Part 13

“It is important, on moral no less than on economic grounds, to insist upon this, that no public benefit of any kind arises from the existence of an idle rich class. The wealth accumulated by their ancestors and others on their behalf, where it is employed as capital, no doubt helps to sustain industry; but what they consume in luxury and idleness is not capital, and helps to sustain nothing but their own unprofitable lives. By all means they must have their rents and interest, as it is written in the bond; but let them take their proper place as drones in the hive, gorging at a feast to which they have contributed nothing.”[55]

The fact that the modern capitalist may be not only useless but positively obstructive was well illustrated at a meeting of the shareholders of the London and South Western Railway on 7th February last. Three shareholders urged a reduction in third-class fares. The chairman pointed out the obvious fact that such a reduction would probably lower the dividend, and asked the meeting if that was what they wished. He was, of course, answered by a chorus of “No, no!” and all talk of reduction of fares was at an end. Here is a plain sample (hundreds might be quoted) of the evident interests of the public being sacrificed to those of the capitalist.

That joint-stock capitalism is extending rapidly everyone knows. In the United States, according to Mr. Bryce, the wealth of joint-stock corporations is estimated at one-fourth of the total value of all property.[56] In England every kind of business, from breweries, banks, and cotton-mills down to automatic sweetmeat machines, is falling into the hands of the joint-stock capitalist, and must continue to do so. Twenty years ago who would have supposed that a brewery like that of Guinness or such a banking firm as Glyn Mills, and Co. would become a joint-stock company? Yet we know it is so to-day. Capitalism is becoming impersonal and cosmopolitan. And the combinations controlling production become larger and fewer. Baring’s are getting hold of the South African diamond fields: A few companies control the whole anthracite coal produce of Pennsylvania. Each one of us is quite “free” to “compete” with these gigantic combinations, as the Principality of Monaco is “free” to go to war with France should the latter threaten her interests. The mere forms of freedom remain; but monopoly renders them nugatory. The modern State, having parted with the raw material of the globe, cannot secure freedom of competition to its citizens; and yet it was on the basis of free competition that capitalism rose. Thus we see that capitalism has cancelled its original principle--is itself negating its own existence. Before considering its latest forms, attention may here be conveniently directed to the Co-operative movement, which is, on one side at any rate, closely allied to the joint-stock development.

The Co-operative movement had in England a Socialistic origin: for its founder was Robert Owen. As Mr. Seligman says very truly in the _Political Science Quarterly_: “Owen was the founder of the Co-operative movement in England, a fact often ignored by those who glibly use the word to-day with an utter failure to discern its true significance.” And Owen himself avowed that his grand ultimate object was “community in land,” with which he hoped would be combined “unrestrained co-operation on the part of all, for every purpose of human life.” It is thus important to associate co-operation with Robert Owen--_clarum et venerabile nomen_--because there are many persons who suppose that co-operation began with the Rochdale Pioneers in 1844. What the Rochdale movement really did was to commence the process of joint-stock shop-keeping, a very different thing from that which Owen had in view.

A powerful impetus was given to co-operation by the Christian Socialist movement under Maurice and Kingsley. “Of all narrow, conceited, hypocritical, anarchic and atheistic schemes of the Universe,” said Kingsley, “The Cobden and Bright one is exactly the worst.” The orthodox economic conclusions of the day fared badly at Kingsley’s hands. “The man who tells us,” said he, “that we ought to investigate Nature, simply to sit patiently under her, and let her freeze, and ruin, and starve, and stink us to death, is a goose, whether he calls himself a chemist or a political economist.” These Christian Socialist leaders felt deeply the anguish and poverty of the workers and the selfish apathy of the rich. “Mammon,” says Kingsley, “shrieks benevolently whenever a drunken soldier is flogged; but he trims his paletot and adorns his legs with the flesh of men and the skins of women, with degradation, pestilence, heathendom, and despair; and then chuckles complacently over his tailor’s bills. Hypocrite! straining at a gnat and swallowing a camel.” All this is very admirable; but cheap clothes are not made solely or chiefly for Mammon, but for the masses, who are poor people. It is part of the sad irony of the situation that the great majority are obliged to accept the alternative of cheap clothes or none at all. And as the English climate and the British matron combine to exercise an absolute veto over the latter form of prehistoric simplicity, it follows that one portion of the working-classes must, in order to be clothed, connive at the sweating of another portion.

