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Socialism As It Is - A Survey of The World-Wide Revolutionary Movement
by William English Walling
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[TRANSCRIBER'S NOTE: Footnotes have been corrected and moved to the end of chapters.]

SOCIALISM AS IT IS

A SURVEY OF THE WORLD-WIDE REVOLUTIONARY MOVEMENT

BY

WILLIAM ENGLISH WALLING

New York

THE MACMILLAN COMPANY

1918

All rights reserved

COPYRIGHT, 1912,

BY THE MACMILLAN COMPANY.

Set up and electrotyped. Published April, 1912. Reprinted October, 1912; January, 1915.

Norwood Press J. S. Cushing Co.—Berwick & Smith Co. Norwood, Mass., U.S.A.



PREFACE

The only Socialism of interest to practical persons is the Socialism of the organized Socialist movement. Yet the public cannot be expected to believe what an organization says about its own character or aims. It is to be rightly understood only through its acts. Fortunately the Socialists' acts are articulate; every party decision of practical importance has been reached after long and earnest discussion in party congresses and press. And wherever the party's position has become of practical import to those outside the movement, it has been subjected to a destructive criticism that has forced Socialists from explanations that were sometimes imaginary or theoretical to a clear recognition and frank statement of their true position. To know and understand Socialism as it is, we must lay aside both the claims of Socialists and the attacks of their opponents and confine ourselves to the concrete activities of Socialist organizations, the grounds on which their decisions have been reached, and the reasons by which they are ultimately defended.

Writers on Socialism, as a rule, have either left their statements of the Socialist position unsupported, or have based them exclusively on Socialist authorities, Marx, Engels, and Lasalle, whose chief writings are now half a century old. The existence to-day of a well-developed movement, many-sided and world-wide, makes it possible for a writer to rely neither on his personal experience and opinion nor on the old and familiar, if still little understood, theories. I have based my account either on the acts of Socialist organizations and of parties and governments with which they are in conflict, or on those responsible declarations of representative statesmen, economists, writers, and editors which are not mere theories, but the actual material of present-day polities,—though among these living forces, it must be said, are to be found also some of the teachings of the great Socialists of the past.

It will be noticed that the numerous quotations from Socialists and others are not given academically, in support of the writer's conclusions, but with the purpose of reproducing with the greatest possible accuracy the exact views of the writer or speaker quoted. I am aware that accuracy is not to be secured by quotation alone, but depends also on the choice of the passages to be reproduced and the use made of them. I have therefore striven conscientiously to give, as far as space allows, the leading and central ideas of the persons most frequently quoted, and not their more hasty, extreme, and less representative expressions.

I have given approximately equal attention to the German, British, and American situations, considerable but somewhat less space to those of France and Australia, and only a few pages to Italy and Belgium. This allotment of space corresponds somewhat roughly to the relative importance of these countries in the international movement. As my idea has been not to describe, but to interpret, I have laid additional weight on the first five countries named, on the ground that each has developed a distinct type of labor movement. As I am concerned with national parties and labor organizations only as parts of the international movement, however, I have avoided, wherever possible, all separate treatment and all discussion of features that are to be found only in one country.

The book is divided into three parts; the first deals with the external environment out of which Socialism is growing and by which it is being shaped, the second with the internal struggles by which it is shaping and defining itself, the third with the reaction of the movement on its environment. I first differentiate Socialism from other movements that seem to resemble it either in their phrases or their programs of reform, then give an account of the movement from within, without attempting to show unity where it does not exist, or disguising the fact that some of its factions are essentially anti-Socialist rather than Socialist, and finally, show how all distinctively Socialist activities lead directly to a revolutionary outcome.

I am indebted to numerous persons, Socialists and anti-Socialists, who during the twelve years in which I have been gathering material—in nearly all the countries mentioned—have assisted me in my work. But I must make special mention of the very careful reading of the whole manuscript by Mr. J. G. Phelps Stokes, and of the numerous and vital changes made at his suggestion.



CONTENTS

PAGE PREFACE v

INTRODUCTION ix

PART I

"STATE SOCIALISM" AND AFTER

CHAPTER I. THE CAPITALIST REFORM PROGRAM 1 II. THE NEW CAPITALISM 16 III. THE POLITICS OF THE NEW CAPITALISM 32 IV. "STATE SOCIALISM" AND LABOR 46 V. COMPULSORY ARBITRATION 66 VI. AGRARIAN "STATE SOCIALISM" IN AUSTRALASIA 85 VII. "EQUALITY OF OPPORTUNITY" 97 VIII. THE "FIRST STEP" TOWARDS SOCIALISM 108

PART II

THE POLITICS OF SOCIALISM

I. "STATE SOCIALISM" WITHIN THE MOVEMENT 117 II. "REFORMISM" IN FRANCE, ITALY, AND BELGIUM 131 III. "LABORISM" IN GREAT BRITAIN 146 IV. "REFORMISM" IN THE UNITED STATES 175 V. REFORM BY MENACE OF REVOLUTION 210 VI. REVOLUTIONARY POLITICS 231 VII. THE REVOLUTIONARY TREND 248

PART III

SOCIALISM IN ACTION

I. SOCIALISM AND THE "CLASS STRUGGLE" 276 II. THE AGRICULTURAL CLASSES AND THE LAND QUESTION 300 III. SOCIALISM AND THE "WORKING CLASS" 324 IV. SOCIALISM AND LABOR UNIONS 334 V. SYNDICALISM; SOCIALISM THROUGH DIRECT ACTION OF LABOR UNIONS 354 VI. THE "GENERAL STRIKE" 387 VII. REVOLUTION IN DEFENSE OF CIVIL GOVERNMENT 401 VIII. POLITICAL AND SOCIAL REVOLUTION 416 IX. THE TRANSITION TO SOCIALISM 426

NOTES 437

INDEX 447



INTRODUCTION

The only possible definition of Socialism is the Socialist movement. Karl Marx wrote in 1875 at the time of the Gotha Convention, where the present German party was founded, that "every step of the real movement is of more importance than a dozen programs," while Wilhelm Liebknecht said, "Marx is dear to me, but the party is dearer."[1] What was this movement that the great theorist put above theory and his leading disciple valued above his master?

What Marx and Liebknecht had in mind was a social class which they saw springing up all over the world with common characteristics and common problems—a class which they felt must and would be organized into a movement to gain control of society. Fifty years before it had been nothing, and they had seen it in their lifetime coming to preponderate numerically in Great Britain as it was sure to preponderate in other countries; and it seemed only a question of time before the practically propertyless employees of modern industry would dominate the world and build up a new society. This class would be politically and economically organized, and when its organization and numbers were sufficient it would take governments out of the hands of the old aristocratic and plutocratic rulers and transform them into the instruments of a new civilization. This is what Marx and Liebknecht meant by the "party" and the "movement."

From the first the new class had been in conflict with employers and governments, and these struggles had been steadily growing in scope and intensity. Marx was not so much interested in the immediate objects of such conflicts as in the struggle itself. "The real fruit of their victory," he said, "lies, not in immediate results, but in the ever expanding union of the workers."[2] As the struggle evolved and became better organized, it tended more and more definitely and irresistibly towards a certain goal, whether the workers were yet aware of it or not. If, therefore, we Socialists participate in the real struggles of politics, Marx said of himself and his associates (in 1844, at the very outset of his career), "we expose new principles to the world out of the principles of the world itself.... We only explain to it the real object for which it struggles."[3]

But the public still fails, in spite of the phenomenal and continued growth of the Socialist movement in all modern countries, to grasp the first principle on which it is based.

