"socialism," and the Pope's arguments are effective as against what he
evidently means by socialism. They are sadly weakened, however, by his
want of a logical conception of what constitutes private property. He
shows in more than one place that he believes private property to be
only the result of human labor, but when he comes to apply his ideas,
he admits of its extension to land and other monopolies, without
realizing that because such monopolies are not the creation of human
labor they cannot therefore be rightfully considered as private
property. He is like the man who would divide the human race into men,
women, and poets, or in enumerating the New England States would
include Boston after having mentioned Massachusetts. His arguments are
still further weakened by his evident leaning towards compulsory
Sunday rest, and an eight-hour day, trades-unionism, and regulation by
church societies, all of which savor of the very socialism which he is
combatting.
He argues well, however, against the theory which proposes that the
state should administer individual property as common property for the
benefit of all. This would be more correctly termed state socialism
or, in its extreme form, communism. But the Pope fails to recognize
that there is such a thing as public property, created by the mere
presence of large communities, and which those communities have a
perfect right to administer. While endeavoring to uphold the rights of
private property, he impugns what Father William Barry called in a
recent review article, "The Rights of Public Property." His Holiness'
ignorance on this point can be best shown by a quotation:--
"If one man hires out to another his strength or his industry, he does
this for the purpose of receiving in return what is necessary for food
and living; he thereby expressly proposes to acquire a full and real
right, not only to the remuneration, but also to the disposal of that
remuneration as he pleases. Thus, if he lives sparingly, saves money,
and invests his savings, for greater security, in land, the land in
such a case is only his wages in another form; and, consequently, a
workingman's little estate thus purchased should be as completely at
his own disposal as the wages he receives for his labor."
It would be interesting to know what the Pope would say if the
workingman invested his savings in a slave, and whether the Holy
Father would consider the slave only the workingman's "wages in
another form." Pope Leo certainly never could have intended to state
that the mere purchase of a thing was sufficient to convey ownership.
Yet that is just what the last sentence quoted amounts to. The justice
of the ownership depends entirely upon whether the thing purchased be
rightfully capable of ownership, in the first place, and whether it be
obtained from the rightful owner, in the second.
"As effects follow their cause," Pope Leo says a little further on,
"so it is just and right that the results of labor should belong to
him who has labored."
There he strikes the key-note of the right of property upheld alike by
the best churchmen and economists in all ages. That is the natural law
of labor. It is opposed to the theory of State socialism, and to what
many in this country understand by nationalism. If the Pope had
adhered to that proposition, he would have been saved from his
illogical position. It is undoubtedly true that a man is entitled to
that of which he is the producing cause. And in some branches of labor
which are more intimately associated with the earth than others, such
as agricultural operations, it is true that the results of labor, and
the improvements made upon land, become physically inseparable from
the land itself, so that he who would own what his labor has produced
must also have security of tenure, and exclusive possession of "that
portion of nature's field which he cultivates."
It is for want of distinguishing carefully between possession and
ownership that the Pope falls into his ludicrous economic blunders.
This part of his encyclical is absolutely self-contradictory. He is
arguing for the securing to the laborer of the fruits of his labor.
The workman on land must have ownership of those things he has
produced, and hence must have exclusive possession of that part of the
earth which he tills. He must have such disposal of it as will enable
him by the exertion of his labor to secure a proportionate reward. But
this is not ownership. Ownership carries with it something more than
this. Once "divide the earth among private owners," as the Pope puts
it, and you have this condition of things: that those who do not
happen to be among the private owners must compete for the privilege
of living on the earth, they must pay a part of the results of their
labor for permission to work, and on the other hand the fortunate
owners receive something for which they themselves render no labor. It
is strange that the Pope did not see the absurdities of his own
propositions. He says:--
"Moreover the earth, though divided among private owners, ceases not
thereby to minister to the needs of all; for there is no one who does
not live on what the land brings forth. Those who do not possess the
soil contribute their labor; so that it may be truly said that all
human subsistence is derived either from labor on one's own land, or
from some laborious industry which is paid for either in the produce
of the land itself or in that which is exchanged for what the land
brings forth."
Pope Leo is mistaken. All human subsistence is not derived either from
labor on one's own land or from some laborious industry. Some human
subsistence, as the Pope says, is derived from labor on one's own
land. Some human subsistence is derived from laborious industry on the
land of others. And--what the Pope seems to ignore--some human
subsistence is derived by owning land and letting others work upon it,
taking from them part of the fruits of their labor in exchange for the
mere permission to labor. By no construction can such ownership be
classed as a "laborious industry." Yet such owners generally enjoy the
very best of "human subsistence."
