LETTERS TO JUDD
_An American Workingman_
_By_
UPTON SINCLAIR
PUBLISHED BY THE AUTHOR
PASADENA, CALIFORNIA
This book is written and published as an act of love for America. It is
made out of faith in our country, and in you.
Our fathers bequeathed to us a great democracy and a great ideal. We
must preserve them.
This book will not be reviewed in the great press, nor promoted by the
powers that be. If it is read, it will be because the plain people do
their part in passing it about from hand to hand.
Several times in our history this miracle has happened, the people
have been reached by a message: Tom Paine’s “+The Crisis+,” Helper’s
“+Impending Crisis+,” Henry George’s “+Progress and Poverty+,”
Bellamy’s “+Looking Backward+.” There has been no need greater than the
present.
This book is an act of service, not of money-making. The work is not
copyrighted, and any one may reprint it. If you want a large edition,
the author’s plates are at your service free of cost.
Read, and do your part.
LETTERS TO JUDD
BY
UPTON SINCLAIR
INTRODUCTION
Judd is an old carpenter who has done odd jobs on our place for the
past ten years. Just how old he is I don’t know, but he’s pretty old;
his hands are gnarled and calloused and his finger nails chewed up and
broken by hammer blows; there are knotted veins in his forehead and his
hair is grey and thin. But he works like a beaver, and don’t you ever
hint that he should slow up--he will hoot at you, and say that he can
lick any young feller with one hand. He will hitch his harness into
place--he has a rupture, and wears some kind of truss--and will slide
under the house to connect up a gas pipe, and come crawling out with
his hair and eyes full of cobwebs, and my wife will say, “Come out of
there, you old gopher.” He adores her when she talks to him like that,
he would lift the side of the house to please her. The two of them
engage in violent arguments as to how a door ought to be hung or a tree
pruned. “Nobody ever did it like that,” Judd declares--and considers
that sufficient reason. He does it her way, so long as she stands over
him; but if she leaves, he is apt to finish it his way--for, after all,
it is manifest that a man knows better than a woman.
Ten years ago our home was a row of vacant lots on a hillside, covered
with weeds and rusty cans. Now it is an old-fashioned Southern house
with a long veranda and a row of white columns, surrounded by rose
gardens and grape arbors and fig trees and oranges. The house was made
out of five old houses, bought for a little more than nothing, and
moved onto the place and joined together; the gardens were made by my
wife sticking baby plants into the ground, and holding a hose over them
all day and part of the night. I helped a little; and two school boys
helped after hours; but Judd was the Hercules who did most of this
mighty labor. He would rout us out of bed in the morning, and many a
time we have worked after dark, to get a roof over something before
it rained, or finish a concrete job before it set. What is there we
haven’t done together?--digging ditches and setting fence-posts, hoeing
weeds and pruning trees, laying shingles and tacking down tarpaper,
cleaning old furniture and painting an automobile, moving a garage
and installing a sprinkler system. And always with a presiding female
genius hovering over us, exhorting and appraising, mostly on the debit
side! Never was there such a woman for saving, and for devising, and
for utilizing. Once Judd in his digging came upon a rusty iron spike,
and showed it secretly to me. “Better throw it over the hill quick,” he
said. “If the missus sees that, she’ll start a railroad!”
When the house was done, there was a party. The living room is
extra fancy, with high, peaked ceiling, and lights way up, dim and
mysterious; in a million years you’d never guess that it was once an
old tailor shop, bought for a hundred dollars, and moved over here,
and the upper floor taken out! Well, our friends came, some of them
rich people in limousines, creating a sensation in our neighborhood.
The neighbors were invited--it is a working-class part of town, and
a few people came, shy and a little distrustful, and picked out
seats with backs to the wall, and sat stiff and silent, while George
Sterling, great poet and genial soul, told us intimate recollections of
Joachim Miller and Ambrose Bierce and Jack London, and other old-time
California writers.
Judd wore his best clothes, and a stiff collar, and brought a lady
friend in black satin. We were surprised by this, for we knew that Judd
was a widower of many years’ standing; we teased him afterwards about
this lady, and he blushed, but insisted there was “nothing to it”--and
apparently there wasn’t, for he still lives alone in the house he has
built, with a fire-place made of every kind of shiny colored stone you
can find on the beaches of California. There is a porch to this house
and a lot of fancy concrete work, that will last Judd’s life-time and
longer. You must understand, this is no “hard-luck story,” quite the
contrary; Judd has got to be a rich man in the course of ten years,
with war-time wages of a dollar an hour. He put his savings into two
lots, and his spare time into building three houses on them, and now
he has two of them rented, and he goes trout-fishing every spring, and
deer-hunting in the fall, and he took a trip to Texas just to have
the fun of spending some of his money, instead of leaving it all to
his nephews. When he comes now to do odd jobs for us, it is by way
of a favor; and he says, “Well, you got a new book now?” Of course I
always have, and he demands a copy, and insists it must be cloth, and
autographed; and then we have our regular argument as to whether he
shall pay for it, and we compromise on the basis of his paying the
wholesale price. He tells me what he thinks about my writings, and just
what is wrong with my ideas.
