THE EVOLUTION OF SECURITIES 13 
were exploration and commercial development companies like 
the Dutch East India Company, the French Compagnie des 
Indes Occidentales, or the British East India, and many similar 
companies. Many of these old British exploration companies 
still exist, and still perform important economic functions in 
the development of North America, Africa, and elsewhere. 
But in the late eighteenth century the practical development 
of machinery, and particularly the application of water and 
then steam power to industrial purposes, made large industrial 
profits possible, and called for large sums of capital to pur- 
chase and maintain extensive industrial equipment. Thus it 
was principally the invention of the steam engine and its practi- 
cal employment in steam railways and steam factories that at 
the opening of the nineteenth century wrought a profound and 
permanent change in business methods and business organiza- 
tion. Indeed, the so-called Industrial Revolution which re- 
sulted was ultimately destined to raise standards of living, in- 
crease populations, modify laws, overthrow governments, upset 
almost immemorial business practices, transform finance and 
the stock exchanges, shift the routes of trade, create and de- 
stroy market places, and alter profoundly the morals, beliefs, 
and the very security of many nations. 
The Industrial Revolution, however, at once encountered 
serious obstacles arising from the very structure of the small- 
scale business of that day. Unconsciously, industrial enter- 
prises had grown beyond the point where a few wealthy part- 
ners could finance them. Thus the larger enterprises which 
steam locomotives and steam factories necessitated could not be 
financed until the stock corporation was developed to enable 
more partners to engage in them, and until stock exchanges 
were developed to stabilize and protect investment by the public 
in the new corporate bonds and shares.* 
Financing the First Railroads.—A significant example of 
just how difficult it was for individuals to finance the great 
4 Appendix Ic.