CHAPTER LVTHE CAPITALIST SYSTEM

(Discusses history as a battle-ground between ruling and subject classes, and the method and outcome of this struggle.)

There is a theory of social development, sometimes called the materialistic interpretation of history, and sometimes the economic interpretation of history. It is one of the contributions to our thought which we owe to Karl Marx, and like all the rest of Marxian theory, it is a subject of embittered controversy, not merely between Socialists and orthodox economists, but between various schools of revolutionary doctrine. For my part, I have never been a great hand for doctrine, whether ancient or modern; I am not much more concerned with what Marx taught than I am with what St. Paul taught, or what Martin Luther taught. My advice is to look at life with your own eyes, and to state in simple language the conclusions of your own thinking.

Man is an eating animal; he has also been described as a tool-making animal, and might be described as an ideal-making animal. There is a tendency on the part of those who specialize in the making of ideals to repudiate the eating and the tool-making sides of man; which accounts for the quarrel between the Marxians and the moralists. All through history you find new efforts of man to develop his emotional and spiritual nature, and to escape from the humiliating limitations of the flesh. These efforts have many of them been animated by desperate sincerity, but none of them have changed the fundamental fact that man is an eating animal, an animal insufficiently provided by nature against cold, and with an intense repugnance to having streams of cold water run down back of his neck. The religious teachers go out with empty purse, and "take no thought for the morrow"; but the forces of nature press insistently upon them, and little by little they make compromises, they take to shelter while they are preaching, they consent to live in houses, and even to own houses, and to keep a bank account. So they make terms with the powers of this world, and the powers ofthis world, which are subtle, and awake to their own interests, find ways to twist the new doctrine to their ends.

So the new religion becomes simply another form of the old hypocrisy; and it comes to us as a breath of fresh air in a room full of corruption when some one says, "Let us have done with aged shams and false idealisms. Let us face the facts of life, and admit that man is a physical animal, and cannot do any sane and constructive thinking until he has food and shelter provided. Let us look at history with unblinking eyes, and realize that food and shelter, the material means of life, are what men have been seeking all through history, and will continue to seek, until we put production and distribution upon a basis of justice, instead of a basis of force."

Such is, as simply as I can phrase it, the materialistic interpretation of history. Put into its dress of scientific language it reads: the dominant method of production and exchange in any society determines the institutions and forms of that society. I do not think I exaggerate in saying that this formula, applied with judgment and discrimination, is a key to the understanding of human societies.

Wherever man has moved into the stage of slavery and private property there has been some group which has held power and sought to maintain and increase it. This group has set the standards of behavior and belief for the community, and if you wish to understand the government and religion, the manners and morals, the philosophy and literature and art of that community, the first thing you have to do is to understand the dominant group and its methods of keeping itself on top. This statement applies, not merely to those cultural forms which are established and ordained by the ruling class; it applies equally well to the revolutionary forms, the behavior and beliefs of those who oppose the ruling class. For men do not revolt in a vacuum, they revolt against certain conditions, and the form of their revolt is determined by the conditions. Take, for example, primitive Christianity, which was certainly an effort to be unworldly, if ever such an effort was made by man. But you cannot understand anything about primitive Christianity unless you see it as a new form of slave revolt against Roman imperialism and capitalism.

The theory of the class struggle is the master key to the bewilderments and confusions of history. Always there is adominant class, holding the power of the state, and always there are subject classes; and sooner or later the subject classes begin protesting and struggling for wider rights. When they think they are strong enough, they attempt a revolt, and sometimes they succeed. If they do, they write the histories of the revolt, and their leaders become heroes and statesmen. If they fail, the histories are written by their oppressors, and the rebels are portrayed as criminals.

One of the commonest of popular assumptions is that if the rebels have justice on their side, they are bound to succeed in the long run; but this is merely the sentimental nonsense that is made out of history. It is perfectly possible for a just revolt to be crushed, and to be crushed again and again; just as it is possible for a child which is ready to be born to fail to be born, and to perish miserably. The fact that the Huguenots had most of the virtue and industry and intelligence of France did not keep them from being slaughtered by Catholic bigots, and reaction riveted upon the French people for a couple of hundred years. The fact that the Moors had most of the industry of Spain did not keep them from being driven into exile by the Inquisition, and the intellectual life of the Spanish people strangled for three hundred or four hundred years.

