CHAPTER THIRTEEN

_The Economic Problems_

We have aimed to speak of the American as he appears in the economic world—of the American in his actual economic life and strife—rather than merely of his inanimate manufactures. That is, we have wished specially to show what forces have been at work in his soul to keep him thus busied with progress. And although we have gone somewhat further, in order to trace the economic uplift of the last decades, nevertheless we have chiefly aimed merely to show the workings of his mind and heart—not the economic history of the American, but the American as little by little he builds that history, has been the point of interest.

Seen from this point of view, everything which stands in the foreground of the actual conflict becomes of secondary interest. The problems leading to party grievances which are solved now one way, now another, and which specially concern different portions of society, different occupations or geographical sections, contribute very little to reveal the traits that are common to all sections, and that must, therefore, belong to the typical American character. If we have given less thought to the political problems of the day than to the great enduring principles of democracy, we need still less concern ourselves with the disputes of the moment in the economic field. The problems of protection, of industrial organization, of bimetallism, and of labour unions are not problems for which a solution can be attempted here.

And nevertheless, we must not pass by all the various considerations which bear on these questions. We might neglect them as problems of American economy; and purely technical matters, like bank reform or irrigation, we shall indeed not discuss. But as problems which profoundly perplex the national mind, exercise its best powers, and develop its Americanism, silver, trusts, tariff, and labour unions require minuter consideration. The life and endeavour of the Americans are not described if their passionate interest in such economic difficulties is not taken into account; not, once more, as problems which objectively influence the developing nation, but as problems which agitate the spirit of the American. An exhaustive treatment is, of course, out of the question, if for no other reason than that it would distort our perspective of things. Had we only the objective side of the problems to consider, we might, perhaps, doubt even whether there were any problems; whether they were not rather simple events, bringing in their train certain obvious consequences, whether deplorable or desirable. These economic problems are, indeed, not in the least problematical. The silver question will not be brought up again; the trusts will not be dissolved; the protective tariff will not be taken off and labour unions will not be gotten rid of. These are all natural processes, rather than problems; but the fact that these events work diversely on men’s feelings, are greeted here with delight and there with consternation, and are accompanied by a general chorus of joy and pain, gives the impression that they are problems. This impression seizes the American himself so profoundly that his own reaction comes to be an objective factor of importance in making history. It is not to be doubted that the course of these much-discussed economic movements is considerably influenced by prejudices, sentiments, and hobbies.

_The Silver Question_

Perhaps the power of mere ideas—of those which are clear, and, even more, those which are confused—is shown in none of these problems more strongly than in the silver question. If any problem has been really solved, it is this one; and still no one can say that it has dropped out of the American mind, although, for strategic reasons, politicians ignore it. The sparks of the fire still glow under the ashes of two Presidential campaigns. The silver schemes have too strongly fixed public attention to be so quickly forgotten, and any day may see them revive again. Just here the possibility of prejudices which would not profit by experience has been remarkably large, since the question of currency involves such complicated conceptions that fallacious arguments are difficult to refute. And such a situation is just the one where the battle of opinions can be waged the hottest: the silver question has, in fact, more excited the nation than any other economic problem of the last ten years. And there can be no doubt that many valid arguments have been urged on the wrong side, and some untenable theses on the right side.

The starting-point of the discussion lay in the law of 1873, which, for the first time in the United States, excluded silver coin from the official currency. There had already been differences of opinion before the passage of this law. The friends of silver say that in 1792 the United States permitted the coinage of both silver and gold without limit, and that silver was the actual monetary standard. And, although by accidents of production the relative value of the precious metals, which had been 15 to 1, later became 16 to 1, nevertheless the two metals continued to be regarded equally important until the surreptitious crime of 1873. It was a secret crime, they say, because the law was debated and published at a time when the nation could have no clear idea of what it meant. The Civil War had driven gold coin out of the country, every one was using paper, and no one stopped to ask whether this paper would be redeemed in gold or silver, and no one was accustomed to seeing gold coins in circulation. General Grant, who was President at that time, signed the bill without any suspicion that it was anything more than a technical measure, much less that it was a criminal holdup of the nation on the part of the rich. And great was the disaster; for the law demonetized silver, brought a stringency of gold, lowered prices tremendously, depressed the condition of the nation, and brought the farmers to poverty, so it was said.

The opponents of bimetallism recognize no truth in this story. They say that in the first third of the nineteenth century the silver dollar was counted equal to the gold dollar, at the ratio of 15 ounces to 1 ounce of metal; but since this ratio did not continue to correspond with the market price, and the gold of the country went to Europe, because it there brought a better value, the official ratio was changed as early as 1834 to 16 to 1. This rate put a small premium on gold, and virtually established a gold standard for American currency. The owners of silver mines no longer had silver coined in the country, because they could get more money for their silver bars abroad; and so, as a matter of fact, during the next decade only 8 million silver dollars were coined, and this denomination virtually went out of circulation. Only the fractional silver currency could be kept in the country, and that only by resorting to the trick of making the coins proportionately lighter than the legal weight of the silver dollar.

The currency became, therefore, to all intents and purposes, a gold one, and nobody was discontented with it, because silver was then less mined. From 1851 to 1855, for instance, the average silver production of the United States was only $375,000, while that of gold was $62,000,000. Then came the lean years of the Rebellion. The government borrowed from the banks, in the autumn of 1861, $100,000,000 in gold, and in the following year issued $150,000,000 of unsecured greenbacks. Thereupon the natural laws of exchange drove all sound currency out of the country, and $150,000,000 more greenbacks were soon issued. The premium on gold went higher and higher, and reached its highest point in 1864, when the price was 185 per cent. of the normal value. After the war confidence was restored, the paper dollar rose from 43 to 80 cents; but the quantity of paper in circulation was so tremendous that metallic money was never seen, and not until the early seventies did conditions become solid enough for the treasury to take steps to redeem the greenbacks.

But this was just the time when all the civilized nations were adopting the gold standard—a time in which the production of gold had become incredibly large. The two decades between 1850 and 1870 had brought five times as much gold bullion into the world as the preceding two decades, and the leading financiers of all countries were agreed that it was high time to make gold the universal standard of exchange. The general movement was begun in the conference of 1867 held in Paris. Germany led in adopting the gold standard; the United States followed in 1873. The gold dollar, which since the middle of the century had been the actual standard of American currency, became now the official standard, and silver coinage was discontinued. There was nothing of secrecy or premeditated injustice, for the debates lasted through several sessions of Congress.

If, nevertheless, the so-called crime remained unnoticed, and so many Senators failed to know what they were doing, this was not because the transactions went on in secret, nor because the use of paper money had made every one forget the problems of metallic currency, but rather because no one felt at that time that he would be injured by the new measure, although the attention of everybody had been called to the discussions. The owners of silver mines themselves had no interest in having their mineral made into coin, and no one was disturbed to see silver go out of circulation. All the trouble and all the hue and cry about a secret plot did not commence until several years later, when, for entirely independent reasons, circumstances had considerably changed. The step had been taken, however, and the principle has not been repudiated. The unlimited coinage of silver has not been permitted by the United States since 1873.

Nevertheless, silver was destined soon again to become regular currency. Hard times followed the year 1873, prices fell and the value of silver fell with them, and bimetallic coinage had been discontinued. Bimetallists connected these facts, and said that the price of silver fell because the commercial world had stopped coining it. For this reason the only other coined metal, which was gold, became dear, which meant, of course, that prices became cheap, and that the farmer got a low price for his harvests. And thus the population was driven into a sort of panic.

A ready expedient was suggested: it was to coin silver once more, since that would carry off the surplus and raise the price; while on the other hand, the increased amount of coin in circulation would bring prices up and restore the prosperity of the farmers and artisans. This is the main argument which was first heard in 1876, and was cried abroad with increasing loudness until twenty years later it was not merely preached, but shouted by frenzied masses, and still in 1900, misled the Democratic party. But the desire for an increased medium of circulation is by no means the same as the demand for silver coinage. After the Civil War the public had demanded more greenbacks just as clamorously as it now demanded silver. It was also convinced that nothing but currency was needed to make high values, no matter what the value of the currency itself.

So far as these main facts are concerned, which have been so unjustly brought into connection, there can be no doubt that the depreciation of silver was brought about only in very small part by the coinage laws. To be sure, the cessation of silver coinage by several large commercial powers had its effect on the value of silver; but India, China, and other countries remained ready to absorb large amounts of silver for coinage; and in fact the consumption of silver increased steadily for a long time. The real point was that the production of silver increased tremendously at just the time when the production of gold was falling off. From 1851 to 1875, $127,000,000 worth of gold on an average was mined annually, but from 1876 to 1890 the average was only $108,000,000; while, on the other hand, the average production of silver in those first twenty-five years was only $51,000,000, but in the following fifteen years came up to $116,000,000. The output of gold therefore decreased 15 per cent., while that of silver increased 127 per cent. Of course, then silver depreciated. Now the future was soon to show that increased coinage of silver would not raise its price. Above all, it was an arbitrary misconstruction to ascribe bad times to the lack of circulating medium. Later times have shown that, under the complicated credit system of the country, prices do not depend on the amount of legal tender in circulation in the industrial world. The speed of circulation is a factor of equal importance with the amount of it; and, most important of all, is the total credit, which has no relation to the amount of metallic currency. When more money was coined it remained for the time being unused, and could not be put in circulation until the industrial situation recovered from its depression.

Thus the bad times of the seventies were virtually independent of coinage legislation: but public agitation had set in, and as early as 1878 met with considerable success. In that year the so-called Bland Bill was passed, over the veto of President Hayes, which required the treasury of the United States to purchase and coin silver bars to the value of not less than 2 million, and not more than four million, dollars every month. This measure satisfied neither the one side nor the other. The silverites wanted unlimited coinage of silver; for, if a limit was put, the standard was still gold, even though the price of silver should be somewhat helped. The other side saw simply that the currency of the country would be flooded with depreciated metal, and one which was really an unofficial and illegal circulating medium. It was known that the silver, after being coined into dollars, would be worth more than its market value, and it was already predicted that all the actual gold of the country would be taken abroad and replaced by silver. The “gold bugs” also saw that this legislation would artificially stimulate the mining of silver if there should actually be any increase in its price.

The new law was thus a bad compromise between two parties, although to many it seemed like a safe middle way between two dangers. Some recognized in the unlimited coinage of silver the dangers of a depreciated currency, but believed that the adoption of the gold standard would be no less dangerous, because gold was too scarce to satisfy the needs of the commercial world. It was said that free silver would poison the social organism and free gold would strangle it, and that limited silver coinage, along with unlimited gold coinage, would therefore be the only safe thing.

But it soon appeared that such legal provisions would have no effect in restoring the value of the white metal. Although the government facilitated in every way the circulation of the new silver coins, they nevertheless came back to the treasury. No matter how many silver dollars were distributed as wages, they found their way at once to the retail shops, then to the banks, and then to Washington. It appeared that the nation could not keep more than sixty or seventy million dollars’ worth in circulation, while there were already more than $400,000,000 lying idle in Washington. The banks boycotted silver at first; but the more important fact was that the price of silver did not rise, but kept on falling. It was the amount produced and naturally consumed, and not the amount coined, which regulated the price of silver. In the year 1889 the relative values of silver and gold were as 22 to 1; and the true value of the silver dollar coined under the Bland Bill was only seventy-two cents. Congress now proposed to take a more serious measure looking toward a higher price for silver.

In July, 1890, a law was passed whereby the treasury was obliged to buy four and one-half million ounces of silver every month at the market price, and against this to issue treasury certificates to the corresponding amount, which should be redeemable either in gold or silver; since, as that law declared, the United States asserted the equal status of the two metals. The law did not prescribe the number of silver certificates which were to be issued, since the weight of silver to be purchased was fixed and the value of it depended on the market. Only a few months afterward it became clear that even this energetic stroke would not much help the price of silver. The silver and gold dollars would have been really equal to each other if an ounce of silver had brought a market price of $1.29. In August, 1890, silver came up to $1.21 an ounce, and fell the next year to $1.00, and in 1892 to $0.85. But while the price of silver was falling, gold was rapidly leaving the country.

In April, 1893, the gold reserve of the treasury fell for the first time below the traditional hundred millions. It was a time of severe economic depression. The silverites still believed that the rise of silver had not commenced because its purchase was restricted to monthly installments, and they clamoured for unlimited purchases of silver. But the nation opposed this policy energetically. President Cleveland called an extra session of Congress, and after a bitter fight in the Senate, the law providing for the purchases of silver and issue of silver certificates was repealed, in November of 1893. The Democratic party had split on this measure, and then arose the two divisions, the Gold Democrats who followed Cleveland, and the Silver Democrats who found a leader a year later in Bryan, and dictated the policy of the Democratic party for the following decade.

Looking on American economic history from the early seventies to the middle nineties without prejudice, one cannot doubt not only that the entire legislation relative to coinage has had scarcely any influence on the price of gold and silver—since the price of silver has fallen steadily in spite of the enormous amounts purchased—but also that the general industrial situation, the movement of prices, and the volume of business have been very little affected by these financial measures.

The strongest influence which they have had has been a moral one. Business became active and foreign commerce revived as soon as the confidence in the American currency was restored. This result, of course, contradicted the expectations and wishes of the apostles of silver. International confidence declined in proportion as a legal tender standing for a depreciated metal was forced into circulation. It was not the amount of silver, but the fear of other countries as to what that amount might become, which most injured American commerce. And the great achievement of Cleveland’s Administration was to reassure the world of our solidity.

Otherwise the economic fluctuations depended on events which were very little related to the actual amount of gold on hand. If, in certain years, the amount of circulation increased, it was the result rather than the cause of industrial activity; and when, in other years, a speculative movement collapsed, less money was used afterward, but the shortage of money did not cause the collapse. Then, too, harvests were sometimes good and at other times bad, and foreign commerce changed in dependence on quite external events in Europe. There were, moreover, certain technical improvements in agricultural and industrial processes which rapidly lowered prices and which took effect at independent times and seasons.

