and origin of which need no further discussion in this place. Once
established it is subject to attack and evasion along various lines.
Downright fraud is possible, as in the concealment or false weighing
of dutiable articles, the publication of false statements regarding
the financial condition of fiduciary institutions, the covering up
of defects in tenement house building, and so on. Practices of this
character are extremely dangerous, however, as they are subject to
detection and consequent punishment by the first more than ordinarily
inquisitive inspector. Criminal chances are materially improved by
the bribery of officials who are thus bound to concealment both by
money interest and their own fear of exposure. Vigilant and honest
administration of the laws and the infliction of sufficient penalties,
particularly if they involve the imprisonment of principals, may be
trusted to reduce such practices to a minimum. There are, however,
other and more open methods of attack upon the regulation of business
by the state. Appeal may be made to the courts in the hope that laws of
this character may be declared unconstitutional. Business interests may
also seek their repeal or amendment at the hands of the legislature.
No one who accepts the fundamental principles of our government can
quarrel with either of these two modes of procedure. While doubtless
intended to secure the public interest, attempts to regulate industry
by the state may in given cases really defeat this end. And the latter
likelihood would be increased almost to the point of certainty if
legitimate protests from the businesses affected were stifled. On the
other hand attempts may be made by business interests to influence
courts or legislatures corruptly. Assuming that the honesty of all the
departments of government would be proof against such attempts there is
still another possibility. A business affected by some form of state
regulation may endeavour to call to its aid the influence of party.
This final method of procedure may also be conducted in a perfectly
legitimate fashion. Public sentiment may be honestly converted to
the view that the amendment or repeal of the law, as demanded by the
business interest, is also in the interest of the state as a whole. On
the other hand the effort may be made, either by large contributions
to campaign funds, or by other still more objectionable means, to
enlist the support of party regardless of the public welfare. Carrying
out these various methods of procedure to their logical conclusion
brings us, therefore, face to face with the question which underlies
the whole fabric of political corruption, namely how shall our party
organisations be supported and financed?
Reserving this issue for subsequent discussion, certain general
features of the reaction of industry against state regulation must be
noted as of immense importance. Black as it is corruption after all
is a mere incident in this struggle. The broad lines of development
which the Republic will follow in the near future would seem to depend
largely upon the outcome of this great process. Certain social prophets
tell us insistently that there are but two possibilities: if the state
wins the upper hand the inevitable result will be socialism; if on the
other hand business triumphs we must resign ourselves to a more or less
benevolent financial oligarchy. Imagination is not lacking to embellish
or render repulsive this pair of alternatives. From Plato to Herbert
George Wells all social prophets have been thus gifted with the power
of depicting finely if not correctly the minutiæ of the world as it is
to be. Time, the remorseless confuter of all earlier forecasters of
this sort, has shown them to be singularly lacking in the ability to
anticipate the great divergent highways of development,—sympodes in
Ward’s phrase,—which have opened up before the march of human progress
and determined the subsequent lines of movement. So it may well be
in the present case. The social futures, one or the other of which we
are bidden by present day prophets to choose, are like two radii of
a circle. They point in very different directions, it is true, but
between them are many possible yet uncharted goals. And if social
development may be likened to movement in three instead of only two
dimensions the lines open to the future are enormously more divergent
than our seers are wont to conceive. Employing a less mathematical
figure, prophecy usually proceeds from the assumption that cataclysmic
changes are immediately impending. Otherwise, by the way, the prophets
would utterly fail to attract attention. But this presupposes an
extremely plastic condition of society. If social structures, however,
really are so plastic, they may then be remoulded not into one or two
forms merely, but into many other forms conceivable or inconceivable
at the present time. Current and widely accepted forecasts to the
contrary, therefore, one may still venture to doubt that our through
ticket to 1950 or 2000 A.D. is inscribed either “socialism” or
“financial oligarchy,” and stamped “non-transferable.”
Whatever the future may bring forth faith has not yet been lost in the
efficacy of state regulation. It is certainly within the bounds of
possibility that some working balance between government and industry
may be established through this means which will continue indefinitely.
As late as 1870, according to Mr. Dicey, individualistic opinions
dominated English law-making thought.[57] Reaction from the doctrine of
_laisser faire_ was, if anything, even later in the United States. For
a considerable period after the turning point had been passed measures
of state regulation were weakened by survivals of old habits of
thought. Even to-day the period of construction and extension along the
line of state regulation seems far from finished. Certain inevitable
errors have required correction, but no major portion of the system has
been abandoned. Further progress should be made easier by accumulating
experience and precedents.