"Socialism has many phases," says a typical editorial in the Independent. "It is a political party, an economic creed, a religion, and a stage of history. It is world-wide, vigorous, and growing. No man can tell what its future will be. Its philosophy is being studied by the greatest minds of the world, and it deserves study because it promises a better, a safer, and a fairer life to the masses. But as yet it is only a theory, a hypothesis. It has never been tried in toto.... It has succeeded only where it has allied itself with liberal and opportunist rather than radical policies."[4]

As the Socialist movement has nowhere achieved political power, obviously it can neither claim political success or be accused of political failure. Nor does this fact leave Socialism as a mere theory, in view of its admitted and highly significant success in organizing and educating the masses in many countries and animating them with the purpose of controlling industry and government.

Mr. John Graham Brooks, in the Atlantic Monthly, gives us another equally typical variation of the same fundamental misunderstanding. "Never a theory of social reconstruction was spun in the gray mists of the mind," says Mr. Brooks, "that was not profoundly modified when applied to life. Socialism as a theory is already touching life at a hundred points, and among many peoples—Socialism has been a faith. It is slowly becoming scientific, in a sense and to the extent that it submits its claims to the comparative tests of experience."[5]

Undoubtedly Socialist theories have been spun both within and without the movement, and to many Socialism has been a faith. But neither faith nor theory has had much to do with the great reality that is now overshadowing all others in the public mind; namely, the existence of a Socialist movement. The Socialism of this movement has never consisted in ready-made formulas which were later subjected to "the comparative test of experience"; it has always grown out of the experience of the movement in the first instance.

Another typical article, in Collier's Weekly, admits that Socialism is now a movement. But as the writer, like so many others, conceives of Socialism as having been, in its inception, a "theory," a "doctrine" promoted by "Utopian dreaming," "incendiary rhetoric," an "anti-civic jargon," he naturally views it with little real sympathy and understanding even in its present form. The same Socialism that was accused of all this narrowness is suddenly and completely transformed into a movement of such breadth that it has neither a new message nor even a separate existence.

"It is merely a new offshoot of a very old faith indeed," we are now told, "the ideal of the altruistic dreamers of all ages, an awakened sense of brotherhood in men. Stripped of all its husks, Socialism stands for no other aim than that. All its other teachings, the public ownership of the land, for example, the nationalization of the means of production and distribution, the economic emancipation of woman, have only program values, as they lead to that one end. Whether, so stripped, it ceases to be Socialism and becomes merely the advance guard of the world-wide liberal movement is not, of course, a question of more than academic interest."[6]

The moment it can no longer be denied that Socialism is a movement, it is at once confused with other movements to which it is fundamentally and irreconcilably opposed. Surely this is no mere mental error, but a deep-seated and irrepressible aversion to what is to many a disagreeable truth,—the rapid growth and development, in many countries, of political parties and labor organizations more and more seriously determined to annihilate the power of private property over industry and government.

The radical misconceptions above quoted, almost universal where Socialism is still young, are by no means confined to non-Socialists. Many writers who are supposed, in some degree at least, to voice the movement, are as guilty as those who wholly repudiate it. Mr. H. G. Wells, for instance, says that Socialism is a "system of ideas," and that "Socialism and the Socialist movement are two different things."[7] If Socialism is indeed no more than a "growing realization of constructive needs in every man's mind," and if every man is more or less a Socialist, then there is certainly no need for that antagonism to employers and property owners of which Mr. Wells complains.

Mr. Wells himself gives the true Socialist standpoint when he goes on to write that political parties must be held together "by interests and habits, not ideas." "Every party," he continues, "stands essentially for the interests and mental usages of some definite class or group of classes in the existing community.... No class will abolish itself, materially alter its way or life, or drastically reconstruct itself, albeit no class is indisposed to cooeperate in the unlimited socialization of any other class. In that capacity of aggression upon the other classes lies the essential driving force of modern affairs."[8]

The habits and interests of a large and growing part of the population in every modern country are developing a capacity for effective aggression against the class which controls industry and government. As this class will not socialize or abolish itself, the rest of the people, Socialists predict, will undertake the task. And the abolition of capitalism, they believe, will be a social revolution the like of which mankind has hitherto neither known nor been able to imagine.

FOOTNOTES:

[1] John Spargo, "Karl Marx," pp. 312, 331.

[2] John Spargo, op. cit., p. 116.

[3] John Spargo, op. cit., p. 73.

[4] The Independent (New York), commenting on the Socialist victory in the Milwaukee municipal elections of April, 1910.

[5] "Recent Socialist Literature," by John Graham Brooks, Atlantic Monthly, 1910. Page 283.

[6] Collier's Weekly, July 30, 1910.

[7] H. G. Wells, "Socialism and the Family."

[8] H. G. Wells, "The New Macchiavelli."

SOCIALISM AS IT IS



PART I

"STATE SOCIALISM" AND AFTER



CHAPTER I

THE CAPITALIST REFORM PROGRAM

Only that statesman, writer, or sociologist has the hearing of the public to-day who can bind all his proposed reforms together into some large and far-sighted plan.

Mr. Roosevelt, in this new spirit, has spoken of the "social reorganization of the United States," while an article in one of the first numbers of La Follette's Weekly protested against any program of reform "which fails to deal with society as a whole, which proposes to remedy certain abuses but admits its incapacity to reach and remove the roots of the other perhaps more glaring social disorders."

Some of those who have best expressed the need of a general and complete social reorganization have done so in the name of Socialism. Mr. J. R. MacDonald, recently chairman of the British Labour Party, for example writes that the problem set up by the Socialists is that of "co-ordinating the forces making for a reconstruction of society and of giving them rational coherence and unity,"[9] while the organ of the middle-class Socialists of England says that their purpose is "to compel legislators to organize industry."[10]

Indeed, the necessity and practicability of an orderly and systematic reorganization in industrial society has been the central idea of British Socialists from the beginning, while they have been its chief exponents in the international Socialist movement. But the idea is equally widespread outside of Socialist circles. It will be hard for British Socialists to lay an exclusive claim to this conception when comrades of such international prominence as Edward Bernstein, who holds the British view of Socialism, assert that Socialism itself is nothing more than "organizing Liberalism."[11]

Whether Socialists were the first to promote the new political philosophy or not, it is undeniable that the Radicals and Liberals of Great Britain and other countries have now taken it up and are making it their own. Mr. Winston Churchill, while Chairman of the Board of Trade, and Mr. Lloyd George, Chancellor of the Exchequer, members of the British Cabinet, leaders of the Liberal Party, recognize that the movement among governments towards a conscious reorganization of industry is general and demands that Great Britain should keep up with other countries.

"Look at our neighbor and friendly rival, Germany," said Mr. Churchill recently. "I see that great State organized for peace and organized for war, to a degree to which we cannot pretend.... A more scientific, a more elaborate, a more comprehensive social organization is indispensable to our country if we are to surmount the trials and stresses which the future years will bring. It is this organization that the policy of the Budget will create."[12]

Advanced and radical reformers of the new type all over the world, those who put forward a general plan of reform and wish to go to the common roots of our social evils, demand, first of all, reorganization. But how is such a reorganization to be worked out? The general programs have in every country many features in common. To see what this common basis is, let us look at the generalizations of some of the leading reformers.

One of the most scientific and "constructive" is Mr. Sidney Webb. No one has so thoroughly mastered the history of trade unionism, and no one has done more to promote "municipal Socialism" in England, both in theory and in practice, for he has been one of the leaders of the energetic and progressive London County council from the beginning of the present reform period. He has also been one of the chief organizers of the more or less Socialistic Fabian Society, which has done more towards popularizing social reform in England than any other single educative force, besides sending into all the corners of the world a new and rounded theory of social reform—the work for the most part of Sidney Webb, Bernard Shaw, and a few others.

Mr. Webb has given us several excellent phrases which will aid us to sum up the typical social reformers' philosophy in a few words. He insists that what every country requires, and especially Great Britain, is to center its attention on the promotion of the "national efficiency." This refers largely to securing a businesslike and economic administration of the existing government functions. But it requires also that all the industries and economic activities of the country should be considered the business of the nation, that the industrial functions of the government should be extended, and that, even from the business point of view, the chief purpose of government should be to supervise economic development.

