DUKE UNIVERSITY LIBRARY Treasure %oom I Digitized by the Internet Archive in 2010 with funding from Duke University Libraries http://www.archive.org/details/bisocialismreignOOtrow BISOCIALISM THE REIGN OF THE MAN AT THE MARGIN BY OLIVER R. TROWBRIDGE If any man is able to convince me or show me that I do not think right, I will gladly change, for I seek the truth, by which no man was ever injured. — Marcus Aurelius. New York : 35 Nassau Street. MOODY PUBLISHING COMPANY. Chicago : 79 Dearborn Street. COPTBIGHT, 1903, BY OLIVER R. TROWBRIDGE. K6iK Co my tDtfc, Hlice C. XTrowbrl^ae, wljose labor anb sacrifices Ijar>e mabe its publication possible, ttjis book is gratefully bebicateb. 500408 PREFACE When a boj thirteen years of age residing on a farm in central Illinois, I one day read in a Chicago paper a diseussion concerning the hard times of 1873, in which some reference was made to "the present conflict between capital and labor.'' I do not remember any other part of the discussion, but these words attracted my attention and became fixed in my memory. At that time I had never seen a work on Political Economy, and it is doubtful if I had ever heard the term political economy used. How- ever, I set myself to work upon the question of the seem- ing conflict between capital and labor referred to in the newspaper discussion. I do not know just how long I pondered over it, without any guidance but my own limited experience, but while still a boy I came to a decision upon the subject and formulated it in these words: "Naturally there is, and logically there can be, no conflict between capital and labor." From this con- clusion I have never departed. Some time after this I began to have access to books upon the subject of Political Economy and read even the 5 500408 () PREFACE (Iryest of them with avidity. In the summer of 1883 I read Henry George's Progress and Poverty, an original work of great power and clearness, in which was first elaborated the doctrine of taking ground rent for public revenue. In 1893 I became acquainted, through transla- tions and reviews, with the works of the Austrian econo- mists. From them I received the suggestion that prima- rily value is not a matter of labor cost, but of utility. Their discussions, while purely theoretical and in many ways unsatisfactory and incomplete, led me to develop and apply to economic conditions the theory of value presented in the following pages. The illustrations used in Chapter IV of Part I in the analysis of utility and disutility are taken largely from the writings of the Austrian school. I began WTiting this book ten and a half years ago. For a long time I clung to many of the terms and defini- tions, and to som^ of the doctrines of standard Political Economy, but was finally forced to abandon nearly all of them and to invent terms and to formulate definitions as well as doctrines distinctively my own. For this I offer no apology. It was not done merely in order to present something new, or something old in a new form, but because new thoughts and principles were necessary and could not be stated adequately with the old terms and in PREFACE 7 the old way. Of about one hundred economic terms spe- cifically defined or definitely used in these pages, nearly one-half are original in nomenclature and practically all in definition or application. All of the new terms, how- ever, are such as tend to explain or define themselves. To those friends who have so cheerfully and loyally assisted me in the preparation of this work, I desire to express my heartfelt thanks and appreciation. July 4, 1903. Oliver R. Trowbridge. CONTENTS PART I ECONOMICS CHAPTER. PAGE. I. Of the Economic Problem 13 II. Of Coxflicting Theories 23 III. Of Utility and Disutility 34 IV. Of the Marginal Labor-Form 46 V. Of IxorsTRY and Exchange 59 VI. Of the Marginal Pair 73 VII. Of Value and Cost 87 VIII. Of the Socialization of Utility 98 IX. Of Measurable Utility and Disutility 104 X. Of the PosITI^'E Theory of Value 114 XI. Of the Origin of Values 127 XII. Of Marginal and Differential Values 142 XIII. Of Ground Rent and Ground Value 157 XIV. Of Land Tenure 171 XV. Of Ground Rent, Wages and Interest 184 XVI. Of the Economic Standard of Valute 193 PABT II POLITICAL EC0N03IY I. Of the Medium of Esch.vnge 201 II. Of Current Credit-Forms 213 III. Of Monopoly and Franchise Values 228 IV. Of the Socialization of Values 246 9 10 CONTENTS CHAPTER. PAGE. V. Of the Economic Imperative 258 VI. Of the Established Order 264 VII. Of Omnisocialism 279 VIII. Of Bisocialism 293 IX. Of Equality of Opportunity 307 X. Of Compensation 319 XI. Of Public Utilities 333 XII. Of Economic Evolution 345 XIII. Of the Individualization of Values 363 XIV. Of Inadequate Reforms and Remedies 380 XV. Of Social Disutilities 394 XVI. Of Social Solidabity 409 PART I ECONOMICS Make for thyself a definition or description of the thing which is presented to thee, so as to see distinctly what kind of a thing it is in its substance, in its nudity, in its complete entirety, and tell thyself its proper name, and the names of the things of which it has been compounded, and into which it will be resolved. For nothing is so productive of elevation of mind as to be able to examine methodically and truly every object which is presented to thee in life, and always to look at things so as to see at the same time what kind of universe this is, and what value everything has with reference to the whole, and what with reference to man. Marcus Aurelius. 12 BISOCIALISM PART I ECONOMICS CHAPTER I. OF THE ECONOMIC PROBLEM. My soul is sick with every day's report Of wrong and outrage with which earth is filled. Cowper. A new and fair division of the goods and rights of this world should be the main object of those who conduct human affairs. De TocqiieviUe. The young man of to-day who stands upon the threshold of business life is confronted by a serious problem. If he chooses a professional career, he sees before him a long and expensive course of preparation which, as a rule, only those can take who have unusual advantages of education or financial support. Yet when he completes this preparation he finds himself to be only one of a multitude, apparently, of young men for whom there seem to be no available opportunities. If he chooses a com- mercial career, he sees but small chance for a man of no 13 14 BISOCIALISM— ECONOMICS means or of only moderate means to engage in any pursuit with reasonable hope of success. Statisticians of repute tell him that of all business enterprises undertaken over 95 per cent ultimately fail. If he has no financial means or but small means at his command, his only pros- pect seems to be a life of salaried service in the employ- ment of another — probably in the employment of a great corporation. If he turns from these professional and commercial prospects to till the soil, he is met, where farming is most profitable, by a demand for approximately one-half of all he can earn, one year with another, for the privilege of tilling a given piece of ground — for the mere privilege of living and working upon the earth. The problem which faces the average man of middle age is almost as serious as that which confronts the man who is just beginning to meet life's responsibilities. If a man in middle life has a profession, he sees the field be- coming crowded with young men just out of school; and while these competitors themselves scarcely live, they secure enough business to cut down his income, or at least to prevent it from increasing as formerly. If he is a merchant, he sees his trade gradually dwindling away because of the department store and the mail order house with which he must compete with odds against him. If he is a small manufacturer, he sees himself giving way little by little before the merciless competition of the trust. If a tenant farmer, he sees his rents rising year by year, while the increase in the price of lands makes it more difficult for him to secure even a small farm of his own. If he is a wage earner, he realizes that his position be- OF THE ECONOMIC PROBLEM 15 comes more precarious every day, and that to lose his employment is a calamity most fearful for himself and those dependent upon him to contemplate. But of all persons who must live by their labor from year to year the man who is approaching old age has most to dread. In the economy of the present day there is no place for the old man. Although he may have served faithfully for thirty or even forty years, he fears more and more as the weeks go by that with the next pay envelope he will receive the notice, becoming well nigh inevitable, that his services are no longer needed. He looks forward to the time when, like an old horse, he will be turned out to die. In such circumstances it is not strange that men are discussing as never before the evils which now befall the masses, and that they ask of Economic Science some ex- planation of the origin of these evils and demand of it a remedy. In vain has workman delved, inventor planned, and scientist sought the laws of force and life; in vain has patriot died and statesman wrought unless the econo- mist shall solve the problem which confronts him. People see readily enough that the miseries of the established order can not be for lack of sufficient property for all, because while many are in want, or in dire fear of want, a few persons are possessed of fortunes beyond the dreams of avarice. The conviction is growing among all the classes we have considered that the trouble lies in the laws which affect the distribution of property. But when they turn to Economic Science for a satisfactory solution of this t; bisocialism— economics matter, they are confronted by so many divergent and conflicting theories upon every phase of every question tliat they are likely to become discouraged and to conclude that a clear and complete solution of economic problems is impossible. They find not only that different writers uphold different theories, but, with one or two notable exceptions, given writers upon economic subjects uphold theories upon various phases of their themes which are iitterly inconsistent with one another. It seems impos- sible to take the writings of any writer or school of writers upon economic subjects, and from such writings frame a complete treatise of Economic Science consistent in all its parts. Yet when fully analyzed all theories which have been or m'ay hereafter be advanced along economic lines may be classified as supporting one of three schools of thought. All such theories are either anarchistic in their tendencies, or they tend to support the established order substantially as it exists, or they tend to support some form of socialism. In a later chapter we shall ascertain the proper scope of Economic Science, and define and distinguish its two branches — Economics and Political Economy. For the present it is sufficient to say that the general subject which we are to pursue has to do with the question. What should be the policy of the State with reference to the institution of property? This is the economic prob- lem. By the "State" we mean throughout this discussion the body politic commonly called the Government, whether this body politic manifests itself in the nation, the political division called a state, or territory, or prov- OF THE ECONOMIC PROBLEM 17 ince, or any subdivision of these, such as county, city or other municipality. By the "institution of property" we mean property with reference to its legal status — ^the sum total of what we usually call property rights under the law. The State determines what shall be deemed prop- erty, fixes and regulates the tenure by which it is held, and undertakes to protect the owner of property in the enjoyment thereof. Viewed as a whole, Economic Science presents a double aspect. Upon the one hand it raises questions concerning the nature, the proper sphere and functions of govern- ment, and even of its raison d'etre (reason for existence). Upon the other hand it raises two fundamental questions concerning the legal status of property; first, What things are rightfully the subject of property? and, second, "What should be the policy of the State with reference to the individualization or socialization, or both, of those things which are rightfully the subject of property? From the first point of view the most fundamental question raised by our inquiry is that of the raison d'etre of government. Upon this question all men are divided into two classes; they are either anarchists or government- alists. Were it not for the mistaken notions which prevail even among persons generally well informed concerning an- archists and anarchism, we should pass these people and their doctrines without discussion. As it is, we are im- pelled to say that anarchists themselves are divided into two classes as different from each other as light from darkness. They all see the e^^ls of misgovernment, past 18 BISOCIALISM— ECONOMICS and present, and conclude that these evils are inherent attributes of every form of government, and that the only remedy is the abolition of all government. They agree, also, that all government is based solely upon physical force. But here they part. One class believes in oppos- ing force with force, and some individuals even believe in removing rulers by assassination. These anarchists of the sanguinary type we shall call revolutionary anarchists. They are comparatively few in number, but their occa- sional deeds of violence, especially against the heads of governments, give them and their doctrines great promi- nence, and all anarchists are indiscriminately condemned along with them in the public mind. The other class of anarchists take an exactly opposite view of the situation. Being opposed to government be- cause it is based, as they maintain, upon physical force, they do not deem it consistent to oppose it with force, and do not advocate resort to force in any circumstances. They are even less participant in government than the Quakers. An anarchist of this philosophic type — an evo- lutionary as distinguished from a revolutionary anarchist — not only refuses to oppose government with force, but he refuses voluntarily to uphold it even with his vote. He not only has conscientious scruples against being a soldier, but against being a part of the civil machinery of govern- ment in any way. Yet in matters in which he has no choice he yields peaceably to the government. He will not vote, because voting is not compulsory. But he will pay taxes and do other similar things under compulsion without any show or even thought of physical resistance. OF THE ECONOMIC PROBLEM lir In this attitude of peaceableuess he has no superior. He talks against the existence of government even where speech is not free; hut he favors the abolition of govern- ment by peaceable means. The mode of procedure which he advocates is the abolition of the exercise, one after another, of the various functions of government as now constituted. This, if carried out, will bring about a state of non-government in which every man, according to this doctrine, will do as he sees fit, without injury or hindrance to any other man in the enjoyment of equal freedom. This is the ideal of evolutionary anarchy. Unless Eco- nomic Science can refute the claim of the anarchist that such a consummation is possible in the absence of govern- ment (and only in the absence of government), the police power of the State will struggle with him in vain. The theory of the evolutionary anarchists does not imply that under an anarchistic regime every man would isolate himself, and that there would be nothing of the cooperation of modern life. Quite the contrary. Such anarchists believe in cooperation; they would live and work together in communities, but their cooperation as well as their communism would be purely voluntary. There would be no body politic to say to any man "thou shalt" and "thou shalt not." Nor could any man say these things to another with authority. It is conceded by evolutionary anarchists that under the system which they advocate great cities with their sky- scraping buildings, myriads of luxuries, and gigantic business enterprises would not exist. But neither, they claim, would there be any jails, penitentiaries, poorhouses, 20 BISOCIALISM— ECONOMICS insane asylums or suicides. These things, say the an- archists, are the price which we now pay for the so-called advantages of a false civilization. Opposed to the anarchists are all persons who advocate the maintenance of government. Such persons we have called governmentalists. All persons, therefore, favor either anarchism or governmentalism. Anarchism is that condition of society which prevails in the absence of all forms of governmental polity. Governmentalism is that condition of society which pre- vails under any form of governmental polity. A distinction must be made between anarchism and individualism. Individualism does not imply an entire negation of government, but simply a limitation upon its activities in certain directions and especially in the matter of its polity toward property, property values and indus- trial enterprises. Individualism, while distinctly negative in character, constitutes a form of governmental polity. Individualism is that form of governmental polity by virtue of which the State leaves property, property values and industrial enterprises to individual ownership, opera- tion and control. The doctrines of all governmentalists tend either to uphold the established order substantially as it exists, simply increasing its individualism a little here or its so- cialism a little there; or to substitute for the established order, or for some material part of it, a form of systemic socialism. Socialism is that form of governmental polity by virtue of which the State takes unto itself property, property OF THE ECONOMIC PROBLEM 31 values and industrial enterprises for the common use and benefit of all the people. In the established order there are several socialistic features, but they are unrelated to one another and do not constitute essential parts of a distinctively socialistic sys- tem. The postoffice department of our national govern- ment is such a socialistic feature; the public schools maintained in the several states furnish another illustra- tion. Yet there is at present no well-defined economic relation between these socialistic features; either might exist without the other. Such examples of socialism in present conditions are purely sporadic. The governments v/hich maintain them disclaim any intent to establish systemic socialism to any degree in any of their depart- ments. Sporadic Socialism is that form of socialism in which the various socialistic features of government are unrelated to one another and do not constitute essential parts of a distinctively socialistic system. Systemic Socialism is that form of socialism in which the various socialistic features of government are related to one another and constitute essential parts of a distinc- tively socialistic system. The fact that the established order maintains purely socialistic features without committing itself to socialism as a system in any degree is the result of the individualistic conceptions which pervade the common thought. These conceptions are expressed in such aphorisms as these: "That government is best which governs least." "The less government the better, provided the end be attained." 22 BISCK^IALISM— ECONOMICS Such conceptions of individualism are strongly impreg- nated with truth, but the)' are as sporadic in their incep- tion and application as are the conceptions of sporadic eocialism. Individualism as it is manifested to-day as a governmental polity is simply a negation. It acts merely ari a check upon the tendency toward sociali-sm; it has no definite and complete doctrine, working plan or program of its own; nor does it point to any distinct line of demarcation between those things which are within the proper sphere and purview of government and those which are not. Those persons whose doctrines tend to uphold present conditions we shall call standard economists. Some of their doctrines are socialistic and others are individualistic in their tendencies. Indeed, in one respect the standard economists agree with the anarchists, for like the anarcli- ists they believe that government — the body politic — is an evil. Like the socialists, on the other hand, they believe that government is necessary. According as the standard economists incline toward one or the other of these inconsistent doctrines, they advocate the curtailment or the increase, respectively, of governmental powers and functions, but not to the extent of anarchy upon the one hand nor of systemic socialism upon the other. CHAPTEE II. OF CONFLICTING THEORIES. Hate not each other because you differ in opinion — rather love each other; for it is impossible that in such a variety of sentiments there should not be some fixed point on which all men ought to unite. Zoroaster. Anarchy is based upon the theory that government is both evil and unnecessary, and that, being an unnecessary evil, it should be abolished. The established order is based upon the conception that while government is an evil, it is a necessary evil, and must be maintained at whatever cost. In his "Politics for Young Americans" Charles Nordhoff expressed the current theory of govern- ment as follows: "Governments may be said to be neces- sary evils, their necessity arising out of the selfishness and stupidity of mankind." The conception of socialism concerning the nature and necessity of government differs wholly from that of an- archy, and also, upon one point, from that expressed by Mr. Xordhoff. Socialism regards government not only as necessary, but as a necessary good. It regards government as arising not out of the stupidity, but out of the intelli- gence of mankind; and not out of their selfishness, but rather out of their common desire for more complete cooperation. The conceptions of these different schools with reference to the proper sphere and functions of gov- ernment will be left for discussion in a future chapter; it 23 24 BISOCIALISM— ECONOMICS being understood, of course, that all anarchists deny to the State any proper sphere or function with reference either to persons or property. The remainder of our discussion will have to do chiefly with those who are gov- ernmentalists of one school or the other; either upholders of the established order — standard economists— or social- ists. Each of these schools is divided into two classes or factions. The theories of one faction of the standard economists tend to uphold the established order substan- tially without change; the members of this faction con- stitute the conservatives of modern politics. The theories of the other faction tend to change the established order in certain details or along certain lines, but without fundamentally attacking any existing institution. The members of this faction m'ay be distinguished in a general ■way as the liberals of modern politics. Upon the question as to what may rightfully be made the subject of private property the standard economists say, in substance, that all things which are now treated as such property are rightfully so treated. No distinction is made by them between things which are the gifts of nature and things which are distinctively the result of the mental and physical exertion of man. They unqualifiedly uphold private property in natural opportunities as well as in labor products. There is nothing outside of our fellow men which we can succeed in appropriating that is not recognized as a fit subject of private property under the present system. If air and sunshine were susceptible of private and exclusive appropriation, they would also be treated as private property under the theory of the stand- OF CONFLICTING THEORIES 25 ard economists. Indeed, both air and sunshine are sus- ceptible of private appropriation and control to a slight degree, and just to that degree they are made the subject of private property. Suits at law sometimes arise in our courts which involve nothing except a claim upon one side to uninterrupted use of light and air in a given locality, and upon the other side a claim to the legal right to intercept such use by the improvement of adjoining realty or otherwise. Upon the question of the individualization or socializa- tion of property standard economists also tend to maintain that whatever is, is substantially right. In some of its features the established order tends strongly towards in- dividualism; in others it upholds and maintains features which are purely socialistic. The postoffice and the public school are excellent examples of socialism. Yet the gen- eral trend of the established order may be said to be towards individualism. While supporting both of these tendencies so far as they are exemplified in present condi- tions, standard Political Economy indicates no clear line of demarcation between them. It points out no criterion by which it may be definitely and positively determined whether a certain kind of property or a certain kind of business should or should not be socialized. While the theories of standard Political Economy may be divided into those which are conservative and those which are more or less liberal, the persons who accept the standard doctrines can not be so classified with any ap- proach to accuracy. The reason of this is that standard Political Economy furnishes no central truth by which its 26 BISOCIALISM— ECONOMICS adherents may at all times be guided and by which economic doctrines may at all times be tested. The same man is often very conservative upon one question and liberal almost to radicalism upon another, so that the classification of conservative and liberal must be applied to doctrines rather than to individuals. The advocates of systemic socialism are divided into two classes, and by a clear line of demarcation. One fac- tion of this school is in favor of the socialization of all forms of property in so far as they may be used in eco- nomic production and distribution. For this reason we shall call them omnisocialists and their doctrines omni- socialism.* Like the standard economists, they make no distinction between natural bounties and the products of labor. But unlike the standard economists, they would, in the first instance, socialize them both. Nothing would be individualized under a regime of omnisocialism until it had passed through the hands and ownership of the State and had reached the hands of its final consumer. Under this form of socialism there would be a collective ownership of all the means of production and distribution. This would involve the collective ownership of all land used productively and all capital. There would be no production whatever on private account or with private means of any kind. There would be no market — no buy- ing or selling between individuals — and no money. There would be no lending of capital nor payment of interest. The State would be the only employer in productive or distributive enterprises. Payment would be made in social * Omni, from Latin omnis, all. OF CONFLICTING THEORIES 27 labor-time checks, and prices would be put upon goods in the public storehouse according to the social labor necessary for their production. As between the State and the citizen labor-time checks would be the only medium of exchange. As between individuals there would be no medium of exchange and no use for any. There would be no chance for the making of a profit by the individual, and to the omnisocialist this is the great desideratum. The private ownership of capital and the making of private profits are two of the things most condemned by socialists of this type. They would eliminate from social life all forms of commercial comj3etition, for it is to competition that they attribute the great evils of modern life, and especially the spoliation of the laborer of all of his product except a bare living according to the accepted standard at any given time. For a bare living, they claim, is all that the laborer receives in present conditions, and he must constantly struggle against the tendencies of the existing system in order to get even his living and to maintain its standard. The underlying principle of omnisocialism with refer- ence to production is sufficiently stated in its demand for the collective ownership of all means of production and distribution. Dr. Schaflle has called this demand the "quintessence of socialism." Upon the question of the collective ownership of all the means of distribution omni- socialists agree. But as to the principle which should govern distribution by the State of the collective product, omnisocialists are divided into three classes, each of which is distinguished by its formula concerning the rightful 28 BISOCIALISM— ECONOMICS distributive share of the individual worker. The formula concerning the contribution of each worker to the State is the same for all; they are all to contribute according to their ability. The first class, which we may designate as the Christian socialists, use the following formula: From each according to his ability; to each accord- ing to his needs. The second class, which we may designate as the Bel- lamy socialists, use this formula: From each according to his ability; to all equally. The third class, known as the Marxian socialists, present the following: From each according to his ability; to each according to his deeds. According to some writers of the standard school the formula of the Marxian socialists is ciso the formula which governs distribution in present conditions. It is maintained by them that under our much berated competi- tive system men share in the product according to the efficacy of their respective efforts. But this the socialist denies. He maintains that, however it may be in theory, in practice the distributive process under the present sys- tem is a mere substitution of legal power for the physical force of ancient times in the appropriation by some of the earnings of others, and that both the ancient and modern regimes conform to the plan described in Wordsworth's Rob Roy's Grave: "For why? Because the good old rule Sufficeth them; the simple plan, That they should take who have the power, And they should keep who can." OF CONFLICTING THEORIES 29 There is not so much difference between the ideals of the Marxian and the Bellamy socialists as their formulas would indicate. The principles of Marxian socialism, while gauging individual rewards by individual deeds, would tend, so it is said, to induce all men to put forth substantially the same effort, measured in labor-time, and thus to realize substantial equality of reward. Opposed to the omniaocialists are those socialists who would limit the State to the socialization of but two things, viz., natural opportunities — ^represented by ground values — and public utilities. These persons we shall call bisocialists, and their doctrine bisocialism.* They make a positive distinction between things which are the gifts of nature and things which are the products of man's mental and physical exertion. This distinction is of vital importance to their theory. They contend that what a man creates is rightfully his own as against the world. But that natural opportunities are the bounties of nature to all men and can not rightfully be made the private prop- erty of some men to the exclusion of all others, except upon the annual payment into the public treasury of the differ- ential value of such natural opportunities. This plan would allow private possession and exclusive use of natural opportunities in the same manner and by the same legal titles as under the present order; and yet such natural opportunities would be effectively socialized by the sociali- zation of their differential rental values. The socialization of these values would supply the State with revenue, so *BI, from Latin bis. twice; used in English without the s, two. 30 BISOCIALISM— ECONOMICS that all forms of taxation upon the products of labor — upon energy and thrift — would be abolished^, leaving to the producer his entire product so far as it is distinctively the result of his effort, to do with as he may see fit. The bisocialist is a thorough going socialist as far as he goes; but he limits his socialism to the complete socializa- tion of natural opportunities and public utilities; as to all labor products he is the strictest of individualists. He denies the right of the State to take from him any part of his labor values in taxation; or at least until the differential rental values of all natural opportunities and all public utilities (if privately owned) have been turned into the public treasury and exhausted. He also denies the claim of the omnisocialist that present evils are the result of competition. He contends that these evils result not from competition, but from a denial of free competi- tion by the creation and maintenance of monopolies, franchises and other special privileges. The bisocialist maintains that although his doctrine is a golden mean between the established order and omni- socialism, yet it is in no sense a compromise. It has a distinct and complete philosophy of its own. In answer to the question, What, if any thing, is rightfully the sub- ject of unqualified private property, the bisocialist replies, The products of labor. In answer to the question, What, if any thing, is rightfully the subject of socialization for the maintenance of the State, he replies, The differential advantages (as reflected in the selling values) of all natural opportunities. Bisocialism would retain the present indus- trial and commercial systems stripped of all monopolies OF CONFLICTING THEORIES 31 and special privileges. It would retain the use of money, but it has a theory of the standard of value and of the proper medium of exchange distinctively its own. It would not abolish the payment of interest, but would deprive the money lender of all chance of extortion. It would give to all men of whatever generation equal exter- nal opportunities, but it would not attempt to make men equally strong or equally wise. It -would assure to every man a fair field in industry and exchange, and with that every honest man should be content. These are some of the things which are claimed by its advocates in favor of bisocialism. There is no mistaking the fact that in the realm of economic thought a fierce -battle is being waged. There is no concealing the fact that this battle will soon leave the field of thought for the field of action. There is no denying the fact that the established order is on trial at the bar of public opinion, and that this trial will go on until a final judgment has been reached and a rehearing has been denied. By the agitation of the anarchist, gov- ernment itself is arraigned before this bar. By the chal- lenge of the omnisocialist, the institution of private property and the entire competitive system of industry and exchange are joined in one indictment and must meet the issue as best they may. By the philosophy of the biso- cialist, private property in natural opportunities under the present tenure, and private property in public utihties under the present system are put upon trial and must make defense or die. Among the governmentalists it is not the socialiste 32 BISOCIALISM— ECONOMICS alone who bring to the bar of Justice in the high court of public opinion the iniquities of the established order. Men of high intellectual rank who have no tinge of social- ism in their economic conceptions may be heard sounding their notes of warning. There is presumably something wrong, and fundamentally wrong, with an economic con- dition which would lead Professor Thomas H. Huxley to say: "Even the best of modern civilizations appears to me to exhibit a condition of manlcind which neither embodies any worthy ideal nor even possesses the merit of stability. I do not hesitate to express the opinion, that, if there is no hope of a large improvement of the condition of the greater part of the human family; if it is true that the increase of knowledge, the winning of a greater dominion over Nature which is its consequence, and the wealth which follows upon the dominion, are to make no difference in the extent and intensity of Want, with its concomitant physical and moral degradation, among the masses of the people, I should hail the advent of some kindly comet which should sweep the whole affair away."* This, then, is the situation. We must solve the economic problem. Before we can do this, we must ascertain clearly what it is in its essence. We must submit all economic phenomena to the tests of scientific analysis. Out of the essential data thus obtained we must, by a scientific synthesis, arrive at a solution which will stand every test and meet every man with an honest, full and open answer to his every question. Such a solution must have the cer- titude of science, and in order to obtain this we must make our discussion conform to the scientific method. This we * Nineteenth Century Magazine. May, 1890. OF CONFLICTING THEORIES 33 propose to do by means of an inquiry comprehensive in its scope and brief in its treatment, yet, when seeking funda- mental principles, not neglecting the minutest details. In Part I we shall define the terms and deduce the laws that are necessarily involved in all true economic inquiries. In Part II we shall apply these definitions and laws, not only in determining the fundamental faults of the estab- lished order, but also in elaborating the principles and the working plan of a complete remedy for all the economic evils which now beset us. If at times the discussions of Part I shall seem technical or even tedious, we bespeak the patience and persistence of the reader with full assurance that the conclusions drawn in Part II will be replete with interest and will well repay a careful perusal of the entire subject. These discussions are of interest not merely to those whose ideals would lead them to change the estab- lished order; they are of the utmost practical importance to people of all classes and professions if the established order is to continue. CHAPTER III. or UTILITY AND DISUTILITY. All that man can do is to reproduce existing materials under another form which may give them an utility they did not before possess, or merely enlarge one they may have before presented. So that, in fact, there is a creation, not of matter, but of utility. J. B. Say. In order to decide among the conflicting claims of the governmentalists it is necessary for us first to pass upon the merits and demerits of the competitive system of pro- duction. This system is an essential feature of the estab- lished order and, as a system, it would survive the changes which would follow the adoption of bisocialism. Upon the other hand, the advent of omnisocialism necessarily in- volves the destruction, root and branch, of the competitive system. This attack of omnisocialism upon the competitive sys- tem as a whole is the distinctive characteristic of this school of governmentalists. If their contention in this regard is sustained, they must necessarily prevail not only over the standard economists, but over the bisocialists as well; for the preservation of commerce — the preservation of the freedom of the individual to buy and sell — is more jealously guarded and defended by the bisocialist than by the upholder of the established order. On the other hand, if the arraignment of the competitive system, as a system, can not be maintained, omnisocialism is without a rcdson 34 OF UTILITY AND DISUTILITY So d'etre. It must prevail absolutely or it must fall com- pletely upon the determination in the minds of the people of this one issue. Short of the adoption of omnisocialism as a system, the only fundamental contest among governmentalists is be- tween the established order and bisocialism. In advance of the final decision of the people as to omnisocialism must come the verdict of Economic Science concerning the com- petitive system. The salient feature of the competitive system is the market. It is here that competition is manifested, and from the market the good or evil of the competitive system must emerge. Within the market (using the word in its widest sense) the most salient features are those of value and cost. In this chapter and in the chapters next follow- ing, therefore, we shall investigate with great care and in some detail those economic phenomena which have to do with the processes of the market and with the origin and essential features of value and cost. The complexities of modern industry and exchange, when reduced to their simplest forms, are found to rest upon those simple laws of nature which govern the efforts of the individual man to satisfy his desires. In order cor- rectly to apprehend those complexities it is necessary for us to recognize certain attributes common to all men, and certain natural laws which tend to govern the individual man in his attempts to satisfy his desires. A Desire is the conscious recognition of a want or a need. Man is a being possessed of unlimited actual or potential 36 BISOCIALISM— ECONOMICS desires; this all experience proves. Many writers have dwelt upon this fact and have pointed out that while all other animals have the same wants from age to age, man's wants increase with every advance of civilization. The beaver, for instance, builds for himself a rude hut and constructs a dam for its protection. Compared with the huts built by primitive man, those of the beaver show the exercise of sagacity in location and construction greater, it may be, than that of man. But the wants of the beaver are fixed and unchangeable. Xo beaver ever was born that evolved a desire for a better or different habitation than the house provided by beaver Adam; no beaver ever evolved a desire for better or different food than that com- monly desired by his kind. This trait the beaver possesses in common with all other animals except man. Although certain domestic animals individually acquire tastes when pampered and fed by man, the lower animals, as a class and of their own volition, never progress either in the kind or number of their wants, or in the means of satisfying them. On the other hand the physical desires of man, both in kind and number, increase indefinitely. Although he may for generations inhabit rude huts, the power is ever within him "To hew the shaft and lay the architrave. And spread the roof above them " with' more perfect design and ever increasing execution until he dwells in palaces. As with shelter, so with food. Man's appetite changes Insomuch that what he once prized he now abhors, and things which he once looked upon as nauseous or poisonous OF UTILITY AND DISUTILITY 37 he now relishes as delicacies. This is not all. With man the quantity of food desired is limited; but its quality has no assignable limit. When he has satisfied one desire, he has within him a thousand others waiting only for a cir- cumstance to call them forth. His physical wants, actual and potential, are well nigh infinite in number, and the means of satisfying them increase from year to year and age to age. We have only to consider the myriads of articles of commerce and the ever increasing facility with which they are made and transported to realize that even with reference to the physical wants man, and man alone, is voluntarily and persistently a progressive animal. Superimposed upon the desire to eat, to drink, and to dress, there is in man the desire to know; like the desires of his physical nature, his intellectual desires are unlim- ited in number, and manifest themselves progressively as the means of satisfying them increase. At first his means of observation are limited; his opportunities to know are meager. Gradually he learns to put facts into such rela- tions that other facts are derived from them and impressed ■upon his consciousness in addition to those perceived di- rectly by the senses. Finally, with more favorable environ- ment and with increased knowledge, he seeks to solve the problems of matter, of force, of body, of soul, of space, of time, of eternity. It would almost seem that, with the fullest freedom of inquiry and the widest range of opportunity, none of these things is beyond his powers. Yet not less true and important is the fact that the means for satisfying all these desires are finite and are not com- mensurate with the desires themselves. 38 BISOCIALISM— ECONOMICS Man's ability to satisfy his desires is limited by his own powers of body and mind. Nature has furnished him with powers of action and of endurance, but upon both of these is placed a limit beyond which he can not go. Nature has also furnished him a field upon which to exert his powers, but the possibilities of this field are finite. Although this fact does not justify that distorted and exag- gerated doctrine based upon it, known as Malthusianism, yet it is true that it is man's attempt to satisfy his unlim- ited desires with his limited powers and environment that furnishes a basis for Economic Science. This science, properly understood, will enable man to develop his powers and to put himself into the best possible relations with his physical and social en\dronments, and so reach the highest possible satisfaction of desire. The expenditure of effort in the satisfaction of desire is not necessarily and always irksome to man. Up to a certain point exertion may give pleasure, while beyond such point it may become more and more irksome. Again, up to a certain point a desire may be satisfied by the spon- taneous bounty of nature without the necessity of any exertion worthy of serious consideration; while beyond that point an exertion irksome in its nature may be re- quired. Thus, in summer a man may partially subsist upon wild fruits with but a slight disutility of gathering. To this disutility he is practically indifferent. But if he travels far to secure such fruits, or performs the toil nec- essary to preserve and store them for future use, the disu- tility affects him to an appreciable degree. He recognizes the irksomeness of thp necessary travel a^ toil to th^ extent OF UTILITY AND DISUTILITY 39 tlu'.t he i.