The Online Library of Liberty

A project of Liberty Fund, Inc.

• Foreword to the Revised Edition.
• Modern Economic Problems
• Part I: Money and Prices
• Chapter 1: Nature of Economic Problems
• Chapter 2: Origin and Nature of Money
• Chapter 3: Commodity Money and the Quantity Theory
• Chapter 4: Fiduciary Money, Metal and Paper
• Chapter 5: Price Levels and the Gold Standard
• Chapter 6: Rising Prices and the Standard
• Part II: Banking and Insurance
• Chapter 7: The Functions of Banks
• Chapter 8: Banking In the United States Before 1914
• Chapter 9: The Federal Reserve Act
• Chapter 10: Crises and Industrial Depressions
• Chapter 11: Institutions For Saving and Investment
• Chapter 12: Principles of Insurance
• Chapter 13: Scientific Life Insurance
• Part III: Tariff and Taxation
• Chapter 14: American Tariff History
• Chapter 15: International Trade
• Chapter 16: The Policy of a Protective Tariff
• Chapter 17: Objects and Principles of Taxation
• Chapter 18: Property and Corporation Taxes
• Chapter 19: Personal Taxes
• Part IV: Wages and Labor
• Chapter 20: Methods of Industrial Remuneration
• Chapter 21: Organized Labor
• Chapter 22: Public Regulation of Hours and Wages
• Chapter 23: Other Protective Labor and Social Legislation
• Chapter 24: Social Insurance
• Chapter 25: Population and Immigration
• Part V: Public Policy Toward Private Industry
• Chapter 26: Agricultural and Rural Population
• Chapter 27: Problems of Agricultural Economics
• Chapter 28: The Transportation Problem
• Chapter 29: Railroad Regulation
• Chapter 30: The Problem of Industrial Monopoly
• Chapter 31: Public Policy In Respect to Monopoly
• Part VI: Private Property Versus Socialism
• Chapter 32: The Present Economic System
• Chapter 33: Public Ownership
• Chapter 34: Methods of Distribution
• Chapter 35: Socialism, Present and Future

PART VI

PRIVATE PROPERTY VERSUS SOCIALISM

CHAPTER 32

THE PRESENT ECONOMIC SYSTEM

§ 1. The place of private property. Of fully equal importance with material wealth in determining the economic power of a people is the social system under which the nation lives. This is the term applied to the whole complex of institutions and arrangements in which and by which people live together in society. It is the embodiment of the opinions, ideas, and habits of life inherited by each generation from its forebears. It is, indeed, a people’s whole state of civilization, with its political, economic, intellectual, scientific, religious, and esthetic aspects.

The most important economic aspect of the existing system is, broadly speaking, the institution of private property. So closely connected with this that they are hardly more than different phases of the same thing are the use of money (the monetary economy), the wage system, and competition as a mode of distribution. “The institution of private property” is the general expression for the way in which men in the modern state make use of their own energies and of material wealth within the nation. We live in a régime of private property, and all our economic problems are affected by that fact. The determination of the exact boundaries of private property makes up a large part of the politico-economic problems which the people in each generation have to solve. A large share, possibly, in a certain sense, every one of the economic problems that are discussed involve change, limitation, definition, or, more radically, abolition of present laws of property. Broadly understood, as above, therefore, determination of the nature of private property is the essential problem in economic legislation.

§ 2. Nature of property. Property means ownership, and ownership is the abstract noun expressing the quality of possessing a thing. Correspondingly, owner is the Anglo-Saxon equivalent of “proprietor.” Property thus, fundamentally, means, not an object held or possessed, but the right in or belonging to a person to control something that he owns. Ownership is a legal right to control under certain conditions.1 Physical possession of an object is not necessarily ownership.

The law makes between property rights and equitable rights some subtle distinctions, which have their reason in the history, if not in the logic, of the law, but which are not essential to economic discussion. In some states this distinction has been in large measure abolished. What interests us are the rights (claims) that men have to the control of wealth and services, whether by technical law these are called legal or equitable, and this right is what is meant by “property” in our discussion of it.

There are different kinds of ownership. It may be private, as that of individuals, families, partnerships, or corporations; or it may be public, as that of nations, states, counties, cities, and towns, owning such things as public buildings, parks, highways, the Adirondack forest reserve, or the Erie Canal. These two kinds are equally effective as against the claims of outsiders, but the rights of those inside the circle of ownership differ. For example, the rights of one shareholder against another, or the rights of one member of a family as against another, are not the same as the rights against outsiders. Private property is the characteristic feature of our present industrial society, but it exists side by side with public property and with many intermediate grades between private and common property.

Though property meant originally and essentially the intangible right to a thing, the word came to be applied also to the object of the right. This is done both in common speech and in judicial decisions, with inevitable ambiguity. This may be readily seen by trying to substitute the word ownership for property, a thing quite simple in some cases but impossible in others. One would not point to a house and say, “This is my ownership,” but either, “This is my property,” or “I exercise ownership over it.” It is well recognized that a man may have a property right in this abstract sense in or over his own services, as to practise a trade or in the “good will” of a business, or in an intangible patent or a copyright, quite as well as in a material object.

§ 3. Relation of wealth, property, and capital. A failure to see this distinction and to keep it clearly in mind has led to confusion, even on the part of legislatures, learned judges, and able economists. If property is said to be (for example) a house and lot and at the same time the right to that house and lot, then there are two properties at once for each economic good, viz.: the object itself and the right to it.2

This difficulty could be avoided by the consistent definition and use of terms. A material economic object is a good, is a form of wealth. The usance of wealth and the service of laborers at the moment rendered constitute forms of income. The right of ownership, i. e., the right to control, use, or direct the use of wealth and services, is property, which is therefore the right to receive incomes. The value of the income of an individual constitutes his capital. Goods, rights to goods, value of rights to goods: these three things are clearly distinguishable.

§ 4. Some theories of private property. Various theories have been framed to explain the origin and to justify the existence of private property. The occupation theory is that property is based upon the priority of claim of one who finds wealth without an owner and appropriates it. This is not an explanation of the property rights that are arising every moment, nor does it give a logical reason for the continuance of ancient property rights. It is a statement applying to a case that has rarely happened, the settlement of an unoccupied territory.

More adequate to explain many cases is the conquest theory, that property is based on force; for nearly all lands to-day are occupied by the descendants of conquering invaders who took the lands and natural resources from the former inhabitants, who in turn had taken them from other occupants many centuries before. The conquest theory applies, for example, to the invasion of the Roman provinces by barbarian tribes who divided the country and developed the feudal system based on land tenure. But it hardly applies to present-day happenings, and at its best it cannot, to modern minds, “justify” present property rights.

The labor theory, meeting some queries where others fail, is that ownership is based on the act of production. It is declared that every man has a right to that to which his brain and his muscles have imparted value. It is apparent that this test leaves without explanation or justification a great number of things that do exist and have existed as property. Usually the basis of the labor theory of property is declared to be each individual’s natural right to the results of his own labor, which claim is assumed to be an ultimate, undebatable, axiomatic fact. However, that type of natural-right doctrine, which makes no appeal to experience and results, is now quite discredited in political science.

Another form of natural-rights theory is that property is necessary for the realization of the dignity of human nature, and every individual has the natural right to self realization. This theory is, in a way, based on an appeal to experience as to the effect of property on human character, and it has the virtue of expressing one of the ideals of modern democracy. Although, in common with various other “natural-rights” theories, it must be deemed too absolute and too individualistic, it contains a far-reaching truth, of which due account must be taken in our social philosophy.

The legal theory is that property exists because the law says it shall. This expresses a truth, but is no more than a truism. The law determines the limits of property, but what determines the limits of the law? What practical or social justification is there for passing and continuing such law? The legal theory does not contain a final explanation.

Each of the five theories has its defects, but each points to some fact important and significant, at certain times and places, in the explanation of this widespread institution. They all find some place within a more comprehensive sixth theory, that of social expediency, which will be outlined below. First, however, let us briefly survey some of the historical and legal qualifications of property as it has been and is.

§ 5. Origin vs. justification. The question of the origin is not the same as that of the present justification of the existing system of private property. The institution of private property has evolved under diverse conditions. In early societies individual property rights were not very clearly marked. Every tribe asserted against other tribes, and tried to uphold by war, its claims upon its customary hunting-grounds; but the claims of the individual hunters on land within the tribe did not often come into conflict. Private property at the outset was in personal possessions, ornaments, weapons, utensils, which were very meager in that primitive society in which it was the custom “to go calling with a club instead of a card-case.” Only later came individual property in land. A few years ago it was generally believed that the organization of the old German tribes was politically an almost perfect democracy, and economically a communism in which all had equal claims upon the land. To-day this opinion is very seriously questioned. It seems probable that there was a goodly measure of communism in the control and use of lands (though not in other things), but this was largely confined to an oligarchy of the favored; whereas the masses lived in subjection, cut off from all but a meager share in the common lands. However that may have been, strong forces within historic times have put an end to the common ownership and tillage of land as it existed among the peasants of Europe. That system was shown by experience to be wasteful. Competition tended to bring the economic agents into more efficient hands, and the movement was furthered by many acts of injustice and violence on the part of those in power.

Inquiries into the origin and development of any social institution are interesting and helpful in forming an estimate of its present significance, but the problems of the past are not those of to-day. Whether or not the ancient beginning of property in Europe was in violence and evil has but a remote bearing on the question as to the present working of it. Social conditions and needs have not changed more than have the forms and limits of property itself. Each generation has its own problems to solve, and, ignoring for the most part the evils of the distant past, each generation must test existing institutions by their present results.

§ 6. Limitations of private property. It is well, in discussing private property, to rid the mind at once of the idea that it is an absolute and unchanging thing. Few realize the manifold ways in which property rights are limited. Unmodified private control of property is unknown; the public makes many reservations in its own interest. There is, first, a whole set of limitations to prevent nuisances. An owner in many situations is not free to build a slaughter-house or to start a glue-factory on his land. Property is governed by general public utility, and anything that threatens to become a nuisance or a danger may be excluded. Under the right of eminent domain, the state or the railroad may take the old homestead from the owner who would live and die there. Although pecuniary damages are paid to him, this is a limitation of his property rights. Rights of way on property exist either by contract or by prescription permitting its public use. Most important of all limitations is the right of taxation, by which society takes more or less of private incomes for purposes of which the individual owners may not approve.

The law enforces a multitude of private claims by some persons against others. A variety of rights called easements or servitudes may attach to private property, modifying its exclusive use. Leases for any period are a limitation of the owner’s control. Both the holder of the lease and the owner of the property have certain rights before the law. The lender of money secured by mortgage has a legally recognized and enforceable equity in the mortgaged wealth. Property is left in trust for the benefit of persons or of institutions or of the public, and is administered by trustees who are strictly bound to execute the terms of their instructions. Contracts of many sorts are entered into by owners, limiting their control in manifold ways, and the law enforces these contracts. These all form a complex of equitable claims, which together equal in value one undivided property right, which in turn equals the value of the wealth.3 These claims mutually delimit each other (whether they be called equitable claims, or liens, or property rights), and wealth is not multiplied by multiplying the claims, as is unfortunately sometimes assumed to be the case.

