THE CONCENTRATION OF WEALTH: ITS ECONOMIC JUSTIFICATION
THE CONCENTRATION OF WEALTH: ITS ECONOMIC JUSTIFICATION
[1902]
The concentration of wealth I understand to include the aggregation of wealth into large masses and its concentration under the control of a few. In this sense the concentration of wealth is indispensable to the successful execution of the tasks which devolve upon society in our time. Every task of society requires the employment of capital, and involves an economic problem in the form of the most expedient application of material means to ends. Two features most prominently distinguish the present age from all which have preceded it: first, the great scale on which all societal undertakings must be carried out; and second, the transcendent importance of competent management, that is, of the personal element in direction and control.
I speak of “societal undertakings” because it is important to notice that the prevalent modes and forms are not confined to industrial undertakings, but are universal in all the institutions and devices which have for their purpose the satisfaction of any wants of society. A modern church is a congeries of institutions which seeks to nourish good things and repress evil ones; it has buildings, apparatus, a store of supplies, a staff of employees, and a treasury. A modern church (parish) will soon be as complex a system of institutions as a mediaeval monastery was. Contrast such an establishment with the corresponding one of fifty years ago. A university now needs an immense “concentration of wealth” for its outfit and work. It is as restricted in its work as the corresponding institution of fifty years ago was, although it may command twenty times as much capital and revenue. Furthermore, when we see that all these and other societal institutions pay far higher salaries to executive officers than to workers, we must recognize the fact that the element of personal executive ability is in command of the market, and that means that it is the element which decides success. To a correct understanding of our subject it is essential to recognize the concentration of wealth and control as a universal societal phenomenon, not merely as a matter of industrial power, or social sentiment, or political policy.
Stated in the concisest terms, the phenomenon is that of a more perfect integration of all societal functions. The concentration of power (wealth), more dominant control, intenser discipline, and stricter methods are but modes of securing more perfect integration. When we perceive this we see that the concentration of wealth is but one feature of a grand step in societal evolution.
Some may admit that the concentration of wealth is indispensable, but may desire to distinguish between joint-stock aggregations on the one side and individual fortunes on the other. This distinction is a product of the current social prejudice and is not valid. The predominance of the individual and personal element in control is seen in the tendency of all joint-stock enterprises to come under the control of very few persons. Every age is befooled by the notions which are in fashion in it. Our age is befooled by “democracy”; we hear arguments about the industrial organization which are deductions from democratic dogmas or which appeal to prejudice by using analogies drawn from democracy to affect sentiment about industrial relations. Industry may be republican; it never can be democratic, so long as men differ in productive power and in industrial virtue. In our time joint-stock companies, which are in form republican, are drifting over into oligarchies or monarchies because one or a few get greater efficiency of control and greater vigor of administration. They direct the enterprise in a way which produces more, or more economically. This is the purpose for which the organization exists and success in it outweighs everything else. We see the competent men refuse to join in the enterprise, unless they can control it, and we see the stockholders willingly put their property into the hands of those who are, as they think, competent to manage it successfully. The strongest and most effective organizations for industrial purposes which are formed nowadays are those of a few great capitalists, who have great personal confidence in each ether and who can bring together adequate means for whatever they desire to do. Some such nucleus of individuals controls all the great joint-stock companies.
It is obvious that “concentration of wealth” can never be anything but a relative term. Between 1820 and 1830 Stephen Girard was a proverb for great wealth; to-day a man equally rich would not be noticed in New York for his wealth. In 1848 John Jacob Astor stood alone in point of wealth; to-day a great number surpass him. A fortune of $300,000 was then regarded as constituting wealth; it was taken as a minimum above which men were “rich.” It is certain that before long some man will have a billion. It is impossible to criticize such a moving notion. The concentration of capital is also necessarily relative to the task to be performed; we wondered lately to see a corporation formed which had a capital of a billion. No one will wonder at such a corporation twenty-five years hence.
