Notes
CHAPTER VII
The Case of America
I. The Self-made Man
IN this matter of absentee ownership the case of America is peculiar in some respects, although the special features of the case are not such that it departs from the main line of the development in any material degree. Indeed, it might rather be said that America shows this development in the freest and fullest shape which it has anywhere attained hitherto. The special circumstances which have conditioned its growth in this country have brought the institution more swiftly to a more stable and mature state here than elsewhere. So that absentee ownership has become the master institution in American civilisation, speedily and summarily, with slighter reservations than in the older civilised nations. In this particular, at least, America may be said to stand at the apex of cultural growth among the peoples of Christendom. And America is followed closely by the other, newer peoples that have come up out of European colonisation; although it is doubtful if any of them will have the fortune to overtake America. There is some ground for thinking that these others may have made too late a start, so that an undue proportion of other ideals and principles, alien to the perfect dominance of absentee ownership, may be included in the effectual drift of popular sentiment in these other cases. But so far these others are coming along very nicely, and there is perhaps no ground for serious apprehension.
America is the oldest and maturest of the colonies founded by the English-speaking peoples, or by any of those Continental peoples which fall into the same class with the English in this connection, as, e. g., the Dutch or the Scandinavians. And the foundation and impetus dates back to that period of West-European culture when the principles of self-help, free contract, and net gain, achieved their ascendency, and before these principles had been pruned back by legal definition to fit a more conservative manner of thinking. It is, indeed, a point of distinction for the American case that here the pruning back of these popular principles of conduct was carried out to fit the working-out of these principles themselves, under such conditions of singleminded conviction that other institutional holdovers of the older order have not seriously troubled the outcome. It was the fortune of the American people to have taken their point of departure from the European situation during a period when the system of Natural Liberty was still “obvious and simple,” fresh and crude, and consequently amenable to growth and adaptation on its own premises under the direct impact of the new material circumstances offered by the New World. Whereas later enterprises in colonisation have had their institutional point of departure blurred with a scattering of the holdovers that were brought in again by the return wave of reaction in Europe, as well as by those later-come stirrings of radical discontent that have questioned the eternal fitness of the system of Natural Liberty itself. The difference is not wide, and the American advantage is not a great one ; nor need it make or mar the outcome in the end, since the colonists and the later-come inhabitants of these other new countries are, after all, the same thing over again in respect of their permanent traits of character. They are all made up of substantially the same hybrid mixture of races, so that by heredity they are all substantially the same people.1
In this matter those other, South-European or “Latin,” peoples who have had a share in the colonisation of the new continents fall somewhat to one side. In this matter of absentee ownership after the pattern set by the system of Natural Rights, these others carry a serious handicap. It is their fortune, not their fault. At that period, when they were taking the lead in the winning of the New World, these South-Europeans were still living very busily in a more archaic and barbarian phase of the European culture, which belongs at a point in the sequence antedating the natural rights that make democracy. Their ideals and motives were, on the whole, of a visibly different order and have worked out in time to a different effect. Their enterprise in colonisation, as, e. g., the Spanish and in a degree the Portuguese, was an enterprise in pillage, inflamed and inflated by religious fanaticism and martial vanity ; and it has worked out in the erection of a class of colonial nations which have hitherto scarcely proved fit to survive under this newer order of things that has been imposed by the mechanical industry and the business enterprise which makes use of the mechanical industry.
In effect, the English-speaking peoples, on the other hand, colonised with a view to the orderly exploitation of the natural resources ; driven, on the whole, by motives and ideals of self-help, equal opportunity, and net gain. The difference may not be wide or substantial, nor is there by any means a sharp contrast between the English-speaking colonial pioneers and the South-Europeans on these heads; not nearly so wide and sharp as this blunt phrasing of it will imply. But, in effect, a difference of this character is visible, and in its working-out this initial difference has told cumulatively in the outcome. And in the outcome the English-speaking colonial nations turn out to be addicted to democratic institutions, the mechanical industries, and business enterprise. It will not do to say that the English-speaking colonisation to which America owes its beginnings and its character was untouched by the spirit of plunder or unfamiliar with religious atrocities and warlike vanity; but while the difference may be one of degree rather than of kind, such measure of initial difference as there was appears to have made the outcome. And the difference in the outcome is too obvious to be overlooked by any but statesmen and lawyers.
America is the most mature of these English-speaking colonies. And in all of these colonial nations the mainspring of the enterprise and the enduring preoccupation of the people has been the exploitation of natural resources for private gain. In all of them the natural resources have progressively been taken over into private ownership on a reasoned plan of legalized seizure. It has been a sober and orderly-advancing seizure of these resources, conducted under rules designed to safeguard a democratically equal opportunity of seizure, and advancing as fast as the available resources have successively become, or have promised to become, valuable. The rules governing this progressive subreption have been drawn on lines that constantly call to mind the rules governing games of skill, where a formally even chance is prescribed for all players who “sit in.” And these rules of equitable “grab” have also, on the whole, been lived up to with about the same degree of scruple that is commonly to be had in games of luck and skill. In either case, whether in the standard games of chance and dexterity or in the business of taking over natural resources and turning them to account, it is understood that any formally blameless evasion of the rules will rightly inure to the benefit of any competitor who so has been able to “beat the game.” It is a principle of self-help. But in either case, too, there is a formal limit on profitable evasion, beyond which tact and salesmanship cease to be sportsmanlike finesse or businesslike ambiguity and become sharp practice or swindle.2
So there has been incorporated in American common sense and has grown into American practice the presumption that all the natural resources of the country must of right be held in private ownership, by those persons who have been lucky enough or shrewd enough to take them over according to the rules in such cases made and provided, or by those who have acquired title from these original impropriators.
With the (partial) exception of the agricultural lands, the ownership of these natural resources is always absentee ownership, and it has always been absentee ownership that has been aimed at in the efforts made to come into possession of them. And they are always acquired and held with a view to getting a larger benefit from them than their cost; that is to say, with a view to getting a margin of something for nothing at the cost of the rest of the community. These are commonplaces, of course, which it should scarcely be necessary to call to mind. The natural resources of America are, or have been, unexampled in abundance and availability, and they have always been the main factor on which the life and comfort of the inhabitants have depended. They are the indispensable means of life of the population at large, so that the livelihood of all the inhabitants from day to day is unavoidably bound up in their daily use. So long and so far as these resources can be turned to use without hindrance the American population will always be assured an abundant and easy livelihood. So much so that with free and full use of its unexampled natural resources and an unhindered employment of its workmanship this people may, or rather might, come in for an unexampled material abundance on unexampled easy terms. What stands in the way of this climax of material good fortune, immediately and directly, is the absentee ownership of these natural resources. And what stands in the way of discontinuing this absentee ownership of the country’s resources is the moral sense of the American body of citizens ; and in this they are in close accord with the working bias of their constituted authorities, whose chief care it is to safeguard and augment all rights of absentee ownership at all points.
Doubtless the discontinuance of absentee ownership in the country’s resources would not of itself set the industrial system free to run at full capacity and so make the most of the country’s workmanship; business considerations could not permit that, so long as business considerations continue to control the industrial system,—and there is other business to be taken care of than that which is occupied with the control of natural resources. But it remains true that absentee ownership of the country’s resources stands first and obviously in the way of a continued full run of the country’s productive industry.
Should it occur to anyone to take exception to this broad statement, it should suffice to call attention to the fact that the raw materials drawn from these natural resources command a price beyond the cost of the workmanship that goes to bring out the supply. Should this, again, be questioned, there is the fact that the absentee owners of the country’s coal, ore, oil, water-power, timber, quarries, water frontage, building sites, and the like, continue to hold these properties as a valued possession from which they derive a revenue. This is free income payable to the absentee owners of these things and constitutes an overhead charge on the country’s productive industry; it goes into the cost of the goods produced, and is that much of a burden and restriction on the output. This should also be sufficiently obvious; but the moral sense of the body of citizens will tolerate no disallowance of this right of the absentee owners to get this legalised margin of something for nothing.
Natural resources are valuable to their owners not because the owners have produced these things nor because they have invested their “savings” in them, but because the community has use for them and is willing to pay something for their use,—because they are an indispensable means of living. Failing either the industrial usefulness which these things now have, or failing the continued willingness to allow the absentee owners a usufruct in these resources as a source of free income, they will no longer have value as assets, whatever they may have cost.3 Natural resources are acquired, owned, and valued, as a source of free income; income for which no equivalent in useful work is given, whatever the cost at which these assets may have been acquired. At the same time they will be of no use, and so will have no value as assets, except as they are turned to use by the workmanship of the population. It is the state of the industrial arts that makes them natural resources, not the funds invested in their ownership. In the language of mathematics, the value of these things as a source of free income to their owners is a “function” of the workmanship of the population at large. And for the completeness of statement it should be added that the workmanship of the population is a “function” of the state of the industrial arts ; which is a joint stock of technical knowledge and workmanlike habits ingrained in the population and carried on jointly by the country’s man-power, which in this respect carries on as an indivisible going concern.
The absentee owner of natural resources is enabled to make them a source of free income, that is to say make them assets, by the power legally conferred on him to withhold them from use until his charge for their use is allowed him. What this charge will be is always a question of what the traffic will bear; which is the same as what will yield him the largest net return. But what the traffic will bear will vary indefinitely according to the circumstances of the case, and the value of given resources as assets will vary accordingly.4 Aside from changes in the industrial arts, the most considerable and most widely effective of these varying circumstances is the varying degree in which competition prevails among the owners of such assets.5
In the usual course, in the case of such staple resources as coal, oil, or the ores, the business of exploitation has at the outset commonly been competitive in a pronounced degree ; that is, the owners have competed in the market by speeding up the output and underbidding on the price. The result has been low prices for the time being, and a rapid exhaustion, with waste, of the natural supply. Presently, as the holdings have been drawn together into the ownership of a smaller and more manageable number of absentee owners, these owners have more and more consistently acted in collusion, and in time have drawn together into combinations which have taken on a corporate character, at least in effect, and so have ceased to compete among themselves.6
The result is not that competition ceases or declines when the business of a given line of natural supply so outgrows what is called the competitive stage and passes under the control of a collusive or corporate combination of absentee owners, but only that it takes a new turn, commonly with an increased vigor and persistence. Instead of competing against one another, to their own mutual defeat, the absentee owners now turn their undivided competitive efforts against the consumers. It becomes a competition not within the business but between this business as a whole and the rest of the community. This stage of business maturity, which may be called the stage of vested interest, has progressively been reached in a very passable fashion by the generality of that absentee ownership that controls the necessary supply of raw materials used in the leading industries,— in what are sometimes called the “key industries.”
There is, of course, the large exception of agricultural food products, and the partial exception of such a natural staple as crude oil, where the continued opening of new deposits and the continued growth of an under-supplied market continues still to trouble the business and its vested interests with a weedy crop of upstart competitors for the market. The agricultural soil, the natural resource from which the food-products are drawn, is not amenable to absentee ownership except in a partial measure, at least not yet ; and agricultural food products have accordingly not yet been successfully handled on the non-competitive or collusive plan, so far as concerns their production ; although there are typical cases of collusion and absentee control to be found among the concerns that own the business of milling, packing, and marketing many of these food-products. And while crude oil is still troubled with irresponsible competitive production for an open market, of the kind sometimes called “wild-catting,” the efforts toward a collusive stability of the business have, after all, been as successful as might reasonably be looked for. So that, on the whole, the owners and distributors are already engaged on a fairly secure and consistent collusive competition against the rest of the community.
The farmers who have to do with the great staples have, for some time past and repeatedly, endeavored to establish a collusive control of their market, with a view to narrowing and stabilising the margin between the prices they get and the prices which the consumers pay; but so far with no substantial results. It has quite uniformly worked out in nothing better than gestures of desperation. Their markets are controlled, but not by the farmers. Absentee ownership in farming has yet reached neither the extent nor the scale which would enable a collusive combination of farm-owners to determine what the traffic will bear and arrange the volume of output accordingly. All that matter is now taken care of by those massive vested interests that move obscurely in the background of the market and decide for themselves what the traffic will bear for their benefit at the cost of the farmers on the one side and the consumers of farm products on the other.
II. The Independent Farmer
The case of the American farmer is conspicuous; though it can scarcely be called singular, since in great part it is rather typical of the fortune which has overtaken the underlying populations throughout Christendom under the dominion of absentee ownership in its later developed phase. Much the same general run of conditions recurs elsewhere in those respects which engage the fearsome attention of these farmers. By and large, the farmer is so placed in the economic system that both as producer and as consumer he deals with business concerns which are in a position to make the terms of the traffic, which it is for him to take or leave. Therefore the margin of benefit that comes to him from his work is commonly at a minimum. He is commonly driven by circumstances over which he has no control, the circumstances being made by the system of absentee ownership and its business enterprise. Yet he is, on the whole, an obstinately loyal supporter of the system of law and custom which so makes the conditions of life for him.
His unwavering loyalty to the system is in part a holdover from that obsolete past when he was the Independent Farmer of the poets ; but in part it is also due to the still surviving persuasion that he is on the way, by hard work and shrewd management, to acquire a “competence” ; such as will enable him some day to take his due place among the absentee owners of the land and so come in for an easy livelihood at the cost of the rest of the community; and in part it is also due to the persistent though fantastic opinion that his own present interest is bound up with the system of absentee ownership, in that he is himself an absentee owner by so much as he owns land and equipment which he works with hired help,—always presuming that he is such an owner, in effect or in prospect.
It is true, the farmer-owners commonly are absentee owners to this extent. Farming is team-work. As it is necessarily carried on by current methods in the great farming sections, farm work runs on such a scale that no individual owner can carry on by use of his own personal work alone, or by use of the man-power of his own household alone,—which makes him an absentee owner by so much. But it does not, in the common run, make him an absentee owner of such dimensions as are required in order to create an effectual collusive control of the market, or such as will enable him, singly or collectively, to determine what charges the traffic shall bear. It leaves him still effectually in a position to take or leave what is offered at the discretion of those massive absentee interests that move in the background of the market.6a
Always, of course, the farmer has with him the abiding comfort of his illusions, to the effect that he is in some occult sense the “Independent Farmer,” and that he is somehow by way of achieving a competence of absentee ownership by hard work and sharp practice, some day; but in practical effect, as things habitually work out, he is rather to be called a quasi-absentee owner, or perhaps a pseudo-absentee owner, being too small a parcel of absentee ownership to count as such in the outcome. But it is presumably all for the best, or at least it is expedient for business-as-usual, that the farmer should continue to nurse his illusions and go about his work; that he should go on his way to complete that destiny to which it has pleased an all-seeing and merciful Providence to call him.