Nevertheless, a few sentences further on, the Pope naively asks: "Is
it just that the fruit of a man's sweat and labor should be enjoyed by
another?" Had the Pope pondered over that question more profoundly, he
might have come to far different conclusions from those which he seems
to have reached.
It is unfortunate that the Pope through a desire to uphold the just
rights of property should have been led to maintain the privileges of
monopoly, and still more unfortunate that so many Catholics will
consider his blunder an article of faith and feel it binding upon
their consciences to oppose all further efforts to impair private
ownership of land by taxation--the only way in which individual
possession can be reconciled with the common right of all mankind to
the earth.
In one place the Pope seems to doubt the extent to which the principle
of private ownership is applicable to land, for he says: "The limits
of private possession have been left to be fixed by man's own industry
_and the laws of individual peoples_." But if the laws should tax the
monopoly value out of land, then the holder of land would not be able
to get any profit out of it except by his own labor. It would be no
longer such ownership as exists to-day which allows private owners to
confiscate the results of other's labor. The Pope here abandons the
unqualified ownership which he elsewhere maintains. It might well be
asked if he is prepared to excommunicate the legislators and assessors
who, in nearly every civilized country to-day, do tax land, and thus
to a certain extent impair ownership. And if the same principle were
extended so that the tax would equal the entire rental value there
would be no chance for the land monopolist to exploit the earnings of
labor. Man's means should not be "drained and exhausted by excessive
taxation," as the Pope seems to fear, showing that he has a vague idea
of the method by which it is proposed to destroy ownership. But as the
rental value to-day is already paid by labor, the proposed plan could
not drain or exhaust labor any more than at present, while such a tax
falling upon lands held for speculation would cause their abandonment,
and thus open new fields for labor. Workingmen would then be really
"encouraged to look forward to obtaining a share in the land," and
that prosperity which the Pope hopes for would result. He seems to be
ignorant of the fact that taxing land, unlike a tax upon any product
of labor, makes it cheaper and easier to obtain for possession and
use.
More than all does he forget that what labor needs is not the
protecting arm of Church or State, but equal opportunity and the
fullest possible freedom of access to Nature's bounties. He is untrue
to himself and talks like the veriest socialist when he says: "Among
the purposes of a society should be to try to arrange for a
"continuous supply of work at all times and seasons." Bountiful nature
in the great storehouse of the earth has provided a "continuous supply
of work" for the whole human race for all future ages. Make monopoly,
by taxation, loosen her grip upon the earth, and labor would have
abundant opportunity for all time to come without the necessity for
paternal, socialistic tinkering on the part of either State or
Church.
THE AUSTRIAN POSTAL BANKING SYSTEM.
BY SYLVESTER BAXTER.
There is a possibility that the plan for the establishment of postal
savings banks, so ably advocated by the postmaster-general, may result
in a radical change in our entire banking system. The demand for
postal savings-banks is so popular that it is not likely that there
will be much further delay on the part of Congress in realizing the
project. Now it happens that among the new political issues that have
arisen, the question of the currency has assumed a most prominent
place. There can be no doubt of the intensity of the feeling that has
developed against the national banks, which have supplied a large
proportion of the circulating medium since the war, and the demand for
a currency issued directly by the government, without the intervention
of the banks, is growing both in volume and in force.
The sense of the inadequacy of the national banks to the financial
necessities of the country is by no means confined to those who, by
theory or experience, have been made hostile to them, and regard them
as detrimental to our institutions, and as dangerous instruments for
the oppression of the common people. It extends to those who recognize
that the national banks have been of invaluable service to the
country, and are a vast improvement over the banking system that
preceded them. Nevertheless they feel that grave defects are showing
themselves, and that for the security of the community something
better is needed. There is not the confidence on the part of the
business community that there should be, and events like the recent
occurrences in connection with the Keystone National Bank, in
Philadelphia, are not likely to enhance that confidence. One of the
most frequent of surmises is as to how many similar cases there may
be, and a very commonly heard query is that as to the state of affairs
that a general financial panic might reveal, with the banks loaded
with collateral upon which it would be hardly possible to realize at
such a time.
