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 AT LOS ANGELES 
 
 — ii 
 
 I 
 
 THE GIFT OF 
 
 MAY TREAT MORRISON 
 
 IN MEMORY OF 
 
 ALEXANDER F MORRISON 
 
 1
 
 INDUSTRIAL 
 FREEDOM 
 
 BY 
 
 DAVID MACGREGOR MEANS 
 
 WITH AN INTRODUCTION BY 
 THE HON. DAVID A, WELLS 
 
 
 i 
 
 NEW YORK 
 
 D. APPLETON AND COMPANY 
 
 1897
 
 Copyright, iSq7, 
 BV'.D;'APPLETQN: ANP COMPANY.
 
 
 INTRODUCTION. 
 
 Our age is distinguished by the attention 
 given to the condition of the poorer members of 
 society. Vast sums have been devoted, both by 
 individuals and by governments, to the allevia- 
 tion of the sufferings of those who are unable to 
 help themselves, and it might seem that this pro- 
 fuse benevolence would be sufficient to neutralize 
 the evils of poverty. But the modern sensitive- 
 ness to inequalities of condition and opportunity 
 is not quieted by such palliative measures. The 
 enormous increase of wealth is believed to indi- 
 cate something wrong in the existing principles 
 of its distribution, and the world has had an in- 
 finite number of suggestions made to it for the 
 improvement of its constitution. Some of these 
 suggestions are wise and practical. They are 
 made in the light of experience and with regard 
 to the permanent conditions of human progress. 
 
 Other proposals are bolder, and assume that 
 under changed circumstances human nature may 
 
 ii: 
 
 432371.
 
 IV INDUSTRIAL lUI t I)<>M. 
 
 become something very (liliiit.iii iiom wliat it 
 lias hitherto shown itself to be. 
 
 Most of these latter suggestions have the 
 common aim of proposing to effect the desired 
 changes by compulsory measures. They look to 
 Government as the agent by which improvement 
 is to be introduced, and to legislation as the 
 means to be employed. They imply that by such 
 instrumentalities greater equality in the distri- 
 bution of wealth can be attained. They assume 
 that without decreasing the aggregate produc- 
 tion of mankind, the share now appropriated by 
 the rich may be diminished, and that allotted 
 to the poor may be enlarged. They refuse to 
 be bound by the severe restraints prescribed 
 by the experience of the race, because that ex- 
 perience has been obtained under the influence 
 of militant passions. The great principle of hu- 
 man brotherhood is now becoming dominant, 
 and the lessons derived from the days when 
 hatred and malice governed human action are no 
 longer applicable. 
 
 It is not to be denied that these proposals are 
 attractive. The end to be attained is so desira- 
 ble as to appeal to the best elements in our na- 
 ture. It interests the benevolent members of 
 the well-to-do classes, who feci that they can not 
 altogether justify their possession of so large a
 
 INTRODUCTION. V 
 
 share of the good things of this Hfe. Hence they 
 give a certain countenance to many of the social- 
 istic schemes for improving the condition of the 
 poor. They are not prepared to estimate the 
 tendencies or ultimate results of these schemes 
 very critically, and they yield them a qualified 
 support with the vague hope that somehow good 
 may come out of them. 
 
 It is the aim of this essay to show that no 
 good can come out of them. The author con- 
 siders the existing methods of distributing the 
 products of human activity by means of the 
 wages system, and demonstrates that it tends to 
 establish working people in a state of independ- 
 ence rather than subjection; to promote "in- 
 dustrial freedom," not to produce " industrial 
 slavery." He shows how intimately the welfare 
 of labourers is connected with the prosperity of 
 their employers, and how the attempts to dimin- 
 ish the wealth of corporations may diminish the 
 fund of capital out of which the wages of labour- 
 ers are paid. He points out the dangers that 
 arise from the misapplication and abuse of the 
 taxing power, and indicates the pecuHar evils to 
 which such abuses will lead under our form of 
 Government. 
 
 It is the general aim of socialists to take from 
 the rich in order to give to the poor, but they sel-
 
 VI INDUSTRIAL FREEDOM. 
 
 (loin advocate this direct redistribution. They 
 pro^jose to ai)j)ly tlie increased taxes which they 
 would impose on accumulated property, or the 
 income derived therefrom, to all sorts of public 
 enterprises. In other w<^rds, they would increase 
 the number of persons in the pay of the Govern- 
 ment, and the amount expended in public works, 
 with the idea that labourers or poor people as a 
 class will be benefited. But they overlook the 
 fact, which is pointed out in this book, that the 
 public revenue can be added to only by subtrac- 
 tion from private revenue, and that the impair- 
 ment of private accumulation may reduce the 
 fund applied to the payment of labourers more 
 than the expenditure of Government can increase 
 it. In this way the proposals of the socialists 
 defeat themselves, and if carried out would in- 
 jure the poor as a class. The expense of Govern- 
 ment is a charge that the public must bear, but 
 its limits are defined by experience, and the 
 modern tendency to exceed them results in cor- 
 ruption and extravagance, which may in the 
 first place be injurious to the rich, but which 
 eventually causes suffering among the poor. 
 
 To turn aside after the ideals of the socialists 
 is thus directly productive of injury to the gen- 
 eral welfare. It is also indirectly prejudicial, be- 
 cause the verv best element in our societv. that
 
 INTRODUCTION. Vll 
 
 which is both conscientious and cultivated, is 
 led to waste strength needed for important re- 
 forms. There are many reforms about which 
 most people are agreed, but they can be accom- 
 plished only by the union of all public-spirited 
 citizens. If these citizens lend their support to 
 the measures of socialistic tendency, they can not 
 expect to carry out conservative reforms. If 
 they are not in accord as to their general line of 
 political action the consequences may be disas- 
 trous for the country. Their efforts neutralize 
 each other, and when honest men fall out, rogues 
 get their own way. We have recently had a 
 startling exhibition of the prevalence of Jacobin- 
 ical doctrines among our demagogues, and of 
 their popularity among our people. If such 
 doctrines are to be overcome, it will be by means 
 of the diffusion of such truths as are contained 
 in this book, and those who are concerned for the 
 future of our country will do well to read it and 
 to let it influence their thought and action, 
 
 David A. Wells. 
 
 NoRV.'iCH, Conn., Scpiemler i, iSgj.
 
 CONTENTS. 
 
 CHAPTER PAGE 
 
 I. — The grievance i 
 
 II. — The standard of justice 9 
 
 III. — Relations between the employer and the 
 
 employed 20 
 
 IV. — The status of labourers employed by cor- 
 porations 29 
 
 V. — Some exceptions considered .... 39 
 VI. — Some elementary truths about corpora- 
 tions 60 
 
 VII. — Personal relations in corporate industry . 88 
 
 VIII. — Corporations possessing monopolies ... 98 
 
 IX. — The partnership theory 123 
 
 X. — What limits the rate of wages . . . 146 
 XI. — The nature of profits, and some conse- 
 quences OF reducing them .... 159 
 XII. — Possible effect on wages of reducing the 
 
 RATE of profit 189 
 
 XIII. — Particular measures for reducing profits . 209 
 
 XIV. — Conclusion 237
 
 INDUSTRIAL FREEDOM. 
 
 CHAPTER I. 
 
 THE GRIEVANCE.-' ' ' 
 
 If we were to follow ilie complaints' ©f" bl>e 
 existing constitution of human society to their 
 ultimate source, we should find them all em- 
 braced under the head of injustice. There are 
 numberless specific evils, but in the end they can 
 all be traced back to this fundamental ground and 
 cause. It is not mere inequality of possessions 
 that arouses discontent and indignation. Every 
 one who thinks seriously of the matter sees that 
 the natural endowments as well as the achieve- 
 ments of men differ so greatly as to make any 
 absolute equality of rewards the height of in- 
 justice. To enforce such equality would be to 
 put a premium on vice and incompetency. But 
 the underlying feeling is that, after all such al- 
 lowances are made, the dififerences in the distri- 
 bution of the comforts and enjoyments of life 
 are excessive and unjust. We find ourselves in
 
 2 INOfSTKIAL rRKKDflM. 
 
 the possession of ic-rtrun advaiitn^^cs, not simply 
 material advantages, but advantages of educa- 
 tion, of travel, of society, of culture, of the 
 graces of life, which advantages arc not pos- 
 sessed by numbers of our fellow-citizens whom 
 we feel to be as deserving as ourselves. We be- 
 lieve them to be morally as good as we are, and 
 perhaps not infrequently better. W'c sec that 
 they, are endowed by Nature with equal or su- 
 perior intellectual powers. They often work as 
 hard as we do, and if we take into account the 
 disagreeable conditions of their labour, the pre- 
 cariousness of their employment, and the con- 
 stant proximity of want, their work may fairly be 
 called, if not harder than ours, at least more 
 unpleasant. On any comprehensible theory of 
 justice it certainly seems that, unless we fare 
 better than we deserve, they fare worse than they 
 deserve. Our fathers appear to have accepted 
 this dispensation without questioning it too par- 
 ticularly. They received their blessings as by 
 the grace of the Almighty, and left the justice 
 of his treatment of the poor with him. Possibly 
 there was in this somewhat of the disposition 
 of the Pharisee to be thankful over not being as 
 other men are; but at all events this is not our 
 attitude. So far from being thankful for our 
 own favoured lot. we complain that it is too
 
 THE GRIEVANCE. 3 
 
 favoured, and that others who are as good as we 
 are do not share it. 
 
 As I have said, it is not so much the distri- 
 bution of material things that causes our feeHng. 
 No doubt the fare of the masses of mankind is 
 very plain, their clothing coarse, their shelter 
 poor, their luxuries few. We live on a variety of 
 choice meats and vegetables and fruits; they live 
 on salt pork and cabbage and potatoes. We 
 have constantly on our tables wines and other 
 beverages which they have never tasted and will 
 never taste. We carpet our houses, and warm 
 them with open fires and furnaces; they have 
 stoves and bare floors. We cover our bodies 
 with delicate fabrics of wool and silk; they cover 
 theirs with coarse cotton cloth and shoddy. It 
 is idle to extend the list; we know that we have 
 hundreds of pleasant things which they can not 
 have or hope to have. 
 
 But in spite of our luxurious Uving and of 
 their humble fare, we do not regard this inequal- 
 ity as the greatest of hardships. We have learned 
 that the life is more than meat and the body than 
 raiment. Food is nothing without appetite, and 
 with appetite the coarsest fare is delicious. So 
 long as the material conditions are such as to 
 maintain the physical system in health, the rest 
 is largely vanity. Many men and many women
 
 4 INUUSTKIAL FKKKDOM. 
 
 have found themselves better and happier when 
 they have lost their fortunes and been compelled 
 to work; and if this can be true, the deprivation 
 of luxuries implies no injustice in the nature of 
 things, r.ut wc have come to take a broader 
 view of man than as simply an animal to be well 
 fed and groomed. We hold to the brotherhood 
 of mankind, and recognise in every human being 
 the existence of like capacities, the potentiality 
 of adections and aspirations similar to our own. 
 Happiness is conditioned on development, but 
 development is conditioned on opportunity. The 
 struggle for mere survival among the peoples of 
 the earth is no longer so desperate as of old; but 
 what shall we say of the struggle for develop- 
 ment, for intellectual attainment, for moral re- 
 finement, for the expression of genius? We 
 need not visit the country churchyard to find oc- 
 casion to lament the '' heart once pregnant with 
 celestial fire." Never morning wears to evening 
 but some such hearts do break, and his experi- 
 ence is limited who has not known many of 
 whom he must say: 
 
 Chill penun- repressed their noble rage, 
 And froze the genial current of their soul. 
 
 It is here that our sense of justice is sorely 
 wounded. How anxiously wc seek the most 
 eminent doctors at the suspicion that disease
 
 THE GRIEVANCE. 5 
 
 threatens our lives, even while we may admit 
 that we could easily be spared! But our poor 
 brother, whose life is the sole support of his 
 family, must take it in his hands and run his risk 
 of sickness. How tenderly we shield our chil- 
 dren from the knowledge of what is vile and 
 from the companionship of those who are cor- 
 rupting, and seek to give them every possible 
 advantage of pure and wholesome surroundings! 
 Are there not parents among the poor who love 
 their children as well, but who have no choice but 
 to familiarize them with the obscene words and 
 practices of the street and the public school? 
 When they see them pining away, can they pro- 
 cure for them such treatment or such- change of 
 climate as will save their lives? And can they 
 be convinced that .it is just that those whom 
 they love so well should die for the lack of 
 what the rich could spare from their lavish lux- 
 ury without even missing it? Is it nothing to 
 them that the most promising talents must be 
 suppressed and stunted by early devotion to 
 manual toil, that powers whose development 
 would reward the most liberal expenditure 
 must be crushed and blighted by the mere lack 
 of food? 
 
 Certainly these deprivations are felt, bitterly 
 felt, and to maintain that they are in accordance
 
 O INDUSTRIAF. I KKMDOM. 
 
 with justice scfiiis but mockt-ry. J)<)ul>tlcss the 
 I)<)()r arc in some respects better off tlian ever be- 
 ft)re; but, on tlie other hand, they have perhaps 
 never felt their poverty so keenly as now. They 
 have been awakened to ai)parent possibiHties of 
 development and progress of which they formerly 
 never thouj^ht; but they find these possibilities 
 iiKTcly the ^tulT that dreams are made of. If re- 
 membering happier things is sorrow's crown of 
 sorrows, what shall be said of finding that hafjpier 
 things once anticipated are forever unattainable? 
 Yet such must be the lot of by far the greater 
 number of the poor. Their lives and their chil- 
 dren's lives must be passed in a continuous strug- 
 gle with care and want, and, so far as hope of 
 progress is concerned, they soon learn that the 
 battle is lost, and that even hope must be aban- 
 doned. While there is no more disheartening 
 feeling than that of our own exclusion from all 
 possibility of success in life, it is intensified by 
 the conviction that it is undeserved, and that 
 others who arc perhaps by nature our infe- 
 riors are granted the opportunities of develop- 
 ment denied to us. Small wonder that social- 
 ism tends to become the religion of the poor 
 of Europe, or even that anarchy seems to 
 some the first step toward the attainment of jus- 
 tice.
 
 THE GRIEVANCE. 7 
 
 Such " clouds of nameless trouble " as give 
 rise to general denials of the justice of the na- 
 ture of things, however real, are yet too vague 
 to lead to the formulation of specific charges. 
 But from time to time there come crises, such as 
 the outbreak at the Carnegie works at Home- 
 stead, and the Chicago riot, when particular fea- 
 tures of the present social system are thrust into 
 odious prominence. The sting of poverty then 
 maddens the multitude, and for a moment the 
 dream of a social revolution, in which their op- 
 portunities shall come, approaches the reality of 
 a hope. Then, too, the latent feeling of injustice 
 blazes up among the benev'olent, and, until 
 quenched by reports of violence and rapine, leads 
 them to express their sympathy with the aspi- 
 rations of the labourers. Even when the battle 
 has been lost and those who rebelled against 
 their lot have been compelled to submit per- 
 haps to even harder conditions than before, it 
 is impossible not to be moved by the pity of it 
 all, or not to regret that somehow the weaker 
 combatants might not have prevailed. Such 
 submission is but yielding to superior might, 
 and involves no conviction of the reason, no con- 
 version of the heart. It is like the submis- 
 sion of slaves whose fierce outbreak for freedom 
 has been crushed by the combined force of their
 
 8 INDUSTIUAI. IKI.KDOM. 
 
 masters; and st'ciiijj^ tlicsc tliiiij;s, many arc led to 
 si)fal< of and to believe in the existence of such 
 Iiar(lslii|)s in the condition of the l.nhonring classes 
 as may fairly be said to constitute a status of 
 industrial slavery.
 
 CHAPTER II. 
 
 THE STANDARD OF JUSTICE. 
 
 Before undertaking a particular examination 
 of the economic institutions that are beHeved to 
 work injustice, it is desirable to ascertain as pre- 
 cisely as possible the meaning which we attach 
 to that word when we speak of human society. 
 In the first place, it is to be observed, the be- 
 liefs of men concerning the government of the 
 universe are, from our point of view, irrelevant. 
 This is so because of the distinction between 
 remediable and irremediable evils. Death, for 
 example, is an evil, but it is an unavoidable evil, 
 and it is therefore not properly described as an 
 injustice. The theist, certainly, can not call God 
 unjust. He has created Hfe and ordained death 
 according to his good pleasure; and shall the 
 thing formed say to him that formed it, " Why 
 hast thou made me thus? " But the agnostic 
 is even more effectually estopped. The laws of 
 the universe are for him no personal commands, 
 but mere uniformities in the operation of Nature.
 
 lO INDUSTKIAI. FRKKDOM. 
 
 The attrilmtc of justice is alloj^cthcr inapplica- 
 lilc to such conceptions, and the most that can 
 be said is that they do not operate to our hking. 
 
 Christians may entertain (hfTerent views con- 
 cerninj; sin and evil. They may beHevc that the 
 (hvine idea of justice is substantially the same as 
 the Iniinan. and that, however it may be with 
 sin, evil is only relative. So may ajjnostics hold 
 that the laws of the universe tend to promote 
 human hap|)incss and welfare. But they must 
 all atjrce i)oth that sufTering and death are in- 
 trinsically undesirable, and that they arc not 
 projicrly characterised as unjust. 
 
 Hence, whenever we speak of injustice, it 
 is to be understood that human injustice is re- 
 ferred to. If we maintain that an institution is 
 unjust, such as polygamy, for example, we mean 
 that human beings wrongfully maintain the in- 
 stitution. It may not be easy to determine who 
 these human beings are, or how their responsi- 
 bility is distributed; but such human beings there 
 must be, unless we commit the absurdity of 
 charging an abstraction with moral turpitude. 
 Such expressions, therefore, as the injustice of the 
 present constitution of society, are really peri- 
 phrastic; they can mean only that some human 
 beings are acting unjustly toward others. To 
 say this is, of course, not to define justice; that
 
 THE STANDARD OF JUSTICE. II 
 
 definition will indeed occupy all the rest of our 
 space. But we shall find our labour greatly- 
 lightened by bearing it steadily in mind that 
 what is immutable is not unjust, and that there 
 is properly no injustice except in the unjust acts 
 of human beings. 
 
 In order to simplify the inquiry still further, 
 let us define the injustice of which complaint is 
 made as consisting in the compensation of la- 
 bourers at too low a rate. By this, as is ex- 
 plained above, we mean not merely that we 
 should like to have this rate of compensation in- 
 creased, but that it is practicable to increase it. 
 By labourers, it may be assumed, we mean or- 
 dinary manual labourers who work for wages, and 
 not all persons who perform labour. We should 
 be led quite astray if we undertook to include 
 in our inquiry all those who make any exertion 
 for a compensation. Many such persons, pros- 
 perous doctors and lawyers, for example, fre- 
 quently possess much more wealth than those 
 who employ them, and while they may complain 
 of the inadequacy of their compensation, and 
 even of the slavery of their lives, their condition 
 does not arouse the sympathy of the public. The 
 ordinary manual labourer, however, is conceived 
 as immediately dependent for subsistence on the 
 compensation received for his labour, and the
 
 12 INDUSTRI.M- FREEDOM. 
 
 quality of his subsistence is therefore affected by 
 the quantity of his compensation. 
 
 For tlic same reason skilled labourers are 
 properly excluded. They, too, complain that 
 their compensation is inadequate, but their de- 
 pendence on this compensation is less immedi- 
 ate and the quality of their subsistence is hij^hcr 
 than that of ordinary labourers. The subsist- 
 ence of these latter, it is undoubtedly believed, 
 is not ample or varied enough to enable them 
 to attain that development of their capacities as 
 human beings which is desirable, and those who 
 deny them greater compensation than they now 
 receive are therefore held to be guilty of injus- 
 tice. 
 
 We must also determine whether we mean, 
 in speaking of ordinary labourers, to include the 
 whole class, or only some of its members. I 
 think it will appear, on reflection, that it is the 
 condition of the whole class that arouses the sym- 
 pathy of the benevolent. There is no doubt a 
 considerable ditlerence in the compensation of 
 the members of this class. As Mr. Booth has 
 shown in his investigation of the condition of 
 the poor of London, there is a " submerged 
 tenth." whose subsistence is very precarious and 
 miserable. This lowest stratum, however, is 
 composed principally of those who are morally
 
 THE STANDARD OF JUSTICE. 1 3 
 
 delinquent. It is true that some persons main- 
 tain that the immoraUty of these degraded crea- 
 tures is a necessary consequence of the condi- 
 tions under which they live, and that they are 
 therefore not responsible for it. Into the ques- 
 tion of their actual culpability we do not need to 
 enter, but it is impossible to deal with human 
 beings practically upon any fatalistic theory. We 
 can not confine the application of such theories 
 to any class of humanity. Excluding the insane, 
 we are obliged to assume that all adults are re- 
 sponsible beings, and that they have the ability 
 to be moral. The temptations are different for 
 different classes, and we can not determine de- 
 grees of guilt; but it is quite compatible with 
 the exercise of the largest charity to hold that 
 no one shall throw all the blame for his own 
 drunkenness or dishonesty upon other people's 
 shoulders. 
 
 We may not feel disposed to cast a stone at 
 the poor, but if we undertake to acquit them 
 of responsibility for the vices common to those 
 in their station, we can not logically refuse to 
 exonerate the rich from blame for the vices which 
 prevail among their class. The obstacles to vir- 
 tue which are encountered by the very poor may 
 be formidable, but they are not insurmountable; 
 for many of the poor surmount them. It is their
 
 14 INDUSTRIAL FRKKDOM. 
 
 l.uk of honesty and tcmpcr.incc, however, that 
 causes the lowest stratum of the poor to receive 
 less compensation for their labour than ordinary 
 labourers. To maintain that their compensation 
 should justly be as j^reat, would lead to the per- 
 nicious doctrine that virtuous conduct is no more 
 deserving than vicious, and that it is unjust to 
 pay less compensation for the services of drunken 
 and dishonest labourers than for those of the 
 faithful and sol)cr, 
 
 hi other words, the meaji^re subsistence of the 
 extremely poor is mainly due to their own lack 
 of virtue, and not to the injustice of social ar- 
 rangfements. The existence of that injustice 
 must be established by showing that, because of 
 these arrangements, the ordinary labourer who is 
 willing to work hard and be temperate is unable 
 to procure the wherewithal for proper subsist- 
 ence. The prol)lcm of the " submerged tenth " 
 is, in short, not the same as that portion of the 
 " labour problem " which we are considering un- 
 der the head of industrial slavery. 
 
 W'e must recognise the fact that the com- 
 pensation of ordinary labourers appears to vary 
 considerably, even when the amount of service is 
 the same. \\'agcs in large cities are frequently 
 higher than in the country, and they are higher 
 in some parts of the country than in others. But
 
 THE STANDARD OF JUSTICE. 1 5 
 
 it will generally be found that the cost of sub- 
 sistence varies accordingly. We read in the re- 
 ports of the Department of Agriculture that 
 milch cows are valued at ten dollars in Utah 
 and at thirty-two dollars in Massachusetts; that 
 hogs are worth less than four dollars in Nevada 
 and over eleven dollars in Connecticut; and the 
 prices of grain vary to a corresponding extent. 
 As food varies so greatly in price, it is evident 
 that the real compensation of labourers is very 
 imperfectly measured by money wages, and that 
 much of the inequality in the latter is only ap- 
 parent. Moreover, unless prevented by laws, or 
 by combinations, labourers constantly tend to 
 remove from where the rate of compensation is 
 low, and to go where it is high. Adam Smith 
 remarked upon the influence of the law of set- 
 tlement and the exclusive privileges of the cor- 
 porations or trade-unions in promoting inequality 
 of wages in England; and the modern trade- 
 unions, as they profess the same intention, 
 doubtless accomplish the same result. But the 
 improvement of the means of travel is a pro- 
 digious power in equalizing wages, as is suffi- 
 ciently shown by the enormous volume of mi- 
 gration in modern times; and we may now make 
 the assumption of an average compensation for 
 ordinarv labourers with less deviation from the
 
 l6 IM»1 M UlAI, JI<I.I.I><»M. 
 
 actual rates paid than ever before. And as it 
 is plainly impossible to consider the case of la- 
 bourers individually, \vc must be limited to an 
 examination of the conditions of their average 
 compensation. 
 
 It follows, therefore, if the compensation of 
 labourers is unjustly small, either that employ- 
 ers are able under the existing social system to 
 pay higher compensation (else there would be 
 no injustice), or that under some other system 
 than that of free contract this compensation 
 would be greater. For a number of reasons it 
 does not seem worth while to add another to 
 the many elaborate criticisms of the schemes for 
 tiic abolition of property and freedom of con- 
 tract which go under the name of communism 
 or collectivism. Some of these reasons will be- 
 come evident as we proceed; but one of the most 
 cogent is suggested by the proverb. " An two 
 men ride of a horse, one must ride behind." All 
 modern industry, all industry upon any large 
 scale is necessarily co-operative. In order to ac- 
 complish any useful result, there must be direc- 
 tion and subordination. There have not been 
 nianv concrete socialisms: but they have invari- 
 ably encountered this .difficulty and succumbed 
 to it. Freedom of contract being abolished, sub- 
 mission to authority must take its place.
 
 THE STANDARD OF JUSTICE. 1/ 
 
 Accordingly, we find that all communistic 
 schemes provide for compulsory labour, and that 
 in them the condition of the labouring class must 
 be that of " industrial slavery.'' In theory, the 
 labourers would choose their directors or mas- 
 ters by universal suffrage, and would thus pre- 
 serve a theoretical freedom. Even this freedom 
 would be confined to the members of the ma- 
 jority. But if any ordinary member of the po- 
 litical faction that happens to be dominant in 
 our present society will consider the matter, he 
 will quickly see that he has practically nothing 
 to say about the officers who direct his action. 
 Theoretically he has a part in their selection; 
 practically he is entirely helpless as to who shall 
 be policemen, or inspectors, or judges, or county, 
 State, or national officers. These officers now 
 control but a small part of his action. Under 
 communism they would control the whole of it; 
 and hence the most repugnant part of the rela- 
 tion between employer and employed — that of 
 obedience and submission by one human being 
 to the authority of another — would be intensified. 
 
 At present the labourer, if he is obliged to 
 work for a master, is at least able to choose 
 whom he will serve, and can change at his pleas- 
 ure. Under the regime of socialism no such 
 liberty could be tolerated. It would produce as
 
 l8 INUrsiulAI. rRKKDOM. 
 
 niucli confusion as to permit private soldiers to 
 shift from regiment to regiment, according to 
 tlicir hinnour. The (hrcction of industry in a 
 sociahstic slate would rc(|uire much more skill 
 .'UKJ forethought than the direction of a military 
 campaign, and the greatest disasters would re- 
 sult if the labourers assigned to one department 
 of industry should choose to abandon it for 
 another. 
 
 r.ut, as I have said, it is foreign to my purpose 
 to criticise the schemes of socialists at length. 
 All that the present argument requires is that 
 we should recognise the fact that socialism im- 
 plies the surrender of the freedom of the labourer, 
 the expectation being that this will be more than 
 made up for by the increase of his compensation. 
 We are therefore brought back to a considera- 
 tion of the possibility of such increase, whether 
 under the existing regime or any modification 
 of it that is conceivable. 
 
 A word of caution may be offered here. In 
 attempting reform, we can not deal with indi- 
 vidual cases; we must proceed by means of gen- 
 eral laws. For one thing, the number of indi- 
 viduals is too great. To devise regulations for 
 their action would be altogether beyond human 
 power, and the varieties of individual caprice are 
 so infinite as to surpass calculation. Hence we
 
 THE STANDARD OF JUSTICE. I9 
 
 must classify human beings and human acts, and 
 frame or modify laws and institutions with ref- 
 erence to these classifications. These laws and 
 institutions may cause suffering in particular in- 
 stances, but they can not be condemned as un- 
 just unless they cause more suffering than would 
 be caused by different regulations. Humanly 
 speaking, therefore, a law is just if it tends more, 
 on the whole, to promote what is commonly re- 
 garded as the general welfare than any other 
 law that can be devised in its place. Our re- 
 forming zeal, therefore, need not be aroused by 
 complaints of the injustice of any existing insti- 
 tution, if we find that no practical change of this 
 institution is suggested or conceivable. Unless 
 we can adopt a substitute that will work better, 
 meddling will cause more injustice than it will 
 remove.
 
 CHAPTER III. 
 
 RELATIONS BETWEEN THE EMPLOYER AND THE 
 EMPLOYED. 
 
 According to the theory of our law, and of 
 popular c^ovcrnment in general, the relation be- 
 tween the employer and the employed is one 
 of free contract. The employer offers such wages 
 as he considers proper to such persons as he 
 chooses. The labourer is free to accept or to 
 reject the terms. Here, however, according to 
 many, theory and practice diverge. The em- 
 ployer is free, but the labourer is under com- 
 pulsion. The employer can do without the la- 
 bourer, but tlie labourer can not do without the 
 employer. The law may call the labourer a free- 
 man, but modern economic conditions have made 
 him practically a slave. 
 
 As a matter of fact, however, the status of 
 a slave is very different from that of a labourer 
 in modern times. A slave is a human being who 
 can make no legal contract, who can suffer no 
 tort, and who is legally liable to compulsion at
 
 EMPLOYER AND EMPLOYED. 21 
 
 the will of his master. He is thus deprived of 
 freedom of locomotion, and receives no wages for 
 his labour except such support as the master 
 thinks fit to allow him. According to this defi- 
 nition, the modern workman is very far from be- 
 ing a slave. He may be drunken, deceitful, lazy, 
 incompetent, and wasteful; but no force can be 
 applied to him by his employer. He may law- 
 fully contract with any one, and the operation of 
 the law is such that he can break his contracts 
 with employers or with other people with impu- 
 nity, while he can compel them to keep their con- 
 tracts with him. His property is exempted from 
 liability for his debts, but he is himself a preferred 
 creditor. No one may prevent him from going 
 whither he pleases, when he pleases, or staying 
 anywhere while he pleases. So far as his legal 
 status is concerned, it is nowadays indeed an 
 exceptionally favoured one. The law has been 
 changed so that combinations of labourers for 
 the purpose of getting higher wages are per- 
 mitted, although combinations of capitalists for 
 the purpose of raising the prices of their products 
 are forbidden. Labourers may combine to raise 
 the price of what they have to sell; but employ- 
 ers may not combine to raise the price of what 
 they have to sell, even if its cost to them is in- 
 creased by the combination of labourers.
 
 22 INDUSTRIAL FRF.KDDM. 
 
 Still, it is iirj^n'd, c.'ij)ital lias the advantage 
 of lalxnir in the- har^aiii for waj^cs. It can af- 
 ford to l)c idle, wliicli labour can not; it is not 
 lost if not used, like the labourer's time; and it 
 docs not suffer from cold and hunj^cr. Putting 
 this in concrete form, it amounts t(j saying that 
 the workman is more dependent on the employer 
 than the employer on the workman. It is not 
 altogether easy, lu)wever, to define exactly what 
 is meant by this. The co-operation of master 
 and workman is as necessary as the co-operation 
 of the two blades of a i)air of scissors. The end 
 in view can not be attained without this co-oper- 
 ation, l-'urthermore, it is to a large extent un- 
 true that capital can afford to be idle; that it is 
 not lost if it is not employed. To attain correct 
 views of this subject we must examine its details 
 ^vit!l some care. 
 
 \'ery many goods which are properly classed 
 as capital arc of a perishable nature. Milk, for 
 example, must be immediately consumed, or it 
 will become worthless. Its production also is 
 subject to the same condition as to time; for if 
 cows are not milked at regular intervals they are 
 ruined. The same is true of the production of 
 the hay and grain upon which cows are fed, as 
 well as of most agricultural products. The 
 ground must be prepared in due season, the seed
 
 EMPLOYER AND EMPLOYED. 23 
 
 sown, the crops cultivated and harvested at just 
 the proper time, or very great loss will result. 
 Meat and fish, fruits and vegetables, must be 
 promptly marketed in order to save them — in 
 spite of modern appliances for refrigeration; 
 and when cooked by those who make feeding 
 people a business, they can not be kept, but must 
 be eaten at once. 
 
 Many things not subject to rapid decay never- 
 theless lose their value unless disposed of to the 
 consumer at the proper moment. Articles of 
 dress are subject to the caprices of fashion and 
 quickly become unsalable. Spring goods must 
 be sold in the spring, summer goods in the 
 summer, " holiday goods " before the holidays 
 are over. Pig iron is an article of most inde- 
 structible nature; but if the workmen at a blast 
 furnace strike before the charge is drawn, the 
 molten ore will congeal in the furnace and ren- 
 der it utterly useless. The owners of steam en- 
 gines and many other machines are frequently 
 at the mercy of their employees. A sudden re- 
 fusal to work may result in very great destruc- 
 tion. Nothing, apparently, is less perishable 
 than a mine; but mines require to be kept free 
 from water, and if the miners prevent the opera- 
 tion of the pumps, as they have occasionally done, 
 the value of the mines may be annihilated.
 
 24 INDUSTRIAL FREEDOM. 
 
 Most business is carried on largely with bf^r- 
 rowcd capital, and it must go on without inter- 
 ruption if the borrowers are to remain solvent 
 and the lenders arc to get their capital back. 
 Contractors must complete their jobs at specified 
 times, or they may be ruined, anrl their backers 
 with them. Even if a man uses his own capital, 
 he can seldom afTord to let it be idle. Very much 
 more than the loss of interest is generally in- 
 volved in the stoppage of business; and the stop- 
 page of some forms of business, such as trans- 
 portation, the furnishing of food, heat, light, etc., 
 can not be tolerated by society. It is hardly a 
 figure of speech to say that capital is not a dead 
 thing, but a living thing; for without continu- 
 ous nutrition by productive activity it loses its 
 power, and its very existence will soon terminate. 
 
 It may be said that, although prolonged idle- 
 ness would destroy capital, yet it can bear tem- 
 porary lack of employment better than labour. 
 Even this is true only with modifications. Very 
 few labourers are dependent for actual subsist- 
 ence on incessant toil. Skilled labourers are to 
 a deplorable extent given to drink, and thus 
 prove their independence of continuous employ- 
 ment. Every employer has had workmen who 
 would not work steadily; who chose to take a 
 day off from time to time for rest or recreation.
 
 EMPLOYER AND EMPLOYED, 2$ 
 
 Some of them prefer to forego their wages rather 
 than expose themselves to rain, or cold, or heat; 
 others are simply lazy. It follows that if in their 
 own judgment abstention from labour has ad- 
 vantages that compensate for loss of wages, 
 abstention at the will of their employers is not al- 
 together injurious. If they lose their wages, they 
 save their toil and have their time. This they 
 can often employ advantageously at their homes; 
 and the demand for an eight hours' working day 
 proves that rest and leisure are not unmixed evils. 
 Nor should we forget that the workman is not 
 in danger of actual starvation in his contests with 
 his employer. The municipality of Paris regu- 
 larly devotes the funds appropriated for the poor 
 to the relief of the families of men on strike; and 
 under our poor laws the workman is entitled in 
 the last resort to food and shelter, the expense 
 of which, in part at least, his employers must 
 defray. Indeed, it is now the case that funds 
 are regularly contributed in aid of strikers when- 
 ever their action causes serious suffering to their 
 families. It is privation, not starvation, to which 
 the workman is exposed; and from privation, real 
 as well as apprehended, employers often suffer. 
 So far as the small employer is concerned, it is 
 unquestionably true that he is often quite as de- 
 pendent on his servant as his servant on him; and
 
 26 INDITSTRIAI. FRF.F.DOM. 
 
 in such cases the siiffcrinj^s of the employer, when 
 industry is iiitrmipud, may be (|uitc as great 
 as those of the workman.* 
 
 It will perhaps he generally conceded that in 
 the case of the employer who has but a small 
 capital and engages only a few labourers, freedom 
 of contract, although many cases of hardship 
 occur under it, gives on the whole the best re- 
 
 * "If the l.ihourcrs arc in \%-ant, they must take whatever the 
 capitalists offer them ; if the capitalists are in want, they must buy 
 the labour on the cheapest terms they can, but get it they must. 
 And the capitalist is as likely, perhaps, to be in want as the la- 
 bourer. It is true that the distress of the labourer is much more 
 conspicuous, and that he advertises it ; he goes about saying, ' I 
 am starving, and it is the tyranny of capital which is killing me.' 
 But it is also tnie that the capitalist is in danger of ruin, and that 
 he conceals it. If he can not complete contracts which he has made, 
 if he has to stay out of a return from his business longer than he 
 can afford, he is ruined ; but he will never say this, because it may 
 injure his credit and quicken the coming of the evil. He will lie 
 awake with anxiety, till his hair turns prematurely gray, and till 
 deep lines of care form on his brow, but he will say nothing. And 
 it is necessary to insist on this now, because our current literature — 
 some even of our gravest economical literature — is dangerously 
 tainted with superficial sentiment : it speaks much of the sufferings 
 of the workingmen, which are seen, and little of those of the capi- 
 talist, which are not seen. But the capitalist, being a higher and 
 more thinking kind of a man, is probably of more sensitive organi- 
 zation than the labourer, and pecuniary anxiety is a more racking 
 thing than any physical kind of pain short of extreme hunger. The 
 mental feelings of the capitalist must just as much be regarded as 
 those of the labourer in computing the rate at which the money of 
 the one will be exchanged for the labour of the other." — Bagehot, 
 Cost of Production.
 
 EMPLOYER AND EMPLOYED. 2/ 
 
 suits obtainable. The obvious evils from disturb- 
 ing it are greater than the probable gains. But 
 when the capital of the employer becomes very- 
 large, and especially when the capital of a great 
 many persons is combined by means of incor- 
 poration, the situation presents new features. 
 The corporation is more enduring than the indi- 
 vidual, and capital under this form is managed 
 not by its owners but by their agents. Be- 
 tween the stockholders of a corporation and its 
 servants there is frequently no personal commu- 
 nication, and the kindly relations that naturally 
 arise from contact between man and man do 
 not take place. But it is these kindly relations 
 that in former ages softened the rigours of slavery 
 and feudalism, and that have made the evils of 
 the regime of contract tolerable. If it is impos- 
 sible to establish relations of this character, or 
 of similar tendency, between the managers of 
 large corporations and those employed by them, 
 the future can not be contemplated without grave 
 anxiety. Indeed, many would say that De 
 Tocqueville's prophecy has been already fulfilled, 
 and that the " manufacturing aristocracy," which 
 was growing up before his eyes, has become, as 
 he anticipated, one of the harshest which ever 
 existed in the world. 
 
