LIBRARY Connecticut Agricultural College Vol :l^ .^ :5 7 Class No. -^ 3 C ^5- Cost > rt bD ti > I-. C > .S "2 c 15 3 » .ti e f" o 5P ^% of the people of the United States own all the capital and that 87^% own none. If there were enough personal inequalities within certain oc- cupations to show still further concentration, even though there were equality as among occupations, this inequality might be still further reduced to a much smaller percen- tage, say 6j4 %' In that case, in spite of the fundamental ECONOMIC EQUALITY 219 equality, the figures would still show that 6>^% of the population owned all the capital. If a large proportion of this property were owned by cooperative societies and joint stock corporations, it might then be true that much less than 1% of the people controlled 99% of the capital. These figures might be strictly correct, and yet there might be fundamental equality throughout the country — equality of average money income among occupations, equality of enjoyment on the average among those ply- ing different occupations, and so on. Under these condi- tions the consciousness on the part of the common run of citizens that they were all having an equally good time, so far as this is dependent upon material wealth, would natu- rally give a feeling of complacency even on the part of the intelligent majority. In other words, the complacency that would be shown under such conditions would not be due to ignorance but to intelligence and discrimination. It is probable that we are approximating much more nearly to this ideal of equality In the United States than most of us have been able to realize. It is certainly true that there is no inherent reason why we might not, at some time in the near future, approximate pretty closely to It. We seem, at the present time, to be making definite prog- ress in that direction. VII EQUALITY BEFORE THE LAW EQUALITY before the law was the unvarying ob- jective in the construction of the American govern- ment. Its founders had been suffering from a government before which all men were not equal, especially those who lived in its colonies. As evidence that their brethren in Great Britain enjoyed a reasonable degree of equality be- fore the law, these colonists had but to read the Commen- taries on the Lazv of England by Sir William Blackstone. Ten years before the beginning of the American Revolu- tion this great classic had been published; it expounded laws and usages of long standing. The idea and practice of this political or civil liberty flourish in their highest vigor in these kingdoms, where it falls little short of perfection, and can only be lost or destroyed by the folly or de- merits of its owner'^ .... The absolute rights of every Englishman .... are coeval With our form of govern- ment.^ .... These may be reduced to three principal or primary articles; the right of personal security, the right of per- sonal liberty, and the right of private property The right of personal security consists in a person's legal and uninter- rupted enjoyment of his life, his limbs, his body, his health, and his reputation.^ .... This personal liberty consists in the power of locomotion, of changing situation, of moving one's person to whatsoever place one's own inclination may direct, without im- prisonment or restraint, unless by due course of law.'* .... 1 1 Blackstone 126. "^ Ibid.,12']. ^ Ibid., i2g. * Ibid., 134. 220 EQUALITY BEFORE THE LAW 221 The third absolute right, inherent in every Englishman, is that of property: which consists in the free use, enjoyment, and disposal of all his acquisitions, without any control or diminution, save only by the law of the land.^ Though these rights and liberties — emphatically, even boastfully, acclaimed by Sir William Blackstone — were being enjoyed by Englishmen of Great Britain, they ex- isted only In theory for Englishmen of the American Col- onies. Repeated efforts to induce the government of the mother country to recognize these rights having failed, the colonists resolved to throw off that government and to establish a new one whereby an equality before the law would be secured. In proclaiming this resolution to the world they began their justification with the sweeping premise that "all men are created equal." They did not profess to be announc- ing a novel philosophy; It was of such ancient origin that they accepted It as a self-evident truth. It was a con- ception taken from the Law of Nature, a theory having its beginning In classical antiquity. The philosophers of ancient Greece conceived the idea that reason Is the guid- ing principle of the universe, that the rules revealed by natural reason are the Ideal toward which men should direct their acts, that the expression of these rules Is the law of Nature. The law of Nature, developed as a theory by Greek philosophers, was applied in practice by Roman jurists. It gradually made Roman law more equitable and better suited to practical needs. The ideas that the law of Na- ^ Ibid., 137. 222 THIS ECONOMIC WORLD ture is the source of morality and the ideal of positive law, that mankind forms one natural community, that all men are equal before Nature, gradually pervaded the Roman mind.^ These ideas represented, however, an Ideal to- ward which society was moving rather than an actual basis on which it was built. Though Roman jurists employed the law of Nature to render their positive law more bene- ficial and equitable, they halted this tendency within prac- tical limits. They frequently used the term "reason" as equivalent to common sense and convenience, a concep- tion that approximates "utility" as the basis of law.^ With the rising power of the Christian church, the law of Nature acquired an added significance; It was Identified with the law of God. During the Middle Ages, however, the theory of natural law enjoyed less practical applica- tion than among the ancient Romans. It was used less In the sphere of pure law than in theology and ethics, In specu- lation and political controversy.^ Though the Christian church taught the equality of men before God, Its Influ- ence, along with that of the feudal lords, arrested the de- velopment of individual liberty in medieval times, except among the privileged classes.* Feudalism continued In France until the Revolution of 1789, but It began to de- cline in England during the Middle Ages. The privileged classes employed the aid of the lower classes in restricting the power of the king, and, as a result, increasing liberty ^ Bryce, History and Jurisprudence, p. 578. 2 Ibid., p. 587. ^Ibid., p. 595. ■* Scherger, Evolution of Modern Liberty, p. 34. EQUALITY BEFORE THE LAW 223 was extended to the lower classes. In 1215, Magna Carta guaranteed liberties not only to the barons but to all "freemen." The religious Reformation of the sixteenth century be- gan as a demand for freedom of conscience, but it led to a demand also for freedom in politics and law. In the agitation which followed, the law of Nature acquired a new meaning; it was associated with the conception of a "state" of Nature. This change was momentous. The law of Nature had hitherto been only an ideal toward which positive law should be guided, a perfection gradu- ally revealing itself in the education of the human race. The "state" of Nature was now alleged to have been a pre-political age in which conditions had been perfect, a perfection which civilization had corrupted; since the law of Nature had actually prevailed in that perfect "state," it could and should be restored. Among the brilliant exponents of the new theory were John Milton, Algernon Sidney, James Harrington, and John Locke. All of them declared for individual liberty and the natural equality of men; all of them were dili- gently studied in the American colonies. Most prominent among these as an influence on American thought was John Locke. Lie argued that natural law issues from reason, that it is prior to all governments, that it entitles men to vindicate their natural rights against tyranny.^ The framers of the American Declaration of Independ- ence invoked the philosophy of John Locke to declare as * Locke, Two Treatises on Civil Government ; Bryce, History and Juris- prudence, p. 598. 224 THIS ECONOMIC WORLD a self-evident truth that "all men are created equal." Though the law of nature as a constructive theory had developed, or degenerated, into a destructive political force — later demonstrated by the excesses of the French Revolution — the founders of the American government, like the great jurists of ancient Rome, restrained them- selves by practical common sense. They knew that a "state of Nature" could be nothing but savagery, that "history is the laboratory of politics,"^ that the remedy for existing evils lies in profiting by the experience of the past. In their Declaration of Independence they em- ployed a sweeping phrase from the idealistic philosophy of the law of Nature: "all men are created equal." As they were drafting a declaration of war, they did not pause to specify in what respect all men are created equal. They trusted the common sense of mankind to give the words a practical interpretation. They knew that all men are not created equal, for example, in physical, mental, and moral strength. Even John Locke did not Include all sorts of equality,^ though he believed in a "state of Nature" as well as in the equality of men. As soon as the founders of our government had estab- lished their independence, they furnished an abundance of evidence that their conception of equality was equality be- fore the law. Every provision of the new state and Fed- eral constitutions was drafted to make that ideal a practi- cal reality. These provisions were carefully selected from the experience of history as far as available and appro- ^ Richie, Natural Rights, p. 103. -Locke, T1V0 Treatises on Civil Government (Morley's edition) p. 217. EQUALITY BEFORE THE LAW 225 priate. As a result, the founders of our government pre- cluded tyranny, whether of one man, a group, or a multi- tude; they secured a reign of law and not a Reign of Terror; they instituted a government that has endured for nearly a century and a half, under which all men are equal before the law. Though the new Constitution of the United States did not employ the phrase "equality before the law," it was the most comprehensive safeguard for equality before the law that the world had yet seen. The people, however, were not entirely satisfied; the instrument did not contain a bill of rights. They were determined that their recent sad experience should not be repeated. Though the "un- written" constitution of their former government was sup- posed to secure a reasonable degree of individual liberty, a ruler who had inherited his ideas from a German despot- ism had invaded their rights. As a further guaranty that the new Federal government should not do the same, they immediately annexed a bill of rights to the new Constitu- tion in the form of amendments, thus placing such rights as freedom of speech, freedom of the press, freedom of religion, security of property, personal liberty, and trial by jury beyond the reach of the Federal government. They provided that no person should "be deprived of life, liberty, or property without due process of law." Even then they did not employ the phrase "equality before the law." With their new machinery for making constitu- tional provisions effective — a coordinate judicial power — they were satisfied with a phrase that had been sanctioned by the experience of ages, "due process of law." 226 THIS ECONOMIC WORLD The phrase "due process of law" has its origin in Magna Carta, wrested from King John by the English people at the remote date of 12 15. In that historic docu- ment the crown was forced to guarantee that '*no free- man shall be taken or imprisoned or disseised or exiled or in any way destroyed, nor will we go upon him, except by the lawful judgment of his peers or by the law of the land."^ The phrase "law of the land" has long been rendered "due process of law"; the expressions are used interchangeably in constitutional law and are identical in meaning.^ Though the American concept of "due process of law" was taken from Enghsh traditions, it immediately re- ceived a wider application. In England it limits the execu- tive power only; in the United States it applies to the judicial and legislative powers as well.^ The innovation is warranted. Law is something more than a legislative act, something more than mere will exerted as a result of power. It must not be a special rule for a particular per- son or a particular case, but the general law whereby every citizen shall hold his life, liberty, property, and im- munities under the protection of the general rules which govern society. Arbitrary power, enforcing its edicts to the injury of the persons and property of its subjects, is not the law, whether manifested as the decree of a personal monarch or of an impersonal multitude.* ^ Magna Carta, chap. 39. ^11 Coke's Institutes, p. 46; I Cooley's Blackstone, p. 134 note. ^Murray's Lessee v. Hoboken Land Co., 18 How. 272, 376. * Hurtado v. Calif ornia, 110 U.S. 516, 535, S36. EQUALITY BEFORE THE LAW 227 Though the bills of rights in the constitutions of the several states^ as well as the Fifth Amendment to the Federal Constitution had provided that life, liberty, and property should be regulated only by due process of law, events culminating in the Civil War convinced the people that they needed an additional safeguard against the arbi- trary acts of state governments. They stipulated in the Fourteenth Amendment to the Federal Constitution that no "State" should "deprive any person of life, liberty, or property, without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws." The immediate object of this amendment was to secure for the newly created citizens of African blood an equality before the law, but its scope is infinitely wider; instead of the term "citizen," it employs the more in- clusive term "person," thus embracing aliens as well as citizens, people of every race and color, "corporate" as well as "natural" persons. It rests the final decision with an impartial tribunal beyond the influence of local preju- dice and pressure; it supplies an additional guaranty that civil and political rights are to be regulated only by due process of law; it adds the further security of an equal protection of the laws. Just as due process of law is an English creation, the closely related principle, the equal protection of the laws, is an American creation^ — a more complete expression of equality before the law. Though each person has the right to exercise his liberty and use his property according to his own views of his in- ^ McGehee, Due Process of Laiv, p. 23. 2 Taylor, Due Process of Laiv, xv. 228 THIS ECONOMIC WORLD terest and happiness, according to the dictates of his own conscience, he is restrained as well as protected by just and impartial laws. Even liberty, the greatest of all rights, is not an unrestricted license to act according to one's own will. It is only freedom from restraint under conditions essential to the equal enjoyment of the same right by others.^ The Constitution does not guarantee that no state shall deprive any person of liberty; it guarantees that no state shall deprive any person of liberty without due process of law. The liberty which each person is per- mitted to enjoy is liberty regulated by law;^ it is liberty under the law. Equality before the law presupposes a law to be equal before, a law whose function It is to secure this equality. This law cannot permit any person to be the final judge of his rights; otherwise, the more aggres- sive persons will encroach on the rights of others and there will be no equality. Not only the phrase "equality before the law," but even the more technical ones, "due process of law" and "equal protection of the laws," are merely handy labels for broad, general principles. In practical application these principles need definition. The courts have never attempted comprehensive definitions. Such definitions would be impossible to formulate, and if formulated would at once prove inadequate. The courts have at- tempted only to ascertain as cases arise what is and what is not due process of law^ and equal protection of the ^ Croivley v. Chrlstensen, 137 U.S. 86, 89. ^ Idem, 90. ^ Tiuining v. Neiu Jersey, 211 U.S. 78, 100. EQUALITY BEFORE THE LAW 229 laws — a gradual process of judicial inclusion and exclu- sion.^ Due process of law precludes capricious decisions; de- cisions must be made with proper regard for precedent. That is due process which is in substantial accord with the law and usages in England before the Declaration of In- dependence and in this country after it became a nation.^ Since a rigid adherence to precedent, however, as the only essential of due process would deny every quality of the law but its age and render it incapable of progress,^ even our fundamental law must adapt itself to new conditions of society.^ From the day Magna Carta was signed, amendments to the structure of the law have been made with increasing frequency.^ Subject to the limitation that new procedure must not operate as a denial of fundamen- tal rights, the state and Federal governments may avail themselves of the wisdom gathered by experience to make necessary change.® Methods of procedure which at the time the Constitution was adopted were deemed essential to the protection and liberty of the people are no longer necessary; former restrictions have proved detrimental; and some classes of persons, for example, those engaged in dangerous employments, have been found to need addi- tional protection."^ No change, however, in ancient pro- ^ Davidson v. Neijj Orleans, 96 U.S. 97, 104. - Lo^-e V. Kansas, 163 U.S. 81, 85. ^ Hurtado v. California, no U.S. 516, 529. ^Holden V. Hardy, 169 U.S. 366, 387. ^Idem. ^ BrO'Zcn v. New Jersey, 175 U.S. 172, 175. "^ H olden v. Hardy, 169 U.S. 366, 385, 386. 230 THIS ECONOMIC WORLD cedure may be made which disregards those fundamental principles, to be ascertained from time to time by judicial action, which have relation to process of law and protect the citizen in his private right and guard him against ar- bitrary action of government.^ When a new case comes to a court for decision its facts probably differ, more or less, from those of the decisions available as precedents. The application of these prece- dents requires, therefore, the use of judgment and com- mon sense — the rule of reason. There are no comprehensive definitions of the phrases "due process of law" and "equal protection of the laws"; none can be formulated. Though quasi-definitions are possible, a statement of them would Involve a digest of all the decisions relating to these principles, extending back to Magna Carta. In the following paragraphs are ref- erences to a few of these thousands upon thousands of de- cisions. The result Is necessarily a sketchy exposition which can no more than illustrate here and there what is and what Is not due process of law and equal protection of the laws. The requisites of due process of law depend upon the subject matter and the nature of the proceeding.^ Due process Is not necessarily judicial process.^ Other process Is sometimes sanctioned, as In the collection of taxes, the acquisition of property by eminent domain, and the assess- ^ Tiuining v. Neiu Jersey, 211 U.S. 78, loi. 2 Ex parte Wall, 107 U.S. 265, 289. ^Reetz V. Michigan, 188 U.S. 505, 507. EQUALITY BEFORE THE LAW 231 ment for local improvements.^ The problem Involves a classification of the subject matter, a selection of the ap- propriate standard of due process, and the application of that standard.^ In any case, if the procedure is found to be arbitrary and oppressive, it is not due process of law and may be declared void. The leading essentials of due process are general and equal laws, notice and hearing, and jurisdiction.^ Since due process requires that the laws operate on all alike,* equality before the law was a fundamental principle of our constitution even before the addition of the equal- protection clause of the Fourteenth Amendment. Gen- erality and equality of the laws as necessary to due proc- ess is an American innovation.^ The requirements for notice and hearing regard substance rather than form and depend on the nature of the case.^ The notice must be reasonable in time.*^ One kind of notice is required before courts, another before administrative officials, another in the collection of taxes, and another in proceedings for public improvements.^ In cases of direct contempt com- mitted in the presence of a court, neither notice nor trial is essential to due process.® The power of a court to ^ Davidson v. Neiu Orlearis, 96 U.S. 97, 107. ^ Taylor, Due Process of Law, 286. ^ McGehee, Due Process of Lain, 60. * Giozza V. Turman, 148 U.S. 657, 662. ^ Taylor, Due Process of Lanv, 297. '^Davidson v. New Orleans, 96 U.S. 97, 105. ''Roller V. Holly, 176 U.S. 398. ^Taylor, Due Process of Law, 286. ^Ex parte Terry, 128 U.S. 289. 232 THIS ECONOMIC WORLD make an order carries with it the power to punish for dis- obedience of that order. To submit the question of dis- obedience to another tribunal, either a jury or another court, would deprive the proceeding of its efficiency.^ When the court has no personal knowledge of the con- tempt, however, the right to notice and hearing must be substantially protected.^ A court may grant writs of gar- nishment and attachment, foreclose a mortgage, or en- force a lien against property within its jurisdiction, even though the owner is not within the jurisdiction and has no actual notice. The law presumes that he will keep in touch with his property. Due process requires that one have an opportunity to be heard in his own defense^ but it may not require a hearing before a court of justice.^ In many cases a hearing before an executive or administra- tive board has been held sufficient to legalize the taking of property.^ Usually a person may be deprived of life or liberty only after a trial in a court of justice.^ Due process in a criminal case requires a law defining the offense, a court of competent jurisdiction, accusation in due form, notice, opportunity to answer the charge, trial according to the settled course of judicial proceedings,''^ and a right to be discharged unless found guilty. If a de- fendant voluntarily pleads guilty, even though he be ^Ex parte Terry, 128 U.S. 289. ^ Savin, Petitioner, 131 U.S. 267, 274 et seq. ^ Hovey v. Elliott, 167 U.S. 409. * MrMillen v. Anderson, 95 U.S. 37, 41. ^Hibben v. Smith, 191 U.S. 310. ^ Hagar v. Reclamation Dist., in U.S. 701, 708. ''Frank v. Mangum, 237 U.S. 309, 326. EQUALITY BEFORE THE LAW 233 charged with a felony, a trial is no longer necessary, and in appropriate cases the sentence of death may be pro- nounced.^ A right of appeal is not a requisite of due process.^ Military law is due process for those in the military or naval service;^ martial law is due process when properly proclaimed by the executive, public danger war- ranting the substitution of executive process for judicial,* Jurisdiction extends generally to persons and things within the state, and to neither persons nor things beyond the state. ^ The courts of one state have no control over the resident of another state when neither his person nor his property is within its jurisdiction.^ Though a court may control property, within its jurisdiction, of a non- resident, It cannot render a personal judgment against him; a notice served by publication is Inadequate.'^ To afford jurisdiction, courts^ and administrative officials must also be competent by the laws of their creation to pass upon the matter before them. The rights protected by due process of law are life, liberty, and property. The terms "life" and "liberty" are used In a broad sense, including all personal as dis- tinguished from property rights. Any law which destroys property or its value, or takes away any of its essential ^ Hallinger v. Davis, 146 U.S. 314. ^McKane v. Durston, 153 U.S. 684. ^Reaves v. Ainsivorth, 219 U.S. 296. ^ Moyer v. Peabody, 212 U.S. 78. ^ Galpin v. Page, 18 Wall. 350, 367. ^Riverside, etc., Mills v. Menefee, 237 U.S. iJ '' Pennoyer v. Neff, 95 U.S. 714. ^Idem, 733. 234 THIS ECONOMIC WORLD attributes, deprives the owner of his property.^ The right to work,^ to pursue a profession, business, or calling^ Is property. The labor and skill of the workman, the plant of the manufacturer, the equipment of the farmer, the In- vestments of commerce, are all property.^ A statute pro- viding that the right to labor shall be construed as a per- sonal and not a property right and shall be denied an In- junction for its enforcement Is without due process of law.^ The right to make a contract Is both liberty^ and property.'' Liberty embraces the right of a person to use his faculties In all lawful ways, to live and work where he will, to enter Into all contracts which may be proper for earning his livelihood, and to earn it by any lawful call- ing.^ Though the freedom of contract Is not absolute, it Is the general rule and restraint the exception; such re- straint can be justified only by exceptional circumstances.^ Within these limits, the parties to a contract have a right to obtain the best terms they can by private bargalnlng.^*^ Taking property from one person and giving It to an- other is without due process of law.^^ This was the effect ^ In re Jacobs, 98 N.Y. 98, 105. ^ Bogni v. Perotti, 224 Mass. 152. ' McGehee, Due Process of Laiv, 33s and cases cited. * State V. Steivart, 59 Vt, 273. ^ Boffni V. Perotti, 224 Mass. 152. ^Lochner v. lieiu York, 198 U.S. 45, 53. "^ German, etc., Co. v. Barnes, 189 Fed. 769, 775. ^ Young's Case, loi Va. 853, 863. ^ Adk'tns V. Children's Hospital, 261 U.S. 525, 546. ^Udem, 545- "^^ Hurtado v. California, no U.S. 516, 536. EQUALITY BEFORE THE LAW 235 of an order of a state railroad commission which required a railroad to install and maintain cattle scales, since the purpose of the requirement was to facilitate trading In cattle and had no substantial relation to their transporta- tion.^ A legislature cannot compel a railroad company to furnish free transportation to persons having nothing to do with its affairs, such as members of a state water supply commission,^ nor impose on the owner of a motor vehicle liability for injuries resulting from the negligent operation of the car by a person who obtains possession without his consent and without his f ault.^ Due process requires that laws regulating conduct should fix standards possible to ascertain.* In order to authorize combinations of tobacco growers, Kentucky laws modified former restrictions and permitted combina- tions for controlling prices, unless a price was fixed that was greater or less than the real value of the article. This real value was defined to be "its market value under fair competition and under normal market conditions." Since a combination of manufacturers was thus required to guess on peril of indictment what Its products would have sold for if the combination had not existed, the laws were unconstitutional; they Imposed a standard that could not reasonably be ascertained.^ No vested right exists In a mode of procedure. A remedy as such is no part of a contract and may be 1 Great Northern R. Co. v. CaJiill, 253 U.S. 71. -Delaivare, etc., R. Co. v. Board of Pub. Utilities, 85 N.J.L. 28. ^Dougherty v. Thomas, 174 Mich. 371. ^International Harvester Co. v. Kentucky, 234 U.S. 216. = Idem. 236 THIS ECONOMIC WORLD changed at the will of the legislature, provided that the change does not take away the right to enforce the con- tract.^ Statutes limiting the periods within which suits are to be brought may be changed, when a reasonable time is allowed for the commencement of actions. If the legisla- ture may Impose a limitation where none existed before, it may change one which has already been established; the parties to a contract have no more vested right In a particular limitation which has been established than they have in an unrestricted right to sue.^ Also, due process does not require any particular form of criminal proce- dure as long as the defendant has sufficient notice of the accusation and an adequate opportunity to defend him- self.^ Any legal proceeding enforced by public author- ity In furtherance of the public welfare and with proper regard for liberty and justice, whether sanctioned by custom or newly devised In the discretion of the legis- lative power, Is due process of law.^ Due process does not require Indictment by a grand jury.^ A state may re- duce the number of petit jurors from twelve to eight, ^ or dispense with a jury trial altogether. ''' In cases of felony, due process requires that the defendant be present at every stage of his trial. If he Is in custody or If he is charged with a capital offense, he is Incapable of waiving ^ McGehee, Due Process of Laiv, 174. ^ Terry v. Anderson, 95 U.S. 628, 633. ^Rogers v. Peck, 199 U.S. 425. ^ Hurtado v. California, no U.S. 516, 537. ^Idem, 516. ^Maxivell v. Doiv, 176 U.S. 581. ''Jordan v. Massachusetts, 225 U.S. 167, 176. EQUALITY BEFORE THE LAW 237 this right. ^ He may, however, waive the right to be present when the verdict is rendered.^ Though equality in right, in protection, and In burden has been exempHfied in the life of this nation and in its constitutional enactments since the Declaration of Inde- pendence,^ the equal-protection clause of the Fourteenth Amendm.ent has amplified this equality and has safe- guarded it with the power of the Federal government. "Equal protection of the laws" is more inclusive than "due process."* Due process secures equality by fixing a required minimum of protection for the life, liberty, and property of everyone, upon which the Congress or the leg- islature may not encroach. The additional guaranty of equal protection is aimed at individual or class privilege, at hostile discrimination; it seeks an equality of treatment for all persons, even though they enjoy the protection of due process.^ The equal protection of the laws is a pledge of the protection of equal laws.^ Equal protection necessarily involves equal regulation and equal burdens. The exercise of liberty by each person must be restrained so as not to impair an equal enjoyment of liberty by others; the use of property by each person must be regu- lated so as not to interfere with an equal use of property by others, nor to injure the rights of the community.'^ 1 Diaz V. United States, 223 U.S. 442, 455. ^ Frank v. Mangum, 237 U.S. 309. 3 Gulf, etc., R. Co. V. Ellis, 165 U.S. 150. * United States v. Neiv York, etc., R. Co., 165 Fed. 742. ° Truax v. Corrigan, 257 U.S. 312, 332, 333. ^ Yick Wo V, Hopkins, 118 U.S. 356, 369. '^ Common'u.'ealth v. Alger, 7 Cush. 53, 84. 238 THIS ECONOMIC WORLD The Fourteenth Amendment applies to the arbitrary acts of states and not of their citizens or residents.^ Laws of a state may now be reviewed by the Federal courts; they will not be sustained when they are special, partial, or arbitrary.^ The Fourteenth Amendent limits all the departments and agencies of a state government, not only the executive, legislative, and judicial departments, but also the subordinate legislative bodies of counties and cities.* The unconstitutionality of legislation may be manifested on its face or in the manner of Its enforcement. The state in the management of its property, however, Is not per- forming a government function and Is not limited by the Fourteenth Amendment. Having the right of other em- ployers to determine the character of its employees, it may discriminate In favor of its citizens and may exclude aliens from employment on its public work. Equal pro- tection does not mean that nonresidents and aliens who have no interest in the common property of the state must share In that property.* If the discriminatory statute Includes not only public work but also private enterprise, it is unconstitutional.^ The equal-protection clause secures equality before the law in that it guarantees equal recourse to the law by all persons for the vindication of rights and the redress of wrongs.