ability to maintain his leadership. He gained his leadership by directing the passage of a great legislative programme. He easily demonstrated that his was the biggest personality in Washington. He put in practice, more than any other recent President, the theory of responsible leadership by the Chief Executive. He has the power and the prestige which success breeds and the confidence and support of the general public.

On the other hand, he has a much smaller majority in the House of Representatives than he previously had. There is a new leader of the House whose capacity to lead and to follow is still to be tried. The programme that will come up this winter is not, like the original programme, called for by the party platform. All Democratic Congressmen are not necessarily committed to it. The Democratic majority is not large enough to warrant dispensing with the Tammany delegation, which is somewhat disgruntled over its lack of patronage.

Yet, notwithstanding these difficulties, the chances seem bright for the passage of the first adequate plan of national defense, for the furtherance of our relations with South America, for the growing prosperity of the country, and perhaps for definite progress against the pork barrel abuse.

SIMPLIFYING NATIONAL DEFENSE

Τ'

HE Army and the Navy both exist for one purpose: national defense. Major Charles D. Hine, formerly in charge of the organization work on the Harriman and other railroads, suggests that the two departments be consolidated into a department of defense:

"Navigation of the air over both land and sea emphasizes the necessity for amphibious central administration. Wireless permits the local unification of control which is the essence of military effectiveness.

"The absence of complete local control in combined land and water operations has often caused partial results if not total disaster. It may be safely asserted that it is the exception rather than the rule when maximum combined efficiency is obtained

by coöperating the forces of the Army and the Navy.

"Our Navy Department was segregated from the War Department and given an independent status in the administration of President John Adams by act of Congress approved April 30, 1798. The motive power of ships of that day was wind. Land transportation was confined to men and animals. All extensive communication was by human messenger. The steamship, the railway, the telegraph, the telephone, the automobile, the motor boat, the wireless, the submarine, the airship, the really long-range gun were all unknown in 1798. Their existence in 1915 demands simplicity and directness of method to offset complexity and intricacy of mechanism. Flexibility of personnel alone can give full force to the magic possi.. bilities of scientific material.

"In the same big Government building in Washington are two Secretaries and two sets of officers, who for the main part find their activities running in parallel lines. The Secretaries of War and of the Navy are, from the viewpoint of business administration, performing similar service. The Adjutant General of the Army, as the head of its bureau of personnel, finds his counterpart in the Chief of the Bureau of Navigation. The Quartermaster General of the Army becomes of necessity for the time being a desk officer, as does the Chief of the Bureau of Supplies and Accounts in the Navy end of the building. The Chief of Ordnance in the Army and the Chief of the Bureau of Ordnance in the Navy study the same immutable laws of matter applied to the resistance of containers, the flight of projectiles, or the composition of explosives. The Surgeon General of the Army and the Surgeon General of the Navy deal with similar hygiene and the same anatomy whether the treatment be given ashore or afloat. The Bureaus of Construction and Repair and of Yards and Docks of the Navy Department, having to do primarily with naval things, find less in common with the Engineering Bureau of the War Department, which plans and constructs fortifications, buildings, dikes, harbors, and jetties. The motive power branch of the Navy,

now miscalled the Bureau of Steam Engineering, has no complete counterpart in the War Department.

"The fundamental error has been in attempting to reason that because some bureaus of the two departments are admittedly different, therefore all bureaus must be highly segregated. The practical conclusion should be that all bureaus should be consolidated when that is possible, and only such left segregated as

may be necessitated by the essentials of the problem of national defense."

Major Hine has pointed out that this suggestion is not altogether new. President Garfield, when chairman of the Committee on Military Affairs, and General John M. Schofield, when Secretary of War, both recommended it. But the increasing complexity of the machinery of war makes it more and more necessary to simplify their management.

A

LITTLE more than a year ago, a man who lives in one of the suburban towns not far from New York City called at the office of the WORLD'S WORK to discuss the advisability of putting a considerable amount of money into the stock of the corporation that controlled the International Correspondence Schools. The man explained that the stock, which was being offered at the time at $125 a share, had been called to his attention by a friend, a former student in the schools, whose subsequent career had been eloquent of the genuine value of the educational work which the institution had long been carrying on. He said he had read a good deal about the institution, that he had become deeply impressed with its purposes and its methods, and that he had decided he would like to become a partner in its laudable and apparently sound enterprise. But he realized that he ran the risk of allowing sentiment to control his judgment in too great a degree, and that when it came to investing hard-earned money in any way whatsoever sentiment could not safely be allowed to enter into the calculations. He wanted to know, therefore, what conclusions were deducible from the facts about the stock as they might be weighed on neutral ground.