Judd, you understand, is not the least bit of a “radical.” “I got no
use for these ‘reds,’” he says, being a simon pure, hundred per cent
American; there are too many foreigners in the country, and if they
don’t like it, let them get out. But at the same time Judd is nobody’s
fool. For one thing, he is “onto” the politicians; they are a bunch of
crooks, and he proves it, telling me things that are going on right in
Pasadena--he knows from this friend or that who works for the city.
Also, Judd is “onto” the politicians at Washington; of course you can’t
get the facts, because the newspapers won’t print them, but look at
this oil business, and look at the fellows that got a billion dollars
from the government, pretending to make airplanes for the war, and they
never got a single fighting-plane to France. Judd supported the war,
and bought liberty bonds with his savings; but he says that if the
truth was known, we could have kept out of that war, if it hadn’t been
for the munition-makers, and the bankers and their loans to England and
France.
So you see, we have plenty to talk about while nailing down shingles
and screwing up water-pipe! Once, not so long ago, Judd said to me,
“By golly, I never thought of that!” I answered, “You’d be surprised
to know how many things you never thought of.” Said he: “Why don’t
you write a book for fellows like me? A workingman is tired when he
gets home, and don’t have time for big books, and he don’t know the
long words. But you write something short and easy, and show us little
fellows just how we get it in the neck.”
Well, there are lots of things one would like to write, and one doesn’t
get around to them all. But every now and then I think about Judd, and
the millions of other Judds there are, scattered over this great land.
I think of things I’d like to say to them, if only I could get to them.
Here it is, Thanksgiving morning of the year 1925; and just why this
morning should have chosen itself, I can’t imagine, but I am sitting at
my typewriter, on the very porch that Judd helped to build, and came
crawling out from under with his hair and eyes full of cobwebs--the old
gopher! I am beginning the book he asked me to write, for him and the
other American workingmen.
LETTER I
MY DEAR JUDD:
There are some things which you and I and all Americans take for
granted, and don’t have to argue about. For example, every man has a
right to get to heaven in his own way, if he can; we are not going to
meddle with any one’s religion. Also, we believe that all men should be
equal before the law. We don’t mean they all have equal abilities--for
that would be a foolish thing to say; but they all have equal rights
“to life, liberty and the pursuit of happiness.” Also, every man has a
right to what he has produced by his own labor; and it is the business
of government to protect him in this right.
Speaking generally, we think that men live better if they are let
alone, to work out their own destinies. We don’t want any more
government than there has to be; if the government will see that
the other fellow keeps his hands out of our pockets, we’ll manage
to build our own house, and live in it our own way. That is called
individualism, and you are keen for it, Judd, and I am no less keen.
The only time the government has been on our place in the past ten
years has been when it came to inspect the foundations, the plumbing,
and the fire-stops in the walls of the house; all of which concern the
common welfare.
If a fellow won’t work, he has no right to anything--we agree to that,
and we will shed no tears over shirkers and loafers. We are defending
the real workers, and we say that such are entitled to the fruits of
their own labor. Let us set that down for the corner-stone of our
thinking; let us make it our test of a sensible and decent world. I
ask you: Are the workers getting what they produce today? Or is some
other fellow getting part of it? Put it the other way about, and ask:
Are there any people in our country getting wealth without producing
it, without doing any useful work? It is obvious that if any man gets a
thing he hasn’t produced, some other man must have produced that thing
and not got it.
I choose a case which lies nearest to your own heart, Judd--those three
houses that are the security for your old age! You paid your good money
for materials, and you put them together with your own hands, and you
say those houses belong to you. If a fellow came with skids and a
truck and tried to cart one of them off, you would surely stop him. If
a fellow moved into one of them, and refused to move out, you would
surely put him out. The law would back you--and so you believe in the
law! But suppose I were to tell you, Judd, there are ways by which some
fellow might take your houses away from you, and the law would not move
a finger to help you, but on the contrary, would come and turn you out
for the other fellow’s benefit?
Watch your step, now! Suppose that some man had the power to fix the
prices of the things you have to buy day by day, your food and clothing
and gasoline; and suppose he boosted the prices, so that you found
yourself running short; then you’d have to put a mortgage on one of
the houses; and when the mortgage fell due, if you were still short,
your house would be sold by an auctioneer at a foreclosure sale, and
the law would turn you out. Or let us suppose this man had the power
to dilute the currency of the country, so that every dollar of yours
became worth only half as much as it was before; don’t you see that he
might deprive you of your three houses, one after another? There are a
dozen different ways in which the trick might be worked; and strange
and startling as the idea may seem to you, I assure you that it has
been done many times, and will be done many times more. The world you
live in is full of devices by which your pockets are emptied, without
your ever feeling the touch of the thief’s fingers.
