101. THE INEQUALITY OF WEALTH.—In all of the great industrial countries of the world, including the United States, the existing distribution of wealth is roughly in the form of a pyramid, i.e., at the top or apex of the pyramid there is a relatively small number of persons who enjoy large incomes, while at the base there is a large number with relatively small incomes. This inequality is explained by Professor Taussig on two grounds: First, it is likely that some individuals originally secured an economic advantage over their fellows because of inborn superiority of some kind. Second, the economic advantage thus secured has been maintained from generation to generation by inheritance. Where, for example, wealth is invested so that the principal remains intact while a large annual income is thrown off as interest, the heirs may live in affluence, regardless of ability or desert. Thus we have a leisure class emerging as the result of inborn differences between men, supplemented by the accumulation of wealth and its transmission by inheritance.

102. THE QUESTION OF INDUSTRIAL REFORM.—It goes without saying that great inequalities in the distribution of wealth are undesirable. If any improvement is humanly possible, we ought not to rest content so long as millions of our citizens have too few of the good things of life, while others have much more than is necessary for comfort and happiness. The test of an economic system is whether or not it provides a good world to live in, and so long as large numbers of individuals have fewer necessities and comforts than it is possible to give them, our economic system must be considered defective. The people as a group are both the means and the end of progress. Democracy cannot rest upon any other basis than the greatest good to the greatest number.

103. APPROACHING THE PROBLEM.—In approaching the problem of industrial reform it is necessary to cultivate a fair and sane attitude. We must attack all of the problems of American democracy, certainly. But in so far as some of these problems involve the integrity of the capitalistic system, we should distinguish between ills which are clearly traceable to that system, and defects which obviously would exist under any industrial system. Capitalism cannot be discredited, for example, by pointing out that crime exists in all capitalistic countries. Though capitalism may accentuate some types of crime, our knowledge of human nature leads us to suspect that a considerable amount of crime would exist under any known system of industry. Again, criticism should be constructive; it is easy to point out the defects of an institution, but it is quite another thing to provide a good substitute for that institution.

The problem before us is a double one: First, can we remedy the defects of the capitalistic system? And, if so, by what method shall we proceed? Second, if the defects of capitalism cannot be remedied, what industrial system shall be substituted for capitalism? It is not a question of whether or not capitalism is faulty, but of whether it is more faulty than the system that would be substituted for it. The virtues of capitalism, most authorities believe, clearly outweigh its defects, and though some other system may eventually prove to have as great virtues with fewer defects, the burden of proof is upon those who advocate other systems than capitalism. Until the advantage is clearly shown to be on the side of a rival system, it will be wise to retain capitalism.

QUESTIONS ON THE TEXT

1. Is it correct to speak of a "capitalistic system"?

2. What is the chief economic function of government?

3. Name the four methods of getting a living. Which will be encouraged by a good government?

4. To what extent is the attitude of a good government toward industry a negative one?

5. What is the relation of government to the institution of private property?

6. What is the importance of laws requiring the enforcement of contracts?

7. Why is there competition?

8. How does competition tend to harmonize the interests of the individual with those of the community?

9. Why are diamonds high in price? Why is bread low in price?

10. What is the relation of capitalism to economic freedom?

11. What can be said as to the benefits of capitalism?

12. What are the chief defects of capitalism?

13. Outline the existing distribution of wealth.

14. On what two grounds does Professor Taussig account for this situation?

15. What facts should be borne in mind in attacking the problem of industrial reform?

REQUIRED READINGS

1. Williamson, Readings in American Democracy, chapter x.

Or all of the following:

2. Ely, Outlines of Economics, chapter ii.

3. Fetter, Modern Economic Problems, chapter ii.

4. Hobson, Evolution of Modern Capitalism, chapter i.

5. Seligman, Principles of Economics, chapter ix.

QUESTIONS ON THE REQUIRED READINGS

1. Define capitalism. (Hobson, page 1.)

2. How has the development of mines affected the growth of capitalism? (Hobson, page 6.)

3. What is the relation of colonization to capitalism? (Hobson, pages 10-12.)

4. What is the relation of capitalism to a large labor supply? (Hobson, pages 13-14.)

5. Define private property. (Ely, page 21.)

6. Discuss the theories of private property. (Fetter, pages 18-20.)

7. What were the earliest forms of private property? (Seligman, page 126.)

8. What was the effect of the domestication of animals upon the institution of private property? (Seligman, pages 126-127.)

9. What are the limitations of private property? (Fetter, pages 20- 21.)

10. What is meant by the term "vested interests"? (Ely, pages 25-26.)

11. What is "fair" competition? (Ely, pages 29-30.)

TOPICS FOR INVESTIGATION AND REPORT

I

1. Suppose an unscrupulous individual fraudulently secured possession of property belonging to you. What steps would you take to secure justice?

2. What penalties are inflicted in your state for highway robbery, embezzlement, theft, forgery, and similar crimes against property?

3. Suppose that you are a florist and that you have ordered a large quantity of flowers from a greenhouse keeper for your Decoration Day trade. Assume that you could not sell the flowers at a profit if they arrived later than Decoration Day. Assume, also, that you have reason to suspect that the greenhouse keeper will not be prompt in delivering the flowers ordered. Draw up a contract (to be signed by him) which would protect you against his tendency to carelessness.

4. Select for study an isolated rural district, a small town, or a section of a suburb in which the community secures its supply of a given commodity from a single shop or store. Compare the price of the commodity, and its quality, with the price and quality of a similar commodity in stores located in communities served by several competing stores. What do you conclude as to the value of competition?

5. Make a study of bill-board advertising, listing the number of advertisements inviting purchase of competing commodities. Write to a bill-board advertising company for advertising rates, and draw your conclusions as to (a) the cost of advertising, and (b) the waste involved in advertising competing commodities.

Make a similar study of magazine advertising, writing to the advertising manager of the magazine selected for study, in order to secure advertising rates.

II

6. Relation of good government to economic prosperity. (Carver, Elementary Economics, chapter vii.)

7. Competition. (Seligman, Principles of Economics, chapter x.)

8. Methods of struggling for existence. (Carver, Elementary Economics, page 40.)

9. The development of economic freedom. (Seligman, Principles of Economics, chapter xi.)

10. Distribution of wealth in the United States. (Taussig, Principles of Economics, vol. ii, chapter liv; King, Wealth and Income of the People of the United States, chapter ix.)

11. Place of machinery in the capitalistic system. (Hobson, Evolution of Modern Capitalism, pages 27-29.)

12. The impersonality of modern life. (Lessons in National and Community Life, Series B, pages 97-104.)

13. The extent of poverty in modern life. (Burch and Patterson, American Social Problems, chapter xvi.)



B. PROGRAMS OF INDUSTRIAL REFORM

CHAPTER XI

SINGLE TAX

104. DEFINITIONS.—The words "single tax" refer to a policy under which all public revenue is to be raised by a single tax on land value. All other taxes are to be abolished. By land value is meant the value of the land itself, irrespective of all improvements, such as ditches, drains, and buildings. Everything done on the land to increase its value would be counted as an improvement, and would thus be exempt from taxation. This would leave only location value and fertility to be taxed. By location value is meant that value which is due to the situation of the land. For example, land in a wilderness has little or no location value, but if, later, schools, stores, railroads, and other elements of community life develop in that region, the land may take on great value because of its location in the community. The fertility value of land is that value which is due to natural endowment in the way of moisture, climate, and soil elements.

105. HENRY GEORGE AND HIS WORK.—The doctrine of single tax is closely associated with the name of Henry George, an American reformer who died in 1897. His theory was best developed in his book, Progress and Poverty, published in 1879. In this book George points out that in spite of the progress of the world, poverty persists. This is due chiefly, he contends, to the fact that land-owners take advantage of the scarcity of good land to exact unduly high prices for its use. According to George, this monopoly of the gifts of Nature allows landowners to profit from the increase in the community's productiveness, but keeps down the wages of the landless laborers. "Thus all the advantages gained by the march of progress", George writes, "go to the land-owner, and wages do not increase."

George proposed to use the single tax as an engine of social reform, that is to say, to apply it with the primary view of leveling the inequalities of wealth. Value due to improvements was to be exempt from taxation, so that land-owners might not be discouraged from making improvements on their land. On the other hand, it was proposed that the single tax take all of the income due to location and fertility. This, according to George, would "render it impossible for any man to exact from others a price for the privilege of using those bounties of Nature to which all men have an equal right."

106. RESULTS CLAIMED FOR THE SINGLE TAX.—George claimed that the application of the single tax was highly desirable. If, through the medium of this tax, the government were to take from the land-owners all the location and fertility value of their land, two great benefits were to result. First, rich landlords would be deprived of much unearned wealth. Second, the wealth so secured, called the unearned increment, could be used to make life easier for the poor. Ultimately, George went so far as to claim, the single tax would "raise wages, increase the earnings of capital, extirpate pauperism, abolish poverty, give remunerative employment to whoever wishes it, afford free scope to human powers, lessen crimes, elevate morals and taste and intelligence, purify government, and carry civilization to yet nobler heights." The steps by which George arrived at this gratifying conclusion are obscure, and practically every modern economist agrees that too much has been claimed for the theory. Nevertheless, there is much to be said on both sides of this interesting question.

