Part 18

At one extreme stands anarchism, which must be thought of not as anarchy and riot, but as a philosophical theory of society. Scientific anarchism contemplates an ideal state of perfect freedom, in which the State, the coercive exercise of authority by man over man, would not exist. According to this theory only the individual has rights; there is no more divinity of right in a majority than there is in kings. Government is an invasion of the right of the individual to do as he will, and should be abolished; with its abolition would vanish the various moral, social, and industrial evils to which it has given rise, and human society would develop on a higher plane. Stated in its extreme form anarchism is evidently too ideal for frail human nature as at present constituted. Of more practical importance has been the theory of extreme individualism as set forth by Herbert Spencer--a view designated by Huxley as the night-watchman theory of the State. According to this the functions of government should be limited to 166 the protection of life and property and the enforcement of contracts, but should not include such things as education, regulation of industry, local improvements, charities, coinage, etc. Private initiative and competition are trusted to supply these things, while the economic harmony of the interests of each individual with those of society will prevent any wrong from being done. The keynote of the whole theory lies in the view that government is an evil, though a necessary one, and should consequently be restricted. Adam Smith’s system of “national liberty” went somewhat further, as it added to the three functions named above, the construction of public works and buildings, etc.; but it excluded such activities as education and the civil courts, which we regard as most suited to government management. This theory had its origin in the reaction against the undue interference with industry by the Government under mercantilism and had thus a historic justification and value.

The theory most generally held by economists and writers in the United States is probably the modified individualism set forth by John Stuart Mill. According to him, freedom of industry or “laissez faire should be the general practice; every departure from it, unless required by some great good, is a certain evil.” Industry, he said, should be left to individuals and the Government should never interfere unless there is an antagonism between social and private interests. Individuals following their own interests will always conduct business better than the Government, which is inefficient, corrupt, and can fall back on taxation to cover its mistakes. Individualism should therefore be the rule and governmental action the exception. But Mill himself admitted that there was no theoretical limit to the extension of governmental functions, and in so doing is said to have opened the door to socialism. Nevertheless, the basic idea is still that government is an evil and an extension of its activities is on the whole undesirable. 167

Opposed to this view is the culture state theory, enunciated by Roscher and very generally held in Germany, which regards the State as a beneficent, positive and constructive force in our industrial life. The advocates of this theory point out that the functions of the Government change with progress, and that in our complex modern industrial life it should seek to improve conditions positively, and not leave the people to the mercies of a blind competitive struggle; practically, it should regulate industry, conditions of work, housing, etc., and should manage all public utilities which affect the life or well-being of the citizens, as railroads, telegraphs, industrial insurance, etc. Still further in the same direction goes the view known as state socialism, of whom the best-known advocate is Professor Wagner. This advocates individualism, but insists that it is responsible for many injustices and evils, which it is consequently the duty of the State to redress. For instance, the State should correct the inequalities of wealth brought about by the distribution of the social income under the present competitive system; this should be done by the progressive taxation of inheritances and incomes, the limitation of inheritance and bequest, the government ownership of public utilities, as railroads, telegraph, telephone, coal mines, etc. This theory stops just short of socialism, but enlarges the functions of the State to the largest degree compatible with individualism. Beyond this, and at the farthest extreme from anarchism, stands socialism, which, however, demands a more careful examination than the other views have received because of its present prominence.

Socialism may be briefly defined in the words of Professor Ely[49] as “that contemplated system of industrial society which proposes the abolition of private property in the great material instruments of 168 production, and the substitution therefor of collective property; and advocates the collective management of production, together with the distribution of social income by society, and private property in the larger proportion of this social income.” Four features are involved in this definition, namely, common ownership, production, distribution, and private incomes. The cardinal and distinctive element in socialism is the collective or social ownership of the means of production, that is, of the land and capital. Instead of having these owned privately as today, they would be owned by the people as a whole, by the State, and used by them for production. Socialists do not oppose capital, as is often said, but only the private ownership of capital. But under such a system private business as we know it today, individual enterprise for the sake of profit, could not exist. It is often urged that socialism means a “grand divide,” and that in such an event the shrewder and more thrifty would shortly have the wealth of the idle or stupid members of society. But just that is guarded against under socialism, for there would be no private ownership of capital, and hence no one could get his neighbor’s share; it would all be held under collective ownership. With the abolition of private capital, there would disappear of course all the economic institutions that have grown up around it, as credit, banking, lease, hire, the stock and produce exchanges, etc.