If a fellow comes along and tries to sell you a gold brick, you laugh
at him; that’s an old one, and you are “on.” If he tries to sell you
a gold mine in Kamchatka, or shares of stock in an oil well--come to
think of it, Judd, I believe you told me you did take some shares in
the Somebody-or-Other Oil Syndicate--twelve hundred dollars, you said
it was! But you’ve learned your lesson now, and nobody can play you for
a sucker again.
But, Judd, these things I am talking about here are not called
swindling, they are entirely respectable things, with such beautiful
names that you go to the polls and vote for them on election day, and
for some of them you would give your life on the battlefield. For
example, that thing called the “protective tariff”; such a lovely
name, “protective,” it makes you think of a mother watching over an
infant in a cradle! The economists call this tariff a form of “indirect
taxation”; and what do these words mean? Exactly that thing which I
said a minute ago--a device for emptying your pockets without your
feeling the touch of the thief’s fingers!
Or take that thing called “inflation”; that is, the diluting of the
currency, so that the money in your pocket is less money than it was
before. The bankers all tell you that “inflation” is a most wicked
thing, and you believe them, and are quite sure it couldn’t happen;
while the plain fact is, the bankers have been doing it to you right
along! They have deprived your money of about forty per cent of its
value in the last ten years--and you, my good old friend, thought it
was fine, because the value of your lots went up, and of your houses,
too. It never occurred to you that the price of everything you bought
was going up also; and that the value of your money in the savings-bank
was going _down_; and also the value of your liberty bonds!
Judd, you get up by an alarm clock at dawn every morning, and boil
yourself some coffee, and gulp down a couple of slices of bread, and
maybe a fried egg, and give your chickens and rabbits their water and
feed, and then you hustle off to work. For forty years that has been
your rule, six days out of seven; you worked like an old mule, eight
or nine hours of it, and then come home and worked till dark on your
own place. There are forty-two million Americans doing much the same
thing, and the total of what they produce is a thumping pile of wealth.
And who is to get it, Judd? How shall it be divided? In the great
cities, in many-storied office buildings, sit white-handed gentlemen at
flat-topped mahogany desks, and these gentlemen have no idea of ever
crawling around in the muck, or sweating in the heat, or freezing their
fingers in the cold, or soiling their white collars and breaking the
crease in their trousers--no, Judd, they have not an idea of it!
While you are working, these gentlemen have nothing to do but think;
and the subject of their thoughts is one thing and one alone, how
can they get away from you the largest possible share of that
wealth which you are producing by your labor. They call themselves
“great executives,” Judd; and what they execute is the American
workingman. They have devised the most subtle and perfect machine of
exploitation--that is, for getting you to produce wealth while they
consume it--which has ever existed in the history of mankind. I am
going to show that machine to you; I am going to take it apart, just
as if it were an automobile, and let you see exactly how it is built.
I will show you the thing called “stock-watering,” and how it takes
away from you the greater part of your day-by-day earnings. I will show
you the thing called “rigging the market,” and how that conjures the
coins out of your purse--and mind you, old friend, not when you go to
gamble in Wall Street, for you have never done that; but when you go
round the corner to the store and buy a loaf that is made of wheat, or
a shirt that is made of cotton, or any other article that is produced
by machinery and shipped on a railroad.
Above all I am going to show you that most fascinating piece of
wizardry, our banking system. You were a rancher in your youth; and
some of your relatives are farmers back East. Well, Judd, we have a
thing called the Federal Reserve Bank, and three years ago that bank
reached down into the pockets of the farmers of America, and took
out--how much, do you think? Just about four billions of dollars! And
gave it to whom, do you think? Why, to the big bankers of Wall Street,
and the manufacturers and trust magnates with whom they work hand in
glove. Soon after that I traveled through the Northwest, and in state
after state I found whole counties in which every single farm had been
sold for taxes. Do you think I am claiming too much, Judd, when I tell
you that you really ought to understand how such things can happen?
LETTER II
MY DEAR JUDD:
The Bible tells us that “man does not live by bread alone.” To hear
some people talk, you would think the Bible said that “man does not
live by bread.” You and I know that he does; and if he is to be
decent and civilized, he needs many other things, a home with several
rooms in it, and clean clothing, and books, and recreation. There is
nothing more destructive of health and happiness than extreme poverty;
the inability to get for yourself and your loved ones the common
necessities of life.
There are parts of the world where poverty is an infliction of nature;
but that is surely not true of the United States in the year 1925.
We have a country of nearly four million square miles, with greater
variety and wealth of natural resources than any similar area in the
world. We have almost everything needed by modern industry; the bulk
of our imports are luxuries--coffee and bananas and music and French
fashions. We have forty-two millions of workers, all carefully trained
to their jobs, and we have the most highly organized industrial system.
We produce 40 per cent of the world’s iron and steel, 52 per cent of
its coal, 60 per cent of its copper, 75 per cent of its corn, 85 per
cent of its automobiles, and so on through a long list.