To bring about the maximum of efficiency in production would require, in Mr. Webb's opinion and that of the overwhelming majority of reformers everywhere, a vast extension of government activities, including not only the nationalization and municipalization of many industries and services, but also that the individual workman or citizen be dealt with as the chief business asset of the nation and that wholesale public expenditures be entered into to develop his value. Mr. Webb does not think that this policy is necessarily Socialistic, for, as he very wisely remarks, "the necessary basis of society, whether the superstructure be collectivist or individualist, is the same."

Mr. Wells in his "New Worlds for Old" also claims that the new policy of having the State do everything that can promote industrial efficiency (which, unlike Mr. Webb, he persists in calling Socialism) is to the interest of the business man.

"And does the honest and capable business man stand to lose or gain by the coming of such a Socialist government?" he asks. "I submit that on the whole he stands to gain....

"Under Socialist government such as is quite possible in England at the present time:—

"He will be restricted from methods of production and sale that are socially mischievous.

"He will pay higher wages.

"He will pay a large proportion of his rent-rate outgoings to the State and Municipality, and less to the landlord. Ultimately he will pay it all to the State or Municipality, and as a voter help to determine how it shall be spent, and the landlord will become a government stockholder. Practically he will get his rent returned to him in public service.

"He will speedily begin to get better-educated, better-fed, and better-trained workers, so that he will get money value for the higher wages he pays.

"He will get a regular, safe, cheap supply of power and material. He will get cheaper and more efficient internal and external transit.

"He will be under an organized scientific State, which will naturally pursue a vigorous scientific collective policy in support of the national trade.

"He will be less of an adventurer and more of a citizen."[13]

Mr. Churchill while denying any sympathy for Socialism, as both he and the majority of Socialists understand it, frankly avows himself a collectivist. "The whole tendency of civilization," he says, "is towards the multiplication of the collective functions of society. The ever growing complications of civilizations create for us new services which have to be undertaken by the State, and create for us an expansion of the existing services. There is a growing feeling, which I entirely share, against allowing those services which are in the nature of monopolies to pass into private hands. [Mr. Churchill has expressed the regret that the railways are not in the hands of the State.] There is a pretty steady determination, which I am convinced will become effective in the present Parliament to intercept all future unearned increment, which may arise from the increase in the speculative value of the land."[14] (Italics mine.)

Mr. Churchill's declared intention ultimately "to intercept all future unearned increment" of the land is certainly a tremendous step towards collectivism, as it would ultimately involve the nationalization of perhaps a third of the total wealth of society. With railways and monopolies of all kinds also in government hands, a very large part of the industrial capital of the country would be owned by the State, and, though all agricultural capital, and therefore the larger part of the total, remained in private hands, we are certainly justified in calling such a state of society capitalist collectivism.

But not one of the elements of this collectivism is a novelty. Railroads are owned by governments in most countries, and monopolies often are. The partial appropriation of the "unearned increment" is by no means new, since a similar policy is being adopted in Germany at the present moment, and is favored not by the radicals alone, but by the most conservative forces in the country; namely, the party of landed Prussian nobility. Count Posadovsky, a former minister, has written a pamphlet in which he urges that the State should buy up the land in and about the cities, and also that it should fix a definite limit beyond which land values must not rise. Nearly all the chief cities of Prussia, more than a hundred, are enforcing such a tax in a moderate form, and the conservatives in the Reichstag proposed that the national government should be given a right to tax in the same field. Their bill was enacted, and, in the second half of 1911, the German government, it was estimated, would raise over $3,000,000 by this tax, and in 1912 it is expected to give $5,000,000. This tax, which is collected when land changes hands by sale or exchanges, rises gradually to 30 per cent when the increase has been 290 per cent or more. Of course this scale is likely to be still further raised and to be made more steep as the tax becomes more and more popular.

Mr. Churchill's defense of the new policy of the British government is as significant as the new laws it has enacted:—

"You may say that unearned increment of the land," he says, "is on all-fours with the profit gathered by one of those American speculators who engineer a corner in corn, or meat, or cotton, or some other vital commodity, and that the unearned increment in land is reaped by the land monopolist in exact proportion, not to the service but to the disservice done. It is monopoly which is the keynote; and where monopoly prevails, the greater the injury to society the greater the reward of the monopolist will be....

"Every form of enterprise, every step in material progress, is only undertaken after the land monopolist has skimmed the cream off for himself, and every where to-day the man, or the public body, who wishes to put land to its highest use is forced to pay a preliminary fine in land values to the man who is putting it to an inferior use, and in some cases to no use at all.... If there is a rise in wages, rents are able to move forward because the workers can afford to pay a little more. If the opening of a new railway or a new tramway, or the institution of an improved service of workmen's trains, or the lowering of fares, or a new invention, or any other public convenience affords a benefit to the workers in any particular district, it becomes easier for them to live, and therefore the landlord and the ground landlord, one on top of the other, are able to charge them more for the privilege of living there." (Italics mine.)[15]

But we cannot believe that the government of Great Britain, which draws so much of its support from the wealthy free trade merchants and manufacturers has been persuaded to adopt this new principle so much by the argument that a land rent weighs on the working classes, though it is true that the manufacturer may have to pay for this in higher money wages, as it has by that other argument of Mr. Churchill's that it weighs directly on business.

"The manufacturer proposing to start a new industry," he says, "proposing to erect a great factory offering employment to thousands of hands, is made to pay such a price for his land that the purchase price hangs around the neck of his whole business, hampering his competitive power in every market, clogging far more than any foreign tariff in his export competition; and the land values strike down through the profits of the manufacturer on to the wages of the workman. The railway company wishing to build a new line finds that the price of land which yesterday was only rated at its agricultural value has risen to a prohibitive figure the moment it was known that the new line was projected; and either the railway is not built, or, if it is, it is built only on terms which largely transfer to the landowner the profits which are due to shareholders and the privileges which should have accrued to the traveling public." (My italics.)[16]

No doubt Mr. Churchill's failure to mention shippers was inadvertent.

It was a practical application of these business principles and chiefly in the interest of the employers, manufacturers, investors, and shippers, that the State decided, as a first step, to take 20 per cent of all the increase in land values from the present date and to levy an annual tax of one fifth of one per cent on all land held for speculation, i.e. used neither for agricultural nor for industrial nor building purposes.

The collectivist policy, that governments should undertake to reorganize industry and to develop the industrial efficiency of the population, is a relatively new one, however, and where non-Socialist Liberals and Radicals are adopting it, they do so as a rule with apologies. For while such reforms can be considered as investments which in the long run repay not only the community as a whole, but also the business interests, they involve a considerable initial cost, even beyond what can be raised by the gradual expropriation of city land rents, and the question at once arises as to who is to pay the rest of the bill. The supporter of the new reforms answers that the business interests should do so, since the development of industry, which is the object of this expenditure, is more profitable to them than to other classes. While Mr. Churchill declares that Liberalism attacks landlordism and monopoly only, and not capital itself, as Socialism does, he is at great pains to show that the cost of the elaborate program of social reform is borne not by monopolist alone, but by that larger section of the business interests vaguely known as those possessing "Special Privileges." In distributing the new taxes in the House of Commons, the question to be asked of each class of wealth is, he says, "By what process was it got?" and a distinction is to be made, not between monopoly and competitive business, but "between wealth which is the fruit of productive enterprise and industry or of individual skill, and wealth which represents the capture by individuals of socially created values."[17]

"A special burden," says Mr. Churchill, "is to be laid upon certain forms of wealth which are clearly social in their origin and have not at any point been derived from a useful or productive process on the part of their possessors."[18] And since all income "derived from dividends, rent, or interest," is, according to Mr. Churchill, unearned increment, it is evident that nearly every business, all being beneficiaries, ought to share the burden of the new reforms.[19] At the same time he hastens to reassure his wealthy supporters, especially among merchants and shippers, on grounds explained below by Mr. Lloyd George that the new taxes will not rise faster than the new profits they will bring in, that they "will not appreciably affect, have not appreciably affected, the comfort, the status, or even the style of living of any class in the United Kingdom."[20]

Mr. Lloyd George in proposing the so-called Socialistic Budget of 1910 reminded the representatives of the propertied interests [he might have added "in proportion to their wealth"] that the State, in which they all owned a share, should not be looked upon so narrowly as a capitalistic enterprise. They could afford to allow the State to wait longer for its returns.