^ A statute which subjects persons to such exces- ^ Chil Rights Cases, 109 U.S. 3. - Hurtado v. California, no U.S. 516, 536. ^Raymond V. Chicago Traction Co., 207 U.S. 20, 36. ^Heim v. McCall, 239 U.S. 175. ° Truax v. Raich, 239 U.S. 33. ^ Bogni v. Perotti, 224 Mass. 152, 157. EQUALITY BEFORE THE LAW 239 sive penalties for its violation as to intimidate them from testing its validity in court/ or one which provides that the right to labor shall not be recognized as property by an equity court,^ or one which exempts ex-employees, when committing irreparable injury to the business of their former employer, from restraint by Injunction while leav- ing all other persons engaged In like wrong-doing subject to such restraint,^ is a denial of equal protection. A per- son who suffers no legal injury from a statute, however, cannot contest its constitutionality because it discriminates against others.* Though "equal protection of the laws" and **due proc- ess" are not identical In scope,® they are similar in some respects. Both apply to "persons" and not merely to "citizens." The term "person" is not confined to citi- zens;^ it Includes nonresidents,'' aliens,^ Chinese or Mon- golians,^ and all persons Irrespective of race, color, or na- tionality.^^ A state cannot prefer resident creditors over nonresident creditors. ^^ Though the Congress may law- fully exclude aliens or regulate their admission, an alien ^ JVadley, etc., R. Co. v. Georgia, 235 U.S. 651. - Bogni v. Perottl, 224 Mass. 152. ^Truax v. Corrigan, 257 U.S. 312, 336, 337. * Dillingham v. McLaughlin, 264 U.S. 370, 374. ^ Truax v. Corrigan, 257 U.S. 312, 332. ^ Frazer v. McConivay, etc., Co., 82 Fed. 257. ''Drew V. Cass, 129 App. Div. 453. ^Yick JVo V. Hopkins, 118 U.S. 356, 369. ^ In re Parrott, 1 Fed. 481. '^^Yick JVo V. Hopkins, 118 U.S. 356, 369. ^^ Sully V. Am. Nat'l Bank, 178 U.S. 289. 240 THIS ECONOMIC WORLD who Is rightfully within the country Is entitled to due proc- ess of law.^ A corporation Is a person within the mean- ing of the Fifth and Fourteenth Amendments.^ Though a corporation Is a person as regards its property rights,^ the "liberty" protected by these amendments is the liberty of natural and not of artificial persons.* The rights of life, liberty, and property are subject to certain paramount sovereign powers of the state, such as the police power, eminent domain, and taxation.^ The police power Is the power inherent In a state government to preserve the order, peace, health, and safety of the public, and to provide for its general welfare.^ Speaking generally, this power Is reserved to the states; the Con- stitution did not grant It to the Federal government."^ The legislature cannot deprive Itself of the power of mak- ing these needful regulations, the police power being in- alienable even by express grant.^ The due-process guar- anty is not Intended to limit the subjects on which the police power of the state may lawfully be exerted.^ Lib- erty secured by the Constitution Is not an unrestricted license to act according to one's own will. It Is only free- ^Lem Moon Sing v. United States, 158 U.S. 538, 547. 2 Covington, etc., Co. v. Sandford, 164 U.S. 578, 592, ^ Smyth V. Ames, 169 U.S. 466. * Northivestern, etc., Co. v. Riggs, 203 U.S. 243, 255. ^ Taylor, Due Process of Laiv, 493. ^ Manigault v. Springs, 199 U.S. 473, 480. ''Keller v. United States, 213 U.S. 138, 144. 8 Chicago, etc., R. Co. v. Tranbarger, 238 U.S. 67, 77. ^ Idem, 76, 77, EQUALITY BEFORE THE LAW 241 dom from restraint upon conditions essential to the en- joyment of the same right by others, and is subject to regulation by the state in the exercise of its police power.^ Such regulation may be enforced upon all without regard to their own private views — that is, the private views of the minority — as to the wisdom of the measures adopted.^ Prior to the adoption of the United States Constitution, police power was sparingly used in this country. As we were almost entirely an agricultural people, the need for special protection of a particular class did not exist.^ The exercise of this power has been greatly expanded during the past century because of the enormous increase in the number of occupations which are dangerous.* The growth of cities, the development of mining and manufacturing, have required increased regulation — fire escapes for large buildings, inspection of boilers, protection of passengers and employees on railways, guarding of dangerous ma- chinery, stairways, and elevator shafts, the cleanliness and ventilation of mines and work rooms. ^ The state may abate a public nuisance, destroy buildings that en- danger the safety of the public or stand in the path of a conflagration, destroy diseased animals and unwholesome food, prohibit wooden buildings in cities, restrict objec- tionable trades to certain localities, compel vaccination, confine persons that are insane or afflicted with contagious ^ Croivley v. Chr'istensen, 137 U.S. 86, 89, 90. ^ McGehee, Due Process of Laiv, 343. ^ Holden V. Hardy, 169 U.S. 366, 392, 393. ^ Idem, 391. ^Idem, 393. 242 THIS ECONOMIC WORLD disease, restrain vagrants, beggars, and drunkards, sup- press obscene publications and immoral resorts.^ Not only industries involving special dangers to em- ployees or the public,^ but also those affected with a pub- lic interest may be regulated, such as the business of inn- keepers,^ wharfingers,'* ferrymen,^ hackmen,^ millers,'^ warehousemen,^ grain elevator companies,^ stockyard companies, ^^ railroad companies, ^^ companies supplying water and gas,^^ persons operating public amusements, ^^ or persons furnishing market quotations.^* As a reason- able regulation to promote the safety of employees and passengers, railroads may be required to equip their cars with automatic couplers and continuous brakes and their locomotives with driving-wheel brakes. ^^ Because of an emergency, a business which is normally private may temporarily be affected with a public interest. Regulations which ordinarily would be unconstitutional ^ Laivton v. Steele, 152 U.S. 133, 136. -Missouri Pac. R. Co. v. Mackey, 127 U.S. 205, 210. ^ Munn V. Illinois, 94 U.S. 113, 131. ^ Idem, ^ Idem. ^ Lindsey v. Anniston, 16 So. (Ala.) 454. "^ Munn V. Illinois, 94 U.S. 113, 131. ^ Idem, 113. ^ Brass v. Sioeser, 153 U.S. 391. 1^ Coning v. Kansas City, etc., Co., 183 U.S. 79, 85. " Gladson v. Minnesota, 166 U.S. 427. ^"^ Spring Valley Water Works v. Schottler, 110 U.S. 347. ^^ Greenberg v. Western Turf Ass'n, 73 Pac. (Calif.) lojo. ^^Neiv York, etc., Exch. v. Board of Trade, 127 111. 153. ^^ Johnson v. So. Pac. Co., 196 U.S. i. EQUALITY BEFORE THE LAW 243 may then be due process of law.^ The shortage of hous- ing facilities following the World War created an emer- gency which justified legislatures in fixing rents.^ Such regulations, however, go "to the verge of the law,"^ and probably would not be upheld as a permanent change.* Though the Adamson Law, enacted during the World War, establishing an eight-hour day and minimum wages for railway employees, was an extreme regulation, the business was affected with a public interest,^ and the law was a temporary expedient to meet a sudden and great emergency in which the parties could not agree.® Such laws may lose their validity as soon as the emergency is passed.''^ Though no unusual emergency was involved, the Industrial Relations Act of Kansas undertook to com- pel the employer and employees in the manufacture of food, in the event of disagreement, to continue activities on terms fixed by an agency of the state. In thus un- reasonably curtailing the right of the parties to contract about their own affairs, the statute was a denial of due process of law.^ This statute is unconstitutional as ap- plied also to the business of mining coal.^ The legislature in the exercise of its police power may ^ Block V. Hirs/i, 256 U.S. 135, 157. ~ Marcus Bronjun Holding Co. v. Feldman, 256 U.S. 170. ^Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 416. ^ Block V. Hirsh, 256 U.S. 135, 157. ^ Wilson V. Ne p. 270. 292 THIS ECONOMIC WORLD gration to new land or the development of new markets by means of which food and raw materials are brought from wide areas and finished products are sold back in re- turn to the inhabitants of those wide areas. The pent-up type of civilization is found either in those European countries where birth control is carried on to such an ex- tent as to maintain a stationary population or in those Oriental countries where population has grown so dense as to make it difficult to feed the increasing numbers. Examples of the expanding type are found in England, Belgium, and the Netherlands, which countries merely expand their markets, as well as in the United States and Canada, where the people expand their tillable area. In this country, for example, down to about 1900 we were expanding our farm land more rapidly even than we were Percentaqe 1 1 1860= 1 OC ,j^Crops »00 ^••^ 90 %. \ *— Animal Jni rs BO x. ■"•-.., 70 '•• >>. ^•v ■ ^^^ 60 — Pasture ^0 ForesT — ' *"">C- 40 ""••Jjjj»^ 1880 I690 1000 1910 1920 From United States Department of Agriculture, Year-book, 1923, p. 72. Figure i : Trend in per capita acreage of crops, pasture, and forest and in amount of live stock, United States, 1880-1920. THE POPULATION PROBLEM 293 expanding our population. The diagram in Figure i shows how the acres of crops per capita in the United States increased between 1880 and 1900 and then de- creased afterward. It is significant to note that about 1900, when the area per capita began to decrease, or, in other words, when the total population began to increase more rapidly than the total acreage in crops, was the time when we first began to hear about the rising cost of living. In short, the population was beginning to catch up with the expand- ing acreage. Agriculture was beginning to pay, and con- tinued to do so until the great slump following the World War. The impoverishment of our best customers for agricultural products created another agricultural depres- sion which will probably be automatically relieved as soon as our foreign customers regain their former prosperity. The general retardation In the rate of the expansion of farm acreage has brought the Malthusian principle of population again into prominence. A number of books have been written in recent years restating the formula of Malthus and calling attention again to the danger of an ultimate shortage of food. Students of agriculture, how- ever, are not convinced that there is any immediate pros- pect of such a shortage. It is probably correct to say that the only food problem which this country will be called upon to face during the next century will be where to find consumers for the surplus food which our farmers will be able to grow. It must be remembered that very few of the agricul- tural improvements of the past have enabled anybody to 294 THIS ECONOMIC WORLD grow more food on an acre of land. They have been de- signed rather to enable one man to work more land. We have increased our food supply by increasing our acreage rather than by increasing the productivity of the soil. When new areas of land are no longer available and acre- age begins to run short, there is a vast field for the in- ventor who will be called upon to solve the problem, not of how one man may cultivate more acres but of how each acre may be made to produce more food. Of course, an acre of land may be made to produce more food by the simple device of putting more work on it, but the effect of that method is invariably to reduce the product per man and to impoverish the worker on the land. This is not desirable and, what is more to the point, it is something to which our American farm labor- ers will not submit. If we are ever to increase the product per acre in this country, it must be by some other method; that is, by the use of better tools, more power, and a wider use of fertilizers. This will be done promptly whenever the price of agricultural products will justify it. Even the slightest tendency toward a scarcity of food will be reflected in advancing prices for farm products, and this will be a sufficient stimulus to induce our farmers to grow more per acre. The question of food for the gen- eral population is destined to take care of itself automat- ically without any worry on our part. The only ques- tion on which anyone needs to worry is, as I said before, where to find buyers for it at prices that will remunerate the farmer. However, that is not in any way a refutation of Mai- THE POPULATION PROBLEM 295 thus or an assertion that the time will never come when the problem of food may become an acute one. So far as these ultimate problems are concerned, every economist is, as a matter of course, a Malthusian of one kind or another. He could not be otherwise If he once understood Malthus. One great source of misunderstanding is the failure to distinguish between the results of a more and more in- tensive cultivation of land in a given state of knowledge and the results of increasing knowledge over periods of time. In order to make this distinction perfectly clear, the series of diagrams in Figure 2 may be useful. Graphs I, II, III, and IV illustrate what is known as the tendency toward diminishing returns at a given time, which, of course, means a given state of knowledge. Let us suppose that in Graph I the results of intensive cultiva- tion in a given year, 1920, are shown. Along the hne OX are represented the number of units of labor and capital used in the cultivation of a given area of land. Along the line OY are represented the returns from the application of different quantities of labor and capital. The curve ABB' represents the tendency toward diminishing returns. When, according to these assumptions, the number of units of labor and capital is represented by the line 00^ the marginal product is represented by the line BC. In a precisely similar way, with the same assumptions, let us use graphs II, III, and IV to represent the same things with respect to each of the years 1930, 1940, and 1950. During each interval there is assumed to have oc- curred some improvements in the knowledge and tech- 296 THIS ECONOMIC WORLD X I Y. n A ^ A >,•■ I\b- -X n If . 1920 c ,930 --• " Y HI Y Al . n? A >^ ^- 1 1^ -X r .. 1940 c c 1950 ^ ^' V B^ Y, R' B" I I (j C C" C"^^ 1920 1930 1940 1950 Figure 2 : Graphical representation of diminishing returns for different states of agricultural knowledge. nique of farming. This is shown by the fact that the curve ABB' is higher in each successive decade. These improvements may produce one of the following results : First, a much larger number of units of labor and capital could be used in each decade on the same area without lowering the marginal product; or second, the same number of units could be employed in each decade on the same area and produce a much larger marginal product; or .third, a slightly larger number of units of THE POPULATION PROBLEM 297 labor and capital might be employed and produce a slightly larger marginal product. Taking the third of these possibilities as the one which actually happens, we could represent the results of im- provements in the knowledge and technique of agriculture by means of Graph V. In this diagram, the line BO is identical in length with the line BC in Graph I and repre- sents the marginal productivity of labor and capital on land in the year 1920. Line B'C m Graph V is identical in length with line BC in Graph II, line B"C" in Graph V with BC in Graph III, and B"'C" in V with BC in IV. The curve BB'B"B"' in Graph V thus represents the as- sumed rate of progress in well-being, in so far as this de- pends upon the marginal product, during the thirty-year period. This rate of progress in no way offsets or contra- dicts the law of diminishing returns. This law is not a statement of historical trends, but of the way land re- sponds at any given time to different applications of labor and capital. However, there is need for a further refining of the Malthusian theory, or bringing to the front certain special considerations that are not sufficiently emphasized when that theory is stated in its cruder form. The Malthusian doctrine concerns itself with the possibility of general overpopulation. There is a more refined form of Mal- thusianism, however, which concerns Itself with the more immediate problem of congestion. General overpopula- tion must, of course, be considered as a future possibility unless rational checks are enabled to function as limiting factors in the rate of increase. But in the western world 298 THIS ECONOMIC WORLD at least, the one phase of the population question that need cause anxiety In the near future is the question of congestion. Congestion of population Is of two forms, local and oc- cupational. Local or territorial congestion Is so easily solved In these days of effective transportation as to re- quire no serious study. The problem of occupational con- gestion, however, is not so easily solved. Before the days of minute division of labor, the differ- ence between occupational congestion and general over- population would not be very great. In every advanced industrial system, however, the division of labor has been carried so far and different occupational groups are so de- pendent upon one another as to create a wide difference between occupational congestion and general overpopula- tion. If, to take an extreme example, there should be In any locality more hodcarriers than are needed to work with the existing number of masons, that part of the world Is, for the time being, overpopulated with hod- carriers. Hodcarriers will be just as badly off in that situation as they would be if there was general overpopu- lation throughout the entire world. However, in that situation the overpopulation of hodcarriers could be re- lieved in either of two ways: first, by a decrease in the number of hodcarriers; second, by an Increase in the num- ber of masons and others who are required to balance the oversupply of hodcarriers. In this latter case, the over- population of hodcarriers would be relieved by an in- crease in the total population, provided this increase took place in other occupations than that of the hodcarrier. It THE POPULATION PROBLEM 299 may sound a little paradoxical, but in reality it is not, to say that this special phase of overpopulation is relieved by a net increase in the total population. What is said about the possible overpopulation of a portion of the world called hodcarriers can be repeated with respect to any other specialized occupation. It may even be true of a considerable number of occupations. We had in this country a congestion of all agricultural occupations during the seventies, eighties, and early nine- ties of the last century. The Homestead Law, giving free land to actual settlers, the building of transcontinental railroads in advance of settlement, the rapid development of farm machinery, the roller process of manufacturing flour, and the rising tide of European immigration, all combined to cause an overdevelopment of agriculture. Western America was overpopulated with farmers who were growing too much agricultural produce. The farm- ers were just as badly off as they would have been if the whole world had been generally overpopulated with all kinds of people. For that situation there were only two possible cures. One was to thin out the farmers. The other was to wait until the rest of the population increased sufficiently to balance the excessive number of farmers. In short, that form of overpopulation was to be cured by an increase in the total population, provided that Increase took place in the consuming centers rather than in the fields of agricultural production. A similar situation exists In the coal mines of the United States at the present time. There are more coal miners than are needed to supply coal for the rest of the 300 THIS ECONOMIC WORLD population. The result is they cannot all be employed continuously. Being employed only a fraction of the year, their annual earnings are low In spite of the fact that their wages per day or per piece are high. Again, there are two cures for that situation. One would be to thin out the coal miners; the other would be to wait until the rest of the population increased sufficiently to use enough coal to keep the existing number of miners occupied most of the year. In short, that phase of overpopulation which we have called occupational congestion in the coal mines can be relieved by an increase in the total population, pro- vided that increase takes place outside of the mining com- munities. Even in older countries, where population is much more dense than it is in this country, the same observation holds true. In a country where there is a great deal of unem- ployment in the industrial centers, it looks to some like general overpopulation. However, the unemployment is confined to certain occupational groups. The fact that there is a surplus of manual and clerical workers Indicates a deficit of managers and enterprisers. Even this appar- ent overpopulation, which is really occupational conges- tion, can be relieved in two different ways, as Indicated in the previous Illustrations: that Is, manual workers might be thinned out by emigration and colonization, or they might be employed at home if more intelligence were massed on the problems of management and Industrial ex- pansion, that is, If there were larger numbers of highly capable men massing their intelligence on these problems. This would mean an Increase in population, but the in- THE POPULATION PROBLEM 301 crease would take place outside of those occupations that are now overcrowded and in which there is unemploy- ment. If it were possible for England to Import ten thousand Henry Fords, that would constitute an Increase of ten thousand In the total population, but it would go a long way toward relieving the overpopulation of manual workers by so expanding English Industries as to employ every worker. Even those countries that are supposed to be acutely overpopulated are just the countries In which the most extreme luxury is found. The overcrowding of certain oc- cupations automatically creates a deficit in certain other occupations. The few who are capable of functioning in those occupations which are undercrowded automatically become exceedingly rich. Even in these cases it Is not be- yond all possibility that the apparent overpopulation could be partially relieved by an Increase In the total pop- ulation, provided that increase took place In those occupa- tions that are undercrowded. This would be true at least until the absolute scarcity of land became the limiting factor. A system of universal and popular education, provided the education Is not dilettantic, would be a very effective method of redistributing the population occupationally. Such a system of education would make It possible for larger numbers to escape the Intensely overcrowded occu- pations and fit themselves for the less crowded. If the educational system were comprehensive and Included busi- ness and professional schools of a high order, It would tend to shift the balance upward toward the professional, 302 THIS ECONOMIC WORLD managerial, and enterprising occupations. This, to be sure, would not mean a general increase in the total popu- lation. It would merely mean an occupational redistribu- tion of the population. A net Increase In total population that would relieve the congestion at the bottom of the economic scale might take place in one of two ways: first, by the Immigration of men of business talent and training; second, by a more rapid rate of natural Increase within these classes. As a matter of fact, there are certain backward countries today that are receiving Immigrants of this type from the more advanced countries. Technicians, business managers, and enterprisers are going to some of these backward coun- tries and helping to develop Industries. This automat- ically relieves, to a certain extent, the occupational con- gestion at the bottom by Increasing the demand for the lower grades of labor. The other method of increasing the number of such people is merely that of breeding them. One reason why such men are scarce Is undoubtedly the fact that the rate of Increase among such people Is usually lower than the rate among the people who fill the lower ranks. A somewhat higher birth rate among the more capable classes would tend to increase the ratio of men of high capacity to those of lower capacity. A de- crease In the birth rate among those of low capacity would, of course, affect the ratio in the same way. The aim of the birth control movement is both to Increase the birth rate among the more capable and to decrease it among the less capable. Economists have perhaps placed too much dependence THE POPULATION PROBLEM 303 upon a high standard of living as a check upon popula- tion. As a preventive of general overpopulation it is prob- ably effective; but, as stated above, our present concern is not so much with the problem of general overpopulation as with that of occupational congestion. As a preventive of occupational congestion, the standard of living is not universally effective. To begin with, rational foresight is a factor in the standard of living. Expensive habits do not constitute a high standard of living unless coupled with enough foresight to cause people to postpone marriage and reduce the birth rate in order to maintain those expen- sive habits. In the least Intelligent strata of society there is so little foresight as to destroy the effectiveness of expen- sive habits as a check on the rate of multiplication. In the extreme case of the feeble-minded there is prac- tically no foresight at all. In the strictly technical sense, therefore, there is no real standard of living among them. They will multiply regardless of their inability to sup- port children. Any country that permits free multiplica- tion among those of low mentality will therefore always have a congestion in those occupations that can be carried on by persons of low mentality. Such people In such a country will always be as badly off as though the whole world were overpopulated. The only way of preventing this is some means of segregating such people or other- wise preventing their free and unrestrained multiplica- tion. Before anything can be done to remove the menace of the feeble-minded, we must convince ourselves that it is a real menace. Some people are not convinced. It is serl- 304 THIS ECONOMIC WORLD ously suggested that it may become necessary to breed morons in great abundance to do our rough work. How, it is argued, can we, the self-styled intelligentsia, live re- fined lives if we have to do our own rough muscular work? In ancient civilizations they had slaves, but slavery is now impossible. In certain old countries today they have abundant supplies of cheap labor — labor which is, all things considered, cheaper than slaves. In these countries refined people can have well trained servants because well trained servants are abundant and cheap. There are all sorts of menial work there which capable and industrious men and women are glad to do for wages that can be paid by people in moderate circumstances. But in the United States it is hard to find any one to do menial work, and when such persons are found they command wages that put them beyond the reach of any except the very rich. Therefore, it is argued, we must increase our supply ot low-grade, poorly paid labor. If we cannot import it be- cause of our immigration laws, we must breed it. To begin with, men and women do not exist in order that we, the self-styled intelligentsia, may have cheap help. In the next place, we are not the inventive race that we pride ourselves upon being if we cannot invent machines to do what we do not like to do for ourselves or cannot hire others to do for us. The machine is for us what slaves were for ancient civilizations and what cheap labor is for the lower civilizations of the present time. One penalty we must pay for this policy of substituting machines for slaves is that we very soon become depend- ent upon machines in precisely the same sense that the THE POPULATION PROBLEM 305 slave owners became dependent upon their slaves and that the leisure classes in old countries are dependent upon trains of cheap but efficient servants. This dependence upon machines is a penalty that must be faced, but it should be faced intelligently by recognizing it for what it is. It only confuses the problem to say, as some are say- ing, that if we are dependent upon machines we become slaves of the machines. According to that form of per- verted logic, the slave owners were really the slaves and the slaves the masters, because ( 1) the owners became dependent upon their slaves. If productivity is increased by machine production, then the country that develops its productive machinery will either support more people on the same scale of consump- tion or the same number of people on a more lavish scale of consumption than is possible for a country that sticks to hand methods. After once making that choice, there is a severe penalty for a return to hand methods. Either the population must be thinned out, or it must accept a lower or less expensive standard of living. No people has ever willingly accepted either alternative. Therefore we, who are machine-using people, must go on using more and more machinery unless we are willing to face a thinning out of our population, or a lowering of our standard of living. The thinning out of the population could take place only in three ways, a decrease in the birth rate, an increase in the death rate, or emigration. The lowering of the stand- ard of living might take the form of giving up some of our leisure, by working longer hours or having fewer holi- days, or of giving up some of those goods and creature 3o6 THIS ECONOMIC WORLD comforts that machine production now enables us to enjoy. During the greater part of human history the standard of living has been so low for the masses as to make it im- possible to reduce it very much. Consequently, any de- cline in the productivity of industry has generally meant a thinning out of the population in one of the three ways mentioned above. There has, therefore, always been a powerful reason against giving up a more productive in favor of a less productive method. The population ques- tion supplied the reason. Herding, for example, is a more productive method of using land than hunting, and plowing a more productive method than herding. Any tribe that has once made the transition from hunting to herding, or from herding to plowing, is not likely to relapse unless forced by military conquest to do so. Neither is any nation that has once made the transition from hand work to machine work likely to relapse voluntarily into a less productive indus- trial system. The penalties are too severe. However, from the non-economic point of view, there is always a great deal to be said against the advance to a more productive or in favor of a return to the less pro- ductive system. Cain, for example, according to the old story, was a plowman while Abel was a herdsman. The business of plowing literally kills the business of herding, and, figuratively, the plowman may be said to kill the herdsman. There is no help for it, and there is no return to herding except by paying the penalty of migrating to new pastures, which usually means the extermination of their occupan.ts, or of thinning out the population, usually THE POPULATION PROBLEM 307 by increasing the death rate. The population question, again, supplies the reason. Yet the uneconomic minds, or those minds which prize mellow tradition, the ancient ways, the old-time religion, the world as God made it, pretty generally revolt against this change from the less to the more productive methods. They refuse to call it progress and can always find reasons against it, or in favor of a return, which to them are satis- factory. The writer of the story of Cain and Abel was evidently of that mind, as are also those who are today urging a return to the handicraft stage of industry. How- ever, the law of population is against them. It is no wonder that they dislike to hear it mentioned. Machines enable us to live in large numbers and also to live well and even elegantly without either slaves or cheap labor. However, our ideas as to what it means to live elegantly must undergo a change. So long as we try to follow those standards of elegance that were set for us by people who had either slaves or cheap servants to look after and wait upon them, we shall be at a disadvantage. An intellectual and esthetic revolution must accompany the industrial revolution that was and is still being brought about by power-driven machinery. Our ideas as to what refinement and elegance mean are very largely traditional. When our traditions on such matters were formed, machines played a very small part in the lives of our