 Of course, men will always quarrel so long
 
 28 INDUSTKIAI. I-UKEDOM. 
 
 as human nature remains as it is. Tlicrc will 
 always he bickerings between husbands and 
 wives, for that matter, but we do not c^n that 
 account favour the abolition of matrimony. Mas- 
 ters and servants have " had words " since the 
 days of the patriarchs, and such disputes will 
 continue. lUit in all bargaining and in all dis- 
 putes nowadays between the managers of great 
 corporations and their men, it seems to be be- 
 lieved that freedom of contract is in some 
 peculiar way interfered with; that some new 
 clement of inequality is introduced; that for some 
 reason the great resources of the employer put 
 the employee at a disadvantage. Disputes over 
 the contract of employment in such cases are 
 therefore regarded as differing from the tradi- 
 tional higgling over wages between master and 
 servant. Such disputes are spoken of as the 
 struggles of labour to emancipate itself, and some 
 imputation of guilt to employers is thus implied. 
 Let us, then, consider whether or not labourers 
 employed by corporations suffer thereby any pe- 
 culiar injustice.
 
 CHAPTER IV. 
 
 THE STATUS OF LABOURERS EMPLOYED BY 
 CORPORATIONS. 
 
 The legal maxim, " Corporations have no 
 souls," is without doubt interpreted literally by 
 ordinary people. They reason that when the 
 employees of a corporation rebel against the 
 terms of their employment, the suffering must be 
 all theirs. The corporation has no feeling; it 
 can not suffer from anxiety or hunger or fear. 
 The stockholders may, of course, be disquieted, 
 but their sufferings can not be very keen. As 
 they have no personal contact with the work- 
 men, they are not unpleasantly involved in the 
 dispute, and the loss from the suspension of busi- 
 ness is not ordinarily so severe as to cause most 
 of them great inconvenience. 
 
 The active managers of the corporation, it is 
 
 true, may be subjected to a severe strain. Their 
 
 responsibility becomes extremely great, and they 
 
 may even be put in peril of their lives. At all 
 
 events, they become objects of hatred, and are 
 
 29
 
 30 JNi*l .^1 KiAi, I'KKKDOM. 
 
 exposed to storms of vitiipcratifm. But, after 
 all, these inaiia.i;ers are few, while the workmen 
 are many. Perhaps no one individual among 
 them sulTers so nnich as the individual manager; 
 hut wc are accustomed to count sufferings as 
 well as weigh them. If there are a hundred men 
 on one side and only one on the other, it cer- 
 tainly seems better that the one should sufTer 
 rather than the lunulrcd. 
 
 Were there nothing else to be considered, it 
 would be hard to refuse our assent to this propo- 
 sition. But we must be on our guard against a 
 fallacy of composition. We are dealing with in- 
 dividuals, and the question is whether the sin- 
 gle workman, when employed by a corporation, 
 is or is not more of a slave than when w^orking 
 for an ordinary employer. However it may 
 affect society at large, the sufferings of the indi- 
 \-i(lual workman are all that, as an individual, he 
 can complain of. Doubtless he is moved by sym- 
 pathy with his fellows and affected by their as- 
 pirations; but such emotions constitute no limi- 
 tati(^ns of his freedom. I lis particular grievances 
 must always be low wages and lack of employ- 
 ment, and the corporate form of enterprise can 
 not be assumed to create or aggravate these 
 evils. It can not be arbitrarily maintained that 
 the managers of these enterprises are more bru-
 
 LABOURERS EMPLOYED BY CORPORATIONS. 3 1 
 
 tal and hard-hearted than the managers of un- 
 incorporated concerns. No doubt masters that 
 employ only a few workmen have better oppor- 
 tunities to cultivate kindly relations with them; 
 but they are also better able to tyrannize over 
 them, and it is well known that such tyranny 
 has not been uncommon in the past. 
 
 Conceding that, to some extent at least, com- 
 pulsion may take place without the application 
 of force, and that practical restraints on the ca- 
 pacity to contract may coexist with legal free- 
 dom, we must ask in what way the corporate or- 
 ganization of industry favours these results. 
 Such compulsion and restraint must take place 
 through the operation of motives. What mo- 
 tives can the managers of corporations suggest 
 to their men with the result of Hmitine their 
 freedom? Whatever they are, they must belong 
 to one of two classes: they must appeal either 
 to the hope of gain or to the fear of loss. 
 
 It might not at first seem possible that any 
 limitation of freedom could result from the op- 
 eration of such a motive as the hope of gain. 
 If the gain be secured, freedom would so far be 
 extended. But, if we consider the matter 
 closely, the danger appears to be real. The 
 managers of some corporations have devised 
 schemes for assuring pensions and death or acci-
 
 32 INDUSTRIAL FREEDOM. 
 
 (Init Itciuliis to tlu-ir employees. These schemes 
 involve the investment of some portion of their 
 watj^cs by the men, and it is (luitc possible that 
 niidcr some of them a man Icavinj,^ the service 
 of the company, cilhcr voluntarily or by dis- 
 charge, would lose what he had invested. It 
 would thus be practicable for the company to 
 supplement the hope of gain by the fear of loss. 
 It might reduce wages below the market rate, 
 and yet its men would I'lnd that they would lose 
 more than they would gain by changing masters, 
 and might complain that they had parted with 
 their freedom. But as this evil has perhaps not 
 actually occurred, and as it seems possible to cor- 
 rect it by ])roi)er legislation if it should occur, 
 it need not be seriously considered except by way 
 of warning. 
 
 More deserving of scrutiny is the plan adopted 
 by some corporations of inducing their workmen 
 to become owners of houses near their place of la- 
 bour. Where nearly all the industries in a small 
 town or village are in the hands of one or two 
 corporations, as is frequently the case, it may 
 be impossible for a workman discharged by one 
 of these employers to find other work in that lo- 
 cality. If he has invested his savings in a house, 
 he may seem to have become to a certain extent 
 otiscriptiis gkbcc. He may have only partly paid
 
 LABOURERS EMPLOYED BY CORPORATIONS. 33 
 
 for his house, and if his wages cease he will be 
 unable to complete his payments, and may lose 
 his property by foreclosure. Even if it is free 
 from incumbrance, he may be unable to sell it 
 or to rent it. Should the corporation become 
 insolvent and cease to do business, all the houses 
 in such a town would depreciate in value, and 
 many of them would become practically worth- 
 less. Under such circumstances the managers of 
 the corporation apparently have it in their power 
 to compel such workmen, by the threat of dis- 
 missal, to accept lower wages than are elsewhere 
 paid. 
 
 It may be questioned, however, if this has 
 ever taken place, or is likely to take place to a 
 serious extent; and even if it were common, it 
 does not necessarily follow that the ownership of 
 a home tends on the whole to reduce workmen 
 to a condition of slavery. " He that hath wife 
 and children hath given hostages to Fortune"; 
 but the happiness of family life must be regarded, 
 all things considered, as more than compensating 
 for its peculiar cares. Whatever bad qualities are 
 popularly ascribed to the managers of corpora- 
 tions, it is notorious that they are universally 
 animated by a desire to secure good and steady 
 workmen. Men that have families and own their 
 homes are generally of this character, and they
 
 34 INDUSTIUAI- FUKKDOM. 
 
 will 1)0 llic last to l)c discharged when it becomes 
 necessary to reduce the working force. 
 
 Moreover, unless all the employees of the cor- 
 poration arc somehow affixed to the soil by own- 
 ership, it will not be practicable to reduce wages 
 below the rate elsewhere current without dis- 
 charging some of the workmen. Without a re- 
 duction of numbers, a reduction of wages would 
 lead what may be called the floating element 
 among the workmen to obtain employment else- 
 where. Hence, unless it was intended to curtail 
 business, wages would not be reduced. If un- 
 der such circumstances wages are reduced, the 
 step must be made necessary by unprofitable busi- 
 ness. The landowning workmen may thus be 
 led to submit to a reduction of wages which 
 those who do not own land can avoid by emigra- 
 tion; but even then their condition may be on 
 the whole preferable. The saving in rent, and 
 the other advantages connected with proprie- 
 torship must freciuently outweigh whatever loss 
 arises from reduced wages, if we are correct 
 in arguing that such reduction is made im- 
 perative by the depressed condition of trade. 
 Nor should we disregard the loss of time 
 and other expenses incurred by those who 
 change their place of employment, nor the fact 
 that reduced wages are usually accompanied by
 
 LABOURERS EMPLOYED BY CORPORATIONS. 35 
 
 lower prices for the goods consumed by work- 
 men. 
 
 It seems, therefore, to be proper to conchide 
 that the employees of corporations do not suffer 
 any material limitations of freedom by yielding to 
 temptations to improve their condition presented 
 by their employers. Were the conclusion dif- 
 ferent, it would still be impossible to show that 
 in this regard the employees of corporations are 
 at a disadvantage as compared with the em- 
 ployees of individuals. In general, it is true that 
 such limitations of freedom are most likely to 
 take place elsewhere than at the centres of indus- 
 try, and outside of these centres the individual 
 employers of labour are much more numerous 
 than the corporations. As a rule, it must be 
 added, they are in better position than managers 
 of corporations either to benefit or to injure their 
 employees by taking the control of their savings. 
 Where corporations abound, we may be sure of 
 finding savings banks, which afford reasonably 
 safe investment for the earnings of poor people. 
 Where there are few corporations, there are no 
 savings banks, and the working people are 
 obliged to intrust their accumulations to more 
 or less irresponsible individuals. 
 
 It remains to consider how far it is in the 
 power of the managers of corporations to limit
 
 3^ INDUSTRIAL FREEDOM. 
 
 till- fni'flnm of iluir men l>y api)caling to their 
 fears. As we have seen, the apphcation of force, 
 or physical pain, is no lon^a-r allowed, and Icjjal 
 proccedinj^s against defendants proof aj^ainst 
 execution are disastrous remedies for the plain- 
 tilTs. The only available means of arousing the 
 fears of workmen, as such, is by threatening them 
 with lower wages. All other forms of what is 
 spoken of as " corporate tyranny " can be re- 
 duced to this. 
 
 The demand that men shall work longer hours 
 for the wages now paid for a shorter day is ob- 
 viously the same thing as a reduction of wages. 
 1 he demand that men shall perform more work 
 or do it better within the established hours is 
 in effect the same. The exaction of fines, the 
 adoption of vexatious rules, all amount to a 
 diminution of the compensation received by 
 workmen for their labour. In short, whatever 
 increases the sacrifice involved in the toil of the 
 w'orkman without giving him additional recom- 
 pense in efTect reduces wages. Adam Smith said 
 of certain indefinite exactions that their amount 
 might be measured by what men were willing to 
 pay to get rid of them. So with every require- 
 ment on the part of the employer: it is weighed 
 by the workman against the wages that he re- 
 ceives. It mav be added that dismissal, or the
 
 LABOURERS EMPLOYED BY CORPORATIONS. 3/ 
 
 total deprivation of employment, although not 
 precisely the same thing as a reduction of wages, 
 differs from it only in degree. 
 
 To what extent, then, can the managers of 
 corporations go in enslaving their employees by 
 reducing their wages? The limit appears to be 
 a plain one. If the workman considers that the 
 loss involved in submitting to a reduction of, 
 wages will be greater than that incurred in seek- 
 ing other employment, the presumption is that 
 he will not submit. The master, therefore, when 
 he knows that other employment can be ob- 
 tained by his workmen at as good wages as he 
 offers them, will not attempt to reduce wages. 
 To do so would result in depriving himself of 
 labour, and putting a stop to his business, unless 
 he could obtain a new force. If his former force 
 were able to find places at the higher rate of 
 wages, it is evident that a new force willing to 
 work for lower wages would not be obtainable, 
 or, if obtainable, that it w^ould consist of inferior 
 workmen. But to employ inferior workmen at 
 lower wages is seldom an economy. They cost 
 more than better men better paid. 
 
 It follows, therefore, that managers of cor- 
 porations can effectively adopt the measure of 
 reducing wages only when the conditions of busi- 
 ness are such as to make a general reduction of 
 
 432971
 
 38 INDIM KIAI. lUKI.DoM. 
 
 wages i)ra(tiiaI>U' or necessary. And it is plain 
 that as a general rule, when such cf)n(litions pre- 
 vail, managers of corporations must adjust their 
 alTairs to them. We must assume that corpora- 
 tions engaged in business have to meet competi- 
 tion in disi)Osing of their products, and the man- 
 ager that undertakes to pay higher wages than 
 are paid by his competitors — the efficiency of the 
 labourers employed being the same — will be at a 
 disadvantage. He can not afford to dispose of 
 his products at a less price than before. They 
 can, and they will secure his former customers. 
 There are many exceptions to such general prop- 
 ositions as these, some of which are of such im- 
 portance as to require special consideration; but 
 on the whole, and in the long run, the correct- 
 ness of these conclusions can hardly be contro- 
 verted. If they are valid, it necessarily follows 
 that the managers of corporations as a class can 
 appeal to the fears of their workmen no more 
 effectively than other employers of labour; that 
 they, like other employers, are controlled by the 
 conditions of business in raising or lowering 
 wages; and that "industrial slavery." if it may 
 be said to exist at all. prevails as well among the 
 employees of private individuals as among those 
 of corporations.
 
 CHAPTER V. 
 
 SOME EXCEPTIONS CONSIDERED. 
 
 The conclusions reached in the last chapter 
 are of a very general character, and are therefore 
 subject to many exceptions. While it may be 
 conceded that, as a rule, the manager of a cor- 
 poration possesses no special powers of oppres- 
 sion, the belief unquestionably prevails that this 
 is not true of the managers of all corporations. 
 If the corporation employs a very large number 
 of men, or if it is especially strong in its financial 
 resources, or if it possesses a monopoly of a cer- 
 tain branch of industry — in any of these cases, 
 and still more when all these conditions are com- 
 bined in one case, the causes that usually deter- 
 mine the rate of wages may be counteracted. 
 The arbitrary determination of a few domineering 
 men may then be more potent than the law of 
 supply and demand, and they may, for a time at 
 least, secure excessive profits, while they are co- 
 ercing their employees into accepting diminished 
 wages. 
 
 4 39
 
 40 INDfSTKI.M. lUi.l.lJDM. 
 
 In tlio first f)f these cases, it may be con- 
 tended, the j^aeat number of workmen suljject 
 to the (hrection of a single employer of itself ren- 
 ders the theory of a free labour market unten- 
 able. If an individual cmj)loyer discharges a 
 single servant, it may be easy for the servant to 
 find other work; but if a corporate employer 
 discharges a thousand servants at once, it can not 
 l»e possible for such a nutnbcr to fnid work with- 
 out greatly disturbing the rate of wages. There 
 can not be places for them all, and they can only 
 get places by underbidding those who have them 
 already. The men understand the situation, and, 
 rather than encounter the suffering that will re- 
 sult from being discharged, they submit to that 
 involved in reduced wages. Of course, there is 
 a limit to such oppression. Those who contend 
 that it exists do not maintain that wages can be 
 reduced indefinitely by the mere fiat of the em- 
 ployer; but they think that there is a kind of 
 " zone " where the employer is supreme. He not 
 only gets out of his labourers all that the indus- 
 trial conditions justify, but also all that his dispro- 
 portionate power enables him to exact. The la- 
 bourers yield because of their fears. They do not 
 know where else to look for work; they are at- 
 tached to their present abode; they are perhaps 
 too poor to incur the expense of moving, or,
 
 SOME EXCEPTIONS CONSIDERED. 4I 
 
 if not, they are reluctant to expend their lit- 
 tle savings in uncertain ventures. They may 
 not permanently submit to such exactions, 
 but for a time, at least, they will endure familiar 
 ills rather than fly to others that they know 
 not of. 
 
 Doubtless such a situation as this is theoret- 
 ically possible; but before we undertake to rea- 
 son from it we must define it much more pre- 
 cisely. It must be admitted that employers of 
 labour for the purpose of profit, whether individ- 
 uals or corporations, are under constant pressure 
 to reduce the cost of production, in which the 
 wages account is usually the principal item. If 
 there is a " zone " on which encroachments can 
 'be made, competition will make it impossible for 
 the most benevolent of employers to refrain from 
 encroachment. We are, of course, assuming that 
 the qualities of the workmen are the same, and 
 that the conditions of employment do not ma- 
 terially differ. We must also have it in mind 
 that no conclusions in such matters are perfectly 
 accurate, but that all that we can possibly attain 
 to in the way of general laws is the statement 
 of averages and the establishment of tendencies. 
 With these limitations, it appears true that unless 
 the employer is protected in the sale of his product 
 from the competition of other employers, he must
 
 • 12 INDUSTRIAf, I Ul I.Do.M. 
 
 ordinarily reduce his wages account to correspond 
 with theirs. Under free competition, therefore, 
 there could he no such " zone " as is imagined. 
 If invaded hy one employer, it would quickly be 
 occupied by all. In other words, the rate of 
 wages within the supposed "zone," or "mar- 
 gin." is regulated by the conditions of business, 
 and not by the arbitrary fiat of individual men. 
 Wages, in every particular case, are fixed by vol- 
 untary agreement; but the terms of the agree- 
 ment are fixed by circumstances. The theory of 
 a " zone " is true in the sense that wages and 
 profits lluctuate; but it involves a fallacy of com- 
 position if it means that employers as a class 
 can at all times afTord to pay higher wages than 
 they do pay. 
 
 The magnitude of the corporation has no 
 bearing on this conclusion. The manager of a 
 great corporation, if he is to be successful, must 
 adopt the same methods as the manager of a 
 small one. However he may be described by 
 our newspaper writers and legislators, as a matter 
 of fact he does not desire to employ slave labour. 
 He would rather have well-fed than ill-fed work- 
 men, contented than discontented, hopeful than 
 disheartened, friendly than hostile, workmen. 
 He will give up his preferences in this matter 
 rather than surrender the control of his property.
 
 SOME EXCEPTIONS CONSIDERED. 43 
 
 and abdicate the management of his business. 
 But so far as the rate of wages is concerned, no 
 employer, great or small, corporation or individ- 
 ual, wishes his servants to think that they are 
 working for him for less compensation than they 
 can obtain elsewhere. He may be willing to 
 profit by their ignorance; but unless his business 
 is diminishing he will be unwilling to stir up 
 their discontent. As a matter of fact, it is prob- 
 able that the compensation received by the em- 
 ployees of large corporations is, all things consid- 
 ered, rather above the compensation of labourers 
 in general. The money wages paid to unskilled 
 workmen by these corporations may be very 
 small; such workmen seldom command high 
 wages from any employer. But if we take into 
 consideration the regularity of employment, the 
 conditions under which it is carried on, and the 
 comparative certainty of payment, it is difficult 
 to maintain that they are not on the whole bet- 
 ter ofif than if they were serving individual em- 
 ployers. When Homer wished to depict the ex- 
 treme of misery, he instanced the lot of the poor 
 man's slave, and few labourers would to-day pre- 
 fer the service of an impecunious to that of a 
 wealthy master. 
 
 We have turned aside a little from the con- 
 sideration of the possibility of the wholesale dis-
 
 44 INDISI KIAI- rRF.F.noM. 
 
 charge of workmen by the managers of a great 
 corporation, ami tlie use of such a possiljiHty 
 as a means of reducing wages. It can scarcely 
 be contended that such a measure would be re- 
 setted to when trade was prosperous. Conced- 
 ing; the power to exist, there would be no motive 
 for its exercise. If the men refused to accept 
 reduced wages and were discharged, the corpora- 
 tion would sulTer great loss, and in the case sup- 
 posed would be unable to supply its wants, ex- 
 cept with the refuse of the labour market. But, 
 it may be thought, the case is altered when trade 
 is depressed. The profits of the corporation arc 
 reduced or cut off altogether, and in order to pre- 
 serve or restore them, the managers insist that 
 the men shall receive less compensation. At such 
 a time the employer would perhaps be glad to 
 suspend operations completely. The men, know- 
 ing that wages are falling elsewhere, may. in view 
 of the possibilities of loss, be led to accept such a 
 reduction as enables the corporation to continue 
 to make the same profits as before. The labourer 
 employed by the small employer might be will- 
 ing to take his chance of finding other work, if 
 any excessive reduction of wages were proposed; 
 but when a large number of labourers are afTected 
 they know that many of them, if the whole body 
 were discharged, would probably for a consid-
 
 SOME EXCEPTIONS CONSIDERED. 45 
 
 erable time find it impossible to obtain any em- 
 ployment at all. 
 
 Upon careful consideration, it appears to me 
 theoretically possible for some great corpora- 
 tions, under these circumstances, to reduce the 
 wages of their workmen temporarily to a figure 
 lower than that at which they could find em- 
 ployment elsewhere. A great manufacturing 
 corporation, for example, whose works are in an 
 isolated location, may conceivably take advan- 
 tage of its workmen in this way. It is possible 
 that this conception may have been sometimes 
 actually realized, but the facts are notoriously 
 against it. In the first place, the greatest cor- 
 porations are the railroads, and they are entirely 
 unable to stop their operations. The hmit to 
 which they can go in reducing wages is fixed by 
 the conditions of business. They must have a 
 working force, and they can not fix wages at a 
 rate lower than that at which they can obtain 
 workmen to take the place of those who quit 
 their service. If they did so they would tie their 
 own hands. But whatever regret is felt over a 
 reduction of wages to such a rate as this, must 
 be based on some other ground than its injustice 
 to labourers as a class. The loss experienced by 
 the labourers who are discharged is offset by the 
 gain made by those who take their places, for
 
 4^i INDUSTRIAL FKF.F.Df )Nf . 
 
 these latter arr jjrcsimiiitivcly bettering llicir 
 condition. 
 
 I'liit imicli inf)rc than this is true. It is well 
 known that a lar^c number of our ^rcat railways 
 arc- insolvent. They pay nothinj^ to their stock- 
 In •Idcrs. and only a portion of what they owe 
 tlitir bondholders, if they ])ay thcni anything. 
 Under such circumstances it is evident that they 
 continue to pay their employees not only all that 
 their services arc worth, but m(;rc than they are 
 wortli. They can earn neither interest nor divi- 
 dends while they continue to pay such wages; 
 nevertheless they continue to pay tliem. The 
 stockholders and bondholders thus contribute to 
 pay to a large number of labourers higher wages 
 than they really earn. It would certainly seem 
 that these great corporations, so far from having 
 it in their power to oppress and enslave their 
 workmen, are really in their workmen's power. 
 It may be added that the Federal courts, which 
 have been denounced as hostile to labourers, 
 have in some instances compelled the receivers 
 of insolvent railroads to apply their revenues to 
 the payment of higher wages than those for which 
 they could obtain satisfactory service. This may 
 be regarded as unjust by bondholders, and as 
 partial by unemployed labourers, who would be 
 glad to work at the lower rates; but it affords
 
 SOME EXCEPTIONS CONSIDERED. 47 
 
 no support to the view that these great corpora- 
 tions have any exceptional power of forcing un- 
 reasonably low wages on their men.* 
 
 In the second place, we must not disregard the 
 fact that it is a severe blow to the welfare of any 
 corporation, and perhaps especially to a great 
 manufacturing corporation carrying on its opera- 
 tions in an isolated place, to disperse a corps of 
 workmen. It is perhaps too often assumed that 
 for the purposes of such a corporation one labour- 
 er is as good as another, and that new hands are as 
 good as old. Those who have any acquaintance 
 with the conduct of manufactures will not make 
 this mistake. For many purposes the compo- 
 sition of the rank and file is not very important. 
 Where little skill is required, supervision will gen- 
 erally secure proper work. But, in most manu- 
 factures, skilled labour is important, and, in all, 
 trustworthy supervisors or foremen are indispen- 
 sable. No prudent manager will disband a 
 trained and disciplined body of men if he can 
 help it. He will rather suffer some loss to retain 
 them. As a matter of fact, there are numberless 
 instances of this. Not every reduction of profits 
 
 * The United States Commissioner of Labour declares positively 
 that the wages paid by railroads are higher than the current rate. 
 "There has never been a time," he says, " in the history of railroads, 
 when men did not stand ready to fill a labour vacancy at the wages 
 fixed by the railroads."
 
 48 INDUSTRIAL FREEDOM. 
 
 makes a reduction of waj^cs necessary or wise. 
 We need not attribute benevolent motives to the 
 managers of corporations wbo recognise this 
 truth, aUhough we should not always be mis- 
 taken in so doing. They need only to be actu- 
 ated by an enlightened self-interest, and so much 
 sagacity as this it is reasonable to concede to 
 them.* 
 
 We have so far considered the power of great 
 corporate employers over labourers as posi- 
 tively displayed in the reduction of wages. It 
 remains to incjuire as to its negative exercise 
 
 * It is hardly necessary to say that the notion that employers 
 can fix the rate of wages according to their will is not of modem 
 origin. Macaulay quotes a ballad of about 16S5 in which a master 
 clothier says : 
 
 " In former ages we used to give, 
 So that our workfolks like farmers did live ; 
 But the times are changed, we will make them know. 
 
 We will make them to work hard for sixpence a day, 
 Thout;h a shilling they deserve if they had their just pay ; 
 If at all they murmur and say 'tis too small. 
 We bid them choose whether they'll work at all. 
 And thus we do gain all our wealth and estate. 
 By many poor men that work early and late." 
 
 Compare this with the course of one of the " coal robbers," the 
 Delaware and Hudson Canal Company, which now pays the holders 
 of its stock and bonds about $2,100,000 annually, while it pays for 
 labour over $g,ooo,ooo. It has $35,000,000 in stock, $5,000,000 in 
 bonds, total, $40,000,000; and within five years it has paid laboureis 
 more than $44,000,000.
 
 SOME EXCEPTIONS CONSIDERED. 49 
 
 in the failure to raise wages when profits increase. 
 A Httle reflection, however, is enough to show 
 that the cases are substantially parallel, and it 
 would be tedious to repeat the preceding argu- 
 ment in detail. To a considerable extent, when 
 trade is prosperous and wages tend to rise, the 
 workman's fears give place to hopes. If his em- 
 ployer does not raise his wages to such a rate as 
 elsewhere prevails, he thinks that he will better 
 his condition by a change, and he is therefore dis- 
 posed to press his advantage as far as possible. 
 The employer, on the other hand, is anxious to 
 '* make hay while the sun shines," and will think 
 it for his advantage to pay something more than 
 the current rate of wages, rather than to have 
 his business interrupted by changing his work- 
 ing force. It is now the workmen that can ap- 
 peal to the fears of the employers, and although 
 they are frequently prevented by their ignorance 
 from pressing their advantage to the utmost, 
 they are perhaps generally disposed to insist upon 
 it to the extent of their knowledge. Much could 
 be said in support of the view that in this way a 
 certain average of justice is maintained, and that 
 if great corporations drive hard bargains with 
 their workmen when trade is declining, their 
 workmen are correspondingly exacting when 
 prosperity returns. But it is hardly worth while
 
 50 INDUSTRIAL FRKEDOM. 
 
 In ciilarf^c upon this, for it is (|iiitc clear that 
 in a period of risiiii^ vvaj^cs ^rcat corporations 
 have no " (hsproportionatc power" over tlieir 
 workmen. Jf they were to discharge them as a 
 body, they wonld find it practically impossihle 
 to fill their places except at great expense. If 
 they attempt to crowd upon the " zone " into 
 which wages graduate, they will find that work- 
 men are leaving them at a time when it is for their 
 advantage to increase their force. 
 
 Taking everything into consideration, we 
 seem justified in concluding that corporations 
 employing a large number of workmen do not 
 possess by virtue of their mere magnitude any 
 exceptional power of oppression. They can 
 cause no more sufifering to an individual work- 
 man than can be caused by other employers; and 
 when we set the whole body of the employees 
 against their corporate master, and weigh the 
 loss and injury which they can inflict against 
 what they may sufTer, the inequality between the 
 parties is not very manifest. Indeed, when we 
 consider the difl^culty of suddenly procuring a 
 great force of labourers capable of carrying on 
 the work of the corporation, we see that its very 
 magnitude makes it more dependent and helpless. 
 
 We may now proceed to examine more par- 
 ticularly the contention that such corporations
 
 SOME EXCEPTIONS CONSIDERED. 5 1 
 
 as have exceptionally great wealth have excep- 
 tional power over their workmen. In such 
 cases it is commonly believed that the arbitrary 
 fiat of a few arrogant men can override the laws 
 of supply and demand. It appears to be thought 
 that the resources at their command enable them 
 to coerce their workmen into accepting lower 
 w^ages than might fairly be claimed, while profits 
 are maintained at excessive figures. From the 
 ordinary necessities of employers such men are 
 supposed to be exempt. They are in position to 
 endure the losses resulting from a temporary 
 stoppage of their business; or, at least, they can 
 much better endure such losses than their em- 
 ployees can endure the loss of their wages. The 
 employees may be able to hold out for a while 
 with the aid of such little savings as they have 
 made, but these savings will soon be exhausted; 
 they are sufficient for a single battle, but not 
 for a long campaign. Their employers, however, 
 can not be overcome in a single battle. Hence, 
 they can not be overcome at all, and the strike, 
 the only military measure available to workmen, 
 is sure to be disastrous to them. If they resort 
 to it they are only playing into their opponents' 
 hands. When it is over, and they are obliged 
 to admit the defeat which they might have known 
 to be inevitable, they are far more helpless than
 
 52 INDUSTRIAL FREEDOM. 
 
 before, riicir savings are dissipated, tlicir cour- 
 age is gone, and they arc at the mercy of their 
 masters. Like the wretched iniiabitants of Car- 
 thage, after their weapons have been taken from 
 them and resistance is hopeless, they are offered 
 the alternative of starvation or slavery. 
 
 No better illustration of such a situation as 
 is above described can be asked than the strike 
 of the employees of the Pullman's Palace Car 
 Company in 1894. This company not only car- 
 ried on very extensive operations, but also pos- 
 sessed exceptional financial resources. The par 
 value of its capital stock in 1893 was $36,000,- 
 000. Without debt, with revenue amounting to 
 over $11,000,000, with expenses of less than 
 $5,000,000, after having paid dividends since 
 1877 never less than eight per cent, it had ac- 
 cumulated an apparent surplus of over $25,- 
 000,000. The business of the company having 
 greatly fallen ofT in 1893, some of its shops were 
 closed, and the number of workmen employed 
 was very much diminished. It was found by the 
 officers of the company, after diligent inquiry, 
 that a good deal of business was to be had, but 
 at vr y unremunerative rates. They decided to 
 secure this business by bidding for contracts at 
 such figures as would afi"ord no profit, and as 
 would require a considerable reduction of wages
 
 SOME EXCEPTIONS CONSIDERED. 53 
 
 in order to avoid a positive loss. They knew that 
 higher bids than those made by them would have 
 no chance of acceptance, and as a matter of fact 
 they were underbid on a number of contracts. 
 This reduction of wages was accordingly put in 
 force, and against it the men struck, with the 
 far-reaching results so well known to the world. 
 After a long period of idleness a number of them 
 yielded to the necessities of the situation and 
 returned to work at the company's terms, the 
 remainder disappearing from the scene and giv- 
 ing place to newcomers. 
 
 This episode was in many ways of such im- 
 portance that it will be necessary to refer to it 
 again; but for the present we must confine our- 
 selves to its bearing on the particular point un- 
 der discussion. Did the Pullman Company on 
 this occasion, by virtue of its exceptional wealth, 
 bring to bear on its workmen any exceptional 
 pressure? Was it able to force a reduction of 
 wages which a less wealthy employer would have 
 been unable to enforce? Were its workmen 
 subjected to any limitation of freedom which a 
 feebler employer would have been unable to bring 
 about? 
 
 The statement of these questions appears to 
 bear their answer on its face. Had the Pullman 
 Company been less strong financially, it is evi-
 
 54 INIM^IKIAL FUF-EDOM. 
 
 (lent (li.it it could not have offered its men so 
 favourable terms as it did. If it liad been in 
 debt, or obliged to l)orrovv money to carry on 
 its business, it would not have been a safe pol- 
 icy to bid for c(jntracts in which there could be 
 no profit. The pressure which it brought to bear 
 on its workmen consisted in offering them the 
 option of reduced wages or no work. A feebler 
 concern would have been obliged to close its 
 works altogether, or to offer still lower wages. 
 It would have been compelled to insist on a re- 
 duction which the Pullman Company was not 
 compelled, but only persuaded, to adopt. The 
 freedom of its workmen would have been affected 
 by this same necessity, and limited to an even 
 greater extent. 
 
 In short, the severe conditions of business to 
 which a wealthy employer has power to a certain 
 extent, and for a short time, to assert his superi- 
 ority, would have dominated both the weaker em- 
 ployer and his employees. Whatever odium was 
 incurred by the Pullman Company, therefore, 
 must have been aroused by other causes than 
 any exceptional exercise of power in the reduc- 
 tion of wages. The evidence indicates that the 
 company would have suffered smaller loss by clos- 
 ing its works altogether than by undertaking the 
 contracts which it ilid; and if this is true, a less
 
 SOME EXCEPTIONS CONSIDERED. 55 
 
 substantial concern would probably have been 
 obliged to close. 
 
 Still, it may be urged, there are situations con- 
 ceivable in which the wealthier employer can more 
 effectually coerce his workmen. Business may be 
 in such a condition that a small profit can be 
 made, although less than an average one, with- 
 out any reduction of wages. In such a case a 
 corporation of limited resources may find it pru- 
 dent to be content with very little profit, rather 
 than run the risk of having to suspend its opera- 
 tions on account of a general strike. Its man- 
 agers might consider a reduction of wages justi- 
 fiable, and yet not dare to insist on it. By contin- 
 uing as they are, they can hold their own, perhaps, 
 until better times, while if they stopped work al- 
 together they might find it impossible to remain 
 solvent. On the other hand, a corporation with 
 plenty of money at its command could, under such 
 circumstances, carry things with a high hand. 
 The trifiing profit to be gained might not be an in- 
 ducement sufficient to influence the action of its 
 managers. They are prepared to face loss, and 
 they can say to their employees that work will 
 go on at reduced wages or not at all. 
 
 While such a situation is conceivable, it does 
 not often appear to exist. Nothing is more com- 
 mon than for wealthy corporations to pass 
 5
 
 throtijjh pcriorl*^ of unprofitable \ms\x\e%*t without 
 i\\s\.Mx\t\r\v, the wages of their w<'/rkmcn. The 
 i\\^c.tm\.cwX aroused by reduced wage* may cause 
 more lo»* than will l>c balanced by any saving 
 in the wages account, and a» a general rule men 
 in charge of a bu,%iness are very reluctant to 
 have it interrupted- To an extcmt that is ; ' 
 ably not generally realized, the success of a ;,-.. 
 ness de|>ends on the success of its managers in 
 securing customers. If the business is suv 
 pended, these customers may be lost. The)' arc 
 captured by watchful rivals, and they may not 
 1^ won back. As a rule, it may l>e laid down that 
 it is unwise for any large concern to reduce wages 
 unless the conditions are pretty imperative. 
 Then, the workmen appreciate the necessities of 
 the situation; but if they believe that their em- 
 ployer is making customary profits, while mak- 
 ing them accept lower wages, they are very- 
 apt to rebel. Taking all the conditions into 
 consideration, we can hardly escape concluding 
 that corporations of exceptional wealth are 
 not sinners above other employers in limiting 
 the freedom of their workmen. In fact, we 
 can hardly deny that, on the whole, their 
 workmen fare better than those of less opulent 
 masters. 
 
 We have still to examine the case of corpora-
 
 SOME EXCEPTIONS CONSIDERED. 57 
 
 tions enjoying monopolies of particular branches 
 of industry. The term monopoly is now used 
 in a very loose way, and probably means in the 
 popular mind nothing more than the realization 
 of profits above the average. This, of course, 
 implies that for some reason free competition 
 does not prevail, but it is not so much the ab- 
 sence of competition that is regarded as the 
 existence of excessive profits. A corporation, 
 therefore, which possessed entire control of a 
 certain industry, but made only the ordinary 
 rate of profit, would not be, or possess, a mo- 
 nopoly, as now commonly understood. The 
 case before us, therefore, is reduced to the in- 
 quiry whether corporations enjoying excep- 
 tional profits are able, by virtue of them, to 
 make exceptional exactions from their work- 
 men. 
 
 In this case, also, the clear statement of the 
 question indicates what the answer must be. 
 Unless there are exceptional hindrances to the 
 free movement of workmen out of the industry 
 carried on by the monopoly, it can not be pos- 
 sible to depress their wages to any greater extent 
 than they are elsewhere depressed. If the gen- 
 eral business of the country is bad, monopolies 
 can reduce wages, because their employees know 
 that if they quit their work it may not be pos-
 
 58 INDUSTRIAL llilAMOM. 
 
 siblc to obtain employment elscwiiere. If busi- 
 ness is improving, the manaj^ers of the monop- 
 olies know that if they do not raise waj^es their 
 working force will diminish at a time when it is 
 desirable to have it increase. 
 
 So far as unskilled labour is concerned, it is 
 evident that there can be no exceptional hin- 
 drances to its seeking the employer that pays 
 the best wages. The case may be otherwise 
 with skilled labour in special lines of industry. 
 To change his trade may be a serious hardship 
 to a workman who has attained great proficiency 
 in a certain department, and if there is only one 
 employer in that department, he may appear to 
 be entirely dependent on that employer. But 
 we must not disregard the fact that in such cases 
 the employer is equally dependent on his work- 
 men. If he loses them he can not replace them, 
 for there are no others possessing their peculiar 
 qualifications. Since we are assuming that the 
 employer is making exceptional profits, it follows 
 that he is under exceptional inducements to 
 maintain his working force. The conclusion 
 must therefore be that monopolies are likely to 
 pay their skilled workmen higher rates of wages 
 than are current, rather than lower ones. As a 
 matter of fact, skilled workmen under such cir- 
 cumstances arc apt to be strongly united, and
 
 SOME EXCEPTIONS CONSIDERED. 59 
 
 to appreciate the advantages of their position. 
 They are exceptionally independent, rather 
 than the victims of oppression, and their condi- 
 tion is very far removed from that of " industrial 
 
 slavery."
 
