THE NEW 
 
 CAPITALISM 
 
 By 
 
 S. A. BALDUS 
 
 BOSTON COLLEGE LIBRARY 
 CHESTNUT HILL, MASS. 
 
 CHICAGO 
 
 The O’Donnell Press 
 621 Plymouth Court 
 1923 
 
Copyright, 1923, by S. A. Baldus. 
 All rights reserved, including that of 
 translation into foreign languages. 
 
PART I 
 
 The Established Okder 
 
 Page 
 
 Chapter I. The Great Unrest. 7 
 
 II. The Clash of the Classes. 14 
 
 III. The New Division . 22 
 
 IV. The Investors and the Non-Investors. 28 
 
 V. The Different Kinds of Investors. 39 
 
 VI. The Capitalistic Entrepreneurs. 48 
 
 VII. The Supreme April Fool Joke. 61 
 
 VIII. The Principle of Inflation. 72 
 
 IX. The Volume of Inflation. 83 
 
 X. The Capital Crime of Overcapitalization.... 95 
 
 XI. The Railroads: An Object Lesson in Over- 
 
 capitalization . Ill 
 
 XII. The Stock Market . 128 
 
 XIII. Our National Wealth. 143 
 
 XIV. The National Income . 162 
 
 XV. ‘ 1 Capital, Labor and Brains”. 179 
 
 XVI. The Shrinking Dollar . 191 
 
 XVII. The American Standard of Living. 203 
 
 XVIII. Mane-Tekel-Upharsin. 218 
 
 PART II 
 
 The New Order 
 
 Chapter XIX. “Where There’s a Will—”. 245 
 
 XX. “—There’s a Way”. 265 
 
 XXI. Our Principles and Policies. 283 
 
 XXII. Who is “The Public”?. 295 
 
 XXIII. The Science of Wages. 309 
 
 XXIV. The Philosophy of the Quantity Wage. 324 
 
 XXV. The Genesis of Wages and Living Costs. 341 
 
 XXVI. The Cost of Living Basis of Wages. 356 
 
 XXVII. Wages Under the New Capitalism.373 
 
 XXVIII. The Cost of Living under the New Capitalism 388 
 
 XXIX. ‘ 1 Out of the Frying Pan into the Fire ”.400 
 
 XXX. Economic Changes and Adjustments.415 
 
 ' XXXI. What About the Farmer?. 434 
 
 XXXII. Where will the Farmer Stand?.449 
 
 XXXIII. No Political Party. 460 
 
 XXXIV. The Concluding Chapter. 472 
 
 r A Postscript . 483 
 
First Edition, April, 1923 
 
PART I 
 
 THE ESTABLISHED ORDER 
 
CHAPTER I 
 The Great Unrest 
 
 F OR nearly ten years it has been dinned into our ears 
 that there is “industrial unrest,” not only in the 
 United States but throughout the world. There is: 
 but since I have not studied political, social, industrial 
 and economic conditions in Europe at close range, and 
 have only such knowledge of them in other parts of the 
 world as may be obtained from a reading of books, maga¬ 
 zines and newspapers, I shall exclude Europe and the rest 
 of the world from the present discussion and confine 
 myself entirely to the United States,—surely a large 
 enough territory and with enough economic problems to 
 enlist the best energies of an army of avowed students. 
 
 “Industrial unrest” is supposed to be conspicuous in 
 the United States. Books have been written about it, arti¬ 
 cles without number, and countless editorials. Have there 
 not—ever since we entered the European war and even 
 after the armistice—been hundreds of strikes, and threats 
 of strikes, and demands for wage increases, and protests 
 against wage cuts? And many other manifestations of 
 industrial disorder, such as Court orders, decisions and 
 injunctions; Industrial conferences, boards, and commit¬ 
 tees, to say nothing of “red plots,” most of which latter, 
 however, I have always held, existed only in certain official 
 minds. Even though you were to enumerate many more 
 evidences of unrest, and cite many additional instances of 
 tumult, I today maintain that it is not industrial unrest 
 that is afflicting the United States, but something deeper, 
 something more sweeping, something more portentous—a 
 social and economic disease—contagious—fatal if not 
 quickly checked, and likely to become epidemic and end 
 
 7 
 
8 
 
 The New Capitalism 
 
 tragically. The existence of the disease cannot be denied; 
 its gravity must not be underestimated; its symptoms must 
 not be ignored. 
 
 Clearly if a remedy is to be applied it is important 
 that we take a correct diagnosis, for without a proper diag¬ 
 nosis no cure is possible. Or, having the right remedy, 
 care must be taken lest we give the medicine to the wrong 
 patient. Surely it is the part of wisdom to honestly en¬ 
 deavor to discover the causes of the disorder and to eradi¬ 
 cate them, if possible. 
 
 In what street and in which house, then, does our patient 
 live, and what is his name? What are his ailments, and 
 are they organic, or only symptomatic of the disease from 
 which he is suffering? Is he in danger of getting worse, 
 or is there a likelihood of his gradual convalescence and 
 ultimate recovery? 
 
 The Spendthrift Workers 
 
 It is noteworthy that all through the years 1918 and 
 1919, and the first half of 1920, when the industrial unrest 
 was supposed to be at its height, industrial workers were 
 better off than ever before; at least they were being paid 
 better wages and were experiencing less trouble in having 
 their demands, with or without strikes, satisfied. In fact, 
 so well off were the industrial workers that they were 
 accused of spending their newly acquired “ riches ” like 
 drunken sailors. Almost daily we were treated to moral¬ 
 izing editorials anent the wanton extravagance of the wage 
 earners, and the orgy of reckless spending into which the 
 industrial workers had plunged themselves. We were told, 
 not once but a hundred times, that common laborers were 
 buying silk shirts and automobiles; their wives sealskin 
 coats, diamonds and pianos, proof of the hysteria of 
 spending. 
 
 The Silk Shirt Era 
 
 Some writers on economic subjects spoke, and still speak, 
 of the silk shirt era, which was supposedly at its height in 
 
The Great Unrest 
 
 9 
 
 1919. Common laborers in mines and mills, we were told, 
 were buying silk shirts, not one or two at a time but in half 
 dozen and dozen lots, paying ten, twelve, and fifteen dollars 
 apiece for them, and wearing them to their work, perhaps 
 even going to bed with them on, for many of them worked 
 twelve hours a day and seven days a week. I have always 
 taken these “silk shirt’’ reports with a grain of salt. I 
 hold that they were grossly exaggerated. Most of those 
 who wrote about the silk shirt laborers in mill and mine, 
 never brushed shoulders with one of them. It is quite 
 certain that they troubled themselves not at all to investi¬ 
 gate the subject. They gave us no proof, no statistics. 
 We had nothing but their unsupported word, based on 
 fabricated rumor and hearsay reports. 
 
 Gary, Indiana, is a typical steel mill town. The steel 
 plants there employ, let us say, 22,000 workers, most of 
 them foreigners. What percentage of these 22,000 steel 
 workers bought silk shirts in the height of their economic 
 prosperity? What percentage of them wore silk shirts to 
 their work? Who can tell? Who has made an honest in¬ 
 quiry? In the absence of an investigation, or any official 
 report, let us say ten percent, or 2,200 of the workers in 
 the Gary steel mills, adorned their grimy bodies with ten 
 and fifteen dollar silk shirts. What does that prove? It 
 proves, if anything, that among the 22,000 there were 
 2,200 fools—ten percent; which I contend is no greater 
 percentage than can be found in any other economic group. 
 Is it fair to include the other 19,800 non-silk-shirted Gary 
 steel workers in your sweeping indictment of the folly and 
 extravagance of a few—whether ten, twenty or more per¬ 
 cent—of the total number? It would at least be decent to 
 so word your moralizing comments—if moralize you must 
 —that the offending few shall be set apart from the many 
 who have not offended—the economic goats separated from 
 the sheep. 
 
 I am wondering, as I write, whether any economic 
 writer harping on the “silk shirted” wage earner—at 
 Gary, let us say—has ever gone to the trouble of learning 
 
10 
 
 The New Capitalism 
 
 from the merchants at Gary how many silk shirts were 
 actually sold by them to the workers in the steel mills. 
 But that wouldn’t be conclusive, for no doubt many of 
 them made their purchases in Chicago. And I am won¬ 
 dering, too, just how much of an increase or decrease in 
 savings accounts the banks of Gary could show for the silk 
 shirt era of prosperity during and even after the war. 
 
 The Miracle of Spending and Hoarding 
 
 A few months after the armistice, the same papers that 
 published doleful comments anent the silk shirt extrava¬ 
 gance of the mine and mill and other industrial workers, 
 many of whom were foreigners, also complained that thou¬ 
 sands of them were going back to their native lands, taking 
 with them millions of American money. Precisely how 
 they could spend millions in reckless extravagance, and 
 also save and hoard millions, has never been satisfactorily 
 explained. A man cannot be sick in bed, crippled with 
 rheumatism, and run a Marathon race at the same time. 
 Either the moralizing commentators were guilty of exag¬ 
 gerating the reckless extravagance of the industrial work¬ 
 ers, or the economic diagnosticians were wrong when they 
 decided that the patient was suffering from unrest. 
 
 Barking Up the Wrong Tree 
 
 There would be more justification for the cry “industrial 
 unrest ’ ’ today than there was four or five years ago! All 
 through 1918 and 1919, and the first six months of 1920, 
 everybody was working, and the wages of many were ad¬ 
 mittedly above the level of former years; while in 1921 
 four and a half millions of industrial workers were out of 
 work, or working only part time. Many mills and factories 
 closed down entirely. With that singular mental obliquity, 
 which seems to be a national characteristic, we put up the 
 red card of danger on every door when the disease was 
 endemic, and now that it is epidemic we take it down from 
 all doors. 
 
 The fact is that when we said there was industrial unrest 
 
The Great Unrest 
 
 11 
 
 there was less of it than the usual amount among the indus¬ 
 trial workers. But there was—and we said little or noth 
 ing about it— unrest —not so much among the industrial 
 workers as among the mass of the people — men and 
 women who cannot be called industrial workers—millions 
 of men and women who have had little or no increase in 
 their wages or salaries, and who are finding it increasingly 
 difficult to make ends meet. Many of them have been com¬ 
 pelled to abandon their accustomed mode of life, and to 
 adopt a lower standard of living. 
 
 When you speak of industrial unrest there arises the 
 vision of discontented workmen, turbulent toilers—gener¬ 
 ally organized—clamorously engaged in a struggle for more 
 wages, fewer hours, better working conditions or what not; 
 or else contending for some principle, or demanding some 
 right or concession, or opposing some real or fancied 
 aggression. The mind does not include in the picture the 
 average non-industrial working man and woman, working 
 for an inadequate wage or salary, helpless, unorganized, 
 without leaders and without spokesmen. Yet the unorgan¬ 
 ized, non-industrial workers outnumber the organized in¬ 
 dustrial workers. 
 
 Among those unorganized, unchampioned millions of 
 men and women, their grievances ignored and all redress 
 denied them, there is and has been for years, bitter unrest, 
 and a more poignant discontent than among the organized 
 industrial workers. Therefore I insist that “industrial 
 unrest’’ does not fairly state the case. You must amplify 
 it to include the whole population, or rather, that vast 
 portion of it which has no other income than is derived 
 from wages or salaries. Speak not of industrial unrest 
 only. Call it national unrest—call it universal discontent 
 —not industrial in character so much as social and eco¬ 
 nomic. 
 
 ' WTiy beat around the bush? Why predicate about a 
 comparatively small group of industrial workers only, 
 what is easily predicable of the majority of the people— 
 both industrial and non-industrial workers? I have scant 
 
12 
 
 The New Capitalism 
 
 patience with these wrong economic diagnoses. I chal¬ 
 lenge every statement that contains ten percent of truth 
 and is ninety percent a lie; statements that are clearly 
 misstatements based on one part fact and nine parts fabri¬ 
 cation. 
 
 The Danger Symptoms 
 
 Industrial unrest? No, something deeper, something 
 more fundamental, something more terrible, is gnawing 
 at the vitals of our nation. Those who prate of industrial 
 unrest when the whole country is in social foment and 
 economic upheaval, are but “fiddling Neros” or arrant 
 knaves.^ The industrial part of the unrest is only the 
 rumbling of the coming disaster—a faint sound made by 
 an exasperated group, audible only because they are partly 
 organized; of workers whose occasional manifestation of 
 discontent is but the feeble stirring of an outraged sense 
 of justice that is slowly corroding the hearts and embit¬ 
 tering the minds not only of industrial workers but a tre¬ 
 mendous majority of our nation; of wage earners whose 
 spasmodic turbulency is merely an echo of the pent up 
 fury that is harrowing the very souls of millions of men 
 and women in the United States. These periodical labor 
 turmoils are the reverberation of fierce passions raging 
 within bruised breasts; gestures of protest against wrongs 
 they seem powerless to redress; a chorus cry of rage 
 against conditions from which they seem not yet to have 
 discovered the logical way to escape, or, to adjust. 
 
 Economic Quacks cmd Nostrums 
 
 No! ye exalted economic doctors in subsidized colleges, 
 ye learned professors in endowed universities, ye silver- 
 tongued after-dinner speakers, and mercenary apologists 
 for the Capitalistic System; ye hired quacks of plausible 
 speech, and self appointed analysts of the ills afflicting the 
 body social and economic; ye deluded editors, officious 
 writers, and obsequious scribblers;—ye who would have 
 the world believe that the trouble is in the foot, when it 
 
The Great Unrest 
 
 13 
 
 is the heart—a heart no longer merely functionally dis¬ 
 turbed but organically diseased and beating weak and 
 slow—I tell you your diagnosis is false, and you are de¬ 
 ceiving yourselves rather than the public. The industrial 
 unrest of which you speak is only one of the symptoms of 
 a national malady—a virulent disease—a malignant disease 
 which cannot be cured with salves, lotions and unguents, 
 but calls for the skilful use of the knife. 
 
 The Patient Must Cure Himself 
 
 The case stated in its nakedness is simply this: There 
 is today, and there has been for more than a decade of 
 years past, economic unrest and continuously growing 
 social discontent among eighty percent of the population 
 of the United States—industrial and non-industrial toilers 
 —working men and women, organized and unorganized— 
 and their families. These eighty million people; these 
 sixteen million families, have neither leaders nor spokes¬ 
 men ; no representatives of their case, no defender of their 
 rights, no pleader of their cause. 
 
 I have appointed myself their advocate and their cham¬ 
 pion. This book is written for the purpose of arousing 
 them to the full realization of their present condition, 
 bound to grow worse unless they bestir themselves promptly 
 and organize themselves into a unified group. I exhort 
 them to combine their scattered forces into a formidable 
 power. I urge them to constitute themselves into a mighty 
 army—a solid phalanx; to be no longer a despairing horde 
 but an embattled host, whose cause is just, whose might is 
 the right, and whose strength, united, is invincible. 
 
CHAPTER II 
 
 The Clash of the Classes 
 
 I N the older European countries society is generally 
 divided into classes. This division, which is both social 
 and economic, is accepted by all concerned without 
 question or cavil. In some of the countries, particularly 
 England, the class system has—as is inevitable—degener¬ 
 ated into a caste system not unlike that which has fastened 
 its throttling death grip upon India. Kenneth L. Roberts, 
 in an article in The Saturday Evening Post (February 19, 
 1921), writes: 
 
 “H. G. Wells has said that there are more than two 
 hundred classes to English society. Some of the delicate 
 distinctions between different English classes are such as 
 to give many persons a slow, shooting pain at the base of 
 the brain. There is a distinction, for example, between a 
 graduate of Oxford University and a graduate of London 
 University. The latter belongs to a lower class than the 
 former. There is a distinction between an Episcopalian, 
 or Church of England clergyman, and a Baptist or Con- 
 gregationalist or Presbyterian minister. The Episcopalian 
 belongs to a higher class than the Nonconformist minister. 
 Workingmen are divided by rigid class distinctions. Cer¬ 
 tain trades are classed far higher than other trades. The 
 barrister, who argues a case for a client, is in a much 
 higher class than the solicitor, who approaches the bar¬ 
 rister for the client and persuades him to accept the case. 
 If a member of the so-called upper classes undertakes to 
 sell stoves or cheese or canned goods, he falls from the class 
 he originally occupied to a lower class. If, however, he 
 chooses to sell automobiles, stocks and bonds, or land, he 
 
 14 
 
The Clash of the Classes 
 
 15 
 
 remains in his original class and is not lowered. These 
 three pursuits are exempt from the stigma which attaches 
 to trading in all other commodities. . . . There is 
 
 class distinction in England, and the distinction is recog¬ 
 nized and acquiesced in by every class. The lower the 
 classes the more rigid the distinctions.” 
 
 Caste 
 
 Need I emphasize that this is no longer class distinction, 
 but that terrible curse called caste. In Italy, France, Ger¬ 
 many, Russia, and other European countries, there are, 
 as far as I have been able to discover, fewer divisions and 
 less invidious distinctions than in England, especially 
 among the humbler social or economic contingents. What¬ 
 ever of caste is observable seems to be confined to the 
 upper laminae, rather than to the lower strata of society. 
 
 Arbitrary Class Divisions 
 
 But whatever the varying divisions and sundry subdivi¬ 
 sions in the different countries may be, broadly speaking 
 society everywhere has for several centuries been appor¬ 
 tioned into three great groups, or classes, namely, the 
 upper class, the middle class, and the lower class. It is to 
 be noted here that there is no uniform rule or standard; 
 the class division is purely arbitrary. For example, speak¬ 
 ing of France—the celebrated M. Quesnay, physician to 
 the court of Louis XV, divided society into three classes: 
 
 “The first, or productive class, by whose agency all 
 wealth is produced, consists of the farmers and labourers 
 engaged in agriculture, who subsist on a portion of the 
 produce of the land reserved to themselves as the wages 
 of their labour, and as a reasonable profit on their capital; 
 the second, or proprietary class, consists of those who live 
 on the rent of the land, or on the nett surplus produce 
 raised by the cultivators after their necessary expenses 
 have been deducted; and the third, or unproductive class, 
 consists of manufacturers, merchants, menial servants, &c., 
 who subsist entirely on the wages paid them by the other 
 
16 
 
 The New Capitalism 
 
 two classes; and whose labour, though exceedingly useful, 
 adds nothing to the national wealth. ’ 71 
 
 Henry Parkinson, writing in 1913, divides society in 
 England on an entirely different basis. “Roughly speak¬ 
 ing/’ he says, “the upper class will include the aristocracy, 
 nobility, the greater landowners, the capitalist financiers. 
 The middle class will comprise (1) producers (small land- 
 owners and tenant farmers, the yeoman class, and the 
 captains of industry) ; (2) distributors, like merchants 
 and retailers; (3) the great services (ministers of religion, 
 teachers, doctors and nurses, lawyers and clerks, officers 
 of army and navy, the civil service). By the lower class 
 is understood the vast number of those who live mainly 
 by the fruit of their labour and are without landed or 
 other capital. ’ ’ 1 2 
 
 The important thing to remember here is that there is 
 no uniformity as regards class divisions; each writer fol¬ 
 lows his own particular notions, or classifies society accord¬ 
 ing to the accepted standards of the day, or the prejudices 
 of the country in which he lives. Certainly there is noth¬ 
 ing scientific about such classifications. 
 
 No Glasses in the United States 
 
 But I am not particularly concerned at this moment 
 with any country except the United States. Here at home 
 I contend that there are no classes, save for the conve¬ 
 nience of the sociologist. I say this with the full knowledge 
 that all our writers on economics habitually, and quite 
 erroneously, indulge in class distinctions, and prate with 
 turgid eloquence of “class consciousness.” They have 
 divided us, too, into the three great classes—upper, middle 
 and lower. I do not know wiiether any have ventured to 
 say just who is to be included in each of these three 
 classes, but if so, it was without troubling themselves about 
 stating the essential qualifications or distinctive charac¬ 
 teristics of each class. 
 
 1 “The Principles of Political Economy,” by J. R. McCullough. 
 
 2 "A Primer of Social Science,” by Henry Parkinson, D.D. 
 
The Clash of the Classes 
 
 17 
 
 I do not feel disposed at this time to quarrel with these 
 writers for their lack of definiteness when writing about 
 their upper, middle and lower class divisions; but I take 
 issue with them when they transcend the limits of mere 
 classification and proceed to make distinctions which are 
 not only arbitrary and unwarranted, but undemocratic 
 and unscientific. 
 
 Otto H. Kahn, in an article published in The Annalist 
 (January 3, 1921) speaks of the so-called middle class as 
 composed of “the men and women living on moderate 
 incomes, the small shop keeper, the average professional 
 man, the farmer, etc.” And then he continues to say that 
 the welfare of these “is just as important to the commu¬ 
 nity as the welfare of the wage earner.” 
 
 By what right does Mr. Kahn segregate the wage earn¬ 
 ers? By what right does Mr. Kahn differentiate between 
 those whose maintenance is derived from wages, and those 
 who receive a salary, or whose income, the equivalent of 
 a wage or salary, is derived from some other pursuit, or 
 source ? 
 
 The middle class may indeed be composed of “the men 
 and women of moderate income,” but I insist that it 
 doesn’t make a particle of difference w T hetker their mod¬ 
 erate income is derived from wages, salary, or a small 
 business, or the practise of a moderately lucrative profes¬ 
 sion. I contend that the wage earner, whose “moderate 
 income” is, say, $1,000 or $1,500 a year, has as much right 
 to consider himself as belonging to the middle class as has 
 the butcher or the baker, or the lawyer, or farmer having 
 approximately the same amount of income. 
 
 Confusing Society with Economics 
 
 The dictionary defines the middle class as “the class 
 that occupies an intermediate position socially.” The 
 middle class, therefore, is primarily a social group; but 
 that is not the sense in which Mr. Kahn uses the term. 
 
 The dictionary also says that the “trading class” is the 
 middle class. Who constitute the trading class? Surely 
 
18 
 
 The New Capitalism 
 
 in the United States tradespeople do not constitute the 
 middle class, for, according to the United States Census 
 Statistics the following are listed under the designation 
 Trade: bankers, brokers, money-lenders; clerks in stores; 
 commercial travelers; delivery men; insurance agents and 
 officials; laborers in coal and lumber yards, warehouses, 
 etc.; laborers, porters, and helpers in stores; real estate 
 agents and officials; retail dealers; salesmen and sales¬ 
 women; wholesale dealers; importers and exporters, etc. 
 
 J. P. Morgan is in the trading class; so is Barney 
 Baruch; so is John D. Rockefeller; so is Julius Rosen- 
 wald; so is Otto H. Kahn. But J. P. Morgan, and Barney 
 Baruch, and John D. Rockefeller, and Julius Rosenwald, 
 and Otto H. Kahn—traders though they be—are distinctly 
 not of the middle class, socially speaking. Emphatically 
 they are not of the middle class economically speaking. 
 
 By the exclusion of the wage earner from the middle 
 class Mr. Kahn arbitrarily places the men and women who 
 work with their hands in the lowest class. That there are 
 some—and I care not whether you make it ten or twenty 
 percent of the total, or more or less,—working for a wage, 
 or perhaps too lazy to work at all, and who may be put 
 into the lowest class socially considered, I freely concede. 
 
 But, on the other hand, there is a considerable number 
 of idle and lazy rich—men and women—“who toil not, 
 neither do they spin”—who in all their lives have never 
 contributed aught to the sum and substance of human 
 happiness; who have produced nothing; who have added 
 nothing to the wealth of the nation; who render no serv¬ 
 ice to humanity; who are, plainly speaking, social barnacles 
 and economic parasites—where will Mr. Kahn place these? 
 In the upper, or the middle, or in the lower class? Or 
 will he put them in a class by themselves, lower even than 
 his classification of the wage earners? 
 
 Class Contradictions 
 
 If there w r ere only two social groups, one would naturally 
 be the upper and the other the lower group; but since we 
 
The Clash of the Classes 
 
 19 
 
 divide society into three groups or classes, then one is 
 necessarily the uppermost or highest class, one the lowest 
 class, and the other the middle class. Verbal accuracy, if 
 nothing else, it seems to me, demands the abrogation of the 
 commonly accepted upper, middle and lower class classi¬ 
 fication of society, and dictates designating the three con¬ 
 stituent groups, or classes, if you insist, as the highest 
 class, the middle class, and the lowest class. According 
 to Mr. Kahn and others, the wage earner is in the lowest 
 class. 
 
 What is it that puts a man or woman into the highest 
 class ? It isn ’t intellect; it isn’t character; it isn’t culture; 
 it isn’t moral perfection. It is chiefly wealth plus social 
 position, and the purchasable concomitants, such as fash¬ 
 ionable clothes, a magnificent residence, luxurious sur¬ 
 roundings, a retinue of servants, leisure, etc. None will 
 deny that one belonging to the highest class of society, 
 may at heart be—and many of them are—reprobates. In¬ 
 tellectually they may be nonentities, absolutely character¬ 
 less, deficient in culture, lacking in refinement, devoid of 
 the finer qualities, and morally below par. Yet none thus 
 far has challenged their inclusion in the highest class. 
 
 I, for one, cannot subscribe to a group arrangement that 
 deliberately ignores the better qualities in individuals, or 
 in groups. My intelligence refuses to accept as scientific 
 a classification based wholly on the possession of wealth, 
 and all that a plethora of riches implies. My sense of jus¬ 
 tice, or shall I say, my common sense, rejects a stratifica¬ 
 tion of society that takes no account of intellect, or of char¬ 
 acter and the simple virtues which, none will deny, weigh 
 heavy in the scale of human values. 
 
 The Middle Group 
 
 In plain English, I protest against the mass inclusion of 
 all wage earners in the lowest class. Until those who can 
 speak with authority—be they scientific sociologists, or 
 just plain blunt men like Mr. Kahn—are willing to go on 
 record as saying that probity and nobility of soul, goodness 
 
20 
 
 The New Capitalism 
 
 of heart, cleanness of mind, purity of conduct, innate 
 honesty, a sense of justice, a decent regard for the rights 
 of others—in brief, character and conscience—are of no 
 social value, I shall insist on placing a considerable num¬ 
 ber of the wage earners—most of them respectable and 
 useful members of society, and who in the aggregate have 
 contributed vastly more to the nation’s progress than the 
 contingents socially higher,—into the middle class. It 
 does not matter whether they work with their hands or 
 their head; whether for a weekly wage or a fixed salary, 
 or for an irregular honorarium. If the income of these 
 workers with brain or brawn is not large, whose fault is 
 it? If their “moderate income” does not permit them to 
 cut much of a figure socially, who is to blame? If the 
 meager wage or inadequate salary allowed by the Capital¬ 
 istic System compels millions of men and women to live in 
 humble homes and amid unpretentious and unaristocratic 
 surroundings, not to say squalor, it is despicable of any 
 constituent member of the Capitalistic group to turn up 
 his nose at them. 
 
 To Mr. Kahn, and whoever essays to write on this sub¬ 
 ject, I say, with emphasis: “You shall not place the 
 decent men and women of the United States into the lowest 
 class simply because they work for a wage, or the equiva¬ 
 lent of a wage. They are of the middle class! They are 
 the middle class. Remove them and your so-called highest 
 class will fall, socially and economically, into an abyss 
 deeper than hell.” 
 
 The Dead Past and Its Dead 
 
 It is difficult for some people to understand that we are 
 living neither in feudal times nor in the days of Louis 
 XIV. They seem to forget that the American Revolution 
 of 1776, once and for all, wiped out all invidious class dis¬ 
 tinctions, at least in the United States, when politically it 
 placed the nation on a common footing. What else does 
 the term “democracy” signify? They seem to forget that 
 the French Revolution of 1789, taking courage from our 
 
The Clash of the Classes 
 
 21 
 
 own example, in accents none too mild repudiated class 
 distinctions with the words— liberte, equalite, fraternite. 
 Indeed the French Revolution was an endeavor to equalize 
 the classes by entirely eliminating the uppermost class— 
 the nobility—the aristocracy, which, as we are reminded 
 in Thiers’ “The French Revolution” had “built up a 
 wall of demarcation between themselves and the rest of 
 the Community, as if they were fashioned of more ‘ precious 
 porcelain’.” And is there no lesson to be found in the 
 more recent Revolution in Russia? 
 
 The Daivn of a New Day 
 
 It is difficult for some people to comprehend that within 
 the last century vital and tremendous changes have taken 
 place in the civilized world, and that the political upheavals 
 observable everywhere today are but the pains of parturi¬ 
 tion preceding the birth of a new social and economic 
 order. 
 
 At least in the United States let it be understood that in 
 this year of our Lord 1922, we have neither feudal lords, 
 nor barons, neither a nobility nor an aristocracy, and cer¬ 
 tainly we who work for a wage or salary, or its equivalent, 
 refuse to allow ourselves to be hurled back into what it 
 would please some to designate economically, the peasant 
 or serf class, socially the lowest group. 
 
 Those who have a passion for making class distinctions, 
 and particularly those who look upon the wage workers 
 as our lowest class, socially and economically, might with 
 profit ponder on these words spoken by President Harding 
 in his Inaugural Address: “Our fundamental law recog¬ 
 nizes no class, no group, no section. There must be none 
 in legislation or administration. The supreme inspiration 
 is.the common weal.” 
 
CHAPTER III 
 The New Division 
 
 B UT to sweep aside the old and generally accepted 
 division of society into classes, places upon me the 
 obligation to propose an entirely new classification, 
 or rather group division, a division that has none of the 
 objectionable features of the old classification—a division 
 that is new and altogether more scientific. Above all it 
 must be a division that concerns itself wholly with eco¬ 
 nomic society—therefore an economic group arrangement 
 that is reducable to approximate figures and easily divisible, 
 something that is altogether impossible in what might be 
 called a half social and half economic classification or 
 grouping, under which the several members of the same 
 family might belong to the three distinctive social classes. 
 Thus, for example: the father may be a lawyer, which will 
 place him socially in the middle class; the son may be a 
 wage earner, which fact would thrust him into the lowest 
 social class; and the daughter may marry a multi-million¬ 
 aire, which would automatically determine her social status 
 in the uppermost class. But in a statistical division that is 
 primarily economic no social violence is implied; the transi¬ 
 tion from the one economic group to the other group 
 involves no medley of social contradictions. 
 
 Producer and Consumer 
 
 In past decades, loose economic writers, who preferred 
 to deal with nicely sounding words and their opposites, 
 rather than with fairly accurate terms, writers who troubled 
 themselves not at all with definitions, have been wont to 
 loosely divide economic society into two motley groups, 
 namely, Producer and Consumer; and even to this day we 
 
 22 
 
The New Division 
 
 23 
 
 hear them used by writers and speakers as if there attached 
 to them any scientific economic significance. A moment’s 
 reflection would establish that the classification is altogether 
 irrelevant. 
 
 Who are the producers? How many among the forty 
 million men, women and children listed as engaged in the 
 ‘‘gainful occupations” can be called producers in the real 
 sense of the word ? After an analysis of the available sta¬ 
 tistics I will say approximately one-third, certainly less 
 than one-half, could be called producers. The producer 
 group, as used in economic literature, therefore excludes 
 a majority of those engaged in gainful occupations. Conse¬ 
 quently, since no account is taken of the large number who 
 cannot be classed as ‘ ‘ producers, ’ ’ the unscientific character 
 of the producer and consumer division becomes at once 
 apparent. If only those who actually produce something 
 are called producers, some cognizance must be taken of 
 those who, though working, are not engaged in production 
 operations. A farmer, a miner, a steel worker, a baker, 
 can be called a producer; but a boot-legger, a policeman, 
 a railroad conductor, or a chauffeur, cannot be called a 
 producer in the strict sense of the word. To call every 
 worker, whether he produces or not, a producer, is highly 
 inaccurate. 
 
 The entanglement becomes even more obvious when we 
 encounter the word consumer, sometimes, for the sake of 
 emphasis perhaps, the ultimate consumer. The irrelevancy 
 of the economic producer and consumer division is imme¬ 
 diately apparent when we remember that the producer is 
 at the same time a consumer—producing eight hours a day 
 and consuming during sixteen hours of the day; in fact, he 
 is a consumer even while he produces. But the production 
 part of the formula is not predicable of all the consumers; 
 whereas the consumption part is predicable of all, whether 
 they be producers or non-producers, workers or idlers. 
 Only a percentage of the working group are producers; 
 but one hundred percent of the population are consumers. 
 
 Clearly, then, the designations “producer” and “con- 
 
24 
 
 The New Capitalism 
 
 sumer” cannot be used appropriately, because millions of 
 those engaged in work cannot be called producers in the 
 literal sense of the word. All, however, are consumers. 
 Even the retired millionaire is a consumer; he consumes as 
 well as the wage earner. But the role of consumer makes 
 no irksome demand on the millionaire. Consuming, to 
 him, is no hardship, no trial, no tribulation. What he con¬ 
 sumes does not exhaust his income; it makes no inroads on 
 his wealth; it does not interfere with his further w T ealth 
 accumulations; it does not disturb his capital funds. After 
 a most liberal consumption most of his income remains to 
 be invested by him in sundry profitable enterprises which 
 will yield for him in the following year another uncon¬ 
 sumable quantity of wealth, and increase of capital. 
 Certainly he does not deserve to be mentioned in the same 
 class with the wage earner consumer, or the small salaried 
 consumer, who in the course of the year consumes prac¬ 
 tically all he earns; whose wages, or salary, is his only 
 income; who has no investments, no income from any other 
 source than the labor of his hands or his head. All he 
 earns, generally a limited and stipulated amount, he is 
 compelled to spend merely in order that he and his family, 
 or those dependent upon him, may have a roof over their 
 heads, clothes to wear and food to eat. He lives from hand 
 to mouth. A month of idleness, or illness; a sick wife or 
 child; or a death in the family, will cast him down and 
 plunge him into debt. Once and for all I’ll dismiss the 
 "Producer-Consumer division as a sloppy, slippery economic 
 makeshift, illuminating nothing, clarifying nothing, settling 
 nothing, describing nothing. 
 
 Bourgeoisie and Proletariat 
 
 European economic literature abounds with the quasi- 
 scientific terms Bourgeoisie and Proletariat. We have 
 heard them frequently spoken of in connection with Social¬ 
 ism in Germany, Syndicalism in France, Bolshevism in 
 Russia, etc. I seriously question whether their use is scien¬ 
 tifically justified; but since I do not mean to concern myself 
 
The New Division 
 
 25 
 
 with the economic problems of Europe, I will accept them, 
 as, perhaps, applicable to economic conditions in Europe, 
 but they certainly cannot be employed with any degree of 
 appropriateness in the United States. In fact I reject the 
 two terms peremptorily, basing my present rejection on the 
 authority of the dictionary, which defines them as follows: 
 
 Bourgeoisie —The middle class of Society; especially in 
 France; used collectively. 
 
 Proletariat —1. In earlier usage, the indigent classes, 
 collectively of a community or a state, including day 
 laborers and all other persons without capital or assured 
 means of support: Kegarded in ancient Kome as con¬ 
 tributing to the state nothing but offspring; the lower 
 classes; peasantry; rabble. 2. In modern socialistic use, 
 the wage workers of a state or of the world, collectively, 
 regarded as the producers of capital and creators of 
 wealth; the laboring classes; working men. 
 
 To still further emphasize the inapplicability of the 
 terms to the economic conditions in the United States, one 
 has but to glance at the definition of bourgeois and prole¬ 
 tarian. The same dictionary defines them as follows: 
 
 Bourgeois —Of or pertaining to the commercial or 
 middle class as distinguished from gentle or noble; among 
 modern Socialistic writers often used in opposition to 
 working class or proletariat, or to characterize a system 
 of commercialism. 
 
 Proletarian —A person of the lowest or poorest class. 
 
 I shall waste no further words on this strictly European 
 division of economic society, beyond saying that it is inad¬ 
 missible in the United States. 
 
 Drawing the Line of Demarcation 
 
 What, then, is a reasonably accurate and fairly scientific 
 economic division—one that will stand the test of analysis 
 and at the same time be computable in figures and per¬ 
 centages? I may be in error when I say that the only 
 economic division that will fit the case exactly is the one I 
 am about to make; but I am not in error when I claim that 
 my division is better and more nearly descriptive of actual 
 conditions than any thus far made by any economic writer. 
 On that contention I stand pat. My division may be sus- 
 
26 
 
 The New Capitalism 
 
 ceptible of improvement, bnt as it stands I claim for it that 
 it is distinctively economic, and not an olla podrida classi¬ 
 fication, part social, part economic, with a strongly political 
 flavor spoiling the broth altogether. 
 
 What it pleases some to call civilized society was orig¬ 
 inally composed of only two classes—those who ruled and 
 those who were ruled. The economic relationship between 
 them was that of master and slave. But in due time grad¬ 
 ual economic changes gave rise to another group, which 
 became known and is still spoken of by economic writers, 
 as the middle class. The very word society is an aristo¬ 
 cratic term, and I hesitate to use it when speaking of what 
 the economists consider the lowest class of men and women, 
 those who, we are told, constitute a group by themselves and 
 who are in no sense any part of the social machine, except 
 to serve those who are society. The, difference is that in 
 former centuries those who served had no claim whatever 
 on those they served; whereas today the servants have at 
 least a right to demand pay for their services. It is this 
 very thing, namely, that pay must be accorded those who 
 serve, that has given to society its economic, not to say 
 mercenary, character. It is this very thing that has enabled 
 a number of those who, economically, were of tl\e lowest 
 class, to lift themselves into a somewhat more favorable 
 position and thereby improve their social status. 
 
 It is not my intention to trace the economic development, 
 interwoven with that of society, either in Europe or in the 
 United States. For the sake of brevity, therefore, I accept 
 the middle class as a purely social group, while maintaining 
 that many, if not all, of those who labor for a wage, have a 
 right to claim membership therein. But since there is, and 
 can be, no agreement as to who might be included and who 
 denied admission; since there are differences of opinion as 
 to where the dividing line is to be drawn; and since no one 
 has ever ventured to compile a set of statistics from which 
 one might fairly approximate who and how many belong 
 to the highest class; and who and how many to the middle 
 class; and who and how many to the lowest class, I am 
 
The New Division 
 
 27 
 
 persuaded to make an economic classification all my own, 
 and one which, I think, fits in more accurately with the 
 Capitalistic character that society has acquired in the 
 United States within recent years. Instead of dividing the 
 population into three social classes—upper (or highest), 
 middle, and lower (or lowest)—I will divide it into two 
 economic groups, which I shall call the INVESTOR 
 GROUP, and the NON-INVESTOR GROUP. 
 
 This purely economic group division seems to me alto¬ 
 gether preferable in the discussion of a subject which is 
 wholly economic, and concerns itself chiefly with the eco¬ 
 nomic relationship existing between the several contingents 
 that go to make up the social amalgam. 
 
CHAPTER IV 
 
 The Investors and the Non-Investors 
 
 F OR the -purposes of this book, then, I shall divide 
 the population of the United States into two distinct 
 economic groups—the investor group and the non¬ 
 investor group, and make an attempt at numerical classi¬ 
 fication and apportionment. According to the latest United 
 States Census Statistics, the population of the United 
 States is 106,418,175. There are 24,351,676 families; an 
 average family is composed of 4.3 persons. But in order to 
 simplify my subject for the reader, and because practically 
 all statisticians and economists have used five persons as 
 constituting an average family, I am going to make my 
 computations as if the population were one hundred mil¬ 
 lion, and the size of the average family five persons—and 
 therefore twenty million families. How many of this 
 number are investors? 
 
 Family Income Statistics 
 
 The statistics show that in 1910 over ninety percent of 
 the families in the United States had an income of less than 
 $1500 a year. 1 It is a safe guess that there are not many 
 investors to be found among them. It is likely that in 1917, 
 1918 and 1919 the amount of income of these families was 
 considerably greater, but the increase in income was 
 absorbed by the increase in living costs, and therefore did 
 not materially alter the situation as far as investments are 
 concerned. We must, therefore, look for our investors 
 among the remaining ten percent of the families. 
 
 1 According 1 to the income statistics for 1910, computed by Prof. 
 Willford Isbell King, 51.54 percent of the families had an income of 
 less than $500 a year, 30.15 percent between $800 and $1200, and 8.62 
 percent between $1200 and $1500. (See table XL.IV. p. 228, “The 
 Wealth and Income of the People of the United States.”) 
 
 28 
 
The Investors and the Non-Investors 29 
 
 A Glance at Income Tax Statistics 
 
 But he would be a reckless statistician who would con¬ 
 clude that ten percent of the families are investor families! 
 The “Statistics of Income’’ for 1918 2 show that only 
 4,425,114 individuals filed an income tax report in that 
 year. Of this number 1,516,938, or 34.28 percent, were in 
 the class whose income was between $1000 and $2000; and 
 1,496,878, or 33.83 percent in the class whose income was 
 from $2000 to $3000. While beyond a doubt there are some 
 investors among the three million in these two classes the 
 statistics (Table 7) show that “dividends” and “interest 
 and investment income” constituted a minimum of their 
 income. The remaining 1,411,298 who reported incomes 
 from $3000 to over a million, could more properly be said 
 to constitute the investor group. 
 
 Getting Down to Business 
 
 But I am trying to put our best investor foot forward, 
 and am desirous to make the group as large as possible. 
 In the absence of definite statistics I will quote from the 
 writings of a man who can be said to speak with authority. 
 Charles M. Schwab, Chairman of the Bethlehem Steel Cor¬ 
 poration, in an article in Collier’s Weekly (December 11, 
 1920), said: 
 
 “Three years ago a survey of 280 leading railway and 
 industrial corporations disclosed that their securities were 
 owned by more than a million and a half of people. With 
 the large purchasing of securities since the close of the war, 
 a census taken today would, I believe, show that at least 
 two and a half million people own, as investors, rights in 
 
 - Number in 
 
 2 Income Classes Each Class 
 
 $1000 to $2000. 
 
 $2000 to $3000. 
 
 $3000 to $5000. 
 
 ' $5000 to $10,000. 
 
 $10,000 to $25,000_ 
 
 $25,000 to $50,000_ 
 
 $50,000 to $100,000. . . 
 $100,000 to $150,000. . 
 $150,000 to $300,000. . 
 $300,000 to $500,000. . 
 $500,000 to $1,000,000 
 $1,000,000 and over... 
 
 1,516,938 
 
 1,496,878 
 
 932,336 
 
 319,356 
 
 116,569 
 
 28,542 
 
 9,996 
 
 2,358 
 
 1,514 
 
 382 
 
 178 
 
 67 
 
30 
 
 The New Capitalism 
 
 the profits of what is called ‘big business/ If, therefore, 
 big business is in a conspiracy against the people, quite a 
 number of the people seem involved in it.” 
 
 When Mr. Schwab speaks of two and a half million in¬ 
 vestors he does not take into consideration that many of 
 the security holders he speaks of are security holders in 
 a number of corporations; that is to say, the same names 
 appear repeatedly in different investor lists. Which being 
 the case I would be justified in making a considerable 
 reduction on account of duplications. But instead of reduc¬ 
 ing the number of investors—individuals and families—by 
 a half million or more, as I believe could be done in all 
 fairness, I prefer to deliberately enlarge upon Mr. Schwab’s 
 estimate, and to settle upon a figure that will include all 
 investors, of whatever kind. 
 
 For the purposes of this book I am going to say that 
 there are four million investors—or rather four million 
 families, comprising twenty million of the population. 
 Many investors are probably investors in businesses of their 
 own. On the other hand some of the security holders may 
 be lawyers, physicians, dentists, editors, etc.; many of them 
 are manufacturers, merchants, tradespeople, farmers, etc. 
 In other words, whatever dividends or interest they may 
 derive from security holdings is additional to an income 
 derived from other pursuits or sources. Then, too, there 
 are men, and women, who are not actively engaged in busi¬ 
 ness ; who have sold out their business interests for cash, or 
 are retired, or who, through inheritance, have been enabled 
 to invest in real-estate or securities of various kinds, and 
 who are conspicuous in the investor group. 
 
 To say that there are four million investors of all kinds 
 in the United States, is, to my way of thinking, a very 
 liberal estimate, particularly when we remember that from 
 eighty to ninety percent of the families have an income just 
 about sufficient to enable them to live; and who do not share 
 appreciably in the national wealth. This, at least, is the 
 conclusion one would arrive at from a correlation of the 
 statistics pertaining to Income, Wealth, Occupations, and 
 
The Investors and the Non-Investors 31 
 
 Income Tax. Moreover, as we have seen, only four and a 
 half million individuals filed income tax reports in 1918, 
 three million of whom reported that a very small part of 
 their income was derived from investment. 
 
 But when we speak of four million investors in the United 
 States we must keep in mind several things which tend to 
 modify the claim: First, that while there may be four mil¬ 
 lion investors on all the lists, beyond a doubt many names 
 are duplicated, that is to say, the same names are repeated 
 over and over. Second, that many of the “investors” in 
 American securities are foreigners. It has been said that 
 European investors have from eight to twelve billions 
 invested in the United States. Third, that many citizens 
 of the United States, whose names appear in investors’ 
 lists, have invested in foreign securities and enterprises. 
 A financial writer recently stated that “American invest¬ 
 ments in Canada total two billion dollars.” It would be 
 interesting to know exactly how much capital citizens of 
 the United States have invested in foreign enterprises or 
 securities. 
 
 But in spite of all these things I will continue to consider 
 the investor group as composed of four million individuals, 
 families or estates, comprising twenty million persons. Nor 
 will I particularly stress that of a considerable number of 
 families it can be said that every member is an investor. 
 I ’ll go a step further and say that these four million invest¬ 
 ors, to all intents and purposes, own and control practically 
 all of the valuable productive and profit-yielding prop¬ 
 erties in the United States; all the businesses; banks, trans¬ 
 portation systems, insurance companies, public utilities, 
 mines, factories, stores, real estate, etc. 8 
 
 We may now state the case as follows: 
 
 THE INVESTOR GROUP is composed of four million 
 investors—let us say—four million families of five members 
 each; therefore twenty million men, women and children 
 
 * For reasons that I explain later in this chapter, I am excluding 
 the farmer from the Investor Group. 
 
32 
 
 The New Capitalism 
 
 are included in tlie investor group. Twenty percent of the 
 population constitute the investor group. 
 
 THE NON-INVESTOR GROUP is composed of sixteen 
 million families—a total of eighty million men, women and 
 children; or eighty percent of the population. 
 
 Liberty Bond Investors 
 
 Let not some smart aleck triumphantly shout that he has 
 me on the hip—that I have misstated facts—that there are 
 not only four million but nearer twenty million investors, 
 in the United States, for did not millions of men and women 
 in the United States purchase Government bonds—Liberty 
 or Victory bonds? Roger Babson, who is looked upon as 
 an authority on economic matters, and as a statistical 
 expert, said in January, 1921, that eighty percent of the 
 original purchasers are still holding their bonds. A few 
 weeks later George M. Reynolds, former President of the 
 Continental and Commercial Bank, said that about fiftv 
 percent of the original bond purchasers still hold their 
 bonds. I do not know upon what data Messrs. Babson and 
 Reynolds base their conflicting statements; but let us not 
 cavil—let us compromise by saying that more than half of 
 those who bought Liberty and Victory bonds are still 
 holding them. 
 
 But why are they holding them ? It would be fine if we 
 could say in stentorian tones that they are holding them for 
 patriotic reasons. But throwing dust into my own eyes is 
 not one of my accomplishments—and I am incapable of 
 lying to myself. If approximately one-half of the original 
 bond purchasers are still holding the bonds they purchased 
 —they are holding them primarily because they cannot 
 dispose of them except at a loss. If you insist on speak¬ 
 ing of those who bought Liberty and Victory bonds as 
 1 1 investors, ’ ’ I am going to insist that you consider the 
 bonds they hold as nothing more than an investment; in 
 which case I shall tell you that from an investing stand¬ 
 point Liberty and Victory bonds were a poor investment. 
 
 Until the latter part of 1921 the bonds they purchased at 
 
The Investors and the Non-Investors 33 
 
 $100 (many buying them on the instalment plan and paying 
 interest thereon from date of purchase) were quoted in the 
 market as low as $88.00. 4 Let us have done with hypocrisy 
 and camouflage. Hard though it may he, let us at least be 
 honest with ourselves. If the truth must be told many of 
 those who bought either Liberty or Victory bonds were 
 forced to buy them—they had no alternative. Charles G. 
 Dawes, in charge of the Liberty bond sales in Chicago, said 
 to his salesmen: “If any man refuses to buy a bond, knock 
 him down.” The Congressional Record is full of stories of 
 citizens who were forced to buy the quantity allotted to 
 them by the salesmen. A queer kind of investor, who is 
 compelled to buy, nolens volens. A queer kind of invest¬ 
 ment that is compulsory upon many who could not afford 
 to buy, but who would have been punished by loss of their 
 job—or who would have been insulted and reprobated, or 
 jailed or killed, had they refused. The less we say of the 
 manner in which thousands of citizens were coerced into 
 becoming 4 ‘ investors ’ ’ the better. I mention all these things 
 for the benefit of those economic writers and analysts who 
 might be tempted into an endeavor to show that the investor 
 group is larger than I have declared. 
 
 Professor David Friday, in his “Profits, Wages and 
 Prices” says: “Early in 1919 the sales of liberty bonds 
 through private channels and upon the New York Stock 
 Exchange reached tremendous proportions. For the full 
 year these sales on the Exchange totaled three billion dol¬ 
 lars, and for the first four months of 1920 another billion 
 was sold. A large part of the funds derived from this 
 source were devoted to the purposes of ordinary consump¬ 
 tion, rather than to capital expansion.” 
 
 In June, 1922 it was reported that over three-fourths of 
 the Liberty and Victory bonds were now in the hands of 
 
 Liberty Bond Prices 
 
 in New 
 
 York, April 8, 1921: 
 
 
 Liberty S^s. 
 
 90.26 
 
 Liberty 4th 4*4s.... 
 
 87.86 
 
 Liberty 2d 4s. 
 
 87.52 
 
 Liberty reg. 
 
 87.70 
 
 Liberty 1st 4s. 
 
 87.90 
 
 Victory 4%s. 
 
 97.58 
 
 Liberty 2d 4%s. 
 
 87.86 
 
 Victory reg. 
 
 97.44 
 
 Liberty reg. 
 
 87.60 
 
 Victory 3%s. 
 
 97.58 
 
 Liberty 3d 4*4s. 
 
 91.00 
 
 
 
34 
 
 The New Capitalism 
 
 the big banks and investors, who had bought them in at low 
 figures. About the same time Liberty and Victory bond 
 prices went up, and are now quoted at around par. 
 
 Tax Evading Investors 
 
 Those boastful speakers and optimistic writers who 
 delight to swell the number of investors, might, with better 
 grace, speak of the millions of “patriots” who since the 
 passing of the Income Tax law have invested heavily in tax 
 exempt securities, state, county, municipal and even foreign 
 bonds. Secretary of the Treasury Mellon, in his annual 
 report, recently stated that more than ten billion dollars 
 are invested in tax exempt securities. Other estimates I 
 have seen place the amount thus invested between twenty 
 and thirty billions. Professor E. R. A. Seligman, before 
 the House Ways and Means Committee on the resolution 
 to amend the Constitution to permit the Government to tax 
 securities which are now exempt, declared that unless the 
 Government intervenes within a few years, from two to 
 three billion dollars a year of state and local tax exempt 
 securities will be issued. 
 
 Investors in Homes 
 
 But there are those who will insist that the man who 
 owns his home is an investor. I do not feel disposed to 
 quarrel with those who put forth this contention. However, 
 let us take a glance at the statistics. According to the 
 Census Bureau Statistics (published October, 1921) the 
 total number of homes enumerated in 1920 was 24,351,6.76. 
 Of this number 13,247,313 families were renters, 6,667,113 
 families owned their homes, while 4,271,544 families had 
 mortgages on their homes. Reduced to simpler terms 54.4 
 percent of the families live in rented homes; 28.2 owned 
 the homes they occupy free of incumbrance, and 17.5 are 
 occupants of homes that are mortgaged. (The status of 
 285,243 homes was not reported.) 
 
 That it is difficult to even approximate actual conditions 
 with regard to the ownership and tenancy of houses and 
 
The Investors and the Non-Investors 35 
 
 homes may be judged from Chicago’s housing survey, 
 according to which out of the nearly three million persons 
 living in Chicago 125,000 own their homes, while 60,000 
 persons owned 145,914 apartment buildings occupied by 
 nearly two million people. 
 
 Beyond a doubt, many, if not all, of the four million 
 investors, own their homes; many of them, besides, own 
 buildings occupied by tenants. If a house owner occupies 
 the building he owns himself his property represents an 
 investment indeed, but it yields him no revenue. But if he 
 , owns houses in addition to the one he occupies, he takes his 
 place among the landlords, and as such derives an income 
 from his investment. In all probability many of the four 
 million constituting the investor group are landlords. 
 
 Beyond a doubt, also, a fair percentage of those I have 
 classed as non-investors own their homes outright. In that 
 case the owner simply plays the double role of landlord and 
 tenant. Instead of paying rent to a landlord he pays it to 
 himself. The amount he pays out for taxes, insurance, 
 upkeep, alterations and, computing interest on the amount 
 tied up in the property he occupies, is, in every case, the 
 equivalent of rent. 
 
 On the other hand, if he has only an equity in the prop¬ 
 erty, if the home in which he lives is mortgaged, then far 
 from being an investor he is just the reverse—he is a 
 debtor. The real investors are those who hold the mortgage. 
 It is the mortgage holder who derives a revenue from the 
 non-investor’s partial ownership. It is the equity holder 
 who pays interest on the unpaid portion of the property 
 of which he is the nominal, but not the actual, owner. The 
 mortgage holders are the real investors; not the mortgagor. 
 Probably if all data could be obtained it would be revealed 
 that a considerable number of the four million investors 
 hold mortgages against the properties in which many non¬ 
 investors have only an equity. 
 
36 
 
 The New Capitalism 
 
 Is the Farmer * an Investor f 
 
 Farm owners are, of course, investors, but let us remem¬ 
 ber that the farmer derives his income from his joint invest¬ 
 ment and labor, and that it does not much exceed, and in 
 some years even falls below, what the Government calls a 
 subsistence level of income. 
 
 The farming industry is valued at eighty billion dollars, 
 an amount greater than is invested in all the railroads, 
 manufactures and mines. Yet on this investment, plus 
 their labor, the farmers in 1912 realized only six billion 
 dollars, or (considering that there are more than six mil¬ 
 lion farm owners) an average of less than $1,000 per farm 
 owner. This amount, mind you, represents interest on 
 investment, and wages for labor performed. It is quite 
 true that there can be added to this income a certain 
 amount for the item of rent; and likewise an amount cov¬ 
 ering food products consumed by the farmer and his family. 
 But even so, surely it must be clear that the farmers’ in¬ 
 come must cover interest on investment, wages for labor 
 performed, and whatever allowance may be made for the 
 items of rent, and food products consumed, so that the 
 total amount of average income per farmer is hardly more 
 than the equivalent of an industrial worker’s family income. 
 
 The U. S. Department of Agriculture recently studied 
 farm incomes from three groups of farms in the middle 
 west; Dane County, Wisconsin; Washington County, Ohio; 
 and Clinton County, Indiana. According to the Farmers’ 
 and Drovers’ Journal, the Department of Agriculture ob¬ 
 tained the following results: 
 
 “The average annual income from Dane County farms 
 over five years, was $1,293. Of the 185 farmers in the three 
 areas, none made a labor income of $1000 for every year 
 in the study, but 18 in the Indiana area and 7 in the Wis¬ 
 consin area made labor incomes averaging over $1000 per 
 year for the period. Four farmers (two percent of the 
 entire number) made over $500 labor income every year. 
 Averaging labor income and loss over the whole time, 15 
 
The Investors and the Non-Investors 37 
 
 percent of the farmers failed to make any labor income at 
 all. Ten percent failed even to make five percent interest 
 on investment in any year of the study. 
 
 /'The average return on investment increased from about 
 four percent in 1913 to seven percent in 1918. But most 
 of the farmers made less than $500 a year over the things 
 the farm furnished toward the family living. It was ap¬ 
 parent to department officials, therefore, that few farmers 
 are making large profits.’’ 
 
 At the hearings 5 before a subcommittee of the Com¬ 
 mittee on Interstate Commerce, Mr. E. A. Calvin, of Hous¬ 
 ton, Texas, Washington Representative of the Cotton State 
 Board, stated that “the average earnings of a farmer and 
 his family, in the Southern States, where cotton is grown, 
 is less than $750 per annum—that is gross; not net.” 
 
 Even remembering that for the period of the war, when 
 prices of farm products were considerably higher than 
 before the war, the aggregate income of the farmers was 
 18 billion dollars a year—and the average income per 
 farmer can be said to have been $3000, plus his rent and a 
 certain amount of living commodities—it must also be re¬ 
 membered that the prices of all commodities which the 
 farmer had to purchase from others had increased in the 
 same proportion, thus practically leaving him no better off 
 than before the war. At any rate the war period is over; 
 and the war prosperity of the farmer has come to an abrupt 
 end. Taking it all in all, at least for the purpose of this 
 book, I consider it perfectly legitimate to include the far¬ 
 mers in my non-investor group, since from all appearances 
 they are deriving only the equivalent of wages from their 
 joint investment and labor. 
 
 The Investor Group and Non-Investor 
 
 Group Divided 
 
 The investor group and the non-investor group are sepa¬ 
 rate and distinct, and hopelessly divided. There are hun¬ 
 dreds of laws specifically protecting the rights of the inves- 
 
 5 May 20, 1920. 
 
38 
 
 The New Capitalism 
 
 tors, but no specific law protecting the rights of the non¬ 
 investors. The courts, under the aegis of those laws, are 
 compelled to side with the investor as against the non¬ 
 investor. I think I am safe in saying that there are no 
 court decisions that have been favorable to the non-inves¬ 
 tors. 
 
 Not only are there no laws on our statute books that 
 protect the non-investor as against the investor—there are, 
 on the contrary, a formidable number of legal enactments, 
 state and federal, that are distinctly contrary to the inter¬ 
 ests of certain contingents within the non-investor group 
 —laws destructive of natural rights or depriving non¬ 
 investors of the free exercise thereof; curtailing them, en¬ 
 joining them, circumscribing them, compelling them. This 
 is clearly true with regard to the laboring group. During 
 the past few years, a number of state and federal laws have 
 been passed, or proposed, that are restrictive, prohibitive 
 or coercive measures, directly aimed against the Labor 
 group. Among these may be mentioned the Lever law; 
 the Esch-Cummins Bill; the Poindexter Anti-Strike Bill; 
 the Calder Bill; and such by law established institutions 
 as the Kansas Industrial Court. Then there are adverse 
 court decisions, for example the recent decision of the 
 Supreme Court of the United States in the Duplex Printing 
 Press Company case, and which decision practically de¬ 
 stroys the Clayton Act, and other decisions all taking away 
 from those who labor the exercise of their natural rights, 
 or depriving them of legal protection. 
 
 A Postscript 
 
 You may find fault with many things in this chapter; 
 you may object that there are more investors than I claim. 
 Very well, change the proportion as you please. But you 
 cannot deny that dividing the population, or families, of 
 the United States into two separate economic groups— 
 investors and non-investors—is a step forward, and in the 
 right direction—a better group arrangement than we have 
 at present. 
 
CHAPTER V 
 
 The Different Kinds of Investors 
 
 NTIL someone having access to statistics or data not 
 
 available to me, will tell ns exactly how many indi¬ 
 
 vidual investors there are in the United States, I 
 shall adhere to my estimate of fonr million investors in all 
 forms of property, except farms. From this number I will 
 set aside one million whose investments are probably in 
 things other than corporate securities. This leaves three 
 million investors in the securities of corporations. You will 
 probably recall that Charles M. Schwab said that two and 
 a half million persons own, as investors, rights in the profits 
 of the big corporations. My estimate of three million is 
 intended to cover all security holders in all corporations. 
 
 Separating the Wheat from the Chaff 
 
 The term investor is used in a rather loose sense in these 
 Capitalistic times. It is applied to hundreds of thousands 
 who are not investors in any sense of the word. Let us 
 make an attempt at clarifying our views on this important 
 point. 
 
 There is a considerable number of persons who are pro¬ 
 fessional speculators, not investors. They speculate in 
 stocks; they buy on margin. Their profits are derived, not 
 from the industry itself, not from holding the securities of 
 corporations in order to annually derive a dividend, or 
 interest, but from the repeated buying and selling of securi¬ 
 ties. It is a well known fact, and my statement will hardly 
 be .disputed, that nine-tenths of all stock transactions are 
 of a speculative character, the speculator buying one day 
 and selling the next. Senator Cummins, speaking on the 
 floor of the Senate, September 1, 1913, declared that 90 
 
 39 
 
40 
 
 The New Capitalism 
 
 percent of the sales (on the New York Stock Exchange) 
 were purely speculative. 
 
 Moreover, a large percentage of the loans made by the 
 great eastern banks is for the purpose of speculation. The 
 following, from the Chicago Daily News (July 11, 1921) 
 sheds an interesting light on this phase of our subject: 
 
 “It is estimated that the daily call money turnover in 
 the New York market is now only $10,000,000 to $15,000,- 
 000, against a normal of $40,000,000 to $50,000,000. The 
 high level of Wall Street borrowings ran to $1,750,000,000 
 in July, 1919, but the belief is that it runs little beyond 
 $600,000,000 now. Improvement in the stock exchange 
 clearing machinery has tended to reduce the amount of 
 money necessary to transact a day’s business.” 
 
 The annual volume of purely speculative stock transac¬ 
 tions can be gauged by this rather frank admission. Call 
 loans are loans made for a short time to the professional 
 speculators in stocks, not to Iona fide investors. They 
 borrow the money to speculate with, buying on margin, 
 never, or at least rarely, paying the full market price for 
 the number of shares involved. By no stretch of the im¬ 
 agination can one who borrows money for the purpose of 
 marginal speculation be called- an investor. Half of our 
 difficulties and misunderstandings would disappear if we 
 would only call things by their right names. The difference 
 between a speculator and an investor is the difference 
 between night and day; as marked as the difference between 
 a skunk and a robin. 
 
 An Estimate of the Number of Speculative 
 
 Investors 
 
 It would be interesting and illuminating to know exactly 
 how many speculative “investors”—save the mark! there 
 are in the United States. But there are no- statistics. 
 Neither are the professional speculators listed in the sta¬ 
 tistics pertaining to “Occupations” compiled by the De¬ 
 partment of Commerce, and which purport to give a com¬ 
 plete record of everybody “ten years of age and upward 
 
The Different Kinds of Investors 41 
 
 engaged in gainful occupations,” although the Census 
 Statistics for 1910 gives 23,600 commercial brokers and 
 commission men; 13,522 stockbrokers; and 8,391 brokers 
 not specified, and promoters. Beyond a doubt the specula¬ 
 tors in securities—whether you call them speculative in¬ 
 vestors, or professional speculators, or gamblers in securi¬ 
 ties is to me immaterial—constitute a considerable contin¬ 
 gent of the group it pleases financial writers to call 
 investors. 
 
 Let us, for the present, say that one-half of the three 
 million investors are of the speculative kind—that is to say, 
 one and a half million investors are, in reality, speculators, 
 not investors. If you think this estimate too high, or too 
 low, change it to suit yourself. I shall not mind it. I will 
 even allow you to call them investors, on condition, how¬ 
 ever, that you designate them as mala fide investors to 
 distinguish them from the bona fide investors. 
 
 The Bona Fide Investors 
 
 There are left, then, a million and a half of investors 
 in the securities of the various corporations—men and 
 women who paid cash for their securities, and who are 
 content with a reasonable return on their holdings. These 
 I will call bona fide investors. Most of them are small 
 investors; their individual holdings are not large; their 
 collective profits, by comparison w r ith the profits made by 
 the speculative—or mala fide investors, are negligible. As 
 far as the industries in which they happen to have invested 
 are concerned, they are nonentities. They take no active 
 part in any of the industries. They know nothing about 
 the business of which they are a part by virtue of their 
 holdings; they have no voice in its management; and 
 nothing at all to say about the companies’ policies. They 
 are not consulted; an expression of their opinion isn’t 
 solicited; their advice isn’t sought; and if it were volun¬ 
 tarily given would be considered as an impertinence. They 
 attend no conferences, or committee or directors’ meetings; 
 not even the stockholders’ meetings. They do not elect 
 
42 
 
 The New Capitalism 
 
 the officers or directors. Their vote is never cast in person; 
 always by proxy, the proxy holders being invariably an 
 integral part of the corporation’s personnel. 
 
 The Usefulness of the Small Investor 
 
 There is apparent at the present time a concerted en¬ 
 deavor on the part of ‘ ‘ Big Business ’ ’ to increase the tribe 
 of small stockholders. Thus, for example, we read edi¬ 
 torially in the Chicago Journal of Commerce (November 
 9, 1920) : 
 
 “A wider distribution of the stocks among small inves¬ 
 tors is the campaign of corporations. As one financial 
 writer put it, speaking of the railroads, ‘They will never 
 get public opinion behind them and supporting them until 
 they have a great body of small stockholders among those 
 who use their service—the farmer, the shopkeeper, the 
 commercial traveler, the manufacturer. They have got to 
 do what the public utilities did so successfully, entrench 
 themselves in the good will of the people by making the 
 public financially interested in their successful opera¬ 
 tions.’ ” 
 
 Those who constitute ‘ ‘ Big Business ’ ’ long ago discovered 
 that the best way to control public opinion and curb ad¬ 
 verse criticism, is to make a considerable portion of the 
 public, at least nominally, co-partners in their sundrv 
 Capitalistic exploitation schemes. 
 
 The truth of the matter is the small investor is a conve¬ 
 nience to the big corporations rather than a necessity. 
 That he is frequently considered as a necessary evil may 
 be concluded from the ruthlessness with which he is elimi¬ 
 nated whenever his continued presence is construed as 
 obnoxious or superfluous. One has but to examine the 
 records pertaining to some of the wrecked railroad proper¬ 
 ties of the United States to discover in what esteem the 
 small investor is held. For all practical Capitalistic pur¬ 
 poses the small investor is a supernumerary—a spear- 
 bearer ; he adds impressiveness to the play, picturesqueness 
 to the scene. 
 
The Different Kinds of Investors 43 
 
 Women Investors—Widows and Orphans 
 
 Women are especially desirable among the small inves¬ 
 tors, for with them in the crowd, particularly when they 
 can be spoken of as “widows and orphans,” who is so 
 ungallant, so unchivalrous, so bold as to throw stones at 
 them? W. W. Atterbury, Vice President of the Pennsyl¬ 
 vania Railroad Company, recently declared that the Penn¬ 
 sylvania Railroad had 140,000 stockholders, over half of 
 whom are women. 
 
 I hardly know why Mr. Atterbury so insistently stressed 
 the sex of a majority of his investors—for investor is a 
 noun—common gender. When the Pennsylvania Railroad 
 recently reduced its dividend rate from six to four percent, 
 did the women stockholders, “widows and orphans,” fare 
 better than the men stockholders? Why this sex emphasis? 
 What difference does it make whether an investor is male 
 or female, Jew or Gentile; his or her color black, white, red, 
 or yellow? Yes! What difference does it make? Because 
 an investor is a woman does that make the investment more 
 sacred, or the property rights more inviolable? The laws 
 of economics do not differentiate. In actual business prac¬ 
 tice a female is grist for the economic mill as well as a 
 male; as great a profit can be, and is, made out of a female 
 as out of a male—out of a child as out of an adult, out of 
 a widow as out of an orphan. Much of the profit of corpo¬ 
 rations is derived from the labor of underpaid women and 
 children. 
 
 Sex does not protect women stockholders when a cor¬ 
 poration decides to pay no dividends to its stockholders, 
 sometimes for years on a stretch, as in the case of many 
 railroads and public utilities; or when dividends are re¬ 
 duced, as in the case of the Pennsylvania Railroad, from 
 six to four percent. And in those cases where it can be 
 shown that the insiders defrauded the stockholders, froze 
 them out, robbed them of their just due by looting treas¬ 
 uries, grafting and mismanagement and wrecking of prop¬ 
 erties into which women had been persuaded to invest, 
 
The New Capitalism 
 
 44 
 
 one looks in vain for any special consideration extended to 
 “widows and orphans.” 
 
 The Smoke Screen Purpose 
 
 The principal value of the small investor is that he or 
 she can be used as a smoke screen, under cover of which 
 it is possible to do many things which otherwise could not 
 be done. “If Big Business is in a conspiracy,” said Mr. 
 Schwab, “quite a number of people seem involved in it.” 
 It is this smoke screen purpose that explains the small 
 investor’s popularity. 
 
 Employees as Stockholders 
 
 Running parallel with the Capitalistic plan to increase 
 the number of smoke screen investors is the Capitalistic 
 campaign (begun ten or twelve years ago) to inveigle the 
 employees of corporations—wage earners and salaried men 
 and women—into becoming stockholders. During the past 
 few years a considerable number of the leading corporations 
 have ingeniously put forth Employees’ Stock Subscription 
 plans. For example: On Thanksgiving Day, 1920, the 
 daily papers announced that the directors of the Standard 
 Oil Company of New Jersey had voted to submit to its 
 stockholders “a plan by which about 37,000 employees in 
 America would be assisted in acquiring stock. Increase in 
 the common stocks by $10,000,000, accompanied by the 
 reductions of the present $100 par value to $25, is included 
 in the proposition. Employees who have been active in the 
 Company’s service for a year or more will be eligible to 
 acquire stock.” 
 
 According to Mr. Gary 1 on April 30, 1919, more than 
 40,000 employees were stockholders in the United States 
 Steel Corporation. “Their aggregate holdings amounted 
 to more than 186,000 shares of stock at a par value of 
 $18,600,000. 
 
 “In January, 1920, employees of the United States Steel 
 Corporation and the subsidiary companies, were again 
 
 i The Magazine of Wall Street (November 13, 1920). 
 
The Different Kinds of Investors 45 
 
 offered the privilege of subscribing for shares of the com¬ 
 mon stock of the corporation. . . . Subscriptions have 
 
 been received from a total of 66,311 employees, for an 
 aggregate number of 167,263 shares. This is the largest 
 subscription received under any offer. ’ ’ 2 
 
 This endeavor on the part of ‘ ‘ Big Business ’ ’ to grapple 
 to itself its employees “with hoops of steel,” has several 
 notions behind it. Sir Charles Wright Macara, reputed to 
 be “one of the foremost business men in England,” re¬ 
 cently said: 
 
 “If the workmen feel that they must earn more to face 
 the cost of living, they should accept a monetary interest 
 in the industries which give them employment. . . . 
 
 This principle of individual co-partnership would help to 
 solve many of the problems pending between Capital and 
 Labor. * ’ 3 
 
 But we need not go to England for proof that there is 
 method in the madness that is trying to make labor parti- 
 ceps criminis in the sundry Capitalistic schemes. Here, for 
 example, are a few excerpts from a speech made by Dr. 
 Charles A. Eaton, before the Chicago Association of Com¬ 
 merce : 
 
 “Where are we going to find new resources and capital 
 for working the industries of this country? We have got 
 to find it. I tell you, gentlemen, that it is right here in 
 the surplus, the savings of the working people of this 
 nation. . . . 
 
 “I believe that we could turn into the industries of this 
 country about two billion dollars a year from that one 
 source alone, and every investor so guaranteed and so 
 looked after and cared for and educated, would become a 
 tower of strength against all the revolutionary doctrines 
 
 1 At the end of 1921 the United States Steel Corporation reported 
 107,439 stockholders, over one-half of whom it would seem, are em¬ 
 ployees. But their aggregate holdings 353,263 shares, computed at par, 
 represent a value of $35,326,300, which is less than three percent of the 
 authorized capital stock of the United States Steel Corporation. 
 
 8 “In Search of a Peaceful World,” by Sir. Charles Wright Macara 
 quoted in the Chicago Daily News, December 31, 1920. 
 
46 
 
 The New Capitalism 
 
 of radicalism and stupidities that are sweeping over the 
 world today. There is a great field there. ’ ’ 4 
 
 This is what I call killing a whole flock of birds with 
 a stick of dynamite. Dr. Eaton is right—“There is a great 
 field there.” If “Big Business” can succeed in tying, and 
 keeping tied to its chariot, a considerable number of wage 
 earners, its forward course henceforth will be a veritable 
 triumphal procession. 
 
 The Nexus of the Matter 
 
 But I will not allow myself in this chapter to be carried 
 away by the temptation to inquire into the concealed mo¬ 
 tives inspiring and actuating “Big Business” in any of its 
 designs. I set out to approximate the constituency and 
 complexion of the investor group, and shall therefore re¬ 
 sume the pursuit of my immediate purpose. 
 
 I have estimated 5 the total number of investors as four 
 million persons, one million of whom I have set aside as 
 constituting a group whose investments are in things other 
 than the securities of corporations. This leaves three mil¬ 
 lion in the securities investor group, which I have divided 
 as follows: 
 
 Non-speculative, or Iona fide investors, 1,500,000. 
 
 Speculative, or mala fide investors, 1,500,000. 
 
 But even though we were to say that four million inves¬ 
 tors collectively held all the securities issued by all the 
 corporations in the United States, the one thing I desire 
 above all others to emphasize, is that the virtual ownership 
 and control of the important corporate properties is vested 
 in the hands of about one percent of the investors, or about 
 40,000 persons. Nay! I’ll go a step farther and say that 
 actual ownership and control is concentrated in the hands 
 of one-tenth of one percent—-or approximately 4000 indi¬ 
 viduals or families of the so-called investors.- Indeed it 
 would not be difficult to show that dominant ownership and 
 
 4 Quoted from Chicago Commerce, March 12, 1921. 
 
 * I shall be glad to correct my tentative estimates the moment 
 authentic or official statistics, fully covering the points involved, are 
 forthcoming. 
 
The Different Kinds of Investors 47 
 
 control resides in less than one-hundredth of one percent 
 of the total number of investors—in 400 families or estates, 
 rather than in 4000 individuals. I could easily fill a dozen 
 pages with relevant statistics, all tending to support me 
 in my contention; but I do not consider this necessary at 
 the present moment, particularly since succeeding chapters 
 will go far toward establishing the fact. 
 
 These four hundred, or four thousand, or forty thousand 
 (more or less, as you choose) circle within circle, constitute 
 the inner Capitalistic cabal—are the center of the Capi¬ 
 talistic System as we know it today; the chief actors in, and 
 beneficiaries of, what it pleases some to call “the established 
 order”—which is nothing else than Capitalistic Mam- 
 monism. 
 
 
CHAPTER VI 
 
 The Capitalistic Entrepreneurs 
 
 IME was in the history of our industrial develop¬ 
 
 ment, when we had a race of men who were pioneers 
 
 in business enterprises; men who, with small capital 
 at their command, built up the leading industries of the 
 nation successfully and to surprising proportions. Consid¬ 
 ering them as a group, we can say that they were men of 
 native ability, of shrewd intelligence, of sturdy character, 
 of robust integrity. Many of them, by hard work, laid the 
 foundation of modest fortunes upon which they built slowly 
 and conservatively. True, there were few millionaires 
 among them; most of them hardly dared to dream of ever 
 becoming more than moderately rich. 
 
 Captains of Industry 
 
 These men who founded, or were at the head of, the lead¬ 
 ing industries and enterprises were called Captains of 
 Industry, as indeed they were. The railroad president was 
 actually a railroad man—builder or principal owner—tak¬ 
 ing a personal interest, and feeling the pride of manage¬ 
 ment or ownership, and the glory of achievement, in the 
 properties over whose destinies he presided. The president 
 of a steel mill was an iron-master; and so on, covering the 
 entire list of industries. 
 
 Captains of Finance 
 
 In those times banking was a distinct business; and the 
 banker a business man whose business it was to mass to¬ 
 gether small amounts of idle money and wealth and bring 
 them into use. Through his agency wealth, which would 
 
 48 
 
The Capitalistic Entrepreneurs 
 
 49 
 
 otherwise be unproductive, became productive. The banker 
 was, therefore, a Captain of Finance, the intermediary 
 between those who possessed capital and those who em¬ 
 ployed it. As such he was a part of the business machine 
 —the main spring of the Clock of Commerce—the pen¬ 
 dulum, if you will. 
 
 “The Old Order Changeth” 
 
 But towards the end of the nineteenth century a tremen¬ 
 dous change took place in the business of banking. The 
 banker, whose profits and success as a business man de¬ 
 pended as much upon the continued good will and patron¬ 
 age of men in other businesses as upon his reputation for 
 honesty and square dealing; the banker whose sterling 
 character, unquestioned integrity and sound business judg¬ 
 ment were his chief assets, ceased to exist, and in his place 
 appeared the Investment banker, as different from the old 
 style banker as night from day. With his coming the old 
 business and banking methods were contemptuously kicked 
 aside. New business and banking principles were substi¬ 
 tuted for the old; new policies were adopted; new methods 
 introduced, new practices instituted. Thus the ‘ ‘ established 
 order” came to an abrupt end, and a new order was estab¬ 
 lished almost overnighty we might say, and by a few men . 
 
 The Advent of the “Investment Banker” 
 
 The old style banker dealt in actual capital, actual 
 wealth, actual securities, and loaned the capital submitted 
 to his care against actual values and actual assets. The new 
 Investment banker took all these as a basis, and added 
 thereto vast amounts of fictitious capital and fictitious 
 wealth, which he himself created by a stroke of the pen; 
 arbitrarily inflated values, vastly in, excess of existing 
 assets; against which fictitious valuation he issued ‘ ‘ securi¬ 
 ties ’ ’—stocks and bonds which at their inflated value could 
 be used as credit instruments, and upon which he borrowed 
 or loaned, or, more properly speaking, took or extended 
 
50 
 
 The New Capitalism 
 
 credit many times greater than was justified by the actual 
 value of the physical assets. 1 
 
 Conscious of the tremendous power vested in their abso¬ 
 lute monopoly of the nation’s finances—their unchallenged 
 control of the nation’s money and credit; quick to see the 
 possibilities of a still greater expansion of that power 
 through the medium of inflated securities flotations—and 
 by no means blind to the immense profits that could be 
 made to accrue to them—a small group of Investment 
 bankers, under the leadership of J. Pierpont Morgan, con¬ 
 stituted theniselves into syndicates for the clear cut pur¬ 
 pose bf J thkiflg"fiver the principal industries, national re¬ 
 sources, raw materials—everything, in fact, out of which a 
 profit could be made—with what success is now generally 
 
 m 
 
 -gbifj; gaoiiiaird bniiog 
 
 The Ascendancy of the Captains of Finance 
 
 bio 9 fit /noii Jneisnib as 
 
 Thus if came to pass that Capitalists, or bankers—more 
 accurately speaking, Investment bankers—became Entre¬ 
 preneurs; the new Captains of Finance arrogated to them¬ 
 selves also the role of Captains of Industry. Capital be- 
 came the employer. And yet, only a few years before, the 
 possibility of such a thing was scouted by eminent econom¬ 
 ists. For example, Francis A. Walker, “a distinguished 
 American economist” writing in 1875, vehemently main¬ 
 tained t that the capitalist and the employer were entirely 
 distinct; indeed he insisted on calling the employer a 
 
 middle man, placing him between the capitalist and the 
 
 fBjiqso 9 dt bsxLsol him ,89fthuD 
 
 <A It is no longer true , v said he, “that a man becomes an 
 employer because he is a capitalist. Men command capital 
 because they have the qualifications to profitably employ 
 labor. To these, Captains of Industry, despots of industry, 
 
 if one pleases to call them so, capital and labor alike resort 
 
 _ hoirasd ul uoitisiilav guoilltoft ibiib ‘ 
 
 X I need hardly put stress on what is universally known, that the 
 flotation, the underwriting and the marketing of stock and bond issues 
 based on inflated valuations, is now a highly remunerative branch of 
 the Investment banker’s business, and a constant source of considerable 
 revenue and profit to those engaged therein. 
 
The Capitalistic Entrepreneurs 
 
 51 
 
 for the opportunity to perform their several functions. I 
 do not mean that the employer is not in any case, or to 
 some extent, a capitalist; but that he is not an employer 
 simply because he is a capitalist, or to the extent only to 
 which he is a capitalist. . . . 
 
 “I hold that no theory of the distribution of wealth, in 
 modern industry, can be complete which fails to make 
 account of the employing class, as distinguished in idea, 
 and largely also in its personnel, from the Capitalistic 
 class.’ ’ 2 
 
 A New Economic Term 
 
 The word Entrepreneur is a comparatively new word in 
 our economic literature, and economic writers do not seem 
 agreed as to its precise meaning and application. Accord¬ 
 ing to the dictionary an Entrepreneur is “one who starts 
 and conducts extensive industrial enterprises. 7 ’ But there 
 are some economic writers who prefer to use the word in 
 its narrower meaning. For example, Professor Willford 
 Isbell King, as late as 1910, considered “farmers, small 
 merchants or shopkeepers, hotel proprietors and the like” 
 as Entrepreneurs. 3 * 
 
 E. Levasseur, in his “Elements of Political Economy” 
 (p. 74) takes a slightly different view. He says: “Who¬ 
 ever undertakes, on his own account, to fashion a product 
 or execute a bit of work, is an entrepreneur. The entrepre¬ 
 neur who labors alone without a body of men under him, 
 or with the sole assistance of his family, or possibly one or 
 two assistants, is an artisan. The entrepreneur who makes 
 use of workmen is an employer; he exercises authority over 
 his subordinates whom he pays, and the product of whose 
 labor belongs to him according to agreement. There are 
 employers of widely different means, some having but a 
 few workmen, differing but little from artisans, others 
 having hundreds or even thousands of workmen and em- 
 
 2 “The Wages Question,” by Francis A. Walker, page 246. 
 
 3 According to Professor King there were 9,350,000 entrepreneurs in 
 
 the United States in 1910. 
 
52 
 
 The New Capitalism 
 
 ployees, and designated as entrepreneurs, captains of in¬ 
 dustry, manufacturers, managers, or merchants. . . . 
 
 Several entrepreneurs may, without subordinating them¬ 
 selves to one another, unite their efforts and their capital 
 in order to co-operate in the same industrial enterprise, and 
 divide the profits; this is what is called association.” 
 
 Professor Richard T. Ely, 4 says: ‘ ‘ The one who manages 
 a business for himself was formerly called an undertaker 
 or an adventurer, but the first word has been appropriated 
 by one small class of business men, and the latter has 
 acquired a new meaning, carrying with it the implication 
 of rashness and even dishonesty. We have, consequently, 
 been obliged to resort to the French language for a word 
 to designate the person who organizes and directs the pro¬ 
 ductive factors, and we call such a one an entrepreneur. 
 
 11 The function of the entrepreneur has become one of the 
 most important in modern economic society. He has been 
 well called a Captain of Industry, for he commands the 
 industrial forces, and upon him, more than upon anyone 
 else, rests the responsibility for success or failure. ? ’ . . . 
 
 The Period of Gestation 
 
 At the time Professor Ely wrote the above (A. D. 1893), 
 Capitalistic Association, as we know it today, had not yet 
 been developed. There were Capitalists and there were 
 Captains of Industry; but no Capitalistic Entrepreneurs, 
 and no Capitalistic Entrepreneur System. 
 
 “We find the assumption,’’ wrote Professor Walker, in 
 1875, 5 “that the capitalist is the employer, the employer the 
 capitalist, monstrously unreal. ... Of capitalists under 
 our modern organization of industry, but a small minority 
 employ labor; of employers, few T but use capital far in 
 excess of what they own.” 
 
 With the organization of the United States Steel Corpo¬ 
 ration (in 1901), the “assumption” at which Professor 
 Walker expressed horror, became monstrously real. All 
 
 4 “Outlines of Economics,” p. 113. Published 1893. 
 
 5 Even in his later economic writings, Professor Walker adhered to 
 his original opinions on this point. 
 
The Capitalistic Entrepreneurs 
 
 53 
 
 the things that Professor Walker said could not happen, 
 have come to pass. Our leading industries are no longer 
 owned or controlled, or even run by the men who founded 
 them, nor even by their descendants; in many cases not 
 even the names of the founders remaining. Today “the 
 Capitalist is the employer.” A single Capitalistic corpora¬ 
 tion (United States Steel), employs 250,000 workmen—an 
 army of men greater than the standing army of the United 
 States. But worst of all, a “small minority” gained con¬ 
 trol of practically all industries through their uncurbed 
 power to “use capital far in execess of what they own.” 
 Absolute control and definitive ownership of them has 
 passed into the hands of a small group of Capitalistic 
 Entrepreneurs. In a remarkably short time these Captains 
 of Finance assumed the captaincy of all the industries, in 
 fact of every remunerative enterprise. 
 
 The Capitalistic Entrepreneurs, alias the 
 
 “Big Interests” 
 
 Thus the Capitalistic Entrepreneurs, sometimes denomi¬ 
 nated as the ‘ * Big Interests ’ ’ were brought into existence; 
 by such procedure the Capitalistic Entrepreneur System— 
 sometimes spoken of as “Big Business”—was established. 
 “An entrepreneur,” says the dictionary, “is one who 
 starts and conducts extensive industrial enterprises.” As 
 a matter of fact the Capitalistic Entrepreneurs, with few 
 exceptions, did not start the “extensive industrial enter¬ 
 prises,” which they so supremely control today. 6 Most of 
 them had never been in the plants whose ownership and 
 control they took over. Mr. Morgan, it goes without saying, 
 never worked in a mill, mine or factory. Mr. Gary has 
 never in all his life made a pound of steel, as he himself 
 naively admitted at one of the famous and now historic 
 dinners, and at which he presided, given in the first decade 
 of the twentieth century, and during the first decade of 
 the United States Steel Corporation’s existence. 
 
 0 This is shown more clearly in the chapter, “Labor, Capital and 
 Brains.” 
 
54 
 
 The New Capitalism 
 
 “Is it any wonder/’ said Judge Gary, “that such as I, 
 coming a few years ago from another profession, having 
 spent his time in other lines of activity, coming into this 
 business without knowledge of the business or acquaintance 
 with those connected with it, groping along in more or less 
 uncertain paths, but eventually reaching the position which 
 we have reached in our travels, so that we can have and 
 do have absolute confidence in one another, willing to lay 
 our business down upon the table for the inspection of our 
 neighbor—is it any wonder that I should be elated, that I 
 should be happy, that I should be proud of the fact that I 
 am associated with such as you; that in representing the 
 interests of a large corporation I can do business with so 
 many men of prominence, education, high standing and 
 repute in the community, feeling all the time that I and 
 the interests I represent are absolutely safe in your hands. ’ 9 
 (Hearings p. 1777.) 
 
 “The Small Minority” 
 
 The Capitalistic Entrepreneurs did not confine themselves 
 to “industrial enterprises.” Everything out of which a 
 profit could be made became an integral part of the Capi¬ 
 talistic System, the nucleus of which, as I have already 
 shown, is composed of a few thousand persons, more prop¬ 
 erly speaking, a few hundred individuals representing 
 families and estates. These few hundred, or thousand, as 
 you choose, practically own and control: 
 
 1: The Important Banks of the United States. 
 
 2: The Transportation Systems. 
 
 3. The Public Utilities. 
 
 4: The Insurance Companies. 4 
 
 5 : The Basic Materials, such as oil, lumber, coal, iron, etc. 
 
 6: The Principal Industries. 
 
 There may be some who will quarrel about the exact 
 number constituting this small group; but they cannot deny 
 the fact; nor is there any doubt about the ubiquity of the 
 persons composing it. Let us take a concrete example, that 
 of the Standard Oil Company, for which we have authentic 
 
The Capitalistic Entrepreneurs 
 
 55 
 
 data. Henry H. Klein, Deputy Controller of Accounts in 
 New York City, in his book “Standard Oil or the People,’’ 
 gives a list of the principal stockholders in the Standard 
 Oil Company before the Government 1 ‘ dissolution ” suit 
 was brought, August 19, 1907. According to Mr. Klein, 
 nineteen stockholders held 53 percent (or 523,985 shares) 
 of the Standard Oil stock. 
 
 Mr. Klein also names forty-three other stockholders in 
 Standard Oil whose holdings aggregate 94,141 shares. 
 According to Mr. Klein, therefore, sixty-two persons owned 
 an aggregate of 618,126 of the 983,383 outstanding shares 
 of Standard Oil stock. 
 
 Mr. Klein also speaks of the monopolies controlled by the 
 Standard Oil Company: ‘ ‘ Petroleum, oil, gas, turpentine, 
 natural gas, gasoline, vaseline, carbon paper, lubricating 
 oil, paraffin, crude oil, benzine, naptha, and 200 other 
 by-products of oil.” 
 
 In addition to which he enumerates “ other monopolies 
 in which Standard Oil money is largely invested: Rail¬ 
 roads, banks, insurance, coal, steel, iron, copper, lead, zinc, 
 ships, lumber, waterpower, sugar, tobacco, electricity, coal 
 products, agricultural implements, alcohol, rubber, leather, 
 print paper, public lines corporations, glue, mica, auto¬ 
 mobiles, rubber tires, express companies, gun powder, am¬ 
 munition, candy, glucose, eggs, milk, steam pumps, type¬ 
 writers, telephone, telegraph, matches, real estate, grain, tin, 
 cement, ice, chewing gum, shoe machinery, ammonia, sul¬ 
 phuric acid, washing powder, soups, white lead, oilcloth, 
 linseed oil, cotton seed, reaping machinery, benzol, lard, 
 coke, paving blocks, ploughs, salt, bread, threshing ma¬ 
 chines, creosote, putty, coal tar.” 7 
 
 The Financial Oligarchy 
 
 That the control of all the industries, transportation 
 systems, public utilities, etc., is through the instrumentality 
 of a few powerful banks is so generally known that I do 
 not consider it necessary to go into detail. It is impossible 
 
 7 “Standard Oil or the People,” by Henry H. Klein, pp. 128, 129. 
 
56 
 
 The New Capitalism 
 
 to deny that there is a Money Trust—a financial oligarchy, 
 composed of a small group of men who control the finances 
 and financial resources of the nation. The evidence is over¬ 
 whelming; official Government investigations have indubi¬ 
 tably established the fact. Special Commissions, and Con¬ 
 gressional Committees have published their reports. To 
 deny the existence of a Money Trust and a financial 
 oligarchy at this date is an act of stultification, and he who 
 would dare attempt a denial in the face of all the accessible 
 data and testimony, is either a fool or a knave or both, 
 and an object of every decent man’s contempt. 
 
 I shall, therefore, waste no time in proving what has 
 been repeatedly and conclusively established beyond every 
 possible doubt, and is generally known to all the people, 
 viz., that by virtue of this absolute monopoly of money and 
 complete control of the nation’s credit, this same small 
 group of men has been enabled to organize powerful Trusts, 
 thus gaining a monopolistic control of practically all the 
 nation’s resources and productive properties. 
 
 Wall Street—the Citadel 
 
 Neither shall I waste much space in emphasizing that 
 the absolute control and dictatorship of the nation’s money, 
 centers in Wall Street. Senator La Follette, in a speech 
 in the Senate of the United States, on the Winslow-Towns- 
 end Bill, 8 said: 
 
 “I have studied transportation for thirty years of my 
 life, and I want to tell you that there was a time when real 
 railroad men were at the head of the railroads of this coun¬ 
 try. The financiers of Wall Street are running the rail¬ 
 roads today. Beginning about 1900 a change came, and 
 the railroad management of the country passed out of the 
 hands of the men who had come up from the ranks, who 
 were capable of running the railroads, and believed in 
 balancing service against transportation charges. The man¬ 
 agement of the railroads passed into the hands of the 
 
 8 Delivered February 21 and 22, and published in the Congressional 
 Record, March 14, 1921. 
 
The Capitalistic Entrepreneurs 
 
 57 
 
 representatives of Wall Street, and from that hour on the 
 railroads of the United States have not been run by men 
 capable of managing the transportation of the country. 
 They have been run, sir, by the representatives of the great 
 financial houses, by the promoters, by the banks. 
 
 “I should like to have time to hang on this wall a map 
 I have in my committee room above here, showing what has 
 happened in regard to railroad management in the last 
 twenty years in the United States. It has passed into the 
 hands of a few groups of financiers, the Morgan group at 
 the head of the lot. ” 
 
 Senator La Follette declared that of the 600,000 stock¬ 
 holders of the first class roads “which roads represent 97 
 percent of the traffic of the country, ” less than 1.3 percent, 
 or 8,301 control the stock. “But” he added, “we can by no 
 means assume upon these facts that 8,301 individuals actu¬ 
 ally share in the control of the transportation system. The 
 real power which today controls the railroads of the United 
 States is the group of a dozen New York financial institu¬ 
 tions which make up the New York banking combine. 
 
 “In this group are the following institutions: National 
 Bank, The Equitable Trust Co., The American Surety Co., 
 The National Security Co., The National Life Insurance 
 Co., The Equitable Life Assurance Society of the United 
 States, The Chase National Bank, The National City Bank, 
 The Mechanics and Metals National Banks, The New York 
 Trust Co. 
 
 “Members of the boards of directors of these banks con¬ 
 trol approximately 270 directorships of 93 class 1 railroads. 
 The boards of the principal railroad systems do not often 
 number more than 15 directors. The New York banks listed 
 above, average from four to five members on the boards of 
 each of the principal systems. 
 
 ‘ ‘ Taking the banks individually, the Guaranty Trust Co. 
 has 50 railroad directorships; the National City Bank, 48; 
 and the Equitable Trust Co., 34. These three banks have a 
 
58 
 
 The New Capitalism 
 
 total of 132 railroad directorships. The Guaranty Trust 
 Co. has a director on each of the principal systems.” 9 
 
 Interlocking Directorates 
 
 The ingenious device through which a small group of 
 men controls practically all the big banks, insurance com¬ 
 panies, transportation systems, public utilities, mines, and 
 other natural resources, raw materials and industries, is 
 known as “interlocking directorates,” 10 that is to say, the 
 principals of one corporation function also as officers, man¬ 
 agers or directors in other corporations. This was brought 
 out conspicuously during the investigation of the United 
 States Steel Corporation in 1912. Exhibit E of the official 
 report, gives an itemized list showing the “industrial cor¬ 
 porations, railroads, traction, telegraph, express and steam¬ 
 ship companies; the banks, insurance and trust companies 
 of the United States,” of which the President and other 
 directors of the Steel Corporation are officers or directors. 
 
 But instead of filling many wearisome pages with a 
 transcript from the official report, I prefer to illustrate the 
 point by a brief extract from an article that recently 
 appeared in a financial publication, The Annalist, (Sep¬ 
 tember 19, 1921) and the author of which, John Oakwood, 
 (a frequent contributor to The Annalist) cannot be accused 
 of bias or sinister intent. In fact it was by way of lauda- 
 
 9 Senator LaFollette also showed at considerable length, that the 
 same group of banks and bankers that controls the railroads is also 
 “heavily interested in the leading concerns which purchase railway 
 supplies and equipment.” Senator LaFollette offered an Appendix to 
 his speech, which contains exhibits and charts all based upon the latest 
 data available. The Appendix alone covers 45 pages—pp. 4741 to 4786 
 of the Congressional Record, March 14, 1921, Vol. 60, No. 8. 
 
 10 Those who have a sense of humor will enjoy the following: “On 
 December 5, 1921, a financial paper announced that Otto H. Kahn regret¬ 
 fully resigned from the directorship of the Union Pacific Railroad 
 “because of provisions of the Clayton act which so rigidly forbids inter¬ 
 locking directorships.” (The Clayton act may indeed “rigidly forbid 
 interlocking directorships,” but we all recall that a few years ago the 
 United States Supreme Court ruthlessly “dissolved” the Standard Oil 
 Company.) On December 8, 1921, I read that “William Rockefeller 
 today applied to the Interstate Commerce Commission for permission 
 to hold directorships in eighteen railroad companies.” On December 81, 
 1921, the following dispatch from Washington: “All persons holding 
 two or more places as officers and directors of interstate railroad cor¬ 
 porations were given legal permission by the Interstate Commerce Com¬ 
 mission today to hold their various positions indefinitely.” 
 
The Capitalistic Entrepreneurs 59 
 
 tion, and as a tribute to the genius of J. Pierpont Morgan, 
 that Mr. Oakwood delivered himself of the following: 
 
 “When J. Pierpont Morgan was in power he ruled per¬ 
 haps the greatest financial empire the world has ever seen. 
 He was the senior autocrat of an inner group of banks and 
 bankers who directly and indirectly exercised through par¬ 
 tial or absolute control in many financial institutions 
 through their stockholdings, through voting trusts, inter¬ 
 locking directorates and many other devices, a vast domin¬ 
 ion over business, industry and finance. 
 
 “The members of this inner group commanded by Mor¬ 
 gan held 118 directorships in 34 banks and trust companies, 
 whose total resources amounted to $2,678,000,000. 
 
 “They held 30 directorships in 10 insurance companies 
 having total assets of $2,293,000,000. 
 
 “They held 105 directorships in 32 transportation sys¬ 
 tems with a total capitalization of $11,784,000,000, and a 
 total mileage of 150,000. 
 
 11 They held 63 directorships in 24 producing and trading 
 corporations with a total capitalization of $3,339,000,000. 
 
 “They held 25 directorships in 12 public utility cor¬ 
 porations having a total capitalization of $2,150,000,000. 
 In all, in other words, they held at least 341 directorships 
 in 112 corporations having aggregate resources or capitali¬ 
 zation of $22,245,000,000, and how much more the record 
 does not show. 
 
 “In addition this inner group, consisting of three great 
 dominant banking houses, was intimately allied with three 
 great investment houses, and in the course of eight years 
 these six and their associates bought or underwrote nearly 
 300'security issues totaling over $3,600,000,000, their opera¬ 
 tions comprising virtually every financial operation of 
 major importance conducted in the United States during 
 the period. These operations were put through with the 
 entire absence of competition. When Government investi¬ 
 gation brought out and authenticated this much of the 
 
60 
 
 
 The New Capitalism 
 
 story, it irked the public mind as it had seldom been irked 
 before, and Morgan was assailed as a money tyrant. ’ ’ Etc. 11 
 
 The Autocratic Czars of Finance 
 
 Those who are especially interested in this subject are 
 referred to the report of the Pujo Committee (February 28, 
 1913), which was appointed to investigate the Concentra¬ 
 tion of Control of Money and Credit, and from which I 
 quote a few sentences: 
 
 “Far more dangerous than all that has happened to us 
 in the past in the way of elimination of competition in 
 industry, is the control of credit through the domination of 
 these groups over our banks and industries. It means that 
 there can be no hope of revival of competition, and no new 
 ventures on a scale commensurate with the needs of modern 
 commerce, or that could live against existing combinations, 
 without the consent of those who dominate these sources 
 of credit. . . . 
 
 “If the arteries of credit now clogged well-nigh to chok¬ 
 ing by the obstructions created through the control of these 
 groups, are opened so that they may be permitted freely to 
 play their important part in the financial system, competi¬ 
 tion in large enterprises will become possible, and business 
 can be conducted on its merits instead of being subject to 
 the tribute and the good will of this handful of self consti¬ 
 tuted trustees of the national prosperity.” 12 
 
 11 “No Financial Moses Need Apply,” by John Oakwood. 
 
 12 Report of the Pujo Commission; Chapter III, Section 17, pp. 159 
 and 161. 
 
CHAPTER VII 
 
 The Supreme April Fool Joke 
 
 O N April 1, 1901, a great joke was played on the 
 American people—the United States Steel Corpo¬ 
 ration was organized. Ordinary first of April jokes 
 amuse for the moment, perhaps hurt for an hour—par¬ 
 ticularly if the innocent victim has kicked a brick concealed 
 under a hat—and are forgotten in a day. Not so the 
 Supreme Joke of April 1, 1901. Conscious of what w r as 
 being done to them, yet helpless to interfere, or stop it, the 
 American people gathered no amusement out of the joke 
 perpetrated against them. The hurt is still there, for they 
 didn’t stub their toes against a concealed brick; it was their 
 heads that were seriously injured by millions of bricks 
 hurled viciously, wantonly, flagrantly and defiantly, and 
 none to stop the performance. The shower of bricks still 
 continues, and the backs of the people are bent and lame 
 from the effect of dodging. The Supreme April Pool Joke 
 of 1901 is bitterly remembered, and the whole nation is 
 today suffering from its cumulative evil effects. 
 
 Preparing the Way 
 
 In the course of this book I shall have occasion to make 
 frequent mention of the United States Steel Corporation, 
 or to repeatedly refer to its organization, policies, etc., not 
 because I have singled out this gigantic organization with 
 any sinister design or malicious intent, but rather because 
 the United States Steel Corporation was the first real Trust 
 —organized in the United States, and is, therefore, the 
 parent Trust, and has been the model for all other Trusts, 
 combines and consolidations since. The United States Steel 
 Corporation completely illustrates not only the tendencies 
 
 61 
 
62 
 
 The New Capitalism 
 
 but also the logical development of modern Capitalistic 
 control of industries in general. Besides, the details enter¬ 
 ing into the consolidation of the steel industry are set forth 
 with great perspicacity in the reports of the Commissioner 
 of Corporations and the Senate Committee that investigated 
 the consolidation ten years after its organization. Conse¬ 
 quently the exhaustive official reports pertaining to this 
 particular corporation are a safeguard against exaggerated 
 statements that one might be tempted to make when dealing 
 with the subject of Trusts in general. Moreover, no single 
 corporation has been given a wider publicity, in the daily 
 press, as well as in the weekly and monthly periodicals. 
 And last, but not least, its leading officials have written 
 articles and given numerous interviews expressing their 
 opinions, views and sentiments—and are known to the 
 public at large. Any statement I may make concerning the 
 United States Steel Corporation can easily be verified; the 
 records are open to whoever may care to search them. 
 
 Not a Netv Thing 
 
 Trusts, combines and monopolies are not a modern 
 invention. We read that as early as A. D. 1552 “the diet 
 of Nuremberg investigated pools, mergers and trusts.’’ 
 Monopolistic tendencies are discernable all through the eco¬ 
 nomic history of the world. Syndicates, pools, mergers, 
 combines and monopolies easily suggested themselves to 
 those in an advantageous position. While in the United 
 States, immediately following the Civil War and even prior 
 thereto, there have been isolated instances of attempts at a 
 greater control of certain products or industries by groups 
 of individuals—Trusts, in the insidious sense of today, did 
 not come into marked existence until several decades later. 
 
 We do not often hear the words Trusts, combines and 
 monopolies these days. As if by common consent modern 
 economic writers rarely mention them; financial and com¬ 
 mercial experts prefer not to speak of such things. And 
 yet there was a time—not so long ago—when Trusts, com¬ 
 bines and monopolies were denounced as evil things, and 
 
The Supreme April Fool Joke 
 
 63 
 
 those who constituted or created, or were identified with 
 them, as wicked men. Yet in the years when they were 
 most violently attacked, Trusts, combines and monopolies 
 had not done one-lialf the economic harm that can be predi¬ 
 cated against them today. Their tendencies, rather than 
 their deeds, w T ere criticised in those earlier years. 
 
 The years 1880 to 1900 1 can be said to have been the 
 experimental years as regards Trusts, combines, and the 
 monopolistic merging and consolidation of industries, to 
 effect which financial pools and syndicates were formed. 
 But each combination in a given line of industry was more 
 or less independent and in actual competition with some 
 other combination. To be sure there were “secret” and 
 “gentlemen’s” agreements, both as regards production and 
 prices, but frequently one combine less scrupulous than its 
 rival, would take an unfair advantage of its competitor, 
 thus weakening the latter, even bringing him to the verge 
 of ruin. It was in this period that we heard so much of 
 special advantages, rebates, and so forth, granted to certain 
 powerful corporations. Standard Oil, you may recall, was 
 one of the greatest beneficiaries of the system of railroad 
 rebates. 
 
 The New Era 
 
 The year 1901 ushered in the dawn of a New Trust Era, 
 whose possibilities were exemplified in the organization of 
 the United States Steel Corporation. That the principal 
 aims of the Trust consolidation of industrial plants from 
 the very beginning were to eliminate competition, control 
 output, and fix, or rather increase, prices, is so well under¬ 
 stood as to call for no detailed proof at this late date. For 
 the benefit, however, of those doubting Thomases who, for 
 obvious reasons, prefer to enter a denial, I will quote a 
 statement made by no less a person than Charles M. Schwab : 
 
 x The Standard Oil Co. was organized in 1882; the American Cotton 
 Oil Trust in 1884 ; the National Uinseed Oil Trust in 1885 ; the American 
 Sugar Refining Co. in 1887 ; the American Tobacco Co. in 1890 : the 
 General Electric Co. and the United States Rubber Co. in 1892. These 
 are a few of the more important Trusts and monopolies formed during 
 the last two decades of the twentieth century. 
 
64 
 
 The New Capitalism 
 
 “No man has a clearer appreciation than myself of the 
 evil that lurked in the trust scheme. ... It was founded 
 on misconception and promoted along the lines of self- 
 destruction. Its fundamental principles were the restraint 
 of trade, increase of price and the throttling of competition 
 —a trinity that would wreck any proposition, business, 
 political, or social.” 2 
 
 The Pivotal Point 
 
 Whether the throttling of competition, the limiting of 
 output and increasing prices Tbe called the fundamental 
 principles or the principal by-products of Trust combines 
 and consolidations, the important thing to remember is that 
 they were antedated by the overvaluation and overcapi¬ 
 talization of the properties themselves. 
 
 In this chapter I shall confine myself to those points that 
 are relevant to my purpose, leaving untouched matters not 
 immediately germane to the scope of this book. My avowed 
 purpose is to show that overcapitalization is the scarlet 
 cloak that covers a multitude of Capitalistic sins. To show 
 this authoritatively I propose to give a few fragmentary 
 excerpts from official reports with regard to the United 
 States Steel Corporation, and from which the reader may 
 draw his own conclusions. 
 
 The Consolidation Scheme 
 
 Herbert Knox Smith, Commissioner of Corporations, in 
 his letter of Submittal 3 (July 11, 1911) says: 
 
 “The Steel Industry w T as the culmination and the result 
 of a remarkable and even dramatic period in the steel 
 industry. Until about 1898 the bulk of the business was 
 distributed among a very considerable number of concerns. 
 There was sharp competition, modified by frequent pools 
 and price agreements of greater or less duration and 
 effectiveness. 
 
 2 Report No. 1127, House of Representatives, 62nd Congress, Second 
 Session, Investigation of United States Steel Corporation. (Referred 
 to the House Calendar and ordered to be printed, August 2, 1912.) 
 
 3 Report of the Commissioner of Corporations on the Steel Industry. 
 (Part 1.) 
 
The Supreme April Fool Joke 
 
 65 
 
 “In 1898 began an era of great consolidations, with 
 capitalizations ranging from $30,000,000 to $100,000,000, 
 usually mergers of many smaller companies. In most of 
 these, as in the earlier price agreements, the ruling motive 
 was the removal of competition.” 
 
 But these mergers did not immediately produce the 
 desired effect. The Steel companies were still independent 
 of and in competition with each other. “There was sud¬ 
 denly revealed to the industry,” says the Commissioner of 
 Corporations in his letter of Submittal, “what the trade 
 press called. ‘ the impending struggle of the giants, ’ a com¬ 
 bat between great concerns, who, under such circumstances, 
 might be forced to work out, in rigorous competition, the 
 survival of the fittest. . . . 
 
 ‘ ‘ Steel men and the various associated financial interests, 
 regarded the situation with much alarm. In such a com¬ 
 petition they saw a great danger to their businesses, especi¬ 
 ally to the profitable gross monopolies in certain branches 
 of the trade. In averting it they saw a great opportunity. 
 The extraordinary era of industrial expansion was still on; 
 the public was still largely absorbing large issues of 
 securities. By merging these conflicting interests into a 
 great corporation, the threatened ‘steel war’ would be 
 averted, and great profits realized from the flotation of 
 securities. 
 
 “With amazing swiftness, in a few weeks, the United 
 States Steel Corporation was thus organized, and began 
 business on April 1, 1901. Its total capitalization was a 
 little over $1,402,000,000 (including bonds). . . . 
 
 “Thus competition between these concerns was elimi¬ 
 nated, while enormous profits were made from the flotation 
 of securities, with, also, an unparalleled stock commission 
 to the underwriting syndicate, which netted a clear profit 
 of about $62,500,000 in cash.” 4 
 
 4 It is pretty generally known that the firm of J. P. Morgan & Co. 
 was the active underwriting syndicate, and J. P. Morgan the directing 
 genius in the consolidation of the Steel Corporation. 
 
66 
 
 The New Capitalism 
 
 The Capitalistic Deluge 
 
 The report of the Commissioner of Corporations sets forth 
 that the value of all the tangible properties consolidated 
 into the United States Steel Corporation, making a liberal 
 allowance for everything, did not exceed $682,000,000, and 
 “that the entire issue of approximately $508,000,000 of 
 common stock of the Steel Corporation in 1901, had no 
 physical property back of it, and also a considerable frac¬ 
 tion, say from one-fifth to two-fifths, of the preferred stock, 
 was likewise unprotected by physical properties. Even 
 granting that there may have been a considerable value on 
 intangible considerations, it is necessarily clear that at last 
 the entire issue of common stock, except in so far as what 
 may be termed ‘merger value’ may be considered, repre¬ 
 sented nothing but ‘water’.” 
 
 ‘ ‘ In some instances stocks were not ‘ watered ’ in the ordi¬ 
 nary acceptance of that term; they were literally deluged. 
 The cost of constructing, or reproducing the several plants 
 constituting the combine, was inconsequential as com¬ 
 pared with the value of this new device for enjoying with 
 immunity an old and hitherto forbidden privilege—an abso¬ 
 lute monopoly in a valuable and necessary article of com¬ 
 merce.” (House of Representatives Report No. 1127, p. 11.) 
 
 How It Was Done 
 
 Among the ten or tw T elve competing steel corporations 
 consolidated into the United States Steel Corporation was 
 the National Tube Company operating 17 mills. 
 
 “Before acquiring these plants, Morgan and Company 
 employed Julian Kennedy, of Pittsburgh, a most capable 
 engineer of long experience in the construction and opera¬ 
 tion of steel works both in America and Europe and Asia, 
 and instructed him to make a careful estimate of the 
 plants. . . . He reported to Mr. Morgan that the actual 
 value of these plants did not exceed $19,000,000, and that 
 the owners were demoralized and disheartened. . . . 
 
 “Undismayed by this dismal report, J. P. Morgan & Co., 
 
The Supreme April Pool Joke 
 
 67 
 
 with an amazing audacity, launched this new $19,000,000 
 monopoly on its course with a total capitalization of 
 $80,000,000, and for their valued services in thus restraining 
 the previously obnoxious and ‘destructive competition’ 
 received as compensation securities of this concern aggre¬ 
 gating $20,000,000, or one million more than the total value 
 of all the 17 tube plants, one in need of reconstruction and 
 six ‘old style,’ ‘isolated’ and ‘not equipped with modern 
 facilities,’ or on the verge of being ‘shut down and dis¬ 
 mantled. ’ 
 
 “To the uninitiated this would appear to be an utterly 
 impossible task. Under the circumstances, the sudden and 
 instant prosperity of the National Tube Co., is an object 
 lesson of no little moment, illustrating the immense power 
 of an absolute monopoly, no matter how inferior or defect¬ 
 ive or obsolete the plants, or how incapable the manage¬ 
 ment and operation. With all the essential elements of 
 failure, antiquated plants, badly located and burdened by 
 the huge overcapitalization, nevertheless : 
 
 “ ‘The National Tube Co. was one of the most successful 
 concerns of the United States Steel Corporation, and by the 
 time it was acquired by the latter its common stock had a 
 high market value because of the Company’s earning power. 
 For the year ending June 30, 1900, the profits of this com¬ 
 pany, after deducting all expenses, exceeded $14,600,000, 
 and after deduction for depreciation, bad debts, etc., the 
 net earnings were $13,878,000.’ This, it will be seen, was 
 at the rate of 35 per cent on the $40,000,000 of preferred 
 stock outstanding, and the rate of 17 percent on the total 
 capitalization of $80,000,000 or more than 73 per cent of 
 the actual value of the entire company. 
 