The year 1893 was a time in which a great many factors worked in one direction. The overbuilding of railways and a too great expansion of iron industries had been followed by a terrible reaction; a surplus of commodities on all the markets of the world caused prices to fall, and the international distrust of silver legislation in the United States made the situation worse. European capital, on which all undertakings then depended, was hurriedly withdrawn; thousands of businesses failed, and small men fell into debt. The actual panic did not last long, and Cleveland’s successful move of 1893 restored the international confidence. But the situation of the general public was not so readily improved. This was the psychological moment in which the silver question, which had hitherto interested relatively restricted circles, so suddenly came to excite the entire nation that in 1896 the main issue of the Presidential campaign was silver or gold currency. The silver craze spread most rapidly among the farmers, who had suffered more from overproduction than had the manufacturers. The manufacturer sold his wares more cheaply, but in greater quantities, because he improved his methods, and, moreover, he bought his raw materials more cheaply. But the fall in the prices of wheat and corn and other agricultural products which affected the farmer was only in small part due to more intensive cultivation, but rather to the greater area of land which had been planted. The farmer in one state was not benefited by the fact that great areas in some other state were now for the first time laid down to wheat and corn. As prices fell he produced no more, and thus agriculture suffered more severely than industry. While the farmer was able to get for two sheaves of wheat only as much as he used to get for one, he thought, of course, that his patrons had too little money, and was readily convinced that if more money could only be coined, he would get good prices again.

There was another argument in addition to this, which could still even more easily be imposed on the ignorant, and not only on the farmer, but on all classes that were in debt. Silver was cheaper than gold, and if debts were paid in it the creditor lost and the debtor won. It was at this time that the conflict of interests between the great capitalists and the labouring masses began to arouse political excitement. Distrust found its way into a good part of the population, and finally a hatred of capitalists and monopolies, and of the stock market most of all.

This hatred vented itself in a mad clamour for silver. If Congress would authorize an unlimited silver coinage at the ratio of 16 to 1, while the market ratio was down to 33 to 1—so that the silver dollar would be worth hardly fifty cents, and so that the farmer could sell his wheat or maize for a dollar when it was really worth but half a dollar—then at last the robbers on the stock exchange would be well come up with. In reality, these two arguments contradicted each other, for the farmer would be benefited by more silver money only if the market value of silver could be brought up to that of gold; while he would be favoured in the payment of debts only if gold could be brought down to the value of silver. But once let there be any sort of distress, and any ghost of relief haunting the general mind, then logic is totally forgotten. A new faith arises, the power of which lies in suggestion. The call for free-silver coinage at the old ratio of 16 to 1 fascinated the agricultural masses as well as the lower classes in cities, just as the idea of a future state of socialism fascinates German working-men to-day.

And just as one cannot understand the German people without taking into account their socialistic delusions, so one cannot understand the American masses to-day without tracing out the course of the silver propaganda. It was the organizing power of a watchword which gave the delusion such significance, and which, for perhaps the first time, gave voice to the aversion which the masses felt toward the wealthy classes; and so, like the socialistic movement in Germany, it took effect in far wider circles than the points over which the discussion started would have justified.

But the masses could hardly be stirred up to such a powerful agitation merely on the basis of the specious arguments spread about by ignorant fanatics, or even with the substantial support of the indebted farmer. In the middle nineties the literature of the silver question swelled enormously. A mere appeal to the passions of those who hated capital would not have been enough, and even the argument that the amount of money in a country alone regulates prices could have been refuted once for all. A financial and an intellectual impetus were both necessary to the agitation, and both were to be had. Distinguished political economists saw clearly certain unfairnesses and evils in a simple gold standard, and urged many an argument for bimetallism which the masses did not wholly follow, but which provided material for general discussion. And financial aid for the silver side flowed freely from the pockets of those who owned silver mines. Of course, there was no doubt that these mine-owners would be tremendously prospered by any radical legislation for silver. In the days of the Bland Bill even the poorest silver mines were in active operation, whereas now everything was quiet. The discussions which ostensibly urged the right of the poor man against the rich said nothing at all of the deep schemes of the silver-mine owners. These men did not urge their claims openly, but they paid their money and played the game shrewdly.

We have already fully compared the political traits of the two parties; and it will be understood at once that the contest for silver, as a movement for the rights of the poor man against those of the capitalist, would have to be officially waged by the Democratic party, while the Republican party would, of course, take the other side. The nation fought out the great battle in two heated Presidential campaigns; and in 1896 as well as in 1900, the contest was decided in favour of the gold currency. The currency legislation of the Republican Congresses has held to a conservative course. In March, of 1900, the treasury was instructed, on demand, to redeem all United States notes in gold, so that all the money in circulation came to have absolutely the same value. The old silver certificates, of which to-day $450,000,000 are in circulation, can at any time be exchanged for gold coin, and the Secretary of the Treasury was entirely right in showing in his last annual report that it was this wise provision alone which obviated a panic at the time when stock market quotations dropped so suddenly in the year 1903. Thus the finances of the country are definitely on a gold basis.

But, as we have said, we are not interested in the material aspects of the currency situation, and still less shall we undertake a profound discussion of bimetallism, as scientific circles are to-day considering it. The significance of a limited double standard, especially in view of the commerce with the East, and of the effect it will have in quieting the international struggle to get the yellow metal, is much discussed by thoughtful persons. The United States have sent a special commission to visit other countries in order to persuade them that some international agreement as to the monetary recognition of silver is desirable.

All this does not interest us. We care for the silver question only as a social movement. No other problem has so profoundly moved the nation; even the questions of expansion and imperialism have so far aroused less general interest. It is only too likely that if hard times return once more, the old craze will be revived in one form or another. The silver intoxication is not over to-day, and the western part of the country is merely for the moment too busy bringing its tremendous crops to harvest, and carrying its gold back home, to think of anything else.

_The Tariff Question_

The silver question, which was of such great significance yesterday, was very complicated, and only very few who discussed it knew all the difficulties which it involved. This is not true of the tariff question, which may at any time become the main political issue. As the problem of protective tariff is generally discussed, it involves only the simplest ideas.

The dispute has come from a conflict of principle and motive, but not from any difference of opinion as to the effect of protective measures. Here and there it has been maintained, as it has in other countries, that the foreigner pays the tariff; and this argument has, indeed, occasioned keen and complicated discussions. But, for the most part, no academic questions are involved, rather conditions merely which are obvious to all, but toward which people feel very differently, according to their occupation, geographical position, and political convictions. The struggle is not to be conceived as one between protective tariff and free trade, but rather as between more or less protective tariff—since, in spite of variations, the United States have, from the very outset, enacted a tariff greater than the needs of the public treasury, with the idea of protecting domestic labour from foreign competition.

Indeed, it can be said that the policy of protection belongs even to the prehistory of the United States, and that it has contributed measurably to building up the Union. While America was an English colony, England took care to suppress American industries; agriculture and trade were to constitute the business of the colonists. The War for Independence altered the situation, and native industries began to develop, and they had made a brave start in many states before the war was ended. But as soon as the ties with England had been broken, the separate states manifested diverse interests, and interfered in their trade with one another by enacting customs regulations. It looked as if a tariff war on American soil would be the first fruits of freedom from the common oppressor. There was no central power to represent common interests, to fix uniform revenues for the general good, and uniform protection for the industry of the country. And when one state after another was persuaded to give up its individual rights to the Federation, one of the main considerations was the annulment of such interstate customs, which were hindering economic development, and the establishment of a uniform protection for industry. The tariff law of 1789 contained, first of all, such provisions as ensured the necessary public revenue, tariff on goods in whose manufacture the Americans did not compete; and then other tariffs which were meant to protect American industries.

So, at the outset, the principle of protective tariff was made an official policy by the United States; and since, through the highly diversified history of more than eleven decades, the nation has still held instinctively to this policy, we can hardly doubt that the external and internal conditions under which the country has stood have been favourable to such a policy. The tremendous natural resources, especially of iron, copper, lumber, fur, cotton, wool, and other raw materials, and the inexhaustible supply of energy in the coal-fields, oil-wells, and water-falls, have afforded the material conditions without which an industrial independence would have been impossible. The optimistic American has found himself in this land of plenty with his energy, his inventive genius, and his spirit of self-determination. It was predestined that the nation should not only till the fields, produce raw materials, and engage in trade, but that it should set stoutly to work to develop its own industries. Therefore, it seemed natural to pass laws to help these along, although the non-industrial portions of the country, and all classes which were not engaged in industry, were for a time inconvenienced by higher prices.

Once launched, the country drifted further and further in the direction of protective duties. In 1804 a tariff was enacted on iron and on glassware, with unquestionably protective intent. It is true that, in general, the principal increases in the beginning of the century were planned to accelerate the national income. The War of 1812 especially caused all tariffs to be doubled. But this war stirred up patriotism and a general belief in the abilities of the nation. Native industries were now supported by patriotic enthusiasm, so that in 1816 the duties on cotton and woollen goods and on manufactured iron were increased for the sake of protection. And the movement went on. New tariff clauses were enacted, and new friends won over, often in their own selfish interests, until the early thirties. The reaction started in the South, which profited least from the high tariff. Compromises were introduced, and many of the heaviest duties were taken off. By the early forties, when the movement lapsed, duties had been reduced by about 20 per cent.

At this time the divided opinions in favour of raising or lowering duties commenced to play an important part in politics. Protective tariff and tariff reduction were the watchwords of the two parties. In 1842 the Protectionist party got the reins of government, and at once put heavy duties on iron, paper, glass, and cotton and woollen goods. Four years later, tariffs were somewhat reduced, owing to Democratic influences; but the principle of protection was still asserted, as is shown by the fact that tea and coffee, which were not grown in the country, were not taxed, while industrial manufactured articles were taxed on the average 30 per cent. The Democrats continued to assert their influence, and won a victory here and there. Wool was admitted free in 1857. Then came bad times. After a severe commercial crisis, imports decreased and therewith the customs revenues. The demand for high tariff then increased, and the Republicans got control of Congress, and enacted in the year 1861 the Morrill Tariff, which, although strongly protective, was even more strongly a Republican party measure. It aimed to discriminate in protecting the industries of those states which the Republican party desired to win over. Then came the Civil War, the enormous expense of which required all customs and taxes to be greatly increased.

The war tariff of 1864 was enacted for the sake of revenue, but its effect was decidedly protective. And when the war was over, and tariffs might have been reduced so far as revenue went, industries were so accustomed to the artificial protection that no one was willing to take off duties. Some customs, even such as those on woollen and copper, were considerably increased in the next few years, while those on coffee and tea were again entirely removed.

In general, it was a time of uncertain fluctuations in the tariff until the year 1883, when the whole matter was thoroughly revised. In certain directions, the customs were lowered; in others, increased. Specially the higher grades of manufactured articles were put under a higher tariff, while the cheaper articles used by the general public were taxed more lightly. A short time after this, President Cleveland, as leader of the Free-Trade Democrats, came out with a famous message against protection. The unexpected result was, that after the tariff question had thus once more been brought to the front, the Republicans gained a complete victory for their side, and enacted a tariff more extreme than any which had gone before, and which protected not only existing industries, but also such as it was hoped might spring up. Even sugar was now put on the free list, because it had been taxed merely for revenue, and not for protection. While, on the other hand, almost all manufactured articles which were made in the country were highly protected. This was specially the case with velvet, silk, woollen, and metal goods. This was the well-known McKinley Tariff.

The Democrats won the next election, although not on the issue of industrial legislation, and as soon as they came into power they upset the high tariffs. Their Wilson Tariff Bill of 1894, the result of long controversies, showed little internal consistency. Too many compromises had been found necessary with these or those influential industries in order to pass the bill at all. Yet, on the whole, customs were considerably lowered, and for the first time in a long while raw materials, such as wool, were put on the free list. But Democratic rule did not last long. McKinley was victorious in 1896, and in the following year the Dingley Tariff was passed in accordance with Republican ideas of protection, and it is still in force.

The total revenues derived from this source in the year 1902 were $251,000,000, and in 1903 were $280,000,000. Let us analyze the first amount. Its relative importance in the total revenue may be seen from the fact that the internal duties on liquor, tobacco, etc., amounted to $271,000,000, and that the postal budget for the year was $121,000,000. The customs duties of $251,000,000 are officially divided into five classes. The first is live animals and breadstuffs, with sugar at the head bringing in $52,000,000. The sugar duty had not existed ten years before, but the Wilson Tariff of 1894 could not have been enacted if the beet-sugar Senators from Louisiana had not been tossed a bone. In 1895 the revenue on sugar amounted to $15,000,000, and in 1901 to $62,000,000. After sugar, in this year of 1903, came fruits and nuts with 5, vegetables with 3, meat, fish, and rice with only 1 million dollars each. The second class comprises raw materials. Wool yielded 10.9, skins 2.6, coal 1 million dollars, and every other class still less. In the third class are the semi-manufactured products, with chemicals yielding 5.4, tin plate 2.9, wooden-ware 1.8, silk 1.1, and fur 1 million dollars. The fourth class comprises finished products. Linen goods yielded 14, woollen goods 13, cotton goods 10, metallic wares 6, porcelain 5.6, leather goods 3.1, and wooden and paper wares each 1 million dollars. Articles of luxury make the last class, with tobacco bringing 18.7, silk goods 16, laces 13, alcoholic drinks 10, jewelry 2.4, feathers 1.4, and toys 1.3 million dollars. The total imports for the year were $903,000,000, of which $396,000,000 entered free of duty; but of these last only 10 per cent. were half or wholly finished products, 90 per cent. being food or raw materials. The duty was collected from imports worth $507,000,000, and 64 per cent. came from manufactured articles. Thus the Dingley Tariff was a complete victory for protection.

