OF SPURIOUS CAPITAL AND OF PROFITS OFTEN MISTAKEN FOR INTEREST.
The belief that interest is the robbery of industry is, I am persuaded,
in large part due to a failure to discriminate between what is really
capital and what is not, and between profits which are properly
interest and profits which arise from other sources than the use of
capital. In the speech and literature of the day every one is styled a
capitalist who possesses what, independent of his labor, will yield him
a return, while whatever is thus received is spoken of as the earnings
or takings of capital, and we everywhere hear of the conflict of labor
and capital. Whether there is, in reality, any conflict between labor
and capital, I do not yet ask the reader to make up his mind; but it
will be well here to clear away some misapprehensions which confuse the
judgment.
Attention has already been called to the fact that land values, which
constitute such an enormous part of what is commonly called capital,
are not capital at all; and that rent, which is as commonly included in
the receipts of capital, and which takes an ever-increasing portion of
the produce of an advancing community, is not the earnings of capital,
and must be carefully separated from interest. It is not necessary now
to dwell further upon this point. Attention has likewise been called to
the fact that the stocks, bonds, etc., which constitute another great
part of what is commonly called capital, are not capital at all; but,
in some of their shapes, these evidences of indebtedness so closely
resemble capital, and in some cases actually perform, or seem to
perform, the functions of capital, while they yield a return to their
owners which is not only spoken of as interest, but has every semblance
of interest, that it is worth while, before attempting to clear the
idea of interest from some other ambiguities that beset it, to speak
again of these at greater length.
Nothing can be capital, let it always be remembered, that is not
wealth—that is to say, nothing can be capital that does not consist
of actual, tangible things, not the spontaneous offerings of nature,
which have in themselves, and not by proxy, the power of directly or
indirectly ministering to human desire.
Thus, a government bond is not capital, nor yet is it the
representative of capital. The capital that was once received for
it by the government has been consumed unproductively—blown away
from the mouths of cannon, used up in war ships, expended in keeping
men marching and drilling, killing and destroying. The bond cannot
represent capital that has been destroyed. It does not represent
capital at all. It is simply a solemn declaration that the government
will, some time or other, take by taxation from the then existing stock
of the people, so much wealth, which it will turn over to the holder
of the bond; and that, in the meanwhile, it will, from time to time,
take, in the same way, enough to make up to the holder the increase
which so much capital as it some day promises to give him would yield
him were it actually in his possession. The immense sums which are
thus taken from the produce of every modern country to pay interest on
public debts are not the earnings or increase of capital—are not really
interest in the strict sense of the term, but are taxes levied on the
produce of labor and capital, leaving so much less for wages and so
much less for real interest.
But, supposing the bonds have been issued for the deepening of a river
bed, the construction of lighthouses, or the erection of a public
market; or supposing, to embody the same idea while changing the
illustration, they have been issued by a railroad company. Here they do
represent capital, existing and applied to productive uses, and like
stock in a dividend paying company may be considered as evidences of
the ownership of capital. But they can be so considered only in so far
as they actually represent capital, and not as they have been issued in
excess of the capital used. Nearly all our railroad companies and other
incorporations are loaded down in this way. Where one dollar’s worth of
capital has been really used, certificates for two, three, four, five,
or even ten, have been issued, and upon this fictitious amount interest
or dividends are paid with more or less regularity. Now, what, in
excess of the amount due as interest to the real capital invested, is
thus earned by these companies and thus paid out, as well as the large
sums absorbed by managing rings and never accounted for, is evidently
not taken from the aggregate produce of the community on account of the
services rendered by capital—it is not interest. If we are restricted
to the terminology of economic writers who decompose profits into
interest, insurance, and wages of superintendence, it must fall into
the category of wages of superintendence.
But while wages of superintendence clearly enough include the income
derived from such personal qualities as skill, tact, enterprise,
organizing ability, inventive power, character, etc., to the profits we
are speaking of there is another contributing element, which can only
arbitrarily be classed with these—the element of monopoly.