ancestors. Cheap labor enabled the few to avoid rough work and live lives that they chose to call refined and elegant. But for those cheap laborers there was not much of either refinement or elegance, as 3o8 THIS ECONOMIC WORLD the aristocratic few understood such terms. It is quite possible to create new traditions and conventions as to the meaning of such terms, based on machine production. When this is done, we shall have refinement and elegance quite as satisfying as any that any previous age enjoyed, and it will have the incalculable advantage of being within the reach of all. Machinery will make it unnecessary to condemn the many to squalor and hard muscular work in order that the few may cultivate the graces of polite society. The problem of the occupational redistribution of the population is not altogether a matter of education. It is partly a matter of breeding and heredity. So far as any existing generation is concerned. Its heredity is, of course, already determined. Since that factor cannot be changed in a generation that is already born, the only thing to do Is to educate it or at least to improve its environment, and education Is the most positive and effective method now known for improving the environment of a growing gen- eration. But when we are considering the future of so- ciety we must consider the heredity of unborn generations as well as their environment. One fundamental difficulty which in Itself Is enough to menace our civilization, or at least to cast some doubt upon the possibility of its permanence, is the differential birth rate. In so far as it is true that those who are able to fit themselves into our civilization and to make such contributions to it as to win distinction for themselves are failing to multiply or to leave patterns of themselves, so far does that tend to deplete the supply of men of high THE POPULATION PROBLEM 309 capacity. Again, in so far as those who fail to do more than work under direction and who make a rather poor living at that multiply at an inordinate rate, just so far does this tends to increase the numbers of that kind of people. If these two tendencies are found working in combination in our civilization, it is a foregone conclusion that our civilization will run Its course and decline, as others have done. When the time comes, if it ever does, when our population Is made up of those who lack initia- tive and creative power and who must, therefore, work under the direction of others, and when there are too few others with initiative and creative power to direct the Inert mass, then our civilization will be at an end. There is ample evidence, from a variety of sources, that those who possess social adaptability in the form of initiative and creative capacity are not reproducing their kind at the same rate as those who show no capacity for anything except that of working under direction. It is also to be feared that with our amazing prosperity and the extent to which philanthropy has extended Itself, we are lending some encouragement to an over-rapid multi- plication among those of low capacity. Whatever the facts may be, the possibilities In this direction are some- what alarming. This may be made clear by a study of the curve in Figure 3. If In a given population we can find some way of meas- uring capacity and Indicating It on the line OY, while we indicate the numbers along the line OX, we may assume that a normal distribution of capacity might be repre- sented by the solid curve ABC. If the conditions of life 3IO THIS ECONOMIC WORLD Figure 3: Graphic representation of the differential birth rate in capacity and in lack of capacity. were exceedingly hard so that the lower levels of capacity were cut off by starvation, hardship, or the inroads of enemies, the number of weaklings might be so reduced as to be represented by the line OC instead of 0C\ in which case the distribution of capacity would be represented by the curve JBC instead of ABC. However, if conditions are made abnormally easy and the more capable are com- pelled to support the incapables who would otherwise perish, while medical and other devices are found which enable those of naturally very low capacity to multiply and reproduce their kind, the total number living might be extended to C", and the curve of the distribution of ca- THE POPULATION PROBLEM 311 pacity would be then represented by the dotted curve ABC". In addition to this it might happen that through social and other reasons the rate of increase among the more capable should be abnormally reduced. This could be represented by an appreciable sagging in the curve, as indicated in the dotted line ADB, in which case the gen- eral curve of the distribution of capacity or social adapta- bility would be represented by the dotted curve ADB'C", Where this is found to be the case, the prediction could be made with a good deal of certainty that, sooner or later, the great inert mass who have to be directed would be so numerous and those with the creative capacity to direct them so few as to make it impossible to organize and direct the energies of the people in such ways as to maintain a high standard of civilization. A certain bal- ance of energy, similar to that which exists among plants and animals, would result, and this would mean the end of that particular civilization. In order to avert such a calamity where it is found to be imminent, something must be done to flatten out the curve or to bring the curve back to something near its normal shape. This can be done only by reducing the rate of multiplication among those near the right end of the curve and by increasing the rate among those at the left end of the curve. Physical sterility, of course, cuts off the lowest grades of degenerates in spite of all that un- wise philanthropy can do to increase their number. Above the level of physical sterility something must be found to reduce the rate of multiplication. Several agencies are already at work and they may be made much more effec- 312 THIS ECONOMIC WORLD tlve. First, we have the criminal law, under which the lowest grades of criminals are either executed or segre- gated. Even imprisonment results in their complete or partial sterilization, especially if they are imprisoned for long periods of time. Next is the segregation or steriliza- tion of paupers of breeding age. This also has some effect in reducing the numbers born with low capacity. Building regulations and other devices to increase the cost of living to the poorer classes will automatically force in- creasing numbers into the pauper class. One of the most effective devices is a rigid minimum wage law. If no one should be permitted, under any circumstances, to work for less than five dollars a day, it would undoubtedly reduce the rate, or increase the age, of marriage among the less economically capable. The man who could not get a job at all would automatically become a pauper and be thus prevented from marrying. Those that were capable of earning five dollars a day would then have somewhat bet- ter conditions under which to bring up their families. Each of these methods may be made more effective than they now are as a means of reducing the rate of mul- tiplication among people of low capacity. In the applica- tion of criminal law it is especially important that the or- dinary low-grade criminal should be somewhat more dras- tically dealt with than at present. The lowest types are not those that commit what are commonly called the gravest crimes. They are the recidivists who repeatedly commit petty crimes. In fact, the inmates of our Federal prisons who are there for the graver offenses prohibited by Federal law show a fairly high average of intelligence. THE POPULATION PROBLEM 313 The criminals who come up regularly before the police courts for petty stealing, drunkenness, and general dis- order and who are, as a rule, dealt with very leniently and therefore permitted to multiply without much inter- ference are the ones who, in the interests of eugenics, should be effectively prevented from multiplication. If our entire administration, not only of criminal law but of poor relief, and if our labor legislation were all made more drastic, they would tend more and more to thin out the low grades of intelligence or economic adaptability and, to that extent at least, raise the general average. However, none of these devices would affect the sag ADB at the left end of the curve. It is difficult to see how any positive or direct legislation could have much effect on this problem. If, as some believe, the sag is entirely due to the sterilizing effect of mental activity, this would seem to be a matter of physiology upon which social con- trol can have no appreciable effect. If, on the other hand, as some believe, this is largely a matter of social habit or convention, the problem may be difficult but it is not phys- ically impossible of solution. Social standards and habits are capable of change, even though it is difficult to find ways of changing them. One apparent reason for the low rate of multiplication among intellectual workers is the fact that with most of them their one absorbing ambition is an intellectual ca- reer. Until that ambition shows signs of being realized, they have not time or inclination to think of anything else. But it is not beyond the possibilities of a constructive im- agination to picture a society in which the highest ambi- 314 THIS ECONOMIC WORLD tion of every person capable of harboring an overpower- ing ambition would be to found a noble family or to per- petuate a family already honorably and nobly founded. In such a society, with such ideals, business, professions, and arts would take second place. These careers would be pursued not for their own sakes but for the purpose of realizing the main ambition — that of family-building. Another reason for this sagging (one much less diffi- cult to deal with) is that in the most intellectual occupa- tions the man's earning power in the early years of life is practically nil. He does not begin to earn enough to sup- port a family until near middle life, and that leaves com- paratively few years in which to achieve a family. A very moderate amount of financial rearrangement could solve this problem. On this point Francis Galton made, more than a generation ago, the following profound observations: The long period of the Dark Ages under which Europe has lain is due, I believe, in a very considerable degree to the celibacy en- joined by religious orders on their votaries. Whenever a man or woman was possessed of a gentle nature that fitted him or her to deeds of charity, to meditation, to literature, or to art, the social condition of the time was such that they had no refuge elsewhere than in the bosom of the church. But the church chose to preach and exact celibacy. The consequence was that these gentle natures had no continuance, and thus, by a policy so singularly unwise and suicidal that I am hardly able to speak of it without impatience, the church brutalized the breed of our forefathers. She acted precisely as if she had aimed at selecting the rudest portion of the community to be, alone, the parents of future generations. She practiced the arts which breeders would use who aimed at creating ferocious, currish, and stupid natures. No wonder that club law prevailed for centuries over Europe; the wonder rather is that THE POPULATION PROBLEM 315 enough good remained in the veins of Europeans to enable their race to rise to its present very moderate level of natural morality. A relic of this monastic spirit clings to our universities, who say to every man who shows intellectual powers of the kind they de- light to honor, "Here is an income of from one to two hundred pounds a year, with free lodging and various advantages in the way of board and society; we give it you on account of your ability; take it and enjoy it all your life if you like : we exact no condition to your continuing to hold it but one, namely, that you shall not marry."^ Until recently, the policy which Galton so severely con- demned was pursued even by many of our American uni- versities. A somewhat less narrow attitude is showing itself, but much more might be done in the direction of encouraging the holders of fellowships and young in- structors to marry rather than to remain single. In business and professional life something might also be done to enable young men to marry without having to wait until they had achieved economic Independence in these economically hazardous occupations. So far as the young men and women Involved come from well-to-do families, the families should themselves assume some re- sponsibility. If more men should cultivate what Victor Hugo called "the gentle art of being a grandfather," even if they do nothing more than to ease the economic burden of young parents, a positive contribution to eugenics would be made. It is fair to say, however, that a great many middle-aged and elderly people are actually doing this. If people should only preach as well as they prac- tice In this as well as in some other respects, it would be a much better world. ^ From Hereditary Genius, New York, The Macmillan Company, 1892. X THE SUPPOSED NECESSITY FOR AN INDUSTRIAL RESERVE ARMY^ TWO distinct groups are in the habit of insisting that an industrial reserve army, or a normal surplus of laborers, is necessary to the maintenance of the present in- dustrial system. First, there are certain employers of labor who find it very convenient to their purposes to be able to hire and fire, to increase or decrease their labor force, ac- cording as business is brisk or dull. Some of these are doubtless honestly unable to imagine how they could do business in any other way, and really think that their busi- ness would be ruined if there were no normal surplus of laborers who might be called in when business was espe- cially active and orders were coming in rapidly, and dis- charged when orders for new goods were diminishing. Consequently, they state almost as an axiom that such a labor reserve is essential to modern industry. Second, there are certain enemies of the present industrial system who accept as true these statements of the employers and then use them as a basis for attacking the whole system and insisting on a new economic order. If, they insist, the present industrial system cannot exist without a nor- mal condition of unemployment for large numbers of ^ See article by T, N. Carver in the Journal of Social Forces, March, 1926, which is h^re reproduced by permission. 316 AN INDUSTRIAL RESERVE ARMY 317 men, or if it can employ all laborers only in boom times, then the present industrial system is not fit to exist. If the original assumption were true, this conclusion would probably be unassailable. The assumption happens to be false. In demonstrating the falsity of that assumption it is not necessary to attempt to show that an industrial re- serve army is not convenient to certain employers, or to deny that if there were no industrial reserve army certain weak employers might go to the wall and others have their profits reduced. But while the employers' difficulties might be increased if there were no labor reserve, the superior intelligence of the surviving employers might be able to meet them. That is what employing intelligence is for — to solve problems and meet difficulties. This, of course, only presents an alternative; but it is something to show that there is an alternative, or that it is not a fore- gone conclusion that industry must cease to exist if there is no labor reserve. Not every practical business man is gifted with a con- structive imagination. He may be able to solve problems in detail when each detail is presented as an immediate difficulty and yet be unable to see the problem as a whole, much less to see in advance how he could solve a whole group of hypothetical problems that have not yet arisen. This explains why so many practical men in a pro- tected industry say positively that they could not do busi- ness at all without a protective tariff. The removal of the tariff would undoubtedly create difficulties that might eliminate a few of the weaker or less well managed indus- 3i8 THIS ECONOMIC WORLD tries, but the survivors, being presumably better managed, and being certainly relieved of the competition of their defunct rivals, would find a way to carry on. So it is with many new difficulties when they arise. The restriction of immigration, shutting off large supplies of cheap labor, would, according to some of these short-sighted prophets, completely destroy American Industry. Not long ago cer- tain members of a manufacturers' association said posi- tively that the textile industry of New England required at least 100,000 new wage workers a year to replace those that were lost by old age, death, and the migration to other industries. An air of statistical finality was given to the argument by carefully prepared and presumably correct statistical charts showing the losses from these three sources. Then I was asked to give the figures show- ing just where these losses could be made up If Immigra- tion were restricted. And yet, the very men who were then unable to see how the problem could possibly be solved have gone to work as practical men to solve It, partly by paying wages that tended to check the migration to other industries, but mainly by superior labor-saving methods by which the same product can be produced with less labor. Yet even now, there are a few self-styled prac- tical men left, and a few others who pose as economists, who insist that without a large supply of cheap labor our industries must fail and our prosperity come to an end. Even some of the older British economists, before Adam Smith put things in a true perspective, were in the habit of looking at the problem of national economy wholly from the standpoint of the upper classes. Conse- AN INDUSTRIAL RESERVE ARMY 319 quently, they fell into the error of including an abundant supply of cheap labor, along with soil, mines, and other natural resources, among the factors that made for na- tional wealth. Even today we occasionally hear a belated voice proclaiming that we must have cheap labor to make a prosperous nation. Give us immigrants and we will give you steel, said Judge Gary. How can we live a life of elegant leisure without cheap and efficient servants, say the esthetes. All this overlooks the fact that cheap labor means poverty Instead of riches for the wage workers who, man for man, must be reckoned as of equal impor- tance with business and professional men, scholars, and artists. Undoubtedly It would be to the advantage of all these groups, who do not have to compete with manual workers, to have plenty of cheap labor to wait upon them as menial servants, muscular workers, or mechanics. But precisely the same reasoning that leads to this conclusion leads equally to the conclusion that it would be a great ad- vantage to the manual workers to have an abundant sup- ply of competent business and professional men, doctors, artists, actors, and the like, all compelled by competition to work hard and efficiently for low profits, salaries, or fees. In view of the fact that business enterprisers who are supposed by many to be the very keystone of the present economic structure, that the leisure class who live mainly on inherited wealth and are therefore the one class which would lose everything and gain nothing from a change In the economic system, and that even a few artists and scholars who envy their European and Asiatic colleagues 320 THIS ECONOMIC WORLD their cheap servants seem so generally to regard an abun- dant supply of cheap labor, which means a mass of pov- erty, as a necessary factor in their comfortable existence, it is not surprising that others should accept this general idea as a fact and say, "Away with such an economic system 1" I should frankly agree with them If I were once con- vinced of their first assumption. A system is not worthy to last a single week that requires a mass of poverty or unemployment for its continuation. I hereby announce myself as ready to join a revolutionary party for the im- mediate overthrow of the present economic system the moment anyone can show even a preponderance of evi- dence in favor of the proposition that both poverty and unemployment are incurable under the present system. One of the most recent pronouncements based on the assumption that an industrial reserve army is necessary to the existence of the present economic system is con- tained in a recent article by Ross L. Finney.^ Comment- ing upon a suggestion of mine that an increase in the num- ber and quality of entrepreneurs, technicians, and capital- ists would greatly increase the demand for labor of the lower grades and thus tend to raise wages and eliminate unemployment, Mr. Finney has this to say:^ . . . And with jobs for everybody the sky would be the limit. But meantime the profits of marginal entrepreneurs would disappear; whereupon they would shut down, thus throwing men out of work — which would not be so fine. This is exactly what ^"Unemployment: An Essay in Social Control," Social Forces, Septem- ber, 1926, pp. 146-148. * The italics in" the quotation are mine. AN INDUSTRIAL RESERVE ARMY 321 did happen between 1918 and 192 1 os the result of the unusual war demand for labor. In short, the surest result of jobs for everj'body would be that as many would be out of work as before. Nothing would so surely break the mainspring of our economic machine as universal emploj'ment. Automatically, the profits system constantly maintains a great reserve army of unemployed. To reduce this reserve is to reduce viarginal profits, and so recruit the reserve. To abolish the reserve would be to abolish profits, and so abolish the system. By one means or another the ratio between workers and jobs must be main- tained. If the number of workers cannot be increased by immigra- tion, then the number of jobs must be decreased, either by retrench- ment or the introduction of labor-saving machinery. The reason there are too few jobs is because it would wreck the system to provide them; and under the system the ratio is self-regulatory. In other words, unemployment is a fundamental necessity, and therefore an inevitable by-product, of the profits system. The next question is, How scarce do jobs have to be? The answer is. Just scarce enough so that laborers are not likely to get uppish, make unexpected demands, and get away with them. Just scarce enough, in other words, so that wages are definitely under the control of the employing class, at least so far as any abrupt fluctuations are concerned. And under what circumstances can the laboring class be depended upon to sit tight, lick the hand that feeds them, and make no unexpected demands? The answer is, When they are all strictly up against it, with just barely enough wages to make ends meets — almost, and distress staring them in the face if they should lose their jobs. And this condition can obtain only when there is a reserve army of unemployed sufficient to keep those who do have jobs in abject fear of losing them. All of which fits in very nicely with what Ricardo had to say: that whatever the standard of living, down to that the wage scale tends to gravitate. Except that Ricardo did not make it quite clear how the requisite competition among laborers is maintained. Following Malthus, he blamed the stork entirely. But the stork requires reciprocal cooperation. Whatever labor supply the stork may furnish, the profits sj^stem must furnish jobs just less than enough to go around. And that the profits system is bound to do 322 THIS ECONOMIC WORLD — automatically ! Until the leopard changes its spots and the Ethiopian his skin. Before taking up the main problem of a reserve labor supply, I should like to call attention to two minor points raised by Mr. Finney. As to the slump in the demand for labor between 1918 and 1919, It is not even suggested that this was the result of a normal increase in the num- ber and quality of enterprisers, technicians, and capital- ists. It was rather the result of an excessively Inflated war demand for goods (which I have elsewhere^ shown to have been unnecessary) and the subsequent deflation of that demand. That being the case, it has no bearing on the question of the necessity of a permanent oversupply of labor. Again, while a rise of real wages as a result of an increase In the number and quality of enterprisers, technicians, and capitalists would eliminate marginal profits where they formerly existed, as Mr. Finney sug- gests, it is obviously fallacious to slide from this to the statement that it would eliminate profits, as he does in the italicized portion of the second paragraph of the above quotation. Existing marginal profits may be eliminated without eliminating all profits. There is merely a change in the establishments that are on the margin; the old ones having been pushed below the margin and hence out of ex- istence, a new group now occupies the marginal positions. Any increase in cost, from whatever source, unless com- pensated by increased productivity or price, tends to elimi- nate marginal profits and marginal enterprisers, but does '^Principles of National Economy (Boston, Ginn and Company, 1921), chap. xlix. AN INDUSTRIAL RESERVE ARMY 323 not necessarily destroy the whole business by eliminating all profits and all enterprisers. Intramarginal profits and intramarginal enterprisers may remain. New items of cost are continually confronting every business and con- tinually weeding out the weaker establishments, but they seldom destroy a whole business — never, in fact, except when the new item of cost is so great as to be prohibitive. If we are permitted to assume as the new factor in the problem an increase both in the number and in the quality of enterprisers, technicians, and capitalists with no in- crease in the number of wage workers, it does not follow that a rise of wages would result in any net addition to the cost of production except to the inferior employers who were holdovers from the previous condition. The in- creasing number and superior quality of their new com- petitors would force each establishment to pay more for its labor and materials, or to sell its product at a lower price. If any of them could not meet this new situation, it would, of course, go to the wall; but, instead of killing the business, this would merely transfer the business from the hands of the inferior enterprisers of the old condition to the hands of the new and superior enterprisers, tech- nicians, and capitalists who have entered the business. Because of their superior quality, these would be able to pay the higher wages of labor, the higher prices for ma- terials, or to sell at lower prices. If there were an improvement in the quality of enter- prisers, technicians, and capitalist investors with no in- crease in their numbers, it is, of course, conceivable that they might absorb the results of the superior produc- 324 THIS ECONOMIC WORLD tivity of industry in the form of higher profits, salaries, and interest rates, all of which might be classified under the general name "rent of personal ability." But it is a part of our assumption that the number of such men in- creases while their quality Improves. This increase of their number would create an intensity of competition among them which would compel the industries to pay as high wages for labor and as high prices for raw materials, or to sell the products at as low prices, as their superior productivity could afford. In short, profits, interest, and the higher salaries would tend to decrease, certainly not to Increase, leaving the chief benefit of the Increased pro- ductivity of Industry to go to the wage workers, the producers of raw materials, or to the consumers, who, of course, include the wage workers and the producers of raw materials. Any Industrial or non-agricultural country that com- bines a large supply of manual workers with a dearth of capable enterprisers, technicians, and capitalist investors invariably and inevitably shows low wages and unemploy- ment for the manual workers and for the few capable members of the other groups, easy profits, large salaries, and high interest rates. The situation Is comparable In principle to that which arises In an agricultural country where there are large numbers of workers and a scarcity of fertile land. This situation Invariably means low labor incomes for workers, but relatively high rent for land. Conversely, an industrial country which develops large numbers of highly capable enterprisers, technicians, and capitalist investors and which manages to limit its supply AN INDUSTRIAL RESERVE ARMY 325 of manual laborers invariably shows high wages and rela- tively low profits, salaries, and interest rates. This situa- tion is comparable in principle to that which arises in an agricultural country where there is an abundance of fertile land and a scarcity of high-grade labor, where rent is rela- tively low and wages relatively high. Such are the his- torical facts. The table presented in Chapter I (page 61) is a significant illustration of this tendency in agri- culture. The theory of the case is not difficult to state. The same principle holds with respect to the mechanical indus- tries. A country with numerous enterprisers, technicians, and capitalist investors, all of high quality and all active, will expand its industries. The expansion of industries will call for more and more manual workers. Other countries with fewer and weaker enterprisers, technicians, and capitalist investors will then shift their burden of unemployment upon the fortunate country by exporting their surplus manual workers to it, unless it restricts im- migration. Even though immigration be restricted, unless emigration be also restricted, the favored country will export enterprisers, technicians, and capital (to a certain extent also investors of capital) to less favored countries. Thus Germany, before the war, was exporting enter- prisers, technicians, and capital, but no manual laborers, to the countries to the south and east, and importing cer- tain kinds of low-grade labor, but no enterprisers, tech- nicians, or capitalists from those same countries. Under stable conditions we in the United States also export en- terprisers, technicians, and capital, but no manual labor- 326 THIS ECONOMIC WORLD ers, to Mexico, and it is notorious that we are importing hundreds of thousands of Mexican peons, but no enter- prisers, technicians, or capitalists from that country. The exportation of enterprisers, technicians, and capi- tal to such countries as Russia, the Balkans, or Mexico is a good thing for the laborers of those countries but a bad thing for those who formerly enjoyed there a partial mo- nopoly of talent or of invested capital. The importation of cheap labor from those countries to a capitalistic country Is a good thing for those in noncompeting groups, especially for enterprisers, technicians, and capitalists, but a bad thing for the manual workers of the countries to which the immigrants come. Laborers themselves (as distinct from those who pose as spokesmen for labor) correctly sense the situation. In the absence of restrictions, indoor laborers invariably move away from countries in which there is little enterprise, technical training, and capital toward countries where these things are abundant, just as outdoor laborers move from countries where good land is scarce to countries where it is abundant relatively to labor. There are sound theoretical and practical reasons why they should behave in this way. High general wages in industry are nowadays invari- ably associated with ample equipment in the form of power-driven machinery, giving a large product per man, without which high wages would be impossible. The proposition will scarcely be disputed that in the industrial field a large product per man is as dependent upon ample equipment in the way of power and power-driven ma- chinery as in agriculture it is upon an abundance of land. AN INDUSTRIAL RESERVE ARMY 327 The only question would be as to what factors are nec- essary to secure ample equipment in these forms of capi- tal goods. The comparative figures presented on page 61 well Illustrate this point. Ample equipment requires at least three things; first, plenty of capital to invest in it; second, technicians to in- vent and install it; third, enterprisers to effect a working organization and bring labor and equipment Into working harmony. Let any of