From colonial times and through the greater part of its history as a republic America has been in the main an agricultural country. Farming has been the staple occupation and has employed the greater part of the population. And the soil has always been the chief of those natural resources which the American people have taken over and made into property. Through the greater part of its history the visible growth of the country has consisted in the extension of the cultivated area and the increasing farm output, farm equipment, and farm population. This progressive taking-over and settlement of the farming lands is the most impressive material achievement of the American people, as it is also the most serviceable work which they have accomplished hitherto. It still is, as it ever has been, the people’s livelihood; and the rest of the industrial system has in the main, grown up, hitherto, as a subsidiary or auxiliarly, adopted to and limited by the needs and the achievements of the country’s husbandry. The incentives and methods engaged in this taking-over of the soil, as well as the industrial and institutional consequences that have followed, are accordingly matters of prime consideration in any endeavour to understand or explain the national character and the temperamental bent which underlies it.
The farm population—that farm population which has counted substantially toward this national achievement —have been a ready, capable and resourceful body of workmen. And they have been driven by the incentives already spoken of in an earlier passage as being characteristic of the English-speaking colonial enterprise,— individual self-help and cupidity. Except transiently and provisionally, and with doubtful effect, this farm population has nowhere and at no time been actuated by a spirit of community interest in dealing with any of their material concerns. Their community spirit, in material concerns, has been quite notably scant and precarious, in spite of the fact that they have long been exposed to material circumstances of a wide-sweeping uniformity, such as should have engendered a spirit of community interest and made for collective enterprise, and such as could have made any effectual collective enterprise greatly remunerative to all concerned. But they still stand sturdily by the timeworn make-believe that they still are individually self-sufficient masterless men, and through good report and evil report they have remained Independent Farmers, as between themselves, which is all that is left of their independence,—Each for himself, etc.
Of its kind, this is an admirable spirit, of course; and it has achieved many admirable results, even though the results have not all been to the gain of the farmers. Their self-help and cupidity have left them at the mercy of any organisation that is capable of mass action and a steady purpose. So they have, in the economic respect—and incidentally in the civil and political respect—fallen under the dominion of those massive business interests that move obscurely in the background of the market and buy and sell and dispose of the farm products and the farmers’ votes and opinions very much on their own terms and at their ease.
But all the while it remains true that they have brought an unexampled large and fertile body of soil to a very passable state of service, and their work continues to yield a comfortably large food supply to an increasing population, at the same time that it yields a comfortable run of free income to the country’s kept classes. It is true, in the end the farm population find themselves at work for the benefit of business-as-usual, on a very modest livelihood. For farming is, perhaps necessarily, carried on in severalty and on a relatively small scale, even though the required scale exceeds what is possible on a footing of strict self-ownership of land and equipment by the cultivators; and there is always the pervading spirit of self-help and cupidity, which unavoidably defeats even that degree of collusive mass action that might otherwise be possible. Whereas the system of business interests in whose web the farmers are caught is drawn on a large scale, its units are massive, impersonal, imperturbable and, in effect, irresponsible, under the established order of law and custom, and they are interlocked in an unbreakable framework of common interests.
By and large, the case of America is as the case of the American farm population, and for the like reasons. For the incentives and ideals, the law and custom and the knowledge and belief, on which the farm population has gone about its work and has come to this pass, are the same as have ruled the growth and shaped the outcome for the community at large. Nor does the situation in America differ materially from the state of things elsewhere in the civilised countries, in so far as these others share in the same material civilisation of Christendom.
In the American tradition, and in point of historical fact out of which the tradition has arisen, the farmer has been something of a pioneer. Loosely it can be said that the pioneering era is now closing, at least provisionally and as regards farming. But while the pioneer-farmer is dropping out of the work of husbandry, his pioneer soul goes marching on. And it has been an essential trait of this American pioneering spirit to seize upon so much of the country’s natural resources as the enterprising pioneer could lay hands on,—in the case of the pioneer-farmer, so much of the land as he could get and hold possession of. The land had, as it still has, a prospective use and therefore a prospective value, a “speculative” value as it is called; and the farmer-pioneer was concerned with seizing upon this prospective value and turning it into net gain by way of absentee ownership, as much as the pioneer-farmer was concerned with turning the fertile soil to present use in the creation of a livelihood for himself and his household from day to day.
Habitually and with singular uniformity the American farmers have aimed to acquire real estate at the same time that they have worked at their trade as husbandmen. And real estate is a matter of absentee ownership, an asset whose value is based on the community’s need of this given parcel of land for use as a means of livelihood, and the value of which is measured by the capitalised free income which the owner may expect to come in for by holding it for as high a rental as the traffic in this need will bear. So that the pioneering aim, in American farming, has been for the pioneer-farmers, each and several, to come in for as much of a free income at the cost of the rest of the community as the law would allow ; which has habitually worked out in their occupying, each and several, something more than they could well take care of. They have habitually “carried” valuable real estate at the same time that they have worked the soil of so much of their land as they could take care of, in as effectual a manner as they could under these circumstances. They have been cultivators of the main chance as well as of the fertile soil; with the result that, by consequence of this intense and unbroken habituation, the farm population is today imbued with that penny-wise spirit of self-help and cupidity that now leaves them and their work and holdings at the disposal of those massive vested interests that know the uses of collusive mass action, as already spoken of above.
But aside from this spiritual effect which this protracted habituation to a somewhat picayune calculation of the main chance has had on the farmers’ frame of mind, and aside from their consequent unfitness to meet the businesslike manœuvres of the greater vested interests, this manner of pioneering enterprise which the farmers have habitually mixed into their farming has also had a more immediate bearing on the country’s husbandry, and, indeed, on the industrial system as a whole. The common practice has been to “take up” more land than the farmer could cultivate, with his available means, and to hold it at some cost. Which has increased the equipment required for the cultivation of the acres cultivated, and has also increased the urgency of the farmer’s need of credit by help of which to find the needed equipment and meet the expenses incident to his holding his idle and semi-idle acres intact. And farm credit has been notoriously usurious. All this has had the effect of raising the cost of production of farm products ; partly by making the individual farm that much more unwieldy as an instrument of production, partly by further enforcing the insufficiency and the make-shift character for which American farm equipment is justly famed, and partly also by increasing the distances over which the farm supplies and the farm products have had to be moved.
This last point marks one of the more serious handicaps of American farming, at the same time that it has contributed materially to enforce that “extensive,” “superficial,” and exhausting character of American farming which has arrested the attention of all foreign observers. In American practice the “farm area” has always greatly exceeded the “acreage under cultivation,” even after all due allowance is made for any unavoidable inclusion of waste and half-waste acreage within the farm boundaries. Even yet, at the provisional close of the career of the American pioneer-farmer, the actual proportion of unused and half-used land included within and among the farms will materially exceed what the records show, and it greatly exceeds what any inexperienced observer will be able to credit. The period is not long past—if it is past—when, taking one locality with another within the great farming sections of the country, the idle and half-idle lands included in and among the farms equalled the acreage that was fully employed, even in that “extensive” fashion in which American farming has habitually been carried on.
But there is no need of insisting on this high proportion of idle acreage, which none will credit who has not a wide and intimate knowledge of the facts in the case. For more or less—for as much as all intelligent observers will be ready to credit—this American practice has counted toward an excessively wide distribution of the cultivated areas, excessively long distances of transport, over roads which have by consequence been excessively bad—necessarily and notoriously so—and which have hindered communication to such a degree as in many instances to confine the cultivation to such crops as can be handled with a minimum of farm buildings and will bear the crudest kind of carriage over long distances and with incalculable delays. This applies not only to the farm-country’s highways, but to its railway facilities as well. The American practice has doubled the difficulty of transportation and retarded the introduction of the more practicable and more remunerative methods of farming ; until makeshift and haphazard have in many places become so ingrained in the habits of the farm population that nothing but abounding distress and the slow passing of generations can correct it all.1 At the same time, as an incident by the way, this same excessive dispersion of the farming communities over long distances, helped out by bad roads, has beeen perhaps the chief factor in giving the retail business communities of the country towns their strangle-hold on the underlying farm population.
And it should surprise no one if a population which has been exposed to unremitting habituation of this kind has presently come to feel at home in it all ; so that the bootless chicanery of their self-help is rated as a masterly fabric of axiomatic realities, and sharp practice has become a matter of conscience. In such a community it should hold true that “An honest man will bear watching,” that the common good is a by-word, that “Everybody’s business is nobody’s business,” that public office is a private job, where the peak of aphoristic wisdom is reached in that red-letter formula of democratic politics, “Subtraction, division, and silence,” So it has become a democratic principle that public office should go by rotation, under the rule of equal opportunity,—equal opportunity to get something for nothing—but should go only to those who value the opportunity highly enough to make a desperate run for it. Here men “run” for office, not “stand” for it. Subtraction is the aim of this pioneer cupidity, not production; and salesmanship is its line of approach, not workmanship ; and so, being in no way related quantitatively to a person’s workmanlike powers or to his tangible performance, it has no “saturation point.” 2 The spirit of the American farmers, typically, has been that of the pioneer rather than the workman. They have been efficient workmen, but that is not the trait which marks them for its own and sets them off in contrast with the common run. Their passion for acquisition has driven them to work, hard and painfully, but they have never been slavishly attached to their work; their slavery has been not to an imperative bent of workmanship and human service, but to an indefinitely extensible cupidity which drives to work when other expedients fail; at least so they say. So they have been somewhat footloose in their attachment to the soil as well as somewhat hasty and shiftless in its cultivation. They have always, in the typical case, wanted something more than their proportionate share of the soil ; not because they were driven by a felt need of doing more than their fair share of work or because they aimed to give the community more service than would be a fair equivalent of their own livelihood, but with a view to cornering something more than their proportion of the community’s indispensable means of life and so getting a little something for nothing in allowing their holdings to be turned to account, for a good and valuable consideration.
The American farmers have been footloose, on the whole, more particularly that peculiarly American element among them who derive their traditions from a colonial pedigree. There has always been an easy shifting from country to town, and this steady drift into the towns of the great farming sections has in the main been a drift from work into business. And it has been the business of these country towns—what may be called their business-as-usual—to make the most of the necessities and the ignorance of their underlying farm population. The farmers have on the whole been ready to make such a shift whenever there has been an “opening” ; that is to say, they have habitually been ready to turn their talents to more remunerative use in some other pursuit whenever the chance has offered, and indeed they have habitually been ready to make the shift out of husbandry into the traffic of the towns even at some risk whenever the prospect of a wider margin of net gain has opened before their eager eyes.
In all this pursuit of the net gain the farm population and their country-town cousins have carried on with the utmost good nature. The business communities of the country towns have uniformly got the upper hand. But the farmers have shown themselves good losers ; they have in the main gracefully accepted the turn of things and have continued to count on meeting with better luck or making a shrewder play next time. But the upshot of it so far has habitually been that the farm population find themselves working for a very modest livelihood and the country towns come in for an inordinately wide margin of net gains ; that is to say, net gain over necessary outlay and over the value of the services which they render their underlying farm populations.
To many persons who have some superficial acquaintance with the run of the facts it may seem, on scant reflection, that what is said above of the inordinate gains that go to the country towns is a rash overstatement, perhaps even a malicious overstatement. It is not intended to say that the gains per capita of the persons currently engaged in business in the country towns, or the gains per cent, on the funds invested, are extraordinarily high ; but only that as counted on the necessary rather than the actual cost of the useful work done, and as counted on the necessary rather than the actual number of persons engaged, the gains which go to the business traffic of the country towns are inordinately large.3
III. The Country Town
The country town of the great American farming region is the perfect flower of self-help and cupidity standardised on the American plan. Its name may be Spoon River or Gopher Prairie, or it may be Emporia or Cen-tralia or Columbia. The pattern is substantially the same, and is repeated several thousand times with a faithful perfection which argues that there is no help for it, that it is worked out by uniform circumstances over which there is no control, and that it wholly falls in with the spirit of things and answers to the enduring aspirations of the community. The country town is one of the great American institutions; perhaps the greatest, in the sense that it has had and continues to have a greater part than any other in shaping public sentiment and giving character to American culture.
The location of any given town has commonly been determined by collusion between “interested parties” with a view to speculation in real estate, and it continues through its life-history (hitherto) to be managed as a real estate “proposition.” Its municipal affairs, its civic pride, its community interest, converge upon its real-estate values, which are invariably of a speculative character, and which all its loyal citizens are intent on “booming” and “boosting,”—that is to say, lifting still farther off the level of actual ground-values as measured by the uses to which the ground is turned. Seldom do the current (speculative) values of the town’s real estate exceed the use-value of it by less than 100 per cent.; and never do they exceed the actual values by less than 200 per cent., as shown by the estimates of the tax assessor; nor do the loyal citizens ever cease their endeavours to lift the speculative values to something still farther out of touch with the material facts. A country town which does not answer to these specifications is “a dead one,” one that has failed to “make good,” and need not be counted with, except as a warning to the unwary “boomer.” 1 Real estate is the one community interest that binds the townsmen with a common bond ; and it is highly significant—perhaps it is pathetic, perhaps admirable—that those inhabitants of the town who have no holdings of real estate and who never hope to have any will commonly also do their little best to inflate the speculative values by adding the clamour of their unpaid chorus to the paid clamour of the professional publicity-agents, at the cost of so adding a little something to their own cost of living in the enhanced rentals and prices out of which the expenses of publicity are to be met.
