Twentieth Century Socialism Part 6

[21] "The American Farmer," A.M. Simons.

BOOK II

_WHAT CAPITALISM IS_

Socialism is necessarily twofold: destructive and constructive; critical and remedial. We shall take the critical or destructive role of Socialism first; setting down the evils in our existing industrial system which Socialism criticizes and seeks to destroy, and leaving the remedial or constructive role of Socialism where it properly belongs--to the end. For this reason the present book, which treats of the evils of the existing industrial system, is ent.i.tled "What Capitalism is."

EVILS OF CAPITALISM

For nearly two centuries men have produced and distributed the things they needed, upon what is called "the compet.i.tive system." That is to say, every individual is free to choose his particular share in this work and to make out of his work all that he can, in order with the money so made to purchase for himself the things that he individually needs. The farmer undertakes to furnish us with food, the forester with lumber, the miner with iron. Another set of men run railroads, steamboats, wagons, etc., to distribute the things produced to those who are engaged in selling them--by wholesale to the trade, or by retail to the consumer. Every man engaged in production and distribution is in a measure competing with every other man engaged in it, each trying to make out of his particular calling the largest amount of money possible with the view of being able with the money so earned to purchase for himself the largest amount of necessaries, comforts, and luxuries. This so-called compet.i.tive system has been elaborately described by all writers of political economy from de Quesnay and Adam Smith, the fathers of our present system of political economy, to the present day; and because it follows the predatory plan of nature (by which one set of animals lives by devouring another set), it is claimed by some so-called philosophers to be "natural" and therefore wise. The most notorious author of this so-called scientific justification of the compet.i.tive system is Herbert Spencer.

The compet.i.tive system, however, has been found to result in great waste, misery, and disease; and it is to these evil consequences that the Socialist desires to put an end. He claims that the compet.i.tive system is not wise, not scientific, and above all, not economical, but is the most wasteful system conceivable. He alleges that the only intelligent, economic way of producing and distributing the things we need is by cooperation; and the whole economic issue between Socialism and our present industrial system is that Socialism stands for cooperation, and our present system for compet.i.tion.

It is by no means a necessary part of Socialist philosophy that compet.i.tion be entirely eliminated. On the contrary, it has been pointed out and will later be further seen that compet.i.tion has many useful qualities.[22] Socialism, however, points out that compet.i.tion, when allowed full sway in producing and distributing the necessaries of life, is the direct occasion of the larger part of the misery in the world, and insists, therefore, that as _regards production and distribution of the necessaries of life_, compet.i.tion be sufficiently eliminated to a.s.sure to all men the opportunity to work, and as nearly as possible the full product of their work. The limitation in italics is the definite dose to which reference has already been made.[23]

One prominent feature of the compet.i.tive system is that men do not work for the purpose of supplying the needs of their fellow creatures.

The Steel Trust does not manufacture steel to satisfy our need for steel; the farmer does not raise wheat to satisfy our need for bread; they produce these things simply for the purpose of making money for themselves in order that with this money they can procure for themselves the things they need. Socialism claims that the role played by money in the compet.i.tive system is unfortunate, because the amount of money available at any given time is not always properly adjusted.

Sometimes it is so badly adjusted that there is more cotton in one place than the people in that place can use, and in another more people who need cotton than there is cotton to give them; so that it is deliberately proposed to burn cotton for lack of consumers in one place, while consumers are allowed to suffer for lack of cotton in the other. So a short time ago thousands were dying of starvation for lack of wheat in India, while we had such a superabundance of it in America that we were exporting it every day. But that wheat was not available for India because it had to be converted into money.

Socialists allege that this bad situation would never arise if things were produced for the purpose of satisfying human needs instead of for making money.

Let us enumerate some of the most important evils of the compet.i.tive system, which Socialism seeks to correct. These evils briefly are: The compet.i.tive system is stupid because wasteful and disorderly; it is unnecessarily immoral, unjust and cruel.

FOOTNOTES:

[22] See Book I, Chapter III.

[23] See Book I, Chapter III.

