Part I
, 55th Congress, Third Session.
VII. THE STRUGGLE FOR WEALTH AND POWER
1. _Economic Foundations_
The people of the United States, through their contests with the American Indians, the Mexicans and the Filipinos, have established that "supreme and extensive political domination" which is one of the chief characteristics of empire.
But the American Empire does not rest upon a political basis. Only the most superficial portions of its superstructure are political in character. Imperialism in the United States, as in every other modern country, is built not upon politics, but upon industry.
The struggle between empires has shifted, in recent years, from the political and the military to the economic field. The old imperialism was based on military conquest and political domination. The new "financial" imperialism is based on economic opportunities and advantages. Under this new regime, territorial domination is subordinated to business profit.
While American public officials were engaged in the routine task of extending the political boundaries of the United States, the foundations of imperial strength were being laid by the masters of industrial life--the traders, manufacturers, bankers, the organizers of trusts and of industrial combinations. These owners and directors of the nation's wealth have been the real builders of the American Empire.
As the United States has developed, the economic motives have come more and more to the surface, until no modern nation--not England herself--has such a record in the search for material possessions. The pursuit of wealth, in the United States, has been carried forward ruthlessly; brutally. "Anything to win" has been the motto. Man against man, and group against group, they have struggled for gain,--first, in order to "get ahead;" then to accumulate the comforts and luxuries, and last of all, to possess the immense power that goes with the control of modern wealth.
The early history of the country presaged anything but this. The colonists were seeking to escape tyranny, to establish justice and to inaugurate liberty. Their promises were prophetic. Their early deeds put the world in their debt. Forward looking people everywhere thrilled at the mention of the name "America." Then came the discovery of the fabulous wealth of the new country; the pressure of the growing stream of immigrants; the heaping up of riches; the rapacious search after more! more! the desertion of the dearest principles of America's early promise, and the transcribing of another story of "economic determinism."
Until very recent times the American people continued to talk of political affairs as though they were the matters of chief public concern. The recent growth and concentration of economic power have showed plainly, however, that America was destined to play her greatest role on the economic field. Capable men therefore ceased to go into politics and instead turned their energies into the whirl of business, where they received a training that made them capable of handling affairs of the greatest intricacy and magnitude.
2. _Every Man for Himself_
The development of American industry, during the hundred years that began with the War of 1812, led inevitably to the unification of business control in the hands of a small group of wealth owners.
"Every man for himself" was the principle that the theorists of the eighteenth century bequeathed to the industrial pioneers of the nineteenth. The philosophy of individualism fitted well with the temperament and experience of the English speaking peoples; the practice of individualism under the formula "Every man for himself" seemed a divine ordination for the benefit of the new industry.
The eager American population adopted the slogan with enthusiasm. "Every man for himself" was the essence of their frontier lives; it was the breath of the wilderness.
But the idea failed in practice. Despite the assurances of its champions that individualism was necessary to preserve initiative and that progress was impossible without it, like many another principle--fine sounding in theory, it broke down in the application.
The first struggle that confronted the ambitious conqueror of the new world was the struggle with nature. Her stores were abundant, but they must be prepared for human use. Timber must be sawed; soil tilled; fish caught; coal mined; iron smelted; gold extracted. Rivers must be bridged; mountains spanned; lines of communication maintained. The continent was a vast storehouse of riches--potential riches. Before they could be made of actual use, however, the hand of man must transform them and transport them.
These necessary industrial processes were impossible under the "every man for himself" formula. Here was a vast continent, with boundless opportunities for supplying the necessaries and comforts of life--provided men were willing to come together; divide up the work; specialize; and exchange products.
Cooperation--alone--could conquer nature. The basis of this cooperation proved to be the machine. Its means was the system of production and transportation built upon the use of steam, electricity, gas, and labor saving appliances.
When the United States was discovered, the shuttle was thrown by hand; the hammer was wielded by human arm; the mill-stones were turned by wind and water; the boxes and bales were carried by pack-animals or in sailing vessels,--these processes of production and transportation were conducted in practically the same way as in the time of Pharaoh or of Alexander the Great. A series of discoveries and inventions, made in England between 1735 and 1784, substituted the machine for the tool; the power of steam for the power of wind, water or human muscle; and set up the factory to produce, and the railroad and the steamboat to transport the factory product.
American industry, up to 1812, was still conducted on the old, individualistic lines. Factories were little known. Men worked singly, or by twos and threes in sheds or workrooms adjoining their homes. The people lived in small villages or on scattered farms. Within the century American industry was transformed. Production shifted to the factory; about the factory grew up the industrial city in which lived the tens or hundreds of thousands of factory workers and their families.
The machine made a new society. The artisan could not compete with the products of the machine. The home workshop disappeared, and in its place rose the factory, with its tens, its hundreds and its thousands of operatives.
Under the modern system of machine production, each person has his
## particular duty to perform. Each depends, for the success of his
service, upon that performed by thousands of others.
All modern industry is organized on the principle of cooperation, division of labor, and specialization. Each has his task, and unless each task is performed the entire system breaks down.
Never were the various branches of the military service more completely dependent upon each other than are the various departments of modern economic life. No man works alone. All are associated more or less intimately with the activities of thousands and millions of their fellows, until the failure of one is the failure of all, and the success of one is the success of all.
Such a development could have only one possible result,--people who worked together must live together. Scattered villages gave place to industrial towns and cities. People were compelled to cooperate in their lives as well as in their labor.
The theory under which the new industrial society began its operations was "every man for himself." The development of the system has made every man dependent upon his fellows. The principle demanded an extreme individualism. The practice has created a vast network of inter-relations, that leads the cotton spinner of Massachusetts to eat the meat prepared by the packing-house operative in Omaha, while the pottery of Trenton and the clothing of New York are sent to the Yukon in exchange for fish and to the Golden Gate for fruit. Inside as well as outside the nation, the world is united by the strong hands of economic necessity. None can live to himself, alone. Each depends upon the labor of myriads whom he has never seen and of whom he has never heard. Whether we will or no, they are his brothers-in-labor--united in the Atlas fellowship of those who carry the world upon their shoulders.
The theory of "every man for himself" failed. The practical exigencies involved in subjugating a continent and wresting from nature the means of livelihood made it necessary to introduce the opposite principle,--"In Union there is strength; cooperation achieves all things."
3. _The Struggle for Organization_
The technical difficulties involved in the mechanical production of wealth compelled even the individualists to work together. The requirements of industrial organization drove them in the same direction.
The first great problem before the early Americans was the conquest of nature. To this problem the machine was the answer. The second problem was the building of an organization capable of handling the new mechanism of production--an organization large enough, elastic enough, stable enough and durable enough--to this problem the corporation was the answer.
The machine produced the goods. The corporation directed the production, marketed the products and financed both operations.
The corporation, as a means of organizing and directing business enterprise is a product of the last hundred years. A century ago the business of the United States was carried on by individuals, partnerships, and a few joint stock companies. At the time of the last Census, more than four-fifths of the manufactured products were turned out under corporate direction; most of the important mining enterprises were corporate, and the railroads, public utilities, banks and insurance companies were virtually all under the corporate form of organization. Thus the passage of a century has witnessed a complete revolution in the form of organizing and directing business enterprise.
The corporation, as a form of business organization is immensely superior to individual management and to the partnership.
1. The corporation has perpetual life. In the eyes of the law, it is a person that lives for the term of its charter. Individuals die; partnerships are dissolved; but the corporation with its unbroken existence, possesses a continuity and a permanence that are impossible of attainment under the earlier forms of business organization.
2. Liability, under the corporation, is limited by the amount of the investment. The liability of an individual or a partner engaged in business was as great as his ability to pay. The investor in a corporation cannot lose a sum larger than that represented by his investment.
3. The corporation, through the issuing of stocks and bonds, makes it possible to subdivide the total amount invested in one enterprise into many small units.[37] These chances for small investment mean that a large number of persons may join in subscribing the capital for a business enterprise. They also mean that one well-to-do person may invest his wealth in a score or a hundred enterprises, thus reducing the risk of heavy losses to a minimum.
4. The corporation is not, as were the earlier forms of organization, necessarily a "one man" concern. Many corporations have upon their boards of directors the leading business men, merchants, bankers and financiers. In this way, the investing public has the assurance that the enterprise will be conducted along business lines, while the business men on the board have an opportunity to get in on the "ground floor."
The corporation has a permanence, a stability, and a breadth of financial support that are quite impossible in the case of the private venture or of the partnership. It does for business organization what the machine did for production.
The corporation came into favor at a time when business was expanding rapidly. Surplus was growing. Wealth and capital were accumulating. Industrial units were increasing in size. It was necessary to find some means by which the surplus wealth in the hands of many individuals could be brought together, large sums of capital concentrated under one unified control, the investments, thus secured, safeguarded against untoward losses, and the business conservatively and efficiently directed. The corporation was the answer to these needs.
"United we stand" proved to be as true of organizers and investors as it was of producers. The corporation was the common denominator of people with various industrial and financial interests.
The corporation played another role of vital consequence. It enabled the banker to dominate the business world. Heretofore, the banker had dealt largely with exchange. The industrial leader was his equal if not his superior. The organization of the corporation put the supreme power in the hands of the banker, who as the intermediary between investor and producer, held the purse strings.
4. _Capitalist against Capitalist_
The early American enterprisers--the pioneers--began a single-handed struggle with nature. Necessity forced them to cooperate. They established a new industry. The factory brought them together. They organized their system of industrial direction and control. The corporation united them. They turned on one another in mortal combat, and the frightfulness of their losses forced them to join hands.
The business men of the late nineteenth century had been nurtured upon the idea of competition. "Every man for himself and the devil take the hindermost" summed up their philosophy. Each person who entered the business arena was met by an array of savage competitors whose motto was "Victory or Death." In the struggle that followed, most of them suffered death.
Capitalist set himself up against capitalist in bitter strife. The railroads gouged the farmers, the manufacturers and the merchants and fought one another. The big business organizations drove the little man to the wall and then attacked their larger rivals. It was a fight to the finish with no quarter asked or given.
The "finish" came with periodic regularity in the seventies, the eighties and the nineties. The number of commercial failures in 1875 was double the number of 1872. The number of failures in 1878 was over three times that of 1871. The same thing happened in the eighties. The liabilities of concerns failing in 1884 were nearly four times the liabilities of those failing in 1880. The climax came in the nineties, after a period of comparative prosperity. Hard times began in 1893. Demand dropped off. Production decreased. Unemployment was widespread. Wages fell. Prices went down, down, under bitter competitive selling, to touch rock bottom in 1896. Business concerns continued to fight one another, though both were going to the wall. Weakened by the struggle, unable to meet the competitive price cutting that was all but the universal business practice of the time, thousands of business houses closed their doors. The effect was cumulative; the fabric of credit, broken at one point, was weakened correspondingly in other places and the guilty and the innocent were alike plunged into the morass of bankruptcy.
The destruction wrought in the business world by the panic of 1893 was enormous. The number of commercial failures for 1893 jumped to 15,242. The amount of liabilities involved in these failures was $346,780,000. This catastrophe, coming as it did so close upon the heels of the panics that had immediately preceded it, could not fail to teach its lesson. Competition was not the life, but the death of trade. "Every man for himself" as a policy applied in the business world, led most of those engaged in the struggle over the brink to destruction. There was but one way out--through united action.
The period between 1897 and 1902 was one of feverish activity directed to coordinating the affairs of the business world. Trusts were formed in all of the important branches of industry and trade. The public looked upon the trust as a means of picking pockets through trade conspiracies and the boosting of prices. The Sherman Anti-Trust Law had been passed on that assumption. In reality, the trusts were organized by far seeing men who realized that competition was wasteful in practice and unsound in theory. The idea that the failure of one bank or shoe factory was of advantage to other banks and shoe factories, had not stood the test of experience. The tragedies of the nineties had showed conclusively that an injury to one part of the commercial fabric was an injury to all of its parts.
The generation of business men trained since 1900 has had no illusions about competition. Rather, it has had as its object the successful combination of various forms of business enterprise into ever larger units. First, there was the uniting of like industries;--cotton mills were linked with cotton mills, mines with mines. Then came the integration of industry--the concentration under one control of all of the steps in the industrial process from the raw material to the finished product,--iron mines, coal mines, blast furnaces, converters, and rail mills united in one organization to take the raw material from the ground and to turn out the finished steel product. Last of all there was the union of unlike industries,--the control, by one group of interests, of as many and as varied activities as could be brought together and operated at a profit. The lengths to which business men have gone in combining various industries is well shown by the recent investigation of the meat packing industry. In the course of that investigation, the Federal Trade Commission was able to show that the five great packers (Wilson, Armour, Swift, Morris and Cudahy) were directly affiliated with 108 business enterprises, including 12 rendering companies; 18 stockyard companies; 8 terminal railway companies; 9 manufacturers of packers' machinery and supplies; 6 cattle loan companies; 4 public service corporations; 18 banks, and a number of miscellaneous companies, and that they controlled 2000 food products not immediately related to the packing industry.[38]
Business is consolidated because consolidation pays--not primarily, through the increase of prices, but through the greater stability, the lessened costs, and the growing security that has accompanied the abolition of competition.
Again the forces of social organization have triumphed in the face of an almost universal opposition. American business men practiced competition until they found that cooperation was the only possible means of conducting large affairs. Theory advised, "Compete"! Experience warned, "Combine"! Business men--like all other practical people--accepted the dictates of experience as the only sound basis for procedure. Their combination solidified their ranks, preparing them to take their places in a closely knit, dominant class, with clearly marked interests, and a strong feeling of class consciousness and solidarity.
It was in the consummation of these combinations, integrations and consolidations that the investment banker came into his own as the keystone in the modern industrial arch.
5. _The Investment Banker_
The investment banker is the directing and coordinating force in the modern business world. The necessities of factory production demanding great outlays of capital; the immense financial requirements of corporations; the consolidation of business ventures on a huge scale; the broadened use of corporate securities as investments--all brought the investment banker into the foreground.
Before the Spanish War, the investment banker financed the trusts. After the war he was entrusted with the vast surpluses which the concentration of business control had placed in a few hands. Business consolidation had given the banker position. The control of the surplus brought him power. Henceforth, all who wished access to the world of great industrial and commercial affairs must knock at his door.
This concentration of economic control in the hands of a relatively small number of investment bankers has been referred to frequently as the "Money Trust."
Investment banking monopoly, or as it is sometimes called, the "Money Trust" was examined in detail by the Pujo Committee of the House of Representatives, which presented a summary of its report on February 28, 1913. The committee placed, at the center of its diagram of financial power, J. P. Morgan & Co., the National City Bank, the First National Bank, the Guaranty Trust Co., and the Bankers Trust Co., all of New York. The report refers to Lee, Higginson & Co., of Boston and New York; to Kidder, Peabody & Co., of Boston and New York, and to Kuhn, Loeb & Co., of New York, together with the Morgan affiliations, as being "the most active agents in forwarding and bringing about the concentration of control of money and credit" (p. 56).
The methods by which this control was effected are classed by the Committee under five heads:--
1. "Through consolidations of competitive or potentially competitive banks and trust companies which consolidations in turn have recently been brought under sympathetic management" (p. 56).
2. Through the purchase by the same interests of the stock of competitive institutions.
3. Through interlocking directorates.
4. "Through the influence which the more powerful banking houses, banks, and trust companies have secured in the management of insurance companies, railroads, producing and trading corporations and public utility corporations, by means of stock holdings, voting trusts, fiscal agency contracts, or representation upon their boards of directors, or through supplying the money requirements of railway, industrial, and public utility corporations and thereby being enabled to participate in the determination of their financial and business policies" (p. 56).
5. "Through partnership or joint account arrangements between a few of the leading banking houses, banks, and trust companies in the purchase of security issues of the great interstate corporations, accompanied by understandings of recent growth--sometimes called 'banking ethics'--which have had the effect of effectually destroying competition between such banking houses, banks, and trust companies in the struggle for business or in the purchase and sale of large issues of such securities" (p. 56).
Morgan & Co., the First National Bank, the National City Bank, the Bankers Trust Co., and the Guaranty Trust Co., which were all closely affiliated, had extended their control until they held,--
118 directorships in 34 banks with combined resources of $2,679,000,000.
30 directorships in 10 insurance companies with total assets of $2,293,000,000.
105 directorships in 32 transportation systems having a total capital of $11,784,000,000.
63 directorships in 24 producing and trading companies having a total capitalization of $3,339,000,000.
25 directorships in 12 public utility corporations with a total capitalization of $2,150,000,000.
The investment banker had become, what he was ultimately bound to be, the center of the system built upon the century-long struggle to control the wealth of the continent in the interest of the favored few who happened to own the choicest natural gifts.
6. _The Cohesion of Wealth_
The struggle for wealth and power, actively waged among the business men of the United States for more than a century, has thus by a process of elimination, subordination and survival, placed a few small groups of strong men in a position of immense economic power. The growth of surplus and its importance in the world of affairs has made the investment banker the logical center of this business leadership. He, with his immediate associates, directs and controls the affairs of the economic world.
The spirit of competition ruled the American business world at the beginning of the last century, the forces of combination dominated at its close. The new order was the product of necessity, not of choice. The life of the frontier had ingrained in men an individualism that chafed under the restraints of combination. It was the compelling forces of impending calamity and the opportunity for greater economic advantage--not the traditions or accepted standards of the business world--that led to the establishment of the centralized wealth power. American business interests were driven together by the battering of economic loss and lured by the hope of greater economic gains.
Years of struggle and experience, by converting a scattered, individualistic wealth owning class into a highly organized, closely knit, homogeneous group with its common interests in the development of industry and the safeguarding of property rights, have brought unity and power to the business world.
Individually the members of the wealth-controlling class have learned that "in union there is strength"; collectively they are gripped by the "cohesion of wealth"--the class conscious instinct of an associated group of human beings who have much to gain and everything to lose.
FOOTNOTES:
[37] The 169 largest railroads in the United States have issued 84,418,796 shares of stock. ("American Labor Year Book," 1917-18, p. 169.) Theoretically, therefore, there might be eighty-four millions of owners of the American railroads.
[38] Summary of the Report of the Federal Trade Commission on the Meat Packing Industry, July 3, 1918, Wash., Govt. Print., 1918.
VIII. THEIR UNITED STATES
1. _Translating Wealth into Power_
The first object of the economic struggle is wealth. The second is power.
At the end of their era of competition, the leaders of American business found themselves masters of such vast stores of wealth that they were released from the paralyzing fear of starvation, and were guaranteed the comforts and luxuries of life. Had these men sought wealth as a means of satisfying their physical needs their object would have been attained.
The gratification of personal wants is only a minor element in the lives of the rich. After they have secured the things desired, they strive for the power that will give them control over their fellows.
The possession of things, is, in itself, a narrow field. The control over productive machinery gives him who exercises it the power to enjoy those things which the workers with machinery produce. The control over public affairs and over the forces that shape public opinion give him who exercises it the power to direct the thoughts and lives of the people. It is for these reasons that the keen, self-assertive, ambitious men who have come to the top in the rough and tumble of the business struggle have steadily extended their ownership and their control.
2. _The Wealth of the United States_
The bulk of American wealth, which consists for the most part of land and buildings, is concentrated in the centers of commerce and industry--in the regions of supreme business power.
The last detailed estimate of the wealth of the United States was made by the Census Bureau for the year 1912. At that time, the total wealth of the country was placed at $187,739,000,000. (The estimate for 1920 is $500,000,000,000.) Roughly speaking, this represented an estimate of exchangeable values. The figures, at best, are rough approximations. Their importance lies, not in their accuracy, but in the picture which they give of relationships.