No one now asks to have the duties raised, but the Democratic party is trying all the time to have them lowered, so that the question is really whether they shall be lower or remain where they are. Of course, the Republicans have a capital argument which looks unanswerable—success. The history of American protection, they say, is the history of American industrial progress. The years during which native industry has been protected from foreign competition by means of heavy duties have been the times of great development, and years of depression, disaster, and panic have regularly followed whenever free-traders have removed duties. The tariff has never been higher than under the McKinley and the Dingley bills, and never has the economic advance been more rapid or forceful. What is the use, they say, of representing to the working-man that he could buy a suit so much cheaper if the tax on woollen goods were removed? For if it were, and free-trade were to be generally adopted, he would go about without employment, his wife and children would be turned out into the street, and he would be unable to buy even the cheapest suit. Whereas to-day, he is well able to pay the price which is asked. The wealth of fancy with which this sort of argument is constantly varied, and tricked out with word and phrase suited to every taste, is almost overpowering. But the alternative between the high wage which can afford to pay for the expensive suit, and the lower wage which cannot afford to pay for the cheap suit, becomes still more cogent since the fanatical protectionist is able to prove that under a high tariff wages have in fact risen, while the price of the suit has not. Yet the extreme free-trader can prove, with equal certainty, that under free-trade the suit would actually be much cheaper, while wages would in the end be even higher.

It cannot be doubted that a number of industries are to-day very prosperous which could not have gotten even a foothold except by a century of protection. And no Democrat denies this. But he doubts whether the hot-house forcing of such industries has benefited the country, and he believes that the artificial perpetuation of great industrial combinations, which have been able, by means of a protective tariff, to put an artificially high price on the food and other necessary articles used by the masses, has worked infinitely more harm than good.

It is undoubtedly true that many industries have not only been protected, but have actually been created. The tin plate industry is, perhaps, the best example of this. The United States used to obtain the tin plates needed in industry from Wales, and at unreasonably high prices. Twice the Americans tried to introduce the industry at home, but were at once undersold by the English and “frozen out.” Then the McKinley Tariff put a duty on tin plate of 70 per cent. ad valorem, and the American industry was able to make headway. In 1891, 1,036 million pounds of tin plate were imported, and none was produced at home; two years later only 628 million pounds were imported, and 100 million pounds manufactured at home; and ten years later only 117 million pounds came over the sea, while 894 million pounds were produced in this country. It has been much the same in the manufacture of watches. The United States imported all their watches a few years ago. They were then taxed 10 per cent. for revenue, being accounted articles of luxury, and could not be profitably made inside the country. But when Congress taxed them 25 per cent., the industry grew up. It produced at first watches after European models; but American ingenuity soon came to be extended to this field, improved machinery for the manufacture of watches was devised, and now a tremendous industry provides every American school-boy with a watch which is better and cheaper than the corresponding European article. Even the silk industry may well be considered the foster child of protection.

The free-traders reply, that all this may have been very well for a period of transition from an agricultural to an industrial state; but that the great change has now been completed, and the burdensome duties which keep our prices high might perfectly well be dropped, since our industries are now strong enough to compete with foreign industries.

But just at this point the Republican comes out less optimistically than before. He says that American industry has indeed developed with fabulous speed, and that the industrial exports of the country, which now amount to 30 per cent. of the total, are a great showing, but this is a symptom which ought not to be overrated. When prices throughout the rest of the world fell, and England was paralyzed for the moment, although the domestic demand had not yet reached its height, conditions combined so favourably, it is true, as to cause the export trade in American manufactured articles to increase rapidly. But this may not be permanent. Industry is still not able to fill all the demands of the home market; on the contrary, at the very time when American iron and steel industries seemed likely to conquer foreign markets, it was found that some sudden increase in domestic requirements necessitated large importations. While the iron and steel exports decreased by $25,000,000 between 1900 and 1903, the imports during the same time increased $31,000,000, and iron and steel include mostly unfinished products.

Thus even the strongest and most powerful industries greatly need protection still against foreign competition. It is, Thomas Reed has said, entirely mistaken to look on protection as a sort of medicine, to be left off as soon as possible. It is not medicine, but nourishment. The high tariff has not only nursed infant industries, but it is to feed them through life. For it is not a happy expedient, but a system which is justified by its results, and of which the final import is that the American market is for the American people. Protection is a wall behind which the American people can carry on their industrial life, and so arrange it that wages shall be not only absolutely but relatively greater than wages in Europe.

At a time when everything looked so prosperous as in the last few years of industrial activity, it is difficult to contest the powerful argument which the Republicans make in appealing to success. Every one is afraid that a change in tariff might turn back this tide. And if there have been reverses in the last few years it has been pointed out that speculators and corporation magnates have been the chief sufferers, and they are the ones who, least of all, would wish the tariffs removed.

It has been an unfavourable time, therefore, for the free-traders, and their really powerful party has been rather faint-hearted in its fight against the Dingley Tariff. Its satisfaction with the Wilson Tariff was not unmixed, and although it could truthfully say that the law as actually passed was not a Democratic measure since it received six hundred and forty amendments in the Senate, nevertheless it realizes that the legislative measures of the last Democratic régime pleased nobody thoroughly and contributed a good deal to the subsequent Republican victory.

Nevertheless, the Democrats feel that the Republican arguments are fallacious. It is not the protective tariff, they say, which has brought about American prosperity, but the natural wealth of the country, together with the energy and intelligence of its inhabitants. The high level of education, the free government, the pioneer ardour of the people, and the blessings of quick and rapid railway connections have made America great and prosperous. If, indeed, any legal expedients have been decisive in producing this happy result, these have been the free-trade measures, since the Republicans quite overlook the fact that the main factor making for our success has been the absolute free-trade prevailing between the forty-five states. What would have become of American industries if the states had enacted tariffs against one another, as the country does against the rest of the world, and as the countries of Europe do against one another? The entire freedom of trade from Maine to California, and from Canada to Mexico, that is, the total absence of all legislative hindrances and the possibility of free exchange of natural products and manufactures without payment of duties, has made American industry what it is; and it is the same idea which the Democrats cherish for the whole world. They desire to get for America the advantages from free-trade which England has derived.

All the well-known free-trade arguments—moral, political, and economic—are then urged; and it is shown, again and again, that every nation will succeed best in the long run by carrying on only such industries as it is able to in free competition with the world. It is true, admittedly, that if our tariff were removed a number of manufactures would have to be discontinued, and that the labourers would for a time be without work, as happens whenever a new machine is discovered, or whenever means of transportation are facilitated. The immediate effect is to take labour from the workman. But in a short time adaptation takes place, and in the end the new conditions automatically provide a much greater number of workmen with profitable employment than before. America would lose a part of the home market if she adopted free-trade, but would be able to open as many more doors to foreign countries as recompense. Her total production would in the end be greater, and all articles of consumption would be cheaper, so that the workmen could buy the same wares with a less amount of labour, and the adjustment of the American scale of wages would better enable the Americans to compete with the labour of other countries.

But no doubt the times do not favour such logic. The Americans are too ready to believe the statement of Harrison, that the man who buys a cheaper coat is the cheaper man. And quite too easily the protectionists reply to all arguments against excluding foreign goods with the opposite showing that, in spite of the high tariff, the imports from abroad are steadily increasing. Under the Dingley Tariff, in the year 1903, not only the raw materials, but also the half and wholly manufactured articles, and articles of luxury, imported increased to a degree which had never been reached in the years of the Wilson Tariff. The raw materials imported under a Democratic tariff reached their high point in 1897, with $207,000,000; when the Dingley Tariff was adopted the figure decreased to $188,000,000, but then rose rapidly and amounted in 1902 to $328,000,000, and in 1903 to $383,000,000. Finished products declined at first from $165,000,000 to $94,000,000, but increased in 1903 to $169,000,000. Articles of luxury sank from $92,000,000 to $74,000,000, but then mounted steadily until in the year 1903 they were at the unprecedented figure of $145,000,000.

In spite of this, the Democratic outlook is improving; not because people incline to free-trade, but because they feel that the tariff must be revised, that certain duties must be decreased, and others, so far as reciprocity can be arranged with other countries, abolished. Everybody sees that the international trade balance of last year shows a movement which cannot keep on. America cannot, in the long run, sell where she does not buy. She will not find it profitable to become the creditor of other nations, and will feel it to be a wiser policy to close commercial treaties with other nations to the advantage of both sides. Reciprocity is not a theory of the Democratic party merely, but is the sub-conscious wish of the entire nation, as may be concluded from the fact that McKinley’s last great speech voiced this new desire.

He had, more than any one else, a fine scent for coming political tendencies; and his greatness always consisted in voicing to-day what the people would be coming to want by to-morrow. On the fifth of September, 1901, at the Buffalo Exposition, he made a memorable speech, in which he said: “We must not repose in fancied security that we can forever sell everything and buy little or nothing. If such a thing were possible, it would not be best for us or for those with whom we deal. We should take from our customers such of their products as we can use without harm to our industries and labour. Reciprocity is the natural outgrowth of our wonderful industrial development under the domestic policy now firmly established. What we produce beyond our domestic consumption must have a vent abroad. The excess must be relieved through a foreign outlet, and we should sell anywhere we can and buy wherever the buying will enlarge our sales and productions, and thereby make a greater demand for home labour. The period of exclusiveness is past. The expansion of our trade and commerce is the pressing problem. Commercial wars are unprofitable. A policy of good will and friendly trade relations will prevent reprisals. Reciprocity treaties are in harmony with the spirit of the times. Measures of retaliation are not.

“If perchance some of our tariffs are no longer needed for revenue or to encourage and protect our industries at home, why should they not be employed to extend and promote our markets abroad?”

This was the same McKinley whose name had been the apprehension of Europe, and who in fact more than any one else was morally responsible for the high-tariff movement in the United States. The unique position which his service of protection had won him in the party, would perhaps have enabled this one man to lead the Republican party down from its high tariff to reciprocity. But McKinley has unhappily passed away, and no one is here to take his place.

His successor has not had, in the first place, a great interest in questions of commerce. He has necessarily lacked, moreover, such strong authority within his party as would enable him to bring opposing interests into line on such a new policy. The young President was too much suspected of looking askance on great industrial companies. If he had placed himself at the head of the Republicans who were hoping to reduce the tariff, he would have been branded as a free-trader, and would not have been credited with that really warm feeling for protected American industries which in the case of McKinley was taken as a matter of course. More than that, the opponents deterred him, and would have deterred any one else who might have come in McKinley’s footsteps, or perhaps even McKinley himself, with the ghost of bad times which are to come whenever a certain feeling of insecurity is spreading through the commercial world.

Everybody felt that, if the question of tariff should be opened up, unforeseen disputes might ensue. On questions of tariff every industry wields a lever in its own favour, and the Wilson Tariff had sufficiently shown how long and how tragi-comic can be the course from the law proposed to the law accomplished. It was felt everywhere that if the country should be brought into unrest by the fact that no industry could know for some years what its future was to be or where Congress might chance to take off protection, that all industry would be greatly injured. There could be no new undertakings for years, and whatever the ultimate result might be, the mere feeling of uncertainty would make a crisis sufficient to turn the tide of prosperity. And American reciprocity was after all only a matter of philanthropy; for the experience with Canada and Hawaii, it was said, only showed that reciprocity meant benevolence on the part of America.

If America is to be philanthropical, there is enough to do in other ways; but if America is to preserve her commercial interests and her prosperous industries, it is absolutely necessary not to stir up trouble and push the country once more into tariff disturbances and expose industry to doubts and misgivings. And this ghost has made its impression. McKinley’s words have aroused only a faint echo in the party. The need, however, which he instinctively felt remains, and public opinion knows it. It is only a question as to when public opinion will be stronger than party opinion.

There is another thing which gives the anti-protectionists a better chance. Democrats say that high tariff has favoured the trusts. This may be true or false, and statistics speak for both views. But here is a watchword for the party which makes a deep impression, for the trusts are popularly hated. This, too, may be right or wrong, and may be still more easily argued for both sides, but the fact remains, and the seductive idea that abolishing high tariff will deal a fatal blow to the hated, extortionate, and tyrannical trusts gets more hold on the masses day by day. In vain the protectionists say that there is not a real monopoly in the whole country; that every instance of extortionate price calls out competition at once, and injures the trust which charges such price; that protection benefits the small and poor companies as much as the large, and that an attempt to injure the large companies by free-trade enactments would kill all small companies on the instant. And, besides, politics ought not to be run in the spirit of hatred. But the embitterment exists, and arguments avail little. It is incontestable that, of all the motives which are to-day felt to work against protection, the one most effective with the masses is their hatred of the trusts. Herewith we are led from the tariff question to this other problem—the trusts.

_The Trust Question_

“_Von der Parteien Hass und Gunst verwirrt_”—to be hated and to be favoured by the parties is the fate of the trusts. But the odd thing is that they are not hated by one party and favoured by the other; but both parties alike openly profess their hatred and yet show their favour by refraining after all from any action. And this inconsistency is not due to any intentional deception.

To be sure, a good deal of it is political policy. The evils and dangers of many trust formations are so obvious that no party would like to praise them openly, and no party will dispense with the cheap and easy notoriety of declaring itself for open competition and against all monopolies. On the other hand, the power of the trusts is so great that neither party dares to break with them, and each has its special favourites, which could not be offended without prejudicing its campaign funds. Nevertheless, the deeper reason does not lie in the matter of expediency, but rather in the fact that no relief has been proposed which promises to be satisfactory. Some want to treat the evil superficially, as a quack doctor tries to allay secondary symptoms; and others want, as President Roosevelt has said, to end the disease by killing the patient. The fact that this inventive nation has still not solved its great economic problem, is probably because the trusts have grown necessarily from the organic conditions of American life, and would continue to exist in spite of all legislative hindrances which might be proposed against them.