Socialism also means the collective or social organization and management of industry. Socialists criticise severely our present methods of production, which they call planless and wasteful. They point to the constant recurrence of crises as an evidence of mistakes of the competitive system, which they say could be obviated under a well-organized comprehensive scheme. They also urge the wastes of modern capitalism, in the duplication of plants, advertising (which amounts to $500,000,000 a year in the United States and serves little 169 useful purpose), traveling salesmen, multiplication of small stores, etc. Finally, an artificial disharmony between the interests of society and private individuals is promoted by our system of private property and profit: a coal trust limits the supply, farmers rejoice over small crops, and planters burn part of their cotton, in short the bounty of nature is regarded as a calamity. Some truth may be admitted in these criticisms, but in answer it may be said that some of them are being corrected under individualism, while as to those that remain the remedy offered is worse than the disease. The first and fundamental question is the effect of socialism on the amount produced, for as we have seen any diminution would mean a worse economic condition of society, even though it were offset by a more equal distribution. Under individualism the appeal to industry and thrift is the self-interest of the individual, and under the stimulus of this motive the production of wealth has been increased enormously. It is doubtful whether the motives of altruism, desire for social approbation, and similar ones suggested by the socialists would promote industrial activity as efficiently as the individualistic desire for pecuniary gain.

Moreover the difficulties of organizing and managing all industries would be enormous. According to the socialist plan, statistics of consumption would be gathered in advance, the idle changes of fashion would of course disappear, and production could be accurately calculated. But aside from the problem of securing an honest and efficient administration, the work of organizing industry from a centralized bureau would probably prove insurmountable. The distribution of the labor force among various employments suggests another difficulty. Under individualism the necessary distribution takes place through the agency of wage payments and the choice of an occupation is left free to the individual. As the wage-system would disappear with the abolition of private capital, some other means 170 would have to be devised, as allotment by the Government. But more important would be the selection of the managers of industry; competition provides a process whereby the inefficient are eliminated and the able put in charge. As socialism would be an industrial democracy the selection of the captains of industry under that system would probably be made by election. Is it likely that the voters would place over themselves the ablest, that is the strictest, most economical, and most energetic man? Taking men as we find them today, this may well be doubted.

But it is as a scheme of distribution that socialism has been most warmly urged. The inequalities and injustices of present methods are pointed out and a more just system demanded. Socialists themselves, however, are not agreed as to what constitutes justice. Needs and merits have both been urged as bases of distribution, but suffer from vagueness and difficulty in administration; most socialists today agree that equality of income would best meet the requirements of justice. They claim that talented persons have been endowed by nature with their abilities and should use them as a trust for society and not expect greater rewards than their less talented brothers. To this individualists answer that the practical question is, how to secure the greatest exercise of these gifts, and that is now done by appealing to the motive of self-interest. Some writers even go further and assert that the desire for inequality is the chief stimulus to invention and enterprise. A crucial point in every socialistic scheme is the determination of value under such a system; most socialists follow Marx and say that this should be determined by the “socially necessary labor time” required for the production of an article. Such a measure leaves out of account entirely the aspect of utility or demand, and would clearly be inadequate. Prices would be fixed by the State and would be calculated in labor time, which would probably be 171 represented by labor checks, which would constitute the media of exchange of the socialistic society.

Finally, in the definition given above, it was stated that private property would exist in the larger proportion of the social income after it was divided. There is no reason why this should not be true, for, though private capital would be abolished, the State would not interfere with the individual in the use of his income after it was earned. If one man preferred fine clothes and another pictures and books, it would be possible for the latter person to accumulate such articles of enjoyment or consumption. He could even have tools for private carpentering or a horse for riding, but under no circumstances would he be permitted to use these for production or as instruments of private gain. Socialism must stand or fall as a system of production and distribution; it is not necessary to criticise minor points. On these broad grounds it must be rejected, although it may fairly be admitted that socialists have often proved themselves keen and useful critics of existing institutions.

