CAPITALISM IS DISORDERLY
Nature is both orderly and disorderly. She is orderly, for example, in
the general succession of her seasons, in the average rainfall, the
average sunshine. She is orderly in the regular drawing of water from
the ocean to the hills and the return of water from the hills to the
ocean. But Nature is extremely disorderly in her detail. Some years
rainfall is deficient and men starve because of drouth. Other years
the sunshine is insufficient and men starve because of rain. The
beneficent flow of water from the hills to the ocean is attended by
disorder which is often calamitous; the river swells to a torrent in
one place and spreads out to unwholesome marshes in another.
The power of man to profit by the order of Nature and to adjust its
disorder is an attribute that makes man almost divine; for this power
exerts as great influence over the soul of man as over the matter of
Nature. Man has demonstrated his control over Nature by protecting
himself against deficiency of water through reservoirs, and against
excess of rain through drainage; he has robbed torrents of their
terrors by dykes, and made them his servants by irrigation; he drains
the swamp and waters the desert. In one respect only has he failed to
exercise as yet sufficient control; namely, the competitive system.
The competitive system is applauded by Herbert Spencer because he
finds it in Nature. But Nature does not proceed only upon the
competitive plan. She furnishes us with the beehive and anthill as
types of cooperation, from which man can not only learn a lesson, but
receive a warning; for the evils that attend the cooperative plan of
the beehive are almost as great as those that attend the competitive
or predatory system.[72] What man then has to do is not blindly to
follow Nature either as respects her competitive system or her
cooperative system; but to do in this direction what he has done in
others--profit by what is good and orderly in Nature and suppress what
is evil and disorderly in it.
Sec. 1. ANARCHY OF PRODUCTION AND DISTRIBUTION
The intelligent business man has been at work in suppressing the evils
of the competitive system. He has found the waste and disorder
attending unlimited competition so abominable that he has suppressed
competition to the utmost possible by the organization of trusts. It
has been pointed out that the disorder attending our production and
distribution gives rise to anarchy in both these departments of
industry. As long as every man is free to produce exactly what he
chooses--what he thinks will benefit him, there is no rational
relation between supply and demand.
(_a_) _Tyranny of the Market_
This process is going on in every industry. Capital rushes away from
business where there is no profit to business where there is profit.
The result is that the capitalist generally discovers a demand for an
article too late to profit by it, and does not discover that there is
no demand for an article until he is ruined by the discovery. The
boasted "fluidity of capital" causes it to pour from one industry to
another in obedience to what is called "the market"; and of all the
despotisms that the folly of man has subjected him to, none for
stupidity and pitilessness approaches the market. So long as there was
no large-enough combination of capital to acquire knowledge of the
supply and demand that determines market price or to any extent
control it, no man, however intelligent, could tell when prices were
going to rise and when to fall. And although the older economists
loved to dwell upon the fluidity of labor as well as upon the fluidity
of capital, they failed to take account of the bankruptcy that attends
the one or the appalling conditions that attend the other. For when
the supply of labor is large and factories are running at low
capacity; when men and women are seeking employment, and the demand
for labor is small, the effect of this law is to reduce wages below
the rate necessary to support life; the unemployed are then reduced to
a choice between the almshouse and starvation.
This evil consequence is a matter over which isolated employers have
little or no control; for the very same cause that reduces wages
reduces also the price of goods. It is because the demand for goods is
small that the manufacturer has to run his factory at a reduced
capacity; and the demand being small, the manufacturer cannot get a
remunerative price for his goods. Now the thing that reduces prices is
competition, and the thing that reduces wages is competition, and the
main source of every financial, commercial, and industrial disaster is
competition. Employer and employee are alike subjected to the
levelling principle. The moment a particular manufacture is found to
be profitable, and therefore able to pay a high rate of wages, new
factories are started and wages reduced by the competition of
workingmen. The flow to this industry, therefore, of both capital and
labor, inevitably reduces not only wages by the direct competition
between workingmen, but also the profit out of which high wages were
originally paid.
Employer, therefore, and employee are both slaves of the market; the
employer cannot get more than the market price for his goods, and out
of this he has to pay for his raw material, the cost of running the
factory, and the wages of his men. He cannot reduce the price of raw
material nor the cost of running the factory--rent, fuel, etc.; these
too are determined by the market. The only thing he can reduce is
wages: so he is driven to reduce wages or close his factory, for he
cannot long run his factory at a loss.
And so anarchy of production and anarchy of distribution lead
inevitably, as all anarchy does, to despotism--the despotism of the
market.