Real estate is an enterprise in “futures,” designed to get something for nothing from the unwary, of whom it is believed by experienced persons that “there is one born every minute.” So, farmers and townsmen together throughout the great farming region are pilgrims of hope looking forward to the time when the community’s advancing needs will enable them to realise on the inflated values of their real estate, or looking more immediately to the chance that one or another of those who are “born every minute” may be so ill advised as to take them at their word and become their debtors in the amount which they say their real estate is worth. The purpose of country-town real estate, as of farm real estate in a less extreme degree, is to realise on it. This is the common bond of community interest which binds and animates the business community of the country town. In this enterprise there is concerted action and a spirit of solidarity, as well as a running business of mutual manoeuvring to get the better of one another. For eternal vigilance is the price of country-town real estate, being an enterprise in salesmanship.
Aside from this common interest in the town’s inflated real estate, the townsmen are engaged in a vigilant rivalry, being competitors in the traffic carried on with the farm population. The town is a retail trading-station, where farm produce is bought and farm supplies are sold, and there are always more traders than are necessary to take care of this retail trade. So that they are each and several looking to increase their own share in this trade at the expense of their neighbors in the same line. There is always more or less active competition, often underhand. But this does not hinder collusion between the competitors with a view to maintain and augment their collective hold on the trade with their farm population.
From an early point in the life-history of such a town collusion habitually becomes the rule, and there is commonly a well recognised ethical code of collusion governing the style and limits of competitive manoeuvres which any reputable trader may allow himself. In effect, the competition among business concerns engaged in any given line of traffic is kept well in hand by a common understanding, and the traders as a body direct their collective efforts to getting what can be got out of the underlying farm population. It is on this farm trade also, and on the volume and increase of it, past and prospective, that the real-estate values of the town rest. As one consequence, the volume and profit of the farm trade is commonly over-stated, with a view to enhancing the town’s real-estate values.
Quite as a matter of course the business of the town arranges itself under such regulations and usages that it foots up to a competition, not between the business concerns, but between town and country, between traders and customers. And quite as a matter of course, too, the number of concerns doing business in any one town greatly exceeds what is necessary to carry on the traffic; with the result that while the total profits of the business in any given town are inordinately large for the work done, the profits of any given concern are likely to be modest enough. The more successful ones among them commonly do very well and come in for large returns on their outlay, but the average returns per concern or per man are quite modest, and the less successful ones are habitually doing business within speaking-distance of bankruptcy. The number of failures is large, but they are habitually replaced by others who still have something to lose. The conscientiously habitual overstatements of the real-estate interests continually draw new trader’s into the town, for the retail trade of the town also gets its quota of such persons as are born every minute, who then transiently become supernumerary retail traders. Many fortunes are made in the country towns, often fortunes of very respectable proportions, but many smaller fortunes are also lost.
Neither the causes nor the effects of this state of things have been expounded by the economists, nor has it found a place in the many formulations of theory that have to do with the retail trade ; presumably because it is all, under the circumstances, so altogether “naturar’ and unavoidable. Exposition of the obvious is a tedious employment, and a recital of commonplaces does not hold the interest of readers or audience. Yet, for completeness of the argument, it seems necessary here to go a little farther into the details and add something on the reasons for this arrangement. However obvious and natural it may be it is after all serious enough to merit the attention of anyone who is interested in the economic situation as it stands, or in finding a way out of this situation; which is just now (1923) quite perplexing, as the futile endeavours of the statesmen will abundantly demonstrate.
However natural and legitimate it all undoubtedly may be, the arrangement as it runs today imposes on the country’s farm industry an annual overhead charge which runs into ten or twelve figures, and all to the benefit of no one. This overhead charge of billions, due to duplication of work, personnel, equipment, and traffic, in the country towns is, after all, simple and obvious waste. Which is perhaps to be deprecated, although one may well hesitate to find fault with it all, inasmuch as it is all a simple and obvious outcome of those democratic principles of self-help and cupidity on which the commonwealth is founded. These principles are fundamentally and eternally right and good—so long as popular sentiment runs to that effect— and they are to be accepted gratefully, with the defects of their qualities. The whole arrangement is doubtless all right and worth its cost; indeed it is avowed to be the chief care and most righteous solicitude of the constituted authorities to maintain and cherish it all.
To an understanding of the country town and its place in the economy of American farming it should be noted that in the great farming regions any given town has a virtual monopoly of the trade within the territory tributary to it. This monopoly is neither complete nor indisputable; it does not cover all lines of traffic equally nor is outside competition completely excluded in any line. But the broad statement is quite sound, that within its domain any given country town in the farming country has a virtual monopoly of trade in those main lines of business in which the townsmen are chiefly engaged. And the townsmen are vigilant in taking due precautions that this virtual monopoly shall not be broken in upon. It may be remarked by the way that this characterisation applies to the country towns of the great farming country, and only in a less degree to the towns of the industrial and outlying sections.
Under such a (virtual) monopoly the charge collected on the traffic adjusts itself, quite as a matter of course, to what the traffic will bear. It has no other relation to the costs or the use-value of the service rendered. But what the traffic will bear is something to be determined by experience and is subject to continued readjustment and revision, with the effect of unremittingly keeping the charge close up to the practicable maximum. Indeed, there is reason to believe that the townsmen are habitually driven by a conscientious cupidity and a sense of equity to push the level of charges somewhat over the maximum ; that is to say, over the rate which would yield them the largest net return. Since there are too many of them they are so placed as habitually to feel that they come in for something short of their just deserts, and their endeavour to remedy this state of things is likely to lead to overcharging rather than the reverse.
What the traffic will bear in this retail trade is what the farm population will put up with, without breaking away and finding their necessary supplies and disposing of their marketable products elsewhere, in some other town, through itinerant dealers, by recourse to brokers at a distance, through the mail-order concerns, and the like. The two dangerous outside channels of trade appear to be the rival country towns and the mail-order houses, and of these the mail-order houses are apparently the more real menace as well as the more dreaded. Indeed they are quite cordially detested by right-minded country-town dealers. The rival country towns are no really grave menace to the usurious charges of any community of country-town business men, since they are all and several in the same position, and none of them fails to charge all comers all that the traffic will bear.
There is also another limiting condition to be considered in determining what the traffic will bear in this retail trade, though it is less, or at least less visibly, operative ; namely, the point beyond which the charges can not enduringly be advanced without discouraging the farm population unduly ; that is to say, the point beyond which the livelihood of the farm population will be cut into so severely by the overcharging of the retail trade that they begin to decide that they have nothing more to lose, and so give up and move out. This critical point appears not commonly to be reached in the ordinary retail trade—as, e.g., groceries, clothing, hardware—possibly because there still remains, practicable in an extremity, the recourse to outside dealers of one sort or another. In the business of country-town banking, however, and similar money-lending by other persons than the banks, the critical point is not infrequently reached and passed. Here the local monopoly is fairly complete and rigorous, which brings on an insistent provocation to over-reach.
And then, too, the banker deals in money-values, and money-values are forever liable to fluctuate ; at the same time that the fortunes of the banker’s farm clients are subject to the vicissitudes of the seasons and of the markets ; and competition drives both banker and client to base their habitual rates, not on a conservative anticipation of what is likely to happen, but on the lucky chance of what may come to pass barring accidents and the acts of God. And the banker is under the necessity—”inner necessity,” as the Hegelians would say—of getting all he can and securing himself against all risk, at the cost of any whom it may concern, by such charges and stipulations as will insure his net gain in any event.
It is the business of the country-town business community, one with another, to charge what the traffic will bear; and the traffic will bear charges that are inordinately high as counted on the necessary cost or the use-value of the work to be done. It follows, under the common-sense logic of self-help, cupidity, and business-as-usual, that men eager to do business on a good margin will continue to drift in and cut into the traffic until the number of concerns among whom the gains are to be divided is so large that each one’s share is no more than will cover costs and leave a “reasonable” margin of net gain. So that while the underlying farm population continues to yield inordinately high rates on the traffic, the business concerns engaged, one with another, come in for no more than what will induce them to go on; the reason being that in the retail trade as conducted on this plan of self-help and equal opportunity the stocks, equipment and man-power employed will unavoidably exceed what is required for the work, by some 200 to 1000 per cent.,—those lines of the trade being the more densely over-populated which enjoy the nearest approach to a local monoply, as e. g., groceries, or banking.2
It is perhaps not impertinent to call to mind that the retail trade throughout, always and everywhere, runs on very much the same plan of inordinately high charges and consequently extravagant multiplication of stocks, equipment, work, personnel, publicity, credits, and costs. It runs to the same effect in city, town and country. And in city, town or country town it is in all of these several respects the country’s largest business enterprise in the aggregate ; and always something like three-fourths to nine-tenths of it is idle waste, to be cancelled out of the community’s working efficiency as lag, leak and friction. When the statesmen and the newspapers—and other publicity-agencies—speak for the security and the meritorious work of the country’s business men, it is something of this sort they are talking about. The bulk of the country’s business is the retail trade, and in an eminent sense the retail trade is business-as-usual.
The retail trade, and therefore in its degree the country town, have been the home ground of American culture and the actuating center of public affairs and public sentiment throughout the nineteenth century, ever more securely and unequivocally as the century advanced and drew toward its close. In American parlance “The Public,” so far as it can be defined, has meant those persons who are engaged in and about the business of the retail trade, together with such of the kept classes as draw their keep from this traffic. The road to success has run into and through the country town, or its retail-trade equivalent in the cities, and the habits of thought engendered by the preoccupations of the retail trade have shaped popular sentiment and popular morals and have dominated public policy in what was to be done and what was to be left undone, locally and at large, in political, civil, social, ecclesiastical, and educational concerns. The country’s public men and official spokesmen have come up through and out of the country-town community, on passing the test of fitness according to retail-trade standards, and have carried with them into official responsibility the habits of thought induced by these interests and these habits of life.
This is also what is meant by democracy in American parlance, and it was for this country-town pattern of democracy that the Defender of the American Faith once aspired to make the world safe. Meantime democracy, at least in America, has moved forward and upward to a higher business level, where larger vested interests dominate and bulkier margins of net gain are in the hazard. It has come to be recognised that the country-town situation of the nineteenth century is now by way of being left behind ; and so it is now recognised, or at least acted on, that the salvation of twentieth-century democracy is best to be worked out by making the world safe for Big Business and than let Big Business take care of the interests of the retail trade and the country town, together with much else. But it should not be overlooked that in and through all this it is the soul of the country town that goes marching on.
Toward the close of the century, and increasingly since the turn of the century, the trading community of the country towns has been losing its initiative as a maker of charges and has by degrees become tributary to the great vested interests that move in the background of the market. In a way the country towns have in an appreciable degree fallen into the position of toll-gate keepers for the distribution of goods and collection of customs for the large absentee owners of the business. Grocers, hardware dealers, meat-markets, druggists, shoe-shops, are more and more extensively falling into the position of local distributors for jobbing houses and manufacturers. They increasingly handle “package goods” bearing the brand of some (ostensible) maker, whose chief connection with the goods is that of advertiser of the copyright brand which appears on the label. Prices, and margins, are made for the retailers, which they can take or leave. But leaving, in this connection, will commonly mean leaving the business—which is not included in the premises. The bankers work by affiliation with and under surveillance of their correspondents in the sub-centers of credit, who are similarly tied in under the credit routine of the associated banking houses in the great centers. And the clothiers duly sell garments under the brand of “Cost-Plus,” or some such apochryphal token of merit.
All this reduction of the retailers to simpler terms has by no means lowered the overhead charges of the retail trade as they bear upon the underlying farm population ; rather the reverse. Nor has it hitherto lessened the duplication of stocks, equipment, personnel and work, that goes into the retail trade ; rather the reverse, indeed, whatever may yet happen in that connection. Nor has it abated the ancient spirit of self-help and cupidity that has always animated the retail trade and the country town; rather the reverse; inasmuch as their principals back in the jungle of Big Business cut into the initiative and the margins of the retailers with “package goods,” brands, advertising, and agency contracts; which irritates the retailers and provokes them to retaliate and recoup where they see an opening, that is at the cost of the underlying farm population. It is true, the added overcharge which so can effectually be brought to rest on the farm population may be a negligible quantity ; there never was much slack to be taken up on that side.
The best days of the retail trade and the country town are past. The retail trader is passing under the hand of Big Business and so is ceasing to be a masterless man ready to follow the line of his own initiative and help to rule his corner of the land in collusion with his fellow townsmen. Circumstances are prescribing for him. The decisive circumstances that hedge him about have been changing in such a way as to leave him no longer fit to do business on his own, even in collusion with his fellow townsmen. The retail trade and the country town are an enterprise in salesmanship, of course, and salesmanship is a matter of buying cheap and selling dear; all of which is simple and obvious to any retailer, and holds true all around the circle from grocer to banker and back again. During the period while the country town has flourished and grown into the texture of the economic situation, the salesmanship which made the outcome was a matter of personal qualities, knack and skill that gave the dealer an advantage in meeting his customers man to man, largely a matter of tact, patience and effrontery; those qualities, in short, which have qualified the rustic horse-trader and have cast a glamour of adventurous enterprise over American country life. In this connection it is worth recalling that the personnel engaged in the retail trade of the country towns has in the main been drawn by self-selection from the farm population, prevailingly from the older-settled sections where this traditional animus of the horse-trader is of older growth and more untroubled.
All this was well enough, at least, during the period of what may be called the masterless country town, before Big Business began to come into its own in these premises. But this situation has been changing, becoming obsolete, slowly, by insensible degrees. The factors of change have been such as: increased facilities of transport and communication; increasing use of advertising, largely made possible by facilities of transport and communication; increased size and combination of the business concerns engaged in the wholesale trade, as packers, jobbers, warehouse-concerns handling farm products; increased resort to package-goods, brands, and trade-marks, advertised on a liberal plan which runs over the heads of the retailers; increased employment of chain-store methods and agencies ; increased dependence of local bankers on the greater credit establishments of the financial centers. It will be seen, of course, that this new growth finally runs back to and rests upon changes of a material sort, in the industrial arts, and more immediately on changes in the means of transport and communication.
In effect, salesmanship, too, has been shifting to the wholesale scale and plane, and the country-town retailer is not in a position to make use of the resulting wholesale methods of publicity and control. The conditioning circumstances have outgrown him. Should he make the shift to the wholesale plan of salesmanship he will cease to be a country-town retailer and take on the character of a chain-store concern, a line-yard lumber syndicate, a mail-order house, a Chicago packer instead of a meat market, a Reserve Bank instead of a county-seat banker, and the like ; all of which is not contained in the premises of the country-town retail trade.