Many persons in this and other countries, who do not approve of socialism, nevertheless believe in the extension of state ownership or activity along particular lines. Thus Henry George, though in other respects an individualist, did not believe in the private ownership of land. Land is limited in quantity and yields, because of its monopoly character, an “unearned increment” or rent, quite apart from the return due the owner for improvements. He proposed that the Government should confiscate this unearned increment by levying a single tax on all land equal to it. He thought that this would provide revenue sufficient for all government needs without resorting to other forms of taxation; in this he was undoubtedly mistaken, but the main interest in the scheme for us is economic, and not financial. The reason for the scheme was that land, being a limited monopoly, would be increasingly in demand as society progressed, and that consequently 172 the landlords would absorb in their increased rents most of the enlarged production of the future. This assumes that rents always increase and never decrease, which is historically untrue. Nor does the growth and progress of society necessarily increase the demand for land; it may be directed to other things, while improvements in the arts of agriculture may actually decrease this demand. We must, however, admit that there are many instances of unearned increments, not only in the case of ground rents, but also of monopoly profits from various sources; these might very properly be secured to society by means of special and heavy taxes.

The municipalization of local public utilities has been advocated by many persons who are not socialists, except in so far as they desire an extension of governmental activity along these lines. They urge this because the utilities in question--gas, water, electricity, telephone, street railways, etc.--are by their very nature monopolies, and because under private control they are often inefficiently or dishonestly managed. A less drastic remedy for these abuses might of course be found in regulation. Unrestricted private control of municipal monopolies is advocated by few; the real issue is between public regulation and public management. And this issue will depend in the last analysis upon the question which can give the best results to society.

XIX. ECONOMIC PROGRESS.

At the conclusion of a study of this character we are inevitably led to summarize our conclusions and to try to answer the question as to what the lessons of the past have taught us. In what direction are the forces of economic life taking us? The conclusion of this text is that they are making for economic progress, and it will be worth while to justify as far as possible this belief. It is, however, impossible 173 to do this except in very general terms, for definite data for measuring this improvement do not exist, and economic progress itself is a somewhat vague conception. Even such comparatively simple facts as the rate of wages or the hours of labor can be stated only very generally. But both of these show a decided improvement in the condition of the working class. A careful investigation for Great Britain by Mr. A. L. Bowley[50] shows that if wages for the decade 1890-1900 be represented as 100 then the course of wages during the nineteenth century would have run somewhat as follows:

=========+================++===========+=============== Decade | Relative Wages || Decade | Relative Wages ---------+----------------++-----------+--------------- 1800-10 | 55-65 || 1850-60 | 65 1810-20 | 65-70 || 1860-70 | 75 1820-30 | 65 || 1870-80 | 95 1830-40 | 60 || 1880-90 | 90 1840-50 | 60 || 1890-1900 | 100 ---------+----------------++-----------+---------------

Without investigating the validity of the figures too closely, it may safely be affirmed that the movement of wages has been distinctly upward, and that the rise was certainly not less than 50 per cent. For the United States the increase has not been so great, probably because wages started at a higher level. According to the Aldrich report, if wages and prices in 1860 in the United States be taken as 100, relative wages in 1840 were 82.5 and relative prices 98.5; in 1880, they were respectively 143 and 103.4; in 1903, they were 187 and 103. That is to say, relative wages showed a marked advance and real wages, owing to the fact that general prices remained almost stationary, an even greater improvement. So, too, the hours of labor appear to have been shortened in Great Britain about two hours a day (from 10 to 14 hours to 8 to 12), and in the United States probably as much, the average length of the working day in certain employments decreasing 174 from 10.3 hours in 1880 to 9.6 hours in 1903.

In the field of production the most dramatic and striking advances have been achieved. The application of steam and more recently of electricity as the motive power for the newly invented and constantly improved machinery has permitted an enormous expansion of production, which has been made still greater by the opening up of new mines and new lands and improvements in the machinery of transportation and exchange and in the organization of business. Especially in the United States where the natural resources were especially rich and the people energetic and ingenious, has the growth of wealth been marvelous. And yet almost a century after the beginning of the Industrial Revolution in England, Mill alleged that labor-saving inventions had not lightened the toil of any human being; they have only enabled a greater number to live the same life of drudgery and imprisonment. What answer can we make to this indictment today? Why is it that the working class still has so little of this vast increase of wealth and still lives so close to the border line of poverty?

