illi^ 
 
 iiiiiii^ 
 
 Mil-
 
 THE LIBRARY 
 
 OF 
 
 THE UNIVERSITY 
 
 OF CALIFORNIA 
 
 LOS ANGELES
 
 BOOKS BY FREDERIC C HOWE 
 
 Denmark, a Cooperative Common- 
 wealth Ruled by Farmers 
 
 The High Cost of Living 
 
 Why War 
 
 The Only Possible Peace 
 
 Privilege and Democracy in America 
 
 The Modern City and Its Problems 
 
 The Land and the Soldier 
 
 European Cities at Work 
 
 Socialized Germany 
 
 The City; the Hope of Democracy 
 
 The British City, the Beginnings of 
 Democracy 
 
 Wisconsin, an Experiment in Democ- 
 racy
 
 Revolution and Democracy 
 
 BY 
 
 FREDERIC C. HOWE 
 
 Author of The City, The Hope of Democracy; The British 
 City, The Beginnings of Democracy; Privilege and De- 
 mocracy in America; JVisconsin, An Experiment in 
 Democracy; Socialized Germany; European Cities 
 at Work; The Modern City and Its Prob- 
 lems; The Land and the Soldier; Why 
 War; The Only Possible Peace; Den- 
 mark, A Cooperative Common- 
 wealth Ruled by Farmers; 
 The High Cost of 
 Living. 
 
 NEW YORK 
 
 B. W. HUEBSCH, Inc. 
 
 1921
 
 COPYRIGHT, 1921, BY B. W. HUEBSCH, Inc. 
 PRINTED IN U. S. A.
 
 
 CONTENTS 
 
 CHAPTER PAGH 
 
 I Labor i 
 
 II Coal 7 
 
 III Food 13 
 
 IV Circulation 22 
 
 V Land 41 
 
 VI Credit 52 
 
 VII Alien Capitalism 63 
 
 VIII Opinion 70 
 
 IX Culture . 79 
 
 X Exploiters 92 
 
 XI The State 98 
 
 XII Politics 116 
 
 XIII Overhead 127 
 
 XIV Feudalism 144 
 
 XV Civilization 157 
 
 XVI Sabotage 171 
 
 XVII A Natural Society 182 
 
 XVIII Russia 189 
 
 XIX Freedom 196 
 
 XX The First Step 202 
 
 XXI Free Communication 209 
 
 XXII Free Credit 217 
 
 XXIII Industrial Democracy 224
 
 INTRODUCTORY 
 
 For fifty years the world has been drifting into 
 the condition in which it now finds itself. The 
 disordered state of Europe and of America is trace- 
 able to the same causes. International conditions 
 are a mirror of domestic conditions. The treaty 
 of peace as well as the industrial collapse within the 
 individual nations is a product of an economic evo- 
 lution which has resulted in a privileged society 
 which has come to control not only the internal gov- 
 ernments of the world, but international relations 
 as well. 
 
 Fifty years ago there was an approach to equality 
 of opportunity. Competition was the prevailing 
 note in industry. Business was organized in small 
 units. Men worked willingly. Values were fixed 
 by production costs. Nations were largely self-con- 
 tained. International finance was limited to the set- 
 tlement of trade balances. There was equal access 
 to the raw materials of the world. Imperialism was 
 confined to a few subject countries. Freedom was 
 the prevailing note in trade, in commerce, and in 
 industry. This was true not only in America ; it was 
 
 [vii]
 
 true of Great Britain, France, and Germany as well. 
 
 A change began in the closing years of the last 
 century. Industry took on monopoly forms. Mo- 
 nopoly interests acquired control not only of the 
 major industries, but of raw materials, of fuel, of 
 transportation, and of credit. These same inter- 
 ests reached out to control similar opportunities in 
 other countries. Protective tariff laws were enacted 
 by all of the greater powers save Great Britain. 
 Billions of dollars were invested in foreign loans, 
 in concessions, and in exploitation. The world was 
 parceled out into spheres of economic influence. 
 There was a rush for other peoples' lands, for 
 gold, copper, iron ore, petroleum, rubber, cocoa, 
 timber, and tropical products. Monopoly interests 
 first acquired control of the basic industries at home, 
 and then went forth with the aid of the state and 
 international finance, to acquire similar monopolies 
 in other lands. In the decade before the war, the 
 greater powers of Europe were in conflict all over 
 the world. The conflict was economic. It was also 
 political. It was traceable to the struggle of mo- 
 nopoly interests to increase their possessions and 
 their power both at home and abroad. 
 
 During these years industry changed in form. 
 There was more or less complete monopoly in all 
 the relations of life. The transition took place in 
 much the same way and at about the same time in 
 all of the greater powers. By the end of the cen- 
 tury monopoly had become the main objective of the 
 
 [viii]
 
 governing classes not only In America, but In Great 
 Britain, Germany, France, and Russia as well. 
 
 During these years of monopoly conquests and 
 financial Imperialism, business Interests discovered 
 that the road to economic profit and power was 
 through the political state. They discovered that 
 a man may labor for a lifetime with his hands or 
 his brains and have no more at Its close than when 
 he started. They learned that wealth created by 
 labor never amounts to a very substantial sum to 
 any man. But by the use of the state, wealth be- 
 yond measure can be amassed. And they have taken 
 possession of the state for that purpose. They have 
 used It to create special powers and privileges of 
 various kinds. These privileges enable those who 
 possess them to levy tribute on every one else. They 
 collect pennies, dimes, and dollars from the millions, 
 and by so doing accumulate millions for the few. 
 They do this in a variety of ways, but chiefly by laws 
 relating to a few fundamental economic processes. 
 Through these processes they control our economic 
 and our political life. And Inasmuch as these priv- 
 ileges can only be secured by first controlling the 
 state, they have acquired control of the state. In 
 fact, they have become the state. And being the 
 state, they legislate, first to create economic priv- 
 ileges, and then to protect them and to increase the 
 tribute which they collect. 
 
 While the people seek to correct abuses which be- 
 [ix]
 
 set them by condemning, arresting, and seeking to 
 punish individual offenders, they permit the state 
 itself to create conditions that make these abuses in- 
 evitable. On the one hand, we punish. On the 
 other, we invite the offenses of which we complain 
 and give them the sanction of legal approval. 
 
 The condition of America and of the world can 
 only be understood when we understand these ele- 
 mental facts. The greater powers of the world are 
 ruled by a class, by a class that enjoys power and 
 wealth through and by control of the economic state. 
 They control the lawmaking agencies, the adminis- 
 trative agencies, and international relations as Well. 
 
 At the outbreak of the war the governing and the 
 owning classes in the greater powers were substan- 
 tially the same. They owned the same things; they 
 had the same interests and the same point of view. 
 They shaped the psychology and the policy of their 
 governments to the same ends. Financial capital- 
 ism replaced landlordism in political power. In Eu- 
 rope the financial and the landed classes were merged 
 into a ruling group. They controlled the state, not 
 only to protect the privileges they had secured at 
 home, but to extend their power through imperial- 
 ism over the outside world. 
 
 The war enthroned the profit-taking, privileged, 
 imperialistic groups. They found they possessed a 
 power they had never fully realized, and they used 
 it as they had never dared to use it before. They
 
 were astonished at the profits to be made through 
 the state. The necessities of the war and the ab- 
 sorption of the people in patriotic endeavor enabled 
 them to cement their power still further. The eco- 
 nomic state and the political state were so merged 
 that they could hardly be distinguished. The ruling 
 economic group became the ruling political group. 
 Privilege identified the state with itself. It was will- 
 ing to send the state to war to protect its imperial- 
 istic privileges. It was willing to sacrifice the state 
 in the midst of war for the protection of these priv- 
 ileges. It took unparalleled profits while men were 
 dying by the millions. It pledged itself to the free- 
 dom of the world while it made secret pacts to hold 
 the world in serfdom. 
 
 This was the condition of the world at the end 
 of the great war. The Allied powers had called 
 mankind to arms to free the world from force and 
 from economic privilege. But the peace which has 
 been given us enthroned force and sanctioned eco- 
 nomic privilege as it was never sanctioned before. 
 The peace was not made by Lloyd George, by Clem- 
 enceau, by Orlando. The peace was the inevitable 
 result of the ascendancy of economic groups in the 
 victorious powers who owned or represented priv- 
 ileges which they sought to have sanctioned by the 
 peace conference. The belief that President Wil- 
 son could have controlled these groups or interests 
 was so fatuous a stand that any one familiar with the 
 
 [xi]
 
 governments of Europe should have known it. That 
 Lloyd George, Clemenceau, or Orlando could have 
 made a peace based on the principles of freedom 
 laid down by President Wilson was equally fatuous. 
 The governing groups, the parliaments, and the min- 
 istries of the Allied powers would not have toler- 
 ated a ministry or a peace that failed to protect the 
 privileges that the governing classes In these coun- 
 tries owned and had struggled for years to secure 
 at home and abroad. 
 
 The peace treaty was not given us by wicked men. 
 It was not a personal betrayal of promises or guar- 
 antees. It was a peace that Is perfectly responsive 
 to the will of the groups and classes that control their 
 respective governments. The peace was not made 
 by peoples. It was not made by individual men. 
 It was made by iron, by coal, by oil, by tropical re- 
 sources, by trade privileges, and by those economic 
 forces which had come to control the domestic life 
 of the Powers, Allied as well as Central. The 
 treaty of peace was the last word of capitalism; of 
 a capitalism that had become a system of world im- 
 periahsm. 
 
 The capitalistic world is now in a state of col- 
 lapse. The economic state is being strangled by 
 privilege. The profit-making motive has been car- 
 ried so far that the world is deadlocked. The do- 
 mestic life of the greater powers is deadlocked. 
 
 [xii]
 
 Class laws have made it difficult if not impossible 
 for the world to function. And to protect the priv- 
 ileges and sustain the imperialistic peace that has 
 been imposed on the world, the class ruled states 
 resort again to force to suppress any effective pro- 
 test. They continue to arm and equip themselves, 
 not from fear of one another, but from the fact that 
 when a ruling class reaches a certain pinnacle of priv- 
 ileged power, it turns instinctively to force because 
 of the insecurity of its possessions. Great Britain 
 is exhausting herself in Mesopotamia, in Ireland, in 
 India, in Turlcey, not because Great Britain has any- 
 thing to fear from a free world, but because the 
 privileged classes are blinded by apprehension. 
 They may even destroy the state in their efforts to 
 protect their privileges. It is not fear of Germany 
 alone that leads France to exhaust herself in Syria, 
 in South Africa, or in Poland, or even in maintain- 
 ing a cordon sanitaire about Germany. It is rather 
 fear for her far-flung investments that are inter- 
 woven with the peasants and the exploiting banks in 
 Paris, which in turn are so powerful with the govern- 
 ment that they shape and mold the foreign policy 
 of the country. 
 
 Germany is being strangled by the terms of the 
 peace. Austria is dying by virtue of the fact that 
 her resources have been tal^en from her and she has 
 been isolated from the outside world. Hungary is 
 in but little better phght. Poland has been driven 
 
 [xiii]
 
 to make war for imperialistic conquest at the in- 
 stance of the Allied powers; while Russia has been 
 subjected to an embargo, partly through fear of her 
 ideals and partly to coerce her to pay her indebted- 
 ness to France. Nearly 300,000,000 of the 500,- 
 000,000 people in Europe have been tied hand and 
 foot by the AUied powers. They have been tied by 
 a privileged peace drafted not by the peoples of 
 these countries but by the representatives of priv- 
 ileged interests in these countries. 
 
 The same blind instinct for privilege at home led 
 to the erection of protective tariffs at a time when 
 the world needs freedom of communication more 
 than anything else. That is the only way to bring 
 the world back to life. The world needs a fair dis- 
 tribution of shipping, of raw materials, of coal, iron 
 ore, copper, lumber, and other essentials of industry. 
 The great need of France is to permit Germany to 
 rise from the ashes. But Germany can only rise 
 when the amount of the indemnity is fixed; when she 
 has access to coal and to iron, to copper and to oil; 
 when she dares to build locomotives, ships, and 
 means of transport with the assurance that they will 
 not be seized by France. Great Britain in turn needs 
 that France should release Germany so that Ger- 
 many can again become a customer of England; so 
 that German factories can produce the goods to 
 clothe and feed and give work to 67,000,000 peo- 
 ple. Until the terms of peace are redrawn along 
 the lines of freedom, until the economic obstacles 
 
 [xiv]
 
 that have been imposed on the world are razed, it 
 will not be possible for the world to go on. It will 
 not be possible for the nations of Europe to produce. 
 It will not be possible for them to establish a stable 
 ratio of exchange. It will not be possible for them 
 to retire their paper money or raise the value of 
 their securities so that they will be acceptable to 
 investors either at home or abroad. 
 
 The same privileged classes are ascendant in the 
 United States. They too are contributing to the 
 death of the world. We have loaned something 
 less than $15,000,000,000 in some form or other to 
 the countries of the world. They owe us interest. 
 They owe us the principal. They can only pay in 
 one of three ways : in gold, of which they have little 
 or none; in bonds or paper money, which have a 
 depreciated value; or in commodities. If they are 
 permitted to pay in commodities, exchange would re- 
 establish itself. The value of the securities which 
 we hold would be increased. Trade would revive, 
 as would all industry. Europe would then buy our 
 iron, our cotton, and our wool. Europe would buy 
 our foodstuffs which lie hoarded or rotting in the 
 West. But the United States, like Europe, has 
 adopted a policy of economic isolation. We refuse 
 to buy from other countries. We have determined 
 that Europe shall not pay us in the only thing that 
 has any value to us. We insist on selling, but re- 
 fuse to buy. And the incoming administration is 
 
 [xv]
 
 pledged to raise the prohibition against foreign im- 
 ports still higher. 
 
 The United States has added its weight to the 
 destructive embargo on the life of the world. We 
 too are destroying ourselves, as France and Great 
 Britain are destroying themselves. We want our 
 cake and want to eat it. It cannot be done. Not 
 only will Europe go bankrupt in this destructive 
 process, but we too will drift in the same direction. 
 
 To use a term that has been applied solely to 
 labor, the economic life of the world is being de- 
 stroyed by sabotage. Through sabotage capitalism 
 is destroying itself. It is making it impossible for 
 the interdependent world to go on. The same 
 thing happened in a somewhat different way after 
 the wars of Rome and Carthage. Carthage never 
 recovered. Rome went into decline. Rome de- 
 stroyed her freeman farm owners through land mo- 
 nopoly, through usury, and through the importation 
 of slaves to cultivate her fields. This was made 
 possible by the tribute which Rome collected from 
 conquered lands; a tribute not very different from 
 the tribute America took from the nations of Eu- 
 rope in the form of war profits, which profits en- 
 throned in power the profit-making class that now 
 uses the government to give permanence and pro- 
 tection to privileges and profits which the war made 
 possible. 
 
 The sickness of society will not be cured by slight 
 [xvl]
 
 modifications in the treaty of peace. It will not be 
 materially helped by disarmament or by a reduction 
 of the burdens of taxation. The world will only 
 come back to life when it produces freely, when it 
 communicates freely, when it exchanges freely. And 
 it cannot do these things under the restrictive, priv- 
 ileged peace imposed upon it at Versailles. The 
 victors are suffering with the vanquished. There 
 must be a new renunciation of privileges, or there 
 will be something like a revolution that will destroy 
 the privileges that those who possess them will not 
 themselves voluntarily relinquish. Explanations 
 that blink the fact that the world is tied like Gulliver 
 by a thousand thongs explain only the superficial 
 facts. The truth is that the life of the world is being 
 strangled by a privileged group of men possessed of 
 national and imperialistic grants and interests, which 
 they have sought to make inviolate through the 
 treaty of peace. It is these interests that have in- 
 sisted on the destructive indemnity from Germany; 
 that sought control of the eastern Mediterranean 
 and of Africa. It is these interests that seized on 
 Mesopotamia and the Mesopotamian oil fields, and 
 on similar resources in South Russia. It was they 
 that divided South Africa. They stripped Germany 
 and embargoed Russia. 
 
 Sabotage is the most pervasive thing in the society 
 in which we live. It is present in almost every in- 
 dustry and in every profit-making service. It is the 
 
 [xvii]
 
 controlling motive of our major industries. It is 
 dominant in domestic as it is in international affairs. 
 President Wilson laid down a program of freedom 
 such as Jefferson, as Lincoln, as Cobden might have 
 urged. It was hailed by the whole unprivileged 
 world. But the peace that emerged was a peace of 
 sabotage. It was a peace dictated by the desire to 
 control industry; to control transportation; to con- 
 trol raw materials, to control fuel, to control bank- 
 ing. The peace of Versailles was the final step in 
 the evolution that began about the middle of the last 
 century, and which has continued uninterrupted ever 
 since. Monopoly first rose to power at home. It 
 then reached out for imperialistic possessions in 
 other lands. It used the government to protect its 
 imperialistic concessions. War came as a result of 
 a conflict of imperialistic interests. And the peace 
 that was given us is a peace that sanctions imperial- 
 ism and aims to protect from interference the im- 
 perialistic division of the world. 
 
 Occasional men like Anatole France have told us 
 that Europe is dying. Europe is dying. Austria 
 is dying, Poland is dying. Germany is dying. 
 And because of the death sentence imposed on these 
 countries. Great Britain, France, and Italy are dying 
 as well. Russia refuses to die. She refuses to be 
 sabotaged by the Old Regime, by the old inefficiency, 
 by debt and taxation to pay for the wastage of priv- 
 ileged rule. Russia prefers to die, if she is to die, by 
 
 [xviii]
 
 disorders, by revolutions, by giving the natural eco- 
 nomic instincts of the people a chance to play. Un- 
 happily Russia too is sabotaging. She is sabotaging 
 freedom. If this is a permanent policy of commun- 
 ism, Russia too will pay the cost of its suppression 
 of freedom. But if this is merely a transition stage 
 made necessary or deemed necessary by counter- 
 revolutions, by the imperialistic assaults of the 
 greater powers, by the necessity of securing some 
 kind of stability, which is to be changed when se- 
 curity is obtained, then we may see in Russia a new 
 kind of a state, a state in which the natural instincts 
 and powers of the people are given an opportunity 
 to play as they have never been permitted to play in 
 the history of the world. For freedom is the only 
 way out of the economic impasse which is blocking 
 the recovery of a world already all but destroyed 
 by war. 
 
 [xix]
 
 CHAPTER I 
 
 LABOR 
 
 Sabotage is new in America. Up to recently men 
 worked willingly. They expected to rise in the 
 world and themselves become employers. They 
 were moved by hope; they were inspired by the suc- 
 cess of their fellows who had risen from the bench 
 or the forge. Within the last few years, however, 
 and especially since the war, a change has come over 
 the worker. Labor, it is claimed, is slowing down. 
 Production is being checked. The worker is tak- 
 ing advantage of his power. This complaint comes 
 from all over the country. It is claimed that Amer- 
 ica is not producing to anything like its capacity. 
 Something very like sabotage is creeping into our 
 industrial processes. 
 
 _In the fall of 19 19, the shoe manufacturers of 
 Massachusetts brought suit against their employees, 
 on the ground that they were loafing on their jobs. 
 The men had demanded an increase in wages before 
 a wages contract had expired. The employers de- 
 chned to meet this demand. Instead of striking, 
 
 [I]
 
 the men reduced their output. They slowed down 
 their efforts. There was a silent strike. To meet 
 this condition the employers applied for an injunction 
 to compel the men to increase the output. 
 
 Similar complaints are heard of the printers and 
 pressmen of New York, of the miners and steel 
 workers in the Pittsburgh and Chicago districts. It 
 is heard from the lumber mills of the Northwest. 
 Suggestions of labor sabotage have become so gen- 
 eral as to constitute a grievance. Men are getting 
 higher nominal wages than they ever received before. 
 Prohibition has reduced labor waste and increased 
 the efficiency of men. The eight-hour day has be- 
 come the standard of a day's labor. Men should 
 work more willingly and produce more than in the 
 past. The employer says that the reverse is true. 
 Men work with deliberation. Their tools are not 
 in place. Materials are not satisfactory. Some- 
 times there is an unaccounted breakdown in the 
 machine. 
 
 In December last, the New York Sun ^ made an in- 
 vestigation of complaints of labor conditions in dif- 
 ferent parts of the country. It reached the conclu- 
 sion that in many industries men were not working 
 as they had in the past, and that in consequence the 
 output per man was reduced In some sections by 
 from 15 to 50 per cent. An investigation by the 
 Research Department of the National Association 
 of Credit Men estimates the average ratio of labor 
 
 1 Issue of December 1, 1919.
 
 efficiency at 73 per cent, and an enquiry by the New 
 York World placed it at 75 per cent. 
 
 The employers treat the evil as though it were 
 personal and could be corrected by the injunction or 
 by some kind of force. But employers are not in a 
 position to complain. They too limit production. 
 They reduce output to keep up prices. Monopoly 
 profits come from restricted production. Profits 
 would be reduced by working to capacity, by the oper- 
 ation of the natural laws of demand and supply. 
 
 THE NEW PSYCHOLOGY 
 
 jLabor has adopted the rules that prevail in in- 
 dustry. Labor is able to use these rules because of 
 the shortage of workers. For the first time in his- 
 tory, labor enjoys a quasi-monopoly. This is one 
 explanation of labor slacking. But there is a 
 deeper reason. It is psychological. The human 
 element in industry is divorced from interest in the 
 quantity or the quality of output. Men have no 
 part in the management. They do not share in the 
 profits. Their return is fixed by the wage scale. It 
 is measured in the pay envelope at the end of the 
 week. The worker has little contact with the em- 
 ployer. He has become a number, a brass check. 
 He no longer owns his tools. He performs possibly 
 a single function. He attaches a nut to a machine. 
 Why should he produce more than he has to ? Why 
 should he be concerned over the volume or the qual- 
 ity of the output? 
 
 [3]
 
 Moreover, the interest of labor is opposed to 
 quantity production. The less effort the worker 
 makes, the longer the job will continue. The work- 
 man who works to capacity is working against his 
 own interest. He may terminate his own employ- 
 ment. He may increase the number of men out of a 
 job. And the man out of a job is a standing menace 
 to the man who has a job. 
 
 Labor also is treated as a commodity. It is 
 bought in the lowest market. It sells in the highest 
 market. Being merely a commodity, it sells as little 
 as possible and gets as much as possible. This is 
 good business. Labor is learning to drive a busi- 
 ness bargain in the business world. Capital should 
 not complain, for capital treats labor as a commodity. 
 That is one of labor's complaints. Nor has society 
 a right to complain. For society has created an in- 
 dustrial system in which the worker has no share in 
 the management and enjoys no return from increased 
 effort. 
 
 COST TO SOCIETY 
 
 There is no doubt but that the wages relationship 
 is not working well. Labor is taking advantage of 
 the shortage of workers. In some industries it is 
 making silent war on the employer. But labor is 
 not striking against the employer alone. For the 
 employer shifts the cost to the public. Labor is 
 striking against society. For society wants wealth. 
 
 [4]
 
 It wants food, coal, lumber, machinery, clothes, 
 shoes, and commodities of all kinds. 
 
 Sabotage is the result of the passing of the old 
 hopes and ambitions and the definite establishment 
 of the wages system. We may protest against it; 
 employers may seek mandatory injunctions; the 
 courts may jail the agitator and make strikes illegal 
 — society may do all of these things, but sabotage 
 will not be ended by force. It will not be ended by 
 the injunction. Nor will moral appeal have any ef- 
 fect). We can only end sabotage by changing men's 
 relation to their employment, and we can only do this 
 by the creation of psychological forces that will auto- 
 matically impel men to produce willingly and to en- 
 joy their work as well. There is no other way save 
 force or hunger to call forth the efforts of men and 
 these forces cannot now be applied. Sabotage, with- 
 holding efficiency, slacking, the silent strike these 
 tendencies are likely to continue under an industrial 
 system in which the worker has no interest in his 
 work. 
 
 The wages system seems to have reached its logical 
 conclusion. It will linger for a long time, but as a 
 system of industry it has lost its vitality. It no 
 longer satisfies men. This is the meaning of the 
 spirit of industrial unrest not only in America, but 
 in Europe as well. \ 
 
 This is the opinion of Mr. Fred J. Miller, Presi- 
 dent of the American Society of Mechanical Engi- 
 neers, who says : 
 
 [5]
 
 " Our industrial problems of to-day follow from 
 the fact that the relations of employer and employee 
 are still based on the old ideas of slavery and of 
 the patriarchal system. We still believe that the 
 workman ought to be grateful to the employer for 
 having employment. We still consciously or uncon- 
 sciously regard the workman as somehow inferior or 
 of less importance than the employer. 
 
 " As long as management is based upon such ideas, 
 there will be no end to our industrial difficulties. It 
 is the common thing to-day to jump on the workers 
 and to denounce them indiscriminately for restricting 
 production. But it is equally true that a restriction 
 of production is carried on by employers on a large 
 scale. It is notorious that in the anthracite coal 
 industry, both employers and workers have for years 
 restricted production by strikes, lockouts, and in 
 other ways. It is futile to ascribe all our ailments 
 to * wicked workers.' If there are wicked workers, 
 then there are also wicked employers, and the im- 
 portant thing to remember is that the common run 
 of humanity is the same throughout all industries 
 and in all conditions of society." 
 
 The industrial system, not the individual employer, 
 not the wage earner, is at fault. 
 
 [6]
 
 CHAPTER II 
 
 COAL 
 
 The bituminous coal miners went on strike in 1919 
 for a six-hour day and a thirty-hour week. This 
 seemed an unreasonable request. It was resented 
 by the public. The operators said the men wanted 
 more pay and shorter hours. But the men replied 
 that they wanted to work more hours than the coal 
 operators permitted them to work. The miners 
 claimed they were employed less than thirty hours a 
 week; that the mines are idle a great part of the 
 time in order that the operators might charge a 
 higher price for the output. This contention is sup- 
 ported by the United States Geological Survey, which 
 shows that out of a total possible working days of 
 304, the men worked from 195 days, in 19 14, to 299 
 days in 19 1 8. In 19 16 the miners worked 198 days 
 in Illinois, 187 days in Indiana, and 197 days in 
 Ohio. Since the armistice the average hours of 
 work have been cut to 62.5 per cent., or to 30 hours 
 out of a possible 48 hours a week. While this is 
 true the country is paying monopoly prices for coal, 
 and is periodically confronted with a fuel shortage. 
 No one doubts that our coal supply is adequate 
 [7]
 
 for every need. There should be no fuel shortage 
 in any part of the country. Anthracite and bitumin- 
 ous coal is deposited in abundance from the Atlantic 
 to the Pacific. It is found in Pennsylvania, Ohio, 
 West Virginia, Tennessee, Indiana, Illinois, Color- 
 ado, and Wyoming. A coal famine would be easily 
 avoided if coal mining were intelligently organized. 
 And coal could be sold far below its present cost — 
 a cost fixed by monopoly control of the basic Indus- 
 try of the country. 
 
 COAL PROFITS 
 
 ] — 
 
 I Coal operators, like labor, are unwilling to pro- 
 duce to capacity. Capacity production means com- 
 petition. Competition brings down prices to the con- 
 sumer. It reduces profits. Under competitive con- 
 ditions coal would sell at cost, plus a reasonable re- 
 turn on capital. A few years ago bituminous coal 
 sold at from $i to $3 a ton, where it is now selling 
 at from $5 to $20 a ton. The labor cost of produc- 
 tion is reported at below $1.40 a ton. A recent re- 
 port of the Federal Trade Commission Indicates the 
 exorbitant profits of the bituminous mine operators. 
 So does a recent statement of Mr. W. G. McAdoo, 
 who says that profits ran as high as 200 per cent, 
 during the war. In some cases they were as high as 
 1000 per cent. According to the report of the Fed- 
 eral Trade Commission on the bituminous coal min- 
 ing Industry of western Pennsylvania, the operators 
 kept only 6 cents out of every dollar In 19 16, whereas 
 
 [8]
 
 in 19 19 they kept 23 cents out of every dollar, or 
 an increase of nearly 400 per cent. Official investi- 
 gations of over 400 coal companies disclosed that 
 they earned dividends in excess of their total capital- 
 ization, real and fictitious, during the war. 
 
 The coal operators, like the workers, sabotage 
 production. In so doing they sabotage society. 
 They sabotage all industry as they do the individual 
 consumer. 
 
 The mine owners say the blame should not all 
 be laid at their door. They protest that their out- 
 put is fixed by their ability to secure cars. They 
 can only mine coal if they can carry it to market. 
 They can only employ their men 62 per cent, of the 
 time, they claim, because of the refusal of the rail- 
 roads to haul their product. 
 
 ECONOMIC MOTIVE FOR SCARCITY PRODUCTION 
 
 \ It is to the interest of the railroad owners, as it 
 is to the interest of mine operators, to suppress com- 
 petition and limit production. Railroad stock- 
 holders are owners of coal mines. They own 96 per 
 cent, of the anthracite coal of Pennsylvania. They 
 own a great part of the bituminous coal all over 
 the country. Even though the law forbids direct 
 ownership by the railroads, ownership is lodged in 
 corporations made up of the directors and stock- 
 holders of the railroads. And the railroad stock- 
 holders give their own coal the preference. They 
 discriminate against competitors. They do not 
 
 [9]
 
 make prompt deliveries. They often deny coal cars 
 altogether. It was by these means that the inde- 
 pendent coal operators of Pennsylvania were crushed 
 out. One after another was driven out of business 
 or acquired by the anthracite coal roads. The bit- 
 uminous coal supply has been monopolized in the 
 same way. 
 
 The railroads, like the mine operators, are inter- 
 ested in a coal shortage. They are interested in 
 suppressing free production. In the process, they 
 sabotage industry and society as well. 
 
 Railway directors often make more money out of 
 coal than they do out of hauling freight. Freight 
 rates are fixed by the Interstate Commerce Commis- 
 sion. The law declares they should be fixed at a 
 reasonable figure. The price of coal is not. The 
 capital stock of the railroads is widely held. Not 
 so with the coal mines. The railroad mines are 
 owned largely by the directors and stockholders of 
 railroads, who have capitalized them far above their 
 purchase price, and who make more money out of 
 the sale of coal than they do out of their small hold- 
 ings in the railroads. It is thus to their interest to 
 block the free production of fuel, for the free pro- 
 duction of fuel interferes with the monopoly prices 
 which they enjoy. 
 
 SCARCITY PHILOSOPHY 
 
 Scarcity, not plenty, is the rule not only of coal but 
 of all basic industries. Withholding production is 
 
 [10]
 
 becoming the rule of modern industry. It Is becom- 
 ing the rule of our economic life. It is true of al- 
 most all industries that enjoy a monopoly; it is es- 
 pecially true as to raw materials, iron ore, coal, 
 lumber, copper, and oil. 
 
 Speaking on this subject, Mr. Walter N. Polakov, 
 a well known consulting engineer, said: 
 
 " The current talk about efficiency and increased 
 production is misleading. As a matter of fact, in- 
 creased production in the aggregate is not desired. 
 It would lead to a fall in prices which would cut 
 heavily into profits. This is the last thing those 
 who are in control of industry wish. 
 
 " The trouble arises from the fact that a shortage 
 of commodities means higher prices and that higher 
 prices is what our manufacturers and merchants 
 want. The talk about increased production is a re- 
 sult of a confusion of ideas. What each owner of 
 an industrial plant wants is an increase in produc- 
 tion in a particular plant, as against every other 
 plant. But even this desire is thwarted by a knowl- 
 edge that inefficiencies in management which lead 
 to decreased production will be paid for by the con- 
 sumer in higher prices. That is why, regardless of 
 all the talk about efficiency, we find employers un- 
 willing to introduce new methods of organization, 
 which mean increased production." 
 
 The sabotage of which we complain by labor is not 
 confined to labor. Scarcity philosophy had its origin 
 in the protective tariff. It inspired the organi- 
 
 ["]
 
 zation of the trust. It is the underlying motive of 
 all monopoly. Scarcity, not plenty; dearness, not 
 cheapness, has become the accepted economic phil- 
 osophy of American industry. 
 
 [12]
 
 CHAPTER III 
 
 FOOD 
 
 The production and distribution of food is univer- 
 sally sabotaged. This explains the high cost of liv- 
 ing in America where food should be both cheap 
 and plentiful. Up to a generation ago food was 
 produced and distributed freely from the farm to 
 the consumer. There were few intermediaries in its 
 handling and the railways cooperated willingly in de- 
 veloping local production. 
 
 It is not possible to control the production of food 
 at the source as is done with coal, lumber and mineral 
 products. Food is sabotaged after production. It 
 is not permitted to reach the consumer. Often it 
 is not permitted to leave the farm. The labor and 
 capital which have gone into its production are lost 
 to the farmer and to society as well. 
 
 EARLY CONDITIONS IN AGRICULTURE 
 
 A generation ago the farmer produced for a local 
 market. He sold his produce in the near-by town. 
 He bartered at the general store. He slaughtered 
 
 [13]
 
 his cattle on the farm or in the near-by slaughter- 
 house. He was largely self-contained. Agriculture 
 was diversified. The farmer raised cattle, hogs, 
 sheep and poultry. This enriched the soil and main- 
 tained its productive power. There were few if 
 any middlemen between the farmer and the ultimate 
 consumer. The prices of food products — meat, 
 flour, butter, eggs and milk. — were determined by 
 competition, by quantity production and by quantity 
 consumption. Food was cheap and plentiful up to 
 a few years ago when the speculators began to con- 
 trol the supply. 
 
 This is the condition of food marketing in Europe 
 to-day. The city is fed by the surrounding country. 
 Great central markets are maintained by the cities, 
 into which the farmer brings his produce for direct 
 sale to the retail dealer. In Germany, France, Italy, 
 Belgium and Denmark, every town has its own 
 slaughter-house. These stimulate the raising of 
 cattle in the surrounding country. The cattle are 
 killed in the municipal slaughter-house and the local 
 butcher buys from the producer direct. There are 
 over a thousand municipally owned slaughter-houses 
 in Germany alone. There are 44 cooperative 
 slaughter-houses in little Denmark. All of the coun- 
 tries in Europe require that slaughtering be done in 
 public abattoirs or in abattoirs controlled by cooper- 
 ative socieites. This was the condition in America 
 up to the advent of the packing trust. The packers 
 of Chicago destroyed the local slaughter-house. 
 
 [14]
 
 They did this in a variety of ways, usually by unfair 
 competition. 
 
 FOOD SPECULATION 
 
 America, which should be the cheapest country in 
 the world in which to live, is possibly the most ex- 
 pensive. American grown foodstuffs sell at a lower 
 price in Europe than they do at home. Many 
 staple articles sell at the same price at the point of 
 production that they do a thousand miles distant. 
 The cost of transportation is often added even 
 though there has been no transportation. A dozen 
 exploiters are often found in between the producer 
 and the consumer. 
 
 It is to the interest of the speculators to limit the 
 supply of food. This is done through the control 
 of transportation, slaughtering, warehousing, mill- 
 ing, cold-storage and banking credits. These agen- 
 cies are in the hands of speculators who first secure 
 control of the supply and then restrict the amount 
 that reaches the market. In order to limit the sup- 
 ply, food is permited to decay in the fields. It is 
 permitted to rot at terminals. It is dumped into the 
 rivers or denied access to market. Local produc- 
 tion is killed in order to prevent competition. 
 After purchase food is placed in warehouses or cold 
 storage plants and held. In a thousand ways our 
 food supply is sabotaged on its way from the farmer 
 to the consumer. 
 
 [IS]
 
 CURTAILING MILK SUPPLY 
 
 As indicative of the methods employed to sabot- 
 age food, it was recently disclosed by an investiga- 
 tion of the District Attorney of New York City that 
 the milk trust refused to permit the farmers to 
 bring 2,500,000 quarts of milk to market. This 
 was enough to supply every family in the metropolis 
 with two quarts of milk a day. The farmers were 
 producing it. They were eager to dispose of it. 
 But the milk trust, which controls the distributing 
 agencies of the city, refused to permit it to be sold. 
 Representatives of the trust defended its action by 
 saying that there was a milk surplus; they admitted 
 that if the milk were permitted to be sold it would 
 reduce the price. Yet the result of this action was 
 to destroy nearly two million dollars' worth of prop- 
 erty a week: the farmers were the poorer by this sum, 
 while the consumers, and especially young babies of 
 the metropolis, were denied food. 
 
 Farmers in New York State feed their milk to the 
 hogs, while babies, according to medical investiga- 
 tions, are dying in the cities for lack of it. The 
 cattle men of the West, the wheat growers of the 
 Dakotas, the truck gardeners everywhere, make the 
 same complaint. 
 
 When food is not actually destroyed, it is held in 
 storage. It is denied transportation facilities. It 
 is permitted to decay at terminals to keep down the 
 supply that reaches the market. 
 
 [16]
 
 SACRIFICING THE FARMER 
 
 As a result of this process the farmer Is being 
 driven from the land. At the end of a season he 
 often sees his effort wasted because of his inabiUty 
 to find a market. He gives up one kind of produce 
 after another. When he sees the results of his labor 
 left to rot on the ground, when he has it refused 
 by commission men, when the freight rates amount to 
 more than he realizes on his produce, he gives up in 
 despair. This is one reason why agriculture is un- 
 profitable in eastern states and in the West as well. 
 This is one reason why thousands of farms are 
 going out of cultivation. The eastern farmer es- 
 pecially is unable to market his cattle, his grain, his 
 vegetables, and his fruit. He is denied a market 
 by the railroads or the speculative agencies that con- 
 trol his product.^ 
 
 Farming is actually being destroyed. It is not 
 alone the tribute the exploiting agencies take; it is 
 the wealth that is not produced that is alarming. 
 
 THE RAILROADS AND AGRICULTURE 
 
 The railroads sabotage agriculture as they sabot- 
 age independent mine owners, independent iron and 
 
 1 The Agricultural Bureau of the State of New York states that 
 35,000 men and boys left the farms of that State in 1919, while 
 only about 11,000 changed from industry to farming. New York 
 is rapidly being denuded of farmers; yet it is a state of rich soil, 
 fertile valleys and the best market in the world at its doors. Re- 
 ports of a similar exodus are made by the United States Depart- 
 ment of Agriculture, in other parts of the country. 
 
