FOOTNOTES:[37]The 169 largest railroads in the United States have issued 84,418,796 shares of stock. ("American Labor Year Book," 1917-18, p. 169.) Theoretically, therefore, there might be eighty-four millions of owners of the American railroads.[38]Summary of the Report of the Federal Trade Commission on the Meat Packing Industry, July 3, 1918, Wash., Govt. Print., 1918.
[37]The 169 largest railroads in the United States have issued 84,418,796 shares of stock. ("American Labor Year Book," 1917-18, p. 169.) Theoretically, therefore, there might be eighty-four millions of owners of the American railroads.
[37]The 169 largest railroads in the United States have issued 84,418,796 shares of stock. ("American Labor Year Book," 1917-18, p. 169.) Theoretically, therefore, there might be eighty-four millions of owners of the American railroads.
[38]Summary of the Report of the Federal Trade Commission on the Meat Packing Industry, July 3, 1918, Wash., Govt. Print., 1918.
[38]Summary of the Report of the Federal Trade Commission on the Meat Packing Industry, July 3, 1918, Wash., Govt. Print., 1918.
The first object of the economic struggle is wealth. The second is power.
At the end of their era of competition, the leaders of American business found themselves masters of such vast stores of wealth that they were released from the paralyzing fear of starvation, and were guaranteed the comforts and luxuries of life. Had these men sought wealth as a means of satisfying their physical needs their object would have been attained.
The gratification of personal wants is only a minor element in the lives of the rich. After they have secured the things desired, they strive for the power that will give them control over their fellows.
The possession of things, is, in itself, a narrow field. The control over productive machinery gives him who exercises it the power to enjoy those things which the workers with machinery produce. The control over public affairs and over the forces that shape public opinion give him who exercises it the power to direct the thoughts and lives of the people. It is for these reasons that the keen, self-assertive, ambitious men who have come to the top in the rough and tumble of the business struggle have steadily extended their ownership and their control.
The bulk of American wealth, which consists for the most part of land and buildings, is concentrated in the centers of commerce and industry—in the regions of supreme business power.
The last detailed estimate of the wealth of the United States was made by the Census Bureau for the year 1912. At that time, the total wealth of the country was placed at $187,739,000,000. (The estimate for 1920 is $500,000,000,000.) Roughly speaking, this represented an estimate of exchangeable values. The figures, at best, are rough approximations. Their importance lies, not in their accuracy, but in the picture which they give of relationships.
The Total Wealth of the United States, Classified byGroups, with the Percentage of the TotalWealth in Each Group[39]
The bulk of the exchangeable wealth of the United States consists of "productive" or "investment" property. If, to the total of 110 billions given by the Census as the value of real property, are added the real property values of the public utilities, the total will probably exceed three quarters of the total wealth of the United States. If, in addition, account is taken of the fact that much of the wealth classed as "raw materials, etc.," is the immediate product of the land (coal, ore, timber), some idea may be obtained of the extent to which the estimated wealth of the country is in the form of land, its immediate products, and buildings. Furthermore, it must be remembered that great quantities of ore lands, timber lands, waterpower sites, etc., are assessed at only a fraction of their total present value.
The personal property of the country is valued at less than one fourteenth of the total wealth. It is in reality a negligible item, as compared with the value of the real property, of the public utilities, and of the raw materials and products of industry.
The wealth of the United States is in permanent form—land and improvements; personal possessions are a mere incident in the total. In truth, American wealth is in the main productive (business) wealth, designed for the further production of goods, rather than for the satisfaction of human wants.
Who owns this vast wealth? It is impossible to answer the question with anything like definiteness. Figures have been compiled to show that five per cent of the people own two-thirds to three-quarters of it; that the poorest two-thirds of the people own five per cent of it, and that the well-to-do or middle class own the remainder. These figures would make it appear that more than one-fourth of the population is in the middle class. If the income-tax returns are to be trusted this proportion is far toohigh. On all hands it is admitted that the wealth of the country is concentrated in the hands of a small fraction of the people and the important wealth—that is, the wealth upon which production, transportation and exchange depends—is in still fewer hands.
Neither the total wealth of the country, nor that portion of the total which is owned directly by the propertied class is of most immediate moment. Ownership does not necessarily involve control. A puddler in the Gary Mills may own five shares of stock in the Steel Corporation without ever raising his voice to determine the corporation policy. This is ownership without control. On the other hand, a banking house through a voting trust agreement, may control the policy of a corporation in which it does not own one per cent of the stock. This is control without ownership. Ownership may be quite incidental. It is control that counts in terms of power.
Most of the property owners in the United States play no part in the control of prices or of production, in the direction of economic policy, or in the management of economic affairs.
Theoretically, stockholders direct the policies of corporations, and, therefore, each holder of 5 or 10 shares of corporate stock would play a part in deciding economic affairs. Practically, the small stockholder has no part in business control.
The small farmer—the small business man of largest numerical consequence—has been exploited by the great interests for two generations. Despite his numbers and his organizations, despite his frequent efforts, through anti-trust laws, railway control laws, banking reform laws, and the like, he has little voice in determining important economic policies.
The small savings bank depositor or the holder of an ordinary insurance policy is a negative rather than a positive factor in economic control. Not only does he exercise no power over the dollar which he has placed with thebank or with the insurance company, but he has thereby strengthened the hands of these organizations. Each dollar placed with the financier is a dollar's more power for him and his.