When Queen Elizabeth, in violation of the spirit of Anglo-Saxon law, distributed in the course of a year nearly fifty industrial monopolies, and caused the price of some commodities to be doubled, the House of Commons protested in 1601, and the Queen solemnly declared that she would revoke all privileges which endangered industrial freedom; and from that time on, monopolies were done away with. The American people are their own sovereign, and the effect of monopolies is now about the same as it was in England three hundred years ago. But the New World sovereign cannot issue a proclamation revoking the monopolies which it has granted, or at least it knows that the monopolies, if taken from one, would be snatched by another. It is true that the present form of trusts could be made illegal for the future, but some other form would appear, to compass the same ends; and if certain economic departments should be liberated by a free-trade legislation, the same forces would gather at other points. We must consider the essence of the matter rather than its outward form.

The essence is certainly not, as the opponents of trusts like to represent, that a few persons are enriched at the expense of many; that the masses are plundered to heap up wealth for a small clique. The essence of the movement does not lie in the distribution of wealth, but in the distribution of power. The significance of the movement is that in recent times the control of economic agencies has had to become more strongly concentrated. It is a mere attendant circumstance that in the formation of the trusts large financiers have pocketed disproportionately large profits, and that the leading trust magnates are the richest men of the country. The significance of their position lies in the confidence which is put in them. But the actual economic endeavour has been for the organized control of larger and larger undertakings. It has been very natural for the necessary consolidation of smaller parts into new and larger units to be accomplished by men who are themselves rich enough to retain a controlling share in the whole business; but this is a secondary factor, and the same result could have been had if mere agents had been appointed by the owners to all the great positions of confidence.

Almost the same movement has gone on in other economic spheres than the industrial. Railroad companies are all the time being consolidated into large companies, controlled by fewer and fewer men, until finally a very few, like Morgan, Vanderbilt, Rockefeller, Harriman, Gould, Hill, and Cassatt, virtually control the whole railroad system. But this economic movement in the railroad world would not really stop if the state were to take over all the railroads, and a single badly paid secretary of railroads should be substituted for the group of millionaires. The main point is that the savings of the whole country are invested in these undertakings, and are looking for the largest possible returns, and get these only when leadership and control are strongly centralized.

The very obvious opulence of the leaders naturally excites popular criticism, but it has been often shown that the wealth of these rich people has not increased relatively to the average prosperity of other classes, and the corporations themselves make it possible to distribute the profits saved by concentration throughout the population. The famous United States Steel Company had last year 69,000 stockholders, and the shares of American railroads are owned by more than a million people. For instance, the Pennsylvania Railroad alone has 34,000 stock and bond holders, who intrust the control to a very few capitalists. In fact, the whole railway system belonging to a million people is controlled by about a dozen men; and the Steel Company with its 69,000 owners is managed by twenty-four directors, who in turn are guided by the two presidents of the administration and finance committees. The chief point is thus not the concentration of ownership, but the concentration of power.

This same movement toward concentration has taken place in the banking business; and here the point is certainly, not that one man or a few men own a main share in the banks, but only that a few men are put in charge of a group of financial institutions for the sake of organized management. In this way the public is more uniformly and systematically served, and the banks are more secure, by reason of their mutual co-operation.

Among the directors of the Bank of Commerce there are, for instance, directors of two life-insurance companies which have a capital of $750,000,000, and of eight trust companies; and the directors of these trust companies are at the same time directors of other banks, so that they all make a complete chain of financial institutions. And they stand more or less under the influence of Morgan. There is, likewise, another system of banks, of which the chief is the National City Bank, which is dominated by Rockefeller; and these personal connections between banks are continued to the industrial enterprises, and then on to the railroad companies. For instance, the Rockefeller influence dominates not only banks and trust companies whose capital is more than $400,000,000, the famous Standard Oil Company with a capital of $100,000,000, the Lackawanna Steel Company worth $60,000,000, and the gas companies of New York worth $147,000,000, but also the St. Paul Railroad, which is capitalized at $230,000,000, the Missouri, Kansas and Texas at $148,000,000, and the Missouri Pacific at $212,000,000.

It is certainly true that such tremendous influence under present conditions can be gotten only by men who actually own a huge capital. And yet the essential economic feature is always the consolidation of control, which is found necessary in every province of industry, and which entirely overtops the question of ownership. It has been estimated that the twenty-four directors of the United States Steel Company exert a controlling influence in two hundred other corporations; that back of them are the largest banks in the whole country, about half the railroads, the largest coal, oil, and electric companies, and the leading telegraph, express, and life-insurance companies, etc. They control corporations with a capital of nine billions of dollars: and such consolidation is not to be undone by any artificial devices of legislation.

If economic life, by reason of the dimensions which it has assumed in the last decades, requires this welding together of interests in every department, then the formation of syndicates and trusts is only a phase in the necessary development; and to prevent the formation of trusts would affect the form, and not the essence of the movement. Indeed, the form has already changed a number of times. The earliest trusts were so organized that a number of stock companies united as such and intrusted their business to a new company, which was the “trust.” That system was successfully abolished; the trust itself seemed unassailable, but the state could revoke the charters of the subsidiary companies, because by the law of most states these latter might continue only so long as they carried on the functions named in their charters; that is, so long as they carried on the transaction of their affairs themselves. A stock company has not the right, possessed by an individual, to intrust its property to another. And if the stock companies which came together into a trust were dissolved, the trust did not exist. In this way the State of New York proceeded against the Sugar Trust, Ohio against the Standard Oil Company, and Illinois against the Chicago Gas Company.

But the course of events has shown that nothing was gained by this. Although it was recognized that corporations could not legally combine to form a trust, nevertheless the stockholders controlling the stock of separate companies could join as individuals and contribute their personal holdings to a new company which was virtually a trust; and in this form the trusts which had been demolished were at once reorganized. Moreover, of course any number of stock companies can simply dissolve and merge into one large company, or they may keep their individuality but make important trade agreements with one another, and so indirectly fulfil the purposes of a trust. In short, the ways of bringing assenting industrial enterprises under one management and so of virtually making a given industry into a monopoly, are manifold.

To promote the development of trusts, there was nothing necessary but success at the outset. If the first trusts were successful, the device would be imitated so long as there was any prospect of profit. It really happened that this imitation went on finally as a sort of mania, where no special saving of profits could be predicted; one trust followed another, and the year 1903 saw 233 purely industrial trusts incorporated, of which 31 had a capital of over $50,000,000 each, and of which the total capitalization was over nine billions.

At first sight it might look as if this movement would be really sympathetic to the American people in general. The love of size generated in the nation by the lavishness of nature must welcome this consolidation of interest, and the strong spirit of self-initiative claiming the right of individuals to unite and work together must surely favour all sorts of co-operation. As a fact now an opposite tendency operates, which after all springs from the same spirit of self-initiative. The freely acting individual must not be prevented by a stronger force from using the strength he has. Everything which excludes free competition and makes the individual economically helpless seems immoral to the American. That is old Anglo-Saxon law.

The common law of England has at all times condemned agreements which tend toward monopoly, and this view dominates the American mind with a force quite surprising to the European who has become accustomed at least to monopolies owned by the state. The laws of almost all the separate states declare agreements tending toward a monopoly to be illegal; and federal legislation, in its anti-trust measures of 1887 and 1890, has seconded this idea without doing more than formulating the national idea of justice. The law of the country forbids, for instance, all agreements looking to the restriction of trade between different states of the country or with foreign nations. Senator Foraker, in February, 1904, called down public displeasure by proposing a law which permitted such agreements restricting commerce so long as the restriction was reasonable. It was feared at once that the courts would think themselves justified in excusing every sort of restraint and monopolistic hindrance. And yet there is no doubt that the interpretation of what should constitute “restriction” to commerce was quite as arbitrary a matter as the interpretation of what should be “reasonable.” Indeed, the economic consolidation of competing organizations by no means necessarily cuts off the beneficent effects of competition. When, for instance, the Northern Securities Company united several parallel railway lines, it asserted justly that the several roads under their separate corps of officials would still compete for public favour. Yet the public and the court objected to the consolidation. The one real hindrance to the propagation of trusts lies in this general dread of every artificial check to free competition.

Many circumstances which have favoured the formation of trusts are obvious. In the first place, the trust can carry on business more cheaply than the component companies individually. The general administration is simplified by doing away with parallel positions, and all expenses incident to business competition are saved. Then, too, it can make larger profits since when competition stops, the fixing of prices lies quite with itself. This is of course not true, in so far as other countries are able to compete; but here comes in the function of the protective tariff, which permits the trust to raise its prices until they equal those of foreign markets plus the tariff.

The good times which America has enjoyed for some years have also favoured the development of trusts. When the harvests are good and the factories all busy, high prices are readily paid. The trusts can do even better than single companies by shutting down unprofitable plants and adapting the various remaining plants for mutual co-operation. Then, too, their great resources enable them to procure the best business intelligence. In addition to all this came a series of favourable external circumstances. First was the rapid growth of American capital which was seeking investment. In the seventies, the best railroad companies had to pay a rate of 7 per cent. in order to attract investors; now they pay 3½ per cent. Capital lies idle in great quantities and accumulates faster than it can find investment. This has necessarily put a premium on the organization of new trusts. Then, too, there was the well-known uniformity of the market, so characteristic of America. The desire to imitate on the one side, and patience and good nature on the other, give to this tremendous region of consumption extending from the Atlantic to the Pacific Ocean a uniformity of demand which greatly favours manufacture on a gigantic scale. This is in sharp contrast with the diversity of requirements in Europe.

It has been, doubtless, also important that the American feels relatively little attached to his special business. Just as he loves his Fatherland really as a conception, as an ideal system, but feels less bound to the special piece of soil where he was born and will leave his own farm if he is a farmer and go westward in search of better land, so the American passionately loves business as a method, without being over attached to his own particular firm. If the opening is favourable, he gives up his business readily to embark on another, just as he gives up an old-fashioned machine in favour of an improved one.

Just this quality of mind is so different from the German that here would be probably the greatest hindrance to the organization of trusts in Germany. The German feels himself to have grown up in his special business, which he may have inherited from his father, just as the peasant has grown up on his farm, and he does not care to become the mere employee of a large trust. Another contributory mental trait has been the friendly confidence which the American business man puts in his neighbour. The name is here appropriate; the trusts in fact repose to a high degree on mutual trust, and trusts like the American could not develop wherever there should be mutual distrust or jealousy in the business world. Finally, the laws themselves have been favourable, in so far as they have favoured the issue of preferred stock in a way very convenient to trusts, but one which would not have been approved in Europe. And, moreover, the trusts have made considerable use of the diversity existing between the laws of different states.

There have been retarding factors, too. We have mentioned the most important of all—the legal discountenance of all business agreements tending to create a monopoly or to restrain trade. There have been others, however. One purpose of the trusts is to put prices up and so to make the necessities of life dearer. It is the people who pay the prices—the same people who elect Congress and determine the tariffs and the laws; so that every trust works in the knowledge that putting up prices tends immediately to work back on business by calling forth tariff revision and anti-trust laws.

One source of great profit to the trusts has been the possibility of restricting output. This method promised gain where natural products were in question, such as oil, tobacco, and sugar, of which the quantity is limited, and further for all technical patents. Where, however, there is no such limitation the most powerful corporation will not be able to avoid competition, and if it tries to buy up competing factories to stop such competition, still more are built at once, solely with the purpose of extorting a high ransom from the trusts; and this game is ruinous. In other departments again consolidation of business means very little economy; Morgan’s marine trust is said not to have succeeded for this reason. In short, not all industries are susceptible of being organized as trusts, and the dazzling profits of certain favoured trusts too easily misled those who were in pursuit of fortune into forgetting the difference between different businesses. Trusts were formed where they could not be profitable. Perhaps the real founders themselves did not overlook the difference; but they counted on the great hungry public to overlook it, until at least most of the shares should have been disposed of.

As a fact, however, the reluctance of the great investing public has been a decidedly restraining factor too. The securities spoiled before the public had absorbed them; everywhere the complaint went up of undigested securities. The public came early to suspect that the promoters were making their profits not out of the legitimate economies to be saved by the trusts, but by enormously overcapitalizing them and taking large blocks of stock for themselves.

There was still another unfavourable influence on public opinion. The main profits of a protected trust lie in its being able to sell more dearly than it could if exposed to foreign competition. But now if the consolidated industry itself proposes to sell to other countries, it must of course step down to the prevailing level of prices. It must therefore sell more cheaply abroad than at home. But this is soon found out, and creates a very unfavourable impression. The American is willing to pay high prices, as far as that goes; but when he has to pay a price double what the same factory charges for the same goods when delivered in Europe, he finds the thing wholly unnatural, and will protest at the next election. Thus there have been plenty of factors to counteract the favourable conditions, and the history of trusts has certainly not been for their promoters a simple tale of easy profits.

Now, if we do not ask what has favoured or hindered the trusts, nor how they have benefited or jeopardized their founders, but rather look about to see what their effect on the nation has been and will be, some good features appear at once. However much money may have been lost, or rather, however fictitious values may have been wiped out in the market, the great enterprises are after all increasing the productive capacity of the nation and its industrial strength in the fight with other peoples. They give a broad scope to business, and bring about relations and mutual adaptations which would never have developed in the chaotic struggling of small concerns. They produce at the same time by the concentration of control an inner solidarity which allows one part to function for another in case there are hindrances or disasters to any part of the great organism, and this is undoubtedly a tremendous factor for the general good. A mischance which, under former conditions, would have been disastrous can be survived now under this system of mutual interdependence: thus it can hardly be doubted that the combined action of the banks in the year 1903 prevented a panic; since, when stocks began to fall, the banks were able to co-operate as they would not have been able previously to their close affiliation.