 [17]
 
 steel producers, independent industry of all kinds. 
 Forty years ago the New York farmer shipped his 
 cattle, his grain, his vegetables and his fruit to New 
 York and Buffalo. The New England farmer 
 shipped to Boston. They had the best markets in 
 the world. Cattle, sheep and hogs were found on 
 every farm. So were dairy cows. The farmer 
 brought his produce to the railway station, and the 
 railway agent solicited his freight, which the rail- 
 roads gladly hauled to the nearest market. The 
 railroads were part of the local life of the commun- 
 ity. They were interested in upbuilding agriculture. 
 If the farmer prospered, the railroad prospered in 
 turn. It got its share from every pound of produce 
 that was conveyed to market. It was to the eco- 
 nomic interest of the railroads to encourage the rais- 
 ing of cattle, hogs, sheep, to bring fruit and other 
 farm produce to the near-by city market. In those 
 days there was no meat trust, no egg, poultry, milk 
 and food supply trust. Prices were fixed by com- 
 petition, and food was plentiful. 
 
 LONG HAUL PROFITS 
 
 In the closing years of the last century the rail- 
 roads were consolidated into great trans-continental 
 systems. There are to-day four great systems 
 radiating out from New York to Chicago and the 
 Pacific Coast. The Pacific Coast raises apples, fruit, 
 and farm produce in abundance. The Dakotas, Kan- 
 sas and Nebraska raise wheat and cattle. California, 
 
 [i8]
 
 Colorado, Texas, Florida and the South produce 
 vegetables of all kinds. It is to the profit of the 
 railroads to haul freight as far as possible. There 
 Is more money In the long haul than there Is in the 
 short haul. There is a bigger return from hauling 
 food from Seattle or Florida to New York than there 
 is from Syracuse to New York. The feeding of 
 New York City by the farmers of New York State 
 reduces railways earnings. It cuts down profits. 
 It is profitable for the railroads that the East should 
 be fed from distant states. Produce from the 
 Pacific Coast yields possibly a hundred times as much 
 In freight earnings as does the produce of New York 
 and Pennsylvania. 
 
 Investigations made some years ago by the State 
 Market Commissioner of New York showed that 
 New York apples, recognized to be among the best in 
 the world, rotted each year on the ground, while 
 train loads of Oregon apples came to New York 
 City with the regularity of express service. The 
 organized agricultural agencies of the state were 
 denied terminal facilities after they had perfected 
 a state organization to sell their produce. Cattle 
 from all over the country are sent to Chicago, and 
 after being killed, the meat is brought back to the 
 point of origin to be eaten. 
 
 The farmers of New England, New York, of our 
 Eastern States, cannot slaughter their cattle as they 
 could forty years ago. The slaughter-houses have 
 been bought up by the meat trust or killed by un- 
 
 [19]
 
 fair competition. They are forbidden or regulated 
 out of business by state laws. In consequence, 
 farmers no longer raise cattle as they did when they 
 had a local market. There are no flocks of sheep 
 on the hills of New England. The farms of the 
 East lack variety. They are robbed of natural 
 fertilizers. They no longer produce all kinds of 
 cattle, because the farmers have been deprived of a 
 market. 
 
 Truck gardening has been killed by a similar con- 
 spiracy. The commission men buy from distant 
 points. They control the market by discriminating 
 against the near-by producer. The cattle men of 
 the West labor under a similar disadvantage. They 
 are confronted by a combination of the railroads and 
 the packers. In addition to the fact that it is to 
 the interest of the railroads to haul food as far as 
 possible, the interlocking of stock ownership be- 
 tween banks, railroads and the packing syndicate 
 makes discrimination inevitable. 
 
 RAILROAD SABOTAGE 
 
 Thus the railroads sabotage food production. 
 They destroy agriculture. This Is one of the rea- 
 sons, it may be the most important reason, why 
 farms are being abandoned all over the country. 
 
 Food scarcity Is not due to the lack of fertility 
 of American soils. It Is not due to the fact that 
 farmers will not work, or that the soil Is exhausted. 
 The production of food is being sabotaged by trans- 
 
 [20]
 
 portation agencies, which find it to their profit to 
 haul food as far as possible, irrespective of the cost 
 to the consumer. It is also to their profit to aid 
 the packer and speculator, for the stockholders of 
 both industries are often the same men. Private 
 transportation is unsocial. It cannot be otherwise. 
 We cannot run the railroads for profit, and at the 
 same time run them for service, for there is more 
 money to be made from unsocial, than there is from 
 social operations. The railroads are more respon- 
 sible for the high cost of living than any other 
 agency. The food problem cannot be solved until 
 we first solve the railroad problem. And we may 
 delay the solution so long that the American farm 
 will be destroyed in the process. This is by no 
 means impossible.^ 
 
 1 An official preliminary report of the United States Census for 
 1920 discloses a startling exodus from the land. During the pre- 
 ceding ten years the city population increased 7J/2 times as fast as 
 the rural population. The urban population increased at the rate 
 of 25.2 per cent, during the decade and the farming population but 
 3.2 per cent. The present urban population is 54,796,100 and the 
 rural population 50,972,000. Ten years ago the urban population 
 was 42,623,383 and the rural population 49,383,883. 
 
 [21]
 
 CHAPTER IV 
 CIRCULATION 
 
 The railroads have been handed back to private 
 operation, because private operation is said to be 
 more efficient than public operation. Private initia- 
 tive, it is claimed, will develop, because it is to its 
 interest to develop, the best transportation system 
 possible for meeting the needs of the country. It 
 is to the advantage of private capital, it is said, to 
 make economies, to promote efficiency, and to de- 
 velop the agencies of transportation so that they 
 will be serviceable. This is the argument which 
 underlies all others for entrusting the railroads to 
 private hands. 
 
 Every one admits the importance of transporta- 
 tion to the life of the nation. Upon it almost every 
 other activity depends. We realized this depend- 
 ence a few months ago, when an unauthorized rail- 
 way strike paralyzed part of the nation. The same 
 situation confronted us in the months before the 
 government assumed control. Certain sections of 
 the country were in a state of industrial collapse. 
 
 [22]
 
 New England was paralyzed. So was western 
 Pennsylvania. The great arteries, east and west, 
 for carrying coal and munitions were clogged with 
 trains which did not move. Not only had the rail- 
 road system broken down, it had carried farmers, 
 manufacturers, and workers with it. 
 
 The amount of wealth that we produce is fixed by 
 the amount that can be transported. The railroads 
 determine whether coal shall move from the mouth 
 of the mine; whether iron and steel shall reach the 
 shops which convert it into the finished product. 
 The railroads decide for the farmer as to whether 
 his produce will be brought to the market, and a 
 few years ago, wheat, corn and other cereals rotted 
 on the ground in the northwest, because of the 
 failure of cars. This is suggestive of the extent 
 to which the transportation agencies figure in the 
 production of wealth. They control it. It is ob- 
 viously impossible to expect the manufacturer, the 
 farmer, and the producer to bring forth wealth, 
 unless it can be brought to market. 
 
 Is it true that the men to whom the railroads have 
 been returned are interested in developing a trans- 
 portation system that will serve the nation? Is 
 it to their interest, their primary, absorbing interest, 
 to develop such a system as the country needs? 
 Have they the same interest in developing trans- 
 portation that the merchant has in expanding his 
 business; that the manufacturer has in building up 
 his plant; or, have the men to whom the railroads 
 
 [23]
 
 have been returned, other interests; interests more 
 profitable to them than railroading; interests that 
 are possibly hostile to efficient railroading? Have 
 we invited production or sabotage by placing the 
 railroads in private hands? 
 
 TO WHOM HAVE THE RAILROADS GONEf 
 
 In the first place, the railroads are not operated 
 by the owners. They are not operated by bond- 
 holders. They have no voice in the management. 
 They have no vote. They are mere mortgagees. 
 They own $12,000,000,000 of securities. Nor do 
 the stockholders manage the railroads. The aver- 
 age stockholder does not even attend the annual 
 meetings. At most, he sends a proxy to some one to 
 vote. The railroads have gone back to the men who 
 controlled them before the war. Those men are 
 bankers. The report of the Pujo investigating 
 committee in 19 13 disclosed, what was a well-recog- 
 nized fact, that the main transportation agencies of 
 the country were controlled by four big banking 
 institutions of New York, which banks, through inter- 
 locking directorates, consolidated the railroads of 
 the country into what was in effect a single railroad 
 system.^ 
 
 This condition has not been changed. All dis- 
 cussion of the railroad question, of efficiency of 
 management, of the service to be rendered, must be 
 
 ^ Committee to Investigate the Concentration of Control of Money 
 and Credit. H. of R. Report 1593. 
 
 [24]
 
 based upon a recognition of the fact that the rail- 
 roads are operated by bankers. 
 
 RAILROADING AND BANKING 
 
 The 250,000 miles of railroads of America are 
 not controlled by trained and experienced railroad 
 men. They are controlled by men with thousands 
 of other interests. For the men that control the 
 railroads control the major trusts of America. 
 They control the great banks and insurance com- 
 panies. They control international and domestic 
 finance. They control iron, coal, copper, the public 
 utility corporations, rubber, sugar, oil and gas. 
 Their interests radiate into hundreds of other cor- 
 porations scattered all over the land. Each rail- 
 road director serves upon scores of other director- 
 ates. At most, he can give no more than a fraction 
 of his thought to the railroad business, about which 
 he often knows little more than what is shown by the 
 annual balance sheets. 
 
 Are the railway bankers interested in making the 
 railroads serviceable? Or are they interested in 
 other things? 
 
 The history of the last twenty years indicates the 
 attitude of banking managers to railroading, to the 
 development of industry and commerce, to the in- 
 terests of the stockholders and the workers. The 
 bankers are primarily interested in banking profits 
 and commissions. They are interested in issuing 
 new securities. They were interested in such trans- 
 
 [25]
 
 actions as wrecked the New Haven Railroad, the 
 Frisco, the Pere Marquette, the Rock Island, Chi- 
 cago & Alton, and scores of other properties. The 
 securities of some of these roads, which had a value 
 like that of a government bond, were depreciated al- 
 most to the vanishing point. The capital stock of 
 the New Haven Railroad sold for over two hun- 
 dred dollars a share. It fell to less than fifty dol- 
 lars a share. The same is true of the Rock Island 
 system. 
 
 These are some of the exploiting interests of the 
 men to whom the railroads have been returned. 
 They are interested in railroad service as earnings 
 affect the stock market. It is to their interest to 
 spend as little as possible on improvements and bet- 
 terments, in order that they may take as much as 
 possible in profits and dividends. 
 
 Here at the beginning, we have an almost un- 
 answerable reason why the Government should have 
 retained the railroads until it could find clean and 
 expert hands to whom it could return them. Our 
 first concern should be that the men who operate the 
 railroads are practical railroad men; that they are 
 men who are experts and are interested in develop- 
 ing transportation to meet the nation's needs. 
 
 WILL THE RAILROADS DEVELOP THE COUNTRY? 
 
 A railroad should be open to all on equal terms; 
 it should be a public, not a private, highway; it should 
 be operated at the lowest possible cost. It is neces- 
 
 [26]
 
 sary if industries and communities are to develop, 
 first, that they be sure of a means of reaching their 
 market, and second, that they have equal treatment 
 with their competitors. These should be axioms of 
 railroad administration. 
 
 For thirty years the railroads have signally failed 
 to satisfy these requirements. Instead of being im- 
 partial carriers of freight, they have been used to 
 foster monopoly and destroy independent industry. 
 It was railway rebates that built up the Standard 
 Oil monopoly from a small refinery in Cleveland, 
 Ohio, into the colossal corporation that it is. The 
 packing monopoly received similar favors. It was 
 permitted to own refrigerator cars, and through such 
 ownership competing packers were discriminated 
 against. The history of the consolidation of the 
 anthracite coal fields is a story of the destruction and 
 bankruptcy of independent coal operators, by the 
 refusal of the anthracite coal roads to give them 
 cars. In this way the anthracite coal roads ob- 
 tained control of ninety-six per cent, of the coal 
 production of eastern Pennsylvania. The same 
 processes were pursued as to bituminous coal. By 
 these means the railroads acquired or controlled, 
 directly or indirectly, great coal fields. These coal 
 properties are highly profitable. The same is true 
 of iron and steel, which is merged into five major cor- 
 porations. All these industries now enjoy a favored 
 position in the market because the railroads can 
 grant them cars and deny them to others. They 
 
 [27]
 
 can grant privileges and favors, which they deny to 
 outside producers. There is no law that can reach 
 these evils under private control. 
 
 INDUSTRIAL CONCENTRATION 
 
 An examination of the report of the Pujo investi- 
 gating committee gives some indication of the ex- 
 tent to which the railroads are interlaced with in- 
 dustrial corporations. They are interlaced by com- 
 mon stockholders, by common directors, by common 
 officers. It is impossible for these officers to treat 
 outside competitors fairly, or to permit competition 
 to play freely on any of the corporations in which 
 the railway owners are interested. These cor- 
 porations include almost every basic industry and 
 every form of food as well. 
 
 Here, again, we have a reason why the railroads 
 under private operation cannot serve the country. It 
 is against their interests to develop new business, to 
 open up new resources, to stimulate the productive 
 power of the nation. Rather, their interests are 
 against such development. It is to their interest 
 to destroy, not create, competition; to smother initia- 
 tive, not encourage it. 
 
 Not alone the major industries but thousands of 
 other industries are interlaced with railroad stock- 
 holders and directors. The packing syndicate 
 owned or controlled upwards of seven hundred dif- 
 ferent kinds of industries. These industries, in 
 turn, were linked up with the railroads through the 
 
 [28]
 
 close relationship of the packing plants with rail- 
 road directors. They, too, were in a position to 
 secure favors. They, too, were in a position to kill 
 off competition. There is scarcely a competitive in- 
 dustry of any importance that is not subject to being 
 killed by the railroads, to whose interest it may be 
 and often is to destroy them. 
 
 Why, it may be asked, is this true? For the 
 simple reason that the directors of the railroads own 
 only a small portion of the railway securities. Their 
 dividends from this source may be negligible. The 
 rates the railroads may charge are fixed by the In- 
 terstate Commerce Commission. The directors and 
 stockholders have much larger holdings and much 
 greater financial interest in industrial plants. They 
 make more money out of these industries than they 
 do out of the railroads. If they can give them ex- 
 clusive privileges, there is no limit to the profits 
 which they may enjoy. It is not because men are 
 criminal that this is true. It is because human 
 nature instinctively leads men to use their power to 
 increase their economic advantages by any means at 
 hand. 
 
 Here is one of the most destructive forms of sabo- 
 tage. The railroads check production. They limit 
 output. They prevent the production of wealth. 
 They establish an embargo about the farmer, the 
 manufacturer, the mine operator and all labor as 
 well. 
 
 [29]
 
 RAILWAY SUPPLY CORPORATIONS 
 
 Nor is it to the interest of the private owners to 
 operate the railroads economically. The reverse 
 is true. It is to their interest to operate them ex- 
 travagantly. Under the Cummins-Esch act, re- 
 cently passed by Congress, the railroads are guaran- 
 teed a rate sufficient to yield six per cent, on their 
 property. This guarantee is in addition to operat- 
 ing expenses, and taxes. No more wasteful propo- 
 sal could possibly be made. It encourages wasteful- 
 ness, rather than economy. Neither the operating 
 officials nor the stockholders are under any spur to 
 keep down operating costs, for their returns are 
 guaranteed by the nation. This is a cost-plus plan 
 with a vengeance. It is an invitation to waste and 
 extravagance. 
 
 There is an additional reason why this is true. 
 Several years ago the Interstate Commerce Com- 
 mission made an investigation of the extent to which 
 railways officers and stockholders were interested in 
 corporations which dealt with the railroads. This 
 investigation showed that directors of practically all 
 the railroads were stockholders and officers in other 
 corporations, which supplied the railways with every 
 kind of material, including steel rails, coal, locomo- 
 tives, cars, and equipment of all kinds. Almost 
 every need of the railroads was supplied by cor- 
 porations in which the railway stockholders, offi- 
 cials and directors were financially interested. Rail- 
 
 [30]
 
 road officials bought from themselves. Buying from 
 themselves, it was not to their interest to buy cheaply. 
 Operating costs were increased In consequence. It 
 is not in human nature to be over-scrupulous under 
 such conditions. 
 
 INVITATIONS TO WASTE 
 
 The railroads are the largest single buyers of 
 supplies in the country. They buy four hundred 
 and fifty million dollars' worth of coal alone. They 
 spend hundreds of millions on rails, on locomotives, 
 on cars, on equipment. They have interlocking con- 
 tracts with the express companies, with the fast 
 freight line companies, with the Pullman Company, 
 with terminal railroads, union bridges, tug and barge 
 companies. They are Interlaced with the packers, 
 with cold storage, food and supply warehouses, with 
 advertising concessionaries, with transfer companies, 
 with news agencies, with every kind of supply house 
 which sells materials in which the railroads stand In 
 need. Officials of the railroads even control em- 
 ployment agencies. These agencies secure a com- 
 mission on every man employed. It is in the interest 
 of these employment offices to hire and fire as many 
 men as possible. 
 
 Here we have a condition in which It Is to the In- 
 terest of the railroads to pay excessive prices for 
 equipment, cars and coal, for lighterage and rental, 
 for practicaly every purchase save labor. These 
 purchases run into the hundreds of millions. Labor 
 
 [31]
 
 alone is outside of the interlocked commodities under 
 the control of the railroad syndicates. 
 
 Efficiency and economy are impossible under such 
 conditions. Human nature cannot stand such a 
 strain. The Interstate Commerce Commission can- 
 not supervise purchases. Neither the commission 
 nor any laws that can be enacted could reach these 
 evils. Years ago, the United States Supreme Court 
 divorced the railroads from the ownership of coal 
 mines. Various devices were immediately adopted 
 by the railroads to avoid this decision. Many rail- 
 roads created another corporation to which the rail- 
 road transferred its coal properties. The stock- 
 holders and directors in the coal-mining corporations 
 are the same as the stockholders and directors of the 
 railroads. There are two corporations instead of 
 one. This was the net result of years of costly liti- 
 gation. 
 
 Again under any kind of private operation, the 
 Interstate Commerce Commission is required to per- 
 mit rates that will pay operating expenses and en- 
 able the railroads to secure capital with which to 
 make extensions and improvements. Inasmuch as 
 rates must be the same on all competing roads, and 
 as the directors of the prosperous roads are also 
 stockholders and directors in the weak roads, it is 
 to their interest to promote extravagant expenditures 
 so that the weak roads will be able to demand a 
 freight-rate structure that will confer large profits on 
 the stronger roads. To make the weak roads self- 
 
 [32]
 
 supporting, strong roads must be given colossal pro- 
 fits. It is impossible under private ownership with 
 the interlocking corporations and interests which 
 must inevitably exist, to avoid these evils or the colos- 
 sal price which the country must pay in consequence. 
 A guarantee of earnings is an invitation to loose and 
 wasteful management. It cannot be otherwise.^ 
 
 WATER TRANSPORT 
 
 America has the greatest system of inland water- 
 ways in the world. They include the Great Lakes 
 from Duluth to Buffalo with the Erie Barge Canal 
 connecting the lakes with the port of New York. 
 The continent is interlaced with waterways radiating 
 out from the Mississippi, while coastal rivers in New 
 England, New York and the Atlantic Seaboard 
 penetrate inland far from the seaboard. 
 
 Water transportation costs about one-seventh as 
 much as rail transportation. It is universally de- 
 veloped by European countries. The waterways of 
 Germany carry almost all of the heavy freight. 
 France, Belgium and Austria have brought their 
 rivers and canals to a high state of efficiency. Be- 
 ing state owned it is to the interest of the commun- 
 ity to carry freight as cheaply as possible. 
 
 The Great Lakes and the Erie Barge Canal carry 
 less freight to-day than they did twenty years ago. 
 The Great Lakes are in effect a private railroad and 
 
 1 As to the effect of private operation of the railroads on farming 
 and the production of food, see Chapter III. 
 
 [33]
 
 steel trust preserve. The railroads have killed water 
 transportation. They endeavored to prevent the 
 building of the Panama Canal. They have closed 
 great ports and harbors along the seaboard and have 
 monopolized most of the harbors of the Great Lakes. 
 They have converted waterways upon which the Gov- 
 ernment has spent millions of dollars into private 
 possessions. Inland water transportation in the 
 United States has been destroyed by the railroads 
 just as a generation and a half ago the railroads 
 acquired the canals built at great expense by the 
 states and permitted them to fall into disuse. 
 
 Water transportation means cheap transportation. 
 It means competitive transportation. It could be 
 developed very easily if we were free to do so. But 
 the railroads have sabotaged waterways. They 
 have sabotaged our coastal trade. They have 
 sabotaged our harbors and have throttled the 
 development of transportation which they are 
 dedicated to promote. It is doubtful if we can 
 have inland water transportation so long as the rail- 
 roads are in private hands. Neither the railroads 
 nor the banks will permit capital to go into water- 
 ways development. The railroads will kill such 
 traffic once it becomes a serious competitor to rail- 
 way freight rates. 
 
 HYDRO-ELECTRIC POWER 
 
 Mr. McAdoo, when Director General of the Rail- 
 roads, urged that our railroads should be operated 
 
 [34]
 
 by hydro-electric power. He pointed to the water 
 power which existed all over the country and which 
 if developed would greatly reduce operating rail- 
 road costs and conserve our fuel supply. We al- 
 ready have an example of hydro-electric power de- 
 velopment at Niagara Falls by the Province of 
 Ontario. Power Is generated in bulk and is dis- 
 tributed from one end of the Province to the other 
 and sold to the cities and to individual consumers at 
 a very low rate. Switzerland has electrified her 
 railroads, Bavaria has done the same thing, as has 
 Norway. 
 
 Suggestions have been made by Interstate Com- 
 merce Commissioner Robert W. WooUey for cen- 
 tral power stations erected at the mouths of the 
 coal mines, which would generate power in bulk 
 for the operation of the railroads. Many valuable 
 by-products would be secured in the process. 
 
 The consumption of fuel by the railroads is placed 
 at 150,000,000 tons a year. In addition, 40,000,- 
 000 barrels of oil are consumed. It is assumed that 
 the only obstacle in the way of such electrical de- 
 velopment is the cost involved. Even this would 
 preclude such development by the railroads. But 
 this is not the main reason why the railroads will 
 not electrify their properties or build central power 
 plants. The owners of the railroads being also the 
 owners of coal mines would lose a market for their 
 coal. The railroads are their own best customers. 
 The directors enjoy enormous dividends from this 
 
 [35]
 
 source. The railroads' fuel bill is $450,000,000 a 
 year. The railroads, too, derive one third of their 
 revenues from the hauling of coal; a revenue that 
 would be lost if water power were harnessed and 
 nature did the work directly. 
 
 The public has a right to the economy that would 
 come from such a cheapening of power; the pub- 
 lic is entitled to the greater cleanliness that would 
 follow. The public also wants cheap light. Fac- 
 tories want cheap power. Our cities and even the 
 country districts could be lighted far more brilliantly 
 with power developed in bulk, and distributed from a 
 central station. Moreover an immense amount of 
 coal and oil would be saved. 
 
 CONFLICT OF ECONOMIC INTEREST 
 
 But these economies, these conveniences, these 
 services, conflict with the profits which the railroad 
 owners make as owners of the coal mines. Social 
 gains run counter to private gains. So the railroads 
 refuse to use or permit us to use the power which 
 nature has placed in our hands, while all of us suffer 
 many inconveniences, we exhaust our limited coal 
 and oil resources as a result of this unsocial condi- 
 tion. The wastage involved runs into the hundreds 
 of miUions annually, while the loss and dirt to our 
 homes and to society runs into hundreds of millions 
 of dollars more. 
 
 Here again, we find that the monopoly, profit- 
 
 [36]
 
 making motive in railroading checks improvements; 
 it prevents economies; it sabotages civilization. 
 
 Commenting on the wastage in the coal mining 
 industry and the gains which would come from cen- 
 tral power stations, Mr. W. H. Polakov, an expert 
 consulting engineer, said: 
 
 *' One-third of our railroad freight is coal. The 
 people who control our coal mines have also a heavy 
 interest in railroad securities. Any improvement in 
 the utilization of our coal which would result in de- 
 creasing the amount of railroad freight, would 
 diminish the value of railroad securities. This 
 would mean heavy losses to the same financial in- 
 terests. To prevent this we waste our resources 
 and burden the people with costs of production 
 which make life an agonizing struggle. A proper 
 utilization of our coal resources would reduce the 
 number of men employed in the mines. We could 
 get all the coal we need by eliminating 80 per cent, 
 of our mines and about 80 per cent, of our miners. 
 This means a re-organization in industrial processes 
 which neither employers nor workers are as yet will- 
 ing to consider." 
 
 RAILWAY EXTENSIONS 
 
 Undoubtedly railway extensions are badly needed 
 to develop the productive power of the country. 
 Spurs should be run to coal and iron mines, to cop- 
 per mines, to docks and harbors. Every large city 
 
 [37]
 
 needs a unification of its terminals and freight sta- 
 tions. This would develop freight, which in turn 
 would increase the earnings of the railroads. But 
 it is not to the interest of the railway owners to 
 open up new territory, to build new lines, to stimu- 
 late production. According to investigations of the 
 Interstate Commerce Commission, the railroads have 
 divided the country into closed districts. Other rail- 
 roads keep out. Banks refuse to compete in the 
 floating of securities. America is divided into 
 feudal domains, in each of which a single railway 
 system is supreme. There is no particular reason 
 why these systems should expand their mileage. 
 There is every reason why they should not do so if 
 such mileage would bring competition to the indus- 
 tries which the railway owners control. The profits 
 which railway owners enjoy from other industries 
 operate to prohibit the expansion and development 
 of our transportation agencies to meet the varied 
 needs of the country as a whole. 
 
 BOYCOTTING THE NATION 
 
 The railroads sabotage the country as a whole for 
 the benefit of favored railroads or favored ports, and 
 interests. In so doing they increase the cost to the 
 public. We see this in the upbuilding of favored 
 ports, just as a generation ago the same influence led 
 to the upbuilding of favored industries. The entire 
 eastern seaboard from New York to Florida, as well 
 as the Gulf of Mexico as far west as the Rio Grande 
 
 [38]
 
 River, contain splendid harbors with a rich hinter- 
 land in which traffic could be developed. Many of 
 these harbors have been improved by the Federal 
 Government at great expense. So have the rivers 
 which flow into them. This is true of Baltimore, 
 Norfolk, Charleston, Savannah, Mobile, New 
 Orleans, and Houston. A natural railroad policy 
 would carry freight from the far west and the middle 
 west to the Gulf ports. It would link up the Missis- 
 sippi and tributary streams. It would carry freight 
 from Chicago and the central industrial regions as 
 well as the southern states to these South Atlantic 
 and Gulf of Mexico harbors. Our South American, 
 Central American and Asiatic commerce would pass 
 through these channels and lines of communication 
 and terminal facilities would be established at these 
 ports. Steamship lines would connect with Europe, 
 South and Central America, and the Orient, by way 
 of the Panama Canal. This would mean shorter 
 hauls, quicker deliveries, shorter ocean routes and 
 uncongested harbor facilities. 
 
 Under federal operation, these ports have re- 
 ceived their share of the traffic. They developed 
 steamship lines. They enjoyed a new prosperity. 
 Under private operation, however, the short haul 
 and the near-by harbor was discriminated against in 
 favor of the North Atlantic ports and especially 
 New York, even though New York is the most 
 expensive of ports. Southern shipping was dis- 
 couraged, as was southern industry. The railroads 
 
 [39]
 
 prefer the long haul. And they do everything pos- 
 sible to encourage it. They haul produce from the 
 far west and the middle west to New York. This 
 however is not the only reason for this policy. 
 
 The officials who control the railroads own the 
 banks of New York, which do an international bank- 
 ing and credit business. They own the so-called 
 shipping trust. They control barges, warehouses, 
 terminals and countless other agencies in and about 
 New York which are tributary to and derive large 
 revenues from the railroads. It is to the interest 
 of the railroad owners to divert all traffic possible 
 to New York in order to secure profits for other 
 industries. As a result the port is congested. 
 Operating costs are increased, while the industrial 
 life of the nation is sabotaged for the benefit of a 
 small group of men who own the port, ocean and 
 warehouse facilities of a single port. The service 
 motive of transportation is subordinated to a profit 
 motive that is inimical to the country as a whole. 
 
 The assumption that private ownership can be 
 relied upon to develop the railroad industry has 
 broken down in America as it has in all other coun- 
 tries. Transportation is a secondary interest with 
 railway operators. No one can estimate the extent 
 to which our whole industrial life is arrested in 
 consequence. Along with credit and the monopoly 
 of basic resources the private ownership of the rail- 
 roads is the great obstacle to the development of 
 the productive resources of the nation. 
 
 [40]
 
 CHAPTER V 
 
 LAND 
 
 Society itself sabotages production. It sabotages 
 the source of all wealth. Society in fact is the worst 
 offender of all. All industry is dependent upon the 
 resources of nature. The fuel we burn, iron ore, 
 oil, and copper, the timber of our forests, and the 
 food which suppHes man with energy, all come from 
 the land, the source of all life, of all industry. Yet 
 society has sanctioned a system that results in the 
 great bulk of our natural resources being kept out 
 of use. 
 
 Up to a generation ago, man was his own master. 
 He worked for himself. He could take up a home- 
 stead in the West. He could build his own fortunes. 
 But he could do so only by labor. He could live 
 only by his own efforts. He had to hew the forests, 
 break the soil, and produce food with which to sup- 
 port himself until another season rolled around. 
 Then our laws invited the tenant and the city dweller 
 from the eastern seaboard to the western prairies. 
 Then the teachers of political economy, the press 
 and statesmen, saw life in terms of production and 
 of competition as well. There are few tenants in 
 
 [41]
 
 a new country, and few landlords. There Is no rent 
 and no profits. For every man can work for him- 
 self. He can live by his own labor on his own land. 
 For 250 years we held to the idea that it was a 
 good thing for men to work for themselves. We 
 believed in competition, in cheapness. We believed 
 in quantity production. This was the most charac- 
 teristic thing of America. 
 
 OUR WASTEFUL LAND POLICY 
 
 By the end of the last century our public domain 
 as well as our mineral resources had been disposed 
 of. Title deeds had passed from the Government 
 to individual owners. Then followed a profound 
 change in all of the relations of life. Land now 
 had a new value; a value it had never possessed be- 
 fore. Up to this time men wanted land only as 
 a means of making a living. If richer land was 
 available in a neighboring state, men abandoned 
 their old farms and took up new ones. Land had 
 a value only to the worker. It was an economic 
 value, pure and simple. Men took only so much 
 land as they could cultivate. The farms of New 
 England, New York and the original colonies in the 
 north, were from fifty to one hundred acres in ex- 
 tent. 
 
 When the land was all gone, land acquired a spec- 
 ulative value. The homestead lands rose in value 
 to five and ten dollars an acre. Within the next 
 decade these same lands shot to twenty and thirty 
 
 [42]
 
 dollars an acre. By the end of the century, land In 
 Illinois, Iowa and Kansas was worth from fifty to 
 seventy-five dollars an acre. 
 
 Population grew. More people went to the 
 cities. A larger percentage of the population was 
 engaged in industry. This increased the value of 
 food. It increased the value of land. To-day land 
 in Iowa, Illinois, and parts of Kansas, that fifty years 
 ago was worth little or nothing, is selling at from 
 three hundred to four hundred dollars an acre. The 
 war gave a speculative value to some land in these 
 states of from five hundred to six hundred dollars 
 an acre. In California land is held at from a thou- 
 sand to two thousand dollars an acre, that a genera- 
 tion ago had little or no value whatever. 
 
 LA.ND SPECULATION 
 
 It has become profitable to hold land out of use; 
 to permit it to lie idle. Each year the needs of the 
 world increase; each year population crowds against 
 the land. And each year land increases in value, 
 just as does the value of the coal deposits, the iron 
 ore deposits, the copper deposits, and the standing 
 timber. It is more profitable to speculate in land 
 than it is to work land. 
 
 Society itself is sabotaging production. It does 
 this by permitting men to idly wait for the neces- 
 sities of mankind to make them rich. The result of 
 our land policy is to Hmit production. It sabotages 
 future generations as well. 
 
 [43]
 
 This in turn sabotages all other forms of industry. 
 It made monopoly possible in iron, steel, fuel, oil, 
 copper and timber. Raw materials are basic to all 
 industry. 
 
 The new psychology of labor is also a result of 
 land monopoly. When men could no longer take up 
 a homestead they became of necessity wage earners 
 or tenants. They had no other alternative. They 
 had to work for some one else. For a generation 
 they worked willingly because of the tradition of 
 equality and the widespread belief that any man 
 might rise above his station and escape into the 
 capitalistic class. The war has ended this tradi- 
 tion. The wages status is recognized as permanent. 
 As a result labor sabotage has come in. It is a re- 
 sult of our land policy and the closing of opportunity 
 to men to work for themselves. This more than 
 anything else is responsible for labor unrest. The 
 pioneer spirits who formerly followed adventure to 
 the West are now to be found in the labor movement. 
 
 LAND MONOPOLY 
 
 We assume that America is a land of farm owners; 
 that the nation is divided into farms of from fifty to 
 two hundred acres each, and the land is for the most 
 part under cultivation. Nobody realizes, and few 
 people are concerned over the fact that this is not 
 true. The total cultivable area of America amounts 
 to 841,000,000 acres. This is about four times the 
 area of France. Yet in 1900, over 200,000,000 
 
 [44]
 
 acres were in estates which exceeded i,ooo acres. 
 Their average size was 4,230 acres. This vast do- 
 main, nearly as large as Germany, was owned, ac- 
 cording to census reports, by less than 50,000 people 
 and corporations. It is owned by .0006 per cent. 
 of our population. Many of these estates exceed 
 a hundred thousand acres; many equal five hundred 
 thousand acres; some of them exceed the million 
 acre mark. The states of Texas, California, Wash- 
 ington, Montana, and parts of Colorado, Kansas, 
 Nebraska and the Dakotas, contain great manorial 
 estates, like those of England, Prussia, Russia, and 
 Central Europe. They are worked by tenants, or 
 by hired hands. Much of the land is not worked 
 at all. The hand and mind of man is denied access 
 to a great part of this vast domain, capable of main- 
 taining millions of families in comfort. 
 
 But this is by no means all. Much of the land 
 enclosed in farms is not cultivated. It too is held 
 out of use. The dead hand of sabotage keeps nearly 
 half of the cultivable area of the country out of 
 cultivation. According to the census reports of 
 19 10, there were 400,346,575 acres of land, out of 
 the 878,798,325 acres enclosed, that was not in till- 
 age. It was unimproved. It was failing to pro- 
 duce wealth. 
 
 OPPORTUNITY FOR MORE FARMS 
 
 The extent to which we have sabotaged opportuni- 
 ties for food production, is indicated by the fact that 
 
 [45]
 
 the state of Texas is as large as Germany with her 
 70,000,000 people. Switzerland could be added 
 and these two countries would not exceed the area of 
 a single American state. 
 
 The population of the United States in 19 10 was 
 but 33 to the square mile. Little Denmark, in many 
 ways the most prosperous and contented country in 
 the world, supports 183 people to the square mile. 
 France supports 191 people, Switzerland 234, and 
 Belgium, a bee-hive of industry, a population of 671 
 to the square mile. None of these countries, un- 
 less it is France, are as fertile as the United States; 
 none of them are endowed with as great a diversity 
 of climate, and all of them are more or less ex- 
 hausted by centuries of cultivation. There is no 
 doubt but that the United States could maintain at 
 least 500,000,000 people in comfort, and measured 
 by Belgium, which country is of course not self-sup- 
 porting, 2,000,000,000 people could be cared for 
 within our borders. If our agricultural land were 
 opened to use and cultivated as it is in countries 
 where peasant proprietorship prevails, America 
 would provide farms for tens of millions of families, 
 while a system of home ownership would increase 
 our production of food to an almost unlimited ex- 
 tent. Yet we are to-day confronted by the pos- 
 sibility that in a few years' time we will have to 
 import food. 
 
 [46]
 
 CITY LAND 
 
 We have sabotaged our city dwellers by the same 
 unsocial policy. This too we have done by law. 
 We permit men to speculate in building sites; to hold 
 them out of use entirely, or to cover them with 
 shacks. By so doing we distort our cities into the 
 misshapen, tenement-ridden hives of human beings 
 that they are. The slum is a product of land specu- 
 lation. Monopoly rents are traceable to the limita- 
 tion of the land in use. The suburbs around our 
 cities are held by speculators until the growth of 
 population bursts the bonds of the built-up area and 
 carries people on to the new land, which is given 
 a monopoly, if not prohibitive price, by the neces- 
 sities of the people. We think of New York City 
 as completely built upon. We see only the tene- 
 ments and the skyscrapers. Yet there are 200,000 
 building lots in Greater New York that are held out 
 of use, and tens of thousands of other lots that are 
 covered with shacks or tax-earning buildings. Build- 
 ing sites are held so high that they prohibit the build- 
 ing of homes. This is true of every large city. 
 Our house famine is not alone a house famine. It 
 is largely a land famine. 
 
 We ourselves have sabotaged the land. In so 
 doing we have sabotaged all labor and industry. 
 We have sabotaged the traditions of America. 
 Land sabotage means less wealth, it means fewer op- 
 portunities for labor, less food, less fuel, less com- 
 
 [47]
 
 fort. It means fewer houses, fewer conveniences, 
 and increased rents. It means tenancy rather than 
 home ownership. Unless checked it means a regres- 
 sive, or at least a stationary civilization. For the 
 house and land famine is reducing the birth rate. 
 It increases the death rate. Man cannot live, he will 
 not reproduce his kind, if access to the earth is 
 closed against him. 
 
 IRON ORE MONOPOLIES 
 
 Sabotage of the land is the most costly sabotage 
 of all. It is also the most pervasive. It is not con- 
 fined to agricultural or to city land. We permit the 
 United States Steel Corporation to monopolize the 
 iron ore deposits of Minnesota and Wisconsin and 
 mine only so much ore as it sees fit to mine. It con- 
 trols the iron ore deposits of Tennessee and much of 
 the coking coal of western Pennsylvania. Most of 
 the known iron ore deposits of America are con- 
 trolled by a half dozen corporations which form the 
 iron and steel monopoly. Competition is impossible 
 without the assent of the steel trust. It determines 
 how much iron and steel products shall be produced, 
 and what the public shall pay for them. Steel is 
 King. It is so recognized by high finance. All so- 
 ciety is dependent on steel. It controls railroads and 
 battleships. It controls the distribution of water 
 and gas within our cities. It determines the cost of 
 structural steel, which in turn determines how much 
 shall be used for building. The merchant marine 
 
 [48]
 
 of the world is scarcely less dependent on steel than 
 are the railroads, while docks, harbors, locomotives, 
 cars, the great machines for distributing and hand- 
 ling freight, the tools with which the farmer and 
 the artisan works — every industry, all society in 
 fact, is dependent upon iron and steel for its life.^ 
 
 Steel is the monarch of industry. The autocratic 
 power of the steel trust is traceable to its control of 
 raw materials. This control is sanctioned by so- 
 ciety; it is approved by law. We have permitted a 
 handful of men to control the resources of the earth, 
 and by so doing to exclude capital and labor from 
 entering this industry, from bringing forth wealth, 
 except as such activity suits the will of a single cor- 
 poration. 
 