"A State can and ought to take a longer and a wider view of its investments," said Mr. Lloyd George, "than individuals. The resettlement of deserted and impoverished parts of its own territories may not bring to its coffers a direct return which would reimburse it fully for its expenditure; but the indirect enrichment of its resources more than compensate it for any apparent and immediate loss. The individual can rarely afford to wait; a State can; the individual must judge of the success of his enterprise by the testimony given for it by his bank book; a State keeps many ledgers, not all in ink, and when we wish to judge of the advantage derived by a country from a costly experiment, we must examine all those books before we venture to pronounce judgment....

"We want to do more in the way of developing the resources of our own country....

"The State can help by instruction, by experiment, by organization, by direction, and even, in certain cases which are outside the legitimate sphere of individual enterprise, by incurring direct responsibility. I doubt whether there is a great industrial country in the world which spends less money on work directly connected with the development of its resources than we do. Take, if you like, and purely as an illustration, one industry alone,—agriculture,—of all industries the most important for the permanent well-being of any land. Examine the budgets of foreign lands,—we have the advantage in other directions,—but examine and compare them with our own, and Honorable Members will be rather ashamed at the contrasts between the wise and lavish generosity of countries much poorer than ours and the short-sighted and niggardly parsimony with which we dole out small sums of money for the encouragement of agriculture in our country....

"We are not getting out of the land anything like what it is capable of endowing us with. Of the enormous quantity of agricultural and dairy produce, and fruit, and the timber imported into this country, a considerable portion could be raised on our own lands."[21]

The proposed industrial advance is to be secured largely at the expense of capital, but for its ultimate profit. The capitalists are to pay the initial cost. Mr. Lloyd George is very careful to remind them that even if the present income tax were doubled, five years of the phenomenal yet steady growth of the income of the rich and well-to-do who pay this tax, would leave them as well off as they were before. He proposes to leave the total capital in private hands intact on the pretext that it is needed as "an available reserve for national emergencies." And as an evidence of this he refused to increase the existing rate of inheritance tax levied against the very largest estates (15 per cent on estates of more than L3,000,000). Though up to this point he graduated this tax more steeply than before, and nothing could be more widely popular than a special attack on such colossal estates, Mr. Lloyd George draws the line at 15 per cent, on the ground that a large part of the income from such estates goes into investments, and more confiscatory legislation might seriously affect the normal increase of the capital and "the available reserves of taxation" of the country.[22]

Mr. Lloyd George does not fail to guarantee to capital as a whole, "honest capital," that it will suffer no loss from his reforms. "I am not one of those who advocate confiscation," he said several years ago, "and at any rate as far as I am concerned honest capital, capital put in honest industries for the development of the industry, the trade, the commerce, of this country will have nothing to fear from any proposal I shall ever be responsible for submitting to the Parliament of this realm." (My italics.)[23]

Mr. Lloyd George is well justified, then, in ridiculing the idea that he is waging war against industry or property or trying to destroy riches. He not only disproves this accusation by pointing to the capitalist character of his collectivist program, but boasts that the richest men in the House of Commons are on the Liberal side, together with hundreds of thousands of the men who are building up trade and business.

And the attitude of the Radicals of the present British government is the same as that of capitalist collectivists elsewhere. However certain vested interests may suffer, there is nowhere any tendency to weaken capitalism as a whole. Capitalism is to be the chief beneficiary of the new movement.

There are many differences of opinion, however, as to the ultimate effect of the collectivist program. In Great Britain, which gives us our best illustration, there are Liberals who claim that it is Socialistic and others who deny that it has anything to do with Socialism; Conservatives who accept part of the program, and others who reject the whole as being Socialistic; Socialists, who claim that their ideas have been incorporated in the last two Budgets, and other Socialists who deny that either had anything in common with their principles.

While it is certain that the present policy of the British government is by no means directed against the power or interests of the capitalist class as a whole, and in no way resembles that of the Socialists, were not Socialist arguments used to support the government's position, and may not these lead towards a Socialist policy?

Certainly some of the principles laid down seem at first sight to have been Socialistic enough. For example, when Mr. Churchill said that incomes from dividends, rent, and interest are unearned, or when Mr. Lloyd George cried out: "Who is responsible for the scheme of things whereby one man is engaged through life in grinding labor to win a bare and precarious subsistence for himself, and when, at the end of his days, he claims at the hands of the community he served, a poor pension of eight pence a day, he can only get it through a revolution, and another man who does not toil receives every hour of the day, every hour of the night, whilst he slumbers, more than his poor neighbor receives in a whole year of toil? Where did the table of that law come from? Whose fingers inscribed it?"[24]

Lord Rosebery has pointed to the extremely radical nature of Mr. Lloyd George's arguments. The representatives of the Government had urged, he said, that the land should be taxed without mercy:—

"(1) because its existence is not due to the owner;

"(2) because it is limited in quantity;

"(3) because it owes nothing of its value to anything the owner does or spends;

"(4) because it is absolutely necessary for existence and production."[25]

Lord Rosebery says, justly, that all these propositions except the last apply to many other forms of property than land, as, for instance, to government bonds, and that it certainly would be Socialism to attempt to confiscate these by taxation.

Lord Rosebery's task would have become even easier later, when Mr. Lloyd George enlarged his attack on the landlords definitely into an attack against the idle upper classes, who with their dependents he reckoned at two million persons. He accused this class of constituting an intolerable burden on the community, said that its existence was the symptom of the disease of society, and that only bold remedies could help. The whole class of inactive capitalists he viewed as a load both on the non-capitalist, wage-earning, salaried and professional classes, and on the active capitalists. Mr. Lloyd George argues with his capitalist supporters that capitalism will be all the stronger when freed from its parasites. But Lord Rosebery could answer that the active could no more be distinguished from the passive capitalists than landowners from bondholders.

An article in the world's leading Socialist newspaper, Vorwaerts, of Berlin, shows that many Socialists even regarded these speeches as revolutionary:—

"The Radical wing of the British Liberals," it said, "is leading the attack with ideal recklessness and lust of battle. It is conducting the agitation in language which in Germany is customarily used only by a 'red revolutionist.' If the German Junker (landlord conservative) were to read these speeches, he would swear that they were delivered by the Social Democrats of the reddest dye, so ferociously do they contrast between the rich and the poor. They appeal to the passion of the people; they exploit social distinctions in the manner best calculated to fire popular anger against the Lords.

"In the heart of battle the Liberals are employing language which at other times they would have considered twice. Their words will some day be assuredly turned against them, when more than the mere Budget or the existence of the Lords is at stake. When the Liberals, allied with the conservative enemy of to-day, are fighting the working classes, the Socialists will recall this language as proof that the Liberals themselves recognize the injustice of the existing order.

"Mr. Lloyd George made such a speech at Newcastle that the seeds he is planting may first bring forth Liberal fruit, but there can be no doubt that Socialism will eventually reap the harvest. His arguments must arouse the workingmen, and when they have accustomed themselves to look at things from this standpoint it is certain that once standing before the safes of the industrial capitalists they will never close their eyes."

It is perhaps true that the Socialists will at some future day reap the harvest from Mr. Lloyd George's and Mr. Churchill's campaigns, though a careful analysis of the expressions of these statesmen will show that they have said nothing and done nothing in contradiction to their State-capitalistic or "State Socialist" standpoint.