The country town, of course, still has its uses, and its use so far as bears on the daily life of the underlying farm population is much the same as ever; but for the retail trade and for those accessory persons and classes who draw their keep from its net gains the country town is no longer what it once was. It has been falling into the position of a way-station in the distributive system, instead of a local habitation where a man of initiative and principle might reasonably hope to come in for a “competence”—that is a capitalised free livelihood—and bear his share in the control of affairs without being accountable to any master-concern “higher-up” in the hierarchy of business. The country town and the townsmen are by way of becoming ways and means in the hands of Big Business. Barring accidents, Bolshevism, and the acts of God or of the United States Congress, such would appear to be the drift of things in the calculable future; that is to say, in the absence of disturbing causes.
This does not mean that the country town is on .the decline in point of population or the volume of its traffic ; but only that the once masterless retailer is coming in for a master, that the retail trade is being standardised and reparcelled by and in behalf of those massive vested interests that move obscurely in the background, and that these vested interests in the background now have the first call on the “income stream’’ that flows from the farms through the country town. Nor does it imply that that spirit of self-help and collusive cupidity that made and animated the country town at its best has faded out of the mentality of this people. It has only moved upward and onward to higher duties and wider horizons. Even if it should appear that the self-acting collusive storekeeper and banker of the nineteenth-century country town “lies a-moldering in his grave,” yet “his soul goes marching on.” It is only that the same stock of men with the same traditions and ideals are doing Big Business on the same general plan on which the country town was built. And these men who know the country town “from the ground up” now find it ready to their hand, ready to be turned to account according to the methods and principles bred in their own bone. And the habit of mind induced by and conducive to business-as-usual is much the same whether the balance sheet runs in four figures or in eight.
It is an unhappy circumstance that all this plain speaking about the country town, its traffic, its animating spirit, and its standards of merit, unavoidably has an air of finding fault. But even slight reflection will show that this appearance is unavoidable even where there is no inclination to disparage. It lies in the nature of the case, unfortunately. No unprejudiced inquiry into the facts can content itself with anything short of plain speech, and in this connection plain speech has an air of disparagement because it has been the unbroken usage to avoid plain speech touching these things, these motives, aims, principles, ways and means and achievements, of these substantial citizens and their business and fortunes. But for all that, all these substantial citizens and their folks, fortunes, works, and opinions are no less substantial and meritorious, in fact. Indeed one can scarcely appreciate the full measure of their stature, substance and achievements, and more particularly the moral costs of their great work in developing the country and taking over its resources, without putting it all in plain terms, instead of the salesmanlike parables that have to be employed in the make-believe of trade and politics.
The country town and the business of its substantial citizens are and have ever been an enterprise in salesmanship; and the beginning of wisdom in salesmanship is equivocation. There is a decent measure of equivocation which runs its course on the hither side of prevarication or duplicity, and an honest salesman—such “an honest man as will bear watching”—will endeavor to confine his best efforts to this highly moral zone where stands the upright man who is not under oath to tell the whole truth. But “self-preservation knows no moral law”; and it is not to be overlooked that there habitually enter into the retail trade of the country towns many competitors who do not falter at prevarication and who even do not hesitate at outright duplicity; and it will not do for an honest man to let the rogues get away with the best—or any—of the trade, at the risk of too narrow a margin of profit on his own business—that is to say a narrower margin than might be had in the absence of scruple. And then there is always the base-line of what the law allows; and what the law allows can not be far wrong. Indeed, the sane presumption will be that whoever lives within the law has no need to quarrel with his conscience. And a sound principle will be to improve the hour today and, if worse comes to worst, let the courts determine tomorrow, under protest, just what the law allows, and therefore what the moral code exacts. And then, too, it is believed and credible that the courts will be wise enough to see that the law is not allowed to apply with such effect as to impede the volume or narrow the margins of business-as-usual.
“He either fears his fate too much, Or his deserts are small, Who dare not put it to the touch” and take a chance with the legalities and the moralities for once in a way, when there is easy money in sight and no one is looking, particularly in case his own solvency—that is his life as a business concern—should be in the balance. Solvency is always a meritorious work, however it may be achieved or maintained; and so long as one is quite sound on this main count one is sound on the whole, and can afford to forget peccadillos, within reason. The country-town code of morality at large as well as its code of business ethics, is quite sharp, meticulous ; but solvency always has a sedative value in these premises, at large and in personal detail. And then, too, solvency not only puts a man in the way of acquiring merit, but it makes him over into a substantial citizen whose opinions and preferences have weight and who is therefore enabled to do much good for his fellow citizens—that is to say, shape them somewhat to his own pattern. To create mankind in one’s own image is a work that partakes of the divine, and it is a high privilege which the substantial citizen commonly makes the most of. Evidently this salesmanlike pursuit of the net gain has a high cultural value at the same time that it is invaluable as a means to a competence.
The country-town pattern of moral agent and the code of morals and proprieties, manners and customs, which come up out of this life of salesmanship is such as this unremitting habituation is fit to produce. The scheme of conduct for the business man and for “his sisters and his cousins and his aunts” is a scheme of salesmanship, seven days in the week. And the rule of life of country-town salesmanship is summed up in what the older logicians have called suppressio veri and suggestio falsi. The dominant note of this life is circumspection.3 One must avoid offense, cultivate good-will, at any reasonable cost, and continue unfailing in taking advantage of it ; and, as a corollary to this axiom, one should be ready to recognise and recount the possible short-comings of one’s neighbors, for neighbors are (or may be) rivals in the trade, and in trade one man’s loss is another’s gain, and a rival’s disabilities count in among one’s assets and should not be allowed to go to waste.
One must be circumspect, acquire merit, and avoid offense. So one must eschew opinions, or information, which are not acceptable to the common run of those whose good-will has or may conceivably come to have any commercial value. The country-town system of knowledge and belief can admit nothing that would annoy the prejudices of any appreciable number of the respectable townsfolk. So it becomes a system of intellectual, institutional, and religious holdovers. The country town is conservative ; aggressively and truculently so, since any assertion or denial that runs counter to any appreciable set of respectable prejudices would come in for some degree of disfavor, and any degree of disfavor is intolerable to men whose business would presumably suffer from it. Whereas there is no (business) harm done in assenting to, and so in time coming to believe in, any or all of the commonplaces of the day before yesterday. In this sense the country town is conservative, in that it is by force of business expediency intolerant of anything but holdovers. Intellectually, institutionally, and religiously, the country towns of the great farming country are “standing pat” on the ground taken somewhere about the period of the Civil War; or according to the wider chronology, somewhere about Mid-Victorian times. And the men of affairs and responsibility in public life, who have passed the test of country-town fitness, as they must, are men who have come through and made good according to the canons of faith and conduct imposed by this system of holdovers.
Again it seems necessary to enter the caution that in so speaking of this system of country-town holdovers and circumspection there need be no hint of disparagement. The colloquial speech of our time, outside of the country-town hives of expedient respectability, carries a note of disallowance and disclaimer in all that it has to say of holdovers; which is an unfortunate but inherent defect of the language, and which it is necessary to discount and make one’s peace with. It is only that outside of the country towns, where human intelligence has not yet gone into abeyance and where human speech accordingly is in continued process of remaking, sentiment and opinion run to the unhappy effect which this implicit disparagement of these holdovers discloses.
Indeed, there is much, or at least something, to be said to the credit of this country-town system of holdovers, with its canons of salesmanship and circumspection. It has to its credit many deeds of Christian charity and Christian faith. It may be—-as how should it not?—that many of these deeds of faith and charity are done in the business-like hope that they will have some salutary effect on the doer’s balance sheet; but the opaque fact remains that these business men do these things, and it is to be presumed that they would rather not discuss the ulterior motives.
It is a notorious commonplace among those who get their living by promoting enterprises of charity and good deeds in general that no large enterprise of this description can be carried through to a successful and lucrative issue without due appeal to the country towns and due support by the businesslike townsmen and their associates and accessory folks. And it is likewise notorious that the country-town community of business men and substantial households will endorse and contribute to virtually any enterprise of the sort, and ask few questions. The effectual interest which prompts to endorsement of and visible contribution to these enterprises is a salesmanlike interest in the “prestige value” that comes to those persons who endorse and visibly contribute; and perhaps even more insistently there is the loss of “prestige value” that would come to anyone who should dare to omit due endorsement and contribution to any ostensibly public-spirited enterprise of this kind that has caught the vogue and does not violate the system of prescriptive holdovers.
Other interest there may well be, as, e. g., human charity or Christian charity—that is to say solicitude for the salvation of one’s soul—but without due appeal to salesmanlike respectability the clamour of any certified solicitor of these good deeds will be but as sounding brass and a tinkling cymbal. One need only try to picture what would be the fate, e. g., of the campaigns and campaigners for Red Cross, famine relief, Liberty Bonds, foreign missions, Inter-Church fund, and the like, in the absence of such appeal and of the due response. It may well be, of course, that the salesmanlike townsman endorses with the majority and pays his contribution as a mulct, under compunction of expediency, as a choice between evils, for fear of losing good-will. But the main fact remains. It may perhaps all foot up to this with the common run, that no man who values his salesmanlike well-being will dare follow his own untoward propensity in dealing with these certified enterprises in good deeds, and speak his profane mind to the certified campaigners. But it all comes to the same in the upshot. The substantial townsman is shrewd perhaps, or at least he aims to be, and it may well be that with a shrewd man’s logic he argues that two birds in the bush are worth more than one in the hand ; and so pays his due peace-ofifering to the certified solicitor of good deeds somewhat in the spirit of those addicts of the faith who once upon a time bought Papal indulgences. But when all is said, it works; and that it does so, and that these many adventures and adventurers in certified mercy and humanity are so enabled to subsist in any degree of prosperity and comfort is to be credited, for the major part, to the salesmanlike tact of the substantial citizens of the country towns.
One hesitates to imagine what would be the fate of the foreign missions, e. g., in the absence of this salesmanlike solicitude for the main chance in the country towns. And there is perhaps less comfort in reflecting on what would be the terms of liquidation for those many churches and churchmen that now adorn the land, if they were driven to rest their fortunes on unconstrained gifts from de facto worshippers moved by the first-hand fear of God, in the absence of that more bounteous subvention that so comes in from the quasi-consecrated respectable townsmen who are so constrained by their salesmanlike fear of a possible decline in their prestige.
Any person who is seriously addicted to devout observances and who takes his ecclesiastical verities at their face might be moved to deprecate this dependence of the good cause on these mixed motives. But there is no need of entertaining doubts here as to the ulterior goodness of these businesslike incentives. Seen in perspective from the outside—as any economist must view these matters—it should seem to be the part of wisdom, for the faithful and for their businesslike benefactors alike, to look steadfastly to the good end and leave ulterior questions of motive on one side. There is also some reason to believe that such a view of the whole matter is not infrequently acted upon. And when all is said and allowed for, the main fact remains, that in the absence of this spirit of what may without offense be called salesmanlike pusillanimity in the country towns, both the glory of God and the good of man would be less bountifully served, on all these issues that engage the certified solicitors of good deeds.
This system of innocuous holdovers, then, makes up what may be called the country-town profession of faith, spiritual and secular. And so it comes to pass that the same general system of holdovers imposes its bias on the reputable organs of expression throughout the community—pulpit, public press, courts, schools—and dominates the conduct of public affairs; inasmuch as the constituency of the country town, in the main and in the everyday run, shapes the course of reputable sentiment and conviction for the American community at large. Not because of any widely prevalent aggressive preference for that sort of thing, perhaps, but rather because it would scarcely be a “sound business proposition” to run counter to the known interests of the ruling class; that is to say, the substantial citizens and their folks. But the effect is much the same and will scarcely be denied.
It will be seen that in substantial effect this countrytown system of holdovers is of what would be called a “salutary” character ; that is to say, it is somewhat intolerantly conservative. It is a system of professions and avowals, which may perhaps run to no deeper ground than a salesmanlike pusillanimity, but the effect is much the same. In the country-town community and its outlying ramifications, as in any community of men, the professions made and insisted on will unavoidably shape the effectual scheme of knowledge and belief. Such is the known force of inveterate habit. To the young generation the prescriptive holdovers are handed down as self-evident and immutable principles of reality, and the (reputable) schools can allow themselves no latitude and no question. And what is more to the point, men and women come to believe in the truths which they profess, on whatever ground, provided only that they continue stubbornly to profess them. Their professions may have come out of expedient make-believe, but, all the same, they serve as premises in all the projects, reflections, and reveries of these folks who profess them. And it will be only on provocation of harsh and protracted exposure to material facts running unbroken to the contrary that the current of their sentiments and convictions can be brought to range outside of the lines drawn for them by these professed articles of truth.
The case is illustrated, e. g., by the various and widely-varying systems of religious verities current among the outlying peoples, the peoples of the lower cultures, each and several of which are indubitable and immutably truthful to their respective believers, throughout all the bizarre web of their incredible conceits and grotesqueries, none of which will bear the light of alien scrutiny.4 Having come in for these professions of archaic make-believe, and continuing stubbornly to profess implicit faith in these things as a hopeful sedative of the wrath to come, these things come to hedge about the scheme of knowledge and belief as well as the scheme of what is to be done or left undone. In much the same way the country-town system of prescriptive holdovers has gone into action as the safe and sane body of American common sense ; until it is now self-evident to American public sentiment that any derangement of these holdovers would bring the affairs of the human race to a disastrous collapse. And all the while the material conditions are progressively drawing together into such shape that this plain country-town common sense will no longer work.
