Socialism: A Summary and Interpretation of Socialist Principles Part 7

CHAPTER V

CAPITALISM AND THE LAW OF CONCENTRATION

I

Such was the mode of the development of capitalistic production in its first stage. In this stage a permanent wage-working cla.s.s was formed, new markets were developed, many of them by colonial expansion and territorial conquest, and production for sale and profit became the rule, instead of the exception as formerly when men produced primarily for use and sold only their surplus products. A new form of cla.s.s division thus arose out of this economic soil. Instead of being bound to the land as the serfs had been under feudalism, the wage-workers were bound to their tools. They were not bound to a single master, they were not branded on the cheek, but they were, nevertheless, dependent upon the industrial lords. Economic mastery gradually shifted from the land-owning cla.s.s to the cla.s.s of manufacturers. The political and social history of the Middle Ages is largely the record of the struggle for supremacy which was waged between these two cla.s.ses. That struggle is the central fact of the Protestant Reformation and the Cromwellian Commonwealth.

The second stage of capitalism begins with the birth of the machine age; the introduction of the great mechanical inventions of the latter half of the seventeenth century, and the resulting industrial revolution, the salient features of which we have already traced. That revolution centered in England, whose proud but, from all other points of view than the commercial, foolish boast for a full century it was to be "the workshop of the world." The new methods of production, and the development of trade with India, and the colonies and the United States of America, providing a vast and apparently almost unlimited market, a tremendous rivalry was created among the people of England, tauntingly, but with less originality than bitterness, designated "a nation of shopkeepers" by Napoleon the First. Compet.i.tion flourished and commerce grew under its mighty urge. Quite naturally, therefore, compet.i.tion came to be regarded as "the life of trade," and the one supreme law of progress by British economists and statesmen. The economic conditions of the time fostered a st.u.r.dy individualism on the one hand, expressing itself in a policy of _laissez faire_, which, paradoxically, they as surely destroyed. The result was the paradox of a nation of theoretic individualists becoming, through its poor laws, and more especially through the vast body of industrial legislation which developed in spite of theories of _laissez faire_, a nation of practical collectivists.

The third and last stage of capitalism is characterized by new forms of industrial ownership, administration, and control. Concentration of industry and the elimination of compet.i.tion are the distinguishing features of this stage. When, more than half a century ago, the Socialists predicted an era of industrial concentration and monopoly as the outcome of the compet.i.tive struggles of the time, their prophecies were mocked and derided. Yet, at this distance of time, it is easy to see what they were foresighted enough to envisage in the future; easy enough to see that compet.i.tion carries in its bosom the germs of its own inevitable destruction. In words which, as Professor Ely says,[94] seem to many, even non-Socialists, like a prophecy, Karl Marx argued that the business units in production would continuously increase in magnitude, until at last monopoly emerged from the compet.i.tive struggle. This monopoly becoming a shackle upon the system under which it has grown up, and thus becoming incompatible with capitalist conditions, socialization must, according to Marx, naturally and necessarily follow.[95] In this as in all the utterances of Marx upon the subject we are reminded of the distinction which must be made between Socialism as he conceived it and the Socialism of the Utopians. We never get away from the law of economic interpretation. Socialism, according to Marx, will develop out of capitalist society, and follow capitalism necessarily and inevitably.

It is not a plan to be adopted, but a stage of social development to be reached.

II

For the moment, we are not concerned with the prediction that Socialism must follow the full development of capitalism. The important point for our present study is the predicted growth of monopoly out of compet.i.tion, and the manner in which that prediction has been realized.

Concerning the manner and extent of the fulfillment of this prediction, there have been many keen controversies, both within and without the ranks of the followers of Marx. While Marx and Engels are properly regarded as the first scientific Socialists, having been the first to postulate Socialism as the outcome of evolution, and to explore the laws of that evolution, they were not wholly free from the failings of the Utopists. It would be unreasonable to expect them to be absolutely free from the spirit of their age and their a.s.sociates. There is, doubtless, something Utopian in the very mechanical conception of capitalist concentration which Marx held; the process is too simple and sweeping, the revolution too imminent. Still, by followers and critics alike, it is generally conceded that the _control_ of the means of production is being concentrated into the hands of small and ever smaller groups of capitalists. In recent years the increase in the number of industrial establishments has not kept pace with the increase in the number of workers employed, the increase of capital, or the value of the products manufactured. Not only do we find small groups of men controlling certain industries, but a selective process is clearly observable, giving to the same groups of men control of various industries otherwise utterly unrelated.

