The article to which Mr. Cotten referred was as follows: I have been asked to write briefly my views concerning the effect the war has had upon the operation of a Morris Plan company. It is but natural that my opinion should be influenced by conditions as we find them in and around Boston, but I believe the same general principles would apply to the operation of this business in any section of the country. The basic principle of the Morris Plan of Industrial Banking is that a person of good character who works for wages is a safe bankable credit risk for a loan of approximately 10 per cent. of his annual wages, provided the liquidation or repayment of such loan be arranged for by a series of regular weekly or monthly payments distributed over a period not to exceed one year, and further provided the loan be made to meet a real need or economic necessity of the borrower. In other words, a working man may safely be loaned, say $100, to pay a debt contracted for a necessity if he be required to immediately set aside out of his salary a sinking fund of $2 weekly (or 2 per cent. of the loan) with which, after fifty weeks, to repay the loan. Of course the man who applies for the accommodation must show good character, regular habits and a record of continuous employment. The need to borrow implies the inability of the applicant to meet his immediate financial requirements, which inability may be caused either by low wages, high or unusual living expenses or unemployment, voluntary or involuntary. If the wages of such a would-be borrower be substantially raised, without any corresponding increase in living cost, and under such increased scale permanent employment be given, then immediately the need for financial accommodation disappears, or should disappear. There may still remain the desire to borrow, but the factor governing the granting of the loan should be the need for same. So it is with industrial conditions in New England now. The scale of wages has increased so abnormally that the need of the working classes for borrowed money in any substantial volume has practically disappeared. I do not mean by this statement that it is impossible to loan money to wage earners now, for there are- and always will be thousands of people willing and anxious to borrow money "when, as and if possible," but I do submit that the need for such borrowing by the honest, industrial laboring man in New England no longer exists. Undoubtedly this condition is abnormal and temporary, but none the less true. .It may be urged that living costs have also largely increased and the margin between wages and living expenses is no larger now than prior to the war. Any careful study of the subject, however, will prove conclusively to the contrary. Every line of trade which sells luxuries of the cheaper kind reports sales far in advance of any prior period. Motor cycles, cheap automobiles and cheap talking machines were never so numerous. We are all familiar with the splendid patriotism of the industrial classes shown by the enormous amount of Liberty Bonds they bought and paid for. This all spells prosperity, a surplus of cash, better living conditions, AND- no need of borrowing. Then, again, we find the former steady employee disposed to move from one factory to another, always with the higher wage incentive in mind. To this peripatetic worker the doors of credit must necessarily be closed, and the day of readjustment will find him, I fear, without employment and unsettled in mind, susceptible to every socialistic suggestion. Conservation would prompt a careful analysis of probable conditions affecting the social and financial status of the industrial classes after the Undoubtedly we must go through a period of readjustment, a reclassification of industries, and wages must necessarily be standardized on a lower scale, a very much lower scale, if we are to compete with other nations for our share of the world's commerce. A careful executive, therefore, in considering the development of business for a Morris Plan company, will not overlook the possible inability of borrowers, whose credit was extended on the present scale of wages, to repay the loan when the inevitable lower scale becomes effective. Undoubtedly living expenses will also be readjusted on a descending scale, but not so rapidly as wages. In the writer's opinion the regular Morris Plan loan made upon the basis of the borrower's present wages would prove unliquid, not to say unsafe, under the conditions which must result when the war industries are stopped and normal conditions return. And so Morris Plan managers and executives who have to consider these many new problems, who must develop business along new lines to take the place of old business no longer available, will heartily agree with General Sherman in his now famous definition of war. It may be that this is the acid test to try the business initiative and resourcefulness of the successful manager who can adapt his operation of a company to meet these changed conditions so as to make his dividend, not because of the war, but in spite of it. Explanations were given by Morris Plan companies for the increase and decrease of their business, as follows: "To the natural growth of the company, it seems to me, is largely to be credited the reason for the increase of loans of $300 and under." "Our forecast of January, 1918, considered a business of $175,000 for the year. We actually did a business of $188,000 for the year, which was somewhat above what was considered would be a normal growth, not taking into consideration war conditions. We carried on a somewhat extensive newspaper advertising campaign in 1917, but have no means of taking up the matter to be sure whether our growth can be traced to said advertising. Frankly, I am at a loss to account for our growth, but consider it the outcome of our various business connections, and establishing ourselves in the confidence of the public." "The falling off of the small loans in 1918 as compared with 1916 is accounted for by the fact that we were very cautious in making loans to men of the draft age." "Whatever increase has been shown in our loans of $300 and less has been due, more than any other factor, to my mind, to the fact that there is a constantly growing confidence in this institution. We insist upon courtesy and fair treatment to all. The purposes for which we loaned in 1918 were not very different from those of previous years. Perhaps there has been more borrowing for coal and doctors' bills than usual, but the great majority of loans were to those people, who, with many old bills against them, and earning good pay, took this means of squaring up and concentrating their indebtedness. All told, I should say that our increase has been in keeping with the general trend." "Replying to your inquiry as to our business the past year, will say that it was slightly less than in 1917. In normal times our business has increased approximately $100,000 per year. The majority of our loans are for constructive purposes, and not to people who are ordinarily customers of loan brokers. Consequently, our business has not been affected to as great an extent as others by the high wages which have been paid the past two or three years." "I can give no reason for the increase in our business other than its natural growth. We feel that had it not been for the unusual conditions brought on by the war we would have made a much more creditable showing than we have done, but on account of the draft restrictions our advancement was very slow." COMPARATIVE STATISTICS. Loans made by Several Morris Plan Companies and Remedial Loan Associations during Ten Months of 1916 and 1918, respectively ($300 and less). |