There is no doubt that the principle of the new taxes and the new expenditure these statesmen are introducing is radical, and that it marks a great stride towards a collectivist form of capitalism. Let us assume that development continues along the lines of their present policies. In a very few years the increased expenditure on social reform will be greater than the increased expenditure on army and navy, and the increase of direct and graduated taxes that fall on the upper classes will be greater than that of the indirect taxes that fall on the masses. We will assume even that military expenditure and indirect taxes on articles the working people consume will begin some day to decrease, while graduated taxes directed against the very wealthy and social reform expenditures rise until they quite overshadow them. There is every reason to believe that the social reformers of the British and other governments hope for such an outcome and expect it. This would be in no way inconsistent with their policy of subordinating everything, to use one of their expressions, to "that trade and commerce which constitutes the source of our wealth."

For the collectivist expenditures, intended to increase the national product through governmental enterprises for the promotion of industry, and for raising the industrial efficiency of the workers, would be introduced gradually, and would soon be accompanied by results which would show that they paid financially. And finally, even if railways and monopolies were nationalized and their profits as well as all the future rise in land value went to the State to be used for these purposes, as Mr. Churchill hopes, and even if a method could be found by which a large part of the income of the idle rich would be confiscated without touching the active capital of the merchant and manufacturer, the position of the latter classes, through this policy, might become still more superior relatively to that of the masses than it is at present. The industrial capitalists might even control a larger share of the national income and exercise a still more powerful influence over the State than they do to-day.

The classes that the more or less collectivist budgets of 1910 and 1911 actually do favor, those whose economic and political power they actually do increase, are the small and middle-sized capitalists and even the larger capitalists other than landlords and monopolists. The great mass of income taxpayers, business men, farmers, and the professional classes with incomes from about L200 to L3000 ($1000 to $15,000) are given every encouragement, while those with somewhat larger incomes are only slightly discriminated against on the surface, in the incidence of the taxes, and not at all when we inquire into the ways in which the taxes are being expended. Certainly nothing is being done that will "appreciably affect the status or style of living of any class in the United Kingdom," or that will check materially the enormous rise of this "upper middle" class both in wealth and numbers—for the income tax payers have doubled their income in a little more than a decade, until it has reached the total of more than a billion pounds a year. And surely no tendency could be more diametrically opposed to a Socialism whose purpose it is to improve the relative position of the "lower middle" and working classes.

While the new reform programs of the various parties are in general agreement in all countries, in that they are all collectivist, and favor as a rule the same social classes, there is much controversy as to names, whether they shall be called Socialistic or merely radical or progressive. The question is really immaterial.

"Capital, divested of its perversions, would be natural Socialism," says one of Henry George's most prominent disciples.[26] Whether the proposed reforming is done with a purified and strengthened capitalism in view, or in the name of "natural Socialism" or "State Socialism," the program itself is in every practical aspect the same.

If a contrast formerly appeared to exist between "Individualist" and "State Socialist" reformers, it was never more than a contrast in theory, quickly dispelled when the time for action arrived. The individualist radical would have the State do as little as possible, but still is compelled to resort to an increase of its powers at every turn; the "State Socialist" would have the State do as much as practicable, but would still retain State action within the rigid limits imposed by the need of gaining capitalist support and the desire for immediate political success. In economic policy the Individualist is for checking the excess of monopoly and special privilege in order to allow "equal opportunity" or a free development to whatever competition or "natural Capitalism" remains, while the "State Socialist" is more concerned with protecting and promoting the natural checking of the excesses of competitive capitalism and private property that comes with "natural monopoly" and its regulation by government. The "State Socialist," however critical he is towards competition, recognizes that the first practical possibility of putting an end to its excesses comes when monopoly is already established, and when it is relatively easy for the State to step in to nationalize or municipalize; the Individualist reformer who wishes to preserve competition where practicable, at the same time recognizes that it is impossible to do so where monopolies have become firmly rooted in certain industries, and he also at this point proposes nationalization, municipalization, or thoroughgoing governmental control.

Henry George himself recognizes that "State Socialism," which he called simply "Socialism," and the "natural Capitalism" he advocated, far from being contradictory, were complementary and interdependent. Mr. Louis Post says:—

"Even in the economic chapters of 'Progress and Poverty' its author saw the possibility of society's approaching the 'ideal of Jeffersonian Democracy, the promised land of Herbert Spencer, the abolition of government. But of government only as a directing and repressive power.' At the same time and in the same degree of approach, he regarded it as possible for society also to realize the dream of Socialism."[27]

The following passage leaves no doubt that Mr. Post is correct, and at the same time shows in the clearest way how the two policies of reform were interwoven in Henry George's mind:—

"Government could take up itself the transmission of messages by telegraph, as well as by mail, of building and operating railroads, as well as of the opening and maintaining common roads. With the present functions so simplified and reduced, functions such as these could be assumed without danger or strain, and would be under the supervision of public attention, which is now distracted. There would be a great and increasing surplus revenue from the taxation of land values for material progress, which would go on with great accelerated rapidity, would tend constantly to increase rent. This revenue arising from the common property would be applied to the common benefit, as were the revenues of Sparta. We might not establish public tables—they would be unnecessary, but we could establish public baths, museums, libraries, gardens, lecture rooms, music and dancing halls, theaters, universities, technical schools, shooting galleries, playgrounds, gymnasiums, etc. Heat, light, and motive power, as well as water, might be conducted through our streets at public expense; our roads be lined with fruit trees; discoveries and inventors rewarded, scientific investigation supported; in a thousand ways the public revenues made to foster efforts for the public benefit. We should reach the ideal of the Socialist, but not through government repression. Government would change its character, and would become the administration of a great cooeperative society. It would become merely the agency by which the common property was administered for the common benefit." (Italics mine.)[28]

But the "State Socialist" and the Individualist reformer, who are often combined in one person, as in the case of Henry George, differ sharply from Socialists of the Socialist movement in aiming at a society, which, however widely government action is to be extended, is after all to remain a society of small capitalists.

Professor Edward A. Ross very aptly sums up the reformer's objections to the anti-capitalist Socialists. Capitalism must be "divested of its perversions," the privately owned monopolies and their political machines, primarily for the purpose of strengthening it against Socialism. "Individualism should make haste to clean the hull of the old ship for the coming great battle with the opponents of private capital...."[29] The reformers, as a rule, like Professor Ross, consciously stand for a new form of private capitalism, to be built up with the aid of the State. This is the avowed attitude of the larger part of the "progressives," "radicals," and "insurgents" of the day.

The new reform programs, however radical, are aimed at regenerating capitalism. The most radical of all, that of the single taxers, who plan not only that the state shall be the sole landlord, but that the railways and the mines shall be nationalized and other public utilities municipalized, do not deny that they want to put a new life into private capitalism, and to stimulate commercial competition in the remaining fields of industry. Mr. Frederick C. Howe, for instance, predicts a revival of capitalistic enterprise, after these measures are enacted, and even looks forward to the indefinite continuation of the struggle between capital and labor.[30]

FOOTNOTES:

[9] The Socialist Review (London), April, 1909.

[10] The New Age (London), Nov. 4, 1909.

[11] Edward Bernstein, "Evolutionary Socialism," p. 154.

[12] Winston Churchill, "Liberalism and the Social Problem," p. 345.

[13] H. G. Wells, "New Worlds for Old," p. 185.

[14] Winston Churchill, op. cit., p. 80.

[15] Winston Churchill, op. cit., pp. 326, 327.

[16] Winston Churchill, op. cit., pp. 326.

[17] Winston Churchill, op. cit., p. 396.

[18] Winston Churchill, op. cit., p. 399.

[19] Winston Churchill, op. cit., p. 336.

[20] Winston Churchill, op. cit., p. 339.

[21] Lloyd George, "Better Times," p. 163.

[22] Lloyd George, op. cit., pp. 94-101.

[23] Lloyd George, op. cit., p. 58.

[24] Lloyd George, op. cit., p. 174.

[25] Lord Rosebery's Speech at Glasgow, Sept. 10, 1909.