107. ARGUMENTS FOR THE SINGLE TAX.—Single taxers claim that it is just to take from land-owners that land value which is not due to their individual efforts. Fertility, on the one hand, is due originally to the bounty of Nature, and as such belongs to all men alike, rather than to particular individuals. Location value, on the other hand, is due to community growth, and should therefore be taken for the benefit of the community at large.

A very strong argument in favor of the single tax is that land cannot be hidden from the tax assessor, as can stocks, bonds, jewels, and other forms of personal property. A single tax on land would, therefore, be relatively easy to apply.

A tax on the location and fertility value of land would not discourage industry. Location value is largely or entirely due to community growth, rather than to the efforts of the individual land-owner. Fertility, of course, is largely a natural endowment, and as such cannot be destroyed by a tax. The land would continue to have all of its location value, and probably much of its fertility value, whether or not the owner were taxed.

Another argument is that a single tax on land would eliminate taxes on live stock, buildings, and all other forms of property except land, and that this would encourage the development of the forms of property so exempted. This would stimulate business.

It has also been said that the single tax would force into productive use land which is now being held for speculative purposes. It is claimed that many city tracts remain idle because the owners are holding them in the hope of getting a higher price in the future. According to the single taxer, a heavy tax would offset this hope of gain, and would force speculators either to put the land to a productive use, or to sell it to someone who would so employ it.

A last important argument in favor of the single tax is that it might force into productive work certain capable individuals who are now supported in idleness by land rents. Professor Carver has pointed out that if the single tax deprived such persons of their incomes, they would be forced to go to work, and thus the community would gain by an increase in the number of its productive workers.

108. ARGUMENTS AGAINST THE SINGLE TAX.—The most important objection to the single tax is that the confiscation of land, or, what amounts to the same thing, the confiscation of the income which land yields, is unjust. "Pieces of land," Professor Seager points out, "have changed hands on the average dozens of times in the United States, and present owners have in most cases acquired them not as free gifts of Nature, nor as grants from the government, but by paying for them, just as they have had to pay for other species of property." Where individuals have acquired land in good faith, and under the protection of a government which guarantees the institution of private property, the confiscation of land value would be demoralizing to the community and unfair to its land-owning citizens.

Another difficulty lies in the ease with which value due to permanent improvements is confused with value due to location or fertility. Where money has been expended in draining land, removing stones or applying fertilizer, it is hard to tell, after a few years, what part of the value of the land is due to improvements. The possibility of this confusion would cause some land-owners to neglect to improve their land, or might even cause them to neglect to take steps to retain the original fertility. Thus the single tax might result in the deterioration of land values.

It is also objected that the single tax would provide an inelastic taxation system. This means that it would tend to bring in an equal amount of revenue each year, whereas the revenue needs of government vary from year to year. A good tax system will accommodate itself to the varying needs of the government, always meeting the expenses of government, but at the same time taking as little as possible from the people. [Footnote: Some opponents of the single tax declare that the heaviest possible tax on land would yield only a fraction of the revenue needed to finance the government. Single taxers, however, maintain that the tax would yield more than enough revenue to meet public expenditures. The merits of this argument are uncertain.]

It is doubtful whether the single tax would force into productive use land now being held by speculators. Even though a heavy tax were laid upon such land, it would not be utilized unless there were an immediate use to which it could profitably be put.

A last important argument against the single tax is that there is no good reason for removing the tax burden from all except land-owners. Land is only one form of wealth, and it is unfair not to tax individuals who hold property in some other form. Some land value is indeed unearned, but there are other forms of unearned wealth, as, for example, monopoly gains and inherited property. Taxes ought to be levied upon these forms of unearned wealth, as well as upon the unearned income from land. It is desirable, too, to levy at least a light tax upon the propertyless classes, in order to encourage them to feel an interest in, and a sense of responsibility for, the conduct of their government.

109. SERVICE RENDERED BY THE SINGLE TAX AGITATION.—Economists are unanimous in agreeing that the single tax, as expounded by Henry George, is too drastic and special a reform to find wide favor. Nevertheless, the single taxers have performed a valuable service by emphasizing the fact that in many cases the income from land is largely or entirely unearned. It would be manifestly unjust to dispossess present-day land-owners who have acquired land in good faith; on the other hand, most economists agree that we ought to reform our tax system so as to take for the community a larger share of the future unearned increment of land values. As Professor Taussig has pointed out, no one has a vested right in the indefinite future. The taking of this future unearned increment, it is hardly necessary to add, would not constitute a single tax, but rather a heavy land tax. Many other taxes would continue to be levied. [Footnote: The general problem of taxation is discussed in Chapter XXXIL]

QUESTIONS ON THE TEXT

1. Define the single tax.

2. What is location value?

3. Define fertility value.

4. Who was Henry George?

5. What benefits, according to George, were to result from an application of the single tax?

6. Give the chief arguments in favor of the single tax.

7. Give the chief objections to the doctrine.

8. What service has been rendered by the single tax agitation?

9. What is the attitude of most economists toward the future unearned increment of land?

REQUIRED READINGS

1. Williamson, Readings in American Democracy, chapter xi.

Or all of the following:

2. Carver, Elementary Economics, chapter xlv.

3. George, Progress and Poverty, book ix.

4. International Encyclopedia, vol. 21, article on "Single Tax."

QUESTIONS ON THE REQUIRED READINGS

1. Who were the Physiocrats? (Carver, page 372.)

2. What is the "ethical argument" in favor of the single tax? (International Encyclopedia, vol. 21, page 136.)

3. What is the "expediency argument" in favor of the single tax? (International Encyclopedia, vol. 21, page 136.)

4. What is meant by "mining" the soil, and what is the relation of this practice to the single tax? (Carver, pages 375-376.)

5. What, according to George, would be the effect of the single tax upon production? (George, book ix, chapter i.)

6. What, according to George, would be the effect of the single tax upon the distribution of wealth? (George, book ix, chapter ii.)

7. What are the present aims of the single tax movement? (International Encyclopedia, vol. 21, page 137.)

TOPICS FOR INVESTIGATION AND REPORT

I

1. Select for study a plot of farm or garden land in your locality.

(a) What is the market value of the land?

(b) Is it more or less valuable than similar plots in the same neighborhood? Why?

(c) To what extent is the value of the plot selected for study due to natural fertility?

(d) To what extent is the value due to location?

(e) To what extent is the value due to permanent improvements, such as drains, ditches, hedges, fences, or the use of fertilizer to retain or increase the natural fertility?

(f) If you were the owner of this plot, to what extent, if to any, would your future use of this land be affected by the adoption of the single tax program?

2. Select for study a plot of ground in your locality which has been idle for a number of years.

(a) Why has this ground been idle so long?

(b) Do you believe that this land is being held for speculative purposes?

(c) If so, suppose that a very heavy tax stimulated the owner to put the land to some use. Do you know of a productive use to which it could be put?

II

3. The life of Henry George. (Consult an encyclopedia.)

4. The economic background of Henry George's doctrine. (Young, The Single Tax Movement in the United States, chapter ii.)

5. Is land-ownership a monopoly? (Seligman, Principles of Economics, page 391.)

6. Tactics of the single tax movement. (Young, The Single Tax Movement in the United States, chapter xii.)

7. Relation of the single tax to socialism. (Young, The Single Tax Movement in the United States, pages 307-312.)



CHAPTER XII

PROFIT SHARING AND COPERATION

A. PROFIT SHARING

110. THE NATURE OF PROFIT SHARING.—The essence of profit sharing is that the workmen in a given enterprise receive, in addition to their regular wages, a share in the profits which would ordinarily go entirely to the entrepreneur. The share going to the employees varies with the establishment, but generally from one quarter to three quarters of the profits are divided among them.

Distribution is by various methods. The workmen may receive their share in cash at the end of the year. Sometimes the money is placed in a provident fund for the workmen as a body; in other cases it is deposited in savings banks to the account of the individual workmen. In still other cases the workman's share is invested in the business for him, the workman thereafter receiving dividends on this invested capital.

In every case, however, the division of profits among the individual laborers is on the basis of the wages received, that is to say, the higher the regular wage received by a workman, the larger will be his share of the profits set aside for distribution. Generally, too, only workmen who are steadily employed are allowed to share in the distribution of profits.

111. LIMITS OF PROFIT SHARING.—Profit sharing was once considered a remedy for many of our industrial troubles, but it is now generally conceded that the plan is decidedly limited in scope. Profit sharing increases the income of the workmen involved, but for this very reason it is often bitterly opposed by the trade unions. The unions fear, of course, that the plan will make the workmen interested chiefly in the employees of their particular establishment, rather than in the workmen in the trade as a whole. The trade unions also maintain that profit sharing is often administered in a patronizing manner, which is offensive to the self-respect of the workmen.

To a large extent, the spread of profit sharing depends upon the development of altruism among employers. But unfortunately altruistic employers are rare, and the majority of entrepreneurs will not adopt the profit-sharing plan unless it promises to result in some distinct advantage to themselves. This attitude explains, in part, the failure of many profit-sharing experiments. Employers have sometimes tried out profit sharing in the hope that it would prevent strikes and other labor troubles. In some cases this expectation has been realized; in many other cases serious labor troubles have continued. This continuance of labor troubles has rendered profit sharing less attractive to certain types of employers.

