should arise. It is part of the process of capitalist evolution due
to machine industry. As competition led to waste in production, so it
led to the cutting of profits among capitalists. To prevent this the
massing of capital was necessary, by which the large capitalists could
undersell his small rivals by offering, at prices below anything they
could afford to sell at, goods produced by machinery and distributed
by a plexus of agencies initially too costly for any individual
competitor to purchase or set on foot. Now for such massive capitals,
the contributions of several capitalists are needed; and hence has
arisen the Joint Stock Company or _Compagnie Anonyme_. Through this new
capitalist agency a person in England can hold stock in an enterprise
at the Antipodes which he has never visited and never intends to
visit, and which, therefore, he cannot “superintend” in any way. He
and the other shareholders put in a manager with injunctions to be
economical. The manager’s business is to earn for his employers the
largest dividends possible: if he does not do so he is dismissed. The
old personal relation between the workers and the employer is gone;
instead thereof remains merely the cash nexus. To secure high dividends
the manager will lower wages. If that is resisted there will probably
be either a strike or lock-out. Cheap labor will be perhaps imported by
the manager; and if the work-people resist by intimidation or organized
boycotting, the forces of the State (which they help to maintain) will
be used against them. In the majority of cases they must submit.
Such is a not unfair picture of the relation of capitalist to workman
to-day: the former having become an idle dividend-receiver. The dictum
of orthodox political economy, uttered by so competent an authority as
the late Professor Cairnes, runs:--
“It is important, on moral no less than on economic grounds, to
insist upon this, that no public benefit of any kind arises from the
existence of an idle rich class. The wealth accumulated by their
ancestors and others on their behalf, where it is employed as capital,
no doubt helps to sustain industry; but what they consume in luxury
and idleness is not capital, and helps to sustain nothing but their
own unprofitable lives. By all means they must have their rents and
interest, as it is written in the bond; but let them take their proper
place as drones in the hive, gorging at a feast to which they have
contributed nothing.”[55]
The fact that the modern capitalist may be not only useless but
positively obstructive was well illustrated at a meeting of the
shareholders of the London and South Western Railway on 7th February
last. Three shareholders urged a reduction in third-class fares. The
chairman pointed out the obvious fact that such a reduction would
probably lower the dividend, and asked the meeting if that was what
they wished. He was, of course, answered by a chorus of “No, no!” and
all talk of reduction of fares was at an end. Here is a plain sample
(hundreds might be quoted) of the evident interests of the public being
sacrificed to those of the capitalist.
That joint-stock capitalism is extending rapidly everyone knows. In
the United States, according to Mr. Bryce, the wealth of joint-stock
corporations is estimated at one-fourth of the total value of all
property.[56] In England every kind of business, from breweries, banks,
and cotton-mills down to automatic sweetmeat machines, is falling into
the hands of the joint-stock capitalist, and must continue to do so.
Twenty years ago who would have supposed that a brewery like that of
Guinness or such a banking firm as Glyn Mills, and Co. would become
a joint-stock company? Yet we know it is so to-day. Capitalism is
becoming impersonal and cosmopolitan. And the combinations controlling
production become larger and fewer. Baring’s are getting hold of the
South African diamond fields: A few companies control the whole
anthracite coal produce of Pennsylvania. Each one of us is quite “free”
to “compete” with these gigantic combinations, as the Principality of
Monaco is “free” to go to war with France should the latter threaten
her interests. The mere forms of freedom remain; but monopoly renders
them nugatory. The modern State, having parted with the raw material
of the globe, cannot secure freedom of competition to its citizens;
and yet it was on the basis of free competition that capitalism rose.
Thus we see that capitalism has cancelled its original principle--is
itself negating its own existence. Before considering its latest
forms, attention may here be conveniently directed to the Co-operative
movement, which is, on one side at any rate, closely allied to the
joint-stock development.
The Co-operative movement had in England a Socialistic origin: for
its founder was Robert Owen. As Mr. Seligman says very truly in
the _Political Science Quarterly_: “Owen was the founder of the
Co-operative movement in England, a fact often ignored by those who
glibly use the word to-day with an utter failure to discern its
true significance.” And Owen himself avowed that his grand ultimate
object was “community in land,” with which he hoped would be combined
“unrestrained co-operation on the part of all, for every purpose of
human life.” It is thus important to associate co-operation with Robert
Owen--_clarum et venerabile nomen_--because there are many persons who
suppose that co-operation began with the Rochdale Pioneers in 1844.
What the Rochdale movement really did was to commence the process of
joint-stock shop-keeping, a very different thing from that which Owen
had in view.