 CHAPTER VI. 
 
 SOME ELEMENTARY TRUTHS ABOUT 
 CORPORATIONS. 
 
 The arq^umcnts heretofore presented have 
 been of a nature to prove that corporations, even 
 when exceptionally rich, have no power, or, if 
 they have the power, have no sufficient motive 
 to reduce wages below the rate paid by individual 
 employers. In such a treatise as this it is not 
 practicable to appeal to facts, except in a very 
 general way; but I do not hesitate to say that 
 any one who will observe what is within his own 
 field of knowledge will find abundant confirma- 
 tion of the above reasoning. The ordinary farm 
 labourer receives wages varying, according to the 
 time of year and the necessities of his employer, 
 from mere board to $20 a month in addition to 
 his keeping. It is doubtful if at the present 
 time farm hands get through the year the equiv- 
 alent of $20 a month without board. Much 
 higher rates may prevail in some parts of the 
 
 country, but they are oflfset by the lower rates 
 
 60
 
 TRUTHS ABOUT CORPORATIONS. 6l 
 
 which are all that many farmers in the West and 
 South can afford to pay. Very few corporations, 
 however, pay lower wages than these, and the 
 greater number pay much more. Even the 
 Pullman Company was paying its men at the 
 time of the strike on the average more than 
 $2 a day, and wages as low as $i, paid by cor- 
 porations, are on the whole exceptional even for 
 unskilled labour. In the case of railroads, we 
 have already seen that, at the present time, many 
 of them are paying higher wages than the aver- 
 age of private employers, and that it is the judg- 
 ment of the United States Labour Commissioner 
 that this is and always has been the rule. But 
 however this may be, no evidence has been made 
 public at any time showing that corporations in 
 general, or rich corporations in particular, do, as 
 a matter of fact, either systematically depress or 
 from time to time reduce the wages of their em- 
 ployees below the rates paid by private employ- 
 ers for similar service. 
 
 But it is impossible to ignore the existence of 
 a belief or conviction that corporate employers, 
 especially if they are rich, owe something more 
 than this to their workmen. We shall, perhaps, 
 find sufficient reasons why this belief is not very 
 clearly expressed or definitely asserted; but it 
 unquestionably prevails. The leaders of the
 
 62 INDUSTRIAI. rRF.F.DOM. 
 
 American Railway Union stated it very frankly 
 in their testimony before the commission that 
 invcstij^^ated the Chicaj^o strike. They thouj^ht 
 that the Government ou^ht to own the railroads, 
 " nu'ctiii^- deficits as they do on mail routes," 
 and applying the vast sums now paid in dividends 
 to the payment of such \vaf:;^cs and pensions that 
 " the men would not feel that they had to resort 
 to extreme efforts of any kind to maintain a live- 
 lihood." Undoubtedly men that maintain such 
 a proposition as this consider that the Govern- 
 ment is abundantly able to pay these liberal wages 
 and pensions. The Government is the most 
 powerful and in a certain way the richest cor- 
 poration of all, and it is not surprising that the 
 ordinary labourer, observing the wages and pen- 
 sions paid by it to a certain number of its sub- 
 jects, should see no reason why similar favour 
 should not be extended to a greater number, if 
 not to all. 
 
 Nor are such beliefs confined to labourers. 
 The members of the strike commission, in the 
 questions addressed by them to the officers of 
 the Pullman Company, indicated their convic- 
 tion that these officers ought to have paid higher 
 wages than their competitors, although they 
 could get no higher prices for their products. 
 The testimonv of these officers showed that the
 
 TRUTHS ABOUT CORPORATIONS. 63 
 
 company was not only making no profit, but was 
 actually losing money on its contracts; that its 
 surplus represented the accumulations of twenty- 
 seven years, intended to insure to its stockholders 
 the maintenance of dividends, while the work- 
 men at Pullman had been in its employ on the 
 average probably little more than two years; that 
 the earnings of the employees had always been 
 at a high rate, no material reduction having ever 
 taken place before, and that this reduction was 
 followed by the employment of three times the 
 number of men that had been at work before it 
 was made. 
 
 Nevertheless, the commissioners pretty clear- 
 ly intimated that the managers of the corpora- 
 tion were under a moral obligation to apply its 
 surplus to the payment of higher wages. It 
 does not clearly appear that they held that the 
 demand of the strikers for the wages prevailing 
 before the panic should have been complied with, 
 but they apparently regarded a reduction of 
 twenty-two per cent as unfair. Nor does it 
 appear to me to admit of doubt that the com- 
 missioners represented a considerable public 
 opinion. I take no account of the ravings of 
 newspaper writers or the frantic utterances of 
 demagogues. Disregarding these, I am satisfied 
 that a large number of upright and benevolent
 
 64 INDUSTRIAL I'K KIIDOM. 
 
 people sincerely believe that under such circum- 
 stances as are stated above, to reduce waj^cs is 
 an act of oppression. This necessarily involves 
 ihc piinciplc that, as a matter of justice, corpora- 
 tions should not (iiily i)ay their workmen wiien 
 business is good as high wages as are paid by 
 other employers for like service, but should also, 
 when business is bad, pay them higher wages 
 than their comi)elitors; or else it involves the 
 principle that such corporations as have an accu- 
 mulated surplus arc justly held to this responsi- 
 bility. 
 
 I have been careful to use the expression, the 
 managers of corporations, in many cases where 
 it would have apparently been simpler to speak 
 of corporations directly. However pedantical 
 this may have seemed, it has been done from the 
 deliberate conviction that a great many danger- 
 ous fallacies spring from the practice of personi- 
 fying abstractions. This is especially true of cor- 
 porations, and it is particularly mischievous in the 
 case of the Government, which is the largest cor- 
 poration of all. Most of the wild schemes that 
 captivate the imagination and excite the hopes 
 of the populace are unconsciously based on the as- 
 sumption that the Government is a semi-omnipo- 
 tent being, having inexhaustible stores of wealth 
 in its possession, which it is able to dispense in
 
 TRUTHS ABOUT CORPORATIONS. 65 
 
 the shape of bounties, or pensions, or money, 
 to the inestimable gain of its subjects. If the 
 common people could be made to realize that 
 Government is merely a name expressing a body 
 of relations under which the actions of a certain 
 number of human beings are determined, that it 
 has no powers in excess of the combined powers 
 of these human beings, and no revenue except 
 what is furnished by them out of their earnings, 
 a great stride forward would be made. Hence 
 it is of the utmost importance, when we are dis- 
 cussing governmental policy, to speak of the wis- 
 dom and justice not of our Government but of 
 our legislators; to dwell not on the wealth of 
 our Government but on that of its subjects; and 
 to emphasize the truth that what is called the 
 revenue of Government is nothing but a part of 
 the revenue of the individual men, women, and 
 children composing the nation taken from them 
 in the shape of taxes. 
 
 For somewhat similar reasons it is eminently 
 desirable to avoid personifying other corpora- 
 tions. No matter how clear-headed we may be, 
 it is impossible not to be affected to a certain 
 extent by the incessant attribution of the quali- 
 ties of the angels of darkness to these legal ab- 
 stractions. No one will deny that it is only by 
 a figure of speech that moral quality can be as-
 
 CfC> INOrSTRIAL KRKKI)f)M. 
 
 sipfiicd to an y til ill, 1^^ but the acts of liunian beings; 
 but no one will deny that it is very difficult not to 
 be misled by figures of si)cech. We hear so in- 
 cessantly of the greed, the tyraiuiy, the rapacity, 
 the unscrupulousncss of corporations, that we are 
 in constant danger of forgetting that in reality no 
 such vices can exist, and of insensibly acquiring 
 a prejudice against the very name corporation. 
 Sensible peojile may be able by an effort of reason 
 to avoid most of the worst results of such falla- 
 cies, but it is doubtful if they can avoid them 
 altogether; and it is certain that many unreason- 
 ing people are completely deceived by them, 
 and think and talk as if the country was overrun 
 and dominated by sw^arms of incorporated 
 demons. We congratulate ourselves on our 
 own enlightenment, when we read of the hosts 
 of ghouls and werewolves and hobgoblins and 
 witches and bogies with which, in the middle 
 ages, our miserable ancestors imagined them- 
 selves to be encompassed; but if they were to 
 read some of the accounts now published of the 
 fiendish malignity and superhuman ingenuity of 
 our corporations, they might be inclined to think 
 their plagues a lighter infliction than ours. 
 
 In view of the mischief likely to arise from 
 such fallacies, it is perhaps prudent to restate 
 some elementary truths concerning corporations.
 
 TRUTHS ABOUT CORPORATIONS. 6/ 
 
 They are not persons, and can have none of the 
 attributes of persons. They can not commit 
 wrong or suffer wrong. They can be neither 
 benevolent nor malevolent. They can not be 
 seen or touched. They have no souls nor any 
 life. When we speak of a corporation, we mean 
 generally that a certain number of people have 
 agreed to put some of their property in charge 
 of certain agents, for a definite period, and for 
 special purposes. The owners of the property 
 part with their control over it, and in considera- 
 tion of this are exempted from liability for the 
 acts of their agents, except to the amount of 
 the property committed to their charge. When 
 we speak of the acts of corporations, therefore, 
 we mean, and can only mean, the acts of the 
 stockholders or their agents. When we speak of 
 the greed, or the oppression, or the malice of a 
 corporation, we mean, and must mean, that some 
 or all of the stockholders, or trustees, or offi- 
 cers, or agents of the corporation are guilty of 
 these abominations. When we speak of its 
 crimes, we mean crimes committed by some of 
 these individuals. When we speak of imposing 
 fines, burdens, taxes, or other charges on cor- 
 porations, we mean that they are to be paid out 
 of the property of certain individual human be- 
 ings. And when we speak of the resources of
 
 68 INDUSTRr,\I. I UK I.I) oM. 
 
 a CDipntation, \vc incrui a certain quantity of 
 wealth that bclonj^s in definite proportions to 
 a certain nutnhcr of human heinj^s called its 
 stockholders. 
 
 Let us therefore inf|uire whether the men 
 who manage corj)orate enterprises, or those who 
 own corporate property, arc under any greater 
 moral obligation than private employers to pay 
 their workmen higher wages in bad times than 
 those currently j)aid for similar service. It is to 
 be observed, in the first place, that the managers 
 of business corporations are restrained by law 
 from applying the funds under their control to 
 benevolent purposes. They are liable as trustees 
 for the stockholders, and confined by the cor- 
 porate charters to certain definite business op- 
 erations. There is, no doubt, some elasticity in 
 these restrictions. The law will not compel the 
 manager of a corporation to reduce wages to 
 the lowest possible figure at which he can obtain 
 workmen, provided he can reasonably claim that 
 in the long run such a policy would be injurious 
 to the property under his charge. On the other 
 hand, it will not sanction his application of sur- 
 plus capital to the payment of unnecessarily high 
 wages on grounds of humanitarian sentiment. 
 In neither direction can he go so far as the pri- 
 vate employer, for the latter is dealing with his
 
 TRUTHS ABOUT CORPORATIONS. 69 
 
 own property, and is responsible only to him- 
 self. Nor would it be safe for the law to lay down 
 any other rule. Trustees are too prone to treat 
 the funds under their control as if they owned 
 them, and if the law is to be modified, it should 
 be in the direction of more rather than less rigid 
 accountability. 
 
 In the second place, justice does not seem to 
 require that stockholders in corporations should 
 pay higher wages to their workmen than other 
 employers. Corporations not possessed of ex- 
 ceptional advantages have no power to pay ex- 
 ceptionally high wages, and where the power 
 does not exist there can be no moral obligation. 
 Such a requirement would imply the existence 
 of a responsibility for employing property in cor- 
 porate enterprises which does not attach to its 
 other uses. Were it true that the existence of 
 corporations was an evil in itself, and that there 
 was something culpable in investment in them, it 
 might be proper — if it could be proved practica- 
 ble — to enact such laws as would make the re- 
 turn on capital so invested smaller than on that 
 under private management. Perhaps no one is 
 prepared to maintain the truth of this proposi- 
 tion; yet, since much denunciation of corpora- 
 tions is unjust unless it be established, it seems 
 necessary to examine it.
 
 70 INDI .-. I KIAI. !• Rl I l)()M. 
 
 Tt cm not be (Ic-iucd that witli<jut the aid of 
 the coiixjialc form of doin^ business, a vast 
 amount of wealth that is now productive would 
 he wasted; many fields of industry would have 
 In he abandoned, and many labourers deprived of 
 employment. I'y means of corporations an in- 
 iinile number of small sums, of which the owners 
 can make no profitable use, are united into large 
 funds, which bear fruit in b(;lh j^rofits and wages. 
 It is, of course, possible for business to go on 
 ^vhere there are no corporations, but it must be 
 on a restricted scale. The vast operations of 
 modern industry arc only possible by means of 
 our credit system. Borrowed capital, and enor- 
 mous quantities of it, are as necessary to the con- 
 duct of the business of the present day as coal is 
 to the production of steam or iron to the opera- 
 tion of railroads. As Mr. Bagehot points out, 
 the English did not look with favour on the con- 
 struction of the Suez Canal. So acute an ob- 
 server as De Tocc|ueville thought that it would 
 bring back the Eastern trade to the Mediter- 
 ranean and revive Genoa anil \'enice, and the 
 English generally agreed with him. But when 
 the canal was made, it was found that it could 
 be profitably used only by large vessels, and that 
 the great supplies of loanable capital necessary 
 to send forth a tlcet of these vessels were to be
 
 TRUTHS ABOUT CORPORATIONS. /I 
 
 found only in England. No one will question the 
 fact that the railroads of the United States have 
 added almost fabulous amounts to the national 
 wealth. Without them, regions now crowded 
 with towns and cities would still be the hunting 
 grounds of Indians, and the white population 
 would be confined to the neighbourhood of the 
 ocean and the waterways. These great railroads, 
 however, could never have been built without the 
 use of borrowed capital; and without the aid 
 of corporations this capital could neither have 
 been made available in the first place, nor utilized 
 after it had been made available. 
 
 This will be evident if we consider what 
 agencies are necessary for the collection and ap- 
 plication of capital, if it is to be used on the 
 present scale. Loanable capital consists of the 
 savings of those who are not in position to use 
 their savings in business. Most wage-earners 
 and salaried persons are — ex vi termini — not in 
 business for themselves; hence they must lend 
 their savings either to individuals, or to partner- 
 ships, or to corporations. To lend to an indi- 
 vidual, however, unless with the collateral secu- 
 rity of a mortgage of his property — a protection 
 not available for small sums and short terms — is 
 for most people a difficult and perilous transac- 
 tion. One man may with good reason have con-
 
 72 INDUSTRIAL rUKKUOM. 
 
 fulciicc in another; hiil it is scKlom possible for 
 a minihcr of i)crs<)ns to have the same rational 
 L^roinuls of confidence in the same individual. 
 \(ir can an inchvichial ad\anta}^eously supply 
 liiinsclf with wliat caj)ital he needs by borrowing 
 small sums from a multitude of lenders, unless, 
 indeed, he is a banker by profession. There 
 arc. it is true, many individual bankers, but their 
 number has decreased, for the simple reason that 
 banking — that is, borrowing and lending other 
 pco(>le's capital — is a business refjuiring per- 
 manency in its conditions. The individual man, 
 however, is subject to the infirmities of disease, 
 old age, and death. Those who have lent him 
 money, therefore, may find themselves embar- 
 rassed by contingencies of very frequent occur- 
 rence, and they will secure themselves against 
 such embarrassments if any practicable method 
 is offered. 
 
 There have been many partnerships engaged 
 in banking, and formerly on a very great scale. 
 By virtue of numbers, their business is placed 
 on a permanent basis; but they sufTer from 
 another difficulty. Under the law of partner- 
 ship, one member may not only make away with 
 all the partnership property, but also exhaust the 
 private fortunes of all the members in payment 
 of its debts. To lend one's moncv to a firm of
 
 TRUTHS ABOUT CORPORATIONS. 73 
 
 bankers, therefore, implies confidence in the in- 
 tegrity of all the members of the firm — a confi- 
 dence for which ordinary people can seldom offer 
 any rational justification. On the other hand, 
 the fact that every partner is the unlimited agent 
 of all the others in matters not plainly foreign 
 to the partnership business, makes a great many 
 people extremely reluctant to go into partner- 
 ship. It is a great deal easier to get into this 
 relation than it is to get out of it, and when 
 men have acquired great wealth, they are often 
 unwilHng to risk even a remote possibility of hav- 
 ing it all swept away. Hence, old banking firms 
 have in modern times often become incorporated, 
 and not many new ones have arisen to take their 
 place. 
 
 Corporations doing a banking business are 
 not only more permanent but also safer reposi- 
 tories of savings than individuals or partnerships. 
 A partnership may be utterly ruined by the folly 
 of one of its members, but the corporation is 
 limited by law, nowadays at least, to such an ex- 
 tent that folly must be supplemented by fraud 
 in order to dissipate its assets. Many deplorable 
 instances of this pernicious combination have 
 taken place, but if we take into view the great 
 number of these financial institutions, the per- 
 centage of loss from both errors of judgment and
 
 74 INUrSTRIAI. FKKKDOM. 
 
 positive defalcation is comparatively small. Al- 
 tliou^h not commonly spoken of as hanks, insur- 
 ance companies of various kinds really carry on the 
 bankinjj^ business, and we can hardly conceive the 
 possibility of their functions being discharged by 
 individuals or partnerships. It is certainly not 
 too much to say that without the aid of savings 
 banks, insurance companies, and corj)orations of 
 similar character, vast amounts of capital that 
 arc now collected and made available by union 
 would not only not be collected, but would never 
 be saved at all. For without opportunities for 
 deposit, savings become nothing but hoardings, 
 and the legitimate desire to contribute to and to 
 participate in the prosperity of the country degen- 
 erates into mere anxiety for personal security. 
 
 As corporations have become indispensable 
 means of collecting savings, so they are equally 
 necessary for their utilization. It can seldom be 
 the case that an individual or even a partnership 
 can create a railroad or carry on any enterprise 
 on a similar scale. The embarrassments already 
 referred to would make it difficult to borrow capi- 
 tal, and would make it especially difficult to pro- 
 cure the participation of those who now take 
 shares of stock. Very few people would be will- 
 ing to take an interest in a railroad, or in a large 
 manufacturing concern, if they would thereby
 
 TRUTHS ABOUT CORPORATIONS. 75 
 
 make -themselves liable to the extent of their 
 whole property for its debts. These enterprises 
 require such masses of capital as only the multi- 
 tude possesses, but if the multitude were legally 
 in partnership the situation would be utterly in- 
 tolerable. If one partner became insolvent, his 
 interest in the partnership might be attached, and 
 if he died or retired it would have to be adjusted. 
 Complications would arise if he wished to sell 
 or mortgage It; in short, the difficulties that 
 would be encountered would be innumerable. 
 To sum the whole matter up, by means of cor- 
 porations countless numbers of people are able 
 to invest portions of their savings in all sorts of 
 enterprises with the assurance that at the very 
 worst their whole property can not be lost, but 
 only those parts of it severally invested in these 
 enterprises. In other words, they can make use 
 of the economic advantages of partnership, or co- 
 operation, without subjecting themselves to the 
 abnormal perils with which the application of the 
 primitive rules of the common law to modern 
 afifairs has surrounded this form of enterprise. 
 
 We have dwelt on the part played by corpora- 
 tions in collecting and applying loanable capital, 
 but it is evident from what has just been said 
 that they enable those who make savings to 
 derive profits from them as well as interest. Men
 
 y6 INDUSTKIAf. FRI.KDOM. 
 
 will lend on collateral security to individuals and 
 partnerships, but tliey will not put their money 
 into the business of an individual or a partner- 
 ship. Thus, while the aniovnit of loanable capi- 
 tal crcatr(l would be nnuh smaller if there were 
 no ct)rporations, the amount of capital invested 
 without collateral security would also be dimin- 
 ished. It is highly unreasonable to suppose that 
 new enterprises would be undertaken on anything 
 like the present scale were capitalists precluded 
 from availing themselves of the corporate form 
 of investment. The self-interest of individuals 
 becomes an indispensable condition of the 
 progress of the community. Every new ven- 
 ture is necessarily attended with some risk of 
 failure, and profits commensurate with the risk 
 must be anticipated, or capitalists will have noth- 
 ing to do with it. But these new ventures have 
 beyond c|ucstion enormously increased wealth, 
 and with it the recompense of labourers. Hence 
 it is a distinctly injurious policy to say to those 
 who have small savings to invest, that if they 
 invest them in a corporation they shall be fined 
 for it. The result must be not only a diminution 
 of the amount of capital seeking such invest- 
 ment, but also the surrender of the field to the 
 most unscrupulous members of the investing or 
 exploiting class. There are objections to the
 
 TRUTHS ABOUT CORPORATIONS. 'J^ 
 
 policy sometimes adopted in certain communities 
 of paying a bounty in the shape of exemption 
 from taxes to manufacturing corporations oper- 
 ating within their hmits, but this policy is more 
 enlightened than that of positive discourage- 
 ment. 
 
 It is sometimes claimed that a great boon is 
 granted to capitalists in allowing them to form 
 corporations, and that the community ought to 
 be paid for its liberality. This seems to be a 
 survival of the mediaeval idea that all trade ex- 
 ists only by the grace of the sovereign, and that 
 manufacturers and merchants ought not to be 
 allowed to carry on their pursuits without special 
 permission. But unless those who raise this ob- 
 jection are prepared to maintain that the exist- 
 ence of corporations is, on the whole, injurious 
 to the community, instead of distinctly beneficial, 
 they do not deserve much attention. Doubtless 
 it is a great convenience to capitalists to obtain 
 the permanency of corporate existence, and to 
 avoid having the business in which they are en- 
 gaged broken up whenever one of their number 
 dies or becomes insolvent; but unless the pub- 
 lic can show that it is the gainer by maintaining 
 inconveniences and hindrances in general, it need 
 not arrogate any special virtue to itself for per- 
 mitting their removal. The same is true of the
 
 78 INDUSTRIAL FRF.P.nOM. 
 
 limitation of stockholders* liability for corporate 
 debts. It is not a question of havinj^ our mod- 
 ern business carried on by companies of unlim- 
 ited ratlier than limited liability; it is a question 
 of liavinj^ it carried on at all. If men can be 
 relieved from unlimited liability, they will exploit 
 every industry that offers a possibility of profit. 
 If they can not be so relieved, most of them will 
 have nothing to do with undertakings where the 
 penalty of failure is so terrible. Creditors are no 
 sufTerers from the limitation of stockholders' lia- 
 bility for corporate debts. Probably more cred- 
 itors lose money by the failure of individuals and 
 partnerships than of corporations, and, except in 
 the case of firms of well-known wealth, lenders 
 do not count much on the private fortunes of 
 partners as security. For a number of reasons 
 the financial condition of a corporation is much 
 more open to discovery than that of the mem- 
 bers of a firm. The latter are frequently found 
 to have lost their property before their reputa- 
 tion for wealth was afTected; but it is far more 
 difficult for a corporation to conceal its condition 
 from those of whom it desires to borrow. Even 
 if the limitation of liability were attended with 
 more injury to creditors than is found to be the 
 case, this injury would l)e far outweighed by the 
 gain to stockholders and to the community
 
 TRUTHS ABOUT CORPORATIONS. 79 
 
 through the enlarged opportunities for business 
 created by this exemption. 
 
 It follows, therefore, that the demand of the 
 public for greater benevolence on the part of 
 stockholders in corporations than on the part of 
 individual employers of labour is not justified by 
 anything in the nature of the functions of cor- 
 porations. Stockholders may reasonably claim 
 to make the same profit on their capital that is 
 made by individuals or partnerships, and if they 
 are called upon to pay labourers at higher rates 
 than other employers, the formation of corpora- 
 tions will be discouraged. By insisting on the 
 moral obligation of all stockholders to pay these 
 higher wages, the community might thus bring 
 about a positive reduction of wages in general; 
 for if the business of a corporation fails to be 
 profitable, the stockholders will certainly termi- 
 nate it. The funds which would have produced 
 a perennial supply of wages will thus produce no 
 wages at all, and the attempt to maintain ab- 
 normal wages on moral grounds will result in low- 
 ering them below the normal figure. In short, 
 to hinder the establishment of corporations is 
 to obstruct the investment of capital; and to 
 obstruct the investment of capital is to dimin- 
 ish the employment and the wages of labourers. 
 
 These conclusions may seem to require some
 
 80 INDISIKIAI. IRKKDOM. 
 
 iiuxlifK-ation in the case (tf a corporation tliat 
 lias accuiuulatc'd a surplus. 'I'lic stockholders of 
 such a corporation, it may he th(ni^lit, can af- 
 ford to make some contrihiiti(jn out of their ex- 
 ceptional profits to the i)aymcnt of exceptional 
 wages to their employees. This opinion, how- 
 ever, is based on a misapprehension of the nature 
 of a surplus, and on a confusion of the wealth 
 of a corporation with the wealth of its stockhold- 
 ers. C'oncernint^ surjjlus cai)ital, it is to be re- 
 marked that, as a rule, the constitution and the 
 policy of corporations contemplate permanency. 
 Their promoters enj^age in a business with the 
 expectation that the business will continue in- 
 definitely, and they are generally compelled to 
 convert a large part of their stock into fixed capi- 
 tal. If the managers are competent, they are 
 well aware that great fluctuations in prices and 
 in the volume of trade have occurred and will 
 occur. It becomes of the first importance, there- 
 fore, to accumulate a surplus. If profits are only 
 normal when general trade is good, it is highly 
 probable that in bad times they will altogether 
 disappear. If they are large, it still remains prob- 
 able that they may be greatly cut down. Pru- 
 dent managers, therefore, bend all their efforts 
 to put aside a surplus, or insurance fund. Such 
 a fund will enable tb.em to meet their obligations
 
 TRUTHS ABOUT CORPORATIONS. 8 1 
 
 easily in times of disaster, and to pay some divi- 
 dend at least to the stockholders; and it will 
 also enable them to maintain the wages of their 
 employees at a figure somewhat above that which 
 is current — a result obviously advantageous to 
 the men, if not to the masters. 
 
 It seems to be altogether justifiable, there- 
 fore, when a corporation is making abnormally 
 large profits, for the managers not to increase 
 wages to a corresponding extent. If they are 
 wise, they do not increase their dividends corre- 
 spondingly, and they can not wisely do so with 
 wages. Should they do so, they would very 
 likely be unable, in periods of distress, to main- 
 tain wages even at a low rate, and they might 
 have to close their works altogether. In theory, 
 it might be more desirable for workmen to exer- 
 cise this foresight for themselves, and insure 
 against loss of wages by saving from them when 
 they were abnormally high. In practice, this is 
 done by prudent workmen; but there are ad- 
 vantages, even in theory, in the other plan. At 
 all events, it is an established custom, for it does 
 not admit of question that the country is full of 
 corporations, many of them large, that have for 
 years, whether they were making or losing 
 money, kept the main body of their workmen 
 steadily employed. Doubtless many managers
 
 82 INDUSTRIAL FKKI-.I)r)M. 
 
 pursue a difftTcnt course, from j)olicy or from ne- 
 cessity ; l)Ut their maiiaj^'cmcnt is pcrliaps not, in 
 the lonj; run, so successful, nor is it proper to 
 blame lar^e corporations as a class for the acts of 
 certain of their aj^^cnts. 
 
 As to the second error above referred to, it 
 is evident that the connection between the wealth 
 of a corporation and that of its stockholders may 
 be extremely slight. Most investors are careful 
 to regard the maxim not to put all their eggs 
 in one basket. Neglect of it soon teaches them 
 its value. In periods of business depression 
 nearly every one fmds that some of his invest- 
 ments turn out badly. In some cases he loses 
 all that he has invested; in others he loses 
 all return from it for a period; in still others 
 the rate of dividend is reduced, and in some it is 
 maintained. By means of these latter wise or 
 fortunate investments he is able to make shift 
 until the times improve. But if the corpora- 
 tions that have accumulated a surplus for the 
 purpose of keeping up the payment of dividends 
 when they are not earned are to devote this sur- 
 plus to paying higher wages than are earned, 
 their stockholders may be brought to great dis- 
 tress. The Pullman Company, for example, had 
 some 4.200 stockholders. Doubtless many of 
 them were to a great extent dependent on their
 
 TRUTHS ABOUT CORPORATIONS. 83 
 
 dividends from this company, and relied upon 
 the surplus as insuring their continuance. Many 
 of them probably were women, and unable to 
 support themselves. There is nothing unrea- 
 sonable in the supposition that most of them 
 suffered a material diminution of their income 
 from other sources. Perhaps Mr. Pullman had 
 himself made some investments that were 
 disastrous. Some of these stockholders may 
 even have found that all their dividends ex- 
 cept those from the Pullman Company were 
 cut ofif. 
 
 Under such circumstances, which are proba- 
 bly the actual circumstances, it seems difficult to 
 maintain that these stockholders, as a class, were 
 under any moral obligation to relinquish their 
 dividends in order to continue the payment of 
 wages at the rates prevalent in prosperous times. 
 No doubt some of them were abundantly able to 
 forego their dividends for this purpose; but it is 
 equally certain that some of them were altogether 
 unable to make such a sacrifice. But if there 
 was any moral obligation in the matter, it must 
 have been an obligation of all the stockholders, 
 and not of a part. It would be a duty of the 
 stockholders as such, and not as individuals. The 
 wealthy stockholders may or may not have been 
 benevolent as individuals, but that is irrelevant
 
 84 INDUSTRIAL rKICKDOM. 
 
 to this discussion. What they (Hd with their 
 (livi(lcti<ls after tliey j^'ot them we need not in- 
 quire; hut it is ohviously idle to assert that 
 the rich stockholders of the I'ullnian Company 
 ouj^ht to have received a lower rate oi dividend 
 than the i)oor ones. 'ihe discrimination *re- 
 (juired for the application of sucii a rule would 
 be altogether too severe a task for human in- 
 telligence. 
 
 It is important to add that the securities of 
 corporations are to an enormous extent held by 
 insurance companies and savings banks, and that 
 probably most of the dcj^osits in these institu- 
 tions are the property of working people. There 
 is nothing improbable in the supposition that 
 some of the stock in the Pullman Company was 
 held by savings banks as a means of investing 
 these deposits. Many savings banks have made 
 much worse investments. If we recognise a 
 moral obligation on the part of the Pullman 
 stockholders to apply their surplus in hard times 
 to the payment of abnormally high wages to their 
 workmen, it follows that depositors in savings 
 banks holding this stock are afTected with this 
 obligation. Hence we reach the conclusion that 
 such of those depositors as are working people, 
 earning perhaps less than the ordinary rate of
 
 TRUTHS ABOUT CORPORATIONS. 85 
 
 wages, are morally bound to relinquish some of 
 their gains for the purpose of paying other work- 
 ing people more than the ordinary rate of wages. 
 Such a conclusion, however, can hardly claim to 
 appeal forcibly to the conscience. 
 
 The supposition which we have just consid- 
 ered is not to be rejected as speculative. It is 
 well known that fiduciary institutions prefer as 
 investments the securities of corporations that 
 maintain a surplus. They justly regard it as of 
 the greatest importance to invest their depos- 
 itors' money in such a way as to make it bring 
 in a regular return. If they understand that 
 strong corporations are to recognise such a moral 
 obligation as we are considering, they will ex- 
 perience the greatest perplexity. They will ap- 
 prehend that the market value of the securities 
 of such corporations must fluctuate violently ac- 
 cording to the condition of business, and that no 
 certain return can be expected from them. Un- 
 der such circumstances the rate of interest paid 
 to depositors would become variable, and their 
 confidence in the safety of their deposits would 
 be justly shaken. It can hardly be necessary to 
 enlarge upon this further; and when we consider 
 the vast investments of the insurance companies, 
 the trust companies, hospitals, libraries, colleges, 
 churches, the trustees of estates, etc., we may
 
 86 INDUSTKIAI. 1 KKKHOM, 
 
 well hesitate to admit the existence of a moral 
 olilij^^'ition which would dcinoralize all fiduciary 
 rt-lalinns, and introduce uncertainty and specula- 
 tion into those departments of business from 
 which it is the j^dory oi our civilization to have 
 larj^ady expelled them. 
 
 In truth, the " solidarity " of our economic 
 world is far more complete than we are apt to 
 suppose. Machiavelli warns us that no one who 
 begins an innovation in a state need expect to 
 stop it at his pleasure or regulate it according 
 to his intention. We can not insist upon the as- 
 sumption of new responsibilities in a particular 
 case without invoking principles the application 
 of which may produce the most mischievous con- 
 fusion. The present condition of society is the 
 result of innumerable causes, acting and react- 
 ing with such complexity as to baffle all our at- 
 tempts to analyze their particular influences. In 
 the industrial world the part played by corpora- 
 tions has gradually become a very great one, and 
 its magnitude is appalling to many minds. The 
 direst possibilities are foreseen, and hasty and 
 ill-considered preventives are grasped at. But 
 enough has been said to indicate that the gain 
 from the introduction of the corporate form of 
 industry has been very real, while the evil re- 
 sulting from it has been largely imaginary. To
 
 TRUTHS ABOUT CORPORATIONS. 8/ 
 
 proscribe or discourage it, and to attribute moral 
 delinquency to those who engage in it, are very 
 revolutionary proceedings, the effect of which on 
 the whole community can not but be extremely 
 grave.
 
 CllAITI'R \'fl. 
 
 PERSONAL RKLATIONS IN COklMjUATK INDUSTRY, 
 
 A CKRTAiM despotic brutality is commonly 
 believed to characterize the dealings of corpora- 
 tions with their employees. As we have seen, 
 De Toc(iueville spoke with much seriousness of 
 the prospective harshness of modern industrial 
 relations. We know that men are always prone 
 to abuse power, and there is no reason why 
 ai^cnts of corporations should be free from this 
 temptation. Probably no corporation has ever 
 been more violently accused in this regard than 
 the Pullman Company, and in its case we are 
 fortunately in possession of the evidence for and 
 against the charges, which we shall presently con- 
 sider. Apart from this case, evidence is obtain- 
 able with great difficulty. Newspaper reports 
 are inaccurate and mendacious, as well as charac- 
 terized by ignorance of the worthlessness of hear- 
 say testimony. Assuming, however, that pe- 
 culiarly harsh personal relations between mas- 
 ters and workmen result from the existence of 
 
 83
 
 RELATIONS IN CORPORATE INDUSTRY. 89 
 
 industrial corporations, there is certainly some 
 ground for contending that their existence is not 
 an unmixed blessing. Those who choose to em- 
 ploy their wealth in this way may thus incur some 
 obligation to mollify the severity of present con- 
 ditions by the sacrifice of a portion of their gains. 
 In other words, the mere establishment of the 
 relation of master and servant, when the master 
 is a purely legal entity representing the action 
 of a number of masters by means of hired agents, 
 although in some respects a public advantage, 
 may be in others a public nuisance. 
 
 The substitution of the agent, or superin- 
 tendent, for the true owner in the case of cor- 
 porate industries, may be compared with the 
 substitution of the overseer, or slave driver, for 
 the master of the slave. The capitalist may be 
 a humane person, incapable of oppressing those 
 who directly work for him; but when he in- 
 trusts his wealth to the hands of a paid agent, 
 he becomes concerned only in the pecuniary re- 
 sults, and ceases to observe or be interested in 
 the condition of those whom this agent em- 
 ploys. The reader of these words may be in 
 the receipt of income from many different cor- 
 porations; but it is a chance if he be acquainted 
 with even so much as the name of a single one 
 of their employees. No matter how kindly his
 
 90 INDISTRIAL FKKEUOM. 
 
 tlisi)Osition, it is inij>raclicablc for him to display 
 it, and he must j,^cncrally content himself with 
 the lujpe that the corporations in which he is 
 interested are managed by just and humane of- 
 ficers. 
 
 It admits of no question that the dealings 
 of a corporation with its employees are character- 
 ized by greater rigidity than the dealings of in- 
 dividual masters with their servants. This is a 
 necessary consequence of the larger scale on 
 which the business of corporations is conducted. 
 The individual who employs two or three men 
 can control them by his personal influence, and 
 does not need to lay down a body of rules for 
 their observance. But when a large number of 
 men arc employed the conditions are very ditTer- 
 ent. Punctuality then becomes essential. If 
 some of the men are late in coming to their work, 
 the whole force may be kept idle. In a manufac- 
 turing industry the machinery must start prompt- 
 ly and be kept in motion continuously. In the 
 business of transportation there can be no delay 
 in starting trains or cars. A system of rules is 
 necessary, and it must be strictly enforced. Neg- 
 ligence, idleness, and inefficiency must be checked 
 by fines and penalties. In short, whenever large 
 numbers of men are engaged in a common em- 
 ployment, discipline must be maintained; and
 
 RKLATU)NS IN CORrORATl': INDUSTRY. QI 
 
 discipline is in itself odious to mankind. It in- 
 volves a surrender of liberty, which may be indis- 
 pensable, and in the end advantageous, but which 
 is intrinsically unpleasant. 'The fatlici- of a fam- 
 ily may secure the obedience of his ciiildrcn with- 
 out making his control evident; but if ho sends 
 his children to school with others, the Icachcr 
 can scarcely avoid insist ins;" upon Ihcir compli- 
 ance with formal roi^iilations; and the same 
 principle applies to every aggregation of hu- 
 manity. 
 
 In such cases we easily recognise the truth 
 that a partial surrender of liberty on the part 
 of individuals results in a positive increase of the 
 amount of liberty collectively enjoyed. The 
 same truth must be recognised in the emjjloy- 
 ment of human beings in C()ri)orate industries. 
 The discipline enforced is a necessary condition 
 of their effective production — that is, of their 
 employment at all — and if it is not needlessly se- 
 vere it furnishes no legitimate ground of com- 
 plaint. We have seen that the compensation of 
 labourers employed by corporations is ])rcjbably 
 on the whole somewhat greater than that of the 
 employees of individuals, and the additional com 
 pensation must be considered — in view of tlu- fad 
 that the service of corporations is generally 
 sought by labourers — as a sullicient e(|uivalent
 
 92 IN'nrSTKIAL FKKF.DOM. 
 
 for wlmtcvcr loss of liberty may appear to be 
 involved ill the submission to discipline. 
 
