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BOOK IV: THE DISTRIBUTION OF CAPITAL - Yves Guyot, Socialistic Fallacies [1910]Edition used:Socialistic Fallacies (London: Cope and Fenwick, 1910).
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BOOK IVTHE DISTRIBUTION OF CAPITALCHAPTER IBernstein and the Concentration of Capital and of IndustryIncrease in the number of capitalists in England and in Prussia—Increase of small industries in Germany. Economists who have ventured to make a few timid observations upon the theory outlined in the last chapter, or upon the iron law of wages, have been declared to be the “enemies of the workman.” This was considered an all-sufficient argument, like Molière's tart and Molière's cream. But a German Socialist, Bernstein, who, as executor of Engels' will, presented some guarantee of orthodoxy, had the misfortune to be exiled from Germany for complicity in an illegal agitation. He spent eleven years in Switzerland and eleven in England, and made a comparison in those countries between economic facts and the allegations of Marx and Engels—“a great misfortune,” as Bebel said at the Lübeck Congress. It was indeed a misfortune for those Socialists who accept Marx's fallacies as indisputable dogmas. Bernstein, observing what went on before his eyes, formed the conviction that these fallacies were erroneous, and had the audacity to publish this discovery.1 While Karl Marx based his theory of the social revolution entirely upon the concentration of capital in an increasingly limited number of hands, and the increase of a progressively wretched number of the proletariat, Bernstein replies by showing that the number of capitalists, so far from diminishing, is increasing, and that the new capitalists disclaim the struggle between classes even while they remain supporters of it in theory. Consequently, the social revolution is not a fatal consequence of the historical law imagined by Karl Marx, and a policy based upon this struggle can only end in deception. The number of capitalists does not diminish, as the following facts will show1 : The very form of limited companies is inconsistent with the centralisation of fortunes, by permitting a considerable subdivision of capital. Thus an English thread-spinning trust, which has only been in existence for a year, numbers no less than 12,300 shareholders. The fine spinners' trust has 5,454, the Manchester ship canal 40,000, and Lipton's 74,262. Messrs. Spiers and Pond's undertaking in London, which is cited by Socialists as an instance of the concentration of capital, has a total capital of £125,000, and numbers 4,650 shareholders, of whom 550 hold shares to an amount of more than £480. The total number of holders of shares in England is estimated at a great many more than a million, and this seems to be no exaggeration in view of the fact that in the year 1896 alone the number of limited companies in the United Kingdom was 21,223, with a capital of £1,069,920,000. These figures do not include the shares in foreign enterprises which are dealt in on the English market, Government stock, etc. Therefore the number of owners of property in England does not diminish. Is it otherwise in Prussia? In Prussia, as readers of Lassalle know, there were 44,407 individuals out of a population of 16,300,000 with an income of 1,000 thalers (£150). In the year 1894-5, out of a population of 32 millions, there were 321,296 in the enjoyment of an income of more than that amount. In 1897-8 their number was 347,328. While the population doubled, the number of individuals who enjoyed a small competency was multiplied by six. The proportion of persons in the easiest circumstances, as compared with the total population, increased in the proportion of more than two to one. And if we take a later period we find that in the fourteen years from 1876 to 1890, side by side with a total increase of 20.56 per cent. of persons liable to taxation, incomes between £100 and £1,000 (upper and lower middle class) increased by 3.52 per cent. (582,024 as against 42,534). The class of owners properly so-called (incomes of 2,000 thalers and upwards) increased during the same period by 58.47 per cent. (109,095 as against 66,319). Five-sixths of this increase falls upon the moderate incomes of from 500 to 6,500 thalers. The “Einkommensteuer,” a graduated income, was introduced in 1891: persons whose incomes fall short of 900 marks (£45) are exempt. It is fair to assume that a number of persons conceal part of their income in order to remain within this limit. Nevertheless the number of taxable incomes of more than 900 marks was 2,436,000 in 1892, and the total income was upwards of 5,961 millions of marks. In 1907 the number was 5,390,000, an increase of 120 per cent., while the income had increased from 5,704 millions of marks to 11,747 millions, an increase of 100 per cent. This difference of 14 per cent. between the increase of total income and the increase of taxable incomes demonstrates that wealth has been distributed and not concentrated. This improvement continues: in 1908, the number of taxable incomes was 5,880,000. Taking the number of individuals, after deducting corporate bodies, we find:—
So that economic progress, far from producing an increasingly numerous and increasingly poor mass, adds to the number of those who possess a more or less considerable income. The molecule which is to-day put at the bottom rises to-morrow to the surface. Civilisation becomes more and more fluid. The boy who sells newspapers on an American railway car is the potential Carnegie or Edison of to-morrow. In France the bricklayer of Limoges is not only a bourgeois candidate, he is a successful bourgeois who, with a salary in Paris, is a capitalist in his own country. Do the great industries destroy the small? Here is what has happened in Prussia, according to Bernstein, where the Government absolutely favours the former:— In 1875 the greater industries occupied the same relative position, as regards production, as in England in 1891. In Prussia 38 per cent. of the workmen were engaged in them in 1875, so that these industries have developed in a sufficiently large proportion. None the less, the great majority of persons employed in industries in Germany was still employed in the moderate-sized and minor industries. Of 10¼ millions of workmen employed in industries in 1875, rather more than three millions were employed in the larger industries, 2½ millions in the moderate-sized industries (employing from 5 to 50 workmen), and 4¾ millions in the minor industries. There were only 1¼ millions carrying on their own small hand-trades. From 1882 to 1895 the small undertakings (1 to 5 workmen) in Germany increased from 2,457,950 to 3,056,318, or 24.3 per cent.; the minor undertakings of moderate size (6 to 10 workmen) from 500,097 to 833,409, or 66 per cent.; the greater undertakings (11 to 52 workmen) from 891,623 to 1,620,848, or 81.8 per cent. During this period the population only increased by 13.5 per cent. “If,” says Herr Bernstein, “during the period in question the greater industries have increased in a larger proportion—88.7 per cent.—this increase has not coincided with an absorption of the minor industries, except in a few isolated cases.” Percentages should be treated with caution, for it is important to know to what figures they are to be applied. If 1 becomes 2, the increase is 100 per cent. If 6 becomes 9, the increase is only 50 per cent., but the actual figure is much larger. In Prussia, the number of persons employed in traffic and business (exclusive of those employed by the railways and the post office) increased from 1885 to 1895, in the case of undertakings employing more than two persons, from 411,509 to 467,636, an increase of 13.6 per cent.; in undertakings employing from 3 to 5 persons the increase was from 176,867 to 342,112, or 93.4 per cent.; and in undertakings employing from 6 to 50 persons the increase was from 157,328 to 303,078, or an increase of 142.2 per cent. The minor undertakings indicate the greatest increase, although the increase is the most considerable, in proportion, in the greater ones. But the latter do not represent more than 5 per cent. of the whole. Herr Bernstein's conclusion, which we believe to be correct in all respects, is that “the larger industries do not continually absorb the minor and moderate-sized undertakings, but gather strength and increase side by side with them.” The cries of rage with which Herr Bernstein's conclusions were received by Socialists are easily explained. From the moment when the law of the concentration of capital fails to be verified by the facts, Socialism loses its hopes. But Van der Velde and Georges Sorel are obliged to state that no such concentration has come to pass. The greater industries have constantly shortened the hours of labour and increased the rates of wages, and wages are highest where the greater industries have attained the highest degree of development. The foremen in the rolling mills at Pittsburg draw 15 dollars a day. The bourgeois, or middle class, far from decreasing, constantly increases in numbers. CHAPTER IIThe Poor Become Poorer