 TIMBER MONOPOLY 
 
 Lumber is also basic to all industry. It deter- 
 mines the numbers and cost of homes. It enters 
 into all industrial processes. Yet America has sabo- 
 taged its people by permitting a complete investi- 
 ture of the growing timber of the United States by a 
 handful of timber monopolists. The United States 
 Bureau of Corporations conducted an investigation 
 
 iThc United States Steel Corporation earned net earnings in 
 1918, after paying ordinary taxes (but not war taxes) and after 
 deducting $100,000,000 for depreciation, in the sum of $549,180,000. 
 It paid in wages and salaries $452,663,524. It could have reduced 
 the price of every ton of rolled steel by $30 and still have paid 
 7% on all its stock and provided for all interest and sinking fund 
 charges as well. 
 
 [49]
 
 of the timber monopoly In 19 14. It showed that 
 1,694 timber owners held over one-twentieth of the 
 land area of the entire United States, from the 
 Canadian to the Mexican borders. These 1,694 
 holders owned 105,600,000 acres. This is an area 
 four-fifths as large as France; it is more than two 
 and one-half times the land area of the six New 
 England states. Sixteen of these holders owned 47,- 
 800,000 acres, or nearly ten times the land area of 
 New Jersey. Three land grant railroads alone own 
 enough timber land to give 15 acres to every male of 
 voting age in the nine western states where almost 
 all their holdings lie. 
 
 These timber holdings, according to the Govern- 
 ment investigation, are further interrelated until 
 of eighty per cent, of the privately owned timber, 
 three individuals and corporations own fourteen per 
 cent., nineteen persons own two-fifths, and 195 own 
 nearly one-half. These groups again are interlocked 
 by community stock holdings and otherwise, until 
 they act in all essentials as a unit. They deter- 
 mine the production of lumber. They fix its price. 
 
 And they, like the coal miners, and the iron ore 
 monopolists, sabotage production. They limit out- 
 put by preventing competition and excluding free ac- 
 cess to the land. 
 
 GROUND RENT 
 
 Some Idea of the burden which society has heaped 
 upon itself is indicated by the fact that the ground 
 
 [50]
 
 rentals alone of the land underlying New York City 
 amount to at least $250,000,000 a year. This is in 
 excess of $250 per family. This is a tax which must 
 be paid for the mere right to live in the city; to 
 work or to carry on industry. This is the embargo 
 which the land speculators impose on the production 
 of wealth. It is a first charge on life. It must be 
 paid before any other activity is possible. Not alone 
 must this tax be paid, but a great part of the land 
 within the city and for many miles around, is held 
 at such prohibitive figures that it cannot be used at 
 all. This too is a burden on society. It distorts the 
 city's growth. It prohibits expansion. It compels 
 every individual to travel hundreds, possibly thou- 
 sands of unnecessary miles every year, because of the 
 distorted development of the city. Life is cramped, 
 while rent for such land as is improved is increased 
 to the point of herding men and women like cattle 
 in stalls. 
 
 Society is impoverishing itself by this land policy. 
 It embargos all industry. It denies us homes, farms 
 and food and fuel. It limits the size of families, and 
 affects the morals, the health and even the marriage 
 rate of our people. 
 
 [51]
 
 CHAPTER VI 
 
 CREDIT 
 
 Wealth production is controlled by credit. Credit 
 determines the freedom and expansiveness of all in- 
 dustry. It determines what industries shall live and 
 what not; who shall receive assistance and who not. 
 The manufacturer and the mine operator need credit 
 to pay wages; to buy materials. They need it to 
 carry on business until they can realize from their 
 sales. The farmer needs credit to plant, to harvest, 
 to market his produce. Through credit the manu- 
 facturer and the farmer change their wealth into 
 new forms so that industrial processes may be com- 
 pleted. These are the functions of credit. 
 
 Land, transportation and credit are the masters 
 of the economic life of a country. They control it. 
 
 EARLY BANKING 
 
 The bank is the instrument for supplying credit. 
 It receives deposits. It makes loans. This was the 
 sole function of banking for two and a half centuries. 
 Banking was local. The banker kept the monev of 
 
 [52]
 
 his neighbors and extended credit to them as well. 
 He kept a small reserve in some larger town for 
 the clearance of checks and drafts. 
 
 Competition played freely between banks. Usury 
 was not the rule. Interest rates were controlled by 
 competition, by public opinion and the laws. The 
 banker was almost as local in his outlook as was the 
 blacksmith, the storekeeper, and the factory owner 
 who supplied the communities' needs. Credit was 
 not a serious cost to industry. It was open to all on 
 equal terms. The bank was not an exploiting 
 agency. It was used to aid production, to encourage 
 men of ability, and to stimulate the industrial life 
 of the community. 
 
 Banking has been profoundly changed in recent 
 years. It is no longer a free agency. Credit is no 
 longer open to all on equal terms. Bank directors 
 are directors and stockholders in local industries. 
 They are owners of stores, mills and factories. 
 Controlling credit, they control the opportunities of 
 other men to enter fields already occupied by those 
 who control the banks. In almost every town, in- 
 dustry and credit are under the control of a group 
 of men who have already established their position 
 in, if not their control of, the industrial life of the 
 community. 
 
 CONCENTRATION OF CREDIT 
 
 Banking and credit have also ceased to be local. 
 This is the most serious evil of all. The banking, 
 
 [53]
 
 savings and trust institutions of the country are in- 
 terlaced in countless ways with the great financial 
 institutions of New York, which institutions are con- 
 trolled by two great banking groups, whose ramifi- 
 cations, connections and control and the methods 
 which they employ, were described in detail in the 
 Report of the Pujo Committee of Congress in 1913.^ 
 Practically all of the banks in New York City, which 
 is the money reservoir of America and of the world, 
 are under the control of a small number of men. 
 So are the insurance companies with their huge res- 
 ervoirs of funds. These men often own stock in or 
 influence the policy of the banks and trust companies 
 in Boston, Philadelphia, Chicago, Pittsburgh, Cleve- 
 land, St. Louis and the Pacific Coast. They in- 
 fluence the banking institutions in the smaller towns; 
 sometimes through ownership of stock, more fre- 
 quently through the control of opportunities of profit 
 which the banks in New York are able to offer the 
 other banks of the country. Banking is in effect a 
 nation-wide monopoly closely bound together by a 
 community of interest.^ 
 
 The New York banks make the financial and in 
 a measure the political opinion of the country. They 
 
 1 See Committee to Investigate the Concentration of Control of 
 Money and Credit, H. of R. Report 1593. 
 
 2 The New York banks are opposed to the development of new 
 railroads, mines or industries which compete with those which they 
 already own. Through their nation-wide ramifications they close 
 avenues of credit to competing enterprises. They exercise a feudal 
 control of our industrial life. 
 
 [54]
 
 do this through circulars, through daily announce- 
 ments in the press, and through press control. 
 
 THE MONEY MONOPOLY 
 
 Banking has become an investment business. The 
 Eastern banks underwrite billions of securities each 
 year. Not alone the securities of industrial and 
 railroad corporations, but public loans of the United 
 States and foreign countries. They underwrite 
 these securities at a fixed price, low enough to enable 
 them to pass them on to other banks to which they 
 allot a portion of the issue. The inland banks buy 
 the securities at a figure fixed in New York, and sell 
 them to their customers at a higher price. Instead 
 of being banks they are merchants. They buy at a 
 low price and sell at an advanced price. They make 
 substantial profits from this source. They are part 
 of a nation-wide agency for the sale of securities of 
 the railroads, public utility corporations, mines and 
 industrial trusts. In this way they are dependent 
 upon the good will of Wall Street bankers. If they 
 do not accept such underwritings as are offered them, 
 they may be deprived of other opportunities for 
 gain. 
 
 In this way the securities of railroads, trusts, 
 mines, and industries are sold to the public. In this 
 way foreign loans, both to Europe and to weak and 
 dependent countries, are distributed. By this means 
 the inland banks are identified with the mainte- 
 nance of the status quo, and of monopoly interests 
 
 [55]
 
 generally. Competition is a menace to the estab- 
 lished order. So is freedom of production. Credit 
 is organized to maintain a security structure that is 
 based upon monopoly and the inflated prices which 
 monopoly must exact to sustain the security issues 
 that have been placed upon the market. Financial 
 imperialism is promoted by the financial interests, 
 as is the demand for a large army and a powerful 
 navy. The agitation for intervention in Mexico is 
 largely inspired by American interests with invest- 
 ments in that country that are distributed among the 
 bankers and the financiers in the credit centers of the 
 country. 
 
 Our banking and credit agencies have become sub- 
 sidiary of a new type of financial capitalism that is 
 not primarily interested in the development of in- 
 dustry, in the production of wealth, or in the promo- 
 tion of the local community. Rather, they are op- 
 posed to free production. They are opposed to new 
 projects, new railways, more mines, cheap food. 
 Our banking agencies are interested in maintaining 
 the status quo. They, with the railroads, are the 
 main support of the scarcity philosophy. 
 
 PROMOTING SPECULATION 
 
 Through this interlacing of interests, the deposits 
 of 105,000,000 people are drawn from their respec- 
 tive communities and lodged in the money centers 
 and especially in New York. They are used for 
 speculation, stock gambling, the underwriting of se- 
 
 [56]
 
 curities, the flotation of foreign loans. It is the 
 banks that make possible the hoarding of food, of 
 sugar, wool, and raw materials of all kinds. It is 
 the denial of credit to farmers and producers that 
 prevents the farmers from being their own ware- 
 housers and from realizing on the most advantageous 
 market. 
 
 Inland banks keep credit balances in Wall Street. 
 They amount to colossal sums. Through these 
 balances they are permitted to participate in under- 
 writing syndicates. They make more money on call 
 loans used for speculation on the Stock Exchange 
 than they do from commercial loans to customers. 
 It is the investment and speculative feature of met- 
 ropolitan banking that lures the credit resources of 
 the country from the centers of production and di- 
 verts them from local industry, from the upbuilding 
 of agriculture, and the development of the country.^ 
 
 OUR COLOSSAL CREDIT RESOURCES 
 
 Credit in America should be abundant. Interest 
 rates should be low. There should be easy loans 
 for the farmer, for the business man, for the manu- 
 
 ^ We get some suggestion of the power of banking institutions 
 when we contemplate their resources. They amount to $45,000,- 
 000,000 or one fifth of the total estimated wealth of the nation. 
 There are 19,000,000 depositors in the national banks alone whose 
 gross earnings in 191 9 were over $900,000,000. Despite the fact 
 that America is the credit reservoir of the world, despite the 
 colossal reservoirs of the banks and insurance companies, there is 
 to-day scarcely any money to be had for the building of homes, 
 for easy relief for the farmer and no credit at all for the man 
 
 [57]
 
 facturer, for the home builder, for any legitimate 
 enterprise. America has become the credit reser- 
 voir of the world. The federal reserve act widened 
 the foundations of credit so as to make wealth 
 rather than gold the basis for bank loans, while the 
 power to issue federal reserve notes makes tight 
 money impossible. According to the report of the 
 Comptroller of the Currency for the year 19 19 the 
 banking power of the United States at this time " is 
 three times as great as the total banking power of 
 the entire world in 1890 as estimated by Mulhall 
 at $15,585,500,000. The banking power of the 
 United States, according to Mulhall's estimate in 
 1890, was only $5,150,000,000. Our banking 
 power is, therefore, to-day about nine times what it 
 was just thirty years ago." 
 
 Continuing, the Comptroller says : " The so 
 called Banking Power of the United States in June, 
 19 1 9, as expressed by the capital, surplus, profits, 
 circulation and deposits of all national banks and all 
 reporting state banking institutions, including trust 
 companies, together with the estimated amount of 
 such funds in non reporting state banks, plus the capi- 
 tal, surplus, government and reserve deposits and 
 circulation of the Federal Reserve Banks as of June 
 30, 1919, was $45,756,300,000.^ 
 
 " This represents an increase in the banking power 
 
 who needs credit most, the man who has only his character and 
 personal integrity with which to back a loan. 
 
 ^ For the fiscal year 1920 the banking resources were over 
 $53,000,000,000. 
 
 [58]
 
 of the United States over June 30, 19 18, of $6,673,- 
 500,000." ^ 
 
 This is the banking credit power of the country. 
 It is three times the banking resources of the 
 world thirty years ago and nine times the total bank- 
 ing power of this country thirty years ago. 
 
 With this colossal credit reservoir there should 
 be credit for every legitimate need. Banks should 
 be seeking borrowers; they should be going out to 
 the farmer and the business man; they should be 
 developing new industries, building new homes, ex- 
 panding our productive powers In every way. Yet 
 the reverse is true. And conditions seem to be 
 growing worse rather than better. During the 
 summer and fall of 19 19 the farmers of the West 
 were sending frantic appeals to the East for credit 
 with which to save their crops from loss. The 
 building of houses has stopped. Industries have 
 been shut down and certain kinds of merchandising 
 has been almost ruined by the refusal of the banks 
 to grant loans. Yet while this condition prevails as 
 to productive industry the Comptroller of the Cur- 
 rency issues a protest to the banks of New York 
 against the usurious interest they are charging for 
 call money, which he states has gone up to sixteen 
 and even twenty per cent. His open letter to the 
 press of August 10, 19 19, stated that at least a 
 billion dollars was being used for call loans in New 
 York, which means that it is being used for specula- 
 
 1 Report of Comptroller of the Currency, 1919, p. 16. 
 
 [59]
 
 tion on the Stock Exchange. This does not include 
 the billions used for other kinds of speculation not 
 only in New York but all over the country. For 
 some reason or other with all of this credit at our 
 disposal, with banking resources many times greater 
 than we ever enjoyed before, with our banking laws 
 adjusted to the creation of unlimited credit, there 
 is little or no credit for those who produce wealth 
 and for those who need it most to keep us in food, 
 in houses and in the necessities of life. 
 
 Banking and credit have been divorced from their 
 earlier and proper purposes. Credit has ceased to 
 be primarily a local agency. It has become an 
 agency of exploitation and monopoly. Our banks 
 fail to perform the function for which they were 
 chartered; the functions that give them a reason for 
 existence at all. Once the banks become investors 
 in the securities of railroads, public utility corpora- 
 tions, mines, the steel trust, the packing trust, the 
 sugar trust and scores of other great industries, they 
 Insensibly resist any new projects or any new ven- 
 tures that are discredited by Wall Street or that 
 threaten the securities in which they have invested. 
 The banks thus aim to maintain monopoly. They 
 too sabotage production. They refuse to encourage 
 local initiative, new enterprises or the production of 
 wealth. They too are identified with a scarcity phil- 
 osophy. 
 
 Quite as important, the banks of the country resist 
 political change that seeks to regulate or control 
 
 [60]
 
 any of these interests. They have become part of a 
 nation-wide political system that takes its opinions 
 from the money centers of the country. They in- 
 fluence the local press. They are influential in mak- 
 ing nominations to the state legislature and to Con- 
 gress. They contribute to campaign funds. They 
 oversee political parties, their platforms, and the 
 opinions of the men who may be nominated for any 
 public position. 
 
 CREDIT CONTROLS INDUSTRY 
 
 While land monopoly and the ownership of our 
 resources controls the production of wealth, while 
 transportation strangles and sabotages any industry 
 that competes with those industries which the rail- 
 road owners control; while it is to the interest of 
 the major industries to limit production in order to 
 secure a monopoly price ; the banking and credit 
 agencies sabotage industry at the source. They de- 
 termine who shall enter industry and who shall not. 
 They do not permit their funds to be freely used for 
 such useful purposes as the building of homes. 
 There are no agencies for the ending of farm ten- 
 ancy and the encouragement of farm ownership 
 such as exist in Denmark, Australia and Ireland. 
 There are no banks or government agencies for the 
 promotion of farm ownership, or the encouragement 
 of building. There is no credit for the tenant or 
 the worker. Mere moral security is dependent 
 largely on the usurer and loan shark. 
 
 [6i]
 
 American banking is used largely for speculation. 
 It is used for the protection and strengthening of 
 those who already own rather than for the en- 
 couragement of those who have only their labor, 
 their imagination and their initiative to offer. Yet 
 a real banking system should encourage the man 
 without capital or with little capital. It should ac- 
 cept moral risks. It should develop new industries 
 and unused resources. It should seek out the man 
 of talent and extend such aid as can properly be 
 offered to him. 
 
 For generations banking performed these services. 
 It is only by such a union of capital and labor that 
 surplus wealth is created. The land is broken, 
 homes are built, industry is started. But a definite 
 turn in the tide occurred with the monopoly of in- 
 dustry in the closing years of the last century. 
 Then the banks became part of a nation-wide con- 
 solidation and financial control of transportation, of 
 industry and credit, and they have continued to sus- 
 tain this system ever since. To-day they are the 
 antennas reaching out from New York which shape 
 and control our economic life and our political, social 
 and intellectual opinions as well. America works, 
 America produces and America thinks, much as those 
 who control our credit decree. They are the ulti- 
 mate arbiters of our economic as they are of our 
 political life. 
 
 , 162]
 
 CHAPTER VII 
 
 ALIEN CAPITALISM 
 
 Alien capitalism Is the final step In the evolution 
 of sabotage. By alien capitalism I mean the export 
 of credit and capital to foreign countries, either in 
 the form of loans, or for the building of railroads 
 and public utility corporations, the exploitation of 
 mines, the development of timber preserves, planta- 
 tions, and other natural resources. 
 
 Alien capitalism Is the Inevitable consequence of 
 the accumulation of surplus wealth, so called, and 
 the monopoly of opportunities for exploitation in the 
 home country.^ Surplus wealth springs largely from 
 monopoly profits. It is accumulated by the banks 
 and used by the banks for private profit rather than 
 national service. Privilege first secures control of 
 the resources of the home country and then strikes 
 
 1 There is no such thing as surplus wealth and there is no coun- 
 try, not even Great Britain, that does not need all of the capital 
 that is invested in other countries. There can only be a surplus 
 of wealth after the people are decently housed, clothed and fed, 
 and all of their proper wants are provided for. We are export- 
 ing billions of capital but there is little money or credit for aid 
 to our own people. 
 
 [63]
 
 out to conquer other lands where even larger profits 
 are possible. Capital is exported not because it can- 
 not be invested profitably at home, but because it 
 can be invested more profitably abroad. 
 
 From the Civil War to the end of the century, 
 America was a debtor nation. Her railroads and 
 resources were developed by European capital. The 
 extraordinary richness of the country enabled us to 
 speedily liquidate these loans and build up a huge 
 surplus capital in a few years' time. This surplus 
 was lodged with the banks, which in turn used it for 
 the acquisition and monopolistic control of the basic 
 industries and transportation agencies of the country. 
 
 The Great War liquidated our foreign debts. It 
 made us a creditor nation on a large scale. Over 
 forty per cent, of the gold of the world was drawn 
 to America in payment of foreign obligations, while 
 our banking resources at the end of the war exceeded 
 the combined banking resources of the imperial and 
 national banks of all of the other great nations. At 
 the time of the armistice we were not only a creditor 
 nation, we were the only nation in a position to ex- 
 tend credit to other countries and to reach out for 
 the exploitation of the world. 
 
 ENGLAND, FRANCE AND GERMANY 
 
 The United States has passed through the same 
 economic evolution as England, France and Ger- 
 many. England was the first great creditor nation, 
 as England was the first country to develop industry 
 
 [64]
 
 and commerce. Her overseas investments at the 
 outbreak of the war amounted to twenty billion 
 dollars. France Is also a creditor nation. Her 
 overseas investments amounted to over nine billion 
 dollars. Germany became a creditor nation in the 
 decade which preceded the Great War. Her for- 
 eign investments amounted to six billion dollars. 
 Each of these nations in turn was led into imperial- 
 istic undertakings and the exploitation of weaker 
 people as a result of alien capitalism. Great Britain 
 was drawn into Egypt, South Africa, Persia, China, 
 Central and South America, as well as her colonies. 
 The expansion of the British Empire was largely the 
 result of the growth of overseas interests and the 
 demand on the part of the investing classes that 
 political power should follow their investments. 
 French capital penetrated into Algiers, Tunis and 
 Morocco. It was invested in Russia, Turkey, the 
 Balkan States, and Central Africa. The surplus 
 capital of Great Britain was drawn from ground 
 rents of the aristocracy and the profits of the manu- 
 facturing, shop-owning and commercial classes. 
 The surplus wealth of France came from the petty 
 savings of the peasants, which was mobilized by the 
 Paris banks, which loaned it to other governments 
 or used it for exploitation purposes in foreign lands. 
 Germany adopted and perfected the methods em- 
 ployed by England and by France. Through inter- 
 national banks, of which the Deutsche Bank was the 
 chief, she penetrated rapidly into countries where 
 
 [65]
 
 British and French capital had already found lodge- 
 ment. She came into conflict with England and 
 France in Turkey, Asia Minor and Mesopotamia. 
 Her investments in these regions, and especially the 
 Bagdad railway, was a menace to the British Em- 
 pire. Germany conflicted with France in Morocco, 
 and the Morocco incident of 191 1, which nearly 
 precipitated war at that time, was a result of the 
 warring claims of German and French concession 
 seekers and bankers which came in conflict not only 
 in the making of the public loans, but in the securing 
 of iron ore concessions as well. Alien capitalism is 
 the forerunner of imperialism. It has always been 
 so. 
 
 IMPERIALISM 
 
 The investing classes in America are now politi- 
 cally ascendant, as they were in England, France 
 and Germany. The foreign investor demands an 
 aggressive foreign policy and the use of diplomacy 
 for the securing and protection of loans and conces- 
 sions. He demands that the flag shall follow his 
 investments, and in furtherance of such demands in- 
 sists upon a large navy and a sufficiently large army 
 to enforce his claims. International usage sanctions 
 the right of a creditor nation to use force for the 
 securing of concessions and their maintenance once 
 they have been secured. It sanctions intervention 
 in weak countries, the overthrow of governments, 
 the fomenting of revolutions, and the use of intrigue 
 
 [66]
 
 and power in the interest of its foreign investors. 
 We see alien capitalism at work in Mexico to-day, 
 in which country American investors have claims 
 aggregating nearly a billion dollars. These claims 
 are in oil wells, copper mines, plantations, railroads 
 and other investments of a monopolistic sort. 
 
 MENACE TO DOMESTIC DEVELOPMENT 
 
 Alien capitalism is a most serious check to domestic 
 development. It exports capital that should be in- 
 vested at home. France was greatly weakened by 
 the export of capital. Money that should have 
 been used for the expansion of the railroads, the 
 development of waterways and industry found its 
 way into other countries. The same is true of Great 
 Britain. The poverty of her people, the decay of 
 agriculture, the shortage of homes and the relative 
 impairment of her industry, is traceable to the export 
 of capital to countries where higher rates of interest 
 are obtainable, where wages are low and human 
 labor along with natural resources are open to ex- 
 ploitation. 
 
 Our own industrial development is now menaced 
 by the lending of billions of credit to other countries. 
 Our railroads need billions of dollars for their 
 proper extension. The same is true of our water- 
 ways. The country is in need of vast hydro-electric 
 development, which would enable us to save fuel, 
 operate our industries and railways, light our towns 
 and substitute the white coal of our rivers for the 
 
 [67]
 
 black coal of the pits. There is need of a million 
 houses and as many farms. But we cannot use 
 capital abroad and at home at the same time. The 
 export of capital starves agriculture. It increases 
 interest rates. It limits our supply of houses and 
 creates monopoly conditions and with them monopoly 
 rents. Billions of dollars should be spent to-day for 
 the better housing of our people, while hundreds of 
 millions more should be used in the opening of our 
 lands, the encouragement of agriculture, the building 
 of roads and the bringing of the country to a proper 
 state of development. America has scarcely 
 scratched her resources; the productive power of 
 labor could be greatly increased by additional capital 
 investment. Our resourcefulness and productive 
 capacity would be greatly stimulated if the surplus 
 wealth accumulated during the war were used for 
 our own purposes rather than for the development 
 of backward countries in which high and usurious 
 interest rates can be obtained. 
 
 The export of capital lowers wages by reducing 
 opportunities for labor. It reduces the demand. It 
 thus reduces wages. Alien capitalism is not only a 
 menace to our industrial development; it is a menace 
 to the wage-working population and to the whole 
 consuming public. 
 
 ECONOMIC SABOTAGE 
 
 Alien capitalism is the final step in economic 
 sabotage. It makes its appearance with the monop- 
 
 [68]
 
 oly of resources at home; the control of natural re- 
 sources by the banking-exploiting group, and the 
 opening of opportunities for the acquisition and ex- 
 ploitation of similar resources in other lands. Un- 
 der natural conditions, surplus wealth means a fall- 
 ing interest rate. It^ means cheap money and abun- 
 dant credit. Falling interest rates would stimulate 
 industry, encourage new projects, and reduce the cost 
 of living. Alien capitalism is thus at war with the 
 best interests of the country. It is anti-social. It 
 is an agency of the exploiting classes for increasing 
 their economic power. 
 
 Alien capitalism is a foe to labor, to industry, to 
 agriculture, and to the peace of the nation as well. 
 For alien capitalism leads to imperialism. Imperial- 
 ism leads to an increasing military and naval estab- 
 lishment. Imperialism ultimately leads to war, as 
 it has all over the world during the last thirty years. 
 Imperialism in other countries has been followed by 
 national decay. This was the experience of Rome, 
 of Spain, of Portugal, of the Hanseatic League. 
 In the nineteenth century, it was the experience of 
 France, England, Germany, Austria-Hungary, and 
 Russia. Alien capitalism and imperialism are the 
 gravest menace to America. They are the natural 
 and inevitable consequences of the ascendancy of 
 privilege in our economic and political life. 
 
 [69]
 
 CHAPTER VIII 
 
 OPINION 
 
 The opinions of a country reflect the will of the 
 class that owns. We think as we are directed to 
 think. We believe the things we are told to be- 
 lieve. This is true of politics, of economic questions. 
 It is true of war and of imperialism. It is true of 
 labor and morals. Our opinions mirror the inter- 
 ests of economic classes that control the thought- 
 molding agencies and make them serve their will. 
 
 This has been true from the beginning. Up to 
 about i860, the most characteristic thing about 
 America was economic equality. Man worked for 
 himself. He usually owned his own farm and his 
 own home. He owned his own tools. He knew no 
 boss, no master. There was no landlord and no 
 capitahst class. 
 
 EARLY IDEALS 
 
 As a people we believed in economic freedom and 
 equality of opportunity. Laissez faire, " let us 
 alone," was the rule of industry. We commanded 
 the Government to keep hands off, to interfere as 
 
 [70]
 
 little as possible with our daily life, with our opinions, 
 religious, political, social. 
 
 We cherished political liberty. It enjoyed almost 
 religious veneration. Like crusaders, we wished to 
 extend it to all subject people; to Ireland, Russia 
 and Poland. America was the asylum not only to 
 the oppressed; it was the asylum of those who sought 
 to establish a government abroad as free as our own. 
 We were hospitable to revolutionary opinions and 
 to revolutionary leaders. We had no fear of old 
 world disturbances. We opened our arms to Kos- 
 suth, Garibaldi, Carl Schurz, to the revolutionists 
 of Russia, Poland, and Central Europe. 
 
 A people where economic equality is the rule has 
 no fear for its institutions. It has no fear for prop- 
 erty. A free people is hospitable to new ideas. 
 The repressive spirit is a by-product of fear born 
 of privileged wealth. 
 
 THE FEDERAL CONSTITUTION 
 
 The people accepted the Federal Constitution on 
 very definite conditions. They feared government 
 as government. They made reservations before 
 they approved of the Constitution. They insisted 
 that the individual should be guaranteed forever in 
 his liberties. They insisted that freedom of speech, 
 freedom of the press, freedom of assemblage, and 
 the right to jury trial and the writ of habeas corpus 
 should be written into the Constitution before they 
 would accept it. These were the first amendments 
 
 [71]
 
 adopted. They were conditions precedent. They 
 constitute the Bill of Rights. To those who 
 adopted it, the Constitution was not primarily a 
 form of government; it was a guarantee of personal 
 rights. When men talk of attempts to overthrow 
 the Constitution they are talking about something 
 else than the Constitution. For the Constitution 
 is not an enumeration of powers, of the method of 
 electing the President and Congress; the Constitu- 
 tion is an enumeration of rights which the Ameri- 
 can people sought to make inviolate. The alleged 
 revolutionary groups of to-day are in the main fight- 
 ing for the Constitution, not making war on it. 
 
 America came into being to insure the natural 
 rights that should inhere in every human being. 
 That was what the state meant to the colonists. It 
 was a guardian of rights; not a form of government. 
 
 The people expressed their resentment to any other 
 conception of the state in their repudiation of the 
 Federalist Party and the Alien and Sedition Laws 
 enacted by it. They swept the Federalist Party out 
 of office. It never came back to life. Down to 
 the Civil War, individual freedom, hands oft by the 
 Government, was the dominant note in our political 
 life. The rights guaranteed by the Constitution 
 were jealously guarded by the courts, by Congress, 
 by the press, by public opinion. There was an al- 
 most religious adoration of liberty, save negro 
 slavery, in all of its forms. This was the most 
 symptomatic thing of our civilization. 
 
 [72]
 
 POLITICAL FREEDOM 
 
 This psychology of freedom was a by-product of 
 economic equality. There were no special privi- 
 leges; no law-made wealth. What one man pos- 
 sessed was open to others to acquire. And a society 
 based on labor values is of necessity a society of 
 equality and of liberty as well. 
 
 During these years, public opinion, the press, the 
 universities, the textbooks on political science, were 
 highly individualistic. Competition, it was said, 
 was the life of society. To challenge this was 
 heresy. Legislation mirrored this psychology. We 
 accepted with approval the philosophy that issued 
 from England with the support of Adam Smith, 
 Ricardo and the political economists of that country, 
 that the best possible society was a society in which 
 competition was allowed to play freely in all 
 economic relations. This philosophy in turn was a 
 reflection of the economic life in which we lived. 
 It was a reflection of the economic desires of the 
 dominant class in the state. 
 
 THE CIVIL WAR 
 
 The Civil War changed economic conditions. It 
 definitely ended the old order. The protective 
 tariff gave birth to exotic industry. War necessities 
 led to the National Bank Act. The Pacific rail- 
 roads secured valuable land grants, while corrupt- 
 ing influences identified themselves with privileges, 
 
 [73]
 
 which came into existence through the aid of the 
 Government. The special privileges created by 
 Congress, the states and cities increased in value as 
 the country grew in population and wealth. To 
 protect their privileges these interests entered poli- 
 tics. They sought to control the Government in 
 order to strengthen the grants they had acquired 
 from the Government. And they found a national 
 philosophy ready made to support them. It was 
 the philosophy of laissez faire, let industry alone. 
 " Hands off " became the cry of privilege, as it had 
 been the doctrine of liberty. Conceived as a phil- 
 osophy of equality, it became a philosophy of in- 
 equality. Economic freedom gave birth to the phil- 
 osophy that the Government should interfere as 
 little as possible with industry, and privilege later 
 capitalized this philosophy as a sanction of its 
 power. 
 
 During the generation that followed the Civil 
 War, competition tended to disappear. The basic 
 industries and many of the secondary industries 
 passed under monopoly control. Competition is 
 limited to retail business, to agriculture and to the 
 rather unimportant activities of the people. The 
 chain stores are rapidly occupying this field. 
 Monopoly has become the prevailing economic sys- 
 tem. 
 
 Reflecting this change, the press and the uni- 
 versities ceased to exalt competition, to emphasize 
 liberty and equality of opportunity. There is no 
 
 [74]
 
 voice now raised for free trade. We no longer be- 
 lieve in the traditions that prevailed for eight genera- 
 tions. Rather we approve of a feudal society in 
 which the control of capital is lodged in a small 
 group on one side, while labor and the farmer are 
 massed as a class apart on the other side. 
 
 ASCENDANCY OF PRIVILEGE 
 
 Privilege reached the height of its power at the 
 end of the European war. The press and agencies 
 of public opinion organized for war propaganda, 
 became an agency for the support of the status quo. 
 Privilege used these agencies to arouse fear and 
 hysteria against labor, the alien and all liberal opin- 
 ion. It influenced the minds of Congress and ad- 
 ministrative officials. It made possible the consider- 
 ation of the Sedition Bill that was slipped through 
 the Senate with scarcely a protest and came close 
 to passage in the House of Representatives. 
 
 FEUDALISM 
 
 The thought of America has passed into a third 
 stage. Public opinion reflects the will of a feudal 
 society just as twenty years ago it reflected the will 
 of monopoly; just as up to i860 it reflected the will 
 of a free competitive state. Our morals and our 
 customs are shaped by the economic state. Prohi- 
 bition is a by-product of the demand for efficiency 
 from the workers. The saloon impaired the work- 
 ing capacity of men. So the saloon had to go. 
 
 [75]
 
 Education, and literature, are consciously shaped by 
 the ruling class, through the press, the magazine 
 and education. For fifty years our immigration 
 policy was designed to supply cheap labor for the 
 mines, the mills and the factories. There was no 
 concern for America, no concern over the effect upon 
 our institutions, of unassimilated, un-Americanized 
 aliens. The employing groups did everything to 
 make assimilation impossible. They employed men 
 in herds. They housed them in shacks. They em- 
 ployed priests and agents to prevent their amalgama- 
 tion with other races in trade union organizations. 
 They limited educational facilities. Everything 
 possible was done to submerge the immigrant and 
 prevent his becoming articulate or even ambitious for 
 the American standard. In the southwest, Mexi- 
 cans are imported to cultivate the plantations and to 
 operate the copper mines. Persons of American 
 descent are being driven out. They cannot compete 
 with the Mexican worker. They will not accept the 
 Mexican standard. The plea for the loosening of 
 our immigration laws against the Chinese is inspired 
 by the same motive. 
 
 The recent change in our attitude toward the im- 
 migrant is inspired by fear. The alien agitator, 
 who under the inspiration of the war believed bet- 
 ter conditions to be possible, is arrested and sent 
 back to Europe so that he will not contaminate his 
 fellow workers. Force is substituted for real Amer- 
 icanization. The Department of Justice, the state 
 
 [76]
 
 constabulary, the army and the police have been 
 enlisted, not to make better citizens out of the alien, 
 but to make him accept without protest the rule of 
 the exploiting group. 
 
 BACK TO THE OLD ORDER 
 
 Following the war, a nation-wide propaganda was 
 started whose objective was, " back to conditions as 
 they were before the war." It was directed by the 
 press, by the popular magazines, by the movies, by 
 an army of speakers who like minute men molded 
 public opinion across the country. There must be 
 no change. The human mind was ordered to stand 
 still. The promises made during the war were to 
 be ignored. The right of labor to organize was 
 challenged. The right to collective bargaining was 
 no longer admitted. Congress assumed that this 
 made-to-order public opinion was a popular ex- 
 pression, and Congress started in to reduce labor to 
 the status from which it has taken it a generation to 
 emerge. The injunction against the coal miners, the 
 attempt to make strikes illegal, the efforts to find 
 means for denying the strike weapon without seem- 
 ing to take it away, are indicative of the psychology 
 that has been sedulously created for the reduction 
 of labor to its pre-war status. 
 
 THE ECONOMIC BASIS OF PUBLIC OPINION 
 
 From the beginning of America, our prevailing 
 philosophy has reflected the economic structure of 
 
 [77]
 
 America. It has reflected equal opportunity and 
 economic liberty; It reflected negro slavery; it re- 
 flected and approved of monopoly and now approves 
 of a caste like feudal society. 
 
 In a quarter of a century, the mind of America 
 has passed from a belief in freedom to a belief in 
 feudalism. Our political philosophy has passed 
 through the same evolution. From a distrust of 
 government, we now accept the Prussian idea of the 
 state. From a belief in economic equality, we ac- 
 cept the wage relationship as final. From liberty of 
 thought, of the press and of assembly, we have come 
 to approve of a political censorship on freedom. 
 From an acceptance of change as a most desirable 
 thing, we have come to condemn change. Privi- 
 lege has decreed we shall have a stratified society. 
 It has decreed there shall be no protest. The pres- 
 ent order must be protected at all hazards. 
 
 The thought of America is shaped to-day as it 
 was a hundred years ago by the economic structure 
 that prevails. It Is a mirror of the economic state. 
 Our psychology, our opinions, even our morals are 
 molded by the class which owns, and particularly by 
 the class which uses the Government for its own 
 economic advantage. 
 
 [78]
 
 CHAPTER IX 
 
 CULTURE 
 
 The human mind withers under censorship. It 
 withers under control. Like the body it requires 
 free air. This is true of all fields of thought, 
 whether it be in art, in literature, or in the technical 
 professions. A censored society cannot be original. 
 If censored by an economic class it is standardized 
 to a materialistic level. It adjusts itself to the wants 
 of the ruling class. 
 
 A free society invites originality. It stimulates 
 variety. The mind goes out to untrodden fields; it 
 experiments with new ideas. It is moved by hope. 
 A privileged society is moved by what the psycho- 
 analysts term a " fear complex." It fears for its 
 institutions, for established politics, for established 
 property rights. It fears most of all for its priv- 
 ileges; privileges acquired and maintained by the 
 political state and the law-making agencies of the 
 state. It is the artificiality, and law-made character 
 of privileged property that makes it timorous of in- 
 tellectual freedom. The nation-wide suppression of 
 protest since the war is born of fear, a fear which 
 
 [79]
 
 springs from a realization of the Instability of law- 
 made accumulations and war-made profits. 
 
 Privileged wealth as opposed to labor-created 
 wealth has come to control the cultural agencies of 
 our life. It controls the press. The papers of the 
 large cities are owned by men of wealth. In the 
 smaller towns the press is under the fear of the de- 
 partment store, which in turn is in fear of the banks. 
 The country press is controlled partly by advertising, 
 partly by political printing, partly by outright pur- 
 chase of Its opinions. The press has ceased to be a 
 record of current events, honestly reported. It re- 
 flects the will of a class. And It uses Its power as 
 though It were a private business, irrespective of the 
 trust involved in the presentation of the news. 
 