 “In order to illustrate the purposes, methods, and effect 
 of such consolidations, we have described somewhat in 
 detail the organization and operation of the National 
 Tube Co. In discussing the other concerns forming the 
 so-called ‘Morgan group,’ this is not necessary, owing to 
 the fact that the same scheme for throwing together into 
 one mass ‘of unrelated units,’ efficient and inefficient, new 
 
68 
 
 The New Capitalism 
 
 and obsolete plants under one control and into one heavily 
 overcapitalized corporation, characterized all the opera¬ 
 tions of J. P. Morgan & Co. in the Steel Industry.”* 
 
 Pointing a Moral 
 
 It would serve no particular purpose at this time to give 
 all the figures pertaining to all of the companies merged 
 and consolidated into the United States Steel Corporation. 
 The history of each is the same; only the amount of the 
 inflation in each is different. Thus, for example: 
 
 Mr. Morgan’s syndicate accepted the Federal Steel Co., 
 on a basis of less than $33,000,000 of actual property, 
 against which it authorized an issue of $200,000,000. 
 
 Against the properties of the Carnegie Co., whose actual 
 or tangible value its owner had sworn did not exceed 
 $75,610,104.06, and whose total assets, according to the 
 balance sheets of the Carnegie Co. (Ltd.) on March 1, 1900, 
 amounted to $100,416,802.43, the United States Steel Cor¬ 
 poration issued $492,000,000 of its securities. 
 
 Exit the Ironmaster—Enter the Capitalistic 
 
 Entrepreneur 
 
 “Carnegie,” says the Report (No. 1127, p. 41), “seems 
 to have remained in blissful ignorance of the revolution in 
 methods which characterized the transfer of the seat of the 
 steel industry from Pittsburgh to Wall Street, and unmind¬ 
 ful of the enormous sums his competitors were amassing 
 by the capitalization of their various companies. He dis¬ 
 plays a quaint indifference even to the advantages incident 
 to doing business as a corporation. ‘If,’ says he, ‘you want 
 to keep this country ahead in steel, you cannot depend 
 upon great “Combinations.” ’ ” (Hearings, p.. 2419.) 
 
 “What is more remarkable, these fabulous returns from 
 stock jobbing operations do not seem to have abated in 
 the least ‘the iron master’s’ inveterate and old familiar 
 antipathy to gambling institutions generally. 
 
 B Report No. 1127, Investigation of United States Steel Corporation, 
 pp. 12-15. 
 
The Supreme April Fool Joke 
 
 69 
 
 “I made them (shares in the Carnegie Co.) a thousand 
 dollars so as not to render them gambling instruments in 
 the Stock Exchange, . . . because I do not want to 
 
 have partners that would be tempted to get into speculation. 
 I never bought a share in my life on the Stock Exchange. 
 I never sold a share. I have been, you might say, a mono¬ 
 maniac on the subject of speculation. I have never touched 
 it ... I want to say that I am not a stock jobber, and 
 I never in my life associated with stock gamblers. . . . 
 
 I think that the common stock gambler is one of the worst 
 institutions that a country can have. They are parasites 
 feeding upon values and creating none.” (Carnegie, Hear¬ 
 ings, p. 2538.) 
 
 The conflict between the Carnegie Co. and the “ interests 
 behind the Steel Corporation ’ ’ is described in the Report as 
 a contest “between fabricators of steel and fabricators of 
 securities; between makers of billets and makers of bonds. ’ ’ 
 
 Turning One Dollar into Five, Plus 
 
 “The Commissioner of Corporations gives an interesting 
 account of the method by wdiich these companies ‘capital¬ 
 ized 9 and recapitalized their profits: 
 
 ‘ 1 In the organization of the American Steel and Wire Co., 
 of Illinois, in 'March, 1898, each $100 of the stock of the 
 Consolidated Steel and Wire Co., one of the constituent 
 concerns (and itself a consolidation of seven plants), received 
 $175 of preferred stock and $175 in common stock of the 
 new company, or $350 of new securities for every $100 of 
 the old. (See Com. Report, p. 6.) 
 
 “A few months later each $100 of the preferred stock 
 of the American Steel and Wire Co. of Illinois, received 
 $100 in preferred stock and $60 in common stock, while 
 
 9 
 
 each of the Illinois concern’s common stock received $120 
 in common stock of the New r Jersey concern. Thus each 
 $100 stock of the old consolidation company became $490 
 in the stock of the New Jersey concern. In the final merger 
 of the latter company into the Steel Corporation, each $100 
 par value of the preferred stock, received $117.50 in pre¬ 
 ferred stock of the Steel Corporation, while each $100 (par 
 
70 
 
 The New Capitalism 
 
 value) of the common stock received $102.50 in United 
 States Steel common stock. In other words, every $100 
 par value of the stock of the Consolidated Steel & Wire Co. 
 was finally transmuted into $528.50 par of Steel Corpora¬ 
 tion securities.” (Com. report, p. 176.) 
 
 Capitalizing Non-Existent Assets 
 
 “So well satisfied were the syndicates that had evolved 
 this plan for what Mr. Converse calls ‘ community of own¬ 
 ership or unified control over great industries as the only 
 means of restraining destructive competition’ that they 
 began to treat this ingenious and illegal device as a lawful 
 institution, no doubt reassured in this position by the fail¬ 
 ure of the Government to proceed against them, and in 
 their future operations they failed to discriminate between 
 the cost of construction or the intrinsic value of these prop¬ 
 erties and earning capacity due entirely to ‘community’ of 
 ownership and unified control or ‘potential value’—as 
 James Gayley calls it. This ‘combination value’ of the 
 various companies since acquired by the Steel Corporation, 
 has been capitalized as a tangible asset, stocks issued and 
 bonds sold, all based upon this new device, as a perfect and 
 permanent evasion of all laws prohibiting combinations in 
 restraint of trade. 
 
 “The earning power of the American Steel and Wire, the 
 Tin Plate, National Tube and other companies, was enor¬ 
 mously increased by virtue of the complete monopoly which 
 resulted from assembling practically all of the manufac¬ 
 turers of such commodities as horseshoes, nails, fencing 
 wire, sheet steel, and tin plate for roofing or kitchen 
 utensils, under one control. 
 
 “The gains incident to the difference in the price of such 
 things sold under competitive and monopolistic conditions, 
 were but a small part of the amount actually secured by 
 these companies and by the Morgan-Moore and other 
 syndicates. 
 
 “To illustrate: If under normal conditions these vari- 
 
The Supreme April Fool Joke 
 
 71 
 
 ous plants acting separately, could earn 10 per cent, and 
 acting collectively they could earn 100 per cent, then by 
 discarding any form of physical valuation, either the orig¬ 
 inal cost or the cost of reproduction, and taking as their 
 sole standard the new and artificially created earning 
 power, due entirely to the consolidation, and for that reason 
 aptly termed, ‘ combination value, ’ then ten assembled 
 plants were worth ten times as much with the acquired 
 monopoly of the business as the same ten plants would have 
 been worth acting separately and in competition. And 
 these immense aggregations were created and capitalized 
 upon that principle; neither in the incorporation of the 
 Steel Corporation nor of the subsidiaries which preceded 
 it, now' under discussion, has there been any serious attempt 
 to deny that the greater part of the securities of these com¬ 
 panies has any other element of value. 
 
 “ ‘Everybody know r s, ’ said W. II. Moore, of the Moore 
 syndicate, ‘what they are getting v r hen they get common 
 stock (in the Tin Plate Co.). They know they are not 
 getting anything that represents assets’. 7 ’ (Reports Indus¬ 
 trial Commission, vol. 1, p. 932; hearing pt. 63.) 6 
 
 The Established Fact 
 
 But I am not interested in tracing the genesis of the 
 United States Steel Corporation, and shall not particularly 
 concern myself at this time with all the successive steps and 
 immediate processes of its metamorphosis, such as the pools 
 and agreements, sundry schemes, covenants and devices, 
 employed by way of creating monopolies, restraining or 
 preventing competition, artificially increasing prices, con 
 trolling or curtailing output, etc. The one thing I want to 
 emphasize is the fact of overcapitalization, and if the reader 
 will keep the salient points of these few extracts from the 
 official reports with regard to the United States Steel Cor¬ 
 poration before him, he wfill be able to follow the succeeding 
 chapters with an increase of interest and understanding. 
 
 6 Report No. 1127, Investigation of the United States Steel Corporation. 
 
CHAPTER VIII 
 
 The Principle of Inflation 
 
 I T was not long before the sundry Capitalistic explana¬ 
 tions advanced to justify the outrageous overcapitali¬ 
 zation of the big corporation, viz., *‘monopoly,” “com¬ 
 munity of ownership and unified control,” “potential 
 value,” “merger value,”'“combination value” and their 
 variants, were discarded by economic writers who favored 
 and defended Trusts and all they implied, for the reason 
 that it was soon discovered that mention of these things 
 was as a red rag to the general public. Reluctantly at first, 
 it was admitted that what had really been capitalized was 
 the immense profits of those corporations. Mr. Gary him¬ 
 self, under pressure, admitted before the Ways and Means 
 Committee, that it wasn’t plant values that had been 
 capitalized—but profits. 1 
 
 Professor Edward Sherwood Mead, of the Wharton 
 School of Finance and Economy, of the University of 
 Pennsylvania, in his “Trust Finance,” 2 says, (p. 291) : 
 
 “The capitalization of a corporation is the face or par 
 value of the stocks and bonds which the corporation has 
 issued. . . . There is general agreement upon this 
 
 definition of capitalization, and its discussion need not, 
 therefore, detain us.” . . . 
 
 “We may define overcapitalization as that condition in 
 which the par value of the securities of a company exceeds 
 their actual value based on profits.” 
 
 It is not necessary to give definitions from other economic 
 
 1 Mr. Cochran. Of this whole sum of $1,782,000,000 was not 
 $1,000,000,000 at least capitalized profits, as distinguished from original 
 investment? 
 
 Mr. Gary. I shall have to guess at that; but I shall guess yes, 
 including increases in value. (See Hearings Ways and Means Com¬ 
 mittee, 1908 and 1909 ; see Hearings, pt. 63, p. 240, Appendix.) 
 
 2 Chapter X VI “The Capitalization of Corporations.” 
 
 72 
 
The Principle of Inflation 
 
 73 
 
 writers, for they are practically agreed with regard to the 
 essentials, differing only in phraseology. According to 
 Professor Mead, the difference between capitalization and 
 overcapitalization is one of degree only. In reality there 
 is no distinction between the two. He considers an issue 
 of stocks, no matter how much in excess of actual assets, as 
 legitimate capitalization. Only if the par value of the 
 securities of a company exceeds the actual value of said 
 securities, based on profits, does he consider it overcapi¬ 
 talization. 
 
 Actual Value Not Considered 
 
 It is to be noted that Professor Mead does not so much 
 as mention the actual value of the properties; he speaks 
 only of the values of securities based on profits. According 
 to him, and most other economic writers, actual value of 
 properties does not enter into the equation; in fact it is 
 entirely ignored. Inflated valuation based on profits is 
 the basis of the modern system of overcapitalization. An 
 issue of securities, therefore, is based not upon the actual 
 value of assets—but upon an arbitrary inflation of value 
 —a fictitious valuation. But “capitalization of profits” 
 had a bad sound, and so a less irritating expression was 
 coined and shoved into currency. Today “earning power” 
 is the generally accepted basis for overcapitalization. 
 
 What is Earning Power? 
 
 The normal earning power of capital is, as a rule, com¬ 
 puted at six percent. I do not know precisely just why 
 six percent was hit upon as the measure of earning capacity, 
 but assume it is because—generally speaking—six percent 
 has been considered as a normal rate of interest, and also 
 as a fair return upon an investment. At any rate, six 
 percent 3 of earning power is the basis upon which modern 
 
 3 So large were the earnings during the war that the six percent 
 basis was, in a number of cases, raised to eight percent. Professor 
 H. J. Davenport, in an article in The Dial (October 4, 1919) tells of a 
 certain rubber company whose “surplus earnings for the year 1917-1918 
 were equivalent to about thirty percent on the common stock ; and sub¬ 
 stantially the same for the first half of 1919.” 
 
74 
 
 The New Capitalism 
 
 capitalization is computed. And this method of figuring has 
 yielded the nefarious system of overcapitalization. 
 
 Let me illustrate : If a plant actually worth $500,000, 
 has made a profit of $60,000, that $60,000 is computed not 
 as twelve percent on $500,000, but as being the equivalent 
 of six percent on one million dollars. This showing, accord¬ 
 ing to Capitalistic logic, or the higher mathematics of the 
 Capitalistic System, justifies capitalizing the plant, orig¬ 
 inally worth $500,000, at a million dollars. 
 
 The following year, let us say, the profits of the same 
 plant are $120,000. This under the Capitalistic System of 
 computing “earnings” would not be considered as twenty- 
 four percent on $500,000, or twelve percent on one million, 
 but as if six percent had been earned on two million dol¬ 
 lars; and therefore an increase in the capitalization up to 
 two million would be perfectly justified; for, as Professor 
 Mead declares (p. 298), capitalization contains “two prac¬ 
 tical implications: First, that the capitalization of a new 
 company shall be based upon a conservative estimate of its 
 earning power; and second, that this capital shall be in¬ 
 creased from time to time as increasing earnings warrant. ’ ’ 4 
 
 What If the “Earning Power” Decreases? 
 
 If “earning power” computed at six percent is a logical 
 basis for fixing the amount of the capitalization of an 
 industry or enterprise, then in the event of a decrease in 
 the earning power the capitalization should be reduced. 
 But no such phenomenon is observable. Instead of reduc¬ 
 ing the capitalization—the value of the stock is permitted 
 to go down, and whenever stocks tumble the bona fide 
 investors are made to bear the brunt of it. They are sub¬ 
 jected to the double penalty of not receiving any dividends 
 besides suffering a shrinkage in the market value of their 
 securities. 
 
 In the recent admitted decline in the earning power of 
 
 4 The enormous increase in the issuance of industrial securities 
 during - the past four or five years can be easily explained by the 
 enormous increase in the "earning power,” i.e. in the profits of the 
 industries. 
 
The Principle of Inflation 
 
 75 
 
 practically all corporations one looked in vain for any 
 marked decrease in the amount of capitalization. Evidently 
 basing capitalization on the principle of 4 ‘ earning power 7 ’ 
 doesn’t work the other w’ay round. Par from reducing 
 capitalization, many of the leading corporations have in¬ 
 creased their stock and bond issues, as these few items, 
 taken at random from hundreds I have collected, clearly 
 show: 
 
 1: ‘ 1 The Sugar Manufactur¬ 
 ing Co. has filed notification of 
 an increase in the capital stock 
 from $60,000,000 to $90,000,000, 
 and announces a stock dividend 
 of $30,000,000. ’ ’ (December 13, 
 1920.) 
 
 2: The New York Stock Ex¬ 
 change has received notice from 
 the Wickwire-Spencer Steel Cor¬ 
 poration of a proposed increase 
 in its preferred stock from 
 $7,500,000 to $10,000,000). (Janu¬ 
 ary 26, 1921.) 
 
 3: The New England Tele¬ 
 graph and Telephone Company 
 has called a special meeting of 
 stockholders for New York on 
 February 16 to act upon the in¬ 
 crease of the capital stock from 
 $75,000,000 to $100,00 0,00 0. 
 Transfer books will be closed 
 February 7, and reopened Feb¬ 
 ruary 17. (January 26, 1921.) 
 
 4: The Clay County & St. 
 Joseph Railroad Company, oper¬ 
 ating an electric bus between 
 Kansas City, St. Joseph and Ex¬ 
 celsior Springs, has asked the 
 state public service commission 
 for authority to issue $6,000,000 
 of 7 percent preferred cumulat¬ 
 ive stock and $4,000,000 of com¬ 
 mon stock. (January 26, 1921.) 
 
 5: Springfield, Ill., May 26.— 
 The Peoples ’ Gas & Electric Com¬ 
 pany of Savanna today asked the 
 Public Utilities Commission for 
 authority to issue $50,000 7 per¬ 
 cent preferred stock. The money 
 is to be used in extension, im¬ 
 
 provement and retiring outstand¬ 
 ing notes. (May 27, 1921.) 
 
 6: “Notice has been received 
 by the New York Stock Exchange 
 from the Milwaukee Electric Rail¬ 
 way & Light Co., that the com¬ 
 pany’s authorized issue of pre¬ 
 ferred stock has been increased 
 from $4,500,000 to $20,000,000. 
 No details of the purpose of the 
 proposed increase have been made 
 public. ” (June 9, 1921.) 
 
 7: “At the special stockhold¬ 
 ers ’ meeting held in Wilmington, 
 Del., on May 20 last, the capitali¬ 
 zation of the Boone Oil Company 
 was increased $6,000,000, consist¬ 
 ing of $3,000,000 of nine percent 
 cumulative convertible class ‘ A ’ 
 stock and $3,000,000 of common 
 stock. ” ( June 9, 1921.) 
 
 8: The Winther Motor Truck 
 Company has changed its name to 
 Winthers Motors, Inc., and the 
 capital has been increased from 
 $22,000,000 to $61,000,000. The 
 office of the company is at Ken¬ 
 osha, Wis. (July 19, 1921.) 
 
 9: The Wheeling & Lake Erie 
 Railroad yesterday applied for 
 authority to issue $451,000 of 6 
 percent refunding mortgage 
 bonds to reimburse its treasury 
 for expenditures made for addi¬ 
 tions and improvements. (Julv 
 20, 1921.) 
 
 10: A special meeting of stock¬ 
 holders of the Delaware & Lacka¬ 
 wanna Railroad has been called 
 for today for the purpose of au¬ 
 thorizing an increase in the road’s 
 
76 
 
 The New Capitalism 
 
 capitalization by $45,000,000. A 
 stock dividend of 100 percent 
 probably will be declared by the 
 directors at their next regular 
 meeting, July 28, provided the 
 shareholders approve the increase 
 in capitalization. There is 
 $42,227,000 stock outstanding. 
 Last April the Interstate Com¬ 
 merce Commission approved the 
 proposal of the road to capitalize 
 part of its surplus, which amounts 
 to about $90,000,000. (July 21, 
 1921.) 
 
 11: The St. Louis & San Fran¬ 
 cisco Railroad has applied to the 
 state public service commission 
 of Missouri for authority to issue 
 $4,578,000 6 percent prior lien 
 
 mortgage bonds. Of this amount 
 $4,392,000 are to reimburse the 
 treasury of the company for im¬ 
 provement expenses and acqui¬ 
 sition of new property, and 
 $180,000 for refunding purposes. 
 (August 12, 1921.) 
 
 12: B. B. & R. Knight, Inc., 
 has notified the Massachusetts 
 commissioner of corporations of 
 an increase in its authorized cap¬ 
 ital stock from $5,000,000 to 
 $8,000,000 by authorization of 
 25,000 additional shares of no 
 par common and 30,000 addi¬ 
 tional shares, 7 percent second 
 preferred* $100 par. (August 15, 
 1921.) 
 
 A Fair Question 
 
 If overcapitalization, based on “earning power” is de¬ 
 fensible, then I ask you in all sincerity, why is not the 
 largest industry in the United States overcapitalized? Or 
 let me put it thus: Why is the largest industry in the 
 United States not capitalized on the basis of its earning 
 power the same as every other industry? I mean the 
 Banking industry. 
 
 It is rather singular that the banks—the primary and 
 basic industry of the Capitalistic group—are neither over¬ 
 capitalized nor capitalized on the basis of their earning 
 power. The capitalization of all the national banks in the 
 United States is somewhat in excess of one billion dollars. 
 On June 30, 1920, there were 8,019 banks with a total cap¬ 
 italization of $1,220,781,000, and a surplus of $984,977,000. 
 The authorized capital of a single industrial corporation— 
 the United States Steel Corporation—is greater by nearly 
 a quarter of a billion dollars than the capitalization of all 
 the national banks. 
 
 Why are not the banks overcapitalized? Why are they 
 not capitalized on the basis of earning power? For surely 
 every bank has “earning power.” Indeed the earning 
 power of capital is the very essence of the business of 
 
The Principle of Inflation 
 
 77 
 
 banking. Without this earning power of capital, banking 
 institutions would not be possible, and could not exist. If, 
 basing the capitalization, or overcapitalization, of an indus¬ 
 try on its earning power can be defended at all, it could 
 certainly be justified in the case of banks. Yet the one 
 industry whose very life and continued existence depends 
 on the earning power of its capital, is excluded from over- 
 capitalization on that basis. This is all the more remark¬ 
 able for in the case of a bank the actual earning power is 
 inherent in the capital employed—is created by the use of 
 the capital itself; whereas, in an industry, the “earning 
 power ’ K is not inherent in the capital employed, in fact 
 does not exist until the productive power of labor and the 
 purchasing power of the public are brought into play. The 
 earning power of the banks can be best shown by the actual 
 earnings, which, according to Government reports, w T ere in 
 excess of forty percent in 1920. This showing of “earning 
 power” would justify raising the capitalization of the 
 banks to about six billion dollars. 
 
 Why? 
 
 While it is somewhat premature here, since I intend to 
 treat of stock transactions in another chapter, nevertheless 
 it is opportune to ask: Why does not the market value of 
 stocks of banks bought and sold in the stock market 
 fluctuate as violently as the stocks of industrial and other 
 corporations ? Why is there no marked speculative market 
 for bank stocks as there is for industrial stocks ? Why are 
 bank stocks not sold on margin? 
 
 To all these whys you may sweepingly answer that the 
 federal and state laws do not permit the overcapitalization 
 of banks, nor gambling in their stocks. Quite true! but 
 why is the legitimate capitalization of banks a matter of 
 so great concern to federal and state governments? And 
 why do bank officials, governors of stock exchanges, and 
 brokers, assume a different attitude towards bank stocks 
 than towards industrial and other stocks? Why? Why? 
 Whv ? 
 
78 
 
 The New Capitalism 
 
 “Earning Power”—A Myth 
 
 What the Capitalistic Entrepreneurs have been pleased 
 to call the “earning power” of capital, is, in reality, a 
 myth. Capital, except in the case of banks, has no earning 
 power of its own. Not until after Labor’s productive power, 
 and Labor’s—that is to say, the public’s—purchasing power, 
 have been brought into play does Capital take on an earning 
 power. If the Capitalistic Entrepreneurs were disposed to 
 be honest and call things by their right name they would, 
 in conscience, be compelled to say that the capitalization, 
 or rather overcapitalization, of all the industries, is based 
 not on Capital’s earning power, but on Labor’s productive 
 power, plus Labor’s (that is, the public’s) purchasing 
 power. The overcapitalization of the industries of the 
 United States on the basis of earning power, is, therefore, 
 a compliment to Labor’s productive power. 
 
 Here we have one explanation for the so-called struggle 
 between Capital and Labor, more properly speaking, the 
 struggle between the Capitalistic Entrepreneurs and the 
 wage earners. If six percent is considered as a fair return 
 on the capital actually invested in a given industry; and 
 the owners of said industry capitalize their productive 
 properties for an amount two to four times greater than the 
 amount actually invested, they practically admit (though 
 they have cleverly disguised and camouflaged the fact) that 
 Labor’s productive power, that is the profits derived from 
 Labor’s production, is the foundation of their wealth and 
 the source of their capital accumulations. Wage earners, 
 in a blundering sort of fashion, realize that they are being 
 exploited by these Capitalistic Entrepreneurs,' who insist 
 on keeping for themselves all the profits derived from 
 Labor’s productive, plus its purchasing, power. Labor be¬ 
 lieves that it is entitled to at least a share of these enormous 
 profits derived from its joint productive ability and pur¬ 
 chasing power. Labor’s fight is, therefore, for a more 
 equitable distribution of profits, expressed in terms of 
 
The Principle of Inflation 
 
 79 
 
 higher wages. But I shall have more to say on this point 
 further along in my book. 
 
 “Good Will”—What is It ? 
 
 In some businesses instead of capitalizing profits under 
 the guise of “earning power” it has been deemed prefer¬ 
 able to capitalize them as “good will.” “Earning power” 
 is found generally in corporations that employ productive 
 labor; “good will” is generally employed in businesses 
 where productive labor as such is not so much in evidence, 
 as, for example, in merchandising establishments, such 
 as big department stores, the mail order concerns, etc. 
 However it is only a different name for the same disease. 
 Like “earning power” the item of “good will” is used 
 to cover the watered stock of excessively overcapitalized 
 corporations. 5 
 
 “According to the law of most of the United States, and 
 Great Britain,” says Arthur Lowes Dickinson, “capital 
 stock cannot be issued except for value; but this legal dif¬ 
 ficulty is avoided by issuing it in accordance with a contract 
 in the body of which is contained a statement as to value 
 conformable to the stock or other securities to be issued, 
 and the excess of this value over that of the actual tangible 
 assets acquired is often euphemistically entitled ‘good 
 will \ . . . 
 
 “While this fiction has so far maintained its legal sanc¬ 
 tion, it still remains doubtful how far an issue of stock for 
 a cash consideration clearly less than its par value is legal, 
 or whether if so issued the purchaser or broker is not liable 
 to pay up the whole of the discount, at any rate on liqui¬ 
 dation of the corporation. ’ ’ 6 
 
 5 In many cases of which overcapitalization can be predicated, 
 Patents appear on the books as an asset, against which vast amounts 
 of securities have been issued. I shall not deny that a Patent is an 
 asset; indeed were it not for his Patent many an inventor or manu¬ 
 facturer would not be in business at all. A Patent that gives to an 
 individual or corporation the exclusive rig-ht to manufacture a certain 
 article, is valuable, however, only because it confers a monopoly. It 
 is this monopoly , rather than the invention itself, that is capitalized. 
 
 6 “Accounting-—Practice and Procedure,” by Arthur Lowes Dickin¬ 
 son, (pag-e 127). 
 
80 
 
 The New Capitalism 
 
 Once Upon a Tune 
 
 There was a time in the history of business when “good 
 will” really signified something and could justly be con¬ 
 sidered as an asset in the transfer or sale of an established 
 business. For, when a man, in competition with many 
 others, had built up a reputation for square dealing, trust¬ 
 worthiness, superior quality of goods, service, etc., it was 
 only fair that the successor reaping the benefit of another’s 
 reputation, work, intelligence, character or what not, should 
 pay a reasonable amount for the advantages accruing to 
 the business which he took over. But in those days “good 
 will” was never computed at an excessive figure over and 
 above the true value of the tangible assets. If I am per¬ 
 mitted a guess based on a dozen or so cases that came within 
 my personal observation, I should say that the amount paid 
 for the ‘ ‘ good will ” of an established business, ranged from 
 ten to twenty-five percent of the purchase price paid for 
 the property itself. Moreover, while the amount paid for 
 “good will” was naturally charged up to investment, it 
 did not have a tendency to materially increase prices, for 
 in those days competition was keen, and it was necessary 
 for a manufacturer or merchant to stay within the limits 
 observed by his competitors. 
 
 Briefly, in those days, “good will” did not appear on 
 the books as an asset on which a dividend had to be earned 
 or paid. In fact the continued and growing patronage of 
 the public constituted the “good will”; nor were the cus¬ 
 tomers x>enalized for their continued patronage by being 
 made to pay a bigger price for the goods they purchased. 
 
 It’s D iff event N ow 
 
 But since the birth of the Capitalistic System “good 
 will” has ceased to have any meaning. Not only is it con¬ 
 sidered as an asset on which a dividend is to be earned or 
 paid; in most cases it is the principle asset, and is often 
 caxntalized for more than the plants of a corporation. One 
 of the big merchandising firms in the United States has 
 
The Principle of Inflation 
 
 83 
 
 placed a value of twenty-seven million on its plants; and 
 a value of thirty million on “good will.” Its total capital¬ 
 ization is $115,000,000. 
 
 The Decline in “Good Will” 
 
 Incidentally let me add that during the past few years 
 the business of the firm I have in mind has decreased from 
 twenty-five to thirty-five percent. Consequently, if logic 
 is to prevail, it can be said that the “good will” of this 
 particular firm has declined from one-fourth to one-third. 
 Therefore, the capitalization of the “good will” should be 
 reduced proportionately. But there has been no reduction 
 in the capitalization; the shrinkage has been in the value, 
 or market price, of the securities. The bona fide investor, 
 as usual, must bear the brunt of the depreciation; he alone 
 suffers a loss of dividends and in the value of the securities 
 he purchased. 
 
 “Good will,” as Capitalistically employed, is, more prop¬ 
 erly speaking, ‘ ‘ bad will. ’ ’ At any rate when the inflated 
 securities issued against it are offered daily, and bought 
 and sold on the market as if “ good will ’ ’ were a commodity 
 whose value fluctuates, quoted, perhaps, at 100 on the first 
 of the month and worth only fifty cents on the dollar a few 
 weeks later; paying dividends one year, and none the next 
 —“good will” is not markedly in evidence. 
 
 In plain language, “earning power” and “good will” 
 are nothing more than Capitalistic devices invented to con¬ 
 ceal the cardinal crime of OVERCAPITALIZATION. 
 
 Just Inflation 
 
 When we speak of Overcapitalization or Inflation, the 
 mind, somehow, harps on the inflated valuation of corpo¬ 
 rations. Yet that is only half the story. Inflation is the 
 order of the day, and it is universally practiced. Inflation 
 to the right of us; inflation to the left of us; inflation in 
 front of us; inflation all around us;—inflation everywhere, 
 based on false valuations arbitrarily raised to the uttermost 
 limit. 
 
82 
 
 The New Capitalism 
 
 I want to make this perfectly clear, and I ask the reader 
 to keep it in mind—viz., that when I speak of Overcapital¬ 
 ization or Inflation I do not mean only the overcapitalized 
 corporations, and which issue stocks and bonds against a 
 greatly inflated valuation; I also include inflated values of 
 properties that are not incorporated, such as real estate, 
 land, etc. In many cases the inflation predicable of such 
 properties is even greater than the inflation of corporate 
 properties. 
 
 I will not take a narrow view of, nor a niggardly stand 
 on value. I can subscribe to a healthy, fair and reasonable 
 increase in the value (price) of property, especially if the 
 increase is computed on an absolutely fair and reasonable 
 basis. I have nothing to say against a gradual and natural 
 increase, but I protest against sudden and tremendous 
 increases—in brief against artificial, excessive and arbi¬ 
 trary inflation. 
 
 This “inflation ’ 1 of valuation is now general, particularly 
 with regard to the valuation of real estate in the big cities. 
 It has given us excessively high rents. See for yourself 
 how it works: If I occupy a house whose value, inclusive 
 of the land, is $5000, and the landlord computes rental at, 
 let us say, ten percent on the actual value or the fairly 
 computed amount invested, I will have fairly reasonable 
 rent. But if the landlord raises the “value” of the prop¬ 
 erty which I occupy to $10,000, it is easy to see that he will 
 demand an excessive rent in order to earn ten percent on 
 the inflated valuation. 
 
 But it is not only residential property whose “value” 
 has been raised to the topmost limit. Business property 
 of all kinds, factories, offices and stores have been included 
 in the general scheme of inflation, with the result that the 
 occupants pay the higher rentals and pass them along to 
 the public. And the same process of “passing it along” 
 applies to every line of business or form of property of 
 which inflation can be predicated. And the non-investor 
 is “the goat.” 
 
CHAPTER IX 
 
 The Volume of Inflation 
 
 0 
 
 T HE overcapitalization of the corporate enterprises in 
 the United States is simply fabulous. Under cor¬ 
 porate enterprises might be included every kind of 
 corporate property—railroads, transportation systems, pub¬ 
 lic utilities, manufacturing industries, mining and sundry 
 other enterprises. But the paucity of statistics pertaining 
 to these different property classifications makes computa¬ 
 tion of their actual value and their fictitious valuations 
 difficult, almost impossible. Besides it is not necessary for 
 the immediate purposes of this book. I shall, therefore, 
 confine myself in this chapter to the one kind of corporate 
 properties for which fragmentary, rather than approximate 
 data are available—viz., the manufacturing industries. 
 
 If I were put to the necessity of making an estimate— 
 not a wild guess, but an estimate based upon careful com¬ 
 putations—I should say that the overcapitalization of the 
 manufacturing industries in the United States is four times 
 greater than the actual value of the properties. This has 
 been shown by actual figures, as regards the United States 
 Steel Corporation, by which, in round numbers, $500 of se¬ 
 curities were issued for every $100 of actual value of phys¬ 
 ical assets. Making due allowance for the passing of twenty 
 years of time, and taking everything into consideration, 
 and also, above all, because I want to be conservative and 
 fair to those concerned, I will say that the overcapitaliza¬ 
 tion of the manufacturing industries today is approximately 
 twice the amount of the actual value of the properties capi¬ 
 talized. That is to say, for every dollar of actual value— 
 
 83 
 
84 
 
 The New Capitalism 
 
 value fairly and liberally computed—of the productive in¬ 
 dustrial properties in the United States, two dollars of 
 inflation have been added. 
 
 “Where Ignorance is Bliss—’Twere Folly 
 
 to be Wise” 
 
 If we had complete data for all industrial properties, if 
 we had the complete figures for all the industrial corpora¬ 
 tions in the United States, if we had the totals pertaining to 
 the capitalization of these properties and the amount of 
 securities, common and preferred stock outstanding, and 
 bonds and notes issued, we could at least approximate the 
 total amount of inflation. But unfortunately, and for 
 reasons that we need not inquire into at this time, this 
 important information has never been put into concrete 
 shape for the convenience and edification of the general 
 public. In such works as Poor’s and Moody’s Manuals 
 we find a wealth of information, composed of thousands of 
 pages, with regard to the securities, industrial and others, 
 but no tabulated statistics covering these points. Other 
 statistical experts seem to be equally reticent. The United 
 States Government, in all its hundreds of volumes of star 
 tistics and data pertaining to hundreds of more or less 
 interesting subjects, has never attempted to publish any 
 statistics that would throw a definite light on this particu¬ 
 lar subject. Perhaps it is well for the peace of mind of 
 the public at large that the statistics pertaining to the 
 amount of overcapitalization, that is, of securities, sans 
 value, be not published. 
 
 “When Doctors Disagree, Disciples Then 
 
 Are Free” 
 
 In the absence, therefore, of any worth-while tabulations, 
 we are put to the necessity of approximating the situation 
 from a correlation, or piecing together, of fragmentary 
 (and sometimes contradictory) figures having bearing on 
 the points involved. 
 
 According to the 1920 Bureau of Census Statistics, the 
 
The Volume of Inflation 
 
 85 
 
 capital of 275,793 manufacturing establishments in 1914, 
 aggregated $22,790,980,000. In its latest Summary of Man¬ 
 ufactures, published October 4,1921, the United States Cen¬ 
 sus Bureau gives the capitalization of 289,768 manufactur¬ 
 ing establishments as $44,678,911,000—an increase of 
 twenty-two billion in six years; which would be at the 
 rate of about three and one-half billion a year. 
 
 It is to be remembered that ordinarily capitalization re¬ 
 fers to stock; it does not take into account the bonds and 
 notes issued by corporations. If the figures for bond and 
 note issues could be obtained and added to the stock issues, 
 the total securities issued by the industrial corporations 
 would yield a staggering figure. 
 
 Unfortunately there are no detailed statistics. Wherever 
 we encounter them they are incomplete, and unsatisfactory, 
 or camouflaged, or so twisted and turned as to be almost 
 irrelevant. For example: The Statistical Abstract of the 
 United States Census (1920) gives the Journal of Com¬ 
 merce and Commercial Bulletin of New York as the source 
 of the following statistics pertaining to “the capital in¬ 
 vested in new enterprises whose authorized capital equalled 
 or exceeded $100,000. ” 
 
 1917 . 4,607,894,100 
 
 1918 . 2,599,753,600 
 
 1919 . 12,677,229,600 
 
 1920 . 13,998,944,2001 
 
 Total. 33,883,821,500 2 
 
 One may ask: precisely what is meant by “capital 
 invested in new enterprises ’ ’ ? What about the new capital 
 invented from 1917 to 1920 in old enterprises? And does 
 the “capital invested” include notes and bonds as well as 
 stock issues, or only the latter? 
 
 1 Since January, 1921, following’ the decision of the United States 
 Supreme Court that stock dividends are non-taxable, there has been a 
 veritable orgy of inflation of capitalization. Billions of undistributed 
 surplus profits that had been allowed to accumulate pending the decision 
 of the Supreme Court, were transmuted into securities. In some in¬ 
 stances a four hundred percent stock issue was distributed. 
 
 2 According to the Summary of Manufactures for 1919, published by 
 the United States Department of Commerce, the capital of 290,111 
 establishments was $44,776,000,000. 
 
86 
 
 The New Capitalism 
 
 “Confusion Worse Confounded” 
 
 At any rate, according to these statistics, a total of nearly 
 thirty-four billion dollars was added to the various enter¬ 
 prises during four years. Yet we were told that in 1914 
 the capitalization of the manufacturing establishments 
 amounted to nearly twenty-three billion dollars. Adding 
 to this nearly twenty-three billion the nearly thirty-four 
 billion of “capital invested” from 1917 to 1920, the total 
 would be fifty-seven billion. Yet we were told as late as 
 October, 1921, that the capitalization of the manufacturing 
 establishments was approximately forty-five billion—a dif¬ 
 ference of twelve billion. (And be it remembered we have 
 not even touched upon the item “capital invested” from 
 1914 to 1917.) 
 
 All of which emphasizes the untrustworthy character of 
 the statistics upon which many financial writers base their 
 solemn dicta and cocksure asseverations. 
 
 Let me give you one more example of the utter unrelia¬ 
 bility of securities statistics. Please note that according 
 to the United States Census Statistics (see statistics, page 
 85) “the capital invested in new enterprises” in 1920 was 
 $13,998,944,200. Then compare that with the following 
 from the New International Year Book for 1920: 
 
 “Issues of new domestic corporate securities in 1920 
 aggregate $3,107,000,000, of which $1,157,000,000 were 
 stocks. Total issues exceeded those of 1919 by $86,000,000. 
 Of the total, $416,000,000 were offered by railroads, and 
 $2,691,000,000 by industrial concerns. The amount of new 
 long term municipal bonds issued was $653,000,000, while 
 loans of foreign companies and corporations placed here 
 aggregate $345,000,000. It would thus appear that the 
 grand total of security issues in this country in the year 
 1920, exceeded $4,000,000,00.” 
 
 Ten Billion Dollars of Securities a Year 
 
 What do you make of it? Isn’t it confusing? But let 
 us proceed; perhaps light will break through a rift in the 
 clouds. 
 
The Volume of Inflation 
 
 87 
 
 The Wall Street Journal, which ought to know whereof 
 it speaks, early in 1921, in an endeavor to explain the great 
 decline in stocks and sundry securities, gives a list of ten 
 reasons for the decided downward movement, among which 
 we find these three: 
 
 “Flotation of companies at inflated valuations, par¬ 
 ticularly petroleum companies without established merit. 
 
 “Too many securities for the public properly to digest. 
 As an example, over four hundred issues were recently 
 traded in on the New York Stock Exchange in a single 
 five-hour session. Close to one-third of the issues were 
 stocks listed over the last year or two. In three years there 
 has been an increase in total of public and private bonds 
 and stocks listed on the New York Stock Exchange of 
 something like $30,000,000,000, or at the rate of $300 per 
 capita. Add new stocks not listed, and the total will reach 
 a much larger figure. 
 
 “Billions in new financing, including flotation of hun¬ 
 dreds of millions of dollars of foreign securities in this 
 market. ’ 9 
 
 From this confusion of conflicting statistics I return to 
 my original statement made in the beginning of this chap¬ 
 ter, viz., that for every dollar of actual value of the pro¬ 
 ductive industrial properties in the United States, two 
 dollars of inflation have been added. 
 
 The Public Pays the Interest 
 
 If we accept the statistics of the United States Census 
 Bureau, published October 4, 1921, according to which the 
 capitalization of 289,768 manufacturing establishments is 
 $44,678,911,000—forty-five billion in round numbers—then 
 the actual value of the plants would be fifteen billion dol¬ 
 lars, and thirty billion would be sheer inflation. But the 
 public is paying interest on this thirty billion of inflated 
 capitalization. Computing the interest at six percent the 
 public is being mulcted of $1,800,000,000 a year on this one 
 item alone. In addition to capital stock there are bond and 
 note issues against the inflated valuation of the industrial 
 
88 
 
 The New Capitalism 
 
 properties, on which the public is also paying interest. 
 And mark you well! this is predicated only of manufactur¬ 
 ing establishments; it does not include railroads, public 
 utilities, mines, etc., for which I shall make no estimate for 
 the present. You may make your own computations if you 
 care to pursue the subject further. 
 
 A “Saltus Lyricus” 
 
 Now for an abrupt transition. Two lessons at least, we 
 learn from this chapter, and they stand out clear and 
 strong from the maze of stupendous figures and conflicting 
 statements. They are: 
 
 1: That the aggregate corporate securities issues are simply 
 tremendous. 
 
 2 : That the securities issues are out of all proportion to the 
 actual value of the properties against which they are 
 issued. 
 
 Writing at a time (1883) when pools, syndicates and 
 mergers were in their experimental stages, and consolida¬ 
 tions, monopolies and Trusts in their infancy; when stock 
 and bond issues were not so recklessly floated as at present, 
 Henry Demarest Lloyd 3 said that “ Securities have become 
 as staple an article of production with us, as wheat, cotton, 
 oil or hogs. One million dollars worth a day of stocks and 
 bonds is needed in prosperous years to supply the demands 
 of the New York Stock Exchange. . . 
 
 Thirty-eight years ago, according to Henry Demarest 
 Lloyd, one million dollars worth a day of stocks and bonds 
 was needed “to supply the demands of the New York Stock 
 Exchange . 91 Mr. Lloyd was simply horrified; and yet one 
 million dollars a day was only about a third of a billion 
 of securities issues a year. 
 
 How does that compare with the securities issued today? 
 Basing my estimate on the sundry statistics and statements 
 quoted in this chapter, I think it is exceedingly conserva¬ 
 tive to say that during the last three years corporate secur- 
 
 3 “Making- Bread Dear,” North American Review, August, 1883. 
 
The Volume of Inflation 
 
 89 
 
 ities of all kinds (stocks, bonds, notes) were issued at the 
 rate of five billion dollars a year; or about 416 million a 
 month; or about 16 million a day; which is approximately 
 two million dollars of securities every hour of every 
 working day in the year. 
 
 What pikers they must have been in the times of which 
 William Demarest Lloyd wrote! For every dollar of secur¬ 
 ities issued in 1883 we are today issuing sixteen dol¬ 
 lars of securities; for every million they issued thirty-eight 
 years ago, we are issuing sixteen million! 
 
 “He Babbled o’ Green Fields”—Shakespeare 
 
 Even now I hear a babble of voices, all clamoring to be 
 heard in defense and justification of the tremendously 
 greater securities issues of today. ‘‘We have grown tre¬ 
 mendously in population, in size, in wealth, etc.,” they are 
 saying in chorus. 
 
 Aye, we have! That I will not even attempt to deny! 
 But, hear me now: The volume of ~bona fide business was 
 not sixteen times greater than in 1883; the popula¬ 
 tion was not sixteen times greater; the production 
 was not sixteen times greater, and consumption was 
 not sixteen times greater; exports were not sixteen 
 times greater, and certainly the increase in the physical 
 assets, or in the legitimate value of the properties was not 
 sixteen times greater; then why should the volume of 
 corporate stocks and bond issues be sixteen times greater? 
 Perhaps some economic Solomon will arise among us to 
 explain; perhaps some statistical wizard will enlighten us 
 on this important point, or some camouflage expert will set 
 us right. 4 
 
 * Those who are disposed to contend that I have exaggerated the 
 volume of securities issued, or that the statistics on which I base my 
 estimate are open to criticism, or need qualification, are at liberty to 
 substitute the correct figures (if they have them) for those I have 
 given. Indeed I shall not mind if they cut down my claim by fully 
 one-half. In that case we would be issuing about eight dollars of se¬ 
 curities for every dollar issued in 1883. In that case, too, I would 
 maintain that population, production, consumption, etc., is not eight 
 times greater than in 1883. 
 
90 
 
 The New Capitalism 
 
 “How Long, 0 Lord, How Long—” 
 
 How long is this debauch of issuing “securities” at the 
 rate of say from four to five billion a year going to 
 continue? Where is it going to stop? When will the 
 bubble burst? Even though the tremendous increase were 
 justified by growth in the volume of business, population, 
 production, consumption, exports, etc.,—this I contend, 
 that the end of possibilities is in sight. Certainly the enor¬ 
 mous increase observable from 1883 to 1920 cannot be 
 duplicated during the next thirty-eight years; nor can the 
 same percentage of increase be maintained for any length 
 of time. 
 
 Maturing Securities 
 
 But I hear a murmur among the defenders of the 
 Capitalistic System, growing louder and louder, finally 
 bursting into an angry shout of accusation against me for 
 having overlooked a most important point, viz., that there 
 are maturing securities which must be taken into account. 
 
 That is a very good point, and cognizance must be taken 
 of it in any book or article pretending to discuss the sub¬ 
 ject of securities issues. Indeed so important is this point 
 that I prefer to let an authority speak for me. 
 
 The 1920-21 edition of “Poor’s Handbook of Investors’ 
 Holdings,” prepared entirely from the latest published 
 official data, and including the holdings of about three 
 hundred and eighty companies additional to those appear¬ 
 ing in last year’s issue, devoted seventy-five pages (six 
 point type, double column) to a list of securities maturing 
 from January 1, 1921, to December 31, 1923. “This com¬ 
 pilation, ’ ’ we are told in the preface, ‘ ‘ covers all the secur¬ 
 ities in which there is known public interest, embracing 
 bonds, notes, etc., of Steam Railroads, Street Railways, 
 Public Utilities and Industrial, Mining and Miscellaneous 
 Corporations.” 
 
 These maturing securities aggregate $2,664,337,634, which 
 is less than ten percent of the new securities issued during 
 
The Volume of Inflation 
 
 91 
 
 the past three years. In other words, for every dollar of 
 maturing securities nine dollars of new securities are 
 issued; for every million of maturing securities, nine million 
 new securities are issued. Or, to express it more in con¬ 
 formity with the basis of calculation adopted in this chap¬ 
 ter: Securities are maturing at the rate of about 880 
 million dollars a year; or about 74 million a month; or 
 about $2,500,000 a day. 
 
 “Maturing Securities” that Perpetuate 
 
 the Debt 
 
 But that is not the end of our story. The practice of 
 issuing new stocks and bonds and selling them in order to 
 pay off the maturing securities, is growing alarmingly. As a 
 matter of fact, many of the maturing securities are not 
 retired , they are merely refunded; and thus the liability or 
 debt is perpetuated. This is called high corporate finance 
 ■—a fine scheme for the holders of the maturing securities, 
 and bankers and brokers, but it does not lighten the burden 
 for the non-investors, who will continue to be taxed in 
 order to pay the interest on the new securities issued 
 against the old debt. A solitary example will illustrate 
 the point. 
 
 In a press clipping, dated Washington, May 21, 1921, 
 we read of a new bond issue jointly made by the Northern 
 Pacific Railway Company and the Great Northern Railway 
 Company: 
 
 ‘‘These corporations have bonds now due that amount 
 to $215,227,000, bearing 4 y 2 percent. To renew this 
 indebtedness they have been authorized by the interstate 
 commerce commission to issue $230,000,000 at 6% percent 
 interest. The higher interest is justified by the railroads 
 on the ground that ‘many brokers whom they have con¬ 
 sulted’ have advised them that this is necessary. 
 
 “The new bonds are nearly $15,000,000 in excess of the 
 amount of the indebtedness. The difference goes to bankers, 
 brokers and investment dealers, who will receive a com¬ 
 mission for every $100 sold. The market value of the 
 
92 Tlie New Capitalism 
 
 bonds—what the public pays—is $96.50 for every $100 
 bond. 
 
 ‘ ‘ This bond issue means that the people are saddled with 
 an additional tax of $15,000,000, at 6% percent interest, 
 and because the interest rate on $230,000,000 bonds is 
 increased from 4 y 2 percent to 6% percent, the public must 
 also pay this increased wage for the dollar.” 
 
 Hundreds of similar cases could be cited, all empha¬ 
 sizing that in order to pay maturing bonds, corporations 
 simply issue new bonds. In good business practice the 
 bonded debts of a concern or corporation should be liqui¬ 
 dated out of the earnings; that is to say, should be paid off 
 out of a sinking fund. A business that cannot pay off 
 its bonded indebtedness in the course of fifteen or twenty 
 years, out of its sinking fund, is being mismanaged and 
 deserves to be put through bankruptcy proceedings. The 
 management of a concern or corporation that cannot con¬ 
 duct its business so as to clear it of its burdening incum¬ 
 brances is incompetent, and ought to be removed by the 
 stock and bond holders. The practice, at present, almost 
 universally employed, of meeting maturing debts by new 
 bond issues, is immoral and reprehensible, besides offering 
 all kinds of opportunities for inside jobbing, a phase of 
 the subject which I shall not discuss at this time. 
 
 Let it be understood that I am not against the bonding 
 of properties; in fact I accept it as a business necessity. 
 But what I do object to is the manner in which maturing 
 bonds are paid—or rather perpetuated—viz., by the sale 
 of other stocks or bonds; and most strenuously do I object 
 to this method, because making a debt upon a property 
 perpetual and even increasing it, and the interest charges 
 thereon, means compelling the public to pay perpetual 
 interest upon the original and the increased debt. 
 
 Where the Non-Investor Comes In 
 
 There we have the nexus of this whole subject. The non¬ 
 investor must pay it all. Here you have the principle 
 clearly stated. It is the chief explanation of the High Cost 
 
The Volume of Inflation 
 
 93 
 
 of Living that is afflicting the nation. Whether 20, or 50, 
 or 100 billions of inflation has been added to the actual 
 value of the properties in the United States, it is a burden 
 of ponderous proportions placed upon the backs of the 
 sixteen million families—a gigantic debt against every man, 
 woman and child—the interest on which must be paid by 
 the non-investor public; and it is collected through the 
 instrumentality of higher prices. The greater the debt the 
 greater the interest charge; the greater the interest charge 
 the higher the prices; the higher the prices the higher the 
 Cost of Living. That is clear! 
 
 Not only is this debt perpetual, it is cumulative; it in¬ 
 creases year after year. Whatever the exact amount of 
 the inflation may be at this hour—whether 20, or 50, or 
 100 billion—or more or less—unless radical changes are 
 made in the present corporation finance methods—it is 
 likely that at the end of another eighteen or twenty years 
 the debt charged up against the non-investors will have 
 doubled itself. Let me explain what I mean, by giving 
 you a concrete illustration. Let us assume that instead of 
 cash, J. Pierpont Morgan received 62 y 2 million dollars of 
 stock for organizing the United States Steel Corporation. 
 That was the reward for his genius. He didn’t put in a 
 single dollar, but the stock he received increased his wealth 
 62 1 / 2 million dollars. Now, figuring the interest he was to 
 receive at only five percent, Mr. Morgan drew from the 
 corporation $3,125,000 a year. Within twenty years he (or 
 his heirs) will have drawn out from that one corporation 
 alone, 62 y 2 million dollars, or the full amount of the face 
 value of the stock given him. Then the same process begins 
 over again; that is to say, every twenty years he (or his 
 heirs) will have drawn out 62y 2 million dollars. Within 
 a hundred years his heirs or their descendants, will have 
 drawn out of that one corporation alone, $312,500,000. 
 
 The Era of Super-Overcapitalization 
 
 The pioneer period of arbitrary overcapitalization of 
 industries has successfully demonstrated the possibilities of 
 
94 
 
 The New Capitalism 
 
 a System of exploitation. In the beginning overcapitali¬ 
 zation was computed on the basis of a six percent * ‘ earning 
 power ’ 9 on the amount of capital actually invested. But 
 now the era of swper-overcapitalization has begun. Hence¬ 
 forth the stock and bond issues will be based on the 
 “earning power” of the inflated valuation. Through the 
 simple device known as declaring “stock dividends” the 
 overcapitalization will increase automatically, thus making 
 the debt perpetual and yielding cumulative interest. This 
 means placing a crushing weight upon the non-investors. 
 
 Can they continue to carry the load? My answer is, 
 they cannot! And I will add that once they understand 
 what has been and is being done to them, they will not only, 
 through their combined strength, throw off the burden, 
 but abolish or even destroy the Capitalistic-Mammonistic 
 Sj^stem that aims to crush them. 
 
CHAPTER X 
 
 The Capital Crime of Overcapitalizatiox 
 
 I T IS one thing to say that overcapitalization is the evil 
 tree that has produced, if not all, at least most, of our 
 economic troubles, and quite another thing to prove it. 
 It will not do merely to make assertions; I must be able to 
 give definite and demonstrable reasons for the opinions I 
 hold. For years I have held that overcapitalization is fun¬ 
 damentally wrong; that although sanctioned by law it is 
 wicked and indefensible; economically it cannot be con¬ 
 doned; from a business standpoint it must be condemned 
 as a “delusion and a snare” and altogether unsound. I 
 shall not categorically animadvert on these points in this 
 chapter, but my collective contention will be made clear 
 when this work is taken in its entirety. 
 
 More recently I have maintained that overcapitalization 
 is the fundamental cause for the High Cost of Living, and 
 entirely to blame for the decrease in the purchasing power 
 of mcney. I furthermore maintain that the system of 
 overcapitalization is responsible for the system of inade¬ 
 quate wages, and the determination of Capitalistic employ¬ 
 ers to keep the wages of the mass of workers even below a 
 mere living basis. All these, and many other things, I 
 shall try, in the course of this book, to prove to anyone 
 amenable to reason and disposed to be fair; to anyone 
 whose mind is not saturated with Capitalistic toxins and 
 whose pockets are not bulging with ill-gotten gains—thanks 
 to the ingenious Capitalistic System. 
 
 The Party of the First Part 
 
 For the sake of brevity and greater lucidity let us con¬ 
 sider the effect of overcapitalization upon the two parties 
 
 95 
 
96 
 
 The New Capitalism 
 
 concerned—the chief beneficiaries of the Capitalistic Sys¬ 
 tem—the Capitalistic group; and the non-beneficiaries—the 
 non-investors—the public. The beneficiaries we will call 
 the Party of the First Part. 
 
 Great and calculable benefits have accrued to the Capital¬ 
 istic Entrepreneurs through the creation of ouercapital. 
 Let me briefly summarize the immense benefits and mani¬ 
 fold advantages that redounded to the Capitalistic Entre¬ 
 preneur group: 
 
 1: Overcapitalization at least trebled (in many cases in 
 the beginning quadrupled and quintupled) the wealth of 
 the constituent members of the Capitalistic System. 
 
 2: Overcapitalization at least trebled the profits of the 
 beneficiaries of the System. 
 
 3: Overcapitalization at least trebled the credit , i.e., the 
 borrowing power, of all the persons concerned. 
 
 4: Overcapitalization conferred upon every member in 
 the Capitalistic group a greatly increased capacity for 
 speculating in stocks and bonds. 
 
 These, in brief, are the cardinal benefits from which 
 innumerable minor advantages have flowed, all emptying 
 into the coffers of those chiefly concerned. 
 
 Long before overcapitalization of the industrial corpora¬ 
 tions became general the control of capital and credit was 
 centered in a small group. Overcapitalization increased 
 the hold and power of this small group, which automatically 
 became the nucleus—the heart—of the greater Capitalistic 
 System. It was overcapitalization that brought into the 
 charmed circle of the Capitalistic Entrepreneurs,' hundreds 
 —and their number in time grew into thousands—of new 
 men, all of whom can directly trace their rise to greater 
 wealth and power to the date of the inclusion of their 
 ‘ * recapitalized ’ ’ corporations into the System. 
 
 The Master Mind 
 
 J. Pierpont Morgan was able to organize the United 
 States Steel Corporation primarily because he was the head 
 of the banking house of J. P. Morgan & Co. In the finan- 
 
The Capital Crime of Overcapitalization 97 
 
 cial oligarchy he was the recognized dictator; his will was 
 law, his mere nod a command, his power greater than that 
 of a Czar. But even a financial potentate requires some¬ 
 thing more than autocratic power, and this something more, 
 if I have read the records correctly, J. Pierpont Morgan 
 possessed to an uncanny degree. No doubt others before 
 him had vaguely sensed the possibilities of mergers, com¬ 
 bines and consolidations, but they lacked his resourceful¬ 
 ness, and so their visions never fructified. Although navi¬ 
 gators before Columbus may have dreamed of an El Dorado, 
 only Columbus translated his dream into a voyage beyond 
 the charted seas. 
 
 With all his dictatorial power Morgan could not have 
 successfully organized the United States Steel Corporation 
 had his genius not prompted him to perfect the machinery 
 that enabled him to carry out his plans. The particular 
 machinery which carried the United States Steel Corpora¬ 
 tion, as well as every other ‘ ‘ reorganized ’ ’ corporation since, 
 over the rocks of disaster to the haven of security, is over- 
 capitalization. It wasn’t the amount of money in Mr. 
 Morgan’s and the allied banks, and which the dictator could 
 have commandeered had he deemed it necessary, that made 
 the United States Steel Corporation a success; nor yet the 
 credit he might have commanded in an emergency. It was 
 the amount of money that wasn’t in Mr. Morgan’s, or 
 allied, banks; it was the amount of money that didn’t exist 
 —that had neither been minted, nor printed, and for which 
 there was no gold or silver bullion in the United States 
 Treasury vaults, nor any place on earth; it was the amount 
 of wealth that existed only in the Morgan mind, and which 
 the master conjurer made his audience believe actually 
 existed; it was the amount of capital that his legerdemain 
 persuaded the world into imagining into existence that is 
 responsible for the financial success of the United States 
 Steel Corporation, as well as every other so-called success¬ 
 ful corporation organized since, according to the plans and 
 specifications laid down by Morgan, the conjuror. 
 
 Mr. Morgan’s remarkable feat of organizing the most 
 
98 
 
 The New Capitalism 
 
 gigantic corporation in the world, stamps him less a wizard 
 of financiering than as a bold necromancer, and master of 
 the black art of Inflation. The magician on the stage 
 shows his audience an empty silk hat, over which he waves 
 his wand; and lo, extracts from it a white rabbit. Mr. 
 Morgan drew from his empty hat not only a single white, 
 unresisting rabbit—but hundreds of millions of wealth and 
 capital. No magician ever succeeded in deceiving his audi¬ 
 ence as he succeeded in deluding the people into believing 
 that there was wealth where there was no wealth; capital 
 where there was no capital; value where there was no 
 value; property where there were no assets; and property 
 rights where there was neither capital, wealth, assets nor 
 value. That his wonderful performance won the admira¬ 
 tion, applause and approval of the men who found them¬ 
 selves made rich over night, goes without saying. That 
 thousands of imitators, lacking *his originality and genius, 
 quickly learned the trick and have since duplicated his 
 performance with a fair degree of success to themselves and 
 others, is a matter of common knowledge. It cannot be 
 denied that the creation of fictitious wealth by a stroke of 
 the pen makes a powerful appeal to the imagination, par¬ 
 ticularly since the wealth thus created can be converted 
 into counterfeit capital and be made the basis for credit 
 out of which further capital accumulations quickly result. 
 
 Papier Mache Millionaires 
 
 It is a matter of history that when the United States 
 Steel Corporation was organized, scores of men became 
 millionaires over night. The automatic increase in the 
 wealth of the individuals immediately concerned is the note¬ 
 worthy thing about this whole business of overcapitaliza¬ 
 tion. The man in a given concern, and whose holdings 
 therein are worth, fairly valued, let us say, $500,000, 
 tw T enty-four hours later considers himself, and is rated, 
 worth a million or two. His wealth is increased—doubled 
 or trebled—by a mere resolution of a Board of Directors; 
 his fortune augmented by a stroke of the pen. 
 
The Capital Crime of Overcapitalization 99 
 
 The inherent immorality of arbitrarily inflating the 
 wealth of individuals, or families, from the million dollars, 
 fairly computed, to say three million dollars; or from ten 
 million to thirty million; or from thirty million to ninety 
 million; or from one hundred million to three hundred 
 million; and so on without limit and without rhyme or 
 reason, must be apparent to all w T hose sense of decency 
 is still able to function. 
 
 Thousands of men today consider themselves worth a 
 certain amount, which, when reduced to actual facts and 
 figures, would be considerably less. Their wealth is largely 
 fictitious; it has no assets behind it—nothing more substan¬ 
 tial than a mythical ‘ ‘ earning power ’ ’—which does not and 
 cannot reside in the fictitious wealth itself, but is derived 
 wholly from the paying power of the Party of the Second 
 Part—the public. Thousands of so-called millionaires only 
 imagine that they are millionaires. I would not venture 
 to ruthlessly destroy the delusions of these papier mache 
 millionaires were it not for the fact that they are hugging 
 their delusions to their souls at my expense—at the expense 
 of all non-investors—the public. The non-investors are 
 penalized through the medium of higher prices for life's 
 commodities. The millions of inflation taken in the aggre¬ 
 gate now run far into the billions. It is on this enormous 
 increase of non-existing wealth that the public must pay 
 interest and dividends, as we shall see in the course of 
 this book. 
 
 An Objection Ansivered 
 
 “What difference does it make," said a friend of mine 
 who knows my views but who has strong leanings toward 
 the present Capitalistic System and would defend it 
 against all attacks, “what difference does it make whether 
 a corporation earning, say $240,000 considers this amount 
 as twenty-four percent on a million dollars invested, or six 
 percent on four million invested? In other words, what 
 difference does it make whether the capitalization in the 
 
100 
 
 The New Capitalism 
 
 case given is one million or four million? I cannot see 
 that it makes any difference at all.” 
 
 My friend is only one of thousands who take this view— 
 they cannot see any difference! “None so blind as he who 
 does not want to see! ’ ’ May I not ask the valiant defenders 
 of the present Capitalistic System, and apologists for all its 
 practices: “If it makes no difference, why do it?” Evi¬ 
 dently, in the minds of those most concerned, there is a 
 difference—and the difference is strongly in their favor, 
 or they would not do it. In the case given the amount of 
 earnings would be the same, viz., $240,000; but the trial 
 balance sheet would read differently. Without the camou¬ 
 flage of overcapitalization the claim that capital earns only 
 six percent is exposed as an outrageous lie. The Capital¬ 
 istic device of a mythical six percent “earning power” is a 
 lie! Capital, under the segis of overcapitalization, earns 
 many times more than six percent on every dollar actually 
 invested, as I shall hope to establish in the course of this 
 book. What I am trying to establish at the present moment 
 is that it does make a difference whether a corporation 
 earning $240,000 is capitalized for a million or for four 
 million. Let me ask: “What is the amount actually 
 invested?” “One million,” says my friend. Then why 
 pretend that four million are invested? It is simply an¬ 
 other gross lie. And these lies we find everywhere; it is 
 upon lies that the Capitalistic System is builded; lies are 
 its sustaining props. 
 
 When a corporation overcapitalizes two, three or four 
 times, in excess of its actual value, it is but compelling the 
 public to pay interest on wealth that doesn’t exist, and 
 dividends on capital that does not exist. That is an eco¬ 
 nomic injustice, not to be tolerated much longer. 
 
 But I do not want to wander from my point. Over- 
 capitalization does make a difference. It increases the 
 wealth of the individuals immediately concerned in that 
 they are given securities of a mythical ‘ ‘ value ’ ’ three times 
 as great as the actual value of the assets. 
 
The Capital Crime of Overcapitalization 101 
 
 Fictitious Borrowing and Trading Power 
 
 But that isn’t all. The issuance, sale, or conveyance of 
 securities largely in excess of the existing assets, auto¬ 
 matically increases the credit facilities or borrowing power 
 of the persons concerned. All of which is fine for the per¬ 
 sons immediately concerned, the borrower; and a splendid 
 source of profit for the banks, which, as is pretty generally 
 known, are under the dominance of the chief Capitalistic 
 Entrepreneurs. For, the inflated securities are collateral, 
 and are accepted as such without question by the creators 
 of fictitious values. The borrowings are “reinvested” in 
 other inflated securities. Beyond a doubt considerably 
 greater sums of money can be made by the favored few 
 than would be possible under a system not based on over- 
 capitalization. 
 
 Another great advantage to the immediate beneficiaries 
 of the Capitalistic System lies in their ability to trade in 
 and juggle their securities on the Stock Exchange, from 
 which transactions probably as great, if not greater, profits 
 are derived in the course of a year, than from their busi¬ 
 ness enterprises. 
 
 It must be clear that an increase in interest-bearing 
 wealth and dividend-paying capital; an increase in col¬ 
 lateral, which creates a greatly augmented borrowing 
 power; which in turn confers the power to use a larger 
 amount of capital to 1 i invest 9 ’ in other securities, thus multi¬ 
 plying profits; besides the opportunity of repeatedly selling 
 and buying their own securities, generally at a profit, con¬ 
 stitute a combination of advantages that are of incalculable 
 benefit to any component member of the Capitalistic group. 
 Does overcapitalization make any difference ? It does! A 
 most decided difference! Even under the old Capitalistic 
 System of non-inflation—the era antedating the organiza¬ 
 tion of the United States Steel Corporation—numerous 
 benefits accrued to the proprietors, but at least they were 
 content with returns on actual investments—not imaginary 
 investments; interest on actual wealth, not fictitious wealth. 
 
102 
 
 The New Capitalism 
 
 The possibility of accumulating wealth more or less real, 
 and certainly far in excess of any substantial wealth it 
 would be possible to accumulate sans the device of over- 
 capitalization; and the ability to command credit which 
 can be converted into profit earning capital, has, naturally 
 enough, recommended the trick of overcapitalization—it is 
 nothing more than a trick, and a scurvy trick at that—to 
 all hungering after greater wealth and not particularly 
 scrupulous as to how it is acquired. 
 
 No Property Rights Where There Is No 
 
 Property 
 
 During the past twenty years I have read a number of 
 ponderous books dealing with Property and its Rights— 
 books in which the authors with a great show of learning 
 and many elaborate legal definitions ably defended their 
 thesis. On the general thesis I am in accord with these 
 writers. It is not to dispute or controvert aught that has 
 been written on these subjects that I propose the question: 
 Can there be Rights where there is no Property; or can the 
 rights in a certain piece of property be greater than the 
 actual fairly computed value of that piece of property? 
 
 To discuss this subject even half way would require 
 many chapters. I shall make no attempt to discuss it. 
 However, I will briefly state the principle involved. The 
 acquisition and possession of property is a sacred indi¬ 
 vidual right. All laws are based on the principle that the 
 rights of property are paramount; and their interpretation 
 by courts proclaims the rights implied by possession in¬ 
 violable and impregnable. I accept this status. I have 
 the utmost respect for property, and shall always defend 
 its rights. But I maintain that there are certain limitations 
 with regard to property and its rights—which no man, nor 
 group of men, has the right to transcend. Property own¬ 
 ership may be absolute; but property rights are only 
 relative. A property owner cannot do with his property 
 as and what he chooses; there is a limit beyond which he 
 cannot go, nor be permitted to go. A gun is a piece of 
 
The Capital Crime of Overcapitalization 103 
 
 property, the owner of the gun a property owner; but the 
 owner of the gun cannot, even if it pleases him, or is to 
 his advantage, shoot his neighbor with his undoubted prop¬ 
 erty—his gun—with impunity. 
 
 A man who owns a twenty dollar gold piece, minted by 
 the United States Government, is the absolute owner of it; 
 it is his property. All the legislatures cannot deprive him 
 of his property; the courts must recognize and protect his 
 rights in it. But if the owner of that twenty dollar gold 
 piece were to melt it in a pot that belongs to him, and mix 
 it with cheaper metals, all of which belong to him; and 
 with tools belonging to him, converts the twenty dollar 
 United States gold piece into five twenty dollar counterfeit 
 coins, he would be punished, in spite of the fact that the 
 original twenty dollars, and all the baser metals, and all 
 the materials and tools he employed, are his undisputed 
 property. Surely there is none to assert that the owner’s 
 property rights in a twenty dollar gold piece is more than 
 coextensive with the actual value of his property, nor that 
 his absolute ownership gives him the right to trample upon 
 the rights of, or defraud, his neighbor. 
 
 If the rights of an individual in property of which he is 
 the sole owner and actual possessor are circumscribed, we 
 can certainly challenge the validity of rights in property 
 that does not exist. Thus, for example, we may ask, are 
 the property rights of the stockholders in a corporation 
 greater than the value of the properties themselves. If the 
 actual value of the physical properties of a corporation 
 fairly computed, is $100,000, but the officials of the cor¬ 
 poration arbitrarily give it an inflated valuation of $500,000 
 and issue against it $500,000 of stock, does the inflation 
 process raise the rights of the stockholders from one hun¬ 
 dred thousand dollars to five hundred thousand? Surely 
 a $100 stock certificate issued against $20 of actual value, 
 confines the stockholders’ rights to the latter figure. 
 
 As a general proposition I maintain that there can be no 
 rights where there is no property; and that the property 
 rights of stockholders can be no greater than the actual 
 
104 
 
 The New Capitalism 
 
 value of the property against which the stock is issued. 
 I deny that corporation officials or Boards of Directors 
 have the right to arbitrarily and fictitiously raise values. 
 If they have this right, or authority or power, by whom 
 was it conferred? Has the counterfeiter the right or 
 authority or power to convert a $20 gold piece into five 
 $20 counterfeit coins? Certainly not! Neither have cor¬ 
 poration officials the right to convert $20 of property value 
 into $100 of stock value. 
 
 Calling Things by Their Right Name 
 
 I care not by what laws sanctioned nor by what courts 
 sustained, the whole thing is a crime against justice, a 
 violation of every law of decency. The practice cannot be 
 defended any more than the counterfeiter can be defended. 
 
 There is not a state in the Union that has not a law on its 
 statute books aimed against the check-raiser and check 
 forger. In some states it is considered criminal to issue a 
 check against a bank in which its issuer has no deposits; 
 and within recent years attempts have been made to declare 
 the drawing of a check for an amount greater than the 
 drawer has on deposit a criminal offense. 
 
 It is well known that the United States Government 
 relentlessly prosecutes and severely punishes the counter¬ 
 feiter. What happens to the man who raises a ten dollar 
 bill to one hundred dollars? Or converts a twenty dollar 
 gold piece into five spurious coins of a supposed value of 
 twenty dollars each? Will the Government condone the 
 offense ? Does the Federal Court extend clemency or 
 mercy to a counterfeiter? Not even when the crime was 
 committed to provide food for the criminal’s wife and 
 children ! x 
 
 I may be old fashioned and behind the times; or perhaps 
 my training in logic was defective, but for the life of me 
 
 1 With what severity the Court punishes infractions of certain laws 
 may be judged from the following news item : New York, July 20.— 
 Theophilus A. Frey, 40, of Davenport, Iowa, was sentenced today by 
 Judge McIntyre in General Sessions to from 14 months to five years in 
 Sing Sing prison. Frey is said to have sold between $150,000 and 
 $200,000 worth of worthless stock in a Wyoming oil company. 
 
The Capital Crime of Overcapitalization 105 
 
 I can discern no material difference between issuing a check 
 against a bank in which the issuer has no deposits and 
 issuing ‘ ‘ securities ’ 7 against assets that do not exist. I can 
 discern no moral difference between the counterfeiter who 
 raises a ten dollar bill to one hundred dollars, or converts 
 one twenty dollar gold piece into five twenty dollar pieces, 
 and a corporation that issues one hundred dollars of secur¬ 
 ities against twenty dollars of actual value. 
 
 Through the instrumentality of overcapitalization bil¬ 
 lions of dollars of ‘‘securities 77 (call them rather ‘‘inse¬ 
 curities”) have been issued against inflated valuations— 
 i.e., against a fictitious valuation many times greater than 
 the actual value of the existing assets. We have heard a 
 great deal within recent years about the printing presses 
 of Russia, Germany, Austria and other European coun¬ 
 tries turning out unlimited quantities of paper money. The 
 principle upon which the bankrupt governments of Europe 
 issue these vast quantities of paper money is in no wise 
 different from the principle of inflation upon which cor¬ 
 porations issue large quantities of so-called “securities” of 
 a face value greatly in excess of the actual value of their 
 assets. 
 
 Actual Value and Inflated Valuation 
 
 When we discuss a subject of this kind we encounter all 
 kinds of objections. Thus I have discovered a disposition 
 on the part of certain passionate defenders of, and apolo¬ 
 gists- for, the Capitalistic System to challenge the conten¬ 
 tion that it is wrong and wicked to overcapitalize an indus¬ 
 try in excess of its actual value. ‘ ‘ What is value ? ’’ asked 
 one of these valiant defenders. “Who can say what a piece 
 of property is actually worth ? ” To philosophically define 
 the word value and enter into a discussion of its absolute 
 character and related characteristics, would require a sepa¬ 
 rate volume; but for the benefit of those sensitive souls, 
 disposed to be generous in defense of their beloved System, 
 let us take a concrete example. 
 
 The sundry properties that were consolidated into the 
 
106 
 
 The New Capitalism 
 
 United States Steel Corporation seem to have had a value 
 (most liberally computed) of $562,000,000 on March 31, 
 1901; but on April 1,1901, or thereabouts, these same prop¬ 
 erties were declared to have a value of $1,400,000,000. If 
 there is to be any discussion about the exact meaning of 
 the word value, or what constitutes value, it seems to me 
 that I, rather than those opposed to me, have a right to 
 ask questions. Who, for example, gave Mr. Morgan the 
 right and the power to capitalize for $80,000,000, properties 
 (The National Tube Co.) which one of his own agents 
 declared were worth, everything included, only about 
 $19,000,000? Who gave Mr. Morgan the right and the 
 power to add to the “value” of the properties of the 
 Carnegie Steel Company, estimated by Mr. Carnegie him¬ 
 self as worth between seventy-five and one hundred million, 
 a mythical value of three or four hundred million? 
 
 When these elementary questions have been answered 
 satisfactorily by those qualified and possessing authority 
 in the premises, I shall be glad to discuss the subject more 
 fully in due time. In the meantime, and for the sake of 
 clarity, I wish to state here that for the purposes of this 
 book, when I speak of value of property I have in mind 
 the amount of capital actually invested in the properties 
 concerned. And let it be understood that, in addition to 
 the amount of capital actually invested, I am willing to 
 make due allowances and liberal concessions—in brief I am 
 willing to accept a fair and reasonable estimate of values 
 of properties, but not an excessively inflated valuation, 
 arbitrarily fixed by interested parties. 
 
 When Is a Crime Not a Crime 
 
 In December, 1921, Henry Ford proposed a plan for the 
 financing of the Muscle Shoals plant. Mr. Ford proposed 
 that instead of floating a bond issue which would inevitably 
 fall into the hands of Wall Street brokers and bankers, the 
 Government issue 1,500,000 new $20 bills ($30,000,000) 
 which he said would be backed “by the imperishable and 
 inexhaustible energy of the Tennessee river, ’ ’ which energy 
 
The Capital Crime of Overcapitalization 107 
 
 Mr. Ford intended to harness to the Muscle Shoals plant. 
 
 I shall say nothing either in criticism or in commendation 
 of Mr. Ford’s proposal; it is of no consequence at this 
 time whether I consider it meritorious or otherwise. What 
 interests us is the savage attack made upon Mr. Ford and 
 his plan, by a number of bankers and financial writers who 
 protested against it for sundry reasons, chief among which 
 was their contention that the water in a river has no 
 stability. 
 
 (In comment I desire merely to say that the water in 
 the Tennessee, or any other river, for the matter of that, 
 has greater “stability” than the water in the stocks of 
 most of the Capitalistic corporations.) 
 
 The aforesaid bankers and financial writers said that 
 they considered the mere suggestion that the Government 
 issue paper money “backed by nothing more stable than 
 the unharnessed power in the Tennessee river” nothing 
 short of a crime. 
 
 Isn’t it rather strange that the bankers and financial 
 writers who pretend to be horrified at Mr. Ford’s proposal, 
 have in all these years discovered nothing criminal in the 
 Capitalistic practice of issuing unlimited quantities of 
 paper “securities” by corporations against arbitrarily cre¬ 
 ated and excessively inflated property “values.” Nor have 
 they found anything to condemn in flooding the market 
 (at the rate of five or more billion a year) with “securities” 
 based on nothing more substantial than a mythical “earn¬ 
 ing power.” But Mr. Ford’s proposal, which involves the 
 issuance of a measly thirty million real dollars (backed by 
 the United States Government as well as by “ the imperish¬ 
 able and inexhaustible energy of the Tennessee river ’ ’) they 
 characterize as a “ crime. ’ ’ Who can understand the work¬ 
 ings of the Capitalistic mind; who can follow its serpentine 
 logic ? 
 
 As Inflation Increases—Value Declines 
 
 It is rather singular that the Capitalistic economists, so 
 fecund in formulating economic ‘ ‘ laws ’ ’ that explain injus- 
 
108 
 
 The New Capitalism 
 
 tices against non-investors, and justify outrages upon the 
 general public, have been so utterly lacking in vision and 
 barren of ingenuity as not to have hit upon the obvious 
 economic law with regard to overcapitalization. I hope 
 they will not accuse me of impertinence for venturing to 
 formulate a “law” that should have been put into words 
 several decades ago. Here is the law, stated in general 
 terms: 
 
 The value of stocks declines in inverse ratio to the in¬ 
 crease in the inflation of capitalization. 
 
 The greater the amount of securities issued the less valu¬ 
 able the securities are bound to become. If against the 
 assets of a corporation, liberally valued at, say, one million 
 —four million of securities are issued, then the actual value 
 of the securities is twenty-five cents on the dollar. That 
 is to say, there is only twenty-five cents of actual value in 
 every dollar of the so-called “securities.” The bona fide 
 investor who pays $100 for a $100 stock certificate is paying 
 $75 for inflation—a value that does not exist—except on 
 paper and in the minds of the officials of the corporation. 
 In the event of liquidation of an excessively overcapitalized 
 corporation, the stockholders could not, even under the 
 most favorable circumstances, realize more than a small 
 fraction of the amount they invested. The corporation 
 officials know that there is no value there; indeed it has 
 been repeatedly admitted in so many words. 2 
 
 Overcapitalization Defined 
 
 But when we view this whole subject from the standpoint 
 of the wage earner—the non-investor—a different vision is 
 unfolded to our intelligence. No appeal is made to the 
 imagination; no thrill of delight fills the soul. Blunt ques- 
 
 2 Within recent years an ingenious device has been invented. The 
 inspiration for the substitution of “no par value” of stock issues, is 
 probably to be found in a burning desire to circumvent the Income Tax 
 law. But if so it is a case of killing two birds with one stone. Not 
 only is the Income Tax law circumvented, but the constantly dimin¬ 
 ishing value of stocks is concealed from all those who give no thought 
 to anything except stock market quotations. Stocks issued without 
 “par value” retain their fluctuating gambling value. Unwary investors, 
 especially “widows and orphans,” are not expected to discover nor to 
 pry into the mysteries of this rather ingenious device. 
 
The Capital Crime of Overcapitalization 109 
 
 tions as to the why and wherefore, and the significance of 
 it all, demand a comprehensible answer. Reduced to com¬ 
 mon sense terms: What is overcapitalization? 
 
 Overcapitalization is the process of creating fictitious 
 wealth by a scratch of the pen, and entering it on the books 
 of a corporation as if it were actual capital, regarding it as 
 if it were actual wealth, and rewarding it as if it were 
 actual capital. Mark you! I differentiate between actual 
 capital—capital behind which there are actual assets, and 
 counterfeit capital, behind which there are no assets. It 
 is this absence of actual assets that makes such capital 
 fictitious wealth. 
 
 By cwercapital I mean capital or wealth that does 
 not exist, and since it does not exist it can have no earning 
 power; and having no earning power, it cannot and should 
 not be rewarded. Yet both are handsomely rewarded under 
 the system of overcapitalization. Indeed it was to reward 
 fictitious wealth and counterfeit capital that the clever 
 scheme of overcapitalization was invented. 
 
 What would you think if an employer of a thousand 
 people with a weekly pay roll of say $25,000, were to dis¬ 
 tribute another $25,000 a week among another thousand 
 men and women who did no work whatever in his estab¬ 
 lishment? Within how many weeks, do you think, that 
 employer would be bankrupt, or would be restrained as 
 irresponsible, probably at the instigation of some indignant 
 stockholder? Yet that is precisely what the Capitalistic 
 System is doing when it pays dividends on tens of billions 
 of inflated capitalization and imbues with an “ earning 
 power” wealth that does not exist. Capital that has never 
 been invested and ‘‘wealth” that does not exist, is not 
 entitled to any reward, any more than men and women who 
 render no service are entitled to a reward. 
 
 Where the Party of the Second Part Coynes In 
 
 Let it be remembered that I haven’t one word to say 
 against wealth that is real and capital that is actual—that 
 is, wealth that represents actual property, and capital that 
 
110 
 
 The New Capitalism 
 
 is covered by actual assets; to both I am willing to accord 
 a decent reward. But when I speak of ouercapital I mean 
 wealth or capital that does not exist; and since it does not 
 exist it can have no earning power; and having no earning 
 power it cannot and should not be rewarded. But interest 
 on this non-existing wealth; and dividends for this non¬ 
 existing capital, are ruthlessly collected from the Party of 
 the Second Part, from those who have no participation in 
 the non-existing wealth and no share in the non-existing 
 capital—that is to say, from the wage-earners—the non¬ 
 investors—the public. 
 
 The summarized effect of all this on the Party of the 
 Second Part—the wage-earners, the non-investors, the pub¬ 
 lic—can be expressed in a few words. It has given us the 
 phenomenon called the High Cost of Living. -In other 
 words the people are compelled to pay interest and divi¬ 
 dends on billions of non-existing wealth and capital. As a 
 result prices have been advanced to a point where wages 
 are no longer sufficient to maintain a decent living standard. 
 
 As long as corporations overcapitalize and corporations 
 and individuals are permitted to collect tribute from the 
 public on an inflated valuation of their properties—so long 
 will there be unrest and turmoil, bound, eventually, to end 
 in disaster. There is but one remedy. Overcapitalization 
 and Inflation must be abolished or destroyed. 
 
CHAPTER XI 
 
 The Railroads—An Object Lesson in 
 Overcapitalization 
 
 A S a “horrible example” of the evil of overcapitali¬ 
 zation, and all that inflated valuation implies, I 
 point to the railroads of the United States. Prom 
 1876 to 1913, 754 roads, involving 145,176 mileage, have 
 been under receiverships. During the year 1913 alone, 
 seventeen roads, operating 9,020 miles, and having a gross 
 capitalization of $477,780,820, were placed in the hands of 
 receivers. 1 From 1914 to 1919 inclusive, seventy-seven 
 additional roads, with 35,053 mileage, and a stock and bond 
 valuation of $1,793,687,304, were placed under receiver¬ 
 ships. 2 According to the same authority, from 1876 to 
 1919 there were 1099 railroad foreclosures. Today nearly 
 all the roads, according to the authority of railroad officials, 
 are bankrupt, in the hands of receivers, or on the verge of 
 bankruptcy. 
 
 This is passing strange, for if ever a business has had 
 advantages, and opportunities to make money, it is the 
 railroads. There isn’t a thing on your body, nor in your 
 home or office; hardly a thing you eat, or wear, or use, on 
 which the railroads have not had a “rake off” and on 
 many articles several “rake offs”; for nearly everything 
 that enters into use or consumption—every article of com¬ 
 merce—is transported at least once, and frequently two and 
 three times in the raw, semi-finished or finished state via 
 the railroads. 3 
 
 1 “Statistics of American Railways for 1913.” 
 
 2 “The Manual of Statistics—Stock Exchange Handbook, 1920.” 
 
 3 In 1913 Senator Gore of Oklahoma stated that the value of the 
 farm products amounted to six billion dollars, and that the railroads 
 received five hundred million dollars merely for hauling them. The 
 railroads are today receiving more than a billion and a half for merely 
 hauling coal. Take the item of freight for any commodity; it is a 
 colossal sum in the aggregate. And* the public pays it all. And I am 
 not saying one word about the “Pittsburgh Plus” plan, under which 
 the public pays millions for freight that was never expended, on goods 
 that were never hauled. 
 
 Ill 
 
112 
 
 The New Capitalism 
 
 There is not a single business in the United States that 
 has received greater encouragement or been given so much 
 help, financial and otherwise, enjoyed subsidies, guarantees 
 and privileges; land grants, the right of way and eminent 
 domain—as the railroads. Prom the very beginning they 
 were considered a great national asset, and legislation, both 
 federal and state, favorable to their existence, development 
 and growth, was freely enacted. 
 
 And yet today, practically all, with a few conspicuous 
 exceptions, are bankrupt, in the hands of receivers, or on 
 the verge of bankruptcy. The properties are run down, 
 equipment and roadbeds are admittedly in a sorry state, 
 maintenance and upkeep have been neglected to a criminal 
 degree. So terrible was the condition of the railroad sys¬ 
 tems, so low was their efficiency, that when the Government 
 took over the railroads upon our entrance into the war, it 
 was imperative to immediately appropriate 750 million of 
 dollars to put them into fairly decent condition. The peo¬ 
 ple of the United States were forced to provide the 750 
 million dollars necessary to rehabilitate the railroad prop¬ 
 erties owned by the Wall Street Capitalists. 
 
 It is well known that many of the railroads have not been 
 paying any dividends on their stock for years, besides de¬ 
 faulting interest on their bonds, while increasing, rather 
 than reducing, their funded debt. Why are the railroads 
 in so critical a condition today? The dominant reason is 
 that they have been outrageously overcapitalized, while 
 those who own and control them—the Wall Street Capital¬ 
 ists—have been reaping enormous incomes variously dis¬ 
 guised as expenses, fixed charges, reserves, etc., on an 
 inflated valuation. 
 
 Inflated Valuation 
 
 There are some financial writers who would have us 
 believe that the railroads are not overcapitalized. Their 
 claim is disproved by the known facts. One has but to 
 delve into the history of some of the prominent roads to 
 discover OVERCAPITALIZATION and INFLATION 
 
The Railroads—An Object Lesson 113 
 
 written in big letters all over the properties. Moreover, 
 official investigations of some of the modern railroad scan¬ 
 dals brought many ugly things that had to do with watered 
 stock and stock jobbing, to light. Besides there are Court 
 records that substantiate the fact. 
 
 About ten years ago the capitalization of all the railroads 
 was said to be fifteen billion dollars. With these attentive 
 ears of mine I heard Senator Cummins, co-author of the 
 Esch-Cummins Bill, publicly declare at that time that “one- 
 half of this amount is ‘water’.” 4 Yet not long ago the Inter¬ 
 state Commerce Commission, basing its estimate on that 
 ingenious Capitalistic device ‘ ‘ replacement value, ’ ’ gave to 
 the railroad properties a valuation of $18,900,000,000, and 
 it is upon this valuation that the Esch-Cummins law in¬ 
 structed the Board to adjust rates so as to yield a return 
 of six percent. 5 
 
 There may be those who see nothing wrong in the Capital¬ 
 istic inflation device called “replacement” valuation. I am 
 sorry for them, and I’ll not argue with them. But I •’ll 
 state my objection to the “replacement” device in the 
 briefest possible form. “Replacement” valuation means 
 that the public is being charged interest on an investment 
 that was never made, interest on high wages that were not 
 paid, interest on high priced materials that were not used, 
 interest on stocks that have no assets behind them, interest 
 on bonds issued against nothing. 
 
 Oh, yes, I know that ‘ ‘ replacement valuation ” is in gen¬ 
 eral use—but that doesn’t make it right. And its general 
 use explains many things that enter into the High Cost of 
 Living problem. For example: One of the reasons why 
 rentals are high is because they are based on a “replace¬ 
 ment valuation ’ ’; the tenants are charged high rents com¬ 
 puted on high wages that were not paid, and high priced 
 
 4 This statement was made on the stage of Orchestra Hall, Chicago. 
 I sat within twenty feet of the speaker. 
 
 5 Edgar E. Clark, Chairman, said that the Commission based its 
 “valuation” first, on the cost of reproduction as of the date of valuation; 
 then upon the cost of reproduction less depreciation, which represents 
 the depreciated condition of the property as of that date; and then 
 the actual cost to date. 
 
114 
 
 The New Capitalism 
 
 materials that were not put into the building, etc. Those 
 afflicted with moral obliquity may defend, but they cannot 
 justify, the practice. 
 
 t 
 
 An Old—But not the Sweetest Story 
 
 Ever Told 
 
 1 ‘ Replacement valuation ’ ’ is only a new name for an old 
 Capitalistic crime. Almost from the very beginning the 
 railroads adopted bookkeeping methods which falsified cost 
 of construction as well as their capitalization. 
 
 D. C. Cloud in his “Monopolies and the People” (pub¬ 
 lished in 1874) says: 
 
 “Their balance sheets do not present the truth in any 
 instance, and have not that purpose, being only an exhibit 
 that will apparently justify the many extortions and decep¬ 
 tions practiced by the corporations. The actual cost of 
 constructing and stocking the road is not given; instead we 
 have the cost as represented by the stocks and bonds issued 
 and watered And he gives many examples and the per¬ 
 tinent facts and figures. 
 
 Senator La Follette in his speech before the Senate 6 de¬ 
 clared that the Hepburn-Dolliver Bill “required an ac¬ 
 counting from the railroads as to what they were doing, a 
 uniform system of bookkeeping, so that the Interstate Com¬ 
 merce Commission could find out wdiether they were 
 doctoring their reports made with regard to these various 
 charges, upon which rates charged the public were based.” 
 
 Senator La Follette further stated that year after year 
 since the passing of the Hepburn-Dolliver Bill, the Com¬ 
 mission said to Congress: “We cannot tell whether these 
 maintenance charges are honest or not. The system of 
 bookkeeping is such that we are all at sea about it. We 
 know nothing about it, and the railroads may be taking an 
 undue advantage of us.” 
 
 6 February 21, 22, 1921. Published in the Congressional Record. 
 March 14, 1921. 
 
The Railroads—An Object Lesson 115 
 Just One “News” Item 
 
 “Washington, Dec. 2.—Use of intercorporate holdings in 
 figuring rates was charged against the railroad corporations 
 of the United States by Frank J. Warne, economist for the 
 railroad brotherhoods, in testimony before the Senate Inter¬ 
 state Commerce Committee. He added that as a conse¬ 
 quence continuously lower returns are reported by the 
 railroad companies. 
 
 “Mr. Warne said that the capital accounts of the cor¬ 
 porations showed investments of approximately $5,213,- 
 000,000 in stocks and bonds of other companies, or about 25 
 per cent of the entire outlay claimed as transportation 
 investment. Such investments, he asserted, were not always 
 governed by their anticipated revenue production, but were 
 made for the purpose of controlling or influencing man¬ 
 agements. 
 
 “The intercorporate holdings, the witness said, had re¬ 
 sulted in many forms of evil in financing, not the least of 
 these, he added, being the deception practiced on the public 
 in the corporation’s efforts to show poor returns on the 
 investments as a whole. 
 
 “Mr. Warne said other results included inflation of 
 property investment, overcapitalization, involving the ex¬ 
 cessive issues of securities; speculation with corporate 
 funds, ‘reckless and profligate’ financing, secret and con¬ 
 fusing bookkeeping, manipulation or juggling of accounts 
 and falsification of records.” 7 
 
 Hut why waste more space to establish the fact of over- 
 capitalization since it proves itself. 
 
 The Virtue of Persistency 
 
 For years prior to the war the railroad executives clam¬ 
 ored for rate increases. For years they argued that the 
 rates they were receiving did not yield them a big enough 
 income on the ‘ ‘ amount invested ’ ’; and they offered a won¬ 
 derful array of statistics to show that they were entitled 
 to a much higher profit on their “investment.” In 1913, 
 
 7 Chicago Her aid-Examiner, Commercial Edition, December 3, 1921. 
 
116 
 
 The New Capitalism 
 
 Samuel Rea, as President of the Pennsylvania Railroad 
 Company, in the course of giving his testimony before the 
 Interstate Commerce Commission in the matter of increased 
 freight rates said: 
 
 “We know it is essential for us to maintain adequate 
 dividends as well as an adequate margin over the dividends 
 if we are to obtain from the investing public the capital 
 needed to provide the additional facilities to take care of 
 the usual growth of traffic; and we must have some leeway 
 against business depressions, which occur periodically, and 
 for other extraordinary emergencies that may arise.” 
 
 All Good Things Come to Those Who Wait 
 
 The war was a windfall for the railroads. It brought 
 them all the blessings for which they had sighed for many 
 years. For one thing, it brought them a goodly sum of 
 money, taken directly from the public to rehabilitate their 
 broken down properties; besides the Esch-Cummins Bill, to 
 say nothing of sundry other good things. But alas! their 
 joy was not unalloyed, for a part of the increased revenue 
 flowing into the coffers of the roads, went to Labor, and 
 that is a thing not even to be dreamed of in the Capitalistic 
 philosophy. 
 
 Eliminating Labor from the Equation 
 
 Even before the Esch-Cummins Bill was passed the rail¬ 
 roads opened aggressive war on Labor; for it is no part of 
 the Capitalistic scheme that those who labor be permitted 
 to enjoy a greater measure of prosperity than is sufficient 
 to enable them just to subsist. The benefits accruing to 
 salaried employees from the Adamson Law, and those be¬ 
 stowed by the railroad administration and the Railway 
 Wage Commission during the war had to be revoked or 
 nullified. Toward the end of 1920 a nation-wide campaign 
 began in earnest. Railroad executives, and railroad sta¬ 
 tisticians unloosed a flood of oratory, press literature and 
 an avalanche of statistics, all calculated to show, 1: That 
 railroad employees were being overpaid; and 2: that unless 
 
The Railroads—An Object Lesson 117 
 
 all of the revenue provided by the Esch-Cummins law could 
 be kept in the hands of the Wall Street crowd the rail¬ 
 roads and the country would surely go to hell. 
 
 On January 31, 1921, the Railroad Managers met in 
 Chicago for the specific propaganda purpose of excluding 
 Labor from participation in any share of the Government 
 award under the Esch-Cummins law. At the opening ses¬ 
 sion Mr. W. W. Atterbury, Chairman of the Labor Com¬ 
 mittee of the Railroad Executives’ Association, and Vice 
 President of the Pennsylvania lines, demanded immediate 
 abrogation of the war time wage adjustment, and stated 
 that only a wage cut totalling $500,000,000 a year can pre¬ 
 vent a panic. The Railroad Managers were successful; the 
 wage reductions they demanded were allowed. At the same 
 time the railroads announced that there would be no re¬ 
 duction in freight and passenger rates. Perish the thought! 
 
 Railroad Wage Statistics 
 
 The statistics with regard to wages, employed in the 
 campaign, are particularly interesting. They came from 
 a dozen different directions, but all from one source. There 
 is a deadly similarity about them. It is clear that the rail¬ 
 road statisticians all drink out of the same cup, and eat out 
 of the same hand. One of the earliest and most conspicuous 
 of the statisticians was Samuel O. Dunn, editor of Bailway 
 Age.' In an address before the New York Railroad Club 
 (January 21, 1921) he explained that the inability of the 
 railroads to earn the return expected was chiefly due to 
 “the enormous payroll.” “In 1914,” he said, “the railroads 
 had 1,700,000 employees, and paid them $1,337,000,000. In 
 1917 they had about the same number of employees and 
 paid them $1,740,000,000. Today, because of the establish¬ 
 ment of the eight-hour day and the advance in wages which 
 has been granted, they have about 1,950,000 employees who 
 are being paid $3,600,000,000 a year.” 
 
138 
 
 The New Capitalism 
 
 Accepting Mr. Dunn’s figures we arrive at the conclusion 
 that the average wage per railroad employee 
 
 In 1914 was $ 787 a vear 8 
 In 1917 was 1024 a year 
 In 1919 was 1846 a year 
 
 Merely to sIioav that it is possible to arrive at different 
 results from a computation of the same statistics I give the 
 following from the report of the Railway Wage Commis¬ 
 sion according to which: 
 
 “Fifty-one percent of all employees during December, 
 1917, received $75 per month or less, 80 percent received 
 $100 or less; that even among locomotive engineers the 
 majority received less than $170 per month, and that be¬ 
 tween the grades receiving from $150 to $250 per month 
 there was less than 3 percent of all employees, aggregating 
 less than 60,000 out of 2,000,000. 
 
 “One hundred and eighty-one thousand, six hundred 
 and ninety-three men received between $60 and $65 per 
 month; 312,761 received from $65 to $75 per month; the 
 average pay of the clerks being $56.77 per month; section- 
 men received $50.31 per month; the average pay of un¬ 
 skilled labor was $58.25 per month; station service 
 employees averaged $58.57; freight brakemen and flagmen 
 averaged $100.17; and passenger brakemen and flagmen 
 averaged $91.10.” The report adds: 
 
 “These, it is noted, are not prewar figures; they repre¬ 
 sent conditions after a year of Avar, and two years of rising 
 prices. And each dollar now represents in its pOAver to 
 purchase a place in which to live, food to eat, and clothing 
 to wear, but 71 cents as against the 100 cents of Jan¬ 
 uary 1, 1918.” 
 
 8 Slason Thompson said in 1914 that the “average” holdings of 
 the railroad stockholders was $15,000. At a six percent dividend 
 rate the “average” railroad stockholder, giving not an hour of his 
 time or service to the roads, would receive as his reward $900, which 
 is $113 more than the “average” railroad employee received as wages 
 for a year’s work in 1914. 
 
The Railroads— An Object Lesson 119 
 
 Cut—“From Nearest the Heart” 
 
 But let me return to Mr. Dunn’s statements and sta¬ 
 tistics. He insisted that operating expenses must be cut. 
 But note you well! the cutting was to apply to only one 
 operating item— labor; although it would be much easier 
 to cut some of the other operating items, such as coal, 
 materials and supplies, particularly since the same financial 
 group that controls the railroads also controls coal, and 
 practically all materials and supplies charged against rail¬ 
 road operating expense—and are reaping enormous profits 
 from the sale of their own commodities to themselves. 
 Take, for example, the item of coal. The cost of locomotive 
 fuel in 1900 was $90,593,965, or $475 per mile per annum; 
 whereas in 1920 it was $672,891,964, or $2778 per mile per 
 annum; an increase of $582,297,999, or an increase of 
 $2303 per mile—for coal. Increase in wages does not ex¬ 
 plain this enormous increase in the cost of fuel, which came 
 from the mines belonging to the same group of men who 
 also own the railroads. 
 
 Prank Farrington, head of the Illinois miners, in an 
 address (March 28, 1921) said that the railroads consume 
 one-third of the soft coal output and do not pay a decent 
 price for it, leaving the public to stand the difference. The 
 railroads are given coal contracts at less than cost of pro¬ 
 duction. 9 If the facts are as stated by Mr. Farrington, one 
 wonders how the railroads explain the nearly $600,000,000 
 increase in their coal bill over former prices. 
 
 Parenthetically, while on the subject of coal, it may be 
 stated here that the average freight rate for coal, before 
 the war, was about $1.50 a ton, while the present rate is 
 about $3.00. That is to say, the public is paying to the 
 railroads $825,000,000 more in freight cost than formerly. 
 This is for bituminous coal only. I have not gone to the 
 trouble of looking up the statistics for anthracite coal. In 
 brief, the miners get about $1.12 a ton for mining coal, 
 
 9 See Chicago Tribune, March 29, 1922. 
 
120 
 
 The New Capitalism 
 
 while the railroads get $3.00 a ton for merely hauling it. 
 There’s something wrong somewhere. 10 
 
 A Few Pointed Questions 
 
 I have no desire to argue the several points involved in 
 the various wage controversies going on at present. But I 
 will say that when Messrs. Dunn, Atterbury, J. DeWitt 
 Cuyler, Julius Kruttschnitt, Slason Thompson, et al ., try 
 to interpret the chronic inability of the railroads to make 
 a creditable showing by the present high cost of labor— 
 wages—they are simply stultifying themselves. Why did 
 not the railroads make a better showing in all the previous 
 years when wages were considerably lower than they are 
 at present? 
 
 Was there ever a time when the railroads made money? 
 If the railroads did not, in the past, and are not now mak¬ 
 ing any money, if they are a losing venture, as many of the 
 railroad executives would have us believe, how will you 
 explain the dogged tenacity with which the Capitalistic 
 Wall Street group clings to these “unprofitable” prop¬ 
 erties? W. W. Atterbury, Chairman of the Labor Com¬ 
 mittee of the Railroad Executives’ Association, and Vice 
 President of the Pennsylvania lines, on January 31, 1921, 
 publicly stated that the railroads were on the verge of 
 bankruptcy, and to prove that he spoke the truth the 
 Pennsylvania railroad lowered its dividend rate to the 
 stockholders from six to four percent. 11 
 
 But on January 28, 1921, only three days before Mr. 
 Atterbury’s gloomy address in which he emphasized the 
 serious financial condition of the railroads, his road, the 
 Pennsylvania, sold a $60,000,000 fifteen year 6y 2 percent 
 bond issue within an hour’s time. The issue was heavily 
 oversubscribed. I find it difficult to explain the avidity 
 
 10 President Lewis, of the mine workers, said, March, 1921, that 
 the average income of the miners in the bituminous field in 1921 was 
 only about $700. Yet in October, 1921, soft coal sold for $10.41. 
 The cost of labor was $1.97. Who gets the difference? - 
 
 11 Mr. Atterbury subsequently repeated his statement to the Penn¬ 
 sylvania employees by way of proving to them that they must accept 
 lower wages. Receivership stared them in the face, he told them. 
 
The Railroads—An Object Lesson 121 
 
 with which Capitalistic “investors” subscribe for “secur¬ 
 ities” of unstable properties in a business that, according 
 to Mr. Atterbury and other railroad officials, is insolvent, 
 and whose earnings are below normal. Incidentally, it may 
 be added here that the new Pennsylvania bonds were 
 promptly admitted to trading on the New York Stock 
 Exchange. 
 
 Only a few more questions while I am on this subject! 
 Who were the first millionaires in the United States ? The 
 Vanderbilts, Goulds, et al. And how did they build up 
 their immense fortunes ? Out of profits made from railroad 
 operation and stock transactions. Who are the multi¬ 
 millionaires today? The Harrimans, Hills, Rockefellers, 
 Morgans, et al., the railroad magnates—whose aggregate 
 wealth—a goodly portion of which came from railroad 
 profits and stock operations—runs into the billions. 
 
 No! it isn’t difficult to understand why some of the rail¬ 
 roads out of which a small group of insiders have made 
 immense fortunes, are bankrupt, or on the verge of bank¬ 
 ruptcy. 12 The reason is not far to seek. Read the history 
 of the railroads in the United States. Sold out from one 
 to three times a year for the past fifty years, on the Stock 
 Exchange, each time at a tremendous profit to a small group 
 of manipulators! Stockholders unhesitatingly frozen out, 
 bond holders cheated, properties wrecked, property ac¬ 
 counts juggled—to say nothing of the shameful transactions 
 revealed by Court inquiries into such roads as the Rock 
 Island, New Haven, and other roads. 
 
 The “Widows and Orphans'' in the Lion's Ben 
 
 We have been told that there are about 600,000 stock¬ 
 holders in the first class roads, and that there are many 
 “widows and orphans” among them, but we are not told 
 
 12 However near to “bankruptcy” some of the roads are may be 
 judged'from the following item which appeared in the Chicago Journal 
 of Commerce, March 1, 1920. “Washington, Feb. 28 (Special).—The 
 Chicago, Burlington and Quincy Railroad Company was today granted 
 permission to issue $60,000,000 capital stock as a stock dividend to 
 be paid out of surplus earnings.” This is only one of many similar 
 “news” items. 
 
122 
 
 The New Capitalism 
 
 that the report of the Interstate Commerce Commission of 
 March 25, 1919, shows that the majority of the stock in 
 each one of these roads, and their subsidiaries, is held by 
 fewer than twenty of the big stockholders in each road. 
 Nor has any statistician for the railroads ever pointed out 
 that the largest part of the six percent return guaranteed 
 by the Esch-Cummins law, amounting to over a billion dol¬ 
 lars, will go to the big stockholders—a few thousand in 
 number. The bona fide small stockholder, if he will be bene¬ 
 fited at all by the distribution, will share in only a small 
 part of it, for it can be clearly showrn that the small investor 
 is always the goat. Scant consideration is extended him 
 either by the railroads, or any of the corporations in whose 
 securities he has, in good faith, invested. A few of the 
 most recent occurrences will at least give color to my asser¬ 
 tion with regard to the small stockholders in railroad, and 
 other, securities. 
 
 In the first place there has been a terrific fall in the 
 market price of railroad stocks (and all corporation stocks). 
 This means a terrific shrinkage in the value of the holdings- 
 of small investors—a loss which means a great deal to 
 them. For example: ‘ ‘ The preferred stock of the Chicago, 
 Milwaukee and St. Paul Company was sold to the public 
 by the Company years ago at par, $100 per share. Divi¬ 
 dends have been suspended upon it, and the stock is chang¬ 
 ing hands in the market under $40 per share.” 13 (A loss 
 of $60 a share.) 
 
 Before the war the Pennsylvania Railroad, considered 
 one of the most substantial roads, was paying six percent. 
 In 1921 the dividend rate was reduced to four percent. 
 Needless to say the market price of the stock declined. 
 
 Slason Thompson, director of the Bureau of Railway 
 News and Statistics, is authority for the statement that for 
 the past quarter of a century the dividend rate on all 
 railroad stocks “has not averaged three percent.” 14 
 
 13 Monthly letter of The National City Bank (New York), Novem¬ 
 ber, 1921. 
 
 14 “Statistics of American Railways, 1914.” 
 
The Railroads—An Object Lesson 123 
 
 Let the bona fide small investors take note of this: the 
 dividend rate on their holdings has not averaged three per¬ 
 cent. And when we take into consideration the losses they 
 have sustained during the last quarter of a century through 
 the fall of market values of their holdings, even the less 
 than three percent dividend is wiped out of existence. The 
 financial writer who recently said “Many railroads turn 
 out to be poor investments” told a bitter truth. 
 
 While on the subject of the small investor in railroad 
 securities, the following, by B. C. Forbes, another financial 
 writer, is of interest here: 
 
 “When the late J. P. Morgan was indicted, along with 
 Charles S. Mellen, in connection with certain New Haven- 
 Grand Trunk Railway maneuvers, he took to bed absolutely 
 inconsolable. When, several years later, William Rocke¬ 
 feller was indicted, along with other New ITaven directors, 
 he confided to me one day, in very grave tones, that it was 
 not comfortable to be under indictment and to have the 
 possibility of a prison sentence hanging over one. 
 
 “These indictments are recalled to mind -by the suit 
 brought by a protective committee of Denver & Rio Grande 
 Railroad stockholders against men who were directors of the 
 road. The stockholder’s committee petitions the Supreme 
 Court to compel the directors to account for $200,000,000 
 alleged to have been lost through stock manipulation, con¬ 
 spiracy, collusion and forced and fictitious sales of railroad 
 property. 
 
 “It is probably well to have this whole Denver & Rio 
 Grande-Western Pacific matter cleared up to the satisfac¬ 
 tion of all parties. While the standard and character of 
 the men sued made it hard to believe for a moment that 
 they would have laid themselves open to the charges made, 
 nevertheless the losses sustaind by Denver & Rio Grande 
 security holders have been so heavy that intense bitterness 
 and suspicion have been created. 
 
 “the first purchase of securities I ever made was ten 
 shares of Denver & Rio Grande preferred stock. I paid 
 about $800 for it. I sold it for about $100. Naturally, like 
 
124 
 
 The New Capitalism 
 
 other stockholders, I had a feeling that the Denver & Rio 
 Grande got the thin end of the stick in its dealings with 
 Western Pacific, which virtually gobbled up the whole 
 property. 
 
 “If the suggestion of taint attaches to the Denver & Rio 
 Grande directors they ought to welcome the receipt of a 
 clean bill of health from the Supreme Court. On the other 
 hand—well, let the law take its course.” 15 
 
 The bona fide small investor who flatters himself that he 
 is a beneficiary of the Capitalistic System would do well to 
 wake up out of his dream. 
 
 An Interlude 
 
 If any one imagines that the railroads, even though they 
 succeed in materially bringing down wages of all railroad 
 employees, will be content with the resultant increase in 
 revenue or profit, let him disabuse his mind of any such 
 imaginings. Let him remember that since 1907 the Inter¬ 
 state Commerce Commission has permitted an addition of 
 seven billion dollars to the property investment account of 
 the roads, although the mileage increased only by about 
 24,000 miles—about nine percent increase in mileage. 
 
 But read on! Walker D. Hines, former director general 
 of railroads, declared before the Senate Interstate Com¬ 
 merce Commission that the American railroads must spend 
 more than one billion dollars a year in property improve¬ 
 ments for years to come. Mr. Hines expressed opposition 
 to changes in the transportation act on the grounds that 
 such alterations would destroy possibilities of betterment 
 by the railroads. From Mr. Hines’ statement we can log¬ 
 ically conclude two things: First, that the railroads have 
 no intention to reduce freight and passenger rates even 
 after their “liquidation of wages” is completed; and sec¬ 
 ondly, that the “property account” of the railroads will 
 be increased for years to come at the rate of a billion dollars 
 a year. Increase of property account is, after all, simply 
 
 15 B. C. Forbes in the Chicago Herald-Examiner, March 28, 1921. 
 
The Railroads—An Object Lesson 125 
 
 a matter of bookkeeping, rather than of actual investment. 
 
 But that is not all! S. Davies Warfield, President of 
 the National Association of Owners of Railroad Securities 
 (a rather big title) stated before the same committee that 
 a less return than that provided by the Esch-Cummins law 
 would not maintain transportation. ‘ ‘ The question for the 
 moment is,” said Mr. Warfield, “can sufficient revenue be 
 attained from rates and fares that will be considered rea¬ 
 sonable by the public and the shippers, or will part of the 
 money have to be supplied by taxation?” 
 
 Prom these, and many other statements made by railroad 
 executives and representatives it is clear what is going on 
 in the Capitalistic mind. The Government—that is the 
 public—has already been compelled to supply more than 
 a billion dollars to bolster up the railroad properties, and 
 if all the “claims” presented are allowed, probably an¬ 
 other billion of the public's hard earned money will have 
 been poured into the coffers of the roads. 
 
 I have listened to eloquent denunciations of the Adamson 
 law, which, it cannot be denied, was favorable to railroad 
 employees, if you consider a law that grants a wage more 
 nearly commensurate with living costs as a special favor. 
 I have heard and read bitter attacks upon the Railway 
 Wage Board and the Railroad Administration during the 
 war. But not one word of criticism had the speakers and 
 writers to make against those whose wrong doings and mis¬ 
 deeds are written in many railroad hearings, investigations 
 and Court records; not a syllable of reprobation against 
 those who, through sundry methods of exploitation of 
 Labor and the public (as well as the small investors) have 
 augmented their fortunes; not a whisper of condemnation 
 against those whose mismanagement is responsible for the 
 wretched condition of the properties entrusted to their care, 
 and to rehabilitate which a heavy burden of taxes has been 
 placed upon our shoulders. 
 
 I do not understand the temper of a public that will 
 allow itself to be fleeced without so much as a peep of pro¬ 
 test. And yet the past deeds and future designs of the 
 
126 
 
 The New Capitalism 
 
 railroads are “like glass; the very sun shines through 
 them. ’ ’ 
 
 But the Railroad Executives Are Right! 
 