 If we would incpiire whether, as a matter of 
 fact, the rules imi)osed by corporations on their 
 employees are unnecessarily harsh, we should 
 find some evidence, at least, showinj; that on the 
 whole this is not true. Dishonesty among the 
 cmjiloyees of transportation companies intrusted 
 with tlu- collection of fares is notoriously one 
 of the greatest difticultics with which the man- 
 agers of these companies have to contend, and 
 it requires drastic remedies. Wherever pecula- 
 tion is feasible, experience proves that it must 
 be guarded against, and the offence is so serious 
 that hardly any precautions can be excessive. 
 Incessant quarrels over these and other disci- 
 plinary regulations take place, some of them of 
 such extent as to arouse public interest. But 
 when these disturbances are investigated by 
 commissions, the official reports generally show 
 that the evidence offered by dissatisfied em- 
 ployees is very weak. Much of it proves to be 
 actually false, while the acts of the employers 
 that occasion complaint are found to be not be- 
 yond the legitimate exercise of discipline. It 
 is true that they are often misunderstood, and 
 that trouble might have been avoided by con- 
 ciliatory methods on the part of employers. On
 
 RELATIONS IN CORPORATE INDUSTRY. 93 
 
 the other hand, the acts of the men are often 
 too hasty and violent to give opportunity for 
 mediation or explanation, while they are some- 
 times positively malicious. 
 
 The Pullman strike, for instance, was precipi- 
 tated by the act of the company in laying off a 
 number of workmen temporarily, because the 
 work on which they were engaged was completed 
 and there was at the time nothing for them to do. 
 Among this number were two or three who had 
 taken part in an appeal for higher wages, and 
 the impression became prevalent among the 
 workmen that these persons were permanently 
 discharged because of their participation in this 
 movement. This belief led to an immediate 
 strike, without any demand for explanation, and 
 so far as this point is concerned the acts of the 
 employers seem to demand no criticism. 
 
 It is perhaps commonly believed that it was 
 the poHcy of this company to compel its em- 
 ployees to Hve in its " model tenements " and to 
 pay rent for many conveniences and luxuries 
 which they may or may not have desired. That 
 this belief is ill founded appears from the fact 
 that at the time of the strike only about one 
 third of the employees of the company were its 
 tenants. Furthermore, an examination of the 
 regulations enforced on the company's property
 
 (j\ IN'I)['STkI.\I. IKI.KDOM. 
 
 will satisfy any one conversant witii such mat- 
 ters that they were not only judicious hut neces- 
 sary. It is impossihle to maintain the character 
 of a " model " tenement without compelling 
 dirty and disorderly people to conform to a hij^her 
 standard than that to which they are used. That 
 is the very object aimed at in the construction 
 of such tenements. Whatever surrender of lib- 
 erty is involved in such conformity is, from every 
 point of view, well paid for. No workinj^^man 
 can properly appeal to the sympathies of the 
 benevolent if he rc.c:ards the prohibition of liquor 
 shops and bawdy houses in the neighbourhood 
 of his abode as an odious manifestation of 
 despotic power, and prefers in the name of lib- 
 erty to bring up his children in the midst of all 
 manner of physical and moral nuisances. 
 
 Considering the advantages enjoyed by the 
 tenants of the Pullman Company, their rents do 
 not seem to have been higher than those paid 
 in adjoining towns. As a matter of fact, the 
 rents charged by the company amounted to little 
 more than one half what would have been a fair 
 return on the investment if it had been regarded 
 as purely a matter of business; and if the rents 
 WTre not reduced when wages were lowered, it 
 is to be remembered that they had never been 
 increased during the preceding years of prosper-
 
 RELATIONS IN CORPORATE INDUSTRY. 95 
 
 ity and high wages. Nor was the collection of 
 rents enforced with anything like the severity 
 commonly found necessary by landlords. At the 
 beginning of the strike its tenants owed the 
 Pullman Company some $50,000 for rent due 
 and unpaid, and at the end of it this sum must 
 have been greatly increased, as no eviction for 
 this cause had taken place. Only a small portion 
 of this indebtedness, it is safe to say, has ever 
 been paid, and under such circumstances the 
 complaints of intolerable oppression in the ex- 
 action of rents scarcely deserve serious attention. 
 At all events, the tenants of the Pullman Com- 
 pany, Hke the ancient Hebrews, appear to have 
 judiciously despoiled their oppressors as a pre- 
 liminary to making their escape. 
 
 It is a mistake to suppose that the managers 
 of corporations have, as a rule, no personal 
 friendly relations with their men. In corpora- 
 tions of moderate size the reverse is very com- 
 monly the case, and many provisions are made 
 for the comfort of employees, both in health and 
 sickness. The chief managers of large corpora- 
 tions, it is true, can have little opportunity for 
 direct acquaintance with the great body of the 
 workmen in their service, but in such cases there 
 are necessarily many subordinate managers 
 whose duty it is to know the characters of the
 
 96 INnrSTRIAI. rRKF.DOM. 
 
 iiulivifhials ulioiii tlu-y direct, and to whom it is 
 unju.sl to impute iiiluimatiity without more evi- 
 dence than has been hitlierto produced. The 
 testimony as to such inhumanity is jjcncrally 
 of the vaguest kind, and often demonstral^ly 
 false. No doubt, as was observed above, the e.x- 
 crcise of power by one human bein^ over another 
 is ne\er unattended with tlie d.'in.L,a'r of abuse, 
 and is fre(|uently abused. lUit there is httle 
 reason in tlie nature of things wliy the agents 
 of corporations should be more cruel than others 
 who employ labourers directly, and it is the opin- 
 ion of those conversant with the factory acts, 
 both in former days and at present, that work- 
 men are better treated in large establishments 
 than in small ones. Their very numbers make 
 it practicable to furnish conveniences which the 
 employer of a few hands could not afford. 
 
 Many of our great corporations maintain li- 
 braries, schools, and hospitals for their men, and 
 manifest a much greater degree of solicitude for 
 their welfare than the public that obtains its 
 information from the newspapers would suppose. 
 Even the vilified Pullman Company kept a 
 physician to attend to the injuries of its em- 
 ployees, and paid their expenses while in hos- 
 pital, as well as the charges of specialists when 
 their services were needed. While managers
 
 RELATIONS IN CORPORATE INDUSTRY. 97 
 
 may go somewhat further in such benevolence 
 than the technical requirements of their trust 
 would justify, it is doubtful if an instance can 
 be produced where stockholders have made com- 
 plaint of their liberahty, although there are many 
 where they have encouraged it.
 
 CHAPTER VIII. 
 
 CORPORATIONS POSSESSING MONOPOLIES. 
 
 Some reasons have l)een already given for 
 the concUision that a corporation cnjoyinp a mo- 
 nopoly is unlikely to pay the men in its employ 
 lower wages than they can elsewhere obtain. It 
 was explained that, according to the common 
 view, monopoly consists in the enjoyment of ex- 
 cessive profits — that is, of profits greater than 
 are generally obtained by capital, after making 
 allowance for all conditions tending to produce 
 inequality of returns. Where monopoly of this 
 kind exists, it is undoubtedly believed by many 
 persons that exceptional gains should not be the 
 absolute property of the owners of the capital 
 employed, but that the workmen have some 
 claim to them. They reason that the product 
 of the industry is the result of the co-operation 
 of labour and capital, and that if this product is 
 exceptionally great, it is inequitable for the em- 
 ployers to appropriate the whole of the excep- 
 tional profit made upon it as their share, leaving 
 
 93
 
 CORPORATIONS POSSESSING MONOPOLIES. 99 
 
 to the labourers only the ordinary rate of wages. 
 Those who entertain these opinions seldom at- 
 tempt to determine the proportion in which the 
 abnormal profits ought to be divided; but they 
 are convinced that justice requires that some 
 division be made, and they are disposed to en- 
 courage all professed attempts to bring it 
 about, without perhaps considering how far 
 such attempts are really calculated to promote 
 justice. 
 
 If we reflect upon the problem, however, we 
 are at once struck with the fact that unless the 
 exceptional profits made by a monopoly are in 
 some way due to exceptional exertions on the 
 part of the labourers employed, justice forbids 
 these labourers to claim any part of them. We 
 are not considering their claims as a matter be- 
 tween them and their masters, but as members 
 of the labouring class at large. If the men em- 
 ployed in a certain industry receive higher wages 
 than other labourers, although their sacrifices are 
 no greater, it is plain that these other labourers 
 may properly be dissatisfied. We can recognise 
 here no lord of the vineyard, doing as he will 
 with his own, for we must maintain as our stand- 
 ard of justice the equality of reward with sacri- 
 fice. To contend that justice to labourers is pro- 
 moted by enforcing the exceptional compensa-
 
 lOO INDUSTKIAI. IRKEDOM. 
 
 tif)ii of those who have rendered no exceptional 
 service involves us in obvious inconsistency. 
 
 According to the supposition commonly 
 made, the monopolistic gains arc secured by levy- 
 ing a tax on the purchasing community. By 
 some inequitable means the ordinary laws of sup- 
 ply and demand are controlled, and all buyers 
 are compelled to pay an unreasonable price for 
 the monopolized commodity. To insist that 
 any part of these unjust gains justly belongs to 
 those labourers who, by the customary degree 
 of exertion, have assisted in producing them, 
 is not only contradictory on its face, but is 
 also extremely well calculated to aggravate the 
 discontent and envy already prevailing. The 
 favoured class of labourers would then occupy 
 the position of participating in profits extorted 
 from their less fortunate brethren. They would 
 perhaps not be so unselfish as to refuse to par- 
 ticipate in gains of this character. Hardly any 
 class of men appears in practice to carry unselfish- 
 ness to such a degree as this. They would de- 
 fend their action by various sophistical argu- 
 ments, the most forcible of which would be that 
 if they did not secure these profits their em- 
 ployers would, and that therefore neither the 
 community at large nor any other class of la- 
 bourers could sulTer any injury. The prejudice
 
 CORPORATIONS POSSESSING MOST'qP'OJLlES. ICCl' 
 
 against monopolies is so str-pno'^a.-? tojrii^kc such 
 arguments specious, but it is a travesty of jus- 
 tice to offer them in its name. The profits of 
 the monopoly are really exacted from the pur- 
 chasing community, including workmen, and 
 workmen that participate in them must confess 
 that their increased rewards are derived from 
 a fund created by decreasing the rewards of their 
 fellows. 
 
 Were there any reason to think that the par- 
 ticipation of the workmen in the profits of the 
 monopoly would tend to extinguish these profits, 
 this conclusion might require some modification. 
 Such participation, however, would have a di- 
 rectly opposite tendency. Under our form of 
 government, where all workmen have the 
 suffrage, it would be peculiarly dangerous for 
 those employed in a monopolized industry to feel 
 that they are to be the gainers by maintaining 
 its excessive profits. Their employers are under 
 continual temptation to influence their poHtical 
 action — a temptation which, it must be said, they 
 have sometimes been unable to resist. So long 
 as these workmen receive no exceptional re- 
 muneration, the scepticism with which they 
 naturally listen to the representations of their 
 employers may be sufficient to preserve their in- 
 dependence; but if they became convinced that
 
 ]n2 is\)j'\\n\i. Mi I, I. IX ».Nt. 
 
 nn Appi'ccialilc '\)hcl (.A llic excessive gains of the 
 monopcjly really fell to their share, they would 
 almost infallibly combine with their masters to 
 perpetuate these gains. 
 
 Under universal sufTragc these combinations 
 might attain such strength as to be irresistible. 
 They would dictate legislation, and make the at- 
 tempt to overthrow privilege hopeless. But if 
 justice. is violated by the existence of monopolies, 
 the friends of justice must take care to do noth- 
 ing to increase their power. It is the aim of true 
 reformers to do away with all exclusive privileges, 
 as tending to diminish lil)crty, and to hinder the 
 attainment of equality of opportunities for de- 
 velopment. Success in this endeavour is possi- 
 ble under our form of government only through 
 the generous and enlightened co-operation of the 
 working people. They must come to under- 
 stand that progress consists in enlarging the op- 
 portunities of all, and not in securing special 
 advantages for a few at the expense of the re- 
 mainder. Hence it is altogether deplorable if 
 they arc led to suppose that the cause of " la- 
 bour " is advanced by its obtaining a share of in- 
 equitable gains. The condition of labourers as 
 a whole can be improved only by the increase 
 of their aggregate remuneration. It is true that 
 this aggregate must be made up of the remunera-
 
 CORPORATIONS POSSESSING MONOPOLIES. IO3 
 
 tion of individuals; but it is not true that it can 
 be enlarged by permitting certain individuals to 
 remunerate themselves by appropriating from 
 the common dividend a share out of proportion 
 to their services in creating it. 
 
 On this account the growth of the labour 
 unions must be regarded with some apprehen- 
 sion. They have probably been able in some 
 cases to obtain higher wages from their masters 
 than the services of their members were worth 
 in the market, and if they have accomplished 
 this without depressing the wages of other la- 
 bourers, their success may not have been in 
 conflict with justice. But it is the practice of 
 most of these unions to restrict their member- 
 ship, and to prevent labourers who are not mem- 
 bers from working at their trade. So far as they 
 are successful in this, these excluded workmen 
 are forced into other industries, thus causing in 
 these industries an unnatural supply of labour- 
 ers, whose competition leads to a reduction in 
 the rate of wages. Since it is not easy to recon- 
 cile this result with justice, the members of the 
 unions are naturally tempted to claim that out- 
 side labourers are their inferiors, and they seem 
 very quickly to acquire the jealous and hateful 
 temper of other monopolists. When we con- 
 sider that in Great Britain, where the trade
 
 I04 INDI'STUIAL FREEDOM. 
 
 unions have attained their hij^hcst development, 
 they tlo not comprehend more than a tenth of 
 the lal)ouring class, it is easy to see that they 
 constitute an oligarchy which holds power by 
 a precarious tenure, and which is therefore only 
 too ready to resent criticism and opposition. 
 
 There is nothing surprising, therefore, in the 
 desire expressed by many of the representatives 
 of these unions, that tiic Government should as- 
 sume the control and ownership of their indus- 
 tries. Were they satisfied that their labour re- 
 ceived no higher compensation than that of 
 similar labour in general, they would have no 
 particular inducement to make this compensation 
 a permanent charge on the whole people. Since 
 they desire to accomplish this result, it is reason- 
 able to suppose that they expect in this way to 
 make sure of the continuance of some exclusive 
 privileges, which they may otherwise lose. Un- 
 less they can show that their possession of such 
 privileges is somehow beneficial to those who 
 are excluded from them, they must make their 
 appeal in some other name than that of justice. 
 
 The same criticism applies to the payment 
 by public corporations of wages and salaries 
 higher than are paid for similar service by pri- 
 vate persons. The revenue of these corpora- 
 tions is derived from the income of their citizens.
 
 CORPORATIONS POSSESSING MONOPOLIES. I05 
 
 One is increased by diminishing the other. If 
 the Government pays higher wages, it can not 
 employ so many men as would have been em- 
 ployed with the same fund in private hands; and 
 the diminished capital in private hands must be 
 distributed as wages among a relatively larger 
 number. Government officers and employees 
 are thus favoured at the expense of other work- 
 ers. A privileged class of citizens is created in 
 violation of the principles of our Government as 
 well as those of justice. 
 
 " It is evident from what has just been said 
 that the existence of a class of employees fa- 
 voured by Government arouses envy. The ques- 
 tion is not to be complicated with any assump- 
 tion that the employees of Government are a 
 superior class. In so far as they are superior 
 they are entitled to higher compensation. If 
 their fitness has been determined by competitive 
 examination, they may justly claim preferment 
 over those that are proved unfit. But the com- 
 parison must be made not between the fit and 
 the unfit, but between the fit who get the places 
 and the fit who do not. It is to be expected 
 that the incapable will be envious. Had they 
 sufficient magnanimity not to be envious, they 
 would not be very apt to be incapable. Such 
 virtue would imply ability. Their envy, how-
 
 Io6 INDUSTKIAL FRKKDOM. 
 
 ever, wliilr it may he a serious evil so lonj^f as 
 ai>|)oiiiliHciUs arc made without regard to merit 
 and as rewards for party services, is nothing that 
 needs he considered under tlic competitive sys- 
 tiin. 1 1 is a part of their general discontent 
 with the universe and tlicir disapprobation of 
 the i)rocesses of natural selection. They can not 
 succeed because they do not deserve to succeed; 
 and if we have a system under which desert brings 
 success, we can not rdiiKiuish it because of the 
 complaints of the undeserving, no matter how 
 much wc may pity them. 
 
 " It is otherwise when men arc excluded not 
 because they arc unfit, but because others have 
 crowded in l:)cfore them. We are familiar with 
 the spectacle of a crowd of applicants for every 
 position under Government, and we know that 
 often many of such applicants are unfit for any 
 position. We are not yet familiar with the spec- 
 tacle of a crowd of meritorious applicants; but 
 if the compensation attached to such positions 
 is greater than can be earned elsewhere by like 
 service, this spectacle will infallibly be presented. 
 If this compensation were no more than what 
 could be otherwise earned, the number of office 
 seekers would be diminished until the supply was 
 equal to the demand. But if this is not the 
 case, those who fail to secure office through no
 
 CORPORATIONS POSSESSING MONOPOLIES. lO/ 
 
 fault of their own will naturally be envious. They 
 will be angry at what they properly regard as 
 injustice, and their grievance will have danger- 
 ous consequences. 
 
 " For those who by favour or fortune have 
 secured privileged places will do what all priv- 
 ileged classes have done in the past. They will 
 be apprehensive of losing advantages to which 
 they feel their title is of doubtful justice, and 
 they will combine to protect themselves. This 
 is no speculative peril. The Legislature of New 
 York has more than once responded to combina- 
 tions of this kind with increases of salaries, and 
 such increases have been procured by corrupt 
 means and are available for corrupt purposes. 
 Were the salaries only such as are paid in the 
 competitive market, such corruption would be 
 impossible. Rather than pay assessments, office- 
 holders would run the risk of being removed, 
 considering that they could do as well else- 
 where as in the public service. But if they know 
 that their official pay is greater than they can 
 obtain in private life, the temptation is strong to 
 buy security. And as those who are in will pay 
 to stay in, so those who are out will pay to get 
 in. They will beset the Legislature with their 
 appeals. They will insist upon the creation of 
 new offices and the extension of governmental
 
 io8 iNDrsTKiAi. rKF:i:i)f)M. 
 
 activity. And tlifir opponents will labour under 
 the immense disadvantaj^e of havinj; to defend 
 a system which is indefensible, and to justify 
 what is unjust." * 
 
 Wo have hitherto adopted the popular defi- 
 nition of monoj)oly as consisting in the enjoy- 
 ment of unusually large profits. But, as will be 
 shown later, such profits may be the result of 
 more economical production and superior busi- 
 ness management, in which case they may involve 
 no injustice. We must therefore add to the 
 popular conception the idea of privilege — that is, 
 the possession of advantages which enable those 
 who have them to obtain exceptional gains with- 
 out any equivalent service or sacrifice. Such 
 monopolies may be rudely classified as natural 
 and artificial. What may be called a natural 
 monopoly arises when exclusive privileges 
 come to be possessed by certain individuals as 
 an incidental result of human laws and institu- 
 tions. The laws providing for the acquisition 
 and transfer of property, for instance, may often 
 create a species of monopoly in the ownership 
 of land through the operation of the economic 
 principle of rent. On the other hand, a mo- 
 nopoly produced intentionally may be properly 
 
 * Extracted from an article in the Forum, September, 1S95, en- 
 titled " Municipal Progress and the Living Wage."
 
 CORPORATIONS POSSESSING MONOPOLIES. IO9 
 
 denominated artificial. Such monopolies are de- 
 liberately created by bounties and by customs 
 duties on the importation from abroad of goods of 
 the same nature as those produced at home. To 
 determine what is required by abstract justice, 
 in the case of these artificial monopoHes, is a 
 matter of no Httle difficulty. It is evidently the 
 intention of the Legislature, and presumptively 
 therefore of the majority of the people, to insure 
 exceptional profits to certain classes by restrict- 
 ing the competition to which they would natu- 
 rally be exposed. The acquisition of these profits 
 by such persons is therefore precisely what was 
 in contemplation by the Government, and it is 
 inconsistent for the public to complain of it as 
 unjust. It may indeed be denounced by those 
 who oppose such legislation in general, but, ac- 
 cording to the supposition, public opinion is 
 against them. 
 
 We must therefore conclude that, according 
 to the common standard of morality, the profits 
 of these artificial monopolies are not unjust; and, 
 if they are not unjust, it is absurd to maintain 
 that justice requires those who receive them, 
 whether corporations or individuals, to divide 
 them with their workmen. The latter may in- 
 deed set up some tacit understanding that they 
 should share in these gains, but there is nothing
 
 no INDL'STRIAL FRKIIx )M. 
 
 ill I lie l.iw In justify their claim. It h, and al- 
 ways lias been, the policy of jjioteclivc statutes 
 to suhsidize employers and ncU workmen, the 
 assumption being tliat the benefits arising from 
 this policy were diffused throughout the coun- 
 try, and that if the workmen in the protected 
 industries obtained the ordinary rate of wages 
 they should be content. There may be some 
 points of honour in these cases, as in others aris- 
 ing from the division of spoils; but enough has 
 been said to show that justice is not to be in- 
 voked in such disputes. 
 
 Corporations enjoying natural monopolies are 
 at first sight without defence to the charge of 
 making unjust gains. They can plead no delib- 
 erate legislative sanction for their exactions, for 
 the institutions of which they arc the outgrowth 
 were not established for the purpose of creating 
 exclusive privileges. So far. therefore, as their 
 profits arc in excess of the ordinary returns of 
 capital, and not due to any exceptional ability 
 on the part of their managers, it does not seem 
 possible to deny that they are unjust. Xo evi- 
 dence, however, is forthcoming to show that such 
 corporations exercise any greater control over 
 their workmen than other employers, and in- 
 deed wc have seen reason to suppose that the 
 compensation paid by them will be somewhat
 
 CORPORATIONS POSSESSING MONOPOLIES. Ill 
 
 higher than is customary. Hence, upon the 
 grounds already explained, the particular set of 
 workmen employed by these corporations have 
 no claim to participate in their exceptional 
 profits. Such profits must be regarded as in 
 equity belonging to the whole community, out 
 of whose revenue they are collected, and not to 
 any particular members of that community. The 
 attainment of justice must in such a case consist 
 either in the distribution of these profits among 
 the whole community, or else in their total sup- 
 pression. The corporations should either be 
 subjected to taxation of such an amount as will 
 equal their excessive revenue, or else they should 
 be deprived of the power to secure this excess- 
 ive revenue. 
 
 As a matter of fact, the nature and extent 
 of these excessive gains by corporations are com- 
 monly exaggerated. So far as the ownership 
 of land is concerned, which is regarded by many 
 persons as the greatest of all monopolies, indi- 
 viduals and corporations stand on the same foot- 
 ing. If it is unjust for the latter to own land, 
 it must be for the same reasons unjust for the 
 former; and since we are at present considering 
 only such charges of injustice as apply to cor- 
 porations and not to individuals, we need not 
 dwell on this controverted question. Apart from
 
 112 INDt'STRIAL FREEDOM. 
 
 this monopoly, \vc should tiiul it ditVicult to name 
 many cori)orati(jns that jxjsscss exclusive priv- 
 ileges to any great extent, or at least to any 
 greater extent than individuals. The most con- 
 spicuous monop(jlies in the public view arc the 
 railroads, and their power to charge excessive 
 rates is uncjuestionably due principally to their 
 possession of advantageous sites and routes. But, 
 conceding that the monopoly of railroads is due 
 to other causes, we find on examination that it 
 has been confined within very narrow limits. It 
 is notorious that the rates charged in this coun- 
 try arc much lower than those that prevail else- 
 where, and it is equally notorious that a vast 
 amount of the capital invested in railroads, far 
 from producing excessive profits, actually pro- 
 duces no profit at all. It is true that the figures 
 expressing railroad capitalization are largely fic- 
 titious, but. making allowance for this, it re- 
 mains true that the average returns on the capital 
 actually expended are less than the rate of profit 
 ordinarily expected by individuals. It is true, 
 also, that the wealth of many railroads has very 
 greatly increased through the increase in the gen- 
 eral wealth of the country and the growth of its 
 population. Such increase, it must be remem- 
 bered, has also taken place in the wealth of in- 
 dividuals, and their property in this increase has
 
 CORPORATIONS POSSESSING MONOPOLIES. II 3 
 
 not been assailed by the Legislature. The case 
 is altogether different with railroads. Their 
 profits, in spite of their apparent monopolies, 
 have been continually reduced by legalized com- 
 petitors, their charges have been reduced by stat- 
 ute, and their property lessened by taxation. 
 
 To state the figures that support these ob- 
 servations would be impracticable in an essay 
 of this kind. A single illustration, however, will 
 indicate the character of these figures. Mr. 
 Blackstone, the President of the Chicago and 
 Alton Railroad, recently called attention to the 
 fact that in 1877 all the property in the State 
 of Illinois, except railroads, was assessed for tax- 
 ation at a valuation of about $892,000,000, while 
 in 1895 the valuation was only $753,000,000 — a 
 decrease in nineteen years of almost $140,000,- 
 000, or about 15^ per cent. The property of the 
 railroads in the State was valued at $37,141,000 
 in 1877, and at $79,231,000 in 1895, an increase 
 of 112)2 peJ* cent. It is true that the actual value 
 of the railroads has increased, since their mileage 
 is 47 per cent greater, and their net earnings 40 
 per cent larger; but, on the other hand, it is 
 notorious that the value of other property has 
 also very greatly increased instead of diminish- 
 ing. Were it otherwise, it would be altogether 
 impossible to explain the enormous increase In
 
 114 INDUSTKI.M. FUKi:U(>M. 
 
 the iiuiuhcr of passengers and the amount of 
 frci^lit carrieil. The growth of the city of Chi- 
 cago has hccii procUgious, hut property appears 
 to I)c assessed there at a nominal figure. It 
 woultl he far from increihhlc that hetween 1S77 
 and 1895 property in lUinois increased in actual 
 value by an amount several times greater than 
 its assessed valuation. 
 
 The i)roportion of taxes borne by the rail- 
 roads is therefore far greater than formerly, and 
 in the year 1894 it amounted to about jj)^ i)er 
 cent of the total sum of the dividends earned 
 in Illinois by the railroads operating there. 
 From the report of the railroad commissioners 
 of that State for 1894, according to Mr. Black- 
 stone's statement, the railroads therein earned 
 $i.7JO.ooo less than their fixed charges, while 
 their debit balances were increased by $12,978,- 
 000. They transported over 83.000.000 passen- 
 gers during that year, the average journey being 
 about 27 miles, and the average fare about S\ 
 cents less than the average cost of carriage. 
 Shortly after making this report the Railroad 
 Commission issued an order for the reduction of 
 the rates on freight. Even if these figures are 
 not altogether accurate, it is impossible to main- 
 tain that they indicate the existence of any op- 
 pressive railroad monopoly. They rather indi-
 
 CORPORATIONS POSSESSING MONOPOLIES. II 5 
 
 cate the confiscation of railroad property, and 
 there seems to be much reason in Mr. Black- 
 stone's complaint that " the people are as confi- 
 dent that they have the right to demand and 
 enforce railway service upon such terms as may 
 be in accordance with their will and pleasure as 
 ever men were of their right to demand and en- 
 force services on like terms from persons who 
 were subject to their power." This may fairly be 
 characterized as the obverse side of " industrial 
 slavery." 
 
 Similar complaints are heard from other 
 States; but it is not necessary to accumulate 
 evidence on this point. Those who examine the 
 returns of railways find many suspensions of divi- 
 dends, great decreases of revenue, frequent re- 
 ductions of operating expenses; but they seldom 
 find any reduction of taxes. These remain the 
 same, or are increased, no matter how much the 
 value of the property decHnes. The aggregate 
 amount of these taxes is very large; but the 
 newspaper writers, who furnish the common peo- 
 ple with all their information, seldom allude to 
 it. They are more inclined to raise the cry that 
 owners of railroad stocks escape taxation, al- 
 though they should know that the property from 
 which such stockholders receive their income fre- 
 quently pays larger amounts in taxes than in divi-
 
 Il6 INOUSTUIAL I-RKKDOM. 
 
 (Ifiuls, and prohahly, as a rule, i)ays at a higher 
 rate than property owned by indivi(kials. 
 
 While these complaints ol unjust taxation 
 are heyond (juestion to a great extent well 
 founded, they fail to make allowance for a fact 
 of much importance. The deplorable condition 
 of these railways is primarily due to their own 
 contests. In other words, so far from enjoying 
 a monopoly, they are the victims of excessive 
 competition. In proportion to our population, 
 we have from four to six times as many miles of 
 railroad as any European state. The charges 
 for transportation on the foreign railways are 
 generally at least one half more than in this coun- 
 try, and frequently double- what they are here. 
 At the same time, the wages paid are probably 
 little more, on the average, than half what are 
 paid by our roads. 
 
 Under such circumstances it is evident that 
 investors in American railroads can hardly ex- 
 pect the ordinary rate of profit. Too much rail- 
 road has been built for the business to be done. 
 The legislatures, it is true, have prescribed low 
 rates, but the railroad managers, in their fierce 
 competition for traffic, had set them the exam- 
 ple. We are not at present concerned to deter- 
 mine what* was required by justice under such 
 conditions, but wc can not fail to be struck with
 
 CORPORATIONS POSSESSING MONOPOLIES. HJ 
 
 the severity of the check which competition ex- 
 ercises on monopoly. It may be laid down as a 
 general rule that if the profits of a natural mo- 
 nopoly are very excessive, they will be of brief 
 duration. The amount of capital ready for in- 
 vestment in new enterprises is now so great as 
 to be a constant menace to the profits of those 
 already established. The progress of invention 
 is so rapid, and the improvement and economies 
 of production are so extensive, as to make ex- 
 isting machinery continually obsolete. It fol- 
 lows from this that in considering whether the 
 profits of any enterprise are excessive, we must 
 take into view their probable duration. In many 
 cases we shall find that after a short period of 
 large profits the enterprise has ceased to make 
 any at all, and has finally been abandoned, at the 
 loss of nearly the whole capital invested. ^Vhile 
 this result seldom takes place with a railroad, 
 nothing is more common than for the original 
 stockholders to lose all their investment, or to 
 have their profits cut down to a very insignifi- 
 cant figure. Hence it seems reasonable that 
 those who are willing to assume the risk of in- 
 vesting their wealth in such a way as to be inex- 
 tricable — of transforming it into embankments 
 and tunnels and bridges and excavations, which 
 are essentially permanent and admit of no re-
 
 llS INDUSTRIAI- I'RKKDOM. 
 
 transformation — that sucli investors should be al- 
 lowed to receive sufficient profits to insure them 
 ai^'ainst their prospective losses. 
 
 The elevated railway in the city of Xew York 
 affords a very striking' illustration of these prin- 
 ciples. This railway is a favourite subject of de- 
 nunciation as a monopoly by some of the writers 
 for the newspaper press, because it pays perhaps 
 nearly double the ordinary rate of interest on the 
 capital actually devoted to its construction. 
 These writers seem to ignore the difficulties that 
 attended the inception of this enterprise. It was 
 in the first place a comi)lete failure, and those 
 who had put their money in it were ridiculed for 
 their folly. Certainly no prudent investor would 
 have had anything to do with it if he had been 
 told that he should receive in case of success 
 only the ordinary rate of interest, while he must 
 assume the whole risk of loss. Considering the 
 novelty of the enterprise, the violent opposition 
 that it was sure to encounter, and the legal diffi- 
 culties that were to be expected, twice the or- 
 dinary rate of interest might very well have been 
 regarded as an insufficient inducement to venture 
 into it. 
 
 Although this rate of compensation was per- 
 haps as much as was just, in view of the risk 
 originally incurred in this enterprise, it may be
 
 CORPORATIONS POSSESSING MONOPOLIES. 1 19 
 
 argued that it is altogether inadequate if we con- 
 sider the perils of its future. Its profits have 
 been already much reduced by the competition 
 of surface cars propelled by cables, and if the city 
 of New York should construct an additional sys- 
 tem of rapid transit the elevated railway might 
 not be able to earn its operating expenses. In 
 view of this contingency, it seems impossible to 
 deny the justice of the profits made by the road. 
 Such profits must be regarded at present largely 
 as a sinking or insurance fund. They may even- 
 tually prove to be no more than sufficient to 
 replace the original investment after allowing the 
 ordinary rate of interest. Should they prove to 
 be more than enough for this, they may yet not 
 exceed a fair compensation for the uneasiness 
 and apprehension attending such an investment; 
 for men demand compensation in the rate of 
 profit for the dread of loss, even if it does not 
 actually occur. Unless they are to be recom- 
 pensed for their anxiety concerning precarious 
 investments, they will certainly confine them- 
 selves to those which are free from risk — which 
 is but another way of saying that no speculative 
 ventures will be undertaken unless the public is 
 willing to recognise the justice of exceptionally 
 great returns. At least it w^ould be true that 
 if the public really refused to take that position, 
 9
 
 I20 INDUSTRIAL FRKEDOM. 
 
 speculative ventures would become on that ac- 
 count nil the more speculative. They would 
 nrrd the prospect of very j^reat profits to make 
 them attractive, and would therefore tend all the 
 more to fall into the hands of reckless and un- 
 scrupulous men. The example of the Brooklyn 
 elevated roads, which have been nearly ruined 
 by the competition arising from the use of elec- 
 tric motors by the surface lines, is extremely 
 instructive upon these points. 
 
 i'.nt whatever doubts may be entertained con- 
 ccrnitii; the monopoly supposed to be enjoyed 
 by the elevated railway, there can be no question 
 about the efTect of this railway in increasing the 
 monopoly enjoyed by landlords. The immediate 
 efTect of the building of this road was to make 
 a very large tract of land in the city of New 
 York available for residences. This land, owing 
 to its inaccessibility, had previously possessed lit- 
 tle value; but so soon as it was reached by the 
 railway its price advanced at a prodigious rate, and 
 has since been maintained at a very high figure. 
 The owners of this land, therefore, found them- 
 selves at once very greatly enriched by the opera- 
 tion of a cause with which they had no connection. 
 Without the least efTort on their part they found 
 their land suddenly worth twice or thrice, or even 
 four times, what it had been worth before.
 
 CORPORATIONS POSSESSING MONOPOLIES. 121 
 
 The public, however, hears very little con- 
 cerning the injustice of this monopolistic gain, 
 although it is from every point of view more re- 
 markable than that of the elevated railway. The 
 owners of the land affected certainly made much 
 greater profits than the men who constructed 
 the road, and they made them, too, without any 
 risk to themselves. Nor do they suffer any ap- 
 prehension concerning the loss of these profits 
 in the future. Should the elevated railway be 
 hereafter unable to continue its service, it will 
 only be because some more convenient method 
 of travel has taken its place. Whatever may 
 happen, therefore, the owners of these lands are 
 not likely to be unfavourably affected. They 
 seem thus to occupy the fortunate position of 
 enjoying the advantages of a lucrative and per- 
 manent monopoly, without any effort, or ex- 
 pense, or risk on their part, while the elevated 
 railway secured its uncertain privileges at great 
 cost and maintains them with great difficulty. 
 In this case the corporation, which was really 
 the means of conferring an enormous benefit on 
 the public as well as the landlords, encounters 
 the greatest odium for making profits that can 
 not be called, on the whole, immoderate; while 
 private persons, reaping where others sowed, en- 
 joy their gains without reproach.
 
 122 INDUSTRIAL I KIKDnM. 
 
 It may he .'kMcmI that some of these persons 
 wt-rr only prcs c-iittd hy a slraiiic<l decision lA the 
 ("oiiit of Appeals from j;ctlinj; damages from the 
 elevated roads for the dilTerence hetween the value 
 of their property and the value which it wcnild 
 have had if the road had heen of)erated in a purely 
 henelkial way — i. e., without any detrimental in- 
 lluences. Jt is hard to resist the conclusion that 
 the monopoly enjoyed by these landlords is quite 
 as unjust as that of the railroads; in which case 
 the employees of the railroads have certainly no 
 better claim to higher wages than the employees 
 of the private persons whom the railroads have 
 incidentally enriched.
 
 CHAPTER IX. 
 
 THE PARTNERSHIP THEORY. 
 
 Moved with a desire to mitigate the loss and 
 suffering occasioned by controversies between 
 employers and workmen, philanthropists have la- 
 boured to develop systems of co-operation and 
 profit sharing. The theory of these systems is 
 that the employers and labourers engaged in a 
 particular enterprise are jointly interested in mak- 
 ing it productive. They are practically in part- 
 nership, and some better method of dividing the 
 profits than the higgling of the market ought 
 to prevail. There is so much friction in bar- 
 gaining about wages, so much time lost in strikes, 
 and so much waste and damage from mutual 
 hatred and jealousy, where there should be peace 
 and concord, that these projects for industrial 
 partnership have been eagerly welcomed, and 
 have in some instances attained a degree of suc- 
 cess, although not the degree hoped for by their 
 advocates. That they have attained no greater 
 success appears to have been due to a misunder- 
 standing of the partnership relation. 
 
 123
 
 124 INDUSTRIAL FREEDOM. 
 
 The cssciUial features of a partnershij) arc 
 joint ownersliip of profits and individual liability 
 fur jiartiiersliii) ohlij^ations. These arc the fea- 
 tures recognised by the law, and they imply, as 
 a rule, that the compensation of the partners 
 is to be paid out of accruing profits. This also 
 implies that cipital is contribuied to the firm 
 by its members, or, at least, that capital is pos- 
 sessed by those who do not contribute any. It 
 is not uncommon for partnership agreements to 
 provide that one member shall put in not money, 
 but skill and labour. I'ut such a partner has to 
 live during the period which must elapse before 
 the profits of the enterprise are realized; he must 
 live even if there are never any profits realized. 
 Tiie sum that he consumes for this purpose, 
 whether he owns it or borrows it, is really in- 
 vested in the partnership. If he were not en- 
 gaged in the partnership he would have this 
 sum to invest elsewhere. 
 