Suppose—the impossible—that half of the families in the United States "own property." Subtract from this number the small stockholders; the holders of bonds, notes and mortgages; the small tradesman; the small farmer; the home owner and the owner of a savings-bank deposit or of an insurance policy—what remains? There are the large stockholders, the owners and directors of important industries, public utilities, banks, trust companies and insurance companies. These persons, in the aggregate, constitute a fraction of one per cent of the adult population of the United States.
Start with the total non-personal wealth of the country, subtract from it the share-values of the small stockholders; the values of all bonds, mortgages and notes; the property of the small tradesman and the small farmer; the value of homes—what remains? There are left the stocks in the hands of the big stockholders; the properties owned and directed by the owners and directors of important industries, public utilities, banks, trust companies and insurance companies. This wealth in the aggregate probably makes up less than 10 per cent of the total wealth of the country and yet the tiny fraction of the population which owns this wealth can exercise a dictatorial control over the economic policies that underlie American public life.
While control rests back directly or indirectly upon some form of ownership, most owners exercise little or no control over economic affairs. Instead they are made the victims of a social system under which one group lives at the expense of another.
Against this tendency toward control by one group or class (usually a minority) over the lives of another groupor class (usually a majority) the human spirit always has revolted. The United States in its earlier years was an embodiment of the spirit of that revolt. President Wilson characterized it excellently in 1916. Speaking of the American Flag, he said,—"That flag was originally stained in very precious blood, blood spilt, not for any dynasty, nor for any small controversies over national advantage, but in order that a little body of three million men in America might make sure that no man was their master."[40]
Against mastery lovers of liberty protest. Mastery means tyranny; mastery means slavery.
Mastery has always been based upon some form of ownership. There is in the United States a group, growing in size, of people who take more in keep than they give in service; people who own land; franchises; stocks and bonds and mortgages; real estate and other forms of investment property; people who are living without ever lifting a finger in toil, or giving anything in labor for an unceasing stream of necessaries, comforts and luxuries. These people, directly or indirectly, are the owners of the productive machinery of the United States.
Historically there have been a number of stages in the development of mastery. First, there was the ownership of the body. One man owned another man, as he might own a house or a pile of hides. At another stage, the owner of the land—the feudal baron or the landlord—said to the tenant, who worked on his land: "You stay on my land. You toil and work and make bread and I will eat it." The present system of mastery is based on the ownership by one group of people, of the productive wealth upon which depends the livelihood of all. The masters of present day economic society have in their possession the natural resources, the tools, the franchises, patents, and the other phases of the modern industrial system with which the people must work in order to live. The few who own and control the productive wealth have it in their powerto say to the many who neither own nor control,—"You may work or you may not work." If the masses obtain work under these conditions the owners can say to them further,—"You work, and toil and earn bread and we will eat it." Thus the few, deriving their power from the means by which their fellows must work for a living, own the jobs.
Job-ownership is the foundation of the latest and probably the most complete system of mastery ever perfected. The slave was held only in physical bondage. Behind serfdom there was land ownership and a religious sanction. "Divine right" and "God's anointed," were terms used to bulwark the position of the owning class, who made an effort to dominate the consciences as well as the bodies of their serfs. Job-ownership owes its effectiveness to a subtle, psychological power that overwhelms the unconscious victim, making him a tool, at once easy to handle and easy to discard.
The system of private ownership that succeeded Feudalism taught the lesson of economic ambition so thoroughly that it has permeated the whole world. The conditions of eighteenth century life have passed, perhaps forever, but its psychology lingers everywhere.
The job-holder has been taught that he must "get ahead" in the world; that if he practices the economic virtues,—thrift, honesty, earnestness, persistence, efficiency—he will necessarily receive great economic reward; that he must support his family on the standard set by the community, and that to do all of these essential things, he must take a job and hold on to it. Having taken the job, he finds that in order to hold it, he must be faithful to the job-owner, even if that involves faithlessness to his own ideas and ideals, to his health, his manhood, and the lives of his wife and children.
The driving power in slavery was the lash. Under serfdom it was the fear of hunger. The modern system of job-ownership owes its effectiveness to the fact that it has been built upon two of the most potent driving forces in all the world—hunger and ambition—the driving force that comes from the empty stomach and the driving force that comes from the desire for betterment. Thus job-owning, based upon an automatic self-drive principle, enables the job-owner to exact a return in faithful service that neither slavery nor serfdom ever made possible. Job-owning is thus the most thorough-going form of mastery yet devised by the ingenuity of man.
Unlike the slave owner and the Feudal lord the modern job-owner has no responsibility to the job-holder. The slave owner must feed, clothe and house his slave—otherwise he lost his property. The Feudal lord must protect and assist his tenant. That was a part of his bargain with his overlord. The modern job-owner is at liberty, at any time, to "discharge" the job-holder, and by throwing him out of work take away his chance of earning a living. While he keeps the job-holder on his payroll, he may pay him impossibly low wages and overwork him under conditions that are unfit for the maintenance of decent human life. Barring the factory laws and the health laws, he is at liberty to impose on the job-holder any form of treatment that the job-holder will tolerate.