In certain cases employers have experimented with profit sharing in the hope that it would stimulate efficiency and economy on the part of the workmen. Sometimes the immediate effect of the adoption of the plan has been to make the workmen more efficient and more interested in their tasks, but after the novelty of the scheme has worn off they have generally fallen back into their former pace. In justice to the workmen, it should be noted here that in most enterprises the conditions of the market and the employer's managerial ability have more influence upon profits than have the personal efforts of individual workmen. Where workmen realize this, they tend to lose faith in their ability to influence the share accruing to them under the profit-sharing plan.

A last important reason why profit sharing is limited in scope is that in many hazardous enterprises, such as mining, agriculture, fishing, or building construction, the refusal and inability of the workmen to share in possible losses prevent the adoption of the plan. A mining corporation, for example, may make large profits one year, and lose heavily the second year. Profit sharing is here inadvisable, if not impossible. The distribution among the workmen of a large share of the profits accruing at the end of the first year might so deplete the financial reserves of the entrepreneur that he would be unable to meet the losses of the second year.

B. COPERATION

112. RELATION OF PROFIT SHARING TO COPERATION.—Profit sharing permits the workmen to secure more than a regular wage from a given enterprise, without, however, giving them any control over the management of the business. Coperation goes a step farther, and attempts to dispense with either a number of middlemen or with the managing employer, or with both middlemen and employer. In the case of a profit-sharing scheme in which the share of the profits accruing to the workmen is invested in the business for them, ultimate control of the enterprise may come into the hands of the workmen through profit sharing. In such a case the plant might be conducted coperatively. In practically every instance, however, coperation does not grow out of profit sharing, but arises independently.

113. ESSENCE OF COPERATION.—The essence of coperation is that a group of individuals undertake to perform for themselves those functions which are commonly carried on by the business man. Coperatives are often workmen, though not necessarily so.

Under the coperative plan, all of the profits of the enterprise are divided among the coperators; on the other hand, the risks of the business must also be borne by them. Management of the enterprise is conducted partly by officers or committees serving without pay, and partly by paid agents. The general policies of the business are settled by the coperators acting as a body.

Coperation seeks to exchange the centralized control of the business man for the diffuse control of a group of coperators. This arrangement, its advocates hope, will permit wealth and power to be distributed among more and more people, and especially among those classes that possess relatively little property. Let us inquire briefly into the four types of coperation.

114. CONSUMERS' COPERATION.—Consumers' coperation, also known as distributive coperation or coperation in retail trade, is the most common form of coperation. It is also probably the most successful form.

In this form of coperation, a number of individuals contribute their savings to a common fund, buy certain desired commodities at wholesale prices, and distribute these among themselves. Generally, the coperative store sells to its members at the regular retail price, but at stated intervals throughout the year the profits of the business are distributed among the coperatives in proportion to the amount of their individual purchases. Thus the difference between the wholesale and the retail price—minus the expense of conducting the store—goes to the coperators, instead of to a store keeper or other middleman.

One of the best examples of consumers' coperation is the Rochdale Society of Equitable Pioneers, established in England in 1844. This type of coperation has also been remarkably successful in Germany, Belgium, and other continental countries. The idea was taken up in the United States about the middle of the nineteenth century, and at the present time there are in this country about 2000 coperative stores, many of them doing a thriving business. These stores are located chiefly in New England, the North Central States, and the West, few being found in the South.

115. COPERATION IN CREDIT.—Credit coperation may take any one of a number of forms. In one of the best known forms, a group of persons form a credit society by contributing a proportion of their personal savings to a common fund. On the strength of this capital, and of their own individual liability, they borrow more capital. The total amounts thus got together are then loaned to the members of the society at a specified rate of interest. This rate of interest is higher than that at which the group had borrowed money from outside sources; nevertheless, it is lower than the rate members would have to pay if they individually sought loans at a bank. This is the aim of coperation in credit: to enable persons of small means to secure loans without paying the high rates which as individuals they would ordinarily have to meet, if, indeed, they as individuals could secure loans under any conditions.

Credit coperation has been most successful in Germany, particularly among artisans and small farmers. It has also attained considerable success among the small tradesmen and artisans of Italy. In the United States coperation in credit is less highly developed, but recently its influence has been slowly increasing. In many cases it supplies the principle underlying building and loan associations in this country.

116. COPERATION IN MARKETING.—The coperative principle has also been applied to the marketing of agricultural products. In Denmark, for example, it has been found that farmers can market their dairy products coperatively, and thus save for themselves much of the profit that would otherwise go to commission agents and other middlemen. A similar saving has been effected in Holland, Belgium, and, to some extent, in France. Of recent years, coperation in marketing has become important in the United States, finding particular favor among the farmers of the Middle and Far West. At the present time there are in this country more than two thousand coperative cheese factories, and more than three thousand coperative creameries. There are also more than a thousand societies for the coperative marketing of fruit, as well as numerous live-stock selling agencies.

117. COPERATION IN PRODUCTION.—The three forms of coperation which we have been considering seek to eliminate unnecessary middlemen from industry. In producers' coperation, on the other hand, the attempt is made to get rid of the entrepreneur, or managing employer. A group of workmen get together, subscribe or borrow the required capital, purchase tools, materials, and plant, and set up as producers. They seek markets for their product, direct the enterprise either as a group or through salaried agents, share the profits among themselves, and accept the risks of the enterprise.

Coperation in production has been tried repeatedly in the various countries of Europe, but without success. True producers' coperative associations have also met with almost universal failure in the United States, though experiments have been made in a variety of industries, and in nearly every part of the country. Formerly the Minneapolis Copers were a coperative group which seemed destined to attain a considerable success in production, but this group has now abandoned the coperative principle. The coperative marketing of fruit, cheese, and other agricultural products is, of course, not true producers' coperation, but rather the coperative marketing of commodities produced by individual enterprisers.

118. BACKWARDNESS OF COPERATION IN THE UNITED STATES.—In all forms of coperation, progress has been much slower in this country than in Europe. There are several reasons for this. For one thing, American workmen move about to a greater extent than do European workmen, whereas coperation succeeds best where the coperators have a fixed residence and develop a strong sense of group solidarity. The fact that our population is made up of diverse racial types likewise checks the growth of the feeling of solidarity.

An important reason for the backwardness of the coperative movement in this country is that American workmen "make, rather than save money," whereas coperation requires thrift, and a willingness to practice small economies. Again, the efficiency and progressiveness of our industrial system renders coperative ventures less necessary in this country than in some parts of Europe. It is particularly true that retail stores in the United States are more efficient than similar shops in England and on the Continent.

Altogether, the most successful coperators in this country are not native-born Americans, but groups of Finns, Russians, Slovaks, and other peoples of immediately foreign derivation. It is among these groups that the thrift and group solidarity demanded by coperation are best found.

119. LIMITS OF COPERATION.—Consumers' coperation, coperation in credit, and coperation in marketing all seek to improve the capitalistic system by eliminating some of the unnecessary middlemen from our industrial life. In so far as this is true, these forms of coperation are desirable developments, and deserve to succeed. Though the movement is limited by the considerations set forth in the preceding section, it is to be hoped that these three forms of coperation will in the future show a considerable development in this country.

Producers' coperation is a different affair. Rather than attempting to decrease the number of unnecessary middlemen, it attempts to supersede the entrepreneur or managing employer where he is most needed. For this reason producers' coperation will probably continue a failure. To run a modern business of any size at all requires a degree of intelligence, imagination, judgment, courage, and administrative ability which is altogether too rare to be found among casual groups of laborers. Varied experience, high ability, the determination to accept the risks of the enterprise, and a consistent singleness of purpose are necessary in modern production. Even though coperators are able to secure an amount of capital sufficient to initiate production, they rarely have the requisite ability or experience; too often they object to accepting the risks of the enterprise; practically never can they administer the business with that unity of control which characterizes the most successful business enterprises.

120. BENEFITS OF COPERATION.—While no longer considered a far- reaching industrial reform, the coperative movement brings with it many benefits. Coperation in retail trade, credit, and marketing cuts down the waste between consumer and producer, and thus helps substantially to reduce the cost of living. Coperation in production, though it fails to reach its chief objective, has the virtue of demonstrating to groups of workmen that the entrepreneur is of far more value in our industrial life than they might otherwise have realized. Aside from these advantages, coperation in any form is an important educative force. It fosters the spirit of solidarity and mutual helpfulness among members of a group or community. It teaches thrift. It trains the coperating individuals to exercise foresight and self-control. Altogether the training which it affords is productive of good citizenship.