Twenty-seven years ago our government made a study of hand-power as
compared with machine-power in some of the common industries; thus,
making ten plows by hand took 1,180 hours, while making them by
machinery took only 37½ hours; making one hundred pairs of cheap boots
took by hand 1,436 hours, and by machinery only 154 hours. From these
calculations it appeared that machinery had cut human labor, in some
cases 80 per cent, in some cases as high as 95 per cent. That was in
1898; and since then, how much more has been done! We have the Ford
factory, employing 165,000 men, and turning out 2,500,000 cars and
trucks every year, one for twenty days’ labor of a man! In Chicago
are great ovens, worked automatically by electricity, which turn out
14,400 perfect loaves of bread every day. I have a friend who owns
a book-making machine which turns out 64-page books at the rate of
5,000 every hour. One might fill pages with miracles of this sort. We
are now harnessing the rivers and water-falls, and in Maine the tides
of the ocean, and engineers estimate that machine-power provides us
with the equivalent of three billion hard-working slaves. Mr. Roger
W. Babson, who runs a big statistical bureau, presents figures of
machine-production from which it appears that 13 important industries
now average 88 times as much production as by hand-labor.
Obviously, then, everybody in the country ought to be 88 times as well
off; poverty for the willing worker ought to be one-eighty-eighth of
what it was in 1825. But what is the matter, Judd? For some reason
there is just as much poverty as there ever was, and possibly more!
In the old days nobody starved--that is, unless he was a loafer or a
drunkard. Our ancestors were well fed, and managed to raise families of
ten, and sometimes even twenty sturdy children. How many of the workers
in our mills and mines can afford such a luxury today?
I have before me a photograph of our national capital at Washington,
with its high white marble dome; the picture is taken over the top of
filthy slum tenements, falling into decay. And this is not a made-up
picture, it is a photograph that you might take from many different
spots in Washington. Or go to New York, the centre of our wealth and
fashion; the school authorities there report that two-thirds of the
children are physically defective, and one-fourth come to school
suffering from hunger and malnutrition; two years ago the State
Planning Commission reported two-thirds of a million people in the city
“miserably housed.”
In New England are thousands of mill-workers now on strike against
reduction in their starvation wages; here you find the “she-towns”--all
the men have gone away, and you can buy a woman for the price of a
sandwich. In Pennsylvania a hundred thousand miners are on strike to
preserve their wretched livings; they dwell in hovels, and can barely
keep their families. In Georgia and the Carolinas you find the mills
run on the labor of little children; and nearby are palatial estates of
the rich, a happy condition described by a woman poet:
The golf-links lie so near the mill
That almost every day
The laboring children can look out
And see the men at play.
The defenders of our industrial system will admit these facts, if you
pin them down, but they say that things are getting better all the
time. A professor of Harvard University has just published a book, in
which he tells how our glorious system is rapidly solving all problems;
very certainly and very soon there will be no poor. Well, now, I am
going to make a statement, Judd, and you paste it in your hat, and look
at it every now and then while you are sawing timbers or mixing cement:
_The condition of the mass of workers in the United States has
been getting slowly but steadily worse for the past thirty-five
years._
Let us see now. We want to determine what are called “real wages”: that
is to say, wages in relation to the cost of living. It is clear enough
that if your wages rise from four dollars a day to eight, and at the
same time the cost of living doubles, you are no richer than you were
before. That is one way to fool the workingman; but we are not going to
let ourselves be fooled!
The problem is not a simple one; you have to figure wage-rates in
representative industries over a term of years; and then you have to
figure the average cost of goods for the same period of time. It is
easy to “load” your figures, by giving emphasis to those trades in
which wages rose, or, on the other hand, by featuring those goods whose
prices stayed low. For example, as I write, Secretary Hoover reports
to the President, and the President gives out to the press, a set of
figures showing how the American workers have made some gains in real
wages during the last few years; and these glad tidings are featured
upon the front page of all our great newspapers. And what is it? Simply
a barefaced fraud! Mr. Hoover has figured wholesale prices! He knows
that these prices have gone down, while retail prices have not gone
down correspondingly; also, needless to say, he knows that American
workingmen do not buy their food and clothing at wholesale!
Prof. Paul H. Douglas of the University of Chicago published in the
Proceedings of the Academy of Political Science (Vol. XI, No. 2), a
very elaborate study of real wages from 1890 to 1924. This is the best
work I had seen, and the results may be summed up in one sentence: real
wages in the United States from 1890 to 1924 suffered a _decrease_ of
five per cent. To phrase it another way: where a workingman could buy
20 pounds of necessaries in 1890, he could buy 19 pounds today.
These figures caused a sensation; for you can understand that there is
nothing our masters try so hard to keep from their servants as this
very fact. I used the figures throughout these letters; but just as
I am through, and about to send the manuscript to the printer, the
professor writes me a letter, saying that he has revised the work,
and he now shows a gain in real wages during the past four years. The
reason for the change is, he has decided that the earlier figures were
“unduly weighted with pork and beef, which rose much more rapidly than
other commodities.”
