Chapter V: The Eventual Failure of the Capitalist System

How long did it last, this initial success of the reign of capitalism?

It is, of course, impossible to assign to any one year the date at which capitalism, in all its manifold developments in agriculture, in mining, in manufacture, in finance and transport and trading at home and abroad, changed, in any particular country, from being a national advantage, to being, on balance, a national drawback. Moreover, there is a relative as well as an absolute efficiency; and it is of little use estimating the absolute efficacy of profit-making as a method of stimulating and remunerating industry before alternatives became available. Roughly, it was not until the middle of the nineteenth century that the more penetrating observers began to urge that the dictatorship of the capitalist had not only hopeless limitations in wealth production, but was actually producing a great deal that was the very reverse of wealth. From about that time onward, as is now evident, profit-making became increasingly subject to malignant growths and perverted metabolisms, which created their own poisons and lessened the advantages of the system itself. It is only within the past half-century that alternative methods of organizing industry, demonstrably superior in the equitable distribution and efficient consumption of wealth, and, as we should claim, all things considered equal, if not superior, in the production of wealth, have been discovered and applied.

The Adverse Developments of Capitalism

This failure of modern business enterprise can be traced to certain inherent defects in the motive of profit-making, and to certain inevitable developments in the profession of the profit-maker. We shall leave out of consideration such obvious anomalies as the interests created by capitalism in destruction by accident, catastrophe, and the utmost acceleration of wear and tear in all commodities. From the interest of the glazier in the hailstorm to the interest of the wayside garage in accidents to motor cars and of the huge railway wagon repairing industry in the most destructive and wasteful methods of transport, there are more examples to hand than we have room to describe, or even enumerate, of the fact that under capitalism it is impossible to create an interest in production that is not also an interest in decay and destruction. We therefore propose to describe this failure under the following heads only. The profit-maker is, by the nature of the case, led to damage and destroy, not only the most valuable of the instruments of production, but also some of those that are irreplaceable; he tends to adulterate (or to produce inferior substitutes for) necessary commodities; he often employs his own and other people's labor in producing commodities and services of no social value—sometimes, indeed, ruinously pernicious; and he is found eager to use his own and other people's capital and credit in ways productive of profit to himself, but of nothing else. Even in the early competitive stage of capitalism the simple fact that when the community wanted one pair of new boots a hundred boot manufacturers made a pair in the hope of catching that single customer caused industry to proceed in a series of gluts and depressions which were demoralizing personally and disastrous financially. Crises were as much a matter of course as cholera epidemics. But now that we have survived this phase, the perpetual pressure for increased output and larger transactions leads to periodical depressions in the markets of the world, which may even become chronic, with a consequent hypertrophy of the organization for sale as compared with the organization for production, so that, as is currently said, "it costs more to sell an article than it does to make it." Although within each country the principle of free competition among capitalist profit-makers, which was assumed to guarantee to the consumer the lowest price and the best quality, is superseded, in industry after industry, by combinations among capitalists to secure monopoly prices and to compel consumers to accept articles standardized in the interests of the profit-maker, the separate industries and combinations of industries, freed as they are from internal competition, are still driven fatalistically to compete with one another for the fresh capital that never ceases accumulating, and, when they get it, to launch into increased production to employ it and earn dividends on it, without regard to the demand for its products, which they accordingly must excite by all the arts of advertisement and commercial traveling, and all the political intrigues of the hunt for foreign markets, sometimes poetically called "places in the sun." Thus the desire to hold old markets and the greed to acquire new ones on the part of the capitalist manufacturer, trader and financier in each of the great European states, reveals itself as the fundamental cause of the catastrophic world war of 1914-18, with its twenty millions of dead, and its unexampled devastation of territory and destruction of wealth. Finally, the growing hatred of the capitalist dictatorship, and the increasing anger of the proletariat at the permanent inequality in income and personal freedom which the capitalist system entails, is culminating in a suicidal class war within each of the great industrial states.

The Damage and Destruction of the Instruments of Production by Capitalist Profit-Makers.

The first discoverer of this evil was the founder of British socialism (Robert Owen), who insisted, at the very beginning of the nineteenth century, that the capitalist system is ruinous in its effects on the instruments of wealth production with which it works. Owen, himself a capitalist, was the first of his class to understand that his instruments of production were, as Bismarck said of the instruments of diplomacy, blood and iron, and that, as another famous German had pointed out, "blood is a quite peculiar juice." Let us work out his thesis.

All instruments of production except living ones wear out by use; and, the faster they produce, the sooner they are worn out. The capitalist employer has therefore to solve two problems as to his tools and machines. First, how much shall he allow in his yearly balance sheet for their depreciation by wear and tear? Second, as the wearing out of a machine may be described as working it to death, and as the length of time occupied by the process varies with the speed at which it is driven, what length of life can he most profitably allot to it? The initial factor in the calculation is the cost of the machine. A savage, whose hammer is a stone and whose lever a stick, costing him only the trouble of picking them up, need not consider whether they will last him ten minutes or ten years: there are plenty more where they came from; so he may be as careless and destructive as he likes as far as they are concerned. But if he uses an implement which takes him a day to make, and wears it out or breaks it in half a day, he will be bankrupt and destitute before the end of the week. In the same way, if an employer pays £5000 for a machine, and wears it out before it has produced £300 worth of goods or services, the machine will ruin him instead of enriching him. On the other hand, if the machine is used so sparingly that it becomes obsolete before it has paid for its cost, or produces so slowly that the loss of time costs more than the wear and tear of working it harder, it will pay the employer to speed it up. It may be a delicate matter to ascertain the precise point at which the profit is greatest; but the delicacy is not sentimental: the feelings of the machine may be left out of account because it has none; and the interest of the community may be left out of account because it does not clash with that of the producer. And about scrapping the machine the moment a better one can be procured there is no compunction whatever.

But if the instrument of production is not a machine, but a living organism, the problem becomes sentimentally complicated at once. If the savage, instead of spending a day to make an implement, has to spend ten days catching a wild horse and breaking it in, and he proceeds to overwork, ill-treat, and starve that horse to death before it has repaid the ten days' work with something to boot, then clearly he will share the horse's fate presently. Like the employer with the machine he has to ascertain how long he should let the horse live in order to get the utmost profit out of him. A slave-owner has to make the same calculation as to his slaves. Such calculations are made quite cold-bloodedly as a matter of capitalistic business. Before slavery was abolished in the southern States of North America it had become accepted on certain plantations that the most profitable system was to wear out the negroes in eight years. Before horse traction had given way to electric traction for tramways in London, it was calculated that the greatest profit was made by using up the horses in four years.

Obviously the substitution of hired white labor for enslaved black labor, or the substitution of hired horses for owned horses by the tramway company, does not change the nature of the calculation. When the Lancashire factory owners were reproached with using up nine generations of men in one generation, their reply, when they were imprudent enough to reply frankly, was that the calculation worked out that way whether they liked it or not, and that business is business.

Such calculations are not admissible in the interest of the community. In spite of the political power of the employers, Parliament was forced by the atrocity of the results to intervene with Factory Acts, the beneficent effect of which, not only on the factory employees, but on the employers' profits, proved that the calculation had been not only inhuman but so ignorantly and inaccurately made that the employers had been led by it into killing the goose that laid the golden eggs. Nevertheless, the corrected calculation is as irreconcilable finally with human welfare as the inaccurate one. It is not possible to prove that a quite unrestrained and unscrupulous sacrifice of humane considerations to the single aim of attaining the maximum profit for each particular employer may not at any moment in any industry lead to higher dividends than those attained under the Factory Acts.

There is an economic as well as a vital difference between the mechanical and human instruments of production employed in capitalism. The capitalist has to pay the whole cost of the machine and even more, whilst the human instrument, though much more costly to produce, can be had for nothing. His mother's pains and risks and housekeeping, his father's labor, his education at the cost of the ratepayers, the common resources placed at his disposal by municipal and national Communism, the wastage of human life which goes with the successful survival of each able-bodied worker; all these are the prime cost of the man before he presents himself at the factory gate begging for a job; but the employer acquires him as an instrument of production for nothing, his only expense being the bare cost of maintaining his power of working from week to week by food, clothing and lodging, precisely as if he were acquiring a steam engine for nothing, and supplying it with oil and fuel at its own expense. If, by abusing this gratuitous living instrument of production by over-driving or underfeeding, he damages it, or uses it up so fast that it is "too old at forty," all he has to do is to throw it back into the street on to the hands of the ratepayer, and pick up a new human instrument on the same terms.

Against so outrageous an incentive to abuse and deterioration of the national human stock an individual may stand out here and there either by a self-impoverishing refusal to engage in business at all, or by a personal generosity supported by exceptional organizing powers in certain special departments of business; but capitalist employers as a class cannot stand out against it. Under its pressure we have not only what is called a submerged tenth of the population, but eight tenths who can barely keep their heads above very dirty water, the remaining tenth having to spend the resultant profits mostly in keeping out the sea of misery which surrounds them. It makes wholesale degradation of the nation inevitable, because four out of every five of its adult heads of families have no other means of livelihood than to sell themselves as instruments of production, and those to whom they sell themselves have no uncommercial interest in them, and no public responsibility for them. That such a system should endure as the basis of a high civilization is inconceivable. Just think of it. The colliery owner has to buy another pony for the one he kills in the mine, or do without it. He has not to buy another boy for the one that gets killed with the pony. The very next morning his agent finds at the gate another boy, or perhaps many other boys, standing, ready-made, to be taken on for weekly subsistence in the place of the one who has been killed. That is why the typical entrepreneur in all capitalist countries has remained so indifferent to the disease and death rate among the "hands" that he employs as, in the first instance, intuitively to oppose every measure introduced for their protection. But accidents are the least of the evils. We need not again recite the tragic story of abject poverty, brutal demoralization and premature death wrought among millions of families by the unrestrained capitalism of the first half of the nineteenth century, through underpayment and overwork, through the formation of stagnant pools of casual labor and the creation of recurrent periods of unemployment without wages. And let us not flatter ourselves that this is merely an incident of the past. The evils of low wages, long hours and insanitary conditions still drag on in every industry in which the dictatorship of the capitalist has not been limited by the authority of the law or the rival command of the trade union; whilst the slow starvation due to under-employment or unemployment is still only mitigated by costly and demoralizing doles at the public expense. This damage and destruction of the human instrument of production cannot be regarded as a mere perversion of the capitalist system. It is now seen to be an inevitable incident of the profit-making process itself. Indeed, in the final analysis it is obligatory on the individual profit-maker by the nature of his being; for unless in exploitation he keeps up with the most ruthless of his competitors, the very profit by which he lives, dependent as it is on the margin between cost and selling price, eventually disappears. By the end of the third quarter of the nineteenth century, this side of the failure of capitalism had become recognized by candid students all over the world.

A later discovery was the ruin which capitalism brought on those common resources which were not reduced to private ownership, such as the air which the profit-maker's industry contaminates with smoke and noxious fumes; the running streams which it pollutes; the thoroughfares and waste spaces which it befouls. Any respect for these common requisites of healthy existence is an impediment to individual profit-making, and hence under its dictatorship cannot be maintained. Who can measure the diminution in health, in happiness, in morality and in intelligence—all factors in human productivity—caused through the profit-maker by the defilement of air, water and land, and the destruction of all amenity and beauty in the surroundings of countless millions of his fellow-citizens?