 When the railroad executives contend that they cannot 
 pay decent wages and also pay themselves huge sums as 
 dividends on stock and interest on bonds—they are right, 
 absolutely and demonstrably right. It is impossible for any 
 business, whatever its character, to pay dividends and inter¬ 
 est on an excessively inflated valuation. It cannot be done 
 longer than for a period of about twenty years; after which 
 the system is bound to break down. It can be carried on 
 for a longer period only on one condition, and that is that 
 the money necessary to pay dividends on non-existing cap¬ 
 ital be extorted from the general public bj r simply ruinous 
 rates or prices. In this regard, however, the railroads are 
 handicapped. They cannot continue to raise freight and 
 passenger rates indefinitely. There is a limit beyond which 
 it is impossible to go. If freight rates become too exor¬ 
 bitant it reacts on the volume of freight traffic, and auto¬ 
 matically reduces the volume of revenue. If passenger 
 rates are raised to a point that the public considers exces¬ 
 sive, it automatically checks travel, and this, in time, seri¬ 
 ously affects the roads’ revenue. And so it is not difficult to 
 understand the unwillingness of the railroads to pay decent 
 wages to the employees, as it is only by cutting wages and 
 keeping freight and passenger rates exorbitant that they 
 can pay themselves dividends on their watered stock and 
 interest on their bonds. The public must pay, the wage 
 earner must pay, and the small investor must pay. 
 
 The Conclusion 
 
 AVliat is the real purpose of this chapter ? Simply this— 
 to go on record as saying that what has happened to the 
 overcapitalized railroads in the United States is going to 
 happen to every overcapitalized industry or business of 
 whatever kind. It is inevitable! Any corporation whose 
 securities issues, based on inflated valuation, are greatly in 
 
The Railroads—An Object Lesson 127 
 
 excess of actual assets; any industry that rewards capital 
 that doesn’t exist, is hound, ultimately, to end in disaster. 
 Through the device of lower wages and higher prices the 
 Capitalistic group may succeed for a while longer to delay 
 the day of reckoning; but it cannot avert the disaster. And 
 in every instance the wage earners—the non-investor group, 
 the public, must pay the whole bill. 
 
CHAPTER XIT 
 The Stock Market 
 
 I AM aware that the stock market, or Stock Exchange, is 
 considered by many as an essential institution. With¬ 
 out a stock market, we have been told, industry would 
 languish, investments could not be made, etc., and that 
 taking it all in all the world could not very well get on 
 without it—no progress could be made. 
 
 Originally the Stock Exchange might be said to have had 
 legitimate functions and served a legitimate purpose. “In 
 their origin Stock Exchanges appear to have been free to 
 the use of anyone who wished to buy and sell, and it was 
 probably with this function in view that some of the older 
 exchanges, notably the Paris Bourse, were located in build¬ 
 ings erected at the public expense.” 1 
 
 But the stock exchange of today lias departed both 
 from the original intent and purpose. Its conservative 
 character of a public convenience has degenerated into a 
 madly speculative game for the immediate and ultimate 
 benefit of a select coterie of Financial potentates and Cap¬ 
 italistic wizards. Membership in a modern Stock Exchange 
 is “regarded very valuable, those in New York having been 
 quoted as high as $97,000 in the most prosperous times.” 2 
 
 The first book I read, about thirty years ago, on the sub¬ 
 ject of the Stock Exchange and stock transactions was 
 entitled “Ten Years in Wall Street.” I can’t recall the 
 author’s name. The stock transactions were then confined 
 almost exclusively to rail and transportation stocks. The 
 industrials had not yet developed into marketable securities. 
 Books of more recent date, such as “The Stock Exchange 
 
 i “The New International Encyclopedia,” Vol. XVIII,' p. 579. 
 
 2 “Monetary and Banking- Systems,” by Maurice L. Muhleman, L.E.M. 
 
 128 
 
The Stock Market 
 
 128 
 
 from Within,” by W. C. Van Antwerp; ‘ ‘The Work of 
 Wall Street,” by Sereno S. Pratt, and “The Stock Mar¬ 
 ket,” by S. S. Hnebner, Ph.D., give a fair idea into what 
 kind of an institution the stock market has developed, or 
 degenerated. 
 
 Were it my particular design to expatiate on the chi¬ 
 canery of the stock market, and to expostulate on its utter 
 depravity, nothing would better serve the purpose than to 
 quote liberally from some of the books written in defense 
 of and by way of apology for the stock market. But since 
 moralizing is foreign to my present plan I will not concern 
 myself with aught that has not a direct bearing on the sub¬ 
 ject under discussion. 
 
 Shearing the Lambs in the Shambles 
 
 Why do I write of the stock market and its transactions 
 at all ? For very definite reasons, which I shall state briefly. 
 For one thing I want to emphasize that the stock market 
 and all its transactions are for the enrichment of a small 
 group. Authorities differ as to the number of investors. 
 The latest estimate is by Professor Huebner, who claims 
 that “exclusive of the numerous holders of Government 
 bonds, there are probably 4,000,000 persons who are share¬ 
 holders and bondholders in American corporations.” 
 
 Accepting his estimate it is to be noted here that many 
 of these 1 ‘ investors, ’ ’ and for whom financial writers evince 
 such tender solicitude, are mere lambs, invariably coming 
 out of the pit bleeding, gored by the bulls and clawed by 
 the bears—while the inner circle of Capitalistic stock 
 market gamblers and manipulators ultimately reap what¬ 
 ever profits are derived from the buying and selling of 
 stocks. 
 
 G. C. Selden, in an article entitled “The Machinery of 
 Wall Street: Why It Exists, How It Works, and What It 
 Accomplishes, ’ ’ says: 
 
 ‘ ‘ Small investors, even though they may be very numer¬ 
 ous, do not usually have much influence on the immediate 
 movements of prices. The main contest is between the big 
 
130 
 
 The New Capitalism 
 
 investors—who might as well be called speculators, except 
 that they can always command money or credit enough to 
 pay for their stock in full if necessary—and the other class 
 of speculators, who will take a loss if the market goes 
 against them far enough.” 3 
 
 Playing the Market on Margin 
 
 Briefly the bona fide small investor is not a conspicuous 
 figure in the stock market. He buys stocks, of course, and 
 sells whenever the opportunity offers, at a profit. The 
 important thing to remember is that the bona fide small 
 investor pays the full market price for his stock. How¬ 
 ever, all the purchases and sales, by and on behalf of small 
 investors, in the aggregate are a bagatelle when compared 
 with the marginal stock transactions. It has been said that 
 90 percent of all stock transactions are of a speculative 
 character. That is to say, options on large blocks of stock 
 are bought on margin. The speculator “puts up” let us 
 say, a ten-point margin—that is to say, ten percent of the 
 value of the stock. If he sells before the ten points are ex¬ 
 hausted he makes a profit. If, on the other hand, the market 
 falls below ten points, and he is unable to put up another 
 margin to protect his option, he loses. It is by this practice 
 that “fortunes” are made and lost. 
 
 The Principle Set Forth 
 
 Let us try to understand the principle underlying 
 gambling in stocks on margin. John Smith (let us call 
 him)—may his tribe decrease!—let us say has a thousand 
 dollars which he puts up as a ten-point margin in the 
 month of January of a given calendar year, for an option 
 on a ten thousand dollar block of stock. If the stock rises 
 ten points within the next few days, and he sells at the 
 right time, he disposes of the ten thousand dollar block of 
 stock, in which he never had more than a tenth part inter- 
 
 3 The Magazine of Wall Street, November 25, 1916. 
 
The Stock Market 
 
 131 
 
 est, at a clear profit of one thousand dollars—that is to say, 
 he has doubled his one thousand dollars. 
 
 If he repeats his transaction for twelve consecutive 
 months—and let us, furthermore—in order to simplify the 
 illustration of the principle involved—say that he never 
 puts up more than a thousand dollars as margin, his reward 
 at the end of twelve months will be as follows: 
 
 Original “capital” $1000. Putting this up as a ten 
 percent margin he will have “purchased” a ten percent 
 equity in a $10,000 block of stock. Since we are assuming 
 a monthly re-investment of the original $1000 he has pur¬ 
 chased $120,000 worth of stock, although he never pos¬ 
 sessed more than $1000 actual money, and made a total of 
 $12,000 in the twelve months. 4 
 
 What entitles John Smith to such a profit? Is it his 
 shrewdness, his sagacity, his thrift, his economy, or is it his 
 industry that is being rewarded ? It is none of these. He 
 simply had the ‘ ‘ courage ’ ’ to risk his $1000, make or lose ; 
 he took a chance; he gambled. He is not entitled to any 
 such reward. He has done absolutely nothing; he has con¬ 
 tributed nothing to society, nothing to the welfare of the 
 public. Why, then, should he be rewarded? Why indeed? 
 He has not helped, nor given his service to the industry, or 
 industries, in whose stocks he gambled. 
 
 I need hardly waste any time in stating what is known 
 to nearly everybody, that no mere uninitiated “investor” 
 of the piker variety would ever be permitted so easily and 
 so successfully to play the market. That is not the way the 
 game is played. I merely want to illustrate the principle 
 upon which the stock market is operated. 
 
 Now let us assume a fall in the market, and consequently 
 the ten-point margin would not be sufficient. Another ten 
 percent margin will be necessary. To protect himself and 
 his “investment” John Smith borrows from the bank or 
 banker: that is to say, John Smith borrows your money and 
 mine (our savings) with which to speculate in stocks. Bil- 
 
 4 And if he were to pyramid his “winning's” he would make hun¬ 
 dreds of thousands out of his original $1000. 
 
132 
 
 The New Capitalism 
 
 lions are borrowed every year for speculative purposes on 
 the Stock Exchange. These loans to speculators are known 
 as “call loans/’ 
 
 Thanks to the Capitalistic System of speculating on mar¬ 
 gin, John Smith can make a fortune; though of course he 
 also runs the risk of losing the money he has or has bor¬ 
 rowed, and of going broke. The real winners, ultimately in 
 the stock gambling game are the inner circle 5 composed of 
 a few thousand men who manipulate the market and win 
 whether it goes up or down. 
 
 Business Is Not Directly Benefited 
 
 This chapter is taking me further afield than I had in¬ 
 tended to go. Certainly I had not intended to write at any 
 length of stock transactions, operations, manipulations, etc. 
 My purpose in writing this chapter was really to say that 
 none of the stock transactions are for the benefit of business 
 itself. Not any of the money won in the speculative stock 
 market enters directly and ipso facto into the channels of 
 productive industry. The transaction is between individ¬ 
 uals—one buyer and one seller. Whatever money passes 
 between them is from pocket to pocket; not from pocket to 
 the corporation’s treasury. 
 
 The Public, Is Not Benefited 
 
 Furthermore, all the stock transactions are not of the 
 slightest benefit to the eighty million non-investors. The 
 eighty million derive not a solitary advantage from all the 
 stock sales; just the reverse, for I think I can put it down 
 as an axiom that not a dollar of profit is ever made by any¬ 
 one in the stock market or elsewhere but the profit comes 
 from somewhere; and that “somewhere” is generally the 
 non-investor’s pocket-book. In the end the non-investor 
 
 5 I have been told by one who knows the game that the real inner 
 circle is composed of only about 100 men—who constitute a syndicate. 
 
The Stock Market 
 
 133 
 
 group 6 must pay the total bill of all stock winnings. If the 
 non-investor group does not pay, then tell me from what 
 source the winnings in the stock market are derived. 
 
 Why, some will say, * 1 A certain number win and a certain 
 number lose: just as in a poker game, a certain amount of 
 money is put into the game by a certain number of players. 
 At the end of the game the same amount of money is there 
 —only it has changed hands. 7 ’ Precisely! just as in a 
 poker game! But sirs! there are no marginal transactions 
 in a poker game; the players do not put up ten cents on 
 the dollar; neither do they borrow from the players nor 
 from the innocent bystander—not unless the rules have 
 been changed recently. Nor do they expect the general 
 public to make good their losses. 
 
 Who Is Benefited? 
 
 If the winnings of the lucky ones in the stock market 
 are not derived from the general public; if, as some will 
 probably assert, the winnings of a certain number are the 
 losses of a certain number—then every point I have scored 
 in this chapter stands admitted. And the condemnation of 
 the stock market is eminently fitting. A few of the four 
 million “investors,” beyond a doubt, are greatly benefited 
 by stock speculation, but neither business, nor the general 
 public, is directly benefited. 
 
 IIoiv One Billion Can Grow Into Billions 
 
 Now let us assume for the present that a given num¬ 
 ber of professional gamblers go into the stock market with 
 a certain amount of money—let us say one billion dollars— 
 and that this amount is both lost and won in the course of 
 twelve months. Consequently it is still in the game at the 
 end of the year, with this difference, that it has been placed 
 to the credit of the winners on the books of banks; and the 
 
 9 
 
 6 The bona fide small investor also helps to pay the bill. “Managers, 
 
 when successful in operations on the Exchange, have pocketed the 
 profits, but when unsuccessful, have thrown the loss on the stock¬ 
 holders,” says Ernest Von Halle in “Trusts or Industrial Combinations 
 in the United States.” 
 
134 
 
 The New Capitalism 
 
 losers have been eliminated from the game. So far so good! 
 The following year this same amount of money will again 
 be used by the winners; and let us say that they continue 
 to win at the maximum rate. Here’s the principle: 
 
 Within ten years there will have been credited to sundry 
 persons winnings aggregating billions of dollars, although 
 only one billion of money w T as actually entered in the game. 
 
 Who can tell me how much actual cash is put into the 
 stock gambling game in the course of a year ? Who can tell 
 me how much credit (call loans) is employed therein? Who 
 can tell me how much is lost and how much is “made”? 
 Who can tell me what proportion of the winnings each year 
 is taken out of the game and placed to the credit of indi¬ 
 viduals in banks? If I had these and a few other relevant 
 data I should like to have, I could, by simple arithmetic, 
 prove the damnable character of the stock market; and the 
 mystery of inflated fortunes, and inflated bank accounts 
 would dissolve into thin air. 
 
 The Big Game Played in a Big Way 
 
 The stock transactions on the New York Stock Exchange 
 for the year 1920, was 223,084,035 shares. Computing each 
 share at par value 7 the stock transactions for the year 1920 
 involved $22,308,403,500. This covers only the stocks of 
 those corporations listed on the New York Stock Exchange 
 —about 1000. It does not include the transactions for the 
 same group of stock on the exchanges of other cities, 8 or 
 stocks traded on the New York Curb Market. It is esti¬ 
 mated that the annual sales on the Curb average about 
 60,000,000 shares; while those of the exchanges outside of 
 New York aggregated about 35,000,000 shares in 1920. 
 
 There is no way of arriving at definite figures as regards 
 the amount of money actually involved in all stock transac¬ 
 tions in the course of twelve months in the United States. 
 
 7 The par value of most listed stocks is $100. Those whose par 
 value is less than $100 are only a small percentage of the total. 
 
 8 Boston, Philadelphia, Chicago, Baltimore, Pittsburgh, Washington, 
 Detroit, Cleveland, Cincinnati, New Orleans, Los Angeles, and San 
 Francisco. 
 
The Stock Market 
 
 135 
 
 In the first place, the New York Stock Exchange—the 
 biggest business institution in the United States—certainly 
 doing the greatest volume of business—keeps no books, i.e., 
 officially; nor does it publish official reports or statements. 
 
 Moreover the fluctuation in market quotations, the rise 
 and fall of prices of stocks, make it difficult even to ap¬ 
 proximate. However from the unofficial data that we have 
 it is safe to say that in normal times from twenty-five to 
 thirty-five billions of dollars change hands on the various 
 stock Exchanges every year. 
 
 And this is only for stocks. The bond transactions are 
 comparatively small in volume. In 1920, for example, the 
 bond sales on the New York Stock Exchange amounted to 
 $3,955,036,400; whereas in 1918 they amounted to only 
 about two billion. The reason for this is that bonds are of 
 a less speculative character—and that cash, rather than 
 margins, enter into their purchase and sale. 
 
 Capitalistic Anachronisms 
 
 Out of the welter of chicanery apparent in the specu¬ 
 lative stock game, two things stand out clear and strong: 
 First: the speculative investor is not a stockowner in any 
 sense of the word. They merely hold an option on stock 
 for a few days, weeks or months. They are mere transients, 
 not permanent members of a company. They have no per¬ 
 sonal or vital interest in the business itself; its manage¬ 
 ment, its conduct, or its affairs. Their chief concern is in 
 the “earning power” as it is reflected in the market quo¬ 
 tations. 
 
 The average marginal speculative stockholder cannot be 
 said to be an integral part of a corporation. Generally 
 speaking I will say that a majority of the speculative stock¬ 
 holders in a given corporation on January first of a cal¬ 
 endar year, are not stockholders in said corporation at the 
 end of the year, particularly if there is a decline in the 
 market quotations. Here we have a condition that gives 
 neither solidity nor responsibility to the existing corpora¬ 
 tions. It means perpetual changing of /leadership; it is 
 
136 
 
 The New Capitalism 
 
 erroneous to speak of ownership when there is none. The 
 group of “speculative investors,” or temporary stock- 
 holders, rotates. The speculative investor flits from flower 
 to flower, tarrying longest where there is the most honey— 
 the most likely prospect of a sightly profit from the pur¬ 
 chase, or sale, of stock. The average speculative investor, 
 or stockholder shifts from corporation to corporation—I 
 will not say that he transfers his loyalty, for he has no 
 loyalty—sticking to one or the other as long as all’s well— 
 and deserting it as soon as difficulties arise or adversity sets 
 in. The average speculative marginal investor is a coward 
 -—an adept at scuttling a ship. 
 
 The second anachronism is that hundreds of corporations 
 are sold over and over in the course of every twelve months. 
 This is particularly true of the corporations whose stocks 
 are listed on the New York Stock Exchange. Let me 
 give you just one illustration. The United States Steel 
 Corporation has outstanding $360,281,100 preferred stock, 
 and $508,302,500 common stock—consequently a total of 
 $868,583,600. During the year 1920 the sales of the United 
 States Steel Corporation stock on the New York Stock 
 Exchange alone, amounted to 13,585,300 shares of the com¬ 
 mon stock and 224,200 preferred. Since the par value of 
 the United States Steel Corporation stock is $100, the stock 
 transactions involved $1,380,950,000, which is an amount 
 considerably greater than its outstanding issue. 
 
 The Case Clearly Stated 
 
 The following excerpts from the speech of Hon. Albert 
 B. Cummins, in the Senate, Monday, September 1, 1913, on 
 a bill to reduce tariff duties and provide revenue for the 
 Government and for other purposes, are worth reading, in 
 that they are the utterances of a man considered an author¬ 
 ity on the subject. Said Senator Cummins: 
 
 “I take, as an illustration, the year 1912. The dealings 
 upon the exchange were less that^year than the year before, 
 and therefore it is entirely fair to take the year 1912. 
 
 “In that year there were sold upon the exchange in 
 
The Stock Market 
 
 137 
 
 New York, bonds—and I am giving the bonds simply for 
 the purpose of instituting a comparison—amounting in the 
 aggregate to $653,497,000. I want Senators to remember 
 the small, meager amount of bonds sold upon the New York 
 Stock Exchange when I come to state the amount of stock 
 sold in the same market during the same time. 
 
 “In the year 1912 there were sold on the exchange in 
 New York, 63,704,779 shares of railway stocks alone. The 
 par value of the stock so sold was $5,052,823,900. Of in¬ 
 dustrial and miscellaneous stocks there were sold upon the 
 exchange, in the year, 72,413,946 shares of the par value of 
 $6,150,899,600. Of all stocks there were sold 136,118,725 
 shares, with an aggregate par value of $11,203,723,500. 
 
 “I pause here to point out the fact that the aggregate 
 value of the railroad stocks sold or pretended to be sold 
 during that year upon the exchange, amounted to about 
 four-fifths, or certainly more than three-fourths of all the 
 railroad stocks of the United States. All the railroad 
 stocks are not listed upon the New York Exchange; but the 
 aggregate stocks, common as ivell as preferred, of all the 
 railway companies of this country, does not greatly exceed 
 $7,500,000,000. I state it in round numbers. Of the stocks 
 listed upon the New York Stock Exchange there were sold 
 during that year $5,052,823,900. 
 
 “It goes without saying that 90 percent of these sales 
 were purely speculative. Certainly not more than 10 per¬ 
 cent of the stocks of the railroad companies of this country 
 actually changed hands during the year 1912, and yet three- 
 fourths of those stocks were nominally sold upon the New 
 York Exchange alone . 
 
 “We might as well face the question whether we intend 
 to enter upon a campaign against selling short in this 
 country. I believe it is as serious a menace to industrial 
 stability and financial strength as is now before the Amer¬ 
 ican people. Some time we must take up in earnest the 
 problem of suppressing these gigantic gambling transac¬ 
 tions, and I think this is the time to do it. My amendment 
 demands that we do it now. . . . 
 
138 
 
 The New Capitalism 
 
 “There are a great many people who believe that the 
 short sale— that is, the sale of a commodity or a product or 
 a stock by a man who does not own it, but who expects to 
 go into the market when the time for delivery comes and 
 either settle upon the market price as it then is or buy at 
 the market price the thing he has sold, in order to make 
 delivery—is a valuable element in the business of the 
 United States. It has been so argued for a long, long time. 
 I do not think so. It is said that short sales are necessary 
 to create a market for things that people actually want to 
 sell, and in order to insure a condition which will enable a 
 man to sell anything, the moment he wants to sell it, at the 
 market price. I do not think so. When one has a thing 
 that somebody else wants to buy, there will always be an 
 opportunity for the seller and the buyer to meet. . . . 
 
 “But as it is now, it is not a place for the transfer of 
 actual shares. It is a place where bold and experienced 
 men balance their wits. It is a place in which men of great 
 mental capacity and audacity as well, fight for supremacy, 
 employing, not alone the means which ought to influence 
 the price of stocks, but every means which may tend to 
 affect the market. . . . 
 
 With Regard to Railroads 
 
 “In 1912 the Atchison, Topeka & Santa Fe Railroad Co. 
 had listed on the New York Stock Exchange its common 
 stock. It amounted to $168,430,500. At the end of the 
 year, as we are assured by those who know something of 
 the subject, practically the same persons owned the stock 
 who owned it at the beginning of the year; and yet during 
 the course of the year the stock of this company to the 
 amount of $129,319,700 was sold and bought upon the New 
 York Stock Exchange alone. . . . 
 
 “The Chicago, Milwaukee & St. Paul Railroad Company’s 
 . . . entire common stock amounted to $116,348,200; 
 
 but during this year there were sold and bought on the 
 New York Stock Exchange stock of this company to the 
 amount of $149,277,200. At the end of the year practically 
 
The Stock Market 
 
 139 
 
 the same persons owned the stock that owned it at the 
 beginning of the year; and the fluctuations in the market 
 price, steady and permanent as it ought to be, ran from 
 117% to 99%. 
 
 “How many fortunes were wrecked in that fluctuation it 
 is impossible for me to say. There was no material differ¬ 
 ence in the actual value of the stock during that year. It 
 was just as certain to pay dividends at one time as at 
 another. The future of the country remained the same. 
 The business at its command continued without great 
 change or variation. Yet during the course of the year, up 
 and down, under the influence of these speculators who 
 sought nothing else than their own advancement, and their 
 own profit, this stock varied from 117% to 99%. 
 
 “Again, the Erie Railroad Co. had outstanding that year 
 $112,378,900 of stock, but there were sold on this exchange 
 shares aggregating $245,033,100—almost two and a half 
 times in the one year the aggregate value of all the stock 
 of the company. 
 
 “The Canadian Pacific, another company which is en¬ 
 gaged in legitimate railroad business, whose earnings do not 
 change very greatly, had listed upon this stock exchange 
 stock of the aggregate value of $180,000,000. During the 
 year there were traded in shares of the value of $159,- 
 693,800, and the market price of the stock ranged from 
 226, the low point, to 283, the high point, without any 
 reason whatsoever for the fluctuation. 
 
 “The Great Northern, another rather steady property 
 when it escapes from the hands of those who desire to 
 manipulate its fortunes for their private interest, had listed 
 $209,981,875 of stock: and there passed back and forth, in 
 this fictitious and unreal way which is known in no other 
 business in the world except that which is done upon such 
 an exchange, shares of the value of $119,236,700. 
 
 “The Lehigh Valley is a road that has seemed to be the 
 favorite of these speculators in New York, although it is a 
 railroad doing a most legitimate business and supplying a 
 service that must continue without essential change. Its 
 
140 
 
 The New Capitalism 
 
 stock amounted to $60,501,700, yet men pretended to buy 
 and sell upon the exchange during this year, $175,625,000, 
 and its market price ranged from 155% to 185%. 
 
 “The Missouri Pacific had $83,251,085 of stock. Some¬ 
 body bought and sold on the exchange $113,320,800 of it 
 without any real change of ownership, and it fluctuated 
 from 35, the low point, to 47%, the high point. 
 
 “The Northern Pacific, with $248,000,000 of stock, saw 
 its shares bought and sold to the extent of $151,551,800. 
 
 “The Reading, another of these great composite rail¬ 
 roads, well established, doing a business which must con¬ 
 tinue so long as the people of this country do any business 
 at all—and I beg, now, that Senators will especially remem¬ 
 ber this—had a capital stock of $70,000,000. Yet these peo¬ 
 ple in New York, for themselves or for these blind and 
 inexperienced men who seek to find a fortune where for¬ 
 tunes are not to be found, sold, and somebody bought. 
 $1,114,468,250 of its stock. In other words, all its capital 
 stock was bought and sold more than fifteen times during 
 the course of the year. 
 
 “The Southern Pacific had stock 1 to the amount of 
 $272,672,405, and of its stock there was sold during the 
 year $129,139,400. 
 
 “Of the common stock of the Union Pacific there was 
 outstanding $216,627,800. There was bought and sold dur¬ 
 ing that year $1,062,600,000, and the range of market value 
 was from 150% to 176%. 
 
 “The speculators, of course, like stocks that are easily 
 depressed and easily increased in price. 
 
 And Here Are a Few Industrials 
 
 “But I now turn to another kind of stock. I call them 
 industrial or miscellaneous stocks. The first one that I 
 mention is Amalgamated Copper; known to every man who 
 has any interest in what takes place among the great specu¬ 
 lators of the country. Its stock amounts to $153,887,930. 
 It was traded in during 1912 to the extent of $812,869,500. 
 I doubt exceedingly whether at the close of the year there 
 
The Stock Market 
 
 141 
 
 was any substantial difference in the ownership of the 
 stock as compared with the beginning of the year. The 
 lowest price was 60, the highest price 92%, a range of 32% 
 per cent, or one-third of the par value of the shares them¬ 
 selves. 
 
 “The American Beet Sugar Co., of which we have heard 
 a great deal in recent years, had a common capital stock to 
 the value of $15,000,000. There were sold and bought on 
 this exchange during the year shares of this company to 
 the aggregate value of $108,612,400, more than seven times 
 the entire amount that had been issued by the company. 
 
 “The American Can Co., another company out of which 
 great fortunes have come, had stock of the par value of 
 $41,233,300, and yet there were sold on the exchange dur¬ 
 ing the year shares amounting to $379,658,300, quite nine 
 times the value of all the stock then outstanding. 
 
 “The Stock of the American Smelting and Refining Co., 
 another institution which has been utilized for winning 
 great fortunes, was $65,000,000, and of that $15,000,000 
 had been withdrawn and deposited to secure certain bonds, 
 and therefore really it had outstanding but $50,000,000. 
 Yet the trading in this stock amounted during the year to 
 $227,741,000. Its low point was 66%, its high point 91. 
 
 “The General Electric Co. had $77,325,200 of stock. The 
 trading amounted to $50,551,000. 
 
 “The United States Steel Corporation, the greatest in¬ 
 dustrial organization of the time, or of any other time iff 
 this or any other country, had outstanding common stock 
 of the par value of $508,302,500, and yet somebody sold 
 and somebody bought during the course of the year, shares 
 of this stock amounting to $2,462,622,400. The low point 
 was 58%, the high point 80%. ” 
 
 The Capitalistic Corollary 
 
 Why, and for whose benefit, are these stocks bought and 
 sold year after year? The non-investors, i. e ., the public, 
 derives no benefit whatever. Are the industries benefited 
 thereby, or only a certain number of individuals within the 
 
142 
 
 The New Capitalism 
 
 so-called “investor’’ group? The answer is obvious. Tre¬ 
 mendous as are the profits derived by the chief owners of 
 the big corporations, whether from operation of railroads 
 or public utilities, etc., or from the manufacture and sale 
 of industrial products, the profits they derive from their 
 stock transactions and manipulations (to say nothing of 
 interest, dividends, and commissions) are probably greater. 
 
 There are many other things besides stocks in which the 
 gambler speculates—scores of staple commodities, wheat, 
 corn, rye, barley, oats, petroleum, cotton, butter, eggs, etc., 
 and various kinds of produce. Besides real estate, the re¬ 
 peated buying and selling of which (and a sightly profit on 
 each “turn over” to the speculator) has given us inflated 
 “values” and higher rents. The same principle that gov¬ 
 erns the stock market controls the speculative market what¬ 
 ever the commodities may be. The marginal speculator 
 takes his profit (needless to say there are also sometimes 
 losses) or inflated returns, out of the price fluctuations, 
 while the consumer, i. e., the public, pays the bill. 
 
 The Period to This Chapter 
 
 What prostitution is to society, that is what the stock 
 market is to legitimate business—with this difference—that 
 houses of prostitution were once tolerated as the less of 
 two evils—whereas the stock market, in spite of its flagrant 
 immoralities, boasts of being an institution upon which the 
 salvation of the nation depends. 
 
 Society has never accepted prostitution as an honorable 
 business; nor have those practising the profession ever 
 sought to paint the halo of holiness around their transac¬ 
 tions. But Capital has forced society to accept the stock 
 market as if it were an honorable and sacred institution; 
 besides placing at the disposal of those who ply their ne¬ 
 farious trade within its purlieus, the nation’s financial 
 resources—that is to say, the people’s money—the savings 
 of the non-investors. 
 
CHAPTER XIII 
 Our National Wealth 
 
 P ROFESSOR WALKER in his “Political Economy” 
 says: “Economists have found much difficulty in de¬ 
 fining wealth; and not a few writers, especially of 
 late, have chosen to abandon the word altogether.” 
 
 Notwithstanding Professor Walker’s statement that not 
 a few waiters have abandoned the word wealth, our eco¬ 
 nomic literature has become cluttered with more or less 
 erudite definitions of, and elaborate treatises on wealth, its 
 nature, distribution, etc. These various definitions and 
 treatises are often in conflict with each other, for the rea¬ 
 son that the writers are not in agreement with regard to 
 the fundamentals involved. 
 
 The Best Definition of “Wealth” 
 
 While it may be difficult for Capitalistic economists to 
 arrive at a crystallized definition of wealth, the man in 
 the street finds it less puzzling to determine what wealth 
 is when applied to himself. He takes an invetory of all he 
 owns and owes, and the difference between the two is his 
 wealth. Therefore, wealth, in the popular mind, is some¬ 
 thing measureable, something computable, something that 
 can be reduced to figures. The average man may not be 
 able to give a scientific definition of the word wealth, but 
 most of us do not find it at all difficult to compute how 
 much or how little of it we have. 
 
 The very best definition of wealth I have ever heard—the 
 simplest and, I will add, the most scientific definition, came 
 froip the lips of an expert accountant. “Wealth,” he said, 
 ‘ ‘ is the difference between assets and liabilities. ” It is this 
 definition that will guide me in the writing of this chapter. 
 
 143 
 
144 
 
 Tlie New Capitalism 
 
 Statistics on the Wealth of the United States 
 
 What is the wealth of the United States today? The 
 Census Bureau has published no official estimate nor sta¬ 
 tistics since 1912. Nevertheless, in 1917, after our entrance 
 into tiie war, the then Secretary of the Treasury, William 
 G. McAdoo, said our national wealth was 255 billions. 1 
 The latest estimate for 1920 is 288 billion. It goes without 
 saying that both of these estimates are pure guess w T ork, 
 and probably grossly exaggerated. But for the present we 
 will accept them for what they are worth. With the esti¬ 
 mates for 1917 and 1920, added to those for 1900, 1904 
 and 1912, published in the 1921 United States Census Re¬ 
 port, we can at least get an approximate idea, if not of the 
 actual wealth at least of the supposed growth of wealth in 
 the United States : 
 
 1900.$88,517,306,775 
 
 1904.107,104,211,917 
 
 1912.187,739,071,090 
 
 1917.255,000,000,000 
 
 1920.288,464,000,000 2 
 
 Growth of the National Wealth 
 
 Carlyle has said somewhere: “A judicious man looks at 
 statistics not to get knowdedge, but to save himself from 
 having ignorance foisted on him.” In this spirit let us 
 examine the statistics with regard to the increase in our 
 national wealth. 
 
 During the century from 1800 up to the year 1900 the 
 wealth of the United States grew to 88 billion dollars; or 
 at an average rate of about 880 million dollars a year. 
 
 From 1900 to 1920 our wealth, according to the statistics 
 before us, grew from 88 billion dollars to 288 billion dollars 
 —an increase of approximately 200 billion dollars within 
 
 1 In 1912 when our National Wealth was declared to be 187 billion, 
 the assessment valuation was sixty-nine and a half billion. In 1917 
 the National Wealth was estimated by Mr. McAdoo at 255 billion; 
 the assessment valuation was only 88 billion. 
 
 2 The Journal of Finance and Commerce in May, 1920, said the 
 National Wealth was 500 billion, an absurdity on the face of it. 
 
Our National Wealth 
 
 145 
 
 twenty years, or at the rate of about 10 billion a year. 
 
 How is it possible for the wealth of a nation to increase 
 so suddenly, so rapidly, so tremendously ? There is but one 
 answer. It isn’t possible, and it didn’t happen! No such 
 growth in wealth could have been brought about by any 
 known process of healthy development; no such tremendous 
 yearly increase could have been produced by legitimate 
 means. 
 
 One Hundred Billion—Sheer Inflation 
 
 What, then, is the explanation? The explanation is 
 simple enough. You will please observe that the tremen¬ 
 dous increase in our national wealth began approximately 
 in 1900, i. e., the same year that overcapitalization began 
 to assume gigantic proportions. Much of the increased vol¬ 
 ume of the “wealth” which the nation is supposed to pos¬ 
 sess, is sheer inflation. There are no commensurate assets. 
 The tremendous increase is for the most part fanciful; the' 
 colossal increment in wealth is fictitious. If I were asked 
 to make a guess as to the probable amount of our national 
 wealth I would say that it does not exceed 188 billion. But 
 I consider even that amount too high, for I do not believe 
 that our average yearly legitimate increase since 1900 was 
 at the average rate of five billion a year. But judge for 
 yourself. 
 
 According to the United States Census (Statistical Ab¬ 
 stract, 1921) the national wealth in 1880 was $43,642,- 
 000,000, and in 1890 it was $65,037,000,000—an average 
 increase of $2,139,500,000 a year. By 1895 the national 
 wealth had risen to $77,000,000,000, an average increase of 
 $2,400,000,000 a year. By 1900 it had mounted to $88,- 
 517,000,000, which was at the rate of about $2,750,000,000 
 a year. From 1900 to 1904 the increase was at the rate of 
 about $4,600,000,000; from 1904 to 1912 at the tremendous 
 rate of about ten billion a year; and from 1912 to 1920 at 
 the rate of about twelve and a half billion a year. 
 
 To admit, therefore, a possible yearly increase of five 
 billion dollars during the past twenty years—a total of 100 
 
146 
 
 The New Capitalism 
 
 “National Wealth” Statistics from the U. S. Census 
 Statistical Abstract, 1921 
 
 National Wealth; Estimated under Specified Heads in 1900, 
 
 1904 and 1912 
 
 (Source: Reports of the Bureau of Census, Department of Commerce) 
 
 Form of wealth 
 
 Gold and silver coin 
 
 and bullion . 
 
 Manufacturing mach ’y 
 
 tools, etc. 
 
 Railroads and their 
 equipments . 
 
 Total 
 
 Street Railways, Etc.: 
 
 Street Railways . 
 
 Telegraph Systems .. . 
 Telephone (Systems . . 
 Pullman & private cars 
 Shipping and Canals. . 
 Irrigation Enterprises. 
 Privately owned 
 
 waterworks . 
 
 Privately owned central 
 electric light and 
 power stations. 
 
 Total 
 All Other: 
 
 Clothing and personal 
 
 Ornaments .. 
 
 Furniture, carriages, 
 etc. 
 
 Total 
 
 Grand total 
 
 1900 
 Dollars 
 46,324,839,234 
 6,212,788,930 
 3,306,473,278 
 ' 749,775,970 
 
 1904 
 
 Dollars 
 
 55,510,247,564 
 
 6,831,244,570 
 
 4,073,791,736 
 
 844,989,863 
 
 1912 
 
 Dollars 
 
 98,362,813,569 
 
 12,313,519,502 
 
 6,238,388,985 
 
 1,368,224,548 
 
 1,677,379,825 
 
 1,998,603,303 
 
 2,616,642,734 
 
 2,541,046,639 
 
 3,297,754,180 
 
 6,091,451,274 
 
 9,035,732,000 
 
 11,244,752,000 
 
 16,148,532,502 
 
 69,848,035,876 
 
 83,801,383,216 
 
 143,139,573,144 
 
 1,576,197,160 
 211,650,000 
 400,324,000 
 \ 98,836,600 
 
 537,849,478 
 
 2,219,966,000 
 
 227,400,000 
 
 585,840,000 
 
 123,000,000 
 
 846,489,804 
 
 4,596,563,292 
 
 223,252,516 
 
 1,081,433,227 
 
 123,362,701 
 
 1,491,117,193 
 
 360,865,270 
 
 290,000,000 
 
 267,752,468 
 
 275,000,000 
 
 402,618,653 
 
 562,851,105 
 
 2,098,613,122 
 
 3,495,228,359 
 
 4,840,546,909 
 
 10,265,207,321 
 
 1,455,069,323 
 s 6,087,151,108 
 '424,970,592 
 326,851,517 
 
 1,899,379,652 
 
 7,409,291,668 
 
 495,543,685 
 
 408,066,787 
 
 5,240,019,651 
 
 14,693,861,489 
 
 826,632,467 
 
 815,552,233 
 
 2,000,000,000 
 
 2,500,000,000 
 
 4,295,008,593 
 
 4,880,000,000 
 
 5,750,000,000 
 
 8,463,216,222 
 
 15,174,042,540 
 
 18,462,281,792. 
 
 34,334,290,655 
 
 88,517,306,775 
 
 107,104,211,917 
 
 187,739,071,090 
 
 * Including live stock on farms and ranges and in cities and towns. 
 
Our National Wealth 
 
 147 
 
 billion, is certainly liberal. Therefore I consider my esti¬ 
 mate that our national wealth does not exceed 188 billion 
 as extremely fair. In brief, I maintain that since 1900 over 
 100 billion dollars of fictitious “wealth” has been included 
 in all statistics pertaining to our “National Wealth.” 
 
 If I am correct in saying that the national wealth is 100 
 billion inflation, then the general public is paying about 
 $6,000,000,000 a year interest on this inflated, non-exist¬ 
 ing wealth. If I am correct in saying that the inflation in 
 our national wealth is 100 billion, then the Capitalistic 
 System has placed a debt of $5,000 upon every family, the 
 annual interest on w r hich amounts to $300 per family. 
 
 There will be those, of course, who will challenge my 
 statement that 100 billion dollars of our statistical national 
 wealth is sheer inflation. They will say that I am in error. 
 Let them prove it! They cannot deny that there is con¬ 
 siderable inflation. If they accuse me of exaggeration as 
 regards the amount of inflation I wish to say that I shall 
 gladly revise my estimates on condition that they will fur¬ 
 nish me with complete and absolutely correct data showing 
 contrary conditions. Until the proof of my error is forth¬ 
 coming, my guess and estimate must stand. My guesses and 
 my estimates are fully as valuable as the guesses and esti¬ 
 mates of any other writer on economic subjects. 
 
 However, for the purpose of this chapter I am willing to 
 accept the official statistics for our “National Wealth,” 
 just as they are, without making any deduction for infla¬ 
 tion. But I will ask you to remember the expert account¬ 
 ant’s definition of wealth, viz., “the difference between as¬ 
 sets and liabilities.” 
 
 The National Assets 
 
 What do the statistics or estimates (see opposite page) 
 of' our national wealth cover? Wealth or assets? I hold 
 that they cover assets only. As proof I single out the item 
 “Railroads.” In 1912 the wealth of the “railroads and 
 their equipment” is given as $16,148,532,502. But where 
 
148 
 
 The New Capitalism 
 
 do we find mention of the liabilities of the railroads? The 
 railroad properties are bonded (i. e., mortgaged) for over 
 ten billion, which means that the railroad properties are 
 hypothecated for approximately two-thirds of their esti¬ 
 mated value. 
 
 Thus I could take item for item and show that the sta¬ 
 tistics for our national wealth are, to put it mildly, irrele¬ 
 vant and misleading. I ask every business man who reads 
 this chapter whether in all his life he has ever seen a trial 
 balance in which only assets are given, and no mention 
 whatever is made of liabilities. AVhat would he think of 
 an accountant who made a glowing report of the wealth 
 represented by his assets, without saying at least something 
 of the debts that must be paid—the liabilities. 
 
 The National Liabilities 
 
 I have no intention of pursuing this phase of the subject 
 to the bitter end. To do so in any worth-while fashion 
 would require a considerable amount of space. But merely 
 to indicate the possibilities let me ask: What are the Na¬ 
 tional Liabilities? For surely you will not deny that there 
 are liabilities. Look over the trial balance of any corpora¬ 
 tion and you will see that there are liabilities scheduled 
 which cut rather alarmingly into the assets. (While on 
 this subject, and merely in passing, I have always won¬ 
 dered why “Capital Stock”—AVhich is presumably the 
 amount of capital a given number of persons constituting 
 a corporation ‘ ‘ invested ’ ’ for the acquisition of their assets , 
 such as land, buildings, machinery, equipment, etc.—should 
 also be their liability. A contradiction is involved here. 
 But let us return to our subject.) 
 
 The national assets in 1920 amounted presumably to 288 
 billion. Remember that; then read the following: 
 
 “Debts of the Government, of states, cities, counties, 
 school districts, improvement districts, transportation cor¬ 
 porations, all industrial corporations, private mortgages 
 and bank loans, amount to more than $150,000,000,000, 
 
Our National Wealth 
 
 149 
 
 approximately $1,500 for every man, woman and child in 
 the United States. Figures by Richardson.” 3 
 
 The Trial Balance 
 
 “ Wealth is the difference between assets and liabilities,” 
 said the expert accountant. Which being the case we ar¬ 
 rive at the conclusion that the national wealth is only 
 $138,000,000,000. Here are the figures : 
 
 National Assets .$288,000,000,000 
 
 National Liabilities . 150,000,000,000 
 
 National Wealth.$138,000,000,000 
 
 The Public Pays the Interest and Principal 
 
 It is of tremendous importance to keep the liabilities 
 in mind, for, according to the Capitalistic logic the non¬ 
 investors will have to pay the interest as well as liquidate 
 the principal of the entire debt. The national liabilities 
 are estimated as 150 billion. This means that the public 
 is paying not less than six percent, or a total of 9 billion 
 dollars a year interest on this debt. And if the practice of 
 setting up a sinking fund to ultimately cancel the principal 
 of the debt is general, then the public is paying consider¬ 
 ably more than 9 billion a year. I do not know within 
 what period of time this liability will be liquidated; some 
 note and bond issues run to A. D. 1956, and some even be¬ 
 yond that year. But let us assume that the liabilities will 
 not be increased; and that the entire debt (liabilities) will 
 be paid off promptly at the end of twenty years. 4 In that 
 case the public will have paid as interest, 180 billion dol¬ 
 lars; and by way of liquidating the principle of the debt 
 150 billion dollars; or a total of 330 billion dollars. 
 
 3 Frederick R. Burch in The Dearborn Independent , Jan. 28, 1922. 
 
 4 It is an absolute certainty that twenty years hence the National 
 liability will be considerably greater than 150 billion. I have already 
 shown that maturing - securities are not “retired” ; on the contrary, 
 they are being perpetuated. We have seen that for every dollar of 
 maturing securities, nine dollars of new securities are issued. Conse¬ 
 quently when I “assume” the cancellation of the 150 billion national 
 liabilities at the end of twenty years, I’m dealing in a pure hypothesis. 
 
150 
 
 The New Capitalism 
 
 Putting the case into the simplest form, the national 
 liabilities, amounting at present to 150 billion dollars, 
 means that a debt of $7,500 has been placed on every fam¬ 
 ily, and the interest alone on which amounts to at least 
 $450 per family. 
 
 Getting to the Point 
 
 But let me return to the point of my subject—the Na¬ 
 tional Wealth. “Wealth is the difference between assets 
 and liabilities.” If a piece of property valued at ten thou¬ 
 sand dollars, and of which I am presumably the owner, is 
 mortgaged for $8000, what is the amount of my wealth? 
 Answer: $2000! Correct! 
 
 But, you will say: Nevertheless there is $10,000 worth 
 of property in existence. Quite true! but it isn’t mine; I 
 have no title to it; it is encumbered—there are notes and 
 mortgages amounting to $8000 against it, on which I am 
 compelled to pay interest. My equity is $2000. Those to 
 whom I owe $8000—those who hold the notes and mort¬ 
 gages, have the other $8000. They—not I—own the wealth 
 I am supposed to have. 
 
 Now we are getting into the very heart of our subject, 
 and I am going to make a statement of tremendous fact; 
 a statement that is incontrovertible; a statement susceptible 
 of proof; a statement based upon examination and analysis 
 of an overwhelming amount of evidence; a statement of 
 staggering portent to all the people of the United States— 
 particularly to the wage-earners, the small salaried men 
 and women—the non-investors—the public. 
 
 The “National Wealth” is mortgaged to the limit, and 
 the few hundred, or thousand, constituting the Capitalistic- 
 Mammonistic group—four hundred or four thousand indi¬ 
 viduals, families or estates—(make it forty thousand, or 
 four hundred thousand) hold the mortgages. The major 
 portion of the national assets—the valuable, profitable, pro¬ 
 ductive properties, and natural resources, are virtually 
 owmed by these few thousand. What they do not own out¬ 
 right they dominatingly control. Not content with a rea- 
 
Our National Wealth 
 
 151 
 
 sonable profit from their wealth, they hit upon the plan of 
 creating a tremendous liability against same, through the 
 instrumentality of note and bond issues. I do not pretend 
 to know what portion of the tremendous note and bond 
 issues, aggregating tens and tens of billions, are in the 
 hands of the ‘ ‘ investor public ’ ’; what portion is held by the 
 few thousand constituting the Capitalistic-Mammonistic 
 group. It would be interesting if this information could 
 be obtained. And it would be still more illuminating if we 
 had definite data as to the amount of the notes and bonds 
 originally purchased, let us say, by the “investor public,’’ 
 that found their way into the banks and are held by them 
 as collateral. In the final summing up, I think, it would 
 be found that the major portion of national assets and 
 liabilities are concentrated in the hands of a few thousand 
 —make it four hundred, or four thousand, or forty thou¬ 
 sand, or four hundred thousand, if you like. (And I have 
 not said one word as yet, nor will I particularly dwell on it 
 now, of the immense profits made by a few from the flota¬ 
 tion of securities issues of all kinds, their underwriting, 
 commissions, etc.) The point I wish particularly to em¬ 
 phasize here is that the public—the wage-earners, the non¬ 
 investors, are paying interest both on the assets and the 
 liabilities—into the hands of the Capitalistic group. Not 
 only that but the public—the wage earners, the non-inves¬ 
 tors, will ultimately have to pay the principal of the debt 
 —i. e. liquidate the liabilities. But I have already made 
 this clear to all those who are not purblind. 
 
 A Word to tiie Dust Throwers 
 
 I realize, perhaps better than most of my readers, since 
 I have lived longer with my subject, the danger of gener¬ 
 alizations. For this reason let me emphasize that I am not 
 overlooking the fact that in the national liabilities are in¬ 
 cluded items which, properly speaking, are not issued by 
 the Capitalistic group—for example, federal, state, and 
 municipal bonds. But it will not be denied that the non¬ 
 investor portion of the public pays the greater part of the 
 
152 
 
 The New Capitalism 
 
 interest; and ultimately also the principal of these national 
 (or public) debts. I’ll waste no time in insisting that the 
 public pays practically all taxes. It is admitted that busi¬ 
 ness does not pay the federal income tax; business merely 
 advances the tax; ultimately it is collected from the public, 
 the major portion of the amount involved being paid by 
 that large contingent whose income is small—the wage 
 earners and salaried men and women, the non-investors, 
 and the bona fide small investors. 
 
 Let There Be Light 
 
 Note that I have added the bona fide small investors. I 
 have done this purposely: First, because it is a fact; and 
 secondly, because the Capitalistic group has impressed 
 those who never think, that a very large number of small 
 investors share in the emoluments of the Capitalistic Sys¬ 
 tem. “If Big Business is in a conspiracy,” said Mr. 
 Schwab, “quite a few people are involved in it.” 
 
 IIow many bona fide small investors are there? I have 
 estimated their number at a million and a half. (You may 
 increase their number if you have access to statistics that 
 justify an increase.) What are the average holdings of the 
 average small investor? Who knows? I don’t! Let us 
 make a guess. Let us say that the par value of the hold¬ 
 ings of the average bona fide small, non-speculative investor 
 in securities of corporations, is $1000. In that case their 
 combined holdings would total $1,500,000,000—and their 
 combined income, computed at six percent on their invest¬ 
 ment would aggregate $90,000,000, which is certainly a 
 trifling portion of the total Capitalistic income. 
 
 But let us not be too conservative in our computations. 
 Let us say that their average holdings are $5000. In that 
 case their combined holdings would total $7,500,000,000, 
 and their combined yearly income $450,000,000, which is 
 still a small percentage of the aggregate amount involved. 
 
 Further along in this work of mine I shall revert to the 
 bona fide small investor in corporate securities, and show 
 
Our National Wealth 
 
 153 
 
 that he is not a beneficiary of the Capitalistic System; in¬ 
 deed he is penalized to the same extent as the non-investor. 
 
 Let the Authorities Speak for Us 
 
 But whatever contentions those favorably disposed 
 toward the present Capitalistic System may raise to mini¬ 
 mize the evil inherent in the System; whatever tactics they 
 may pursue to throw the student off the track; however 
 they may labor to controvert my statements—there is one 
 thing they cannot deny, and that is that the corporate 
 wealth of the nation, whatever its amount may be, is con¬ 
 centrated in the hands of a few hundred or thousand—four 
 hundred, or four thousand, or forty thousand, or four hun¬ 
 dred thousand, or four million—as you choose! 
 
 About one hundred and forty-seven years ago Adam 
 Smith wrote a book, which he called “The Wealth of Na¬ 
 tions. ’ ’ But the wealth of a nation, is invariably owned by 
 a comparatively small number of families or persons within 
 a nation. That is true of all nations; it is particularly true 
 of the United States. In 1890 the aggregate wealth of the 
 United States was $65,000,000,000. According to an emi¬ 
 nent economist and statistician of that time, Dr. Charles B. 
 Spahr, this wealth was distributed among the then twelve 
 and one-half million families as follows: 
 
 
 Aggregate 
 
 Average 
 
 Families 
 
 Wealth 
 
 Wealth 
 
 125,000 
 
 $33,000,000,000 
 
 $264,000 
 
 1,375,000 
 
 23,000,000,000 
 
 16,000 
 
 5,500,000 
 
 8,000,000,000 
 
 1,500 
 
 5,500,000 
 
 800,000,000 
 
 150 
 
 12,500,000 
 
 $65,000,000,000 
 
 $5,200® 
 
 That, approximately, was the distribution a generation 
 ago. Today a third of a century later, there are 22 million 
 families, less than 100 percent increase; and the aggre- 
 
 5 These figures beautifully illustrate the absurdity of the “average 
 wealth per family” so generously apportioned by statisticians. In 
 the above statistics by Dr. Spahr the average wealth of five and a half 
 million families is $150 per family; and the average wealth of another 
 five and a half million families is $1500 per family. But lo! to each 
 of these 11 million families the statistics allot $5200 of wealth. 
 
154 
 
 The New Capitalism 
 
 gate wealth is said to be $288,000,000,000, an increase of 
 343 percent. Thirty-three years ago Dr. Charles B. Spahr 
 computed that seven-eights of the families in the United 
 States held but one-eighth of the national wealth, while one 
 percent of the families held more than the remaining 99 
 percent. 
 
 In 1918 Professor E. A. Ross declared that: “Two per¬ 
 cent compose the rich and very rich, who own about one 
 and one-half times as much as the other 98 percent to¬ 
 gether. ’ ’ 
 
 According to the latest statistics, compiled by Henry H. 
 Klein, First Deputy Commissioner of Accounts of the City 
 of New York, and published in his book “Dynastic Amer¬ 
 ica’ ’ (1921), even less than one percent of the families 
 own one-half of the country’s wealth. According to Mr. 
 Klein, one family (John D. Rockefeller’s) owns approxi¬ 
 mately one percent of the country’s wealth, or $2,400,- 
 000,000; over forty families have wealth in excess of 
 $100,000,000; more than one hundred other families, in 
 excess of 50 million dollars each; more than three hun¬ 
 dred other families, in excess of 20 million dollars each. 
 In addition to these Mr. Klein gives a list of sixty-five fami¬ 
 lies whose wealth is between 10 and 20 million, and sixty- 
 five whose wealth is between 5 and 10 million. “The list 
 of those who died in the present generation leaving between 
 one and five million is too long to print,” says the author 
 of “Dynastic America.” “It contains several thousand 
 names. ’ ’ 6 
 
 Mammonism—The National Menace 
 
 Professor E. R. A. Seligman, head of the Department 
 of Economics of Columbia University, recently defined 
 Capitalism as “that form of industrial organization where 
 the means of production and by that I mean primarily un¬ 
 der modern technological conditions—the machine, and the 
 
 6 1 happen to know that Mr. Klein has taken great pains to 
 gather the data for his statistics, and for this reason consider his com¬ 
 pilations of great value in a study of our national wealth. 
 
Our National Wealth 
 
 155 
 
 funds required to work the machine, are in the control of 
 private individuals. 777 
 
 That is a very good definition for Capitalism; but the 
 point I raise is that the character of Capitalism has changed 
 completely during the past twenty years and no longer de¬ 
 serves to be called Capitalism, but by its new name, 
 MAMMONISM. Therefore, adapting Professor Seligman’s 
 definition to the altered conditions, we may say that Capi¬ 
 talistic Mammonism is that form of industrial organization 
 where the means of production—the machine—and the 
 funds required to work the machine, are concentrated in 
 the hands of a very small number—a few thousand indi¬ 
 viduals, families or estates, and into whose coffers most of 
 the profits flow. 
 
 The Capitalistic Sport of Knocking Down 
 
 Straw Men 
 
 A number of the Capitalistic apologists, for reasons not 
 difficult to understand, have recently put forth arguments 
 and statistics calculated to show that a greater distribution 
 of wealth, or a more equable division of the profits, would 
 be of little benefit to the workers or the public in general. 
 
 An article 7 8 by George E. Roberts (Vice President of the 
 National City Bank of New York), entitled “If We Divided 
 All the Money—How Much Do You Think You Would 
 Get? 77 emphasizes that if all the wealth in this country 
 were divided among the people, each would receive only a 
 small sum—a negligible amount hardly worth while both¬ 
 ering about. Mr. Roberts, referring to Professor Willford 
 Isbell King’s book, “Wealth and Income of the People of 
 the United States, 7 7 says: 
 
 “Professor King found that if all the profits which now 
 go to pay interest and dividends were to be divided among 
 all the wage earners, the result gained to the wage earners 
 could not be more than 25 percent of their present income 
 
 7 Debate between Professor E. R. A. Seligman and. Professor Scott 
 Nearing, Lexington Theatre, New York City, January 23, 1921. 
 
 8 Originally published in the American Magazine and reprinted in 
 pamphlet form, 1920. 
 
156 
 
 The New Capitalism 
 
 from wages. Of course, if the wage earner owned his home, 
 or had any other investment, the loss on this might wipe 
 out the gain in the salary or wages.” 
 
 Mr. Roberts furthermore tells us that Professor David 
 Friday, who also “has made a similar study of incomes 
 . . . found that the average wage in the chief industries 
 in 1918 was about $1320 a year. 9 . . . and that if all 
 interest and dividend payments, that is, the amount realized 
 from the use of capital employed in carrying on the same 
 industries, the average wage would be increased only about 
 $330 a year.” 
 
 Mr. Roberts a little later approaches the subject from a 
 slightly different angle, and shows, or attempts to show, 
 that if the big salaries paid to officials and managers w r ere 
 divided among the workers, it would be only a trifling sum 
 for the workers. In the case of the Bell Telephone system 
 such a division, we are told, would have raised the average 
 pay of the workers only 17 cents a week, or $9.00 a year. 
 
 Why this kind of figuring; what prompts it if not a burn¬ 
 ing desire on the part of the conspicuous members of the 
 Capitalistic group to throw dust into the eyes of the public 
 —that dear public which they violently protest they love so 
 much, and of which they are always so considerate? Who 
 is clamoring for an equal division, either of wealth or of 
 profits ? Certainly not I; nor any considerable part of the 
 people. There may be in the United States a few hundred 
 thousand extremists who are clamoring for an equal divi¬ 
 sion of the country’s wealth, properties, and its earnings; 
 but there are, in round numbers, fully one hundred million 
 people who are not crying for the moon, and who are not 
 asking that the national wealth and the national income be 
 equally distributed or evenly divided among them. Pre¬ 
 cisely what is to be gained by setting up a straw man and 
 then valiantly knocking him down? 
 
 9 I do not know upon what statistics Professor Friday computed 
 his average wage of $1320. My own computations would seem to 
 indicate that Professor Friday’s average is exceedingly high. 
 
Our National Wealth 
 
 157 
 
 There’s Method in Their Madness 
 
 Ill tell you what is gained by it. They want to hide 
 from the public: First: that an abnormal part of the 
 national income is retained by them; and secondly : that 
 it was by the petty process of extorting a few pennies, a 
 trifling sum, a seemingly negligible amount from the non¬ 
 investors that the Capitalistic group has built up its 
 gigantic System, accumulated its colossal capital and piled 
 up its fabulous wealth. The Capitalistic System began 
 with penny extortion; it has developed into a System of 
 dollar extortion. You can easily compute it for jmirself. 
 If the Capitalistic System can, under one pretext or 
 another, in addition to a fair and legitimate profit, extort 
 an average of ten cents a day from each of the 100,000,000 
 men, women and children in the United States (which is 
 fifty cents a day per family) it is enriching itself by ten 
 million dollars a day—or $3,650,000,000 a year. 
 
 Penalizing the Non-Investor $750 a Year 
 
 According to my computations the Capitalistic System 
 is collecting considerably more than fifty cents a day, over 
 and above a fair profit from the average non-investor (and 
 also from the small investor) family. According to my 
 figures it is collecting more than $2.00 a day from each 
 non-investor family—$750 a year—through the medium of 
 higher living costs. In view of the fact that the living costs 
 of the average family have advanced from about $650 in 
 1900 to $1550 in 1920, I consider my estimate of $750 a 
 year extremely conservative. I do not mean to say that 
 all of this $750 is confiscated by the few thousand consti¬ 
 tuting the Capitalistic nucleus; it is distributed among 
 whatever number constitutes the Capitalistic System. Let 
 us not forget that His Royal Highness—the Landlord— 
 who has just recently come into his own, and who lias 
 learned every Capitalistic trick—is getting a considerable 
 slice of it. And a fair part of it goes for taxes—but the 
 non-investor pays! 
 
158 
 
 The New Capitalism 
 
 What the Non-Investor Pays 
 
 If you find it difficult to grasp that the non-investor 
 family is mulcted of about $750 a year, remember what the 
 non-investor pays: He pays the interest on the actual 
 investment, as well as interest on the inflated valuation of 
 all properties; interest on the stocks, and on the bonds 
 issued against the inflated valuation; besides interest on 
 every dollar of capital borrowed by corporations in the 
 course of doing business. He pays, moreover, every dollar 
 of rent, every dollar of insurance, and every dollar of taxes, 
 for all of these items are overhead expense and are charged 
 up to cost of production; and the non-investor pays them 
 all. He also pays a certain amount set up as reserves, sur¬ 
 plus, depreciation, sinking and sundry Capitalistic funds. 
 And he pays his own wages, and the salaries of the corpor¬ 
 ation officials and managers. Just a word of comment 
 about the latter item. Blame Mr. Roberts, if it is a digres¬ 
 sion. 
 
 The Reverse Side of the Shield 
 
 It may be true, as Mr. Roberts tells us, that if the 
 salaries of the officials and managers of corporations were 
 divided among the wage earners and small salaried em¬ 
 ployees, that each worker would receive only a few dollars 
 —say ten or twenty dollars a year more. So far as I know 
 nobody has raised the question to date. But since Mr. 
 Roberts, and others, have computed what such income of 
 officials, managers, etc., if distributed among the employees 
 would amount to, I insist that they also show the reverse 
 side of the shield. Thus we have seen that 317,579 corpor¬ 
 ation officials in 1918 paid themselves as “compensation” 
 an amount aggregating $2,225,543,259. In other words, 
 each of ,the sixteen million wage earner or non-investor 
 families in 1918, contributed over $100 toward paying 
 the salaries of the 317,579 corporation officials. 
 
 If I felt disposed to push the inquiry further, and 
 relentlessly pursue the argument so blithely begun by Mr. 
 
Our National Wealth 
 
 159 
 
 Roberts, I would ask him why should the wage earners pay 
 the salaries of the corporation officials and managers, out 
 of their wages. His answer, no doubt, would be interest¬ 
 ing, and perhaps reveal the queer processes of the Capi¬ 
 talistic mind. ‘‘Speak, thy servant hears!” 
 
 In the meantime I should like to whisper a word of 
 friendly counsel into the Capitalistic ear—namely that 
 skating on thin ice is a dangerous sport; also that it is not 
 wise to monkey with a buzz saw, or poke a stick into a 
 hornet’s nest. 
 
 Excessive Capitalistic Pro jits 
 
 Let me repeat that I never have, and do not now, ask for 
 an equal division of the profits (and certainly not of 
 wealth). I hold, and shall at all times defend the prin¬ 
 ciple, that capital—legitimate and actual capital—is 
 entitled to a reasonable profit, and that the Ijona fide 
 investor is entitled to a fair return on his investment. 
 No! it is not a wider distribution of the present excessive 
 profits that I would advocate—but a system of economics 
 under which there would be a considerably smaller volume 
 of profit than at present, going to the Capitalistic group— 
 or Capitalistic “investors”—a system under which exces¬ 
 sive profits would be impossible. Here you have the gist 
 of my thought on this entire subject. 
 
 Less Capitalistic Pro jit and Greater Wage 
 
 Savings 
 
 In plain English—the profits of the Capitalistic System 
 are excessive, and the non-investor pays. Isn’t it rather 
 strange that not one of these bright men who have com¬ 
 puted how small a part of the excessive profits, if they were 
 evenly distributed, would go to Labor, has ever pointed out 
 thaf the profits are excessive, nor has one ever tried to 
 score the point that if the profits of the Capitalistic System 
 were less excessive—the average family (granting, of 
 course, a reasonable wage or family income) could save at 
 least a small portion each year out of its income. Nor has 
 
160 
 
 The New Capitalism 
 
 any statistical expert ever gone to the trouble of trying to 
 express in figures precisely what less corporation profit, 
 and more savings on the part of the wage earner families, 
 would mean to the latter. Thus: 
 
 If each of 16,000,000 wage earner families had been 
 enabled to save only $100 a year (about 27 cents a day) 
 during the past twenty years—each family would have 
 saved $2000, or collectively the stupendous sum of $32,000,- 
 000,000. 
 
 And if they could have saved $200 a year (about fifty- 
 five cents a day) each family would have $4000, or collec¬ 
 tively a wealth accumulation of $64,000,000,000. 
 
 And so on! “Many a little makes a Mickle,” applies 
 to the wage earner as well as to the Capitalist. 
 
 Figuring Another Way 
 
 Nor has any keen minded Capitalistic analyst ever 
 pointed out that if the Capitalistic System can continue 
 to extort from sixteen million families—say an average 
 of $500 a year—it w r ill collect $8,000,000,000 a year or 
 $160,000,000,000 during the next twenty years. 
 
 No! Not a more equable distribution of the excessive 
 profits among a large number but a decided diminution 
 of the excessive profits that are now demanded by the com¬ 
 paratively small number constituting the Capitalistic Sys¬ 
 tem. That is all that those who work for a wage are 
 demanding when they ask a fair recompense for their labor 
 —not a division of wealth, but an opportunity to acquire 
 some of it; not an undue proportion of the national income, 
 but a chance to save a fraction of it, so that they might not 
 be thrown on the rude mercies of the world—when sick¬ 
 ness, age, or infirmity steals upon them. Is their demand 
 unreasonable ? 
 
 Concentration of Wealth . 
 
 Political Economy is said to be “the science that treats 
 of the nature, the production and the distribution of 
 wealth As a matter of fact Political Economy, without 
 
Our National Wealth 
 
 161 
 
 pausing to deny that it is a ‘'science,” concerns itself not 
 at all with the distribution of wealth, but rather with the 
 concentration of wealth. “Distribution of wealth 7 ’ in 
 economistic circles is clearly a figment of the mind. Surely 
 when 80 per cent of a nation’s population, in spite of an 
 admitted productive power, possess little or no wealth, and 
 are deliberately prevented from sharing in the wealth they 
 admittedly produce, there should not be such loud talk 
 about its distribution. To speak of the wealth of a nation, 
 or its distribution, when a majority of the families consti¬ 
 tuting the nation possess no wealth—or just enough to 
 keep them out of the poorhouse—is playing deuces wild 
 with words. 
 
CHAPTER XIV 
 The National Income 
 
 I T is significant that there are no worth-while statistics 
 pertaining to the “National Income”—that is to say, 
 the aggregate income of all the people living within the 
 nation. It would be comparatively easy to compile such sta¬ 
 tistics if all concerned were honest enough to furnish the 
 necessary data. The government is spending tens of millions 
 of dollars annually for the gathering of data, and the com¬ 
 puting, compiling and classifying of statistics on hundreds 
 of subjects in most of which the general public has neither 
 concern nor interest. So far as I know, no systematic 
 effort has ever been made to definitely ascertain the actual 
 income of all the people of the nation, derived from all 
 possible income sources. There are in existence unrelated 
 sets of earnings or income statistics for a few groups, gath¬ 
 ered and compiled by government bureaus, but they are 
 fragmentary, and, on account of their incompleteness, 
 worthless for any practical purpose. Most of them are 
 estimates or generalizations based upon data obtained from, 
 or for, a limited number of persons within a given group; 
 and one doubts the accuracy of the data. Under the cir¬ 
 cumstances their scientific value is nil. 
 
 Even the “Statistics of Income” compiled from the 
 income tax returns, under the direction of the Commis¬ 
 sioner of Internal Revenue for 1917, when all persons with 
 a net income of $2000 a year, and since 1918, when all 
 persons with a net income of $1000 a year, were obliged 
 to file an income tax return, are of no particular value, for 
 the published statistics give no hint of the actual total 
 income of even those who reported, and none for those 
 whose net income fell below $1000. 
 
 162 
 
The National Income 
 
 163 
 
 George E. Roberts, Vice-President of the National City 
 Bank of New York, in an address delivered npon the occa¬ 
 sion of his retirement from the Presidency of the American 
 Statistical Association, 1 bewailed the fact that there was 
 no reliable information with regard to the national income; 
 no comprehensive statement showing “how it was disposed 
 of, who absorbed and enjoyed it,” etc.; and declared that 
 such a statement 1 ‘ would take the place of anonymous esti¬ 
 mates in circulation.” 
 
 It is, perhaps, nugatory to ask why has the American 
 Statistical Association, in the more than eighty years of its 
 existence, never made an effort to obtain the data necessary 
 for a set of worth-while statistics pertaining to the incomes 
 of all the people derived from all sources. Either the 
 American Statistical Association is lacking in ingenuity 
 and does not know how to go about accomplishing so simple 
 a task, or else it believes in the saying “where ignorance 
 is bliss ’twere folly to be wise.” 
 
 In the absence, then of any definite information on so 
 vital a subject as the incomes of the people of the United 
 States, and the sources from which their incomes are 
 derived, we must turn to the studies of men who, consider¬ 
 ing the limited data and fragmentary material at their 
 disposal, have made computations which, while neither 
 scientific nor conclusive are at least interesting and indica¬ 
 tive. 
 
 The Income “Authorities” 
 
 I have before me as I am writing this chapter, Professor 
 Willford Isbell King’s “The Wealth and Income of the 
 United States.” Professor King is recognized among the 
 statisticians and students of sociology and of the econom¬ 
 ists in this country “as a very eminent man in his particu¬ 
 lar field.” (His studies do not extend beyond the year 
 1910.) Also a recently published book entitled, “The 
 Income in the United States—Its Amount and Distribution 
 
 l “The Equilibrium in Industry,” an address delivered Dec. 29, 1920. 
 
164 
 
 The New Capitalism 
 
 from 1909-1919 —and which purports to be a summary 
 of an exhaustive statistical analysis of the income of the 
 United States for each year, 1910-1919, prepared by the 
 staff of the National Bureau of Economic Research: Wes¬ 
 ley C. Mitchell, Willford I. King, Frederick R. Macaulay 
 and Oswald W. Knauth. Also the Statistics of Income, 
 compiled from the returns for 1918, under the direction of 
 the Commissioner of Internal Revenue. Besides a half 
 dozen books of a less pretentious character, dealing in a 
 fragmentary and desultory way with Incomes, Profits, 
 Wages, etc. 
 
 I had originally intended to go into an extended analysis 
 of all available income statistics and statements pertaining 
 thereto, but discovered that this would lead me too far 
 afield. For the sake of brevity I have concluded to con¬ 
 fine myself in this chapter to a few independent comments, 
 observations and conclusions, on some of the principal 
 points involved in the subject—the National Income. 
 
 What Is Income ? 
 
 I suppose, to do myself justice, I ought to go into lengthy 
 definitions of Income, Profit, etc., and sundry other terms 
 conspicuous in the Capitalistic glossary and current in 
 Accountancy parlance. But I will not enter into that at 
 present. Nevertheless when the Secretary of the United 
 States Treasury Department maintains, and the Supreme 
 Court of the United States, decides that stock dividends 
 are not income, it is easy for a mere student to run a-foul 
 of Capitalistic finicalness. Briefly let me say that every 
 profit is an income, but not every income is a profit. For 
 example, wages are income, but not profit. But when 
 income is convertible into property, capital or wealth, 
 then it becomes profit, no matter with what mystic terms 
 the fact is disguised or obscured. 
 
 But you may dismiss what I say on this subject, and be 
 guided entirely by what the economic authorities have to 
 say. Professor King says: “A workman’s wages, interest 
 on loans, the rent of land, and the profits of business men, 
 
The National Income 
 
 165 
 
 are all classified as income. A man is said to receive 
 income through gifts or inheritance, through a rise in the 
 value of property in his possession, through winnings from 
 lotteries or gambling, or from the sale of products which 
 he himself manufactures or produces from the soil.” 
 
 We may accept this definition as coming within the 
 limits of permissibility, though in an argument I should 
 protest against considering “a rise in the value of prop¬ 
 erty” as income. 2 However, it is not to argue but rather 
 to clear the subject of inherent obscurities that I am writing 
 this chapter. To me an income, statistically figured, must 
 be an actual money income, or convertible into money or 
 property, capital or wealth. The line must be drawn some- 
 Avhere, for if things other than actual revenue derived from 
 one of the admitted and legitimate sources are computed as 
 income, money statistics are meaningless, and the whole 
 subject is reduced to an absurdity. 
 
 “Reductio ad Abswrdum” 
 
 This tendency to include under 11 Income ’ ’ sundry things 
 to which it is utterly impossible to give a money value, is 
 rampant among statisticians and economists, and Professor 
 King admits it. ‘‘In recent years,” he says, “most econo¬ 
 mists have added to the income list those pleasures which 
 a person receives from the use of free goods. A man enjoys 
 a beautiful sunset. Does he not receive income as truly as 
 the man who enjoys the Oriental rug in his home ? One is 
 free and the other costs money, but both alike appeal to the 
 man’s sense of beauty.” 
 
 Absurdity can go no further! The pity is that the idio¬ 
 syncrasies of statisticians, and vagaries of economists are 
 becoming painfully apparent in their so-called “Income 
 studies.” For example, on page 59 of “The Income in the 
 
 ^ I think I have shown at sufficient length how “the value of 
 property” has been artificially and arbitrarily inflated—to the tune 
 of billions of dollars. I am willing to consider the dividends or inter¬ 
 est derived from the inflated valuation as “income” but not the rise 
 In the inflation itself. If anyone insists on including the fictitious 
 Inflation in value in the statistics, it behooves me to say that the 
 proper place is in the Wealth statistics—not the Income section. 
 
166 
 
 The New Capitalism 
 
 United States”—(one of the books before me)—it is seri¬ 
 ously proposed to include in the “national income” the 
 hypothetical wages of eighteen to twenty million “Amer¬ 
 ican women, sixteen years of age and over, engaged in their 
 own homes without monetary remuneration.” Thus, for 
 1919 we find $900 allotted per housewife; and the “money 
 value” of their aggregate services is computed at $18,450,- 
 000,000. However great a value one may place on the 
 services of housewives, (and the value of their services is 
 inestimable) what has value to do with actual income? 
 The truth is that housewives throughout the world are not 
 receiving any money compensation; and statisticians have 
 no right whatever to credit them with a money revenue 
 that they do not receive. The outstanding, glaring fact is 
 that the eighteen or twenty million American housewives 
 are not receiving $18,450,000,000 in the course of twelve 
 months for the work they do in their homes. Why, then, 
 pretend that they are? 
 
 Sunsets, and evening stars, fresh air, clear skies, and cool 
 summer breezes, however delightful and enjoyable, are not 
 Money Income. That’s flat! The mythical wages of house¬ 
 wives buy no hats, nor shoes, nor bread. Let’s have done 
 with this kind of economic tom-foolery! 
 
 The Non-Investor’s Income Is Gross and 
 
 Disappears 
 
 Before entering upon an analysis of the national income 
 I want to fix another point clearly in the mind of the 
 reader. I am not aware that a single economist has ever 
 commented on the fact that in all the statistics for incomes 
 there is a queer mixture of gross and net income. With 
 regard to the non-investors their income is in all cases gross. 
 This is predicable of all wage earners, which includes the 
 small salaried men and women, small business men, most 
 professional men, in brief all those receiving the equivalent 
 of an average wage. I beg the readers to bear this in mind. 
 The income of the wage earners is gross. There are no 
 
The National Income 
 
 167 
 
 reserves, no surplus, no undivided profits, no depreciation 
 and replacement fund, no dividend-earning assets, no in¬ 
 terest bearing securities, no principal, no wealth, no capital, 
 nothing except their wage income, which in most cases is 
 spent before it is received. 
 
 Out of this gross income (their wages) the non-investors 
 must pay the living expenses of themselves and those de¬ 
 pendent upon them, which leaves them penniless at the end 
 of the year. While the wage earners are accredited by the 
 statisticians with having received a formidable amount of 
 wages (income) in the course of twelve months—the sta¬ 
 tistics are silent concerning the fact that generally speaking 
 the wage earner’s income has entirely disappeared by the 
 end of the year. 
 
 The Investor’s Income is Net, and Accumulates 
 
 Whereas the income of investors, of those whose revenue 
 is derived from other sources than wages—from invest¬ 
 ments or speculation—dividends, interest or rent, is net 
 income— i. e. profit. If it is argued that these, too, must 
 pay their living expenses out of their income, I’ll agree. 
 But there is this to say—that after a reasonable deduction 
 for living expenses a vast amount of the income remains 
 and is converted into additional profitable investments, 
 from the accumulation of which the investors will derive a 
 constantly increasing revenue in the succeeding years. 
 How great the aggregate amount of net income is can be 
 judged from the capital accumulations during the past 
 twenty years, which show an increase in the national wealth 
 of about ten billion a year. 
 
 Nor must we forget that in addition to interest, dividends, 
 rent and sundry profits, many of the investors receive a 
 salary or compensation, which, in most cases, is far in 
 excess of living expenses. Thus, for example, the United 
 States Income Statistics for 1918 show that in that year 
 317,579 corporations reported $2,225,543,259 as “compen¬ 
 sation of officials.” 
 
168 
 
 The New Capitalism 
 National Income Estimates 
 
 According to Professor King (Table XXX, p. 158) the 
 total national income for the year 1910 was $30,529,500,000. 
 
 According to Otto H. Kahn, the total national income 
 for the year 1918 was $55,000,000,000. 
 
 Estimates made by statistical experts place the national 
 income in 1918 between fifty-five and sixty billion. 
 
 It is immaterial whether we fix upon fifty-five or sixty 
 billion as the approximately correct estimates for 1918. 
 
 The following statistics from ‘ ‘ The Income in the United 
 States” (Table 2) make an attempt at giving the amount 
 of income and the sources from which derived, and are, 
 therefore, of especial interest here. 
 
 Percent of 
 
 1918 
 
 
 Total Income 
 
 Agriculture . 
 
 $12,682,000,000 
 
 21.01 
 
 Mineral production . 
 
 2,013,000,000 
 
 3.33 
 
 Manufacturing 
 
 A. Factories . 
 
 16,018,000,000 
 
 1,280,000,000 
 
 26.53 
 
 B. Construction . 
 
 2.12 
 
 C. Other trades . 
 
 1,704,000,000 
 
 2.82 
 
 Transportation 
 
 A. Railway, Pullman, Express, 
 
 Switching, and Terminal 
 
 Companies . 
 
 3,684,000,000 
 
 6.10 
 
 B. Street Railway, Electric Light 
 and Power, Telegraph and 
 
 Telephone Companies . 
 
 1,042,000,000 
 
 1.73 
 
 C. Transportation by water. . . . 
 
 506,000,000 
 
 .84 
 
 Banking . 
 
 767,000,000 
 
 1.27 
 
 Government . 
 
 5,352,000,000 
 
 8.87 
 
 Unclassified industries and miscel- 
 
 laneous income . 
 
 15,318,000,000 
 
 25.38 
 
 
 $60,366,000,000 
 
 100.00 
 
 By Way of Comment 
 
 I cannot forbear to make a few comments on Ihe 
 above statistics. For example—take the item Agriculture. 
 According to the United States Statistical Abstract (1920) 
 the value of the farm wealth produced in 1918, is given as 
 
The National Income 
 
 169 
 
 $22,480,000,000. In the above statistics (Table 2), the in¬ 
 come derived from Agriculture is given as $12,682,000,000, 
 which raises the questions: How is the “income” com¬ 
 puted ? Is the income gross or net ? Has an allowance been 
 made for rent and food? For interest on investment, and 
 salaries of owners or managers? Does the figure given 
 cover the income of all those engaged in agriculture, or 
 only of the farm owners, tenants, share farmers, etc. ? Are 
 wages paid to farm laborers, included in the figure given? 
 Is the unsold portion of the farmers’ products included in 
 “income”? Are the theoretical wages of the farmers’ 
 wives for household work or farm labor taken into con¬ 
 sideration, etc.? When sunsets and waterfalls, and rain 
 and sunshine can be considered as “income,” it behooves 
 one to inquire carefully just what has been included in 
 income, and what deductions and allowances have been 
 made, etc. 
 
 Or take the item Government. I, for one, question the 
 right to include Government in any Income schedule. 
 Under no circumstances can the income of the Government 
 be considered as part of the national income; it is clearly 
 a national expense. None will dispute that the expenses 
 of the Government are paid out of the income of the people, 
 principally out of the wages of non-investors through the 
 medium of direct and indirect taxes. But if it is contended 
 that it is legitimate to consider the expense of Government 
 as a national income item, then I shall insist that the full 
 amount of government expense be included, state, city, 
 county, etc., as well as federal. 
 
 I could note a few other incongruities in Table 2, but 
 that is irrelevant at this time. However, just to satisfy 
 my curiosity, I should like to know whether no income is 
 derived from stock transactions—the repeated buying and 
 selling of securities, stocks, bonds, notes, mortgages, etc., by 
 a comparatively small group of “investors.” Surely it is 
 a considerable item. Also the Board of Trade transactions 
 in cereals, produce, etc., involving billions in the course of 
 
170 
 
 The New Capitalism 
 
 a year. Also where is the income derived from the buying 
 and selling of real estate, land, buildings, etc. Also what 
 percentage of the national income is derived from the 
 Insurance business? Etc., etc. Is it possible that all these 
 things are lumped under “Unclassified Industries and 
 Miscellaneous Income”? If so I should like to see them 
 classified, and itemized. 
 
 Merged Statistics 
 
 But these things are really beside the question at this 
 time. What concerns us most just now is that the statistics 
 in Table 2 give no hint nor clew as to the wage earners’ 
 share in the national income. And that is what I want to 
 know most. If the national income in 1918 was sixty bil¬ 
 lion, or as the conservative Mr. Kahn claims, fifty-five 
 billion, what proportion of the income went to the wage 
 earners, the small salaried men and women—in brief the 
 non-investors ? 
 
 No “study” that I have ever seen answers this question. 
 In the book, “The Income of the United States,” Table 21 
 (p. 107), gives a “rough estimate” of the income from all 
 sources of salary and wage workers. I should say the 
 estimate is rough, exceedingly rough—wages and salaries 
 lumped as usual, and the meager salary of the clerk merged 
 into the munificent reward of the employers. 
 
 The ‘ * rough estimate ’ ’ raises a point worthy of some note 
 in a chapter dealing with the national income. For some 
 mysterious reason “Wages and salaries” are lumped in 
 practically all income statistics; also in corporations’ re¬ 
 ports. Moreover, under “salaries” is included the salary 
 paid to the clerk employee and to the high officials. I find 
 it difficult to make myself believe that this lumping of 
 wages and salaries is not a deliberate effort to conceal how 
 small a part of the national income goes to those who work 
 for a wage or small salary—the non-investors.' But what¬ 
 ever the concealed motive or hidden purpose, the fact is 
 glaring—the statistics speak for themselves; wages and sal¬ 
 aries are merged; and “salaries” includes the salaries of 
 
The National Income 
 
 171 
 
 clerks and officials. Table 21 is utterly worthless for the 
 purpose of determining what portion of the national income 
 goes to the wage earners. 
 
 Untangling a Skein of Statistics 
 
 But let us make an attempt at approximation by com¬ 
 puting some of the pertinent statistics given in Table 22 
 for the year 1918. 
 
 From the statistics for Farmers we discover that the 
 aggregate income of 4,433,000 farmers, having an income 
 of less than $2000 a year, was $4,600,000,000, (or $1038 
 per farmer). The aggregate income of 2,008,000 farmers 
 having an income of more than $2000 a year was $6,300,- 
 000,000, (or $3137 per farmer). Consequently the farm¬ 
 ers’ share of the income was $10,900,000,000, (or an average 
 of $1676 per farmer). 
 
 From the statistics “all income receivers except farm¬ 
 ers,” (Table 22), we learn that the aggregate income of 
 30,450,000 persons having an income of less than $2000 a 
 year was $32,100,000,000, (or $1054 per person). 
 
 The aggregate income of 3,400,000 persons having an 
 income of more than $2000 a year, was $17,400,000,000, or 
 $5118 per person. 
 
 Here, then, we have three groups: 1. Farmers; 2. Those 
 whose income was less than $2000; and, 3. Those whose 
 income was more than $2000. Counting those whose income 
 fell below $2000 generally as wage earners, and those whose 
 income exceeded $2000 as constituting the investor group, 
 
 we get the following result: Average 
 
 Total number Aggregate income per person 
 
 Farmers ... 6,441,000 $10,900,000,000 $1676 
 
 Wage earners. 30,450,000 32,100,000,000 1054 
 
 Investors. 3,400,000 17,400,000,000 5118* 
 
 40,291,0003 $60,400,000,000 
 
 3 It is only fair to say that the economists who compiled these 
 statistics included among - those employed 2,500,000 soldiers, sailors 
 and marines, to each of whom they generously allotted an average 
 income of $700, or a total of $1,750,000,000. 
 
 4 It is interesting to note here that in 1918, according to Table 27 
 in the same work (p. 136) only 842,458 persons in the United States 
 had an income of more than $5000 a year. Who can reconcile these 
 statistical contradictions? I confess my inability. 
 
172 
 
 The New Capitalism 
 
 The Average Income Per Family 
 
 So far, so good! But when we try to reduce the income 
 of the forty million persons to a family basis, we discover 
 that there is something fundamentally wrong somewhere. 
 In 1918 the population was 105,000,000, (21 million fam¬ 
 ilies). If we consider each farmer and each investor as the 
 head of a family of five, these two groups account for about 
 fifty million persons, or approximately ten million families. 
 This would leave fifty-five million persons, or eleven million 
 families, as constituting the wage-earner group. Of these 
 fifty-five million, it would appear, 30,450,000 were, in 1918, 
 engaged in gainful occupations (or about 2.77 persons per 
 family) which w r ould yield an income of $2918 per wage- 
 earner family; w 5 * 7 hich is preposterous. 
 
 To the credit of economists be it said that none has ever 
 statistically allocated so handsome an “average income” 
 to the wage-earner families—not even figuring into the 
 income account, sunsets and housewives’ imaginary wages, 
 and lumping “wages and salaries” as is their custom. It 
 must be admitted that they have been fairly conservative, 
 as may be judged from the following statistics appearing 
 in Professor King’s tables (p. 128 and p. 169). 
 
 Family Income Average Money Wage 
 
 in Dollars per employee, per annum 
 
 1850. 535 $204 
 
 1860. 613 265 
 
 1870. 889 397 
 
 1880. 735 323 
 
 1890. 941 398 
 
 1900. 1109 417 
 
 1910. 14945 507 
 
 All through the war the average income per family was 
 estimated between $1500 and $1850. Let us adopt the 
 latter figure for the present. In the course of the past 
 
 5 From Professor King's Table XLIV (p. 228) we learn that in 
 
 1910 over half (’51.54 percent) of the families in the United States 
 had an income of less than $800 a year; 11.89 percent had an income 
 between $800 and $1000 a year; and 12.26 percent had an income 
 between $1000 and $1200. In other words, in 1910, over eighty percent 
 
 (81.69 percent) of the families in the United States had an income 
 of $1200 or less. 
 
The National Income 
 
 173 
 
 few years I have read a number of articles speaking dis¬ 
 paragingly of the statistical average family, and their sta¬ 
 tistical average income. An anonymous writer in The 
 Saturday Evening Post not long ago, was particularly sar¬ 
 castic in his remarks. I share the anonymous author’s 
 objection to the statistical average family income, but for a 
 different, reason. My objection is that the average is ob¬ 
 tained by dividing the total wages, salaries and compensa¬ 
 tion of all those listed as “ engaged in the gainful occupa¬ 
 tions” equally among all the families. Consequently a 
 large number of families, whose actual income falls con¬ 
 siderably below $1850 a year, are made statistical sharers 
 in wages and salaries they do not receive; whereas thou¬ 
 sands whose income exceeds from ten to a hundred times, 
 and a thousand times $1850, statistically are placed in a 
 class to which they do not belong. 
 
 It is well to remember here that in 1918 less than twelve 
 percent of those engaged in gainful occupations filed an 
 income tax report. If the statistical $1850 “average income 
 per family ’ ’ is unfair, as the anonymous contributor to The 
 Saturday Evening Post would have us believe, it is unfair 
 only to the millions of families whose actual income falls 
 below $1850. 
 
 But if the statistical “average income per family” was 
 as high as $1850 in 1918-1920, the average is not $1850 at 
 present, for the group of wage earners and salaried men 
 and women. Their theoretical participation in the statis¬ 
 tical $1850 annual income was temporary, lasting less than 
 three years, and has been utterly destroyed by material 
 decreases in wages and salaries, to say nothing of loss of 
 wages on account of unemployment, or actual loss through 
 enforced idleness, during the two years following the 
 armistice. 
 
 But whatever may be the portion of the national income 
 that goes to the wage earner or non-investor families, never 
 forget that little or none of it is in their possession at the 
 end of the year. Their necessary living expenses consume 
 their gross income. 
 
174 
 
 The New Capitalism 
 The Investor’s Share 
 
 Not so with the investor group. According to the statis¬ 
 tics given in this chapter, 3,400,000 persons had an income 
 in 1918 totaling $17,400,000,000. Let us say that this 
 amount represents the income of the investor group. How 
 was it distributed? The statisticians are silent. We must 
 therefore, make our own deductions. What part of this 
 stupendous sum went to the bona fide small investors? 
 Again there are no statistics. Shall I say ten percent, or 
 $1,740,000,000 ? I doubt it! But if you think otherwise you 
 may double or treble this amount. 6 
 
 In Chapter V, you may recall, I set aside one million 
 investors “ whose investments are in things other than the 
 securities of corporations.” What part of the $17,400,- 
 000,000 went to them ? Who can tell ? And what part went 
 to the speculative investors? Does anyone know? 
 
 Of one thing we are quite certain, and that is that the 
 lion’s share of the $17,400,000,000 income went to the four 
 hundred, or four thousand (or forty thousand, or four 
 hundred thousand, if you prefer), who derive enormous 
 incomes from many principal sources: 
 
 1: From the Banks. 
 
 2: From the Insurance Companies. 
 
 3: From the Railroad and Transportation Systems. 
 
 4: From the Public Utilities. 
 
 5: From their Monopoly of the Raw Materials and 
 Natural Resources. 
 
 6: From their Control of the Leading Industries. 
 
 7: From Stock, and Board of Trade, Transactions. 
 
 6 Let those who may be tempted to double or treble the amount 
 of income of the bona fide small investors remember that $1,740,000,000 
 is six percent on twenty-nine billion dollars. Or let them take a glance 
 at the Stockholders Statistics appearing in the Annual Report (1921 of 
 the American Telephone and Telegraph Company—a typical corpo¬ 
 ration) according to which there were 186,342 shareholders of record 
 on December 31, 1921. Of this number 63,857 held five shares or less; 
 and 84,134 between five and twenty-five shares. These are the small 
 stockholders. In the A. T. and T. Co., 128,000 employees are stock¬ 
 holders. 
 
The National Income 
 
 175 
 
 Concealed Incomes 
 
 But in addition to the $17,400,000,000 of admitted income 
 there are concealed incomes, which are in reality profits 
 camouflaged as expenses, reserves, etc. For, just as it was 
 necessary to disguise the crime of overcapitalization (i.e. 
 capitalizing profits) by the invention of some euphonious, 
 indefinite phrases, such as “merger value,” “combination 
 value, ” “ earning power, ” “ good will, ’ ’ etc., it was found 
 necessary to invent accounting and cost systems to camou¬ 
 flage the reprehensible Capitalistic practices and particu¬ 
 larly to conceal: 
 
 1: That the profits are vast—considerably greater than 
 six percent even on the inflated capitalization. 
 
 2: That the bona fide small investor does not participate 
 appreciably in their distribution. 
 
 3: That the enormous profits are extorted from the gen¬ 
 eral public—principally the wage earners—the non¬ 
 investors. 
 
 Capitalistic Accounting and Cost Systems 
 
 The scientific accounting and cost systems, devised by 
 some of the acutest minds, are still in a state of evolution; 
 they are being revised, amended, and improved constantly. 
 Books and special periodicals dealing with the fine and 
 subtle points of accounting, are published in increasing 
 number. Nearly all of the colleges and universities have 
 special accounting courses. In brief, the highly scientific 
 Capitalistic accounting and cost systems are now in general 
 use; even concerns and individuals that cannot be said to 
 be a component part of the Capitalistic System have adopted 
 them, for their great benefit to those who employ them can¬ 
 not be denied. No question is ever raised regarding their 
 validity, their fairness, or their justice. 
 
 As a matter of fact most, if not all, of the big corpora¬ 
 tions, keep two sets of books—one for those on the inside, 
 showing the actual condition and earnings—and another 
 for the stockholders and the benefit of the public. This sys- 
 
176 
 
 The New Capitalism 
 
 tem of keeping two sets of accounts was brought out in a 
 number of the federal inquiries held at different times 
 during the past dozen years. 
 
 Capitalistic Secret Reserves 
 
 But I have no desire to enter into a discussion of account¬ 
 ing and cost systems, their principles, subtleties and tech¬ 
 nicalities. Therefore I shall confine myself to a brief gen¬ 
 eral discussion of a few of the camouflaging practices, or 
 rather devices, now almost universally employed and con¬ 
 sidered entirely legitimate—devices which serve the triple 
 purpose of keeping prices at a high level; pre-empting a 
 goodly percentage of the profits for themselves; and exclud¬ 
 ing the bona fide stockholders from participation therein. 
 
 I will not particularly dwell on the items: interest; fixed 
 charges; overhead expense; maintenance expense; salaries 
 of officers; and sundry items calculated to keep production 
 cost at the highest possible notch, for I am at this moment 
 dealing with concealed profits, not with the cost raising 
 devices. 
 
 The devices that conceal profits are the several secret 
 reserves. But let an authority on accounting explain them : 
 
 ‘ ‘ Secret reserves may take several forms, as writing down 
 to a comparatively small figure valuable assets, providing 
 excessive depreciation, providing excessive reserves for bad 
 debts, or contingencies, valuing stocks of materials and 
 products on hand at values largely below T either cost or 
 market, or including special reserves for future contingen¬ 
 cies under the head of accounts payable. Inasmuch as the 
 majority of industrial corporations do not publish their 
 gross earnings, such reserves can easily be made, and are 
 made continually in a form in which they do not appear in 
 any way in the published accounts, and are known, there¬ 
 fore, only to the directors and managers.’’ 7 
 
 7 From “Accounting' Practice and Procedure,” by Arthur Lowes 
 Dickinson, “Balance Sheet Liabilities,” Chapter VI, p. 151. 
 
The National Income 
 
 177 
 
 A Concrete Example 
 
 I can best illustrate the principle involved by giving an 
 actual example. John Skelton Williams, at the time Comp¬ 
 troller of the Currency in his letter to Elbert Gary, speak¬ 
 ing of the 1918 report, said that the United States Steel Cor¬ 
 poration ’s net earnings amounted to $549,180,000, but made 
 deductions which left net earnings of only $274,603,000. 
 “This deduction,” said Mr. Williams, “included an item 
 of $96,675,000 for maintenance and repairs, though the 
 company was carrying on its books to the credit of ‘depre¬ 
 ciation and extraordinary replacement’ the impressive sum 
 of $191,281,000.” 
 
 And this sort of thing, mind you, has been going on for 
 a quarter of a century. I do not know—I cannot esti¬ 
 mate—how many billions of dollars of concealed profits in 
 the aggregate have been diverted by corporations, man¬ 
 agers, owners and officials into the coffers of a few thousand 
 constituting the “inner circle” of the Capitalistic-Mam- 
 monistic group. My guess is that several billions a year 
 are thus “set aside.” And I believe it’s a conservative 
 guess. I do not think that I am unfair to the Capital¬ 
 istic “investor” group when I say that in addition to its 
 admitted income of $17,400,000,000 in 1918, it can be cred¬ 
 ited with an “income” of several billions of concealed 
 profits. But whatever the actual figures—the fact cannot 
 be denied. 
 
 The Established Order 
 
 All the available statistics with regard to wealth and 
 income establish one thing beyond the shadow of a doubt, 
 namely—the concentration of wealth in the hands of a few. 
 This is not exactly a phenomenon, for “ ’twas ever thus,” 
 even 'from the beginning. Indeed the concentration of 
 wealth in the hands of a few was for centuries practically 
 accepted by the masses as a matter of course. Moreover, 
 they believed that they were helpless to alter it. 
 
 But during the past century tremendous changes have 
 
178 
 
 The New Capitalism 
 
 taken place in the world. The masses are no longer dis¬ 
 posed to contemplate the continued process of concentration 
 with patient indifference. For a hundred years they have 
 been more or less insistently asking a hundred questions 
 which may be summarized thus: ‘ 1 Why should a favored 
 few garner, or be permitted to garner, all the riches of the 
 earth; to accumulate for themselves all the wealth, and the 
 manifold blessings and advantages that (real or fancied) the 
 possession of wealth implies or is supposed to imply. Why 
 should they be permitted to own and to acquire all the prop¬ 
 erties from which wealth is derived? Why should they be 
 permitted to practically confiscate for their own private en¬ 
 richment the resources which Nature gave to all the people? 
 WTiy should we, year after year, sweat and toil, labor and 
 slave, merely for them? Why are they and they alone 
 entitled to the usufruct of our labor? We are no longer 
 satisfied with a bare living; we want a greater share of the 
 wealth we produce, and which is markedly swelling the cof¬ 
 fers of those who already have vastly more than they need, 
 and more than is good for them, or for us. This concentra¬ 
 tion of the country’s wealth is wrong; it is an injustice, and 
 it must cease.” 
 
 And hundreds of more or less capable thinkers and writ¬ 
 ers have tried to answer these questions more or less intelli¬ 
 gently, more or less intelligibly, while thousands of others 
 have come to the defense of what it pleases them to call 
 “the established order.” 
 
 Thus far the advocates of “the established order” have 
 been victorious—the concentration of wealth in the hands 
 of the few continues, and is a demonstrable fact. But it is 
 becoming increasingly clearer to those not entirely blind, 
 that “the established order” is by no means the accepted 
 order; indeed is being rejected by a continuously increas¬ 
 ing number. The end of the “established order” is ap¬ 
 proaching. 
 
CHAPTER XV 
 
 ■ ■ 
 
 
 “Labor, Capital and Brains” 
 
 I N October, 1920, the American Bankers’ Association 
 held its forty-sixth annual Convention in Washing¬ 
 ton, D. C. In its report the Committee on Resolutions 1 * 
 ‘ ‘ fully realizing that a special duty devolves at this time on 
 the bankers of this country to aid as best they may in meet¬ 
 ing conditions and solving problems with a view to the 
 welfare of the nation” (meaning, of course, their own wel¬ 
 fare) declared itself as follows: 
 
 “ With special emphasis we would call the attention of 
 labor to the essential unity of the three great elements 
 entering into the industrial structure, labor, capital and 
 brains. A fair balancing of interest between these factors 
 in production of wealth must be maintained to insure their 
 common prosperity. Failure to recognize this balance 
 may easily wreck industry, and we call upon each factor 
 involved to recognize this basic truth , 9 ’ etc. 
 
 The Slogan 
 
 “Labor, Capital and Brains.” This is the new substi¬ 
 tute for that other slogan, “Labor, Capital and Manage¬ 
 ment,” which for a while was freely employed by writers 
 and speakers—the valiant apologists for, and defenders of, 
 the Capitalistic Entrepreneur System. But “Labor, Cap¬ 
 ital and Management” was so clearly an absurdity—Capital 
 and Management could easily be shown to be in all cases 
 identified—one and the same thing—cut out of the same 
 piecer of cloth—that it has now practically disappeared 
 from the writings and utterances of those, who, by pen or 
 
 i See Journal of the American Bankers Association, November, 1920, 
 
 page 289. 
 
 179 
 
180 
 
 The New Capitalism 
 
 word of mouth, discoursed in favor of the Capitalistic 
 Entrepreneur System. In every instance Capital and Man¬ 
 agement are synonymous, and the two in deadly unison are 
 arrayed against Labor. 
 
 The same can be said of the new version, “Labor, Cap¬ 
 ital and Brains.” Like Capital and Management, Capital 
 and Brains are one and the same thing. The same indi¬ 
 viduals who control capital are also considered ipso facto 
 the possessors of brains—the sole possessors, the sole inher¬ 
 itors of that rare thing. The two—Capital and Brains— 
 are an interlinked unit—a solid phalanx arrayed against 
 Labor. 
 
 The Propaganda 
 
 The slogan is not new; it was not invented by the Reso¬ 
 lutions Committee of the American Bankers’ Association; 
 it has been current for some time. But the Bankers’ Asso¬ 
 ciation has infused into it the breath of vitality. It will 
 become more conspicuous. We will probably hear it repeat¬ 
 edly from now on, for the Public Relations Committee 
 of the American Bankers’ Association at the same time 
 reported that: 
 
 “More than 650 of the leading newspapers of the country 
 have been supplied every two weeks with bulletins contain¬ 
 ing news of banks and the association. The editors have 
 been exceptionally responsive.” . . . 
 
 “Nearly a hundred financial papers and writers have 
 received a weekly news service. These editors have re¬ 
 sponded in a most wholesome fashion. . . . 
 
 “Public opinion, that elusive mistress of fortune, is 
 courted assiduously these days with various forms of public 
 relation by people in all walks of life, and is recognized in 
 the constructive efforts of most all organizations,” etc. 
 
 In an article in the North American Review (March, 
 1921) entitled “The New Socialism,” by John Corbin, we 
 find the new idea as exemplified in the slogan “Labor, 
 Capital and Brains” neatly interpreted. “In the realm of 
 industry,” writes Corbin, “there is more than labor, more 
 
“Labor, Capital and Brains” 
 
 181 
 
 than capital—more than the two combined and eager to 
 work in harmony. The body and the members are power¬ 
 less without the brain that is strong and clear—force to 
 lead, and, when need is—to rule.” 
 
 The Capitalistic Claimants 
 
 Probably before this book of mine is completed I will run 
 across many repetitions and paraphrases of the new slogan, 
 “Labor, Capital and Brains.” In the meantime let us 
 analyze it briefly. In the minds of those who will employ 
 it, Capital and Brains will, of course, always mean one and 
 the same thing. They will never associate Brains wdth 
 Labor. It will be assumed that only the Capitalistic Entre¬ 
 preneurs have Brains; by no process of reasoning will 
 ‘‘Brains” ever be conceded to reside in any other head. 
 Only into the Capitalistic cranium has the Creator injected 
 Brains. In the opinion of Capitalistic Entrepreneurs the 
 “brains” in a calf’s head are superior to those in Labor’s 
 head, for they can, at least, be scrambled. By “Brains” is 
 meant a superior intelligence—ability, talent, genius—a 
 sort of “divine right.” The Capitalistic group alone, it 
 would seem, has intelligence, ability, talent, genius. Cap¬ 
 italistic “Brains” is a wonderful thing in nature. 
 
 Yet all the great inventions and discoveries were made, 
 not by the Capitalistic confraternity, but by workers, men 
 who, while working for a wage in shop or factory, or at the 
 bench; or in their moments of studious leisure, pondered 
 over the mysterious principles of their branches of labor, 
 and devoted their best energy to the mastery of principles 
 and technique—invented machines, improved them, per¬ 
 fected them, and the sum total of whose multiplied benefits 
 today constitute the principal asset, capital, wealth—and 
 the chief means of enrichment, of the Capitalistic group. 
 
 If it served any other purpose than to show the utter 
 stupidity of the new slogan, and thus stultify the Capital¬ 
 istic crowd, I should like to give over a chapter or two of 
 this book to a brief paragraphic record of some of the most 
 important achievements in the field of inventions and dis- 
 
182 
 
 The New Capitalism 
 
 coveries, beginning, let us say, with Richard Arkwright, 
 inventor of the spinning jenny. 
 
 Such a record would establish beyond cavil or dispute, 
 that if brains had not resided in bountiful quantities in 
 ordinary heads, the Capitalistic brain today, assuming that 
 it would have the ability to function at all, would die of 
 inanition. It is because there was a high quality of brains 
 developed long prior to and entirely independent of the 
 Capitalistic Entrepreneur System, that the sundry indi¬ 
 viduals constituting the Capitalistic Entrepreneur group 
 owe their success and fortune. Has J. Pierpont Morgan 
 added anything to the sum and substance of human happi¬ 
 ness? For what great mechanical invention is Elbert Gary 
 conspicuous in the eyes of the world? We speak of Besse¬ 
 mer steel, but “lo and behold ye”—the Bessemer process 
 was not invented by Sir Henry Bessemer, but by William 
 Kelley, an iron maker of Eddyville, Kentucky, whose ex¬ 
 perimentations antedated Bessemer’s by nearly ten years. 
 Both Bessemer’s and Kelley’s processes would have yielded 
 no practical results but for the discoveries of Mushet and 
 Gorannson, particularly the former’s. But ‘ ‘ Mushet’s Brit¬ 
 ish patents lapsed, and became public property, owing to 
 his poverty and other unfortunate circumstances. ’ ’ Mushet 
 died ‘ ‘ poor and unknown, while Bessemer was knighted by 
 Queen Victoria for his invention and received royalties 
 aggregating $500,000 a year.” 2 
 
 Calling the Turn 
 
 Nearly ten years ago the Capitalistic group (or more 
 accurately speaking the dominant heads of the Capitalistic 
 Entrepreneur banking group) sought to win for themselves 
 the unstinted applause of the world for their wonderful 
 “brains.” Louis D. Brandeis treats of it in an interesting 
 chapter 3 in his book “Other People’s Money.’’ He tells us 
 that J. P. Morgan & Co., declared in a letter to the Pujo 
 
 2 “The Marvels of Modern Mechanism," by Jerome Bruce Crabtree, 
 p. 333. 
 
 3 “Big - Men and Little Business," page 135. 
 
“Labor, Capital and Brains’’ 
 
 183 
 
 Committee that ‘ 4 practically all the railroad and industrial 
 development of this country has taken place initially 
 through the medium of the great banking ho uses / 1 
 
 And then Mr. Brandeis proceeds to show that just the 
 reverse is true, that 4 4 nearly every such contribution to our 
 comfort and prosperity” was “initiated without their aid,” 
 and it was not until after success had been attained, or ‘ 4 the 
 possibility of success had been demonstrated,” or not until 
 ‘ 4 the funds of the hardy pioneers, who had risked their all, 
 were exhausted,” that the financial “brains” came “into 
 relation with these enterprises.” 
 
 4 4 This is true of our early railroads, ’ ’ writes Mr. 
 Brandeis, 4 4 of our early street railways, and of the automo¬ 
 bile ; of the telegraph, the telephone and the wireless; of gas 
 and oil; of harvesting machinery, and of our steel industry; 
 of the textile, paper and shoe industries; and of every other 
 important branch of manufacture.” And in support of 
 his contention he gives the pertinent facts with regard to 
 the industries mentioned. 
 
 “By Their Works Ye Shall Know Them” 
 
 Capital and Brains!—leaving Labor for the moment 
 entirely out of the equation, Capital and Brains forsooth! 
 At this very moment the country is in industrial turmoil 
 and economic upheaval, thanks to the Capitalistic Entre¬ 
 preneur System evolved by Capitalistic Entrepreneur 
 brains. For nearly two years the Great Industries were 
 practically at a standstill, and millions of workers out of 
 employment or working only part time. According to the 
 balance sheets of some of the leading corporations—in spite 
 of the tremendous increase of business and the greatly 
 increased prices, and enormous profits reaped during the 
 past twenty years, they were on the verge of bankruptcy. 
 Some of them saved themselves by 4 4 reorganization ’ 1 
 schemes, evolved by Capitalistic 44 brains”—by the flotation 
 of more and more watered stocks, and bond and note issues. 
 
184 
 
 The New Capitalism 
 
 “A Modern Instance” 
 
 In February, 1921, W. W. Atterbury, Vice President of 
 what is presumably the most prosperous railroad system in 
 the country, made the statement that practically all the 
 railroads are insolvent, and more than intimated that the 
 only thing that can save them from disaster is to cut down 
 the wages of railroad employees. 
 
 On September 26, 1921, Mr. Atterbury told the members 
 of the Mutual Benefit Society of the road, which met in 
 Philadelphia on that date, that wages must come down or 
 the roads would be forced into Government control, or 
 receiverships. 
 
 “It is true,” he said, “there isn’t much left for a further 
 reduction in wages, and it isn’t pleasant to hear or contem¬ 
 plate; but there faces us either reduction or receivership.” 4 
 
 For many years the railroads have been in a notoriously 
 bad condition. Many of them have gone through the hands 
 of receivers. At the time of the war, when the Government 
 took them over, some of the important railroad properties 
 were in a dilapidated condition. To rehabilitate them it 
 was necessary to provide funds borrowed from the non- 
 investor public. And even when the roads were turned 
 back it was found imperative to supply the roads with addi¬ 
 tional funds, borrowed from the non-investor public, besides 
 passing a law guaranteeing returns to the “investors” in 
 railroad “securities.” And yet the Capitalistic Entrepre¬ 
 neurs dare to shout “over the roofs of the world”: “With 
 special emphasis we would call the attention of labor to the 
 essential unity of the three great elements entering into the 
 industrial structure, labor, capital and brains.” 
 
 “Whom the Gods Woidd Destroy” 
 
 A peculiar symptom of madness—a sort of ‘ * divine 
 right” lunacy, is beginning to manifest itself among the 
 self-appointed trustees of the nation’s wealth—those who 
 have deluded themselves into the belief that “capital and 
 
 4 Chicago Tribune, September 27, 1921. 
 
“Labor, Capital and Brains” 
 
 185 
 
 brains” are theirs by ordination of Providence—that they 
 are financial and industrial supermen, set apart and above 
 ordinary men, endowed with supreme intelligence, wisdom 
 and authority, and that as a sacred duty which they are 
 beginning to construe as a divine right, it behooves them to 
 exercise their superior prerogatives by assuming not only 
 IDolitical dictatorship in the nation, but also leadership over 
 citizens, controlling their conduct, regulating their pleas¬ 
 ures, formulating their thoughts and directing their opin¬ 
 ions. Books, magazine articles and editorials have been 
 written in which this lunacy is clearly apparent. A brief 
 excerpt from an article written by a man who, by virtue of 
 his position as Vice President of one of New York’s largest 
 Capitalistic banks can be said to speak as one inspired, will 
 suffice to give color to my comment: 
 
 “The leaders and managers of American industry, the 
 men who by reason of their abilities hold the positions of 
 power and influence in the community, must accept a 
 greater responsibility for the common welfare than they 
 have felt in the past. If they want society to develop a 
 common outlook and spirit they must exert themselves to 
 that end. They must show that spirit themselves. They 
 must show themselves outside the circle of their own private 
 interests and identify themselves with the common interests. 
 They must help give that direction and supervision to com¬ 
 munity interests which are so much needed. 
 
 “This responsibility they must take whether they like it 
 or not. Whatever goes wrong with society for want of 
 intelligent guidance and affects the living conditions of the 
 people unfavorably, reacts upon business. The average 
 man does not think very deeply or reflect very profoundly 
 about causes; he judges mainly by visible results. It is up 
 to th'em to show the common man how to be efficient, to 
 make him prosperous, and to satisfy him that he has a stake 
 in the country. It is squarely up to them to win the confi¬ 
 dence of the masses. Success may not be easy, but in all 
 fields the ability to overcome obstacles is one of the condi- 
 
186 
 
 The New Capitalism 
 
 tions of leadership. The man who cannot measure up to 
 the requirements simply fails as a leader,” etc. 5 
 
 Or as John Corbin succinctly put it: “The body and 
 the members are powerless without the brain that is strong 
 and clear —free to lead, and, when need is —to rule.” 
 
 The Bourbonic Plague 
 
 Let those who have fallen victim to the Bourbonic plague 
 of Capitalistic hallucinations hold communion with them¬ 
 selves before it is too late. Let them keep in mind what 
 mortal illness befell those nobles who suffered from similar 
 delusions around A.D. 1789, who, we are told by Taine, had 
 arrogated all the prominent positions in the Kingdom, with 
 all the advantages accruing thereto, namely, “authority, 
 property, honors, or, at the very least, privileges, immun¬ 
 ities, favors, pensions, preferences and the like.” Let us 
 hope that our modern “nobles” who prate of “capital and 
 brains” and boast of their superior wisdom, authority and 
 power may not lose their senses even as those who circa 
 1789 imagined they were made of a superior kind of clay, 
 lost their heads. 
 
 But I am less concerned with Capitalistic Grossenwahn 
 —the Capitalistic tendencies, pretentions and boasts, than 
 I am with what applies peculiarly to the economic life and 
 welfare of the people; and it is to the consideration of those 
 particular phases of my subject that I will confine myself 
 in this chapter. 
 
