Part 23

The cohesion of wealth is a force of peculiar social significance. It might perhaps be referred to as the class consciousness of the wealthy except that it manifests itself among people who have recently acquired wealth, more violently, in some cases, than it appears among those whose families have possessed wealth for generations. Then, the cohesion of wealth is not always an intelligent force. In the case of some persons it is largely instinctive.

Originally, the cohesion of wealth expresses itself instinctively among a group of wealth owners. They may be competing fiercely as in the case of a group of local banks, department stores, or landlords, but let a common enemy appear, with a proposition for currency reform, labor legislation or land taxation and in a twinkling the conflicting interests are thrown to the winds and the property owners are welded into a coherent, unified group. This is the beginning of a wealth cohesion which develops rapidly into a wealth consciousness.

American business, a generation ago, was highly competitive. Each business man's hand was raised against his neighbor and the downfall of one was a matter of rejoicing for all. The bitter experience of the nineties drove home some lessons; the struggles with labor brought some more; the efforts at government regulations had their effect; but most of all, the experience of meeting with men in various lines of business and discussing the common problems through the city, state and national and business organizations led to a realization of the fact that those who owned and managed business had more in common than they had in antagonism. By knifing one another they made themselves an easy prey for the unions and the government. By pooling ideas and interests they presented a solid front to the demands of organized labor and the efforts of the public to enforce regulation.

"Plutocracy" means control by those who own wealth. The "plutocratic class" consists of that group of persons who control community affairs because they own property. This class, because of its property ownership, is compelled to devote time and infinite pains to the task of safeguarding the sacred rights of property. It is to that task that the leaders of the American plutocracy have committed themselves, and it is from the results of that accomplished work that they are turning to new labors.

FOOTNOTES:

Speech in the Senate, June 20, 1832. Works Colvin Colton, ed. New York, Putnam's, 1904, vol. 7, p. 503.

Ibid., p. 503.

"Speeches," E. P. Whipple, ed. Little, Brown & Co., 1910, pp. 59-60.

"The Constitutional Position of Property in America," Arthur T. Hadley, Independent, April 16, 1908.

X. INDUSTRIAL EMPIRES

1. They Cannot Pause!

The foundations of Empire have been laid in the United States. Territory has been conquered; peoples have been subjugated or annihilated; an imperial class has established itself. Here are all of the essential characteristics of empire.

The American people have been busy laying the political foundations of Empire for three centuries. A great domain, taken by force of arms from the people who were in possession of it has been either incorporated into the Union, or else held as dependent territory. The aborigines have disappeared as a race. The Negroes, kidnaped from their native land, enslaved and later liberated, are still treated as an inferior people who should be the hewers of wood and the drawers of water. A vast territory was taken from Mexico as a result of one war. A quarter million square miles were secured from Spain in another; on the Continent three and a half millions of square miles; in territorial possessions nearly a quarter of a million more--this is the result of little more than two hundred years of struggle; this is the geographic basis for the American Empire.

The structure of owning class power is practically complete in the United States. Through long years the business interests have evolved a form of organization that concentrates the essential power over the industrial and financial processes in a very few hands,--the hands of the investment bankers. During this contest for power the plutocracy learned the value of the control of public opinion, and brought the whole machinery for the direction of public affairs under its domination. Thus political and social institutions as well as the processes of economic life were made subject to plutocratic authority. A hundred years has sufficed to promulgate ideas of the sacredness of private property that place its preservation and protection among the chief duties of man. Economic organization; the control of all important branches of public affairs, and the elevation of property rights to a place among the beatitudes--by these three means was the authority of the plutocracy established and safeguarded.

Since economic political and social power cover the field of authority that one human being may exercise over another, it might be supposed that the members of the plutocratic class would pause at this point and cease their efforts to increase power. But the owners cannot pause! A force greater than their wills compels them to go on at an ever growing speed. Within the vitals of the economic system upon which it subsists the plutocracy has found a source of never-ending torment in the form of a constantly increasing surplus.

2. The Knotty Problem of Surplus

The present system of industry is so organized that the worker is always paid less in wages than he creates in product. A part of this difference between product and wages goes to the upkeep and expansion of the industry in which the worker is employed. Another part in the form of interest, dividends, rents, royalties and profits, goes to the owners of the land and productive machinery.