Then there is the moral aspect of the case, so well expressed in an
essay[22] by one of the soundest philosophical and political thinkers
whom America has known, the late David Atwood Wasson. Said he: "At
present the government permits itself to become indirectly,--or,
if we speak of the State governments, worse, sometimes, than
indirectly,--confederate with those who amass fortunes by making
credit precarious, and forcing the hazards of the gaming-table into
all the legitimate operations of business. The comptroller of the
currency has publicly said that about one half, on an average, of the
means of the national banks, in one chief city--institutions, observe,
created by government, and charged, in effect, with one of its most
distinctive functions, that of supplying a medium of exchange--are
loaned to speculators; that is, to men who subsist largely on
artificial disturbances of credit, upon corners in the stock market
and money market, upon alternations of inflation and stringency, the
ups and downs of a disordered constitution. Without going into the
matter closely, which is aside from my present purpose, I leave before
the reader the main facts of the case: that the system of credit
centred in the modern banking system plays a vast and increasing role
in our civilization; that while of a utility not easily overstated, it
affords peculiar opportunities of fraud and exaction; that aside from
these, its unregulated condition is dangerous, resulting in
alternations of inflation and depression, like the alternate extremes
of fever and ague; that vast and growing combinations exist for
producing artificially this disorder; that those institutions which
credit has created under the express sanction of government, at once
to supply its necessities and hold it healthily in check, are managed
only as private property; that much oppression, alike of labor and
capital, and also, I fear, much demoralization--which is an interior
and worse oppression--are suffered in consequence; and that hitherto
our statesmanship wants the studious leisure, and our method of
government the stability and precision of operation, which these
exigencies demand."
[22] "The New Type of Oppression," in "Essays: Religious, Social,
Political." Lee & Shepard, Boston.
A truer statement of the case never was made, and these words should
be well pondered by patriotic citizens.
Probably the reason why the feeling against our present banking system
has not yet taken shape in legislation is because no sound
constructive measures have been proposed. Faulty as the system is,
what is there better that can take its place? is asked, and to this no
satisfactory reply has been given. Even though the notes of the
national banks should be retired, and currency issued directly from
the national treasury should take their place, we must have banking
facilities of some kind.
Absolute security of bank deposits is what is desired, and any measure
that would secure that end could hardly fail to be joyfully welcomed
by the business community, with the exception of the small minority
either selfishly interested in present banking corporations, or whose
prosperity is derived from operations based upon a state of
insecurity. Powerful as these interests are, there is no reason why
they should be permitted to stand in the way of the realization of a
better condition of affairs, should that prove attainable.
The leading merit of the national banking system comes from the
absolute security of its circulating medium, proceeding from the
governmental guarantee. Meanwhile the interests of the depositors, in
supplying whose convenience the bank derives its business, remain
inadequately guarded. Is not some system possible whereby in place of
this partial guarantee we may have a complete guarantee, covering both
circulating medium and deposit?
Fortunately, with the experiences of other countries furnishing
examples so available as they do nowadays, we are not left entirely to
our own resources in devising solutions for problems that confront us.
We have but to look to Austria for a most successful example of a
truly national banking system, that completely meets the demand. When
Austria established its postal savings bank, in 1882, a regular check
and clearing system was made a feature thereof. This, offering
substantially the same convenience as our ordinary private or national
banks in this country, together with the additional advantages of
absolute security of deposits, and checks good in all parts of the
country, has become enormously popular with the mercantile public, so
that the regular banking department has quite overshadowed the
savings department, important as the latter is.
Every post-office in Austria, therefore, has the function of both a
savings-bank and a bank of deposit. A permanent deposit of one hundred
florins, or forty dollars, is sufficient to make a person a member of
the check and clearing department. No limit is placed on the amount
that may be deposited, but a single check cannot be drawn for more
than ten thousand florins [four thousand dollars]. Interest is paid on
deposits at a rate not exceeding two per cent., while the interest on
savings may not exceed three per cent. A charge of two kreutzers
[eight mills] is made for each entry, together with a commission of
one fourth per mille. Another function of the postal bank is the
buying and selling of government securities, for which a commission of
two per mille is charged, with a commission of one per mille for the
cashing of coupons.
It is interesting to learn that two years before the adoption of this
system by Austria, a very similar plan was advocated by an able
American student of finance, the Hon. L. V. Moulton, of Grand Rapids,
Michigan. In his book, "The Science of Money and American Finances,"
published in 1880, he said: "The government ought to provide a deposit
system of absolute safety to depositors for all who choose to avail
themselves of it. A system of postal savings-banks somewhat similar to
the British should be adopted. The government receiving a deposit, and
allowing the depositor to check out at the same or any other office,
paying no interest and doing no loaning, receiving the use of the
funds while on deposit, as compensation for storage and transportation
of funds. No actual transportation would, of course, be required,
except to settle balances between offices. This would be the safest
possible deposit and most convenient exchange system, and is quite as
proper for the government to undertake as the postal or money-order
business. As it is, the government coins money and transfers money,
but will not take it on storage, which is absurd, and forces the
people to deposit with loan and discount concerns, liable to explode
at any time and leave them penniless."