Furthermore, economic wealth can now be created more advantageously for the nation. The saving of funds which were formerly spent in direct competition is a true economy, and the trusts have asserted again and again that as a matter of fact they do not put up prices, but that they make sufficient profits in saving what had formerly been wasted in business hostilities. Certainly the trusts make it possible to isolate useless or superannuated plants, without causing a heavy loss to the owners, and thus the national industry is even more freely adaptable to changing circumstances than before; and this advantage accrues to the entire country. The spirit of enterprise is remarkably encouraged and the highest premiums are put on individual achievement. Almost all the men who hold responsible positions in the mammoth works of the Steel Trust have worked up, like Carnegie himself, from the bottom of the ladder, and made their millions simply by working better than their fellows.

On the other hand, the trusts have their drawbacks. One of the most regrettable to the American mind is their moral effect. The American distrusts such extreme concentration of power and capital; it looks toward aristocracy, oligarchy, and tyranny. At the same time the masses are demoralized, and in very many cases individual initiative is strangled. There are, as it were, nothing but officials obeying orders; no men acting wholly on their own responsibility. Work ceases to be a pleasure, because everything goes by clock-work; the trust supersedes the independent merchant and manufacturer just as the machine has superseded the independent artisan.

The trusts have other demoralizing effects. Their resources are so tremendous as in the end to do away with all opposition. The independent man who hopes to oppose the great rival, can too easily be put in a position in which he is made to choose between beggary and the repudiation of all his principles. Everybody knows the shameless history of the Standard Oil Company, which has strangled not merely weak proprietors, but, much more, has strangled strong consciences. Then, too, the whole system of over-capitalization is immoral. Large trusts can hardly be formed except by purchasing the subsidiary companies at fancy prices, and issuing stock which in large part represents the premium paid to the promoters. Indeed, this whole system of community of interests which puts thousands of corporations into the hands of a few men who everywhere play into one another’s hands, must bring it about that these men will soon grow careless and overlook one another’s irregularities in a way which will threaten sober business traditions. The whole country was shocked on hearing the revelations of the Shipbuilding Trust, and seeing with what criminal carelessness the organization went on in a little group of friends, and how the methods of poker-playing were applied to transactions of great moment. The fundamental objection, however, is always that it is immoral to kill competition by agreements which create a monopoly.

Now, what can be done to obviate these evils? Apparently the first thing would be a revision of the tariff; and yet even their opponents must agree that there is only an indirect relation between the protective tariff and the trusts. It is true that the high tariffs have helped to create those industries which have now come together in trusts, and if the industries were to be wiped out, of course there would be nothing left of consolidations. But it is surely not true that the trusts are the immediate effect of the tariff, and the more a revised tariff were to let in foreign competition so much the more would the national industries need to form themselves into trusts for the sake of the benefits of consolidated management. All the business advantages and all the moral evils of trusts would still remain, even though the dividends were to sink. And the trusts would not be carried off the field unless American industry itself should utterly succumb to the foreign enemy.

Most of all, however, it seems clear that any policy prejudicial to the conditions of production and distribution would first of all, and most sadly, hit the competitors of the trusts. There is no absolute monopoly in any American industry. Indeed, even the Sugar Refining Company has a few outside competitors, and there is a legion of independent producers outside of the Steel Trust who are themselves in part organized in groups, and in many industries the trusts do not comprise even half of the manufacturers. Now, if the high tariff wall should be torn down so that a flood of cheap foreign manufactures could come in, it is certain that the first sufferers would be the small independent companies, which would be drowned out, while the mighty trusts would swim for a long time. Indeed, the destruction of such home competition would greatly benefit the trusts. Some of the strongest of these would hardly be reached at all by a reduction of the tariff—as, for instance, the strongest of them, the Petroleum Trust, which does not enjoy any protection. And it is also to be asked if trusts do not prosper in free-trade England? So soon as the water is squeezed out of their stocks, as has in good part lately happened, the trusts would still have a great advantage after protective duties should be abolished. And at the same time the necessary depression of wages which would result from that movement would endanger the whole industrial fabric. Moreover, the social and moral evils of the trusts would persist. Therefore the Republican party, which is just now in power, will take no part in solving the trust question by reducing the tariff.

Those Republicans who oppose the trusts are much more inclined to proceed to federal legislation. President Roosevelt has, in a number of speeches which are among the most significant contributions to the whole discussion, pointed to this way again and again. The situation is complicated and has shifted from time to time. The real difficulty lies in the double system of legislative power which we have already explicitly described. We have seen that all legislative power which is not expressly conferred on the Union belongs to the several states; specially has each state the right to regulate the commercial companies to which it has given charters. But if the company is such a one as operates between several states—as, for instance, one which transports goods from one state to another—it is regulated by federal law. Now, as long ago as the year 1890, in the so-called Sherman Act, Congress passed draconic regulations against interstate trusts. The law threatens with fine and imprisonment any party to a contract which restricts interstate commerce. It can be said of this law that it entirely did away with the trusts in their original form, in which the various companies themselves composed the trust. At the same time the federal officials were strongly seconded by the judicial doings of the separate states, as we have already seen. But the effect has only been to drive industry into new forms, and forms which are not amenable to federal regulations, but fall under the jurisdiction of the separate states. Corporations were formed which have their home in a certain state, but which by the tremendous capital of their members have been able to acquire factories distributed all through the country. Indeed, they are not real trusts any more, and the name is kept up only because the new corporations have descended from trusts and accomplish the same purpose.

Of course, this change would have been of no advantage for the several companies if the stern spirit shown by Congress in this legislation had been manifested once more by the separate states, that is, if each separate state had forbidden what the Union had forbidden; but so long as a single state in the whole forty-five permitted greater freedom to business than the others, of course all new companies would be careful to seek out that state and settle there. And, what was more important, would there pay taxes—a fact which tended to persuade every state to enact convenient trust laws.

Now, it is not a question between one state and forty-four others, but rather between the diversities of all the forty-five. Almost every state has its peculiar provisions, and if its laws are favourable to the trusts this is because, as each state says, if it were to stand on high moral grounds it would only hurt itself by driving away profitable trusts, and would not benefit the whole country, because the trusts would simply fly away and roost in some other state. More especially the industrially backward Western States would be always ready to entertain the trusts and pass most hospitable laws, for the sake of the revenue which they could thereby get for their local purposes. And so it is quite hopeless to expect the trusts to be uprooted by the legislation of the separate states. If all forty-five states were to pass laws such as govern stock companies in Massachusetts, there would be no need of further legislation; and it is also no accident, of course, that there are very few trusts in the State of New York. All the great trusts whose directors reside in the metropolis have their official home across the river in the State of New Jersey, which has made great concessions to the companies.

If these companies are to be reached by law, the surest way seems to be by taking a radical step and removing the supervision of large stock companies from the single states, and transferring it to the federal government; this is the way which President Roosevelt has repeatedly recommended. In our political section we have explicitly shown that such a change cannot be introduced by an act of Congress, but only by an amendment to the Constitution, which cannot be made by Congress, since it is in itself a product of the Constitution. Congress would be able only to take the initiative, and two-thirds of both houses would have to support the proposition to change the Constitution; and this change would have to be ratified by three-fourths of the state legislatures themselves. Now, it would be difficult to get a two-thirds majority in both houses on any question hostile to trusts; but it is quite out of the question to induce the three-fourths of the states to cripple their own rights in so important a matter as the regulation of stock companies; particularly as in economic matters local power is necessary to local optimism, and the weaker states would never consent to give up such rights, since they would be forced to see industrial laws framed according to the requirements of the more highly developed states. Was the President, then, in his speeches, like Don Quixote, tilting against the windmills; or was he proposing, as some of his opponents said, quite impracticable solutions in order to divert attention from such a handy solution as that of tariff reduction? And was he declaiming loudly against the trusts before the public in order really to help on the friends of capital?

Perhaps another point of view may be found. It may be that President Roosevelt proposed a constitutional amendment in order to arouse discussion along certain lines, and in order specially to have the chance of demonstrating that federal control of those overgrown business enterprises is necessary, and that their control by the several states is dangerous. It looks indeed as if such discussion would have been highly superfluous if not insincere, if it were true that the sole way of helping the situation were the quite impossible constitutional amendment.

But such is not the case; there is another way of reaching the same end without meeting the difficulties involved in changing the Constitution. Of course, the President was not free to discuss this means, nor even to mention it. This way is, we think, for the Supreme Court to reverse its former decision, and to modify its definition of interstate commerce in closer accord with the latest developments of the trusts. We have seen that there are drastic laws relating to interstate commerce which have overthrown all the earlier trusts; but a corporation claiming home in New Jersey, although owning factories in different states and dependent on the co-operation of several states for its output, is to-day treated by the Supreme Court as a corporation pertaining to one state. If, now, the Supreme Court were to decide that such a corporation transacts interstate commerce, then all the severity of the existing federal laws would apply to such corporations, and everything which could be accomplished by an amendment to the Constitution would be effected by that one decision. Of course, the President could not suggest this, since the Supreme Court is co-ordinate with the Executive; yet if public attention should be awakened by such a discussion, even the judges of the Supreme Court might consider the matter in a new light.

To be sure, this would at the same time require the Supreme Court somewhat to modify its previous interpretation of the Anti-Trust Law itself, and not merely its application; since otherwise, if the trusts come under federal jurisdiction, the law might wipe out the new trusts, as it did the old, instead merely of regulating them. In view of the recently published memoirs of Senator Hoar, there can be no doubt that the Supreme Court has interpreted the law forbidding the restraint of trade more strictly than was originally intended in the bill which Hoar himself drew up. Congress meant to refer to agreements in restraint of trade in a narrow, technical sense, while the court has interpreted this law as if it were to apply to every agreement which merely regulates production or sale in any place. But this unnecessarily severe construction of the law by the unexpected verdict of the court can of course be set aside by a further Congressional measure, and therefore offers no difficulty.

The Administration might proceed in still another way. A good deal has been said of greater publicity in public affairs, and in the last few years energetic measures have already been taken at the instance of the President. Many of the evils of trusts lie in their concealment of the conditions under which they have been organized; and the new Department of Commerce is empowered to take official testimony concerning all such matters, and to demand this under oath. Whether this will be an ultimate gain is doubted by many, since those acquainted with the matter say that the secrets of modern book-keeping make it impossible to inspect the general condition of a large industrial concern when its promoters desire to conceal the truth. While if one were to go back of the books and lay bare every individual fact to the public eye, the corporations would be considerably injured in their legitimate business. And in any case, this new effort at publicity has so far no judicial sanction. One large trust has already refused to give the information desired because its counsel holds the Congressional law to be unconstitutional, and this matter will have to be settled by the Supreme Court.

The most thoughtful minds are coming slowly to the opinion that neither tariff provisions nor legislation is necessary, but that the matter will eventually regulate itself. The great collapse of market values has opened the eyes of many people, and the fall in the price of commodities manufactured by trusts works in much the same direction. People see, more and more, that most of the evils are merely such troubles as all infant organisms pass through. The railroads of the country were also at first enormously overcapitalized, but the trouble has cured itself in the course of time. The surpluses have been spent on improvements, and railroad shares to-day represent actual values. Such a change has in fact already set in among the trusts. Paternal regulation by the government, which prescribes how industry shall go on, is always essentially distasteful to Americans. Exact regulative measures which shall be just cannot be framed beforehand by any government. Even Adam Smith believed, for instance, that the form of organization known as a stock company was suitable for only a few kinds of business. The American prefers to submit all such questions to the actual business test. All experimental undertakings are sifted by natural selection, and the undesirable and unnecessary ones fall through. It is true that many lose their property in such experiments, but that is only a wholesome warning against thoughtless undertakings and against hasty belief that the methods profitable in one field must be profitable in every other. It is true that here and there a man will make large profits rather too easily, but Roosevelt has well said that it is better that a few people become too rich than that none prosper.

The development of affairs shows most of all that prices can be inflated for a short time, but that they slowly come back to a reasonable figure so long as there are no real monopolies. The experience of the last ten years teaches, moreover, that the most important factor which works against the trusts is the desire for independence on the part of capitalists, who do not for a long time willingly subordinate themselves to any corporation, but are always tempted to break away and start once more an independent concern.

And comparing the situation in 1904 with that of 1900, one sees that in spite of the seeming growth of the trust idea, the trusts themselves have become more solid by the squeezing out of fictitious valuations; they are more modest, content themselves with less profits, and they are much less dangerous because of the competition which has grown up around them. The trusts which originally ruled some whole industry through the country are to-day satisfied if they control two-thirds of it. A single fundamental thought remains firm, that the development of industry demands a centralized control. This idea works itself out more and more, and would remain in spite of any artificial obstruction which might be put before it. But the opposite tendencies are too deeply rooted in human nature, in Anglo-Saxon law, and in the American’s desire for self-initiative, to let this centralization go to dangerous limits.

But those who will not believe that the trusts, with their enormous capitals, can be adequately restrained in this way, may easily content themselves with that factor which, as the last few years have shown, speaks more energetically than could Congress itself—this is organized labour. The question of capital in American economy is regulated finally by the question of labour.

_The Labour Question_

As the negro question is the most important problem of internal politics, so the labour question is the most important in American economic life; and one who has watched the great strikes of recent years, the tremendous losses due to the conflicts between capital and labour, may well believe that, like the negro question, this is a problem which is far from being solved. Yet this may not be the case. With the negro pessimism is justified, because the difficulties are not only unsolved, but seem unsolvable. The labour question, however, has reached a point in which a real organic solution is no longer impossible. Of course, prophecies are dangerous; and yet it looks as if, in spite of hard words, the United States have come to a condition in which labourers and capitalists are pretty well satisfied, and more so perhaps than in any other large industrial nation. It might be more exact to say that the Americans are nearer the ideal condition for the American capitalist and the American labourer, since the same question in other countries may need to be solved on wholly different lines.

In fact, the American problem cannot be looked into without carefully scrutinizing how far the factors are peculiar to this nation. Merely because certain general factors are common to the whole industrial world, such as capital, machinery, land values, labour, markets, and profits, the social politician is inclined to leave out of account the specific form which the problem takes on in each country. The differences are chiefly of temperament, of opinions, and of mode of life.