There is no limit to the amount of industrial property that one man may own. Therefore, there is no limit to the number of jobs he may control. It is possible (not immediately likely) that one coterie of men might secure possession of enough industrial property to control the jobs of all of the gainfully occupied people in American industry. If this result could be achieved, these tens of millions would be able to earn a living only in case the small coterie in control permitted them to do so.
Job ownership is built, of necessity, on the ownership of land, resources, capital, credit, franchises, and other special privileges. But its power of control goes farbeyond this mere physical ownership into the realms of social psychology.
The early colonists, who fled from the economic, political, social and religious tyranny of feudalism, believed that liberty and freedom from unjust mastery lay in the private ownership of the job. They had no thought of the modern industrial machine.
The abolitionists who fought slavery believed that freedom and liberty could be obtained by unshackling the body. They did not foresee the shackled mind.
The modern world, seeking freedom; yearning for liberty and justice; aiming at the overthrow of the mastery that goes with irresponsible power, finds to its dismay that the ownership of the job carries with it, not only economic mastery, but political, social and even religious mastery, as well.
The industrial overlord holds control of the job with one hand. With the other he controls the product of industry. From the time the raw material leaves the earth in the form of iron ore, crude petroleum, logs, or coal, through all of the processes of production, it is owned by the industrial master, not by the worker. Workers separate the product from the earth, transport it, refine it, fabricate it. Always, the product, like the machinery, is the possession of the owning class.
While industry was competitive, the pressure of competition kept prices at a cost level, and the exploiting power of the owner was confined to the job-holder. To-day, through combinations and consolidations, industry has ceased to be competitive, and the exploiting power of the job-owner is extended through his ownership of the product.
The modern town-dweller is almost wholly in the hands of the private owners of the products upon which he depends. The ordinary city dweller spends two-fifths ofhis income for food; one-fifth for rent, fuel and light, and one-fifth for clothes. Food, houses, fuel (with the exception of gas supply in some cities), and clothing are privately owned. The public ownership of streets and water works, of some gas, electricity, street cars, and public markets, is a negligible factor in the problem. The private monopolist has the upper hand and he is able through the control of transportation, storage, and merchandising facilities, to make handsome profits for the "service" which he renders the consumer.
The wealth owners are doubly entrenched. They own the jobs upon which most families depend for a living. They own the necessaries of life which most families must purchase in order to live. Further, they control the surplus wealth of the community.
There are three principal channels of surplus. First of all there is the surplus laid aside by business concerns, reinvested in the business, spent for new equipment and disposed of in other ways that add to the value of the property. Second, there are the 19,103 people in the United States with incomes of $50,000 or more per year; the 30,391 people with incomes of $25,000 to $50,000 per year and the 12,502 people with incomes of $10,000 to $25,000 per year. (Figures for 1917.) Many, if not most of these rich people, carry heavy insurance, invest in securities, or in some other way add to surplus. In the third place there are the small investors, savings-bank depositors, insurance policy holders who, from their income, have saved something and have laid it aside for the rainy day. The masters of economic life—bankers, insurance men, property holders, business directors—are in control of all three forms of surplus.
The billions of surplus wealth that come each year under the control of the masters carry with them an immense authority over the affairs of the community. The ownersof wealth owe much of their immediate power to the fact that they control this surplus, and are in a position to direct its flow into such channels as they may select.
No one can question the control which business interests exercise over the jobs, the industrial product, and the economic surplus of the community. These facts are universally admitted. But the corollaries which flow naturally from such axioms are not so readily accepted. Yet given the economic power of the business world, the control over the channels of public opinion and over the machinery of government follows as a matter of course.
The channels of public opinion—the school, the press, the pulpit,—are not directly productive of tangible economic goods, yet they depend upon tangible economic goods for their maintenance. Whence should these goods come? Whence but from the system that produces them, through the men who control that system! The plutocracy exercises its power over the channels of public opinion in two ways,—the first, by a direct or business office control; and second, by an indirect or social prestige control.
The business office control is direct and simple. Schools, colleges, newspapers, magazines and churches need money. They cannot produce tangible wealth directly, and they must, therefore, depend upon the surplus which arises from the productive activities of the economic world. Who controls that surplus? Business men. Who, then, is in a position to dictate terms in financial matters? Who but the dominant forces in business life?
The facts are incontrovertible. It is not mere chance that recruits the overwhelming majority of school-board members, college trustees, newspaper managers, and church vestrymen, from the ranks of successful business and professional men. It is necessary for the educator, the journalist, and the minister to work through these men inorder to secure the "sinews of war." They are at the focal points of power because they control the sources of surplus wealth.
The second method of maintaining control—through the control of social prestige—is indirect, but none the less effective. The young man in college; the young graduate looking for a job; the young man rising in his profession, and the man gaining ascendancy in his chosen career are brought into constant contact with the "influential" members of the business world. It is the business world that dominates the clubs and the vacation spots; it is the business world that is met in church, at the dinner tables and at the social gathering.
The man who would "succeed" must retain the favor of this group. He does so automatically, instinctively or semi-consciously—it is the common, accepted practice and he falls in line.
The masters need not bribe. They need not resort to illegal or unethical methods. The ordinary channels of advertising, of business acquaintance and patronage, of philanthropy and of social intercourse clinch their power over the channels of public opinion.
