If we were back in the old days of hand labor and crude, unorganized production, I admit that the only way to benefit the slaves might be to turn out the masters by force. But here we have a social system of infinite complexity, a delicate and sensitive machine, which no one person in the world, and no group of persons understands thoroughly. In the running of such a machine a slight blunder may cost a fortune; and certainly all the skill, all the training, all the loyal services of our expert engineers and managers is needed if we are to remodel that machine while keeping it running. The amount of wealth which we could save by the achieving of that feat would be sufficient to maintain a cla.s.s of owners in idleness and luxury for a generation; and so I say, with all the energy and conviction I possess, _pay them_! Pay them anything that is necessary, in order to avoid civil war and social disorganization! Pay them so much that they can have no possible cause of complaint, that the most hide-bound capitalistic-minded judge in the country cannot find a legal flaw in the bargain! Pay them so that every engineer and efficiency expert and manager and foreman and stenographer and office-boy will stay on the job and work double time to put the enterprise through! Pay them such a price that even Judge Gary and John D. Rockefeller will be willing to help us do the job of social readjustment!
"Ah, yes," my young radical friends will say, "that sounds all very beautiful, but it"s the old Utopian dream of brotherhood and cla.s.s co-operation. That will never happen on this earth, until you have first abolished capitalism." My answer is, it could happen tomorrow if we had sufficient intelligence to make it happen. That it does not happen is simply absence of intelligence. And will anyone maintain that it is the part of an intelligent man to advocate a less intelligent course than he knows? What is the use of our intelligence, if we abdicate its authority, and give ourselves up to programs of action which we know are blind and destructive and wasteful? We may see a great vessel going on the rocks; we may feel certain that it is going, in spite of everything we can do; but shall we fail to do what we can to make those in the vessel realize how they might get safely into the harbor?
We have had the Russian revolution before us for four years. Mankind will spend the next hundred years in studying it, and still have much to learn, but the broad outlines of the great experiment are now plain before our eyes. Russia was a backward country, and she tried to fight a modern war, and it broke her down. She had practically no middle cla.s.s, and her ruling cla.s.s was rotten, and so the revolutionists had their chance, and they seized it. Perhaps it would be more correct to say that they came to the rescue of Russia, saving her from the hands of those who were trying to force her to fight, when she was utterly exhausted and incapable of fighting.
Anyhow, here was your dictatorship of the proletariat. It turned out all the executive experts, or nearly all of them, because they were tainted with the capitalist psychology; and then straightway it had to call them back and make terms with them, because industry could not be run without them. And of course these engineers and managers sabotaged the revolution--every non-proletarian sabotaged it, both inside Russia and outside. You denounced this, and protested against this, but all the same it happened; it was human nature that it should happen, and it is one of the things you have to count on, in any and every country where you attempt the social revolution by minority action.
They have got power in Russia, and they dream of getting power in America in the same way. But there is no such disorganization in our country as there was in Russia, and it would take a generation of civil strife to bring us to such a condition. We have a middle cla.s.s, powerful, thoroughly organized, and thoroughly conscious. Moreover, this cla.s.s has ideals of majority rule, which are bred in its very bones; and while they have never realized these ideals, they think they have, and they are prepared to fight to the last gasp in that belief. All that the leaders of Moscow have to do is to bring about an attempt at forcible revolution, and they will discover in American society sufficient power of organization and of brutal action to put their movement out of business for a generation.
A hundred years ago we had chattel slavery firmly fixed as the industrial system of one-half of these United States. To far-seeing statesmen it was manifest that chattel slavery was a wasteful system, and that it could not exist in compet.i.tion with free labor. There was a great American, Henry Clay, who came forward with a proposition that the people of the United States, through their government, should raise the money, about a billion dollars, and compensate the owners of all the slaves and set them free. For most of his lifetime Henry Clay pleaded for that plan. But the masters of the South were making money fast; they knew how to handle the negro as a slave, they could not imagine handling him as a free laborer, and they would not hear to the plan. On the other side of Mason and Dixon"s line were fanatical men of "principle," who said that slavery was wrong, and that was the end of it. There is a stanza by Emerson discussing this question of confiscation versus compensation:
Pay ransom to the owner And fill the bag to the brim.