< put upon choice whether or not he will make the necessary exertion. It is not necessary for us fully to analyze the different powers of man, nor to distinguish between his physical and mental powers. All powers of man which are irk- somely exerted for the satisfaction of desire constitute what we shall call labor-power. Labor-Power is the physical or mental power of man irksomely exerted for the satisfaction of desire. This power is exerted in two ways — in the production of immediate and direct satisfactions without any tangible result, as in the case of the services of all public officers, public speakers, opera singers, actors, teachers, preachers, lawyers, body servants, waiters, ushers, and many others; and in the production with tangible result of future and indirect satisfactions, as in the case of the labor of all artisans, mechanics, farmers — in short, of all who exei't their powers upon their physical environment for the pro- duction of material forms which are afterwards consumed in the satisfaction of desire. Labor-power exerted in the first way is called Service; in the second, Labor. When service is rendered for the benefit of the public and at its expense, it is public service; when rendered for the benefit of private persons and at their expense, it is private service. The question of public and private service belongs to our inquiry, but service does not con- stitute the primary mode of exerting the powers of man for the satisfaction of desire. Primarily, man satisfies 40 BISOCIALISM— ECONOMICS liis desires through the exertion of labor-power upon his physical environment. Although the mechanism of modern industry may seem to be very complex and its methods extremely intricate, yet, at the bottom, the mechanical problems are exceedingly simple. The exertion of labor-power upon external objects can produce changes of two kinds only; it may change the form of the objects; it may change their position; or it may change both. If any such change creates or increases in such material substances a fitness to administer to human wants, or, what is the same thing, to satisfy human desires, then such substances are brought within the field of our inquiry; otherwise, not. The exertion of labor-power, therefore, may bring about such a change of the form or position of a part of the physical environment as to fit it to satisfy or better to sat- isfy a human desire. This fitness to satisfy desire is called utility, and the material substance to which this fitness is given by labor-power may be called a labor-form. Utility is fitness to satisfy desire. An object in its natural state may possess utility, and this natural utility may be retained even after a new and distinctive utility has been given to the object by labor- power. Thus, the wood of an oak tree has natural utility for the purposes of fuel; and this utility is retained after the wood has been converted into chairs or other manu- factured articles. But the utility of the wood as fuel is no longer the distinctive utility. The present distinctive utility is that of the manufactured article. In any case in which the utility added by labor-power is distinguish- OF UTILITY AND DISUTILITY 41 able it is ahvays easy to determine whether the present dis- tinctive utility of an object is natural, or whether it is the result of labor-power. In those cases where the added utility is so slight as not to be readily distinguishable the change has no economic significance. A Labor-Form is any material substance, great or small, so circumstanced that its present distinctive utility is the result of labor-power. The necessary expenditure of effort beyond a point soon reached is irksome to man, and produces immediate fatigue as well as immediate or ultimate enjoyment. Labor-power has its irksomeness as well as its utility, the former can- celing or neutralizing the latter to a certain extent. Within certain limits, which we shall hereafter discover and define, both irksomeness and utility are capable of measurement. Not only that, but they may be measured by the same labor-form used as a unit, and therefore the one may be directly compared with the other. Irksomeness and utility are not correlatives, however, but opposites. In comparing them the one is set against the other. The one is negative, the other positive. It is true that after a thing has once been attained the fact that it required an effort to secure it sometimes gives added zest to its enjoynuent. But this fact does not con- vert irksomeness into utility; nor is it the rule that the more irksomeness the more utility; nor do these exception- al cases affect the market as a whole. In anticipation of the market men who desire to sell weigh the irksomeness of production against the utility of market price, and unless the comparison is favorable to utility they do not, 42 BISOCIALISM— ECONOMICS in normal conditions, enter the market at all; and men who desire to buy weigh the irksomeness which has attend- ed the attainment of the price against the utility of the thing to be purchased, and act accordingly. Each man seeks to satisfy his desires with the least irksomeness, restraint or hindrance. If all desires could be satisfied without the expenditure of effort and without any restraint or hindrance, all utility would be unalloyed. But to the extent that irksome effort is required, directly or indirectly, in the satisfaction of desire, and to the extent that enjoyment is restrained or hindered, just to that extent is utility alloyed and thereby canceled. It is immaterial, in this view, whether the irk- someness, restraint or hindrance precedes the enjoyment or is concurrent therewith. Taking into consideration the entire period covered by both acquisition and enjoyment, any irksomeness, restraint, or hindrance which attends the attainment, or diminishes the enjo}Tnent of utility, nega- tives or alloys such utility and constitutes what we shall call disutility. Disutility is any irksomeness, restraint, or hindrance, however caused, which attends the attainment or other- wise alloys the enjoyment of utility. A man produces a labor-form, for instance a coat, and it has for him a certain amount of utility. A certain degree of disutility attends its production, however, so that only a part of its utility gives to him unalloyed satisfac- tion of desire. After he has completed the coat any tax upon it or restriction upon its transportation, sale, or use OF UTILITY AND DISUTILITY 4o practically increases the disutility of its acquisition and, to Ihat extent, alloys the enjoyment of its utility. The i)ractical problem of the individual is to obtain a maxinnim of utility with a minimum of disutility. In (h)iiig so he must compare and measure various utilities and disutilities. Two tilings may be compared when it can be said of them either that they are equal, or that one is greater t han the other. Measurement is a step beyond mere com- parison. In order to measure a thing three things are nec- essary; a point from which to measure, a point to which to measure, and a unit of measurement. It is our present ])urpose to consider those conditions under which various utilities and disutilities may be compared and measured. First, then, let us establish a common point of view for the purposes of comparison. Up to a certain point, as we liave seen, utility may be spontaneous or practically so, and in all cases of productive industry nature spontane- ously does a part by furnishing the raw materials. But at the point where irksomeness begins spontaneity ends. For convenience we shall call the point where spontaneity begins the point of spontaneity, and the point where dis- utility begins the point of disutility. The Point of Spontaneity is the point where the spon- taneity of nature begins. The Point of Disutility is the point where the sponta- neity of nature ends and the disutility of acquisition be- gins. Man does not care either to compare or to measure utili- ties which are spontaneous. But as soon as irksomeness 44 BISOCIALISM— ECONOMICS emerges his interest is aroused, and his comparisons be- gin. The point of disutility becomes the point from which he compares all utilities and disutilities. It is the economic starting point. Economics does not deal with spontaneities. It is only when the procuring of utilities is onerous that man puts any estimate upon them. The first distinction, therefore, which we must make with reference to utilities is to sepa- rate those which do not require the exertion of labor-power for their acquisition and enjoyment from those which do require such exertion. This separation is based upon the distinction between spontaneous and onerous utility. Spontaneous Utility is utility which does not require the exertion of labor-power for its acquisition and enjoyment. Onerous Utility is utility which requires the exertion of labor-power for its acquisition and enjoyment. Onerous utility begins at the point of disutility. Dis- utility begins at the same point. They extend upward to- gether, the disutility neutralizing the utility up to a cer- tain point at which the disutility ceases and the utility alone extends indefinitely upwards. To illustrate: A man exerts a certain amount of labor-power in making a pair of shoes. Disutility begins with the labor. A new utility also begins with the labor, and each successive moment adds to the distinctive utility which culminates in a pair of shoes. "When he has cut out only the soles there is distinctive utility accompanied by a perceptible disutility. The disutility ends with the completion of the shoes, while the utility then becomes complete and persists until the shoes are worn out. OF UTILITY AND DISUTILITY 45 The point at which the disutility ends and the positive utility of the shoes begins we shall call the point of positive utility. It marks the point of separation between dis- utility — the negative of utility — and positive utility. It is the economic zero point. The Point of Positive Utility is the point where the dis- utility of acquisition ends and positive utility begins. We must now discover a unit of measurement for both utility and disutility. Every measuring unit must be of the same nature as the thing measured. Utility can be pleasured only by a standard of utility, and disutility by a gtandard of disutility. But since every labor-form is the concrete expression of both utility and disutility, it is possible for the same labor-form to furnish a unit, or standard, for the common measurement of both of these intangible qualities. For such a labor-form, therefore, we shall seek. CHAPTER IV. OF THE MARGINAL LABOK-FORM. First recognize what is true; we shall then discern what is false, and properly never till then. Thomas Carlyle. The individual must apportion his expenditures among his various kinds of wants in such a way that to him, as nearly as practicable, each last unsatisfied want will weigh the same in his scale of desires as every other. Richard T. Ely. Let us first consider man in his attempt to satisfy, in a primitive state, the most pressing of all his desires — his desire for food. By putting forth a certain amiount of effort he is able to satisfy his present needs, say, by gath- ering chestnuts. At the beginning of his effort his hunger is great and chestnuts have for him a correspondingly great utility. Compared with this utility the disutility of his exertion is slight; he scarcely notices it. As his hun- ger becomes appeased the present utility of chestnuts diminishes, and relatively, though not absolutely, the dis- utility of his exertion increases. Finally he reaches a state of satisfaction in which the present utility of chestnuts is no greater than their disutility and he ceases his efforts. The utility has become to him indifferent. It may be said there is a time when a chestnut has for him just enough utility to cause him to put forth the necessary effort to acquire it; after that the disutility turns the scale. How much utility the first chestnut secured by him possessed we can not tell, nor does it matter. But that the last 46 OF THE MARGINAL LABOR-FORM 47 chestnut possesses for him but one unit of positive utility we know. For if it possessed two units, he would exert himself to procure another chestnut; and if it possessed less than one unit, he would not exert himself to obtain this one. The positive utility of the last chestnut, there- fore, furnishes him with a unit of comparison for utility. In like manner it may be shown that the last chestnut has but one unit of disutility, and that its disutility is consequently the natural unit of comparison for all dis- utility to him at the time and place in question. For if it had not one unit of disutility, its utility would be spon- taneous, as is the utility of the air and of sunshine in ordinary circumstances, and no exertion at all would be required to secure it; and if it possessed two units of disutility, its disutility would cancel its one unit of posi- tive utility, and its utility would become indifferent. Intensity of desire is thus seen to be the determining element of onerous utility. Whatever intensifies desire increases the utility of anything which has fitness to sat- isfy such desire. We shall now examine those factors which influence intensity of desire. We have considered the chestnuts with reference to present utility only. Man does not, like some of the lower animals, hoard food for future use in obedience to instinct. When he hoards at all it is in obedience to an attribute of the mind of man which is absent in the lower animals — the attribute of forethought. The distinc- tion will appear when we consider that among the lower animals the hoarding instinct is present in all animals of a given species in equal degree. Age after age bees 48 BISOCIALISM— ECONOMICS have stored up honey to the same extent and in the same way. The same condition is substantially true of all hoarding animals except man. "With him none of these things is true. Some men appear to be void of any ten- dency to hoard, while others possess it to an abnormal degree. From that primitive hoarding which was con- fined to the most pressing wants and the shortest pos- sible anticipation of the future, men have progressed so as to anticipate and provide for manifold wants in years and decades yet to come. Anticipation of the future and provision for it furnish one of the best indexes of the state of civilization attained by a particular man, nation or race. Let us recur to the man and the chestnuts. It may be that after his present want of food is satisfied, he will anticipate the next meal or the next day, and continue to gather chestnuts. But the utility of the chestnuts to be eaten to-morrow is less than of those to be eaten at once. Man places a lower estimate upon future than upon present satisfaction of desire, and the more remote the time of enjoyment the lower the estimate, other things being equal, until he ceases to esteem at all satisfactions to be enjoyed beyond a certain time, and will make no present effort to anticipate them. There is a "perspective of utility, diminishing with remoteness of time." A man may be so situated that for to-day's dinner of chestnuts he will put forth a certain effort. In anticipation of to- morrow's wants he will put forth some effort, but not so much as for to-day's; and for day after to-morrow's wants he will make no present effort at all. OF THE MARGINAL LABOR-FORM 49 Let us now assume that this man has advanced in civilization until he has acquired enough forethought and energy to provide chestnuts in advance for several days — say a pint for each day for a week. Prohably he can not point to any particular pint and say it has cost him more effort than the others. Ordinarily the effort to secure the several pints will have been substantially the same; there- fore, they have equal disutilities, or, what is the same thing, their points of positive utility coincide. He esteems them alike. It is impossible for him to say that any particular pint has the greatest, and another the least utility at any given time, unless he arbitrarily sets aside a particular pint for each particular day. But even if he does this, and by some accident loses the pint which he has set aside for the morrow, he will not on that account go hungry on that day. He will shift the loss to the seventh day whether he has so parceled the chestnuts out or not. In this way he will minimize his loss by shifting it to that pint of chestnuts which has for him the least present utility. Suppose, now, that the accident which cost him this one pint had endangered all the others so that the man is forced to put forth an effort to save them. When he has saved the first pint his zest for saving the second is less, although he saves it, and so on for the others, until for the last he may make no effort, or not sufficient effort, and it is lost. Consciously or unconsciously the remoteness of the satisfaction was the determining factor which governed his efforts. From these illustrations wc may say that time is a 50 BISOCIALISM— ECONOMICS factor of that intensity of desire which affects positive utility. While we may not be able exactly to measure this factor in all cases, we know that a labor-form which is held for the satisfaction of a present want has a higher utility, other things being equal, than one which is held for future satisfactions; and so far as both present and future satisfactions are concerned, we know that the least labor-form which a man will exert himself at any given time to secure, if he has it not, or to save, if he has it, has for him but one unit of utility. Let us now change the illustration, and consider a man situated, like Selkirk, upon an island in the springtime and possessed of three bags of corn, the remainder of hia last year's crop. The bags contain equal amounts of com of the same quality, and were secured and preserved by equal expenditures of effort. Their disutilities are the same, and their points of positive utility coincide. In considering their utilities, let us consider only the pur- poses to which the bags of corn are to be devoted. "We will assume that one bag is held to supply him with food while planting and tending the next crop; another, for seed com for immediate planting; and the third, for the sustenance of a pet parrot. If, now, an accident causes the loss of one bag of corn, the man will not go hungry himself, nor will he refrain from planting his crop for his own future sustenance. He will shift the loss to the least sensitive point, and deprive the parrot of cereal food, since the parrot's pangs of hunger are of less moment to him than are his own, and its company is less to be regarded than his supply of food during the bleakness of the coming OP THE MARGINAL LABOa-FORM 51 winter. And if another accident causes him the loss of a second bag of corn, he will consider his present rather than future wants, and plant no corn. The particular choices which are here attributed to the man in his attempts to shift the loss to the least sensitive point are not material to our argument. In his loneliness he might prefer the company of the parrot to a future supply of corn; or he might prefer a future supply of corn to present cereal food. The salient points are that in such a case the three bags of equal amounts and equal disutilities would have for the man different degrees of utility, so far as the several purposes for which he held them are concerned; and in case of loss of part of the corn he would shift the loss to that portion having for him the least utility in all the circumstances. To the factor of time of satisfaction we may now add that of choice of satisfactions in our analysis of intensity of desire. We may also say that the laws governing these factors are the same. Analysis in either case carries us back to a labor-form having but one unit of the particular kind of utility involved. A closer analysis of the illustration of the three bags of corn will show that the conclusions are based upon the hypothesis that the satisfaction of the several desires named is dependent upon the existence of corn. In ordi- nary circumstances this is not true. Corn is not the ciily article of food available even on an island. And if we introduce into our illustration not only the fact that the same labor-form — corn — will satisfy different desires, hut tbat other labor-forms will satisfy each of these do- 52 BISOCIALISM— ECONOMICS sires, we shall notice a change in the man's estimate of the various utilities. If he has at hand, or easily obtainable, some other parrot food, he will all the more readily shift his loss to that quarter. If he has no such substitute for parrot food, but has for his own present food, he may continue to feed the parrot and go without corn himself. This change of relative utilities, however, introduces no new law. He still shifts the loss to the least utility. In the analysis of the intensity of desire which affects the positive utility of labor-forms the presence or absence of substitutional forms enters as a third factor. Lastly, let us note that an increase in the number of bags of corn possessed by the islander at the outset would have changed the whole situation. We assumed that with three bags he could satisfy three different desires, but that the loss of one bag necessarily deprived him of one of these satisfactions. If, however, with the same desires, he had possessed six bags of corn, the result would have been the same as if he had obtained three substitutional labor-forms. The loss of one bag would not have embar- rassed him seriously nor greatly increased his estimation of the other five bags. Hence the number of labor-forms in relation to particular desire is a fourth factor affecting intensity of desire. Therefore, the point of positive utility remaining the same, the positive utility of a labor-form varies according to the intensity of desire, and this in turn varies accord- ing to the time of satisfaction, the number of desires involved capable of satisfaction by the same labor-form, the number of substitutional labor-forms, and the number of particular labor-forms in question. OF THE MARGINAL LABOR-FORM 53 So far we have confined our illustrations to articles of food, and to food of one kind, except in the case of sub- stitutional foods of the same general class. In the cases considered we have found both a unit for the comparison of utilities — the least or marginal utility — and a starting point from which to institute comparisons — the point of disutility. If we consider the same man in connection with the various kinds of food which he may possess at one time, we shall find that the same principles apply. There will be one article of food which he will esteem less than the others, and if necessity requires him to deprive him- self of some one article of food, he will prefer to sacrifice the one which, if retained, would afford him the least satisfaction. This article thus becomes the unit by which he compares the utilities of his various articles of food, and its point of disutility becomes the point from which he judges them. And if to food we add articles which furnish him clothing, shelter, amusement, etc., the result will be similar. There will be one article among them which he, esteems least of all, and by which and from' the point of disutility of which he will compare and judge all the utilities then and there possessed or desired by him. The least utility which a man at a given time and place will strive to secure, if he has it not, or to save, if he has it, is to him the marginal utility; the effort neces- sary to secure it is the marginal disutility; and, similarly, that labor-form which he will barely strive to produce, if he has it not, or to save, if he has it, is to him the marginal labor-form. The Mar^nal Labor-Form of any person is that labor- 54 BISOCIALISM— ECONOMICS form which has for him but one unit of positive utility and but one unit of disutility. The marginal labor-form of any man is his natural standard of comparison for all utilities and disutilities. But what is the marginal labor-form to one man is not likely to be to another, so much do men differ in their desires and estimates. This fact furnishes a basis for barter and exchange. We have already alluded to the fact that some utilities require no irksome effort on the part of man for their production and enjoyment, as air and sunshine in ordinary circumstances. They are usually free to all alike and abound everywhere. These we have called spontaneous utilities. Inasmuch as they can be appropriated by man without labor they have no bearing on economic questions. Plaving no unit of utility or disutility with which to insti- tute a comparison, they are never compared with indus- trial utilities or with each other. Man places no estimate upon them. In short, in order to have any economic significance, an object must have disutility as well as utility — and the latter must exceed the former. If inven- tion could reduce the point of positive utility in all cases to the point of disutility, all economic phenomena would cease. As it is, nearly all utility is onerous rather than spontaneous. Having divided all utility with reference to the means of its attainment into spontaneous and onerous utility, and having excluded the former from our consid- eration, let us seek to analyze onerous utility. In their entireties and in some circumstances onerous utilities are not only immeasurable but incomparable. If OF THE MARGINAL LABOR-FORM o;") a man's life is seemingly dependent upon the retention by him of a single morsel of food^ his only store, its utility to him is absolute — it is a matter of life or death. For the time being he looks upon this fitness to satisfy desire as all in all, without relation to the comparative fitness of any or all other utilities. In such circumstances the utility involved has no reference to the market. But in ordinary circumstances the utility of a morsel of food is but relative, and may freely be compared with other utilities. All relative utilities may be considered with reference to the market. Absolute Utility is fitness to satisfy desire without refer- ence to the comparative fitness of any or all other utilities. Relative Utility is fitness to satisfy desire with reference to the comparative fitness of any or all other utilities. Economics does not treat of absolute utilities, so that these also may be excluded from our consideration. Our next step is to analyze relative utility. With reference to particular labor-forms all men are either producers or consumers. To each of these classes the primary importance of a labor-form does not lie in the fact that it has been made into a particular shape, but in the fact that it possesses utility. The form which it assumes under the hand of man in the process of its making is important only because it contributes to its use- fulness. A labor-form has no economic significance ex- cept as a concrete expression of utility. The making of a labor-form in the sense of giving to it its distinctive form and finish is not the only thing which contributes to its utilitv. We have already seen that 56 BISOCIALISM— ECONOMICS labor-power may be exerted upon external objects so asS to produce changes not only of form, but of position. Each of these changes may contribute to utility, and the one as much as the other. A labor-form may be completed as to its form in a factory upon the Atlantic coast and yet have little utility until it has been transported to the Pacific coast to be employed in some enterprise peculiar to that region. The man who buys it of the manufacturer and transports it to the Western coast adds greatly to its utility by so doing. And if upon its arrival in San Francisco a final purchaser is not immediately forthcoming, the dealer in such wares who buys it of the shipper and places it for sale in some convenient and conspicuous place also adds to its utility. He brings it so much nearer to the person who wants it for final consumption, and has it ready for use as soon as it is needed by such consumer. All the men who have added in any way to the utility of a labor-form, whether by giving it its form, by changing its location, or by holding it in readiness for the purchaser so as to save the time of the latter, are producers. They have all created or increased its utility and this, and not mere manufacture, is the gist of production. Production is the artificial creation or increase of utility. After relative utility has been created it may be used by the producer as an aid to still further production, or it may be used by a final consumer without reference to any further processes of production. The processes of produc- tion are those of industry — the making and transporting of labor-forms — and of exchange. Utility which avails only the consumer we shall call OF THE MARGINAL LABOR-FORM 57 ultimate utility; while that which avails only the producer we shall call intermediate utility. Ultimate Utility is that form of relative utility which avails a consumer subsequent to all the processes of in- dustry and exchange. Intermediate Utility is that form of relative utility which avails a producer in some of the processes of in- dustry or exchange. A labor-form may be used in such a manner that it avails a consumer subsequent to all the processes of in- dustry and exchange, or in such a manner that it avails a producer in some of these processes. In the former case it is a satisform; in the latter, a capital-form. A Satisform is a labor-form so circumstanced that it avails a consumer subsequent to all the processes of in- dustry and exchange. A Capital-Form is a labor-form so circumstanced that it avails a producer in some of the processes of industry or exchange. A satisform is distinctively possessed of ultimate utility; a capital-form, of intermediate utility. It is the marginal satisform of every man that furnishes him with a marginal unit of utility. If a man is possessed of but one kind of food, say corn, and no other satisforms whatever, then that part of the corn which is least es- teemed by him furnishes the marginal unit. If he now acquires several different kinds of food, some having less and some greater utility than corn, the marginal unit for food shifts to that portion of food least esteemed. And if he shall further acquire various satisforms besides food, of 58 BISOCIALISM— ECONOMICS different relative utility, the marginal unit for all his sat- isforms will shift to that satisform least esteemed of all. We have so far confined our discussion to those utilities and disutilities which are of interest to man as an isolated individual. "We have not yet reached the field of Econom- ies proper. But man in society retains his individual char- acteristics. He does not cease to be a man; and, as we shall see, all those facts and circumstances which affect a Selkirk in his attempt to compare utilities or disutilities will affect him when he attempts to measure them as an exchanger in the markets of civilized society. Other facts will intervene, but in all circumstances he will find use for that most fundamental of all economic ideas — the idea of the margin. CHAPTER V. OP INDUSTRY AND EXCHANGE. That which does no harm to the state can do no harm to the citizen. That can not be for the good of a single bee which is not for the good of the whole hive. Marcus Aurelius. Both parties to an exchange will be benefited if the utility which each gains is larger to him than the utility which he parts with. John M. Gregory. In order to pass to the next step of our inquiry, let us assume that our Selkirk builds a rude boat and starts out upon a voyage of discovery. On a neighboring island he finds a small company of men of his own race with their wives and families who, like himself, have been ship- wrecked. Out of their wreck the men have saved various commodities and implements sufficient for their simplest needs. At first Selkirk takes but little notice of this fact. N"o sooner has he seen these men than he determines to abandon his island and all his fixed improvements and cast his lot with them. The mere matter of their companion- ship is more to him than all his physical possessions. On the other hand, they are glad to welcome him as one of their number. So he conveys to their island his movable belongings with all convenient speed. He thus willingly gives up the result of many days' labor spent in building an abode upon his own island and cheerfully exerts himself to huild another liome. 59 60 BISOCIALISM— ECONOMICS In doing this Selkirk weighs the advantages of compan- ionship against the labor-forms which he must lose, and chooses the former. He may, indeed, be said to exchange the one for the other, but it must be observed that, in fact, it is a mere change on his part, and not an exchange in any commercial sense. No one acquires anything by what he loses, or loses anything by what he acquires. They all gain from a more extended companionship, but this gain has nothing to do with his loss of improvements. The gain would have been just as great to them all, and greater to him, if he had had nothing to lose by deserting his own island. There are many instances of this kind in our daily lives. We often relinquish advantages which do not there- by accrue to others, and we as frequently acquire advan- tages without any corresponding disadvantage to any one else. These changes have no economic significance. The loss or gain is confined to the individual and can not be measured. The men upon the island cooperate, as men tend to do everywhere, for the satisfaction of their desires. At first their cooperation is likely to take the form of joint exer- tion of physical strength. Thus, in building huts, they can jointly place in position logs which, working singly, they could not even move. This simple illustration may stand for others of the same class, the distinctive characteristic being the union of labor-power in the performance of heavy tasks. On the other hand, in the joint performance of many tasks labor-power is not united, but purposely di- vided. One man rows the boat while another casts the line; one carries the cross-bow or the gun; another, the OF INDUSTRY AND EXCHANGE 61 game. Afterwards they adopt the simpler forms of what in a more complex society is known as division of labor. Thus, in the production of labor-forms one man habitually makes but a part, and often a small part, of the finished product, and so is enabled to acquire skill and dexterity otherwise impossible. Each man, in fact, may become an expert in his line, and the joint product of ten men is vastly more than ten times as great as the aggregate product of the same men working independently in the production of labor-forms of the same kind; for aside from the increase in skill there is a saving of the time otherwise required by each man in passing from one kind of work to another. Then again, it is not long before the inventive powers of some of these men begin to develop. A tool is made which enables one man to do the work formerly done by two. The tool suggests the simple machine, which not only increases the amount which one man may produce in a given time, but also reduces the labor-power to be exerted within that time. Finally, in a higher civilization, the complex and intricate labor-saving machinery of our pres- ent factory system is developed, and the products of m'an's handiwork are prodigiously increased until, in present con- ditions, the world at times seems overstocked, and men by hundreds, thousands, aye, by millions, are somehow compelled to stop working and to remain idle for days and months, and even years, because of a seeming and so-called over-production. We have seen that nature has provided certain utilities so generously that no voluntary action on the part of man is nece??ary for their production and enjoyment; as air 62 BISOCIALISM— ECONOMICS and sunshine in ordinaiy circumstances. Such utilities are spontaneous. So far as they alone are concerned man ex- ists without the exertion of labor-power. We have also seen that the exertion of labor-power is irksome to man, and that he tends to satisfy his desires with as little irk- someness as possible. His ideal is to reduce all labor-forms to spontaneities. In practice this is impossible, but he seeks to approach spontaneity as closely as he can; he strives to lower the point of positive utility until it will coincide with the point of spontaneity. Before passing to the next step in the development of these islanders, let us note that so far we have considered their cooperation only as it involves the exertion of labor- power in the production of labor-forms. Quantity and va- riety of products have been the results sought and ob- tained. The union of effort has resulted in substantial buildings; the division of labor, in the production of more hats, more coats, more shoes, more food, and more kinds of food. But when a man has one or two coats he is com- paratively content on that score. An additional quantity or even variety of coats is of no considerable moment to him. But he may have no shoes. Another may have both coat and shoes, but no hat; a third may have clothing to spare, but no food. Taken all in all, there is in the com- munity plenty of clothing, plenty of food, and plenty of shelter, these constituting the simplest satisforms; but no man among them is in possession of a supply of all three. In such circumstances these men, acting naturally, will exchange labor-forms. The man with an extra coat and no OF INDUSTRY AND EXCHANGE 63 shoes will seek another who has an extra pair of shoes, but no coat. Still another man will exchange a hat for food. Let us now consider the islander who has an extra coat, but no shoes. He has secured the coat by the exertion of a certain amount of labor-power. The coat, therefore, to him represents a certain disutility. He has reduced the disutility by applying his labor-power to an industry with which he is familiar — the making of coats — rather than to one of which he knows little or nothing — the making of shoes. But while the disutility of his product is compara- tively low, so, also, is its positive utility to him at the pres- ent time. The utility of a pair of shoes to him is much greater than that of the coat, but if he had to make the shoes himself, the disutility would be so great as to offset much of the utility, thus leaving the positive utility of the shoes comparatively small. His plan is to produce a coat with small disutility, and then exchange it for a pair of shoes of greater utility, and thus enjoy the benefit of a maximum of utility as the result of a minimum expendi- ture of labor-power. The natural law by which men ever}'- where attempt to secure a maximum of utility with a min- imum of disutility is the economic "law of gravity." "With the producer of the pair of shoes the conditions are just the reverse, but the ultimate object is the same. His pair of shoes represents to him a comparatively small disutility, and he hopes to exchange his product for a coat having to him vastly greater utility than the shoes. He, also, obeys the ''law of gravitj'" of the market. When they have exchanged labor-forms, the one has se- ( ';ro(l n pair of shoes Avith the disutility of making a coat; 64 BISOCIALISM— ECONOMICS and the other, a coat with the disutility of making a pair of shoes. Both are gainers by the transaction; not neces- sarily equal gainers, but that gives them no concern. Both are better off than if the exchange had not been made; neither has suffered a whit because of it. Each has satis- fied his desire with the least labor-power, and each is in possession of his product or what, to him, is a satisfactory equivalent. Our illustration has assumed an "even trade," but not of necessity. In the discussion of the estimates put upon dif- ferent labor-forms by our Selkirk alone upon his island, we found that such estimates were influenced by at least four possible circumstances, or conditions, which affect intensity of desire. All these and other considerations may enter into the calculations of each of the two islanders in the ex- change just described. The intensity of the desire of one of them for a coat will vary greatly according to the season of the year, and from other causes. If he has no coat at all, his desire will be greater than if he has an old coat which he intends to wear for a time before entering into the enjoyment of a new one. If he desires the coat merely for bodily comfort, he will esteem it less than if it will also administer considerably to a desire for display — a desire to be in style. If his desire is simply for a work coat, its place may be supplied by a simpler and smaller garment, as a jacket or a roundabout. And the number of coats possessed either by himself or by the other islander in question, if known to the former, will affect his estimate of the coat which he desires to secure. Again, a like num- ber of considerations may affect his estimate of the pair OF INDUSTRY AND EXCHANGE 65 oi shoes which he proposes to exchange for the coat; and to these must be added all the considerations which go to the question not of utility, but of disutility, which will be greater or less according to his opportunities for the use of tools and all other labor-saving devices in their manu- facture. On the other hand, the maker of the coat is beset with a like number of considerations upon his side of the transac- tion. From this point of view the matter of the exchange which seemed at first simple appears now exceedingly com- plex, especially when we include in the category of deter- mining factors not only the tendency of each to make the best of the bargain so as to secure the greatest results from his labor, but also the varying degrees of shrewdness with which they severally carry on the "higgling of the mar- ket," which finally fixes the terms upon which the ex- change is made. The fraction ^ when encountered by a child in the first lesson in common fractions is a very simple thing, and is easily understood. The complex fraction with half a dozen other complex fractions for its numerator and as many more complex fractions for its denominator which he en- counters later on among the miscellaneous problems is to all appearances quite a different matter; but when the sim- ple rules of multiplication and division are applied to it, its complexity disappears, and the result, when it has been reduced to its simple form, is found, perchance, to be ^. In much the same way all of the complexity of the prob- lem of exchange vanishes when the parties thereto auto- 66 BISOCIALISM— ECONOMICS niatically and almost unconsciously reduce their various es- timates to their simplest forms. Each man has in his consciousness, if not actually in his possession, some labor-form which he will barely exert him- self to save, if he has it, or to possess, if he has it not, and which has, consequently, for him but one unit of positive utility, and which represents to him but one unit of dis- utility. To this marginal labor-form he refers and with it compares, first, the labor-form which he has, and then the one he has not. In this way he is enabled accurately to compare his estimate of the one with his estimate of the other. This done, if he prefers what he has not to what he has, he determines at once to exchange, provided the dis- utility of the labor-form secured in this manner is not greater than the disutility of producing a similar labor- form himself. Having decided to exchange, and having not only the desire but the wherewithal to secure what he desires, he is economically capable; and if no third party in- tervenes, the respective abilities of himself and his oppon- ent to higgle will determine the point of exchange. A Capable Buyer in a given market is one who is both willing and able to buy at the market price rather than not buy at all. After the maker of the coat has made his own estimates of the two labor-forms he will consider the various cir- cumstances likely to influence the maker of the shoes in the formation of his estimates, and so anticipate, as far as he can, the action of the latter. The maker of the shoes will do likewise, and the comparative skill of the two as traders will decide the terms upon which the exchange is OF INDUSTRY AND EXCHANGE 67 made. But after all, the transaction is one of simple bar- ter between the two, wholly uninfluenced by circumstances outside themselves. So far the results obtained do not dif- fer in effect from those derived from physical cooperation in the union or division of labor. In each of these, how- ever, the active participation of each person involved is es- sential to the final result. The mere presence of bystand- ers, however capable they may be, avails nothing in indus- try. Their labor-power must be brought into use in order to be effective. It is otherwise in the matter of exchange. A capable bystander upon either side of the market is not without influence. Let us assume that hvo islanders have extra coats, both being in want of shoes. The three men now meet for barter, and all are capable traders. All of the con- siderations which influenced the traders when there were but two will influence the three. They will severally make their estimates in substantially the same way. But when expression is given to these estimates the fact of the pres- ence of the second coat owner will cause the owner of the shoes to set his asking price on the shoes high and to offer a relatively low price for a coat. On the other hand, the first coat owner will be influenced by the presence of the second, and will consent to take less for his coat, or, what is the same thing, to give more for the shoes than he other- wise would, and so make the exchange. Thus the mere presence of the second coat owner as a possible and capa- ble trader for the shoes, although he may not even have made a bid for them openly, may cause the fir?t coat owner 68 BISOCIALISM— ECONOMICS to give not only a coat, but a vest, also, for the pair of shoes. In this transaction we note that the presence of the sec- ond coat owner has not affected the other parties equally or in like manner. It has given to the shoes a greater, and to the coat a less utility to those who offer them, re- spectively, in the market. From another point of view it caused the owner of the shoes to acquire what he desired at a less, and the coat owner at a greater disutility than would otherwise have been the case. Both have satisfied their desires with the least effort in the circumstances, however, and each has his labor-form, or what to him is its equivalent, for otherwise there would have been no ex- change. Men by associated effort may strive to put themselves into the best relations with their physical environment. They may unite labor-power to labor-power when greater strength is required. They may divide their tasks when greater skill or a saving of time is sought. They may make tools and machinery to supplement both strength and skill by calling to the assistance of man the powers of na- ture and the mathematical precision of the mechanic arts. These efforts may extend from the simplest cooperation, as in the building of a hut in the wilderness, to the exquisite finishing of the most delicate products of modern indus- try, and from the transportation of logs in the "lumber woods" to the transmission of intelligence by telegraph or telephone. Yet in all these things we have but the appli- cation of labor-power for the purpose of overcoming the disutilities of nature. They are but manifestations of man's OF INDUSTRY AND EXCHANGE 69 desire to approximate the spontaneity of nature in the phy- sical world by annihilating the disutilities of matter, space and time. They result simply in an increase of positive physical utility. We have seen, however, that men in association attempt to satisfy their desires not only by creating labor-forms, but by exchanging them; by taking advantage not only of physical utility, but of the utility of