Part 11

Pre-eminent among the forms of business corruption are the vicious practices which have grown up in the general relation of buyer and seller. Purveyors of adulterated, infected, or diseased consumption goods, such as food stuffs, and particularly meat and milk; dealers in sweatshop clothing; vendors of patent medicines; owners and builders of unsanitary tenement houses, of unsafe theatres, and excursion steamers; managers of railroad and trolley companies who neglect to install devices to protect their passengers may serve as illustrations. A further branch of this form of corruption, the importance of which would perhaps justify separate classification, occurs in connection with the dealers in vice,—the dive keepers, policy kings, gamblers, and procurers. The relation of master and servant furnishes a second subdivision of the primarily economic forms of corruption. Transportation companies, mine owners, manufacturers, and others who neglect the installation of safety devices to protect labourers; the employers of child labour; the labour leaders who extort blackmail by threatening strikes are cases in point. Still another subdivision of economic corruption centres about the fiduciary business relations such as occur particularly in connection with savings banks, trust companies, corporate directorships in general, and with the work of the promoter. Underlying nearly all these kinds of economic corruption, and emerging in the corruption of public instruction and political corruption as well, is competition,—itself a force or method rather than a form. Some species of corruption belonging logically under one or another of the preceding heads exhibit the effects of competition more plainly than others. Thus many practices common to those periods of forced competition which so frequently precede the formation of trusts have come to be looked upon as essentially corrupt and deserving of legal restraint. Corruption does not disappear when competition is practically eliminated, however. Some of the most difficult problems involved in dealing with it notoriously result from the existence of monopolies which have outstripped if they have not exterminated their rivals.

To attempt the adequate discussion of all the forms of economic corruption would require extended treatises on the labour problem, the trust problem, banking, transportation, insurance, and many other special subjects. The limitations of the present study exclude anything beyond a few general observations. It may first be noted that many of the abuses which are now undergoing the process of sanitation were the result not so much of corrupt intention as of ignorance and the relatively unlimited character of the competitive struggle to which reference has already been made. They emerged long before the era of consolidation, and are therefore not to be attributed solely to big business. For many years prior to the Chicago slaughter house exposures of 1906, for example, unclean meat was sold both by large packers and by country butchers. Small producers were and are largely responsible for impure milk and sweatshop clothing. Petty landlords as well as extensive holders of real estate have built unsanitary tenement houses and overcrowded them with renters. The neglect of transportation companies to install safety devices for the protection of passengers and employees has in the very nature of the case been a corporation offence. On the other hand small as well as large mining operators have sinned in this way, and small as well as large manufacturers have exploited child labour. Betrayal of fiduciary relationships has naturally occurred most frequently and most disastrously in enterprises of large capital, although by no means confined exclusively to them. Indeed there would seem to be reason for believing that in certain ways consolidation has aided in bringing about the correction of some of these evils. It centres them in a few large establishments, often in a single district of no great size, where by their very magnitude abuses force themselves upon a sluggish public attention. Consolidation also makes it appear that the interests of a few selfish owners are being pursued at the cost of the general welfare. This at once enlists popular support for attacks upon abuses, and is a factor well worth comparison with the defensive strength of massed capital. For these reasons the cleaning up of the meat industry probably proceeded far more rapidly after the Chicago exposures than would have been the case if the effort had been made some years earlier during the period of many scattered local abattoirs.

So many factors co-operated in bringing about the business evils under consideration that the quality of corruption cannot always be ascribed to them directly. Under a policy of _laisser faire_, of unlimited competition, of public indifference and apathy, it is not easy to fix moral responsibility. Even the twentieth mean man at any given time may be only a little meaner than several of his nineteen competitors. His offences are dictated by self-interest, of course, but they are offences against a vague set of business customs or moral principles. Public interest suffers, it is true, but the public is apathetic; it has not laid down definite norms of business conduct. On the part of the offender there is often lacking that conscious and purposeful subordination of public to private interest which constitutes full fledged corruption. Whatever degree of extenuation is afforded by these considerations vanishes, however, when definite regulation is undertaken by the state. Now that we are fairly launched upon an era of legislative and administrative control, business offences of the kind under consideration are frankly corrupt. Public apathy has vanished, the interest of the public has been sharply defined, and he who in contravention of these norms places his private gain above the general welfare does so with full intent, and cannot evade or shift the accusation of corruption.