Some eight hundred years ago our ancestors in England brought a cruel and despotic king to battle, and conquered him, and on the field of Runnymede forced him to sign a grant of rights to Englishmen. That document is known as Magna Carta, or the Great Charter, and everyone who writes political history today recognizes it as one of the greatest of man's achievements, the beginning of a process which we hope will bring freedom and equality before the law to every human being on earth.

And now we have come to the stage in our industrial affairs, when the organized workers seek to bring the monarchs of industry into the council chamber, and force them to sign a similar Great Charter, which will grant freedom and self-government to the workers. Just as King John was forced to admit that the power to tax and spend the public revenue belonged to the people of England, and not to the ruler; just so the workers will establish the principle that the finances of industry are a public concern, that the books are to be opened, and prices fixed and wages paid by the democratic vote of the citizens of industry. If that change isaccomplished, the historian of the future will recognize it as another momentous step in progress; and he will heed the protests of the lords of industry, that they are being deprived of their freedom to do business, and of their sacred legal rights to their profits, as little as he heeded the protests of King John against the "treason" and "usurpation" and infringement of "divine right" by the rebellious barons.

(Shows how wealth is produced in modern society, and the effect of this system upon the minds of the workers.)

In the beginning man got his living by hunting and fishing. Then he took to keeping flocks and herds, and later by slow stages he settled down to agriculture. With the introduction of slavery and the ownership of the land by ruling classes, there came to be a subject class of workers, who toiled on the land from dawn to dark, year in and year out, and got, if they were fortunate, an existence for themselves and their families. Whether these workers were called slaves or serfs or peasants, whether their product was taken from them in the form of taxes by the king, or of rent by the landlord, made no difference; the workers were bound to the soil, like the beasts with which they lived in intimate contact. They were drafted into armies, and made to fight for their lords and masters; they suffered pestilence and famine, fire and slaughter; but with infinite patience they would rebuild their huts, and dig and plant again, whether for the old master or for a new one.

In the early days these workers made their own crude tools and weapons; but very early there must have been some who specialized in such arts, and with the growth of towns and communications came a new kind of labor, based upon a new system. Some enterprising man would buy slaves, or hire labor, and obtain a supply of raw material, and manufacture goods to be bartered or sold. He would pay his workers enough to draw them from the land, and would sell the product for what he could get, and the difference would be his profit. That was capitalism, and at first it was a thing of no importance, and the men who engaged in it had no social standing. But princes and lords needed weapons and supplies for their armies, and the men who could furnish these things became more and more necessary, and the states which encouraged them were the ones which rose to power. Merchants and sea-traders became the intimates of kings, and bythe time of the Roman empire, capitalism was a great world power, dominating the state, using the armies of the state for its purposes. It went down with the rest of Roman civilization, but in the Middle Ages it began once more to revive, and by the end of the eighteenth century the merchants and money lenders of France, with their retainers, the lawyers and journalists, were powerful enough to take the control of society.

Then, in the beginning of the nineteenth century, came the invention of machinery and of the power process. Capitalism began to grow like a young giant among pygmies. In the course of a century it has ousted all other methods of production, and all other forms of social activity. A hundred years ago the British House of Commons was a parliament of landlords; today it is a Merchants' and Manufacturers' Association. Out of the 707 members of the British House of Commons, 361 are members of the "Federation of British Industries," the labor-smashing organization of British "big business." And the same is true of every other parliament and congress in the modern capitalist state. Practically all the wealth of the world today is produced by the capitalist method, and distributed under capitalist supervision, and therefore capitalist ideas prevail in our society, to the practical exclusion of all other ideas. I have shown in "The Profits of Religion" how these ideas dominate the modern church, and in "The Brass Check" how they dominate the modern press. I plan to write two books, to show how they dominate education and literature.

