Problems in American Democracy Part 26

The series of reforms referred to above must have three aims: first, to give every individual exactly what he earns; second, to make it possible for every individual to earn enough to support himself and his family at least decently; and third, to teach every individual to use wisely and economically the income which he receives.

A program embodying these three aims has the disadvantage of seeming commonplace and slow of fulfillment to those who prefer novel and sensational schemes, but it has the advantage of being both workable and safe.

168. THE NATURE OF JUSTICE.--Among the advocates of socialism the word "justice" is much used, but apparently little understood. Justice in industry implies that every individual shall receive precisely what he earns, no more, no less. If a monopolist secures unearned profits, there is injustice. If a laborer adds to the value of a product to the extent of five dollars, there is injustice if he receives less than five dollars in wages. Similarly, there is injustice if the laborer earns only four dollars, but receives five dollars. Wherever there is an unfair distribution of wealth, there is a double injustice: some individual gets a share of wealth which he did not earn and to which, therefore, he is not ent.i.tled; while the individual who did earn that wealth is deprived of it.

169. THE IMPORTANCE OF THIS.--All right-thinking reformers will agree with the socialist that much or all of the unearned wealth of the moneyed cla.s.ses ought to be taken for the benefit of the community.

But he who accepts the democratic program of industrial reform will not sanction the socialist's proposal to eliminate poverty primarily by decreeing higher wages.

In the first place, this proposal of the socialist is unjust. A man who earns three dollars a day may not be able to live on that amount, and it may be desirable for some agency to give him more than three dollars a day. But that would be charity, not justice. It would be, as we have just seen, a double injustice.

In the second place, such a practice would lead inevitably to national bankruptcy. Under the compet.i.tive system, wages tend to be determined by productivity. To attempt to eradicate poverty primarily by the raising of wages is futile, for employers cannot long pay out in wages more than the laborer adds to the product. Some employers might do so for a long time, and all employers might do so for a short time, but if the practice were nation-wide and long-continued, it would result in economic ruin. To put a premium upon propagation by guaranteeing every man a job, and to pay him, not according to productivity, but according to need, would be equivalent to building up a gigantic charitable inst.i.tution. Charity is a necessary and laudable function, but the proper care of the dependent cla.s.ses is possible only when the majority of the people are not only self-supporting, but actually produce a surplus out of which the unfortunate can be cared for. If applicants for charity too largely outnumber those producing a surplus, national bankruptcy results.

In the third place, an increase in wages might not benefit even those receiving higher wages unless they were able and willing to spend their income wisely and economically.

170. THE REDISTRIBUTION OF UNEARNED WEALTH.--The first step in our program is to apply the principle of justice to the problem of unearned wealth. The student should be careful at this point to distinguish between wealth which has been earned, however great, and wealth which has been acquired by unjust methods. American democracy will tolerate no interference with wealth which has been earned; on the other hand, it demands that unearned riches be redistributed in the form of services performed by the government for the people as a whole.

There are three chief methods of redistributing unearned wealth. The first is by means of increased taxes on land. As was pointed out in the chapter on single tax, that income from land which is due, not to the efforts of the owner, but either to natural fertility or to the growth of the community, may be considered as unearned. While the single tax is too drastic a reform, it is unquestioned that we need heavier taxes upon the unearned increment arising from land.

A second method of redistributing unearned wealth is through the application of inheritance taxes. Reserving the whole problem of taxation for later discussion, [Footnote: See Chapter x.x.xII.] it may be said here that in many cases large sums are willed to individuals who have done little or nothing to deserve them. In so far as this is true, and in so far as such a tax does not discourage the activities of fortune builders, the inheritance tax is a desirable means of redistributing unearned wealth.

The last method of redistributing unearned wealth is by a tax on those elements in profits which are due to the abuse of monopoly conditions.

[Footnote: Monopoly will be treated more fully in Chapters XXVII and XXVIII.] Complete monopoly rarely exists, but in many businesses there is an element of monopoly which allows the capitalist or entrepreneur to secure a measure of unearned wealth. In the interest of justice, much or all of this ought to be taken for the use of the community.