A powerful impetus was given to co-operation by the Christian Socialist
movement under Maurice and Kingsley. “Of all narrow, conceited,
hypocritical, anarchic and atheistic schemes of the Universe,” said
Kingsley, “The Cobden and Bright one is exactly the worst.” The
orthodox economic conclusions of the day fared badly at Kingsley’s
hands. “The man who tells us,” said he, “that we ought to investigate
Nature, simply to sit patiently under her, and let her freeze, and
ruin, and starve, and stink us to death, is a goose, whether he
calls himself a chemist or a political economist.” These Christian
Socialist leaders felt deeply the anguish and poverty of the workers
and the selfish apathy of the rich. “Mammon,” says Kingsley, “shrieks
benevolently whenever a drunken soldier is flogged; but he trims his
paletot and adorns his legs with the flesh of men and the skins of
women, with degradation, pestilence, heathendom, and despair; and then
chuckles complacently over his tailor’s bills. Hypocrite! straining
at a gnat and swallowing a camel.” All this is very admirable; but
cheap clothes are not made solely or chiefly for Mammon, but for
the masses, who are poor people. It is part of the sad irony of the
situation that the great majority are obliged to accept the alternative
of cheap clothes or none at all. And as the English climate and the
British matron combine to exercise an absolute veto over the latter
form of prehistoric simplicity, it follows that one portion of the
working-classes must, in order to be clothed, connive at the sweating
of another portion.
The _Christian Socialist_, which was the organ of Maurice and
Kingsley, betrayed great simplicity as to the real nature of the
economic problem. It neglected Owen’s principle of “community in
land,” and supposed that by working together and selling articles
of good quality at a fair price poverty could be eliminated, while
yet every worker in the community was paying his tribute of economic
rent to the owners of the instruments of production. Thus the
movement had no economic basis; and when the moral idealism had
departed from it, no wonder that it degenerated into mere “divvy”
hunting and joint-stock shop-keeping. The economic advantages of
joint-stock shop-keeping are thus summed up by Mr. Robert Somers in
the “Encyclopædia Britannica” (Art., “Co-operation”): “Wholesome
commodities, ready-money payments, a dividend of from five to ten
per cent on share capital, and a bonus to non-members on the amount
of their purchases.” As joint-stock shop-keeping, co-operation is a
useful and cheap method of distribution, which has doubtless benefited
a considerable number of persons; but the notion that it can solve the
economic problem before society is “chimerical,” as Dr. J. K. Ingram
tells us is the opinion of modern economists.[57] This, indeed, might
only be expected from the fact that 961 out of every 1,000 persons
in England die without furniture, investments, or effects worth
£300.[58] Economically considered, co-operation is, now that the
initial enthusiasm has died out of it, a subsidiary branch of the great
joint-stock enterprise. Ethically considered, its results are often
doubtful. In its chief stronghold, Lancashire, one observes a narrow
selfishness among its votaries, which could not be surpassed in the
most genteel quarters of Bayswater. Its ideal is not the raising of
the working class as a whole, but the raising of certain persons out
of the working into the middle class. If the advocates of co-operation
will abate their pretensions, and claim merely (1) that their method
is a useful and economic means of distribution among the lower-middle
and upper-working classes; and (2) that by its agency working men can
learn the important functions of organization and administration, their
claim will be freely admitted. But if they go further their vaulting
ambition will o’erleap itself. At the present rate of progress made
by co-operative societies as compared with joint-stock capitalist
companies, several generations will be in their graves before any deep
or general impression is made. And meanwhile, unless economic rent is
diverted from the class which at present absorbs it to the community
which creates it, co-operators, like the rest of us, must pay tribute
to the lords of the soil and of money. But the noteworthy fact about
co-operation, is that its very existence testifies to the process of
industrial and capitalist aggregation here insisted on as the great
social factor of our period. For co-operative societies supersede
individual by social distribution, effecting it without the waste
attendant on a number of little shops all competing against each other,
the owners of none of which can make a decent living. Co-operation,
therefore, well illustrates the economic evolution of the present age.
I now come to treat of the latest forms of capitalism, the “ring” and
the “trust,” whereby capitalism cancels its own principles, and, as a
seller, replaces competition by combination. When capitalism buys labor
as a commodity it effects the purchase on the competitive principle.
Its indefinitely extended market enables it to do so; for it knows
that the workman must sell his labor to secure the means to live.
