Lombard Street | Page 6

none of our
ancestors could have conceived. In every district small traders have
arisen, who 'discount their bills' largely, and with the capital so
borrowed, harass and press upon, if they do not eradicate, the old
capitalist. The new trader has obviously an immense advantage in the
struggle of trade. If a merchant have 50,000 L. all his own, to gain 10
per cent on it he must make 5,000 l. a year, and must charge for his
goods accordingly; but if another has only 10,000 L., and borrows
40,000 L. by discounts (no extreme instance in our modem trade), he
has the same capital of 50,000 L. to use, and can sell much cheaper. If
the rate at which he borrows be 5 per cent., he will have to pay 2,000 L.
a year; and if, like the old trader, he make 5,000 L. a year, he will still,
after paying his interest, obtain 3,000 L. a year, or 30 per cent, on his
own 10,000 L. As most merchants are content with much less than 30
per cent, he will be able, if he wishes, to forego some of that profit,
lower the price of the commodity, and drive the old-fashioned
trader--the man who trades on his own capital--out of the market. In
modem English business, owing to the certainty of obtaining loans on
discount of bills or otherwise at a moderate rate of interest, there is a
steady bounty on trading with borrowed capital, and a constant
discouragement to confine yourself solely or mainly to your own

capital.
This increasingly democratic structure of English commerce is very
unpopular in many quarters, and its effects are no doubt exceedingly
mixed. On the one hand, it prevents the long duration of great families
of merchant princes, such as those of Venice and Genoa, who inherited
nice cultivation as well as great wealth, and who, to some extent,
combined the tastes of an aristocracy with the insight and verve of men
of business. These are pushed out, so to say, by the dirty crowd of little
men. After a generation or two they retire into idle luxury. Upon their
immense capital they can only obtain low profits, and these they do not
think enough to compensate them for the rough companions and rude
manners they must meet in business. This constant levelling of our
commercial houses is, too, unfavourable to commercial morality. Great
firms, with a reputation which they have received from the past, and
which they wish to transmit to the future, cannot be guilty of small
frauds. They live by a continuity of trade, which detected fraud would
spoil. When we scrutinise the reason of the impaired reputation of
English goods, we find it is the fault of new men with little money of
their own, created by bank 'discounts.' These men want business at
once, and they produce an inferior article to get it. They rely on
cheapness, and rely successfully.
But these defects and others in the democratic structure of commerce
are compensated by one great excellence. No country of great
hereditary trade, no European country at least, was ever so little
'sleepy,' to use the only fit word, as England; no other was ever so
prompt at once to seize new advantages. A country dependent mainly
on great 'merchant princes' will never be so prompt; their commerce
perpetually slips more and more into a commerce of routine. A man of
large wealth, however intelligent, always thinks, more or less 'I have a
great income, and I want to keep it. If things go on as they are I shall
certainly keep it; but if they change I may not keep it.' Consequently he
considers every change of circumstance a 'bore,' and thinks of such
changes as little as he can. But a new man, who has his way to make in
the world, knows that such changes are his opportunities; he is always
on the look-out for them, and always heeds them when he finds them.
The rough and vulgar structure of English commerce is the secret of its
life; for it contains 'the propensity to variation,' which, in the social as

in the animal kingdom, is the principle of progress.
In this constant and chronic borrowing, Lombard Street is the great
go-between. It is a sort of standing broker between quiet saving
districts of the country and the active employing districts. Why
particular trades settled in particular places it is often difficult to say;
but one thing is certain, that when a trade has settled in any one spot, it
is very difficult for another to oust it--impossible unless the second
place possesses some very great intrinsic advantage. Commerce is
curiously conservative in its homes, unless it is imperiously obliged to
migrate. Partly from this cause,