When James I. granted to his minion the exclusive privilege of making
gold and silver thread, and prohibited, under severe penalties, every
one else from making such thread, the income which Buckingham enjoyed
in consequence did not arise from the interest upon the capital
invested in the manufacture, nor from the skill, etc., of those
who really conducted the operations, but from what he got from the
king—viz., the exclusive privilege—in reality the power to levy a tax
for his own purposes upon all the users of such thread. From a similar
source comes a large part of the profits which are commonly confounded
with the earnings of capital. Receipts from the patents granted for
a limited term of years for the purpose of encouraging invention
are clearly attributable to this source, as are the returns derived
from monopolies created by protective tariffs under the pretense of
encouraging home industry. But there is another far more insidious
and far more general form of monopoly. In the aggregation of large
masses of capital under a common control there is developed a new and
essentially different power from that power of increase which is a
general characteristic of capital and which gives rise to interest.
While the latter is, so to speak, constructive in its nature, the power
which, as aggregation proceeds, rises upon it is destructive. It is
a power of the same kind as that which James granted to Buckingham,
and it is often exercised with as reckless a disregard, not only of
the industrial, but of the personal rights of individuals. A railroad
company approaches a small town as a highwayman approaches his victim.
The threat, “If you do not accede to our terms we will leave your
town two or three miles to one side!” is as efficacious as the “Stand
and deliver,” when backed by a cocked pistol. For the threat of the
railroad company is not merely to deprive the town of the benefits
which the railroad might give; it is to put it in a far worse position
than if no railroad had been built. Or if, where there is water
communication, an opposition boat is put on; rates are reduced until
she is forced off, and then the public are compelled to pay the cost of
the operation, just as the Rohillas were obliged to pay the forty lacs
with which Surajah Dowlah hired of Warren Hastings an English force to
assist him in desolating their country and decimating their people.
And just as robbers unite to plunder in concert and divide the spoil,
so do the trunk lines of railroad unite to raise rates and pool their
earnings, or the Pacific roads form a combination with the Pacific Mail
Steamship Company by which toll gates are virtually established on
land and ocean. And just as Buckingham’s creatures, under authority of
the gold thread patent, searched private houses, and seized papers and
persons for purposes of lust and extortion, so does the great telegraph
company which, by the power of associated capital deprives the people
of the United States of the full benefits of a beneficent invention,
tamper with correspondence and crush out newspapers which offend it.
It is necessary only to allude to these things, not to dwell on them.
Every one knows the tyranny and rapacity with which capital when
concentrated in large amounts is frequently wielded to corrupt, to
rob, and to destroy. What I wish to call the reader’s attention to is
that profits thus derived are not to be confounded with the legitimate
returns of capital as an agent of production. They are for the most
part to be attributed to a maladjustment of forces in the legislative
department of government, and to a blind adherence to ancient
barbarisms and the superstitious reverence for the technicalities of a
narrow profession in the administration of law; while the general cause
which in advancing communities tends, with the concentration of wealth,
to the concentration of power, is the solution of the great problem we
are seeking for, but have not yet found.
Any analysis will show that much of the profits which are, in common
thought, confounded with interest are in reality due, not to the
power of capital, but to the power of concentrated capital, or of
concentrated capital acting upon bad social adjustments. And it will
also show that what are clearly and properly wages of superintendence
are very frequently confounded with the earnings of capital.
And, so, profits properly due to the elements of risk are frequently
confounded with interest. Some people acquire wealth by taking chances
which to the majority of people must necessarily bring loss. Such are
many forms of speculation, and especially that mode of gambling known
as stock dealing. Nerve, judgment, the possession of capital, skill in
what in lower forms of gambling are known as the arts of the confidence
man and blackleg, give advantage to the individual; but, just as at a
gaming table, whatever one gains some one else must lose.
Now, taking the great fortunes that are so often referred to as
exemplifying the accumulative power of capital—the Dukes of Westminster
and Marquises of Bute, the Rothschilds, Astors, Stewarts, Vanderbilts,
Goulds, Stanfords, and Floods—it is upon examination readily seen that
they have been built up, in greater or less part, not by interest, but
by elements such as we have been reviewing.
How necessary it is to note the distinctions to which I have been
calling attention is shown in current discussions, where the shield
seems alternately white or black as the standpoint is shifted from
one side to the other. On the one hand we are called upon to see, in
the existence of deep poverty side by side with vast accumulations of
wealth, the aggressions of capital on labor, and in reply it is pointed
out that capital aids labor, and hence we are asked to conclude that
there is nothing unjust or unnatural in the wide gulf between rich and
poor; that wealth is but the reward of industry, intelligence, and
thrift; and poverty but the punishment of indolence, ignorance, and
imprudence.