Who is the owner? The slave is owner, And ever was. Pay him.
This, you see, is magnificent utterance, but as economic philosophy it is reckless and unsound. The abolitionists of the North took up this poem, and the slave power of the South answered with a battle-song:
War to the hilt, Theirs be the guilt, Who fetter the freeman to ransom the slave!
And so the issue had to be fought out. It cost a million human lives and five billions of treasure, and it set American civilization back a generation. And now we confront exactly the same kind of emergency, and are coming to exactly the same method of solution. We have white wage-slaves clamoring for their freedom, and we have business men making money out of them, and exercising power over them, and finding it convenient and pleasant. They are going to fight it out in a civil war, and which side is going to win I am not sure. But when the historians come to write about it a couple of generations from now, let them be able to record that there were a few men in the country who pleaded for a sane and orderly and human solution of the problem, and who continued to voice their convictions even in the midst of the cruel and wasteful strife!
CHAPTER LXVIII
THE PROBLEM OF THE LAND
(Discusses the land values tax as a means of social readjustment, and compares it with other programs.)
The writer of this book has been watching the social process for twenty years, trying to figure out one thing--how the change from compet.i.tion to co-operation can be brought about with the minimum of human waste. He has come to realize that the first step is a mental one; to get the people to want the change. That means that the program must be simple, so that the ma.s.ses can understand it. As a social engineer you might work out a perfect plan, but find yourself helpless, because it was hard to explain. As ill.u.s.tration of what I mean, I cite the single tax, a theory which has a considerable hold in America, but which politically has been utterly ineffective.
A few years ago a devoted enthusiast in Southern California, Luke North, started what he called the "Great Adventure" to set free the idle land.
In the campaign of 1918 I gave my help to this movement, and when it failed I went back and took stock, and revised my conclusions concerning the single tax. Theoretically the movement has a considerable percentage of right on its side. Land, in the sense that single taxers use it, meaning all the natural sources of wealth, is certainly an important basis of exploitation, and if you were to tax land values to the full extent, you would abolish a large portion of privilege--just how large would be hard to figure. I was perfectly willing to begin with that portion, so I helped with the "Great Adventure." But a practical test convinced me that it could never persuade a majority of the people.
The single tax proposal is to abolish all taxes except the tax on land values. Then come the a.s.sociations of the bankers and merchants and real estate speculators, crying in outraged horror, "What? You propose to let the rich man"s stocks and bonds go free? You propose to put no tax on his cash in the vaults and on his wife"s jewels? You propose to abolish the income tax and the inheritance tax, and put all the costs of government on the poor man"s lot?"
Now, of course, I know perfectly well that the rich man dodges most of his income tax and most of his inheritance tax. I know that he pays a nominal pittance on his cash in the bank and on his wife"s jewels, and likewise on his stocks and bonds. I know that the corporations issuing these stocks and bonds would be far more heavily hit by a tax on the natural resources they own; they could not evade this tax, and they know it, and that is why they are moved to such deep concern for the fate of the poor man and his lot. I know that the tax on the poor man"s lot would be infinitesimal in comparison with the tax on the great corporation. But how can I explain all this to the poor man? To understand it requires a knowledge of the complexities of our economic system which the voters simply have not got.
How much easier to take the bankers and speculators at their word! To answer, "All right, gentlemen, since you like the income and inheritance taxes, the taxes on stocks and bonds and money and jewels, we will leave these taxes standing. Likewise, we a.s.sent to your proposition that the poor man should not pay taxes on his lot, while there are rich men and corporations in our state holding twenty million acres of land out of use for purposes of speculation. We will therefore arrange a land values tax on a graduated basis, after the plan of the income tax; we will allow one or two thousand dollars" worth of land exempt from all taxation, provided it is used by the owner; and we will put a graduated tax on all individuals and corporations owning a greater quant.i.ty of land, so that in the case of individuals and corporations owning more than ten thousand dollars" worth of land, we will take the full rental value, and thus force all idle land into the market."
Now, the provision above outlined would have spiked every single argument used by the opposition to the "Great Adventure" in California in 1918; it would have made the real intent of the measure so plain as to win automatically the additional votes needed to carry the election.