It is significant of the temper of the American people on this question
that an increasing number of the great successes of our political life
are being made by the men who have shown themselves strongest and
most resourceful in correcting the abuses of business. Under present
conditions no public man suspected of weakness on this issue has the
remotest chance of election to the presidency or to the governorship
of any of our larger states. On the purely administrative side of
the system of state regulation new and more powerful agencies,—such
as the Bureau of Corporations and the various state Public Service
Commissions,—have been devised recently to grapple with the situation.
Considering the extreme importance of the work which such agencies
have to perform it is improbable that either their position, or the
position of government in general, is as yet sufficiently strong with
reference to corporate interests. Under modern conditions success in
business means very large material rewards. Important as are industry
and commerce, however, certain parts of the work which the state is now
performing are, from the social point of view, immensely more valuable.
The commonweal requires that our best intellect be applied to these
tasks. Any condition which favours the drafting of our ablest men from
the service of the state into the service of business is a point in
favour of the latter wherever the conflict between them is joined. Yet
not infrequently we witness the promotion of judges to attorneyships
for great corporations, the translation of men who have won their
spurs in administrative supervision of certain kinds of business to
high managerial positions in these same businesses. As long as our
morals remain as mercenary as those of a Captain Dugald Dalgetty there
may seem to be little to criticise in such transactions. Doubtless
loyalty is shown by the men concerned to the government, their original
employer, and to the corporation, their ultimate employer. If, however,
there is to be an exchange of labourers between these fields it would
be vastly better for the state if the man who had succeeded brilliantly
in business should normally expect promotion to high governmental
position. As things are at present the glittering prizes known to be
obtained by ex-government officials who have gone into corporation
service cannot have the most favourable effect upon the minds and
activities of officials remaining in public positions requiring them to
exercise supervision over business activities.
It is high time that there should be a reversal of policy in this
connection. We need urgently greater security of tenure, greater social
esteem, much higher salaries, and ample retiring pensions for those
public officials who are on the fighting line of modern government.
Incomes as large as those of our insurance presidents or trust magnates
are not needed, although in many cases they would be much more richly
deserved. There is recompense which finer natures will always recognise
in the knowledge that they are performing a vitally important public
work. In spite of the loss which political corruption causes the
state it is probably more than made up by the devoted, and in part
unrequited, work of its good servants. Still the labourer is worthy of
his hire. It is both deplorable and disastrous that the current rewards
of good service should be so meagre while the rewards of betrayal are
so large.[58]
But it may be objected that public sentiment in a democracy will not
support high salaries even for the most important public services,
that democracies notoriously remunerate their higher officials very
much less adequately than monarchies. The time is ripe, however, for
challenging this attitude. As long as government work is looked upon as
a dull, soulless, and not extremely useful routine, popular opposition
to high salaries is not only comprehensible but praiseworthy. Once
convinced of the value of certain services, however (and there is
plentiful opportunity to do this), it is doubtful if self-governing
peoples will show themselves less intelligent than kings. Even
now engineers directing great and unusual public undertakings are
frequently paid larger salaries than high officers of government
charged with the execution of ordinary functions. Recognition of the
importance of the work of the specialist is much more common now than
formerly. The development of science and large scale industry is daily
enforcing this lesson. As regards the unwillingness of democracy to
pay well, a change that has recently come over the policy of certain
labour unions is worth noting. Instead of ordering strikes they have
on occasion taken a lesson from the procedure of their employers, and
resorted to the courts for the redress of grievances. And in doing so
they have called in the very ablest lawyers they could find, paying
the latter out of the funds of the union fees as large as they could
have earned on the opposing side. A similar illustration is afforded
by the policy of the Social-democratic party in Germany which
for a considerable period has recognised and met the necessity of
remunerating its leaders in editorial, parliamentary, and propagandist
work at professional rates far higher than the average wages received
by the party rank and file.[59] Demos may despise aristocracy of birth
but he is perhaps not so incapable of comprehending the aristocracy of
service as many of his critics suppose.