The American government,—city, state and nation—is in almost the same position as the schools, newspapers and churches. It does not turn out tangible, economic products. It depends, for its support, upon taxes which are levied, in the first instance, upon property. Who are the owners of this property? The business interests. Who, therefore, pay the bills of the government? The business interests.
Nowhere has the issue been stated more clearly or more emphatically than by Woodrow Wilson in certain passages of his "New Freedom." As a student of politics andgovernment—particularly the American Government—he sees the power which those who control economic life are able to exercise over public affairs, and realizes that their influence has grown, until it overtops that of the political world so completely that the machinery of politics is under the domination of the organizers and directors of industry.
"We know," writes Mr. Wilson in "The New Freedom," "that something intervenes between the people of the United States and the control of their own affairs at Washington. It is not the people who have been ruling there of late" (p. 28). "The masters of the government of the United States are the combined capitalists and manufacturers of the United States.... Suppose you go to Washington and try to get at your government. You will always find that while you are politely listened to, the men really consulted are the men who have the biggest stakes—the big bankers, the big manufacturers, the big masters of commerce, the heads of railroad corporations and of steamship corporations.... Every time it has come to a critical question, these gentlemen have been yielded to and their demands have been treated as the demands that should be followed as a matter of course. The government of the United States at present is a foster-child of the special interests" (p. 57-58). "The organization of business has become more centralized, vastly more centralized, than the political organization of the country itself" (p. 187). "An invisible empire has been set up above the forms of democracy" (p. 35). "We are all caught in a great economic system which is heartless" (p. 10).
This is the direct control exercised by the plutocracy over the machinery of government. Its indirect control is no less important, and is exercised in exactly the same way as in the case of the channels of public opinion.
Lawyers receive preferment and fees from business—there is no other large source of support for lawyers. Judges are chosen from among these same lawyers. Usually they are lawyers who have won preferment andemolument. Legislators are lawyers and business men, or the representatives of lawyers and business men. The result is as logical as it is inevitable.
The wealth owners control the machinery of government because they pay the taxes and provide the campaign funds. They control public officials because they have been, are, or hope to be, on the payrolls, or participants in the profits of industrial enterprises.
The man fighting for bread has little time to "turn his eyes up to the eternal stars." The western cult of efficiency makes no allowances for philosophic propensities. Its object is product and it is satisfied with nothing short of that sordid goal.
The members of the wealth owning class are relieved from the food struggle. Their ownership of the social machinery guarantees them a secure income from which they need make no appeal. These privileges provide for them and theirs the leisure and the culture that are the only possible excuse for the existence of civilization.
The propertied class, because it owns the jobs, the industrial products, the social surplus, the channels of public opinion and the political machinery also enjoys the opportunity that goes with adequately assured income, leisure and culture.
The members of the dominant economic class hold a key—property ownership—which opens the structure of social wealth. Those who have access to this key are the blessed ones. Theirs are the things of this world.
The property owners enjoy the fleshpots. They hold the vantage points. The vital forces are in their hands. Economically, politically, socially, they are supreme.
If the control of material things can make a group secure, the wealth owners in the United States are secure. They hold property, prestige, power.
The phrase "our United States" as used by the greatmajority of the people is a misnomer. With the exception of a theoretically valuable but practically unimportant right called "freedom of contract," the majority of the wage earners in the United States have no more excuse for using the phrase "our United States" than the slaves in the South, before the war, for saying "our Southland."
The franchise is a potential power, making it theoretically possible for the electorate to take possession of the country. In practice, the franchise has had no such result. Quite the contrary, the masters of American life by a policy of chicanery and misrepresentation, advertise and support first one and then the other of the "Old Parties," both of which are led by the members of the propertied class or by their retainers. The people, deluded by the press, and ignorant of their real interests, go to the polls year after year and vote for representatives that represent, in all of their interests, the special privileged classes.
The economic and social reorganization of the United States during the past fifty years has gone fast and far. The system of perpetual (fee simple) private ownership of the resources has concentrated the control over the natural resources in a small group, not of individuals, but of corporations; has created a new form of social master, in the form of a land-tool-job owner; has thus made possible a type of absentee-landlordism more effective and less human than were any of its predecessors and has decreased the responsibility at the same time that it has augmented the power of the owning group. These changes have been an integral part of a general economic transformation that has occupied the chief energies of the ablest men of the community for the past two generations.
The country of many farms, villages and towns, and of a few cities, with opportunity free and easy of access, has become a country of highly organized concentrated wealth power, owned by a small fraction of the people and controlled by a tiny minority of the owners for their benefit and profit. The country which was rightfully called "our United States" in 1840, by 1920 was "their United States" in every important sense of the word.
FOOTNOTES:[39]"Estimated Valuation of National Wealth, 1850-1912," Bureau of the Census, 1915, p. 15.[40]"Addresses of President Wilson," House Doc. 803. Sixty-fourth Congress, 1st Session (1916), p. 13.
[39]"Estimated Valuation of National Wealth, 1850-1912," Bureau of the Census, 1915, p. 15.
[39]"Estimated Valuation of National Wealth, 1850-1912," Bureau of the Census, 1915, p. 15.
[40]"Addresses of President Wilson," House Doc. 803. Sixty-fourth Congress, 1st Session (1916), p. 13.
[40]"Addresses of President Wilson," House Doc. 803. Sixty-fourth Congress, 1st Session (1916), p. 13.