The _Christian Socialist_, which was the organ of Maurice and Kingsley, betrayed great simplicity as to the real nature of the economic problem. It neglected Owen’s principle of “community in land,” and supposed that by working together and selling articles of good quality at a fair price poverty could be eliminated, while yet every worker in the community was paying his tribute of economic rent to the owners of the instruments of production. Thus the movement had no economic basis; and when the moral idealism had departed from it, no wonder that it degenerated into mere “divvy” hunting and joint-stock shop-keeping. The economic advantages of joint-stock shop-keeping are thus summed up by Mr. Robert Somers in the “Encyclopædia Britannica” (Art., “Co-operation”): “Wholesome commodities, ready-money payments, a dividend of from five to ten per cent on share capital, and a bonus to non-members on the amount of their purchases.” As joint-stock shop-keeping, co-operation is a useful and cheap method of distribution, which has doubtless benefited a considerable number of persons; but the notion that it can solve the economic problem before society is “chimerical,” as Dr. J. K. Ingram tells us is the opinion of modern economists.[57] This, indeed, might only be expected from the fact that 961 out of every 1,000 persons in England die without furniture, investments, or effects worth £300.[58] Economically considered, co-operation is, now that the initial enthusiasm has died out of it, a subsidiary branch of the great joint-stock enterprise. Ethically considered, its results are often doubtful. In its chief stronghold, Lancashire, one observes a narrow selfishness among its votaries, which could not be surpassed in the most genteel quarters of Bayswater. Its ideal is not the raising of the working class as a whole, but the raising of certain persons out of the working into the middle class. If the advocates of co-operation will abate their pretensions, and claim merely (1) that their method is a useful and economic means of distribution among the lower-middle and upper-working classes; and (2) that by its agency working men can learn the important functions of organization and administration, their claim will be freely admitted. But if they go further their vaulting ambition will o’erleap itself. At the present rate of progress made by co-operative societies as compared with joint-stock capitalist companies, several generations will be in their graves before any deep or general impression is made. And meanwhile, unless economic rent is diverted from the class which at present absorbs it to the community which creates it, co-operators, like the rest of us, must pay tribute to the lords of the soil and of money. But the noteworthy fact about co-operation, is that its very existence testifies to the process of industrial and capitalist aggregation here insisted on as the great social factor of our period. For co-operative societies supersede individual by social distribution, effecting it without the waste attendant on a number of little shops all competing against each other, the owners of none of which can make a decent living. Co-operation, therefore, well illustrates the economic evolution of the present age.

I now come to treat of the latest forms of capitalism, the “ring” and the “trust,” whereby capitalism cancels its own principles, and, as a seller, replaces competition by combination. When capitalism buys labor as a commodity it effects the purchase on the competitive principle. Its indefinitely extended market enables it to do so; for it knows that the workman must sell his labor to secure the means to live. Other things being equal, therefore, it buys its labor in the cheapest market. But when it turns round to face the public as a seller, it casts the maxims of competition to the winds, and presents itself as a solid combination. Competition, necessary at the outset, is found ultimately, if unchecked, to be wasteful and ruinous. It entails great expense in advertising; it necessitates the employment of much unproductive labor; it tends to the indefinite lowering of prices; it produces gluts and crises, and renders business operations hazardous and precarious. To escape these consequences, the competing persons or firms agree to form a close combination to keep up prices, to augment profits, to eliminate useless labor, to diminish risk, and to control the output. This is a “ring,” which is thus a federation of companies. The best examples of “rings” and “pools” are to be found in America, where capitalism is more unrestrained and bolder in its operations than in Europe; and also where nearly all the active intellect is attracted to those commercial pursuits that dominate American life.