 Sometimes a partner is admitted under an 
 agreement that he shall not only contribute no 
 money, but shall also draw a regular sum from 
 the start. But such a partner is generally in pos- 
 session of special skill, or some kind of advan- 
 tage which is worth paying for. and which is 
 therefore practically capital. He is probably a 
 successful manager, or can procure customers, or
 
 THE PARTNERSHIP THEORY. 12$ 
 
 has technical training or knowledge. Something 
 of the kind he must have, or there would be no 
 motive for promising him a part of the profits 
 in addition to compensation for his labour. If 
 this compensation is the full value of his service, 
 why should he participate in the profit? If it 
 is less than his service is worth, then he con- 
 tributes to the partnership a capital measured by 
 the difference. 
 
 Whenever two or more labourers combine to 
 produce or distribute goods they necessarily em- 
 ploy some capital. They must own some tools 
 and appHances, they must rent a place of busi- 
 ness, or a workshop, and purchase some mate- 
 rials; and it makes no difference whether this is 
 done with their own or with borrowed capital. 
 Whether owned or borrowed, the capital must 
 belong practically to the participants in the en- 
 terprise, and so long as this is true a real part- 
 nership exists among them. Some of the first 
 English co-operative stores were partnerships; a 
 few men made up a joint fund, contributed their 
 own labour, and divided the profits. But most 
 of these stores have long ceased to maintain 
 this relation. They hire their employees for 
 wages, just like other concerns, and do not share 
 their profits with them. If the title " co-opera- 
 tive " implies division of profits between employ-
 
 126 INDUSTRIAL FRKEDOM. 
 
 crs and cMiiploycd, these English concerns have 
 no rij^lil to the title. And there are very few 
 concerns anywhere that have a rij^ht to it. 
 
 There are many reasons why this should be so, 
 one of whicli, however, is (|uite sufficient to pro- 
 (hice the effect. The day for the most effective 
 einploynunt of small capitals is past, and it can 
 not return while the rate of profit is so low as 
 it is at present. The possessors of small capi- 
 tals must aggregate their funds; but in the case 
 of labourers, their individual funds are so small 
 that it takes a great many of them to make an 
 elTective aggregate. Now there can not be a 
 partnership with a great many partners; it will 
 not work. There are too many men to be con- 
 sulted and too many chances for differences of 
 opinion. Even when there are not more than 
 three or four partners there has to be some spe- 
 cialization; one of them has sole charge of one 
 ])ranch of the business, and one of another. The 
 greater the number of partners the greater the 
 chance of death; and if one of the partners 
 dies it often makes a great deal of trouble. It 
 dissolves the partnership and brings in the law- 
 yers, and it may end the business. Hence part- 
 nerships constantly give place to corporations; 
 but the stockholders in a corporation are not 
 partners. They can elect a committee to carry
 
 THE PARTNERSHIP THEORY. 12/ 
 
 on their business, but they can not carry it on 
 themselves. They can not even control their 
 committee, the trustees or directors, as they are 
 called, except within narrow Hmits; they can 
 only turn them out at the end of their term of 
 office and replace them with others. Nor can 
 they withdraw their capital, unless they can find 
 some one to buy their stock; the capital belongs 
 to the corporation, and continues to belong to it 
 until it is dissolved. On the other hand, the 
 stockholders' liability is limited. They may lose 
 what they have invested in the corporation, but 
 they can not be held for its debts. 
 
 It may be said that these distinctions are im- 
 material; that labourers may participate in 
 profits whether they are called stockholders or 
 partners. No doubt, where labourers are em- 
 ployed by a corporation, they are at liberty to 
 buy shares of its stock, and the managers of most 
 corporations would be very glad to have them 
 do so. But they would participate in profits on 
 the same basis as other investors of capital. Un- 
 less they owned a major part of the stock they 
 could exercise no control of the management of 
 the business; and it could seldom happen that 
 they, would own a controlling interest. Were 
 they able to do so, they would generally have 
 been graduated from the class of labourers into
 
 128 INDUSTRIAL FRKKDOM. 
 
 that (»f capitalists. They woulrl not know 
 whflhiT it would l)c most to their interest to 
 lower wages or raise them; it would be like taking 
 money out of one pocket and putting it into the 
 other. Indeed, the most extreme confusion 
 would l)c introduced into our clas.sifications. 
 There would be a majority of labourers who were 
 also employers and capitalists, employing a mi- 
 nority who were neither, and who, of course, 
 would not participate in the profits. 
 
 It is true that a number of labourers might 
 iorm a joint-stock company and employ only 
 themselves. Being both labourers and capital- 
 ists, they would get the whole product, whether 
 it were called wages or profits. T.ut the fact 
 that little has been done in this direction in- 
 dicates that it results in no economic gain. La- 
 bourers have generally found that they fared 
 better if their wages were paid out of other 
 people's capital than out of their own. They 
 have seldom been able to secure the prudent and 
 sagacious management that is essential to busi- 
 ness success, and they have lost more than they 
 have gained by most of their attempts at co- 
 operation. It is probable that the difficulty of 
 maintaining proper subordination will always be 
 fatal. The men will feel that it is their own 
 property that is dealt with, and they will be un-
 
 THE PARTNERSHIP THEORY. 1 29 
 
 der continual temptation to interfere with the 
 management. The managers, being under con- 
 stant supervision and criticism, will be timid. 
 They will want to satisfy the men, and they will 
 not feel disposed to insist on their own judg- 
 ment when the men are opposed to it. They 
 will not be able to reduce wages when they think 
 them too high, or to limit production when they 
 think the market is overstocked. They will be 
 like the Athenian generals who had to fight bat- 
 tles under the supervision of a committee of the 
 citizens: they will be more anxious about the 
 movements of their friends than of their enemies; 
 they will look backward instead of forward. 
 
 Some profit-sharing schemes have been per- 
 haps less open to these objections, but they have 
 encountered many difificulties. In these schemes 
 the employers have agreed to pay the men a fixed 
 rate of wages, and in addition a " bonus " out of 
 whatever profits were made beyond a certain per 
 cent on the capital stock. The theory has been 
 that in this way the men would be led to take 
 a more positive interest in increasing the profits 
 of the business, and that, by reason of their 
 greater industry and better spirit, these profits 
 would be materially enhanced. To a certain ex- 
 tent this idea has been realized, but not to an 
 extent sufficient to encourage us to believe that
 
 130 INDt'STklAI. FREEDOM. 
 
 its fiiUirc is hri^^lit with j)r()iiiisc. The additional 
 pnxhiclioii docs not appear to he lar^c enouj^h 
 to allow of a (hvidend of any j^reat size, and it 
 has not hecn found practicahlc to determine how 
 far increased profits were due to better service 
 on the part of the men, and how far to other 
 causes. When tlie introduction of the plan has 
 occurred at the hcpinniuf^ of a period of j^eneral 
 prosperity, the men have been naturally inclined 
 to refer increased profits to their own greater 
 exertions, and to think that their bonus was in- 
 sufficient, while the masters have laid stress on 
 the potency of other causes. On the other 
 hand, when profits have fallen off and there is no 
 bonus, the men arc apt to reason that they are 
 rendering greater service and getting only or- 
 dinary wages. Such misunderstandings may be 
 removed, but at an expenditure of time and pa- 
 tience incommensurate with the gain. 
 
 For we must bear it constantly in mind that 
 prosperity comes by fits and starts. Xo concern 
 can regularly pay out all the profits of each year 
 in the shape of dividends or bonus. There will 
 come lean years, and successions of lean years, 
 and a surplus is extremely important as a pro- 
 tection against many disastrous possibilities. 
 There come times when almost every concern 
 needs to borrow and when every one is cau-
 
 THE PARTNERSHIP THEORY. I3I 
 
 tious about lending. The company that has 
 a surplus has money offered to it on its own 
 terms. The company that has no surplus must 
 pay high rates and furnish security; it may not be 
 able to get money on any terms. But these con- 
 siderations are not easily explained to a mass of 
 imperfectly educated labourers. They are con- 
 siderations which a great many of their employ- 
 ers do not sufficiently attend to, although the 
 consequences of neglecting them may be ruinous. 
 Even where the managers of a business are dis- 
 posed to maintain a surplus they are liable to 
 be thwarted by their stockholders, who are 
 clamorous for dividends; and their employees 
 would be even more difficult to pacify. In short, 
 the bickerings over wages with which we are 
 now plagued would be stayed only to give place 
 to disputes about dividends. Unless work- 
 men cease to regard their masters with sus- 
 picion and come to trust both their honesty 
 and their ability, they will be, and they have 
 been found to be, dissatisfied with their masters' 
 management of profit-sharing enterprises, while 
 incompetent to improve upon it. 
 
 It is evident that such schemes have little 
 to recommend them unless it be assumed that 
 they cause the labourers to become more effi- 
 cient without increasing their sacrifices. We
 
 132 INDUSTRIAL FKnF.POM. 
 
 iinist hold that if they iiu-rt-ascwl their toil they 
 wtiiild j^a't hi^dicr vva^es uikIct the onhnary sys- 
 tiiii (if coinptMisation, and the system of profit 
 shariii}^^ wouhl only be a cumbrous mode of pay- 
 in}^ the increase. lUit it is (|uile doubtful if it 
 is desirable that labourers should work harder 
 than thiy do now. Philanthropists are inclined 
 to favour shortcninj^ rather than lenj^theninj:^ the 
 hours of labour. The strain of steady work un- 
 der the stimulus of incessant machinery is now 
 frc(iiicntly more severe than is wholesome. 
 Some workmen arc inclined to shirk, and under 
 a proflt-sharintj^ system their fellows would, it has 
 been supposed, compel them to work more stead- 
 ily; but the possible ^ain has been found to be 
 hardly sufficient to induce men to undertake this 
 invidious ofTice. The fellow-feeling of workmen 
 is too inveterate to give place so easily to the 
 sentiments natural to employers; nor are the lazy 
 j)rone to become industrious for any slight stim- 
 ulus. There is, it is true, a possible saving from 
 the mere improvement in the attitude of the 
 men; they can make a considerable ditTcrence 
 in the outgo, if they choose, without doing any 
 more work. Whatever can be saved in this way 
 is pure gain from every point of view; but, after 
 all, good workmen generally mean to give a fair 
 day's work for a fair day's wages, and in a well-
 
 THE PARTNERSHIP THEORY. 133 
 
 conducted business employers know how much 
 ought to be accomplished for a given expenditure 
 of labour and material. We should not unduly 
 minimize the desirability of promoting the feel- 
 ings of loyalty and fidelity among workmen; but 
 the experiments with profit sharing as a motive, 
 in spite of some notable successes, have been 
 hitherto disappointing. 
 
 If there is no considerable margin of this 
 kind for saving, it is doubtful if profit-sharing 
 schemes will ever be successful. The difficulty 
 of operating them would outweigh their benefits. 
 In most cases there would properly be no surplus 
 profits to divide. The exceptional gains of good 
 years would be no more than enough to balance 
 the exceptional losses of bad years. A concern 
 that distributed all such gains as dividends, either 
 to labourers or stockholders, would, as we have 
 seen, in most cases become involved. On the 
 other hand, a concern that accumulates its profits 
 really insures steady wages to its labourers. When 
 other concerns are obliged to close their works 
 and discharge their workmen, this concern can 
 go on piling up goods, for which there is no 
 present market, rather than interrupt the con- 
 tinuity of its business. Its workmen thus receive 
 somewhat more than ordinary wages. Their 
 share of the profits of good years is held for them,
 
 134 INDUSTRIAL FRMKDOM. 
 
 ;iinl jiaifl to tluiii in bad years, in the shape of 
 waf^cs wliiili tluir l;il)()iir would not elsewhere 
 command. If there is any reduction of force at 
 such times, it is the undcscrvinj^ that j^o first. 
 Really faithful and industrious men are only dis- 
 charj^ed in the last extremity, and their reten- 
 tion is a further means of giving them a share 
 in past profits. Thus a wise accumulation hy 
 the managers of an enterprise practically in- 
 creases the compensation of the labourers en- 
 gaged in it by giving them work when labourers 
 elsewhere arc idle, and by rewarding the best 
 among them for their former fidelity. 
 
 There is, however, a fundamental objection 
 to the theory that the labourers in any particu- 
 lar enterprise are. or should be. in partnership 
 with their employers. It is essential to the part- 
 nership idea that losses are to be shared as well 
 as profits, and we are not at liberty to assume 
 that it is for the best interests of the labourers 
 that tills idea should be realized. Tf we review 
 the history of manufactures and trade in any 
 community, we can not fail to be appalled at the 
 number of failures which have occurred. It may 
 Mcll be doubted if the average duration of the 
 prosperity of business enterprises is equal to the 
 average duration of human life. The graveyards 
 of these enterprises arc not so conspicuous as
 
 THE PARTNERSHIP THEORY. 135 
 
 those of mankind, although the spectacle of 
 abandoned mills and crumbling foundations is 
 sadly common. Yet these graveyards exist in 
 the reports of commercial agencies and in 
 the records of the courts of insolvency, and their 
 extent is a melancholy commentary on the limits 
 of business sagacity. A shrewd and industrious 
 man builds up a successful undertaking, and it is 
 sometimes so fortunate as to outlast his day. 
 There may be a succession of able managers in 
 a business, just as there may be a succession of 
 able kings in a government; but it does not 
 often happen. Too often the sons of a capable 
 business man are incapable; they succeed to the 
 control when everything is running smoothly, 
 and they have never learned how to cope with 
 the difificulties which their father surmounted, 
 and which they think, if they think at all about 
 it, will never recur. But they will recur. The 
 conditions of business change incessantly, and 
 in these days of rapid invention and extended 
 communication they often change violently. 
 Unless manufacturers are on the watch for the 
 latest improvements in machinery they suddenly 
 find that more alert competitors are underselling 
 them, and they may be ruined before they 
 know it. 
 
 The fluctuations in the prices of raw ma-
 
 1}C) INDl'STRIAI. I KKI.DO.M. 
 
 tcrials arc very ^rcat, and they arc exceedingly 
 (lifriciili to prognosticate. They frctjuently de- 
 pend on the machinations of a few powerful men; 
 sometimes on the will of one very |)fnverful man. 
 'riicrc may he very suhstantial reasons for ex- 
 Itictin}^^ l)riccs to advance, and the manaj^er of 
 a husiness may think it necessary to huy larj^cly 
 for fear he may have to pay higher prices later 
 on. lUit secret or unperceived causes may be 
 in operation, and the price falls instead of rising, 
 and thus the manager who thought he was pru- 
 dent, and would have been praised for his sagac- 
 ity by every one had the issue been difTerent, fnvls 
 that he has incurred a disastrous loss, and is de- 
 nounced as a reckless speculator. 
 
 Sometimes there are several able partners, 
 and they all make fortunes. Eventually they 
 die. and their executors or trustees come into 
 control of their estates. But it is seldom the 
 case that they can continue the business of the 
 decedents. They may not know anything about 
 it, and if they try to retain the management 
 they are very likely to wreck it. If they employ 
 the right men the business may continue to suc- 
 ceed; but they frequently find out that they have 
 not employed the right men, and then it is too 
 late to extricate themselves. 
 
 There are reasons, which I need not dwell
 
 THE PARTNERSHIP THEORY. 13/ 
 
 upon, why corporations may endure longer than 
 private enterprises. The old directors may be 
 sagacious enough to recognise that there must 
 be a constant infusion of new blood if the vitality 
 of the concern is to be kept up, and may take 
 care to fill up their board with young men of 
 proved capacity. But if they neglect this there 
 is great probability of trouble. The business 
 gets into a rut, and those who are really most 
 interested in it can not do anything to make 
 things better. They can not take any active 
 part in the management, because they do not 
 understand it, and they have to employ mana- 
 gers who are interested only to the extent of 
 their salaries. Gradually the profits diminish, 
 and the surplus disappears. Then resort is had 
 to borrowing, and so long as business is good 
 there may be a little spurt under the influence 
 of this stimulus. But when bad times come 
 credit is restricted, and the charges for interest 
 are not earned and can not be met. Then 
 comes the discovery of the dry rot, and the 
 stockholders wake up to the knowledge that 
 their investment has disappeared. 
 
 The moral of this is plain enough. As we 
 observed before, wise people do not put all their 
 eggs in one basket. Unless they are personally 
 familiar with the manner in which an enterprise
 
 138 INDUSTRIAL I'RKF.DDM. 
 
 is inannj^cd, they arc careful not to have in it 
 more money than they can afford to lose. They 
 scatter I heir investments, and when they observe 
 si^Mis of had nianafi;ement and decay in any 
 concern they withdraw from it betimes. But 
 or(Hnary hibourers are entirely incapable of the 
 exercise of such discretion. They have no idea 
 of the extent of tlicir employers' obligations; 
 they undoubtedly, as a class, exaggerate their 
 employers' resources. In the case of corpora- 
 tions especially, many workmen apparently 
 suppose that the wages paid are fixed by the arbi- 
 trary volition of the managers. They may grad- 
 ually become aware of the fact that their employ- 
 ers are short of money, and the more astute 
 among them may suspect the possibility of a col- 
 lapse before it occurs; but by the time they 
 become suspicious affairs are likely to be in such 
 a state that no one who has any money in the 
 business can get it out. He can not " unload " 
 on any one. because every one knows what is 
 likely to happen. 
 
 Hence we may lay it down almost as a car- 
 dinal rule that it is not prudent for a labourer 
 to invest all his savings in the business of his 
 employer. A portion of them may perhaps be 
 so invested, provided the conditions are made 
 such that it can be withdrawn, or that it can
 
 THE PARTNERSHIP THEORY. 139 
 
 be secured by some kind of preference in the pay- 
 ment of debts; but, as a general rule, experi- 
 ence indicates that labourers fare best either 
 when they employ their earnings in some invest- 
 ment that is under their own control, such as 
 land, or when they scatter them in a number of 
 investments. This is practically what is done 
 when they deposit them in the savings banks; 
 for it is an elementary maxim in the management 
 of these institutions that the amount of their 
 funds invested in any single security or class of 
 securities should be small. In nearly every case 
 where these banks have failed in recent years it 
 has been due to a disregard of this principle. 
 The gratifying fact that these failures have been 
 so few is in like manner explained by its ob- 
 servance. 
 
 It is of vital importance to keep in mind the 
 fact that profits are the result of the previous 
 expenditure of wages. Wages are paid out of 
 wealth already existing; profits are to be made 
 out of wealth created by spending pre-existing 
 wealth. Were it otherwise, were labourers re- 
 munerated out of the things they are at any given 
 time producing, they would not need to hire 
 out. The ploughman necessarily consumes his 
 daily bread; but it is made of the wheat that 
 grew last year, not of that which is expected
 
 I40 INDUSTRFAI, IK IlI.DONf . 
 
 to prow ill the ficM tliat he is plouphinp. There 
 may luvtr ho any wheat there; frost, or flood, 
 or hhj^ht, or accident, may annihihite it before 
 the time of harvest. Nevertheless he is suppHcd 
 with bread; it is advanced out of capital with 
 the hope that it will be more than repaid in the 
 future. The recompense of the labourer is as- 
 sured; that of the emjjloycr is contingent. Since 
 the labourer does not share losses, he is not in 
 partnership with his employer, and the employ- 
 er's profits must be sufTicient to insure him 
 ai^ainst the risk of loss which he must bear 
 alone. 
 
 While labourers and employers are not part- 
 ners in the ordinary sense, they are in a larger 
 sense. They arc interested primarily in the par- 
 ticular enterprise that brings them together; but 
 they are more interested in the general welfare. 
 If the community at large is not prosperous, in- 
 di\idua] enterprises will be generally unprosper- 
 ous. Hence the labourers and employers of the 
 whole country are in a kind of universal partner- 
 ship, in which all that they have is invested. In 
 the interest of both classes this truth deser\'es to 
 be emphasized. Our legislators are continually 
 engaged with schemes intended to benefit this 
 interest or that at the expense of the whole body 
 of citizens. As a general thing the representa-
 
 THE PARTNERSHIP THEORY. I4I 
 
 lives of one class are ready to combine with those 
 of other classes, sacrificing something with the 
 hope of gaining more. But this selfish policy 
 often overreaches itself. Such burdens are as- 
 sumed by those who secure favours that their 
 success proves disappointing. The general bur- 
 den laid on society hampers and impoverishes it, 
 and every branch of business suffers, because 
 some have endeavoured to thrive at the expense 
 of the rest. 
 
 The French Revolution was the result of such 
 a policy as this, carried to an extreme and long 
 persisted in. Every one tried to secure some 
 special favour or immunity, and eventually the 
 whole framework of society collapsed under the 
 weight of its own materials. All genuine 
 progress in government has been attained by 
 reversing this policy. Reformers have insisted 
 that if special favours granted by Government 
 were withdrawn there would be such a stimulus 
 to the general prosperity that the special inter- 
 ests would gain more than they lost; and so it 
 has proved. The classical instance of this is, of 
 course, the repeal of the corn laws in England, 
 which the landlords declared and believed would 
 be their ruin, but which actually increased their 
 wealth to an extent which astonished not only 
 them but everybody else.
 
 l.\2 INDUSTRIAL FKKKUOM. 
 
 Ill a cnuiifry governed hy universal sufTragc 
 it is peculiarly important that the community 
 of interests of all classes should he recognised. 
 Since the class of labourers is the largest of all, 
 it would be in their power, if they could learn 
 to act in combination, to adopt measures in- 
 tended to benefit thcni as a class at the expense 
 of other classes. Demagogues are constantly 
 advertising measures purporting to be of this 
 character, and the timidity of legislators permits 
 many of them to become laws. But we are quite 
 warranted by experience in asserting that if la- 
 bourers were to unite in support of such a policy 
 they would do themselves, as well as the coun- 
 try, great injury. They would not be very likely 
 to succeed in devising a practicable scheme in 
 harmony with this policy; but the policy itself 
 is essentially pernicious. No great reform has 
 ever been accomplished by granting favours to 
 a class, because the motive for asking such fa- 
 vours is essentially evil and selfish. On the con- 
 trary, all great refomis have consisted in the 
 revocation of privileges enjoyed by particular 
 classes, and they have owed their success to the 
 generous and unselfish feelings to which they ap- 
 pealed. It is to face in the wrong direction for 
 labourers to demand the creation of privileges 
 rather than their abolition; to insist on class leg-
 
 THE PARTNERSHIP THEORY. I43 
 
 islation instead of legislation for the general wel- 
 fare. 
 
 Paradoxical as it may sound, we may lay 
 down the principle that it is easier for the com- 
 mon people to judge what is for the welfare of 
 the community in general than what is required 
 for the prosperity of the particular industries in 
 which they are engaged. They are quite com- 
 petent to decide whether it is more advantageous 
 to have the friendship of a kindred people, with 
 whom our relations of every sort are of the most 
 intimate kind, and with whom we have a trade 
 of a thousand millions a year, or to have that of 
 an alien people, whom most of us know nothing 
 about, with whom we have scarcely any connec- 
 tion, and whose commerce is insignificant. They 
 are equally competent to decide whether, in view 
 of the manner in which public money is spent, it 
 is wiser to increase expenditure and taxation or 
 to reduce them. Nor are they less competent 
 to decide whether the general welfare will be pro- 
 moted by legislation that frightens those who 
 possess capital and leads them to withdraw it 
 from business, or that encourages them to be- 
 lieve that if they lend their money they will get 
 it back again. 
 
 These are the matters that require decision 
 by Government, and they are really very simple
 
 144 INDUSTRIAL FRF.EDOM. 
 
 matters. They arc larpdy moral questions, and 
 rr(|iiirc only the exercise of ordinary courtesy, 
 sincerity, and honesty for tiieir solution. And 
 on their proper solution the prosperity of labour- 
 ing men depends far more than on any schemes 
 of profit sharing or compulsory increase of wages. 
 Such a solution would in a short period result 
 in the creation of new wealth sufficient not only 
 to increase the wages fund more than it could 
 possibly be increased by any legislative device, 
 but also to maintain or even enlarge the present 
 rate of profit. 
 
 We may sum up the matter by saying that 
 labourers will best promote their own interest by 
 struggling to promote the general interest. The 
 influences that promote the general welfare are 
 of a large, simple, and universal character; they 
 are capable of comprehension by ordinary people. 
 Those that afifect the prosperity of a particular 
 enterprise or interest are frequently special, com- 
 plicated, and technical. They require not only 
 peculiar training, but also peculiar talent for their 
 comprehension. Those who comprehend them 
 seem to do so by a kind of business intuition; 
 they are often unable to give correct reasons for 
 their correct judgment, and they could not act 
 with the necessary promptness and decision if 
 they had to explain their motives to their la-
 
 THE PARTNERSHIP THEORY. 145 
 
 bourers or their representatives. Even as it is, 
 labourers run the risk of losing by the failure 
 of their employers. They may be thrown out of 
 work; they may have to seek new employments. 
 To this extent they are now in partnership with 
 their employers, and it is a sufificient extent. 
 They receive their wages so long as the business 
 continues, perhaps long after the business has 
 ceased to be profitable. Their savings are, on 
 the whole, better placed where they are more 
 secure than they can be in any single investment, 
 and where there is little danger of their being 
 w^holly lost, even if the rate of interest seems dis- 
 couragingly small.
 
 CTT APTKR X. 
 
 WHAT LIMITS THK KATK OF WAGES. 
 
 In llic i)rcvit)u.s cliajjlcrs \vc have examined 
 tlic charge that the employees of corporations 
 are treated with less justice than those of indi- 
 viduals. This examination has been protracted 
 to what may seem a tedious length, but its re- 
 sults will shorten and simplify the remainder of 
 the in(juiry. Ihat will evidently involve both 
 the justice of the wages system itself and that of 
 the great fortunes which appear to be its out- 
 growth. All that we have hitherto formally ac- 
 complished has been merely to prove that, under 
 this system, workmen are no more industrial 
 slaves when employed by corporations than when 
 employed by individuals. Conceding this, the 
 real grievance, as originally stated, remains the 
 same. The quantity of destitution is not less- 
 ened, suffering is not decreased, nor opportuni- 
 ties of development enlarged by any demonstra- 
 tion that one class of employers is no worse than 
 
 another. The " bitter cry " of the poor can not 
 
 146
 
 WHAT LIMITS THE RATE OF WAGES. 14/ 
 
 be Stilled by abstract arguments and considera- 
 tions of this character. It may be quite true 
 that corporations deal as justly as individuals 
 with their men, but those whose feeling of re- 
 sponsibility for the poor has been aroused will 
 not be contented by the establishment of this 
 truth. They may be convinced that they were 
 in error in regarding the existence of corpora- 
 tions as the cause of the evils of which they 
 complain, but the correction of the error does 
 not correct the evils. If corporations are not the 
 cause of injustice, some other cause must be 
 sought, for the discovery of a defect in our diag- 
 nosis can not be treated as curing the disease. 
 
 Is it then possible, by any conceivable reform 
 of the present industrial system, or by the intro- 
 duction of a different system, to increase the com- 
 pensation received by labourers for their toil? 
 To answer this question we must in the first 
 place examine the causes that determine the 
 present rate of compensation. Some writers on 
 political economy have laid it down that, at any 
 given time, there is a certain amount of wealth 
 devoted to the payment of wages, and that, as 
 there must be a definite number of labourers in 
 existence at that time, the rate of wages, possi- 
 ble or actual, can be ascertained by a simple 
 process of arithmetical division. From this it
 
 148 INDUSTIUAL 1 KHEDOM. 
 
 has been iiifcrrc<l iliat tlic only way to increase 
 vva^cs nujst I;c cither to iiicrrasc the wages fund 
 or to decrease the nunihcr oi labourers; to en- 
 larj;i- till- dividend or lessen the divisor. This 
 view has been criticised as assuming a fixity in 
 the wages fund that does not correspond with 
 fact. It is no doubt true that at any given mo- 
 ment the average rate of wages would be ascer- 
 tained by dividing the sum actually paid by the 
 number actually receiving it, but this arithmetical 
 proposition does not explain the causes which 
 produce the wages fund and determine its size, 
 or the causes that influence the growth of the la- 
 bouring class. 
 
 The ultimate source of the wages fund is to 
 be found in the fact that under certain condi- 
 tions the labour of mankind produces more 
 wealth than is necessary for their support. That 
 portion W'hich can be spared may be spent in 
 the immediate gratification of luxurious desires, 
 or it may be wliolly or partly applied to the pro- 
 duction of increased wealth, in which case it re- 
 ceives the name of capital, and such of it as is 
 paid directly to labourers is called wages. The 
 motive which induces men to refrain from the im- 
 mediate enjoyment of wealth and to risk it in 
 the various enterprises of human industry is the 
 desire of gain or profit. Unless there were a rea-
 
 WHAT LIMITS THE RATE OF WAGES. 149 
 
 sonable expectation of obtaining an increase of 
 his grain, the farmer would have no motive for 
 ploughing and harrowing the land and consigning 
 the seed to it. It is quite unnecessary to describe 
 this motive as a selfish one. The use made of 
 profits may be selfish, but men desire to make 
 them quite as much for the sake of others as 
 for their own sake. We may therefore prop- 
 erly regard the desire to obtain a profit from the 
 use of capital as nothing intrinsically reprehensi- 
 ble. It is on many accounts praiseworthy, and 
 is certainly not only advantageous, but indis- 
 pensable to human society. Were it otherwise, 
 the desire could not be realized; for, in general, it 
 is only when wealth is employed for the benefit of 
 others that its owner is enabled to secure a gain 
 for himself. 
 
 For the sake of simplifying the argument, 
 we must assume that we are dealing with a con- 
 stant number of labourers, or that it increases 
 only in its usual ratio. We may also fairly as- 
 sume that the conditions of production remain 
 the same, or vary only at the prevailing rate. 
 Under these circumstances, that increased com- 
 pensation for their toil demanded for labourers 
 by justice must come out of that part of the 
 wealth of the community heretofore set apart by 
 its owners for other purposes. And it must
 
 150 INDUSTRIAL FRKKDOM. 
 
 como not from the fixed wealth of the commu- 
 nity, I)Ul fiom its income or revenue, 
 
 \\\altli in the shape of machinery and biiild- 
 inj^s, and railroads, and im|)rovements of land, 
 can not he converted into <nher forms. Prop- 
 erty in these permanent investments may be sold; 
 hut transfers of title do not afTect the nature of 
 its subject. Such wealth is valuable only for its 
 uses, and these are measured by the income or 
 revenue derivable from it. This revenue is for 
 the most part in such a form, or convertible 
 into such a form, as to be applicable to the pay- 
 ment of wages; and out of it, in the long run, 
 wages, and any increase of wages, must come, 
 however the fact may be disguised by the use 
 of money. 
 
 What is known as circulating capital is, it 
 is true, frequently in a shape to be applicable to 
 the support of labourers; but circulating capital 
 itself comes into existence in the shape of rev- 
 enue. And since we have used the term profits 
 as signifying the return from the employment 
 of capital, it will simplify our reasoning if we ad- 
 here for the present to this meaning, and under- 
 stand by profits whatever revenue is received by 
 any one from other sources than the sale of his 
 labour. We shall be obliged, after a while, to 
 distinguish between interest and profits in the
 
 WHAT LIMITS THE RATE OF WAGES. I5I 
 
 technical sense, but as we are concerned here 
 with the fundamental distinction between the 
 reward of capital and that of labour, we may 
 properly speak of the whole revenue of the com- 
 munity as divisible into wages and profits. At 
 any given time, therefore, an increase of the one 
 involves a decrease of the other. 
 
 It does not follow from this that such a 
 diminution of that part of the general revenue 
 as would be applied to other purposes than the 
 payment of wages may not eventually result in 
 an increase of the gross revenue. On the con- 
 trary, such a diminution constantly tends to take 
 place under the expectation of just such an in- 
 crease. Nearly every one, under the temptation 
 of very great profits, will economize in his ex- 
 penditure for luxuries and apply his savings to 
 these attractive investments. But the real mo- 
 tive, generally speaking, for his disposition to 
 increase his future revenue is the expectation of 
 increasing that part of it which is applicable to 
 the promotion of his own comfort, or the com- 
 fort of other persons in whose welfare he is in- 
 terested. If he understood that no increase of 
 his profits could be controlled by him, but must 
 all be devoted to increasing the wages of labour- 
 ers, the situation would be very different from 
 what it now is. We need not be so hasty as to
 
 152 INDUSTRIAL FREEDOM. 
 
 assert tliat uiwlfr such circumstances no one 
 wouM !)(.• disposed to deny himself in the manner 
 su|)i)()scd. This may or may not be true, but 
 it is clear tiiat the present motives for such self- 
 denial would be extinj^uished, 
 
 'J'hc sug^gestion may be made that increased 
 wages will cause increased production through 
 the increased efficiency of labourers. The result 
 would therefore be a larger fund to be divided, 
 and the apparent sacrifice made by employers 
 might be after all only an investment of a pn^fita- 
 ble nature. This, however, would be true only if 
 the sacrifice did not have to be repeated, for if 
 the process were perpetual the employers could 
 never recover their original loss. Their gross 
 profits would be continually enhanced, but the 
 share of them available for their own consump- 
 tion would steadily diminish. Were it other- 
 wise we should have a mere repetition of the 
 present state of affairs. It is notorious that the 
 wages of labourers have steadily and very greatly 
 risen during this century; and they have risen 
 in precisely this way. When we speak of wages 
 as determined by competition, we mean, if we 
 look into the matter, that employers are con- 
 stantly bidding against each other for the services 
 of workmen. When we say that wages are ris- 
 ing, we mean that some employers, tempted by
 
 WHAT LIMITS THE RATE OF WAGES. 153 
 
 the anticipation of future profits, have deter- 
 mined to apply a larger proportion of their 
 present profits to the payment of labourers, 
 and a smaller proportion to their own consump- 
 tion. 
 
 Bearing in mind our postulates concerning 
 the number of labourers, we see that such em- 
 ployers can increase their force only by draw- 
 ing away some labourers from other employers. 
 This they can do only by offering them higher 
 wages than they are receiving, and their present 
 employers, if they would retain them, must meet 
 the advance. As a matter of fact, some of them 
 are not able to do so, or do not think it worth 
 while, and thus labourers are constantly drawn 
 into those branches of industry which are at any 
 given time most profitable. The whole move- 
 ment is thus determined by the expectation of 
 greater profits, which during the present century, 
 owing to a number of causes, have been largely 
 realized. 
 
 It is, of course, natural for employers to 
 wish to keep their expense for wages at as low 
 a figure as possible. It is equally natural for 
 them to desire to keep their expenditure for ma- 
 terials and machinery at the lowest possible fig- 
 ure. But as they buy these goods with the 
 greatest attention to their quality and service-
 
 154 INDUSTRIAL FRKF.DOM. 
 
 al)ility, as well as llnir price, so they pay much 
 regard to the cITiciency of their lahourcrs. Their 
 aim is to make a profit, and tlicy are, as a rule, 
 aware that this is not to he made with had ma- 
 terials or had work. It is certainly reasonahle 
 to presume that they arc f|uitc as well aware of 
 the advantages of employing a high quality of 
 lahour as those professedly unselfish philanthro- 
 pists who, although frequently unaccjuainted 
 with the conduct of husiness, undertake to in- 
 struct husiness men in this particular. The aims 
 of these philanthropists may be highly lauda- 
 ble, but it can not be denied, however paradox- 
 ical the assertion may sound, that increased 
 wages are the result of the voluntary acts of em- 
 ployers. They are frequently said to be com- 
 pelled to pay higher wages, but there is a sup- 
 pressed alternative. They need not pay them at 
 all unless they choose; but while they may be 
 indifferent to the welfare of their workmen as 
 an end in itself, they are not blind to its relation 
 to their own profit. Some of them would per- 
 haps be glad if they could increase their profits 
 by diminishing their payments for wages; but the 
 history of this century shows conclusively that 
 employers as a class, or capitalists, if the term 
 be preferred, have, consciously or unconsciously, 
 acted on the principle that increased profits
 
 WHAT LIMITS THE RATE OF WAGES. 155 
 
 could not be obtained without paying increased 
 wages. 
 
 It is further to be observed that the increased 
 profits of which we have just spoken are gross 
 profits, and have been apparently realized, on the 
 whole, not only not through an increase in the 
 rate of 'profit, but in spite of a decrease in that 
 rate. As Adam Smith remarks, it is practically 
 impossible to ascertain what is the average profit 
 of all the different trades carried on in a country; 
 but some notion of it may be formed from the 
 interest of money. " It may be laid down as a 
 maxim, that wherever a great deal can be made 
 by the use of money a great deal will commonly 
 be given for the use of it; and that wherever 
 little can be made by it, less will commonly be 
 given for it." 
 
 Measured by this test, it would seem that 
 the rate of profit is now scarce one half what it 
 was fifty years ago. At all events it has con- 
 siderably fallen, while the rate of wages has con- 
 siderably risen. A great many persons, there- 
 fore, must have continually decided that, al- 
 though they could not obtain the same rate of 
 profit as before, they would nevertheless increase 
 their savings. In other words, they have less- 
 ened the proportion of their total revenue which 
 they devote to their own consumption, and en-
 
 15^ INDUSTRIAL FREEDOM. 
 
 largcd the proportion which they devote to the 
 payment of wages. 
 
 Such being the case, it might seem that our 
 iiujuiry could be sj)cc(hly terminated. Experience, 
 it might be urged, has shown that what justice re- 
 quires is practicable. Since employers liave in the 
 past increased wages by reducing the proportions 
 of their own luxurious expenditures, they can do 
 so in the future, and according to all the require- 
 ments of justice it is just that they should. If 
 the dcmaiul had been made upon them at any 
 former period they would have declared it im- 
 possible to comply with it; but the sequel has 
 proved that they were wrong. There are many 
 evidences that a vast amount of wealth is every- 
 where expended in luxurious consumption, some 
 of which might certainly be curtailed without 
 detriment to the welfare of any one; and while 
 this is so, the justice of the claim of labour to 
 increased compensation can not be denied on the 
 ground of impossibility. 
 
