Part 3

How long this can go on before a change comes we do not know. It cannot be maintained long. Unless some law is enacted that will stop the encroaching power of wealth, things will go on until the inequality becomes so glaring, so oppressive, that the pent-up social waters, gathering force, will break through the wall of concentrated wealth and allow society once more to regain its natural level. Every statesman, every thinker, should know that we cannot expect a healthy growth with class arrayed against class. Every strike, every riot, is a retrogressive step in our nation's history. If our American civilization is to endure and progress we must bring about a change in the distribution of wealth. If conditions are such as to be beneficial to a small number and injurious to society in general, those conditions should be changed. Unless limited, the alarming development and aggressiveness of great capitalists and powerful corporations will eventually lead to the absolute degradation of the toiling masses. Unless checked, it will continue to grow until it usurps the entire legislative and executive branches of our government, and, like a huge vampire, slowly draws the life-blood from every healthy, helpful creature. This power of wealth is the greatest danger that has threatened our country since the civil war, and against it we must constantly be on our guard. If the power is permitted to grow it may become too late, and can then be remedied only by putting class against class--by revolution, which always means the rejoicing of the poor at the downfall of their oppressors.

This, then, is to be the battle of the future--concentrated wealth on one hand, concentrated poverty on the other. The battle should not be one of force, but one of reason and agitation until wealth shall be bound by proper constitutional limitations; a battle in which law shall triumph; for the true remedy, the remedy most conducive to equality, lies in legislation. But this legislation should be immediate. If we desire to prevent actual war between class and class, it is imperative that a legal check at once be placed upon the growing power for evil of aggregated wealth.

The limitation of wealth by law has received the approval of some of the most gifted as well as philanthropic of minds. In our own country such men as Horace Greeley, Theodore Parker, and William Ellery Channing have advocated it. Still, a ready objection of some against the limitation of wealth is that any attempt to remedy by legislation the inequality of fortune at once infringes upon the right of personal liberty. Have we no laws in existence now which infringe upon the right of personal liberty? Do not our usury laws take some rights from the individual? Does not our custom-house law, which permits the trunks of every new arrival to be searched, infringe somewhat upon the right of personal liberty? The citizen who would object to these laws would have but a very narrow conception of the true purpose of government. If we examine our laws closely we shall find many that encroach upon individual liberty for the sake of public good. Then why should any objection be made to those laws which tend to limit wealth?

Undoubtedly a tax levied upon all incomes, which would be progressively raised and graduated according to the amount of the individual or corporate wealth could be constitutionally enacted. And if a progressive income tax can be enacted, the graduated inheritance tax can also be enacted, for the principle is practically the same. Senator David B. Hill, of New York, has called the progressive tax a "modern fad." It is so modern, however that it can be traced back to the Romans, Greeks, and Egyptians. During the palmiest days of Greece--the days of Solon and Lycurgus--a progressive tax was a stern reality.

Our own country has not been without a progressive tax. In 1797 a graded inheritance tax was levied by Congress. This law was repealed in 1802. In 1862 a similar law was passed. But after having been decided to be constitutional by the Supreme Court, it was repealed in 1872.

Other governments at the present time tax the rich. In England, besides the income tax, many other items of revenue are contributed entirely by the rich--contributed upon the principle that those who have acquired riches shall bear the burden of taxation. In the United States we seem to place the burden of taxation upon the shoulders least fitted to bear it. Every effort to tax the rich, to properly tax corporations and trusts, has met with failure. The lobbyist and corporation lawyer have defied the tax-gatherer until they have worn out the patience of the people. The time is now ripe for proper legislation. A progressive income tax and a tax upon inheritances should be made a law in every State. The power to tax, it has been said, is the power to destroy. If a scale of taxation were wisely adopted it would eventually enable us to reach without political disturbance the almost total abolition of an aristocracy of wealth and thus solve the great problem of the day. If we are to consider humanity of any importance at all, wealth must be limited. The rights of all must be considered. When this is done we may be able to have a truly prosperous nation--a nation in which prosperity will not be confined to a favored few, but given to all.

"Prosperity," says Rousseau, "is best secured when the medium-class income prevails, when no citizen is so rich that he can buy others, and no one so poor that he might be compelled to sell himself."

THE BATTLE OF THE MONEY METALS

I. BIMETALLISM SIMPLIFIED.

BY GEORGE H. LEPPER.

The "free-silver delusion" is not dead, nor will it die unless the McKinley administration shall give it its quietus by providing the country with a sound and popular system of bimetallism. Even the most sanguine of the Republican leaders must admit that the prospect of accomplishing this task by international agreement is not so encouraging as to make the tentative consideration of other plans, not requiring concerted action, unnecessary or useless. The purpose of this article is to present such a plan, and to contrast it with those which have already been tried, or have thus far been proposed.