In the early stages of the movement toward concentration and trustification, it was possible to cla.s.sify the leading capitalists according to the industries with which they were identified. One set of capitalists, "Oil Kings," controlled the oil industry; another set, "Steel Kings," controlled the iron and steel industry; another set, "Coal Barons," controlled the coal industry, and so on throughout the industrial and commercial life of the nation. To-day all this has been changed. An examination of the "Directory of Directors" shows that the same men control varied enterprises. The Oil King is at the same time a Steel King, a Coal Baron, a Railway Magnate, and so on. The men who comprise the Standard Oil group, for instance, are found to control hundreds of other companies. They include in the scope of their directorate, banking, insurance, milling, real estate, railroad and steamship lines, gas companies, sugar, coffee, cotton, and tobacco companies, and a heterogeneous host of other concerns. Not only so, but these same men are large holders of investments in all the great European countries, as well as India, Australia, Africa, Asia, and the South American countries, while foreign capitalists similarly, but to a less extent, hold large investments in American companies. Thus, the concentration of industrial control, through its finance, has become interindustrial and is rapidly becoming international. The predictions of Marx are being fulfilled, even though not in the precise manner antic.i.p.ated by him.

III

During recent years there have been many criticisms of the Marxian theory, aiming to show that this concentration has been, and is, much more apparent than real. Some of the most important of these criticisms have come from within the ranks of the Socialist movement itself, and have been widely exploited as portending the disintegration of the Socialist movement. _Inter alia_, it may be remarked here that a certain fretfulness of temper characterizes most of the critics of Socialism.

Strict adherence to the letter of Marx is p.r.o.nounced as a sign of intellectual bondage of the movement and its leaders to the "Marxian fetish," and, on the other hand, every recognition of the human fallibility of Marx by a Socialist thinker is hailed as a sure portent of a split in the movement. Yet the most serious criticisms of Marx have come from the ranks of his followers--perhaps only another sign of the intellectual bankruptcy of the academic opposition to Socialism.

Of course, Marx was human and fallible. If "Capital" had never been written, there would still have been a Socialist movement, and if it could be destroyed by criticism, the Socialist movement would remain.

Socialism is the product of economic conditions, not of a theory or a book. "Capital" is the intellectual explanation of the genesis of Socialism, and neither its cause nor an argument for it by which it must be judged. Hence the futility of such missions as that undertaken by Mr.

W. H. Mallock, for example, based upon the a.s.sumption that attacks upon the text of Marx will serve to destroy or seriously hinder the living movement. Like a prophet's rebuke to these critics, as well as to those within the ranks of the Socialist movement who would make of the words of Marx and Engels fetters to bind the movement to a dogma, come the words of Engels, published recently, letters in which he writes vigorously to his friend Sorge concerning the working-cla.s.s movement in England and America. Of his compatriots, the handful of German Socialist exiles in America, who sought to make the American workers swallow a ma.s.s of ill-digested Marxian theory, he writes, "The Germans have never understood how to apply themselves from their theory to the lever which could set the American ma.s.ses in motion; to a great extent they do not understand the theory itself and treat it in a doctrinaire and dogmatic fashion.... It is a credo to them, not a guide to action." And again, "Our theory is not a dogma, but the exposition of a process of evolution, and that process involves several successive phases." Of the English movement he writes, "And here an instinctive Socialism is more and more taking possession of the ma.s.ses which, _fortunately_, is opposed to all distinct formulation according to the dogmas of one or the other so-called organizations," and again, he condemns "the bringing down of the Marxian theory of development to a rigid orthodoxy."[96] The critics who hope to destroy the Socialist movement of to-day by stringing together mistaken predictions of Marx and Engels, or who think that Socialism is losing its grip because it is adjusting its expressions to the changed conditions which the progress of fifty years has brought about, utterly mistake the character of the movement. In its abandonment of the errors of Marx it is most truly Marxian--because it is expressing life instead of repeating dogma.