In the discussion which followed, the attempt was first made to impress upon this prospective investor's mind that the manner in which this corporation made its financial statements placed practically insurmountable difficulties in the way of determining the status of the shares at all accurately. It was suggested, for example, that the statements of earnings as regularly furnished to stockholders were much too abbreviated to enable one to judge whether the business, which on account of its many peculiar phases could not logically be compared with any other, was being carried on with due regard for efficiency and economy-and this notwithstanding that rather substantial surpluses were being shown from year to year.

It was pointed out that of the corporation's assets, then standing at the impressive total of about $16,000,000, a very considerable part was made up of securities of certain affiliated corporations about which there was an almost complete lack of essential information, and that such assets might conceivably be of little more than nominal value.

And, finally, it was explained that the corporation had branched out along certain lines of activity apparently only slightly compatible with its fundamental purposes, and that in so doing it had almost

ertainly had to assume what might be alled "contingent liabilities," which night prove serious handicaps. Unfortunitely, no means of measurement of these iabilities had up to that time been provided.

Other shortcomings of somewhat diferent significance were called to the investor's attention; for instance, the remarkably active and extensive way in which the principals in the corporation's management had engaged in the promotion of a number of untried industrial ventures, in many respects of doubtful promise; and, again, the way in which these promotion activities were being generally looked upon as affecting the underlying structure of the established enterprises of the group, notwithstanding that there was not in all cases direct intercorporate relationship.

In short, the only conclusion which it seemed possible to draw from an admittedly inadequate supply of essential facts was that, to say the least, purchase of the stock would involve risks of both capital and income which the average investor could not afford to take.

But the case was one of the many in which the investment critic is necessarily at considerable disadvantage in justifying his conclusions. At the close of the interview, the caller was obviously, at most, no more than half convinced that he could not as safely rely, with possibly slight qualifications, upon the representations about the merits of the stock as made by the corporation's officers themselves. In any event, he wrote a letter a short time afterward, in which he said he had purchased a number of the shares, although not as many as he had originally intended. A few weeks ago he wrote again. This time his letter was very brief. It said:

"You were right. Now I should like to have your opinion of the revelations in the enclosed document. What do you think of the outlook?"

Adversity had overtaken the corporation at last and its complete collapse had been narrowly averted only by the prompt and, in many respects, public-spirited action on the part of local bankers, with the coöperation of a few individual investors. Dividends had been cut off and the stock

had declined in value until it was quoted nominally at only about $28 a share.

At their annual meeting about the middle of the year the stockholders had been astounded to learn officially that of the $16,000,000 assets boasted by their corporation only $49,000 was represented by cash-enough to cover scarcely 8 per cent. of the outstanding accounts payable. They determined to find out more about how matters stood, and to that end appointed a committee to dig as deeply a possible into the corporation's affairs. After several months of work, with the aid of expert accountants, this committee of stockholders had summarized its findings in a report which was the document referred to in the investor's letter.

Several reasons were given in the report for the corporation's deplorable condition (aside from those directly pertaining to the war and its effect upon business in this country). A few of the more important may be referred to here. Such were:

(1) The mistake of investing a large amount of capital in a manufacturing enterprise carried on by a company which at the time of the investment had practically no domestic and comparatively little foreign business, and which lacked both means and promise of profitable development; (2) the ill-advised policy of making advances to this and other affiliated enterprises-advances shown on the assets side of the books to have amounted to nearly a million and a half dollars, subject even in more favorable circumstances to very large shrinkage and now practically uncollectable; (3) the lavish expenditure of more than a half million dollars in unnecessarily increasing the organization for producing new business; (4) extravagance in expenses of administration and operation measured by the committee's discovery of means whereby "the business can be conducted efficiently at a saving of at least $400,000 a year"; and (5) the practice of carrying under the head of assets items running into several millions, some at greatly inflated values, and others 'unfairly" treated as assets at all, "partially to justify a large surplus account."

This case is outlined here in its essential

particulars, not with the idea of making a

merit of the judgment (so fully affirmed by later developments) which might have been the means of saving the man of the story from investment misfortune; nor yet with the idea of suggesting to investors generally any of the short-cuts to the science of accounts as a means of criticising the management of the corporations which bid in one way or another for the use of their surplus capital. It is outlined rather as an especially striking illustration of the sharp and bitter correction which is certain to be administered sooner or later to those who let their capital out at the bidding of any one but a responsible banker.

The corporation in question had long been boastful of its complete independence of the machinery of distribution employed in the legitimate market-place for securities. And for a time it seemed to have made of itself a somewhat notable exception to established rule and practice. But what may have been in the beginning merely

financial independence became, as experience had amply demonstrated it was very apt to become, financial license-and the inevitable happened.

Of course, it cannot be denied that occasionally the same kind of fiction as that discovered in the financing of the enterprise referred to here has manifested itself in the financing of enterprises that have had the sponsorship of careful, conservative banking houses. But such occasions, for the most part, have served to show only the more clearly what it means to the investor to deal with bankers who take a pride in their service to clients, rather than to become the mere customer of the kind of people who frequently masquerade as bankers, but who seldom are found to have any lofty idea of the fiduciary capacity of a banking house; or to participate directly in the class of financing that is refused and scoffed at by the established investment firms.