social environment. When a labor-form has entered the market for exchange its importance to its possessor depends upon its commer- cial rather than upon its industrial utility. These, how- ever, are but forms of intermediate utility. Industrial Utility is that form of intermediate utility which avails its possessor in the processes of industry. Commercial Utility is that form of intermediate utility which avails its possessor, as seller, in the processes of ex- change. Commercial utility, as we have so far discussed it, has two of the elements of direct measurement. It lies be- tween the point of disutility, where all economic utility begins, and the point of exchange. We have not yet de- veloped a common unit of measurement, however, nor are we ready to define the point of exchange. The presence in the market of other capable buyers compels the successful bidder to give more for an article, and so gives rise not only to a commercial utility, but to a commercial disutility. In the case last considered we found that with but two exchangers in the market one of them secured a pair of shoes in return for a coat. But the coming of a second capable shoe buyer into the mar- W BISOCIALISM— ECONOMICS kct caused the first to give iu exchange a coat and vest for a pair of shoes. In the market and at the point of exchange the disutility of the pair of shoes was as to him increased by the presence of another capable shoe buyer, or, in other words, a competitor. This disutility arises from the fact that only one person can wholly possess and enjoy a given labor-form at any given time. This is a physical fact, but assumes a social aspect when mani- fested in the market. Experience teaches us that in every general market this disutility asserts itself and is recog- nized, under the name of "competition," as the determin- ing factor in every exchange. The disutility which arises from the acquisition of utility by means of exchange we shall call commercial disutility. This will distinguish it from that disutility which arises from the acquisition of utility by means of the processes of industry. All disutility is onerous, so that we do not have a division of disutility to correspond to the distinction be- tween spontaneous and onerous utility. But like utilities, disutilities may be either absolute or relative. The dis- utility of gaining a certain end may be the disutility of giving life itself, but ordinarily disutilities are susceptible of comparison. Industrial and commercial disutilities are but forms of relative disutility. Absolute Disutility is irksomeness of acquisition without relation to the irksomeness of any or all other disutilities. Relative Disutility is irksomeness of acquisition in rela- tion to the irksomeness of any or all other disutilities. Economics takes no note of absolute disutilities. We therefore exclude them from further consideration. OF INDUSTRY AND EXCHANGE 71 Industrial Disutility is that form of relative disutility which arises from the acquisition of utility by means of the processes of industry. Commercial Disutility is that form of relative disutility which arises from the acquisition of utility by means of exchange. In the early part of our discussion reference was made to the fact that labor-forms are primarily of two kinds according as they avail a consumer subsequent to all the processes of industry and exchange or a producer in some of these processes. For the sake of clearness we shall here repeat four definitions and add two which grow out of these. Labor-Power is the physical or mental power of man irksomely exerted for the satisfaction of desire. A Labor-Form is any material object, great or small, so circumstanced that its present distinctive utility is the result of labor-power. A Satisform is a labor-form so circumstanced that it avails a consumer subsequent to all the processes of in- dustry and exchange. A Capital-Form is a labor-form so circumstanced that it avails a producer in some of the processes of industry or exchange. An Aid-Form is a capital-form so circumstanced that its distinctive utility is industrial. A Trade-Form is a capital-form so circumstanced that its distinctive utility is commercial. "We have also seen that the distinctive utility of a satis- form is ultimate; of a capital-form, intermediate. Ulti- 73 BISOCIALISM— ECONOMICS mate and intermediate utility on the one hand, and in- dustrial and commercial utility on the other, are divisions and subdivisions, respectively, of relative utility. They are not independent utilities, but are merely forms of relative utility. To a large extent they are interconvert- ible. Ultimate utilities may be thrown back upon the market and so become trade-forms (intermediate utilities); while trade-forms are constantly passing into the domain of satisforms (ultimate utilities). All industrial utilities may be changed for the time being from aid-forms to trade-forms; while trade-forms are constantly leaving the field of exchange to become the instruments of industry. As we shall see, commercial utilities and disutilities are forms which all relative utilities and disutilities must assume for the purposes of measurement. CHAPTER VI. OF THE MARGINAL PAIR. The price coincides very nearly with the estimate of the "last buyer." E. von Boehm-Bawerk. Let us now assume that three coat owners enter the market where, as before, there is but one person with an extra pair of shoes. All of the conditions which we have noted will apply, and there will be from the start one of the three coat owners who, because of the greater intensity of his desire, will tend to lead in the bidding for the shoes, although he will try to get them with as little disutility as possible. If the three have equal abili- ties for exchange, the one having the greatest need or desire for the shoes will be the most capable of the capable buyers in that market, and the one with which the owner, or seller, of the shoes will most readily strike a bargain. Whenever there is more than one capable buyer for an article in a limited market, one of them will be the most capable, and will make the actual exchange, al- though every capable buyer will to some extent influence the fixing of the point of exchange. But whenever there is a one-sided market, with all or a greater part of the competition among the buyers, the most capable buyer — the capable buyer with the greatest desire — will tend to fix the point of exchange. This results in a correspond- 73 74 BISOCIALISM— ECONOMICS ingly great disutility to the buyers in such a market. The disutility of competition in such case is thrown upon the buyers, while the utility is enjoyed by the seller or sellers. It is natural enough, perhaps, in such conditions, that the sellers should endeavor to retain their advantage, even to the extent of persuading the buyers that such is the natural and necessary condition of every market. The entrance of other capable buyers of shoes into this market — neither the number of sellers nor the stock of shoes being increased — could only result in greater diverg- ence of desires between the most capable and the least capable buyer, until the disutility of obtaining a pair of shoes by exchange would approximate the disutility of making them at first hand. Thus the utility of the mar- ket w^ould be reduced to a minimum, if not entirely de- stroyed. For even in a one-sided market the commercial disutility of a labor-form can not, as a rule, be made to exceed its industrial disutility to the most capable buyers; for otherwise there is in even the most capable buyers no motive for exchange. Let us now consider a one-sided market in which there are more sellers of shoes than buyers. If there are two sellers and but one buyer, one of the sellers will make the exchange, but he will do so at a lower point than if he were the only seller. The presence of the second seller is a disadvantage to him and a corresponding advantage to the buyer. If another seller enters the market, the disadvantage to the most capable seller is increased, as is also the advantage to the buyer. A Capable Seller in a given market is one who is both OF THE MARGINAL PAIR 75 n!)le and williDg to sell at the market price rather than not sell at all. It will be noted that in such a one-sided market the most capable seller is the one who has the least desire to retain his extra pair of shoes as compared with the desire to- acquire a coat. That is, he is the one most anxious to sell. It follows that if the number of sellers be increased, the number of buyers remaining the same, the point of exchange will be forced down until there remains but one unit of utility to the most capable seller. In normal conditions it can not be forced lower, for then even the most capable seller would have no motive for exchange. Therefore, in one-sided markets the point of exchange of a given labor-form will range from its dis- utility to the most capable buyer (highest bidder) down to its utility to the most capable (or lowest) seller, accord- ing as the advantage of the market is with the sellers or the buyers, respectively. Let us now consider a market in which there are two sellers and two buyers of coats, each seller having but one extra coat. The most capable buyer and the most capable >eller — called the most capable pair in the market — will first exchange, their point of agreement being influenced by the presence in the market of the other men. These will then be left to agree upon an exchange without refer- ence to the first pair who, having satisfied their desires through exchange, are now out of the market. In our discussion of utility and disutility we were led to consider the point of spontaneity, the point of disutility, the point of positive utility, and the marginal units of •ye BISOCIALISM— ECONOMICS utility and disutility. In the foregoing discussion of ex- changes in one-sided markets we have considered, also, the point of exchange, which lies at the upper limit of com- mercial utility. "We have now to consider the point of exchange as it is manifested in a general market. We have been considering a small market in which men have met for the purposes of barter. In developing a larger market, it will not be necessarj-' for us at this time to trace the various steps in the growth of the market until men have ceased to barter and have agreed upon some labor-form, as gold or silver, for use as a medium of exchange. For convenience we will for the present assume that men have adopted gold and silver as current trade metals, and that these metals have been coined into units with various fractional and multiple denominations as in the case of current coin. After money comes into current use and a general mar- ket is established, each man produces labor-forms to l)e turned by sale into money, with which he purchases other labor-forms as his needs may require. This we know; but out of these seemingly simple transactions arise certain economic definitions and laws of the highest importance. An Ordinary Trade-Form is a trade-form which is bought and sold in the ordinary process of the market. A Current Trade-Form is a trade-form which passes current in the market as a medium of exchange. Current trade-forms, current debit-forms, and current credit-forms constitute the money-forms of modern com- merce. The additional forms will be defined later. OF THE MARGINAL PAIR 77 We have seen that in any market containing several capable buyers there is one who is most anxious to pur- chase. We have also seen that in a one-sided market with few sellers and many buyers the most anxious buyer is the one who will first exchange. The price may then fall to the bid of the next buyer, and so on, it being possible in such a market to have a different price for each pur- chase. The same shifting of price may result from a one-sided market with many sellers and but few buyers, except that the price will tend to increase with each pur- chase and sale, as the most anxious or cheapest sellers will first dispose of their wares. But, as is well known, in a general market in which there are many sellers and many buyers, and in which the supply of ordinary trade- forms and the demand for them tend toward an equil- ibrium, the price does not differ with each sale, nor does it tend to do so. On the contrary, the tendency is toward a fixed market price at which all must sell and all must buy in that market. This is one of the most interesting as well as the most important facts which we have to consider. It constitutes one of the most talked about and least understood phases of economic phenomena. One of the first things which a buyer learns is the advantage of concealing his own desires and necessities, and of assuming an indifference which is felt only by those buyers whose desires and necessities are least of all. The seller also learns to conceal his necessities, if any such exist, but he must constantly evince his desire to sell by advertising, window displays, and the thousand and one expedients known to the modern merchant. The ulii- 78 BISOCIALISM— ECONOMICS mate effect of the tendency of buyers to conceal their de- sires is to abolish, in a general market, all open competi- tion among buyers. While the ultimate effect of the ten- dency among sellers to attract huyers at all hazards is to intensify, in a general market, the open competition among sellers. To illustrate: There is little, if any, conscious and open competition among the buyers of staple groceries and dry goods in an ordinary country town; but there is consider- able conscious and open competition among even country merchants. In large cities there is absolutely no open com- petition among the buyers of goods at a mammoth depart- ment store. It matters not that one purchaser may be practically destitute of clothing and another supplied be- yond his actual needs; the price is the same to both. A starving man enters a restaurant and sits at the same table with an epicure who is so surfeited that he can scarcely select from a most elaborate bill of fare a morsel that is even palatable to him; yet the starving man pays no more than the epicure. The price was fixed before they came, and neither the abnormal appetite of the one nor the lack of appetite of the other affects it in the least. They do not bid against each other. What does fix the price? Supply and demand? As well say, "Chops and tomato sauce" for all that the hackneyed phrase "supply and de- mand" means as currently used. The difficulty of answering this question as to the de- termining factor or factors of market price is increased by the fact that there is nowhere a market of any considerable consequence in which tlie natural laws of exchange have OF THE MARGINAL PAIR 79 free play. Everywhere that we may seek to examine the market we shall find that it is affected more or less by juridical institutions, laws and customs which interfere with normal conditions. This makes it necessary for us to distinguish between normal and abnormal economic conditions, and between the normal and the abnormal mar- ket. Juridical Institutions, Laws and Customs are in- stitutions, laws and customs which are recognized and en- forced by the judicial powers of the State. A Normal Market is a market unaffected by juridical in- stitutions, laws or customs which interfere with normal conditions. An Abnormal Market is a market affected by juridical institutions, laws or customs which interfere with normal conditions. In the following discussion of market and price and of value and cost the examination of facts and principles is confined to normal conditions except in instances in which the contrary is specially noted. This noting is usually done by the use of the term "in present conditions." By the use of this term we mean conditions of the market abnormally affected by present juridical institutions, laws and customs. In the science of mechanics there is discussed a process called the composition of forces by means of which a single physical force is found which is the concentrated effect of two or more separate forces acting in given di- rections and meeting at a common center. This single force when found, or composed, is measurable and is 80 BISOCIALISM— ECONOMICS called the resultant. In connection with every re- sultant there is conceived to be a force acting in the opposite direction which just equals it and which is called an equilibrant. If Economic Science, so- called, be truly a science, it must disclose a process by means of which a single resultant may be found which is the concentrated effect of all the economic forces which center in the market. It must do this just as completely and with as much certainty as mechanical science is en- abled to compose physical forces into measurable resul- tants and their corresponding equilibrants. That Eco- nomic Science is a true science, and that the composition of those economic forces which center in the market finds a measurable resultant in Talue and a corresponding equi- librant in cost we now proceed to prove. We have seen that in any market the competition among sellers persists. In fact, the larger the market the greater the competition becomes. In the country town the merchants compete, but are comparatively at ease; w^hile in the large city, in present conditions, men lie awake at night evolving plans for enlarging their trade at the ex- pense of their competitors. Now, in any general market there is one seller who, in respect to a given trade-form, is most anxious to sell. If he has but a small supply of that trade-form compared with the usual demand in that market, he may lower his price and dispose of his supply without affecting the general market price. His action in so doing will be known to but few. In such case he is not, economically speaking, an integral part of the general mar- ket, but rather an isolated and incidental seller. But if OF THE MARGINAL PAIR 81 his supply of such trade-form is sufficient to affect the en- tire market, he becomes a marginal seller upon that mar- ket, and competition forces all other sellers to offer simi- lar trade-forms at his price. It makes no difference how- large the market, if the supply of a given seller be large enough, he may set a price which all others must meet. The marginal seller, then, is the determiner of price upon his side of the market. The Marginal Seller of a given trade-form is the most anxious seller whose supply of such trade-form is suffi- cient to affect the entire market. In a large market there are usually several sellers who are equally capable and equally anxious to sell, and who consequently offer a given trade-form at the same price. If their combined supplies are sufficient to affect the entire market, the price fixed by them becomes the market price. In such cases they constitute the "marginal group" of sellers, and practically act as one man. "We have seen that in any general market the open com- petition among buyers tends to diminish and finally to dis- appear. We must not conclude from this, however, tkat the buyers of a given trade-form have little or nothing to do with fixing its price. As a class they appear to buy at a price already fixed; and as a class, the sellers appear to fix the price. But the fact is contrary to the appear- ance. In the absence of monopoly the price is not fixed arbitrarily by the seller. It is largely determined by the desires of those capable but indifferent buyers whose par- ticipation is necessary to exhaust the supply in the given market. 82 BISOCIALISM— ECONOMICS Suppose that in a given market, at the beginning of the fruit season, 100 baskets of peaches are received and of- fered for sale. This fruit is perishable and must all be disposed of quickly in order to avoid deterioration and loss. Let us assume that the supply is divided among three or four dealers, and that it is necessary, in order to avoid loss, to dispose of the entire stock upon the day of its arrival. There are in that market five families able and willing, if necessary, to pay $5 a basket for peaches; ten other families who are capable buyers at not exceeding $3; fifteen other families, at not exceeding $2; seventy other families, at not exceeding $1 per basket, and all of the sellers are aware that, from the state of the demand, their entire stock can not be sold unless the market price be- comes as low as $1 per basket. In the ordinary course of business in such circumstances each dealer marks his peaches at $1 per basket, and all buyers take advantage of that price. On the next day 150 baskets of peaches are received in that market, and the capable demand of the 100 families above mentioned remains the same, but in addition to these there are fifty families who will buy peaches at not ex- ceeding 75 cents per basket. The price of peaches for that day is 75 cents. If, on the next day, 250 baskets are received, and one hundred additional families are ca- pable buyers at not exceeding 50 cents per basket, that sum is the price necessary to be fixed in order to exhaust the entire supply of peaches. If the price at which the en- tire supply can be disposed of is not known to the dealers in advance, the market price may start higher and fall dur- OF THE MARGINAL PAIR 83 ing the day; but at any given time the price tends toward uniformity among all the dealers. For the sake of brevity and clearness of illustration we have made use of a perishable labor-form in a market in which the price may fluctuate from day to day, the ma- terial points being that at any given time there is, in or- dinary circumstances, but one price in that market, and that that point is fixed, not arbitrarily by the sellers them- selves, but by the capable demand of the lowest buyers whose participation is necessary to exhaust the supply in the market. If now we change the illustration to some article not immediately perishable, we shall find that the market price is relatively constant from day to day, but that such changes of price as may occur result from the de- mand of the most indifferent, but necessary, buyers. This fact is recognized by all merchants, and especially by large dealers in a market where competition among sellers is close. They not only strive to secure a large share of the trade of those whose demand for a given trade- form is so great that they will buy it somewhere without urging — in which case the question is simply which mer- chant gets the trade — but they also constantly seek to at- tract buyers who are practically indifferent. Full page ad- vertisements in metropolitan dailies, elaborate window dis- plays, and tempting prices are resorted to not only to at- tract the man who wants the goods in question, but also to create desire in those who otherwise would not buy at all. It is not the men and women of wealth who drive to the store in fashionable turnouts and are met at the door with smiles of welcome, followed with fawning, and dismissed 84 BIS0CIALI9M— ECONOMICS Avith obsequiousness and flattery, who fix the price of staple articles; it is the people of small means who are just on the verge of expending hard earned money in some other way. The merchant must dispose of his entire stock on hand be- fore it becomes shopworn, and for this reason he caters with low prices to those with whom it is a matter of the turning of a hand whether or not they will buy. The marginal buyer is the determiner of price upon his side of the market. The Marginal Buyer of a given trade-form is the most indifferent buyer whose participation is necessary to ex- haust the supply of such trade-form in the market. As in the case of the marginal seller, the marginal buyer is often but one of a class of buyers similarly situated. These buyers collectively constitute the "marginal group" of buyers and practically act as one man. The marginal seller and the marginal buyer in any mar- ket constitute its "marginal pair." The marginal pair are the determiners of market price in normal conditions. But from the fact that the marginal seller is anxious upon his side of the transaction, and the marginal buyer indifferent upon his, it necessarily follows that the preponderating tendency is toward the bid of the marginal buyer, and consequently toward lowness of price. There are economic forces behind each of these factors of market price, however, which we can not fully analyze until we have considered the subject of value and cost. And there is an economic fact of great practical impor- tance which follows from what has been said in the fore- going discussion, and which will be emphasized by the OF THE MARGINAL PAIR 85 discussion of value and cost. It is this: All individual traders above the margin in a normal market arc bound by prices fixed by forces outside themselves. In the ab- sence of some monopoly possessed by them — which would render the market abnormal — they do not control the market price, but are controlled by it. It must at all times be remembered that the marginal seller is not merely the most anxious seller, and the mar- ginal buyer not merely the most indifferent buyer. The marginal seller must control such a stock of trade-forms as will affect the supply of the market as a whole; and the marginal buyer must be a buyer who is needed in the given market to exhaust the supply. He must have desire enough, despite his indifference, to become an actual buyer. He must evince an effective demand. An examination of the qualif3ing or limiting clauses in the definitions of marginal seller and marginal buyer will disclose the fact that the marginal seller must usually be a man of some means in order that his supply may af- fect the entire market; while the marginal buyer may be and presumably will be, in most cases, a man of compara- tively small means. In fact, the chances are that the least capable of all the capable buyers will become the marginal buyer in any general market. These facts present another reason why tlie normal market is more readily affected from the side of the buyer than that of the seller with a consequent tendency toward lower prices. After we have considered the questions of value and cost and the problem of ])roduction, we shall be prepared to say that, in a gen- eral market of staple trade-forms at least, in normal condi- 86 BIS0CIALI9M— ECONOMICS tions, the price of trade-forms already ii: the market is fixed by the lowest capable demand of the marginal buyers. "We shall also see that this does not controvert the fact, equally important in its place, that the further production or non-production of labor-forms to he placed in the mar- leet is determined by their disutility to the marginal sel- lers. CHAPTER VII. OF VALUE AND COST. The question of value is fundamental. * * * The small- est error on that subject infects with corresponding error all our other conclusions; and anything vague or misty in our conception of it creates confusion and uncertainty in every- thing else. John Stuart Mill. We have already seen that men may secure satisfonns in two ways; by means of direct production, technically called industry, and by means of exchange. Attending each of these modes there is a certain disutility. In order to distinguish these disutilities, we have named that at- tending the acquisition of the desired labor-forms by di- rect production industrial disutility; and that attending their acquisition by exchange, commercial disutility. Of those labor-forms which are consumed by the pro- ducer and which, therefore, never actually acquire either commercial utility or disutility, the subject we are pursu- ing takes no immediate account. But when a labor-fonu enters the market for exchange it must be considered from two different points of view — that of the seller, and that of the buyer. From the standpoint of the seller its signi- ficance arises from its commercial utility; from the stand- point of the buyer, from its commercial disutility. Let us now recall to mind certain matters which wo have heretofore discussed, and examine them more fully. TVe have seen that men in association are constantly develop- 87 88 BISOCIALISM— ECONOMICS ing their desires, and as constantly seeking to satisfy them with the least exertion. Fitness to satisfy desire we have designated utiliiy; while that which alloys or neutralizes the satisfaction of desire we have called disutility. We have seen that while increase of utility is the ultimate ob- ject sought, the means used are such as diminish disutility, for only in this way, in the absence of monoi^oly, can fur- ther satisfaction of desire be had with the same effort, or equal satisfaction be had with less effort. We are justified, therefore, in anticipating the fact that any inquir}- into normal conditions will be concerned with the reduction of disutility. Although men, in making exchanges, may be looked upon as divided into buyers and sellers, the fact is that, economically considered, they are both buyers and sellers at one and the same time. The man who exchanges a coat for a pair of shoes is a seller as to the coat and a buyer as to the shoes. And if he sells the coat for mone}^, and with that buys shoes, the effect is the same. So in every trans- action between merchant and customer there is upon one side of the counter a seller-buyer, and upon the other side a buyer-seller. This is plain enough when the customer ex- changes country produce for dry goods; but if he sells his produce for cash, and with the money buys the dry goods, the intervening step is likely to mislead us. This likeli- hood is increased by the fact that we are prone to attribute to money some mysterious and peculiar utility, instead of looking upon it as the equivalent, in concentrated and cur- rent form, of the commercial utility of that for which it is received, or for which it is paid. This tendency toward OF VALUE AND COST 8'.) mystery is increased by the fact that the money we use has been given a peculiar and artificial utility by law. As a seller each man is interested directly and imme- diately in the commercial utility of his trade-form, the disutility of its acquisition being to him a thing of the past. As a buyer each man is interested directly and im- mediately in the commercial disutility to himself of the seller's trade-form, its utility being to the buyer a thing of the future. The seller desires that the trade-form in question should have for him great commercial utihty; the buyer desires that it should have for him small com- mercial disutility. The attention of each is centered upon the point of exchange, which to both is the market price of the trade-form. But the market price, although the same for both, means vastly different things to them. To the seller the market price represents the commercial util- ity to him of the thing sold. The difference between this commercial utility and the disutility of acquiring the thing sold represents its positive utility to the seller. Later we shall discuss and define this positive utility as net value. To the buyer market price represents the commercial dis- utility of the thing bought. The difference between this commercial disutility and the disutility to him of direct production represents a saving, i. e., an avoidance, of dis- utility which we shall later discuss and define as net sal- vage. ■ We learned in our discussion of utility and disutility that in their entireties utilities can not be measured. If a man produces a certain lalior-form, as, for instance, a coat, it may have for him but one kind of utilitv. If he be our 90 BISCX3IALI&M— ECONCWVIICS Selkirk alone upon an island, its only utility is that of a satisfonn. He has in his consciousness, if not in his imme- diate possession, some labor-form which has for him but one imit of positive utility — his marginal labor-form. By means of this unit he may compare the coat with other labor-forms and determine which he esteems most and the order in which he esteems them. But he can not measure the absolute utility of the coat. On a bright, sunny day it might at first have practically no present utility; while within a few hours it might so protect him from a storm and its attendant chill as to save his life. As a mere satisform he may know that he esteems it greatly or but little, but Just how much actual utility it may have for him he can not tell. If Selkirk now produces a rude ax, the utility of this la- bor-form will be that of an aid-form. The utility to him will be great, but he can not measure its utility as aid-form any more than he can measure the utility of the satisforms in the production of which the ax is used. To Selkirk alone up- on his island the utilities of all labor-forms are indefinable at the upper limit. They are comparable with the one at the lower limit — the marginal labor- form — and through it with one another, but as there is nothing definitely to fix the upper limit, no measurement of their entire utilities is possible; for measurement involves not only a starting point and a measuring unit, but also a point to which to measure. Let us now assume that after Selkirk has returned to civilization he produces a labor-form as at first — a coat — and goes with it into the open market. Its distinctive OF VALUE AND COST 91 utility to him will now be that of a trade-form ; its utility to him as a seller in the market will be commercial. This utility may be measured and accurately so, if we secure a proper unit of measurement, since its upper limit is the poijit of exchange and its lower limit the point of dis- utility. Between these two points is a definite utility which stops short, and, it may be, far short of its total utility. In every civilized community there is a common margi- nal unit of utility. It is the labor-form having the least utility which men in general will exert themselves to ac- quire. This common marginal labor-form is typified by the lowest current coin — in the United States a one-cent piece. For unless a labor-form is worth one cent, it is, in general, not worth producing for the market. In the case of those few labor-forms which sell in the market at two or more for one cent, the group which so sells may be considered as a whole, and as a marginal labor-form. The fact that the cent is the lowest coin shows that in the gen- eral market it represents the marginal labor-form; the market, like the law, takes no note of trifles. In practical business, however, one hundred cents, or one dollar, is treated as the unit of trade. Custom in this regard has ripened into law, and for the present we may adopt the customary and legal unit for the measurement of all utility which bears a definite and determinable rela- tion to the common marginal unit of utility. We have, therefore, in respect to utility, when commercial in form, a unit of measurement, a point from which to measure, and a point to which to measure. "We now have need of a distinctive term which will express utility when measured; 92 BISOCIALISM— ECONOMICS that is, which will express measurable utility, commercial in form, determined in the market at the point of ex- change. For in the absence of an exchange, actual or potential, to determine the point of upper limit no measurement is possible. And this measurable utility is not a common or general utility, but a utility limited to the possessor as a seller in the market. Xot only that, but as we shall see, the utility to the seller of a given labor- form is equal, when expressed in price, to its disutility to the buyer. These elements are all comprehended in the terms com- mon marginal unit of utility, measurable utility and value, which we now define, together with the term immeasurable utility. The Common Marginal Unit of Utility is the labor-form having the least utility which men in general will exert themselves to acquire, as typified by the lowest current coin. Measurable Utility is any utility so circumstanced that it bears a definite and determinate relation to the common marginal unit of utility. Value is measurable utility at the point of exchange. Immeasurable Utility is any utility so circumstanced that it bears an indefinite and indeterminate relation to the common marginal unit of utility. Value is always limited and measured by the point of exchange which is fixed in a general market, not by the total utility of the thing sold, but by its utility to the mar- ginal pair, particularly the marginal buyer. We have also seen that the utility of a labor-form is neutralized more or OF VALUE AND COST 93 less by the disutility of its acquisition. Its value, there- fore, takes on two forms — the negative and the positive. To the extent of its disutility its value is negatived or canceled, and it is only above the- point to which the dis- utility extends that there is a positive value to the seller. Thus, if a man produces a labor-form at a disutility which may be represented by five dollars, and sells it in the market for ten dollars, the ten dollars represent the total measurable utility to him of the labor-form at the point of exchange, or, in other words, its value. But its value is not all gain. It covers the disutility of production plus the net gain of the transaction. The disutility of produc- tion neutralizes the value to that extent, and leaves only a portion of the total value as a positive gain. We have already learned that some utilities, like those of the air and sunshine in ordinary circumstances, are spontaneous and require no irksome effort upon the part of men to acquire them; that men, by invention, division of labor, exchange, etc., strive to lessen disutility and to at- tain spontaneity in the acquirement of satisforms; and that, if this were possible, the point of positive utility would be lowered until it would fall below the point of dis- utility. If the point of disutility were reached and passed in any case, both value and disutility would disappear, and not till then. Value and disutility, therefore, both begin at the point of disutility. They extend upward together, the disutility canceling the value, until the point of posi- tive utility is reached, while value alone continues to the point of exchange. If, now, we conceive the value of a labor-form to be rep- 94 BISOCIALISM— ECONOMICS resented by a vertical line, we have three points which must be kept constantly in mind. They are, first, the point of disutility, which marks the lower limit of both value and disutility; second, the point of positive utility, which marks the upper limit of disutility; and, third, the point of exchange, which marks the upper limit of value. In order that we may distinguish between disutility to the seller and disutility to the buyer, and also between value and that coincident disutility to the seller which negatives value, two new terms become necessary. We shall call disutility to the seller, or the negation of value, disvalue; and the positive value which lies between the point of positive utility and the point of exchange, net value. Disvalue is the disutility to the seller of acquiring the thing sold. Net Value is the excess to the seller of value over dis- value. Let the line ABODE, extending indefinitely as indicated by the dotted extremities, represent the immeasurable total utility of a given labor- form at a given time and place. Let A represent the point of spontaneity, B the point of disutility, C the point of positive utility, and D the point of exchange. Then the definite dark portion of the line extending from B to C represents the dis- value; the definite light portion extending from C to D represents the net value; and the total B definite portion of the line extending from B to . i D represents the value of the labor-form. E OF VALUE AND COST 96 A man who has produced or acquired trade-forms for the market is interested, primarily, in their net value. In order that this may be as great as possible he strives to enlarge it at both the upper and lower limit. In order to attain these ends, he becomes interested, secondarily, in market price and in disvalue, seeking to increase the one and to decrease the other. These constitute practical prob- lems of business life. We must defer their consideration for the present, however, and take ujd a more extended examination of the market — and this time from the point of view of the buyer. To the buyer the market price represents the commer- cial disutility to him of the thing bought; its disutility is the disutility of acquiring the price, instead of the dis- utility of acquiring the thing itself directly by labor. Thus, a man may produce a pair of shoes and sell them for five dollars, with which sum he may buy a coat which he could make at first hand only at a disutility of ten dollars. To the buyer the difference between the disutility of acquiring the price and the disutility of acquiring the thing itself direct- ly by labor represents a saving — an avoidance — of dis- utility. This saving of disutility in turn results in an in- crease in positive utility. It is to secure this resulting in- crease of utility, through the saving of disutility, that all exchanges are made upon the part of the buyer. "We learned in our discussion of utility and disutility that the marginal labor-form of any indi\ddual is his unit of comparison not only of utility, but of disutility; also, that the marginal lal)()r-form has one and but one unit of disutility. For unle-s it had at least one unit of disutilitv, 96 BISOCIALISM— ECONOMICS its utility would be spontaneous, and no effort would be made to secure it; and if it had two units of disutility, the second unit would neutralize its only unit of utility, and its utility becoming indifferent, no effort would be made to produce it. In the United States the real marginal unit of disutility is one cent. Labor that is not of the disutility of one cent either will not be exerted at all, or it will ordinarily be exerted gratuitously. Custom and law, however, having fixed upon one hundred cents, or one dollar, as the unit of commerce, we may for the present treat this as the prac- tical common marginal unit of disutility. All disutility has its lower limit at the point of disutility. Commercial disutility is determined by market price, and its upper limit is fixed by the point of exchange. "We have, therefore, with respect to disutility, commercial in form, a unit of measure- ment, a point from which to measure, and a point to which to measure. We now have need of a term which will express commercial disutility when measured, that is, which will express measurable disutility, commercial in form, deter- mined in the market at the point of exchange. For in the absence of an exchange, actual or potential, to determine the point of disutility to the buyer, no measurement is possible. And this measurable disutility is not a common or general disutility, but a disutility limited to the buyer; for the disutility to the buyer is determined by price, which also determines the utility of the same trade-form to the seller. These elements are all comprehended in the terms covi- mon marginal vnit of disutility, measurable disutility and OF VALUE AND COST 97 cost as we shall now define them, together with the term immeasvrahle disutility. The Common Marginal Unit of Disutility is the irksome- ness of attaining the least valuable labor-form which men in general will exert themselves to acquire, as typified by the lowest current coin. Measurable Disutility is any disutility so circumstanced that it bears a definite and determinate relation to the com- mon marginal unit of disutility. Cost is measurable disutility at the point of exchange. Immeasurable Disutility is any disutility so circum- stanced that it bears an indefinite and indeterminate re- lation to the common marginal unit of disutility. CHAPTER VIII. OF THE SOCIALIZATION OF UTILITY, The constant striving of economic progress is toward taking commodities out of the categories of values, and mak- ing them utilities like the rain and sunshine. William Smart. A man may buy trade-forms to use for the direct satis- faction of his desires, to use productively, or to sell again. In the first case the trade-forms become satisforms and their distinctive utility ceases to be commercial. In the second case they become aid-forms and their cost becomes an element of the disvalue of the trade-forms produced by their aid. If the trade-forms are bought to be sold again, they remain trade-forms, and their cost becomes disvalue to the owner as a prospective seller. The buyer deals distinctively with measurable utility. He has the alternative of buying or of producing at first hand whatever he may need. This applies, in strictness, only to those labor-forms which can be made by one man working alone with ordinary appliances. But in a complex system of industry and exchange in which it is impossible for any buyer with his own labor-power and simple facili- ties to produce a given satisform, the alternative shifts from total to partial production. A buyer has the choice of working at one trade or at another — of following one profession or another — in securing the trade-forms or 98 OF THE SOCIAUZATION OF UTILITY 99 money-forms which he proposes to use in exchange. In any case the disutility of the direct means of acquisition is distinguishable from the indirect, and each may be meas- ured in terms of money. It is as easy to determine how- much more a man can make at one trade or emplo}Tnent than another as it is to determine how much more a given labor-form will cost if made at first hand than if purchased in the market. The utility gained by the saving of dis- utility through exchange is a measurable utility. It rep- resents the saving which results from regular rather than shifting occupation and employment. It lies between cost and alternative cost — ibetween the point of exchange and what we shall call the point of alternative cost. The Alternative Cost of a labor-form is that cost which would be necessitated by the direct processes of industry, if there were no saving of disutility by the indirect proc- esses of exchange. Between the point of exchange and the point of alter- native cost lies that utility gained by the buyer through the saving of disutility and which we shall call his net sal- vage. Net Salvage is the saving to the buyer of cost over al- ternative cost. The Point of Alternative Cost is the point where net sal- vage ends and measureless utility begins. Net value and net salvage are very different things, yet they have certain features in common. Both may be ex- pressed in terms of money. Both may be reflected in land values — a fact hitherto overlooked — as we shall see when we discuss the question of ground rent. Because of these 100 BISOCIALISM— ECONOMICS facts the one may become commercially equivalent to the other, but not identical with it in any respect. It will be noted that value, disvalue and net value per- tain to capital-forms; while cost, alternative cost and net salvage pertain to satisfonns, it being remembered that cost becomes disvalue to the merchant who buys to sell again, or to the manufacturer who buys raw or unfinished materials for use in his business. Value and cost in their economic sense are manifested only at the point of ex- change; but the exchange need not