Doubtless Marx antic.i.p.ated a much more complete concentration of capital and industry than has yet taken place; doubtless, too, he underrated the powers of endurance of some petty industries, and saw the breakdown of capitalism in a cataclysm, whereas modern Socialists see its merging into a form of socialization. But, when all this is admitted, it cannot be fairly said that the sum of criticism has seriously affected the general Marxian theory, as apart from its particular exposition by Marx himself. So far as the criticism has touched the subject of capitalist concentration, it has been pitifully weak, and the furore it has created seems almost pathetic. The main results of this criticism may be briefly summarized as follows: First, in industry, the persistence, and, in some cases, even increase, of petty industries; second, in agriculture, the failure of large-scale farming, and the decrease of the average farm acreage; third, in retail trade, the persistence of the small stores, despite the growth in size and number of the great department stores; fourth, the fact that concentration of industry does not imply a like concentration of wealth, the number of shareholders in a great industrial combination being frequently greater than the number of owners in the units of industry prior to the combination. At first sight, and stated in this manner, it would seem as if these conclusions, if justified by the facts, involved a serious and far-reaching criticism of the Socialist theory of a universal tendency toward the concentration of industry and commerce into units of ever increasing magnitude.

But upon closer examination, these conclusions, their accuracy admitted, are seen to involve no very damaging criticism of the theory. To the superficial observer, the mere increase in the number of industrial establishments seems a much more important matter than to the careful student, who is not easily deceived by appearances. The student sees that while some petty industries undoubtedly do increase in number, the increase of large industries employing many more workers and much larger capitals is vastly greater. Furthermore, he sees what the superficial observer constantly overlooks, namely, that these petty industries are, for the most part, unstable and transient, being continually absorbed by the larger industrial combinations or crushed out of existence, as soon as they have obtained sufficient vitality and strength to make them worthy of notice, either as tributaries to be desired or potential compet.i.tors to be feared. Petty industries in a very large number of cases represent a stage in social descent, the wreckage of larger industries whose owners are economically as dependent as the ordinary wage-workers, or even poorer and more to be pitied. Where, on the contrary, it is a stage in social ascent, the petty industry is, paradoxical as the idea may appear, frequently part of the process of industrial concentration. By independent gleaning, it endeavors to find sufficient business to maintain its existence. If it fails in this, its owner falls back to the proletarian level from which, in most instances, he arose. If it succeeds only to a degree sufficient to maintain its owner at or near the average wage-earner's level of comfort, it may pa.s.s unnoticed and unmolested. If, on the other hand, it gleans sufficient business to make it desirable as a tributary, or potentially dangerous as a compet.i.tor, the petty business is pounced upon by its mightier rival and either absorbed or crushed, according to the temper or need of the latter. Critics of the Marxian theory have for the most part completely failed to recognize this significant aspect of the subject, and attached far too much importance to the continuance of petty industries.

IV

What is true of petty industry is true in even greater measure of retail trade. Nothing could well be further from the truth than the hasty generalization of some critics, that an increase in the number of retail business establishments invalidates the theory of a progressive concentration of capital. In the first place, many of these establishments have no independence whatsoever, but are merely agencies of larger enterprises. Mr. Macrosty has shown that in London the cheap restaurants are in the hands of four or five firms, and this is a branch of business which, because it calls for relatively small capital, shows in a marked manner the increase of establishments. Much the same conditions exist in connection with the trade in milk and bread.[97]

Similar conditions prevail in almost all the large cities of this country. Single companies are known to control hundreds of saloons, restaurants, cigar stores, shoe stores, bake shops, coal depots, and the like. A mult.i.tude of other businesses are subject to this rule, and it is doubtful whether, after all, there has been the real increase of individual ownership which Mr. Ghent concedes.[98] However that may be, it is certain that a very large number of the business establishments which figure as statistical units in the argument against the Socialist theory of the concentration of capital might very properly be regarded as so many evidences in its favor.

A very large number of small businesses, moreover, are really manipulated by speculators, and serve only as a means of divesting prudent and thrifty artisans and others of their little savings.