§ 7. Limitations of bequest and inheritance. The term bequest implies a will, usually a written will in which the person, in anticipation of death, expresses his wishes as to the disposition of his property. It is said sometimes that bequest is a “logical” result of private property, but the law does not treat it as necessary. The right of bequest, or of gift at death, is limited in various ways in different countries. In countries where hereditary aristocracies exist, primogeniture is in some cases required by law, in others so strongly favored by public opinion that it is practically always followed. Custom limits bequests in England to members of the family, and wills giving outside the family are rare, and are almost always broken in the courts. John Stuart Mill contrasted this with the practice in America, frequent even in his day and still more frequent now, of rich men giving for public purposes. In France the right of bequest outside the family is legally limited; only the share of one child can be willed away by the father, and the rest must be equally divided among the children. “Settlements” and fidei commissa are limited in many countries because of the recognized social evils resulting from the tying up of estates for generations. Throughout the history of England, Parliament has given attention to the question of mortmain, which chiefly concerned the drifting of great estates into the hands of the church or of corporations as the result of bequests by the pious. In England, of late (and to a less extent in this country), the policy of permitting unlimited endowments to charitable institutions has been seriously questioned, and by legislation some of the old endowments have been diverted from their original purposes when these have ceased to be of social utility. Inheritance, in contrast with bequest, usually means succession to the property of one who has died intestate, that is, has made no will. The law of inheritance likewise varies greatly with time and place.

§ 8. Social expediency of private property. In the light of history and of present political philosophy, the explanation and justification of private property must be on grounds of social expediency. This is a broad explanation, and it has the fault of a broad explanation that it needs to be further explained. Under it can be brought the many varying conditions. Even if private property works hardships to individuals in many cases, it may be justified if, on the whole, it gives the best results that are practically possible. Laws must be judged by their average working, not by exceptional cases. In general, the system of private property must be judged by this test: Does it advance the welfare of the nation better than would any alternative plan for the control of economic wealth? The question is not whether it is faultless, for no human institution is so. Nor must it be assumed that the rule of property needs to be uniform in respect to all kinds of wealth. There are many kinds of property, and the test may be applied separately to the different forms and to the varying degrees of property rights. The varied and often strict limitations of property mentioned above are all determined by some thought, wise or foolish, of social expediency. In the last chapter have been seen many examples of the fact that different parts of wealth may be treated in different ways: there may be private property in wagons, and public property in roads; private property in houses, and public property in forests; private property in automobiles, and public property in railway carriages. But any rule of property, like any other workable human law, must be applicable to all individuals who meet the conditions.

The very acceptance of the theory of social expediency implies the need of frequent readjustment of the institution of private property. The essential thought in the various attacks on the institution of property is that, because it either causes or makes possible the inequality of incomes, it is not socially expedient. Private property, as it is found to-day, is complicated by many historical accidents. Survivals of ancient injustice and relics of feudal institutions that rest on no vital reason remain in our new country as well as in the older ones. The limits of property in many respects are determined, not according to the logic of expediency, but by the social inertia that often governs successive generations.

The question is raised in many minds: If private property is not an absolute right, what shall be its limits? What changes should be made in it? These questions put one of the greatest economico-political problems of our day, one that contains within it, indeed, the many minor problems that have appeared in the foregoing pages.

§ 9. The monetary economy. So greatly does the use of money facilitate the transfer, buying, and selling of private property, and so closely are property and pecuniary trade connected in practice and in the thoughts of men, that every radical proposal or attempt to abolish private property, including the recent marvelous performance of the Bolsheviki in Russia, has included a plan to do away with money also. But money and private property are not essentially and logically bound up together, for a certain measure of private property always has been found where money was little or not at all used. True, if there were absolutely no private property there would be little use for money, although it might still be used as a form of counter by the communistic state. We have already seen4 how a monetary unit comes into use, and have treated of the nature of money. We note here that the use of money is an outstanding feature of the present economic system and gives rise to many of the problems of political economy.

§ 10. The competitive system. The existing system is likewise characterized by competition5 in the buying and selling of wealth and of the usances and services of economic agents. By competition we mean here the condition of political freedom on the part of each man to trade his property (goods, uses, or services) as he chooses, and this combined with the disposition on his part to get what he values most highly for himself and his family. Whenever any one else (official or citizen) forbids and prevents a man from getting all he can, in so far competition is limited. Whenever any one is deterred by fear of, or by affection for, some other trader, from getting all he can, in so far competition is limited. Whenever any one conspires with another trader to act together with him to withdraw or to alter his bid, in so far competition is limited. Private property and economic competition do not merely happen to exist side by side, forming more or less favored conditions each for the other; they are essentially connected.6

It is not our task at this point to present the advantages and disadvantages of competition, but merely to indicate its important place in the actual economic world. Like private property, competition is not a universal feature of our present system, but it is the most general and characteristic method of valuation, of price-fixing, and of trade.

§ 11. Limitation of competition by custom.7 The relatively large influence of competition in present society appears more plainly in comparing the present system with that of an earlier state of society or with that of a present savage tribe. A member of the lowest human societies is subject to law; though he is a savage, he is not “untutored.” On the contrary, he is bound in many ways to follow customary lines of conduct, and a large part of his time is given to learning the traditions and then to observing the ceremonials of the tribe. Primitive customs always take on a religious sanction, and every member of the tribe is piously bound to do as his fathers have done and as his neighbors are doing. This limitation applies to the choice of food to eat, clothes to wear, time to hunt, plant, and harvest, weapons and tools to use, where and how to trade, how much to give or take, and to countless other details of economic choice. So, in early society, economic relations were complex and but slowly changing from generation to generation. Custom, rather than competition, ruled in manifold ways the economic actions of men.

Custom continued to rule a large share of the individual life of the peoples of northern Europe through barbarian and feudal times. Its force has gradually decreased, but even yet is not entirely set aside. Political and economic interests were not clearly distinct in the Middle Ages. Land was the all-important kind of wealth. Military and other public services were performed by the higher landlords (as vassals of their overlords), who in this way paid at the same time what we to-day would call rent and taxes. The landlord in turn received from his underlings services and goods in kind (food and supplies) and so (in modern eyes) was both a collector of taxes and a receiver of rent. The rent, however, was not a competitive price, but consisted of the dues and services that the forefathers had been accustomed to pay. In many ways also, in the towns, close organizations of craftsmen and of merchants regulated prices and kept others out of their industries. Industrial privilege pervaded the life of that time.

Yet through all the Middle Ages ran the forces of competition. The inefficiency of customary services and the high prices charged by selfish privilege were constant invitations to men to become competitors. Men strove to break over the barriers of custom and of prejudice. The effort to attain freedom to compete was the vital force of the time. The industrial history of the Middle Ages was largely the story of the struggle of the forces of competition against the bonds of custom and privilege.

§ 12. Effect of modern forces upon custom. The industrial events following the discovery of America strengthened the forces making for economic freedom. Discoveries in the western hemisphere opened up a wide field for the adventure and enterprise of Europe. Commerce is the strongest enemy of custom, and new opportunities gave a rude shock to the conservatism both of the manor and of the village. With the rapid growth of industry and manufactures, old methods broke down. In an open market custom declines; it flourishes best in sheltered places. Further, the movement of thought in the Reformation, and the spirit of the times which expressed the principle of personal liberty and allowed the individual to follow his own opinions and take the consequences, were favorable to competition. Despite these facts, the restraints of the national governments on trade continued great, in some respects increasing during the seventeenth and eighteenth centuries in France, Holland, and England. The regulation before attempted by towns and villages was employed on a larger scale by national governments in their industrial systems. The colonies in America were used for the economic ends of the “mother country” and for the selfish interests of the home merchants in Europe. The American Revolution was one of the bitter fruits of the English policy of trade restriction.

§ 13. Adam Smith’s influence. “The Wealth of Nations,” the first great work on political economy, was published in the year 1776. That was the “psychological moment” for its appearance, as public thought was so prepared for it that it had its maximum possible influence. The year of the American Declaration of Independence gave the most striking object lesson on the evils of a selfish colonial policy that interfered on a grand scale with economic freedom. The old customs had become ill fitted to life, ill adapted to the rapid industrial changes that were going on. What was needed in many directions, both in politics and in industry, was merely negative action by the government, the repeal of the old laws, the overthrow of old abuses. The French Revolution, following a few years later, emphasized this thought in the political field. The philosophers of the time believed in a “natural law” in industry and politics. The reformers of the time wished to throw off the trammels of the past and to give men opportunity to exert themselves “naturally.” In America the old abuses never had taken deep root, as the conditions of a new continent were not favorable to monopoly and privilege. Although the movement for the repeal of medieval laws has continued in Europe from 1776 till the present time, yet custom still is stronger to-day in Europe than in America. Serfdom was not abolished until the first half of the nineteenth century in Austria and southeastern Europe, and not until the last half in Russia. Many economic and cultural forces furthered this movement, but the most powerful intellectual force in its favor was the work of Adam Smith. So strong an impression did Smith’s book make that in the minds of men “free trade” became almost identical in thought with political economy, whereas that was but the temporary economic problem of the eighteenth century.

Many men then thought that in “free and unlimited competition” had been found a solution of all economic problems for all time. But soon it was apparent that it was no such simple and absolute solution. Indeed, many of the present economic problems—in one sense all of them—center around this one: to determine the proper forms and limits of competition. This problem has appeared in various aspects throughout the foregoing pages.

§ 14. The wage system. Viewed in another aspect, the present economic and social order is called the wage system.8 The wage contract, like the use of money, is not essential to the existence of a system of private property. Communities such as the American colonies and many of the newly settled states may consist almost entirely of self-employed owners of land. Bulgaria, before the Balkan wars called the peasant state, presented this organization (though of course with some wage payment), as did also its neighbor Serbia. But, given the institution of private property with competition (freedom to buy and sell), let manufactures and commerce develop to any extent, and inequalities of fortunes increase while an increasing number of persons work for wages. It is noteworthy that as this goes on (as it has done in America at an increasing rate since the middle of the nineteenth century) it is the agricultural and rural hand industries that continue to be mainly worked by owner-managers and workers, while it is the manufacturing, transporting, and large commercial enterprises in which the labor is done for wages. The acceptance of the wage system thus far has been the inevitable price to be paid for manufacturing and industrial development.

References.

• Brooks, J. G., Labor’s challenge to the social order. Pp. 441. New York. Macmillan. 1920. An able description and analysis of the aims and accomplishments of the different labor groups.
• Cooley, C. H., Human nature and the social order. N. Y. Scribner. 1902.
• Ely, R. T., Competition: its nature, its permanency, and its beneficence. A. E. Assn. Pubs., 3d ser., 2; 55-70. 1901.
• Ely, R. T., Property and contract in their relation to the distribution of wealth. N. Y. Macmillan. 1914. (2 vols.)
• Gladden, Washington, Tools and the man. N. Y. Houghton. 1893. (One example of a large number of American books appealing for the application of Christian ethics to social questions.)
• Gleason, A., What the workers want. A study of British labor. Pp. 518. New York. Harcourt, Brace and Howe. 1920.
• King, W. I., The wealth and income of the people of the U. S. New York. Macmillan. 1915.
• National Bureau of Economic Research, The income of the U. S. New York. Harcourt, Brace & Co. 1921.
• Parker, C., The casual laborer and other essays. Pp. 199. New York. Harcourt, Brace & Howe. 1920. Study of the psychology of the laboring element that makes up the bulk of the I. W. W.
• Spahr, C. B., Present distribution of wealth in the United States. 1896.
• Watkins, G. P., Growth of large fortunes. N. Y. Macmillan. 1907.
• Williams, W., What’s on the worker’s mind? N. Y. Scribner. 1920. A first hand study of the problem of industrial unrest.