be of the particular thing in question, if it be of one of a class of things which sell at a common price in the market. For instance, it is not necessary to exchange a particular bushel of wheat in the market in order to ascertain its value, for in the same market all bushels of wheat of the same grade are economic equivalents. Economic Equivalents are things which exchange for each other, or at the same price, at any given time in the same market. It will be noted, also, that while value is a term appli- cable only to the seller, and cost a term applicable only to the buyer, yet in any given case value and cost meet in price at the point of exchange. That is to say: Price is the measure, in terms of money of either value or cost, according to the point of view. As was anticipated in the last chapter, we have now shown that all the economic forces which center in the market are composed and measured in market price. Value is the resultant of the composition of these forces, OF THE SOCIALIZATION OF UTILITY 101 and cost is its exact ec^uilibrant in every case. Economic Science is thus demonstrated to be a true science. We may now formulate a definition of the point of ex- change. Like price, it has a double aspect which must be recognized by definition and kept well in mind. The Point of Exchange is the point where net value to the seller ends and net salvage to the buyer begins. Let the line ABODE, extending indefinitely as indicated by the dotted extremities, represent the immeasurable total utility of a given labor- form at a given time and place. Let A represent the point of spontaneity, B the point of disutil- ity, C the point of exchange, D the point of alter- native cost, and E the indefinite and indetermi- nate point of immeasurable utility. Then C also D represents the point of disutility to the buyer. The definite dark portion of the line extending from B to C represents commercial disutility to the buyer at the point of exchange, or cost. The definite light portion C D represents disutility saved to the buyer, or net salvage. The entire definite line from B to D represents measurable utility; and that portion of the line extending from D indefinitely upwards to the indeterminate point E represents immeasurable utility of the labor-form. We have called the point of disutility the economic Btarting point, and the point of positive utility the eco- nomic zero point. The point of exchange is the economic meeting point; there value and cost meet in market price 102 BISOCIALISM— ECONOMICS and are both expressed in terms of current money. The point of alternative cost, being the upper limit of measur- able utility, is the economic stopping point. Beyond it our inquiry can not go. The point of immeasurable utility is an indeterminate point which, for the sake of conveni- ence, we merely assume to exist; it has no definite reality. In the diagram shown in the last chapter the net value or positive gain to the seller is measured by the light line C D. In the above diagram the net salvage, or negative gain to the buyer, is measured by the light line C D. These gains may or may not be equal. As long as each line C D represents at least one unit of utility gained, positive or negative, as the case may be, the corresponding trader is capable, and an exchange is economically possible. We have indicated by alternative cost the disutility which would be required to secure a given satisfonn by direct production. Between the point of exchange and the upper limit of alternative cost lies an utility which is saved to the buyer by the process of exchange. This gain, how- ever, is not limited to the individual buyer. By the law of the market the point of exchange is fixed not by the parties to a particular purchase and sale, but by the mar- ginal pair. The marginal buyer fi^es the price in so far as it is affected from his side of the market, and all other buyers participate in the gain by buying at the same price. In the open market, in normal conditions, no man can live unto himself, either as seller or buyer, producer or con- sumer. If any man acquires a mastery over any disutility of matter, time or space, other men are led to acquire the same mastery, or its economic equivalent in other direc- OF THE SOCIALIZATION OF UTILITY 103 tions; and in the regular course of exchange, in the ab- sence of monopoly, the market price of all labor-forms tends to fall, thus lessening cost to all as consumers. With every fall in price the difference between cost and alterna- tive cost is increased for the entire community, and the spontaneity of nature is to that extent more nearly ap- proached by all. Such an increased enjoyment of utility by the entire community, brought about by saving dis- utility and distributing the resulting benefits to all through the processes of exchange, we shall call the so- cialization of utility. CHAPTER IX. OF MEASURABLE UTILITY AND DISUTILITY. Value is the calculation-form of utility. F. von Wieser. In matters of philosophy and science authority has ever been the great opponent of truth. A despotic calm is the triumph of error. W. S. Jevons. It must be remembered that commercial utility is but a form of intermediate utility, and that this again is but a form of relative utility. The remaining portion of inter- mediate utility, viz., industrial utility, is readily reducible to the commercial form, and at some stage of its existence usually passes through it. Aid-forms are now seldom made by those who actually employ them in industry, but are manufactured by others and placed upon the market as trade-forms. After passing through one or more ex- changes, in each of which their commercial utility is pri- mary, and their future industrial utility merely a circum- stance which gives them their importance in the market, they become instruments of industry, and their primary utility becomes industrial. A similar transformation is possible, though not so usual, in the case of other relative utilities. Ultimate utilities may at any time be transferred to the category of intermediate utilities, since all satisforms of consequence may be put upon the market, and so be changed into capital-forms. Commercial utility, with its adjuncts, money and market price, furnishes, therefore, 104 MEASURABLE UTILITY AND DISUTILITY 105 a common denominator to which all relative utilities may be reduced, and thus subjected to measurement. In like manner commercial disutility is but a form of relative disutility. The remaining portion of relative dis- utility, viz., industrial disutility, is readily reducible to the commercial form, and in modern methods of production usually passes through it in the form of wages of labor. So true is this that in those cases, now comparatively rare, in which a given person acquires a satisform entirely by his own industry, without exchange, he measures this disutility in terms of wages paid in the open market for similar effort. He gauges his effort, not by its own industrial disutility, but by the commercial disutility of a known economic equivalent. Measurable utility in the hands of the seller is mani- fested as value, and is limited by the point of exchange; but there is another form of measurable utility which manifests itself as net salvage to the buyer, and, lying above the point of exchange, is limited only by the point of alternative cost, that is, by the limit of measurable util- ity itself. On the other hand, all disutility is not in the form of cost to the buyer; there is a disvalue associated with every value in the hands of the seller. So that both measurable utility and measurable disutility appear upon both sides of the market in every exchange. It is of these, and these alone, that Economics seeks to know the natural laws. By means of the foregoing analyses and illustrations we find that while commercial utility and commercial dis- utility arc the only forms in which measurement actually 106 BISOCIALISM— ECONOMICS takes place, all relative utilities and disutilities are meas- urable by reduction to the commercial form; and that all forms of utility and disutility other than the relative forms are immeasurable. This gives us the fundamental economic classification of utilities and disutilities into those which are measurable and those which are im- measurable. It will be remembered that the same labor-form which furnishes the marginal unit of utility also furnishes the marginal unit of disutility. All measurable utilities and disutilities are within the province of Economic Science; all immeasurable utilities and disutilities are without its province. A complete dis- cussion of Economic Science involves a study of Eco- nomics and Political Economy. These both treat of meas- urable utilities and disutilities — and of these only — but from different points of vicAv. x\ll measurable utilities are manifested in the market as value and net salvage; all measurable disutilities as disvalue and cost. Economic Science is that science which treats of meas- urable utilities and disutilities. Economics is that branch of Economic Science which treats of measurable utilities and disutilities in so far as they are unaffected by juridical institutions, laws or cus- toms. Political Economy is that branch of Economic Science which treats of measurable utilities and disutilities in so far as they are affected by juridical institutions, laws or customs. The following outline will give a graphic view of our §•3 H > z H w J -) a n < v which tho reduction mav bo 148 BISOCIALISM— ECONOMICS accomplished are those of labor-power, capital-forms, and land-forms. The use of more effective labor-power in the form of skill or ability, or both, lowers the point of positive utility to the user. In competition with others in the open mar- ket he has by this means an advantage. This advantage he can enjoy so long as his skill or ability continues to be exceptional. But since all men naturally seek to satisfy their desires with the least exertion, the exercise of ex- ceptional skill or ability upon the part of one man tends to incite all others to the acquirement of like advantages. And those who can not acquire skill or ability of the same kind and degree are moved to seek improvement along some other line. In this way a system of specialized in- dustry develops, each man tending to do that which he can perform with the least disutility or the most effectiveness, knowing that by the exchange of labor-forms, in normal conditions, he can secure in satisforms suited to his needs the full economic equivalent of his product. The natural outgrowth of specialization in industry in which, at first, each man makes an entire labor-form of a particular kind, as a coat or an ax, is a system of division of labor in which each man makes but a part, and often but a very small part, of the completed labor-form. Thus in divers ways, the special skill of the individual is neutral- ized and the point of positive utility lowered by his com- petitors. And inasmuch as the lessening of the dis- utility of production tends to increase the amount of the product thrown upon the market, the anxiety of the mar- ginal seller is increased and the point of exchange is there- MARGINAL AND DIFFERENTIAL VALUES 14*J by lowered. In a free and open market the resulting net value to the individual producer tends to diminish, al- though the advantages of special skill are always great enough to encourage further individual development. Pur- chasers are always benefited by increased production brought about by superior skill, and the individual skill of the producer increases his net values without adding to the cost or other disutility of any other person. Not only does the competition among men engendered by differences of skill and ability incite them to a further development of labor-power, but it leads them to supple- ment their labor-power by the use of auxiliary capital- forms. All that has been said with respect to the use of exceptional labor-power applies equally well to the use of capital-forms. This is naturally true, inasmuch as capital- forms represent the stored up utility of labor-power. The purpose of acquisition of capital-forms is the same as that of the acquisition of superior personal skill and ability; the results of the use of one and the exertion of the other are the same upon all the parties concerned. The use of capital-forms in production tends to stimu- late invention along all lines; it tends to specialize indus- try along the line of particular inventions; it tends greatly to the encouragement and development of division of labor ; it tends to lower the point of exchange of the labor-forms produced, and tends to diffuse among purchasers or con- sumers many of the advantages of the use of auxiliary capital-forms in production through the socialization of utility. Tf an individual producer makes use of pure capital- 150 BISOCIALISM— ECONOMICS forms to enable him to reduce the disutility of time, the special advantage gained by him is but temporary. In normal conditions all may use capital-forms according to their abilities, and the result is that the price of pure cap- ital as expressed in current interest rates is fixed by the marginal user of pure capital who. for the same reason that he is the marginal buyer of labor-forms, is the man who produces at the margin. In normal conditions, the ad- vantages of the use of capital-forms and of more effective labor-power are diffused by advancement in the indus- trial arts and by the lowering of prices and rates of in- terest, so that even the marginal producers share therein. The market prices of labor-forms and of interest rates, in such conditions, tend to a general level which reflects the economic welfare of the marginal pair. The disutilities of all men are reduced to the lowest limit and all utilities tend toward spontaneity. There can be no production of labor-forms without the use of land-forms. A labor-form is in reality a land-form which has been so changed in form or position, or both, by the expenditure upon it of labor-power that its present distinctive utility is the result of the labor-power thus ex- pended. The utilities of land-forms for the production of labor- forms differ greatly. In some cases the difference is partly one of fertility, but in all cases there is a difference of site or locality with reference to market which manifests it- self in value. The man who, in producing labor-forms, occupies a land-form which, with like fertility, is superior to that occupied by others in location, is enabled to place MARGINAL AND DIFFERENTIAL VALUES 151 his trade-forms upon the market with less disutihty than his competitors. The same is true if his land-form, with like location, is superior to that of others in fertility. By selling at the market price, which is the same for all, he ])ossesses an increment of net value which the others do not. The point of disutility is lowered as to him by virtue of the superior utility of his land-form. In considering the cases of the use of exceptional labor- power and of capital-forms we found that the tendency is to induce all to increase their skill and ability, and to lead to the general acquisition and use of capital-forms. A man simply by acquiring superior skill can not long retain an advantage over his fellows. Others will soon reach his at- tainments, and if he still further increases his skill, the in- creased attainments of others will closely follow. All can not be equally skillful or powerful, nor can all acquire and use capital-forms to the same extent or with equal advan- tage. But a given expenditure of labor-power and a given use of capital-forms will bring the same reward if applied upon land-forms of equal utility. The law of the market by which all obtain labor-forms at prices fixed by the marginal pair causes the benefits of extra production to be diffused in lower prices among all the buyers of the community. But if given labor-power and capital-forms are applied upon land-forms of unequal utilities, the resulting net values are unequal. And while the advantage of the use of superior land-forms tends to incite a desire in all other persons to acquire and occupy similar land-forms, there faces them the fact of nature that the number of such land-forms is limited, and it is 152 BISOCIALISM— ECONOMICS not within the range of human effort to increase them. Personal skill and ability may be increased until the re- sults are marvelous; capital-forms may be multiplied until both in number and variety they are well nigh countless; but irrespective of improvements — and improvements are not land-forms — land-forms can not be created. They are the gift of nature, and any changes or improvements made upon them or out of them by labor-power are labor-forms. This distinction must be clearly seen and constantly kept in mind in all economic discussion. With increase of population the competition for land- forms, instead of increasing their number, forces into use those of inferior utility, and this increases the value of su- perior land-forms. As the pressure of population increases the buyer of land-forms becomes, not indifferent, but anx- ious; while the seller's anxiety changes to indifference. The same cause — increase of population — which in the case of labor-forms tends to produce a general market with equality of net values, tends in the case of land-forms to a one-sided market, with inequality of net values. It is necessary for us henceforth to distinguish between common and superior labor-power. The former is labor- power exerted with only ordinary skill, energy or ability, and without the use of auxiliar)' capital-forms. The lat- ter is labor-power exerted with more than ordinary skill, energy or ability, or with the use of auxiliary capital-forms, or, commonly, with both. We have already seen that auxiliary capital-forms are simply products of labor-power and represent its stored up utility. From another point of view the relation between MARGINAL AND DIFFERENTIAL VALUES 153 labor-power and capital-forms is equally plain. Labor- power includes not only the physical but the mental powers of man when irksomely exerted for the satisfaction of de- sire. Superiority in the exertion of labor-power is a mat' ter of mind rather than muscle, and this is especially true when the object sought is the satisfaction of desire through the use of capital-forms. It is by the exercise of superior labor-power that capital-forms are thought out and produced in the first instance; by superior labor-power they are saved, collected and made ready for future use, and by superior labor-power they are finally put to use. The production, conservation and use of capital-forms al- ways involve an exercise of personal skill, energy and abil- ity. In so far, therefore, as the use of capital-forms is merely auxiliary to labor-power and does not involve a re- duction of the disutilities of time it is merely an exercise of superior labor-power. Common Labor-Power is labor-power exerted with only ordinary skill, energy or ability, and unattended by the use of capital-forms. Superior Labor-Power is labor-power exerted with more than ordinary skill, energy or ability, or attended by the use of auxiliary capital-forms, or both. In ordinary circumstances the producer upon the eco- nomic margin exerts common labor-power. Upon the mar- gin, also, is found a dearth, if not an utter absence of capi- tal-forms. Let us assume that on the marginal land-form of a given community a day's common labor-power will pro- duce a lal)or-form of the value of one dollar and fifty cents, 154 BISOCIALISM— ECONOMICS and that the disutility of such labor-power is represented by fifty cents. Then the net value of such day's labor- power is one dollar. Upon another and superior land- form in that community labor-power of like disutility will produce two labor-forms of like kind as the first, and hence, of the value in that market of three dollars. Here the net value is two dollars and fifty cents. When the two occupants dispose of their products each pockets his net value, and one acquires two and a half times as much as the other with the same disutility. The principle underlying this illustration is universal in its operation. The market price of any product is fixed by the marginal pair and, in normal conditions, is the same for all sellers in a given market. The producer upon a marginal land-form is the marginal seller, and a producer of some other labor- form upon another marginal land-form is the marginal buyer. In the interchange of the market the net values of all marginal producers are substantially equal; while above the margin the net values of different producers, in normal conditions, vary according to the efficiency of their labor-power, their use of pure capital-forms, and the utili- ties of their respective land-forms. Through all net values, wheresoever produced, there may be drawn a line, horizontally as it were, which will separate those values which are only equivalent to the marginal return to com- mon labor-power from those which exceed it. The former are marginal and the latter differential net values. Marginal Net Values are net values which are only equal to the net marginal return to common labor-power. MARGINAL AND DIFFERENTIAL VALUES 155 Differential Net Values are net values which exceed the net marginal return to common labor-power. Marginal net values are economic equivalents and, so far as they are received, all men fare alike. Beyond these lie differential values of various kinds. The present day struggle in the industrial and commercial worlds is for the attainment of differential net values. Although these values assume many different forms their sources are but five; the use of superior labor-power, the use of capital-forms, the use of superior land-forms, the possession of franchises, and the possession of monopolies. These five sources re- sult respectively in differential net values of five classes: differential labor values, capital values, land values, fran- chise values, and monopoly values. This classification is of great importance, as upon it is based the conclusions of Economics upon the ultimate question of that science — the question of the distribution of values. Differential Labor Values are differential net values which distinctively result from the use of superior labor- power. It must be remembered that, by definition, superior la- bor-power includes all labor-power when assisted by the use of auxiliary capital-forms. It will be seen, moreover, that all capital values are differential, they being in excess of the marginal return to common labor-power. For convenience we shall sometimes omit the words "net value" in connection with the term '^differential," as the meaning will always readily be understood. Thus the term "labor differential" will be understood to mean dif- ferential not value resulting from the use of superior labor- 156 BISOCIAUSM—ECONOMICS power; 'land dijfferential," differential net value resulting from the use of a superior land-form, etc., thus bringing into use without further explanation the terms "capital dif- ferential," "franchise differential" and "monopoly differ- ential," all of these terms referring to differential net val- ues and indicating their sources. CHAPTER XIII. OF GROUND RENT AND GROUND VALUE. The part played by rent in the problems of poverty can scarcely be overestimated. John A. Hobson. It must be noted that the normal marginal land-form of any market is not the least productive land-form in use, but the least productive one necessarily used to supply the demand of such market. In normal conditions no one would occupy a poorer land-form than the natural scarcity required. But under a system which encourages the appro- priation of land-forms from which there is not present adequate return, but from which great values are expected in the future, it frequently happens that the producers who occupy the poorest land-forms are far beyond the nor- mal economic margin. Some of these occupants expect a greater future return to compensate them for their pres- ent lack of adequate net values, and voluntarily go into the wilderness and forestall progress by taking up the best land-forms in advance of the needs of society; but the great majority of the occupants of an artificially depressed eco- nomic margin are driven there from the fact that many superior land-forms are held out of use by their owners for speculative purposes, and thus the normal economic margin is not available for use by the normally marginal laborers. The artificial depression of the economic margin by the 157 158 BISOCIALISM— ECONOMICS holding of superior land-forms out of present use and oc- cupation necessitates a distinction between the normal eco- nomic margin and the artificial margin which usurps its place. The artificial margin is the result of juridical in- stitutions, laws and customs, which sanction the holding of superior land-forms wholly or partially out of use; the normal margin is the margin unaffected by such juridical institutions, laws and customs. We may distinguish be- tween land-forms which are superior only to the normal margin from those which are also superior to an artificially depressed or abnormal margin by designating the former normally superior, and the latter abnormally superior land-forms. Land values appear under two forms ; annual, or rental values; and ground, or selling values. A normally superior land-form acquires an annual rental value because its pres- ent products at current prices yield a differential net value. The producer collects this differential when he sells his products. If he is the owner of the land-form as well as its user, he retains this differential value, and the fact that he may do so gives ground or selling value to his land- form. If the producer is a tenant, he pays this differential value over to the land owner as ground rent, and reserves to himself at the most only the net labor and capital dif- ferentials of his product. The fact that the owner can collect an annual ground rent from the tenant gives to his land-form a gTound or selling value. The differential net value which distinctively results from the use of a superior land-form is reflected in ground value whether the owner is the actual land user or not. In either case ho acquires OF GROUND RENT AND GROUND VALUE 159 this net value as owner of the land-form and not as user. The amount of ground rent in any case where land- forms are used productively is determined by the excess of the net value which may be secured upon a given land- form by a given expenditure of labor-power and capital- forms over what a like expenditure would produce, if ap- plied upon the economic margin. The tenant gives to his landlord as ground rent substantially that part of the dif- ferential value of his products which, results from the use of a superior laud-form, and thus puts himself upon the same level a? the man who produces at the margin. The value which thus accrues to the owner does not result from any expenditure of labor-power or use of capital-forms by such owner, and is in excess of the return which could be secured by the tenant by an equal expenditure of labor- power and capital-forms upon the margin. The illustrations which we have used all refer to the ground rent of land-forms wbiicli are used for the produc- tion of labor-forms and the creation of net value. Yet we know that land-forms upon which nothing is produced, but which are used rather for the purposes of the consump- tion and enjoyment of labor-forms, also yield ground rent. This is a fact entirely overlooked by those who accept and follow the Eicardian formula concerning rent, as that for- iimla is currently stated. An illustration showing that in any country where marginal land-forms yield five dollars' worth of wheat per acre, land-forms yielding ten dollars' worth per acre will bear an acreage rental of five dollars is correct as far as it goes; but it does not explain why an acre of land will bear a erround rent when u^ of the exertion of labor-power or the existences oi capn»^ forms. Their origm is in nature alone. No man, either by taking thought or taking action, can originally create 171 172 BISOCIALISM— ECONOMICS the smallest land-form. In normal conditions land values tend to increase as labor values and capital values tend to fall. With increase of population and material progress in a given territory the demand for superior land-forms in- creases, while the supply is limited by nature; conse- quently the values of superior land-forms in such territory tend to rise, while labor values and capital values tend to fall. We now come to a further point of differentiation be- tween labor values and capital values upon the one hand, and land values upon the other. Every exchange in the market presupposes a right .of exclusive possession to the thing sold, which right is trans- ferred from the seller to the buyer and forms the gist of the transaction. Neither the laws of the market nor the laws of the State recognize as valid a sale of property or of an interest therein to which the seller has not the right of possession as against the world to the extent of the property or interest transferred. It is commonly recog- nized among all commercial peoples that the right of ex- clusive possession to all labor-forms and capital-forms is based upon their production. It is assumed in all cases that the rightful possessor of such property either pro- duced the same or derived his title, directly or indirectly, through or from some one who did. With land-forms this is not true. Not having been pro- duced by man, no title can be based upon the ground of production. In the absence of organized government the original exclusive possession of particular land-forms can J OF LAND TENURE 173 only be obtained and maintained by individual force. It can not originally be acquired by purchase, because no one has a recognized right to sell. When organized govern- ment appears, however primitive its form, it at once as- sumes a sovereignty over all land-forms within its juris- diction, and thereafter all land-forms are "held from the crown," and some form of land holding is established and maintained by law. The right to the exclusive possession of particular land-forms in any country having an estab- lished government depends upon the collective power of the State in the enforcement of a juridical or legal sanction known as land tenure. land Tenure is the juridical or legal sanction by which particular land-forms are held, used, or controlled. Four facts of economic importance grow out of the facts hitherto discussed in this chapter. The first is that organized government — the State — bears a relation to land-forms, and consequently to land values, different from its relation to labor-forms and capital-forms, and consequently to labor values and capital values. To the title of labor-forms and capital-forms its relation is sim- ply that of protector; toward them it exercises what is known in law as its police power ; while of the title to land- forms it is the creator as well as protector. The State determines what land-forms' shall be devoted to private, and what to public uses, and all private titles relate back to the government. Under an orderly government the matter of the exclu- sive possession of particular land-forms can not be left to individual strife; nor can it be settled by the compe- 174 BISOCIALISM— ECONOMICS tition of the market alone, for originally no man can eonie into the market with any better right to convey than that possessed by every other man therein. In this condition the State intervenes, assumes title to all land-forms, and parcels them out under such system of land tenure as it sees fit to adopt. In doing so it assumes, directly or indi- rectly, to represent the interests of all its citizens in and to the land-forms within its borders, and by giving title to one man, to cut off the rights of all other men to the particular land-form conveyed. No State has ever as- sumed the right or the power to act in this manner toward labor-forms or capital-forms; for although the products of labor-power may be arbitrarily diverted by law from the actual producer to another, either wholly, as in slav- ery, or in part, through the various forms of monopoly, yet the law in such cases looks upon the beneficiary as the producer, and the title to the property does not at any time vest in the State or issue directly therefrom. The impor- tance of this distinction will more fully appear when we discuss the matter of the socialization of values. The second fact to which we have referred is this : All general benefits derived from good government tend to raise the values of superior land-forms — including fran- chise values based upon land grants — and to lower all other values. In any country where property rights are well protected, where personal safety is assured, and where government is economically administered, production is encouraged, markets are well supplied, and current prices fall. In this way every man, through the interchange of the market, may supply his individual needs with the least J OF LAND TENURE 175 exertion. But if property and persons are insecure, if lawlessness prevails, and an extravagant government wastes its revenues, production is discouraged, markets are depleted, and current prices rise. On the other hand, when production is encouraged by good government, com- petition for land-forms is increased and land values rise; and when production is discouraged by bad government the competition for land-forms decreases and land values fall. Let us suppose the case of two cities equally well located as to natural advantages and as to communication with the outside world. Up to a given time both have been equally prosperous. Suppose now that the one increases the efficiency of its police department, establishes supe- rior fire protection, develops its public school system, and so attracts to itself an increase of population of a thrifty and temperate character who build stores, factories and churches, and beautify their premises. The stores will be filled with merchandise, merchants will compete with one another for the making of sales, and low prices will result. But the merchants will also compete for the most advan- tageous locations, and the new comers will compete with one another and with the older residents for sites for homes, stores and factories. The price of land-forms will increase from year to year and upon the most valuable comer in the city a department store will lower the prices of all staple articles. Suppose that in the other city the police department becomes demoralized, the fire protection inadequate and uncertain, and the public school system inefficient. In such circumstances the grpwth of the city will be checked, 176 BISOCIALISM— ECONOMICS merchants will carry small stocks of goods at increased risks, prices will be high at the stores, and land-forms will decrease in value. All of the advantages of good gov- ernment in any country are reflected in increased land values. The third fact to which we have alluded is this: All natural advantages of climate, soil, scenery, water ways, forests, mines, coal beds, petroleum and gas deposits, etc., are reflected in land values. Examples illustrating this fact might be cited almost indefinitely, but one will suf- fice. Suppose that in a large city, upon land belonging to the municipality, the public authorities happen to strike a deposit of natural gas sufficient to supply the entire city for fuel and lighting purposes. Suppose further that the city pipes this gas through all of its streets and furnishes it to consumers at an actual cost of twenty-five cents, whereas the citizens have been paying one dollar and twenty-five cents per thousand feet to a private company for artificial gas. What will be the effect ? Eents will im- mediately rise and absorb this advantage upon all tene- ment property and the selling values of all land-forms will rise accordingly. Land users, as users, will be financially little or no better off than before, while land owners, as owners, whether they are the real occupiers of their respec- tive land-forms or not, will reap substantially all the finan- cial benefits, either in increased ground rents or in greater ground values, or both. The fourth fact in question is that all improvements in the matter of highways and other transportation facilities increase the value of all adjacent and tributary land- OF LAND TENURE 177 forms. This is a fact which may easily be verified by any one who will look around him. A railroad can not be built through any territory having present need of it with- out increasing the ground values of the adjacent and tribu- tary land-forms more than the economic equivalent of the actual cost of the road. After the road is in operation the increase in ground rents of adjacent and tributary land- forms will more than equal the annual cost of operation. The same is true of a street railway in any city. The bet- ter the needed transportation in any community the higher the land values in the form of both ground rents and ground values. The gain to the sellers of all labor-forms produced locally is absorbed in increased rental and ground values, while all labor-forms brought to market from the outside bear a lower price because of cheaper transportation charges. All labor values tend to fall within the territory affected by the improved transporta- tion service. The fact that labor-forms can be cheaply purchased in any given market is reflected in local land values, especially in the values of city and village lots for residence purposes, as was shown in the preceding chapter. Instances of the marked effect of railroad building upon land values have been exemplified in almost every com- munity in the United States. In former years it was quite the custom for the people of a community to vote an issue of bonds sufficient to build and equip, at actual cost, a proposed railroad through such community. Inasmuch as these people were to pay the regular rates for freight and passenger service upon the completion of the road, they 178 BISOCIALISM— ECONOMICS could only hope to recoup themselves for the increased taxes necessary to pay the bonds by an increase in the values of their labor-forms which, in turn, would be re- flected in the increased values of their land-forms. The mere announcement that a railroad is to be constructed tiirough a given territory causes a speculative increase in land values throughout such territory. So great has been the inflation of land values because of the construction or proposed construction of railroads that roads have been built for which there was no present need, and through territory which could not possibly supply traffic to pay current expenses. In other cases bonds have been voted and even issued in payment of bonuses for the construction of railroads which never existed, nor were intended to exist, except upon paper. It must be perceived and kept in mind that when in- creased labor-power is exerted, or when more capital-forms are expended upon a superior land-form, the effect is not all manifested in the increase of labor, or capital differen- tials, as the case may be. A part of the increase in net value is always absorbed by land values. Although the additional labor-power or capital-forms may increase the total net value upon the superior land-form 50 per cent, yet if the same increase applied upon the economic margin would result in an increase in net value of only 10 per cent, then 10 per cent is all that will go to the producer as producer upon the superior land-form. The other 40 per cent will manifest itself as land value, and will go to the owner of the land as land o^vner, whether he be the land user or not. If the relation of landlord and tenant exists. OF LAND TENURE 179 this division of the increase will immediately appear in an increase of ground rent as well as ground value. If the owner occupies the superior land-form himself, the result will be manifested only in the increased ground value of his land-form. If a tenant be the user of the land-form under a long time lease at a fixed rent, the effect will seemingly be modified, but in reality such a tenant is owner to the extent of his term. He can sell his leasehold interest at a premium or sublet at a profit. In case of a tenancy from year to year, the tenant may acquire and retain approxi- mately the entire increase for the current year, because of the terms of his lease already made ; but taken one year with another, an increase in ground rent will absorb sub- stantially all the increase acquired over what a like exer- tion or expenditure would produce at the margin. Another peculiarity of land value is that in any given case it is wholly independent of the labor-power of any par- ticular person, be he owner or otherwise. Indeed, it is practically independent of the existence of any particular person. A vacant land-form in a great city in present conditions may be owned by a man who never saw it, never performed a stroke of productive labor in his life, and who lives on the other side of the globe. The owner may die and his heirs be unknown, but the land value is not thereby affected. The land-form may lie idle for an- other fifty years, and at the end of that time have double its present value. The growth of the city, the presence and labor of every man, woman and child within its limits, ha^^ contributed to this value, while the act of its owner, known or unknown, in leaving it idle has been a detriment to 180 BISOCIAUSM— ECONOMICS surrounding property and, perhaps, even to the city itself. It is not so with labor-forms. Some man, or some par- ticular men, must originally exert labor-power in order that labor- forms may exist, and when produced they require constant use, care or supervision to maintain their value at all. The larger the community, the larger the relative sup- ply of such labor-forms is likely to be, and the more likely they are to decrease in value aside from natural deteriora- tion. Again, land-forms which are held out of use in a pro- gressive community not only increase in value themselves, but the fact that they are unused adds to the value of all still superior land-forms. Suppose that in any given com- munity there are certain land-forms which are capable of yielding, with given disutility of cultivation, $10 per acre; certain others, $8, $6, $4 and $2, respectively. Suppose, further, that at any given time all the $10, $8, and $6 land- forms are occupied under present private tenure, the $6 forms being upon the normal economic margin. Then the $10 land-forms will yield a differential value of product of $4, and the $8 forms of $2 per acre. If, now, the growth of population requires the occu- pancy and use of $4 land-forms, the economic margin falls to these ; the $6 forms yield a differential value of $2 ; and the differential values of the higher forms are increased to $6 and $4, respectively. Let us assimie, however, that under the existing land tenure the $4 land-forms have been bought up for speculative purposes, and are held out of use for a rise in the land market. Then production must descend at once to the $2 land-forms, and the dif- OF LAND TENURE 181 ferential values of the superior land-forms rise $2 per acre more than if the $4 land-forms were open to use. ITius an abnormal condition of land tenure has increased the land differentials of tlie best land-forms by the arbi- trary act of the owner of the $4 land-forms in holding these out of use. This is the inevitable result of the hold- ing out of use of land-forms above the economic margin. The values of all still superior land-forms become not merely differential, but, to a greater or less degree, mo- nopoly values. The effect of the increase of land values through the lowering of the economic margin from any cause is more far reaching than might at first sight appear. It must be remembered that land values go to the land owner as owner, and not as land user, or producer. This leaves to the actual producer upon a given land-form, at the most, only the net labor values and capital values available thereon. If the producer is a tenant and exerts only com- mon labor-power, he receives but the equivalent of the marginal return; for the only differential value is that arising from the superiority of the land-form, and that is taken from him in the form of ground reni If now the tenant, through the acquirement of special skill or the use of capital-forms, or both, increases the value of his product 10 per cent, there arises a new differential value. The tenant, however, does not retain all of this increase one year with another. The land owner, at the time of their next bargaining, increases the ground rent so as to ab- sorb all of the increase for the next year, except what a like additional expenditure of labor and capital will produce, 182 BISOCIALISM— ECONOMIC:^^ i r applied upon the economic margin. If 2 per cent is all the increase that will accrue upooi the margin, that is all that the tenant can retain. Nor is this all. From pressure of population, the withholding of land-forms from use, or for some other reason, the marginal producer may be com- pelled to occupy a land-form which is 10 per cent less productive than the margin formerly occupied. In such case the land-form which was formerly upon the margin now bears a rent, and the rent of all superior land-forms, including that occupied by the tenant in question, is in- creased 10 per cent. The tenant is, therefore, no better off than before. What he gains in labor and capital differ- entials he loses in the payment of increased ground rent. Again, a man may be so circumstanced at a given time that he acquires a certain net return after the payment of ground rent. Within a certain space of time thereafter, say five years, he acquires additional skill and uses addi- tional capital-forms so that his increased labor and capital differentials net him 5 per cent of his former return. But it may be that in these five years the economic margin has been artificially depressed so that his ground rent has in- creased 10 per cent of his former net return, whereas his net labor and capital differentials together have increased but 5 per cent of such return. In such case, notwithstand- ing the man's diligence, his last state is worse than the first ; the increase in ground rent has absorbed twice as much net value as his additional skill and capital-forms have realized. While it is true that he is still better off than if he had not acquired skill and accumulated the capital- forms, it is also true that, if the economic margin had not OP LAND TENURE 183 been depressed, he would have retained his former return and he, instead of the land owner, would have acquired and retained the 5 per cent additional differential net value. The user of land-forms, as user, is vitally interested in the welfare of the man who produces labor-forms of the same kind upon the economic margin. CHAPTER XV. OF GROUND RENT, WAGES, AND INTEREST. Let US, then, seek the true laws