171. SOMETHING MORE THAN JUSTICE IS NECESSARY.--It is an error to suppose that justice would necessarily eliminate either low wages or poverty. As we have seen, justice would require the redistribution of a large amount of unearned wealth. But much more important is the question of large numbers of laborers whose wages are undesirably low.

If the rule of justice were applied to this latter cla.s.s, that is, if they were given just what they earned, many would continue to be poor.

Indeed, if justice were strictly administered, it is even possible that among a few groups poverty would increase, since some individuals are incapable of really earning the wages they now receive.

Something more than justice, therefore, is necessary. We must not only see that a man gets as much as he produces, no more, no less, but we must make it possible for every individual actually to produce or earn enough to support himself decently or comfortably. This, in essence, is the distinction between the socialist and the liberalist, _i.e._ he who accepts the democratic program of industrial reform: the socialist would practice injustice and invite economic ruin in a vain effort to eliminate poverty; the liberalist seeks the abolition of poverty without violating either justice or economic law.

172. WHY WAGES ARE LOW.--A little thought will show that directly or indirectly poverty is sometimes the result of low wages. It follows, thus, that the source of some poverty would be dried up if an increase in wages could be secured in an economical manner. To come to the heart of the problem, wages are low because productivity is low. That is to say, employers operating under conditions of free compet.i.tion will pay laborers in proportion as the latter give promise of adding to the value of the product. When men are scarce, relatively to the supply of land and capital, the employer will be justified in offering high wages, because under those circ.u.mstances the productivity of each of his prospective employees will be high. He will actually offer high wages, because if he does not, the laborers will tend to hire out to his compet.i.tors. But if laborers are plentiful, relatively to the supply of the other factors of production, the employer will be forced to offer lower wages, because under the circ.u.mstances each of the prospective employees shows promise of being able to add relatively little to the value of the product. In such a case, the employer will actually offer low wages because he need not fear that his compet.i.tors will hire all of the laborers applying for jobs.

Thus when laborers are plentiful, relatively to the demand, the automatic functioning of the law of supply and demand will result in low wages. We need not waste time debating whether or not there ought to be such a thing as the law of supply and demand; a far more profitable exercise is to recognize that such a law exists, and to consider how our program of industrial reform may be adapted to it.

173. AN ECONOMICAL REMEDY FOR LOW WAGES.--Low wages are generally the result of low productivity, and low productivity is in turn the result of an oversupply of laborers relatively to the demand. Granting the truth of these premises, an economical remedy for low wages involves two steps: first, the demand for labor [Footnote: By "labor" is here meant those types of labor which are poorly paid, because oversupplied. Unskilled day labor is an example.] must be increased; and second, the supply of labor must be decreased. Any measure which will increase the demand for labor, relatively to the demand for the other factors of production, will increase the productivity of labor, and will justify the payment of higher wages. Compet.i.tion between prospective employers will then actually force the payment of higher wages. Similarly, any measure which will decrease the supply of labor will strengthen the bargaining position of the laborer, and, other things remaining equal, will automatically increase wages.

174. INCREASING THE DEMAND FOR LABOR.--If we bear in mind that modern industry requires a combination of the various factors of production, it will be seen that the utilization of laborers depends upon the extent to which land, capital, and entrepreneur ability are present to combine with those laborers. Where there is a large supply of these factors, many laborers can be set to work. Thus one way of increasing the demand for labor is to increase the supply of land, capital, and entrepreneur ability.

The available supply of land can be increased by several methods.

Irrigation, reclamation, and dry farming increase the available supply of farm land. The fertility of land may be retained and increased by manuring, rotation of crops, and careful husbandry. Improved agricultural machinery will also enable land to be used in larger quant.i.ties and in more productive ways. And while we do not think of man as actually creating land, the draining of swamps and the filling in of low places increases the available amount of both farm and urban land. By whatever means the amount of available land is increased, the effect is to open more avenues to the employment of laborers.