 PRESS CONTROL 
 
 Privilege controls the organized news agencies 
 which collect and distribute the news. The Associ- 
 ated Press is a close corporation Into which new 
 papers may not enter. Telegraphic dispatches pass 
 through the censorship of the local office that gathers 
 them, and then through the central office in New 
 York or Chicago which distributes them. Foreign 
 news passes through the same editing process. It 
 is censored In London. Not only Is news of a lib- 
 eral sort excluded from the press; it is distorted and 
 colored in its presentation, as well as in its final edit- 
 ing- 
 Privilege controls advertising. The counting 
 
 [80]
 
 room controls the editorial policy. This control is 
 direct, through the actual ownership by privileged 
 groups of the corporations which place advertising; 
 it is indirect, through the power of the advertising 
 agencies to shape the policy of papers and magazines 
 to which it gives contracts. Some of this control is 
 frank, but much of it is subtle and indirect. As but 
 few publications can live without advertising, the 
 press of the country is under the control of the count- 
 ing room. The editorial room and the control of 
 public opinion has been sabotaged; it is sabotaged 
 by capitalism, by privilege, by those who own. 
 
 Many of the popular magazines have passed under 
 capitalistic ownership. Some of them are directly 
 owned by banks and large corporate interests; others 
 are controlled as is the press through advertising. 
 
 HIGHER EDUCATION 
 
 Our colleges and universities reflect the same eco- 
 nomic will. Their cultural ideals are subordinated 
 to financial considerations. Buildings, endowments, 
 equipment, have become more important than intel- 
 lectual eminence. Any one familiar with academic 
 thought must admit the progressive decay of our 
 educational institutions during the last twenty-five 
 years. The donor of funds has come to shape our 
 cultural life. The Carnegie Endowment for teach- 
 ers' pensions is a standing menace to intellectual in- 
 tegrity. 
 
 University trustees are chosen from the money- 
 [8i]
 
 giving groups. They are largely bankers and finan- 
 ciers. Nowhere is the teaching staff given any sub- 
 stantial control over the university personnel or the 
 course of study. This control is in the hands of 
 the trustees. They scan the records of teachers; 
 they drop men of doubtful opinions. Advancement 
 is denied to men who are not safe. There are only 
 a few progressive thinkers on political economy left 
 in our colleges or universities. The social sciences 
 confine themselves to safe subjects; subjects years in 
 arrears of current day problems. There is little at- 
 tempt to honestly interpret industrial conditions, or 
 to understand the cause of Industrial unrest. 
 
 Men who remain in the teaching profession are 
 compelled to accept this subordination to outside 
 control. They accept the censorship of thought, and 
 act accordingly. This is true not alone of the eco- 
 nomic and political sciences; It Is true of literature, 
 of science, of philosophy. It cannot be otherwise. 
 
 Our universities are becoming sterile. They 
 awaken little interest on the part of students, and 
 contribute little to the intellectual life of the country. 
 Such thought as Issues on social questions is cold- 
 storage, statistical, uninspiring. Our universities 
 are sabotaged by an economic class; by the same class 
 that controls the press of the country. 
 
 Fear has enveloped practically all of our educa- 
 tional agencies; it is suppressing the intellectual pro- 
 cesses of modern life. It has been decreed that there 
 shall be no change. The human Intellect has been 
 
 [82]
 
 ordered to stand still. In the realm of academic 
 thought it is standing still. 
 
 THE PUBLIC SCHOOL 
 
 The same censorship extends to elementary and 
 secondary schools. Teachers have been suspended 
 because of a suspicion of sympathy for Russia. 
 Discussions of revolutionary Europe are under a ban. 
 The slightest reference to radical thought, even the 
 answering of an innocent question from a pupil, has 
 been the cause of an inquisitorial investigation in 
 New York, Washington, and elsewhere. The press 
 has ruthlessly destroyed the reputation of men and 
 women teachers by the display of headlines and scare 
 stories. As a result, the teaching profession is in 
 terror. It is under surveillance. Under such con- 
 ditions men are of little value as teachers. They 
 are of little value to the students. Many leave the 
 profession in consequence. 
 
 Privilege is striking at education in yet another 
 way. The increasing cost of living is stripping uni- 
 versities, colleges and public schools of teachers. In 
 a recent address. Dean James E. Russell of the 
 Teachers College of Columbia University, New 
 York, is reported as saying that there are more than 
 130,000 vacancies in the schoolrooms of the country, 
 and that 300,000 teachers are paid less than $450 
 a year. He said the waiters in the dining rooms 
 get more for their services than do graduates of the 
 school when they enter the teaching field. William 
 
 [83]
 
 C. Redfield, former Secretary of Commerce, stated 
 at the same meeting that the schools of the rural 
 districts of America "are rapidly disintegrating"; 
 while Jacob Gould Schurman, President of Cornell 
 University, said the remuneration paid educators is 
 so low that any red-blooded man hesitates to place 
 such a financial burden upon his wife and family. 
 The present low salary scale Is threatening the very 
 existence of education. 
 
 Privilege fears the public schools. It fears edu- 
 cation. Education breeds unrest. It lures the 
 children of workers out of the factory. It stimulates 
 a demand for a higher standard of living. Most 
 important of all, it educates the worker and strength- 
 ens his intellectual power. 
 
 Privilege is unwilling to pay for education. It is 
 unwilling to pay Increased taxes which adequate pay 
 to teachers and professors involves. While America 
 is willing to spend $1,500,000,000 on a military 
 establishment in peace times. It expended In 19 13 less 
 than $700,000,000 In all educational fields. Amer- 
 ica spends less than one-third as much for education 
 as It does for advertising and advertising solicitors. 
 Our total educational budget in 19 13 for the entire 
 nation was less than one half the amount called for 
 by the war and navy estimates for the year 192 1. 
 
 INDUSTRIAL SUPPRESSION 
 
 Privilege exercises the same deadening effect on 
 industrial processes. For two hundred years com- 
 
 [84]
 
 petition encouraged initiative. With the coming of 
 monopoly, however, invention was chilled. The 
 present economic structure Is financial rather than in- 
 dustrial. Industry is operated to maintain security 
 issues. It is operated by bankers and financiers. 
 The producing classes are being driven out of con- 
 trol. Anything that might imperil the existing in- 
 dustrial organization would endanger the speculative 
 security structure. As a result, the financial group 
 suppresses Inventions. A revolutionary change in 
 engineering would endanger $20,000,000,000 of 
 railway values. Electrification of the railroads 
 would scrap hundreds of millions Invested In car 
 equipment. It would deprive the mine operators of 
 a market for $450,000,000 of coal. It would im- 
 peril the business of railway supply corporations that 
 are interlaced by stock ownership with the owners 
 and directors of the railroads. A new electrical 
 discovery would menace the electrical trust. It, too. 
 Is Interlaced with the railroads and the banking trust. 
 The same is true in many other industries. 
 
 The security Issues of the steel trust are depen- 
 dent upon the maintenance of the status quo. A 
 great discovery might bring In competition. It 
 might decentralize the Industry into smaller units. 
 A generation ago, when competition ruled In the 
 iron and steel industry, the steel magnates changed 
 their machines every few years. They did this at 
 great cost to meet the competition of other mills. 
 This Is no longer necessary. For the steel mills 
 
 [85]
 
 are interlaced through common financial ownership 
 into what is in effect a single trust. 
 
 The art of telegraphy has made but little progress 
 in fifty years' time. There are scores of inventions 
 which would greatly increase the rapidity of trans- 
 mission and permit a considerable reduction in tele- 
 graph rates. The same is true in telephony. It 
 is true in scores of processes that are not subject to 
 competition. Any advance in the arts might imperil 
 monopoly and unsettle the financial structure, which 
 is primarily interested in the maintenance of the 
 status quo. 
 
 DISCOURAGING INITIATIVE 
 
 Privilege discourages initiative on the part of the 
 worker. This is inevitable as class divisions be- 
 come fixed. Labor contributed generously of its 
 mind so long as labor was impelled by ambition. 
 But with the stratification of society, labor solidarity 
 has come in. The slackening in production com- 
 plained of is a natural result of a recognition by 
 labor of its new status. It is a natural reaction 
 against the present industrial system. A new psy- 
 chology has come in. It is partly conscious, partly 
 a subconscious realization that labor as a class can- 
 not rise above its station. It is doomed to remain 
 a wage-earning class. Labor sabotage referred to 
 In an earlier chapter Is one manifestation of class 
 solidarity. It is the worker's reply to the injunc- 
 
 [86]
 
 tion, to anti-strike legislation, to the attitude of the 
 employing classes generally. 
 
 SUPPRESSION OF DISCUSSION 
 
 Privilege is also suppressing discussion in the press 
 and on the platforms. The Espionage and Sedition 
 Acts were directed against industrial unrest quite 
 as much as against the fear of revolution. So were 
 the activities of the Department of Justice against 
 the immigrant alien. Freedom of speech was not 
 only suppressed, but meetings were covered by secret 
 service men much as they were in Russia prior to the 
 revolution. Peaceful meetings have been broken up 
 by private individuals having the support or sym- 
 pathy of the Government. The Government main- 
 tains an army of secret service men, while quasi- 
 governmental agencies and private detective agencies 
 organized during the war have continued to spy upon 
 liberal and radical thought. The Socialist press is 
 still denied the mails. 
 
 Fear is the explanation of this form of sabotage. 
 It is fear for privileges created by power and main- 
 tained by law. 
 
 The Lusk Committee of New York violated the 
 Federal Constitution. It broke into offices, seized 
 private papers, and arrested persons without proper 
 warrants. Aliens have been arrested by the thou- 
 sands for alleged offenses, which when subjected to 
 inquiry were found to be too trivial for consideration, 
 
 [87]
 
 Hundreds of persons have been deported for opin- 
 ions and acts that passed unnoticed for forty years. 
 Many of these had no opportunity for even a sha- 
 dow of a trial, none were given a jury trial, and many 
 were denied the right of going into court on a writ 
 of habeas corpus to try out the question of whether 
 there was any evidence against them at all. 
 
 Constructive sedition, the making of mere opinions 
 a criminal offense, was urged on Congress by the 
 Department of Justice. The mind of America is 
 being threatened by inquisition as it was in the six- 
 teenth century by Spain, as it was by medieval Europe 
 for religious heresies, as it was in old Russia under 
 the Czar. 
 
 The sedition laws which have been proposed and 
 seriously urged in Congress would have weakened 
 the rights of labor to organize. These laws would 
 have placed in the hands of policemen, marshals, 
 prosecuting attorneys and judges an autocratic 
 power by which men might be dragnetted into court, 
 and if they escaped conviction they would be bank- 
 rupt in purse and possibly held in jail for an indefinite 
 time at the will of the exploiting group. 
 
 Force is being substituted for discussion. Society 
 is being made to conform to conventional ideas by 
 a censorship that controls our cultural life. Inde- 
 pendent thought is being driven into the cellar. The 
 mailed fist hangs over our thought processes. Privi- 
 lege is using the same tools, it is adopting the same 
 methods, it is aiming at the same objectives as did 
 
 [88]
 
 the old regime In France, as did the feudal caste in 
 Prussia and Russia. 
 
 RISE OF MEDIOCRITY 
 
 As a consequence the intelligence of America is 
 being driven out of influence and power. It is not 
 found in politics. It is not found in the pulpit. It 
 is not found in the colleges or the schools. It is not 
 found in the railroads, in banking, in trustified in- 
 dustry. American life and American industry is 
 passing into mediocre hands. It is being feudalized 
 under the control of an economic caste that has little 
 cultural enthusiasm itself, that has little intelligence 
 or interest outside of the making of money. It 
 demands that all other minds shall be content with 
 its materialistic point of view. This is the result of 
 the industrial change which has placed the control 
 of our economic life in the hands of the exploiting, 
 banking groups which are not interested primarily 
 In productive processes. Our economic life has 
 been transformed in a generation's time. It has be- 
 come a financial rather than an industrial system. 
 
 Members of the engineering profession are mani- 
 festing unrest over the waste and Inefficiency of 
 capitalistic processes and the restrictive profit-making 
 policies which prevail. Mr. Walter N. Polakov, 
 consulting engineer, has contributed a number of 
 articles on this subject, one in the New York World 
 and another In the Socialist Reviezv for March, 1920. 
 In the latter article he stated that 40 per cent, of the 
 
 [89]
 
 blast furnaces of the country were idle in the last 
 decade. The avoidable waste alone was equivalent 
 to a general strike of all the workers of the whole 
 iron and steel industry for three months of every 
 year. The steel trust, he says, claims losses during 
 the recent strike of $23,750,000. The idleness of 
 capital in just one department of the iron and steel 
 industry is over twice as much each year as the loss 
 incurred in this strike. Stated in another way, he 
 says, the same amount of products as are now pro- 
 duced could be turned out by the mills in a six hours' 
 day instead of ten if the mills were intelligently 
 operated. 
 
 In 19 1 8, 54 per cent, more ore went into the 
 manufacture of an equal amount of pig iron than 
 was used in 19 15. Fifty-four per cent, more ore 
 has to be carried by the railroads to produce the same 
 amount of pig iron, than was carried three years 
 earlier. Duplicating processes are wasteful of 
 metal. They wasted 155,000 tons of steel in 1918, 
 465,000 car miles of freight, and 100,000 tons of 
 fuel. 
 
 The by-product wastage is equally colossal. 
 This is true of coke, of ammonium sulphate, of ben- 
 zol, of tar. The total loss in unrecovered by- 
 products that was avoidable in 19 18, amounted ac- 
 cording to his estimates, to $267,400,000. 
 
 The wastage in human life traceable to unintelli- 
 gent industry involved four times as many accidents, 
 
 [90]
 
 fatalities, or permanent disabilities in 191 8 as in 
 19 1 5. In mining and the transportation of fuel and 
 ore, he says, ioo,OQO men are rendering no useful 
 service to society. 
 
 This is traceable to the control of our economic 
 life by economic groups which are shielded from 
 competition by law. They can afford to waste, first 
 because the waste is shifted onto the public, and sec- 
 ond because in many industries profits are actually 
 increased by wasteful and inefficient methods. 
 
 [91]
 
 CHAPTER X 
 
 EXPLOITERS 
 
 We think of America as a nation of producers. And 
 such we were up to a few years ago. Our fathers 
 worked on the farm or In the shop. The factory 
 unit was small. The corporation was merely an en- 
 larged partnership. It had not become the huge 
 impersonal thing it is to-day. A farmer was a 
 farmer — not a landlord. There were few tenants 
 or agricultural workers. Any one could own his 
 own farm If he chose. The wage earner worked 
 alongside of the employer. He had not yet become 
 a number, carrying a brass check as a means of 
 identification. He too expected to rise and himself 
 become an employer. 
 
 Industrial processes were on a small scale. Capi- 
 talism had not yet divided the master from the man. 
 There were few non-producers in this simple eco- 
 nomic organization. Price was fixed by labor cost. 
 Profits were kept at a minimum by competition. 
 Banking was a local business, often carried on by a 
 single individual as a convenience to the neighbor- 
 hood. Even railroading was on a competitive basis. 
 
 [92]
 
 The railroads were operated for the benefit of the 
 communities and states which organized them. 
 
 Our early society was a producers' society, in 
 which productive labor was the all but universal 
 rule. Men received all that their labor produced. 
 There was little or no overhead in the form of taxes, 
 interest or rent. 
 
 Up to 1880 there was little surplus wealth. Ex- 
 ploitation was almost non-existent. As late as forty 
 years ago America was a nation of economic equality. 
 There were but few intermediaries, and wealth ex- 
 changed from man to man on a competitive basis 
 that kept prices to production cost. 
 
 Our economic processes were efficient. They 
 were in the hands of men familiar with industry. 
 They had come up from the bottom. Men met 
 fairly in open competition. We had a producers' 
 society in which men worked to capacity. They 
 produced willingly. They were impelled by one 
 thought; to produce in quantity and to serve and 
 hold the market by excellence of product and cheap- 
 ness of price. 
 
 RISE OF THE EXPLOITING CLASS 
 
 A new class began to emerge about 1890. It 
 sprang from the tariff, the railroads and the ground 
 landlords. More recently the banking group has 
 become ascendant. This class exploits the wealth 
 produced by others. Year by year it takes an 
 increasing share of the annual output. It takes it 
 
 [93]
 
 in rent, In interest and in profits. Within the last 
 ten years, and especially as a result of the war, 
 this class has been increasing in numbers and In 
 power. It has become the dominant class in the 
 nation. No one wants to be a producer If he can 
 avoid It. To be a manual worker is a badge 
 of a lower caste. To be a farmer is no longer 
 a mark of respectability. The producer has been 
 displaced In public esteem by the exploiting type. 
 Every one aims to crowd into the exploiting busi- 
 nesses and professions. It Is here that great 
 wealth is to be made. It Is to these groups that 
 social distinction attaches. The native-born Amer- 
 ican is ceasing to be an artisan; more rarely Is he an 
 unskilled worker. He seeks to avoid productive in- 
 dustry. He sends his children to college so that they 
 may rise in the social scale, and to rise means to get 
 out of the producing groups. Manual labor is 
 largely performed by the foreign-born. They sup- 
 port both themselves and the Anglo-Saxon stock. 
 They perform the hard unskilled labor. There Is 
 now a racial as well as an economic class division. 
 
 THE BURDEN ON THE PRODUCING CLASSES 
 
 Productive labor now supports Itself and a vast 
 army of non-productive exploiters that have wedged 
 themselves Into every business and imposed them- 
 selves on every transaction. They perform count- 
 less useless functions. They levy an Increasing tri- 
 bute and take an increasing share of the output. 
 
 [94]
 
 They do this through profits, rents, commissions and 
 charges for unnecessary service. They employ an 
 army of dependants that profit from the expendi- 
 ture, the ostentation and the luxuries of the exploit- 
 ing group. In a generation's time we have changed 
 from a producing society into a society in which pos- 
 sibly one-third to one-half of the wealth produced is 
 appropriated by the parasitical classes.^ 
 
 The exploiting groups include the magnates of 
 finance. There are bankers, brokers, middlemen, 
 commission men, speculators. There is a growing 
 class that lives ofif rents, especially ground rents of 
 the cities. There is a profit-taking class, a royalty- 
 taking class. There is a class that finances and con- 
 trols the monopolized industries. Below is an 
 army of butlers, footmen, maids, chauffeurs, who 
 draw wages and salaries from the exploiting group. 
 Lawyers are largely dependants of this class, as are 
 the men who pose as captains of Industry, but who 
 merely control credit and through this control rise 
 to wealth and power. The ground landlord takes 
 the greatest share. His wealth grows by night and 
 by day. He does nothing to produce It. He grows 
 In power with every advance in society and with 
 every increase of population. 
 
 These are the more powerful exploiting groups. 
 It Is these who take an increasing share of the wealth 
 produced. 
 
 1 See Chapter XIII. 
 
 [95]
 
 LABOR AND EXPLOITATION 
 
 The rents, profits, commissions, salaries and 
 wages of the exploiting groups are paid by the 
 worker and the farmer, who a generation ago were 
 free from such burdens. They knew no overhead. 
 They received all that their labor produced. The 
 only fund from which overhead can be taken is the 
 wealth produced each year by labor, either labor in 
 the mill, or labor on the land. The private palaces 
 of our cities, the splendid hotels, the country estates, 
 the thousands of shops maintained for the parasitical 
 classes, are all maintained by the producing groups. 
 They are ultimately supported by the toil of those 
 who work on the farm, in the mill, or in the fac- 
 tory. 
 
 Herein is the ultimate division of all society. The 
 groups and classes are not always clearly marked, 
 nor is the line between the labor which is produc- 
 tive and that which is exploitive. But the division 
 is none the less clear. It is between the producers 
 and the exploiters. And in the final analysis, pro- 
 ductive labor supports both itself and the class that 
 lives off its efforts. 
 
 Here, too, is the line of natural political division. 
 It should be between those who produce wealth and 
 those who exploit it. The governments of the 
 world almost everywhere represent the exploiting 
 groups. But labor and the farmer are breaking 
 into politics in a number of countries. There is only 
 
 [96]
 
 one vital, defensible party division, and that is a 
 division which frankly represents these two groups 
 which struggle over the wealth of the world. 
 
 Parasitism is another form of sabotage. It is 
 sabotage on society, especially on labor and those 
 who toil to support the world. Parasitism is also 
 direct action, for the exploiting groups do not arbi- 
 trate, they do not reach an agreement with those 
 from whom they take tribute. They act on their 
 own judgment. They take what they can get. 
 They charge what the traffic will bear. This is the 
 essence of direct action, whether it be by labor, by 
 capital, or by the landlord who fixes rent as suits his 
 will or his power. 
 
 This is another explanation of the disease of 
 sabotage which is creeping into all labor. The 
 banker complains of taxes that discourage initiative. 
 The same discouragement operates on the produc- 
 ing classes when they become conscious of the exist- 
 ence of a parasitical class and the tribute which it 
 takes. Just as the peasant in pre-revolutionary 
 France gradually ceased to produce because of fear 
 of the tax collector and the agent of the grand 
 seigneurs, so to-day the worker slacks because of the 
 exactions of the state and the privileged classes. 
 When a society decays at the top, the decay ulti- 
 mately penetrates into all other classes. 
 
 [97]
 
 CHAPTER XI 
 
 THE STATE 
 
 The state has become an agency of sabotage. It dis- 
 courages the production of wealth. It determines 
 its distribution as well. It paralyzes social and indi- 
 vidual effort. It violates the laws of biology. This 
 has been true in large measure from the beginning. 
 
 The state is the reverse of what we think it is. 
 We think of it as an instrument to enable society to 
 express itself. In reality, it prevents such expres- 
 sion. It is an obstacle to freedom. The state is 
 not even an agency of democracy. It is not a guar- 
 antee of liberty. 
 
 A properly organized state should be as friction- 
 less as possible. It should encourage the greatest 
 possible freedom of individual and social action. It 
 should express the will of the community easily and 
 accurately. It should be responsive to its wants and 
 needs. It should act almost automatically. And 
 it should not act as a detached thing, but as an in- 
 tegral part of the everyday life of the people. The 
 state is the reverse of all these things. It is a 
 
 [98]
 
 brake to effort. It is in conflict with man's cultural, 
 social and economic activities. The state is an 
 agency of suppression. It should be an agency of 
 cooperation and help. 
 
 THE ORIGIN OF THE STATE 
 
 We see the artificial nature of the state when we 
 examine its beginnings. It had its origin in force. 
 For centuries it was an instrument of oppression. 
 It had no other function. The state came into be- 
 ing to resist attack from without and to prevent pro- 
 test from within. That is all the state was from the 
 tenth to the middle of the last century. It denied 
 expression to the average man. And it performed 
 little, almost no social service whatsoever. 
 
 This was the political genesis of the state. The 
 economic genesis is equally illuminating. In its 
 origin the modern state was not a voluntary as- 
 sociation of free individuals. It was a landlords' 
 council. It issued from the feudal system. It had 
 its birth in land monopoly. Even the form of gov- 
 ernment is landed, feudal. The modern constitution 
 took its form from the seigneurs, from the barons 
 and the Junker lords of Europe. Parliament was 
 a group of landlords organized to resist the king. 
 
 THE BRITISH CONSTITUTION 
 
 The British Constitution is the political expres- 
 sion of the economic interests of the great landlords 
 who banded themselves together nearly eight cen- 
 
 [99]
 
 turies ago In their struggles with the king. The 
 great barons organized a King's Council. They 
 quarreled with the king to be rid of their obligations 
 to the Crown. The council was a council of re- 
 sistance. It fought the king on the one hand, and 
 the people on the other. Ultimately it reduced the 
 king to impotence and the people to serfdom. This 
 King's Council later became the House of Lords. 
 In time it split into two parts; the House of Com- 
 mons being a council of lesser landlords. Neither 
 the House of Lords nor the House of Commons 
 were interested in political liberty. They had no 
 concern for the people. Neither the Magna Charta, 
 the Petition of Rights, nor the Bill of Rights were 
 declarations of liberty for the common man. They 
 were declarations of resistance to the state which 
 sought to collect perfectly legal dues from the 
 great barons. The great landlords wanted to be 
 free from these feudal dues. They wanted to rule 
 their serfs unrestrained by the Crown. And this 
 is the genesis of the British Constitution. It was 
 born of a struggle of economic groups. 
 
 If we study the history of Great Britain from the 
 Magna Charta down to the Lloyd George budget 
 of 1909 and the Irish problem of to-day, we see that 
 the question of landed power and of landed privi- 
 lege appears on every page and enters into every 
 great controversy. Even the expansion of the Brit- 
 ish Empire is a product of the exportation of the 
 rents and profits of the landed aristocracy to weaker 
 
 [100]
 
 countries, which later became imperialistic posses- 
 sions of the Crown. 
 
 Parliamentary government had its origin in an 
 economic oligarchy. It took its form from a group 
 of landlords. It was an artificial instrument whose 
 historical background is feudalism. The political in- 
 stitutions of the world to-day took their form from 
 the council of British landlords organized for private 
 profit and economic power. 
 
 ECONOMIC FOUNDATIONS OF THE STATE 
 
 The economic organization of the state, against 
 which we protest in Russia, is common to all or- 
 ganized government. Revolutionary Russia has 
 merely democratized the economic state as it has 
 prevailed for at least eight centuries. It has ex- 
 panded the council of great landlords into a council 
 that includes the peasant and the worker. The Rus- 
 sian Soviet is an adjustment of the political state to 
 the industrial state as it is to-day. Just as the House 
 of Lords was an economic group legislating in the 
 interest of a landed class, so the Russian Soviet is 
 an economic group legislating in the interest of the 
 great majority of the people who form the producing 
 class. The British Parliament represents those who 
 take rents. The Russian Soviet represents those 
 who paid rents. 
 
 We assume that the state is a detached thing 
 which issued from the voluntary association of the 
 people. Historically considered it is an economic 
 
 [lOl]
 
 heritage. This is almost all the British Parliament 
 has ever been. The financiers and commercial classes 
 have made their way into both houses. But they 
 are subordinate to the landed gentry. Parliament 
 remains what it was in the sixteenth century. It 
 is still a board of directors of the feudal classes. It 
 is a landlords' soviet. For the landlords rule Great 
 Britain to-day much as they did in the sixteenth and 
 the seventeenth centuries. 
 
 The rest of the world has adopted the British 
 Parliament as a model. It is wholly accidental, 
 wholly artificial. And the ruling classes have given 
 a sanctity to parliamentary forms because they are 
 able to control them. They would have overthrown 
 them quickly enough, as they have attempted to do 
 in Russia, as they have done in Hungary, if the 
 political state had sought to honestly reflect the eco- 
 nomic state by representing the producing classes. 
 
 THE AMERICAN CONSTITUTION 
 
 The American Constitution is the lineal heir of 
 the landlord's state, as it was in Great Britain a 
 century and a quarter ago. It was not drafted by 
 the men who wrote the Declaration of Independence, 
 but by men who stepped into power following the 
 Revolution, and who were apprehensive of demo- 
 cratic institutions. They feared popular govern- 
 ment and took precautions to limit the expression of 
 the popular will. The Revolutionary War was 
 followed by a period of reaction. The business 
 
 [102]
 
 classes of the North and the landlords of the South 
 saw the value of a centralized government, distant 
 from the people. They needed it to control taxa- 
 tion, to secure a protective tariff, to validate the 
 issues of Continental currency in which they had 
 speculated. The Revolution was won by the 
 workers and the farmers, the Constitution was 
 drafted by the land-owning aristocracy of the South 
 and the commercial classes of the North. Alexander 
 Hamilton took the more conservative elements of the 
 British Constitution and shaped them to the interests 
 of an economic class which willingly approved of 
 the confusion, the centralization, and the many limi- 
 tations that were designed to hold democracy in 
 check. There was industrial unrest then as now. 
 And fear of democracy was one of the influences in 
 making the Constitution the complicated, difficult, 
 unworkable instrument that it is. 
 
 It is the centralization of government and its 
 complicated, unresponsive form that makes it an 
 agency of the exploiting classes. 
 
 WHAT A NATURAL STATE SHOULD BE 
 
 If we inquire as to what a democratic state should 
 be we see how unnatural the political state is. It 
 is separate and detached from all other processes. 
 It does not function freely and easily. It is diffi- 
 cult to understand. It is out of harmony with what 
 we know about the natural processes of life. 
 
 First, a natural state should be simple. It should 
 [103]
 
 be easily understood and easily worked. It should 
 function with such directness that the voter can 
 readily achieve his desires by a single expression of 
 his will. The line of action between the voter and 
 legislation should be as short and direct as possible. 
 The representative should be responsible and re- 
 sponsive to the people. It should be easy to hold 
 him accountable. 
 
 Second, a natural government should be close to 
 the people. A highly centralized, distant govern- 
 ment is easily controlled by privileged, exploiting 
 groups. Local government is more likely to be hon- 
 est and efficient than a government that is distant 
 from the people. That is one reason for treating 
 the local unit rather than a highly centralized state 
 as the basis for government. This was Jefferson's 
 idea. He believed in a biological state and did 
 everything in his power to keep the political agencies 
 close to the voter. The first axiom of a natural 
 state should be local autonomy, and the greatest 
 possible degree of decentralization. 
 
 Third, the Constitution should be easily changed. 
 It should be scarcely more sacrosanct than the laws 
 of the land. There is no reason for fearing man 
 in his collective capacity. As a matter of fact, there 
 is little that democracy could do that would perma- 
 nently or even temporarily injure any class of the 
 community except the class that lives by exploitation. 
 For a democratic society is bound to be a producers' 
 
 [104]
 
 society, and labor-created wealth is perfectly secure 
 in such a society. 
 
 It is possible to change our form of government 
 only with the greatest difficulty. The American 
 Constitution is rigid. It was framed nearly a cen- 
 tury and a half ago, by men with no knowledge of 
 modern industrial problems. Amendment is diffi- 
 cult. In some states it is impossible. Part of this 
 was designed by the framers of the Constitution; 
 part of it is the result of judicial interpretation, and 
 part of it is inherent in the bigness of the country. 
 It may be that it is impossible for a nation as big 
 as our own to govern itself as it should be governed 
 through a centralized government. Certainly, the 
 Constitution is unresponsive to social needs. The 
 same is true of our state constitutions. 
 
 Fourth, there are innumerable checks to the ex- 
 pression of the popular will. The first is the selec- 
 tion of political agencies at different times, for differ- 
 ent periods and upon different issues. The House 
 of Representatives is elected for two years. The 
 United States Senate is elected for six years and only 
 one-third of the body is elected at the same time. 
 The President is elected for four years. Members 
 of the Supreme Court and the District Courts are 
 appointed for life. A minimum period of four years 
 must roll around before the people can enforce their 
 will or change a government with which they are dis- 
 satisfied, while in practice, the issues before the coun- 
 
 [105]
 
 try shift so radically from year to year that It is 
 almost impossible for the people to so organize their 
 power as to consistently carry through their desires. 
 It requires a long period of time to bring about 
 changes In legislation, and a much longer period to 
 change the Constitution. A really democratic gov- 
 ernment, a natural government, would shift as the 
 will of the people shifted. 
 
 Fifth, political and social changes have to make 
 their way over one veto after another. Legislation 
 must first meet the approval of both branches of the 
 legislature. The Senate Is not responsive to the 
 electorate which elects the members of the House. 
 Legislation must then be approved by the Executive. 
 Finally, If contested, it must fight through the bar- 
 rage of the Federal Courts, which involves from 
 three to six years of litigation. 
 
 Finally, every political change and every piece of 
 industrial legislation must adjust Itself to a Consti- 
 tution, written by men for the most part conserva- 
 tive, and with no possible means of anticipating the 
 conflict of economic groups or the power of privi- 
 leged Interests. In the last analysis, the American 
 government Is In the hands of men long since dead, 
 whose opinions we would not accept on any other 
 subject under the sun. 
 
 In one of the Scandinavian countries, the constitu- 
 tion provided for four separate legislative chambers. 
 One represented the big landowners; a second the 
 lesser landowners; a third represented the church, 
 
 [io6]
 
 and a fourth represented the towns and commercial 
 interests. Each of these bodies, as well as the king, 
 had to approve of every measure before It became 
 a law. As a result there was deadlock. Our own 
 system is scarcely less intolerant of change than the 
 mediaeval constitution that frankly recognized eco- 
 nomic groups as the basis of government. 
 
 These inhibitions on the freedom of the people 
 are suggestive of the extent to which the politi- 
 cal state is founded on distrust. It is an expres- 
 sion of fear. It was designed to make change 
 difficult. 
 
 THE STATE AND THE CITY 
 
 What is true of the Federal Constitution Is true 
 of our states. As a rule state legislatures meet every 
 two years. In many states the length of the session 
 is limited to forty or sixty days. It is assumed that 
 the state legislature Is a nuisance. Yet sessions of 
 this length preclude any serious legislation. It is 
 difficult for a legislative body to organize, select its 
 officials, acquaint itself with the procedure, much less 
 to enact any serious measures in so short a time. 
 This is one reason why the average legislative body 
 is a farce. State politics can only be worked by a 
 boss. Control by outside interests is inevitable. 
 Our political system Invites It. It cannot be other- 
 wise. 
 
 As indicative of the unnaturalness of our political 
 machinery, a measure for granting the suffrage to 
 
 [107]
 
 women, the most natural of political rights, had to 
 make its way against every kind of legal obstacle. 
 It took three-quarters of a century to secure this 
 right, which a natural society would have granted as 
 a matter of course. Laws directed against child 
 labor meet the same obstacles, as do other measures 
 for improving social and political conditions. 
 
 Fear of democracy extends to the very sources of 
 political action. They still further sabotage the 
 community and the individual as well. Methods of 
 nomination and election reflect fear. Nominations 
 in many states are removed from direct control. 
 The blanket ballot is an additional difficulty. There 
 are many other obstacles between the voter and what 
 he wants. 
 
 This distrust Is carried still further In local gov- 
 ernment. Our cities have no home rule. They can 
 only act by permission of the state legislature. 
 They are frequently tied hand and foot by state con- 
 stitutions. The municipal tax rate is limited. So 
 is the amount of Indebtedness that can be incurred. 
 Only rarely are cities permitted to own street rail- 
 ways, gas companies, electric lighting Industries, or 
 means for service to the people. None of our cities 
 are permitted to properly plan their development, 
 to control property. None of them are able to solve 
 the housing question as it is being solved in European 
 cities through public loans or direct public action. 
 The private corporation has far more power. 
 
 Most Important of all, the city is compelled to 
 [io8]
 
 raise its taxes as the state decides. It has no free- 
 dom in this, the most important of all functions. 
 And the laws of. the state compel the cities to collect 
 their taxes as the property interests desire. They 
 are not permitted to tax land values or to use the 
 taxing power for social purposes. The American 
 city, like the American state, is manacled by distant 
 constitutions, usually drafted by interests inimical to 
 democracy. 
 
 OBSTACLES TO PROGRESS 
 
 As a result of these many limitations, any social 
 change has to win a half dozen battles before it wins 
 a victory. Inaction on the other hand has to win 
 but a single skirmish. It needs to control but a 
 single political agency. If it controls the courts, that 
 is a block to progress. Public opinion has to strug- 
 gle to the point of exhaustion to express itself in legis- 
 lature. Democratic movements have to survive a 
 series of elections to achieve their ends. A single re- 
 action in public opinion may block progress for a 
 generation, through a loss of some branch of the 
 Government, while the courts may chain a state or 
 the nation for a generation by the vote of a single 
 man, through a mere majority opinion.^ 
 
 1 The enforcement of the Sherman anti-trust law is an evidence 
 in point. Also the laws regulating railroads and public utility 
 corporations The state of North Dakota passed laws by the initia- 
 tive and referendum, and struggled for years merely to be pro- 
 tected from fraudulent grain grading by millers and commission 
 men. For nearly ten years they have been trying to build itate- 
 
 [109]
 
 REVERSAL OF NATURAL PRINCIPLES OF 
 GOVERNMENT 
 
 The American state has reversed the principles of 
 life, of nature, of biology. We have created an 
 artificial thing. We have provided a political instru- 
 ment in which fear is the controlling motive. We 
 have sabotaged the free expression of humanity, and 
 of talent and ability as well. There is little to lure 
 men of ability from private life where freedom in- 
 vites initiative and power, into a system where am- 
 bition has so little opportunity to play. 
 
 This psychology of fear has palsied the state. It 
 has palsied political effort. The average man is 
 moved by the desire for results. Yet when success 
 is subject to innumerable obstacles, when the end de- 
 sired is distant and highly problematical, when the 
 fruits of effort are subject to veto by officials unre- 
 sponsive to the public will, initiative and effort are 
 discouraged. It cannot be otherwise. And from 
 the earliest step in the promotion of an idea to its 
 ultimate achievement, one hurdle after another is 
 found in the path, which tends to paralysis of effort 
 and the paralysis of our social forces as well. 
 Herein is the real explanation of the failure of 
 American politics. Herein is the explanation of the 
 lack of political interest. America has invited di- 
 
 owned flour mills and terminals. Only within the last few months 
 has the United States Supreme Court released the state from an 
 injunction against such action. 
 
 [IIO]
 
 rect industrial action by the Indirection of our polit- 
 ical institutions. 
 
 THE SACREDNESS OF THE CONSTITUTION 
 
 Moreover America Is almost alone In the sanctity 
 we have attached to the written Constitution. Re- 
 actionary as is the British Constitution, it is far more 
 fluid than Is our own. The composition of the gov- 
 ernment of Great Britain can be changed at a single 
 election. The ministry Is elected by Parliament. 
 It is responsive and responsible to Parliament. 
 There Is no Supreme Court to interfere with the will 
 of the people once It is finally imbedded In law. 
 Even the House of Lords has only a suspensive veto, 
 which can be overridden by the more popular branch 
 of the government. 
 
 America Is the only country that has entrusted its 
 courts with power to veto the acts of other branches 
 of the government. No other country has approved 
 the idea that officials shall be subject to endless ob- 
 stacles in carrying out their acts. America almost 
 alone assumes that indirection is to be preferred to 
 directness, and that confusion is more to be desired 
 than simplicity. 
 
 These obstacles to popular government are not 
 accidental. They were designed by the men who 
 drafted the Federal Constitution. Hamilton dis- 
 trusted democracy. And he carried his distrust as 
 far as possible in the provisions of the Federal Con- 
 stitution. He copied the most reactionary features 
 
 [.II]
 
 of the British Constitution. And these provisions 
 have been given sanctity by the decisions of the 
 courts, which have aggrandized their power for 
 nearly a century. 
 
 FEATURES OF A NATURAL GOVERNMENT 
 
 These should be the axioms of a natural govern- 
 ment, a free government, a government that aims 
 to be responsible and responsive to the will of the 
 people : 
 
 ( 1 ) It should be simple and easily understood. 
 Issues should be free from confusion. There should 
 be a direct line of action from the voter to the ob- 
 ject desired. Once the public has expressed its will, 
 it should be carried into execution. 
 
