The Next Step: A Plan for Economic World Federation Part 2

1922. p. 43.) A point has now been reached where the French, Russian, Italian, German, Austrian and Hungarian debts are equal to at least half of the total estimated national wealth. When it is remembered that most of this wealth is in private hands, and heavily enc.u.mbered with private mortgages; that the cities have issued enormous numbers of bonds against the same wealth, and that even though the wealth were in public hands it could not be liquidated for anything like its estimated value, it must be apparent that the capitalist world--particularly that part lying in Central Europe--has put itself into a position where its governments cannot meet their promises to pay.

Nor is this the worst. The war experience taught European government officials that it was possible to make money and pay debts with the aid of printing presses. The rapid increase in prices, and the unwillingness of the owning cla.s.ses to pay for the war by means of a capital levy, placed the governments in a position where the ordinary expenses, plus the costs of the war, the interest on the war bonds, the costs of reparations and other extraordinary expenses amounted to far more than the total government revenue. As lately as 1920, all of the European belligerents, with the exception of Great Britain, all of the European neutrals, except Sweden, and all of the other princ.i.p.al countries of the world except Peru and the United States, reported expenditures in excess of receipts. The deficit for Austria amounted to 38 per cent of its expenditures. In other princ.i.p.al countries the ratio of deficit to expenditure was:

Belgium 69 per cent France 57 " "

Germany 46 " "

Italy 21 " "

j.a.pan 17 " "

("Our Eleven Billions," p. 40-41).

These events led inevitably to a demoralization of the foreign exchange market, which reflects the measure of confidence felt by the business men of one community in the promises to pay made by the government of another community. The exchange values of the non-warring countries remained generally near to par during the entire war and post war period. j.a.panese exchange fluctuated very little; British pounds, which up to the time of the war were recognized the world over as the standard of value, fell to about three fifths of their par value as expressed in dollars; the French franc and the Italian lira fell to a quarter of their par values, while the Russian ruble, the German mark, the Austrian and the Polish crowns fell to less than one-tenth of one per cent of par. In addition to the serious depreciation of these various currencies, their values fluctuated from day to day and hour to hour, making business transactions difficult or impossible.

Coupled with the disorganization of exchange has been the economic depression which, beginning in March, 1920, spread like a tidal wave, bringing disaster and hardship to workers, farmers and business men.

With abundant crops, with industries united into great combinations, with the banks more efficiently organized than ever before in modern times, there should have been no crisis according to the accepted economic philosophy, or, if there was a temporary set-back following the strain of the war, it should have been a regulated panic. But despite the predictions the depression came, and proved to be one of the most severe that the modern world has experienced. The thoughtful man noting these facts, and then learning that, beginning with the hard times of 1814, there have been seventeen of these breakdowns in the economic machinery of the United States, with corresponding derangements in France, Britain, Germany and the other industrial countries; and learning further that there is a tendency for such catastrophes to become more, rather than less severe, begins to wonder whether the difficulty is not very much more deep-seated than many public men would have him believe. Even the most stalwart supporters of the present order must agree that the system does not function smoothly. There are many b.u.mps, jars and hitches, and considerable friction.

Another evidence of economic chaos is furnished by the extent of industrial waste. Studies in industrial efficiency have led recently to the publication of a number of reports, the most ambitious of which, "Waste in Industry," issued by the Committee on the Elimination of Waste in Industry of the Federated Engineering Societies of the United States, describes waste under four aspects:

1. Low production caused by faulty management of materials, plant, equipment and men.

2. Interrupted production, caused by idle men, idle materials, idle plant and idle equipment.

3. Restricted production, intentionally caused by owners, management or labor.

4. Lost production, caused by ill health, physical defects and industrial accidents. (Page 8.)

With these various kinds of waste in mind the committee made a survey of some of the leading industries in the United States, and drew up a table showing the percentage of waste found in each industry. The figures were as follows:

Men's Clothing Manufacturing 63.78 per cent Building Industry 53.00 " "

Printing 57.61 " "

Boot and Shoe Manufacturing 40.93 " "

Metal Trades 28.66 " "

Textile Manufacturing 49.20 " "

The bulk of the responsibility for this waste is placed on "management,"--the lowest percentage (50 per cent) in Textile Manufacturing, and the highest (81 per cent) in the Metal Trades. The remainder of the responsibility is shared by labor, with a minimum of 9 per cent in the Metal Trades and a maximum of 28 per cent in Printing, and by miscellaneous causes, with a minimum of 9 per cent in Men's Clothing and Printing and a maximum of 40 per cent in Textile Manufacturing. (Page 9.)