CHAPTER 33

PUBLIC OWNERSHIP

§ 1. Waves of opinion as to public ownership. Opinion and practice in the matter of the public ownership of wealth and the direct management of enterprises has moved in waves. In feudal times, when government was virtually identical with the personal ruler, and the private “domains” of the lord or king were the sole source of his public revenues,1 holdings of this kind were very large. Their public nature came to be more fully recognized, but they did not yield large revenues, and gradually were in large part sold or given away to private owners. This was particularly true in England, and in a less degree on the continent of Europe. The conviction grew that the state, or government, was an inefficient enterpriser, and that the sound public policy was to foster private industry and obtain public revenues by taxation. The ideal was embodied in the laissez-faire philosophy that government should confine itself exclusively to the most essential political functions, leaving the economic functions absolutely alone. It should keep the peace, prevent men from beating and robbing each other, and preserve the personal liberty of the citizen.2 Thus, it was believed, all of the economic needs would be provided for by competition, in the best way humanly possible, in the quantities and at the rate needed. This policy attained its maximum influence in the first half of the nineteenth century in England, and in America probably just before the Civil War, in the decade of the fifties.

§ 2. Primary functions of government favoring public ownership. Civilized government requires the use of numer-out material agents to make possible the exercise even of the primary political functions. The state may either own these agents or hire their use from private citizens who own them. It is now the general policy for government to own and control many of the more essential agencies, especially for the performance of the political functions; but a wide range of choice remains. Buildings for legislative and executive officers, customs-houses, post-offices, lighthouses, can be rented from private citizens, as post-offices usually are in small places; but it is obviously economical and convenient in large cities for the government to own the public buildings.

A city may own the machines and wagons for cleaning the streets and for collecting garbage, and may hire day-labor directly, or it may have the work done by private contractors. The more simple political functions shade off into the economic. To coinage usually are added the issue of legal-tender notes and certain banking functions; the post carries packages, transmits money, and in most countries now performs the function of a savings bank for small amounts. The social and industrial functions undertaken by public agencies have steadily increased since the middle of the nineteenth century, and the sphere of the state has been enlarging.3 The question as to the proper limits to this development is ever open.

§ 3. Economic influences favoring public ownership. In some cases private ownership is difficult because of the excessive cost of collecting for the service. The cost of maintaining toll-houses on a turnpike sometimes exceeds the amount collected. Collection in other cases, as for the service of lighthouses to passing ships, is impossible. Public industry may secure, through the economy of large production, a cheaper and more efficient service, the benefits and costs being diffused throughout the community. A manufacturer able to keep his methods secret, or to retain his advantages for a time, can afford to undertake expensive experiments in his business, but the farmers seldom can. The benefits of the work of experiment stations for agriculture are felt immediately by the farmers, but are diffused to all citizens. The public ownership of parks for the use of all gives a maximum of economy in the production of the most essential goods,—fresh air, sunshine, natural beauty, and playgrounds in the midst of crowded populations. Municipal ownership of waterworks is an extension of the same idea. Not only because large amounts of water are used by the public, but because cheap, pure, abundant water is an essential condition to good citizenship, it is felt that speculation should in every possible way be eliminated from this industry.

The assumption is made in the laissez-faire doctrine that the interest of the public harmonizes with that of the individual. But this proves often not to be the case. For example, the forest has an immediate value to its owners and to the consumers of lumber, and it has also a diffused utility in its influence on industry, on climate, on navigation, on water-power, and on floods. Yet, as the private owner, unless a great land monopolist, does not control enough of the forest appreciably to affect any of these things, and could rarely sell them even if he could affect them, he will cut down the tree whenever he can gain by doing so. In this situation either governmental control or governmental ownership of forests is essential.

Each kind of political unit, or subdivision of government, develops characteristic kinds of public ownership and industry. Federal states consist of three main groups of political units; national, provincial, and local. Provincial units are the largest subdivisions, as the American “states,” or commonwealths, the German states, and the provinces in other countries. The term local political unit is more complex, and may mean county, township, village, city, or school or sanitary district; but most of what is to be said of local ownership refers to cities or to incorporated villages.

§ 4. Forms of municipal ownership. Local political units acquire ownership only in local industries and in wealth used locally by the citizens. Nearly all parks and recreation-grounds are owned by cities. As population has become more dense, private yards of any extent have become impossible, in cities, for all but the wealthy. Public ownership of parks insures a “breathing-place” and recreation-grounds to the common man in the most economical way. Of late the movement for large and small public parks and playgrounds has gone on rapidly in American cities. Related to parks are public baths, public libraries, art collections, museums, zoological gardens, etc. Some have seen danger in this policy of “giving something for nothing,” but the public sees no such danger as long as the things supplied gratify the higher tastes—as art, music, literature, and social recreation. These give no encouragement to the increase of improvident families and to the breaking down of independent character.

Streets, roads, and bridges were once owned largely by private citizens. Here and there still are found toll roads and toll bridges built under charters granted a century ago, but tolls on public thoroughfares are for the most part abolished. Public markets, where the producer from the farm and the city consumer can meet, are old institutions. About two thirds of the cities of 30,000 population or more have public markets or scales, and fully one third have public markets of importance. New York city has six large retail and wholesale markets for selling meat and farm produce, in which rents or fees are charged, and several open markets. There has recently been a large movement in this direction.

The providing of apparatus for extinguishing fires is always a public duty; the conveyance of waste water is increasingly a public function. The supply of pure water for domestic and business uses, for fire protection, and for street cleaning, while often a private enterprise in villages and sometimes in large cities, is increasingly undertaken by public agencies. Most of the larger cities now own their own water-supply systems. Public ownership of gas and electric lighting is less common, as the utility supplied is not so essential and the industry is somewhat less subject to monopoly; but the difference is one of degree only. Street railroads are often under public ownership in Europe; but there have thus far been few cases of the kind in the United States and Canada.4

§ 5. Localized production favoring monopoly. A number of these enterprises have characteristics in common which appear to make inevitable their drift into monopolistic control. Waterworks, gas, electric lighting, street railways, telephone systems, are among these. However fierce may be the competition between separate private companies for a time, sooner or later either one company drives out the other or buys it up, or both come to an agreement by which the public is made to pay higher prices.

A feature favoring the growth of monopoly when such industries are left to private enterprise is the need to produce and supply the commodity or service at a given locality. While two street railways can compete on neighboring streets, it is physically impossible for two or more to compete on the same street. Two systems of water-mains or gas-mains can be put down, as sometimes is done; but this is not only a great economic waste, but the tearing up of the streets is an intolerable public nuisance. This difficulty is less marked in the case of telephones and electric lighting, and some persons still cling to faith in competition to regulate the rates in those industries; but faith in competition between water companies and between gas companies has been given up by nearly all persons now, as it was long since by students of the subject.

§ 6. Economies of large production favoring monopoly. A second feature favoring monopoly in such industries is the marked advantage of large production in them. These industries are usually spoken of as “industries of increasing returns.” This advantage is enjoyed in some degree by every enterprise, but it is gradually neutralized and limited. The need to extend an expensive physical plant to every point where customers are to be served, and the very much smaller cost per unit of delivering on the same street large rather than small amounts of water, gas, electricity, and transportation, offers a greater inducement for one competitor to crowd out or buy out the other at a more than liberal price. Even then, larger net dividends and correspondingly larger capitalization are secured than were before possible to both companies combined.

§ 7. Uniformity of products favoring monopoly. A third feature favoring monopoly is uniformity in the quality of the product furnished. It is a general truth that competition is most persistent where there is the greatest range of choice open to the customer, and consequently the most individual treatment required of the enterpriser. An artist’s product is very distinctive. Even a storekeeper attracts about him a body of patrons who like his product (for the merchant’s manner and method of dealing are qualities of his goods) and who cannot be tempted away by slight differences in price. Rival companies in the stage of competition are seen to claim superiority for their particular goods and to improve their service in every way possible. A new telephone company, entering where a monopoly has held the field, works at once a wonderful betterment in rates, courtesy, and service. But, as the product of all competitors attains the highest technical standard possible at the time, the rivalry is reduced to one of price, and it is usually a “fight to the finish.”

§ 8. Franchises favoring monopoly. A fourth feature favoring monopoly in these enterprises is the necessity of making permanent and exceptional use of the public streets and alleys. If this right were granted by a general law to every citizen, this feature would be sufficiently implied in the foregoing discussion. As it would be intolerable to allow private interests to use public property in whatever way they wished, the legislative body makes special grants in such cases, in view of the circumstances. Not only is the legislature (or council, or county board of commissioners, etc.) led by the economic difficulties to withhold a charter from a second company, but it may be corruptly influenced by the company already established. The knowledge of the opposition to be encountered in getting a franchise must keep competitors out, even though monopoly prices are maintained.

Because of these several features, which are so closely related that they form a common character, more or less fully shared by various industries, and especially in view of the necessity for the formal granting to them of peculiar privileges in the form of a public franchise, they are monopolies. The public, in order to protect itself, is forced to undertake an exceptional control of these industries.

§ 9. Various policies toward local public-service industries. Several courses are open to the public, acting in its political capacity, to retain these monopolistic advantages for the general welfare. (a) It may do nothing, trusting vainly to competition to regulate the rate, or consciously leaving the result to be worked out by the monopoly principle; this is what in most cases has been done in the past in America. (b) It may leave the rate to be fixed by the monopoly principle, but charge for the franchise so much that the value of the monopoly is appropriated into the public treasury; virtually this is selling the franchise at auction. (c) It may attempt, in granting the franchise, to fix near cost the charge for the service or product, so that the franchise will be worth little as private property. (d) It may leave the price to be fixed at cost, not definitely by law, but by an administrative commission having the power to regulate rates. (e)) It may have public officials carry on the business, either selling the product at cost or making monopoly profits that go into the public treasury. Various combinations of these plans are followed in practice.

After plan (a), rates fixed in the franchise (c) had wide vogue. But fixed maximum rates, even under the most favorable conditions, are rarely equitable, for a uniform rate does not apply justly to all parts of a town and to all conditions of service. Fixed maximum rates become too high in periods of stationary prices, when technical improvements are rapidly introduced, and from a different cause, when general prices are falling, as between 1873 and 1897. They became too low (unless offset by extraordinary technical improvements and economies of increasing output) in periods of rising prices. Since the nineties many public utilities have been brought to the verge, or quite into, bankruptcy, while many others have found their salvation in the administrative commissions, which had the power to increase the rates as well as to reduce them.

The plan of selling the franchise (b) is difficult to apply because of the limited number of bidders and because of the unpredictable character of the returns. There remain the policies of administrative rate-fixing (d) and of public ownership to secure the profits of monopoly to the public, either directly or in a diffused manner. In the recent period of rising prices the administrative state commissions have, like the Interstate Commerce Commission, performed very valuable services. But, on the whole, the general trend of municipal policy is everywhere toward public ownership of this type of local public-service industries.

