CHAPTER II

CAPITALISM IS WASTEFUL

Under the system of free competition in the beginning and middle of the last century, every investor who saw a profit in refining oil or sugar, or making steel, put up a refinery or factory. The aim of every factory was to manufacture the largest amount possible and sell it at the highest price possible; and this is what Herbert Spencer[65] and the Manchester School regard as the ideal system of production. Now let us see just what happens as a result of this system of unlimited competition.

Sec. 1. GETTING THE MARKET

Every manufacturer and refiner has to find purchasers for his product. This effort to find purchasers is called in the trade, "getting the market."

The expression "getting the market" covers all the expenses attending the bringing of goods to the attention of the public, and they may be roughly divided into two principal categories--advertising and commercial travellers. The public little appreciates the enormous cost which attends the work of finding a purchaser. Mr. Bradley, after a careful calculation, estimates that "somewhere between the distiller and the consumer in this country forty millions of dollars are lost; this goes primarily to the attempt to secure trade."[66] Mr. Dowe[67] the President of the Commercial Travellers' National League, testifies that 35,000 salesmen have been thrown out of employment by the organization of trusts, and 25,000 reduced to two-thirds of their previous salaries. This would represent a loss of $60,000,000 in salaries on a basis of $1200 each. He cites, as instances of trusts that have dismissed salesmen, the baking powder, bicycle, chair, paper-bag, rubber, tin-plate, steel and rod, sugar, coffee, thread and type-founders' combinations. Not only do trusts dismiss salesmen, they substitute for salesmen who, prior to the organization of the trust had been earning $4000 to $5000 a year, cheaper salesmen who receive $18 a week. He also estimates that the dismissal of commercial travellers means a loss to railways of about $250 per day, 240 days in the year; in all, $25,000,000. The loss to hotels is about as much, and "many hotels are likely to become bankrupt if any more travellers are taken off."

Sec. 2. CROSS FREIGHTS

Another waste attending the competitive system results from "cross freights," the double freight a refiner sometimes pays for hauling oil from the well, or sugar from the nearest seaboard and back over exactly the same ground, when refined, to the customer. So also the steel manufacturer sometimes pays freight for hauling ore to the coal mine or coal to the ore, and back, after smelting, to the customer.

This waste resulting from cross freights is only a small part of a similar waste that results from competition in the task of distribution--or retail trade.

We are all familiar with the amazing results obtained by the national enterprise known as the Post Office, and how, for the insignificant sum of two cents, a letter written in New York can be delivered in an incredibly short space of time in San Francisco, and even perhaps more incredibly in the heart of the Rocky Mountains.

Let us consider for a moment the cost of doing this were letters distributed throughout the country in the same way as our other commodities, as for example, milk, coal, or bread. It would be interesting to calculate how many hundred dealers in milk there are in New York[68] or London, equipped with their own horses, wagons, and men, each engaged in delivering milk all over the city; add to these the thousands distributing in like manner bread, and the thousands distributing coal, and so on with butter, eggs, meat, fish, vegetables, and all other things that enter into our daily consumption.

Every block of houses is served with milk by this large number of milk dealers instead of by one, as would be the case if the distribution of milk were in the hands of one agency; so every block is furnished with butter, eggs, meat, fish, and vegetables by this large number of dealers in butter, eggs, meat, fish, and vegetables, instead of by one, and so on, through every article that enters into our daily use.

Compare with this the economy of time, labor, and expense effected by the Government Post Office through sorting letters beforehand according to streets, and confining the distribution in any one street to a single carrier who distributes the letters with the greatest economy of time and labor, from door to door.

No practical business man would be guilty of the stupidity of putting a hundred men to do the work that could be done just as well by a single man; and yet, this is exactly the stupidity of which the competitive system is guilty. Let us consider the unnecessary number of butcher shops in the city of New York.[69]