Other things being equal, therefore, it buys its labor in the cheapest
market. But when it turns round to face the public as a seller, it
casts the maxims of competition to the winds, and presents itself as
a solid combination. Competition, necessary at the outset, is found
ultimately, if unchecked, to be wasteful and ruinous. It entails
great expense in advertising; it necessitates the employment of much
unproductive labor; it tends to the indefinite lowering of prices; it
produces gluts and crises, and renders business operations hazardous
and precarious. To escape these consequences, the competing persons or
firms agree to form a close combination to keep up prices, to augment
profits, to eliminate useless labor, to diminish risk, and to control
the output. This is a “ring,” which is thus a federation of companies.
The best examples of “rings” and “pools” are to be found in America,
where capitalism is more unrestrained and bolder in its operations than
in Europe; and also where nearly all the active intellect is attracted
to those commercial pursuits that dominate American life.
The individualist devotees of _laisser faire_ used to teach us
that when restrictions were removed, free competition would settle
everything. Prices would go down, and fill the “consumer” with joy
unspeakable; the fittest would survive; and as for the rest--it was
not very clear what would become of them, and it really didn’t matter.
No doubt the “consumer” has greatly benefited by the increase in
production and the fall in prices; but where is “free competition”
now? Almost the only persons still competing freely are the small
shopkeepers, trembling on the verge of insolvency, and the workingmen,
competing with one another for permission to live by work. Combination
is absorbing commerce. Here are a few instances of the formation of
rings.
A steel rail combination was some years ago formed among previously
competing firms in America. This combination discovered that too many
rails were being made and that prices were being cut. Accordingly, one
of the mills in the combination--the Vulcan mill of St. Louis--was
closed, and stood smokeless for years: its owners meanwhile receiving a
subsidy of $400,000 a year from the other mills in the combination for
_not_ making rails. That is how the owners of the Vulcan mill earned
their “wages of superintendence.” It is needless to add that no payment
was made to the men for _not_ working: they were thrown on the streets
to meditate on the right to “liberty and the pursuit of happiness,”
secured to them by the Declaration of Independence.
Or, again, take the case of the anthracite coal lands of Pennsylvania,
occupying an area of some 270,000 acres, and held by the Reading
Coal and Iron Company, the Lehigh Valley Railroad, the Delaware,
Lackawanna and Western Railroad, the Delaware and Hudson Railroad,
the Pennsylvania Railroad, the Pennsylvania Coal Company, and smaller
firms and corporations tributary to these. The rich owners, popularly
known as the “coal barons,” agree to fix absolutely the wholesale price
of coal, always securing an immense rise just before the winter sets
in. There is no such thing known or possible as free trade or open
competition in the anthracite coal produce of America.
Combinations in the United States have been made by the Western
millers, the New York icemen, Boston fish dealers, manufacturers of
sewer-pipe, copper miners, makers of lamps, pottery, glass, hoop-iron,
shot, rivets, candy, starch, sugar, preserved fruits, glucose, chairs,
vapor stoves, lime, rubber, screws, chains, harvesting machinery, pins,
salt, hardware, type, brass tubing, silk and wire. In these trades
freedom of production and sale has been for a time partially or wholly
destroyed. The American business man is very angry when boycotting
is resorted to by workmen; but he is quite ready to boycott others
when his interests lead that way. The stamped tinware makers in 1882,
formed a ring and expelled members who sold at lower prices than the
fixed rates, and refused to allow anyone in the pool to sell to the
offenders. Some of the previous facts are taken from an article by Mr.
Henry D. Lloyd,[59] who has investigated capitalist combinations with
much knowledge and insight. From the same article I quote the following:
“On the 1st of April, 1882, when the rest of us were lost in the
reckless gaity of All Fools’ Day, forty-one tack manufacturers
found out that there were too many tacks, and formed the Central
Manufacturing Company of Boston, with 3,000,000 dollars capital. The
tack-mills in the combination ran about three days in the week. When
this combination a few weeks ago silenced a Pittsburg rival by buying
him out, they did not remove the machinery. The dead chimneys and idle
machines will discourage new men from starting another factory, or can
be run to ruin them if they are not to be discouraged in any other
way. The first fruits of the tack-pool were an increase of prices to
twice what they had been.”
Again I quote Mr. Lloyd:
“The men who make our shrouds and coffins have formed a close
corporation known as the ‘National Burial Case Association,’ and held
their annual convention in Chicago last year. Their action to keep up
prices and keep down the number of coffins was secret, lest mortality
should be discouraged.”