* * * * *
By the system of regulation, as we have seen, government is brought
into close contact with business along many lines. But the state is
also one of the largest sellers and buyers in the markets of the
world, and as such has many other intimate points of contact with
economic affairs. Like any individual or corporation under the same
circumstances it is liable to be victimised by practices designed
fundamentally to make it sell cheaply or buy dearly,—both to the
advantage of corrupt outside interests. Franchise grabbing is perhaps
the most magnificent single example of the difficulties the state
encounters when it appears as a vendor. Popular ignorance of the real
nature of such valuable rights has been responsible for enormous
losses on this score. A city which for any reason had to dispose of a
parcel of land would find itself safeguarded in some measure by the
fact that a large number of its citizens were familiar with real estate
values and methods. Knowledge of intangible property is very much less
common. There has been a great deal of effective educational work along
this line, however, and that community is indeed backward which at the
present time does not understand perfectly that perpetual franchises
without proper safeguards of public interests are fraudulent on their
face. Administrative agencies such as were referred to in connection
with business regulation, and particularly public service commissions,
are doing extremely valuable work in cutting down the possibilities
of franchise corruption. The grabbing of alleys, the seizure of
water fronts, and the occupation of sidewalks are minor forms of the
same sort of evil which can no longer be practised with the impunity
characteristic of the good old free and easy days of popular ignorance
and carelessness.
In disposing of its public domain, although here, of course, the price
obtained was not the major consideration on the part of the government,
notorious cases of corruption were of common occurrence. Recent
developments, particularly in connection with timber, mineral, and oil
lands, reveal the stiffer attitude which the public and the government
are taking on this question. Time was also when deposits of public
funds yielded little or no interest to cities and counties. At bottom
such loan transactions were sales, _i.e._, the sale of the temporary
use of public monies. Quite commonly treasurers were in the habit of
considering themselves responsible for the return of capital sums only,
and any interest received was regarded as a perquisite of office. The
system had all the support of tradition and general usage; it was
frequently practised with no effort at concealment and without protest
on moral or business grounds. Nowadays its existence would be regarded
as a sign of political barbarism, and would furnish opportunity for
charges of corruption about which effective reform effort would
speedily gather.
The element of selling is not of major importance in many services
performed by the state which nevertheless require constant watching in
order to prevent corrupt misuse. Efforts to use the mails improperly
are continually being made by get-rich-quick schemes, swindlers,
gamblers, and touts of all descriptions. Crop reports are furnished
without charge, but extraordinary precautions are necessary to prevent
them from leaking out.
Instances such as the foregoing also serve to illustrate the point
that any extension of the functions of government results in an
enlargement of the opportunities for political corruption. Government
railways, for example, would afford venal public officials many
crooked opportunities (as _e.g._, for false billing, charges, and
discrimination) which do not now exist as direct menaces to public
administrative integrity. Private management of railways, however, has
not been so free from such evils as to be able to use this argument
effectively against nationalisation. Municipalities selling water, gas,
or electricity, are notoriously victimised on a large scale by citizens
whose self-interest as consumers overcomes all thought of civic duty
or common honesty.[60] There is one other closely related phenomenon
connected with the extension of the economic functions of government
which will perhaps not so readily be thought of as corrupt, and which
yet deserves consideration from that point of view. Public service
enterprises under government ownership and management are always
exposed to what some writers stigmatise as “democratic finance,”—that
is strong popular pressure to reduce rates. Cost of production and the
general financial condition of a given city may make the reduction of
the prices charged for water, electricity, or gas, frankly contrary
to public policy. Yet the self-interest of the consumer suggests the
use of his vote and political influence to compel such reductions. Of
course his action is not consciously corrupt, but it has every other
characteristic feature of this evil.