The supply of capital may be increased chiefly by the practice of thrift among all cla.s.ses of the population. Capital arises most rapidly when individuals produce as much as possible, and spend as little as possible for consumers' goods. Any measure which will discourage the well-to-do from wasteful or luxurious ways of living, and at the same time encourage the poor to save systematically, even though they save only a trifle, will add to the supply of available capital. Every increase in the supply of capital will enable more and more laborers to be set to work.

Entrepreneur ability may be increased by a variety of methods. The training of men for business callings increases the supply of entrepreneurs. Taxes on inheritances, excess profits, and the unearned increment of land will tend to force into productive work many capable men who now either idle away their lives, or retire from business prematurely. It is also important that the well-to-do cla.s.ses be encouraged to rear larger families, since it is these cla.s.ses which can best afford to give their children the higher forms of training and education. Lastly, it is desirable to teach that leisure is disgraceful, and that whether one is rich or poor, the useful and productive life is the moral and patriotic life. "He who does less well than he can does ill."

175. DECREASING THE SUPPLY OF LABOR.--Hand in hand with measures deigned to increase the demand for labor should go consistent efforts to decrease the supply of unskilled and poorly paid labor. One of the most effective means of accomplishing this is to restrict by law the immigration to this country of ma.s.ses of unskilled workers which glut the American labor market and force down the wages of unskilled workmen already here. The general problem of immigration will be discussed elsewhere; here it is only necessary to note that as an economic proposition unrestricted immigration is undesirable.

The supply of unskilled labor may be somewhat restricted by additional laws. It is clear that we ought to pa.s.s and enforce laws which would prevent the propagation of mental defectives. There ought also to be laws which would discourage the marriage of individuals who show no promise of being able to rear and support children who are physically fit. It might not be expedient to pa.s.s legislation requiring a certain minimum income of persons intending to marry, but from the purely economic point of view, such laws would certainly be advisable.

Much in this general field can be done by non-legislative methods.

Young people can be taught the desirability of postponing marriage until their earnings justify the acceptance of such a responsibility.

Just as the well-to-do should be encouraged to prefer family-building to social ambition, so the poorer cla.s.ses ought to be encouraged to postpone marriage until, through education or training, the proper support of a family is a.s.sured. This end must be secured through moral and social education, rather than through legislation.

The encouragement of thrift among the poorer cla.s.ses of the population is an important factor in decreasing the supply of unskilled labor.

Thrift increases savings, and by making possible education or apprenticeship in a trade, it enables the children of the unskilled worker to pa.s.s from the ranks of the poorly paid to the ranks of the relatively well paid. Thus not only does the practice of thrift by the poor add to the amount of capital in existence, and thus indirectly increase the demand for labor, but it helps the poor directly and immediately.

Vocational education is of fundamental importance in decreasing the supply of unskilled labor. It renders higher wages economically justified by training individuals away from overcrowded and hence poorly paid jobs, and toward those positions in which men are scarce, and hence highly paid. If vocational education turns unskilled workmen into entrepreneurs, such education has the doubly beneficial effect of lessening the supply of unskilled labor, and of increasing the demand for labor. The importance of trade schools, continuation schools, and other agencies of vocational education can hardly be exaggerated.

Employment bureaus and labor exchanges are essential to the democratic program of industrial reform. Just as vocational education must move individuals from overcrowded to undercrowded occupations, so the employment bureau should move laborers from places where they are relatively little wanted, and hence poorly paid, to places where they are relatively much wanted, and hence better paid. A coordinated system of national, state, and munic.i.p.al employment bureaus is a valuable part of our program of industrial reform.

176. IMPORTANCE OF PERSONAL EFFICIENCY.--We have seen that the bargaining position of the laborer may be strengthened by any and all measures which would increase the demand for his labor, relatively to the demand for the other factors of production. As a general proposition, this strengthened position would tend automatically to result in higher wages.