IBy virtue of the process foreseen by Karl Marx, “Society finds itself suddenly thrown back into a momentary state of barbarism and into pauperism.” Has barbarism increased in the last sixty years? I very much doubt it. Is pauperism greater now than it was then? Let us see. Poor Law statistics do not greatly signify, the actual poor and the real poor are two distinct beings, the latter being produced by the law, by custom and by tradition. The formula in which Karl Marx' theory of the two classes is condensed, that “the rich become richer, the poor poorer,” is due to that man of morbid character, Victor Modeste. In ransacking the registers of the department of public relief (Assistance publique) he observed that the same families appeared in them, generation after generation, and concluded therefrom that “the poor became poorer and the rich richer.” This is not the conclusion to be drawn from the fact, the proper one is quite different. This fact proves that people under the protection of the department, accustomed to live by its aid with a minimum of exertion, make no attempt to emancipate either themselves or their descendants from it. Looking upon themselves as they do as its pensioners they consider that it has duties in regard to them in exchange for their submissiveness and their importunate mendicancy. The number of persons in receipt of relief in France is bound to increase, for the simple reason that the number of charitable institutions has increased. Sir Athelstane Baines and those who have any practical acquaintance with the poor law would agree with Sir William Chance that, generally speaking, a Union can have as many paupers as it chooses to pay for.1 According to M. E. Chevallier in the year X, under the Consulate, 20 per cent. of the inhabitants of Paris were indigent, 12 in 1818, and 5 or 6 about 1880. In 1903 the department only returned 2 per cent. because it only includes in this category those persons who were in receipt of annual relief and not those who had received temporary assistance. M. de Foville says that it is impossible by any method of calculation to find 5 per cent. of actual destitutes in Paris. And so the proportion during the Consulate no longer holds good. M. de Villeneuve-Bargemont, in 1829, calculated that there were 1,329,000 indigent poor in France, say 4 per cent. of the population. Beginning in 1837, the figures of the public charitable institutions yield the following results:—
Despite the increase in the number of charitable institutions and of a population which has in creased from twenty-seven and a half millions to thirty-nine millions, the figures of 1829 and of 1905 are very nearly the same. The law of July 14th, 1905, lays upon the communes the obligation fully and completely to “supply compulsory relief to the old, the infirm, and to incurables without means.” The number of persons in receipt of relief will undoubtedly increase, but the number of actual poor will be no greater. The law of July 15th, 1893, organised gratuitous medical assistance, not only “for all sick persons of French nationality without means,” but for all who “in case of illness are not in a position to obtain medical attendance at their own expense” (Circular of May 18th, 1894). Patients of this description are more numerous than those who obtain relief from public charitable institutions. The law may be estimated as being in operation in departments with a population of 34 millions. The medical man who has no confidence in the prospect of pecuniary recognition of his services, induces his patient to obtain the benefit of gratuitous medical assistance. By this means he makes sure of being paid. Those persons who are in receipt of assistance are not all indigent. The number of beneficiaries in 1903 was about two millions (1,957,000) of whom 860,000 obtained substantial treatment in the course of the year. The proportion, therefore, would work out at between 5½ and 6 per cent. of the population of France; this figure is more probably above than below the true one. IIIn England the ancient poor law of Elizabeth's time was completely recast in 1834. No comparison is possible between the earlier and the present time, but it is estimated that in 1849 there were not more than a million poor in England and Wales, say 5½ to 6 per cent. of the population. According to the Report of the Royal Commission on the Poor Laws (1909, p. 20) the cycles of pauperism since 1871 (the year when the complete statistics for England and Wales begin) are as follows:—
In the two years 1906-7, 1907-8 the numbers have oscillated, and as it is not yet clear what place they will occupy in the general movement, they are given separately. According to a table presented to the International Statistical Institute at its meeting in London (August, 1905) by Mr. C. S. Loch, Professor at King's College and Secretary of the Charity Organisation Society, the ratio of pauperism has undergone the following variations in the Metropolis:—
After 1903 there is a slight rise, but this is in great measure owing to the markedly paternal Socialism which is “making the poor.”1 In spite of this disturbing psychological element the proportionate number of the poor has decreased by more than one-half since 1861. The rich may become richer, but the poor do not become poorer. The followers of Marx have announced the ruin of the bourgeoisie in the following terms:— The bourgeoisie is incapable of ruling because it is no longer able to ensure the existence of its slave, even in the conditions of his slavery, because it is obliged to allow him to fall into a condition in which it must support him instead of being supported by him.2 The pretended slave knows better and better how to support himself by his labour and even by his thrift. CHAPTER IIIFinancial FeudalismM. A. Neymarck—Sub-division of transferable securities—Certificates of railway shares—Bonds—Government stock—The “Banque de France”—Loans on landed security—Saving bank deposits—American millionaires and feudal lords. M. A. NEymarck made a series of studies in 1893, in 1896, and in 1903, in the “Sub-division of transferable securities,”1 bearing upon government stock, shares and bonds of the “Credit Foncier” (a bank issuing loans upon the security of landed property), and shares and bonds of railway companies representing approximately a capital of 55,000 millions of francs (£2,200,000,000) out of the 85 to 90 milliards of francs (£3,400,000,000 to £3,600,000,000) belonging to French capitalists. In 1860, the average number of shares in railway companies registered on each certificate was 28.33: on December 31st, 1900, it was 12.49. The number of certificates was 40,846 in 1860 and 112,026 in 1900. The number of certificates has nearly trebled, while the number of small holders of securities has more than doubled. The value of these certificates, at the prices ruling in 1900, was as follows:—
That is to say a maximum of 26,000 francs and a minimum of 10,000. Out of 100 shareholders, 75 owned only from 1 to 10 shares. Here we have the “financial feudalism” referred to in Socialist orations. The bonds of the railway companies were distributed as follows:— 354,731 of from 1 to 24, say a capital of from 
Nearly 95 per cent. of the shares are the property of investors who hold a maximum number of 100 securities. The total French Government stock is divided among more than five million subscribers. The average is hardly more than 150 francs in interest, say a capital of 5,000 francs. More than 80 per cent. belongs to investors with an income of from two to fifty francs. The number of holders is more than two millions. The Banque de France is an investment patronised by rich men. In 1870 the number of shareholders was 16,062, with an average holding of 12 shares: in 1900 it was 27,136 with an average of 6½: at the end of 1908 it was 31,249, of whom 10,381 owned one share and 17,403 between 2 and 10. Of 39,000 shareholders of the Crédit Foncier in 1900, 32,767 owned 10 shares or less. The “Revue Socialiste” has stated the number of deposits in the savings banks in 1904 to be as follows:—