The Total Wealth of the United States, Classified by Groups, with the Percentage of the Total Wealth in Each Group[39]
_Total Estimated Wealth_
_Amount_ (000,000 _Per Cent_ _Wealth Groups_ _Omitted_) _of Total_
1. Real Property (land and buildings) $110,676 59
2. Public Utilities (railroads, street railways, telegraph, telephone, electric light, etc.) 26,415 14
3. Live Stock and Machinery (live stock, farm implements and manufacturing machinery) 13,697 7
4. Raw Materials, Manufactured Products, Merchandise (including gold and silver bullion) 24,193 13
5. Personal Possessions (clothing, personal adornments, furniture, carriages, etc.) 12,758 7
Total of all groups $187,739 100
The bulk of the exchangeable wealth of the United States consists of "productive" or "investment" property. If, to the total of 110 billions given by the Census as the value of real property, are added the real property values of the public utilities, the total will probably exceed three quarters of the total wealth of the United States. If, in addition, account is taken of the fact that much of the wealth classed as "raw materials, etc.," is the immediate product of the land (coal, ore, timber), some idea may be obtained of the extent to which the estimated wealth of the country is in the form of land, its immediate products, and buildings. Furthermore, it must be remembered that great quantities of ore lands, timber lands, waterpower sites, etc., are assessed at only a fraction of their total present value.
The personal property of the country is valued at less than one fourteenth of the total wealth. It is in reality a negligible item, as compared with the value of the real property, of the public utilities, and of the raw materials and products of industry.
The wealth of the United States is in permanent form--land and improvements; personal possessions are a mere incident in the total. In truth, American wealth is in the main productive (business) wealth, designed for the further production of goods, rather than for the satisfaction of human wants.
3. _Ownership and Control_
Who owns this vast wealth? It is impossible to answer the question with anything like definiteness. Figures have been compiled to show that five per cent of the people own two-thirds to three-quarters of it; that the poorest two-thirds of the people own five per cent of it, and that the well-to-do or middle class own the remainder. These figures would make it appear that more than one-fourth of the population is in the middle class. If the income-tax returns are to be trusted this proportion is far too high. On all hands it is admitted that the wealth of the country is concentrated in the hands of a small fraction of the people and the important wealth--that is, the wealth upon which production, transportation and exchange depends--is in still fewer hands.
Neither the total wealth of the country, nor that portion of the total which is owned directly by the propertied class is of most immediate moment. Ownership does not necessarily involve control. A puddler in the Gary Mills may own five shares of stock in the Steel Corporation without ever raising his voice to determine the corporation policy. This is ownership without control. On the other hand, a banking house through a voting trust agreement, may control the policy of a corporation in which it does not own one per cent of the stock. This is control without ownership. Ownership may be quite incidental. It is control that counts in terms of power.
Most of the property owners in the United States play no part in the control of prices or of production, in the direction of economic policy, or in the management of economic affairs.
Theoretically, stockholders direct the policies of corporations, and, therefore, each holder of 5 or 10 shares of corporate stock would play a
## part in deciding economic affairs. Practically, the small stockholder
has no part in business control.
The small farmer--the small business man of largest numerical consequence--has been exploited by the great interests for two generations. Despite his numbers and his organizations, despite his frequent efforts, through anti-trust laws, railway control laws, banking reform laws, and the like, he has little voice in determining important economic policies.
The small savings bank depositor or the holder of an ordinary insurance policy is a negative rather than a positive factor in economic control. Not only does he exercise no power over the dollar which he has placed with the bank or with the insurance company, but he has thereby strengthened the hands of these organizations. Each dollar placed with the financier is a dollar's more power for him and his.
Suppose--the impossible--that half of the families in the United States "own property." Subtract from this number the small stockholders; the holders of bonds, notes and mortgages; the small tradesman; the small farmer; the home owner and the owner of a savings-bank deposit or of an insurance policy--what remains? There are the large stockholders, the owners and directors of important industries, public utilities, banks, trust companies and insurance companies. These persons, in the aggregate, constitute a fraction of one per cent of the adult population of the United States.
Start with the total non-personal wealth of the country, subtract from it the share-values of the small stockholders; the values of all bonds, mortgages and notes; the property of the small tradesman and the small farmer; the value of homes--what remains? There are left the stocks in the hands of the big stockholders; the properties owned and directed by the owners and directors of important industries, public utilities, banks, trust companies and insurance companies. This wealth in the aggregate probably makes up less than 10 per cent of the total wealth of the country and yet the tiny fraction of the population which owns this wealth can exercise a dictatorial control over the economic policies that underlie American public life.
4. _The Avenues of Mastery_
While control rests back directly or indirectly upon some form of ownership, most owners exercise little or no control over economic affairs. Instead they are made the victims of a social system under which one group lives at the expense of another.
Against this tendency toward control by one group or class (usually a minority) over the lives of another group or class (usually a majority) the human spirit always has revolted. The United States in its earlier years was an embodiment of the spirit of that revolt. President Wilson characterized it excellently in 1916. Speaking of the American Flag, he said,--"That flag was originally stained in very precious blood, blood spilt, not for any dynasty, nor for any small controversies over national advantage, but in order that a little body of three million men in America might make sure that no man was their master."[40]
Against mastery lovers of liberty protest. Mastery means tyranny; mastery means slavery.
Mastery has always been based upon some form of ownership. There is in the United States a group, growing in size, of people who take more in keep than they give in service; people who own land; franchises; stocks and bonds and mortgages; real estate and other forms of investment property; people who are living without ever lifting a finger in toil, or giving anything in labor for an unceasing stream of necessaries, comforts and luxuries. These people, directly or indirectly, are the owners of the productive machinery of the United States.
Historically there have been a number of stages in the development of mastery. First, there was the ownership of the body. One man owned another man, as he might own a house or a pile of hides. At another stage, the owner of the land--the feudal baron or the landlord--said to the tenant, who worked on his land: "You stay on my land. You toil and work and make bread and I will eat it." The present system of mastery is based on the ownership by one group of people, of the productive wealth upon which depends the livelihood of all. The masters of present day economic society have in their possession the natural resources, the tools, the franchises, patents, and the other phases of the modern industrial system with which the people must work in order to live. The few who own and control the productive wealth have it in their power to say to the many who neither own nor control,--"You may work or you may not work." If the masses obtain work under these conditions the owners can say to them further,--"You work, and toil and earn bread and we will eat it." Thus the few, deriving their power from the means by which their fellows must work for a living, own the jobs.
5. _The Mastery of Job-Ownership_
Job-ownership is the foundation of the latest and probably the most complete system of mastery ever perfected. The slave was held only in physical bondage. Behind serfdom there was land ownership and a religious sanction. "Divine right" and "God's anointed," were terms used to bulwark the position of the owning class, who made an effort to dominate the consciences as well as the bodies of their serfs. Job-ownership owes its effectiveness to a subtle, psychological power that overwhelms the unconscious victim, making him a tool, at once easy to handle and easy to discard.
The system of private ownership that succeeded Feudalism taught the lesson of economic ambition so thoroughly that it has permeated the whole world. The conditions of eighteenth century life have passed, perhaps forever, but its psychology lingers everywhere.
The job-holder has been taught that he must "get ahead" in the world; that if he practices the economic virtues,--thrift, honesty, earnestness, persistence, efficiency--he will necessarily receive great economic reward; that he must support his family on the standard set by the community, and that to do all of these essential things, he must take a job and hold on to it. Having taken the job, he finds that in order to hold it, he must be faithful to the job-owner, even if that involves faithlessness to his own ideas and ideals, to his health, his manhood, and the lives of his wife and children.
The driving power in slavery was the lash. Under serfdom it was the fear of hunger. The modern system of job-ownership owes its effectiveness to the fact that it has been built upon two of the most potent driving forces in all the world--hunger and ambition--the driving force that comes from the empty stomach and the driving force that comes from the desire for betterment. Thus job-owning, based upon an automatic self-drive principle, enables the job-owner to exact a return in faithful service that neither slavery nor serfdom ever made possible. Job-owning is thus the most thorough-going form of mastery yet devised by the ingenuity of man.
Unlike the slave owner and the Feudal lord the modern job-owner has no responsibility to the job-holder. The slave owner must feed, clothe and house his slave--otherwise he lost his property. The Feudal lord must protect and assist his tenant. That was a part of his bargain with his overlord. The modern job-owner is at liberty, at any time, to "discharge" the job-holder, and by throwing him out of work take away his chance of earning a living. While he keeps the job-holder on his payroll, he may pay him impossibly low wages and overwork him under conditions that are unfit for the maintenance of decent human life. Barring the factory laws and the health laws, he is at liberty to impose on the job-holder any form of treatment that the job-holder will tolerate.
There is no limit to the amount of industrial property that one man may own. Therefore, there is no limit to the number of jobs he may control. It is possible (not immediately likely) that one coterie of men might secure possession of enough industrial property to control the jobs of all of the gainfully occupied people in American industry. If this result could be achieved, these tens of millions would be able to earn a living only in case the small coterie in control permitted them to do so.
Job ownership is built, of necessity, on the ownership of land, resources, capital, credit, franchises, and other special privileges. But its power of control goes far beyond this mere physical ownership into the realms of social psychology.
The early colonists, who fled from the economic, political, social and religious tyranny of feudalism, believed that liberty and freedom from unjust mastery lay in the private ownership of the job. They had no thought of the modern industrial machine.
The abolitionists who fought slavery believed that freedom and liberty could be obtained by unshackling the body. They did not foresee the shackled mind.
The modern world, seeking freedom; yearning for liberty and justice; aiming at the overthrow of the mastery that goes with irresponsible power, finds to its dismay that the ownership of the job carries with it, not only economic mastery, but political, social and even religious mastery, as well.
6. _The Ownership of the Product_
The industrial overlord holds control of the job with one hand. With the other he controls the product of industry. From the time the raw material leaves the earth in the form of iron ore, crude petroleum, logs, or coal, through all of the processes of production, it is owned by the industrial master, not by the worker. Workers separate the product from the earth, transport it, refine it, fabricate it. Always, the product, like the machinery, is the possession of the owning class.
While industry was competitive, the pressure of competition kept prices at a cost level, and the exploiting power of the owner was confined to the job-holder. To-day, through combinations and consolidations, industry has ceased to be competitive, and the exploiting power of the job-owner is extended through his ownership of the product.
The modern town-dweller is almost wholly in the hands of the private owners of the products upon which he depends. The ordinary city dweller spends two-fifths of his income for food; one-fifth for rent, fuel and light, and one-fifth for clothes. Food, houses, fuel (with the exception of gas supply in some cities), and clothing are privately owned. The public ownership of streets and water works, of some gas, electricity, street cars, and public markets, is a negligible factor in the problem. The private monopolist has the upper hand and he is able through the control of transportation, storage, and merchandising facilities, to make handsome profits for the "service" which he renders the consumer.
7. _The Control of the Surplus_
The wealth owners are doubly entrenched. They own the jobs upon which most families depend for a living. They own the necessaries of life which most families must purchase in order to live. Further, they control the surplus wealth of the community.
There are three principal channels of surplus. First of all there is the surplus laid aside by business concerns, reinvested in the business, spent for new equipment and disposed of in other ways that add to the value of the property. Second, there are the 19,103 people in the United States with incomes of $50,000 or more per year; the 30,391 people with incomes of $25,000 to $50,000 per year and the 12,502 people with incomes of $10,000 to $25,000 per year. (Figures for 1917.) Many, if not most of these rich people, carry heavy insurance, invest in securities, or in some other way add to surplus. In the third place there are the small investors, savings-bank depositors, insurance policy holders who, from their income, have saved something and have laid it aside for the rainy day. The masters of economic life--bankers, insurance men, property holders, business directors--are in control of all three forms of surplus.
The billions of surplus wealth that come each year under the control of the masters carry with them an immense authority over the affairs of the community. The owners of wealth owe much of their immediate power to the fact that they control this surplus, and are in a position to direct its flow into such channels as they may select.
8. _The Channels of Public Opinion_
No one can question the control which business interests exercise over the jobs, the industrial product, and the economic surplus of the community. These facts are universally admitted. But the corollaries which flow naturally from such axioms are not so readily accepted. Yet given the economic power of the business world, the control over the channels of public opinion and over the machinery of government follows as a matter of course.
The channels of public opinion--the school, the press, the pulpit,--are not directly productive of tangible economic goods, yet they depend upon tangible economic goods for their maintenance. Whence should these goods come? Whence but from the system that produces them, through the men who control that system! The plutocracy exercises its power over the channels of public opinion in two ways,--the first, by a direct or business office control; and second, by an indirect or social prestige control.
The business office control is direct and simple. Schools, colleges, newspapers, magazines and churches need money. They cannot produce tangible wealth directly, and they must, therefore, depend upon the surplus which arises from the productive activities of the economic world. Who controls that surplus? Business men. Who, then, is in a position to dictate terms in financial matters? Who but the dominant forces in business life?
The facts are incontrovertible. It is not mere chance that recruits the overwhelming majority of school-board members, college trustees, newspaper managers, and church vestrymen, from the ranks of successful business and professional men. It is necessary for the educator, the journalist, and the minister to work through these men in order to secure the "sinews of war." They are at the focal points of power because they control the sources of surplus wealth.
The second method of maintaining control--through the control of social prestige--is indirect, but none the less effective. The young man in college; the young graduate looking for a job; the young man rising in his profession, and the man gaining ascendancy in his chosen career are brought into constant contact with the "influential" members of the business world. It is the business world that dominates the clubs and the vacation spots; it is the business world that is met in church, at the dinner tables and at the social gathering.
The man who would "succeed" must retain the favor of this group. He does so automatically, instinctively or semi-consciously--it is the common, accepted practice and he falls in line.
The masters need not bribe. They need not resort to illegal or unethical methods. The ordinary channels of advertising, of business acquaintance and patronage, of philanthropy and of social intercourse clinch their power over the channels of public opinion.
9. _The Control of Political Machinery_
The American government,--city, state and nation--is in almost the same position as the schools, newspapers and churches. It does not turn out tangible, economic products. It depends, for its support, upon taxes which are levied, in the first instance, upon property. Who are the owners of this property? The business interests. Who, therefore, pay the bills of the government? The business interests.
Nowhere has the issue been stated more clearly or more emphatically than by Woodrow Wilson in certain passages of his "New Freedom." As a student of politics and government--particularly the American Government--he sees the power which those who control economic life are able to exercise over public affairs, and realizes that their influence has grown, until it overtops that of the political world so completely that the machinery of politics is under the domination of the organizers and directors of industry.
"We know," writes Mr. Wilson in "The New Freedom," "that something intervenes between the people of the United States and the control of their own affairs at Washington. It is not the people who have been ruling there of late" (p. 28). "The masters of the government of the United States are the combined capitalists and manufacturers of the United States.... Suppose you go to Washington and try to get at your government. You will always find that while you are politely listened to, the men really consulted are the men who have the biggest stakes--the big bankers, the big manufacturers, the big masters of commerce, the heads of railroad corporations and of steamship corporations.... Every time it has come to a critical question, these gentlemen have been yielded to and their demands have been treated as the demands that should be followed as a matter of course. The government of the United States at present is a foster-child of the special interests" (p. 57-58). "The organization of business has become more centralized, vastly more centralized, than the political organization of the country itself" (p. 187). "An invisible empire has been set up above the forms of democracy" (p. 35). "We are all caught in a great economic system which is heartless" (p. 10).
This is the direct control exercised by the plutocracy over the machinery of government. Its indirect control is no less important, and is exercised in exactly the same way as in the case of the channels of public opinion.
Lawyers receive preferment and fees from business--there is no other large source of support for lawyers. Judges are chosen from among these same lawyers. Usually they are lawyers who have won preferment and emolument. Legislators are lawyers and business men, or the representatives of lawyers and business men. The result is as logical as it is inevitable.
The wealth owners control the machinery of government because they pay the taxes and provide the campaign funds. They control public officials because they have been, are, or hope to be, on the payrolls, or
## participants in the profits of industrial enterprises.
10. _It is "Their United States"_
The man fighting for bread has little time to "turn his eyes up to the eternal stars." The western cult of efficiency makes no allowances for philosophic propensities. Its object is product and it is satisfied with nothing short of that sordid goal.
The members of the wealth owning class are relieved from the food struggle. Their ownership of the social machinery guarantees them a secure income from which they need make no appeal. These privileges provide for them and theirs the leisure and the culture that are the only possible excuse for the existence of civilization.
The propertied class, because it owns the jobs, the industrial products, the social surplus, the channels of public opinion and the political machinery also enjoys the opportunity that goes with adequately assured income, leisure and culture.
The members of the dominant economic class hold a key--property ownership--which opens the structure of social wealth. Those who have access to this key are the blessed ones. Theirs are the things of this world.
The property owners enjoy the fleshpots. They hold the vantage points. The vital forces are in their hands. Economically, politically, socially, they are supreme.
If the control of material things can make a group secure, the wealth owners in the United States are secure. They hold property, prestige, power.
The phrase "our United States" as used by the great majority of the people is a misnomer. With the exception of a theoretically valuable but practically unimportant right called "freedom of contract," the majority of the wage earners in the United States have no more excuse for using the phrase "our United States" than the slaves in the South, before the war, for saying "our Southland."
The franchise is a potential power, making it theoretically possible for the electorate to take possession of the country. In practice, the franchise has had no such result. Quite the contrary, the masters of American life by a policy of chicanery and misrepresentation, advertise and support first one and then the other of the "Old Parties," both of which are led by the members of the propertied class or by their retainers. The people, deluded by the press, and ignorant of their real interests, go to the polls year after year and vote for representatives that represent, in all of their interests, the special privileged classes.
The economic and social reorganization of the United States during the past fifty years has gone fast and far. The system of perpetual (fee simple) private ownership of the resources has concentrated the control over the natural resources in a small group, not of individuals, but of corporations; has created a new form of social master, in the form of a land-tool-job owner; has thus made possible a type of absentee-landlordism more effective and less human than were any of its predecessors and has decreased the responsibility at the same time that it has augmented the power of the owning group. These changes have been an integral part of a general economic transformation that has occupied the chief energies of the ablest men of the community for the past two generations.
The country of many farms, villages and towns, and of a few cities, with opportunity free and easy of access, has become a country of highly organized concentrated wealth power, owned by a small fraction of the people and controlled by a tiny minority of the owners for their benefit and profit. The country which was rightfully called "our United States" in 1840, by 1920 was "their United States" in every important sense of the word.
FOOTNOTES:
[39] "Estimated Valuation of National Wealth, 1850-1912," Bureau of the Census, 1915, p. 15.
[40] "Addresses of President Wilson," House Doc. 803. Sixty-fourth Congress, 1st Session (1916), p. 13.
IX. THE DIVINE RIGHT OF PROPERTY
1. _Land Ownership and Liberty_
The owners of American wealth have been molded gradually into a ruling class. Years of brutal, competitive, economic struggle solidified their ranks,--distinguishing friend from enemy; clarifying economic laws, and demonstrating the importance of coordination in economic affairs. Economic control, once firmly established, opened before the wealth owning class an opportunity to dominate the entire field of public life.
Before the property owners could feel secure in their possessions, steps must be taken to transmute the popular ideas regarding "property rights" into a public opinion that would permit the concentration of important property in the hands of a small owning class, at the same time that it held to the conviction that society, without privately owned land and machinery, was unthinkable.
Many of the leading spirits among the colonists had come to America in the hope of realizing the ideal of "Every man a farm, and every farm a man." Upon this principle they believed that it would be possible to set up the free government which so many were seeking in those dark days of the divine right of kings.