CHAPTER I

CAPITALISM IS STUPID

-- 1. OVERPRODUCTION

The first and most glaring evil of the compet.i.tive system is that it is stupid. In support of this I shall call as witnesses captains of industry whom the business men regard as the greatest authorities in the world: John D. Rockefeller[24], Henry O. Havemeyer[25], Elbert H.

Gary[26] and others.

Socialists are accused of being impractical. I shall have failed in properly presenting the Socialist case if I do not succeed in demonstrating that the impractical people are the bourgeois, the Roosevelts, Tafts and Bryans who, though aware of the waste of the compet.i.tive system, insist upon maintaining it; and that the only practical people are those who, like the Socialists, having perceived the waste that attends the compet.i.tive system, seek to replace it by a more economic plan.

No one will, I think, deny that the most practical business men to-day in America are Rockefeller, Pierpont Morgan, Havemeyer, and the others who have been engaged in organizing our great trusts. Now the only object of a trust is to eliminate the unnecessary waste of compet.i.tion; and the only difference between the Socialist and the trust magnate is that the Socialist wants the benefit derived from reducing compet.i.tion to be shared by all; whereas Rockefeller, Pierpont Morgan and the other trust magnates want the profit secured by the elimination of waste all to themselves.

I do not suppose there is any man living so prejudiced or so dull as to deny that, if Socialism could present a system by which all could be made to profit from the elimination of the waste of the compet.i.tive system in such a manner that the profit of each shall be proportional to the amount which each contributes, Socialism would be justified.

The only point upon which there can be discussion is whether it is possible to suggest a workable plan under which the evils of compet.i.tion can be eliminated, and the blessings of cooperation take their place. In other words, is cooperation a practical cure for compet.i.tion? It is obviously impossible to decide whether a given treatment would const.i.tute a cure for a given disease, without a thorough knowledge of the disease. It is therefore essential that we should be clear as regards the defects of the compet.i.tive system, and how far these defects are curable and how far incurable.

The beauty of the compet.i.tive system upon which the bourgeois loves to dwell is that it is automatic; whenever there is overproduction in an industry prices fall, profits disappear and therefore capital flows away from it; as soon as overproduction comes to an end prices rise, profits reappear and capital flows back to it. And the beauty of this automatic system is the more commended because it closely follows Nature; and indeed, the system of Nature is beautiful in the extreme.

The sun draws the vapor of pure water from the salt ocean; lifts it high into the air, wafts it by propitious breezes to the continent; sheds it in beneficent rain upon the thirsty land, and deposits it in gigantic reservoirs of ice and snow upon our mountain heights; there is the supply upon which during hot summers we depend; and the hotter the summer, and the more therefore we need moisture, the more the snow and glaciers melt and furnish us with torrents of refreshing streams; so that at last the vapor that has been drawn by the sun from the ocean, in obedience to the inevitable law of gravitation, returns to it in a thousand rivers, after having performed its function of nutrition and refreshment on the way.

In the same fashion demand is ever beckoning labor and capital to seek new fields, tempting them from the low levels of low interest to high levels of high profit; and supply, increasing through their efforts, is forever bringing them back, like the force of gravitation, to the point whence they started; and the cycle is repeated over and over again, performing its mission of production and distribution on the way.

Unfortunately, Nature, though beneficial in the main, does not accomplish its work without distressing incidents. Breezes are not always propitious; they sometimes create disastrous havoc; torrents are sometimes more than refreshing, and summers unduly hot.

For example, the more abundant a crop is, the more prosperous the country which grows the crop ought to that extent to be; but it sometimes happens that, in such case, prices fall so low as to bring disaster to those who have grown it.[27]

Nature is not always to be depended on. Occasionally a crop entirely fails, and when this happens, as lately in India, millions are exposed to starvation and thousands actually starve.

Even when Nature is most bountiful the compet.i.tive system results in misfortune. For example, the President of the Boston Chamber of Commerce in a speech to the Chamber said in 1891:

"In 1890 we harvested a cotton crop of over eight million bales--several hundred thousand bales more than the world could consume. Had the crop of the present year been equally large, it would have been an _appalling calamity_ to the section of our country that devotes so large a portion of its labor and capital to the raising of cotton."[28]

In 1905 the newspapers announced "the South is proposing to burn cotton so as to keep up its price."[29] And still more recently the same suggestion has been made regarding the tobacco crop in Kentucky.