Here you see the very thing I explained. How much pork and beef shall
be figured in the family budget of a workingman? Our fathers ate pork
and beef, and grew to be full sized men; but of course there was no
beef trust in those days. If, now, the cost of pork and beef rise too
fast, the workingman can adjust himself to a coolie diet, those starchy
foods which are cheap and relatively stable in price. But I, for my
part, eat pork or beef once a day, and I claim the same right for you,
Judd!
This much is certain: in many basic industries there has been a loss.
The new figures which the professor sends me show losses for the
clerical workers and the postal clerks; and the only large gainers
are the teachers, who regard themselves as professional persons, not
as workingmen. Surely those striking textile workers in Massachusetts
have made no gains this year, nor the 158,000 striking miners! Ask the
farmers of the Northwest about their case, and you will hear a loud
shout of denial! Ex-governor Lowden of Illinois stated at a public
banquet in New York that from 1920 to 1924 the American farmer’s return
on his invested capital was three-tenths of one per cent!
I know there is a great deal of apparent prosperity among our workers
today. But that is due to a new factor--that the worker now spends his
money for things that last, a home, and an auto, and clothing and radio
sets, instead of spending it for beer and whiskey. That is a vast gain
in civilization, but it is not the same thing as a gain in real wages,
and don’t let anybody fool you by this argument.
To get a clear view of the real truth, ask this question: has the
capitalist suffered a loss of purchasing power during the past
thirty-five years? Merely to suggest such a thing is to raise a laugh!
There are some, like Henry Ford, who are a million times richer
today than they were thirty-five years ago. It is probable that the
Rockefellers are twenty times as rich as in 1890. The total wealth of
our country increased from 65 billions in 1890 to 320 billions in 1922;
and as the workers didn’t get the difference, the rich must have. Here
is what they admit having got, in their income tax statements, during
four years 1921-1924. The number of fortunate ones who got more than
$300,000 a year income increased from 246 to 773. The number of those
with incomes between $100,000 and $300,000 increased from 2,106 to
4,921. The number with incomes between $25,000 and $100,000 increased
from 37,663 to 62,158. Those are the real insiders--and remember, Judd,
they didn’t have to admit any “stock dividends,” nor to pay anything on
the billion or two they have invested in tax exempt securities.
There is a statement commonly made by Socialists, justifying their
prophecy that our present system is on the way to a breakdown. The
statement is that the rich are growing richer and the poor growing
poorer. I know of no statement which causes more irritation to the
capitalist press; I suppose I have read a thousand editorials in which
the statement is ridiculed, or denounced, or waved aside as out-of-date
and not applying to America. Nevertheless, it is the truth, Judd; all
the workers are growing relatively poorer, and vast groups of them are
growing absolutely poorer, in the terms of what they can buy with their
wages. And this in the headquarters of prosperity, the richest of all
nations, which houses in its treasure-vaults more than half the total
gold-reserves of the world!
LETTER III
MY DEAR JUDD:
How does it happen that, in this our land of liberty and prosperity,
the rich are growing richer and the poor poorer.
When you talk about the matter with an economist, he uses many long
words, and tells you about natural processes, controlled by inexorable
laws. Well, Judd, it all depends upon how you look at it, from the
inside or the outside. If you look from the outside, you see economic
processes; but if you look from the inside, you see the actions of men.
Wealth is produced by the actions of men--you know that, because you do
it every day; and wealth is distributed by the actions of men--you also
do that every day. If men, in the course of their dealings, have made
a hell on earth, it has been because they first had a hell in their
hearts; and if they are to make a paradise on earth, they first have to
change their hearts, and then no economic laws will stand in their way.
First among the “actions of men” which have made poverty in America,
I list our banking system: that is to say, the way men have behaved
and are behaving with regard to money. This banking system has been
constructed, just as artificially as a house is constructed, and its
plan can be summed up in one phrase: to enable those who already have
money to get as much more as possible. Many things about the system may
seem complicated, but if you understand that basic idea, you will never
be fooled.
One man raises grain, and another saws lumber. It would be awkward to
exchange a stick of timber for so many bushels of wheat, therefore men
have invented money, which is a standard of value, enabling anything
to be exchanged for anything else. The first point to be got clear is
that money is not wealth, but only a symbol of wealth. You can see that
clearly, if you imagine yourself stranded on a barren island with a
million dollars in greenbacks. Would you be rich? You would not! And it
is equally plain that nobody is made richer when the government prints
a new lot of bank-notes. Of course, if you printed the notes yourself,
and put them into circulation, you would be richer; but this wealth
would be got by taking away from the owners of real wealth a certain
percentage of what they owned; there would be a little more money in
circulation, and so the existing stock of goods would have a slightly
higher money-value.