(_b_) _Tyranny of the Trust_
Now trusts are an attempt of capital to escape from the tyranny of the
market, to eliminate the waste of competition and bring order in the
place of disorder by making supply proportionate to demand. The
testimony of John D. Rockefeller before the Industrial Commission is
illuminating on this subject. In answer to Question 9, he says that he
"ascribes the success of the Standard Oil to its consistent policy to
make the _volume of its business large_." To Question 10, he says he
did this "by cooperation, or what is the same thing, combination." But
the necessity of keeping the volume of the business large made it
indispensable to extend the market. He says "Dependent solely upon
local business, we should have failed years ago. We were forced to
extend our market and to seek for export trade." "And so," he says,
"the Standard Oil spared no expense in _forcing_ its products into the
markets of the world."
The despotism of the market extends over the whole world. It is
impossible for any one nation to organize its industry, or for the
industry of any one nation to organize itself, under a world-wide
competitive system, without taking into consideration the conditions
of the world market. The Standard Oil could not maintain prices in
competition with foreign oil. It had to carry the industrial war into
Europe and Asia, and did this by eliminating competition at home;
putting an end to anarchy of distribution as well as to anarchy of
production; by transforming the whole system through the building of
pipe lines, the use of tank cars and tank steamers, through an
enormous aggregation of capital, and the use of every ingenious
improvement. The Standard Oil succeeded in doing this and "receiving
in return from foreign lands nearly $50,000,000 per year."
Mr. Rockefeller is an adroit witness, and carefully refrained from
reference to the methods by which competition was crushed as an
indispensable preliminary to what he calls the "enlargement of the
business." Mr. H.O. Havemeyer, President of the Sugar Trust, was more
frank. Here is his testimony on this subject in full:
_Q._ (By Senator Mallory) "Did I understand you to say--perhaps I may
have misunderstood you a while ago--that it was your policy to make as
much profit out of the consumer as you possibly could?"--_A._
"Consistent with business methods."
_Q._ "Consistent with business principles. In other words, your idea
is that your organization, the American Sugar Refining Company, will,
if it can, get the maximum profit out of its business from the
consumer. Now, I also understood you to imply at least that it is the
policy of the American Sugar Refining Company to crush out all
competition if possible."--_A._ "But that is not so; there is no such
testimony. I understand it has been put in that form by one of the
gentlemen here, but it is not the fact. What I said was that it was
the policy of the American Sugar Refining Company to maintain and
protect its trade, _and if it resulted in crushing a competitor it is
no concern of the American Company; if he gets in the press, that is
his affair, not ours_."
_Q._ "And if anyone interferes with the business, profits, or
competition of the American Sugar Refining Company, it is its policy
to prevent it if possible?"--_A._ "By lowering profits to defy it."
_Q._ "And if it results in crushing him out?"--_A._ (Interrupting)
"That is his affair."
_Q._ "Not the affair of the American Sugar Refining Company?"--_A._
"No."
_Q._ "Now, suppose in the natural course of events the American Sugar
Refining Company should suppress--we will not use the words 'crush
out'--all competition, all opposition. I understand from your
theory--business principles--that you would then seek to get out of
the public and consumer the largest amount of profit consistent with
your idea of business principles?"--_A._ "Precisely."
_Q._ "Then, if you had the power to charge or impose prices on the
public, what would be your idea of the limit that the public could
possibly stand?"--_A._ "I think it would stand a quarter of a cent
to-day. I think we could do it for twenty cents a hundred. I think the
country is really damaged by having a number of people in the
business."
_Q._ "That is not an answer to my question. My question is the limit.
What restraint would you put upon yourselves? What would be your
restraint?"--_A._ "I call that restraint business consideration."
_Q._ "Would it not be the utmost limit that the consumer would
bear?"--_A._ "Until we had competition we should be in that position,
but whether or not we would exercise it, is quite another matter."
The very effort of Mr. Havemeyer to disown the "policy of crushing out
competition" followed immediately by his admission that a trust is a
"press" built for that purpose, is indicative of the capitalist's mind
on the subject: At one moment he naively admits what a moment before
he emphatically denied. The trust, then, is the organization of an
industry by one or a few men strong enough to suppress competition and
bleed the consumer.
The tyranny of the market has been suppressed only to substitute
therefor the tyranny of the trust. And this new tyranny has for effect
to enrich the trust magnate at the expense of the whole nation.
The course of industrial events beginning with the creation of guilds
to suppress the anarchy of the Middle Ages; the tyranny of the guilds;
the revolt against the guild; its suppression; the substitution
therefor of so-called freedom of industry, of contract, of trade; the
disorder or anarchy that ensued; the despotism of the market; the
gradual suppression of all three freedoms in order to escape from the
despotism of the market; and this suppression only preparing the way
for the tyranny of the trust, is not accidental. It is a cycle through
which industry had to pass till mankind found its way of escaping from
the whirlpool.