 Pouring the Oil of Fact on the Waters of 
 Capitalistic Conceit 
 
 To those who, like George E. Roberts and others, assume 
 or contend that “brains” reside only in the heads of the 
 Capitalistic group; and that business ability and genius 
 cannot be developed in anyone not of the Capitalistic group, 
 I want to state with all the emphasis possible that—I will 
 
 5 Excerpt from “Wealth—Its Use and Control,” by George E. 
 Roberts, Vice President, National City Bank of New York, in Adminis¬ 
 tration, The Journal of Business Analysis and Control, January, 1921. 
 
“Labor, Capital and Brains” 
 
 187 
 
 not say nine times ont of ten, but six times out of ten—in 
 commercial life the actual work is done by the men in the 
 ranks, but the credit for it is wholly claimed by those hold¬ 
 ing positions of power and influence. Under the System 
 devised by the Capitalistic group, the “underling” has no 
 right to go over the head of a department; the subordinate 
 cannot deal directly with the chief. I know of scores of 
 cases where foremen, superintendents, and heads of depart¬ 
 ments, take precious good care that no report of merito¬ 
 rious or extraordinary work done, shall reach the ears, or 
 fall under the notice, of those high in authority, for they 
 are jealous, and afraid that unusual ability on the part of 
 a subordinate might usher them out of their positions. I 
 know of cases where men who gave evidence of possessing 
 unusual ability and honesty, were, under one pretext or 
 another, persecuted, or summarily dismissed. Indeed all 
 the “brains” to be found in the Capitalistic Enterpreneur 
 group have been recruited from the ranks of the supposed 
 brainless. John Oakwood, in an article in The Annalist 
 (September 19, 1921) said: 
 
 “The country’s leading banks, say those with resources 
 of $100,000,000 or more, nearly as many of which are 
 located outside of New York as are in the metropolis, are 
 commanded by men whose average age is about fifty-five 
 years, who on the average have been in banking about 
 thirty years, and who, in the great majority of cases, began 
 as messengers or clerks and have worked their way step by 
 step in the practical business of banking. A great many 
 more of them were born in small towns than in big cities. ’ ’ 6 
 
 Or listen to this from the pen of Roger W. Babson: 
 
 “Were the fathers of these great captains of industry 
 college graduates? No. Were the fathers of these great 
 captains of industry bankers ? No. Were they rich manu¬ 
 facturers and merchants? No. These great captains of 
 industry, these men who have built America’s greatest rail¬ 
 roads, factories and stores, are the sons of poor parents— 
 
 6 “No Financial Moses Need Apply,” by John Oakwood, in The 
 Annalist, September 19, 1921. 
 
188 
 
 The New Capitalism 
 
 the sons of farmers and ministers and wage workers. The 
 statistics of this particular study even show that the great 
 majority of these industrial builders were the sons of par¬ 
 ents whose income averaged less than $1,200 per year. If 
 the captains of industry of the last quarter of a century 
 came from the ranks of the masses, the captains of industry 
 of the next quarter of a century are going to come from 
 the same source. The bankers, manufacturers, and mer¬ 
 chants of the next generation will not be the sons of the 
 bankers, manufacturers and the merchants of today. They 
 will be the sons of farmers, professional men and wage 
 workers of today.” 7 
 
 The Threefold Intent Behind the Slogan 
 
 The threefold intent of the Capitalistic propaganda 
 crystalized into the slogan “Labor, Capital and Brains” 
 is clearly apparent. It is intended: 
 
 1: To impress upon the public mind that the constituent 
 members of the Capitalistic Entrepreneur System are 
 entitled to immense rewards for their double possession— 
 Capital and Brains. 
 
 2: To send the lesson home to those who work for a 
 wage that if it were not for the Capitalistic “brains” 
 Labor would be in a sorry plight. 
 
 3: To convey to those who constitute the non-investor 
 group that without Capitalistic “brains” the world would 
 be in a sad condition and surely go to the demnition bow¬ 
 wows. 
 
 As regards the first, namely, that Capital plus Brains is 
 entitled to immense rewards, let me go on record once more 
 as saying that I have never held nor contended that 
 “brains” should go unrewarded. There are those who 
 have ten talents and those who have only one talent, and I 
 contend that the rew r ard should always be commensurate 
 and liberal. But Capitalistic Brains does not seem to be 
 satisfied with any decent reward—it wants it all. The 
 combination of Capital and Brains is content wfith nothing 
 
 7 Chicago Daily News, July 16, 1921. 
 
“Labor, Capital and Brains” 
 
 189 
 
 less than a hundred percent return on its supposed double 
 investment. Look at the statistics for Wealth and Income. 
 
 Reflect for a moment on the fact that today probably 
 about ten percent of the population owns ninety percent 
 of the country’s wealth. A rather liberal reward consider¬ 
 ing that as a rule the real brains were furnished, not by 
 the Capitalistic crow r d, nor members of their families, but 
 by generations of brain owners vested in the garb of 
 workers. 
 
 Let me ask one question of those who sing the siren song 
 “Capital and Brains.” In 1918 the admitted Capitalistic 
 emoluments amounted to seventeen and a half billion. 
 How much of this amount was a distinct return on Capital, 
 and how much on Brains? Or do the two constitute an 
 intimate, endogenous, inseparable hermaphroditic entity. 
 
 With regard to the second intent concealed within the 
 Capitalistic slogan “Capital and Brains”—let me quote a 
 statement made by Charles M. Schwab: 
 
 “The pressure of large amounts of capital invested in 
 industry does not crush the workingman. On the con- 
 traiy, only by large investments can the prosperity of the 
 workingman be furthered.” 
 
 Indeed? One begins to wonder how workingmen man¬ 
 aged to get along before industries were consolidated and 
 combined. Surely Mr. Schwab will admit that workmen 
 had jobs before Capitalistic Trusts and combines were 
 formed. He will also admit that industries grew and flour¬ 
 ished in the years antedating the origin of ‘ ‘ Big Business. ’ ’ 
 I should like to see him prove his contention that “only 
 by large investments can the prosperity of the workingman 
 be furthered.” But before attempting this it might be well 
 for Mr. Schwab to read the report of The Interchurch 
 World' Movement Committee on the steel strike of 1919. 
 
 The other implication that those who labor do not pos¬ 
 sess and cannot develop “brains”, I have already suffi¬ 
 ciently answered in this chapter. But for emphasis Ill 
 add that there are thousands of men in the ranks every- 
 
190 
 
 The New Capitalism 
 
 where who have great executive and managerial ability, 
 ambition and initiative, who need but an untrammelled 
 opportunity to equal and surpass many of the men holding 
 positions of power and influence. And they have—what 
 many Capitalistic Entrepreneurs—chiefs, executives and 
 managers have not—still a sense of honor and of moral 
 responsibility—a conscience. 
 
 My answer to the third clear intent of the Capitalistic 
 slogan, “Capital and Brains,” is the contents of this book. 
 I grant to the Capitalistic Entrepreneurs the possession 
 of brains—but brains infected with maggots. To the par¬ 
 ticular brand of Capitalistic brains we not only can, but 
 must, attribute the wretched economic condition that pre¬ 
 vails throughout the world today. 
 
 Who is responsible for the steady increase in the cost of 
 living during the past twenty years? Who is responsible 
 for the depreciation of the wage dollar. Who is responsible 
 for the decrease in the purchasing power of money ? Whom 
 are we to blame, or whose praises shall we sing, for the 
 prolonged business stagnation, and for the unemployment 
 of millions of men and women? 
 
 “Brains” 
 
 Brains! Ah, yes, it is a very remarkable kind of 
 “brains” that can originate a business system which finds 
 it necessary to employ three dollars of capital to produce 
 one dollar’s worth of goods; a very special kind of 
 “brains” that has succeeded in developing a business sys¬ 
 tem necessitating the borrowing of from two to three 
 dollars where formerly one sufficed; a most extraordinary 
 kind of “brains” that can set in motion and keep in per¬ 
 fect running order, for its own exclusive benefit, a busi¬ 
 ness machine that compels the public to spend from three 
 to four dollars for what could formerly be bought for one 
 dollar. 
 
 Hats off, ye non-investors, to the BRAINS that has done 
 all this for you! 
 
CHAPTER XVI 
 The Shrinking Dollar 
 
 W E have heard a great deal within the last decade of 
 the shrinking dollar, as if the dollar were compara¬ 
 ble to the modest violet shrinking bhishingly 
 from view. Why call it a shrinking dollar, since there are 
 a half hundred terms that would more aptly describe its 
 evanescent career? For example, you might say that the 
 dollar of today, compared with the dollar of former years, 
 is lean, or shrivelled, or anemic, or emaciated, or attenuated, 
 or debilitated, or lacerated, or mutilated, or emasculated, or 
 sick, or stricken, or an invalid, or devitalized, or incapaci¬ 
 tated, or deteriorated, or depreciated, or depressed. Any 
 of these descriptive terms—just to note a few—will fit the 
 case better than shrinking. 
 
 But the economic doctors have a horror of calling a spade 
 a spade. They are reluctant to call things by their right 
 name. Their innate modesty does not permit them to tell 
 the naked truth; to their delicately attuned ears the truth 
 is bitter, harsh, ugly and repellant. So as not to disturb 
 the peaceful slumber of the expectant relatives, they prefer 
 to let the patient writhe in pain on his Procrustean bed. 
 And so they prate more or less learnedly of the “shrink¬ 
 ing dollar’’ rather than saying in so many words that 
 prices have gone up; and that the going up of prices has 
 necessarily reduced the purchasing power of the dollar, 
 depressed its value, depreciating it calculably by precisely 
 as many cents as prices went up. 
 
 Depreciation of the Wage Dollar 
 
 In 1896 the American dollar was at its best—a perfectly 
 healthy dollar; it was worth one hundred cents; it could 
 
 191 
 
192 
 
 The New Capitalism 
 
 buy a maximum quantity of goods. Then the period of 
 overcapitalization began. Almost immediately prices of 
 commodities began to ascend, slowly at first, but surely. 
 Taking the prices of 1896 as basic w r e discover that for 
 every cent of increase in the aggregate prices of the com¬ 
 modities, the wage dollar, i.e., the non-investor’s dollar— 
 went down by one cent in purchasing power. No finer 
 example of the inverse ratio can be found than in the phe¬ 
 nomena of ascending prices and declining purchasing 
 power. 
 
 Appreciation of the Capitalistic Dollar 
 
 But that isn’t the whole story. For every cent of 
 decrease in the purchasing power of the wage dollar, i.e., 
 the non-investor’s dollar, the Capitalistic dollar increased 
 in value one cent. It is far, far from the truth to say that 
 shrinkage is predicable of all dollars. Only the wage dollar 
 depreciated in value; and because the non-investor’s dollar 
 depreciated in value the Capitalistic dollar appreciated in 
 value. Again we have another fine example of the inverse 
 ratio; besides a splendid illustration of cause and effect. 
 
 The Word of an Authority 
 
 According to Professor Kemmerer the dollar of 1920 had 
 only about 27 cents the value of the dollar in 1896. This 
 means that in the course of about twenty-five years the 
 value, or purchasing power of the wage dollar depreciated 
 at the average rate of about three cents a year—a tragedy 
 only to those who must spend their entire income for the 
 mere privilege of living—for food, clothes, shelter, and the 
 sundry things that constitute the minor comforts of life. 
 Where did this lost value go ? Whither did it w r ander ? It 
 did not evaporate; it was not blown away; it did not dis¬ 
 solve into thin air. No! it entered into the vampire Capi¬ 
 talistic dollar. While the wage dollar became weak, and 
 wobbly, and emaciated, the Capitalistic dollar waxed big, 
 and strong, and lusty. While the wage dollar depreciated 
 
The Shrinking Dollar 
 
 193 
 
 at the rate of about three cents a year, the Capitalistic 
 dollar appreciated at the cumulative rate of about three 
 cents a year. 
 
 Figures That Tell the Tale 
 
 The following Table approximately illustrates the simul¬ 
 taneous weakening of the wage dollar and strengthening 
 of the Capitalistic dollar: 
 
 
 How the Wage Dollar 
 
 How the Capitalistic 
 
 
 Depreciated in Pur- 
 
 Dollar Appreciated 
 
 
 chasing Power 
 
 in Value 
 
 
 Wage Earner’s Dollar 
 
 Capitalistic Dollar 
 
 1896_ 
 
 . $1.00 
 
 $1.00 
 
 1897.... 
 
 . 0.97 
 
 1.03 
 
 1898... . 
 
 . 0.94 
 
 1.06 
 
 1899_ 
 
 . 0.91 
 
 1.09 
 
 1900.... 
 
 . 0.88 
 
 1.12 
 
 1901.... 
 
 . 0.85 
 
 1.15 
 
 1902.... 
 
 . 0.82 
 
 1.18 
 
 1903.... 
 
 . 0.79 
 
 1.21 
 
 1904.... 
 
 . 0.76 
 
 1.24 
 
 1905.... 
 
 . 0.73 
 
 1.27 
 
 1906.... 
 
 . 0.70 
 
 1.30 
 
 1907.... 
 
 . 0.67 
 
 1.33 
 
 1908.... 
 
 . 0.64 
 
 1.36 
 
 1909.... 
 
 . 0.61 
 
 1.39 
 
 1910_ 
 
 . 0.58 
 
 1.42 
 
 1911.... 
 
 . 0.5 5 
 
 1.45 
 
 1912_ 
 
 . 0.52 
 
 1.48 
 
 1913_ 
 
 . 0.49 
 
 1.51 
 
 1914.... 
 
 . 0.46 
 
 1.54 
 
 1915_ 
 
 
 1.57 
 
 1916.... 
 
 . 0.40 
 
 1.60 
 
 1917... . 
 
 . 0.37 
 
 1.63 
 
 1918_ 
 
 . 0.34 
 
 1.66 
 
 1919.... 
 
 . 0.31 
 
 1.69 
 
 1920. .. . 
 
 . 0.28 
 
 1.72 
 
 For more than a dozen years I have puzzled over the 
 phenomenon of the shrinking dollar; for as many years I 
 have endeavored to express the shrinkage in words and fig¬ 
 ures, and I think I have finally succeeded in doing this to 
 the satisfaction of all except those who derive, or have de¬ 
 rived, immense material benefits from the transmutation 
 that has simultaneously depreciated the wage dollar and 
 appreciated the Capitalistic dollar. It goes without saying 
 
194 
 
 The New Capitalism 
 
 that many of those who constitute the investor group—- 
 the darling beneficiaries of the Capitalistic System, who 
 prefer to conceal from the world that their sustenance comes 
 principally from the loins of their fellowmen; and that 
 the major portion of their income or profits is directly de¬ 
 rived from the wage earner’s dollar—will vehemently pro¬ 
 test against my exposure of the phenomenon showing the 
 depreciation of the wage dollar, and the inverse apprecia¬ 
 tion of the Capitalistic dollar. ‘ ‘ Why, ’ ’ they will say, ‘ ‘ no 
 economist ‘in good standing,’ no statistical expert, no ac¬ 
 cepted authority, has ever interpreted the shrinking dollar 
 as set forth in this chapter. ’ ’ 
 
 The Philosophy of the Economists 
 
 And they are quite right! No Capitalistic economist, no 
 statistical expert, no accepted authority has ever gone to 
 the trouble of lucidly stating the facts in the case—neither 
 with regard to the “shrinking” dollar, nor with regard to 
 many other economic phenomena in which the average man 
 and woman is vitally interested. Indeed it can be shown 
 that they have gone to great lengths at times, to obscure the 
 truth or camouflage economic facts into indecipherability. 
 
 I am not finding fault with the Capitalistic economists, 
 “in good standing,” nor with their allies, the statistical 
 experts and accepted authorities. I’ll pay them the com¬ 
 pliment of saying that they do not make, and never have 
 made, any pretentions with regard to the science they pro¬ 
 fess—a “science” from which every ethical principle has 
 been ruthlessly removed, and every moral consideration 
 remorsely eliminated; a “science” that admittedly does 
 not concern itself with the welfare of humanity—but only 
 with Wealth. 
 
 Proudhon has said that “Political economy, which is re¬ 
 garded by many as the philosophy of wealth, is in fact 
 nothing but the organized practice of robbery and misery.” 
 
 Ruskin expressed the same opinion when he said: “You 
 were ordered by the Founder of your religion to love your 
 neighbor as yourself. You have founded an entire Science 
 
The Shrinking Dollar 
 
 195 
 
 of Political Economy, on what you have stated to be the 
 constant instinct of man—the desire to defraud his neigh¬ 
 bor. ’ ’ 
 
 These are not reckless dicta of extreme or radical men. 
 But if you are disposed to hold that they belong to the 
 school of extremists, suppose you consider for a moment 
 this statement made by N. W. Senior, ‘ ‘ the foremost econo¬ 
 mist between Ricardo and Mill,” held in greatest esteem 
 in his generation, and to this day by economists who claim 
 to be “in good standing.” With almost brutal frankness 
 Senior boldly declared: “ It is not with happiness but with 
 wealth that I am concerned as a political economist; and 
 I am not only justified in omitting, but, perhaps, am bound 
 to omit, all considerations which have no influence on 
 wealth. ’ ’ 
 
 The Wisdom of the Serpent 
 
 Which being the case we can hardly blame economists 
 for having put all the emphasis on the shrinking wage 
 dollar and entirely ignoring that other phenomenon, the 
 expanded Capitalistic dollar. They have admitted the meta¬ 
 morphosis of the wage dollar into a 25 cent dollar (approx¬ 
 imately) within twenty-five years; it is no part of their 
 duty to proclaim to the world that within the same period 
 of time the Capitalistic dollar has apotheosized itself into 
 a 175 cent dollar. We can hardly expect them to inform 
 the men and women workers of the nation (three-fourths 
 of whom are in the wage earner or non-investor group) 
 that they are being paid with 25 cent dollars, while the 
 Capitalistic group is rewarding itself with 175 cent dollars. 
 In all the discussions attendant upon wage increases since 
 the armistice, I have never come across a single writer 
 who even so much as hinted that Labor is being paid with 
 depreciated wage dollars, while Capital’s meed is propor¬ 
 tioned with appreciated dollars. And yet that truth lies 
 flat at the bottom of the whole question. However, I shall 
 have more to say on the subject of Wages in Part II of this 
 book. 
 
196 
 
 The New Capitalism 
 
 Make no mistake—the economists, experts, authorities, 
 etc., have the ability to explain the mystery of the High 
 Cost of Living. Indeed they could if they would, with 
 comparative ease, explain to the world that it is on account 
 of the admirable generosity with which the Capitalistic 
 group rewards itself, that the purchasing power of the 
 wage dollar has shrunk to such sad proportions; and that 
 on account of the Capitalistically superinduced “shrink¬ 
 age ’ ’ those who work for a wage must pay nearly four dol¬ 
 lars for what formerly cost only one dollar. 
 
 Another Tell-Tale Table 
 
 The following Table, which I have constructed on the 
 premises stated, gives an idea of what has taken place d 
 
 What Could Be Bought 
 in 1896 for 
 
 $ .25 . 
 
 .50 . 
 
 .75 . 
 
 1.00 . 
 
 2.00. 
 
 5.00 . 
 
 10.00 . 
 
 50.00 . 
 
 75.00 . 
 
 100.00 . 
 
 200.00 . 
 
 250.00 . 
 
 500.00 . 
 
 750.00 . 
 
 1 , 000.00 . 
 
 In 1920 Cost 
 Approximately 
 
 . ..$ 1.00 
 1.75 
 
 2.50 
 3.25 
 
 6.50 
 16.25 
 32.50 
 
 ... 162.50 
 
 .. . 243.75 
 
 ... 325.00 
 
 .. . 650.00 
 
 .. . 812.00 
 ... 1635.00 
 ... 2457.50 
 ... 3250.00 
 
 A Word of Caution 
 
 When analyzing the above statistics I beg the reader to 
 remember these things: 
 
 1: That the comparison is between the years 1896 and 
 1920 . It is important to keep this clearly in mind while 
 reading this chapter. Some statisticians, when speaking of 
 
 i In order to enable the reader to grasp the point more easily I 
 have taken the liberty to use the twenty-five cents value of the depre¬ 
 ciated dollar as basic, rather than the twenty-seven cent dollar 
 spoken of by economists. 
 
The Shrinking Dollar 
 
 197 
 
 the shrinking dollar, make comparisons between later years, 
 for example, between 1914 and 1919. Naturally such com¬ 
 putations, based on more recent years, show a lesser degree 
 of shrinkage than when the comparison is between years 
 more widely apart. 
 
 2: That the increase shown applies to living costs in the 
 aggregate, and not to single items. It would be absurd to 
 say that the article that cost twenty-five cents in 1896 cost 
 one dollar in 1920, although beyond a doubt, for some com¬ 
 modities the increase was even greater than my figures in¬ 
 dicate. 
 
 3: Under 11 living costs” I include all living commodities 
 —food, clothes, rent, and whatever enters into the volume 
 of living goods consumed by an average family, particularly 
 by the eighty percent of families I have designated as non¬ 
 investors. 
 
 How near my computations are to those of the accepted 
 authorities may be judged from the fact that according to 
 Dun’s Index Number the wholesale prices of three hundred 
 articles in 1896 was $74.32, whereas in 1920 it was $260.41. 
 My computation for $75 in 1896 demanding $243.75 in 
 1920 is, therefore, not wide of the mark. And when it is 
 remembered that Dun’s Index Number is based on whole¬ 
 sale prices, while my computation presumes retail prices, 
 it is clear that I am exceedingly conservative. 2 Bradstreet’s 
 Index Number shows that the prices of 157 commodities, 
 which could be bought for $591 in 1896, had risen to $2087 
 in February, 1920. 
 
 2 It is to be remembered that most Index Numbers are based on 
 wholesale prices. If retail prices were used instead a different result 
 would follow. Moreover, they concern themselves only with com¬ 
 modities, not with “living costs,” and take no cognizance of rent 
 increases. Nor do they take into consideration that for many of the 
 commodities, such as clothes, shoes, all kinds of wearing material, 
 fabrics, textiles, etc., while prices have increased, let us say in round 
 numbers, one hundred per cent, quality has been reduced by about 
 one-half, thus putting the average family to the necessity of purchas¬ 
 ing a double quantity. In brief. Price Index Numbers are of pre¬ 
 carious value. Certainly they do not show the actual increase or 
 decrease in the aggregate living costs. 
 
198 
 
 The New Capitalism 
 
 The Non-Shrinkability of the Capitalistic Dollar 
 
 No Capitalistic economist, statistical expert or accepted 
 authority has ever pointed out that the Capitalistic 
 dollar is non-shrinkable; that the dollar in the hands 
 of a Capitalistic overlord retains its full strength; that 
 when Capitalistically employed there is no lost value to be 
 noted in the dollar. Let me briefly illustrate the point. 
 
 Fifty thousand John Smiths—each a small salaried man 
 —pay out of their meager income, fifty dollars a year as 
 premium on a one thousand dollar Life Insurance Policy. 
 The Insurance Company invests these $2,500,000 in a new 
 building. Let us say the building could have been erected 
 in 1896 for $1,250,000. What has raised the cost of the 
 building? Increase in cost of material, supplies, etc. But 
 the same Capitalistic principals who own or control the 
 Insurance Company, also have a monopoly of all the build¬ 
 ing materials, supplies, etc. Consequently they pay the big¬ 
 ger price to themselves. And the bigger price, based sup¬ 
 posedly on a bigger investment, yields them a bigger profit. 
 Then there are the higher freight rates; but the same group 
 that owns or controls the Insurance Company, and the 
 materials and the supplies, also owns the railroads; there¬ 
 fore is directly benefited by the higher freight rates. 3 
 (Don’t interrupt me with the stock explanation that mate¬ 
 rials, increases in the price of supplies, freight, etc., are due 
 to increase in wages. It is just the other way around. 
 Moreover, I shall show in the second half of my book, that 
 whatever increase in wages Labor has had was invariably 
 taken away again through the medium of still higher 
 prices.) 
 
 Now let us assume that the borrowing of money enters 
 into the construction of the building. And let us say that 
 on account of the increase in the price of materials and 
 supplies, freight rates (and wages, if you will), it is neces¬ 
 sary to borrow double the amount the Insurance Company 
 
 3 And I’ll not say a single word about the “Pittsburgh Plus’’ plan 
 at this time. 
 
The Shrinking Dollar 
 
 199 
 
 would have borrowed in 1896; and therefore the principals 
 are paying twice as much interest. But remember the same 
 group that owns the Insurance Company, and the railroads, 
 and has a monopoly on materials, supplies, etc., also owns 
 the banks; and so is the immediate beneficiary of the larger 
 borrowings and the higher interest charges. 
 
 Very well! The building, when completed, has an in¬ 
 creased value of one hundred percent. Consequently the 
 Capitalistic owners of the building can issue bonds for 
 double the amount they would have issued in 1896. And 
 they reap double the amount of commissions, and double 
 the fixed charge—interest. Moreover, the larger bond issue 
 increases the borrowing capacity of the holders; for, bonds 
 are credit instruments, and accepted by banks as collateral. 
 
 And when the building is ready for occupancy, the Cap¬ 
 italistic owners charge their tenants twice as much rent as 
 they would have demanded in 1896. Thus they derive twice 
 as much income from the building. At no point can it be 
 said that the Capitalistic dollar has lost any of its value, 
 purchasing, or earning, power. Bigger income, bigger 
 profits, are visible everywhere, and raining more profusely 
 than ever into the lap of the small Capitalistic group. 
 
 But — 
 
 But when John Smith dies, his $1000 policy will have a 
 purchasing power of only $250, measured in the 1896 value; 
 the difference—$750—being absorbed by the higher prices 
 his widow or family must pay for the needful things of 
 life—thanks to the Capitalistic System, controlled and 
 manipulated by those to whom the late head of the family 
 had been paying his premium of $50 a year regularly. 
 
 Truly there is a ‘‘shrinkage” in the dollar, but only 
 when it passes out of Capitalistic hands, or is employed in 
 other than Capitalistic transactions. Let me give you what 
 is probably the most striking illustration of all, and which 
 will impress you with the real meaning of ‘ ‘ shrinkage . 1 ’ 
 
200 
 
 The New Capitalism 
 
 How the “Shrinkage” Affects Savings 
 
 In 1896 the savings depositors had on deposit in savings 
 banks of the United States, a total of $1,935,466,468. In 
 1896 the dollar had a one hundred cents purchasing power. 
 
 In 1920 the savings depositors had on deposit in the sav¬ 
 ings banks of the United States a total of $6,536,596,000. 
 But by 1920 the purchasing power of the dollar had shrunk 
 to approximately twenty-eight cents. 
 
 Consequently the purchasing power of the $6,536,596,000 
 on deposit in 1920 had a purchasing power equivalent to 
 $1,830,246,880 in 1896. 
 
 No better illustration of the “shrinkage” in the wage 
 dollar than this. In brief, the nearly five billion dollars 
 saved during twenty years, gave no increase of purchasing 
 power to the owners. 
 
 The amount of money you saved, penny by penny, 
 whether you have it in a sock or in a savings bank, has 
 today a purchasing power only about one-fourth of what 
 it was in 1896. That is to say, what you could have bought 
 in 1896 with one dollar of your savings, will take nearly 
 four dollars of your savings if purchased today. Nor is 
 there any immediate prospect that a change of conditions 
 will materially improve the purchasing power either of 
 your wages or savings. Nor is there any evidence of 
 willingness on the part of the Capitalistic group to materi¬ 
 ally increase the purchasing power of your wages or value 
 of your savings. On the contrary! If the Capitalistic 
 group can get away with it; if it succeeds in its double pur¬ 
 pose of increasing its income—interest, dividends, and 
 profits—by bringing down wages approximately to the 1914 
 level, while maintaining a high level of prices—the purchas¬ 
 ing power of your wages and savings will shrink still more. 
 Precisely where it will stop it is idle to speculate at this 
 time. 
 
The Shrinking Dollar 
 
 201 
 
 The Most Damnable Capitalistic Device 
 
 In a previous chapter I have stated that the Capitalistic 
 System, through sundry clever devices, extorts about $750 
 a year from the average family. But the most ingenious 
 Capitalistic device, by the general employment of which 
 the $750 is extorted, while at the same time the shrinkage 
 of the wage dollar is made to appear as if it were a perfectly 
 natural phenomenon—the necessary effect of an irresistable 
 cause—is what is known as the Percentage System of 
 figuring increases in cost, and which percentage increases 
 determine the price of every article of merchandise. 
 
 I have had occasion to denounce this reprehensible prac¬ 
 tice a number of times in the past, and shall lose no oppor¬ 
 tunity to hold it up to obloquy today. What is wrong with 
 the Percentage System of computing increases? Is it not 
 perfectly legitimate and fair? Let me show you how it 
 works, and then judge for yourself whether it is beneficent 
 or otherwise—whether it is fair, or unfair. 
 
 Let us say that the basic price of cattle is $6.00 per hun¬ 
 dredweight. Then it raises to, let us say, $12.00. “Aha!” 
 says the wholesale slaughterer—“An increase of 100 'per¬ 
 cent! I must increase my price to the retail dealer 100 
 percent —plus an additional profit on the increase.” 
 
 The retail dealer gets his invoice, looks it over and says: 
 “Aha, an increase of 100 percent! I must raise my price 
 to the consumer 100 percent, plus, of course, a profit on 
 the increase.” 
 
 And so through the agency of the Percentage System of 
 figuring increases of prices the consumer is compelled to 
 pay three separate 100 percent increases (and sometimes 
 more than three). Do you wonder any longer at the present 
 “high level of prices” for all the commodities—food, rent, 
 clothes, shoes, coal, steel, in brief every article that enters 
 into living costs? 
 
 Here you have the principle and the modus operandi of 
 the Percentage System of figuring increases, now univer¬ 
 sally used, and supposed to be perfectly legitimate, set forth. 
 
202 
 
 The New Capitalism 
 
 I call it the most damnable of all Capitalistic devices. And 
 yet, so far as I know, it has never been challenged. In all 
 these years I have never once, in any financial, commercial, 
 or trade paper, nor from any public or after-dinner speaker, 
 nor statistical expert, nor professor of economics, nor 
 skilled mathematician, nor any text book on cost account¬ 
 ing, read or heard so much as a whisper of protest against 
 nor exposure of, this blatant sophistry and damnable 
 humbug. 
 
 The Percentage System is essentially a pyramiding sys¬ 
 tem, and I for one, demand its abrogation as a matter of 
 simple justice. Take any commodity—coal, for example: 
 add to the 1914 price all the actual increases computed in 
 dollars and cents —wages of miners, insurance, taxes and 
 sundry items that can be legitimately included in “cost of 
 production”—and note the difference between the cent sys¬ 
 tem of figuring increases and the Percentage System. 
 
 But I shall have more to say on this subject in Part II 
 of this book. For the present I ’ll merely say that the uni¬ 
 versal discontinuance of the Percentage System and the 
 adoption of the cent system alone, would quickly bring 
 down prices to a normal and decent level, and forever make 
 impossible violent price fluctuations. Besides the shrinking 
 wage dollar would cease shrinking, and regain a goodly 
 portion of its pristine vigor. 
 
CHAPTER XVII 
 
 The American Standard of Living 
 
 W E frequently hear it said, generally by those who 
 never look below the surface of things, who give no 
 serious thought nor study to any subject, whose 
 reading is confined to a desultory perusal of the daily 
 papers (gorging themselves on headlines), whose scientific 
 knowledge or intelligent understanding of economic prob¬ 
 lems is nil, whose opinions are based on casual observations 
 in their own restricted circle, whose views of life are derived 
 from their own limited experience, who base all their con¬ 
 clusions on a few cases known to them, or their own par¬ 
 ticular case, that the American Standard of living is the 
 highest in the world. By that is meant that the wage earn¬ 
 ers in the United States receive higher wages, eat better 
 food, wear better clothes, live in better houses, and amid 
 better surroundings, enjoying more comforts and even some 
 luxuries; in brief that, generally speaking, they are better 
 off than the wage earners of Europe and other countries. 
 
 In order to save time and space let us accept the state¬ 
 ment without cavil or without pausing to analyze it—as if 
 it were and always had been, literally true. Let us say that 
 the American Standard of living is the highest in the world, 
 and that the economic condition of the wage earners of the 
 United States is superior to that of the workers of Europe, 
 or Asia, or Mexico. 
 
 Organized Labor Established the Standard 
 
 But why is the American Standard of living higher than 
 the standard of any other people? The answer comes 
 naturally: because wages are higher. And why are wages 
 
 203 
 
204 
 
 The New Capitalism 
 
 higher? The answer is simple: because organized wage 
 earners insisted that they shall receive a fairly decent 
 recompense for their labor. It was their persistence alone 
 that has given us what is called the American Standard of 
 living—a standard admittedly somewhat higher than the 
 standard of European countries. For our “higher stand¬ 
 ard of living” certainly no thanks whatever is due to the 
 Capitalistic group, who from the beginning, year in and 
 year out, fought against every demand for better wages; 
 and who granted wage increases only reluctantly and 
 grudgingly, and that, too, in spite of the fact that they 
 had invariably nullified the benefits of each wage increase 
 by a previous increase in the prices of their commodities. 
 
 But Organized Capital Claims the Credit 
 
 It cannot be denied that our higher standard is the 
 result of organized Labor’s stubborn and often bitter fight 
 for higher wages—to that and that alone. Notwithstanding 
 which provable fact the Capitalistic group has for years 
 claimed the credit, as if our “higher standard” had been 
 of their making—a gratuitous gift graciously bestowed 
 upon us out of the plenitude of their generosity. 
 
 For example, James J. Hill, in his “Highways of Prog¬ 
 ress” 1 (p. 122) says: “So far as modern industrial meth¬ 
 ods are concerned we may fairly say that their net result 
 has been to cheapen production, and thus place more of the 
 comforts of life within the reach of the people. ’ ’ Mr. Hill 
 also contended that big business combinations and conse¬ 
 quent lower cost of production 2 inevitably yield lower 
 prices and higher wages, and therefore “cheaper and more 
 abundant food, shelter and clothing,” etc. 
 
 1 Published in 1912, Doubleday Page & Co., New York. 
 
 2 It can be proved that generally speaking big combinations did not 
 lower cost of production ; on the contrary raised it considerably. But 
 assuming that they did “lower cost of production,” no benefit accrued 
 to the public from the reduction ; just the reverse. 
 
The American Standard of Living 205 
 Shall the Standard Be Maintained f 
 
 Not to Capital, but to organized Labor, belongs the full 
 credit for having established what it pleases many to call 
 the American Standard of living. Indeed the present bitter 
 fight between organized Labor and organized Capital, more 
 properly speaking, between organized wage earners and the 
 organized Capitalistic group, revolves around the question 
 whether the American Standard of living shall be main¬ 
 tained, or whether it shall be reduced to the admittedly 
 lower European standard; and ultimately to the low Ori¬ 
 ental standard. The Capitalistic group has demanded that 
 the American Standard shall no longer be maintained; and 
 organized Labor is fighting for its maintenance. Who will 
 win? Organized Capital or organized Labor? It must be 
 admitted that thus far organized Capital has nothing but 
 victories to report. Indeed it may be truly said that organ¬ 
 ized Capital has been brilliantly successful. 
 
 Lotvering the Standard 
 
 I cannot follow the fight step for step, and shall, there¬ 
 fore, content myself with noting a few of the obvious results 
 thus far obtained by organized Capital. 
 
 The Department of Labor in the “Monthly Labor 
 Review, ” July, 1920, gives an analysis of some of the 
 effects of increased cost of living on family budgets. It 
 found, among other things, that there was a less quantity 
 of fresh beef, fresh pork, salt pork and poultry purchased 
 in 1918-19 than in 1901. “In many cases the decrease in 
 quantity is striking, such, for instance, as in fresh pork 
 from 87 pounds in North Atlantic States in 1901, to 19 
 pounds in New York, and 22 pounds in Portland, Me., in 
 1918-19. ” Decreases with regard to the consumption of 
 many'other articles of food are noted, among them eggs, 
 milk, butter, lard and sugar. Making a comparison of the 
 total number of pounds of food purchased in 1918-19 by 
 the standard family in each of the five North Atlantic 
 cities, the analysis shows that: “In none of the cities listed 
 
206 
 
 The New Capitalism 
 
 in the report does the total reach that of the health and 
 decency budget of the Bureau of Labor Statistics, * ’ and 
 that “the food actually consumed in these cities of the 
 North Atlantic group falls considerably below the 3,500 
 calories generally recognized as the standard by food 
 experts. ’ ’ 
 
 Those who refuse to grasp the significance of the fore¬ 
 going will, perhaps, be able to see a little light when they 
 ponder over this: 
 
 “Dr. Wood of Columbia University, after an exhaustive 
 investigation, informs the public that 25 percent of the 
 20,000,000 school children of the United States are imper¬ 
 fectly nourished.” 3 
 
 The Difficulty of Making Ends Meet 
 
 The United States Department of Labor, during 1921, 
 published a number of tables pertaining to changes in the 
 cost of living in some of the big cities. From the report 
 issued June 20th (the day on which I am writing this) 
 covering ten cities, I give the expenditure data pertaining 
 to the first city on the list, viz., Baltimore, Md.: 
 
 Items of 
 Expenditure 
 
 Food. 
 
 Clothing. 
 
 Housing. 
 
 Fuel and Light. 
 
 Furniture and Furnishings 
 Miscellaneous . 
 
 Percent of 
 Total Expenditure 
 
 _ 42.0 
 
 _ 15.0 
 
 _ 14.0 
 
 .... 5.0 
 
 .... 4.3 
 
 _ 19.7 
 
 These percentages applied to an average family of five 
 with a statistical income of $1,500 a year, computed in 
 dollars and cents, give the following results: 
 
 Per Year Per Person Per Person Per Person 
 (5 Persons) Per Year Per Week Per Day 
 
 Food.$630.00 $126.00 $2.43 35 cts. 
 
 Clothing. 225.00 45.00 .87 12^ cts. 
 
 Housing. 210.00 42.00 .81 11*4 cts. 
 
 Fuel and Light. 75.00 15.00 .29 4 cts. 
 
 Furniture and Fur’shings. . 64.50 14.50 .28 4 cts. 
 
 Miscellaneous . 295.50 59.10 1.14 16 cts. 
 
 3 From a pamphlet entitled “Fabric Facts,” published by Strang 
 Hewat & Co., Inc. 
 
The American Standard of Living 207 
 
 Surely it is not necessary to make any extended comment 
 on these items in the family budget. They speak for them¬ 
 selves; they need no lengthy explanation. But since there 
 are those who refuse to see the light, no matter how clear 
 it may be, let us briefly analyze the first item— Food —for 
 which an average family of five, having at least theoretically 
 a joint income of $1,500 a year, is supposed to expend $630 
 within twelve months. Food prices at the time these sta¬ 
 tistics were computed by the Government, were supposed 
 to be considerably less than peak prices in 1920; but the 
 average housewife, as she scans her weekly expense for 
 meats, groceries, vegetables, milk, butter, eggs, ice, etc., 
 wonders how she can feed her family on the statistical $630 
 a year; for an annual expenditure of $630 for food means 
 only about $12.00 a week, which is an allowance of about 
 $2.43 per person per week, or about 35 cents a day per 
 person. Considering that the average healthy person eats 
 three meals a day it means about twelve cents per meal. 
 Hats off to the housewife who, considering prevailing prices, 
 can, day after day, put up a nourishing meal at an average 
 outlay of only about twelve cents per head. Well may the 
 husband, who, perhaps, takes his noonday luncheon at some 
 cheap restaurant, paying ten cents for a bowl of soup, 
 fifteen cents for a sandwich, ten cents for a cup of coffee 
 and five cents for a doughnut or two, and twenty-five cents 
 for half a cantaloupe, wonder how she does it. 
 
 Thus could I analyze item after item in the household 
 budget, but I do not deem it necessary except for those 
 who are blind because they do not want to see, and I haven’t 
 much space to waste on them. Just one word, however, 
 with regard to the “Miscellaneous” item. It would be 
 interesting to know what “Miscellaneous” covers. For 
 example, assuming that two of the five persons work, and 
 that they must both use the street car coming and going, it 
 means sixteen cents a day per person, or thirty-two cents 
 for both, and counting three hundred days a year it means 
 
208 
 
 The New Capitalism 
 
 an expenditure of $96 for street car fare alone. 4 We may 
 indeed speak of the “high standard of living,” and give 
 organized Labor credit for having established it; but God 
 knows organized Capital is making us pay the price for its 
 maintenance. 
 
 The Item of Rent 
 
 The National Industrial Conference Board Review Re¬ 
 port, Number 44 (December, 1921) on “Changes in the 
 Cost of Living” says: “Investigations made by authori¬ 
 tative agencies indicate that, in normal years preceding the 
 war, average wage earners’ families so apportioned their 
 expenditures as to spend approximately 43 percent of the 
 total for food, 18 percent for shelter, 13 percent for cloth¬ 
 ing, 6 percent for fuel and light, and 20 percent for sun¬ 
 dries.” Computed in dollars, the item of rent is $270 a 
 year, or about $22.50 a month, which is a huge joke. I’ll 
 venture the statement that a majority of wage-earners 
 residing in the large cities and fair sized towns (unless they 
 live in hovels and dumps) are paying considerably more 
 than $22.50 a month. I maintain that the average yearly 
 rental is nearer $400 than $270 per family. Confining 
 myself to conditions in Chicago, rentals, on an average, 
 have been raised fully one hundred percent. Thousands of 
 families that lived in fairly decent neighborhoods, paying 
 perhaps from $35 to $65 a month, were confronted with the 
 alternative of paying twice as much rent or moving. As a 
 result tens of thousands of families were compelled either 
 to move into less desirable neighborhoods, or go into smaller 
 quarters, or double up with another family, or break up 
 their home altogether, storing their furniture and boarding, 
 or retrenching in other things. In many cases to meet the 
 situation other members of the family, not infrequently the 
 wife and mother, entered the ranks of workers. There are 
 no statistics, but it is quite believable that in the aggregate 
 throughout the United States hundreds of thousands of 
 
 4 Since the above was written there has been a slight decrease in 
 the street car fare in some cities. 
 
The American Standard of Living 209 
 
 families have been compelled to materially revise their 
 standard of living downward—thanks to the well laid and 
 cleverly organized plans of the Capitalistic System. I care 
 not what arguments you might advance to explain the con¬ 
 dition, or minimize the guilt of those responsible. I am, 
 for the present, dealing with the fact —that the ‘ ‘ American 
 Standard 7 ’ of living has been lowered. 
 
 The Capitalistic System 
 
 There will be those who will say: Why blame the Capital¬ 
 istic group for the well nigh universal increase in rents? 
 Morgan, Gary, Schwab, et al. do not own the houses in which 
 the wage earners live; they are not the landlords. Quite 
 true! but they, i.e., the dominant members of the Capital¬ 
 istic group, control the banks, which, as is well known, have 
 given practically no assistance to the public, and certainly 
 made no effort to relieve the distressing situation. More¬ 
 over, they control the building materials market, and the 
 prices they arbitrarily fixed for them had made building 
 prohibitive. But that is not the point. Let us put the 
 entire blame for the exorbitant rents on real estate men, 
 and landlords. Why did they raise their rents—practically 
 doubling them? What was their excuse? On what did 
 they base the increase, and how did they compute it? On 
 the Capitalistic principles: 1: Inflated valuation; 2 : Arbi¬ 
 trary raising of the price of property by selling and resell¬ 
 ing ; 3 : Basing rentals on ‘ ‘ replacement ’ ’ valuation; 4: The 
 employment of the Percentage System of figuring increases. 
 
 You may, if you choose, exculpate certain individuals 
 within the Capitalistic group—but you cannot exonerate 
 the System—you cannot defend the principles, nor the 
 methods, no matter by whom practiced, particularly since 
 their universal employment is responsible for what I charge 
 —namely the compulsory lowering of the American Stand¬ 
 ard of living. 
 
210 
 
 The New Capitalism 
 
 Holding Up the European Standard as an Ideal 
 
 The anonymous writer in The Saturday Evening Post 
 referred to in a previous chapter, makes a strong point 
 of the extravagance of the American wage earner. He can¬ 
 not understand why the American born wage earner com¬ 
 plains about his wages, considering that foreign born 
 workers (he speaks particularly of steel workers) manage 
 to save a considerable sum out of their wages. 
 
 Of course the anonymous writer did not go to the trouble 
 of explaining that there are millions of foreign born wage 
 earners in this country who do not live according to the 
 American Standard. Eight or ten or twelve (and more) 
 persons—men, women and children—are huddled together 
 in two or three squalid rooms in dirty tenement houses, or 
 hovels, paying only a nominal rent. Needless to say, in 
 some cases the women work; and frequently, also, the chil¬ 
 dren. They buy only the cheapest food and clothes. They 
 purchase nothing that adds to their creature comforts, 
 which being the case it is possible, that out of their aggre¬ 
 gate earnings they save a fair portion. But if they lived 
 according to what is called the American Standard, if, in¬ 
 stead of living in miserable rooms in a crowded tenement 
 house or hovel, they lived in decent quarters or neighbor¬ 
 hoods ; if they consumed the food that an average American 
 consumes, or made any attempt at even ordinary social im¬ 
 provement, it is quite likely that the savings of these 
 foreigners would be considerably less than our anonymous 
 critic would have us believe they are. 
 
 True, many of these foreigners are living in out-of-the- 
 way places, far removed from the centers of civilization. 
 How they live, the food they eat, the clothes they wear, is 
 their own affair. But to hold them up to men and women 
 of America as proof that it is possible to save out of wages 
 which are demonstrably inadequate for the maintenance of 
 of a decent living standard, or as an example worthy of 
 emulation, or to intimate that the foreigner is thrifty and 
 economical and the average American is shiftless and 
 
The American Standard of Living 211 
 
 extravagant, is exceeding the speed limit of imagination; 
 nay it is the height of impertinence and an insult to every 
 decent American man and woman. 
 
 The Truth Without Trimmings 
 
 Perhaps the anonymous author has never read the report 
 of the Interchurch World Movement Committee on the 
 Steel strike of 1919, according to which: 
 
 ‘ ‘ The annual earnings of over one-third of all productive 
 iron and steel workers were, and have been for years, below 
 the level set by the government experts as the minimum of 
 subsistence standard for families of five. 
 
 “The annual earnings of 72 percent of all workers were, 
 and have been for years, below the level set by government 
 experts as the minimum of comfort level for families of 
 five. 
 
 “This second standard being the lowest which scientists 
 are willing to term an 'American Standard of living’, it 
 follows that nearly three-quarters of the steel workers could 
 not earn enough for an American standard of living. 
 
 “The bulk of unskilled steel labor . . . earned less 
 
 than enough for the average family’s minimum subsistence. 
 
 “The bulk of semi-skilled steel workers earned less than 
 enough for the average family’s minimum comfort. 
 
 “Skilled steel labor is paid wages disproportionate to 
 the earnings of the other two-thirds, thus binding the skilled 
 class to the companies and creating division between it and 
 the rest of the force. ’ ’ 5 
 
 The Economic Sin of Extravagance 
 
 Let me say it once, and without further parley, that 
 during the past twenty years there has crept into the 
 nation’s life, like a slimy snake into a fair garden, wanton 
 extravagance and sinful wastefulness, a sort of national 
 thriftlessness and shiftlessness, for which no economic rem¬ 
 edy can be formulated. Nor shall I waste much time in 
 
 5 Chapter IV, “Wages in a No Conference Industry.” 
 
212 
 
 The New Capitalism 
 
 tearful commiseration for those who, with their eyes wide 
 open and of their own free will, are jazzing toward their 
 economic doom. There are today, principally in the big 
 cities, I know not how many million men and women who 
 are living away beyond their means; in better style and in 
 better neighborhoods than their income justifies; wearing 
 clothes and eating foods they cannot afford; running auto¬ 
 mobiles, and into debt, in an endeavor to maintain a false 
 social status and a standard of pretense despite an empty 
 purse; and their number is growing alarmingly. 
 
 Shall I venture an estimate of the numerical strength of 
 this tribe? Is it ten percent of the population—or two 
 million families, involving not only the men and women, 
 but also the children? Is that too low an estimate? I’ll 
 double it if you think I am too conservative. It is imma¬ 
 terial! I am less interested in the exact number than in 
 the fact that these ten, or more, million thriftless economic 
 derelicts, and shiftless social pretenders, are amongst us, 
 and we must take some note of them in passing. But this 
 is certain—that they belong chiefly to the economic groups 
 whose individual earnings are in excess of $1500 a year. 
 Few in the classes whose family income is from $500 to 
 $1500 are included in the category of the socially pre¬ 
 tentious and economically shiftless. 
 
 Let none dare urge that many a girl working in store or 
 office, factory or shop, wears silk stockings instead of lisle 
 or cotton; or perhaps in an evil moment, or hour of aber¬ 
 ration has invested a goodly portion of a year’s wage in a 
 fur coat; or that the laundress goes to the movies with her 
 children an average of once or twice a week; or that the 
 colored porter in the barber shop smokes fifteen cent cigars. 
 Let none with glib tongue enumerate the venial economic 
 sins of a comparatively small percentage of foolish or 
 deluded wage earners, lest I be tempted to bombard him 
 with a few leading questions that will glaringly reveal his 
 own much more flagrant economic transgressions. The big 
 fact to remember is that the earnings of a majority of wage 
 earners and lower salaried men and women, are insufficient 
 
The American Standard of Living 213 
 
 to enable them and their families to live in decent comfort. 
 No dust throwing tactics can obscure this fact. Eighty per¬ 
 cent of the workers’ families, according to the 1910 statis¬ 
 tics, had an income of $1200 or less a year—an amount, 
 considering prices of living goods—clothes, food, rent, etc., 
 that fell below even the subsistence level. In 1920 the 
 eighty percent of the workers’ families may have had an 
 average income of $1500 or $1600, but they were in no wise 
 economically better off, for the increase in the cost of living 
 was greater than the increase in their wages. 
 
 Changing Living Standards 
 
 We sometimes hear it said that the condition of the wage 
 earner of today is infinitely superior to that of the laborer 
 of several centuries ago; and that he is enjoying comforts 
 that a few hundred years ago would have been considered 
 luxuries by lords and kings and queens. There may be a 
 measure of truth in this, for we read: 
 
 “The houses, even of the rich and great, were, in the 
 sixteenth century, mostly destitute of glass windows; and 
 the cottages of the poor were not only universally without 
 them, but also without chimneys! The luxury of a linen 
 shirt was confined to the higher classes. The cloth used by 
 the bulk of the people was mostly of home manufacture; 
 and, compared with what they now make use of, was at once 
 costly, coarse and comfortless. All classes, from the peer 
 to the peasant, were universally without many articles the 
 daily enjoyment of which is now deemed essential even by 
 the poorest individuals.” 6 
 
 This, we are told, was the general condition in the six¬ 
 teenth century. By the nineteenth century the condition 
 of the “rich and great” had improved considerabty. But 
 what 'about those who labored for a wage ? The following 
 from the same work throws some light on this phase of our 
 subject: 
 
 6 “A Descriptive and Statistical Account of the British Empire,’' by 
 J. R. McCulloch. Vol. II, Chap. V. 
 
214 
 
 The New Capitalism 
 
 “The Rev. Mr. Smith, in his Agricultural Survey of 
 Wigtown and Kirkcudbright, published in 1810, gives, on 
 authority of persons then living, the following details with 
 respect to the state of husbandry, and the condition of the 
 people towards the middle of last century: . . . 
 
 “ ‘Their houses were commonly wretched dirty hovels, 
 built with stones and mud, thatched with fern and turf; 
 without chimneys; filled with smoke; black with soot; hav¬ 
 ing low doors, and small holes for windows, with wooden 
 shutters, or, in place of these, often stopped with turf, straw, 
 or fragments of old clothes. . . . 
 
 “ ‘Nothing but the frugal, penurious manner in which 
 the peasantry then lived could have enabled them to subsist 
 and pay any rent whatever. Their clothing was of the 
 coarsest material; their furniture and gardening utensils 
 were often made by themselves; their food always the pro¬ 
 duce of their farms, was little expensive, consisting chiefly 
 of oatmeal, vegetables, and the produce of the dairy; if a 
 little animal food was occasionally added, it was generally 
 the refuse of the flock, unfit to be brought to the market. ’ 1 ’ 
 
 Living Standards Around 1850 
 
 John Stuart Mill, quoting from Mr. Holyoake’s History 
 of the Rochdale (Cooperative) Society, gives a glimpse of 
 the condition of Rochdale working men in the first half of 
 the nineteenth century: 
 
 ‘ ‘ These crowds of humble working men, who never knew 
 before when they put good food in their mouths, whose 
 every dinner was adulterated, whose shoes let in the water 
 a month too soon, whose waistcoats shone with devil’s dust, 
 and whose wives wore calico that would not wash, now buy 
 in the markets like millionaires, and as far as fineness of 
 food goes, live like lords.” 
 
 One may criticize the rhetoric of Mr. Holyoake for speak¬ 
 ing of workmen and their families around 1850 buying 
 “like millionaires,” and living “like lords,” but whether 
 or no, that is not the important point, as far as we are 
 
The American Standard of Living 215 
 
 concerned. That their economic condition was materially 
 improved is certain; the important point is that no thanks 
 was due to their economic overlords; they, the workmen 
 themselves, improved their own condition—raised them¬ 
 selves to a higher level of living, in spite of their Capital¬ 
 istic masters. 
 
 But if the working classes of England “lived like kings’’ 
 in 1850, they were not “living like kings” in the year of 
 Our Lord 1922. There are today several million unem¬ 
 ployed workers in England who subsist on doles, precisely 
 as did the workers a century ago under the Poor Laws. 7 
 Does that spell economic progress, or economic retrogres¬ 
 sion? Can the workers of England be said to have gone 
 forward, or to have been hurled back? 
 
 But if the condition of the wage earners in the United 
 States, or elsewhere, is better than that of the laborers of 
 a century or two ago, no thanks is due to the “rich and 
 great”—to lords or kings or queens, who, history shows, 
 would have preferred to keep those who toil in perpetual 
 bondage. And if the condition of the nobles and aristocrats 
 of today—of lords, kings and queens, is vastly better than 
 the condition of the lords, kings and queens of former 
 times, who deserves the credit? Who invented the thou¬ 
 sand and one things that have added to their comfort? 
 Why, those who toiled for a wage, a meager wage, a bare 
 living wage! Who has a better right to share in comforts 
 than those who created them; who a prior right to the con¬ 
 veniences added to life than those, whose skill and inge¬ 
 nuity called them into existence? 
 
 A Boast Blasted 
 
 But is the condition of the wage earner of today so much 
 better'than that of the laborer around 1650, when the labor 
 of husband and wife and two children old enough to work 
 were required to earn enough to enable them to live? 
 
 7 In 1910-11 over a million people in Great Britain were in the 
 poorhouse. 
 
216 
 
 The New Capitalism 
 
 Let us see. According to the latest published statistics, 
 Thirteenth Census of the United States, 1910—in 1910 the 
 total number of persons ten years of age and over, engaged 
 in the principal gainful occupations, was 38,167,336, of 
 which 30,091,564 were males and 8,075,772 were females. 
 Of the total number of persons, 10,828,365 were children 
 between the ages of ten and fifteen years of age, divided 
 as follows: boys—5,464,228; girls—5,364,137. This means 
 that more than twenty-five percent of all wage earners are 
 children, an important point to remember, especially when 
 computing the average income per family. 
 
 It is also well to bear in mind that a steadily increasing 
 number of wage earners are women, and that the wages of 
 women are considerably less than the wages of the male 
 workers; and the average in all cases below what could be 
 called a living wage. It will not be denied that there is a 
 growing number of married women who find it necessary to 
 join in the labor of the husband in order to make the eco¬ 
 nomic ends meet or enable them to keep the ends together. 
 This is particularly true of families residing in the big 
 cities. Fifteen years ago it might have been said that a 
 considerable number of women were entering the ranks of 
 wage earners, not so much driven by any economic necessity 
 but as a matter of choice, merely that they might live in 
 better style and enjoy comforts and pleasures which they 
 could not obtain otherwise—a not unnatural desire. But 
 this is less markedly true today, for the economic pressure 
 has increased tremendously within recent years; and what 
 was once a matter of choice has now become more a matter 
 of necessity. 
 
 When it becomes necessary in order to maintain a fairly 
 decent living standard, for wife and children to enter the 
 ranks of wage earners, you have taken an economic step 
 back and to the conditions that prevailed two and three 
 hundred years ago. When it is necessary, as it was in 1650, 
 and as it is today, for wife and children to jointly labor to 
 
The American Standard of Living 217 
 
 earn the amount required for a family to live, no real eco¬ 
 nomic advance has been made; at least there is no great 
 reason to boast, or to prate of “ a higher standard of living. ’ 1 
 
 The New Pauperism 
 
 I think it will not be disputed by anyone that our eco¬ 
 nomic system, as far as those who work for a wage or salary 
 are concerned, is a from hand to mouth system. What the 
 average wage earner receives on Saturday, at most carries 
 him through the week. With regard to most wage earners, 
 and salaried men and women, it would be entirely safe to 
 say that the wages they receive pay not for what they will 
 consume, but for what they have already consumed. So, 
 then, the economic system is even worse than a from hand 
 to mouth system;—it is, more correctly speaking, a debtor 
 system—by virtue of which the wage earner is kept con¬ 
 stantly in arrears, in a state of chronic indebtedness. He 
 consumes before he earns. That, my friends, is poverty of 
 the direst kind. That is the New Pauperism established by 
 the Capitalistic System. From a condition such as this it 
 is only a step to the economic coolieism of China and India, 
 and the peonage of Mexico. 
 
 It may take a quarter or a half century to complete the 
 job of utterly degrading those who work for a wage; and 
 unless determined opposition not only by organized Labor, 
 but by all those who work for a wage, or its equivalent, in 
 brief by the non-investor group is offered, the Capitalistic 
 program will succeed beyond a doubt. 
 
CHAPTER XVIII 
 Mane—Tekel—Upharsin 1 
 
 i From the Book of Daniel, Chapter V. (1) Belshazzar the king- 
 made a great feast to a thousand of his lords, and drank wine before 
 the thousand. 
 
 (2) And being now drunk he commanded that they should bring 
 the vessels of gold and silver which Nebuchadnezzar his father had 
 brought away out of the temple, that was in Jerusalem, and that the 
 king and his nobles, and his wives and his concubines, might drink 
 in them. 
 
 (3 ) Then they brought the golden vessels that were taken out of the 
 temple of the house of God, which was at Jerusalem, and the king, 
 and his princes, his wives, and his concubines, drank in them. 
 
 (4) They drank wine, and praised the gods of gold, and of silver, 
 of brass, of iron, of wood, and of stone. 
 
 (5) In the same hour came forth fingers of a man’s hand, and 
 wrote over against the candlestick upon the plaster of the wall of 
 the king’s palace ; and the king saw the part of the hand that wrote. 
 
 (25) And this is the writing and that was written. Mane, Tekel, 
 Upharsin. 
 
 (26) This is the interpretation of the thing: Mane; God hath 
 numbered thy kingdom, and finished it. 
 
 (27) Tekel; Thou art weighed in the balances, and found wanting. 
 
 (28) Upharsin; Thy kingdom is divided, and given to the Medes 
 and Persians. 
 
 S CORES of writers are interpreting the greatly dis¬ 
 turbed conditions in the world today as foreshadowing 
 the doom of civilization. I do not agree with these 
 prophet writers. What is going on throughout the world 
 does not signify the breakdown of civilization. It is either 
 the prelude to the utter collapse of the Capitalistic System, 
 or else a trumpet blast of triumph, heralding its complete 
 success. 
 
 Long before the war I had written down this sentence in 
 my notebook: 
 
 “The Capitalistic Entrepreneur System can exist for 
 fifteen or perhaps twenty years. Then one of two things 
 must happen: either it will break down completely; or it 
 will continue to maintain itself by increasing the burdens 
 upon the people; succeeding in which it will grow mightier 
 and more tyrannical with the passing of the years / 1 
 
 218 
 
Mane—Tekel—U pharsin 
 
 219 
 
 My prediction was not merely a guess; it was the answer 
 to a simple problem in arithmetic, as simple as the formula 
 two plus two makes four. In 1913 I believed (and I think 
 I was right)—that the Capitalistic Entrepreneur System 
 was in its death throes. During the first dozen years it 
 maintained itself by the simple process of raising living 
 costs. But since prices of living commodities cannot be 
 raised indefinitely without producing a reaction—for there 
 is a limit beyond which the patient public will not, or more 
 correctly speaking cannot, go; and since the people were 
 beginning to murmur and to think aloud, I concluded that 
 the end of the System was imminent. Only a war of 
 gigantic proportions could save it. And a war came. 
 
 Making the World Safe for Timocracy 
 
 Aristotle tells us that there are three political constitu¬ 
 tions: Kingship (or monarchy), aristocracy, and timocracy, 
 which latter “people generally call constitutional govern¬ 
 ment. ” “Of these,” says Aristotle, “timocracy is the 
 worst. ’ ’ Timocracy, he explains, ‘ ‘ recognizes the principle 
 of wealth.” 
 
 The World War, we were told, was fought to “make the 
 world safe for Democracy.” The war did nothing of the 
 kind. It made the world safe for TIMOCRACY —for the 
 rule of wealth. No historian will ever say, or attempt to 
 show, that the World War of 1914-18 was deliberately 
 planned and provoked by the Capitalistic groups of Europe 
 and the United States working in unison; but the phil¬ 
 osopher and student of history will have no difficulty in¬ 
 showing that the fates have a way of playing right into 
 their hands. The International bankers (among whom the 
 United States bankers are dominant at present) have been 
 and are, the chief beneficiaries of the recent war. The ill 
 wind that fanned the fierce flames of the holocaust, almost 
 destroying the whole civilized world, blew good only to 
 them. For one thing the Capitalistic System was saved 
 from collapse. 
 
220 
 
 The New Capitalism 
 
 Moreover, the well nigh universal misery and wretched¬ 
 ness produced by the war gave it a new lease on life, and a 
 tighter grip on the throat of the world; for, when people 
 are reduced to poverty and beggary, they are docile and 
 submissive. There is a popular belief that hunger makes 
 men desperate. That is a fallacy. Show me a nation where 
 hunger is chronic and starvation stalks, and I’ll show you 
 a nation that is slavish, submissive, docile and unresisting. 
 There is no fight in people weakened by hunger. Far from 
 being desperate they are grateful for the few husks thrust 
 
 before them as before swine. 
 
 • 
 
 The Capitalistic Program 
 
 But I do not want to pursue this distressingly seductive 
 theme further. I must hurry along. What I have said 
 above was for the purpose of emphasizing what to my way 
 of thinking is the clear intent of the Capitalistic-Mammon- 
 istic group constituting the Capitalistic-Mammonistic Sys¬ 
 tem in the United States—viz., to reduce the people of the 
 United States to a condition of helpless poverty and abject 
 servility. That is the Capitalistic program, and quite a 
 few numbers have already been played. The performance 
 is going well, and with a flourish. Whether I am right or 
 wrong in saying that the war saved the Capitalistic System 
 from disaster, it is clear that since the war the Capitalistic 
 group has acquired an excess of confidence in its impreg¬ 
 nability, and a renewal of faith in its ability, not only to 
 conserve itself perpetually but to strengthen itself still 
 more; and to crush its antagonists. The war and its con¬ 
 sequences seem to have beguiled those constituting the Cap¬ 
 italistic group into the belief that the Capitalistic System 
 they have established, can be made to endure forever. 
 
 Reaching Out for More 
 
 Not content with having acquired control and practical 
 ownership of all the profitable properties in the United 
 States—the banks, insurance companies, transportation 
 
Mane-—Tekel—U pharsin 
 
 221 
 
 systems, public utilities, natural resources, raw materials, 
 and leading industries—they are now reaching out to 
 gobble into their maw those properties overlooked, or con¬ 
 sidered of minor importance during the first twenty years 
 of their regnancy. Scores of ‘‘news” items have appeared 
 during the past year clearly indicating what is going on in 
 the Capitalistic mind. A brief excerpt from a single article 
 by a well known financial writer, B. C. Forbes, will suffice 
 to illustrate the point: 
 
 “Wall Street rumor is busy forming two ambitious steel 
 combinations, a comprehensive coal consolidation, oil mer¬ 
 gers galore, the welding together of various important cop¬ 
 per companies, annexations of automobile plants by larger 
 ones, and other assimilations of similar units by trusts of 
 influential independents. . . . 
 
 “Moreover, our brainiest financial and industrial giants 
 do not confine their reckonings to the present surplus of 
 productive capacity. They look ahead, and, looking, they 
 foresee the time when America will require vastly greater 
 productive capacity than now exists. 
 
 “When that time comes—and there is little doubt that 
 it is coming—everything will be right for the flotation of 
 mergers. 
 
 “If the Washington conference achieves the results Presi¬ 
 dent Harding joyously predicts, the way will be paved for 
 the summoning of international financial leaders to a con¬ 
 ference which may also contrive to evolve workable plans 
 for getting the world back on its feet. ’ ’ 2 
 
 The World on Its Bach 
 
 Read with especial care the last paragraph of the above 
 item. Note the reference to the “international financial 
 leaders,” and who, we are told, may “contrive to evolve 
 workable plans for getting the world back on its feet. ’ ’ To 
 my humble way of thinking the “international financial 
 leaders” (among whom our American Investment bankers 
 
 2 Chicago Herald-Examiner, December 13, 1921. 
 
222 
 
 The New Capitalism 
 
 are conspicuous), are laying plans, not so much to get the 
 world back on its feet as to get it on its back, and then to 
 plant their feet on its face. 
 
 The war has given our former Investment bankers their 
 opportunity to become International bankers; and when 
 the “workable plans” of the ‘‘international financial lead¬ 
 ers” are completed I hold it will be discovered, perhaps 
 too late, that a few thousand individuals are holding the 
 economic destinies of all the peoples of the earth—includ¬ 
 ing the United States—in the hollow of their hand. Euro¬ 
 pean students of economic problems have long ago awak¬ 
 ened to a realization of what is going on the in the Interna¬ 
 tional Capitalistic mind. They speak quite plainly of “the 
 international cooperation of Capitalism”—and boldly de¬ 
 clare that the plan is “to impose new standards of living 
 on the proletariate of Europe.” 3 4 Indeed the economic 
 subjugation of the people of Europe is already accom¬ 
 plished. There remains but to subdue us. 
 
 The One Hindrance in the Capitalistic Road 
 
 The only obstacle in the way of the complete success of 
 the plans of the Capitalistic potentates is organized Labor 
 in the United States, and every effort is being made to 
 crush it out of existence. One of the chief weapons,—the 
 scientific employment of which was made possible by the 
 universal havoc produced by the war, against organized 
 Labor, is what is called ‘ ‘ our ’ ’ foreign investments. Ameri¬ 
 can capital is being “invested” by American International 
 “investors,” in immense quantities in European industries, 
 and in sundry enterprises in other foreign lands. Ameri¬ 
 can Capital!—that is to say—the savings of the wage- 
 earners, the non-investors, or the credit based on their sav¬ 
 ings, is being “invested” (God save the mark!) particu- 
 
 3 M. Philipps Price in Labor Monthly (February 15, 19-22), a British 
 Magazine of International L*abor. 
 
 4 “More than $2,000,000,000 of American capital is now invested 
 in foreign enterprises paying dividends of hundreds of millions of 
 dollars, and the volume of American investment abroad is increasing 
 daily.” Arthur Sears Henning, Chicago Tribune, April 2, 1922. Mr. 
 Henning, it would seem, is ultra- conservative. 
 
Mane—Tekel—Upharsin 
 
 223 
 
 larly in European industries where labor, as everyone 
 knows, is poorly rewarded. And in due time the cheaper 
 product of the poorly paid European labor, financed with 
 the savings of American wage-earners, will be dumped in 
 increasing quantities into the American market in competi¬ 
 tion with the output of American workmen. As a result 
 hundreds of thousands, if not millions, of American work¬ 
 men will be subjected to inconstancy of employment, and 
 their families to the hardships and misery following en¬ 
 forced idleness. Thus a permanently “mobile labor sup¬ 
 ply’’ the great Capitalistic desideratum , will have been 
 created, and from that day forward wage workers in the 
 United States must accept the low wages that Capital offers. 
 Besides, there is no better way of keeping the other millions 
 who are fortunate enough to have jobs, quiet and tractable, 
 than to keep the alternative of losing their jobs dangling 
 constantly before their eyes. 
 
 The “Lodged and Ancient Grudge” Against 
 
 Labor 
 
 Today those who own the nation’s wealth and control 
 the nation’s money and credit, more than ever look upon 
 those who work for a wage as a necessary evil to be en¬ 
 dured only because vast profit accumulations, and the still 
 greater concentration of the nation’s wealth in the hands 
 of a small coterie of Mammonistic Capitalists demands their 
 continued existence. 
 
 Today organized Capital, more than ever, looks upon 
 organized Labor as ‘ 4 the abomination of abominations ’ ’—as 
 something intolerable and to be utterly destroyed. Indeed 
 the work of destruction which began many years ago has 
 progressed to a point where organized Labor, outmaneu- 
 vered at every turn, finds itself at this very moment des¬ 
 perately hard pressed. 
 
 The fight between Capital and Labor—(it was never any¬ 
 thing less than a fight; let those who sincerely believe, or 
 insincerely pretend to believe, that Capital and Labor are 
 
224 
 
 The New Capitalism 
 
 more amiably disposed toward each other, hug the delusion 
 to their hearts)—the fight between Capital and Labor is 
 getting fiercer and bitterer. We can indeed say, and quite 
 truly, that Capital and Labor are getting closer together— 
 to each other’s throats; closer to each others hearts, but 
 there is a knife in the hand of each. 
 
 “Divide and Conquer” 
 
 Machiavelli ? s notorious work, “The Prince” (published 
 A. D. 1532), is a “scientific account of the art of acquiring 
 and preserving despotic power, and a calm, unvarnished 
 and forcible exposition of the means by which tyranny may 
 be established and maintained.” “Divide and Conquer!” 
 is an old slogan, and the favorite formula of tyrants and 
 despots, of politicians and Mammonistic Capitalists who 
 have learned from centuries of experience that as long as 
 they can keep people from uniting—or better still—quar¬ 
 relling among themselves—thus keeping them divided— 
 they are safe. 
 
 Capitalism easily surpasses the Machiavellian code in the 
 employment of ingenious tactics. First it divided wage 
 earners into opposing groups—the organized workers and 
 the unorganized workers; and then it subdivided each group 
 into contentious factions. In the case of the unorganized 
 workers in certain important industries, those of foreign 
 birth predominate. The difference of languages keeps them 
 not only apart but in turmoil. Whereas in the organized 
 groups we find greater homogeneity, but bitter antagonism 
 between radicals and conservatives. Besides there are many 
 other elements of disintegration and destruction at work. 
 
 The Capitalistic Coup d’etat 
 
 But the greatest achievement of Capitalism is that it has 
 succeeded in inaugurating a nation-wide system of espio¬ 
 nage. Thousands of hireling agents—“under-cover men” 
 or “operatives” they are called, have been hired to mingle 
 with workmen, to win their confidence and then to betray 
 
Mane—Tekel—U pharsin 
 
 225 
 
 them. The information obtained is frequently used to dis¬ 
 criminate against members of unions. This is ‘‘boring from 
 within” with a vengeance. Espionage has been developed 
 into a system, and the results achieved thus far seem to be 
 eminently satisfactory to the Capitalistic group. Through 
 this system of espionage existing labor unions have been 
 disrupted and disorganized. But particularly does it aim 
 to make organization impossible. 
 
 The supplementary report recently published by the In¬ 
 terchurch World Movement exposes the system and its 
 workings, and shows that it is one of the basest inventions 
 of modern Capitalism. It shows conclusively that “the 
 existence of widespread, well financed, privately incorpo¬ 
 rated spy concerns constitutes an integral part of industrial 
 corporations’ policy of ‘not dealing with labor unions’ ” 
 and that these Capitalistic hireling agents, “under-cover 
 men,” or “operatives,” are “inside the plants, or inside 
 the unions, or outside both, and during the strike (of 1919) 
 spied, secretly denounced, engineered raids and arrests, and 
 incited to riot.” Some of these “spies” working for the 
 Capitalists, get into the labor unions, assume leadership 
 and manage to have themselves elected to important offices. 
 Needless to say, to create dissension within unions, and to 
 discredit labor organizations in the eyes of the public, is 
 one of the big aims of the Capitalistic espionage system. 5 
 
 In addition to the organized Capitalistic “Service” Com¬ 
 panies—that is Spy Service placed at the disposal of any 
 Capitalistic employer for a price—some of the larger cor¬ 
 porations maintain a spy system of their own. Mr. Atter- 
 bury, Vice-President of the Pennsylvania lines, testified 
 before the Railroad Labor Board (March 22, 1921) that 
 his railroad “maintained an extensive spy and espionage 
 system among its employees” and that it “had little ars¬ 
 enals at various plants where guns and ammunition were 
 
 5 Whoever is interested in this phase of the subject is advised to 
 read “Public Opinion and the Steel Strike of 1919”—the supplementary 
 Report to the Commission of Inquiry, Interchurch World Movement. 
 Published by Harcourt Brace & Co., New York. 
 
226 
 
 The New Capitalism 
 
 kept.” To maintain this “police” system the Pennsyl¬ 
 vania railroad spends $800,000 a year, which, of course, 
 the public pays. 
 
 The “Open Shop” Campaign 
 
 For more than twenty years the Capitalistic group has 
 been preparing for the time when with little or no danger 
 to itself it might give the death blow to organized Labor. 
 That time has arrived. The war greatly strengthened the 
 Capitalistic group; while its consequences placed those who 
 work for a wage into an unfavorable position. And Mam- 
 monistic Capitalism came forward with a well thought out 
 plan—a thoroughly organized, a thoroughly systematized 
 campaign, to render organized Labor hors de combat. 
 
 Needless to say Capitalism did not label its campaign “a 
 campaign to destroy organized Labor”; that would have 
 been crude, and I, who have observed and studied Capi¬ 
 talistic tactics and strategy for-many years, am the last one 
 to accuse the Machiavellian Capitalistic group of crudeness. 
 Not only is the Capitalistic campaign to destroy organized 
 Labor not called by its right name, but it is cleverly dis¬ 
 guised as a pseudo patriotic movement—‘ ‘ A Campaign for 
 the Open Shop—the American Plan,” it is called. And 
 “Citizens” Committees with millions of dollars at their 
 disposal have been formed in strategic places—pledged not 
 to let up in the fight until organized Labor is destroyed 
 root and branch. 
 
 Superficial students of industrial and economic subjects 
 are under the impression that the campaign for an Open 
 Shop, which in reality is a fight against organized Labor, 
 began towards the end of 1919. They are in error. The 
 fight against the closed shop (more properly speaking, 
 against organized Labor) began on June 17, 1901. Six 
 weeks after the Steel Corporation was organized and began 
 operations, a meeting of the executive committee was held 
 in New York city. But so as not to be accused of misstate¬ 
 ment, or prejudice, let me quote what happened at that 
 
Mane—Tekel—Upharsin 
 
 227 
 
 meeting from the official report of the Congressional Inves¬ 
 tigation of the United States Steel Corporation: 
 
 Labor Unions 
 
 “The attitude of the United States Steel Corporation 
 toward organized Labor was early determined. On June 
 17, 1901, six weeks after the Steel Corporation was organ¬ 
 ized and began operations, a meeting of the executive com¬ 
 mittee was held in New York City. At this meeting Mr. 
 Charles Steele, then a member of the firm of J. P. Morgan 
 & Co., and also a member of the executive committee of the 
 Steel Corporation, was present. The question of the atti¬ 
 tude of the corporation toward organized labor was exten¬ 
 sively discussed at this meeting. As a final result of the 
 deliberations of the executive committee, Mr. Steele brought 
 forward the following proposition, which the records show 
 was finally voted upon, and the president of the Steel Cor¬ 
 poration instructed to convey it to the presidents of the 
 subsidiary companies, to wit: 
 
 “That we are unalterably opposed to any extension 
 of union labor and advise subsidiary companies to take 
 firm position when these questions come up and say 
 that they are not going to recognize it, that is, any ex¬ 
 tension of unions in mills where they do not now exist; 
 that great care should be taken to prevent trouble, and 
 that they promptly report and confer with this corpo¬ 
 ration. 
 
 “Following that declaration, the evidence clearly shows 
 how American laborers felt. Justly or unjustly, they con¬ 
 sidered themselves persona non grata in the works of the 
 United States Steel Corporation. Thereafter the great bulk 
 of American union laboring men in the iron and steel in¬ 
 dustry understood that they were not wanted at the works 
 of the United States Steel Corporation. The process of 
 filling the places of these union laborers is interesting and 
 important to observe. American laborers loyal to their 
 
228 
 
 The New Capitalism 
 
 unions could not be had. Something had to be done to get 
 laborers. Southern Europe was appealed to. Hordes of 
 laborers from Southern Europe poured into the United 
 States. They were almost entirely from the agricultural 
 classes, knew absolutely nothing about iron and steel manu¬ 
 facture, but were sufficient to fight the labor unions. They 
 were absolutely unskilled, but they could work, especially 
 as common laborers. In times of special necessity even ad¬ 
 vertisements for foreign help of this class were spread 
 broadcast. A sample of these advertisements, which the 
 evidence shows were caused to be circulated by subsidiary 
 companies of the Steel Corporation, is as follows: 
 
 “ WANTED.—Sixty tin house men, tinners, catchers, and 
 helpers to work in open shops; Syrians, Poles, and Rouma¬ 
 nians preferred; steady employment and good wages to men 
 willing to work; fare paid and no fees charged for this 
 work. Central Employment Bureau, 628 Pennsylvania 
 Avenue. 
 
 “This advertisement appeared, as the evidence shows, in 
 the Pittsburgh Gazette-Times of July 14, 1909. (See page 
 3074 of hearings.) 
 
 “The result is that about eighty percent of th* unskilled 
 laborers in the steel and iron business are foreigners of this 
 class. With the benefit of a skilled American foreman such 
 a crew can work out results in unskilled labor production. 
 The profits of this system of labor employment go to the 
 Steel Corporation, while the displaced American workman 
 shifted as best he could. 
 
 “Following the elimination of Union labor, and the in¬ 
 troduction of the above-described foreign laborers, an inves¬ 
 tigation was made as to the conditions of laborers, hours of 
 labor, home life, etc. As to the hours of labor, the evidence 
 before the committee was conclusive that long hours of labor 
 prevailed in the iron and steel industry, especially in the 
 unskilled departments. Under the direction of the United 
 States Commissioner of Labor, a very careful and thorough 
 investigation as to the hours of labor in the steel industry 
 
Mane—Tekel—Upharsin 229 
 
 has been made. From this official report we quote without 
 comment: 
 
 “During May, 1910, the period covered by this investi¬ 
 gation into the steel industry, 50,000 persons, or 20 percent 
 of the 153,000 employees of the blast furnaces, steel works, 
 and rolling mills covered by this report, customarily worked 
 seven days per week, and 20 percent of them worked 84 
 hours or more a week, which, in effect, means a 12 hour 
 working day in the w T eek, including Sunday. 
 
 ‘ 1 This hardship of 12 hour days and a 7 day week is still 
 further increased by the fact that every w T eek or two weeks, 
 as the case may be, when the employees on the day shift 
 are transferred to the night shift, and vice versa, employees 
 remain on duty without relief either 18 to 24 consecutive 
 hours, according to the practice adopted for the change of 
 shifts. The most common plan to effect this change of shift 
 is to work one shift of employees on the day of change 
 through the entire 24 hours, the succeeding shift working 
 the regular 12 hours when it comes on duty. (See page 
 2837, hearings.) 
 
 11 While we deem it unnecssary to quote the testimony of 
 other witnesses, it is true, as the testimony shows, that they 
 fully corroborate these statements of the United States 
 Commissioner, and, in fact, some of the witnesses are much 
 stronger in their statements. 
 
 “As to the daily lives and conditions of living of these 
 laborers, the testimony taken is voluminous, far too exten¬ 
 sive to even summarize in this report. The testimony cer¬ 
 tainly shows conditions undesirable, and far below what is 
 ordinarily understood to be the American standard of living 
 among laborers in our country. Some of the details are 
 revolting, both as to sanitary and moral conditions. Taking 
 the ordinary family as a unit, the wages paid, even if the 
 head of the family is constantly employed, are barely 
 enough to provide subsistence. ’ ,e 
 
 6 Quotations from United States Steel Corporation Investigation. 
 These living conditions were found to exist among steel workers in 
 the United States Steel Corporation ten years ago. 
 
230 
 
 The New Capitalism 
 
 The American Plan 
 
 From this excerpt from an official Government report 
 you can judge for yourself what is at the bottom of the 
 Capitalistic “American Plan.” The present campaign for 
 an “American Plan” is but the corollary of that other 
 American plan inaugurated by the United States Steel Cor¬ 
 poration when in its fight upon organized Labor, more than 
 twenty years ago, it began to fill its plants with cheaper 
 European labor, replacing native and naturalized Ameri¬ 
 can citizens with recent arrivals,—immigrants from all 
 parts of Europe. The present “American Plan” is Capi¬ 
 tal^ last desperate charge upon organized Labor. And 
 the hidden design is to reduce all those who labor, whether 
 for a wage or salary, to a condition of perpetual servility 
 and permanent poverty. 
 
 Dragging Down the Salaried Employees 
 
 Let none imagine that the Capitalistic System intends 
 merely to degrade the industrial wage earners to a common 
 level. No! The Capitalistic System is thorough; it does 
 nothing by halves. Its campaign to “liquidate labor”— 
 to cut wages below the decent living level—includes the 
 salaried employees. Hundreds of thousands of salaried 
 men and women throughout the United States were dis¬ 
 charged during the slack period, then hired back at a lower 
 salary, or replaced by cheaper help. 
 
 Items such as the following appeared frequently in the 
 daily press during the past year: 
 
 “The Pittsburgh Coal Company will make reductions 
 of 15 percent on September 1 in the wages of between 3,000 
 and 4,000 members of its salaried staff. ’ ’ 
 
 “A 10 percent pay reduction, effective October 1, is an¬ 
 nounced by the E. I. DuPont de Nemours Company. The 
 cut will affect all salaries from the president down.” 7 
 
 7 These items appeared in the Chicago Herald-Examiner. August 
 31, 1921. 
 
Mane—Tekel—U phar sin 
 
 231 
 
 In an article entitled ‘'The White-Collar Job and the 
 Big Jolt” by James H. Collins, in The Saturday Evening 
 Post (September 3, 1921), a “New York Employment spe¬ 
 cialist ’ ’ is quoted. That gentleman divides the workers into 
 three great groups—: Industrial, Agricultural and Market¬ 
 ing —this latter being composed of those engaged in mer¬ 
 cantile trade, clerical and sales work, etc.—in brief the 
 salaried class. According to this “specialist”: 
 
 “When re-adjustment comes in the marketing group 
 prices will drop, people will be able to buy more with their 
 wages, and production will gradually be restored.” The 
 “re-adjustment,” of course, has reference to the cutting 
 of salaries. 
 
 A brief excerpt from Mr. Collins’ article suffices for the 
 present to give point to my statement that the campaign 
 to reduce wages includes salaried employees: 
 
 ‘ ‘ Reduction of the salaried staffs has proceeded, industry 
 by industry, as different lines of business have been affected 
 by the depression. It began with silks in the spring of 
 1920, ran into clothing and shoes, spread from manufac¬ 
 turer to jobber, and jobber to retailer, invaded automobiles 
 and farm implements. One industry’s hard times some¬ 
 times made brisk times for another line of business, as with 
 exporting, where cancellations and accumulated goods in 
 foreign ports threw work upon banks and branches abroad. 
 But eventually banking organizations were affected, the 
 peak of employment being reached in that line about last 
 February, when it became necessary to cut bank staffs five 
 to ten percent, letting executives go, along with clerical 
 workers. 
 
 “Every employment organization, whether semi-public, 
 like the Knights of Columbus and the Young Men’s Chris¬ 
 tian Association, or the purely private business enterprise, 
 reports about the same conditions—more salaried men seek¬ 
 ing work than ever before in their history, ten applicants 
 for every position, and anxious inquiries from unemployed 
 salaried people in other places who imagine that conditions 
 
232 
 
 The New Capitalism 
 
 are better elsewhere, and want to crowd into the already 
 congested cities.’’ 
 
 Cannot the salaried employees read their doom between 
 the lines ¥ 
 
 The One Thing Capitalism Cannot Destroy 
 
 Will the Capitalistic group and System succeed in de¬ 
 stroying organized Labor, and reducing all those who labor 
 to the ranks of serfs? When we consider what the Capi¬ 
 talistic group has already accomplished and that organized 
 Labor’s condition has never been so precarious as at pres¬ 
 ent, one is tempted to answer the question in the affirma¬ 
 tive. 
 
 But in spite of all the seeming successes, in the face of all 
 the past Capitalistic victories, I ’ll say with all the emphasis 
 I can command, that Mammonistic Capitalism will not suc¬ 
 ceed—that it will not triumph. Why ¥ Because it has over¬ 
 looked a very vital point. I ’ll tell you what I mean. 
 
 When M. Clemenceau was urged by some of the French 
 deputies to bring about the utter destruction of Germany 
 by dismemberment, Clemenceau answered that to dismem¬ 
 ber Germany would be an easy task, but that there is one 
 thing that he could not hope to succeed in destroying, and 
 this one thing is the unity of spirit of the German people. 
 
 “There is no unity deeper than the unity of spirit,” he 
 said, “and that unity no human hand can touch. You do 
 not create or destroy unity by diplomacy. It is something 
 that exists in the hearts of men. We love what we love, we 
 hate what we hate. When the moment of peril comes we 
 know what side to take; when the call to battle is heard, 
 we know where to stand. ’ ’ 8 
 
 This is a lesson of history that the Bourbon Mammon¬ 
 istic Capitalists have never learned. If, as the wise states¬ 
 man Clemenceau well said, you cannot destroy unity of 
 spirit by diplomacy, history shows that it can much less be 
 destroyed by violence! It is quite possible that Mammon- 
 
 s The Living Age, July 17, 1920. 
 
Mane—Tekel—TJpharsin 
 
 233 
 
 istic Capitalism will succeed in seriously harassing organ¬ 
 ized Labor for a time. Let us go so far as to say that it 
 will succeed in crushing it entirely, even trampling it un¬ 
 derfoot for a while. But it will be a sorry and brief victory 
 for Mammonistic Capitalism, for out of the trials and tribu¬ 
 lations to which Mammonistic Capitalism is at present sub¬ 
 jecting all those who work for a wage, or salary; out of 
 the smouldering embers of their common resentment, there 
 will arise, phoenix-like, a spirit of unity and solidarity, and 
 a unanimity of action that will break every link in the 
 Capitalistic-Mammonistic chain that binds them. Torn and 
 tortured, bruised and bleeding,—organized and unorgan¬ 
 ized Labor will pick itself up out of the dust and dirt, bind 
 up its wounds and retire long enough to let them heal. 
 Then, its teeth set, its fists clenched, and its face calmly 
 turned toward the future, full panoplied, and accoutered 
 as never before, it will emerge for a bigger and mightier 
 contest than the world has ever seen. It will have learned 
 the secret of its own weakness, which is a disunited front. 
 If those who work for a wage, men and women, organized 
 and unorganized, will learn this one lesson, their tempo¬ 
 rary defeat will turn into a tremendous and lasting victory. 
 
 The Mammonistic Conquest 
 
 Throughout these chapters I have used the word CAPI¬ 
 TALISM , not because it accurately described what I have 
 in mind, or existing conditions, but because Capitalism 
 conveys to the popular intelligence more than its superla¬ 
 tive designation MAMMONISM. 
 
 Mammon was the Syrian god of riches. The rich, the 
 greedy ,the avaricious worshipped at his altar. Capitalistic 
 Mamihonism, or Mammonistic Capitalism as we know it to¬ 
 day, is the sordid greed for wealth; the vulpine hunger for 
 riches; a vulturous appetite for profits, a ravenous craving 
 for emoluments, a fiendish lust for power, and many other 
 things that cannot be described in polite language. 
 
234 
 
 The New Capitalism 
 
 It must be clear to whosoever has carefully followed me 
 thus far, that the Capitalistic-Mammonistic conquest of the 
 people of the United States is well nigh completed. A 
 small group of Mammonists, who are the nucleus of the 
 Capitalistic System—owns the major portion of the na¬ 
 tion’s wealth. Moreover, it practically owns and certainly 
 controls, the banks, the insurance companies, the railroad 
 and transportation systems, the public utilities, the raw 
 materials, natural resources and leading industries. By 
 virtue of its supreme sovereignty it reaps the biggest por¬ 
 tion of the profits derived from the employment of Capital 
 and Labor, in whatever enterprises. I will not particularly 
 emphasize here that the administration of our Government 
 is in a large measure controlled, and its policies dictated, 
 by this small Capitalistic-Mammonistic group; however, it 
 is even so. But I will emphasize that the destinies of thirty 
 million workers, and the fate of sixteen million non-investor 
 families, is entirely in the hands of this small group. 
 
 Legitimate Capitalism 
 
 Let none imagine that I am opposed to legitimate Capi¬ 
 talism ; I am not! Capital is essential to progress, to life. 
 Capital is the prime requisite for business. Without Capi¬ 
 tal the wheels of production cannot function; and the car 
 of commerce cannot move. No sane man can have any 
 quarrel with legitimate Capital, nor take exception to any 
 of its legitimate functions, nor begrudge it a fair reward. 
 But when Capital ceases its legitimate operations, and 
 transcends the respectable limits of decency; when it be¬ 
 comes a name for greed and a synonym for cupidity and 
 injustice; when the whole concern of those who employ 
 it is the quick accumulation of riches regardless of the 
 methods used, regardless of the means employed, no mat¬ 
 ter whom it injures or whom it hurts, then it reveals itself as 
 the monster of Capitalistic Mammonism, and quite natur¬ 
 ally we may expect some more or less audible protests from 
 its victims. The Capitalism of which I speak in this book 
 
Mane—Tekel—Upharsin 
 
 235 
 
 is the Mammonistic variety. Capitalism with the rabies. 
 It is Capitalistic Mammonism, not Capitalism, that must 
 be destroyed. 
 
 My Argument Summarized 
 
 Let it be understood that I have never, and do not now, 
 advocate what is sometimes spoken of as an equal division 
 of property, or of wealth. Against both of these proposals 
 I set my face. I uphold the principle of the doctrine of 
 property rights; but I strongly protest against the concen¬ 
 tration of all the productive, profitable properties in the 
 hands of a few. I will at all times defend the right of the 
 individual to hold property, but I favor an economic con¬ 
 dition under which the right to have and to hold property 
 will be enjoyed by a greater number. 
 
 In brief I summarize my argument into the advocacy 
 of an economic system under which those who work for a 
 wage will participate in the usufruct of their labor, and 
 which participation automatically gives them an oppor¬ 
 tunity to save a part of their wages, and invest same in the 
 enterprises which their labor makes possible, and their 
 patronage profitable. If simple justice is extended to those 
 who labor for a wage, Mammonism will come to an end, 
 and never more lift its ugly monster head upon the earth. 
 
 “The Established Order” 
 
 There are those who speak of the “established Order” 
 as if it were something holy, fashioned by the hand of God 
 Himself, and for the exclusive benefit of a few. There is 
 no such thing as an established Order. From the beginning 
 of the world the “established” Order has changed, pro¬ 
 gressively—generally gradually, but sometimes suddenly. 
 Thus the Order, that can be said to have been the estab¬ 
 lished Order from 1850 to 1900, came to an abrupt end the 
 day the United States Steel Corporation was organized; 
 and by that act a new Order was created almost over night. 
 But this new Order , i ‘ conceived in sin and brought forth in 
 
236 
 
 The New Capitalism 
 
 iniquity”—is now old and decrepit and disreputable. Nay, 
 it has ceased to be Order at all; it is ‘ 1 the established Dis¬ 
 order. ” But whether you call it Order or Disorder, it is no 
 longer acceptable to a majority of the people. Surely there 
 is none so bold as to say that it is the duty of the people 
 to support an Order under w T hich all the wealth and all the 
 profits flow through myriad streams into the coffers of a 
 few hundred or thousand Capitalistic Mammonists. It is 
 not the duty of the people to support and make permanent 
 an Order under which they are gradually being reduced to 
 economic serfdom. Nay, it is their duty to change the 
 Order under the tyranny of which they are slowly being 
 forced into a condition of poverty and slavery. 
 
 A Bird’s Eye View 
 
 If any one doubts the sinister design of the Capitalistic 
 Mammonists to reduce the wage earners of the nation to 
 servility and economic serfdom, let him consider at least 
 a few of the things they have imposed upon us: 
 
 They have depreciated the wage dollar—reduced the pur¬ 
 chasing power of money; 
 
 They are compelling us to pay approximately four dol¬ 
 lars for what formerly cost one dollar; 
 
 They have given us the High Cost of Living; 
 
 They have compelled us to lower our standard of living, 
 •—doubling our rents, and prices of foods, wearing ap¬ 
 parel, etc.; 
 
 They have succeeded in establishing conditions by virtue 
 of which the income of an average family will be insuffi¬ 
 cient to live in decency and comfort; besides compelling an 
 increasing number of women and children to enter the 
 ranks of wage earners; 
 
 They have cut wages and salaries to a point that will 
 make it well nigh impossible for a wage earner to lay aside 
 even a small surplus (savings) ; 
 
 Within recent years they have put millions of men and 
 women to the necessity of consuming what little surplus 
 
Mane—Tekel—Upharsin 
 
 237 
 
 they may have managed to save, by dint of thrift and sac¬ 
 rifice, in those better times before the Capitalist c-Mam- 
 monistic System was fully developed. 
 
 They have foisted upon us a system of from hand to 
 mouth existence; 
 
 Thanks to them the average wage earner—the average 
 family—is constantly a week or month, or several weeks 
 or several months, in arrears; for the wages or salary they 
 receive pay not for what they are going to consume, but for 
 what they have consumed—and that is Pauperism of the 
 direst kind. 
 
 But why lengthen the list of Capitalistic-Mammonistic 
 achievements, when a single sentence tells the story. The 
 Capitalistic Mammonists have pressed us into the dust. 
 Can they keep us there ? They can! unless we break their 
 stranglehold. And I say it can be broken! It must be 
 broken! It will be broken! 
 
 A Strong Cup of Coffee 
 
 Senator Atlee Pomerene, in an address before the Ohio 
 State Bankers Association, Cleveland, Ohio, discussed the 
 economic problems of the day. 9 * 
 
 He concluded by saying that he had received many let¬ 
 ters from his constituents, but one of them, he said, gave 
 the cause of the disturbed conditions more tersely and more 
 forcefully than all the rest. He said the explanation of 
 present conditions is “the country is getting over a big 
 drunk.” “I am afraid,’’ continued Senator Pomerene, 11 he 
 told the truth. Whether we are of the employer or employee 
 class, whether we belong to the idle rich or to those who 
 are objects of charity, let us all take a strong cup of coffee, 
 sober up and work and save. It will clear our vision. It 
 will help solve the problems that confront us.” 
 
 With all due respect to Senator Pomerene, who, I believe, 
 is a well intentioned man—though a mighty poor economist 
 
 9 See Congressional Record, July 15, 1921, p. 4007. Needless to 
 
 say Senator Pomerene discussed his subject from the Capitalistic, not 
 
 from the non-investor’s standpoint. 
 
238 
 
 The New Capitalism 
 
 —this is the sort of economic nonsense one encounters fre¬ 
 quently in these days. No! the country is not just ‘ ‘ getting 
 over a big drunk.” The country has been on a bestial de¬ 
 bauch for more than twenty years, and is at present suffer¬ 
 ing from the consequences of its vile excesses and shameful 
 immoralities practiced for nearly a quarter of a century. 
 A more drastic specific than a “strong cup of coffee” is 
 needed. In fact there is no cure known to science for what 
 ails the patient. The corruption has progressed too far; it 
 has reached the final stage. 
 
 Trouble With a Cup of Coffee 
 
 But apropos of Senator Pomerene’s “strong cup of cof¬ 
 fee.” I wonder whether he has ever read that amusing 
 book called “The Peterkin Papers”! I read it when I was 
 still in my teens. The very first paper is entitled ‘ ‘ Trouble 
 with a Cup of Coffee. ’ ’ 
 
 Mrs. Peterkin had just prepared a cup of delicious coffee, 
 but absent-mindedly had put salt into it instead of sugar. 
 She called her family together and explained the difficulty, 
 and asked their advice. Agamemnon, just home from 
 college, suggested that they call in the chemist, a most 
 learned man. They go to him and state their errand, prom¬ 
 ising to pay him in gold. He agrees to go with them. Into 
 the cup of coffee the chemist puts a half hundred different 
 kinds of chemicals. Still the coffee is not fit to drink. They 
 pay him for his trouble, and he departs. 
 
 Again the disturbed Peterkins hold council, and they 
 decide to call in the herb-woman. She agrees to try her 
 skill. Into the spoiled cup of coffee she puts tansy, penny¬ 
 royal, caraway seed, spearmint, cloves, sweet marjoram, 
 basil and rosemary, wild thyme, catnip, valerian and hops. 
 But still the coffee wasn’t fit to drink. She decides that it’s 
 bewitched, and goes home. 
 
 In desperation the Peterkins decide to ask the Lady from 
 Philadelphia, a most wise woman. She suggests that they 
 
Mane—Tekel—Upharsin 
 
 239 
 
 throw out the cup of doctored coffee and make a fresh one. 
 Delighted, they decide to do so. 
 
 And the moral of this tale is that salt and chemicals and 
 herbs have been stirred, for nearly a quarter of a century, 
 into the economic coffee—myrrh—which we are supposed 
 to drink—not absent-mindedly but deliberately and with 
 malice aforethought, by Capitalistic cooks with evil designs 
 upon our economic health and social well-being. We mean 
 to throw out the cup of coffee with salt, and chemicals and 
 herbs in it, and henceforth do our own brewing, according 
 to our own formula. 
 
 Scrambled Eggs 
 
 Since Senator Pomerene’s homely remedy has brought us 
 into the vicinity of the kitchen. I recall a pertinent question 
 asked by the most illustrious of all Capital] stic-Mammonis- 
 tic chefs, J. Pierpont Morgan, a few years before his death. 
 He admitted that things were pretty badly mixed up, but 
 complacently dismissed the whole subject with the query: 
 ‘ ‘ Can you unscramble eggs ? ’ ’ 
 
 No! we can’t unscramble eggs, but we can fire the cook 
 whose sole culinary ability consists in scrambling eggs. The 
 country is sick of the continuous, exclusive and excessive 
 diet of scrambled eggs that has been forced down its un¬ 
 willing throat into its rebellious stomach. Nor is the situa¬ 
 tion improved by the discovery that the scrambled eggs 
 with which the country has been fed for the last quarter 
 of a century, were rotten eggs. 
 
 The terrible grip of Mammonistic Capitalism must be 
 broken. Carthago est delenda, cried Cato; and Carthage 
 was destroyed. The god Mammon must be dethroned; 
 Moloch must be toppled over. 
 
 “Impossible!” 
 
 “Impossible!” a hundred thousand, perhaps a million, 
 or several million, voices will cry in unison. But read the 
 
240 
 
 The New Capitalism 
 
 following from Carlyle’s essay on “Chartism,” from the 
 chapter entitled ‘ ‘ Impossible! ’ ’ 
 
 ‘ ‘ ‘ But what are we to do ? ’ ” exclaims the practical man, 
 impatiently on every side: “ ‘ Descend from speculation and 
 the safe pulpit, down into the rough market-place, and say 
 what can be done!’ ”—0, practical man, there seem very 
 many things which practice and true manlike effort, in Par¬ 
 liament and out of it, might actually avail to do. But the 
 first of all things, as already said, is to gird thyself up for 
 actual doing; to know that thou actually either must do, or, 
 as the Irish say, “come out of that.” 
 
 “It is not a lucky word, this same impossible; no good 
 comes of those that have it so often in their mouth. Who 
 is he that says always, There is a lion in the way? Slug¬ 
 gard, thou must slay the lion, then; the way has to be 
 travelled! . . . 
 
 “It was proved by fluxionary calculus, that steamships 
 could never get across from the farthest point of Ireland 
 to the nearest of Newfoundland; impelling force, resisting 
 force, maximum here, minimum there; by law of Nature, 
 and geometric demonstration:—what could be done ? The 
 Great Western could weigh anchor from Bristol Port; that 
 could be done. The Great Western, bounding safe through 
 the gullets of the Hudson, threw her cable out on the cap¬ 
 stan of New York, and left our still moist paper-demonstra¬ 
 tion to dry itself at leisure. ‘Impossible!’ cried Mirabeau to 
 hi s secretary. ‘ Ne me dites jamais ce bete de mot, N$vtt 
 xame to me that blockhead of a word! ’ 
 
 “To the practical man, therefore, we will repeat that he 
 kas, as the first thing he can ‘do,’ to gird himself up for 
 actual doing; to know well that he is either there to do, or 
 not there at all. Once rightly girded up, how many things 
 will present themselves as doable which now are not at- 
 temptable! ’ ’ 10 
 
 10 “Chartism/' by Thomas Carlyle, Chapter X. 
 
241 
 
 Mane—Tekel—Upharsin 
 The Servile State 
 
 Hilaire Belloc, in his most interesting book, ‘ ‘ The Servile 
 State, ” graphically describes how by the middle of the 
 seventeenth century a dominant few had established them¬ 
 selves as the overlords of creation. He speaks of it as “the 
 new wealth”—“with all the realities of power in the hands 
 of a small, powerful class of wealthy men, the King still 
 surrounded by the fancies and traditions of his old power, 
 but in practice a salaried puppet. And in that social world 
 which underlies all political appearances, the great domi¬ 
 nating note was that a few wealthy families had got hold 
 of the bulk of the means of production in England, while 
 the same families exercised all local administrative power 
 and were, moreover, the Judges, the High Executives, the 
 Church and the generals. They quite overshadowed what 
 was left of central government in this country. J 9 
 
 “By 1700,” continues Mr. Belloc, “half of the English 
 were dispossessed of capital and land. Not one man in two, 
 even if you reckon the very small owners, inhabited a home 
 of which he was the secure possessor, or tilled land from 
 which he could not be turned off. . . . England had 
 
 already become Capitalistic. She had already permitted 
 a vast section of her population to become proletarian, and 
 it is this, and not the so-called “Industrial Revolution,” a 
 later thing, which accounts for the terrible social condi¬ 
 tion in which we find ourselves today. . . . 
 
 “In an England thus already cursed with a very large 
 proletariat class, and in an England already directed by a 
 dominating Capitalist class, possessing the means of pro¬ 
 duction, there came a great industrial development. 
 
 “Had that industrial development come upon a people 
 economically free, it would have taken a cooperative form. 
 Coming as it did upon a people which had already lost its 
 economic freedom, it took at its very origin a Capitalistic 
 form, and this form it has retained, expanded, and per¬ 
 fected throughout two hundred years. 
 
242 
 
 The New Capitalism 
 
 “It was in England that the Industrial System arose. 
 It was in England that all its traditions and habits were 
 formed; and because the England in which it arose was 
 already a Capitalistic England, modern Industrialism, 
 wherever you see it at work today, having spread from 
 England, has proceeded upon the Capitalistic model. ’ ’ Etc. 
 
 The Challenge to Mammonistic Capitalism 
 
 Mr. Belloc’s book from which I quoted the foregoing, 
 contains many other passages which w r ould throw T consid¬ 
 erable light on our own economic affairs. But we must con¬ 
 tent ourselves for the present to merely emphasize what 
 he so admirably discloses, that the desperate economic con¬ 
 dition of the world, including, of course, the United States, 
 can be directly traced to the dominant ascendancy and 
 supreme sovereignty of Mammonistic Capitalism which 
 began its operations several centuries ago, and has con¬ 
 tinued its deadly work with almost scientific fiendishness 
 until today the whole world is, economically speaking, being 
 throttled to death. 
 
 The immediate question that presses for an immediate 
 answer in the United States (as well as elsewhere), is: Shall 
 Mammonistic Capitalism be permitted to tighten its 
 stranglehold upon the throats of the people—upon the 
 throats of those who -work for a wage—who constitute the 
 non-investor group; or shall it be compelled to release its 
 throttling death grip? 
 
 To merely content ourselves with giving a stentorian 
 answer is not enough. Valiant action must accompany our 
 words. Great deeds must be performed, such as will bring 
 the Capitalistic-Mammonistic group to its senses, if not to 
 its knees; and the non-investors—those who work for a 
 wage or salary, or the equivalent, into their rightful heri¬ 
 tage. 
 
 To point THE WAY is the purpose of the Second Part of 
 this book. 
 
PART II 
 
 THE NEW ORDER 
 
This world, ’tis true, was made for Caesar, 
 But for Brutus, too . 
 
CHAPTER XIX 
 “Where There’s a Will 
 
 ? J 
 
 W HEN one begins to look under the surface of the 
 Capitalistic Entrepreneur System—a System which 
 takes into consideration only the welfare of a com¬ 
 paratively small group of individuals, and entirely ignores 
 the interests of the non-investor portion of the pub¬ 
 lic, one wonders why the eighty million non-investors 
 have never made any serious attempt to organize for 
 their own protection. I do not mean in a social or political 
 way; (the one is impossible; the other unnecessary and 
 undesirable, at least for the present) I mean in a purely 
 economic way; I mean to protect themselves and their 
 families from further exploitation, and save themselves 
 from the permanent poverty into which they are slowly, but 
 none the less surely, drifting. If ever there was a reason 
 for the non-investor group to seriously consider such a step, 
 that reason exists today as never before. If ever the neces¬ 
 sity for self-protection existed, it is urgent today. What 
 the non-investors have lacked to date is leadership, and a 
 rational, workable program. No one has ever showed them 
 the way, nor pointed out how their economic freedom might 
 be won. The purpose of this book is to show them the way; 
 let us hope that the leaders will arise among them in dwe 
 time. 
 
 The fundamental weakness of all economic remedies thus 
 far proposed, is that they call for group action and strive 
 only for group benefits; whereas what the world needs 
 today is a program that calls for mass action, the net 
 result of which will yield mass benefits. There are eighty 
 million men and women who constitute the non-investor 
 group. Of this number approximately thirty million are 
 
 « 
 
 245 
 
246 
 
 The New Capitalism 
 
 engaged in gainful occupations, that is, working for a wage 
 or salary, or for a recompense the equivalent of a wage or 
 salary. These thirty million men and women workers (Oh, 
 yes, there are children included in the number, millions of 
 them, more’s the pity and greater the shame—children who 
 ought to be in school), represent a tremendous power—a 
 power that is now going to waste because unorganized. I 
 call upon them to constitute themselves into a unified group. 
 I exhort them to combine their scattered strength into a 
 formidable power. I urge them to organize themselves into 
 an economic unit, which for the purpose of this book I 
 shall call THE NEW ORDER. 
 
 The Will to Do 
 
 Have they the will to do it? That is where the people 
 are weak. Generations of buffeting have weakened their 
 wills, and created a state of mind that has robbed them of 
 all initiative—and even of the courage to try. Keeping 
 their nose to the grindstone has dulled their vision and 
 ruined whatever of keen far-sightedness they may once 
 have possessed. The vital energies of their natures have 
 been drained by the struggle for existence. So long have 
 they stood in open-mouthed wonder at the supposed omnipo¬ 
 tence of the organized few that they have lost all conscious¬ 
 ness of their own strength. Compelled to wrestle with the 
 little, vexatious problems of their daily lives, they have not 
 dared to dream, much less venture to attempt the solution, 
 of the one supreme problem—their economic independence 
 and their social well being. Driven, and accustomed to 
 being driven, they have never allowed themselves to think 
 of ever being Masters of their own lives, Masters of their 
 own fortunes, Masters of their own destinies;—Captains of 
 their own finances, Captains of their own industry, Cap¬ 
 tains of their own souls. 
 
 “A House Divided Against Itself” 
 
 I have said that we have no caste system in the United 
 States; but we have something that is unspeakably worse. 
 
“Where There’s a Will” 
 
 247 
 
 There is no homogeneity among us. We are split into 
 warring camps and quarreling groups, opposing parties 
 and fighting factions, along political, social, racial, religious 
 and economic lines. There is not a single question on which 
 we are united; not a single issue on which we present a solid 
 front. And when I speak of we I mean particularly the 
 eighty percent composed of wage earners, and salaried men 
 and women, constituting the non-investor group. Indeed 
 if my plan contemplated organizing a national association 
 of the eighty million non-investor population now scat¬ 
 tered and disorganized throughout the forty-eight states, I 
 would despair, or at least be tempted to set it down as an 
 unaccomplish able plan. But the thing that makes such an 
 association not only possible but already a partially accom¬ 
 plished fact, is the actual existence of the nucleus of the 
 New Order, the one power which thus far has saved us from 
 sconomic serfdom and through which alone society can be 
 re-created. The machinery through which a struggling 
 humanity can redeem itself is in running order. 
 
 Organized Labor—the Niocleas of the New Order 
 
 It is not accurate to say that the eighty million non¬ 
 investors are entirely unorganized. A part of the non-in¬ 
 vestor group is organized. I refer to that portion of the 
 eighty million known as organized Labor, or wage earners 
 —not all of the wage earners but a considerable number. 
 According to the statistics there are in the United States 
 approximately thirty million wage earners and salaried men 
 and women. Of these it is reported that six or seven mil¬ 
 lion are more or less thoroughly organized. The most pow¬ 
 erful Labor organization, and the one having the largest 
 membership, is the American Federation of Labor, to which 
 about four million of wage earners belong. Then there are 
 independent Labor organizations, brotherhoods, or unions, 
 and amalgamations of workers in specified industries. All 
 told the total membership in Labor organizations is approxi¬ 
 mately seven and a half million. In other words, about 
 one-fourth of the wage earners are organized. It matters 
 
248 
 
 The New Capitalism 
 
 little as to their precise number; the stress is to be laid 
 entirely on the fact that they are organized, imperfectly, 
 and not ideally, perhaps, but organized, therefore the 
 nucleus of a greater organization. ‘ ‘ Aye, there’s the nib! ’ 1 
 Even though organized Labor numbered only a million 
 members I would still say that the nucleus of the New Order 
 is in existence today, and able to carry out all the plans I 
 have in mind with regard to the NEW CAPITALISM. 
 
 Around this nucleus, it is reasonable to suppose that, 
 while it will not be easy in the beginning, yet with per¬ 
 sistent effort it will be possible to gather the active support 
 and cooperation of a fair percentage of men and women 
 engaged in gainful occupations who do not belong to any 
 Labor organization, and who have no affiliation whatever 
 with organized Labor; for, let me make myself entirely 
 clear—the New Order is not to be composed exclusively of 
 those who are members of Labor organizations, but is to 
 include anyone desirous of lending a helping hand in the 
 work of improving economic conditions—of making people 
 happier, the world a better place to live in, and life more 
 enjoyable. No one will be barred, whatever his rank or 
 station in life may be. Wage earner and salaried person; 
 property owner or tenant; lawyer, physician, druggist, 
 dentist, farmer, shop-keeper, or to whatever occupational 
 group each may belong, is eligible to membership. 
 