Again, the compet.i.tive system under which every man goes into the business where he sees most profit, inevitably leads to periods of overproduction, and overproduction leads to unemployment and misery.

No political economist denies the obvious fact that whenever an industry is known to be profitable, capitalists are likely to engage in this industry--indeed, this is one of the automatic processes which the Manchester school has put forward as const.i.tuting the chief merit of the system. It is, of course, important for the community at large that prices should in no one industry become excessive; and obviously the disposition of capital to rush into industries where profits are high, does by compet.i.tion tend to reduce prices, and thus prevent them from becoming excessive. But economists, especially those of the Manchester school, have not been willing to recognize that this disposition of capital to flow into productive enterprises may, though sometimes beneficial, be also sometimes ruinous; may, indeed, often result in a devastating deluge. These economists, therefore, it may be well to confront with a brief history of one or two of our largest combinations. Let us take as a first example the sugar trust.

Just before the organization of this trust, overproduction had become so excessive that of forty refiners in the United States eighteen became bankrupt. Of the twenty-two that remained, eighteen combined.

Of the refineries belonging to these eighteen, eleven were closed, leaving seven to do profitably the work which had previously been done unprofitably by forty.

The history of the whisky trust shows overproduction to a still more aggravated degree. Before the organization of the Distilling and Cattle-Feeding Company, agreements were entered into by the majority of the distillers; under one of them they agreed to reduce production to forty per cent of what it at that time was; subsequently they agreed to reduce still further to twenty-eight per cent; and of eighty of the princ.i.p.al distillers who organized the Distilling and Cattle-Feeding Company, the establishments of sixty-eight were closed, leaving only twelve distilleries operating.

The same succession of events is found in the history of the American Steel and Wire Company, and indeed of practically all American trusts.

This inevitable tendency towards overproduction vitally concerns workingmen, for it is upon them that the evil consequences of this process first and most fatally fall. As soon as the process results in the inevitable reduction of prices to near cost, the manufacturer must either throw workmen out of employment or reduce wages. Wages const.i.tute the only elastic element in cost, and it is therefore the workingman who first pays for the evil working of this system. And not only does the workingman pay for it, but the employer pays for it also; for workingmen, to protect their interests, strike, and only the wealthiest employers can stand the strain of a strike; the rest are ruined by it.

Even a reduction of the hours of work or the days of employment in the week will, if it lasts long enough, ruin the employer, for he has still to pay the fixed charges of the factory, and if prices get low enough, and he cannot sell his goods except at a ruinous loss, he ends by not having means to pay these charges; and this process is ill.u.s.trated in the cases just mentioned; for example, eighteen out of forty sugar refiners became bankrupt; and it was not till the eighteen were ruined that a combination was possible amongst the rest.

One method employed by trusts to keep up prices at home is to sell their excess of goods in foreign markets at prices below cost.

Mr. Gary, President of the Federal Steel Company, testified before the Industrial Committee that steel had been recently shipped to j.a.pan at a price below the domestic price.[30]

Mr. J.W. Lee, President of the three independent pipe-line organizations, testified that prior to 1895 "oil for export was sold below the cost of crude at the refinery."[31]

Again, at a time when the American trade was paying $28 for steel rails, the same steel rails were sold in j.a.pan at $20.[32]

Obviously, the nations who are the victims of this process are not long going to tolerate it; but this is a relatively small part of the international complications produced by overproduction. The most serious consequence of overproduction is that manufacturers, when they can no longer get a remunerative price for their goods in the home markets, are inevitably driven to seek it elsewhere. They seek foreign markets, and failing foreign markets, they seek new markets by colonization or conquest.

It is impossible to read the history of the British Empire during the last 150 years without becoming persuaded that its so-called greed for conquest inevitably results from the necessity under which English manufacturers have been to secure markets for their increasing goods.

Either British factories had to close, and British workmen to be thrown out of employment, or England must, by colonization or conquest, secure a price outside her own borders for the goods which compet.i.tion perpetually tended to make her factories overproduce.