* * * * *
The state is a much larger buyer than seller, and manifold are
the possibilities of malpractice in connection with its enormous
purchases of land, materials, supplies, and labour. Yet nothing in our
contemporary political life is more marvellous than the light-hearted
indifference with which the public regards the voting and expenditure
of sums running into the millions. We recall vaguely that the great
constitutional issues of English history were fought out on fiscal
grounds, but we find the budget of our own city a deadly bore. We rise
in heated protest whenever the tax rate is advanced by a fraction of a
mill, but we regard with indifference the new forms either of necessary
expenditure or needless extravagance which make such increases
inevitable. There is one general advantage which state buying has over
state selling, however. A great many of the purchases of government are
made in competitive markets where fair price rates are ascertainable
with comparative ease. Even large public contracts such as for erecting
public buildings or for road construction are usually resolvable into
a number of comparatively simple processes and purchases. Of course
there are exceptions, as for example government contracts with railroad
companies for carrying mail. But as a rule the ordinary purchasing
operations of the state are simpler and more easily comprehensible
than such acts of sale as franchise grants,—to mention the one of most
importance from the view point of possible corruption. It is precisely
at this vulnerable point on the buying side of governmental operations
that the New York Bureau of Municipal Research has struck home. With a
skill that amounts to positive genius this voluntary agency has placed
before the people the ruling market prices and the enormously higher
prices actually paid by officials for public supplies. Taking the
purchasing departments of our best organised private corporations as
a model it has drawn practical plans for the installation of similar
methods as part of our municipal machinery. Equipped with field glasses
and mechanical registering devices its agents have kept tab upon
the flaccid activities of labourers in the public service and have
contrasted the long distance results thus obtained with the suddenly
energised performances of the same men when they knew themselves to be
under observation. It has co-operated quietly and effectively with all
willing officials in improving the methods of work in their offices,
in installing more logical accounting systems and better methods of
recording work done; and it has fought effectively, with the penalty
of discharge by the Governor in two cases, those officials who were
not amenable to proper corrective influences. And finally the Bureau
has attacked the city budget and has even succeeded in making that
dry and formidable document the object of active and intelligent
public interest. Yet the cost of the Bureau’s work has been out of
all proportion small in comparison with the benefits obtained. “Less
than $30,000 was spent in 1908 in securing for four million people the
beginnings of a method of recording work done when done, and money
spent when spent, which will henceforth make inefficiency harder than
efficiency, and corruption more difficult than honesty.”[61]
It is extremely gratifying to note the widespread interest which this
work is arousing. Philadelphia and Cincinnati have established bureaus
under the supervision of the parent organisation, and other cities are
earnestly considering similar action. There would seem to be ample
opportunity for the employment of the same sort of agency in connection
with our state governments, and possibly in certain fields of national
administration. Altogether it is by far the most noteworthy recent
effort to stamp out governmental inefficiency and corruption. Other
efforts are being made to the same end, particularly where extravagance
is concerned. In many cities business men’s clubs, improvement
associations, and taxpayers’ leagues, are watching expenditure as
it has never been watched before. Public officials have co-operated
loyally in a number of cases. Occasional discoveries have been made
of safeguards and powers in the law which had been long forgotten
or unused. The progress of uniform bookkeeping is rapid and highly
significant in this connection. Aided largely by the latter development
census reports, particularly the special issues dealing with statistics
of cities of over 30,000 inhabitants, are making it possible to compare
municipalities on strictly quantitative lines as to the cost and
efficiency of various services. Altogether we are developing a new
financial alertness and intelligence that should materially cut down
various forms of political inefficiency and corruption, particularly
on the purchasing side of governmental operations. It is not too much
to say that the methods by which these results are to be effected are
either at hand or capable of being worked out on demand. The question
now is simply one of funds and the training of specialists to do the
work.
* * * * *
Efforts by the state to regulate or suppress vice and crime bring
about reactions on the part of the interests affected not unlike those
which follow from the attempt to regulate legitimate business.[62]
The corrupt practices thus occasioned are among the commonest and
most objectionable that society has to contend with. Very large money
returns in the aggregate are obtainable by political organisations
which protect vice. It is doubtful, however, whether such sources of
income are ordinarily so productive financially as the various corrupt
relationships between business and politics described above. On the
other hand the alliance between politics and the underworld has the
advantage, from an unmoral point of view, that it yields not only money
but also strong support at the polls. And as some of the voters whose
support is thus secured may be depended upon for work as repeaters,
ballot-box staffers, and thugs, the net political power which they
wield is much greater than their number alone would indicate. There
is one other important difference between the corruption arising from
the attempt to regulate legitimate business and that which arises from
the regulation of vice. In the former case a “deal” can frequently
be consummated between two principals, the leader of a centralised
business interest on the one hand and the leader of a centralised
political organisation on the other. Something of the secrecy and the
binding personal obligation of a “gentleman’s agreement” are thus
obtained. Of course to carry out the compact the political leader must
control the action of his dependents in public office, but the latter,
whatever they may suspect, know nothing definite about the agreement
into which the boss has entered. The protection of vice cannot be
managed by so small a number of conspirators. Compliance by the whole
police force with orders from the “front” is necessary. Every patrolman
knows what is going on when he is told that he must not molest dives,
gambling hells, or brothels. Members of the force may or may not be
used to collect protection money and pass it “higher up,” but since
there are many establishments which must pay tribute the employment
of a considerable corps of collectors is necessary. In any event the
number of those who have knowledge amounting to legal evidence is
likely to be much larger in the case of the protection of vice than in
the case, for example, of a corrupt franchise grant. Exposure either by
some disgruntled police officer or by some overtaxed purveyor of vice
is likely to come at any moment.