these three things be absent, and the result is impossible. Let them all be present and active, and the result is inevitable. One man under highly efficient management may run sixty looms, turning out a large product per man, even though the product per loom may be relatively small. But to equip every weaver with sixty looms requires not only a large amount of capital, but also capable technicians and enterprisers. When the problems are worked out sat- isfactorily, a textile factory that can combine sixty looms with one man can pay higher wages than can be paid by a factory that can combine only four looms with one weaver. The activity of inventors and organizers in this direc- tion increases the demand for capital relatively to the de- mand for labor, and if capital does not Increase in quan- tity to meet that demand, it would merely increase interest rates until the rising overhead cost in the form of interest would check the tendency to substitute capital (or ma- chinery) for labor. But if thrift campaigns and other movements for the increase of capital are successful, so that capital increases more rapidly than these new oppor- 328 THIS ECONOMIC WPRLD tunlties for its investment, interest (i.e., net or pure in- terest) may disappear in spite of the increase in the de- mand for capital. In fact, no one could afford to com- bine sixty looms with one weaver except where interest rates were relatively low and wages high. This brings us to one of the most difficult and at the same time one of the most important of all economic prin- ciples, and the reader is requested to exercise his patience as well as his reasoning power in studying it. It may be called the principle of reciprocity among the factors of production, or the reciprocal influence of one factor upon another. To those who have never grasped this idea it seems a contradiction to say that two or more factors mu- tually determine one another. It is really no more of a contradiction than to say that the three legs of a tripod mutually support one another. To say that without the third the other two would fall does not mean that the third is capable of standing alone. We find this principle everywhere, in economics as well as in physics or engineer- ing. The relationship on the market between different fac- tors of production is that of reciprocity, each one helping the market for the other. An abundant supply of capi- tal seeking investment helps the market for inventions in which the new capital can be invested. A scarcity of in- vestible capital makes a poor market for the products of the inventor. An abundance of both capital and inven- tions furnishes a good market for the work of the enter- priser, and so on. This principle runs through all our economic life. Its most conspicuous and distressing form AN INDUSTRIAL RESERVE ARMY 329 is the relation between an abundant supply of cheap labor and the prosperity of all other classes. A more hopeful but less conspicuous form is the relation between an abun- dant supply of everything besides manual labor, including not only capital, but also inventors, enterprisers, and pro- fessional and artistic talent, and the prosperity of the manual workers. So general has been the oversupply of manual labor that many minds, especially among the employing classes, have come to regard it as normal and inevitable. Those who find it convenient to run business by the "hire and fire" method, who, when they need extra help cannot im- agine themselves doing anything more than hanging out a shingle saying "men wanted," are likely to say that they could not run their business in any other way. Even if that were true, it would not follow that a smarter man- ager might not do so. The only question is, can we get smarter managers? Certain householders who have always been accustomed to trains of hereditary household servants cannot imagine how a household could be run without them; nevertheless, rnore capable household man- agers might do so. Again, can we get more capable house- hold managers? Educational policies may aim at different objects. Within limits it is possible to accomplish any purpose for which an educational system is intelligently planned. One possible object is to solve the labor problem, first, by giv- ing employment to all who want it, second, by raising all wages to a level that will permit comfort, culture, and ac- cumulation of enough capital to provide for emergencies 330 THIS ECONOMIC WORLD and old age. Most other so-called solutions are attempts to keep laborers contented with their condition. I shall try to show that one way to bring about universal em- ployment at high wages is to change the ratio between the kinds of labor that are not universally employed and the other factors of production. This brings us to the main thesis. A good approach to the problem of wages In Indoor In- dustry is to begin with agriculture. It is an observed fact that the ratio between the number of workers on the one hand and the quantity of land and equipment on the other has a great deal to do with the distribution of the agri- cultural income. This observed fact rests upon another, namely, that in the growing of given crops the product per worker increases, up to a certain limit, as he is given more land and equipment on and with which to work. Conversely, the product per acre of land increases as more workers and equipment are applied to its cultivation. The statement of this general reciprocal influence has been re- fined in the form of the law of diminishing returns, which need not be restated here. It follows from these observed facts that if you wish to increase the product of each farm worker, one way to do it is to give him more land on which to work, or better equipment with which to work, or a combination of both. If the farmer is enabled to in- crease the quantity of land and equipment per worker, not by bidding a higher price for them but by reason of the fact that land and equipment have increased in abun- dance and are forced onto the market at low prices, then the increase in the land and equipment per worker does AN INDUSTRIAL RESERVE ARMY 331 not involve any necessary increase in the total rent and in- terest charges. Since there is a larger product without any increase in rent and interest, the increase will go either as profits to the farmer or as wages to farm labor. Where the farmer does his own work, it makes little dif- ference to him whether his increased income is called profits or wages. In case the farmers hire their laborers, if farmers are numerous and laborers scarce and hard to find, it is certain that the increased income will go as wages rather than as profits. In indoor industries the same principle holds except that land is a minor factor and may be neglected. Equip- ment, however, is of even more importance here than in agriculture. It is an observed fact that a large product per worker is secured by ample equipment in the form of power and power-driven machinery. In this case, if equipment increases as an independent variable and not in response to higher prices offered, that is, if through in- creased saving capital piles up, if, through increased ac- tivity on the part of increased numbers of inventors, engines and machinery increase in quantity and improve in quality, and if, through increased activity by increased numbers of superior enterprisers, all this equipment is brought into the market while manual workers are de- creasing in numbers through restriction of immigration and a decline in the birth rate among working people, then the equipment must force itself onto the market for what it will bring, and the increased product per man will go mainly as wages. The scarcity of labor will insure that. 332 THIS ECONOMIC WORLD Again, the question may be asked, Will not the lower interest rates, the lower profits and salaries, decrease sav- ing, inventiveness, and enterprise? They will rather operate as a check upon the further increase of saving, inventiveness, and enterprise. One result of thrift cam- paigns is to induce people to save increasing quantities of capital at decreasing rates of interest, but this tendency is self-limiting. It results in a new equilibrium in which there is a permanent increase of saving at permanently lower rates of interest. One result of increasing numbers of technical schools of higher and higher quality is to increase the number and quality of inventors and techni- cians. The falling salaries will eventually check that tend- ency to increase and result in a new equilibrium in which there will be a permanent increase in the number and quality of technicians at permanently lower salaries. Simi- larly, increasing numbers of business schools, of higher and higher qualities, at lower tuition rates, will result in more and better enterprisers. Falling profits will check this tendency but will result in a permanently larger num- ber of enterprisers of better quahty at permanently lower profits. In the same way, the restriction of immigration and a rise in the standard of living which reduces the birth rate will reduce the number of manual laborers, thus making it more difficult for enterprisers to find help and forcing them to pay higher wages. These higher wages tend to check the tendency; that is, a point is reached where even the superior enterprisers cannot advance wages any fur- ther, but this results in a new equilibrium in which wages AN INDUSTRIAL RESERVE ARMY 333 are permanently higher. The same thing bruigs about a more steady employment. When enterprises tend to mul- tiply until they cannot multiply any further because of the scarcity of manual workers, obviously manual work- ers find it easier to get jobs, to choose when they will work and when they will not, and involuntary unemployment is eliminated. This shifting of the equilibrium point is the thing that needs to be understood if one Is to grasp the significance of what Is going on In the economic world. The prin- ciple involved Is illustrated In Figure 4. Let us assume that the quantity of a given commodity, say labor. Is measured along the line OX, while both its cost of production and Its price are measured along the line OY. Let us assume also that Its cost curve at one time is represented by the curve AB while its demand curve Is represented by the curve CB. That being the case, the equilibrium price Is represented by the horizontal line DB. By the equilibrium price is meant the price at which the market clears itself, that is, the price which will In- duce producers to continue, under the same conditions, to bring to the market exactly as much as It will induce buy- ers to take off the market. If, for any unforeseen reason, buyers want more at the existing price than producers are willing to bring at the existing price, the price tends to go up until the equilibrium is again approximated. If, for some unforeseen reason, producers bring to the market more than buyers are willing to take at the existing price, the price tends to fall until the equilibrium Is again ap- 334 THIS ECONOMIC WORLD Figure 4: Graphical representation of the establishment of equilibrium prices. proximated. Thus, the normal price may be said to be the equilibrium price, or the price about which market prices tend to fluctuate. Now, in the above diagram, with the above assump- tions, let us suppose that there has been a change in the cost of production. In the case of labor, immigration be- ing eliminated, the cost is what men and women think they must have before they will marry and undertake the support of a .family. If their standards on that subject AN INDUSTRIAL RESERVE ARMY 335 are high, that Is, if they will not marry until they can afford life insurance, a savings account, and a Ford car, this makes an expensive family, and no children will be legitimately born except in families that can afford these things. Eventually this will thin out laborers. But this thinning out of laborers will raise wages and make it pos- sible to afford these things. Will this rise in wages so in- crease the marriage and the birth rate as to force wages down again to the old level? It will not, because to do so would be to deprive families of these requisites for mar- riage, and they would stop multiplying before that point would be reached. The rise in the standard of living operates as an in- crease in cost. This increase in cost may be pictured in our diagram by raising the curve AB to the dotted curve A'B\ This would tend to reduce the supply of labor from OE to OE'. This reduced supply of labor would tend to raise wages until the new equilibrium wages would be rep- resented by the dotted line D'B' instead of by the solid line DB. This line D'B' now represents the new equilibrium wage, as the line DB represented the old equilibrium wage. It represents the price at which, with the new standard of living, the producers of labor are willing to put on the labor market exactly as much labor as the buyers of labor are willing to take off the market. If we assume not only an increase in the cost of pro- ducing a commodity but also an increase in the demand for it, we get a still more violent shifting upward of the equi- librium price. Let the curve C"B" represent the increase 336 THIS ECONOMIC WORLD in demand. In that case the new equilibrium price be- comes D"B" instead of D'B'. The wages of labor may now be quite sufficient to induce laborers with a markedly higher standard of living to marry as early and multiply as rapidly as did those with a lower standard of living and lower wages. The same general principle of the shifting of the equi- librium price works in the opposite direction if we assume an opposite change in one of the factors. This may be shown in Figure 5. Let us suppose in this case that the amount of saving is measured along the line OX, the cost of saving and the demand for capital along the line OY, that the solid curve AB represents the cost of saving and the solid curve CB the demand for capital. In this case, the equilibrium rate of interest is represented by the solid line DB. Now sup- pose that a change comes In the habits of the people, or in their relative appreciation of present and future, so that saving becomes m.uch less irksome than it used to be. This change could be represented in the diagram by dropping the solid curve AB to the dotted curve A'B'. This would tend to increase the amount of saving, but this increase would tend to lower the rate of interest. This lowering of the rate of interest would, of course, tend to check the tendency to further saving, but it would not completely neutralize the tendency and restore the old rate. It would shift the equilibrium rate to a lower level; that is, the equilibrium rate of Interest would fall from the solid line DB to the dotted line D'B'. This lower price would now be sufficient to induce as much saving as the demand AN INDUSTRIAL RESERVE ARMY 337 Y C ^^ D ^\ nP D' ^y^ y 1 1 ^^ 1 w A A' r^.-' EE' '^ Figure 5 : Graphical representation of the shifting of the equilibrium price. for capital would take off the market at that price. All this leads to the conclusion that a permanent change in the distribution of our national income can be effected by changing some of the original factors In the problem. Cultivation of habits of thrift can permanently lower the rates of interest; encouragement of more and more men to become enterprisers and technicians can permanently lower profits and the higher salaries. Raising the stand- ard of living of laborers can permanently raise their wages, and if all these things can be done at the same 338 THIS ECONOMIC WORLD time, a general shift in the direction of equality among all occupations can be brought about. One and only one condition can permanently interfere with the tendency toward an equilibrium of the labor mar- ket and leave a surplus of labor seeking employment. That Is a trade-union policy or some form of government interference that will force wages above the equilibrium point. This may be Illustrated by the diagram In Figure 6. Let us suppose, as in the preceding diagrams, that AB represents the supply curve (or the cost curve) of a given Figure 6: Graphical representation of interference with the equilibrium of the labor market. AN INDUSTRIAL RESERVE ARMY 339 class of labor, that CB represents the demand curve for It, and that DB represents the equilibrium wage, that Is, the wage at which the available supply of that kind of labor would all be employed. If an artificially high wage were established by law or by union policy represented by the dotted line D'B', then, the demand remaining the same, the number employed at the new wage would be represented by the distance OE' instead of by the dis- tance OE. The latter being the actual number seeking employment, the number represented by the distance E'E would fail to find employment. Far from being a necessary condition of the present economic system, this so-called labor reserve is the product of Interference with the system. If let alone, the profits systems would tend to eliminate this labor reserve by low- ering wages until the entire available supply would be employed. It may be a wise policy to establish a wage above the equilibrium wage, that is, it may be better to pay high wages to those who can find employment and leave the rest unemployed, but it cannot be said that this is essential to the profits system. It would be essential, rather, to some policy of interference with the system. Whether it be wise thus to interfere is another question. Another point should be mentioned that does not viti- ate our argument, but that may confuse the non-theo- retical mind. Not all workers want continual employ- ment. High school and college boys and girls frequently want employment during the summer months, farm work- ers want Indoor work during the winter months, women with famihes want employment at times when family 340 THIS ECONOMIC WORLD cares do not interfere and do not want it at other times. This kind of labor exists independently of the profits sys- tem, would, in fact, exist under any system. It therefore furnishes, at times, a small labor reserve which the exist- ing system may make use of but which is not essential to the existence of the system. Another point of much greater theoretical and prac- tical importance is that the presence of an industrial re- serve army is more a cause than a result of these uneven- nesses of business sometimes called the business cycle, and the elimination of the industrial reserve army would go a long way toward ironing out these unevennesses. It is coming to be realized that something is needed to act as a drag or a brake upon the overexpansion of busi- ness in boom times. If business is permitted, with no hindrance or retarding factor, to expand as rapidly as it wants to, it will overdevelop at one time, and this over- development will be followed by a period of excessive stagnation. The only effective check that works automatically is an increase in the cost of production. If, when orders are coming in rapidly, every manufacturer can increase his production without having to pay a higher price for any of the things he needs, raw materials, labor, loans, and so forth, there is no effective drag. That is, if he can hire increased numbers of workers at the same wages, buy in- creased quantities of raw materials at the same prices, borrow increased sums of working capital at the same rates of interest, there is no drag on the expansion of his business. But. if a boom, anticipated or potential, finds AN INDUSTRIAL RESERVE ARMY 341 him unable to get more labor without offering higher wages for it, to buy increasing supplies of raw materials without bidding higher prices to get it, or to borrow more working capital without paying higher rates of interest, these things act as a drag and prevent excessive booms. Again, if a depression should begin, if all these wages, prices, and interest rates tend to fall, this would stimulate the profit makers to increased activity and thus smooth out the depression. In the past we have had to rely mainly upon variations in the rate of interest to act as a repressant in boom times and a stimulant in times of depression. Lately, the Fed- eral Reserve Board has acted in a rather positive manner to increase the efficiency of the depressant and the stimu- lant. But the principal item of cost is not interest on loans but the wages of labor. So long as there is a large labor reserve, there need be no increase in wage cost in boom times and decrease in times of depression to act as a de- pressant and a stimulant. But if there were no reserve labor army, then when every employer wanted to expand his business to take advantage of an active market, he could not get indefinite supplies of new labor by merely hanging out a shingle saying "men wanted." In fact, he could not get extra help at all in a real boom. All em- ployers would be wanting extra help at the same time and they would merely bid against one another for the help that was already employed. This would put a more effec- tive drag on a business boom than a mere rise in the in- terest rate could possibly do. Of course, so long as there are considerable numbers of 342 THIS ECONOMIC WORLD workers who, as pointed out above, do not want work all the time, that preference of theirs will create a small labor reserve, so that there is never likely to be a complete ab- sence of labor reserve. But this reserve is created by the preferences of the workers themselves and not by the necessities of the profits system. In fact, this system would be better off without it. Again, so long as a labor reserve is artificially created by forcing actual wages above the equilibrium level, it will always be possible to hire and fire, to employ increasing numbers without increasing wage rates in times of business activity and de- creasing numbers without lowering wages in times of busi- ness depression. However, this condition is created by artificial restraint and not by the necessities of the so- called profits system. In fact, the profits system tends to eliminate it and would work much better if it could be eliminated. Other and more striking changes even than steadiness of employment and the increase in wages can also be brought about. The independence of the laborer results automatically from these changes. Where there is a surplus of laborers or a dearth of jobs, of course the laborer is very dependent. He will think twice before quitting a job already held. But when any kind of labor becomes scarce and hard to find, it is the employer and not the laborer who is dependent. The housekeeper who knows that her cook has several other positions open and that she herself might not be able to find another cook is the dependent person, and the cook is the independent one. The Kansas farmer whose wheat is ripe for the har- AN INDUSTRIAL RESERVE ARMY 343 vest and who cannot find harvest hands to help him har- vest it is another dependent person, while the farm hand is the independent one. This condition is not the result of some occult or mysterious power that goes with cook- ing or wheat harvesting; it is the result of the relative scarcity of cooks and harvest hands, or the relative abun- dance of housekeepers who want cooks and farmers who want help. It may be argued, however, that where there is such an acute scarcity as the above illustrations imply, there is as yet no true equilibrium wage, or that the actual wages are not high enough to establish a true equilibrium under which there would be exactly as many seeking the wages as there were those willing to pay them. The illustra- tions were chosen deliberately for the purpose of bringing out the fact that, in a dynamic situation created by a pro- gressive increase in the number and the quality of enter- prisers, technicians, and capitalist investors, while the sup- ply of manual workers does not keep pace with the in- creasing demand, wages not only tend to rise, but there is a lag in the rise of wages.* That is, wages are always approaching the equilibrium point, but the point itself moves upward, so that before the equilibrium is estab- lished, it is again disturbed. In this progressive condition we invariably find not only rising wages but also a grow- ing independence of labor. Show me any situation where laborers of any kind, manual or mental, are scarce and hard to find — that is, ^ To accelerate the rise of wages and reduce the extent of the lag is, of course, a legitinaate purpose of labor organization activity. 344 THIS ECONOMIC WORLD where employers want more laborers than are to be had — and I can show you a place where laborers are inde- pendent. Show me a situation anywhere where any kind of labor (cooks and farmhands as well as other kinds) is abundant and easy to find and where jobs are hard to find — that is, where laborers want more jobs than are to be had — and I can show you a place where that class of laborers (even including cooks and farm hands) is de- pendent. In the days of free immigration to this country, many classes of laborers were in that position of depend- ence. At the present time, few of them are. If present tendencies continue, there will be fewer and fewer in that position of dependence. However, even though wages should reach a condition of stable equilibrium at a high level, that is, even though there should be permanently just as many laborers seek- ing jobs at high wages as there would be jobs seeking laborers at those wages, it can be shown that the inde- pendence of laborers would be much greater than where the equilibrium wage is a low one. Wages are only one of the inducements to take jobs. Work which interferes with a particularly agreeable diversion is less attractive, other things equal, than work which permits that diver- sion. The former requires a higher wage than the latter in order to bring about an equilibrium between the num- bers of laborers seeking jobs and the number of jobs seek- ing laborers. In general, independence, or the ability to choose among a considerable number of goods or activities, is considered desirable. Men who can afford this desirable AN INDUSTRIAL RESERVE ARMY 345 condition are likely to be willing to sacrifice a little money in order to enjoy it. They who have plenty of money in their pockets are more likely to sacrifice the chance of making more money in order to enjoy this feeling of in- dependence than are those who have no money and who have needy families. The latter will sacrifice independ- ence for cash, while the former will frequently sacrifice cash for independence. In general, the basic necessaries of life must take prece- dence over luxuries and comforts, even the comfort of feeling independent in one's field of choice. When laborers generally are barely able to afford the basic necessaries of life, they are likely to sacrifice the comfortable feeling of independence by accepting jobs that are confining, that offer few opportunities for diversion, or that put them under the domination of an overbearing boss. But when laborers are generally well paid, have money in their pockets, and are able to supply their families not only with the basic necessaries of life but with numerous com- forts and luxuries besides, then the comfort or luxury of feeling independent comes Into their field of choice. An overbearing boss will then have a harder time filling his shop than the boss who treats his men as comrades In a common enterprise. The job that involves a loss of Inde- pendence will have to pay a much higher wage to bring about an equilibrium than the job that leaves a good de- gree of Independence. But will not the multiplication of numbers again reduce laborers to the necessity of competing so strenuously for jobs as to destroy their Independence? No; the standard 346 THIS ECONOMIC WORLD of living will take care of the laborer's independence exactly as it takes care of his wages. If the standard of living is low, laborers will marry and multiply even if it involves both a lowering of wages and a loss of independ- ence. But where the standard of living is high, they will not marry until they are both well paid and independent. A high standard of living means a low rate of multiplica- tion unless general economic conditions are extraordi- narily good. A low rate of multiplication among manual workers means a scarcity of that kind of labor and the maintenance of good economic conditions among them. Among these good economic conditions we must include whatever laborers wholesomely crave. If they crave in- dependence, that, as well as high wages, is assured by a high standard of living which will retard multiplication until independence is secured. If present tendencies continue — and they will if our scholars are astute enough to point the way and our states- men wise enough to follow their teaching — there is no reason why labor should not eventually become a fixed charge upon industry, and capital a contingent expense. Already certain high salaries are fixed charges. Key men must be retained and their salaries paid regardless of the state of business. More and more kinds of labor are en- tering this class. During the last winter a certain manu- facturer of soft drinks kept his force of truckdriver-sales- men intact, paying the men wages all winter when many days they did nothing but play checkers. The reason was not benevolence nor a Christian spirit. It was that these men would be so hard to replace in the spring that the AN INDUSTRIAL RESERVE ARMY 347 employer did not dare fire them for the winter. If there had been a large reserve of competent men, it would have been cheaper to fire in the fall and hire in the spring. There being no such reserve, it was cheaper to pay these men wages even when there was no work for them than to let them go. The next thing, of course, is for the em- ployer to find something for these men to do during the winter months. This is a condition that will spread to all classes of labor as labor becomes more and more scarce relatively to the demand for it. Any kind of labor may become a fixed charge when it is scarce enough and hard enough to find. At the same time, if capital becomes more and more abundant it will eventually cease to be a fixed charge or an overhead cost in the strict sense. It will become un- necessary to guarantee interest to the capitalist, and he will be forced to take his chance upon a contingent in- come, receiving dividends or profits when there is any- thing to divide, and none when there is nothing to divide after paying wages and other fixed charges. If the dispo- sition to save becomes strong enough, men will accumu- late all the capital that is needed and invest it on the chance of dividends. This making of the wage bill into a fixed charge and the capital account into a contingent charge is not contrary to but in strict accord with the profits systems. It is the profits system carried to its "logical results," though to produce these logical results will require more intelligent steering and rational encour- agement. It will not require hostile legislation, but in- telligent education, the encouragement of thrift, the occu- 348 THIS ECONOMIC WORLD pational redistribution of our population by which manual workers are thinned out and more and more high intelli- gence is concentrated in the entrepreneurial, managerial, technical, and capitalistic occupations. Here we find the answer to the question, Will not the increase of saving and investing, if carried far enough, re- sult in general overproduction? Strictly speaking, gen- eral overproduction is a logical impossibility, as has been shown many times. What is really meant is. Will it not throw things out of balance by providing more capital than is needed to produce all the consumers' goods that men will buy? If men generally cut down their purchases of consumers' goods in order that they may invest more and more in producers' goods, may there not be more producers' goods than are needed to supply the dimin- ished market for consumers' goods? That unbalanced state of industry which some have mistakenly called gen- eral overproduction is a real possibility. But the first symptom of an approach to that unbalanced condition is the disappearance of pure, or net, interest.