The owners of American wealth have been molded gradually into a ruling class. Years of brutal, competitive, economic struggle solidified their ranks,—distinguishing friend from enemy; clarifying economic laws, and demonstrating the importance of coördination in economic affairs. Economic control, once firmly established, opened before the wealth owning class an opportunity to dominate the entire field of public life.
Before the property owners could feel secure in their possessions, steps must be taken to transmute the popular ideas regarding "property rights" into a public opinion that would permit the concentration of important property in the hands of a small owning class, at the same time that it held to the conviction that society, without privately owned land and machinery, was unthinkable.
Many of the leading spirits among the colonists had come to America in the hope of realizing the ideal of "Every man a farm, and every farm a man." Upon this principle they believed that it would be possible to set up the free government which so many were seeking in those dark days of the divine right of kings.
For many years after the organization of the Federal Government men spoke of the public domain as if it were to last indefinitely. As late as 1832 Henry Clay, in a discussion of the public lands, could say, "We should rejoice that this bountiful resource possessed by our country, remains in almost undiminished quantity." Later in the same speech he referred to the public lands as being "liberally offered,—in exhaustless quantities, and atmoderate prices, enriching individuals and tending to the rapid improvement of the country."[41]
The land rose in price as settlers came in greater numbers. Land booms developed. Speculation was rife. Efforts were made to secure additional concessions from the Government. It was in this debate, where the public land was referred to as "refuse land" that Henry Clay felt called upon to remind his fellow-legislators of the significance and growing value of the public land. He said, "A friend of mine in this city bought in Illinois last fall about two thousand acres of this refuse land at the minimum price, for which he has lately refused six dollars per acre.... It is a business, a very profitable business, at which fortunes are made in the new states, to purchase these refuse lands and without improving them to sell them at large advances."[42]
A century ago, while it was still almost a wilderness, Illinois began to feel the pressure of limited resources—a pressure which has increased to such a point that it has completely revolutionized the system of society that was known to the men who established the Government of the United States.
This early record of a mid-western land boom, with Illinois land at six dollars an acre, tells the story of everything that was to follow. Even in 1832 there was not enough of the good land to go around. Already the community was dividing itself into two classes—those who could get good land and those who could not. A wise man, understanding the part played by economic forces in determining the fate of a people, might have said to Henry Clay on that June day in 1832, "Friend, you have pronounced the obituary of American liberty."
Some wise man might have spoken thus, but how strange the utterance would have sounded! There was so muchland, and all history seemed to guarantee the beneficial results that are derived from individual land ownership. The democracies of Greece and Rome were built upon such a foundation. The yeomanry of England had proved her pride and stay. In Europe the free workers in the towns had been the guardians of the rights of the people. Throughout historic times, liberty has taken root where there is an economic foundation for the freedom which each man feels he has a right to demand.
Feudal Europe depended for its living upon agriculture. The Feudal System had concentrated the ownership of practically all of the valuable agricultural land in the hands of the small group of persons which ruled because it controlled economic opportunity. The power of this class rested on its ownership of the resource upon which the majority of the people depended for a livelihood.
The Feudal System was transplanted to England, but it never took deep root there. When in 1215 A. D. (only a century and a half after the Great William had made his effort to feudalize England) King John signed the Magna Carta, Feudalism proper gave way to landlordism—the basis of English economic life from that time to this.
The system of English landlordism (which showed itself at its worst in the absentee landlordism of Ireland) differed from Feudalism in this essential respect,—Feudalism was based upon the idea of the divine right of kings. English landlordism was based on the idea of divine right of property. English landlordism is the immediate ancestor of the property concept that is universally accepted in the business world of to-day.
The evils of Feudalism and of landlordism were well known to the American colonists who were under the impression that they arose not from the fact of ownership, but from the concentration of ownership. The resourcesof the new world seemed limitless, and the possibility that landlordism might show its ugly head on this side of the Atlantic was too remote for serious consideration.
With the independence of the United States assured after the War of 1812; with the growth of industry, and the coming of tens of thousands of new settlers, the future of democracy seemed bright. Daniel Webster characterized the outlook in 1821 by saying, "A country of such vast extent, with such varieties of soil and climate, with so much public spirit and private enterprise, with a population increasing so much beyond former examples, ... so free in its institutions, so mild in its laws, so secure in the title it confers on every man to his own acquisitions,—needs nothing but time and peace to carry it forward to almost any point of advancement."[43]
"So free in its institutions, so mild in its laws, so secure in the title it confers on every man to his own acquisitions,"—the words were prophetic. At the moment when they were uttered the forces were busy that were destined to realize Webster's dream, on an imperial scale, at the expense of the freedom which he prized. Men were free to get what they could, and once having secured it, they were safeguarded in its possession. Property ownership was a virtue universally commended. Constitutions were drawn and laws were framed to guarantee to property owners the rights to their property, even in cases where this property consisted of the bodies of their fellow men.