A hundred years ago an industry consisted of a half a dozen or a dozen men, working under the personal supervision of an owner, and using crude hand tools. Today it consists of a gigantic trust, owning and managing scores and perhaps hundreds of mills and factories, each employing thousands of workers. A corporation like the Steel Trust owns enough of the sources of its raw material to give it practical monopoly; it owns a fleet of vessels especially designed for ore-carrying; it owns its private railroads, to deliver the ore to the mills. Through its system of dummy directorates it has practical control of the main railroads over which it distributes its products; also of banks and trust companies and insurance companies, to gather the money of the public to finance its undertakings. It owns huge office buildings,and vast tracts of land upon which the homes of its workers are built. It has a private army for the defense of its property—a complete army of cavalry, infantry and artillery, including a large and highly efficient secret service department, with a host of informers and spies. It has newspapers for the purpose of propaganda, and it controls the government of every village, town and city in which it has important interests. If you will take the trouble to visit a "steel town," and make inquiries among public officials, newspaper men, and others who are "on the inside," you will discover that those in authority consider it necessary and proper that "steel" should control, and are unable to conceive any other condition of affairs. If you go to other parts of the country, where other great industries are located, you find it taken for granted that "copper" should control, or "lumber," or "coal," or "oil," or whatever it may be.

Under the system of large scale capitalism, labor is a commodity, bought and sold in the market like any other commodity. Some years ago Congress was requested to pass a law contradicting this fundamental fact of world capitalism. Congress passed a law, very carefully worded so that no one could be sure what it meant, and a few years later the Supreme Court nullified the law. But all through this political and legal controversy the status of labor remained exactly the same; there was a "labor market," consisting of those members of the community who, in the formula of Marx, had nothing but their labor power to sell. These competed for recognition at the factory gates, and highly skilled foremen selected those who offered the largest quantity of labor power for the stated wage.

So entirely impersonal is this process that there are great industries in America in which ninety per cent of the common labor force is hired and fired all over again in the course of a year. These men are put to work in gangs, under a system which enables one picked man to set the pace, and compel all the others to keep up with him, under penalty of being discharged. This process is known as "speeding up," and its purpose is to obtain from each worker the greatest quantity of energy in exchange for his daily wage. In the steel industry men work twelve hours a day for six days in the week, and then finish with a twenty-four-hour day. If they do not work so long in other industries, it is because experience hasproven that the greatest quantity of energy can be obtained from them in a shorter time. There are very few men who can stand this pace for long. Those who are not crippled or killed in accidents are broken down at forty, and all the great corporations recognize this fact. Their foremen pick out the younger men, and practically all concerns have an age rule, and never hire men above forty or forty-five.

I shall not in this book go into details concerning the fate of the worker under the profit system. I have written two novels, "The Jungle" and "King Coal," in which the facts are portrayed in detail, and it seems the part of common sense to refer the reader to these text-books. It will suffice here to set forth the main outlines of the situation. In every capitalist country of the world the masses of the people are herded into industries, in whose profits they have no share, and in whose welfare they have no interest. They do not know the people for whom they work; they have no human relationship, either with their work or with their employers. They see the surplus of their product drawn off to maintain a class of idlers, whose activities they know only through the scandals of the divorce courts and the luxury-love of the moving picture screen. They compete with one another for jobs, and bid down one another's wages; and if they attempt to organize and end this competition, their efforts are broken by newspaper propaganda and policemen's clubs. At the same time they know that monopoly, open or secret, prevails in the fixing of prices, and so they find the struggle to "get ahead" a losing one. In America it used to be possible for the young and energetic to "go West"; but now the wave of capitalism has reached the Pacific coast and been thrown back, and there is no more frontier.

The man who works on the land has been through all the ages a solitary man. He is better friends with his horse and his cow than with his fellow humans. He is brutalized by incessant toil, he lives amid dirt and the filth of animals, he is, in the words of Edwin Markham:

He is a victim of natural forces which he does not understand, and inevitably therefore he is superstitious. Being alone,he is helpless against his masters, and only utter desperation drives him to revolt.

But consider the capitalist system—how different the conditions of its workers! Here they are gathered into city slums, and their wits are sharpened by continual contact with their fellows. The printing press makes cheap the spread of information, and the soap-box makes it even cheaper. Any man with a grievance can shout aloud, and be sure of an audience to listen, and he can get a great deal said before the company watchman or the policeman can throttle him. Moreover, the modern worker is not struggling with drought and tempest and hail; he does not see his labors wiped out by volcanic eruption or lightning stroke; he is dealing with machinery, something that he himself has made, and that he fully understands. If a machine gets out of order, he does not fall down upon his knees and pray to God to fix it. All the training of his life teaches him the relationship of cause and effect, the adjustment of means to ends. So the modern worker, as a necessary consequence of his daily work, is practical, skeptical, and unsentimental in his psychology. And what is more, he is making all the rest of society of the same temperament. He is building roads out into the country, and building machines to roll over them; he is running telephone lines and sending newspapers and magazines and moving picture shows to the peasant and the farmer; so the young peasants and farmers hunger for the city, and they learn to fix machinery instead of praying to God.