* When all industries are equipped with all the capital that they need to supply the demands of consumers, or, in others words, when they have all the equipment that the inventors have shown them how to use economically, no industry will then be willing to pay interest to get more capital. Banks, insurance companies, brokers, and pri- ^ The disappearance of pure, or net, interest would not, of course, en- able an enterprise of dubious solvency to borrow without contracting to pay interest. It would still be necessary to overcome the owner's prefer- ence for keeping his money in a safe place as compared with letting it get out of his control in a hazardous enterprise or a doubtful loan. AN INDUSTRIAL RESERVE ARMY 349 vate investors will be unable to place safe productive loans, and consequently will be unable to pay real interest to depositors, patrons, or anyone else. Those who are fortunate or skillful enough to pick winners in the form of enterprisers and borrowers will pay dividends; others will not. The entire income from capital would be of that sort, and, the losses tending to balance the gains, the In- come of the capitalist class would tend to disappear. In those establishments where the returns to investors are negative, that is, those whose owners do not get even their principal back, the other participants get more than the total product. Where these losses equal the gains made in other establishments there is no net income for capital- ists as a class. In fact, we are much nearer that condition today than most of us are aware. Now, when the income of the capitalist class disap- pears, it means that other classes get the entire product of industry. These include the receivers of profits, of sal- aries, of wages, and of rent. The profits of enterprisers as a class tend to cancel in so far as the losses balance the gains under the same conditions and for the same reasons as cause the disappearance of net interest. A considerable increase in the number of enterprisers watching for oppor- tunities tends to increase the intensity of the competition among themselves and to increase the losses and decrease the gains until the cancellation Is complete. This tends to concentrate the total national income into the two classes, rent, and salaries and wages. Rent I prefer not to dis- cuss, because it is not claimed by anyone, so far as I know, that an Industrial reserve army is essential to Its existence. 350 THIS ECONOMIC WORLD There is still one problem, as yet unsolved, the solution of which is essential to the final elimination of the last vestige of the possibility of an industrial reserve army: that is the problem of the feeble-minded. Among the in- telligent, the development of a high standard of living is a complete safeguard against an oversupply of labor; but a high standard of living is impossible among the unintelli- gent who are not capable of exercising forethought. With them, their habits or tastes, no matter how expensive, do not and cannot in any way affect their marriage rates and birth rates and therefore do not constitute a true standard of living.^ With them, reproduction is a biological proc- ess, uncontrolled by rational purpose. Being a biological process as it is with plants and animals, nothing short of physical control will check their multiplication. Without physical control, the feeble-minded, given time enough, can overstock any market with low-grade, unskilled labor. Consequently, we must manage to control them if we ever hope to prevent permanently the development of a mass of poverty. But, let it be remembered, this reproductive propensity of the feeble-minded is not the result of the profits system. It would exist under communism or any other system, and the same necessity for control would exist under any sys- tem. But if it is not controlled, and if we continue to breed morons, the profit takers and many others will man- age to make productive use of them. Again, profit takers are not different from the rest of us. Housewives will hire morons to do housework, farmers will hire them to ^ See the author's Principles of National Economy (Boston, 1921), p. 500. AN INDUSTRIAL RESERVE ARMY 351 do farm work, artists and others to relieve themselves of hack work, with even more avidity than enterprisers will hire them to work in factories. To conclude. If we can maintain the democratic tradi- tion that business is just as respectable as any other call- ing, if we can continue to show a generous appreciation of those who succeed in building up great business enter- prises, if our higher institutions of learning can continue to train men for business as well as for the professions to which the word "learned" was formerly restricted, if all our schools can continue to move men upward in the scale of occupations, if we can continue to restrict the immigra- tion of low-wage labor, adding Mexican labor to the kind that is to be restricted, if we can continue to maintain re- sponsible parenthood among the intelligent classes, and if we can manage in some way to limit the multiplication of the mentally weak, we can not only eliminate the indus- trial reserve army, but can diffuse prosperity more and more evenly among all classes, and we can put all laborers in a position of independence quite equal to that of the employing classes. XI THE INVENTOR AND THE INVESTORS THERE are not many economic problems that can be discussed intelligently without considering comple- mentary factors or agents of production. These are com- monly likened to the two blades of a pair of scissors, or the upper and nether millstones, either one being useless without the other. Amateurs are frequently puzzled by this mutual interdependence. Sometimes they fall into the error of attributing the entire product to one factor alone, because, forsooth, without it there would be no product at all. Labor, for example, is said to produce all wealth because without it not anything could be pro- duced. That is like saying that the upper blade of the scissors does all the cutting, or the upper millstone all the grinding, because no cutting or grinding could be done without it. Among the more sophisticated, another error, almost equally fatal, is made. It is easily seen that one factor is quite as important as the other, but since both are ab- solutely necessary, it is claimed that it is useless to discuss their relative importance. That is, of course, true enough, but it does not exhaust the subject. Suppose one blade of ^ This chapter was published as an article by T. N. Carver in Capital and Surplus, American Institute of Banking, Detroit Chapter, December, 1926, and is reproduced by permission. 352 THE INVENTOR AND THE INVESTOR 353 the scissors was short, dull, or otherwise defective while the other was good enough. There would not be much gain in still further improving the good blade while leav- ing the defective one unrepaired. While one blade, con- sidered in itself, might be just as important as the other, it is much more important, nevertheless, that the defective blade should be repaired than that the good one should be improved. The maximum economy of effort requires that effort be expended where it is most needed. Or, if we choose a somewhat more realistic illustration, crust is just as necessary as filling in the making of pie, but if the crust is too thick for the filling, or the filling too thin for the crust, it is more important that the pie- maker should use more filling than that she should use more crust. Again, if, in the entire pie belt there is an abundance of material for the making of crust and a scarcity of material for the making of filling, it is more important, from the standpoint of human happiness, that men should get busy producing more filling than that they should get busy producing more crust. One way to in- duce them to produce more filling and less crust is to pay them more for their work In one case than in the other. A thousand other illustrations of the same principle could be given if they were necessary. It is the thesis of this chapter that the inventor and the investor fit together like the two blades of the scissors, the upper and the nether millstone, or the crust and the filling of pie. Without the inventor there would not be many opportunities for investment, and without the in- vestor there would not be much of a market for inventors. 354 THIS ECONOMIC WORLD To show how dependent the investors are upon the in- ventors, let us consider for a moment what rich men, If there were any, could do with their wealth, or what forms their wealth could take on, if there had been no mechanical inventions. Some light may be thrown on the question by considering what rich men did with their wealth or what form it took before the days of mechan- ical inventions, or what they do now in countries where mechanical inventions do not play a large part in Industry. What, for example, does an Oriental prince do with his wealth, or what forms of material wealth can he own? Of course, a modern accountant might capitalize the ty- rant's power to extort tribute from his subjects and call that capitalized sum his wealth; but that sum would not be embodied in any list of material objects. If he con- sumed all his income in riotous living, there would be no list of durable material objects that could be listed under the name of wealth. If he does not consume his whole in- come in the form of ephemeral satisfactions, what durable forms of material wealth are available? Lands, palaces, hoards of precious metals or jewels, and rich fabrics prac- tically exhaust the category. The private citizen of a community in which there were no mechanical inventions and therefore no expensive manufacturing plants, not hav- ing the power to collect tribute, would be limited to those few forms of wealth. Even if he were a merchant he could not be very rich, that is, he could not own objects of great value except stocks of valuable merchandise such as gold, silver, jewels, and rich fabrics. In western .countries, before the age of mechanical in- THE INVENTOR AND THE INVESTOR 355 ventions, the same conditions held. Land was the most important form of durable wealth, and the wealthy classes were, in the main, landowners. Next came ships and merchandise, but ships are mechanical inventions of a special kind, and the only kinds of merchandise that em- bodied great riches were, here as in Oriental countries, objects of great value in small bulk. Since the age of mechanical invention, however, capital has come to play a vastly larger part in the economic life of western peoples, and our richest men are no longer landowners or merchants, but capitalists in a newer sense. Capital now consists mainly in mechanical instruments of production — factories of all kinds, railroads, steamships — and capitalists are mainly owners of such things. The joint stock system of ownership makes it easy for vast numbers to become owners of such things; in short, to become capitalists. To show on the other side of the question the depend- ence of the inventor upon the investor, we need only to consider what an inventor would do with his invention unless he or someone else was able to pay the cost of mak- ing it and to wait for it to repay that cost through its superior productivity. If he is able to do that himself, he is his own capitalist-investor. If he is not, he must find someone else who is. If neither he nor anyone else is able or willing to pay the initial cost and wait for a re- turn, his invention will be useless, both to himself and to the world. Any movement, whether It be a thrift cam- paign, a program for the safeguarding of small investors against the machinations of large shareholders or boards 356 THIS ECONOMIC WORLD of directors, or a blue sky law, which encourages men and women to save and invest their money, automatically ex- pands the market for productive inventions. Conversely, any movement for the discouragement of thrift and in- vestment automatically contracts that market. If I were a great capitalist and possessed no moral scruples whatsoever, being solely desirous of increasing my power or of clinching my grip upon the industrial system, I would deliberately start a comprehensive cam- paign for the discouragement of thrift and the encourage- ment of hand-to-mouth extravagance. I would found In- stitutes of Extravagance to teach the virtues of lavish consumption and Installment buying, I would subsidize the publication of books on the Fallacy of Thrift, I would buy controlling Interests In both popular and highbrow magazines and encourage the editorial policy of publish- ing articles on the Dilemma of Saving, all to the end that the number of my potential competitors, the Investors, should decrease. If I should be successful in my cam- paign, I would have an easy time of It. Every inventor would then have to come to me to get me to finance his invention, and I could then dictate terms, whereas, if there were thousands of other capitalists looking for opportuni- ties to invest their capital, I could not. If I should be successful in my campaign, every promoter of a new In- dustry requiring capital would have to come to me. I could then not only control him, but I alone should have the power to say what industries should start and what should not, whereas if I had thousands of competitors my power would be shorn. If I should be successful, in short, THE INVENTOR AND THE INVESTOR 357 everyone who needed capital for any purpose would be- come my subject, whereas, if there were thousands of other capitalists, I would have no more power than the common laborer when labor is scarce. Were it not for the serious consequences which might follow, this form of propaganda should be taken about as seriously as propaganda against the safety razor by a bar- ber, against electric washing machines by a laundry man, or against improved sanitation by a low-grade physician. A capitalist who opposed thrift should be classified with those enemies of American labor who oppose the restric- tion of immigration or the control of the birth rate among the poor. The latter campaign is not so very dangerous because most people see through it. It is easy to see that unrestricted immigration or a high birth rate among wage workers would flood our labor market, reduce wages, and put our wage workers generally at a disadvantage and their employers at an advantage. Many people do not yet see the equally patent fact that diminution of thrift would produce the same results, that it would change the ratio between labor and capital, not by increasing the number of laborers but by decreasing the amount of capi- tal. Consequently, the promoters of extravagance and a diminution of capital are more dangerous, because more plausible, than the promoters of an oversupply of labor. Even a laborer can be a dictator whenever he is the only one who can do a certain necessary kind of work. The only thing that keeps him from being a dictator is the fact that he has too many competitors. The capitalist's power is diminished by the same fact wherever it exists. 3S8 THIS ECONOMIC WORLD Wherever capital and capitalists are scarce relatively to the need for them, their power is great. Wherever they are abundant relatively to the need for them, their power is gone. "The obvious is always overlooked until it is pre- sented as the unusual." Men and women have labored to show how capitalism is being remade by a new religious spirit that is entering the hearts of capitalists. Perhaps there is something in that idea, but it is not where most of these writers think it is. A puritanic religion which discourages luxury and riotous living makes it easy to save and accumulate capital. In a country where Puri- tanism, Quakerism, or Methodism is influential, men do not gain prestige by lavish expenditure or conspicuous waste. As they accumulate wealth, there is not much encouragement to turn to a life of ease and luxury. This means more and more accumulation of capital. This accumulation, in turn, makes it harder and harder for the capitalist to invest his capital. This forces him to do several things that make for progress. First, he must encourage the invention of new mechanical con- trivances for saving labor. That is, he must be on the lookout for promising inventions. This furnishes a good market for the real inventor who has anything genuine to offer. It is no accident, therefore, that inventions in- crease as capital increases, and vice versa. Second, in order to find avenues for the investment of capital, interest rates must fall, unless the mechanical in- ventors more than keep pace with the accumulators. It is possible, of course, that interest rates may rise while THE INVENTOR AND THE INVESTOR 359 the supply of capital Is Increasing, but that can be only where Inventors are presenting so many new opportuni- ties for the Investment of capital that even the increasing supply of capital cannot keep up, or when inventors In such numbers are looking for capitalists to finance their inventions as to create a demand for more capital than is being supplied. But, If capital accumulates rapidly enough to more than meet that demand, Interest rates must fall. Third, when capital is expanding and inventions in- creasing, Industry grows in magnitude and efficiency, and human wants and desires are more and more abundantly supplied. If the expansion of industry is universal and well balanced, there is no such thing as general overpro- duction until interest on capital disappears altogether. The first symptom of that hypothetical state of general overproduction is the disappearance of interest. W^hen there Is more capital seeking productive Investments than can find opportunities with the existing demand for com- modities, this sheer oversupply of capital and the com- petition among the owners of capital for some return, or to avoid complete unemployment for their capital with no return at all, will reduce net Interest to the vanishing point. Such interest as one would then have to pay would not be true interest but only enough to overcome the fear of loss — that is, risk. Fourth, unless laborers should increase more rapidly than the demand for them, wages would automatically rise, not directly because of a Christian spirit on the part of employers, but because the labor market would be so improved as to raise the price of labor. Indirectly, if 36o THIS ECONOMIC WORLD a Christian spirit discouraged luxury and ease, this would encourage accumulation and this, in turn, would so im- prove the labor market as to raise the price of labor. Non-Christians, pagans, atheists, and Gradgrinds would all alike have to pay the high wages. The surest way to raise wages, equalize wealth, emanci- pate the laborer from the necessity of taking the first job that offered (or of holding on to a present job for fear of not getting another) by giving him several good jobs to choose from and by making him quite as free as a capital- ist, is to encourage the accumulation of capital by increas- ing numbers of capitalists on the one hand, and on the other to thin out the ranks of laborers that are now poorly paid, by providing educational opportunities that will enable the rising generation to avoid all poorly paid occu- pations and find their way into those that are well paid. With capital and enterprise enough, all may be well paid, and about equally well paid except where exceptional ability or exceptional stupidity would justify some differ- ence. XII THE LAST FIFTY YEARS IN THE UNITED STATES! A GOOD working definition of civilization is the art of living together comfortably in large numbers. Numbers can be counted, but what constitutes a comfort- able living is largely a matter of opinion. Opinions on this subject fall into three main groups: first, that living comfortably means having an abundance of material goods; second, that it consists in having abundant leisure; third, that it consists in having many children. Where the first of these three opinions prevails, people take their progress in the form of more and more goods; where the second prevails, they take it in the form of more and more leisure, where the third prevails, they take it in the form of larger and larger families. We in the United States take ours mainly in the form of goods ; the Central American peon takes his in the form of leisure; the people of China and India take theirs in the form of numbers. Which is the superior type of civilization could be argued for a long time and with many words. We are accustomed In this country, at least since 1876, to measure our progress mainly in terms of material wealth, though we are also somewhat proud of our num- ^ A part of this chapter was published as an article by T. N. Carver in the World's fVork for July, 1926, and is reprinted by permission. 361 362 THIS ECONOMIC WORLD bers. Leisure Is not highly esteemed. Before the Cen- tennial Exposition, our chief sources of pride and the chief themes for patriotic oratory were our vast area, our po- litical system with its absence of kings and aristocrats, our free schools, and the fact that we, more than any other country, had removed all handicaps upon individual achievement. As a result of this unshackling of the hu- man spirit, every person has been encouraged to make the most of himself, and this has resulted In unparalleled progress In the production and enjoyment of material goods. We are now beginning to take pride In these goods rather than the ideals that made them possible, in the things that have been added unto us rather than In the things we really sought. And many things have been added unto us. The total wealth of the United States, estimated on a gold basis, from 1870 to 1922, Is as follows: Year Total Amount Amount per Capita 1870 1880 1890 1900 1904 1912 1922 $ 24,055,000,000 43,642,000,000 65,037,000,000 88,517,000,000 1 07, 1 04 ,000, (XX) 186,300,000,000 320,804,000,000 $ 624 870 1,036 1,165 1.318 1,950 2,918 Some allowance must be made, however, for the cheap- ening of gold or the decline In the purchasing power of the dollar. Estimates vary as to just how much cheaper gold was In .1922 than In 1870, but 50% Is a reasonable estimate. Estimated on this basis, the national wealth THE LAST FIFTY YEARS 363 increased more than six times from 1870 to 1922, and the per capita wealth two and one-third times. The Bankers Trust Company estimates the per capita wealth in 1923 of Great Britain to have been $1,489, of France, $1,484, of Germany, $901. Not only do we seem to be the richest country in the world, but our per capita wealth is appreciably higher than that of our nearest rivals. These vast accumulations of goods are at least an index of our mastery over material forces, of our ability to har- ness them to our purposes and make them do our bidding. If fault is found, it must be with the nature of our desires, or with the things which we choose to produce with our industrial system. When we change our desires, whether in the direction of preferring leisure to goods, or of pre- ferring different kinds of goods, our highly efficient indus- trial system will enable us to satisfy the new desires quite as well as it now enables us to satisfy our present desires. If we were willing to live today as our people lived in 1876, that Is, with the same material comforts, we could doubtless get along with four hours' work a day. This would give us a great deal of leisure. But should we like it as well as we now like an abundance of goods and no great amount of leisure? Probably not. We need not feel depressed, as John Stuart Mill did, with the thought that our mechanical improvements have not shortened the hours of labor, so long as the people generally are get- ting what they seem to want. The population increased from 1876 to 1925 according to the following table : 364 THIS ECONOMIC WORLD 1876 45,137,000 1900 76,120,408 1880 50,155.783 igio 92,367,080 1800 62,947,714 1920 106,418,17s 192S 113,493,720 In considering the population question, some account must be taken of immigration. Down to the very out- break of the World War immigration was increasing, as shown by the following table : Years Total Immigrants 1871-18S0 2,812,191 1881-1890 5,246,613 1891-1900 3,687,564 1901-1910 8,795,386 1911-1920 5,735,811 1920-1924 2,774,600 Most of the increase during the decade from 191 1 to 1920 came before 1915. In 1913 there were 1,197,892 immigrants admitted to this country; in 1914 there were 1,218,480, that being the largest number ever received in one year. This shows very clearly that immigration did not fall off but continued to increase after the exhaustion of the free public lands. The high wages paid in large industrial centers proved even more attractive than the free public lands had ever been, if we may judge by the numbers that came. A more encouraging factor in our increase of numbers, indicating as it does a growing mastery over the dread enemy, disease, is the decline in the death rate. In 1880, in those areas where records were kept, the death rate was 19.8 per 1000. Since that date the rate has steadily THE LAST FIFTY YEARS 365 fallen until in 1924 it was 11.9. The figures by decades are as follows: 1880 19.8 1910 iS-o 1890 19.6 1920 13.1 1900 17.6 1924 11.9 Even more important than the total population is the quality of our population. The best index of this is the effort that is being made to improve the quality of public education. The figures on page 366 show, roughly, the increasing efforts that we are making in this direction. These increasing expenditures for public education are a part of our endeavor to realize the great ideal of equal opportunity for all. There is no monopoly so dangerous as a monopoly of knowledge, and nothing so effectually destroys that monopoly as the diffusion of knowledge. The greatest stimulus that can be given to the human spirit is to serve notice upon it that its achievements are to be limited solely by its own native power, supplemented by its own efforts, that neither birth nor family prestige will count for much, and that humble birth and lack of prestige are no handicap to the person of ability and in- dustry. This has made the typical American a model of energy. Our public school system has provided him with a free chance to train whatever native ability he possessed. Our people have responded to these stimuli and have thrown themselves into their life work with an enthusiasm that cannot be matched anyhere else. Our people are commonly regarded as somewhat ex- travagant in the spending of money, but they are ex- o H < U Q W o EQ O < a 1^ -o •* o f) I~ N Ol 1 R; *;: ". 0> N f^ fT vO M* fO . r< i« S t^ o> •s „ t» Oi « -O ro 00 o' „' O" 00 irt "^ O r^ o Ov « ro " O ro in >ri N o OO" 05 <> cX w" r~ n s m o to N O O •* o 00 N 00 ^ m s t^ r* t* (vj O M lO N N ■* W O M O 00 " 5 « vo o 5 ^!? ^"!!?i 00 i lO 1^ l~- Tf M PO M <» »-< N ^ li^ 00 N ■* w v> 0\ f<5 t» 8; fO 00 M t^ 11 o. 1- «» w V) n lo r- o o. fo 00 lO U uj vO, >0_ rC lo o lo in T? o 00 00 vO vO 00 00 Oi 0\ 00 in N CO M o S "^ in 00* m m t» «* N m •* o m m 1^ o o 00 r^ 1^ O 0» 00 Ov o 00^ in cj f^ "^ ^ m o" tC f<5 ro -O M> u 3 u O ■> a 3 ! c • .9 c "5 II « D. 3 ^O in public lied of po inclusive f teacher teachers, s j: ■S2 ft o o -^ ™ 3 „ 'O'^vZ.^''''"^- > V c rv.^ ?i cwi:; ,« Is enroll Entagee ars of a{ 1 numbe 1 salari( d princi age per 1 expend inditurei 3 C 3u'^00''>0X in 0. 0. H H < HW 1 366 THE LAST FIFTY YEARS 367 tremely penurious In the matter of time. We are always trying to save time, even if we have to spend money in doing it; witness the vast scale on which we have intro- duced labor- and time-saving devices, not only in our fac- tories but also In our households. More than half of all the telephones in the world are In the United States. Electric household devices of all kinds are increasing rapidly; the manufacture of such things is one of the growing Industries. We are sometimes accused of being dollar-chasers by the very people who accuse us of being extravagant In spending money. But In no country do men give money on such a lavish scale to educational, charitable, and pub- lic enterprises as here. We have 167 colleges and uni- versities each with an endowment of one million dollars or more. During the decade 1910 to 1920, the value of college and university buildings rose in round numbers from 211 millions to 425 millions, the value of dormitories from 17 millions to 69 millions, and the amount of produc- tive funds from 259 millions to 556 millions. Correlated with this increase of material equipment and productive funds Is an increase, over many years, of the number of Instructors and students in our colleges. In 1890 the teaching staffs numbered 7,918; In 1900, 18,220; in 1910, 24,667; In 1920, 42,882. In 1890 the students numbered 156,449; in 1900, 197,163; in 1910, 274,084; in 1920, 521,754- These abundant opportunities for higher education are also a part of our general policy of a free chance for all. Our whole educational system, from the primary grades 368 THIS ECONOMIC WORLD to the graduate and professional schools, tends to move men upward in the economic scale. This automatically thins out the lower occupations where wages in the past have been chronically low, and this, in turn, tends to make wages in those occupations higher than they have ever been before. As a consequence of our democratic ideal of free op- portunity for all and special favors for none, as expressed in our educational system, this has always been a good country for the worker. This is shown objectively by the vast scale on which workers from other parts of the world sought this country. In the earlier years, to be sure, they came largely because of the lure of free land. In a special sense, therefore, we may attribute their coming to our rich natural resources, especially our vast areas of agricultural land. It must be observed, however, that rich natural resources may be used in such ways as to con- centrate rather than to diffuse prosperity. It would have been easy, for example, to sell the public land in large tracts or give It in large grants to a few wealthy land- owners. Rural America would then have consisted of a limited number of vast estates, owned by one class and worked by another. In a few of the earlier American colonies this system developed, but it could not endure long under the democratic principles on which the War of Independence was fought and the new government con- stituted. As observed above, immigrants came in even larger numbers after the free public lands were exhausted. They have been attracted by the ample opportunities for em- THE LAST FIFTY YEARS 369 ployment at wages that were definitely higher than in other countries, and this abundance of employment at relatively good wages was the result of our industrial ex- pansion. There was a distinct upward bend in the curve of immigration statistics in the year 1880, four years after the Centennial Exposition. All students agree that the Centennial Exposition is a landmark in our industrial history. It, for the first time, gave millions of Americans, from all parts of the country, an idea of our industrial possibilities. Besides, it not only educated the people, but it stimulated their desire for new articles of all kinds. It turned the attention of statesmen, voters, and politicians toward the industrial problems of the future rather than toward the constitutional and po- litical problems of the past. The presidential campaign of 1876 was the last that was definitely waged on the old political issues growing out of slavery and the Civil War. The next few campaigns were waged primarily on eco- nomic questions, such as the tariff problem, monetary and banking reform, conservation, and the control of "trusts." The campaigns may not have decided anything very im- portant, but they were at least an indication of the sub- jects on which the people were thinking, and that is a matter of the very greatest importance. Of course, no one who understands the question would have expected any considerable rise in wages during the period of free immigration. The expansion of the de- mand for labor was a good thing for labor in general, but the advantage went mostly to the newly arrived immi- grants and not to the laborers who were already here. 370 THIS ECONOMIC WORLD The newly arrived immigrants were enabled to get higher wages than they had ever had before, and they were put on the road to prosperity. The native-born laborers found their progress somewhat retarded by the new com- petitors, and in their progress upward they had to keep step with the immigrant laborers. Since the restriction of immigration there has been a positive advance in wages. The advance between 1914 and 1924 has been variously estimated at from 28% to 40%. Most of this advance has come since 1918. The International Labour Review published in January, 1926, an