The movement toward the protection of property rights has been progressive. Webster as a representative of the dominant interests of the country a hundred years ago rejoiced that every man had a secure title to "his own acquisitions," at a time when the property of the country was generally owned by those who had expended some personal effort in acquiring it. It was a long step from these personal acquisitions to the tens of billions of wealthin the hands of twentieth century American corporations. Daniel Webster helped to bridge the gap. He was responsible, at least in part, for the Dartmouth College Decision (1816) in which the Supreme Court ruled that a charter, granted by a state, is a contract that cannot be modified at will by the state. This decision made the corporation, once created and chartered, a free agent. Then came the Fourteenth Amendment with its provision that "no state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty or property, without due process of law." The amendment was intended to benefit negroes. It has been used to place property ownership first among the American beatitudes.
Corporations are "persons" in the eyes of the law. When the state of California tried to tax the property of the Southern Pacific Railroad at a rate different from that which it imposed on persons, the Supreme Court declared the law unconstitutional. This decision, coupled with that in the Dartmouth College Case secured for a corporation "the same immunities as any other person; and since the charter creating a corporation is a contract, whose obligation cannot be impaired by the one-sided act of a legislature, its constitutional position, as property holder, is much stronger than anywhere in Europe." These decisions "have had the effect of placing the modern industrial corporation in an almost impregnable constitutional position."[44]
Surrounded by constitutional guarantees, armed with legal privileges and prerogatives and employing the language of liberty, the private property interests in the United States have gone forward from victory to victory, extending their power as they increased and concentrated their possessions.
The efforts of Daniel Webster and his contemporaries to protect "acquisitions" have been seconded, with extraordinary ability, by business organizers, accountants, lawyers and bankers, who have broadened the field of their endeavors until it includes not merely "acquisitions," but all "property rights." Daniel Webster lived before the era of corporations. He thought of "acquisitions" as property secured through the personal efforts of the human being who possessed it. To-day more than half of the total property and probably more than three-quarters of productive wealth is owned by corporations. It required ability and foresight to extend the right of "acquisitions" to the rights of corporate stocks and bonds. The leaders among the property owners possessed the necessary qualifications. They did their work masterfully, and to-day corporate property rights are more securely protected than were the rights of acquisitions a hundred years ago.
The safeguards that have been thrown about property are simple and effective. They arose quite naturally out of the rapidly developing structure of industrialism.
First—There was an immense increase in the amount of property and of surplus in the hands of the wealth-owning class. After the new industry was brought into being with the Industrial Revolution, economic life no longer depended so exclusively upon agricultural land. Coal, iron, copper, cement, and many other resources could now be utilized, making possible a wider field for property rights. Again, the amount of surplus that could be produced by one worker, with the assistance of a machine, was much greater than under the agricultural system.
Second—The new method of conducting economic affairs gave the property owners greater security of possession. Property holders always have been fearful thatsome fate might overtake their property, forcing them into the ranks of the non-possessors. When property was in the form of bullion or jewels, the danger of loss was comparatively great. The Feudal aristocracy, with its land-holdings, was more secure. Land-holdings were also more satisfactory. Jewels and plate do not pay any rent, but tenants do. Thus the owner of land had security plus a regular income.
The corporation facilitated possession by providing a means (stocks and bonds) whereby the property owner was under no obligation other than that of clipping coupons or cashing interest checks upon "securities" that are matters of public record; issued by corporations that make detailed financial reports, and that are subject to vigorous public inspection and, in the cases of banks and other financial organizations, to the most stringent regulation.
Third—Greater permanence has been secured for property advantages. Corporations have perpetual, uninterrupted life. The deaths of persons do not affect them. The corporation also overcame the danger of the dissipation of property in the process of "three generations from shirt sleeves to shirt sleeves." The worthless son of the thrifty parent may still be able to squander his inheritance, but that simply means a transfer of the title to his stocks and bonds. The property itself remains intact.
Fourth—Property has secured a claim on income that is, in the last analysis, prior to the claim of the worker.
When a man ran his own business, investing his capital, putting back part of his earnings, and taking from the business only what he needed for his personal expenses, "profits" were a matter of good fortune. There were "good years" and "bad years," when profits were high or low. Many years closed with no profit at all. The average farmer still handles his business in that way.
The incorporation of business, and the issuing of bonds and stocks has revolutionized this situation. It is no longer possible to "wait till things pick up." If the business hasissued a million in bonds, at five per cent, there is an interest charge of $50,000 that must be met each year. There may be no money to lay out for repairs and needed improvements, but if the business is to remain solvent, it must pay the interest on its bonds.
Businesses that are issuing securities to the public face the same situation with regard to their stocks. Wise directors see to it that a regular rate, rather than a high rate of dividends, is paid. Regularity means greater certainty and stability, hence better consideration from the investing public.
Fifth—The practices of the modern economic world have gone far to increase the security of property rights.
Business men have worked ardently to "stabilize" business. They have insisted upon the importance of "business sanity;" of conservatism in finance; of the returns due a man who risks his wealth in a business venture; and of the fundamental necessity of maintaining business on a sound basis. After centuries of experiment they have evolved what they regard as a safe and sane method of financial business procedure. Every successful business man tried to live up to the following well-established formula.
First, he pays out of his total returns, or gross receipts, the ordinary costs of doing business—materials, labor, repairs and the like. These payments are known as running expenses or up-keep.
Second, after up-keep charges are paid he takes the remainder, called gross income, and pays out of it the fixed charges—taxes, insurance, interest and depreciation.
Third, the business man, having paid all of the necessary expenses of doing business (the running expenses and the fixed charges), has left a fund (net income) which, roughly speaking, is the profits of the business. Out of this net income, dividends are paid, improvements and extensions of the plant are provided for.