There are a number of angles from which this result may be viewed. Waste may be looked upon merely as the index of industrial inefficiency due to the failure of the industrial mechanism to adjust itself to the demands made upon it. In that case the remedy for the waste is superior adjustment of the present system to itself. On the other hand, if the waste is the result of friction generated within the system, there must be some change in the system before it can be eliminated. The latter explanation seems to tally with the facts more thoroughly than does the former. Certainly, the unrest, bitterness and general sabotage which are encountered throughout the industrial order would point to the conclusion that the economic system is generating its own condition of chaos.

Sabotage, or "go slow," is becoming the dominant note of the entire economic system. "Get the most you can out and put the least possible in," is the theory upon which both workers and owners are operating.

There has been much comment upon the tendency of the workers to use the go slow tactics. The real withholding of productive effort, however, takes place among the owners and managers of industry.

Industrial leaders are well versed in the law of monopoly profit: "Minimum product at maximum price." The railroad men have rephrased the law thus: "All that the traffic will bear." Industry has been organized and capitalized and is now owned by a group whose interests lie, not in the extent of production, but in the volume of profit. When profit is no longer forthcoming, the owners practice the conscious withholding of efficiency. In accordance with this general policy the control of industry is shifting from the hands of engineers into the hands of financial experts "who are unremittingly engaged in a routine of acquisition, in which they habitually reach their ends by a shrewd restriction of output; and yet they continue to be entrusted with the community industrial welfare, which calls for maximum production." ("The Engineers and the Price System," Thorstein Veblen. Huebsch. 1921. p.

40-41.) The recent cry of the American farmer: "Produce only what you need for your own keep," is a crude effort to imitate the successful tactics of the business world in limiting production to the volume that will yield the greatest possible profit to the owner.

War-menace const.i.tutes another indication of the chaos existing in modern economic society. The purpose of economic activity is to produce wealth. The purpose of war is to destroy it. The two are therefore in direct antagonism; yet the greatest war machines are maintained by the greatest industrial nations. To reply that they have the big war machines because they can afford to pay for them, is no conclusive answer. The organizing of nations for war came into present-day society with the present industrial system. Industrial leaders have engaged in a great compet.i.tive struggle from which the final appeal was always the appeal to arms. Furthermore, one of the most profitable businesses has been that of making the munitions and supplies required for the prosecution of war. Nor is there wanting evidence that modern wars have been made for profits--that they have been "commercial wars," as President Wilson put it.

There is no longer any question but that the forces behind the world war were in the main economic. The war was fought by capitalist empires, for the furtherance of capitalist enterprises. The publication of the secret treaties entered into by the Allies in 1916 gives conclusive proof of the land grabbing character of the Allies' intentions. There can scarcely be any question of the existence of similar intentions on the side of the Central Empires. The forces that const.i.tuted the war menace in 1914 were the economic forces arising out of the compet.i.tive economic regime that dominated the European world at that time.

Since the ending of the war, these forces have been augmented rather than abated. To them there must be added the other element of danger that threatens to throw Europe again into turmoil. Soviet Russia is and for a time must remain a source of international bitterness among the great capitalist nations, while the struggle for the control of the Near East is fraught with consequences as momentous as was the pre-war German dream of a railroad from Berlin to Baghdad. Unrest in Egypt, India, Korea, and the other countries held in subjection by the power of the bayonet; the contest between j.a.pan, Britain and the United States for the control of the Pacific and the exploitation of China; the unrest and revolution that are stirring in China; the keen intensity of the struggle for foreign markets and for such strategic resources as the supply of petroleum, are all suggestive of a situation resembling an open gasoline can surrounded by lighted matches. And to add the last, and the most realistic touch to the picture, there are a million more men under arms in Europe than there were in 1913, while the military and naval authorities in all of the leading countries are busy planning how and where the next war is to be fought. (See "The Next War," Will Erwin.

Dutton, 1921; "The Coming War with America," John MacLean. British Socialist Party, 1920; "War in the Future," F. von Bernbardi. Berlin, 1920; "The Inevitable War between j.a.pan and America," F. Wencker.

Stuttgart, 1921; "Coal, Iron and War," E.C. Eckel. New York, Holt, 1920, etc.) Before the gra.s.s was green over the graves where lies the flower of Europe's manhood, leaders of the present order were busy with the blueprints of another carnage.

The facts speak for themselves. The existence of such chaos is a matter of every day comment and experience. Though its nature and its causes are little understood, there is no issue of more immediate concern to the western world than the intelligent solution of the vexing questions arising out of the production and distribution of wealth.

