Other social factors

As a broad illustration of the points that have here been discussed the development of the credit system in England as contrasted with that on the continent of Europe may be briefly alluded to. It has been pointed out that the insular position of Great Britain has left her relatively free from the fear of invasion.1 For centuries no foreign soldier has put a foot on her soil. This freedom from an anxiety that has weighed more or less heavily on all the nations of the continent has stimulated a sense of security that has been of great moment in the development of the system of credit. Furthermore, her rich deposits of coal and iron enabled Great Britain after the invention of power machinery to take her position as leader in the industrial revolution of the nineteenth century. Her opportunities in this respect were further accentuated by the fact that the other nations of Europe during the French revolutionary and the Napoleonic periods were almost constantly harassed by warfare. While Great Britain was interested and participated in the struggles, its participation took the form of contributions of treasure rather than of men, and thus while Europe was a battlefield in which the best men of the continental nations were being offered as sacrifices, England kept her men busily engaged in the process of wealth production at home. With the overthrow of Napoleon her supremacy of the seas was undisputed and since that time the maintenance of her navy has tended to preserve at home a comfortable assurance of absolute security. On the continent the situation in this respect has been entirely different. Wars have been frequent and a feeling of doubt and of insecurity has largely prevailed. The vaguest rumors of international difficulties have sufficed at times to stimulate general popular hoarding. The effect of such hoarding on the credit market is, of course, always costly and annoying.

Illustration from

European history

1 Notwithstanding Zeppelins.

Furthermore the equable climate of most of England is said to account for the Englishman's stolidity and evenness of temperament. He is not easily excited or thrown into a panic. He is opposed to sudden or violent changes and has a great respect for precedent and the established order. Political changes have come slowly in England and only at rare intervals have there been serious disturbances. Moreover, as modern governments go that of England has been liberal and democratic. While the law has been strictly enforced it has been impartially enforced. Security, justice, and order have thus for a long time encouraged the Englishman's enterprise and have strengthened his confidence in the future. This enterprise and confidence naturally reacted on the development of the credit system. The English banking system has grown and expanded, until today it stands as the most marvelously complex and efficient system that the world has ever seen. On the continent the situation has been different. The temperament of the continental European is not like that of the Englishman. But, apart from temperament, exhaustive wars, political upheavals, and general economic backwardness have on the continent put serious checks on the development of the credit system. Deposit banking grew up but slowly, and it is still largely confined to the commercial centers. The bank note remains, therefore, the preferred form of bank credit and in view of the strength of habit and tradition it will probably remain so for a considerable time to come.1

In view of the many intricate causes affecting the demand for bank credit considered as a whole as well as the relative distribution of demand between the two forms of that credit, it will readily be seen that this demand is subject to wide variation. The demand varies not only absolutely, but relatively, and the purpose now is to bring this out more clearly and to show that serious consequences may result from such variation unless provision is made to meet it.

The demand for the two forms of bank credit is subject to wide fluctuation

1 Strenuous efforts are now being made also in France to stimulate the development of the checking system.

The demand for bank credit varies absolutely from place to place. This variation is due to the different social conditions that prevail in different communities. Even as regards communities in the same country the differences are greater than is ordinarily supposed. Not only are there usually fundamental economic differences, but the whole point of view differs. But, owing to the persistence of habit and tradition, it is probably safe to say that this place demand, from one year to the next is subject only to slow changes.

Over short periods, however, in a given community there may be considerable variation from time to time. This might easily arise from the exigencies of the normal economic life. Where agriculture is the chief reliance of the people, production is bound to be seasonal. The demand for credit facilities would normally be heavier in the planting and in the harvesting seasons than it would at other times. In the planting season the farmer needs seeds, fertilizer, new implements, and perhaps some stock. For these he has in most cases to depend upon his capacity to borrow. Similarly when the crop is harvested, but before it is sold, the farmer needs funds to pay off the hands, and, perhaps, to settle his account at the store. At other times, however, his exchanges are few and his money needs are light. In industrial and commercial communities, on the other hand, the process of wealth production goes on day in and day out without prolonged interruption. Of course, even in manufacture and in commerce there are marked seasonal differences from one line to another, but in a community with diverse manufacturing and commercial interests these seasonal variations, coming at different periods for different trades, are likely to a considerable extent to offset each other. Hence the demand for credit facilities is apt to be more uniform in a manufacturing or commercial community than in an agricultural community. Making due allowance tor possible offsets, however, absolute day to day uniformity in any community is out of the question. There is always some fluctuation even though the degree be relatively small and the average over an extended period remain almost constant.