NOTEBOOK “ι” (“IOTA”)

LIEFMANN, HOLDING AND FINANCING COMPANIES

Professor Dr. Robert Liefmann , Holding and Financing Companies , Jena, 1909 (A Study of Modern Capitalism and Securities) (x + 495).

[cf. especially p. 11 of the extracts] ((The author is a double-dyed idiot, who makes a great fuss about definitions—very stupid ones—all revolving around the word “substitution”. His factual data, however, mostly quite raw, are valuable. Opponent of the labour theory of value, etc., etc.))

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| | pp. 104-449: “Descriptive part.” The theoretical part = nonsense |
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p. 9: Against Sombart for following “wholly in the wake” of the Ricardo-Marx labour theory of value.

| number of shareholders | | | p. 33: “In Prussia, the number of share - holders is only 2 per cent of the population.” There are more in Britain and America. “According to the estimate for Prussia in the 1909 Bill for taxation of joint-stock companies, the average shareholding in Prussia is not even 10,000 marks. These holdings are distributed among approxi- mately 700,000 persons . All such estimates, however, are very unreliable” (34). |
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“There are no general statistical data at the present time on the spread of stock capital.... Philippovich ( Outline , 7th edition, p. 164) estimates that 40 per cent of the British national wealth is in ‘securities’ (i.e., stocks and, mortgages). Schmoller (statistical supplements to the Minutes of the Stock-Exchange Enquiry Commission, 1892-93) estimated in 1892 that about one-quarter of total Prussian capital, nearly 16,000-20,000 million marks, was invested in securities. Sombart ( The German National Economy in the Nineteenth Century , p. 224) puts the stock capital of Germany in 1900 at 31,000-32,000 million marks” (37). “Today this figure is definitely too low; German stock capital should be put at 45,000-50,000 million marks, which nevertheless is only about one-fifth of the country’s national wealth, estimated at 250,000 million marks” (37).

In America (✕) the national wealth in 1904 was 107,000 million dollars. About one-third was stock capital. “For Great Britain he (✕) gives the stock capital as 26,000 million dollars, for France—19,500 million dollars. The figure for the whole of Europe is about 75,000 million dollars” (38).

| (✕) Charles A. Conant , “The Concentration of Capital in New York and Those Who Manage It”, Bankers’ Magazine , November 1907 (quoted, p. 38). | | | N.B. |

| Thus: |
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| Stock capital | America | 35 | thousand | million | dollars | | | | |
| Great Britain | 26 | ” | ” | ” | } | 58.0 – |
| France | 19.5 | ” | ” | ” | 75 |
| Germany | 12.5 | ” | ” | ” | 58 |
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| | 93.0 | difference | | 17 |
| ✕ | 5 = 465,000 million francs |
| | [but Neymarck reckons 60 0 , 000 million] |

| 44: ...“extraordinary interweaving of all economic interests”. 51: The Union (mining, etc., joint-stock company in Dortmund ) ((see also Stillich α pp. 38 and 41 [1] )). Formed in 1872. “Share capital was issued to the amount of nearly 40 million marks in 1872 and the market price rose to 170 per cent after it had paid a 12 per cent dividend for a year. After that, however, no dividends were paid until 1880, and already in 1875 the first of the reconstructions had to be undertaken, which since then were repeated in almost every period of unfavourable market conditions.... And every time the chief sufferers were the original shareholders.” [2] “Even companies founded with other aims than these (‘speculation in stocks’) in fact often go over more or less exclusively to spe- culation in stocks. This may happen partly because the shareholders do not pay enough attention to the activity of their directors, and partly because in this respect they are deceived by the latter” (67). | |
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| | | | | 170% |
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71: In different countries, different types of companies predominate:

In America—control over other companies.

” Germany— take-over (Übernahme) companies.

” France—capital investment companies.

” Holland (“as a rentier state”, p. 71)—ditto.

Belgium—à la Germany.

Great Britain—investment trusts....

Jeidels , Relation of the German Big Banks to Industry , Leipzig, 1905.