For many years after the organization of the Federal Government men spoke of the public domain as if it were to last indefinitely. As late as 1832 Henry Clay, in a discussion of the public lands, could say, "We should rejoice that this bountiful resource possessed by our country, remains in almost undiminished quantity." Later in the same speech he referred to the public lands as being "liberally offered,--in exhaustless quantities, and at moderate prices, enriching individuals and tending to the rapid improvement of the country."[41]
The land rose in price as settlers came in greater numbers. Land booms developed. Speculation was rife. Efforts were made to secure additional concessions from the Government. It was in this debate, where the public land was referred to as "refuse land" that Henry Clay felt called upon to remind his fellow-legislators of the significance and growing value of the public land. He said, "A friend of mine in this city bought in Illinois last fall about two thousand acres of this refuse land at the minimum price, for which he has lately refused six dollars per acre.... It is a business, a very profitable business, at which fortunes are made in the new states, to purchase these refuse lands and without improving them to sell them at large advances."[42]
A century ago, while it was still almost a wilderness, Illinois began to feel the pressure of limited resources--a pressure which has increased to such a point that it has completely revolutionized the system of society that was known to the men who established the Government of the United States.
This early record of a mid-western land boom, with Illinois land at six dollars an acre, tells the story of everything that was to follow. Even in 1832 there was not enough of the good land to go around. Already the community was dividing itself into two classes--those who could get good land and those who could not. A wise man, understanding the part played by economic forces in determining the fate of a people, might have said to Henry Clay on that June day in 1832, "Friend, you have pronounced the obituary of American liberty."
Some wise man might have spoken thus, but how strange the utterance would have sounded! There was so much land, and all history seemed to guarantee the beneficial results that are derived from individual land ownership. The democracies of Greece and Rome were built upon such a foundation. The yeomanry of England had proved her pride and stay. In Europe the free workers in the towns had been the guardians of the rights of the people. Throughout historic times, liberty has taken root where there is an economic foundation for the freedom which each man feels he has a right to demand.
2. _Security of "Acquisitions"_
Feudal Europe depended for its living upon agriculture. The Feudal System had concentrated the ownership of practically all of the valuable agricultural land in the hands of the small group of persons which ruled because it controlled economic opportunity. The power of this class rested on its ownership of the resource upon which the majority of the people depended for a livelihood.
The Feudal System was transplanted to England, but it never took deep root there. When in 1215 A. D. (only a century and a half after the Great William had made his effort to feudalize England) King John signed the Magna Carta, Feudalism proper gave way to landlordism--the basis of English economic life from that time to this.
The system of English landlordism (which showed itself at its worst in the absentee landlordism of Ireland) differed from Feudalism in this essential respect,--Feudalism was based upon the idea of the divine right of kings. English landlordism was based on the idea of divine right of property. English landlordism is the immediate ancestor of the property concept that is universally accepted in the business world of to-day.
The evils of Feudalism and of landlordism were well known to the American colonists who were under the impression that they arose not from the fact of ownership, but from the concentration of ownership. The resources of the new world seemed limitless, and the possibility that landlordism might show its ugly head on this side of the Atlantic was too remote for serious consideration.
With the independence of the United States assured after the War of 1812; with the growth of industry, and the coming of tens of thousands of new settlers, the future of democracy seemed bright. Daniel Webster characterized the outlook in 1821 by saying, "A country of such vast extent, with such varieties of soil and climate, with so much public spirit and private enterprise, with a population increasing so much beyond former examples, ... so free in its institutions, so mild in its laws, so secure in the title it confers on every man to his own acquisitions,--needs nothing but time and peace to carry it forward to almost any point of advancement."[43]
"So free in its institutions, so mild in its laws, so secure in the title it confers on every man to his own acquisitions,"--the words were prophetic. At the moment when they were uttered the forces were busy that were destined to realize Webster's dream, on an imperial scale, at the expense of the freedom which he prized. Men were free to get what they could, and once having secured it, they were safeguarded in its possession. Property ownership was a virtue universally commended. Constitutions were drawn and laws were framed to guarantee to property owners the rights to their property, even in cases where this property consisted of the bodies of their fellow men.
The movement toward the protection of property rights has been progressive. Webster as a representative of the dominant interests of the country a hundred years ago rejoiced that every man had a secure title to "his own acquisitions," at a time when the property of the country was generally owned by those who had expended some personal effort in acquiring it. It was a long step from these personal acquisitions to the tens of billions of wealth in the hands of twentieth century American corporations. Daniel Webster helped to bridge the gap. He was responsible, at least in part, for the Dartmouth College Decision (1816) in which the Supreme Court ruled that a charter, granted by a state, is a contract that cannot be modified at will by the state. This decision made the corporation, once created and chartered, a free agent. Then came the Fourteenth Amendment with its provision that "no state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty or property, without due process of law." The amendment was intended to benefit negroes. It has been used to place property ownership first among the American beatitudes.
Corporations are "persons" in the eyes of the law. When the state of California tried to tax the property of the Southern Pacific Railroad at a rate different from that which it imposed on persons, the Supreme Court declared the law unconstitutional. This decision, coupled with that in the Dartmouth College Case secured for a corporation "the same immunities as any other person; and since the charter creating a corporation is a contract, whose obligation cannot be impaired by the one-sided act of a legislature, its constitutional position, as property holder, is much stronger than anywhere in Europe." These decisions "have had the effect of placing the modern industrial corporation in an almost impregnable constitutional position."[44]
Surrounded by constitutional guarantees, armed with legal privileges and prerogatives and employing the language of liberty, the private property interests in the United States have gone forward from victory to victory, extending their power as they increased and concentrated their possessions.
3. _Safeguarding Property Rights_
The efforts of Daniel Webster and his contemporaries to protect "acquisitions" have been seconded, with extraordinary ability, by business organizers, accountants, lawyers and bankers, who have broadened the field of their endeavors until it includes not merely "acquisitions," but all "property rights." Daniel Webster lived before the era of corporations. He thought of "acquisitions" as property secured through the personal efforts of the human being who possessed it. To-day more than half of the total property and probably more than three-quarters of productive wealth is owned by corporations. It required ability and foresight to extend the right of "acquisitions" to the rights of corporate stocks and bonds. The leaders among the property owners possessed the necessary qualifications. They did their work masterfully, and to-day corporate property rights are more securely protected than were the rights of acquisitions a hundred years ago.
The safeguards that have been thrown about property are simple and effective. They arose quite naturally out of the rapidly developing structure of industrialism.
_First_--There was an immense increase in the amount of property and of surplus in the hands of the wealth-owning class. After the new industry was brought into being with the Industrial Revolution, economic life no longer depended so exclusively upon agricultural land. Coal, iron, copper, cement, and many other resources could now be utilized, making possible a wider field for property rights. Again, the amount of surplus that could be produced by one worker, with the assistance of a machine, was much greater than under the agricultural system.
_Second_--The new method of conducting economic affairs gave the property owners greater security of possession. Property holders always have been fearful that some fate might overtake their property, forcing them into the ranks of the non-possessors. When property was in the form of bullion or jewels, the danger of loss was comparatively great. The Feudal aristocracy, with its land-holdings, was more secure. Land-holdings were also more satisfactory. Jewels and plate do not pay any rent, but tenants do. Thus the owner of land had security plus a regular income.
The corporation facilitated possession by providing a means (stocks and bonds) whereby the property owner was under no obligation other than that of clipping coupons or cashing interest checks upon "securities" that are matters of public record; issued by corporations that make detailed financial reports, and that are subject to vigorous public inspection and, in the cases of banks and other financial organizations, to the most stringent regulation.
_Third_--Greater permanence has been secured for property advantages. Corporations have perpetual, uninterrupted life. The deaths of persons do not affect them. The corporation also overcame the danger of the dissipation of property in the process of "three generations from shirt sleeves to shirt sleeves." The worthless son of the thrifty parent may still be able to squander his inheritance, but that simply means a transfer of the title to his stocks and bonds. The property itself remains intact.
_Fourth_--Property has secured a claim on income that is, in the last analysis, prior to the claim of the worker.
When a man ran his own business, investing his capital, putting back part of his earnings, and taking from the business only what he needed for his personal expenses, "profits" were a matter of good fortune. There were "good years" and "bad years," when profits were high or low. Many years closed with no profit at all. The average farmer still handles his business in that way.
The incorporation of business, and the issuing of bonds and stocks has revolutionized this situation. It is no longer possible to "wait till things pick up." If the business has issued a million in bonds, at five per cent, there is an interest charge of $50,000 that must be met each year. There may be no money to lay out for repairs and needed improvements, but if the business is to remain solvent, it must pay the interest on its bonds.
Businesses that are issuing securities to the public face the same situation with regard to their stocks. Wise directors see to it that a regular rate, rather than a high rate of dividends, is paid. Regularity means greater certainty and stability, hence better consideration from the investing public.
_Fifth_--The practices of the modern economic world have gone far to increase the security of property rights.
Business men have worked ardently to "stabilize" business. They have insisted upon the importance of "business sanity;" of conservatism in finance; of the returns due a man who risks his wealth in a business venture; and of the fundamental necessity of maintaining business on a sound basis. After centuries of experiment they have evolved what they regard as a safe and sane method of financial business procedure. Every successful business man tried to live up to the following well-established formula.
First, he pays out of his total returns, or gross receipts, the ordinary costs of doing business--materials, labor, repairs and the like. These payments are known as running expenses or up-keep.
Second, after up-keep charges are paid he takes the remainder, called gross income, and pays out of it the fixed charges--taxes, insurance, interest and depreciation.
Third, the business man, having paid all of the necessary expenses of doing business (the running expenses and the fixed charges), has left a fund (net income) which, roughly speaking, is the profits of the business. Out of this net income, dividends are paid, improvements and extensions of the plant are provided for.
Fourth, the careful business man increases the stability of his business by adding something to his surplus or undivided profits.
The operating statistics of the United Steel Corporation for 1918 illustrate the principle:
1. Gross Receipts $1,744,312,163 Manufacturing and Operating expenses including ordinary repairs 1,178,032,665 --------------- 2. Gross Earnings $ 566,279,498 Other income 40,474,823 --------------- $ 606,754,321
General Expense, (including commission and selling expense, taxes, etc.) 337,077,986 Interest, depreciation, sinking fund, etc. 144,358,958 -------------- 3. Net Income $ 125,317,377 Dividends 96,382,027 -------------- 4. Surplus for the year $ 28,935,350 Total surplus 460,596,154
Like every carefully handled business, the Steel Corporation,--
1. Paid its running expenses, 2. Paid its fixed obligations, 3. Divided up its profits, 4. And kept a nest egg.
The effectiveness of such means of stabilizing property income is illustrated by a compilation (published in the _Wall Street Journal_ for August 7th, 1919) of the business of 104 American corporations between December 31, 1914, and December 31, 1918. The inventories--value of property owned--had increased from 1,192 millions to 2,624 millions of dollars; the gain in surplus, during the four years, was 1,941 millions; the increase in "working capital" was 1,876 millions. These corporations, representing only a small fraction of the total business of the country, had added billions to their property values during the four years.
These various items,--up-keep; depreciation; insurance; taxes; interest; dividends and surplus,--are recognized universally by legislatures and courts as "legitimate" outlays. They, therefore, are elements that are always present in the computation of a "fair" price. The cost to the consumer of coffee, shoes, meat, blankets, coal and transportation are all figured on such a basis. Hence, it will be seen that each time the consumer buys a pair of shoes or a pound of meat, he is paying, with part of his money, for the stabilizing of property.
Fifth. Property titles under this system are rendered immortal. A thousand dollars, invested in 1880 in 5 per cent. 40 year bonds, will pay to the owner $2,000 in interest by 1920, at which time the owner gets his original thousand back again to be re-invested so long as he and his descendants care to do so. The dollar, invested in the business of the steel corporation, by the technical processes of bookkeeping, is constantly renewed. Not only does it pay a return to the owner, but literally, it never dies.
The community is built upon labor. Its processes are continued and its wealth is re-created by labor. The men who work on the railroad keep the road operating; those who own the railroad owe to it no personal fealty, and perform upon it no personal service. If the worker dies, the train must stop until he is replaced; if the owner dies, the clerk records a change of name in the registry books.
The well-ordered society will encourage work. It will aim to develop enthusiasm, to stimulate activity. Nevertheless, in "practical America" a scheme of economic organization is being perfected under which the cream of life goes to the owners. They have the amplest opportunities. They enjoy the first fruits.
4. _Property Rights and Civilization_
Under these circumstances, it is easy to see how "the rights of property" soon comes to mean the same thing as "civilization," and how "the preservation of law and order" is always interpreted as the protection of property. With a community organized on a basis which renders property rights supreme in all essential particulars, it is but natural that the perpetuation of these rights should be regarded as the perpetuation of civilization itself.
The present organization of economic life in the United States permits the wealth owners through their ownership to live without doing any work upon the work done by their fellows. As recipients of property income (rent, interest and dividends) they have a return for which they need perform no service,--a return that allows them to "live on their income."
The man who fails to assist in productive activity gives nothing of himself in return for the food, clothing and shelter which he enjoys,--that is, he lives on the labor of others. Where some have sowed and reaped, hammered and drilled, he has regaled himself on the fruits of their toil, while never toiling himself.
The matter appears most clearly in the case of an heir to an estate. The father dies, leaving his son the title deeds to a piece of city land. If he has no confidence in his son's business ability or if his son is a minor, he may leave the land in trust, and have it administered in his son's interest by some well organized trust company. The father did not make the land, though he did buy it. The son neither made nor bought the land, it merely came to him; and yet each year he receives a rent-payment upon which he is able to live comfortably without doing any work. It must at once be apparent that this son of his father, economically speaking, performs no function in the community, but merely takes from the community an annual toll or rental based on his ownership of a part of the land upon, which his fellowmen depend for a living. Of what will this toll consist? Of bread, shoes, motor-cars, cigars, books and pictures,--the products of the labor of other men.
This son of his father is living on his income,--supported by the labor of other people. He performs no labor himself, and yet he is able to exist comfortably in a world where all of the things which are consumed are the direct or indirect product of the labor of some human being.
Living on one's income is not a new social experience, but it is relatively new in the United States. The practice found a reasonably effective expression in the feudalism of medieval Europe. It has been brought to extraordinary perfection under the industrialism of Twentieth Century America.
Imagine the feelings of the early inhabitants of the American colonies toward those few gentlemen who set themselves up as economically superior beings, and who insisted upon living without any labor, upon the labor performed by their fellows. It was against the suggestion of such a practice that Captain John Smith vociferated his famous "He that will not work, neither shall he eat." The suggestion that some should share in the proceeds of community life without participating in the hardships that were involved in making a living seemed preposterous in those early days.
To-day, living on one's income is accepted in every industrial center of the United States as one of the methods of gaining a livelihood. Some men and women work for a living. Other men and women own for a living.
Workers are in most cases the humble people of the community. They do not live in the finest homes, eat the best food, wear the most elaborate clothing, or read, travel and enjoy the most of life.
The owners as a rule are the well-to-do part of the community. They derive much of all of their income from investments. The return which they make to the community in services is small when compared with the income which they receive from their property holdings.
Living on one's income is becoming as much a part of American economic life as living by factory labor, or by mining, or by manufacturing, or by any other occupation upon which the community depends for its products. The difference between these occupations and living on one's income is that they are relatively menial, and it is relatively respectable, that is, they have won the disapprobation and it has won the approbation of American public opinion.
The best general picture of the economic situation that permits a few people to live on their incomes, while the masses of the people work for a living, is contained in the reports of the Federal Commissioner of Internal Revenue. The figures for 1917 ("Statistics of Income for 1917" published August 1919) show that 3,472,890 persons filed returns, making one for each six families in the United States. Almost one half of the total number of returns made in 1917 were from persons whose income was between $1000 and $2000. There were 1,832,132 returns showing incomes of $2000 or more, one for each twelve families in the country.
The number of persons receiving the higher incomes is comparatively small. There were 270,666 incomes between $5,000 and $10,000; 30,391 between $10,000 and $25,000; 12,439 between $25,000 and $50,000. There were 432,662 returns (22 for each 1000 families in the United States) showing incomes of $5,000 or over; there were 161,996 returns (8 returns for each 1000 families) showing incomes of $10,000 or over; 49,494 showing incomes of $25,000 and over; 19,103 showing incomes of $50,000 and more. Thus the number of moderate and large incomes, compared with the total population of the country, was minute.
The portion of the report that is of particular interest, in so far as the present study is concerned, is that which presents a division of the total net income of those reporting $2,000 or more, into three classes--income from personal service, income from business profits and income from the ownership of property.
PERSONAL INCOMES BY SOURCES--1917
_Amount of_ _Per Cent_ _Income_ _of Total_ _Source_ _Income_ 1. Income from personal service; salaries, wages; commission, bonuses, director's fees, etc $ 3,648,437,902 30.21
2. Income from business; business, trade, commerce, partnership, farming, and profits from sales of real estate, stocks, bonds, and other property 3,958,670,028 32.77
3. Income from property; rents and royalties 684,343,399 5.67 Interest on bonds, notes, etc. 936,715,456 7.76 Dividends 2,848,842,499 23.59 Total from Property 4,469,901,354 37.02
4. Total income 12,077,009,284 100.00
Those persons who have incomes of $2,000 or more receive 30 cents on the dollar in the form of wages and salaries; 33 cents in the form of business profits, and 37 cents in the form of incomes from the ownership of property. The dividend payments alone--to this group of property owners, are equal to three quarters of the total returns for personal service.
These figures refer, of course, to all those in receipt of $2,000 or more per year. Obviously, the smaller incomes are in the form of wages, salaries, and business profits, while the larger incomes take the form of rent, interest and dividends. This is made apparent by a study of the detailed tables published in connection with the "Income Statistics for 1916."
Among those of small incomes--$5,000 to $10,000--nearly half of the income was derived from personal services. The proportion of the income resulting from personal service diminished steadily as the incomes rose until, in the highest income group--those receiving $2,000,000 or more per year, less than one-half of one per cent. was the result of personal service while more than 99 per cent. of the incomes came from property ownership.
A small portion of the American people are in receipt of incomes that necessitate a report to the revenue officers. Among those persons, a small number are in receipt of incomes that might be termed large--incomes of $10,000 or over, for example. Among these persons with large incomes the majority of the income is secured in the form of rent, interest, dividends and profits. The higher the income group, the larger is the percentage of the income that comes from property holdings.
The economic system that exists at the present time in the United States places a premium on property ownership. The recipients of the large incomes are the holders of the large amounts of property.
Large incomes are property incomes. The rich are rich because they are property owners. Furthermore, the organization of present-day business makes the owner of property more secure--far more secure in his income, than is the worker who produces the wealth out of which the property income is paid.
5. _Plutocracy_
The owning class in the United States is established on an economic basis,--the private ownership of the earth. No more solid foundation for class integrity and class power has ever been discovered.
The owners of the United States are powerfully entrenched. Operating through the corporation, its members have secured possession of the bulk of the more useful resources, the important franchises and the productive capital. Where they do not own outright, they control. The earth, in America, is the landlords and the fullness thereof. They own the productive machinery, and because they own they are able to secure a vast annual income in return for their bare ownership.
Families which enjoy property income have one great common interest--that of perpetuating and continuing the property income; hence the "cohesion of wealth." "The cohesion of wealth" is a force that welds individuals and families who receive property income into a unified group or class.
