For finance is most closely linked with credit, and credit is only the business name for faith.When people talk of finance as if it were riddled with dishonesty, facts give them the lie.The normal honesty of finance is proved by the fact that larger and larger numbers of men and women in every country of the civilised world are coming to entrust their savings more and more to men who are personal strangers, for investment in distant countries and in businesses the exact nature of which is unknown to them, and over which they cannot hope to exercise an appreciable control.
The working of the machinery of modern investment by which millions of men in England, France, and Germany have sent their savings to make railways in S.America, or to open up mines in S.Africa, or to build dams in Egypt, is the largest tangible result of modern education that can be adduced.
It implies the intellectual and moral cooperation of larger numbers of distinct personalities across wider local and national barriers than bas ever occurred before in the history of the world.
§9.A reasonable faith in the future and a willingness to run some risk are complementary motives in this growth of financial investment.
They are, however, by no means confined to operations of finance.All industry involves faith and risk-taking.Every producer who acts as a free agent conceives some good object which be thinks attainable by his work.He may be mistaken, either in conceiving wrongly, or in failing to carry out his plan.His failure may be due to want of skill or knowledge, or to adverse circumstances.In primitive societies, where a man produces mostly for his own use, the risk is less.For he may be supposed to know what he wants, how much, and when he wants it.But when he makes for others, i.e., for a market, the risks are greater.For he will not know so much about the wants of other persons as about his own.It might seem as if small local markets, in which the producer dealt exclusively with neighbours, would carry the least risk, and that the risk would expand with each expansion of the market area.But this is not commonly the case.As a rule, there is less risk for the producer serving a large market, the individual members of which he does not know, than a small market of his neighbours.For the fluctuations of aggregate demand will be smaller in the larger market, and though he will know less about the individual contributions to its supply and its demand, his risk of failing to effect a sale, when he desires to do so, will usually be less.This at any rate applies to most standard trades.
Since effective access to large markets implies a fairly large business, the economy of risk becomes one of the economies of capitalism, and its calculation a chief branch of the employer's skill.The watching of the market so as to reduce the waste of misdirected production is the most delicate of the intellectual activities of most managers.It takes him outside the scope of his own business and the present process of production, to consider the whole condition of the trade in the present and the probable future.These calculations and acts of judgment issuing from the brain of business managers are the psychical aspect of the whole structure of markets and of the trade and traffic arrangements which give such unity and order as are visible in what is termed the industrial system.
Thus, not merely on the financial but on the commercial side, industry is perceived to be a great fabric of beliefs and desires.Though, as we shall recognise, in dealing with labour, and with saving, risk-taking is by no means confined to employers and entrepreneurs, its wider operations belong to the speculative skill which comes under the general head of ability of management.In the psychological interpretation of industry this function of the entrepreneur is of quite crucial significance, cooperating everywhere with the more abstract calculations of financiers in directing the amounts, kinds, and directions, of the various currents of industrial energy which move in the business world.Since it involves a constant use of the constructive imagination in the interpretation of the play of changing motives in many minds, and the forecasting of future conditions which can never be a mere repetition of the past, the 'creative' faculty obtains here its highest expression.It is not for nothing that the great modern master either of finance or industry is accredited with some quality of imaginative power akin to that of the artist.This, however, must in not a few instances imply, not merely the genius of the prophet, but that of the skilled manipulator of economic material and opportunity, who helps to secure the due fulfilment of the prophecies upon which he stakes his faith.