 (2) Governmental agencies and powers should 
 be close to the people. There should be a large de- 
 gree of local sovereignty. Local agencies should be 
 free to do as they please. There should be no limi- 
 tations on the powers of cities, towns or counties. 
 They should be free cities. The German city has 
 such freedom. And Germany has produced the 
 greatest cities the modern world has known. Local 
 autonomy and decentralization are possibly the most 
 important needs in a free state. 
 
 (3) The voter should act directly. There 
 should be no intermediaries such as electoral colleges, 
 conventions and delegates between him and his rep- 
 resentative. Officials should be the servants of the 
 people, not their masters. 
 
 [112]
 
 (4) There should always be means of direct leg- 
 islation through such an agency as the initiative and 
 referendum. Direct legislation should be made easy 
 and simple. And any decision of the people should 
 be immune from interference by the courts. 
 
 (5) The Constitution should be scarcely more 
 sacrosanct than other laws. It should be easily 
 changed; either by the joint action of the Assembly 
 called for that purpose, or by the direct action of 
 the people. There is no more reason why we should 
 have two sets of laws — one all but impossible of 
 change — than that we should have two separate 
 agencies for the same purpose in any relation of life. 
 
 We have provided just such a constitution for 
 the business corporation. Its organization is sim- 
 ple. It can change its constitution and by-laws at 
 will. It determines for itself what its executive or- 
 ganization shall be. When the directors act that 
 is the end of the matter. They can do anything 
 except make it impossible for the corporation to 
 carry on the business for which it was created. 
 There is no conflict of power and responsibiUty, no 
 checks or balances. A business corporation would 
 go bankrupt if it were subject to the endless checks 
 and delays that inhere in political action. 
 
 The private corporation is a reflection of the de- 
 sires of business. It is a natural instrument for 
 getting things done. It is biological in its form. It 
 is like a human being in the simplicity of its meth- 
 ods and the directness of its processes. 
 
 [113]
 
 The private corporation has greater freedom than 
 a sovereign state and more power than a municipal- 
 ity. It can borrow money as it wills; it can spend 
 it as it wills; It can carry on almost any industry 
 and perform almost any service. The corporation 
 is a free agency. The political state is in chains. 
 The one is organized for action, the other for inac- 
 tion. This Is one reason why the state is inefficient. 
 This is one reason why the private corporation Is so 
 all powerful. 
 
 FREEDOM THE PROPER OBJECTIVE OF 
 GOVERNMENT 
 
 A natural society should be adjusted to the great- 
 est possible freedom of expansion. It should be 
 fluid and responsive. It should evolve and change. 
 There Is no more reason to fear mankind in Its col- 
 lective capacity than In Its Individual capacity. Free- 
 dom is the rule to which political life should adhere. 
 For freedom Is the first law of nature. It under- 
 lies all biological processes. Freedom also explains 
 our achievements. The ingenuity, resourcefulness 
 and courage of America is traceable to freedom. 
 
 And freedom is the law of nature; a law as Im- 
 mutable as any law that nature sanctions. Not the 
 freedom that gives privileges to some and Imposes 
 burdens on others; not the freedom that refuses to 
 distinguish between that which is essentially public 
 and that which Is essentially private; not the free- 
 dom which grants a license to the corporation and 
 
 [114]
 
 chains to the community; but the freedom of each 
 man to Hve his Individual life so long as he does not 
 Interfere with the equal freedom of his fellows and 
 the equal right of the community to live Its life in 
 its own way unrestrained by artificial obstacles. 
 
 [115J
 
 CHAPTER XII 
 
 POLITICS 
 
 We think of politics as a struggle of individuals 
 and parties over fundamental policies and statesmen 
 as the exponents of great principles. But these are 
 the non-essentials of politics, just as they are the non- 
 essentials of history. Politics is a struggle to con- 
 trol the distribution of wealth. 
 
 Wealth is diverted from one group to another by 
 law. This is accomplished by legislation which con- 
 fers privileges or some form of monopoly power. 
 Laws endow one group with the right to collect 
 tribute from another group. It is for this that men 
 seek to control government. 
 
 PARTIES ARE ECONOMIC AGENCIES 
 
 Organized government is carried on by parties. 
 But if we look beneath the surface we find that politi- 
 cal parties are agencies of economic groups, repre- 
 senting different kinds of wealth, and seeking differ- 
 ent kinds of privileges. This is true of all nations. 
 
 In Europe the contending parties are the old 
 landed aristocracy on the one hand, and the new 
 
 [ii6]
 
 industrial and financial bourgeoisie on the other. 
 The history of the nineteenth century is a history of 
 the struggle of these two groups. They contend 
 for principles as those principles fall in with their 
 economic interests. But their principles always re- 
 flect their economic interests. 
 
 In England, the Conservative Party is a land- 
 lords' party while the Liberal Party is a party of the 
 bourgeoisie. But the landed class is always su- 
 preme. It never loses power. It controls the 
 House of Lords. It controls the House of Com- 
 mons as well. It controls the administrative 
 agencies of the government. 
 
 In France the ruling group is also economic. It 
 is financial. The power which rules France is the 
 banks of Paris. The Paris banks are interlaced with 
 millions of peasants to whom they have sold billions 
 of securities of foreign governments. This has 
 identified the peasants with the bankers. The bank- 
 ers control the press; they shape the foreign policy. 
 They shape the domestic policy as well. 
 
 In pre-war Germany it was the Junker landowner 
 and the industrial trusts, combined with the big 
 banks, the Deutsche Bank, the Dresdener Bank, the 
 Darmstater Bank and Disconto Gesellschaft, that 
 ruled Germany and brought her to ruin. 
 
 In Denmark a different class is in control. It is 
 the peasant class. It owns and rules. For 89 per 
 cent of the farmers of Denmark are home owners. 
 In Australia it is the middle-class farmer and the 
 
 ["7]
 
 workers that own the country and rule it. Those 
 who own a country rule it, and those who rule it own 
 it as well. 
 
 ECONOMIC POWER CONFERS POLITICAL POWER 
 
 In every age and in every country, politics reflects 
 the will of the class that is economically the most 
 powerful. This was true in ancient Greece as it 
 was in ancient Rome. It was true in the mediaeval 
 Italian cities. It is true in Europe to-day. The 
 state is an economic, not a political thing. The 
 state is an agency of an economic class. It is little 
 more. 
 
 The long struggles of the British kings with the 
 lords were economic struggles. They were not 
 struggles for liberty. Neither the king nor the 
 barons were interested in the people of England. 
 They were interested in the distribution of taxes. 
 Should the king collect his revenues from the land- 
 lords through feudal dues, or should the landlords 
 and the king join hands and shift the tax burden on 
 to the common people? These and other struggles 
 over the land were the controlling issues of Great 
 Britain for seven centuries. 
 
 To-day the essentials of politics are the same. 
 Political parties, tory and liberal, are agencies to 
 further the interests of the landed and the commer- 
 cial classes. Only within the last few years has a 
 labor or producers' party risen to challenge their 
 power. 
 
 [ii8]
 
 Politics in America reflects the same economic 
 struggle. Prior to the Civil War the Democratic 
 party represented the slave owners and cotton 
 growers. To-day it represents the plantation own- 
 ers of the South and the small business men of the 
 North. The Republican party is a party of high 
 finance. It represents privilege in all of its forms. 
 As an evidence of the artificiality of party organiza- 
 tions, we see the old parties coming together when 
 threatened by a producers' party. The Republicans 
 and Democrats joined hands in North Dakota and 
 Minnesota to defeat the Nonpartisan League. In 
 New York City and Milwaukee, they joined hands 
 to prevent the Socialists from electing their repre- 
 sentatives. The Assembly at Albany, without re- 
 gard for party, recently expelled the Socialist mem- 
 bers, and passed a bill whose object was the exclusion 
 of Socialists from representation in the government. 
 In England, Conservatives and Liberals unite to de- 
 feat candidates of the Labor Party. Wherever a 
 producers' group threatens the power of privilege, 
 the old parties bury their differences in order to 
 prevent it from coming into power. 
 
 HISTORY OF PARTIES 
 
 America is no exception to this economic interpre- 
 tation of politics. Up to about 1880, the politics of 
 America reflected a free society. The official class 
 was drawn from agriculture, from industry, and 
 from the legal profession which represented these 
 
 ["9]
 
 classes. Wealth was fairly well distributed. There 
 were few law-made privileges. There was little 
 caste. Society was organized to encourage equality 
 of opportunity. And the contending parties repre- 
 sented the economic structure of the state. 
 
 For two and a half centuries we had a political 
 state that mirrored a free economic state. Alexan- 
 der Hamilton, it is true, had used the government 
 to create privileges of various kinds. He was re- 
 sponsible for the protective tariff, for a national 
 bank, and for the centralization of government. 
 These measures may have been justified by the emer- 
 gencies of a new and a loosely knit federation. The 
 privileges and tendencies established by him were 
 swept away by the election of Jefferson, and from 
 this time down to the close of the Civil War, privi- 
 lege, aside from negro slavery, exercised but little 
 influence on the nation. The tariff was kept at a 
 low level. The public lands were distributed to ac- 
 tual settlers. The philosophy which prevailed was 
 that of state rights, decentralization of government, 
 and freedom of action and equality of opportunity 
 to the individual man. The federal expenditures 
 were kept at a minimum. They amounted to only 
 $63,000,000 in 1 86 1. There was a small army and 
 navy. There was no demand for a military estab- 
 lishment. 
 
 [120]
 
 THE CIVIL WAR 
 
 The opportunities of the Civil War, Hke the great 
 war just closed, gave birth to an exploiting class. 
 The Republican party demanded a protective tariff. 
 The necessities of the treasury gave the protected 
 industries an opportunity to go the limit in protective 
 legislation. When the war was over this class was 
 too powerful to be dislodged. The national banks 
 which had aided the Government during the war, 
 were interlaced with the Treasury Department. 
 The Pacific railroads came forward with plans for 
 transcontinental railroads. They made inroads on 
 the public domain, and obtained 130,000,000 acres 
 as an aid to their construction. As time went on, 
 these interests were merged into what was a single 
 economic group. It ramified into states and cities 
 in connection with public utility corporations, pro- 
 moted and ultimately owned by the same financial 
 interests. 
 
 In recent years, the exploiting class has been grow- 
 ing more and more powerful. It has added to its 
 wealth and to its political power as well. It fas- 
 tened its hold upon our municipal life, upon our 
 states, and upon the nation as well. 
 
 RISE OF FINANCIAL GROUPS TO POWER 
 
 About 1900, these economic interests began to be 
 closely interlocked, politically and financially, by 
 common directors. Their oflices were moved to 
 
 [121]
 
 New York. They became in effect a nation-wide 
 syndicate, controlled by four or five banking groups, 
 whose ramifications ran Into insurance companies, 
 transportation, mining, and other monopolies. 
 They control all of the major trusts. The extent of 
 this concentration of banking and Industrial control 
 is indicated in the report of the Pujo investigating 
 committee to Congress in 19 13, which made an in- 
 quiry Into " Concentration and Control of Money 
 and Credit." 
 
 From 1865 to 19 14 political power has gradu- 
 ally passed from the producing to this new exploit- 
 ing group. It is a financial group. It is identified 
 with Treasury operations. It maintains the protec- 
 tive tariff. It controls railroads, mines, public service 
 corporations all over the country. It protects the 
 great trusts from interference. Most important of 
 all, it aims to control taxation. It seeks to shift 
 the burden of taxes from wealth to consumption. It 
 is identified with indirect, as opposed to direct taxes. 
 It opposes the income and Inheritance taxes and 
 stands solidly for customs and excise taxes. It is 
 now seeking to shift the burdens of war taxation 
 from direct taxes on to taxes on sales. The power 
 of these interests was manifested in the recently 
 enacted railroad bill; in its opposition to the Federal 
 Reserve Banking Act. It is active in water-power 
 legislation, and legislation looking to the disposition 
 of the public lands. It uses its power to secure a 
 great army and a powerful navy; to promote inter- 
 
 [122]
 
 national finance and imperialism. The suppression 
 of freedom of speech, the sedition bills before Con- 
 gress, the use of the injunction against labor, and the 
 control of the policing and the military power for 
 the suppression of protest, is symptomatic of the 
 power and the purposes of privilege in politics. 
 
 This briefly is the history of the use of govern- 
 ment as an agency of economic privilege. The Re- 
 publican party is identified with the exploiting finan- 
 cial group. The Democratic party is primarily in- 
 terested in the economic interests of the South and 
 in the suppression of the negro. Exploitation, as 
 opposed to production, is the controlling motive of 
 both parties. They both use the Government as 
 an agency for the distribution of wealth. They are 
 at one in their hostility to labor and to the farmer 
 who are unrepresented in politics. 
 
 CONGRESS 
 
 In the congressional election in 191 8 privilege was 
 swept into almost absolute power in both houses of 
 Congress. There is scarcely a score of men in the 
 Senate and the House of Representatives who rep- 
 resent the interests of the producing groups. There 
 are 285 lawyers in the present Congress. They 
 carry into political life the interests of their former 
 clients. There are scores of bankers in Congress. 
 The South is represented almost exclusively by the 
 plantation-owning type, and by lawyers, while the 
 West is represented by landlords, mine owners, 
 
 [123]
 
 editors, lawyers, and other representatives of privi- 
 leged interests. Whereas two generations ago 
 American politics represented the interests of the 
 farmer and the small manufacturer, to-day the pro- 
 ducing groups are almost unrepresented. They 
 have little voice in the affairs of government, and 
 are only tolerated by the ruling groups in both houses 
 of Congress. The transformation of government is 
 complete. 
 
 The producing groups are allowed to retain only 
 so much of the wealth that they produce, as the ex- 
 ploiting classes are unable to take from them. The 
 right of labor to strike is being taken away by the 
 arbitrary acts of executive officials and of Congress. 
 The Attorney General and members of the Senate 
 have sought to enact laws to make strikes unlawful, 
 while the sedition bills before Congress were said to 
 be so worded as to make striking workers outlaws, 
 subject to criminal prosecution. 
 
 In America as in old Europe the political state 
 has been taken over by an economic group. It has 
 become a private thing. It is used to protect pri- 
 vate interests. It has little concern for human 
 rights or for the promotion of comfort, happiness 
 and convenience for the people. The state has be- 
 come an almost exclusive agency of privilege. It is 
 an agency of a class that creates wealth by law and 
 then uses the state to protect the wealth so created. 
 It is because of the control of the state by the ex- 
 ploiting, parasitical class that poverty exists in the 
 
 [124]
 
 midst of plenty, that two per cent, of the people 
 own sixty per cent, of the wealth, that banking agen- 
 cies have been able to secure such complete control 
 of the credit and wealth of the nation. It Is because 
 of such control that the means of transportation 
 have been passed over to banking control, that mon- 
 ster monopolies have been reared, that the mines, 
 standing timber, oil and land of the nation has be- 
 come the private possessions of a handful of men. 
 These are some of the costs of the control of the 
 nation by an economic class which controls political 
 parties. Congress and the courts and that makes and 
 molds public opinion through the press for the main- 
 tenance of its power. 
 
 FUNDAMENTALS OF POLITICS 
 
 Herein Is the real Issue of all politics. It Is be- 
 tween the producing and the exploiting groups. 
 The producers aim to keep the wealth which they 
 produce; the exploiters aim to take it from them. 
 The workers and the farmers desire freedom from 
 extortion, cheap and open means of transportation, 
 the control of credit and marketing In the interest of 
 the producing and the consuming classes. Their 
 interest lies with freedom in trade and In Industry. 
 They are opposed to customs and excise taxes, taxes 
 on sales, and to the protective tariff. 
 
 Almost all of the Issues before the country are 
 between the producing and exploiting groups. The 
 producers are in the great majority, but are split 
 
 [125]
 
 asunder between two parties, neither of which rep- 
 resents their Interests. The exploiting groups are 
 well organized. They are sympathetically related. 
 They are readily responsive to a call which is parti- 
 san or bi-partisan as the necessities of the occasion 
 may demand. 
 
 The real issue In American politics should be be- 
 tween economic classes about economic Issues. The 
 line of party cleavage should be between those who 
 produce wealth and those who seek to appropriate it. 
 Until this issue Is recognized, until parties divide 
 along these natural lines, there will be no vital politi- 
 cal system in this or any other country. 
 
 [126]
 
 CHAPTER XIII 
 
 OVERHEAD 
 
 The political state not only sabotages the produc- 
 tion of wealth; it transfers a constantly increasing 
 share of the restricted output from one class to an- 
 other. This is another form of sabotage. It dis- 
 courages effort as it did in the old regime when the 
 peasant found that increased effort resulted only in 
 increased rent and higher taxes. There is less and 
 less wealth to go around while an increasing portion 
 of the wealth produced is absorbed in overhead by 
 those who do not produce it. This transfer of 
 wealth is a result of the control of the state by a 
 non-producing, privileged class. 
 
 The budget of a country Is a mirror of the kind of 
 government that prevails. A democratic society 
 spends generously for democratic purposes; for edu- 
 cation; for the promotion of the comfort and well- 
 being of the people. We find examples of this in 
 Australia, in Denmark, and in Switzerland. A 
 privileged society spends lavishly for policing, 
 for the army and the navy, for spectacular displays 
 of force. Privilege fears for its unstable privileges. 
 
 [127]
 
 It fears education. It fears protest. It has a mor- 
 bid apprehension of revolution. Fear is the normal 
 psychology of a parasitical society. And fear leads 
 to extravagant expenditures for agencies of force 
 both at home and abroad. Alien capitalism de- 
 mands a large navy to protect its imperialistic in- 
 vestments, while the financial interests demand a big 
 military establishment for the maintenance of order 
 at home. The present Congress reflects the hys- 
 teria and fear of the capitalistic classes. The colos- 
 sal federal budget is born of the psychology of fear 
 and force. ^ 
 
 TAXES 
 
 Taxes are the first of the overhead charges on 
 society. They were a negligible burden up to forty 
 years ago. Taxes have been enormously increased 
 as a result of the war. Whereas in 19 13 the federal 
 budget amounted to a billion dollars a year, it is 
 now more than five times that figure, and may amount 
 to eight times that figure. In 19 14 the federal tax 
 burden was but $50 per family, whereas to-day it 
 amounts to $250 per family. Our federal taxes 
 alone absorb from one-sixth to one-fifth of the in- 
 come of the average worker. Even this is below the 
 burden actually borne, for customs taxes, excise taxes, 
 and even the excess profits taxes cumulate over and 
 
 1 The psychology of the political state is mirrored in the Con- 
 gressional budget for 1920. As shown in Chapter XVI 92.8% of 
 our total expenditures are for past wars and the maintenance of 
 the war and navy departments. 
 
 [128]
 
 over again before they are paid by the consumer. 
 They are also regressive taxes. They are borne 
 by those least able to carry them. 
 
 The budget of the City of New York, which was 
 something over $200,000,000 in 19 12, is now in 
 excess of $350,000,000. It has increased 75 per 
 cent, in seven years' time. It is likely to go much 
 higher. The budget for New York State exceeds 
 $125,000,000. Increased living costs are forcing 
 up wages of teachers, policemen, firemen and other 
 municipal employees. It has raised the cost of all 
 improvements. Within the next few years, munici- 
 pal and state taxes are likely to be increased by at 
 least 100 per cent, over what they were in 19 14. 
 The tax burden of America is not far from ten bil- 
 lion dollars, or nearly one-seventh of the total wealth 
 produced. With the soldiers' bonus, the railway 
 deficits and other demands, the total burden may be 
 increased to more than twelve billion dollars. A 
 great part of this is a war burden. It is for interest, 
 military, naval and other non-productive purposes. 
 For this expenditure society receives little return In 
 services. It Is a privileged expenditure Imposed on 
 society by the class in control of the state. Nearly 
 one-seventh of the currently created wealth Is being 
 taken by the state. It is taken from capital and 
 from labor. It yields no return. It diminishes 
 wealth production. It Impoverishes the people and 
 reduces their power to produce and to consume as 
 well. 
 
 [129]
 
 PROFITS 
 
 Profits, Interest and rent are other forms of over- 
 head. Interest Is a return on savings. In a free 
 society It Is fixed by the competition of capital seek- 
 ing Investment. Prior to the war, the normal re- 
 turn on capital, where the element of risk did not 
 enter, was between four and five per cent. Three 
 and four per cent. Is still the savings bank return 
 to depositors. 
 
 In a normal society. Interest is a proper charge on 
 production. It need not be a serious burden. 
 
 Up to about 1890, interest and profits were kept 
 down by competition. They were a negligible bur- 
 den on the consumer. With the monopolization of 
 Industry in the nineties, prices and profits were in- 
 creased. They were not a return on capital in the 
 form of Interest; they were a tribute exacted by 
 monopoly to maintain an artificial security structure 
 of the monopolized Industries. These monopoly 
 profits soon became fixed as normal profits. Be- 
 tween 1890 and 1905 billions of new securities were 
 sold by the banks which brought the monopolies into 
 existence. To give these securities value, prices had 
 to be increased. These price increases had to be 
 maintained because of the speculative securities 
 structure which had been erected. By 19 14 this arti- 
 ficial scale of prices and profits had become perma- 
 nent. Compared with conditions of twenty years 
 before, profits had become a colossal burden. They 
 
 [130]
 
 absorbed a great part of the current wealth. For 
 these profits society received no return. They were 
 not an interest charge. Nor were they payment for 
 organizing or administrative skill. They were trib- 
 ute taken through monopoly control of basic in- 
 dustries, which for the most part, enjoyed privileges 
 from the government through the tariff, transporta- 
 tion, patent rights, the control of land, minerals and 
 credit agencies. 
 
 THE WAR 
 
 The Great War increased these monopoly profits 
 still further. This was particularly true of coal, of 
 food, of iron, of copper, of oil, of the munition 
 plants, of all industries benefitted by the war. Some 
 indication of the extent to which the overhead 
 charges of society were increased is indicated by of- 
 ficial investigations. Senate Document No. 259 was 
 a report from the Secretary of the Treasury in re- 
 sponse to a Senate Resolution demanding informa- 
 tion on this subject. Briefly summarized, this re- 
 port showed among other things the following: 
 
 Profits of coal operators as stated by Secretary 
 McAdoo, ran as high as 2,000 per cent. Nearly 
 half the coal companies earned profits on their capital 
 stock ranging from 100 per cent, to as high as several 
 thousand per cent. In an analysis of this report 
 made by Basil M. Manly, formerly of the War La- 
 bor Board, which appeared in the Searchlight for 
 April, 1920, it is stated that the American people 
 
 [131]
 
 paid profits equal to the entire capital stock of half 
 the mines reported. The net income of 404 coal 
 companies was $78,000,000, or nearly 45 per cent, 
 on their total capital stock, both bona fide and 
 water. Mr. Manly says: " Making due allowance 
 for smaller profits in 19 18 and 19 19, it is absolutely 
 certain that it would have been cheaper for the 
 American people to have bought the coal mines out- 
 right when we entered the war so that coal could 
 have been sold to people at a low cost, than to have 
 paid the enormous profits of the last three years. 
 To put the matter in a different way, in the last three 
 years the American people have paid in net profits 
 every dollar's worth of stock of the coal companies." 
 
 Food speculators, canners, etc., made as much as 
 2,000 per cent.; owners of woolen mills as much as 
 1,770 per cent.; the furniture manufacturers as much 
 as 3,295 per cent. 
 
 The steel corporations made colossal profits. 
 " One corporation," says Mr. Manly, " made net 
 profits for the two years 19 16-17, after the payment 
 of interest on bonds and other allowances for all 
 charges growing out of the installation of special war 
 facilities " amounting to $888,931,51 1. The Comp- 
 troller of the Currency in a special investigation of 
 the subject, says that the United States Steel Cor- 
 poration could have doubled the wages and salaries 
 of every one of its employees, salaried as well as 
 wage earners, and still have paid a handsome return 
 on the capital stock and set aside a substantial sum 
 
 [132]
 
 for reserves. Or it could have reduced the price of 
 steel by $30 a ton and still have made very substan- 
 tial profits. 
 
 The Senate Document shows that out of 122 
 meat packers, one-fourth made more than 100 per 
 cent, profit on their capital stock. One corporation 
 with a capital stock of $1,000,000 made a net in- 
 come in 1917 of $49,139,147. Even after the pay- 
 ment of all income and excess profits taxes it still 
 had a profit of $43,810,984. 
 
 This is Mr. Manly's conclusion after investigat- 
 ing the report. He says : 
 
 " The fact is — and this report of the Treasury 
 Department proves it beyond any doubt — that the 
 American people during the war did pay in net prof- 
 its for the entire capital stock of the corporations 
 in the essential lines of industry and trade." 
 
 Continuing, he says: " In other words, it is clear 
 that if the national Government at the beginning of 
 the war had taken over the essential lines of indus- 
 try, and the American people had been required to 
 pay the prices which private manufacturers and mer- 
 chants have charged them, there would have been 
 sufficient profit to pay for every dollar's worth of 
 capital stock, and leave the nation to-day in posses- 
 sion and control of practically all its manufacturing 
 plants. 
 
 " If this had been done, and the manufacturing of- 
 ficials and employes had performed their duties as 
 efficiently for the Government as for the private 
 
 [133]
 
 corporations — and every citizen has a right to as- 
 sume that neither the manufacturing officials nor the 
 other employes would deliberately sabotage their 
 Government — we should have to-day, instead of a 
 debt of $26,000,000,000, a large part of which went 
 to pay for the products of these Industries, a debt 
 of only the billions necessary to cover the expenses of 
 our Government, the pay of our soldiers, and the 
 loans to our allies. In addition we should have 
 vested in the Federal Government the ownership of 
 billions of dollars' worth of manufacturing com- 
 mercial property. This opportunity now seems to 
 be lost, but the picture of American profiteering re- 
 vealed by this official document of the Treasury De- 
 partment should be indelibly fixed in the mind of 
 every American citizen." 
 
 A similar independent inquiry of war profiteering 
 was made by W. Jett Lauck and presented to the 
 United States Railroad Labor Board in the railway 
 wages hearings. The report which he presented 
 disclosed : 
 
 ( I ) The corporations of the country earned in net 
 profits approximately $4,800,000 more each year 
 for the three years 1916, 1917, 1918 than they did 
 during the three years that preceded the war. In 
 other words, their net profits were almost $15,000,- 
 000,000 more than they had been in the three pre- 
 war years. Reduced to an Individual basis, this 
 meant a profit of $240 from every family of five in 
 the nation. 
 
 [134]
 
 (2) These corporations earned enough In profits 
 to replace the entire value of their capital stock and 
 their entire investment, in a little over four years' 
 time. 
 
 (3) The coal operators increased the price of 
 coal four times as much as the increase in labor cost. 
 They made a clear profit of more than $1,000,000,- 
 000 in four years' time. 
 
 (4) Since the war new profiteers have come in; 
 profiteers in clothing, food, household supplies, and 
 other staple necessities. Price advances since the 
 war have in many instances been greater than during 
 the war. 
 
 The report of Mr. Lauck concludes: " Viewed as 
 a pure economic proposition, in the light of economic 
 history, no sane man can fail to realize that the 
 present situation in the United States marks the 
 gravest crisis the nation has confronted since the 
 Union was threatened In i860." 
 
 " Probably the most aggravating factor in the sit- 
 uation from the labor standpoint Is that the same 
 powerful interests which have been and are so mani- 
 festly exploiting the needs of the public and the toil 
 of the workers, are the same interests which have 
 embarked upon a deliberate campaign of propaganda 
 and misrepresentation to fasten upon labor the re- 
 sponsibility for high prices; In other words, to play 
 off the two sets of victims, the public and the 
 workers, against each other." 
 
 " It cannot be denied that this effort, plain to the 
 
 [135]
 
 worker who struggles to maintain his family de- 
 cently is daily becoming more precarious, is fanning 
 the flames of discontent, and making the United 
 States a fertile field for the propagandists of violent 
 economic revolution." 
 
 The overhead of society expresses itself in other 
 wasteful ways. It expresses itself in extravagant 
 display, in wasteful effort. The amount of money 
 spent on advertising before the war amounted to 
 $1,000,000,000 a year. Nearly as much more was 
 spent for oral and other kinds of persuasive sales- 
 manship. This was three times the cost of educa- 
 tion in elementary, secondary, professional schools, 
 colleges and universities, for which the total expen- 
 diture in 19 13 was only $704,082,295. Advertis- 
 ing costs to-day are probably two or three times the 
 pre-war expenditure. 
 
 These war profits and post-war profits bear little 
 relation to labor cost. They are profiteering pure 
 and simple. In the report submitted by Mr. Lauck, 
 referred to, it was shown that while shoes had ad- 
 vanced $3.50 in price, labor had received only 15 
 cents of the increase, A similar showing was made 
 as to clothes, as to coal, as to railway transportation 
 cost, as they affected individual commodities. The 
 labor increase in iron and steel products, in copper, 
 oil and gasohne, in lumber and print paper, bore no 
 relation to the arbitary increases in price. They 
 were the result of monopoly power, arbitrarily used 
 under the protection of the Government and the 
 
 [136]
 
 privileges the Government has conferred upon those 
 who control the basic industries and services of the 
 nation. 
 
 The new scale of war profits has now become fixed 
 as normal profits. It is far in excess of a proper re- 
 turn on capital. It bears no necessary relation to 
 cost of production. This profit level is a monopoly 
 profit, pure and simple. It is fixed by what the traf- 
 fic will bear. 
 
 GROUND RENT 
 
 Ground rent is the third overhead charge on so- 
 ciety. It has been increasing with great rapidity. 
 This is true of agricultural, as it is of urban rents. 
 There is no possible justification for this increase. 
 There has been no labor added to land. Nor have 
 the taxes on land been increased. Ground rent is 
 tribute pure and simple. 
 
 Ground rent is payment for speculative land 
 values, which have shot up at an unparalleled rate 
 during the last few years. As a result of the con- 
 gestion of our cities, and the checking of building 
 operations, rents have advanced to prohibitive fig- 
 ures. They are limited only by the ability of the 
 people to pay. The result has been fewer rooms 
 for families, less desirable homes, a curtailment of 
 comforts by all, save the rich and well to do. This 
 rent increase has been highest where the pressure of 
 war industry has been most severe. The control of 
 rent profiteering by rent legislation has scarcely 
 
 [137]
 
 touched the evil. High rents are affecting mar- 
 riages. They are checking the birth rate. They 
 are attacking the professional classes, teachers and 
 persons of fixed income. 
 
 Agricultural rents have also advanced with in- 
 creasing land values and food prices. In Iowa, Illi- 
 nois, and Kansas, land values have been pyramided 
 by land speculators until they have reached dizzy 
 heights. War prices for farm products made it pos- 
 sible for farm tenants to pay high rents. These 
 rents have been capitalized by landlords. The land 
 of America has been artificially increased in value by 
 many billions of dollars, and land has been sold and 
 mortgaged on this new basis. Farm rents in Iowa 
 and Illinois have been doubled and trebled in the 
 process. 
 
 BURDEN ON PRODUCERS 
 
 The overhead charges of taxes, profits and rent 
 are measured in tens of billions of dollars. The tax 
 burden alone, with its accumulated accretions, 
 amounts to from ten to fifteen billion dollars a year; 
 rents, royalties and payments for the land, probably 
 amount to ten billion dollars additional, and exces- 
 sive profits to as much more. The total overhead 
 of America, with the cost of maintaining the army 
 of exploiters and parasites which it involves, is 
 from one-third to one-half the total wealth pro- 
 duced. 
 
 The producing classes are staggering under this 
 
 [138]
 
 colossal overhead of taxes, profits and rent, which Is 
 relatively new to America. It has come upon us 
 during the present generation. It was unknown to 
 our fathers. For this overhead society receives 
 little or no return. It adds little to the comforts, 
 the convenience, the happiness of society. It en- 
 riches society no more than did the services ren- 
 dered by the serf to the seigneur In the old regime. 
 The privileged classes return no services for the 
 tribute which they collect. 
 
 This overhead is taken by those who own from 
 those who toil. Labor seeks to meet its increased 
 burden by collective bargaining or by strikes. Yet 
 labor In the aggregate does not and cannot keep up 
 with the increased overhead charges. Labor may 
 receive higher wages. The pay envelope may seem 
 bigger. But the comforts received, the food, the 
 opportunities for living, must of necessity be re- 
 duced. 
 
 THE FARMER 
 
 The same is true of the farmer. He cannot com- 
 bine. The prices he receives are fixed in the markets 
 of the world. They are fixed by food exchanges 
 like the wheat pit in Chicago and Minneapolis, by 
 poultry and egg exchanges, and by the packing 
 monopoly. They are fixed by buyers and commis- 
 sion men employed by these agencies. 
 
 The farmer not only produces for an unknown 
 market; he produces for an unknown price. In this 
 
 [139]
 
 respect he differs from every other producer. Even 
 the worker has more certainty as to the wage he is 
 to receive. The farmer cannot negotiate as to 
 prices. He has but one market and that is con- 
 trolled by the buyer. The price of wheat, corn and 
 cattle as well as milk, eggs, poultry and truck gar- 
 den stuff is fixed for him. The farmer has no ware- 
 houses of his own and little credit with which to 
 carry his produce should he desire to do so. He 
 must sell almost immediately after harvest, and he 
 must sell to a buyer who has all the cards in his 
 hands. Each year the farmers of the West com- 
 plain that they sell their grain-fed beeves and hogs 
 for less than it costs to produce them. The wheat 
 growers of the Northwest, the dairymen and truck 
 gardeners about the cities, make the same complaint. 
 The 6,000,000 farmers of the country carry a great 
 S'hare of these overhead costs, and the profits, com- 
 missions and salaries of the exploiting groups. 
 
 THE BURDE.N ON LABOR 
 
 This burden of overhead is all borne by the pro- 
 ducing classes. It may be the labor of the mind or 
 the labor of the hand. Labor applied to the land 
 brings forth food and raw materials. Labor ap- 
 plied to the machine brings forth goods. Labor ap- 
 plied to transportation gives a place value to wealth. 
 Whatever the field of effort, all wealth is the pro- 
 duct of labor. And the tribute is paid each year out 
 of the current wealth produced. It cannot be other- 
 
 [140]
 
 wise. There Is no other source from which It can 
 come. 
 
 Labor suports itself. It largely supports the 
 state by taxes on consumption ; it supports the land- 
 lord; it supports the exploiting, the professional and 
 the parasitical groups. It supports the cost of bank- 
 ing, credit, distribution, exchange. The costs of ex- 
 ploitation are ultimately paid out of the products of 
 labor. As the exploiting group grows in economic 
 power, it uses its power to increase its political 
 power. It uses the state, the press, the agencies of 
 public opinion. Neither Congress nor the Depart- 
 ment of Justice show any disposition to challenge its 
 exactions. They do not regulate or control the food 
 gamblers, the fuel monopolists, the speculators. 
 Sugar is selling at three times its pre-war cost. Coal, 
 iron and steel, clothes, shoes, hats, have doubled and 
 trebled in cost. Eggs, poultry, meat and all food 
 products have passed under the control of the pack- 
 ing syndicate, which charges what it wills unchal- 
 lenged by the press or by Congress. Lumber and 
 building supplies have become prohibitive. Prof- 
 iteering without limit is the order of the day. The 
 power of the exploiting group is so unquestioned that 
 it fears neither public opinion nor political action. 
 
 The parasitical classes have also increased in 
 number. They too feel that they have a vested 
 right to live as parasites. As they are closely iden- 
 tified with the exploiting groups, they are protected 
 from molestation. 
 
 [HI]
 
 Labor and the rarmer can only meet these condi- 
 tions by demands for higher wages and higher prices. 
 But this does not protect them. It merely creates 
 a vicious circle. Increasing wages are made an ex- 
 cuse for a further Increase In prices. This Increases 
 the cost of living which In turn necessitates further 
 wage demands. 
 
 This Is the Industrial cycle that privilege has set 
 going. Even should labor permit Its standard of 
 living to be reduced, even should the farmer permit 
 his prices to be cut this would bring little relief to 
 the consumer. For competition Is gone. The ex- 
 ploiting groups charge what the traffic will bear. 
 They apply the rule of monopoly, which Is to take 
 as much and give as little as possible. 
 
 PROFITS ARE CREATED OR PROTECTED BY LAW 
 
 In this process of wealth transfer from one class 
 to another privilege Is not violating the law. Privi- 
 lege Is protected by the law. It is pursuing the ap- 
 proved principles of business. There is no legal 
 reason why business should take less than It can get. 
 There Is no reason why the trust should charge less 
 than it can collect. There is no reason In law for 
 expecting men who control the economic life of 
 America to take a penny less than they can make, 
 to refrain from exploitation, to pay higher wages 
 than they have to, to pay more taxes than they are 
 compelled to pay, or to sell any more or any bet- 
 
 [142]
 
 ter goods than they are forced to sell by their cus- 
 tomers. 
 
 Exploitation is the rule of our economic life. It 
 is approved by commercial opinion. It has the sanc- 
 tion of our law makers and of our courts. It is 
 the logical result of the rise of privilege to power. 
 Exploitation is the rule of modern society. It 
 should be frankly faced. For no improvement is 
 possible so long as we deceive ourselves as to the 
 facts. 
 
 Exploitation is born of the political state. The 
 taxes we bear, the ground rents, the profits of mo- 
 nopoly, the subsidies to the railroads, the privileges 
 of the banks, the patent rights that shield monopoly, 
 the tariff and the indirect taxes on consumption, the 
 control of the agencies of justice and of administra- 
 tion, all these are privileges created and protected 
 by the state. The overhead costs of society are 
 law made. They are law protected. They are 
 sanctioned by the state. Were it not for the privi- 
 leges created by the state wealth would be distributed 
 according to labor cost, speculative monopoly val- 
 ues would crumble, profits would be controlled by 
 competition while the producing as opposed to the 
 exploiting classes would rise to power. Wealth cre- 
 ated by law is at war with wealth created by labor. 
 
 [143]
 
 CHAPTER XIV 
 
 FEUDALISM 
 
 Feudalism is commonly described as a system of 
 land tenure by an hierarchy of persons, each hold- 
 ing from some one above him, and all holding ulti- 
 mately from the king. In this hierarchy the lord 
 provided a certain number of soldiers and supplies to 
 the king; the vassal supplied a smaller quota of men 
 and performed personal services to the lord, while 
 the lowest grade of vassals paid rent in the form of 
 produce and rendered personal services on the farms, 
 in the household or on the field of battle. Every 
 man held his land from some one above him; every 
 man worked or rendered services to his superior. 
 Feudalism was a system of land tenure and a politi- 
 cal organization based upon land tenure. It was 
 the prevailing European society for ten centuries. 
 