S

intrepid

IT down, Lenroot! Sit down!" Impatient Joseph Cannon, for many years the powerful Republican Speaker, was thus unceremoniously addressing the statesman from Wisconsin. The occasion was the debate on the tariff bill of 1912. Mr. Claude Kitchin, of North Carolina, had for several hours been expounding the orthodox Southern Democratic attitude. Mr. Lenroot had been persistent in his interruptions to his own discomfiture and that of his party. "Sit down, Lenroot, sit down!" the Speaker insisted. "Don't you know better than to interrupt Claude Kitchin

Don't

when he is talking on the tariff? you know that every time you interrupt him you make him stronger? Don't you know that every question gives him a new place in which to hit the Republican Party? . . . Sit down, Lenroot, sit down."

Two things always arouse Mr. Kitchin's finest oratorical shafts. He was attacking both of them on this occasion. They are the Republican Party and a high protective tariff. More than most Southern statesmen, his political career represents a successful onslaught against the Republican organization. Most Congressmen from the South are merely the survivors of political battles within the Democratic

anks; Mr. Kitchin has actually waged ed-hot campaigns against formidable Republican hosts. His predecessor in Congress was a Republican—an exceedingly black man named White; and Republicans, of various colors, have represented the district off and on since the Civil War. Again, the old-fashioned Democratic idea of a revenue tariff had for years been Mr. Kitchin's choicest possession. His father, a swash-buckling "untamed rebel," as his Northern fellow-Congressmen called him -a fiery spirit whom the Baptist Church twice expelled for over-indulgence in profanity-had taught the present leader this sacred doctrine from the cradle. Claude Kitchin began reading the Congressional Record as a boy of ten-a practice which had become an ingrained habit long before he himself descended upon Washington. Anti-Republicanism and anti-protection: these were his great articles of faith; these prepossessions explain his success in Congress; they explain Mr. Cannon's suggestion that Republican protectionists stop stepping on his toes; they likewise explain the fact that Mr. Kitchin, as chairman of the Ways and Means Committee and leader of the majority party, occupies the most powerful post of any Democrat in the legislative branch.

His elevation emphasizes again the prominent part Southerners are now playing in national affairs. Strangely enough, North Carolina, with Mr. Kitchin chairman of Ways and Means and Mr. Simmons chairman of the Senate Committee on Finance, monopolizes the most influential places in both the upper and the lower chamber. The Nation has become accustomed to this Southern leadership; Mr. Oscar W. Underwood, of Alabama, was chairman of the Committee of Ways and Means from 1912 to 1915.

But Mr. Kitchin represents a different type of Southerner from Mr. Underwood. The touch of the Southland rested rather lightly on the gentleman from Alabama. His father had been a Unionist Southerner and a close friend of Lincoln; Oscar himself, though born in the South, had spent his childhood and adolescence in a state so far removed from his native soil as Minnesota. Consequently his

speech contains few traces of the Southern accent. His well tailored appearance suggests, not the cotton planter, but the prosperous Wall Street broker. His city, Birmingham—the “ Pittsburg of the South"

is really a piece of Northern industrialism planted near certain coal and iron mines that happened to be located in Alabama. Certain Southern newspapers actually objected to Mr. Underwood in the Baltimore Convention as a Presidential candidate on the ground that he was no fit representative of the South.

Mr. Underwood's successor, however, has no such disqualification. Everything about him, from his genial John Bunny face constantly crinkling into smiles, his loud voice, which, even in private conversation, carries at least a hundred feet, to his broad-brimmed black hat and his huge overcoat, with its skirts trailing in the wind, suggests the fine flavor of the agricultural South. Mr. Kitchin's personality differs from that of Mr. Underwood in the same degree that Scotland Neck differs from Birmingham. Mr. Kitchin's "district," which embraces Halifax County, contains about three Negroes to every two whites. It raises in great abundance, not pig iron, steel rails, and barbed wire, but cotton and peanuts. Perhaps its largest crop is an abundant brood of Kitchins. Mr. Claude has nine brothers and two sisters living; he himself has nine children; one brother raises more peanuts than any one else in the United States; another, after serving several terms in Congress, was more recently elected governor of North Carolina. Kitchins are so numerous that they are sometimes found in the law courts fighting on opposing sides: Claude's first case was defending a man accused of murder in which his own father appeared as prosecutor-and the son won the case. But life in the Kitchin. district is simple, Southern; its interests. and diversions are essentially agricultural. tural. By ancestry, education, and interests, Mr. Kitchin is the embodiment of this section. His grandfather was a great slave owner; his father fought in the Civil War, though he died, in 1901, entirely reconciled to the reconciled to the result. The present leader's political career represents the tri