There seems to be a great readiness in the public mind to take alarm at these phenomena of growth — there might rather seem to be reason for public congratulation. We want to be provided with things abundantly and cheaply; that means that we want increased economic power. All these enterprises are efforts to satisfy that want, and they promise to do it. The public seems to turn especially to the politician to preserve it from the captain of industry; but when has anybody ever seen a politician who was a match for a captain of industry? One of the latest phenomena is a competition of the legislatures of several states for the profit of granting acts of incorporation; this competition consists, of course, in granting greater and greater powers and exacting less and less responsibility.
It is not my duty in this place to make a judicial statement of the good and ill of the facts I mention — I leave to others to suggest the limitations and safeguards which are required. It is enough to say here that of course all power is liable to abuse; if anybody is dreaming about a millennial state of society in which all energy will be free, yet fully controlled by paradisaic virtue, argument with him is vain. If we want results we must get control of adequate power, and we must learn to use it with safeguards. If we want to make tunnels, and to make them rapidly, we have to concentrate supplies of dynamite; danger results; we minimize it, but we never get rid of it. In late years our streets have been filled with power-driven cars and vehicles; the risk and danger of going on the streets has been very greatly increased; the danger is licensed by law, and it is inseparable from the satisfaction of our desire to move about rapidly. It is in this light that we should view the evils (if there are any) from the concentration of wealth. I do not say that “he who desires the end desires the means,” because I do not believe that that dictum is true; but he who will not forego the end must be patient with the incidental ills which attend the means. It is ridiculous to attempt to reach the end while making war on the means. In matters of societal policy the problem always is to use the means and reach the end as well as possible under the conditions. It is proper to propose checks and safeguards, hut an onslaught on the concentration of wealth is absurd and a recapitulation of its “dangers” is idle.
In fact, there is a true correlation between (a) the great productiveness of modern industry and the consequent rapid accumulation of capital from one period of production to another and (b) the larger and larger aggregations of capital which are required by modern industry from one period of production to another. We see that the movement is constantly accelerated, that its scope is all the time widening, and that the masses of material with which it deals are greater and greater. The dominant cause of all this is the application of steam and electricity to transportation, and the communication of intelligence — things which we boast about as great triumphs of the nineteenth century. They have made it possible to extend efficient control, from a given central point, over operations which may be carried on at a great number of widely separated points, and to keep up a close, direct, and intimate action and reaction between the central control and the distributed agents. That means that it has become possible for the organization to be extended in its scope and complexity, and at the same time intensified in its activity. Now whenever such a change in the societal organization becomes possible it also becomes inevitable, because there is economy in it. If we confine our attention to industrial undertakings (although states, churches, universities, and other associations and institutions are subject to the same force and sooner or later will have to obey it) we see that the highest degree of organization which is possible is the one that offers the maximum of profit; in it the economic advantage is greatest. There is therefore a gravitation toward this degree of organization. To make an artificial opposition to this tendency from political or alleged moral, or religious, or other motives would be to have no longer any real rule of action; it would amount to submission to the control of warring motives without any real standards or tests.
It is a consequence of the principle just stated that at every point in the history of civilization it has always been necessary to concentrate capital in amounts large relatively to existing facts. In low civilization chiefs control what capital there is, and direct industry; they may be the full owners of all the wealth or only the representatives of a collective theory of ownership. This organization of industry was, at the time, the most efficient, and the tribes which had it prospered better than others. In the classical states with slavery and in the mediaeval states with serfdom, the great achievements which realized the utmost that the system was capable of were attained only where wealth was concentrated in productive enterprises in amounts, and under management, which were at the maximum of what the system and the possibilities of the time called for. If we could get rid of some of our notions about liberty and equality, and could lay aside this eighteenth century philosophy according to which human society is to be brought into a state of blessedness, we should get some insight into the might of the societal organization: what it does for us, and what it makes us do. Every day that passes brings us new phenomena of struggle and effort between parts of the societal organization. What do they all mean? They mean that all the individuals and groups are forced against each other in a ceaseless war of interests, by their selfish and mutual efforts to fulfill their career on earth within the conditions set for them by the state of the arts, the facts of the societal organization, and the current dogmas of world philosophy. As each must win his living, or his fortune, or keep his fortune, under these conditions, it is difficult to see what can be meant in the sphere of industrial or economic effort by a “free man.” It is no wonder that we so often hear angry outcries about being “slaves” from persons who have had a little experience of the contrast between the current notions and the actual facts.