 It may be conceded at once that, so long as 
 anv luxury at all is enjoyed by employers, there 
 is a fund in existence out of which increased 
 wages could be paid. But the difficulty lies 
 somewhat deeper than this. Hitherto, as we 
 have seen, there has been a gradual increase of 
 wages, caused by employers' desire to increase
 
 WHAT LIMITS THE RATE OF WAGES. 15/ 
 
 their gross profits. This increase has been at- 
 tended with a decrease in the rate of profit, but 
 this rate has still been sufficient to encourage 
 accumulation. It does not follow that accumu- 
 lation will continue, no matter what the rate of 
 profit. What the possible minimum may be we 
 can not tell, although the experience of the past 
 informs us of no lower rate of interest than the 
 present; but we can assert positively that there 
 must be a minimum, and that we have ap- 
 proached it very rapidly. If the present order 
 is undisturbed, we may still see an increasing 
 rate of wages and a declining rate of profit, 
 which will eventuate in an equilibrium; the rate 
 of profit becoming so low that people will pre- 
 fer to spend some income which they would have 
 saved had the rate of profit been higher. Be- 
 yond that point no increase of wages can take 
 place unless the number of labourers diminishes; 
 and if it should increase, wages would fall. 
 
 Hence what is really demanded in the name 
 of justice is an artificial acceleration of this 
 process, a compulsory attainment of this equilib- 
 rium. In short, the rate of profit ought to be 
 at once reduced by law to whatever figure it 
 would eventually attain through the voluntary 
 action of the owners of capital. So long as free- 
 dom of contract exists no lower figure can be
 
 15^ INDUSTRIAL FREKDOM. 
 
 rcaclicd. aiid any attempt to do so would be mere 
 confiscation. Sucli attempts would result in the 
 communism which is the ideal (A Karl Marx and 
 his followers. They rej^'ard all profits as unjust, 
 and hold that the whole product of capital and 
 labour belongs to the labourer. Jiut it is not 
 worth while to criticise this theory. Its imprac- 
 ticability has been so often exposed that vvc need 
 only say that the destruction of the motive for 
 saving would inevitably lessen the fund available 
 for production, out of which wages must come.
 
 CHAPTER XL 
 
 THE NATURE OF PROFITS, AND SOME 
 CONSEQUENCES OF REDUCING THEM. 
 
 When we speak of capital and projfits we 
 generally think of them as belonging exclusively 
 to employers. But we have now reached a point 
 where we must recognise the blurring of the 
 lines that in theory divide economic classes. We 
 can not ignore the fact that labourers, as a class, 
 have accumulated enormous amounts of capital, 
 and have to that extent made it to their advan- 
 tage that the rate of interest should be main- 
 tained. They are lenders to their masters, and, 
 like other creditors, they are benefited by the 
 prosperity of their debtors. To some extent they 
 may hoard their savings, but in the main they 
 flow quickly into the reservoirs of capital. Even 
 in agricultural States, where there are few savings 
 banks, thrifty labourers manage to invest what 
 they save from their wages, either buying land 
 and stock, or lending to their employers and 
 
 others needing capital. But the savings banks 
 
 159
 
 l6o INDUSTIUAr. rRF.r.DONf. 
 
 arc the mnsl important as well as conspicuous 
 means of investment for funds of this descrip- 
 tion. 
 
 in the year i«S(;3 the dejjosits in the savinj^s 
 hanks of the United States amounted to about 
 $i,8oo,C)00,(X)0, and the depositors numhcred 
 4,830,000. the average deposit being about $370. 
 Durinj;- the decade preceding, the aggregate de- 
 posits had nearly doubled. These institutions, 
 as we have seen, are confined to populous com- 
 munities. Nearly five sixths of the total depos- 
 its are found in the banks of the Eastern and 
 Middle States, and about that proportion of the 
 depositors belong there. The deposits in Massa- 
 chusetts are somewhat over $400,000,000, cred- 
 ited to about 1.200,000 accounts; in New York 
 they are not far from $700,000,000, the depositors 
 numbering over 1,600,000. In Massachusetts, it 
 would appear, every other person may have an 
 account at the savings bank; in New York, every 
 fourth person. Taking the Eastern and Middle 
 States together, it would be approximately cor- 
 rect to say that every unmarried adult and every 
 head of a family may keep a savings account, the 
 average amount of which would nearly equal a 
 year's earnings. 
 
 Allowance must be made for the notorious 
 fact that many comparatively well-to-do persons
 
 THE NATURE OF PROFITS. l6l 
 
 make use of the savings banks, and that they 
 often keep several accounts. Many institutions 
 and associations also find the savings banks con- 
 venient for certain purposes, so that the number 
 of depositors belonging to the labouring class 
 must be considerably less than the total number. 
 On the other hand, there are numberless other 
 ways in which this class invests its savings. Its 
 members frequently take out life and accident 
 insurance policies, join building associations, and 
 belong to various unions, orders, or societies, 
 which, as we know by the returns collected in 
 Great Britain as well as this country, have col- 
 lectively very large funds. Many thrifty labour- 
 ers lend their savings on personal security, or 
 even on bond and mortgage; and where there 
 are no banks, as we have observed, such methods 
 are necessary. On the whole, if we take into 
 consideration the large number of labourers who 
 are drunken and improvident, it would perhaps 
 not be unreasonable to suppose that a thrifty 
 labourer and his family in one of the manufac- 
 turing States may on an average possess a thou- 
 sand dollars, which is properly classified as capi- 
 tal, in addition frequently to other personal and 
 even real property. Any reduction in the rate 
 of interest, therefore, would occasion such per- 
 sons an appreciable loss.
 
 1^2 INDL'STKIAL FREEDOM. 
 
 This loss, it is evident, would he very unevenly 
 dislrilntlcd. Workmen, while in their prime and 
 in receipt of good wages, endeavour to accumu- 
 late an insurance fund, and as they gradually 
 increase it by additions from their savings, the 
 rate of interest it bears cU^es not seem of very 
 great importance; but when they sutler from 
 sickness, or become old, or from any cause find 
 their wages cut off, the interest derived from 
 their savings becomes of more consequence. 
 This interest can seldom be sufficient for their 
 support, but it may often be sufficient to post- 
 pone the exhaustion of the principal until the 
 purpose for which it was accumulated is accom- 
 plished. A reduction of interest to any consider- 
 able extent might operate, as has been pointed 
 out, to diminish saving or to increase hoarding, 
 and any compulsory measures intended to bring 
 it about would certainly seem unjust to those 
 who had by long self-denial accumulated a fund 
 for support in their declining years. The re- 
 tired or incapacitated labourer, under such cir- 
 cumstances, becomes really a small capitalist; he 
 ceases to be interested in the increase of wages 
 at the expense of interest. The number of such 
 persons, especially of the female sex. is very large, 
 and their protest against the overthrow of their 
 calculations would be far from unreasonable.
 
 THE NATURE OF TROFITS. 163 
 
 The only class of labourers whose gain from 
 the proposed change would have no offsets would 
 be those who spend all their wages as fast as they 
 get them. But we can not ignore the fact that 
 this class of labourers contains many criminal 
 and vicious members. While they are perhaps 
 not to be blamed for a moderate indulgence in 
 alcoholic drinks, their indulgence is often im- 
 moderate. The consumption of such drinks is, 
 of course, not confined to this class of labourers, 
 but it is notorious that excessive indulgence 
 therein regularly accompanies lack of thrift. 
 Drunkenness and frugality are incompatible; and 
 hardly any complaint is more common among 
 the poor than that men who get good wages will 
 spend them in drink instead of providing for their 
 families. 
 
 It would be absurd to maintain that wages 
 ought to be kept low in order to discourage 
 drunkenness; but it can not be denied that a rise 
 of wages promotes it. The excise returns are 
 sufficient evidence of this, so that it is said in 
 England that the people drink the Government 
 out of debt. We may rejoice in advancing wages, 
 but it is necessary to remember that they have 
 this drawback. The evil is insignificant in com- 
 parison with the good; but we can not disre- 
 gard the fact that in our code of morals prudence
 
 i^j4 industrial frkkdom. 
 
 has always occiipicMl a lii^li rank. The thrifty 
 labourer is jjiaiscd and the iminov idciit one con- 
 (kiuncd. JMiihmtljropists have busied themselves 
 in cncouraj^diij; lahourcrs to save, and in dcvisinj^ 
 institutions whereby their savings might be most 
 profitably invested. The whole tendency of the 
 advice given to the j^oor has been to impress 
 on them the importance and merit of getting 
 rich. The labourer is told that it is his duty 
 to lay up against a rainy day; to provide against 
 sickness and old age and death. lie is appealed 
 to to save his earnings in order that he may give 
 his children a better start in life than he has 
 had; that he may be able to benefit others as 
 well as himself. It is incredible that all of this 
 teaching should be wrong, and that lavishness 
 and improvidence are the true ideals for working- 
 men to adopt. We must maintain that the tra- 
 ditional morality is sound, and that if workmen 
 get higher wages, they ought to save some of 
 the increase. 
 
 It is occasionally urged that wages are earned 
 in order to be spent. You can not eat your 
 cake and have it too; and as cake is meant to 
 be eaten, it is wiser to eat it than keep it. But 
 man looks before and after. Whether labourer 
 or capitalist, he desires to provide something for 
 the future support of himself and his family, and
 
 THE NATURE OF PROFITS, 165 
 
 the sense of increased security is itself a pleasur- 
 able gratification. The labourer, it is true, in- 
 dulges in some additional comforts as his savings 
 grow, and the capitalist who finds his profits in- 
 creasing from year to year enlarges his scale of 
 living; but the evidence is abundant that the 
 propensity to save is very strong with both of 
 them, and that it is of the greatest value to the 
 individual and to society. At the same time we 
 must recognise the fact that these economies 
 tend to defeat their own object. The more sav- 
 ings are swelled, the lower goes the rate of in- 
 terest, and as the labourer becomes more of a 
 capitalist he is rewarded less. 
 
 I have dwelt at much length on the economic 
 position of the working classes, because progress 
 seems to depend on their becoming transformed 
 into capitalists. No one will deny that the ac- 
 quisition of property by labourers is on every ac- 
 count desirable. But these acquisitions must, 
 from the nature of the case, assume principally 
 the form of loanable capital. They are concen- 
 trated in banks and distributed by them among 
 the various channels of production. Any seri- 
 ous disturbance of the accustomed flow in these 
 channels not only reduces the income of labour- 
 ers' savings, but imperils the principal. Meas- 
 ures that profess to increase wages, but that ren-
 
 lC»6 INDUSTRIAL FRKF.DONf. 
 
 (Ur lluir invcstniciil unprofitahlc or unsafe, are 
 nnl likely to he of any ptTmaiiciil hcnclU t(j the 
 poor. 
 
 While a lar«;c part of the present fund of loan- 
 able eapilal consists of savinj^s out of wages, the 
 greater part consists of savings out of profits. 
 'J'he position of those who own these savings 
 may be quite different from that of employers 
 as a class. The latter are borrowers; the former 
 are lenders. The employer who uses his own 
 capital may not be directly concerned in the rate 
 of interest. The employer who borrows is di- 
 rectly concerned, and apparently concerned that 
 it should be low. Apparently, too, those whose 
 operations are most successful and on the largest 
 scale are most benefited by lowering the rate of 
 interest. Their abilities enable them to make 
 higher profits than most employers, and if they 
 can increase their capital at small expense they 
 may be able to extend their business greatly and 
 make even higher profits. An artificial reduction 
 of the rate of interest might thus affect the dif- 
 ferent classes that are commonly included under 
 the generic name of capitalists very differently. 
 Those people who depended mainly on interest 
 for their support would suffer, while those whose 
 income arose from profits might be the gainers. 
 In fact, as will appear later, the attempt of the
 
 THE NATURE OF PROFITS. 167 
 
 Legislature to increase the reward of labour at 
 the expense of capital may not only fail to benefit 
 labourers, but may enable those capitalists whose 
 gains are on the largest scale to increase them 
 at the expense of those whose gains are the 
 smallest. 
 
 The number of persons supported wholly or 
 partly by interest as distinguished from profits 
 is now very great. As we have seen, many la- 
 bourers get a part of their income in this way, 
 and as w^e go up the scale we find that an in- 
 creasing proportion of income is derived from 
 this source. People who own their houses are 
 practically in receipt of interest on their cost, 
 and such people are numberless. The natural 
 consequence of our increased wealth has been a 
 more extensive provision for the future by those 
 who have acquired it. Fathers are anxious to 
 insure their children against the cares and suffer- 
 ings of poverty; they wish to enable them to live 
 in comfort and to be able to enjoy some of the 
 refinements of life. A few of them are foolish 
 enough to desire that their sons shall not engage 
 in any useful pursuit; more are fond enough to 
 prefer that their daughters shall not earn their 
 own living. Probably the prevaihng feeling is 
 that, in view of the uncertainty of health, the 
 
 vicissitudes of employment, and the possibilities 
 12
 
 l68 INDUSTRIAL 1 KKI.IXJM. 
 
 of unfortunate marriage, children should be edu- 
 cated so that they may he useful, and at the same 
 time made independent of the necessity of being 
 useful. The rcMdt is that our middle class, or 
 at least the upper part of it, contains a large 
 number of persons of this description, and they 
 constitute an extremely valuable element in our 
 society. The professions are to a great extent 
 recruited from this class; its existence makes the 
 cultivation of the refined arts possible, and it 
 furnishes nuich of the large force of volunteers 
 retpiired in our charitable and religious enter- 
 prises. 
 
 The tendency of a fall in the rate of interest, 
 from whatever cause, is to check the increase of 
 this class. The sum of money that formerly 
 provided for their support can not now furnish 
 that support. Some of those who had leisure 
 for liberal and benevolent pursuits must give 
 them up and devote themselves to earning a liv- 
 ing. ^Marriages will be delayed, and will be, as 
 in France, more and more unproductive. The 
 descendants of the early settlers of \cw Eng- 
 land are already a dying stock, and their places 
 are taken by immigrants of recent date, of more 
 reproductive capacity, but of inferior culture. 
 So strong is the desire to rise in the social scale 
 and to maintain the ground that has been won,
 
 THE NATURE OF PROFITS. 169 
 
 that more and more persons prefer not to marry, 
 but to purchase annuities or to consume their 
 principal, leaving at their death neither posterity 
 nor the wealth by which it might have been 
 supported. 
 
 It is true that there are many people who 
 make a bad use of property that comes to them 
 by gift or inheritance. This is apt to be the case 
 with suddenly acquired wealth. When fathers 
 are absorbed in making money they can not at- 
 tend to the training of their sons, and the sons, 
 being petted and indulged, grow up unfitted 
 either to earn money or to take care of it. But 
 when a family has been wealthy for generations 
 this tendency is less marked. Men have leisure 
 for other pursuits besides that of getting rich, 
 and they can bring up their children in those 
 habits which are indispensable when the per- 
 manent possession of wealth is at stake. In this 
 way an enduring class of well-to-do people, who 
 are also educated, cultivated, and benevolent, is 
 created. It can not exist without a substantial 
 basis of property, and it must be diminished by 
 any sudden reduction of the return from invest- 
 ments. It does not follow that this loss may not 
 be made up for by gains in other directions; but 
 it must not be forgotten, when we reckon these 
 gains, that there are losses also to be estimated.
 
 170 INDUSTRIAL FRKEDOM. 
 
 In this connection \vc may refer to the cfTcct 
 of reduced income njioii I lie ^aeat numbers of 
 reli^jious, cliarilable, and e<lucatir)nal institutions 
 sui)()ortcd wlH)lly or j)artly by invested funds. 
 'Ilic inmiediate effect must be, of course, to cur- 
 tail tluir operations. They must discliarge some 
 of lluir ein|)loytcs; they must get along with 
 fewer surgeons and professors, and pay less to 
 those who are retained. They must suffer im- 
 mediately and directly in this way, and they will 
 also suffer reintjtely ami indirectly in another 
 way. The class by whose liberality they are 
 principally enlarged and supported will no longer 
 be able to keep up their contributions on the 
 f(jrmer scale. Their income being smaller, they 
 must economize somehow, and they will be com- 
 pelled to restrict their benevolence. Many of 
 them will deny themselves luxuries to which they 
 have been accustomed; some of them will even 
 deny themselves comforts rather than relinquish 
 the charities to which they are devoted. But, 
 on the whole, the abilities of this class being re- 
 duced, as well as its numbers, there can not but 
 be a falling off in the amount of donations to 
 benevolent purposes.* 
 
 * The gifts and bequests for public purposes made in amounts 
 of $5,000 and over durinp the year iSg6 foot up, according to 
 "Appleton's .\nnual C)'clopa:dta," more ih.in $27,000,000. In some
 
 THE NATURE OF PROFITS. I/I 
 
 These considerations may be sufficient to 
 show that the Legislature can not reduce the 
 rate of interest without some injury to labourers 
 as well as other classes. It remains to inquire 
 into the rate of profit as distinguished from in- 
 terest. Large business operations are generally 
 conducted to no small extent with borrowed 
 capital, and it might at first seem that a reduced 
 rate of interest would tend on this account to 
 increase profits. But it is not the market rate of 
 interest that would be reduced by governmental 
 action. That might remain the same, while the 
 recipients of interest were amerced by legislators. 
 Employers, therefore, would have to pay as much 
 as before for the use of capital, and if the accu- 
 mulation of capital was checked they might after 
 a while have to pay more. A tax on interest, 
 therefore, might presently become a tax also on 
 profits. 
 
 The immediate effect of a reduction of profits 
 must be most severely felt by small employers, 
 whose profits amount to little more than the wages 
 of their labour. Such employers could no longer 
 make a living by employing labourers; they 
 would have to seek employment instead of offer- 
 
 previous years this sum has been greatly exceeded, and the figures 
 represent only a part of what is actually contributed by the benev- 
 olent.
 
 1/2 INOl'STKI \I. I RKKPOM. 
 
 iii^' it. In tlic case of retail trade, the larj^c c<;- 
 taMislinicnts would profit at the expense of the 
 small ones. This truth is distinctly recognised 
 by our li(|Uor laws. The traffic is heavily taxed 
 with the j)ur|)osc and with the result of makinp 
 it unprofitable for small dealers and driving them 
 out of business. The same causes operate in 
 other trades. The great shopkeepers have many 
 advantages both in buying and selling, and are 
 able to practise many economies which are not 
 within the power of their little rivals. While 
 their rate of profit might be reduced, the extent 
 of their transactions would be enlarged, because 
 of the increased number of their customers. 
 
 The result of the change would therefore be 
 to discourage men of small means from engaging 
 in business on their own account. Thus the in- 
 crease of wages at the expense of profits tends 
 in this instance, as we should expect, to increase 
 the number of labourers and to decrease corre- 
 spondingly the number of small capitalists. We 
 do not often hear it said that justice requires 
 the suppression of this class of capitalists, but it 
 is evident that we must accept this conclusion 
 if we maintain that justice requires that wages 
 be increased. Some one must pay the increase, 
 and the small capitalist can not escape paying 
 his share of it.
 
 THE NATURE OF PROFITS. 1/3 
 
 These conclusions apply not only to sm-all 
 shopkeepers, such as grocers and butchers, and 
 the host of little merchants who buy goods and 
 sell them in a form substantially unchanged; 
 they apply equally to artisans, such as black- 
 smiths, and shoemakers, and bakers, and tailors, 
 and upholsterers, and numberless others, who ex- 
 pend their labour and that of their assistants in 
 changing the form of the goods in which they 
 deal. They are now constantly exposed to the 
 competition of larger capitalists, who are able to 
 introduce new processes and better machines as 
 fast as they appear. The advantages of produc- 
 tion on a large scale are in these trades often 
 strikingly manifested. We find that it is more 
 economical in many instances to discard our half- 
 worn coats or shoes and buy new ones instead of 
 having the old ones repaired by the tailor or the 
 cobbler. The numbers of these independent 
 artisans have been relatively reduced by the in- 
 troduction of machinery. They will be still 
 further reduced if wages are to be raised by de- 
 creasing profits. 
 
 Many small farmers belong in the same cate- 
 gory. They are generally obliged to employ one 
 or two assistants, at least during a part of the 
 year. It has become a saying among them, in 
 these times of falling prices, that they would
 
 174 INDUSTRIAI. FKF:r:rK)M. 
 
 like to cxcliaiif^c places with their hired help. 
 The hired farm hand j^ets his hoard and his 
 waj^cs; the farmer pets only his board. His 
 prolits ha\e in many cases entirely disappeared, 
 and he keeps on farming only because he can 
 not well stop. lUit he would have to stop if he 
 had to pay the same amount for wages and got 
 less i)r(»rit from his farm. He could not raise 
 the money to jiay these wages. As it is, he 
 can hardly raise the money to buy the improved 
 machines that play a large part in modern agri- 
 culture, and without using which he must quickly 
 go to the wall. If his income is decreased, but 
 not his expense, he must give place to the farmer 
 who has the capital to enlarge his operations. 
 If he can not afford to hire labour, he must hire 
 out himself. This process is continually going 
 on, and has by many observers been deplored; 
 but, according to the theory under consideration, 
 justice requires that it be accelerated. 
 
 The statement of these results may seem to 
 amount to little more than saying that what 
 has taken place in the past will tend to be re- 
 peated in the future. In our own country the 
 existence of vast tracts of very fertile land, so 
 situated as to be made easily accessible by rail- 
 ways, has modified and even arrested many eco- 
 nomic tendencies. Now that these land? have
 
 THE NATURE OF PROFITS. 1/5 
 
 mostly passed into private ownership these tend- 
 encies will reassert themselves. A declining 
 rate of profit will render it more and more neces- 
 sary to concentrate capital, and the small capi- 
 talist will find it harder and harder to maintain 
 an independent position. While there may be no 
 actual decrease in the numbers of this class, there 
 will be a relative decrease as compared with the 
 number of labourers. It is idle to lament this, 
 and yet there are many reasons why we should 
 not expedite a change which is attended with 
 many poHtical consequences of an unsatisfactory 
 and even alarming character. At least we may 
 hesitate to adopt measures intended to carry this 
 change at once to the extreme Hmits of its pos- 
 sibility, limits which might under present condi- 
 tions never be reached. 
 
 While it is evident that the general rate of 
 profit may be reduced by Government, and that 
 the number of independent employers will thus 
 be diminished, it does not follow that all those 
 employers who continue in business will find their 
 gains decreased. There is in theory a general rate 
 of profit, but in practice there is an Infinite num- 
 ber of particular rates. Some of them are very 
 high and some very low, and it can not be deter- 
 mined how they will be individually affected. As 
 we have seen, profits arise from the fact that the
 
 I 7^' INDUSTRIAL FRKKDOM. 
 
 abilities of niaiikind ohlain from X.'iturc a larger 
 supply of (lcsiral)lc things than is needed for mere 
 Mi|)port. ICxceptionally high profits, therefore, 
 are generally due to cxcej)tional abilities. In 
 such cases the cost to the community of what 
 it receives is not increased. Indeed, the public 
 eventually, if not at once, makes a positive gain — 
 a gain that comes to it without expense. 
 
 This truth is of so much importance as to 
 deserve to be illustrated at some length. It is, 
 of course, admitted, but it is not fully appre- 
 ciated. No one denies that he is a public bene- 
 factor who makes two blades of grass grow where 
 one grew before; but there is a disposition to 
 ignore what the proverb implies. Let us extend 
 it a little, and observe the different results ob- 
 tained by the good farmer and the bad farmer. 
 They may have farms of equal value and equal 
 cai)ital, but one manages to produce twice as 
 much as the other. The surplus is entirely due 
 to skill, intelligence, and industry; to qualities 
 which it is of the greatest importance to society 
 to encourage. As the direct result of these 
 qualities more and better food comes into exist- 
 ence without any increased exertion on the part 
 of the community. It is all clear gain. 
 
 It is not different in the case of manufactur- 
 ing establishments. The man who by improve-
 
 THE NATURE OF PROFITS. 1/7 
 
 ments in machinery, by employing new proc- 
 esses, by attention to the details of business, 
 turns out an increased product, is as much of a 
 benefactor as the good farmer. The same is 
 true of distributing agencies. The merchant 
 who lays before his customers a stock of well- 
 selected goods renders them a greater service 
 than the one who offers ill-selected goods. He 
 who provides such an assortment as enables cus- 
 tomers to supply their wants with the least ex- 
 penditure of time and trouble is a benefactor to 
 them. Those who efifect improvements in trans- 
 portation, in communication, in exchange, in in- 
 surance, in banking, are all engaged in adding to 
 the general sum of wealth. If they kept the 
 whole of their additions for themselves the com- 
 munity would be no poorer; but they can not 
 keep the whole of them for themselves. The 
 farmer who increases his crops must sell them, 
 and when there is more to be sold the price 
 falls. Ability thus divides its rewards with the 
 world. Its gains are due to itself, but it can not 
 utilize them unless it shares them with man- 
 kind. 
 
 Who can calculate the purely material gain 
 to our race from the wonderful reduction in its 
 death rate that has taken place in modem times. 
 Disease was formerly so much more destructive
 
 178 INDl'STRIAL FRKKDOM. 
 
 that wc may compare its effects willi that of war. 
 lOvery year as many people were swept away by 
 pestilential (hseases as wonld have fallen in a 
 Moody campai^ni; and these lives are now saved. 
 Their preservation is due in a j^eneral sense to the 
 advance of science; hut it is to he especially at- 
 tributed to the increased abilities of physicians. 
 Aithouj^h wc do not speak of their compensation 
 as profits, yet it is clearly of the same nature. 
 They save lives that but for their skill would be 
 lost; the abler of them save lives that ordinary 
 physicians can not save. It has happened to 
 nianv to be bereaved of children or friends be- 
 cause of the absence of professional skill. What 
 figure will they name as the additional recom- 
 pense which they would have paid for professional 
 skill that would have saved these lost lives? 
 
 What would be the value to the German na- 
 tion, it has been asked, of another Moltke when 
 the next war breaks out? Might he not be cheap 
 at a hundred million dollars? Might he not be 
 worth a national debt? Such instances as these 
 illustrate the necessary connection between great 
 accumulations of wealth and great profits. When 
 a man is struggling to defend a fortune against 
 a dangerous claimant he wants a lawyer that 
 can win. The services of a hundred incompe- 
 tent attornevs would be worse than worthless.
 
 THE NATURE OF PROFITS. 1/9 
 
 When it is a question between total ruin and a 
 large fee, it is folly to hesitate. The principle 
 is the same in the case of great business enter- 
 prises. An able man may make the enterprise 
 a splendid success; an incapable man may not 
 only make no profits, but lose the principal. 
 Where losses may be on a large scale, it pays to 
 insure against them by employing the highest 
 talent that can be procured, and the resulting 
 competition among owners of capital to secure 
 this talent raises its compensation to high fig- 
 ures. 
 
 The truth is only disguised when men con- 
 duct their affairs with their own capital. If they 
 have exceptional capacity, they earn its compen- 
 sation in the shape of exceptional profits, whether 
 the capital belongs to them or to others. And as 
 the services of an able general are worth more 
 in time of war than in peace, so the services of 
 an able business manager may be more valuable 
 when profits are reduced than when they are in- 
 creasing. A reduction in the general rate of 
 profit, therefore, may sometimes result in in- 
 creasing those particular rates that were highest. 
 
 During recent years a strong tendency to 
 combine has prevailed among establishments 
 manufacturing staple articles of consumption, 
 and the ears of the public have been deafened
 
 l80 INDUSTRIAL IKJIDoM. 
 
 with outcries a^'ainst these comljinatious, wliicli 
 are ij^uorantly called trusts. 'Ihe j^round of these 
 coiuplaiuts has, of course, heeii the supposed 
 ninnopolies created. Those wiio cfTcctcd these 
 coinhinations undouhtedly cxj)ccted thereby to 
 increase their profits — a result which has been 
 attained in dilTercnl degrees, and in some cases 
 not at all. \\ here the expected profits have been 
 realized there is remarkably little evidence that 
 the public has been subjected to any additional 
 expense. Few people are aware of the very great 
 charges incurred by manufacturers in disposing 
 of their products. These charges are frequently 
 greater than the cost of production. The ex- 
 pense of advertising is enormous; it is estimated 
 at a hundred millions a year. So far as staple 
 articles of established use and (juality are con- 
 cerned, money spent in advertising is wasted. 
 No housekeeper now needs to consult manufac- 
 turers' advertisements before supplying herself 
 with granulated sugar; no grocer is under any 
 such necessity. But if there were many sugar 
 companies, they would spend immense sums in 
 advertising their respective products, and wheth- 
 er this expense fell on the producer or the con- 
 sumer, it would increase the cost of production. 
 It is in evidence that one of the concerns that 
 united to form the American Tobacco Company
 
 THE NATURE OF PROFITS. l8l 
 
 had spent $700,000 for advertising in a single 
 year. After consolidation this expense was 
 saved; and if all the concerns made similar sav- 
 ings, the total would have been sufficient to pay 
 all the dividends of the new company. 
 
 As the reduction of advertising to sober busi- 
 ness announcement is a clear gain, so the saving 
 attained by dispensing with a horde of soliciting 
 agents is altogether beneficial. Special lines of 
 goods and novelties may need to be brought to 
 the attention of consumers, and in such cases 
 there may be no opportunity for combination. 
 But it seems absurd that the community should 
 be called on to support a large number of men 
 engaged in calling attention to the different es- 
 tablishments making a staple article of consump- 
 tion. In the case of sugar, as we just now ob- 
 served, every consumer and every grocer knows 
 exactly what the article costs and what it can be 
 sold for. If there were many competing estab- 
 lishments, every one would have to be on the 
 watch lest he pay more than others. As the 
 saving in expense to the producer is very great, 
 so the saving in friction and anxiety to the buyer 
 is enormous. To effect this saving of money and 
 time and worry is to confer as great a benefit 
 upon society as to invent a new process of manu- 
 facture. As the inventor is allowed to reward
 
 l82 INDUSTHIAI. FKI.I.Dn.M. 
 
 liinisclf by cxccplional f^ains, so tlic business man- 
 ager who institutes economics in the <Hstril)ution 
 of goods may claim a right to ajiproj^riate the 
 resulting benefit. 
 
 Such aj)i)roi)riation, we have seen reason to be- 
 lieve, will be of a temporary character, and the 
 public will after a time share in the prcjfits arising 
 from these improvements. It is not improbable 
 that the public is now getting this benefit to a 
 considerable extent. Some of the industrial com- 
 binations have been obliged to sell their goods 
 at such low prices as to have become insolvent. 
 The most famous, or perhaps we should rather 
 say the most odious of them, the Standard Oil 
 Combination, has made its profits while greatly 
 reducing its prices. Some attempts have been 
 made to prove that, although the prices of the 
 goods manufactured by these concerns have been 
 on the w^hole reduced, yet they have not been 
 reduced so much as they might have been in view 
 of the increase of production and the improve- 
 ment in its methods. This may very likely be 
 true, but it is hardly suflFicient to justify the vio- 
 lent denunciation to which these corporations 
 have been subjected. If it shall eventually prove 
 that their monopoly results in decreased cost of 
 goods to the consumer, it will be impossible to 
 maintain that it is unjust. If it shall appear that
 
 THE NATURE OF PROFITS. 1 83 
 
 their profits are kept up at such a figure as to 
 increase the cost of goods to an appreciable ex- 
 tent, the charge of injustice would be sustained. 
 Up to the present time it is impossible to deter- 
 mine what the ultimate result will be; but there 
 is reason to believe that the injustice hitherto 
 suffered by the public exists principally in the im- 
 aginations of writers for the sensational press, 
 in the representations of disappointed competi- 
 tors, and in the declamations of legislators greedy 
 for blackmail. 
 
 We have seen that a reduction of the general 
 rate of profit tends to decrease the number of 
 small employers. It appears to be a somewhat 
 hasty assumption that an increase of the excep- 
 tionally high profits due to business ability in- 
 creases this tendency. The common accusation 
 brought against monopolies is that they raise 
 the prices of their products. If they do, since there 
 are no complete monopohes, they benefit their 
 small competitors. This conclusion is so ob- 
 vious that the more intelligent among the de- 
 nouncers of monopoly pursue the other line of 
 complaint. In the opinion of a majority of the 
 justices of the United States Supreme Court, 
 combinations of capital may " temporarily, or 
 perhaps permanently, reduce the price of the 
 
 article traded in or manufactured, by reducing 
 13
 
 184 INDUSTRIAF, I UKKIiOM . 
 
 I he expense inseparable from the runninfj of 
 many (lifTcrcnt companies for the same purpose. 
 Trade or eonimerce under those circumstances 
 may nevertlieless be badly and unfortunately re- 
 strained by driving out of business the small deal- 
 ers and worthy men whose lives have been spent 
 therein, and who mifj^ht be unable to readjust 
 themselves to their altered surroundings." 
 
 The Court recognises the fact that the intro- 
 duction of machines and steam interrupted tra- 
 ditional habits of labour, and that the change 
 from stagecoaches to railroads threw men out 
 of employment. This is described as the inevita- 
 ble accompaniment of change and improvement. 
 But it is " wholly different when such changes 
 arc effected by combinations of capital, whose 
 purpose in combining is to control the produc- 
 tion or manufacture of any particular article in 
 the market, and by such control dictate the price 
 at which this article shall be sold, the effect being 
 to drive out of business all the small dealers in the 
 commodity, and to render the public subject to 
 the decision of the combination as to what price 
 shall be paid for the article. In that light it is 
 not material that the price of an article may be 
 lowered. It is in the power of the combination 
 to raise it." 
 
 According to this theory of political ccon-
 
 THE NATURE OF PROFITS. 1 8$ 
 
 omy it is for the public interest that the cost 
 of articles of consumption should not be reduced 
 if the persons who effect the reduction in cost 
 effect it with that purpose in view. If they re- 
 duce the cost to the consumer, they ruin their 
 competitors, who can not make a living unless 
 they charge higher prices; and the fact that they 
 can reduce cost shows that they can " dictate " 
 prices. It is not easy to follow the distinction 
 made by the court between those combinations 
 of capital that in the first place applied steam 
 to manufacturing and transportation, and those 
 which apply improved chemical or electrical 
 processes or more economical methods of any 
 kind at the present day. We can not listen seri- 
 ously to the assertion that Arkwright and Ste- 
 phenson had no idea of reducing the cost of pro- 
 duction, while Vanderbilt and Edison and Besse- 
 mer have been animated with this guilty purpose. 
 It is absurd to maintain that any combination of 
 capital can arbitrarily raise prices to any given 
 figure. There may be a temporary "corner"; 
 a very powerful combination attempted one in 
 copper a few years ago, and incurred thereby the 
 most ruinous losses. But it is palpably not for 
 the interest of a concern engaged in production 
 or transportation to attempt anything of this 
 kind. It is apt to result eventually in loss.
 
 l86 INDUSTKI.M. I Ri;i:i)()M, 
 
 it is tiot t(Kj nuicli to say tliat no monopoly 
 lias, or can have, the power over j>riccs asserted to 
 exist by the Supreme Court. There arc no com- 
 plete moiKtpolies. There are always existing 
 comi)etitors; there are more potential com- 
 petitors. Size is an element of weakness as 
 well as strength in industrial comi)etition. The 
 absolute loss to the American Sugar Company 
 in .1 war of prices with independent refineries 
 would be far greater than that of its antagonists. 
 It can only inflict loss by reducing its prices, and 
 only in an emergency would it be politic to sac- 
 rifice great i)rofits in order to prevent competi- 
 tion. A small concern may have very powerful 
 backers; it can say to a great concern, " Hands 
 off, or we will make it cost you millions to thou- 
 sands that we shall lose." This truth has come 
 to be understood in the case of railroads. The 
 strong roads, it is conceded, are at the mercy 
 of the weak ones. The weak ones know it, and 
 arc always trying to increase their profits by 
 frightening the big roads into concessions by 
 threats of lower prices or rates. A man-of- 
 war is a bigger mark than a torpedo boat. It 
 may be able to sink its little antagonist, but if 
 its own hull may be pierced in the process it will 
 be prudent not to invite battle. 
 
 The imagination of the Supreme Court is ex-
 
 THE NATURE OF PROFITS. 1 8/ 
 
 cited by the idea that a combination of capitalists 
 may possess a complete monopoly and hold a 
 whole people at its mercy. Were such a mo- 
 nopoly to come into existence it would be com- 
 pletely at the mercy of the people. Let us sup- 
 pose that the sugar-refining business was entirely 
 in the hands of one concern. In such a case 
 Congress could extinguish it in a day. It could 
 remove the duty on refined sugar and raise that 
 on raw sugar, and every American refinery would 
 have to close. Congress can not do this now 
 without destroying a number of independent re- 
 fineries. In other words, it can not crush this 
 monstrous monopoly, because there is no mon- 
 strous monopoly to crush. No patriot need be 
 alarmed at the thought that his country may be- 
 come the victim of absolute industrial despotism. 
 Our great manufacturing combinations do not 
 possess the powers attributed to them, and if 
 they did it would be madness to exercise them. 
 They do not court ruin, and they know how vul- 
 nerable they are. 
 
 Whether these conclusions are sound or not 
 is really immaterial in our present inquiry. It 
 is beyond question that workmen employed by 
 great combinations of capital are, on the whole, 
 at least as well paid as those in private employ. 
 It is admitted that these combinations reduce the
 
 1 88 INDUSTRIAL rKI.KDOM. 
 
 cost of prcxlucinj; floods. If they increase tlieir 
 product they employ more hihourers. If tliey 
 I«»\v<.r its price they benefit all labourers who con- 
 sume the product; and if they drive inefficient 
 producers out of the business, it must be remem- 
 bered that the workmen employed by such i)ro- 
 ducers are the worst off of their class. Hence 
 to confiscate the exceptional profits due to the 
 combination of a number of competinir concerns 
 untler one manap^ement may tend rather to de- 
 crease than to increase the compensation of la- 
 bourers.
 
 CHAPTER XII. 
 
 POSSIBLE EFFECT ON WAGES OF REDUCING THE 
 RATE OF PROFIT. 
 