 A Call to Organized Labor 
 
 But while I have in mind the organization of the non- 
 investor portion of the population, eighty million men and 
 women—sixteen million families—I realize that such an 
 •rganization is well nigh impossible save through the agency 
 of organized Labor. Organized Labor is to be the nucleus 
 Of the greater organization that will shape itself by degrees 
 and in due time. Organized Labor has the power, if it will 
 but effectively and intelligently use it, to break the back¬ 
 bone of the Capitalistic Entrepreneur System. The Capital¬ 
 istic Entrepreneur group is not afraid of Labor as at pres¬ 
 ent organized, or rather disorganized; it does not stand in 
 
“Where There’s a Will” 
 
 249 
 
 dread of its power. Indeed the Capitalistic Entrepreneur 
 group has rather successfully undermined Labor’s might. 
 It has divided those who labor into opposing camps; it has 
 corrupted individuals and disrupted groups; and at this 
 very moment, is engaged in dealing death blows to all organ¬ 
 ized Labor. Organized Labor should need no call from me 
 to save itself. For its own sake, then, I cry out to organ¬ 
 ized Labor, or what is left of it—save yourselves—and save 
 the nation. Your death means the nation’s death! Rouse 
 yourselves. Act today; tomorrow it may be too late. 
 
 I do not know whether organized Labor or any organized 
 Labor groups will heed my cry or act upon my suggestion, 
 but at any rate I shall indulge in that assumption in this 
 chapter. I will delude myself into the belief that at least 
 five million wage earners are willing to make an effort to 
 win economic freedom for themselves, their families, and all 
 those not an integral part of the Capitalistic Entrepreneur 
 System—for the sixteen million non-investor families. 
 
 The organization of five million wage earners into one 
 compact body is the first step. For the purpose of this 
 book, and so as to make myself plain, and more easily under¬ 
 stood, I am going to imagine the actual existence of the New 
 Order, with a membership of five million members, drawn 
 entirely from the ranks of organized Labor. For truth to 
 tell, unless organized Labor sees the wisdom, or the possi¬ 
 bilities, of my plan, and decides to take a hand, there is 
 little hope for the non-investors. Things will go on as they 
 are, nay, go from bad to worse, until the final crash comes. 
 
 Very well, then! Here we are, five million strong—all 
 wage earners—organized, consolidated and co-ordinated 
 under the New Order. What is our program? What steps 
 will we take; how will we proceed? 
 
 The Sustaining Props of Capitalistic Supremacy 
 
 In the first part of my book I have endeavored to show 
 the dominant position of the Capitalistic Entrepreneurs; 
 and the tyranny of the Capitalistic Entrepreneur System. 
 I do not consider it necessary to summarize all the points I 
 
250 
 
 The New Capitalism 
 
 have scored against the Capitalistic Entrepreneur group 
 and System, preferring to believe that at least some of the 
 things I have written have made an impression and are still 
 remembered by the readers. It will suffice to remind the 
 readers that the Capitalistic Entrepreneur group is com¬ 
 posed of a small number; I care not whether you make it 
 four hundred, or four thousand, or four hundred thousand, 
 or four million. This compact, powerful group owns and 
 controls practically all the “wealth’’ producing properties 
 in the United States. Not content with that it has, 
 through the device of overcapitalization, inflated the na¬ 
 tional wealth by one hundred billion; against which it has 
 issued immense quantities of “securities.’’ On the inflated 
 wealth, the people are compelled to pay taxes, rents, divi¬ 
 dends and interest. Moreover the giant Capitalistic Entre¬ 
 preneurs have a monopoly of the nation’s finances, con¬ 
 trolling absolutely, money and credits through their system 
 of banks. They have moreover a monopoly of all natural 
 resources, raw materials and the leading industries, trans¬ 
 portation systems, public utilities, etc. 
 
 All these monopolies and controls are made possible to 
 the Capitalistic group first by its control of Capital; and 
 second by its control of Labor. If this double control can 
 be broken the Capitalistic Entrepreneur System will col¬ 
 lapse and sink into the mire of its own rottenness; and the 
 people—the wage earners, the non-investors—will come into 
 their own. 
 
 The Basic Capital Fund 
 
 In the light of all I have said let me ask: How did the 
 Capitalistic Entrepreneurs build up their power? By the 
 autocratic use of capital and credit. Whose capital? Our 
 capital, for, the Basic Capital Fund of the nation is the 
 property of the eleven million savings depositors, most of 
 them, it will be admitted, belonging to the non-investor' 
 group. Indeed it may be well to remind the readers that 
 these eleven million savings depositors have on deposit an 
 
“Where There’s a Will” 
 
 251 
 
 amount greater than the amount of money in circulation. 
 On July 1, 1920, the total amount of money in circulation 
 was $6,087,555,007; on the same date the 11,427,555 savings 
 depositors had a total of $6,536,596,000 in the savings banks 
 of the United States— in other words, a half billion dollars 
 more than money in circulation. 
 
 The savings of the eleven million savings depositors con¬ 
 stitute the nation’s working capital. More accurately 
 speaking, the eleven million savings depositors have placed 
 their aggregate savings into the hands of the Capitalistic 
 Entrepreneur group, which this group is using over and 
 over in its various enterprises—monopolizing materials and 
 industries, controlling markets, fixing prices—in brief, 
 strengthening and enlarging the power of the Capitalistic 
 System. 
 
 Savings Bank Philosophy 
 
 The savings depositors receive three, or let us liberally say 
 four percent per annum for their savings. The average 
 amount of savings per depositor is, let us say $500. Con¬ 
 sequently the average savings depositor receives as a reward 
 for leaving his money on deposit in Capitalistic banks for 
 twelve months, $20.00. Oh, does he? Not much! for, every 
 dollar he leaves on deposit is used in the aggregate, by an 
 average of five different individuals or corporations, each 
 paying an average rate of let us say, five percent, to the 
 bank for its use. Every person or corporation using this 
 money and paying interest thereon, charges it up to cost 
 of production—that is, adds it to the price of the commodi¬ 
 ties produced— and the total amount of interest is collected 
 from those who purchase the commodities. The savings 
 depositor receives $20.00 a year as interest on his sav¬ 
 ings; in reality he is penalized three or four times the 
 amount he receives as interest, by those who use his money. 
 
 There is something tragically funny about the fact that 
 the savings of the w T age earners, are the basic working 
 capital of the Capitalistic Entrepreneur group and the bul¬ 
 wark of the Capitalistic System. It is by the astute and 
 
252 
 
 The New Capitalism 
 
 unscrupulous use of the savings of eleven million non¬ 
 investors of the working group that a comparatively small 
 group of men have been enabled to take possession of prac¬ 
 tically all the properties in the United States, making xabu- 
 lous profits; increasing their wealth enormously, and build¬ 
 ing up vast fortunes. It would be amusing, were it not so 
 tragic, to reflect that the Capitalistic group is at this very 
 moment using the savings of the eleven million non-investor 
 depositors to reduce them to a condition of abject servility, 
 permanent poverty, and hopeless dependence. 
 
 Capital Needs the Worker’s Savings 
 
 Labor is dependent upon Capital, scream the economists; 
 but I say that Capital is dependent not only upon Labor, 
 but upon the very savings of the wage earners. It is easy 
 to see that if the eleven and a half million savings deposi¬ 
 tors each kept his or her money (which, you will admit, is 
 their undisputed right) in a sock instead of depositing it 
 in the savings banks (which banks are a vital part of the 
 Capitalistic Entrepreneur System) the country, to say the 
 least, would be in a quandary. Plainly speaking, it cannot 
 be denied that the savings of the eleven and a half million 
 depositors (mostly non-investors) are not only the nation’s 
 basic working capital fund, but the nation’s credit and com¬ 
 mercial system is entirely based upon its constant circu¬ 
 lation. 
 
 In his book, “Highways of Progress,” 1 James J. Hill 
 says: 
 
 * ‘ Of the nearly $4,000,000,000 of deposits in the savings 
 banks of this country, the bulk consists of the savings of 
 labor; and this represents but a portion of its accumula¬ 
 tions. With such resources, the workingmen of the coun¬ 
 try might, if they chose, practically control a large part of 
 its industry within a few years. From every point of view, 
 the workingman, representing the greatest number whose 
 
 i Published 1912, Doubleday Page & Co. 
 
41 ‘Where There’s a Will” 
 
 253 
 
 good a sound industrial order must seek, appears to be in 
 the world of wealth production. ’ ’ 
 
 If Labor is dependent upon Capital, I’ll say that the 
 Basic Capital Fund belongs to Labor, and it is only neces¬ 
 sary for Labor to learn how to use this basic fund for its 
 own and all the people’s benefit. 
 
 Ye eleven million depositors in savings banks—arouse 
 yourselves! Ye unorganized non-investors—pinch your- 
 
 f 
 
 selves! Ye are asleep. Ye do not know what is being done; 
 ye are unconscious of the plan that is being put into execu¬ 
 tion this very moment. Yours are still the six billion dollars 
 basic capital; they will not be yours ten or twenty years 
 hence if you do not bestir yourselves, for through a less 
 wage and a greater increase in the cost of commodities you 
 will be compelled gradually to withdraw your savings 
 merely to meet your current living expenses. I beseech you, 
 do not let the Capitalistic group transfer the six billion 
 dollars now deposited to your credit, to its credit, via the 
 medium of lower wages and higher living expenses. I have 
 no hesitancy in saying that the conspiracy is on to bring this 
 ■condition about. If the Capitalistic group can succeed in 
 its iniquitous design your last vestige of hope will be gone. 
 
 The Wage Earners Can Control Capital 
 
 Now what we propose to do is gradually to take control 
 of this Basic Capital Fund (indisputably the property of 
 non-investors) away from the small group of Capitalistic 
 Entrepreneurs and place it under control of the New Order. 
 We do not intend to disturb the existing funds. We will, 
 for the present, leave them where they are. But all new 
 savings, from now on, will be placed into a Central Treas¬ 
 ury, or designated banks organized by the New Order, and 
 whose officers will be authorized henceforth to confine the 
 employment of our savings solely for the best interests of 
 the wage earners and the public, and not, as at present, 
 permit them to be used by and for the sole benefit of the 
 Capitalistic Entrepreneurs. 
 
254 
 
 The New Capitalism 
 
 Do not get impatient! I haven’t begun to open the 
 door; I haven’t even put the key in the lock. The splendors 
 concealed within the palace will be fully revealed to you 
 in due time! I am striving to make my plan perfectly clear 
 to every man and woman of even ordinary intelligence. 
 That is why I am throwing rhetoric to the winds, and 
 language out of the window. I am not attempting to write 
 a literary masterpiece. I have a message for the people, 
 not only for the eighty percent of our population but for 
 everyone who cares to read. If occasionally I falter in the 
 delivery it is because I realize that my audience is not 
 accustomed to me, and perhaps incredulous, and some even 
 suspicious. If I digress once in a while it is to give them 
 time to think over something I have just said. If I hesi¬ 
 tate a moment it is not for lack of something to say, but 
 because I do not want to overwhelm them with my own 
 enthusiasm. 
 
 Creating a Capital Fund Under the New 
 
 Capitalism 
 
 Capital is the prime requisite for any undertaking—it is 
 the sine qua non for whatever plans we may have in mind. 
 The creation of Capital funds, therefore, is the first and 
 most important concern of the New Order In brief, if five 
 million persons (members of the New Order—and at the 
 same time members of organized Labor) were to agree to 
 pay into a certain bank, or banks, which they entirely con¬ 
 trol—or shall I say for the present—into a Central Treas¬ 
 ury, five dollars a month, for a period of three years, none 
 of which is to be used for other purposes than may be 
 designated by the Supreme officials of the New Order, it is 
 easy to see that this would give us a Basic Capital Fund 
 of $300,000,000 the first year; $600,000,000 at the end of 
 the second year; and in three years $900,000,000—an 
 amount which I deem sufficient to completely break not 
 only the Capitalistic Entrepreneur stranglehold, but the 
 backbone of the Capitalistic Entrepreneur System of tyr- 
 
“Where There’s a Will” 
 
 255 
 
 anny and oppression. In ten years, by this simple method, 
 three billion dollars would be raised. 
 
 But I am getting ahead of my story. Let me put it this 
 way: 
 
 Each of the five million wage earners is to pledge him¬ 
 self to pay into a Central Treasury a total of $180 within 
 three years; or $60 a year at the rate of $5 a month. This 
 is about seventeen cents a day. The Signers of the Declara¬ 
 tion of Independence pledged their lives, their fortunes, 
 and their sacred honor to win political independence for 
 the nation. It remains to be seen whether five million wage 
 earners can be found who are willing to pledge themselves 
 to pay seventeen cents a day for a period of three years, 
 to win economic independence for themselves, their families, 
 and all the people of the nation. The United States Gov¬ 
 ernment, or rather the people, spent about four billion 
 dollars to emancipate a few million negro slaves. It re¬ 
 mains to be seen whether five million wage earners can be 
 found who are willing to invest $60 a year for a period of 
 three years to emancipate themselves, their families, and 
 the whole nation from a more galling yoke of economic 
 slavery. 
 
 Can it be Bone V 
 
 It goes without saying that the Capitalistic Entrepreneur 
 group will wisely shake its head in unison, and smile while 
 saying: “It can’t be done.” But in that case “the wish 
 is father to the thought.” The plain truth is, the Capital¬ 
 istic Entrepreneur group does not want to see it done, and 
 hopes that it will not be done. Indeed the Capitalistic 
 Entrepreneur group will, by every possible means at its 
 command, fair and foul, bitterly oppose and viciously 
 attack the New Capitalism; for, if any considerable number 
 of men and women were to subscribe each five dollars a 
 month for a period of say three years—it would mean the 
 doom of the Capitalistic System, of which the Capitalistic 
 Entrepreneurs are today the chief beneficiaries. 
 
256 
 
 The New Capitalism 
 
 If anyone says that it can’t be done, I ask: 14 Why can’t 
 it be done?” For one thing the Capitalistic Entrepreneur 
 group has seen to it that the average man and woman who 
 works, shall receive no greater wage or salary than is ab¬ 
 solutely necessary to subsist. Yet, in spite of this fact, 
 eleven million of them have saved, probably most of them 
 by denying themselves many little comforts and pleasures, 
 six billion dollars, which they have put into the savings 
 banks of the United States. This alone, for one thing, 
 shows what can be done when there is the will to do it. 
 
 One Way of Doing It 
 
 But to convince the doubting Thomases, and merely to 
 show what the non-investor group can do, once it makes 
 up its mind, suppose I were to counsel or suggest that the 
 eleven million savings depositors, who have deposited to 
 their credit in the savings banks of the United States nearly 
 six billion dollars, withdraw each one half of the amount 
 he or she has on deposit; or that one-half of the savings 
 depositors withdraw each the full amount of his or her 
 deposits to be used as the Basic Capital Fund under the 
 New Capitalism; a fund of three billion dollars would be 
 created thereby. 
 
 Of course I advise no such thing; in fact I counsel against 
 it: for these two cogent reasons: 
 
 First , the withdrawal of so large an amount, within a 
 period of six months or a year, would not only seriously 
 cripple but utterly wreck every bank in the United States, 
 ruin practically all, or most of the industries, and bring 
 on a condition approximating chaos. 
 
 Secondly (and this is what concerns us most), the 
 New Order would not be in any position to advantageously 
 employ so vast a sum for the time being. Therefore, to 
 place at the disposal of the New r Order, funds considerably 
 in excess of all practical requirements, would bring no ma¬ 
 terial benefits to the owners of said funds. For all imme¬ 
 diate and essential purposes of the New Order during the 
 
“Where There’s a Will” 
 
 257 
 
 first three years, an amount not to exceed $300,000,000 a 
 year will be entirely ample. 
 
 My counsel to all, who, after reading this book, see the 
 advantage and manifold benefits to be derived from the 
 New Capitalism, is to leave their deposits in savings banks 
 intact for the present, or at least not to draw therefrom 
 more than five dollars a month, or a total of sixty dollars 
 in twelve months—and to do that only in case they find it 
 impossible to save the requisite amount from their present 
 earnings, or spare it from whatever funds they may have 
 in hand, or immediately available. 
 
 The Proof of the Wage Earner’s Ability 
 
 But the greatest proof of what the people can do, if there 
 is real need or inspiration to do it, is to be found in what 
 they did during the war. Ten million men and women— 
 most of them wage earners, belonging to the non-investor 
 group—bought twenty billion dollars worth of Liberty 
 bonds. Beyond a doubt wage earners purchased several 
 billion dollars worth, paying for them, if not spot cash, at 
 least within a few months from date of purchase. In view 
 of which fact, will anyone say that it is unthinkable that 
 five million men and women could or would invest , for 
 their own purposes and benefit, five dollars a month for a 
 period of three years? 
 
 Another Positive Proof 
 
 As another proof of what can be done I point to the 
 increases in rents during the past three years. Rents 
 throughout the United States have been increased from 
 fifty to one hundred percent. The point is that the people 
 have paid, and are today paying, the increased rental. 
 (And'by the way—quite parenthetically—if the New Order 
 had been in existence and in operation five or six years ago, 
 landlords could not have raised rents, and would not have 
 dared to demand the outrageous increases they did exact 
 and are at present exacting from the people. We would 
 
258 
 
 The New Capitalism 
 
 have opposed our united strength to their outrageous pro¬ 
 cedure. And I wish to go on record today as saying that if 
 the New Order comes into existence, and the New Capi¬ 
 talism begins to function—rents will be lowered again to 
 approximately where they were in 1914. We will have the 
 power to compel the landlords to be decent, and we mean 
 to use it.) 
 
 But taking the rent situation as it stands today—the 
 average tenant family is paying several hundred dollars a 
 year more for the item of rent than formerly. Perhaps to 
 pay their increases in rent they are compelled to make many 
 sacrifices, but somehow they manage to pay it. Which only 
 proves what can be done. 
 
 As Seen From Another Angle 
 
 The evidence of the people’s ability to provide funds for 
 whatever purpose, is accumulating. On March 18, 1921, 
 P. P. Claxton, National Commissioner of Education, in a 
 formal statement made for the purpose of showing that 
 the people of the United States spent more money for 
 luxuries than for education, published a compilation of 
 comparative statistics. In the course of his statement Mr. 
 Claxton said: 
 
 “According to Government returns for 1920, the people 
 of the United States spent for luxuries in that year 
 $22,700,000,000 ; 2 more than twenty-one times as much as 
 they spent for education only two years before, and 
 $6,000,000,000, or thirty percent more than we have spent 
 for education in all our history. 
 
 2 While I doubt that the people spent the enormous s.um of $22,700,- 
 000,000 in a single year for “luxuries” I will not controvert the Gov¬ 
 ernment’s figures at this time. But I will say that when correlated 
 with the statistics for income, investments, increase in wealth, in capi¬ 
 tal, in savings, in prices and rents, volume of business, wages and 
 salaries and necessary expenditures for the essential living items— 
 that there is a contradiction involved somewhere. Precisely where it is 
 not the purpose of this book to discover. 
 
“mere There’s a Will” 
 
 259 
 
 ‘‘Expenditures for luxuries in 1920 were as follows: 
 
 For Face Powder, Cosmetics, Perfumes, etc.$ 750,000,000 
 
 Furs. 300,000,000 
 
 Soft Drinks . 350,000,000 
 
 Toilet Soaps. 400,000,000 
 
 Cigarettes . 800,000,000 
 
 Cigars . 510,000,000 
 
 Tobacco and Snuff. 800,000,000 
 
 Jewelry . 500,000,000 
 
 Musical Instruments . 250,000,000 
 
 Luxurious Service. 3,000,000,000 
 
 Autos . - . 2,000,000,000 
 
 Joy Rides, Pleasure Resorts and Races. 3,000,000,000 
 
 Cake and Candy. 350,000,000 
 
 Chewing Gum . 50,000,000 
 
 Ice Cream . 250,000,000 
 
 Food Luxuries . 5,000,000,000 
 
 Who can tell what percentage of the aggregate expendi¬ 
 ture for luxuries was made by the four million investors 
 and their families; and what percentage by the wage earn¬ 
 ers—the sixteen million non-investor families? But no 
 matter. Will any one, with these figures before him, dare 
 to assert that if the people of the United States wanted to 
 do it, they could not raise, for the purpose of their economic 
 emancipation, or any other purpose they might have in 
 mind, an amount considerably in excess of that contem¬ 
 plated by my plan? 
 
 What the Capitalists Think 
 
 Whatever may be the actual facts as regards the spending 
 proclivity of the general public, it is at least interesting to 
 hear what the opinion is in Capitalistic circles with regard 
 to the saving ability of the wage earners. In an address 3 
 entitled ‘ ‘ Keal Labor Problems,’ ’ delivered before the Chi¬ 
 cago Association of Commerce, Dr. Charles A. Eaton said: 
 
 “Where are we to find new resources and capital for 
 working the industries of the country ? We have got to find 
 it. I tell you, gentlemen, that it is right here in the surplus, 
 the savings of the working people of the nation. . . . 
 
 3 Published in the Association’s official organ, Chicago Commerce, 
 March 12, 1921. 
 
260 
 
 The New Capitalism 
 
 ‘‘There are billions of dollars a year ordinarily in the 
 savings of workers, and the place for the investment of 
 those savings is in the industries of this nation, not to lay 
 it in a sock, but in the industries of this nation. . . . 
 
 ‘ ‘ I believe that we could turn into the industries of this 
 country about two billion dollars a year from that one 
 source alone, and every investor so guaranteed and so looked 
 after and cared for and educated, would become a tower of 
 strength against all the revolutionary doctrines of radical¬ 
 ism and stupidities that are sweeping over the world today. 
 There is a great field there.’’ 
 
 Dr. Eaton’s address seems to have found favor with 
 Chamber of Commerce Associations, under whose auspices 
 he has spoken in other cities. When he asks “Where are 
 we to find new resources and capital,” etc., and says “We 
 have got to find it,” etc., he gives the unpleasant impres¬ 
 sion of being a delegated spokesman for, or a component 
 member of, the Capitalistic group. At any rate his views, 
 as expressed in his address on ‘ ‘ Real Labor Problems ’ ’ are 
 of the conventional type, and the kind that would win 
 approval before audiences composed of members of Cham¬ 
 ber of Commerce Associations. I do not know how much 
 study Dr. Eaton has given to his subject; nor upon what 
 evidence, or statistics, he bases his statement that the work¬ 
 ing people can, or actually do, save two billion dollars a 
 year. But assuming that he is right with regard to the 
 amount —then the raising of less than one-sixth of that 
 amount a year, as contemplated by my plan, would seem 
 to be comparatively easy and simple. 
 
 Capital Inveigles the Wage Earners 
 
 But whatever the actual amount of the savings of the 
 wage earners of the United States, as a matter of fact the 
 Capitalistic group has set in motion its machinery gradually 
 to transfer their “savings” from the socks and savings ac¬ 
 counts into the treasuries of the corporations of the Capital¬ 
 istic System, through their schemes of selling stock to their 
 employees on easy payment plans. If the recently published 
 report of the American Telephone and Telegraph Company, 
 
“Where There’s a Will” 
 
 261 
 
 (according to which 128,000 of the 186,342 stockholders of 
 record on December 31, 1921—were employees of the Bell 
 system companies “paying for stock at the rate of a few 
 dollars a month”) can be accepted as an indication of the 
 Capitalistic design, it is quite likely that within a few years 
 there will be more than five million employee stockholders 
 in the various corporations, and their holdings in the aggre¬ 
 gate will run into the billions. 
 
 It does not seem to occur to the corporation employees 
 who invest a part of their wages in the stocks of the corpo¬ 
 rations by which they happen to be employed, that they are 
 only placing their savings permanently at the disposal of 
 the very group that is exploiting them; and that any divi¬ 
 dends they may derive from stockholdership in such cor¬ 
 porations, will necessarily be paid out of the price increases 
 of the very commodities their labor produces. 4 
 
 Capital Proposes 
 
 My proposal that the wage earners of the United States 
 create their own capital funds is not so novel as it would 
 seem; a suggestion similar to mine was recently made by a 
 prominent New York banker, Mr. Otto H. Kahn: 
 
 “The Labor Unions in this country claim a membership 
 of 4,500,000. If every member laid aside $1 each week, the 
 available sum at the end of one year would amount to 
 $234,000,000. That is a pretty tidy sum to start business 
 with, in various lines. Personally, I should be glad to see 
 the experiment tried and should welcome its success. The 
 more workingmen come into direct contact with, and 
 acquire direct knowledge of, the realities, the complexities, 
 cares and risks of business conduct, the better it will be.” 5 
 
 4 According to the Boston News Bureau there has been a gradual 
 but steady decrease in the number of shareholders in some of the 
 big corporations during 1922 : 
 
 “The Pennsylvania Railroad reached its record total of stockholders 
 last March, at 141,921 ; and since then there has been a consecutive 
 string of small monthly decreases involving a reduction by September 
 1, of 4,038 holders. The Steel Corporation total of Common share¬ 
 holders reached its peak last December, at 107,439, since which time 
 there has been a decrease of 11,132.” (Literary Digest, Oct. 28, 1922.) 
 
 5 Excerpt from an article “How Shall We Get Back to Better 
 Business,” by Otto H. Kahn, in System Magazine, July, 1921. 
 
262 
 
 The New Capitalism 
 
 As an example of how great minds run in the same chan¬ 
 nel, especially if their owners have their habitat in the 
 Wall Street district, read this from a Commencement ad¬ 
 dress delivered by George E. Roberts, Vice President of the 
 National City Bank of New York: 
 
 “ There are 2,000,000 railroad employes in the United 
 States now receiving an average of something over $1,500 
 per year each. If they would save $50.00 per year each, 
 they could buy control of the New York Central Railroad 
 system in the first year, and of all the systems running from 
 Chicago to the Atlantic Coast within five years, at the pres¬ 
 ent market prices of stocks. ’ ’ 6 
 
 Whether these suggestions, made almost simultaneously 
 by Messrs. Kahn and Roberts, were offered in good faith 
 or not, they serve the purpose of showing that my proposal 
 to the wage earners and the non-investors is not without 
 merit. The distinctive difference between their proposal 
 and mine is that our savings and our capital funds will be 
 put into our banks, not into their banks, and to be used by 
 us, not by them. That’s the vital difference. 
 
 Has the Wage Earner Faith in Himself 
 
 However, it is clear that the Capitalistic group has great 
 faith in the ability of the non-investors to save. It is, there¬ 
 fore, inconceivable that the non-investors themselves should 
 have less confidence in their ability to save, or hesitate to 
 invest their savings for their own benefit, and to their own 
 lasting advantage. If no words of mine can persuade them, 
 let them be animated by what the workers of England and 
 France did for themselves around the ’40s of the last cen¬ 
 tury. In 1844, twenty-eight workman formed a cooperative 
 association, 7 beginning with a capital of twenty-eight 
 
 6 “Supremacy of the Economic Law,” Commencement Address at 
 the Iowa State University, June 15, 1920. 
 
 7 These cooperative societies steadily increased and multiplied, and 
 today are found everywhere in England ; indeed they can be said to 
 have stood between the English workers and their utter degradation 
 and economic enslavement. Recently published statistics show 4,000,000 
 members, and their yearly sales amounting to £200,000,000. 
 
“Where There’s a Will” 
 
 263 
 
 pounds. By 1860 the membership had grown to 3450, and 
 their capital to 37,710 pounds. Bastiat in his “Harmonies 
 of Political Economy” (published about 1860) speaking of 
 the Friendly Societies—“powerful and reciprocal associa¬ 
 tion between the working classes ’ ’ says: ‘ ‘ The total number 
 of these associations for the United Kingdom amounts to 
 33,223, including not less than 3,052,000 individuals—one- 
 half of the adult population of Great Britain. . . . Their 
 revenue is five millions sterling, and their accumulated cap¬ 
 ital amounts to eleven millions and two hundred thousand 
 pounds .’ 1 
 
 John Stuart Mill (whose “Principles of Political Econ¬ 
 omy” was published in 1848) in Book IV, Chapter VII, 
 gives an interesting description of the Industrial Work¬ 
 men and Farmers’ Cooperative Association which sprang 
 up in France and England about the middle of the nine¬ 
 teenth century. In France at that time, the wage of four 
 francs a day, or 1200 francs for a three hundred day year, 
 was the best paid. Speaking of the Association in France, 
 Mill says: (p. 360) 
 
 “The capital of most of the Association was originally 
 confined to the few tools belonging to the founders, and the 
 small means which could be collected from their savings, or 
 which were lent to them by other work-people as poor as 
 themselves. In some cases, however, loans of capital were 
 made to them by the republican government; but the asso¬ 
 ciations which obtained these advances, or at least which 
 obtained them before they had already achieved success, 
 are, it appears, in general by no means the most prosperous. 
 The most striking instances of prosperity are in the case 
 of those who had nothing to rely on but their own slender 
 means and the small loans of fellow workmen, and who 
 lived on bread and water while they devoted the surplus of 
 their gains to the foundation of a capital.” 
 
 The Will to Do — Or the Alternative 
 
 Surely what was done by the workmen of England and 
 France seventy-five years ago, under exceedingly adverse 
 
264 
 
 The New Capitalism 
 
 circumstances, can be duplicated by the wage earners of the 
 United States today, where conditions are more favorable. 
 I do not know how many millions, or billions, of dollars a 
 year the thirty odd million men and women workers actu¬ 
 ally save in the aggregate out of their wages; but this I do 
 know, that they can, and that, too, without half trying, save 
 the amount that I consider necessary for the consummation 
 and complete success of their economic emancipation under 
 the New Capitalism. It may necessitate a sacrifice on the 
 part of some, for millions of wage earners have been sub¬ 
 jected to a long period of idleness; some have consumed 
 their scant surplus (savings) while others have been 
 plunged into debt. 
 
 Indeed, unless the wage earners, the non-investors, act 
 promptly, and make whatever sacrifices are necessary for 
 a year or two or three, to win their economic independence 
 —things will go from bad to worse. The hardships to which 
 they have been subjected during the past year or two will 
 become chronic and irremediable. 
 
 My plan proposes that 5,000,000 organized wage earners 
 raise a Basic Capital Fund of $300,000,000 a year, for a 
 period of three years. This is about one-twentieth of the 
 amount which, according to such authorities as the Iron 
 Age and the Chicago Journal of Commerce, the wage earn¬ 
 ers lost during 1920-1921 through enforced unemployment. 
 Unless those who work for a wage bestir themselves 
 promptly they will henceforth sustain losses through en¬ 
 forced idleness, aggregating annually billions of dollars. 
 It is up to them to decide whether it is to their best inter¬ 
 ests to save and invest $300,000,000 a year for a period of 
 three years out of their wages, or to sustain a loss of several 
 billions a year on account of idleness or irregular employ¬ 
 ment, for that is the alternative. 
 
CHAPTER XX 
 “—Therf/s a Way” 
 
 THERE there’s a will there’s a way.” I am en- 
 %/%/ deavoring in this book to point the way; the will 
 * ▼ must be developed by those most concerned—by 
 organized Labor. Organized Labor, as yon know, has been 
 having a great deal of trouble with organized Capital, and 
 it must be admitted that thus far organized Capital has 
 had the upper hand. The Capitalistic Entrepreneurs have 
 the whip in their hand, holding it more firmly than ever. 
 At this very hour they are using it with telling effect, not 
 only upon the back of Labor but also upon the backs of 
 all the non-investors. 
 
 While I am heralding the New Order as theoretically 
 composed of the non-investors, nevertheless I realize that it 
 is Labor—organized Labor—that will have to bear the brunt 
 of the battle. Organized Labor must do the fighting, this 
 time not for itself alone but for the non-investors—the gen¬ 
 eral public as well. The plan I am proposing is Labor’s big 
 opportunity. It is the only chance it has to win, and with 
 the right leadership it will win; not only win but come out 
 of the contest victorious and with flying colors. 
 
 Today the formula reads: 
 
 Capital plus Labor Equals Uncontrolled Power. 
 
 If my plan is adopted the formula henceforth will read: 
 
 Labor plus Capital Equals Regulated Strength. 
 
 It is all very well for the economists to say that Capital 
 and Labor are dependent upon each other; that without 
 Capital, Labor cannot function. Less emphasis is placed by 
 them on the indisputable fact that without Labor, Capital 
 must corrode. All the capital in the world cannot make the 
 machinery of Industry move without Labor. But Labor, 
 
 265 
 
266 
 
 The New Capitalism 
 
 which is the machinery of Industry, can set itself in motion 
 by the simple expedient of providing its own capital. Cap¬ 
 ital is powerless to supply its own labor; but Labor can 
 supply its own capital. 
 
 According to the present arrangement all the capital is 
 controlled by one small, organized, coordinated group, while 
 the larger group—Labor—has not yet learned the lesson to 
 organize and coordinate itself. The small, organized, co¬ 
 ordinated group which controls capital, dictates to Labor, 
 while Labor, as long as it is unorganized or only partly 
 organized, and uncoordinated, does not control its own 
 strength, therefore cannot effectually cope with Capital— 
 therefore cannot protect itself. The strongest weapon in 
 the hands of Capital is the helplessness of Labor as a force. 
 Capital is powerful only as long as it can control capital 
 and the forces of labor. Deprived of these advantages, 
 Capital becomes helpless—as helpless as Labor is today. 
 Labor is weak so long as it allows a small group of Capital¬ 
 ists to command its forces and to use its strength. If Labor 
 will venture to employ a little of its own capital it will be 
 not only strong and mighty, but invulnerable, invincible, 
 dominant. Hitherto Labor has been beholden to Capital; 
 I propose that henceforth Capital shall be beholden to 
 Labor. 
 
 I could go on writing in this fashion by the hour, but to 
 do so would only try the patience of the readers and delay 
 action. Action is more important than words at this crit¬ 
 ical juncture. Let me, therefore, return to my theme. 
 Organized Labor, according to my plan, within a year’s 
 time will have a fund of $300,000,000; within two years 
 $600,000,000; and at the end of three years $900,000,000 at 
 its disposal. What is to be done with it? To what use is 
 it to be put ? I ’ll answer without any waste of words : To 
 wrest control of the industries, one by one, from the Cap¬ 
 italistic Entrepreneurs; to break their tyrannical power; 
 to crush the despotism of the Capitalistic-Mammonistic 
 Entrepreneur System. 
 
“There’s a Way” 
 
 267 
 
 To Those Who Cry “Impossible!” 
 
 1 ‘ Impossible!’ ’ you will say. And I answer that it is not 
 impossible. 
 
 Let us assume the existence of our Basic Capital Fund. 
 Let us say that the hour for action has arrived. Let us say 
 that in a given industry, which we will call X, there are ten 
 plants—each employing one thousand workers—a total of 
 ten thousand working in the industry. We will open up 
 negotiations for one of the plants. We will, of course, 
 ascertain whether the owners of any of the plants in the 
 industry X are willing to enter into negotiations with us 
 for the purchase of their plant. If they are, the officials of 
 the New Order will ask for a complete and truthful state¬ 
 ment of assets, liabilities, etc., and all data essential to 
 ascertain the correct status of their business. We will ask 
 them what they consider a fair valuation of their plant and 
 business; the amount for which they will sell. Actual value 
 alone will be considered by us. A pric£ based upon an 
 inflated valuation will not be entertained for a moment. If 
 a plant and business is actually worth one million dollars, 
 but capitalized for five million, we will offer to take it over 
 at the actual, but not at the inflated, valuation. Over- 
 capitalization will not be recognized by us. We repudiate 
 “earning power” as a basis for determining value. That 
 is a point upon which there can be no compromise. Under 
 no circumstances whatever will we ever offer, or consent to 
 take over, a plant at more than a reasonable value. We will 
 be fair in our estimate of value; we will make an offer that 
 can even be called liberal; we do not propose to be nig¬ 
 gardly or to take advantage of anyone; but we will con¬ 
 sistently refuse to pay a price in excess of a fair and 
 reasonable value. 
 
 If the owners of the plant will accept our fair offer we 
 will take over the plant and business on the following 
 terms: we will pay a part of the price agreed upon in cash, 
 the balance, (for which bonds will be issued) to be paid in 
 yearly instalments, with interest at say five percent. Under 
 
268 
 
 The New Capitalism 
 
 certain conditions we may find it preferable to pay the full 
 amount involved in cash. We will, furthermore, offer to 
 retain the present managers, clerical and sales force, etc., 
 for it will be our plan to proceed with as little disturbance 
 of the established routine as possible. All this, of course, 
 on the assumption that the business is in a satisfactory con¬ 
 dition at the time of negotiations. 
 
 If, however, we cannot come to an understanding within 
 a reasonable time, or if our fair offer is declined, that ends 
 negotiations for this particular plant for all time. Let me 
 emphasize that the New Order intends to negotiate only 
 once for a plant. Our fair offer having been rejected, we 
 will immediately proceed to erect a plant of our own, equip 
 it with machinery, etc., organize the trained forces neces¬ 
 sary for the conduct of the business, thoroughly systematize 
 the plant, etc., and when we are ready to operate we will 
 call for one thousand workers, taking them either all from 
 one plant (probably the one with which we have had recent 
 negotiations) or else a hundred from each of the ten plants; 
 or two hundred from each of five plants—whichever way 
 may be deemed best under existing circumstances. 
 
 No general, inflexible rule can be laid down to apply to 
 all cases. Each set of conditions must dictate the policy to 
 be followed in each individual case. There may be occa¬ 
 sions, even, when it may be advisable or desirable not to 
 make overtures for the acquisition of an existing plant. It 
 may be altogether preferable to simply go ahead and erect 
 and equip a plant, and then either to withdraw the required 
 number of workers from a single plant, or, by a system of 
 distributive requisition, draw a certain quota from each 
 of the plants constituting the industry. 
 
 A One-Tenth Control 
 
 In either event, whether we purchase a plant actually 
 running or put up a plant of our own, the New Order will 
 have complete control of one-tenth of a given industry. 
 We will be in competition with the Capitalistic group and 
 System. This one-tenth control is the opening wedge! 
 
“There’s a Way” 
 
 269 
 
 Whether we will go deeper into an industry or enterprise 
 will depend entirely upon the Capitalistic Entrepreneurs. 
 If they are disposed to be decent and to meet our compe¬ 
 tition fairly, we will rest content with the one-tenth control; 
 if they become ugly and evince a disposition to fight us 
 unfairly, or to crush us, we shall then find it necessary to 
 enter more aggressively into whatever industry, or indus¬ 
 tries, we may have seen fit to engage, and extend our con¬ 
 trol, in due time. For the present we do not intend, nor 
 will it be necessary, to take over an entire industry in order 
 to carry out the immediate purposes of our plan. 
 
 Once we actually engage in an industry, a scientific study 
 of everything that enters into it will be made; particularly 
 as regards wages and cost of production. I hold that it is 
 possible to appreciably bring down costs, not by the Cap¬ 
 italistic method of cutting down wages, but simply by elim¬ 
 inating or reducing a number of the items which now 
 appear as “fixed charges,” “overhead expense,” etc. We 
 will have a decided advantage over our competitors with 
 regard to some of these items, w r hich now enter into cost, 
 for the reason that in every instance we will begin business 
 with a clean slate and no handicaps. Our plant will be 
 capitalized at its actual, not at an inflated and fictitious 
 valuation. And because we will not be overcapitalized we 
 shall have no dividends to earn or pay on watered stock— 
 on Capital that does not exist. Ample working capital will 
 be provided by ourselves , therefore we will have no interest 
 to pay to any Capitalistic banks. These are only a few of 
 the more obvious advantages, and I mention them merely 
 to indicate the possibilities of the New Capitalism under 
 the regime of the New Order. 
 
 Verb urn Sapientibus Satis 
 
 The Old Order—the present Capitalistic Entrepreneur 
 System—quite naturally will not welcome our entrance into 
 the sundry fields of industry, now entirely controlled by 
 them, with shouts of delight, but rather with a chorus cry 
 of rage. Indeed it is a dead certainty that every obstacle 
 
270 
 
 The New Capitalism 
 
 will be put into our way in an effort to make the carrying 
 out of our plan impossible, or at least difficult. But we 
 expect that, and will be prepared to counter any attack and 
 meet any emergency. 
 
 Incidentally, let me say that if we do not succeed in pur¬ 
 chasing a plant already running, and will be put to the 
 necessity of building a new plant, it is easy to see that there 
 will be an excess of plants—one that is vacant and unpro¬ 
 ductive, therefore profitless to the owners—a dead invest¬ 
 ment on the hands of the Capitalistic group. Does the 
 Capitalistic System relish the prospect? Can the Capital¬ 
 istic Entrepreneurs read between the lines? 
 
 The Basic Principle—Plus 
 
 This briefly states the basic principle of my plan with 
 regard to the industries, and in which organized wage 
 earners are particularly interested; while at the same time 
 showing possibilities of its development and application to 
 other than industrial lines; besides giving a gentle hint to 
 the Capitalistic Entrepreneurs who have deluded them¬ 
 selves into the belief that they are invulnerable, and that 
 their dominant position is impregnable. 
 
 To clearly state the principle and show the possibilities 
 of my plan, and incidentally to sound a note of warning to 
 our economic overlords is all I propose to do for the present. 
 
 Not Revealing All 
 
 I have no intention of revealing my whole plan at this 
 time, nor how all its details will be carried out. That would 
 be the height of folly, for the enemy would learn precisely 
 what to expect and would, beyond a doubt, attempt to pre¬ 
 pare to meet every emergency. I prefer to keep him guess¬ 
 ing, and in the dark. Therefore I am unfolding only as 
 much as is good for him and safe for us. I am willing to 
 play his game of cards, but I will not show him the cards I 
 hold in my hand. 
 
 A general plans his campaign with care and caution, and 
 decides on his line of action with boldness and courage, but 
 
“There’s a Way” 
 
 271 
 
 he does not publish his intentions where the enemy may 
 read them and so prepare against them. I will not say 
 precisely just how we will proceed. I will not say just how, 
 and when, and where we will strike. I will not reveal, at 
 this time, what industries we will negotiate for, or enter 
 first. Suffice it to make clear that we will go forward, and 
 that we will strike when we are quite ready, often in most 
 unexpected places—and proceed in a manner that cannot 
 be foreseen nor prepared against. My whole plan of action 
 is decided upon; and all will, in due time, be unfolded to 
 those who have a right to hear and who will be entrusted 
 with the carrying out of every detail of my plan. 
 
 Besides, these are things that will concern us only after 
 we are organized and have created our Basic Capital Fund. 
 Consequently I shall confine myself chiefly to a discussion 
 of whatever has to do with the essential features of my plan. 
 
 The Supreme Board of Trustees 
 
 I have already stated that the New Order is to be a 
 nation wide organization. Needless to say, it will be builded 
 around a Central organization, the Supreme officials of 
 which will have plenary power; they will be the dominant 
 and directing heads and constitute a national Trusteeship 
 for the members of the New Order. And since anyone— 
 whether an industrial worker or engaged in any other occu¬ 
 pation—can become a member of the New Order, I have in 
 mind that the national officers shall be composed of say 
 twelve men—six chosen from and representing organized 
 Labor, and six chosen from and representing that portion 
 of the non-investor public engaged in other pursuits. These 
 twelve men are the Supreme Board of Trustees. The voting 
 power, the directing power, in brief plenary power, rests 
 entirely in their hands. The selection of these twelve men 
 is of the utmost importance. They must be men of more 
 than ordinary intelligence and ability; sincere, unselfish, 
 just, of tested integrity, proved rectitude and unwavering 
 fidelity; men of principle, character and conscience—the 
 soul of honor; men of unquestioned honesty, and, above all , 
 
272 
 
 The New Capitalism 
 
 incorruptible; in brief, men who will do the right, and who 
 are willing to die for what they believe to be the right. 
 
 I have been told that it w T ill not be easy to find twelve 
 such men, but I am confident that they can be found. 
 Upon these twelve men the success of the New Capitalism 
 depends. You may organize, five million, ten million, 
 twenty million men and women; you may raise three hun¬ 
 dred million, or three billion, or thirty billion of capital, but 
 unless the twelve men who are to be ‘ 1 the head and front ’’ 
 of the New Order—and into whose hands the welfare of 
 eighty million men, women and children is to be entrusted, 
 can be found, nothing can be accomplished. Assuming that 
 these twelve men can be found and are willing to serve the 
 people for nothing more than a reasonable salary—a recom¬ 
 pense hardly proportionate to the service they will be ex¬ 
 pected to render to the public—an organization of unbreak¬ 
 able strength will have been launched. 
 
 Need I stress here that the utmost care will be exercised 
 in so organizing that at no time can control be taken away 
 from the New Order? My plan guards against every 
 eventuality; indeed has taken every possible contingency, 
 every exigency that may arise, into consideration. Every 
 precaution will be taken. We’ll take no chances of any 
 kind. Our stipulations will be clear and clean cut; our con¬ 
 tracts iron bound. This one lesson w r e have learned from 
 the Capitalistic Entrepreneurs, and we will use it for the 
 benefit of all the people. Plenary Power, supreme author¬ 
 ity, absolute control, and complete stewardship is vested in 
 the twelve Supreme officers of the New Order—the Supreme 
 Board of Trustees of our Economic Commonwealth. 
 
 A Move in the Right Direction 
 
 While we may depart from the corporation organization 
 methods in vogue today, nevertheless in describing what we 
 intend to do or how we intend to proceed, I shall use the 
 terms that are current. Consequently I’ll put it this way. 
 Any industry or enterprise into which we may enter, will 
 be capitalized at actual value fairly determined. A safe 
 
‘‘There’s a Way” 
 
 273 
 
 quota of the stock will be common stock. This will be placed 
 in trust in the hands of the twelve national Supreme officers, 
 constituting the Supreme Board of Trustees. The balance 
 of our stock issue will be preferred stock, divided into two 
 equal parts. One-half of this preferred stock will be offered 
 to those workers within the industry concerned, and to the 
 workers (wage earners) in whatever industries they may be 
 engaged; the other half will be offered to the general public 
 —that is to anyone not engaged in the industries—in brief 
 to whoever cares to invest. None will be excluded; and 
 there will be no discrimination. 
 
 But since I am assuming that the New Order, for the first 
 three years, will be composed probably wholly of organized 
 wage earners, let me return to a consideration of their exact 
 status under the New Capitalism. You will recall that each 
 is to pay into the Treasury of the New Order, five dollars 
 a month, or sixty dollars a year, for a period of three 
 years. This amount, be it clearly understood, is not to be 
 a contribution or donation. Ten dollars a year will be set 
 aside as membership fee, to be used as I shall presently 
 explain; and fifty dollars will be considered as an invest¬ 
 ment and treated as such. For every fifty dollars a Cer¬ 
 tificate of Deposit will be issued until such time that we 
 actually enter into an industry, when it will be exchanged 
 for a stock certificate. From that moment each will become 
 a preferred stockholder, or rather stockowner, in whatever 
 plant or plants we may take over or erect. Thus the virtual 
 ownership of the plants of a given industry will be vested 
 in the workers themselves. The control of the plant or 
 plants in whatever industries we may enter, will, of course, 
 be held in trust by the Supreme Board of Trustees. 
 
 When Wage Earners Become Investors 
 
 Thus the wage earner automatically becomes an investor. 
 Consequently from the time we go into active operation the 
 workers holding the preferred stock in a given industry will 
 draw, in addition to their wages, dividends of a minimum 
 of six percent (which will be increased when and as con- 
 
274 
 
 The New Capitalism 
 
 ditions warrant). Workers in a given industry can also 
 obtain stock in any other industry they may desire. More¬ 
 over, they are not limited as to any amount. Any member 
 desiring to invest larger amounts has the privilege to do so. 
 
 Needless to say, since there are five million members rep¬ 
 resenting, perhaps, several hundred different trades, or 
 engaged in different crafts, not all of which will be affected 
 during the first few years of our existence, provision will 
 be made so that all may have an opportunity to participate 
 in one or the other enterprise in which we might be inter¬ 
 ested, for, let it be remembered, we will not concern our¬ 
 selves exclusively with industrial enterprises; we will strike 
 out into sundry directions in our endeavor to break the 
 despotic tyranny of the Capitalistic-Mammonistic System, 
 and gain our economic independence. 
 
 The Membership Fee 
 
 The Membership Pee, as I have stated, is to be ten dol¬ 
 lars. I have lived for years with my subject; I have care¬ 
 fully studied my plan from every possible angle; I know its 
 every possibility, its every demand; its every requisite for 
 success. I have made a complete list of the things that must 
 be done, and a tentative estimate of cost, and can say that 
 the fifty million a year I am setting aside will be ample for 
 all essential and imperative purposes. 
 
 First of all, it will be necessary to build and maintain an 
 organization throughout the nation. That is important, 
 and whatever the cost may be there can be no slighting of 
 a single detail. The organization of the New Order will call 
 for the best quality of “brains”—and a goodly quantity 
 of it. If any one imagines that I am proposing a kinder¬ 
 garten association let him disabuse his mind quickly. What 
 we intend to do will be no child’s play. We shall have to 
 deal with a dangerous, troublesome, resourceful and tricky 
 adversary, a combination of men who have been in supreme 
 and unchallenged control for decades of years, and who 
 naturally may be expected to put up a desperate fight, nor 
 scruple about the weapons with which they mean to combat 
 
“There’s a Way” 
 
 275 
 
 us. None realizes as I do the tremendous power of these 
 unscrupulous men. I am not deluding myself for an 
 instant. But more of that anon. 
 
 In the second place, my plan includes the establish¬ 
 ment of Colleges and Institutes, in which there will be a 
 number of important departments: Technical, scientific 
 and research; legal; legislative; statistical, etc. Political 
 Economy, Accounting and Cost Finding Systems, Banks, 
 Finance, Exchange, and Commerce, will be subjected to a 
 thorough and complete analysis. We will get at the bottom 
 of the Wage Question, Taxes, Tariffs, etc. In brief the false 
 principles around which our economic life has been twisted, 
 will be subjected to expert investigation and analysis in 
 an endeavor to unearth the Facts and discover the Truth. 
 
 But the most important and most necessary thing of all 
 is the building up and maintenance of a powerful and influ¬ 
 ential national press. This includes the issuing and circu¬ 
 lation of the organization’s publications and whatever other 
 literature may be deemed necessary to bring and keep the 
 New Order, its purposes and work, its findings and achieve¬ 
 ments, conspicuously before the public. Without a great 
 national press and “pitiless publicity” service, the New 
 Order would surely fail. With this important institution 
 provided for we are prepared to meet any contingency that 
 might arise, or cope with any conditions that may be created 
 by those who do not want to see us succeed. 
 
 The Capitalistic Cry of Horror 
 
 The Capitalistic Entrepreneur group may be depended 
 upon to raise a cry of horror and indignation at so great a 
 “waste” of the “poor wage earners’ ” money. That is a 
 favorite trick of theirs. Listen, for example, to this howl 
 from the Wall Street Journal, quoted in the Chicago Jour¬ 
 nal of Commerce, (November 11, 1920) : 
 
 “No free country can afford to tolerate an irresponsible 
 central organization like the American Federation of Labor, 
 with the stupendous annual income of $48,000,000, in a 
 
276 The New Capitalism 
 
 position where it can defy the common law as applied to 
 conspiracy. ’ 7 
 
 If no “free country” can afford to “tolerate” a “cen¬ 
 tral organization ’ ’ that has ‘ ‘ a stupendous annual income ’ ’ 
 ($48,000,000)—( provided out of its own wages ) let me say 
 to all friends, supporters, defenders and beneficiaries of the 
 Capitalistic Entrepreneur System that an enslaved people 
 intends not only to create a “central organization” but to 
 provide, out of its own wages (and savings), many times 
 the “stupendous” sum complained of by the Wall Street 
 Journal —for the specific purpose of combating those who 
 for years have defied not only the common law but the laws 
 of simple justice, ordinary honesty, and common decency; 
 and who are today engaged in a conspiracy to crush Labor 
 and reduce the populace to a condition of hopeless servitude 
 and permanent poverty. And they will pay whatever price, 
 figured in sacrifice, and dollars and cents, may he necessary 
 to curb, or if necessary crush, the cruel, inhuman and mon¬ 
 strous Capitalistic-Mammonistic Entrepreneur System. 
 
 The point on which the Capitalistic group will probably 
 concentrate its attacks, is the salaries that it will be neces¬ 
 sary to pay to those who will serve the New Order in one 
 cayjacity or another. When the Grain Growers of the 
 United States, in order to break the grip of the Capitalistic- 
 Mammonistic group upon their throat, recently formed 
 a national organization, sure enough, a cry was raised that 
 they were paying their officers big salaries. So vicious was 
 the propaganda set in motion by the interests anxious to 
 break the new organization, that the United States Grain 
 Growers, Inc., found it necessary to make a public defensive 
 statement. I quote from the Commercial Edition of the 
 Chicago Herald Examiner, (June 27, 1921) : 
 
 “Enemies of the movement,” the statement asserts, “are 
 attempting to discredit it in the eyes of the farmers by mag¬ 
 nifying the importance of the fact that at the first meeting 
 of the board of directors, salaries for officers were fixed as 
 follows: President, $16,000; Secretary, $12,000; Treas¬ 
 urer, $15,000, and General Counsel, $15,000.” 
 
“There’s a Way” 
 
 277 
 
 Talk about big salaries! According to the 1918 Federal 
 Income Tax Report the officials in 317,579 establishments in 
 that year paid themselves as ‘ ‘ compensation, ’ ’ the enor¬ 
 mous sum of $2,225,543,259. In other words each of the 
 sixteen million wage earner or non-investor families in 
 1918, contributed an average of $139, merely to pay the 
 salaries of the 317,579 corporation officials. The fifty mil¬ 
 lion dollars we propose to set aside, out of our wages, be it 
 remembered, for all purposes, is less than three percent of 
 the amount with which the corporation officials reward 
 their services to themselves—and which amount is charged 
 up to the public as “cost of production.” 
 
 The Adequacy of Our Capital Fund 
 
 There is one point on which I desire to give a little light 
 in this chapter. There will be those whose mentality, accus¬ 
 tomed to move within circumscribed limits, cannot visualize 
 what lies beyond their radius of immediate perception. To 
 these a Basic Capital Fund aggregating only three-fourths 
 of a billion will seem altogether inadequate for our economic 
 regeneration. They forget that one of the coordinate pur¬ 
 poses of my plan is to bring into existence a chain of banks 
 or financial centers strategically placed, all under our im¬ 
 mediate control. They forget that business is not done 
 exclusively with cash capital; credit plays a prominent part. 
 To what extent credit is employed may be best judged by 
 observing the financial practices of the Capitalistic System. 
 It is no secret that ninety-five percent of the country’s bus¬ 
 iness is done on the credit basis, that is, for every one dollar 
 of actual cash capital, nineteen dollars of credit are im¬ 
 pressed into service, that is, extended by those who control 
 the nation’s finances through the medium of sundry inter¬ 
 related banking and money institutions—to those in the 
 industrial and other enterprises—by the Captains of 
 Finance to the Captains of Industry, by the Capitalists 
 to the Entrepreneurs—in brief by themselves, to themselves 
 —and for their own exclusive benefit and profit. 
 
278 
 
 The New Capitalism 
 
 If the New Capitalism were to adopt precisely the same 
 tactics that the Capitalistic Entrepreneur System employs, 
 and set in motion the identical machinery, our first year’s 
 Basic Capital Fund of $300,000,000 would be a basis for a 
 volume of credit nineteen times greater—or a total of 
 $5,700,000,000; and the larger Basic Capital Fund of 
 $900,000,000, accumulated during a period of three years, 
 would represent credit possibilities aggregating more than 
 17 billion dollars. 
 
 In saying all this I want to be understood as merely 
 emphasizing the credit utilization of Capital as practiced 
 under the present control of the Capitalistic Entrepreneur 
 System. That there are dangers a-plenty in such a condi¬ 
 tion must be apparent to all those who have more than an 
 elementary understanding of financial practices. The dan¬ 
 ger of collapse is ever present, and every possible precau¬ 
 tion must be taken. I speak of these things at this time and 
 in this place merely to show what the present Capitalistic 
 System has discovered to be the safe, not to say legitimate, 
 limit of possibilities 1 —possibilities which I should scruple 
 to exploit, as well as hesitate to exhaust, preferring always 
 to keep rather within the limits of a sounded safety than to 
 venture into the uncharted seas of possibilities; for, as I 
 have pointed out in another chapter, one of the causes of 
 high prices is directly traceable to the almost limitless 
 employment of credit. The greater the employment of 
 credit in the conduct of business the greater the load of 
 interest charges upon the people, and, therefore, we will 
 be careful not to go beyond the reasonable, requisite and 
 always safe limits in this important matter. 
 
 When Finance is King 
 
 I will merely hint at present that in the science of finance 
 there is less of science than of sorcery. The-miracles of 
 
 i Writing on the Foreign Trade Financing Corporation which was 
 organized with $100,000,000, C. B. Evans, in the Chicago Journal of 
 Commerce . January 17, 1921, said: “In the development of the 
 prospectus the same capitalization of $100,000,000 with power to 
 issue debentures up to $1,000,000,000, as first proposed, is adhered 
 to.” Ergo, nine dollars of credit inflation for every dollar of capital. 
 
“There’s a Waf ’ 
 
 279 
 
 banking can be explained by chicanery rather than by 
 supernatural powers. I am purposely omitting a chapter 
 dealing with ‘‘Banks and Their Practices /’ because in it 
 I would be compelled to say many things which had better 
 be left unsaid at this critical time. Nevertheless, a little 
 light from authentic sources will give verisimilitude to some 
 of my statements with regard to banking practices made 
 in this chapter. 
 
 Finance is King, and “The King Can Do No Wrong!” 
 It seems the dominant group of the banking and finan¬ 
 cial system holds itself above accountability and entirely 
 removed from the sphere of criticism. It resents having any 
 of its tactics questioned or any of its transactions investi¬ 
 gated. As an example, in the case of the New York Legis¬ 
 lative Committee, Samuel Untermyer, Counsel (January 5, 
 1921) proposed that the great financial institutions and 
 insurance companies be investigated. Mr. Untermyer 
 declared that “an insidious campaign through hired propa¬ 
 gandists was on, to defeat the contemplated work of the 
 Committee in investigating the loan market.” 
 
 Or read this excerpt from an editorial in Forbes Maga¬ 
 zine (July 9, 1921) : 
 
 “Incidentally, that was a sorry figure cut by Forrest F. 
 Dryden, president of the Prudential, when he refused to 
 explain certain financial transactions which very badly 
 needed explaining, that is, if Mr. Dryden hoped to retain 
 a reputation for honesty. The only deduction to be drawn 
 from Mr. Dryden’s willingness to be held in contempt 
 rather than lay bare the truth, and from Mr. Lindabury’s 
 excited efforts to butt in to muzzle his Prudential colleague, 
 is that the facts could not stand daylight. From what was 
 revealed by Mr. Untermyer, it would look as if the Pru¬ 
 dential insiders had favored their own pockets.” 
 
 Or this news-item from a daily paper: 
 
 ‘ ‘ The Pittsburgh Clearing House Association was accused 
 by Comptroller Williams of the Currency today (February 
 25) of having forbidden its member banks to furnish data 
 
280 
 
 The New Capitalism 
 
 asked for in the national bank call issued yesterday. ? ’ ( Her¬ 
 ald Examiner, February 26, 1921). 
 
 A Callous Conscience and Sensitive Nerves 
 
 At the American Bankers Association in October, 1920, 
 there was complete unanimity with regard to every reso¬ 
 lution. “The only resolution which caused any discussion 
 was that which referred to the United States Comptroller 
 of the Currency. That officer had one lone defender on the 
 floor of the Convention, and the resolution as presented 
 was adopted with only one dissenting vote.” 
 
 John Skelton Williams, Comptroller of the Currency, had 
 some time before charged that certain New York banks were 
 exacting unnecessarily high rates of interest. In passing 
 it may be stated that Comptroller Williams stated what are 
 known facts. Nevertheless the sensitive body known as the 
 American Bankers Association strongly disapproved of 
 “such utterances by a public official,” and in a resolution 
 declared that they were calculated ‘ ‘ to create an unfounded 
 hostility between bankers and the public, even to breed 
 violence of action and dangerous disturbance of the public 
 mind. ” 2 
 
 No! It is not at all remarkable that those most con¬ 
 cerned have invested their sundry financial transactions 
 with an air of mystery, and that they are loath to reveal 
 how they perform their tricks. But these are matters 
 into which we will go more deeply when the proper time 
 arrives. 3 
 
 Now or Never 
 
 There was never so propitious a time as the present to 
 institute a New Economic Order and inaugurate the New 
 Capitalism. We will have the great advantage of begin¬ 
 ning with a clean slate in every way. Besides the banking, 
 
 • • # 
 
 2 Journal of the American Bankers Association, November, 1920. 
 
 3The Pujo Commission in its report stated: “Most of the State 
 institutions and of the principal national banks in the reserve cities 
 of New York, Philadelphia, Boston and St. Louis, refuse or omitted 
 to make any return whatever and denied the power or jurisdiction 
 of the committee to inquire into their affairs.” 
 
“There’s a Way” 
 
 281 
 
 industrial and commercial interests, in brief the Capital¬ 
 istic Entrepreneurs, are staggering under a tremendous 
 load. We do not want to take advantage of their dilemma, 
 but it cannot be denied that the present situation is fraught 
 with manifold opportunities for us. This, of all times, is 
 the opportune moment for setting in motion the wheels of 
 the New Order—the machinery of the New Capitalism. 
 
 Now is the time to organize; now is the time to raise the 
 Basic Capital Fund; now is the time to plan and arrange 
 all preliminaries so as to be ready to strike when the favor¬ 
 able hour arrives. Now or never! Indeed we should have 
 acted twenty years ago, before the Capitalistic Entrepre¬ 
 neur System had so thoroughly entrenched itself. It would 
 have been much easier to put incipient Capitalistic Entre¬ 
 preneur power to rout in 1900, or say 1905, than it will be 
 today. It would have been easier for the masses of the 
 people to throw off the shackles with which they were being 
 bound; easier for them to crush the incubus; easier to drive 
 the beast out of its lair; easier to clip its claws; easier to 
 extract the fangs of the monster. 
 
 Twenty years ago it would have been possible to hinder 
 the ascendancy to dominance of the small group of men 
 who today are the nub of the Capitalistic-Mammonistic 
 Entrepreneur System. Today, I admit, it is more difficult 
 to challenge their supremacy; there are more obstacles to 
 overcome, more pitfalls to encounter. We must display 
 greater shrewdness and sagacity, and exercise more care. 
 But if it is more difficult today it is also more necessary. 
 It is our only escape from a mighty conspiracy and a con¬ 
 stantly growing menace. In sheer self defense the people 
 must unite their strength and combine their power to break 
 the chains of their economic bondage. If they fail to act 
 promptly, then let them prepare their ankles for the gyves 
 of slavery fastened unbreakably to prison walls. 
 
 A Clarion Call 
 
 This is a clarion call to action! A call to quit talking 
 and do something. Act now! or forever hold your peace. 
 
282 
 
 The New Capitalism 
 
 Break the bonds of economic slavery, while yet you have 
 the strength to do it. 
 
 “Act—act in the living presence, 
 
 Heart within and God o’erliead.” 
 
 Delay is dangerous, and every year lost will by that much 
 weaken the cause of the people and strengthen the Capi¬ 
 talistic Entrepreneur System. I will not say that five or 
 ten years hence it will be too late, but I will say that unless 
 resolute action is taken promptly, more drastic action, less 
 gentle, less polite methods, may be necessary later. Of one 
 thing you may be sure—that from this day forward tremen¬ 
 dous efforts will be made to drive a wedge between the pub¬ 
 lic and the laboring classes. No stone will be left unturned 
 in an endeavor to widen the rift between organized Labor 
 and the unorganized people. Here lies the only hope of 
 the thoroughly organized Capitalistic Entrepreneurs to per¬ 
 petuate and increase their despotic power and tyranny. 
 
 Thus endeth this chapter, in which I have tried merely 
 to give the readers a hurried summary of the essentials of 
 my plan, and a glimpse of the possibilities of the New Capi¬ 
 talism. 
 
CHAPTER XXI 
 
 Our Principles and Policies 
 
 I F I were given a commission to make this world over 
 according to my own ideals, or were asked to improve 
 it in conformity with my ideas, I would make few 
 changes. Certainly there would be no upheaval. Such 
 changes as I might be tempted to make would be entirely 
 in individuals, into whose hearts I would try to infuse a 
 degree of honesty, and into whose minds I would endeavor 
 to inject a decent regard for their followmen. But the 
 institutions I would accept as they are, leaving them intact, 
 when right, and improving them only when necessary. 
 
 The thing that most recommends my plan is the fact that 
 it does not require destruction of a single thing, nor call 
 for disturbance of any kind. We shall be able to proceed 
 without pulling the 11 established order” up by the roots. 
 Because we want to build a habitable house for ourselves 
 is no reason why we should raze our neighbor’s cabin, or 
 his castle, to the ground. There are economic theories 
 a-plenty, each with a certain following. There are so-called 
 remedial schemes without number, but each dependent upon 
 a radical making over of everything. Some sweepingly 
 condemn the whole economic structure, and contend that 
 nothing short of pulling down the pillars of the temple will 
 bring relief. These theories fail to take into consideration 
 that the fabric of society is the texture of civilization; and 
 that a remedy based on wanton destruction, is no remedy at 
 all, and brings with it only ruin and chaos. 
 
 The plan I propose is the only plan with specifications 
 that calls for action—not destructive, but constructive 
 action—upsetting nothing, destroying nothing. No violence; 
 no confiscation of property; no expropriation; no division 
 
 283 
 
284 
 
 The New Capitalism 
 
 of wealth; no overthrowing of the present system of govern¬ 
 ment; no enactment of new laws or abrogation of the old. 
 Indeed all laws now on the statute books are to our advan¬ 
 tage, for—note you well—the Capitalistic Entrepreneurs 
 have been alert, and have had entered on the statute books 
 of the nation, hundreds of laws that are favorable to them¬ 
 selves, all of which can now be employed to our advantage 
 —and will admirably suit our purposes. There are some 
 things we shall try to change by degrees, and some that 
 must be altered in due time, but we shall proceed in an 
 orderly manner and always within the sanctioned limits of 
 the law. What undoubted wrongs exist we shall certainly 
 strive to right, and we hope that we may have the coopera¬ 
 tion of all decent men and women within the nation, in our 
 endeavors. 
 
 A Definite Program 
 
 The New Order must have a definite program, based on 
 clearly defined fundamental principles. We are perfectly 
 willing that the whole world may know precisely what we 
 stand for, and what we will strive to accomplish. 
 
 First of all, we believe in a square deal for everybody. 
 We intend to deal fairly with and act decently toward 
 everybody—every set of interests, every group—whether 
 entrepreneurs, producers, manufacturers, wholesale dealers, 
 retail dealers; and even essential so-called middlemen. Bmt 
 above all we shall insist that a square deal and decent con¬ 
 sideration be given to the men and women included in none 
 of the above groups,—the farmers, the wage earners, the 
 salaried men and women, and those not on any regular 
 pay-roll—in brief, the non-investor group—sometimes 
 spoken of as the ultimate consumers—the public. The 
 Capitalistic Entrepreneur group has never believed in the 
 square deal; certainly it has never practised it. It has 
 never considered the welfare of the great masses of the 
 public—only its own selfish interests. 
 
 It is not our intention to materially alter the established 
 order of business. Nothing is more remote from our minds 
 
Our Principles and Policies 
 
 285 
 
 than to destroy what is good and acceptable even in the 
 Capitalistic Entrepreneur System. We will protect every 
 legitimate interest, but we will eliminate the false principles 
 of exploitation. We will defend the right to a fair profit, 
 but we will not endure the profiteer. We will support and 
 cooperate with every decent business man, be he producer, 
 manufacturer or merchant, or in whatever legitimate line 
 he may be engaged, as long as his methods are honest and 
 his aim is not merely selfish. We will ascertain whether 
 all of the so-called middlemen are essential to the proper 
 and economical conduct of business. Those necessary will 
 be retained; those unnecessary will be eliminated. 
 
 With Regard to Industries 
 
 It will be our aim for the present to enter into industries 
 only to whatever extent may be necessary to bring com¬ 
 modity prices from their present altitudinous height down 
 to a reasonable level. If the Capitalistic Entrepreneurs 
 show an earnest willingness to be decent—to readjust their 
 wicked System—abandon their unjust methods, lay aside 
 their crooked tactics and sinister practices, and give the 
 public a square deal, that will be satisfactory to us. But 
 we will not accept mere promises; we want performances. 
 No undue delays will be tolerated. Procrastination is not 
 only the thief of time; in this critical period it is also the 
 thief of the people’s money—their earnings and their sav¬ 
 ings. We will be fair and reasonable; but we will stand 
 for no tom-foolery nor for dilly-dallying. Mammonistic 
 Capitalism, to save itself, must, willy-nilly, become decent 
 —must reorganize itself on our basis. 
 
 We do not propose ever to act rashly, and never unfairly. 
 Our entrance into any industry will be prompted by the 
 existence of intolerable and unjustifiable conditions in said 
 industry. If the prices of a product are, according to our 
 way of computing, unreasonably high, that is to say, de¬ 
 monstrably excessive or exorbitant—extortionate upon the 
 consumer—we will call upon the manufacturer to reduce 
 them to decent limits. If he is unwilling, claiming that it 
 
286 
 
 The New Capitalism 
 
 can’t be done, or that he is producing at a loss, running on 
 a trivial margin of profit, etc., we shall gladly give him an 
 opportunity to prove his case. We will call for his cost 
 sheets—his trial balance—and study the history of his in¬ 
 dustry, examine his investments, inventories, and whatever 
 figures and data he may have to substantiate his claim. 
 You may rest assured that all the evidence will be critically 
 analyzed, carefully computed, and fairly judged. 
 
 If upon a thorough investigation it is disclosed that the 
 manufacturer is not at fault—that he is not making an 
 enormous profit on his actual investment—but that the 
 retailer is guilty of extortion, we will give the retailer a 
 fair opportunity to adopt reasonable practices. We will 
 proceed with him much as we shall proceed with the manu¬ 
 facturer. 
 
 The Profiteer 
 
 The producer, the manufacturer, the jobber, the whole¬ 
 saler, and the retailer—each is entitled to a profit. We 
 accept as an axiom that profit is the stimulus to business, 
 to progress and to growth. Without a fair profit in pros¬ 
 pect no man would care to go into business. We want it 
 understood that it is at no time our plan to destroy profits. 
 We are not opposed to profits. Indeed, we believe in a 
 decent profit—a profit large enough to provide against any 
 current or reasonable future contingencies. But we oppose 
 double profits, camouflaged profits and extortionate profits. 
 We are determined to curb and crush unconscionable profi¬ 
 teering—to wipe out of existence the tribe of ruthless profi¬ 
 teers. We will be fair in defining what constitutes a legiti¬ 
 mate and reasonable profit. No honest producer or manu¬ 
 facturer, no decent merchant, need have any misgivings as 
 to our designs, aims or intentions in this regard. But the 
 dishonest producer or manufacturer and the dishonest mer¬ 
 chant may, with reason, stand in fear of us. 
 
 It may be taken for granted that we will at no time inter¬ 
 fere in any business where fairness and decency, justice 
 and honesty, are in evidence. Certainly we will never pro- 
 
Our Principles and Policies 287 
 
 ceed recklessly, nor without good and sufficient reasons. 
 It is not our aim to harass established business at any 
 time. Our object and purpose is to create conditions that 
 are fair and decent to all concerned, to the producer, the 
 manufacturer, the retailer, the public, and, of course, to 
 the wage earner—and to see that they are permanently 
 maintained. 
 
 No arbitrary stand will ever be assumed by us. No ill- 
 considered attitude and no hasty action will be taken. We 
 will move with caution and prudence, yet with precision 
 and boldness. No step is to be taken without a complete 
 understanding of what we are doing, and a comprehensive 
 knowledge of what is to be done. In every case the officials 
 of the New Order must be sure of their ground. 
 
 No Miracles 
 
 Let it be clearly understood, the New Order does not 
 pretend that it will work miracles. It took centuries to 
 bring about the conditions that afflict us today; we cannot 
 expect to change them in a week. The evils that now 
 characterize the Capitalistic System crept in little by little; 
 our elimination process must proceed in like fashion. The 
 basic wrongs inherent in the Capitalistic Entrepreneur 
 System—and upon which it has builded its strength and 
 its power—can, must, and will be destroyed by us, but 
 gradually, and always within the sanctioned limits of the 
 law. 
 
 But there will be no sudden changes, and no violent up¬ 
 heavals. Living costs will not come down with a thump. 
 Wages will not be immediately increased; such improve¬ 
 ments as can be made with regard to prices and wages, will 
 be made, but cautiously and gradually. The Capitalistic 
 System has declared that wages cannot be increased, nor 
 prices lowered; we deny the Capitalistic claims, but we will 
 find out for ourselves whether there is, or has ever been, 
 any justification for them. Briefly, we do not propose to 
 effect any radical changes over night, nor to bring about a 
 perfect adjustment of all problems within twenty-four 
 
288 
 
 The New Capitalism 
 
 hours. We will not enter into a Marathon race before we 
 have learned to walk. Remember that the Capitalistic Sys¬ 
 tem arrived slowly and cautiously—step by step, gropingly, 
 and always with the certain knowledge that its feet were 
 planted on firm ground. We will do likewise. In this one 
 thing at least, we will imitate the Capitalistic Entrepreneur 
 group. 
 
 Stock Exchange 
 
 No! my plan proposes no immediate changes whatever 
 in the “existing order,” bad as that “order” is. We will 
 accept things pretty much as they are. Such changes, or 
 rather improvements, as may be deemed necessary or de¬ 
 sirable, will be made in due time and after careful analysis 
 and mature consideration. For the present, however, we 
 will disturb nothing; not even that which, because it brings 
 no economic benefit to the people, deserves to be destroyed. 
 For example: I have pointed out in a special chapter, that 
 the stock exchanges, while undoubtedly of great value to 
 a few hundred thousand, or a million, speculators, serve no 
 useful purpose as far as the general, non-speculating, non¬ 
 investor public is concerned. They are not necessary to the 
 bona fide small investor. But in spite of all this we shall 
 not aim to destroy the stock exchanges. No! let those 
 who desire to gamble continue their gambling operations, 
 but they must do it hereafter with their own money, not 
 with ours. Let the speculator and the Capitalistic Entre¬ 
 preneurs buy and sell their “securities” to each other if it 
 affords them any pleasure—and profit. But while they are 
 having their fun among themselves we will offer the genuine 
 investor—the man or woman who actually desires to safely 
 invest a certain amount of money, and be content with a 
 fair and legitimate profit,—an opportunity to invest in 
 actual properties, in actual securities. Our stocks, behind 
 which there is an actual but not an inflated value, will 
 always be worth one hundred cents on the dollar; they will 
 not be worth $100 today and $85 tomorrow. Our dividends 
 may fluctuate; the value of our stocks will not fluctuate. 
 
 t 
 
Our Principles and Policies 
 
 289 
 
 An Apology to the Small Investor 
 
 All through this book I have had but one regret—viz., 
 that I have been compelled to include in the Capitalistic 
 ‘ ‘ investor group ’ ’ a million or so small investors—men and 
 women who have invested small sums in good faith in some 
 of the Capitalistic enterprises, and by so doing became the • 
 prey of financial pirates, the innocent victims of bulls and 
 bears. The stocks they bought for a hundred dollars a 
 share, today have a market value of perhaps only fifty dol¬ 
 lars—are worth about fifty cents on the dollar in the 
 market. 
 
 Their dividends in many cases have been passed in late 
 years. But even though they have received dividends yearly, 
 do they realize that the value (purchasing power) of their 
 dividends during the past twenty years has been steadily 
 decreasing—that, for example, a dollar of dividends in 
 1920 had a value (purchasing power) of only thirty-eight 
 cents compared to the dollar in 1913. In other words, if a 
 small investor received $60 of dividends on a $1,000 in¬ 
 vestment in 1913, and $60 in 1920, the amount he received 
 in 1920 had a purchasing power of only $22.80 as compared 
 with the purchasing power in 1913. 
 
 A few corporations have come to realize that this depre¬ 
 ciated purchasing power of dividends is a weak link in the 
 Capitalistic chain, and are trying to overcome it by raising 
 their dividend rates from six to eight and nine percent. 
 But raising the dividend rate will not restore the lost pur¬ 
 chasing power. To bring the purchasing power of divi¬ 
 dends up to the full 1913 strength it would be necessary to 
 raise the dividend rate from six percent to about seventeen 
 percent. What corporation intends to do that? I’ll an¬ 
 swer ! Not one! 
 
 But those that have or will raise their rate from six to 
 eight' or nine percent, propose to derive the additional 
 amount necessary for the payment of the greater dividend 
 rate, either by maintaining or raising still higher the 
 prices of their particular commodities. In other words— 
 
290 
 
 The Sew Capitalism 
 
 the stockholders themselves will be made to help provide 
 the additional revenue that would enable the corporations 
 in which they are stockholders, to pay them a higher divi¬ 
 dend rate. 
 
 It is only proper that the “widows and orphans/’ as 
 well as the thousands of employees who are being per¬ 
 suaded, inveigled or coerced into becoming “investors” in 
 the stocks of the corporations employing them, should un¬ 
 derstand the Capitalistic logic with regard to the small 
 investor, and the Capitalistic arithmetic with regard to 
 their investments. 
 
 The Small Investor Under the New Capitalism 
 
 To the bona fide small investors in the so-called securities 
 of the sundry transportation, industrial, public utilities 
 corporations, etc., I want briefly to emphasize the distinc¬ 
 tive difference of their investment under the Capitalistic 
 inflation System—and under the system I propose. 
 
 1: Under my plan their investment will always be 
 worth one hundred cents on the dollar. Its value will be 
 permanent, not change from day to day, or hour to hour. 
 
 2: They will receive, let us say, a minimum of six per¬ 
 cent on the par or permanent value of their investment 
 (and if conditions permit, more than six percent). No 
 bona fide small investor in the Capitalistic corporations has 
 ever received more than six percent—and in the aggregate 
 they have received less. The Pennsylvania Railroad, for 
 example, recently reduced its dividend rate from six to four 
 percent. Many of the big corporations passed their divi¬ 
 dends for 1920 and 1921 entirely. 
 
 3 : And this is a most important point! Under my plan 
 whatever amount of dividends an investor may receive will 
 have a 100 percent purchasing power; whereas under the 
 overcapitalization System the dividends he is receiving have 
 a purchasing power of, let us say, 50 percent. Conse¬ 
 quently, six percent on an investment in our corporations, 
 will have as great a purchasing power as a twelve percent 
 return from an overcapitalized corporation. 
 
Our Principles and Policies 
 
 291 
 
 4: Any dividends which an investor receives and saves, 
 will at all times have a 100 percent purchasing power. 
 This is not the case at present. The dividends an investor 
 saved twenty years ago had a 100 percent purchasing power, 
 but today he can buy less than one-half the amount, volume, 
 or quantity he might have been able to buy twenty years 
 ago. 
 
 But these are points which we propose to discuss more in 
 detail once the New Order is in existence. 
 
 The Banks 
 
 The Sampsonian strength of the Capitalistic Entrepre¬ 
 neur group, the foundation stone upon which the Capital¬ 
 istic Entrepreneur System is builded, rests entirely on its 
 money monopoly—its absolute and complete control of the 
 nation’s cash resources and credit facilities. This has been 
 stated so often, and proved so conclusively, and is so ob¬ 
 vious, that I consider it almost a waste of time to repeat it. 
 
 What does the New Order propose to do as regards the 
 Capitalistic banks? Break them, destroy them? No! We 
 will let them alone; we will let them go on with their mad 
 dance. We will let them have their banks—and their Sys¬ 
 tem, to do with as they please. We’ll not touch a hair of 
 their head. But we will take precious good care that they 
 shall not, hereafter, touch a hair of our head. We will start 
 banks of our own; not a whole string of them at once, but 
 gradually, one after the other—and our funds and credit 
 facilities will be used for our own benefit, and our services 
 placed at the disposal of those who want to convert their 
 savings into real investments. In brief the depositors will 
 own the banks, and will derive whatever profit is to be de¬ 
 rived, from the use of their savings. We will not loan one 
 dollar of our money to any speculator or for any specula¬ 
 tive purpose. We’ll help and cooperate with the decent 
 business man—the legitimate business man ,the farmer, the 
 home builder. The promoter, the gambler, the profiteer, 
 will receive no help from us. 
 
292 
 
 The New Capitalism 
 
 Boards of Trade 
 
 The Board of Trade is the twin brother of the Stock Ex¬ 
 change. The latter facilitates gambling in securities, the 
 former in farm products and food supplies. The same 
 group of traders can be found in both pits. Speculative 
 buying and selling, and marginal transactions, can be pre¬ 
 dicated of both institutions. 
 
 With regard to boards of trade, Senators Kenyon and 
 Capper have clearly shown that some of the crops of the 
 United States are sold over from seven to ten times in the 
 course of a year. For whose benefit? The farmers? No! 
 The public’s ? No! For the undoubted benefit of a few 
 thousand speculators. 
 
 “Years ago,” said Senator Capper, “the people of the 
 United States demanded the suspension of the infamous 
 Louisiana lottery. It is against the law to run a gambling 
 house anywhere within the United States. But today, un¬ 
 der the cloak of business respectability, we are permitting 
 the biggest gambling hell in the world to be operated in the 
 Chicago Board of Trade. The grain gamblers have made 
 the Exchange building in Chicago the world’s greatest 
 gambling house. By comparison, Europe’s suicide club at 
 Monte Carlo is as innocent and innocuous as a church 
 bazaar. ’ ’ 1 
 
 Gambling, marginal transactions, profit taking—these 
 are the sustaining props of boards of trade. Gambling is 
 an ancient sport, and will probably continue to the end of 
 time. Marginal transactions are of more modern origin, 
 and have as their basis the use of other people’s money. 
 We can refuse to allow our money to be used for specula¬ 
 tive and profit taking purposes. If we cannot stop gam¬ 
 bling, we may be able in course of time, to devise ways and 
 means by which the things gambled in can be diverted 
 from purely speculative institutions to legitimate markets; 
 —ways and means by the employment of which the profits 
 
 i From Senator Capper’s Speech at Smith Center, Kansas, October 
 13. 1920. 
 
Our Principles and Policies 
 
 293 
 
 will go to the actual producers rather than to speculative 
 gamblers; and even enable the public to participate in a 
 share of the profits through the medium of lower prices. 
 But all this is too big a subject—too tremendous a theme, 
 with too many ramifications to be discussed in a paragraph 
 or two. Suffice it to say, for the present, that stock ex¬ 
 changes and boards of trade will come under the studious 
 scrutiny of the New Order. 
 
 The Fair Purpose of My Plan 
 
 From all this it can be seen that I am not proposing 
 any radical changes or violent upheaval. Indeed, I’ll go 
 so far as to say that we do not want affiliated with us any¬ 
 one who advocates changing the political, social or economic 
 order through the medium of violence. Let it be understood 
 that I am not calling those who work for a wage to deeds 
 of vengeance. I am making no appeal to their cupidity. I 
 am but asking them to use their common sense to protect 
 themselves and their children from further exploitation. 
 
 I uphold the doctrine of property rights, but strenuously 
 oppose the concentration of all the property in the hands 
 of a few. I will at all times defend the principle of the 
 individual’s right to hold property; but at the same time I 
 shall labor to bring about a condition whereby the right 
 to have and to hold property will be enjoyed by a greater 
 number. The extension of the right to a considerably 
 greater number than at present, and the actual acquisition 
 of property by lawful means, as well as the enjoyment of 
 the legitimate benefits that accrue to the possessor,—that, 
 in brief, is the Alpha and Omega of the System of Eco¬ 
 nomics, I am proposing. 
 
 A Question and an Answer 
 
 Can the New Order succeed? I answer:—Yes—beyond 
 a doubt, for all the elements under which the Capitalistic 
 Entrepreneur System developed itself to tremendous pro¬ 
 portions will be in existence and employed by us to the 
 utmost. We will have the capital; we will control our own 
 
294 
 
 The New Capitalism 
 
 labor; and what is more to the point, we will have the good 
 will of the public at large for whose aggregate benefit, rather 
 than for the selfish advantage of any group, we will operate. 
 Service will be our slogan—Service at as low a cost as is 
 consistent with business prudence. Service at a price that 
 will not only not beggar the wage earners, but enrich them. 
 
 The Attitude of the “Big Interests” 
 
 I am going to pay the Capitalistic Entrepreneurs the 
 compliment of saying that they will, discover the possibili¬ 
 ties of the New Order under the New Capitalism long before 
 those most concerned; and since I am familiar with the 
 tactics of the “Big Interests’’ I know to what extreme 
 measures they will be tempted to resort to prevent the New 
 Order from organizing, and the New Capitalism from be¬ 
 coming a menace to them. In fact I have noted down all 
 the things they will be likely to do in their desperate at¬ 
 tempt to kill our child aborning. 
 
 When once my plan is understood, and the first step 
 toward organizing the non-investor group has been taken, 
 through the nucleus of organized Labor, you may rest 
 assured that a great contest of strength will ensue. The 
 powers that be will launch a nation-wide poison propa¬ 
 ganda, bring forth their strongest weapons, employ their 
 subtlest strategy, their ablest generalship, their most ruth¬ 
 less tactics, and seek to win in the contest with deadly 
 gases and liquid flames of fire. Through their banks they 
 will attempt to checkmate our every move, to strangle us 
 —to throttle us. But let them try. They will find us pre¬ 
 pared to counter their every stroke, to checkmate their 
 every move. 
 
 Not until we are molested will we show our teeth, and 
 even bite if it is necessary; not until we are attacked will 
 we strike back; not until we are threatened with violence 
 will we fight, and then to the death. We serve notice right 
 now that we will not offer the right cheek when our left is 
 smitten. We shall practice patience, but leave humility to 
 the saints. 
 
CHAPTER XXII 
 
 Who Is “The Public”? 
 
 B UT before organized Labor can attempt to inaugurate 
 a New Order, it will have to take an inventory of 
 itself. It behooves me, therefore, to emphasize the 
 two false bases upon which organized Labor has been build¬ 
 ing its organization to date. It is because organized Labor 
 did not discover that the bases were false that its super¬ 
 structure is toppling over. I mean Labor’s wrong attitude 
 toward the public, and its false concept as regards wages. 
 If what I shall write in this chapter, and the chapters deal¬ 
 ing with wages, will help to clarify views; if organized 
 Labor will grasp the full import of these two basic subjects; 
 if seeing the error of its way in the past it can persuade 
 itself henceforth to a clearer vision of its status and true 
 relationship to those not of its fold, much will have been 
 accomplished. A good beginning will have been made. 
 
 You may have noticed within recent years, in the daily 
 press, financial papers, trade journals, manufacturers’ offi¬ 
 cial organs, and commercial publications of all kinds, one 
 of the most effective slogans in the Capitalistic category— 
 viz., that nothing must be done, or even tolerated, that is 
 detrimental to society—to the community, or the public. 
 How tenderly solicitious these Capitalistic spokesmen have 
 suddenly become of society; how graciously considerate of 
 the community; and what wonderful champions of the 
 general public. The assumption is, of course, that the Capi¬ 
 talistic group has never in all its history done anything 
 that was not, ever and always, for the immediate welfare of 
 society, and for the best interests of the community, and 
 invariably for the good of the public. While the inference 
 and the open charge is that every attempt that Labor makes 
 to better its condition is a distinct slap in the face of the 
 
 295 
 
296 
 
 The New Capitalism 
 
 public—an offense against the community—an attack 
 against the very pillars of society. 
 
 Let me briefly examine this new slogan, and lay bare its 
 arrant knavery—its camouflaged hypocrisy. To the propo¬ 
 sition that neither organized Capital nor organized Labor 
 has a right to do aught that is detrimental to society, or 
 an injustice to the community, or an attack on the public, 
 I give heartiest assent. And then I assert that everything 
 that the Capitalistic group has done from its very inception 
 has been diametrically opposed to the best interests of so¬ 
 ciety—of the community and the general public. That this 
 is more than an assertion I hope at least some of the chap¬ 
 ters of this volume will partially show. But lest some eco¬ 
 nomic wiseacre, or offended Mammonist, take issue with me 
 on this score, I challenge him to disprove my claim that 
 the whole Capitalistic System, and all its operations, are 
 specifically for the benefit of a comparatively small group. 
 I challenge him to deny that the public actually pays the 
 dividends on the inflated valuation of the overcapitalized 
 corporations, and interest on all the inflated “values” of 
 productive properties. I challenge him to prove that the 
 public is directly benefited by the Stock Exchange transac¬ 
 tions. I promise him that I will be largely attentive while 
 he categorically enumerates the blessings showered upon 
 the public by selling the grain crops of the United States 
 over several times a year. I am willing to be silent while 
 he demonstrates, arithmetically or otherwise, just how the 
 general public is the beneficiary of the system of overcapi¬ 
 talization and inflation. 
 
 If any organized institution is to be criticised, or con¬ 
 demned, or destroyed, because it is injurious to the best 
 interests of society—harmful to the community—and brutal 
 to the general public—that institution is the Capitalistic 
 Entrepreneur System. 
 
 “The Party of the Third Part” 
 
 But there is another and a more insistent side to this 
 question, a brief discussion of which seems to me entirely 
 
Who Is “The Public”? 
 
 297 
 
 in order here. Who is the general public, which it pleased 
 Governor Allen of Kansas) et id genus, to dub “the Party 
 of the Third Part”? How is this “Party of the Third 
 Part” constituted? Who composes it? The country 
 is made up of twenty percent of investors, and eighty per¬ 
 cent of non-investors. Consequently the public is composed 
 of twenty percent of Capitalistic “investors” and eighty 
 percent of non-investors—of wage earners and salaried men 
 and women. If, then, any group of wage earners, or 
 salaried men and women in their role of workers, seek to 
 protect or defend themselves, or deem it necessary in order 
 to vindicate a fundamental principle, to resist, to strike, let 
 us say, and thereby cause temporary inconvenience or even 
 suffering to the public, they are inflicting inconvenience 
 and suffering principally upon themselves. I rather sus¬ 
 pect that the part of the public that protests is chiefly the 
 twenty percent of Capitalistic “investors”—beneficiaries 
 of the Capitalistic System, which in every instance is re¬ 
 sponsible for strikes and miscellaneous disturbances. Let 
 us have no further nonsense about the wrong that Labor, 
 in a struggle or death grapple, inflicts upon the public— 
 that is—principally on itself. 
 
 Strabismus 
 
 Now the surprising thing is that organized Labor, or 
 more correctly speaking some of its leaders and spokesmen, 
 do not seem to have realized this fact. They speak and act 
 as if there were indeed “a Party of the Third Part”—a 
 portion of the population that belongs neither to the inves¬ 
 tor nor to the non-investor group—that stands between 
 Capital and Labor—a sort of innocent bystander, and help¬ 
 less victim of the multitudinous quarrels and fights between 
 the Capitalistic group and the wage earner group. 
 
 In its preliminary report the Convention Committee on 
 Social Service declared: ‘ ‘ The problem of Labor and Capi¬ 
 tal is no longer one which concerns only, or even mainly, 
 these two essential parties to production. As never before 
 it is a community problem, a national problem, and an in- 
 
298 
 
 The New Capitalism 
 
 ternational problem—in a word, the problem of humanity. 
 
 Frank Morrison, Secretary of the American Federation 
 of Labor, in answer to a request for an opinion on the pre¬ 
 liminary report, seized upon this declaration, and in the 
 course of his analysis combated the theory that the commu¬ 
 nity—i. e. the public—is a party to and therefore con¬ 
 cerned in any dispute between laborers and Capitalists. He 
 maintains in substance, that the public has no interest in 
 the laborer—that its interest is confined to the commodities 
 laborers produce. This, however, he maintains, does not 
 make the public a party to industrial relations. 
 
 If the public took an interest in and concerned itself with 
 the economic welfare of the workers Mr. Morrison would 
 probably concede the public’s concern in Labor disputes. 
 “I believe,” said Mr. Morrison, “a fair statement of the 
 case is that the community’s interest in the worker is 
 founded upon its one desire for the worker’s commodities, 
 and not upon any belief in the right of the worker; its con¬ 
 cern is not with the wages paid to the workers, or the con¬ 
 ditions under which they work, but rather with the con¬ 
 tinuous operation of industry, so that its wants may be 
 supplied without interruption. After these wants have 
 been supplied it is a matter of no concern to the commu¬ 
 nity what becomes of the worker. ’ ’ 1 
 
 Mr. Morrison substantially argues that if the public mani¬ 
 fests no interest in the condition of those who labor, nor 
 evinces any concern whether the wages paid them are suf¬ 
 ficient to enable them to live in frugal comfort and decency, 
 then the public has no right to consider itself an injured 
 party when Labor finds it necessary, either in order to 
 secure better wages, or living or working conditions, to tem¬ 
 porarily cease its operations. 
 
 I have no desire to enter into a discussion of Mr. Mor¬ 
 rison’s views here summarized. While discerning a meas¬ 
 ure of plausibility in his logic I question the wisdom of his 
 stand or contentions. I do not blame him for viewing the 
 
 i The National Labor Digest, August, 1920. 
 
Who Is “The Public”? 
 
 299 
 
 question purely from the worker’s standpoint, particularly 
 since without the use of their most effective weapon—the 
 strike—(and strikes frequently mean a temporary incon¬ 
 venience to the 1 ‘ public ’ ’) the condition of those who labor 
 would be what it was fifty years ago; nay, worse, in that 
 no improvement whatever in their condition, working or 
 living, would have been made. 
 
 When Capital Goes on Strike 
 
 Mr. Morrison might easily have strenghtened his argu¬ 
 ment by asking: What interest does the public evince in 
 those who labor when Capital sees fit to strike (as was the 
 case for more than two years after the war and as a result 
 of which between four and five million men and women 
 were thrown out of work). Capital's most recent and pro¬ 
 longed strike was not only a temporary inconvenience but 
 a prolonged hardship, and an irreparable injury to the 
 four or five million families of men and women who were out 
 of work, or working only part time. Did the public pro¬ 
 test? Did the public take a single step to end the incon¬ 
 venience and hardships to which the four or five million 
 men and women and their families were subjected? Did 
 it make a single move to alleviate the suffering that Capi¬ 
 tal’s strike had imposed? Has it concerned itself with the 
 money losses of the four or five million; or is it particularly 
 disconcerted by the reflection that most, if not all, of them, 
 consumed their scant savings, while many were hurled into 
 debt? 
 
 Two Sides to the Question 
 
 Even those not ordinarily disposed to favor those who 
 work for a wage will have to admit that there are two sides 
 to the question, and that Mr. Morrison and others who have 
 upon occasion taken the stand that the public, which is not 
 vitally interested in those who labor, has no right to feel 
 aggrieved when those who labor find it necessary in order 
 to obtain a decent wage, or to improve their condition, occa¬ 
 sionally to inconvenience the community. In view of the 
 
300 
 
 The New Capitalism 
 
 obvious fact that the public gives scant consideration to 
 those who labor at any time, and no consideration at all 
 when wage earners are in trouble, it is not difficult to 
 understand the occasional tone of bitterness one discerns in 
 the writings and utterances of Labor leaders. One cannot 
 blame them when they ask at least inferentially :—‘ 1 What 
 has the public ever done for us ? What consideration does 
 the public give us; what interest in our welfare does the 
 public take; what gratitude does it show for the personal 
 sacrifice we have made and as a result of which this very 
 public is now enjoying a better standard of living than 
 Capital was willing to concede to it? If the general public 
 is better off than it ever was; if it has improved its general 
 condition, is it not largely owing to the fact that we fought 
 the public’s fight—incurring loss of wages and savings, and 
 even jeopardizing our freedom and our lives—when we in¬ 
 sisted on better wages and better working conditions, more 
 reasonable hours, etc., of all of which things the public is 
 and has been the beneficiary ? ’ ’ 
 
 Wdiking Into the Trap 
 
 To all of which argumentation any fair-minded person 
 can easily subscribe. Nevertheless, and in spite of all this, 
 I consider it unwise on the part of Labor leaders and 
 spokesmen to indulge in harsh utterances as regards the 
 public, particularly since it is the apparent design of the 
 Capitalistic group to spread the idea that organized Labor 
 is opposed to the public; that it considers its own interests 
 superior to the interests of the public;—in brief that what¬ 
 ever is to the interest of organized Labor is necessarily op¬ 
 posed to the public interest and detrimental to the public’s 
 welfare. 
 
 Readers will recall the Allen-Gompers debate, in the 
 course of which Governor Allen asked Mr. Gompers the 
 following question: 
 
 11 When a dispute between capital and labor brings on a 
 strike affecting the production or distribution of the neces¬ 
 saries of life, thus threatening the public peace and impair- 
 
Who Is “The Public”? 
 
 301 
 
 ing the public health, has the public any rights in such a 
 controversy, or is it a private war between capital and 
 labor? If you answer this question in the affirmative, Mr. 
 Gompers, how would you protect the rights of the public ? ’ ’ 
 
 The circular announcing the publication of Governor 
 Allen’s book, entitled “The Party of the Third Part,” com¬ 
 pares the question Governor Allen asked Mr. Gompers to 
 the question Lincoln addressed to Douglas in their famous 
 debate; and adds that no matter whichever way Mr. Gom¬ 
 pers might answer, it would ruin him . 2 
 
 I am not concerned with the Allen-Gompers debate or 
 controversy. I wish merely to emphasize the admitted de¬ 
 sign of Governor Allen to ruin Mr. Gompers, i. e., to dis¬ 
 credit organized Labor in the eyes of the public; and to 
 add that when the leaders and spokesmen of organized 
 Labor go on record with statements which, to say the least, 
 are ungracious, they are walking with both feet into a 
 cleverly concealed steel trap laid by organized Capital. 
 Or to vary the figure somewhat, they are furnishing the 
 powder for the Capitalistic guns. 
 
 The Change in Public Sentiment 
 
 1 doubt whether the public, in the mass, cherishes any 
 serious resentment against organized Labor on account of 
 an occasional inconvenience, or even temporary hardships, 
 resulting from a strike either for better wages or better 
 working conditions, for, be it remembered that the general 
 public is principally composed of men and women who 
 work for a wage or salary, although most of them are not 
 organized, and do not belong to any Labor union. In a 
 general way, then, I would say that the public \s sympathy 
 is with organized Labor, or at least has been up to within 
 recent years. If there has been any change in the public’s 
 sentiment or attitude it is not on account of any temporary 
 inconvenience resulting from an occasional cessation of 
 work on the part of organized Labor, but rather for an 
 
 2 According - to the same circular Mr. Gompers did not answer the 
 question, but later he issued a statement. 
 
302 
 
 The New Capitalism 
 
 entirely different set of reasons. The public—and I speak 
 more particularly of the millions of unorganized men and 
 women who, like those who are organized, work for a mere 
 living wage or salary—has observed for some years now 
 that certain organized Labor unions have used their organ¬ 
 ized strength and power selfishly, and ruthlessly, utterly 
 disregarding the rights or welfare of everyone else. 
 
 For example, in 1919 there was a strike of the Chicago 
 street railway motermen and conductors, and traffic was 
 tied up. After a few days the not unreasonable demands 
 for an increase in the wages of street railway employees 
 were granted. But this increase in the wages of railway 
 employees was made the excuse for a further increase in 
 fares. Formerly the car fare was five cents; now it is 
 eight and ten cents. This means that every man and woman 
 who works, and who uses the street cars, surface or elevated, 
 going to and coming from work, must now pay six or seven 
 cents a day more than formerly—or about twenty dollars a 
 year. 3 
 
 It is generally believed that the surface and elevated lines 
 gained more from this increase in fare than the railway 
 employees. 
 
 In like fashion the milk wagon drivers’ strike, conducted 
 about the same time and supposedly under similar auspices 
 and with the same results to the general public—viz., that 
 the average family was compelled to pay considerably more 
 for its milk, cream and other dairy products. It has been 
 computed that of the total amount of the increase only 
 about 45 percent went to the drivers and other employees, 
 and 55 percent to the operators. 
 
 These are only two instances, in a single city, of hundreds 
 that could be cited, to show how isolated groups of Labor 
 unions in all parts of the United States, have been instru- 
 
 3 In June, 1922, the fare on the Chicago surface lines was reduced 
 by order of the Court, to seven cents. The railway company promptly 
 announced that the seven cent fare would result in a reduction of 
 $9,000,000. On July 3, we read in the Chicago Daily News : "The 
 11,000 motormen and conductors on the Chicago Surface Lines will be 
 asked tonight to take a wage reduction of 25 percent, or thirty cents 
 an hour, from the present scale of eighty cents.” 
 
Who Is “The Public”? 
 
 303 
 
 mental in burdening the general public with a considerable 
 aggregate increase in their living expenses. The recent 
 revelations with regard to hundreds of engineered strikes, 
 generally instituted by so-called ‘ ‘ business agents ’ ’ of Labor 
 organizations for their own private benefit and gain, all 
 of which are to a certain extent responsible for considerable 
 increases in the rent item of families, to say nothing of ad¬ 
 ditional increases in the prices of commodities manufac¬ 
 tured or sold in buildings affected by such “hold up” 
 strikes, have accentuated the bitterness that the general 
 public is beginning to feel toward Labor, particularly 
 organized Labor. 
 
 The Press “Tells the World” 
 
 The daily press is not allowing any opportunity of giving 
 full publicity to every offense of this nature to escape. 
 Thus we read in the^hicago Daily News (July 16, 1921) : 
 
 “Assistant State’s Attorney E. Stanley Hodges an¬ 
 nounced that an investigation of alleged interference with 
 the milk supply, said to have been practised by milk wagon 
 drivers, would be started in the near future. 
 
 “ ‘I have summoned the officials of the Milk Wagon 
 Drivers’ union for questioning,’ said Mr. Hodges, ‘and 
 if the evidence bears out the charges made to the office 
 we will go before the grand jury asking for indictments. 
 
 “ ‘The complaints, most of which have come from Chi¬ 
 cago housewives, charge that there is an agreement among 
 the drivers that dealers cannot be changed—that if a cus¬ 
 tomer wishes to buy from other milk dealers he or she is 
 informed that it is against the rules of the union. In some 
 instances, it is alleged, the milk supply has been cut off and 
 the customer forced to walk to stores for it. 
 
 “ ‘If there is really an interference of this sort we will 
 stop it',’ said Mr. Hodges. ‘It is criminal to tamper 
 with the milk supply during hot weather. In the case of 
 families with babies it may result in death, and in that 
 case we would be justified in holding the boycotting driver 
 for manslaughter.’ ” 
 
304 
 
 The New Capitalism 
 
 This is only one of many similar cases that have been 
 brought to the attention of the public within recent years. 
 Hundreds could be cited in any big city, and thousands in 
 the United States. It is not at all singular that the irrita¬ 
 ting frequency of their occurrence has produced changes in 
 the public mind and attitude in spite of the fact that a 
 considerable portion of the public is composed of men and 
 women who work for a wage or salary, or a recompense the 
 equivalent of a wage. Moreover there is hardly a family 
 that has not at some time or other, been the victim of some 
 of the hundred and one restrictive rules and arbitrary 
 regulations which Labor unions seem to insist upon, under 
 the mistaken impression that they are necessary for La¬ 
 bor’s protection and well being, and the strict observance 
 of which generally means annoyance, discomfort, and ex¬ 
 pense, to all not belonging to a Labor organization. 
 
 When organized Labor employs high-handed tactics it is 
 playing a losing hand. But when organized Labor allows 
 itself to be betrayed into an attitude of seeming hostility 
 to the public, through ill-advised or intemperate utterances 
 of its leaders and spokesmen, it is guilty not only of blun¬ 
 dering but of folly. 
 
 A Study in Contrasts 
 
 Why cannot organized Labor learn a lesson from organ¬ 
 ized Capital? Take, for example, the following statement 
 made by Richard S. Hawes, in his address as President of 
 the American Bankers Association (October 19, 1920) : 
 
 “ Three factors are concerned in all these misunder¬ 
 standings (between Capital and Labor) : labor leaders, in¬ 
 dustrial leaders, and the more often disregarded public. 
 The latter’s interests usually suffer most, because of the 
 rules under which the contest is held. The welfare of the 
 general public is most important. In the settlement of dis¬ 
 putes, consideration should be given to the effect upon the 
 public, and full responsibility placed.” 
 
 Or listen to this cooing statement made by that great 
 humanitarian, Elbert H. Gary, who for years has been 
 
Who Is “The Public”? 
 
 305 
 
 the valiant protector of the “rights” of his employees to 
 work twelve hours a day and seven days a week, and whose 
 whole career has been one prolonged act of affectionate 
 consideration for the public, and loving regard for the 
 public welfare: 
 
 “It will cheerfully be admitted that the interests of the 
 general public, so-called, are first to be considered. When 
 they clash with private interests, the latter must be sub¬ 
 ordinated. On this principle our Government is founded. 
 It is essential to the protection and happiness of all the 
 people,” etc. 4 
 
 Compare the foregoing statements (Mr. Hawes’ and Mr. 
 Gary’s) of tender solicitude for the public, with the 
 brusque and caustic declaration by a representative of 
 organized Labor. At the hearing 5 before a subcommittee 
 of the Committee of Interstate Commerce on the Poindexter 
 Anti-Strike Bill S. 4204 (Senator Poindexter presiding), 
 Henry Sterling, Legislative Representative of the Ameri¬ 
 can Federation of Labor entered a protest against the 
 Poindexter bill. In the course of his statement Mr. Sterling 
 said: 
 
 ‘ 1 The chief reason alleged for the enactment of the anti¬ 
 strike legislation is the convenience of the public. The 
 public must not be inconvenienced. The public must have 
 everything come its way, just as it should come; but did it 
 ever occur to you, Senator, that the public does not give a 
 damn for the man who works ? Unless he kicks and squirms 
 and stops working he never gets a remedy for anything. 
 
 ‘ ‘ The public is like the priest and the Levite that passed 
 over on the other side. The public is the one great sinner 
 in the industrial field. The public makes all its conditions 
 and controls them. It is not alone that the public is indif¬ 
 ferent ; it is positively criminal in its indifference at times. 
 
 9 
 
 The children in the mills in the South might work them- 
 
 4 “Principles and Policies of the United States Steel Corporation.” 
 Statement fay Ellbert H. Gary, Chairman, at the Annual Meeting - of 
 the Stockholders, April 18, 1921. 
 
 5 May 20, 1920. 
 
306 
 
 The New Capitalism 
 
 selves to death and the public would not care. It is only 
 when the agitator comes along and points out what is the 
 offense to the public conscience. They never will notice it 
 unless it is pointed out. The only wrong done in the indus¬ 
 trial conflict is to the so-called innocent third party, and as 
 soon as we who work for a living take some effective meas¬ 
 ures for our own welfare, then you want to put us in jail.” 
 
 It is only fair to say in extenuation that ‘ ‘ the convenience 
 of the public” was given as the chief reason for the pro¬ 
 posed anti-strike legislation; and it was by way of answer¬ 
 ing the “reason alleged” that Mr. Sterling delivered him¬ 
 self as quoted. Nevertheless such statements are illumina¬ 
 ting, in that they clearly show a confused state of mind. 
 
 Confusion Everywhere 
 
 There are two things I charge against organized Labor 
 as regards its crudely stated animadversions on the public. 
 
 iFirst, that it is utterly lacking in tact: 
 
 Secondly, that it has no clearly defined idea as to who 
 constitutes the public. 
 
 The first charge I have sufficiently established in this 
 chapter. But, as regards the second, I desire to urge a few 
 palliating circumstances. Organized Labor is not alone in 
 its confused notions regarding the constituency of the pub¬ 
 lic. The press of the land, and men holding high official 
 positions, cannot be credited with any greater degree of 
 clarity than organized Labor. You .will recall, perhaps, 
 that in 1919 the Chief Executive of the nation, Woodr6vV 
 Wilson, called an Industrial Conference at which Capital, 
 Labor and the Public were to be represented. Now glance 
 at this list of the fifteen men who were invited by Mr. Wil¬ 
 son to represent the 'public: 
 
 “Among those invited and specially designated 
 to ‘represent the Public Interest’ in this Confer¬ 
 ence, behold Rockefeller (Standard Oil)'; Gary 
 (Steel Trust) ; Brookings (Union Trust Co.) ; 
 Chadbourne (Railroads); Dawes (Central Trust 
 Co.) ; Burgess (National Banks) ; Gallaway (Cot- 
 
Who Is “The Public”? 
 
 307 
 
 ton Trust); Endicott (United Shoe Machinery, 
 Smelting Trust, etc., etc.) ; Feiss (Clothing 
 Trust) ; Gay (Editor, Morgan owned Paper) ; 
 James (Manufactures and Banks) ; Jones (N. J. 
 
 Zinc Trust) ; Landon (American Radiator Trust) ; 
 Meredith (U. S. Chamber of Commerce) ; McNabb 
 (Known in San Francisco as ‘McScab’) ; Sweet 
 (Beet Sugar); Titus (Oil).” 6 
 
 Surely there is none to assert that these men are truly 
 representative of the public, or deny that all of them fitted 
 more appropriately into the Capitalistic group. In reality, 
 in the so-called Industrial Conference, Labor had two dis¬ 
 tinctly segregated Capitalistic groups arrayed against it— 
 one admittedly and distinctively Capitalistic, the other also 
 Capitalistic but masquerading as the public group. If then, 
 Labor—more particularly organized Labor—owing to the 
 great confusion as to who’s who, has blundered in tactics 
 and in language against the public, its mistakes can be ex¬ 
 plained as well as condoned. 
 
 With Regard to the Future 
 
 But if there has been confusion in the past there is no 
 excuse for its continuance in the future. The new economic 
 division clearly draws the line. The public is composed of 
 all the people—divided into twenty percent investors and 
 eighty percent non-investors. In the latter group we find 
 jiractically all those who work for a wage; some are organ¬ 
 ized, some are not. Organized Labor is in the non-investor 
 group. Since the interests of organized Labor are identical 
 with the interests of all non-investors, it is the height of 
 folly for organized Labor to proceed as if it were not a 
 component part of the non-investor group—composed of 
 eighty percent of the population, i. e., of the general public. 
 Consequently any move or step, any action or word on the 
 part of the leaders or officials or representatives of the 
 organized portion of the public, that alienates the sympathy 
 
 6 La Follette’s Magazine, October, 1918. 
 
308 
 
 The New Capitalism 
 
 and moral support of those not organized, is the acme of 
 folly. Let organized Labor ponder over this truth before 
 it is too late, and mend its ways. 
 
 Labor’s True Strength 
 
 The greatest strength of organized Labor is found—not 
 within its own ranks—not among its necessarily limited 
 membership, but in the sympathy and moral support of 
 that portion of the public having no investments, and whose 
 income is derived from wages and salaries. There, I say to 
 organized Labor, lies your true strength. These approxi¬ 
 mately eighty percent of the population, are your sustain¬ 
 ing props. True, it is an unorganized strength, an unas¬ 
 sembled power, an undirected influence—but it is up to you 
 to organize and assemble and to direct its support in your 
 favor—not against you. 
 
 Remember that you have no press that reaches all the 
 people; your official organs do not fall under the public 
 eye. Remember that there are millions not actively affi¬ 
 liated with you who derive their information about you 
 from an unsympathetic daily press. Remember that a ma¬ 
 jority of the population gets its slant or bias concerning 
 your virtues or your iniquities from the papers or periodi¬ 
 cals it reads. Avoid narrowness and selfishness. There is 
 nothing more fatal to your aspirations than the attitude 
 “organized Labor for itself, and may the devil take the 
 hindmost”—a sort of “public be damned” policy. 
 
 Protect the eighty million—(of which you are a con¬ 
 siderable part). Do not segregate yourself; do not strive 
 only to protect yourself, and let everybody else not belong¬ 
 ing to your particular organization go hang. That is an 
 unwise attitude, a foolish policy—a suicidal procedure. 
 Protect the eighty million and the eighty million will sup¬ 
 port you. Above all, put your house in order. 
 
CHAPTER XXIII 
 The Science of Wages 
 
 P OLITICAL economists are fond of smothering burn¬ 
 ing questions in a wet blanket of quasi-technical verbi¬ 
 age. Thus, for example, in every treatise on Political 
 Economy, lengthy chapters appear on “Wages.” We are 
 told, with many fine distinctions and technical differentia¬ 
 tions, what wages are and what they are not. We are told 
 that there is a great difference between money w r ages and 
 actual or nominal, wages; between money wages and com¬ 
 modity wages; between gold wages and bread wages, etc. 
 To explain all this, some writers have found it necessary 
 to write voluminous works covering hundreds of pages. 
 