It follows from these figures that these 11,767,772 depositors possess an average deposit of 378 francs, constituting a tolerably small property and that of these 11,767,772 proprietors or capitalists (as M. Yves Guyot or M. Paul Leroy-Beaulieu would freely call them) more than half (3,908,800 + 2,291,489) have an “average capital” varying between 49 and 11 francs, while their income varies between 2 fr. 47 and 33 centimes (“Revue socialiste”). What do these figures prove? That the savings bank does not represent a concentration of capital. It cannot, therefore, be invoked as an argument in favour of Karl Marx' thesis, but these small deposits none the less represent a sum of four milliards of francs (£160,000,000) and that is a total which is not to be despised. Twenty-five years ago, in 1882, the savings banks had:—
One knows that the savings bank does not allow of deposits above 1,500 francs. This progress points to the increase of would-be capitalists. So far from decreasing they become more and more numerous, in spite of Karl Marx' law of concentration, which involves the “pauperisation” of the great majority. But Messrs. Rockfeller, Carnegie and perhaps two or three others are multi-millionaires. Be it so, but do they absorb a greater proportion of wealth than the great feudal lords and kings of the good old times? Quite the contrary. Therefore the alleged law of the concentration of capital is not in accordance with the facts. CHAPTER IVReal and Apparent IncomeRegular incomes vary.—Reduction of income by fall in securities.—French Government stock.—Railway shares.—Fall in landed property.—The increase of capital not automatic. Among the promoters of various taxes upon income who have put forward various proposals, not one has asked himself the simple question, “What is income, and how is it distinguished from capital?” It is repeatedly stated, for example, that the 3 per cent. paid upon stock of the City of Paris, the Crédit Foncier or the railway companies represents a security paying a fixed rate of interest. This is the established phrase. The conclusion is suggested that on the imposition of so much per cent. upon income every taxpayer knows the precise portion of the total levy which he has to bear. This may seem certain, but it is wrong, for French Government stock does not always bear 3 per cent., and railway bonds and other securities paying a fixed rate of interest pay irregular dividends. Instead of exclaiming at the paradox let us look at the facts. I bought 3 per cent. French Government stock at the end of December, 1897, at 103fr. 10; I had to sell at the end of December, 1906, at 95fr. That is a difference of at least 7fr. 85, say an annual loss for nine years of ofr. 87. I must therefore deduct this 87 centimes from my 3 francs of dividend, and my regular income was not 3fr., but 2fr. 13. If the Treasury imposes a tax of 4 per cent. upon my 3 francs I am paying ofr. 12, which upon 2fr. 13, represents an actual rate of 5.68 per cent. But I may fare even worse than this. I bought 3 per cents. at 99fr. at the end of December, 1905, and sold them at the end of December, 1906, at 95fr. 25, that is at a loss of 3fr. 75. I drew a dividend of 3 francs, but this was absorbed by the loss which I sustained on my capital, to which I have to add a further ofr. 75. Accordingly an income tax would have fallen not only upon a smaller income than the anticipated regular income, but upon a deficit as well: I sustain a loss of ofr. 75 and should have had to pay 4 per cent. on 3 francs, i.e., ofr. 12, which I have to add to my loss. Because I have had the misfortune to buy stock bearing 3 francs as interest at the end of December, 1905, the State is to force me to withdraw ofr. 12 of my capital in order to pay income tax to the State, when, instead of supplying me with a dividend, it has already inflicted a loss of ofr. 75 upon me! In reviewing other securities with a fixed rate of interest, I find that their dividend is by no means the nominal dividend upon which the tax is placed. Those who want safe investments are recommended to buy railway bonds, and quite rightly on the ground of safety; it offers a double guarantee, that of the Government, and that of the substantial character of the Company. A woman, a widow, a workman, or a careful clerk buys a 3 per cent. bond in the “Chemin de fer du Nord” at the end of December, 1898, at the price of 478 francs. The holder wants to re-sell at the end of December, 1906, and can only recover 456 francs. The stock has brought in 15 × 8=120 francs. Deducting 22 francs, it has brought in 98fr., i.e. 11fr. per annum or 2fr. 30 per cent. In order to simplify my instance I have not taken actual taxes into account. The holder of a security payable to bearer has only received 13fr. 42 instead of 15 francs, i.e., 107fr. 36 in eight years, from which he must deduct 22 francs. He has therefore received 85fr. 26, i.e., 10fr. 70 per annum or 2fr. 24 per cent. Take another security of the same kind, a share in the issue of the Crédit Foncier of 1895 at the rate of 2fr. 80. At the end of December, 1897, the price was 499fr., at the end of December, 1906, it was only 463fr., i.e. a decline of 35fr. The gross dividend is 14fr. In nine years it has brought in 126—35=91 fr., i.e. 10fr. 11 per annum, or 2.02 per cent. But this is subject to taxation, and if we again deduct the actual tax, the holder's dividend is reduced to 12fr. 46. In nine years he has received 112fr. 14—35=77fr. 14, yielding him 1.54 per cent. per annum. This is the dividend obtained by the holder of a share in the issue of the Crédit Foncier of 1895. At a number of election meetings, and even in the Chamber of Deputies, the income tax is represented as an instrument destined to make railway shareholders disgorge, the shareholders being pictured as vampires which—at the expense of the public—appropriate enormous dividends. The holders of shares in the Compagnie du Nord are among those who are thus attacked. But on examining the illusory dividends received by them from 1898 to 1906, this is what I find. At the end of December, 1898, the stock of the Compagnie du Nord stood at 2,110fr., at the end of December, 1906, it had declined to 1,775, i.e. a fall of 335fr. Now in the eight years from 1899 to 1906, inclusive, the total dividend amounted to 550fr., which, after deducting 335fr., leaves 215. The purchaser of a share at the end of December, 1895, has therefore received 26.87fr. per annum, which amounts to 1fr. 27 per cent., having regard to the purchase price. The income tax of 4 per cent. on 550fr. yields 22fr., but since the income was only 215fr., it actually amounts to 10 per cent. The holder of stock may have done even worse by buying stock at the end of June, 1900, at the price of 2,400fr., if he were forced to sell on May 30th, 1907, at the price of 1,769fr.—a loss of 631fr. Supposing that he drew the whole of the dividends from 1900 to 1906, he has received 472fr. in dividends and his account shews a loss of 159fr. Nevertheless he has had to pay 4 per cent. upon this amount of 472fr., in addition to the lump sum assessed on the nominal capital of the securities and the annual tax of ofr.20 upon their capital value assessed upon their average price during the preceding year, so that it is necessary to add, in round numbers, another 50fr. to his loss. This investment in a first class security has therefore resulted, not in a profit, but in an annual loss of 28fr. 50. Take the case of an investment in real property. In some parts of Paris this class of property has depreciated 20 or 30 per cent. in less than ten years, and this should be deducted from the income. And do not upkeep, rebuilding, and improvements frequently represent several years' income? As proprietor of an agricultural estate, am I not continually obliged to undertake building, repairs and work of all kinds? If my income from the property is 3,000fr. and I build new stables at a cost of 6,000, am I not deprived of my income for two years? Income is only a slice of capital, cut off for convenience in accounts, but it cannot be separated from it; profit and loss can no more stop at a fixed point at the end of a year than the physiological condition of the human body can undergo a sudden change. In order to arrive at a correct statement of income, it is necessary to take into account the rise and fall in the value of capital as well as the nominal rate of interest. The examples that I have given prove that capital does not increase automatically by means of compound interest, as Socialists are pleased to assert who, instead of looking at the facts, only seek for arguments in support of their system. CHAPTER VThe Distribution of Inheritances in FranceDivision of inheritances according to their importance—Analysis—Inherited shares compared with undivided inheritances—Decrease in the number of greater shares and increase in the number of shares less than 100,000 fr.