The cohesion of wealth is a force of peculiar social significance. It might perhaps be referred to as the class consciousness of the wealthy except that it manifests itself among people who have recently acquired wealth, more violently, in some cases, than it appears among those whose families have possessed wealth for generations. Then, the cohesion of wealth is not always an intelligent force. In the case of some persons it is largely instinctive.
Originally, the cohesion of wealth expresses itself instinctively among a group of wealth owners. They may be competing fiercely as in the case of a group of local banks, department stores, or landlords, but let a common enemy appear, with a proposition for currency reform, labor legislation or land taxation and in a twinkling the conflicting interests are thrown to the winds and the property owners are welded into a coherent, unified group. This is the beginning of a wealth cohesion which develops rapidly into a wealth consciousness.
American business, a generation ago, was highly competitive. Each business man's hand was raised against his neighbor and the downfall of one was a matter of rejoicing for all. The bitter experience of the nineties drove home some lessons; the struggles with labor brought some more; the efforts at government regulations had their effect; but most of all, the experience of meeting with men in various lines of business and discussing the common problems through the city, state and national and business organizations led to a realization of the fact that those who owned and managed business had more in common than they had in antagonism. By knifing one another they made themselves an easy prey for the unions and the government. By pooling ideas and interests they presented a solid front to the demands of organized labor and the efforts of the public to enforce regulation.
"Plutocracy" means control by those who own wealth. The "plutocratic class" consists of that group of persons who control community affairs because they own property. This class, because of its property ownership, is compelled to devote time and infinite pains to the task of safeguarding the sacred rights of property. It is to that task that the leaders of the American plutocracy have committed themselves, and it is from the results of that accomplished work that they are turning to new labors.
FOOTNOTES:
[41] Speech in the Senate, June 20, 1832. Works Colvin Colton, ed. New York, Putnam's, 1904, vol. 7, p. 503.
[42] Ibid., p. 503.
[43] "Speeches," E. P. Whipple, ed. Little, Brown & Co., 1910, pp. 59-60.
[44] "The Constitutional Position of Property in America," Arthur T. Hadley, _Independent_, April 16, 1908.
X. INDUSTRIAL EMPIRES
1. _They Cannot Pause!_
The foundations of Empire have been laid in the United States. Territory has been conquered; peoples have been subjugated or annihilated; an imperial class has established itself. Here are all of the essential characteristics of empire.
The American people have been busy laying the political foundations of Empire for three centuries. A great domain, taken by force of arms from the people who were in possession of it has been either incorporated into the Union, or else held as dependent territory. The aborigines have disappeared as a race. The Negroes, kidnaped from their native land, enslaved and later liberated, are still treated as an inferior people who should be the hewers of wood and the drawers of water. A vast territory was taken from Mexico as a result of one war. A quarter million square miles were secured from Spain in another; on the Continent three and a half millions of square miles; in territorial possessions nearly a quarter of a million more--this is the result of little more than two hundred years of struggle; this is the geographic basis for the American Empire.
The structure of owning class power is practically complete in the United States. Through long years the business interests have evolved a form of organization that concentrates the essential power over the industrial and financial processes in a very few hands,--the hands of the investment bankers. During this contest for power the plutocracy learned the value of the control of public opinion, and brought the whole machinery for the direction of public affairs under its domination. Thus political and social institutions as well as the processes of economic life were made subject to plutocratic authority. A hundred years has sufficed to promulgate ideas of the sacredness of private property that place its preservation and protection among the chief duties of man. Economic organization; the control of all important branches of public affairs, and the elevation of property rights to a place among the beatitudes--by these three means was the authority of the plutocracy established and safeguarded.
Since economic political and social power cover the field of authority that one human being may exercise over another, it might be supposed that the members of the plutocratic class would pause at this point and cease their efforts to increase power. But the owners cannot pause! A force greater than their wills compels them to go on at an ever growing speed. Within the vitals of the economic system upon which it subsists the plutocracy has found a source of never-ending torment in the form of a constantly increasing surplus.
2. _The Knotty Problem of Surplus_
The present system of industry is so organized that the worker is always paid less in wages than he creates in product. A part of this difference between product and wages goes to the upkeep and expansion of the industry in which the worker is employed. Another part in the form of interest, dividends, rents, royalties and profits, goes to the owners of the land and productive machinery.
The values produced in industry and handed to the industrial worker or property owner in the form of income, may be used or "spent" either for "consumption goods"--things that are to be used in satisfying human wants, such as street car transportation, clothing, school books, and smoking tobacco; or for production goods--things that are to be used in the making of wealth, such as factory buildings, lathes, harvesting machinery, railroad equipment. Those who have small incomes necessarily spend the greater part for the consumption of goods upon which their existence depends. On the other hand, those who are in receipt of large incomes cannot use more than a limited amount of consumption goods. Therefore, they are in a position to turn part of their surplus into production goods. As a reward for this "saving" the system gives them title to an amount of wealth equal to the amount saved, and in addition, it grants an amount of "interest" so that the next year the recipient of surplus gets the regular share of surplus, and beside that an additional reward in the form of interest. His share of the surplus is thus increased. That is, surplus breeds surplus.
The workers are, for the most part, spenders. The great bulk of their income is turned at once into consumption goods. The owners in many instances are capitalists who hold property for the purpose of turning the income derived from it into additional investments.
Could the worker buy back dollar for dollar the values which he produces there would be no surplus in the form of rent, interest, dividends and profits. The present economic system is, however, built upon the principle that those who own the lands and the productive machinery should be recompensed for their mere ownership. It follows, of course, that the more land and machinery there is to own the greater will be the amount of surplus which will go to the owners. Since surplus breeds surplus the owners find that it pays them not to use all of their income in the form of consumption, but rather to invest all that they can, thereby increasing the share of surplus that is due them. The worker, on the other hand, finds that he must produce a constantly larger amount of wealth which he never gets, but which is destined for the payment of rent, interest, dividends and profits. Increased incomes yield increased investments. Increased investments necessitate the creation and payment of increased surplus. The payment of increased surplus means increased incomes. Thus the circle is continued--with the returns heaping up in the coffers of the plutocracy.
Originally the surplus was utilized to free the members of the owning class from the grinding drudgery of daily toil, by permitting them to enjoy the fruits of the labor of others. Then it was employed in the exercise of power over the economic and social machinery. But that was not the end--instead it proved only the beginning. As property titles were concentrated in fewer and fewer hands, and the amount of property owned by single individuals or groups of individuals becomes greater, their incomes (chiefly in the form of rent, interest, dividends and profits) rose until by 1917 there were 19,103 persons in the United States who declared incomes of $50,000 or more per year, which is the equivalent of $1,000 per week. Among these persons 141 declared annual incomes of over $1,000,000. Besides these personal incomes, each industry which paid these dividends and profits, through its depreciation, amortization, replacement, new construction, and surplus funds was reinvesting in the industries billions of wealth that would be used in the creation of more wealth. The normal processes of the growth of the modern economic system has forced upon the masters of life the problem of disposing of an ever increasing amount of surplus.
During prosperous periods, the investment funds of a community like England and the United States grow very rapidly. The more prosperous the nation, the greater is the demand from those who cannot spend their huge incomes for safe, paying investment opportunities.
The immense productivity of the present-day system of industry has added greatly to the amount of surplus seeking investment. Each invention, each labor saving device, each substitution of mechanical power that multiplies the productive capacity of industry at the same time increases the surplus at the disposal of the plutocracy.
The surplus must be disposed of. There is no other alternative. If hats, flour and gasoline are piled up in the warehouses or stored in tanks, no more of these commodities will be made until this surplus has been used. The whole economic system proceeds on the principle that for each commodity produced, a purchaser must be found before another unit of the commodity is ordered. Demand for commodities stimulates and regulates the machinery of production.
Those in control of the modern economic system have no choice but to produce surplus, and once having produced it, they have no choice except to dispose of it. An inexorable fate drives them onward--augmenting their burdens as it multiplies their labors.
Investment opportunities, of necessity, are eagerly sought by the plutocracy, since the law of their system is "Invest or perish"!
Invest? Where? Where there is some demand for surplus capital--that is in "undeveloped countries."
The necessity for disposing of surplus has imposed upon the business men of the world a classification of all countries as "developed" or "undeveloped." "Developed" countries are those in which the capitalist processes have gone far enough to produce a surplus that is sufficient to provide for the upkeep and for the normal expansion of industry. In "developed" countries mines are opened, factories are built, railroads are financed, as rapidly as needed, out of the domestic industrial surplus. "Undeveloped" countries are those which cannot produce sufficient capital for their own needs, and which must, therefore, depend for industrial expansion upon investments of capital from the countries that do produce a surplus.
"Developed" countries are those in which the modern industrial system has been thoroughly established.
The contrast between developed and undeveloped countries is made clear by an examination of the investments of any investing nation, such as Great Britain. Great Britain in 1913 was surrounded by rich, prosperous neighbors--France, Germany, Holland, Belgium. Each year about a billion dollars in English capital was invested outside of the British Isles. Where did this wealth go? The chief objectives of British investment, aside from the British Dominions and the United States, were (stated in millions of pounds) Argentine 320; Brazil 148; Mexico 99; Russia 67; France 8 and Germany 6. The wealth of Germany or France is greater than that of Argentine, Brazil and Mexico combined, but Germany and France were developed countries, producing enough surplus for their own needs, and, therefore, the investable wealth of Great Britain went, not to her rich neighbors, but to the poorer lands across the sea.
Each nation that produces an investable surplus--and in the nature of the present economic system, every capitalist nation must some day reach the point where it can no longer absorb its own surplus wealth--must find some undeveloped country in which to invest its surplus. Otherwise the continuity of the capitalist world is unthinkable. Great Britain, Belgium, Holland, France, Germany and Japan all had reached this stage before the war. The United States was approaching it rapidly.
3. _"Undeveloped Countries"_
Capitalism is so new that the active struggle to secure investment opportunities in undeveloped countries is of the most recent origin. The voyages which resulted in the discovery, by modern Europeans, of the Americas, Australia, Japan, and an easy road to the Orient, were all made within 500 years. The actual processes of capitalism are products of the past 150 years in England, where they had their origin. In France, Germany, Italy and Japan they have existed for less than a century. The great burst of economic activity which has pushed the United States so rapidly to the fore as a producer of surplus wealth dates from the Civil War. Only in the last generation did there arise the financial imperialism that results from the necessity of finding a market for investable surplus.
The struggle for world trade had been waged for centuries before the advent of capitalism, but the struggle for investment opportunities in undeveloped countries is strictly modern. The matter is strikingly stated by Amos Pinchot in his "Peace or Armed Peace" (Nov. 11, 1918).
"If you will look at the maps following page 554 of Hazen's 'Europe since 1815,' or any other standard colored map showing Africa and Asia in 1884, you will see that, but for a few rare spots of coloration, the whole continent of Africa is pure white. Crossing the Red Sea into Arabia, Persia, Mesopotamia and Asia Minor, you will find the same or rather a more complete lack of color. This is merely the cartographer's way of showing, by tint and lack of tint, that at that time Africa and Western Asia were still in the hands of their native populations.
"Let us now turn to the same maps thirty years later, i.e., in 1914. We find them utterly changed. They are no longer white, but a patch work of variegated hues....
"From 1870 to 1900, Great Britain added to her possessions, to say nothing of her spheres of influence, nearly 5,000,000 square miles with an estimated population of 88,000,000. Within a few years after England's permanent occupation of Egypt, which was the signal for the renaissance of French colonialism, France increased hers by 3,500,000 square miles with a population of 37,000,000, not counting Morocco added in 1911. Germany, whose colonialism came later, because home and nearby markets longer absorbed the product of her machines, brought under her dominion from 1884 to 1899 1,000,000 square miles with an estimated population of 14,000,000."
This is a picture of the political effects that followed the economic causes summed up in the term "financial imperialism."
In the seventeenth and eighteenth centuries it was the trader, dealing in raw stuff; in the nineteenth century it was the manufacturer, producing at low cost to cut under his neighbor's price. During the past thirty years the investment banker has occupied the foreground with his efforts to find safe, paying opportunities for the disposal of the surplus committed to his care. British bankers, French bankers, German bankers, Belgian bankers, Dutch bankers--all intent upon the same mission--because behind all, and relentlessly driving, were the accumulating surpluses, demanding an outlet. European bankers found that outlet in Africa, Asia, Australia and the Americas. The stupendous strides in the development of the resources in these countries would have been impossible but for that surplus of European capital.
The undeveloped countries to-day have the same characteristics,--virgin resources, industrial and commercial possibilities, and in many cases cheap labor. This is true, for example, in China, Mexico and India. It is true to a less extent in South America and South Africa. The logical destination of capital is the point where the investment will "pay."
The investor who has used up the cream of the home investment market turns his eyes abroad. As a recent writer has suggested, "There is a glamor about the foreign investment" which does not hold for a domestic one. Foreign investments have yielded such huge returns in the past that there is always a seeming possibility of wonderful gains for the future. The risk is greater, of course, but this is more than offset by the increased rate of return. If it were not so, the wealth would be invested at home or held idle.
4. _The Great Investing Nations_
The great industrial nations are the great investing nations. An agriculture community produces little surplus wealth. Land values are low, franchises and special privileges are negligible factors. There can be relatively little speculation. Changes in method of production are infrequent. Changes in values and total wealth are gradual. The owning class in an agriculture civilization may live comfortably. If it is very small in proportion to the total population it may live luxuriously, but it cannot derive great revenues such as those secured by the owning classes of an industrial civilization.
Industrial civilization possesses all of the factors for augmenting surplus wealth which are lacking in agricultural civilizations. Changes in the forms of industrial production are rapid; special privilege yields rich returns and is the subject of wide speculative activity; land values increase; labor saving machinery multiplies man's capacity to turn out wealth. As much surplus wealth might be produced in a year of this industrial life as could have been turned out in a generation or a century of agricultural activity or of hand-craft industry.
England, France, Germany, Holland, Belgium, Japan and the United States, the great industrial nations, have become the great lending nations. Their search for "undeveloped territory" and "spheres of influence" is not a search for trade, but for an opportunity to invest and exploit. If these nations wished to exchange cotton for coffee, or machinery for wheat on even terms, they could exchange with one another, or with one of the undeveloped countries, but they demand an outlet for surplus wealth--an outlet that can only be utilized where the government of the developed country will guarantee the investment of its citizens in the undeveloped territory.
The investing nations either want to take the raw products of the undeveloped country, manufacture them and sell them back as finished material (the British policy in India), or else they desire to secure possession of the resources, franchises and other special privileges in the undeveloped country which they can exploit for their own profit (the British policy in South America).
The Indians, under the British policy, are thus in relatively the same position as the workers in one of the industrial countries. They are paid for their raw material a fraction of the value of the finished product. They are expected to buy back the finished product, which is a manifest impossibility. There is thus a drastic limitation on the exploitation of undeveloped countries, just as there is a limitation on the exploitation of domestic labor. In both cases the people as consumers can buy back less in value than the exploiters have to sell. Obviously the time must come when all the undeveloped sections of the world have been exploited to the limit. Then surplus will go a-begging.
Some of the investors in the great exploiting nations have abandoned the idea of making huge returns by way of the English policy in India. Instead the investors in every nation are buying up resources, franchises and concessions and other special privileges in the undeveloped countries and treating them in exactly the same way that they would treat a domestic investment. In this case the resources and labor of the undeveloped country are exploited for the profit of the foreign investor.
The Roman conquerors subjugated the people politically and then exacted an economic return in the form of tribute. The modern imperialists do not bother about the political machinery, so long as it remains in abeyance, but content themselves with securing possession of the economic resources of a region and exacting a return in interest and dividends on the investment. Political tribute is largely a thing of the past. In its place there is a new form--economic tribute--which is safer, cheaper, and on the whole far superior to the Roman method of exploiting undeveloped regions.
5. _The American Home Field_
A hundred years ago the United States was an undeveloped country. Its resources were virgin. Its wealth possibilities were immense. Both domestic and foreign capitalists invested large sums in the canals, the railroads and other American commercial and industrial enterprises. The rapid economic expansion of recent years has involved the outlay of huge sums of new capital.
The total capital invested in manufactures was 8,975 millions in 1899 and 22,791 millions in 1914. The total of railway capital was 11,034 millions in 1899 and 20,247 millions in 1914. Manufacturing and railroading alone secured a capital outlay of over 20 billions in 15 years. Some idea of the increase in investments may be gained from the amount of new stocks and bonds listed annually on the New York Stock Exchange. The total amount of new stocks listed for the five years ending with 1914 was 1,420 millions; the total of new bonds was 2,226 million. (_The Financial Review Annual_, 1918, p. 67.) The total capital of new companies (with an authorized capital of at least $100,000) was in 1918, $2,599,753,600; in 1919, $12,677,229,600, and in the first 10 months of 1920, $12,242,577,700. (Bradstreets, Nov. 6, 1920, p. 731.) The figures showing the amount of stocks and bonds issued do not by any means exhaust the field of new capital. Reference has already been made to the fact that the United States Steel Corporation, between 1903 and 1918 increased its issues of stocks and bonds by only $31,600,000, while, in the same time its assets increased $987,000,000. The same fact is illustrated, on a larger scale, in a summary (_Wall Street Journal_, August 7, 1919) of the finances of 104 corporations covering the four years, December 31, 1914, to December 31, 1918. During this time, six of the leading steel companies of the United States increased their working capital by $461,965,000 and their surplus by $617,656,000. This billion was taken out of the earnings of the companies. Concerning the entire 104 corporations, the _Journal_ notes that, "After heavy expenditures for new construction and acquisitions, and record breaking dividends, they added a total of nearly $2,000,000,000 to working capital." In addition, these corporations, in four years, showed a gain of $1,941,498,000 in surplus and a gain in inventories of $1,522,000,000.
Considerable amounts of capital are invested in private industry, by individuals and partnerships. No record of these investments ever appears. Farmers invest in animals, machinery and improved buildings--investments that are not represented by stocks or bonds. Again, the great corporations themselves are constantly adding to their assets without increasing their stock or bond issues. In these and other ways, billions of new capital are yearly absorbed by the home investment market.
Although most of the enterprises of the United States have been floated with American capital, the investors of Great Britain, Holland, France and other countries took a hand. In 1913 the capitalists of Great Britain had larger investments in the United States than in any other country, or than in any British Dominion. (The U. S., 754,617,000 pounds; Canada and Newfoundland, 514,870,000 pounds; India and Ceylon, 378,776,000 pounds; South Africa, 370,192,000 pounds and so on.) (_Annals_, 1916, Vol. 68, p. 28, Article by C. K. Hobson.) The aggregate amount of European capital invested in the United States was approximately $6,500,000,000 in 1910. Of this sum more than half was British. ("Trade Balance of the United States," George Paisch. National Monetary Commission, 1910, p. 175.)
By the beginning of the present century (the U. S. Steel Corporation was organized in 1901) the main work of organization inside of the United States was completed. The bankers had some incidental tasks before them, but the industrial leaders themselves had done their pioneer duty. There were corners to be smoothed off, and bearings to be rubbed down, but the great structural problems had been solved, and the foundations of world industrial empire had been laid.
6. _Leaving the Home Field_
The Spanish-American War marks the beginning of the new era in American business organization. This war found the American people isolated and provincial. It left them with a new feeling for their own importance.
The worlds at home had been conquered. The transcontinental railroads had been built; the steel industry, the oil industry, the coal industry, the leather industry, the woolen industry and a host of others had been organized by a whole generation of industrial organizers who had given their lives to this task.