It is, indeed, a psychological factor which makes the American labour question very different from the German problem. This fact is neglected, time after time, in the discussions of German theorists and business men. It is, for instance, almost invariably affirmed in Germany that the American government has done almost nothing toward insuring the labourer against illness, accident, or old age, and that therefore America is in this respect far inferior to Germany. It can easily be foreseen, they say, that American manufacturers will be considerably impeded in the world’s market as soon as the progress of civilization forces them to yield this to the working-man.

The fact is that such an opprobrium betrays a lack of understanding of American character. The satisfaction felt in Germany with the laws for working-men’s insurance is fully justified; for they are doubtless excellent under German conditions, but they might not seem so satisfactory to the average American nor to the average American labourer. He looks on it as an interesting economic experiment, admirable for the ill-paid German working-man, but wholly undesirable for the American. The accusation that the American government fails in its duty by not providing for those who have served the community, is the more unjust, since America expends on the average $140,000,000 in pensions for invalid veterans and their widows, and is equally generous wherever public opinion sees good cause for generosity.

It cannot be doubted that the American labourer is a different sort of creature from the Continental labourer; his material surroundings are different, and his way of life, his dwelling, clothes and food, his intellectual nourishment and his pleasures, would seem to the European workmen like luxuries. The number of industrial labourers in the year 1880 was 2.7 million, and they earned $947,000,000; in 1890 it was 4.2 million earning $1,891,000,000; and in 1900 there were 5.3 million labourers earning $2,320,000,000; therefore, at the time of the last census, the average annual wage was $437. This average figure, however, includes men, women, and children. The average pay of grown men alone amounts to $500. This figure gives to the German no clear idea of the relative prosperity of the working-man without some idea of the relation between German and American prices.

One reads often that everything is twice as expensive in America as in Germany, while some say that the American dollar is worth only as much as the German mark—that is, that the American prices are four times the German; and still others say that American prices are not a bit higher than German. The large German-American steamships buy all their provisions of meat in New York rather than in Hamburg or Bremen, because the American prices are less. If one consults, on the other hand, a doctor or lawyer in New York, or employs a barber or any one else for his personal services, he will find it a fact that the American price is four times as high as the German. The same may be said of articles of luxury; for bouquets and theatre tickets the dollar is equal to the mark. It is the same with household service in a large town; an ordinary cook receives five dollars per week, and the pay of better ones increases as the square of their abilities. Thus we see at once that an actual comparison of prices between the United States and Europe cannot be made. A dollar buys five marks’ worth of roast beef and one mark’s worth of roses.

In general, it can be said that the American is better off as regards all articles which can be made in large quantities, and worse off in articles of luxury and matters of personal service. The ready-made suit of clothes is no dearer in America than in Germany and probably better for the price, while the custom-made suit of a first-class tailor costs about four times what it would cost in Germany. All in all, we might say that an American who lives in great style and spends $50,000 a year can get no greater material comforts than the man in Germany who spends a third as much—that is, 70,000 marks. On the other hand, the man who keeps house with servants, but without luxuries, spending, say, $5,000 a year, lives about like a man in Germany who spends 10,000 marks—that is, about half as much. But any one who, like the average labourer, spends $500 in America, unquestionably gets quite as much as he would get with the equal amount of 2,100 marks in Germany.

But the more skilled artisan gets $900 on the average—that is, about three times as much as the German skilled workman; so that, compared with the wages of higher-paid classes, the working-men are paid relatively much more than in Europe. The average labourer lives on the same plane as the German master artisan; and if he is dissatisfied with the furnishings of his home it is not because he needs more chairs and tables, but because he has a fancy for a new carpet or a new bath-tub. In this connection we are speaking always of course of the real American, not the recent immigrants from Southern and Eastern Europe, who are herded together in the worst parts of large cities, and who sell their labour at the lowest rate. The native American labourer and the better class of German and Irish immigrants are well clothed and fed and read the newspapers, and only a small part of their wages goes for liquor.

More important than the economic prosperity of the American working-man, though not wholly independent of it, is the social self-respect which he enjoys. The American working-man feels himself to be quite the equal of any other citizen, and this not merely in the legal sense. This results chiefly from the intense political life of the country and the democratic form of government, which knows no social prerogatives. It results also from the absence of social caste. There is a considerable class feeling, but no artificial lines which hinder any man from working up into any position. The most modest labourer knows that he may, if he is able, work up to a distinguished position in the social structure of the nation.

And the most important thing of all is probably the high value put on industry as such. We have spoken of this in depicting the spirit of self-initiative. In fact, the background of national conceptions as to the worth of labour must be the chief factor in determining the social condition of the working-man. When a nation comes to that way of thinking which makes intellectual activities the whole of its culture, while economic life merely serves the function of securing the—outward comforts of the nation as it stretches on toward its goal of culture, then the industrial classes must content themselves with an inferior position, and those who do bodily labour, with the least possible amount of personal consideration. But when a nation, on the other hand, believes in the intrinsic worth of industrial culture, then the labour by which a man lives becomes a measure of his moral worth, and even intellectual effort finds its immediate ethical justification only in ministering to the complex social life; that is, only so far as it is industry.

Such now is the conception of the American. Whether a person makes laws, or poetry, or railway ties, or shoes, or darning-needles, the thing which gives moral value to his life’s work is merely its general usefulness. In spite of all intellectual and æsthetic differences, this most important element of activity is common to all, and the manual labourer, so far as he is industrious, is equal to those who work with their brains. On the other hand, the social parasite, who perhaps has inherited money and uses it only for enjoyment, is generally felt to be on a lower plane than the factory hand who does his duty. For the American this is not an artificial principle, but an instinctive feeling, which may not do away with all the thousand different shadings of social position, but nevertheless consigns them to a secondary place. One may disapprove of such an industrial conception of society, and like better, for example, the æsthetic conception of the Japanese, who teach their youth to despise mercantile business and tastefully to arrange flowers. But it is clear that where such an industrial conception prevails in a nation the working-man will feel a greater self-respect and greater independence of his surroundings, since the millionaire is also then only a fellow-workman.

Undoubtedly just this self-respect of the American labourer makes him the great industrial force which he is. The American manufacturer pays higher wages than any of his competitors in the markets of the world and is not disconcerted at this load, because he knows that the self-respecting working-man equalizes the difference of price by more intense and intelligent labour. It is true that the perfection of labour-saving machinery is a tremendous advantage here, but after all it is the personal quality of the working-man which has brought about that in so many industries ten American workmen do more than fifteen or, as experts often say, twenty Italian workmen. The American manufacturer prefers to hire a hundred heads rather than a thousand hands, even if the wages are equal, and even the greedy capitalist prefers the labourer who is worth thirty dollars a week to one who is worth only twenty. The more the working-man feels himself to be a free co-operator, the more intelligently does he address himself to the work. We hear constantly of improvements which artisans have thought out, and this independent initiative of theirs does not in the least impair the discipline of industry. American discipline does not mean inferiority and the giving up of one’s own judgment, but is a free willingness to co-operate and, for the common end, to intrust the leadership to some one else. This other person is exalted to the trustworthy position of leader by the desire of those concerned, so that each man is carrying out his own will in obeying the foreman.

Therefore, everything which in any wise savours of compassion is entirely out of the question for him. In fact, the friendly benevolence, however graciously expressed, intended to remind the workman that he is after all a human creature, perhaps the friendly provision of a house to live in or of some sort of state help for his family, must always be unwelcome to him, since it implies that he is not able, like other fathers of a family, to be forethoughtful and provident. He prefers to do everything which is necessary himself. He insures himself in a life-insurance company and, like anybody else, he looks out for his own interests—tries to improve his conditions by securing good contracts with his employer, by arranging organizations of his fellow-workmen, and by means of his political rights. But whatever he accomplishes, he enjoys it because he has worked in free competition against opposing interests. Any material benefits which he might purchase by enduring the patronizing attitude of capitalists or legislators would be felt to be an actual derogation.

And thus it happens that social democracy, in the technical sense, makes no advance among American workmen. The American labourer does not feel that his position is inferior; he knows that he has an equal opportunity with everybody else, and the idea of entire equality does not attract him, and would even deprive him of what he holds most valuable—namely, his self-initiative, which aims for the highest social reward as a recognition of the highest individual achievement. American society knows no unwritten law whereby the working-man of to-day must be the same to-morrow, and this gives to the whole labour question in America its distinction from the labour question in European aristocratic countries. In most cases the superiors have themselves once been labourers. Millionaires who to-day preside over the destinies of thousands of working-men have often themselves begun with the shovel or hod. The workman knows that he may set his ambition as high as he likes, and to exchange his equal opportunity for an equality of reward would mean for him to sink back into that social condition in which industry is thought to be only a means to something else, and not in itself a valuable activity. Although Bellamy may already dream of the common umbrella, his native country is probably further from social democracy than any country in Europe, because the spirit of self-initiative is here stronger than anywhere else, and because the general public is aware that no class distinctions cut it off from the highest positions in the country. It knows that everything depends on industry, energy, and intelligence.

This does not hinder the working-men, in their fight for better conditions of labour, from adopting many socialistic tenets. The American calls it socialism even to demand that the government own railways, telegraph lines, express companies, or coal-fields, or that the city conduct tramways, or gas or electric-light works. Socialism of this sort is undoubtedly progressing, although the more extravagant ideas find more wordy orators to support them than hearers to give belief. It is also very characteristic that the labour leaders do not make such agitation their life work, but often after a few years go over to one or another civil occupation. The relation between working-man and capitalist, moreover, is always felt to be temporary. A man is on one side of the line to-day and on the other to-morrow. There is no firm boundary between groups of men, but merely a distribution in temporary groups; and this separates the American labour unions from even the English unions, with which otherwise they have much in common.

Many other conditions by which the American working-man’s life is separated from the Englishman’s are of an economic sort. It is remembered, for instance, how successful the English unions have been in establishing co-operative stores, while in America they have failed in this. The department shops in the large cities have been able to sell cheaper and better goods, and have been in every way more popular. But enough of comparing America with the Old World—we must discuss the actual situation in the New.

The labour movement of the United States really began in the third decade of the last century. Of course, only the North is in question; in the South slavery excluded all alliances and independent movements for improving the condition of the manual labourer. There had been small strikes as early as the eighteenth century, but the real movement began with the factories which were built during the nineteenth.

From the very beginning the demand for shorter hours and higher wages were the main issues. At the same time the American world was filled more or less with fantastic notions of co-operation, and these influenced the course of affairs. Boston and New York were the centres of the new movement. As early as 1825 in New York there appeared the first exclusively labour newspaper, the “Labour Advocate”; it commenced a literature which was to increase like an avalanche. The labourers figured independently in politics in 1830, when they had their own candidate for governor. But all political endeavours of the working people have been mere episodes, and the chief labour movements of the century have taken place outside of politics; the leading unions have generally found that their strength lay in renouncing political agitation. Only when legal measures for or against the interests of labourers have been in question, has there been some mixing in with politics, but the American workmen have never become a political party.

At the beginning of the thirties, working-men of different industries united for the first time in a large organization, such as later became the regular form. But at the outset of the movement there appeared also the opposite movement from the side of the capitalists. For instance, in 1832 merchants and shipholders in Boston met solemnly to declare it their duty to oppose the combinations of working people which were formed for the illegal purpose of preventing the individual workman from making a free choice as regards his hours of labour, and for the purpose of making trouble with their employers, who already paid high wages.

The organization of the working-man and that of the employer have grown steadily, and the nation itself has virtually played the rôle of an attentive but neutral spectator. In the case of direct conflict the sympathy of the country has almost always been on the side of the working-man, since in the concrete case the most impressive point was generally not the opposition between capital and labour, but the personal contrast of the needy day-labourer and the rich employer; and the sentimentality of the American has always favoured the weaker classes. The nation however, has shown an equal amount of sympathy toward capital whenever a general matter of legislation was in question; that is, whenever the problem has seemed more theoretical than personal. In such cases the capitalists have always been felt to be the pioneers of the American nation by putting their enterprise into all sorts of new undertakings, applying their capital and intelligence to economic life; so that they have seemed to a greater extent in need of national protection than the workman, who may always be easily replaced by some one else.

Considering the matter as a whole, it can be said indeed that the nation has preserved a general neutrality, and let both parties virtually alone. A change has very recently taken place. The new conditions of the industrial struggle make it clearer day by day that there are three parties to the conflict, rather than two; that is, not only capitalist and labourer, but also the general public, which is dependent on the industrial output, and therefore so immediately concerned in the settlement of differences as to seem, even in concrete cases, entitled to take active part. The turning-point came perhaps during the coal strike in the winter of 1902–03, when the President himself stood out to represent this third party. But we must follow the development more minutely—must speak of the labour organizations as they exist to-day, of the results of legislation, of the weapons employed by the labourers and those used by the capitalists, of their advantages and disadvantages, and of the latest efforts to solve the problem. Three forms of working-men’s organizations can be discriminated to-day—the Knights of Labour, the independent trades-unions, and the federated trades-unions.

The Knights of Labour are by principle different from both of the other groups; and their influence, although once very great, is now waning. Their fundamental idea is a moral one, while that of their rivals is a practical one. This is, of course, not to be taken as meaning that the labour unions pursue immoral ends or the Knights of Labour unpractical ones. The Knights of Labour began very modestly in 1869 as a secret organization, somewhat like the Free Masons, having an elaborate initiation and somewhat unusual procedures. Their constitution began with the motto, “Labour is noble and sacred,” and their first endeavours were for the intellectual uplifting of the labourer and opposition to everything which made labour mean or unworthy. The order grew steadily, but at the same time the practical interests of different groups of working-men necessarily came into prominence. In the middle eighties, when they gave up their secret observances, the society had about a million members, and its banner still proclaimed the one sentiment that industry and virtue not wealth are the true measure of individual and national greatness. Their members, they insisted, ought to have a larger share of the things which they produced, so as to have more time for their intellectual, moral, and social development. In this moral spirit, the society worked energetically against strikes and for the peaceful settlement of all disputes.