That is what I refer to as “diluting the currency.” When it is done by
governments, it is known as “inflation,” and it is a favorite trick of
governments in trouble. They print paper money, and spend it for goods,
and the more they print, the less is the value of each unit of money,
the rouble, the mark, the franc, or whatever it is called. The bankers,
of course, are greatly opposed to this method of robbing the owners of
wealth; their objection to the process being based upon the fact that
when the paper money is printed, the government owns it, whereas the
bankers think that they, the bankers, should own it. In this country
they have been able to have their way, and we live under a system which
establishes the bankers as legalized counterfeiters.
You must understand, Judd, that only about one per cent of modern
business is done upon a basis of cash--gold or silver or greenbacks;
the rest is notes, or bills of exchange, or checks, or some other
form of credit. And the banker is the man who creates this credit. He
sells it to you, for whatever price he sees fit; and it is his royal
privilege to grant or to withhold it. You may have ever so much real
wealth to offer for security, and still meet with refusal; or you may
have merely a pretense of security, and carry off the prize because you
are the nephew of a director. The banker gives you a “pass-book” with
a line of figures written in it, and you go out into the market, and
discover that your banker-made money is just as real as any other money
you find there--as real as the corn the farmer has raised, or the house
the carpenter has built.
The theory is that the banker is lending the money which his
bank-customers have deposited with him. But see! You take $350 in
greenbacks and put it in the bank, and under our banking laws the
banker can deposit those greenbacks with the Federal Reserve Bank, and
receive a credit of $1,000; and then on the basis of that $1,000 he is
legally permitted to lend out sums amounting to about $10,000 to other
customers of the bank. In other words, $350 deposited by a customer
becomes the basis of bank-loans, not merely of that $350, but of $9,650
additional, created by our legalized counterfeiter! The outstanding
amount of greenbacks, about a third of billion dollars, thus becomes
the basis of ten billions of dollars of banker-created money--and this
for the national banks alone, without counting all the state banks and
the private banks!
The headquarters of this greatest graft of all the ages is Wall Street.
The money from all the little banks pours in here, and likewise
the insurance money which our people put up to insure the safety
of their wives and children. It is all at the service of the big
banker-speculators, to be used in manipulating markets, driving prices
up and down, so that the insiders can buy while securities are low and
sell while they are high. Here is concentrated the collective greed of
all America, and men become frenzied with visions of sudden gain; they
sell the goods they hope to have, and buy with the profits they expect
to make, and the fires of avarice are fanned white hot, until the whole
thing bursts like a crucible in a steel mill.
The financial history of America is the record of a series of great
panics, coming at intervals of from seven to ten years. In these crises
the bankers used to suffer as well as the rest of us; but this was
intolerable to them, and so they put their experts to work. To save
yourself in a panic you must have money--a great deal of money in a
hurry; and where can such money be got? Where, but from our good old
Uncle Sam? So the bankers devised a wonderful new scheme, the Federal
Reserve System; a chain of twelve regional banks with a directing head,
a banker-board, having for its function to watch over our money system
in the interest of the bankers, to lend money freely when they want it
to be cheap, and to call in loans when they are ready for a killing;
above everything else, to watch out for panics, and when these come, to
issue credit to the big insiders, so that they can keep afloat while
the rest of us drown.
In the summer of 1920, there was a riot of speculation, and this
bankers’ board decided that somebody had to be “deflated”; they
picked out the farmers--who cares anything about the “hicks” out
in the sticks? “Go home and slop the hogs,” was the word of a
banker-legislator in North Dakota to a delegation of farmers. So the
Federal Reserve Board “advised” the farmer banks to lend no more
money to farmers; and one little hint was enough to bring farm prices
crashing. Before the crisis was over, a total of 603,000 farmers had
either lost their farms, or were keeping them on sufferance of their
creditors; and those are government figures, Judd! You know how it was
with produce that year--the farmers in the middle West burned their
corn for fuel, and out here in Southern California it didn’t pay to
gather the orange and lemon crops. But the prices of automobiles and
hardware and lumber and cement did not share this harsh fate; the big
Wall Street banks had all the credit they needed, and they “carried”
their friends, the big manufacturers, whose stocks and bonds repose in
their vaults. They were “sitting pretty,” and waited till the storm was
over, and we were ready to buy their goods at the old fancy prices.
So you see what I mean, Judd, by my phrase, “legalized counterfeiters.”
The power to issue new credit is the power to dilute the currency, and
merely by the stroke of your pen. All the highwaymen and safe-breakers
and world conquerors of history never carried off as much treasure
as Wall Street has taken from the American people by the use of this
power. In that summer of 1920, the Federal Reserve System took _four
billion dollars_ out of the pockets of our farmers! And now, Judd, I
beg you, when next you hear people say that human ingenuity cannot
cure poverty--_remember how much human ingenuity has done to cause it!_
LETTER IV
MY DEAR JUDD:
We are studying our money system, with the idea of understanding how it
causes the rich to grow richer and the poor poorer.