 THE ECONOMIC FRAMEWORK OF FEUDALISM 
 
 This hierarchical tenure of land was the economic 
 framework of society. Feudalism was also a social 
 system in which man's relation to land fixed and de- 
 termined everything else. Society was organized 
 
 [144]
 
 about economic relations. The workers and the 
 peasants paid all the taxes, all the rent, and per- 
 formed all the productive work of society. The 
 seigneur owned the wine-presses and the mills to 
 which the workers were compelled to bring their 
 produce. He also took tolls on the highways. By 
 this means the overlord exacted tribute from the 
 workers. Taxes were collected from the things the 
 people consumed, or were paid by the peasants and 
 the serfs. The privileged classes paid no taxes at 
 all. 
 
 Labor was divided into groups. Men could not 
 move from one group to another. They dared not 
 organize as workers. A trade union was a criminal 
 conspiracy. Men might not organize for higher 
 wages or to improve their status. There were laws 
 against such combinations. 
 
 A PRIVILEGED SOCIETY 
 
 Education was privileged. It was confined to the 
 clergy and the leisure classes. The professions of 
 law, drama and literature were parasitic. They 
 lived by the favor of patrons. Professional men 
 thought and said what the ruling classes wanted them 
 to say. There was no freedom of discussion and 
 little freedom of thought. The mind of society was 
 fixed by the rulers and owners, who compelled the 
 philosophers, the lawyers, the teachers and the 
 writers to support the economic system and to say 
 what the ruling classes desired. The psychology of 
 
 [145]
 
 society was a caste psychology shaped and molded 
 to maintain the feudal class. 
 
 The leisure classes did no work. They owned 
 and they ruled. They were privileged in every way. 
 They treated the classes below them as little better 
 than slaves. They, the lower classes, had no rights 
 in the courts. For the seigneurs were the courts as 
 they were the law makers. 
 
 Feudalism was more than an economic hierarchy. 
 It was a stratified society which permeated into all 
 relations of life. There was little for men to strive 
 for. It was dangerous to save because anything one 
 saved was seized for taxes or rent. The mind of 
 the people was controlled. So was invention and 
 initiative. Ultimately people almost ceased pro- 
 ducing. Poverty was universal. The control of 
 society by a parasitic, economic group led to the 
 paralysis of energy and effort. 
 
 THE FRENCH REVOLUTION 
 
 Finally the French revolution came. It was both 
 political and economic. It dethroned the king and 
 the privileged classes. It divided the land among 
 the peasants. It destroyed the feudal system and 
 the caste organization of society. The peasants be- 
 came owners instead of serfs. Economic freedom 
 went hand in hand with political freedom. The 
 mind, the talent and initiative of the people was re- 
 leased and a new society was born which, during the 
 last hundred years, has been increasing the produc- 
 
 [146]
 
 tion of wealth, the efficiency of labor and the eco- 
 nomic and Intellectual well-being of mankind. 
 
 This was the feudal system of old Europe, which 
 we assume came to an end with the French Revolu- 
 tion. Yet an analysis of conditions In America 
 shows that we are fast taking on feudal forms. In 
 fact, almost all of the elements of feudalism are 
 here. The underlying forces of the new feudalism 
 as of the old are economic. They control politics. 
 They shape the Intellectual and social relations In 
 which we live. The forces at work are perfecting 
 a system that Is essentially the same as that of the 
 old regime. It Is a system In which the privileged 
 groups are far more powerful than they were in 
 olden times. 
 
 PRESENT DAY SOCIETY 
 
 First, the structure of present day society is 
 feudal. Land, credit, transportation, fuel, Iron ore, 
 oil, copper, lumber, and the control of foods Is In 
 the hands of a few men who determine how and 
 when and on what terms they may be had. Those 
 who control these economic processes are closely In- 
 terlaced by political and economic Interests. They 
 operate out of Wall Street as the seigneurs operated 
 from Versailles. Through concentrated control of 
 Industry, millions of workers and a hundred mil- 
 lion people are subject to the decree of these 
 men. 
 
 The land Is passing under feudal control. Over 
 
 [147]
 
 200,000,000 acres, or one-fourth of our total area, 
 is in the hands of less than 50,000 persons. Many 
 estates in the West are as large as those of feudal 
 Europe. The agricultural class is rapidly becom- 
 ing a tenant class; we are fast developing a compet- 
 itive tenancy that has no security of tenure, that 
 may be evicted at will, and that pays increasing rent 
 each year to the land-owning group. A study of the 
 census returns shows the rapidity of the growth of 
 tenancy, and the investigations that have been made 
 in the West, especially in Texas, Oklahoma and 
 Iowa, disclose conditions not very different from 
 conditions in Ireland prior to the passage of the 
 Land Purchase acts. 
 
 Agricultural rents are rising. They rise as the 
 result of competition for land and the withholding 
 of land from use. Not to exceed one-half of the 
 enclosed land is tilled, while hundreds of millions of 
 acres are held out of cultivation altogether. Our 
 urban population is increasing while the rural popu- 
 lation is decreasing. The city population demands 
 more food. This in turn increases the value of 
 agricultural land and the price which can be de- 
 manded for its use. 
 
 In so far as land is concerned America exhibits 
 the essential conditions of feudal times. We have 
 land monopoly and large holdings, we have tenancy 
 and increasing rents. These are the essentials of the 
 servile system of old Europe. 
 
 The fuel, the oil, the timber, the iron ore, copper 
 [148]
 
 and resources of the earth are owned by a relatively 
 small group of men as they were in earlier times. 
 
 INDUSTRIAL FEUDALISM 
 
 Transportation is in private hands. It is owned 
 by the same group that owns the basic Industries 
 and the raw materials. The rule of railroading is to 
 charge what the traffic will bear; to take as much as 
 possible from the consuming classes. Railroads are 
 not primarily interested in upbuilding the country; 
 they are interested in speculation, stock-jobbing and 
 the suppression of competition. They discourage 
 competitive production. They, along with landlord- 
 ism and the withholding of resources from use, are 
 sabotaging the nation. They smother the inventive, 
 and productive capacity of the people. 
 
 To this must be added the private control of bank- 
 ing and credit. It too is closely controlled by a 
 banking syndicate, whose power radiates out from 
 New York to the smallest town In the land. Our 
 credit resources are concentrated. They are not 
 used primarily to aid the farmer, to stimulate com- 
 petitive Industry. They are used rather to pro- 
 mote and protect monopoly and to enable those who 
 control our credit resources to speculate and gamble 
 with the lives of the people. More recently, these 
 resources are used for overseas exploitation and the 
 development of other countries rather* than our 
 own. Imperialism has come upon us. And im- 
 perialism is the last stage of capitalistic feudalisni, 
 
 [149]
 
 These elemental agencies — land, raw materials, 
 fuel, transportation, and banking, control every- 
 thing else. They determine our economic life. 
 They are the foundations of society. They shape 
 our life as did the land in feudal times. 
 
 POLITICAL FEUDALISM 
 
 Springing from economic feudalism we have a 
 political feudalism differing but little from that of 
 earlier ages. It is not hereditary, it is true. It is 
 Industrial rather than landed. But political power 
 is based upon economic power. Our cities, states 
 and the nation mirror the wants of the economic 
 group that owns the basic industries of the country. 
 Our political representatives are lawyers or the 
 owners of banks, railroads, mines and the exploit- 
 ing groups. Within the last fifty years the texture 
 of politics has changed until it mirrors the interests 
 of the group that owns. 
 
 Here we have the second element of feudalism. 
 Whereas in feudal times political power was lodged 
 with the king and the landed classes, to-day it is 
 lodged with a similar economic group which seeks 
 power and uses power just as did the grand seigneur 
 in the past. 
 
 FEUDALIZED CULTURE 
 
 The press is an agency of the feudal class. It 
 is owned by bankers, mine-owners, railroads, fran- 
 chise and public utility groups. It is their mouth- 
 
 [150]
 
 piece. It is this and little more. The same is true 
 of our magazines. Any one who has watched the 
 press in recent years must have noted the extent to 
 which honest reporting, honest editorial writing or 
 the free discussion of public questions has tended to 
 disappear. The press has become a proprietary 
 agency. Our opinions are made for us by those who 
 own the nation and who rule it as well. 
 
 Education has taken on the color of the ruling 
 class. This is true of our privately endowed colleges 
 and universities. Teachers dare not think freely 
 or speak freely or permit others to do so. Univer- 
 sities and schools drop from the faculties men of 
 independent thought. They frighten men of initia- 
 tive. This is not confined to political economy. It 
 is true of cultural questions as well. Those who 
 should lead the thought of America are denied the 
 right to do so. They are kept in a condition of ter- 
 rorism by trustees, who in turn represent the group 
 from which donations and foundations are to be ex- 
 pected. 
 
 Our state universities are but little better. 
 They mirror the state legislature. And in recent 
 years our state universities have become almost as 
 reactionary minded and intolerant of free opinion 
 as have the privately endowed universities of the 
 East. 
 
 The church reflects the same condition. The 
 ministry is not free. It too is the servitor of the 
 pew-renters ; of the wealthy men in the congregation \
 
 of those who support and maintain the church. 
 The church has become largely a propertied insti- 
 tution. And It uses Its power to preserve the status 
 quo. 
 
 CASTE 
 
 Caste has appeared as it did In earlier times. The 
 social structure is taking on feudal forms. The ex- 
 ploiting groups have become the ascendant groups. 
 The exploiting professions and parasitic employ- 
 ments have become the desirable professions. No 
 one desires to be a worker or a producer If he can 
 avoid it. Every one seeks to rise into the parasitical 
 classes. And to rise above one's station means to 
 cease to be a producer. 
 
 The overhead burdens of society are being shifted 
 by the exploiting groups to labor, as was done in 
 feudal times. They then consisted of rent and taxes 
 and services. They consist of rent and taxes and 
 profit to-day. The overhead charges are Increas- 
 ing. The owning classes seek to put taxes on to the 
 things the people buy and use. They protest against 
 real estate taxes, income taxes and inheritance taxes. 
 For these taxes bear upon wealth. The constant 
 effort Is to shift all taxation upon the consumer. 
 Just as under the feudal system all taxes were paid 
 by the serf, just as countless exactions were Imposed 
 on him in his industrial activities, so to-day the pro- 
 ducing groups, chiefly farmers and workers, are 
 being exploited by taxes, ground rents and profits
 
 until the share of the producer is being ground down 
 to a living wage. This is true of the farmer, of 
 the professional man, of the person of small means 
 and of a great part of the working class as well. 
 
 SUPPRESSING LABOR 
 
 As a final step in this evolution new statutes arc 
 being proposed and vigorously pressed, making it a 
 criminal offense for labor to strike to maintain or to 
 better its condition. The courts are themselves 
 making laws for this purpose under equity powers 
 of injunction. The Statutes of Laborers passed in 
 Great Britain in the twelfth and thirteenth centuries 
 were designed for the same purpose. Labor is the 
 only group left that challenges exploitation. And 
 the present intolerance of unionism, the legislative 
 efforts to check its power, are part of a class psy- 
 chology that is the final step in the evolution towards 
 industrial feudalism. For with organized labor 
 crushed, there is no organized force left to protest. 
 
 Under the class psychology of feudalism, labor 
 must be forced to accept its status and be content. 
 It must be content to accept a " fair wage " fixed by 
 the employer or by a commission provided for the 
 purpose by the employer. It must submit to arbitra- 
 tion in which labor is always at a disadvantage. 
 These means failing, the state constabulary, the state 
 police, the militia and machine guns are to be called 
 out to break up protests. 
 
 [153]
 
 CONTROLLING CONSUMPTION 
 
 The feudal classes also control the necessities of 
 life which the worker must have to live, much as 
 they did in earlier times when they controlled the 
 wine presses, and the mills to which the serf had to 
 take his produce. They fix the prices of food, of 
 clothes, of fuel, of transportation, of practically 
 everything the worker buys. They control the edu- 
 cation he receives, the recreation he enjoys and the 
 literature he reads. With the power to fix wages 
 and the power to fix prices lodged in the same hands, 
 with the control of political power and with it the 
 right to levy taxes in the hands of the same class 
 that determines wages and prices, we see how com- 
 pletely America has passed from a country in which 
 freedom and liberty was the dominant note, into a 
 country with all the essentials of feudalism save that 
 of hereditary caste. Even hereditary caste is here, 
 for caste is an economic, not a hereditary thing. 
 The class which rules has identified itself with the 
 ownership of the land, and it has been such identifica- 
 tion, whether in old France, or in modern Prussia, 
 ' Russia or Great Britain, that has given permanence 
 and hereditary power to the aristocracies of these 
 countries. Land has always been the basis on which 
 aristocracies have reared themselves. It is only the 
 landed aristocracies that have been permanent. 
 And the aristocracy of America owns the mines, the 
 resources, the land of our cities, the transportation 
 
 [154]
 
 agencies and the public utility corporations, all of 
 which monopolies are based upon the ownership of 
 the land. 
 
 Freedom of discussion of political and economic 
 questions is being censored. Congress, our state 
 legislatures, and our municipal authorities have ar- 
 rested men by the thousands for offenses which were 
 freely recognized rights of a few years ago. The 
 alleged " red " conspiracies passed unnoticed for 
 forty years. They were part of the free, unchal- 
 lenged discussion of the people. No one suggested 
 the suppression of such expression or the interference 
 by the Government with the constitutional rights of 
 all classes to discuss freely the Constitution and the 
 laws of the land. 
 
 Force is the final weapon of feudalism; and force 
 backed by Congress, by the police and by the Army, 
 is being organized to crush criticism or offensive 
 political action. 
 
 These are the elements of feudalism; a feudalism 
 we thought was forever dead. In reality, we are 
 living in a feudal state. Why disguise it or refuse 
 to accept it? Economic liberty is gone for the ma- 
 jority of the people. For the wages system is not 
 liberty, however free the individual worker may be 
 to change his job. Political liberty has not saved 
 our institutions or been able to control economic 
 privilege. 
 
 Our political agencies contribute to a feudalized 
 society. Neither labor nor the unorganized people 
 
 [155]
 
 can function through the maze of primaries, elec- 
 tions, and a tangled governmental organization, all 
 aligned with privilege and each in turn a brake on 
 progress. America is far more effectively chained 
 to privilege than was old France or modern England. 
 Our political and social philosophy is dedicated to 
 the maintenance of the status quo. 
 
 Preferment is controlled. Free discussion is 
 checked. Individuality is stifled. Thought is strati- 
 fied. This is the costliest price of all. For free- 
 dom of the mind is fundamental to a progressive 
 civilization. In this too, we have a reproduction of 
 the psychology of the old regime; of the psychology 
 that deadens and destroys the culture of a people. 
 It is this that is responsible for the slackening of 
 production, it is this that is responsible for sabotage. 
 It is leading the worker to limit his output and de- 
 mand as much as possible for his product. For 
 labor is treated as a commodity. And the rule of 
 the commodity market is to give as little as possible 
 and to get as much as possible. Feudalism is reach- 
 ing its logical consequence in a stratification of all 
 processes. In this it is true to the past. 
 
 [156]
 
 CHAPTER XV 
 
 CIVILIZATION 
 
 The cause of the decay of states has been a favorite 
 study of historians. They have studied the evolu- 
 tion of peoples on the Nile and in the valleys of 
 Mesopotamia, in ancient Greece and in Rome; they 
 have described the glories and decadence of Portugal 
 and of Spain, of the medieval Italian cities and of 
 pre-revolutionary France. They have observed the 
 rise of peoples to greatness, and their subsequent 
 decay. But they have offered no adequate explana- 
 tion for this phenomenon. They have seen no 
 axioms of social evolution. Society has not been 
 studied as have the lower orders of life. We are 
 more nearly in agreement as to pre-historic types, 
 as to the evolution of the ape, than we are as to 
 the evolution of man in his organized social rela- 
 tions. 
 
 Yet an understanding of the rise and fall of states 
 should be the most important concern of research 
 foundations and universities. The colleges and the 
 schools should study the forces that make for human 
 progress and the conditions that contribute to decay. 
 
 [157]
 
 There Is certainly evidence enough In our libraries 
 to disclose what has happened to other nations as 
 powerful as our own. They disclose certain com- 
 mon forces that have operated In all ages and In 
 the same way. There Is evidence enough to enable 
 the scientist to establish a law of civilization and de- 
 cay. History discloses that what is taking place in 
 Great Britain, In France, In Italy, even In America 
 to-day, took place in earlier states whose civiliza- 
 tion In many respects paralleled our own. And 
 there is great similarity In conditions. The modern 
 state It Is true may be a long way from decadence. 
 It is probably a long way from collapse. There 
 are no barbarian hordes to overrun us as there 
 were in earlier times. But decay is here as It was 
 In earlier societies, apparently as impregnable as our 
 own. 
 
 ANCIENT ROME 
 
 Rome is the historic example of the rise of a na- 
 tion to a high civilization and Its subsequent subsid- 
 ence to decay. It was not outside conquest, how- 
 ever, that destroyed the Roman Empire. The de- 
 cadence of Rome began In the Republic, not during 
 the later Empire. It began with the rise of the 
 patrician class to power and the laws enacted by 
 this class to control the economic life of the state. 
 These laws resulted in such a profound impairment 
 of the people that the empire Itself fell Into decay. 
 Under the class rule of an economic group the free 
 
 [158]
 
 Roman citizen became little more than a serf; he 
 became in time a dependent living on doles and kept 
 in subjection by the laws and by force applied by 
 the ruling class. 
 
 Down to the Carthaginian Wars, Roman life was 
 simple. A great part of the land of Italy was di- 
 vided into small holdings cultivated by home- 
 owning farmers. They were the strength of the 
 state. They formed a citizen army. They rarely 
 knew defeat. The political institutions reflected the 
 will of the free citizen. The patrician class was 
 held in check by the democratic institutions that pre- 
 vailed. 
 
 The prolonged wars with Carthage summoned the 
 man power of the nation to arms. It stripped the 
 fields of workers. During their absence in military 
 service, the patrician class in the Senate strength- 
 ened its control of the state. It enacted laws for 
 its personal enrichment. The senators enclosed the 
 latifiindia or common lands of Italy, which belonged 
 to all the people. They had been taken in war and 
 were common property. The members of the aris- 
 tocracy divided these lands into great estates and 
 bestowed them on themselves at an insignificant 
 rental. Not content with this they took the farms 
 of the soldiers. This was done by usury and fore- 
 closure. Quite frequently it was done by force. At 
 the end of the war the soldier found his farm gone. 
 It was encumbered with mortgage or grown up with 
 weeds. The soldier was without capital to begin 
 
 [159]
 
 life anew. The latifundia or public domain was 
 gone and could not be distributed. The soldier had 
 to go to the money lenders for credit. The money 
 lenders came from the patrician class which had al- 
 ready seized his lands. The free yeomen of Italy 
 lost their homes in the process. They were placed 
 in slavery under the debtor laws, or driven to the 
 towns where they lived by doles and were kept con- 
 tented by games and displays. 
 
 The patrician land-owners brought gangs of slaves 
 from conquered lands to cultivate their great estates. 
 With these, the free farmer could not compete. 
 Husbandry became a servile pursuit. This con- 
 tributed to the destruction of the free Roman citi- 
 zen. The freeman lost his virility when he lost his 
 land. He lost his political power as well. In time 
 the citizen soldiery disappeared and hirelings took 
 its place. ^ 
 
 A great part of the food came from overseas. 
 Tribute from the Near East and Africa supported 
 the state. The senatorial class, which was also the 
 land-owning and the money-lending class, gradually 
 acquired all political power. It acquired all 
 economic power as well. It wrung high rents from 
 the poor. It exacted usury from the borrower. It 
 exacted colossal profits from all the necessities of 
 
 1 This is what is happening to-day in the West and Southwest 
 where Mexicans are being imported to cultivate the fields and to 
 work the mines. It was a similar policy that controlled our immi- 
 gration laws and the importation of cheap labor for the mines and 
 the steel mills during the quarter of a century before the war. 
 
 [i6o]
 
 life. The state gradually and insensibly decayed. 
 The freeman, stripped of economic power, lost 
 political interest. He was unable to resist. Rome 
 ultimately fell before the more virile bands from 
 the North. 
 
 Rome was destroyed from within. She was de- 
 stroyed as a result of the control of her life by a 
 privileged group that reduced the free population 
 to poverty with no stake, no participation, and no 
 economic interest in the state. Rent, profits, usury 
 and taxes destroyed the Roman Empire. 
 
 GREAT BRITAIN 
 
 Modern England is a repetition of ancient Rome. 
 The history of these two empires, their evolution, the 
 forces making for decay, are almost identical. 
 
 Two centuries ago, a great part of the land of 
 England was owned in common as it was in Rome. 
 This had been so from early times. The yeoman 
 farmers were the strength of the state. They 
 fought England's wars; they gradually stripped the 
 king of power. But the yeoman farmers were help- 
 less before the patrician class, which controlled the 
 House of Lords as the patricians controlled the 
 Roman Senate. The House of Lords was exclu- 
 sively a landed body. No others were admitted. 
 It was also an hereditary body. Even to-day, the 
 House of Lords is a house of great landlords. 
 Other groups are admitted only on sufferance. 
 
 During the eighteenth century and the Napoleonic 
 [i6i]
 
 Wars, Parliament seized the common lands of the 
 people by enclosure acts, just as did the Senate of 
 Rome during the Carthaginian Wars. Members 
 of Parliament added the common lands to their 
 private estates. They did this by law. And as 
 most of the members of Parliament were landlords, 
 they legislated In one another's interest. They 
 legalized one another's enclosure acts. Over a third 
 of the land of England passed from common owner- 
 ship to private ownership In this way. 
 
 Then the landlords drove off the cattle and the 
 sheep of the farmer. They denied them the right 
 of cultivation, of pasturage, of fuel and of fishery. 
 They converted millions of acres Into hunting pre- 
 serves, Into sheep pastures. Into pleasure resorts. 
 The Scotch immigration to America was the result 
 of the enclosure acts of the eighteenth century. 
 
 LAND MONOPOLY 
 
 The land of England Is to-day owned by a hand- 
 ful of people. Members of the House of Lords 
 alone own fifteen million acres. Individual estates 
 often exceed a million acres. And the men who 
 own the land of England still control the House of 
 Lords. They control the House of Commons as 
 well. The Conservative and the Liberal parties are 
 largely agencies for the protection of the privileges 
 of the landowning class. 
 
 Land monopoly Is universal in Great Britain. Ac- 
 [162]
 
 cording to the Doomsday Book of 1874, there are 
 only 319,550 persons who have any interest in the 
 land at all. One-fourth of the total acreage is held 
 by 1200 persons and another fourth by 6200 per- 
 sons. Individual lords own the land underlying 
 great cities. Nine men and estates own almost all 
 the land covered by the metropolitan area of Lon- 
 don. They collect ground rent from all the peo- 
 ple, from all the business men, manufacturers and 
 occupiers. They own the coal mines. They own 
 houses and tenements. They own the basis of all 
 life. Great Britain is a landlords' country. 
 
 A great part of the land is held idle. This Is 
 possible because the privileged classes which own the 
 land have exempted it from local taxation. For 
 land as land Is not taxed in Great Britain. It is 
 assessed as It was two hundred years ago when Great 
 Britain was almost exclusively agricultural. The 
 valuation made in 1692 has never been changed. 
 Parliament will not permit it to be changed. The 
 Lloyd George budget of 1909 was an empty vic- 
 tory. The valuation provided by that Act has never 
 been completed. 
 
 This makes it possible to use land for hunting, 
 for pasturage, for speculation. Even if the estate 
 is In the heart of London it can be kept out of use 
 at little cost to the owner. Building suburbs can 
 be used as private preserves. By these means forty- 
 three million people pay rent to a handful of noble 
 
 [163]
 
 landowners who not only own the land, they control 
 the politics of the country as well.^ 
 
 CASTE 
 
 Caste is determined by land ownership. The 
 Church is a landed institution. For the Church 
 
 ^ It is inconceivable to Americans that the land of Great Britain 
 is taxed to-day as it was in 1692. There has never been a re- 
 appraisal. The land underlying cities has never been revalued. 
 It pays the same real estate taxes that it did when the land was 
 used for farming. Despite the fact that four peoples out of five 
 now live in cities, despite the fact that the city land is worth bil- 
 lions of pounds, despite the fact that coal mines have been dis- 
 covered and metropolitan cities have been built, the landowner 
 has not had his land revalued for over two centuries. It is as 
 though the land of Manhattan island were taxed at the twenty- 
 four dollars originally paid to the Indians instead of at $5,000,- 
 000,000 as it is to-day. Moreover when there is no tenant in a 
 house, a factory, or a shop, if there is no lessee of a coal mine, or 
 no farmer on the land, if there is no tenant to which the tax col- 
 lector can go real estate is exempt from taxation altogether. For 
 under the laws of Great Britain local taxes, called rates, are 
 paid by the tenant. They are not paid by the owner. He knows 
 nothing about them. He is free to leave his estates in the heart 
 of a city go to weeds, his mines to lie idle, his estates to be used 
 for hunting and idle pleasures. That is why the land of England 
 is still owned by a handful of men who have grown to great 
 wealth by the needs of 43,000,000 people, who are only permitted 
 to use a small part of the land and who pay high rents and all 
 of the taxes as well. In many towns the local taxes equal one-half 
 of the total rent paid. Both are paid by the tenant. This is the 
 real explanation of the decay of farming in England, this is the 
 explanation of the congestion of her cities, this is the underly- 
 ing cause of the poverty of the people. The land of Great Britain, 
 conservatively valued at $25,000,000,000, pays less in local taxes 
 than does the land in a village in this country of 10,000 people. 
 This was the issue of the Budget fight of 1909. In this fight Lloyd 
 
 [164]
 
 too owns land; it lives by tithes. The clergy is 
 recruited from the landed gentry. Livings are doled 
 out to the younger sons of the aristocracy. Religion 
 is part of a landed caste. 
 
 The law is profession of the landed nobility. The 
 barrister is often a younger son. He is always de- 
 pendent on the landed and commercial classes for 
 his briefs. He too forms part of the parasitical 
 group that serves the aristocracy and protects its 
 privileges in the courts, in Parliament and in the 
 press. 
 
 Education is a privileged thing. Oxford and 
 Cambridge are colleges for gentlemen. They are 
 so viewed by all classes. They are very expensive, 
 and very exclusive. They are designed to train 
 statesmen, men of leisure and local squires. They 
 too form part of the stratified, caste-like organiza- 
 tion of the state. 
 
 HIGH FINANCE 
 
 The landed class is also the financial and invest- 
 
 George was successful. The land was ordered reassessed and taxed 
 at its value. But the power of the landowning classes was so 
 great that the assessment has never been made. A press dispatch 
 announces that it has been abandoned. This indicates the power 
 of the feudal aristocracy in England. The privileges which it 
 enjoys by the exemption of its land from taxation amounts to hun- 
 dreds of millions of dollars a year. This shows the economic 
 foundation of British politics. It indicates the profits that come 
 from the making of laws. The methods are those of the Roman 
 patrician and the French nobility. And the consequences to the 
 people are the same. 
 
 [165]
 
 ing class. Its ground rents are colossal. The 
 ground rents of the aristocracy have gone all over 
 the world in quest of investments. They have pene- 
 trated into backAvard countries and have carried the 
 army, the navy and the colonial administrator with 
 them, Britain's imperialistic interests are a by- 
 product of her land system. And British imperial- 
 ism, along with British landlordism, are destroying 
 Britain as they destroyed Rome. The best blood of 
 England is absorbed in the protection of this empire, 
 an empire born very largely of overseas investments. 
 The fiscal burden, which has reached crushing pro- 
 portions, is an imperialistic burden. It too con- 
 tributes to the decay of the Empire. Added to this, 
 the local taxes are assessed exclusively on the work- 
 ing and producing classes. The landed classes pay 
 scarcely any local taxes at all. Privilege is almost as 
 free from local taxation as it was in France in the 
 eighteenth century. 
 
 England is in a state of progressive decay. This 
 was evident long before the war. But the war 
 brought it to a climax. The possession of bank 
 credits, supremacy in shipping or even in industry 
 means little in comparison with the condition of the 
 people. Only the virility of the Labor Party, the 
 character and independence of the intellectual 
 groups, the searching criticism of radical organiza- 
 tion and the splendid traditions of free discussion 
 may and probably will bring about the necessary re- 
 forms by Parliamentary action. Yet this is by no 
 
 [i66]
 
 means certain. British privilege was arrogant 
 enough when its possessions were challenged ten 
 years ago by Lloyd George. Privilege used all Its 
 power to protect its age-long tax exemptions, and 
 especially to prevent the use of taxation to break up 
 the great estates of the aristocracy. The privileged 
 classes used every means in their power, political, 
 economic and social, to thwart democracy, just as did 
 the Roman senate, just as did the Bourbon caste in 
 France prior to the Revolution. The history of so- 
 ciety in fact is one long record of the refusal of the 
 ruling classes to make concessions, until it is engulfed 
 either in revolution or is itself destroyed. And the 
 present-day coercion of Ireland, India and Egypt is 
 an indication of what British reaction may do if it 
 should be challenged by a labor group at home. 
 
 FRANCE 
 
 France has a stationary birthrate. That does not 
 necessarily mean decay. The decay of France is 
 traceable to economic and financial causes that are 
 eating out the vitality, and the productive capacities 
 of the people. These economic forces control her 
 politics. They control her press. They shape her 
 foreign policies. They have diverted the power of 
 the people into wrong channels and have so molded 
 political thought through control of the press that 
 France is guided by much the same economic theories 
 that brought on the French Revolution. The pea- 
 
 [167]
 
 sant contributes to this static condition. His for- 
 eign investments shape the foreign and the domestic 
 policy of the nation. It is the hoarded sou of the 
 thrifty peasant that is responsible for the aggressive 
 imperialism of France. 
 
 Banking privilege rules Parliament. Privileges of 
 all kind rule industry and commerce. They rule the 
 professions and labor. Privilege in France is all- 
 pervasive. It chokes freedom of action. It has 
 so inhibited the life of the nation that the production 
 of wealth and its free movement to the markets of 
 the world is needlessly interfered with for the ex> 
 elusive benefit of the banking, protected and privi- 
 leged groups that control the political life of the 
 country. 
 
 Back of everything else is the power of the great 
 exploiting banks of Paris with their branches all over 
 France. They have weakened the industrial power 
 of the country and are primarily responsible for its 
 aggressive imperialism as well. 
 
 The peasants are bound up with the banking syn- 
 dicates through their foreign inv^estments. For the 
 $9,000,000,000 of foreign securities are owned by 
 the peasants, the shop keepers and the workers. As 
 the banks think, so the peasants act and as these 
 banking institutions are interested primarily in for- 
 eign securities, the peasants rally spontaneously to 
 their opinions. Woven in and out of this merger 
 of interests are countless other privileged groups, 
 
 [168]
 
 classes and industries, each of which seeks its own 
 advantage at the expense of the whole. 
 
 We think of France as a democracy. She has a 
 very democratic Constitution. And the peasants 
 with the banks do control the state. But the con- 
 trol of the press and the agencies of public opinion 
 on the one hand, and the imperialistic financial in- 
 terests on the other, have made the peasant a tool in 
 the hands of the exploiting classes. This is the ex- 
 planation of contemporary France. This is her 
 weakness. 
 
 PRE-REVOLUTIONARY EUROPE 
 
 A study of pre-revolutionary Russia, Prussia, 
 Hungary and Austria shows the same kind of forces 
 at work within these countries. Prussia escaped in 
 part by reason of the social legislation of the past 
 fifty years, the popular credit institutions which 
 existed all over the country, the enlightened policy 
 of education, the state-owned railways and the sys- 
 tem of peasant ownership which prevailed west of 
 the River Elbe and especially in South Germany. 
 FeudaHsm in Prussia and imperialistic ambitions 
 were the cause of Germany's downfall. It was in- 
 ternal disease that brought disaster to Germany, as 
 it has to other European powers. 
 
 In Russia and Austria-Hungary the powers of re- 
 action ran their course. Along with military re- 
 verses they brought on revolution. For political 
 change in an orderly way was inhibited by the feudal 
 
 [169]
 
 classes. Revolution was the only way out. 
 Orderly political change was impossible. 
 
 If we study the nations of the old world, from 
 Rome to England, from Csesar to Lloyd George, we 
 find the same common forces at work. They have 
 produced the same results. Land monopoly, credit 
 monopoly and Imperial conquest have been the causes 
 of decay. These form the economic background of 
 the long history of civilization. And In all of these 
 countries political control was merged with economic 
 control. They acted and interacted on one another. 
 Through them the land was monopolized; unjust and 
 excessive taxes were Imposed; usury was exacted and 
 surplus wealth was massed for imperialistic con- 
 quest. Surplus wealth was first used to exploit the 
 people at home, It was then used to exploit defense- 
 less peoples overseas. This meant more taxes; It 
 meant a crushing military establishment; It Involved 
 a suppression of protest and Intellectual freedom 
 at home and abroad. This Is what is taking place 
 in Egypt, In India, in Mesopotamia and Ireland. 
 This is what Is planned in Mexico. This was the 
 story of imperial Rome, of imperial Spain and Por- 
 tugal, of Imperial France and Imperial England. 
 Decay in all these countries began with monopoly of 
 land and opportunities ; It ended with imperialism and 
 the exhaustion of the state In overseas conquest. 
 The great empires of the world have been de- 
 stroyed not by enemies from without, but by enemies 
 from within. 
 
 [170]
 
 CHAPTER XVI 
 
 SABOTAGE 
 
 Even though all of the conclusions of the preced- 
 ing pages are not accepted it will be generally ad- 
 mitted that we are a different nation than we were a 
 few years ago. The old freedom is gone. The old 
 opportunities have passed. That the following ten- 
 dencies and conditions have made their appearance 
 Is beyond question. 
 
 ' ( I ) Labor is taking on a new psychology. The 
 worker is dissatisfied with the wages relationship. 
 He wants to have a voice in Industry. He wants to 
 own his tools. In many industries there is a dis- 
 position to slack. Everywhere there is a growing 
 reliance on direct industrial action and a loss of con- 
 fidence in the state. , 
 
 We cannot complain of this attitude on the part of 
 labor, for our national philosophy Is a philosophy 
 of sabotage. Sabotage has been sanctioned by the 
 laws of the land and by public opinion. Sabotage 
 had its origin in the protective tariff. For fifty years 
 scarcity has been taught as a most desirable thing. 
 It has been taught by the press, by the schools, by 
 political parties and by eminent statesmen. So com- 
 
 [171]
 
 pletely have we accepted the idea that a country 
 grows rich by scarcity that there is scarcely a voice 
 raised for free trade which a generation ago enlisted 
 the best thought of the country. 
 
 The tariff gave birth to the trust and to other 
 forms of sabotage. The trust destroyed competi- 
 tion. That is its underlying motive. It prevents 
 free production. Competition means quantity pro- 
 duction, with prices fixed by production cost. 
 Monopoly is not a natural product. It is not a 
 natural evolution. Monopoly is born of law 
 
 MADE PRIVILEGES THAT HAVE THE SANCTION OF 
 THE STATE. It HAS THE APPROVAL OF PUBLIC 
 OPINION AND THE LAWS OF THE LAND. Monopoly 
 
 limits production. It sabotages the nation. There 
 is scarcely a monopoly that is not born of laws of 
 our own making. Labor is practicing what we have 
 endorsed as a national business policy. 
 
 (2) Sabotage is not confined to labor. It did 
 not originate with labor. It is common to the busi- 
 ness world. In many industries profits are increased 
 by limiting production. The coming of monopoly 
 has made it possible to close mills, mines and fac- 
 tories and to recoup for the loss in production by in- 
 creased prices. We are living under a scarcity sys- 
 tem as to fuel, iron ore, lumber, food and all raw 
 materials. Wherever substantial monopoly pre- 
 vails there restricted output and increasing prices 
 are the prevailing tendencies of industry. 
 
 (3) The railroads and transportation agencies 
 
 [172]
 
 also sabotage industry. The control of transporta- 
 tion by men who also control the major industries, 
 creates a condition in which it is to the interest of 
 railway operators to prevent competition. The in- 
 terrelationship of the railroads with the packers, 
 warehousemen, millers and speculators leads to de- 
 struction of food as well. 
 
 (4) Most important of all, the free land is gone. 
 No longer is it possible for the pioneer to take up 
 a homestead in the West and build his own for- 
 tunes with his own labor. There is no free land. 
 A great part of it is held for speculation. Scarcely 
 more than half of the cultivable land is under cul- 
 tivation at all. And land has taken on a speculative 
 value, a value that has risen with great rapidity dur- 
 ing the war. These speculative values keep labor 
 from the land. They take almost all that the ten- 
 ant produces. This leads to exhaustive cultivation. 
 Land speculation is the worst form of sabotage. 
 It progressively restricts the amount of wealth pro- 
 duced. It increases the price of that which is pro- 
 duced. It drives an increasing percentage of peo- 
 ple to the cities, there to live upon a progressively 
 limited output of food and wealth; there to pay in- 
 creasing rents for the privilege of living on the land. 
 
 (5) Credit is essential to industry. Yet our 
 credit resources are under the control of banking 
 syndicates, whose power radiates out from New 
 York to the farthermost ends of the nation. These 
 banking syndicates have become investment agencies. 
 
 [173]
 
 They underwrite monopolies, railroads and foreign 
 loans. In many instances it is to their interest to 
 suppress competition and discourage production. 
 
 Our banking agencies sabotage the country. 
 They provide little or no money for the building of 
 homes. They limit credit to the farmer and charge 
 usurious interest. Even commercial credit is diffi- 
 cult to obtain. The banks are identified with the 
 maintenance of the status quo. They are responsi- 
 ble for the organization of the monster monopolies. 
 To encourage competiton means to undermine the 
 monopoly securities which they own or control. 
 Moreover the banks make more money from lending 
 money on call in Wall Street than they do from loans 
 for legitimate customers who deposit their money 
 with them. Billions of dollars are invested in stock 
 speculation, In manipulating wheat, cotton and other 
 supplies, while the farmers of the West and the peo- 
 ple of the towns are crying for loans with which to 
 feed and house themselves. 
 
 (6) The banks further sabotage the country by 
 the export of capital and credit to foreign lands. 
 This Is another reason why there is not enough credit 
 to provide for our own most urgent needs. The ex- 
 port of credit lessens the amount of credit available 
 for our own activities. Upwards of ten billions of 
 dollars have been loaned abroad and hundreds of 
 millions of foreign securities, both public and pri- 
 vate, are being offered at high rates of interest to- 
 day. 
 
