day several cases where it can be demonstrated that this is the case. Dr. Schmeisser has called attention to the same evil. But to return to the promoter. That gentleman does not always at once realise the huge profits at which he aims. The public does not without fail

• The writer may speak with some authority on this matter, as he has during the past year critically examined over two hundred Westralian prospectuses.

I quote once more from Dr. Schmeisser: 'The European company promoters thought they could not float rich deposits at prices high enough. In some of the larger mining fields ground was hastily taken up which had not even been seriously prospected, with a view of forming subsidiary companies with as high a capital as possible. In this way mining properties have been floated with considerable capital which could only produce dividends by being worked on a small scale and in the most economical manner. The unheard-of high capitalisation excludes, of course, in most cases, the payment of dividends.'

respond to his appeals for capital, the biggest advertisements, the most promising of prospectuses, and the most skilful of puffs notwithstanding. Cash subscriptions rarely reach an aggregate total of one-fifth of a company's capital; but I have heard of several cases where the amount subscribed for fell short of 2001. Yet letters of allotment and regret' are posted, and notices to that effect appear in the newspapers. But nevertheless the promoters and their friends the underwriters still have to complete their task. Huge blocks of shares which they have kept on hand are still to be sold to the public.

Before entering upon some details pertaining to the means by which this often difficult task is accomplished I must pause for a moment at the prospectuses. These documents constitute in themselves a fit subject for a critical essay; but I will satisfy myself here with bringing not more than three of their peculiarities to the reader's notice. The first is that the subscription lists are in many cases open for such a brief period that criticism is ineffective. The second is that the finance companies are in the habit of publishing the prospectus of their bantlings for public information only;' but information regarding the shares which anon will be worked off on the public is as a rule deplorably meagre. The third point is that nowadays no reliance whatsoever can be placed upon the statements made in most prospectuses. They abound in mendacious statements clearly made with the object to deceive. This abuse is so frequent and so general that one frequently wonders what object there is in having Companies Acts or a Public Prosecutor.

But to return to the sale of shares in new companies by the promoter. This work is, as a rule, accomplished by means of various subtle devices. The great point is to create a market as soon as the prospectus appears, and this is often done by so called wash sales' on the Stock Exchange. Wash sales are formal' transactions, to which the most reputable brokers do not lend themselves. But many small members of the Stock Exchange are willing to act as brokers to doubtful companies and to push them, and in this way the fictitious quotation of a practically unknown mine gets on the 'tape,' and from there into the newspapers.

The next thing to be done is to obtain favourable reports relating to the mine in the press. I am sorry to say that this is easy work. I have already shown with how little difficulty favourable expert reports can be obtained. Managers seem quite anxious to cable good news relating to marvellous strikes or wonderful crushings; and there are several obscure 'news agencies' which undertake, for a small consideration, to arrange for the insertion of these reports-and, indeed, of almost any paragraph-in a large number of newspapers. Local

country papers are freely used for this purpose, but so-called leading journals also lend themselves to the practice. I have a list containing the names of nineteen provincial dailies and of two London weeklies, all of good standing,' in which I have found such paid puffs. But the financial press is especially guilty of inserting such notices. With three or four honourable exceptions most financial journals are ready to insert and to recommend anything as long as they are paid for it. And apart from the 'tape' and the press, the bucket shop' is also pressed into the service of the promoter of bad companies. Some of these run their own paper; all have tens of thousands of addresses on their lists, and freely circularise investors all over the country.

By such means as these, all devious and dark, are the shares sold by degrees-if possible at a premium, but where it is necessary at a discount. It often happens that large blocks of unabsorbed shares are bought from promoters at a heavy discount by finance companies, who hold them until a market for them has been created. These concerns are to a certain extent characteristic of the Westralian' market. They are, as a rule, worked by powerful financial groups, and are little else than huge promoting concerns; and if we are to draw inferences from the dividends of some of these companies, promoting must be a very paying trade indeed. Several of these institutions have paid from 100 to 200 per cent. on their share capital in dividends, and in consequence the shares of most of them quote at a high premium. But these profits are not derived from the working of the mines, as everyone who looks at the foregoing list of dividends will readily understand. They come entirely from successful promotions and profitable transactions in claims.