A further consequence of the effort to regulate business practice by law is not only intrinsically important but also serves as the great connecting link between primarily economic and political corruption proper. As soon as regulation is undertaken by the state a motive is supplied to the still unterrified twentieth mean man to break the law or to bribe its executors. In either case, by the way, the profits are directly conditioned by the thoroughness with which his competitors are restrained from following his own malpractices. The scales employed by tariff officials may be tampered with in the interests of large importers whose profits are thereby enormously increased. Or inspectors may be bribed to pass infected carcasses, to approve impure milk, to permit get-rich-quick concerns to use the mails, to wink at lead weighted life preservers, to ignore the fact that the exits of a theatre are entirely inadequate. With cases where state regulation supplied the motive for the direct commission of fraud we are not directly concerned here, but in all the cases where the collusion of inspectors is involved we have to note that government regulation of business has made easy the transmutation of what before was merely corrupt and morally offensive into direct bribery. And from the point of view of a venal official or political machine the extension of state control means the widening of the opportunities for levying tribute. Thus a form of corruption which began among, and for a time was limited to, business relations becomes under regulation a menace to political integrity. In other words, it takes on the form of political corruption as well, and must, therefore, become the subject of discussion in that connection.

However disheartening in other ways, a consideration of the forms of business corruption yields the comforting reflection that all the major forms of evil in this field are clearly recognised and severely criticised. One must guard oneself against too cheerful optimism in the premises, however. Reform forces armed _cap-a-pie_ do not spring like unheralded knight errants of old into every breach at which social integrity is being assailed. Instead they can be developed only by persistent individual and associated effort and sacrifice. Moreover the problem of corruption, as we have seen, is a persistent one, the forms of which are ever changing and ever requiring new ingenuity and resourcefulness in the methods of social sanitation. Back of reform effort, also, there remains much that the individual can affect simply by clearer habits of moral reflection and action even in the small affairs of life. Public sentiment is built of such individual fragments. Low opinion, low action in everyday affairs become a part of the psychological atmosphere befogged by which the outlines even of the larger evils of the present régime grow indistinct. Professor Ross has performed a valuable service by exposing the fallacy that “sinners should be chastised only by their betters.”[53] Social life, indeed, would be inconceivable if the judgment of disinterested parties were not superior to that of parties in interest. This is true even if the former are themselves far from moral perfection. But it is further true that the judgment of the disinterested will be more worthy and helpful if in the conduct of their own affairs the disinterested have habituated themselves to scrupulous honesty of thought and action. Till this is more generally the case social ostracism, public contempt, and loathing of the corruptionist, regardless of his looted wealth, will not prove such effective measures of restraint as one might hope. “The simplest reform,” said Mr. James B. Dill, “the hardest, but it must be the first, is to make up our minds not to do those things which the other man may be doing, but which we know to be wrong.”[54] Of course the universal acceptance of such higher individual standards would solve not only the problems of corruption but all our other social and moral difficulties. We may not hope for the early arrival of the millennium in this way, but neither may we hope for any large movement toward better conditions without improvement of personal character. Under our present circumstances much may be accomplished by institutional reform, by legislation and the application of the power of the state, although none of these is possible without the application of the good will, the clearer intelligence and honesty of individuals. If not the first or only reform, then, still it is clear that no movement against corruption is complete which does not demand frank recognition by the individual that he must deliberately choose to get along less rapidly at times when the cost of advancement is personal dishonour.