 [174]
 
 There might be some defense of the export of 
 capital if banks exported their own money. But 
 they export other people's money, which should be 
 kept for the use of those who deposit it. According 
 to the Report of the Comptroller of the Currency 
 for 19 19, there were 19,000,000 individual de- 
 positors in the national banks alone. There are 
 12,000,000 depositors In the savings banks and prob- 
 ably as many more in the state banks and trust com- 
 panies. 
 
 The resources of a bank consist of the capital 
 stock invested by the stockholders and the deposits 
 placed in the banks by the depositors. The stock- 
 holders of the 31,000 banks of the country have in- 
 vested only $2,354,831,000 in the banking business, 
 while the individual deposists amount to $28,243,- 
 416,755. In other words, for every dollar invested 
 by the stockholders the people have invested twelve 
 dollars. Even more significant, the total resources 
 of all the banks amounts to $53,000,000,000, or 
 twenty-three times the amount of the capital stock. 
 In some way or other the people have invested fifty 
 billion dollars in the banks of the country as op- 
 posed to something over two billions invested by 
 the owners. 
 
 Now the people place their money in the banks 
 so as to be able to use it when they want it. They 
 have an implied right to borrow back their own and 
 other people's deposits when they need them. But 
 the banks are exporting the people's money and in 
 
 [175]
 
 so doing are crowding people into tenements, they 
 are making it difficult and ofttimes impossible for 
 the farmer to market his crops, they are sabotaging 
 the production of all kinds of wealth by the credit 
 starvation that prevails all over the country. 
 
 (7) The economic state has passed under the 
 almost complete control of a small group of men. 
 They control the banking and credit. They control 
 the mines and natural resources, the transportation 
 agencies and the greater trusts. They use their 
 power to create and maintain a system that sabo- 
 tages the freedom of society and the production of 
 wealth as well. The captain of industry has be- 
 come a financier. He is apart from industry. Fre- 
 quently he is a lawyer. More frequently he is a 
 banker. He is not familiar with industrial proc- 
 esses. Monopoly breeds the exploiting type of man- 
 agement. It excludes men of industrial experience 
 or technical ability from positions of power and in- 
 fluence. This shifting of industry from the owner 
 who has built up an enterprise and who knows all 
 about its processes to the large aggregations of cap- 
 ital with officers in New York is accompanied by a 
 change in the motive of industry. The instinct of 
 the owner is to improve processes, to increase out- 
 put, to invite invention. The motive of financial 
 control is to increase security issues, to inflate prices, 
 and to maintain a security structure irrespective of 
 the quahty or quantity of output or the improvement 
 of the plant. Monopoly is wasteful and inefficient. 
 
 [176]
 
 We see this in public utility corporations, in the rail- 
 roads, in the greater trusts and in industries that are 
 immune from competition. 
 
 Not only has the motive changed, but the men in 
 control are unfamiliar with industry. They are pro- 
 moting bankers or security merchants. They take a 
 share of the security issues as compensation for their 
 services. They place bankers and lawyers on the 
 boards of directors for the purpose of protecting the 
 corporation or to insure financial support in its under- 
 takings. A list of directors of the large corpora- 
 tions in the City of New York indicates the extent 
 to which the major enterprises of the country have 
 passed under the control of men without industrial 
 experience. It shows the extent to which these en- 
 terprises are interlocked with one another and with 
 the big banking institutions of the metropolis. The 
 economic state is passing under banking control. It 
 is taking on the form of feudalism and its inefficiency 
 as well. 
 
 (8) Economic feudalism creates a corresponding 
 political feudalism. Those who own the country 
 rule it. They use their power to create law made 
 wealth and law made burdens which are borne by 
 the producing classes. That is the purpose of priv- 
 ilege. 
 
 As a result of the perfection of monopoly on the 
 one hand and the control of the state by the ex- 
 ploiting interests on the other there has come a rapid 
 and colossal increase in the overhead charges of so- 
 
 [177]
 
 clety. Sabotage is limiting the amount of wealth 
 produced, while the exploiting interests are taking 
 an increasing share in the form of rent, profits and 
 taxes. An increasing part of the currently created 
 wealth is being absorbed by exploiting groups who 
 render no return for the tribute which they take. 
 
 The members of the exploiting groups are in- 
 creasing in number and in power. Parasitism is be- 
 coming a caste. This caste protects itself as it did 
 in Russia, in Prussia, in ancient France, by the use 
 of the state. It uses the press and the universities 
 to mold pubHc opinion; to give sanctity to its claims, 
 and to protect it in its misuse of power. 
 
 (9) The exploiting groups are supported by la- 
 bor. The overhead charges are produced by labor. 
 They can come from nowhere else. The net result 
 of sabotage on the one hand, and overhead on the 
 other, is that there is less and less wealth for the 
 great majority of the people. Labor must of ne- 
 cessity be the poorer by reason of this burden. 
 
 A recent official enquiry made by Dr. Edward B. 
 Rosa, Chief Physicist of the United States Bureau 
 of Standards, shows the appropriations for the fiscal 
 year 1920 to be $5,686,005,706. Of this 92.8 per 
 cent., or $5,279,621,262, were expenses attributable 
 to previous wars and the maintenance of the war and 
 navy departments, while only 7.2 per cent, was used 
 for governmental functions, including Congress, the 
 Executive, public works, research and educational 
 work. The total budget is about $50 per capita or 
 
 [178]
 
 $250 per family. Yet of this only $1.50 per capita 
 is spent for what may be called the primary func- 
 tions of government. Scarcely anything is spent for 
 those most in need of aid. 
 
 (10) The proximate cause of these conditions is 
 privileges created by the state. A cross section of 
 one phase of society is a cross section of another. 
 Freedom, equality of opportunity, variety, inven- 
 tion are being suppressed by the political state. 
 
 Freedom is fundamental to progress. Freedom 
 is a biological command. It is the first law of na- 
 ture. It is her inflexible rule of life. It was eco- 
 nomic freedom that made America what she is. It 
 was economic freedom that spanned the continent, 
 that developed our resources, that harnessed power 
 and made it a servant of man. It was economic 
 freedom that converted the ignorant and oppressed 
 of Europe into the captains of industry. For three 
 centuries liberty was the dominant note in American 
 hfe. 
 
 Privilege is a denial of freedom. There can be 
 no privilege without an equivalent loss of freedom, 
 just as there can be no master without a slave. 
 Privileges are economic. They are created by law. 
 When privilege becomes powerful enough, it becomes 
 the state. If we examine the governments of the 
 world to-day, outside of those that have passed 
 through a revolution, we will see that the political 
 state is rarely an agency of human rights. It does 
 not represent people. It does not represent even 
 
 [179]
 
 property. It represents privilege. The privileged 
 classes make the laws and administer them. They 
 increase the tribute which they take and the number 
 of persons within the privileged groups. Ultimately 
 the privileged classes become incompetent. They 
 exclude talent and abihty from political power, just 
 as they are excluded from industrial power. That 
 is what is happening in America to-day. This is 
 what has happened to Great Britain and France. 
 The personnel of the last Congress as well as the 
 nominees for the Presidency is a measure of the class 
 in control of our political life. The political state 
 is always a reflection of the economic state and of 
 the class in control of the economic state. This is 
 as true of the aristocracies as it is of the democracies 
 of the world. England, France, Switzerland, Bel- 
 gium, Denmark, Australia, and the United States 
 are alike in this : the class that controls the economic 
 state controls the political state as well. 
 
 When privilege becomes ascendant, decay sets in. 
 The mediocre man rises to power. Invention, initia- 
 tive, variety, change endanger the status quo. They 
 question the established order. For this reason they 
 must be suppressed. 
 
 Decay has already set in in America. This is true 
 of agriculture. That will hardly be questioned. 
 The farmer is so helpless before the privileged 
 groups that surround him that he cannot protect him- 
 self or even save his calling from destruction. Con- 
 ditions in the West are not the result of the war or 
 
 [i8o]
 
 of any passing condition. They are the inevitable 
 consequence of the environment of the farmer by ex- 
 ploiting interests that will not restrain themselves 
 and cannot be restrained by the state because they 
 are the state. The same thing is true of the rail- 
 roads. It is true of the building of homes and the 
 opening up of farms. It is true of many industries, 
 notably coal mining. If we could correctly analyze 
 our industrial system, the slackening of production, 
 the waste, and the sabotage, we would be forced to 
 admit that decay was affecting our whole economic 
 life. 
 
 Stratification is becoming the rule. So is con- 
 formity. Initiative and effort are discouraged. 
 This is true not only of labor, it is true of the pro- 
 fessional and engineering classes. Talent is denied 
 an opportunity to play. The biological processes 
 are being superseded by artificial processes designed 
 to maintain a privileged group in power. Society 
 ceases to function normally and freely. The poison 
 of privilege slowly penetrates to the working groups. 
 In time they take on the vices of the ruling class. 
 They become indifferent, hopeless, hostile. This is 
 the inevitable consequence of the control of society 
 by a parasitical, privileged class. 
 
 [i8i]
 
 CHAPTER XVII 
 
 A NATURAL SOCIETY 
 
 The political state is very different from the agencies 
 that man has evolved in his other activities. It is 
 complicated, unnatural, inexpert. It may be that the 
 maladjustment of society, the inequitable distribu- 
 tion of wealth, the poverty in the midst of plenty, 
 are traceable to the conflict of the political state with 
 normal, natural laws, which if applied in our political 
 relations would usher in a new world. We are in- 
 clined to forget that political society is man-made. 
 It is a survival of earlier economic relations. It is 
 an institution too in which government is in the hands 
 of a small and relatively incompetent and untrained 
 group interested largely in exploitation. The ruling 
 class is the group that owns rather than the group 
 that works. It is a group that exploits rather than 
 a group that produces. And the primary object 
 of the group that rules is to live by the labor of 
 others. The state is an agency of landlords, capi- 
 talists and of parasitical dependants that are at- 
 tached to and dependent on the exploiting groups. 
 
 [182]
 
 The privileges they enjoy are in conflict with a nat- 
 ural order of society. They have so enmeshed our 
 life that society is in a jungle. Privileges are created 
 to transfer wealth from the producing classes to the 
 class which rules. This is done by statute law. It 
 is through special privileges that the state controls 
 the distribution of wealth. Only in primitive socie- 
 ties does the state represent the people as a whole. 
 
 In addition the constitutions and the laws under 
 which we live are not in harmony with the laws of 
 nature. They are at variance with the laws of 
 biology. Political society is an artificial thing; so 
 artificial that the instincts and powers of men func- 
 tion with difficulty or not at all. This is why so- 
 ciety decays. This is why we do not have more 
 wealth and a better distribution of the blessings of 
 civilization. 
 
 THE LAWS OF NATURE 
 
 The law of nature is equality of opportunity; a 
 free field and no favors. Nature's laws are laws of 
 freedom. They promote variety. They encour- 
 age initiative. They stimulate resourcefulness. 
 The laws of nature endow no group, class or individ- 
 ual with any special privileges. Privilege only 
 exists under organized society. Privilege can exist 
 only by law. 
 
 The privileges which the ruling class creates and 
 which give them power are all economic. And an 
 analysis of the modern state discloses that laws con- 
 
 [183]
 
 ferrlng power upon the few at the expense of the 
 many relate: 
 
 (i) To the possession of land; 
 
 (2) To the resources of the earth; 
 
 (3) To transportation and the highways; 
 
 (4) To credit agencies for the transfer and ex- 
 change of wealth in form or in place; 
 
 (5) To taxation; 
 
 (6) To franchises for public service corporations, 
 to patent rights and to direct grants of a monopoly 
 character from the government to individuals or cor- 
 porations. 
 
 These and the artificial organization of govern- 
 ment are the agencies through which a privileged 
 class controls society in its own interest. These 
 too are the agencies that have brought empire after 
 empire to decay. These also are the means by 
 which wealth is transferred from the class which 
 produces to the class which exploits. 
 
 THE FRENCH PHILOSOPHERS 
 
 Let us briefly examine this subject. The French 
 physiocrats or philosophers, Rousseau, Turgot, 
 Quesney and Diderot, who profoundly influenced the 
 French Revolution saw the feudal regime as a con- 
 fused jungle of laws and customs made and admin- 
 istered by the grand seigneur. They advocated a 
 new philosophy; the law of nature; a philosophy of 
 freedom in all the relations of life. They advo- 
 cated a sweeping away of the endless laws that regu- 
 
 [184]
 
 lated every industry and every activity, and the in- 
 troduction of a natural order in whicii men's en- 
 ergies would play freely in every realm of life. 
 The physiocrats were probably the wisest political 
 philosophers the world has known. 
 
 The teachings of these philosophers were inter- 
 preted in Great Britain by Adam Smith. He too 
 saw a way out of the old regime by clearing away 
 the underbrush of feudal legislation which enmeshed 
 society. His work, " The Wealth of Nations," 
 has remained a textbook of clear economic thinking 
 ever since. It too advocated liberty and freedom 
 in the industrial world. But the teachings of Adam 
 Smith were converted by the privileged groups into 
 a means for protecting the existing economic sys- 
 tem. They distorted the law of nature to mean 
 that the state should keep hands off all property; 
 that land monopoly and industrial monopoly should 
 remain unimpaired. Let the landlord take as much 
 rent as he pleases; let him own as much land as he 
 can, permit the capitalist to own the tools and 
 machines and take his profit from industry; sanc- 
 tion the existing laws of property and remove all 
 restraints on the owning classes and a natural state 
 will result in which men will find their place in the 
 social and economic scale according to their abili- 
 ties. 
 
 As the landlords and business classes controlled 
 Parliament, they impressed this philosophy upon 
 the laws of the land. And for over a century it 
 
 [185]
 
 has ruled the thought of Great Britain. But this 
 doctrine of laissez faire, so-called, is a violation of 
 the laws of nature. At the very outset it sanc- 
 tions monopoly of opportunity, and a limitation on 
 the freedom of men in all their economic and in- 
 dustrial activities. Land monopoly, transportation 
 monopoly and credit monopoly decree that other 
 classes must work for and serve the owning classes. 
 There can be no freedom with these basic agencies 
 in private hands. 
 
 America accepted the British interpretation of 
 nature's laws and made it her own. We sanctioned 
 the British laws of property and commanded the 
 state to keep hands off of our economic life. We 
 too turned the land, the resources, transportation 
 and credit over to private control and then appealed 
 to the struggle for existence in which inequality of 
 opportunity was ordained from the start. 
 
 Nature recognizes no such economic priorities. 
 Nature recognizes only one law and that is the 
 ownership of wealth by the labor that produces it. 
 Nature sanctions equality of opportunity. The real 
 law of nature is a fair field and no law-made favors. 
 
 THE ARTIFICIAL STATE 
 
 Man has not only violated nature's laws of prop- 
 erty; he has violated nature's laws in our social 
 relations as well. We have created a highly arti- 
 ficial political state. It is highly centralized; dif- 
 ficult of operation, and so distant from the people 
 
 [i86]
 
 that they cannot control it. A natural society is 
 a local society. It should be simple rather than 
 complex. It should be part of our everyday life 
 and be lodged in the hands of the producing classes. 
 Yet the reverse is true. The state is in the hands 
 of lawyers, editors, bankers. It should be in the 
 hands of farmers, workers, engineers, builders. 
 The state is not adjusted to the needs of those 
 classes who should control the evolution of society. 
 The state is so complicated that it cannot be used by 
 the mass of the people. It can only be used by 
 privileged groups. 
 
 THE INDUSTRIAL STATE 
 
 A natural state would disappear into the indus- 
 trial state. It would be part of our everyday life. 
 It would aid wealth production, wealth distribution 
 and promote the cultural life of the people. We 
 should be as unconscious of the political state as we 
 are of the human body. 
 
 There is no more reason for a dual state, for the 
 political state superimposed upon the industrial 
 state, than there was for the ecclesiastical state 
 superimposed upon the political state. The ec- 
 clesiastical state has passed away. The political 
 state should be integrated with the industrial state, 
 and with the everyday activities of the people. 
 
 The imperial state in Russia broke down not be- 
 cause of the revolution alone. It broke down be- 
 cause it was in collapse. It ceased to serve the most 
 
 [187]
 
 elementary needs of the people. It was directed 
 by a small group, for the most part ignorant and 
 indifferent to anything save their selfish class inter- 
 ests. They thought of the state only as a means 
 of enriching themselv^es and of protecting them- 
 selves through the political power which they en- 
 joyed. There was little local autonomy, practically 
 no self-government. Finally the state ceased to 
 function. It died not because of the revolution, 
 but because of its own Inertia. 
 
 The same is true of the centralized Parliamen- 
 tary governments of Great Britain and of France. 
 This was obvious at the Paris Peace Conference. 
 The rulers of the world were helpless; helpless to 
 solve the big industrial and social problems which 
 confronted them. They were equally helpless to 
 direct Imperial problems. They met the situation 
 by the creation of more privileges, privileges of a 
 financial sort, of an economic sort. They at- 
 tempted to recall the closed state of the seventeenth 
 century. The political state has broken down as 
 a result of the war. 
 
 [i88]
 
 CHAPTER XVIII 
 
 RUSSIA 
 
 One need not accept the Russian revolution or 
 the methods employed by its leaders, to see in the 
 soviet organization of government the most nearly 
 natural organization of society the world has ever 
 known. The local community is the center of the 
 people's life. There is no fixed and inelastic con- 
 stitution to interfere with the will of the commun- 
 ity at every turn. The soviet is substantially au- 
 tonomous. It can do pretty much as it pleases. It 
 can own things and operate things. Most im- 
 portant of all it is organized as an industrial agency, 
 representation in the soviet being according to pro- 
 fessions, trades, industries. The government is in- 
 dustrial; it is local; it reflects the social needs of 
 the people. When the imperial government broke 
 down, the peasants devised a biological society. 
 They quite naturally organized a state suited to 
 their daily needs. They adjusted it to getting food 
 and fuel, to dividing up the land, to providing such 
 protection as was needed. They did as men nat- 
 urally do in emergencies. They created a society 
 
 [189]
 
 of equal opportunity. It is impossible to create 
 special privileges in such a simple, local organiza- 
 tion. For special privileges are only created under 
 a government that cannot be controlled by the peo- 
 ple; they are usually created under distant parlia- 
 mentary forms and by means which the people can- 
 not understand. 
 
 The Russian soviet shook the exploiting classes 
 off the backs of the people. It tested each man by 
 his usefulness. The peasant could see no reason 
 why he should turn over a large part of what he 
 produced to an idle landlord living in Petrograd or 
 Moscow. He could see no reason for supporting 
 himself and another person as well. Quite natur- 
 ally he decided to work for himself. He stopped 
 paying rent. 
 
 The cooperative movement came into existence 
 quite naturally in such a society. There was need 
 of exchange and distribution. But the peasants 
 were unwilling to pay some one else to perform these 
 functions when they could do them for themselves. 
 So they organized cooperative societies for buying, 
 selling and distributing; they organized their own 
 banks and credit agencies; they used their own 
 money for their own needs. 
 
 The same thing took place in the mines and the 
 factories. The workingmen decided to run them 
 themselves. They wanted to get rid of interest 
 and profits. And they sought to adjust industry, 
 highly complex though it is, to a natural order in 
 
 [190]
 
 which men owned their tools and controlled their 
 own life, as did the peasants in the fields. 
 
 The industrial life of the community was merged 
 with the political. The duality of society came to 
 an end. The political institutions became part of 
 the economic institutions. Both were operated by 
 the producing classes. The exploiting groups dis- 
 appeared. There was no one who was willing to 
 support them, no one willing to pay rent or profits. 
 And when rent and profits disappeared, the political 
 power of the aristocracy came to an end. 
 
 ENDING IMPERIALISM 
 
 The central government at Moscow shifted from 
 one group to another until it became a government 
 that reflected the producing classes. And as it was 
 responsive to the local Soviets it too evolved a nat- 
 ural order of society. It abolished all kinds of 
 privileges; it took over the banks, the mines, and the 
 forests. It ended secret diplomacy. It ended im- 
 perialism. It returned Persia to the Persians and 
 Manchuria to the Chinese. The government 
 could not do otherwise. For the government was 
 a government of producers. It had no interest in 
 conquest. As soon as economic privilege came to 
 an end, imperialism came to an end also. The 
 peasants had all the land they could work in their 
 own little villages; the artisan could not work at 
 home and in some distant land as well. There was 
 nothing to be gained from ruling other people. 
 
 [191]
 
 The state was interested only in the peasant and the 
 worker. It had no interest in other peasants' 
 lands. It was not idealism alone that led Russia 
 to renounce conquest. It was an economic system 
 that made imperialism impossible. Other people's 
 lands were a liability; they were a burden; they 
 yielded no return; they involved heavy naval and 
 military expenditure. Imperialism fell with the 
 fall of the old idea of the state. The old state 
 was like a pyramid inverted. When it toppled 
 over and was re-erected on the new basis, the old 
 ambitions of the imperialist state passed away. 
 
 A BIOLOGICAL STATE 
 
 The Russian state is as nearly a biological state 
 as anything the world has known. Men hold only as 
 much land as they can cultivate. This is the law 
 of nature. Equality of opportunity has become the 
 rule of life. The taking over of the tools by the 
 workers is a back to nature movement. Men now 
 live without asking permission from some other 
 man to do so. Industrial freedom has taken the 
 place of industrial feudalism. Russia is an approxi- 
 mation of the philosophy of Rousseau and the 
 French philosophers who believed that a natural 
 society should be a free society, free from privileges 
 in any form. 
 
 The Russian revolution like all revolutions is a 
 protest again overhead charges. It is a revolu- 
 tion against unjust taxes, against ground rent, 
 
 [192]
 
 against the exactions of capital. Like the French 
 revolution it was an economic revolution. It threw 
 off the feudal system. The Irish revolution is a 
 land revolution. It is a protest against the eco- 
 nomic control of Irish life by English land owners 
 and English business men. For a large part of the 
 land in Ireland is still owned by alien landlords 
 while its commercial life is under the control of 
 British capital. 
 
 All over Europe the revolutions of the past two 
 years have been revolutions against the overhead 
 charges of taxes, rent and profits, against an arti- 
 ficial state used by the few for the exploitation of 
 the many. 
 
 And stripped of accessories, the outstanding fact 
 of revolutionary Europe is that men are now work- 
 ing for themselves. They no longer work for 
 landlords, for capitalists. They keep what they pro- 
 duce. The power of the aristocracy ceased when 
 it lost its land. The same is true of the bourgeoisie. 
 Their political power collapsed when their profits 
 were taken away. The new state had to rely on the 
 talent of the working classes. It had to build a 
 producers' society. And there was only one class 
 to which it could appeal. 
 
 ECONOMIC FOUNDATIONS OF POLITICS 
 
 Contemporary Europe presents a demonstration 
 of the economic foundations of politics. It shows 
 that the political state mirrors the economic state. 
 
 [193]
 
 The prevailing economy in Eastern Europe to-day 
 is peasant proprietorship; the prevailing political 
 system reflects such proprietorship. The soviet re- 
 flects the village and the needs of the village. The 
 imperial idea of the state could only live with land- 
 lordism and capitalism. It came to an end when 
 capitalism came to an end. The revolution in 
 Russia freed 180,000,000 people from rent, profit 
 and interest. Much more important, it freed them 
 from fear, it awakened hope, it called forth inven- 
 tion, It ended sabotage. It made people free from 
 any one but themselves. 
 
 It may be that attack from without and counter 
 revolution from within have recreated the centralized 
 state; It may be that personal liberty is again under 
 political censorship and control; it may be that 
 Russia will fail in Its attempt to rear a new society. 
 It may be that a single nation cannot inaugurate a 
 new society on such ideals with the world arrayed 
 against It. It Is possible that authority may shift 
 again from the local units to Moscow and that am- 
 bitious men may acquire military or political power. 
 It may be that the workers and peasants of Rus- 
 sia, of whom a very large per cent, cannot read or 
 write, have been kept in ignorance and suppression 
 for so long, that there Is not sufficient courage or 
 intelligence to build a new society. But If failure 
 should come It should not be ascribed to the Ideals 
 that animated the revolution, it should not be at- 
 tributed to the attempt to call Into being a natural 
 
 [194]
 
 society; rather it should be charged to the old regime 
 that all but destroyed the nation by its abuses, its 
 incompetence and most important of all by its intol- 
 erance of intellectual freedom. This and the organ- 
 ized imperialism of France and Great Britain, aided 
 and abetted by the United States, are the primary 
 causes of conditions in Eastern Europe, whose crime 
 is a desire for a better society in which privileges of 
 all kinds shall be banished from the earth and men 
 shall be permitted to use their powers in their own 
 way and to keep the wealth which their labor pro- 
 duces. This is the crime of revolutionary Europe. 
 
 [195]
 
 CHAPTER XIX 
 
 FREEDOM 
 
 If the preceding analysis of society is correct, it is 
 imperative that means be found to reverse the tend- 
 encies that are shaping our civilization and pos- 
 sibly bringing on decay. These changes must be 
 fundamental. They must cut deeper than criminal 
 proceedings against the individual man, regulatory 
 commissions, or palliatives that seek to preserve 
 existing institutions but protect us from their ex- 
 cesses. The changes must be economic not personal. 
 They must alter the economic structure of society. 
 If society is to progress and civilization is to ad- 
 vance we must find some means to : 
 
 ( 1 ) Reduce the burden of overhead of taxes, 
 ground rent and profits that now appropriate a 
 great part of the wealth produced. 
 
 (2) Release labor from the wages relationship 
 that is paralyzing initiative and destroying hope, 
 and in so doing, is sabotaging the productive powers 
 of the nation. 
 
 (3) Free the land and the natural resources 
 from private control, and open them up to access 
 
 [196]
 
 by capital and labor on the farm, In the city, and 
 in the mine. Access to the source of all life is the 
 first necessity of a free society. 
 
 (4) Free the railways and waterways from the 
 power of monopoly interests to restrict production 
 and maintain control over our industrial life. 
 
 (5) Convert the banking and credit resources of 
 the country into public or cooperative agencies ; into 
 agencies to stimulate the productive powers of so- 
 ciety. 
 
 (6) Create such conditions that men will find 
 their proper employment and use their talents will- 
 ingly, hopefully, and imaginatively in contributing 
 to the economic, political and cultural life of the 
 state. 
 
 These are the conditions that should Inhere in 
 a free society; a natural society. These conditions 
 have existed in the past. They have been inter- 
 fered with by privilege; for the most part by law- 
 made privilege. Society is enmeshed, much as it 
 was In the old regime by conditions of Its own mak- 
 ings. It Is denied an opportunity to function freely 
 and naturally In Its social and economic activities. 
 
 THE ALTERNATIVE TO PRIVILEGE 
 
 The alternative to privilege is freedom in all the 
 relations of life. Freedom Is nature's order. It 
 is the order of all primitive societies; It was the 
 order that prevailed In America for two hundred 
 years. It was this that made us what we are. 
 
 [197]
 
 Freedom involves but little interference by the 
 state with the individual or with industry. It in- 
 volves access to opportunities of all kinds. It is 
 primarily economic. Freedom means the ending 
 of the strangle-hold which the laws of the land have 
 conferred upon the few. Freedom will open up 
 opportunities to initiative and talent. It will re- 
 lease trade, commerce and productive processes 
 from restraints by the state. Freedom involves 
 free trade between nations as well as between the 
 forty-eight states of the union. 
 
 Freedom involves the enactment of but a few 
 laws. These laws relate to land, to transportation, 
 to credit, and in a lesser way to patents. It is about 
 these basic privileges that the present-day evils in- 
 here. With these privileges ended, freedom 
 would come in. It would change all relations of 
 life, economic, political and social. The ending of 
 privilege would call a new class into politics; a pro- 
 ducers' class. It could change the press. It too 
 would reflect the economic foundations of a free 
 society. The universities and the schools would 
 mirror the new economic relationships, just as to- 
 day they mirror the privileged society which con- 
 trols the state. Our cultural life would respond to 
 this release, as would the talents and initiative of 
 the people. 
 
 This is the kind of society that prevailed in Amer- 
 ica up to about 1880. It was a free society, a pro- 
 
 [198]
 
 ducers' society. Men did not rely on the state. 
 They rehed on themselves. There were few law- 
 made privileges, and our political and economic life 
 was almost exclusively in the hands of the producing 
 classes. There are some survivals of free industry 
 to-day. We see it in the dollar watch, in the cheap 
 automobile. No patents, grants or privileges inter- 
 fere with the free play of these industries. Prices 
 are low. Production is at a maximum. There is 
 real competition. It is true the wages system pre- 
 vails; there is still price control. But this is because 
 only a few industries are involved, and the basic 
 privileges of land monopoly, of transportation, of 
 credit, and of taxation are still under private con- 
 trol. But at least we see the possibilities of indus- 
 trial freedom and the effect upon the genius and 
 talent of the people when freedom has a chance to 
 play. 
 
 INVITATIONS TO A FREE SOCIETY 
 
 The legislative changes involved in freedom are 
 few in number. They fall within four groups. 
 They are: 
 
 ( 1 ) The taxation of land values and the resources 
 of the earth so as to force them into use and their 
 most efficient use. 
 
 (2) The socialization of transportation and the 
 means of communication. 
 
 (3) The dedication of banking and credit exclu- 
 
 [199]
 
 sively to production, and the decentralization of con- 
 trol from the money centers back to the producing 
 groups. 
 
 (4) Democracy in industry and the participation 
 of labor in the processes of production. Guild So- 
 cialism, cooperation, and labor partnership are sug- 
 gestions for releasing the resourcefulness of the 
 worker and for enlisting his Interest, his enthusiasm, 
 and his ambition In his employment. 
 
 These proposals look to a new kind of liberty. 
 They propose but little reliance upon the state. 
 They involve no bureaucratic organization of society. 
 They minimize the political state, rather than exalt 
 It. They look to a revival of the individual man; 
 and to the free play of man's Ingenuity on the re- 
 sources and capital of society. 
 
 These proposals, too. are in harmony with what 
 we know of nature's laws. They are biological 
 rather than artificial. They suggest a return to the 
 early traditions of America; to the time when man 
 controlled his economic environment and shaped his 
 life with his own hands. He was not then a part 
 of a machine. He controlled the machine. He 
 was Inspired by hope. He enjoyed all the wealth 
 that his labor produced, unexploited by political and 
 economic agencies which he did not control. 
 
 These economic changes would usher in a social 
 revolution without the use of force. They would 
 create a new society In a few years' time. Wealth 
 would be more equitably distributed. There would 
 
 [200]
 
 be more to distribute while the overhead of interest, 
 profit and rents would be retained by the producing 
 classes. In time labor would receive all that labor 
 produced. The farmer would receive what he pro- 
 duced. So would the artist and the professional 
 man. So would the merchant and the manufacturer, 
 the inventor and the engineer. The Edison and 
 the Ford would be rewarded in a free society as they 
 are to-day. Under natural conditions men would 
 receive all the wealth that their mind or their hand 
 produced. They would receive it without diminu- 
 tion by taxation or otherwise. They would be per- 
 mitted to use it without interference by the state. 
 
 The changes suggested involve no reorganization 
 of society. They involve no complicated system of 
 laws or administrative decrees. Rather they involve 
 the repeal of the laws that privilege has enacted so 
 as to permit the laws of nature to play freely on the 
 opportunities and resources of the earth. With 
 land and labor free, with credit dedicated to produc- 
 tive uses, with transportation open to all on equal 
 terms, with patents, franchises and other grants 
 opened up to use, then the advances, the inventions, 
 the discoveries of civilization would contribute to the 
 well being of man. Then science would be man's 
 servant; then the machine would relieve him of 
 labor. Then the mind of man would be free to play 
 on the possibilities of life as it never has before in 
 the history of man. 
 
 [201]
 
 CHAPTER XX 
 
 THE FIRST STEP 
 
 Is it a good thing that men should be permitted to 
 hold land and refuse to use it? Is it a wise arrange- 
 ment for millions of acres to be held in great feudal 
 estates? Should human beings be herded in slums 
 with building sites in abundance close by in the sub- 
 urbs? Is there any justification for speculation in 
 land as a result of which men go hungry and live 
 close crowded in one, two and three-room tenements? 
 What can be said of an economic system that 
 permits the iron ore deposits of Minnesota, which 
 a few years ago were worthless lands, to be capital- 
 ized at $800,000,000 and held by a single corpora- 
 tion, when iron ore is basic to the civilization in 
 which we live? What can be urged in defense of 
 the ownership of practically all of the anthracite 
 coal of the country by four railroads, and the con- 
 trol of much of the bituminous coal by railroads, 
 mining corporations and individuals who sabotage 
 production and limit the output? Is greater unwis- 
 dom possible than the rule we have adopted for the 
 
 [202]
 
 disposition of our land and mineral and lumber re- 
 sources ? 
 
 man's relationship to opportunity 
 
 What should be the rule of man's relationship to 
 the resources of the earth? Should he own as much 
 as he can seize, irrespective of whether he uses it or 
 permits it to lie idle? Or is there some other sanc- 
 tion of title, a sanction that satisfies divine law, nat- 
 ural law and a properly ordered society as well? 
 
 i The first act of the peasants in the revolutions 
 that swept over Central Europe was the appropria- 
 tion of the great estates and the distribution of the 
 land among the people. This was the first step in 
 the French Revolution of a hundred and thirty years 
 ago. In every revolutionary upheaval of Europe 
 the peasants took the land and distributed it among 
 themselves. They refused longer to pay rent or to 
 work as serfs on another man's land. The princi- 
 ple followed in the redistribution of land was to give 
 a man as much as he could cultivate. He could have 
 no more than he could himself use. Title was sanc- 
 tioned by use alone.( 
 
 TAXATION A MEANS TO INDUSTRIAL FREEDOM 
 
 America is not likely to adopt revolutionary 
 methods in dealing with the land question. We are 
 too long trained to political action. Our traditions 
 are those of orderly evolution. And land monopoly 
 can be corrected by orderly processes. The re- 
 
 [203]
 
 sources of the earth can be opened up by taxation; 
 by the taxation of land values. This can be accom- 
 plished by the repeal of all indirect taxes, both cus- 
 toms and excise, as well as all taxes on houses, build- 
 ings, improvements, and personal property, and the 
 placing of all taxes, federal, state and local on land. 
 Speculation in land would then be impossible. The 
 burden of taxation would end land monopoly and 
 open up land for use. It would absorb ground rent. 
 This does not mean that 10,000 acres of farming 
 land in Kansas or Iowa would pay the same taxes 
 as 10,000 acres in the metropolis of New York. 
 Land would be taxed at its selling value. The land 
 underlying New York is assessed at over $5,000,- 
 000,000. It yields $250,000,000 in ground rents. 
 The mineral resources (coal, iron ore, oil, natural 
 gas, copper, gold and other deposits) would also be 
 assessed at their capital value. Suburban building 
 land would be assessed at its value. Upon the valu- 
 ation so made a direct tax would be levied to meet 
 the needs of society. 
 
 It would be assessed upon the actual value of the 
 land irrespective of improvements. Opportunity, 
 not effort, would be taxed. This would end idle 
 land speculation. It would compel men to use their 
 land or sell it. Society would say that the only title 
 to land was a title based on use. Men could only 
 sleep on their opportunities by paying for the privi- 
 lege. They could not hold resources for their chil- 
 dren or their children's children ; they could not wait 
 
 [204]
 
 for population to grow about their land and by 
 so doing increase their wealth while they idled their 
 time in some distant pleasure resort. 
 
 Under this proposal men would have three alter- 
 natives: They could cultivate their land or build 
 upon it; they could hire labor to cultivate it or build 
 upon it; or they could sell their land to some one else 
 to cultivate or build upon it. The same would be 
 true of all mineral resources. Under any circum- 
 stances land would be taxed into use. It would be 
 impossible to hold it idle. Men would have to use 
 their holdings or dispose of them. 
 
 OPENING UP A CONTINENT 
 
 Under such an impulse great quantities of land 
 would seek buyers, just as millions of ancestral acres 
 of land in England have been broken up into small 
 holdings as a result of the death duties imposed dur- 
 ing the war; just as land in Australia has been di- 
 vided among proprietors by increasing the land tax. 
 A land values tax would automatically distribute 
 land to those who desired to use it. It would open 
 up building sites in the cities, suburban sites, mines, 
 oil land, and all kinds of mineral land as well. In 
 time the land of America would call for labor. It 
 would lure men from the cities. Men could then 
 own a farm of their own. There would be oppor- 
 tunities like a newly discovered continent. 
 
 With land seeking men, men would be freed. No 
 one need work for another if he chose to work for 
 
 [205]
 
 himself. With taxes removed from houses and im- 
 provements, there would be a stimulus to build, an 
 encouragement to industry, a cheapening of the prod- 
 ucts of labor. With the increase in wealth produc- 
 tion which would follow, and its freedom from taxes, 
 prices would fall. Under these conditions a man 
 could not slack, upon the land. He could not slack 
 on mines, standing timber, or other resources. 
 
 Here is a natural means for ending sabotage of 
 the land. Here is a natural means of ending feudal- 
 ism, and for converting every man into a free 
 citizen. Here is a means of creating unlimited op- 
 portunities for labor. The mere existence of oppor- 
 tunity frees a man from the wage relationship. The 
 man who can work for himself is never a wage slave. 
 He has a sense of freedom, a sense of power. He 
 can work for himself or for some other man. The 
 labor shortage due to the stoppage of immigration 
 has demonstrated that. 
 
 The taxation of mineral sites would have the same 
 effect. It would no longer be possible to hold an- 
 thracite and bituminous coal out of use. Coal de- 
 posits would have to be worked to pay the taxes. 
 Oil land could not be held idle. Nor could timber 
 land. The basic monopolies would be broken by 
 this procedure. Moreover they would be opened up 
 to use. Coal-mining, oil drilling, and the production 
 of all kinds of raw materials would be subject to 
 competition. The cost to the consumer would be 
 fixed by labor cost and capital cost rather than by 
 
 [206]
 
 a scarcity cost which is now possible because of the 
 close monopoly of these resources. 
 
 THE NEW FREEDOM 
 
 Freedom, mental as well as economic, would be 
 the great gain from the change. It would react 
 upon the mind of America. It would enable men 
 to be home-owners instead of tenants. Home- 
 owners have always been free men. It is this that 
 lies back of the democracy of France. It is this that 
 explains the democracy of Denmark. It Is this that 
 gave birth to the new Irish movement, just as it is 
 this that has made AustraHa and New Zealand the 
 democratic countries that they are. Democracy, 
 both economic and intellectual, is traceable to the 
 relation of the people to economic opportunities and 
 especially to the land. No people has ever been free 
 that was a tenant people. They were not free in 
 Russia, nor in feudal Prussia, any more than they 
 were free in feudal France before the Revolution. 
 And we need only go out to Texas, to Oklahoma 
 and to other sections of the West, where tenancy 
 has become a system, to find the same economic, 
 social and intellectual conditions appearing that pre- 
 vailed in Europe under the feudal system. 
 