 The fact that our progressive accumulation 
 of wealth has tended to lessen gradually the rate 
 of interest is not of a nature to deter men from 
 saving. The result is too remote to influence 
 present action. It is not generally understood, 
 nor would it, perhaps, be considered if it were. 
 It threatens no immediate loss, no diminution 
 of capital, no impairment of security. At any 
 moment the investor feels that he may with- 
 draw his principal and spend it if he is not con- 
 tent with his income. What is most important 
 of all, he thinks that the decline of interest is due 
 to the operation of natural forces. It has taken 
 place because property has been protected and 
 profits increased under modern methods of gov- 
 ernment. It signifies that freedom of contract 
 has been recognised, that production has been 
 enlarged, that labourers have received a continu- 
 ally increasing compensation, and have had a 
 
 189
 
 190 INDUSTRIAL FRKKDOM. 
 
 greater .surplus above ihcir necessary require- 
 ments. It is on many accounts the most encour- 
 aj^inj^ plienomenon in tlie present situation, just 
 because it has been br()U}.,'ht about under the 
 coiKhtions liere described. If it suj^jjests to the 
 far-si};hted investor that he may not hope for 
 such j^ains hereafter as lie has had in the past, 
 il tells the labourer that in the future wages may 
 be higher, life and property more secure. If his 
 savings will be less productive, they will be easier 
 made; if his interest is diminished, it is because 
 his principal is increased. 
 
 'ilio proposal to anticipate a future stage of 
 development by means of compulsory laws as- 
 sumes not only that this conceivable stage of 
 progress is certain to be reached, but also that 
 it can be reached by establishing conditions dif- 
 ferent from those under which progress has hith- 
 erto taken place. In order to comprehend fully 
 all that is involved in this assumption, we need 
 to examine more particularly, even at the cost 
 of some repetition, the manner in which our pres- 
 ent wealth has been created and the motives 
 which have influenced the classes participating 
 in its creation. W'c know in a general way that 
 owing to greater knowledge of the powers of 
 Nature and increased skill in their application, to- 
 gether with enlarged capital and improved la-
 
 WAGES MAY FALL WITH PROFITS. IQI 
 
 bour, production has become far more effective. 
 We know that the chief motive for increased pro- 
 duction is the desire for gain or profit; and we 
 know that while the share of this gain appro- 
 priated by capital has been absolutely greater, 
 it has been relatively less. The general rate of 
 profit has probably declined; the general rate of 
 wages has certainly increased. Let us look at 
 these movements in detail. 
 
 In the first place, we may remark that the 
 advance that has taken place in the general rate 
 of wages has been so gradual as to have escaped 
 notice. To this day one may hear workmen 
 refer regretfully to the high wages received dur- 
 ing the civil war, although it is well established 
 that these wages were higher only when reck- 
 oned in inflated currency. The great mass of 
 investors are ignorant of this advance and of the 
 relation which they bear to it. Every one who 
 saves his money and deposits it in a bank is 
 contributing his mite to the fund available for 
 the payment of workmen, and is therefore doing 
 what he can to raise their wages; but he has no 
 such intention. Investors may find their income 
 declining, but if they are aware that the higher 
 wages paid workmen contribute to this result, 
 they do not feel that they have been amerced 
 for that purpose. Were they told that they were
 
 192 INinrSTttlAL FREKDOM. 
 
 under ()bli;^ali(jii to accept a lower rate of inter- 
 est or j)ront in order that wapcs mij^ht be in- 
 creased, tlicir fecliiif^s would be very different 
 from what they are now. The view of justice in- 
 volved in this oblij^'ation mij^ht not commend 
 itself to them at all. Tliey mi^ht regard it as 
 the height of injustice, and their attitude would 
 be a very important element in the situation. If 
 the supposed claim of justice can be enforced only 
 by the use of measures that will alarm or exas- 
 perate the possessors of wealth, its purpose may 
 be defeated. If such people become convinced 
 that they are the victims of oppression and spolia- 
 tion, they may resort to measures that will result 
 in withdrawing- their property to a greater or less 
 extent from productive employment. If we can 
 not enforce our supposed requirements of justice 
 without this result, there is nothing for us to do 
 but to confess that we have been mistaken in 
 these requirements. 
 
 No mere assertion, or bluster, however, is 
 sufficient to prove this point. It is very easy to 
 condemn this measure or that on the ground that 
 it will discourage saving, and thereby lessen pro- 
 duction. But we know very well that some ac- 
 cuniulaticMi will take place without the induce- 
 ment of profit or interest. !Macaulay tells us 
 that the father of Pope, the poet, who retired
 
 WAGES MAY FALL WITH PROFITS. 193 
 
 from business in the city about the time of the 
 Revolution, carried to a retreat in the country 
 a strong box containing nearly twenty thousand 
 pounds, and took out from time to time what was 
 required for household expenses; and it is highly 
 probable that this was not a solitary case. Many 
 thrifty princes have stored up large sums of gold 
 and silver, and in the earlier stages of civilization 
 hoarding was extensively practised. It was but 
 yesterday, we may say, that the French peasantry 
 gave up the practice of hiding silver in their 
 stockings or behind their wainscots; and the con- 
 stant absorption of this metal by Asiatic peoples, 
 which goes on to this day, is due to the same 
 propensity. 
 
 It does not appear, however, that the exist- 
 ence of such practices can have any effect upon 
 the compensation of labourers, except to depress 
 it. The motive for hoarding is the desire for 
 security; but the motive for employing labour 
 is the desire of gain. These motives are neces- 
 sarily in perpetual conflict. If the latter were 
 extinguished, there could be no reason given why 
 any one should risk his money in the ventures of 
 commerce. If he keeps it it is safe, but if he 
 pays it out in wages he may lose it. Mere ac- 
 cumulation, therefore, can never promote produc- 
 tion or benefit labourers. Some rate of profit,
 
 194 INDUSTRIAL FREEDOM. 
 
 however small, must be allowed, or the employ- 
 ment of labourers on any considerable scale would 
 cease altogether. 
 
 It is idle to attempt to determine the com- 
 parative efTectiveness of these motives. Many 
 persons enjoy gambling, or what they prefer to 
 call speculation. The excitement derived from 
 I he hope of great gain outweighs the fear of loss, 
 and they arc willing to take chances even when 
 they know that the chances are against them. 
 While this propensity meets with general disap- 
 proval, it can not be denied that it has had much 
 to do with the progress of civilization. We owe 
 an immeasurable debt to our inventors; but their 
 pursuits are of a highly speculative character, and 
 their discoveries are only brought into general 
 use by the aid of those who are willing to risk 
 their money in enterprises whose success is prob- 
 lematical. Upon minds of this character it is 
 impossible to determine what would be the effect 
 of a legislative reduction of the rate of profit. It 
 might deaden their interest in speculation, and 
 make them appreciate the advantages of security, 
 or it might stimulate them to more desperate 
 ventures. Nor is it more possible, perhaps, to 
 determine how the interests of the community 
 will be affected by their action. But we may rea- 
 sonably conclude that, as the prospect of in-
 
 WAGES MAY FALL WITH PROFITS. IQS 
 
 creased gain is known, as a rule, to stimulate en- 
 terprise, so the prospect of diminished profit will 
 have the opposite tendency, even in the case of 
 the more venturesome. 
 
 As to those who do not directly employ la- 
 bourers with their capital, it is evident that the 
 number preferring- a moderate return, with se- 
 curity, to the uncertain chances of speculation 
 is very large. This is indicated roughly by the 
 extent of those forms of investments which are, 
 on their face at least, not speculative. To a 
 great extent the buyers of real estate, and espe- 
 cially the holders of bonds and mortgages, may 
 be regarded as generally investing their savings 
 with an eye principally to their security. The 
 efifect on this class of a sudden fall in the rate 
 of interest may vary according to the extent of 
 their possessions. Those having the greatest in- 
 comes would presumptively suffer less discomfort 
 from their reduction than those having much 
 smaller ones. This is not altogether a matter 
 of conjecture, since many large estates are known 
 to be invested in those " securities " that pay the 
 lowest interest. A sudden fall in this rate might 
 in such cases have little efifect on accumulations 
 already in existence. The principal would be 
 kept intact, although the income was reduced. 
 
 But the same misfht not be true of future
 
 1^6 INDUSTRIAF. I RKEUOM. 
 
 accuimilations. Wealthy persons mi^lit feel that, 
 after making a sufl'icicnt provision for their ordina- 
 rv re(iuiremcnts,it was hardly worth while to econ- 
 omize further. Before the reduction of interest 
 their income was sufficient to enable them to 
 live on a certain scale and to save something as 
 well. Now, although their principal is undimin- 
 isheil, their income is not sufficient to enable 
 them to save anything unless they reduce their 
 scale of living. Some persons would undoubt- 
 edly, under such circumstances, reduce their ex- 
 penses, but others would not. Penurious pco- 
 I)le and those having children or other relatives 
 for whom they wish to provide would be included 
 in the former class; more generous livers and 
 those under no obligations to provide for others 
 would constitute the second. It is at all events 
 possible that a somewhat diminished rate of ac- 
 cumulation would result, for the income out of 
 which savings were made would be smaller. 
 
 Hardly any one will deny that a sound condi- 
 tion of industry may be more important to la- 
 bourers than a rise in wages; nor can it be denied 
 that wages have to be from time to time re- 
 duced in particular trades in order that employ- 
 ers may not abandon them. Any forced or arti- 
 ficial advance in wages, although apparently a 
 present gain to labourers, may thus be more than
 
 WAGES MAY FALL WITH PROFITS. IQ/ 
 
 balanced by future losses. The apprehension is 
 constantly felt in England that her trade will 
 suffer from the competition of countries where 
 the rate of wages is lower. Her industries are 
 dependent on the supply of coal, and the miners' 
 wages have sometimes been raised to a point that 
 made some coal mines unprofitable. The high 
 price of coals thus caused reduced the profits 
 of other industries to such an extent as to affect 
 trade. In this way a general reduction of wages 
 followed, either in the shape of reduced rates or 
 diminished employment. 
 
 Such conditions impair the security of the 
 savings of labourers. Failures take place, mort- 
 gages are foreclosed, credit is contracted. Some 
 capital is thus lost, and more lies idle on account 
 of apprehension. Hardly any member of a mod- 
 ern industrial society can gain in one direction 
 without losing in another, unless the whole com- 
 munity gains. And this community of interests 
 is bound up with continuity of development and 
 progress. Any disturbance of the social order 
 is propagated throughout society. The very 
 apprehension of disturbance is prejudicial; it 
 is not confined in its effects to those who feel 
 alarm, but reaches all those who may be influ- 
 enced by their action. To maintain that there 
 is any resemblance between the results of a grad-
 
 198 INDUSTRIAL FRKKDOM. 
 
 ual decline of pnjlUs through the operation of 
 natural causes and the results of a sudden decline 
 through laws destroying existing rights of prop- 
 erty, is like maintaining that the fear of flcath 
 from old age is like the fear of being murdered 
 by a highway robber. Every one knows that 
 he can take nothing out of this world, and that 
 every night, to use the metaphor of the sacred 
 poet, he pitches his tent a day's march nearer 
 home. Such thoughts, however, do not occupy 
 his mind when he is engaged in business, and 
 he devotes himself to making a living without 
 troubling himself about dying. But if he is 
 threatened with assault by marauders, his emo- 
 tions are altogether different; and when his prop- 
 erty is attacked by those whom he has regarded 
 as its natural guardians, when the law deprives 
 him of the rights which it formerly guaranteed, 
 it is scarcely credible that he should continue his 
 former practices of accumulation and invest- 
 ment. 
 
 In estimating the results of such a change 
 as is proposed, we can not confine ourselves to 
 the contemplation of what might be expected 
 to happen in an isolated society. Our aim being 
 to establish a reign of justice, we can not disre- 
 gard the effect upon mankind of measures adopt- 
 ed bv our own State. If we could succeed in
 
 WAGES MAY FALL WITH PROFITS. I99 
 
 raising the wages of American workmen by legis- 
 lative fiat, we could not assume that we had 
 made any advance toward justice without assur- 
 ing ourselves that labourers elsewhere were not 
 prejudiced. If we were governed by expediency 
 this might not be the case. We might then say 
 that we were not our brothers' keepers; that we 
 must seek the welfare of our own society; that 
 so long as jealousy and hatred prevailed between 
 nations it would be impracticable to realize the 
 ideals of the brotherhood of mankind. 
 
 But we can not say this if we propose an in- 
 dustrial revolution in the name of justice. We 
 must look on the world as a whole, and its de- 
 velopment as a continuous process. We must 
 recognise that the institutions of one nation can 
 not be changed without affecting other nations; 
 that the rewards of labour and capital in one coun- 
 try frequently have a very close connection with 
 their rewards in other countries. We must be 
 prepared to admit that what is intended to pro- 
 mote justice in a particular case may hinder it 
 in the world at large. Hence, unless we are as- 
 sured that our revolution is in the Hne of the 
 world's progress we do wrong to begin it. 
 
 We may find that success in decreasing the 
 rate of profit in this country is followed by fall- 
 ing wages. To some extent this might operate 
 14
 
 200 INDUSTRIAL IHr.I.DOM. 
 
 to im|)rovc the conditicjii of labourers elsewhere, 
 and the ends of justice would tlius be measurably 
 ait.iiiK'd. It is indeed conceivable that abstract 
 justice may re(|uire the inhabitants of a particu- 
 lar rcf^ion to sacrifice themselves for the sake of 
 mankind. I'.ut before destroying our own pros- 
 l)(.rity with a view to promoting that of the rest 
 of the world, wc should require very clear demon- 
 stration that such a result must follow. 
 
 These general observations are sufficient to 
 show that a decrease in the rate of profit caused 
 by increased charges is a very different thing from 
 a decrease caused by the growth of capital, and 
 may have very difTcrcnt effects on wages. There 
 is, unfortunately, much evidence proving that 
 such effects have been produced in our own coun- 
 try. We can not define capital without recognis- 
 ing the psychological element. It is wealth in- 
 tended to be used in production, and the inten- 
 tion of its owners is subject to modification by 
 many causes. It follows that the amount of capi- 
 tal is subject to very sudden and very extensive 
 fluctuations. Fixed capital may not at first sight 
 seem capable of reduction, but to other capital 
 the saying that riches have wings applies. Such 
 capital is not confined by geographical bounda- 
 ries; it belongs to the world, and it can go 
 whithersoever its owners choose. If thev are not
 
 WAGES MAY FALL WITH PROFITS. 20I 
 
 satisfied with the protection afforded in one juris- 
 diction they will seek another. 
 
 Within a few years much capital owned in the 
 Eastern States has been recalled from investment 
 in the West. So much has been lost as to make 
 investors apprehensive; and the disposition of 
 legislators has not always been so reassuring as 
 to make it seem prudent to renew mortgages 
 when they fell due. Probably much more capital 
 owned by European investors" has been with- 
 drawn from this country altogether. Under 
 normal conditions this country is an importer 
 of capital, just as it is an absorber of immigrants. 
 The opportunities for the employment of capital 
 have been very exceptional. The natural wealth 
 of the country is greater than that of most 
 other parts of the earth, and, what is more 
 important, the protection of property has been 
 better than has been obtainable in other coun- 
 tries of undeveloped resources. Hence there 
 has been a comparatively steady and increasing 
 flow of capital hither from the great reservoirs 
 of Europe. We can normally employ perhaps 
 several hundred million dollars of additional for- 
 eign capital every year — that is to say, we can 
 so use this amount as to make satisfactory profits 
 for American employers, satisfactory wages for 
 workmen, and satisfactorv interest for foreign
 
 202 INDUSTKl.M. 1 KKEPOM. 
 
 Ifiidcrs. The " balance of trade," therefore, 
 should I)C regularly against us. Tiie value of 
 our inij)orts ought regularly to exceed that of 
 our exports. 
 
 I'or some years prior to 1896 the value of 
 our imports declined, while we exported much 
 gold and increased the value of our other ex- 
 ports. Immigration also declined. lUit during 
 the year 1896 this tendency became especially 
 marked. The value of our exports is reported to 
 have exceeded that of our imports by about 
 $325,000,000. We imported some gold, and 
 there were dealings in bills of exchange of very 
 exceptional character; but, on the whole, this 
 balance can have been adjusted in only two ways. 
 Either foreign owners of American securities dis- 
 posed of them in this country, or American capi- 
 talists made investments outside of this country. 
 Even if we allow a large sum for interest paid 
 on obligations to foreigners, and for the disburse- 
 ments of Americans abroad, there is a difference 
 that can l)e explained only by the withdrawal 
 of capital from investment here. 
 
 The attention of the public is not invited to 
 transactions of this kind. The long-headed men 
 who look far forward in securing the interests 
 of those dear to them are not in the habit of 
 disclosing their plans. They do not lay bare
 
 WAGES MAY FALL WITH PROFITS. 203 
 
 all their secrets in interviews with newspaper re- 
 porters. But although they can conceal their 
 action as individuals, they can not altogether 
 hide its collective results. \Ye know that capi- 
 tal has to some extent gone out of the coun- 
 try, and we know that our prosperity has hith- 
 erto depended on its coming into the country. 
 It may not be true that six hundred millions, or 
 even three hundred millions, of foreign capital 
 that would under former conditions have been 
 invested in this country, have not been invested 
 here. But it is true that capital has proved its 
 power of taking flight, and it is also true that 
 the result has been to reduce the compensation 
 of American workmen. 
 
 The idea that fixed capital can not be re- 
 duced is incorrect. We are, as has been pointed 
 out, a growing country, needing continually 
 larger fixation of capital. But the additional 
 investment is the voluntary act of capitalists. 
 They will not make it if they think they will lose 
 it; they will be particularly reluctant if they 
 think they may lose it by confiscation. To cease 
 to add to our fixed capital is to effect a relative 
 reduction in its amount; and it is perfectly feas- 
 ible to reduce its absolute amount. Several 
 hundred million dollars' worth of buildings is an- 
 nually consumed by fire. It is optional with the
 
 204 INDUSTRIAF. FRKKDOM. 
 
 owners to rchiiild; if tlicy ^vi h.. j>r(»rit in it, they 
 will cMiij)U)v what they j^ct from the insurance 
 cnnipaiiics in other ways. 
 
 Perhaps an c(|nal vahie annually disappears in 
 various forms of deterioration. Pasture is over- 
 run with bushes; meadows " run out "; barns 
 and houses decay. Manufacturing concerns 
 fmd that it is better to ^Mve up operating some 
 of their mills, or not to renew some of their ma- 
 chinery as it wears out. Even railroads are 
 sometimes abandoned. There are hundreds of 
 miles of railroad that would be abandoned did 
 not the owners hope by putting in more capital 
 to secure some eventual return. When they 
 have thrown enough good money after the bad, 
 they give up hoping, and the unprofitable enter- 
 prise collapses. Some few shreds and tatters of 
 the capital that had been fixed in it may be saved; 
 a bankrupt railroad may earn its operating ex- 
 penses. But there is a partial loss, if not a 
 total loss, and there may be enough partial losses 
 to diminish llie total amount of fixed capital. 
 
 As we have pointed out. whatever charges are 
 imposed on fixed capital must be paid out of the 
 income produced by that capital. It is unfor- 
 tunately beyond dispute that during the last few 
 years railroads have met reductions of income by 
 reductions of wacrcs. Thcv have either reduced
 
 WAGES MAY FALL WITH PROFITS. 205 
 
 the rate of wages or the number of men em- 
 ployed, or both. We are justified in conckiding 
 that where the return upon investments of fixed 
 capital is materially reduced, the amount of cir- 
 culating capital applied in connection with fixed 
 capital will also be reduced, and that the gross 
 if not the proportional share of labourers will 
 be affected by the reduction. Railroad mana- 
 gers are generally ambitious and optimistic; 
 banking houses are blinded by the desire to make 
 commissions; but prudent investors are not 
 Hkely to make further investments on any large 
 scale in new railroads, if there is reason to ex- 
 pect that the rate of profit on such investments 
 is to be reduced. 
 
 Every year a number of men engaged in busi- 
 ness die, and a number fail. Under ordinary con- 
 ditions a greater number take the place of those 
 that drop out. They do this with the expecta- 
 tion of profit; but if they can form no such ex- 
 pectation they will abstain from new ventures. 
 In other words, the amount of capital actively 
 employed will be reduced, and unless the number 
 of labourers is correspondingly reduced the rate 
 of wages can hardly be maintained. But to re- 
 duce the number of labourers is a slow process, 
 and a very distressing process. In this country 
 a certain degree of reduction is quickly accom-
 
 2r/) INDtTSTRIAL rRRFDOM. 
 
 plislicd !)>' clu-il<iii}; llu- itillux of immigrants; 
 Imt even this relief is not ciu)uj;li, in times when 
 (limiiiislied profits arc anticipated, to prevent 
 large numbers of native workmen from being 
 thrown out of work. 
 
 Our recent experience certainly furnishes am- 
 ple i)roof of the proposition that the anticipation 
 of (liininislicd profit caused by legislative action 
 can reduce not only the amount of capital active- 
 ly employed, but also the proportion applied to 
 tiic payment of wages. Investors have appre- 
 hended that Congress might pass laws affecting 
 the standard of value to such an extent that they 
 might not recover the value with which they had 
 parted. If these things are done in a green tree, 
 what shall be done in a dry? If a feeling of un- 
 certainty as to the return of investments has pro- 
 duced such disastrous consequences to labourers, 
 what will be the effect of a certainty of dimin- 
 ished returns intentionally caused by legislative 
 fiat? 
 
 To sum u]) the argument, we find that it is 
 perfectly possible, as this country knows to its 
 cost, for legislators to decrease the rate of profit 
 and the rate of wages at the same time. It is 
 also possible, although our experience in this di- 
 rection is much more limited, for legislators to 
 increase both profits and wages. The fact that
 
 WAGES MAY FALL WITH PROFITS. 20/ 
 
 wages are necessarily paid out of previously ac- 
 quired income by the voluntary appropriation of 
 some part of this income to their payment, con- 
 stitutes the great obstacle to their compulsory 
 increase. The natural result of a decreased rate 
 of profit is a decreased rate of wages. This tend- 
 ency may be overcome; it has been overcome 
 during a considerable part of the century now 
 drawing to its close. But it has been overcome 
 by a very extraordinary cheapening of the 
 processes of production and transportation. The 
 gross income of the community was increased 
 to such an extent that the diminution of the 
 rate of profit did not check the disposition to 
 accumulate. The purchasing power of the 
 profits was increased to such an extent as to 
 counterbalance their diminished rate. 
 
 It may be that the cheapening process will 
 continue. We can not predict what inventions 
 and discoveries may yet be made. It is thus 
 possible that wages may still further increase at 
 the expense of profits. But it by no means fol- 
 lows that our legislators can exercise the magni- 
 cal power of Bessemer, or Bell, or Edison. They 
 can destroy, but they can not create. It may 
 be admitted that their action in reducing the 
 rate of profit may possibly be coincident with 
 the beneficent results of invention. This, how-
 
 208 INDUSTRIAL FKKKDOM. 
 
 ever, would Ik* a matter of chance, and in sucli 
 event the rechiction ordained hy statute would 
 not he caused hy it, hut hy independent forces; 
 for if those forces did ikjI come into j>lay the re- 
 sult might not f(jIlow.
 
 CHAPTER XIII. 
 
 PARTICULAR MEASURES FOR REDUCING PROFITS. 
 
 No practical scheme for the compulsory in- 
 crease of wages has ever been clearly formulated, 
 and it might at first seem that none was con- 
 ceivable. The contract of hiring being a vol- 
 untary one, the employer must be able to enter 
 into it or not at his discretion, and if he is 
 obliged by law to pay a higher rate of wages 
 than he thinks he can afford, he will not enter 
 into the contract. Nevertheless, we can con- 
 ceive methods of accompHshing this result indi- 
 rectly. The expenditure for public purposes in 
 every civilized community is a considerable 
 charge on the income of its members, and it is 
 not on its face impossible to put this charge on 
 the income of certain classes, and to exempt the 
 income of others. 
 
 In point of fact, something of this kind is 
 thought to take place now. The income of la- 
 bourers is their wages, and there are no taxes as- 
 sessed on wages. But it does not follow that 
 
 209
 
 2IO INDUSTRIAL FREEDOM. 
 
 till')' arc exempt from taxation because tlicy are 
 not spccilically taxed. It is {:jenerally niain- 
 I. lined thai a tax on imports, although collected 
 from the imi)orters, is only advanced by them, 
 and is really paid in the end by those who con- 
 snnie the goods. So an excise collected from 
 brewers and distillers, and the sellers of their 
 products, is commonly regarded as paid by those 
 who use them. So far as labourers consume 
 these taxed commodities, they contribute to the 
 payment of the taxes levied on them; and so 
 far as they have no other fund, they must con- 
 tribute out of their wages. 
 
 It is not, perhaps, so clearly understood that 
 other taxes may have similar effects, yet in many 
 cases this appears demonstrable. During the 
 civil war a tax was imposed on the receipts of 
 companies transporting passengers; but they 
 seem to have raised their fares so as to make 
 their passengers pay the tax. In the case of the 
 street-car companies, as they could not increase 
 their rates by the precise amount of the tax, ow- 
 ing to the impossibility of dividing a cent into 
 fractions, they were obliged to charge six or 
 seven cents instead of five or six. Probably this 
 increased charge somewhat decreased the num- 
 ber of their passengers, and thus tended to dimin- 
 ish their profits. But whether this is true or not,
 
 MEASURES FOR REDUCING PROFITS. 211 
 
 it is evident that such passengers as they did 
 carry paid more for the service than before the 
 tax was imposed, and that they therefore paid 
 a part, if not the whole, of the tax. In fact, we 
 may lay down the general rule that any tax paid 
 by those engaged in a particular kind of business 
 tends after a time, if not at once, to be shifted 
 to the shoulders of consumers, or of the commu- 
 nity at large. 
 
 A tax on buildings, for example, may be 
 shifted by the owners to the tenants, and by the 
 tenants to their customers, and by their custom- 
 ers to the general public. Nothing hinders the 
 owner from demanding an increased rent except 
 the knowledge that the tenant will not pay it; 
 and in some cases he knows that the tenant 
 must pay it. If, under ordinary conditions, the 
 landlord raised the rent to a figure beyond that 
 which gave him the usual return on his invest- 
 ment, other people would put up buildings and 
 let them at the normal rate, and thus secure 
 the tenants. But now the increased rent only 
 corresponds with the increased tax, and new 
 buildings would be subject to this tax just as old 
 ones are, so that there would be no inducement 
 to build them. 
 
 We are confronted everywhere with the uni- 
 versal law of economics above referred to — the
 
 212 INIJUS'IKIAL I KII-DoM. 
 
 cc|tiali7.ati<)ii of rales of profit. In most cases, if 
 ail expense is incurred hy those ownin}^ a |jar- 
 licular class of property or cnj^aj^cd in a particu- 
 lar kind of Inisiness, they arc able very soon, if 
 not at once, to call on the rest of the world to 
 share the hiirden with them. When this can not 
 be done immediately, it is done gradually 
 throuj^^h the diminution of that class of proj)- 
 erty or that business. In every case, therefore, 
 we may say that the attempt to diminish particu- 
 lar jM-ofits by taxini,^ them leads eventually to 
 the diminution of profits in general. The effect 
 of such a diminution we have already referred 
 to, and it is unnecessary to repeat the conclu- 
 sions heretofore suggested. 
 
 The demagogues of this country who advo- 
 cated the tax on incomes, therefore, if they be- 
 lieved that labourers would pay no part of it, 
 might have found that they were mistaken. The 
 measure tliat was adopted in 1894 provided for 
 a tax on the dividends of corporations as well 
 as on the interest paid on their debts. This 
 would clearly have been paid in the first place 
 by the stockholders in these corporations and by 
 the holders of their bonds. Such securities are 
 very largely held by fiduciary institutions, and 
 their depositors would thus have contributed to 
 the payment of this tax. In many cases, how-
 
 MEASURES FOR REDUCING PROFITS. 213 
 
 ever, the corporations, as was formerly the case 
 with the street-car companies, would have been 
 able to raise the rates for their services, and the 
 tax would thus have been indefinitely diffused. 
 To some extent, although no one can say to what 
 extent, the same would have been true of the 
 tax on the income of individuals. So far as that 
 income was derived from trade or professional 
 services it would in some cases have been in- 
 creased by higher charges to an extent greater 
 than the tax, in some cases to a less extent, and 
 in many probably not at all. It is altogether 
 impossible to determine whether, on the whole, 
 the collection of this tax would have eventually 
 Hghtened the burdens of labourers or not; for 
 the expense of collection, including therein the 
 annoyance and waste of time to every one that 
 had to make a return, as well as the premium 
 ofifered to those who evaded the tax, would have 
 been in the aggregate enormous, and those upon 
 whom this expense fell would apparently have 
 been to some extent less able to pay wages. 
 
 It is thought expedient everywhere in this 
 country to make the cost of schooling for the 
 children of the common people a public charge. 
 In some cases the Government furnishes books 
 and transportation for the pupils, and the gratui- 
 tous distribution of food is occasionally demand-
 
 2\.\ INDUSTRIAL IKIIKDOM, 
 
 c»I. This policy lias been adojjtcd for various 
 reasons, but il is commonly approved on the 
 j^roiind that in this way the common people arc 
 exempted from the cost of cducatinj^ their ofT- 
 sprin^^ lUit the cost must fall somewhere; it 
 must be paid out of profits or wages. We do not 
 explain it by sayinj^' that the state, or the public, 
 or the (iovcrnmcnt. bears the charfj^es. Individ- 
 ual men bear them, in the shape of reductions 
 of their income or of their wap:es. 
 
 It is (|uile conceivable that if the cost of the 
 common schools were directly met by those edu- 
 cating their children at them their income might 
 be correspondingly increased. Such a statement 
 is altogether paradoxical to Americans; but it 
 would be equally paradoxical in a European 
 country to suggest that the Church could be 
 sustained without the support of the Govern- 
 ment. We have proved that it can, and the poor 
 are nowhere better supplied with efficient re- 
 ligious institutions. In fact, the interests of all 
 sorts and conditions of men are so thoroughly 
 blended and intertwined by the action of innu- 
 merable social forces as to insure the failure of 
 almost all legislative attempts to improve the 
 condition of one class by imposing burdens on 
 others. Taxes on profits may tend to reduce 
 wages; taxes on wages may indirectly reduce
 
 MEASURES FOR REDUCING PROFITS. 21$ 
 
 profits. Certain individuals may for a time gain 
 or lose because of such attempts; but neither any 
 considerable class of citizens nor the community 
 at large is likely in the long run to receive much 
 but injury from them. 
 
 The consequences of taxing interest and 
 profits in general with a view to increasing wages 
 are of such dubious and uncertain efficacy as usu- 
 ally to deter legislators from the attempt. But 
 since the income of the possessors of capital is 
 to a considerable extent expended for luxuries, 
 it is conceivable that this portion of income may 
 be taxed without at all diminishing that portion 
 applied to the payment of wages in productive 
 employments. Taxes of this kind were in favour 
 during the middle ages. Those desiring to con- 
 sume certain commodities were obliged to pay 
 for licenses entitling them to such gratifications. 
 Yet it would be hard to show that such exactions 
 have ever resulted in any lightening of the bur- 
 dens of the poor. The difficulty with these taxes 
 is that no principle can be established for defin- 
 ing luxuries. The nearest approach to a defini- 
 tion is to call a luxury whatever certain people 
 indulge themselves in, when in their neighbours' 
 opinion they could just as w^ell do without it. 
 No one can deny, however, that the opinion of 
 the majority would pronounce luxuries a number 
 15
 
 2l6 INDUSTRIAL FRKKDOM. 
 
 (if tliiii.i;s that many poor people, as well as rich, 
 liiitl necessary for their comfort, perhaps even for 
 their existence. Old and fine wines are called 
 luxuries because they are drunk l>y rich men who 
 are in ^ood health, liut doctors consider them a 
 necessity in certain cases, and if the life of a poor 
 man can he saved, or the strenj^th of a poor 
 woman restored, or even if their suffering can 
 be alleviated by the use of these remedies, it 
 seems deplorable for the Government to put 
 them out of their reach by taxing them. 
 The law, however, can not inquire into the cir- 
 cumstances under which every bottle of wine is 
 consumed, and if it hits the poor while aiming 
 at the rich, that must be accepted as an essential 
 feature of sumptuary legislation. 
 
 It would be easy to multiply proofs of this. 
 To the ordinary Philistine the notion that works 
 of art, or beautiful things in general, are not 
 luxuries is paradoxical. He knows that if it 
 came to choosing between good things to eat 
 and drink and wear, on one side, and pictures or 
 music, or even books or flowers, on the other, 
 he would choose the former, calling them the 
 necessaries of life and the latter the luxuries. 
 Nevertheless there are many poor people whose 
 tastes are different, and who content themselves 
 with plain living in order that they may procure
 
 MEASURES FOR REDUCING PROFITS. 21/ 
 
 what are necessities for their natures. Indeed, 
 we can not separate the necessary from the kix- 
 urious unless we draw the Hne at the very bottom 
 of the scale. Just so much food of the cheapest 
 kind as is sufficient to maintain health; just so 
 much clothing and shelter, also of the cheapest 
 kind, as will preserve vitality — only this is neces- 
 sary to man. Whatsoever is more than this 
 Cometh of luxury. As it is palpably absurd for 
 the Legislature to attempt to tax everybody on 
 the luxuries he consumes with the expectation 
 of improving his condition, so it is equally absurd 
 for it to imagine that it can discover any articles 
 of extensive consumption the taxation of which 
 would not fall on the poor as well as the rich. 
 To determine the degree of incidence on the dif- 
 ferent classes would be an extremely difficult un- 
 dertaking, and one for which the Legislature is 
 altogether incompetent; nor can any one, even 
 if he entertain the highest opinion of the capaci- 
 ty of legislators in general, seriously contend 
 that those whom we elect are qualified to formu- 
 late lists of articles to be banned on aesthetic 
 grounds, or because they are prejudicial to that 
 form of social development which, according to 
 the doctrine of evolution, may hereafter prevail. 
 Still, we must observe, the view that taxes 
 can be drawn from that part of the income of the
 
 2l8 iNDirSTKiAL iki:i:ot)M. 
 
 cnniminiity which would not he profhictivcly cm- 
 ploycil contains an ini|)ortant trnlh. Taxes, as 
 vvc liave seen, nuist ht- paid out of income. They 
 may often for a time and in particular cases come 
 out of principal, hut measures j)roducin^ this re- 
 suh arc of the nature of confiscation rather than 
 taxation, and can not be permanently effective. 
 Taxes, then, that arc paid out of that part of 
 income which would he employed as capital are 
 prejudicial. In any sound polity they must be 
 drawn out of that other part of income which is 
 unproductivcly consumed. In other words, taxa- 
 tion is injurious and excessive when the citizens 
 diminish their savings rather than their spendings. 
 Bearing this in mind, we can understand why 
 that most benevolent of men, Adam Smith, 
 should have declared himself in favour of taxing 
 the luxuries of the poor. So little revenue has 
 been derived from attempting to tax the luxuries 
 of the rich, that governments have been impelled 
 to levy their exactions on the expenditures of 
 the poor, and it has seemed better to tax those 
 expenditures that can be reduced with the least 
 suffering. It seems to be commonly assumed, 
 therefore, tliat as the poor are able to obtain the 
 ordinary necessities of life, and at the same time 
 to consume tobacco and alcoholic drinks, these 
 articles should be subjected to taxation.
 
 MEASURES FOR REDUCING PROFITS. 219 
 
 We are concerned with this theory only in 
 so far as it illustrates our proposition that taxes 
 ought to reduce as Httle as possible that part of 
 the income of a people which is saved. It is that 
 part which insures future progress, the decrease 
 of which insures lower wages. Taxes on so-called 
 luxuries may induce some men to give them up, 
 and thus increase their savings. They may cause 
 other men to devote what they would have saved 
 to meeting the increased cost of their luxuries. 
 So far as these taxes are productive of revenue 
 they perhaps indicate that most men prefer to 
 continue their luxurious consumption and econ- 
 omize elsewhere. In a broad view of the sub- 
 ject it seems that the amount of taxation is of 
 more consequence than its subjects. No writer 
 has demonstrated that a tax on articles consumed 
 by the poor is permanently paid by them alone, 
 nor that a tax on bread or clothes would burden 
 them collectively more than one on beer or to- 
 bacco. Nor has it been demonstrated that taxes 
 on profits are never paid out of wages. But it 
 requires no demonstration to convince an impar- 
 tial inquirer, that as taxes are certainly taken out 
 of the gross product of the whole community, 
 so they tend eventually to be assessed upon the 
 different shares of that product in much the same 
 proportion as the other expenses of production.
 
 220 INDUSTRIAL rKKKDOM. 
 
 \Vc must now consider how far the con(htion 
 of tlie poor can he imi)rovefl by some measures 
 of confiscation that ha\e recently come into fa- 
 vour with oiu" legislators. The colossal fortunes 
 ac(iuired in modern times by single individuals 
 are not easily reconciled with the theories of 
 democracy, and it is not surprising that so com- 
 mon and violent a passion as envy should aflect 
 the policy of our governments. Rut we must 
 not forget that various attempts have been made 
 by rulers in all parts of the world and at all times 
 to compel the possessors of great wealth to give 
 up a part of it. In many Asiatic kingdoms the 
 most drastic methods have been employed in 
 dealing with the rich, and they have been imi- 
 tated to some extent by European despots. But 
 wiierc these methods iiave prevailed the condi- 
 tion of labourers has been invariably wretched, 
 and it has been wretched precisely because of the 
 general insecurity that must accompany confisca- 
 tion. If we merely aim to decrease the property 
 of the very rich, the problem is comparatively 
 simple; but if we aim to increase that of the 
 poor by confiscating that of the rich, we may 
 create economic conditions that will defeat our 
 purpose. 
 
 Some persons apparently suppose that a law 
 might be passed forbidding any one to possess
 
 MEASURES FOR REDUCING PROFITS. 221 
 
 more than a certain amount of property, and 
 ordaining that any excess should be devoted to 
 public uses, thereby exempting the great mass 
 of citizens from taxation. The difficulties in the 
 way of such legislation are numberless. It is 
 hard to fix the maximum amount of property 
 that any one should be permitted to enjoy. The 
 millionaires would set the limit high; the popu- 
 lace would set it low. The great majority regard 
 a hundred thousand dollars, or even fifty thou- 
 sand dollars, as a great fortune, and the majority 
 would determine what the limit should be. 
 Even ten thousand dollars is far beyond the as- 
 pirations of most people, and if the matter were 
 submitted to popular vote, it would seem rea- 
 sonable to expect that the possession of any for- 
 tune greater than what the ordinary man can 
 hope to acquire would be pronounced unjust. 
 But any exceptional burden laid on such fortunes 
 would affect the employment of labourers very 
 directly. 
 