That the financial policy we have pursued since 1878, the year of the Bland-Allison Act, has been absurd and ruinous hardly admits of two opinions. Secretary Carlisle, in his letter of September 16th last, gave authoritative utterance to what had long been tacitly understood. He said, "If the time shall ever come when the parity of the present silver dollars and silver certificates cannot be otherwise maintained, they will be received by the government in exchange for gold." In other words, the vast stores of silver purchased by the United States under the laws of 1878 and 1890 are a dead asset of the Treasury, and cannot be utilized for purposes of redemption until sixteen ounces of silver shall again be equivalent to one of gold, or until they are re-sold in the open market for gold. To render this treasure available for ultimate redemptions thus becomes a prime condition of our problem.

There is a growing disposition in certain influential quarters to evade the difficulties in the way of international bimetallism by taking the government out of the banking business, and relegating the matter of currency issues more and more to the banks. Whatever may be said in behalf of this course, it is certainly not popular with the masses, who, justly or ignorantly, have come to look upon national banks as favored objects of legislation, and in league with syndicates and trusts. But, aside from this, the real core of the trouble is not removed. We but shift the burden of responsibility. The ultimate fund for redemption remains limited to the one metal as beforehand can serve the banks even less efficiently, for the more divided the responsibility the larger the proportion of gold required for reserve purposes.

International bimetallism at the contemplated ratio of 16 to 1, and bimetallism by independent action at the same ratio, although opposing issues in the late campaign, are founded upon the same errors and misconceptions. Both assume that monetization creates a commercial demand for the metals, thereby enhancing their values; that the use of gold and silver as money substances has been one of choice with us instead of necessity; and that legal-tender laws create value.

It may be going too far to say that monetization creates no demand, but whatever demand it may be supposed to create is not a commercial one. In the latter sense the word signifies both an actual purchase, or the exchange of one thing for another, and a permanent withdrawal from the market of the thing bought. The act of coinage is certainly not a purchase, for, directly or indirectly, it aims to restore to the offerer of the bullion not something else, but the _precise thing received_; nor is the metal retired from the market, since it is actually or virtually, though in an altered form, immediately restored thereto. The whole process is merely one of bailment. It would therefore seem incumbent upon those affirming the efficacy of monetization to raise the price of the metal to show by scientific analysis just how, why, and to what extent it does so. The fact that from 1792 to 1873, with free coinage at a very close approximation to the market value, not once did the legal and commercial ratios coincide, and that the change of the former from 15 to 1 to 16 to 1 in 1834 had no perceptible effect on the market, seems to be conclusive proof that the general belief that free coinage at a fixed ratio appreciates the over-valued metal is delusive.

It is important to inquire into the grounds upon which the use of silver and gold is founded, for if we have _chosen_ them for that purpose there is an implication that other substances might have served the same object almost, if not quite, as well. Such is not the case. Silver and gold are absolutely unique in possessing the qualities indispensable for money, and not only nature, but immemorial custom and deep-rooted prejudice combine to compel their use in the exchanges irrespective, and even despite, of legislation. Monetization, therefore, cannot, for this further reason, add to, or take away from, their respective values, because the exchangeability that monetization is supposed to give them is a natural quality and not the creature of law. But so much more is this true of gold than of silver, that the dependence of modern commerce, and, through it, modern civilization, upon it is almost absolute. If, therefore, free coinage at a ratio unfair to gold were attempted, gold would cease to be offered at the mints, but it would nevertheless continue in use in final settlements, especially in transactions of some magnitude, thus preventing its decline in value.

Suppose, then, that such a law, national or international, should go into effect to-day, would anyone be so fatuous as to part with his gold until the effect of the law could be discerned? If the governments at the same time should exercise the same good sense, they would retain their gold and disburse their silver, but such conduct would defeat the very object of the law. If, on the other hand, they should release their gold, retaining their silver, they would give fresh point to the oft-proved saying, "The fool and his money are soon parted." A _bona-fide_ attempt on the part of one or more powers to change the market ratio of the metals could result only in transferring government gold to private coffers, and in a general fall to the silver basis with all its attendant evils. Meanwhile the gold would continue its functions as money in new transactions, but at its market value, never by any chance reaching the public treasuries except on the same basis. The inconvenience of transacting business with a metal some thirty times as heavy, value for value, as that to which they had been accustomed would, without further reason, speedily induce the governments to a restoration of the gold standard at any cost.