[26] Louis F. Post, "Social Service," p. 341.

[27] The Public (Chicago), Nov. 4, 1910.

[28] Henry George, "Progress and Poverty," Book IV, p. 454.

[29] Professor E. A. Ross, "Sin and Society," p. 151.

[30] Frederick C. Howe, "Privilege and Democracy in America," p. 277.



CHAPTER II

THE NEW CAPITALISM

President Taft says that if we cannot restore competition, "we must proceed to State Socialism and vest the government with power to control every business." As competition cannot be revived in industries that have been reorganized on a monopolistic basis, this is an admission that, in such industries, there is no alternative to "State Socialism."

The smaller capitalists and business interests have not yet reconciled themselves, any more than President Taft, to what the Supreme Court, in the Standard Oil Case, called "the inevitable operation of economic forces," and are just beginning to see that the only way to protect the industries that remain on the competitive basis is to have the government take charge of those that have already been monopolized. But the situation in Panama and Alaska and the growing control over railroads and banks show that the United States is being swept along in the world-wide tide towards collectivism, and innumerable symptoms of change in public opinion indicate that within a few years the smaller capitalists of the United States, like those of Germany and Great Britain, will be working with the economic forces instead of trying to work against them. Monopolies, they are beginning to see, cannot be destroyed by private competition, even when it is encouraged by the legislation and the courts, and must be controlled by the government. But government regulation is no lasting condition. If investors and consumers are to be protected, wage earners will most certainly be protected also—as Mr. Roosevelt advocates. And from government control of wages, prices, and securities it is not a long step to government ownership.

The actual disappearance of competition and the growing harmony of all the business interests among themselves are removing every motive for continued opposition to some form of State control,—and even the more far-sighted of the "Captains of Industry," like Judge Gary of the Steel Corporation and many others, are beginning to see how the new policy and their own plans can be made to harmonize. The "Interests" have only recently become sufficiently united, however, to make a common political effort, and it is only after mature deliberation that the more statesmanlike of the capitalists are beginning to feel confident that they have found a political plan that will succeed. As long as the business world was itself fundamentally divided, small capitalists against large, one industry against the other, and even one establishment against another in the same industry, it was impossible for the capitalists to secure any united control over the government. The lack of organization, the presence of competition at every point, made it impossible that they should agree upon anything but a negative political policy.

But now that business is gradually becoming politically as well as economically unified, government ownership and the other projects of "State Socialism" are no longer opposed on the ground that they must necessarily prove unprofitable to capital. If their introduction is delayed, it is at the bottom because they will require an enormous investment, and other employments of capital are still more immediately profitable. Machinery, land, and other material factors still demand enormous outlays and give immediate returns, while investments in reforestation or in the improvement of laborers, for example, only bring their maximum returns after a full generation. But the semi-monopolistic capitalism of to-day is far richer than was its competitive predecessor. It can now afford to date a part of its expected returns many years ahead. Already railroads have done this in building some of their extensions. Nations have often done it, as in building a Panama Canal. And as capitalism becomes further organized and gives more attention to government, and the State takes up such functions as the capitalists direct, they will double and multiply many fold their long-term governmental investments—in the form of expenditures for industrial activities and social reforms.

Already leading capitalists in this country as well as elsewhere welcome the extension of government into the business field. The control of the railroads by a special court over which the railroads have a large influence proves to be just what the railroads have wanted, while there is a growing belief among them, to which their directors and officers occasionally give expression, that the day may come, perhaps with the competition of the Panama Canal, when it will be profitable to sell out to the government—at a good, round figure, of course, such as was recently paid for railroads in France and Italy. Similarly the new wireless systems are leading to a capitalistic demand for government purchase of the old telegraph systems.

Mr. George W. Perkins, recently partner of Mr. J. P. Morgan, foreshadows the new policy in another form when he advocates a Supreme Court of Business (as a preventive of Socialism):—

"Federal legislation is feasible, and if we unite the work for it now we may be able to secure it; whereas, if we continue to fight against it much longer, the incoming time may sweep the question along either to government ownership or to Socialism [Mr. Perkins recognizes that they are two different things].

"I have long believed that we should have at Washington a business court, to which our great problems would go for final adjustment when they could not be settled otherwise. We now have at Washington a Supreme Court, composed, of course, of lawyers only, and it is the dream of every young man who enters law that he may some day be called to the Supreme Court bench. Why not have a similar goal for our business men? Why not have a court for business questions, on which no man could sit who has not had a business training with an honorable record? The supervision of business by such a body of men, who had reached such a court in such a way, would unquestionably be fair and equitable to business, fair and equitable to the public." (Italics mine.)

Mr. Roosevelt and Senator Root are similarly inspired by the quasi-partnership that exists between the government and business in those countries where prices and wages in certain monopolized industries are regulated for the general good of the business interests. In the words of Mr. Root:—

"Germany, to a considerable extent, requires combination of her manufacturers, producers, and commercial concerns. Japan also practically does this. But in the United States it cannot be done under government leadership, because the people do not conceive it to be the government's function. It seems to be rather that the government is largely taken up with breaking up organizations, and that reduces the industrial efficiency of the country."

As the great interests become "integrated," i.e. more and more interrelated and interdependent, the good of one becomes the good of all, and the policy of utilizing and controlling, instead of opposing the new industrial activities of the government, is bound to become general. The enlightened element among the capitalists, composed of those who desire a partnership rather than warfare with the government, will soon represent the larger part of the business world.

Mr. Lincoln Steffens reflects the views of many, however, when he denies that the financial magnates are as yet guided by this "enlightened selfishness," and says that they are only just becoming "class-conscious," and it is true that they have not yet worked out any elaborate policy of social reform or government ownership. None but the most powerful are yet able, even in their minds, to make the necessary sacrifices of the capitalism of the present for that of the future. The majority (as he says) still "undermine the law" instead of more firmly intrenching themselves in the government, and "corrupt the State" instead of installing friendly reform administrations; they still "employ little children, and so exhaust them that they are poor producers when they grow up," instead of making them strong and healthy and teaching them skill at their trades; they still "don't want all the money they make, don't care for things they buy, and don't all appreciate the power they possess and bestow." But all these are passing characteristics. If it took less than twenty years to build up the corporations until the present community of interests almost forms a trust of trusts, how long, we may ask, will it take the new magnates to learn to "appreciate" their power? How long will it take them to learn to enter into partnership with the government instead of corrupting it from without, and to see that, if they don't want to increase the wages and buying power of the workers, "who, as consumers, are the market," the evident and easy alternative is to learn new ways of spending their own surplus? The example of the Astors and the Vanderbilts on the one hand, and Mr. Rockefeller's Benevolent Trust, on the other, show that these ways are infinitely varied and easily learned. Will it take the capitalists longer to learn to use the government for their purposes rather than to abuse it?

It is neither necessary nor desirable, from the standpoint of an enlightened capitalism, that the control of government should rest entirely in the hands of "Big Business," or the "Interests." On the contrary, it is to the interest of capital that all capitalists, and all business interests of any permanence, should be given consideration, no matter how small they may be. The smaller interests have often acted with "Big Business,"—under its leadership, but as industrial activities and destinies are more and more transferred to the political field, the smaller capitalist becomes rather a junior partner than a mere follower. Consolidation and industrial panics have taught him his lesson, and he is at last beginning to organize and to demand his share of profits at the only point where he has a chance to get it, i.e. through the new "State Socialism." Moreover, he is going to have a large measure of success, as the political situation in this country and the actual experience of other countries show. And in proportion as the relations between large and small business become more cordial and better organized, they may launch this government, within a few years, into the capitalist undertakings so far-reaching and many-sided that the half billion expended on the Panama Canal will be forgotten as the small beginning of the new movement.