Before methods of communication had attained their present development, it was necessary that there should be butcher shops in every block to satisfy the needs of the people in the block. But to-day, the telephone service permits of ordering meat at a great distance, and the automobile permits of this meat being rapidly delivered to the consumer. The best housekeepers residing downtown to-day go for their meat to a butcher who lives in Harlem. Now there is no reason why this Harlem butcher should not furnish all the meat to the island of Manhattan, or indeed to all in Greater New York. But there is a reason why under our competitive system this should not take place, and this is the stupidity of butchers in particular and the stupidity of the community at large. Most butchers believe that they can make most money by cheating their customers; and the public at large believe all butchers equally dishonest and therefore deal with the butcher nearest them. This stupidity is to a great extent justified. The art of the butcher consists in finding out to which customers he can sell third-class meat at first-class prices;[70] and as a rule, he is so successful in doing this that no butcher is ever known to fail. On the contrary, they all grow rich. This being the rule, the public is justified in giving up the expectation of being honestly served, so that it is only the most intelligent housewives who discover that there are butchers who do not have dishonest methods. Thus the stupidity of butchers and public tends to encourage the multiplicity of shops and keeps in the butcher business an enormously larger number than is necessary. If now we take into consideration that what is true of butchers is true of almost every dealer in the articles of food we consume, we shall appreciate how much waste of human effort there is in this business of distribution. But all this waste, encouraging stupidity in the customer and dishonesty in the retailer, is endorsed because it "makes character!"

Last but not least is the loss of by-products that inevitably results from manufacturing upon anything less than a gigantic scale.

The managers of the Standard Oil Trust testify that among the waste products capable of being utilized in sufficiently large refineries are gasoline, paraffine, lubricating oil, vaseline, naphtha, aniline dyes, and no less than two hundred drugs; and that the total value of these waste products is actually as great as that of the oil itself.[71]

Is or is not the contention with which this chapter started, justified? It was charged that the competitive system is stupid because wasteful and disorderly, and that it was unnecessarily immoral, unjust, and cruel. The testimony of men recognized as the highest authorities has been produced to demonstrate its wastefulness:

Waste of capital owing to bankruptcy, to working at irregular efficiency, to frequent change of dimension, to cost of "getting the market," to cross freights, to anarchy of distribution, to loss of by-products;

Waste of human energy in the work of competition; and above all in unemployment leading to vagrancy and pauperism.

And we need produce no testimony to prove things so obvious as the immorality, injustice, and cruelty of overemployment and unemployment and the necessary results thereof: drunkenness, disease, pauperism, prostitution, insanity, and crime.

One word only still needs explanation: It has been stated that this immorality, injustice, and cruelty are "unnecessary." It is useless to rail at these things if they are necessary. Nature is often immoral, unjust and cruel. The survival of the few fit and the corresponding sacrifice of the many unfit has no justification in morality. Death, deformity, and disease are often both unjust and cruel. Yet against these last we are in great part helpless. It is not enough to show that the competitive system results in evil; we have to demonstrate that these evils are avoidable; and that our remedy for them will not involve still greater evils. This belongs to the final chapters on Socialism; and is referred to here only to assure the reader that it has not been overlooked.

Sufficient emphasis, however, has not yet been put upon the lack of order that characterizes the competitive system.

FOOTNOTES:

[65] "A Plea for Liberty," p. 17:

"Under our existing voluntary cooperation with its free contracts and its competition, production and distribution need no official oversight. Demand and supply, and the desire of each man to gain a living by supplying the needs of his fellows, spontaneously evolve that wonderful system whereby a great city has its food daily brought round to all doors or stored at adjacent shops; has clothing for its citizens everywhere at hand in multitudinous varieties; has its houses and furniture and fuel ready made or stocked in each locality; and has mental pabulum from halfpenny papers, hourly hawked round, to weekly shoals of novels, and less abundant books of instruction, furnished without stint for small payments. And throughout the kingdom, production as well as distribution is similarly carried on with the smallest amount of superintendence which proves efficient; while the quantities of the numerous commodities required daily in each locality are adjusted without any other agency than the pursuit of profit."

[66] Report of the Industrial Commission, pp. 829-831, Vol. I, 1900.

[67] Ibid., pp. 27-36.

[68] This work has been in part eliminated by combination. But the economies resulting therefrom have all gone to the combinations. The consumer pays just as much as he did before.

[69] Trow's Business Directory of New York city, 1909, lists about 4000 retail butcher shops in Manhattan and The Bronx. There are about 275 postal stations in the same territory.

[70] All good housekeepers know this by experience. I know it from the butchers themselves, who explained it in the course of an effort to arrange a combination of butchers in Paris.

[71] Testimony of Mr. Archbold (pp. 570-571) in the Report of the Industrial Commission, Vol. I, 1900.