From coffins to crackers is a short step in the study of capitalist
methods:
“The Western Cracker Bakers’ Association met in Chicago, in February,
to consider among other things ‘the reprehensible system of cutting
prices’ (_i. e._, the reprehensible system of free competition which
capitalists in buying labor tell us is our salvation). They first had
a banquet. After their ‘merriment and diversion’ the revellers, true
to Adam Smith’s description, turned to consider ‘some contrivance to
raise prices.’ ‘The price-lists were perfected,’ said the newspaper
report; ‘and then they adjourned.’”
In 1875 broke out a severe competition among the fire insurance
companies, upon the collapse of a previous pool; and the competition
cost them in New York City alone $17,500,000 in seven years.
Consequently in 1882 they made a new combination which covered the
whole country, and which Mr. Lloyd declares to be wealthy, cohesive,
and powerful. Though there is no pool or ring, I am credibly informed
that there is a common understanding among the fire insurance companies
of London. One of the most noted of combinations has been the great
Copper Syndicate which attracted world-wide attention early in 1888.
It was formed by some French speculators in October, 1887, and during
the eighteen months of its existence, maintained copper at a purely
arbitrary price in all the markets of the world. At its head was M.
Eugène Secretan, managing director of the Société des Métaux, the
world’s largest buyer of, and dealer in, manufactured copper. The
syndicate’s agents bought all the copper that was visible and for
sale, the result of their speculation being that the price of copper
in the London market rose from less than £40 to over £80 a ton, and
the price of Lake Superior copper in America rose from 10¹⁄₂ cents to
17³⁄₄ cents per pound. M. Secretan informed a London journal that his
designs were purely philanthropic. “Our only purpose,” said he, “is
that every miner, dealer and manufacturer should have fair remuneration
for his work.” Thanks to M. Secretan’s philanthropy, copper, tin, lead
and spelter rose enormously in price; several trades were more or
less paralysed; and in France large numbers of workmen were thrown
out of employment. And let it not be supposed that the suicide of M.
Denfert-Rochereau, which heralded the collapse of this first attempt
to corner the world’s copper--a collapse due to a miscalculation of
the extent to which the supply of copper could increase under the
stimulus of high prices--offers us any security against a repetition
of the attempt. On the contrary, it has shewn how the thing may be
safely done. The metal hoarded by the unlucky speculators is still so
far cornered that it has been kept off the market up to the present,
prices being not yet normal. “To a regular trust it must and will come
at last,” says Mr. E. Benjamin Andrews, of Cornell University. “Nor
has aught taken place to indicate that a Copper Trust, organized like
the Standard Oil Trust, with its energy and relentless methods, would
fail.”[60]
The Individualist who supposes that Free Trade plus private property
will solve all economic problems is naturally surprised at these
“rings,” which upset all his crude economic notions; and he very
illogically asks for legislation to prevent the natural and inevitable
results of the premises with which he starts. It is amusing to note
that those who advocate what they call self-reliance and self-help are
the first to call on the State to interfere with the natural results of
that self-help, of that private enterprise, when it has overstepped a
purely arbitrary limit. Why, on ordinary commercial principles, should
not a copper syndicate grasp all the copper in the world? It is merely
the fittest surviving. The whole case against Socialism is assumed by
its most intelligent opponents to lie in that Darwinian theory. And yet
when the copper syndicate or the “coal barons” survive, they arouse
against themselves the fiercest and, from the commercial point of view,
the most unreasonable antagonism. As sin when it is finished is said
to bring forth death, so capitalism when it is finished brings forth
monopoly. And one might as well quarrel with that plain fact as blame
thorns because they do not produce grapes, or thistles because they are
barren of figs.
The story of the growth of capitalism is not yet complete. The
“ring” is being succeeded by a more elaborate organization known as
the “trust.” Although in England great combinations like the Salt
Union are rapidly rising, yet we must again travel to America to
learn what the so-called “trust” is. The fullest information on the
subject of trusts is contained in a report of a Committee of the New
York State Legislature, which was appointed to investigate the new
combination. The following trusts were inquired into: Sugar, milk,
rubber, cotton-seed oil, envelope, elevator, oil-cloth, Standard oil,
butchers’, glass, and furniture. A trust is defined by the Committee as
a combination “to destroy competition and to restrain trade through the
stockholders therein combining with other corporations or stockholders
to form a joint-stock company of corporations, in effect renouncing
the powers of such several corporations, and placing all powers in the
hands of trustees.” The general purposes and effects are stated to
be “to control the supply of commodities and necessities; to destroy
competition; to regulate the quality; and to keep the cost to the
consumer at prices far beyond their fair and equitable value.” It
is unnecessary to deal with all these trusts, which possess certain
features in common. I will select one or two, particularly the great
Standard Oil Trust and the Cotton-seed Oil Trust.