of the distribution of the produce of labor into wages, rent and interest. The proof that we have found them will be in their correlation — that they meet, and relate, and mutually bound each other. Henry George. People who have at home some kind of property to apply their labor to, will not sell their labor for wages that do not afford them a better diet than potatoes and maize. Laing's Notes of a Traveler. We have seen that when use is made of a land-form which yields more than the marginal return, ground rent emerges and manifests itself in an annual value which, in present conditions, may be collected from a tenant, or may be enjoyed by the owner as a differential value, if he uses the land-form. In either case future ground rent is an- ticipated and appears as the ground value of the land- form ; and in any event, the starting point in the study of the phenomenon of ground rent is the upper limit of the marginal return. In a new country where but few land-forms are util- ized, and these are of substantially equal utility, no one receives anything in excess of the marginal return, and land-forms neither bear ground rent nor have ground value. But as soon as it becomes necessary for some set- tler to occupy and use a land-form of inferior quality or 184 GROUND RENT, WAGES, AND INTEREST 185 position, or both, a distinction arises, and his annual product becomes the marginal return. All the superior land-forms now bear ground rent. But as the community grows, not only do other and still inferior land-forms nec- essarily come into use, but the land-forms of the original settlement cease to be of equal utility, and differences of ground rent arise among them. The general store, the blacksmith shop, the railroad station, and the post-office appear, and nearness to these becomes a principal element of land value in that community. As the community grows, the difference in ground rents becomes greater and greater, and the question of location rather than of fer- tility becomes of greater and greater importance. But in any community, however great, that value which lies back of the entire question of ground rent is the marginal return. When a farm tenant gives half his crop for the exclusive use of a given land-form for one year, it is be- cause he can do so and, all things considered, still retain as his own an amount equal to the marginal return. We have so far considered men as exerting their labor- power for their own direct benefit or, in other words, as em- ploying their own labor. All men do not do this, however. Instead of producing some labor-form for exchange, many men sell their labor-power to others, or as it is commonly expressed, work for wages, for a salary, or for a commis- sion. In all such cases the amount of wages, salary or commission — we shall use '"wages" as an inclusive term — in normal conditions is governed by the marginal return. An employer of labor offers as compensation the lowest sum which he can induce another to accept. But in ordi- 186 BISOCIALISM— ECONOMICS nary circumstances no one will work for wages which are less than the marginal return to self-employed labor of the same grade. On the other hand, if wages should become perceptibly greater than such marginal return, men upon the economic margin would cease self-employment and seek service with others. The marginal return to self- employed labor is the determiner of wages. The solution of the wages question is contained in this simple state- ment. It is not our present purpose, however, to attempt to solve, in detail, this and related questions, but to fur- nish data for their solution. When a man has stored up the utility of his labor-power in capital-forms, he may seek advantage of this stored up utility by using such capital-forms himself, or by selling them to another, either outright, or for a limited time. If he sells them outright, he receives his pay in market price, which is determined by the marginal pair, and these, as we have seen, are the occupiers of the economic margin, and receive for their labor the marginal return; if he sells them for a limited time, he receives his return in the form of interest. The amount of this return is subject to the universal law of the market. As a capitalist he seeks as great a return as he can induce any other person to give ; the borrower, on the other hand, gives as little as possible. The method of the market is then precisely the same as if the capital-forms were for sale outright. The price — the rate of interest — is fixed by the marginal pair. The mar- ginal buyer, or borrower of pure capital, tends to be the user of the economic margin. Upon the margin the opportunities for the reduction GROUND RENT, WAGES, AND INTEREST 187 of the disutilities of time are less than upon superior land- forms, and the return for the use of capital-forms is there least of all. If the bidding of the marginal producer is necessary to exhaust the supply of pure capital offered, his bid fixes the rate of interest for the whole market, and. all borrowers take advantage of this rate. If the supply of pure capital is so small that the lowest necessary bor- rower is found Ijcfore the marginal producer is reached, still it is this lowest borrower, whose demand is necessary to exhaust the supply of such capital, that fixes the rate of interest for the entire market. He occupies the mar- ginal land-form among those land-forms upon which bor- rowed capital is used. Whether used to assist labor-power in overcoming the disutilities of matter, or directly in overcoming the dis- utilities of time, the return to capital-forms is governed by the same laws as the return to labor-power. Like labor- power, the amount and efficiency of capital-forms tends to increase with increase of population and ^dth progress in the industrial arts. In a new community nearly all produc- tion is necessarily directed toward acquisition of satis- forms. But as the community grows, more and more labor- forms are diverted for use as capital-forms. While the com- munity is new and capital-forms scarce, the marginal pro- ducer occupies one of the most advantageous land-forms and can pay as high rate of interest as any one in the com- munity. Tlie little pure capital, therefore, that is avail- able will bear a high rate of interest. When the community, has reached that stage of growth. in which all land-forms available are occupied, the mar- 188 BISOCIALISM— ECONOMICS ginal producer occupies the poorest land-forms of all and pure capital used by him will give a comparatively small return. In the meantime the amount of pure capital for investment has increased in proportion to the growth of the community, and the marginal producer must use such capital in order to exhaust the supply. In such circum- stances he becomes the marginal bidder for pure capital, and his bid fixes the rate of interest. The return to pure capital in the hands of the marginal user is the determiner of the rate of interest for all such capital. This marginal return is governed by the return to pure capital which can be acquired upon the land-form occupied by such mar- ginal user. So that whether we consider the question of ground rent, of wages, or of interest, we are carried back to the return of labor-power and capital-forms upon the land-forms at the economic margin. The nature and laws of wages, interest, and ground rent may be epitomized in the following descriptive statements: Wages in any given case are determined by the marginal return open to similar labor-power. Interest in any given case is determined by the marginal return open to pure capital. Ground rent in any case is determined by the excess of net value or net salvage acquired upon the land-form in question over that acquired with like disutility upon the marginal land-form put to similar uses. The law of wages which we have formulated may be applied to the compensation received for any exertion of labor-power, physical or mental. It does not imply that the compensation of a skilled physician, the superintendent GROUND RENT, WAGES, AND INTEREST 189 of a large business, or of a college professor, is determined by the return which would be open to that particular physician, superintendent, or professor, if he were com- pelled to become a day laborer upon a marginal land-form. This is not true. There is no room for the exertion of the distinctive labor-power of any of these men upon the mar- ginal land-form used for the raising of potatoes, corn or wheat. But there is somewhere in the society in which they labor an opportunity which is the least remunerative of all those open to men of similar skill and ability, and it is the return resulting from this marginal opportunity which constitutes the marginal return for their respective professions. The return to a professional man is greater, however, in a community where the artisan is well paid than where he is poorly paid ; and the artisan fares better where the wages of common labor are high than where they are low. So that although wages in any given case are directly determined by the marginal return open to similar lahor-power, yet, in the last analysis, the pros- perity of all men not the beneficiaries of artificial condi- tions is based upon the return acquired by the man who exerts common labor-power at the economic margin. Not only has the nature and origin of the economic basis of interest furnished the basis of interminable dis- putes, but the very existence of any such economic basis has been denied. Bochm-Bawerk in an exhaustive treatise of two volumes classifies and criticises the leading eco- nomic writers with reference to eleven different theories of capital and five of interest, and then expounds a twelfth theory of capital and a sixth theory of interest 190 BISOCIALISM— ECONOMICS as essentially his own. Notwithstanding all these theories of interest, we have been obliged to work out another in conformity with our definitions and doctrines of utility, disutility, value and cost, in order accurately to classify all the phenomena of the normal market, and to bring Eco- nomics into harmony with related sciences. By the assistance of auxiliary capital, labor-power ac- quires more utility in the same time; by the use of pure capital an additional utility is acquired and enjoyed now rather than at some future time. The utility of auxiliary capital does not differ from that of labor-power in kind, but simply adds to its effectiveness; while the utility of pure capital is essentially different in kind and accom- plishes an end which is impossible to labor-power alone. It overcomes the disutility of time by rendering unneces- sary, or by diminishing, the irksomeness of waiting — that irksomeness which Milton aptly recognized when he said : "They also serve who only stand and wait." Interest does not arise from any productivity of capital, either natural or artificial; nor is it the reward of absti- nence upon the part of the lender; nor simply an agio or premium arising from the exchange of present for future goods (Boehm-Bawerk) ; nor is it that part of the product which results from the use of capital-forms in production as is commonly believed. It is the net value which arises in production from the utility of capital-forms in over- coming the disutility of time. Were it not for this dis- tinctive disutility, the utilty of pure capital-forms would GROUND RENT, WAGES, AND INTEREST 191 not arise, the phenomenon of economic interest would not exist. Interest, in the first instance, applies only to the use of pure capital. But since all values are resolvable into money, and since all capital-forms are interchangeable in the market and may be used interchangeably as auxiliary or pure capital in production, commercial interest is paid upon all borrowed capital regardless of the use to which it is put. Its price — the rate of interest — is determined by the distinctive utility of capital-forms to the marginal user, and this is their utility to him as pure capital. After money is borrowed it may be invested in pure capital, auxiliary capital, or not used at all. The result, so far as commercial or legal interest is concerned, is the same — it must be paid. But only when borrowed money is invested in pure capital does any economic interest arise out of which commercial interest can be paid without loss to the borrower. This accounts for the fact that so many com- mercial enterprises based upon borrowed capital fail. In order to succeed it is not enough that such capital is used to assist labor-power in changing the form and position of material substances. All that capital-forms are worth for this purpose is covered by their price when, in the form of machinery, etc., they are bought in the open market. When bought with borrowed mone}^, capital- forms must be used to overcome the disutility of time as well as of matter. Their utility for the former purpose is paid for in interest; for the latter, in price. Unless put to both uses borrowed capital must necessarily result in loss, and the commercial interest must ho paid, if at all. 192 BISOCIALISM— ECONOMICS from other earnings. It is for this reason that those omni- socialists are substantially right who say that the average man can not pay interest and survive in present business conditions. But present conditions are influenced by juridical laws, and so are not within the province of our immediate inquiry. It ought to be perfectly clear from what has been said that what is commonly denominated rent is usually made up of both ground rent and interest. Ground rent is paid for the use of bare land-forms, irrespective of any and all improvements thereon. All buildings or other improve- ments which have been added to the original land-form by labor-power are labor-forms, and when used as capital- forms their distinctive return is interest and not ground rent. Unless this distinction is clearly perceived and con- stantly kept in mind, no final conclusions worthy to be called scientific are possible. In the study of Economics we must habitually think and speak in the terms of the science. CHAPTER XVL OF THE ECONOMIC STANDARD OF VALUE. A man's labor for a day is a better standard of value than a measure of any produce, because no produce ever maintains a consistent rate of productibility. John Ruskin. Labour, therefore, is the only universal, as well as the only accurate measure of value, or the only standard by which we can compare the values of different commodities at all times and at all places. Adam Smith. The primar}'^ disutilities of the economic world are the same as those of the physical world — the disutilities of matter, time and space. Aside from these disutilities of which they treat in common. Physics treats of energy and its effects; and Economics, of value and its causes. The physicist looks upon energy as initiative, while the econo- mist views value as resultant. Aside, however, from the variance made necessary by the difference in the point of view, the method of the economist is similar to that of the physicist. The physicists have need of a universal standard of energy by means of which standard all measurable forces may be compared. They have secured such a standard in the only possible way — by making it contain a unit of each disutility. In physics the disutility of matter, as a resistance to energj-, is represented by its resistance to the force of gravity, that is, by weight ; the disutility of space, by distance ; and the disutility of time, by time itself. For 193 194 BISOCIALISM— ECONOMICS many purposes of measurement a unit of weight only is required ; for other measurements a unit of distance or of time will suffice; in still other cases a unit including weight and distance, but not time, is a convenience — as the foot pound. But weight, distance and time are all requisite for a universal standard for the measurement of energy. This universal or absolute standard consists of an energy which will move a given mass a given dis- tance against the force of gravity in a given time. More specifically, it is a force which will move one pound against the force of gravity one foot in one second, and is known as the "foot pound second" unit of energy. In a similar way any universal standard for measure- ment of value must contain a unit of each disutility. In Economics the disutility of matter is represented by the labor-power necessary to overcome it; the disutility of space, by the location and area of particular land-forms; and the disutility of time, by time itself. As value is a resultant of economic conditions and not a force, so its standard of measurement must be a resultant and not a force. The standard unit of value must be the resultant of a unit of labor-power exerted upon a unitary or mar- ginal land-form for a unit of time. It must be a "labor time land" unit of value ; it can then furnish the basis of measurement for any and all normal values whether dis- tinctively labor values, capital values, or land values. There is this characteristic difference between the phys- ical and the economic standards. In the former, the ele- mentary units of matter, time and space may all be definitely fixed, and the resultant standard is therefore THE ECONOMIC STANDARD OF VALUE. 195 constant. One pound (at the level of the sea) is the same yesterday, to-day and to-morrow. One foot is the same at all times and in all places. One second is a fixed period of duration everywhere. Having a fixed standard constant in all its elemental units, Physics ranks among the exact sciences. Not so with Economics. Two of the elemen- tary units of its standard are subject to change, and the resultant standard is therefore variable. This it is, more than aught else, which has caused such great confusion in thought upo-n the subject of value, and which accounts for the chaotic condition of economic discussion viewed as a whote. The elementary units of the economic standard which are subject to variation are those of matter and space — typified by labor-power and land-forms. We may choose a unit of time in Economics, as in Physics, and this unit is constant. But the marginal land-form which is the unit of space to-day may not be so next year, and as the marginal land-fo-rms shift from one location to another, the resistances to labor-power of the matter of which they are composed will vary also. Moreover, an exact and con- stant unit of labor-power is unattainable. The utmost that the economist can do is to determine upon a practical standard which contains elementary units of all three kinds and then develop the laws which govern their varia- tions. The nearest approach to constancy in the matter of labor-power is in what we have called common labor- power. We repeat the definition : 196 BISOCIALISM— ECONOMICS Common Labor-Power is labor-power exerted with only ordinary skill and unattended by the use of capital-forms. The most constant return to common labor-power is that which results from its exertion upon the economic margin. And for all purposes one day is the most practical unit of time. We may therefore determine upon and define the economic standard of value as follows: The Economic Standard of Value is that value which results from the exertion of one day's common labor-power upon the economic margin. Values are commonly expressed in terms of money. For this reason the monetary unit, or legal standard of value, should coincide with the economic standard. The fact that it does not has given rise to a world-wide discus- sion concerning the monetary standard of value, in which discussion neither side has taken economic grounds as the basis of its contention. The "money question" is no nearer a permanent solution than heretofore. Neither the "single" nor the "double" standard of coinage includes all the elemental units. But these matters belong to Po- litical Economy. It will be noted that the economic standard of value differs from the marginal return in two of its elements. The time of the economic standard is limited to one day and its labor-power to common labor. The marginal re- turn may apply to any grade of labor-power exerted for any length of time, provided it be exerted upon the eco- nomic margin. The gist of the marginal return is that it is the result of any given disutility exerted for any given time upon the economic margin ; while the economic stand- THE ECONOMIC STANDARD OF VALUE 197 ard is limited to a particular disutility exerted for a ^particular time upon the margin. The marginal return furnishes not an economic measure, but an economic start- ing point for the measurement of values, and a basis for the comparison of not values. It is itself measured by the economic standard of value. The marginal return to the common laborer, when con- fined to one day's time, is the same as the economic stand- ard. If a man has unusual skill, his return upon the margin is greater than that of the common laborer, but in the exchanges of the market the common laborer tends to be one of the marginal pair, not only of the labor market, but of the market in which the products of superior skill are sold. Besides, the difference in skill between the two is only relative. The greater the return to common labor upon the margin the greater the return to superior skill applied thereon, and vice versa. The common laborer fixes the marginal wage. The skilled laborer may not despise the "mud sill." The artisan will look in vain for higher wages, if he takes his eyes from the man who works at the margin and fixes them upon his employer because of the latter's ability to pay. The market for wages, as for aught else, is regulated, not from the top, but from the bottom. The most important personage in the whole field of Economics is the man who exerts common labor at the marffin. PART I I POLITICAL ECONOMY Watchman, What of the night? The watchman said, The morning cometh. Isaiah. Once the welcome light has broken, who shall say What the unimagined glories of the day? What the evil that shall perish in its ray? Aid the dawning, tongue and pen; Aid it, hopes of honest men; Aid it, paper; aid it, type; Aid it, for the hour is ripe. And our earnest must not slacken into play. Men of thought and men of action, Cleab the Way! Lo! a cloud's about to vanish from the day; And a brazen wrong to crumble into clay. Lo! the right's about to conquer: Clear the way! With the right shall many more Enter smiling at the door; With the giant wrong shall fall Many others great and small. That for ages long have held us for their prey. Men of thought and men of action. Clear the Wat! Charles Mackay. 200 CHAPTEE I. OF THE MEDIUM OP EXCHANGE. Whoso has sixpence is sovereign (to the length of six- pence) over all men; commands cooks to feed him, philoso- phers to teach him, kings to mount guard over him, — to the length of sixpence. Thomas Carlyle. The earliest form of exchange was that of barter. A man with an extra beaver skin and in need of a pair of moccasins was compelled to seek a man with an extra pair of moccasins and a desire for a beaver skin. In cases where even trade was not feasible the balance, or '^boot," was paid in any other available labor-form which might be agreed upon. In the course of time certain labor-forms which are generally desired came to be used as mediums of exchange. Finally, wherever they were available, gold and silver came into use as current barter metals because they were not only generally, but universally desired. Any labor-form which, because of its general or universal de- sirability, passed freely from hand to hand in the market acquired a distinctive utility as a medium of exchange and became a current trade-form. All current trade-forms more or less completely perform the functions of money. Any basic medium of exchange naturally and neces- sarily furnishes a unit for the measurement of values. Mere barter furnishes no unit of value, and this is one of its greatest inconveniences. It is not long, however, in any community where exchange becomes a matter of 201 202 BISOCIAUSM— POLITICAL ECONOMY any importance before some one article of barter is singled out as a common measuring unit for all exchanges and so becomes the medium of exchange. In that rudimentary state of society in which subsistence is gained chiefly by the hunting and trapping of wild animals the unit of value is usually a skin. The particular kind of skin varies with the locality, but in each case some kind is fixed upon by common acquiescence. In the book of Job reference is made to "skin for skin/' which shows that at that early day skins were used as money. In the transactions of the Hudson Bay Company in America the beaver skin was the unit of trade. It is said that after coins came into com- mon use in the transactions of fur gatherers, the Indians continued to make exchanges in terms of "skins" rather than in terms of current coin. In the early pastoral state of society cattle were used to pecform the rudimentary functions of money. From this fact originated the words pecuniary and capital, the former being derived from the Latin pectis, cattle, and the latter from the Latin caput, head, cattle being counted and exchanged '%y the head." Aside from the foregoing examples may be cited cases in which wampum, shells, whale's teeth, amber, olive oil, various kinds of grain, tobacco, salt, iron, leather, brass and even pieces of wood have been used as money, and consequently have furnished units for the measurement of values. In the course of time, however, gold and silver became the universally accepted current trade-forms in the principal markets of the world. The tendency now is to confine the common measure of all values to a single OF THE MEDIUM OF EXCHANGE 203 trade-form — gold. This metal in high degree possesses most of the requisites for the performance of the functions of money. Being universally desired, it passes current everywhere; being divisible into coins of various sizes, it readily furnishes a unit for the measurement of current values. In it values can readily be stored in small com- pass and safely transported from place to place; it is durable and not easily counterfeited; its coins may be re- converted into bullion without any loss of value. As a basis for metallic coinage it has no superior. It covers the traditional requisites of money as set out in standard works on Political Economy well nigh perfectly. These requisites are all based upon the overcoming of the dis- utility of matter, and distinctively apply to current labor values. In the development of society, however, other than cur- rent labor values soon appear. With the advent of compe- tition for the ownership and use of land-forms, land values appear; and with the borrowing of capital-forms for the reduction of the disutility of time, capital values arise. The gold standard, like any other standard of metallic money, contains no elemental unit of value which distinctively takes into account the disutility of space; nor does it contain any distinctive recognition of the disutility of time. In the course of the development of the market there arose the elements of debit and credit. A purchaser, not having ready money for use in exchange, was entrusted by the seller with the labor- form desired upon a promise to pay the price at some future time. At first these prom- 204 BISOCIALISM— POLITICAL ECONOMY ises were oral, but after the art of writing came into com- mon use written promises were made and charges were entered upon books of account. Out of the latter prac- tice grew the custom of charges and counter charges, credits and counter credits between two men with an occasional payment by one or the other, as the case might be, of the balance due. This practice curtailed the actual use of money as a medium of exchange, but all debits and credits were bascxl upon tlie standard monetary unit. Out of the practice of giving written promises to pay grew the custom of passing these promises from hand to hand as negotiable paper. This still further curtailed the use of coin as an actual medium of exchange, although the written promises were based upon the standard unit of metallic coinage, and gold or silver was necessary to re- deem the promises. The paper debit, the distinctive characteristic of which is a promise to pay, evidenced by a writing either in the form of a book account or of a promissory note, has been developed in modern business to a high degree. It involves not only accounts current and promissory notes between individuals, but a traffic in various forms of indebtedness, or debits, through brokers, banks, clearing houses, with the use of checks, drafts, bills of lading, bills of exchange, warehouse certificates, stocks, bonds, debentures, consols, etc., almost without number. Great attention is paid to this phase of modem exchange in all treatises on money and political economy, and it is currently stated that more than 90 per cent of all ex- changes are now made through the use in some form or other of "promises to pay." But all these promises to pay OF THE MEDIUM OP EXCHANGE 205 are based upon the standard unit of metallic coinage and their only function in exchange is still further to reduce the mechanical friction of exchange — to overcome still more completely the distinctive disutility of matter. The metallic coins must exist for the purpose of redemption. The use of written promises to pay, or paper debits, simply avoids the necessity of constantly handling and transport- ing the coins. In such a monetary system the use of cur- rent paper promises to pay constitutes a labor saving de- vice of great effectiveness, but it is nothing more than this. The distinctive disutilities of space and time are not in any wise reduced. They are changed, it is true. But the change is a mere shifting of relative values as between individuals — some profiting and others losing by the proc- ess, as when the monetary standard appreciates or depreci- ates in value from time to time. But in the aggregate, the disutilities of space and time remain the same. There is another form of paper promise, however, of which we hear but little. It is seldom used, and seems to be but little understood. It is that form in which the written promise is not a promise to pay but to receive. The distinction is simple but extremely significant. Its significance lies in the fact that the promise to receive furnishes a means of securing a medium of exchange in- volving the three elemental units of the economic standard of value. Suppose that upon an island dwelt a community under a system of law and land tenure similar to that in vogue in England and America. Suppose, further, that all the land of the island was owned by one man, and that all 206 BISOCIAUSM— POLITICAL ECONOMY land-forms, except those of the lowest grade, were neces- sarily occupied and used in order to supply the wants of the community. The owner would receive ground rent from every land user except those who might occupy land- forms upon the margin. Practically every man upon the island would be his debtor in some amount every year. On the other hand, let us assume that the owner lived upon the island and spent all his income there every year, employing all grades of labor from common labor up to the most skilled professional service. In such circum- stances there would be no need of gold or silver or other precious metal as a medium of exchange or as a standard of values, current or future. The daily wage which he would pay to a common laborer would equal the daily earnings of the man who, without capital, cultivated the economic mar- gin. The laborer would take no less because of the oppor- tunity open to his labor at the margin; the laborer could get no more, because, if he did, the man at the margin would be induced to leave his land-form and compete for employment at the hands of the owner. Such a people so circumstanced might well adopt the economic standard of value — a day's common labor upon the economic margin. The owner could employ laborers, and land users could pay their rent upon that basis. For instance: to his day laborers let the land owner give a written instrument promising therein to receive such in- strument from any person at any time in pajTnent of ground rent or other indebtedness, in lieu of one day's common labor. This instrument, or scrip, would pass cur- rent for one day's common labor anywhere upon the island, OF THE MEDIUM OP EXCHANGE 207 and all prices would be based upon one day's common labor as a unit or standard of value. To all other persons fur- nishing him with labor, or service, or labor-forms, let the owner give similar written promises, or scrip, according to their respective values, up to the amount of his annual in- come from ground rent. All such scrip would pass current upon the island and metallic money might be unknown. Within the year all these promises would be "'redeemed" by being received as ground rent, as we have assumed the owner's annual rents and expenditures to be equal. Inasmuch as all material progress upon the island would be reflected in ground rents, no better index of the volume of business or of the "necessary volume of currency" could be found. We are so accustomed to think of something tangible, as gold or silver coin of a given shape, weight, and fineness, as the standard of value that it is difficult to conceive of a standard composed merely of certain labor-power exerted for a certain time at a certain place. Yet we know that a given amount of labor-power exerted under given condi- tions will result in the production of a given labor-form. There is no reason in nature why we should not adopt the given labor-power, so conditioned, as a standard of value, as well as its concrete result — as when it produces the weight of gold or silver contained in the unitary coin. It can not be said that the value of a day's labor upon the margin is variable while the value of a piece of gold is constant, for both are variable. For the measurement of current values the variations of the one may be neither better nor worse than the other. But for the measure- 208 BISOCIALISM— POLITICAL ECONOMY ment of future values the difference is perceptible and ma- terial. To illustrate: Suppose that A borrows of B $1,000 to be repaid at the end of 20 years at 5 per cent interest per annum. If the monetary standard be gold, then principal and interest must be paid in gold or its economic equivalent. Sup- pose, further, that at the time of the borrowing, a common day's labor is of the value of $1 in gold; while at the end of 20 years it is of the value of $2 in gold. Then, whereas A borrowed the economic equivalent of 1,000 days' com- mon labor, he can repay the principal with the equivalent of 500 days of such labor. Or, suppose, upon the other hand, that at the expiration of the 20 years, common labor is worth but fifty cents per day in gold. Then it will require the economic equivalent of 2,000 days' labor to repay the principal sum instead of the equivalent of 1,000 days' labor. In the one case the disutility of repayment is diminished by half; in the other, doubled. These are extreme variations, it is true, but they illustrate the principle, and it is a well known fact that the value of the gold dollar with reference to a day's labor does vary. The amount and the direction of the variation is not material to our argument. The same variations which affect the prin- cipal sum borrowed will apply to the interest also. Let us now suppose that A borrows of B $1,000 for the same term and at the same rate, and that at the time of borrowing the amount of gold now called one dollar and one day's labor are economic equivalents. If, in such case, the economic standard of value is used, then at the end of 20 years the lender is entitled to receive, and the borrower OF THE MEDIUM OF EXCHANGE 209 must pay the economic equivalent at the time of 1,000 days' common labor, regardless of the value of gold or of any other labor-form. If at the end of 20 years one day's common labor will purchase twice as much gold as at the beginning of the term, this fact will make no difference whatever to either of them, as it will also purchase twice as much of everything else in the market, other things being equal. The borrower expected to return 1,000 days' labor or its economic equivalent, and he returns this and no more; he knew in advance just what the disutility of his task would be, measured in common labor, and this disutility is unchanged. The lender had parted with the stored up utility of 1,000 days' common labor, and this is exactly what he receives back as principal. At the time of the loan both could form accurate conceptions of what the disutility of exerting a day's common labor-power would be 20 years thence; but neither could then accu- rately determine what, in 20 years, would be the disutility of obtaining a piece of gold of given weight and fineness. The disutility of the latter might be doubled or it might be cut in half — neither could tell as to that. The matter of the standard of value, whether the gold standard or the economic standard, would affect not only the borrower as to the relative disutility of repaying the loan, but it would also equally affect the lender as to the relative utility of his loan after repayment. If under the gold standard common labor was cheaper by half than when the loan was made, so also would be all labor-forms which he might desire to purchase. This would double the utility of his money in the market. With it he could 210 BISOCIALISM— POLITICAL ECONOMY then purchase the fruits of 2,000 days' current common labor. But if the value of labor should double in the 20 years, so also would the prices of all labor-forms, and his money would buy but half as much as formerly. With it he would buy only the fruits of 500 days' current common labor. On the other hand, if the economic or labor standard of value was used, the values of all labor-forms would remain relatively imchanged. However prices may have changed absolutely, the borrower could pay his debt with the fruits of 1,000 days' current common labor; and with the money so repaid the lender could purchase the fruits of 1,000 days' current common labor. No standard of value can be absolutely constant; and the only standard which can be relatively constant is the economic standard — a standard based directly upon all the elemental units of disutility. If the owner of all the land upon the island in the illustration we have used were also its absolute ruler, po- litically as well as economically, and held the land as sovereign instead of citizen, the ground rent received by him would be public, instead of private revenue. In such case his expenditures would be expenditures of State, and his promises to receive would be government paper. Ground rent would be paid as a tax, and the paper money paid out by the government to its employes and other creditors would become current credit-forms redeemable in payment of taxes — the amount of each man's tax or ground rent being computed in terms of common days' labor. OF THE MEDIUM OF EXCHANGE 211 The greenbacks issued by the United States government, being promises to pay coin, are evidences of public indebt- edness, and are, therefore, current debit-forms. In the hands of the holder they mean that he is entitled to re- ceive labor-forms — gold and silver coins — from the gov- ernment. In the hands of the holder the promises to re- ceive which we have described, if such were issued instead of greenbacks, would mean that he is entitled to receive credit to that amount upon his taxes or other indebtedness to the government. If he had no personal indebtedness to the government, he could readily pass his current credit- forms in the course of business to some one who had. From this brief discussion we learn that a medium of exchange may exist under any one of three forms : current trade-forms, current debit-forms, and current credit-forms. The first has been defined, but we repeat the definition: A Current Trade-Form is a trade-form which passes current as a medium of exchange, A Current Debit-Form is a written evidence of debt which passes current as a medium of exchange. A Current Credit-Form is a written evidence of credit which passes current as a medium of exchange. The United States employs current trade-forms in its coinage, and current debit-forms in its greenbacks and treasury notes of various kinds. National bank notes are also current debit-forms. If this government should pay its employes and creditors in promises to receive, redeem- able in payment of taxes — or other indebtedness to the government — in lieu of gold, such credit-forms would pass current, but gold would be the monetary standard, and such 212 BISOCIALISM— POLITICAL ECONOMY a system would not distinctively recognize in its stand- ard of value the disutilities of time and space. The dis- utility of matter would be greatly lessened by destroying the necessity for a universal struggle for gold;, or gold and silver, for use as money. If the United States should go farther and adopt the economic standard of value, instead of the gold standard, as the basis of its promises to receive it would recognize in its standard the disutilities of both matter and time; and in so far as its taxes are levied upon bare ground values, irrespective of improvements, its standard would also recognize the disutility of space. By levying all its taxes upon such ground values, the eco- nomic standard of value would be made complete. CHAPTER 11. OF CURRENT CREDIT-FORMS. They (governments) determined to try whether they could not * * * make a piece of paper issued by them pass for a pound, by merely calling it a pound, and consenting to receive it in payment of taxes. And such is the influence of almost all established governments, that they have generally succeeded in attaining this object: I believe I might say they have always succeeded for a time, and the power has only been lost to them after they had compromised it by the most flagrant abuse. John Stuart Mill. Bank paper must be suppressed, and the circulating me- dium must be restored to the nation, to which it belongs. Treasury bills, bottomed on taxes, * * * thrown into circulation, will take the place of so much gold and silver, Thomas Jefferson. During the first year of the Civil War the United States government issued "demand notes/' afterwards knowTi as greenbacks, to the amount of approximately $60,000,000, as unlimited legal tender for all debts public and private.* These notes were intended to circulate as money and were issued in denominations of convenient size for this pur- pose. The notes stated upon their face that the United States of America promised to pay the bearer, on demand, the sum of ten dollars, or whatever the sum indicated by the denomination of the several notes might be. Xeither ♦Issues of July 17. 1861, February 12, 1862, and March 17, 1862. 213 214: BISOCIALISM— POLITICAL ECONOMY the laws authorizing their issue nor the notes themselves stated in what they were payable, but the government announced, through its Secretary of the Treasury, that they were payable in coin. Beginning with an issue of $150,000,000, authorized in February, 1868, other greenbacks were authorized during the war until the total issues reached the sum of $450,000,- 000. But none of these notes, except the $60,000,000 above mentioned, were full legal tender for all debts pub- lic and private. All subsequent issues contained a clause which made them legal tender for all debts except duties on imports and interest on the public debt. That is to say, the government issued these subsequent notes in pay- ment of all of its current expenses (not including interest on its bonds), but it would not receive them in payment of duties on imports which constituted a chief source of its revenue. Of the $60,000,000 of demand notes referred to $50,- 000,000 were taken up by the government and a like amount of the subsequent notes of limited legal tender were issued in their stead. But $10,000,000 of the original unlimited tender notes remained in circulation throughout the war. In the latter part of December, 1861, the banks of the United States, by concerted action, suspended specie pa}'-- ments; that is, they ceased to pay out gold and silver, and began to transact all business upon a paper money basis. The government also ceased to pay out specie except as interest upon the public debt. The result of this was that all demand notes, or greenbacks, of the government of the OF CURRENT CREDIT-FORMS 215 limited legal tender issues began to depreciate in value, and continued to do so until in July, 1864, it required $2.85 of such currency to purchase $1.00 in gold. In the language of the market, however, instead of regarding greenbacks as at a discount, gold was said to be at a pre- mium, and in July, 1864, gold was quoted at 285. At no time during the war were any of the unlimited legal tender greenbacks worth less than gold. The $10,- 000,000 referred to were outstanding during all that time and passed current as the equivalent of gold, being ac- cepted in payment of duties on imports, but not being, in fact, redeemable in coin either at the banks or at the gov- ernment treasury after the suspension of specie payments. The reason that these demand notes remained at par with gold could not, therefore, have been because they were payable in coin as is generally supposed. The sole reason was that they were receivable at the custom houses in pay- ment of duties due to the government. If at any time they had been deprived of this quality, they would at once have depreciated to the level of the greenbacks of the limited legal tender variety. The reason of all this, in the light of our previous dis- cussion, is plain. All of these demand notes purported to be government promises to pay, and so were current debit- forms. But those of the $60,000,000 first referred to contained an implied promise by the government to re- ceive them in payment of taxes at the custom houses, and so they became de facta current credit-forms. If, instead of reading "On demand, the United States of America promises to pay the bearer Ten dollars," witb 316 BISOCIALISM— POLITICAL ECONOMY the endorsement of the unlimited legal tender clause thereon^ one of these notes had read: "On presentation hereof the United States of America will receive this cer- tificate in lieu of ten dollars in payment of any indebted- ness due to the United States as duties on imports or otherwise/' such certificate would have passed current with gold at its face value for the reason above stated. But in that case the true reason would have been apparent, instead of being obscured by the fiction of redeemability in coin at a time when for many years specie payments were suspended and redemption in coin impossible. In 1875 congress passed an act which provided that on January 1, 1879, specie payments should be resumed at the United States treasury. By virtue of this act demand notes which had exchanged for gold at the ratio of $3.85 for $1.00 in 1864 were exchanged at the treasury at par with gold in 1879. In common speech these greenbacks were said to have been made redeemable in gold on and after January 1, 1879. But in fact, if congress had sim- ply enacted that on and after said date greenbacks should be received at par in payment of taxes due the United States, the effect would have been just the same. From this discussion it may be seen that by a simple change in the wording of its greenback currency a paper money based upon the gold dollar as a standard could be utilized by the United States up to the amount of the average annual expenses of the government,* exclusive of its obligations * About $550,000,000 for the year ending July 1, 1903. During this year about $343,000,000 of greenbacks were in circulation. OF CURRENT CREDIT-FORMS 217 now payable in gold. But in order to put the finances of the nation upon an economic basis the true standard of value should displace the present gold standard, and the dailor should be made to supplant the dollar as the prac- tical unit of exchange. A Bailor is a current credit-form, representing the value of one day's common labor on the economic margin, issued by the State in payment for services and satisforms, and redeemable by the State in receipt for taxes. In case this plan were adopted the dailor would read substantially as follows : On presentation of this certificate the United States of America will receive the same in lieu of one day's com- mon labor, or the value thereof, in payment of any taxes or other indebtedness due to the national government. These credit-forms would be issued in denominations of one, two, five, ten, twenty, fifty, one hundred, and one thousand dailors in like manner as our present national currency. They would be paid out to all persons furnishing labor-forms, labor, or services to the general government. If these persons owed the government any thing in taxes or otherwise, their credit-forms could be utilized in can- celing such indebtedness. If not, such credit-forms could be passed at their full value to others who did owe taxes, and in their hands could be used in payment of such taxes and so be redeemed. Such credit-forms would thus pass current and would perform all of the characteristic func- tions of a medium of exchange. It is claimed by the advocates of metallic money that the thing chosen to circulate as a medium of exchange 218 BISOCIALISM— POLITICAL ECONOMY must have a high degree of utility for some other purpose. This is necessarily true of a medium of exchange which is developed directly from a system of barter. Historically it is true that all money-forms which have been used not only as a medium of exchange, but as a standard of value, have had a marked utility for some other purpose. But this is only because all monetary standards hitherto used have developed directly from barter without any reference to the function of the State in relation to the market. If the State, practically without cost, can furnish some- thing highly useful as a medium of exchange and not use- ful for any other purpose, surely this is a direct economic gain. The utility of gold and silver for other purposes will not be affected, and the supply of these metals for use in other ways will be greatly increased ; while at the same time the new medium of exchange will not detract from the supply of any other useful article. A money-form which is widely used for other purposes is susceptible to all the fluctuations of value which result from such use. This is a thing to be avoided, and it can only be avoided by adopting as a medium of exchange something which has practically no other utility. In this view the current credit-form is the most desirable of all money-forms. It is next urged that in order to be a medium for the exchange of values, a thing must itself be of value. This is true. And since the values of all labor-forms are cre- ated by labor-power, what is more valuable than labor- power itself? And in what form can the value of labor- power be manifested better than in a certificate attested OF CURRENT CREDIT-FORMS 319 by the government that certain labor has been performed, and that the laborer is entitled to his reward? This is the real gist of the certificate which we have called a dailor.