the management is to be guided and its actions determined by the facts developed through the accounting department. By analysis and comparison the accountant will develop a knowledge of the weak spots in the working organization, bringing them to the attention of the management. This department will be to the management what the mariner's compass and the sounding lead are to the captain and the pilot of the great ocean liner, without which the vessel with its precious cargo of lives and merchandise would be dashed upon the rocks.

An accounting system, to be of any value whatever, should be such that at the close of each period there can be made up a statement of the business in all its detail. It is not enough that the costs should go into a few general accounts; there must be an intelligent subdivision of every item of cost, whether of material or labor, and no accounting system is entitled to confidence which does not classify and properly locate every dollar which has passed through the books. Then if costs are increasing, the comparisons between corresponding periods, will reveal the fact, and if there are leaks they will be detected and stopped.

I have heard manufacturers refer to their bookkeeping and accounting as "unproductive labor," and in a true sense they made no mistake in calling it "unproductive labor," for it produced nothing by which to guide them in the conduct of their

business. Accounting unproductive labor? It is the most productive labor in the whole establishment. Its finished product

is knowledge born of facts, regarding costs,-not vague, indefinite, thumb-rule guesses.

The management of the large corporation, through the account system, is to do for industry what the inventor has done with machinery, for, after all, a machine is simply organized thought, and while no patents are granted for improvements in management, there are just as real inventions in the field of organization and management as in the field of mechanic arts, and it would almost seem as if a large part of the progress of the future, must come along that line, for in certain directions

it would seem as if machinery had almost reached the limit, and even though the machine were operated for nothing, the savings would be very slight.

Men have been willing to pay liberally for the highest grade of engineering skill if results could be produced; they have been willing to literally pour out money for new machinery and factory equipment, but it seems never even to have occurred to some of them that in addition to the new equipment of tools and the machinery in the factory, they needed brains in the office, and through this lack they have often been throwing away all the results obtained from a modern, up-to-date equipment and splendid management in the shop, and many a superintendent or manager of the manufacturing or mechanical department of a business has had failure charged to his account when failure should have been charged to the office.

Industrial accounting is being brought to a scientific basis; it is being systematized and standardized, but this work cannot. be done by men lacking in the scientific knowledge of accounts and men must be willing to avail themselves of the services of the expert here exactly as they would in the legal, chemical or mechanical departments of their business. It is useless to equip a plant with every modern improvement and then through ignorance in the accounting department, throw away all the results of this modern equipment, and that is just what hundreds, yes, thousands of business men are doing today.

It is usually dangerous to prophesy, but you will permit me to quote from a lecture which I delivered at Dartmouth College in 1902.

"We have been having an era of prosperity such as this country has never before known. The output of our factories has been wonderfully increased, and sooner or later there must be a reaction. In the meantime several questions must for the time being remain unanswered. Will the stimulated production be permitted to glut the market? Will prices be forced down to a lower level to dispose of the surplus product?

"This has always been the experience of the past and these violent reactions have brought ruins to thousands. Just how the country will

meet these new conditions remains to be seen. Up to this time business men have had the experience of other depressions like those of 1873, 1884 and 1893 as a guide for future action, but the enormous consolidations of capital during the past few years have made entirely new conditions with which men have, as yet, had no experience which would qualify them to forecast the future. In a degree we face the unknown, and that is always difficult to face with wisdom and intelligence.

"The question will be, What will be the attitude of the large consolidation? In my opinion, it will in all probability, steady the market. It will not crowd production to such a point as to glut the market with goods and force stagnation that would paralyze industry and drive its competitors into bankruptcy, but it will not run short time to prevent excessive over-production while its competitors run full time; about that there will be no question. The consolidation is not going out of business; it will manufacture goods and sell them even though it may not be able to make much money.