 It seems to me that the whole discussion on wages can be 
 greatly simplified. Instead of verbosely distinguishing, 
 with much show of learning, between money wages, and 
 actual or nominal or commodity wages, all of which means 
 nothing, and clarifies nothing to the man and woman who 
 works for a wage—on the contrary, only confuses them— 
 why not reduce the distinctions to terms comprehensible 
 to the average man or woman? Why not express it thus: 
 
 Money wages is a stipulated amount of money a man or 
 woman receives for having performed a certain piece of 
 work, or for having worked a certain number of hours or 
 days. 
 
 Actual or nominal or commodity wages is the amount of 
 money that a man or woman must pay out during twenty- 
 four hours a day for seven days a week in order to merely 
 live and be fit to work at all. 
 
 Therefore, in the aggregate, what the economists call 
 money wages represents the amount of money a man or 
 
 309 
 
310 
 
 The New Capitalism 
 
 woman receives for, let ns say, forty-eight to sixty hours of 
 work within a week’s time; and what they call actual or 
 nominal wages is the amount he or she must pay out during 
 the 168 hours constituting the week. These two definitions 
 seem to me to cover the subject completely, for all prac¬ 
 tical purposes. 
 
 The Exchange Value of Wages—the 
 Important Thing 
 
 Since the wage earner has no alternative but to exchange 
 his wages for the necessary living commodities the all im¬ 
 portant thing about his wages is their exchange value. In 
 any discussion on wages the stress is to be put on the 
 exchange value of the wage dollar. If a small quantity of 
 wages can purchase a given fair quantity of living com¬ 
 modities then the exchange value of the wage dollar can be 
 said to be high. Whereas if a large quantity of wages is 
 demanded for the same quantity of living commodities, then 
 the exchange value of the wage dollar can be said to be low. 
 
 The exchange value of the wage dollar rises or falls 
 inversely as prices of living commodities rise or fall. If 
 we go back as far as 1896 and accept the value of the dol¬ 
 lar and prices prevailing then as basic, we discover that the 
 exchange value of the wage dollar has shrunk precisely by 
 as many cents as prices of living commodities advanced. 
 The wage dollar of 1920, as compared with the wage dollar 
 of 1896, had an exchange value of only about 27 cents. 
 This shrinkage in exchange value was produced by the rise 
 in the cost of living commodities. It may be stated here, 
 in passing, that there has been no rise in the exchange value 
 of the wage dollar from 1896 to 1920—only a steady 
 decline. 
 
 It is rather singular that the political economists, so 
 adept in inventing and formulating economic “laws” and 
 describing their operations and effects, have thus far over¬ 
 looked, or shall I say, ignored, what is easily the nexus of 
 the whole wage question, viz., their exchange value. None 
 
The Science of Wages 
 
 311 
 
 of them, so far as I can recall, has ever written a chapter 
 on this pivotal point in the entire wage controversy. Not 
 one has ever pointed ont that at the bottom of any demand 
 for more wages is the desperate endeavor on the part of the 
 workers, in the face of constantly rising prices, to maintain 
 a reasonable exchange value for their wages. Not one has 
 ever gone to the trouble of explaining that those who labor, 
 particularly when they are organized, may have something 
 to say about the amount of wages that shall be paid them, 
 but they have absolutely nothing to say about the exchange 
 value of the wage dollar; in brief, that Labor may stipu¬ 
 late the amount of its wages; it cannot regulate their 
 exchange vdlue. Nor has one ever emphasized the futility 
 of Labor’s deperate endeavor to maintain the exchange 
 value of the wage dollar in the face of Capital’s grim 
 determination not only to keep the quantity of wages low 
 but also their exchange value. And yet here we have the 
 seeds of the deadly conflict between Capital and Labor— 
 the roots of the bitter hostility between those who pre¬ 
 sumably pay wages and those who work for a wage. 
 
 Capital Does Not Pay Wages 
 
 From the very beginning Capital has been unwilling to 
 accord more than a bare living wage—indeed less than a 
 living wage per worker. And when Capital, a quarter of 
 a century ago, began systematically to raise prices, making 
 it necessary for workers to demand more wages in order to 
 enable them to meet the various price increases—Capital¬ 
 istic Entrepreneurs howled as if every dollar of wages 
 apportioned to Labor came directly out of their pockets; 
 and to this very hour they act as if the paying of wages is 
 taking the bread out of the mouths of their own wives and 
 children. Yet, as a matter of provable fact, Capital does 
 not pay wages at all. Labor pays its own wages out of the 
 values it creates. Certainly it cannot be disputed that wages 
 are paid out of Labor’s own product. 
 
 A century ago a number of economists advanced the 
 
312 
 
 The New Capitalism 
 
 “Wages Fund” theory. 1 This theory emphasized, among 
 other things, the dependence of Labor upon Capital, and 
 insisted that wages were paid out of Capital—a fixed and 
 predetermined fund. The theory was in due time exploded. 
 It is no longer held that wages are paid out of Capital. 
 Professor Seligman says in so many w r ords that “wages are 
 not paid out of Capital; they are only advanced out of 
 Capital.” The amount of money advanced by Capital is 
 taken directly out of the product of Labor—not out of any 
 capital fund. In other words, Labor “earns its own re¬ 
 muneration”—actually pays its own wages. Capital 
 merely finances their payment; for its own sake and con¬ 
 venience expedites the exchange of the products of one 
 group of workers for those of other groups, making at the 
 same time a profit on the transactions involved—that is on 
 the Several turnovers. 
 
 Taking industry in the aggregate it is conservative to 
 say that in normal times there is an average of four capital 
 “turnovers” in the course of twelve months. In some 
 cases the turnover is quicker, in others slower—but four 
 times a year is, I believe, a fair average. Consequently as 
 regards the wages of the workers in an industrial estab¬ 
 lishment the amount of money necessary to enable an 
 employer to finance the payment of the wages of his work¬ 
 ers is one-fourth of the total amount paid out in the course 
 of the year. 
 
 Let me reduce my statement to figures, and so as to sim¬ 
 plify my contention still more I will select the industrial 
 labor group for which statistics are available. In 1914 
 there were 7,036,337 workers engaged in 275,791 establish- 
 
 i John Stuart Mill in 1869, neatly explained the “Wages Fund” 
 theory as follows: 
 
 “There is supposed to be, at any given instant, a sum of wealth 
 which is unconditionally devoted to the payment of wages of labor. 
 This sum is not regarded as unalterable, for it is augmented by 
 saving, and increases with the progress of wealth ; but' it is reasoned 
 upon as at any given moment a predetermined amount. More than 
 that amount it is assumed the wages-receiving class can not possibly 
 divide among them; that amount, and no less, they can not but 
 obtain. So that the sum to be divided being fixed, the wages of 
 each depend solely on the divisor, the number of participants.”— 
 Quoted from “The Wages Question,” by Francis A. Walker. 
 
The Science of Wages 
 
 313 
 
 merits. Their wages aggregated $4,079,332,433, for the 
 year. To finance the payment of the total amount of 
 wages involved here, only one-fourth of the amount, or 
 $1,019,833,108 was required within twelve calendar months. 
 This amount—mark you well—was not paid out by the 
 Capitalistic employers without any hope of ever getting it 
 back; it was merely advanced by them for their own sake 
 and convenience, knowing full well that through the vari¬ 
 ous established channels of trade, all wages must quickly 
 flow back into their coffers, to be again and again dis¬ 
 tributed by them among the same workers, as wages. 
 
 “Turnover” or “Handover” 
 
 Yes! We have heard much within recent years of Cap¬ 
 ital ‘ ‘ turnover.’ ’ It is on the turnover, or rather the 
 frequency of turnover, we are told, that Capital makes its 
 profits. But when we probe deeper into the subject we 
 find that it isn’t out of the Capital “turnover” so much 
 as out of the wage “handover” that the Capitalistic group 
 derives its enormous profits. Those who work for a wage 
 or salary have no alternative but to hand back to the con¬ 
 stituent members of the Capitalistic System practically 
 every dollar of their wages. Generally speaking what a 
 worker earns in a week is consumed within a week. The 
 wage he receives is not his to keep; he is compelled to hand 
 it back. In most cases it is consumed (spent) before it is 
 earned (received). 
 
 An Economic, Paradox 
 
 Did you ever stop to think that the average wage earner 
 receives not fifty-two times twenty or thirty dollars (or 
 whatever his weekly wage may be)—in the course of a year, 
 but only twenty or thirty dollars—fifty-two times a year? 
 Sounds like a paradox, doesn’t it? Well, it is a paradox— 
 not a verbal paradox but an economic paradox—and I’ll 
 explain precisely what I mean. He receives the same 
 twenty or thirty dollars fifty-two times a year. Remember 
 he must hand bach whatever he receives each iveek. It 
 
314 
 
 The New Capitalism 
 
 isn’t as if he could keep all he earns each week, and let it 
 accumulate into a fund. His weekly wage—a stipulated 
 amount—is turned over to him fifty-two times a year; and 
 he is compelled to hand it back fifty-two times a year, or 
 starve. 
 
 Approximately twenty-seven million men and women 
 work for a wage or salary. 2 With what they earn they 
 must support themselves and their families. For their 
 labor they receive, let us say, an aggregate of twenty billion 
 a year from the Capitalistic System; but in the course of 
 the year they hand their twenty billion back to the com¬ 
 ponent members of the System. They gave twelve months 
 of labor for the twenty billion dollars, but they had to give 
 it practically all back in exchange for the living commod¬ 
 ities, for food, clothing, shelter, and sundry things neces¬ 
 sary to life, or, its minor comforts. 
 
 And this performance is repeated not once in a lifetime 
 but once every year. They receive another twenty billion 
 the next year. No, not another twenty billion! It is the 
 same twenty billion that they received the year before, and 
 which, under the Capitalistic System it is not intended 
 they shall keep. They are merely permitted to look at it 
 for a few days, and hold it in their hands; the process of 
 handing it back is a continuous performance. 
 
 Why “Money Wages” Means Nothing 
 
 Money has been defined as the yardstick of values. If 
 we accept this definition and apply it to wages, it follows 
 that the men and women who work for a wage or salary 
 are paid only in yardsticks which they are not permitted 
 to keep—only to handle for a few days. Before the end 
 of the week the yardsticks have found their way back into 
 the lumber-yards of those who distributed them—none too 
 graciously; in most cases not so much as a fraction of an 
 inch remains from the week’s supply of yardsticks. 
 
 z According to Professor Alvin H. Hansen, of the University of 
 Minnesota, there are 6,229,161 farm laborers, 2,074,792 lower salaried, 
 1,572,225 servants; industrial wage earners 14,556,979. unclassified 
 2.317.538. American Statistical Association, December, 1920. 
 
The Science of Wages 
 
 315 
 
 Money has been appropriately defined as a “medium of 
 exchange.” It is that, and only that, to the workers—a 
 medium that must be exchanged by them for the things 
 needful to life. They have no alternative. Money has also 
 been called a “circulating medium.” Aye, it is; and the 
 compulsion to make it circulate is inherent in every wage 
 dollar. 
 
 It has been said that ‘ ‘ Profits are the wages of Capital. ’ ’ 
 Then by the same rule of logic we ought to be able to say 
 that “Wages are the profits of Labor.” The one is as 
 absurd as the other. “Profits,” we are told, “is the 
 amount that remains after all costs have been paid.” A 
 goodly amount of profit remains to Capital after Capital 
 has paid all costs, including labor. Whereas no profits 
 remain to Labor after Labor has paid merely its living 
 costs. 
 
 Labor’s Meager Reward 
 
 The plain truth is that the workmen and women receive 
 nothing as a reward for their labor—nothing beyond a 
 bare subsistence. Comparatively few—and that only by 
 dint of the most rigid economy, manage to save a few paltry 
 dollars. I say paltry, for the savings accounts statistics 
 show that the savings of the eleven million depositors is 
 only a few hundred million a year—a few dollars per 
 capita. You may double or treble or quadruple the amount 
 of their “savings” if you are to consider what may have 
 been paid by them for insurance, protection, etc. 
 
 Where Are the Wages of Yesteryear? 
 
 If all the wage earners, which includes all salaried people 
 and those receiving more or less regular lionoria for their 
 services—the equivalent of a wage or salary—received an 
 amount aggregating, let us say, an average of only ten 
 billion dollars a year for the past twenty years, their joint 
 earnings for the twenty years would total the stupendous 
 sum of $200,000,000,000. What has become of this two 
 hundred billion dollars of wages? Where is it? Whither 
 
THE WAGE EARNER’S FAMILY INCOME 
 AND WHAT BECOMES OF IT 
 
 75 
 
 From more than a dozen different Tables, I have constructed in the 
 course of my studies on Wages, I have compiled the above Chart as 
 approximately showing the distribution of the Wage dollar—or rather, 
 the average wage earner’s family income. Needless to say the figures 
 are only approximate estimates, but, I believe, conservative and fair. 
 In arranging the above Chart I assumed a theoretical $1500 a year 
 income from wages for an average family, contributed by more than 
 one worker per family. A $1500 yearly wage income would mean a 
 wage income amounting to about $28.86 a week; or $4.11 a day. The 
 distribution is about as follows: 
 
 Rent.$225 
 
 Farm Food Prod. 225 
 Mfgd. Food Prod. 150 
 Clothes . 225 
 
 Mfgd. Com’dities $150.00 
 
 Freight . 150.00 
 
 Fuel and Light. . 37.50 
 
 Public Utilities. . 37.50 
 
 Taxes . .$150.00 
 Misc. .. 112.50 
 Savings 37.50 
 
 Total $1,500.00 
 
 There are many other ways of computing the wage income distri¬ 
 bution. For example, you might say that the workers in a wage 
 earner’s family work 7.7 weeks for the Landlord; 7.7 weeks for the 
 Farmer; 5.2 weeks for the Manufacturer of Food Products; 7.7 weeks 
 for Clothing and Wearing Apparel Manufacturers and Dealers; 5.2 
 weeks for the Manufacturers of and Dealers in other Living Com¬ 
 modities; 5.2 weeks for the Railroads (Freight); 1.3 weeks each for 
 the Fuel and Light Companies and the Public Utilities Corporations; 
 5.2 weeks for the Government (Federal, State, City, etc.); 3.9 weeks 
 for the Miscellaneous Items essential to living; after wdiich they may 
 (if they are very thrifty) keep the wages of 1.3 weeks’ work for 
 themselves. 
 
 316 
 
The Science of Wages 
 
 317 
 
 has it disappeared? What of all this vast sum is left to 
 those who worked for it—earned it? 
 
 I am omitting a dozen pages filled with rather interest¬ 
 ing statistics in pursuit of this inquiry, because it would 
 unduly lengthen this chapter. Instead I will tersely state 
 my conclusions by saying that the average wage earner 
 ‘ i saves 5 ’ less than five cents out of every dollar of his wages. 
 This isn’t because he is unwilling to save, but rather be¬ 
 cause, under present economic conditions, it is impossible. 
 “Sixty-five percent of our people are poor”; said Professor 
 E. A. Ross in 1918, “that is, they have little or no prop¬ 
 erty except their clothes and some cheap furniture, and 
 their average annual income is less than $200 per capita.” 
 
 A Helpless “Capitalist” 
 
 It, is all folly to say that every worker is a “ capitalist ’ ’; 
 it is more than mere folly; it is the voice of hypocrisy 
 speaking through the mouth of knavery. Every working¬ 
 man and workingwoman is a capitalist, we have been told 
 with irritating iteration during the past few years. Indeed! 
 A queer kind of capitalist, you will admit, is he who is 
 under compulsion to pay out every dollar of his wages 
 week after week, merely for the roof over his head, for 
 food for his body and clothes for his back. A queer kind 
 of capitalist is he who has no choice but to “invest” his 
 “capital” (labor), and his “dividends” (wages), for so 
 many pounds of food and so many yards of cloth—and for 
 a place in which to live. A queer kind of capitalist, who 
 has no alternative except to let his capital and his divi¬ 
 dends flow back through devious channels and by sundry 
 devices into the coffers of the economic lords of creation— 
 the constituent members of the Capitalistic group. 
 
 The “Wages of Capital” 
 
 But how does the Capitalistic group fare the while? 
 Those constituting the Capitalistic group make their profits 
 by virtue of the fact that the wage earners—the non¬ 
 investors, are compelled to hand back to them in the form 
 
318 
 
 The New Capitalism 
 
 of rent, and the needful articles of food, clothing, etc., they 
 must purchase in the course of a year, practically the full 
 amount of their wages. What profit does the Capitalistic 
 group make on this “handover” of wages? Ten percent, 
 or twenty, or thirty, or forty, or fifty percent ? Who knows 
 the exact amount of the profits of the Capitalistic group; 
 who has the authentic statistics? I can compute the 
 ‘ ‘ profits ’ ’ from a correlation of various sets of available sta¬ 
 tistics, but this would lead us too far afield. Moreover, I 
 am less interested at this time in the exact amount of the 
 profits than in the principle underlying the transactions 
 between the wage earners, i. e., the non-investors, and the 
 Capitalistic Entrepreneurs—the Capitalistic group. 
 
 Nevertheless while we are on this subject I will quote a 
 paragraph from a minority report (on the Revenue Bill 
 of 1921) submitted to Congress by the Honorable Claude 
 Kitchin of the Committee of Ways and Means, and which 
 gives an idea of the profits of some of the big corporations: 
 
 “An analysis of the returns as detailed in the report of 
 the Commissioner of Internal Revenue since January 1, 
 1916, up to and including the present commissioner’s report 
 of July 12, 1921, will show that corporations in the United 
 States made net profits from January 1, 1921, in round 
 numbers $50,000,000,000—to be more exact, $47,000,000,000. 
 After deducting all the taxes they paid since January 1, 
 1916, income, excess profits tax, and other war taxes, they 
 have a clear profit left of $38,000,000,000, more than four- 
 fifths of which was made by less than 10,000 corporations, 
 and more than half of which was made by 1,026 of the big 
 profiteering corporations, which includes the Steel Trust, 
 the Bethlehem Steel Co., the Dupont companies, the vari¬ 
 ous Standard Oil companies, the Coal Combine, the Woolen 
 Trust, the Meat Packers, etc.” 
 
 But whatever the exact amount of all the profits of the 
 entire Capitalistic group may be, this is certain, that a 
 considerable part of the profits garnered by the group is 
 made out of the wages of the workers. View the subject 
 from whatever angle you will; consider it from whatever 
 
The Science of Wages 
 
 319 
 
 standpoint yon please, you must arrive at this conclusion— 
 that a considerable portion of the “profits” of the Capital¬ 
 istic group are made out of the wages of the workers. 
 
 Turning on the Searchlight 
 
 All this is a demonstrable fact! Then why is Capital 
 so determined that those who work for a wage shall receive 
 a minimum of reward for their labor? There is no logic 
 in Capital’s reasoning with regard to wages. What, then, 
 is the psychology of the Capitalistic mind? Whatever 
 charges can be made against Capital the chief Capitalistic 
 Entrepreneurs cannot be accused of ignorance, short-sight¬ 
 edness, or blindness. They know wdiat they are doing every 
 hour of the day and night, and why they are doing it. 
 Their weather eye is never closed. They know that Capital 
 does not pay wages; that Labor pays its own wages. They 
 know that practically every wage dollar flows back into the 
 Capitalistic coffers, and that Capital makes a goodly por¬ 
 tion of its profits because Labor must exchange its wages 
 for the living commodities. They know that the more wages 
 Labor receives the more wage earners will spend, or rather 
 purchase; the more wage earners purchase, the greater will 
 be the volume of business; the greater the volume of busi¬ 
 ness the bigger will be the production, the market, and the 
 profits. 
 
 Or let me express it thus: The greater the recompense 
 Capital grants to Labor, the greater will be the savings 
 (and investments) of the wage earners; the greater the sav¬ 
 ings (and investments) of the wage earners, the greater 
 their contentment: the greater the wealth and prosperity 
 of the nation. 
 
 And one begins to wonder just why the Capitalistic 
 Entrepreneurs are so reluctant to apportion decent wages to 
 Labor; and why they so steadfastly fight against increasing 
 wages. And it is still more incomprehensible why they 
 have banded themselves together as at present, in a com¬ 
 mon, organized endeavor to still further cut wages—cut 
 
320 
 
 The New Capitalism 
 
 them to a point clearly insufficient to enable those who work 
 to meet the high and still rising living costs. 
 
 It would not injure the Capitalistic Entrepreneurs if 
 they would apportion decent wages, or raise wages and 
 maintain them at a decent level. It would deduct nothing 
 from their capital, and their wealth accumulations would 
 proceed the same. But evidently they have concluded that 
 by raising prices and lowering wages their profits can be 
 considerably increased; and that their wealth will, conse¬ 
 quently, accumulate all the faster. One discerns behind 
 the unwilling attitude of the Capitalistic Entrepreneurs 
 with regard to the paying of fair wages, a sinister triple 
 purpose: to crush not only those who labor for a wage or 
 salary, but the whole tribe of non-investors into the dust; 
 to keep them from accumulating a surplus; to hold them 
 perpetually in economic subjection. In no other way can 
 I explain their bitter determination to destroy organized 
 Labor, whose chiefest offense thus far has been that it has 
 insisted on a quantity of wages sufficient to enable workers 
 to at least meet the steadily mounting living costs; a wage 
 adequate for the decent maintenance of an average family. 
 
 Labor’s Side of the Controversy 
 
 Labor is entitled to more than it receives. Labor, far 
 from being irrational has been more than reasonable—has 
 been patient, long suffering, decent toward society and 
 more than fair to Capital, though at times, particularly 
 under the stress of great tribulations, it may have been 
 guilty of the excesses of aroused passion. 
 
 I am by no means disposed to defend physical violence. 
 None condemns sabotage more vehemently than I do. But 
 let us be reasonable and fair. Labor, theoretically, has 
 natural rights, but no legal rights. Moreover, its natural 
 rights, grudgingly admitted in normal times, and always 
 circumscribed with legal restrictions, are, in a crisis, denied, 
 nullified, enjoined and abrogated. It must be remembered 
 that Labor has no other property than its ability to work— 
 and that is a kind of property not protected by specific 
 
The Science of Wages 
 
 321 
 
 laws. Labor cannot invoke tlie power of the state either to 
 defend its property or protect its inherent rights; while 
 on the other hand the power of the state is frequently 
 invoked by Capital to interfere with the natural rights of 
 the workers. Since Labor cannot call for federal troops, 
 the state militia or the community constabulary to protect 
 its property, which is its labor; or defend its rights, small 
 wonder that occasionally groups of workers, who, consider¬ 
 ing themselves abused or aggrieved, conclude that they are 
 dependent upon themselves—and so employ their physical 
 strength to gain redress for their wrongs or to bring about 
 an adjustment of their grievances. In saying all this I 
 want it understood that I am not condoning violence; but 
 rather I am laying some of the extenuating circumstances 
 before the fair minded reader. 
 
 The history of strikes since the inauguration of the big 
 combines under the dominance of the Capitalistic Entre¬ 
 preneur group, reveals that most strikes were for wage 
 increases, and that in most cases wage increases were 
 reluctantly granted, and only after the employment of 
 coercive tactics on the part of the workers concerned. But 
 whatever might be said of the tactics employed, I challenge 
 the most ardent apologist of the Capitalistic System to 
 prove that Labor has ever made a demand for what is 
 unreasonable—unless you call the perfectly natural desire 
 to live decently, and in moderate comfort, an unreasonable 
 demand. 
 
 Capitalistic Victories 
 
 Certain sensitive Capitalistic souls have, within recent 
 years, grown petulant because economic writers habitually 
 speak of an average family and the average income per 
 family. I, for one, am quite willing to dispense with the 
 statistical family of five; and their statistical family in¬ 
 come. I am perfectly willing to speak of the wages per 
 worker. But if we accept that basis for our computations 
 we will find that at no time have the wages per worker 
 been sufficient to enable a family of five to live—not to say 
 
322 
 
 The New Capitalism 
 
 in decency and comfort—but merely to subsist. Oh, yes, 
 we speak of an average family and its average income, but 
 when we remember that there are in round numbers, forty 
 million men, women and children “engaged in the gainful 
 occupations” we are practically admitting that the average 
 family is supported by tivo workers; that it takes the earn¬ 
 ings of two persons to maintain an average family. 
 
 Does not this alone prove that the Capitalistic System of 
 Mammonisin has been gloriously victorious? It is paying 
 less than a living wage per worker. For an amount of 
 wages—a reward that never was, nor is it today, more than 
 just sufficient to purchase the necessaries of life, and per¬ 
 haps a few minor comforts—it compels two members of an 
 average household to render service. It must be clear to 
 anyone who has a head with which to think, that this con¬ 
 dition constitutes not a single but a double victory for the 
 Capitalistic-Mammonistic Entrepreneur System. 
 
 One would think that the Capitalistic Entrepreneurs, 
 contemplating the complete success of their shrewdly com¬ 
 puted plans, would rest content with their successes and 
 achievements, and be disposed henceforth to assume a 
 benevolent, if not generous, attitude, toward those who 
 labor for a wage. But no! Mammonism is like corruption 
 that feeds on itself. The Capitalistic Entrepreneurs today, 
 in spite of the fact that they do not pay the wages of the 
 workers, vociferously exclaim that they are paying to Labor 
 higher wages than they can afford to pay; and Mammon¬ 
 ism has set its machinery—a wonderful mechanism—in 
 motion, to bring down wages to a point where the joint 
 earnings of two persons will no longer be sufficient to meet 
 the living costs of an average family of five. 
 
 The Vendetta 
 
 The fight is waxing bitter. Those who labor for a wage 
 are not blind to the fact that the Capitalistic System is but 
 endeavoring to intensify and perpetuate its ancient injus¬ 
 tice toward those who toil. They see the vast wealth accu¬ 
 mulations of the Capitalistic Entrepreneurs growing yearly 
 
The Science of Wages 
 
 323 
 
 greater; and their own wages growing less in quantity and 
 smaller in exchange value. 
 
 Stripped of cumbersome and confusing phrases the roots 
 of the bitter quarrel between Capital and Labor are found 
 in the unwillingness of the Capitalistic Entrepreneurs to 
 increase the exchange value of Labor’s wages. Not only is 
 there observable an utter unwillingness to increase the 
 amount of wages—there is evident a design to still further 
 decrease the exchange value of the wage dollars of those 
 who labor. 
 
 Here, then, you have the relationship that exists between 
 the Capitalistic group and the Labor group—between the 
 Capitalistic “investor group” and the non-investor group. 
 Relationship? Call it rather Apartship—for relationship 
 implies some sort of connection, more or less intimate or 
 formal; or consanguinity, close or remote; a common tie of 
 some kind; a bond of mutual interest, or a community of 
 interests. But there is, and there can never be as long as 
 the present Capitalistic System exists in full foree and 
 effect, anything even remotely resembling amity between 
 these two mutually antagonistic groups. They are as wide 
 apart in their status and their aims as the poles. It is more 
 than a rift that separates them; a chasm lies between them. 
 Prom the very nature of their diametrically opposed and 
 conflicting interests, it is obvious that bad feeling and 
 enmity will keep them always apart. They have, and can 
 have, nothing in common. As long as the wage earning 
 non-investor more or less clearly realizes what is a demon¬ 
 strable fact—that he is permitted to retain (save) only a 
 beggarly few cents out of every dollar of his wages, while 
 the Capitalistic investor claims as his share profits — 
 whether euphemistically called interest, rent, dividends, 
 surplus, or what not—from ten to fifty cents out of every 
 dollar of the worker’s wages, the vendetta will continue 
 until one or the other group is annihilated, or the false 
 principles of the economic system, responsible for the feud, 
 are utterly destroyed. 
 
CHAPTER XXIV 
 
 The Philosophy of the Quantity Wage 
 
 B UT while I insist that Capital could pay, or rather 
 apportion, a liberal quantity wage and be none the 
 worse off for according it, it behooves me to show 
 the reverse side of the shield to the wage earners them¬ 
 selves. As far as the wage earner is concerned the im¬ 
 portant thing about his wages is not the quantity but the 
 exchange value of his wage dollar. Labor has had some¬ 
 thing to say about the quantity of its wages, but it has had 
 absolutely nothing to say about the exchange value of its 
 wage dollars. This is why wage earners find themselves 
 today, in spite of what might be called a fair sized quan¬ 
 tity wage, in a rather desperate situation. 
 
 Just as the whole labor question is one of exchange — 
 one workman exchanging his product for the products of 
 other workmen, (money being merely the acceptable count¬ 
 ers with which the exchange is facilitated or consummated) 
 —so the whole question of wages resolves itself into one of 
 exchange value, not of quantity. A high quantity wage 
 with a low exchange value is an economic maladjustment. 
 If quantity were the important thing, a Russian workman 
 receiving forty or fifty thousand rubles a day would be 
 better off than workmen anywhere in the world; but, alas, 
 the exchange value of his thousands of rubles is almost nil. 
 The wage compensation of the German artisan was never 
 so high as it is today; but the exchange value of his marks 
 was never so low. The mere quantity wage is an ignis 
 fatuus which if persistently pursued will lead the pur¬ 
 suers into a morass of difficulties and the bogs of despair. 
 
 When Quantity Wages Were Small 
 
 Karl Marx contended that Capital derived its profits 
 from the unscrupulous exploitation of Labor. I have no 
 
 324 
 
Philosophy of the Quantity Wage 325 
 
 desire to enter into a discussion of the Marxian doctrine, 
 nor of any of its derivatives and more modern variants. 
 In this hook I am concerned less with economic gospels and 
 theories and more with economic facts and fundamental 
 principles. However, in the times of which Marx wrote, 
 Capital’s exploitation of Labor was supposed to be carried 
 on through the apportioning of a small quantity wage as 
 Labor’s share of production. That is not true today, for 
 since Marx wrote his indictment against Capital, wages have 
 doubled and trebled. In the aggregate quantity wages have 
 reached their highest point in the whole history of eco¬ 
 nomics. But even though the high wages paid during the 
 war were to hold from this day forth; even though Labor 
 were to receive an ever increasing portion of its production, 
 there would still be no relief, for the exchange value of 
 wages is and will, under the established Capitalistic Sys¬ 
 tem, continue to remain low. 
 
 Quantity Wages and Living Cost Increases 
 
 Up to 1896 wages and living costs per family, generally 
 speaking, ran along parallel lines. It required all a man’s 
 wage (and those of the contributing members of his house¬ 
 hold) to pay for the essentials of living. Savings out of 
 wages in those years were the result of a denial of the com¬ 
 forts, enjoyments, and not infrequently, of the necessaries 
 of life. 
 
 With the dawn of the twentieth century began the 
 ascendancy of the Capitalistic Entrepreneur group. Almost 
 immediately the intent of the Capitalistic Entrepreneurs 
 revealed itself in gradual increases in the prices of their 
 commodities—in the gradual reduction of the exchange 
 value of wages. 
 
 Definitely speaking the High Cost of Living began about 
 twenty-five years ago. Statisticians and economists are 
 agreed that during the year 1896 the dollar had a maximum 
 purchasing power—wages their maximum exchange value. 
 Then the Trusts and monopolies were organized, as a result 
 of which prices began to ascend; and as prices increased 
 
326 
 
 The New Capitalism 
 
 the purchasing power of the dollar decreased—and the 
 exchange value of wages began to decline. It is to be noted 
 that the advance in prices, particularly for articles of 
 daily consumption, was gradual, a quarter of a cent, half 
 a cent, a cent at a time. So gradual were these increases 
 we scarcely noticed them; at least we did not complain. 
 
 It was organized Labor that first took note of the gradual 
 upward turn of the cost of commodities line and began to 
 demand increases in its wages to enable it to meet the in¬ 
 crease in the cost of commodities—living costs in general. 
 Naturally, organized Labor fought only for itself, but it 
 cannot be denied that the success of its own struggles for a 
 better wage and living conditions also improved the wage 
 and living conditions of those who were not organized— 
 those who did not fight. Had organized Labor not waged its 
 fight, economic serfdom and peonage would have resulted 
 long ago. 
 
 But in spite of its valiant fight organized Labor has been 
 only partially successful in its attempts to keep its wages 
 running parallel with living costs. In spite of the fact that 
 it has succeeded in compelling several increases in the 
 quantity of its wages it has not succeeded in narrowing 
 the distance between the two lines. It did not succeed in 
 maintaining the exchange value of wages. 
 
 I need hardly emphasize that in 1914-1919 a new eco¬ 
 nomic era began. Immediately after the war began prices 
 of practically everything advanced rapidly; this time not a 
 quarter of a cent, a half cent or a cent at a time, but by 
 nickles and dimes, and quarters, and dollars. By 1919 
 living costs were practically double what they were in 1914. 
 (This time the landlords took a hand in the increases, and 
 it must be said that they made up for the time they lost 
 from 1900 to 1914.) 
 
 To meet the sudden and tremendous increases in living 
 costs, organized Labor demanded further increases in its 
 wages. These demands were, in the main, granted without 
 a prolonged struggle on the part of Labor, or sullen resist¬ 
 ance on the part of the Capitalistic Entrepreneurs. The 
 
Philosophy of the Quantity Wage 327 
 
 Government had adopted the stupid 10 percent plus cost 
 system, and no matter how much Labor demanded or re¬ 
 ceived, the Capitalistic Entrepreneurs and constituent mem¬ 
 bers of the Capitalistic System were the beneficiaries. In 
 fact the more wages Labor received the greater the cost, 
 and the greater the profits of the employers of Labor. 
 
 The system was satisfactory both to the workers and the 
 Capitalistic Entrepreneurs. Both imagined themselves in 
 the seventh economic heaven. Thousands of wage earners 
 were receiving a greater quantity of wages than ever before 
 in their lives. Small wonder that many of them completely 
 lost their heads, imagining themselves richer by so many 
 dollars a day, a week or a month. It was only the quantity 
 of wages they saw; they did not stop to consider that the 
 increase in the quantity was granted to enable them to 
 meet the quantity increase in price. The exchange value 
 of their wages had not risen a single point. 
 
 The Simple Arithmetic of Wage Increases 
 
 Professor Kemmerer has said that compared to the dol¬ 
 lar of 1913 the dollar of 1920 had a value of only 38 cents. 1 
 What does this mean? It means that if we consider the 
 wages paid in 1913 as basic the wage dollar was a 100 cent 
 dollar; whereas the wage dollar in 1920, on account of the 
 tremendous increase in the prices of living commodities, 
 had an exchange value of only 38 cents. The following 
 Table shows the comparative exchange value of wage dol¬ 
 lars in 1913 and 1920: 
 
 Exchange Value of 
 Wages in 1913 
 
 $ 1.00. 
 
 5.00. 
 
 10.00. 
 
 15.00. 
 
 20.00. 
 
 26.00. 
 
 30.00. 
 
 40.00. 
 
 45.00. 
 
 50.00. 
 
 Exchange Value 
 in 1920 
 
 .$ .38 
 
 . 1.90 
 
 . 3.80 
 
 . 5.70 
 
 . 7.60 
 
 . 9.50 
 
 . 11.40 
 
 . 15.20 
 
 . 17.10 
 
 . 19.00 
 
 l “High Prices and Deflation,” by Edwin Walter Kemmerer. 
 
328 
 
 The New Capitalism 
 
 Still another way of expressing it is to say that for a 
 given quantity of living commodities which in 1913 could 
 have been purchased for one dollar of wages, it was neces¬ 
 sary to pay $2.63 of wages in 1920. The following com¬ 
 parative Table shows the amount of wages required in 1913 
 and 1920 to purchase a given quantity of living goods: 
 
 1913 
 
 1920 
 
 $ 1.00 
 5.00 
 10.00 
 15.00 
 20.00 
 25.00 
 30.00 
 35.00 
 40.00 
 45.00 
 50.00 
 100.00 
 
 $ 2.63 
 13.15 
 26.30 
 39.45 
 52,60 
 65.75 
 78.90 
 92.05 
 105.20 
 118.35 
 131.50 
 263.00 
 
 And so on. 
 
 It is clear, therefore, that unless the workers in 1920 
 received $2.63 of wages for every dollar of wages they 
 received in 1913, they were worse off in 1920 than in 1913. 
 
 The Proof of the Pudding 
 
 I can understand why those who are deriving vastly in¬ 
 creased profits from the considerably higher prices, in order 
 to exonerate themselves from the suspicion of profiteering, 
 pretend that the higher wage paid to Labor is responsible 
 for the higher prices they are charging for Labor’s prod¬ 
 ucts; but I cannot understand why Labor continues stup¬ 
 idly to insist that it has been vastly benefited by its several 
 wage increases, and that, too, in the face of an overwhelm¬ 
 ing amount of evidence to the contrary. The very fact 
 that Labor has demanded more and more wage increases 
 proves conclusively that its aggregate wage increases dur¬ 
 ing the past twenty years, have not been equal to the 
 aggregate price increases during the same period. All sta¬ 
 tistics show this conclusively. 
 
 I have said, and I will repeat it, that while Labor has 
 
Philosophy of the Quantity Wage 329 
 
 had something to say about the quantity of its wage, it has 
 had nothing whatever to say about the exchange value of 
 its wages. But even as regards the quantity of its wage, 
 Labor has been unable to maintain anything like a parity 
 between wages and living costs, as the following statistics 
 clearly show: 
 
 Union Scale of Wages and Hours of Labor, May 15, 1918. 
 Bulletin No. 259 (October, 1919), of the Bureau of Labor Statistics. 
 
 From the figures in Tables 8 and 10 of the comparative increase 
 in rates of wages and in retail prices of food between 1907 and 1918 
 may be stated in percentage form, thus: 
 
 Atlanta .Weekly rates of wages increased 43 percent 
 
 Retail prices of food increased 109 percent 
 
 Baltimore.Weekly rates of wages increased 41 percent 
 
 Retail prices of food increased 125 percent 
 
 Boston .Weekly rates of wages increased 34 percent 
 
 Retail prices of food increased 99 percent 
 
 Chicago .Weekly rates of wages increased 35 percent 
 
 Retail prices of food increased 102 percent 
 
 Cincinnati .Weekly rates of wages increased 37 percent 
 
 Retail prices of food increased 106 percent 
 
 Denver .Weekly rates of wages increased 38 percent 
 
 Retail prices of food increased 91 percent 
 
 New Orleans.Weekly rates of wages increased 33 percent 
 
 Retail prices of food increased 109 percent 
 
 New York .Weekly rates of wages increased 27 percent 
 
 Retail prices of food increased 101 percent 
 
 Philadelphia .Weekly rates of wages increased 51 percent 
 
 Retail prices of food increased 97 percent 
 
 Pittsburgh .Weekly rates of wages increased 44 percent 
 
 Retail prices of food increased 104 percent 
 
 St. Louis .Weekly rates of wages increased 40 percent 
 
 Retail prices of food increased 119 percent 
 
 San Francisco.. Weekly rates of wages increased 34 percent 
 
 Retail prices of food increased 74 percent 
 
 Seattle .Weekly rates of wages increased 39 percent 
 
 Retail prices of food increased 90 percent 
 
 The significance of these statistics grows when it is re¬ 
 membered that over 40 percent of the average family budget 
 goes for food. 
 
330 
 
 The New Capitalism 
 
 The following statistics of the Department of Labor 
 (published in 1921) giving the comparative index numbers 
 for union tvage rates and for the cost of living, strikingly 
 illustrate the utter inadequacy of quantity wage increases. 
 
 Year 
 
 Union Wage Rates 
 
 Cost of Liv 
 
 1913 
 
 100 
 
 100. 
 
 1914 
 
 102 
 
 103. 
 
 1915 
 
 102 
 
 105.1 
 
 1916 
 
 106 
 
 118.3 
 
 1917 
 
 112 
 
 142.4 
 
 1918 
 
 130 
 
 174.4 
 
 1919 
 
 148 
 
 199.3 
 
 1920 
 
 189 
 
 216.5 
 
 Labor's Emphasis on Quantity 
 
 I do not blame wage earners for putting all the emphasis 
 on the quantity of their wages, nor for believing that the 
 size of their pay envelope is the all important thing, and 
 that the more wages they receive the better off they are. 
 I do not blame them for insisting on big wages to meet 
 their already big living costs; nor for demanding wage 
 increases to meet increasing living costs; nor for objecting 
 to wage reductions, particularly in the face of the provable 
 fact that living costs have not been materially reduced, in 
 fact are, in the aggregate, fully as high as they were in 
 1920. Since his pay envelope is the only thing that stands 
 between the wage earner and the poorhouse, small wonder 
 that he attaches so great an importance to its size. His 
 labor is the wage earner’s only productive property, but 
 under the Capitalistic System it is not intended that that 
 property shall receive any other reward than a mere liv¬ 
 ing—and even that is grudgingly granted. 
 
 Nevertheless it is a tremendous mistake to imagine that 
 a big quantity wage is the supreme economic desideratum, 
 or a panacea for all economic ills. No greater misconcep¬ 
 tion is possible; no greater economic fallacy has ever en¬ 
 tered into the heads of men; no greater delusion has ever 
 played havoc with the imagination of the average man and 
 
Philosophy of the Quantity Wage 331 
 
 woman who works, whether with hand or head. From the 
 very beginning I have held that the greatest mistake that 
 Labor ever made was to demand an increase in wages every 
 time the cost of living advanced. What Labor should 
 have insisted upon was not more wages but a greater ex¬ 
 change value for its wages. If Labor had stood pat twenty 
 years ago—if Labor had not demanded—if Labor had (oh, 
 vagrant idealism!) positively refused to accept more money 
 wages but insisted instead on a stabilized exchange value 
 for its wages—the cost of living could never have mounted, 
 and the complex economic problems that now harass us 
 could never have attained their present proportions and 
 gravity. If Labor twenty years ago had been able to see 
 beyond the tip of its own nose it could have compelled an 
 adjustment on the part of the Capitalistic group which 
 would have forestalled future trouble, and rendered im¬ 
 possible of occurrence the many evils that afflict the world 
 today. In making the quantity of its wages the para¬ 
 mount issue, Labor has done itself an almost irretrievable 
 injury. 
 
 I do not blame Labor for its strabismus; nor Labor lead¬ 
 ers for following the line of least resistance, or choosing 
 the easiest way out of what seemed to them a dilemma—in 
 reality enmeshing themselves inextricably in (a vicious 
 circle. I dare say that Labor, individually and collectively, 
 had not concerned itself with economics; in fact hardly 
 knew that there was such a thing as the ‘ ‘ science ’ ’ of Politi¬ 
 cal Economy. It was not until the Trusts were organized 
 and the relationship between wages and the cost of living 
 was thrown out of plumb, that a few—a very few—among 
 those who toil, began to think hazily along economic lines; 
 and I fear me much that there has been considerable 
 muddled thinking ever since. 
 
 The great control that certain Labor leaders in the olden 
 days gained over the rank and file of workers was directly 
 traceable to this wrong concept regarding quantity wages. 
 The rank and file of workers grumbled to their leaders. 
 But every complaint on the part of the rank and file was 
 
332 
 
 The New Capitalism 
 
 invariably met by the statement: “Yon used to get $1.50 
 a day. I got you $3.00 a day; ain’t you satisfied?” 
 
 The argument was unanswerable. It was true! After 
 all, their leaders were responsible for the higher wages 
 they were now receiving. Not one of them ever saw that 
 the higher wage carried with it no increase of purchasing 
 power. Not one discerned that increase in the quantity 
 of wages carried with it a proportionate decrease in the 
 exchange value of the wage dollar. 
 
 Painted Victories 
 
 Samuel Gompers, President of the American Federation 
 of Labor, in Collier’s Weekly (November 27, 1920) said: 
 “By hard fighting the American working people have left 
 behind them one abuse after another. They have taken 
 the children out of the industries, they have abolished the 
 sweat shop, they have reduced the hours of labor, they have 
 renovated the whole factory system, they have given the 
 workman a place respected in the community, they have 
 taken away his rags and removed from him forever the 
 badge of inferiority. Much of this progress has been 
 gained through the ability of workers to organize cessa¬ 
 tions of work. ’ ’ 
 
 Mr. Gompers, and other Labor leaders and champions, 
 may be pardoned for pointing with swelling pride to some 
 of the palliative measures that have been established 
 through legal enactments, principally at the behest of or¬ 
 ganized Labor, such as improved sanitary conditions; limit¬ 
 ing the hours of labor, abolishing the sweat shop, greater 
 protection against accident or disease, better working con¬ 
 ditions for women and children; the minimum wage; the 
 employers’ liability act, the compensation act, and sundry 
 benefits by law secured, but the resultant cost of every 
 “benefit” secured by organized Labor has .been perma¬ 
 nently charged up to increase in the cost of production, 
 overhead expense, fixed charges, etc., and is being paid for 
 by Labor itself, via the medium of higher prices. 
 
 Indeed the supposed benefits of all remedial or protec- 
 
Philosophy of the Quantity Wage 333 
 
 tive labor laws have invariably re-acted on the entire non¬ 
 investor group. Whatever increases in wages have been 
 gained by the well organized Labor groups have been 
 charged up as increases in cost of production, and are 
 being paid by those who are organized and those who are 
 not organized, many of whom have had no increases in 
 wages. When the winning of a fight for better wages by 
 one small group of non-investors means a loss to all the 
 other non-investors, it is, to say the least, a sorry victory 
 for the beneficiaries. When seventy percent of the workers 
 are penalized for the benefit of the other thirty percent, 
 something is radically wrong in the formula. 
 
 But ignoring, for the present, the deleterious effects of 
 wage increases on the general public, and putting the best 
 possible interpretation upon organized Labor’s well meant 
 fight to improve its own condition (and incidentally the 
 condition of all non-investors) can organized Labor be 
 said to have been successful, even with regard to itself? 
 If twenty-five years ago the average wage per worker was, 
 let us say, $12.00 a week, and is today as the result of a 
 series of stubborn strikes, $24.00 a week, is not that suffi¬ 
 cient proof that Labor has been victorious—that it has im¬ 
 proved its condition 100 percent. 
 
 If living costs had remained where they were twenty 
 years ago, and Labor had succeeded in doubling its wages 
 the while, it could, indeed, claim that it has bettered itself. 
 But living costs did not remain stationary; they moved 
 forward more rapidly, and generally considerably ahead of 
 the increase in wages. The relative distance between liv¬ 
 ing costs and wages is the same today as it was twenty, 
 or thirty, or forty years ago. The exchange value of wages 
 is no greater; and the purchasing power of money and 
 savings is considerably less than in those former years. 
 
 To clinch the matter let me ask—Is a workman who re¬ 
 ceives $12.00 a week, and who hands the $12.00 back to 
 those from whom he received it in order to live, worse off 
 than the worker who receives $24.00 a w^eek and who must 
 
334 
 
 The New Capitalism 
 
 hand the entire $24.00 back to those from whom he received 
 it, in order merely to subsist? 
 
 If the wages of every worker were increased by one 
 thousand dollars a year, and living costs were to be in¬ 
 creased by one thousand dollars, it is clear that wage 
 earners would be no better off. And if the workers’ wages 
 were increased another thousand dollars the following year, 
 and living costs likewise advance another thousand dollars, 
 still they would be no better off. Is it necessary to pursue 
 this point further ? Is it not clear that there is no economic 
 salvation, no hope of amelioration, in mere quantity wages ? 
 
 When Bubbles Burst 
 
 There are, no doubt, those who belong to that school 
 of philosophy which pretends to see ‘‘books in the running 
 brooks, sermons in stones, and good in everything,” and 
 who will urge that the larger quantity wage means a more 
 extensive purchasing ability—that is to say, that a larger 
 variety of things can be bought with more dollars than 
 with fewer dollars. I shall not argue to the contrary; 
 indeed, for the sake of better stating my point, I ’ll pretend 
 that the larger amount, even though it has no greater 
 exchange value—no greater purchasing power—is prefer¬ 
 able. Have we not a better standard of living today than 
 was enjoyed twenty or thirty or forty years ago? Yea! Are 
 not people today buying more luxuries, enjoying more com¬ 
 forts than they did twenty or thirty or forty years ago? 
 Again I ’ll agree! But then I will say in rebuttal that, 
 deluded by mere quantity increase, so high have we raised 
 our standard of living that we will not be able to maintain 
 it much longer. Surely there is none to deny that the re¬ 
 cession has already begun. Millions today are not living 
 in the same way they were living even five years ago. Much 
 curtailment in quantity and quality of essential foods, and 
 other living commodities is observable. Replacement is 
 slower. The more careful husbanding of the current re¬ 
 sources has become imperative. Saving is almost out of the 
 question. 
 
Philosophy of the Quantity Wage 335 
 
 Economic Maladjustments 
 
 Beyond a doubt more social and economic maladjust¬ 
 ments are observable during the past twenty years than 
 during all the centuries preceding, and most of them are 
 directly traceable to the insane notion that a larger quantity 
 of wages means greater prosperity for the recipient. The 
 greatest wrong that has come from the system of high 
 wages and low exchange value is that it has made ‘millions 
 of people reckless and extravagant. When quantity wages 
 w T ere lower, but carried with them a high exchange value, 
 people spent conservatively; they watched their pennies 
 and nickels and dimes. A few dollars were saved. When 
 quantity wages increased, accompanied by a proportionate 
 decrease in exchange value, unfortunately most wage earn¬ 
 ers saw only the increase in quantity; they did not see 
 that the exchange value of every wage dollar had actually 
 and automatically declined. In reality they were no better 
 off! But this they did not see, and do not seem to com¬ 
 prehend. Many of them followed the line of least resist¬ 
 ance—“easy come, easy go.” The old virtues of economy 
 and thrift went flying through the window. Wages were 
 spent without thought and without sense. It will, I fear, 
 take some time before thousands of wage earners will change 
 the bankrupting, poverty-bringing habits they acquired 
 during a period of seeming, and only seeming, prosperity. 
 
 4 
 
 Let us be honest with ourselves. Black clouds are gath¬ 
 ering in the heavens overhead, heavens from which the 
 once radiant star of hope has all but disappeared. How 
 long will it be before the storm will break? We have 
 begun to descend from the mountain top. The only ques¬ 
 tion is how long will it take to complete the downward 
 journey; how many times will we stumble and fall in the 
 ipevitable descent. We may not be entirely exhausted 
 when we reach the bottom, but we shall realize then—too 
 late—that our dream is o’er—that we have descended into 
 a vale of tears—only to enter the deeper valley of death. 
 If I see more than others it is not because I have a deeper 
 
336 
 
 The New Capitalism 
 
 ken and a keener vision, but because I have looked longer 
 and with more careful eyes. I pray that the years to come 
 may reveal that my fears were, if not unfounded, at least 
 exaggerated. 
 
 Hard Facts 
 
 Returning once more to the earth, out of the realm of 
 visions, I have no hesitancy in saying that Labor—organ¬ 
 ized and unorganized—has never had a single real triumph; 
 it has never gained a vital point in any controversy; its 
 victories were always concessions. Its several wage in¬ 
 creases have only added to its and our living costs. Not a 
 single benefit that is real, not a single advantage that is 
 clear cut and permanent has ever been accorded to Labor 
 by the constituency of the Capitalistic System. Labor has 
 won in some of the minor skirmishes; it has won a few 
 strikes; it has gained a few trivial concessions; it has a 
 few favorable wage compromises to its credit. But until 
 Labor can say that it has increased the exchange value of 
 the wage dollar it cannot boast of any substantial triumph. 
 
 The Perpetual Interest Charge on Wages 
 
 There is still another point that must not be overlooked 
 with regard to quantity wages. It will not be disputed 
 that Labor pays its own wages; whatever the quanta— 
 Labor pays it to itself. But not only does Labor pay its 
 own wages, it also pays the interest on its wages. Conse¬ 
 quently the greater the quantity of wages Labor receives 
 the greater the amount of interest it must pay on its own 
 wages. This is a most astounding fact, one rarely dis¬ 
 cussed by economic writers. And yet it is one of the most 
 important points in the whole wage question—so important 
 that I shall be at some pains to make it perfectly clear to 
 even the humblest intellect among us. 
 
 It will not be denied that Capital considers every dollar 
 of wages paid for the production or construction of per¬ 
 manent goods as an investment. Therefore, Capital charges 
 wages permanently against the property, and insists on 
 
Philosophy of the Quantity Wage 337 
 
 collecting interest on the total amount of wages paid, per¬ 
 petually, from the public—the constituent majority of 
 which is composed of wage earners. Let me explain just 
 what I mean. 
 
 The House that Jack Built 
 
 Let us say that in the year 1905 a group of twenty 
 workmen, each receiving $2.00 a day, completed a house, 
 doing all the work, excavating, masonry, bricklaying, wood¬ 
 work, plastering, painting, etc., within forty days. The 
 house, when completed, and lot—represent, let us say, an 
 investment of $6,000. Of this amount Labor received 
 $1,600. Please note that the item of labor will henceforth 
 be included in the investment value, and interest on it will 
 be computed not once, but once every year thereafter. 
 
 Now let us say that John Brown, one of the men who 
 worked on the building, rents it from the owner (who com¬ 
 puted the rental, let us say, at 8 percent on his investment), 
 for $40 a month, or $480 a year, and lives in it for fifteen 
 years. What happens? John Brown, the tenant, actually 
 pays 8 percent on all the wages paid to those who built 
 the house in which he lives. He pays $480 a year rental. 
 Of this amount $128 is interest on the $1,600 of wages 
 paid to himself and nineteen other workmen. 2 John Brown 
 received as wages for the forty days work he did on the 
 house he occupies, a total of $80; but he pays interest 
 not only on the amount he himself received, but also on 
 the amount the other nineteen workmen received. 
 
 A fifteen years’ tenancy in that building means that John 
 Brown will have paid a total rental of $7,200, of which 
 amount $1,920 is computable as interest on the wages paid 
 to the .workmen who constructed the house fifteen years 
 ago. In other words John Brown paid, in the course of 
 fifteen years, in the shape of rent, $1,920 interest on $1,600 
 
 2 Not only does John Brown pay interest on the wages he and 
 nineteen other workmen who built the house in which he lives, 
 received; he also pays interest on the wages the workers who 
 fashioned the materials, tools, etc., received. 
 
338 The New Capitalism 
 
 wages he and nineteen other workmen received fifteen 
 years ago. 
 
 The House that Jack’s Son Built 
 
 Bnt living costs have gone np. John Brown and his fel¬ 
 low workmen demanded and received sundry increases in 
 wages. In 1920, let us say, John Brown’s son and his fel¬ 
 low workers, all following the trades of their fathers, are 
 receiving each a wage of $8.00 a day. Just to illustrate 
 the effect of this let us say that the lot, and all the material, 
 are the same price as they were in 1905—that the building 
 trades alone had wage increases. In that case the twenty 
 workmen, each working forty days and receiving $6.00 a 
 day, would be receiving $240 per man, or a total of $4,800. 
 This would bring the value or cost of the $6,000 property 
 up to $9,200. 
 
 John Brown, Jr., rents the building. Assuming that the 
 landlord is content with 8 percent on his investment, John 
 Brown, Jr., will be paying $61.33 rent a month, or $736 a 
 year. John Brown, Jr., received $240 as his share for 
 the labor done on the building he now occupies as a tenant. 
 When he pays his rent he pays, as interest, on his own and 
 the wages nineteen other workmen received while build¬ 
 ing the house in which he lives—a total of $384 a year. 
 In the course of fifteen years he will have paid as interest 
 on $4,800 wages which he and nineteen other workmen re¬ 
 ceived fifteen years ago—a total of $5,760. John Brown 
 is considerable of an optimist, not to say, cheerful idiot— 
 if he considers himself better off than his father. 3 
 
 Another Illustration 
 
 Surely there is none to deny that every dollar of wages 
 that has been paid for the construction of the railroads in 
 the United States has become a permanent part of the in¬ 
 vestment, and the public today is paying interest on those 
 wages. So will the generations to come. Tens of thousands 
 of those whose labor built the railroads are dead and gone— 
 
 3 And what holds for dwellings is likewise true of all buildings, 
 offices, stores, shops, factories, warehouses, storage houses, etc. 
 
Philosophy of the Quantity Wage 339 
 
 but the wages they once received are still carried on the 
 books of the companies as an investment; and interest on 
 that wage investment of tens of thousands of dead and 
 buried workers is still demanded from us. 4 
 
 Here is food for thought. Labor not only pays its own 
 wages, but pays the interest on the wages of all workers. 
 And these interest charges, as shown in the case of dwell¬ 
 ings, the railroads, and many other properties, or commodi¬ 
 ties, are perpetual. On the wages Capital pays once in a 
 current year, Capital charges interest for a long period of 
 years. The higher the aggregate wage the greater the interest 
 charge on the entire volume of wages paid. 5 It is a vicious 
 circle. All that Labor receives as wages is paid back in the 
 shape of rent or interest, one way or another. Let Labor 
 sit up and take notice. 
 
 “It Makes a Difference Whose Ox Is Gored” 
 
 What w r ould you say if I were to argue that since the 
 wages paid for the production, or construction, of perma¬ 
 nent goods became a permanent and integral part of an 
 investment, then it follows that those whose labor increased 
 the value of the property, and gave permanency to the 
 investment, ought to reap the benefit? 
 
 Beyond a doubt a cry of horror and the chorus shout of 
 “Absurd!” from the lips of millions,—constituents and 
 beneficiaries of the Capitalistic System,—would rent the 
 air. And yet the intimation I put forth is less absurd 
 
 4 It is bad enough that the public is compelled to pay interest 
 perpetually on wages that were paid for the construction of the rail¬ 
 roads and the materials that went into them decades and scores 
 of years ago; but the heinousness of compelling the public to pay 
 interest on wages that were never paid, and high priced materials 
 that were never put into the properties, on the basis of “replace¬ 
 ment valuation,’’ must be obvious to the veriest tyro in economics. 
 
 5 It can be shown that the public pays interest also on all 
 wages paid for the production of transient goods—goods to which 
 no permanency attaches—the consumptive products, such as shoes, 
 clothes, all kinds of wearing apparel, fabrics and textiles, food articles, 
 perishable goods, coal, etc. etc., the difference being that the interest 
 is computed once on the gross volume of the goods produced within 
 twelve months. In the case of transient goods the wage invest¬ 
 ment is repetitive and interest is collected from the public from 
 year to year. Whereas, in the case of permanent goods the wage 
 investment is considered permanent, the interest charge is perpetual, 
 and Capital collects it year after year. It’s a distinction without a 
 difference. The public pays. 
 
340 
 
 The New Capitalism 
 
 than the actual practice of the Capitalistic System of 
 today, by virtue of which wages paid once are made to 
 appear perpetually on the books of corporations, and on 
 which wages interest is collected year after year from the 
 very persons whose labor enhanced the value of the invest¬ 
 ment, from the wage earners, the non-investors, the public. 
 I am merely asking a question; I am putting forth no ad¬ 
 vocacy in this paragraph; but it seems preposterous that 
 those who gave not a single hour of labor should be the per¬ 
 petual beneficiaries of the permanent value which wage 
 earners admittedly gave to their investment. 
 
 But I do not want to pursue this most interesting argu¬ 
 ment to its logical end. To do so would be interesting, but 
 alien to the purposes of this book. The one point, however, 
 that I wish to emphasize is this: If those whose labor 
 added a certain value to various kinds of properties—are 
 not to derive a benefit other than a wage—at least they 
 ought not to be penalized and made to pay perpetual inter¬ 
 est on the wages they, or their associates, may once 
 have received. 
 
 Quantity—Not the Ultima Thule 
 
 I have emphasized that mere quantity wages is not the 
 summum bonum nor should it be the ultima thule of any 
 economic arrangement. The exchange value is the impor¬ 
 tant thing. Today Labor is receiving what might be called 
 a maximum wage, but the exchange value of its wages was 
 never lower. This is a point which Labor owes to itself to un¬ 
 derstand fully. Nothing is gained by self-delusion. Certainly 
 I who am writing this book will not deceive those who 
 work for a wage. I would have them know the truth. I 
 will not lie to them. I will not indulge in ambiguity; I 
 will not equivocate. Until the lesson that the exchange value 
 of wages is the crux of the wage question is learned, no 
 progress can be made. 
 
The Genesis of Wages and Living Costs 
 
 CHAPTER NXY 
 
 I N this chapter I shall confine myself to a brief discus¬ 
 sion of a few of the salient points entering into a com¬ 
 parative study of Wages and Prices. In the minds of 
 most people there is a more or less confused notion, sedu¬ 
 lously propagated by the myrmidons of the Capitalistic En¬ 
 trepreneurs, that wages and prices are intimately connected 
 —that wage increases are responsible for price increases, 
 etc. A moment’s reflection would dispel this altogether 
 erroneous impression; for in every instance prices went 
 up first; wages were increased afterwards (reluctantly 
 enough) to enable wage workers to meet the previously 
 advanced prices. In view of which indisputable fact we 
 may eliminate wage increases as a came for price increases; 
 just the reverse is true. To say or to lead people to believe 
 that wage increases are responsible for increases in living 
 costs, is putting the cart before the horse—a deliberate 
 falsehood. 1 
 
 A Basic Economic Lie 
 
 I’ll waste no time in verbosely proving what everybody 
 knows, that naturally enough wages enter into the cost of 
 commodities—but wages is not the only item that enters in; 
 as a matter of fact wages are, for many commodities, the 
 smallest item. Several economic writers have recently 
 stated that wages constitute 70 percent of the cost—an 
 absurd statement utterly disproved by hundreds of sets of 
 statistics. 
 
 0. -A. Mather, a staff writer of the Chicago Tribune, in 
 
 l W. Jett Lauck in a highly interesting and illuminating pamphlet 
 of 92 pages, prepared for the United States Railroad Labor Board, 
 shows conclusively that increased wages to labor are in no way 
 responsible for increased prices. 
 
 341 
 
342 
 
 The New Capitalism 
 
 an article (October 18, 1921), gives some interesting sta¬ 
 tistics pertaining to this subject. According to these sta¬ 
 tistics the wages of railroad employees, who, it is dinned 
 into our ears, receive the highest recompense of all workers, 
 in 1901 represented 38.8 percent of earnings; in 1916, 41 
 percent; in 1917, 43.7 percent; in 1918, 54 percent; in 
 1919, 55.4 percent, and in 1920, at the peak, 60.0 percent. 
 
 In other industries: Wages in the United States Steel 
 Corporation, for example, amounted to 33 1-3 percent of 
 earnings; General Motors Corporation 38 percent; Inter¬ 
 national Harvester Co. 40 percent. 2 
 
 Some, not content with giving the impression that Labor 
 receives the lion’s share of all production, have gone even 
 further. Representative J. W. Fordney, author of the 
 Fordnev Tariff Bill, which contained the notorious ‘ ‘ Amer- 
 ican valuation” plan, speaking before the State Manufac¬ 
 turers’ Association in Chicago (September 29, 1921) said: 
 
 “There is not a manufactured article produced in the 
 United States in which the labor cost is less than 90 per¬ 
 cent of the total cost.” Congressman Fordney may hide 
 behind the subterfuge that “wages” and “labor cost” are 
 not one and the same thing, but the general public doesn’t 
 know how to differentiate; in the mind of the average per¬ 
 son the two are closely allied, if not identical. 
 
 James B. Morman, economist for the Federal Farm 
 Labor Board, in an article September 17, 1921 issue of The 
 Magazine of Wall Street says: “We find that the one 
 dominant factor in changing price levels is the labor ele¬ 
 ment.” “The cost of labor,” he says further on, “is the 
 all-important and general factor.” And then he proceeds 
 to explain that in “labor costs” are included not only 
 wages actually paid to wage earners, but salaries, commis¬ 
 sions, and even profits. Here are his words: 
 
 “Summing up the entire problem we find that the one 
 
 2 In all probability these percentages include salaries of officials, 
 managers, etc. If wages paid to wage workers alone were com¬ 
 puted, the percentage would be considerably lower than those given 
 by the corporations. So, too, would the wages per wage earner be 
 less than reported. 
 
Wages and Living Costs 
 
 343 
 
 dominant factor in changing price levels is the labor 
 element. It is true that a few other incidental elements 
 enter into and affect prices in the processes of transporting, 
 manufacturing and retailing products, but the all-impor¬ 
 tant and general factor is the cost of labor. Even what 
 are called ‘profits,’ ‘commissions’ and other costs for han¬ 
 dling raw materials or goods in unfinished or finished 
 form are the ‘wages’ charged by middlemen for services 
 of themselves and their employees in the processes of pass¬ 
 ing such products on toward the ultimate purchaser for 
 use or consumption. The mere difference in terms does 
 not alter the principle involved whether the remuneration 
 is called wages, salary, commission or profits. ’ ’ 3 
 
 If all these things are included under “labor costs” no 
 wonder Congressman Fordney says “labor costs” consti¬ 
 tute 90 percent of the total cost. 
 
 I am unable to understand why Labor allows the Capi¬ 
 talistic claim that wage earners receive the lion’s share of 
 recompense, to go unchallenged. A principle is involved, 
 of which wage earners owe it to themselves to make an 
 issue. Hasn’t Labor a head as well as a fist ? Speaking for 
 myself, I should like to have all those who assert that wages 
 constitute 70 percent of the cost of commodities, and those 
 who, like Mr. Fordney, declare that labor cost is not less 
 than 90 percent of the total cost —prove their contention 
 —let us say, for example, with regard to steel rails, or any 
 other manufactured article for the matter of that; or for 
 a commodity such as coal, for example. 
 
 The “Percentage” Device 
 
 But let us pursue our studies anent prices and wages. 
 No! Wage increases are not responsible for increases in 
 prices of commodities, or in living costs in general. This 
 is so obvious that I almost consider it a waste of space to 
 dwell at length on this point. The utterly dishonest and 
 disreputable Capitalistic device of computing increases in 
 
 3 Excerpt from "Why Commodity Prices Fluctuate,” by James B. 
 Morman, in The Magazine of Wall Street, September 17, 1921. 
 
344 
 
 The New Capitalism 
 
 percentages , is responsible for the wrong impression that 
 has taken hold of the average person’s mind—that wage in¬ 
 creases are responsible for price increases, or for what 
 collectively we call increased living costs. It is to be re¬ 
 gretted that the average man or woman has neither the 
 time, nor facilities, for examining into this subject. It is 
 indeed remarkable that not one of the hundreds of writers 
 on economic subjects, whose writings are regularly pub¬ 
 lished in the daily press, in financial, trade papers and 
 commercial periodicals, have ever gone to the trouble of ex¬ 
 posing the scurvy trick. “There can be no doubt,” says 
 one so-called economic writer, ‘ ‘ that if a hat-maker receives 
 $1.50 a day for making hats that sell for three dollars 
 apiece, and his wages have been increased 100 percent—so 
 that he now earns three, that the increase in wages neces¬ 
 sarily raises the price of each hat to six dollars.’’ 
 
 The questions in the case of the hatmaker to be answered 
 are: How many hats does the hatmaker turn out in a 
 day, and how many cents will his $1.50 (or 100 percent) 
 increase in wages add to the cost per hat? But most 
 pseudo-economic writers prefer not to bother with such 
 trifling details. It seems to be so much simpler, and alto¬ 
 gether more convenient and satisfactory, to deal in per¬ 
 centages. 
 
 George E. Roberts, Vice President of the National City 
 Bank of New York, in one of his pamphlets says: “People 
 seem inclined to blame the big corporations, ‘ big business, ’ 
 the ‘trusts,’ or somebody in that category, for the rising 
 costs of living. But the price tables show that the prices 
 of manufactured goods have increased by lower percentages 
 than the cost of the labor and the raw materials that en¬ 
 tered into them.” 
 
 This is a typical example of Capitalistic camouflage— 
 an artistic blending together of half truths, perversions of 
 the truth and just plain lies. I challenge Mr. Roberts to 
 substitute for the dishonest percentage basis of figuring 
 increases, the dollars and cents basis, which if he will do a 
 different state of affairs than he claims, will be revealed. 
 
Wages and Living Costs 
 
 345 
 
 The “Cent” System versm 
 the “Percentage System” 
 
 I call for the abrogation of the Percentage System of 
 computing increase in costs and prices, and the substitution 
 of the cent system. Let me briefly illustrate the difference 
 in principle between the two systems. 
 
 Let us say that when the basic price of hogs was $6.00 
 per hundredweight (six cents a pound) the wholesale 
 slaughterer sells the hog products to the retail dealer for 
 twelve cents a pound; and the retail dealer sells same to the 
 public for eighteen cents a pound. 
 
 Now let us say that the price of hogs has gone up to 
 $12 per hundredweight—an increase of six cents per pound, 
 or rather an increase of 100 percent. This 100 percent 
 increase is passed along to the consumer. Under the ex¬ 
 tortion of the Percentage System of figuring increases the 
 retail dealer now pays twenty-four cents a pound for the 
 hog products, and sells same to the public for forty-eight 
 cents a pound. The percentage increase formula reads 
 about as follows: 
 
 Basic Prices 100 per cent increase 
 
 per pound Prices per pound 
 
 Hogs . 6 cents Hogs .12 cents 
 
 Hog products to dealer. 12 cents Hog products to dealer. 24 cents 
 Same to the public.18 cents Price of same to public.. 48 cents 
 
 The consumer pays three separate 100 percent increases. 
 
 But under the cent system of figuring increases the 
 formula would be as follows: 
 
 Basic Prices Six cents increase 
 
 per pound Prices per pound 
 
 Hogs . 6 cents Hogs .12 cents 
 
 Hog products to dealer. 12 cents Hog products to dealer.. 18 cents 
 Same to the public.18 cents Same to public .24 cents 
 
 This'would be fair and reasonable—the consumer would 
 pay the actual number of cents increase in the basic cost 
 once , not a 100 percent increase three times (or oftener) 
 as is the case under the Percentage System of computing 
 
 increases. 
 
346 
 
 The New Capitalism 
 
 The Science of Profiteering 
 
 It is under the guise of this Percentage System of com¬ 
 puting increases that profiteering has been raised to the 
 dignity of a science. It is not difficult to see that since the 
 average commodity passes through three or four hands 
 before it ultimately reaches the consumer, each person or 
 firm figuring percentage of increase, that the sale price 
 will reach such a sightly figure, even though the increase 
 in wages per unit of production, figured in dollars, or 
 cents, is trifling. Thus, for example, if the item of wages 
 on a given article which the manufacturer sells to the 
 wholesaler for one dollar is 30 cents, and the wages go 
 up 100 percent, or to 60 cents, the manufacturer will 
 raise his price to the wholesaler 100 percent, or to $2.00. 
 The wholesaler, who used to sell the article to the retailer 
 for $1.50, will now raise the price 100 percent, or to $3.00. 
 The retailer, who used to sell it for $2.00, will now sell it 
 for $4.00. This example is intended to show the principle 
 of the Percentage System in figuring wage and price 
 increases. The point to be emphasized is that the 
 final purchaser, alias the ultimate consumer, pays 
 three (or more) separate 100 percent increases. It is an 
 excellent system from the profiteer’s standpoint. 
 
 For the sake of greater emphasis, I’ll repeat, that in all 
 cases prices were advanced before wages were increased. 
 But even if the wage increases had preceded increases in 
 commodity prices, or in living costs, it could be shown 
 that in all cases the increase in prices, per unit of produc¬ 
 tion, were considerably greater than the increases of the 
 workers’ wages. A single specific example will suffice to 
 illustrate my contention: 
 
 In 1915, according to the Shoemakers’ Journal, August, 
 1921, the amount of wages paid for making a pair of a 
 given quality of men’s shoes, was 60 cents;-this shoe sold 
 retail for $3.50. 
 
 In 1918 the amount of wages paid for making the same 
 shoe was $1.02 —an increase in wages of 62 cents per pair; 
 
Wages and Living Costs 
 
 347 
 
 but the retail price was advanced to $10 and $12 —an in¬ 
 crease to the consumer from $6.50 to $8.50 a pair. 
 
 Steel Prices and Wages 
 
 That the quantity increase in prices, per unit of produc¬ 
 tion, is, generally speaking, considerably greater than the 
 quantity increase in wages per unit, is bountifully exem¬ 
 plified in the steel industry, for which complete data for 
 wage and price increases are available. The data for wages 
 are from the official announcement made by Elbert H. 
 Gary, Chairman of the Board of Directors, August 19, 
 1921; and those for prices are taken from the Iron Age: 
 
 Feb. 
 
 1, 
 
 1915 
 
 $2.00 
 
 Feb. 
 
 1, 
 
 1916 
 
 2.20 
 
 May 
 
 1, 
 
 1916 
 
 2.50 
 
 Dec. 
 
 15 , 
 
 , 1916 
 
 2.75 
 
 May 
 
 1, 
 
 1917 
 
 3.00 
 
 Oct. 
 
 1, 
 
 1917 
 
 3.30 
 
 Apr. 
 
 16 
 
 ,1918 
 
 4.80 
 
 Aug. 
 
 1, 
 
 1918 
 
 4.20 
 
 Oct. 
 
 1,1918 
 
 4.62 
 
 Feb. 
 
 1, 
 
 1920 
 
 5.06 
 
 May 
 
 16 
 
 , 1921 
 
 4.05 
 
 July 
 
 16 
 
 , 1921 
 
 3.70 
 
 Aug. 
 
 29 
 
 ',1921 
 
 3.00 
 
 * Price not 
 
 given. 
 
 Bessemer Bessemer 
 Steel Rail Pig Iron at 
 at Mill Pittsburgh 
 
 $28.00 
 
 $14.55 
 
 28.00 
 
 21,51 
 
 33.00 
 
 21.95 
 
 38.00 
 
 35.68 
 
 38.00 
 
 45.15 
 
 * 
 
 37.25 
 
 55.00 
 
 36.15 
 
 55.00 
 
 36,60 
 
 55.00 
 
 36.60 
 
 55.00 
 
 42.90 
 
 47.00 
 
 26.16 
 
 47.00 
 
 22.84 
 
 47.00 
 
 21.96 
 
 Bessemer 
 
 Basic Pig 
 
 Steel Billets 
 
 Iron F.O.B 
 
 at Pittsburgh 
 
 Furnace 
 
 $19.50 
 
 $12.50 
 
 33.50 
 
 17.69 
 
 45.00 
 
 18.00 
 
 57.50 
 
 30.00 
 
 86.00 
 
 41.60 
 
 49.38 
 
 33.00 
 
 47.50 
 
 32.00 
 
 47,50 
 
 32.00 
 
 47.50 
 
 33.00 
 
 55.25 
 
 42.25 
 
 37.00 
 
 22.00 
 
 32.25 
 
 19.38 
 
 29.60 
 
 18.20 
 
 Comment is hardly necessary. The figures speak for 
 themselves. Similar price increases can be noted for all 
 of the 88 iron and steel products listed in the War Indus¬ 
 tries Board’s Price Bulletin No. 33. All conclusively show 
 that the dollar and cents increases in the prices of the 
 articles produced, were considerably greater than the dollar 
 and cents increases in the wages of those who produced 
 them. 4 
 
 John Skelton Williams, at the time Comptroller of the 
 
 4 As a matter of fact an official of the Bethlehem Steel Corporation 
 himself admits that wage increases are not the principal reason for 
 the increase in the prices of iron and steel products. I quote this 
 official’s statement further along" in this chapter. 
 
348 
 
 The New Capitalism 
 
 Currency, in his letter to Elbert H. Gary says, speaking 
 of the 1918 report of the United States Steel Corporation: 
 
 “We find that they received an average of $87.70 per 
 ton for every ton of the 14,124,986 tons of rolled steel and 
 other products shipped to domestic and export trade.” 
 
 According to Mr. Williams “the United States Steel 
 Corporation paid out during the calendar year 1918 on 
 pay rolls, including administrative and selling departments, 
 as well as all manufacturing departments, a total of $452,- 
 663,524”—(in other words a trifle more than thirty dollars 
 per ton for all wages and all salaries). 
 
 Mr. Williams declares that the earnings of the United 
 States Steel Corporation “were so large that the Company 
 could, during the year 1918, have doubled the salaries and 
 wages paid to everyone of its 268,710 employees and offi¬ 
 cers, amounting to $452,663,524, and would have had a 
 surplus of $96,517,000 left over.” 
 
 From all of which it is clear that the quantity increase 
 in the price of steel products was not caused by any 
 quantity increase in wages; and that the dollar and cents 
 increase in prices was many times greater than the dollar 
 and cents increase in wages. 
 
 One Dollar Wage Increase—Two Dollars 
 Living Cost Increase 
 
 These disposed to argue that the tremendous increase in 
 retail prices was caused by marked increases in the prices 
 of the various materials going into commodities, are involv¬ 
 ing themselves in a vicious circle. If the increase in the 
 price of every kind of material going into a shoe (or any 
 other commodity) is fairly computed in dollars and cents, 
 instead of percentages, it will be found that the aggregate 
 increase in the price of all materials used does not begin to 
 justify the tremendous increase in the price of shoes (or 
 other commodities). 
 
 No matter what article you take, whether manufactured 
 or one whose production is not complicated with other ma¬ 
 terials—coal, for example—if the cent system is used in- 
 
Wages and Living Costs 
 
 349 
 
 stead of the Percentage System, it will be found that in 
 every instance the price increase per unit of production, 
 was considerably greater than the increase in wages per 
 unit of production. Which being the case, it is unfair to 
 Labor and to the public, to pretend that so-called high 
 wages are responsible for the prevailing high prices. 
 
 No matter which industry we analyze in an endeavor 
 to discover the relationship, if any exists, between wage 
 increases and price increases, we observe the same phe¬ 
 nomenon. For every dollar of wage increase per unit of 
 production, there has been an increase of from two to ten 
 (and more) dollars in the price of the commodity con¬ 
 sumed. And for every dollar of increase that wage earn¬ 
 ers received the living costs increased not less than two 
 dollars. When I say this I wish it to be understood that 
 I am not guilty of exaggeration; on the contrary I am un¬ 
 derstating the actual condition, particularly if we ex¬ 
 tend the discussion to cover living costs in general—which 
 includes the item of Rent. 
 
 From 1900 to 1914 the cost of living—that is with regard 
 to all commodities produced by Labor, or into which the 
 element of labor entered—all except rent—practically 
 doubled; but wages did not double within the same period. 
 In 1900 the cost of living per family was approximately 
 $650. By 1914 the cost of living had mounted to $1,100,— 
 an increase of $450; whereas the wages per worker had 
 advanced from $417 in 1900 to only $580 by 1914 ,—an 
 increase of only $163. The only thing that made the situa¬ 
 tion endurable was the fact that rents did not rise ma¬ 
 terially between 1900 and 1914. For whatever reason land¬ 
 lords did not dare to raise their rentals appreciably up to 
 that time. 
 
 Doubling the Rent 
 
 From 1914 to 1920 living costs practically doubled. 5 This 
 
 5 In November, 1919, the Bureau of Applied Economics reported that 
 the minimum of subsistence level was approximately $1,575 in the 
 latter part of 1919 ; whereas the cost of maintaining - the minimum 
 of comfort level was $1,760 in June, 1918 ; and approximately $2,000 
 in 1919. 
 
350 
 
 The New Capitalism 
 
 time the landlord took a hand. Rents were practically 
 doubled, were increased 100 percent, since that is the 
 language some understand best. Why? On account of 
 the increase in the wages of those engaged in the building 
 trades, some will quickly answer. Indeed? What are the 
 facts? The facts are that probably ninety-five percent of 
 all the buildings and apartments occupied by tenants were 
 built under old wage rates and scales. Many of the build¬ 
 ings are ten, fifteen, twenty and more years old—erected 
 when all building wages (and materials) were low. But 
 for all buildings, regardless of when erected, rentals were 
 increased, in round numbers, an average of 100 percent. 
 The landlords computed the increases on the basis of 
 present day building costs—present day prices for wages 
 and materials. They reasoned thus: If we had put up 
 our building in 1920 instead of in 1900, or 1905, or 1910, 
 it would have cost us thus and thus much; therefore we are 
 justified in charging rentals based upon 1920 prices of 
 wages and materials. 6 This is the kind of rotten economic 
 logic that is universal today, and not a single economic 
 writer, or statesman, to challenge it. 
 
 Wages That Were Never Paid 
 
 Still confining myself to the item of wages paid to the 
 workers in the building trades, I have shown in a preced¬ 
 ing chapter that the tenant pays annual interest on every 
 dollar of wages that goes into a building, whether applied 
 on the production of the material or for the labor of actual 
 construction. That’s bad enough; but to charge the ten¬ 
 ants interest on labor that was never performed, and on 
 wages that were never paid—is a crime against common 
 decency and though sanctioned by “economic laws” and 
 “good business practice,” I denounce it as a heinous 
 offense against the public. 
 
 And what I say of dwelling places applies with equal 
 
 e Those with keener vision will probably emphasize the increased 
 price of coal, taxes, insurance, janitor’s wages, etc. Very well! but 
 let them compute the aggregate increases in dollars and cents, not 
 in percentages. 
 
Wages and Living Costs 
 
 351 
 
 force to office and store buildings, factories, warehouses, 
 storage plants, etc., all of which helps to explain not only 
 the increase in the prices of commodities—but living costs 
 in general. It is bad enough to compute prices of com¬ 
 modities on the basis of higher costs actually chargeable, 
 but to compute them on fictitious costs is an economic 
 crime that cries to heaven for vengeance. Here w r e see 
 two of the Capitalistic devices employed to exploit the 
 public; 1,—the Percentage System; and 2,—charging 
 rentals on the basis of what it pleases some to call “re¬ 
 placement value.” 
 
 At any rate, out of all this, one thing stands out clear 
 and strong, and that is that Labor—the wage earners— 
 cannot be blamed for the 100 percent increase in the item 
 of rent with regard to 95 percent of buildings. Nor are 
 wage earners responsible for the high prices of most com¬ 
 modities. 
 
 The Nation’s Tremendous Freight Bill 
 
 By far the greatest increase in the list of “costs” is the 
 item of freight. The several freight increases allowed to 
 the carriers means that the public is paying freight bills 
 amounting to several billion dollars a year over former 
 years. Just a few examples, to give substance and edge to 
 my statement. 
 
 A lumber dealer, writing to Capper’s Weekly , July 2, 
 1921, says in his letter: 
 
 “Ten years ago or less, it cost $5.50 a thousand to put 
 lumber in our yard. That is what freight bills called for 
 then. Now it costs $21.75 per thousand feet.” 
 
 In the 1921 “literature” prepared by the National Coal 
 Association (Washington, D. C.) we read as follows: 
 
 “Freight rates have approximately doubled since 1914. 
 Where the average freight rate was about $1.50 a ton in 
 pre-war days, the average rate now, so far as it is possible 
 to strike an average, is about $3 a ton. For long distances 
 from the mines the freight rates run much higher than 
 $3 a ton. 
 
352 
 
 The New Capitalism 
 
 “This increase of $1.50, applied to a yearly production 
 of 550,000,000 tons, represents an advance in the cost of 
 coal to the consumer of the country over, on account of 
 freight charges, of $825,000,000.’ ’ 
 
 The following is from an item that appeared in the 
 Chicago Daily News, October 10, 1921: 
 
 “ Kelationship between increased freight rates and 
 cement prices is shown in a statement prepared by the 
 Universal Portland Cement Company. It says in part: 
 
 “ ‘The freight rate from Buffington, Ind., to Milwaukee, 
 for example, in 1917 was 23 cents, and now is 49 cents a 
 barrel. This is an increase in freight rates since 1917 of 
 about 113 percent. 
 
 “ ‘In considering these comparative increases of 37 per¬ 
 cent in cement prices and 113 percent in freight rate, it 
 should be borne in mind that the effect of increased freight 
 rates is not confined to the cost of moving the finished 
 product from mill to destination; the higher rates apply 
 also on incoming raw materials, and thus affect the cost 
 of manufacture as do taxes and other factors over which 
 the manufacturer has no control. ’ ” 
 
 According to an editorial note by Arthur Brisbane 
 (October 10, 1921) : 
 
 “You can buy brick now wholesale at $16 a thousand. 
 That sounds cheap, compared with $40 and more not long 
 ago. It sounds dear compared with $6 and $8, the old 
 price for ordinary brick. But the price of brick makes 
 little difference when you consider the price of hauling. 
 To haul a thousand bricks less than fifty miles, some rail¬ 
 roads charge $15, about 100 percent more than brick used 
 to cost delivered, not so long ago. They say ‘Freight rates 
 do not affect the consumer.’ They do, if you pay a cent 
 and a half to carry one brick fifty miles.” 
 
 Letting the Cat Out of the Bag 
 
 But the most authoritative proof that for many commodi¬ 
 ties freight rates, rather than high wages, are responsible 
 for the prevailing high prices, we find in the September 
 
Wages and Living Costs 
 
 353 
 
 1921 Monthly Review Letter issued by the National City 
 Bank of New York, of which George E. Roberts, already 
 quoted in this chapter, is the author: 
 
 “Mr. Grace, President of the Bethlehem Steel Company, 
 has made a statement explaining that if allowance is made 
 for the increase in costs due to railroad charges, steel 
 products are now lower than before the war. In an¬ 
 nouncing new and lower prices for steel products, going 
 into effect on July 5th, last, Mr. Grace said: 
 
 “ ‘The increase in freight rates has been the largest 
 factor in increasing the cost of manufacturing steel prod¬ 
 ucts because the making of a ton of finished steel involves 
 the transportation of more than five tons of raw materials. 
 The cost factors next in importance are raw materials and 
 labor. 
 
 “ ‘Taking as an example the price of structural shapes, 
 under the new schedule of prices, 2 cents a pound, or 
 $44.80 a gross ton, the comparison with pre-war prices, 
 reflecting concretely the three more important cost factors 
 is as follows: 
 
 “ ‘1st: The increase over pre-war cost in transportation 
 on ore, coal, limestone, scrap and miscellaneous supplies 
 amounts to $7.85 per ton of finished steel. 
 
 ‘ ‘ ‘ 2nd: The increase in the cost of coal, ore, limestone, 
 alloys, refractories, lubricants and miscellaneous supplies 
 at point of shipment amounts to $7.10 per ton of finished 
 steel. 
 
 ‘ ‘ ‘ 3rd: The increase in the cost of labor under the 
 present wage scale, as compared with pre-war wages in 
 the steel plant proper, is $5.64 per ton of finished steel. 
 
 “ ‘The figures I have used are the result of actual com¬ 
 pilation made by.the Company’s comptroller in the every 
 day conduct of the business.’ 
 
 “Iron and steel products enter into farm implements, 
 railroad costs, and the costs of every line of industry. ’ ’ 
 
 I have nothing to say in comment of Mr. Grace’s state¬ 
 ment at this time, except that his figures show that of the 
 increase in the price of the finished steel per ton, $7.85 
 
354 
 
 The New Capitalism 
 
 went to the railroads, $7.10 to the mine owners, and those 
 who have a monopoly on raw materials, and $5.64 to labor. 
 
 Needless to say neither Mr. Grace, nor Mr. Roberts of 
 the National City Bank, offered the above statement by 
 way of exonerating Labor from the unjust charge that the 
 high wages paid to industrial workers are responsible for 
 high prices. Quite the reverse. The statement is really 
 intended as a twin argument for a still further reduction 
 in the wages of railroad employees and in the w T ages of 
 industrial workers. The intended inference is that freight 
 rates are high on account of the wages railroads are pay¬ 
 ing their employees. 
 
 The Monthly Review Letter of the National City Bank 
 of New York, from which I have already quoted, mentions 
 that reduction in wage rates “ probably would permit of 
 an even greater reduction in freight rates, particularly if 
 it is accompanied by corresponding reductions throughout 
 all the industries, because the stimulus given to business 
 would increase the volume of railroad traffic. Railroad 
 rates are under public supervision, and there is every 
 reason to believe that they would be made to conform to 
 increased earnings. 
 
 “ Finally, such a general reduction of industrial costs 
 would reduce the ‘cost of living,’ not only to railroad em¬ 
 ployees but to wage-earners, farmers and everybody, in¬ 
 crease the purchasing power of the entire population, en¬ 
 large the consumption of all products, and improve the 
 whole situation. ’ ’ 7 
 
 The Bach-Fire of Capitalistic Logic 
 
 Harking back once more to Mr. Roberts’ queer statement 
 that “the prices of manufactured goods have increased by 
 lower percentages than the cost of the labor and the raw 
 materials that entered into them ’ ’—there * is a modicum 
 
 T The wages of railroad employees were reduced by $400,000,000 
 notwithstanding which reduction railroad officials immediately 
 announced that freight rates would not be lowered. The evident 
 design of the Capitalistic interests is to bring the wages of railroad 
 employees down to the level of workers in the industries. 
 
Wages and Living Costs 
 
 355 
 
 of truth in his claim that the increase in the cost of raw 
 materials has helped to increase the price of the finished 
 product. But Mr. Roberts fails to state that the same 
 Capitalistic Entrepreneurs who own the important indus¬ 
 tries also have a monopoly on the raw materials—and that 
 prices are fixed by them for the raw materials, and the 
 finished products independently of the wages paid to the 
 workers. And that quantity prices of raw material and 
 finished product have been increased far in excess of the 
 quantity increase in the wages of the workers. And since 
 freight rates seem to play so conspicuous a part in the 
 price of materials and products — and therefore living 
 costs—it may not be amiss to emphasize here that the 
 same group that controls the industries and raw materials, 
 also controls the railroads. 
 
 The Unassailable Fact Stated 
 
 I think I have shown to anyone disposed to be fair, that 
 the quantity increase in wages is not responsible for the 
 quantity increase in the prices of living commodities, or 
 commodities in general. In the first place prices went 
 up first; wages were increased afterwards (and generally 
 under compulsion) merely to enable wage earners to meet 
 the advance in living costs. Moreover, for every one dollar 
 increase in wages, living costs went up not less than two 
 dollars. Under these circumstances the injustice and the 
 absurdity of blaming Labor for increases in living costs is 
 obvious. 
 
CHAPTER XXVI 
 
 The Cost of Living Basis of Wages 
 
 T one of the Chicago theatres recently, several sheep 
 
 appeared on the stage in one of the scenes of the 
 
 JL -m.play. During the day these sheep were kept in the 
 lobby of the theatre as an advertisement. Everybody who 
 passed that theatre in the course of a day, paused for a 
 moment, or perhaps only turned his or her head to glance 
 at the sheep—a unique sight in a crowded city. The sheep 
 received no wages or salary, neither for the part they 
 played on the stage, nor for their advertising value or 
 power. They received nothing but their upkeep. And 
 this is precisely the case with the wage earners whose wages 
 are computed on the “cost of living’’ basis. The average 
 man or woman who works is allowed nothing more than his 
 or her upkeep—clothing, food, shelter. A mere living is 
 all that is grudgingly allowed to those who labor for a 
 wage. The sheep’s owner has an advantage, in that the 
 upkeep of sheep embraces only the items of food and shel¬ 
 ter ; nature, not their keeper, provides them with clothing. 
 
 The Servitude of the Workers 
 
 The principle of basing wages upon cost of living is 
 traceable all through economic history. For many cen¬ 
 turies the economic line of demarkation was sharply drawn 
 between master and slave. To the masters belonged the 
 earth and all it brought forth through the labor of their 
 slaves, their bondmen, their serfs, their servants. All 
 property, all rights, all authority, all power, was vested in 
 the hands of a few, to whom belonged the land, the riches 
 and the treasures; the offices, the honors, and the emolu¬ 
 ments. The right of the few to rule, to govern, to com¬ 
 mand, to take, to own, to control, was never questioned by 
 the poor. There is no sense in denying that from the be- 
 
 356 
 
Cost of Living Basis of Wages 357 
 
 ginning of what it pleases ns to call civilization, society was 
 founded on slavery. Servitude was universally considered 
 as the natural state of the poor; misery and wretchedness 
 as their normal condition; hardships and suffering as their 
 portion by ancient heritage. A bare existence was all that 
 was allowed them; it was all they expected, and they were 
 disposed to be grateful even for that. 
 
 Taking it all in all, it is not strange that those who had 
 grown rich and become powerful through the toil of others, 
 and who were accustomed to keep for themselves the entire 
 usufruct of labor, did not readily accept the idea of re¬ 
 warding those who in former times had served them without 
 any recompense whatever. Nor is it remarkable that when 
 the absolute necessity of rewarding those who toiled had to 
 be recognized, the same old principle of allowing those 
 who labor just enough recompense to enable them to live, 
 was applied. 
 
 Wages Around A. D. 1650 
 
 Adam Smith, the first edition of whose noted work, * ‘ The 
 Wealth of Nations,” was published in 1776, writing “Of 
 the Wages of Labor,” relates that: 
 
 “Lord Chief Justice Hales, who wrote in the time of 
 Charles II, computes the necessary expense of a laboring 
 family, consisting of six persons, the father and mother, 
 two children able to do something, and two not able, at 
 ten shillings a week, or twenty-six pounds a year. If they 
 cannot earn this by their labor, they must make it up, he 
 supposes, either by begging or stealing. ’ ’ 1 
 
 It is not my purpose to examine into Adam Smith’s 
 views with regard to wages, but to his credit be it said 
 that he favored a liberal wage, not, perhaps, so much as 
 a reward of labor as on account of the advantage that 
 would naturally accrue to the wealthy from the greater 
 contentment, and the greater industry of the laboring 
 class; and particularly because it encouraged marriage 
 
 i Adam Smith says that Chief Justice Hales “appears to have 
 inquired very carefully into the subject.” 
 
358 
 
 The New Capitalism 
 
 among the poor and stimulated their fecundity, thus in¬ 
 suring for industry “the multiplication of laborers,” which 
 “multiplication,” needless to say, implied cheaper labor 
 and consequently bigger profits for those who owned both 
 the capital and the wealth. 
 
 The “Law” of Wages as Stated by Ricardo 
 
 Ricardo, whose “Principles of Political Economy and 
 Taxation” was published in 1817, is considered to have 
 been the first to formulate the principles underlying the 
 law of wages. He says (Chapter V), in his discussion on 
 “Wages”: 
 
 “The power of the laborer to support himself, and the 
 family which may be necessary to keep up the number of 
 laborers, does not depend on the quantity of money which 
 he may receive for wages, but on the quantity of food, 
 necessaries and conveniences become essential to him from 
 habit, which that money will purchase. The natural price 
 of labor, therefore, depends on the price of food, necessaries 
 and conveniences required for the support of the labourer 
 and his family. With a rise in the price of food and neces- 
 aries, the natural price of labor will rise; with the fall in 
 their price the natural price of labor will fall. ’ ’ 2 
 
 According to the Economists—'Tis an Iron Law 
 
 The writings of Adam Smith and his contemporaries in 
 the eighteenth century, and those of Ricardo and his dis¬ 
 ciples in the nineteenth century, have, with such modifica¬ 
 tions and adaptations as became necessary by changes, 
 been accepted as representative and standard by the en¬ 
 tire group of political economists of the twentieth cen¬ 
 tury. This is particularly true with whatever concerns 
 the laboring class, and as regards the subject of their 
 wages. As a consequence the relative economic condition 
 of the workmen of today is in no wise an improvement 
 over the economic condition of the laborer who lived in 
 the time of Charles II. Wages, relative to living costs, 
 
 2 Ricardo also says: “There is no other way of keeping profits 
 up, but by keeping wages down.” 
 
Cost of Living Basis of Wages 359 
 
 are no greater than the wages of the laborer of two or 
 three centuries ago. 
 
 The Old Wage Law in Modern Clothes 
 
 Dogberry has said that “comparisons are odorous,” and 
 indeed they are sometimes, but if so it is because the things 
 compared themselves are foul. Yet comparisons, if made 
 in a spirit of fairness, are often illuminating, if not edi¬ 
 fying. Let us attempt a comparison between the laboring 
 family which around the middle of the seventeenth cen¬ 
 tury received a recompense of twenty-six pounds a year, 
 and w'hose necessary living expenses were computed at ten 
 shillings a week—and the laborer (and his family) of more 
 modern times. If it is permissible, for the sake of conveni¬ 
 ence, to account the value of the pound at around five 
 dollars in our money, then the seventeenth century com¬ 
 mon laborer and his family received a yearly wage amount¬ 
 ing to $130—which was then considered a sufficient amount 
 for a family of six. Evidently the $130 was not an 
 average income for all families; it would seem that the 
 earnings in many cases were not sufficient to meet the 
 necessary living costs, for we are told that “if they can¬ 
 not earn this by their labor, they must make it up, either 
 by begging or stealing.” 3 
 
 How does this amount of wages paid in 1650 in England, 
 compare with the amount of earnings of American artisans 
 two centuries later in the United States ? From the sundry 
 statistical records I have examined I can but conclude that 
 there is no unity of agreement as regards the amount of 
 wages paid in the United States in the first half of the 
 nineteenth century. Even those computations for the sec¬ 
 ond half are based on partial statistics or incomplete data 
 for certain industries. Wherever we may find them, from 
 whatever source they may have been derived, or however 
 they may have been computed, no scientific value attaches 
 
 3 The chronic inadequacy of the wages of English laborers for 
 the necessaries of life is repeatedly observed by James E. Thorald 
 Rogers in his work “Six Centuries of Work and Wages.” 
 
360 
 
 The New Capitalism 
 
 to them. They are at best approximations, in many cases 
 guesses, but the best available. 
 
 According to Professor Willford Isbell King, the average 
 yearly money wages per man were as follows: (Table 
 XXXI, p. 168.) 
 
 Census Years Average Money Wage 
 
 1850.$ 204 
 
 1860. 265 
 
 1870. 397 
 
 1880. 323 
 
 1890. 398 
 
 1900. 417 
 
 1910. 507 
 
 1915. 600 4 
 
 1920. 1200 4 
 
 My own data and computations would lead me to believe 
 that Professor King's statistics, especially for the years 
 1850 to 1900, are rather low as an average for all workers. 
 However, I am quite willing not to press my own findings, 
 preferring to accept those of a recognized authority. 
 
 It is to be noted here that in point of quantity the wages 
 of an American wage earner in 1850 were less than a hun¬ 
 dred dollars higher than the income of an English laborer’s 
 family in 1650. The contrast in economic and industrial 
 conditions between 1650 and 1850 is so great that a com¬ 
 parison is impossible, and I shall attempt none. The one 
 point I want particularly to emphasize here is that wages 
 have always advanced at a slow rate. To illustrate this let 
 us take the “family” income of the English laborer of 1650 
 and the family income in the United States, which in 1850, 
 according to Professor King, was $535. Consequently the 
 increase has been at the cumulative rate of about two dol¬ 
 lars a year. 
 
 I shall leave this subject at this point, merely wishing to 
 say that when we consider wage increases it will be observed 
 that the quantity of wages increased at a rather conserva- 
 
 4 Professor Friday, in his book “Profits, Wages and Prices” says 
 that wages had risen by 1919, so that the average wages will prob¬ 
 ably exceed $1,300 per annum, or more than twice the average wages 
 of 1914. The money wage for 1915 and 1920 is a compromise estimate 
 of conflicting computations made by .various “authorities.” I con¬ 
 sider it a liberal estimate. 
 
Cost of Living Basis of Wages 361 
 
 tive rate; always after the living costs had advanced; and 
 always lagging away behind the quantity increases in living 
 costs. Generally speaking—since 1900, for every dollar 
 increase in wages, living costs advanced two dollars. 
 
 Wage Increases Altvays Inadequate 
 
 That is the one lesson we learn from a study of statistics, 
 particularly when each person correlates them with his 
 own experiences and observations. All through the years, 
 particularly during the past twenty-five years, living ex¬ 
 penses rose first, and wages generally under compulsion, 
 were reluctantly advanced later to enable those most con¬ 
 cerned to meet the mounting living costs. Never (with the 
 possible exception of the years from 1917 to 1920) were 
 wage increases equal to the living cost increases that had 
 preceded. In 1919, when wages had reached their zenith, 
 the average wages per worker were considered as between 
 $1200 to $1300. In November of 1919 the Bureau of 
 Applied Economics (Washington, D. C.) computed that 
 “the annual cost of maintaining a family of five at a mini¬ 
 mum of subsistence level at prices prevailing in the latter 
 part of 1919, was approximately $1575. ” 5 
 
 Two Important Points 
 
 With regard to the wage increases made during the years 
 1917-20, I have examined and computed hundreds of sets 
 of statistics that have come to me regularly from the vari¬ 
 ous departments of the Government, and hundreds of pri¬ 
 vate compilations of hundreds of sets that appeared in the 
 leading trade, industrial and financial publications; besides 
 sundry works dealing with economic questions, and a num¬ 
 ber of corporation reports. To save the readers’ time, and 
 space in this book, I will briefly summarize my findings 
 and conclusions with regard to that group engaged in the 
 manufacturing industries. 
 
 I. The average wage around 1915 was less than $600 a 
 
 5 In the April Number, 1922, of the “Monthly Labor Review” pub¬ 
 lished by the U. S. Department of Labor, we are given the informa¬ 
 tion that the yearly increases of miner’s families averaged only 
 $1,590.65 while the average expenditures per family was $1,705.86. 
 
362 
 
 The New Capitalism 
 
 year per worker. According to Professor Friday, who has 
 made a fairly thorough inquiry into the subject, and whose 
 computations are based on the latest available statistics up 
 to the beginning of 1920, “The annual wages in 1914 of 
 employees of manufacturing corporations were $685 per 
 employe.” It is to be observed, however, that Professor 
 Friday’s figures include industrial wage workers and sal¬ 
 aried employees within the industries. According to the 
 Census Statistics there were in 1914 in the various manu¬ 
 facturing industries, 7,036,337 wage earners, whose total 
 wages were $4,079,332,433—an average of $580 per worker. 
 
 2. The sundry increases in wages, since 1914, even 
 granting that they would have increased wages 100 percent, 
 did not yield an average wage for all industrial workers of 
 $1200 a year. 
 
 This figure was, beyond a doubt, exceeded by some work¬ 
 ers in certain industries, but it is not an average for all 
 workers in all industries. 
 
 Deceptive Statistics 
 
 As a matter of fact the average increase fell below 100 
 percent. 0 True, in many instances I have seen, the increase 
 of total wages in cities and states exceed 100 percent—but 
 this is offset by the fact that the increased volume of wages 
 was distributed among a greater number of workers, the 
 division yielding often an average of less than a thousand 
 dollars per worker. For example, in the city of Wilming¬ 
 ton, Delaware : 6 7 
 
 In 1914 the average number of wage earners was 15,048; 
 and the aggregate wages was $8,674,000. 
 
 In 1919 the average number of wage earners was 21,414; 
 and the aggregate w T ages was $19,352,000. An increase in 
 wages of 123.1 percent. 
 
 6 In its Bulletin No. 274 the Bureau of Labor statistics gives 
 the “Union Scale of Wages and Hours of Labor, May 15, 1919.” Its 
 report is based on “912,000 union workers in the organized trades and 
 occupations of 61 of the principal cities of the United States.” “In 
 all trades taken collectively the income in weekly wage rates on 
 May 15, 1919, was J/3 percent over 1913. 
 
 7 The statistics are those of the Department of Commerce, pub¬ 
 lished by the Bureau of the Census. 
 
Cost of Living Basis of Wages 363 
 
 That sounds big, but when actually computed we find 
 that in 1914 the average wage per worker was $577, and in 
 1919 it was $900. It must be apparent to all, that in spite 
 of the 123.1 percent wage increase for 1919 it was $675 
 below the minimum subsistence level. 
 
 Or let us take a state —Rhode Island, for example. The 
 statistics are as follows: 
 
 1914 1919 Percent of 
 
 Increase 
 
 Wage earners 113,425 139.665 23.1 
 
 Wages $59,366,000 $137,671,000 131.9 
 
 But when wages are computed w T e find that in 1914 they 
 were $523 per worker, and in 1919, $987 per worker, a 
 money increase of $464, or an increase of 89 percent. 
 
 There is but one obvious conclusion; the workers were 
 decidedly underpaid in 1914; nor was their relative condi¬ 
 tion improved in 1919. In all cases—for all cities and 
 states—the large percentage increase in wages, computed 
 in dollars and cents, did not begin to enable them to meet 
 the large money increase in the cost of living. As already 
 pointed out, the only thing that saved the situation for all 
 wage earners was the fact that in a majority of cases more 
 than one worker contributed to the support of a family. 
 
 Statistical Wages of Steel Workers 
 
 The United States Steel Corporation is supposed to have 
 paid the highest wages to industrial workers, particularly 
 during the period of the war. One writer, Edward A. 
 Bradford, says: ‘‘Never were such wages paid as now. 
 Some manual workers in the steel industry earn $10,000 
 a year. ” 8 
 
 Professor David Friday says: “The average wage per 
 man in the United States Steel Corporation was $905 in 
 1914, $1,042 in 1916, and $1,902 in 1919.” 
 
 It is to be regretted that Professor Friday did not 
 explain at the same time that the ten and twelve-hour day 
 
 8 The Annalist, January 28, 1918. Is it permissible to ask Mr. 
 Bradford: “How many wage workers in the steel industry earned 
 
 $10,000 a year?” 
 
364 The New Capitalism 
 
 was still in force for a considerable number of employees in 
 the plants of the United States Steel Corporation, and that 
 the figures he gives are not wage rates but actual earnings, 
 i. e. y all wages received including overtime. 
 
 The following news item, published in the Chicago 
 Tribune, August 2, 1921, sheds light on the wages paid to 
 the workers in the United States Steel Corporation plants: 
 
 “New York, Aug. 19, 1921.— (Special)—The United 
 States Steel Corporation today announced another adjust¬ 
 ment in the wages of its employees, the third to be put into 
 effect since the decline in steel prices began. . . . 
 
 “The official announcement made by Elbert H. Gary, 
 chairman of the board of directors, follows: 
 
 “ Tn view of the prevailing low selling price of steel as 
 compared with costs of production, it is necessary to make 
 reductions in wage rates, and therefore we will recom¬ 
 mend to subsidiary companies that the general rates of day 
 labor be decreased to thirty cents per hour, to become 
 effective Monday, August 29, and that other wages and 
 salaries be equitably adjusted.’ ”... 
 
 The following Table shows wages of unskilled labor after 
 each advance in wages since 1915, the percentage of each 
 advance and the cumulative advance of each, with statistics 
 for the last three adjustments: 
 
 1915 
 
 10 hr. day 
 $2.00 
 
 Advance 
 
 Percent Advance 
 
 Feb. 1, 1916 
 
 2.20 
 
 10.0 
 
 10.0 
 
 May 1, 1916 
 
 2.50 
 
 13.6 
 
 25.0 
 
 Dec. 15, 1916 
 
 2.75 
 
 10.0 
 
 37.5 
 
 May 1, 1917 
 
 3.00 
 
 9.0 
 
 50.0 
 
 Oct. 1, 1917 
 
 April 16, 1918 
 
 3.30 
 
 10.0 
 
 65.0 
 
 4.80 
 
 15.0 
 
 90.0 
 
 Aug. 1, 1918 
 
 4.20 
 
 10.5 
 
 110.0 
 
 Oct. 1, 1918 
 
 4.62 
 
 10.0 
 
 131.0 
 
 Feb. 1, 1920 
 
 5.06 
 
 10.0 
 
 153.0 
 
 May 16, 1921 
 
 4.05 
 
 *20.0 
 
 ' 102.0 
 
 July 16, 1921 
 
 3.70 
 
 t 9.5 
 
 85.0 
 
 Aug. 29, 1921 
 
 3.00 
 
 *18.9 
 
 50.0 
 
 * Reduction. 
 
 t Elimination of time and a half for overtime work over eight 
 hours. 
 
Cost of Living Basis of Wages 365 
 
 It is to be remembered that in spite of recent modifica¬ 
 tions the ten and twelve-hour day. is still in force in the 
 several plants of the United States Steel Corporation. The 
 twelve-hour day is still defended by Mr. Gary as impos¬ 
 sible of abrogation. If the earnings per worker in 1919, 
 amounting, according to Professor Friday, to $1902, were 
 computed at the highest rate ever paid, viz., about fifty 
 cents an hour, it will be found that the average steel worker 
 worked approximately twelve hours a day in order to earn 
 $1902. 
 
 At the wage rate of August 29, 1921—$3.00 for a ten- 
 hour day, or thirty cents an hour—a steel worker working 
 eight hours a day and three hundred days a year, would 
 earn $750 a year. But there has been no material decrease 
 in living costs. Despite the much advertised decrease in 
 the wholesale prices of some commodities, the retail prices 
 have remained singularly inflexible. And for many com¬ 
 modities the quality has been lowered to such an extent as 
 to necessitate purchasing double the former quantity. On 
 an average, especially when we include the item of Rent, 
 the $1575 considered necessary for a mere subsistence, is 
 just as necessary today as it was in 1910. 
 
 “The End of a Perfect Day” 
 
 But granting for the present that the wage earners for 
 a period of two or three years were, indeed, “in clover 
 that the wages they received were the highest that had ever 
 been paid them in the history of the world; and that wages, 
 considering that an average family draws its support from 
 more than one worker, were more nearly adequate, per¬ 
 haps even in some instances more than adequate, to meet 
 even the considerably higher living costs—granting all 
 that, and anything you may care to add in order to 
 bolster your possible contention that the wage earners’ 
 condition, especially during the years 1917-1920 was ex¬ 
 cellently fine; granting aught you might say on this sub¬ 
 ject—I will put a deadly period to your sentence by de¬ 
 claring that the brief season of the wage earners’ glory is 
 
366 
 
 The New Capitalism 
 
 permanently over; and that all the Capitalistic machinery 
 is in full motion to take away from them every temporary 
 advantage that might have been grudgingly granted them 
 under stress of extraordinary circumstances; and that 
 within another few years all wage earners and families 
 of wage earners, will find themselves precisely in the same 
 economic condition they were in in former times; nay, 
 they will probably be worse off than ever before. 
 
 The Plight of the Salaried Employees 
 
 I'll go a step further and say that after the Capitalistic 
 Entrepreneur “readjustment” will have been completed, 
 not only the industrial wage earners but all workers—all 
 non-investors—will find it increasingly harder to make 
 ends meet than ever before. 
 
 It is rather singular that nearly all writers who have 
 essayed to deal with the subject of wages and living costs, 
 base all their conclusions on computations regarding wages 
 paid to industrial workers. And yet there are many mil¬ 
 lions more who are in the group known as salaried work¬ 
 ers, for whom, as well as for the industrial workers, there 
 have been two separate 100 percent increases in living 
 costs, but for most of them there has been no proportionate 
 increase in salary. 
 
 To illustrate what I mean suppose we"take the statistics 
 for the salaried officials, clerks and so forth, in the manu¬ 
 facturing industries as given in the 1920 Statistical Ab¬ 
 stract (Table No. 447, page 804) ; those for 1919 are from 
 the Department of Commerce Summary of Manufactures. 
 
 Salaried Officials, Salaries 
 
 
 Clerks, etc. 
 
 
 1899 
 
 364,120 
 
 $ 380,771,321 
 
 1904 
 
 519,556 
 
 574,439,322 
 
 1909 
 
 790,267 
 
 938,574,967 
 
 1914 
 
 964,217 
 
 1,287,916,951 
 
 1919 
 
 1,447,761 
 
 2,893,046,000 
 
 Average Salary 
 Per Person 
 $1045 
 1106 
 1188 
 1136 
 1998 
 
 Please remember that from 1896 to 1914—the cost of 
 living advanced 100 percent; to meet which the salaried 
 workers, as the above statistics indicate, had an average 
 
Cost of Living Basis of Wages 367 
 
 increase of less than a hundred dollars. From 1914 to 
 1920 there was another distinct 100 percent increase in 
 living costs, and an increase of only $862 in salaries. 
 