QUESTIONS ON THE TEXT

1. Explain clearly the nature of profit sharing.

2. What is the attitude of the trade unions toward profit sharing?

3. What is the attitude of the employer toward profit sharing?

4. Does profit sharing result in increased efficiency on the part of the workmen? Explain.

5. What is the relation of profit sharing to coperation?

6. What are the essential features of coperation?

7. Explain the principle involved in consumers' coperation.

8. Where has this form of coperation been most successful?

9. What are the essential features of credit coperation?

10. Where is credit coperation most successful?

11. What is the aim of coperation in marketing?

12. In what way does producers' coperation differ from the other forms of coperation?

13. To what extent is producers' coperation a success?

14. Why is coperation backward in this country?

15. Outline the chief benefits of coperation.

REQUIRED READINGS

1. Williamson, Readings in American Democracy, chapter xii.

Or all of the following:

2. Fay, Coperation at Home and Abroad, part iv, chapter v.

3. Harris, Coperation, the Hope of the Consumer, chapter vi.

4. International Encyclopedia, vol. 19, article on "Profit Sharing" and vol. 6, article on "Coperation."

5. Taussig, Principles of Economics, vol. ii, chapter lxix.

QUESTIONS ON THE REQUIRED READINGS

1. What is the principle upon which profit sharing is based? (International Encyclopedia, vol. 19, page 244.)

2. Discuss the origin of profit sharing in the United States. (_International Encyclopedia, vol. 19, page 244.)

3. Give some examples of profit sharing in this country. (International Encyclopedia, vol. 19, pages 244-245.)

4. Describe the earlier forms of coperation in this country. (International Encyclopedia, vol. 6, page 44.)

5. For what purpose was the "Rochdale plan" originated? (Harris, page 88.)

6. Discuss voting rights under the Rochdale plan. (Harris, pages 90- 91.)

7. Describe the store service under the Rochdale plan. (Harris, pages 93-94.)

8. How does the Rochdale plan promote thrift? (Taussig, pages 348- 349.)

9. Why has coperation succeeded in Great Britain? (Taussig, page 350.)

10. What is the Schulze-Delitzsch plan? (Taussig, pages 352-353.)

11. What is the Raiffeisen plan? (Taussig, page 354.)

12. Among what classes of the population is coperation of greatest importance? (Taussig, pages 347-349.)

13. How does coperation teach self-government? (Fay, pages 324-325.)

14. How has coperation encouraged thrift? (Fay, page 329.)

TOPICS FOR INVESTIGATION AND REPORT

I

1. Make a study of a profit-sharing plan in your locality. (Write to the Bureau of Labor Statistics at your State Capitol, asking for the names and addresses of employers in your locality who have experimented with profit sharing.)

2. Interview, or write to, an employer, explaining the essence of profit sharing, and asking his opinion as to its practicability in his business.

3. Interview, or write to, the officials of a trade union, regarding their attitude toward profit sharing.

4. Write to the Coperative League of America, 2 West 13th Street, New York City, asking for free literature on coperation in your section. If any of the groups of coperators in your section are found to be close at hand, make a study of a typical coperative group.

5. Draw up a plan for a coperative buying club, and discuss with your fellow students the chances for its success. (Consult Harris, Coperation, the Hope of the Consumer, chapter xiv.)

6. Draw up a plan for the coperative marketing of some agricultural product in your section. Send a description of the plan, giving advantages, etc., to a farm journal in your section. (Consult Powell, _Coperation in Agriculture>/i>, chapter iv, and Coulter, _Coperation Among Farmers_.)

II

7. Profit sharing as a method of securing industrial peace. (Burritt, and others, Profit Sharing, chapter vii.)

8. Profit sharing as a means of stabilizing labor. (Burritt, and others, Profit Sharing, chapter vi.)

9. Relation of coperation to advertising. (Harris, Coperation, the Hope of the Consumer, chapter xix.)

10. Credit coperation in Germany. (Fay, Coperation at Home and Abroad, part i, chapter ii.)

11. Coperation in dairying. (Fay, Coperation at Home and Abroad, part ii, chapter vi.)

12. Coperation among New England farmers. (Ford, Coperation in New England, chapters vi-ix.)

13. Coperation among immigrants in New England. (Ford, Coperation in New England, chapter iii.)

14. Coperation in the fruit industries. (Powell, Coperation in Agriculture, chapter viii.)

15. The relation of thrift to nation-building. (Annals, vol. lxxxvii, pages 4-9.)

16. The relation of coperation to socialism. (Fay, Coperation at Home and Abroad, pages 350-355; Sonnichsen, Consumers' Coperation, part ii, chapter ii.)



CHAPTER XIII

THE GENERAL NATURE OF SOCIALISM

121. SOCIALISM IS A VAGUE TERM.—It is often said that the term "socialism" is so vague that it is useless to attempt to define it. The word is used to cover all sorts of schemes of industrial and social reform. Sometimes a person whose viewpoint concerning politics or business has become more liberal appears to himself or to others as a socialist. From the standpoint of many individuals, all those who advocate the extension of government control are socialists. Still others label as socialists all reformers with whose ideas they are not in accord. It very often happens that persons who pass in the community for socialists are not recognized as such by the official socialist parties. Indeed, certain official socialist groups go so far as to declare that other official socialist groups are "not really socialists," either in thought or in action.

122. A DEFINITION OF SOCIALISM.—In spite of this confusion it is possible to formulate a rather precise definition of socialism. Leaving until later the distinction between the chief socialist groups, we may say that the following definition covers all who are strictly socialists: Socialism is an economic theory which aims to abolish the capitalistic system, and to substitute for it "a system of collective ownership and democratic management of the socially necessary means of production and distribution." In rather more simple language, socialism intends that all income-producing property shall be owned and directed by the state. The state is to own and operate land, factories, workshops, railroads, and all other means of production. Private property and the competitive system are to be abolished. [Footnote: Socialism does not seek to abolish the private ownership of food, clothing, and other forms of consumers' goods, yet both socialists and non-socialists accept the unqualified statement that "socialism seeks to abolish private property." because it is the private ownership of producers' goods rather than of consumers' goods, which constitutes a cornerstone of the capitalistic system.] All business is to be conducted by the government, and all persons are to be employees of the government. The distribution of wealth is to be directed by the government.

123. RELATION OF SOCIALISM TO OTHER RADICAL THEORIES.—The terms "communism" and "socialism" call for careful distinction. What is now known as socialism was formerly known as communism. For example, Karl Marx, the founder of modern socialism, called himself a communist. His followers later abandoned the name, and began calling themselves socialists. Still later, during the World War, a group of Russian socialists, popularly known as the bolshevists, revived the term communist in the sense used by Marx. Strictly speaking, however, communism is generally thought of to-day as a type of small community organization in which all wealth, including both the instruments of production and consumers' goods, is owned by the community. Socialism, on the other hand, proposes that the state own and operate only the instruments of production, leaving food, clothing, and other consumers' goods to be owned and enjoyed by individuals.

Socialism is often thought of in connection with the doctrine of anarchy. Anarchism and socialism are alike in that both object to one man having authority over another. Anarchism agrees with socialism that capitalism is bad because it gives the employer power over the laborer. But at this point the two theories begin sharply to diverge. Socialism desires to abolish private property and to concentrate all authority in the hands of the state. The anarchist maintains that this is simply a transference of authority, and declares that authority in any form is an evil. Thus where socialism seeks to enlarge the powers of the state, anarchism objects to the existence of any governmental authority whatsoever.

In addition to communism and anarchism, there are a number of interesting theories that are more or less closely associated with the socialist movement. These will not be discussed here, for two reasons: first, an adequate treatment of them would permit the problem of industrial reform to take up a disproportionate share of our time; second, many of these theories, while interesting, are relatively unimportant, from the standpoint of American democracy at least. We may, therefore, confine ourselves to socialism proper, as defined in Section 122.

124. KARL MARX AND HIS INFLUENCE.—The germ of socialism can be traced back as far as Plato, but the modern movement takes its main impetus from the teachings of Karl Marx. Karl Marx was a German Jew, who lived between 1818 and 1883. Marx early became known for his radical views on political and economic subjects. In 1848, he published, in collaboration with Frederick Engels, the well-known Communist Manifesto. The Manifesto, which has been called the "birth-cry of modern socialism," gives in concise form the essence of the socialist doctrine. In 1864 Marx helped organize the "International," a federation of radical thinkers, with affiliations in the different countries of Europe. In 1867 he published the first volume of his famous work, Capital, which elaborated the views set forth in the Manifesto, and which has since been adopted as the "Bible of Socialism." Due to the great influence which Marx has exerted upon socialist doctrine, he may justly be called the founder and inspiration of modern socialism.

125. THE SOCIALIST INDICTMENT.—The claims of socialism, as formulated by Marx and elaborated by his followers, constitute a serious indictment of present-day society. Socialists point out, for example, that the capitalistic system has numerous faults. They call attention to the fact that capitalism involves enormous wastes in materials and men; they show that luxurious and injurious goods are produced; and they maintain that in the past natural resources have often been monopolized by a few. They believe the system of private property to be unjust, and declare that free competition involves needless duplication of effort. At the present time, it is contended, all the good things of life go to a few, while the masses remain in poverty and misery. Socialists declare that the fruits of capitalism are unemployment, industrial accidents, crime, vice, poverty, disease, and premature death. These charges are serious, and Chapter XVI will be devoted to their critical examination. In this chapter we are concerned chiefly with an exposition of the socialist doctrine.

126. ECONOMIC INTERPRETATION OF HISTORY.—Formerly a great principle of socialism was the claim that all history has been determined by economic forces. According to this view, our whole social and political life, including our basic ideas concerning religion, art, science, and government, are only the reflected result of economic forces. History, Marx contended, is the record of how one class has gained wealth and power at the expense of another class. The present state of society, he asserted, is the result of the exploitation of the masses by a few.

With this principle we need not further concern ourselves. It is an academic appendage to the socialist doctrine, and at the present time is not stressed by socialists. The majority of socialists now concede that while economic forces have been important in history, social, religious, and political forces are also important. In view of this admission, the chief importance of the doctrine of the economic interpretation of history is its theoretical connection with the two great cornerstones of socialism: the theory of surplus value, and the theory of class struggle.