§ 10. State ownership of various kinds. The movement toward public ownership by the American states has been much less marked than that by the municipalities. Many of the states have retired from some fields where once they were engaged in industry. Students of American history know that between the years 1830 and 1840 some states engaged largely, even wildly, in canal-building, railroad construction, banking, and in other enterprises. The undertaking of these industries was determined often by political and by selfish local interests, and their operation often was wasteful. A few enterprises succeeded for a time, the most notable of these being the Erie Canal in New York, though this too became almost worthless as a result of railroad competition. The unsuccessful ones remained in the hands of the state or were sold to private companies, as in the case of the Pennsylvania Railroad. These reckless state enterprises were bitter lessons in public ownership, and continued for three quarters of a century to have such an effect on public opinion that few proposals for public ownership could have a fair hearing in America. But railroads and canals are publicly owned, and more or less successfully operated, by many foreign states, as in Prussia and other German states, in Switzerland, and in the new states of Australia, and this policy is rapidly extending to other countries and to varied industries.

There has been recently a greatly increased interest in forestry shown by the American states. This is especially likely to be a state enterprise wherever the forest tracts are entirely within the limits of the state, as in the case in New York with 2,000,000 acres and Pennsylvania with 1,000,000 acres of state forests. At present at least thirty-three states have forestry departments. Most of the forests in Germany are either communal or state-owned. The schools, a great industry for turning out a product of public utility, are largely conducted by the American state and by local units rather than by the nation or by private enterprise. The state encourages researches in the arts and sciences, and gives technical training. A variety of minor enterprises have been undertaken by states to supply salt, phosphate, banking facilities, even some manufactures. One after another the states are adopting the “state use” system of labor in the prisons and public institutions, engaging in agriculture and manufacturing on a large scale, and using the products, amounting to millions of dollars annually, almost entirely for public purposes.

§ 11. National ownership. The national governments everywhere appear to be enlarging the field of their ownership. This policy has its roots far in the past. Some industries grow out of the political needs of government. Established as a means of communication with military outposts, the post became a convenient means of communication for merchants and other citizens and grew into a great economic institution. In most countries the telegraph is publicly owned and has been annexed to the post, to which it is very closely related in purpose. National ownership of railroads is the rule, and our policy of private ownership the great exception in the world to-day. Many persons, some in railroad circles, have long believed that national ownership of railroads is sure to develop out of our present policy of regulation; and this opinion is gaining ground, since the passage of the Transportation Act of 1920, even with many that deplore the prospect.

The national improvements connected with rivers and harbors were first political—that is, they were for the use of the government’s navy; they became, secondly, commercial—for the free use of all citizens engaged in trade; and they continue to unite these two characters. Forestry is most largely undertaken in this country by the national government, partly because some forest areas in the West extend over state boundaries, and largely because large tracts of public forestlands were still unsold at the time public attention was attracted to the subject. Since 1890 the policy of reserving great areas for forests, and picturesque districts for national parks, has developed greatly in the United States. The national forest area contained in the various forests in twenty states (not including Alaska and Porto Rico) now covers about 282,000, square miles, equal in area to six states of the size of Pennsylvania, with all of New Jersey, Delaware, and Rhode Island thrown in for good measure; or to all New England and the middle Atlantic states, plus Ohio, Indiana, and West Virginia. There are, besides, fourteen large national parks, ranging in size from a few hundred acres up to over 2,140,000 acres (the area of the Yellowstone National Park), and aggregating 4,600,000 acres, nearly the size of Massachusetts or of New Jersey, besides numerous other national reservations for monuments and antiquities.

In some countries mines are thought to be peculiarly fitted for national ownership and control. In Germany the several states own coal, salt, and other mines. Coinage and banking are everywhere looked upon as functions of sovereignty, and yet it is no more necessary for a nation to own its own mint in order to control the monetary system than for it to print the bank-notes in order to regulate their issue. The American government has its own printing-office. The fish commission, and the various branches of the department, coöperate with private industry in many ways. This brief survey suggests that the industries undertaken by government are both varied in nature and large in extent, although small in proportion to the mass of private industry.

§ 12. Sources of heat, light, and power. Next to the question as to the public ownership of the railroads, that as to coal mines and hydraulic power sites is most likely to become insistent for answer in America in the not distant future. The law of the conservation of energy expresses the fundamental likeness of heat, light, and power. The principal sources from which man derives these agencies are coal and falling waters, though wood is of importance as fuel in some localities. About 500,000 square miles of land (about 13 per cent of the area of the country) are underlaid with coal. These deposits are widely distributed, so that nearly every part of the country is within five hundred miles of a mine. The enormous deposits, if used at the present amounts per year, would last probably from two to four thousand years, but if used at the present increasing rate (doubling the product every ten years), they would, it has been estimated, last but one hundred and fifty years. What shall be the actual rate as between these extremes is a question the answer of which depends on our economic legislation as to ownership, exploitation, prices, use, and substitution. The experiences in the war, as well as the constantly recurring labor difficulties in coal-mining, verging upon civil war, have forced the public thought to recognize its dependence on the regular supply of coal, and the exceptional public nature of the coal industry.

The one great available substitute for coal as a source of heat and light and power is water-power. It is estimated that in 1908 but 5,400,000 horse-power was being developed from waterfalls, whereas about 37,000,000 primary horse-power5 was available; but, by the storage of flood-waters so as to equalize the flow, at least 100,000,000 horse-power, and possibly double that amount, could be developed. As it requires ten tons of coal to develop one horse-power a year in a steam-engine by present methods, there is here a potential substitute for coal equal to from two to four times our annual use of coal (above 600,000,000 tons).

But this does not mean that it would be economical, at present costs of mining coal and of building reservoirs, to make this substitution now. To determine when, how far, and by what methods to develop this water-power from lakes and rivers for the use of the people, and to make this substitution, is one of our great economic problems. The question is being daily decided, in numerous acts of legislation and administration, whether the water-power of the United States shall be more rapidly developed by becoming private property, or shall be developed more slowly as a part of the national domain.

§ 13. Economic basis of public ownership. The question as to the proper limits of public ownership is one most actively debated. The movement is progressing in accordance with the principle that public ownership is economically justified wherever it secures a product or service of widespread use that would otherwise be impossible, or insures the public a better quality or a lower price. The question of public ownership is not exclusively an economic question. There are incidental problems, such as its effects on enterprise and on political integrity, with which it is not possible here to deal. In the main, however, public ownership is simply a business policy which must be justified by its economic results. In the case of a general social benefit not to be secured without public ownership (as popular education or the climatic effect of forests), the only question to answer is whether the utility is worth the cost. In the case of industries already in private hands, as waterworks, gas and electric lighting, there is needed, to make a wise decision possible, a knowledge of the effect a change to public ownership will have upon cost and service. If public officials can furnish some goods more cheaply than they are furnished by private enterprise, it is because of the wide margin of monopoly profit, not because there is any magic in public ownership. The same general items of cost must be met. The first cost of the plant and the annual interest payments are much the same. Experience shows that, because of political influence and of public opinion, wages are likely to be higher under public ownership, but salaries for management lower. Public collection of dues along with taxes is an advantage not enjoyed by private companies. Several public officials sometimes share the same office and thus reduce expenses. In small towns the public electric lighting and waterworks have been operated more economically under one roof. Some items of cost may be less under public management, but, on the whole, public industry probably has no advantage in these respects. Public industry does not have to meet the costs of lobbying and blackmail which are often forced upon private companies. But the greatest source of saving in public ownership is the value of monopoly privileges that, under private management, go into private pockets.

The temptation of political corruption may be more insistent when a large force of men is constantly employed, and when large supplies are constantly purchased, by public officials, but the temptation is not so strong or so centralized as it is in the granting of franchises to wealthy corporations. Public industry is weakened by the absence of certain motives to excellence that are present in private business. The income of public officials not being dependent on the economy of management, the spur and motives of competitive industry are lacking. No social discovery has made individual honesty and civic virtue useless to good government.

The decision in any specific case is one dependent on local conditions, and the exact limits of public ownership are not fixed. Industry is changing so rapidly that new adjustments are made every year. The main outlines of public ownership, however, are now in large part determined. Some industries do well, others ill, under public management, and between these lie many debatable cases. Waterworks and probably electric lighting, because of the comparative simplicity of their operation, are more suitable for public ownership than are gas-works. No absolute line divides the one group from the other. But, whatever the changes, the fact cannot be ignored that the increase of public ownership is altering in manifold ways the organization of industry, and is reacting upon the production of wealth and the distribution of incomes.

References.

• Bemis, E. W., (Ed.), Municipal monopolies. N. Y. Crowell. 1899.
• Brooks, R. C., Municipal Affairs, 5: 1-346. 1901. An exhaustive and well-arranged bibliography on all aspects of municipal problems.)
• Fairlie, J. A., Recent extensions of municipal functions in the United States. A. A. A., 25: 299-310. 1905.
• Guyot, Yves, Where and why public ownership has failed. Trans. 19: 61-73. 1902.
• Lincoln, E. E., The results of municipal electric lighting in Massachusetts. Pp. 484. Boston. Houghton, Mifflin Co. 1918.
• Maltbie, M. R., Municipal utilities. Princeton. University Press. 1917.
• National Civic Federation, Report on municipal and private operation of public utilities. 1907. 3 vols. (A monumental study by an American delegation, which visited many cities of Europe and America; favorable, in the main, to extension of municipal ownership.)
• Stephens I. L., A bibliography of municipal utility regulation and municipal ownership. Pp. 410. Cambridge. Harvard Univ. Press. 1918.
• Todd, A. M., Municipal ownership, with a special survey of municipal gas plants in America and Europe. Public Ownership League of America. Chic. 1918.
• Van Hise, C. R., Conservation of natural resources. N. Y. Macmillan. 1910.

CHAPTER 34

METHODS OF DISTRIBUTION

§ 1. The problem of distribution. The great economic progress of the past two centuries has been mainly in lines of technical production. The developing natural sciences and mechanic arts have given men a marvelously increased control over forces and materials. This has multiplied the quantities of goods of most kinds at the disposal of men, collectively considered. All men, with rare exceptions, have been gainers; but the increased production has been very unequally distributed among the members of the community. More and more insistently the plea and the demand have been made for better methods of distribution that will give to the masses of the people a larger share of the goods produced. Production is largely a problem of the technical arts; distribution is a problem of social economy. Distribution as a problem of incomes is not to be confused with distribution of physical goods by transportation (as on the railroads) or by commercial agencies transferring goods from producer to consumer (as in coöperative stores and marketing).

Two aspects of the distribution of incomes may be distinguished. Functional distribution is the attribution of value (yields) to wealth and labor considered impersonally, as groups of productive agents. Functional distribution is the prime subject of the theory of value and price1 (e. g., usance, value of labor, time preference, profits), a study of which is prerequisite to an intelligent study of the problems of personal distribution.

Personal distribution is the actual movement of incomes into the control of persons. Personal incomes, whether monetary, real, or psychic, are the sum of a number of elements. Some parts are due to services performed by the person himself. When one combs his own hair he is performing for himself a service that is a part of his income. Benjamin Franklin said it was better to teach a boy to shave himself than to give him a thousand dollars with which to pay barbers for a life-time. Other parts of income are the uses and fruits of legally controlled wealth; chance finds, as gifts of value or lost and abandoned goods; goods assigned to one by authority; wealth inherited; illegal gains by robbery; goods secured on credit; gifts either of things or of services. The many methods by which incomes are distributed to the persons making up a society may be grouped in the following five general classes: (1) force, (2) status, (3) charity, (4) competition, and (5) authority. These will be discussed in order.