The Ruin of Natural Resources

Nor is it man and man's environment alone that the profit-maker destroys: it is not only the older civilizations that he contaminates. In pursuit of the limitless natural wealth of new and slightly peopled lands the profit-maker proceeds with his destructive process from continent to continent. Natural resources are abundant and cheap: in many places they are cost-less. Hence fur-bearing and food animals are killed, in season and out of season, to the point of extermination of the species; primeval forests are leveled to the ground; natural pastures are denuded; virgin soils are defertilized; coal and metals, oils and gases—all reserves of potential power—are wasted and exhausted; the rivers are dried up, and the very climate is impaired. No one will accuse the government of the United States of being anti-capitalist, or of having any theoretical prejudice against the process of profit-making. But no Bolshevik agitator could denounce the devastation and destruction of the natural resources of the American continent, in more unmeasured terms than President Roosevelt and the governors of the separate states have done. "I have asked you," gravely stated President Roosevelt to the conference of governors in 1908, "to come together now, because the enormous consumption of these resources, and the threat of imminent exhaustion of some of them, due to reckless and wasteful use, once more calls for common effort, common action. It is equally clear that these resources are the final basis of national power and perpetuity. Finally, it is ominously evident that these resources are in the course of rapid exhaustion."¹ "To-day as you ride through the South," asserted Mr. J. J. Hill, one of the greatest of America's industrial magnates, "you see everywhere land gullied by torrential rains, red and yellow clay banks exposed where once were fertile fields, and agriculture reduced, because its main support has been washed away. Millions of acres, in places to the extent of one-tenth of the entire arable area, have been so injured that no care can restore them."² "There is no doubt," declared President James of the University of Illinois, "that we have in many directions wasted our patrimony. In our haste to get rich we have overreached ourselves and undermined the very basis on which a permanent national industry and a permanent national life must rest."³ "Prodigious waste has accompanied our use of the forest," report the government experts. "The chief causes are fire, wasteful methods of logging and turpentining, waste in the mill, and waste in the use of wood."⁴ A similar tale of destruction is told about the mineral products: "the percentage of coal left in the ground beyond recovery," an American expert told the conference of governors, "varies from 40 to 70 percent in the different fields, to say nothing of the wasteful and extravagant use of the portion extracted; while the waste of natural gas, the most precious fuel of all, is so vast that no one can even approximate the percentage. The forces of greed and selfishness are so entrenched behind corporate power and influence that to attack them may often appear to you useless as the labors of Sisyphus; but as you love your states and country, I adjure you to take up this fight for the conservation of our fuel resources with the determination never to surrender until the forces of greed and avarice which are so rapidly sapping the very foundations of our country's greatness capitulate, and agree to end the wild riot of destruction that has characterized the past."⁵ The capitalist in Canada is no better than the capitalist in the United States. "At Calgary just before the war," we are told, "they discovered petroleum in an indifferent quantity at a single well. Within forty-eight hours land in the neighborhood was changing hands at between £10,000 and £12,000 an acre, and companies had been floated with a capital of £12,000,000; concessions were being granted and leases signed at machine-gun speed; and even if a true oil-field had been revealed it would have been quickly drained and devastated by a mob of promiscuous, unregulated, competitive drillers."⁶ Once more we must emphasize the fact that the cause of all this devastation and destruction is not the malice of man, even of capitalist man, but the inevitable result of profit-making enterprise. "Before the older states," summed up one of the governors, "realized the value of their forests, their waterways, their mines and minerals, they had allowed all to slip from their hands and into private ownership. The same thing is now going on in the younger states; and soon there will be left nothing to conserve of what we received from our forefathers as a magnificent heritage."⁷ "The pecuniary demands of those directly interested and occupied in such industry," explained a contemporary economist, "be they promoters, capitalists or settlers, are usually immediate; and the rewards of their enterprise must be had in quick profits. Their economic interests are, for the time, confined to present values."⁸ With future values, the rightful inheritance of future generations, the capitalist is naturally wholly unconcerned. In all that relates to the interests of future generations, "the making of profit" not only does not decide "whether labor has been wisely applied or material rightly used," but it actually inclines the mind of the director of enterprise to use labor for the destruction of the material necessary for future production.

We have next to notice the progressive deterioration in the quality of commodities brought about by the apotheosis of profit-making as the sole and sufficient method of organizing industry. It used to be axiomatic that capitalist competition led to improvements in production. What we now see, however, is that it leads no less certainly to deterioration in the products. When the sole measure of efficiency, and the only test of success, is the making of profit, the motto of the dictatorship of the capitalist is non olet. Whatever yields profit is good; and the larger the profit the greater the assumed advantage to the community. If the stimulus of gain has led to discoveries and inventions, by which the wealth of the nation has been largely increased, we see the same stimulus positively worsening the quality of the output.

The Worsening of Commodities

Adulteration, substitution, and all forms of short weight and false measure, tend to be regarded—to use John Bright's classic phrase, as merely "methods of competition."⁹ It was not until the middle of the nineteenth century that the public became aware of this form of competition; and it was the microscope that brought it to light. "Until the microscope was brought to bear upon the subject," we are told in the First Report of the Select Committee on Adulteration of Food, "no means existed whereby the great majority of adulterations could be discovered, and the parties producing them little dreamt that an instrument existed capable of bringing to light even these secret and guilty proceedings. Adulteration was then practiced in security, and with comparative immunity; now this feeling of security has been destroyed, and the adulterator knows that at any time he is liable to discovery." The leading medical witness demonstrated to the ordinary citizen the baneful effects of the much admired principle of free competition. "It may so happen, and it doubtless does sometimes occur, that the same person, in the course of a single day, receives into his stomach some eight or ten of the articles which I have enumerated. Thus, with the potted meats and fish, anchovies, red sauces, or cayenne taken at breakfast, he would consume more or less bole Armenian, Venetian red, red lead, or even bisulphuret of mercury or cinnabar. At dinner, with his curry or cayenne, he would run the chances of a second dose of lead or mercury; with the pickles, bottled fruits, or vegetables, he would be nearly sure to have copper administered to him; while if he partook of bon-bons at dessert, there is no telling what number of poisonous pigments he might consume. Again, at his tea, if mixed or green, he would certainly not escape without the administration of at least a little Prussian blue, and it might be much worse things. Lastly, if he was a snuff taker, he would be pretty sure to be putting up his nostrils, from time to time, small quantities of either some ferruginous earths, chromate of potash, chromate of lead, or red lead. If an invalid, his condition would be still worse; for then, in all probability, he would be deprived of much of the benefit of the skill of his physician, through the dilution and sophistication to which the remedies administered for his relief were subjected. This, I would remark, is no fanciful or exaggerated picture, but one based upon the legitimate conclusions derived from the analysis of different articles as sold to the consumer."¹⁰ From this first inquiry in 1855 down to the present day, we watch, in all capitalist countries, a rising tide of indignation against the complicated systems of adulteration and substitution practiced by the profit-maker, with a continually elaborated code of law for the purpose of detection and restraint. If the microscope enabled the public analyst to discover adulterations, the progress of chemistry has enabled the profit-maker to use science to dodge the microscope. "The detection of adulteration," states a medical officer in 1915, "is becoming more and more difficult, and is due, in the first place, to the astuteness of the vendors of the adulterated articles, and, in the second, to the more highly scientific means now practiced. It has been pointed out in previous reports that the vendors of milk 'tone' it, or, in plain English, adulterate it with separated milk; but they take great care that they do not 'tone' it below the standard set up by the Board of Agriculture. The addition of separated milk to new milk has become almost a fine art with some milk purveyors; and, although they are known to receive large quantities of separated milk, which they do not sell, yet they mix it so skillfully that it is impossible to bring them within the four corners of the law."¹¹ "The chief difficulty is with meat, the signs of disease in which are difficult for the ordinary person to detect: they are frequently very easily removed; and as a last resort the sausage machine, spices, and a final attractive dressing as potted meat, pastes, sausages, or other delicacies, puts an effective disguise upon food which may be totally unfit for the purpose. The only place and time at which meat can be efficiently inspected is at the slaughter-house, just after slaughter, before any of the offal has been removed. . . The circumstances at Grimsby are quite typical of provincial towns; 'there are fifty-four annually licensed slaughter-houses scattered all over the town; and slaughtering may be in progress at all of them simultaneously at any hour of the day or night, Sunday included.' From the point of view of those whose care is for the wholesomeness of the meat supply, these facts constitute the justification for local public abattoirs and the abolition of private slaughter-houses."¹² The demand, in short, is for the supersession of capitalist by municipal enterprise.

The elaborate regulations which all civilized countries have had to adopt for the detection and punishment of the profit-maker in his tricks and counter-tricks in worsening production, have been, in the main, restricted to foodstuffs and drugs. It has become recognized that this form of adulteration "means the gradual poisoning of a people, the lowering of the physique of a whole nation, the stunting of our growth, the rapid deterioration of our constitution; while morally it means a daily and constant fraud practiced by the seller on the buyer: a cheating which, begun with the smallest trifle, soon makes us so callous that it is applied with equally comfortable conscience to things car of greater importance."¹³

The same process of worsening production is seen at work in all sorts and kinds of commodities and services: in the over-sizing of cotton cloth; in the manufacture of rickety furniture and of shoddy woolens for slop clothing; and in the "jerry-building" of the homes of all but the richest persons. Indeed, much of the odium which has been attached to machine production as compared with the more costly handicraft is due to the ease with which the former can be made to simulate soundness in commodities which have lost the largest part of their value in use. There is no reason why the machine-made chair or window-frame, or the machine-made dress material or boot, should be less durable, or even less artistically designed, than the analogous hand-made commodity. But division of labor and machine production, carried on by capitalist profit-makers for immediate gain, lends itself to, and in the end requires all kinds of petty deceptions, many of which, like the "soaping together" of separate parts in slop clothing, are actually performed by hand. Here again the capitalist is aiming only at short-term success, and will often supply to the new markets which he has acquired by the most expensive machinery for selling, commodities which will be quickly "found out" as essentially uneconomical—occasionally even "not up to sample"—so that all his compatriots in the business, and even his own firm, will in a few years' time lose the market to the traders of some other nation, who begin by supplying a better article, but, because they too are seeking only profit, end by descending as low as the first.

This constant shifting of particular export trades from nation to nation is one of the factors in the new desire of the traders in each country for the use of political influence to "secure" their markets. Profit-making enterprise, we are told by an American critic, "is in the hands of men who are single-minded in their competitive conduct of affairs. They neither are inclined, nor will business competition permit them, to neglect or overlook any expedient that may further their own advantage or hinder the advantage of their rivals."¹⁴

The Supply of Pernicious Commodities and Services

To the capitalist profit-maker positive evil may be a good. The stimulus of profit-making works as potently in building up the vast industry of supplying futile or deleterious patent medicines, medicated wines, and proprietory cures for cancer, consumption, venereal disease, gout or rheumatism, not to mention abortifacients for the prevention of child-birth, as in that of feeding the hungry and clothing the naked. "The rate of profit in this business [quack remedies]," we are told, "remains high because many decent people do not choose to embark on it. . . A man will buy only two or three boxes of pills, which can and do really cure him of an ailment, but he will continue to buy for years those remedies which never do him any good. This is quite a usual practice."¹⁵ It is calculated that, in this business alone, over three million pounds a year is extracted from the public in return for an expenditure of two millions on puffing advertisements—an expenditure which effectually silences the press with regard to this iniquitous trade. A mere fraction of the sum collected from the consumers—possibly £100,000—is cost of production, the remainder of the £3,000,000 being a "profit on price" which builds up great private fortunes.¹⁶ The profitable industry of Tono Bungay is rivaled by that in which Mrs. Warren was engaged. In all the great capitals of the world millions of pounds are invested some contributed by quite innocent rentiers—in dwelling-houses, tea shops, massage establishments, concert rooms, dancing halls, and other convenient covers for the profitable business of first decoying, and then interning girls and boys for the purpose of sexual vice. With this the economist must rank the promotion and organization of gambling in all its forms. Private gambling may or may not be a desirable pleasure. But the deliberate stimulation and exploitation of the gambling instinct in men, women and young persons, for the purposes of private gain—an industry employing vast capitals—can hardly be accepted as a legitimate utilization of the nation's capital, brain and labor. Another instance is the "service" of lending money at hundreds per cent to minors and to temporarily distressed landlords or incompetent business men, or to foolish clerks who have overspent their salaries.¹⁷ Finally, we have to note the fact that, as "civilization" advances, more and more of the land, machinery and labor of advanced industrial nations—more and more of the vaunted business ability that the all-powerful stimulus evokes—are diverted, first to the incitement, and then to the satisfaction of the world's "effective demand" for alcoholic drink of various grades of harmfulness—not to say for the production of, and the secret traffic in opium, cocaine and other deleterious drugs—which now account for so large a proportion of the fortunes on which families are founded and country houses maintained. Is it suggested that if the savings of each year were deliberately allocated to the extension and development of those branches of production which seemed most to need increasing—if these savings were administered by the democratically organized coöperative movement, by municipal enterprise, or through nationalized industries under the authority of Parliament, we should find anything like so large a proportion of the national dividend being used for these invidious, if not actually pernicious, purposes?