Fourth, the careful business man increases the stability of his business by adding something to his surplus or undivided profits.
The operating statistics of the United Steel Corporation for 1918 illustrate the principle:
Like every carefully handled business, the Steel Corporation,—
1. Paid its running expenses,2. Paid its fixed obligations,3. Divided up its profits,4. And kept a nest egg.
1. Paid its running expenses,
2. Paid its fixed obligations,
3. Divided up its profits,
4. And kept a nest egg.
The effectiveness of such means of stabilizing property income is illustrated by a compilation (published in theWall Street Journalfor August 7th, 1919) of the business of 104 American corporations between December 31, 1914, and December 31, 1918. The inventories—value of property owned—had increased from 1,192 millions to 2,624 millions of dollars; the gain in surplus, during the four years,was 1,941 millions; the increase in "working capital" was 1,876 millions. These corporations, representing only a small fraction of the total business of the country, had added billions to their property values during the four years.
These various items,—up-keep; depreciation; insurance; taxes; interest; dividends and surplus,—are recognized universally by legislatures and courts as "legitimate" outlays. They, therefore, are elements that are always present in the computation of a "fair" price. The cost to the consumer of coffee, shoes, meat, blankets, coal and transportation are all figured on such a basis. Hence, it will be seen that each time the consumer buys a pair of shoes or a pound of meat, he is paying, with part of his money, for the stabilizing of property.
Fifth. Property titles under this system are rendered immortal. A thousand dollars, invested in 1880 in 5 per cent. 40 year bonds, will pay to the owner $2,000 in interest by 1920, at which time the owner gets his original thousand back again to be re-invested so long as he and his descendants care to do so. The dollar, invested in the business of the steel corporation, by the technical processes of bookkeeping, is constantly renewed. Not only does it pay a return to the owner, but literally, it never dies.
The community is built upon labor. Its processes are continued and its wealth is re-created by labor. The men who work on the railroad keep the road operating; those who own the railroad owe to it no personal fealty, and perform upon it no personal service. If the worker dies, the train must stop until he is replaced; if the owner dies, the clerk records a change of name in the registry books.
The well-ordered society will encourage work. It will aim to develop enthusiasm, to stimulate activity. Nevertheless, in "practical America" a scheme of economic organization is being perfected under which the cream of life goes to the owners. They have the amplest opportunities. They enjoy the first fruits.
Under these circumstances, it is easy to see how "the rights of property" soon comes to mean the same thing as "civilization," and how "the preservation of law and order" is always interpreted as the protection of property. With a community organized on a basis which renders property rights supreme in all essential particulars, it is but natural that the perpetuation of these rights should be regarded as the perpetuation of civilization itself.
The present organization of economic life in the United States permits the wealth owners through their ownership to live without doing any work upon the work done by their fellows. As recipients of property income (rent, interest and dividends) they have a return for which they need perform no service,—a return that allows them to "live on their income."
The man who fails to assist in productive activity gives nothing of himself in return for the food, clothing and shelter which he enjoys,—that is, he lives on the labor of others. Where some have sowed and reaped, hammered and drilled, he has regaled himself on the fruits of their toil, while never toiling himself.
The matter appears most clearly in the case of an heir to an estate. The father dies, leaving his son the title deeds to a piece of city land. If he has no confidence in his son's business ability or if his son is a minor, he may leave the land in trust, and have it administered in his son's interest by some well organized trust company. The father did not make the land, though he did buy it. The son neither made nor bought the land, it merely came to him; and yet each year he receives a rent-payment upon which he is able to live comfortably without doing any work. It must at once be apparent that this son of his father, economically speaking, performs no function in the community, but merely takes from the community an annual toll or rental based on his ownership of a part of theland upon, which his fellowmen depend for a living. Of what will this toll consist? Of bread, shoes, motor-cars, cigars, books and pictures,—the products of the labor of other men.
This son of his father is living on his income,—supported by the labor of other people. He performs no labor himself, and yet he is able to exist comfortably in a world where all of the things which are consumed are the direct or indirect product of the labor of some human being.
Living on one's income is not a new social experience, but it is relatively new in the United States. The practice found a reasonably effective expression in the feudalism of medieval Europe. It has been brought to extraordinary perfection under the industrialism of Twentieth Century America.
Imagine the feelings of the early inhabitants of the American colonies toward those few gentlemen who set themselves up as economically superior beings, and who insisted upon living without any labor, upon the labor performed by their fellows. It was against the suggestion of such a practice that Captain John Smith vociferated his famous "He that will not work, neither shall he eat." The suggestion that some should share in the proceeds of community life without participating in the hardships that were involved in making a living seemed preposterous in those early days.
To-day, living on one's income is accepted in every industrial center of the United States as one of the methods of gaining a livelihood. Some men and women work for a living. Other men and women own for a living.
Workers are in most cases the humble people of the community. They do not live in the finest homes, eat the best food, wear the most elaborate clothing, or read, travel and enjoy the most of life.
The owners as a rule are the well-to-do part of the community. They derive much of all of their income frominvestments. The return which they make to the community in services is small when compared with the income which they receive from their property holdings.