IV. The New Gold
America has been a land of unexampled natural resources. Some day China and the Russian dominions will presumably outbid America in that way, both as to the abundance and the availability of their natural resources, and Brazil and Argentine come into the same class in this respect, as also other less well known regions in the low latitudes. But the material resources of these countries are to be counted with in the future rather than in the past ; and, for the present at least, a good part of them are to be counted in as a source of supplementary and subsidiary materials required for use in the industries of the countries lying in the temperate latitudes, not as countries that are abundantly endowed with a balanced allowance of those raw materials that go to make the basis of that system of industry which runs on the existing state of the industrial arts. Something to the same general effect may be said for all the greater fertile lands in the low latitudes. As the case stands just now these regions are outlying tributaries to the industrial system that centers in the north-temperate latitudes, and they come into the industrial scheme as a necessary compliment to the ways and means of this industrial system rather than a basis for self-balanced industrial commonwealths at home. All of that may be due to change presently. The state of the industrial arts is unstable, now as always, and it would be idle to speculate on what is due to come of it all in the remoter course of time and change. But for the present and the calculable future the seats of the mighty in this industrial system lie in the north-temperate latitudes, and for the immediate present and that recent past that goes to make the current situation, America comes easily first in this matter of abundant and available natural resources.
That such is the case may be called an historical accident. The state of the industrial arts as it has taken shape in this recent past has brought productive industry to depend, in the main and perforce, on that range of natural resources with which America is peculiarly well endowed. It is no serious stretch of language to say that this current state of the industrial arts has made America a land of abundant resources, inasmuch as these industrial arts have made these material facts of the American continent serviceable for industrial use. In the absence of that mechanical industry that arose in Europe in the eighteenth century and that system of mixed farming which runs along with the mechanical industry, the natural resources of America would count for little. So that the current state of the industrial arts might even quite warrantably be said to have created this natural wealth of the country,—converted otherwise meaningless elements of physiography and mineralogy into industrial wealth. It all was of little use or value, counted for little as wealth or as means of production, until the coming of this state of the industrial arts. And it is of course also conceivable that in the further course of time and change men may learn to do well enough without the use of this range of materials; whereupon these resources would cease to be resources, by that much. But all that lies beyond the calculable future.
In the same connection it may, at the risk of tedious iteration, be worth while to recall that this state of the industrial arts that now makes the outcome is, like any other, of the nature of a joint stock of technical knowledge and proficiency, held, worked, augmented, and carried forward in common by the population at large; indeed, by the population of the civilised world at large, not by any one class or country unaided or in isolation. It is a joint stock of technical knowledge and workmanlike habits, without the use of which the existing material wealth of the civilised nations would not be wealth. Also, in the same connection it should also be recalled that the American plan is and has been, consistently from the beginning, to convert all these unexampled natural resources to absentee ownership, with all haste and expedition, so soon as they have become valuable enough to be worth owning,—all the while that it is the community’s workmanship that gives them whatever value they have.
This American plan began at the beginning, and has continued. It is not peculiarly American, except in the sense that it has been worked out more consistently and more extensively here than elsewhere, and that it has been worked into the texture of American life and culture more faithfully. In the last analysis, the difference in this respect between the Americans and the other civilised nations will probably resolve itself into a difference of opportunity, and there is no wide difference at that. This American plan or policy is very simply a settled practice of converting all public wealth to private gain on a plan of legalised seizure.
First among these natural resources to fall under the American plan were the fur-bearing animals. The fur trade, of course, was not a matter of the first magnitude, and it is now a scarce-remembered episode of pioneering enterprise ; nor does it now count in any appreciable degree among the useful means of livelihood, in great part because business enterprise has run through that range of natural resources with exemplary thoroughness and expedition and has left the place of it bare. It is worth while to speak of it here only because it shows a finished instance of business-as-usual converting community goods to private gain without afterthought. It is a neat, compact, and concluded chapter of American business enterprise.
Bound up with the enterprise there is also an unwritten chapter on the debauchery and manslaughter entailed on the Indian population of the country by the same businesslike fur trade; one of the least engaging chapters of colonial history, lapping over far into the nineteenth century, and leaving more than one distasteful sequel to run into the future. Indirectly and unintentionally, but speedily and conclusively, the traffic of the furtraders converted a reasonably peaceable and temperate native population to a state of fanatical hostility among themselves and an unmanageable complication of outlaws in their contact with the white population. The traffic has, of course, also had its effect on the latter, chiefly by way of what may be called sclerosis of the American soul.
But the Americans have forgiven themselves for the fur trade and its hideous accessories and have nearly forgotten it all ; nor is the fur trade in any case to be counted in as a factor in the economic situation as its runs in recent times. The Great Adventure of the Americans has, after all, been the seizure of the fertile soil and its conversion to private gain. Their dealing with the soil has been the largest of these enterprises in absentee ownership, both in respect of its extent in time and space and in its social and civil consequences ; and this has already been spoken of, in its main bearings and at some length. Yet there is at least one further, and very consequential, feature of the case that should come in for mention, if not for extended discussion, as a grave and instructive incident in the working-out of this American plan.
In the North this enterprise in land-values has run off in the manner and with accessory consequences somewhat as described in the last two preceding sections But the case of the South, and the institutional value of the soil in that section, has been different. In the South the private usufruct of the soil injected into American life the “peculiar institution” of Negro slavery. The soil, crops, topography and climate of the North were, on the whole, not suited to agricultural exploitation on a large scale by use of forced labor; whereas the soil and crops of the South lent themselves very passably to that manner of absentee ownership in agriculture. So the more fertile tracts in the South fell into the shape of “plantations” rather than farms; and the large scale, with forced labor and absentee coercion, became the type-form of Southern husbandry. The consequence has been that while Negro slavery tapered off and faded out in the North before it had time to give its character to the industrial system and to mold the scheme of social values and usages into its own image, in the South Negro slavery became the “peculiar institution” about which “the scheme of things entire” circled and gravitated, and which gave its color and bias to all the local conventions and principles of honor and honesty; until, in the end, Negro slavery has left its mark on the culture of that section so deeply etched into the moral tissues of its people that the bias of it will presumably not be outgrown within the calculable future. In the South that bias is still right and good which the exacting discipline enforced by this “peculiar institution” once made right and good to them and so ingrained it in their common sense; very much as the equally peculiar institution of the Country Town has made the moral bias and the spiritual outcome in the North.
This is not saying that the Country Town has counted for nothing in the South,—the county-seat politics and social amenities of that section are not to be overlooked ; nor did Negro slavery leave the North untouched. Negro slavery presumes a Negro slave-trade. And the slave-trade was a Northern enterprise in the main, centering chiefly in New England, it is said; and it has doubtless had its effect in giving a certain implacable effrontery to the commercial spirit of that section, while it also had something substantial to do with the early accumulation of commercial fortunes in New England.1
Aside from agriculture and real estate, the progressive seizure of natural resources and their conversion to private gain falls under several main heads, somewhat as follows :—gold and other precious metals, timber, coal, iron and other useful metals, petroleum, natural gas, water-power, irrigation, transportation (as water-front, right-of-way, and terminal facilities).
For the time being the great ones among these are: coal, iron, transportation, and perhaps oil. As the case stands just now, coal, iron, and transportation together can make and remake the industrial balance, and the control of either one of the three can mar it, as is shown by current events. These are public interests of course, public utilities, if that term is to be applied at all in a community where the custom is to turn every public need to account as a means of private gain, and to capitalise it as such. One must quite naturally hesitate about speaking of a “public interest” or a “public utility” which is carried on the books of a private corporation as a capitalised source of income. It seems incongruous.
While gold and the chase after it is not to be reckoned among the country’s greater enterprises in point of permanent importance for industry, yet it ranks in the popular esteem as the greatest and most glorious of them all, the most picturesque and the most affectionately familiar in men’s mind. It stands out as the type-form of that manly enterprise which aims to get something for nothing at all costs. So that, one thing with another, for its bald honesty and its picturesque qualities as well as by the concrete and tangible nature of the reward which it offers for spent manhood, the quest of gold has always a place in the rosy foreground of all pioneering.
It is not that the bountiful earth gives up its gold, or its other precious minerals, without cost to the finder, but it always remains his aim and his actuating hope that he may come in for much of it at next to no proportionate cost; in which, it is true, he is commonly disappointed. But “Hope springs eternal in the human breast.” The actuating hope of the prospector is something for nothing, although his work will more commonly bring nothing for something. But there is also another sense in which it can be said even more truly that the gold which is found and brought out is a clear case of something for nothing. The gold is added to the outstanding purchasing power, while nothing is thereby added to the purchasable goods in hand. So that its finder or producer, at whatever cost, comes in for a share of the useful goods already on hand, without anything having been added to the community’s material wealth.
Wherever gold has been found or procured in recent times the tale of it runs always to the same effect, whether in California, Australia, South Africa, or Alaska, And it runs to this effect:—Many ablebodied men, at a very appreciable cost for equipment and subsistence, engage in this adventure for a considerable length of time, hard at work under conditions of some hardship, and subject to a death-rate which invariably exceeds that of equally robust men in the common run of employments. The greater number of these men come through the adventure alive, most of them without seriously impaired health,—unless the period covered by the enterprise should run longer than has commonly been the case. Some of them, relatively few, come in for large fortunes. Many of them, an appreciable fraction of those who come through alive, come out of it with modest gains, or at least without pecuniary loss. The greater number, perhaps ninety per cent, or so, of those who come out alive, come through with nothing to show for the time, work, and equipment which they have staked on the lucky chance, nothing but a harsh experience and an increased age. Meantime, as the period of free adventure draws to a close, the gold-bearing properties will have been taken over by absentee corporations, after having served their turn as stakes in what is reputed to be the most doubtful game of hazard known to men.2
The total value of the gold produced, one year with another, is also doubtless appreciably less than the total of the work and equipment expended on its discovery and production during the same period. And the same relation between cost and output holds true for any given gold field also, through its earlier years, while individual initiative is still running free; but in the adventurous years of the beginning the difference between total costs and the total value produced will be still wider than it is after the work has been standardised and stabilised under corporate control. There is always a net loss in the production of gold, but the net loss is larger during the earlier years of novelty and adventure. Even if the time, expenses, and wear and tear of the unsuccessful seekers are left out of the account—as being perhaps no more than a fair equivalent of the “pleasures of the chase”—it still will hold true that the total cost of producing the supply of gold habitually exceeds the total value of the product by several hundred per cent.3 And the same will hold true in a less degree for the other precious and semi-precious metals and minerals.
And all the while it holds true that, loosely speaking, the production of gold is of no industrial use and no material service to the community at large. What may have to be admitted in qualification of this broad statement is so slight and doubtful that it may be neglected without serious oversight. The gold supply is a supply of specie, on which money and money-values are based. The productive use of the metal in industry is altogether of secondary consequence, particularly such use as can claim to serve any material need. What goes into the industrial arts goes in chiefly as a means of conspicuously wasteful consumption; a need which is doubtless real enough, but which could also doubtless be met as adequately in the absence of a gold supply, or by use of any smaller gold supply, without apparent lower limit.4
The gold supply is useful as specie. This has to do with business, not with industry, except as industry is controlled by business. And here, again, one meets with the paradox that, while gold is extremely valuable and does good service as specie, a smaller supply of bullion would doubtless serve the same purpose quite as well. Indeed, a greatly increased supply would be inconvenient, and if carried very far an increasing supply would seriously impair or conceivably destroy the usefulness of gold as specie. The immediate and substantial effect of an increased supply of specie is to decrease the purchasing-value of the money unit ; that is to say, a depreciation of the dollar and a consequent advance of the general price level.
Otherwise it leaves things very much as before, except for certain indirect consequences which may be more or less serious. So, e. g., other things equal, an increased supply of specie will depress the purchasing-value of annuities, insurance payments, fixed salaries and fees, and similar incomes, and it will also lighten the effectual burden of fixed charges payable on long-term loans and the like, and so will depress the purchasing-value of outstanding securities which carry a stated rate of income. Its direct and proximate effect is, therefore, to undo the stability of the money-unit, depreciate it, and so derange prices, in the direction of an advance; to alter the effectual terms of loans outstanding, to the advantage of the debtor; to bring on an effectual redistribution of property as counted in goods, to the disadvantage of creditors, annuitants, and holders of securities drawn in terms of money ; and, perhaps the most consequential outcome, effectually to lighten the burden of outstanding corporation securities, and thereby enable the corporations to increase the volume of their obligations and their capitalisation. So also, by further indirect effect there will commonly follow an increased activity in business —and therefore in industry—due to the inflation of prices. The whole matter is summed up in saying that an increased supply of specie brings depreciation of the money unit. And it should be added that business men commonly welcome such depreciation, so long as it is not known by that name. Such depreciation (or inflation), within reasonable limits, is “good for trade.”
In point of material usefulness, then, it seems fair to say that the production of gold is pure waste—more especially the production of more than is currently taken up in the arts—and that this waste commonly exceeds the total value of the product. But in point of expediency for business it appears to be very much the other way. The effect on business appears to be altogether “salutary,” as it would be called. That is to say, continued production of gold in excess of what is consumed in the arts will bring business prosperity—the only prosperity known to civilised men—by raising prices. The surplus of gold depreciates the money unit; which inflates prices; which provokes to increased activity in business by holding out a prospect of larger gains in money; which involves larger sales; which calls for a larger industrial output; which speeds up industry and increases the percentage of employment both of the plant and of the industrial man-power. So also, this inflation of prices and increased activity of business will increase the rate and volume of the business turnover and of the business earnings—as counted in terms of the depreciated money unit —and will thereby inflate capital values, and so make credit easier by inflating the values of the collateral. Doubtless, no other single circumstance will affect the business situation in so invariably acceptable a manner as a surplus output of specie, such, e. g., as was had during the closing years of the nineteenth century and the opening years of the twentieth.5
The surplus output of gold takes effect on the conduct of business along two main lines. Directly and immediately it acts to inflate prices—in so far as it is not offset by the Federal Reserve’s remedial control of credit and currency—and so it inflates the business men’s expectations of gain, and thereby speeds up business and industry; for among the securely known facts of psychology, as touches the conduct of business, is the ingrained persuasion that the money unit is stable ;6 the value of the money unit being the base-line of business transactions. Therefore an inflation of prices is rated as an accession of wealth. Therefore such an inflation will impart confidence and buoyancy and raise great expectations, by a tropismatic stimulation of the business men’s sensibilities if not by logical inference ; and logic is after all a feeble defense in the face of a tropismatic stimulation, as is abundantly shown by the history of business cycles.7 And when so borne up on the resulting “wave of confidence” the business men are in a frame of mind for new commitments ; which turns the wave of confidence into a wave of prosperity.