Until the Russian Revolution of 1917, the entire western world was so organized that one group or cla.s.s owned the land, the machines and the productive devices with which other groups or cla.s.ses worked in order to live. The establishment of this "capitalist" system between 1750 when it had its start in England, and 1860, when it secured a foothold in j.a.pan, has raised certain questions of economic procedure which lie at the background of the economic problems which men are seeking to understand and to solve.

There is no necessity for an elaborate discussion of these problems, since they are at the moment quite generally under the dissecting knife of social students, reformers and revolutionaries. They may be divided into two main groups:--those which are localized in character and those which are world-wide in character. Perhaps the latter group might be called "worldized."

2. _Localized Problems_

There are a number of outstanding economic problems that affect locally, each community that has adopted the capitalist system. Among the most important of them are:

1. The relations between the job owner and the job taker.

These relations involve the question as to whether job control shall be vested in those who hold the property or in those who do the work. The issue is an old one, intensified to-day by the absentee ownership which stocks and bonds make possible, and aggravated by the presence of vast industrial establishments in which there are employed thousands of workers without the possibility of any direct contact between job owners and job takers.

2. The distribution of wealth and income.

Another old issue has returned to plague a society that makes it possible for some to enjoy "progress" while others must suffer from "poverty." Labor saving machinery has increased the quant.i.ty of the industrial product, but as yet there has been no general effort to see that the advantages of this wealth production go to those who are in need of food, clothing and shelter. Indeed, under the present order, millions of those who work are called upon to accept a standard of living which represents less than physical health and social decency, while those who own the land and the machinery with which the wealth is produced are able to exact a rent or unearned income that keeps them permanently on easy street. This embittering contrast between the house of have and the house of want is leading to-day, as it has in any historical society, to division and conflict, for, as Madison wisely observed in the Federalist, "The most common and durable source of factions has been the various and unequal distribution of property."

3. The interrelation of industries.

So long as there was a direct connection between a worker and the product which he turned out, economic life was simple. When, however, the coal dug in eastern Pennsylvania was used to heat houses in Minneapolis, while wheat grown in Dakota was milled in Duluth, made into crackers in Boston and sold all over New England, there arose the problem of the relation between mining, wheat raising, transport, manufacturing, and merchandising. Thus far the banker has acted as the go-between in holding this machinery together, but he labors under two important disqualifications: first, he does not represent anyone except himself and his fellow owners and is therefore not socially responsible for what he does; in the second place, like every other business man, he is out to make a profit rather than to render the community a service.

Hence the structure of industrial society rests in chaotic dependence upon the ambitions and foibles of self-selected financiers.

4. Attempts at government control of industry.

The irritated people, incensed by repeated acts of economic tyranny, have turned to the political state, which has been thought of as the guardian of popular rights in a democracy, and through regulatory legislation the appointment of commissions, and even through state compet.i.tion they have sought to bring obstreperous business interests under the wing of state control. These efforts have generally failed: the business interests, through their control of the economic surplus, have dominated the commissions and have used the machinery of the political state as the instrument for further exploiting ventures; the police, the courts, the executive power, the military--all have been employed by the owners and exploiters against the workers. The issue between the empires of industry and the political state still remains one of the most vexing in the field of public life.

These problems of job control, of wealth and income distribution, of industrial inter-relations and of the relation between the state and industry are pressing for solution in every important centre of modern economic life. Each const.i.tutes a disturbing element and contributes its mite to the aggregate of social instability and unrest that are racking the economic world.

3. _World Problems_

Aside from these problems, localized in character, though world-wide in their distribution, there are a number of other problems of a world character which also are factors in the disorganization of economic life. One of these world problems is the compet.i.tive struggle between economic groups for trade, markets, resources and investment opportunities; another is, the excessive concentration of the world's wealth in a few centres.

4. _Compet.i.tion for Economic Advantage_

The issue of non-redeemable promises to pay has crippled the world's credit machinery. The compet.i.tion for economic advantage has played havoc with the world's social stability.

Theoretically the coffee grower of Brazil and the agricultural machine manufacturer of Illinois produce and exchange those things that they can turn out most advantageously. Practically the resources of the world are monopolized by powerful financial interests each striving to destroy its rivals, each seeking its own enrichment, and each busy reinvesting the surplus wealth which piles up as the result of exploitation at home and abroad.

Compet.i.tion for economic advantage has followed the line of greatest profit. The present age inherited from the medieval economic world certain time-honored trade rivalries such as those which had existed between Rome, Carthage and Corinth in cla.s.sic times, or between Holland, France and England in more modern days. These trade rivalries concern themselves with:

1. The transport of goods and people.

2. The financing of such transactions through bills of exchange, and the like.