127. THEORY OF SURPLUS VALUE.—Marx claimed that practically all wealth has been created by the laborers alone, and that all persons other than laborers are parasites. To those who have carefully studied Chapter VIII the error of this claim must appear self-evident, nevertheless, this concept of value is the basis of all socialist attacks upon government and industry. Marx developed this theory as follows:

The value of an article is determined solely by the amount of labor expended upon its production. But although the laborer creates all wealth, the capitalist is enabled, by virtue of his monopolistic control over the instruments of production, to prevent this wealth from going entirely to the laborer. [Footnote: By "capitalists" socialism means not only individuals with money to loan, but "employers" in general, whether middlemen, entrepreneurs, or true capitalists. ] Socialism declares that the capitalist holds the laborer in virtual slavery, the laborer receiving only enough of the wealth created by him to enable him to keep alive, while the surplus of this wealth goes to the capitalist. The capitalist is thus a parasite who performs no useful task, but robs the laborers of the fruits of their industry. Marx did not regard profits as reward for business enterprise, but called them "plunder." Capitalism, according to this view, is a system of theft, involving "misery, oppression, slavery, degradation, and exploitation."

128. CLASS STRUGGLE.—Marx declared that the capitalistic system was doomed to destruction. He maintained that as time went on, wealth would tend to concentrate more and more in the hands of the capitalist or employing class. Trusts and monopolies would become more common, and gradually capitalism would become so unwieldy and so unworkable a mechanism that it would finally fall to pieces of its own weight. Crises, panics, and trade depressions were supposed to be indications of this inevitable disaster.

The tendency for wealth to concentrate in the hands of a few was to be accompanied by the growing poverty of the masses. Marx believed that the middle classes would eventually disappear, leaving only the wealthy employers and the miserable laborers. The individuals comprising these two classes would steadily draw apart into two great armies which were destined to battle to the death. Socialism denies that employers and laborers have anything in common, and insists that between these two groups a struggle must go on until the employing class is abolished.

129. WHAT IS THE ULTIMATE AIM OF SOCIALISM?—Nothing could here be more important than to know the ultimate aim of socialism, nevertheless, there is among socialists no agreement as to the framework of the system which they expect to substitute for capitalism. All socialists desire collective ownership and direction of the instruments of production, but beyond this there is practically nothing in the way of a constructive socialist program. Generally, it is declared that when capitalism has been abolished, the working classes will organize industry on the basis of communal ownership. In the socialist commonwealth there is to be no class struggle, for the reason that there are to be no classes. There is to be a just distribution of wealth, together with an abolition of poverty, unemployment, and all forms of social injustice. But as to how this is to be accomplished we have no proof. The so-called constructive program of socialism is not so much a definite agreement as to aims and methods, as it is a confused and disordered expression of the attitude of different socialist groups toward capitalism. Indeed, when socialists are asked to advance a concrete and definitely constructive program, the reply is often made that the advent of socialism is so far distant that the constructive side of its program is of no immediate consequence.

130. NEGATIVE CHARACTER OF SOCIALISM.—But although the constructive program of socialism is vague and unreal, its destructive or negative program is definite and very real. Socialism is opposed to government as it exists to-day, and to that extent, it disapproves of the Constitution of the United States. The capitalistic system is to be destroyed. The institution of private property is to be abolished. Free competition and private initiative are to be abolished or greatly restricted. All business is to be under the thumb of the government. Personal liberty is to be narrowed down. Some socialists even go so far as to declare war upon the family and the church, but though a number of socialist leaders favor the abolition of the institution of marriage, and are professed atheists, it should be borne in mind that the great majority of socialists are not openly hostile to the home and the church. Indeed, the average socialist is probably as friendly to these institutions as is the average non-socialist.

131. SOCIALIST ATTITUTE TOWARD VIOLENCE.—It is important to understand the methods of socialism. Throughout the greater part of his life, Karl Marx openly advocated violence and revolution as a means of securing the downfall of capitalism. Socialists, says the Communist Manifesto, "disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions." Toward the end of his life, Marx changed this view somewhat, and apparently came to believe that the overthrow of the capitalistic system might come gradually and without bloodshed. In accordance with this later view, there is to-day a considerable socialist group which disavows violence. Members of this group are known as political socialists.

On the other hand, many socialists cling to Marx's earlier insistence upon violence and bloodshed as a means of attaining socialist ends. Members of the latter class are known as militant socialists, as opposed to those who disavow violence and rely chiefly upon political weapons. The two best-known groups of militant socialists are the Industrial Workers of the World and the Russian bolshevists.

132. POLITICAL SOCIALISM.—Many political socialists are personally so mild and agreeable that the thought of unlawful action would never be associated with them. The political socialist relies chiefly upon the growing political power of the working class to effect the abolition of capitalism. This emphasis upon political weapons has been particularly noticeable among socialists living in democratic countries where the franchise is widely extended, and where the will of the people is reflected through the action of their chosen representatives. The political socialist makes a large use of propaganda. He tries to stir up the workingman, to create in him a feeling of solidarity with his fellow workmen, and to incite a feeling of antipathy toward, and dislike for, the employing class. The political socialist emphasizes or exaggerates the undesirable side of the laborer's life, and endeavors by promises of an industrial millennium to rouse him to political action. "Workingmen of the world, unite, you have nothing to lose but your chains," is the slogan of the political socialist.

133. ALL SOCIALIST TEACHINGS TEND TOWARD VIOLENCE.—Though large numbers of political socialists are peaceful and responsible citizens, it should be noted that all socialist teachings tend to result in violence. The insistence of socialism upon the class struggle, the deliberate encouragement of industrial ill-will and the general policy of obstructing the activities of government, all lead inevitably to violence. Strikes involving bloodshed have in many instances been traced to the teachings of political socialism. During the World War, many political socialists in the United States supported our cause, but others of this group opposed the selective draft, attempted to demoralize our military forces, and impeded the conduct of the war by giving aid and succor to German agents. By a series of slight steps, political socialism, theoretically law-abiding and harmless, may drift into treasonable and revolutionary acts. The difference between political and militant socialism is thus one of degree only.

QUESTIONS ON THE TEXT

1. Define socialism.

2. What is the relation between the terms "communism" and "socialism."?

3. How are anarchism and socialism related?

4. Who was Karl Marx, and what has been his influence upon socialism?

5. Outline the socialist indictment.

6. What is meant by the "economic interpretation of history"?

7. Explain clearly Marx's theory of surplus value.

8. Just what is meant by the class struggle?

9. Discuss the character of the socialist program.

10. Explain the attitude of Marx toward violence.

11. Distinguish between political and militant socialism.

12. Name the two chief groups of militant socialists.

13. In what respect do all socialist teachings tend to result in violence?

REQUIRED READINGS

1. Williamson, Readings in American Democracy, chapter xiii.

Or all of the following:

2. International Encyclopedia, vol. 21, article on "Socialism."

3. Le Rossignol, Orthodox Socialism, chapter i.

4. Marx and Engels, The Communist Manifesto, all.

5. Skelton, Socialism, a Critical Analysis, chapter ii.

QUESTIONS ON THE REQUIRED READINGS

1. Explain why increasing social discontent among certain groups may be due to improvement in their social and economic condition. (Skelton, page 17.)

2. What, according to socialists, has been the effect upon the workers of the introduction of machinery into industry? (Le Rossignol, page 9.)

3. What, according to Marx, has been the effect of the factory system upon the laborer? (Skelton, pages 33-34.)

4. What is meant by "wage slavery"? (Skelton, pages 30-32.)

5. What is meant by the "iron law of wages"? (Le Rossignol, page 9.)

6. What, according to socialism, has been the effect of capitalism upon the moral tone of the workers? (Skelton, pages 37-40.)

7. Who are the bourgeoisie? (Communist Manifesto.)

8. Who are the proletariat? (Communist Manifesto.)

9. What, according to Marx and Engels, are the aims of socialism? (Communist Manifesto.)

10. What does Marx mean by "class consciousness"? (International Encyclopedia, vol. 21, page 235.)

11. What changes would occur in human character, in the opinion of the socialists, if socialism were to supplant capitalism? (Le Rossignol, page 10.)

TOPICS FOR INVESTIGATION AND REPORT

I

1. Ask each of a number of prominent citizens in your community to define socialism. Compare the definitions secured with that given in section 122. What do you conclude as to the indefiniteness of the term "socialism"?

2. Make a brief study of the social classes in your community. Does it appear that all of the community's citizens may be grouped into either a wealthy employing class or into an impoverished laboring class? Compare your conclusion with Marx's statement. (Section 128.)

3. Select for study a shop, factory or mill in your locality.

(a) Does it appear that the interests of the laborers and the employers are identical or in opposition?

(b) Carefully observe the actual conduct of the business. Does it appear to you that the laborers alone create the product? Give your reasons.

(c) Do the laborers under observation appear to be getting barely enough wages to enable them to keep alive? Check up your conclusion by visiting the homes of some of the laborers in question.

4. Write to the Department of Justice, Washington, D. C., for information regarding the activities of American socialists during the World War.

II

5. Robert Owen and his work. (Consult an encyclopedia.)

6. Utopian socialism. (Skelton, Socialism, a Critical Analysis, chapter iv; Carver, Elementary Economics, chapter xliii.)

7. Examples of Utopian communities in the United States. (Hinds, American Communities. See also an encyclopedia under "Communism.")