Gain Without Production

It is one of the ironic incidents in the enterprise of the private owner or organizer of the instruments of production that the accumulated capital of the nation can be used for securing large profits on price without producing any services or commodities whatsoever, whether useful or deleterious. "The capitalist undertaker of old," we are told by the German exponent of modern capitalism, "bore a technical impress. The modern undertaker is quite colorless." He may decide to use the credit and capital which he owns or controls in the manufacture of commodities or services, or he may find it more profitable to use it in manufacturing "securities" which represent no assets at all, but merely extravagant expenditure in advertising and booming what exists only on paper. "Henceforth, stocks and shares come into being, not because of the needs of those who require money, and depend on credit, but quite independently, as a form of capitalistic enterprise."¹⁸ The promotion of "wild-cat" companies is in fact as perennial and as unfailing a source of profit as the toilsome organization of useful enterprises. "This class of fraud," solemnly explained our greatest Lord Chief Justice in 1898, at the reception at the Law Courts of the Lord Mayor of London, "is rampant in this community—fraud of a most dangerous kind, widespread in its operation—touching all classes, involving great pecuniary loss to the community—loss largely borne by those who are least able to bear it. And even, much more important than this, fraud which is working insidiously to undermine and corrupt that high sense of public morality which it ought to be the common object of all interested in the good of the community to maintain—fraud blunting the sharp edge of honor and besmirching honorable names."¹⁹ "There was one case," continued the Lord Chief Justice, "in which a property was sold, or at least purported by the vendor to be sold—a property on the West Coast of Africa—for the sum of £48,000, when there was no property in existence at all. But an agent was sent out after this fictitious sale had been effected, whose report recorded the purchase of a property for the sum of £140 from a native chief, which the agent thought would nearly answer the description given of the fictitious property described in the prospectus. In another case a business, having been bought a few weeks before the formation of a company for a sum of £637, was sold to the public, who subscribed something like £76,650. These are the grosser cases. Another mode of fraud which is practiced—I am speaking from my experience in Courts of Justice—is this: going to allotment on insufficient capital. The public did not subscribe as was hoped, and there was but a small amount of money from them. What, then, is to be done? An honest, independent, distinterested board of directors, who knew their business, would say that it was impossible to go to allotment upon such a subscription. But they are not their own masters; they are, in the cases which I have been supposing, creatures of the promoter, who pays them; they are not in a position to form an independent judgment. What is the result? The promoter gets hold of what money there is; and to carry on the company's miserable weak existence the directors issue debentures which are largely unregistered, and of which the creditors have no notice. They get an apparent amount of business carried on by the company; tradesmen and merchants deal with them; and, when the crash comes, down come the debenture-holders and sweep away their stock—every stick that belongs to the company—and the creditors are left without remedy."

A more subtle form of gainful enterprise is over-capitalization. "A concern which is honestly worth £100,000," we are told by the Lord Chief Justice, "and which upon that capital value might well pay a decent return for investment, becomes an imposition if inflated to satisfy the greed of the middleman and promoter to cover extravagant advertising charges, extravagant fees for expert reports, gifts in money or in shares to procure directors, aye, and even to procure the introduction of directors. By these means it is offered to the public at an inflated price—at two or three times its actual value. Need I say that in such cases loss and failure are certain, and the public are called upon to pay fees for the deception which has been practiced upon them?" Even if it could be said that the boards of directors brought actual knowledge of business or strength of government to the concern it might at least mitigate the evil. But it is notorious that in too many cases they bring neither one nor the other—neither knowledge nor strength—that they are chosen because it is supposed that their names or their titles might be attractive to the public.²⁰ Indeed, it has been discovered that business failures, with all the depreciation and loss of capital that they cause, and the tragedies of bankruptcy, unemployment,²¹ and family ruin that they involve, may be, for whole classes of capitalists, from the firms who make a business of supplying the perpetual crowd of venturous dupes who start little retail shops, up to the promoters and furnishers of mammoth hotels owned by companies destined to early "reconstruction," are as profitable as the laborious foundation of a flourishing new industry. We are never allowed to forget the "losses" incurred by the London County Council in organizing its own works department (to defend itself against a "ring" of contractors), and in taking up an enterprise in which private capitalism had failed miserably, namely, running a steamboat service on the Thames (to the health and enjoyment of many thousands of passengers); whereas nothing is heard, under "private enterprise," of the deliberate and continued abstraction from useful service of all the enormous amount of capital, ability, and labor that is being used, in the ways mentioned above, for socially unprofitable profit-making.

The Hypertrophy of Selling Agencies

One of the most significant, and assuredly the least foreseen and least recognized, of the results of the profit-making impulse is the excessive development which it has brought about in the machinery of selling for selling's sake as distinguished from that of the production and legitimate distribution of commodities. The hypertrophy of mere trading and financing as sources of profit; the growth of tier after tier of parasitic middlemen; the expenditure, not only in one but in all highly organized capitalist states, of hundreds of millions of pounds a year in competitive and mostly mendacious advertising,²² has already gone so far as to cause it to be said that it often costs more to sell an article, after it has been produced, than the manufacture of all its materials and all its component parts has required from end to end of the process, from plantation or mine to loading the finished product "free on rail" at the factory siding. It is scarcely an exaggeration to say that the dictatorship of the capitalist, under the stimulus of private profit, has brought us to this pass, that in the Britain of to-day a quarter—possibly even a half—of all the land, machinery, labor, and business ability of the nation is taken up merely in the profitable industry of putting into the hands of ourselves as consumers the commodities that we, as producers, have created.

It may be asked, Why not? It is not on the surface surprising that distribution should cost more than the more concentrated process of production. An obvious example is the water supply, in which the production costs nothing and the distribution is enormously expensive. Any one who has witnessed the production of pins and steel pens by machinery or even of the cloth-bound sevenpenny book, will have no difficulty in believing that the conveyance of the finished article from the machine to the consumer is a far more lengthy and laborious task than its production from the raw material. Again as the product might as well not exist if its existence and uses are not brought to the knowledge of the consumer, advertisement has a legitimate function in national industry.

But the process of distribution developed by the profiteering system might more fitly be described as an elaborate system of interception and blackmail. The open road from the producer to the consumer becomes obstructed by a series of piratical turnpikes set up by persons who have neither made the road nor mended it, but predatorily squatted on a portion of it and set up a trade in wayleaves. Perhaps a more exact illustration would be a canal on which a number of unnecessary locks had been imposed, alternately raising and lowering the barges until they were finally delivered at the level at which they started and which they need never have left. And the profiteering advertisement gives information only as an incident of misrepresentation and seduction. For example, when the citizen has become possessed of an instrument, such as a sewing-machine or typewriter or motor car or what not, capable of doing him efficient service for ten years, extraordinary efforts are made by means of advertisement to induce him to purchase a new model every year; and changes are made—for better, for worse—in the instrument to persuade him that it has been improved, the change being as often as not either a matter of indifference or a positive disablement. It is the mass of "dead wood" or of actively cancerous tissue thus carried by the departments of distribution and publicity developed by the pursuit of profit that makes those departments so costly and so mischievous, and accounts for that hypertrophy of the selling part of the system of which we have given such unequivocal examples.

The cause of this hypertrophy is the perpetual anxiety of manufacturers and wholesale traders to obtain profit on an output which they are forced to increase continually without regard to demand. In the initial stages of capitalism, more particularly in the period when Great Britain had almost a monopoly of the machine process and the use of power, the output of commodities habitually failed to exhaust the effective demand of home and foreign markets. The world was still hungry for commodities. When Europe became satiated, eager merchants "had some pleasant years chasing the remaining hunger of the world and its attendant security of profit for themselves into odd corners of the East." So long as selling was a straight-forward process, conducted by merchants whose main business was actually to transport commodities to places in which there was an effective demand for them at a higher price—literally to buy in the cheapest in order to sell in the dearest market—the axiom of the old economists that prices, in the long run, oscillated closely about the cost of production under the worst conditions worth facing at all, including the cost of transport, had some sort of meaning, the point being that any increased efficiency in the processes of manufacture, or any increased facility in the transport of commodities from the place of manufacture to the place of consumption, was followed by a decrease in the price to the consumer.

How "Over-Production" Occurs

But with the extension of manufacturing enterprise on a large scale to all civilized countries this connection between increased efficiency and low price came to an end. Profit-making manufacturers and merchants, in their pursuit of increased profits through ever-increasing transactions, over-reached themselves. They produced in all the markets of the world temporary gluts of commodities, which they had either to retain at great cost or sell at a loss. "And here we come to the edge of the great problem of our gigantic industrial system," we are told by the acutest observer of this general over-development of the selling organization. "If we open the sluices of modern productive resources, developed under the factory system in the last seventy years, goods pour out at an amazingly cheap and ever cheaper rate, and the market is flooded beyond any possibility of commercial remuneration. The analogy is eminently appropriate without any laboring. No barriers of price could withstand the outflow; and the resulting inundation would mean the waste of the product and the probable destruction of the means of supply. Modern industry, therefore, besides the necessity of lowering the cost of production by a great expenditure of capital, has had to devote an even greater aggregate capital to a machinery for marketing the goods." "The productive power of modern industry is so tremendous," explains Mr. Dibblee, "that a comparatively small amount of capital laid down in some dozen suitable English, German, and American towns with a well-trained industrial population will be able to produce most kinds of goods capable of indefinite multiplication, sufficient for the whole world. But we are now talking of such large quantities, as without further mercantile organization could never be profitably absorbed." "It is not," he sums up, "production that is costly, but marketing. Since apparently the greater parts of the rewards of industry go to those members of our commercial organization who are engaged in the adjusting duties of selling, buying, and selling again, we have also to infer that there is some corresponding difficulty in these tasks which enables those engaged in them to gain their great rewards. It cannot be all chicanery and thievery."²³

How Capitalism Increases Cost

This conclusion, as thus baldly stated, is not entirely convincing. The fact that an operation requires genuine ability does not guarantee its honesty. The burglar may be more skillful than the locksmith. But it is sound in its essential contention, which is, that the business of selling more products than the consumers really need, and of discovering fresh reserves of consumers, is a more difficult one than the business of production, and also an entirely different one. It thus becomes a separate branch: an industry in itself. And because it absorbs and retains a special class of profiteering ability, withdrawing it from production, and from simple direct distribution, it finally creates a class of middlemen who, from being at first indispensable to the manufacturers for the disposal of their surplus products, soon become indispensable for the disposal of all products by setting up a financial and commercial machinery of distribution which the producers and shopkeepers do not understand and cannot work. Thus the middlemen become masters of the situation. They will not allow the producers and shopkeepers to compete and thus fix prices by the old higgling of the market. Their argument (until they are in a position to command) is, "That way lies ruin for us all." They fix prices themselves with an eye to their own profit, limited only by the point at which the consumers will go without rather than pay, and thus levying the highest toll on the most vital necessities. It is hardly half a century since the American economist, F. A. Walker, declared that the manufacturer as entrepreneur was supreme in the industrial situation. But the entrepreneur has lived to see his mastery pass to the financial middleman, who produces nothing, distributes nothing, but sells everything.

Thus arises the paradox, that the lower the cost of production of an article, including the cost of transport, the higher may be its price to the consumer, owing to the greater difficulty and expense of selling it. Or, in other words, increased competition means increased cost of selling, and this has to be added to the price charged to the consumer. The greater the competition, the higher becomes the retail price!