In fact, what we all need to do is to be taught by the facts in regard to the notions which we ought to adopt, instead of looking at the facts only in order to pass judgment on them and make up our minds how we will change them. If we are willing to be taught by the facts, then the phenomena of the concentration of wealth which we see about us will convince us that they are just what the situation calls for. They ought to be because they are, and because nothing else would serve the interests of society.
I am quite well aware that, in what I have said, I have not met the thoughts and feelings of people who are most troubled about the “concentration of wealth.” I have tried to set forth the economic necessity for the concentration of wealth; and I maintain that this is the controlling consideration. Those who care most about the concentration of wealth are indifferent to this consideration; what strikes them most is the fact that there are some rich men. I will, therefore, try to show that this fact also is only another economic justification of the concentration of wealth.
I often see statements published, in which the objectors lay stress upon the great inequalities of fortune, and, having set forth the contrast between rich and poor, they rest their case. What law of nature, religion, ethics, or the state is violated by inequalities of fortune? The inequalities prove nothing. Others argue that great fortunes are won by privileges created by law and not by legitimate enterprise and ability. This statement is true, but it is entirely irrelevant; we have to discuss the concentration of wealth within the facts of the institutions, laws, usages, and customs which our ancestors have bequeathed to us and which we allow to stand. If it is proposed to change any of these parts of the societal order, that is a proper subject of discussion, but it is aside from the concentration of wealth. So long as tariffs, patents, etc., are part of the system in which we live, how can it be expected that people will not take advantage of them; what else are they for? As for franchises, a franchise is only an x until it has been developed. It never develops itself; it requires capital and skill to develop it. When the enterprise is in the full bloom of prosperity the objectors complain of it, as if the franchise, which never was anything but an empty place where something might be created, had been the completed enterprise. It is interesting to compare the exploitation of the telephone with that of the telegraph fifty years earlier. The latter was, in its day, a far more wonderful invention, but the time and labor required to render it generally available were far greater than what has been required for the telephone, and the fortunes which were won from the former were insignificant in comparison with those which have been won from the latter. Both the public and the promoters acted very differently in the two cases. In these later times promoters seize with avidity upon an enterprise which contains promise, and they push it with energy and ingenuity, while the public is receptive to “improvements”; hence the modern methods offer very great opportunities, and the rewards of those men who can “size up” a situation and develop its controlling elements with sagacity and good judgment, are very great. It is well that they are so, because these rewards stimulate to the utmost all the ambitious and able men, and they make it certain that great and useful inventions will not long remain unexploited as they did formerly. Here comes, then, a new reaction on the economic system; new energy is infused into it, with hope and confidence. We could not spare it and keep up the air of contentment and enthusiastic cheerfulness which characterizes our society. No man can acquire a million without helping a million men to increase their little fortunes all the way down through all the social grades. In some points of view it is an error that we fix our attention so much upon the very rich and overlook the prosperous mass, but the compensating advantage is that the great successes stimulate emulation the most powerfully.
What matters it then that some millionaires are idle, or silly, or vulgar; that their ideas are sometimes futile and their plans grotesque, when they turn aside from money-making? How do they differ in this from any other class? The millionaires are a product of natural selection, acting on the whole body of men to pick out those who can meet the requirement of certain work to be done. In this respect they are just like the great statesmen, or scientific men, or military men. It is because they are thus selected that wealth — both their own and that intrusted to them — aggregates under their hands. Let one of them make a mistake and see how quickly the concentration gives way to dispersion. They may fairly be regarded as the naturally selected agents of society for certain work. They get high wages and live in luxury, but the bargain is a good one for society. There is the intensest competition for their place and occupation. This assures us that all who are competent for this function will be employed in it, so that the cost of it will be reduced to the lowest terms; and furthermore that the competitors will study the proper conduct to be observed in their occupation. This will bring discipline and the correction of arrogance and masterfulness.