Such is the psychology of the modern working class; and the supreme achievement of their sharpened wits is an understanding of the capitalist process. As a matter of fact they did not make this discovery for themselves; it was made for them by middle-class men, lawyers and teachers and writers—Fourier, Owen, Marx, Lassalle. The modern doctrine is called by various names: Socialism, Communism, Anarchism, Bolshevism, Syndicalism, Collectivism. Later on I shall define these various terms, and point out the distinctions between them. For the moment I emphasize the factor they all have in common, and which is fundamental: they wish to break the power of class ownership and control of the instruments and means of production; they wish to replace private capitalism by some system under which theinstruments and means of production are collectively owned and operated; and they look to the non-owning class, the proletarian, as the motive power by which this change is to be compelled. I shall in future refer to this as the "social revolutionary" doctrine; taking pains to explain that the word "revolutionary" is to be divested of its popular meaning of physical violence. It is perfectly conceivable that the change may be brought about peaceably, and I shall try to show before long that in modern capitalist states the decision as to whether it is brought about peaceably or by violence rests with the present masters of industry.

(How profits are made under the present industrial system and what becomes of them.)

We have next to examine the structure of the capitalist order, basing our argument on facts which are admitted by everyone, including the most ardent defenders of the present system.

All men have to have certain material things which we describe as goods. As these goods do not produce themselves, it is necessary that some should work. The workers must have tools; also they must have access to the land and the sources of raw materials. These means of production are owned by some individuals in the community, and this ownership gives them power to direct the work of the rest. Those who own the land and the natural sources of wealth we call capitalists, or business men, and those who do not own these things, or whose share in them is insignificant, are the proletariat, or working class.

If you state to the average American that there is a capitalist class and a proletariat in this country, he will point out that many who are now members of the capitalist class were originally members of the proletariat; they have worked hard and saved, and accumulated property. But this is merely confusing the issue. The fact that some proletarians turn into capitalists and some capitalists into proletarians is important to the individuals concerned, but it does not alter the fact that there are two classes, capitalist and proletarian. Consider, by way of illustrating, a field with trees growing on it; we have earth, and we have trees, and the distinction between them is unmistakable. The roots of the trees go down into the earth, and take up portions of the earth and turn it into tree. The leaves and the dead branches fall, and in the course of time are turned once more to earth. There are all sorts of stages between earth and tree, and between tree and earth; but you would not therefore say that the word "earth" and the word "tree" are misnomers.

The working men go to the business man and apply for work. The business man gives them work, and takes their product, and offers it in the market at a price which allows him a profit above cost. If he can sell at a profit, he repeats the process, and the worker has a job. If he cannot sell at a profit, the worker is out of a job. Here and there may be a benevolent business man who, rather than turn his workers out of a job, will sell his goods at cost, or even for a short time at a loss; but if he keeps the factory going simply for the benefit of his workers, and with no expectation of ever making a profit, that is a form of charity, and not the common system under which our business is now carried on.

So it appears that the worker is dependent for his wages upon the ability of the business man to make a profit. The worker's life is inextricably bound up with the profit of the capitalist—no profit for the capitalist, no life for the worker. The capitalist, going out to look for markets for his goods, is seeking, not merely profit for himself, but life for his workers.

Now, the business man pays a certain percentage of his total receipts for labor, another percentage for raw materials, another percentage for his overhead charges, and the rest is profit in various forms, rent to the landlord, interest to the bondholder, dividends to the stockholder. All this total sum goes to human individuals, and each has thus a certain amount of money to spend. They pay it over to other individuals for goods or services, and so the money keeps circulating, and business keeps going. That is as deep as the average mind probes into the process.

But let us probe a little deeper. It is evident that, in the course of all this exchanging of goods, some individuals get a larger share than other individuals. Our government collects an income tax, and thus we have statistics representing what people are willing to admit about the share they get. In 1917 it appeared that, speaking roughly, one family out of six had an income of over $1,000 a year, and one family out of twelve had an income of over $2,000. But there were 19,000 families which admitted incomes of over $50,000 a year, and 300 with over $1,000,000 a year.