We find the same cycle in the political world. The anarchy of the
horde paving the way to the despotism of the tyrant; the despotism of
the tyrant creating a revolt resulting in a new anarchy leading to
another despotism as bad as the last, until staggering between anarchy
and despotism, men slowly evolved a system of popular government. We
shall see later that popular government can never remain popular under
a system of industrial anarchy or industrial despotism, and that our
industrial organization must adopt a system of popular control, if
popular government is ever to become in fact as well as in name,
popular.
Suffice it to point out that our industrial development following a
law of necessity has so far staggered like a drunken man from anarchy
to despotism and from despotism to anarchy--and that we are not likely
to attain order from despotism until we recognize that the competitive
system, such as we now have, can never attain it; and that it can be
attained only by a deliberate substitution of cooperation for
competition _to the extent necessary_.
(_c_) _Tyranny of the Union_
Let us now consider another part of the industrial field which seems
destined to be the arena of the next great development--the field of
labor.
The consumer is not organized as yet; he has not waked up to the
extent to which he is fleeced by the trust. But labor is organized,
driven to organization by the terrible consequences of the freedom of
contract[73] for which he clamored so loud in the Revolutionary
period. A workingman alone, ignorant of the profits earned by the
manufacturer, ignorant of the number of workingmen applying for work,
himself hungry, and with a hungry family to support, is no match for
an employer with sufficient capital at his disposal, a considerable
knowledge of the labor market where he can find men to replace such as
ask for a higher wage than he is willing to pay, and with practically
no reason to fear hunger or even discomfort for himself or for those
who are dear to him.
Freedom of contract, therefore, meant for the unorganized workingman
at the beginning of the nineteenth century, not freedom, but slavery.
It will be later recorded how inevitably the tyranny of the market and
the greed of capital combined to reduce workingmen to starvation wages
and condemn women and children to degrading labor. One of two things
had to happen: The whole laboring class had to be reduced to a
condition of permanent slavery, or the laboring class had to combine
to put an end to competition between worker and worker that left them
at the mercy of the market. That men reduced to the physical condition
created by the industrialism of a century ago should have had the
intelligence, courage, and self-restraint to combine and act in
concert until they were able to some extent to impose rates of wages
upon the employers, seems to-day hardly less than miraculous, and
ought to serve as a warning to capitalists that they can no longer
dispute the coming political power of such workingmen, or remain
indifferent to it, or even denounce it with _Outlook_ intemperateness.
Mr. Eliot, President Emeritus of Harvard University, is outraged by
what he regards as the tyranny of the trade union. Has he ever thought
of the tyranny of the trust, or the tyranny of the market from which
both inevitably spring? Has he ever understood that such a competitive
system as ours can only put an end to anarchy by despotism; and can
only shake off despotism at the risk of anarchy?
But the subject of trusts and trade unions is too large to be treated
as an incident in the discussion of the evils of the competitive
system. I shall content myself, therefore, with summing up briefly the
course of events through which industrial development has passed, for
the light it throws upon the course through which it has still to
pass:
Anarchy of industrial conditions during the Middle Ages gave rise to
the guild, which for a season substituted order for disorder.
The order introduced by the guild involved regulation; regulation
involves power; and wherever power is exercised free from efficient
popular control, it must end in tyranny.
The tyranny of the guild aroused a revolt and the cry of freedom of
trade, freedom of industry, freedom of contract; these three freedoms
under the competitive system reintroduced an era of anarchy--both in
production and distribution--both for the employer and the employee,
subject only to the despotism of the market.
The employees undertook to put an end to competition between employees
by organizing trade unions.
The employers undertook to put an end to competition between employers
by organizing trusts.
So the anarchy which, under the competitive system, must result from
freedom, has given rise to the tyranny of the market, and the effort
to escape the tyranny of the market to two other tyrannies--of the
trust and of the trade union. These two tyrannies stand to-day not
only arrayed against one another, but in the bitterest conflict--in
the courts, in strikes, lockouts, and ultimately on the field of
politics.
One thing stands out in singular relief from the foregoing sketch,
viz., that it is freedom--of industry, of contract, and of trade--the
battle cry both of the bourgeois employer and the proletarian
employee--that has led to these two tyrannies.
At the present time I believe that the confusion in the ranks not only
of the employer, but of the employee, as regards this so-called
freedom--a freedom that both are clamoring for but neither have ever
attained--is responsible for the failure of both to understand one
another. And the subject of freedom or liberty will therefore be
discussed in a chapter to itself.
FOOTNOTES:
[72] "Government," Vol. I, p. 276.
[73] Book II, Chapter IV.