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.