—Number of inheritances in relation to number of deaths—Conclusions. Since the Finance Law of February 25th, 1901, the details of inheritances after deduction of liabilities, are available. Those who introduced and carried this law include a number of men who, in the absence of adequate information with regard to the previously ascertained facts, imagined that this inventory would supply them with a formidable collectivist argument in favour of the expropriation of the land, of minerals and of all the means of production and exchange. The registry places inheritances in thirteen graduated classes, according to the total amount of their net assets. The figures for 1907 are as follows:—1
The small estates of from 1 to 2,000 fr. are 223, 130 in number, i.e. 55 per cent., with net assets of 162 millions, i.e. rather less than 3 per cent. of the whole. The number of people with small inheritances is very large, while the total of their inherited property is restricted. But 562 million francs have to be distributed among 114,695 persons in the series of estates ranging from 2,001 to 10,000 francs. This is a new series representing 28 per cent. of the number of inheritances, and 10 per cent. of the total net assets to be distributed. If one confine oneself to this series, this numerous class is a class of capitalists with a keen desire to increase their capital. Inheritances of between 10,001 and 50,000 francs are 47,967 in number, i.e. 11 per cent., representing 1,014 millions. If one includes the series between 50,000 and 100,000 francs, i.e. 9 per cent., one finds a total of 40 per cent. for the two series or 18 per cent. of the total. If we take the large fortunes of from a million to 50 million francs, we find 534 estates, with a total of 1,231 millions, i.e. 22 per cent. of the total. There was no estate above 50 millions in 1907. But these estates are divided, and if (after making allowance for charitable bequests) we compare the number of portions with the number of estates, we find:—
Except in the last series, the number of portions is smaller than the number of estates: the estates are divided and the heirs fall back one or two classes—a movement which is the converse of concentration. In the case of estates, however, of 250,000 francs and under the number of portions is higher than that of estates to be distributed:—
This follows from the same tendency. The division of large fortunes has driven the beneficiaries back into the lower series, so that they add to the number of portions into which the lesser estates are divided. This movement is the exact opposite to that which is alleged by Karl Marx and his followers. A comparison of the total assets of estates devolving by succession and of the amount of the portions confirms this explanation:—
In every instance the total of the portions is less than the total of the estates. The effect of division has been to cause the amount of capital to decline class by class down to the class of estates of from 100,001 to 200,000 francs. Below this class the total capital increases in each class concurrently with the number of portions:—
Of the total estate, the large fortunes of more than a million are 22 per cent., and the portions 11 per cent. The portions of less than 100,000 are 55 per cent., and those of between 100,000 francs and a million are 33 per cent. The amount of the large portions of more than a million is therefore 12 per cent. of the total. In 1854 the number of estates was 438,905, the number of deaths being 859,000, i.e., 51.11 per cent. In 1874, the figures are 500,311 and 816,000 respectively, a percentage of 61.43; and in 1900, 534,000 and 854,000, a percentage of 62.60. Since this date, the mortality has always been less than 800,000. Since the law of February 25th, 1901, only one statement is made for each estate, so that no comparison is possible; nevertheless, the percentage of estates to deaths is 60.30. And it is necessary to take into account children, minors and persons who have made gifts inter vivos either by deed or by delivery. In a speech delivered on June 14th, 1906, M. Jaurès said, “400,000 estates pass by hereditary succession, but the number of deaths is eight or nine hundred thousand annually.” His conclusion is that one half of those who die have no assets, since their death has not caused the distribution of an estate by hereditary succession. And there are those who, in order to escape the duty of registering their estate, conceal the amount which they could leave by gifts made by delivery inter vivos. Such gifts remain unknown, but an addition should be made to the total assets of the smaller estates, although no figure can be stated. The registry of estates estimated the total voluntary transfers of property inter vivos at 1,038 million francs. A number of these are legacies by anticipation; they are therefore also to be added to the value of inherited estate in order to arrive at the figures of private property in France. The addition of 200,000 deaths of minors and of 105,000 transfers inter vivos to the 400,000 inherited estates gives a total of 700,000. So far from onehalf of the persons dying leaving no estate, the number should be less than 8 per cent., and of these a number have succeeded in leaving estate without declaring it. This is of no consequence; in 1907 there are 401,000 estates and 830,000 deaths, but how many portions do these estates represent? The number of portions is 1,124,000, so that there are more beneficiaries than there are deaths, a fact which is not at all surprising. According to the figures, there are 93 per cent. whose portions do not exceed 10,000 francs. Possibly if it were proposed to distribute among them the funds of the 323 proprietors of portions exceeding a million a number of them would accept the offer without troubling themselves about the legitimacy of such a division, or would find pretexts for justifying it. But if it were proposed to the same individuals that they should pay their portions of 200, 2,000, 5,000, or 10,000 francs respectively into the common exchequer they would exclaim against the robbery, and would defend their property with the most ferocious heroism. They are quite willing to receive, but unwilling to give. In order to ensure their paying taxes, they have to be deluded by “being made to pay without realising it.” This deep-seated feeling for individual property, extending itself day by day by reason of the increase of individual owners of property, is the reason why there is no future for collectivism, a word which merely serves to amuse one category of simpletons and to terrify another, playing the same parts as the words “Paradise” and “Hell.” The conclusions which follow are therefore:—
Karl Marx put the question of the concentration of capital in the following way: Capital will become concentrated in a small number of hands: the old middle-classes, men of business and men of independent means, artisans and peasants will all decline into the proletariat (Communist Manifesto, Art. 18). This assertion would be correct if there were less individuals who take a share in property devolving by inheritance than there were in 1847, the date of Marx' Manifesto. The sub-division of transferable securities and the increase of small deposits in the savings banks justify us in saying without temerity that there are more individuals with a share in property than there were sixty years ago, and consequently that the facts contradict Marx' prophecies. CHAPTER VIThe Distribution of Landed Property in France
IOn November 21st, 1893, M. Jaurès exclaimed “Ownership of small properties is a legend. Of the seven millions of workers scattered over our soil there are hardly 1,500,000 who own their own land, and by their side are 800,000 farmers, 400,000 small farmers, two millions of farm labourers and two millions of day labourers.” These assertions are drawn from statistics to which M. Jaurès would not find it easy to refer. The facts are as follows. The number of assessments for taxation of land unbuilt upon is:—