index of real wages — that is, the purchasing power of the money wages in terms of food — in a. number of cities selected from different coun- tries. Each city is taken as a sample of the whole country in which it is located, Philadelphia being the American city that was chosen. On October i, 1925, the relative wages ran as follows, the wages of London on July i, 1924, being taken as 100 per cent. City Wages Philadelphia 176 Ottawa 158 Sydney 133 Copenhagen 109 London 94 Stockholm 82 Amsterdam 81 Berlin 65 The Avide diffusion of our prosperity is evidenced fur- ther by the scale on which our people are buying what a previous generation would have called luxuries, and also by the scale oh which they are saving and investing their THE LAST FIFTY YEARS 371 money. The striking thing about the sale of articles of luxury is not the high prices at which a few are sold, but the vast numbers that are sold at moderate prices. The striking thing about our vast accumulation of capital is not the large sums invested by a few, but the vast numbers that are investing small sums. Even such concentration of wealth as we still have is coming more and more to be, Indirectly at least, or tempo- rarily, a by-product of the wide diffusion of purchasing power. It is less and less a result of monopolizing the necessaries of life, and more and more a result of hitting the popular taste in what would formerly have been called luxuries, but to which our people have become so accus- tomed as to make them seem almost necessaries. Our most conspicuous fortunes are being made by supplying the masses with luxuries which they want and are able to pay for, and by selling them at moderate prices with small profits per unit. Even where prices are high, they are be- coming more and more a reflection of the high wages of labor, and less and less a reflection of the high profits per unit of product. These new and growing fortunes would repay pro- longed study. They are made by taking at the flood those "tides in the affairs of men" which, in technical jargon, are described as new and growing demands. These de- mands, in turn, may mean either new desires or new pur- chasing power. An increasing national dividend means, of course, new purchasing power for someone. If it meant the increasing riches of the rich and the increasing poverty of the many, as some have affirmed, then the new 372 THIS ECONOMIC WORLD purchasing power would be in the hands of the rich, and the new fortunes would be made by catering to them. If, on the other hand, a larger national dividend means higher wages and salaries, or larger incomes for masses of people, then the new and increasing demand will be where this new spending money is found. Fortune will await him who can tap these new reservoirs of spending money by producing and selling what the masses will buy. All our new and conspicuous fortunes are built up in this way, and not by catering to the rich. In the automobile industry, to take a single example which may serve as a sample of the whole, we do not manufacture the most expensive cars. Those who desire the height of luxury must import their cars from other countries. In those countries, as in this, manufacturers attempt to supply the demand, or to sell to those who have the power and the willingness to buy. There is this difference, however; in this country the power to buy is in the pockets of the masses; in those countries it is in the pockets of the few who are very rich. Our most suc- cessful manufacturers supply cars at moderate prices for millions of users. In 1926, there were 22,101,393 niotor vehicles registered in the United States, or, roughly, one motor car for every 6 persons. Thus the entire popula- tion, by crowding a little, could be loaded on motor cars at the same time and motor out of the country, if there were any place to go. The number of passenger cars manufactured during the year 1926 was 3,765,059. Of these, 1,942,770, or 51.6%, were priced at $675 or less; 320,030, or 8.5%, at $676 to $875; 929,969, or 24.7%, THE LAST FIFTY YEARS 373 at $876 to $1,375; 402,861, or 10.7%, at $1,376 to $2,275; 169,427, or only 4-5%, at $2,276 and over. In other lines of activity as well, it is found that the largest reservoirs of purchasing power are found in the pockets of the masses, who, in the aggregate, have more money to spend, even for luxuries, than the very rich. They who can tap these vast reservoirs of purchasing power, whether in the field of manufacturing, publishing, writing, acting, or lecturing, are the ones who make the most money. Catering to the rich in any field is rela- tively unremunerative. The vast scale on which cheap cameras and camera supplies, radio sets and materials, as well as books on radio topics, and phonographs and rec- ords are sold, the stupendous growth of the moving pic- ture business, and the huge incomes of favorite movie actors and actresses, professional baseball and football players, popular novelists, dramatists, and magazine and newspaper writers, and even of chewing gum manufac- turers, all of whom please the many rather than the few, testify to the fact that the road to fortune in this country is to supply luxuries to the masses. From the point of view of an older generation, and possibly also from that of the present generation in other countries, our people must seem to be indulging in an orgy of extravagance. It would look so to anyone who saw only the scale on which cheap luxuries sell and the huge fortunes that come to the manufacturers and sellers of them. There are other facts, however, which, when con- sidered alone, would seem to imply that our people are thrifty even to the point of penuriousness. I refer to the 374 THIS ECONOMIC WORLD rate at which they are accumulating and investing capital, not in a few large sums, but in a great multitude of small sums. In fact, the scale on which our people are saving and investing their capital — millions of them in small sums — is even more surprising than the scale on which they are buying luxuries. These two facts seem so contradictory that the unin- formed may be excused for an attitude of skepticism. The probable explanation is as follows. First, all classes and conditions of people find themselves in possession of more spending money than they formerly had. Second, they are using their surplus spending money in different ways. The thriftless are spending it on luxuries, the thrifty on investments. Thus there is an enlarged sale of luxuries to the thriftless and an enlarged sale of securities to the thrifty. There is nothing contradictory in the sit- uation. What it signifies for the future is another ques- tion. If we take the statistics relating to the old-fashioned forms of thrift, such as the shares of building and loan associations, saving deposits, and insurance policies, and add to them such facts as we can gather regarding some newer forms of investment by laboring people, such as their investments in corporation securities and the strik- ing new phenomenon of the labor bank, we shall gain some impression of the extent to which the masses are sav- ing and investing. We may properly begin with building and loan associa- tions because they seem to have originated In Philadel- phia. In 1876 there were 450 such associations in that THE LAST FIFTY YEARS 375 city alone. The number has since increased to something like 2,000. The statistics of their growth throughout the entire country are not available before 1893, at which date the first nation-wide survey of building and loan associa- tions was made. Their growth since then is illustrated by the chart on the following page.^ As for deposits in savings banks, their increase is shown in the following table : Year Amount 1876 $ 941,350,255 1880 819,106,973 1890 1,550,023,956 1900 2,389,719,954 1910 4,070,486,247 1920 6,536,596,000 1924 8,539,855,000 1Q25 9,065,181,000 Besides deposits in savings banks there are savings de- posits in other banks. Adding these figures to those in savings banks we get the total savings deposits for the years 1914, 1924, and 1926. They are as follo.ws: Per Capita Total Number Year Total Savings Deposits Deposit of Depositors 1914 $ 8,728,536,000 $ 89 11,385,734 1924 20,873,562,000 186 38,867,994 1926 24,696,192,000 211 46,762,240 This great increase in the number of depositors indi- cates a wide diffusion of savings. Of course, not all these depositors are wage workers. I do not know of any com- ^ See H. F. Clark and F. A. Chase, Elements of the Modern Building and Loan Associations (New York, The Macmillan Company, 1925), p. 463. 376 THIS ECONOMIC WORLD 780O ♦ 1 4000 7400 - 3800 7000 - A 3600 ^ 6600 - /' ^400 ■g 6200 _ /« 3^00 > ^ 5800 - y/ 3000 u< (A g 5400 - ji 2800 o fE 5000 - h 2600 "^ 5 4600 - If 2400 5 9- 4200 - y t 2200 2 ■^ 3800 - 2000 = ;- s/ * „ „ o a. 3400 — •^ / 1800 3 ^ .S/ ^ E 3000 - 1600 ^^ ^ 2600 - , Vf : 1400 2200 - 1200 1800 - -V,^^,,^.— . >w^— -""""''''^^ ''^ lOOO 1400 _ ^*' ~ 800 1000 r-— .'* I 1 60O I69J 1897 1901 1905 1909 1913 1917 IJJI 1925 Figure 7: Growth in membership and assets of building and loan asso- ciations in the United States, 1893-1925. prehensive investigation which shows the occupations of all savings depositors. The Women's Educational and Industrial Union of Boston has made some investigations regarding women depositors in a group of savings banks in Greater Boston. Of the first 2,000 depositors among women gainfully employed, the largest group, or over 31%, were engaged in domestic and personal service clas- sified as cooks, domestics, housekeepers, waitresses, and others. The next largest group, or 30%, were engaged in clerical occupations. The next (15%) were those en- gaged in professional service, and the next (14%) were those engaged in manufacturing and mechanical indus- tries. THE LAST FIFTY YEARS 377 The annual statement published January i, 1926, by the Philadelphia Saving Fund Society shows the occupations of the depositors who opened accounts with the society during 1925. Of the 22,000 male depositors, 10,000 (in round numbers) were classified as wage earners, 2,000 as salaried employees, 8,000 as minors, that Is, young persons under 21 for whom no occupation was given, and the rest scattering. Of the 25,000 female depositors, 1,000 were wage earners, 8,000 were wives of wage earners, 1,500 were wives of salaried employees, and 8,000 were minors. In other words, this shows that a large percentage of the total depositors were wage earners or wives of wage earn- ers. If we leave out those classified as minors, five- sevenths of the male depositors were wage earners and more than half of the females were either wage earners or the wives of wage earners. Great as are the Increases in the number of depositors and total deposits, there is nothing phenomenal about them. The shrinkage of the purchasing power of the dollar and the normal Increase In wealth and population account for a part of this Increase in deposits. The thrift campaign also accounts for a part. However, making all proper allowances, there has been a substantial Increase. It must be remembered that savings deposits are not supposed to represent the total savings of any except the smallest savers. When any one savings account grows large. It Is likely to be withdrawn and Invested in some- thing else, either a home or some Investment that yields a little more than savings banks pay. Savings deposits, therefore, would hardly be expected to keep up with the 378 THIS ECONOMIC WORLD general prosperity of the whole people. I mention them and their actual increase to prepare for a question which may arise later. When I speak of the increase in invest- ments in the shares of corporations the question may arise, "Have not these investments been made at the expense of savings accounts?" The foregoing shows that savings accounts have not been depleted but have actually grown in a very substantial manner. A still more striking increase shows Itself In the matter of life insurance. During the 45 years from 1880 to 1924, Inclusive, the total number of ordinary policies increased from 686,000 to 22,082,377. The amount of these ordi- nary policies had increased from $1,581,842,000 to $49,- 241,424,055, but the number of industrial policies had in- creased from 237,000 to 68,247,642, while the amount of these industrial policies had Increased from $20,533,000 to $11,343,740,085. Adding the ordinary policies and the industrial policies, we find that the total number of poli- cies Increased during this 45-year period from 923,000 to 90,330,019, and the amount of these policies increased from $1,602,375,000 to $50,585,164,140. It is, of course, impossible to say how many of the ordi- nary life insurance policies are held by wage workers. The number of industrial policies held by them is known to be considerable; In fact, they make up the bulk of this class of policies. Neither the number of policies nor the face value of these policies represents the savings of the people during any given period of time. The premiums actually paid in during a given year represent this kind of savings for THE LAST FIFTY YEARS 379 that year. On this basis we find that during the last five years there have been paid into insurance companies some- thing like $8,000,000,000. Adding this sum to the total savings deposits in 1924 and the total assets of building and loan associations, we get the enormous sum of $33,000,000,000. As stated above, there are no accurate figures to show what proportion of this enormous sum has been saved by wage workers. We know that considerable quantities are saved, and since the numbers of savers of various kinds has increased so amazingly it means a wider and wider diffusion of this kind of prosperity. I do not know where we could find so many millions of depositors and holders of life insurance policies without Including a great many wage workers. A further evidence of the wide diffusion of prosperity is the vast Increase In the number of shareholders In our great Industrial corporations. In 1890 there were 81,000 stockholders of 33 leading railroads; by 1923 the number of stockholders of these same railroads had risen to 602,000. The Western Union Telegraph Company had 1,382 stockholders In 1875. In 1923 the number had In- creased to 26,276. In 1900 the American Telephone and Telegraph Company had 7,535 shareholders; in 1924 It had 343,000. If we take all the corporations of the coun- try we find that in 1900 there were 4,400,000 stockholders; in 1922 there were 14,400,000. An interesting study has been made by Robert S. Blnkerd^ of the sources of the In- crease in stockholders from 1918 to 1925. The following ^ See Proceedings of the Academy of Political Science, Vol. 11, No. 3 (April, 192s), p. 34. 38o THIS ECONOIMIC WORLD table shows the increase in the number of employee and customer owners as a phenomenon of the last few years. Source of Increase in Stockholders, 1925 over 1918 Industries From Employees From Customers From General Public Railroads Express and Pullman Total rail and allied services Street railways Gas, electric light and power com- panies Telephone and telegraph Packers Ten oil companies Five iron and steel companies Ten high-grade miscellaneous manu- facturing and distributing com- panies 70,262 45,003 2,996 203,216 7,827 70,262 15.000 75,000 62,649 7,000 21,153 87,696 47,999 815,955 800 211,043 260,000 470,324 201,922 28,000 115,724 4,530 19,337 Total. 338,760 864,75+ 1,310,^ Another striking evidence of the wide diffusion of pros- perity is the growth of labor banks. A leaflet published by the research department of the Amalgamated Clothing Workers of America gives the financial condition of these banks as of December 31, 1925. The 36 banks show a capital stock of more than $9,000,000, surplus of nearly $3,500,000, total deposits of more than $98,000,000, and total resources of just under $115,000,000. The first labor bank to be organized was the Mount Vernon Savings Bank of Washington, D.C., opened May 15, 1920, by the Machinists. The second oldest is the Brotherhood of Locomotive Engineers Cooperative Na- THE LAST FIFTY YEARS 381 tlonal Bank of Cleveland, Ohio, organized November i, 1920. It is the largest of all, having a capital stock of $1,000,000. It has accumulated a surplus of more than $295,000. It has deposits of more than $26,000,000 and resources of more than $28,500,000. The third oldest is the United Bank and Trust Company of Tucson, Arizona. The others are scattered throughout the Union from coast to coast. They are owned and operated by various labor groups, the Brotherhood of Locomotive Engineers having the largest number. These two great tendencies, first, that toward the seem- ingly extravagant buying by increasing numbers of people of what would formerly have been called luxuries, and second, that toward the rapidly increasing saving and in- vestment of capital, not in a few large sums but in a multi- tude of small sums, together constitute a veritable eco- nomic wonder. How did it happen? The answer to this question is found principally in the utilization we have made of our man power, or the de- velopment of the productive possibilities of all classes of people. Not only have we trained the average worker and tended to promote him as far as possible from the overcrowded to the undercrowded occupations; we have also trained the talented and turned a great deal of high talent toward industrial careers. More than that, we have no leisure class worth mentioning. It is not an American ideal that a man should retire and indulge in elegant leisure as soon as he has accumulated a compe- tence. Wherever this ideal prevails, the more capable the man, the earlier he will retire and the greater the portion 382 THIS ECONOMIC WORLD of his life that will be wasted. Only third-rate men will stay in business all their lives, and they only for the reason that they can never accumulate enough to enable them to retire. Where business is managed only by third-rate men, there are only third-rate industries, the product per man is low, and only low wages can be paid. First-rate men stay In business in this country, even though they might retire. That is one reason why we have first-rate industries that manage to pay first-rate wages. Next to killing, stealing, and lying, drunkenness is the greatest factor in the waste of man power in modern civili- zation, especially in northern latitudes. The evidence is overwhelming that, for the country as a whole, drunken- ness and other by-products of alcoholism have greatly de- creased since prohibition. There are, it Is true, some thickly populated areas in which prohibition has not been very well enforced. Nevertheless, it is probably more than a coincidence that the most striking evidences of the diffusion of prosperity, especially among the working classes, synchronizes with the period of national prohibi- tion, though the restriction of immigration came about the same time. These two laws are probably the best laws ever enacted in this country in the interest of the laboring classes. However, not only Is prohibition poorly enforced, but the restriction of immigration is only partial. There is no restriction of immigration from any American country. The result is that Mexico has be- come our greatest source of cheap labor. Mexican peons are coming to us by hundreds of thousands and very definitely threaten to lower our wage levels. If prohibi- THE LAST FIFTY YEARS 383 tion could be reasonably well enforced — that Is, as well enforced as other laws, such as those against highway rob- bery (which Is not saying much) — and If the American continent could be put on the quota basis under our immi- gration law, there is not much reason to doubt that wages would advance still more rapidly and savings and invest- ments expand at a hitherto unheard-of rate. A secondary result of our policy of developing our man power Is the use we have made of power-driven ma- chinery. Even In agriculture, more work is done by machinery and less by human muscles than In other parts of the world. Until recently, however, most of the power used on the farms was animal power. Before 1900 the horse power used on farms exceeded the horse power of all the steam engines used in manufacturing. Since that time steam engines have furnished more power than horses in this country. The quantity of power used Is probably the best index we have of the quantity of power- driven machinery. The diagrams^ on pages 384 and 38$ show the increase in the output per man and the power per man In two fundamental industries, Iron and copper. It will be noticed that the curves bend sharply upward in 1880, the first census year after the Centennial. Some comparison between the United States and other countries is quite as important as the growth of power from decade to decade in this country. Professor Taus- sig and others, especially Mr. A. W. Flux, have collected ^ These charts are reproduced from Louis I. Dublin, Population Prob- lems (PoUak Foundation for Economic Research; Boston, Houghton Mifflin Company, 1926), pp. 115-116. 384 THIS ECONOMIC WORLD Gross Tons HoRSt Per Year Power 1,400 1,200 1.000 600 600 400 200 o / 14- (2 10 8 6 4 2 / / OUTP JT PE ^ MAN / 7 / / / .^ / 1 .►-""'POWEP PER MAN 1 1 1 o o o o o o o> iO I*- eO 0) O o — CO cO cO CO 0^ 0> 0) Figure 8: Yearly output per man and power per man in the iron mines of the United States, 1860-1919. some significant evidence as to the product per worker in different countries in selected industries which permit of such a comparison. It appears that the product per worker Is higher In the United States than In other coun- tries, and this higher product per worker seems to be cor- related with the larger use of power and power-driven machinery per worker. In the steel industry, for example, the total number of workers is very little greater in the United States than in Great Britain, the ratio being 7 to THE LAST FIFTY YEARS 38s Thousands Of Pounds do O O O 0\ C< Os oOO> O h- 00 oO 00 00 00 cO «0 00»O^C3^ Figure 9: Yearly output per man and power per man in the copper mines of tile United States, 1860-1919. 6. But the total product in tonnage Is a little more than twice as large, showing that the product per worker is practically twice as great in the United States as in Great Britain. It is also worthy of remark that the American industry uses almost exactly twice as much horse power per man as the British. The table on page 386 shows the comparative product per man in the leading coal produc- ing countries. Gasoline is second only to coal as a source of power at 386 THIS ECONOMIC WORLD Tons of Coal Produced^ 191 1 1914 1918 Per under- ground worker Per worker of every kind Per under- ground worker Per worker of every kind Per under- ground worker Per worker of every kind 819 371 381 244 300 681 300 28s 176 216 5SS 560 127 803 341 389 200 673 275 284 143 S36 589 128 1,134 337 207 890 26s 138 460 New South Wales India 60s 126 the present time. The whole automobile Industry, of course, Is based partly upon this new source of power. Gasoline, however, does not create an automobile Industry in those countries whose people are not mechanically gifted. Even In this case, therefore, we come back to the proposition that the development of our man power Is the fundamental thing In the growth of our Industries. This Is said, not for the purpose of patting ourselves on the back, but as a suggestion for our future guidance. If we rely upon our physical resources alone, they will not do much for us; but if we develop the Industrial Intelli- gence of our people, they will find ways of developing whatever resources we have. They will be able to econo- mize their own labor by tapping other sources of power than human muscles, by harnessing our streams and the vast quantities of cheap power In our coal beds and oil fields. These latter will some time be exhausted, but the resources of the human mind are inexhaustible. If these ^ "Labor Costs in the United States as Compared with Other Countries," Quarterly Journal of Economics, November, 1924. THE LAST FIFTY YEARS 387 mental resources are developed, they will find other sources of mechanical power still to be harnessed — the winds and the tides and that incalculable stream of en- ergy that comes daily from our greatest available power plant, the sun. We shall have solar engines whenever it pays to build them, that is, when we no longer have any- thing cheaper, such as coal and gasoline. Meanwhile, we must be duly mindful of the fact that we are a fortunate people. Our geographical resources are very great. We probably have more good agricul- tural soil than any country except Russia. Our coal beds are probably more extensive than those of any country except China. So far as is now known, no country has such rich beds of iron ore. Little is yet known as to the petroleum resources of the world. At least we can say that we have discovered richer resources of this kind than any other country, though it may be merely because we have searched a little more diligently. Besides, we are a big country. Our very bigness has acted as a stimulus to the constructive imagination of our people. It has helped to rid our minds of the pestilential idea, inherited from the Old World and still sedulously taught by those who are wholly dependent upon that source for all they know of culture, that business is in some way sordid. The vast possibilities of our wide terri- tories have given to business a glamor akin to that of em- pire building in older countries and less happy times. We have made extensive use of power from other sources than human muscles even in agriculture. From the following table it will be seen that the production of 388 THIS ECONOMIC WORLD our three leading crops, corn, wheat, and cotton, a Httle more than trebled between 1870 and 1920, yet our total population did not quite treble during that time, and our rural population did not double. During the twenty years from 1900 to 1920, it increased very slightly, that is, from 45 million to 51 million. The only rational explanation is that the effectiveness of labor on farms was increased by the increasing use of power, mainly that of horses and mules, but latterly also of tractors.^ Leading Agricultural Products Leading Sources OF Power Year Corn (bushels) Wheat (bushels) Cotton (soo-lb. bales) Coal (tons) Petroleum (gallons) 1870 1880 1,094,255,000 1,717,434,543 1,489,970,000 2,105,102,516 2,886,260,000 3,208,584,000 235,884,700 498,549,868 399,262,000 522,229,505 635,121,000 833,027,000 4,024,527 6,356,988 8,562,089 10,123,027 11,608,616 13,439,603 29,496,054 63,822,830 140,866,931 240,789,310 447,853,909 587,331,190 220,951,000 1,104,017,166 1890 1900 1910 1920 1,924,550,024 2,672,062,218 8,801,404,416 18,622,884,000 While our population was trebling (almost), our pro- duction of coal multiplied almost twenty times and that of petroleum more than eighty times. These are our two principal sources of power — coal for factories and rail- roads, and petroleum, or its derivative, gasoline, for motor vehicles. ^ According to figures collected by the National Industrial Conference Board, 24.4 acres were being cultivated per farm worker in the United States immediately before the World War; in Scotland, 16.6; in England, 9.5; in France, 8.3; in Germany, 6.2; and in Italy, 4.2 acres. During the decade from 1910 to 1920, American farm labor increased in efficiency about 22.5%. The number of farm workers decreased about 9%, but the volume of crop production increased about 11%. The value of farm machinery in the United States increased from about $36 per worker in 1870 to $176 per worker in 1920. In other words, the average farm worker is now using about five times as much machinery as he did in 1870. THE LAST FIFTY YEARS 389 The following table shows the kinds of power used in manufacturing: Quantities and Kinds of Power Used in American Manufactures* (in horse power) Kinds 1909 1914 1919 1923 Steam engines Internal combustion engines 14,228,632 751,186 1,822,888 1,749,031 15,591,171 988,591 1,826,413 3,884,724 17,036,201 1,241,829 1,765,131 9,284,499 16,695,493 1,230,302 1,802,805 13,365,628 Water power Rented electric power * From Statistical Abstract oj the United States for 192 1 and 1924. The most significant thing in the above table is the rapid increase in the amount of rented electrical power. This is a part of a great movement for the manufacture of power in great central plants, driven by either steam or water power, or by a combination of both, and the distri- bution of that power to factories in the form of electric current. Already in 1923 the amount of rented electric power in factories is almost equal to and will probably soon exceed that of steam engines installed within the factories. No one except an electrical engineer is compe- tent to discuss the future possibilities of super-power, but anyone can see from the above figures that considerable progress has already been made. There is no reason for supposing that it will suddenly stop. Some think, that it will lead to a speedy development of our water power re- sources; others, that this will be postponed until coal becomes scarcer and dearer than it shows any sign of be- coming in the immediate future. It is not difficult to 390 THIS ECONOMIC WORLD imagine a time in the distant future when our coal beds and petroleum fields will be exhausted, when the technique of power transmission will be so perfected that not only our streams of water but the streams of solar energy that fall on the almost cloudless deserts of the Southwest will be harnessed and the power distributed over the length and breadth of the land. At any rate, It is a safe hazard that the best insurance against a future shortage of mechanical power is the development of the latent powers of the human mind. The technique and equipment for the development of these resources are the technique and equipment of popular education. Have we wasted these fifty years ? The mastery which we have gained over the forces of nature through the de- velopment of our human resources is a sufficient answer. Having sought first the ideals of justice and a fair chance for everyone, power and goods have been added unto us. We are able to have what we want. The next thing is to refine and elevate our wants. XIII HOW LONG WILL THIS DIFFUSION OF PROSPERITY LAST, AND WHAT WILL IT DO TO US? THERE may be differences of opinion as to whether this country as a whole is prosperous or not. There cannot be much doubt that wage workers are better off here than In other countries, in so far, at least, as high wages can make them well off. Nor can there be much doubt that our wage workers, taking the country as a whole, are better off than they were before the World War. The scale on which they are both spending and saving money should convince anyone of that. As a partial offset there are, of course, some who have lost because of these high wages. Farmers who cannot work their own farms but must depend on hired labor have not been able to get prices that would enable them to pay these high wages without losing money. A few lines of manu- facturing have found themselves In the same condition. Besides, there Is the general complaint of the high wages of domestic servants. These, however, are among the Inevitable hardships of any change, however progressive It may be in its general effects. They who formerly asserted that high wages or a gen- eral diffusion of prosperity were impossible under the 391 392 THIS ECONOMIC WORLD present economic system because of what they supposed was an Inevitable tendency of wealth to concentrate In fewer and fewer hands, must now content themselves with saying that our present condition will not last, that as soon as certain special circumstances are removed, wages will again tend downward, interest, profits, and rent up- ward, and that the so-called "law of concentration of capital" will begin to produce its logical results. The "special circumstances" which are commonly evoked to explain this temporary diffusion of wealth are, first, the World War; second, our rich natural resources; third, our sparse population. "Just wait," they say, "until the war profits are dissipated, until our natural resources are used up, or until we become as densely populated as older countries, and then see what happens to wages and the prosperity of laborers." Whatever effect profiteering might have upon total national wealth, there is no reason to suppose that it alone would produce higher wages or that it would even tend toward a wide diffusion of prosperity. It