The Growth of Monopoly and the Negation of Individual Freedom of Enterprise

The more astute or powerful of the organizers of the means of production in the United States of America, Germany, and the United Kingdom were the first to discover the fallacy of free competition, and the disastrous results to the profession of profit-making of "letting each man get rich in his own way." When production had become "common form," and the markets had been all explored, this competition in cheapness, which was perpetually grinding, not merely the faces of the poor but also the margin of the capitalist, naturally failed to commend itself to the up-to-date business man as the short cut to riches. The powerful profession of profit-makers, in spite of their mutual distrust, could not fail to realize that combination would pay them better than the "cut-throat competition" which was always leading each of them to magnify his own output, and to seek to dispose of it by an indefinite lowering of price, or by raising the cost of selling. We need not dwell on the recurrent cycles of inflation and "over-production" that marked the British and American business world from 1825 to 1887; or upon the genesis, during the past half-century, of the "gentlemen's agreements," rings, associations, cartels, trusts, consolidations, and amalgamations by which, in Germany and the United Kingdom as in the United States, whole industries have passed into the control of little groups of capitalist monopolists. The most sensational examples of the inevitable tendency to consolidate the interests of all profit-making capitalists within a single trade or industry are to be found in the United States of America. Both American official reports and American fiction resound with the iniquitous doings, first of the American railway kings, and then of the great American trusts in oil, in meat, in copper, in steel and in innumerable other commodities. The growth of the German cartels, extolled by German economists as the last word of Teutonic capacity for organization, have been denounced by British business men who have been continually engaged, especially during the Great War, in imitating them! There is to-day, indeed, no hesitation among the captains of industry of any country in admitting the existence, and in justifying the working of these legalized conspiracies against free competition. "Prior to the formation of the Salt Union," stated its representative to the British Government Committee on Trusts, "there had been a period of very keen competition, with the result that most manufacturers were making little, if any, profit. Many were practically ruined."²⁴ "The cause of the formation of the association," stated the chairman of an important metal company to the same committee, "was the fact that this industry in Great Britain had been very unremunerative for many years, and had stood in danger of being crushed out of existence by foreign competition, and by too much competition among manufacturers at home; and it was realized that, if the industry was to be saved at all, the manufacturers would have to come together and form an association. By securing remunerative prices in the home market they could make a successful bid against foreign competition in the export trade. They had a fund, a fighting fund, for the special purpose of subsidizing members who found it necessary to sell at less than an economic price in order to cut out foreign competitors."²⁵ "Trade organizations have in the past," testified the chairman of the Sheet Makers Conference to the same tribunal, "in many cases, put restrictions upon output; they have realized that if more of an article is produced than can be sold, unprofitable prices must result. The problem we have to solve, therefore, is how to produce the maximum output and maintain profitable prices, and in my opinion the only way is to adopt the methods employed in the past with so much success by Germany. The trade organizations must become selling agencies. They then eliminate competition amongst themselves, in those markets where profitable prices can be obtained they get them, in other markets where competition from other countries is severe they must sell at the best prices obtainable—at a loss if necessary—and so the maximum amount of trade is done, and the burden of the unprofitable business is spread over the whole of the trade. In the past it has paid Germany handsomely to export a large part of her steel products at a loss. In the future it will pay this country to do the same." "In the modern industrial and commercial world," summed up the Secretary of the Committee on Trusts in his learned memorandum, "competition, which indeed never was wholly 'free,' is becoming less free with each passing year. In very many branches of trade and industry, business concerns whose inter-competition is conventionally supposed to maintain prices at a competitive level have, in fact, working arrangements of one kind or another which prevent competition. Again, in some branches of trade, amalgamations of erstwhile rival firms have taken place, with the result that in some cases so large a proportion of the whole trade is in the hands of one firm, or financially interwoven group of firms, that an effective monopoly is obtained."²⁶ Indeed, all the facts of modern industry prove conclusively that the competitive management of property invested in industrial enterprise, and its management in detail by individual owners, leads to hopeless inefficiency.²⁷

We need not ignore the industrial advantages of these successive concentrations, with their production of standardized articles on the most gigantic scale, and their progressive elimination of unnecessary costs. But in them, it is clear, the world loses a great deal of the individual initiative, the personal risk, and the freedom of enterprise with which the capitalist system started, and by which it achieved its greatest triumphs. What is more serious is that the consumer loses that security against excess of price over cost; that guarantee of variety and quality; and even that assurance of abundance which free competition was assumed to afford him.

The Drawbacks of Industrial Concentration

The progressive, though masked, usurpation of power by the capitalist becomes a dictatorship indeed, against which not the trade unionists alone, nor the socialists, but the whole world is in revolt. The first remedy to which American, Colonial, or British statesmen have turned has been the construction of complicated legal machinery, either for preventing trusts and combinations altogether, or for controlling their pernicious practices of restricting output and raising prices. But hitherto all attempts to police the capitalist monopoly have failed. In all capitalist countries rings, price associations, cartels, trusts, and amalgamations, some national and some international, extend from industry to industry, the aggregations of capital becoming ever larger, and their tentacles creeping upwards and downwards, monopolizing natural resources,²⁸ integrating manufacturing processes, controlling transport, and more and more dominating the markets of the world by their manipulation of prices and their regulation of output. "Competition is growing more and more feeble and ephemeral," summed up Professor Lester Ward: "combination is growing more and more powerful and permanent. . . The coöperative tendencies of the rule of mind which destroy competition can only be overcome by that higher form of cooperation which is able to stay the lower form and set the forces of nature free once more."²⁹

The Apotheosis of Industrial Concentration

Now it is beyond dispute that the Great War has resulted alike in Britain and the United States, France, and above all in Germany, in accelerating, even more than is yet commonly realized, the process of amalgamation, horizontal and vertical, of the separate capitalist enterprises within each industry or group of industries, for the express purpose of putting an end to free competition for both the home and the foreign market. Nor can the economist complain of this. For one of the administrative discoveries under the stress and strain of the struggle for national existence was the failure, the almost sensational failure, of competitive profit-making to attain the maximum productivity, either in quality or in quantity. In one industry after another, in all the various countries, it was found that the more effective the competition among rival profit-makers the less efficient and economical was the process of production regarded as an aggregate. Hence, in spite of the overwhelming bias of capitalist governments against interference with competitive profit-making, government departments were driven to compel the capitalists to stop competing one with another, and to combine in gigantic organizations or associations, so as to utilize all their undertakings in the manner found to be most effective in maximizing the total supply. That is to say, when the governing class in each nation became really concerned for output, the "Court of Profit," with its unorganized juries of consumers, was set on one side; and the "Court of Public Audit," served by new classes of costing experts, uninterested in private profit, was given jurisdiction over capitalist industry. On the cessation of hostilities, governments bent on maintaining the reign of capitalism precipitately abandoned their new discovery of control. But whilst the "Court of Public Audit" was abolished, the "Court of Profit" was not reestablished. As the economists have not failed to observe, " the habit of working together by standard methods for a common purpose has disclosed so many economies of business administration that, taken in conjunction with the obvious interest of price control in a period of grave financial and commercial insecurity, it has given a very important impetus to the pre-war tendency towards capitalist combinations. It is quite idle to suppose that the big combinations, especially in the metal and machinery trade, chemicals, and some branches of textiles and pottery, many trades supplementary to building, the railroad and shipping conferences, are likely to return to free competition."³⁰

The "Forced Alternative"

Thus the modern capitalist profit-makers, by eliminating the simple freedom of competition, have confronted the community with a forced alternative: either passively to submit to this capitalist dictatorship, now recognized and on the point of completion, or else establish without delay whatever social machinery may be required to enable the community to control the industries and services by which it lives. Either the trusts will own the nation or the nation must own the trusts. And this forced alternative is recognized even by clear-sighted Conservatives. "It would be very difficult to argue," writes Lord Hugh Cecil, "that it was more dangerous and mischievous to place all the means of production in the hands of the state itself than to have them monopolized by a number of private combinations. It is certainly true that the practical alternative before us is competition (at any rate among our own countrymen), or the control of the state, and that any effort to limit competition in the interests of any group of private persons, or anything less than the state, would be speedily judged to be intolerable."³¹

The Divorce of the Brain-Workers From the Instruments of Production

The industrial revolution which took place in Britain during the last decades of the eighteenth, and the first decades of the nineteenth century, and, in the course of that century, in the United States and the industrialized parts of Europe, divorced, as we commonly say, the manual workers from the ownership of the instruments of production. It was left to the growth of joint-stock enterprise in the nineteenth century and the merging of firms and companies in gigantic rings, trusts and amalgamations, the capital resources of each of which is counted in tens, and even in hundreds of millions of pounds sterling, to carry to an extreme the divorce of the brain-workers from the ownership of the instruments of production, and to reduce them also to the position of salaried employees. The past three-quarters of a century in Great Britain, the past half century in the United States, the last three or four decades in Germany and France, have witnessed a rapidly increasing separation of the great majority of the organizers and managers of industry from the ownership of the bulk of the material wealth embodied in the land and buildings, the minerals, the machinery and plant, and the means by which the product is transported.

This has come about by gradual stages, as a mere consequence of private ownership. In the management and direction of industry, the operation of the law of inheritance progressively interfered with the "selection of the fittest." Sons reared in luxurious homes, and, to say the least, not picked out for their profit-making ability, succeeded to their fathers ' businesses, which gradually ceased to be marked by those qualities of initiative, discovery and enterprise which had served as a justification for the dictatorship of the capitalist. And the businesses did not, as may once have been the case in the eighteenth century, usually go into bankruptcy.

What has proved more and more practicable is the introduction of the hired brain-worker. Generation after generation saw an increasing number of enterprises directed by salaried administrators, on whom their otiose proprietors relied. The development of joint-stock enterprise in banking and in the larger forms of transport, and presently also in mining, manufacturing and trading on a considerable scale, revealed the unexpected fact that salaried management, under the supervision of boards of directors who were themselves more and more divorced from the dominant ownership of the concern, and were in fact only paid professionals in directorship, was quite capable of maintaining in existence, with reasonable dividends to the shareholders, large, varied and widely ramifying businesses. In some directions, such as banking, joint-stock enterprise under salaried management has, in nearly all countries, actually beaten the individual capitalist entrepreneur out of the field. In Britain the growth of mining royalties, the decline of the squirarchy, and the great development of house property in towns, have led to the substitution, for the active agricultural landowners, of a class of rent-receivers taking no more part in the management of real estate than the dividend-receivers in the management of industry, the two forming the rentier class now representing private property in France and Germany no less than in the United Kingdom and the United States. In this way ownership of the instruments of wealth production has accordingly now passed—in Britain to the extent of probably one-half of the whole wealth—to a steadily increasing class of functionless share-holders and rent-receivers, men, women and children, numbering possibly not more than 2 per cent of the population, who take no part in industry and mostly do not even know whence their incomes are derived. The aggregate income of these persons, who unashamedly "live by owning," amounts, apparently, to something like a fifth or a fourth of the entire product of the advanced industrial community.

The Growth of the Professional Class

But the enormous growth of what John Stuart Mill called, three-quarters of a century ago, "the great social evil of an idle rich class," is not the most significant feature of the situation. Parallel with this development has been the growth, in all advanced industrial countries, of a still more numerous class of salaried brain-workers, of all grades, who, without the stimulus of profit-making, or any prospect of "making a fortune," beyond such modest provision for their old age and for their dependents as their saving may permit, are engaged, for the most part, all their lives, in different kinds of industrial and professional service. A tiny percentage of this class receive large salaries and other emoluments, and may be classed with the capitalist directors of industry themselves, into whose ranks a certain number of them actually pass. But the vast majority of them serve all their lives long in such capacities as foremen, managers, accountants, scientific workers, and technicians of various kinds—even as designers, authors and inventors— for quite modest remuneration; while associated with them are an unnumbered host of clerks, salesmen, travelers and professional subordinates of every description. Along with these must be ranked the rapidly increasing army of public officials of every kind, from the teachers of the publicly maintained schools and the various functionaries of the municipalities up to the highest administrators of the services that pass into State management. Already before the war it could be said (without counting the army and navy) that more than a million persons in the United Kingdom were in the direct employment of either the central or local government, whilst cities like Glasgow or Manchester had as many as 20 per cent of all their households on the municipal pay roll.³²

It is the upgrowth and the ubiquitous service of this nouvelle couche sociale, comprising now the vast majority of the active brain-workers in each country—honest, diligent, highly qualified for their work, and eminently successful in their function—which has reduced to absurdity the claim of the capitalist that only by the stimulus of profit-making and the ambition to "found a family" could efficient service of the community in the industrial realm be obtained. At the same time this "intellectual proletariat" discovers that the capitalist system has, for the great mass of brain-workers, practically no prizes. In many cases they find themselves pecuniarily worse off than the manual workers. They often earn less; their livelihood is sometimes more insecure; and they are in most cases subject to greater personal tyranny. More and more they are seeking a remedy in organization of the nature of trade unionism; and, like the manual workers, they are increasingly demanding for their professions the dignity and security of a public service. It is a significant fact that neither of them demands property as the remedy for their poverty. In spite of an agitation for what is called The Distributive State, which would abolish poverty by making every man an owner, the workers, whether by hand or brain, are practically unanimous in demanding honorable service as their means of livelihood. It is this development of an honest, an efficient, and an instructed "salariat" which not only emphasizes the steadily narrowing sphere of the profit-making motive, but also, as we shall see, makes practicable an alternative system of industrial organization.

The Loss of the Whip of Starvation

We now pass to the most potent, though hitherto the least recognized, factor in the progressive decay of capitalist civilization that has now set in. In the political democracies of the twentieth century it has become more and more impossible to apply the whip of starvation.