Now the families that get less than a thousand dollars a year obviously have to spend the greater part of their income upon their immediate living expenses. But the families thatget $50,000 a year do not need to spend everything, and most of them take the greater part of their income and reinvest it—that is, they spend it upon the creating of new machinery of production, railroads, mills, factories, office buildings, the whole elaborate structure of capitalist industry.

Exactly what proportion of the total product of industry is thus taken and reinvested no one can say; but this we know, our cities are growing at an enormous rate, our manufacturing power is increasing by leaps and bounds, we are perfecting processes which enable one man to do the work of a hundred men, which increase the product of one man's labor a hundredfold. All this goes on blindly, automatically; a Niagara of goods of all sorts is poured out, and we call it "prosperity."

But then suddenly a strange and bewildering thing happens. All at once, and without warning, orders fall off, values begin to drop, business collapses, factories are shut down, and millions of men are thrown out of jobs. Merchants look at one another with blanched faces; each one has been counting on paying his bills with the profits he was going to make, and now his profits are gone, and he can't pay. The newspapers and magazines keep insisting that it can't be true, that business is going to revive next week, that prosperity is just ahead. But the factories stay shut, and the millions of men stay idle.

This is the condition in which we find ourselves as I write this book. It has been happening regularly in our history every ten years or so, ever since America started; we have had a hundred years to reflect upon it and to probe into the causes of it, and such is business intelligence in the most enlightened country in the world, you may search the pages of our newspapers from the first column of millionaire divorce suits to the last column of "situations wanted," and nowhere can you find one word to explain this mysterious calamity of "hard times"—how it comes to happen to our social system, or what could be done to prevent it! To supply this deficiency in present day thinking is our next task.

(Explains why capitalist prosperity is a spasmodic thing, and why abundant production brings distress instead of plenty.)

Let us picture a small island inhabited by six men. One of these men fishes, another hunts, another gathers cocoanuts, another raises goats for clothing, and so on. The six men among them produce by their labor all the necessities of their lives, and they exchange their products with one another. The island is productive, and each of the men is free, and makes his exchanges on equal terms; on that basis the industry of the island can continue indefinitely, and there will never be any trouble. There may sometimes be over-production, but it will not cause anyone to starve. If the fisherman is unusually lucky one day, he will be able to take a vacation for a few days, living on his fish and the products he exchanges for his fish. For the sake of convenience in future reference, I will describe this happy island as a "free" society; meaning that each of the members of this society has access on equal terms to the sources of wealth, and each owns the product of his own labor, without paying tribute to any one else for the right to labor, or to exchange his products.

But now let us suppose that one of the men on the island is strong and aggressive; he takes a club and knocks down the other five men, and compels them to sign a piece of paper agreeing that hereafter he is the president of the land development company of the island, the chief stockholder in the goat-raising company, and owner of the fishing concession and the cocoanut grove; also, that hereafter goods shall not be bartered in kind, but shall be exchanged for money, and that he is the banker, and also the government, with the right to issue money. In this society you will find that the real work, the actually productive work, is done by five men, instead of by six, and these five do not get the full value of their labor. The fisherman will fish, but his product will no longer belong to himself; he will get part of it as wages, while the "business man" takes charge of the balance. Sowhen there is a lucky day, there will be prosperity in the fishing industry, but this prosperity will not benefit the fisherman; he will have only his wage, and when he has caught too many fish, he will not have a few days' vacation, but will be out of a job.

And exactly the same thing will happen to the goat-herd. He will probably have work all the year round, because goats have to be tended, but he will get barely enough to keep him alive, and the surplus skins and milk will go to the owner of the no-longer-happy island. Perhaps it will occur to the owner that the man who raises cocoanuts might also keep an eye on the goats, and so the goat-herd will be permanently out of a job, and will turn into what is called a tramp, or vagrant. Inasmuch as everything to eat on the island belongs to the owner, the ex-goat-herd will be tempted to become a criminal, and so it will be necessary for the owner to arm the cocoanut man with a club and make him into a policeman; or perhaps he will organize the fisherman and the hunter into a militia for the preservation of law and order. They will be glad to serve him, because, owing to the extreme productivity of the island, they will be out of jobs a great part of the time, and but for the generosity of the business man, would have no way of earning a living.