§ 2. Distribution by force and by status. Distribution by force is the most primitive mode of distribution. The stronger takes from the weaker. Slavery is distribution by force, as is the levying of war indemnities from a conquered people. Forceful distribution still persists in the form of crime, and, if we include fraud within the term, it still affects an enormous amount of income. The lawless take whatever they can, and the supporters and officers of the law do what they can to check the acts.

Distribution may be by status, or set rules and customs. In this case men receive incomes that are independent of their efforts and outside of their control. Distribution by status is guided neither by the personal merit of the recipients nor by the value of their direct services, but by the merits and acts of men not living. Feudal society was built on status. Men were born to certain privileges and positions; they inherited property which could neither be bought nor sold; they followed trades which could rarely be entered by any outside of favored families. Caste in India and in other Oriental countries regulates a large part of the life of the people.

This method still prevails to a greater extent in our society than is usually recognized.2 By public opinion and by prejudice, status is still maintained in respect to the choice of occupations even where the law has formally abolished it, as is seen in modern race problems. In western countries to-day inheritance of property is the main legal form of status and it shades off into other forms of distribution. Private property must find its justification in social expediency.3 There is no feature of it that is more questioned than is the right of inheritance.

§ 3. Social effects of the right to transmit property. The right to transmit property by inheritance or by bequest may be judged with reference to its effects upon the giver, upon the receiver, and upon society at large. It is well to take these three points of view. The right to dispose of property either during life or at death has undoubtedly in many ways a good effect upon the character of men. It stimulates the husband and father to provide for his wife and children, and spurs others to continued economic activity. There is a joy in giving, a joy in the power to bestow one’s wealth upon those one loves, or as one pleases. Much of the existing wealth probably never would have been created if men had not had this right. But there is a limit to the working of this motive, and other motives often are more effective. Many a man after gaining a competence continues to work for love of wealth and power in his own lifetime, as the miser continues to toil for love of gold. When men without families die wealthy, when men not having the slightest interest in their nearest relatives labor till their dying days to amass wealth, it is apparent that the right to bequeath property has little to do with their efforts. Love of accumulation and love of power in these cases supply the motive. A more limited liberty to dispose of property at death might still suffice, therefore, to call out the greater part of the efforts now made to accumulate property.

§ 4. Effects of the right to inherit property. That the effects upon the receiver of the property are good is somewhat more doubtful. It is true that children reared in families of large incomes would be great sufferers if plunged into poverty at the death of their parents. There is much social justification for permitting families to maintain an accustomed standard of comfort. Few would deny that provision by parents to provide education and opportunity for their children is commendable and desirable. But the evil effects of waiting for dead men’s shoes are proverbial. Many a boy’s greatest curse has been his father’s fortune. Many a man of native ability waits idly for fortune to come and lets opportunities for self-help slip by unheeded. The world often exclaims over the failure of the sons of noted men to achieve great things, for, despite confusing evidence, men still have faith in biologic heredity. A too easy fortune saps ambition and relaxes energy; and thus rich men’s sons, if not most carefully and wisely trained, are often made paupers in spirit, while the self-made fathers think their boys have better opportunities than they themselves enjoyed. The greater social loss is not the dissipated fortunes, but the ruined characters. Andrew Carnegie said that it would be a good thing if every boy had to start in poverty and make his own way. Cecil Rhodes recorded in his will his contempt for the idle expectant heir.

§ 5. Broader social effects of inheritance. Inheritance has good effects for the community in so far as it helps to secure efficient management of wealth. If the son or relative has been in business with the deceased, there is a reason why he should inherit the property, and his succession to it makes the least disturbance to existing business conditions. This consideration, however, has less weight as the corporate form of organization becomes well-nigh universal in “big business.” Every profligate son, every incompetent heir, is an argument against the inheritance of property. It is to society’s interest that no able-bodied member should stand idle. Every child should have presented to him the motive to use his powers in useful ways. Moreover, many feel that the great fortunes now accumulating through successive generations in the hands of a few families are a danger to our free society, even if these fortunes should continue to be well administered. There is a widespread feeling that the heredity of great wealth is, like the heredity of political power, out of harmony with the democratic spirit. Democracy wishes to see men and individuals put to the test, not profiting forever by the deeds of their forebears. This feeling is shared by those who cannot be charged with radical prejudices. It was startling when a conservative body of lawyers, meeting in their state association in Illinois, passed a resolution favoring moderate limits to inherited fortunes. Almost every year sees bills of this purport introduced in the legislatures and in Congress. Probably no one of many current radical proposals is more widely favored than this among men of otherwise conservative social views. The sum most often mentioned as the proper limit is $1,000,000, but usually it is a sum larger than the fortune of the person speaking.4

§ 6. Limitations upon intestate inheritance. A proposal less crude, and with strong reasons of social expediency in its favor, is to limit the right of intestate inheritance to persons that have been in essential economic and social relations with the deceased. The foregoing considerations show that the case for the right of gift in the lifetime of the giver is strongest; that for the right of bequest comes next. The man who has acquired wealth may usually be trusted to decide who bear to him close social or personal relations, and to say whose lives have in a measure furnished the motives of his activity. But the right of intestate inheritance by distant relatives is one that stands on weak social foundations. It is a survival from more patriarchial conditions when, in the large family or clan, the bond of unity was very strong. A truer test to-day of the proper limits for intestate inheritance is whether the wish to provide for these heirs has furnished the motive for the producing and preserving of the wealth. The claims of those nearest in blood and closest in personal relations are strongest. Family affection and friendship form the strongest of social ties, and it is socially expedient to cultivate them. Motives for abstinence and industry must be strengthened. But the same test shows that the zealous regard of the American law for the rights of distant kinsmen in foreign lands or in distant quarters of this country is irrational, and is unjust to the community where the fortune was made. Public opinion tends strongly toward this idea.

Property rights as they exist are clearly seen not to be a product of pure reason. They are the result of social evolution, of historical accidents, of class legislation, and in many cases of selfish interests. Changing social conditions and ideas are bringing many changes in law, and further changes must be expected to come that will reduce the influence of inheritance of property in fostering status in distribution. Especially important are the increasing application of the progressive principle to incomes and inheritance,5 and the development of insurance to put family savings into the form of terminable annuities instead of capital sums.6

§ 7. Some merits of competition. The dominant method of distribution to-day is that of competition.7 It is evident from the voices of praise and of blame that competition has its good and its bad aspects. Let us observe first the good ones. Competition acts to distribute the working force over the field of industry wherever it is most needed. The remarkable (though far from perfect) adjustment of industry to the needs of each neighborhood is brought about by individual motives, not by centralized authority. Wherever consumers settle, stores are started and factories are built. Wherever work is to be done, men come in about the right number to do it. It is not mere chance that produces this result. The available skill is adjusted to varying needs by the delicate measurement of the market rate of wages. Two-sided competition gives a definite rule of price—the only definite impersonal rule. The theoretical competitive price is the standard to which things tend constantly to adjust themselves in an open market.8

Competition is an essentially economic method as contrasted with the legal and personal methods above and later described, because it is impersonal and reducible to a rule of value. Distribution under competition is made, not with reference to abstract ethical principles or to personal affection, but to the value of the product. Each worker strives to do what will bring him the largest return, and the price others pay expresses their estimates of the service in that market. Each seeking his own interest is led to make himself more valuable to others. In most cases and in large measure, competition stimulates men to sacrifice, to invention, to preparation; thus is zeal animated and are efforts sustained. In the economic realm, as is now seen to be the case in the biologic realm, competition of some effective kind is an indispensable condition not only of progress but of life without degeneration. Monopoly, as we have noted, never has ceased to rest under the ban of Anglo-Saxon law, and therefore to exemplify compulsory as opposed to competitive distribution. A striking feature of the competitive method is its decentralization. Each helps to value the economic services of each. If one pays more for the services of the singer than for those of the cook, it is not because one would rather listen to the singing than to eat when starving, but because by apportioning one’s income one can get the singing and the eating too. In the existing circumstances, the singer’s services seem to the music lover to be worth paying for, and he backs his opinion with his money. So each is measuring the services of all others, and all are valuing the services of each. It is distribution by valuation, and it is valuation by democracy, with all of the defects of the frail and foolish human beings who are expressing their choices.

§ 8. Wide acceptance of competition. On purely abstract and a priori grounds competition cannot be accorded an unqualified ethical sanction, as is sometimes assumed. It is not always and necessarily “right” and “best” in an absolute sense. However, its dominant place is not a mere accident, but is a resultant of unending experimentation with different methods of distribution carried on since the beginning of human society. A method of distribution had to be found and retained that would work under the conditions of human nature at each stage of social progress; and competition has worked, however imperfectly, because it has met in large measure the pragmatic test. The competitive rule of distribution appeals to all men (even to those who denounce it) as having in many of its applications a moral character, as compared with the other possible methods of distribution. Indeed, the competitive rule is the only rule that does not involve either personal and arbitrary judgment (force, charity, and authority) or status. Even such a measure of justification as is found in status is traceable, in the long run, to competition. The case for a limited application of status (as in property and inheritance laws) is based upon its results in stimulating motives of effort and accumulation.9 When the rule of authority is applied to-day in the large field of public regulation where actual competition has become impossible, almost the only guiding rule is hypothetical competition. The just rate is felt to be that which in the long run would be just sufficient to afford “normal” incomes to labor and to capital, to call forth the necessary effort, skill, judgment, forethought, abstinence, and investment, if competition were at work, as it is not.10 Only this rule of hypothetical competition redeems these public rates from arbitrariness, favoritism, and force.

§ 9. “Economic harmonies” and discords. Every truth in political philosophy finds some exaggerated expression. Competition, as compared with status and custom, has some notable merits; and when the eighteenth century was throwing off some of the burdens inherited from the more static Middle Ages, competition appeared to be a panacea for all the ills of society.11 The belief in the benefits of competition and the virtues of economic freedom found its extremist expression in the first half of the nineteenth century in the doctrine of the “economic harmonies.” According to this, if men are left entirely free to do as their interests dictate, the highest efficiency and best results for all will follow; the economic interests of all men are in harmony. Corresponding with this doctrine is the economic policy of extreme laissez faire.

But experience has shown that the economic interests of the individuals in a community are only partly, very rarely are they wholly, in harmony. There are three planes of competition in every market: that between sellers, that between buyers, and that between sellers on the one hand and buyers on the other.12 If at any point free competition is hindered, even the disciple of economic harmony must, from the very nature of his doctrine, expect a discordant result. In reality, competition is rarely quite complete on both sides, and when it is not the weak usually suffer. Men do not start with fair opportunities. All that they may be entitled to have under competition may be so little that social sympathy seeks to better the results; hence poor relief, public and private. Society as a whole has an interest in the outcome of the individual’s economic struggle. It cannot see men starving or driven into crime. Moreover, when competition is the rule of valuation, it, like all valuations, partakes of the quality of those choosing—wise or foolish, good or evil.13 And though competition is the rule of democracy in economics, yet democracy cannot permit the economic vote of a vicious or of a foolish group to stand, where the goods, services, and prices resulting offend the prevailing public judgment and social conscience.