Now it was by the whip of starvation brought to bear on the mass of manual workers, more than by the incentive of profit-making (which could, in practice, only become effective in a tiny minority of entrepreneurs), that the capitalist system achieved its initial almost automatic, success. That is why the separation of the workers from the ownership of the instruments of production rather than the series of technological discoveries that transformed industrial processes, is, to the scientific economist as well as to the socialist, the essential feature of the Industrial Revolution. The power with which the new capitalist entrepreneur found himself endowed, of suddenly and simultaneously throwing out of employment hundreds and even thousands of operatives, having no alternative means of gaining a livelihood for themselves and their families, was a new dictatorship, unknown in medieval society, or even in the Britain or the North American Colonies of the beginning of the eighteenth century.³³ The alternate inflations and depressions of each industry, the successive revolutions in industrial processes and the ups and downs of foreign trade—acting on populations newly herded together in the expanding urban districts, where multiplication was unrestricted—burnt into the minds of successive generations of the wage-earners that only by obedience to the capitalist class could the property-less man obtain a livelihood for himself and his family. But, in England and Wales at least, there was, in the first half century of the machine-industry, one mitigation of this new dictatorship. The able-bodied man to whom the capitalist could or would not give employment at the subsistence wage—a wage which might be, and indeed, legally ought to have been, prescribed by the Justices of the Peace—could, under the Elizabethan Poor Law, demand to be set to work by the parish overseers, or to have his scanty earnings made up from the Poor Rate to the amount required to maintain himself and his family, whilst full maintenance had to be provided as a matter of course for all the non-able-bodied. We have described elsewhere how the overseers of parish after parish of England found themselves confronted with hundreds, and sometimes thousands, of men, women and children, rendered destitute by the capitalist refusal to continue them in employment, whilst new Local Authorities were established under separate statutes to establish workhouses, and to "set the poor to work" in the vain hope of enabling them to produce their own maintenance. It is not surprising to find that as the capitalist system spread, the total expenditure on poor relief, by which the stroke of the whip of starvation was to some extent broken, increased by leaps and bounds. At the beginning of the eighteenth century the total Poor Rate levied throughout England and Wales scarcely reached one million pounds. During the ensuing three-quarters of a century it rose very slowly to a million and three-quarters. Between 1776 and 1785 it suddenly bounded up by 25 per cent. At the beginning of the nineteenth century it had risen to over four million pounds, by 1813 to nearly seven millions, and by 1818 to nearly eight millions. The peace of 1815, like the peace of 1918, brought with it social conditions far worse than those of the two decades of war. From the beginning of 1816, England was visited by an unexampled stagnation of trade. "The poor," said Brand in the House of Commons on March 28th, 1816, "in many cases have abandoned their own residences. Whole parishes have been deserted; and the crowd of paupers increasing in numbers as they go from parish to parish spread wider and wider this awful desolation."³⁴

The Episode of a Penal Poor Law

By 1832 it had become as clear as noonday to every enlightened person that the Elizabethan Poor Law was inconsistent with the capitalist system of industry. How could vast multitudes of men, women and children be made to toil and strain for twelve, fourteen and sixteen hours out of every twenty-four, frequently for less than a bare subsistence, and under wretched and unsanitary conditions, so long as there was always open to the able-bodied man and woman the alternative of being "set to work" on the parish stock, and to the non-able-bodied the indiscriminate idleness of the parish workhouse if not the freedom of outdoor relief; whilst for adventurous spirits there was the opportunity of being "passed" and repassed at the public expense from county to county in search of the parish of their settlement. We need not here repeat the oft-told tale of the wholesale pauperization of England under the reign of capitalism tempered by the carelessness of the parish officers, and the benevolent but misguided attempts of the Tory Justices to secure, by means of the allowance system, the national minimum of subsistence demanded and enforced by Tudor and Stuart legislation. Some way of escape from the horns of this dilemma had to be found. Hence the first great legislative achievement of the reformed Parliament of 1833, following on the enfranchisement of the new middle class of capitalist manufacturers, with their retinue of large and small traders and shopkeepers, was the famous Poor Law Amendment Act of 1834, expressly designed to make the condition of the pauper "less eligible" than that of the lowest grade of sweated worker. Every unemployed able-bodied man, whatever might be the cause of his unemployment, found himself confronted with the alternative, either of working at any wage and under any conditions offered by the capitalist profit-maker, or being incarcerated with scanty fare under a studiedly offensive penal discipline. The helpless rage of the British wage-earners against being thus handed over without appeal to the capitalist dictatorship found violent expression in the Chartist Movement; whilst the Trade Unions grew apace with their double purpose of meeting capitalism by combination with regard to the conditions of employment, and of insuring the members against unemployment.

But there was another force at work. The slow but persistent pressure of the wage-earners, through their Trade Unions and political organizations, for their political enfranchisement, led, in the United Kingdom, between 1867 and 1918, and in other countries during the same half century, to the adoption of manhood, and eventually even of adult suffrage, with political consequences of which we are only gradually becoming aware.

The Repudiation of the Penal Poor Law

What has become apparent is that, just as a capitalist franchise proved incompatible with the Elizabethan Poor Law, a democratic franchise is incompatible with the penal Poor Law which replaced it. Right down to the twentieth century "enlightened public opinion," whether that of bishops or professors, of business men or civil servants, of devoted district visitors or able administrators of poor relief, still adhered to the "workhouse test" and to the principle of "less eligibility," as the only way of inducing men to prefer capitalist employment to Poor Law relief. Over and over again it was proved that, if the unemployed were given maintenance on a reasonably adequate scale, whether in the form of relief works or in that of the pauper dole, numbers of them would refuse to take work on the only terms offered by employers, and many of them would become unemployable through being maintained for long periods without work. Over and over again it was proved that any attempt to supplement, by outdoor relief or even by temporary sojourn in the workhouse, the sweated wage of the worst-paid workers, would increase the area of sweating and act as a subsidy to the most ruthless employers, who would immediately reduce wages by the amount of the supplement. But in spite of the continuous demonstration that disaster must follow any attempt to combine the capitalist system with a return to the Elizabethan conception of the right to "work or maintenance," each successive government, whether Liberal or Conservative, found itself compelled to whittle away the principle of "less eligibility."

It was expressly to stop this rot in the Poor Law and its administration that the great Poor Law Commission of 1905-9 was set up, under the confident assumption that the Commission could not do otherwise than recommend a return to the principles of 1834. But here again the unseen forces of political democracy were at work; and not only the Minority but also the Majority Report of the Commission (signed by the representatives of the Local Government Board and the Charity Organization Society) expressly repudiated the principle of "less eligibility," and denounced the workhouse test. But both reports coupled this repudiation of the principle of "less eligibility" by some provision for an adequate testing of the willingness of unemployed persons to accept employment when it could be found for them, and to work in such a manner that their services would be continuously required. This is not the place to discuss or criticize these suggestions. What matters here is that public opinion, expressed not only through the Labor Party, but equally through the Liberal and Conservative Parties, flatly refused to supply the indispensable fulcrum for the capitalist lever by making the acceptance of capitalist employment virtually compulsory. All proposals to register, test, and if necessary train, all destitute persons who demanded to be maintained, and could not under the law be denied, were repudiated. In vain did the Guardians of the Poor point to able-bodied paupers who lived cynically on the rates, demanding their discharge only to go out and earn enough for a debauch before returning to the workhouse gate as destitute persons, and resuming their residence there. The ratepayers clamored, the employers clamored, even the socialists (drawing a wide moral) clamored against supporting men without obliging them to produce what they were consuming; but the mass of workers knew that capitalism had them with their back to the wall, and that if the wall, stony as it was, were demolished, there would be nothing behind them but the abyss. During the years 1905-14 the machinery for giving subsistence to the able-bodied unemployed, without tests, was enormously multiplied. In 1920, capitalist industry, which had been virtually superseded as a system during the war (otherwise the war could not have been carried on), failed to keep the machinery of production going, and completed the destruction of the semi-nationalized form which had just saved the country. The consequence was that the means of livelihood were withdrawn from millions of British wage-earners through no fault of their own. But they did not starve; nor did they go into the workhouse. In spite of every desire to curtail public expenditure, and of an openly avowed intention of forcing down wages, the British Government found itself driven, in 1921-3, to provide maintenance for every unemployed worker, either by way of Outdoor Relief on what would at any previous period have been deemed an extravagant scale, or else by weekly doles direct from the Exchequer at rates actually exceeding the wages offered by employers in some counties to the agricultural laborers. Something like a hundred million pounds a year were thus distributed among a couple of million families for years together. This completed the demonstration of the incompatibility of capitalism with democracy. It is impossible not to see in this the warding off, as regards the one-fifth of the entire population who would otherwise have felt the lash of the capitalist whip of starvation.

The inevitable conclusion is that, if political democracy endures, the adoption of the policy of "work or maintenance" at the public expense is henceforth certain. And this work or maintenance, afforded by central or local governments to all who claim to be unemployed, will, we predict, necessarily have to be free from penalization and from the stigma of pauperism. Even the tests of destitution, with which the Poor Law experts of 1834-1900 thought it essential to load the public succor, are doomed. For to any such clogging of the provision for those to whom, through no fault of their own, the capitalist system fails to find employment at adequate wages, the great majority of the electorate strongly objects. So long as the community notoriously allows a minority to be "above the law of nature and morality that if a man does not work neither shall he eat": that is to say, so long as a definitely parasitic class of idle rich is permitted its habit of "conspicuous waste," the representatives of the wage-earning class are justified (and will be upheld in their contention at the polls) in objecting to the law being applied to the most innocent of the non-workers, namely, those prevented from working by the capitalists' failure to perform the task they have undertaken.

It will be said here, and said very cogently, that democracy may say what it pleases and vote how it pleases, but that any system under which a large section of the population can obtain maintenance for themselves and their families without being required to accept work at such jobs and at such wages as are actually obtainable then and there, must lead to national bankruptcy; and that if it be an objection to the capitalist system that it enables thousands of the population to live in idleness, a system which enables millions to live in idleness is in that respect an intolerable aggravation of the evil. This is true: and it was this consideration that carried the Poor Law of 1834 into effect in spite of a popular hatred of it which, though not at first enfranchised, would nevertheless have wrecked the measure, had the Chartists been able to convince the nation that there existed a then practicable alternative. Nowadays the alternative is quite familiar, and was so even before the war had given a stupendous proof of the possibility, and even of the necessity, of superseding capitalism and substituting public organization and control of industry. Even those who in defiance of the experience of the war believe that this is a dream, cannot deny that the people are dreaming it, and no longer fear that pulling the linchpin out of the capitalist apple-cart is pulling the linchpin out of human society.

Besides, the capitalist, to whom access to virtually compulsory labor is a matter of life or death, is forced to resist any legal compulsion to labor. His whole object is to make himself and his family and descendants independent of their own exertions by establishing them in genteel idleness. When he is brought to the point and asked bluntly whether he is in favor of making labor legally compulsory, he cannot say yes, because the next question from his workmen will be, "Is it to be compulsory on your sons as on ours?" That is checkmate: if there is to be compulsion to work by the withdrawal of supplies or by any other method³⁵ it must clearly apply to all able-bodied idle persons without distinction of birth or education; for equality before the law is, under political democracy, an essential condition of its enforcement.

Take as an example of this the extraordinary obedience of the vehicular traffic of London to the rule of the policeman. An observer standing at Piccadilly Circus during the busiest hours will fail to discover a single instance in which the authority of the constable directing the traffic is defied, evaded or even resented. But imagine what would occur if the law privileged all persons of title, or all payers of super-tax, or all owners of motor cars to defy the rule of the road, and go right or left at what speed they chose. At once, at least in the Britain of the twentieth century, every other person would claim for himself a like privilege; and the enforcement of any rule would become impracticable. During the war of 1914-18, nothing was more remarkable than the very near approach to universality with which the nation accepted the various disciplinary measures that were deemed necessary. But imagine how impossible it would have been to have enforced, on the four-fifths of the population who are wage-earners, either military service or food-rationing, if the "gentlemen and ladies" of property had been exempted from the law.

Thus capitalism finds itself in a cleft stick. Democracy has taken its whip out of its hand; and the only other instrument of compulsion available to make men work for it would be laid across its own back, and would thereby withdraw from it the peculiar privilege and sole reason for existence of the whole rentier class, of living above the first law of nature and morality, that "if a man will not work, neither shall he eat."