Money-values are the underlying realities of the business man’s world, the substance of things hoped for, the evidence of things not seen. Therefore an inflation of prices is a business gain, and a decline of prices is a business loss. And one must not do business at a loss. Therefore the staple remedy for declining prices is to do no business until “things look up again.” Therefore such business as-is concerned with productive industry will aim to correct low or declining prices by slowing down, curtailing output, holding back,—in short, sabotage. So long as the case is not desperate—that is to say so long as the failure of the price situation can be covered over with plausible make-believe—so long the business-like remedy will be a steadfast application of sabotage, while waiting watchfully for things to take a turn. But so soon as the case grows desperate—that is to say when the unreality of the money-values involved can no longer be overlooked, even with the best endeavours of make-believe —then there is no remedy within the range of assumptions on which business is conducted. Therefore, in this last extremity there comes a break-down, a slaughter of the innocents, called a period of liquidation; which violates the premises of business-as-usual.8.
In ordinary times as well as in hard times, such as the present, it is of necessity the constant care of the business men who control industry to guard against an over-supply of their industrial output,—a running balance of sabotage on production with a view to maintain prices. It is the immediate effect of a surplus output of gold to inflate prices by depreciating the money unit. Therefore it relieves the need of this businesslike sabotage on the output of industry by that much. Therefore it brings a run of prosperity in business, a reduction of unemployment in industry, and a run of increased production. Its great merit is that it offsets, in its degree, this habitual need of curtailing the output of industry. It is a psychological factor, and it owes its efficacy to this inveterate habit of rating wealth in terms of money-values instead of use-values; and this habit rules the case wherever and in so far as the price-system has taken effect.
But in recent times the mastery of the price-system has taken a peculiar turn, in that corporation finance has, in effect, supplanted private initiative, and so has taken over the direction of business enterprise and the control of the material fortunes of the community. And the surplus output of gold stands in a somewhat special relation to corporation finance. A corporation is an incorporation of credit, an organisation of funds, a capitalisation of obligations. Loosely its capital value is measured by its outstanding obligations, and the whole is rated and administered on the basis of the current money-values of these obligations. This is the measure of its rating and the basis of its commitments. Its everyday business transactions, too, large and small, are in the nature of transactions in credit. At the same time —if it is an industrial concern in any sense—the corporation is possessed of tangible assets (natural resources, raw materials, industrial plant, right of way, etc.) as well as intangibles (of the nature of credit instruments, monopolies and custom). All these are valuable, and all will serve as collateral at the same time that they are means of earning. Any increase in the money-value of these assets, tangible or intangible, is an increase of the corporation’s assets and therefore an accession of wealth, in the only sense in which wealth can be taken account of in corporation finance.
Any inflation of money-values due to an increased supply of specie will enhance the corporation’s assets, while it leaves the outstanding obligations at the old figure. Inflation, therefore, signifies net gain to the corporation in all its book-values; and its assets will serve as collateral to float that much more debt, with a fixed charge.
In the last analysis, of course, all this gain that comes to the corporation from this inflation of prices comes at the cost of its senior creditors, the holders of its outstanding securities with a fixed rate, the purchasing power (or use-value) of whose claims shrinks by as much as the money unit has depreciated. But except in an extreme case, and very tardily then, the creditors will not see it that way. Nor have they any remedy if they should come to see it that way. On the contrary, they are elated with the improved solvency of the corporation whose securities they are holding. For these creditors, too, like other men who live by and under the price-system, go on the assumption that money-values are the final reality of things, and that they can lose nothing so long as the face value of their paper is undiminished and the solvency of their debtor remains unimpaired. It is true, these creditors may know better, as a matter of deliberate information, but they do not know it with such efliect as to shake their faith in the realities of the price-system or to influence their conduct in any degree.
Among other things, then, this depreciation of the currency affects the corporation’s assets and enhances their carrying-capacity as collateral; which enables the corporation to contract new credit-obligations, add something to its capitalisation, and so to take on an additional overhead of fixed charges. The income-rate on the new capitalisation is fixed formally by the terms of the instrument which covers it (e. g. in the case of bonds and similar debentures) or informally and more flexibly by usage, presumption, and financial expediency (e.g. in the case of stocks). When the inflated assets have so been capitalised and hypothecated they are, in effect, standardised at a stated value and become unshrinkable, except by way of enforced liquidation. So they come to stand at these inflated values as staple assets, on which it is then imperative to “earn” a net gain answering to the fixed or customary income-charge ordinarily borne by securities of the class which covers them.9 So the traffic must be made to bear such charges in perpetuity as will yield that rate of net gains which is called for by this expanded recapitalisation. And the staple procedure dictated by sound business principles in such a case is to increase the schedule of charges and curtail the output. It is perhaps unfortunate that there is no other way out according to the canons of business-as-usual, since there is after all a limit to this method of making the traffic bring a reasonable net gain on inflated capitalisation.10
It apears, then, that so far as concerns the output of gold—and other precious metals—there is much to be said for this American plan of exhausting the country’s natural resources by seizure and conversion to absentee ownership, regardless of cost and as expeditiously as may be. This particular range of natural resources has, in effect, no use-value; so that their loss or exhaustion entails no material loss on the community directly,—apart from the excessively high cost of their exhaustion by this method. Indirectly but immediately, it is true, by operation of the added purchasing-power which the new specie gratuitously brings into the market, the community at large loses so much in useful goods as this added purchasing power will account for; which will, by use of fiduciary currency, bank checks, and other forms of credit-extension, foot up to some multiple of the initial value of the new specie that is brought to market,—say some ten times the value of the new specie, or some such figure. But this loss the community bears gladly, and in fact counts it as so much gain measured by the purchasing-value of the new specie. The country is so much richer per capita, counted in terms of the depreciated money unit. So great is the magic of the price system and its frame of mind. Beyond this there is to be set down to the credit of the new specie the creation of a wave of prosperity by inflation, and the creation also of enlarged opportunities for corporation finance.
V. The Timber Lands and The Oil Fields
The American Plan of seizure and conversion as it has worked out in the case of the land and the precious metals has been greatly complicated with ulterior consequences and secondary effects, not aimed at and not contemplated in the original design. The like is not true in the same degree in respect of those other natural resources which are more usually spoken of as such; as timber, coal, iron, oil, gas, waterpower, irrigation waters. Harbor facilities and transportation lines should also be included among these. The history of the large and many enterprises that have had to do with taking over these articles of national wealth can, of course, not be recited here, nor need it be. The records are full and accessible, for all such facts relating to these public utilities as the public has a right to inquire into under this American plan.
Publicity touching these matters is no part of the American plan. Yet, to recall what the ordinary course of events has been like, and what has been the commonplace outcome of absentee ownership and business enterprise in this field, it is necessary to show some of the characteristic practices and incidents that have marked this pioneering enterprise. And this can be shown as well, and perhaps more simply and concisely, in lumber than in any other one line of natural resources.
There have been many picturesque incidents and not a few spectacular episodes in the course of this pioneering enterprise ; but all such it will be necessary to avoid, since that which is of interest here as bearing on the present argument is not the colorful atmosphere of this thing but only its workday nature, causes, and outcome—the industrial significance of its ordinary working-out. The case as a whole, of course, as an object-lesson showing the merits and qualities of the American Plan, runs not on picturesque episodes but on standard practice and workday outcome.
What has been done with the country’s timber supply is a well defined and characteristic case, showing how absentee ownership functions in taking over the country’s natural resources and using them up. As a characteristic feature of the case it may be called to mind at the outset that much of what has happened to the stand of hardwood timber has happened as an episode by the way, a side-issue of pioneer farming. The greater proportion of the original stand of hardwood, together with an appreciable fraction of the pine and hemlock, was got rid of in all haste in clearing the land to get at the soil. It would be hard to say how much of this hurried work of destroying the stand of timber is to be set down to the account of absentee ownership. There can be no question as to the broad fact that the practice of competitively taking over land more rapidly and in larger parcels than the requirements of cultivation called for will have increased the rate and volume of this waste. For more or less, so much is to be set down to the account of absentee ownership. It would perhaps be an overstatement to say that this practice has doubled the waste of timber incident to bringing the soil under cultivation, though it is not an extravagant overstatement. The enterprise in “land-grabbing,” as it has been called, has involved a great deal of hasty work by men who have commonly been short of equipment and “working capital” and who have been driven to many shifts by present need and so have gone on a plan of hurried exploitation instead of economical use.1
The pine and other evergreens have been taken care of by enterprising lumbermen driven by a businesslike pursuit of immediate net gain without afterthought. The like is also true for much of the hardwood timber; for such of it as has not been included in the “farm areas.” The greater and better part of the stand of pine timber east of the plains—and much of the hemlock, spruce, and cedar—was run through and virtually exhausted during the latter half of the nineteenth century.
In pursuance of this American plan of lumbering as shown in the pine-timber country the usual procedure of the business men who conducted the enterprise was to acquire title to tracts of timber-land by one means and another. There was a shady side to some—quite a large proportion, they say—of the transactions involved in so acquiring title to these timber-lands or to the stand of timber on them ; but this somewhat prevalent shady complexion of the enterprise at this point is not of particular interest here. Title was acquired under the broad principle that all is fair in competitive business; particularly so long as any dubious practices are carried through at the cost of the community at large.
According to the standard routine of the time, as seen, e.g., in the pineries of Michigan, Wisconsin, and Minnesota, these tracts of timber-land would then be “lumbered” as expeditiously as might be ;2 that is to say, as the practice ran through the larger and busier part of that half-century, the high-grade and accessible pine timber was taken out, turned into lumber, and marketed. The inferior grades of pine timber—the smaller sticks (say, under eighteen inches in the butt), the crooked and short sticks (say, under sixteen feet length), and other kinds than White pine (as, e.g., “Norway,” “pitch,” “jack,” or “bull” pine)—were left standing or fallen, together with the greater part, sometimes all, of the hemlock, spruce, fir, cedar, tamarack, and any scattered bodies of hardwood. So also the slashings (approximately one-half of the total mass of material in each tree) were left on the ground. So soon as these loppings were sufficiently dry—say, in two or three years—they would presently be fired, by accident or design, and the tract would then be burned over, destroying whatever timber had not been taken out.
When account is taken of the frequent spread of these fires into uncut tracts of standing timber, it is probably within the mark to say that something more than one-half of the original stand of timber was lost in these unavoidable fires. This standard routine of American lumbering, including the destruction by fire, did not vary greatly from place to place, and it has held true with little abatement throughout the period. It is doubtless within the mark to say that this enterprise of the lumbermen during the period since the middle of the nineteenth century has destroyed very appreciably more timber than it has utilised,3 although some practice of economy has come into the business toward the close of the period, and more particularly since the beginning of the present century.4
None of this passionate endeavour of the lumbermen to get rich quick has been wilfully destructive. It is only that as it has been conducted, and as it could not but be conducted according to sound business principles, a destructive waste of the timber supply has been involved in it and a greater waste and destruction has unfailingly followed it up. It is always sound business practice to take any obtainable net gain, at any cost and at any risk to the rest of the community. The Captains of Industry who have been engaged in this enterprise of disemboweling the country’s timber resources and who have profited by it have been quite within their rights and within the ethics of business. Not only so; commonly if not invariably their conduct is heartily approved and admired by their fellow citizens, and they have come through the adventure with a greatly augmented self-respect and a very notable conviction of well-doing.
They, the successful ones, have become substantial citizens, bearing all the stigmata of civic substance and merit. And after the pattern of substantial American citizens they have, not unusually, gone on and acquired further merit by devoting some part of their takings to conspicuously humane works. There are towns, not a few, that have been named in reverent memory of these enterprising men, and there are many parks, hospitals, museums, libraries, fountains, school and town edifices, and other municipal works, in many towns and cities in these states, which bear their name and carry forward the memory of their munificence. Indeed, so highly do their fellow citizens esteem their meritorious work in so having disembowelled the country’s timber resources, that they have not uncommonly been called by popular vote to take over the business of governing the country whose resources they have disembowelled, in legislative and administrative office, in the states and in the Federal Government. There is, broadly speaking, no fault to be found with them or their works, or at least no fault is found, by themselves or by their fellow citizens. Their rating, in the popular esteem and in their own, is reflected by the fact that a very appreciable and honorable number of these men have proved to be substantial and public-spirited enough to find their way into the federal senate, sometimes even at a cash outlay which it might be inconvenient to specify; and here they have honorably “stood pat,” embattled in defense of the principles of business-as-usual, and have honorably kept faith with all the vested interests. In short, they run meritoriously true to the American ideal of the self-made man who knows that his work is well done.
In the end, that is to say since the end of the timber resources has very crudely come in sight, a more economical plan of seizure and conversion has gone into effect, more economical and also more conclusive in the matter of seizure and conversion. It became evident some time ago that the timber-lands were by way of becoming valuable holdings for eventual profit. Therefore title to the major part of what was left was presently acquired by interested individuals and corporations, to be held for an eventual rise in the prices of lumber. And the rise in lumber was looked for as due to come so soon as the increasing scarcity of timber and the collusive strategy of these large absentee owners could be effectually brought to bear on the market. And, indeed, the anticipated advance came on with reasonable promptitude, so soon as the major part of the remaining stand of timber had passed securely under the control of these larger absentee owners. And the outcome has been such a schedule of prices as the traffic could be made to bear on this basis of organised collusion. In the end this remnant of the original stand of timber promises to cost the community as much at the hands of these collusive absentee owners as the original stand of timber would have been worth in case it had been managed on a plan of deliberate economy and conservation from the outset. And its value to its absentee owners is measured by its cost to the community, which in turn is measured by what the traffic can be made to bear in the case of a tariff-protected necessity under competent monopoly management.5
The Lumber Interest shows the American plan as it has worked out in a moderately large and well defined field. In principle, what has been done with other, larger natural resources does not differ essentially from the case of the timber lands. The details are different, of course, inasmuch as these others come into the industrial system each in ways of its own. So far as the peculiar circumstances of each case will permit, these others, too, show the characteristic traits of the American plan,— initial waste and eventual absentee ownership on a large scale and on a quasi-monopolistic footing. And wherever and so far as the course of enterprise has had a chance to work out, the outcome is monotonously the same,—collusive management under absentee control at the cost of the underlying population.