§ 10. Competition modified by charitable distribution. In practice the competitive method of distribution always has been modified or supplemented in varying degrees by the other methods. Important among these is charitable distribution. Charitable is here used in its original sense, as synonymous with benevolence and affection. First is parental love, the root and type of all the forms of charity. There is a complete lack of economic equivalence in the relation of parent and child in early years. The helpless infant does nothing for the parent, the parent gives all and does all for the child. Gradually, however, the balance is regained; as the years go on, not only do children repay in affection, but in many cases they repay in material ways. Especially in the factory districts and on the farm, the child sooner or later begins to reëstablish the balance, becomes a worker, and contributes to the family income as much as the cost of his support, and finally more. A student of modern English town life has traced the curve of poverty traversed by the average poor family as the children are first an economic burden and later an aid to their parents. In the middle, or propertied, classes the children do not for many years cease to be a financial burden to their parents, and in most cases the economic balance is never reëstablished. It is not to the parents, but to the succeeding generation, that the debt is tardily paid.

Friendship widens the range of generosity and multiplies the mass of gifts. Broad sentiments of humanity lead to gifts outside the range of personal affection and personal interest, to the beggar on the street, to institutions devoted to charity. In New York state alone a sum of more than $20,000,000 a year is expended by institutional charities. About $512,000,000 in public benefactions were given in the United States by private donors in the year 1915, and in this respect that year was not exceptional. An enormous and increasing body of property is thus being year by year socialized, largely through bequests from persons without direct heirs. Great public subscriptions to the sufferers from unusual disasters, such as the Irish and the Indian famines, the Chicago fire, the Galveston flood, the San Francisco earthquake, the great European war, bespeak a widening generosity. Religion impels to the building of churches, to the support of priests, missions, and manifold religious undertakings. Charity in this connection is the expression of a sentiment that varies from the most intense personal affection to the broadest and most general humanitarian sentiment.

§ 11. Competition modified by authoritative distribution.Authority is essentially the assignment of a common, or social, income to individuals by some person or persons chosen, or accepted, by the society to perform this function. After force, it is the oldest and was the earliest widely operative method of distribution. It shades into force, status, and charity in manifold ways. But it may be distinguished from force, which takes for itself what belongs to another; and from charity, which gives to another what belongs to one’s self; and from status, which transmits claims to income from one generation to another by a fixed impersonal rule, not by a personal judgment in the particular case.

Authoritative distribution is the dominant method in patriarchal tribes, in communal societies, and in monastic and other religious orders. Each person works at what he is commanded to do, and some one in authority (patriarch, head of the community, father of the monastic order) portions out the tasks and the rewards. In the family this rule largely prevails, and even after the children have come to years of discretion they not infrequently accept, from habit or affection, the will of the parents, and give up their entire wages to receive back a portion. The method of charitable distribution while the child is young gradually changes to authoritative distribution after the child becomes a worker. The untrained and indocile youth, however, is made the subject of compulsory distribution.

The collection and distribution of taxes is by public authority. No attempt is made to give back an exact equivalent to each taxpayer. The money is taken and spent by authority. The new forms, or at least the new extensions, of taxation, especially of incomes and inheritances at progressive rates, are very important examples of authoritative distribution. The courts sometimes find themselves obliged to apply the method of authoritative distribution, although they do it unwillingly. They try to confine their efforts to interpreting the contracts men have voluntarily entered into, and they avoid, as far as possible, the making of contracts or the fixing of rates. Authoritative distribution is exemplified in the work of many commissions appointed by law to fix rates or settle disputes, such as boards of conciliation and arbitration and railway commissions.

§ 12. Progressive versus reactionary. Distribution in the present economic system, in all its modifications in the various industrial states of the world, thus is revealed by our examination to be determined, not by a single principle, but by an eclectic grouping of various principles and methods. It is further revealed not as final truth fixed in its details, not as an absolute expression of human wisdom, but as a constantly changing result of human experience. The world of free parliamentary governments is a vast laboratory of experimentation wherein the institutions of property and the process of distribution are being shaped by the forces of public opinion. Changes are constantly embodied in legislation, in judicial interpretation, and in the administration of the laws.14

The different individuals and groups in our society take various attitudes in respect to our present economic system and to the views just expressed. Indeed, opinions are innumerable and grade off with manifold differences of degree and in detail from one extreme to the other. However, all opinions on this subject may be classified broadly in two groups—conservative and destructive (or disruptive); the one favoring the present economic system in its essentials, the other rejecting the essentials of the present system. Each of these broad groups may again be subdivided: the conservatives having two wings, the stand-pat conservatives (the extreme being the reactionaries) and the other the progressive conservatives. (It need hardly be said that progressive is not used here with reference to any political party or group that has been designated by that name.) The reactionary conservatives are numerically a small group, but in wealth, social position, and political influence are very powerful. They favor the existing order, excepting in those features designed to limit wealth and the use of monopolistic power. The stand-pat conservatives are a much larger group of moderately well-to-do, including most of the residents on “Main Street,” who like things just as they are.

§ 13. Progressive versus radical. The conception of the present economic system outlined above may likewise be called conservative, but it must be modified by the adjective progressive, or liberal, as contrasted with reactionary. In this view the central features of the present economic system must continue much as they are, and progress must be won by gradual correction of evils. These are recognized to be many, and to call constantly for remedial legislation and remedial effort in our rapidly shifting industrial conditions. The progressive-conservatives believe that the evils are not due solely or mainly to the “present economic system”; they believe that a workable economic system cannot be devised by doctrinaire philosophers as a thing apart from human nature, a thing to be declared absolutely good or bad without reference to the kind of people who compose the community. The present economic system can be made better only slowly and as the individuals who compose the community keep pace with growth in virtue and wisdom. Therefore, the progressive-conservative sees that much of the task of social progress is individual and family education, moralizing the oncoming generations with the old-fashioned virtues of thrift, honesty, loyalty, and duty. All such suggestions are impatiently and angrily rejected by the more radical social reformers, who (again with varying emphasis and with many gradations of opinion) advocate abandoning the present economic system and substituting for competition with private property a universal principle of authority.

References.

• Hinds, W. A., American communities, 2d ed. Chicago. Kerr. 1908. (Describes many experiments, all failures; by a sympathizer with socialism.)
• Lockwood, G. B., The New Harmony movement. 2d ed. N. Y. Appleton. 1907.
• Nordhoff, C., Communistic societies of the U. S. N. Y. Harper. 1875.

CHAPTER 35

SOCIALISM, PRESENT AND FUTURE

§ 1. Meanings of socialism. Our reason for leaving to the last the discussion of authority as a method of distribution is not that it appeared last in historical development, but that it now is the most strongly advocated as an alternative of competition. In primitive, in ancient and in medieval societies, authority as a method of distribution was used much more than it now is, and the history of Europe from about the eleventh century is filled with the record of the displacement of authority and status by competition. But one of the most striking developments of opinion in the nineteenth century was that favoring an increasing use of authority in distribution. Authority has been advocated not merely to supplement and modify competition, but to displace it completely or, in the more moderate program, in large part.

This opinion, or plan, has appeared under a variety of names, the main ones being communism, collectivism, socialdemocracy, and socialism, of which the last name has just now the greatest vogue. Socialism is a word of manifold meanings no one of which is generally accepted. Discussion is therefore often a Babel of tongues. Much of the confusion may be cleared up by observing that the word “socialism” designates (1) a social1 philosophy (2) a mode of social action, (3) a particular political party. There is thus philosophic, active, and partizan socialism. Each of these may be taken either in an absolute or in a more or less relative sense. The first meaning is the most fundamental, the second less so, and the last the least fundamental, but just now the most frequently used.

§ 2. Philosophic socialism. As a philosophy socialism is related to social just as individualism is related to individual. Socialism is faith in the group motive and group action rather than in self-interest and competitive action. Instead of social philosophy we may say social faith, or social ideals. This faith may be absolute, or radical, to the rejection of all economic competition; or it may be moderate, and leave more or less place for self-interest and competition. Every man of conscience and of ideals has moods that are socialistic (in this sense) and dreams of a world without toil, competition, or poverty.

This social philosophy has taken form as “Christian Socialism” among men of strong religious natures, in various religious denominations. Great secular dreamers—Plato in his “Republic,” Sir Thomas Moore, in his “Utopia,” Edward Bellamy, in “Looking Backward,” William Morris, in “News from Nowhere,” and others—have painted beautiful pictures of ideal economic states from which all of the great evils and problems of our society have been banished.

§ 3. Socialism in action. Active socialism is group action in economic affairs. This may be by private voluntary groups, as a club, church, or trade union, or by a public group, or political unit of government, which has therefore a compulsory character. The most radical kind of active socialism would be the ownership by government of all the means of production and the conduct of all business, assigning men, by authority, to particular work and granting them such incomes as the established authority thought they deserved. This kind exists nowhere, and never has existed, though it has been nearly approached in many parts of Russia under the Bolshevik régime.

A moderate kind of active socialism is represented by each separate case of public ownership or industry. Even public regulation by authority, of the many kinds described in this volume, is touched with a quality of active socialism. In this sense there can be more or less of active socialism in a community; a state may be more or less socialized in its economic aspects. An English Chancellor of the Exchequer declared in the last decade of the nineteenth century, “We are all socialists now.” The ever-increasing sphere of the state2 gives to that statement to-day a larger, fuller meaning than when it was uttered.

Socialism in action is of course always the expression of a more or less socialistic philosophy held either by a democratic majority of the people or by a despotic minority, as in Russia under the Czars and the Bolsheviki. Most of the great recent movement of socialism in industry is the expression not of a radical but of a moderate social philosophy. It does not look to the abolition, but only to the modification and limitation in some directions, of private property and of competitive industry. The spirit of this movement is opportunist, or experimental. It is ready to try public action, but recognizes that it has difficulties and limitations. The ultra-radical and the ultra-conservative alike declare that these measures “logically” lead on to the complete destruction of private property. But men find that they can warm their hands without being “logically” compelled to thrust them into the fire, and that they can quench their thirst without a growing resolution to drink the well dry. When this governmental activity has proceeded somewhat extensively and systematically in cities, as in Great Britain, it is called municipal socialism; and in states, as in Germany before the World War, it is called state socialism.

§ 4. Origin of the radical socialist party. Socialism in the partizan sense is an actual political organization. Both in Europe and in America such organizations have been designated as “social-democratic,” “socialist labor,” or “labor” parties. Socialism in this sense of a party organization, or movement, is very different from a social philosophy. In its partizan phase socialism exhibits all of the baffling variability and elusiveness that it does in its other aspects. However, in its printed program, the socialist party sets forth both a socialist philosophy and an ideal of active socialism in their most radical forms.

Modern political socialism traces its origin directly to the most radical of German social philosophers, Marx, Engels, and Lassalle. Karl Marx (1818-1883), preëminently the philosophic leader of the movement, collaborating with his friend Friedrich Engels (1820-1895), sought to give a solider foundation of reason to the somewhat romantic socialist philosophy current in his day. His own doctrine, first set forth connectedly3 in the Communist Manifesto in 1847, and later developed in his chief book “Das Capital,” he called Communism. He deemed this to be, as it has been called by his followers, “scientific socialism.” “Scientific” was meant to emphasize the contrast with “Utopian” socialism, as Marx and Engels somewhat scornfully characterized alike the older communist philosophy, the romances of the ideal state, and the attempts to found and conduct small communistic societies.

§ 5. The two pillars of “scientific” socialism. Scientific communism was to be based upon two immovable pillars, the one economic, the other historical (or historico-philosophical). The one was the labor theory of value, by which Marx sought to show that all profits and incomes from investment were due virtually to robbery of the wage-workers.4 “Capital,” that is, the ownership of the means of production, was declared to be the instrument of this “exploitation.”