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Corrupt practices may begin in, and at first be limited to, the business world, but, as we have just seen, they are likely to overstep economic boundaries and become a menace to the integrity of the state. As such they must also be recognised and discussed as derivative forms of political corruption. But in addition to evils of this kind which originate, as it were, in other fields, various subdivisions of the forms of corruption which immediately involve government may be marked out tentatively for subsequent illustration and discussion.

To gain means for its support the state is obliged to impose taxes and other burdens upon its citizens. The self-interest of the latter leads them into many evasive practices of a more or less corrupt character. The state is also a great buyer of materials and services of all sorts, and hence subject to fraud in innumerable forms. It is further a great seller and provider of various services, and is equally exposed to danger in this capacity. Efforts by the state to regulate or suppress vice and crime necessarily lead to attempts on the part of the vicious and criminal to protect themselves by corrupt means. Without outside collusion public officials may endeavour to exploit in their private interest the powers which were conferred upon them solely for the public benefit, and the result is auto-corruption, as defined in an earlier study.[55] Preyed upon by corruption the state also at times instigates corruption in the pursuit of its own ends, particularly where international rivalries are concerned.[56] Finally the control of government by political parties may lead to the purchase or stealing of elections and the perversion of the functions of all the organs of government in the interests of the machine. The fundamental importance of the practices which fall under the last head is apparent. Upon them ultimately depends the ability to maintain and profit by all the other forms of political corruption.

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Regulation of business by the state is an established fact, the causes and origin of which need no further discussion in this place. Once established it is subject to attack and evasion along various lines. Downright fraud is possible, as in the concealment or false weighing of dutiable articles, the publication of false statements regarding the financial condition of fiduciary institutions, the covering up of defects in tenement house building, and so on. Practices of this character are extremely dangerous, however, as they are subject to detection and consequent punishment by the first more than ordinarily inquisitive inspector. Criminal chances are materially improved by the bribery of officials who are thus bound to concealment both by money interest and their own fear of exposure. Vigilant and honest administration of the laws and the infliction of sufficient penalties, particularly if they involve the imprisonment of principals, may be trusted to reduce such practices to a minimum. There are, however, other and more open methods of attack upon the regulation of business by the state. Appeal may be made to the courts in the hope that laws of this character may be declared unconstitutional. Business interests may also seek their repeal or amendment at the hands of the legislature. No one who accepts the fundamental principles of our government can quarrel with either of these two modes of procedure. While doubtless intended to secure the public interest, attempts to regulate industry by the state may in given cases really defeat this end. And the latter likelihood would be increased almost to the point of certainty if legitimate protests from the businesses affected were stifled. On the other hand attempts may be made by business interests to influence courts or legislatures corruptly. Assuming that the honesty of all the departments of government would be proof against such attempts there is still another possibility. A business affected by some form of state regulation may endeavour to call to its aid the influence of party. This final method of procedure may also be conducted in a perfectly legitimate fashion. Public sentiment may be honestly converted to the view that the amendment or repeal of the law, as demanded by the business interest, is also in the interest of the state as a whole. On the other hand the effort may be made, either by large contributions to campaign funds, or by other still more objectionable means, to enlist the support of party regardless of the public welfare. Carrying out these various methods of procedure to their logical conclusion brings us, therefore, face to face with the question which underlies the whole fabric of political corruption, namely how shall our party organisations be supported and financed?