8. The nature of anarchism. (Carver, Elementary Economics, chapter xlvi.)

9. The life of Karl Marx. (Consult an encyclopedia.)

10. The law of capitalistic development. (Skelton, Socialism, a Critical Analysis, chapter vii.)

11. The economic interpretation of history. (Skelton, Socialism, a Critical Analysis, chapter v.)



CHAPTER XIV

MILITANT SOCIALISM: THE I. W. W.

134. ORIGIN OF THE I.W.W.—The letters I.W.W. are a convenient abbreviation which is used to designate a group of militant socialists calling themselves the Industrial Workers of the World. The I.W.W. resemble a French socialist group known as syndicalists, and on that account the I.W.W. are sometimes called the American syndicalists. As a matter of fact, the I.W.W. are a distinct group, and are in no way affiliated with the French syndicalists.

The I.W.W. movement can be traced to a miners' strike in Colorado in 1903. As the result of the labor unrest which this strike accentuated, a conference of radical labor leaders was called in Chicago in 1904, to discuss the question of forming a socialist organization which should advocate methods more drastic than those of political socialism. In the summer of 1905 a second convention was held in Chicago, and a constitution was drawn up and subscribed to. Section 1 of Article I of this constitution reads: "This Organization shall be known as the 'Industrial Workers of the World.'"

135. THE I.W.W. AND THE POLITICAL SOCIALISTS: SIMILARITIES.—Like the political socialists, the I. W. W. go back to Karl Marx for their basic teachings. William D. Haywood, one of the I. W. W. leaders, accepted Marx's theory of surplus value in these terms: "The theory of surplus value is the beginning of all socialist knowledge. It shows the capitalist in his true light, that of an idler and a parasite. It proves to the workers that capitalists should no longer be permitted to take any of their product." The I. W. W. also stress the class struggle. The preamble to their constitution declares that "the working class and the employing class have nothing in common," and asserts that "between these two classes a struggle must go on until all the workers of the world organize as a class, take possession of the earth, and the machinery of production, and abolish the wage system." In these important particulars there is agreement between the I. W. W. and the political socialists.

136. THE I.W.W. AND THE POLITICAL SOCIALISTS: DIFFERENCES.—The chief difference between the two groups is one of method. The political socialists prefer political action to violence; the I.W.W. prefer violence to political action. The I.W.W. believe that political methods are altogether too slow and unreliable, and accordingly they have so far refused to affiliate with any political party. The extreme limits to which the I.W.W. have gone in the matter of violence have caused many political socialists to disavow this militant group. The attempt has even been made to prove that the I.W.W. are not socialists at all, though as a matter of fact they are as truly so as is any other socialist group.

137. I.W.W. METHODS: THE STRIKE.—The I.W.W. use the strike, not as a means of securing better working conditions, but as a method of fomenting revolution. "Instead of the conservative motto, 'A fair day's wages for a fair day's work,'" declares the preamble to their constitution, "we must inscribe on our banner the revolutionary watchword, 'Abolition of the wage system.'" In their use of the strike, the I.W.W. accordingly oppose conciliation or arbitration of any kind, and whether or not they gain their point, they go back to work with the intention of striking again at the next opportune time. This policy has been formulated by the I.W.W. in the following words: "Strike; win as much as possible; go back to work; recuperate; strike again... whatever concessions from capitalism the workers secure, sooner or later they will strike again."

The principal strikes initiated in pursuance of this policy occurred at McKees Rocks, Pennsylvania, in 1909; Lawrence, Massachusetts, in 1912; Butte, Montana, in 1914; and Bisbee, Arizona, in 1916. Violence and lawlessness have been prominent features of each of these strikes.

138. I.W.W. METHODS: SABOTAGE.—The word sabotage is of French origin, and is used to describe any sort of deliberate action on the part of workmen which results in the destruction of the employer's property. Sabotage is a species of guerrilla warfare, designed to foment the class struggle. Louis Levine, an I. W. W. sympathizer, has said that "stirring up strife and accentuating the struggle as much as is in his power is the duty" of the I. W. W. Some of the commoner forms of sabotage are injuring delicate machinery, exposing the employer's trade secrets to rival employers, lying to customers about the quality of the goods, crippling locomotives so that they cannot be operated, slashing the harness of teamsters, shipping perishable goods to the wrong destination, burning forests and wheat fields, sawing lumber into unusual lengths, and allowing foodstuffs to spoil or deteriorate.

139. I.W.W. METHODS: DESTRUCTION OF LIFE.—In their effort to destroy the existing order of society, some of the I.W.W. are frankly willing to go as far as assassination. I.W.W. leaders have advised their followers, both orally and through their writings, to extend the term sabotage to cover the destruction of human life. During the World War the I.W.W. caused a loss of life by putting poison in canned goods, and by causing train wrecks. They have advocated the placing of ground glass in food served in hotels and restaurants. Since the organization was formed in 1905, several bomb outrages resulting in loss of life have been charged against the I.W.W., but in justice to this group, it must be observed that these crimes have never been proved to have been committed by authorized I. W. W. agents.

140. NEGATIVE CHARACTER OF THE I.W.W.—The I.W.W. resemble the political socialists in their failure to offer a definite system which could be substituted for the capitalistic system. Some of the I. W. W., it is true, have formulated a plan by means of which society is some day to be organized primarily on an industrial basis. According to this program, the workers of a given industry, say the railroad industry, will be organized into a single union, rather than, as at present, into a number of trade unions, such as an engineers' union, as distinct from the firemen's union, the brakemen's union, etc. The railroad union would in turn become a branch of a great transportation union, and the transportation union would in turn become a division of the "One Big Union," which is to include all workers in all countries of the world.

If this plan were approved by the entire I. W. W. organization, it would mean that the I. W. W. intended industry to be controlled by a super-organization of workingmen, all other persons to be excluded from any control whatsoever. As a matter of fact, this is the program of only a faction of the I. W. W. The idea of "One Big Union" is opposed by a second group, which insists that after the destruction of capitalism, industry must be handed over to the exclusive control of small units of laborers, unaffiliated with, and uncontrolled by, any larger organization. Beyond the formulation of these two opposing views, a constructive I. W. W. program has never been developed. Attention continues to be centered upon the destruction of the present system.

141. UNDEMOCRATIC CHARACTER OF THE I. W. W.—The I. W. W. oppose our present democracy. They oppose our Constitution and its fundamental guarantees of personal liberty, individual rights, and private property. They seek revolution, not in order to secure justice for the masses, but in order to place the laboring class in complete power in industry and government. They announce their intention of continuing the class struggle "until the working class is able to take possession and control of the machinery, premises, and materials of production right from the capitalists' hands, and to use that control to distribute the product of industry entirely among the workers."

142. LIMITED APPEAL OF THE I. W. W. PROGRAM.—It is a testimonial to the common sense of American workmen that the I. W. W. have made little headway. Until the Lawrence strike in 1912, the movement centered in the Far West, and it is even now practically confined to those parts of the West where industry is less well organized, and where family life is less stable. Miners, lumbermen, and railway construction workers are prominent in the movement. In general, the I. W. W. theory appeals chiefly to the lower strata of unskilled labor, to young and homeless workers, to transients, and to unassimilated immigrants. The better trained and the more intelligent American workmen reject the program of the I. W. W. These latter workmen believe in bettering their condition through the gradual development and enforcement of industrial standards, made possible by lawful coperation with the employer. The truth of this statement is borne out by the fact that whereas the I. W. W. number scarcely 30,000, the American Federation of Labor has more than 4,000,000 members. Numerically the I. W. W. are unimportant, and it is chiefly their violent and spectacular tactics which attract attention.

QUESTIONS ON THE TEXT

1. What do the letters I. W. W. stand for?

2. How did the I. W. W. organization come into existence?

3. In what ways are the I. W. W. like the political socialists?

4. In what way do the I. W. W. differ from the political socialists?

5. What use do the I. W. W. make of the strike?

6. Define sabotage, and give some examples.

7. Discuss "destruction of life" as an I. W. W. aim.

8. Upon what basis do the I. W. W. expect to reorganize society?

9. What is meant by "One Big Union"?

10. What is the attitude of the I. W. W. toward democracy?

11. To what classes of the population does the I. W. W. theory make its chief appeal?

REQUIRED READINGS

1. Williamson, Readings in American Democracy, chapter xiv.

Or all of the following:

2. Bloomfield, Modern Industrial Movements, pages 40-50 and 78-86.

3. Hoxie, Trade Unionism in the United States, chapter vi.

4. International Encyclopedia, vol. 12, article on "Industrial Workers of the World."

5. Preamble to the Constitution of the Industrial Workers of the World.

QUESTIONS ON THE REQUIRED READINGS

1. Name some of the unions represented in the I.W.W. convention of 1905. (International Encyclopedia, page 150.)

2. What do the I.W.W. insist must be the outcome of the class struggle? (Preamble to the constitution.)

3. What sort of an organization do the I. W. W. believe to be essential if the condition of the workers is to be improved? (Preamble to the constitution.)

4. What are the three reasons why the I.W.W. expect to take over industry? (Bloomfield, page 80.)

5. What may be said as to the present attitude of the I.W.W. toward political parties? (International Encyclopedia,_ page 151.)