The other pillar was “the materialistic philosophy of history,” that is, the explanation of all the intellectual, cultural, and political changes of mankind from the side of the material economic conditions as causes. As Engels expressed it, “The pervading thought . . . that the economic production with the social organization of each historical epoch necessarily resulting therefrom forms the basis of the political and intellectual history of this epoch.” This doctrine denies that, in an equally valid sense, biological changes in brain, and cultural changes in science, arts, and education, cause the mechanical inventions and improved processes and thus alter the form of economic production.

§ 6. Aspects of the materialistic philosophy of history. Marx’s general philosophy of economic materialism had three minor propositions or doctrines. (a) The doctrine of increasing misery; capital in private hands results in the “exploitation” of the workers as explained by the economic theory of surplus value (labor theory of value); this causes and must cause the steadily increasing degradation of the masses. (b) The doctrine of the class conflict; all history is a record of the class struggle between those who have property, the ruling classes within the nations, and those who have not, the oppressed working class, (a conception of history blind to most of the great international conflicts). The class conflict was declared to be growing more sharply marked and bitter than ever before; “the entire human society more and more divides itself into two great hostile camps, into two great conflicting classes, bourgeoisie and proletariate.” (c) The catastrophic theory; the final and inevitable result of this misery and class conflict must be a revolution, when the downtrodden workers will throw off their chains and “expropriate the expropriators,” and institute the communistic order in place of capitalism.

§ 7. Utopian nature of “scientific” socialism. The term “scientific” set in contrast with “utopian” was meant to imply that the doctrine of Marx was not “utopian” (a word that had come to mean fanciful and impracticable). Marx had a contempt for the romances of the ideal state and for what he deemed to be the unfounded speculations of earlier prophets of communism. But utopian (from utopia, Greek for no place) means nonexistent, and Marxian socialism surely was that. The words “experimental” or “actually at work” would have been a more logical contrast with “utopian” than is the word “scientific.” Marx and his followers likewise had a contempt for the communistic experiments, or settlements and colonies, which by the scores had been started and had failed, bringing discredit upon all communistic proposals. The beauty of “scientific” socialism for the purpose of discussion was that it never could be tried on a small scale, or tried at all until a whole nation adopted it; therefore, its adherents believed that no facts of history or of human nature could be used to disprove its workableness.

The old time “scientific” socialist had a lofty scorn for any less dogmatic philosophy than his own or for any less sweeping social change than that he expected. Moderate social reform to him was but temporizing; indeed, it was evil, inasmuch as it helped to postpone the inevitable, but in the end, beneficent catastrophe of the social revolution. A step-by-step movement toward socialism, state socialism,5 even of a pretty sweeping character, was, to the old-time Marxians, not really socialism at all. Some explanation of this attitude is found in the extremely limited manhood suffrage and in the aristocratic class government of most European countries, especially of Germany; so that, as the party socialists saw it, multiplying state enterprises but increased the power of the ruling, and eventually of the militarist, class. The social-democratic leaders felt that until they themselves were in power, the growth of “state socialism” would be a calamity for the nation. The events of 1914 may make our judgment tolerant toward their feeling.

§ 8. Its unreal and negative character. The so-called “scientific” socialism had, therefore, a peculiarly unscientific spirit; for, in a modern sense, science implies a patient search for truth, not a sudden revelation; a constant testing of opinions by observation and experiment, not a dogmatic conviction that refuses the test of reality. “Scientific” socialists talked much, and still talk much, of the “evolution” of social institutions; but they refused to admit the essential condition for institutional evolution, the competitive trial on a small scale, of a new form of economic organization to prove its fitness to survive. Indeed, communism had been tried on a small scale many times in the communistic societies, and had always failed in a brief time.

Lincoln said that a man’s legs ought to be long enough to reach to the ground; but “scientific” socialism was not built on that plan. To be sure it contained many elements of truth, but these were so distorted that the result was a caricature of history, of philosophy, of economics, and of prophecy. The most important influence of radical socialism has been exerted through negative criticism. It has performed the function of a party in opposition, relentlessly hunting out and pointing out the defects of existing institutions, arousing the smugly contented, and, by its very recklessness and bitterness, inspiring at times a wholesome fear of more revolutionary evils. This has been a real service to the cause of moderate and constructive reform in the more democratic countries of western Europe and in America.

§ 9. Revisionism in the Marxian ranks. “Marxism” or Marxian “scientific” socialism, from the time of its promulgation was studied by a small but increasing group of disciples as a well-nigh inspired and perfect revelation of economic truth. Das Kapital became known as the communist bible; zealous followers held it to be their duty to accept it, even where they could not understand it or reconcile it with the realities around them. The various doctrines composing the Marxian system were expressed in phrases ambiguous enough to permit much loose and shifting thought. But vigorous criticism forced upon the attention of the more frank and intellectual radicals, the need of more accurate and greatly modified conclusions. The labor theory of value which Marx had taken from English Ricardian economics was discredited by the critique of the psychological economists of Austria and America. The doctrine of increasing misery which first was taken to mean what is said, came to be explained not in an absolute sense, but in a relative sense (that the masses may be getting more wages, real as well as monetary, but they are not getting as much more as are the owners of capital). The doctrine of class conflict, it was admitted, had to be softened greatly to fit the facts of modern society. Doubt as to the inevitableness of the great catastrophe grew steadily. It cannot be questioned that Marx, when he first formulated his philosophy, believed that a revolution, most violent in nature, would occur within a few years. The revolutions of 1848 came, but with no such results as Marx predicted. Thereafter radical socialists played fast and loose with the word “revolution.” They made it mean a violent and bloody civil war with victory for the warlike minority, whenever they wished to rouse a proletarian audience. But in addressing bourgeois hearers they made revolution mean a slow evolution ending in peaceful victory at the polls by a majority of the nation, after many years of educational propaganda and of further industrial changes.

As socialist intellectual leaders began to be affected by the criticism originating outside of the ranks they lost some of their theoretical illusions, and began to temper their claims of Marx’s infallibility. “Revisionism,” the socialist higher criticism, beginning in 1899 with the work of Eduard Bernstein, a prominent German Social-democrat, gained influence in the party counsels in all countries in the years before 1914. This brought many of the Marxians much nearer to the more opportunist ideas and plans of the Fabian society, which had been founded in England in 1884, but which had been regarded scornfully by the adherents of “scientific socialism.”

§ 10. Socialism and anarchism. In these and other respects the socialist movement, while gaining in the total number of its adherents, was breaking up into various schools of thought. Ceaseless and often bitter controversy over matters of doctrine and of policy have divided the leaders and split the parties. Almost the only general agreement among them is on a negative point, hostility to the existing system of private capital. In respect to the forms of political and of industrial organization that are to take the place of the present order, communist ideas and plans differ widely. In the last quarter of the nineteenth century Marxian socialists were usually associated in popular thought with the bomb-throwing type of anarchists whose aim was to destroy all government and whose policy was that of terrorism and assassination of members of the ruling class. Usually the “scientific” socialists scornfully denounced this classification, declaring that socialism trusted to peaceful evolution, not to violence, that socialism put its hope in the triumph of democratic majorities, whereas anarchy hoped to win its ends through the violence of a minority. Socialism, they said, was primarily concerned with economic organization, and so far as it was concerned with government, looked toward a completer organization of the state for social purposes, whereas anarchy was essentially opposed to the state in any form. In truth, as we have observed above, some socialists conceived of class conflict as gradual evolution, while others conceived of it as bloody and not distant revolution. The rank and file of the socialists have been ready as a majority to “expropriate the expropriators” peacefully, if they could, and willing as a minority to do it violently if they must.

§ 11. Syndicalism and I. W. W. Among the various tendencies, or schools, within socialistic circles, two especially, syndicalism and guild socialism, have shown the marks of anarchistic influence. These both share the anarchistic dislike of strong central government, and cherish the ideal of self-governing independent communes. The model of the early anarchists was the simple Russian village community. Syndicalism in France originally meant trade unionism. The French syndicates (trade unions) which developed many years later than did the British unions, came under the influence both of Marxian socialism and of anarchism in the ’80’s and ’90’s, and developed a hybrid form of theory and of program. Syndicalism is anti-parliamentary and opposed to political action within the present capitalist states. It opposes militarism, and repudiates patriotism for any country. It favors the violent revolt of a minority whenever the workers are well organized enough to seize power. It favors the general strike as a means of wrecking society, not merely to win in immediate wage-controversies. Its most characteristic doctrine, detestable to all outside its ranks, is sabotage, which means any kind of vandalism, deceit and dishonesty which may inflict loss upon employers and capitalists and inspire their fears. Everything is permissible and laudable which would be done by a spy in modern war, for the syndicalist declares that a state of war exists. Yet he does not draw the corollary that every one with such a purpose and using such means should expect to be shot as an enemy spy. The syndicalist’s economic ideal of the future state is somewhat vague, but it is one of communism, in which the instruments of production in each trade would be controlled by the unionized workers. After a revolution attained by sabotage and bloodshed, men would dwell together peacefully without restraint of any government, ruled only by sweet reasonableness.

Syndicalism has been most influential in France and Italy among the less skilled workers, but in Europe appears to have lost of late somewhat both in its intellectual and in its popular following. In America it appears as the I. W. W. (International Workers of the World) in some cities, but chiefly among the migratory workers in mines, lumber camps, and agriculture in the Middle and Far West.

§ 12. Guild Socialism. A school of writers, known as Guild Socialists, which has attracted wide attention since the war, had its origin in England about 1907, and in 1915 founded the National Guilds League. Guild socialism resembles syndicalism (and philosophic anarchy) in its plan of the future state. Producers are to be organized in shops, or in groups, which are to be further federated in a national guild, the supreme council of producers. This plan suggests more of a unified state than does syndicalism, a sort of “dual sovereignty” of local producing guilds and central social organization. These ideas seem to be all in the realm of imagination (Utopian) but they were reflected somewhat in the widespread discussion after the war for “industrial democracy” as in the Plumb Plan for the ownership of railroads by the railroad workers. Unless and until groups of trade workers can demonstrate by experiment, at their own risk, that they can coöperatively carry on enterprises of some size with success, the rest of the nation, the great body of consumers, must look upon such proposals as unpractical. The Bolsheviki since the second revolution in Russia in 1917, have exemplified the syndicalist ideal of a ruling militant minority, and in the Soviets, or local governing bodies made up of organized workers, have shown some likeness to the guild ideal.

§ 13. “Opportunism” in socialist party tactics. While many winds of doctrine have been blowing over socialistic philosophy, the practical programs of the party have veered in various directions. Whenever the party gained any success at the polls, the socialists in public office and the party leaders found it necessary to “do something” immediately. The rank and file might be willing to talk of the millennium, but preferred to take it in instalments instead of waiting for it to come some centuries after they were dead. And so the socialist party, as fast as it gained any practical power, became “opportunist” and worked for moderate practical reforms. The leaders did this with many misgivings lest the masses might become so reconciled to the present order that they would refuse to rise in revolt. In that case the revolution never could happen (although it was inevitable).