But suppose that the cocoanut man should invent a machine for gathering a year's supply of nuts in a week; suppose the fisherman should devise a scheme to fill his boat with fish in a few minutes; and suppose that as a result of these inventions the business man got so rich that he moved to Paris, and no longer saw his workers, or even knew their names. Under these conditions you can see that overproduction and unemployment might increase on the island; and also the business man might seem less human and lovable to his wage slaves, and might need a larger police force. It might even happen that he would discover the need of a propaganda department, in order to keep his police force loyal, and a secret service to make sure that agitators did not get into the schools.

The five islanders, having filled all the barns and storehouses, would be turned out to starve; and when they asked the reason, they would be told it was because they had produced a surplus of food. This may sound grotesque, but it is what is being said to 5,000,000 men in America as I write. There are clothing-workers who are going about inrags, and they are told it is because they have produced too much clothing. There are shoe-workers whose shoes are falling off their feet, and they are told it is because they have produced too many shoes. There are carpenters who have no homes, and they are told that a great many homes are needed, but unfortunately it doesn't pay the builders to go ahead just now. This may sound like a caricature, but it happens to be the most prominent single fact in the consciousness of 5,000,000 Americans at the close of the year 1921. No wonder they are discontented with the present order.

The solution of the mystery is so simple that the 5,000,000 unemployed cannot be kept permanently from understanding it. The reason the five men on the island are starving is because one man owns the island and the others own nothing. If the island were community property, the five men would each own a share of the contents of the barns and storehouses, and would not be starving. If the 100,000,000 people of America owned the productive machinery of America, then instantly the unemployment crisis would pass like an evil dream. The farm-workers who need shoes would exchange their food with the starving shoe-workers, and the starving shoe-workers would have jobs. They would want clothing, and so the clothing-makers would start to work; and so on all the way down the line. There is only one thing necessary to make this possible, and that is the thing which we have agreed to call the social revolution.

(Analyzes further the profit system, which strangles production, and makes true prosperity impossible.)

We have seen that in an exploiting society there is a surplus which is taken by the exploiter; and that under the modern system this surplus must be sold at a profit before production can continue. The vital fact in such a society is that the worker has not the money to buy back all that he produces; therefore it is inevitable that a surplus product should accumulate. When this happens, production must be cut down, and during that period the worker is without a job, and without means of living. The fact that he needs the product does not help him; the point is that he has not the money to buy it. In such a society the productive machinery is never used to the full. The machinery is controlled by a profit-seeking interest, seeking an opportunity to make sales, and restricting production according to the prospect of sales. So the actual product bears no relationship to the possible product, and people who live in an exploiting society can form no conception of true prosperity.

For, you see, the market is limited by the competitive wage system. We have seen that in our own rich, prosperous country only one family out of six has more than $1,000 a year income; only one family out of twelve has $2,000 a year. It does not make any difference that the warehouses are bursting with goods; a family constitutes a market of so many dollars a year, and then, so far as the profit system is concerned, that family is non-existent; that family stops consuming, and the productive machinery is halted to that extent.

I have been accustomed to portray the profit system under the simile of an iron ring riveted about the body of a baby. That ring would cause the baby some discomfort at the beginning, but it would not be serious, and the baby would get used to it. But as the baby grew the trouble caused by the ring would increase, and finally there would come a timewhen the baby would be suffering from a whole complication of troubles, and for each of these troubles there would be but one remedy—break the ring. Does the baby cry all the time? Break the ring! Is its digestion defective? Break the ring! Is it threatened with convulsions or with blood poisoning? Break the ring!

Here is our industrial society, growing at a rate never equalled by any human baby; and here is this iron ring riveted about its middle. Here is poverty, here is unemployment, here is graft, here is crime, here is war and plague and famine; and for all these evils there is but one cause, and but one remedy. Break the ring! Set production free from the strangulation of the profit system.

I will admit that there may have been a time in the history of the social infant when this ring was necessary. I admit that if the great industrial machine was to be constructed, it was necessary that the mass of the people should consume only part of what they produced, and should allow the balance to be reinvested as capital. But now it has been done, and the process is complete. We have a machine capable of producing many times more than we can consume; shall we still go on building that machine? Shall we go on starving ourselves, to save the money, to multiply over and over again the products, in order that we may be thrown out of work, and be starved even more completely?