Money, in its relation to the price of goods, is like a pair of scales
in balance. If you add to the weight in the right-hand pan, it will go
down; also, the same thing will happen if you take away the weight in
the other pan. A bushel of wheat is worth, let us say, one dollar; and
if anything should happen to double the quantity of wheat in the world,
the price of wheat would go to half a dollar. On the other hand suppose
that without changing the amount of wheat in the world, you were to cut
in half the amount of money in the world; then the same thing would
happen, the cost of a bushel of wheat would go to half a dollar. By
reducing the money supply, you lower prices, and make “tight” money; by
increasing the money supply, you raise prices, and make “soft” money.
Now, the people of our country are divided into two classes, those who
own money, and those who owe it; the creditor class and the debtor
class. It is evident that there is a conflict of interest between these
two classes, as to how much money shall be put into circulation. If
the money supply is increased, money is cheaper, and wages go up, so
it is easier to get money and pay your debts. But the creditor loses
correspondingly, because he cannot buy so much goods with the money
he gets; thus, for the government to put more money into circulation,
is to cancel a percentage of all debts. But on the other hand, if the
amount of money in circulation should be reduced, money will be harder
to get, and it will buy more goods; thus all creditors will be getting
more than is really due them, and a great many debtors will be ruined,
because they cannot pay this extra amount.
All through our history there has been a struggle between these two
classes. Whichever side controls the government, will shift the
currency supply to favor itself. And which side has controlled? The
answer is, the rich; they have had the money to subsidize political
parties and name candidates and carry elections. Here is a rule of
politics, Judd, which I set down for you to paste in your hat and study
while you are sawing timbers and mixing cement:
_Out of fifteen presidential elections since the civil war,
fourteen were carried by that party which had the biggest campaign
fund._
The struggle has centered about what is called the “gold standard.”
All money of our government is supposed to be exchangeable for gold.
Prior to 1873, silver also counted as a standard; but in that year
silver was “demonetized,” and of course that made money very “tight.”
The “Crime of ’73,” this action of the creditor class was called; it
produced a frightful panic, and tens of thousands of men were ruined,
and hundreds driven to suicide. Since poverty breeds poverty, the great
mass of the descendants of these people are still poor, and are told in
the churches that it is the Will of God, and in the newspapers that it
is Economic Law.
In 1893 we had another severe panic; I was a boy then, and remember
it well. Millions of men were out of work and starving, and the mass
of discontent piled up, and three years later we had the Bryan “free
silver” campaign. I was just beginning to think about politics, and
if today I can be patient with the mass of our deluded workingmen
and farmers, voting for “Coolidge and Prosperity,” it is because I
recollect exactly how I was bamboozled in 1896, so that I would have
voted for “McKinley and Prosperity,” had I been of age. Mark Hanna, the
millionaire corruptionist and banker-boss who paid McKinley’s personal
debts and set him up for our puppet-president, raised a campaign fund
of $16,750,000, and bought that election for his puppet, quite openly
and obviously; so Bryan, who had only $675,000 for his campaign fund,
did not succeed in his scheme of making silver money, and letting all
the business men off with half payments to the bankers. So here again
you see how the “actions of men” kept the rich rich and the poor poor;
and God had nothing to do with it--unless you believe that God was
buying votes for Mark Hanna!
The maintaining of the “gold standard” as in 1896 would by now have put
the bankers in possession of the entire wealth of our country; and that
was what the bankers intended. But an accident happened--the discovery
of new gold, and the development of large-scale, commercial mining of
low-grade ore. So we got the very thing Bryan had wanted--more money in
circulation; and so the bankers have got only one third of our wealth,
and a mortgage on another third. Also, they have their Federal Reserve
System, whereby they manipulate the currency; they can make “free
silver” today, and “gold standard” tomorrow, and when the next smash-up
comes, they will sweep the board clean.
As a matter of fact, Judd, the “gold standard” has been nothing but a
pious memory since the World War; the gambling game has run away with
the players, and no sensible man believes that the world’s debts can
ever be paid, in gold or in anything else. Our Federal Reserve notes,
which make up most of our paper money, no longer carry the promise to
pay in gold, or in anything--look at one and see. There are “silver
certificates,” that promise you a silver dollar, but the others
promise nothing. One sort of “paper” is pyramided on another sort of
“paper”--stocks and bonds and promissory notes and bills of exchange
and certificates of deposit and personal checks, all take the place of
currency, and become the basis of new loans and credits and promises
to pay at some future date. The outstanding greenbacks, about a third
of a billion dollars, become the basis of ten billion dollars of
imaginary money; and there are over three billions of Federal Reserve
notes outstanding, and nearly a billion of national banknotes, all
secured by nothing but paper; and there are 25 billions of government
bonds, to say nothing of all state and county and municipal bonds, and
some 19 billions owed to us by foreign nations, all of which paper the
banks have put off on us; and we are adding to the foreign credit a
billion a year, for the reason that we cannot keep our industries going
otherwise. Moreover, we have worked out a system of selling automobiles
and houses and furniture on instalment payments, and there are six or
seven billions of such credits now outstanding, all backed by the banks.