The number has decreased by about 4.9 per cent., a decrease which is due in great measure to the reduction in small properties effected by the law of 1897, which suppressed a certain number. The number of assessments of land built upon has undergone an insignificant decrease:—
The number of assessments does not indicate the number of owners. According to the inquiry in 1851–1853 there were 7,845,000 owners for 12,445,000, or 63 per cent. A most complete inquiry into the valuation of properties unbuilt upon, made between 1879 and 1883, under the able direction of M. Boutin, exhibits the following proportions:—
The proportion is as follows:—
Admitting the number to have been reduced by 5 per cent., there remain more than eight million owners and 800 per thousand households, or a proportion of 80 per cent. of owners of property in land. A French family consists on an average of four individuals, so that we have 34 million direct or indirect owners of property in land unbuilt upon. We exclude the number of owners of land containing buildings in order to escape the charge of needless repetition, although a number of them only own one property, but we do not include them. It follows that 8 individuals out of 10 are in occupation of land. IIA deduction must be made from the 52,857,000 hectares which represent the area of France, of State and municipal lands, which are not taxable, highways, roads, public squares, cemeteries, public buildings, rivers and lakes, and of the State forests occupying an area of 998,000 hectares, say a total of 2,822,000 hectares. This leaves 50,035,000 hectares, from which are to be deducted about 200,000 hectares of land covered with buildings, to which we propose to return, and 105,000 for railways and canals. What proportion of the total area is occupied by agricultural properties? The following list shews their sub-division according to the manner of cultivation:—
The distribution of property according to the size of the holdings, as ascertained by a survey made in 1884, and excluding 7,000 hectares in Paris and about 629,000 hectares in the communes of Corsica, Savoy and Upper Savoy which are not yet surveyed, is as follows:—
Nine-tenths of the holdings are less than six hectares, three-quarters are less than two. A detailed examination shews 2,670,000 holdings of between 20 and 30 ares; 2,482,380 of between 20 and 50, and 1,987,480 of from 50 ares to one hectare, i.e. 8,853,000 holdings or 61.14 per cent. of holdings of less than one hectare in proportion to the whole.
An analysis of the smallest holdings of less than one hectare discloses:—
IIIThe Socialist argument is based upon the existence of numerous small properties and of a small number of large proprietors owning the greater part of the soil. Large properties of more than 50 hectares occupy 17,400,000 out of 50,000,000 hectares, i.e. 34 per cent. After indulging for a long time in recriminations against the sub-division of property, the public now exclaim against the dangers of large properties. From the total of large properties one has to deduct:—
The extent of these is as follows:— 
The figure of 50,035,000 is therefore reduced by (in round numbers) 5,000,000, leaving a total area of 45,000,000 hectares. This deduction almost exclusively affects the large properties, whose extent being 17,400,000 hectares is therefore reduced to 12,400,000. But woodlands occupy an area of 8,397,000 hectares apart from the million hectares of State forests, and moorland and other land not under cultivation occupies an area of 6,746,000—a total area of 15,213,000 hectares, Deducting this from the total of 50 million hectares, we obtain 35 million. Woods and moorland are a considerable element in large properties, and are a negligible quantity in the small ones. As compared with the 35 million which are actually productive, we have:—
Small holdings are therefore 36 per cent. of the total area of arable land, meadows, vineyards, gardens, etc. These figures can be checked by the agricultural survey of 1892, which should have been revised in 1902, but was neglected because so many statesmen and legislators are as frightened of statistics as bad men of business are of a balance-sheet. The small rural properties of less than 10 hectares number 4,852,000 out of 5,700,000 and occupy an area of 11,626,000 hectares. The 711,000 properties of from 10 to 40 hectares occupy 14,312,000 hectares, while the 138,000 properties of more than 40 hectares occupy 22,492,000. But the latter include 5,827,000 hectares of woods and forests and 3,913,000 of moorland, while the properties of from 10 to 40 hectares include 1,567,000 hectares of woods and forests, and 1,367,000 of moorland, giving a total of 7,324,000 hectares of woods and forests and 5,278,000 of moorland. The small properties only contain 1,107,000 hectares of woods and forests and 945,000 of moorland. A deduction of 12,700,000 hectares must therefore be made from the 36,800,000 hectares occupied by large and moderate-sized properties, leaving 23,800,000 hectares occupied by properties of less than 10 hectares. According to the assessment of 1879–81 the value in the market of woods was 745 francs a hectare, and of moorland 207 francs, while the value of arable land was 2,197 francs and of meadow land 2,961. The agricultural survey of 1892 (p. 359) shows that the relative distribution of various kinds of cultivation (including woods but excluding moorland) was as follows:—
It was thus only in the large properties that the woodlands predominated. The number of large agricultural properties, localised in certain departments, had decreased from 1882 to 1892 from 142,000 to 138,000; the number of quite small ones had risen from 2,168,000 to 2,235,000 and from 1,083,000 hectares to 1,327,000. The average area of each had increased from 0.50 ares to 0.59—an increase of nearly one-fifth, and this increase was observable in 60 departments out of 87. In nearly all the departments North of the Loire and down the left bank of the Rhone as far as the Isère the areas of small and moderate-sized agricultural properties had increased during this decennial period. An inquiry made by order of the Ministry of Agriculture in 1908–1909 shewed that the number of small owners increased in 42 departments, diminished in 13, and remained the same in 17. IVThe agricultural survey of 1892 shewed that agricultural properties were held as follows:—
The number of tenant farmers has decreased, while the number of occupiers cultivating their own land exclusively has increased. The statistics of the census of 1901 give the number of independent cultivators of agricultural properties as having increased from 3,086,000 in 1896 to 3,469,000 in 1901. The survey of 1892 numbers 7,200,000 separate undertakings; a number of farmers and tenant farmers therefore cultivate two or more undertakings or properties. M. Augé Laribé, a Socialist, who is the author of a book on vine-growing in the South of France, concludes that “on all points we find ourselves in the presence of contradictions and uncertainties.”1 We should be all the more anxious to congratulate him upon this admission seeing that Socialists have not accustomed us to so much modesty. M. Briand says2 : “The ownership of his land is necessary to the agriculturist, and such ownership alone will protect him against his misfortunes.” But the Socialist idea, is the abolition of land as the property of the agriculturist, so that M. Briand in submitting the idea of peasant proprietorship is setting up an idea of political conservatism. Nevertheless he is mistaken if he believes that all the cultivators of the soil are anxious to possess their “instrument of labour.” Mr. Winfrey has given an account3 of an attempt at a home-colony which was made for fifteen years in the counties of Lincoln and Norfolk. He placed allotments of land, amounting in 1894 to 1,384 acres, at the disposal of a number of agricultural labourers. He reports that in order to save their small capital and to turn it to the best account they would rather rent their allotments than buy them. Arthur Young, an English agriculturist, who studied agriculture in France from 1787 to 1789, said of his own countrymen at that time that any of them who possessed £200 “did not buy a piece of land, but rented it and equipped a good farm with the money.” Except in certain