But I tried for three years, without being able to persuade a single one of the "Great Adventure" leaders to recognize this plain fact. The single taxer has his formula, the land values tax and no other tax, and all else is heresy. Actually, the president of a big single tax organization in the East declared that by the advocacy of my idea I had "betrayed the single tax!" We may take this as an ill.u.s.tration of the difference between dogmatism and science in the strategy of the cla.s.s struggle.
I first suggested my program immediately after the war, with the provision that the land thrown on the market should be purchased by the state, and used to establish co-operative agricultural colonies for the benefit of returned soldiers. But we have preferred to have our returned soldiers stay without work, or to displace the men and women who had been gallantly "doing their bit." By this means we soon had five million men out of work, and many other millions bitterly discontented with their wages. Again I took up the proposition for a graduated land tax, with the suggestion that the money should be used to provide a pension, first for every dependent man or woman over sixty years of age in the country, and second for every child in the country whose parents were unable properly to support it, whether because they were dead or sick or unemployed.
You may note that in advocating this program, you would not have to convert anybody to any foreign theories, nor would you have to use any long words; you would not have to say anything against the const.i.tution, nor to break any law, nor to give occasion for patriotic mobs to tar and feather you. To every poor man in your state you could say, "If you own your own house and lot, this bill will lift the taxes from both, and therefore it will mean fifty or a hundred dollars a year in your pocket.
If you do not own a home, it will take millions of idle acres out of the hands of the speculators, and break the price of real estate, so that you can have either a lot in the city or a farm in the country with ease."
Furthermore, you could say, "This measure will have the effect of drawing the unemployed from the cities at once, and so stopping the downward course of wages. At the same time that wages hold firm, the cost of food will go down, because there will be millions more men working on the land. In addition to that, the state will have an enormous income, many millions of dollars a year, taken exclusively from those who are owning and not producing. This money will be expended in saving from suffering and humiliation the old people of the country, who have worked hard all their lives and have been thrown on the sc.r.a.p-heap; also in making certain that every child in the country has food enough and care enough to make him into a normal and healthy human being, so that he can do his share of work in the world and pay his own way through life."
I submit the above measure to those who believe that the road to social freedom lies by some sort of land tax. But before you take it up I invite you to consider whether there may not be some other way, even easier. There is a homely old saying to the effect that "mola.s.ses catches more flies than vinegar"; and I am always looking for some way that will get the poor what they want, without frightening the rich any more than necessary.
I know a certain type of radical whom this question always exasperates.
He answers that the opposition will be equally strong to any plan; the rich will do anything for the poor except get off their backs--and so on. In reply I mention that among the most ardent radicals I know are half a dozen millionaires; I know one woman who is worth a million, who pleads day and night for social revolution, while the people who work for her are devoted and respectful wage slaves. Herbert Spencer said that his idea of a tragedy was a generalization killed by a fact. I shall not say that the existence of millionaire Socialists and parlor Bolsheviks kills the theory of the cla.s.s struggle, but I certainly say it compels us to take thought of the rich as well as of the poor in planning the strategy of our campaign.
And manifestly, if we want to consider the rich, the very last device we shall use is that of a tax. n.o.body likes to pay taxes; everybody agrees in cla.s.sifying taxes with death. Each feels that he is paying more than his share already; each knows that the government which collects the tax is incompetent or worse. Stop and recall what we have proven about the "iron ring"; the possibilities of production latent in our society.
Realize the bearings of this all-important fact, that we can offer to mankind a social revolution which will make everybody richer, instead of making some people poorer! Exactly how to do this is the next thing we have to inquire.
CHAPTER LXIX
THE CONTROL OF CREDIT
(Deals with money, the part it plays in the restriction of industry, and may play in the freeing of industry.)
How is it that the rich are becoming richer? The single taxer answers that it is by monopoly of the land, the natural sources of wealth; the Socialist answers that it is by the control of the machinery of production. But if you go among the rich and make inquiry, you speedily learn that these factors, large as they are, amount to little in comparison with another factor, the control of credit. There are hosts of little capitalists and business men who deal in land and produce goods with machinery, but the men who make the real fortunes and dominate the modern world are those who control credit, and whose business is, not the production of anything, but speculation and the manipulation of markets.