Although interest on deposits is paid in Austria, there appears to be
no good reason why it should be paid were the system adopted in this
country. There is no need of it as an inducement, for the absolute
security and the greatly increased convenience of the system would be
sufficient for that. The present national banks pay no interest on
deposits, the facilities afforded being adequate to secure all the
deposits needed.
It appears desirable, however, to pay interest on deposits of savings.
In the bill prepared by Postmaster-General Wanamaker, it is provided
that this shall not exceed 2.4 per cent. This low rate is fixed upon
in order that the interest may be considerably less than the average
paid by private bankers to depositors. The great obstacle to the
establishment of postal savings-banks in this country has been the
lack of available means for the investment of the funds, the rapidly
decreasing national debt making government bonds out of the question
for the purpose. Mr. Wanamaker proposes to overcome this obstacle by
loaning the funds to national banks within the State where the
deposits are made. The objection to this course lies in the objection
to the national banks themselves, as heretofore stated. To give them
disposition over such a vast amount--it is estimated that the deposits
in the postal savings-banks would soon reach $500,000,000--would be to
increase vastly their power for harm.
Mr. Wanamaker's alternative proposition, to utilize the funds in the
direction of greater and much needed expenditures for public
buildings, particularly post-office structures, is, on the other hand,
a sound one. They might also be employed to advantage in providing the
means for the much needed extension of the postal service now so
widely demanded, as in the adoption of a parcels post equal to that of
Germany, England, and other countries, and in nationalizing the
telegraph and telephone and incorporating them into the postal
department.
The deposits in the proposed check and clearing department would place
an enormous amount at the disposal of the government, in addition to
the postal savings-bank funds. Paying no interest on these deposits,
the government might utilize the money in its own expenditures, and
thus to a considerable extent reduce taxation. Or, just as the
ordinary banks loan their deposits, the government might loan this
money for mortgages on land and on staple products, somewhat as
demanded in recent agitations.
A person so eminent in the discussion of these questions as Mr. Edward
Atkinson has recently stated, in substance, that, increase the volume
of the currency as we may, still it would not be adequate to certain
exigencies of regular recurrence, like the annual moving of the crops.
He thus practically concedes the justice of the farmers' demand, as
formulated in their "sub-treasury project," but he would supply this
want through private banking institutions organized expressly to loan
money for this purpose.
Such institutions would, however, naturally take advantage of the
necessities of the farmers by obtaining the highest rates of interest
possible, while the underlying purpose of the other plan would be that
of making the loans at the lowest rates consistent with the expense of
the transactions. Is it not better, it may be asked, and more in
accordance with the principles of true self-help, for the people thus
to supply their own financial needs in the cheapest way possible
through the instrumentality of their governmental organization, rather
than depend upon "private enterprise" organized to take advantage of
their necessities for its own profit?
At first glance there might seem to be an objection in the fact that,
while the government was lending money at two per cent. it was paying
on savings deposits interest possibly as high as 2.4 per cent., which
would appear to be an unbusiness-like and unprofitable proceeding. But
on striking an average between the sums on which it was paying that
rate and the large amounts on which it was paying no interest, but
receiving two per cent., it would probably be found that it was
getting the whole at a rate considerable less than two per cent.
A more valid objection to the lending of money by the government at a
fixed low rate of interest, instead of at whatever rates it might
obtain according to the state of the money market, as private banking
institutions would do, might be found in the liability that the
parties to whom it was loaned might reloan it at higher rates, and
thus use the good offices of the government as a means of personal
profit. The measure could hardly fail, however, to lower very greatly
the general rate of interest in the business world. It would be
important, of course, to keep this large sum in circulation, and thus
avoid the evils arising from hoarding. Its utilization for the
regular expenditures of the government would be likely to do this, and
the consequent reduction of taxation would be a great public
advantage. Although the idea of loaning money at fixed low rates upon
certain securities, such as land and staple products, might prove
impracticable from various considerations--such, for instance, as the
injustice of discriminating in favor of any particular classes in the
community, as such a scheme would appear to do--there should be no
difficulty in devising some practicable system for using to the
advantage of the entire public the extensive funds which thus would be
placed at the disposal of the government.