 Even if the attempt at confiscation were con- 
 fined to very great fortunes it might be de- 
 feated.* We can not expect the co-operation 
 
 * We are told by M. des Essars, of the Bank of France, in his 
 History of French Banking, that about 1715, financiers, and espe- 
 cially revenue farmers, having become extremely obnoxious to the 
 people, who imputed to them misfortunes for which the rapacity of
 
 222 INDUSTKIAI. I KKI.DoM, 
 
 of wcaltliy iiKMi ill .schemes intended to deprive 
 tlicin of their property, and we can not nowadays 
 conipti ihciii to (H.sclose what they own by apply- 
 ing the bastinado, or jjulhng out their teeth, as 
 was done to the Jews l>y sonic of the Knj^dish 
 kinj;s. The possession of wealth would be con- 
 cealed, and such concealment is known to be 
 practicable. Under our law all tanj^iblc property 
 is taxable, and all rij^hts in that property, or 
 choses in action, are also taxable. But as it is 
 the tangible property that produces revenue, the 
 common sense of mankind revolts against the as- 
 sessment of mere evidences of debt; and al- 
 though such personal property is nearly ever>'- 
 
 the Trcxsury should have been held .iccount.-ible, the regency de- 
 termined on making an indiscriminate spoliation of this class, or, 
 as the saying was, upon making them "disgorge," To this end 
 they were forbidden to quit the countr)' under pain of death, and a 
 Chamber of Justice was erected to take cognizance of their official 
 extortions. They were ordered to produce all their accounts for 
 twenty-seven years, to prove what they were worth at the beginning 
 of this period, and to furnish a minute account of their possessions 
 at its end. False testimony was punishable by sentence to the gal- 
 leys for life, and rewards were offered to informers. If no offense 
 could be proved .against the accused, the Chamber of Justice let him 
 off with the confiscation of four fifth.s of his earnings during twenty- 
 seven years and the admonition that he retained the remaining 
 fifth by the grace of the king. About six thousand persons were 
 prosecuted, whose possessions amounted by their own showing to 
 1,200,000,000 livres ; 4,410 of these were condemned to pay a total 
 of 2ig,ooo,ooo livres ; but many of them were able to find powerful 
 protectors, and by 1 71 7 the Treasury had recovered only 70,000,000 
 livres, and barely half the fines imposed were ever collected at all.
 
 MEASURES FOR REDUCING PROFITS. 223 
 
 where taxable by law, the amount actually taxed 
 is comparatively insignificant. 
 
 In some communities very earnest attempts 
 are made to collect such taxes, and capital ac- 
 cordingly flies h"om such communities to those 
 where assessors are more lenient. We can not 
 forbid men to travel; no practical plan has ever 
 been suggested to prevent rich people from tak- 
 ing their money to Europe and spending it there, 
 although the practice has encountered the stern- 
 est reprobation from some moralists. So far as 
 personal property is concerned, to prohibit the 
 possession of more than a certain quantity of it 
 would be a mere brutum fiilmen. Unless the whole 
 fabric of our law were torn to pieces, and the 
 transfer of personal property surrounded with the 
 same formalities as that of real estate, no limita- 
 tion of ownership would be practicable. But to 
 require such formalities would destroy civiliza- 
 tion. If no purchase of goods could be made 
 except by deed, executed, acknowledged, and re- 
 corded, the entire traffic of mankind would be 
 arrested. The baker could not give title to 
 his rolls, the dairyman to his milk, or the 
 butcher to his meat. But unless this formality 
 were enforced, no one could be hindered from 
 paying money; and unless we could make it im- 
 practicable for rich men to receive money, we
 
 224 INDUSTRIAI. TUKKDOM. 
 
 could not keep them from iK^anlin;^ it, and liid- 
 in^ it, and carrying it where they thought it 
 would l)C safest. 
 
 As to real estate, it is conceivable that limita- 
 tions of the amount owned might be to some 
 extent enforced, although obviously at great ex- 
 pense. A man may own land in every State, and 
 }c't the fact be known only to himself. The only 
 way in which large ownership could be prevented 
 would be by disqualifying large owners from giv- 
 ing title. P)Ut this would impose an intolerable 
 burden u])nii the purchasers of land. To be 
 sure of their property they would have to search 
 in all the counties of all the States, and they 
 could never make these searches terminate to- 
 gether. No people accustomed to our present 
 methods could be brought to submit to such a 
 system. But if large owners of land were able 
 to give good title, it is safe to say that they would 
 never be found in possession of more than the 
 permitted quantity of land. They would find 
 trustworthy agents to hold land for them; and 
 if the difficulties proved serious, they would grad- 
 ually transmute their holdings of real estate into 
 personal property. 
 
 The existence of these obstacles has caused 
 legislators to turn their attention, of recent years, 
 to the development of a system of taxes known
 
 MEASURES FOR REDUCING PROFITS. 22 5 
 
 variously as inheritance, or succession taxes, or 
 as legacy, or transfer, or death duties. Since 
 it has proved impracticable to collect exceptional 
 taxes from those in possession of great fortunes 
 while they were aUve, it has been thought that 
 better success might be had with those who suc- 
 ceed to these fortunes upon the death of the 
 original proprietors. The opportunity is given 
 by the necessary publicity of the proceedings of 
 probate courts. No legislation can be devised 
 to prevent a man from parting with his wealth 
 while he is living; but when he dies no title can 
 be made to what he owned without the aid of 
 the law. Many ingenious and refined reasons 
 have been suggested why this aid should be 
 granted only on the payment of a fine or 
 tax; but we are not concerned with the vaHdity 
 of these reasons. Our inquiry is limited to the 
 consideration of the economic effect of such 
 taxes. Can the Government derive sufficient 
 revenue in this way to lighten the burden of tax- 
 ation for the poor? If not, the death duties, 
 whatever theoretical merits they may possess, do 
 not contribute to the attainment of our ideal of 
 justice. 
 
 It may be conceded, for the purposes of argu- 
 ment, that the constitutional difficulties in the 
 way of imposing exceptionally high death duties
 
 22C} INDUSTKIAI. I KKKDOM. 
 
 ill the case (jf j^reat estates can he overcome. 
 1 1 may I'C conceded further that, if these duties 
 arc iiKMk-ialc in amount, the j)osscssors of great 
 estates will not take the trouble to evade them. 
 r.ut if they arc moderate in amf)unt they will 
 not he sulliciently j)r(jductive to reduce appre- 
 ciably the rate of other taxation. The amount 
 now dcniandrd for public purposes is so great 
 that a small percentage of the value of the large 
 fortunes that are administered through the pro- 
 bate courts would not furnish any sensible relief 
 to the poor. It would therefore be thought ne- 
 cessary, and it would doubtless be popular, to 
 make the tax very high, and it has lately been 
 proposed in the State of New York to confiscate 
 as much as fifteen per cent in some cases of 
 decedents' estates. 
 
 It can hardly be contended that the prospect 
 of such exactions will be contemplated with in- 
 ditTerence by the wealthy. If they can so ar- 
 range their afTairs that their property will not 
 be subjected to this amercement, they will cer- 
 tainly, as a rule, be tempted to do so. And they 
 unquestionably can so arrange their affairs. Xo 
 statute of this kind has yet been devised which 
 will defy the ingenuit)- of astute lawyers to cir- 
 cumvent it. Their schemes may be thwarted by 
 accident, and mav invoKe nuich inconvenience
 
 MEASURES FOR REDUCING PROFITS. 22/ 
 
 and expense; but they can be made on the whole 
 effective. Much confidence would have to be 
 reposed in expected survivors; but no more than 
 men now often repose in their executors. Doubt- 
 less many rich men are comparatively indifferent 
 as to what becomes of their property after their 
 death. Provided they can enjoy it and control 
 it while they live, they care little for those who 
 come after them. But such is not the rule. 
 Those who have children desire to assure them 
 comfort and social position; those without rela- 
 tives wish to endow institutions; and they would 
 generally prefer that their accumulations should 
 be expended under their own direction, and not 
 by our legislators. 
 
 Since the tax is imposed as a charge for the 
 assistance rendered by the law in confirming the 
 title to property, that assistance will be to a great 
 extent declined. Other and cheaper methods of 
 making title will be resorted to, and the revenue 
 from this tax will eventually prove to be much 
 less than is anticipated by its advocates. Nor 
 should we forget to reckon the expense of col- 
 lection in estimating the net return to the pub- 
 lic. The statutes imposing the tax are neces- 
 sarily so complicated as to make it unsafe for the 
 representatives of decedents to proceed without 
 legal advice, and the fees of lawyers, whether
 
 228 INDUSTRIAL 1 KKEDOM. 
 
 paid by the (if)vcrnnicnt or by these repre- 
 sentatives, contribute a deduction from the 
 ^^•lin to be dcrivfd from this source by the com- 
 munity. 
 
 In the city of Xew York no lawyer of stand- 
 iii}^ would care to go through all the formalities 
 required for the settlement of this tax for less 
 than twenty-five or fifty dollars, even in the case 
 of a small and simple estate. If the estate is large, 
 and if questions arise that have to be litigated, 
 the fee may be augmented ten, or fifty, or a hun- 
 dred fold. To this must be added the salaries 
 and fees of the taxgatherers. The law had al- 
 ready provided for the appraisement of decedents' 
 estates; but this statute creates a dujilicate set of 
 appraisers to repeat the process and double the 
 charges. It adds a list of salaried officers in the 
 surrogates' courts, and a further set in the dis- 
 trict attorneys' offices, and it authorizes these 
 attorneys to receive for their own use very sub- 
 stantial costs in proceedings instituted by them, 
 whether successful or unsuccessful; while the 
 custodians of the money collected are paid a per- 
 centage on its amount. One of these custodians, 
 it is estimated, was presented with about sixty 
 thousand dollars for his services in receiving the 
 tax levied on one estate, although his functions 
 consist principally in depositing checks. To
 
 MEASURES FOR REDUCING PROFITS. 229 
 
 many minds this suggests robbery rather than 
 justice. 
 
 The tax is defended by many enthusiastic 
 theorists, but it is probable that no other tax 
 imposed by the State of New York inflicts so 
 great a burden on the community in proportion 
 to the revenue it produces. However levied, it 
 is frequently paid by those ill prepared to pay 
 it. If levied on small estates, it is oppressive 
 to widows and orphans. When a man engaged 
 in active business dies, his family is deprived of 
 his earnings, and the Government seizes on a 
 part of the savings on which his family must now 
 depend for support. Even when the decedent 
 was out of business, his death frequently reduces 
 the income of his family. And in the case of 
 great estates, the payment of the tax must, as 
 a rule, come directly out of the fund of loanable 
 capital, and thus tend to reduce the part avail- 
 able for the employment of labour. Whether this 
 tendency will result in a serious loss we can not 
 yet tell. We know that, in the past, dread of 
 confiscation has made some men live meanly and 
 hoard their money, while others have preferred 
 to spend it before the Government could seize 
 it. We may find that the new taxes do not ma- 
 terially discourage the accumulation of wealth; 
 but as the tendency of reform has been to re-
 
 230 INDUSTRIAL FRKEDOM. 
 
 move ohstailcs to accuinulatioii, llic imposition 
 of penalties on this process is likely to check it 
 to some extent. 
 
 We may, however, be quite sure of one re- 
 sult: that the abilities which have enablerl some 
 men to actjuire great fortunes by objectionable 
 and even illegal i)raclices will enable them in 
 some measure to protect their wealth against 
 confiscation. It will be the wealth of the de- 
 fenceless that will suffer — the wealth of those who 
 are unable to circumvent the law, or who con- 
 sider it wrong to evade any burden laid f»n them 
 by legislators. Persons of this description gen- 
 erally use their wealth beneficently while they 
 hve. They support many charities; they gener- 
 ally have long lists of impoverished and helpless 
 friends and relatives who call on them for as- 
 sistance. These pensions they do not wish inter- 
 rupted by their death; but the taxes on legacies 
 and bequests are a distinct discouragement to 
 such ciiaritable purposes. The death of such 
 citizens can seldom be a gain to the community. 
 They generally add to its wealth by hving. and 
 the confiscation of their property at death by 
 the community may be but adding one loss to 
 another. 
 
 To this whole line of argument there is one 
 comprehensive reply. Granted, the objector will
 
 MEASURES FOR REDUCING PROFITS. 23 1 
 
 say, that if the income of the wealthy is dimin- 
 ished they can not pay so much in wages as be- 
 fore, what does that prove? The proposition is 
 self-evident; and it was quite unnecessary to es- 
 tablish it by many pages of elaborate demonstra- 
 tion. The diminution of the income of the 
 wealthy and the decrease of wages are but half 
 the phenomenon, but one side of the case. What 
 is taken from the rich is taken by the Govern- 
 ment and applied to the promotion of the gen- 
 eral welfare. It may be directly employed in the 
 payment of wages; part of it is necessarily so em- 
 ployed. It is, at all events, expended for public 
 purposes, and while the action of the Govern- 
 ment apparently reduces wages, it really benefits 
 the poor by furnishing them what wages buy, 
 and what they would have to purchase with 
 wages did not the Government purchase it for 
 them. How else than through the Government 
 can roads be provided? Can labourers establish 
 parks with their wages, or lay out streets, or 
 maintain the courts and the post? The possi- 
 bilities of beneficent public expenditure are in- 
 finite, and while such measures involve the tem- 
 porary reduction of the income of the community 
 by taxation, they restore in the end more than 
 they take away. 
 
 The answer to this objection I shall not here 
 16
 
 232 INDUSTKIAL !■ RMKDOM. 
 
 attempt to State, for the simple reason that I 
 am afraid to tax further the |)atience of those 
 readers who have followed my argument to this 
 point, r.ut. although a conclusive answer would 
 lill a volume by itself, it is possible to give its 
 outlines within a narrow compass. To the asser- 
 tion that public expenditure restores more to the 
 community than it takes away, except within 
 certain well-defined limits, the proper reply is a 
 flat contradiction. The evidence of the wasteful- 
 ness of governmental administration is perfectly 
 overwhelming. Si monumcnliim qnccris circttm- 
 spicc. What rational man will maintain that the 
 one hundred and forty million dollars taken an- 
 nually by taxation from the earnings of the peo- 
 ple and distributed to pensioners is not an op- 
 pressive burden upon industry? That sum is 
 more than can be saved in a year by a million 
 families of farmers. It would be easy to select 
 a million whose total yearly income in money 
 does not amount to that sum. It is a half year's 
 wages for a million common labourers; and al- 
 though it is more than thirty years since the close 
 of the civil war, and although no pensions are 
 paid to those who fought on the side of the South 
 or their dependents, it would be rash to predict 
 that new pension acts will not hereafter increase 
 the burden even beyond its present size.
 
 MEASURES FOR REDUCING PROFITS. 233 
 
 Much of the money paid in pensions is well 
 expended; but no one who has acquaintance with 
 pensioners can deny that a very large part of it 
 merely promotes idleness and encourages dissi- 
 pation. It certainly requires great hardihood to 
 maintain that if the Government were to leave 
 one hundred millions of this sum in the posses- 
 sion of those who earn it, it would not be ex- 
 pended so as to promote the general welfare 
 more than at present. Had the Government 
 been relieved from this expenditure, the pro- 
 digious losses to the country caused by the im- 
 minent bankruptcy of the Treasury during the 
 last few years might have been altogether 
 averted. 
 
 In .what department does the expenditure of 
 money by Government produce results commen- 
 surate with those obtained by the private invest- 
 ment of capital? Have the extensive purchases 
 of silver bulHon by the Treasury resulted, on the 
 whole, in a satisfactory profit? Shall we instance 
 the governmental expenditure for printing, or 
 for the distribution of seeds, or for the produc- 
 tion of rain by exploding dynamite? Will the 
 vouchers for supplying the manifold luxurious 
 requirements of our legislators bear publication? 
 What shall we say of the policy adopted in the 
 State of New York whereby the employment of
 
 234 INDUSTKIAI. FKKKDfJM. 
 
 convicts at remunerative lalxnir is prohibited, 
 and free labourers are taxed tliat criminals may 
 he supported in idleness? Is the Public IJuild- 
 inp^ at riiiladelphia, or the Courthouse at 
 New York city, or the Capitol at Albany, 
 an illustration of the economical and benefi- 
 cent application to public uses of the pro- 
 ceeds of taxation, the restoration to the people 
 of more than is taken from them? And is there 
 any evidence that waste and corruption will tend 
 to decline as the funds at the disposal of legis- 
 lators increase? 
 
 It is often said that the Government at least 
 succeeds well in the management of the post of- 
 fice, but the claim will not bear the slightest ex- 
 amination. Its management shows every year 
 a large deficit, which would be doubled with cor- 
 rect bookkeeping. Were it not for its monopoly, 
 the Government would be driven out of business 
 altogether if it made the slightest attempt to 
 do business on business principles. The express 
 companies would take the whole enterprise off 
 the Government's hands, render equally good 
 service to the community for two thirds what it 
 now pays, and make a good profit for their own 
 stockholders. They would, of course, have to 
 cut off the $20,000,000 or more now received by 
 a subsidized press from the Government: but no
 
 MEASURES FOR REDUCING PROFITS. 235 
 
 one not pecuniarily interested will contend that 
 the productions of our press are, on the whole, 
 of such a character that the public welfare is pro- 
 moted by taxing the people for their gratuitous 
 transportation. Many of these publications are 
 notoriously scandalous and immoral. Let those 
 who want them pay for them; let those who hold 
 them pernicious be not compelled to contribute 
 to their promiscuous dissemination. Some of the 
 " Star Routes," too, might have to be abandoned; 
 but let those who would maintain them read 
 the testimony taken a few years ago in the mal- 
 odorous " Star Route trials," the conduct of 
 which, it may be remarked by the way, although 
 the Government was completely defeated, was so 
 expensive and scandalous as itself to require in- 
 vestigation. 
 
 Government at any cost is preferable to an- 
 archy. Violence can be systematically repressed 
 only by the sovereign power, and public order 
 is essential to the protection of private rights. 
 The property of the subject is therefore prop- 
 erly taxable by the Government; some of the 
 income of the individual is taken from him in 
 order that he may be secured in " life, Hberty, 
 and the pursuit of happiness." To a certain ex- 
 tent, and within bounds well settled by experi- 
 ence, there is general agreement that taxation is
 
 2j6 INDUSTKIAI. IKI I.Do.M. 
 
 necessary and just, in spite ol the almost invari- 
 able wastefulness of ^governmental expenditure. 
 W lini ranicil hrynml those limits, it is e(jually 
 well scttkd, taxation has ruined communities and 
 even nations; nor is there anythinj^ in the form 
 of our Government or the character of our legis- 
 lators to make it probable that we shall be cx- 
 (.11)] »t from the usual consequences of extrava- 
 gance.
 
 CHAPTER XIV. 
 
 CONCLUSION. 
 
 In one of those fine digressions by which 
 Hawthorne often incidentally reveals the great- 
 ness of his genius, he describes his hero as hav- 
 ing " that sense, or inward prophecy — which a 
 young man had better never have been born than 
 not to have, and a mature man had better die at 
 once than utterly to rehnquish — that we are not 
 doomed to creep on forever in the old bad way, 
 but that, this very now, there are the harbingers 
 abroad of a golden era, to be accomplished in 
 his own lifetime." As to the main point, Haw- 
 thorne continues: " May we never live to doubt 
 it! As to the better centuries that are coming, 
 the artist was surely right. His error lay in 
 supposing that this age, more than any past 
 or future one, is destined to see the tattered gar- 
 ments of antiquity exchanged for a new suit, in- 
 stead of gradually renewing themselves by patch- 
 work; in applying his own little life span as the 
 
 measure of an interminable achievement; and 
 
 237
 
 238 INDUSTHIAI. IKKI I)(»M. 
 
 more llian all in faiKsin^ ili.ti ii mattered any- 
 lliiiij^ to tlie great end in view whetlicr he him- 
 self should contend for it or against it." 
 
 TIk' truth contained in this passage must ever 
 he kept in mind by all who arc interested in social 
 reform. It may seem to those who have read the 
 foregoing jiages that their result is purely nega- 
 tive. The great prohlem is, to reduce the ine- 
 qualities of wealth, to bring about such a distri- 
 bution of the product of the community that 
 those who now receive the smallest shares shall 
 receive larger ones; and this book is made up 
 of specious arguments intended to prove that 
 every statute intended to transfer some of the 
 wealth of those who have more than enough to 
 those who have less must fail. The author con- 
 tends that all attempts to compel either rich cor- 
 porations or rich individuals to bear an increased 
 part of the common burdens only aggravate the 
 condition of the poor, and thus condemns the 
 world to remain indefinitely in its present evil 
 state — " to creep on forever in the old bad way." 
 What is this but to shut the gates of hope upon 
 mankind? 
 
 To the charge of disbelief in the success of 
 the schemes for social reform now most in favour 
 I plead guilty; but the assumption that progress 
 is only possible through these schemes is prop-
 
 CONCLUSION. 239 
 
 erly met with an unqualified denial. It is not 
 those who insist on resorting to measures proved 
 disastrous by experience, but those who oppose 
 the repetition of such blunders, that have the 
 more rational hope for the future. England, that 
 minute speck upon the globe, has during the last 
 two generations made prodigious advances in 
 wealth, advances in which the working people 
 have participated. Their numbers have relatively 
 diminished because many of them have risen into 
 the middle class; but, according to Mr. Mallock's 
 calculations, their average wages have during the 
 century considerably more than doubled. Their 
 income amounted in i860 to as much as the in- 
 come of all classes in 1800; it amounted in 1880 
 to as much as the income of all classes in 1850. 
 The great factors in this advance have been two: 
 the substitution of the forces of Nature for hu- 
 man muscle, and the abolition of innumerable 
 taxes and restrictions on industrial freedom 
 which had been established by Government on 
 the pretense of promoting the public good. It 
 may not be reasonable to anticipate any discov- 
 ery comparable with that of the motive power 
 of steam; but the progress of invention contin- 
 ues. That it would continue under a regime of 
 socialism is doubtful. Government officers have 
 little inducement to devote their time to the
 
 240 INDISTRIAL FREEDOM. 
 
 necessary studios, and private inventors could not 
 alTord it, if the j)ossibility of preat gains were 
 l)rccluded. On the other hand, were the incu- 
 bus of govennnental waste and dishonesty, of 
 legislative blackmail, of vexatious taxes, of per- 
 l)lexing restrictions, of official commissions, once 
 removed, industry and inventions would respond 
 with a bound, as they did in England fifty years 
 ago. 
 
 No calm and rational man can doubt that if 
 our Government would al)stain from compelling 
 its subjects to accept promises to pay as pay- 
 ment, and would cease to meddle with the es- 
 tablished standard of value, the employment of 
 capital would be extended and the compensation 
 of labourers increased. The " currency prob- 
 lem " would be very soon settled by the bankers 
 of the country. The enlightened, skilful, and 
 patriotic action of these able men during the 
 recent years of panic has saved the nation from 
 bankruptcy; saved it not with the co-operation 
 of the national Legislature, but in spite of its 
 stupid and malignant opposition. If any one be- 
 lieves that the condition of the common people 
 is improved by having Congress, rather than pri- 
 vate enterprise, create and control the currency 
 of the country, he must hold the belief in the face 
 of a perfectly overwhelming mass of evidence.
 
 CONCLUSION. 241 
 
 The losses suffered by workingmen from reduced 
 wages and lack of employment since 1892 are far 
 greater than can be made up to them by all the 
 plans for improving their condition by diminish- 
 ing the wealth of their employers. It is of the 
 essence of these plans that they be carried out 
 by Government; to a great extent by the very 
 body that by its ignorant perversity, its con- 
 temptible spite, and its narrow partisanship has 
 spread disaster and misery throughout the land; 
 the body whose action is watched with anxiety 
 rising to terror by cautious capitalists and pru- 
 dent men of business, while it constitutes the 
 opportunity of reckless speculators, and which is 
 seldom so well employed as in repealing its own 
 mischievous statutes. 
 
 The face value of the stocks of the railways 
 of the country is about five thousand million dol- 
 lars, and that of the bonds some three hundred 
 millions less. Seven tenths of these stocks pay 
 no dividends; one fifth of the bonds pay no inter- 
 est. Such frightful losses of income can not but 
 curtail wages. Investors have become indiffer- 
 ent to profit if they can only find safety. But 
 safety is exactly what is threatened by the prev- 
 alent tendency to enlarge the functions and in- 
 crease the cost of Government. Many of our 
 legislatures are a positive menace to property.
 
 242 INDt'STHFAI, lKI.i;i»nM. 
 
 'I'licrc arc few induccniciits to construct new rail- 
 roads in States where rates on existing roads 
 are reduced and expenses increased by statute, 
 without rej^ard to iucouie or obli}:(ations. There 
 is httle temptation to lend j^old on bond and 
 uiortt^fagfe in communities where a majority of 
 thr people proclaim that such debts must be 
 made payable in silver. I low can prosperity re- 
 turn where the people assert their purpose to 
 couiiscate wealth, and legislatures carry confis- 
 cation into effect? 
 
 Men are now arranging their affairs with ref- 
 erence to the culmination of this theory of gov- 
 ernment. They fear that the twentieth centur)- 
 may be ushered in by a gigantic act of repudia- 
 tion by the American republic. But while these 
 fears have been chilling enterprise, destroying in- 
 come, and reducing wages, our public expendi- 
 ture steadily grows. The revenue produced by 
 increasing and multiplying taxes is all spent; 
 more offices are created, salaries raised, pensions 
 granted, and indebtedness increased. Vet, if 
 any serious attempt were made — and it never 
 has been made — to show that the greater 
 part of the wealth taken by our governments 
 from their subjects is spent in such a way as to 
 iinjirove the condition of the common people so 
 much as it would be improved if this wealth were
 
 CONCLUSION. 243 
 
 left in the hands of its producers, such attempt 
 would result in miserable failure. Until the at- 
 tempt is successfully made, the expectation of 
 bettering the status of the poor by enlarging 
 the functions of Government should be aban- 
 doned by every sincere reformer. 
 
 Undoubtedly the profuse expenditure of many 
 wealthy persons for purposes deemed selfish or 
 wasteful by large numbers is a cause of exasper- 
 ation and discontent. On the other hand, the 
 extravagant indulgence by many of the poor in 
 alcoholic drink may seem to deserve reproba- 
 tion. In neither case is there any ground for 
 denouncing whole classes of people because of 
 the misconduct of some of their members. If 
 we could legislate against wicked rich people 
 alone, or against bad uses of property by the 
 rich alone, something might be accomplished; 
 but no such discriminations are practicable. The 
 law can take cognizance only of outward acts, 
 and not of sentiments. If the bad rich people 
 outnumbered the good rich people, it might seem 
 desirable to take promiscuous vengeance — in the 
 spirit of that Christian bishop who, according to 
 the story, cried out in an assault on a town occu- 
 pied chiefly by heretics: "Slay them all! God 
 will know his own! " But the list of the known 
 benefactions of the wealthy is so long, and the
 
 244 INDUSTKIAI. I KI.KDO.M. 
 
 evidence of liicir sccrcl Lciicfaclions is so mani- 
 fold, as to make it im|)ossihlc not to believe that 
 tlu'ic arc more };ood rich jicople than bad ones. 
 While ue may deplore the waste of wealth by 
 the idle and vicious and selfish rich, it seems vain 
 to express our disapproval by measures that will 
 cripple the active and virtuous and unselfish rich, 
 and with them those of moderate means. 
 
 Waste for waste, orgy for orgy, corruption 
 for corruption, our legislators and their de- 
 pendents and lobbyists can fairly rival our men 
 of large fortunes, and to increase the present op- 
 portunities for blackmail and plunder would not 
 improve the morals of the community. The vices 
 of the rich may not lose their evil by losing their 
 grossness; but the aspects of vice which mani- 
 fest themselves about the halls of our rulers 
 are at least no more attractive. Loud com- 
 plaints arise from the occupants of these halls 
 over the bribery and corruption which they 
 sufTer at the hands of unscrupulous corpora- 
 tions; the virtue of legislatures, it seems, is 
 quite unable to resist the blandishments of licen- 
 tious w^ealth. Our legislators apparently sup- 
 pose that their weakness is nothing discredita- 
 ble. They take it as a matter of course that if 
 bribes are offered them they must accept, and 
 thev unbhishintjlv invcicfh acrainst the wicked-
 
 CONCLUSION. 245 
 
 ness of their tempters. They occupy the posi- 
 tion of that French deputy who, according to 
 the story, told his constituents that the corrupt 
 influences in the Chamber were so potent as to 
 overcome even his own virtue. 
 
 No more grotesque attempt to arouse the 
 righteous wrath of honest citizens was ever made 
 than these appeals to the people by their chosen 
 representatives. They cry out in public because 
 of their outraged honour, but their private com- 
 plaints arise from disappointed greed. They do 
 not deny, but in their own sessions openly pro- 
 claim that they are venal. Doubtless the tempta- 
 tion of a large bribe is very great, and we know 
 that genuine integrity is a rare thing among men. 
 But at all events, if the virtue of legislators is 
 so frail as to be unable to resist the present 
 temptations, it can not be expected to withstand 
 them when they are increased. The whole lesson 
 of our legislative history is that the powers of 
 such representatives as our system of govern- 
 ment gives us should be restricted and not en- 
 larged. They have been so unfaithful in a few 
 things that it is folly to make them rulers over 
 many things. 
 
 Moreover, it is of the very essence of ethics 
 to substitute reason for authority,, persuasion for 
 force. It is better to induce men to act in par-
 
 24^ INDUSTRIAL FRl.KDoM. 
 
 ticiilar ways by their (nvii choice than to ohH^c 
 them so to act by law. It is better to cstabhsh 
 conditions of business that shall enable honour- 
 able and conscientious men to engajjc in it than 
 by vexatious interference, inf|uisitorial taxation, 
 and i)ractical blackmail to throw it into the hands 
 of unscrupulous speculators. There is no dearth 
 of reforms which would command the support 
 of nearly all public-spirited citizens. The list of 
 abuses is long enough to occupy all the energies 
 and to arouse all the enthusiasm of the most 
 ardent friend of humanity. There is work enough 
 to do in directions in which the support of the 
 benevolent can be enlisted, work which can not 
 be done unless this support is obtained, to make 
 it in the highest degree unfortunate for the 
 progressive impulse to be diverted to the advo- 
 cacy of schemes that will encounter the unflinch- 
 ing opposition of great numbers of most intelli- 
 gent and conscientious people. 
 
 No one can deny that, in the last resort, so- 
 cial improvement must come through the in- 
 crease of integrity and honesty among men. Xo 
 amount of mechanical ingenuity in the con- 
 struction of laws will avail in the absence of this 
 foundation. But there is little probability that 
 honesty will increase when the principle of re- 
 gard for property and respect for existing rights
 
 CONCLUSION. 247 
 
 ceases to be cherished. If we devote ourselves 
 to arraignments of the social system and to plans 
 for the redistribution of wealth by law, we in- 
 evitably undermine that sentiment of reverence 
 that is the basis of integrity. It is like reading 
 books that extenuate unchastity; we may not 
 become unchaste, but the horror of unchastity 
 is diminished, and we may at last cry out with 
 Renan, " Perhaps, after all, chastity is a mis- 
 take! " 
 
 So long as a man stands in awe of the sim- 
 ple precept, " Thou shalt not steal," he will be up- 
 right and hate dishonesty. When he occupies 
 his mind with arguments showing that it is not 
 stealing to confiscate wealth acquired under ex- 
 isting standards of justice, because these stand- 
 ards are not ideal, he is in danger of falling. If 
 the mass of our people were consumed with the 
 desire for righteousness, and insisted on strictly 
 honourable dealings, most of our evils would be 
 quickly remedied, and prosperity would be con- 
 tinuous. Seeking first the kingdom of God, all 
 these things would be added unto us. But the 
 movement toward socialism has no tendency to 
 promote a stern integrity. It signifies, to every 
 one who joins in it, not that he should reform 
 himself, but that he should restrain others from 
 
 misconduct. Such restraint is doubtless neces- 
 17
 
 248 INDUSTRIAL FRKF.DOM. 
 
 sary, but self-restraint is for ordinary people the 
 prime re(|iiirenient. Ideals that do not make it 
 proiiiinenl are dangerous ideals in a democracy. 
 A great responsibility rests on that class of 
 our citizens which is both conscientious and cul- 
 tivated. 'J'hey have leisure to devote to the 
 service of society, and they have the disposition 
 to so devote it. To a large extent they are at 
 I)rcsent captivated by socialistic ideals, or at least 
 inclined to resort to socialistic remedies. If the 
 arguments above set forth are sound, every step 
 in tills direction is a step backward. As a com- 
 plete system, socialism will not be established; 
 civilization will collapse first. Ikit the movement 
 in that direction, even if eventually arrested, will 
 leave ineradicable traces. It will leave laws that 
 can hardlv be rejiealcd, institutions that will be 
 permanently mischievous, debts that will burden 
 children yet unborn. It will weaken the sense 
 of personal responsibility while strengthening the 
 spirit of envy; and the growth of this spirit is 
 the greatest danger that threatens the future 
 of the Republic. 
 
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 attractive by a vigorous and resonant style, the book will receive much attention. It 
 is a great theme the author has taken up, and he grasps it with the confidence of a 
 master." — New York Times. 
 
 "Mr. Eggleston's 'Beginners' is unique. No similar historical study has, to our 
 knowledge, ever been done in the same way. Mr. Eggleston -is a reliable reporter of 
 facts; but he is also an exceedingly keen critic. He writes history without the effort 
 to merge the criric in the historian. His sense of humor is never dormant. He renders 
 some of the dullest passages in colonial annals actually amusing by his witty treatment 
 of them. He finds a laugh for his readers where most of his predecessors have found 
 yawns. And with all this he does not sacrifice the dignity of history for an instant" — 
 Boston Saturday Ezienittg Gazette. 
 
 "The delightful style, the clear flow of the narrative, the philosophical tone, and 
 the able analysis of men and events will commend Mr. Eggleston's work to earnest 
 students." — Philadelphia Public Ledger. 
 
 " The work is worthy of careful reading, not only because of the author's ability as a 
 literary artist, but because of his conspicuous proficiency in interpreting the causes of 
 and changes in American life and character." — Boston Journal. 
 
 " It is noticeable that Mr. Eggleston has followed no beaten track, but has drawn 
 his own conclusions as to the early period, and they diflfer from the generally received 
 version not a little. The book is stimulating and will prove of great value to the stu- 
 dent of history." — Minneapolis Journal. 
 
 "A very interesting as well as a valuable book. . . . A distinct advance upon most 
 that has been written, particularly of the settlement of New England." — Newark 
 A dvertiser. 
 
 " One of the most important books of the year. It is a work of art as well as of 
 historical science, and its distinctive purpose is to give an insight into the real life and 
 character of people. . . . The author's style is charming, and the history is fully as inter- 
 esting as a noveL" — Brooklyn Standard-Union. 
 
 "The value of Mr. Eggleston's work is in that it is really a historj' of 'life,' not 
 merely a record of events. . . . The comprehensive purpose of his volume has been 
 excellently performed. The book is eminently readable." — Philadelphia Times. 
 
 New York : D. APPLETON & CO., 72 Fifth Avenue.
 
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 A Stiiiiy i>/ the Antirtittn Cotnmomi'falth^ t/s 
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 ture, Science, Education, and Self-G(n'ernnient. 
 
 Edited by NATHANIEL S. SHALER, S. D., 
 
 ,V IN HAKVAHI. INIVKR .11 V. 
 
 In two vulumcs, royal 8vo. With Maps, and 150 full-pajce 
 Illustrations. Cloth, $10.00. 
 
 1^ VF.RY subject in this r<)mprchpn''ivc wfirk '\^ timr-ly, bccau-v it is of Im- 
 -< mediate inieresl to every American. Sfx-cial attention, hf>w«-vcr, may be 
 callefl to the account of "American Productive lndiistr>'." by the Hon. Ed- 
 ward Atkinson, with its array of immensely infonrinfr diaj^mms and tables ; 
 and also to " Industry and Finance, "a succinct and lo(.;ical prewntation of 
 the subject by Professor F. W. Taussig, of Harvard University. Ikjlh these 
 eiuinent authorities deal with questions which are u| permost to-day. 
 
 LIST OF CONTRIBUTORS. 
 
 Hon. WU.MAM I.. WILSON, Chairman of the Ways and Means Com- 
 mittee, Fifty third Con^Tcss. 
 
 Hon. J. R. SOLEV, formerly Assistant Secretary of the Navy. 
 
 EDWARD ATKINSON, LL. D., Ph. D. 
 
 Col. T. A. DODGE, U. S. A. 
 
 Col. GEORGE E. WARING, jR. 
 
 J. B. Mc.MASTP'R, Professor of History in the University of Pennsylvania. 
 
 CHARLES DUDLEY WARNER, LL. I). 
 
 Major J. W. POWELL, Director of the United Suites Geological Survey 
 and the Bureau of Ethnolof^. 
 
 WILLIAM T. HARRIS, LL. D., U. S. Commissioner of Education. 
 
 LYMAN ABBOTT, D. D. 
 
 H. H. BANCROFT, author of " Native Races of the Pacific Coast." 
 
 HARRY PRATT JUDSON, Head Dean of the Colleges, Univ. of Chicago. 
 
 Judge THOMAS M. COOLEY, formerly Chairman of the IntersUte Com- 
 merce Commission. 
 
 CHARLES FRANCIS ADAMS. 
 
 D. A. SARGENT, M. D., Director Hemenway Gvmnasium, Harvard Univ. 
 
 CHARLES HORTON COOLEY. 
 
 A. E. KENNELLY, Assistant to Thomas A. Edison. 
 
 D. C. OILMAN, LL. D., President of Johns Hopkins University. 
 
 H. G. PROUT, Editor of the Railroad Gazette. 
 
 F. D. MILLET, formerly \'ice-Pres. of the National .Academy of Design. 
 
 F. W. TAUSSIG, Professor of Political Economy in Harvard L'niversity. 
 
 HENRY VAN BRUNT. 
 
 H. P. FAIRFIELD. 
 
 SAMUEL W. ABBOTT, M. D., Sec. State Board of Health, Massachusetts. 
 
 N. S. SHALER. 
 
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