These finance companies are in the Westralian market what the controlling firms are in the South African; and this leads to the inference that the Westralian market, too, is largely cornered, artificial, and unhealthy. Indeed, those at all conversant with money matters and in touch with the stock markets will find hundreds of small indications that point with irresistible force to this deduction. There is no doubt whatsoever that a large part of the eighty million Westralian gold mining shares created during the last three years are still in the hands of the finance companies, which practically dominate this market. These companies are at once the creating, the moving, and the ruling spirits. But whilst their ultimate object is as clear as the object of gain can be, their means are dark in more senses than one. We outsiders only know that they deal and barter with each other-that they are sometimes at battle and sometimes at peace-that they silently resist each other here and support each other there-that they are now destroying each other's work and then shoring up each other's shams. But their true mutual relations are complex and mysterious like those of the components of

a 'nest' of eels, or of one of those curious litters of rats which are for ever tied together by their entangled tails.

Let us now briefly summarise the facts cited above, and see to what deductions they lead. We have in the first place seen that some inordinately rich gold deposits have been discovered in Western Australia. But the auriferous formations are unreliable for the purposes of ordinary mining, owing to the irregular course and uncertain quality of the auriferous deposits. The depth and course of formation have nowhere been tested to any extent, but numerous disappointments have already been caused by the pinching out of reefs, and there will no doubt be more of them. Crushings are very irregular, and development, has not advanced beyond initial stages. In consequence it is foolish to profess unbounded faith in the future of these mines, and still more foolish to 'back' such faith. The most favourable attitude which cautious persons can assume is, as Dr. Schmeisser hints, to wait for a year or two until more extensive developments have taken place;' but the balance of evidence provided by the experience that has hitherto been gained forces us to conclude that scepticism is wiser than even an open mind. There are already thirty mines that have absolutely failed; there are few indeed that may be regarded as permanent successes, as fit media for the safe investment of capital.

There never was inflated, unreasoning speculation yet which did not come to grief, from the tulip mania of 1634 down to the Kaffir boom of 1895; and the Westralian craze of 1896 is not likely to be the first exception to the rule.

S. F. VAN OSS.

1896

COMMERCIAL MORALITY IN JAPAN

WITHIN the last few weeks there has been a renewal of interest in the discussion on commercial morality which, recurring at intervals throughout the last few years, has directed attention to the ethics of commerce. The facts upon which the present discussion is based are by no means new. Mr. Herbert Spencer, writing thirty-five years ago, gave a number of similar instances of corruption in his essay on The Morals of Trade,' where, summing up the general opinion expressed by his mercantile informants, he says: On all sides we have found the result of long personal experience to be the conviction that trade is essentially corrupt.' Nevertheless, he demurs to the suggestion that the commercial morality of the time was inferior to that of a hundred or a hundred and fifty years earlier, when, as Defoe showed in his 'Complete English Tradesman,' a state of things existed which was not only no better than that prevailing to-day, but was in many respects decidedly worse. 'There was scarce a shopkeeper,' says Defoe, 'who had not a bag of spurious or debased coin, from which he gave change whenever he could.' After dealing with this and other facts which he adduces, Mr. Spencer comes to the conclusion that while the great and direct frauds have been diminishing, the small and indirect frauds have been increasing, alike in variety and number; and against this state of things he suggests that there is no remedy save a 'purified public opinion.' 'When,' he says, 'that abhorrence which society now shows to direct theft is shown to theft of all degrees of indirectness, then will these mercantile vices disappear. When not only the trader who adulterates or gives short measure, but also the merchant who overtrades, the bank director who countenances an exaggerated report, and the railway director who repudiates his guarantee, come to be regarded as of the same genus as the pickpocket, and are treated with like disdain, then will the morals of trade become what they should be.'

Such a higher tone of public opinion Mr. Spencer did not regard as likely to be reached in the near future. Throughout the civilised world, especially in England, and above all in America, social activity is almost wholly expended in material development. And as, in times when national defence and conquest were the