Across the borders of the United States--almost within arm's reach of the eager, stirring, high-strung men of the new generation, there were tens of thousands of square miles of undeveloped territory--territory that was fabulously rich in ore, in timber, in oil, in fertility. On every side the lands stretched away--Mexico, the West Indies, Central America, Canada--with opportunity that was to be had for the taking.
Opportunity called. Capital, seeking new fields for investment, urged. Youth, enthusiasm and enterprise answered the challenge.
The foreign investments of the United States at the time of the Spanish-American War were negligible. By 1910 American business men had two billions invested abroad--$700,000,000 in Mexico; $500,000,000 in Canada; $350,000,000 in Europe, and smaller sums in the West Indies, the Philippines, China, Central and South America. In 1913 there was a billion invested in Mexico and an equal amount in Canada. ("Commercial Policy," W. S. Culbertson, New York, Appleton, 1919, p. 315.)
Capital flowed out of the United States in two directions:
1. Toward the resources which were so abundant in certain foreign countries.
2. Toward foreign markets.
7. _Building on Foreign Resources_
The Bethlehem Steel Corporation is a typical industry that has built up foreign connections as a means of exploiting foreign resources. The Corporation has a huge organization in the United States which includes 10 manufacturing plants, a coke producing company, 11 ship building plants, six mines and quarries, and extensive coal deposits in Pennsylvania and West Virginia. The Bethlehem Steel Corporation also controls ore properties near Santiago, Cuba, near Nipe Bay, Cuba, and extensive deposits along the northern coast of Cuba; large ore properties at Tofo, Chile, and the Ore Steamship Corporation, a carrying line for Chilean and Cuban ore.
The American Smelting and Refining Company is another illustration of expansion into a foreign country for the purpose of utilizing foreign resources. According to the record of the Company's properties, the Company was operating six refining plants, one located in New Jersey; one in Nebraska; one in California; one in Illinois; one in Maryland, and one in Washington. The Company owned 14 lead smelters and 11 copper smelters, located as follows: Colorado, 4; Utah, 2; Texas, 2; Arizona, 2; New Jersey, 2; Montana, 1; Washington, 1; Nebraska, 1; California, 1; Illinois, 1; Chile, 2; Mexico, 6. Among these 25 plants a third is located outside of the United States.
These are but two examples. The rubber, oil, tobacco and sugar interests have pursued a similar policy--extending their organization in such a way as to utilize foreign resources as a source for the raw materials that are destined to be manufactured in the United States.
8. _Manufacturing and Marketing Abroad_
The Bethlehem Steel Corporation and the American Smelting and Refining Company go outside of the United States for the resources upon which their industries depend. Their fabricating industries are carried on inside of the country. There are a number of the great industries of the country that have gone outside of the United States to do their manufacturing and to organize the marketing of their products.
The International Harvester Company has built a worldwide organization. It manufactures harvesting machinery, farm implements, gasoline engines, tractors, wagons and separators at Springfield, Ohio; Rock Falls, Ill.; Chicago, Ill.; Auburn, New York; Akron, Ohio; Milwaukee, Wisc., and West Pullman, Ill. It has iron mines, coal mines and steel plants operated by the Wisconsin Steel Company. It has three twine mills and four railways. Foreign plants and branches are listed as follows: Norrkoping, Sweden; Copenhagen, Denmark; Christiania, Norway; Paris, France; Croix, France; Berlin, Germany; Hamilton, Ontario, Canada; Zurich, Switzerland; Vienna, Austria; Lubertzy, Russia; Neuss, Germany; Melbourne, Australia; London, England; Christ Church, New Zealand.
One of the greatest industrial empires in the world is the Standard Oil Properties. It is not possible to go into detail with regard to their operations. Space will admit of a brief comment upon one of the constituent parts or "states" of the empire--The Standard Oil Company of New Jersey. With a capital stock of $100,000,000, this Company, from the dissolution of the Standard Oil Company, December 15, 1911, to June 15, 1918, a period of six and a half years, paid dividends of $174,058,932.
The company describes itself as "a manufacturing enterprise with a large foreign business. The company drills oil wells, pumps them, refines the crude oil into many forms and sells the product--mostly abroad." (_The Lamp_, May, 1918.) The properties of the Company are thus listed:
1. The Company has 13 refineries, seven of them in New Jersey, Maryland, Oklahoma, Louisiana and West Virginia. Four of the remaining refineries are located in Canada, one is in Mexico and one in Peru.
2. Pipeline properties in New York, New Jersey, Pennsylvania and Maryland.
3. A fleet of 54 ocean-going tank steamers with a capacity of 486,480 dead weight tons. (This is about two per cent of the total ocean-going tonnage of the world.)
4. Can and case factories, barrel factories, canning plants, glue factories and pipe shops.
5. Through its subsidiary corporations, the Company controls:
a. Oil wells in Pennsylvania, West Virginia, Ohio, Kentucky, Louisiana, Arkansas, Mississippi, Texas, California, Peru and Mexico. In connection with many of these properties refineries are operated.
b. One subsidiary has 550 marketing stations in Canada. Others market in various parts of the United States; in the West Indies; in Central and South America; in Germany, Austria, Roumania, the Netherlands, France, Denmark and Italy.
The Standard Oil Company of New Jersey comprises only one part--though a very successful part--of the Standard Oil Group of industries. It is one industrial state in a great industrial empire.
Foreign resources offer opportunities to the exploiter. Foreign markets beckon. Both calls have been heeded by the American business interests that are busy building the international machinery of business organization.
9. _International Business and Finance_
The steel, smelting, oil, sugar, tobacco, and harvester interests are confined to relatively narrow lines. In their wake have followed general business, and above all, financial activities.
The American International Corporation was described by its vice-president (Mr. Connick) before a Senate Committee on March 1, 1918. "Until the Russian situation became too acute, they had offices in Petrograd, London, Paris, Rome, Mexico City. They sent commissions and agents and business men to South America to promote trade.... They were negotiating contracts for a thousand miles of railroad in China. They were practically rebuilding, you might say, the Grand Canal in China. They had acquired the Pacific Mail.... They then bought the New York Shipbuilding Corporation to provide ships for their shipping interests."
By 1919 (_New York Times_, Oct. 31, 1919) the Company had acquired Carter Macy & Co., and the Rosin and Turpentine Export Co., and was interested in the International Mercantile Marine and the United Fruit Companies.
Another illustration of the same kind of general foreign business appeared in the form of an advertisement inserted on the financial page of the _New York Times_ (July 10, 1919) by three leading financial firms, which called attention to a $3,000,000 note issue of the Haytian American Corporation "Incorporated under the laws of the State of New York, owning and operating sugar, railroad, wharf and public utility companies in the Republic of Hayti." Further, the advertisers note: "The diversity of the Company's operations assures stability of earnings."
American manufacturers, traders and industrial empire builders have not gone alone into the foreign field. The bankers have accompanied them.
Several of the great financial institutions of the country are advertising their foreign connections.
The Guaranty Trust Company (_New York Times_, Jan. 10, 1919) advertises under the caption "Direct Foreign Banking Facilities" offering "a direct and comprehensive banking service for trade with all countries." These connections include:
1. Branches in London and Paris, which are designated United States depositories. "They are American institutions conducted on American lines, and are especially well equipped to render banking service throughout Europe." There are additional branches in Liverpool and Brussels. The Company also has direct connections in Italy and Spain, and representatives in the Scandinavian countries.
2. "Direct connections with the leading financial institutions in Argentina, Uruguay, Chile, and Brazil." A special representative in Buenos Ayres. "Through our affiliation with the Mercantile Bank of the Americas and its connections, we cover Peru, Northern Brazil, Columbia, Ecuador, Venezuela, Nicaragua, Honduras, Guatemala, and other South and Central American countries."
3. "Through the American Mercantile Bank of Cuba, at Havana, we cover direct Cuba and the West Indies."
4. "Direct banking and merchant service throughout British India," together with correspondents in the East Indies and the Straits Settlements.
5. "Direct connections with the National Bank of South Africa, at Cape Town, and its many branches in the Transvaal, Rhodesia, Natal, Mozambique, etc."
6. Direct banking connections and a special representative in Australia and New Zealand.
7. "Through our affiliations with the Asia Banking Corporation we negotiate, direct, banking transactions of every nature in China, Manchuria, Southeastern Siberia, and throughout the Far East. The Asia Banking Corporation has its main office in New York and is establishing branches in these important trade centers: Shanghai, Pekin, Tientsin, Hankow, Harbin, Vladivostok. We are also official correspondents for leading Japanese banks."
The advertisement concludes with this statement: "Our Foreign Trade Bureau collects and makes available accurate and up-to-date information relating to foreign trade--export markets, foreign financial and economic conditions, shipping facilities, export technique, etc. It endeavors to bring into touch buyers and sellers here and abroad."
The same issue of the _Times_ carries a statement of the Mercantile Bank of the Americas which "offers the services of a banking organization with branches and affiliated banks in important trade centers throughout Central and South America, France and Spain." The Bank describes itself as "an American Bank for Foreign trade." Among its eleven directors are the President and two Vice-Presidents of the Guaranty Trust Company.
The Asia Banking Corporation, upon which the Guaranty Trust Company relies for its Eastern connections, was organized in 1918 "to engage in international and foreign banking in China, in the dependencies and insular possessions of the United States, and, ultimately in Siberia" (_Standard Corporation Service_, May-August, 1918, p. 42). The officers elected in August 1918, were Charles H. Sabin, President of the Guaranty Trust Co., President; Albert Breton, Vice-President of the Guaranty Trust Co., and Ralph Dawson, Assistant Secretary of the Guaranty Trust Company, Vice-Presidents, and Robert A. Shaw, of the overseas division of the Guaranty Trust Company, Treasurer. Among the directors are representatives of the Bankers Trust Company and of the Mercantile Bank of the Americas.
10. _The National City Bank_
The National City Bank of New York--the first bank in the history of the Western Hemisphere to show resources exceeding one billion dollars--illustrates in its development the cyclonic changes that the past few years have brought into American business circles. The National City Bank, originally chartered in 1812, had resources of $16,750,929 in 1879 and of $18,214,823 in 1889. From that point its development has been electric. The resources of the Bank totaled 128 millions in 1899; 280 millions in 1909; $1,039,418,324 in 1919. Between 1889 and 1899 they increased 600 per cent; between 1899 and 1919 they increased 700 per cent; during the 40 years from 1889 and 1919 the increase in resources exceeded six thousand per cent.
The organization of the Bank is indicative of the organization of modern business. Among the twenty-one directors, all of whom are engaged in some form of business enterprise, there are the names of William Rockefeller, Percy A. Rockefeller, J. Ogden Armour, Cleveland H. Dodge of the Phelps-Dodge Corporation, Cyrus H. McCormick of the International Harvester Co., Philip A. S. Franklin, President of the International Mercantile Marine Co.; Earl D. Babst, President of the American Sugar Refining Co.; Edgar Palmer, President of the New Jersey Zinc Co.; Nathan C. Kingsbury, Vice-President of the Union Pacific Railroad Co., and Frank Krumball, Chairman of the Chesapeake & Ohio Railroad Co. Some of the most powerful mining, manufacturing, transportation and public utility interests in the United States are represented, directly or indirectly, in this list.
The domestic organization of the Bank consists of five divisions, each one under a vice-president. New York City constitutes the first division; the second division comprises New England and New York State outside of New York City; the three remaining divisions cover the other portions of the United States. Except for the size and the completeness of its organization, the National City Bank differs in no essential
## particulars from numerous other large banking institutions. It is a
financial superstructure built upon a massive foundation of industrial enterprise.
The phase of the Bank's activity that is of peculiar significance at the present juncture is its foreign organization, all of which has been established since the outbreak of the European war.
The foreign business of the National City Bank is carried on by the National City Bank proper and the International Banking Corporation. The first foreign branch of the National City Bank was established at Buenos Aires on November 10th, 1914. On January 1st, 1919, the National City Bank had a total of 15 foreign branches; on December 31st, 1919, it had a total of 74 foreign branches.
The policy of the Bank in its establishment of foreign branches is described thus in its "Statement of Condition, December 31st, 1919": "The feature of branch development during the year was the expansion in Cuba, where twenty-two new branches were opened, making twenty-four in the island. Cuba is very prosperous, as a result of the expansion of the sugar industry, and as sugar is produced there under very favorable conditions economically, and the location is most convenient for supplying the United States, the industry is on a sound basis, and relations with the United States are likely to continue close and friendly. Cuba is a market of growing importance to the United States, and the system of branches established by the Bank is designed to serve the trade between the two countries." The trader and the Banker are to work hand in hand.
The National City Bank has branches in Argentina, Brazil, Belgium, Chile, Colombia, Cuba, Italy, Porto Rico, Russia, Siberia, Spain, Trinidad, Uruguay and Venezuela, all of which have been established since 1914.
A portion of the foreign business of the National City Bank is conducted by the International Banking Corporation which was established in 1902 and which became a part of the National City Bank organization in 1915. The International Banking Corporation has a total of twenty-eight branches located in California, China, England, France, India, Japan, Java, Dominican Republic, Philippine Islands, Republic of Panama and the Straits Settlements. Under this arrangement, the financial relations with America are made by the National City Bank proper; while those with Europe and Asia are in the hands of the International Banking Corporation and the combination provides the Bank with 75 branches in addition to its vast organization within the United States.
The National City Bank of 1889, with its resources of eighteen millions, was a small affair compared with the billion dollar resources of 1920. Thirty years sufficed for a growth from youth to robust adulthood. Within five years, the Bank built up a system of foreign branches that make it one of the most potent States in the federation of international financial institutions.
11. _Onward_
Exploiters of foreign resources, manufacturers, traders and bankers have moved, side by side, out of the United States into the foreign field. Step by step they have advanced, rearing the economic structure of empire as they went.
The business men of the United States had no choice. They could not pause when they had spanned the continent. Ambition called them, surplus compelled them, profits lured them, the will to power dominated their lives. As well expect the Old Guard to pause in the middle of a charge--even before the sunken road at Waterloo--as to expect the business interests of the United States to cease their efforts and lay down their tools of conquest simply because they had reached the ocean in one direction. While there were left other directions in which there was no ocean; while other undeveloped regions offered the possibility of development, an inexorable fate--the fate inherent in the economic and the human stuff with which they were working compelled them to cry "Onward!" and to turn to the tasks that lay ahead.
The fathers and grandfathers of these Twentieth Century American Plutocrats, working coatless in their tiny factories; managing their corner stores; serving their local banks, and holding their minor offices had never dreamed of the destiny that lay ahead. No matter. The necessity for expansion had come and with it came the opportunity. The economic pressure complemented the human desire for "more." The structure of business organization, which was erected to conquer one continent could not cease functioning when that one continent was subdued. Rather, high geared and speeded up as it was, it was in fine form to extend its conquests, like the well groomed army that has come scatheless through a great campaign, and that longs, throughout its tensely unified structure to be off on the next mission.
The business life of the United States came to the Pacific; touched the Canadian border; surged against the Rio Grande. The continent had been spanned; the objective had been attained. Still, the cry was "Onward!"
Onward? Whither?
Onward to the lands where resources are abundant and rich; onward where labor is plentiful, docile and cheap; onward where the opportunities for huge profits are met with on every hand; onward into the undeveloped countries of the world.
The capitalists of the European nations, faced by a similar necessity for expansion, had been compelled to go half round the earth to India, to South Africa, to the East Indies, to China, to Canada, to South America. Close at home there was no country except Russia that offered great possibilities of development.
The business interests of the United States were more fortunate. At their very doors lay the opportunities--in Canada, in Mexico, in the West Indies, in Central and South America. Here were countries with the amplest, richest resources; countries open for capitalist development. To be sure these investment fields had been invaded already by foreign capitalists--British, German, Belgian and Spanish. But at the same time they were surrounded by a tradition of great virility and power--the tradition of "America for the Americans."
XI. THE GREAT WAR
1. _Daylight_
The work of industrial empire building had continued for less than half a century when the United States entered the Great War, which was one in a sequence of events that bound America to the wheel of destiny as it bound England and France and Germany and Japan and every other country that had adopted the capitalist method of production.
The war-test revealed the United States to the world and to its own people as a great nation playing a mighty role in international affairs. Most Europeans had not suspected the extent of its power. Even the Americans did not realize it. Nevertheless, the processes of economic empire building had laid a foundation upon which the superstructure of political empire is reared as a matter of course. Henceforth, no one need ask whether the United States should or should not be an imperial nation. There remained only the task of determining what form American imperialism should take.
The Great War rounded out the imperial beginnings of the United States. It strengthened the plutocracy at home; it gave the United States immense prestige abroad.
The Era of Imperialism dawned upon the United States in 1898. Daylight broke in 1914, and the night of isolation and of international unimportance gave place to a new day of imperial power.
2. _Plutocracy in the Saddle_
The rapid sweep across a new continent had placed the resources of the United States in the hands of a powerful minority. Nature had been generous and private ownership of the inexhaustible wilderness seemed to be the natural--the obvious method of procedure.
The lightning march of the American people across the continent gave the plutocracy its grip on the natural resources. The revolutionary transformations in industry guaranteed its control of the productive machinery.
The wizards of industrial activity have changed the structure of business life even more rapidly than they have conquered the wilderness. True sons of their revolutionary ancestors, they have slashed and remodeled and built anew with little regard for the past.
Revolutions are the stalking grounds of predatory power. Napoleon built his empire on the French Revolution; Cromwell on the revolt against tyrannical royalty in England. Peaceful times give less opportunity to personal ambition. Institutions are well-rooted, customs and habits are firmly placed, life is regulated and held to earth by a fixed framework of habit and tradition.
Revolution comes--fiercely, impetuously--uprooting institutions, overthrowing traditions, tearing customs from their resting places. All is uncertainty--chaos, when, lo! a man on horseback gathers the loose strands together saying, "Good people, I know, follow me!"
He does know; but woe to the people who follow him! Yet, what shall they do? Whither shall they turn? How shall they act? Who can be relied upon in this uncertain hour?
The man on horseback rises in his stirrups--speaking in mighty accents his message of hope and cheer, reassuring, promising, encouraging, inspiring all who come within the sound of his voice. His is the one assurance in a wilderness of uncertainty. What wonder that the people follow where he leads and beckons!
The revolutionary changes in American economic life between the Civil War and the War of 1914 gave the plutocrat his chance. He was the man on horseback, quick, clever, shrewd, farseeing, persuasive, powerful. Through the courses of these revolutionary changes, the Hills, Goulds, Harrimans, Wideners, Weyerhausers, Guggenheims, Rockefellers, Carnegies, and Morgans did to the American economic organization exactly what Napoleon did to the French political organization--they took possession of it.
3. _Making the Plutocracy Be Good_
The American people were still thinking the thoughts of a competitive economic life when the cohorts of an organized plutocracy bore down upon them. High prices, trusts, millionaires, huge profits, corruption, betrayal of public office took the people by surprise, confused them, baffled them, enraged them. Their first thought was of politics, and during the years immediately preceding the war they were busy with the problem of legislating goodness into the plutocracy.
The plutocrats were in public disfavor, and their control of natural resources, banks, railroads, mines, factories, political parties, public offices, governmental machinery, the school system, the press, the pulpit, the movie business,--all of this power amounted to nothing unless it was backed by public opinion.
How could the plutocracy--the discredited, vilified plutocracy--get public opinion? How could the exploiters gain the confidence of the American people? There was only one way--they must line up with some cause that would command public attention and compel public support. The cause that it chose was the "defense of the United States."