A few generations ago we had in colonial America a society that in part at least was "free." In that society everybody got the necessities of life. They did not have the modern Sunday supplement and the moving picture show, but they had bread and meat and good substantial clothing, and furniture so well made that we still preserve it. The children in those days grew up to be strong and sturdy men and women, who would have seen nothing to envy in the bodies or minds of the slum population of New York and Chicago. In short, they had all the true necessities of life; and yet their work was done by hand, the power process was unknown and undreamed of.

Now comes modern machinery, and multiplies the productive power of the hand laborer by five, by ten, sometimes by a hundred. Here, for example, is the "Appeal to Reason" selling millions of cheap books for ten cents apiece, and making a profit on it; installing a gigantic press which takespaper, sheet after sheet, prints 128 pages of a book at one impression, and folds and stitches and binds the books, all in one process, and turns them out complete at the rate of 10,000 copies per hour. Here is a factory which turns out 100,000 automobiles a month. Here is a mill which turns out many millions of yards of cloth a month. If our colonial ancestors had been told about these marvels, they would have said instantly: "Then, of course, everybody in that society will have all the books they want, and all the clothing they want, and all the automobiles. Everybody in that society will have five or ten or one hundred times as much goods as we have."

Imagine the bewilderment of our colonial ancestor if he had been told: "The majority of the people in that society will not have so much of the real necessities of life as you have. They will have a few cheap trinkets, designed to tickle their senses; they will have cheap newspapers, carefully contrived to keep their minds vacant and to keep them contented with their lot; they will have moving picture shows constructed for the same purpose; but all their material things will be flimsy, put together for show and not for permanence; their food will be adulterated, their clothing will be shoddy, everything they have will be made, not for their service, but for the profit of some one who lives by selling to them. The average wage earned by those who do the work of this new machine civilization will be less than half the amount necessary to purchase the necessities of a decent life, and one-tenth of the total population will be living in such poverty that they are unable to maintain physical fitness, or to rear their children into full sized men and women."

(Considers the efforts of capitalism to save itself by marketing its surplus products abroad, and what results from these efforts.)

If our analysis of present-day society is correct, we have the enormous populations of the modern industrial countries, living always on the verge of starvation, their chance for survival depending at all times upon the ability of their employers to find a profitable market for a surplus of goods. At first the employer seeks that market at home; but when the home markets are glutted, he goes abroad; and so develops the phenomenon of foreign trade and rivalry for foreign trade, as the basic fact of capitalism, and the fundamental cause of modern war.

Let us get clear a simple distinction concerning foreign trade. There is a kind of trade which is normal, and would thrive in a "free" society. In the United States we can produce nearly all the necessities of life, but there are a few which we cannot produce—rubber, for example, and bananas, and good music. These things we wish to import. We buy them from other countries, and incur a debt, which we pay with products which the other countries need from us; wheat, for example, and copper, and moving pictures with cowboys in them. This is equal exchange, and a natural phenomenon. A "free" society would produce such surplus goods as were necessary to procure the foreign products that it desired. When it had produced that much, the workers would stop and take a vacation until they wanted more foreign products.

But under capitalism we have an entirely different condition—we produce a surplus of goods which wehaveto sell in order to keep our factories running, and to keep our working population from starving. And note that it does not help us to get back an equal quantity of foreign goods in exchange. We must have what we call "a favorable balance"; that is, we must have other people going into debt to us, sothat we can be continually shipping out more goods than we take back; continually piling up credits which we can "negotiate," or turn into cash, so that we can go on and repeat the process of making more goods, selling them for more profits, and putting the surplus into the form of more machinery, to make still more goods and still more profits.

And then, after a while, we come upon this embarrassing phenomenon; nations which buy and do not sell must either do it by sending us gold, or by our giving them credit. The sending of gold cannot go on indefinitely, because then we should have all the gold, and if other nations had none that would destroy their credit. On the other hand, business cannot be done by credit indefinitely; for the very essence of credit is a promise to pay, and payment can only be made in goods, and how can we take the goods without ruining our own industry?