It is true that for the moment the stupendous wealth and power of the "Large Interests," already more or less consolidated, threaten to overwhelm the rest. Mr. Steffens does not overstate when he says:—

"To state correctly in billions of dollars the actual value of all the property represented in this community of interests, might startle the imagination to some sense of the magnitude of the wealth of these men. But money is no true measure of power. The total capitalization of all they own would not bring home to us the influence of Morgan and his associates, direct and indirect, honest and corrupt, over presidents and Congresses; governors and legislators; in both political parties and over our political powers. And no figures would remind us of their standing at the bar and in the courts; with the press, the pulpit, the colleges, schools, and in society. And even if all their property and all their power could be stated in exact terms, it would not show their relative wealth and strength. We must not ask how much they have. We must ask how much they haven't got."[31]

But over against this economic power the small capitalists, farmers, shopkeepers, landlords, and small business men, have a political power that is equally overwhelming. Until the "trusts" came into being, no issue united this enormous mass. Yet they are still capitalists, and what they want, except the few who still dream of competing with the "trusts," is not to annihilate the latter's power, but to share it. The "trusts," on the other hand, are seeing that common action with the small capitalists, costly as it may be economically, may be made to pay enormously on the political field by putting into the hands of their united forces all the powers of governments.

If the principle of economic union and consolidation has made the great capitalists so strong, what will be the result of this political union of all capitalists? How much greater will be their power over government, courts, politics, the press, the pulpit, and the schools and colleges!

It is not the "trusts" that society has to fear, nor the consolidation of the "trusts," but the organized action of all "Interests," of "Big Business" and "Small Business," that is, of Capitalism.

A moment's examination will show that there is every reason to expect this outcome. Broadly considered, there is no such disparity between large capitalists and small, either in wealth and power, as at first appears. All the accounts of the tendency towards monopoly have been written, not in the name of non-capitalists, but in that of small capitalists. Otherwise we might see that these two forces, interwoven in interest at nearly every point, are also well matched and likely to remain so. And we should see also that it is inconceivable that they will long escape the law of social evolution, stronger than ever to-day, toward organization, integration, consolidation.

Messrs. Moody and Turner, for example, finished a well-weighed study of the general tendencies of large capital in this country with the following conclusion:—

"Through all these channels and hundreds more, the central machine of capital extends its control over the United States. It is not definitely organized in any way. But common interest makes it one great unit—the 'System,' so called.

"It sits in Wall Street, a central power, directing the inevitable drift of great industry toward monopoly. And as the industries one after another come into it for control, it divides the wealth created by them. To the producer, steady conditions of labor; to the investor, stable securities, sure of paying interest; to the maker of monopolies and their allies, the increment of wealth of the continent, and with it the gathering control of all mechanical industry."[32] (My italics.)

Certainly the fundamental social questions in any country at any time are: Who gets the increment of wealth? Who controls industry? No objection can be taken to the facts or reasoning of this and some of the other studies of the "trusts"—as far as they go. What vitiates not only their conclusions, but the whole work, is that written from the standpoint of the small capitalists, they forget that the "trusts" are only part of a larger whole.

The increment of wealth that has gone to large capital in this country in the census period 1900-1910 is certainly less than what has gone to small capital. Farm lands and buildings have increased in value by $18,000,000,000, while the increased wealth in farm animals, crops, and machinery will bring the total far above $20,000,000,000. The increase in city lands and houses other than owned homes, which has not been less than that of the country in recent years, must be reckoned at many billions, and these, like the farm lands, are only to a small degree in the hands of the "Trusts." Even allowing for the more modest insurance policies, and savings bank accounts, as belonging in part to non-capitalists, small capitalists have piled up many new billions within the same decade, in the form of bank deposits, good-sized investments in insurance companies, in government, municipal, and railway bonds, bank stock, and other securities. No doubt the chief owners of the banks, railways, and "trusts" have increased their wealth by several billions within the same period, but this is only a fraction of the increased wealth of the smaller capitalists. It is not true, then, that "the increment of wealth of the continent" has gone to—"the makers of monopolies and their allies."

Let us now examine the question of the control of industry from this broader standpoint. It is admitted that the direct control of the "Interests" extends only over "mechanical industry"—not over agriculture. We have seen that it does not extend over the mine of wealth that lies in city lands, nor over large masses of capital more and more adequately protected by the government. It might be said that by their strategic position in industry the large capitalists control indirectly both agriculture, city growth, savings banks and government. This would be true were it not for the fact that as soon as we turn from the economic to the political field we find that not only in this country, but also in Europe nearly all the strategical positions are held by the small capitalists. They outnumber the large capitalists and their retainers ten to one, and they hold the political balance of power between these and the propertyless classes. The control of industry and the control of government being in the long run one and the same, the only course left to the large capitalists is to compromise with the small, and the common organization of centralized and decentralized capital with the aid and protection of government is assured.

The fact that, for the masses of mankind, capitalism is the enemy, and not "Big Business," is then obscured by the warfare of the small capitalists against the large. Perhaps nowhere in the world and at no time in history has this conflict taken on a more definite or acute form than it has recently in this country. So intense is the campaign of the smaller interests, and it is being fought along such broad lines that it often seems to be directed against capitalism itself. The masses of the people, even of the working classes, in America and Great Britain have yet no conception of the real war against capitalism, as carried on by the Socialists of Continental Europe, and it seems to them that this new small capitalist radicalism amounts practically to the same thing.

The "Insurgents," it is true, differ fundamentally from the Populists of ten and twenty years ago, in so far they understand fully that in many fields competition cannot be restored, that the large corporations cannot be dissolved into small ones and must be regulated or owned by the government, because they have deserted the Jeffersonian maxim that "that government is best that governs least."

"With the growing complexity of our social and business relations," says La Follette's Weekly, "a great extension of governmental functions has been necessary. The authority of State and nation reaches out in numberless and hitherto unknown forms affecting and regulating our daily lives, our occupations, our earning power, and our cost of living. The need for this intervention, for collective action by the people through their duly constituted government, to preserve and promote their own welfare, is a need that is growing more and more important and imperative to meet the rapidly growing power of commerce, industry and finance, centralized and organized in the hands of a few men."

This is nothing more nor less than the creed of capitalist collectivism. The analysis of the present political situation of the Insurgents is not only collectivist, but, in a sense, revolutionary. After describing how "Big Business," controls both industry and politics, La Follette says:—

"This thing has gone on and on in city, State, and nation, until to-day the paramount power in our land is not a Democracy, not a Republic, but an Autocracy of centralized, systemized, industrial and financial power. 'Government of the people, by the people, and for the people' has perished from the earth in the United States of America."

An editorial in McClure's Magazine (July, 1911) draws a similar picture and frankly applies the term, "State Socialism," to the great reforms that are pending:—

"Two great social organizations now confront each other in the United States—political democracy and the corporation. Both are yet new,—developments, in their present form, of the past two hundred years,—and the laws of neither are understood. The entire social and economic history of the world is now shaping itself around the struggle for dominance between them....

"The problem presented by this situation is the most difficult that any modern nation has faced; and the odds, up to the present time, have all been with the corporations. Property settles by economic law in strong hands; it has unlimited rewards for service, and the greatest power in the world—the power of food and drink, life and death—over mankind. Corporate property in the last twenty years has been welded into an instrument of almost infinite power, concentrated in the hands of a very few and very able men.

"Sooner or later the so far unchecked tendency toward monopoly in the United States must be met squarely by the American people....

"The problem of the relation of the State and the corporation is now the chief question of the world. In Europe the State is relatively much stronger; in America, the corporation. In Europe the movement towards Socialism—collective ownership and operation of the machinery of industry and transportation—is far on its way; in America we are moving to control the corporation by political instruments, such as State Boards and the Interstate Commerce Commission....

"And if corporate centralization of power continues unchecked, what is the next great popular agitation to be in this country? For State Socialism?"