Its principal weakness was perhaps that, when the membership became large, it began to take part in politics; the Knights demanded a reform in taxation, in the currency, in the credit system, and a number of other matters in line with state socialism. It was also a source of weakness that, even in local meetings, working-men of different trades came together. This was of course quite in accordance with the ethical ideal of the society. As far as the moral problems of the workmen are in question, the baker, tailor, mason, plumber, electrician, and so on, have many interests which are identical; but practically it turned out that one group had little interest in its neighbour groups, and oftentimes even strongly conflicting interests were discovered. Thus this mixed organization declined in favour of labour societies which comprised members of one and only one trade, so that at the present time the Knights of Labour are said to number only 200,000 and their importance is greatly reduced. It is still undoubted that the idealistic formulation in which they presented the interests of labour to the nation has done much to arouse the public conscience.

At the present time the typical form of organization is the trades-union, and between the independent and the federated trades-unions there is no fundamental difference. There are to-day over two million working-men united in trades-unions; the number increases daily. And this number, which comprises only two-fifths of all wage-earners, is kept down, not because only two-fifths of the members of each trade can agree to unite, but because many trades exist which are not amenable to such organization; the unions include almost all men working in some of the most important trades. The higher the employment and the more it demands of preparation, the stronger is the organization of the employed. Printers, for instance, almost all belong to their union, and in the building and tobacco trades there are very few who are not members. The miners’ union includes about 200,000 men, who represent a population of about a million souls. On the other hand, it would be useless and impossible to perfect a close organization where new individuals can be brought in any day and put to work without any experience or training; thus ordinary day-labourers are not organized. The number of two million thus represents the most important trades, and includes the most skilled workers.

The oldest trades-union in America is the International Typographical Union, which began in 1850. It is to be noticed at once that the distinction between national and international trades-unions is a wholly superficial one, for in the hundreds of so-called international unions there has been no effort to stretch out across the ocean. “International” means only that citizens of Canada and, in a few cases, of Mexico are admitted to membership. It has been the experience of other countries, too, that the printing trades were the first to organize. In America the hatmakers followed in 1854, the iron founders in 1859, and the number of organized trades increased rapidly during the sixties and seventies. The special representation of local interests soon demanded, on the one hand, the division of the larger societies into local groups, and, on the other, the affiliation of the larger societies having somewhat similar interests. Thus it has come about that each locality has its local union, and these unions are affiliated in state organizations for purposes of state legislation and completely unified in national or international organizations. On the other hand, the unions belonging to different trades are pledged locally and nationally to mutual support. But here it is no longer a question, as with the Knights of Labour, of the mixing up of diverse interests, but of systematic mutual aid on practical lines.

The largest union of this sort is the American Federation of Labour, which began its existence in Pittsburg in 1881, and has organized a veritable labour republic. The Federation took warning at the outset from the sad fate of previous federations, and resolved to play no part in politics, but to devote itself exclusively to industrial questions. It recognized the industrial autonomy and the special character of each affiliating trades-union, but hoped to gain definite results by co-operation. They first demanded an eight-hour day and aimed to forbid the employment of children under fourteen years of age, to prevent the competition of prison labour and the importation of contract labour; they asked for a change in laws relating to the responsibility of factory owners and for the organization of societies, for the establishment of government bureaus for labour statistics, and much else of a similar sort. At first the Federation had bitter quarrels with the Knights of Labour, and perhaps even as bitter a one with socialistic visionaries in its own ranks. But a firm and healthy basis was soon established, and since the Federation assisted in every way the formation of local, provincial, and state organizations, the parts grew with the help of the whole and the whole with the help of the parts. To-day the Federation includes 111 international trades-unions with 29 state organizations, 542 central organizations for cities, and also 1,850 local unions which are outside of any national or international organizations. The interests of this Federation are represented by 250 weekly and monthly papers. The head office is naturally Washington, where the federal government has its seat. Gompers is its indefatigable president. Outside of this Federation are all the trades-unions of railway employees and several unions of masons and stonecutters. The railway employees have always held aloof; their union dates from 1893, and is said to comprise 200,000 men.

The trades-unions are not open to every one; each member has to pay his initiation fees and make contributions to the local union, and through it to the general organization. Many of the trades-unions even require an examination for entrance; thus the conditions for admission into the union of electrical workers are so difficult that membership is recognized among the employers themselves as the surest evidence of a working-man’s competence. Every member is further pledged to attend the regular meetings of the local branch, and in order that these local societies may not be too unwieldy, they are generally divided into districts when the number of members becomes too great to admit of all meeting together. The cigarmakers of the City of New York, for example, have a trades-union of 6,000 members, which is divided into ten smaller bodies. Every single society in the country has its own officials. If the work of the official takes all his time, he receives a salary equal to the regular pay for work in his trade. The small organizations send delegates to the state and national federations; and wherever these provincial or federal affiliations represent different trades, each of these trades has its own representative, and all decisions are made with that technical formality which the American masters so well. In accordance with this parliamentary rigour, every member is absolutely pledged to comply with the decisions of the delegates. Any one who refuses to obey when a strike is ordered thereby loses all his rights.

The rights enjoyed by the members of the trades-unions are in fact considerable. Firstly, the local union is a club and an employment agency, and especially in large cities these two functions are very important for the American working-man. Then there are the arrangements for insurance and aid. Thus the general union of cigarmakers of the country, which combines 414 local unions having a total membership of 34,000 men, has given in the last twenty years $838,000 for the support of strikes, $1,453,000 for aid to ill members, $794,000 for the families of deceased members, $735,000 for travelling expenses, and $917,000 for unemployed members; and most of the large unions could show similar figures. Yet these are the lesser advantages. The really decisive thing is the concessions which have been won in the economic fight, and which could never have been gotten by the working-men individually. Nevertheless, to-day not a few men hold off from the unions and get rid of paying their dues, because they know that whatever organized labour can achieve, will also help those who stay outside.

The main contention of these trades-unions refers to legislation and wages, and no small part of their work goes in fighting for their own existence—that is, in fighting for the recognition of the union labourer as opposed to the non-union man—a factor which doubtless is becoming more and more important in the industrial disputes. Many a strike has not had wages or short hours of labour or the like in view, but has aimed solely to force the employers officially to recognize the trades-unions, to make contracts with the union delegates rather than with individual men, and to exclude all non-union labourers.

The newly introduced contention for the union label is in the same class. The labels were first used in San Francisco, where it was aimed to exclude the Chinese workmen from competition with Americans. Now the labels are used all over the country. Every box of cigars, every brick, hat, or piano made in factories which employ union labour, bears the copyrighted device which assures the purchasing public that the wares were made under approved social and political conditions. The absence of the label is supposed to be a warning; but for the population of ten millions who are connected with labour unions, it is more than a warning; it is an invitation to boycott, and this is undoubtedly felt as a considerable pressure by manufacturers. The more the factories are thus compelled to concede to the unions, and the more inducements the unions thus offer to prospective members, and the faster therefore these come in, the more power the unions acquire. So the label has become to-day a most effective weapon of the unions.

But this is only the means to an end. We must consider these ends themselves, and first of all labour legislation. Most striking and yet historically necessary is the diversity in the statutes of different states, which was formerly very great but is gradually diminishing. The New England states, and especially Massachusetts, have gone first, and still not so fast as public opinion has often desired. In the thirties there were many lively fights for the legislative regulation of the working hours in factories, and yet even the ten hours a day for women was not established until much later; on the other hand, the employment of children in factories was legislated on at that time, and in this direction the movement progressed more rapidly.

A considerable step was taken in 1869, when Massachusetts established at the expense of the state a bureau for labour statistics, the first in the world; this was required to work up every year a report on all phases of the labour question—economic, industrial, social, hygienic, educational, and political. One state after another imitated this statistical bureau, and especially it led to the establishment of the Department of Labour at Washington, which has already had a world-wide influence. During the seventies there followed strict laws for the supervision of factories, for precautionary measures, and hygienic improvements. Most of the other states came after, but none departed widely from the example of Massachusetts, which was also the first state to make repeated reductions in the working-day. Here it followed the example of the federal government. To be sure, the reduction of the working-day among federal employees was first merely a political catering to the labour vote, but the Federation kept to the point and the separate states followed. Twenty-nine states now prescribe eight hours as the day for all public employees and the federal government does the same.

The legislative changes in the judicial sphere have been also of importance for trades-unions. According to Old English law at the beginning of the nineteenth century, it was conspiracy for workmen to unite for the purposes which the trades-unions to-day hold before themselves. This doctrine of conspiracy, which to be sure from the beginning depended largely on the arbitrary interpretation of the judges, has been weakened from time to time through the century, and has finally given away to legal conceptions which put no obstacles in the way of the peaceful alliance of working-men for the purpose of obtaining better conditions of labour. They especially regard the strike as lawful so long as violence is not resorted to. Nearly all states have now passed laws which so narrow the old conception of criminal conspiracy that it no longer stands in the way of trades-unions. Other legal provisions concern the company stores. In some mining districts far removed from public shops, the company store may still be found, where the company buys the articles needed by its employees and sells these things to them at a high price. But nearly every state has legally done away with this system; it was, indeed, one of the earliest demands of the trades-unions.

There have been great improvements too in legislation relating to the responsibility of employees. The Anglo-Saxon law makes an employer responsible for injury suffered by the workmen by reason of his work, but not responsible if the injuries are due to the carelessness of a fellow-workman. The penalty fell then on the one who had neglected his duty. It was said that the workman on taking up his duties must have known what the dangers were. But the more complicated the conditions of labour have become, the more the security of any individual has depended on a great many fellow-labourers who could not be identified, so that the old law became meaningless. Therefore, the pressure of trades-unions has in the last half century steadily altered and improved the law in this respect. American state law to-day virtually recognizes the responsibility of the employer for every accident, even when due to the carelessness of some other labourer than the one injured.

Thus on the whole a progress has been made all along the line. It is true that some states have still much to do in order to come up with the most advanced states, and the labour unions have still many demands in store which have so far been nowhere complied with—as, for instance, that for the introduction of the Swiss referendum, and so forth. Government insurance is not on this programme—one point in which the American working-man remains individualistic. He prefers to make provision for those dependent on him, against old age, accident and illness, in his own way, by membership in unions or insurance companies. As a fact, more than half the labouring men are insured. Then too the number of industrial concerns is increasing which make a voluntary provision for their employees against illness and old age. This was started by railroad companies, and the largest systems fully realize that it is in their interest to secure steady labour by putting a pension clause in the contract. When a workman takes work under companies which offer such things, he feels it to be a voluntary industrial agreement, while state insurance would offend his sense of independence.

The state has had to deal with the labour question again in the matter of strikes, lockouts, boycotts, and black-lists. During the last two decades of the nineteenth century, there were 22,793 strikes in the country, which involved 117,509 workers; the loss in wages to the workmen was $257,000,000 and in profit to the employers $122,000,000; besides that $16,000,000 were contributed to aid the strikes, so that the total loss made about $400,000,000. The problems here in question are of course much more important than the mere financial loss. About 51 per cent. of these strikes resulted successfully for the workmen, 13 per cent. partially successfully, and in 36 per cent. the employers won.

Since 1741, when the bakers of New York City left work and were immediately condemned for conspiracy, there has been no lack of strikes in the country. The first great strike was among sailors in 1803, but frequent strikes did not occur until about 1830. The first strike of really historical importance was on the railroads in 1877; great irregularities and many street riots accompanied the cessation of work, and the state militia had to be called out to suppress the disturbances in Cincinnati, St. Louis, Chicago, and Pittsburg. The losses were tremendous, the whole land suffered from the tumults, and in the end the working-men won nothing. When in the year 1883 all the telegraphers in the country left their work and demanded additional payment for working on Sunday, most of the country was in sympathy with them; but here too the employers, although they lost millions of dollars, were successful. In 1886 there were great strikes again in the railroad systems of the Southwest.

The bitterness reached its highest point in 1892, when the Carnegie Steel Works at Homestead were the scenes of disorder. Wages were the matter under dispute; the company, which could not come to an agreement with the labour union, proposed to exclude organized labour and introduced non-union workmen. The union sought by the use of violence to prevent the strangers from working; the company called for aid from the state; the union still opposed even the militia, and actual battles took place, which only the declaration of martial law by the governor, after the loss of many lives, was able to suppress.

The Chicago strike in 1894 was more extensive. It began with a strike in the Pullman factories in Chicago, and at its height succeeded in stopping the traffic on a quarter of all American railroads. The interruption of railway connections meant a loss to every person in the country, and the total loss is estimated at $80,000,000. The worst accompaniments of strikes soon appeared—riots, intimidations, assaults, and murders. And again it was necessary to call out troops to restore peace. Great wage disputes followed presently in the iron and steel trades; but these were all surpassed in inner significance by the great coal strike of the winter before last.

The conditions of labour in the anthracite coal mines of Pennsylvania were unfavourable to the labourers. They had bettered themselves in a strike in 1900, but the apparently adequate wages for a day’s labour yielded a very small annual income, since there was little employment at some seasons of the year. The working-men felt that the coal trusts refused to raise the wages by juggling with arguments; the capitalists tried to prove to them that the profit on coal did not permit a higher wage. But the labourers knew too well that the apparently low profits were due only to the fact that the trusts had watered their stock, and especially that the coal mines were operated in connection with railroads under the same ownership, so that all profits could be brought on the books to the credit of the railroads instead of the mines. The trades-unions thought the time was ripe for demanding eight hours a day, a ten per cent. increase in wages, and a fundamental recognition of trades-unions, along with a few other technical points. The organized miners, under their leader, Mitchell, offered to wait a month, while the points of difference might be discussed between both parties; Senator Hanna, whose death a short time later took from politics one of the warmest friends of labour, offered his services as mediator, and left no doubt that the workmen would accept some compromise.