 I have no intention of going into an analysis of salaries 
 as distinguished from wages. To do so in any worth-while 
 manner would require many pages. My reason for calling 
 attention to this consistently ignored phase of the subject 
 at this time is to emphasize that ordinarily when we speak 
 of wages as having gone up 100 or more percent during 
 the past five or six years, the increase is applicable to a 
 limited number of wage earners only. It is true, let us 
 say, for eight or ten million, but it is not true for fully as 
 many others who statistically are not accounted as wage 
 earners. According to the Monthly Labor Review (March, 
 1922) published by the United States Department of Labor, 
 the per capita salaries increased only 50 percent during 
 the five-year period 1914-1919. Yet the increase in the 
 living expenses of these salaried employees during that 
 period, was fidly 100 percent. 
 
 If we lump salaries and wages, and particularly if we 
 subtract from the total salary roll the enormous salaries 
 of officials and principals, in which the average small sal¬ 
 aried person shares only statistically, it will be found, I 
 believe, that the average money increase in the pay per 
 worker was considerably less than the money increase in 
 living costs. I doubt whether the average increase from 
 1914 to 1919 in wages and salaries per worker, would ex¬ 
 ceed 60 percent. But remember that the increase in the 
 cost of living was 100 percent for 100 percent of the work¬ 
 ers—whether wage earners or salaried employees. It is 
 clear that this subject concerns the salaried men and 
 women even more than the so-called wage worker. 
 
 Looking Ahead 
 
 But what was yesterday is of less importance than what 
 will be tomorrow. Therefore, let us determine what the 
 economic condition of the non-investors will be after the 
 Capitalistic Entrepreneurs will have completely ‘ 1 adjusted” 
 
368 
 
 The New Capitalism 
 
 wages and salaries. I shall try to give the readers a simple 
 and easily comprehended answer. 
 
 For the present I will overlook the fact that the cost of 
 living increased from 1896 to 1914 a round 100 percent, 
 and that wages were not increased in proportion. In order 
 to simplify my contention I am going to proceed for the 
 present as if the increase in wages and salaries from 1896 
 to 1914 had kept pace, dollar for dollar, with the increase 
 in the cost of living. In which event I am assuming that 
 in 1914 the average family wage income of the average 
 wage earner and salaried employee, sufficed to enable them 
 to meet the prevailing costs of living. Consequently w T e 
 may express it thus: In 1914 one dollar of wages or salary 
 was equal to one dollar of living cost.- 
 
 Wages 1914 Living Cost 
 
 $1.00 $1.00 
 
 Then prices began to ascend rapidly, so that the living 
 costs in 1920 were 100 percent higher than in 1914. It is 
 to be emphasized here that the 100 percent increase in the 
 living costs is predicable of 100 percent of the population. 
 But most of those working for a wage or salary are un¬ 
 organized, and only those who are organized succeeded in 
 compelling a material increase in their wages. Let us say 
 that in the aggregate the increase in wages and salaries, 
 if distributed among all the wage and salary workers, was, 
 in round numbers, 60 percent. That is to say, for every 
 dollar of wages the average wage earner or salaried man or 
 woman received in 1914, he or she received $1.60 in 1920, 
 whereas the one dollar living cost of 1914 had risen to two 
 dollars by 1920. The formula may then be expressed as 
 follows: 
 
 Wages Living Cost 
 
 1914_$1.00 1914 $1.00 
 
 1920_ 1.60 1920_2.00 
 
 Capitalistic Unwillingness to Lower 
 
 Living Costs 
 
 The Capitalistic campaign which is still in full swing, 
 has certain clearly defined objects in view. First of all it 
 
Cost of Living Basis of Wages 369 
 
 was inevitable that the prices of some commodities should 
 fall. 9 But it is apparent to those who study price sched¬ 
 ules, that those who have been the beneficiaries of big 
 profits from high prices will not permit prices to fall to 
 the 1914 level. Hundreds of statements of public speakers, 
 writers, bankers, merchants, statesmen, government offi¬ 
 cials, et al., could be quoted here to show the declared 
 determination and avowed purpose of the Capitalistic 
 group that prices of commodities shall not go back to the 
 1914 level. A few will suffice as pointing a moral, as well 
 as adorning a tale. For example: 
 
 Elbert H. Gary, of the United States Steel Corporation, 
 declared repeatedly during 1920 and 1921, that steel prices 
 would not come down. Since his last utterance steel prices 
 have been lowered, but they are still far above the 1914 
 prices. 10 
 
 Henry C. Wallace, the new Secretary of Agriculture, in 
 his first public statement, said: ‘ ‘ This talk of bringing 
 
 prices, whether farm prices or other prices, back to the 
 pre-war normal, is morally wrong and economically impos¬ 
 sible.” In a later statement Secretary Wallace repeated 
 the above utterance with a few more trimmings: “We can 
 pay off our debts much easier if we maintain a price level 
 more nearly the level at which the debts were incurred.” 
 
 Col. John P. Wood, of Philadelphia, (President of the 
 American Woolen Co.) appearing before the Finance Com¬ 
 mittee having the Fordney Emergency Tariff Bill under 
 consideration, on behalf of the wool manufacturers said 
 that the government had been “unwise” in promulgating 
 a campaign against high prices. 
 
 The Manufacturers Record, which blames the Federal 
 
 9 While beyond a doubt some of the wholesale prices of com¬ 
 modities were lower in price in 1921 than they were in 1919, and 
 1920, nevertheless the increase in the item of Rent has robbed the 
 average man or woman of whatever advantage might be derived 
 from lower commodity prices. The aggregate “living costs” remain 
 about the same, the difference being that a greater proportion goes 
 to the Capitalist in the role of landlord and a smaller proportion to 
 the Entrepreneur in the role of commodity producer, manufacturer 
 or dealer. 
 
 10 Steel prices are again in the ascendent. 
 
370 The New Capitalism 
 
 Reserve Bank for price reductions, in its issue of Febru¬ 
 ary 24, 1921, said: “The war of the Federal Reserve Bank 
 to break down prices and prosperity was a crime against 
 civilization,” etc. 
 
 (Parenthetically let me say that I could give hundreds 
 of quotations from the writings and speeches of bankers, 
 merchants, statesmen, etc., saying in effect that wages must 
 come down nearer to the pre-war basis.) 
 
 The New Level of Prices and Wages 
 
 At any rate my guess (it is more than a guess, but so as 
 not to be compelled to enter into a lengthy discussion I’ll 
 call it simply a guess)—my guess is that the new level of 
 prices will be fixed about midway between the prices of 
 1914 and 1920; that is to say: the article that cost $1.00 in 
 1914, and had risen to $2.00 by 1920, will cost $1.50 from 
 now on. 
 
 On the other hand the Capitalistic campaign contem¬ 
 plates bringing down wages and salaries as near as possible 
 to the 1914 level. From the wage cuts made thus far for 
 the various kinds of labor, (reductions ranging from 10 to 
 25 percent for skilled labor, and from 25 to 50 percent for 
 unskilled labor) I compute that the cut in wages and sal¬ 
 aries will average 25 percent for all workers—wage earners 
 and salaried men and women. That is to say, the wage 
 earners and salaried men and women will have their 
 average 1920 wage of $1.60 cut 25 percent, which will 
 leave them $1.20 or twenty cents more for every dollar of 
 wages over the wages of 1914. The formula now reads as 
 follows: 
 
 Wages Living Cost 
 
 1914. $1.00 $1.00 
 
 1920 . 1.00 2.00 
 
 1922 and thereafter. 1.20 1.50 
 
 This, I think, is a result that the average wage earner 
 and the moderate salaried man and woman can verifv with 
 actual figures as pertaining to themselves. To bring the 
 whole subject nearer to the actual figures, let us say that 
 
Cost of Living Basis of Wages 371 
 
 the average weekly wage of the average worker in 1914 was 
 $20.00, and that this amount enabled him or her to just 
 meet the cost of living. The formula then reads as follows: 
 
 Wagea Living Cost 
 
 1914 .$20.00 1914 .$20.00 
 
 1920 increase 60%. 32.00 1920 increase 100%... 40.00 
 
 1922 decrease 25%. 24.00 1922 decrease 25% 30.00 
 
 Here you have the arithmetic of the prices and wages 
 situation as it will be from now on, about as clearly as it 
 can be expressed when averages are employed. 
 
 The Old Level of Profits 
 
 The Capitalistic campaign, however, includes another 
 fixed purpose, not observable on the surface. If the Cap¬ 
 italistic Entrepreneurs can succeed in stabilizing com¬ 
 modity prices midway between 1914 and 1920, so that they 
 will receive henceforth $1.50 instead of $1.00 as in 1914; 
 and lowering wages down to a point where they will pay 
 $1.20 for labor for which they paid only $1.00 in 1914, it is 
 clear that they will enjoy a margin of profit considerably 
 in excess of that they reaped in 1914. But that is not 
 enough to satisfy the Capitalistic Entrepreneurs; they will 
 not willingly give up their maximum war time profit. If, 
 therefore, they can succeed in reducing the number of 
 workers, at the same time increasing output per worker; or 
 increasing the number of hours; or eliminating those por¬ 
 tions of their contracts with labor by which they are com¬ 
 pelled to pay time and a half for over time;—if they can 
 succeed in increasing by one method or another Labor’s 
 production, without an increase in wages, they will have 
 succeeded in creating a condition by virtue of which their 
 aggregate volume of profits will approximate the aggregate 
 volume of war time peak profits. 
 
 The Corollary 
 
 At the same time they will have created a condition 
 which will have brought the average American workman 
 nearer to the level occupied by the average European 
 
372 
 
 The New Capitalism 
 
 workman. The ability to save will be practically taken 
 away from the average man and woman. The labor of two 
 persons will be required to enable the average family to 
 merely subsist. A bare living, and in many cases not even 
 that, will be the rule rather than the exception. As Chief 
 Justice Hales expressed it—“If they (the workers) cannot 
 earn this by their labor they must make it up by begging 
 or stealing. ” This, it has seemed to me for years, is the 
 “ideal” the Capitalistic group is striving to achieve. I 
 cannot shake off the feeling that there is this definite design 
 behind the whole Capitalistic-Mammonistic scheme. 
 
 If the Capitalistic Entrepreneurs succeed in putting 
 through their program—and thus far they have been suc¬ 
 cessful in having their own way—the American Standard 
 of living will be nearer than ever to the European standard 
 of living; and the condition of the wage earners and sal¬ 
 aried employees will, in a few years more, be hopeless. 
 
CHAPTER XXVII 
 
 Wages Under tite New Capitalism 
 
 I N the several chapters dealing with Wages, I hope I 
 have succeeded in giving an intelligible interpretation. 
 At any rate, I think I have made clear at least these 
 few things: 
 
 1: That Capital does not pay wages. 
 
 2: That Labor pays its own wages. 
 
 3: That Labor pays the interest on its wages. 
 
 4: That a big quantity wage with a low ex¬ 
 change value (or purchasing power) is of 
 no advantage to the wage earners. 
 
 If these elementary propositions are tenable it behooves 
 the New Order to bring about an early and scientific adjust¬ 
 ment of the Wages question under the New Capitalism— 
 one that will give those who work a fair and reasonable 
 wage, and to the people greater benefits and more advan¬ 
 tages, than accrue to them under the ‘ ‘ established ’ ’ Cap¬ 
 italistic Order. 
 
 Let me emphasize once more that the important thing 
 about wages is their exchange value. Indeed if I were 
 compelled to choose between a system of a big quantity 
 wage and a low exchange value, or a less quantity wage 
 and high exchange value, I would, by all odds, choose the 
 latter. But whatever our views with regard to the quan¬ 
 tity, or the exchange value, of wages may be, we must 
 accept the situation as we find it. 
 
 The Capitalistic Entrepreneur group has declared over 
 and over, that anything higher than a subsistence wage 
 cannot be paid;. that the paying of wages in excess of a 
 bare living would mean the destruction of the industries. 
 I hold a contrary opinion; to my way of figuring the pay¬ 
 ing of fair and reasonable wages does not mean the destruc- 
 
 373 
 
374 
 
 The New Capitalism 
 
 tion of the industries, but it does mean a material reduction 
 in the enormous Capitalistic profits, without which the 
 Capitalistic -Mammonistic Entrepreneur System cannot 
 flourish. However, to be perfectly fair, we will take the 
 Capitalistic Entrepreneurs at their word. We will accept 
 as basic the wage rates and scales that may be in existence 
 at the time we begin to function. 
 
 Our Chief Endeavor 
 
 Our chief endeavor will be to bring down the cost of 
 living. If we cannot assure those who labor of a larger 
 quantity recompense for, say eight hours of work a day, we 
 can guarantee them a material reduction in the prices of 
 the things they must purchase during sixteen hours a day. 
 
 Let none harbor delusions with regard to what we pro¬ 
 pose to do, and what we shall aim to accomplish. Assuming 
 that we will organize into a compact national body—with 
 organized Labor as the nucleus—(for without the active 
 help and co-operation of organized Labor all efforts will be 
 useless, nothing can be accomplished)—our initial aim will 
 be, not to increase w T ages, but rather to bring down the prices 
 of commodities—the cost of living—in brief, to increase 
 the exchange value of wages. 
 
 For millions of families in the United States the present 
 wage is not sufficient to enable them to meet the ordinary 
 living expenses. Indeed were it not for the fact that in 
 many of these families there are several members working, 
 dire poverty would be their doom. All the statistics con¬ 
 clusively show that the wages per worker are considerably 
 below the minimum family subsistence level. The only 
 thing that saves the situation is this quite accidental fea¬ 
 ture, predicable of a majority of families, that more than 
 one person is at work. It is their joint and aggregate earn¬ 
 ings that enable the average family to get through. If each 
 male worker were married and the sole support of an aver¬ 
 age family of five, poverty would be prevalent among all 
 wage earners; while if families were dependent upon the 
 
Wages Under the New Capitalism 375 
 
 wages paid to female workers, they would long ago have 
 sunk into misery and wretchedness. 
 
 We propose to change this in due time. To keep down 
 the wages of a worker below a living standard on the theory 
 that there are other workers in his family—wife, daughters 
 or sons, sisters or brothers, and that between them they can 
 manage to “get by,” is only keeping the road to the poor- 
 house open, and the jails well filled. 
 
 A Fundamental Principle 
 
 Fair and reasonable wages for all workers will be a fun¬ 
 damental principle under the New Capitalism. If too low 
 wages are being paid in any line of industry, or for any 
 kind of service, it will be our earnest purpose to raise them 
 to a point where they will be fair and reasonable. If, on 
 the other hand, it will be found that for certain kinds of 
 work or service, excessively high wages are being paid, we 
 shall seek to make what must be considered a fair and 
 reasonable adjustment. But I rather think that by the 
 time this book is published, the Capitalistic System will 
 have completed the “liquidation” of all wages, and that 
 we shall not be obliged to waste any of our time revising 
 wages downward. For several years now we have been 
 told, with maddening insistence, that some groups of work¬ 
 ers are receiving unconscionably high wages. But no stress 
 has been put on the fact that only the wages rates are high 
 —that the actual annual earnings of those engaged in occu¬ 
 pations in which high wage rates prevail, constitute only 
 an average living wage. No particular stress has been 
 placed on the very vital fact that many of the workers 
 receiving high wage rates work only part of the time. Nor 
 has it been deemed worthy of emphasis that all wage earn¬ 
 ers are being paid with considerably depreciated w T age 
 dollars. 
 
 Labor Will Fix its Oivn Wage 
 
 The New Capitalism will insist on a fair and reasonable 
 wage for all workers. There is, and can be, no such thing 
 
376 
 
 The New Capitalism 
 
 as a fixed wage applicable for any and all kinds of labor. 
 There is skilled and unskilled labor; there is labor that is 
 productive and labor that is non-productive; there is labor 
 that is menial, requiring no high order of intelligence for 
 its performance, and labor that demands more than ordi¬ 
 nary intelligence. The scientific classification and grading 
 of service, and determining its fair and reasonable reward, 
 is part of our plan. It will be our endeavor, in due time, 
 to determine what constitutes a fair and reasonable wage 
 for each of the different kinds of labor. But whatever kind 
 of work or character of labor, or quality of service, one 
 thing is certain—that wages must be ample, and not merely 
 intended to enable the wage earner and his family barely 
 to subsist. In my system of economics even the lowest wage 
 implies an excess of sufficiency for subsistence. For I hold 
 that even the humblest worker, and his family, is entitled to 
 more than a bare subsistence; just as I hold that any indus¬ 
 try that cannot flourish save by paying less than subsistence 
 wages does not deserve to survive. 
 
 It is to be remembered that my proposal provides that 
 the scientific adjustment of wages and wage rates, shall be 
 made by those most concerned—by Labor in the aggregate, 
 acting through accredited representatives. Hitherto Cap¬ 
 ital alone has dictated wage terms, and Labor had no 
 alternative but to accept them. Henceforth, Labor will 
 decide for itself what is a fair and reasonable wage for every 
 kind of work and service. This important matter settled 
 to the satisfaction of all concerned, means the end of strikes 
 —“a consummation devoutly to be wished.” 
 
 Wages, and a Margin of Profit 
 
 A standard wage, that shall also be permanent, i. e., not 
 subject to fluctuations), and always ample, that is, a wage 
 which after the exchange involved in the purchase of the 
 necessary living commodities leaves a reasonable surplus in 
 favor of those who work for w r ages—would yield not only 
 a satisfactory solution of the wage question but solve prac¬ 
 tically all of our economic difficulties. One would not— 
 
Wages Under the New Capitalism 377 
 
 one could not—quarrel with a wage whose quantity is not 
 only always adequate for the purchase of the essentials of 
 life and its implied reasonable comforts, but always some¬ 
 what greater than the purchase price of the things involved 
 in the maintenance of a comfort level of living. 
 
 I hold that there is a point somewhere—precisely where 
 I am unable to say, though under my system it can and 
 will be ascertained—at which wages could be permanently 
 fixed and prices practically stabilized, which would yield 
 to Labor a fair recompense, and to Capital a fair profit, 
 besides maintaining a nicely balanced economic equilibrium 
 between income' and living costs, wages being always some¬ 
 what in excess of living costs, thus leaving a margin of 
 profit (surplus or savings) to the wage earner. 
 
 Capital is Uncompromising 
 
 Up to the beginning of the twentieth century the ten¬ 
 dency of Capital was to increase its profits by keeping 
 down wages. But with the inauguration of the scientific 
 Capitalistic Entrepreneur System, Capital became more 
 ambitious, and determined to increase its profits not only 
 by keeping wages low but also by gradually increasing 
 prices. But this seriously disturbed the exchange value of 
 wages and the purchasing power of money, partially to 
 recover which Labor found itself put to the necessity of 
 demanding progressive wage increases. These were reluc¬ 
 tantly granted. But the Capitalistic Entrepreneurs, hav¬ 
 ing tasted of the flesh-pots of Egypt—i. e., garnered a 
 greater profit—refused to be driven from their banquet 
 table, and sought to maintain the greater profit by still fur¬ 
 ther increasing prices, mendaciously blaming the somewhat 
 higher wages they were compelled to pay to Labor. And 
 thus it continued all through the years, and all through 
 the war, up to the end of 1920. 
 
 Then we entered upon what it pleased some to call the 
 ‘‘liquidation or re-adjustment” period. Capital first low¬ 
 ered wages, then, reluctantly, prices, though in no case, if 
 fairly computed in dollars and cents, have prices been 
 
378 
 
 The New Capitalism 
 
 lowered to the same extent as wages. The liquidation is 
 not yet completed; the adjustment is still going on. How 
 long it will take Capital to finish the job I am unable to 
 say. But I will venture the guess that in the final summing 
 up, Labor will find itself worse off than ever before. 
 
 Capital is Unwilling to Share in Losses 
 
 The Capitalistic philosophy demands that when the 
 profits are big, i. e., largely in excess of normal, Capital 
 shall keep them all for itself; Labor is not to share in them. 
 But when profits are small, falling even a fraction below 
 normal, Capital immediately insists that its deficit be made 
 up out of the Avages of Labor. 
 
 In all the Capitalistic palaver about “cutting down 
 costs’' it has never occurred to a single contingent in the 
 Capitalistic group to suggest cutting down anything but 
 wages. Labor must bear the brunt of any “saving” it is 
 desired to affect. The Capitalistic group is unwilling to 
 apply any “saving” device to itself—to Capital. It is 
 quite willing to deduct from Labor’s wages enough to make 
 up for any loss; but never willing to deduct even a fraction 
 of the loss from Capital’s reward. If there is business stag¬ 
 nation ; if the wheels of commerce do not move; if the chan¬ 
 nels of trade are clogged and it is necessary to ‘ ‘ save, ’ ’ the 
 only source whence the Capitalistic group is willing to 
 “save” is from Labor’s reward—from Labor’s wages. 
 
 The Capitalistic group insists upon its pound of flesh— 
 in sunshine or in rain, in fair weather or in foul. Let the 
 evil days come; they fall entirely upon the shoulders of 
 Labor. Let the fat years reign—never in all its history 
 has Capital been willing to accord to Labor more than a 
 bare living wage—not even in its most prosperous times. 
 Let the lean years set in, Labor, not Capital, pays the pen¬ 
 alty. If there is scarcity of consumption, the wage earner 
 suffers, not Capital. If there is scarcity of production, 
 again the wage earner pays. I hold that when things go 
 awry, for whatever reason, Labor should not be made to 
 bear the entire burden; Capital should be made to share it 
 
Wages Under the New Capitalism 379 
 
 —to bear at least a part of it. If the conditions are dis¬ 
 turbed or abnormal, Capital tries to save its own bacon by 
 compelling the workmen and women to accept a smaller 
 wage, in order that its profits may remain the same as in 
 normal times. 
 
 Labor Always at the Mercy of Capital 
 
 The Capitalistic System has built up its brutal strength, 
 its despotic might, its cruel power, on the principle of 
 “earning power,” but when Capital’s earning power does 
 not come up to expectation, when it falls below r 6 percent, 
 Capitalists reimburse themselves out of the pay envelope 
 of those who labor. 
 
 The “earning power” of Capital and the exchange value 
 of wages, are in direct conflict; as the one rises the other 
 is bound to fall. The increase in the earning power of 
 Capital is derived chiefly from the decrease in the exchange 
 value of wages. Conversely it should be true that a decrease 
 in the earning power of Capital produce an increase in the 
 exchange value of wages. But no such phenomenon is 
 observable. The whole intent of the Capitalistic System is 
 to prevent this perfectly natural phenomenon from taking 
 place. Whenever for whatever reason, a decrease in the 
 earning power of Capital threatens the Capitalistic System 
 insists on a decrease in wages—and thus maintains its max¬ 
 imum earning power—its maximum profit. There is no 
 escape for the wage earner from the adverse operation of 
 this Capitalistic device. No matter which way the wind 
 blows—Capital always protects itself—Labor always suffers. 
 
 Stabilizing Wages and Prices 
 
 However, in this chapter I want to show the solution my 
 system proposes. We will ascertain the point of safety for 
 Labor and Capital; at which we shall endeavor to stabilize 
 wages and prices, thus stabilizing the exchange value of 
 wages and the purchasing power of money. This stabiliza¬ 
 tion will be made at a point that will leave a fair profit 
 for Capital—and a fair profit, that is a wage, that will 
 
380 
 
 The New Capitalism 
 
 leave a surplus or savings over living costs—to Labor. 
 That is one of the primary purposes of the system of eco¬ 
 nomics I am proposing in this book. 
 
 Let me summarize the essential features of my plan with 
 regard to wages and prices. It is intended: 
 
 1: To establish an equilibrium between wages and prices; 
 
 2 : To increase the exchange value of wages; 
 
 3: To increase the wage earners’ ability to save. 
 
 The Government of the United States has declared that 
 the dollar shall be a unit of value, and the equivalent of 
 one hundred cents. Our Capitalistic Entrepreneurs how¬ 
 ever, have decreed that the exchange value of the wage 
 dollar, and its purchasing power, shall be considerably less 
 than one hundred cents. The New Capitalism intends to 
 recover a considerable portion of the dollar’s lost value by 
 standardizing wages and stabilizing prices; thus materially 
 increasing the exchange value of wages and the purchasing 
 power of money. 
 
 The economic stability and the commercial safety of our 
 nation, and the material welfare, not to say happiness, of 
 the people, depend upon the very elementary principle that 
 the value of money be practically permanent, its purchas¬ 
 ing power nearly stable, and the exchange value of wages 
 free from serious fluctuations. This principle, I hold, can 
 be permanently established and maintained, chiefly by 
 organized Labor. 
 
 Depreciation of the “Human Machine” 
 
 Nor is that all that organized Labor can accomplish 
 under the New Order, and through the instrumentality of 
 the New Capitalism. Labor can raise its status to a height 
 not attainable under the “established” Capitalistic Order. 
 At present the average worker is only a wage earner, who 
 in order merely to live is compelled to exhaust his capital 
 (i. e., his labor) and consume his dividends (i. e., his 
 wages). In brief, the wage earner is nothing more than a 
 machine, but receiving less consideration at the hands of 
 Capital than the machines in shops, factories, mines and 
 
Wages Under the New Capitalism 381 
 
 mills, and for which the Capitalistic System carefully com¬ 
 putes ‘ ‘ depreciation. ” But not for the wage earner—the 
 human machine; no allowance is made by Capital for 
 “depreciation” of the human machine, or for its obso¬ 
 lescence, or exhaustion. 
 
 “A Modern Instance” 
 
 Slason Thompson, statistical expert for the railroads, 
 said in 1914 that the average holdings of the railroad stock¬ 
 holders was $15,000. What does this mean? It means that 
 if all the railroad stock were divided equally among the 
 •stockholders, each “investor” would be allotted $15,000 of 
 stock. With this as a basis let us make our computations. 
 
 Needless to say the average railroad stockholder, as far 
 ■as the properties in which he holds stock are concerned, is 
 a non-producer—a non-worker. Nevertheless he receives 
 in the course of twelve months, dividends which, computed 
 at 6 percent per annum, amount to $900—an amount 
 greater than the average railroad employee, working eight 
 hours a day, and probably in excess of 300 days a year, 
 receives as wages. 1 
 
 Continuing our computations: At the end of twenty- 
 five years the average railroad stockholder will have 
 received in dividends a total of $22,500, for which not one 
 hour of labor has been given, not an hour of service 
 rendered; and his capital of $15,000 still remains intact, 
 and its earning power at its full strength. 
 
 Whereas, at the end of twenty-five years the average rail¬ 
 road employee will have received in wages a total of $20,250, 
 for which he has given 11,500 days of labor—92,000 hours 
 of service. It will be conceded that a man who toils eight 
 hours a day for twenty-five years, has expended consider¬ 
 able of his strength; and that his earning power decreases 
 with his productive power. A few years more and his 
 capital (labor) is exhausted, and his dividends (wages) 
 will cease. He is ready for the economic scrap pile. 
 
 If at the end of twenty-five years the average railroad 
 
 i In 1914 the average wage per railroad employee was $810. 
 
382 
 
 The New Capitalism 
 
 stockholder dies, he leaves to his heirs $15,000, after having 
 drawn $22,500 in dividends. Whereas the average railroad 
 employee, having been compelled to consume both his cap¬ 
 ital and his dividends, will probably be buried at his 
 children’s expense. 
 
 The Smoke Screen “Small Investor” 
 
 But, the stock of the railroad is not equally divided. 
 The $900 per stockholder is only a statistical distribution, 
 based upon that precarious device called, in this particular 
 case, “average holdings.” The average small investor has 
 no such income. I do not pretend to know what the yearly 
 income per small stockholder is, for, information that would 
 enable one to make computations is not available. But I 
 will venture to guess that in the case of the railroads, the 
 average small investor receives only a fraction of the sta¬ 
 tistical $900. I should say somewhere between $100 and 
 $200, and I consider that a liberal estimate. 2 The lion’s 
 share, that is $700 or $800 of each “average investor’s” 
 statistical dividend revenue, goes to a few thousand big 
 stockholders—the financial potentates who annually con¬ 
 vert their collective and concentrated incomes into vast 
 new Capital accumulations, while the average small stock¬ 
 holder, in all probability, is compelled to consume the 
 income derived from his small holdings. 
 
 The Wage Earner’s “Reserves” 
 
 One would not quarrel with the Capitalistic System, 
 which has persistently excluded the human machine—the 
 wage earner—from participation in any depreciation fund, 
 if it were disposed to be more liberal with regard to his 
 wages. But Capital has never been willing to accord to 
 Labor a wage that would enable each worker to build up 
 a reserve against the calamitous years when his earning 
 power becomes less, or he is incapacitated through infirmity, 
 sickness, accident, or other causes. 
 
 2 In 1914 Mr. Slason Thompson declared that the average yearly 
 return on railroad investments for the past twenty-five years “has 
 not averaged three percent.” Let the small investors in railroad and 
 other Capitalistic securities take note. 
 
Wages Under the New Capitalism 383 
 
 A wage that is calculated to merely allow a wage earner 
 and his family to live, deprives the wage earner of the 
 opportunity to accumulate a surplus against contingencies 
 and eventualities. Under my system the wage earner will 
 be enabled to do for himself what Capital has either refused 
 to do for him, or has deliberately prevented him from doing 
 for himself. Under my system the wage earner will be 
 more than a mere machine. He will be a component part 
 of the industry in which he is employed. For the work he 
 does he will receive a wage as at present—not, however, a 
 mere living wage, but an ample wage that will enable him to 
 set up protective reserves—both a depreciation fund and 
 a surplus fund. 
 
 Tifie Wage Earner Investor and Capitalist 
 
 Moreover, he will deposit his earnings in banks whose 
 funds are used by himself, not by speculators and gamblers. 
 Thus he will be given an opportunity to invest his savings 
 for his own benefit—rather than for the benefit of others. 
 Whatever profits will be derived from the investment of 
 his savings and reserves, will accrue to himself and not to 
 persons who give not an hour’s work to the industry—who 
 perhaps, do not even know where the properties in which 
 they are security holders are located—who have never set 
 foot in the plants from which they derive dividends—or 
 who, perhaps, are not even residents of the United States. 3 
 
 Briefly my plan contemplates increasing the number of 
 investors considerably, to such an extent that practically 
 all wage earners and salaried men and women, will be, or 
 at least could be, small investors, deriving separate incomes 
 from their labor and their investment, during the greater 
 part of their lives. 
 
 I may be boasting when I say that we will succeed in 
 doing what the Capitalistic Entrepreneurs, with all their 
 
 8 Prior to the war it was estimated that about five billions of Euro¬ 
 pean capital was invested in American securities. One wrtier went 
 so far as to say that more than ten billions of English Capital is 
 invested in the United States alone. I give these figures as mere 
 estimates. 
 
384 
 
 The New Capitalism 
 
 “brains’’ have failed to do, what they are so desperately 
 trying to do at the present time—viz., to greatly increase 
 the number of small “ investors. ’ ’ Under my plan all the 
 workers—that is to say a majority of the public who are 
 now and will continue, under the Capitalistic Entrepre¬ 
 neur System, to be classed merely as wage earners, will have 
 an opportunity to change their status from non-investor 
 to investor and capitalist. We will make stock owners , not 
 stock holders of them; co-partners in our enterprises; 
 co-owners of our properties; co-sharers in all the benefits 
 accruing to an investor and in the profits reaped by a 
 Capitalist. 
 
 No Altruism in Business 
 
 There is not a single instance on record of any man, or 
 group of men, going into business primarily to promote 
 the public welfare. The sole impetus has ever been the 
 desire to make money; the prime motive— Profits. The 
 railroads of the United States were built not so that people 
 might conveniently and cheaply travel whithersoever they 
 please, or that they might have their supplies transported 
 from the place of production to their homes at a minimum 
 cost. Nor were they built for the purpose of giving employ¬ 
 ment to a considerable number of people. The inspiration 
 for their building must be sought wholly in the vision of 
 immense profits for their builders and promoters. And 
 this perfectly natural aspiration is predicable of every suc¬ 
 cessful industry. If any benefits redound to the public at 
 large, or to any considerable number of the public, that is 
 always incidental, or, which is more likely, because in the 
 promulgation of benefits the profits were to be found. 
 Profits, ever and always, were the inspiration, the im¬ 
 petus and the beacon light. Profits—and “the public be 
 damned! ’ ’ 
 
 Pro jits Under the New Capitalism 
 
 Will we turn up our noses at profits? We will not! 
 Indeed there is one good thing about the tremendous price 
 
Wages Under the New Capitalism 385 
 
 increases and concurrent wage increases that have been 
 made during the past twenty-five years. It will give the 
 New Capitalism a fine opportunity to prove its value to 
 the workers—to that large group who are today non¬ 
 investors. Here is the formula: High prices and high 
 wages have yielded immense profits to the Capitalistic group 
 and constituent members of the Capitalistic System. We 
 accept the status quo. We accept the high prices and the 
 high wages. We will maintain wages at the high point and 
 then deliberately, gradually, systematically, reduce prices 
 —i. e., living costs. The corporate profits quite naturally, 
 will be less—but the savings of the individuals will be 
 greater. These savings are profits in the true sense of the 
 word, but instead of appearing conspicuously on the books 
 of our corporations they will appear conspicuously in the 
 pockets of the workers. Instead of being retained by a 
 few, as at present, our profits will be distributed among 
 the many through the medium of lower prices, i. e., as a 
 result of a greater exchange value of wages and a higher 
 purchasing power of money. 
 
 In brief, there will be no elimination of profits; the only 
 difference being that henceforth they will be savings. More¬ 
 over, these savings will become Capital accumulations, con¬ 
 vertible into investments, the normal returns or dividends 
 on which will accrue to the savers themselves as investors, 
 not as at present, to the Capitalistic users of the savings 
 of the wage earners. 
 
 Pro jits and Capital Accumulations 
 
 There are those who will say that the maintenance of 
 high wages and the lowering of prices are mutually ex¬ 
 clusive—that it is impossible to pay high wages and reduce 
 living costs. Well, we shall see whether they are right; we 
 propose to find out for ourselves. In the meantime let us 
 not forget that the capital accumulations during the past 
 twenty years have been at the rate of ten billion a year. 
 These immense capital accumulations were derived from 
 the bountiful Capitalistic profits accruing from sundry 
 
386 
 
 The New Capitalism 
 
 sources; inflation of capitalization, money monopoly, 
 monopoly of raw materials, manufacturing industries, 
 transportation systems, public utilities, speculation in farm 
 products, exorbitant rentals,—and from stock gambling. 
 
 Under my system the capital accumulations will not be 
 so great. Indeed it is for the specific purpose of cutting 
 down capital accumulations that we propose to organize. 
 Since there will be no money monopoly as it exists today 
 there will be a considerable reduction in the “ profits” 
 derived from this source alone; but a greater saving will 
 result to the public. With regard to the industries—we 
 will have no inflated capitalization; no dividends to pay 
 on non-existing capital. This will decrease “profits” but 
 increase savings. And since there will be no speculating 
 in our stocks possible, a source of revenue now wide open 
 to promoters, speculators and gamblers will be practically 
 cut off. All of which will have a tendency to cut down 
 what has hitherto been called in Capitalistic parlance, 
 profits, or capital accumulations. But savings will increase. 
 
 Let me illustrate the principle: Let me say that in a 
 given year twenty-five billions of wages were paid, and that 
 living costs totaled twenty-five billions. The exchange of 
 the twenty-five billions of wages for twenty-five billions of 
 living commodities, yielded a profit that enabled a few 
 million of the Capitalistic System to heap up say, five bil¬ 
 lions of capital accumulations. 
 
 Under the New Capitalism wages would remain the same 
 —twenty-five billions—but living costs would be lowered to 
 twenty billions, let us say. The difference, five billions, will 
 remain in the possession of the wage earners as savings. 
 That is the vital difference that I shall ask you to keep 
 constantly in mind. Their savings will become the capital 
 accumulations of the workers, whose income from wages 
 will be augmented by an income from their investments. 
 
 “How can a nation be rich without having rich men in 
 it?” asked a financial writer recently. 
 
 I will answer that question after the writer quoted 
 answers these few questions: 
 
Wages Under the New Capitalism 387 
 
 1: What is the difference whether the aggregate of a 
 nation’s wealth—for instance that of the United States, 
 said to be 288 billions—is owned by four million families 
 or by twenty million families? 
 
 2: Which nation is richer—the one whose productive 
 properties are owned by four million families of investors 
 or by twenty million families of investors? 
 
 3 : Is it preferable that the profits derived from the indus¬ 
 try of the nation’s workers be concentrated in the hands of 
 a few, or more widely diffused among the many? 
 
 4: If the national income in 1918 was, as claimed, fifty- 
 five billion, would the nation be poorer today if the uncon¬ 
 sumable portion were reinvested by twenty million families 
 rather than by only four million of the twenty million 
 families ? 
 
 I could ask a few other pertinent questions, but these will 
 suffice for the present. 
 
 And Mamvnonism Must Bleed to Death 
 
 Let it be understood that I have never, and I do not 
 now advocate, what is sometimes spoken of as an “equal 
 division” of profits or of wealth. Against such proposals 
 I set my teeth. But I do demand that henceforth the pres¬ 
 ent non-investor public—the wage earners—shall be given 
 a greater opportunity of saving a fair part of their wages, 
 and an opportunity of investing their savings in enter¬ 
 prises that belong to them rather than in enterprises that 
 belong to a mighty few. And that they, rather than the 
 mighty few, shall receive whatever profits might accrue 
 from the joint investment of their capital (savings) and 
 their labor. 
 
 If this can be done (and the whole purpose of my book 
 is to show that it can be done), the problem of the distri¬ 
 bution of profits and wealth will be solved in a manner 
 that is legitimate, fair and just. And the evil of Mam- 
 monism—the concentration of all the wealth in the hands 
 of a few, will cease to afflict us. 
 
CHAPTER XXVIII 
 
 The Cost of Living Under the New Capitalism 
 
 T HROUGHOUT this work I have endeavored to con¬ 
 fine myself strictly to facts and figures, all of which 
 I have used as a basis for my various statements, con¬ 
 tentions, computations, deductions and conclusions. In 
 this chapter I am going to indulge my fancy just a little, 
 and even allow my imagination to roam at will. 
 
 Let me, therefore, continue to suppose the existence of 
 the New Order, and that the New Capitalism has begun to 
 function. It will take at least one year to raise the initial 
 $300,000,000. Beyond a doubt, with all potentialities ex¬ 
 ploited to the fullest extent (as can be seen from Chapter 
 XIX) we could raise the requisite initial capital within 
 ninety days; but that is not desirable, for the reason that 
 before we can effectively employ our capital it will be 
 necessary to thoroughly and completely organize, and plan 
 our campaign—measuring every step of the way, and the 
 distance we are to go. And this, I figure, will take at 
 least twelve months, during which time—be it remembered 
 —we would be accumulating $300,000,000 of our Basic 
 Capital Fund. We shall hardly care to begin aggressive 
 operations before that time. Even after setting ourselves 
 in motion the effects of our operations will not be materially 
 felt during the first year; not until the following year will 
 we be able to show unmistakable results. I say this pre¬ 
 ferring to be conservative in making promises, or painting 
 visions, or raising hopes, for I would rather surprise all 
 those who will be interested in watching our .progress, by 
 exceeding their expectations, than disappoint them by fall¬ 
 ing short of their fulfilment. 
 
 388 
 
Cost of Living Under New Capitalism 389 
 
 Briefly summarized the endeavor of the New Order under 
 the New Capitalism will be to bring the living costs of the 
 average wage earner (or non-investor) family down to a 
 point that will leave a surplus of wages to be invested by 
 the wage earners themselves, in enterprises that will yield 
 an income in addition to wages. 
 
 The Normal Level of Living Costs 
 
 But before we can establish a normal level of living 
 costs, it behooves us to ascertain what can be considered a 
 rational and attainable level. Precisely where is a normal 
 or rational level of living costs to be found ? In what year 
 can it be said that living costs were at a normal or rational 
 level? In 1896 prices were at their lowest; the dollar had 
 its greatest value; wages their greatest exchange value. Is 
 this the normal or rational level? 
 
 I shall say no! But even if it were—and if returning 
 thither were desirable and the ultima thule of all economic 
 endeavor, the return trip would have to be so slow as to 
 become wearisome to the travelers. It would have been 
 easier ten years ago; today it is well nigh impossible, and 
 we may just as well dismiss the thought from our minds, 
 once and for all. Moreover, the war has produced certain 
 economic effects that must be reckoned with—that cannot 
 be ignored. To make a long story short I have set as an 
 attainable goal the living costs of 1915—not, however, by 
 the familiar Capitalistic Entrepreneur method of lowering 
 wages first. In fact my plan does not contemplate the 
 cutting of wages; on the contrary it insists on the main¬ 
 tenance of prevailing wages. 
 
 The Living Costs Per Family 
 
 Let us confine ourselves for the present to the subject of 
 “living costs,” and see how they mounted under the 
 gegis of the Capitalistic Entrepreneur System, and of 
 which mounting the Capitalistic Entrepreneurs were the 
 principal beneficiaries. 
 
 The cost of living for an average family in 1900 was 
 
390 
 
 The New Capitalism 
 
 about $650 a year. This cost increased in the last twenty 
 years about as follows : 
 
 Average yearly 
 increase. 
 
 1900 .$ 650 
 
 1910 . 850 $20.00 
 
 1915 . 1,100 50.00 
 
 1920 . 1,5501 90.00 
 
 The increases were less by leaps and bounds than by a 
 steady, gradual growth. For the first ten years of the 
 Capitalistic System the increases were at the rate of about 
 $20 a year. For the next five years, at the rate of about 
 $50 a year. From 1915 to 1920, at the rate of about $90 
 a year. All the increases were cumulative and are now 
 permanent. If there is no marked recession in the retail 
 prices of all classes of commodities, or a considerable 
 increase in quality (and matters in this regard will grow 
 worse instead of better under the Capitalistic Entrepreneur 
 System); if rents remain at their present high figure, it 
 means that from now on every average family will pay 
 $900 a year more each calendar year than in 1900, or $9,000 
 during the next ten years. It means that the 16,000,000 
 non-investor families henceforth—thanks to the ingenuity 
 of the Capitalistic arrangement—will pay $14,400,000,000 
 a year more for the bare privilege of living then they did 
 twenty years ago. Think of it!—$14,400,000,000 a year, or 
 a total of $144,000,000,000 during the next ten years. 
 
 Under the New Capitalism we propose to bring down the 
 living costs, not suddenly but gradually, steadily, and pro¬ 
 gressively. We propose to reduce them at the rate of about 
 $50 a year. Within five years we would bring down the 
 cost of living commodities from $1550 to about $1350; and 
 within ten years to approximately the 1915 level, i.e., to 
 about $1100. This reduction would mean a saving of $450 
 a year for an average family, or a saving of $4,500 in ten 
 years per family. 
 
 i Throughout this book I have conservatively considered $1,500 
 as the living cost of an average family, in spite of the fact that 
 unbiased statisticians have computed that a family can not live in 
 decent comfort for less than $2,000, some even claiming $2,600 as 
 a minimum. 
 
Cost of Living Under New Capitalism 391 
 
 This means an aggregate saving for the 16,000,000 non¬ 
 investor families of $7,200,000,000 a year, or $72,000,000,000 
 within ten years. 
 
 Take your choice, my fellow workmen and non-invest¬ 
 ors ! Under the old Capitalism you will be compelled to 
 pay to the Capitalistic System during the next ten years 
 $144,000,000,000 more than the living costs of 1900. 
 Whereas, under the New Capitalism you will be enabled 
 to save $72,000,000,000 within ten years. 
 
 Paying Tribute to Caesar 
 
 It ought to be possible to bring living costs down to less 
 than a thousand dollars a year, but several elements will 
 make this difficult, if not impossible. This check on our 
 ability to lower living costs much beyond the 1915 level, 
 is, in a measure, due to the fact that we will have to contend 
 for a while w T ith adverse conditions created by the Capital¬ 
 istic Entrepreneur System which cannot be remedied all at 
 once. It must be remembered that the Capitalistic group 
 has a monopoly on practically all the basic materials that 
 enter into industry; coal, iron, lumber, oil, etc. Under the 
 circumstances the basic materials, and consequently, fin¬ 
 ished products, will cost more than they would if they were 
 not monopolistically controlled. In due time we mean to 
 break this monopolistic stranglehold on the basic raw ma¬ 
 terials, and finished products, but we realize that it will 
 require time to bring this about. The outstanding feature 
 of the situation is that the giant Capitalistic Entrepreneurs 
 have so powerful a grip on many of the important materials 
 and products that for a while we shall be compelled to pay 
 tribute to them. Their monopoly in due time will be broken 
 —that is part of my plan; but I should not care to set a 
 time limit for the present. 
 
 The Nation’s Tremendous Freight Bill 
 
 I have already shown that the same group that abso¬ 
 lutely controls the nation’s finances, and has a monopoly 
 of the basic materials and the industries, also owns and 
 
392 
 
 The New Capitalism 
 
 controls the transportation systems of the United States. 
 I shall waste no time in expatiating on what is generally 
 known, that the increase in the nation’s freight bill has 
 more than doubled within recent years. A glance at the 
 following statistics 2 for the “freight revenue” of the rail¬ 
 roads, will show this conclusively. 
 
 R. R. Freight 
 Revenue. 
 
 1900 .$1,049,000,000 
 
 1910 . 1,925,000,000 
 
 1920 . 4,373,989,717 
 
 A chapter could easily be written on this subject; there 
 is so much to say about it. But at the present moment I 
 am concerned only with one feature, and that is, that as 
 conditions are, or rather will be after the railroads have 
 “ adjusted” the wages of all the railroad employees, the 
 nation will be compelled to pay, annually, considerably 
 more freight on its commodities than in former years. In 
 due time the New Order will demonstrate the possibility 
 and urgency of relief from this tremendous item of freight 
 charges; but nothing can be done immediately. All that is 
 said here is for the purpose of emphasizing that it is one 
 of the formidable handicaps which the Capitalistic System 
 has constructed, and with which we shall grapple as best 
 we can for the first decade of years. 
 
 Inflated Real Estate Values 
 
 There are other disadvantages under which we will be 
 compelled to operate for some time—thanks to the iniqui¬ 
 tous principles established by the Capitalistic System. I 
 refer particularly to the system of arbitrarily inflated 
 values of properties. Inflation is universal; it applies not 
 only to the properties from which the basic materials are 
 derived, and to the manufacturing industries—basic or 
 derivative—it is predicable of all kinds of properties—par¬ 
 ticularly land. Real estate values everywhere, or, more 
 properly speaking, real estate juices, have been doubled 
 
 2 Railway Statistics of the United States, for 1920. 
 
Cost of Living Under New Capitalism 393 
 
 and trebled, many increased tenfold, thanks to the stimulus 
 for speculation and for “profit-taking” given to the real 
 estate speculators by the Capitalistic System. 
 
 The increase in the value, or rather in the prices, of city 
 property since the adoption of the Capitalistic System’s 
 method of computing “values” has been enormous. Natu¬ 
 rally the inflation of “values” means higher rents and 
 consequently a bigger “overhead expense,” all of which 
 has increased prices to the non-investor group, and is likely 
 to prevent the cost of living from coming down to its ulti¬ 
 mate normal level for some years to come. The increase in 
 rentals, within recent years, instituted throughout the 
 United States, is responsible for a considerable increase in 
 living costs. I do not mean only the rents paid by indi¬ 
 viduals and families, but also the rents for offices, stores, 
 factories, warehouses ,etc., and which find their way back 
 into the living costs. I should say that the average is easily 
 100 percent increase. 
 
 The rentals of stores, shops, offices and lofts, were, during 
 the war, raised from fifty to three and four hundred per¬ 
 cent. This was brought out in the Lockwood Committee 
 investigation in New York. Increases of fifty percent were 
 so common, Samuel Untermyer, Committee Counsel, said, 
 that he would not trouble himself to read them into the 
 record. 
 
 “Some of the buildings named by Mr. Untermyer were, 
 the Standard Oil Building, 26 Broadway, where it was 
 charged, one rent was increased from $1,500 in 1916 to 
 $4,700 in 1921, and another from $15,000 in 1920 to $32,000 
 in 1921; Corn Exchange Building, 15 Williams St., from 
 $1,200 in 1918 to $2,400 in 1921; 470 Fourth Avenue, 
 $4,500 in 1920 to $12,000 in 1921.” . . . 
 
 “Among the many instances of increased rents was one 
 where a tenant whose lease called for $9,000 two years ago, 
 now pays $24,000 for the same suite. 
 
 “There were some cases where offices renting five years 
 ago for a few hundred dollars, were leased this year for 
 several thousand dollars. Tenants who paid $2 a square 
 
394 
 
 The New Capitalism 
 
 foot last year in a down-town sky-scraper, sign leases for 
 1921 requiring payment of $6, $7, and $8 for the same 
 space.” 3 
 
 The conditions that exist with regard to the increases in 
 rentals applies to all the cities in the United States. Thou¬ 
 sands of small business men and women have been forced 
 out of business because their rent had been raised to a point 
 that made continuance unprofitable. 
 
 The Crushing Burden of Taxes 
 
 But even though it were possible to break the Capital¬ 
 istic Entrepreneur stranglehold with regard to monopolies 
 and inflated values and high rents, within a single year’s 
 time, there are two items which we cannot of our own 
 ability reduce, namely the taxes that have arisen out of 
 the recent war, and the tariffs. Briefly stated, the Federal 
 Government collects, and will indefinitely collect, from the 
 twenty million families, annually, from four to five billion 
 dollars a year in taxes. In the Mid-Month Review of Busi¬ 
 ness, September 15, 1921, published by the Irving National 
 Bank of New York, statistics compiled by George W. Norris, 
 Governor of the Philadelphia Reserve Bank, pertaining to 
 the annual governmental expenditures, are given. Before 
 the war these were computed to be $33 per family of five. 
 Now they are $214.80 per family of five. 
 
 Surely there is none to dispute that the wage earners— 
 the non-investors—pay the major portion of all taxes 
 directly and indirectly. 
 
 The following is an excerpt from an article ‘ ‘ The Crush¬ 
 ing Burden of Taxation,” published in The Boston Com¬ 
 mercial , April 8, 1922: 
 
 “The Boston Chamber of Commerce has been collecting 
 some data from state and federal sources to show the bur¬ 
 den of taxation, which was borne by the citizens of Massa¬ 
 chusetts that year. From them we have been making a few 
 calculations that deserve more than passing notice. 
 
 “In the year 1910 the internal revenue taxes collected in 
 
 3 Commercial Edition Chicago Herald-Examiner, June 10, 1921. 
 
Cost of Living Under New Capitalism 395 
 
 Massachusetts were $7,400,000, and state, county and local 
 taxes totaled $85,800,000, or a combined tax on the people 
 of Massachusetts of $93,200,000. The population of Mas¬ 
 sachusetts in 1910 was 3,366,000, which made a per capita 
 tax of about $28. Taking the census figures of 4.3 persons 
 to a family, the tax per family in 1910 was $120 or $2.30 
 a week. 
 
 “Ten years later the federal government levied on Mas¬ 
 sachusetts for $259,000,000 and the state, county and local 
 tax was $198,000,000, or a total tax of $457,000,000, an 
 increase of 400 percent. In 1920 the population had in¬ 
 creased to 3,852,000, making the per capita tax nearly 
 $120, and the family tax approximately $520 or ten dollars 
 per week. 
 
 “It is idle to claim that these taxes are paid by anyone 
 but the ultimate consumer and the ultimate consumer on 
 whom the burden falls the heaviest is the man who works 
 for wages.” 
 
 George Wheeler Hinman, writing in the Herald-Ex¬ 
 aminer (February 10, 1921), says that Congressman Sisson 
 told the House of Representatives a few days ago that the 
 total expense of all the Governments in the United States 
 —national, state, county and city—are $15,000,000,000 a 
 year. This means that ‘ ‘ the average man with a family of 
 five has to pay, in one way or another, some $750 as his 
 share. He may pay it directly in taxes, or indirectly in 
 prices, or partly in taxes and partly in prices; but he has 
 to pay it somehow.” 
 
 Whatever the exact amount of federal, state, county and 
 municipal taxes paid by the average family, it is apparent 
 that in the aggregate taxes constitute a burden of tremen¬ 
 dous proportions, for the lifting of which the New Order 
 does not pretend that it can fashion an Archimedian lever. 
 But while we can promise no immediate relief from taxes, 
 the whole subject of Taxation will be studied from the 
 standpoint of the ultimate payer of all taxes—and a way 
 may be found to lighten the load. 
 
396 
 
 The New Capitalism 
 
 The Tariff Tax 
 
 Then there is the Tariff. What the Tariff means to the 
 average family may be judged from the following excerpts 
 from a speech on the Fordney Tax Bill, by the Hon. Percy 
 E. Quin, of Mississippi, published in the Congressional 
 Record, July 13, 1921: 
 
 “Today it takes one-third of the cost of all products to 
 pay the railroad transportation. You have raised the 
 transportation of railways more than $1,000,000,000 yearly, 
 and yet in power all of this time and nothing has been done 
 to stop it. The gentleman from Kansas (Mr. White) yes¬ 
 terday quoted from the President’s message where he said 
 that the rates of transportation would have to come down. 
 This was one of the great evils of the day. Today in the 
 United States the annual cost to the American people for 
 railway transportation is $4,000,000,000. The annual tax 
 of municipal and county taxes—State and Federal—makes 
 a total of $9,000,000,000; four and a half or five billions of 
 that is out of the Federal taxation power of the United 
 States Government, and through this monstrous bill you 
 propose to put through here you are going to take out of 
 the taxpayers of the United States at least $3,000,000,000 
 or $4,000,000,000 more money, and less than $500,000 or 
 $600,000 of it will go into the Treasury of the United 
 States. Where does the difference between the amount that 
 goes into the Treasury and that which comes out of the 
 pockets of the people of this Republic go ? You are putting 
 it into the coffers of the rich, the corporations, trusts, and 
 partnerships of this Republic.” 
 
 On June 25, 1922, Senator David I. Walsh, of Massachu¬ 
 setts, made public statistics showing that the increased rates 
 in agricultural products in the tariff bill, under discussion 
 in the Senate, will add $13.15 annually to the cost of living 
 of every individual in the United States: “At the very 
 period when we are attempting to deflate the enormous 
 costs of production and the excess prices prevailing as a 
 result of war conditions, it is proposed to increase the cost 
 
Cost of Living Under New Capitalism 397 
 
 of living to the American people to the extent of $1,316,- 
 569,449 per annum.” 
 
 The Tariff question will be carefully studied by us—from 
 the non-investor’s standpoint, and not from the Capital¬ 
 istic standpoint. 
 
 Increase in Price and Decrease in Quality 
 
 But while our hands will be tied for some years to come, 
 with regard to a number of the fortuitous items that find 
 their way into the cost of our sundry living commodities, 
 there are some things with regard to which we will be strong 
 enough to compel amelioration. For example: There is 
 one point in the “cost of living” which no one seems so far 
 to have discovered or discussed; nor do the various index 
 numbers take it into consideration, viz., that for a large 
 number of articles, such as clothing, shoes and sundry kinds 
 of wearing apparel—textiles and fabrics—not only are 
 prices practically double what they were in 1914 but the 
 quality has been materially reduced, thus putting the whole 
 nation to the necessity of buying approximately double the 
 quantity. For all these items the increase has been not one 
 hundred percent, but nearer three hundred percent. Ac¬ 
 cording to the statisticians, the item of “clothing” consti¬ 
 tutes about sixteen percent of the average family budget; 
 which being the case, the non-investor families (or wage 
 earners) pay out an aggregate of about four billion dollars. 
 The expenditure of about one-half of this immense sum is 
 made necessary on account of reductions in quality, a 
 shrewd calculation made by the Capitalistic Entrepreneurs. 
 
 It is not to be supposed for a minute that the Capitalistic 
 Entrepreneurs reduced quality in order to keep a large 
 number of workmen employed. By no means! They re¬ 
 duced quality because it necessitates double the consump¬ 
 tion—consequently means double profits to them. In other 
 words, Capital, with regard to the industries w r here there 
 lias been a material reduction in quality, makes twice as 
 much as formerly on the output per workman; for the price 
 
398 
 
 The New Capitalism 
 
 of the present inferior article is approximately the same as 
 the price of the former superior article. 
 
 Reduction in quality (to say nothing at this time about 
 a noticeable reduction in the quantity for an ever increas¬ 
 ing number of articles) means the expenditure of billions 
 of dollars a year. We propose a material increase in the 
 quality, not only of clothing but with regard to many arti¬ 
 cles of family use. This will mean a tremendous saving in 
 the family budget. 
 
 My Modest Claim 
 
 As regards the cost of living of the average family: I 
 hold that, under the New Capitalism it will be possible to 
 bring down prices of the aggregate living commodities to 
 a point which will enable the average family to save from 
 $100 to $450 a year. It may take from five to ten years 
 before the maximum figure is reached, but even during the 
 first five years the saving will be appreciable. 
 
 It is not to be supposed for a moment that the New Order 
 will concern itself only with manufacturing industries. It 
 will include within its sphere of operation, economic adjust¬ 
 ments in sundry directions. Anything that has helped to 
 increase the cost of living unduly, or refuses to return to 
 a more rational level of prices, will be grist for our mill. 
 We are determined to increase the exchange value of the 
 dollar, to restore its maximum purchasing power. We pro¬ 
 pose to revitalize the emaciated, debilitated wage dollar, not 
 by a weak saline injection, but by blood transfusion from 
 the giant Capitalistic dollar—treatment that may be a 
 trifle heroic, but absolutely necessary and effective. 
 
 No Utopian World 
 
 Let none imagine that the New Order is in any way 
 intended as a Utopia; let none delude himself into think¬ 
 ing that its complete success will usher in the millennium. 
 Neither a Utopian world, nor a millennial heaven on earth 
 will result from the adoption of my plan. But it will bring 
 the country back to a common sense basis of business, and 
 
Cost of Living Under New Capitalism 399 
 
 common sense views of life will begin to control the world. 
 That is about as much as I expect to achieve through the 
 medium of my plan. The New Capitalism is intended to 
 usher in an era of Common Sense-ism—the only ism that 
 has never been advocated—that no one has ever suggested. 
 
 The New Capitalism is not a catholicon for the ills of 
 the world. It is not an alchemy that converts dross into 
 precious metal. It does not pretend that it will shake Hes- 
 perides apples into the lap of Labor. It holds out no 
 promise of great wealth to anyone. All it will aim to do 
 is to place those who labor in a position that will assure 
 them the highest possible recompense for work performed, 
 while enabling them to live in decent comfort, and retain 
 (and invest) a fair portion of their earnings, against the 
 inevitable ‘ ‘ rainy day. ’ ’ 
 
 There will never be a system of economics that will 
 straighten out all tangles, or be equable for all. My plan 
 is not calculated to take care of the foolish, the imprudent, 
 the lazy, the shiftless, the thoughtless, the extravagant. 
 These ye have always with you. I have no idea how a man 
 can eat his cake and have it too. I know of no way in 
 which common sense can be pounded into the heads of 
 foolish people. I do not know of any way in which people 
 can spend all they earn or make, and also have a compe¬ 
 tence at the end of twenty or twenty-five years—a reserve 
 fund for old age, infirmity, sickness and accidents. My 
 plan, however, will give every man and woman his or her 
 choice—each can choose to be sensible or foolish—provident 
 or improvident—frugal or prodigal, thrifty or shiftless. 
 My solace is that tens of millions of those who, with the 
 best of will, can, under the present conditions, hardly make 
 ends meet or barely keep the ends together, will henceforth 
 be enabled to save a fair portion of their earnings, which 
 profitably invested, will secure them and those dependent 
 upon them, against poverty and wretchedness. 
 
CHAPTER XXIX 
 
 “Out of the Fryihg Pax into the Fire” 
 
 E VEN a cursory examination of economic history 
 reveals that numerous attempts have been made at 
 different times by the people of European nations to 
 break and thrust off the shackles of their economic serfdom. 
 Socialism is rampant in Germany. In Russia the new eco¬ 
 nomic order is Bolshevism. In France, we hear, or at least 
 did hear up to a few years ago, much of Syndicalism. In 
 England the Guild movement seems to be gathering 
 strength. In Italy, until recently, a mixture of Socialism, 
 Syndicalism, and Bolshevism prevailed; now Fascism is in 
 the saddle. 
 
 While there is no universal agreement with regard to 
 principles, nor uniformity as regards programs, most of the 
 economic reform movements in Europe have certain ten¬ 
 dencies in common. Thus, for example, we observe in 
 every country where the revolutionary spirit is rampant, 
 a growing desire on the part of the people to overthrow 
 their rulers and the existing governments, some extreme 
 doctrinaires going even so far as to advocate the destruc¬ 
 tion of all government. The inspiration for this attitude 
 is easy to understand when we keep in mind that in most 
 European nations the people have practically nothing what¬ 
 ever to say with regard to their own political affairs and 
 destinies. They are subjects, rather than citizens; ruled, 
 rather than governed. What makes their resentment all 
 the bitterer is their knowledge that those who rule over 
 them politically, also rule over them economically. 
 
 The Fallacy of a Worker's Republic 
 
 And so, out of the babble of economic voices across the 
 ocean, we can distinctly hear shrill mention of what it 
 pleases some to call the rule of the proletariat, or a “ work¬ 
 ers' republic.” From the economic standpoint a “workers’ 
 
 400 
 
“Out of the Frying Pan 
 
 401 
 
 
 republic” is at best a madman’s dream. In Russia they 
 tried to establish one; with what success is generally known. 
 In Italy, and in other countries, several attempts have been 
 made within recent times on the part of groups of work¬ 
 men, to take over, sans ceremonie, the leading industries. 
 Every such attempt is bound to fail ultimately; or else, to 
 succeed, must become a proletarian tyranny, no less repug¬ 
 nant than the Capitalistic tyranny it was designed to 
 destroy. 
 
 In England, if I may base my conclusions on such long¬ 
 distance studies of the Guild movement as I have been 
 enabled to make from the writings of such men as Douglas, 
 Penty, Cole—and others—Labor is preparing for the day 
 when it proposes to assume active control of the industrial 
 workshops. England’s Labor movement is seemingly bet¬ 
 ter organized than in other countries; the workers have a 
 definite plan and program; but granting all this I can dis¬ 
 cern no hope of economic betterment, neither for the work¬ 
 ers nor for England’s general public. 
 
 I may be wrong as regards England! but applying the 
 principles involved in the rule of the proletariat—or a 
 “workers’ republic” to conditions in the United States, 
 and with -which I am fairly familiar—I unhesitatingly say 
 a so-called “workers’ republic” is not only utterly repug¬ 
 nant to me; but entirely unthinkable. 
 
 No Revolutionary Program in the United States 
 
 Briefly, any and every brand of revolutionary doctrine 
 or radical economic reform movement that may be defens¬ 
 ible and perfectly logical in Europe where political and 
 economic conditions are entirely different, and, it would 
 seem, decidedly worse than in our own country, is inap¬ 
 plicable to the United States, and cannot succeed here. 
 True, we find here and there isolated radical groups, whose 
 leaders, entirely lacking in originality, have borrowed sun¬ 
 dry tenets from the various European revolutionary doc¬ 
 trines and incorporated them into a sort of program, which, 
 however, makes no appeal to the imagination of the average 
 
402 
 
 The New Capitalism 
 
 sensible man and woman; a program so extreme, and vio¬ 
 lent, that it does not, cannot, and never will, win the 
 approval of any considerable number of the general public 
 in the United States. Rather would we bear the ills we 
 have, several times multiplied, than fly to others that in all 
 likelihood would be more unendurable. 
 
 A Fundamental Fallacy 
 
 In “industrial socialism’’ I can discern only this one 
 erroneous thought, that the earth and all it can be made to 
 bring forth, belongs to the industrial workers, and that 
 industrial workers have a prior claim to the usufruct of all 
 Labor. This is precisely the fallacy upon which the Cap¬ 
 italistic System has builded itself. The principles involved 
 are so obviously untenable that I shall not delay the reader 
 a moment in emphasizing their falsity. To my way of 
 thinking there is not the slightest difference between an 
 economic system whose bountiful emoluments, as is the case 
 today, are selfishly pre-empted by a few million minority 
 —the many more millions majority being made to suffer— 
 and a system which proposes that the same emoluments 
 shall hereafter be appropriated by a different minority, 
 which would not lighten in the least, but make heavier, the 
 burden of the greater majority. 
 
 While I differentiate between industrial socialism and 
 organized Labor, for the two are as wide apart in their 
 ideals and their policies as the poles—nevertheless I have 
 observed that group dominance and control of industries is 
 not entirely repugnant to certain Labor groups. Needless 
 to say, I do not sympathize with their aspirations, which I 
 think are based on insufficient understanding of the fun¬ 
 damental principles involved, rather than inspired by any 
 evil design. 
 
 Economic Amelioration Vagaries 
 
 But while we have not in the United States any organ¬ 
 ized economic movement, or any economic doctrine that has 
 won for itself the endorsement and support of any con- 
 
“Out of the Frying Pan—” 
 
 403 
 
 siderable number.of people, we have a rather variegated 
 collection of theories and so-called remedies, each of which 
 has succeeded in winning a limited number of adherents. 
 During the past few years I have read at least a dozen 
 books and articles in which the writers suggest various ways 
 by which Labor could get control of industries—as if that 
 in itself were a panacea for all our economic ills. If there 
 were any truth in that assumption the people of Russia 
 would today be at the zenith of their economic prosperity, 
 for there the proletariat has taken over the industries, with 
 what results to themselves and the country is now pretty 
 generally understood. But political and economic condi¬ 
 tions in Russia are different from our own, and I do not 
 consider it either fair or necessary to draw a parallel be¬ 
 tween the happenings in Russia and what would likely 
 happen in our own country, were like measures adopted. 
 
 With regard to the proposals of the several writers who 
 have ventured seriously to propose the possibility of Labor’s 
 control of the industries, the suggestions they make seem 
 plausible enough until analyzed; and then they fall to pieces. 
 Labor is to take over the control—by purchase, I infer— 
 of the industries just as they are—including overcapitali¬ 
 zation, watered stock, bonds, notes, liabilities, cost systems, 
 overhead expense, fixed charges and all; the difference 
 would be that the profits and the accruing interest and 
 dividends would go to the workingmen instead of as at 
 present, to the Capitalists or the investors. This is sup¬ 
 posed to be of some immediate benefit to the workers. It 
 isn % as I shall show; but granting for the moment that it 
 would be of advantage to the workers, it would certainly 
 yield no benefits and certainly no advantages to those not 
 numbered among the workers in the several industries 
 taken over. It would solve none of our economic difficulties. 
 Production costs would remain the same; prices of com¬ 
 modities would be as high as ever; rents would not be low¬ 
 ered; in brief it would not decrease the burden nor lessen 
 the hardships now resting on the average non-investor 
 family. 
 
404 
 
 The New Capitalism 
 
 Any economic scheme that has for its immediate objective 
 an increase of benefits for a minority, a single group, at the 
 expense of the majority is in no wise different from what 
 we have today, and consequently does not win my approval. 
 Any economic proposal that seeks to confine its benefits to 
 a fraction of the workers, and excludes all others from par¬ 
 ticipation therein, does not merit serious consideration. 
 That is precisely the trouble now\ The benefits all accrue 
 to a group, the Capitalistic group, while the larger group— 
 those who work for a wage and who are no part of the 
 Capitalistic System, must bear the brunt of it. 
 
 Let us for a moment imagine that the ten million workers 
 engaged in the mechanical and manufacturing industries 
 actually had gained control, (and by perfectly legitimate 
 means, let us say,) of all the industries; and whatever 
 benefits would accrue would belong exclusively to the ten 
 million workers. Of what benefit would the transfer of 
 control or ownership be to twenty or twenty-five million 
 of men and women workers who are not engaged in any 
 of the industries concerned? None whatever! 
 
 An Economic Experiment 
 
 From a newspaper editorial, a clipping, (December 11, 
 1920) I learn that an ex-minister in Cincinnati is at pres¬ 
 ent the president of a large clothing factory, in the conduct 
 of which he applies the Golden Rule. Some of the results 
 noted in the item before me are these: “Wages have been 
 increased forty percent. Invested Capital is earning sixty 
 percent. Profits above sixty percent are equally divided 
 between owners and workers. Perfect content reigns in the 
 factory. ’ ’ 
 
 I made no effort whatever to look up this matter, or make 
 any inquiries concerning it, since to give detailed informa¬ 
 tion with regard to the various economic experiments is not 
 included within the scope of my book. I do not know what 
 the conditions in said clothing factory are today; but assum¬ 
 ing they are unchanged, and basing my statement upon 
 the meager data contained in the newspaper item from 
 
“Out of the Frying Pan 
 
 405 
 
 7 7 
 
 which I have quoted, I would conclude that the factory is 
 conducted in some respects along the lines advocated by 
 those writers who consider Labor’s control of the indus¬ 
 tries as an economic remedy. 1 * * * * * If the statement that “in¬ 
 vested capital is earning sixty percent ’ 7 is not an exaggera¬ 
 tion, then the ex-minister ’s clothing factory is certainly run 
 on a basis calculated to be of the greatest advantage to the 
 workers ivithin that factory; in that case few, if any, 
 benefits, redound to the general public. Basing my assump¬ 
 tion entirely upon the information contained in the item 
 referred to, I am inclined to think that the products of the 
 ex-minister’s clothing factory are sold at approximately 
 the same high prices asked for the products of other plants. 
 If I am correct in assuming this, then the opportunity for 
 noting an essential difference between the ex-minister’s plan 
 and my own plan has arisen. Decent wages for workers are 
 the prime consideration of my plan; nor do I overlook the 
 necessity for reasonable profits. But more important than 
 either or both of these features are lower prices to the 
 public for the commodities produced, for this alone makes 
 wages and profits valuable. It is not my plan to make the 
 New Order advantageous only to certain groups of indus¬ 
 trial workers, but to make it of the greatest possible benefit 
 to all workers—that is—the general public. 
 
 The Deadly Distinction 
 
 I want to emphasize this distinctive feature of my plan. 
 If its successful establishment meant merely the improved 
 condition of small groups of workers—or the laboring group 
 in the aggregate; if it meant simply the transference of 
 an unjust and tyrannical power now in the hands of the 
 organized Capitalistic Entrepreneurs to the hands of organ- 
 
 i Since writing - the above I have discovered that the ex-minister 
 
 is the Rev. Mr. Nash. Besides critical articles have been published 
 
 about his plan and plant in the Neio Republic and The Nations with 
 
 all of which, however, I am not concerned. I shall confine myself 
 
 strictly to a discussion of the principles involved. Nothing that I 
 
 have read with regard to the Rev. Mr. Nash’s clothing factory alters 
 
 the principles involved in his experiment. 
 
406 
 
 The New Capitalism 
 
 ized Labor, then, economically speaking, the public in gen¬ 
 eral would be no better off than it is today. High prices 
 and the high cost of living would still be evils, all the more 
 distressing because maintained by the very people who 
 complained loudest against them. 
 
 As stated before—I may be in error in having arrived at 
 certain conclusions with regard to the ex-minister’s clothing 
 factory; but even so—it gives me an opportunity to accen¬ 
 tuate a point which I shall be at great pains to make per¬ 
 fectly clear in the course of this book. We mean, indeed, 
 to destroy the unjust and tyrannical power of the Capi¬ 
 talistic Entrepreneur System. The tremendous power the 
 Capitalistic Entrepreneurs now exercise will be wielded by 
 us, but never unjustly or tyrannically. In our hands that 
 power must be beneficent, and exercised in a strictly just 
 manner so as to yield the greatest good to the greatest num¬ 
 ber. 
 
 Another point that I desire to accentuate on every pos¬ 
 sible occasion in the course of this book, is that big 
 profits do not constitute the ultima thule of my plan. On 
 the contrary we shall strive to bring about a condition that 
 will considerably reduce the excessive profits now garnered 
 by the Capitalistic Entrepreneur group; for it is quite 
 provable that big profits are the corollary of high prices of 
 the living commodities. As long as prices are high and 
 profits big, so long will the purchasing power of the dollar 
 be proportionately below par; so long will wages have a 
 minimum exchange value. 
 
 To pay liberal wages for labor performed will be a definite 
 striving of my plan—but high wages are of no avail unless 
 accompanied by a higher purchasing power—a greater ex¬ 
 change value. A maximum wage with a minimum exchange 
 value is demonstrably an economic maladjustment of no 
 special advantage to the worker, nor of benefit to the public 
 in general; but a maximum wage with a maximum exchange 
 value—that is an ideal with a practical purpose—an ideal 
 that we shall strive to realize. 
 
“Out of the Frying Pan—” 407 
 
 Again the Question of Exchange 
 
 If it were possible for each trade, craft, or guild, to abso¬ 
 lutely control its own industry, and raise the prices of its 
 products ad libitum —and so add to its wages also, enormous 
 profits,—Labor would still not have improved its relative 
 condition one particle, for the profits made by the workers 
 in one craft would be taken away by the workers in all the 
 other crafts. Let us take, for example, the clothing indus¬ 
 try. Under Labor’s control of the craft, the profits made by 
 the clothing workers would be taken away again by the 
 shoemakers, the hat makers, the shirt makers, the dress¬ 
 makers, the milliners, the furniture makers, etc., etc. Not 
 only that, they would be compelled to pay excessively high 
 prices for many things that are not produced in shops and 
 factories and mills; for example, rent, and the many prod¬ 
 ucts of the farm necessary to their existence. Absolutely 
 no advantage would result to the wage workers from inde¬ 
 pendent group control of the industries; their economic 
 condition would in nowise be improved; indeed, they would 
 be worse off than they are today. 
 
 Playing With a Loaded Gun 
 
 Labor must keep these two essential things in mind: 
 
 1: That wages come out of the product of Labor itself. 
 In other words, in the course of production one workman 
 exchanges his labor for the labor of other workmen. 
 When the hatmaker buys a pair of shoes he helps to pay 
 the wages of the shoemaker; and the shoemaker helps to pay 
 the wages of the hatmaker when he buys a hat. There is 
 no escape from this rule. No system of ^economics can ever 
 be devised that would alter this exchange of labor feature, 
 and its corollary that the wages of one group of laborers 
 are ultimately paid by all the other laboring groups. 
 
 2 : That all profits come directly out of Labor’s wages— 
 or let me rather say out of the exchange of wages by those 
 who labor for the commodities necessary to life. Conse¬ 
 quently Labor in the mass would not improve its condition 
 
408 
 
 The New Capitalism 
 
 one iota. Living costs would not only remain at an abnor¬ 
 mally high level, but undoubtedly would rise still higher; 
 and while the workers themselves might, by a division of 
 the profits among themselves, increase the quantity of their 
 wages or income, they would be no better off at the end of 
 the year, for their greater quantity income would have no 
 greater exchange value; and their savings no greater pur¬ 
 chasing power. 
 
 For the present I want to impress upon the readers, par¬ 
 ticularly on those who are wage earners, that the New Order 
 is not to be an organization of and for the exclusive benefit 
 of workingmen, but of and for the benefit of all those who 
 constitute the group of non-investors. Nor is the New Capi¬ 
 talism intended to give temporary advantages to a few of 
 them; but rather permanent benefits to all of them—with¬ 
 out exception. 
 
 The Inherent Weakness of Organized Labor 
 
 The inherent weakness of all Labor organizations lies in 
 the fact that the workers constituting them have organized 
 themselves merely as wage earners. Six or seven million 
 men and women have organized to protect themselves as 
 wage earners, but they are unorganized as consumers—as 
 non-investors. Indeed it could be demonstrated that the 
 protection that Labor has gained for itself when serving in 
 the capacity of wage earners, has been detrimental to the 
 laborer and his family in the role of consumer and non¬ 
 investor. Every advantage that Labor has gained through 
 its organization is taken away in its unorganized capacity 
 as consumer and non-'investor. In other words, Labor has 
 protected itself for eight hours a day; but has left itself 
 open to a thousand attacks during the remaining sixteen 
 hours a day. Labor has protected itself for 2400 hours a 
 year, but is absolutely unprotected during 6360 hours each 
 year. Moreover, Labor, in protecting itself during eight 
 hours, has been the innocent cause of imposing greater 
 hardships upon a large percentage of the non-investor 
 group of consumers—that group which is not organized or 
 
“Out of the Frying Pan 
 
 409 
 
 ? 1 
 
 could not derive any immediate benefit whatever from or¬ 
 ganization. Into this group I will put all the salaried men 
 and women, as well as those who, receiving no regular wages 
 or salary, derive a revenue from their labor, or service, the 
 equivalent of a wage or salary. 
 
 But that is not the phase of the subject that I desire to 
 discuss. I merely want to emphasize that Labor has organ¬ 
 ized itself for collective protection for eight hours only, 
 and left itself entirely unprotected during sixteen hours a 
 day. Labor has, or thinks it has, protected itself against 
 Capital, but I say that Labor has not protected itself against 
 the Capitalistic System. What Labor has seemingly won 
 from a few hundred thousand employers is taken away 
 from it by several million profiteers. Protection during 
 eight hours; exploitation during sixteen hours a day. Labor 
 collectively is protected eight hours a day; the individual 
 laborer still remains unprotected the greater part of the 
 day. Let us take an average family of five, of which one 
 is the wage earner. This means one member is protected 
 for eight hours a day while actively engaged in the role of 
 wage earner; he is not protected, and his organization can 
 give him no protection, during the other sixteen hours. 
 And the other four members of his family remain unpro¬ 
 tected twenty-four hours a day. 
 
 I have tried to put my thought in a manner easily under¬ 
 stood by the average man and woman. I call upon my 
 readers to ponder over my presentation a few moments, 
 which, if they will do, they w T ill clearly see the point. As 
 long as a wage earner can give himself no greater protection 
 than at present; as long as he does not protect every member 
 of his family every hour of the day, so long will he have de¬ 
 rived no actual benefit, and certainly won no material ad¬ 
 vantage from his organization. 
 
 I have entitled this chapter ‘ ‘ Out of the Prying Pan into 
 the Fire,” because it aptly describes the situation, for if 
 the several groups of wage earners were in actual control of 
 the industries, and they would raise both their wages and 
 the prices of their products so that their aggregate income 
 
410 
 
 The New Capitalism 
 
 from these two sources would be one-fourth or one-third 
 higher than it is today, they would still not have improved 
 their own condition, for the reason that the exchange value 
 of their wages would be lower than ever; and even though 
 their savings would be larger than before (though I am dis¬ 
 posed to doubt that) the purchasing power of their savings 
 ■would be considerably less than it is today. And the eco¬ 
 nomic status of the millions of men and women workers, 
 those not engaged in the manufacturing industries, would 
 be a great deal worse. 
 
 Briefly, any economic reorganization plan that does not 
 include within its program a definite design to raise the 
 exchange value of wages and to increase the purchasing 
 power of money (or savings) will bring no relief to the 
 workers in the capacity of wage earners, nor to the workers 
 in the role of consumers and non-investors—that is, to the 
 general public. 
 
 The Open Road to Disaster 
 
 It is to be noted, too, that all the writers who had visions 
 of Labor’s control of the industries as a remedy for our 
 economic ills have overlooked the most important point— 
 namely, the necessity for capital and credit. They have 
 given no hint as to how the capital necessary to gain con¬ 
 trol of the industries, or the capital and credit necessary to 
 run them, is to be raised. And, most of all, they entirely 
 overlooked the very important point, viz., that, even grant¬ 
 ing the possibility of group control of the several industries, 
 they would still be at the mercy of the Capitalistic group 
 that controls the system of banks upon which they would 
 have to depend for credit necessities, and to whom they 
 would have to yield up their securities as collateral—in 
 brief, in whose favor they would be compelled to hypothe¬ 
 cate their plants and business. Foreclosures, refusal to 
 renew notes, or extend credit facilities, receiverships and 
 bankruptcies would be the order of the day. Indeed, it is 
 on record that during the past few years several Labor 
 groups have struck out for themselves, and that most of 
 
“Out of the Frying Pan 
 
 411 
 
 » 5 
 
 them have gone to pieces on the rocks of insufficient finances, 
 and credit withdrawals, refusals and curtailments. It is 
 well to remember that it was by virtue of their dominant 
 control of the financial resources of the nation that the 
 Capitalistic group attained its supremacy, even to the 
 extent of crushing or controlling powerful rivals—and so- 
 called independents. Any economic plan that disregards 
 the existence of this cruel power is foredoomed to failure. 
 It must be reckoned with, or else circumvented or check¬ 
 mated. 
 
 The greatest possible stupidity that organized Labor could 
 perpetrate would be to break itself up into small, inde¬ 
 pendent units—each group bent upon getting a maximum 
 of revenue—‘ ‘ all that the traffic can bear ’ ’—out of its par¬ 
 ticular industry. Were I a Capitalistic Entrepreneur I 
 should not only welcome, but do all in my power to encour¬ 
 age even to the extent of financing, so foolhardy a procedure 
 on the part of Labor, for it would be the easiest thing in 
 the world to crush group after group—and, once crushed, 
 they would be out of harm’s way forevermore. The only 
 possible chance that Labor has to lift itself out of eco¬ 
 nomic thraldom is to constitute itself into an organized 
 group; not to break itself up into disintegrated and unre¬ 
 lated units. 
 
 The Lesson of the Past 
 
 Fifty years ago business was conducted on an entirely 
 different basis than it is today. Then business ability, integ¬ 
 rity, and efficiency of the proprietors of a business counted 
 for something. Business was truly competitive; there was 
 real rivalry, often keen, sometimes bitter. The man who 
 went into business provided his own funds, managed his 
 own finances, and established his own credit. As his busi¬ 
 ness grew he took in a partner or two. Stock companies 
 were almost unknown. Out of their profits they extended 
 their business; out of their profits , be it understood. Or, 
 if they borrowed, they paid back what they borrowed out 
 
412 
 
 The New Capitalism 
 
 of their profits. Their plant was considered by them as 
 their machinery for making a fair profit—gradually increas¬ 
 ing their wealth by increasing the size of their plants and 
 the volume of their production. The foundation of every 
 big industry was laid in the last half of the nineteenth 
 century, under the then prevailing system. Most of the 
 pioneers were successful business men—men who took a 
 natural pride in making a success of their business. Finan¬ 
 cially they were prosperous; they did not become mil¬ 
 lionaires over night; it took years to lay the foundation of 
 a fortune; and years to build the superstructure. 
 
 Then came the period of Trusts. At first pools and 
 syndicates were formed. Combinations of Capital were 
 followed by the combination of the important manufac¬ 
 turing plants. The founders of the plants, or their descend¬ 
 ants, were persuaded by seductive offers to enter the com¬ 
 bine. Most of them did, accepting as their reward stock of 
 a par value several times in excess of the actual value of 
 their properties and assets. Many of the existing plants 
 that had been in competition with each other were deemed 
 unnecessary under a system of combination that was cal¬ 
 culated to entirely eliminate competition, and were closed 
 up or dismantled. 
 
 For several decades there had been many more or less 
 successful attempts made at combination, but not until the 
 organization of the United States Steel Corporation, which 
 combined the biggest plants in the most important indus¬ 
 try in the United States into one gigantic corporation, was 
 launched, were the inherent possibilities of organized com¬ 
 bines revealed. How the organization was effected, and 
 that it was successful, is now pretty generally known. It 
 is not any part of my design to go into details either with 
 regard to the United States Steel or any other corpora¬ 
 tion. I want merely to remark that the United States 
 Steel Corporation set the example. The ‘ ‘ reorganization ? 1 
 of most other industries quickly followed, so that not only 
 the big industries but the less important businesses were 
 
“Out of the Prying Pan—” 413 
 
 organized along the same lines as the powerful combines. 
 Competitive methods were no longer a part of trade and 
 commerce; the semblance alone was kept up. 
 
 Today price fixing is the rule; cost-finding systems are 
 perhaps not uniform, but certainly universal. Items are 
 now charged up against “cost of production,” and taken 
 out of “earnings,” which were formerly taken out of 
 profits. The purchasers of the commodities produced are 
 taxed with sundry items of “cost,” such as insurance, all 
 taxes, depreciation, replacement, interest on investment, 
 interest on bonds, etc. For the present, suffice it to say 
 that all the principles and practices of the big fellows have 
 been successfully and universally copied by the little fel¬ 
 lows. Not a lesson has been overlooked. 
 
 The Value of Organization 
 
 The most important lesson, however, and which has not 
 been overlooked by any one group of individuals, is the 
 lesson of the importance of organization, unity and soli¬ 
 darity. From top to bottom, business is organized—com¬ 
 pletely, thoroughly organized. The bankers, the financiers, 
 the brokers, the producers, the manufacturers, the employ¬ 
 ers, the wholesalers, the jobbers, the retailers, and even 
 the various branches and departments of business of what¬ 
 ever kind—all thoroughly and completely organized—all 
 constituting a single system—a harmonious whole; the con¬ 
 stituents singing the same songs, saying the same prayers, 
 worshiping the same golden calf—all tied together by the 
 common bond of self-interest expressed in dollars and 
 cents—in bigger profits and greater riches. 
 
 There you have, in brief, a bird ’s-eye view of the Capital¬ 
 istic System. Even those who cannot be said to be either 
 Capitalists or Entrepreneurs, but have been or are benefi¬ 
 ciaries of the System or its practices, think in unison, or, 
 more properly speaking, they have their thinking done 
 for them by the so-called Captains of Industry and Finance, 
 and are content to be merely echoes. There is complete 
 
414 
 
 The New Capitalism 
 
 unanimity, for their interests are identical. They are a 
 chorus of acquiescence, or agreement. Not a single dis¬ 
 cordant voice is lifted at any of their banquets; not a dis¬ 
 senting vote is heard in any of their meetings. There are 
 no radicals among them, no independents, no dissenters, 
 none to kick over the traces. 
 
 Every contingent has, moreover, its own press—a power¬ 
 ful, well-financed and well-supported press. There are 
 hundreds of trade journals, or journals having to do with 
 the sundry interests of the different groups. 
 
 The One Conclusion 
 
 This is the System against which I propose that the non¬ 
 investors organize themselves, and of which organization 
 Labor is to be the nucleus. The lesson of unity, organiza¬ 
 tion and solidarity is the one lesson to be mastered. The 
 folly of disintegrated and unrelated units acting independ¬ 
 ently of each other must be apparent to even the merest 
 novice. A solid and united front will be necessary to op¬ 
 pose the forces whose strength lies not so much in numbers 
 as in their complete homogeneity and their perfect morale. 
 
CHAPTER XXX 
 
 Economic Changes and Adjustments 
 
 HERE is one phase of the economic side of the 
 
 natipn’s life that we cannot much longer hide from 
 
 ourselves. We are fast approaching a condition under 
 which industrial stagnation in business will become more 
 frequent, and periodical labor lay-offs become the rule. 
 Herbert Hoover, Secretary of Commerce, in 1921 pointed 
 out that the present is the fourteenth industrial depression 
 we have had since the Civil War. If I have read the signs 
 aright, the wage earners may just as well make up their 
 minds that from this time on there will be an industrial 
 disturbance every five or six years. It is inevitable un¬ 
 der the Capitalistic Entrepreneur System, which cannot 
 flourish under stable conditions. Fluctuations—rises and 
 falls, ups and downs—are the essence of the System. As 
 an example, if prices of stocks remained stable for two con¬ 
 secutive years the stock exchanges would collapse like so 
 many houses of cards. The immense profits in the stock 
 game are made out of fluctuations in market prices. 
 
 That these fluctuations are manipulated is no secret. If 
 immense profits in the securities market are derived from 
 artificial fluctuations, the same principle can be applied 
 with similar results to industrial conditions. Therefore, 
 disturbances and crises are desirable things from the Cap¬ 
 italistic standpoint, particularly as regards Labor, for, if 
 those who work for a wage had five or ten years of con¬ 
 tinuous prosperity, they would acquire so great a degree 
 of economic power, importance and momentum that they 
 could not be controlled, which would be fatal to the Cap¬ 
 italistic Entrepreneur System. The best way to keep wage 
 earners in the proper frame of mind, and docile and sub- 
 
 415 
 
416 
 
 The New Capitalism 
 
 missive, is to keep the prospect of periodical industrial de¬ 
 pression—loss of jobs, of wages, or savings—hovering con¬ 
 tinually over their heads. 
 
 The Course of Events 
 
 It is quite possible that many who read this do not see, 
 and are unable to discover, any planned design in the peri¬ 
 odical industrial depressions that have afflicted the nation 
 in the past, and so will not admit design in those that will 
 afflict the nation—particularly the non-investors—in the 
 future. Very well! I shall not press the point at this 
 time. Indeed I am quite willing, for the present, to confine 
 myself to a consideration of sundry events which seem to 
 play right into the hands of the Capitalistic Entrepreneurs 
 —events in the shaping of wdiich it cannot be said they are 
 playing the conspicuous role of villain, but events the evil 
 effect of whose reaction is visited on the heads of the wage 
 earners—the non-investors, the public. 
 
 For example: The industrial development of the country 
 within the past twenty-five years has been phenomenal. It 
 was not so much a gradual growth as a tremendous, sud¬ 
 den forward leap. In many lines of production the in¬ 
 crease was doubled and trebled. I do not want to lumber 
 this chapter with an array of statistics. For this reason I 
 refer the readers to the latest Statistical Record of the 
 Progress of the United States as recorded in the Statistical 
 Abstract for 1922, where he will find enough data to either 
 confirm or disprove my statement. The statistics, if ana¬ 
 lyzed and correlated, show that the growth prior to ]900 was 
 steady and gradual; the rate of increase was normal. But 
 after that we note a more rapid expansion. While the 
 population increased from 75 million in 1900 to about 105 
 million in 1920—an increase of 40 percent—the increase 
 in our progress in the past twenty years was at the rate of 
 .100 to 300 and even more percent. An admirable record, 
 surely one to be proud of and rejoice over! But it cannot 
 be kept up. Perhaps the simplest way to show the quick, 
 not to say sudden, progress is to point to the increase in 
 
Economic Changes and Adjustments 417 
 
 bank clearings from $84,582,450,081 in 1900 to $462,920,- 
 250,000 in 1920. 
 
 The Limit of Healthy Growth 
 
 The point I want to make is that we cannot maintain 
 the same percentage of increase; the tremendous industrial, 
 commercial and even agricultural expansion during the 
 past twenty years cannot be repeated during the next 
 twenty years. The century from 1800 to 1900 can be said 
 to have been the years of adolescence, of our “productive 
 progress.” A study of the statistics for the years from 
 1900 to 1920 reveals an enormous step forward, an abnormal, 
 not to say unnatural, increase in our productive progress, 
 due to artificial stimulation through the medium of infla¬ 
 tion and an unusual combination of circumstances and 
 events. As an example, take the automobile industry. 
 Twenty years ago it was in its infancy. Twenty years ago 
 a mere corporal’s guard of our citizens had automobiles. 
 Today there are nine million pleasure cars in use. But it 
 would be folly to compute that, therefore, twenty years 
 hence eighteen million pleasure cars will be in use; and 
 forty years hence, thirty-six million. 
 
 Healthy boys and girls keep on growing until about the 
 age of twenty. Then suddenly their growth stops, and all 
 the remaining years of their lives will not add an inch to 
 their height. She, you will admit, would be a foolish mother 
 who, knowing that her son at the age of twenty wore trous¬ 
 ers forty inches in length, would therefore conclude that 
 by the time he reaches forty he will wear trousers eighty 
 inches in length. Put into bold relief, we are no longer in 
 our ’teens; our nation’s “productive progress” has passed 
 beyond the “growing” years; we have transcended the 
 normal limits of growth; we have reached a point beyond 
 which, in the nature of things, w r e cannot increase in vol¬ 
 ume or percentage per capita —a fact which our purblind 
 Captains of Finance —alias Captains of Industry—refuse 
 to admit. As a result of their insistence that we shall con¬ 
 tinue to grow—that at the age of forty we shall wear 
 
418 
 
 The New Capitalism 
 
 trousers twice as long as we w T ore when we were twenty— 
 they have put the nation on stilts, and they are goading us 
 on to a fall. 
 
 Speed Without Motion 
 
 There will not be, there cannot be, the same percentage 
 of increase, neither in production nor in manufacture, 
 nor in sales. Production is regulated by consumption. 
 With regard to many things, particularly articles of food 
 and of manufacture, production is already in excess of 
 normal consumption. Why blink the fact? Why lie about 
 it? During January of 1920 Elbert H. Gary declared 
 that during the next five years we would increase our 
 crops 100 percent. Assuming that we do—who is going 
 to benefit by this excessive increase in production? What 
 are we going to do with the additional 100 percent of 
 cereals, etc. ? The people will not consume twice as much; 
 that is certain. Just the reverse is likely; for the people 
 are consuming less and less on account of high prices. Nor 
 can we depend on larger exports, for it is reasonable to 
 suppose that the United States will not be alone in its in¬ 
 creased production; other parts of the world will increase 
 as well. And certainly the population of the United States 
 and the population of Europe will not double during the 
 next five years. Who, then, will be benefited by a 100- 
 percent increase in crop production, with no proportionate 
 increase in consumption and in the markets? 
 
 As late as June, 1921, at a time when the steel mills were 
 running at about 20 percent of capacity, Charles M. Schwab 
 publicly declared that we were not producing enough. “We 
 must increase our production,” he said. Increase produc¬ 
 tion of what? If Mr. Schwab really believed what he was 
 saying, why didn’t he start his own plants going full tilt? 
 Why didn’t he put the men back to work in his own mills ? 
 
 Crying “Wolf, Wolf” When There is no Wolf 
 
 During and following the war we were told that there 
 was underproduction; the cry was raised by Chambers of 
 Commerce and the sundry sycophantic hirelings of the 
 
Economic Changes and Adjustments 419 
 
 Capitalistic System that what was needed was more pro¬ 
 duction. Then came the buyers 7 strike, and the retailers 7 
 strike, and the wholesalers 7 strike. The manufacturer was 
 caught with vast quantities of raw materials and finished 
 products in warehouses and on his shelves. The retailers 
 had previously, under persuasion of manufacturers or 
 wholesalers, stocked up rather better than ordinarily. The 
 general public, too, had been induced by the retailer to buy 
 double quantities. “Better buy two or three pairs of 
 shoes, 77 said a shoe clerk in Chicago’s leading department 
 store to me in January, 1919. 
 
 “Why? 77 I queried. 
 
 “Because prices are going to go still higher.” 
 
 “If prices will go still higher,” I answered, “it will be 
 simply for the reason that you will have succeeded in 
 inveigling a sufficient number of fools into buying two or 
 three pair of shoes at present outrageously high prices in 
 stead of only one pair. If I, and every other person in need 
 of a pair of shoes, can be coaxed, or cajoled into buying 
 two or three pair of shoes, it means that your firm will sell 
 two or three times as many shoes as formerly; and the 
 wholesaler will sell two or three times more shoes; and the 
 manufacturer likewise. Then the cry will be raised that the 
 demand is abnormal, and this will only help to keep up 
 prices. Moreover, your firm will give out interviews to the 
 press that the people are buying recklessly and extrava¬ 
 gantly—two or three pair instead of one, and— 77 
 
 But the young fellow didn 7 t understand. I was wasting 
 my time. 
 
 At any rate, when the buyers 7 strike struck the country 
 it became apparent that there was not, and had not been 
 at any time—even when the cry “we must produce more” 
 was loudest—what could be called underproduction. Pro¬ 
 duction had always been equal to, and even in excess of, 
 the normal demand. The semblance of underproduction 
 was created by the irrational endeavors on the part of the 
 manufacturers, wholesalers and retailers to stimulate and 
 maintain a condition of abnormal consumption. 
 
420 
 
 The New Capitalism 
 
 Precisely what is the game ? What is behind this studied 
 attempt on the part of certain interests to give the impres¬ 
 sion that there is underproduction when just the reverse 
 is true ? Are they themselves deluded ? I do not believe it. 
 Why the continued deception? Is there a Senegambian in 
 the wood-pile ? Then let us find him. 
 
 To Stimulate Capital Accumulations 
 
 The conditions which made the tremendous sudden in¬ 
 crease possible during the past twenty years are not in 
 operation today. The reaction has set in. This reaction 
 will affect the various parties involved—the Capitalistic 
 Entrepreneurs, the wage earners, and all the non-investors, 
 differently. It is more than likely that the Capitalistic 
 Entrepreneurs will put forth every possible endeavor to 
 maintain the same percentage of increase in their wealth 
 accumulations during the next twenty years as during 
 the past twenty years. How great this percentage is may 
 be fairly computed from the statistics for “ national 
 wealth,” which was 88 billion in 1900 and 288 billion in 
 1920—an average increase of ten billion a year. 
 
 What methods will be employed by them to still further 
 increase their “national wealth” is easily guessed. Wealth 
 inflation will continue at the same or a greater rate; 
 interest charges will probably be increased; high com¬ 
 modity prices, and rents, also, will continue ; transporta¬ 
 tion and freight rates will remain high; higher tariffs will 
 be added to “cost of production”; “overhead expense,” 
 “maintenance costs,” “administration expense,” and 
 “fixed charges” will be pushed beyond the present high 
 figures; and the quality of many commodities will be re¬ 
 duced, thus putting people to the necessity of purchasing 
 twice as much as formerly. 
 
 The effects of all this will be visited upon the heads of 
 the wage earners and salaried men and women, in brief 
 will be felt in every home by all non-investors, in the role 
 of consumers during sixteen hours a day. As wage earners 
 or workers they will get rather the worst of it, in that they 
 
Economic Changes and Adjustments 421 
 
 will be made to feel the effects also while at work in mine 
 or mill, shop or factory, store or office. Their wages will 
 be cut to the bone; their hours of labor will be increased; 
 their output per day, or week, increased. And, of course, 
 for many there will be periodical lay-offs—longer seasons 
 of idleness, during which they will be compelled to con¬ 
 sume their scant savings, or run into debt. 
 
 The Gapitalistic-Mammomstic Juggernaut 
 
 This is no sickly dream. This is no purple prophesy. 
 It is not even a fanciful guess; it is a statement of prosaic 
 fact. The things I enumerate are not going to happen at 
 some time in the future,—they are happening today; this 
 very hour. They have been shaping themselves for over 
 twenty years and are now developed to a point of alarm¬ 
 ing perfection. A little polishing here, a finishing touch 
 there, a tightening of screws all around, and the Capital- 
 istic-Mammonistic Entrepreneur machine which has been 
 building for more than twenty years will be in smooth 
 running order—a Juggernaut that crushes and kills every¬ 
 thing in its path as on it sweeps. 
 
 The wage earners will be, as they have always been in 
 the past, the worst sufferers from the onward rush of this 
 monster machine. They still have the power to stop this 
 mighty engine of destruction if they can but muster up the 
 courage and develop the will, to do it. In another decade 
 it may too late. But they must be made to understand, 
 what they do not seem thus far to have been able to grasp, 
 that there are other elements than the item of wages in¬ 
 volved in their economic welfare. There is, for example, 
 the constantly growing menace of unemployment for an 
 increasing number. 
 
 More Workers Than Jobs—A Capitalistic 
 
 “Ideal” 
 
 In plain English, there are, and under the supremacy 
 of the Capitalistic Entrepreneurs there will continue to 
 be, more workers than jobs. I should hesitate to put all 
 
422 
 
 The New Capitalism 
 
 the blame for this state of affairs on the Capitalistic Entre¬ 
 preneur System, but there is considerable evidence that 
 unemployment of a certain percentage of workers has 
 from the very beginning been conspicuous among the 
 Capitalistic “ideals.” When the great consolidation of 
 steel industries took place, dozens of plants were closed— 
 and dismantled, and thousands of men were thrown out 
 of employment. This was euphemistically called “a sav¬ 
 ing of waste”—“the doing away with duplication of 
 effort,” etc. The reduction in the number of men on 
 the payrolls meant a saving, not of waste, but of wages— 
 consequently an increase of profit. 1 The working day of 
 many of the steel workers not thrown out of employment 
 on account of the closing of plants, was lengthened to ten 
 and twelve hours, not a few being compelled to work 
 seven days a week. This system, with some modifications 
 made on account of public sentiment, is still in effect in 
 most of the plants of the United States' Steel Corporation, 
 Mr. Gary persistently refusing, under various pretexts, to 
 inaugurate an eight hour day for all wmrkers. 
 
 An eight hour day would mean the employment of many 
 thousands of additional men. Apart from the fact that 
 an increase in workers means an increase in the size of the 
 payroll, which would produce if not a marked, still a 
 noticeable effect on the earnings, there is the more im¬ 
 portant consideration that it would practically exhaust 
 the now available supply of steel workers. Not that 
 that in itself is a serious dilemma, for the United States 
 Steel Corporation has repeatedly proved that it is equal 
 to any emergency, as, for example, when, in 1901, in its 
 fight on the unions, it replaced American workingmen 
 out of the foreign labor market. 
 
 No, that isn’t it! The United States Steel Corporation 
 has a reputation to sustain—the reputation of having for- 
 
 i "When Elbert H. Gary was before the Lockwood Committee (June 
 2, 1922), Samuel Untermyer reminded him that in 1921 the United 
 States Steel Corporation had only 45 percent of its capacity employed, 
 and yet made more money than when the full capacity was employed. 
 This confirms my own theory that the profits of the Capitalistic 
 Entrepreneurs will be greater when fewer are employed. 
 
Economic Changes and Adjustments 423 
 
 mnlated and systematically promulgated a set of ideals 
 now universally adopted by the entire Capitalistic System. 
 The particular ideal with which we are concerned in this 
 chapter, is the ideal of so maneuvering as to create and 
 maintain a condition that provides for “a docile and 
 flexible labor supply”—in other words, a certain percent¬ 
 age of workers constantly available to replace other 
 workers. 
 
 Labor in Competition with Labor 
 
 This “ideal” has been splendidly maintained thus far. 
 I shall make no stress of the fact that in 1915 there were 
 fully as many people out of work as in 1922. Of greater 
 significance is the report of the Hoover Committee on the 
 Elimination of Waste, which estimates that in the best 
 years, like 1917 and 1918, there “was a regular margin of 
 unemployment amounting to more than a million men.” 
 This is the ideal the Capitalistic System has set for itself 
 in normal times—a condition where there will always be 
 a margin of a million or so wage earners out of work, 
 seeking employment, willing to take any job at the em¬ 
 ployer’s price. 
 
 The consolidation of the big industries was brought 
 about and justified on the principle that it is ruinous to 
 have Capital in competition with Capital; but the consoli¬ 
 dators deem it highly desirable to have Labor in competi¬ 
 tion with Labor. Evidently what is sauce for the goose 
 is not always sauce for the gander. When Labor is in 
 competition with Labor, Capitalistic Entrepreneurs can 
 urge the ancient claim that Labor is a “commodity,” and 
 that wages are regulated by the “law of supply and de¬ 
 mand.” 
 
 Professor Ely, in his interesting work, “Studies in the 
 Evolution of Industrial Society,” says that Professor John 
 B. Clark “has worked out a theory of wages which, in his 
 opinion, enables us to ascertain the true product of Labor, 
 which should be then assigned to Labor. What Labor re¬ 
 ceives under perfectly free competition, ‘with Labor ideally 
 
424 
 
 The New Capitalism 
 
 mobile, 7 is he says, the true product of Labor. ‘The really 
 natural standard of pay lies between the amount that idle 
 men may here and there consent to take and the amount that 
 a union, which guards its monopoly by force, may be able 
 to extort; and it lies at about the level of what a union 
 that is extended and efficient, but not monopolistic, can 
 get. The standard that is so indicated would be one which 
 well-constituted courts could recognize, etc. 7 7 7 2 
 
 All this but emphasizes the Capitalistic Entrepreneur 
 ideal with regard to Labor—an ideal which the System 
 has fully attained; and the determination to maintain 
 which explains much of the bitterness of the fight of the 
 Capitalistic System against organized Labor. 
 
 “A certain degree of unemployment, 77 said the New 
 York Times in 1921, “is corrective of many social dis¬ 
 orders. 77 This is not unlike David Harum’s philosophy, 
 that ‘ ‘ a certain amount of fleas is good for a dog; it keeps 
 him from worrying about being a dog. 77 
 
 God help the nation that can devise no better corrective 
 for its social disorders than wholesale unemployment and 
 resultant misery and wretchedness, for a considerable 
 number of its families. 
 
 “I Die of Thirst by the Side of the Brook” 
 
 The early English economists rather favored a high 
 
 "birthrate, on account of the resultant cheapness of labor, 
 
 which would inevitably redound to the benefit of the 
 
 •/ 
 
 Capitalists. Quite naturally their views were shared by 
 the leading statesmen—the ruling Capitalistic class of the 
 time. In 1798 T. R. Malthus published his “Essay on the 
 Principle of Population as It Affects the Future Improve¬ 
 ment of Society. 77 Malthus argued that “Population has 
 the constant tendency to increase beyond the means of 
 subsistence 77 —that the constant tendency of all living 
 
 2 The words which I italicize, viz., the amount that "a union 
 which guards its monopoly (?) by force(l) may be able to extort (?) ” 
 are objectionable, and open to criticism, in which, however, I shall not 
 indulge at this time; that would be beside the question imme¬ 
 diately involved in this chapter. 
 
Economic Changes and Adjustments 425 
 
 beings is to increase faster than the food supply. Malthus 
 contended that population tends to increase in a geometri¬ 
 cal progression, thus: 
 
 1, 2, 4, 8, 16, 32, 64, 128 
 while the means of subsistence can increase only in an 
 arithmetical progression, thus: 
 
 1, 2, 3, 4, 5, 6, 7, 8. 
 
 Almost the whole so-called thinking world accepted the 
 Malthusian theory without cavil or question. Today it is 
 still reverently expounded in the universities, and emi¬ 
 nent economists continue to preach it not only in England 
 but also in the United States, with this difference, that 
 whereas Malthus confined his theory to a consideration of 
 the relation of the population to the means of subsistence 
 —the food supply—the modern economists have given it 
 a more inclusive application, namely, that population has 
 the tendency to increase beyond the means of subsistence 
 including all production; this in spite of the fact, too, 
 that it can be shown by a wealth of statistics that Malthus’ 
 fears, at least as far as the United States is concerned, 
 were entirely unfounded. The means of subsistence—the 
 food supply—is greater per capita than ever; we are 
 producing rather more than we can consume. We are 
 unable to find markets for what we produce. Millions of 
 people throughout the world—slowly starving—would 
 be glad to get our surplus, but, alas, they haven’t the 
 means, the money; they are already on a starvation basis 
 of wages. In their countries the Capitalistic System has 
 been completely successful. 
 
 In brief, in the United States, production of commodities 
 in general has outstripped consumption; and not the re¬ 
 verse, as so many Capitalistic Entrepreneurs and econo¬ 
 mists would have us believe. Why does Mr. Gary seek to 
 give the impression that a hundred percent increase in 
 cereals is needed during the next five years? Why does 
 Mr. Schwab (and scores of others) insist that we are not 
 producing enough when just the reverse is true? Ask the 
 stars! Mayhap they can answer! 
 
426 
 
 The New Capitalism 
 
 An Economic Dilemma 
 
 The neo-Malthusians face the difficulty more bravely. 
 They do not try to disguise the fact that we are producing 
 more than we can consume. Indeed they attribute the 
 Capitalistic tendency (which they defend) to pay nothing 
 more than a bare living wage, to the over-presence of 
 workers—a greater supply of workers than is needed. And 
 the solution they have to offer is the deliberate limitation 
 of the birth rate—that, or dire poverty for the whole tribe 
 of wage earners. 
 
 And yet the deliberate limitation of births, it seems to 
 me, carries with it its own condemnation. Let it be under¬ 
 stood that whatever my private views may be with regard 
 to the deliberate restriction of births, in this book I shall 
 not allow any ethical consideration to enter in. I am view¬ 
 ing the economic aspect of the subject, purely from a 
 business standpoint, putting it on its lowest possible plane, 
 or rather keeping it on the low level where I found it. 
 
 Keeping all these things in mind I maintain that the 
 production of population (consumers) is, if not a nation’s 
 chiefest asset, at least its most important industry. When 
 that industry, for whatever reason, languishes, economic 
 disturbances are bound to result. The normal progress 
 of a nation depends on the maintenance of a normal birth¬ 
 rate. Curtailment of the normal birthrate is bound to 
 curtail normal consumption. The economic equilibrium 
 of a nation can be maintained only as long as a nation 
 does not neglect the production of consumers (children). 
 But when a nation increases production of commodities 
 and cuts down the number of consumers of the commodi¬ 
 ties, then something worse than Malthus foresaw has be¬ 
 fallen the world. 
 
 Olive Schreiner, in her book, “Woman and Labor,” ar¬ 
 gues that there is no need of maintenance of .what can be 
 called the normal birthrate, for today, she says, one 
 worker produces enough for ten persons. Not exactly true! 
 But—accepting Miss Schreiner’s statement as if it were an 
 
Economic Changes and Adjustments 427 
 
 arithmetically correct fact, why not consider also its cor¬ 
 ollary, that if one worker today produces for ten persons , 
 it follows that ten consumers are necessary to consume what 
 the one produces. And how are we going to keep np con¬ 
 sumption if we refuse to produce the ten consumers neces¬ 
 sary for what the one produces? In former times, if we 
 accept Miss Schreiner’s loose way of putting it, one worker 
 on the average consumed what he produced, whereas today, 
 one man produces for himself and nine others. But how 
 can we hope to cope with this new situation if we delib¬ 
 erately curtail the production of consumers—that is, if we 
 keep down the birthrate? 
 
 To the positive checks on population enumerated by 
 Malthus—war, pestilence, famine, disease, vice, crime, etc., 
 —and the preventive checks urged by the neo-Malthusians 
 —John Stuart Mill encouraged another check, viz., that 
 resulting from ‘ ‘ the opening of industrial occupation freely 
 to both sexes,” and which “industrial and social inde¬ 
 pendence of women” would produce, he contended, “a 
 great diminution of the evil of overpopulation.” 
 
 But we may seriously question whether society as a whole 
 is benefited to any extent by a wholesale transference of 
 those who, in the design of nature, are intended to be pro¬ 
 ducers of consumers to the list of producers of commodities. 
 Indeed it is an open question which only those immediately 
 concerned—the women themselves—can answer, viz., 
 whether they themselves are economic gainers or losers; 
 and whether, after all, they are not helping with their own 
 hands to set the stage for a terrible catastrophe involving 
 the whole human race. 
 
 Penalizing the Worker for His Fecundity 
 
 There is much in Malthus ’ elaborate treatise on the Prin¬ 
 ciple of Population which compels acquiescence; and there 
 is much commendable logic in his argument; nor was Mal¬ 
 thus a monster of unmorality, as some would have us be¬ 
 lieve. It must be remembered that he wrote of a time, and 
 up to a certain period, and around a series of economic 
 
428 
 
 The New Capitalism 
 
 facts that were pertinent at the time he wrote. Indeed 
 there are lands where many of the conditions described by 
 Malthns have not materially improved even to this day. 
 But I am not speaking of those lands. I am not thinking 
 at this moment of India, Japan, Russia, China, Turkey, etc. 
 I am confining myself strictly to the United States, for 
 which territory I am willing to go on record as saying that 
 for the next two centuries the menace of overpopulation 
 will not seriously affect us. My quarrel, if you care to call 
 it such, is not with Malthus or his theory, but with those 
 economists in the United States who have deliberately per¬ 
 verted the Malthusian formula into an argument defending 
 and justifying the payment of less than a living wage to 
 the tribe of workers. 
 
 Just read, for example, the following from “The Wealth 
 and Income of the People of the United States,’’ by Pro¬ 
 fessor Willford Isbell King, (p. 249) : 
 
 “Of late we have heard a tremendous demand from 
 would-be social reformers for a ‘living wage.’ We hear 
 the employers on all sides denounced as heartless villains 
 because they do not pay enough to allow their employees to 
 live in decency and comfort. But this sentiment seems to 
 arise from a superficial analysis of the difficulty. Why are 
 the employees not in a position to demand a satisfactory 
 return for their services? Whose fault is it? And the 
 ultimate blame must be laid not upon the employers but 
 upon the parents and grandparents of the workers them¬ 
 selves. Why did these ancestors of the present generation 
 bring into the world children whom they could afford 
 neither to educate nor to train for some occupation, the 
 products of which were sufficiently in demand to make a 
 living wage easily secured ? Why indeed ? Simply because 
 these same parents and grandparents were either incom¬ 
 petent, ignorant, or unwilling to restrain their animal pas¬ 
 sions. Here we have an excellent example of-‘visiting the 
 iniquity of the father upon the children unto the third and 
 fourth generation’.” 
 