* The third requisite of a money-form, as usually stated, is that it must not only have value, but it must also be a measure of value. We have gone farther than this and have shown in a former chapter that it must be a measure of all of the three distinctive forms of value, viz., labor value, capital value, and land value. The current credit- forms which we advocate for use as money represent a given kind of labor-power — common labor — exerted for a specified time — one day — at a given place — the economic margin. This furnishes us not only with a measure for all forms of value, but with a unit or standard of measurement — the dailor. Under this system every man who performs common labor for the public will receive one dailor a day. In the interchange of the market his wages will purchase the economic equivalent of the return to the self-employed worker upon the economic margin. For, if one of these should fare perceptibly better than the other, there would result a shifting of occupation wliich would soon equalize the current returns of these two classes of common la- borers. Common laborers everywhere would necessarily receive one dailor a day, or its equivalent, as the return for their labor, and the wages of the common laborers would become the basis for the payment of all other wages and * We use the term dailor for convenience in this discussion. If the doctrines of this chapter were adopted the word dollar could well be retained. 220 BISOCIALISM— POLITICAL ECONOMY for the measurement of all industrial returns. In this way the prosperity not only of the government employes, but of all persons performing labor or services or engag- ing in productive enterprises, would directly depend upon the status of the man at the margin. In the fourth place it is claimed that the basic money- form in any country should be made of such material as will cause it to pass current anywhere in the world at sub- stantially the same value. This sounds well, but it is a mere matter of sentiment. There is no more reason why the people of the United States should not transact all domestic business with current credit-forms issued by the government than why they should not use checks, which are negotiable only where the maker is known. ^Vhereve^ the credit and stability of the government are recognized, its credit-forms will pass current just as its debit-forms — greenbacks and treasury notes — pass current in foreign countries at present. And then as now, gold and silver may still be coined, the stamp of the government certifying to their weight and fineness. Such coins will pass cur- rent then, as at present, at their bullion values in foreign markets and in settling the balances of international trade. In the fifth place it is a prime requisite that a basic money-form should furnish the best available standard for deferred payments. In the last chapter we learned that in present conditions a debt contracted now and payable twenty years hence may require twice as much labor to repay it at maturity as at present. And on the other hand, the creditor might receive the labor prod- ucts of only half as many days as were represented by OF CURRENT CREDIT-FORMS 221 his money-forms when loaned. But by the substitution of the economic standard of value for the present standard, and the dailor for the dollar as the unit of payment, the same number of days' labor would be returned as was bor- rowed, let the loan run as long as it may. The dailor fur- nishes the only fit standard for the making of deferred payments. In the sixth place a monetary system must readily ac- commodate itself to the varying demands of trade. We hear a great deal nowadays about the necessity for an elastic currency. In normal conditions, such as would prevail under bisocialism, the demands of trade would be much more unifoi-m than at present, and such fluctua- tions as would exist from time to time would have econ- omic and easily ascertained causes. Such fluctuations could readily be anticipated and provision could be made against them. Xo man or set of men, for financial gain, could in any way manipulate the supply of currency as at present. For this reason one of the most prolific causes of financial stress would be eliToinated. Bisocialism could have no Black Fridays. Arbitrary expansion and con- traction of the currency would be unknown. Again, under bisocialism the most prolific and persistent of all causes of periodical and general financial depressions would be removed. In the established order the private appropriation and absolute control of land-forms and the consequent artificial lowering of the economic margin gives to the category of ground rent a flagrantly excessive share of the net values of production. The more pros- perous the times the higher the ground rents; the greater 222 BISOCIALISM— POLITICAL ECONOMY the struggle for advantageous land-forms, the more these are taken up in advance of actual need and held out of use for a price which finally becomes prohibitive. The increase of rent swallows all the measurable gains of ad- vancing civilization, and the tribute finally becomes more than production can bear. Business men begin to fail, and every failure embarrasses many who are already on the verge of collapse. Loss begets loss, private credits be- come strained, financial accommodations are withdrawn, and ruin becomes widespread. Finally ground rents are lowered, business enterprises tend to recover, make gains, and finally prosper openly. Then again the rent line is lowered, ground rents rise and encroach upon the earn- ings of labor and capital, and the same catastrophe is repeated, but with ruin more widespread than before. Under bisoeialism, therefore, with a currency governed by the needs of the nation and not by the rapacity of the so-called "monied interest," and with healthful production based upon a normal economic margin, violent financial fluctuations could, have no place. Gold and silver would not be eliminated as money-forms. Their use would not be confined to foreign trade. The government would al- ways receive them at their actual value in payment of taxes. The dailor and the dollar would circulate together, the former being the standard and regulating the value of the latter in common with all other labor-forms. Any approach to stringency in the money market would readily call into circulation all the gold and silver which might be required for domestic trade. An unusual demand for these metals for monetary purposes would tend to raise OF CURRENT CREDIT-FORMS 233 their values and would quickly cause them to be with- drawn to some extent from other uses. Stability is a great deal better quality in a monetary system than elasticity. In securing both of these in adequate degree nothing can be so efficacious as normal economic conditions. The elas- ticity of the currency, whether it be great or small, must be a natural elasticity, and not in any manner or degree subject to manipulation by any man or class of men. Otherwise it were better to have no elasticity at all. We have now shown that the current credit-form repre- sented by the dailor has the requisite utility and the neces- sary value of a medium of exchange ; that it furnishes both a measure and a unit for the measurement of value; that it will pass current without question at home and may, if necessary, be supplemented by the use of metallic money both at home and abroad ; and that it furnishes the stabil- ity required by an ideal standard for deferred payments. These constitute the prime requisites of a medium of ex- change. Subsidiary to these the following requisites are usually mentioned in treatises on the subject of money. A money-form must have in marked degree the quality of convenience. The experience of the present day shows that in this respect paper currency has a great advantage over coin and especially over gold. In current transac- tions coin is but little used except for change and the pay- ment of small sums of money. Under the system of credit- forms above proposed it would doubtless meet the con- venience of the people to coin the dailor from aluminum — a metal of little weight and now of triflinoj value in itself — 224 BISOCIALISM— POLITICAL ECONOMY and to have subsidiary coins of the usual denominations made from aluminum, nickel and copper. The quality of durability was formerly insisted upon as chief among the subsidiary qualities of money. But under a system of current credit-forms this quality would become one of least importance. In the usual course a credit-form would be issued for current expense and re- deemed in receipt for current taxes. The life of the aver- age credit-form would not exceed one year. Whether a given credit-form when received by the government should be re-issued or canceled is a matter of administrative de- tail which we need not now determine. Theoretically it would become a new credit-form, even if re-issued. Akin to the foregoing is the demand usually made that the ordinary medium of exchange should furnish an in- destructible storehouse, as it were, for the preservation of values while in transit and in hoarding for long spaces of time. Gold possesses this quality in high degree, and for this reason it is urged that gold is the material most fit for a circulating medium and for the standard of value. But under the economic standard of value and a system utilizing credit-forms as currency, gold would be just as available for the safe transportation and storage of values as ever. If the reasoning of the standard economists upon this point were true, diamonds would make even a better standard of value and medium of exchange than gold. Their argument, if it proves anything, proves too much. Portability is another of the standard demands of a cir- culating medium. In this respect paper currency of large denominations has everv advantage over coin. The bulk OF CURRENT CREDIT-FORMS 225 need not be great and the weight, even of a large sum, is insignificant. It is also said that the material used as a medium of ex- change should be susceptible of adequate divisibility, and that the different divisions should be readily cognizable by their sizes or by their respective appearances. A paper currency yields readily to this demand in so far as it prop- erly extends. Experience has shown that there is no neces- sity whatever for making a ten dollar bill one-half the size of a twenty dollar bill, and so on throughout the different denominations. By a difference of coloring and engraving bills of the different denominations are now readily cogniz- able and distinguishable, and this is all that is required. In respect to the subsidiary coins, the present differences of size may be adhered to when silver is changed to alumi- num, which resembles it in appearance save for the lack of luster. Lastly, it is claimed in favor of a metallic standard that silver and gold coins may be reduced to bullion substan- tially without loss, and bullion may be converted into coins substantially without expense. In this way it is claimed that the supply of money may be regulated and, in fact, tends to regulate itself, since as the bullion value of these metals rises coins will bo melted for use as bullion, and as bullion values fall the metals will be more extens- ively coined. But under a system of current credit-forms limited to the expenses of the government and fully re- deemed in receipt of its income, the supply of money will also automatically regulate itself. And if the revenue of the government be confined to the absorption into the pub- 226 BISOCIALISM— POLITICAL ECONOMY lie treasury of all ground values, there will at all times be a definite and normal relation between the amount of money outstanding and the volume of business currently transacted in the entire country. For it is the demands of business and the condition of trade in any community which determine the ground values of that community; and when these ground values are all absorbed in taxes and a corresponding amount of credit-forms are issued, the same relation between the currency and current business will prevail as between current business and ground val- ues. This is indeed one of the great factors in the economic demand for the adoption of credit-forms as currency, and the economic standard as the standard of value. Normal conditions will then at all times prevail in what we call the money market, and the supply of money will always he entirely independent of the manipulations of private persons or corporations. Banks will be relegated to their normal functions of making loans and exchanges and will cease to be an overshadowing power in the financial polity of the nation. The issuing of bank notes to circulate as money will be abolished along with all other differential privileges now created and enforced by law. The bank- ing business will not be destroyed, nor its normal func- tions interfered with, but rather promoted. For in pres- ent conditions not only do banks have differential priv- ileges, but these privileges are of greater benefit to some banks than others — to the great centralized institutions rather than the smaller banks away from the money centers. OF CURRENT CREDIT-FORMS 227 The present tendency is for those great banking institu- tions specially favored by the government to make financial adjuncts of the smaller and more remote banks, and to appropriate unto themselves, as it were, the cream of all the banking business. The thing that will be most advan- tageous to the ordinary banker is a return by all bankers to their normal functions under conditions which will bring greater prosperity to their respective communities at large. A legitimate banking business prospers as the com- munity about it prospers, and not otherwise. The pros- perity of the community at large, in normal conditions, is based directly upon the prosperity of its marginal pro- ducer. The dailor, not the dollar, is the true harbinger and measure of his prosperity. The current credit-form is the only medium of exchange having a complete eco- nomic basis. CHAPTER III. OF MONOPOLY AND FRANCHISE VALUES. I do not recognize as either just or salutary a state of society in which there is any "class" which is not labouring; any human beings exempt from bearing their share of the necessary labours of human life, except those unable to labour, or who have fairly earned rest by previous toil. John Stuart Mill. We have hitherto sought, as far as possible, to limit our discussion of values to those values which have their origin in normal conditions. By normal conditions we have un- derstood those conditions which attend a market unaf- fected by juridical institutions, laws, or customs. We now come to consider values as they appear in a market af- fected more or less completely by such institutions, laws, and customs. This leads us at once to a new and artificial element in the origin of values — the power of the State to create and maintain differential privileges in industry, exchange and land tenure. A Differential Privilege is an artificial advantage in in- dustry, exchange, or land tenure, created and maintained directly or indirectly by the State, by means of which the possessor may acquire and retain differential net value. From the earliest times governments have exercised this power. It is not our purpose in this chapter to seek to jus- tify or specially to condemn such action, but to examine 228 MONOPOLY AND FRANCHISE VALUES 229 critically the effect of the exercise of such power by the State iipon values in various circumstances. Net value lies between two movable points, the point of positive utility and the point of exchange. The individual producer may increase his net values by lowering the point of positive utility, or by raising the point of exchange as to his particular labor-forms. The point of positive utility may be lowered in such manner as not to affect either the net values of other producers or the net salvage of any consumer. Thus, if an individual producer exhibits un- usual ability or acquires unusual skill, the effect may be an increase of net value to himself without any correspond- ing loss or detriment to another. The same may be true, if he discovers some new process, or invents some tool or instrument or machine for use in his enterprise. In all these cases he may enjoy increased net value, both abso- lutely and relatively, until the ability, skill, process, or instrument of production, at first peculiar to himself, shall become commonly used by his fellows. If all others are as free as himself to exhibit, acquire, discover, invent and use such ability, skill, process, or instrument, his superiority, while it lasts, will give him a relative advantage, but will ordinarily not increase the disutility, industrial or com- mercial, of any person. On the other hand, if the possessor of such advantage can, by law, or under its sanction, prevent other producers from using a like advantage, should they be able to de- velop, discover, or otherwise attain the same, he not only can increase his own net values, but can prevent the in- crease of the net values of his competitors in so far as 230 BISOCIALISM— POLITICAL ECONOMY such increase is dependent upon his artificial advantage. Under the law of the market, which makes market price dependent upon the marginal pair, the price of the products in question may remain unchanged, and he alone may possess an exclusive advantage. The lowering of the point of exchange — the falling of price — which naturally follows the free use of an improved method, process or instrument, may be prevented, and thus the consumer is deprived of the advantage of lower cost. It is a necessary result of any such artificial advantage in production that all other producers and all consumers are barred from enjoying benefits which, in normal conditions, would arise from lessened disvalue on the one hand, and lessened cost on the other. All consumers are deprived of the benefits of the normal socialization of utility. As already indicated, differential privileges may exist in industry, in exchange, and in land tenure. A man may se- cure an exclusive privilege for the use or control of a cer- tain process, or of a certain tool or machine used in man- ufacture; or he may secure an exclusive trading privilege at a certain place or in a certain line of trade-forms; or, finally and most important of all, he may secure the ex- clusive use in industry or exchange, or both, of superior land-forms. Differential privileges may be granted with the avowed purpose of giving the possessor an artificial economic ad- vantage, or they may be granted immediately and ostensi- bly for some purpose supposably politic in its nature, the economic advantage being looked upon as merely inci- dental. The former may be called direct, and the latter MONOPOLY AND FRANCHISE VALUES 231 indirect differential privileges. A patent right, so-called, is an example of direct privilege; while a protective tariff furnishes many instances of indirect differential privileges. The most important distinction in differential privileges arises from the fact that in most cases full and free com- petition among individuals would be possible but for the action of the State in creating the privilege; while in a few cases natural causes intervene to prevent such com- petition among individuals prior to any act of the State and irrespective of such action. For instance, in manufac- ture, all men, in the absence of patent laws or other re- strictions, can fully and freely compete in the use of all processes and of all machinery; or, in exchange, in the absence of tariff or other restrictive laws, all men can fully and freely compete in the market. But in such businesses as the operation of steam and street railways, the distribu- tion of consumers of water, gas, electricity, and other so- called "public utilities," full and free competition is im- possible from natural causes. But one railroad can ordi- narily be constructed upon the shortest and best line be- tween two cities; and even if two railroads are parallel throughout their entire length, the competition is practi- cally limited to these two roads, and may be entirely elim- inated by agreements for pooling. In the same way full and free competition is impossible in the use of city streets for street railways, water mains, gas mains, light, power, telegraph, and telephone systems. It is true that it is physically possible for two or even more competing companies to use a given street for some or all of the foregoing purposes; but this does not alter •?33 BISOCIALISM— POLITICAL ECONOMY the fact that every such business involves a differential privilege. Tlio benefits of the privilege in any such case are divided between the competing companies, and it is sel- dom, indeed, that the competition is strong enough and persistent, enough to benefit the public for any consider- able time. With two companies in the field there is prac- tically no danger of competition from a third, and the two find it to their advantage to pool their interests and to unite against further competition rather than to compete between themselves. This is not true of the grocery busi- ness, the dry goods, hardware, or jewelry business, and the like; nor is it true of any manufacturing enterprise in normal conditions. These are all open to full and free competition ; among them pooling is practically impos- sible. There is another distinction, however, which more fully differentiates those businesses which are normally open to full and free competition from those which are not. In the grocery business, for instance, it is not necessary for the proprietor to make private use of public property or to invoke the exercise of any public power. He owns the land-form upon which his store is located or rents it from a private owner, and the same is true of his store build- ing. But a street railway company, a private water, gas, electric light, or telephone company makes use of the pub- lic streets in a manner not open to the general public. In order to do this they are required by law to secure spe- cial grants of privilege from city and village councils in the form of franchises. In addition to this private use of public property, MONOPOLY AND FRANCHISE VALUES 233 these companies usually have granted to them by law the right of eminent domain, or the power, through the ju- dicial machinery of tlio State, of condemning private prop- erty for use in their businesses when necessary. This is especially true of steam and street railway companies. In the authority to invoke and use the right of eminent do- main these companies have delegated to them a part of the sovereign power of the State, and in condemning private property they exercise what is properly a public function. In addition to these distinguishing characteristics, the business carried on in an enterprise which requires the grant of a franchise by public authority is itself of a pub- lic nature. The corporations which engage in such enter- prises are frequently termed quasi-public corporations. They are also known as public service corporations. The State maintains the right to regulate them in a special manner. In the case of steam railways, congress has power to regulate freight charges in all cases of inter-state com- merce, and the several states regulate fares and freight charges within their respective limits. It is now conceded that cities may, within reasonable limits, regulate the fares charged by street railway companies, the prices charged by gas companies for their product and, in a general way, by all persons or companies who operate public utilities. A Public Utility is an industrial enterprise which neces- sitates the special use of public land-forms or the acquisi- tion and use of private land-forms under the special power of eminent domain, or both, in supplying some product or service generally desired by the people. In present conditions the differential privileges con- 234 BISOCIALISM— POLITICAL ECONOMY ferred by public authority are of two kinds: monopolies and public utility franchises. The term franchise has so many different applications that it is necessary to limit it in this discussion by placing before it the words public utility. This is to be regretted, especially as it compels us to adopt a still longer phrase in speaking of public utility franchise values. But, unlike many lengthy terms, these phrases do not tend to obscure the subject. They are easily understood and are capable of accurate definition. Simplicity and accuracy are the first requisites in the elaboration of any science. A Monopoly is a differential privilege exercised or en- joyed in connection with some private enterprise which, in normal conditions, is open to full and free competition among individuals. A Public Utility FrancMse is a differential privilege ex- ercised or enjoyed in connection with some private enter- prise which, in normal conditions, is not open to full and free competition among individuals, but requires the pri- vate use of public property or the private exercise of a public function, or both, to make such enterprise effective in private hands. These definitions lead to simple distinctions as to mo- nopoly and public utility franchise values. Monopoly Values are differential net values acquired and retained by means of monopolies. Public Utility Franchise Values are differential net val- ues acquired and retained by means of public utility franchises. In the remainder of tliis discussion the term franchise MONOPOLY AND FRANCHISE VALUES 235 is used only in the sense of public utility franchise as above defined. Franchise values are related upon the one hand to land values, and upon the other hand to monopoly values. Like land values they involve the use of superior land-forms under the sanction of the State; but land values arise un- der a general form of land tenure applying to the use of land-forms under fee simple titles in enterprises fully open to competition ; while franchise values arise under a special form of land tenure limited to non-competitive enterprises only. A farmer or a merchant occupies a land-form under a general tenure which applies alike to all persons occupy- ing land-forms for the same or for any normally com- petitive purpose ; while a railroad company occupies a con- tinuous strip of land-forms under a special tenure carry- ing with it the extraordinary power of eminent domain, and uses such strip for a purpose normally non-competi- tive. When the possessor of a franchise appropriates for special use land-forms hitherto devoted to public instead of private uses (as a public street) he does not exercise the right of eminent domain, but he always engages in a normally non-competitive enterprise. The latter is the distinguishing characteristic. In a former chapter we have seen that if the State should appropriate by way of taxation — or more properly speaking, in lieu of taxation — the entire ground value of all land-forms each year, the owner's investment in a given land-form, irrespective of improvements, would be but the present worth of one year's ground rent ; and upon this in- 236 BISOCIALISM— POUTICAL ECONOMY vestment he would make a percentage equal to the current rate of interest upon secure investments, and nothing more. He could not hold his land-form at 20 years' pur- chase instead of one, and secure an income based on such increased valuation. Land-forms would increase in value as the economic margin receded, but of this increase the owner could appropriate but a small part (a percentage equal to that expressed by the current rate of interest), the remainder going to the State in increased ground value. Land-forms would then have neither speculative nor mo- nopoly values, and the income of an investment at true values would be the economic equivalent of the income to pure capital invested in productive enterprises at the cur- rent rate of interest. Millions of dollars now invested in monopoly and speculative land values would be diverted to productive uses, to the great encouragement and increase of industry and exchange. Essentially the same thing is true in the case of land- forms used under a franchise for a special purpose. The income of such an enterprise, in so far as it is dependent upon the special use of the land-form, is a species of mo- nopolized ground rent. The value of the franchise as dis- tinguished from the value of the plant itself — i. e., the personal property, so-called, of the concern — is a species of monopolized ground value. If the franchise value is re- tained by the franchise owner, it accumulates in selling price after the manner of land value; while if the fran- chise were taxed at 100 per cent of its selling value, this value would be the present worth of one years income from the special use of the land-forms involved. The net in- MONOPOLY AND FRANCHISE VALUES 237 come of the franchise as such would then be equivalent to the interest upon an amount of pure capital equal to the selling value of the franchise at one year's purchase. In such circumstances money invested in an enterprise using a franchise would pay but the current rate of interest, or its economic equivalent. The value of the differential privilege, aside from this current return, would be ab- sorbed annually by the State which granted the franchise. If both land values and franchise values were taxed at 100 per cent of their selling values, the State would absorb all differential values which result from the use of superior land-forms over and above the equivalent of the return to pure capital, and land values and franchise values would yield "unto Caesar that which is Caesar's," and unto the producer that which is distinctively his. Although economically distinct, monopolies and fran- chises are closely related. Indeed, they are frequently joined, and the one is made to support the other in a given business enterprise. A street railway company may be possessed of a franchise as to its use of public streets and of one or more monopolies with reference to its roll- ing stock and motive power. The same person, firm, or corporation, may possess a monopoly in industry, as a pat- ent; a monopoly in exchange, by being the beneficiary of a tariff law; and a monopoly in land tenure through the exclusive ownership of a land-form furnishing natural water power. To these holdings may also be added, in the hands of a single person, or concern, a franchise in the matter of transportation, or of furnishing heat, light, and power by means of electricity to the people of a great cit}-. 238 BISOCIALISM— POLITICAL ECONOMY x\ll of these monopolies and franchises are dependent upon the State for their existence and enforcement in private hands. Just as there is an evolution in the development of the normal market, so there is an evolution in the develop- ment of monopolies in an abnormal market. First, there arises the simply monopoly, limited in extent and unre- lated to any franchise; then follows an extension of the scope and application of the simply monopoly; then the franchise is developed as an adjunct to simple monopoly, rendering the economic situation complex; then follows the establishment, in primitive form, of monopolies and franchises united under one management for the purpose of controlling the differential values of a given trade-form in an extensive local or even a national market; and finally these compound or trust monopolies are extended in scope and application until they seek to affect and con- trol the differential net values of a given trade-form or class of trade-forms in the markets of the world. This evolution is epitomized in the following definitions : A Simple Monopoly is a single monopoly unrelated to a franchise. A Complex Monopoly is a monopoly coupled with a franchise. A Compound or Trust Monopoly is a combination of monopolies, simple or complex, under one management, for the purpose of controlling differential values as to a given trade-form, or class of trade-forms, in a general or universal market. In a former chapter we learned that when land-forms MONOPOLY AND FRANCHISE VALUES 239 upon the normal margin are monopolized and held out of use, the result is to force the marginal producers to a lower level and so reduce the amount of the marginal return. Not only this, but such withholding of the normally mar- ginal land-forms from use increases the ground rent and also the ground value of all land-forms above the margin. This makes it more and more difficult to acquire land- forms for use either in production or for residence pur- poses, and compels a greater number of people to resort to an already artificially depressed economic margin. In like manner a monopoly in any of the processes of industry or exchange does not expend all of its baleful ef- fects upon those who are directly superseded or injuriously affected by it. The people who are displaced from their normal callings by the existence of monopolies in the hands of a few persons in a given field, seek to find busi- ness opportunities or employment in some other vocation where monopolies do not exist. This tends to overcrowd these latter callings and thereby unnaturally to reduce the net values to be obtained therein. As the divergence between the returns of monopolies and of ordinary occupations becomes more and more apparent, a greater number of people seek the advantages of differ- ential privilege?, and monopolies tend to multiply. Tliis still further accentuates the divergence between the favored and the unfavored, and still further accelerates the piling up of unearned net values in the hands of the few upon the one hand and, upon the other hand, the reduction of the wages of. the many to a minimum which will barely sustain life andlnecessary bodily strength. Simple mo- 24U BISOCIALISM— POLITICAL ECONOMY nopolies become complex and the evil results are increased accordingly. And when trust monopoly after trust mo- nopoly is formed, the crowding in the occupations not fa- vored by law becomes so great that all labor values are forced below the normal return to labor-power, and all cap- ital values become less than the marginal return to pure capital. An unnatural and unnecessary strife arises be- tween employers and their employes even where no mo- nopoly is enjoyed by the former. All consumers suffer from prices rendered artificially high, while those who produce receive wages which are artificially low. All such conditions are abnormal and unnecessary and should be abolished. It is at this point that standard Political Economy comes to the rescue of the established order. It teaches that the evils which we have described are natural and necessary evils, and that they would continue to exist, if all mo- nopolies were abolished and the best of economic condi- tions were established among men. They maintain that the fecundity of the human race is so great that popula- tion constantly tends to press upon subsistence, and that the inevitable result must be a struggle for existence in which the fittest shall survive. But even if this ghastly conception of Infinite Goodness were true, should not all men have equal opportunity to- survive? Shall not the State, which assumes to protect the weak against the strong, the property owner against the thief, after pro- duction is completed, also assume to protect the weak against the strong, the honest toiler against the exploiter of his labor-power in the process of production? Assum- MONOPOLY AND FRANCHISE VALUES 241 ing that the opportunities of nature are not sufficient for the sustenance of the race, shall the State parcel out to the few such opportunities as exist? Does not the general in a beleaguered city dole out the scant rations with an im- partial hand? As long as some men roll in the lap of luxury through the differential privileges of the law, let not Political Economy malign the Most High. In the United States at the present time there is a cor- poration engaged in the manufacture and sale of kerosene oil and other products of petroleum. It employs thou- sands of men, uses both auxiliary and pure capital-forms in large measure, is possessed of monopolies in the proc- esses of manufacture, owns or controls nearly all of the principal oil fields of the continent, controls transporta- tion of its own and like products over railways through a s.ystem of rebates, and has numerous and valuable fran- chises for pipe lines, one of which extends from its prin- cipal oil fields to the Atlantic seaboard. In its products appear net values of all possible kinds — labor values, capital values, land values, monopoly values and franchise values, all of which we have heretofore defined. What chance has the ordinary producer of oil and kindred prod- ucts in competition with this gigantic beneficiary of all forms of privilege? We have already discussed labor values and capital val- ues, and have shown the relation in which they stand to each other, and in which both stand to land values. From what has been said it may be seen that monopoly and franchise values are essentially different from labor val- 242 BISOCIALISM— POLITICAL ECONOMY ues and capital values. The latter two are based directly upon labor-power, do not depend upon the power or favor of the State for their creation, and can be traced to the labor-power of particular individuals ; while both franchise and monopoly values are based directly upon the power of the State in granting and maintaining differential privileges, and can not be traced to the labor-power of any particular individual or individuals. Wliile monopoly and franchise values differ essentially from labor values and capital values, they also, in many respects, differ from each other. Monopoly values would not arise at all, were it not for the action of the State in creating them. On the other hand, franchise values, like land values, would arise without any positive action by the State. The restriction placed by nature upon the use of su- |>erior land-forms exists independently of the State, but the State can not exist without exercising some sort of con- trol over the land-forms within its limits. The State has to do with territory as well as with people; and while it does not create either land-forms or land values, it controls the tenure of the one and the distribution of the other. If land-forms are used under any organized and orderly sys- tem of industry and exchange, the State must establish and maintain some form of land tenure ; and if enterprises not in themselves fully open to competition are left in private hands, the State must grant and maintain fran- chises. But the special value of all franchises may be appropriated by the public in taxation or by the terms of the franchise. Under a competitive system in which pub- MONOPOLY AND FRANCHISE VALUES 343 lie utilities are not directly socialized by public ownership and operation there is an economic reason for the crea- tion of a franchise — a differential privilege, at least in form, in a business naturally non-competitive; but there is no economic reason or excuse whatever for the creation of a monopoly — a differential privilege in a fully competi- tive business. In this connection it should be borne in mind that the point of exchange measures not only value to the seller, but cost to the buyer. Therefore a rise in price, or the artificial maintenance of price above the point incident to the normal market, can not increase the net value of a producer or seller without at the same time correspond- ingly increasing the cost to some buyer or consumer. Con- sequently there is no possibility of any general or aggre- gate economic gain in the enactment of any law creating or maintaining a monopoly. The statesman must look wholly to politics for justification when he proposes to create or maintain monopoly values of any kind or char- acter; and he must first demonstrate that anything can bo politic which is not at the same time economic. Under the assumption that enterprises which require franchises are to l^e left in private hands, we have sho^^■u the relation of franchise values to land values, and the effect of a distinctive tax upon franchise values. There is another view of this question, however, which still more clearly identifies franchise values with land values, and which shows that by a simple process the former may be transformed into the latter. "We have already shown, by way of illustration, that if 244 BISOCIALISM— POLITICAL ECONOMY natural gas should be distributed by any city to its citi- zens at cost, in lieu of the distribution of artificial gas by a private company at a higher price, the saving in the cost of gas would be offset by a rise in ground rents. If now the same city should furnish this natural gas absolutely free to its citizens, bearing the cost of distribution itself, the result would be a still greater increase in ground rent, and consequently of the ground value, or selling price, of building lots. If, however, the city should increase its taxes upon building lots, irrespective of improvements, i. e., upon bare ground values, to such an extent as to absorb into the public treasury this increase in ground value, the amount of its revenues would be substantially the same as if it collected the cost of distribution from each user of gas and allowed its tax rate to remain as be- fore. The matter of collection of this revenue would be greatly simplified, however, by the plan of furnishing free gas and raising the tax rate on ground values. The same principle applies in case of any so-called pub- lic utility. Any city having a municipal water plant could abolish all water rates and collect the cost of the distribution of water by means of appropriating in in- creased taxes that ground value which would result as cer- tainly as the sun would continue to shine. A city owning and operating its own street railways could give free transportation and collect the cost in taxes upon increased ground values. For if transportation were free, rents in the residence districts would rise until the saving in car fares was wholly absorbed, and ground values would rise accordingly. The State instead of private owners could MONOPOLY AND FRANCHISE VALUES 245 then appropriate the increase. This principle can be ex- tended to include free transportation upon steam railroads owned and operated by the State ; it points to the ultimate municipalization, with free use to the citizen, of all public utilities. Attention is again called to the fact that free gas, free water, free transportation and the like, while increasing the value of superior land-forms, would not increase the value of labor- forms, either as satisforms or capital-forms, in the least degree. Indeed, such free utilities would tend to increase the production of all labor-forms, and so cheapen them. The importance of this distinction between the effects of cheaper public utilities upon land values and labor values, respectively, will be seen in the next chap- ter. CHAPTER IV. OF THE