4. _"Preparedness"_
The plutocracy, with a united front, "went in" for the "defense of the United States,"--attacking the people on the side of their greatest weakness; playing upon their primitive emotions of fear and hate. The campaign was intense and dramatic, featuring Japanese invasions, Mexican inroads, and a world conquest by Germany.
The preparedness campaign was a marvel of efficient business organization. Its promoters made use of every device known to the advertising profession; the best brains were employed, and the country was blanketed with preparedness propaganda.
Officers of the Army and Navy were frank in insisting that the defense of the United States was adequately provided for. (See testimony of General Nelson A. Miles. _Congressional Record_, February 3, 1916, p. 2265.) Still the preparedness campaign continued with vigor. Congressman Clyde H. Tavenner in his speech, "The Navy League Unmasked," showed why. He gave facts like those appearing in George R. Kirkpatrick's book, "War, What For"; in F. C. Howe's "Why War," and in J. A. Hobson's "Imperialism," showing that, in the words of an English authority, "patriotism at from 10 to 15 per cent is a temptation for the best of citizens."
Tavenner established the connection between the preparedness campaign and those who were making profits out of the powder business, the nickel business, the copper business, and the steel business, interlocked through interlocking directorates; then he established the connection between the Navy League and the firm of J. P. Morgan & Co., 23 Wall St., New York. Regarding this connection, Congressman Tavenner said, "The Navy League upon close examination would appear to be little more than a branch office of the house of J. P. Morgan & Co., and a general sales promotion bureau for the various armor and munition makers and the steel, nickel, copper and zinc interests."[45]
The preparedness movement came from the business interests. It was fostered and financed by the plutocrats. It was their first successful effort at winning public confidence, and so well was it managed that millions of Americans fell into line, fired by the love of the flag and the world-old devotion to family and fireside.
5. _Patriots_
From preparedness to patriotism was an easy step. The preparedness advocates had evoked the spirit of the founders of American democracy and worked upon the emotions of the people until it was generally understood that those who favored preparedness were patriots.
Plutocratic patriotism was accepted by the press, the pulpit, the college, and every other important channel of public information in the United States. Editors, ministers, professors and lawyers proclaimed it as though it were their own. Randolph Bourne, in a brilliant article (_Seven Arts_, July, 1917) reminds his readers of "the virtuous horror and stupefaction when they read the manifesto of their ninety-three German colleagues in defense of the war. To the American academic mind of 1914 defense of war was inconceivable. From Bernhardi it recoiled as from a blasphemy, little dreaming that two years later would find it creating its own cleanly reasons for imposing military service on the country and for talking of the rough rude currents of health and regeneration that war would send through the American body politic. They would have thought any one mad who talked of shipping American men by the hundreds of thousands--conscripts--to die on the fields of France...."
The American plutocracy was magnified, deified, and consecrated to the task of making the world safe for democracy. Exploiters had turned saviors and were conducting a campaign to raise $100,000,000 for the Red Cross.[46] The "malefactors of great wealth," the predatory business forces, the special privileged few who had exploited the American people for generations, became the prophets and the crusaders, the keepers of the ark of the covenant of American democracy.
Radicals who had always opposed war, ministers who had spent their lives preaching peace upon earth, scientists whose work had brought them into contact with the peoples of the whole world, public men who believed that the United States could do greater and better work for democracy by staying out of the war, were branded as traitors and were persecuted as zealously as though they had sided with Protestantism in Catholic Spain under the Inquisition.
By a clever move, the plutocrats, wrapped in the flag and proclaiming a crusade to inaugurate democracy in Germany, rallied to their support the professional classes of the United States and millions of the common people.
6. _Business in Control_
After the declaration of war, the mobilization and direction of the economic war work of the government was placed in the hands of the Council of National Defense, an organized group of the leading business men. The Council consisted of six members of the President's Cabinet, assisted by an Advisory Commission and numerous sub-committees. The "Advisory Commission" of the Council (the real working body) contained four business men, an educator, a labor leader and a medical man. ("The Council of National Defense" a bulletin issued by the Council under date of June 28, 1917.)
Each member of the Advisory Commission had a group of persons cooperating with him. The make-up of these various committees was significant. Among 706 persons listed in the original schedule of sub-committees, 404 were business men, 200 were professional men, 59 were labor men, 23 were public officials and 20 were miscellaneous. It was only in Mr. Gompers' group that labor had any representation, and even there, out of 138 persons only 59 were workers or officials of unions, while 34 were business men and 33 professional men, so that among Mr. Gompers' assistants the business and professional men combined considerably outnumbered the labor men.
The make-up of some of the sub-committees revealed the forces behind the Defense Council. Thus Mr. Willard's sub-committee on "Express" consisted of four vice-presidents, one from the American, one from the Wells-Fargo, one from the Southern and one from the Adams Express Company. His committee on "Locomotives" consisted of the Vice-President of the Porter Locomotive Company, the President of the American Locomotive Company, and the Chairman of the Lima Locomotive Corporation. Mr. Rosenwald's committee on "Shoe and Leather Industries" consisted of eight persons, all of them representing shoe or leather companies. His committee on "Woolen Manufactures" consisted of eight representatives of the woolen industry. The same business supremacy appeared in Mr. Baruch's committees. His committee on "Cement" consisted of the presidents of four of the leading cement companies, the vice-president of a fifth cement company, and a representative of the Bureau of Standards of Washington. His committee on "Copper" had the names of the presidents of the Anaconda Copper Company, the Calumet & Hecla Mining Company, the United Verde Copper Company and the Utah Copper Company. His committee on "Steel and Steel Products" consisted of Elbert H. Gary, Chairman of the United States Steel Corporation; Charles M. Schwab, of the Bethlehem Steel Company; A. C. Dinkey, Vice-President of the Midvale Steel Company; W. L. King, Vice-President of Jones & Loughlin Steel Company, and J. A. Burden, President of the Burden Steel Company. The four other members of the committee represented the Republic Iron and Steel Company, the Lackawanna Steel Company, the American Iron and Steel Institute and the Picklands, Mather Co., of Cleveland. Perhaps the most astounding of all the committees was that on "Oil." The chairman was the President of the Standard Oil Company, and the secretary of the committee gives his address as "26 Broadway," the address of the Standard Oil Company. The other nine members of the committee were oil men from various parts of the country. What thinking American would have suggested, three years before, that the Standard Oil Company would be officially directing a part of the work of the Federal Government?
Comment is superfluous. Every great industrial enterprise of the United States had secured representation on the committees of business men that were responsible for the direction of the economic side of war making.
Then came the Liberty Loan campaigns and Red Cross drives, the direction of which also was given into the hands of experienced business men. In each community, the leaders in the business world were the leaders in these war-time activities. Since the center of business life was the bank, it followed that the directing power in all of the war-time campaigns rested with the bankers, and thus the whole nation was mobilized under the direction of its financiers.
The results of these experiences were far-reaching. During two generations, the people of the United States had been passing anti-trust laws and anti-pooling laws, the aim of which was to prevent the business men of the country from getting together. The war crisis not only brought them together, but when they did assemble, it placed the whole political and economic power of the nation in their hands.
The business men learned, by first hand experience, the benefits that arise from united effort. They joined forces across the continent, and they found that it paid. James S. Alexander, President of the National Bank of Commerce (New York), tells the story from the standpoint of a banker (_Manchester Guardian_, January 28, 1920. Signed Article.) In a discussion of "the experience in cooperative action which the war has given American banks" he says, "The responsibility of floating the five great loans issued by the government, together with the work of financing a production of materials speeded up to meet war necessities, enforced a unity of action and cooperation which otherwise could hardly have been obtained in many years."
7. _Economic Winnings_
The war gains of the plutocracy in the field of public control were important, as well as spectacular. Behind them, however, were economic gains--little heralded, but of the most vital consequence to the future of plutocratic power.
The war speeded production and added greatly to the national income, to investable surplus, to profits and thus to the economic power of the plutocrats.
The most tangible measure of the economic advantage gained by the plutocracy from the war is contained in a report on "Corporate Earnings and Government Revenues" (Senate Document 259. 65th Congress, Second Session). This report shows the profits made by the various industries during 1917--the first war year.
The report contains 388 large pages on which are listed the profits ("percent of net income to capital stock in 1917") made by various concerns. A typical food producing industry--"meat packing"--lists 122 firms (p. 95 and 365). Of these firms 31 reported profits for the year of less than 25 percent; 45 reported profits of 25 but under 50 percent; 24 reported profits of 50 but under 100 percent, and 22 reported profits of 100 percent or more. In this case, a third of the profits were more than 25, but less than 50 percent, and half were 50 percent or over.
Manufacturers of cotton yarns reported profits ranging slightly higher than those in the meat packing industry (pp. 167, 168, 379). Among the 153 firms reporting, 21 reported profits of less than 25 percent; 61 reported 25 but less than 50 per cent; 55 reported 50 but under 100 percent, and 16 reported 100 percent or more.
Profits in the garment manufacturing industry were lower than those in yarn manufacturing. Among the 299 firms reporting (pp. 171, 380) 74 gave their profits as less than 25 percent; 121 gave their profits as 25 but under 50 percent; 65 gave profits of 50 but less than 100 percent, and 39 gave their profits as 100 percent or over.
The profits of 49 Steel plants and Rolling Mills (pp. 100, 365) were considerably higher than profits in any of the industries heretofore discussed. Four firms reported profits of less than 25 percent; 13 reported profits of 25 but less than 50 percent; 17 reported profits of 50 but less than 100 percent, and 15 reported profits of more than 100 percent. In this instance two-thirds of the firms show profits of 50 percent or over.
Bituminous Coal producers in the Appalachian field (340 in number, pp. 130 and 372) report a range of profits far higher than those secured in the manufacturing industries. Among these 340 firms, 23 reported profits of less than 25 percent; 45 reported profits of 25 but under 50 percent; 79 reported profits of 50 but under 100 percent; 135 reported profits of 100 but under 500 percent; 21 reported profits of 500 but under 1,000 percent, and 14 reported profits of 1,000 percent and over. In the case of these coal mine operators only a fourth had profits of under 50 percent and half had profits of more than 100 percent.
The profits in these five industries--food, yarn, clothing, steel and coal--are quite typical of the figures for the tens of thousands of other firms listed in Senate Document 259. Profits of less than 25 percent are the exception. Profits of over 100 percent were reported by 8 percent of the yarn manufacturers, by 13 percent of the garment manufacturers, by 18 percent of the meat packers, by 31 percent of the steel plants, and by 50 percent of the bituminous coal mines. A considerable number of profits ranged above 500 percent, or a gain in one year of five times the entire capital stock.
When it is remembered that these figures were supplied by the firms involved; that they were submitted to a tremendously overworked department, lacking the facilities for effective checking-up; and that they were submitted for the purposes of heavy taxation, the showing is nothing less than astounding.
8. _Winnings in the Home Field_
What has the American plutocracy won at home as a result of the war? In two words it has gained social prestige and internal (economic) solidarity. Both are vital as the foundation for future assertions of power.
The plutocracy has unified its hold upon the country as a result of the war. Also, it has won an important battle in its struggle with labor. The position held by the American plutocracy at the end of the Great War could hardly be stated more adequately than in a recent Confidential Information Service furnished by an important agency to American business men:
"SHALL VICTORS BE MAGNANIMOUS?
"There is no doubt about it--Labor is beaten. Mr. Gompers was at his zenith in 1918. Since then he has steadily lost power. He has lost power with his own people because he is no longer able to deliver the goods. He can no longer deliver the goods for two reasons. For one thing, peace urgency has replaced war urgency and we are not willing to bid for peace labor as we were willing to bid for war labor. For another thing, the employing class is immensely more powerful than it was in 1914.
"We have an organized labor force more numerous than ever before. Relatively twice as many workers are organized as in 1916. But this same labor force has lost its hold on the public. Furthermore, it is divided in its own camp. It fears capital. It also fears its own factions. It threatens, but it does not dare.
"We said that the employing class was immensely more powerful than in 1914. There is more money at its command. Eighteen thousand new millionaires are the war's legacy. This money capacity is more thoroughly unified than ever. In 1914 we had thirty-thousand banks, functioning to a great degree in independence of each other. Then came the Federal Reserve Act and gave us the machinery for consolidation and the emergency of five years war furnished the hammer blows to weld the structure into one.
"The war taught the employing class the secret and the power of widespread propaganda. Imperial Europe had been aware of this power. It was new to the United States. Now, when we have anything to sell to the American people we know how to sell it. We have learned. We have the schools. We have the pulpit. The employing class owns the press. There is practically no important paper in the United States but is theirs!"
9. _The Run of the World_
The war gains of the American plutocracy at home were immense. Even more significant, from an imperial standpoint, were the international advantages that came to America with the war. The events of the two years between 1916 and 1918 gave the United States the run of the world.
Destiny seemed to be bent upon hurling the American people into a position of world authority. First, there was the matter of credit. The Allies were reaching the end of their economic rope when the United States entered the war. They were not bankrupt, but their credit was strained, their industries were disorganized, their sources of income were narrowed, and they were looking anxiously for some source from which they might draw the immense volume of goods and credit that were necessary for the continuance of the struggle.[47]
The United States was that source of supply. During the years from 1915 to 1917, the industries of the United States were shifted gradually from a peace basis to a war basis. Quantities of material destined for use in the war were shipped to the Allies. The unusual profits made on much of this business were not curtailed by heavy war taxation. Thus for more than two years the basic industries of the United States reaped a harvest in profits which were actually free of taxation, at the same time that they placed themselves on a war basis for the supplying of Europe's war demand. When the United States did enter the war, she came with all of the economic advantages that had arisen from selling war material to the belligerents during two and a half years. Throughout those years, while the Allies were bleeding and borrowing and paying, the American plutocracy was growing rich.
When the United States entered the war, she entered it as an ally of powers that were economically winded. She herself was fresh. With the greatest estimated wealth of any of the warring countries, she had a public national debt of less than one half of one percent of her total wealth. She had larger quantities of liquid capital and a vast economic surplus. As a consequence, she held the purse strings and was able, during the next two years, to lend to the Allied nations nearly ten billion dollars without straining her resources to any appreciable degree.
The nations of Europe had been so deeply engrossed in war-making that they had been unable to provide themselves with the necessary food. All of the warring countries, with the exception of Russia, were importers of food in normal times. The disturbances incident to the war; the insatiable army demands, and the loss of shipping all had their effect in bringing the Allied countries to a point of critical food scarcity in the Winter of 1916-1917.
The United States was able to meet this food shortage as easily as it met the European credit shortage--and with no greater sacrifice on the part of the American people. Then, too, with the exception of small amounts of food donated through relief organizations, the food that went to Europe was sold at fancy prices. The United States was therefore in a position to lay down the basic law,--"Submit or starve."
With the purse strings and the larder under American control, the temporary supremacy of the United States was assured. She was the one important nation (beside Japan) that had lost little and gained much during the war. She was the only great nation with a surplus of credit, of raw materials and of food.
The prosperity incident to this period is reflected in the record of American exports, which rose from an average of about two billions in the years immediately preceding the war to more than six billions in 1917. In the same year the imports were just under three billions, leaving a trade balance--that is, a debt owing by foreign countries to the United States--of more than three billions for that one year.
10. _Victory_
The war had been in progress for nearly three years before the United States took her stand on the side of the Allies. At that time the flower of Europe's manhood had faced, for three winters, a fearful pressure of hardship and exposure, while millions among the non-combatants had suffered, starved, sickened and died. The nerves of Europe were worn and the belly of Europe was empty when the American soldiers entered the trenches. They were never compelled to bear the brunt of the conflict. They arrived when the Central Empires were sagging. Their mere presence was the token of victory.
For the first time in history the Americans were matched against the peoples of the old world on the home ground of the old world, and under circumstances that were enormously favorable to the Americans. European capitalism had weakened itself irreparably. The United States entered the war at a juncture that enabled her to take the palm after she had already taken billions of profit without risk or loss. The gain to the United States was immense, beyond the possibility of present estimate. The rulers of the United States became, for the time being, at least, the economic dictators of the world.
The Great War brought noteworthy advantages to the American plutocracy. At home its power was clinched. Among the nations, the United States was elevated by the war into a position of commanding importance. In a superficial sense, at least, the Great War "made" the plutocracy at home and "made" the United States among the nations.
FOOTNOTES:
[45] "The Navy League Unmasked," Speech of December 15, 1915, _Congressional Record_.
[46] This campaign was conducted by H. P. Davison, one of the leading members of the firm of J. P. Morgan and Co. Later a great war-fund drive was conducted by John D. Rockefeller, Jr. Cleveland H. Dodge of the Phelps-Dodge corporation was treasurer of another fund.
[47] J. Maynard Keynes notes the "immense anxieties and impossible financial requirements" of the period between the Summer of 1916 and the Spring of 1917. The task would soon have become "entirely hopeless" but "from April, 1917" the problems were "of an entirely different order." "The Economic Consequences of the Peace." New York, Harcourt, Brace & Howe, 1920, p. 273.
XII. THE IMPERIAL HIGHROAD
1. _A Youthful Traveler_
Along the highroad that leads to empire moves the American people, in the heyday of its youth, sturdy, vigorous, energy-filled, replete with power and promise--conquerors who have swept aside the Indians, enslaved a race of black men, subdued a continent, and begun the extension of territorial control beyond their own borders. More than a hundred million Americans--fast losing their standards of individualism--fast slipping under the domination of a new-made ruling class of wealth-lords and plutocrats--journey, not discontentedly, along the imperial highroad.
The preliminary work of empire-building has been accomplished--territory has been conquered; peoples have been subjected and a ruling class organized. The policy of imperialism has been accepted by the people, although they have not thought seriously of its consequences. They have set out, in good faith, as they believe, to seek for life, liberty and happiness. They do not yet realize that, along the road that they are now traveling, the journey will not be ended until they have worn themselves threadbare in their efforts to conquer the earth.
The American people,--lacking in political experience and in world wisdom; ignorant of the laws of economic and social change,--have committed themselves, unwittingly, to the world old task of setting up authority over those who have no desire to accept it, and of exacting tribute from those who do not wish to pay it.
The early stages of the journey led across a continent. The American people followed it eagerly. Now that the trail leads to other continents they are still willing to go.
"Manifest destiny" is the cry of the leaders. "We are called," echo the followers, and the nation moves onward.
There was some hesitancy among the American people during the Spanish War. Even the leaders were not ready then. Now the leaders are prepared--for markets, for trade, for investments. They are indifferent to political conquest, but economically they are prepared to go on--into Latin America; into Asia; into Europe. The war taught them the lesson and gave them an inkling of their power. So they move along the imperial highroad--followed by a people who have not yet learned to chant the songs of victory--but who are destined, at no very distant date, to learn victory's lessons and to pay victory's price. Along the path,--far away in the distance they see the earth like a ball, rolling at their feet. It is theirs if they will but reach out their hands to grasp it!
2. _An Imperial People_
This is the American people--locked in the arms of mighty economic and social forces; building industrial empires; compelled, by a world war, to reach out and save "civilization,"--capitalist civilization,--a people that, by its very ancestry, seems destined to follow the course of empire.
The sons and daughters of the native born American stock are, in the main, the descendants of the conquering, imperial races of the modern world. During recent times, three great empires--Spain, France and Great Britain--have dominated western civilization. It was these three empires that were responsible for the settlement of America. The past generation has seen the German empire rise to a position that has enabled her to shake the security of the world. The Germans were among the earliest and most numerous settlers of the American colonies. Those who boast colonial ancestry boast the ancestry of conquerors. The Anglo-Saxon-Teutonic races, the titular masters of the modern world; the races that have spread their power where-ever ships sail or trade moves or gain offers, furnished the bulk of the early immigrants to America.