Fifteen years ago I pointed this out in a book. The argument was irrefutable, and the conclusion inescapable, but the few critics who noted it repeated their usual formula about "dreamers and theorists." Now, however, the business mills have ground on, and what was theory has become fact before our eyes. We have trusted the nations of Europe for some $10,000,000,000 worth of goods, and they are powerless to pay, and if they did pay, they would bankrupt American industry. France wishes to collect an enormous indemnity from Germany, but nobody can figure out how this indemnity can be paid without ruining French industry. The French have demanded coal from Germany, and have got more than they can use, and are "dumping" it in Belgium and Holland, with the result that the British coal industry is ruined. The French clamor that the Germans must pay for the destruction they wrought in Northern France, and the Germans offer to send German workmen to rebuild the ruined towns; but the French denounce this as an insult—it would deprive French workingmen of their jobs! So I might continue for pages, pointing out the manifold absurdities which result from a system of industry for the profit of a few, instead of for the use of all.

Ever since I first began to read the newspapers, some twenty-five or thirty years ago, all our political life has been nothing but the convulsions of a social body tortured by the constricting ring of the profit system. Everywhere one groupstruggling for advantage over another group, and politicians engaged in playing one interest against another interest! My boyhood recollections of public life consist of campaign slogans having to do with the tariff: "production and prosperity," "reciprocity," "the full dinner pail," "the foreigner pays the tax," etc.

The workingman, under the profit system, is like a man pounding away at a pump. He can get a thin trickle of water from the spout of the pump if he works hard enough, but in order to get it he has to supply ten times as much to some one who has tapped the pipe. But the tapping has been done underground, where the workingman cannot see it. All the workingman knows is that there is no job for him if the products of "cheap foreign labor" are allowed to be "dumped" on the American market. That is obvious, and so he votes for a tax on foreign imports, high enough to enable his own employer to market at a profit. He does not realize that he is thus raising the price of everything that he buys, and so leaving himself worse off than he was before.

All governments are delighted with this tariff device, because they are thus enabled to get money from the public without the public's knowing it. "The foreigner pays the tax," we are told, and as a result of this arrangement the steel trust just before the war was selling its product at a high price to the American people, and taking its surplus abroad and selling it to the foreigner at half the domestic price. And we see this same thing in every line of manufacture, and all over the world. We see one nation after another withdrawing itself as a market for manufactured products, and entering the lists as a marketer. One more nation now able to fill all its own needs, and going out hungrily to look for foreign customers, adding to the glut of the world's manufactured products and the ferocity of international competition!

At the close of the Civil War the total exports of the United States averaged approximately $300,000,000, and the total imports were about the same. In 1892 the exports first touched $1,000,000,000, while the imports were about nine-tenths of that sum. In the year 1913 the exports were nearly $2,500,000,000, while the imports were $600,000,000 less; and in the year 1920 our exports were over $8,000,000,000 and our imports a little over $5,000,000,000! So we have a "favorablebalance" of almost $3,000,000,000 a year—and as a result we are on the verge of ruin!

This "iron ring" of overproduction and lack of market exercises upon our industrial body a steady pressure, a slow strangling. But because the body is in convulsions, struggling to break the ring, the pressure of the ring is worse at some times than at others. We have periods of what we call "prosperity," followed by periods of panic and hard times. You must understand that only a small part of our business is done by means of cash payments, whether in gold or silver or paper money. Close to 99% of our business is done by means of credit, and this introduces into the process a psychological factor. The business man expects certain profits, and he capitalizes these expectations. Business booms, because everybody believes everybody else's promises; credit expands like a huge balloon, with the breath of everybody's enthusiasm. But meantime real business, the real market, remains just what it was before; it cannot increase, because of the iron ring which restricts the buying power of the mass of the people by the competitive wage. So presently the time comes when somebody realizes that he has over-capitalized his hopes; he curtails his orders, he calls in his money, and the impulse thus started precipitates a crash in the whole business world. We had such a crash in 1907, and I remember a Wall Street man explaining it in a magazine article entitled, "Somebody Asked for a Dollar."

We learned one lesson by that panic; at least, the big financial men learned it, and had Congress pass what is called the "Federal Reserve Act," a provision whereby in time of need the government issues practically unlimited credit to banks. This, of course, is fine for the banks; it puts the credit of everybody else behind them, and all they have to do is to stop lending money—except to the big insiders—and sit back and wait, while the little men go to the wall, and the mass of us live on our savings or starve. We saw this happen in the year 1920, and for the first time we had "hard times" without having a financial panic. But instead we see prices staying high—because the banks have issued so much paper money and bank credits.

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