Its sole consolation is a rather dangerous one socially. When the unemployed were left to starve, or to face the misery and contempt deliberately inflicted on them by the 1834 Poor Law, the peril of insurrection was so obvious that it had to be staved off in times of special stoppages of trade, as in the case of the cotton famine caused by the civil war in America, by huge public subscriptions and relief funds. This peril did not prevent lock-outs and wholesale discharges of "hands" in slack times; for these are essential features of capitalist commerce; but it had some effect in making the employers think twice before they produced desperate situations without absolute commercial necessity. To-day, owing to the almost universal provision of a weekly income for every unemployed man, the employers can indulge their caprices and make speculative changes without the risk of finding their factories besieged and their houses burnt by starving rioters. Even the completely discredited "Allowance System," by which the insufficient earnings of men actually in employment are brought up to something like subsistence level, was, in 1922, beginning to be reintroduced in England; either in the form of alternate weeks of wage-earning and unemployment benefit, or, in cases of continuously employed agricultural laborers and sweated women-workers, by weekly supplement from the Poor Rate.

Now is it really necessary to repeat once again the old, old truth—always being reinforced by events—that distribution without equivalent production means ruin through exhaustion? The pernicious anæmia of a slowly but continuously increasing area of maintenance without work may well prove a more deadly disease than the destruction of capital and the capitalists by a bloody revolution. There can be no permanence in a situation in which we abandon production to capitalism, and yet give the workers the political power to enforce demands on the national income which capitalism has neither the ability nor the incentive to supply. It is a situation in which those before cry Forward and those behind cry Back.

This incompatibility of political democracy either with a landed aristocracy or a trading autocracy was prophetically perceived by no less stalwart a squire than Oliver Cromwell, to whom, significantly enough, the Liberal Ministry of 1894 erected a statue paid for by its wealthiest member. Poring over those illuminating debates in the Council of War at Reading in 1647, we watch Cromwell and Ireton spending day after day in trying to persuade their officers and men that "That which is most radicall and fundamentall, and which if you take away there is noe man hath any land, any goods, [or] any civill interest, that is this: that those that chuse the Representors for the making of Lawes by which this State and Kingedome are to bee govern'd, are the persons who, taken together, doe comprehend the locall interest of this Kingedome; that is, the persons in whome all land lies, and those in Corporations in whome all trading lies. . . If wee shall goe to take away this fundamentall parte of the civill constitution, wee shall plainly goe to take away all property and interest that any man hath, either in land by inheritance, or in estate by possession, or any thinge else."³⁶ It was useless for the protagonist of the contemporary radicals, Colonel Rainborow, to assert, "I doe nott finde anythinge in the law of God, that a Lord shall chuse twenty Burgesses, and a Gentleman butt two, or a poore man shall chuse none. I finde noe such thinge in the law of nature, nor in the law of nations. But I doe finde, that all Englishmen must bee subject to English lawes, and I doe verily believe, that there is noe man butt will say, that the foundation of all law lies in the people. . . Therefore I doe [think] and am still of the same opinion; that every man born in England cannot, ought nott, neither by the law of God nor the law of nature, to bee exempted from the choice of those who are to make lawes, for him to live under, and for him, for ought I know, to loose his life under."³⁷ Again and again Cromwell and Ireton reiterate that if "one man hath an equall right with another to the chusing of him that shall governe him—by the same right of nature, hee hath an equal right in any goods hee sees: meate, drinke, cloathes to take and use them for his sustenance. . . If the Master and servant shall bee equall Electors, then clearlie those that have noe interest in the Kingedome will make itt their interest to chuse those that have noe interest. Itt may happen, that the majority may, by law, nott in a confusion, destroy propertie; there may bee a law enacted, that there shall bee an equality of goods and estate."³⁸ (The italics are ours.) At last Colonel Rainborow ironically retorts: "Sir, I see that itt is impossible to have liberty butt all propertie must be taken away. If itt be laid downe for a rule, and if you say itt, itt must bee soe."³⁹

The Economic Case Against Capitalism

We can now sum up the strictly economic case against the continuance of profit-making capitalism as the sole, or even as the main method of owning and directing the instruments of wealth production, before we proceed to the last count in the indictment, the relation of the process of profit-making to wars between nations and classes.

In the first three chapters we described the adverse results on the mass of the people of the dictatorship of the capitalist. In spite of an enormous increase in the aggregate production of commodities and services, due to the application of physical science under the potent stimulus of the desire for profit, capitalism has been everywhere accompanied by persistent insecurity and chronic penury among the wage-earners, together with a widespread morass of destitution. And although the rise and growth of a new wealthy class may not, in itself, have increased either the insecurity and penury of the mass of the people, or widened the surrounding destitution, the contrast adds a further grievance, whilst the encouragement of parasitic idleness, the sterilization of intellect and the decay of manners among the newly enriched, are social evils paralleled only by the servility, the envy, and the corruption of ideals manifest in the slum population. Besides, the inequality in personal fortune, which is admittedly inherent in capitalism, produces, as we have seen, an evil of its own. In all communities where division of labor has developed from the domestic division of the primitive farmhouse to generally organized industrialism, the great majority of the workers are necessarily wholly occupied in performing technical operations which transform materials into products or rendering services which are part of organized systems of service. They must therefore be at the orders of the relatively few persons whose business it is to buy materials, to sell products, and to organize services. This natural necessity places a power in the hands of these few persons which, unless it is controlled in the general interest, as it is in the public services, can and does become a tyranny compared to which the worst political tyrannies are negligible. When it is wielded by the irresponsible private owners of the sources of production, or by their agents, the disparity of effective freedom—" the opportunity for continuous initiative"—is such as to amount to the practical subjection of the mass of the people. This subjection disguises itself as subordination; but in genuine social ordination the director is no more free to give orders as he pleases than his subordinates are to work as they please. The capitalistic owner and director is entirely insubordinate, whilst his employees are helplessly subordinate; and thus the necessary and beneficent subordination becomes a mischievous and oppressive subjection. How tremendous is the new power over other people, which capitalism thus gives to the propertied class, is seen, for instance, in the peremptory closing-down of works or mines, as a means of starving the workers of whole districts into submission, and in the irresponsible determination, by this class, through the decisions of the directors whom it supplies for the industry of the nation, of the physical environment in which millions of their fellow-citizens shall pass their lives: in the devastation of the pleasant countryside, the pollution of the streams and the atmosphere, the creation in the slums of the new urban centers of all the conditions of disease and premature death, which have everywhere accompanied the mining, metallurgical and manufacturing enterprises of capitalism in the pursuit of private gain. And the social result is made no better—is even made worse—by the fact that alike in Britain and France, the United States and Australia, the propertied class has known how to escape from the adverse environment which—without, as is only fair to say, being fully conscious of what it was doing—it has created for its wage slaves. Equally unexpected, either by the economist or the moralist advocates of the unrestricted enterprise of the owners of the instruments of production a century ago, and perhaps until our own generation seldom consciously sought by the capitalists themselves, is the typical phenomenon of twentieth century democracy, in which private wealth, concentrated as to direction into relatively few hands, is seen very largely to control, by its dominion over the newspaper press, the mental environment of the whole population; and by its power in this and various other ways, even to nullify universal suffrage, and dangerously to influence, in the interests of private gain, the executive government and the legislation of every advanced industrial community.

The False Judgments of the "Court of Profit"

In the present chapter we have brought into view some of the developments of capitalism itself, which seem to us, from the outset, to undermine the economic arguments by which the dictatorship of the capitalist was supported. The experience of the world, whether in countries of advanced industrialism or in those newly opened to capitalist enterprise, has revealed that the tremendous stimulus of profit-making is undiscriminating. If the capitalist finds that he can enrich himself more quickly by a reckless consumption of the irreplaceable mineral resources of the community, by the most wasteful utilization of its forests and by the exhaustion of its agricultural fertility—ruinous as this may be to the permanent economic interests of the community—there is nothing to prevent, or even to dissuade, such a use of the dictatorship involved in the private ownership of the means of production. In the "Court of Profit," by which Charles Booth thought it so satisfactory that all capitalist enterprise was necessarily tested, the widespread stripping of the world's forests for the advantage of a single generation; the waste of its accessible resources in coal, oil and gas; the exhaustion of its virgin soils, by which, as we now see, the United States and Britain have shown themselves as improvident as the barbarians—were approved and applauded as "good business" even from an actuarial standpoint. In like manner, the insidious worsening of commodities, so long as the consumer could still be induced to buy, might be, and was frequently proved to be, productive of a greater percentage of profit, and often of a greater aggregate income to the individual profit-maker, during the whole continuance of his business, than the supply of articles of a better quality. Not even the most optimistic defender of capitalist enterprise has been able to allege that the verdict of the "Court of Profit" coincides with that of any judge of soundness of material, artistic excellence, perfect adaptation, durability, or, taking all things into account, even cheapness to the purchaser. Much more serious, however, has been the discovery, to which the economists and moralists were for a whole generation astonishingly blind, that, when capitalism brings its enterprises for judgment into the "Court of Profit," that court can pay no heed to evidence that the profit-making enterprise is entirely divorced from any public service. Within the wide scope given by the penal code all pursuits are alike valid, all saleable commodities and services equally permissible. The destruction of commodities, whether fish or a bumper crop of cotton, in order to maintain prices is no less a "productive" enterprise than adulteration or substitution in order to lessen cost. The smuggling of opium into China or whisky into the United States, like the manufacture of cocaine in a foreign factory, or the organization of gambling in another country—both being crimes in that in which the capitalist happens to reside—are as legitimate sources of gain as the growing of wheat. The whole industrial organization may, as we have seen, be distorted by the fact that greater profits can be made by the financing, and even by the selling of commodities than by their production, in such a way as to lead to the creation of an altogether disproportionate amount of social machinery of middlemen for the mere dealing in commodities, to which both producers and distributors find themselves paying unnecessary or excessive tribute. In the "Court of Profit" the mere fact that any profit is actually made, without demonstrated transgression of the criminal law, is accepted as conclusive proof of equivalent social service.

The Fundamental Fallacy of Laissez Faire

Why does the "Court of Profit" give, in all these cases, what the world now sees to be false judgments? It is because the basic assumption, which commended capitalism to the moral conscience of the nineteenth century, is now seen to be without foundation. The world no longer believes that, if every person without exception, capitalist or wage-earner, rigidly pursues his own pecuniary gain—and even pursues it with knowledge and wisdom—this will necessarily coincide with the greatest aggregate pecuniary advantage of the community as a whole. We know now that personal and corporate interests not infrequently conflict, even within the sphere of pecuniary gain: the individual may make profit by all sorts of manipulation without rendering service; whole classes may live by mere tribute, whether the fruit of commercial monopoly, or of more reputable rents, royalties and dividends; finally, the entire population of one generation may, as we have seen, with the full approval of capitalist ethics, for its own gain waste the substance of all future generations. There is no such "invisible hand," as Adam Smith romantically suggested, always guiding the dictatorship of the capitalist, even without his being aware of it, so that it promotes the economic welfare of the community. Though the existence of profit is, as we have seen, no proof that social service has been rendered, it is instructive to note within what limitations the judgment of the "Court of Profit" may afford a test of business enterprise. As between one profit-maker and another, for instance, the judgment of the court may have a certain validity. It may be a test of relative efficiency in human labor and of the ability exercised in its direction and in the purchase and sale of materials with a view to the greatest commercial profit. But it does not, and by its very nature cannot, decide between rival enterprises one of which aims at profit and the other at something else.

Comparison of Cost

There can be no comparison in that court between a patent medicine manufacturer, making profits by the million pounds, and a public hospital making none. It can never be an effective tribunal as between enterprises having different ends. What is needed for this purpose is not a skilled and impartial assessment of profits, which one of the parties (say a private electric lighting company) is aiming at maximizing whilst the other (say a municipal electric supply) must minimize on pain of being convicted of malversation, but that objective measurement and publicity which is the method of science. And here we see that the very divorce, not only of the manual workers but also of the great mass of brain-workers, from the ownership of the instruments of production, to which the further development of capitalism has led—the rise in advanced industrial communities of whole classes of independent experts, from physicists and engineers, chemists and biologists, to analysts and surveyors, accountants and auditors—is creating an alternative court of appeal. During the Great War, the costing expert determined, not which process yielded the greatest profit, but which produced the goods at the least cost. And here we see how it is that the supersession of the test of relative profit-making by that of relative cost and relative production implies a stride onward in knowledge as well as in organization. This enables us to understand why it is that, in the Britain of to-day, it is the Labor Party with its socialistic aims, and not the Liberal Party or the Conservative Party, as adherents of the capitalist system, which deliberately puts in its program the advancement of science.