Along with these measures it should not be forgotten that the industrial position of the individual worker tends to improve in proportion as he increases his personal efficiency. It is of the greatest importance that the individual should strive to secure as thorough an education as possible, and that he safeguard himself against accident and disease. He should realize, also, that employers seek men who are not only competent, but whose personal habits are attractive and trust-inspiring. Regardless of the scarcity or oversupply of labor, personal efficiency will tend to enable the worker to receive larger wages than would otherwise be possible.

177. SOMETHING MORE THAN HIGH WAGES IS NECESSARY.--We have taken some time to point out how wages might be increased without violating economic law. But high wages do not necessarily mean the abolition of poverty, indeed, actual investigations have proved that often poverty exists regardless of whether wages are high or low. A family of four, for example, might be well fed, comfortably clothed, and otherwise cared for in a normal manner, on, say, three dollars a day, provided that sum were utilized wisely. A second family of equal size, however, might spend six dollars a day so carelessly that the children would be denied such vital necessities as medical attention and elementary education, while neither parents nor children would be adequately provided with food or clothing.

178. INCOME MUST BE UTILIZED WISELY.--Thus an indispensable factor in the abolition of poverty is the economical utilization of income.

Aside from the fact that it increases the amount of capital in existence, thrift is imperative if a family is to get the full benefit of its income. In both the home and the school the child should be taught the proper care and utilization of money. He should receive, in addition, fundamental instruction in such matters as expense- accounting and budget-making. Of similarly great value is the training of boys and girls to a proper appreciation of the home-making ideal, to which subject we shall return later. [Footnote: See Chapter XXIII.]

It is fortunate that we are directing more and more attention to these and similar measures, for they strike at the heart of one of the great causes of poverty--the inability of the individual to make the proper use of his income. Unless our citizens are trained to spend money wisely, and to distinguish clearly between the relative values of services and commodities, an increase in wages will never eliminate malnutrition, illiteracy, and other elements of poverty.

179. SUMMARY.--For the sake of clearness, let us summarize the essential features of the democratic program of industrial reform.

The first aim of this program is to give every individual precisely what he earns, no more, no less. Applying the principle of justice would result in heavy taxes on unearned wealth secured through inheritance, or as rent from land, or as monopoly profits.

The second aim of our program arises from the fact that justice might not improve the condition of the laboring cla.s.s, since some laborers manifestly could not earn enough to support themselves and their families decently.

In addition to administering justice, therefore, we must put the individual in a position to earn an amount adequate to his needs. This involves two lines of action: first, the bargaining position of the laborer must be strengthened by measures designed to increase the demand for his labor, relatively to the demand for the other factors of production; second, increasing the personal efficiency of the worker will render him more attractive to the employer.

The third aim of the democratic program of industrial reform is to teach the individual to use his income wisely and economically. Only after this has been done can we be a.s.sured that the raising of wages will materially improve the condition of the worker.

180. SOCIAL PROBLEMS.--There is an important word to be said here. The democratic program of industrial reform is economically sound, and ultimately it would eliminate poverty. But it is not an immediate cure for all of the social and economic ills of American democracy. There will long continue to be persons whom no amount of care can render capable of earning enough to support themselves. There are many other individuals who may ultimately become self-supporting, but who for some time to come will need special care and attention. There are, lastly, many other individuals who are partially or entirely self- supporting,--women and children, for example,--but whose social and economic interests need to be safeguarded by legislation. The democratic program of industrial reform could ultimately eliminate many of the basic social problems now confronting us; meantime we are under the necessity of grappling with such questions as labor disputes, the risks of industry, crime, and dependency. Indeed, no matter how vigorously and intelligently we attack the defects of capitalism, it is probable that we shall always have to face grave social problems. Part III of the text will accordingly be devoted to a consideration of American social problems.

QUESTIONS ON THE TEXT

1. Why is there no simple remedy for the defects of capitalism?

2. What are the three aims of the program advanced in this chapter?

3. What is the nature of justice?

4. In what sense is an unfair distribution of wealth a double injustice?

5. Under what conditions would the raising of wages tend to result in national bankruptcy?

6. What are the three chief methods of redistributing unearned wealth?

7. Why does the elimination of poverty demand something more than justice?