parts of the country, where cultivation on a small scale is rendered necessary by the nature of the soil or of what it produces, a French peasant with a piece of land worth such a sum finds it in his interest to sell it and devote the proceeds to the purchase of live stock, plant and improvements, and to rent a piece of land containing 20 or 30 hectares, instead of contenting himself with the two or three hectares which are the equivalent of such a capital sum. He can find an owner who will entrust him with a piece of land worth ten times the amount of his capital. There is no other industry in which a capitalist on a small scale can obtain an investment of the same extent and with so small a liability. A farmer with method, good health and good management, and a wife with the same qualities, can bring up a family in conditions which are greatly superior than those which would have obtained had he been content with the piece of land of which he was originally the proprietor. In spite of these advantages to the farmer, neither properties nor agricultural undertakings have tended to become concentrated in France, while German Socialists have been constrained to admit that the same observation holds good in their own country. CHAPTER VIIMarx' Principles and Small PropertiesThe ideal of collective production and the peasant.—Lafargue and Guesde disown the programme of the Havre Congress—Engels protests—Liebknecht and Bebel abjure the collectivist doctrine.—Accusations of Schippel and Kautsky—Inconsistency of M. Jaurès. The supporters of the doctrines of Marx in their purest form display the nonchalance with which they put aside their “scientific doctrines” when they are inconvenient. M. Werner Sombart puts the difficulty in this way, “Ought submission to the ideal of collectivist production, which depends upon production on a large scale, to be imposed upon modifications of that principle for the benefit of the small farmer?” The programme of the Havre Congress of 1880, drawn up by Karl Marx, proclaims the “return to collectivism of all the means of production.” But three years later, Guesde, who was responsible for the adoption of this programme, and Paul Lafargue, who was Marx' son-in-law, and had introduced it, abandoned it, considering it inconvenient on political grounds, and set out upon the conquest of the small proprietor. “The Socialist party,” they said, “far from depriving him of his land, will guarantee his possession.” Forgetting that Marx had incessantly repeated that “Society can only be reformed by the destruction of private property,” they obtained the adoption of an agrarian programme at the Marseilles Congress in 1892, based upon the ownership of small holdings, a result which was aggravated by the fact that Liebknecht was present and took part in this recantation. Engels was angry and wrote that “ownership of small holdings must necessarily be destroyed and annihilated by the development of capital. Whosoever desires to maintain it in a permanent form, sacrifices the great principle and becomes a reactionary.”1 He reproached the French Socialists with adopting an appearance of disloyalty by seeming to promise the peasants that which they were unable to perform. Bebel proclaimed that if the peasant claimed to remain an owner, it only remained for him to desert to the antisemitic camp. The German Socialist party nevertheless decided upon a grand inquiry, as the result of which they published, on July 16th, 1895, a programme which “had nothing in common with the abolition of individual property and, on the contrary, would have the effect of ameliorating the condition of the owners of agricultural land.” The question became acute at the Breslau Congress. Bebel, like Liebknecht, was carried away by political considerations; they abandoned collective property in favour of small peasant proprietorship. They were opposed by Kautsky and Dr. Schippel, who said, “Does not the Erfurt programme declare that ownership of small properties is doomed to destruction, and yet you promise to extend it and to continue those who hold it in their possessions?” Mme. Zetkin exclaimed, “The interest of the party requires the peasants to join the proletariat, however painful to them the operation may be. Since Marx has demonstrated that, in accordance with the fatal law of capitalistic evolution, the peasant's destiny is to descend the steps of the ladder of misery, why give him doses to fortify him on his way?” Dr. Schippel denounced the supporters of the agrarian programme as rope dancers, charlatans and makers of snares for yokels. But the point was to win votes for the elections. Kautsky condemned the programme of the agrarian committee in the light of the gospel of Karl Marx. Such and such an article was contrary to such and such a paragraph of the “Communist Manifesto,” or such and such a chapter of “Capital.” He carried a declaration against the system of individual landed property by a majority of 158 votes to 63, but accepted an additional provision in these terms: “The Congress recognises that agriculture requires to be regulated by special laws differing from those which regulate industry.” It is necessary to study and dwell upon these laws, but this particular incident is not calculated to reassure small owners. The doctrine is a communistic one and the qualifications by which certain Socialists seek to attenuate it in particular circumstances or with regard to some particular class are mere political trickery. The owners of small properties are almost everywhere suspicious. They would not object to the expropriation of others for their benefit, but they have no desire to cast their own possessions into a common abyss from which they would be certain never to recover them. As for M. Jaurès, he stated in 1893 that the “ownership of small properties is a legend.” Later, he showed a good deal of tenderness for small “peasant proprietorship,” although in 1901 he denounced it in these words: “The hour is drawing near when no one will be able to speak to the country of the maintenance of individual property without covering himself with ridicule and at the same time branding himself with the mark of an inferior intellect.”1 On June 14th, 1906, he was obliged to recognise that “property has taken hold of the democrats in every fibre,” and, he might have added, of the Socialists as well. CHAPTER VIIILimited Liability CompaniesMultiplication of capitalists—Two advantages—31,799 holders of preference shares in the United States Steel Corporation—“Shirtsleeves”—Opponents of Socialism in the United States. We have seen that Herr Bernstein, far from looking upon limited liability companies as instruments of confiscation, considers them as means for the distribution of capital. Mr. Flint says that1 the large industries were formerly in the hands of a small number of people and were confined to a few families; nowadays they are greatly divided. “There are a hundred times as many people interested in our industries now as there were 25 years ago, and there probably will be at the end of another 10 years a hundred times as many more. So these interests are being more widely distributed.”2 Mr. Schwab, who was a director of the United States Steel Corporation, and began life as a workman, has proved by force of example that capitalism is accessible to all. The securities issued by the trusts associate the multitude of holders with them in their success, and, far from adding to the number of the proletariat, increase the number of capitalists. There are two great advantages in limited liability companies: they enable individuals to embark upon enterprises which they could not attempt with their own capital, and they limit the possible loss of their subscribers. They stand for industrial democracy. There are few businesses in which it is possible for an individual to make an advantageous investment with 100 francs. If he buys a share or a bond, he can obtain a good profit from it, with a prospect of a rise in value if he has made a good selection. The big companies do not confirm Marx' law of concentration, for so far from calling members of the proletariat into being, they multiply the number of capitalists. In 1903 there were 31,799 holders of preference shares in the United States Steel Corporation. The Americans, instead of considering that they prevent each individual from attaining to wealth, say that there are only three generations between shirt sleeves and a fortune.1 The “Wall Street Journal,” in examining the form taken by Socialism in the United States, after a careful investigation enumerates the following classes of persons as being opposed to it:—2