The Problem of Authority

For without the application of the scientific method to social organization the crucial problem of democracy, the problem of authority—how we can obviate the arbitrary exercise of one man's will over another—cannot be solved. Hitherto it has always seemed, to the wage-earner, that the vital question in social organization is who should give orders and who should obey them—whether the government of industry shall be "from above" or "from below." Experience shows that both these ways of exercising authority have their special drawbacks. In the ensuing years of ever-increasing socialization this controversy will become largely meaningless. Strange as this may seem to-day, we venture on the prediction that, from the standpoint of personal authority, it will matter far less than at present exactly how the executive command is apportioned. In industry no less than in political administration, the combination of measurement with publicity is to-day already undermining personal autocracy. The deliberate intensification of this searchlight of published knowledge we regard as the corner-stone of successful democracy. The need for final decision will remain, not merely in emergencies but also as to policy; and it is of high importance to impose heavy responsibility for a decision, according to the nature of the case, on the right people. How, for this purpose, those democratic institutions that have been for a whole century encroaching on capitalism? whether central or local, government, consumers' coöperation or vocational organization? can be further developed and coördinated, so as to provide for the exercise of ultimate authority in industry, we have described in another book.⁴⁰ What we want here to point out is that, owing to the advance of science, a great deal of the old autocracy, once deemed to be indispensable in government departments and capitalist industry alike, is ceasing to be necessary to efficiency, and will, accordingly, as democracy becomes more genuinely accepted, gradually be dispensed with.

The stream of decisions or orders by which the wheels of industry are kept going will cease to be the exercise of one man's arbitrary will over other men's actions. The independent professional, whether costing auditor or efficiency engineer, medical man or educational adviser, will report according to his knowledge; but he will give no orders and exercise no authority. His function is exhausted when his report is made. His personality will find expression, and his freedom will be exercised without limitation, in the process of discovery and measurement, and in the fearless representation of whatever he finds without regard either to the amour propre of the management or to the rebellious instincts of any grade of employees. Those who are "in authority," whether directors, managers or foremen, trade union executives or shop stewards, will give their instructions with these expert reports before them. They will exercise their authority under the searchlight of published knowledge; a searchlight which will encourage, if not compel them to feel their responsibility, not merely to sections, but to the whole community. A steadily increasing sphere will, except in matters of emergency, be found for consultation among all grades and sections concerned, out of which will emerge judgments and decisions arrived at, very largely, by common consent. This common consent will be reached by the cogency of accurately ascertained and authoritatively reported facts, driven home by the silent persuasiveness of the public opinion of those concerned. Under any genuine democracy it is, in the last resort, public opinion that decides; and the more effectively public opinion is educated and the more weight is given to the findings of science, the greater will be the success of any administration. In place of the jealous secrecy in which thousands of rival engineering establishments at present enshroud their operations, and of the bureaucratic concealment which to-day marks alike the Post Office and the government dockyards, we foresee the administration of each national industry and service, no longer concerned for magnifying the private gains of particular capitalist groups, or enhancing the net revenue of the Exchequer, but merely for increasing the efficiency of the service to the public, in the glare of a whole series of searchlights, impinging at different angles upon what is essentially the same problem, namely, how to obtain for the community as a whole the greatest possible efficiency in relation to the efforts and sacrifices involved. To quote the words with which we end our Constitution for the Socialist Commonwealth of Great Britain, "What we visualize is a community so variously organized, and so highly differentiated in function as to be not only invigorated by a sense of personal freedom, but also constantly swept by the fresh air of experiment, observation and verification. We want to get rid of the 'stuffiness' of private interests which now infects our institutions; and to usher in a reign of 'Measurement and Publicity.'"⁴¹

Notes

1. Proceedings of the Conference of Governors on the Conservation of Natural Resources, May 13-15, 1908 (House Documents, vol. 128, No. 1425, 2nd Session, 1908-9, p. 67).↩
2. Ibid., p. 67.↩
3. Ibid., p. 174.↩
4. "The experience of half a century has clearly shown in Virginia, the Carolinas and Georgia that turpentining under present methods renders a permanent naval-stores industry in the South utterly impossible. These methods usually render the forest unproductive in four or five years. They have so greatly reduced the long-leaf pine forests available for turpentining that in some localities trees 4 or 5 inches in diameter are now being boxed. This generally means an exceedingly low return in turpentine and the death in a year or two of trees, which would otherwise have grown to make lumber. . . And year by year, through careless cutting and fires, we lower the capacity of existing forests to produce their like again, or totally destroy them. . . By wasteful logging, fire, and general failure to provide for a second crop, we have made our forests less productive than any others of similar area in the world, in spite of the remarkably quick growth of most of our timber trees" (Re- port of the National Conservation Commission, vol. i, Senate Documents, vol. 10, No. 670; Sixtieth Congress, 1908-9, Statement by the Secretary of Forests, pp. 57-9)↩
5. No. 1425, Proceedings of the Conference of Governors on the Conservation of Natural Resources, May 13-15, 1908 (House Documents, vol. 138), p. 36. ↩
6. The Observer, June 1, 1919. "That has been the history of almost every oilfield opened on the American continent," the writer adds. "A strike, a rush of speculators, a great boom in the price of land, indiscriminate drilling on plots so small that the derricks, as one catches sight of them, seem to be literally touching one another, a dozen wells sunk in an area that can barely support three, each frenzied small-holder drilling as fast as he can to prevent the oil beneath his plot of ground from being drained away by his neighbor and rival, no scientific precautions to conserve the gas which will alone force the flow of oil, a feverish higgledy-piggledy of cut-throat, beggar-my-neighbor competition, in the course of which anywhere from half to three-quarters of the petroleum is left in the ground and rendered for ever irrecoverable—it is so that America, the richest and the most wasteful and negligent of all lands, has set the classic example of how an oil-field should not be developed" (ibid.).↩
7. Proceedings of Joint Conservation Conference, Senate Documents, vol. 10, No. 676. National Conservation Committee Re- port, p. 135. ↩
8. The Foundations of National Prosperity, edited by Professor R. T. Ely, 1918, pp. 100-101. "That Smith's [Adam Smith's] school teaches nothing else than the theory of values. . . It is. . . that science which teaches how riches, or exchangeable values, are produced, distributed and consumed. This is undoubtedly not the science which teaches how the productive powers are awakened and developed, and how they become repressed and destroyed. M'Culloch calls it explicitly 'the sci- ence of values,' and recent English writers 'the science of ex- change'" (ibid., p. 74).↩
9. A contemporary of John Bright's explained this defense of adulteration. "If you could destroy the competition" of adulterated commodities, the Select Committee on Adulteration of Food was informed by the chairman of the Leamington Local Board of Health, "instead of working a benefit to the public, you would be working the greatest injury, because you would be creating a whole host of small monopolies in genuine articles, which would so increase the price of those articles that it would place them beyond the reach of one-third of the population" (Second) Report of the Select Committee on Adulteration of Food, August, 1855, No. 480, Q. 2535).↩
10. First Report from the Select Committee on Adulteration of Food, etc., with the Minutes of Evidence and Appendix, July 27, 1855, No. 432, Q. 150.↩
11. Quoted in Forty-second Annual Report of the Local Government Board, 1915, Part III., p. lxvi.↩
12. English Public Health Administration, by B. G. Bannington, 1915, р. 160. "Here is a description of the private slaughter-houses given by a recent writer on the subject: 'often hemmed in by dwelling-houses on all sides, through ventilation in them is well-nigh impossible, the light sometimes can, but with difficulty, penetrate; the floor is often altogether unpaved, or so badly paved that the ground becomes sodden with blood and ordure; the walls are often made of wood that becomes saturated with filth; and the lairs are frequently insufficient to accommodate the animals.' To this might be added a large midden-stead into which, through a hole in the wall of the slaughter-room, the manure, offal and blood are swept, the floor level being specially arranged for this purpose. Around this sweltering mass of corruption the blue fly is present in myriads, and it is busy plying its deadly mission between the midden- stead, the slaughter-room, and the butcher's shop, as for the sake of convenience, they are all attached to each other" ("Municipal Inspection of Meat": a paper read by William W. Kelso, Chief Sanitary Inspector, Paisley, in Glasgow University at the Annual Congress of the British Institute of Public Health, July 27, 1896, p. 3). ↩
13. Transactions of the National Association for the Promotion of Social Science, 1870. (Newcastle-on-Tyne Congress.) What Legislative Measures ought to be taken to prevent the Adulteration of Food, Drink, and Drugs? by Phillips Bevan, p. 391.↩
14. The Theory of Business Enterprise, by Thorstein Veblen, 1904, pp. 292-3. ↩
15. The Laws of Supply and Demand, G. B. Dibblee, 1912, p. 113. ↩
16. House of Commons Select Committee Report, 1914, 414, pp. ix-x. Two remarkable publications by the British Medical Association on Secret Remedies, 1909 and 1912, give a series of analyses of all the principal proprietory remedies. This analysis reveals that whilst some of these patent medicines are positively injurious, the bulk of them are merely valueless, and are only distinguished by the enormous disproportion of the cost of production plus the government stamp, to the price paid by the consumer. The ingredients of a cough mixture at 2s. 9d. cost one-third of a penny; a shilling bottle of another remedy costs one-thirteenth of a farthing; an electric fluid advertised as a cure for cancer yielded nothing to analysis, whilst another mixture was water diluted with impure alcohol. Following on these revelations a Select Committee of the House of Commons was set up in 1914 which reported in favor of government analysis and control of all patent medicines—a measure not yet adopted, and not even within sight of adoption (1923).↩
17. The parliamentary secretary of the Local Government Board, in introducing the Money Lending Bill in 1900, cited "two illustrations that came before the committee of the system against which the Bill is directed. An unfortunate Irish landowner named Finlay borrowed a sum of £300 from a money-lender, for which he gave a promissory note for £456, the money being re- payable in monthly installments. Mr. Finlay paid several installments regularly, and then for a subsequent installment the check was sent a single day late. The check was returned and the whole amount claimed. Default interest was charged, and when Mr. Finlay came before the court he had been compelled to pay, besides £114 in installments, a sum of £600-£714 in all—for the loan of £300 from November 13, 1890, to February 20, 1892.... In the other case, an English firm named Adams borrowed £50 from Isaac Gordon in November, 1892, and signed a promissory note for £200. Further advances were made of £50 in February, 1893, of £20 in June and of £50 in November, 1893. Between November, 1892, and September, 1894, Mr. Adams paid £461, and in October, 1894, Gordon claimed that £5PP was still owing in respect to an advance of £220. . . Gordon took proceedings in the County Court at Birmingham on one promissory note" (Hansard, June 21, 1900, p. 681). The Bill had been considered by a strong legal Committee who reported, that "after carefully considering the evidence ..your Committee have unhesitatingly come to the conclusion that the system of money-lending by professional money-lenders at high rates of interest is productive of crime, bankruptcy, unfair advantage over other creditors of the borrower, extortion from the borrower's family and friends, and other serious injuries to the community" (ibid., pp. 682-3).↩
18. The Jews and Modern Capitalism, by Werner Sombart, 1913, p. 101.↩
19. The buying of nobles, and other socially eminent persons who are without business training or capacity, as decoy-ducks to simple-minded investors is the converse to the public scandal of selling titles to wealthy parvenues who are without manners or morals. The 586 members of the House of Lords (including ritual Lords) of 1900 shared among them "no fewer than 435 directorships or chairmanships of commercial concerns. On the list of peer directors of companies there are two bishops, nine dukes, eight marquises, fifty-three earls, nine viscounts, and eighty-one barons—all members of the House of Lords" ("Company Fraud and Parliamentary Inactivity," by J. G. Swift Mac-neill, Q.C., M.P., in the Annual of the Co-operative Wholesale Societies, Ltd., 1900, p. 174).↩
20. The Times, November 10, 1898. Lord Russell stated that the Official Receiver told him that from 1890 to 1897 "there had been lost to the community and gone into the pockets of the unworthy no less a sum than £28,159,482; made up of losses of creditors dealing with companies, £7,696,848; and of loss to the wretched contributories or shareholders, £20,462,633." (These figures relate only to companies wound up compulsorily, and exclude cases of reduced capital.) The loss of permanent situations by bankruptcies was pointed out by the Minority Report of the Poor Law Commission, 1909. It was found by investigators into the causes which had brought men down to unemployment that bankruptcy or reconstruction of their employers' business held a high place. "In 1899, a year of good trade, there were in England and Wales, 7,085 bankruptcies and deeds of arrangement with creditors. In 1904, in the trough of the cyclical depression, the number was 8,631, or 22 per cent more (Twenty-fifth Annual Report by the Board of Trade on Bankruptcies, House of Commons, No. 254 of 1908). If we assume that, on an average, only ten men lose their employment in each case, though the business does not always cease altogether, the statistics imply the loss of situations, through no fault of their own, by 70,000 men in a good year, and 86,000 men in a bad year. And many small concerns fail and cease without formal bankruptcy" (Minority Report, p. 572). ↩
21. We have omitted, because of its controversial aspect, the vast subject of speculation on the stock exchanges and the produce markets of the world. Some part of this speculation may be defended as an indirect, but we think cumbersome, way of equalizing prices. But legitimate speculation has in recent years been submerged underneath an elaborate superstructure of commercial gambling, not only in securities, but in essential food-stuffs and raw materials; the dealings in "options" and "futures" in wheat, cotton, etc.; the practices of "short-selling" and "rigging,” "bolstering" and "hammering," "unloading" and "switching," in gambling on "specified margins," are all ways of getting rich—often fabulously rich—without producing anything else but the maximum amount of uncertainty in the earnings of all classes of producers and in the prices paid by all classes of consumers. "The chief attention of the business man," it is remarked by Professor Veblen, "has shifted from the old-fashioned surveillance and regulation of a given industrial process, with which his livelihood was once bound up, to an alert redistribution of investments from less to more gainful ventures and to a strategic control of the conjunctures of business through shrewd investments and coalitions with other business men" (The Theory of Business Enterprise, Professor Veblen, pp. 24-5). Moreover, this activity involves an actual increase of the risk and uncertainty of productive processes. men, in so far as they have no ulterior strategic ends to serve, have an interest in making the disturbances of the system large and frequent, since it is in the conjunctures of change that their gain emerges" (ibid., p. 34). Broadly this class of business↩
22. G. B. Dibblee, in The Laws of Supply and Demand (p. 183), quotes Mr. Thomas Russell, president of the Incorporated Society of Advertisement Consultants, as estimating that a hundred millions sterling are spent annually on advertising in this country. That is a very considerable figure, and it appears still larger when we note that the total engineering industries of this country, including shipbuilding and motor factories, had an output for 1909 in round figures of £150,000,000, of which £70,000,000 was due to the cost of material. Their net output of £80,000,000 is less than the advertising bill of the United Kingdom." The United States and Canada together would spend at least £250,000,000; Germany with Switzerland and industrial Austria about equal to this country; therefore we may reckon that the gross expenditure on advertising for Europe and North America is £550,000,000.↩