Living on one's income is becoming as much a part of American economic life as living by factory labor, or by mining, or by manufacturing, or by any other occupation upon which the community depends for its products. The difference between these occupations and living on one's income is that they are relatively menial, and it is relatively respectable, that is, they have won the disapprobation and it has won the approbation of American public opinion.
The best general picture of the economic situation that permits a few people to live on their incomes, while the masses of the people work for a living, is contained in the reports of the Federal Commissioner of Internal Revenue. The figures for 1917 ("Statistics of Income for 1917" published August 1919) show that 3,472,890 persons filed returns, making one for each six families in the United States. Almost one half of the total number of returns made in 1917 were from persons whose income was between $1000 and $2000. There were 1,832,132 returns showing incomes of $2000 or more, one for each twelve families in the country.
The number of persons receiving the higher incomes is comparatively small. There were 270,666 incomes between $5,000 and $10,000; 30,391 between $10,000 and $25,000; 12,439 between $25,000 and $50,000. There were 432,662 returns (22 for each 1000 families in the United States) showing incomes of $5,000 or over; there were 161,996 returns (8 returns for each 1000 families) showing incomes of $10,000 or over; 49,494 showing incomes of $25,000 and over; 19,103 showing incomes of $50,000 and more. Thus the number of moderate and large incomes, compared with the total population of the country, was minute.
The portion of the report that is of particular interest, in so far as the present study is concerned, is that which presents a division of the total net income of those reporting $2,000 or more, into three classes—income frompersonal service, income from business profits and income from the ownership of property.
Those persons who have incomes of $2,000 or more receive 30 cents on the dollar in the form of wages and salaries; 33 cents in the form of business profits, and 37 cents in the form of incomes from the ownership of property. The dividend payments alone—to this group of property owners, are equal to three quarters of the total returns for personal service.
These figures refer, of course, to all those in receipt of $2,000 or more per year. Obviously, the smaller incomes are in the form of wages, salaries, and business profits, while the larger incomes take the form of rent, interest and dividends. This is made apparent by a study of the detailed tables published in connection with the "Income Statistics for 1916."
Among those of small incomes—$5,000 to $10,000—nearly half of the income was derived from personal services. The proportion of the income resulting from personal service diminished steadily as the incomes rose until, in the highest income group—those receiving $2,000,000 or more per year, less than one-half of one per cent. was the result of personal service while more than 99 per cent. of the incomes came from property ownership.
A small portion of the American people are in receipt of incomes that necessitate a report to the revenue officers. Among those persons, a small number are in receipt of incomes that might be termed large—incomes of $10,000 or over, for example. Among these persons with large incomes the majority of the income is secured in the form of rent, interest, dividends and profits. The higher the income group, the larger is the percentage of the income that comes from property holdings.
The economic system that exists at the present time in the United States places a premium on property ownership. The recipients of the large incomes are the holders of the large amounts of property.
Large incomes are property incomes. The rich are rich because they are property owners. Furthermore, the organization of present-day business makes the owner of property more secure—far more secure in his income, than is the worker who produces the wealth out of which the property income is paid.
The owning class in the United States is established on an economic basis,—the private ownership of the earth. No more solid foundation for class integrity and class power has ever been discovered.
The owners of the United States are powerfully entrenched. Operating through the corporation, its members have secured possession of the bulk of the more usefulresources, the important franchises and the productive capital. Where they do not own outright, they control. The earth, in America, is the landlords and the fullness thereof. They own the productive machinery, and because they own they are able to secure a vast annual income in return for their bare ownership.
Families which enjoy property income have one great common interest—that of perpetuating and continuing the property income; hence the "cohesion of wealth." "The cohesion of wealth" is a force that welds individuals and families who receive property income into a unified group or class.
The cohesion of wealth is a force of peculiar social significance. It might perhaps be referred to as the class consciousness of the wealthy except that it manifests itself among people who have recently acquired wealth, more violently, in some cases, than it appears among those whose families have possessed wealth for generations. Then, the cohesion of wealth is not always an intelligent force. In the case of some persons it is largely instinctive.
Originally, the cohesion of wealth expresses itself instinctively among a group of wealth owners. They may be competing fiercely as in the case of a group of local banks, department stores, or landlords, but let a common enemy appear, with a proposition for currency reform, labor legislation or land taxation and in a twinkling the conflicting interests are thrown to the winds and the property owners are welded into a coherent, unified group. This is the beginning of a wealth cohesion which develops rapidly into a wealth consciousness.
American business, a generation ago, was highly competitive. Each business man's hand was raised against his neighbor and the downfall of one was a matter of rejoicing for all. The bitter experience of the nineties drove home some lessons; the struggles with labor brought some more; the efforts at government regulations had their effect; but most of all, the experience of meeting with men in variouslines of business and discussing the common problems through the city, state and national and business organizations led to a realization of the fact that those who owned and managed business had more in common than they had in antagonism. By knifing one another they made themselves an easy prey for the unions and the government. By pooling ideas and interests they presented a solid front to the demands of organized labor and the efforts of the public to enforce regulation.
"Plutocracy" means control by those who own wealth. The "plutocratic class" consists of that group of persons who control community affairs because they own property. This class, because of its property ownership, is compelled to devote time and infinite pains to the task of safeguarding the sacred rights of property. It is to that task that the leaders of the American plutocracy have committed themselves, and it is from the results of that accomplished work that they are turning to new labors.