In spite of this moderation of the working-men, the representatives of the mine owners refused in any way to treat with them. Their standpoint was that if they recognized the trades-unions in their deliberations, they were beginning on a course which they might not know how to stop; if eight hours were demanded to-day by the trades-unions, seven hours might be demanded in the same way next year. The employers thought it high time once for all to break up the dictatorial power of the trades-unions. President Baer explained that trades-unions are a menace to all American industry. The strike continued. Now the anthracite miners produce five million tons every month, which supply all the homes in the eastern part of the country. A cold winter came on, and the lack of coal throughout the country brought about a condition which resembled the misery and sufferings of a time of siege. In many places it was not even a matter of price, although this was four times what it ordinarily is, but the supply of coal was actually used up. Schools and churches had to be closed in many places. And now the public understood at last perfectly clearly that, if the trades-unions wanted to exert their whole power, the country would be absolutely helpless under their tyranny. Nevertheless, the embitterment turned most strongly against the employers, who still affirmed that there was nothing to arbitrate, but that the workmen simply must give in.

The workmen then put themselves on the wrong side by threatening with violence all men who came to take their places in the mines; indeed, they forced back by barbarous methods the engineers who came to pump out the water which was collecting in the mines. Troops had to be called, but at that moment the President took the first steps toward a solution of the problem by calling representatives of both parties to Washington. A commission was finally appointed, composed of representatives of both parties and well-known men who were neutrally inclined, and after Pierpont Morgan on the side of the capitalists gave the signal to consent to arbitration, the coal miners went back to work. The commission met, and some time later in the year 1903 decided about half of the points under dispute in favour of the miners, the other half against them. This was by no means the last strike; the building trades in many parts of the country, and specially in New York, were thoroughly demoralized during the year 1903, the movement proceeding from the strikes of 5,000 bridge builders: then too, the textile workers of the East and miners of the South have been restless. And at the present time, every day sees some small strike or other inaugurated, and any day may see some very large strike declared. It was the coal strike, however, which set the nation thinking and showed up the dangers which are threatening.

The results of the coal strike had shown the friends of trades-unions more clearly than ever the strength which lies in unity. They had seen that results could be achieved by united efforts such as could never have been gotten by the unorganized working-man. They had seen with satisfaction that the trades-unions had taken a conservative part by putting off the great strike as long as possible; and they had seen that the employers would not have consented for their part to any arbitration. In the end not only many of the union demands had been granted, but, more than that, the policy of the trades-unions had been put in the most favourable light. A whole country had to suffer, human lives were sacrificed and millions lost, and in the end the trades-unions won their point; if the mine owners had been willing in the autumn to do what they had to do in winter, a great deal of injury would have been spared. But the trades-unions could truthfully say that they had been true to their policy and had always preferred peace to war. The majority of votes within the trades-unions was against thoughtless and unnecessary strife, against declaring a strike until all other means had been tried. Many people felt that the interests of that neutral party, the nation at large, were better looked out for by the more thoughtful union leaders than by such capitalists as were the Pennsylvania coal magnates.

On the other hand, it was felt that the most calmly planned strikes can lead to embitterment and violence, and the tyrannical and murderous suppression of the non-union working-man. And here the American sense of freedom is touched. Every man has the right to decide freely under what conditions he shall work; the strike-breaker was regarded as a hero, and the trusts did their best to convince the world that the interference of the trades-unions in the movements of non-union workmen is a menace to American democracy. The unionists admit that it is unlawful power which they have used, but pretend that they had a moral right; they say that every working-man has a claim on the factory more than his weekly wage: for he has contributed to its success; he has in a way a moral share, which brings him no income, but which ought to assure him of his position. And now, if during a strike an outside person comes in and takes his place, it is like being robbed of something which he owns, and he has the right of asserting his claim with such means as any man would use on being assaulted.

Capitalists turned against the trades-unions with the greater consternation, because these latter put not only the independent working-man, but also the companies, in a powerless position. They showed that their right to manage their own property was gone, and that the capitalist was no longer the owner of his own factory the instant he was not able to treat with the individual working-man, but forced to subject himself to the representatives of trades-unions. It was easy to show that while he, as undertaker of the business, had to take all the risks and be always energetic and industrious, the working-men were simply showing their greed and laziness by wanting shorter days, and that they would never be really satisfied. It was affirmed that the best workman was an unwilling party to the strike, and that he would more gladly attend to his work than to trades-union politics, and that as a fact he let his trades-union be run by irresponsible good-for-nothings, who played the part of demagogues. Every man who had ever saved a cent and laid it up, ought to be on the side of the capitalist.

But the public took a rather different attitude, and felt that the group of capitalists had been revealed in a bad light by the strike, and when their representatives came to instruct the President of the United States, in a brusque way, on the rights of property, the public began to revise its traditional ideas. The public came to see that such large corporations as were here in question were no longer private enterprises in the ordinary sense of the word; that a steel trust or coal trust cannot be such an independent factor in the commonwealth as a grocery shop in a country town. It was felt that the tremendous growth of the business was the product of national forces, and in part dependent on public franchises; wherefore, the business itself, although privately owned, nevertheless had a semi-public character, so that the public should not be refused the right to interfere in its management. Belief in state socialism, in state ownership of railroads and mines, made great progress in those days; and the conviction made still greater progress that the working-man has a moral right to take an active hand in managing the business in which he works.

And so public opinion has come round to think that violence on the part of working-men, and refusal to treat with trades-unions on the part of employers, are equally to be condemned. The community will hardly again permit capital and labour to fight out their battles in public and make the whole nation suffer. It demands that, now that labour is actually organized in unions, disputes shall be brought up for settlement before delegates from both sides, and that where these cannot come to a solution the matter shall be brought before a neutral court of arbitration which both sides agree to recognize.

Of course these disputes will continue to arise, since the price of manufactured articles is always changing; the employer will always try to lower wages in dull times, and the labourers will try to force wages up during busy times. But it may be expected that the leaders of trades-unions will be able to consider the whole situation intelligently and to guide the masses of working-men carefully through their ambitions and disappointments. Although the employers of labour continue to assert that, so soon as they are handed over to the mercies of the trades-unions, the spirit of enterprise will be entirely throttled and capital will decline to offer itself, because all profit is sacrificed to the selfish tyranny of the working people, nevertheless, experience does not show this to be true. Trades-unions are convinced that, in these days of machinery, too small a part of the profit falls to the labouring man; but they know perfectly well that they themselves can prosper only when the industry as a whole is prosperous, and that it cannot prosper if it is burdened by too high wages. Trades-unions know also that after all they will be able to gain their point in courts of arbitration and elsewhere only so long as they have the sympathy of the public on their side, and that every undue encroachment on the profits of capital and every discouragement of the spirit of enterprise will quickly lose them the sympathy of the American nation. If they really attack American industry, public opinion will go against them. That they know, and therefore the confidence is justified that, after all, their demands will never endanger the true interests of capital. Capitalists know to-day that they will always have trades-unions to deal with, and that it will be best to adapt themselves to the situation. Many thoughtful captains of industry admit that the discipline of trades-unions has had some salutary effect, and that some of their propositions, such as the sliding wage-scale, have helped on industry.

Thus both parties are about to recognize each other with a considerable understanding. They instinctively feel that the same condition has developed itself on both sides; on the one side capital is combined in trusts, and on the other labour has organized into unions. Trusts suppress the competition of capital, trades-unions kill the non-union competitor. The trusts use as weapons high dividends, preferential rates, and monopoly of raw material; the unions use the weapons of old-age insurance, free aid during illness, the union label, strikes, and boycotts. Both sides have strengthened their position by the consolidation of many interests; just as the steel works are allied with large banks, railroads, steamship lines, copper mines, and oil companies, so the leaders of trades-unions take care to spread the disputes of one industry into other industries.

Moreover, both parties fight alike by means of artificially limiting the market; and this is, perhaps, the most dangerous factor of all. While the trusts are continually abandoning factories or temporarily shutting them down in order to curtail production, so the trades-unions restrict the offering of labour. Not every man who wants to learn a trade is admitted to an apprenticeship; the trades-union does not allow young men to come in while old men who have experience are out of work. The regulation of the flow of labour into the trades which require training, and the refusal of union men to work with non-union men, are certainly the most tyrannical features of the situation; but the trades-unions are not embarrassed to find high-sounding arguments for their course, just as the trusts have found for their own similar doings.

Things will continue in this way on both sides, no doubt; and the nation at large can be content, so far at least as, through this concentration and strict discipline on both sides, the outcome of the labour question is considerably simplified. As long as the mass of capitalists is split up and that of working-men chaotically divided, arbitration is difficult, and the results are not binding. But when two well-organized parties oppose each other in a business-like way, with mutual consideration and respect, the conference will be short, business-like, and effective.

The next thing necessary is simply an arrangement which shall be so far as possible automatic for appointing an unprejudiced court of arbitration in any case when the two parties are not able to agree. In this matter public opinion has gone energetically to work. In December, 1901, at the instigation of the National Civic League, a conference of leading representatives of capital and labour was called, and this appointed a standing commission to pass on disputes between employers and labourers. All three parties were represented here—capital by the presidents of the largest trusts, railroads, and banks, trades-unions by the leaders of their various organizations, and the public by such men as Grover Cleveland, Charles Francis Adams, Archbishop Ireland, President Eliot, and others, who enjoy the confidence and esteem of the whole nation.

It has been objected that the millions of unorganized working-men are not represented, but in fact these neutral leading men of the nation are at the same time the representatives of unorganized labour. If these were in any other way to be represented by delegates, they would have to organize in order to choose such delegates. But this is just what unorganized labour does not wish to do. Everything looks as if this permanent commission would have the confidence of the nation and, although created unofficially, would contribute a good deal to prevent the outbreak of real industrial wars. But there can be no doubt that the nation is ready to go further, and that if the two well-organized parties, together with the men in whom both sides put their confidence, are still not able to come to harmonious agreement, nor even to the appointment of a court of arbitration, then the nation will quite likely appoint an official and legally authorized board for compulsory arbitration.

The example of New Zealand is encouraging in this direction, although the experience of a small country may not be immediately applicable to a large one. Nevertheless, there is some wish to imitate that example, and to disregard the outraged feelings of capitalists who predict that American industry will collapse utterly if the country becomes socialistic enough to appoint arbitrators with the power to prescribe to capital what wages it shall pay, and how otherwise it shall carry on business. The nation has learned a good deal in the last two or three years.

A peaceable solution of the problem is promised also from another direction. The dramatic wars have concerned generally very large companies, which employ thousands of workmen. The whole thing has been repeated, however, on a more modest scale, where thousands of working people stood opposed not to large trusts but to hundreds of small employers, who were not separated from the working-men by any social cleft. Here the battles have often been more disastrous for the employers and their helplessness before small unions more patent. Then it became natural for them to imitate the example of the workmen and to form organizations to regulate the situation.

The first employers’ union was formed in 1890 by the owners of newspapers, for whom sudden strikes are of course especially disastrous. For ten years very few trades followed this example; but in the last few years trades-unions of employers have been quietly forming in almost all trades, and here the situation has been much more favourable from the outset for bringing employer and labourer to a mutual understanding. While the employers were not organized, an understanding was hard to arrive at; but now both sides are able to make contracts which must be in all respects advantageous, and one of the most important clauses has regularly been that disputes shall be submitted to a court of arbitration.

Whether this solution will be a source of great satisfaction to the public seems doubtful, since, as soon as local employers and working-men close an agreement for offensive and defensive co-operation, the general public is left in the lurch, and an absolute monopoly is created. When, for instance, in a large city, all the proprietors in the electric trades have agreed to employ only union workmen, and all workmen have agreed to work for only such as belong to the employers’ union, it is hardly possible for a new employer to step in as competitor and lower prices, since he would have difficulty in getting workmen. The consequence is that every house owner in the city who wants an electric bell must pay such prices as the employers’ and workmen’s unions have seen fit to agree on. Free competition is killed.

The problem of so-called economic freedom is thus opened up again. Trades-unions are, of course, the product of free and lawful agreement, but one of their most important achievements is to pledge themselves to furnish the employers’ union with a certain number of workmen, which is sufficient for all needs. In return for this they receive the promise of the employers to hire only members of the working-men’s union. The result is, then, that the workman himself becomes a mere pawn, and is dealt about like a Chinese coolie.

It is clear that these latest movements are able to contribute a great deal, and already have so contributed, to the reconciliation of capital and labour and to an appreciation of their common interests. The right is being more and more conceded to labour unions of controlling certain matters which relate to the discipline and conditions of work, and more assurance is given to the working-men of permanent employment, so that they are able to bring up their families with more confidence and security. And cases of dispute are more and more looked on as differences of opinion between partners of equal rank.

A good deal may still be done on both sides; especially the labour unions must be more strict in their discipline: they must become responsible for seeing that their members refrain from every sort of violence during wage wars, and that every violation of law, particularly with regard to strike-breakers, is avoided. It is true that labour unions have always preached calmness, but have nevertheless looked on willingly when individual members or groups of members, in their anger, have indulged in lawlessness and crime. This must be stopped. It was in the wish to avoid such responsibility that labour unions have hitherto struggled against being forced to become legal corporations; they have not wished to be legally liable for damages committed by their members. But such legal liability will be absolutely necessary if contracts between the unions of employers and those of labourers are to become important. It is perhaps even more necessary for both sides to learn what apparently American public opinion has forgotten, that a court of arbitration must really arbitrate judicially and not merely hit on compromises.

The labour question is still not solved in America; but one must close one’s eyes to the events of recent years in order to think that it is unsolvable, or even unlikely to be solved soon. The period of warfare seems in the East nearly over; both sides have found ways of asserting themselves without impairing the progress of the nation’s industry. And the nation knows that its progress will be more rapid in proportion as both parties maintain their equilibrium and protect industrial life from the tyranny of monopolies, whether of capital or labour.