Undoubtedly, says the “Wall Street Journal,” the classes in this list overlap to some extent. The farmer may be a shareholder in a bank or a railway. Be it so, but making a deduction of five millions, there remain ten million individuals with large or small interests in these different forms of property. These ten million individuals represent families which may be estimated to average five persons. Thus we have 50 million individuals, i.e. 60 per cent. of the population of the United States, who are of necessity opponents of Socialism, and among the most refractory and the least amenable are to be found nearly all the women. CHAPTER IXCartels and Trusts
IThe followers of Marx are full of admiration for cartels and trusts: they assert that they abolish competition and that they are thus instruments of socialistic politics; that, by concentrating industries within a few large organisations, they facilitate the absorption of private capital in collectivism; and that, finally, by their example, they teach the methods which collectivist society will have to follow in order to organise its methods of production. Neither cartels nor trusts are applicable to every industry.1 On November 27th, 1907, M. Posadowski compiled a list of the industries in which their action was effective, viz., the mining, metallurgical and chemical industries, paper-making, sugar-refining and sale of alcohol, pottery, cement, glass works on the Rhine and in Westphalia and plate-glass manufactories. Most of these industries only supply raw material or articles for consumption, one seldom finds cartels or trusts which sell finished products direct to the consumer. IISocialists have naturally claimed the American trusts as a justification of the “Communist Manifesto.” M. Paul Lafargue is full of enthusiasm for them, not on this account only, but principally “because they suppress competition and substitute a methodical organisation for the anarchy which prevails in capitalist production.” Now the facts shew the exact opposite. The Anti-Trust Law of 1890 defines trusts as follows1 : Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations. But the Anti-Trust Law is not easily applicable because the majority of trusts, far from restricting industry or commerce between different States, has developed them. As regards foreign nations, it is not the trusts that restrict commerce with them, but the protective tariff. Mr. James Lee, President of the Pure Oil Co., defined a trust before the Industrial Commission in the following terms: “A trust is a corporation or combination of corporations intended to create and maintain a monopoly in any industry.”1 Mr. Archibald, Vice-President of the Standard Oil Co., replies that “under the definitions there are no trusts.” The establishment of a trust is composed of two groups: (1) a promoting body, more or less nominated by some particular promoter, and (2) a financial body which supplies the purchase price of the properties which are to be included in exchange for preferred shares and common stock. The bonus is at least equal to the preferred shares. The holders of common stock have no privileges and only receive interest with the consent of the holders of preferred shares. The common stock represents the intangible assets, the goodwill, the power of the trust to make profits, and no one conceals the fact that this is watered capital. Although there was for several months a period of unprecedented prosperity in the United States, with prices greatly inflated, common stock has almost invariably produced more disappointments than dividends. Out of seven or eight combinations, only one from time to time makes an allotment to the holders of common stock in order to maintain or to raise its market price. Both the promoters and the administrators of trusts agree that the inflation of capital does not affect the shareholder; all that matters to him is the income. Now, such inflation denotes a decrease in the return upon capital or an increase in the outlet for it. Mr. Flint states that inflations have given experience to the public and have prevented the banks which have abused the practice from continuing their operations. The resultant economic intervention of competition is that the capitalist institutes a comparison between the different instruments which are open to him and decides upon that which appears to him the most advantageous. The whole of that portion of the capital of the trust which is based upon anticipations or hopes is unlimited except by the prudence of capitalists. Consequently it is an error to attempt to compare the capital of the trusts with the total wealth of the United States—an error into which M. Lafargue does not fail to lapse. The census has estimated the value of the trusts, under the title of “combinations,” which are defined as follows: “An industrial combination consists of a number of formerly independent mills which have been brought together into one company under a charter obtained for that purpose.”1 On June 30th, 1900, there were 185 “combines” with a total authorised capital of $3,619,038,000 distributed as follows:—
In the following years down to 1903 there was a considerable development of trusts, such as the United States Steel Corporation, the International Mercantile Marine Company, and others. M. Paul Lafargue has obtained the figures for his pamphlet from a small work published by Mr. Moody in 1903. I take mine from a work published subsequently to Mr. Moody's, entitled “The Truth about the Trusts,” of which the author is an ardent admirer. The figures are:—
The industrial trusts formed prior to January, 1898, represented a capital of $1,196,000,000; those which were formed subsequently to that date, a capital of $6,049,000,000. Ten trusts have each a capital of $100,000,000 or more. The seven largest have a total capital of $2,662,000,000, of which the United States Steel Corporation has $1,370,000,000 or about one half. Thirty trusts have a total capital of 50 million dollars, and 129 trusts a capital of ten million. But according to the census of 1900, common stock represented 65 per cent., and the proportion has certainly not diminished, so that $4,700,000,000 must be deducted from the total of $7,245,000,000. Mr. Moody adds the following figures:—
The conclusion he arrives at is that the whole of the “combines” represent 8,604 original companies, and a capital of $20,379,000,000. He adds, with regard to the capital of the seven largest trusts, that their capital is $2,662,000,000, while their market value (in 1904) is $2,278,000,000, a decline of 384 million dollars. Mr. Pierpont Morgan's “combines” represent $1,540,000,000 or 60 per cent. of the total capital of the seven largest trusts. At the market price (in 1904) they were only worth $820,000,000, or less than 37 per cent. of the total market price of $2,278,000,000. The Shipbuilding Trust began with a capital of $3,278,000; when it was reconstructed, it was reduced to $1,450,000, i.e., a reduction of 55 per cent. The “Wall Street Journal,” on October 23rd, 1903, published a list of a hundred trusts, with a total capital of $3,693,000,000, which would have obtained a price of $490,000,000 on the market, and recovered sufficiently to be valued at $2,336,000,000, a decline of $1,357,000,000 or 43.4 per cent from the price at the time of the boom. The capital of the United States Steel Corporation was $1,370,000,000. Mr. Carnegie was paid $447,416,000 in shares for his concerns, which had brought in six million dollars in 1896, seven million in 1897, eleven and a half million in 1899, and twenty-one million in 1899, which was an exceptional year. The Steel Corporation issued shares and bonds to the amount of $1,297,000,000, in exchange for shares and bonds bought for $894,988,000, an inflation of 45 per cent. The apparent values represented 25 per cent., the mysterious values 75 per cent. According to the census of 1890, $414,000,000 were invested in the metallurgical industry. The capital has increased regularly by 46 per cent., and should have been 600 million dollars in 1900. The trust which only represents 40 per cent. of the total capital was formed with a capital of more than 100 per cent. in excess of the total capital nominally required by the industry. People form wild illusions as to the wealth of the trusts. A great part of their capital is based upon the hope of goodwill, its