23. The Laws of Supply and Demand, G. B. Dibblee, M.A., 1912 (pp. 43, 47, 52). One of the most interesting corollaries of this process of increasing price by diminishing cost of production, is the high salary earned by the expert seller of an article as compared with the expert producer of an article. "Take, for instance," remarks Mr. Dibblee, "the universally current expression of 'getting business'; that does not mean making shoes or marble clocks or cocoa, but finding customers for shoes, clocks, and cocoa. It shows the prevailing mental preoccupation of every one that a man who is reputed to be 'good at getting business' has ipso facto a ready market for his services in any line of commerce that he cares to undertake. The man who has that capacity and can plan to make production subservient to it has an easy road to fortune before him. It is the most valued talent in business, and one can be entirely without it who wishes to avoid failure" (ibid., p. 180).

    "What the economists have not so clearly brought out is the fact that on markets the middlemen owe their strength largely to their position at the center of exchange. They can take toll of the producer on the one side and of the consumer on the other; and (subject to extraneous competition or internal dissension) they have only to form a ring to manipulate both sides at once to their own advantage. What war again, with its tightening of organization and its urgent need for production, has shown up more clearly than the economists, is not merely the effect of bad or overpaid distribution on consumption and prices, but its reaction on production. Before the war the middleman was allowed to kill the goose that laid the eggs he dealt in; and nobody cared; food not produced at home could be imported. But war has raised the status of the goose. It should now be more evident where the money goes and why. Most fish markets are more or less close corporations; and the newcomer is not exactly received with open arms. Prices, in fact, are usually skied against him. But once he has achieved his footing, then it is to the interest of the older merchants to allow him to hang together with them as against the producer on the one side and the consumer on the other. In virtue of their position at the center of exchange, dealing on either hand with scattered and comparatively unorganized producers and retailers, the merchants are masters of the situation; and thus we find in nearly every port:

    (1) That the salesmen and merchants are too many for the fish; and

    (2) That the accepted scale of charges and profits is keyed up, not according to distributive services rendered, but so that each one of the too many can draw a livelihood from his share of the fish passing through.

    "If the small and inefficient merchant can charge the small charge amount of fish he handles with his livelihood, it is plain that, on the same scale of profit, the big and more efficient firm can draw a fortune from its larger quantity" (evidence given before the Committee on Trusts, 1916-17, "Rings among Fish Middlemen," Memo. by Stephen Reynolds, not published by the government). ↩

24. Statement by Salt Union Limited, September 11, 1918. ↩
25. Report of Committee on Trusts (Ministry of Reconstruction), 1919 (Cd. 9236), p. 5. ↩
26. Report of Committee on Trusts (Ministry of Reconstruction), 1919 (Cd. 9236), p. 5. ↩
27. Ibid. The interesting reports made by committees of employers in each industry to the Board of Trade (1916-1918) demonstrate the gross inefficiency in processes, mechanical plant and organization within each of the staple trades. This is shown, states the Departmental Committee on the Position of the Engineering Trades after the War, " by the very large number of relatively small firms that exist—each with a separate organization, separate establishment charges, separate buying and selling arrangements, and each producing a multiplicity of articles. Some of them seemed to take a special pride in the number of things they turn out; whilst few of them seemed to be willing to contemplate buying at a cheaper price a component part from a rival manufacturer, even if they were permitted to do so by that rival. A system of exclusiveness and aloofness marked the Engineering Trades before the war. Each manufacturer keeps his own secrets, and if he has any special method of manufacture, he, somewhat naturally, is desirous of retaining that process for himself rather than of adding it to the common manufacturing knowledge of the country. The result of many firms being employed upon producing a large number of articles in common use is the causing of confusion in the types of articles produced, so that no two manufacturers seem intentionally to produce precisely the same articles there is consequently a very large amount of unnecessary stock of different patterns carried throughout the country and made at a higher cost than is necessary. Workmen are constantly diverted from the manufacture of one article to the manufacture of another; much time is thereby wasted, and the change over from machines entails a considerable amount of machinery standing idle when the special article for which that tool is required is not at the moment being produced. This is a wasteful and costly process, which limits output and therefore decreases possibility of profit and high wages, whilst the absence of much repetition work prevents a system of payment by piece being largely introduced. " Indeed, the confessions and mutual accusations of employer and employed shows that, in the engineering industry at any rate, there was a persistence of "cacanny" alike among capitalist brain-workers and all grades of workmen—the employers accusing the British mechanic of deliberately restricting his output " below that which represents a reasonable day's work, and that this deliberate restriction does ultimately have a serious effect on his character and makes him physically incapable of producing a reasonable day's work through habit which this restriction engenders." On the other hand, the workers attribute this restricted output to the employer's practice of cutting piece-work rates, the workers ' fear of unemployment, and the belief that the older or less experienced hands must not be handicapped by the superior productive powers of their fellow-workmen. (See also reports by the Departmental Committee on the Electrical Trades and Electric Power Supply, and " The Evidence before the Sub-Committee of the Advisory Committee of the Board of Trade on Commercial Intelligence for securing the Position after the War of Certain Branches of British Trade, " Cd. 8275.) These committees of capitalists had one remedy only to suggest, namely combinations among British capitalists, supported by the political and military power of the British Empire. ↩
28. The trusts are already reaching out to the control of what may be the next great source of mechanical power in industry, namely, hydro-electric energy. " An investigator has recently published convincing evidence that two great public utility organizations, the Stone and Webster and the General Electric groups, are systematically acquiring control of the undeveloped water power resources of the nation.... The rapidly increasing dependence of industrial and commercial activities upon hydroelectric energy will, at an early date, place magnificent values upon water-power sites. We know that tremendous speculative profits are assured by the acquisition and holding of such properties without the expenditure of a dollar of capital in their development. We know that the sources of industrial energy are so limited that the centralized and unregulated control of water power in the hands of a few private corporations would soon become the basis of one of the most powerful natural monopolies which may possibly be conceived " (The Foundations of National Prosperity, by R. T. Ely, etc., 1918, " Conservation and Economic Evolution, ' Ralph Hess, p. 159). ↩
29. Annals of American Academy of Political and Social Science, vol. iii., No. 4, January, 1893; Psychologic Basis of Social Economics, L. F. Ward, pp. 89-90. ↩
30. Incentives in the New Industrial Order, by J. A. Hobson, 1922, p. 16. ↩
31. Conservatism, by Lord Hugh Cecil, 1912, p. 104. ↩
32. In such countries as Germany and France—as also in Australia and New Zealand—the proportion was even before the Great War considerably greater; although in the United States, owing to the continuance in capitalist hands of the railways, telegraphs and most of the tramway, gas and electricity services, it was smaller. ↩
33. It is important to recollect that not only in medieval England but in the England of the seventeenth and early eighteenth century, the majority of workers owned their instruments of production and the product of their labor. The yeoman cultivator, the domestic manufacturer, the craftsman of the corporate towns, with his journeyman and apprentice, might find himself and his family on the verge of starvation through a bad harvest, an epidemic or a great fire, a foreign war or the introduction of a substitute trade or process. All these temporary disturbances to the accustomed livelihood seemed to him the Act of God in no way altering his relation to the other members of the community in which he lived. So long as the head of the little industrial group owned the instruments of production and the product of his labor and produced food or other commodities for his own family and for his fellow-citizens, the fear of starvation through continuous unemployment, and more particularly unemployment deliberately caused by an economic superior, was practically non-existent. Moreover, what the peasant cultivator or master craftsman lost by ill luck he more than made up by the slow but continuous improvement in the processes of production characteristic of nascent capitalism. Thus we find during the first half of the eighteenth century a stationary population of turbulent workers, drinking heavily, eating largely of meat, rollicking in the streets, betting and fighting at the fairs, occasionally recruiting the much-admired profession of highwaymen, more often touring the country as professional vagrants, and generally behaving so as to shock the pious justices into forming Societies for the Reformation of Manners whilst giving endless opportunities of illicit gains to the notorious trading justices who sprang up in urban districts. For a detailed description of the growth of destitution and pauperism coincidentally with the Industrial Revolution see English Local Government: Statutory Authorities for Special Purposes, by S. and B. Webb, 1922; and The Parish and the County, 1907, by the same. ↩
34. Hansard, vol. 33, p. 671; The Life of Francis Place, 1771-1854, by Graham Wallas, 1898, p. 114. ↩
35. It is needless to remind the reader that in previous periods of depression accompanied by a penal Poor Law, large masses of vagrants have sprung up and have been dealt with not by the withdrawal of supplies but by penal imprisonment. One of the apparently good results of universal maintenance for unemployed persons under the Insurance Act and the lax administration of outdoor relief has been the relative absence of vagrancy: few unemployed men being willing to take " to the road " at the cost of giving up unemployment benefit. It is not so universally recognized that any withdrawal of this maintenance would mean an immediate recrudescence of vagrancy with a demand for the prosecution and punishment of any person found wandering " without the means of subsistence." But this would be countered by an immediate agitation for the prosecution and imprisonment of all persons without the method of subsistence, i.e., without a recognized way of earning their livelihood by producing commodities or services for other people to consume.↩
36. The Clarke Papers: Selections from the Papers of William Clarke, edited by C. H. Firth, for the Camden Society, 1891, vol. i., pp. 302-3. And see English Democratic Ideas in the Seventeenth Century, by G. P. Gooch, pp. 202-226. ↩
37. The Clarke Papers: Selections from the Papers of William Clarke, edited by C. H. Firth, for the Camden Society, 1891, vol. i., pp. 304-5. ↩
38. Ibid., p. 307. ↩
39. Ibid., vol. i, pp. 304-5, 315. ↩
40. A Constitution for the Socialist Commonwealth of Great Britain, by S. and B. Webb, 1920. ↩
41. A Constitution for the Socialist Commonwealth of Great Britain, by S. and B. Webb, 1920, pp. 355-6. ↩