"Money makes the mare go," our ancestors used to say; and money today determines the destiny of empires. What is money? We think of it as gold and silver coins, and pieces of engraved paper promising to pay gold and silver coins. But the report of the U. S. Comptroller of the Currency for 1919 shows that the business of the country was done, 5% by such means and 95 % by checks; so, for practical purposes, we may say that money consists of men"s willingness to trust other men, or groups or organizations of men, when they make written promise to pay. In other words, money is credit; and the control of credit means the control of industry. The problem of social readjustment is mainly but the problem of taking the control of credit out of the hands of private individuals, and making it a public or social function.
Who controls credit today? The bankers. And how do they control it? We give it to them; we, the ma.s.ses of the people, who take them our money and leave it with them. A very little real money in hand becomes, under our banking system, the basis of a great amount of imaginary money. The Federal Reserve law requires that banks shall hold in reserve from seven to thirteen per cent of demand deposits; which means, in substance, that when you leave a dollar with a banker, the banker is allowed, under the law, to turn that dollar into anywhere from seven to thirteen dollars, and lend those dollars out. In addition, he deposits his reserves with the Federal Reserve bank, and that bank keeps only thirty-five per cent in reserve--in other words, the seven to thirteen imaginary dollars are multiplied again by three.
Under the stress of war, this process of credit inflation has been growing like the genii let out of the bottle. Under the law, the Federal Reserve banks are supposed to hold a gold reserve of 40% to secure our currency. But in December, 1919, these banks held a trifle over a billion dollars" worth of gold, while our paper money was over four billion. In addition, our banks have over thirty-three billions of deposits, and all these are supposed to be secured by gold; in addition, there are twenty-five billions of government bonds, and uncounted billions of private notes, bonds and accounts, all supposed to be payable in gold. So it appears that about one per cent of our outstanding money is real, and the rest is imaginary--that is, it is credit.
The point for you to get clear is this: The great ma.s.s of this imaginary money is created by law, and we have the power to abolish it or to change the ownership of it at any time we develop the necessary intelligence. Let us consider the ordinary paper money, the one and two and five and ten dollar "bills," with which we plain people do most of our business. These are Federal Reserve notes, and there are about three billions of them; how do they come to be? Why, we grant to the national banks by law the right to make this money; the government prints it for them, and they put it into circulation. And what does it cost them? They pay one per cent for the use of the money; in some cases they pay only one-half of one per cent; and then they lend it to us, the people--and what do they charge us? The answer is available in a recent report of the U. S. Comptroller of the Currency, as follows:
"I have the record of the loans made by one Texas national bank to a hard-working woman who owned a little farm a few miles from town. She borrowed, in the aggregate, $2,375, making about thirty loans during the year. Listen to the details of the robbery: $162.50 for 30 days at 36 per cent; $377. for 34 days at 44 per cent; $620.25 for 23 days at 77 per cent; $11. for 30 days at 120 per cent; $21.50 for 30 days at 90 per cent; $33. for 2 days at 93 per cent; $27. for 15 days at 195 per cent; $110. for 30 days at 120 per cent--that was to buy a horse for her plowing; $20 for 48 days at 187 per cent; $6 for 10 days at 720 per cent; $7 for 3 days at 2,000 per cent, and so on; every cent paid off by what sweat and struggle only G.o.d knows."
In Oklahoma, where the legal rate of interest is six per cent, with ten per cent as the maximum under special contract, hara.s.sed farmers paid all the way from 12 to 2400 per cent, with 40 per cent as the average.
In the case of one bank, the Comptroller proved that not a single solitary loan had been made under fifteen per cent. He cited one particular case that he asked to be regarded as typical. In the spring the farmer went to the bank and arranged for a loan of $200. Out of his necessity he was compelled to pay 55 per cent interest charge. Unable to meet the note at maturity, he had to agree to 100 per cent interest in order to get the renewal. The next renewal forced him up to 125 per cent. For four years the thing went on, and all the drudgery of the father and the mother and the six children could never keep down the terrible interest or wipe out the princ.i.p.al. As a finish the bank swooped down and sold him out; the wretched man, barefoot and hungry, went to work clearing a swamp, caught pneumonia and died; the county buried him, and neighbors raised a purse to send the widow and children back to friends in Arkansas.