only merit being in the foresight or the expectations of capitalists. It is therefore a mistake to make a comparison between the capital of the trusts and the total wealth of the United States. In an affidavit made in the summer of 1902, Mr. Schwab estimated at 11,000 million dollars the value of the ores, coal, natural gas and limestone belonging to the Corporation. What is the value of the ore. If it represents the whole of the ore of the United States, it is enormous; if it represents 65 per cent., as is suggested, it is not so large; and if only 30 per cent., it is still less. In spite of its unprecedented industrial activity, the capital value of the Steel Corporation of 1,370 million dollars had fallen in 1904 to 760 million. The year 1906 was an exceptional year every where. The preferred shares issued in March 1902 at $92¾, fluctuated between 102 and 117; common stock issued at $42/3 fell as low as 33⅜ and rose as high as 52⅛. In August, 1907, there was a heavy decrease in orders. The railways always need rails, but have not always the funds to pay for them. The corporation's enterprise has, therefore, passed through various vicissitudes and is likely to encounter others. On September 30th, 1907, the preferred shares stood at 90⅞ and the common stock at 27½. Is such a concentration necessarily deducible from economic evolution? Has it not been provoked and hastened by the intervention of the State? Mr. Hamevayer, President of the Sugar Trust, says frankly, “I doubt whether we could venture to form the trust if it were not for the tariff. The tariff is the father of all the trusts.” And Mr. Carnegie exclaimed in an enthusiastic moment of sincerity, “Protection is the American revenge for the high-handed acts of the Alabama. We have had thirty years of protection at 30 per cent. Without protection we could do nothing.” Mr. Schwab, at that time a director of the Steel Corporation, said before the Industrial Commission: “If you take the case of rails or tinplate and the highly finished articles in which labour forms a very important element of cost, and remove the tariff, you lose the trade or you reduce your labour.”1 According to Mr. David Wells in 1880, the capital employed in the iron and steel industry amounted to 341 million dollars. From 1878 to 1887 the consumers of the United States have paid 560 million dollars more for iron and steel than they would have paid if there had been no protective tariff, so that they have paid 60 per cent. more to the iron and steel owners than the amount of capital employed by them. Mr. Byron W. Holt, of Boston, in 1902, attributed 76 millions out of the 111 millions of profits1 of the United States Steel Corporation to the tariff. Otherwise they would not have exceeded 35 millions, of which the requirement of bond holders, after the conversion of 200 millions of preferred shares into bonds, would have absorbed 25 millions. There would thus have remained only 10 millions to pay interest upon 600 millions of share capital. Can the trusts be said to have destroyed competition? Not a single one absorbs the whole of production. According to Mr. J. Moody, of the 92 large trusts, 78 absorb 50 per cent. and more of production, 50 absorb 60 per cent. and more, and 26 absorb 80 per cent. and more. The Standard Oil Company itself only controls 84 per cent. of the home and 90 per cent. of the foreign consumption. The United States Steel Corporation has not destroyed the metallurgical enterprises of the United States, far from it; they have always been on the increase. Enterprises which are not burdened with the financial dead weight which the trusts have to drag, are able to compete with them. At the beginning of 1892 the lead trust owned all the concerns in the United States, except two. In 1894 the independent concerns produced as much lead as the trust, and their capital was two million dollars as compared with the thirty millions of the trust. Competition is the check upon the trusts. Mr. Chapman, a banker, states the principle of their policy as being that “he is going to get all he can, but he must be careful, because if he raises the price too high, in comes competition. To keep out competition, he must reduce his price, and keep the margin between cost and selling price just as low as he can.”1 It is freely stated that a trust can sell at a loss in order to ruin a competitor. But if its operations are extended, can it sell at a loss in every market in order to annihilate a competitor everywhere? Its losses would be in proportion to the amount of its business. Not only do the trusts fail to suppress competition on the market, they make it the motive force of their internal economy. When Mr. Hadley says that there is very little difference between the administration of trusts and of public affairs, he makes a mistake of fact. In the first place, there is only one policy in the trust, to increase business in order to increase profits. Now a government or a municipality are occupied with other aims. There are the political interests of influential supporters to satisfy, as well as party rivalries, which have to be taken into account, and which frequently force an administration, however intelligent it may be or however good its intentions, to take precisely the opposite course to that which would be necessary in order to attain its object. This is a fundamental distinction. And no State has yet succeeded in establishing a method of promotion in its services which entirely ensures the predominance of the most capable and excites the emulation of all. Trusts, on the other hand, are organised on a competitive basis. In the United States Steel Corporation, each of the concerns is autonomous, and the directors are frequently animated by a spirit of particularism, each striving to do better business than the others. If they have to hand over particular products of their manufacture to a concern belonging to the same trust, so far from making a present of it, they insist on selling it at the best possible price. The trust is in fact a federation of companies, its committee of management constituting a clearing house for the mutual exchange of information. There is thus no comparison with the compressed and centralised administration existing in a government monopoly. The following points should be noted:—
I have only examined trusts from the point of view of Marx' theory of the concentration of capital. They do not confirm it. We may admit the existence of preferential rates, such as those obtained by the Standard Oil Company from the railway companies, but this only proves that the company has committed acts which can be successfully attacked by a legislation of an individualistic and not a communistic type. [1]“Die Voraussetzungen des Socialismus und die Aufgaben der Social Demokratie.” [2]This summary is based upon a pamphlet by M. Abel, the editor of La Flandre Libérale. [1]Royal Statistical Society, June 20th, 1906. [2]See St. Loe Strachey's “Making the Poor.” [3]Werner Sombart, p. 89. [1]Société de Statistique de Paris (Séances du 19 mars, 1902, et du 18 mars, 1903.) [1]Estates which have paid duty more than once are only counted once, on the occasion of their first declaration. [1]The ownership of the property of churches and religious congregations has changed, but not the properties themselves. [2]“La Viticulture industrielle,” 1907, Giard et Brière, édit. [3]Discours de Roanne, 24 juin 1906. [4]At the fifth congress of the International Co-operative Alliance. [1]Bourdeau, “l'Evolution du Socialisme,” p. 297. [2]“Etudes socialistes,” p. 161. [1]“United States Industrial Commission,” vol. xiii., p. 32. [2]Ibid, vol. xiii., p. 91. [3]“Socialism,” being Notes on a Political Tour, by Sir Henry Wrixon, late Attorney-General of Victoria, 1896. [4]Reproduced by the Journal of Commerce of New York, January 30th, 1906. [1]Arthur Raffalovitch, “Trusts and Cartels.” See also Lacollection du Marché financier. [2]For the law on the subject, see “Trusts, Pools, and Corporations,” edited by William Ripley, 1906. [3]United States Industrial Commission, vol. xiii., p. 668. [4]Census 1900. Census Reports. vol. vii (manufactures, part i.), p. lxxv. [5]United States Industrial Commission, vol. xiii., p. 456. See also “The Tariff and the Trusts,” by Franklin Pierre (1907). [1]For the details, see Yves Guyot, “I'United States Steel Corporation,” Journal des Economistes, November, 1902. [1]United States Industrial Commission, vol. xiii., p. 107. |
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