When depression comes, in my opinion, the consolidations will take the lead in slowing down. If the competitors of the so-called trusts and consolidations are willing to do the same thing, adjustments will be made to fit the new conditions, but if they insist upon running full time, cutting prices to maintain their full product, that will produce a condition which will have to be met and while the consolidation will still steady the market, it may be forced to do it on so low a basis of profit, that it will be likely to produce a 'tired feeling' which the ordinary. spring medicines will not entirely relieve and everyone connected with the industry, both insiders' and 'outsiders' will have to take the medicine."

Late in 1903 and in the early months of 1904 many lines of manufacturing industry passed through a period which bordered on depression. The word "depression" is a little too strong to accurately describe the conditions, and perhaps it would be better to call it a season of slackened activity. In a sense manufacturing. industry slowed down and marked time but on the whole there. was not much headway lost but the stock market or the speculative side of industry passed through a revolution early in 1904. Yet there was no panic in industry itself; on the contrary, through it all there was a steadiness which it has been hard for

me to account for except on the theory that it was the direct result of the influence of the large corporation which through all the fluctuations in Wall street, held a steady hand on the conduct of business and did not paralyze trade by demoralizing the market price of goods and by cutting down wages. The Wall street captain of industry might be gambling in the smoking room, but the real captain of industry was on the bridge and brought his craft safely through the storm.

We are now having a very serious depression and consolidated industry has done exactly what in 1902 I predicted it would do. We were facing the unknown conditions then suggested and the order was given to slow down and the competitors of the consolidations have, in the main, done the same thing and as a result, while we have had a smaller volume of business, we have practically had no panic in industry and the commercial highway has not been strewn with financial wrecks. Considering the conditions, we have had comparatively few commercial failures, nothing like what we would have had, in my opinion, without the steadying influence of consolidation.

So far as I can judge, business houses from one end of this country to the other, while not enjoying the abnormal volume of business which they had last year, all things considered, taking the country as a whole, are in a comparatively healthy financial. condition. As a result of slowing down they have reduced their financial obligations, they have reduced their stock of made-up goods and they have taken an inventory and know their true financial condition. The working organization has not been. destroyed by financial disaster. Stocks in the hands of the trade. are very low; there is no glutted market such as has usually followed business depression and a comparatively small demand. I will set the wheels in motion.

We have simply been going too fast and as a railroad man would say, "Some were running past the danger signals set. against them." They were going so fast they could not see the danger signals.

We have been and we are now somewhat in the position of

the captain of the great ocean liner in a fog, who has signalled the engineer to go slow. The line of business with which I am connected (the envelope industry) is one that acts as a barometer which pretty accurately registers trade conditions, and, gentlemen, I believe the fog is lifting. We have a good boat under us; we still have the sounding lead and compass and the stars and we shall soon be able to see the sun and take an observation and pick up the buoy which marks the channel of industrial progress and then the signal will be given "Full steam ahead".

Permit me now to illustrate how the consolidated corporation acts as a steadying power on the market. The price list established by the consolidation is not guessed at by the rule of the thumb. It is wrought out on a scientific basis of accounting and that price list is the basis upon which, not only the consolidation but practically every one of it competitors, does business. Not that all the competitors of the consolidation always adhere strictly to either the established prices or standards for quality, but the price list established by the consolidation is the base from which they make all their calculations. And this is true. even where the consolidations control a relatively small percentage of the product.

I believe I am perfectly safe in saying in not one single industry does the large corporation control the market. It maintains at great cost a system by which its costs of production are very accurately determined and when a new price list is issued every competitor will practically duplicate that list within fortyeight hours or just as soon as they can get it through the printing office. They are not called upon to exercise a particle of judgment and they don't; they simply follow copy and they follow it so accurately that if there should happen to be a blunder in the list they will duplicate the blunder. From the fact that all manufacturers in a given industry issue practically the same list, many persons labor under the mistaken notion that there is an agreement or understanding between them and that the public is being held up, but such is not the case.

Now suppose there were no large corporation to establish a