LIBRARY.

THE

YALE REVIEW.

MAY, 1893.

COMMENT.

The Gold Reserves and Bond Issues: The Farmers' Movement in Connecticut: Trade Unions and the Law.

FOR

several months past the gold reserves in the treasury have been approaching the danger point, and during the last few weeks they have fallen below the sum of $100,000,000 which is regarded as essential to safety. Under these circumstances there has been a constant pressure upon the Secretary of the Treasury to use his power to sell bonds for the sake of increasing his reserve, or at any rate to give definite assurance that such a power would be used in case of necessity. The Secretaries of the Treasury, both under the past administration and the present, have shown a reluctance to make use of this power. For this caution, which seems to us thoroughly wise, they have been subjected to a great deal of adverse criticism, especially among the financiers and journalists of the East. We believe that these criticisms have been based on a misconception of the situation, and that the Treasury department has shown itself wiser and more far sighted than its critics.

The grounds of the criticism are obvious enough. If the United States failed to make gold payments whenever they were wanted, it would cause a great shock to public confidence and produce a severe depression, if not an actual crisis. The evils from any such depression would be so great, that many of our business men deem it the duty of the government to avoid this present peril at all hazards, trust

ing to the future to take care of itself. There can be no doubt that there is such a peril, but there is grave doubt whether the expedient of bond issues as a means of meeting it would be either right or in the long run advantageous.

If a business man is spending more than he earns, we do not advise him to mortgage his house. Such a course may enable him to meet his current obligations, but in the long run it destroys his financial prosperity, instead of advancing it. The only right thing for him to do is to retrench his expenses. So far as the mortgage postpones the necessity of such retrenchment, we regard it as a bad thing. The United States government to-day is in a condition similar to that of a business man who spends more than he earns. It is making large outlays for rivers and harbors, it is burdened with a large pension roll, and worst of all, it has undertaken to maintain the parity between gold and silver in the face of adverse commercial conditions. These three things together prove too much for its current resources. There are three ways of meeting the difficulty,-either by decreased expenditure, increased taxation, or by borrowing money. Either of the two first is an honest business method, the last is not. If we allow an individual or a government to borrow money to meet a current deficit, we take away our only check against wildcat financiering of every kind. At present the power of the silver mine owners to use the United States government for their purposes is limited by the net revenues of that government itself. If we admit the issue of bonds as a means of maintaining the factitious parity of the two metals, we commit the country, as well as the government, to the support of the mine owners. Bond issues of $50,000,000 or $100,000,000 would enable them to draw to that extent on the commercial resources of the banks and the nation as a whole.

Any such policy can only prove of service for a time. It can only postpone the crisis which the present law is bound to bring. Any means of postponement like this will make the crisis worse when it does come. To-day we are in good condition to meet it. If the United States should fail to maintain gold payments, there is nevertheless $500,000,000 of

available gold in the country and not likely to be driven out of it, sufficient to form a good banking reserve for gold accounts, and to meet the demands for the use of that metal which are incident to the foreign and domestic trade of any first class country, under the commercial conditions of the present day. If the United States issues bonds as a means of making further purchases of silver, it correspondingly decreases the gold reserve in the country as a whole. It is useless to talk of selling the bonds abroad instead of at home. The indirect effect will be the same in either case. If we sell the bonds at home, we withdraw that amount of gold from circulation and gradually substitute silver. If we sell them abroad, we bring the gold to this country with one hand and drive it back to Europe with the other, as fast as the Treasury notes are placed in circulation. Under the exceptional conditions of a war there may be certain advantages in negotiating a foreign loan instead of a domestic one, but under the ordinary conditions of production and international trade it makes but the very slightest difference, whether the gold be borrowed at home and replaced from abroad, or borrowed abroad and then exported.

There is only one condition under which such an issue of bonds would be justifiable. If the exigency which now exists were only temporary, and the prospects for the speedy repeal of the silver purchase act were excellent, then we might be justified in temporary loans as a means of meeting the exigency. But we cannot look forward to a change of policy of this kind with anything like thorough confidence. That there is some change of sentiment on the silver question, we are glad to believe, but we are far from believing that there has been change enough to make an immediate repeal of the Sherman act certain or even probable. In the face of this uncertainty, we are not justified in treating the present difficulty as a temporary thing, which it is the duty of the Secretary of the Treasury to tide us over without regard to the future. We believe that the surest way to have the Sherman act repealed is to let people see its disastrous consequences. The gold advocates have been for fifteen years predicting evil which has not come. This is

to-day one of the strongest arguments in the hands of the advocates of silver coinage. We do not believe that the United States will come back to a gold standard, until it has had a taste of this evil. The present time is not a bad one for the experiment. If the evil is inevitable and can only be made worse by postponement, it is best to face it to-day, when we can stand the strain, rather than postpone it until the future, when the strain itself will be more severe, and our own powers of resistance weaker.

The State of Connecticut has just added an interesting chapter to the history of the farmers' movement. For thirty years the Sheffield Scientific School of Yale University has been the Land Grant College of Connecticut under the act of Congress of July 2nd, 1862. That act granted to the several States certain amounts of land scrip to be used for the endowment of colleges giving instruction in agriculture and the mechanic arts.

The sum realized by Connecticut from the sale of this scrip amounted to $135,000, and only the interest on this could, according to the act of Congress, be used. To establish an independent college with such means was out of the question, unless the State should appropriate a very large additional sum of money. But in the Sheffield Scientific School, Connecticut already had an institution of the kind. contemplated by Congress. The Legislature, therefore, decided in 1863 to constitute this school the College of Agriculture and the Mechanic Arts for Connecticut, and to offer to it the income of the fund, provided Yale College would execute a contract, promising compliance with the terms of the act of Congress. This contract, which was signed on behalf of the corporation by President Woolsey in 1863, provided, among other things, that the Scientific School should take gratuitously, each year, such a number of pupils as would, if they paid at the regular rates, expend in tuition fees a sum equal to half of the income of the fund. The school has faithfully kept this contract for 30 years, it has added very largely to its teaching facilities from its own funds, and has

never received any appropriation from the State of Connecticut.

In 1890 an act was passed by Congress "For the more complete endowment and support" of colleges established under the act of 1862. This act offered to each of these colleges an appropriation rising from $15,000 in the first year to $25,000 in the eleventh year, "subject to the legislative assent of the several States and territories." Special provision was made for the payment, on the assent of the governor, of such installments of this appropriation as might become due before the adjournment of the legislature meeting next after the passage of the act, and, during the immunity from legislation which the people of this commonwealth enjoyed for two years, the income was under this provision paid to the Scientific School. The number of free scholarships was at once voluntarily increased by the authorities of the school in proportion to the increase in the government appropriation and in accordance with the terms of the contract of 1863.

When, however, the legislature convened in 1893, a bill giving the assent of the State to the acceptance of this grant was tabled, and another bill was introduced, providing, in substance, that all of the appropriation made under the act of 1890 should go to the Storrs Agricultural School. This school, it should be explained, had been established in 1881. by Augustus and Charles Storrs, who gave 160 acres of land in the town of Mansfield and $5,000 in cash for the purpose. It is controlled and supported by the State. It was intended to be, and always has been, not a college, but a school of a lower grade. The aim of its founders was to give to country boys such facilities in the way of education. as the city boys get from their high schools.

The hearing on this bill was novel in many particulars. It was referred, not to the judiciary committee, but to the committee on agriculture. The manifestation of interest in the subject proved so great that the ordinary committee rooms were not adequate, and the committee accordingly met in the hall of the assembly. Not only the seats of the house but also the galleries were filled with spectators of