The values produced in industry and handed to the industrial worker or property owner in the form of income, may be used or "spent" either for "consumption goods"--things that are to be used in satisfying human wants, such as street car transportation, clothing, school books, and smoking tobacco; or for production goods--things that are to be used in the making of wealth, such as factory buildings, lathes, harvesting machinery, railroad equipment. Those who have small incomes necessarily spend the greater part for the consumption of goods upon which their existence depends. On the other hand, those who are in receipt of large incomes cannot use more than a limited amount of consumption goods. Therefore, they are in a position to turn part of their surplus into production goods. As a reward for this "saving" the system gives them title to an amount of wealth equal to the amount saved, and in addition, it grants an amount of "interest" so that the next year the recipient of surplus gets the regular share of surplus, and beside that an additional reward in the form of interest. His share of the surplus is thus increased. That is, surplus breeds surplus.

The workers are, for the most part, spenders. The great bulk of their income is turned at once into consumption goods. The owners in many instances are capitalists who hold property for the purpose of turning the income derived from it into additional investments.

Could the worker buy back dollar for dollar the values which he produces there would be no surplus in the form of rent, interest, dividends and profits. The present economic system is, however, built upon the principle that those who own the lands and the productive machinery should be recompensed for their mere ownership. It follows, of course, that the more land and machinery there is to own the greater will be the amount of surplus which will go to the owners. Since surplus breeds surplus the owners find that it pays them not to use all of their income in the form of consumption, but rather to invest all that they can, thereby increasing the share of surplus that is due them. The worker, on the other hand, finds that he must produce a constantly larger amount of wealth which he never gets, but which is destined for the payment of rent, interest, dividends and profits. Increased incomes yield increased investments. Increased investments necessitate the creation and payment of increased surplus. The payment of increased surplus means increased incomes. Thus the circle is continued--with the returns heaping up in the coffers of the plutocracy.

Originally the surplus was utilized to free the members of the owning class from the grinding drudgery of daily toil, by permitting them to enjoy the fruits of the labor of others. Then it was employed in the exercise of power over the economic and social machinery. But that was not the end--instead it proved only the beginning. As property titles were concentrated in fewer and fewer hands, and the amount of property owned by single individuals or groups of individuals becomes greater, their incomes (chiefly in the form of rent, interest, dividends and profits) rose until by 1917 there were 19,103 persons in the United States who declared incomes of $50,000 or more per year, which is the equivalent of $1,000 per week. Among these persons 141 declared annual incomes of over $1,000,000. Besides these personal incomes, each industry which paid these dividends and profits, through its depreciation, amortization, replacement, new construction, and surplus funds was reinvesting in the industries billions of wealth that would be used in the creation of more wealth. The normal processes of the growth of the modern economic system has forced upon the masters of life the problem of disposing of an ever increasing amount of surplus.

During prosperous periods, the investment funds of a community like England and the United States grow very rapidly. The more prosperous the nation, the greater is the demand from those who cannot spend their huge incomes for safe, paying investment opportunities.

The immense productivity of the present-day system of industry has added greatly to the amount of surplus seeking investment. Each invention, each labor saving device, each substitution of mechanical power that multiplies the productive capacity of industry at the same time increases the surplus at the disposal of the plutocracy.

The surplus must be disposed of. There is no other alternative. If hats, flour and gasoline are piled up in the warehouses or stored in tanks, no more of these commodities will be made until this surplus has been used. The whole economic system proceeds on the principle that for each commodity produced, a purchaser must be found before another unit of the commodity is ordered. Demand for commodities stimulates and regulates the machinery of production.

Those in control of the modern economic system have no choice but to produce surplus, and once having produced it, they have no choice except to dispose of it. An inexorable fate drives them onward--augmenting their burdens as it multiplies their labors.

Investment opportunities, of necessity, are eagerly sought by the plutocracy, since the law of their system is "Invest or perish"!

Invest? Where? Where there is some demand for surplus capital--that is in "undeveloped countries."

The necessity for disposing of surplus has imposed upon the business men of the world a classification of all countries as "developed" or "undeveloped." "Developed" countries are those in which the capitalist processes have gone far enough to produce a surplus that is sufficient to provide for the upkeep and for the normal expansion of industry. In "developed" countries mines are opened, factories are built, railroads are financed, as rapidly as needed, out of the domestic industrial surplus. "Undeveloped" countries are those which cannot produce sufficient capital for their own needs, and which must, therefore, depend for industrial expansion upon investments of capital from the countries that do produce a surplus.