SOCIAUZATION OF VALUES. A land tax levied in proportion to the rent of land • • • will fall wholly on the landlords. David Ricardo. A tax on rent falls wholly on the landlord. There are no means by which he can shift the burden upon any one else. John Stuart Mill. We have so far confined our discussion of the distribu- tion of values to distribution among individuals, the share taken by the State for revenue having been mentioned only incidentally. The question of the socialization of values — commonly discussed under the head of taxation — has long been recognized as one of great importance. Political bat- tles have waged about this question for centuries, and many wars and insurrections have risen from it, both di- rectly and indirectly. The subject stands foremost in im- portance to-day with reference to the relation of every government to the property of its citizens. Political economists are at sea about it ; statesmen are at odds about it ; politicians make a great ado about it, not knowing or caring much one way or the other; while the people in general who pay the taxes feel, rather than know, that there is something radically wrong about it in present co]i- ditions. Just now there is a growing tendency in certain quarters to turn the whole matter over to a board or com- mission of "experts," which is the worst thing that could be done. This matter of the socialization of values about 246 OF THE SOCIALIZATION OF VALUES 247 which there is so much confusion is really one of the sim- plest things in the world. Any ordinary man can under- stand it, any set of ordinary men can correctly apply it to a whole nation. It is necessary simply to get away from the dogmatic statements and statistical jumbles of the ex- perts, and to return to simple first principles in order to solve this vexing problem. Man may satisfy his desires as an isolated individual by his own unaided efforts, or he may unite with his fellows in the expenditure of eifort for the attainment of benefits which are reciprocal. This union of effort for reciprocal benefit may be exerted under two forms, cooperation in industry and competition in exchange. Both forms are now in vogue, subject to the artificial interference of mo- nopolies and franchises which tend to destroy their recipro- cal features. For the sake of convenience, let us consider the case of a people having diversified industries and maintaining a general market in which is determined the current prices of all their products. From the association of these people in industry and exchange there arise certain utilities which can be acquired in no other way. Some of these utilities are capable of measurement in the market by means of exchange; others are immeasurable. All the measurable utilities are manifested in the form of values or their economic equivalents in net salvage. These values, con- sidered with reference to their origin, in conditions un- affected by juridical laws, are of three kinds : labor values, capital values and land values; in conditions affected by juridical laws there are also franchise values and mo- 248 BISOCIAUSM— POLITICAL ECONOMY nopoly values, although the latter are wholly artificial and do not necessarily arise from the existence of the State. We shall now consider each of these values with reference to the advisability and the possibility of its so- cialization. In the community which we are considering a man cre- ates a certain labor-form, and takes it to the market for exchange. He finds the price of similar labor-forms fixed in advance of his coming, and he must sell, if at all, at the market price. This price is determined by the mar- ginal buyers and sellers of such labor-forms in that market, and the tendency in a general unrestricted market is toward lowness of price. The larger the community the lower the price of labor-forms is likely to be. Associa- tion with his fellows has furnished each man with a fine opportunity to satisfy his desire for one labor-form by the creation and sale of another. In the course of the whole transaction he is enabled to satisfy his desires with the least possible disutility, the size of the market benefiting him as a buyer of other labor-forms, making up in not salvage his decrease in net value. But the fact remains that, as a seller, the market is against him, if only the value of his own labor-form is considered. There is not a particle of the value of a labor-form to which the seller can point and say that the community, independent of the body politic called the State, has dis- tinctively created or increased it. Nor can the State itself as a body politic lay claim to the distinctive creation or increase of any particle of such value. What has the State, as such, done with reference to this labor-form? OF THE SOCIALIZATION OF VALUES 249 Say you that it has educated the producer in his youth and protected him and his property in his manhood, and 60 made it possible for him to create and exchange his labor- form with the least possible disutility? Very well. It does this for all its citizens, and the result, as we have seen in a former chapter, is that in any country where education is fostered and property well protected the market price of labor-forms is correspondingly low, and market price is the measure of value, expressed in terms of money. All of the benefits of government are mani- fested, not in the value of labor-forms, but in their cheap- ness. We have been so prone, under the teachings of current Political Economy, to look upon the creation of values as the great desideratum of production that we are shocked to find that the government is constantly lending its aid to the cheapening of all labor products, individually con- sidered. In the aggregate, of course, with reference to quantity, the production of labor-forms is vastly increased by good government. But with reference to labor values, a given quantity of product being considered, the rule is universal that the larger the market and the better the government, the lower the values of labor-forms as ex- pressed in price. The benefits of civilization with refer- ence to labor-forms are either immeasurable or are mani- fested in net salvage. The same is true with reference to all capital values. We have shown the intimate relation between labor values and capital values, and have demonstrated the fact that in normal conditions these values are affected alike by 250 BISOCIALISM— POLITICAL ECONOMY given phenomena, and that they tend to rise and fall to- gether and from the same causes. Auxiliary capital-forms are subject to the same laws of the market as labor-forms, and the rate of interest with respect to pure capital-forms is determined by its marginal users, who also tend to be the marginal producers of labor-forms. The larger the community and the better the government, the lower the current rate of interest in normal conditions. And since good government tends to diminish all labor values and capital values, there is in neither of these values any social increment whatever which may be segregated and measured so as to form a natural or economic revenue for the State. Arbitrarily such values may be taken — arbitrarily they are taken — by the State, but such socialization of labor values and capital values is without any economic warrant what- soever. If men are to be taxed in proportion to the revenue which they respectively enjoy under the protec- tion of the State, as stated in one of the famous canons of Adam Smith, we must look elsewhere than to labor- forms and capital-forms for any value or values which reflect governmental benefits. So far as labor-forms and capital-forms are concerned such benefits are manifested in an increase of immeasurable utilities, and a correspond- ing decrease of those measurable utilities which constitute labor values and capital values. The existence of a general market in a well ordered State gives to every member thereof a higher satisfaction of desire, a greater degree of enjoyment, physical and mental ; but so far as this enjoyment has to do with labor-forms and capital-forms it is largely immeasurable. There is no means OF THE SOCIALIZATION OF VALUES •^'51 by which labor values and capital values commensurate with such enjoyment and economically equivalent thereto can be measured. Indeed, in present conditions, although the canon of Adam Smith is theoretically the basis of taxa- tion, the fact is that it is the necessities of the State, and not the amount of protection which it affords to labor- forms and capital-forms, which determines what tax shall be levied upon personal property each year. Whatever may be the doctrine of the schools, men are taxed nowa- days because, upon the one hand, they are possessed of certain values, and upon the other hand, because the State needs a part of those values for revenue. No inquiry is made as to how those values were acquired, nor as to whether they have been created, increased, or diminished by the existence of the State. Diligent search is made to unearth values which are wholly devoid of social incre- ment, while other values which are distinctly the result of associated effort in industry and exchange under the pro- tection of the State, and which can not possibly be con- cealed, are passed by without special notice or considera- tion. Although the benefits of association with reference to labor-forms and capital-forms are reflected in increased utility which is not reducible to a measurable form, the reverse is true with reference to land-forms. Labor-forms which sell at the same price, and have consequently the same value, in a given market, are produced upon land- forms of varying utility. The better situated or more fertile the land-form occupied by a given producer, the more net value he realizes by selling his product at the 252 BISOCIALISM— POLITICAL ECONOMY market price. The greater the population within the ter- ritory tributary to a general market, the greater the advan- tage of occupying a superior land-form and the greater the competition for its possession. The growth of the community merely as a community and irrespective of the organization called the State brings about a constant tendency toward the increase of land values. WTiile the State itself, by maintaining a system of land tenure under which men may exclusively occupy particular land-forms and produce upon them in safety, adds still further to the values of all land-forms within its limits. Nor is this increase of land values exhibited only upon the producer's side of the market. Land-forms which are well suited to the needs of buyers and of ulti- mate consumers of labor-forms — such as desirable resi- dence lots near a general market — also bear a high value. It is not necessary for us to repeat our former illustrations, especially those given in the chapters concerning "Ground Rent and Ground Value" and "Land Tenure," in order to show that all the measurable utilities, or benefits, of civilization, as well as of government, are reflected in land values. In the last chapter we discussed the subject of franchise values, and showed that while they are essentially differ- ent from labor values and capital values they bear a close relation to land values. Franchise values have all the characteristics of land values and one more, viz., they distinctively result from the use of land-forms in busi- nesses normally non-competitive. Land values dis- tinctively result from the use of land-forms in businesses OF THE SOCIALIZATION OF VALUES 253 normally competitive. Franchise values, like land values, have an economic basis in the use of superior land-forms, and, like them, are increased with the growth of the com- munity and the security which results from the existence of government. The action of the State in granting fran- chises still further increases these values. Like land values franchise values have distinctively a social content and can not be traced to the labor-power of particular indi- viduals. Like land values they are susceptible of taxa- tion to the full extent of their present worth, and this without increasing the disutility, industrial or commercial, of any person. The present worth of land value is repre- sented by ground value. The complete socialization of both ground values and franchise values is economically possible, feasible, and desirable, for by this means all labor values and capital values which have no social con- tent may be left as the rewards of the individual skill and industry which produce and conserve them. Monopoly values have no economic basis whatever. They are purely the result of the arbitrary action of the State, and can not exist in the hands of favored persons without adding to the disutility of all other persons affected thereby either as competing sellers or as buyers. They can not be socialized, because to the extent they are taxed the burden is shifted to consumers or the monopoly itself is destroyed. They ought not to be individualized, because they are not, to any extent, the result of individual skill or industry. Although Adam Smith, in his canon of taxation, to which reference has already been made, used the word "revenue^" it is apparent that by that word he meant 254 BISOCIALISM— POUTICAL ECONOMY '^benefits/' and that what he really advocated was the taxa- tion of men in proportion to the benefits which they re- spectively enjoy under the protection of the State. Many men who are taxed presumably pursuant to this canon have no revenue at all in the sense of current income from the things taxed. Such men are the owners of vacant lots and lands, moneys in bank, or of any kind of so-called unpro- ductive property. Even with this modification, however, this canon of taxation is incorrect. Behind both the revenues and the benefits which men enjoy stand the opportunities which make these revenues and benefits possible. Primarily man is possessed of labor-power, the exertion of which will satisfy his desires according to the external opportunities which are open to him and upon which his labor-power may be exerted. Upon the economic margin natural op- portunities are equally open to all men, but above this margin this is not true. All men can not equally occupy and enjoy any superior land-form. The exclusive indi- vidual occupation and enjoyment of superior land-forms is imperative, both because of physical necessity, and in order to secure the best use of such land-forms; but such exclu- sive enjoyment in an orderly state of society can be main- tained only by law. Men can not be taxed according to all the natural oppor- tunities which they enjoy, because opportunities which they enjoy equally or in common are immeasurable. On the other hand, the advantage of one natural opportunity over another is exactly measured by their difference in value. It is possible, therefore, to tax men according to OF THE SOCIALIZATION OF VALUES 2 5 -5 the differences of their respective enjoyment of natural opportunities under the law. Taxation upon this basis is morally right and economically correct. For however much men may differ in ability either to create labor- forms, or to use and conserve them as capital-forms, it is demanded by the plainest dictates of justice and of ex- pediency that they have equal opportunities to produce and enjoy so far as external natural opportunities are con- cerned. Such equality of opportunity can only be ac- quired by the taxation of natural opportunities to the full extent of their present worth each year. On the other hand, having produced in circumstances of equality of opportunity, each man is then entitled to his whole product, free from any claim of the State upon it by way of taxation or othervdse. The true canon of taxa- tion expressed in general terms is this: Men should be taxed only in proportion to the external natural opportunities which they exclusively enjoy or con- trol under and by virtue of the laws of the State; and they should be taxed to the full extent of the present worth of such exclusive opportunities, annually computed. All natural opportunities are enjoyed and controlled through the possession or control of land-forms, either under ordinary land tenure or under the grant of fran- chises. All the measurable benefits of association and government as well as of the exclusive possession of natural opportunities are manifested in ground values and fran- chise values, and in no other way. Therefore, technically and more briefly the true canon of taxation is as follows : Men should be taxed only upon the ground values and 256 BISOCIALISM— POLITICAL ECONOMY the public utility franchise values (if any) annually pos- sessed by them, and should be taxed to the full extent thereof every year. It may be urged against this canon of taxation that if an attempt was made to socialize ground values by means of levying all taxes thereon, the land owners would shift the burden to their tenants in increased rents and so be as well off as before. But this is impossible. When the value of property distinctively the result of labor-power is taxed the tax may be passed along from owner to user; but when mere legal privilege in the control of natural opportunities is taxed this is not true. A tax on the value of houses tends to discourage the building of houses and to make them scarce and consequently dear. But a tax upon the value of bare land-forms, irrespective of improvements, does not tend to make land-forms scarce. On the contrary it tends to discourage the holding of land- forms out of use, or for any purpose other than their best use, and consequently to increase the supply of land-forms open to immediate use and occupation for industrial and residence purposes. This tends to decrease the rental values of all land-forms and to benefit not only all tenants, but all prospective buyers of land-forms. It must be remembered, also, that this new canon of taxation proposes to take all the ground value of a given land-form every year. An arbitrary increase in ground rent, if this were possible, would result in increased ground value, and this would simply increase the revenue of the State; it would not really benefit the land owner. If it were possible for land owners as a class to exact OF THE SOCIALIZATION OF VALUES 257 more ground rent from their tenants, they would do it now without waiting for the excuse of increased taxation. They now take in annual ground rentals all the return which results from the use of land-forms above the pres- ent economic margin. ISTothing can operate to increase present rentals except it lowers the present margin. This the taxation of ground values can not do. By throwing all valuable land-forms into use it will necessarily raise the economic margin and to that extent will decrease ground rents. At the same time the entire exemption of all buildings and all building materials from taxation, direct and indirect, will encourage the building of houses, stores, and factories, relieve the present scarcity, and so diminish building rents (a form of interest) as well as ground rents themselves. In such circumstances it is impossible for any landlord to raise his ground rents arbitrarily, or in any manner shift the burden of taxation upon indus- try and exchange, when ground values are socialized by means of taxation. CHAPTER V. OF THE ECONOMIC IMPERATIVE. We must make room at the Father's table for all his chil- dren. Father Edward McGlynn. We have now treated in a brief yet comprehensive man- ner all of the primary questions which pertain to Eco- nomic Science in both normal and abnormal conditions. All other questions which may arise are subsidiary to these, and may readily be classified and analyzed in the light of what has already been given. We have carried our analyses into the minutest details where details have been important, and have clearly defined every term having a distinctive economic meaning. In no case has a term been defined in one way and afterwards used in another; nor has any definition, statement, or argument been used which in any manner contradicts or even fails to support any other definition, statement or argument to be found in the text. Every phase of the subject touched upon has been considered in relation to all economic phenomena and all deductions have been pressed to their ultimate con- elusions regardless of consequences. We are now prepared to say upon the authority of Economics and with the certi- tude of science that there is a criterion by which the policy of the State toward the institution of property under any system, actual or proposed, may be tested and correctly 258 OF THE ECONOMIC IMPERATIVE 259 determined. For the statesman there is an Economic Imperative. It is this: The State must destroy all monopoly values; it must socialize all ground values and all public utility franchise values; it must individualize all labor values and capital values; and withal it must maintain an economic system which permits and protects the fullest cooperation in in- dustry and the freest competition in exchange. From an economic point of view this statement fur- nishes the State with its only reason for existence. It is the answer of Economic Science to the anarchist* In any state of society where civilized men are entirely and equally free — and the anarchist's conception is based upon the ideas of civilization and of entire equal freedom — men will produce labor-forms according to their predilections and their environment, and will exchange them for the products of others. The denial of the right of exchange is contrary to the fundamental tenet of anarchism ; such a denial is advocated only by the omnisocialist. It follows, therefore, that the anarchist is bound by all the natural laws of the market and by all the results which naturally flow from those laws. In the absence of any government at all, i. e., in the absence of any body politic, labor values, capital values, and land values will inevitably accrue. And Just as inevitably labor values and capital values will tend to fall, and land values will tend to risp. The value of land-forms then, as now, would be an un- earned increment, and would have to be disposed of in one • See Part I, page 19. '^60 BISOCIALISM— POLITICAL ECONOMY of two way?. If it were left in the hands of the fortunate individuals who occupied or owned the superior land-forms, they would thus secure a differential value created by others than themselves, and the law of equal freedom would be broken. No man can occupy or own a superior land-form to the exclusion of his fellows without infringing upon the equal freedom of all other men in the use of the earth — the storehouse of nature. And if it were sought to equalize the use of land-forms, this could be done only by some form of governmental action. In any com- munity in which it is necessar}' for different persons to occupy and use land-forms of different degrees of desira- bility, either the law of equal freedom must be broken, or gome sort of compact must be made and carried out by the community as a whole. Neither of these is consistent with anarchism, for the making and enforcement of such a com- pact necessarily involves a body politic. If equality of opportunity is to be acquired at all in any community, it must be by collective or governmental action. The fact that governmental action has been in vogue for centuries without securing equality of oppor- tunity in any state or nation gives to the anarchist a coign of vantage in argument from which it is not easy to dis- lodge him. Yet if it is within the power of government to accomplish a given result, the fact that it has neither accomplished such result nor seriously attempted to do so does not warrant the conclusion that all government should be abolished. Nor does the fact that certain acts or laws of the State sometimes or even continuously op- press and exploit those whom the State is presumed to pro- OP THE ECONOMIC IMPERATIVE 261 teet show any necessity for the abolition of the State. It is only necessary to abolish the injustice and oppression. If all land-forms were of equal desirability, there would be no land values and no distinctively economic reason for the existence of the State. In the absence of any juridical law, labor values and capital values would be dis- tributed automatically by the laws of the market, except in so far as such laws should be interfered with by rob- bery, theft, or other forcible exploitation of one man by another. To prevent such forcible exploitation the State is indeed necessary, but its necessity in that behalf is civic, not economic. The economic function of the State is to prevent the exploitation of one man by another, not by force, but by the monopolization of natural opportuni- ties; that is, it is the economic function of the State to socialize natural opportunities. The only way in which this can be done with justice to all and without arbitrarily and unequally abridging the freedom of the individual members of the State is by socializing the distinctive dif- ferential values of these opportunities. As was shown in a former chapter, this may be done by the imposition and collection of an annual tax to the amount of the full sell- ing value of all land-forms and franchises. The selling value of land-forms and franchises, it will be remem- bered, would then be less than their annual rent or in- come; they would sell for the present worth of the ground rent or income, as the case might be, computed at the current rate of interest. Therefore, the economic function of the State resolves itself into the annual socialization, by means of taxation 262 BISOCIALISM— POLITICAL ECONOMY and public expenditure, of all ground values, and of all franchise values, if public utilities are permitted to remain in private hands. Its civic function is the protection of the individual citizen in his freedom to cooperate or not, as he sees fit, in industry, and to compete or not, as he sees fit, in exchange. But whether the individual chooses to cooperate or to work out his own salvation in industry, or to compete or not to compete in exchange, the State, in the exercise of its civic function, must see to it that he interferes not with the freedom of others to cooperate and compete as they will, and that he exploits not the earnings of any man either by force or by fraud. To any existing institution or to any proposed change of economic policy, thereforo, both the student and the statesman may apply these unfailing tests: Does it tend to destroy, or to create and maintain mo- nopoly values? If to destroy them, it is to be upheld; if to create or maintain them, it is to be condemned. Does it tend to socialize all ground values and all public utility franchise values ? If so, it is to be upheld ; if not, it is to be condemned. Does it tend to individualize all labor values and capital values ? If so, it is to be upheld ; if not, it is to be con- demned. Does it tend to permit and protect the fullest coopera- tion in industry ? If so, it is to be upheld ; if not, it is to be condemned. Does it tend to pcnnit and protect the freest competition in exchange? If so, it is to be upheld; if not, it is to be condemned. OF THE ECONOMIC IMPERATIVE 2G3 What could be more simple than these tests? Yet the application of them to practical affairs is all that stands between men and economic freedom — equal freedom not only of person, but of opportunity. It is all that stands between those who produce and the whole product which distinctively is theirs. In the light of these simple tests what becomes of the insistent demand for government by experts ? These tests are so simple that the people should soon learn to govern themselves in fact as well as in name. If they would be masters of themselves and control their own destinies, let them but heed and enforce the economic imperative: The State must destroy all monopoly values; it must socialize all ground values and public utility franchise values; it must individualize all labor values and capital values; and withal it must maintain an economic system which permits and protects the fullest cooperation in in- dustry and the freest competition in exchange ! CHAPTEE VI. OF THE ESTABLISHED OEDER. Wooley Foster has a hen, Cockle button, cockle ben; She lays eggs for gentlemen — But none for Wooley Foster. Mother Goose Melodies. When Adam delved and Eve span, Who was then the gentleman? Popular couplet, fourteenth century. Judged by the economic imperative, the existing eco- nomic system is condemned upon every hand. It grants and fosters many monopolies, and thus creates and main- tains monopoly values; it fails to socialize either ground values or public utility franchise values, leaving them al- most wholly in private hands to the upbuilding of great private fortunes, economically unearned by the individual holders; it fails to individualize either labor values or capital values, since nearly all of the revenues of the State are drawn therefrom; and it neither permits nor protects full cooperation in industry, nor free competition in ex- change. In the established order the normal economic margin is unknown. Land-form after land-form is held out of use, or is not put to its best use, and by these means the rent line is forced down until it lies far below the normal margin. The marginal pairs that determine prices in all 264 OF THE ESTABLISIHED ORDER 265 branches of industry and trade are men who produce upon margins artificially depressed so that market price is not the true index, as it should be, of normal economic con- ditions. In industries not in themselves the beneficiaries of some monopoly, e. g., the business of the working farmer, the market price is forced abnormally low, both because the marginal buyer produces upon a low plane and is poor, and because the marginal seller also produces upon a low plane and can not stand out for a higher price. In industries which are the beneficiaries of one or more monopolies, simple, complex or compound, the seller is made abnormally independent of the laws of the market and can ignore the normal price; while the buyer, who is usually engaged in an industry not favored by any mo- nopoly, is helpless to stand out for the normal price, and must pay what is asked, or do without what he desires. The only thing which induces the monopolist to concede anything in the matter of price within the range of his control is the fact that he may gain more by increased sales at a decreased net value on each sale. But even then the price which he consents to take is abnormal. It is not determined by a normally marginal pair, but by the self- interest of the monopolist himself. From the arbitrary lowering of the economic margin upon the one hand and the existence of industrial and trade monopolies upon the other, it necessarily follows that all prices in present conditions are abnormal. They are too low in industries not favored by monopolies or franchises, and too high in those industries which are so favored. And yet the working farmer, who is peculiarly ■riGG BISOCIALISM— POLITICAL ECONOMY the victim of both these abnormal conditions, is depended upon by its beneficiaries as the most loyal defender of the established order. The farmer does not see that by the artificial depression of the economic margin he is forced to pay much more than the normal price when he buys a farm, and much more than the normal rent when he tills a farm as a tenant. Xor does he see that as a seller of products he has no monopoly whatever, but must compete with all others of his class in the markets of the world ; while the price of practically everything which he buys is affected by some form of differential privilege. Every wage earner, every man in any vocation what- ever who is dependent upon toil, physical or mental, for a livelihood is affected in the same manner as the working farmer by the artificial depression of the margin and the existence of monopolies. The abnormal depression of the margin forces him to pay a greatly increased price for a home, if he is fortunate enough to be able to purchase one, or to pay a greatly increased rent, if he can not or does not buy. He must either invest what to him is a small fortune in a home, or he must continually pay tribute to a landlord in ground rent. For so far as ground rent paid to a private owner in present conditions is concerned it is nothing more nor less than the payment by one man to another no better than himself of tribute for the mere privilege of living upon the earth. If the rent payer stays upon the earth at all, he must stay in some particular place at any given time. And unless he betakes himself to the desert or lives among savages, he can not find a place any- where where he can even pitch a tent without the consent OF THE ESTABLISHED ORDER 267 of a fellow creature. In a state of savagery he might meet a fellowman, armed with a club, who would dispute with him the right to occupy a particular land-form unless he gave up half his average income from the chase for the privilege. In a state of civilization he meets a fellow- man, armed with a statute, who makes of him a similar demand with regard to his income every year, and he is obliged to succumb. Verily, our boasted civilization in some respects is simply a refinement of savagery. When the wage earner buys either the necessaries or the luxuries of life he usually pays tribute to a monopolist. In this respect he is no better off than the working farmer. If of nothing else, he, like the farmer, is the victim of a so-called protective tariff which, fixes the price of all pro- tected articles above the price which, in normal conditions, would be fixed by the marginal pair. When the wage earner seeks employment he must compete in price with men who are willing to accept in the service of others just what they could earn by self-employment upon an abnormally depressed and unproductive margin. The necessities of the marginal laborer are of greater importance in the fixing of wages than is the parsimony of the employer. For however much an employer may harden his heart and attempt to oppress his employes, it is only the necessities of the latter, or of some other workmen below them who can be induced to take their places, that give to the employer an opportunity to manifest and sat- isfy his selfish greed. It is this fact which leads the mem- bers of a labor union not only to antagonize every interest of an employer while they are upon a strike, but to look •268 BISOCIALISM— POLITICAL ECONOMY upon one of their own class who refuses to strike or who takes the place of a striker — a "scab" workingman — with infinite scorn and contempt, and oftentimes with unre- lenting hate. If wage earners as a class are permanently to better their condition, they must bring about the restoration of the normal economic margin upon the one hand, and the destruction of monopoly upon the other. By united action they can do this, and the more readily, if the working farmers and all other men engaged in busi- ness enterprises not specially favored by the State should join them. Every man engaged in a business enterprise, great or small, which is not specially favored by some form of dif- ferential privilege is injuriously affected as a business man both by the abnormal depression of the economic mar- gin and by the existence of differential privileges in the hands of others. If a business man is so fortunate as to own the land-forms upon which his business is conducted, he is compelled in purchasing them to pay much more than their normal price, and to keep invested in them a large sum for which there is no current return, and which detracts by just so much from his investment in the busi- ness proper. If he is a tenant, his ground rent is all that he can bear and constantly tends to exhaust the earnings of his business. On the other hand, a monopoly in the hands of a competitor means a relative loss to him and may encompass his ruin; while as a consumer he is sub- jected to all the evils which befall the farmer and the artisan from the existence of different forms of monopoly in the hands of those from whom he must buv. All of the OF THE ESTABLISHED ORDER 369 laws of the normal market are based upon the existence of a normal economic margin and of a normal marginal pair. The established order makes the existence of both of these impossible, and nothing short of the complete alteration of the status quo in so far as it interferes with these prime requisites of economic conditions can cure the evils of which the masses complain, but which they do not fully understand. Standard Political Economy, as the exponent of the es- tablished order, originally held that the value of anything is determined by the cost of its production. It requires only a casual view of this theory to disclose the fact that it is not universally true. Many things are put upon the market and sold at less than the cost of production. To make the theory cover numerous exceptions of this kind it was next held that it is not the cost of the original pro- duction of any thing which determines its value, but the cost of its reproduction (or rather, the cost of its duplica- tion) at the present time. But neither the cost-of-produc- tion theory nor the cost-of-reproduction theory of value applies to land values, since land-forms are neither pro- duced nor reproduced by the hand of man. There is another aspect, moreover, in which the theories of standard political economists concerning value fail to conform to the most obvious facts of the market. If the value of an article is determined by either the cost of its production or the cost of present reproduction, it must necessarily follow that the value of a composite article is at least equal to the sum of the costs of its various com- ponent parts. But this is not always true. It is not the 270 BISOCIALISM— POLITICAL ECONOMY cost, as exhibited in market price, of the labor and mate- rials which enter into a finished product which determines the price at which it may be sold. This price is fixed by those persons who constitute the marginal pair with refer- ence to this particular article, and especially by the mar- ginal buyer, who may neither know nor care any thing whatever about the cost of the constituent parts. On the contrary, it is the price of the finished article as deter- mined by the marginal pair which determines the prices at which the component parts must be sold in order to leave a net value to the producer of the completed article, and so to assure its continued production. For unless the necessary parts can be purchased at certain prices the manufacture of the finished article must cease. Suppose, now, that in the case of a composite article for which there is a sufficient demand to justify its continued production in normal conditions, there falls into the hands of one person, firm or corporation, a monopoly as to the manufacture or sale of one of the parts or processes neces- sary to produce such article. Then the possessor of such a monopoly can arbitrarily determine whether or not the composite article shall further be produced at all. He can despoil the hitherto successful producer to the last cent which can be spared not only of the net value from that part of the product upon which the monopoly is held, but from the entire business, since the monopolist may at any time stop the supply of a necessary factor. In case the monopolist should resort to this extremity, he not only would ruin the business of the manufacturer of this par- ticular article, but he would deprive the sellers of all the OF THE ESTABLISHED ORDER 271 other constituent parts of such article of a customer upon whom, in normal conditions, they could safely rely. Thus the evil effects of monopoly do not fall upon consumers alone, but upon producers also, and such effects tend to spread in an ever widening circle throughout the entire field of industry and exchange. It must be remembered that the power of the monopolist over production is not confined to his relations with one manufacturer but with many. Each producer whom he despoils of normal net values is unable by just so much to extend his business, and so to extend the market for the labor-power and products of others. One evil effect propa- gates another until, as in present conditions, the power of business success or failure is held by one man over many men just as certainly and with nearly as disastrous results as the power of life and death was held by the nobility of ancient times over their chattel slaves. The evil effects of the established order we see and feel day by day. The causes of such conditions are obscured by the teachings of standard Political Economy, based as it is upon a par- tially false and wholly inadequate theory of value. The established order recognizes, in a limited way, the beneficence of the market; but not sufficiently to make the market absolutely free. It recognizes, in a limited way, the great truth of Economics that all men seek to satisfy their desires with the least exertion; but at the same time it puts it in the power of some men to interfere with the exertion by other men of labor-power along the lines of least resistance; it raises its revenues in such manner as seriously and unnecessarily to interfere with the laws of 273 BISOCIALISM— POLITICAL ECONOMY the normal market ; and it allows some men to appropriate, own and control all of the desirable land-forms which other men must use in order to satisfy their desires at all. The established order fails to realize the beneficence of the market in bringing about the socialization of utility. The social gain resulting from the fact that in a general market, open to free competition, all consumers are en- abled to satisfy their desires at the price fixed by the mar- ginal pair is ignored by standard Political Economy. In the discussions of this cult, net salvage is also practically ignored. Net value is the one desideratum — therefore, get net value. This is its teaching. It does not dis- criminate as to the origin of values. The personal appro- priation of a value created by labor-power has no higher sanction in its teachings than the personal appropriation of a value which attaches to a vacant land-form merely because of the growth and productive activity of the com- munity as a whole and entirely irrespective of any effort or expenditure, past or present, of the man who claims such value as his own. In the field of finance, the practices of the established order are not in harmony with the demands of the eco- nomic imperative. In present conditions we have a stand- ard of value which recognizes and reflects but one of the three elemental units of disutility- The disutilities of space and time are practically ignored. Accompanying this defective standard of value we have a medium of exchange based upon a barter metal instead of upon gov- ernmental credit-forms. The paper money issued by the national government consists of current debit-forms re- OP THE ESTABLISHED ORDER 273 deemable in the gold of barbaric barter instead of cur- rent credit-forms redeemable in the pa}Tiient of the taxes of civilized society. In the matter of taxation the established order violates all the requirements not only of the economic imperative, but also of the true canon of taxation. In present con- ditions taxes are levied in every conceivable way upon all conceivable kinds of property and property values, and even upon men themselves. The capitation, or poll, tax is an arbitrary tax upon men at so much a head, rich or poor, strong or feeble, young or old, after reaching man's estate. Such a tax is always unpopular and in many places has passed from use. The revenue of our national government is largely de- rived from tariff duties levied upon imports. Such a sys- tem of revenue creates monopoly values ; it interferes with the beneficent functions of the normally marginal pairs; it wrongfully permits the individualization of the natural revenues of the State, viz., ground values and the values of public utilities; it wrongfully socializes those values which should be wholly left to individuals, viz., labor values and capital values, for all tariffs are levied upon these alone ; it hampers the majority of those engaged in industry and hinders free competition in exchange. The tariff system as a means of raising revenue does not conform to any recognized canon of taxation. It does not purport to tax men according to their ability, whether this be ability to produce or ability to pay; it does not tax men in proportion to the revenues respectively enjoyed by them under the protection of the State, as Adam Smith 274: BISOCIALJSM— POLITICAL ECONOMY in his canon said, nor according to the benefits respectively enjoyed by them under the protection of the State, as he doubtless meant; and it goes without saying that the tariff system is contrary to every element of the true canon of taxation as we have stated it heretofore. It is doubtful if a tariff system could long survive in any enlightened country were it not for the fact that it is re- inforced by the doctrine of so-called protection to home industry. This doctrine, like the tariff system which it supports, has no economic basis whatever. Like the tariff, it violates every condition of the economic imperative, and conforms to no canon of taxation. It is simply an appeal to selfishness. To the few its selfish appeal is true ; to the many it is false. A protective tariff has its beneficiaries; it is a differential privilege by virtue of which some men acquire and retain differential net values through the shut- ting out, in their particular businesses, of normal compe- tition. These men are truly protected, if a differential privilege may be called protection. The laboring man, it is said, is protected from the pau- per labor of Europe. Yet wages in America are constantly tending to the European standard. If the American la- borer would successfully combat this tendency and im- prove his condition, let him seek protection from laws which give differential privileges to some of his fellow countrymen, and not allow himself to be deluded with the idea that he needs protection from other laborers much worse off than himself and 3,000 miles away. After all it is better to compete with the products of foreign laborers and allow the laborers themselves to remain in Europe, OF THE ESTABLISHED ORDER 275 than to force them to come to America and, with their low standard of living, to compete with the American laborer upon his own ground. Selfishness may easily over- reach itself. The selfishness involved in the protective system has also a national aspect. It has long been thought that in order for one nation to become rich other nations must become poor. This sentiment has often been expressed, and is often followed, but never with success. For twenty years Cato, the censor, after speaking to the Roman senate upon any subject, did not resume his seat without saying, "It is my opinion, fathers, that Carthage must be destroyed !" And in the destruction of Carthage as a competitor began the economic downfall of Eome. Free from commercial competition she no longer depended upon the laws