Part 22

The present organization of economic life in the United States permits the wealth owners through their ownership to live without doing any work upon the work done by their fellows. As recipients of property income (rent, interest and dividends) they have a return for which they need perform no service,--a return that allows them to "live on their income."

The man who fails to assist in productive activity gives nothing of himself in return for the food, clothing and shelter which he enjoys,--that is, he lives on the labor of others. Where some have sowed and reaped, hammered and drilled, he has regaled himself on the fruits of their toil, while never toiling himself.

The matter appears most clearly in the case of an heir to an estate. The father dies, leaving his son the title deeds to a piece of city land. If he has no confidence in his son's business ability or if his son is a minor, he may leave the land in trust, and have it administered in his son's interest by some well organized trust company. The father did not make the land, though he did buy it. The son neither made nor bought the land, it merely came to him; and yet each year he receives a rent-payment upon which he is able to live comfortably without doing any work. It must at once be apparent that this son of his father, economically speaking, performs no function in the community, but merely takes from the community an annual toll or rental based on his ownership of a part of the land upon, which his fellowmen depend for a living. Of what will this toll consist? Of bread, shoes, motor-cars, cigars, books and pictures,--the products of the labor of other men.

This son of his father is living on his income,--supported by the labor of other people. He performs no labor himself, and yet he is able to exist comfortably in a world where all of the things which are consumed are the direct or indirect product of the labor of some human being.

Living on one's income is not a new social experience, but it is relatively new in the United States. The practice found a reasonably effective expression in the feudalism of medieval Europe. It has been brought to extraordinary perfection under the industrialism of Twentieth Century America.

Imagine the feelings of the early inhabitants of the American colonies toward those few gentlemen who set themselves up as economically superior beings, and who insisted upon living without any labor, upon the labor performed by their fellows. It was against the suggestion of such a practice that Captain John Smith vociferated his famous "He that will not work, neither shall he eat." The suggestion that some should share in the proceeds of community life without participating in the hardships that were involved in making a living seemed preposterous in those early days.

To-day, living on one's income is accepted in every industrial center of the United States as one of the methods of gaining a livelihood. Some men and women work for a living. Other men and women own for a living.

Workers are in most cases the humble people of the community. They do not live in the finest homes, eat the best food, wear the most elaborate clothing, or read, travel and enjoy the most of life.

The owners as a rule are the well-to-do part of the community. They derive much of all of their income from investments. The return which they make to the community in services is small when compared with the income which they receive from their property holdings.

Living on one's income is becoming as much a part of American economic life as living by factory labor, or by mining, or by manufacturing, or by any other occupation upon which the community depends for its products. The difference between these occupations and living on one's income is that they are relatively menial, and it is relatively respectable, that is, they have won the disapprobation and it has won the approbation of American public opinion.

The best general picture of the economic situation that permits a few people to live on their incomes, while the masses of the people work for a living, is contained in the reports of the Federal Commissioner of Internal Revenue. The figures for 1917 ("Statistics of Income for 1917" published August 1919) show that 3,472,890 persons filed returns, making one for each six families in the United States. Almost one half of the total number of returns made in 1917 were from persons whose income was between $1000 and $2000. There were 1,832,132 returns showing incomes of $2000 or more, one for each twelve families in the country.

The number of persons receiving the higher incomes is comparatively small. There were 270,666 incomes between $5,000 and $10,000; 30,391 between $10,000 and $25,000; 12,439 between $25,000 and $50,000. There were 432,662 returns (22 for each 1000 families in the United States) showing incomes of $5,000 or over; there were 161,996 returns (8 returns for each 1000 families) showing incomes of $10,000 or over; 49,494 showing incomes of $25,000 and over; 19,103 showing incomes of $50,000 and more. Thus the number of moderate and large incomes, compared with the total population of the country, was minute.

The portion of the report that is of particular interest, in so far as the present study is concerned, is that which presents a division of the total net income of those reporting $2,000 or more, into three classes--income from personal service, income from business profits and income from the ownership of property.

PERSONAL INCOMES BY SOURCES--1917

Amount of Per Cent Income of Total Source Income 1. Income from personal service; salaries, wages; commission, bonuses, director's fees, etc $ 3,648,437,902 30.21

2. Income from business; business, trade, commerce, partnership, farming, and profits from sales of real estate, stocks, bonds, and other property 3,958,670,028 32.77

3. Income from property; rents and royalties 684,343,399 5.67 Interest on bonds, notes, etc. 936,715,456 7.76 Dividends 2,848,842,499 23.59 Total from Property 4,469,901,354 37.02

4. Total income 12,077,009,284 100.00

Those persons who have incomes of $2,000 or more receive 30 cents on the dollar in the form of wages and salaries; 33 cents in the form of business profits, and 37 cents in the form of incomes from the ownership of property. The dividend payments alone--to this group of property owners, are equal to three quarters of the total returns for personal service.

These figures refer, of course, to all those in receipt of $2,000 or more per year. Obviously, the smaller incomes are in the form of wages, salaries, and business profits, while the larger incomes take the form of rent, interest and dividends. This is made apparent by a study of the detailed tables published in connection with the "Income Statistics for 1916."

Among those of small incomes--$5,000 to $10,000--nearly half of the income was derived from personal services. The proportion of the income resulting from personal service diminished steadily as the incomes rose until, in the highest income group--those receiving $2,000,000 or more per year, less than one-half of one per cent. was the result of personal service while more than 99 per cent. of the incomes came from property ownership.

A small portion of the American people are in receipt of incomes that necessitate a report to the revenue officers. Among those persons, a small number are in receipt of incomes that might be termed large--incomes of $10,000 or over, for example. Among these persons with large incomes the majority of the income is secured in the form of rent, interest, dividends and profits. The higher the income group, the larger is the percentage of the income that comes from property holdings.

The economic system that exists at the present time in the United States places a premium on property ownership. The recipients of the large incomes are the holders of the large amounts of property.

Large incomes are property incomes. The rich are rich because they are property owners. Furthermore, the organization of present-day business makes the owner of property more secure--far more secure in his income, than is the worker who produces the wealth out of which the property income is paid.

5. Plutocracy

The owning class in the United States is established on an economic basis,--the private ownership of the earth. No more solid foundation for class integrity and class power has ever been discovered.

The owners of the United States are powerfully entrenched. Operating through the corporation, its members have secured possession of the bulk of the more useful resources, the important franchises and the productive capital. Where they do not own outright, they control. The earth, in America, is the landlords and the fullness thereof. They own the productive machinery, and because they own they are able to secure a vast annual income in return for their bare ownership.

Families which enjoy property income have one great common interest--that of perpetuating and continuing the property income; hence the "cohesion of wealth." "The cohesion of wealth" is a force that welds individuals and families who receive property income into a unified group or class.