Dr. Riesser , On the History of the Development of the German Big Banks, with Special Reference to Concentration Trends , 1906.

p. 117—one of many examples of shareholding by the Belgian Société générale (December 31, 1906—shares and bonds amounting to 198 million francs, a host of companies).

p. 136-37. One example:

| an example of speculation | | | | The London and Colonial Finance Corpo- ration, “with a paid-up capital of only £21,745 in 1890 obtained a net profit of £80,567 = 370 per cent of capital and paid a 100 per cent dividend.” |

| good example | | | Capital investment company (Kapital- anlagegesellschaft)— —Aktiengesellschaft für rheinish-west- phälishe Industrie. Founded October 1871 (p. 156). |
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| Dividend: | 1872 | — | 35% | — | 35!! |
| N.B. | 1873-1883 | — | 0 | — | 0 |
| | 1884-1895 | — | 3-9% |
| N.B. | | | | | 1896-1899 | — | 10-21% |
| | | | 1900 | — | 60% | — | 60 | | | | !! |
| | | 1901-02 | — | 0 | — | 0 |
| | 1905-06 | — | 40% | — | 40 |
| | 1907-08 | — | 6-4% |

Dr. Emil Wolff , The Practice of Financing, etc. , Berlin, 1905.

Francis Cooper , Financing an Enterprise , Two vols., New York, 1906.

Edward Carroll , Principles and Practice of Finance , 1902 (New York).

W. Lotz , “The Technique of Securities Issues”. In Schmoller’s Jahrbuch , 1890, p. 393 et seq.

“Thus nothing has come of using capital investment companies ‘to ensure small owners the profitability of the big’ (✕)” (163).

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| | p. 64 : “Louis Hagen, the Cologne banker, sat on the Supervisory Boards of 35 firms; the Deutsche Bank, according to Jeidels (✕ ✕), had its directors on the Supervisory Boards in 101 companies, and its own Supervisory Board members in 120 companies” (p. 64). | | | N.B. |
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(✕) Jörgens , pp. 45-46.

(✕ ✕) Jeidels , Relation of the German Big Banks to Industry , 1905.

Various companies repeatedly issue stock for one and the same assets.

| Example (American)... “their (railway com- panies’) assets appear repeated five times over in the stock of the companies directly or indirectly controlling them” (182). | | | N.B. five times repeated |

Ch. A. Conant , “The Tendencies of Modern Banking” ( Bankers’ Magazine , 1905 ).

| The Northern Pacific Railway Co. Capi- tal = 80 million dollars of foundation shares. Struggle between Harriman and Hill . Hill acquired foundation shares to the amount of 15 million. “This ‘raid’ forced up the market price of Northern Pacific shares nearly 1,000 per cent.... On May 9, 1901, there was a crisis on the Stock Exchange, ruining a large number of smallholders, while the chief participants, according to Harriman’s testimony, suffered no losses through this manipulation” (184). | |
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| | | 1,000% and crisis |
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| | “With the further development of stock capitalism, the methods of fleecing the public of large sums of money and diverting it into one’s own pockets have become more subtle . Today the method is to form, and graft on one another new companies , to which one and the same material assets are sold or leased; these assets pass from one company to another” (180). |
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| (my italics) N.B. | | | |
| Liefmann’s italics | | | |
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The Standard Oil Company was founded in 1900.

| N.B. | | “It has an authorised capital of $150,000,000. It issued $100,000,000 common and $106,000,000 preferred stock. From 1900 to 1907 the following dividends were paid on the latter: 48, 48, 45, 44, 36, 40, 40, 40 per cent in the respective years, i.e., in all $367,000,000. From 1882 to 1907, out of total net profits amounting to $889,000,000, $606,000,000 were distributed in dividends and the rest went to reserve capital” [3] (212). |
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| N.B. (new technique 500 % dividend.... | | | “In 1907 the various works of the United States Steel Corporation employed no less than 210,180 people (1908—165,211).... The largest enterprise in the German mining industry, Gelsenkirchener Bergwerksgesell- schaft, in 1908, had a staff of 46,048 workers and office employees, and 43,293 in 1907” [4] (p. 218). Internationale Bohrgesellschaft (in Erke- lenz).... “Founded in order to apply the drilling method invented by engineer Anton Raky... (235)... the company paid a 500 per cent dividend in each of the years 1905-06 and 1906-07” (236). |

| | “In fact, experience shows that it is suffi- cient to own about 40 per cent of the voting shares of a company in order in normal times to direct its affairs” [5] (258). Further, there are also (especially in America) “non-voting shares” (259), bonds, etc., and if these are shares of a company controlling a number of other companies, then “he [the capitalist], with his own capital of five million dollars can control a capital 40-50 times as great” (259). |
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...and even “an amount of capital” “80—100 times as great” (as he owns) (260)....