Whoever has lived in the poorer quarters of a great city, where small stores are most numerous, and has watched the changes constantly occurring in the stores of the neighborhood, will realize the significance of this observation. The writer has known stores on the upper East Side of New York, where for several years he resided, change hands as many as six or seven times in a single year. What happened was generally this: A workingman having been thrown out of employment, or forced to give up his work by reason of age, sickness, or accident, decided to attempt to make a living in "business." In a few weeks, or a few months at most, his small savings were swallowed up, and he had to leave the store, making place for the next victim. An acquaintance of the writer owns six tenement houses in different parts of New York City, the ground floors of which are occupied by small stores. These stores are rented by the month just as other portions of the buildings are, and the owner, on going over his books for a period of five years, found that the average duration of tenancy in them had been less than eight months.

During the past few years in the United States, as a result of the development of the many inventions for the production of "moving pictures," a new kind of cheap, popular theater has become common.

Usually the charge of admission is five cents, whence the name "Nickelodeon"; the entertainment consists usually of a number of more or less dramatic incidents portrayed by means of the pictures, and a few songs, generally ill.u.s.trated by pictures, and sung to the accompaniment of a mechanical piano. In almost every town in the United States these cheap pictorial theaters have appeared and their number will, doubtless, considerably swell the total of business establishments. In the small towns of the State of New York, the writer made an investigation and found that there were frequently several such places in the same town; that they were practically all built by the same persons, started by them, and then leased to others. These were generally people with small savings who, in the course of a few weeks, lost all their money and retired, their places being taken by other victims of the speculators.

What seemed to the casual observer an admirable and conspicuous example of an increase in petty business, proved, upon closer study, to be a very striking example of concentration, disguised for purposes of speculation.

Thus reduced, the increase of small industries and retail establishments affects the contention that there is a general tendency to concentration very little. It does perhaps seriously weaken, or even destroy, some extreme statements of the theory, contending that the process of monopolization must be a direct, simple process of continuous absorption and elimination, leaving each year fewer small units than before. Small stores do exist; they have not been put out of existence by the big department stores as was at one time confidently predicted. They serve a real social need by supplying the minor commodities of everyday use in small quant.i.ties, just as the petty industries serve a real social need.

Many of them are conducted by married women to supplement the earnings of their husbands, or by widows; others by men unable to work, whose income from them is less than the wages of artisans. Together, these probably const.i.tute a majority of the small retail establishments which show any tendency to increase.[99]

The effect of this increase is still further lessened when it is remembered that only the critics of Socialism interpret the Marxian theory to mean that _all_ petty industry and business must disappear, that all must be concentrated into large industrial and commercial units, to make Socialism possible. If we are to judge Marxism as the basis of the Socialist movement, we must judge it by the interpretation given to it by the Socialists, and not otherwise. There is no Socialist of note to-day who does not realize that many small industrial and business enterprises will continue to exist for a very long time, even continuing to exist under a Socialist regime. Kautsky, perhaps the ablest living exponent of the Marxian theories, leader of the "Orthodox"

Marxists, admits this. He has very ably argued that the ripeness of society for Socialism, for social production and control, depends, not upon the number of little industries that still remain, but upon the number of great industries which already exist.[100] The ripeness of society for Socialism is not disproved by the number of ruins and relics abounding. "Without a developed great industry, Socialism is impossible," says this writer. "Where, however, a great industry exists to a considerable degree, it is easy for a Socialist society to _concentrate production, and to quickly rid itself of the little industry_."[101] It is the increase of large industries, then, which Socialists regard as the essential preliminary condition of Socialism.

Far more important than the increase or decrease of the number of units is their relative significance in the total production, a phase of the subject which is rather disingenuously avoided by most critics of Marxism. Mr. Lucien Sanial, a Socialist statistician of repute, and one of the profoundest Marxian students in America, has shown this in a number of suggestive tables. For example, he takes twenty-seven typical manufacturing industries for the years 1880, 1900, and 1905, and compares the number of establishments in each year with the total amount of capital invested and workers employed. In 1880 the number of establishments was 63,233; in 1900 the number was 51,912, and in 1905 it was only 44,142. From 1880 to 1905 there had been a decrease in the number of establishments of 35.3 per cent, of which 15 per cent took place within the last five years. But within the same period there had been an increase in the amount of capital invested in these twenty-seven industries as follows: from $1,276,600,000 in 1880 to $3,324,500,000 in 1900 and to $4,628,800,000 in 1905--a total increase from 1880 to 1905 of 262.6 per cent. On the other hand, the number of wage-workers increased in the same period only 60.2 per cent, the number in 1905 being 1,731,500, as against 1,611,000 in 1900 and 1,080,200 in 1880.