The bulk of the early immigration to the United States was from Great Britain and Germany. The records of immigration (kept officially since 1820) show that between that year and 1840 the immigrants from Europe numbered 594,504, among them there were 358,994 (over half) from the British Isles, and 159,215 from Germany, making a total from the two countries of 518,209, or 87 percent of the immigrants arriving in the twenty-year period. During the next twenty years (1840-1860) the total of immigrants from Europe was 4,050,159, of which the British Isles furnished 2,386,846 (over half) and Germany 1,386,293, making, for these two countries, 94 percent of the whole immigration. Even during the years from 1860 to 1880, 82 percent of those who migrated to the United States hailed from Great Britain and Germany. American immigration, from 1820 to 1880, might, without any violence to facts, be described as Anglo-Teutonic, so completely does the British-German immigrant dominate this period.
Literally, it is true that the American people have been sired by the masters and would-be masters of the modern earth.
3. _A Place in the Sun_
The Americans, like many another growing people, have sought a place in the sun--widening their boundaries; grasping at promised riches. Unlike other peoples they have accomplished the task without any real opposition. Their "promised land" lay all about them, isolated from the factional warfare of Europe; virgin; awaiting the master of the Western World.
The United States has followed the path of empire with a facility unexampled in recent history. When has a people, caught in the net of imperialism, encountered less difficulty in making its imperial dream come true? None of the foes that the American people have encountered, in two centuries of expansion, have been worthy of the name. The Indians were in no position to withstand the onslaught of the Whites. The Mexicans were even less competent to defend themselves. The Spanish Empire crumpled, under attack, like an autumn leaf under the heel of a hunter. Practically for the taking, the American people secured a richly-stocked, compact region, with an area of three millions of square miles--the ideal site for the foundation of a modern civilization.
The area of the United States has increased with marvelous rapidity. At the outbreak of the Revolution (1776) the Colonies claimed a territory of 369,000 square miles. The Northwest Territory (275,000 square miles) and the area south of the Ohio River (205,000 square miles) were added largely as a result of the negotiations in 1782. The official figures for 1800 give the total area of the United States as 892,135 square miles. The Louisiana Purchase (1803) added 885,000 square miles at a cost of 15 millions of dollars. Florida, 59,600 square miles, was purchased from Spain (1819) for 5 millions of dollars; Texas, 389,000 square miles was annexed in 1845; the Oregon Country, 285,000 square miles, was secured by treaty in 1846; New Mexico and California, 529,000 square miles, were ceded by Spain (1848) and a payment of 15 millions was made by the United States; in 1853 the Gadsen Purchase added 30,000 square miles at a cost of ten millions of dollars. This completed the territorial possessions of the United States on the mainland (with the exception of Alaska) making a continental area of 3,026,798 square miles. Between 1776 and 1853 the area of the United States was increased more than eight fold. What other nation has been in a position to multiply its home territory by eight in two generations?
These vast additions to the continental possessions of the United States were made as the result of a trifling outlay. The most serious losses were involved in the Mexican War when the casualties included more than 13,000 killed and died of wounds and disease. The net money cost of the war did not exceed $100,000,000. In return for this outlay--including the annexation of Texas--the United States secured 918,000 square miles of land.[48]
There is no way to estimate the loss of life or the money cost of the Indian Wars. For the most part, the troops engaged in them suffered no more heavily than in ordinary police duty, and the costs were the costs of maintaining the regular army. The total money outlay for purchases and indemnities was about 45 millions of dollars. Within a century the American people gained possession of one of the richest portions of the earth's surfaces--a portion equal in area to more than three times the combined acreage of Belgium, France, Germany, Italy, Japan and the British Isles[49]--in return for an outlay in money and life that would not have provided for one first class battle of the Great War.
Additions to the territory of the country were made with equal facility during the period following the Civil War. Alaska was purchased from Russia for $7,200,000; from Spain, as a result of the War of 1898, the United States received the Philippines, Porto Rico, and some lesser islands, at the same time paying Spain $20,000,000; Hawaii was annexed and an indemnity of $10,000,000 was paid to Panama for the Canal strip. During the second half of the nineteenth century, 716,666 square miles were added to the possessions of the United States. The total direct cost of this territory in money was under forty millions. These gains involved no casualties with the exception of the small numbers lost during the Spanish-American and Philippine Wars.
One hundred and thirty years have witnessed an addition to the United States of more than two and a half million square miles of contiguous, continental territory, and three-quarters of a million square miles of non-contiguous territory. The area of the United States in 1900 was four times as great as it was in 1800 and more than ten times as great as the area of the Thirteen Original Colonies. For the imperialist, the last century and a half of American history is a fairyland come true.
Other empires have been won by the hardest kind of fighting, during which blood and wealth have been spent with a lavish hand. The empire of the French, finally crushed with the defeat of Napoleon, was paid for at such a huge price. The British Empire has been established in savage competition with Holland, Spain, France, Russia, the United States, Germany and a host of lesser powers. The empires of old--Assyria, Egypt, Rome--were built at an intolerable sacrifice. So terrible has been the cost of empire building to some of these nations that by the time they had succeeded in creating an empire the life blood of the people and the resources of the country were devoured and the empire emerged, only to fall an easy prey to the first strong-handed enemy that it encountered.
No such fate has overtaken the United States. On the contrary her path has been smoothed before her feet. Inhabiting a garden spot, her immense territory gains in the past hundred and fifty years have been made with less effort than it has cost Japan to gain and hold Korea or England to maintain her dominion over Ireland.
Once established, the old-world empire was not secure. If the territory that it possessed was worth having, it was surrounded by hungry-eyed nations that took the first occasion to band together and despoil the spoiler. The holding of an empire was as great a task as the building of empire--often greater because of the larger outlay in men and money that was involved in an incessant warfare. Little by little the glory faded; step by step militarism made its inroads upon the normal life of the people, until the time came for the stronger rival to overthrow the mighty one, or until the inrushing hordes of barbarians should blot out the features of civilization, and enthrone chaos once more.
How different has been the fate of the people of the United States! Possessed of what is probably the richest, for the purposes of the present civilization, of any territory of equal size in the world, their isolation has allowed them more than a century of practical freedom from outside interference--a century that they have been able to devote to internal development. The absence of greedy neighbors has reduced the expense of military preparation to a minimum; the old world has failed to realize, until within the last few years, what were the possibilities of the new country; vitality has remained unimpaired, wealth has piled up, industry has been promoted, and on each occasion when a greater extent of territory was required, it has been obtained at a cost that, compared with the experience of other nations, must be described as negligible.
So simple has been the process of empire building for the United States; so natural have been the stages by which the American Empire has been evolved; so little have the changes disturbed the routine of normal life that the American people are, for the most part, unaware of the imperial position of their country. They still feel, think and talk as if the United States were a tiny corner, fenced off from the rest of the world to which it owed nothing and from which it expected nothing.
The American Empire has been built, as were the palaces of Aladdin, in a night. The morning is dawning, and the early risers who were not even awakened from their slumbers by the sound of hammer and engine, are beginning to rub their eyes, and to ask one another what is the meaning of this apparition, and whether it is real.
4. _The Will to Power_
The forces of America are the forces of Empire,--the geography, the economic organization, the racial qualities--all press in the direction of imperialism. There is logic behind the two centuries of conquest in which the American people have been engaged; there is logic in the rise of the plutocracy. Now it remains for the rulers of America to accept the implications of imperialism,--to thrill with the will to power; to recognize and strengthen imperial purpose; to sell imperialism to the American people--in other words to follow the call of manifest destiny and conquer the earth.
The will to power is very old and very strong. Economic and social necessity on the one hand, and the driving pressure of human ambition and the love of domination on the other, have given it a front place in human affairs. The empires of the past were driven into being by this ardent force. As far back as history bears a record, one nation or tribe has made war on its more fortunately situated neighbor; one leader has made cause against his fellow ruler. The Egyptians and Carthaginians have conquered in Africa; the Persians, Assyrians and Babylonians conquered in Asia; the Macedonians, Greeks, Romans, Spanish, Dutch, French, and British built their empires on one or more of the five continents. Conqueror has succeeded conqueror, empire has followed empire. Spoils, domination, world power, have been the objects of their campaigns.
Each great nation grew from small beginnings. Each arose from some simple form of tribal or clan organization--more or less democratic in its structure; containing within itself a unified life and a simple folk philosophy.
From such plain beginnings empires have developed. The peasants, tending their fertile gardens along the borders of the Nile; the vine dressers of Italy, the husbandmen and craftsmen of France and the yeomen of Merry England had no desire to subjugate the world. If tradition speaks truth, they were slow to take upon themselves anything more than the defense of their own hearthstones. It was not until the traders sailed across the seas; not until stories were brought to them of the vast spoil to be had, without work, in other lands, that the peasants and craftsmen consented to undertake the task of conquest, subjugation and empire building.
The plain people do not feel the will to power. They know only the necessities of self-defense. It is in the ambitions of the leisure classes that the demands of conquest have their origin. It is among them that men dream of world empire.[50]
The plain people of the United States have no will to power at the present time. They are only asking to be let alone, in order that they may go their several ways in peace. They are babes in the world of international politics. For generations they have been separated by a great gulf of indifference from the remainder of the human race, and they crave the continuance of this isolation because it gives them a chance to engage, unmolested, in the ordinary pursuits of life.
The American people are not imperialists. They are proud of their country, jealous of her honor, willing to make sacrifices for their dear ones. They are to-day where the plain folk of Egypt, Rome, France and England were before the will to power gripped the ruling classes of those countries.
Far different is the position of the American plutocracy. As a ruling class the plutocracy feels the necessity of preserving and enlarging its privileges. Recently called into a position of leadership, untrained and in a sense unprepared, it nevertheless understands that its claim to consideration depends upon its ability to do what the ruling classes of Egypt, Rome, France and England have done--to build an empire.
Almost unconsciously, out of the necessities of the period, has come the structure of the American Empire. In essence it is an empire, although the plain people do not know it, and even the members of the plutocracy are in many instances unaware of its true character. Yet here, in a land dedicated to liberty and settled by men and women who sought to escape from the savage struggles of empire-ridden Europe, the foundations and the superstructure of empire appear.
1. The people of the United States have conquered and now hold possession of approximately three million square miles of continental territory that has been won by armed force from Great Britain, Mexico, Spain, and the American Indians. (The entire area of Europe is only 3,800,000 square miles.)
2. The people of the United States have conquered and now hold under their sway subject people who have enjoyed no opportunity for self-determination. A whole race--the African Negroes--was captured in its native land, transported to America and there sold into slavery. The inhabitants of the Philippine Islands were conquered by the armed forces of the United States and still are subject people.
3. The United States had developed a plutocracy--a property holding class, that is, to all intents and purposes, the imperialist class--controlling and directing public policy.
4. This plutocratic class is exploiting continental United States and its dependencies. After years of savage internal strife, it has developed a high degree of class consciousness, and led by its bankers, it is taking the fat of the land. The plutocrats, who have made the country their United States, are at the present moment busy disposing of their surplus in foreign countries. As they build their industrial empires, they broaden and deepen their power.
Thus is the round of imperialism complete. Here are the conquered territory, subject people, an imperial ruling class, and the exploitation, by this class, of the lands and peoples that come within the scope of their power. These are the attributes of empire--the characteristics that have appeared, in one form or another, through the great empires of the past and of the present day. Differing in their forms, they remain similar in the principles that they represent. They are imperialism.
5. _Imperial Purpose_
The building of international industrial empires by the progressive business men of the United States lays the foundation for whatever political imperialism is necessary to protect markets, trade and investment. Gathering floods of economic surplus are the driving forces which are guided by ambition and love of gain and power.
The United States emerged from the Great War in a position of unquestioned economic supremacy. With vast stores of all the necessary resources, amply equipped with capital, the country has entered the field as the most dangerous rival that the other capitalist nations must face. Possessed of everything, including the means of providing a navy of any reasonable size and an army of any necessary number, the United States looms as the dominating economic factor in the capitalist world.
Imperial policy is frequently bold, rough and at times frankly brutal and unjust. Where subject peoples and weaker neighbors submit to the dictates of the ruling power there is no friction. But where the subject peoples or smaller states attempt to assert their rights of self-determination or of independence, the empire acts as Great Britain has acted in Ireland and in India; as Italy and France have acted in Africa; as Japan has acted in Korea; as the United States has acted in the Philippines, in Hayti, in Nicaragua, and in Mexico.
Plain men do not like these things. Animated by the belief in popular rights which is so prevalent among the western peoples, the masses resent imperial atrocities. Therefore it becomes necessary to surround imperial action with such an atmosphere as will convince the man on the street that the acts are necessary or else that they are inevitable.
When the Church and the State stood together the Czar and the Kaiser spoke for God as well as for the financial interests. There was thus a double sanction--imperial necessity coupled with divine authority. Those who were not willing to accept the necessity felt enough reverence for the authority to bow their heads in submission to whatever policy the masters of empire might inaugurate.
The course of empire upon which the United States has embarked involves a complete departure from all of the most cherished traditions of the American people. Economic, political and social theories must all be thrust aside. Liberty, equality and fraternity must all be forgotten and in their places must be erected new standards of imperial purpose that are acceptable to the economic and political masters of present day American life.
The American people have been taught the language of liberty. They believe in freedom for self-determination. Their own government was born as a protest against imperial tyranny and they glory in its origin and speak proudly of its revolutionary background. Americans are still individualists. Their lives and thoughts both have been provincial--perhaps somewhat narrow. They profess the doctrine "Live and let live" and in a large measure they are willing and anxious to practice it.
How is it possible to harmonize the Declaration of Independence with the subjugation of peoples and the conquest of territory? If governments "derive their just powers from the consent of the governed," and if it is the right of a people to alter or to abolish any government which does not insure their safety and happiness, then manifestly subjugation and conquest are impossible.
The letter and the spirit of the Declaration of Independence contradict the letter and spirit of imperial purpose word for word and line for line. There can be no harmony between these two theories of social life.
6. _Advertising Imperialism_
Since the tradition of the people of the United States and the necessities of imperialism are so utterly at variance, it becomes necessary to convince the American people that they should abandon their traditions and accept a new order of society, under which the will to power shall be substituted for liberty and fraternity. The ruling class of imperial Germany did this frankly and in so many words. The English speaking world is more adroit.
The first step in the campaign to advertise and justify imperialism is the teaching of a blind my-country-right-or-wrong patriotism. In the days preceding the war the idea was expressed in the phrase, "Stand behind the President." The object of this teaching is to instill in the minds of the people, and particularly of the young, the principles of "Deutschland ueber alles," which, in translation, means "America first." There are more than twenty million children in the public schools of the United States who are receiving daily lessons in this first principle of popular support for imperial policy.
Having taken this first step and made the state supreme over the individual will and conscience, the imperial class makes its next move--for "national defense." The country is made to appear in constant danger from attack. Men are urged to protect their homes and their families. They are persuaded that the white dove of peace cannot rest securely on anything less than a great navy and army large enough to hold off aggressors. The same forces that are most eager to preach patriotism are the most anxious about national preparedness.
Meanwhile the plain people are taught to regard themselves and their civilization as superior to anything else on earth. Those who have a different language or a different color are referred to as "inferior peoples." The people of Panama cannot dig a canal, the people of Cuba cannot drive out yellow fever, the people of the Philippines cannot run a successful educational system, but the people of the United States can do all of these things,--therefore they are justified in interfering in the internal affairs of Panama, Cuba and the Philippines. When there is a threat of trouble with Mexico, the papers refer to "cleaning up Mexico" very much as a mother might refer to cleaning up a dirty child.
Patriotism, preparedness and a sense of general superiority lead to that type of international snobbery that says, "Our flag is on the seven seas"; or "The sun never sets on our possessions"; or "Our navy can lick anything on earth." The preliminary work of "Education" has now been done; the way has been prepared.
One more step must be taken, and the process of imperializing public opinion is complete. The people are told that the imperialism to which they have been called is the work of "manifest destiny."
7. _Manifest Destiny_
The argument of "manifest destiny" is employed by the strong as a blanket justification for acts of aggression against the weak. Each time that the United States has come face to face with the necessity of adding to its territory at the expense of some weak neighbor, the advocates of expansion have plied this argument with vigor and with uniform success.
The American nation began its work of territorial expansion with the purchase of Louisiana. Jefferson, who had been elected on a platform of strict construction of the Constitution, hesitated at an act which he regarded as "beyond the Constitution." (Jefferson's "Works," Vol. IV, p. 198.) Quite different was the language of his more imperialistic contemporaries. Gouverneur Morris said, "France will not sell this territory. If we want it, we must adopt the Spartan policy and obtain it by steel, not by gold."[51] During February, 1803, the United States Senate debated the closing of the Mississippi to American commerce. "To the free navigation of the Mississippi we had an undoubted right from nature and from the position of the Western country,"[52] said Senator Ross (Pennsylvania) on February 14. On February 23rd Senator White (Delaware) went a step farther: "You had as well pretend to dam up the mouth of the Mississippi, and say to the restless waves, 'Ye shall cease here, and never mingle with the ocean,' as to expect they (the settlers) will be prevented from descending it."[53] On the same day (February 23rd) Senator Jackson (Georgia) said: "God and nature have destined New Orleans and the Floridas to belong to this great and rising Empire."[54]
God, nature and the requirements of American commerce were the arguments used to justify the purchase, or if necessary, the seizure of New Orleans. The precedent has been followed and the same arguments presented all through the century that followed the momentous decision to extend the territory of the United States.
Some reference has been made to the Mexican War and the argument that the Southwest was a "natural" part of the territory of the United States. The same argument was made in regard to Cuba and by the same spokesmen of the slave-power. Stephen A. Douglas (New Orleans, December 13, 1858) was asked:
"How about Cuba?"
"It is our destiny to have Cuba," he answered, "and you can't prevent it if you try."[55]
On another occasion (New York, December, 1858) Douglas stated the matter even more broadly:
"This is a young, vigorous and growing nation and must obey the law of increase, must multiply and as fast as we multiply we must expand. You can't resist the law if you try. He is foolish who puts himself in the way of American destiny."[56]
President McKinley stated that the Philippines, like Cuba and Porto Rico, "were intrusted to our hands by the Providence of God" (Boston, February 16, 1899), and one of his fellow imperialists--Senator Beveridge of Indiana--carried the argument one step farther (January 9, 1900) when he said in the Senate (_Congressional Record_, January 9, 1900, p. 704): "The Philippines are ours forever.... And just beyond the Philippines are China's illimitable markets. We will not retreat from either. We will not repudiate our duty to the archipelago. We will not abandon our opportunity in the Orient. We will not renounce our part in the mission of our race, trustee, under God, of the civilization of the world."
Manifest destiny is now urged to justify further acts of aggression by the United States against her weaker neighbors. _The Chicago Tribune_, discussing the Panama Canal and its implications, says editorially (May 5, 1916): "The Panama Canal has gone a long way towards making our shore continuous and the intervals must and will be filled up; not necessarily by conquest or even formal annexation, but by a decisive control in one form or another."
Here the argument of manifest destiny is backed by the argument of "military necessity,"--the argument that led Great Britain to possess herself of Gibraltar, Suez and a score of other strategic points all round the earth, and to maintain, at a ruinous cost, a huge navy; the argument that led Napoleon across Europe in his march of bloody, fatal triumph; the argument that led Germany through Belgium in 1914--one of the weakest and yet one of the most seductive and compelling arguments that falls from the tongue of man. Because we have a western and an eastern front, we must have the Panama Canal. Because we have the Panama Canal, we must dominate Central America. The next step is equally plain; because we dominate Central America and the Panama Canal, there must be a land route straight through to the Canal. In the present state of Mexican unrest, that is impossible, and therefore we must dominate Mexico.