 INDUSTRIAL DEMOCRACY 
 
 With the land free industrial democracy would 
 come in as a matter of course. The employer would 
 have to recognize the spiritual as well as the eco- 
 
 [207]
 
 nomic demands of the worker. Labor's standard 
 of living would be determined by the free men, not 
 the subject men. This is what always happens when 
 there are more jobs than men seeking jobs. Under 
 free conditions the employer would have to make 
 terms with the worker. And these terms would 
 carry with them a freedom and a participation in 
 industry on the part of the employee that is not pos- 
 sible when opportunities are limited and closed by 
 the owning classes. 
 
 The production of wealth would be stimulated in 
 such a free society. Taxation of land value would 
 stimulate industry. Men would have to produce to 
 meet the demands of the tax-gatherer. Quite as 
 important, the cost of many commodities would fall. 
 The heavy overhead of indirect taxes running into 
 the billions would be taken off wealth and consump- 
 tion, and would fall upon land values. And all 
 economists are agreed that taxes on land values re- 
 main where they are placed. They cannot be 
 shifted. They reduce the ground rent of the owner 
 but they do not increase prices. All industry, all 
 commodities, all services, all incomes, would then 
 be freed from taxation, as would all articles of con- 
 sumption. 
 
 Freedom to use the resources of the earth is the 
 first step in industrial democracy. It is basic to 
 all others. 
 
 [108]
 
 CHAPTER XXI 
 
 FREE COMMUNICATION 
 
 In the congressional discussion of the railroad 
 question the Railroad Brotherhoods alone offered 
 a proposal that suggested a properly organized 
 transportation system. The measure fathered by 
 them known as the Plumb plan provided for pur- 
 chase and permanent ownership of the railroads by 
 the government and their operation by a corporation, 
 made up of five representatives of the public ap- 
 pointed by the President, five representatives chosen 
 from the ofl^cial groups to represent executive and 
 engineering experience and five representatives 
 selected by the classified employees. This board 
 was directed to merge the railroads into a single 
 system, to unify water and rail transport and to 
 develop trucking so as to make deliveries from the 
 producer to the consumer. 
 
 The profit-making motive was to be eliminated 
 from operation. The plan provided for a fixed re- 
 turn on the capital investment and the distribution 
 of surplus earnings over and above operating costs 
 and fixed charges to the Government and the em- 
 
 [209]
 
 ployees on a fixed scale. There were provisions for 
 wage boards to adjust wages controversies while the 
 Inter-state Commerce Commission was given con- 
 trol of rates and charges. 
 
 This was the first proposal of organized labor for 
 an assumption of responsibility in industry. It was 
 America's interpretation of industrial democracy or 
 Guild Socialism. The measure treated capital as 
 entitled to only a fixed return. It placed the control 
 of transportation in the hands of those most con- 
 cerned over it, to wit, the public as consumers, the 
 workers as producers, and the professional talent as 
 entrepreneur. Quite as important, the measure of- 
 fered a plan for calling into the industry the talent 
 of two million employees, the dedication of the trans- 
 portation agencies to the production of wealth and 
 its cheap and rapid distribution as well. 
 
 Congress showed little interest in any of these 
 considerations. The transportation act provided a 
 guarantee of dividends; protection to security hold- 
 ers and opportunities for waste and exploitation. It 
 contained few provisions for a system of transporta- 
 tion such as is found in other countries, or even for 
 such a system as was developed under government 
 control. 
 
 THE FUNCTION OF TRANSPORTATION 
 
 A properly conceived transportation program 
 would look upon the railroads as agencies of serv- 
 ice, rather than of profit. Their function is to trans- 
 
 [210]
 
 port goods and persons at a minimum cost. So ad- 
 ministered transportation would become a great 
 agency of industrial and cultural development. 
 Population could be distributed out into the country 
 as an aid to the housing problem. The railroads 
 can remake city life. But the most important serv- 
 ice is the development of the country. The rail- 
 roads should stand at every man's door inviting 
 him to produce to the fullest with an assurance that 
 his produce will find a market. They should dis- 
 courage the long haul and promote the short haul. 
 They should build up agriculture about our cities 
 rather than thousands of miles away. They should 
 promote home markets rather than distant markets. 
 They should localize industry rather than distribute 
 it. They should develop water ways, harbors and 
 terminals. They should use the water power of the 
 country not only for the railroads but for industry 
 and domestic use. 
 
 RAILROAD POLICIES OF OTHER COUNTRIES 
 
 We get a suggestion of what a socially organized 
 transportation system can accomplish from countries 
 where the railroads are operated by the Government. 
 This is true of every country in Europe where gov- 
 ernment operation prevails. The Industrial devel- 
 opment of Germany was largely traceable to the 
 highly developed system of water and rail transport. 
 The manufacturer, trader and farmer had free, equal 
 and cheap transportation not only to every part of 
 
 [211]
 
 the Empire but to every part of the world. The 
 railroads were operated to promote the productive 
 resources of the country. This was the policy of 
 the German railways from the time they were taken 
 over in the eighties down to the outbreak of the war. 
 
 No other agency contributed more to the upbuild- 
 ing of the Empire than the state owned railroads. 
 Their administration was decentralized. Every 
 chamber of commerce, every agricultural association 
 was in sympathetic contact with the central adminis- 
 tration. They looked after local industries. They 
 formulated local rates and charges. If a mine or 
 an industry needed encouragement, low freight rates 
 were granted to enable it to get on its feet. When 
 Germany determined to have a merchant marine of 
 her own, the railroads hauled coal, steel and lumber 
 to the shipbuilding plants at a low cost. Food was 
 carried from the eastern provinces to the industrial 
 sections of western Germany at favorable rates, 
 while the shipper engaged in foreign trade received 
 preferential rates to enable him to meet the competi- 
 tion of other countries. Often goods were hauled 
 below cost to develop an industry or a section of the 
 country. 
 
 The rivers, harbors and canals were developed. 
 The finest water terminals in Europe are found on 
 the Baltic, the North Sea, and along the River Rhine 
 from Duisberg to Mannheim. They are equipped 
 with marvelous docking and trans-shipment facil- 
 ities. These harbor terminals are linked with the 
 
 [212]
 
 railroads in such a way as to encourage both rail and 
 water transportation. Upwards of $250,000,000 
 has been spent by Prussia alone for the development 
 of her waterways in spite of the fact that the water- 
 ways competed with the railroads. 
 
 AUSTRALIA 
 
 Australia uses her state owned railroads in the 
 same way. To encourage agriculture, cheap rates 
 are made upon farm machinery, on fertilizers, on 
 building materials. The farmer's produce is han- 
 dled for him at a minimum cost. The railway sta- 
 tion agent performs the functions performed in this 
 country by a score of middlemen. He receives a 
 consignment of a dozen chickens, a thousand head of 
 cattle, or a carload of wheat and gives a receipt for 
 them which can be used by the farmer to secure a 
 loan at the bank. Upon delivery to the station 
 agent, the farmer's concern is at an end. Poultry, 
 sheep, cattle, wheat are shipped to the seaboard; 
 there cattle are killed and cold-storaged by the state 
 in a state owned slaughter-house. Wheat, oats and 
 other produce are warehoused in the same way. Ul- 
 timately a cargo is made up and shipped to London 
 on a state chartered steamer, so that food supplies, 
 hides and wool from central Australia are deposited 
 in England and there sold by representatives of the 
 Government without the intervention of any middle- 
 man whatsoever. The railways are agencies of na- 
 tion building rather than of profit making. 
 
 [213]
 
 DENMARK AND SWITZERLAND 
 
 Little Denmark operates her railroads to develop 
 her markets with England and Germany. They are 
 run at a low scale of freight and passenger rates. 
 The official policy is to use the railroads to promote 
 industry, to develop commerce, to make the nation 
 rather than railroad owners prosperous. 
 
 Switzerland is substituting the white coal of the 
 Alps for the black coal of Germany in the operation 
 of her railroads. The Rhine and the Rhone have 
 been harnessed by great hydro-electric power sta- 
 tions whch generate power at a very low cost. A 
 part of the power is used for the operation of the 
 railroads while the surplus is used for industry, the 
 lighting of streets and country roads and even for 
 serving the peasants in their homes and on their 
 farms. All this has been done since the railroads 
 were taken over by the government. Bavaria and 
 Norway have electro-equipped their railroads while 
 Italy is planning a similar development to free the 
 country from dependence on the coal supply of other 
 countries. It is to the profit of the railroads in the 
 United States to refuse to develop electric power, 
 for the railroads are the largest buyers of coal in 
 the country. Their fuel bill amounts to at least 
 $4f;o,ooo,ooo a year. As the railroads buy coal 
 from companies owned or controlled by the stock- 
 holders of the railroads, and as they would lose their 
 best market by the use of water power, such a de- 
 
 [214]
 
 velopment will never be made so long as the rail- 
 roads are in private hands. 
 
 THE .NEED OF A COMPREHENSIVE TRANSPORTATION 
 PROGRAM 
 
 America is in need of a nation-wide transporta- 
 tion program. Transportation should be studied 
 from the point of view of the producing and con- 
 suming classes rather than of the financiers and se- 
 curity holders. There should be a study of what 
 has been done in other countries, of the gains from 
 unification of competing railroads, terminals and op- 
 erating agencies. Water transportation and truck- 
 ing should be treated as a coordinate part of rail 
 transportation. Such questions as the long and 
 short haul, the needless cross hauls and empty hauls 
 due to the maintenance of competing systems should 
 be inquired into. Efforts should be made to sim- 
 plify freight classifications as well as to adjust rates 
 and charges to the needs of industry and the stimu- 
 lation of travel. The waste involved in the mainte- 
 nance of several hundred different railroads with 
 their thousands of useless ofl'icials and worse than 
 useless competition should be ended and the equip- 
 ment of the roads should be merged under a single 
 system. The same is true of terminals, shops, 
 motive power, cars and harbors. The advantages 
 of such a merger was shown during the period of 
 government operation. The cost to the country 
 from the maintenance of needless officials and equip- 
 
 [215]
 
 ment runs into the hundreds of millions of dollars 
 annually while the loss to the country in inadequate 
 transportation amounts to as many millions more. 
 
 DIVORCE THE RAILROADS FROM BANKING CONTROL 
 
 Most important of all railroading should be di- 
 vorced from banking management. Transportation 
 should be in the hands of engineers and experts 
 rather than in the hands of money lenders. It 
 should be divorced from coal mining, from intimacy 
 with the trusts and monopolies, from the community 
 of interest that now prevails through banking con- 
 trol. It is not so much the tribute the railroads take ; 
 it is the wealth that they destroy that is so costly. 
 Every manufacturer, every independent coal oper- 
 ator, every independent packer and warehouseman 
 lives in fear of discrimination or inability to secure 
 service. It is this that is checking production as it 
 is destroying agriculture. 
 
 The railroads are sabotaging the life of the na- 
 tion. They are progressively reducing the produc- 
 tion of wealth. As they exercise a powerful con- 
 trol over the press and Congress these facts are but 
 little known. They are given no publicity. Cham- 
 bers of Commerce and shippers dare not complain 
 and such organizations as do protest receive but 
 scant notice and are lacking in influence. There can 
 be no real freedom to the economic life of any coun- 
 try so long as the means of transportation are in 
 private hands. 
 
 [216]
 
 CHAPTER XXII 
 
 FREE CREDIT 
 
 Credit should enable those who possess no capital 
 to secure capital. It should be an agency to aid men 
 of resource, of abihty, of integrity, to obtain tools, 
 machines and materials so that they can use their 
 labor most effectively. Credit should be an agency 
 of production alone. Its control should be in the 
 hands of the producing classes. Its proper function 
 is to convert wealth into new forms, to change the 
 wealth a man does not want into wealth that he does 
 want. It should translate immobile values into 
 liquid values. Credit should carry the wheat of the 
 Dakotas to their markets in New York and in Liver- 
 pool. It should exchange wheat and cattle for other 
 commodities that the farmer wants. What Is quite 
 as important, it should enable the man without means 
 to acquire a home, a farm, to start a business, to 
 build a factory. These are the functions of credit. 
 Credit like transportation should be a social agency. 
 It should be impressed with a pubHc use. 
 
 THE SOCIAL NATURE OF BANKING AND CREDIT 
 
 Credit should be a by-product of our economic 
 life. It should function as does our circulatory sys- 
 
 [217]
 
 tern, not as a thing by itself, but as a life-giving 
 force to production, distribution and exchange. 
 
 Banking should be largely a clerical operation; a 
 means of testing men's integrity and character; of 
 passing upon the value of securities and of bringing 
 economic groups and interests together in the easi- 
 est and least expensive way. 
 
 The banks and credit agencies performed these 
 functions in the early days of the country. They 
 were local, neighborhood affairs. They ceased to be 
 this in the closing years of the last century. They 
 were converted into means of exploitation and are 
 now used very largely to strengthen the exploiting 
 groups. 
 
 There are many ways for socializing banking and 
 credit to make them agencies of social service. 
 
 PUBLIC BANKS 
 
 Banking and credit are partially public agencies 
 in Australia and North Dakota. The Common- 
 wealth Bank of Australia is a state-owned bank. 
 It was organized to protect the farmers from extor- 
 tion and to provide adequate and cheap credit for 
 development purposes. 
 
 North Dakota has established a state bank with 
 a capital of $2,000,000. It is the legal depository 
 of the state, of the cities, counties and school dis- 
 tricts. It was opened for business in July, 19 19. 
 By December its resources amounted to $17,000,000. 
 It has made very substantial earnings. It is oper- 
 
 [218]
 
 ated like a private bank, but with the sole aim of 
 developing farming and the industrial life of the 
 state. It loans money to the farmers and has cut 
 down interest rates by at least 2^ per cent, over 
 rates previously paid. Farm loans are made on a 
 long-time amortization plan. The borrower pays 
 7 per cent, on the original amount of the loan, of 
 which 6 per cent, is interest, and the balance is used 
 to liquidate the principal in about 34 years. 
 
 The bank is also the depository of private banks 
 in the state, of which over 600 have opened accounts 
 with it. It is the clearing house of other institutions 
 and has effected a great saving in exchange rates. 
 The bank re-deposits its funds with local banks whose 
 transactions are subject to its supervision in so far 
 as interest rates are concerned. 
 
 The enacting clause of the measure creating the 
 bank describes it as an institution " for the purpose 
 of encouraging and promoting agriculture, commerce 
 and industry." Its original capital was derived 
 from the sale of $2,000,000 of bonds issued by the 
 state, while the bulk of its deposits are those of 
 civil divisions of the state which are required to make 
 it their depository. The state itself guarantees all 
 the deposits. It exempts them from state, county 
 and local taxes. 
 
 There is no inherent reason why banking should 
 not be a public function. Banking is not a compli- 
 cated business. It is relatively simple. For the 
 banker himself fixes the terms of his transactions. 
 
 [219]
 
 He determines the interest paid depositors, as well 
 as the interest paid by borrowers. He also passes 
 on the security he requires. The negligible losses 
 in the tens of thousands of cooperative banks that 
 exist all over Europe operated by peasants and 
 workers is suggestive of the simplicity and safety 
 of banking operations. 
 
 COOPERATIVE BANKING 
 
 Cooperative banking is the second means of mobil- 
 izing the resources of the country for use by the 
 producers. And cooperative banking has been de- 
 veloped to a remarkable degree during the last 50 
 years. The cooperative banking institutions of 
 Europe are known as credit unions or people's banks. 
 They have followed the lines laid down by the orig- 
 inal Raiffeisen and Schulze-Delitzsch banks, which 
 originated in Germany about 70 years ago. The 
 Raiffeisen banks are designed to aid the peasants, es- 
 pecially the small peasants who were unable to se- 
 cure credit from the banks. The Schulze-Delitzsch 
 banks were designed to aid the artisans. Both sys- 
 tems have spread all over Europe, especially into 
 Italy, France, Russia and Austria-Hungary. 
 
 The credit unions consist of groups of neighbors 
 who live within the same community, or of workers 
 in a trade union who place their savings with one 
 of their number as treasurer. The sums deposited 
 by individuals are not very large, but the aggregate 
 deposits are sufficient to care for the loans required 
 
 [220]
 
 within the community. Loans are made in small 
 amounts. They must be used exclusively for pro- 
 ductive purposes, such as the purchase of cattle or 
 machinery. In the workers' banks they are used to 
 aid men to buy tools, for sickness or an emer- 
 gency. The loans are covered by notes which are 
 endorsed by one or more persons. The loan is re- 
 paid in installments, usually covering a short period 
 of time, although loans are made for long periods 
 under amortization plans. Unlike other banks, a 
 man's moral character figures largely in the making 
 of the loan. That is known to his neighbors. If 
 he is not thrifty, if he is not a good farmer, he does 
 not secure the loan. And after he has secured it, 
 he is watched over by his neighbors, who see to it 
 that he spends the money as he promised to spend 
 it; that he uses his credit wisely, and that he repays 
 it when he agrees to do so. The object of these 
 banks is to aid men without capital. It is a means 
 of increasing the efficiency of the man who has noth- 
 ing to sell but his labor. 
 
 The first of these banks was started about 1850. 
 Latterly they have been growing with great rapidity. 
 There were 16,000 Raiffeisen banks in Germany in 
 19 13, with a combined capital of $650,000,000. 
 There were 65,000 such banks in Europe and about 
 5,000 in Japan. The total turnover in 19 10 of all 
 these people's banks was $5,900,000,000. Their 
 losses were negligible. 
 
 As these banks grew in number they federated into 
 [221]
 
 regular banking institutions with headquarters in the 
 cities. These central banks hold the deposits of the 
 credit unions and made loans back to them for local 
 use. The central banks are controlled by the local 
 credit unions and through them the resources of the 
 peasants and the workers are mobilized so that they 
 can be used wherever needed. 
 
 The credit union has been developed in Canada, 
 where 300 banks have been organized. Not one of 
 them had lost a penny up to 19 14. The states of 
 Massachusetts, Rhode Island, New York, North 
 and South Carolina, Texas, Wisconsin, Utah and 
 Oregon have credit union laws, and in Massachusetts 
 and New York they are growing with great rapidity. 
 
 THE NECESSITY FOR NEW BANKING METHODS 
 
 Public banks, the cooperative bank, and the credit 
 union, are suggestive of the kind of institutions which 
 should control all credit. Credit should be im- 
 pressed with a public use. It should be a public serv- 
 ice, not a private business. The money of the peo- 
 ple should be used to serve the people. This is one 
 of the first needs of a free society. Along with the 
 land, it is the most imperative need, if we would re- 
 lease the productive powers of the country. 
 
 There must in fact be a revolution in banking and 
 credit. For our credit resources are used very 
 largely for exploiting purposes. Control is concen- 
 trated in New York, Chicago, MinneapoHs. Much 
 
 [222]
 
 of our credit is used for stock-gambling, for food 
 gambling, for speculation of all kinds. 
 
 There can be no release of our productive powers 
 until the reservoirs of credit have been placed under 
 social control or control by the producing classes and 
 by them dedicated exclusively to their proper func- 
 tion. Credit should go out to the farmer, to the 
 worker, to the manufacturer. It should supply tools 
 and machinery to the man of character, and enable 
 him to get started in the world. It should build 
 homes, enable men to buy farms, and develop the 
 neglected talent of the nation. New mines should 
 be opened up, and the labor, and resources of the 
 country should be brought together in the coopera- 
 tive production and distribution of wealth. Credit 
 must be given a social sanction. Our banking agen- 
 cies must be impressed with a public trust. 
 
 [223]
 
 CHAPTER XXIII 
 
 INDUSTRIAL DEMOCRACY 
 
 A SURVEY of the revolutionary movements taking 
 place all over Europe show a universal drift in the 
 direction of industrial democracy. The widespread 
 acceptance of the idea and the assurance of the work- 
 ers in Russia, Great Britain and Italy, suggests the 
 universality of the idea as well as the rapidity with 
 which labor is rising to economic if not to political 
 power. The workers are ignoring the political 
 state. They are losing confidence in it. They feel 
 that it does not represent them and cannot be made 
 to do so. They have turned to the industrial state 
 and are seeking to build a structure of their own 
 that they more readily understand. 
 
 In a large part of Europe there is either revolution 
 or the preliminaries of revolution. These revolu- 
 tions are economic. They are born of injustice and 
 the exactions as well as the incompetence of the rul- 
 ing classes. They are an attempt to be free from 
 rent, interest, profits and taxes. The workers and 
 peasants seek to be rid of the landlord and the cap- 
 italist. In its essence revolution is an effort to 
 
 [224]
 
 throw off the age long privileges which interfere at 
 every turn with the freedom of the individual man. 
 
 REVOLUTIONARY EUROPE 
 
 In Russia we have a communistic state in which 
 the peasants and workers own the land, the factories 
 and the tools. They adopted industrial as opposed 
 to political action. They took the property as well 
 as the privileges of the ruling class and have under- 
 taken a syndicalistic organization of society along 
 industrial lines. In Italy the revolutionary move- 
 ment has been growing in power during the past six 
 months. It has followed Russian methods. The 
 workers, who had been locked out by the employers 
 in anticipation of a general strike, took possession 
 of the mills and factories. They organized their 
 own operating staffs and secured credit from the co- 
 operative banks which they control. They sent the 
 output of the mills to the cooperative stores and 
 wholesales. The Italian workers ignored the po- 
 litical state and adopted methods with which they 
 are familiar in their labor unions and through the 
 cooperative societies which have been developed in 
 great numbers both during and prior to the war. 
 Similar movements are developing in France, as they 
 are in Great Britain. 
 
 We are living in a new world, with new forces 
 fermenting in men's minds. The political state either 
 cannot or will not face conditions until it is too late. 
 Possibly the state cannot face them. No individual 
 
 [225]
 
 and no class will give up its privileges. Fear leads 
 to efforts to strengthen them. The recently enacted 
 railroad bill, the resentment of the banks to any 
 attempt to provide credit for farmers and home 
 builders, the attitude of the profiteering class and the 
 intolerance of the press and Department of Justice 
 toward any criticism or protest are manifestations 
 of the same spirit that preceded the Revolution in 
 France a hundred years ago, just as it manifested 
 itself in the countries of Europe that are now in a 
 state of convulsion. Privilege learns nothing from 
 the past. It relies on force and encircles its pos- 
 sessions with machine guns and constabulary. 
 
 Despite the revolutionary tendencies in the world 
 to-day, democracy in America will undoubtedly rely 
 on the ballot for a long time to come. The Non- 
 partisan League of the Northwest, the political in- 
 surgency of Wisconsin and the Pacific Coast, the 
 rapidly growing cooperative movement and the de- 
 velopment of political consciousness on the part of 
 labor are all evidences of a deep seated belief in the 
 possibilities of political action as a means of orderly 
 economic evolution. We have no heritage of igno- 
 rance and feudalism. We are accustomed to free- 
 dom and to the ballot. And the conditions under 
 which we suffer can be changed by the state, once the 
 state becomes an agency of the class that produces 
 rather than the class that exploits. 
 
 [226]
 
 A PHILOSOPHY OF FREEDOM 
 
 A revolutionized society is possible that avoids 
 socialism on the one hand and communistic syndical- 
 ism on the other. It can be brought about by few 
 changes and by a very few laws. It involves no 
 regimentation of society and little interference with 
 personal liberty. Rather it protests against such in- 
 terference as it does against the enlargement of gov- 
 ernmental powers. It involves no dictatorship by a 
 class and no violent change in the existing machinery 
 of government. Such a society is possible by the 
 economic changes enumerated in the preceding chap- 
 ter. They would shift the burden of taxes from 
 production onto privilege; they would end the bur- 
 den of overhead from profits and ground rent by 
 the destruction of the privileges which make them 
 possible. They would destroy the major monopolies 
 that control the lesser ones and recreate competition. 
 They would free the worker from the wages rela- 
 tionship and end the sabotage that is slowly creeping 
 into all industrial processes. They would usher in 
 freedom and equality of opportunity. They would 
 change politics and education. They would strike at 
 the feudal control of society and end the conditions 
 that make for decay. Most important of all they 
 would reestablish our traditions of freedom and re- 
 distribute the wealth of the world to those who pro- 
 duce it. 
 
 [227]
 
 All of the proposals referred to look to freedom, 
 to freeing the land, to freeing the means of communi- 
 cation, to freeing credit, to freeing industry, to free- 
 dom in trade and most important of all to freeing 
 the minds of men. 
 
 FREEDOM OF TRADE 
 
 A free society involves freedom of trade with 
 other countries. It involves the razing of all cus- 
 toms barriers and the ending of the artificial condi- 
 tions made possible by the tariff walls that encircle 
 the country. The protective tariff destroys as many 
 industries as it aids; it denies us the advantages of 
 trade with other countries; it produces exotic indus- 
 try and permits of the maintenance of numerous 
 plants and industries that should never have been 
 brought into existence. With free trade the trust 
 would be forced to meet the competition of other 
 countries; it would be forced to improve its pro- 
 cesses ; to introduce improvements, to better its pro- 
 duct and to sell at a competitive price. Along with 
 this the abolition of all customs taxes on consump- 
 tion would reduce the overhead cost to the consumer 
 who pays not only the taxes which reach the treas- 
 ury but many times that amount in the additions that 
 are made to prices by the monopoly charges that the 
 tariff makes possible. 
 
 America of all countries should adopt free trade. 
 We have the most highly organized industry, we 
 have abundant raw materials, we have the most in- 
 
 [228]
 
 telligent workmen and the highest per capita invest- 
 ment in machines and tools with which men work. 
 Whatever may have been true a generation ago, 
 there is no longer danger from the competition of 
 European labor, save to those industries that are 
 shielded behind the tariff wall and that use the power 
 which it gives them to levy tribute on the public. 
 
 FREE MEN ' 
 
 With economic privileges destroyed all other re- 
 lations of life would undergo a change. Economic 
 power would be shifted. The center of gravity 
 would pass from the few to the many. The psy- 
 chology of society would change with the change in 
 economic relations. Men would no longer fear for 
 their jobs. They would no longer fear their master. 
 The wages system would be modified or ended alto- 
 gether. Men could so easily pass from one job to 
 another or from working for some one else to work- 
 ing for themselves that the relations of master and 
 man would be reversed. Employers would then seek 
 workers. They would compete not only with each 
 other but with the free land which would offer all 
 men a home and a farm of their own. Industrial 
 democracy or labor partnership would come in as a 
 matter of course. Just as for centuries the master 
 worked alongside of his employees and trained them 
 to follow in his calling so in a free society a new kind 
 of partnership or cooperative corporation would take 
 the place of the capitalistic forms which now prevail, 
 
 [229]
 
 All over Europe from the twelfth to the eight- 
 eenth centuries industry was organized on a cooper- 
 ative basis. It was the most human and in many 
 ways the most perfect form of industrial organiza- 
 tion the world has ever known. It was the guild 
 system that adorned Europe with cathedrals, with 
 beautiful cities, with palaces and town halls that 
 remain to this day the most splendid monuments of 
 the old world. There was art and peace and con- 
 tent under the guild system before the private cor- 
 poration and the monopoly of capital and credit 
 changed the relations of men from one of fraternal 
 comradeship to the impersonal thing it has become 
 to-day. 
 
 COOPERATIVE INDUSTRY 
 
 There is no reason to doubt the ability of the peo- 
 ple to reestablish industrial democracy or their ca- 
 pacity to organize successful cooperative under- 
 takings for carrying on the business and industry of 
 the world. The success of cooperation in Great 
 Britain, in Denmark, Germany, Belgium, Russia and 
 Italy, not to speak of other European countries dem- 
 onstrates the ability of the people to develop an 
 industrial state along cooperative as opposed to cap- 
 italistic lines. But we need not go to Europe for 
 proof of the possibilities of cooperation. The 
 farmers of Minnesota have organized and success- 
 fully manage 2,700 cooperative societies. They 
 do an annual business of $108,000,000 a year. 
 
 [230]
 
 These societies include dairying, the making of 
 cheese, the sale of live stock, telephones and stores 
 of various kinds. The citrous fruit growers of Cali- 
 fornia do an annual business of $54,000,000 a year. 
 The farmers of Wisconsin own 2,000 cooperative so- 
 cieties while in North Dakota, Nebraska, Kansas 
 and all over the West the cooperative movement is 
 rapidly superseding capitalistic control of staple 
 farm produce. No single movement has grown with 
 such rapidity since the war as cooperation. It has 
 swept over central Europe while in Great Britain 
 one person out of three is connected with one or 
 more of the cooperative societies or is in some way 
 benefitted by them. 
 
 The mind of man would change in a free society. 
 Men would want to produce to capacity. There 
 would be no reason for sabotage. There would be 
 no strikes. For men do not strike against them- 
 selves. When men work for themselves they do not 
 need a trade union. Industrial democracy would 
 keep the trade union as a fraternal or insurance 
 agency but it would not be needed as an agency of 
 protection. Freedom to move to another employ- 
 ment is the only protection a man would need. 
 Even the unorganized worker would be in a posi- 
 tion of power. 
 
 CONCLUSION 
 
 It may seem incredible that such a transformation 
 would follow the enactment of a half dozen laws or 
 
 [231]
 
 that a revolution in all the relations of life can 
 be ushered in without the striking of a blow or the 
 violent overturn of the government. Yet any one 
 who will honestly follow the effect of the proposals 
 here made will admit their revolutionary conse- 
 quences. The appropriation by taxation of all un- 
 earned increment which inheres in land, in mines and 
 in forests would open up the continent to labor 
 and capital. Hundreds of millions of acres would 
 call for workers, for farmers, for miners, for home 
 builders. The burden of ground rent would disap- 
 pear and such rent as was collected would be turned 
 into the public treasury. It would support all legiti- 
 mate needs of the state and relieve us of all other 
 taxes. With banking socialized and placed under 
 public or cooperative control credit would be avail- 
 able to every man of talent who had character and 
 physical strength to back up his loan. 
 
 Transportation is the only other economic agency 
 necessary to free men in their economic relations and 
 with it under public control the circulatory system of 
 the nation would be opened to all on cheap and equal 
 terms. There would then be no favored shippers, 
 no rebates or discriminations. When to these are 
 added the ending of patent monopolies and franchise 
 monopolies and the opening of our ports to the trade 
 of the world, the production and distribution of 
 wealth will automatically settle to a competitive basis 
 in which men will be impelled to do their best. Sab- 
 
 [232]
 
 otage will come to an end with freedom. It will end 
 in no other way. 
 
 With privilege ended the political state will be- 
 come a less imposing thing than it is. It will be- 
 come an agency of democracy. The exploiting 
 classes will lose their power with the ending of the 
 privileges on which they rely. Just as the old aris- 
 tocracy of Europe came to an end when its landed 
 estates were distributed, so the power of the privi- 
 leged groups in America will pass away when their 
 economic privileges are taken from them. 
 
 These proposals involve no impairment of prop- 
 erty, no confiscation of wealth. They recognize the 
 right of every man to all that his mind or his hand 
 produces. They guard property more jealously 
 than does the state under which we live. 
 
 Only privileges would be taken away, — the spe- 
 cial privileges which are created by the political 
 state. And privilege is not wealth. It is not the 
 product of labor. It is the product of laws enacted 
 by a class for its own enrichment. The overhead 
 charges of society are the product of laws; of laws 
 made by a ruling class. And these privileges are in 
 derogation of property. They are responsible for 
 the inequitable distribution of wealth and the pov- 
 erty which everywhere persists in the midst of 
 plenty. 
 
 The condition of America and the world as well 
 is traceable to the control of the state by a privilege 
 
 [233]
 
 seeking class. The privileges which it enjoys are at 
 war with social justice and with freedom as well. 
 End privilege and freedom will usher in a new 
 world in which justice and equality will prevail. 
 And it should be the aim of society to adjust its in- 
 stitutions to the laws of nature, which are the laws 
 of all life. 
 
 [234]
 
 INDEX 
 
 Agriculture, Early Conditions of, 13. 
 
 America, debtor nation, 64; present condition of, 147; Constitution 
 
 of, 102. 
 Americanization, 76. 
 Australia, railroads in, 213; Commonwealth Bank of, 218. 
 
 Banking, and Railroading, 25; early-, 52; New York banks, 54; 
 banking power of the United States, 58 ; banking power, 
 France, 168; cooperative banking, 200; banking control of rail- 
 roads, 216; banking public, 218; North Dakota Bank, 218. 
 
 Biological state, 192. 
 
 British constitution, 99. 
 
 Carthaginian Wars, Effect of, 159. 
 
 Caste, Great Britain, 164. 
 
 Civilization, history of, 157. 
 
 Civil War, 73, 121. 
 
 Class control of politics, 117. 
 
 Coal : production of, 7 ; profits in, 8 ; monopolization of by rail- 
 roads, 27. 
 
 Concentration of credit, 53. 
 
 Constitution, sacredness of, ni. 
 
 Cooperative Movement, Russia, 190; banking, 220; industry, 231. 
 
 Corporations, profits of, 134. 
 
 Credit: 52; early banking, 52; concentration of, 53; New York 
 Banks, power of, 54; money monopoly, 55; speculation, how 
 promoted, 56; credit resources, 57; control of industry, 61; 
 financial groups, rise to power, 121; social nature of, 217. 
 
 Culture feudalized, 150. 
 
 Decay of the State, 157. 
 
 Discussion, suppression of, 87; freedom of, 156. 
 
 Domestic development menaced by imperialism, 67. 
 
 [235]
 
 Economic Foundations of the State, ioi; framework of feudal- 
 ism, 144; foundations of politics, 193. 
 Education in the United States, 8i. 
 Europe, revolutionary, 325. 
 Exploitation, 92, 95. 
 
 Farmer, Burdens of, 139. 
 
 Feudalism in America, 75; what it is, 144; industrial, 149; politi- 
 cal, 150. 
 
 Financial groups, rise to power, 121. 
 
 Food, production of, 13; speculation in, 15. 
 
 France, condition of, 167. 
 
 Freedom, object of government, 114; necessity for, 179; in France 
 and England, 184; principles of, 196; economic, 207; philoso- 
 phy of, 227, 236. 
 
 Free land, 202. 
 
 French Revolution, 146; philosophers, 184. 
 
 Fuel, consumption of by railroads, 35. 
 
 Germany, Transportation in, 212. 
 
 Government, fear of by early settlers, 71. 
 
 Great Britain, power of privileged classes, 161; land monopoly in, 
 
 162; high finance, 165; imperialism, 166. 
 Ground rent, 50, 137; absorption of by taxation, 204. 
 
 High Finance, Great Britain, 165. 
 History of parties, 199. 
 Hydro-electric power, 34. 
 
 Imperialism, Financial, 63; Great Britain, 166; ended in Russia, 
 
 191- 
 Industry, conditions of, 6 ; control of by credit, 61 ; suppression of, 
 
 84; feudalism in, 149. 
 Industrial democracy, 207, 224. 
 Iron ore, monopoly of, 48. 
 
 Lador, Sabotage, i ; conditions of 2 ; coal miners, days work, 7 ; 
 
 hostility of privilege to, 77; tax burdens of, 96; burdens on, 
 
 140; suppression of, 153. 
 Land: policy in America, 42; speculation, 43; cit>' land, 47; ground 
 
 rent, 50, 37, 204; monopoly in. Great Britain, 162; free-, 202. 
 Laissez faire, 70. 
 
 [236]
 
 Lauck, W. Jett, 134. 
 Laws of Nature, 183. 
 Legislation and exploitation, 93. 
 
 Manly, Basil M., 131. 
 Marketing in Europe, 14. 
 McAdoo, W. G., 8. 
 Mediocrity, rise of, 89. 
 Milk supply, curtailing of, 16. 
 Miller, Fred J., 5. 
 Money monopoly, 55. 
 
 Monopoly: promoted by railroads, 27; land-, 44; timber-, 49; money, 
 55; Great Britain, 162; ending of by taxation, 206. 
 
 National Development and Railroads, 26. 
 Natural government, principles of, H2. 
 Nature, lavys of, 183. 
 
 Origin of State, 99. 
 
 Overhead charges of society, 127. 
 
 Parties, Economic Agencies, 117; history of, 119. 
 
 Plumb Plan, 209. 
 
 Polakov, Walter N., 11, 37. 
 
 Political feudalism, 145, 150. 
 
 Politics, fundamentals of, 125; economic foundations of, 193. 
 
 Political liberty in America, 71. 
 
 Population, density of in United States, 46. 
 
 Production, wealth, controlled by credit, 52. 
 
 Press, control of, 80. 
 
 Privilege, rise of, 73. 
 
 Profits, 130; of steel corporations, 132; created by law, 142. 
 
 Producing classes, burdens on, 138. 
 
 Public schools, 83. 
 
 Pujo Investigating Committee, 28. 
 
 Railroads: limit production of coal, 9; agriculture, 17; sabotage, 
 20; importance of, 22; banking control, 24, 216; discrimina- 
 tions, 26; coal monopolization, 27; interlocking interests, 29; 
 supply corporations, 30; waste, 31; water transport, 33; hydro- 
 electric power, 34; development, 37; brotherhoods, plan of, 
 209; in foreign countries, 2ii. 
 
 [237]
 
 Resources, banking, 57. .- ^ , 
 
 Revolutionary, Europe, 225. 
 
 Rome, 58. 
 
 Russia, ideals of, 189. 
 
 Sabotage, i; — in food, 15; by railroads, 29; of initiative, 86; 
 
 — and the State, 98 ; in America, 171. 
 Scarcity, coal production, 9. 
 Schools, public, 83. 
 Sedition laws, 98. 
 Single Tax, 203 ; effect of, 205. 
 Slavery, Rome, 160. 
 Soviet, what it is, 189. 
 
 Speculation: in foods, 15; in land, 43; promotion of, 56. 
 State, The, 98 ; economic foundations of, loi ; natural state, 103, 
 
 112; sacredness of constitution, in; freedom, proper objective 
 
 of, 114; artificial, 186. 
 Steel corporations, profits of, 132. 
 
 Tariff, 172. 
 
 Taxes, 128. 
 
 Teaching profession, 82. 
 
 Timber monopoly, 49. 
 
 Transportation, importance of, 22; (see Railroads). 
 
 Waste, Due to Private Operation of Railroads, 31. 
 Water transport, 43. 
 
 Wealth, production limited by railroads, 23 ; production controlled 
 by credit, 52. 
 
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