When a treaty of peace is made between "Big Business" and the smaller capitalists under such leadership as La Follette's, we may be certain that it will not amount merely to a swallowing up of the small fish by the large. The struggle waged according to La Follette's principles is not a mere bid for political power and the spoils of office, but a real political warfare that can only end by recognition of the small capitalist's claims in business and politics—in so far as they relate, not to the restoration of competition, but to government ownership or control. As early as 1905, when governor of Wisconsin, La Follette said:—

"It must always be borne in mind that the contest between the State and the corporate powers is a lasting one.... It must always be remembered that their attitude throughout is one of hostility to this legislation, and that if their relation to the law after it is enacted is to be judged by the attitude towards the Interstate Commerce Law, it will be one of continued effort to destroy its efficiency and nullify its provision." Events have shown that he was right in his predictions, and his idea that the war against monopolies must last until they are deprived of their dominant position in politics is now widely accepted.

The leading demands of the small capitalists, in so far as they are independently organized in this new movement, are now for protection, as buyers, sellers, investors, borrowers, and taxpayers against the "trusts," railways, and banks. Formerly they invariably took up the cause of the capitalist competitors and would-be competitors of the "Interests"—and millionaires and corporations of the second magnitude were lined up politically with the small capitalists, as, for example, silver mine owners, manufacturers who wanted free raw material, cheaper food (with lower wages), and foreign markets at any price,—from pseudo-reciprocity to war,—importing merchants, competitors of the trusts, tobacco, beer, and liquor interests bent on decreasing their taxes, etc.

The great novelty of the "Insurgent" movement is that, in dissociating itself from Free Silver, Free Trade, and the proposal to destroy the "trusts," it has succeeded in getting rid of nearly all the "Interests" that have wrecked previous small capitalist movements. At the same time, it has all but abandoned the old demagogic talk about representing the citizen as consumer against the citizen as producer. It frankly avows its intention to protect the ultimate consumer, not against small capitalist producers (e.g. its opposition to Canadian reciprocity and cheaper food), but solely against the monopolies. Indeed, the protection of the ultimate consumer against monopolies is clearly made incidental to the protection of the small capitalist consumer-producer. The wage earner consumes few products of the Steel Trust, the farmer and small manufacturers, many. Nor does the new movement propose to destroy the "trusts" by free trade even in the articles they produce, but merely to control prices by lower tariffs. With the abandonment of the last of the "Interests" and at the same time of the "consumers" that they use as a cloak, the new movement promises for the first time a fairly independent and lasting political organization of the smaller capitalists.

While Senator La Follette is the leading general of the new movement, either Ex-President Roosevelt or Governor Woodrow Wilson seems destined to become its leading diplomatist. While Senator La Follette declares for a fight to the finish, and shows that he knows how to lead and organize such a fight, Mr. Roosevelt and Mr. Wilson are giving their attention largely to peace terms to be demanded of the enemy, and the diplomatic attitude to be assumed in the negotiations. Perhaps it is too early for such peaceful thoughts, and premature talk of this kind may eliminate these leaders as negotiators satisfactory to the small capitalists. Their interest for my present purpose is that they probably foreshadow the attitude that will finally be assumed when the large "Interests" see that they must make terms.

Mr. Wilson's language is at times so conciliatory as to create doubt whether or not he will stand with Senator La Follette and the Republican "Insurgents" for the whole of the small capitalist's program, but it leaves no doubt that, if he lives up to his declared principles, he must aim at the government regulation, not of "Big Business" merely, but of all business—as when he says that "business is no longer in any sense a private matter."

"We are dealing, in our present discussion," he said in an address, delivered in December, 1910, "with business, and we are dealing with life as an organic whole, and modern politics is an accommodation of these two. Suppose we define business as economic service of society for private profit, and suppose we define politics as the accommodation of all social forces, the forces of business, of course, included, to the common interest." (My italics.)

It is evident that if the community gains by an extended control over business, that business gains at least as much by its claim to be recognized as a public service. And this Mr. Wilson makes very emphatic:—

"Business must be looked upon, not as the exploitation of society, not as its use for private ends, but as its sober service; and private profit must be regarded as legitimate only when it is in fact a reward for what is veritably serviceable,—serviceable to interests which are not single but common, as far as they go; and politics must be the discovery of this common interest, in order that the service may be tested and exacted.

"In this acceptation, society is the senior partner in all business. It first must be considered,—society as a whole, in its permanent and essential, not merely in its temporary and superficial, interests. If private profits are to be legitimatized, private fortunes made honorable, these great forces which play upon the modern field must, both individually and collectively, be accommodated to a common purpose." (My italics.)

Business is no longer "to be looked upon" as the exploitation of society, private profits are to be "legitimatized" and private fortunes "made honorable"—in a word, the whole business world is to be regenerated and at the same time rehabilitated. This is to be accomplished, as Mr. Wilson explained, in a later speech (April 13, 1911), not by excluding the large capitalists from government, but by including the small, and this will undoubtedly be the final outcome. He said:—

"The men who understand the life of the country are the men who are on the make, and not the men who are made; because the men who are on the make are in contact with the actual conditions of struggle, and those are the conditions of life for the nation; whereas, the man who has achieved, who is at the head of a great body of capital, has passed the period of struggle. He may sympathize with the struggling men, but he is not one of them, and only those who struggle can comprehend what the struggle is. I would rather take the interpretation of our national life from the general body of the people than from those who have made conspicuous successes of their lives."

But the "Interests" are not to be excluded from the new dispensation.

"I know a great many men," Mr. Wilson says further, "whose names stand as synonyms of the unjust power of wealth and of corporate privileges in this country, and I want to say to you that if I understand the character of these men, many of them—most of them—are just as honest and just as patriotic as I claim to be. But I do notice this difference between myself and them; I have not happened to be immersed in the kind of business in which they have been immersed; I have not been saturated by the prepossessions which come upon men situated as they are, and I claim to see some things that they do not yet see; that is the difference. It is not a difference of interest; it is not a difference of capacity; it is not a difference of patriotism. It is a difference of perception....

"Now, these men have so buried their minds in these great undertakings that you cannot expect them to have reasonable and rational views about the antipodes. They are just as much chained to a task, as if the task were little instead of big. Their view is just as much limited as if their business were small instead of colossal. But they are awakening. They are not all of them asleep, and when they do wake, they are going to lend us the assistance of truly statesmanlike minds.

"We are not fighting property," Mr. Wilson continues, "but the wrong conception of property. It seems to me that business on the great scale upon which it is now conducted is the service of the community, and the profit is legitimate only in proportion as the service is genuine. I utterly deny the genuineness of any profit which is gathered together without regard to the serviceability of the thing done.... Men have got to learn that in a certain sense, when they manage great corporations, they have assumed public office, and are responsible to the community for the things they do. That is the form of privilege that we are fighting." (Italics mine.)[33]

A second glance at these passages will show that Mr. Wilson speaks in the name rather of struggling small capitalists, business men "on the make," than of the nation as a whole. His diplomacy is largely aimed to move the "honest" large capitalists. These are assured that the only form of privilege that Mr. Wilson, representing the smaller business men, those "on the make," is attacking, is their freedom from political and government control. But the large capitalists need not fear such control, for they are assured that they themselves will be part of the new government. And as there is no fundamental "difference of interests," the new government will have no difficulty in representing large business as well as small.

No better example could be found of the foreshadowed treaty between the large interests and the whole body of capitalists, and their coming consolidation, than the central banking association project now before Congress. Originated by the "Interests" it was again and again moderated to avoid the hostility of the smaller capitalists, until progressives like Mr. Wilson are evidently getting ready to propose still further modifications that will make it entirely acceptable to the latter class. Already Mr. Aldrich has consented that the "State" banks, which represent chiefly the smaller capitalists, should be included in the Reserve Association, and that the President should appoint its governor and deputy governor. Doubtless Congress will insist on a still greater representation of the government on the central board.

Mr. Wilson emphasizes the need of action in this direction in the name of "economic freedom," which can only mean equal financial facilities and the indirect loan of the government's credit to all capitalists, through means of a government under their common control:—

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