The individualist devotees of _laisser faire_ used to teach us that when restrictions were removed, free competition would settle everything. Prices would go down, and fill the “consumer” with joy unspeakable; the fittest would survive; and as for the rest--it was not very clear what would become of them, and it really didn’t matter. No doubt the “consumer” has greatly benefited by the increase in production and the fall in prices; but where is “free competition” now? Almost the only persons still competing freely are the small shopkeepers, trembling on the verge of insolvency, and the workingmen, competing with one another for permission to live by work. Combination is absorbing commerce. Here are a few instances of the formation of rings.

A steel rail combination was some years ago formed among previously competing firms in America. This combination discovered that too many rails were being made and that prices were being cut. Accordingly, one of the mills in the combination--the Vulcan mill of St. Louis--was closed, and stood smokeless for years: its owners meanwhile receiving a subsidy of $400,000 a year from the other mills in the combination for _not_ making rails. That is how the owners of the Vulcan mill earned their “wages of superintendence.” It is needless to add that no payment was made to the men for _not_ working: they were thrown on the streets to meditate on the right to “liberty and the pursuit of happiness,” secured to them by the Declaration of Independence.

Or, again, take the case of the anthracite coal lands of Pennsylvania, occupying an area of some 270,000 acres, and held by the Reading Coal and Iron Company, the Lehigh Valley Railroad, the Delaware, Lackawanna and Western Railroad, the Delaware and Hudson Railroad, the Pennsylvania Railroad, the Pennsylvania Coal Company, and smaller firms and corporations tributary to these. The rich owners, popularly known as the “coal barons,” agree to fix absolutely the wholesale price of coal, always securing an immense rise just before the winter sets in. There is no such thing known or possible as free trade or open competition in the anthracite coal produce of America.

Combinations in the United States have been made by the Western millers, the New York icemen, Boston fish dealers, manufacturers of sewer-pipe, copper miners, makers of lamps, pottery, glass, hoop-iron, shot, rivets, candy, starch, sugar, preserved fruits, glucose, chairs, vapor stoves, lime, rubber, screws, chains, harvesting machinery, pins, salt, hardware, type, brass tubing, silk and wire. In these trades freedom of production and sale has been for a time partially or wholly destroyed. The American business man is very angry when boycotting is resorted to by workmen; but he is quite ready to boycott others when his interests lead that way. The stamped tinware makers in 1882, formed a ring and expelled members who sold at lower prices than the fixed rates, and refused to allow anyone in the pool to sell to the offenders. Some of the previous facts are taken from an article by Mr. Henry D. Lloyd,[59] who has investigated capitalist combinations with much knowledge and insight. From the same article I quote the following:

“On the 1st of April, 1882, when the rest of us were lost in the reckless gaity of All Fools’ Day, forty-one tack manufacturers found out that there were too many tacks, and formed the Central Manufacturing Company of Boston, with 3,000,000 dollars capital. The tack-mills in the combination ran about three days in the week. When this combination a few weeks ago silenced a Pittsburg rival by buying him out, they did not remove the machinery. The dead chimneys and idle machines will discourage new men from starting another factory, or can be run to ruin them if they are not to be discouraged in any other way. The first fruits of the tack-pool were an increase of prices to twice what they had been.”

Again I quote Mr. Lloyd:

“The men who make our shrouds and coffins have formed a close corporation known as the ‘National Burial Case Association,’ and held their annual convention in Chicago last year. Their action to keep up prices and keep down the number of coffins was secret, lest mortality should be discouraged.”

From coffins to crackers is a short step in the study of capitalist methods:

“The Western Cracker Bakers’ Association met in Chicago, in February, to consider among other things ‘the reprehensible system of cutting prices’ (_i. e._, the reprehensible system of free competition which capitalists in buying labor tell us is our salvation). They first had a banquet. After their ‘merriment and diversion’ the revellers, true to Adam Smith’s description, turned to consider ‘some contrivance to raise prices.’ ‘The price-lists were perfected,’ said the newspaper report; ‘and then they adjourned.’”