“In Germany and other leading countries the trade in metals, other than iron, especially copper and zinc, also rare metals, is extremely concentrated” (301)... “small number of firms” (mostly in private hands)....

...“very many German gas works of the earlier period were built by British firms and with British capital”... (321)....

| ...“only a comparatively few people have achieved virtuosity in this sphere” (355)—in financial matters, etc. | | | ha- ha!! |

...“The Swiss Credit Institute administers it [the Zurich Electrical Development Bank] for the ‘Bank’ is not an institution or office but, like all companies of the kind, is, so to speak, a large portfolio in which its securities and a few business books are kept” (376)....

| Allgemeine Elektrizitäts Gesellschaft (A.E.G.) |
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| —shares | — | 100 million marks |
| bonds | — | 37  ”   ” |
| “securities owned” | — | 23 million marks, etc. |

| | South African gold mines. “The huge profits, particularly in the late eighties and early nineties prompted British capital, and also, especially, French, as well as German, Belgian and Dutch, to acquire shares in the mines.... Share prices jacked up, reaching their peak in the ‘boom’, which ended in 1895. The decline in mining securities was further increased by the Transvaal war”... (414). | | |
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| N.B. N.B. | | | | “The more developed an economic system is, the more it resorts to risky enterprises, or enterprises in other countries, to those which need a great deal of time to develop, or finally, to those which are only of local importance. [6] Hence, special financing companies have been established in these fields, for enterprises requiring a long time for development, for example, railway and mining enterprises”... (etc.) (434). [The more developed, the more risky... N.B.] Schulze-Gaevernitz repeats this almost word- for-word in an article “ Banking ”, p. 21 . (Book III. Principles of Social Economics , Section V, Part II.) |
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| | “Especially if, as in the case of American control- ling companies, real activity is centred in the subor- dinate companies, the parent company being no more than the owner of their stock, and the share- holders learn nothing of the activities of the subor- dinate companies, then it is clear that all legal regulations to assure maximum public control over the company’s enterprises can be made unworkable. That danger can arise in all companies based on the substitution of stock, indeed in all cases when one company has considerable holdings in another” (439). |
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“At the end of 1904, 3.8 per cent of all limited liability companies had a capital of over one million marks, 9.1 per cent had a capital of over 500,000 marks each. The 3.8 per cent, however, represented 45.2 per cent of the total capital of all limited liability companies, and the 9.1 per cent accounted for 60.5 per cent of this capital” (459).

(In Germany? Apparently.)

460: Author’s proposal: to oblige companies to “declare” in their accounts amounts of securities which are >1/20 “of the paid-up share capital”.

((Idiotic red-tape-ism!))

| “In all probability mankind will see further important technical revolutions in the near future which will also affect the organisation of the economic system”.... Electricity and aviation.... “As a general rule, in such periods of radical economic change, speculation develops on a large scale ”, [7] and judging by previous experience a considerable role will doubtlessly be played by the principle of stock sub- stitution and by the holding and financing companies for carrying out necessary large-scale capital transactions” (465-66).... | | | | N.B. |
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But, he says ... joint-stock capitalism has passed its “period of youth”. The public has become wiser.... And with big technical inventions, “Gründungsschwindel” (flotation of bubble companies) “hardly”, etc.... (466-67)... ((“Harmonist”))

...“the essence of trade is in general the substitution of demand”... (475).

((Ha-ha! “Theoretician”!))

...“commerce is an occupation having for its object the collection, storage and supply of goods” (476). ((In bold-face italics. Idiot!)) [8]

End.

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Notes:
[1] See pp. 52-63 of this volume.— Ed .

[2] See present edition, Vol. 22, p. 235.— Ed .

[3] See present edition, Vol. 22, p. 203.— Ed .

[4] Ibid— Ed .

[5] Ibid., p. 228.— Ed .

[6] See present edition, Vol. 22, p. 208.— Ed .

[7] Ibid., p. 209.— Ed .

[8] Ibid., p. 227.— Ed .