Reserving this issue for subsequent discussion, certain general features of the reaction of industry against state regulation must be noted as of immense importance. Black as it is corruption after all is a mere incident in this struggle. The broad lines of development which the Republic will follow in the near future would seem to depend largely upon the outcome of this great process. Certain social prophets tell us insistently that there are but two possibilities: if the state wins the upper hand the inevitable result will be socialism; if on the other hand business triumphs we must resign ourselves to a more or less benevolent financial oligarchy. Imagination is not lacking to embellish or render repulsive this pair of alternatives. From Plato to Herbert George Wells all social prophets have been thus gifted with the power of depicting finely if not correctly the minutiæ of the world as it is to be. Time, the remorseless confuter of all earlier forecasters of this sort, has shown them to be singularly lacking in the ability to anticipate the great divergent highways of development,—sympodes in Ward’s phrase,—which have opened up before the march of human progress and determined the subsequent lines of movement. So it may well be in the present case. The social futures, one or the other of which we are bidden by present day prophets to choose, are like two radii of a circle. They point in very different directions, it is true, but between them are many possible yet uncharted goals. And if social development may be likened to movement in three instead of only two dimensions the lines open to the future are enormously more divergent than our seers are wont to conceive. Employing a less mathematical figure, prophecy usually proceeds from the assumption that cataclysmic changes are immediately impending. Otherwise, by the way, the prophets would utterly fail to attract attention. But this presupposes an extremely plastic condition of society. If social structures, however, really are so plastic, they may then be remoulded not into one or two forms merely, but into many other forms conceivable or inconceivable at the present time. Current and widely accepted forecasts to the contrary, therefore, one may still venture to doubt that our through ticket to 1950 or 2000 A.D. is inscribed either “socialism” or “financial oligarchy,” and stamped “non-transferable.”

Whatever the future may bring forth faith has not yet been lost in the efficacy of state regulation. It is certainly within the bounds of possibility that some working balance between government and industry may be established through this means which will continue indefinitely. As late as 1870, according to Mr. Dicey, individualistic opinions dominated English law-making thought.[57] Reaction from the doctrine of _laisser faire_ was, if anything, even later in the United States. For a considerable period after the turning point had been passed measures of state regulation were weakened by survivals of old habits of thought. Even to-day the period of construction and extension along the line of state regulation seems far from finished. Certain inevitable errors have required correction, but no major portion of the system has been abandoned. Further progress should be made easier by accumulating experience and precedents.

It is significant of the temper of the American people on this question that an increasing number of the great successes of our political life are being made by the men who have shown themselves strongest and most resourceful in correcting the abuses of business. Under present conditions no public man suspected of weakness on this issue has the remotest chance of election to the presidency or to the governorship of any of our larger states. On the purely administrative side of the system of state regulation new and more powerful agencies,—such as the Bureau of Corporations and the various state Public Service Commissions,—have been devised recently to grapple with the situation.

Considering the extreme importance of the work which such agencies have to perform it is improbable that either their position, or the position of government in general, is as yet sufficiently strong with reference to corporate interests. Under modern conditions success in business means very large material rewards. Important as are industry and commerce, however, certain parts of the work which the state is now performing are, from the social point of view, immensely more valuable. The commonweal requires that our best intellect be applied to these tasks. Any condition which favours the drafting of our ablest men from the service of the state into the service of business is a point in favour of the latter wherever the conflict between them is joined. Yet not infrequently we witness the promotion of judges to attorneyships for great corporations, the translation of men who have won their spurs in administrative supervision of certain kinds of business to high managerial positions in these same businesses. As long as our morals remain as mercenary as those of a Captain Dugald Dalgetty there may seem to be little to criticise in such transactions. Doubtless loyalty is shown by the men concerned to the government, their original employer, and to the corporation, their ultimate employer. If, however, there is to be an exchange of labourers between these fields it would be vastly better for the state if the man who had succeeded brilliantly in business should normally expect promotion to high governmental position. As things are at present the glittering prizes known to be obtained by ex-government officials who have gone into corporation service cannot have the most favourable effect upon the minds and activities of officials remaining in public positions requiring them to exercise supervision over business activities.

It is high time that there should be a reversal of policy in this connection. We need urgently greater security of tenure, greater social esteem, much higher salaries, and ample retiring pensions for those public officials who are on the fighting line of modern government. Incomes as large as those of our insurance presidents or trust magnates are not needed, although in many cases they would be much more richly deserved. There is recompense which finer natures will always recognise in the knowledge that they are performing a vitally important public work. In spite of the loss which political corruption causes the state it is probably more than made up by the devoted, and in part unrequited, work of its good servants. Still the labourer is worthy of his hire. It is both deplorable and disastrous that the current rewards of good service should be so meagre while the rewards of betrayal are so large.[58]