 To my humble way of thinking the emphasis placed by 
 
Economic Changes and Adjustments 429 
 
 certain Capitalistic economists on the doctrine of birth 
 restriction, and their contention that wages are low be¬ 
 cause there are too many workers, is solely for its psycho¬ 
 logic effect upon the workers themselves. If the haunting 
 thought that he himself, and not the Capitalistic System, 
 his own “iniquity,” or the “iniquity” of his ancestors, 
 and not the iniquity of the Capitalistic System, is to blame 
 for his economic helplessness and quandary, can be firmly 
 rooted into the consciousness of the average wage worker, 
 and of his wife and progeny, a kind of sordid docility 
 will eat into their souls, a sickly resignation overpower their 
 wills; after which their resentment against the “established 
 order” will never be more than a feeble protest. 
 
 A Puzzling Problem 
 
 But however we may interpret the Apologia of the Cap¬ 
 italistic economists and their defense of a system of wages 
 notoriously inadequate for decency; however we may con¬ 
 temn the obtuseness or blindness of those who, in the face 
 of an admitted excessive productive ability, advocate a 
 reduction in the number of consumers, it cannot be denied 
 that the situation is fraught with difficulties, and in its 
 entirety constitutes an enigma of gigantic proportions. 
 
 In the days of Malthus it was believed that the time was 
 inevitable when population would outstrip the means of 
 subsistence. Conditions today prove that just the reverse 
 has happened. Production is vastly greater than con¬ 
 sumption. There are more workers than jobs; more mer¬ 
 chandise than markets. And things will grow rather worse 
 than better in this regard, in the years to come. 
 
 The Wrong Solution 
 
 Perhaps Bichard Arkwright’s townsfolk, who, as Car¬ 
 lyle tells us, “rose in mob” against the barber inventor of 
 the spinning wheel “for threatening to shorten labor, to 
 shorten wages; so that he had to fly, with broken wash-pots, 
 scattered household, and seek refuge elsewhere,” (even his 
 wife turning against him)—had a clearer vision of what 
 
430 
 
 The New Capitalism 
 
 was in store for them and their descendants than we are 
 willing to admit, for is it not written that “the children of 
 this world are wiser in their generation than the children 
 of light ? ’ ’ 
 
 At any rate it would seem that the things they dreaded 
 have truly come to pass in England, where, we are told, a 
 system of “ca’ canny,” of “go slow,” is sapping the eco¬ 
 nomic vitality of the nation. This is not because the Eng¬ 
 lish workmen are lazy, or unwilling to give fair service for 
 their wage, but rather because there are more workers than 
 jobs—and by dragging out their work they imagine that 
 they are doing a wise thing, distributing the work among 
 a greater number. A fool philosophy if ever there was 
 one! 
 
 Adding Fuel to the Fire 
 
 In our own United States things, economically, are not 
 so bad as in England,—not yet; but, alas, the fool philos¬ 
 ophy of the British workmen is beginning to manifest itself 
 in the muddled minds of some American workers, who 
 imagine that by prolonging a job they are—doing what ?— 
 Helping other workmen? No! not so much that as better¬ 
 ing their own condition—increasing their own wages, 
 obtaining more pay than they otherwise would for perform¬ 
 ing a certain piece of work. Apart from the utter dishon¬ 
 esty of such a procedure it is the stupidest kind of logic. 
 When a workman can, reasonably computed, complete a 
 given job in one day’s time, but puts in two days, he does 
 not make himself richer, but his neighbor poorer. And 
 when, as the enemies of Labor insist, work that was form¬ 
 erly performed by one skilled worker, now, under restrict¬ 
 ive rules requires two or three skilled workmen, a situation 
 is created that is bound to alienate the sympathy of the 
 public, as well as weaken Labor’s cause. 
 
 “In normal times,” says James H. Collins, -“economists 
 estimate, if our industrial organization works five and a 
 half eight-hour days, it will produce so much that the coun¬ 
 try can consume only about four days’ output. One and 
 
Economic Changes and Adjustments 431 
 
 one-half days’ output must be shipped abroad. As we are 
 now selling little abroad, and our buying power is at an 
 average of less than 50 percent, we are really using only 
 two days’ output. Briefly, there are more people in the 
 marketing and financial departments of industry than are 
 needed to do the business of the country. When we get 
 back to normal many of these people will be eliminated— 
 the high-profits merchants and the salaried workers who 
 were overpaid or rendering no real service.” 3 
 
 “No one,” says Professor John R. Commons, “can 
 squarely defend all of the restrictive policies of unions, but 
 if they are carefully examined . . . they will be found 
 
 to be not so very different from the restrictive policies of 
 employers and of non-unionists. In all cases these policies 
 have their source in the knoivledge that there are not, at all 
 times, enough markets to take all of the work and the 
 product at fair wages and profitable prices .” 
 
 The Pot Calling the Kettle Blach 
 
 If Labor is attempting to limit production so that it will 
 be employed twelve months a year, and Capital is attempt¬ 
 ing to speed up production so that it can “lay off” Labor 
 on an average three or four months a year—who is the 
 greater culprit? On whose side is the greater right; on 
 whose the greater wrong? Which group is more justified? 
 I make no defence and offer no justification for either 
 group. But while I am on this subject let me add that he 
 w T ho can see any difference between the fixed determination 
 of the employer to get as much work as possible for as little 
 wages as possible, and the growing determination of the 
 worker to get as much wages as possible for as little work 
 as possible, has a finer sense of moral values than I have. 
 
 A Eift in the Clouds 
 
 No! this country is not suffering from an excess of pro¬ 
 ducers so much as from a dearth of consumers. Undercon- 
 
 3 From “The White Collar Job and the Big' Jolt,” by James H. 
 Collins, Saturday Evening Post, September 3, 1921. 
 
The New Capitalism 
 
 sumption, rather than overproduction, is our economic dif¬ 
 ficulty. And this underconsumption is, in a great measure, 
 attributable to the niggardly wage alloted by Capital to 
 those who labor; and certainly accentuated thereby. 
 
 Things cannot go on forever as they are going; there 
 must be a fundamental readjustment or something will 
 break—something go to smash. Since the Capitalistic 
 Entrepreneurs have nothing else to offer except periodical 
 unemployment and less than a living w r age, it behooves the 
 New Order to “find a way” out of the encircling difficulties. 
 
 I shall not particularly emphasize here what seems to me 
 the logical and basic solution, namely—a greater number 
 of marriages, which would naturally yield an increase in 
 the number of producers of consumers; but that is a social, 
 rather than an economic solution, and it is the economic, 
 rather than the social, side of the problem that I desire to 
 discuss. Therefore I propose as a possibility under the 
 New Order, a reduction in the number of the working hours 
 of the producers. Or it would be possible to institute a 
 system of fewer working days. Also raising the age limit, 
 which would keej) out of the ranks of the workers boys and 
 girls of tender years. Also retirement from active labor 
 at an earlier age, which is possible only if wages are fair 
 and reasonable, and other sources of income have been 
 opened to the workers. These, be it remembered, are not 
 “ideals” that I should care to incorporate as tenets of the 
 New Order, nor propose as an integral part of my system 
 —but I should certainly advocate them, should it ever 
 seem necessary or desirable, in order to safeguard the many 
 against the evil of unemployment and less than a living 
 wage—the fecund parents of misery and poverty. 
 
 The Great Triumph 
 
 This brings us to the pivotal point of this whole subject 
 —the question of constant employment of the workers and 
 uninterrupted business. I have said, and I shall repeat 
 it here, that a system of fair and reasonable wages, with a 
 maximum exchange value, is preferable to a system of 
 
Economic Changes and Adjustments 433 
 
 excessively high wages with a minimum exchange value, 
 for these two very important reasons: 
 
 1: Fair and reasonable wages will permit the employ¬ 
 ment of a larger number of workers than would be possible 
 under a system of excessively high wages. 
 
 2: When wages are reasonable, prices will be lower than 
 when wages are excessively high. When prices are reason¬ 
 able, people will buy more. It is this purchase stimulus 
 that keeps the machinery of industry and the wheels of 
 commerce going. The purchase of more commodities will 
 insure, as nothing else can, steady prosperity and the con¬ 
 tinuous employment of workers. 
 
 If nothing else were to be gained by the New Capitalism 
 than these two things—the constant employment of prac¬ 
 tically all workers, and continuous business—Labor would 
 have achieved its greatest triumph. 
 
CHAPTER XXXI 
 What About the Farmer % 
 
 T HE earliest form of wealth was land. The first 
 monopoly was a land monopoly—the complete own¬ 
 ership of which was centered in a few, who were 
 wealthy because they owned the land, and who grew 
 wealthier from year to year because to them, by virtue of 
 their ownership, belonged the usufruct of the labor of those 
 wdio in order merely to subsist were compelled to make 
 their land productive. Thus the economic subjection of 
 the populace of Europe, literally speaking, can be said to 
 have been rooted in the soil—a subjection which continued 
 after the passing of the system of Feudalism; 1 and exists 
 to this day, though in a more modified form, in spite of the 
 French Revolution of 1789, and even more modern revo¬ 
 lutions. 
 
 Our Escape from Land Monopoly 
 
 Luckily the United States has escaped the economic evils 
 that arise from a monopoly of the land by a few, although 
 a careful study of the development of our country reveals a 
 tendency toward individual ownership of immense tracts 
 of land, which might, in due time, have developed into a 
 monopoly by a few; but a number of things saved us from 
 this particular brand of serfdom. Among the obstacles 
 unfavorable to the development of a land monopoly may 
 be mentioned the vast extent of the territory—the abun¬ 
 dance of land, its free and wide distribution, the difficulty 
 of access, the lack of transportation facilities, a small popu¬ 
 lation, and a limited market for the products of the soil, 
 
 i I emphasize the system of Feudalism because only the crude 
 system, or form, was changed—the principles, practices and policies 
 of Feudalism continue to this day, have, in fact, been advanced to 
 a science. 
 
 434 
 
What About the Farmer? 
 
 435 
 
 particularly since many families owned or occupied small 
 tracts of land which they cultivated. In 1800 the United 
 States was considered an agrarian nation, 85 percent of 
 the population being listed as agricultural. 
 
 But the one great thing that economically intervened and 
 saved us from the menace of a land monopoly was the 
 development of the industries, which tempted many by 
 offering vastly greater opportunities; and held out a greater 
 promise of profit and a greater reward of wealth to those 
 who had the courage to venture upon their pursuit. Never¬ 
 theless today the productive farm land of the United States 
 is widely distributed among nearly six and a half million 
 owners, whose aggregate wealth is estimated at eighty bil¬ 
 lion dollars. 
 
 The nation owes a debt of gratitude to the farmers of the 
 United States, that wonderful race of men and women, who, 
 in spite of many hardships and handicaps, and numerous 
 discouragements, stuck to the land, and who by dint of 
 hard toil, patience and perseverance, raised husbandry to 
 the dignity of a great industry. The Homer who can 
 fittingly commemorate the heroism and valor of those hardy 
 pioneers into an epic poem, is not yet born. 
 
 The Nation's Rock of Gibraltar 
 
 The farmers of the United States themselves seem not to 
 realize that all these years they have stood, and they stand 
 today, a formidable bulwark of safety between the Mam- 
 monistic Capitalists and the economic enslavement of the 
 nation—I mean that portion of the population which I have 
 called the non-investor group, and to which the farmers 
 themselves—though some may be loath to admit it—belong. 
 At any rate, throughout this book, for the reasons stated 
 in Chapter IV, I have included the farmers in the non¬ 
 investor group. In spite of the fact that the farmers of 
 the United States, strictly speaking, are investors, the 
 aggregate income they derive from their joint investment 
 and labor, on an average is hardly more than the equivalent 
 of a fair living wage. From the 1919 Income Tax report 
 
436 
 
 The New Capitalism 
 
 we learn that for the 418,945 individuals engaged in “Agri¬ 
 cultural and related industries/’ reporting an income, the 
 average net income was less than $3000. Taking income 
 as a basis, I think I am justified in considering the group 
 of farmers, in spite of their investment—of an estimated 
 value of eighty billion—as wage earners, or non-investors. 
 And this classification gains in merit when we remember 
 that like the wage earner, the average farmer has been, and 
 is, the helpless victim of the Capitalistic system; the foot¬ 
 ball of the Capitalistic group. 
 
 The Rock Shaken by Capitalistic Winds 
 
 I have said that the people of the United States have 
 escaped the evil of land monopoly; but they did not entirely 
 escape paying the penalty of a form of land monopoly as 
 sinister as any to be found anywhere on earth. Who owns 
 the forests, the oil lands, the coal and iron mines—the nat¬ 
 ural resources of the nation? Not the farmers! But a 
 small coterie of men who, for the most part, have their 
 habitat in Wall Street, LaSalle Street, and other formida¬ 
 ble centers of finance, and to whom the farmers, no less 
 than the wage earners, are compelled to pay a heavy tribute. 
 
 Oh, yes! the farmers own millions of acres of productive 
 land; but they do not reap the full measure of benefits to 
 which they are entitled as owners and producers; for the 
 same group of men who, through methods we need not 
 inquire into at this time, have gained absolute possession 
 of all the valuable coal and iron, oil and timber lands, also 
 reap incalculable profits from the products of the lands 
 owned by the farmers—profits, which, in point of quantity, 
 are as great, I believe, as the clear profits of the agricul¬ 
 tural owners. 
 
 I will not pause to dilate on the mechanism of boards of 
 trade, and chambers of commerce, nor descant on the 
 methods of these institutions through whose agency the 
 leading cereal crops are sold from five to ten times over in 
 the course of a year. None knows better than the farmer 
 that boards of trade, and chambers of commerce, are not 
 
What About the Fanner? 
 
 437 
 
 conducted for the farmer’s benefit—and certainly not for 
 the benefit of the public. 
 
 Nor will I waste any time on the commission houses and 
 their methods; nor make any attempt to show the sundry 
 devices by which immense profits are made by a few thou¬ 
 sand non-producers out of the produce of farms—butter, 
 milk, eggs, poultry, fruits, cotton, etc. 
 
 Nor will I interrupt the pursuit of the main theme of 
 this chapter to emphasize the economic anomaly and gro¬ 
 tesque absurdity of men living hundreds of miles from 
 farms—men who own nor hoe nor plow T , who did not give 
 so much as an hour of toil to the tilling of the soil— 
 sitting in offices fixing the prices of all farm products, rais¬ 
 ing them one day, lowering them the next, and so on, mak¬ 
 ing a profit on each fluctuation. Would the United States 
 Steel Corporation allow farmers to fix the price of steel 
 products? Would the packers permit the farmers to fix 
 the price of lard or pork, or veal, or canned goods ? They 
 would not! 
 
 No wonder the farmers of the United States are banding 
 themselves into national organizations, firmly resolved that 
 hereafter they shall have something to say about the price 
 of their own products. No wonder they feel that if it is 
 necessary, as the Capitalistic protagonists contend, to sell 
 farm crops from five to ten times in the course of a year, 
 that they themselves mean to profit thereby. 
 
 On the Trail of Truth 
 
 I have not hesitated in this book to tell Capital what I 
 think, nor have I spared Labor in my criticism. I would 
 be false to myself if I did not also tell the Farmers the 
 truth as I see it, regarding the economic situation as it 
 affects them, or as others are affected by it. In all fairness, 
 therefore, let me go on record as saying that if the farmers 
 of the United States, through their national associations, 
 could wrest control of marketing institutions from the 
 Capitalistic group; and if by virtue of that absolute control 
 they themselves would hereafter pocket the profits which 
 
438 
 
 The New Capitalism 
 
 at present go to gamblers and speculators—the public 
 would not be benefitted one iota. Nothing more could be 
 said to have happened than a transference of large profits 
 from the group of speculators and gamblers to the pockets 
 of the farmers. But as far as the general public is con¬ 
 cerned, living costs would remain practically the same; 
 there would still be no relief from high prices. 
 
 I have labored in this book to expose the fundamental 
 fallacies that have complicated the whole economic contro¬ 
 versy. Among other things I have shown that the wage 
 earner, in spite of a high quantity wage, is no better off 
 than he was twenty or twenty-five years ago. It behooves 
 me now to apply the principles vindicated thus far, to the 
 situation as it affects the farmer. In a general way I will 
 say that the farmer, like the wage earner, is today precisely 
 in the same position he was twenty years ago; he is no 
 better off; he hasn’t advanced a single step. Indeed I seri¬ 
 ously question, whether, following the Capitalistic lead, the 
 farmers have not betrayed themselves into self deception. 
 
 The Flattery of Statistics 
 
 In spite of rosy statistics showing a tremendous increase 
 in the value of farm properties—when we apply the acid 
 test we discover that a considerable part of the statistical 
 increase in the value of properties—or in the wealth of 
 farmers—must be called Inflation, that is to say—is an 
 increase in a theoretical market price rather than in value . 
 That this increase in price has been advantageous to a lim¬ 
 ited number of individuals within the farmer group goes 
 without saying; but it has brought no substantial benefits 
 to the farmers in the aggregate. 
 
 No doubt some will attempt to defend the price increase 
 by the notorious 11 law of supply and demand ’ ’; while others 
 will urge the mythical Capitalistic device “earning power” 
 as the logical explanation. As regards the former, viz., ‘ ‘ the 
 law of supply and demand,” I shall say nothing at this 
 time, except that I have omitted two chapters I had written 
 about it from this volume, because I intend, at some later 
 
What About the Farmer? 
 
 439 
 
 time, to discuss this damnable “law” in extenso, within the 
 proportions of a fair sized volume. As regards “earning 
 power, ’’ I have had some things to say in the first part of 
 this book which may still be remembered by the readers. 
 If so, it will suffice, then, to apply the principles involved to 
 the subject under discussion in order to reveal the mockery 
 of that Capitalistic trick. When the price of land is in¬ 
 creased on the basis of its maximum “earning power,” 
 quite naturally there is a point beyond which the price can¬ 
 not go without diminishing the normal return to the owner 
 of the land, thus reducing its value. This is precisely what 
 is the trouble at the present time. So high has the price 
 of land become that it is impossible to make it yield a 
 reasonable return except by raising the prices of all farm 
 products to a practically prohibitive point; which, as I 
 shall endeavor to show in this and the next chapter, penal¬ 
 izes the city consumers while bringing no material ad¬ 
 vantage to the farmers themselves. 
 
 Increase in Price—Decrease in Value 
 
 Briefly then, as far as the farmers in the aggregate are 
 concerned, a quantity increase in the price of farm land; 
 or a quantity increase in the prices of farm products, means 
 little or nothing to the farmers in the aggregate, for the 
 reason that the purchasing power of money has declined to 
 such an extent, that the bigger amount of money they 
 receive either for their land or products has a minimum 
 exchange value. It must be clear to all that no increase in 
 the earning power of productive property can be predicated, 
 so long as a decrease in the purchasing power of the money 
 received for its products is predicable. 
 
 Consequently the value of land was no greater in 1920 
 than in 1900. Only one thing can increase its value, and 
 that is a marked increase in its productivity. There may 
 have been a slight increase in this regard per average acre 
 during the past twenty years, but certainly not enough to 
 justify a threefold increase in price. Only one explanation 
 can be advanced to justify the threefold increase in the 
 
440 
 
 The ]STew Capitalism 
 
 price of land, namely that it was necessary to offset the fall 
 in the purchasing power of money, and so maintain the 
 value the land had in 1900. 
 
 The Difference Between Price and Value 
 
 I shall waste no time defining value. To do so with any 
 degree of completeness—to pursue the chameleon character 
 of value through all its nuances, would require a book the 
 dimensions of the volume before you. Rather will I illus¬ 
 trate the difference between price and value in a manner 
 easily understood by all already interested. Let me assume 
 that a farmer bought a farm in 1900, paying a thousand 
 dollars therefor, and that he sold it in 1920. Unless he 
 received four thousand dollars he lost money, for the 
 shrinkage in the value or purchasing power of money has 
 been so great during the twenty years (from 1900 to 1920) 
 that four dollars are but the equivalent of the former one 
 dollar. 
 
 Conversely, if a farmer bought a farm and paid four 
 thousand dollars for it, he purchased no greater value, 
 though paying a threefold bigger price for it. For the 
 exchange value of the farmer’s dollar has shrunk as much 
 as the exchange value of the wage-earner’s dollar. Until 
 this point is hammered into the brain of every intelligent 
 man there is bound to be much muddled thinking along 
 economic and commercial lines, and “confusion worse con¬ 
 founded. ’ ’ 
 
 Victim or Culprit? 
 
 It is clear, from all this, that whereas the farmer is 
 receiving a considerably larger quantity of money for his 
 property in a sale, he is compelled to pay considerably more 
 for whatever property he may purchase with the proceeds. 
 But he is not growing richer. He is not increasing, and 
 cannot, increase the purchasing power of his money—the 
 exchange value of his dollars; and without any increase in 
 these, all his transactions are merely an even exchange, 
 regardless of the quantity of money involved. 
 
What About the Farmer? 
 
 441 
 
 Who has disturbed the purchasing power of money; who 
 is responsible for the fall in the exchange value of the 
 dollar? Not the farmer, although he has been unjustly 
 blamed for the depreciation of the dollar. Indeed I’ll 
 defend him from the charge. More than that, I’ll show 
 that not only has he not been benefited, but on the con¬ 
 trary, he has been the principal sufferer from the fall in the 
 purchasing power of money. He has been the victim, not 
 the culprit. 
 
 The Farmer's Fabled “Wealth” 
 
 First I ’ll show that the farmer was no wealthier in 1920 
 than in 1900. The depreciation in the exchange value of 
 the farmer’s dollar, and in the purchasing power of his 
 money, seriously affects the farmer’s wealth. Here are the 
 relevant statistics: 
 
 Number of Value of Farm 
 
 Farms Property 
 
 1900 . 5 , 737,372 $ 20 , 439 , 901,164 
 
 1910 . 6 , 361,502 40 , 991 , 449,090 
 
 1920 . 6 , 447,998 80 , 500 , 000,000 
 
 Please note the increase in the “Value of Farm Prop¬ 
 erty” from twenty billion in 1900 to eighty billion in 1920. 
 But it is to be remembered that the exchange value, or pur¬ 
 chasing power, of the dollar, shrank from a 100 cents value 
 in 1900 to a value of about 25 cents in 1920. 2 In other 
 words, using the purchasing power of money as a basis: 
 the twenty billion dollars in 1900 had each a 100 cents value, 
 or a twenty billion dollar purchasing power; whereas the 
 eighty billion dollars in 1920 had but a value of 25 cents, 
 or a total of twenty billion dollars of purchasing power. 
 In brief, the seemingly formidable increase from twenty to 
 eighty billion dollars was a theoretical price increase, and 
 not an increase in actual value, or wealth; a quantity in¬ 
 crease, not a purchasing power increase. As a matter of 
 
 2 According to Professor Kemmerer the dollar in 1920 had a 
 value of twenty-seven cents as compared with the dollar of 1896. 
 But for the sake of easy computation by the reader I am taking 1 the 
 liberty to fix the approximate value of the 1920 dollar at twenty-five 
 cents. 
 
442 
 
 The New Capitalism 
 
 fact the eighty billion dollars in 1920 had no greater value, 
 or purchasing power, than the twenty billion dollars in 
 1900. No doubt the farmers in the aggregate, considered 
 themselves vastly wealthier in 1920 than in 1900; in reality 
 they had not progressed at all, for as regards the purchas¬ 
 ing power of their wealth, and the exchange value of their 
 money, they were no better off than they were twenty 
 years ago. 
 
 More Money but Less Purchasing Poiver 
 
 As regards his farm production, unless the farmer in 
 1920 received four dollars for every dollar he received in 
 1900, he is making less money than formerly. As a matter 
 of computable fact there has been no such increase in the 
 prices of farm products. The peak prices the farmer en¬ 
 joyed for a brief period during the course of the war, 
 beyond a doubt yielded him an increase in quantity of 
 money, but hardly in purchasing power, as the following 
 statistics “Wealth Production of Farms” (Statistical Ab¬ 
 stract, 1920, p. 180), clearly show: 
 
 Wealth Produced 
 Total Gross. 
 
 1900 . 5 , 009 , 595,000 
 
 1910 . 9 , 037 , 391,000 
 
 1911 . 8 , 819 , 175,000 
 
 1912 .. 9 , 342 , 790,000 
 
 1913 . 9 , 849 , 513,000 
 
 1914 . 9 , 984 , 961,000 
 
 1915 . 10 , 774 , 491,000 
 
 1916 . 13 , 406 , 364,000 
 
 1917 . 19 , 331 , 000,000 
 
 1918 . 22 , 480 , 000,000 
 
 1919 . 24 , 961 , 000,000 
 
 1920 . 19 , 856 , 000,000 
 
 Since our comparison is between 1900 and 1920 we will 
 confine ourselves to a consideration for these two years only. 
 The approximately twenty billions of wealth the farmers 
 produced in 1920 just about equalled in purchasing power 
 the five billion they produced in 1900. 
 
What About the Parmer? 
 
 443 
 
 No Accruing Benefits 
 
 As a result of the enormous increase in the so-called land 
 value—or rather market price, and the increase of all indus¬ 
 trial products—considerably greater than the increase in 
 the prices of his farm products,—the farmer must borrow 
 vastly greater sums of money than formerly. I do not 
 know how much more money, but continuing the ratio 
 adopted in this chapter I should say that he must borrow 
 four dollars where formerly one dollar sufficed. If in 1900 
 it was necessary for him to borrow a thousand dollars, in 
 1920 he borrowed four thousand. But the four thousand 
 had no greater purchasing power or exchange value, than 
 the former one thousand. In other words he is paying inter¬ 
 est on four dollars instead of one. At five percent he is 
 actually paying twenty cents interest, where formerly he 
 paid five cents; twenty dollars, where formerly he paid 
 five dollars; two hundred dollars, where formerly he paid 
 fifty dollars. 
 
 Or reverse the proposition. Let us suppose that the 
 farmer is a lender instead of a borrower, and that he 
 receives as interest twenty cents where formerly he received 
 five cents; twenty dollars where formerly he received five 
 dollars; two hundred dollars where formerly he received 
 fifty dollars; but note the difference. His twenty cents 
 today has no greater purchasing power than the five cents 
 formerly; the twenty dollars will buy no greater quantity 
 of goods than he could have bought with five dollars twenty 
 years ago; the two hundred dollars makes him no richer 
 than the fifty dollars a score of years before. 
 
 I will not pause to inquire whether there has been any 
 material increase in the amount of taxes the farmers paid 
 in 1920 over the amount they paid in 1900. Let each farmer 
 answer for himself. But if the tax rate has been advanced 
 on account of the supposed increase in the amount of the 
 farmers’ wealth, or the supposed increase in the value of 
 their property—(and no doubt it has) they were worse off 
 in 1920 than in 1900. For be it remembered that all through 
 
444 
 
 The New Capitalism 
 
 the years the decline in the value or purchasing power of the 
 farmer’s dollar has been as great as the decline in the wage 
 earner’s dollar. The farmers must never lose sight of the 
 fact that for them, as well as for the wage earners, the 
 exchange value of the dollar, the purchasing power of 
 money, has shrunk considerably. If he buys he must pay 
 so many more dollars; if he sells he receives more dollars, 
 but they have a smaller purchasing power. 
 
 The Chief Beneficiaries 
 
 I have shown that the farmer in reality does not grow 
 richer by a quantity increase in the price of his land; nor 
 has he been benefited by an increase in the price of farm 
 products. Who, then, has been the beneficiary ? 
 
 The answer is simple! The Capitalistic group, or the 
 constituent members of the Capitalistic System! If it 
 were possible to obtain all the statistics involved it could 
 be demonstrated that the Capitalistic group has for years 
 derived profits from four distinct agricultural sources: 3 
 
 1: From speculation in the principal cereal crops, both 
 before and after they are harvested. 4 
 
 2: From selling and re-selling sundry agricultural prod¬ 
 ucts after they leave the farm. 
 
 3: From the larger quantity of borrowings of farmers, 5 
 
 3 On account of the supplementary processess necessarily involved 
 I am deliberately excluding manufactured products as a source of 
 profit derived by the Capitalistic group from agricultural production. 
 
 4 Senator Capper, in an article in HearsCs Magazine (March, 
 1921), says: “More wheat was sold in Chicago last October than 
 was raised in the entire United States in 1920. Last year’s corn 
 crop was sold fourteen times in Chicago before a bushel of corn had 
 reached the markets. More than $100,000,000 was lost in three 
 months by speculating in cotton and wheat, nearly half of which was 
 cleaned up by commission houses and brokers.” 
 
 5 The latest census statistics reveal that the mortgage indebtedness 
 on farms increased from $1,726,172,851 in 1910 to $4,003,767,192 in 
 1920, or 131.9 percent. It is estimated that the interest bill of the 
 farmers of the United States on mortgages and loans amounted to 
 about $200,000,000 a year. 
 
 Since the above was written, still later statistics seem to indi¬ 
 cate an even worse state of affairs. Thus in an editorial (HeraId- 
 Examiner, February 22, 1923) we read that the American farmers’ 
 income is “nine billion dollars. He owes twelve and a- half billion, 
 his interest charges are a Ibillion, and his taxes a billion and a quar¬ 
 ter, maybe a billion and a half.” 
 
 The following from an article by Robert Watson Winston, describ¬ 
 ing conditions in the state of North Carolina (see The Nation, Febru¬ 
 ary 21, 1923), gives a poignant picture of existing conditions: 
 
 “Tens of thousands of small farmers are owned body and soul 
 by the landowner and the money-lender. Their crop is mortgaged 
 
What About the Farmer'? 
 
 445 
 
 and interest charges vastly greater in size on account 
 of higher prices of farm lands and to enable them to 
 purchase the higher priced implements and equip¬ 
 ment. 
 
 4: From the higher prices the farmer must pay for his 
 implements, tools, etc., and, of course, for the sundry 
 articles of merchandise necessary to his existence. 
 
 I have no means of knowing how great is the volume of 
 profit derived by the Capitalistic group, but in the aggre¬ 
 gate, I think, (if it were possible to obtain the actual sta¬ 
 tistics) the clear profit of the Capitalistic group is as great 
 as the clear profit of the agricultural group. Indeed it is 
 greater, for, as I have already pointed out, the 
 dollar in the hands of the Capitalistic group has always 
 a 100 cents value; whereas in the hands of the farmer only 
 a fraction of its original value remains. 
 
 The Capitalistic Weather-Vane 
 
 Is it possible that the Capitalistic group, not content with 
 the profits from the farmers’ production, is now reaching 
 out for actual possession of the land? Is it possible that 
 the Capitalistic System has formed plans to capitalize the 
 productive ability of the farm workers, as they have already 
 capitalized the productive ability of industrial and other 
 workers? Or rather—to overcapitalize the farming indus¬ 
 try as it has overcapitalized the manufacturing industries, 
 transportation systems, public utilities, etc.? This is cer¬ 
 tain to happen if the various farm groups succeed in their 
 endeavors to control their output and the markets, thus 
 depriving the Capitalistic group of some of the enormous 
 profits they have been reaping for years from their board 
 of trade transactions and manipulations. 
 
 Only a few months after I privately expressed the above 
 thought, the actual proof of the design and of the carrying 
 
 before it sprouts, and if cotton and tobacco prices reach a low level, 
 which happens many years, not only is there no margin over and 
 above the debt, but a deficit which leaves the farmers deeper in the 
 mire than ever. . . . Competent observers have estimated that 
 
 between two and three hundred thousand of these tenant farmers—• 
 'croppers,' as they are called—and their families are not possessed of 
 the wherewithal for even the simplest sort of decent life.” 
 
446 
 
 The New Capitalism 
 
 out of the Capitalistic project fell under my eyes. In the 
 March 17, 1921, issue of the Manufacturers Record (Bal¬ 
 timore, Md.), we read: 
 
 “ Formation of a Farm Finance Corporation in South 
 Carolina to help handle the cotton crop of 1921 is under 
 way, and with the recent action of the South Carolina 
 Legislature looking to the standardization of grades of the 
 staple held in warehouses, is expected to he completed in 
 a short time. 
 
 ‘ ‘ This was announced here by Bernard M. Baruch, broker, 
 head of the War Industries Board and of the economic 
 division of the peace delegation of the United States, who 
 has had a series of conferences with J. S. Wanamaker, 
 president of the American Cotton Association, and who 
 expects to furnish at least a part of the initial capital for 
 the corporation. 
 
 “Mr. Baruch said that whatever stock he purchased in 
 the enterprise would be offered by him to the citizens of 
 South Carolina at cost, as he is anxious for the corporation 
 to be controlled entirely within the state. In addition to 
 furnishing a part of the necessary capital, Mr. Baruch said 
 he woidd handle the securities of the corporation. Mr. 
 Baruch is a South Carolinian by birth. 
 
 “Asked if an effort would be made to dispose of all the 
 stock within South Carolina, he said disposal of the secur¬ 
 ities would involve no effort, in his opinion, and that he 
 expected the stock to be quickly sold, as it was a first rate 
 investment. 
 
 “It was reported some weeks ago that such a corpora¬ 
 tion was to be organized in South Carolina to handle the 
 tobacco crop, but this Mr. Baruch denied, saying that the 
 present plan had doubtless given rise to this rumor. He 
 said the American Cotton Association had given its full 
 approval to the scheme, and that he understood similar 
 corporations would be formed in other States under the 
 auspices of the association.” 
 
What About the Farmer? 
 
 447 
 
 The Capitalistic Net 
 
 Who can doubt that the success of this experiment means 
 its permanent establishment, and its further extension to 
 all farm properties? Who can doubt that the Capitalistic 
 group, having gained control of all natural resources, the 
 basic materials, and the industries; having reached out and 
 captured all the industries, even those entirely unrelated 
 to their original charters—is now reaching out to draw 
 into their net the one industry which thus far they have 
 been unable to grab—the agricultural industry. I may be 
 mistaken in my opinion—I sincerely hope I am—but my 
 guess is that the Capitalistic System is trying to get con¬ 
 trol of and regulate farm production; that it has its plans 
 all laid to organize the important staple producing farms 
 of the nation on the same basis that it has organized the 
 industries—viz., by overcapitalization—and issuing im¬ 
 mense quantities of securities against the inflation. 
 
 While I believe that the Capitalistic group, to complete 
 its economic conquest of the nation—and of the world—is 
 now reaching out for the farms—I want to make clear the 
 thought that is in my mind. I do not think that the aim of 
 the Capitalistic group is to own or purchase outright the 
 farm lands of the nations. That is really not necessary, 
 for even now it fixes the prices of the products of the farms 
 and controls the market, and that is sufficient for all imme¬ 
 diate Capitalistic purposes. But see what the Capitalistic 
 group loses by not being enabled, at the present time, to 
 buy and sell lands on the stock market! What a splendid 
 source of income is as yet closed to it! My guess is that 
 within ten or twenty years farm lands will have issued 
 against them, stocks and bonds, largely in excess of their 
 present valuation, and Wall Street will literally be deluged 
 with watery wealth. 
 
 When Wall Street Controls the Farms 
 
 Why, indeed, should not all the productive farm land of 
 the nation be bought and sold at least once, if not twice, a 
 year, just as the industries and railroad systems are bought 
 
448 
 
 The New Capitalism 
 
 and sold once or several times every twelve months ? Why, 
 indeed? When we stop to reflect that land tenure today 
 is not what it was thirty years ago, and that the tenant 
 class is growing, we begin to realize that the first step 
 towards a breaking up of the diversified land ownership 
 has actually been taken, and as a result, it will be easier to 
 arrange stock, or security holdership, in farm lands. If 
 one farm can be made, with the Capitalistic System of 
 figuring “earning power,” “cost of production,” etc., to 
 comfortably support two people, or rather families, namely 
 owner and tenant, it can be made to support a still greater 
 number. In other words the Capitalistic System is 
 gradually bringing about conditions with regard to farm 
 lands in the United States that, we may rest assured, it will 
 utilize to its own great advantage when it considers that 
 the proper time has arrived. 
 
 “Will you walk into my Parlorf” 
 
 Will the farmers bite on the bait? Will they succumb 
 to the lure of speculative profits, or will they stand firm for 
 what is right and fair and just and decent ? Will they walk 
 into the Capitalistic trap? I do not know, for human 
 nature is weak; and it is the common experience of man¬ 
 kind that an appeal to cupidity and self interest is gen¬ 
 erally more successful than an appeal to decency and 
 common sense. As I see it the farmers of the United States 
 have come to the parting of the ways. They must choose 
 their path—one leads to Wall Street and ultimate ruin, 
 the other to actual farm ownership and safety. Today the 
 farmers stand between the Mammonistic Capitalists and 
 the non-investor group as the French soldiers stood against 
 the invading German army, except that in the present 
 situation the Capitalistic group is the invading army. And 
 if the farmers of the United States wish to save, themselves 
 as well as the nation, there must come from their lips, as 
 did from the lips of the French soldiers at Verdun, the 
 chorus cry: ‘ ‘ They shall not pass. ’ ’ The nation has its ear 
 to the ground! 
 
CHAPTER XXXII 
 
 Where Will the Farmer Stand? 
 
 T HERE is no excuse for any misunderstanding be¬ 
 tween the agricultural portion of the population and 
 the industrial portion. It is to their mutual interest 
 that the farmers and the wage earners find the ground of 
 common agreement. I have sought, in this book, to impress 
 upon the wage earner that the quantity of his wages is of 
 less importance than their exchange value; and necessarily 
 so, too, I would impress upon the farmer that high prices 
 for his products carry with them a depreciated exchange 
 value—a considerably lessened purchasing power of his 
 money. As I see it the farmer should be just as much 
 interested in the exchange value of the workers’ wages as 
 in the exchange value of the prices he receives for his prod¬ 
 ucts ; and the wage earner should be just as much interested 
 in the prices the farmers receive for their products as in 
 his own wages. For just as one worker exchanges his labor 
 for the labor of other workers, so the farmer exchanges his 
 labor (products) for the labor (products) of the workers 
 in other branches of production (industry). The exchange 
 of labor and of labor’s products, is the sum and substance 
 of a nation’s economic life. The goods of one group are 
 exchanged for the products of all other groups. Unless 
 goods are exchanged, stagnation sets in. 
 
 The Interdependence of Economic Groups 
 
 In other words, the various economic groups are mutually 
 dependent. It is all folly to say that one group of pro¬ 
 ducers is more important than all the other groups. It is 
 quite true that husbandry was the first industry. Food is 
 the first requisite; and because it is so we can indeed say 
 that the farming industry is of the utmost importance to 
 
 449 
 
450 
 
 The New Capitalism 
 
 a nation’s life. For we are not living in primitive times, 
 when families could (and many did) produce their own 
 food essentials, even depending on hunting and fishing for 
 a part of their food supplies. Happily all those things are 
 in the dim past. The system of exchange of products is 
 here to stay; that’s why it’s so great a pity that the various 
 groups have not yet grasped the fundamentals involved in 
 the interchange transactions. 
 
 The Exchange of Products 
 
 The average wage earner is principally concerned in, and 
 most affected by, prices of products, whether agricultural 
 or industrial, that must be classified as essential living com¬ 
 modities, viz., clothes, food and shelter. Whereas the aver¬ 
 age farmer is less concerned about his food commodities, 
 since he raises them for himself; and only in a moderate 
 degree in clothes; while shelter or rent, in the majority of 
 cases, is less of a vexation to the farm owner than to the 
 average wage earning city dweller. 
 
 But on the other hand the farmer is vitally interested in 
 many commodities in which the average wage earner or city 
 dweller has no direct concern; for example, in plows, har¬ 
 nesses, implements, tools, wagons, etc., a hundred com¬ 
 modities essential to the conduct of a farm. 1 
 
 While I am unable to say what proportion of their income 
 the farmers of the United States exchange for the com¬ 
 modities produced by the industrial wage-earners, it is, no 
 doubt, a large amount in the aggregate, as the following 
 statistics would seem to show: 
 
 1914 
 
 1919 
 
 Value of Farm 
 Products 
 
 Value of Manufactured 
 Products 
 
 $ 9 , 894 , 491,000 $ 24 , 246 , 434,724 
 
 19 , 856 , 000,000 62 , 427 , 905,000 
 
 i And I haven’t said one word about the many commodities that 
 neither wage earner nor farmer uses or purchases; yet both wage 
 earner and farmer are penalized in that they ultimately pay the 
 higher prices, the higher interest charges and, of course, the bigger 
 profit on articles, purchased, I might say, exclusively by the Capital¬ 
 istic group; and the purchase of which only adds to the value of 
 their investment; for example: steel rails, locomotives, engines, ma¬ 
 chinery, etc. 
 
Where Will the Farmer Stand? 451 
 
 But even though the farmers of the United States had 
 spent every dollar of the nearly ten billion they received in 
 1914 for their products; or the nearly twenty billion they 
 received in 1919, for manufactured products, it must be 
 remembered that only a part of their purchases are made 
 for what are called ‘ ‘ living commodities, ’’ while a consider¬ 
 able part of their purchases of manufactured goods are 
 tools, implements, equipment, machinery, etc., and there¬ 
 fore less an expenditure than an actual investment, which 
 increases the value of their properties. Whereas the wage 
 earner can show neither investment nor profit. If the 
 farmer buys a plow, who makes a money profit—the wage 
 earner ? No! the Capitalistic employer of those who made 
 the plow makes the profit. At no time does the wage earner 
 receive more than a living for having made the plow. 2 3 And 
 so it is for every manufactured commodity that the farmer 
 must purchase. All the profits go to the Capitalistic group 
 —none of it to the wage earner group. 
 
 The Inter-Relation of Economic Groups 
 
 Moreover, to the wage earner attaches the compulsion to 
 spend all he earns; and a fair part of his earnings are 
 expended for farm products. Of the approximately forty 
 million men and women “engaged in the gainful occupa* 
 tions” ten million are listed as agricultural. But instead 
 of launching a new division based on workers, let me rather 
 employ the simple division of farm families and city fam¬ 
 ilies. In round numbers there are ten million farm families 1 
 and ten million city families. Consequently the average 
 farmer produces for his own and one city family. Or we 
 may express the formula conversely by saying that every 
 
 2 A comparison of the annual revenue of the six and a half 
 million farm owners given under “Value of Farm Products’’ (see p. 
 450), and of the wages of the industrial wage earners is interesting: 
 
 Number of Industrial Total Amount 
 
 Wage Earners of Wages 
 
 1914 .7,036,337.$ 4,079,332,433 
 
 1919 .9,098,119. 10,545,905,000 
 
 3 This division would seem to embrace farm workers and farm 
 owners, and tenant farmers. 
 
452 
 
 The New Capitalism 
 
 city family supports itself and one farm family. I will not 
 particularly emphasize in this chapter that the tenant 
 farmer is growing more numerous. But since we are deal¬ 
 ing with the economics involved in the subject, it behooves 
 me to say that, translated into clear language, this would 
 seem to indicate an unhealthy tendency, in that the con¬ 
 tinued growth of the tenant farmers would ultimately put 
 the average city family to the necessity of supporting two 
 farm families—owner and tenant. 
 
 I could pursue this phase of the subject over many, many 
 pages, but nothing would be gained thereby. The specific 
 purpose I have in mind is to emphasize that agricultural 
 and industrial production go hand in hand. The farmers 
 and the wage workers are interdependent; they exchange 
 their products; their interests are common, mutual and 
 identical; their relationship reciprocal and complementary. 
 There can be, there must be, no conflict between them. 
 There is only one technical difference between them; the 
 industrial workers receive wages, whereas the farmers are 
 dependent upon prices. 
 
 Excessive Farm Production 
 
 The war has demonstrated the great productive ability 
 of the farmers of the United States. Not only does their 
 normal production adequately supply the normal needs of 
 our own population, but a surplus remains for export. 
 With intensified production our farms could easily produce 
 enough to supply a considerably greater number of people. 
 If there is any logic in the Malthusian theory that the con¬ 
 stant tendency of a nation’s population is to outstrip its 
 food supply, the farmers have shown that we need not waste 
 any of our time in worry. Considering their wonderful 
 productive ability, so splendidly proved during the period 
 of the war, neither this generation nor the next, nor the 
 next, will be subjected to suffering on account of an inade¬ 
 quate farm production. 
 
Where Will the Farmer Stand*? 453 
 
 A Disastrous “Remedy” 
 
 The particular menace—and it is not a purely theoretical 
 condition—that hangs over the farmers of the United States 
 today, is that their normal production is greater than the 
 consumption. So real is this menace that no less a person 
 than the Secretary of the Department of Agriculture, 
 Henry C. Wallace, himself a farmer, or at least publisher 
 of several farm papers, and, therefore, supposed to be 
 conversant with farming conditions in his own state as well 
 as with the farm situation throughout the nation, recently 
 suggested that production of some of the cereals be cur¬ 
 tailed 25 percent. The dominant idea in Secretary 
 Wallace’s mind when he made the suggestion, was that by 
 the deliberate curtailment of output prices of farm products 
 would remain nearer to the level of war time prices. Secre¬ 
 tary Wallace, no doubt, believes that curtailed farm pro¬ 
 duction is to the farmers’ interest. A moment’s reflection 
 reveals the fallacy of his proposal. 
 
 When Secretary Wallace advocates a 25 percent less 
 farm production for the purpose of keeping up high prices 
 for farm products he entirely overlooks the city dwellers, 
 who would be compelled to pay materially increased prices 
 in consequence of a lessened production. He also seems to 
 forget that the materially increased prices for farm prod¬ 
 ucts, as a result of curtailed production, would automatic¬ 
 ally lessen consumption. In the end, neither producer nor 
 consumer would be benefited economically. 
 
 It is an absolute certainty that the average city worker 
 (wage earner) cannot increase the amount of money he pays 
 for farm products. According to Government statistics 
 the average family pays 40 percent of its family income for 
 food. If the family income is $1000—then $400 goes for 
 food products. If the family income is $1500—then $600 goes 
 for food products. Assuming that the average wage earner’s 
 income is sufficient to meet the living costs of an average 
 family, he is paying forty cents out of every dollar he earns 
 merely for food. I do not mean to say that all of this amount 
 
454 
 
 The New Capitalism 
 
 goes directly to the farmer, for many of the farm products 
 are subjected to manufacturing processes, and go through 
 the hands of middlemen before ultimately reaching the 
 wage earner’s table; but it cannot be denied that a consid¬ 
 erable part of the 40 percent expended by an average family 
 for food, goes to the farmer. 
 
 Reduced Wages Curtail Consumption 
 
 Now that wages have been reduced from 25 to 50 percent, 
 for practically the whole tribe of city workers,—wage earn¬ 
 ers as well as small salaried employees,—the family income 
 will be less. This reduction in income, even though still 40 
 percent were figured as applying to the item food, would 
 necessarily reduce the amount spent by an average family 
 for food. If a worker’s family income in 1920 was $1500, 
 and he spent 40 percent, or $600 for food; and his income 
 is cut to $1000, still spending 40 percent he automatically 
 cuts down the food allowance to $400. But if prices remain 
 approximately as they were when his income was $1500, a 
 cutting down in the quantity of consumption is imperative. 
 
 A Remedy Worse than the Disease 
 
 Let me illustrate in the simplest possible way why farmers 
 would not benefit by deliberately curtailing their produc¬ 
 tion. Let us assume for the purpose of this illustration 
 that the nearly six and a half million farm owners in a given 
 year raise 800,000,000 bushels of wheat—a normal crop, let 
 us call it; and that the price is one dollar a bushel. Then 
 it occurs to them that by cutting down production by one 
 half, the price will be two dollars per bushel. The result, 
 then, would be a 400,000,000 bushel crop, for which they 
 would receive as much at two dollars a bushel as they re¬ 
 ceived the year before for 800,000,000 at one dollar a bushel. 
 You will observe that in the aggregate they do. not receive 
 any greater quantity of money in spite of the higher prices 
 they received. 
 
 But let us assume that on account of the great scarcity 
 created by the deliberate reduction in production the price 
 
Where Will the Farmer Stand? 455 
 
 of wheat would go to three dollars a bushel. Would they 
 receive $1,200,000,000 for their 400,000,000 bushels? No! for 
 there would be so decided a drop in consumption as to nat¬ 
 urally cut down their sales; for it is to be remembered that 
 thus much and no more can the average wage earner spend 
 for food. Consequently, if prices of food products go up he 
 purchases less quantity. Or he might insist on w r age in¬ 
 creases to enable him to purchase the usual quantity of food; 
 but in that case the prices of all non-food commodities 
 which the farmers must normally purchase, would advance, 
 and the greater quantity of money the farmer receives for 
 his wheat, would disappear in the greater amount he must 
 pay for what he must purchase. 
 
 The curtailment remedy defeats its own purpose; is, in 
 brief, no remedy at all. The argumentative farmer might 
 say that for the smaller crop he will require less seed and 
 only half the land; and of course his work is cut down by 
 one half. Quite true! but that way lies the road to ruin, 
 which may indeed be delayed a few years, but in the end 
 disaster will surely overtake him. Let those who are wise 
 read as they run. 
 
 Two Formulas 
 
 The ideal formula, and to the maintenance of which the 
 farmers should bend their efforts, is, normal production, 
 normal prices, and normal consumption. Tamper with this 
 formula and trouble ensues—trouble for all concerned. I 
 lay it down as an axiom, that the economic equilibrium can¬ 
 not be disturbed with impunity—the penalty must be paid 
 sooner or later, not only by one party but by all parties 
 concerned. This must be clear to everyone who is not 
 utterly devoid of common sense, not to speak of logic. Judge 
 for yourself. Assume, for the moment, normal production 
 and abnormal prices. The result is subnormal consumption, 
 and that means if not absolutely a less, at least no greater, 
 income for the producer, to say nothing of the incidental 
 suffering of the victims of a less than normal consumption. 
 
 But the viciousness of Secretary Wallace’s proposal be- 
 
456 
 
 The New Capitalism 
 
 comes apparent when one reduces it to a formula. What he 
 proposes is subnormal production, attended by abnormal 
 prices. This would lower still more an already subnormal 
 consumption. It would, moreover, intensify the suffering 
 of the wage earner families—and visit deleterious conse¬ 
 quences upon their constituent members—particularly the 
 children. But overlooking this fact, which belongs rather 
 to the realms of sociology than economics,—clearly the pro¬ 
 ducing farmers would not be the beneficiaries of any arbi¬ 
 trary system which may best be expressed as follows: Sub¬ 
 normal production, abnormal prices, and -subnormal 
 consumption. 
 
 In short the farmer would not be benefited in the least. 
 Even though curtailed production might bring him higher 
 prices per ton, bushel, or pound, the higher prices would 
 not bring him a bigger amount of money in the aggregate. 
 Lessened farm production with resultant higher prices for 
 a smaller unit of production, does not and cannot increase 
 the farmers ’ quantity of money income, for, those who must 
 buy would meet the situation by cutting down their pur¬ 
 chases probably even beyond the smaller supply produced. 
 It is unbelievable that a man of Secretary Wallace’s intelli¬ 
 gence should seriously propose to the farmers of the United 
 States so disastrous and vicious, an economic ‘ ‘ remedy. ’ ’ 4 
 
 “Exchange Value” Once More 
 
 But even though the farmer, by producing less and charg¬ 
 ing higher prices for the smaller quantity produced, could 
 increase his quantity income, his economic condition would 
 still in no wise be improved, for the exchange value of his 
 money, its purchasing power, would be no greater. Even 
 though it were possible to keep up the higher war prices 
 for farm products the farmer would still be no better off, 
 
 4 In his letter to W. E. Holler, of the Flint, Mich., Chamber of 
 Commerce, Secretary Wallace wrote: “Kill off the fallacy that it 
 is immoral for farmers to adjust their production to the probable 
 demand by curtailing- a particular crop in the face of a present or 
 prospective over supply and ruinously low prices—a thing manu¬ 
 facturers have been doing- from the beginning- of time .”—Quoted from 
 The Chicago Herald-Examiner, June 23, 1921. 
 
Where Will the Farmer Stand? 457 
 
 for the high prices he receives for what he sells would be 
 absorbed by the high prices he would be compelled to pay 
 for what he must buy. The high prices he receives for 
 what he produces are reduced to nullity by the high prices 
 he must give for what others produce. 
 
 The process of exchanging high priced agricultural prod¬ 
 ucts for high priced industrial products is essentially a can¬ 
 cellation process. No benefit whatever accrues, either to 
 the agricultural producer or to the industrial producer (i. e. 
 wage earner). And when I use the word producer here it 
 is in its literal sense, for the average farmer is a wage 
 earner, before he is an investor. Without his labor his in¬ 
 vestment is dead. He cannot go to Europe for a year or 
 two or three years and expect to derive benefits from his 
 property unless he is a large landowner, and has his busi¬ 
 ness so thoroughly systematized that his personal labor or 
 supervision is not necessary to its continued success. There 
 are some such in the United States, but their percentage of 
 the total is negligible. In the majority of cases the agri¬ 
 cultural proprietor must give his personal supervision and 
 labor. 
 
 Which being the case he must, for all practical economic 
 purposes, consider himself classed with the wage earners, 
 rather than with the Capitalistic group. It is from non¬ 
 investors (wage earners) rather than from investors (Capi¬ 
 talists) that the farmer derives his livelihood and his profits. 
 It is from the continued patronage of the non-investors 
 (wage earners) that the farmer will hereafter, as in the 
 past, derive his greatest benefit. Indeed the welfare and 
 prosperity of the industrial wage earners and the welfare 
 and prosperity of the agricultural wage earners are of a 
 piece. They cannot be separated without injury to both 
 parties. 
 
 The Solitary Solution 
 
 Prices for farm products have seriously slumped, as far 
 as the producer (the farmer) is concerned, but the slump 
 has brought no relief to the consumer (the wage earner), 
 
458 
 
 The New Capitalism 
 
 who is compelled to pay in the course of his retail purchases 
 of them, fluctuating prices whose average through the year 
 at least approximates the prices he paid for them in 1920, 
 for be it remembered that the aggregate living costs of the 
 average wage earner’s family, which includes the item rent, 
 are practically what they were when living costs were at 
 their peak. 
 
 There is but one hope for both farmer and wage earner, 
 and that is not in higher prices or higher wages, but in a 
 greater exchange value of the wages of the industrial work¬ 
 ers and a greater purchasing power of the prices which are 
 the wages of the agricultural worker. The power to restore 
 the dollar to its maximum value lies in the hands of the 
 wage earners and farmers. 
 
 The farmer must take his stand—either he must array 
 himself on the Capitalistic side against the wage earning 
 non-investors; or he must take his stand ivith the wage 
 earning non-investors, against the encroachments of the 
 Capitalistic group, thus saving not only the wage earner 
 but himself, from complete submergence. 
 
 It should not be difficult for the farmer to decide. For all 
 these years he has been at the mercy of the Capitalistic 
 group. Has the Capitalistic group ever considered the far¬ 
 mer's welfare? Let each farmer answer the question for 
 himself. Is it reasonable to suppose that the Capitalistic 
 group, whose whole endeavor is to pile up greater and 
 greater Capital accumulations, and to concentrate the na¬ 
 tional wealth within the hands of a few,—will hereafter 
 extend greater consideration to the agricultural producers 
 than it has to the industrial wage-earners? 
 
 The One Hope 
 
 Driven to desperation, and in sheer self defense, the far¬ 
 mers are organizing themselves into national associations. 
 Will they be successful? Frankly, I doubt it, principally 
 for the reason that in one vital thing they are, and will con¬ 
 tinue to be, dependent upon the organized Capitalistic 
 group. As long as they must rely upon the Capitalistic 
 
Where Will the Farmer Stand*? 459 
 
 group for financial assistance to enable them to pay their 
 mortgages, or move their crops, so long will they be weak 
 and vulnerable—their Achilles heel remain exposed. Under 
 my system, in due time, this dependence upon Capitalistic 
 assistance, and which is never extended, and even refused 
 unless a sightly profit is in sight, will be removed, and our 
 cooperation substituted to safeguard the farmers, and serve 
 their best interests. 
 
 I can only hope that the various national associations of 
 agricultural producers will be in existence and in perfect 
 working order when we begin to operate, for it will be alto¬ 
 gether simpler for us to cooperate with the farmers organ¬ 
 ized than with them disorganized. We can be of greater 
 service to them if they are a component, homogeneous, 
 united group than divided into smaller units—heterogene¬ 
 ous, scattered and ineffective. We may not be able in the 
 beginning to help the farmer so much with what he buys as 
 with what he has to sell. We can be instrumental in pre¬ 
 venting the profits of his production from falling into the 
 hands of the non-farm owning, non-farm working Capitalis¬ 
 tic group. More than that, under our regime, every dollar 
 of money he receives, will have a vastly increased exchange 
 value; and every dollar of profit a considerably higher 
 purchasing power. 
 
CHAPTER XXXIII 
 No Political Party 
 
 I EARNESTLY beseech those into whose hands the man¬ 
 agement of the affairs, and the control of the destinies 
 of the New Order will be committed, to make no at¬ 
 tempt, and permit no attempt to be made, to organize the 
 New Order into a political party. The manifold reasons 
 for the undesirability of giving a political character and 
 complexion to our organization are so obvious that I hesi¬ 
 tate to enumerate them. Still there may be some who hav¬ 
 ing insufficiently considered the importance and magnitude 
 of the project advocated in this book, may not clearly com¬ 
 prehend my caution and counsel. For the benefit of these 
 I will briefly summarize my reasons and arguments. 
 
 Business in Politics 
 
 In the first place let us remember that those constituting 
 the Mammonistic-Capitalistic Entrepreneur group are not 
 organized into a political party, yet they thoroughly con¬ 
 trol the politics of the nation, dictating the platforms and 
 policies of both of the major parties—not only of the vari¬ 
 ous states but of the national government as well. It is 
 unnecessary to enter upon a lengthy discussion of this 
 phase of my subject. The conclusive facts are recorded in 
 thousands of pages of official investigations and reports. 
 Moreover, not so many years ago, our popular magazines 
 engaged in a campaign of exposure which clearly established 
 the premises here stated. To fill pages and pages of this 
 book with excerpts and quotations would be like writing 
 a voluminous treatise to prove that water is wet. 
 
 Nevertheless to clear myself of any charge' of misrepre¬ 
 sentation or exaggeration I will quote the first official utter¬ 
 ance on the subject made by President Cleveland in his 
 
 460 
 
No Political Party 
 
 461 
 
 Fourth Annual Message to the Congress of the United States 
 (December 3, 1888) : 
 
 “We discover that the fortunes realized by our manufac¬ 
 turers are no longer solely the reward of sturdy industry 
 and enlightened foresight, but that they result from the dis¬ 
 criminating favor of the Government and are largely built 
 upon undue exactions from the masses of our people. The 
 gulf between employers and the employed is constantly 
 widening, and classes are rapidly forming, one comprising 
 the very rich and powerful, while in another are found the 
 the toiling poor. 
 
 “As we view the achievement of aggregated capital we 
 discover the existence of trusts, combinations, and monopo¬ 
 lies, while the citizen is struggling far in the rear or is 
 trampled to death beneath an iron heel. Corporations, 
 which should be the carefully restrained creatures of the 
 law and the servants of the people, are fast becoming the 
 people’s masters. ’’ 1 
 
 “Big Business” Statesmen 
 
 Succeeding Presidents in their addresses or messages to 
 Congress expressed similar sentiments with regard to the 
 growing menace of Trusts, Combines and Monopolies. But 
 after the organization of the United States Steel Corpora¬ 
 tion we discern a less critical attitude; in fact, a decided 
 change of front became distinctly observable in some of the 
 official utterances. Accusations and condemnations are 
 transmuted into palliation of deeds, and admiration for 
 and laudation of, the doers. Thus in his first Message to 
 Congress (December 3, 1901), President Roosevelt said: 
 
 “The captains of industry who have driven the railway 
 systems across this continent, who have built up our com¬ 
 merce, who have developed our manufactures, have on the 
 whole done great good to our people. Without them the 
 material development of which we are so justly proud could 
 never have taken place. Moreover, we should recognize the 
 immense importance of this material development of leaving 
 
 i Messages and Papers of the Presidents, Vol. VIII, p. 774. 
 
462 
 
 The New Capitalism 
 
 as unhampered as is compatible with the public good the 
 strong and forceful men upon whom the success of business 
 operations inevitably rests. The slightest study of business 
 conditions will satisfy anyone capable of forming a judg¬ 
 ment that the personal equation is the most important factor 
 in a business operation; that the business ability of the man 
 at the head of any business concern, big or little, is usually 
 the factor which fixes the gulf between striking success and 
 hopeless failure. . . . 
 
 “The mechanism of modern business is so delicate that 
 extreme care must be taken not to interfere with it in a 
 spirit of rashness or ignorance. Many of those who have 
 made it their vocation to denounce the great industrial com¬ 
 binations which are popularly, although with technical in¬ 
 accuracy, known as “trusts,” appeal especially to hatred 
 and fear. These are precisely the two emotions, particularly 
 when combined with ignorance, which unfit men for the 
 exercise of cool and steady judgment. In facing new indus¬ 
 trial conditions, the whole history of the world shows that 
 legislation will generally be both unwise and ineffective un¬ 
 less undertaken after calm inquiry and with sober self 
 restraint. Much of the legislation directed at the trusts 
 would have been exceedingly mischievous had it not also 
 been entirely ineffective. . . . 
 
 “There is widespread conviction in the minds of the 
 American people that the great corporations known as trusts 
 are in certain of their features and tendencies hurtful to 
 the general welfare. This springs from no spirit of envy 
 or uncharitableness, nor lack of pride in the great industrial 
 achievements that have placed this country at the head of 
 the nations struggling for commercial supremacy. It does 
 not rest upon a lack of intelligent appreciation of the neces¬ 
 sity of meeting changing and changed conditions of trade 
 with new methods, nor upon ignorance of the fact that com¬ 
 binations of capital in the effort to accomplish great things 
 is necessary when the world’s progress demands that great 
 things be done. It is based upon sincere conviction that 
 combination and concentration should be, not prohibited, 
 
No Political Party 
 
 463 
 
 but supervised and within reasonable limits controlled; and 
 in my judgment this conviction is right. ’ ’ 2 
 
 One is not surprised, therefore, that in 1907 the President 
 of the United States abetted the United States Steel Cor¬ 
 poration in the absorption of the Tennessee Coal and Iron 
 Company, the acquisition of which was “particularly ad¬ 
 vantageous to the Steel Corporation, because of the iron 
 and coal properties that go with it.” (Investigation of the 
 United States Steel Corporation Hearings, p. 1129.) 3 
 
 Statesmen on “Big Business” in Politics 
 
 That conditions had not materially altered—except for 
 the worse—since President Cleveland’s declaration of 1888 
 may be judged from the following from Woodrow Wilson’s 
 book, “The New Freedom,” published in 1913: 
 
 ‘ ‘ One of the most alarming phenomena of the time, . . . 
 is the degree to which government has become associated 
 with business. I speak for the moment of the control over 
 the Government exercised by Big Business. Behind the 
 whole subject, of course, is the truth that, in the new order, 
 government and business must be associated closely. But 
 that association is at present of a nature absolutely intoler¬ 
 able; the precedence is wrong, the association is upside 
 down. Our Government has been for the past few years 
 under the control of heads of great allied corporations with 
 special interests. It has not controlled these interests and 
 assigned them a proper place in the whole system of busi¬ 
 ness; it has submitted itself to their control. As a result 
 there have grown up vicious systems and schemes of govern¬ 
 mental favoritism (the most obvious being the extravagant 
 tariff) far-reaching in effect upon the whole fabric of life, 
 touching, to his injury, every inhabitant of the land, laying 
 unfair and impossible hardships upon competitors, imposing 
 taxes in every direction, stifling everywhere the free spirit 
 of American enterprise. . . . It is an intolerable thing 
 
 2 Messages and Papers of the Presidents, Vol. X, pp. 422, 423, 424. 
 
 3 Senator La Follette is authority for the statement that over 
 twelve thousand firms were combined during the seven years of 
 President Roosevelt’s administration. 
 
464 
 
 The New Capitalism 
 
 that the Government of the republic should have got so far 
 out of the hands of the people; should have been captured 
 by interests which are special and not general. In the train 
 of this capture follow the troups of scandals, wrongs and 
 indecencies, with which our politics swarm . . . 
 
 “We know that something intervenes between the people 
 of the United States and the control of their own affairs at 
 Washington. It is not the people who have been ruling 
 them of late,” etc., etc. 
 
 More Recent Testimony 
 
 On April 16, 1921, Senator La Follette delivered an ad¬ 
 dress in Washington, D. C., under the auspices of the Na¬ 
 tional Council of the People’s Legislative Service, from 
 which I quote the following: 
 
 “The great issue before the American people today is 
 the control of their own government. 
 
 “A mighty power has been builded in this country in 
 recent years, so strong, yet so insidious and far-reaching 
 in its influence that men are gravely inquiring whether its 
 iron grip on government and business can ever be broken. 
 
 “Again and again it has proved strong enough to nomi¬ 
 nate the candidates for both political parties. It has domi¬ 
 nated the organization of legislative bodies, state and na¬ 
 tional, and of the committees which frame legislation. Its 
 influence has been felt in cabinets and in the policies of ad¬ 
 ministrations and has been clearly seen in the appointment 
 of prosecuting officers and the selection of judges upon the 
 bench. In business it has crippled or destroyed competi¬ 
 tion. It fixes the prices of the necessaries of life and im¬ 
 poses its burdens upon the consuming public in defiance of 
 the law. In transportation, after a prolonged struggle for 
 government control, it is absolute master of the highways 
 of commerce. In finance its power is unlimited. With the 
 connivance of the trustees of the people, it has acquired vast 
 areas of the public domain and has monopolized the natural 
 resources—timber, iron, coal, oil. And this thing has grown 
 
No Political Party 
 
 465 
 
 up in a country where, under the Constitution and the law, 
 the CITIZEN is sovereign. 
 
 “This great power which has taken from the American 
 people the control of their own government, is the product 
 of Monopoly and Organized Greed. 
 
 ‘ ‘ At this hour, as never before in the history of this coun¬ 
 try, the Congress of the United States is being subjected to 
 influences which are undermining representative govern¬ 
 ment. 
 
 “Never before, in a generation of time, has the national 
 capital attracted so menacing an army of lobbyists seeking 
 from the representatives of the people unjust concessions 
 to special interests, ” etc. 
 
 Plain Words 
 
 Scores of other statesmen are on record with definite and 
 specific charges, accusing the Capitalistic group of consti¬ 
 tuting an “invisible government.” But to establish a fact 
 already known is not the purpose of this chapter. Let me, 
 therefore, continue with the more practical considerations 
 involved in my counsel not to venture upon any attempt to 
 organize a political party under the auspices of the New 
 Order—at least not for many years to come. 
 
 The first requisite for a successful party is a powerful 
 national press. While the New Order will endeavor to build 
 up a national press, years necessarily must elapse before one 
 sufficiently strong to cope with all the established Capital¬ 
 istically owned and controlled periodicals can be developed. 
 The foolhardiness of launching a party without a press must 
 be apparent to all. 
 
 Moreover, we would for many years be a third and a 
 minority party, and in competition with the existing major 
 parties, which would place us beyond the pale of their 
 consideration. Without a party of our own, we can claim 
 the attention of both parties. Both parties will court our 
 favor and covet our assistance; and so be careful not to an¬ 
 tagonize or offend us. Thus we would exercise a greater 
 
466 
 
 The New Capitalism 
 
 influence and power than if we were entirely detached from 
 and opposed to them. 
 
 But even though it were possible, after a score or so of 
 years, to win in a state or national election, we would expose 
 ourselves to possible defeat in some following election, just as 
 one or the other of the existing major parties regularly suf¬ 
 fers defeat at present. The inevitable result would be that 
 before long we would find ourselves, in order to combat the 
 chicanery and trickery of politicians, put to the necessity 
 of giving a larger measure of attention to politics than to 
 economics, thus inviting both political and economic dis¬ 
 aster. 
 
 When the Tail Wags the Dog 
 
 Political economists are prone to accentuate that the po¬ 
 litical and economic life of a nation are inextricably inter¬ 
 woven; that politics and economics are inseparably linked 
 together. And there is a measure of truth in their contention. 
 That is why in European countries fiery doctrinaires are 
 preaching that their economic emancipation and their politi¬ 
 cal liberation can be brought about only by the overthrow 
 of the existing governments. 
 
 ‘ ‘ Socialism, ’ ’ said Lenin, * ‘ is impossible without the domi¬ 
 nation of the proletariat in the state. ’ ’ In other words, the 
 proletariat, according to Lenin’s philosophy, is to be the 
 state. This is in no wise different from the famous saying 
 of Louis XIV— L’Etat, c’est mois —“I am the State.” 
 
 In Europe there may be reason and justification for the 
 several attempts that have been, and are being made, to 
 ameliorate economic conditions by radical political changes; 
 but not in the United States. And I seize this opportunity 
 to note the distinctive difference between my plan and the 
 sundry politico-economic isms with which the public is more 
 or less familiar. I place myself in uncompromising opposi¬ 
 tion to those who declare that the economic redemption of 
 society can be accomplished only through the instrumental¬ 
 ity of the State. I hold that an economic system that de¬ 
 pends for its maintenance upon the exercise of political 
 
No Political Party 
 
 467 
 
 power, or that has for its basic principle the destruction of 
 wealth, the elimination of capital, and the confiscation of 
 property regardless of the established processes of law; or 
 the dispossession of a group, because a few, or even many, 
 within that group have wrongfully acquired property or 
 wealth, cannot be approved. Any economic program that 
 calls for the violent overthrow of the existing political order, 
 whether that order is acceptable or not, is, to say the least, 
 a dangerous doctrine. Nor have I any sympathy with any 
 economic scheme that is synonymous with a leveling process. 
 All radical reform plans and their derivatives, by whatever 
 name they may be called, I sweep aside, not so much because 
 they are revolutionary but because they would not change 
 for the better—but rather for the worse, the conditions 
 against which the world is in protest. Granting that the 
 present Capitalistic order of society is tyrannical and un¬ 
 just, the substitution of any of the radical isms would still 
 continue that tyranny and injustice. Its acceptance would 
 merely transfer tyrannical control and power from the 
 hands of the Capitalistic group to the hands of a none the 
 less tyrannical* group—call it proletariat or by whatever 
 name you choose. 
 
 The Power of the Ballot 
 
 Happily we in the United States are more fortunately 
 situated than the people of Europe. Though tremendous 
 changes have taken place in our country’s political principles 
 and policies during the past few decades—changes which 
 perverted our government from a Democracy into a Timoc¬ 
 racy—while many public officials have proved unfaithful 
 to their trust and betrayed the people, there reposes in our 
 hands the franchise through the intelligent exercise of which 
 every existing evil can be removed or eradicated. 4 
 
 I hold that fundamentally our political life and our eco¬ 
 nomic life are distinct; certainly they are not irremediably 
 
 4 De T-ocqueville, author of “Democracy in America,” in one 
 of his letters said: “All the world over. Governments are just as 
 rascally as nations will allow them to be. This is the only limit 
 to their vices.” 
 
468 
 
 The New Capitalism 
 
 interwoven as they seem to be in the European countries. 
 Speaking with particular reference to the United States— 
 I am inclined to think that the Capitalistic economists have 
 hitherto put an undue stress on the Political features of the 
 “science” of Political Economy. We propose to put the 
 greater stress on the Economy side. Instead of worrying over 
 the porisms of Political Economy, we will build up a science 
 of Economic Politics—or rather let me call it—Economic 
 Polity. A century and a half of experience has revealed 
 that the people cannot hope to improve their economic con¬ 
 dition through the medium of politics. Perhaps it will be 
 easier for them to improve politics by first improving their 
 economic condition. A people that is held in economic sub¬ 
 jection cannot be politically powerful, however much writ¬ 
 ers and speakers may disguise the fact by mouthing the 
 word ‘ ‘ Democracy ’ J and its variants. As long as the people 
 are economically enslaved, so long will they be held in 
 political bondage; and all the oratorical boast about ‘ ‘ popu¬ 
 lar government” and “government of the people, for the 
 people and by the people” are but words, words, words— 
 meaningless phrases and inept platitudes. Not until they 
 are economically powerful can the people become politically 
 potent. 
 
 At any rate—let it never be forgotten that the New Order 
 is primarily an Economic Association, organized for the 
 definite purpose of bringing about the economic welfare 
 and security of the people. If we are true to our prin¬ 
 ciples the New Order can get along without any political 
 party; the New Capitalism can succeed independently of 
 politics. 
 
 “A Daniel Come to Judgment” 
 
 At the Annual Meeting of Stockholders 5 of the United 
 States Steel Corporation (April 18, 1921) Mr. Elbert H. 
 Gary read a paper entitled “Principles and Policies of the 
 
 5 It would be interesting to know how many of the 160,000 stock¬ 
 holders of the United States Steel Corporation attended the meet¬ 
 ing ; and their names and addresses; and the amount of the actual 
 holdings of each would add to the interest. 
 
469 
 
 No Political Party 
 
 United States Steel Corporation.” I have no intention of 
 analyzing these “Principles and Policies” at this time; nor 
 even of discussing Mr. Gary's utterances, beyond saying 
 that, of course, he reiterated his avowed opposition to labor 
 unions. “I firmly believe that complete unionization of the 
 industry of this country . . . would be the beginning 
 
 of industrial decay,” said Mr. Gary. 
 
 Let that pass without comment. I am not interested in 
 that aspect of the controversy at this time. It is only the 
 last sentence of Mr. Gary’s discussion of ‘ ‘ labor unions ’ ’ on 
 which I shall concentrate for a moment. Says Mr. Gary : 
 
 “It seems to me that the natural, if not the necessary, 
 result of the contemplated program of labor unions, if suc¬ 
 cessful, would be to secure the control of the shops, then 
 of the general management of business, then of capital, and 
 finally of government.” 
 
 Mr. Gary’s fears are well founded, but he has the cart 
 before the horse. He has somewhat mixed the order of 
 procedure. Under the New Capitalism, the people, with 
 organized labor, as the nucleus will endeavor first to secure 
 control of capital—their own capital, if you please—the 
 very capital which Mr. Gary and the entire tribe of Capi¬ 
 talistic Entrepreneurs are today using in a high-handed 
 fashion, and have ruthlessly utilized for all these years; 
 and by the unchallenged use of which he and his friends 
 and associates have grown fabulously wealthy; besides ac¬ 
 quiring an uncontrolled power which he and his kith are now 
 employing to suppress and enslave those who labor for a 
 wage. 
 
 No, Mr. Gary, you are in error; the “contemplated pro¬ 
 gram of labor unions” under the rule of the New Capital¬ 
 ism, does not contemplate “to secure the control of shops 
 and management of business ’ ’ until it has taken away from 
 you and your kith the ruthless control of capital and all 
 that this implies. Your fear that the labor unions will 
 finally secure control of government need not disturb you 
 for a while as yet, for as the author of the New Capitalism 
 I distinctly warn against political maneuvers. But since 
 
470 
 
 The New Capitalism 
 
 I am on this subject; since you yourself raise the point, 
 what possible objection can you offer against any group, 
 truly solicitious for the people’s welfare, I will not say try¬ 
 ing to secure 11 control of government, ’ ’ but endeavoring to 
 take the control of government away from you and your 
 Capitalistic associates? Or do you really believe that the 
 average citizen is so densely ignorant as not to know that 
 Big Business—the corporations, the Capitalistic Entrepre¬ 
 neurs—the Mammonistic Capitalists—absolutely control 
 the politics of the nation ? 
 
 The End of Timocracy 
 
 I have already quoted Aristotle to the effect that there 
 are three political constitutions: Kingship (or monarchy), 
 aristocracy, and timocracy. “Of these,” says Aristotle, 
 “timocracy is the worst,” because it is the rule of wealth. 
 “From timocracy,” continues Aristotle, “the transition is 
 to Democracy .” 
 
 Timocracy in the United States cannot maintain itself 
 except by the potency of party rule; and party rule is wan¬ 
 ing fast. At any rate the transition from Timocracy to 
 Democracy will not be brought about by any of the existing 
 political parties (in whose vapid platform promises the 
 people have lost all confidence), but by the people them¬ 
 selves who, in the years to come, will choose their own can¬ 
 didates, and give their support to men and principles rather 
 than to selfish Capitalitic measures, disguised as partisan 
 programs. 
 
 It is this belief that persuades me to say that there may, 
 —indeed I think there will—come a time when a political 
 organization truly representative of the eighty (and more) 
 million non-investors will be formed, but not in the usual 
 way. Ordinarily a few irrelevant platitudes formulated 
 into a ringing platfrom, a picturesque or dazzling leader 
 and a striking party name, were considered sufficient to 
 arouse popular sentiment and win for it the support of the 
 people. 
 
 The New Order must operate along different lines. It 
 
No Political Party 
 
 471 
 
 must first of all demonstrate its fitness, and prove that its 
 principles are safe and sound, and its leaders worthy of an 
 increase of trust. These things conclusively proved through 
 a series of years, the spontaneous sentiment of the voters 
 among the eighty (and more) million will shape itself into 
 a majority which in due time will insist on expressing itself 
 as a unit at the polls. 
 
 In the meantime from the eighty (and more) million will 
 come the legislators and judges and the officials of federal, 
 state and city governments, and who will carry into their 
 public service the conviction that the interests of the eighty 
 (and more) million are at least as important as the interests 
 of the twenty million. 
 
 It will be years before this metamorphosis can take place, 
 but in the New Order it will surely come to pass. Without 
 any effort or design this party will slowly shape itself, and 
 all that will be needed to give it entity, is a name. 
 
CHAPTER XXXIV 
 The Concluding Chapter 
 
 W E have been told of the Englishman who, while 
 confined in the Debtors’ Prison, wrote a treatise on 
 how to wipe out the national debt of England; 
 whereat we are supposed to laugh. But we have never been 
 told what his plan was; therefore none can tell whether it 
 was meritorious or otherwise. Nor is there anyone who can 
 deny that if his plan had been tried the national debt of 
 England might have been liquidated. Nor can anyone as¬ 
 sert that said debtor was more foolish than the government 
 that put him behind the bars. 
 
 It is entirely within the realm of possibilities for one sent 
 to prison for debt to devise a plan that might bring freedom 
 from debt to the nation that sent him there. Certainly it is 
 not more incongruous than a barber inventing the spinning- 
 wheel. When you come to think about it, nearly all great 
 discoveries and inventions were made by most unlikely peo¬ 
 ple—by people who were considered failures, or fools, or 
 lacking in wit; or ne’er-do-wells, or dreamers— Theorists , 
 we call them today. Some of the most biting sarcasm I 
 have ever heard, fell from the lips of speakers before Cham¬ 
 bers of Commerce crowds, and before Economic Associa¬ 
 tions; it was leveled at Theorists. The sarcastic denuncia- 
 tors were, or at least considered themselves, practical men. 
 It did not occur to them that they were of the lowest order 
 of theorist—that is, parrot theorists—setting forth the theo¬ 
 ries of others—expounding doctrines which they themselves 
 lacked the intelligence to originate; dicoursing on prin¬ 
 ciples which others, not they, had the ingenuity to discover. 
 
 Theorists and Theories 
 
 Now as a matter of fact, whatever of progress has been 
 made in the world, or whatever development with regard 
 
 472 
 
The Concluding Chapter 
 
 473 
 
 to civilization, it is the result of theories. The American 
 continent was discovered because Columbus had a theory. 
 When Washington and Jefferson, et at; founded the Ameri¬ 
 can Republic, they were theorists,—not practical men! They 
 had a theory of government—which, by the way, is still in 
 its experimental stages, likely within the next decade or two 
 to prove itself a success or a failure. As long as we ad¬ 
 hered to the principles underlying their theory our country 
 was safe; but now that we ignore their principles, and are 
 departing from their theory, the country is in danger; in 
 more serious danger than I care to admit. But whatever 
 our Government may be today; or will have proved itself to 
 be ten or twenty years hence, this must be admitted—that 
 the American Government, when first proposed, was a 
 theory; its organization and development, the work of theo¬ 
 rists. 
 
 In fact, every great achievement in the world was first 
 proposed as a theory! Watt, who discovered the power of 
 steam, was a theorist; Fulton, who applied the discovery to 
 navigation, was a theorist; Stephenson, who turned it to 
 land purposes, was a theorist. The telephone, the telegraph, 
 the wireless, the aeroplane, the biograph, the automobile, 
 the radio, radium—hundreds of other inventions and dis¬ 
 coveries, were but the fruition of theories. Write this down 
 in your notebook: Theorists, not practical men, have 
 pushed the world onward and upward. Theorists, not prac¬ 
 tical men, are the hope of the world today. 
 
 One of the cleverest things that Gilbert K. Chesterton has 
 ever written is this: ‘ ‘ There has arisen in our time a most 
 singular fancy; the fancy that when things go very wrong 
 we need a practical man. It would be truer to say that when 
 things go wrong we need an unpractical man. Certainly 
 at least we need a theorist. A practical man means a man 
 accustomed to mere daily practice, to the way things com¬ 
 monly work. When things will not work you must have the 
 thinker, the man who has some doctrine why they work 
 at all.” 
 
474 
 
 The New Capitalism 
 
 The Failure of Practical Men 
 
 There is a world of truth in these words. If you want to 
 know what a frightful mess practical men have made of 
 human affairs everywhere, you need but look about you, 
 or read your daily paper. Who is responsible for the eco¬ 
 nomic, and other, troubles of the world today ? Why, prac¬ 
 tical men! Who is responsible for the world muddle ? Again 
 the answer is—practical men! Who invented the various 
 methods and sundry systems that are threatening to cul¬ 
 minate in chaos? The answer is simple—practical men! 
 Who is aggravating and intensifying the universal unrest ? 
 Practical men! Who is getting the world deeper and deeper 
 into the mire? Echo answers—practical men! The ter¬ 
 ribly disturbed conditions in the United States and else¬ 
 where, are the result of the plannings, scheming and plot¬ 
 tings of practical men! Which being the case, from prac¬ 
 tical men, good Lord, deliver us! 
 
 Therefore, avaunt, ye practical men! Enter the theo¬ 
 rist! You need not take off your hat to the theorist, nor 
 bend your knee to him; but at least do not pelt him with 
 stones, nor stick out your tongue at him. The theoretical 
 man adheres to the fundamentals, unswervingly, uncom¬ 
 promisingly. In his reasoning processes he hews to the line 
 and lets the chips fall where they may. He neither dissem¬ 
 bles ; nor deludes himself; nor deceives his fellow man. He 
 speaks the truth, as he sees it; and calls things by their right 
 name. Smash his principles and his theories fall to the 
 ground. But ‘‘until thou canst rail the seal” from off his 
 bond, “thou but offend’st thy lungs to speak so loud.” 
 
 President Wilson went into the Peace Conference—an 
 unpractical man, a theoretical man, a leader; he came out 
 of it a practical man, a compromiser, a defeated man. Had 
 he adhered to the fundamentals—had he even held uncom¬ 
 promisingly to his enunciated theories, the historian a hun¬ 
 dred years hence would be compelled to declare him one of 
 the greatest men, perhaps the greatest man, of all times. 
 
The Concluding Chapter 
 
 475 
 
 False Maxims 
 
 A modern writer has said that the world is governed by 
 a half hundred maxims, most of which are false. This is 
 literally true. It is particularly true with whatever per¬ 
 tains to economics. The whole porismatic “science” of 
 Political Economy is constructed around maxims most of 
 which are false. These false maxims have been current so 
 long that they are accepted as axioms. Men who in all their 
 lives have never so much as looked at the outside of a book 
 on Political Economy,— (and who wouldn’t have the intelli¬ 
 gence to understand what they read were they ever to ven¬ 
 ture upon the perusal of a few pages of such a book, should 
 it accidentally fall into their hands)—mouth them as if 
 their mere utterance constituted the finality of human 
 wisdom. Thus I have heard men of supposed intelligence 
 prate of the “established order” as if it were a sacred and 
 unchangeable thing—entirely ignoring that what we call the 
 “established” order today, was not in existence a half- 
 century ago. Time and again I have heard the statement 
 “prices are regulated by the gold supply” made by men 
 who could not, for the life of them, tell how much gold, coin 
 and bullion, there is in the United States; or how many 
 grains of gold are contained in the standard gold dollar. 
 And I have heard men who were both ignorant and illiterate 
 defend the excessive price of their particular commodities 
 by the ‘ ‘ law of supply and demand. ’ ’ It was of this ‘ ‘ law ’ ’ 
 of which DeQuincey wrote: “A crazy maxim has got pos¬ 
 session of the whole world; viz., that price is, or can be, 
 determined by the relation between supply and demand. ’ ’ 
 
 Maxims that are false; half truths; perversions of the 
 truth; and plain lies—these are things with which the world 
 has been governed for many, many centuries. “Go, my 
 son,” said a Swedish Chancellor to his son, “go and see 
 with what little cost of wisdom this world is governed. ’ ’ 
 
 “Where Ignorance is Bliss” 
 
 How, then, in spite of the falsity of the maxims, and the 
 remarkable unwisdom of those who govern us, did the world 
 
476 
 
 The New Capitalism 
 
 manage to get along as well as it did ? The answer is given 
 by the cynic who said that five percent of the people think; 
 tan percent, think they think; and eighty-five percent would 
 rather die than think. If it were otherwise it would not 
 have been possible for a few thousand (or a few million, if 
 ‘ ah will) to gather the wealth of the world into their laps, 
 leaving to the many millions just enough sustenance to keep 
 body and soul together. And it would not have been pos¬ 
 sible to foist upon the people a “science” which pretends 
 to concern itself with the distribution of wealth, when in 
 reality it concerns itself only with the concentration of 
 wealth in the hands of a few, and the exclusion of the many 
 millions from participation therein. 
 
 “Go, my son,” said a Swedish Chancellor to his son,— 
 “go and see with what little cost of wisdom this world is 
 governed.” “Go,” might a scholar, in like manner say, 
 after a thoughtful review of literature, “go and see how 
 little logic is required to the composition of most books. ’ ’ 1 
 
 The One Non-Progressive Science 
 
 DeQuincey, writing in the first quarter of the nineteenth 
 century, had in mind those books on Political Economy 
 written toward the end of the eighteenth century, and dur¬ 
 ing the early decades of the nineteenth. “Political Econ¬ 
 omy,” he wrote, “does not advance. Since the revolution 
 effected in that science by Ricardo (1817) upon the whole it 
 has been stationary.” In the science of Political Economy, 
 he maintained, “Nothing can be postulated—nothing can 
 be demonstrated; for anarchy, even as to the earliest prin¬ 
 ciples, is predominant.” 
 
 But it is not to give concurrence to his views that I quote 
 from DeQuincey’s writings, but rather to lead up to a vital 
 point, and which seems to me pivotal, in the plan I am pro¬ 
 posing. The early economists (among whom Adam Smith 
 stands out as the Father; and whose book, “The Wealth of 
 Nations,” is by some called “the Bible of Economics”) 
 deduced their principles from the conditions actually exist- 
 
 ♦DeQuincey’s Essay on “Malthus.” 
 
The Concluding Chapter 
 
 477 
 
 ing at the time they wrote—long before Industrialism had 
 appeared. And it is upon these antiquated ‘ 1 principles ’’ 
 (in reality porisms) that modern economists are still build¬ 
 ing the nation’s economic life. It is quite comprehensible 
 that a book, written nearly a century and a half ago, and 
 which purports to state the “principles” upon which the 
 wealth of a nation—particularly England’s wealth—neces¬ 
 sarily rested, might be esteemed today as “the Bible of 
 Economics”—but in that case I should insist on calling it 
 the Old Testament, whose usefulness as an economic 1 ‘ guide, 
 philospher and friend” ceased with the dawn of the New 
 Industrial Revelation. The tremendous changes that came 
 over the world as Industrialism developed during more than 
 a century’s time, surely call for a New Testament in the 
 Economic Bible. Political Economy is the only “science” 
 that hasn’t progressed, in spite of the fact that the automo¬ 
 bile has displaced the ox-cart. 
 
 When Teeth were Literally Pulled 
 
 Not so many years ago signs in barbers’ shops and win¬ 
 dows announced: “Leeching, Cupping and Bleeding Done 
 Here; Also Teeth Extracted.” I distinctly recall a tooth¬ 
 pulling operation performed by the town barber— 
 Schweitzer by name, on old Ulmer, the luckless patient. I 
 can see old Schweitzer now, his feet encased in red socks, and 
 slippers worn down at the heels, standing on a common 
 kitchen chair, behind old Ulmer reclining in the barber 
 chair, and boring with all his strength with a corkscrew¬ 
 like instrument into the groaning Ulmer’s tooth (or was it, 
 perhaps, a vice, and he was fastening his hold on the tooth); 
 and then pulling so hard that he fell backward from his 
 chair, pulling old Ulmer, who was holding on grim death to 
 the barber chair, along with him. Did he get the tooth? I 
 do not know, for frightened by old Ulmer’s blood-curdling 
 yells, as if he were being murdered, I took flight. This was 
 less than two score years ago; I think I was about twelve 
 years old at the time. None will deny that dentistry has 
 made some progress since then. 
 
478 
 
 The New Capitalism 
 
 Medical and Economic Doctors 
 
 In any second-hand book store you will find on the 
 twenty-five cent counter, hundreds of medical books written 
 by men who only a few years ago, were considered authori¬ 
 ties. So tremendous and quick has been the progress in 
 medical science and everything appertaining thereto, that 
 those works are hopelessly out of date, and of interest only 
 to antiquarians or collectors of curious books. 
 
 In every department of human endeavor revolutionary 
 changes have taken place, but not in Political Economy. 
 Economic doctors still perform their miracles by “Leeching, 
 Cupping and Bleeding. ’ ’ In brief, political economists, now 
 as then, reason from the Capitalistic standpoint and for 
 the exclusive benefit of those constituting the Capitalistic 
 System. It is under the protective logic of their writings 
 that Industrialism begot Capitalism, and Capitalism begot 
 Mammonism. 
 
 It cannot be denied that Capitalism and Mammonism are 
 self sufficient and successful institutions, and the explana¬ 
 tion for this is to be found in the fact that from the begin¬ 
 ning every moral principle and every ethical consideration 
 has been carefully excluded from all works dealing with 
 economics. In the Bible of Moses and the Prophets you 
 will find all the rules of morality, by the practice of which 
 civilization gradually reared itself aloft. None of these rules 
 are found in the “Bible of Economics.” It is to their rigid 
 exclusion that we must attribute the growth and success 
 of Capitalism and Mammonism. 
 
 Moses, we are told, granted a bill of divorce to the Jews 
 because they were hard-hearted; but the Economic Fathers, 
 of their own volition, absolutely divorced Ethics from Po- 
 lical Economy; and the whole human race has been com¬ 
 pelled ever since to pay alimony to those constituting the 
 Capitalistic family. No wonder the world—that is to say, 
 most of the people in it, are poor and discontented. No won¬ 
 der there is misery and wretchedness, and crime and degra¬ 
 dation, among them. Where will it end, and how? 
 
479 
 
 The Concluding Chapter 
 “The Moving Finger Writes” 
 
 It was reflections such as these that urged me to the writ¬ 
 ing of this book—the new Evangel of Economics. It was 
 in the contemplation of what might happen unless the world 
 (and that without much delay), comes to its senses, that I 
 found the inspiration for my plan. In my previous writ¬ 
 ings I addressed myself to the powerful men who today 
 hold the economic destiny of the nation, aye, of the world, 
 in the hollow of their hand. I knew, of course, that any 
 appeal to them was futile. Neither Moses and the Prophets, 
 nor Christ Himself, could move them. Nevertheless, unless 
 they curb their insatiable greed for WEALTH, and their 
 gluttony for PROFITS—the deluge will surely come. 
 
 Yes, the deluge! I am not a pessimist; neither am I a 
 cheerful idiot—sometimes euphemistically called an optim¬ 
 ist by the unthinking. But I try always to be calmly sen¬ 
 sible, and to view things as they are. I have never been able 
 to deceive myself, nor to throw dust into my own eyes. Nor 
 am I an alarmist. Neither am I a prophet, nor the son of 
 a prophet, nor the seventh son of a seventh son. But when 
 I see the black clouds gathering, and the lightning’s flash, 
 and I hear the ominous roll and terrific crashes of thunder, 
 and say “There’s a storm brewing; it’s going to rain—” 
 I am not a pessimist, nor an alarmist, nor am I prophesying; 
 I am only reading what is plainly legible in the sky; I am 
 only saying what must be clear to all who are neither blind, 
 nor deaf, nor perverse. Just as we can read with fair accu¬ 
 racy the disturbed elements in nature, so we can in a meas¬ 
 ure, interpret the social unrest, the economic upheaval, the 
 political disturbances, and the growing discontent, mani¬ 
 fest in the United States and throughout the world today. 
 
 Appealing from Peter to Pavl 
 
 Since any appeal to the Mammonistic masters and Capi¬ 
 talistic over-lords of this earth is bound to fall on deaf ears; 
 since, moreover, it is clear, judging from the sundry things 
 happening at the present time, particularly in the United 
 
480 
 
 The New Capitalism 
 
 States, that they do not intend to release, but to strengthen 
 still more their stranglehold upon the throats of the people, 
 I turn to the people themselves to tell them what is so clear 
 to me—that their future destiny rests in their own hands. 
 
 - Probably I shall not escape the charge of “setting class 
 against class.’’ James E. Thorold Kogers, M. P., in “Six 
 Centuries of Work and Wages—the History of English 
 Labor ’ ’—says in his preface: 
 
 ‘ ‘ The charge of setting class against class has always been 
 made by those who wish to disguise their own indefensible 
 advantages by caluminating the efforts of those who discern 
 abuses and strive to rectify them. ’ ’ 
 
 Jeremy Bentham, in his essay, “Britain in 1817,” says: 
 
 “Propose anything good; the answer is at hand:—wild, 
 theoretical, visionary, Utopian, impracticable, dangerous, 
 destructive, anarchial, subversive of all governments—there 
 you have it.” 
 
 The Plan I propose is necessarily a theory, until it as¬ 
 sumes the proportions of an experiment, in which case I 
 maintain that it will demonstrate itself a complete success, 
 for the reason that the principles upon which it is based 
 are fundamental and sound. 
 
 I do not think it necessary in this chapter to give a sum¬ 
 mary of all I have said but I will add a word of warning. 
 Let none imagine for a moment that the things I propose 
 shall be done will be as easy of performance as is the read¬ 
 ing, or as was the writing of this book, written only after 
 twenty years of thought, study, analysis and computation. 
 Above all, let none imagine that the Capitalistic-Mammon- 
 istic Entrepreneurs will surrender instantly, or that they 
 will not put up a bitter fight. Indeed while the non-invest¬ 
 ors are guffawing over a Charlie Chaplin picture, or dawd¬ 
 ling over their evening paper; while the wage' earners are 
 yawningly making up their minds whether they are awake 
 or asleep; and while certain Labor groups are nebulously 
 debating whether, after all, quantity wages for themselves 
 are not preferable to economic independence for all the non- 
 
The Concluding Chapter 
 
 481 
 
 investors, they are diligently taking steps to prevent this 
 new child from growing up. 
 
 Back to Earth) 
 
 Throughout the writing of Part II, I have, for the sake 
 of convenience, imagined the existence of the New Order, 
 and visualized the New Capitalism as if in actual operation. 
 Will the New Order ever become an entity ? Will the New 
 Capitalism develop into a reality f I do not know! I have 
 lived too long to harbor delusions. But this I do know, that 
 if ever Labor will lift itself to a higher plane it will be 
 through some such plan as mine; not necessarily the precise 
 plan I have formulated, but at least one built upon the fun¬ 
 damental principles, which I have merely restated. 
 
 It is quite possible that years will elapse before those 
 most concerned will begin to discern merit in my plan. Per¬ 
 haps the present generation will have passed away; but the 
 time will surely come—say around the year 1975—when 
 some one who has not entirely lost the power of analysis, 
 the capacity to think, and the ability to reason, will com¬ 
 pute “what might have been” had my plan been followed. 
 He will seize upon my statement that under the New Capi¬ 
 talism the average non-investor family will be enabled to 
 save from $100 to $450 a year, and compute what the savings 
 of sixteen million families would have amounted to within 
 twenty-five years, say from 1925 to 1949. His figures will 
 read about as follows: 
 
 At the rate of $100 a year their aggregate savings would 
 have amounted to $1,600,000,000 a year, or $40,000,000,000 
 within twenty-five years; or $2,500 per family. 
 
 At the rate of $200 a year, their aggregate savings would 
 have amounted to $3,200,000,000 a year, or $80,000,000,000 
 within twenty-five years; or $5000 per family. 
 
 At the rate of $300 a year, their aggregate savings would 
 have amounted to $4,800,000,000 a year, or $120,000,000,000 
 within twenty-five years; or $7500 per family. 
 
 At the rate of $400 a year, their aggregate savings would 
 
482 
 
 The New Capitalism 
 
 have amounted to $6,400,000,000 a year, or $160,000,000,000 
 within twenty-five years; or $10,000 per family. 
 
 At the rate of $450 a year, their aggregate savings would 
 have amounted to $7,200,000,000 a year, or $180,000,000,000 
 within twenty-five years; or $11,250 per family. 
 
 And he will be at some pains to make clear that the figures 
 represent only aggregate savings ,—that if the savings had 
 been cumulatively invested in the sundry enterprises of the 
 New Order, and earned from five to six percent a year, and 
 compounded—the Capital accumulation would at end of the 
 twenty-five years be considerably more than double the 
 amount of the savings. 
 
 To illustrate what he means he will take the case of a man 
 twenty years of age in 1925, and who under the New Capi¬ 
 talism would be enabled to save, let us say, $200 a year; and 
 who invests each year’s savings in, say six percent, securi¬ 
 ties of the enterprises of the New Order, and allows his sav¬ 
 ings and interest to accumulate. At the end of twenty-five 
 years, or by the time he is forty-five years old, this man 
 would have accumulated a fund of over $11,000. 
 
 He will— 
 
 But why pursue this theme further. “Though I were to 
 speak with the tongue of men and of angels”; though I 
 were to continue to write in this fashion till doomsday, I 
 could add nothing to what I have said, nor augment my 
 argument, to show that 
 
 4 ‘ Men at some time are masters of their fates: 
 
 The fault, dear Brutus, is not in our stars, 
 
 But in ourselves, that we are underlings.” 
 
A Postscript 
 
 M Y interest in economic subjects dates back a quarter 
 of a century. From early boyhood I was an in¬ 
 defatigable reader; fiction was my chief delight. 
 During my college days I changed from fiction to belles- 
 lettres —essays, poetry, drama. History was added in due 
 time. The one subject which I knew had a literature of its 
 own, yet which failed to interest me, was Political Economy. 
 Statistics were my pet aversion. 
 
 One day there fell into my hands a little book of essays 
 on economic subjects. I have forgotten the author’s name 
 and the title of the book—but no matter. Not being par¬ 
 ticularly interested in the subjects discussed I read it cas¬ 
 ually, until I came to the following sentence : 
 
 “The poor are getting richer and the rich are getting 
 poorer. ’ ’ 
 
 This statement—one of supposed fact by a supposed 
 authority—made me pause and ponder. Instinctively I felt 
 that the writer was not telling the truth. I took a mental 
 survey of the little suburb in which I lived. I knew every 
 family and its circumstances. They were for the most 
 part working people, all of them poor. As far as these sev¬ 
 eral hundred families known to me, were concerned, the 
 author’s statement was not true. None of them was getting 
 richer—all of them were as poor as they had been ten or 
 fifteen years before, and I concluded that at least one-half 
 of the sentence quoted above was a lie. 
 
 But how about the other half, viz., that “the rich are 
 getting poorer”? There were no rich men in my commu¬ 
 nity, but there were ten or twelve families in those times 
 considered well-to-do—small business men worth between 
 ten to perhaps fifteen thousand dollars. Were they getting 
 poorer ? Yes! some of them were; in fact a number of them 
 ultimately became bankrupt. So there was some justifi- 
 
 483 
 
484 
 
 The New Capitalism 
 
 cation, after all, for the author’s statement that “the rich 
 were getting poorer.” It was literally true with regard to 
 the few who abided in my immediate neighborhood. 
 
 But being of an inquisitive mind I was not satisfied with 
 the fact. I wanted to know the why and wherefore. What 
 were the underlying reasons for this anomaly? I wanted 
 to know precisely what was responsible for the change in 
 the status of the well-to-do. What was making them, if not 
 poor, at least less wealthy? There could be no peace for 
 me until I had found the complete answer to my sundry 
 questions. 
 
 In due time I made the discovery that a tremendous 
 change was taking place: The small business man could 
 not compete with the encroaching big business man. To 
 attempt competition was inviting bankruptcy. A few, prob¬ 
 ably not realizing what was going on, were foolish enough 
 to try it, with the inevitable result: they were pushed 
 against the wall. In particular, at this moment, I recall 
 the fate of a splendid family known to me, living in an¬ 
 other part of the city, the father and sons of which had 
 built up a lucrative business, dealing in oil. Then along 
 came the Standard Oil Company, undersold them, and so 
 drove them out of business. I can call by name, too, a 
 number of small butchers, and a sausage maker, who were 
 compelled to go out of business because they could not com¬ 
 pete with the big slaughterers. But all this is now ancient 
 history. 
 
 Thus I arrived at the conclusion that what the economic 
 writer had stated, viz., that the poor were getting richer, 
 was not true; nor was it true that the rich were getting 
 poorer. The thing that was true, and which he did not 
 state—was that the small business man was being ruth¬ 
 lessly eliminated. 
 
 My interest in economic subjects was now thoroughly 
 aroused. True, I had hoped to be able to pursue my studies 
 without bothering much about statistics, which always 
 worried and mystified me. In brief, for several years I 
 followed the line of least resistance—concentrating on those 
 subjects which did not depend on wearisome statistical ' 
 
A Postscript 
 
 485 
 
 tables for their comprehension and mastery; and slighting 
 those which did. But I soon discovered that if I wanted 
 to get at the bottom of things I would have to conquer my 
 antipathy for statistics. This I bravely resolved to do. 
 It was a bitter pill, but I swallowed it. For a year or two 
 I continued my studies faithfully, but without enthusiasm, 
 doggedly groping my stumbling way among the labyrin- 
 thal mazes of charts, diagrams, statistical tables, and per¬ 
 centages. 
 
 Then suddenly a great light began to break in upon me. 
 I had frequently heard the defiant challenge: ‘ ‘ There are 
 the figures, and figures don’t lie.” Like everybody else I 
 accepted the rather trite and silly saying as a truism—-an 
 indisputable and incontrovertable fact—the argument un¬ 
 answerable. But in due time I discovered that it was pos¬ 
 sible to lie through the medium of figures as well as through 
 the medium of words. A Scottish philosopher neatly ex¬ 
 pressed it when he said: “As the statist thinks, the bell 
 clinks.” Moreover, just about this time I made, the 
 acquaintance of a prominent public man—“a gentleman 
 and a scholar,” who had spent a number of years in an 
 important branch of the Government service. With him I 
 discussed many things, particularly statistics. He told me 
 of a certain case in which, to his knowledge, certain official 
 statistics had been altered by order of a certain high official, 
 to suit this official’s purposes. While this startling piece 
 of information did not help to increase my faith in 
 statistics, nor my respect for statisticians, it did increase 
 my determination to get under the skin of statistics. 
 
 It was a French philosopher who said that men employ 
 speech to conceal their thoughts. After many years of 
 patient analysis of thousands of sets of statistics, and their 
 correlation, I am willing to go on record as saying that the 
 purpose of statistics seems to be to conceal the truth, and 
 to confuse, confound, and deceive the public. 
 
 By the same process of logic I have arrived at the com 
 elusion that the whole “science” of Political Economy is 
 built around a framework of half truths, perversions of 
 half truths, and plain and statistical untruths. And I 
 
486 
 
 The New Capitalism 
 
 determined that one day I would write a book which would 
 lay bare the fundamental fallacies of this vaunted “ sci¬ 
 ence, ” and the glaring sophistries of those who exploited 
 it; while at the same time setting forth the true principles 
 and premises, and upon which alone it is possible to build 
 an orderly economic system. And I flattered myself that 
 the net result of my labors would constitute a veritable 
 Symphony in Economics. 
 
 With this definite purpose in mind I continued my eco¬ 
 nomic studies, making copious notes and many computa¬ 
 tions, while writing down all the independent conclusions 
 at which I was arriving. On July 4, 1920, I began the 
 actual work of composition. For a whole year I wrote— 
 an average of a thousand words a day. But the more I 
 wrote the bigger became my task, and my subject. At the 
 end of twelve months I took an inventory of the progress I 
 had made. I found that while I had written a full three 
 hundred thousand words I had hardly scratched the surface. 
 All that I had done in a year ’s time was not even a phrase 
 of my planned Symphony. 
 
 It was then that I saw the magnitude of the task I had 
 set for myself, and the utter hopelessness of ever accom¬ 
 plishing so prodigious and ambitious an undertaking. I 
 realized that to do justice to myself and to the subject, I 
 would have to write not one, but twenty books—twenty 
 ponderous volumes, the writing of which would demand 
 years of studious solitude and intensive concentration, none 
 of which I could afford to give. Besides, who would read 
 a work of such proportions? 
 
 Regretfully I abandoned my original plan to write an 
 Economic Symphony. What I am offering the public 
 under the title “The New Capitalism” is nothing more 
 than a few elementary lessons on a few of the principles 
 of economics, and those, corrective of technique rather 
 than exhaustive of the theme. There is hardly a paragraph 
 that could not be developed into a chapter; hardly a chap¬ 
 ter that could not be elaborated into a book. Therefore 
 let it be understood that the various chapters constituting 
 this single volume are not a compendium, not even an out-* 
 
A Postscript 
 
 487 
 
 line of the more ambitious work I had in mind when I began 
 to write. * ‘ The New Capitalism ’ ’ is nothing more than an 
 attempt to strike the deeper and the rarely sounded notes 
 in our nation’s economic life, a work essentially fragmen¬ 
 tary in character, the fragments pieced and fitted together 
 into, I hope, a not inharmonious whole. 
 
 Under the circumstances it is not strange that a kind of 
 incompleteness should be apparent here and there. To sim¬ 
 plify what is essentially mixed and complicated; to devise 
 a simple solution for a hundred intricate problems; to shape 
 a definite plan out of a confusion of cross purposes; to 
 make a single consistent garment out of multi-colored 
 patches; to weave a myriad tangled threads into gorgeous 
 vestiture for naked Truth; to build a habitable house out 
 of rotten timbers;—these are the things that I have 
 attempted to do in this book—and beside which the mani¬ 
 fold labors of Hercules were as a series of playful diversions. 
 
 While I have been at work on this volume during two 
 whole years, every line was written after a full day’s work 
 at other tasks had already been performed—written during 
 the few free days and leisure hours and spare moments; on 
 Saturday afternoons and Sundays and holidays, and nearly 
 every day from after dinner until midnight, and beyond. 
 Already tired and wearied from the regular day’s work, I 
 often drove myself to the task I had set for myself. As I 
 look back today I wonder how I did it without breaking 
 down; and I do not hesitate to say that I should not care 
 to repeat the performance. 
 
 I purposely avoided moralizing, and reduced to a min¬ 
 imum a strong natural tendency to philosophize. Nor did 
 I make any attempt at fine writing, for Literature and Sta¬ 
 tistics are incompatible, or at least contradictory terms. 
 With almost rude violence I suppressed every inclination 
 to indulge in flights of rhetoric, nor did I allow myself to 
 engage in discursive dissertation merely for the sake of 
 verbal pyrotechnics, preferring to sacrifice style for truth, 
 form for substance, and picturesqueness for the one end in 
 view—to make what I was writing comprehensible and in¬ 
 teresting to the average man and woman. 
 
488 
 
 The New Capitalism 
 
 Statistics! Oh, yes! there are statistics! But remem¬ 
 bering my own aversion to them long ago I used them spar¬ 
 ingly, and only to whatever extent was necessary to illus¬ 
 trate a point, establish a fact, demonstrate a principle, or 
 justify a conclusion. For the same reason I have introduced 
 a few statistical computations of my own. I shall not be 
 surprised if my temerity in this regard will be met by gibes 
 and jeers; and that I will be duly written down as an eco¬ 
 nomic heretic or charlatan. Of one thing you may be sure, 
 that those who will protest the loudest against any inde¬ 
 pendent computations are the very ones who have for years, 
 without so much as a whisper of objection, swallowed all 
 the false, garbled and misleading statements and statistics, 
 and upon which they have slyly built their arguments, or 
 their fortunes. Those who do not find a single thing to 
 criticise in the Capitalistic System will find much to con¬ 
 demn in my book, and absolutely no virtue in my plan. 
 
 I did not bother much about pretty terms for my plan; 
 just ordinary words sufficed. I speak of the New Order in 
 contradistinction to the old, or ‘ ‘ established, * f order, which 
 is composed of a comparatively small number—a decided 
 minority; whereas the majority is to be the constituency 
 of the New Order. Through the potency of the New Order 
 there is to come into existence the New Capitalism—as dif¬ 
 ferent from the old or established Capitalism as night from 
 day. The plan in its entirety I shall not object to become 
 known as the Baldus Plan. The system of economics that 
 can be developed out of it, might not inappropriately be 
 called the Baldusian System, around the principles of which 
 a truly Economic Commonwealth can be made to arise. 
 
 I fully realize that I have fallen far short of a supreme 
 human achievement, yes, even of my own expectations; 
 nevertheless, there are a few things I want to say on 
 behalf of my book and myself. 
 
 In the first place, the writing of ‘‘The New Capitalism ’’ 
 was primarily a labor of love, and as such I give it to the 
 world. At the same time I have no delusions. I have lived 
 too long to expect either gratitude or appreciation; and 
 I have read enough of history to know that mankind rewards 
 
A Postscript 489 
 
 its servitors with persecution, while society crucifies its 
 saviors. 
 
 My second claim is that throughout the writing I have 
 adhered steadfastly to the fundamentals. I may be in error 
 with regard to some minor points entering into my theme, 
 but as regards the fundamentals, I stand pat, and will not 
 compromise. In defense of the fundamentals I’ll take, if 
 need be, my solitary stand against the world. I say this in 
 spite of the existence of that most pitiful and numerous 
 breed of creatures, who in the conceit of their ignorance 
 sweep aside principles that do not comport with their selfish 
 notions—those intellectual and moral pigmies who would 
 deny the proposition that ‘‘man is a biped” for the reason 
 that they actually know a man who has only one leg, or no 
 legs at all. 
 
 But my chief and proudest claim is that I have been in 
 earnest, and I hope I have succeeded in being fair. If there 
 is an occasional vehement word, or a stentorian sentence, 
 construe it as emphasis rather than vindictiveness, for I 
 carry no malice against any man; nor is there in me bitter¬ 
 ness against any human institution. I have the satisfying 
 consciousness of knowing that from the beginning of this 
 work to its completion this day, my intention has been 
 sincere. 
 
 To the many millions then—to those who are not a com¬ 
 ponent part of the Capitalistic System, and never will be, 
 I have this to say. On July 4, 1776—one hundred and 
 forty-six years ago today, the Founders of our Republic 
 declared their political Independence to the world. In that 
 same year, Adam Smith published his famous book “The 
 Wealth of Nations” (called by some “The Bible of Eco¬ 
 nomics”) the principles and tenets of which have gone far 
 towards holding the nations of the earth, including our 
 own, in economic bondage and subjection. “The New 
 Capitalism” is, as it were, your Declaration of Economic 
 Independence. I have written and signed it; I can do 
 no more. 
 
 S. A. Baldus. 
 
 July 4 , 1922. 
 

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