might be ex- pected, on the contrary, to concentrate rather than to diffuse wealth. The spending of money made by war profiteering would, of course, tend to raise prices and stimulate business activity, but it could scarcely raise real wages by raising money wages more than It raised the money cost of the things laborers had to buy. Again, if profiteering accounts for our generally high wages, Hol- land, the Scandinavian countries, Spain, and Latin America, which never entered the war at all, ought to be even richer than we and also ought to show a stronger HOW LONG WILL IT LAST? 393 tendency toward the diffusion of wealth by paying higher wages relatively than we. As to our rich resources, we are undoubtedly blest in that respect; but not more so than many other countries, such as Brazil, Argentina, Mexico, and Russia. Yet these countries do not pay high wages. In fact, rich resources, unless the institutions of the country prevent it, are quite as hkely to result in concentration as in the diffusion of wealth. To begin with, rich resources attract capital as well as labor. There was a time when foreign capital was attracted to this country as well as foreign laborers. Lately we have not been importing much capital, but foreign laborers kept coming until we had to restrict im- migration to prevent our labor market from being flooded with them. The rich resources of Mexico tend to attract American capital; they do not attract any American wage labor. In fact, their wage workers tend to come here and will continue to do so until they are restricted; while our capital tends to go there and will continue to do so until the Mexican government restricts it. In short, that is a country which, either in spite of or because of its natural resources, attracts capital and exports labor, while ours exports capital and attracts labor. Institutions seem to have more to do with the diffusion of prosperity than natural resources. Institutions make this a better coun- try than Mexico for labor. Our natural resources do not attract any Mexican capital; Mexico's natural resources attract our capital. Another point to be remembered is that the prosperity of our wage workers has been perceptibly accelerated 394 THIS ECONOMIC WORLD since the World War, yet no new natural resources have been discovered or developed during this period. Two things seem to synchronize with this upward bend in the curve of prosperity, namely, the restriction of immigration and prohibition. This would seem to suggest that these had more to do than our natural resources with the rather sudden increase in the prosperity of our wage workers. At any rate, this noticeable change In economic conditions ought to be correlated with some fairly recent happenings and not accounted for on the ground of something that has existed from the beginning of our national life. As shown in other chapters, there are sound and logical reasons why the restriction of immigration should have been expected to raise wages and why prohibition should result in greater general prosperity. As to our sparseness of population, we have a great advantage over some old countries, but there is no reason why that advantage may not be permanent. Of course, if we open our doors to immigration it is only a question of time when our wages will fall to the level of those of Europe, or even of Asia if free Asiatic immigration is permitted. But if American workingmen and their friends are alert and ready to vote against each and every anti-restrictionist, no matter how he covers up his anti- restriction policies with other less important issues, there is no reason why that should ever happen. They hold that matter In their own hands, and so far as Immigration is concerned, they can vote themselves low wages by voting for anti-restrictionists, or high wages by voting for restrictionists. HOW LONG WILL IT LAST? 395 As to the natural Increase of population, that also is under control. A high standard of living, the world over, goes with a low birth rate, and a low standard with a high birth rate. If we see to it that a high standard of living is maintained, that will take care of the population problem, and we never shall be so overcrowded in this country as European, not to mention Asiatic, countries have already become. Besides, as shown In the chapter on the "Present Status of the Population Problem," It is not the total population so much as the occupational dis- tribution of the population that counts in determining whether wealth shall be concentrated or diffused. If, through enlightened views on education and a wise direction of our educational policies, we continue thinning out the ranks of manual workers and increasing the num- ber of those who are capable of so managing industries as to pay high wages, that is, by training large numbers of technicians, managers, Investors, and enterprisers, two things can be predicted — one with reasonable and the other with absolute certainty. The one prediction Is that, with a sufficient number of highly trained men massed on the problem, we shall find ways of utilizing other resources even though those on which we now rely should be ex- hausted. When our coal beds and oil wells are all gone there are other potential sources of energy to draw upon. The distillation of combustibles from shale, and even solar engines are within the limits of technical possibility and probably can be made economically possible whenever the demand Is sufficiently Intense. Soil chemists and soil bac- teriologists seem to show no lack of confidence in the 396 THIS ECONOMIC WORLD possibilities of soil conservation and soil improvement. Numerous other possibilities lie before us, and it is a reasonable prediction that, If enough intelligence is massed upon discovering them, we shall never lack for physical resources. We can predict with absolute certainty that such pros- perity as the nation as a whole achieves will be diffused and not concentrated if we look carefully after the occu- pational distribution of our population. If we do this, and if the total prosperity increases, every class or occupa- tion will share in it, while if our total prosperity declines, every class and occupation will share also in that decline. There is absolutely no reason why the widely diffused prosperity which we are now witnessing should not perma- nently increase. The only possible reason why our total prosperity may not increase indefinitely is the possibility that at some time we may fail to mass enough high intelli- gence upon the economic problems of that time to meet new difficulties as fast as they arise. The tendency toward diffusion will stop when but not until we ourselves reverse the process by doing one or more of several things. We can reverse the process by discouraging our ablest men from going into business and expanding our industries. When our industries are run by second- and third-rate men, we shall have second- and third-rate industries which cannot expand nor employ large numbers of men. We can discourage our ablest men from entering industry in several ways. We can discour- age them, for example, by cultivating a general jealousy of or resentment toward those who are successful in build- HOW LONG WILL IT LAST? 397 ing great enterprises or In making two jobs to grow where one grew before. We can also discourage them by chang- ing our educational policy and aiming to produce In our universities men fitted only for graceful consumption, ele- gant leisure, or the more ornamental professions. We can also work for concentration rather than diffusion of wealth by discouraging thrift and decreasing the supplies of capital. We can do this by writing books on the fallacy of saving and by carrying on an active propaganda in favor of lavish expenditure on the part of all classes. We can do it also by endowing institutes to further the cause of extravagance, thus limiting the profits of accumu- lation and ownership to the few and keeping the masses in what some are pleased to call "their places." The most direct and deadly thrust at labor is made by those who are working to increase the supplies of manual labor, first, by attacking our immigration law, second, by attacking our system of public education, third, by attack- ing prohibition, fourth, by advocating large families among the poor, thus assuring a plentiful supply not only of cannon fodder but of cheap labor as well. Many of these attacks are camouflaged under various other names. In reality, they are all aimed to make things easier for the employing classes by supplying them with increasing quan- tities of low-wage labor. Those who are working against our immigration laws are so obviously working for the impoverishment of our own manual workers as to make it an insult to the intelligence of the reader even to stop to discuss it. Certain self-appointed spokesmen of labor are attack- 398 THIS ECONOMIC WORLD ing the prohibition law. When men sober up, begin to work steadily, and to save and Invest a little money, they become more independent, more inclined to pick and choose their jobs. As Mrs. Cannon has ironically ex- pressed it, "Prohibition has withdrawn from the economic field that last hope of the overburdened American house- keeper, the faithful charwoman, sole support of a drunken husband." A gentleman in Spokane once gave a unique argument against prohibition. In the old days, said he, when the lumberjack came into town after several months in the woods, with a few hundred dollars in his pockets. It took him only a short time to blow In his money. Then as soon as he sobered up, he was compelled to go back to work. Under prohibition, it took him months where it formerly took him weeks to get rid of his money, and until he did, he would not go back to work. Every attack upon our system of public education is a movement for the increase of our supplies of low-wage labor by leaving great masses of men with no training that will fit them for anything except the low-wage occupa- tions. Everyone who advises worklngmen to beget more children than they can support and educate properly is also, whether he knows it or not, working for a large supply of cheap labor. There are other pessimists who admit that so far as material prosperity is concerned, our working classes are well off, but they will not thus be robbed of a grievance. Admitting that prosperity is widely diffused, that wage workers as well as others, in addition to saving and in- vesting on a large scale, are also buying comforts and HOW LONG WILL IT LAST? 399 even luxuries on a scale never before known in the history of the world and not now known in any other country; admitting also that such great fortunes as are still being made are made not by monopolizing the necessaries of life but mainly by catering to the popular taste in cheap luxuries, ranging all the way from chewing gum to auto- mobiles, including such things as low-priced cameras, popular novels and magazines, soft drinks, moving pic- tures, popular athletics, and so on, nevertheless they main- tain that this is not real prosperity, because the cheap luxuries which people are buying do them no good, that they are merely wasting their substance in riotous living and are, in reality, no better off than wage workers in Europe or even in Asia. This brings us to the question raised by the second half of the title of this chapter. What will the diffusion of prosperity do to us? It calls for serious discussion, and should not be decided either way in a spirit of flippancy. There is some advantage in being in a position where one can buy useless or even harmful things, even though it is agreed that it is better not to do so. A situation in which large classes cannot buy such things because they have not money enough to buy anything but necessaries is not a good economic condition. An economic condition which permits every class to buy something besides the necessaries of life admittedly has its dangers; but it also has in it possibilities for good. Certainly, it would be the poorest kind of a reason for keeping the masses in a state of poverty to say that they are likely to spend their money foolishly if they become prosperous. This merely means 400 THIS ECONOMIC WORLD that all problems will not be solved the moment potential prosperity in the form of purchasing power is diffused among all classes. Nevertheless, it does positively mean that one problem is solved, and we can then turn our attention to others that follow in its train. The new-rich everywhere are inclined to have their fling — to buy the things that have been just beyond their reach in the days of their poverty. Wage workers as a class are exactly like every other class in this and all other respects. Instead of being a just subject of ridicule, the new-rich are always entitled to our sympathetic interest and encouragement. To begin with, new wealth, provided it is earned, is the most respectable kind of wealth. It represents the results of one's own ability and exertion. Inherited wealth is the least defensible form of legally acquired wealth, and the most useless members of society are those who live unproductively on Inherited wealth. In the second place, there Is pathos rather than humor (if there is a real difference) In the efforts of any creature to adjust itself to a situation for which Its previous ex- perience has not trained It. This applies not only to the fish out of water, but also to those people who were once poor but now rich, as well as to those who were once rich but now poor. A generation or two of affluence will be a means of educating the majority of laborers In sounder appreciation of real values. The Intelligentsia, however, are generally more worried over what Is happening to themselves than over what manual workers will do with their new-found prosperity. Many of them are quite willing, even anxious, that all HOW LONG WILL IT LAST? 401 large employers of labor should pay higher and higher wages to their laborers, but are incensed when those wages are shifted onto themselv^es in the form of higher prices, and they are dumfounded when household servants also demand wages comparable with those which may be earned in large industrial establishments. The readjust- ments that will have to be made in private life are even more profound than those that are taking place in indus- try. It is the machine, or rather, the inventors, investors, and enterprisers back of it, that is making possible the large production per man and the high wages in industry. It is likewise the machine that must relieve housekeepers, small shopkeepers, and farmers of the soul-killing drudgery which they formerly shifted onto cheap labor or, in a few cases, onto slaves. It is as useless to attempt to stay the course of this revolution which is shifting drudgery onto the machine as to attempt to stay the stars in their courses. However dis- paragingly we may speak of our "machine-made civiliza- tion," no one can truthfully deny that it excels every other civilization in one important respect. It makes possible the emancipation of all, and not simply of the few, from the body-wrecking, brutalizing effect of overwork. The "man with the hoe" who became merely a food motor is to be displaced by the man directing a machine which is driven by a mechanical motor. If they only knew it, the machine is to do for the cultured householders of the future what cheap servants did for those of the past. Every civilization of which we know anything has had some means by which the fortunate elements in society 402 THIS ECONOMIC WORLD could relieve themselves of soul-killing drudgery and de- vote themselves to the arts and graces of life. Slaves supplied the so-called need in certain cases, cheap wage labor in others. The machine is destined to supply it in the stage into which we are now entering. It has the advantage over previous stages of not requiring that large numbers of human beings shall be doomed to a life of drudgery in order that others may be relieved. In this new age, all may be relieved of drudgery and all may have a surplus of energy with which to do what they like to do instead of being compelled to do what physical necessity commands. This must be accepted as a real step In pro- gress, even though the energy thus released should, in part, be wasted in ludicrous gambolings. Let It be understood once for all that If we are to have a wide diffusion of prosperity among all classes, the servant-keeping class must dwindle to smaller and smaller numbers. When a household servant expects an income comparable with that of the head of the household, house- hold servants are an impossibility. They are definitely limited to those households whose heads have Incomes far in excess of those demanded by household servants. In this respect a household differs fundamentally from a pro- ductive industry. In the latter, it is quite possible that the income of the owner may really be less than that of many of his employees. The farmer's is frequently less than that of his hired man. But that would be impossible in the consuming unit known as the household. Equality of prosperity means precisely that the incomes of house- hold servants should be comparable with those of the HOW LONG WILL IT LAST? 403 heads of households. The way out Is not to breed morons in order that we may have cheap help; It Is to use our wits to find ways of getting along without household help of any kind. Electric washing and drying machines, vacuum clean- ers, and a number of other mechanical devices are already enabling well educated and well-to-do women to get along comfortably without the washerwoman and the char- woman who formerly had to work to support their drunken husbands. By changing from the ceremonial meal, the fashion for which was set by a leisure class which could afford numerous servants, to a simpler one- course meal, where everything is placed on the table and everyone helps himself, we shall not only save a great deal of useless labor, but be better and more wholesomely fed besides. One welcome evidence of the revolt of youth Is the refusal of college students to pay the stupidly out- rageous price for board which Is necessary if elaborate service is provided at the present high wages of labor. They wisely prefer the lunch counter, the cafeteria, or even the "hot dog" stand, where they pay for what they want and are not compelled to pay for what they do not want In the form of elaborate service. Even our domestic architecture Is making rapid im- provement in the same general direction. Houses are seldom constructed nowadays even in the fashionable sec- tions with a view to advertising the solvency of the occupier by their size and the visible fact that it requires a great deal of work to take care of them. The old type of slum is, at the same time, disappearing. The houses 404 THIS ECONOMIC WORLD of the well-to-do are being built more and more with a view to saving steps and enabling well educated and well- to-do people to live without servants and without drudgery. They are noticeable not only for their small size, compact form, and the convenient arrangement of rooms, but for the labor-saving features that are being built into them. Even in small houses, the incinerator solves the great problem of garbage, dust, and waste paper, chutes and dumb waiters connecting different stories from attic to cellar save much stair-climbing. Breakfast nooks in kitchens foreshadow a return to the old New England kitchen where the housework and the family life were not divorced. We have made only a beginning in the general direction of saving steps and eliminating drudgery from housework. The ceremonial home life that requires cheap household service for its very existence has had centuries, nay, thousands of years, to fasten itself upon us. We have been less than a generation without cheap help. While practical, matter-of-fact people are going directly about the work of replanning our home life, many romanticists are doing all they can to retard it. Having only a sort of racial memory to guide them, with very little construc- tive imagination, they cannot see how the new life can have any beauty or romance in it. Only that which has been hallowed by time and rendered romantic by being blended with old memories has value for them. How- ever, the change continues. It is objected that this will make us all slaves of the machine. That it will make us more and more dependent HOW LONG WILL IT LAST? 405 upon machinery is true, but we shall be no more dependent upon machinery than slave owners were upon their human slaves, or than well-to-do persons have always been upon hired help. But to be dependent upon some person or some thing does not make us the slave of that person or that thing. If it did, then the slave owner was really the slave and the slave the master, or the well-to-do employer was the slave of the low-wage laborer and the low-wage laborer was the master. Such was not the case, and neither can a machine ever become our master, however much we may be dependent upon it. Others find an objection In the fear that we are coming to be dominated by things, or that we are becoming too much obsessed with the value of mere things. Before we pronounce the word "things" In too scornful a tone, we shall do well to consider carefully what mere things, in the sense of mechanical contrivances, have contributed, passively, to the larger and finer life of the present. Without mechanical contrivances, our ability to com- municate with our contemporary fellow beings would be limited by the carrying power of the human voice and the running power of the human legs; and we could benefit by the thoughts and achievements of past generations only In so far as the human memory, supplemented by oral trans- mission, could hand them down to us. Even books and pictures are things. They carry the Impression made by those who thought and worked at one time down to later times. They are therefore a means by which men who live at a later time may correlate their own thoughts and actions with the thoughts and actions of those who 4o6 THIS ECONOMIC WORLD thought and worked in earlier times. They vastly enlarge the possibilities of human cooperation both in space and time. But books and pictures are not the only — It is not quite certain that they are the most important — pieces of ma- terial that carry the imprint of one generation to future generations. Every piece of durable material on which anyone has ever worked does that. It Is this ability of certain pieces of matter to carry and transmit the Im- pression of man's work that enables large numbers of people, widely separated In time and space, to communi- cate with one another, to coordinate their labors and to make whatever approach we have been able to make to- ward a common life. The long line of inventors and workers who together made a machine are coordinating their labor with that of the one who uses the machine. Without some such medium as the tool or the machine, the general collective name for which Is capital, each indi- vidual either would have to work alone or, at best, could cooperate with only a very few who at the same instant happened to be together in one place. He whose social optimism Is not stirred by thinking that a large number of investors, Inventors, mechanics, and common laborers, many of whom have long ago lived out their allotted time, are really helping the housekeeper of today with her housework, relieving her of the fatigue which she or her servants of a previous generation under- went, must be a misfit in this age of large ideas. Of course, machines are not everything. A modern Martha, In the most up-to-date house, with every known HOW LONG WILL IT LAST? 407 mechanical device to save work, may lack the soul of Mary; but frankly, that is not the question. The question is, given the soul of Mary, would the fact that she had the benefit of labor-saving devices destroy that soul? To say yes would not be much of a tribute to the soul of Mary. These devices merely relieve the bodies of the Marys and the Marthas of much drudgery and release energy which may be used in whatever ways their souls may desire. It is interesting and probably significant that the things in which we, in this country, take most interest are not the kind that are to be passively enjoyed. Most of them require action, even strenuous action, on our part in order that we may get any satisfaction out of them. The whole field of sport, of which some of our critics think that we are excessively fond, is a field of strenuousness instead of passivity. The kind of wealth which Americans seem most to enjoy is not the kind that enables them passively to register pleasurable sensations, that is, it is not to be classified as consumers' goods; it is rather the kind that they must actively control and master in order to get the thrills which they enjoy. Wealth, with us, more than most other people, consists of instruments of production, and we use them productively in much the same spirit as that in which a sportsman uses the instruments of sport. From the point of view of those who are primarily inter- ested in consumption in the narrower sense, we are, as a nation, poor consumers. We are not interested in grace- ful consumption and elegant leisure, much less in gour- mandizing. Our millionaires are not, as a rule, fat- necked, pot-bellied and pop-eyed; they are generally lean 4o8 THIS ECONOMIC WORLD men who might easily be mistaken for hard working stu- dents who burn much midnight oil. They seem to suggest a diet of crackers and milk rather than of rich viands and costly wines. They whose interests center in a titillated palate and a full belly rail at our prosperous men for not enjoying their wealth more than they do. Such minds cannot com- prehend the superior satisfactions of a life of action over a life of passive enjoyment. It is fortunate for our work- ing classes that prosperous men prefer to spend their money for new and better engines, machines, and other instruments of production rather than for consumers' goods. It is also fortunate that our successful men do not retire from business as soon as their barns are full, saying, ''Soul, thou hast much goods laid up for many years; take thine ease, eat, drink, and be merry." They keep at it, for the sheer sport of it, long after they have acquired enough to enable them to retire. This results in the mass- ing of a larger quantity of high intelligence on business problems than would be had if every man of superior ability were to retire from the field as soon as he was able to do so. The latter habit would tend to leave industry in the hands of inferior men who never could make enough to retire; this, in turn, would result in inferior industries, and this in inferior wages. Civilization, in one of its many important aspects, is the utilization of surplus energy. The character of a civilization is largely determined by what people predomi- nantly do with their surplus. Some, following the ex- ample of the plants and animals, as pointed out in a HOW LONG WILL IT LAST? 409 previous chapter, use up their surplus in multiplication; this results in overpopulation. Some use their surplus in leisure; this results in general stagnation and torpor. Some use their surplus in luxurious consumption; this re- sults either in gluttony and bestiality or in the arts and graces of elegant luxury. Some use their surplus in action; this results either in highly developed sports, or, if they take their sport in the form of business activity, in highly developed industry and much buying of the engines and machines of production. If the latter is carried out to its logical conclusion, it results in the piling up of all in- struments of production whose collective name is capital, the disappearance of interest, and giving to the workers the entire product of industry in the form of wages, salaries, and profits. Men of action who undertake big things sometimes require big tools. Columbus required ships for his big undertaking, and ships in that day were big and expensive tools. The artist also needs tools, but they are not usually big or expensive. Palette and brush, mallet and chisel, do not require large Investments of capital. But that is no reason why those who use such things should call Columbus a mercenary person because he sought large sums of money. The thing that Is done with money, not its quantity, Is the thing which we should weigh and con- sider. Columbus wanted larger and larger fleets in order that he might carry out larger and larger operations. To one who saw no significance In those operations, but saw only that he was always asking for more and more equip- ment, he must have seemed mercenary and grasping. 