As the party socialists did more to improve the present, they talked less of the distant future state. They ceased their criticisms of “mere temporizing” “bourgeois” reforms, and began to claim these as the achievements of the socialist party. They began to write of the remarkable growth of social legislation in Europe and America in the past half century under such titles as “socialism in practice” and “socialists at work.” This was despite the fact that these reforms were all brought about by governments in which the socialist party had no part whatever or was a well-nigh insignificant minority. This bald sophistry, or self-deception, was easily possible by confusing the word “socialist” as relating to the abstract principle of social action, with socialist as applied to their own party organization. It is as if the Republican party in the United States were to claim as its own all the works of the republican spirit and principles of government in the world from the party’s organization to the present time.

The German democratic revolution of November 1918, which drove the Kaiser into exile, brought the social-democrats into power as the dominant party in Germany. The more moderate element is in the majority and, in alliance in parliament with various liberal parties, has thus far been administering the affairs of the state along economic lines little different from those of the old order. No serious modification of private property has been made. The situation is far from clear as yet. We seem to see here again the sobering effect of responsibility, and the definite unwillingness of the German workingmen, with the example of Bolshevik ruin under their eyes at the East, to risk abolishing capitalism.

§ 14. Alluring claims of party socialism. In becoming opportunist, the radical socialist party in every country has been somewhat put to it to retain any clear distinction between itself and other parties of social reform. It has done this however by continuing to proclaim the ultimate desirability of re-organizing all society without leaving any productive wealth in private hands; while in practice it has shown misgivings prompted by the experience of the world. Its case against the present order continues to be far the strongest in its negative aspect, the exposure of evils. To many natures the claims of the socialist party have all the allurements of patent medicine advertisements. These describe the symptoms so exactly and promise so positively to cure the disease, that they are irresistible, especially when the regular physicians keep insisting that the only way to get well is to adopt such troublesome and disagreeable methods as taking baths and exercise, and stopping the use of whiskey and tobacco.

Those attracted to the socialist party by its sweeping claims are of two main types. The one is the low-paid industrial wage-worker to whom competition awards so small a share of the national income; the other is the sympathetic person of education or of wealth (or of both), who has become suddenly aroused to the misery in our industrial order. To both of these types, feeling intensely on the subject, the socialist party appeals as the only one with promises sweeping enough to be attractive. The one becomes the proletarian, workshop socialist, the other the intellectual, parlor socialist. Many of the latter type are persons overburdened either with unearned wealth or with an undigested education. Many of them, having enjoyed for a time the interesting experience of radical thought and of bohemianism, come later to more moderate social opinions.

§ 15. Changes in the socialist party vote. The socialist vote in Europe and in the United States had been steadily growing in the forty years preceding the outbreak of the World War, and amounted in the aggregate at least to six and possibly to ten millions (as variously estimated, the name socialist being elastic). There were 3,000,000 social-democratic voters in Germany at the outbreak of the war, and the socialist party in the United States polled 900,000 votes in the presidential election of 1912. The socialist parties were made up of men of many shades of opinion. They included not only the radicals, but large numbers of the discontented, unable to find an alternative economic philosophy and a plan that inspired their hopes. They included many others who held only the mildest sort of socialistic philosophy. In America many men voted the socialist ticket as a protest against the inaction of the conservative parties, and barely one-tenth regularly enrolled as members of the party. Similarly, in Germany before the war many voters supported the social-democratic party merely as the most effective way to protest against Militarism, Kaiserism, and undemocratic class government.

The war affected profoundly the policies and fortunes of partizan socialism. In accord with the doctrine of the class conflict, Marx had exclaimed, in the Communist Manifesto, “Proletarians of all lands, unite.” Marxian socialism condemned national patriotism and fostered in its place a spirit of internationalism. For years prominent Marxians had boldly announced that any attempt to bring on a European war would be blocked by a general strike declared by the socialist workers. But when German militarism precipitated war in 1914, only a feeble fraction of the German radical socialists stood out against it, and nearly all socialists in every country lined up with their fellow nationals. The immediate result was loss of prestige and of following for the socialist parties in the allied countries.

The American socialist party with an enrolled membership largely of immigrants, many of them still unnaturalized, was more unpatriotic and pro-German than were the socialists in any of the other allied countries. A number of its American members and of those born in allied countries left the American socialist party. The socialist vote for presidential electors fell to 590,000 in 1916, but rose again in 1920 to 900,000. In addition over a quarter of a million of votes were cast, mostly in the Northwest, for the Farmer-labor party, presenting a state-socialist program.

§ 16. Economic legislation and the political parties. These figures, while indicating no landslide to communism, do not forecast the disappearance of the radical socialist philosophy and of the socialist party. Both philosophy and party are based on the fact of great inequality in the distribution of wealth, on the growth of cities and the spread of the wage system, on resentment at the abuse of power and at many cases of individual injustice suffered by the poor at the hands of employers, and on the conviction that conditions cannot become better under the present régime. The masses now, for the first time in history, have the ballot without hereditary, class, or property limitations. The world is for the first time trying the experiment of full political democracy side by side with great private fortunes and great economic inequality. The democratic Samson may be blind, but he has the power to pull down the temple of capitalism in ruin upon our heads.

The future of partizan socialism depends on the policy of the other political parties quite as much as it does on its own policy. The floating liberal vote with socialistic sympathies is now so large that it is eagerly sought by candidates of the other parties. These independent voters care little for the radical and distant tenets of the socialist party leaders, who, to attract wider support, are forced to place increasing stress upon immediate and moderate reforms. On the other hand, men of larger qualities of leadership in the older parties are constantly adopting and advancing pending measures of social reform. Where this is not done the radical socialist party tends more quickly to develop into the one powerful party of protest and of popular aspiration, receiving support from many elements of the middle and small propertied classes and from non-radical wageworkers. This movement from both sides is leaving less noticeable the contrast between the socialist party and other parties claiming to be “progressive” or “forward looking.” The strongest allies of the more radical communistic faction of the socialist party are those members of the conservative parties who fail to recognize the need of humane legislation, who irritate by their unsympathetic utterances, and who unduly postpone by their powerful opposition the gradual and healthful unfolding of the social spirit, energy, and capacity of the nation. The greatest problem of social and economic legislation for the next generation is to determine how far, and how, the principle of authority may wisely be substituted for the principle of competition in distribution.

The many and varied forms of economic legislation described in the foregoing pages are so many experiments to find that better and that best adjustment of economic institutions to the needs and actual capacities of the people. Some of these experiments turn out badly, others well, and accordingly some are extended, others after a time are abandoned, perhaps to be tried again by a later hopeful generation of men. It does not seem possible for human society to stand still or to remain unchanged in respect to the many features which go to make up the present order. In some ways things grow better, in other ways worse. Moreover, this process of change is no longer so unconscious, and human society is not now so passive in the hands of fate, as in the past. Democratic society has become self-conscious and aspires to shape its own destiny. Can it be wise enough to know and will it be virtuous enough to do, that which will lead to an ideal social state? In any case it is making the attempt which must spell the continued progress or the eventual downfall of human civilization.

References.

• Brooks, J. G., The American syndicalism: the I. W. W. N. Y. Macmillan. 1913.
• Bussenden, P. F., The I. W. W. A study of American syndicalism. Pp. 432. New York. Longmans. 1919. (Historical study of the I. W. W.)
• Clark, J. B., Social justice without socialism. Bost. Houghton. 1914.
• Ensor, R. C. K., (Ed.), Modern socialism. 2d ed. N. Y. Scribner. 1907. (Selections from socialistic sources.)
• Gompers, Samuel, Out of their own mouths; a revelation and an indictment of Sovietism. 12mo. New York. Dutton. 1921.
• Hillquit, M., History of socialism in the United States. N. Y. Funk. 1903.
• Hillquit, M., Socialism in theory and practice. N. Y. Macmillan. 1909.
• Laidler, H. W., Socialism in thought and action. New York. Macmillan. 1919.
• Kirkup, T., Inquiry into socialism. 3d ed. N. Y. Longmans. 1907. (A sympathetic, but not a partizan statement.)
• Martin, John, An attempt to define socialism. A. E. Assn. Bul., 4th ser. 1 (no. 2): 347-354. 1911. Round table discussion of above, 355-367.
• Menger, A., The right to the whole produce of labor. Trans. 1899. (Masterly criticism.)
• Rae, John, Contemporary socialism. 3d ed. N. Y. Scribner. 1901. (Standard work by a non-socialist.)
• Schaeffle, A., The quintessence of socialism. N. Y. Scribner. 1898. (Exposition by a non-socialist, so favorable that it is used by the socialists as a tract.)
• Spargo, John, Socialism. 1906. N. Y. Macmillan. (Pro.)
• Walling, W. W., and associates, The socialism of today. New York. Holt. 1916. (A source book of the present position and recent development of the Socialist and labor parties in all countries, consisting largely of original documents.)
• Wells, H. G., New worlds for old. N. Y. Macmillan. 1908. (An appeal for juster distribution; Fabian school.)

[1 ]See Vol. I, pp. 264-267.

[2 ]This confusion has had important practical consequences in the field of taxation. See Vol. 1, pp. 265-267, and above, ch. 18, §§ 3-5.

[3 ]See § 3.

[4 ]See Vol. I, p. 51, and above, ch. 2.

[5 ]See Vol. I, p. 73.

[6 ]This will appear in comparing the competitive methods of distribution with other methods in ch. 34, §§ 7-11.

[7 ]See Vol. I, p. 143, on medieval land tenures; p. 158, on customary rents; p. 190, on the effect of caste.

[8 ]See Vol. I, p. 227, and above, ch. 20, §§ 1-4.

[1 ]See above, ch. 17, § 5.

[2 ]See ch. 17, § 2, on the police function.

[3 ]See ch. 17, § 3 and § 4.

[4 ]See ch. 17. § 5, industrial revenues of governments.

[5 ]That is, “the amount which can be developed upon the basis of the flowage of the streams for a period of two weeks in which the flow is the least,” all the rest being allowed to escape unused. Van Hise, “Conservation of Natural Resources,” p. 119.

[1 ]Treated throughout Vol. I.

[2 ]See Vol. I, pp. 190, 223; and above, ch. 32, §§ 11-13.

[3 ]See Vol. I, pp. 248-255, 297, 298, 406, 408, 415-418, 480, 481, 483, 484; also Vol. II, chs, 11, 20, and various passages in the chapters of this Part.

[4 ]See ch. 32, § 7, on limitations upon bequest and inheritance.

[5 ]See ch. 19.

[6 ]See ch. 13, § 9 and § 10.

[7 ]See ch. 32, § 10.

[8 ]See Vol. I, pp. 54 and 66; also pp. 504-507 on an organic theory of value.

[9 ]See above, § 2, note 3.

[10 ]Compare, e. g., portions of chs. 9, 14, 21, 22, 28; and 31, § 16.

[11 ]See ch. 32, §§ 11-13.

[12 ]See Vol. I, p. 75.

[13 ]See, e.g., Vol. I, pp. 25, 71, 205, 479, 509, 511, 513.

[14 ]Almost every chapter of this volume gives examples of these statements; but recall especially chs. 17, 22, 23, 29, 31, 33.

[1 ]See Vol. I, p. 6, on “social” and the social sciences.

[2 ]See e. g., ch. 9, §§ 2, 10; ch. 11, §§ 7, 8; ch. 7, §§ 3, 4, 12; chs. 19, 22, 23, 24, 29, and 31.

[3 ]See Vol. I, p. 502, on communism and value theory.

[4 ]See Vol. I, pp. 210, 228, 502 on the labor-theory of value.

[5 ]See above, § 3.