As for the legal-tender quality, it cannot be denied that governments here possess a peculiar power which individuals cannot exert; but that fact does not make the exercise of that power morally right. The quality of legal tender infused into the debased dollar cannot but add temporarily to its exchangeable value in a degree gradually diminishing with the exhaustion of the accumulated credits. When, however, the last debtor in the series is reached, and there is no longer a Peter to rob for the sake of Paul, the fraudulent coin must inevitably sink to the value it had as bullion prior to the act that created it.

Upon such fallacies as these it is sought to erect the elaborate superstructure of the civilized world's monetary system! Some of the more advanced thinkers among the self-styled bimetallists, realizing that some deference must be paid to the lessons of experience, which offers not a solitary instance of the concurrent use of the two metals under a fixed ratio, argue that, even so, the chief blessing of bimetallism--a less variable standard--will have been secured in the automatic oscillation from one circulation to the other. If this oscillatory feature is the object sought, the adoption of a ratio of 16 to 1, or thereabouts, would certainly not secure it, but one almost identical with the market ratio would be imperative. Not once in the history of our country did this alternation occur, although from 1792 to 1873 we were upon the double standard. It is true that in 1834 the circulation changed from silver to gold, but that was due not to the automatic effect of that system, but to an actual change of the legal ratio from 15 to 1 to 16 to 1. But if the legal ratio is now made to conform to the market one, what becomes of our present silver coins? Must they be called in and be replaced by the new? If so the convenience of our subsidiary coinage will be sacrificed, for a silver dollar twice its present size would be intolerable.

The obstacles in the way of international bimetallism need not be enumerated here. The proceedings at the Brussels monetary conference in 1892, though they accomplished little besides, certainly served to make these difficulties plain. The primary object is to make silver coins and gold coins continuously interchangeable in trade at a ratio approximating as closely as possible to 16 to 1, and the discussion of the means to accomplish this has apparently narrowed down to one proposition to be answered by a simple yes or no: Shall the free coinage of gold and silver at the ratio of 1 to 16 be restored? It will not do to insert any other ratio (except, perhaps, 1 to 15 or 1 to 15-1/2), because if a ratio closely approximating the commercial one is contemplated, each nation might decide the question for itself, and an international agreement would be superfluous. All the civilized nations have their own established ratios of coinage varying from 15 to 15-1/2 or 16 of silver to 1 of gold, and whichever of these should prevail the result could not but be a serious matter to those nations obliged to reform their coinage in accordance therewith. Neither horn of the dilemma presented by the plan of a fixed ratio is practicable; the convenient one of 16 to 1 is impossible, and the commercial one would necessitate recoinages and make the coins prohibitively cumbrous. The choice of an intermediate ratio would be a virtual relinquishment of the principle itself, for how would that ratio be arrived at if not by mere guess? There are no data to guide us, nor is there any formulated rule by which the desired ratio may be determined. Besides, the intermediate ratio would still remain open to the objections advanced against the higher ratio, both in requiring recoinage and in unduly enlarging the coins.

The inevitable result of free coinage at a fixed ratio is to expel the undervalued metal from circulation. There can be but one way to prevent this, and that is by a system of sliding scale whereby scrupulous fidelity to the state of the market from day to day may be preserved. Diurnal recoinages are of course out of the question, but the thing is nevertheless both easy and practicable.

Let us assume that gold only has hitherto been used as money, that 25.8 grains thereof have been taken to be one dollar, and that it is now desired to supplement it with the use of silver. Our proposition will necessarily take this form: If one dollar is equal to 25.8 grains of gold, it must be equal to as many grains of silver as 25.8 grains of gold will buy in the open market. Here we must remember that what is true to-day may not be true to-morrow or a year hence. So many grains of gold may to-day be worth 412-1/2 grains of silver, to-morrow they may be worth but 400, and next day, 420. By _fixing the amount_ of silver in the dollar we thus utter through these coins a new falsehood each day. _Constant values, not constant weights, is what we are driving at; so in lieu of the silver coin we must substitute a promise to pay a gold dollar, or a gold dollar's worth of silver, whatever the state of the market._ This is what I designate _natural bimetallism_. The silver dollar and fractional pieces as we now have them may nevertheless continue in circulation, for the promise can be written into them by legislation to redeem them, upon surrender, in the same manner as the paper promises. It is possible that Hamilton and his successors in office prior to 1837 may have thought of this expedient, but discarded it as not then feasible. We must remember, however, that they had serious practical difficulties to contend with, which are now happily removed. The advantages of the telegraph, the cable, the improved means of transportation, and our admirable system of market quotations, enable us now with certainty and ease to determine daily what any given thing is worth in terms of any other.