The argument was stated with persuasive power by ex-Senator Albert J. Beveridge (_Collier's Weekly_, May 19, 1917). "Thus in halting fashion but nevertheless surely, the chain of power and influence is being forged about the Gulf. To neglect Mexico is to throw away not only one link but a large part of that chain without which the value and usefulness of the remainder are greatly diminished if indeed not rendered negligible." By a similar train of logic, the entire American continent, from Cape Horn to Bering Sea can and will be brought under the dominion of the United States.
Some destiny must call, some imperative necessity must beckon, some divine authority must be invoked. The campaign for "100 percent Americanism," carefully thought out, generously financed and carried to every nook and corner of the United States aims to prove this necessity. The war waged by the Department of Justice and by other public officers against the "Reds" is intended to arouse in the American people a sense of the present danger of impending calamity. The divine sanction was expressed by President Wilson in his address to the Senate on July 10, 1919. The President discussed the Peace Treaty in some of its aspects and then said, "It is thus that a new responsibility has come to this great nation that we honor and that we would all wish to lift to yet higher service and achievement. The stage is set, the destiny disclosed. It has come about by no plan of our conceiving but by the hand of God who has led us into this war. We cannot turn back. We can only go forward, with lifted and freshened spirit to follow the vision."
8. _The Open Road_
The American people took a long step forward on November 2, 1920. The era of modern imperialism, begun in 1896 by the election of McKinley, found its expression in the annexation of Hawaii; the conquest of Cuba and the Philippines; the seizure of Panama, and a rapid commercial and financial expansion into Latin America. In 1912 the Republicans were divided. The more conservative elements backed Taft for reelection. The more aggressive group (notably United States Steel) supported Roosevelt. Between them they divided the Republican strength, and while they polled a total vote of 7,604,463 as compared with Wilson's 6,293,910, the Republican split enabled Wilson to secure a plurality of 2,173,512, although he had less than half of the total vote.
President Wilson entered office with the ideals of "The New Freedom." He was out to back the "man on the make," the small tradesman and manufacturer; the small farmer; the worker, ambitious to rise into the ranks of business or professional life. With the support, primarily, of little business, Wilson managed to hold his own for four years, and at the 1916 election to poll a plurality, over the Republican Party, of more than half a million votes. He won, however, primarily because "he kept us out of war." April, 1917, deprived him of that argument. His "New Freedom" doctrines, translated into international politics (in the Fourteen Points) were roughly handled in Paris. The country rejected his leadership in the decisive Congressional elections of 1918, and he and his party went out of power in the avalanche of 1920, when Harding received a plurality nearly three times as great as the highest one ever before given a presidential candidate (Roosevelt, in 1904). Every state north of the Mason and Dixon Line went Republican. Tennessee left the Solid South and joined the same party. The Democrats carried only eleven states--the traditional Democratic stronghold.
The victory of Harding is a victory for organized, imperial, American business. The "man on the make" is brushed aside. In his place stands banker, manufacturer and trader, ready to carry American money and American products into Latin America and Asia.
Before the United States lies the open road of imperialism. Manifest destiny points the way in gestures that cannot be mistaken. Capitalist society in the United States has evolved to a place where it must make certain pressing demands upon neighboring communities. Surplus is to be invested; investments are to be protected, American authority is to be respected. All of these necessities imply the exercise of imperial power by the government of the United States.
Capitalism makes these demands upon the rulers of capitalist society. There is no gainsaying them. A refusal to comply with them means death.
Therefore the American nation, under the urge of economic necessity; guided half-intelligently, half-instinctively by the plutocracy, is moving along the imperial highroad, and woe to the man that steps across the path that leads to their fulfillment. He who seeks to thwart imperial destiny will be branded as traitor to his country and as blasphemer against God.
FOOTNOTES:
[48] "New American History," A. B. Hart. American Book Co., 1917, p. 348.
[49] The total area of these countries, exclusive of their colonies, is 807,123 square miles.
[50] See "Theory of the Leisure Class," Thorstein Veblen. New York, Huebsch, 1918, Ch. 10.
[51] "A History of Missouri," Louis Houck. Chicago, R. R. Donnelly & Sons, 1908, vol. II, p. 346.
[52] "History of Louisiana," Charles Gayarre. New Orleans, Hansell & Bros., Ltd., 1903, vol. III, p. 478.
[53] Ibid., p. 485.
[54] Ibid., p. 486.
[55] McMaster's "History of the American People." Vol. VIII, p. 339.
[56] Ibid., p. 339.
XIII. THE UNITED STATES AS A WORLD COMPETITOR
1. _A New World Power_
Youngest among the great nations, the United States holds a position of immense world power. Measured in years and compared with her sister nations in Europe and Asia, she is a babe. Measured in economic strength she is a burly giant. Young America is, but mighty with a vast economic strength.
An inexorable destiny seems to be forcing the United States into a position of international importance. Up to the time of the Spanish War, she played only a minor part in the affairs of the world. The Spanish War was the turning point--the United States as a borrowing nation gave way then, to the United States as an investing nation. Economic forces compelled the masters of economic life to look outside of the country for some of their business opportunities.
Since the Civil War the United States has been preparing herself for her
## part in world affairs. During the thirty years that elapsed between 1870
and 1900 she emerged from a position of comparative economic inferiority to take a position of notable economic importance. Between the years 1870 and 1900 the population of the United States increased 97 per cent. During the same period the annual production of wheat increased from 236 million bushels to 522 million bushels; the annual production of corn from 1,094 to 2,105 million bushels; the annual production of cotton from 4,352 to 10,102 thousand bales; the annual production of coal from 29 to 241 million tons; the annual production of petroleum from 221 to 2,672 million gallons; the annual production of pig iron from 1,665 to 13,789 thousand tons; the annual production of steel from 68 to 10,188 thousand tons; the annual production of copper from 12 to 271 thousand tons, and the production of cement (there is no record for 1870) rose from two million barrels in 1880 to 17 million barrels in 1900. Thus while the production of food more than kept pace with the increase of population, the production of those commodities upon which the new industry depends--coal, petroleum, iron, steel, copper and cement--increased many times more rapidly than the population. During one brief generation the United States, with almost unbelievable rapidity, forged ahead in the essentials for supremacy in the new world of industry.
By the time of the Spanish War (1898) American industries had found their stride. During the next fourteen years they were overtaking their European competitors in seven league boots. Between 1900 and 1914 while the population of the United States increased by 30 per cent,--
Wheat production increased 70 per cent Corn production increased 27 " " Cotton production increased 58 " " Coal production increased 90 " " Petroleum production increased 317 " " Pig Iron production increased 69 " " Steel production increased 131 " " Copper production increased 89 " " Cement production increased 406 " "
The United States was rushing toward a position of economic world power before the catastrophe of 1914 hurled her to the front, first as a producer (at immense profits) for the Allies, and later as the financier of the final stages of the War.
The economic position that is now held by the United States among the great competing nations of the world can be in some measure suggested--it cannot be adequately stated--by a comparison of the economic position of the United States and some of the other leading world empires.
Neither the geographical area of the United States nor the numerical importance of its people justifies its present world position. The country, with 8 per cent of the area and 6 per cent of the population of the world, looms large in the world's economic affairs,--how large will appear from an examination of certain features that are considered essential to economic success, such as resources, capital, products, shipping, and national wealth and income.
2. _The Resources of the United States_
The most important resource of any country is the fertile, agricultural land. Figures given in the Department of Agriculture Year Book for 1918 (Table 319) show the amount of productive land,--including, beside cultivated land, natural meadows, pastures, forests, woodlots, etc., of the various countries according to pre-war boundary lines. The total of such productive land for the 36 leading countries of the world was 4,591.7 million acres. Russia, including Siberia, had almost a third of this total (1,414.7 million acres). The United States came second with 878.8 million acres, or 19 per cent of the total available productive land. Third in the list was Argentine with 537.8 million acres. British India came fourth with 465.7 million acres. Then there followed in order Austria-Hungary, Germany, France, Australia, Spain and Japan. Austria-Hungary, Germany and France combined had almost exactly four hundred million acres of productive land or less than half the productive area of the United States.
The United States, in the area of productive land, is second only to Russia. In the area of land actually under cultivation, however, it stands first, with Russia a close second and British India a close third,--the amounts of cultivated land in each of these countries being 293.8 million acres, 279.6 million acres, and 264.9 million acres respectively. These three countries together contain 64 per cent of the 1,313.8 million acres of cultivated land of the world. The United States alone contains 22 per cent of the total cultivated land.
The total forest acreage available for commercial purposes is greatest in Russia (728.4 million acres). The United States stands second with 400 million acres and Canada third with 341 million acres. The Chief of Forest Investigations of the United States Department of Agriculture (Letter of Oct. 11, 1919) places the total forest acreage of both Brazil and Canada ahead of the United States. In the case of Brazil no figures are available showing what portion of the 988 million acres of total area is commercially available. Canada with a total forest acreage of 800 million acres has less timber commercially available than the United States with a total forest area of 500 million acres.
The iron ore reserves of the world are estimated at 91,000 million tons ("Iron Ores," Edwin C. Eckel. McGraw Hill Book Co., 1914, pp. 392-3). Of this amount 51,000 millions are placed in Asia and Africa; 12,000 million tons in Europe, and 14,800 million tons in North America. The United States alone is credited with 4,260 million tons or about 5 per cent of the world's supply. The United States Geological Survey (_Bulletin_ 666v) estimates the supply of the United States at 7,550 million tons; the supply in Newfoundland, Mexico and Cuba as 7,000 million tons, and that in South America as 8,000 million tons as against 12,000 million tons for Europe. This estimate would give the United States alone 8 per cent of the iron ore of the world. It would give North America 15 per cent and the Western Hemisphere 25 per cent, as against 15 per cent for Europe.
Iron ore furnishes the material out of which industrial civilization is constructed. Until recently the source of industrial power has been coal. Even to-day petroleum and water play a relatively unimportant role. Coal still holds the field.
The United States alone contains 3,838,657 million tons--more than half of the total coal reserves of the world. ("Coal Resources of the World." Compiled by the Executive Committee, International Geological Congress, 1913, Vol. I, p. XVIII ff.) North America is credited with 5,073,431 million tons or over two-thirds of the world's total coal reserves (7,397,553 millions of tons). The coal reserve of Europe is 784,190 million tons or about one-fifth of the coal reserves of the United States alone.
Figures showing the amount of productive land and of timber may be verified. Those dealing with iron ore and coal in the ground are mere estimates and should be treated as such. At the same time they give a rough idea of the economic situation. Of all the essential resources,--land, timber, iron, copper, coal, petroleum and water-power,--the United States has large supplies. As compared with Europe, her supply of most of them is enormous. No other single country (the British Empire is not a single country) that is now competing for the supremacy of the world can compare with the United States in this regard, and if North America be taken as the unit of discussion, its preponderance is enormous.
3. _The Capital of the United States_
The United States apparently enjoys a large superiority over any single country in its reserves of some of the most essential resources. The same thing is true of productive machinery.
Figures showing the actual quantities of capital are available in only a small number of cases. Estimates of capital value in terms of money are useless. It is only the figures which show numbers of machines that really give a basis for judging actual differences.
Live stock on farms, the chief form of agricultural capital, is reported for the various countries in the Year Book of the United States Department of Agriculture. The United States (1916) heads the list with 61.9 million cattle; 67.8 million hogs; 48.6 million sheep and goats, and 25.8 million horses and mules,--204 million farm animals in all. The Russian Empire (including Russia in Asia) is second (1914) with 52.0 million cattle; 15.0 hogs; 72.0 million sheep and goats, and 34.9 horses and mules,--174 million farm animals in all. British India (1914) reports more cattle than any other country (140.5 million); she is also second in the number of sheep and goats with 64.7 millions, but she has no hogs and 1.9 million horses. Argentina (1914) reports 29.5 million cattle; 2.9 million sheep and goats; and 8.9 million horses and mules. The number of animals on European farms outside of Russia is comparatively small. Germany (1914), United Kingdom (1916), Austria-Hungary (1913), and France (1916) reported 61.8 million cattle, 46.6 million hogs, 60.8 million sheep and goats, and 11.5 million horses and mules, making a total of 180.7 million farm animals. These four countries with a population of about 206 million persons, had less live stock than the United States with its population (1916) of about 100 millions.
It would be interesting to compare the amount of farm machinery and farm equipment of the United States with that of other countries. Unfortunately no such figures are available.
The figures showing transportation capital are fairly complete. (_Statistical Abstr._ 1918, pp. 844-5.) The total railroad mileage of the world is 729,845. More than one-third of this mileage (266,381 miles) is in the United States. Russia (1916) comes second with 48,950 miles; Germany (1914) third, with 38,600 miles and Canada (1916) fourth with 37,437 miles.
The world's total mileage of telegraph wire (Ibid.) is 5,816,219, of which the United States has more than a fourth (1,627,342 miles). Russia (1916) is second with 537,208 miles; Germany (1914) is third with 475,551 miles; and France fourth with 452,192 miles.
The Bureau of Railway Economics has published a compilation on "Comparative Railway Statistics" (_Bulletin 100_, Washington, 1916) from which it appears that the United States is far ahead of any other country in its railroad equipment. The total number of locomotives in the United States was 64,760; in Germany 29,520; in United Kingdom 24,718; in Russia (1910) 19,984; and in France 13,828. No other country in the world had as many as ten thousand locomotives. If these figures also showed the locomotive tonnage as well as the number, the lead of the United States would be even more decided as the European locomotives are generally smaller than those used in the United States. This fact is clearly brought out by the figures from the same bulletin showing freight car tonnage (total carrying capacity of all cars). For the United States the tonnage was (1913) 86,978,145. The tonnage of Germany was 10.7 millions; of France 5.0 millions; of Austria-Hungary 3.8 millions. The figures for the United Kingdom were not available.
The United States also takes the lead in postal equipment. (_Stat. Abstr._, 1918, pp. 844-5.) There are 324,869 post offices in the world; 54,257 or one-sixth in the United States. The postal routes of the world cover 2,513,997 miles, of which 450,954 miles are in the United States. The total miles of mail service for the world is 2,061 millions. Of this number the United States has 601.3 millions.
The most extreme contrast between transportation capital in the United States and foreign countries is furnished by the number of automobiles. _Facts and Figures_, the official organ of the National Automobile Chamber of Commerce (April, 1919) estimates the total number of cars in use on January 1, 1917 as 4,219,246. Of this number almost six-sevenths (3,500,000) were in use in the United States. The total number of cars in Europe as estimated by the Fiat Press Bureau, Italy, was 437,558, or less than one-seventh of the number in use in the United States. Automobile distribution is of peculiar significance because the industry has developed almost entirely since the Spanish-American War and therefore since the time when the United States first began to develop into a world power.
The world's cotton spindleage in 1919 is estimated at 149.4 million spindles. (Letter from T. H. Price 10/6/19.) Of this total Great Britain has 57.0 millions; the United States 33.7 millions; Germany 11.0 millions; Russia 8.0 millions, and France and India each 7.0 millions.
No effort has been made to cite figures showing the estimated value of various forms of capital, because of the necessary variations in value standards. Enough material showing actual quantities of capital has been presented to prove that in agriculture, in transportation, in certain lines of manufacturing the United States is either at the head of the list, or else stands in second place. In transportation capital (particularly automobiles) the lead of the United States is very great.
If figures were available to show the relative amounts of capital used in mining, in merchandising, and in financial transactions they would probably show an equally great advantage in favor of the United States. In this connection it might not be irrelevant to note that in 1915 the total stock of gold money in the world was 8,258 millions of dollars. More than a quarter (2,299 millions) was in the United States. The total stock of silver money was 2,441 millions of dollars of which 756 millions (nearly a third) was in the United States. (_Stat. Abstr._, 1918, pp. 840-1.)
4. _Products of the United States_
Figures showing the amounts of the principal commodities produced in the United States are far more complete than those covering the resources and capital. They are perhaps the best index of the present economic position of the United States in relation to the other countries of the world.
The wheat crop of the world in 1916 was 3,701.3 million bushels. Russia, including Siberia, was the leading producer with 686.3 million bushels. The United States was second with 636.7 million bushels or 17 per cent of the world's output. British India, the third wheat producer, had a crop in 1916 of 323.0 million bushels. Canada, with 262.8 million bushels, was fourth on the list. Thus Canada and the United States combined produced almost exactly one-fourth of the world's wheat crop.
As a producer of corn the United States is without a peer. The world's corn crop in 1916 was 3,642.1 million bushels. Two-thirds of this crop (2,566.9 million bushels) was produced in the United States.
The position of the United States as a producer of corn is almost duplicated in the case of cotton. The _Statistical Abstract_ published by the British Government (No. 39, London, 1914, p. 522) gives the world's cotton production as 21,659,000 bales (1912). Of this number the United States produced 14,313,000--almost exactly two-thirds. British India, which ranks second, reported a production of 3,203,000 bales. Egypt was third with 1,471,000 bales.
About one-tenth of the world's output of wool is produced in the United States. World production for 1917 is placed at 2,790,000 pounds. (_Bulletin_, National Association of Wool Manufacturers. 1918, p. 162.) Australia heads the list with a production of 741.8 million pounds. Russia, including Siberia, comes second with 380.0 million pounds. The United States is third with 285.6 million pounds and Argentina fourth with 258.3 million pounds.
The United States leads the world in timber production. "Last winter we estimated that the United States has been cutting about 50 per cent of the total world's supply of lumber." (Letter from Chief of Forest Investigation. U. S. Forest Service. Oct. 11, 1919.) The same letter gives the present annual timber cut. The United States 12.5 billion cubic feet; Russia 7.1 billion cubic feet; Canada 3.0 billion cubic feet; Austria-Hungary 2.7 billion cubic feet.
A third of the iron ore produced in the world in 1912 came from the United States. The world's production in that year was 154.0 million tons (_British Statistical Abstract_, No. 39, p. 492). The United States produced 56.1 million tons or 36 per cent of the whole; Germany produced 32.7 million tons; France 19.2 million tons; the United Kingdom 14.0 million tons. No other country is reported as producing as much as ten million tons.
The position of the United States as a producer of iron and steel was greatly enhanced by the war. _The Daily Consular and Trade Reports_ (July 9, 1919, p. 155) give a comparison between the world's steel and iron output in 1914 and 1918. In 1914 the United States produced 23.3 million tons of pig iron; Germany produced 14.4 million tons; the United Kingdom 8.9 million tons, and France 5.2 million tons. The United States was thus producing 45 per cent of the pig iron turned out in these four countries. For 1918 the pig iron production of the United States was 39.1 million tons. That of the other three countries was 22.0 million tons. In that year the United States produced 64 per cent of the pig iron product of these four countries. An equally great lead is shown in the case of steel production. In 1914 the United States produced 23.5 million tons of steel. Germany, the United Kingdom and France produced 27.6 million tons. By 1918 the production of the United States had nearly doubled (45.1 million tons).
The total pig iron output of the world for 1917 was placed at 66.9 millions of tons. The world's production of steel in 1916 was placed at 83 million tons. The United States produced considerably more than half of both commodities. ("The Mineral Industry During 1918." New York, McGraw Hill Book Co., 1919, pp. 379-80).
The two chief forms of power upon which modern industry depends are petroleum and coal. The United States is the largest producer of both of these commodities. The world's production of petroleum in 1917 was 506.7 million barrels (_Mineral Resources_, 1917,