Such is our “banking system,” Judd; and at every step of every process
you find the banker paying low interest rates for what he borrows, and
collecting high rates for what he lends; at every stage the government
belongs to the banker, not merely to collect his money for him, but
to fix the rates against you, and even against itself. Thus, after
generations of agitation, we succeeded in getting postal savings banks,
to protect the money of the very poor; the government pays the poor at
the rate of 2% for this money--and accepts only $2,500, even at this
low rate! The rest of the money it needs, the government borrows from
the bankers at from 3½% to 5¼%! For those Federal Reserve notes which
the government allows the big bankers to lend out to you, the banks pay
the government about 2½%; and what do they charge for the money they
lend to you? Well, I am paying seven, and have sometimes paid eight;
God grant that you may never be really poor, Judd, and have to pay what
the poor devils pay! It happened a few years ago, by some freak of
chance, that we got an honest Comptroller of the Currency--the official
who is supposed to control the banks; he found he couldn’t and they got
rid of him in a hurry--but not before he issued a report, which would
have given you the facts, had not the newspapers suppressed it. He said:
“Sworn reports, made by the banks themselves, show that on September
2, 1915, 2,743 national banks, out of a total of 7,613, were guilty
of usury. This at a time when the Federal Reserve banks were offering
money freely to national banks in every part of the country at rates
varying from 3½ to 5%.”
In Oklahoma, where the legal rate of interest is 6% with 10% as the
maximum under special contract, harassed farmers paid all the way
from 12 to 2400%, with 40% as the average. In the case of one bank,
the comptroller proved that not a single solitary loan had been made
under 15%. He cited one particular case that he asked to be regarded
as typical. In the spring the farmer went to the bank and arranged
for a loan of $200. Out of his necessity he was compelled to pay 55%
interest charge. Unable to meet the note at maturity, he had to agree
to 100% interest in order to get the renewal. The next renewal forced
him up to 125%. For four years the thing went on, and all the drudgery
of the father and the mother and the six children could never keep down
the terrible interest or wipe out the principal. As a finish, the bank
swooped down and sold him out; the wretched man, barefoot and hungry,
went to work clearing a swamp, caught pneumonia and died; the county
buried him, and neighbors raised a purse to send the widow and children
back to friends in Arkansas.
And what do the banks make out of such exploitation? Well, take one
case; the great First National Bank of New York earned 140% on its
capital in 1925; its stock has gone up to $2950 for a share having a
par value of $100. According to the “Financial Age,” a Wall Street
paper, 49 New York banks averaged 50% dividends in 1925.
All right, Judd; and now here are three sentences for you to paste in
your hat and learn by heart.
FIRST: _Credit is the life blood of industry, and the control of
credit is the control of all society._
SECOND: _The private control of credit is the modern form of
slavery._
AND THIRD: _The American banking system is the most perfect
contrivance yet devised by the human brain for making the rich
richer and the poor poorer._
LETTER V
MY DEAR JUDD:
The next thing we want to understand is the tariff, and how that works
to take money out of the pockets of the poor and put it into the
pockets of the rich.
The government has to have money, like any other business. We all
desire government services, and should pay our proper share, honestly
and openly calculated. But we haven’t an honest government, nor an
honest social system; nobody wants to pay his share of anything, and
taxes are unpopular; therefore the politicians put their wits to work
and devise what are called “indirect taxes,” ways of getting your money
without your knowing it. Among these ways is the “protective tariff.”
This was another great issue of the McKinley days, and well I remember
the campaign slogans, devised for tricking the poor voters! “Protection
and Prosperity; the Full Dinner Pail; the Foreigner Pays the Tax!” We
liked the last one especially; we hated the foreigner, and were strong
for making him pay--though just why we should have expected foreigners
to put up the money to support the government of the United States, was
something we might have been puzzled to explain!
A tariff is a tax imposed on all goods brought into the country. A
protective tariff is a tax high enough to shut out foreign competition,
by raising the cost of imported goods. Who pays the tax? The importer
pays it, and he at once adds it to the price of the goods, so that
the tax is passed on to the person who uses the goods, the ultimate
consumer. He is the man who pays, always and everywhere; and the effect
of the tariff is simply to boost prices in a whole line of commodities.
If the government got all this boost, it wouldn’t be so bad; but the
government gets only a small fraction, and the rest is a fat and juicy
graft for the “protected” manufacturers.
But, say the newspapers and campaign orators of the “Grand Old Party,”
it is the workingman as well as his boss who is “protected”; if it were
not for the tariff, our wage scales would be dragged down to the levels
of Europe; the labor-sweating foreigner would “dump” his goods on us!
Well, Judd, for the workingman to try to improve his condition by a
tariff, is as if a man should make himself rich by taking money out of
his right-hand pocket and putting it into his left-hand pocket. If you
look only at the left side of this man, you will think he is enjoying
“prosperity”; and that is what the newspapers and the campaign orators
did--and the poor workingman too, alas; for the subject is complicated,
and the workingman does not have much time to think.