In 1875 broke out a severe competition among the fire insurance companies, upon the collapse of a previous pool; and the competition cost them in New York City alone $17,500,000 in seven years. Consequently in 1882 they made a new combination which covered the whole country, and which Mr. Lloyd declares to be wealthy, cohesive, and powerful. Though there is no pool or ring, I am credibly informed that there is a common understanding among the fire insurance companies of London. One of the most noted of combinations has been the great Copper Syndicate which attracted world-wide attention early in 1888. It was formed by some French speculators in October, 1887, and during the eighteen months of its existence, maintained copper at a purely arbitrary price in all the markets of the world. At its head was M. Eugène Secretan, managing director of the Société des Métaux, the world’s largest buyer of, and dealer in, manufactured copper. The syndicate’s agents bought all the copper that was visible and for sale, the result of their speculation being that the price of copper in the London market rose from less than £40 to over £80 a ton, and the price of Lake Superior copper in America rose from 10¹⁄₂ cents to 17³⁄₄ cents per pound. M. Secretan informed a London journal that his designs were purely philanthropic. “Our only purpose,” said he, “is that every miner, dealer and manufacturer should have fair remuneration for his work.” Thanks to M. Secretan’s philanthropy, copper, tin, lead and spelter rose enormously in price; several trades were more or less paralysed; and in France large numbers of workmen were thrown out of employment. And let it not be supposed that the suicide of M. Denfert-Rochereau, which heralded the collapse of this first attempt to corner the world’s copper--a collapse due to a miscalculation of the extent to which the supply of copper could increase under the stimulus of high prices--offers us any security against a repetition of the attempt. On the contrary, it has shewn how the thing may be safely done. The metal hoarded by the unlucky speculators is still so far cornered that it has been kept off the market up to the present, prices being not yet normal. “To a regular trust it must and will come at last,” says Mr. E. Benjamin Andrews, of Cornell University. “Nor has aught taken place to indicate that a Copper Trust, organized like the Standard Oil Trust, with its energy and relentless methods, would fail.”[60]

The Individualist who supposes that Free Trade plus private property will solve all economic problems is naturally surprised at these “rings,” which upset all his crude economic notions; and he very illogically asks for legislation to prevent the natural and inevitable results of the premises with which he starts. It is amusing to note that those who advocate what they call self-reliance and self-help are the first to call on the State to interfere with the natural results of that self-help, of that private enterprise, when it has overstepped a purely arbitrary limit. Why, on ordinary commercial principles, should not a copper syndicate grasp all the copper in the world? It is merely the fittest surviving. The whole case against Socialism is assumed by its most intelligent opponents to lie in that Darwinian theory. And yet when the copper syndicate or the “coal barons” survive, they arouse against themselves the fiercest and, from the commercial point of view, the most unreasonable antagonism. As sin when it is finished is said to bring forth death, so capitalism when it is finished brings forth monopoly. And one might as well quarrel with that plain fact as blame thorns because they do not produce grapes, or thistles because they are barren of figs.

The story of the growth of capitalism is not yet complete. The “ring” is being succeeded by a more elaborate organization known as the “trust.” Although in England great combinations like the Salt Union are rapidly rising, yet we must again travel to America to learn what the so-called “trust” is. The fullest information on the subject of trusts is contained in a report of a Committee of the New York State Legislature, which was appointed to investigate the new combination. The following trusts were inquired into: Sugar, milk, rubber, cotton-seed oil, envelope, elevator, oil-cloth, Standard oil, butchers’, glass, and furniture. A trust is defined by the Committee as a combination “to destroy competition and to restrain trade through the stockholders therein combining with other corporations or stockholders to form a joint-stock company of corporations, in effect renouncing the powers of such several corporations, and placing all powers in the hands of trustees.” The general purposes and effects are stated to be “to control the supply of commodities and necessities; to destroy competition; to regulate the quality; and to keep the cost to the consumer at prices far beyond their fair and equitable value.” It is unnecessary to deal with all these trusts, which possess certain features in common. I will select one or two, particularly the great Standard Oil Trust and the Cotton-seed Oil Trust.