6. What are some of the differences between the I.W.W. and the French syndicalists? (Bloomfield, pages 49-50.)

7. What is the origin of the word sabotage? (Bloomfield, page 80.)

8. To what extent is the I.W.W. movement supplied with able leaders? (Hoxie, pages 149-150.)

9. Discuss the membership of the I. W. W. (Hoxie, pages 139-140.)

10. Explain the attitude of the masses of American workmen toward the I.W.W. (Hoxie, pages 157-161.)

TOPICS FOR INVESTIGATION AND REPORT

I

1. Interview, or write to, the officials of a trade union in your community with reference to the attitude of the trade union toward the I.W.W. (Many trade unions are bitterly opposed to the I.W.W.; others are more tolerant of this form of militant socialism.)

2. Investigate the conditions surrounding any strike which has been initiated in your neighborhood by the I.W.W. (Consult the officials of a local trade union. Consult, also, the files of local newspapers and the Readers' Guide to Periodical Literature.)

3. A number of states have recently passed laws restricting the destructive tactics of the I.W.W. Ascertain whether or not your state has passed such laws. (Write to the state library at the state capitol.)

Also write to the proper authorities in several other states, asking for a copy of such laws, if any have been passed in those states.

II

4. Origin of the I.W.W. (Groat, Organized Labor in America, chapter xxvii.)

5. The theory of "direct action." (Bloomfield, Modern Industrial Movements, pages 62-67.)

6. Conflict of aims and ideals within the I. W. W. organization. (Hoxie, Trade Unionism in the United States, chapter vi.)

7. Sabotage. (Groat, Organized Labor in America, chapter xxviii.)

8. Theory of the "general strike." (Brooks, American Syndicalism: The I. W. W., chapter x.)

9. Syndicalism. (International Encyclopedia, vol. 21, article on "Syndicalism.")

10. Relation of the I. W. W. theory to anarchism. (Brooks, American Syndicalism: The I. W. W., chapter xiv.)



CHAPTER XV

MILITANT SOCIALISM: THE BOLSHEVISTS

143. SIGNIFICANCE OF BOLSHEVISM.-The term "bolshevist" is used to designate a group of militant socialists that seized power in Russia in the fall of 1917. Strictly speaking, the bolshevists were purely a Russian group, nevertheless, they are of interest to students of American democracy. Until the outbreak of the World War socialism was primarily a theory, the claims of which could not definitely be settled for the reason that it had never been applied on a large scale. Bolshevism is significant because it is the only instance in the history of the world where nation-wide socialism has actually been put into operation. The peculiar conditions surrounding the Russian experiment may prevent any detailed conclusions as to the availability of bolshevist experience for other countries; on the other hand, the general results of that experiment must throw some light upon what we might expect if a socialist experiment were made in other countries. It is important, therefore, that we inquire into the nature of the Russian socialist state.

144. ORIGIN OF THE BOLSHEVISTS.—There is a popular impression that since the word bolshevist means "majority" in the Russian language, the bolshevists represented or constituted a majority of the Russian people. This is not true, as the history of the group shows. The origin of the bolshevists dates from a convention of the Russian Social-Democratic party in 1903, at which time a majority (bolshinstv) took an extreme stand upon the policies then being discussed in convention. In the years that followed the bolshevists became known as the radical or extreme wing of the Russian Social- Democratic party, as opposed to the menshevists, or moderate wing.

It appears that as early as 1905 the bolshevists planned to secure control of the Russian government. The opportunity presented itself during the World War, which Russia had entered early in August, 1914. In March, 1917, a non-bolshevist group initiated a revolution, which overthrew the government of the Czar and established a provisional government under the leadership of Alexander Kerensky. This government immediately instituted a number of democratic reforms, including the extension of the suffrage to all men and women who were Russian citizens. These citizens elected delegates to a constituent assembly, but at this point the bolshevists, seeing that the voters of Russia were overwhelmingly against bolshevism, attacked the new government. The constituent assembly was forcibly dissolved, its defenders slaughtered, and on November 7, 1917, the bolshevists seized the reins of government. Thus bolshevism as a government came into being as the result of suppressing the lawfully expressed will of the Russian people.

145. THE BOLSHEVIST CONSTITUTION: LIBERAL ELEMENTS.—On July 10, 1918, the bolshevists adopted a constitution. This remarkable document was a strange compound of liberal and despotic elements. It made a number of important promises to the people of Russia, announcing, for example, that the new government would "put an end to every ill that oppresses humanity." In pursuit of this ideal, the church was separated from the state, and complete freedom of conscience was accorded all citizens of Russia. Citizens were to enjoy complete freedom of speech and of the press. For the purpose of "securing freedom of expression to the toiling masses," provision was made for the free circulation throughout the country of newspapers, books, and pamphlets. Full and general education to the poorest peasantry was also promised. Capital punishment was declared abolished, and a solemn protest against war and violence of every kind was adopted.

146. THE BOLSHEVIST CONSTITUTION: RESTRICTED SUFFRAGE.—These liberal provisions were offset, however, by a number of important restrictions upon the voting rights of the people. Article IV of the bolshevist constitution declared that the right to vote should not be extended to the following groups: all persons employing hired laborers for profit, including farmers who have even a single part-time helper; all persons receiving incomes from interest, rent, or profits; all persons engaged in private trade, even to the smallest shop-keeper; all ministers of religion of any kind; all persons engaged in work which was not specifically defined by the proper authorities as "productive and useful to society"; members of the old royal family; and individuals formerly employed in the imperial police service. The constitution further provided that representation in the various deliberative assemblies (called soviets, or councils) should be arranged so that one urban bolshevist would be equal, in voting strength, to five non- bolshevist peasants. Lastly, the constitution significantly neglected to provide any machinery whereby the voters, either as individuals or in groups, could make nominations for any governmental office. The power of nomination was assumed by various bolshevist officials.

147. THE BOLSHEVIST CONSTITUTION: PROVISION FOR A DESPOTISM.—The bolshevist constitution frankly provided for a despotism. "For the purpose of securing the working class in the possession of complete power," reads the concluding section of chapter two of the constitution, "and in order to eliminate all possibility of restoring the power of the exploiters, (the capitalist or employing class), it is decreed that all workers be armed, and that a socialist Red Army be organized and the propertied class disarmed." These steps, the constitution goes on to state, were to be taken for the express purpose of introducing nation-wide socialism into Russia.

148. "DICTATORSHIP OF THE PROLETARIAT."—Shortly after the publication of the constitution, Lenin and Trotzky, the two bolshevist leaders, established what was called the "dictatorship of the proletariat." The word proletariat refers vaguely to the working classes, but the bolshevists interpreted the term to cover only that portion of the workers which was pledged to the support of socialist doctrine. Lenin admitted that a small number of bolshevized workingmen, the proletariat, was maintaining, by force of arms, a despotic control over the masses of the people. "Just as 150,000 lordly landowners under Czarism dominated the 130,000,000 of Russian peasants," he once declared, "so 200,000 members of the bolshevist party are imposing their will on the masses." According to these figures, the controlling element in Russia included less than one sixth of one per cent of the people.

From the first, the great majority of the peasants stolidly resisted the socialization of the country, but this did not discourage the bolshevist leaders. "We have never spoken of liberty," said Lenin early in 1921. "We are exercising the dictatorship of the proletariat in the name of the minority because the peasant class in Russia is not yet with us. We shall continue to exercise it until they submit. I estimate the dictatorship will last about forty years."

149. SUPPRESSION OF DEMOCRACY.—The democratic tendencies evidenced under the Kerensky regime, and apparently encouraged by some of the provisions of the bolshevist constitution, were quickly checked by the dictatorship. It became the policy of the government to deprive "all individuals and groups of rights which could be utilized by them to the detriment of the socialist revolution." The semblance of a representative system was retained, but voting power was so distributed as to allow an oligarchic group to control the government's policies. This group had the power to disallow elections which went against it, as well as the power to force the dismissal from local Soviets of anti-bolshevist members. The right to vote could be arbitrarily withdrawn by order of the central authorities. Free speech and the right to enjoy a free press were suppressed. Lenin admitted that bolshevism "does not represent the toiling masses," and declared that "the word democracy cannot be scientifically applied to the bolshevist party." Both Lenin and Trotzky declared that they had no fixed policy except to do whatever at the moment seemed expedient, regardless of previous statements or promises.

150. ABOLITION OF THE CAPITALIST SYSTEM.—Socialism, so long a theory, became a practical concern at the moment that the bolshevists secured control of the government. Private property in land was abolished, the arable land of Russia being apportioned among agriculturists without compensation to the former owners. All mines, forests, and waterways of national importance were taken over by the central government, while the smaller woods, rivers, and lakes became the property of the local Soviets. Banking establishments were seized and looted by bolshevist forces. Factories, railroads, and other means of production and transport were taken over. Inheritance was abolished. Private initiative in business was forbidden. Members of the capitalist or employing classes were imprisoned, murdered, or driven from the country. In a word, the capitalistic system was destroyed, and the economic and political machinery of the country came under the full control of a small socialist group, maintained in power by armed force.

151. PARALYSIS OF INDUSTRY UNDER SOCIALISM.—The substitution of socialism for capitalism in Russia was followed by disaster. The workers were unable to carry on the industries which had been handed over to them. Discouraged by repeated errors in administration, and demoralized by their sudden rise to power, they neglected their work and pillaged the factories and shops in which they had formerly been employed. The elimination of the managing employers resulted in a decrease in output, and to aggravate the situation the laborers continued to insist upon a shorter and shorter working day. In desperation the government attempted to keep the people at their tasks by force. The workers were exploited to a degree previously unknown, even in Russia. They worked longer hours and for less pay than formerly. In many places they were attached to their tasks like medieval serfs, and even harnessed to carts like beasts of burden. The trade unions were abolished, and the workers were forbidden to strike, on pain of imprisonment or death. Yet despite these measures the output of factories, mills, and mines steadily decreased. Industry stagnated, and business fell away. The millions of Russia were starving in a land of plenty.