But these larger items of the country’s natural resources—as coal, iron, water-power, or transportation lines—are the material of the country’s “key industries.” They are, therefore, the substance of the country’s industrial system, and it would be a bootless undertaking to go into a discussion of them except as organic factors in that balanced system of industrial processes in which they are the major forces engaged. They can only be taken conjointly, and their joint life-history is the life-history of American industry as it has run on since the mechanical technology began to dominate American industry during the latter half of the nineteenth century.
Coal and iron have already reached a passably settled state of collusive management under corporation control on a basis of unqualified absentee ownership. Water-power is still in process of being taken over and converted to absentee gain, helped along covertly and overtly by official and legislative furtherance; no doubt conscientiously so, in the main, since the legislators as well as the administrative and judiciary officials are commonly men with a sound business-man’s bias ; men whose best knowledge and belief runs to the effect that such gainful absentee enterprise at any cost to the underlying population is “good for business’’; that the common good turns on the unremitting acceleration of absentee business traffic; which is conditioned on increasing net gains for the interested parties. And the costless transfer of these necessaries of life to these absentee owners is an obvious means of increasing their net gains ; thereby provoking them to do business with the underlying population; which is the good end to which in the nature of things a businesslike administration should bend its energies.
So the country’s water-power is unobtrusively passing into the hands of duly constituted vested interests, to be turned to account for the benefit of duly accredited absentee owners, all in due accord with the American Plan. So also the transportation system is still in process, but in an advanced stage of the process, of approach to that settled state of vested interest which confers an inalienable right to a flow of free income computed on an immutably inflated capitalisation. The railways, e. g., should not have much farther to go along that road. What chiefly remains to be done would seem to be that which the authorities already have in hand,—to make the taxpayers chargeable for suitable earnings on the railway corporations’ capitalisation, as a fixed overhead charge on the cost of living, without apology or afterthought So that matter will have been arranged.6
In coal, iron, and transportation the conversion of public necessities into private assets has already reached a passably settled and conclusive state, so that these means of production are now securely held in absentee ownership and managed on the sound business principle of charging what the traffic will bear. Their use is regulated on the steady presumption of rendering no greater service than that minimum which will yield a satisfactory net gain to their absentee owners. That is to say, as regards these natural resources their employment has been brought to a basis of “sound business,” so that the abiding care of the businesslike management is to avoid an excessive output. An excessive output in this connection means such a full and sustained employment of plant and man-power as would overstock the market and lower profits. Hence a watchful curtailment of output, unemployment, and sabotage.7
On the other hand Oil, that is to say the business in crude oil, is still in an immature phase of its development, resembling the earlier lumbering enterprise, and marked by a headlong competitive rush to disembowel the available resources expeditiously and at any cost. In the course of nature the older oil-fields have passed this stage of development and have duly come to rest secure and orderly under the absentee ownership and absentee management of economically regular corporations, of the large and stable type which is known colloquially as Big Business. So also is very much of the business of refining, transporting and marketing the output. These things have already come in under the head of business-as-usual and are managed discretely by collusion and coercion on the principle of what the traffic will bear; that is to say, these lines of business run on a settled plan of competition between the absentee owners and the underlying population, according to which the absentee management makes the terms for the underlying population on the principle of what the traffic will bear. As business concerns these corporate interests have already become enterprises in salesmanship simply, and conduct their affairs quite in conformity with the later approved canons of salesmanship, as touches both their outstanding securities and their marketable products and services.8
There still is much pioneering enterprise in the production of the crude oil, designed to get rich quick on a moderate outlay. Many “independent” concerns are engaged in this enterprise, a number of which—perhaps the greater number—are unrecognised subsidiaries of the large absentee corporations which handle the refined. The affiliations of these “independent” oil concerns are surrounded with much painstaking obscurity. For such of them as are in any degree independent in fact, the manœuvres of the greater corporations are conditioning circumstances to be guessed at and taken account of. The great corporations stand as massive impersonal vested interests which move obscurely in the background of the market and make the terms on which business may be transacted ; and it is for the “independents” to make their peace with them on such terms as may be had. Having come to terms with the master corporations, the enterprising knights of trover and conversion who are “developing” the newer fields go about their business of disemboweling the country’s oil resources in all haste and without afterthought.9
The greater number of these “independent” concerns are scantily equipped for the work ; although the total expenditure on equipment and work in the field greatly exceeds what would be required to produce the crude oil on any reasonably economical plan. They are also commonly under-manned, in the sense that the working personnel in the field includes too small a proportion of suitably skilled and experienced workmen and too scant a staff of technical experts; too scant, that is, for economical working. Also they are commonly ill prepared for contingencies, whether of a financial or a mechanical nature ; partly because they commonly do not have the benefit of competent technical advice and experience; partly because much of this enterprise still carries the mark of “wild-cat” and still does business in a hurry on a chance and a “shoe-string” ; and partly also because unfavorable contingencies are not infrequently arranged for them as a matter of business strategy in behalf of the vested interests that move in the background. And quite as a matter of routine there is a notorious initial waste of the output (both oil and gas) when a well is brought in. This waste commonly goes on for some time at a high percentage, and the waste of gas will often run on nearly unchecked through the life of the well, for want of storage capacity, pipe-line connections, etc.
Much of this enterprise is of the nature of a competitive duplication of work and equipment. The independent producers, many of whom are corporations of some standing, are competitive leaseholders of plots of ground bounded by survey lines, lines of ownership, not by the natural boundaries of the “pools” which they are engaged in exhausting. These leased plots of ground touch one another along the geometrical lines of the survey. So, under the spur of businesslike initiative the leaseholders each and several bend their efforts to get the better of one another by cutting in on one another’s oil-contents underground along these dividing lines. All and several sink many wells rapidly on these competing plots of ground, taking care to crowd many new wells up against the dividing lines and into the corners of their leaseholds, to draw off underground what it would be larceny to take over after it reaches the surface; until the resulting number of wells (and “dry holes”) sunk in any given neighbourhood is several times as many, at several times the cost that would be needed to get out the underlying oil on any reasonable plan.10
This clamorous waste and manhandling of the oil resources runs on quite as a matter of business routine, and the recital of any part of the story here may well seem a piece of aimless tedium. It runs on in this fashion from the outset, but it is plain that the enterprise is in all cases due to head up eventually in a collective control of the output by large absentee owners. The older fields show what is to be expected in that respect and how it is likely to be done. The waste which this pioneering enterprise in oil involves, and the excessive cost of it, will not run to so high a percentage of the output ‘as in the case of the gold production (some 500 per cent, for the Alaskan gold), but counted in absolute figures the total of wasteful costs and wasted output entailed by private initiative in the production of oil is doubtless larger than the corresponding total for gold.
The whole of this routine of waste and inefficiency is a matter of course under the American plan of seizure and conversion; and it is at least a blameless exercise of private initiative, commonly regarded as a meritorious work. It is, in effect, no more than an exemplary working-out of the American citizen’s dearest constitutional rights, and there is no fault to be found with it all on any score of irregularity. In its time and under the given conditions of law and custom it is sound business enterprise ; just as the Big Business and monopoly control in which it invariably heads up is also sound business. It is all in the day’s work. It has seemed necessary here to recall these workday incidents of business-as-usual in oil, just because they show a concrete and exemplary working-out of absentee ownership as it affects the country’s natural resources.
1: Of course, in point of nationality they are, each and several, eternally distinct for the time being.
2: It is not easy in any given case—indeed it is at times impossible until the courts have spoken—to say whether it is an instance of praise-worthy salesmanship or a penitentiary offense. All that may turn on a point of legal verbiage, and it may also depend somewhat on the magnitude of the transaction and the business rating of the parties in interest; a large transaction is, on the whole, less likely to be found reprehensible.
3: A classic illustration of the first point are the flint deposits of Denmark, which were of first-rate consequence as natural resources in the Stone Age; while the second point is covered by the case of the Negro man-power of the Southern States. which ceased to be assets as soon as the consent to its usufruct by absentee ownership was withdrawn.
4: E. g., certain copper properties have varied greatly in their value as assets, with the continued discovery of further copper deposits, on the one hand, and with the increased requirements of electrical material, on the other hand. So also have nickel properties responded to changing circumstances of the same order. And both, but particularly nickel, considered as a means of free income for absentee owners, have been greatly helped out from time to time by a protective tariff designed to safeguard and augment the free income of vested interests of this class. It is the whole wisdom of a protective tariff that when the charges so imposed by the absentee owners are so protected by a protective duty the traffic can be made to bear a heavier charge. In further illustration of the general statement above, it may be recalled that the discovery of the Minnesota iron ores and the gradual perfecting of the steel smelting processes, incontinently cut down the value as assets of those Cuban ore bodies whose American absentee owners were to have been safeguarded in their free income by the Spanish-American War. But there are no end of illustrative instances, since the whole use and value of these natural resources, as well as variations in their value as assets, turn on the state of technological knowledge, with which the owners of them have nothing to do.
5: Compare, e.g., the case of the Texas oil fields with that of the anthracite coal field.
6: The salt business, e.g., shows a very fair instance of this gradual shifting from a competitive to a monopolistic footing.
6a: Cf. Wallace, Farm Prices.
1: As a side issue to this arrangement of magnificent distances in the fertile farm country, it may be called to mind that the education of the farm children has on this account continually suffered from enforced neglect, with untoward results. And there are those who believe that the noticeably high rate of insanity among farmers’ wives in certain sections of the prairie country is traceable in good part to the dreary isolation enforced upon them by this American plan of “country life.”
2: This civilised-man’s cupidity is one of those “higher wants of man” which the economists have found to be “indefinitely extensible,” and like other spiritual needs it is self-authenticating, its own voucher.
The Latin phrase is auri sacra fames, which goes to show the point along the road to civilisation reached by that people. They had reached a realisation of the essentially sacramental virtue of this indefinitely extensible need of more; but the aurum in terms of which they visualised the object of their passion is after all a tangible object, with physical limitations of weight and space, such as to impose a mechanical “saturation point” on the appetite for its accumulation. But the civilised peoples of Christendom at large, and more particularly America, the most civilised and most Christian of them all, have in recent times removed this limitation. The object of this “higher want of man” is no longer specie, but some form of credit instrument which conveys title to a run of free income; and it can accordingly have no “saturation point,” even in fancy, inasmuch as credit is also indefinitely extensible and stands in no quantitative relation to tangible fact.
3: It may be added, though it should scarcely be necessary, that a good part of the gains which are taken by the country-town business community passes through their hands into the hands of those massive vested interests that move obscurely in the background of the market, and to whom the country towns stand in a relation of feeders, analogous to that in which the farm population stands to the towns. In good part the business traffic of the country towns serves as ways and means of net gain to these business interests in the background. But when all due allowance is made on this and other accounts, and even if this element which may be called net gains in transit be deducted, the statement as made above remains standing without material abatement: the business gains which come to the country towns in their traffic with their underlying farm populations are inordinately large, as counted on the necessary cost and use-value of the service rendered, or on the necessary work done. But whether these net gains, in so far as they are “inordinate”—that is in so far as they go in under the caption of Something for Nothing—are retained by the business men of the town or are by them passed on to the larger business interests which dominate them, that is an idle difference for all that concerns the fortunes of the underlying farm population or the community at large. In either case it is idle waste, so far as concerns the material well-being of any part of the farm population.
1: The great American game,” they say, is Poker. Just why Real Estate should not come in for honorable mention in that way is not to be explained off hand. And an extended exposition of the reasons why would be tedious and perhaps distasteful, besides calling for such expert discrimination as quite exceeds the powers of a layman in these premises. But even persons who are laymen on both heads will recognise the same family traits in both.
2: The round numbers named above are safe and conservative, particularly so long as the question concerns the staple country towns of the great farming regions. As has already been remarked, they are only less securely applicable in the case of similar towns in the industrial and outlying parts of the country. To some they may seem large and loose. They are based on a fairly exhaustive study of statistical materials gathered by special inquiry in the spring of 1918 for the Statistical Division of the Food Administration, but not published hitherto.
There has been little detailed or concrete discussion of the topic. See, however, a very brief paper by Isador Lubin on ‘The Economic Costs of Retail Distribution,” published in the Twenty-second Report of the Michigan Academy of Science, which runs in great part on the same material.
It is, or should be, unnecessary to add that the retail trade of the country towns is neither a unique nor an extravagant development of business-as-usual. It is in fact very much the sort of thing that is to be met with in the retail trade everywhere, in America and elsewhere.
3: It might also be called salesmanlike pusillanimity.
4: There is, of course, no call in this Christian land to throw up a doubt or question touching any of the highly remarkable verities of the Christian confession at large. While it will be freely admitted on all hands that many of the observances and beliefs current among the “non-Christian tribes” are grotesque -and palpable errors of mortal mind; it must at the same time, and indeed by the same token, be equally plain to any person of cultivated tastes in religious superstition, and with a sound bias, that the corresponding convolutions of unreason in the Christian faith are in the nature of a divine coagulum of the true, the beautiful, and the good, as it was in the beginning, is now, and ever shall be: World without end. But all the while it is evident that all these “beastly devices of the heathen,” just referred to, are true, beautiful and good to their benighted apprehension only because their apprehension has been benighted by their stubborn profession of these articles of misguided make-believe, through the generations; which is the point of the argument.
1: The slave-trade never was a “nice” occupation or an altogether unexceptionable investment—’’balanced on the edge of the permissible.” But even though it may have been distasteful to one and another of its New-England men of affairs, and though there always was a suspicion of moral obliquity attached to the slave-trade, yet it had the fortune to be drawn into the service of the greater good. In conjunction with its running-mate, the rum-trade, it laid the foundations of some very reputable fortunes at that focus of commercial enterprise that presently became the center of American culture, and so gave rise to some of the country’s Best People. At least so they say.
Perhaps also it was, in some part, in this early pursuit of gain in this moral penumbra that American business enterprise learned how not to let its right hand know what its left hand is doing; and there is always something to be done that is best done with the left hand.