In another table, forty-seven industries are taken. These forty-seven industries comprised 29,800 establishments in 1900; five years later there were but 26,182. In 1900 the total capital invested in these industries was $1,005,400,000, and in 1905 it had increased to $1,339,500,000. In the same five years the number of wage-workers increased only from 618,000 to 749,000. Thus, in the group of larger industries and the group of smaller ones we find the same evidences of concentration: less establishments, larger capitals, and an increase of wage-workers not equal to the increase in capitalization.[102]

In connection with these figures, the following table may be profitably studied, as showing the relative insignificance of the small producer in the total volume of manufacture. It will be seen that the two largest cla.s.ses of establishments have only 24,163 establishments, 11.2 per cent of the total number. But they have $10,333,000,000, or 81.5 per cent of the total manufacturing capital, and employ 71.6 per cent of all wage-workers in manufacturing industries. It may be added that they turn out 79.3 per cent of the total product. Of the petty industries proper, those having a capital of less than $5000, it will be observed that they number 32.9 per cent of the total number of establishments, but employ only 1.3 per cent of the capital invested, and only 1.9 per cent of the wage-workers. It is clear, therefore, that our manufacturing industry in very highly concentrated, and that the petty industries are, despite their number, a very insignificant factor.

TABLE OF MANUFACTURING ESTABLISHMENTS, 1905[103]

CAPITALS NUMBER PER TOTAL CAPITAL PER NO. OF PER CENT CENT WAGE-WORKERS CENT

Less than $5,000 71,162 32.9 $165,300,000 1.3 106,300 1.9

$5,000 to $20,000 72,806 33.7 531,100,000 4.2 419,600 7.7

$20,000 to $100,000 48,144 22.2 1,655,800,000 13.0 1,027,700 18.8

$100,000 to $1,000,000 22,281 10.0 5,551,700,000 43.8 2,537,550 46.4

Over $1,000,000 1,882 0.9 4,782,300,000 37.7 1,379,150 25.2

When we turn to agriculture, the criticisms of the Socialist theory appear more substantial and important. A few years ago we witnessed the rise and rapid growth of the great bonanza farms in this country. It was shown that the advantages of large capital and the consolidation of productive forces resulted, in farming as in manufacture, in greatly cheapened production.[104] The end of the small farm was declared to be imminent, and it seemed for a while that concentration in agriculture would even outrun concentration in manufacture. This predicted absorption of the small farms by the larger, and the average increase of farm acreage, has not, however, been fulfilled to any great degree. An increase in the number of small farms, and a decrease in the average acreage, is shown in almost all the states. The increase of great estates shown by the census figures probably bears little or no relation to real farming, consisting mainly of great stock grazing ranches in the West, and unproductive gentlemen's estates in the East.

Apparently, then, the Socialist theory that "the big fish eat up the little ones, and are in turn eaten by still bigger ones," is not applicable to agriculture. On the contrary, it seems that the great farms cannot compete successfully with the smaller farms. It is therefore not surprising that writers so sympathetic to Socialism as Professor Werner Sombart and Professor Richard T. Ely should claim that the Marxian system breaks down when it reaches the sphere of agricultural industry, and that it seems to be applicable only to manufacture. This position has been taken by a not inconsiderable body of Socialists in recent years, and is one of the tenets of that critical movement within the Socialist ranks which has come to be known as "Revisionism." Nothing is more delusive than statistical argument of this kind, and while these conclusions should be given due weight, they should not be too hastily accepted. An examination of the statistical basis of the argument is necessary.

In the first place, small agricultural holdings do not necessarily imply economic independence, any more than do petty industries or businesses. When we examine the census figures carefully, the first important fact which challenges attention is that, whereas of the farms in the United States in 1880, 71.6 per cent were operated by their owners, in 1900 the _proportion_ had declined to 64.7 per cent. In 1900, of the 5,739,657 farms in the United States, no less than 2,026,286 were operated by tenants. Concerning the ownership of these rented farms little investigation has been made, and it is likely that careful inquiry would elicit the fact that this is a not unimportant phase of agricultural concentration, though not revealed by the figures in the census reports. It remains to be said concerning these figures, however, that they do not lend support to the theory that the small farms are being swallowed up by the larger ones, for in the same period there was a very decided increase in the _number_ of farms operated by their owners. Thus we have the same set of figures used to support both sides of the controversy--one side calling attention to the decreased _proportion_ of farms operated by their owners, the other to the increased _number_.