152. RETURN TO CAPITALISTIC METHODS.—To save the country from economic ruin, Lenin turned to capitalism. Free initiative and open competition in trade were again allowed. The socialization of railroads, mills, and natural resources was halted. The arable land, which under socialism had not grown enough food to support even the peasants living upon it, was again cultivated under the wage system. The capitalists and managing employers who were alive and still in Russia, were gathered together and placed in charge of industry. The laborers, who had been promised an eight- or six-hour day and complete control of industry, were now forced by the bolshevist government to work long hours under their former employers for practically no pay. By 1919 the essential features of the capitalistic system had been accepted by Lenin and Trotzky, the bolshevists continuing in power as a despotic group which maintained authority over the laborers and the employers by armed force. The theory that all except the laborers are parasites had been exploded.

153. WAS SOCIALISM GIVEN A FAIR TRAIL IN RUSSIA?—To point out that an experiment has failed is one thing; to prove that it has been attempted under fair conditions is quite another. We cannot, therefore, condemn the bolshevist experiment without some regard for the conditions under which it was conducted.

Undoubtedly, the bolshevists had to contend against several important difficulties. The majority of the Russian people are illiterate peasants, who had had, at the time of the overthrow of the Czar in 1917, little or no training in self-government. In 1917, Russia was, moreover, in a state of political demoralization, the result of three years of war, concluded by a military debacle and a disorderly peace. The suddenness with which socialism was introduced was also a factor which handicapped the bolshevists.

On the other hand, many favorable conditions were present. With respect to natural resources, Russia is one of the richest countries in the world. She has practically everything necessary to a healthy and self-sufficing industrial life. Over this wealth the bolehevists had full control. Lenin, the bolshevist chief, is conceded to have been a remarkable executive, so that the socialist experiment was conducted by a man not only well versed in Marxian doctrine, but capable of exercising an intelligent and authoritative control of the government. The bolshevist territory was blockaded by Great Britain, France, and the United States, but trade connections between Russia and the two last-named countries had been unimportant. Trade connections with Germany and Sweden on the west, and China on the east, were not broken off.

It is clear that the socialist experiment in Russia was attended by important advantages and disadvantages. Whether or not bolshevism had an absolutely fair trial is as yet impossible to say. On the other hand, the disastrous failure of the experiment would seem to indicate that it could not have met with any great degree of success under fairly favorable conditions. The admissions of the bolshevist leaders themselves, together with the conclusions of the most impartial investigators of the experiment, justify the conclusion that socialism in Russia failed because it was based upon false principles. The bolshevists have been accused of having instituted a reign of terror, bringing in its train lawlessness, murder, desecration of the church, and the most brutal savagery. Into these charges we cannot go; it is enough that the most reliable evidence goes to show that bolshevism, as a nation-wide application of socialist doctrine, was a failure.

154. FAILURE OF BOLSHEVIST PROPAGANDA BEYOND RUSSIA.—Bolshevism, in common with other varieties of socialism, sought to break down national barriers and to establish a dictatorship of the proletariat in all of the countries of the world. Some of the milder socialists in western Europe and America disavowed the acts of the Russian group, but the majority of socialists beyond Russia appear to have at least secretly sympathized with the bolshevists. Encouraged by this attitude, Lenin and Trotzky frankly admitted their intention of fomenting world-wide revolution. The bolshevist government appropriated large sums for propaganda in countries beyond Russia, and socialist sympathizers everywhere advocated an attempt to overthrow "world capitalism." In the period of unrest immediately following the World War there was some response to bolshevist propaganda in a number of countries, but sounder opinion prevailed, and in 1920 Lenin admitted that the workingmen of Europe and America had definitely rejected his program. The one case of nation-wide socialism had proved too great a failure not to impress the laboring classes in the more advanced countries of the world as a visionary and unworkable scheme.

QUESTIONS ON THE TEXT

1. Why is bolshevism of interest to students of American democracy?

2. Explain the origin of the bolshevists.

3. How did the bolshevists come into power?

4. To what extent was the bolshevist constitution liberal?

5. To what extent did it restrict the suffrage?

6. What did the bolshevist constitution say concerning a "red" army?

7. Explain the phrase, "dictatorship of the proletariat."

8. How did the bolshevists suppress democracy in Russia?

9. Outline the steps by which the bolshevists destroyed capitalism.

10. What were the effects of this destruction?

11. Why did Lenin return to capitalism?

12. Was bolshevism given a fair trial?

13. What was the fate of bolshevist propaganda beyond Russia?

REQUIRED READINGS

1. Williamson, Readings in American Democracy, chapter xv.

Or all of the following:

2. Bloomfield, Modern Industrial Movements, pages 295-302.

3. Bolshevist constitution, reprinted in the above reference, pages 243-258; copies may also be secured by writing to The Nation, New York City.

4. Brasol, Socialism versus Civilisation, chapter iii.

QUESTIONS ON THE REQUIRED READINGS

1. What occurred in Russia on October 28, 1917? (Brasol, page 113.)

2. What was the substance of the bolshevist announcement of the overthrow of the Kerensky government? (Brasol, page 114.)

3. What was the attitude of the menshevists toward the bolshevists after the latter had seized control in Russia? (Brasol, pages 120- 122.)

4. What opinion did the bolshevists express with regard to world civilization? (Bolshevist constitution, chapter iii.)

5. In what body did the constitution vest supreme control over the bolshevist government? (Bolshevist constitution, chapter v.)

6. What was the food situation in bolshevist Russia? (Brasol, page 129.)

7. Discuss the output of coal and iron under bolshevist rule. (Brasol pages 132-133.)

8. Describe agricultural conditions under the bolshevists. (Brasol, pages 133-135)

9. Describe the condition of transportation in bolshevist Russia. (Brasol, pages 135-141.)

10. What were the results of the bolshevist attempt to fix prices by governmental decree? (Brasol, pages 154-155.)

11. What was the attitude of bolshevism toward the peasants? (Bloomfield, page 297.)

12. What was the relation between bolshevist theory and bolshevist practice? (Bloomfield, pages 299-300.)

TOPICS FOR INVESTIGATION AND REPORT

I

1. Make as thorough a study as the time allows of material appearing in newspapers and magazines, between November, 1917, and the present time, on the subject of bolshevism. (Consult newspaper files, and also the Readers' Index to Periodical Literature.)

(a) Classify the material according as it consists of direct quotations from bolshevist leaders, or of indirect quotations.

(b) Classify the material according as it is favorable to bolshevism, unfavorable, or neutral.

(c) Classify the material according as it consists of reports of persons who had themselves actually investigated the situation in Russia, or reports based upon hearsay evidence.

(d) What conclusions do you draw from this study?

II

2. The essential elements of the bolshevist constitution.

3. Bolshevist propaganda in the United States. (Hearings before a sub-committee of the Committee on the Judiciary, U. S. Senate. Government Printing Office, Washington, D. C., 1919.)

4. Attitude of the United States government toward bolshevism. (Memorandum on certain aspects of the Bolshevist Movement in Russia, Government Printing Office, Washington, D. C., 1919.)

5. Bolshevism and the Russian trade unions. (Current History Magazine, published by the New York Times, September, 1920.)

6. The character of Lenin. (Bloomfield, Modern Industrial Movements, page's 203-271.)

7. Return of the bolshevists to capitalism. (Bloomfield, Modern Industrial Movements, pages 291-295.)

8. Socialist attempts to explain or justify the failure of bolshevism. (Brasol, Socialism versus Civilisation, chapter iv.)



CHAPTER XVI

THE CASE AGAINST SOCIALISM

155. ADMINISTRATIVE DIFFICULTIES CONFRONTING SOCIALISM.—Under socialism the work of government would be greatly increased. Thousands of intricate administrative rules would have to be drawn up for the control and direction of activities now attended to by individuals animated by personal interest.

Now, it is seriously to be questioned whether the most highly centralized government could effectively administer the innumerable activities of our complex industrial life. Upon what basis would land be distributed? How would individuals be apportioned among the various employments? Upon what basis would the wages of millions of workmen be determined? Could so mechanical an agency as government foresee future business conditions expertly enough to direct the productive forces of the nation effectively? If prices are no longer to be fixed by competition, how, and by means of what agency, are they to be determined?

These are only a few of the vital questions which would arise in connection with the administration of a socialist state. Various suggestions have been made with regard to some of these difficulties, but there is among socialists no general agreement as to the answer of any one of these questions. They continue to constitute, in the eyes of practical men, a grave obstacle to socialism.

156. DANGERS OF A SOCIALIST BUREAUCRACY.—Governmental power would have to be very highly centralized if a socialist state were effectively to administer the nation's economic activities as a unit. But this very concentration of power might easily result in the development of a bureaucracy. Waste and the possibility of corruption have unfortunately characterized even those governments over which the people exercise considerable control; it seems probable that the greater centralization of authority demanded by socialism would increase rather than decrease these dangers.