2: Although it is not greatly to the point, yet it may be noted by way of parenthesis, that many funds are also invested in worthless, “wild-cat,” and spurious mining stocks in the course of that speculative investment that gathers about any one of the greater gold discoveries, and that the funds so invested in profitless make-believe will doubtless in all cases greatly exceed the total value of the gold produced up to the date at which the gold-bearing properties have finally passed into the possession of absentee corporations and are being worked on the basis of corporate business-as-usual. Of course, all this traffic in speculative mining shares has no great or material significance for anyone else than the buyers and sellers. The speculative losses of over-sanguine investors and the speculative gains of the over-facile salesmen who create and dispose of mining stocks have only a speculative interest to anyone but themselves. Like other games of chance and skill it is a closed circuit of profit and loss. It foots up to a transfer of purchasing power from the buyers, who get nothing, for a price, to the sellers, who dispose of the same commodity, for the same price. It is of interest as being a typical case of salesmanship; an exploit of salesmanship in puris naturalibus, as one might say; that is to say, it runs off wholly on the plane of make-believe, without ulterior consequences or sequelae. It has something of that detachment from material fact which distinguishes the publicity enterprise of Holy Church.
3: Cf. W. S. Jevons, Investigations in Currency and Finance (London, 1884) pp. 70-73. “But in itself gold-digging has ever seemed to me almost a dead loss of labour as regards the world in general—a wrong against the human race, just such as is that of a Government against its people, in over-issuing and depreciating its own currency.” Men who are intimately acquainted with the gold deposits of Alaska and their working, and who have had the benefit of a full acquaintance with the work of the U. S. Geological Survey in that region, have been at pains to estimate and compute on the basis of the statistical information which so can be drawn on and have come to the result that the total expenditures which have gone into the production of gold in the Alaskan field, up to the year 1919, have exceeded the total value of the output of gold by some 500 per cent, rather over than under. So that the gold output of Alaska has cost something like six dollars per dollar. Which may be taken as a fair index of the value of the Alaskan gold fields to the American people at large; except that when the matter is appraised from the point of view of the community at large the time and work of the unsuccessful seekers, as well as the lost lives, would have to be counted in among the total costs. Which would raise the cost of the gold appreciably over 1000 per cent, of its purchasing value. Cf. also ‘The World’s Gold Supply,” by William A. Berridge, in The Review of Economic Statistics (Harvard University Press), Preliminary Volume II. pp. 181-199.
4: What has happened to platinum during the past quarter-century may be taken as a passably conclusive object-lesson on this head. In the early nineties platinum still had virtually no use as a decorative precious metal. Then its price began to rise, strongly and steadily, chiefly because of its increasing employment in the electrical industry, and in some degree by a slighter but increased use in photography and dyeing. Then progressively, as the price advanced and so made the decorative use of platinum increasingly and conspicuously wasteful, the decorative use as well as the conventional beauty of platinum steadily gained ground and assurance; until the metal is today imperatively required as an indispensable ingredient in all the more exacting and honorable confections of the jeweler’s art,—at a price ranging some ten or twenty fold higher than the point of departure. No slight is to be put upon platinum, as touches either its beauty or its serviceability, in taking note of the fact that at a sufficiently lower price it would be no more sought after as a personal adornment than some of the several alloys which rival it in visual effect. Indeed, except for the declining value of gold, brought on by the increased supply, and the rising value of platinum, due to scarcity, it is extremely doubtful if the latter metal could have found any special favor as an object of beauty, or could in any degree have displaced gold as an article of personal ornament.
5: The statement is put in this form because it applies without reservation only under the conditions which prevailed in the late nineteenth century and for a few years after its close, gradually changing into a new order of things as the twentieth century has advanced. Since then it will apply only with lessened force. Indeed, until the War brought on the present international complication of insolvent credits, the American system of money and credit seemed in a fair way to become independent of any surplus productions of gold or of any store of specie, if need be.
In short, the statement applies to the older situation ; when the banks and other credit establishments were still doing business in severalty, at least in the main ; and it will apply with gradually lessening force since and in so far as these concerns that do business in credit have effectually been drawing together for concerted action on a collusive plan; and more particularly will it not hold true in the earlier fashion since the establishment of the Federal Reserve has enabled this collusive plan of team-work in credit to be enforced with a reasonable measure of centralised control. The stability (at least de jure) of the money unit and of the country’s credit arrangements is no longer conditioned on the supply of specie in any such intractable fashion. Yet a surplus production of the money metal, at any cost, continues always to be a fortunate circumstance for the conduct of business.
6: This persuasion or presumption prevails wherever the price-system has fully gone into effect. It may fairly be called the spiritual precipitate of the price-system. It affects not only the business men, properly speaking, but the underlying population as well. It is known not to accord with fact, but still it remains a principle of conduct. It has something like an instinctive force; or perhaps rather, it is something like a tropismatic reaction, in that the presumption is acted on even when it is known to be misleading. And it is a necessary assumption in business, since business is necessarily done in terms of price; so that money values unavoidably constitute the base-line to which transactions are finally referred, and by measurements upon which they are ultimately checked, controlled, adjusted, and accounted for.
7: Cf. W. C. Mitchell, Business Cycles, perhaps especially chapter xiii.
8: In the present spectacular conjuncture which had followed upon the War and the Armistice, e. g., it is a matter of common notoriety that the scale of prices went out of touch with the material realities of production and consumption some years ago arid has so continued since then; that the present scale of money-values, in tangible property and in securities, is quite unsound; that the outstanding volume of credit obligations has turned into a fantastic tissue of footless make-believe; and that the only way out of a desperate situation is to go to work.
It is equally notorious that there is a desperate need of goods for consumption; and that the needed raw materials, industrial plant, and manpower are ready to hand—urgently ready to be turned to productive use.
All this is well known to all concerned and has been quite evident all through these years while this situation has run on and grown steadily worse. The established rights of ownership (absentee ownership) vest all discretion in this matter in the country’s business men—and in the Business Administration which has been installed to serve their needs; so that it is for them, and their Business Administration, to say what is to be done about it. And it is also plain enough what need be done. They .are all agreed that the thing to do is to go to work; to make use of the country’s raw materials, equipment and manpower for the production of useful goods. But to take these known facts by their only handle, to acknowledge the known facts and act upon them, would not be “a sound business proposition.” Indeed, it can not be done without violating the premises on which sound business is conducted,—the premises of unshrinkable values and net gain. Therefore the best that the collective wisdom of the business community and the Business Administration knows how to propose after some three or four years of deliberation is “Nothing doing.”
There is wide-spread and steadily increasing privation among the underlying population, increasing unemployment of plant and man-power, increasing discontent, increasing indebtedness, steady shrinkage of use-values, due to consumption, wear and tear, and neglect. And all the while the business men, who alone have the power to act, are bound by their unshrinkable money-values; and so they hold back and wait watchfully for the eventual breakdown, under a smoke-screen of optimistic talk; watchfully and with a manly attempt at self-delusion.
9: The guaranteed earnings of the American railways, as now provided by law, is instructive on this head; both as regards capitalised inflation and as regards the unshrinkable values of assets that have once been covered with securities of the approved forms. The railroad properties have, in great part, ceased to yield earnings. Logically this state of things should call for their recapitalisation at such a lower figure as would answer to their shrunken earning-capacity. But business principles, vested interests, and corporation finance do not admit deflation of assets in the ordinary course of business.
It may be mentioned as something outside the ken of American statesmen and financiers and abhorrent to American principles of sound business that certain European industrial corporate concerns lately (1921-1922) have, under severe pressure, been writing off a very appreciable proportion of capital on which no earnings can be had. But then, there were no American statesmen at hand to succor these Europeans in distress. The parallel case of the American railways and their (actually) valueless assets will point the difference. The American plan is to let the taxpayers make up the shrinkage. America is, after all, the land of unshrinkable absentee ownership.
10: The case of the American railways, again, illustrates the point; in that the schedule of charges in this case has been advanced to such a point that the total net earnings have apparently been falling off. In the absence of a guarantee it should not seem likely that the railways would charge more than the traffic will bear; but with standard earnings guaranteed there may even be a certain economy in making the charges high enough to discourage traffic in a moderate degree.
1: So, e. g., in much of the country where the ground was covered with hardwood timber it was in its time not unusual for the impecunious settlers to raise some slight funds for urgent use by hastily felling the stand of timber, burning it, and selling the ash, which was used for making potash. So also, in the same sections as well as in many places where the land was timbered with pine and hemlock, it has not been unusual to construct fences by felling the timber along the fence-line in such a way as to make a barrier of it to serve the purpose of a fence by cumbering the ground. These Independent Farmers were commonly very nearly penniless, and so were driven to many ingenious devices to find ready money, at the same time that their competitive enterprise in land-grabbing scattered them and their work out over wide spaces of half-wild country with long distances and atrocious roads, leaving them far out of reach of reasonable transportation. They were (commonly) unable to buy or to bring in anything like the equipment and materials required in their work. So they took this way out of present difficulties at the cost of the future; and the future, which has now become the present, is paying the cost in a scarcity of timber.
2: The time allowed for stripping any such given tract and “getting out” its first-class timber would commonly be limited to the number of years which the laws of the state allowed delinquent taxes to run before title to the land reverted to the state. Hence the need of despatch. This period was commonly long enough for the purpose if no time were wasted; and as a matter of economy it was accordingly not usual to pay taxes on the timber-lands during this interval while the desirable timber was removed. So that much of the timber-lands reverted to the state for delinquent taxes after the stand of timber had been cut or burned.
3: Cf. e. g., U. S. Department of Agriculture, Forest Service-circular 171. “The Forests of the U. S. and their Uses,” pp. 9-11.
4: There has been an increasing endeavour to turn by-products and waste products to account, and more economical methods and appliances have come into use. The latter point is illustrated, e. g., by the gradual introduction of the gang-saw, and presently the band-saw, in place of the circular saw in the sawmills which turn the saw-logs into lumber. The circular saw is an American invention, at least in respect of its larger use and as a standard appliance for reducing saw-logs to lumber. In this larger use, in the use of these circular saws of large diameter, the unavoidable waste of material is larger than the corresponding waste involved in the use of the gang-saw, larger by something more than 100 per cent. But the circular saw is expeditious, and it does not require so extensive or so massive an equipment, at the same time that it and its equipment are more readily portable. And so long as waste of material has little or no commercial value the circular saw is preferred. But it makes sawdust of something like one-fourth to one-third of the lumber-content of a saw-log, whereas the gang-saw’s or the band-saw’s allowance for sawdust will be perhaps one-tenth to one-fourth of the lumber-content.
5: There is, of course, no monopoly control of the timber supply, de jure; no more than there is such a control de jure in anthracite or bituminous coal. The law does not tolerate such control, de jure. But the present argument is concerned only with the state of the case de facto. And de facto it will not be questioned that in the case of the timber supply, as is uniformly to be expected under this American plan of expeditious seizure and conversion to private ownership, the spectacularly wasteful competition among enterprising pioneers has now run its course and has worked out in a system of collusive management in behalf of these larger absentee owners who have acquired title to (virtually) all that is left. Whereby it has come about, as happens uniformly where an effectual monopoly control has taken over the output of one of the necessaries of life, that the competition which once used to run between the lumbermen producing for an open market now runs between this group of absentee owners and the underlying population. So the group of absentee owners of the remaining stand of timber make the terms under due cover of law, which the underlying population will have to take, de facto, but which they can leave, de jure.
6: Such a course falls in with the temper of a Business Administration, at the same time that it is wholly consonant with that popular sentiment that is animated with business principles. Any sound business concern is capitalised on that rate of net gain which it has been found that the traffic will bear; and in effect it is held, in law and custom, that any reputably large business concern duly capitalised on this basis, and of some years’ standing, is duly entitled, has a vested right, to a net income in perpetuity answering to this capitalisation so arrived at. Therefore, when earnings fall off—due, perhaps, to businesslike incapacity—it should be the part of economy and clean management to cut out meaningless intermediate steps in the process of getting these legitimate gains out of the underlying populaion, by making the suitable rate of net gains for this business a fixed overhead charge upon the underlying population in the shape of a tax. There is no use of having taxpayers if they are not to be made use of in such an emergency.
7: This is by no means intended to say that this running sabotage on production and output constitutes the whole duty of the corporate management which takes care of the interests of the absentee owners of these natural resources. There are also always the many and various cares of corporation finance, and there is the running administrative routine of “hiring and firing” the working personnel with a view to lower costs, and this duty is forever complicated with “labo troubles” that arise out of refractory human nature. But sabotage, in that inoffensive sense in which the word is used here, remains after all the first and unremitting duty incumbent on these executives, in so far as their business is conducted on the sound principles of net gain in terms of price, as is commonly the case. And this sabotage, graduated un-employment, and parsimonious hiring and firing, entails “labor troubles,” in the nature of things. On this head the situation in coal since the Armistice is typical rather than exceptional. So also in steel. So persistent, or rather chronic, have been the labor troubles in these industries during these years while the necessary sabotage on production has run high, that the management have found it necessary to call in the help of many “under-cover-men” and armed guards as well as the armed forces at the disposal of the local and state authorities. The authorities so called in have even found it necessary transiently to resort to “martial law.” The salutary modicum of sabotage on production is no light care.—Cf., e.g., Public Opinion and the Steel Strike, ch. i; also Report on the Steel Strike of 1919, especially ch. vii.
8: Cf. Joseph E. Pogue, Economics of Petroleum, ch. i.
9: Cf. Pogue, Economics of Petroleum, chapters i, ii, iv and xv.
10: Any detail map of such an oil-field will show this duplication of wells as one of its striking features. Wherever four leaseholds meet, e.g., one expects to find four (or more) competing wells, sunk in all haste, crowded into the four corners as near as the dimensions of the machinery or of the law will permit, in a race to encroach on one another’s oil-contents and draw off the oil which one well would handle with less waste. Such duplication of wells is also enforceable at law, as certain recent court-decisions have established. A leaseholder who fails to crowd in quickly into a competing corner of his leasehold is liable to damages at the suit of the lessor.
Of., e. g., C. G. Gilbert and J. E. Pogue, Petroleum—A Resource Interpretation (Bulletin 102, part 6, U. S. National Museum, 1918,) ; see also J. E. Pogue, Economics of Petroleum (New York, 1921), pp. 31-46, and map on p. 33.