A similar difficulty presents itself in connection with the subject of mortgaged farm holdings. In 1890, the mortgaged indebtedness of the farmers of the United States amounted to the immense sum of $1,085,995,960, a sum almost equal to the value of the entire wheat crop. Now, while a mortgage is certainly not suggestive of independence, it may be either a sign of decreasing or increasing independence. It may be a step toward the ultimate loss of one's farm or a step toward the ultimate ownership of one. Much that has been written by Populist and Socialist pamphleteers and editors upon this subject has been based upon the entirely erroneous a.s.sumption that a mortgaged farm meant loss of economic independence, whereas it often happens that it is a step toward it. The fact is that we know very little concerning the ownership of these mortgages, which is the crux of the question. It is known that many of the insurance, banking, and trust companies have invested largely in farm mortgages. This is another phase of concentration which the critics of the theory have overlooked almost entirely. One thing seems certain, namely, that farm ownership is not on the decline. It is not being supplanted by tenantry; the small farms are not being absorbed by larger ones. It seems a fair deduction from the facts, then, that the small farmer will continue to be an important factor--indeed, the most important factor--in American agriculture for a long time to come, perhaps permanently. If the Socialist movement is to succeed in America, it must recognize this fact in its propaganda.

V

Most of the criticism of the Marxian theory of concentration is based upon a very unsatisfactory definition of what is meant by concentration.

The decrease of small units and their absorption or supercession by larger units is generally understood when concentration is spoken of.

But concentration may take other, very different forms. There may be a concentration of _control_, for example, without concentration of actual ownership, or there may be concentration of actual ownership disguised by mortgages, as already suggested. The sweated trades are a familiar example of the former method of concentration. It has been shown over and over again that while small establishments remain a necessary condition of sweated industry, there is almost always effective concentration of control. To all appearances an independent manufacturer on a small scale, the sweater is generally nothing more than the agent of some big establishment, which finds it more economical to let the work be done in sweatshops than in its own factories. The same thing holds good of the retail trades, many of the apparently independent retail stores being simply agencies for big wholesale houses, controlled by them in every way. In an even larger measure, agriculture is subject to a control that is quite independent of actual or even nominal ownership of the farm. Manifestly, therefore, we need a more accurate and comprehensive definition of concentration than the one generally accepted. Mr. A. M. Simons, in an admirable study of the agricultural question from the Socialist viewpoint, defines concentration as "a movement tending to give a continually diminishing minority of the persons engaged in any industry, a constantly increasing control over the essentials, and a continually increasing share of the total value of the returns of the industry."[105] It is no part of the purpose of this chapter to discuss this definition at length. It is sufficient to have thus emphasized that concentration may be quite as effective when it is limited to control as when it embraces ownership.

There are, then, other forms of concentration than the physical one, the amalgamation of smaller units to form larger ones, and very often these forms of concentration go on unperceived and unsuspected. There can be no doubt that this is especially true of agricultural industry. Many branches of farming, as the industry was carried on by our fathers and their fathers before them, have been transferred from the farmhouse to the factory. b.u.t.ter and cheese making, for example, have largely pa.s.sed out of the farm kitchen into the factory. The writer recalls a visit to a large farm in the Middle West. The sound of a churn is never heard there, notwithstanding that it is a "dairy farm," and all the b.u.t.ter and cheese consumed in that household is bought at the village store.

Doubtless this farm but presented an exaggerated form of a condition that is becoming more and more common. The invention of labor-saving machinery and its application to agriculture leads to a division of the industry and the absorption by the factory of the parts most influenced by the new processes. When we remember the tremendous role which complex agencies outside of the farm play in modern agricultural industry, we see the subject of concentration as it applies to that industry in a new light. The grain elevators, cold-storage houses, creameries, and even railroads, are part of the necessary equipment of production, but they are owned and operated independently of the farm. There is a good deal of concentration of production in agriculture which takes the form of the absorption of some of its processes by factories instead of by other farms.

VI