In order to make my plan as clear as possible, I shall run the risk of seeming elementary by following through, step by step, a typical transaction under it: Let us fancy that the reader, bearing a nugget of gold in his left hand and another of silver in his right, and desiring to convert them into money, repairs to the Philadelphia mint. He applies there to the proper clerk, who, for simplicity's sake, we will suppose performs all the operations. The clerk weighs and assays the two pieces of metal, and finds the gold one to contain 25,800 grains of standard gold, worth precisely $1,000, which are counted out in bills. A similar operation reveals that the lump of silver weighs 35,500 grains, but the clerk is now observed to consult a table before saying, "The market equivalent of a gold dollar is to-day 710 grains, consequently your 35,500 grains are worth $50;" and he then proceeds to count out the money in bills precisely like those given in payment for the gold. Upon examining these at his leisure the reader discovers imprinted thereon a contract running as follows: "This note entitles the bearer on demand to [the denomination of the bill] dollars in gold or to the market equivalent thereof in silver."

In the course of time, say five years hence, these identical notes, by the accidents of trade, have come into my hands, and I desire to have them redeemed. Applying to the United States Treasury I find I am granted the privilege of taking payment in silver, in gold, or partly in one and the balance in the other. For the purposes of our illustration, however, we will adhere to the figures already used. In exchange for the $1,000, then, I receive back precisely the weight of gold originally given for them. For the $50 I receive six pieces of silver of different sizes, which I notice are arranged upon a decimal scale of grains. They contain respectively 30,000, 5,000, 1,000, 500, 100, and 50 grains; in all 36,650 grains, or 1,150 grains in excess of the original quantity. Upon inquiry I learn that this excess is not due to any mistake by the clerk, but that since the first transaction silver has fallen so that 733 grains are now commercially equal to 25.8 grains of gold, and that the government has simply redeemed my notes at par. After this first experience I have many subsequent transactions with the mint and with the Treasury. At the former I find that I have the choice of notes, gold coin, or silver coin. At first I reject the silver coins as being under weight, but upon its being explained that they are purposely made light for the sake of convenience, and that they are by general law redeemable in the same manner as the notes, I no longer object to them. At the Treasury, on the other hand, I am sometimes, though rarely, informed that the government is exercising the option reserved in its contract; that it is paying exclusively in gold, or exclusively in silver, or partly in one and partly in the other. These occasional disappointments, however, never affect the integrity of the money I have in hand, for whether redeemed in gold or silver, everyone knows that it will be redeemed at its _face value_, and it accordingly passes unquestioned.

Upon several occasions I present bonds of the government for redemption, some of them issued previous to the inauguration of the new system, and others issued afterward. In either case I find that the same system of redemption prevails as in the example of the notes. Treasury notes, silver coins, and silver certificates--one and all I discover are also redeemable like the new notes or convertible into them, so that I need never concern myself about any matter save their genuineness.

Gold certificates and greenbacks must, of course, be redeemed as their special contract requires, but, once redeemed, they must reissue in the new bimetallic notes which I have described. Thus a very simple method is provided whereby this form of currency may be transmuted into another without contracting the circulation.

The great desideratum is to make our vast stores of silver available for ultimate redemptions, and this, natural bimetallism effectually accomplishes. Our gold reserve would therefore cease to be indispensable to the preservation of our national credit just as soon as the greenbacks and gold certificates were converted into the bimetallic notes or cancelled. But there need be no fear that the gold reserve would ever become depleted. By removing all danger of the debasement of our money, by insuring the parity of every dollar of our currency with gold, and by permanently retiring the greenbacks, we destroy the incentive to hoard gold, cause its return to the reserve, relieve it of half the burden it formerly had to sustain, and reduce to a minimum the tendency to withdrawals. The copious supply of gold thus secured would enable the Treasurer to waive his option to pay in silver whenever the customer preferred gold, thereby enabling merchants to use the less cumbrous metal for foreign shipments. Indeed, it is entirely probable that the new notes would be preferred to gold in international as well as in domestic exchanges.

An advantage of especial importance is that the metals can be concurrently used. The oscillation from one to the other, even if it be admitted that it would provide us always with the better of them under whatever changes may occur, is certainly not to be preferred to the constant and equal use of both. The unlimited coinage of the two metals upon a plan so equitable, recognizing as it does their precise market relations from day to day, would enable us to view with indifference the fluctuations of the market, however great, and to whatever cause due. Incidental to this advantage, and second only to it in importance, would be the establishment of a par of exchange simultaneously with the gold-and with the silver-using countries by allowing customs duties to be paid in silver bullion at market prices, or in gold.