410 THIS ECONOMIC WORLD Nor is it certain that Columbus was more benevolent or less self-interested than many a modern enterpriser. He seemed to crave the high esteem of the world and to desire to make a great name for himself and his family. He even tried to leave a great estate for that family. There is not the slightest reason to believe that his motives differed essentially from those of many another great enterpriser of that and later days. They are all worthy of vastly more respect and consideration than those whose chief interest is in what is commonly called consumption, or in the use of material things, not as tools for great achievement, but as means of gratifying one of the five senses. But why should modern enterprises require such large and expensive tools ? The ancient and the medieval world got along without them and did some things better than the modern world can do them. To say nothing of the fine arts as they are now defined, finer work was done in many other fields of endeavor than can now be done with our huge machines. More beautiful books, for example, were made by hand than any printing press can turn out. The same formula, with verbal variations, can be used in a multitude of other cases. One thing, however, none of those hand methods could do, either then or now. They could not provide those desirable things for the masses of the people. Those beautiful products of hand work were available only for the few very rich people who could afford to pay for them. The book is a good example. The printing press, with its movable type, gave us the first great example of HOW LONG WILL IT LAST? 4" mass production with interchangeable parts. It cannot produce such beautiful results as some of the Illuminated manuscripts of the days of hand work, but it does place books within the reach of everyone. By similar means, shoes, clothing, glazed dishes, chairs, tables, bathtubs, canned fruits, fresh meat, wheat bread, watches, cameras, telephones, pianos, victrolas and radio sets, and a host of other things In bewildering number and variety are pro- vided for everybody. So much must be admitted, but the pessimist will not be robbed of his grievance. He still asks, are these things worth while? He is never, however, fair in his compari- sons. He Is likely to compare the state of the few who could enjoy the rare and beautiful things of the past with that of the many who can now enjoy the cheap and abundant things of the present. That is not a true com- parison. He should compare the lot of the many who, in the past, could enjoy neither the rare and beautiful things of that time, nor the cheap and abundant things of today, with the many of today who at least enjoy abundance. If one who now rhapsodizes over the glories of a medieval town were compelled to live in a medieval town, neither as the nobility and the rich burghers lived, nor as the very poorest lived, but as the common run of the people lived, he would soon be disillusioned. It is to be regretted that he cannot be subjected to that test. The kinds of enterprise which produce an abundance of more or less desirable things and put them within the reach of masses of people all require large and expensive 412 THIS ECONOMIC WORLD tools, much larger and more expensive than Columbus required for his great enterprise. That is really all there is to this so-called capitalistic system, to distinguish it from that which preceded it. Both have been based on private ownership. The size and costliness of the tools have increased. The joint stock form of organization and the method of voluntary cooperation provide the means by which these great and costly aggregations of tools can be owned and operated under the system of contract or voluntary agreement, without resorting to the method of authority and obedience. But will not this accumulating prosperity eventually be too much for us and break down the morale of civiliza- tion? Much has been said and written, in a vein of high moral seriousness, on the uses of adversity, the Pentecost of calamity, and the purifying furnace of affliction. It is time for us to begin thinking, in the same vein of high idealism, about the uses of prosperity. Prosperity, like adversity, is selective; it is a winnowing fan which sepa- rates the wheat from the chaff. Some are improved by adversity, but others are demoralized by it. The same is true of prosperity. In a remarkable sermon, delivered during the darkest days of the World War, Professor Jack pointed out that adversity and affliction were not in themselves good, but when nobly borne usually brought good in their train, whereas when ignobly borne they could bring only evil. This also might be said of pros- perity. There is no reason why it, when nobly borne, should not bring even greater good than adversity. Men have been more carefully schooled for adversity HOW LONG WILL IT LAST? 413 than for prosperity. During the greater part of the life of man on this earth, he has had a constant fight with adversity and has acquired considerable experience to help him In his fight. He has not had time to accumulate any- thing like the same experience In meeting the problems of prosperity. All his moral and religious systems that have been of any use to him have provided him with disciplines against the demoralizing tendencies of poverty and ad- versity. Where he has lived up to these disciplines, they have fortified him, and neither poverty nor adversity could break him. Special classes have here and there escaped from adversity only to come In contact with the demoralizing Influences of prosperity. There Is not and never has been a religion or a moral discipline that for- tified the prosperous classes against these new dangers as the old religions and moral disciplines had fortified them or their ancestors against the old dangers. Consequently, every aristocracy which the world has ever known has been a decaying aristocracy. It has either disappeared or has been nominally preserved by constant recruiting from below. For the first time in history the masses themselves, in this country, are emerging Into a condition of prosperity comparable to that of the aristocracies of any previous age. They have neither practical experience, nor a re- ligion, nor a moral discipline that was ever designed to fortify them against these new dangers. Every religion that amounts to anything started among the poor and the afflicted. It flourished, if It did flourish, because It pre- served its people In the midst of their poverty and their 414 THIS ECONOMIC WORLD afflictions. It gave them a discipline which kept them true to the basic principles of right living in spite of the hardships which they had to endure. Hardship could not break them. Every modern sect, even Christianity, has had the same origin and has flourished, if it did flourish, for the same fundamental reason. But a new thing has happened in this country. There are no longer any poor as that word was once understood. There are none who need the old discipline because they are not facing the old danger. A new danger, for which they have no discipline, is upon them. Our civilization, or our branch of the human race, is facing a crisis. Unless it can speedily acquire the necessary experience, or unless some religious or moral discipline can be provided and made effective through great preaching, that is, preaching by men who not only see the crisis but can appeal with such passionate and overpowering eloquence as to turn the masses from the evils that always attend prosperity, the masses themselves will go the way of all prosperous classes. They will succumb to the same evils which have destroyed all aristocracies. Many will succumb to these evils in spite of all that can be done. The hope is that a remnant can be saved from the general demoralization to serve as the seed of a new civilization. After all, this is the way of all progress. It is the method of trial and error, of variation and selec- tion, of evolution. In the days of adversity, they who were broken by it disappeared in pauperism, vice, and criminality. • Only those who were strengthened by it ever succeeded in conquering it and lifting themselves HOW LONG WILL IT LAST? 415 above it. The same will be true in the coming days of prosperity. Some will run amuck, as those just out of bondage have always done, celebrating their recent escape from the backwoods, the slums, or the Ghetto by throwing off the shackles of Methodism, Quakerism, Puritanism, and Judaism and seeking new sensations in various forms of physical and spiritual self-indulgence, ranging all the way from physical gluttony to salacious novels and weird forms of art. Others, like good sports, may take their prosperity modestly and thankfully, with a feeling of noblesse oblige, still cultivating in themselves the funda- mental virtues of industry, sobriety, thrift, and domes- ticity, even taking the vow of poverty in a modern and constructive sense by regarding all their wealth as tools to be used in further production rather than as means of self-indulgence. These, if they exist in sufficient numbers, will be the preservers of what is good in the old civiliza- tion and the builders of the new. INDEX INDEX Abortion, aspect of high death rate 26, 34 Action freedom of, under law 181 ideal of 99, 128, 407-408 Adamson Law 243 Adversity, uses of 412-413 Agreement see Voluntary agreement Agriculture acreage per capita in 292-293 acreage per worker in 61 in United States, present state of 293 increase of acreage used in 293, 330 index figures of comparative productivity in 61 limitation of mechanical devices in 23 occupational congestion in 299 production and use of power in 388 ratio of labor to quantity of land in 330-331 see also Cultivation ; Dimin- ishing returns ; Land Alcoholism see Intemperance ; Prohibition ; Sobriety Amendments, Constitutional see Constitution American Telephone and Telegraph Company, stockholders of 379 Animal power 22 Authoritarianism and Bolshevism 118-121 either conservative or radical 123 in England and France 112-113, 114 Authority disposition to escape from 173. 178-179 proper exercise of 127-128, 181, 183-188 restriction of choice under 188-189 Automobile industry 372-373 B Balance of nature, an illustration of static condition 44*45 Bargaining power equalized by occupational redistribution 263 inverse to political power 174-175 of men politically and economically free 262 of necessitous man 261 Belgium, productivity per worker in in agriculture 61 in coal mining 386 Bill of Rights, in United States constitutions 225, 227 Biological family 29 see also Family Birth control 13, 34 by marriage 285 Birth rate a physiological function 25-26 and death rate 6-7 balance of, in stationary population 25 and standard of living 287- 288, 395 control of, by parental responsibility 26-27, 285 419 420 THIS ECONOMIC WORLD Birth rate (continued) differential, a menace 308-309 graphic illustration of 310 remedy for 311 "natural" 6, 26 not controlled under promiscuity 34 Blackstone, quoted 220 Bolshevism and Authorita- rianism 118-121 British Labor Party 114, 116-118 Brotherhood of Locomotive Engineers Cooperative National Bank 381 Building and loan associations 374-375. 376 Business check on overexpansion of 340-341 predatory and productive methods in 20 prejudice against 57-59. 77. 396 Business cycle 340 Business management see Managers ; Management Capital accumulation of and encouragement of industry 358-360 in small sums 374 and productivity, correlation between 61 as tool of service 106-108 ceasing to be a fixed charge in industry 347 control of I99. 200, 201, 217-218 effect of abundance of 347, 358 effect of increase of demand for 327-328 excess of 348 exports and imports of 393 in mechanical instruments of production 355. 407. 409 not predatory 19 ownership of 177 see also Ownership scarcity of, a hindrance to occu- pational redistribution 51, 60-61 see also Wealth Capitalism does not develop into communism 118-119, 176 founded on intelligence and thrift 119 Capitalist class, disappearance of income of 349 Capitalist system, characterized by costliness of tools 412 Capitalists see Enterprisers Celibacy 314 Centennial Exposition, a landmark 369 Children responsibility for support of 33-34 see also Parenthood China, family system in 34 Civilization definition of 361 expanding and pent-up types of 291-292 "machine-made," emancipates from drudgery 401 prehistoric, cause of dis- appearance of 65-66 the utilization of surplus energy 408-409 Coal mining occupational congestion in 299-300 productivity per worker in, U. S. and other countries 286 Colleges and universities attitude of, toward business S7-S8, 59, 77. 397 endowments of, in United States 367 Colonization and dispossession of weaker races 8-9, 14 Columbus, a type of enterpriser 409-410 INDEX 421 Communal property of the biologic family 30 Communism 30, 33, 34, 36, 52-53, 80, 113 compulsory 172 misuse of term "liberal" by 122 not developing out of capitalism 118-119, 176 will not eliminate competition 144 voluntary 170, 17a Communistic societies in the United States 170, 171 reasons for failures of 172 Competition an expression of human nature 142, 143-144, 170 a "survival" factor in evolution 149 among producers 20, 139 and amusements 143 and the Golden Rule 89 economic, distinguished from brute struggle 139, 150 free or unrestricted, a misnomer 139 high standards of 160 is it an evil ? 86-89 political 141 wastes of 141 Competitive spirit can it be eradicated ? 143- 146, 149-150 not a product of environment 146 to be harnessed to productivity 146, 149 Competitive system, the 138-167 Conduct, standards of see Standards of conduct Conflicts of interests 80-83 Congestion of population 34, 297-298 Congestion, occupational see Occupational congestion Conservative and conserva- tionist 122-123 Constitution of the United States amendments to Fifth 225, 227 Fourteenth 227, 237, 238, 250, 258, 259, 264 Nineteenth 252 Bill of Rights in 225, 227 Consumption and production 94-95, 99-100 inequalities in 200-201 Contract freedom and opportunity secured by 264 opposition to, as a form of coercion 185, 187-188 Contract, freedom of see Freedom of contract Contracts adequacy of consideration in 267-268, 273-274 cancellation of, by courts 270-276 enforcement of 184 inequitable, not enforceable 266-267 specific performance of 265-270 under duress, voidable 271 undue influence in 271-273 with necessitous man as party 265 Control concentration of 199, 217-218 inequalities in 200-201 Cooperation compulsory 80, 139, 140, 141, 170 lack of Interest in 142-143 voluntary 140 possible under present economic system 170 Copper mines, in U. S., power and output per man in 385 Copyrights and patents, utility of 84 Cost theory of value 207, 208 Crime and standards of conduct 150-151 Criminals partial sterilization of 311-312 42 2 THIS ECONOMIC WORLD Criminals {continued) proper treatment of 313 Cultivation of land diminishing returns in 12 see also Diminishing returns intensive 29S meaning of lo-ii see also Agriculture ; Land Custom, authority of 132-133 D Damages, suits for 276-278 Dark Ages 314-31S Death rate * decline of, in United States, 1880-1924 364-36S "natural" 6-7 natural control of birth rate by 25-26 see also Birth rate Declaration of Inde- pendence 223-224 Degenerates, physical sterility of 311 Democracy and liberalism in govern- ment 125-126 and volutary agreement 173 not necessarily liberalism 123-124 see also Jeffersonian Democracy Democratic Party 113 Despotism, protection of production by 17, 18-19 De Tocqueville, quoted 190 Diminishing returns in cultivation of land 12, 282-283 graphical illustration of 295-297 Division of labor and occupational congestion 298 cause of lack of occupational balance 39-43 illustrations of 42-43 problems created by 39, 42 see also Specialization Drunkenness see Intemperance ; Prohibition ; Sobriety Due process of law 225, 226, 228 essentials of 231-233 judicial interpretation of 229-233 no comprehensive definition of 228-230 rights protected by 233-235 Economic functions, balancing the (Extrication No. 7) 38-63 summarized 61-63 Economic law 280-281 Economic principles, uni- versality of 37, 67, 103 Economic reform by removal of hindrances to economic forces 41, 43, 44 not.2ilaissezf aire ^oWcy 51 Economic system, the present 38 an orderly system 72 in what sense individualistic 169 is it "somehow good?" 70,108-109 lack of understanding of 39 not yet perfect 78-83, 103 perfectability of 74, 78-79, 109 question of the future of 87-88 wisdom of preserving 79, 80 Economic tendencies and historical facts 75-76, no Economists, personal bias of 73 Education and preservation of present prosperity 76-77 and self-development, in the United States 93 attacks on, dangerous to labor 397-398 expenditures for, in United States 365-366 lack of, a hindrance to occupational redistribu- tion 51, 52 to raise standard of living 289 to restore occupational balance 41-42, 43, 53, 55, 166, 301 INDEX 423 Educational ideals of United States 93. 3^8 Educational policies, aims of 329-330 Electrical power 389-390 Elegance, ideas of, largely traditional 307-308 Eminent domain 255-256 England effect of Labor Party's policy in 117 liberalism in no, 112 type of "expanding" civilization 292 wealth in, per capita, 1923 363 see also Great Britain Enterprisers, technicians, and capitalists competition among 349 effect of dearth of 324 effect of training of 395-396 export and import of 325-326 increase in number of 60, 320, 323, 324, 325 will result in lower interest, profits and salaries 332 increase in quality of 323-324 Equality desire for 190 economic 190-219 bases for determining 193-194 meaning of 191 of condition 194-195, 197 among occupations 197, 203, 206-207, 338 between persons 197 of enjoyment 198,200-201,217,219 of opportunity 194-195, 196 Equality before the law 220-260 in American constitutions 224-225 Equilibrium of supply and demand 44 Equilibrium price 45*46 graphic illustration of 333-334, 335-337 Equilibrium wage 46-47. 60 affected by immigration 47-49, 332-333 affected by standard of living 49, 332-333 graphic illustration of 33S interference with, by artificial regulation 338-339 progressive rise of 343, 359-360 raised by education of lower wage groups 53*55 Equipment in industry see Industrial equipment Equity in interpretation of contracts 266, 268, 269, 272, 277 Esteem see Social esteem Extravagance 77-78,356,373,381,397 of new rich 400 Extrications from want 7,9,13,14,21,24,38 Family and definite parental responsibility 33-34 biological 29 creation of legal, by marriage 29 monogamic 30, 35 patriarchal 33-34 Family property 29-30, 35 Federal Reserve Board 341 Feeble-minded and labor reserve 35o-35i menace of 303-304 Feudalism, part played by 182 Fifth Amendment 225,227 Finney, Ross L., quoted 320-322 Flux, A. W. 383 Food and the struggle for existence 4 derived by commerce from wider areas 9, 24, 289, 290, 292 limit to sources of 23-24 see also Subsistence 424 THIS ECONOMIC WORLD Fourteenth Amendment 227, 237, 238, 250, 258-259. 264 France liberalism in iio-iii productivity per worker in in agriculture 61 in coal mining 386 wealth in, per capita, 1923 Franklin, Benjamin 102 a forerunner of Malthus 289 Fraud, in contracts 271,272,274 Freedom limitations on, necessary for larger freedom 184-185 under restraint of law 181, 184, 228, 237, 240-241 various concepts of 120 Freedom of contract 131,263 in relation to labor 250 nothing yet found superior to 136-137 regulated by law 265 restriction of, necessary 185 under due process of law 234 G Galton, Francis quoted Gasoline engine, a source of power 205 314 23, 385-386 Germany productivity per worker in in agriculture 61 in coal mining 386 wealth in, per capita, 1923 363 Government and predation 16-17 coercion by in properly used 181,183,188 competition in 141 distinction between democ- racy and liberalism in 125-126 Golden Rule, and competition 89 Great Britain productivity per worker in 61 in agriculture 61 in coal mining 386 in steel industry 384-385 see also England Greatness through service 95-97, 161 Gunpowder, a source of power 22 H Hadley, A. T. Homestead Law Horse power per worker Hungary, productivity per agricultural worker in 20,30 299 61,383 61 Immigration cause of overdevelopment of agriculture 299 effect of, on demand for labor 47-49,344,369,370 into United States, 1871-1924 364 Immigration restriction 48,49,63,331,357 and the labor reserve 318,319,331 attacks on, dangerous to labor 397 effect of in higher wages 332, 370, 394 on slums 76 only partial as yet 382 should be supported by workingmen 394 to control migration of laborers 326 Improvident peoples, danger from 32,34,35-36,66-69 Income inequalities in 199, 200 national, change in distribution of 337-338, 349 Independence desire for 345 of wage workers 342, 343, 344, 346 Individualism 168-169 INDEX 425 Industrial equipment and productivity, correla- tion between 61,326-327,331 three things required by 327 Industrial reserve army 316-351 see also Labor reserve Industry effect of expansion of 325,359 ratio of labor to equipment in 331 Inequality, caused by special- ization of occupations 39-42 see also Occupational balance Infanticide, aspect of high death rate 26, 34 Institutionalism 169 Insurance see Life insurance Intemperance a hindrance to occu- pational redistribution 51, 56, 63 control of 77,382 destroys dependability SI, 56, 63, 102 see also Prohibition ; Sobriety Interest equilibrium rate of 336-337 permanently lower rates of 332 pure, or net, disappearance of 328, 348-349, 359, 409 tendency of, to decrease 324, 32s, 358, 359 Invention (Extrication No. 5) 21-24 limitations of, as extrication from want 24 Inventor dependence of, on investor 355-356 and investor 353-354 Investor, dependence of, on inventor 358 Iron mines, in U. S., power and output per man in 384 Italy effect of Mussolini's policy in 116 productivity per agricultural worker in 61 see also Mussolini Jeffersonian Democracy 112, 113 Johnson, Alvin S. 37 Jurisdiction of courts 233 Justice ideals of 97 inherent in our Economic system 72, 161 Justice, social 92, 97, 390 and utility theory of value 212,214 not charity 97 principles underlying 104-105, 161 difficulty of applying 162,-163 qualifications to statement of 163, 164-166 Labor as a fixed charge on industry 346, 347 assumed mobility of 52 cheap assumed need for 304,319 efforts to increase supply of 397-398 exports and imports of 393 freedom of contract relating to 250 immobility of 44> 5° manual migration of, to industrial countries 32S oversupply of 75.77,175,324,329 political power of, stronger than bargaining power 174 scarcity of 32S principle of distribution of 13S-136 ratio of, to land and equipment 330-331 scarcity of, and independence of workers 344 see also Division of Labor ; Labor reserve; Occupational redistribution; Specialization Labor banks 374, 380-381 426 THIS ECONOMIC WORLD Labor Party, British see British Labor Party Labor reserve and business cycles 340, 341 assumption of need for 316-317,318,320 not required by profits system 342 of part time labor 339-340, 342 resuhs from interference with economic system 339 Labor Unions banks maintained by 374,380-381 interference by, with equilibrium wage 338-339 Laborers, independence of 342, 343, 344 Laissezf aire policy 120 Land and labor, ratio between, in agriculture 330-331 cultivation of 9-10 limited productivity of 6, 7-8 public, use of, in United States 367 Language as code of signals 13-14 Law due process of see Due process of law equal protection of 227, 228, 230 more inclusive than "due process" 237 equality under 191 see also Equality before the law freedom under 181, 184, 228 "person" in 227, 239 Law of nature, theory of 221-223 in Declaration of Independence 224 Law of the land 226 Leisure class 98-99, 304, 319, 381,402 Lenin 11S-118 Liberalism and democracy in government 125-126 not identical 123-124 and heterodoxy, not identical 124-125 and standard living 289 antithetical to communism and socialism 122 difficulty of, as continuous party policy 120 economic importance of 126-130 meaningof 112,121-126 opponents of 130 recent history of 110-115 Liberty "natural" 180 protected by due process of law 233, 234 see also Freedom Life insurance 202,374,378-379 Locke, John, influence of philosophy of 223-224 Luxuries for the masses 371,373,374.381,399 M 114, iis-iif 326-327 410-41 1 305,307 304-305, 401 MacDonald, J. Ramsay Machine production high wages associated with mass production from scale of consumption supported by Machinery modern substitute for slaves relief by, from drudgery 401-403 MacPherson, Walter Henry, quoted 71 Magna Carta 223,226 Maine, Sir Henry 168, 182 quoted 131 Malthus, Thomas Robert 281 doctrine of 282-289 Malthusianism 26 Man a predatory animal 15 checks on physiological increase of 282 the standard-setting animal 150 INDEX 427 Man power, productive utiliza- tion of 381-382 Management, irresponsi- bility in 177-178 Managers effects of premature retirement of 59-60,98-99,381-382,408 jealousy of, a hindrance to prosperity 77, 396 lack of, a hindrance to occupa- tional redistribution 51, S7-60 need of developing 395-306 Marriage 27-29,82-83 and parental responsibility 33 between whites and negroes 253-254 birth control through 285 postponement of, for higher standard of living 49, 63 Marx, Karl fundamental mistake of 19, 175-176 wrong prediction of, as to ownership of capital 177 Materialism in the United States 91-92, 93, 94, 102-103, 105, 367 Mexico attitude of, toward church, not liberal 125 field for authoritarian propaganda 119, 177 low-wage labor from 76,326,382-383 should be restricted 351 natural resources of 393 Migration 12, 282 controlled by nationalism 31 not always possible 25 population stress temporarily relieved by 291-292 see also Scattering Mill, John Stuart, quoted 283-284 Minimum wage law 312 Monopoly 82 due to special skill, illustration of 41 Moral standards see Standards of conduct Morons see Feeble-minded Mount Vernon Savings Bank 380 Munsey, Frank A., quoted 48 Mussolini 115-118, 142, 190 N National territory, defense of 31-32 Nationalism and the problem of poverty 36-37 control of migrations by 31 protection of subsistence by 31 Natural birth rate and death rate 6-7 Natural liberty 180 Natural resources in United States 368 abundance of, to be discovered 396 and diffusion of wealth 393 Necessitous men not free 185-186, 261 New South Wales, productivity per coal miner in 386 Nineteenth Amendment 252 Worthington, Lord, quoted 261 Occupational balance, illustra- tions of lack of 40-42,42-43, 164-165 Occupational congestion 166, 263, 298-301 in agriculture 299 in coal mining 299-300 in European countries 300-301 not controlled by standard of living 303 relieved by occupational redistribution 301-302 Occupational redistribution 44, 54, 76-77 bargaining power equalized by 263 428 THIS ECONOMIC WORLD Occupational redistribution (continued) breeding and heredity in 308 hindrances to 50-51,51-61 see also Labor, distribution of Organization (Extrication No. 3) 13 Overcrowding, caused by defec- tive family systems 34 Overexpansion, automatic check on 340-341 Overpopulation 34, 297, 298 Overproduction 348-3S9 Ownership concentration of 218 control of 202 diffusion of 199 inequalities in 199, 200, 201 Parenthood, responsible 24-38 and family property 30 and irresponsible, contrasted 285 control of birth rate by 26-27, 285-286 implies self-protection 32 impossible with promiscuity 27 only a partial extrication from want 35 Patents see Copyrights and patents Paupers, treatment of 312 Philanthropy, productive 106 Police power of states 240, 241-242, 247-250 Politician, type of old-time predator 17-18 Polyandry 29 Polygamy 29 Population and production, favorable balance between 36-37 congested, food supply of 11-12 congestion of 34, 297-298 effect on, of standard of living . 288-289 increase of, in United States, 1876-1925 364 under control 395 stationary 25 three ways of thinning 305 Population problem 280-315 Pound, Roscoe, quoted 10 Poverty a problem of low wages and unemployment 39 and feeble-minded 350 nationalism the agency for control of 37 of a submerged element 38 Power as the mover of matter 22 kinds of, used in American industry 389 sources of 22-23,386-387 see also Horse Power ; Man power; Machinery; Solar energy Predation and government 16-17 competition in 20 in business methods 20 not an escape from want 19 opposite to production 19 "productive" forms of 15-16 protection of production from (Extrication No. 4) 14-21 waste of effort caused by 15 Price see Equilibrium price ; Value Procreation, bisexual, methods of 28 Production and population, favorable balance between 36-37 competition in 20, 139 increase in cost of, a check on expansion 340 opposite to predation 19 protection of (Extrication No. 4.) 14-21 reciprocity among factors of 328,352 Productive achievement 94-95 INDEX 429 Productive activity- directed by standards of conduct 153-154 essential to prosperity 128, 129-130 Productive povper, opportunities for development of 93-94 Profit 90-91 Profiteering, effects of 392-393 Profits 204-206 and wages, division between 331,349 marginal 321,322 tendency of, to decrease 324,325 Profits system and the feeble-minded 350 labor reserves not required by 342 logical results of 347-348 Prohibition 102 and diffusion of prosperity 382-383, 394 attacks on, dangerous to labor 398 Promiscuity difficulty of suppressing 28 incompatible with responsible parenthood 27 Property and parental responsibility 29-30 communal 30 family 29-30 institution of a privilege 84-85, 86 basic fact in 85-86 how evaluated 83-86 protected by due process of law 233-23S safeguarded by suppression of violence 31 subject to power of eminent domain 355-256 power of taxation 256-259 Prosperity a by-product of sound ideals 92, 96, 103, 105 demoralizing in- fluences of 412-413, 414 diffusion of 76, 3Si, 370-371 by opportunities for education 166-167 by productive methods 19 furthered by prohibition 382-383, 394 hindrances to 77-78 how halted 396-397 needed 38-39 principles underlying 104-105 founded on usefulness 95-96 how long will it last? 104,391-398 mankind not schooled for 413-414 three factors in 128-129 United States as object lesson of 91-92, 108 uses of 412 what will it do to us? 399-415 Protection of national territory 31-32 of property 3° Protectionism 112, 113, 114 Purchasing power diffusion of 371-372,373 reservoirs of, in the masses 100 R Race as basis for legal classification 252-255 Radical thinking, basic error of 19 Radicalism and liberalism 122-123 Railroads, stockholders of 379 Rape, social control of 28 Recidivists among criminals 312-313 Reciprocity, principles of, among factors of production 328, 352 Reformation, the 223 Religion and service 95 democracy in, not necessarily liberal 123-124 Republican Party 113-114 Resources, natural see Natural Resources 430 THIS ECONOMIC WORLD Responsible parenthood (Extrication No. 6) 24-38 see also Parenthood Rewards, economic 211-212 determined by usefulness 213 Ripley, W.Z. 177 Roman law 183 "law of nature" theory in 221-222 Rush, Benjamin 102 Russell, Bertrand 138 Russia, effect of Lenin's policy in 116 Savings deposits in United States 374-378 occupational distribution of 376-377 Scarcity a source of human conflict 10 importance of 215 see also Want Scattering (Extrication No. i) 7-9 of plant life 8 Seduction, social control of 28 Self-development, opportunities for, in United States 93-94 Self-government, learned by experience under au- thority 182-183 Servants 304.307. 3i9, 320, 391,401,402 Service and religion 95 evaluation of 163 the basis of greatness 95-97, 161 wealth a means of 106-108 Sex as basis of legal classification 251-252, 258-259 Slavery 183 machinery a substitute for 304-305, 401, 402 Slums 75-76, 403 Smith, Adam 160 Sobriety encouragement of 101-103 see also Intemperance ; Prohibition Social esteem importance of, for business enterprise S8-59, 62 value of 41,211-212 Socialism 52-53,80,113 and competition 140 see also Communism Solar energy, future source of power 387, 390, 395 Specialization of occupation forms of 39 produces inequalities 3Q-40 Specific performance of contracts 265-270 Standard of living 63 and equilibrium wage rate 49.332,335 and independence of labor 346 control of birth rate by 287-289, 395 too much dependence on 302-303 definition of 286-287 Standardization of individual conduct 14-15 Standards of conduct 150-151 agencies for directing productive energy i53-i54 false and irrational 154 pragmatic test of 154-155, 156, 157 social value of 151, 160, 161 illustrated 152-153 Static condition, illustration of, in balance of nature 44-45 Status and contract 131, 168, 169, 263 definition of 169 Steam power 22,383 Stevenson, Robert Louis, quoted 157 Strachey, J. St. Loe, quoted 90 Struggle for existence 4, iS7-i59 Subsistence and life, Malthus' doctrine on 282-289 problem of 4 see also Food INDEX 431 44 Supply and demand, equilibrium of Surplus above necessaries of life 37-38. 39 383 42 256-259 Taussig, F. W. quoted Taxation, power of Technicians see Enterprisers Thrift and the accumulation of capital 60, 63 discouragement of 77.356,357.397 results of 327-328,332,337 the basis of capitalism HQ Trial and error, method of better results produced by 79-80 in solving problems of poverty 37 the way of all progress 4H-4i5 U 271-273 39 Undue influence Unemployment and problem of poverty from interference with equilibrium wage 46, 339 occupational congestion a cause of 298-301 remedy for 107-108, 333 United Bank and Trust Company, Tucson 381 United Kingdom see England ; Great Britain United States agricultural productivity in, compared with foreign countries 61 as object lesson of prosperity 91-92, 108 communism and socialism in 114 communistic societies in 170-171 decline of death rate in, 1880-1924 364-365 education, expenditures for 365-366 educational ideals of 93, 368 see also Education endowments of colleges and universities in 3^7 factors in prosperity of 93-93 immigration to, 1871-1924 364 liberalism in 111-112,114 materialism in 91-92, 93, 94, 102-103, 105, 367 national purposes of 92 population increase in, 1876-1925 364 power used in 389 productivity per worker in 61 in coal mining 386 in steel industry 384-385 prosperity of wage workers in 391-394 public lands in 368 real wages in, compared with foreign countries 62, 370 savings deposits in 374*378 wealth in, 1870-1922 362-363 see also Constitution Universities, relic of monastic spirit in 3^5 see also Colleges Usury laws 244-275 Utility theory of value 207-208,209-210 practical application of 211 Value cost and utility theories of 207-208 determined by practical choices 210 Violence, repression of iS, 84-85, 129 competition regulated by 139 Volstead, Andrew 102 432 THIS ECONOMIC WORLD Voluntarism and liberalism 112 and productive activity 129 depends on freedom of choice 187 economic 168, 169 and contract 131 in institution of property 84-85 Voluntary agreement advantage of, over authority 173-180 efficiency of 179-180 how far can it extend ? 180-189 spread of, with democracy 173 substituted for authority 132 W 46 Wage scale, artificial Wage workers as shareholders in industry 380 changing condition of 262 independence of 342, 343, 344 investments by 374-381 prosperity of, in United States 391-394 should support immigration restriction 394 Wages and poorly managed industries 59, 77, 99, 382, 408 and profits, division between 331 high, associated with machine production 326-327 real, in foreign countries and United States 62, 370 see also Equilibrium wage Want driving force of 4 escape from 3-69 Water power aj Wealth broadened concept of, as means of service 106 concentration of 77,202,316-217,371 earned and unearned 88, 400 enjoyment of 407-408 in the United States, 1870-1922 363-363 inherited 400 investment of, in productive opportunities loi, 107 not to be consumed in leisure 98-99, 381 per capita, in England, France and Germany 363 tangible forms of, limited 354-355 through enrichment of fellow men 91 to be expended on production 99-101, 107 see also Capital ; Prosperity Weisman theory of stability of germ plasm 146, 147 Western Union Telegraph Company, stockholders of 379 Wheeler, Wayne B. 102 White, William Allen, quoted 70-71 Wind power 22 Work (Extrication No. 2) 9-13 consists in moving pieces of matter 21-22 necessity for 82, 93 quality or quantity in measuring 197-198, 202-203 real value of 207