To answer this question thoroughly would require an analysis of the subject of distribution, but a few reasons may be briefly suggested.[51] While the social income has been greatly increased by these improvements the amount paid in rent to owners of land, water powers, etc., has also grown. If we approve of private property in land as best adapted to stimulate its use for society, then we must admit the justice of rent, and of its payment to present land owners. Similarly, too, the payment of interest to the owners of capital has absorbed a large part of the increased income of society, though the proportion going to this factor is probably growing smaller owing to the fall in the rate of interest. But as we have seen, modern industry is essentially capitalistic, that is, it depends upon the use of 175 capital for its operations. Since we allow private property in capital and believe that to be the best method yet devised for securing its accumulation, we must justify interest. Profits in general are fairly earned by industrial organizers and others who manage our businesses, and are necessary to enlist their services. Probably in most cases society does not overpay these leaders of industry. But some forms of profit, as those derived solely from monopoly, especially from the monopoly of limited natural resources, are both too large and socially unearned. These society should clearly control and absorb.

One reason then why labor has not profited more by the great increase in wealth is that the other factors in production have laid claim to their shares also. There is good reason for believing, however, that the share of labor has been steadily growing greater all the time, and that it today gets a larger proportion of the social income than ever before. This fact is obscured by the great growth in population, which has more than doubled in the last hundred years in Europe and has shown a twentyfold increase in the United States. The larger income is divided among more people, and though each today gets more than his grandfather, there is not yet enough produced to make all rich. Indeed, if the wealth of the United States were divided equally, it would not provide a competence for anybody. The difficulty is not merely that there is inequality in distribution, but that the need of a much greater production of wealth must also be met. Inequalities may be adjusted by such measures as progressive inheritance taxes, but resort to this or similar methods must not be so severe as to weaken the motives for the accumulation of capital. That must form one of the strongest reasons for rejecting the drastic proposals of socialism.

Improvements in production have, however, not merely increased the total output; they have greatly reduced the cost of many articles 176 and have brought within the reach of the poorest consumers others which a century ago would have been unattainable. Improvements in transportation have served to bring an ever-increasing variety of products to market. The material progress of a people can be gaged fairly well by their consumption of certain semi-luxuries, such as tea, coffee, sugar, tobacco, beer, etc.; these show a steady increase during the past century. “Thus in the United States between 1871 and 1903 inclusive, the per capita consumption of coffee increased from 7.91 to 10.79 pounds, that of sugar from 36.2 pounds to 71.1 pounds, that of malt liquors from 6.1 gallons to 18.04 gallons, that of wheat and flour from 4.69 bushels to 5.81 bushels.”[52] A similar investigation for Great Britain shows an average increase in a considerably larger list of the same character of 40 per cent between 1860-64 and 1895-96. It must be admitted that there is much lack of economy in present consumption; there is often wasteful and positively injurious consumption, an illustration of which would be found by many persons in the increased consumption of malt liquors cited above. From a purely economic standpoint the enormous waste of war and the burdensome cost of military and naval armament must also be condemned.

The task of prophecy is usually a fruitless one, but at least it is now possible for us to indicate some of the lines along which reform is needed, and the goal towards which the future of progress will probably move. The natural resources of the nation must be more carefully conserved and reckless destruction prevented; at the same time the monopolization of limited resources by private individuals or corporations must be rigidly restricted. The growth of trusts seems but the last step in a steady growth in size of the business unit and may be accepted as an economical method of industrial organization, but the evils of corporate financial management must be carefully guarded against. The growth of labor organizations, on the other 177 hand, must be admitted to be equally logical and desirable. While they often display monopolistic tendencies, yet our main reliance must be placed upon these agencies to secure bargains for laborers on terms of equality with their employers. But on behalf of wage-earners not easily organized we must resort to state interference by means of factory and labor legislation in order to secure equitable labor contracts. Free competition which exposes women and children to the greed of unscrupulous employers is defended by no one today, and it is clearly recognized that legislation along these lines must be further extended, as for instance in the direction of industrial insurance, old age pensions, adequate care for the unemployable, etc.