This is the thing called the Money Trust in action, and this is the power we have to take out of private control. It is our first job, and all other jobs are in comparison hardly worth mentioning. How are we going to do it?
The farmers of North Dakota have shown one way. They took the control of their state government into their own hands, and the most important and significant thing they did was to start a public bank. The interests fought them tooth and nail; not merely the interests of North Dakota, not merely of the Northwest, but of the entire United States. They fought them in the law courts, up to the United States Supreme Court, which decided in favor of the people of North Dakota. Therefore, make note of this vital fact--the most important single fact in the strategy of the cla.s.s struggle--every state can, under the const.i.tution, have a public bank; every city and town can have one, and no court can ever forbid it!
Therefore, I say to all Socialists, labor men and social reformers of every shade and variety, nail at the top of your program of action the demand for a public bank in your community, to take the control of credit out of the hands of speculators and use it for the welfare of the people. Make it your first provision that every dollar of public money shall be deposited in this bank and every detail of public financing handled by this bank; make it your second provision that the purpose of this bank shall be to put all private banks out of business, and take over their power for the people.
At present, you understand, it is taken for granted that the first purpose of the government is to foster the private credit system. Take, for example, the postal savings bank. The private banks fought this for a generation, and finally they allowed us to have it, on condition that it should be turned into a device for collecting money for them. Our postal bank turns over all its money to the private banks, at the grotesque rate of two per cent interest; and recently I read of the director of the postal bank appearing before a convention of bankers, asking for some small favor, and humbly explaining that it was not his idea to make the postal bank a rival of the private savings banks. Why should he not do so? Let us nail it to our radical program that the postal savings bank is to fight for business, just as do the private banks, and lend its funds direct to the people on good security.
Let our Federal banking system also become the servant of the public welfare, and let its energy be devoted to breaking the strangle-hold of predatory finance on our industry. Let the government issue all money, and use it for the transfer of industry from private into public hands.
Do we want to socialize our railroads, our coal mines, our telegraphs and telephones? Do we want to buy them, in order to avoid the wastes of civil war and insurrection? We have agreed that we do; and here we have the way of doing it. If the bankers can create, out of our willingness to trust them, billions upon billions of imaginary money, then so can we, the people of the United States, create money out of our willingness to trust ourselves. And do not let anybody fool you for a single second by talking about "fiat money" and "inflation of the currency." If you are paying twice as much for everything as you did before the war, you are paying it because the bankers have doubled the amount of money in circulation--for that reason and that alone. That double money the bankers own; the only question now to be decided is, who is to own the double money that will be created tomorrow?
Make note of the fact that it costs nothing to start a public bank. If you want to put the steel trust out of business by compet.i.tion, you have several hundred thousand dollars worth of rolling mills and ore land to buy; but the banks can be put out of business by nothing but a law. The material parts of a bank, the white marble columns and bronze railings and mahogany tr.i.m.m.i.n.gs, are as nothing compared with the inner soul of a bank, its control of the life-blood of your business and mine; and this we can have for the taking. We can keep our own "credit"; instead of sending it to Wall Street, where speculators use it to bleed us white, we can set it to building up our own community, under the direction of officials whom we select. Also, we can have our gigantic national bank, controlling all our thirty-three billions of dollars of deposits, and likewise the hundreds of billions of credit built upon them.
The first time you suggest this plan to a banker or business man, you will be told that increase of money by the government does not benefit labor or the general consumer; "inflation of the currency" causes prices to go up correspondingly. To this I will furnish an effective reply: that at the same time the government issues new money, the government will also fix prices; and then watch the face of your banker or business man! If he is a man who can really think, and is not just repeating like a parrot the formulas he has learned from others, he will perceive that the combination of currency inflation and price-fixing would catch him as the two parts of a nut-cracker catch a nut; and he will know that you can take the meat out of him any time you please. He may argue that it is not fair; but point out to him that it is exactly what the big banks and the trusts have been doing to us right along--increasing the amount of money in circulation, and at the same time raising the prices we pay for goods, and so taking out the meat from us nuts!