of industry and trade for her sustenance, but became a plunderer of nations, and so was lost to herself and to the world. As with Rome, so with all other nations which seek to prosper at the expense of competing nations by the elimination either of the nations themselves or of com- petition with them to their detriment. It is an inexorable law of the physical world that action and reaction are equal and opposite in direction, and the same is true in the world of industry and exchange. Any limitation placed by one nation upon trade to the detriment of another must necessarily react upon itself to the same degree. In our study of the market we found that in a fair exchange both buyer and seller may gain, and that in normal con- ditions a gain either in net salvage or in net value inures 276 BISOCIALISM— POLITICAL ECONOMY to them both. In international trade the same principle applies, and all trade restrictions are as much to be de- plored between nations as between individuals. The doc- trines of the standard economists concerning favorable and unfavorable balances between nations are economically without foundation. A nation which imports more than it exports is not injured by its foreign trade, but is bene- fited by it. Any attempt upon its part to limit its im- portations by tariff laws or otherwise will certainly react upon itself. In building a nation the economic law of gravity can not be violated or ignored any more than can the law of gravity of the physical world in building a tower. The doctrines of so-called favorable and unfavor- able balances of trade are based upon the erroneous theory of the omnisoeialists that in every exchange what one party gains another must necessarily lose. In the last analysis there are but two classes of things which may be taxed : labor-power and its products (includ- ing capital-forms) upon the one hand, and land-forms with their natural opportunities, upon the other. Under a system of private ownership of property such as the established order maintains, a tax upon the former class of things is a direct tax upon labor-power ; upon the latter class, it is a tax upon privilege. In present conditions, nearly all taxes fall directly or indirectly upon labor- power. The established order is based ostensibly upon the com- petitive system, and in former times competition had rela- tively free play. Men then expended their energies in OF THE ESTABLISHED ORDER 377 cheapening production so as to undersell their competitors, and in the play and interplay of economic forces the gen- eral public was provided with satisforms substantially at their marginal cost. There was a large socialization of utility. But in present conditions, the effort is not so much to undersell the competitor as to eliminate him and his wares from the market. "Wliat is sought is not simply a cheaper process of production, but a differential privi- lege which, in spite of the cheaper process, will allow the maintenance of the former price and even an increase of price. Those who are able to acquire differential privi- leges in the form of monopolies or franchises, or both, are freed from competition, or at least from its full force, while those who have no such privileges are driven to a more desperate strife among themselves, the result being in many cases literally a life and death struggle. But let it be borne in mind that such conditions are not the fruits of competition, but of the lack of competition engendered by differential privileges granted to some persons by the State and enjoyed by them at the expense of their busi- ness competitors and of the general public, under the sanc- tion of the law. From an economic point of view the established order is an incongruous mixture. Its laws purposely interfere with the natural laws of the market ; with reference to the institution of property, its govemmentalism is so in- equitable that it incites anarchy; while its individualism- is so indefinite and its socialism so sporadic that its law- makers are without economic guidance, and its statesmen 278 BISOCIALISM— POLITICAL ECONOMY without economic conceptions beyond the maintenance of the status quo. The Established Order is that incongruous admixture of indefinite individualism and sporadic socialism which seeks substantially to maintain the status quo with refer- ence to the institution of property. CHAPTER VII. OF OMNISOCIALISM. If false, let them be rejected; but no one has a right to entertain a prejudice against them merely because they are out of the common road. David Hume. Omnisocialism contemplates a complete readjustment of society, with a more just and equitable distribution not only of property, but also of the tasks by which property is produced. It condemns the established order in un- measured terms, and sets itself especially against what it calls the capitalistic system of production. It condemns competition without reserve, and avers that commercialism is without a redeeming feature. It alleges that the pri- vate ownership of the means of production and distribu- tion, with its necessary concomitant, the wage system, is but a means for the exploitation of the labor of the many for the benefit of a favored few. It proposes to abolish this exploitation by destroying private capitalism, private commercialism, and the private employment of one man by another. It proposes to abolish the payment of wages, the payment of rent and the payment of interest; the making of private profit ; the buying and selling of prop- erty as between individuals, and the use of money as a medium of private exchange. Under omnisocialism all productive land-forms and all capital-forms would belong to the State; only satisforms and non-productive land- 279 280 BISOCIALISM— POLITICAL ECONOMY forms could become private property, and these only by purchase from the State. The advocates of omnisocialism are adepts in pointing out the weaknesses and inconsistencies of the established order; they are quick to condemn its abuses, and are sin- cere in their attempts to correct them. Their ideals are very high. In their generalizations regarding the system which they would substitute for the established order they are reasonably clear and are substantially of one accord. In the elaboration of a practical working plan, however, there is much confusion among them, and it is difficult to find any two of these advocates who agree upon any consider- able number of details. In abolishing the open market they destroy the natural basis of all economic phenomena and put their proposed system at once upon an artificial footing. There is no economic reason why men, in normal conditions, should not exchange the products of their labor, and heretofore the commercial exchanges of every nation have furnished a fair index to its civilization; and, so fax as they have been unhampered, commercial exchanges have furnished an automatic system for the distribution of labor products. But under omnisocialism a means of dis- tribution must be found other than through the compe- tition of the market. According to writers of repute, if omnisocialism were substituted for the established order, all workers would be employed in the putriic service and woula be paid in lal. certificates, or labor-time cnecks, showing t>ie number oi hours, days, weeks or months of service performed. In order to prevent "soldiering," a worker's checks would OF OMNISOCIALISM 281 not be paid to him on the basis of the time actually put in by him in performing a given task or in achieving a given result, but on the basis of the time necessarily spent by the average worker in that behalf. This necessary average time is called the time socially necessary to achieve the given result, and the checks proposed to be given in pay- ment are said to represent social labor-time. These labor- time checks would be legal tender at the public stores for labor-forms of every kind. The price of a given labor- form would be marked upon it at the store according to the social labor-time requisite to its production. The pur- chaser would deliver to the public store clerk such part of his labor-time checks as were equivalent to the labor-time represented by the price of the labor-form purchased. In this way labor-forms would sell, it is said, at the labor cost of their production plus a certain fixed percentage for the payment of a proportional share of necessary public ex- penditures. In this method all individual competition and all private profits would be eliminated. Instead of maintaining an economic system which permits and pro- tects full and voluntary cooperation in industry and free and voluntary competition in exchange, omnisocialism would prevent, directly or indirectly, the voluntary co- operation of individuals in private industry, and would prevent any and all competition in exchange. In the program of omnisocialism there is no recognition of the economic margin; there is no possibility of a mar- ginal pair. Value as we have defined it, and as we now commonly use the term, would be unknown. Price would pxiippr^. to represent only the cost of production plus a 282 BISOCIALISM— POLITICAL ECONOMY proportional share of the cost of maintaining the State; in fact, it would represent only the estimate of some per- son or committee as to the cost of production, for in the absence of a market which automatically measures disutili- ties, any precise or Just measurement of such cost is im- possible. The working plan of onmisocialism makes no positive distinction between the bounties of nature and the prod- ucts of labor. It utterly fails to recognize the peculiar significance of the land-form in the economy of the State. Land-forms are not produced by labor-power, and so can have no labor cost. They can not be sold at the cost of production nor rented upon that basis. Xor can all men occupy land-forms of equal desirability under socialism any more than under the established order. Onmisocial- ism takes no account of land values. It ignores ground rent and affords no measurement of ground value. The parceling out of land-forms is left to take care of itself under some form of arbitrary selection and apportionment to be made by those in authority. Inasmuch as the State would be the sole proprietor in all forms of industry and exchange and the sole owner of all the means of production, including land-forms put to pro- ductive uses, the question of the relative desirability of such land-forms could be settled without reference to any price put upon them. No private person would want to buy a productive land-form, and he could not do so, if he would. But with land-forms used for residence pur- poses it would be different. Even though all houses might be equally well constructed and might in every way be OF OMNISOCIALISM 283 equally desirable in themselves, they could not be equally well situated. All houses could not front upon the public parks, nor could all the streets be boulevards devoted to pleasure riding. Either the more desirable locations would be appropriated by those in power, or they would be par- celed out in some arbitrary manner, or they would be rented under a competitive system. It is one of the car- dinal doctrines of omnisocialism, however, that rent shall be abolished. Some writers are willing to admit that enough rent might be accepted by the State to keep the respective premises in repair. But if competition should arise for a given property in which a hundred persons should be willing to pay such a rent, how should the mat- ter be settled among them, if their bids all exceeded the sum necessary for repairs? Again, if the State should accept rent in any case, it could only be paid in labor, labor-forms or labor-time checks. As the State would already be entitled to the labor of every man and to all labor-forms when first pro- duced, the collection of any amount of rent in labor or labor-forms would be but the State receiving its own. While if it were attempted to collect rent in the form of labor-time checks the State would be compelled in some way to fix the rental price of land-forms in terms of labor- time checks, although land-forms can not be produced by labor-power. And after the State had received these time checks what could it do with them ? It would have no need of them for revenue, since all labor-forms when first pro- duced would be its property, and could be devoted to pub- lic uses so far as necessary instead of being offered for sale. 284 BISOCIALISM— POLITICAL ECONOMY It may be said that matters of this kind might be equal- ized by putting the poorest houses upon the best land- forms and vice versa, but this is so contrary to human desire and to the fitness of things that it would scarcely be adopted. Judged by the economic imperative, omnisocialism is entirely without warrant. Under this system the State, instead of granting monopolies to certain of its citizens, would itself become a giant monopolist and, as such, would have absolute control over all the means of life. The mod- icum of private ownershij) allowed, being limited wholly to satisforms and non-productive land-forms, would be a mockery to a people nominally free. There would be no possibility of self-employment. The fact that the oppor- tunities for self-employment are fast disappearing in the established order is one of the greatest factors working toward the downfall of the present economic regime; and yet omnisocialism, with its absolute denial of self-employ- ment in production is advocated as the remedy. The es- tablished order is doomed and will be superseded by a form of systemic socialism — there is no other recourse except anarchy — but if men are to be economically free, the estab- lished order must necessarily be superseded by socialism with an open door. The individual must be left free to employ himself and to do as he will with the fruits of his labor, or he will become a more abject slave under social- ism than he is under the present order. It will avail him nothing to change one master for another, even though the latter should be the State, and even though he should be nominally free. The greatest despotism may exist under OF OMNISOCIALISM 285 a republican form of government^, and the most abject slavery may exist under socialism in the absence of an open door — in the absence of the right and the opportunity of self-employment and of exchange. American socialism of the unlimited type is largely based upon the teachings of Karl Marx. His arraignment of the established order and his advocacy of socialism as a remedy both follow from a critical study of the English factory system of the middle of the last century. In 1836 IST. W. Senior^ a professor of Political Economy at Oxford, gave to the world that remarkable defense of the estab- lished order contained in his theory of the *^last hour." The average working day in the cotton factories at Man- chester at that time was eleven and a half hours, this being the maximum then allowed by law. Senior attempted to demonstrate that all the net profit of the manufacturer was obtained from the work performed in the last hour of the day, all of the work of the other hours going to pay wages and other current expenses, to reimburse the original outlay, and to recoup losses from deterioration. He ar- gued, therefore, if the agitation for a shorter working day then rife in England should succeed and the working day be reduced to ten hours, as was then proposed, not only the net profit, but even the gross profit of manufactur- ing would be lost and all manufacturing must necessarily cease. We need not examine the so-called analysis by which he reached this startling conclusion inasmuch as the reduction of the hours of labor to ten hours did not produce a cessation of all manufacturing as he predicted ; nor has the eight-hours day now in vogue in many lines of 286 BISOCIALISM— POUTICAL ECONOMY work produced any such effect. This doctrine of the 'last hour" is mentioned because it gave direction to the inquiry of Karl Marx thirty years later. Marx' system of socialism is based upon the claim made by him that of the labor performed each day by an em- ploye, a certain amount, which may be indicated by the line A B, is necessary to provide the la- borer with a bare living and to sustain those im- mediately dependent upon him for support. The re- mainder of the day's labor, which may be indicated by continuing the line aforesaid from B to C, thus, A B C, Marx calls the surplus product, or surplus value, of the day's labor. This surplus product he claims should, in the nature of things, go to the laborer, and that he alone should enjoy the whole prod- uct. He further maintains that in the early stage of manufacture when things were really "made by hand," or by simple tools in the hands of workers who produced on their own account and owned their own tools, the entire product did belong to the actual producer, and was actu- ally enjoyed by him. In those days every person em- ployed in industry or exchange, after serving such an apprenticeship as would fit him for the business, might !^et up for himself and in his turn might become an em- ployer of apprentices. Manufacture was then carried on in the home or in a small shop where master and man worked side by side at the same tasks and on a plane of substantial equality. The deserving apprentice might well hope to marry the daughter of his employer and ultimately to succeed to the business which he had helped to create. OP OMNISOCIALISM 287 Such were the days before the introduction of the factory system. With the advent and development of this system, how- ever, all was changed. The factory superseded the home work and eliminated the small shop. The machine, in- tricate and expensive, took the place of the simple and inexpensive tool. The employer was also the owner of the machinery', and instead of working with his men, set a foreman over them and secluded himself in a counting room or an office. He no longer lived among his laborers nor sheltered his apprentices beneath his roof. Between the worthy apprentice and the daughter of the employer a great gulf became fixed so that he might not, with propriety, even speak to her. Although the surplus prod- uct became more and more enlarged, only that part indi- cated by the line A B was received and en- joyed by the man whose labor-power was necessary to bring the entire product into being. It is no longer necessary to use the past tense in de- scribing conditions which have grown up under the fac- tory system. To-day laboring men, as a class, in all voca- tions receive and enjoy but a bare living according to the accepted standards of life in their respective communities. In every country with increase of population and the con- centration of the means of life in the hands of a few, the standard of living has been or is being forced down to a point which will barely sustain life and enough physical strength to enable the laborers, as a class, to continue to exist. The line A B tends everywhere to be- come shorter and shorter, while the line B C 288 BISOCIALISM— POLITICAL ECONOMY in the entire line A B C tends all the while to become, relatively at least, longer and longer. That the term relatively is used advisedly in this con- nection may be seen from the following illustration : Sup- pose that the entire line A C represents the full product of a day's labor at any given time and place; and suppose further that the length of the working day at such time is twelve hours, and that six hours' labor each day is necessary to sustain the laborer and his dependents according to the ac- cepted standard, and that he receives one-half of the prod- uct as his wages. Suppose now that in the course of five years from such date the competition of laborers from other lands where a lower standard of living has long existed has forced down the wages and, con- sequently, the standard, until both are represented by the product of five hours' labor. Then the line which at first was A B C is changed to A B 'C, the part of the product going to laborer and capitalist, respectively, changing from the ratio of 6 to 6 to the ratio of 5 to 7. And suppose, further, that by combination, as members of a labor union, the workers have compelled the granting of a ten-hours day at the expiration of the five years. The net result is that although the laborers are no worse off relatively, both laborer and employer receiving the product of five hours' labor, yet the laborer now lives upon five-sixths of his former compensation; and if wages were forced down so that the ratio for a twelve-hours day was 4 to 8, the reduc- OF OMNISOCIALISM 289 ti'on of the number of working hours from twelve to ten would leave the new ratio 4 to 6 which would leave the worker not only absolutely, but relatively worse off than at first when the ratio was G to 6. The teaching of Karl Marx, therefore, is to the effect that the laborer is exploited by the capitalist of all of the product of his labor except a bare living according to the accepted standard of his country and generation; that by simply shortening the hours of labor no permanent bene- fit will result to the laborers ; and that since, in his view, the laborer is entitled to all that he produces instead of but a part of it, the only complete remedy is to stop the possi- bility of the exploitation by one man of the labor-power of another. This, he contends, can be done only by the complete destruction of the present commercial, or com- petitive system, and by the substitution for it of a com- monwealth based entirely upon cooperative effort. Under the established order, say Marx and his followers, those who produce the foodstuffs of the world eat but little of it; those who build mansions live in hovels; those who make fine garments wear the cheapest clothing; the families of those who mine coal are scarcely able to buy it, even at cost at the mouth of the mine ; and socialists have the sup- port of one of the world's great captains of industry in saying that, generally speaking, the man who works never gets rich. The arraignment of the established order by the social- ists is terrible, and terrible 'tis, 'tis mainly true. But the remedy ! Does not the remedy proposed by the omni- socialist give a counter-shock that should make us pause? 290 BISOCIALISM— POLITICAL ECONOMY Granted that the evils of the established order are great ' — as great as they are protrayed; granted further that these evils are fundamental, and that fundamental changes are necessary to their removal ; granting all this and more, is it necessary that society shall completely abandon com- merce which has carried such civilization as we have at- tained to the uttermost parts of the earth ; that it shall entirely take away from the individual the limited freedom which he now enjoys to produce as he will and to exchange where he may; that it shall become the sole dispenser of all the means of life, the ultimate determiner of every man's employment, and the absolute controller of the destiny of every human being? Admitting that coopera- tion and not destructive competition should form the basis of social life, is it not true that under omnisocialism the form which the cooperation of the individual would take would be compulsory from the cradle to the grave? And is it not true, also, that cooperation, the form and extent of which depends ultimately upon the will of an- other, or even upon the will of the majority, is but slavery in disguise? Were it not for that phase of the market demonstrated in the foregoing pages by virtue of which, in normal conditions, an exchange of products results in net salvage to the buyer as well as in net value to the seller, the whole- sale condemnation by the omnisocialist of competition would be justified. We have seen that in every economic exchange the utility of the thing sold and the utility of the price thereof are both measured at the point of ex- change. The utility lying between the point of positive OF OMNISOCIALISM 291 utility and the point of exchange being the gain of the seller, and that lying between the point of exchange and the point of alternative cost being the saving of the buyer. This gain upon the one hand and saving upon the other are measured by the same unit, and are inter- convertible in terms of money. In an exchange between men having equal opportunities to produce and equal free- dom to trade there can be no economic exploitation. And in circumstances where a laborer has an unrestricted op- portunity of self-emplo}Tiient upon a normal economic margin, no employer can despoil him 'of any part of the product which is distinctively his. This is the answer of Economic Science to the omniso- cialist. His perception of present day evils is unexcelled ; his purpose is beyond reproach ; his ideals are above criti- cism; but for want of sufficient analysis 'of the laws of the market he confuses monopoly with capital, and differ- ential privilege with competition. He consequently mis- takes the remedy. Bisocialism, on the other hand, fur- nishes a remedy which, by destroying monopoly, and socializing all those things which under private ownership and control give rise to differential privileges, affords equality of opportunity, the retention of the market, and the extension, not the destruction, of individual freedom. ISTotwithstanding the defects in both the theory and the working plan of omnisocialism, its ideals are so high that any propagation of its doctrines, or any attempt to put them into operation, must result in good. The working plan which it would necessarily evolve would doubtless be a marked improvement over that incongruous cmbodi- 292 BISOCIALISM— POLITICAL ECONOMY ir.ent of truth and error maintained by the established order. And best of all, the recognition of its defects as they would inevitably appear could not turn the tide of human progress back to the present system, but would necessarily lead to the substitution of the less drastic changes and more efficient working plan proposed by bisocialism. From the discussions of this chapter we may formulate the following definition of omnisocialism : Omnisocialism is that form of systemic socialism which seeks completely to overthrow the existing systems of in- duEjtry and exchange, to establish and maintain in their stead a cooperative system of production under exclusive State ownership, management and control, and, so far as may be necessary to that end, to socialize all forms of property. CHAPTER VIII. OF BISOCIALISM. Common friend to you and me, Nature's gifts to all are free. Robert Burns. The man who monopolizes land monopolizes the concen- trated values of common progress. If these land values were taken by the public and expended for the common benefit, all progress, past and present, would inure to the benefit of the whole people. John Z. White. Judged by the economic imperative, bisocialism is the true remedy for all the economic evils of the established order. It will destroy all monopoly values; socialize all ground values and all public utility franchise values; in- dividualize all labor values and all capital values, and it will create and maintain an economic system which will permit the fullest cooperation in industry and the freest competition in exchange. It must be remembered that the term hisocialism does not imply the creation and maintenance of a little social- ism here and there throughout our present economic sys- tem, such as the postal system and life-saving service. Such isolated and unrelated socialistic features are instances of what we have called sporadic socialism. Under biso- cialism such features will be retained and extended, but they will become material parts of a system wholly social- igtic as far as it goes. The system itself will be limited 293 294 BISOCIALISM—POLITICAL ECONOMY by clear linos of demarcation, but within the scope of the sj^stem there will be no bounds placed upon the socialistic features. Those things which are socialized at all will be completely socialized, while those which are left to individual control Anil be so completely individualized that they will not be called upon even to contribute to the revenues of the State. Bisocialism is not an arbitrary and experimental scheme for the solution of industrial problems. Its working plan is not without an economic basis. It recognizes both cooperation and competition as beneficent agents of progress, but it makes opportunities for the former com- plete ; for the latter, free. It does not destroy the market, nor forbid exchange; on the other hand, it restores the normal market and completely unshackles trade. When all monopoly values have been destroyed and all ground values and public utility franchise values have been completely socialized, industry will not be forced to exert itself below the normal economic margin. The marginal return to common labor-power will then become the true and unerring standard for the measurement of all labor values. The marginal pair will become the de- terminers of all market values, and the common laborer upon a marginal land-form will become the unconscious but certain arbiter of all wage questions. Let us assume that two men of equal skill and ability and without any capital-forms go out together on a cer- tain day and work the same number of hours at the same task upon equally fertile and well situated land-forms. At nightfall their day's products will be substantially equal OF BISOCIALISM 295 and, if taken into the market together, they will have substantially equal values. Let us assume that on the second day one of these men exercises greater skill or ability than the other, thus ex- erting superior labor-power, all other conditions remain- ing the same. At the close of this day his product will exceed that of the other man in quantity, and in the market will be of correspondingly greater value. This in- ( Teased value resulting from superior labor-power we have called a labor differential. Omnisocialism would turn both products into the public storehouse, and reward both laborers with time checks for the same number of hours. The only additional recompense open to the superior la- 1)orer would be possible promotion to a more desirable occupation. Bisocialism would give this labor differential, without reduction by taxation or otherwise, to the man whose superior skill or ability caused it to be; and it would leave him free to bring about his own promotion to a more desirable occupation in competition, and upon equal terms, with his fellows. Again, let us assume that on the third day tlie same man, in addition to the exertion of superior labor-power, lias converted his excess of the day before into a capital- form which he now- uses to overcome the disutility of time. .\t the close of the day his product contains two elements I if differential value. He has now a capital differential as well as a labor differential. Omnisocialism and biso- cialism would treat this capital differential in the same way as they would treat the labor differential, respectively. 296 BISOCIALISM— POLITICAL ECONOMY the one turning it into the common store, and the other leaving it without diminution to the man who created it. The established order purports to treat these differen- tials as individual property, but its treatment differs from that proposed by bisocialism in two respects. The estab- lished order takes from the possessor part of his labor dif- ferential and part of his capital differential in the form of taxes, thus, in effect, fining him for his industry in the one case and his frugality in the other. And on the other hand, it would, in certain cases, grant him a monop- oly in the use of his capital-form, as by a patent, and thus enable him to lay tribute upon his fellow-worker. Biso- Cialism would do neither of these things. Let us further assume that on the fourth day the same man exerts his superior labor-power, assisted by pure cap- ital, upon a superior land-form, the other man having made no changes whatever. The one now has three dif- ferential values of product — a labor differential, a capital differential, and a land differential. The established order gives him the land differential subject to a slight diminu- tion in taxation. Omnisocialism would turn the entire product itself into the public storehouse and issue time checks to both men equally. Bisocialism would turn that part of the differential value of the product which re- sults from the use of the superior land-form into the public treasury to be expended for the common good ; thus treat- ing the superiority of the land-form as an advantage of external nature which all can not occupy, but the dis- tinctive values of which all should and may thus enjoy in common. OF BISOCIALISM 297 Let us now assume that on the fifth day the progressive man in question has acquired a franchise from a munici- pality by virtue of which he uses a public street for pri- vate gain and in a manner not open to any other person. To his net values he has now added a franchise differen- tial. This the established order enables him to retain practically without taxation. In both forms of systemic socialism such business enterprises would be conducted by the municipality, and public utility franchises in private hands would be unknown; or, if private ownership of public utilities should be allowed under bisocialism, the differential values of their franchises would be wholly socialized in taxation. Finally, let us assume that on the sixth day our man of progress acquires and uses a monopoly upon some in- strument or process of production and in this way secures an artificial advantage over his fellow-worker. He now has a monopoly differential of product which the estab- lished order enables him to retain. Under either form of systemic socialism no such differential could be acquired. The five differentials which we have enumerated are the only differentials which it is possible to create or acquire under any economic system whatever. In the established order all these differentials exist and all are left to private ownership subject to the same restrictions in each case as to liability to taxation. The matter of their origin is now wholly ignored by the State in its sys- tem of raising revenue. In omnisocialism the last two — franchise and monopoly differentials — would not arise, and all the others would be absorbed by the State without 298 BISOCIALISM— POLITICAL ECONOMY distinction as to their origin. In bisocialism one class of these differentials — all monopoly diiTerentials — would be abolished, two classes — land differentials and franchise differentials — would be socialized, and the remaining two — labor differentials and capital differentials — would be left to their individual creators without any diminution whatsoever. These five differentials may be examined from another point of view. Labor differentials and capital differentials may be created and acquired under and by virtue of the simple laws of industry and exchange, without the neces- sity for any law or action of the State whatever. Among free men labor has ever been recognized as giving a nat- ural title to its products, and capital is nothing but labor- forms put to a particular use. On the other hand, labor can not give a natural title to a land-form which it did not create ; nor to a franchise nor to a monopoly, for these are creations of the State. In all civilized countries land-forms are held under a tenure established and up- held by law, the source of all land titles being the sov- ereign power of the State. The same is true of all titles based upon franchises and monopolies. Such titles are purely legal as distinguished from the titles of labor- forms and capital-forms which have a purely economic basis and exist independently of the existence or action of a particular government or State. Bisocialism would in- dividualize all purely economic differentials of product, and would either socialize or destroy all purely legal dif- ferentials. By retaining the competitive system as exhibited in OP BISOCIALISM 299 an open and wholly unrestricted market, bisocialism would give to the people the utmost advantage of that feature of the market which results in the socialization of utility. The importance of this feature as a social and economic factor can hardly be overestimated. By it tlie marginal seller of every trade-form must cater to the demand of the marginal buyer. The result is that among producers there is induced a constant effort to acquire their products with the least possible disvalue, and that among consumers all are enabled to buy at prices fixed by those buyers who are most indifferent or least capable of all. In this way society as a whole is enabled to satisfy its desires and the desires of its members with the least exertion. In the absence of all monopolies and with all ground values and all franchise values socialized, there would be nothing in the competitive system of industry and ex- change incompatible with the highest good of any mem- ber of society. It is true, as the omnisocialists say, that under the established order some men are enabled to op- press and exploit their fellows, and that it is possible for a few men to combine in such manner as to oppress and exploit the masses. But it is also true that the only way in which one man may oppress or exploit another, or in which a combination of men may oppress and exploit the masses is by obtaining a differential advantage in the pos- session or control of land-forms, or in the possession and control of public utility franchises, or of monopolies. In other words, the only men who can by any possible means (short of physical force or intimidation) oppress or ex- 300 BISOCIALISM— POLITICAL ECONOMY ploit their fellows or the masses are landlords, franchise- holders, and the beneficiaries of monopolies. When mo- nopolies have been destroyed and all franchise values and ground values have been taken out of the possession and control of private individuals and thoroughly socialized, it will be an utter impossibility for any man to oppress or exploit another in any manner within the reach of any economic remedy. Men may still steal from one an- other, and may reap where they have not sown by means of violence, intimidation, or fraud, but these evils must be remedied by the State under its police power. They are not manifestations of any economic disease, and for them there is no economic remedy. The economic "law of gravity," that men everywhere tend to satisfy their desires with the least exertion — that they seek a maximum of satisfaction with a minimum of effort — is completely recognized by the working plan of bisocialism. This plan enables every man to work under the most favorable conditions possible; it gives no man an economic advantage over his fellows; it places no restrictions upon any man except such as are necessary to give and maintain equality of opportunity to all men; it gives to every man every value which he distinctively creates, and every value to which no man can lay claim as distinctively his own it absorbs into the public treasury to be expended for the common good. It is a cardinal doctrine of bisocialism that the State should enable every man to satisfy his desires with the least exertion, provided that he does not thereby interfere with the equal oppor- OF BISOCIALISM 301 tunity of every other man to do the same. This is the 'law of equal freedom" of bisocialism. Bisocialism recognizes the true nature and import of the market as manifested in value and cost. It recog- nizes the double aspect implied in the definition of price, and gives due attention to both sides of the market. It looks upon the buyer (consumer) rather than the seller (producer) as the more important person in the market, and makes consumption rather than production the mat- ter of greater economic importance. In the established order, the producer is all in all. It is always he that is "protected" by legal differentials. It is always the con- sumer who "pays the freight" — protection and all. In bisocialism the State will not protect any man at the ex- pense of another. It will protect every man — not some men — but it will be by protecting him against any undue advantage upon the part of another. The law should give to all men equality of opportunity, and should pro- tect them in the enjo}Tnent of such equality — that is all. Under bisocialism the tenure of land-forms would re- main as at present in form and also in substance, except that the rate of annual taxation would be increased to 100 per cent, of the ground value. It has been shown in a former chapter that under such a system ground values would be reduced from substantially twenty years' purchase — the aggregate sum of twenty years' ground rent — to the present worth of one year's ground rent at the current rate of interest, and that thus the ground value or selling price of a land-form would become less than its ground rent. Land-forms could still be held as an 302 BISOCIALISM— POLITICAL ECONOMY iiivestment, and would yield the current rate of interest upon secure investments. But other things remaining equal, land-forms would be worth only about one-twentieth what they are at present, and under bisocialism nineteen- twentieths of the funds now invested in land-forms would seek investment in productive enterprises. This would give great impetus to industry and exchange. The social- izing of ground values would make speculation in land- forms unprofitable and impossible, thus throwing all land- forms open to actual users ; and at the same time it would divert a large fund from unproductive to productive uses. It needs only to be stated to be seen that a farm which now costs $20,000 will produce just as much grain when the price is reduced under bisocialism to less than $1,000; and that just as much business can be transacted upon a corner lot when, under bisocialism, the price is sub- stantially $1,000 as when, in present conditions, its price is $20,000. If ground values were wholly socialized as proposed, one effect would be to throw all unused land-forms into use, as the tax would be the entire ground value whether used or not. This would tend still further to lower the price of land-forms. But, on the other hand, the diverting of large investments from idle and otherwise unproductive land-holding into productive enterprises would cause a great demand for land-forms upon which to conduct these enterprises, and we may fairly assume that these changes would tend to establish an equilibrium, and that ground values under bisocialism would be substantially one-twen- tieth as great as at present. OF BISOCIALISM oOd Aside from being very greatly simplified and reduced, the machinery of taxation would remain as at present. All custom houses would be abolished and the horde of tax-gatherers — customs officers, collectors of internal rev- enue, gangers, spies, inspectors, and the like — now main- tained by the general government would be disbanded. The only tax would be a tax upon ground values — irre- spective of the values of improvements — unless it should be the policy of the State to permit public utilities to be operated under franchises by private persons. In this case the tax would be extended so as to include the entire selling value of such franchises each year. The selling value of a franchise under such conditions would be such that the annual net income not only would pay the cur- rent rate of interest on the investment after the payment of the tax each year, but also would reimburse the amount of the investment itself within the life of the franchise. The selling values of franchises would be computed from tables of values in much the same way as the values of annuities are now determined. But under a system of bisocialism the logical plan is governmental or municipal ownership, operation, and control of all public utilities, thus leaving ground values as the single source of governmental and municipal revenue. Under such a working plan the State would permit pri- vate ownership and private enterprise in all matters not requiring a franchise, but would socialize all ground val- ues by absorbing them into the public treasury by means of taxation. Franchise values, on the other hand, would be socialized by the direct socialism of all those businesses 304 BISOCIALISM— POLITICAL ECONOMY under which such values now accure. So that, strictly speaking, bisocialism contemplates the socialization of one kind of value — ground value — and one kind of business — the business of operating public utilities. All other values and all other businesses are to be left to individual own- ership and enterprise free from any and all forms of taxa- tion, and free from all artificial restrictions. If, under a system of bisocialism it should be deemed politic — it certainly would not be economic — to give to authors and inventors such encouragement as the gov- ernment now attempts to give by means of patents and copyrights, it might be done much more effectively than at present, without discriminating against any particular person or class, and with but slight discrimination against society as a whole. The publishing of the copyrighted book or the making of the patented article might be thrown open to all, the only condition being the payment of a given royalty to the author or inventor for a given time by every publisher or manufacturer under such regu- lations as might be necessary to protect the person entitled to receive such royalty. This plan could be adopted under the established order and would be a vast improvement over the present plan, which seldom results in any sub- stantial benefit to the inventor and not always to the author. At any rate, all publishers and manufacturers should be put upon the same plane, and the differential advantages, if they are to be given, should be limited to the authors and inventors themselves. In this connection it may be well to note that a similar change might be made under the established order with OF BISOCIALISM 30.j reference to the policy of so-called protection to homo industry. In order to have all the advantage of the pro- tective system, so-called, it is not at all necessary to have a '^protective tariff" as now established. Instead of congress seeking to ascertain and to establish in the case of every protected article a tariff rate, specific, ad valorem, or both, which will give the desired '^protection,*' let it ascertain and establish as nearly as it can the amount of each foreign article which can be imported into the United States without lowering the market price to the extent of "crippling home industry.'' Then let it be enacted that such quantity may be imported annually, and no more, and let the privilege of such importation be thrown open to competition, the highest bidder being awarded the ex- clusive privilege to import such quantity upon paying the am'ount of his bid into the pu1)lic treasury. This plan, like the formulation of tariff schedules by exjjerts and com- mittees in congress under the present tariff system, is purely arbitrary and economically unjustifiable, but it would carry out the protective theory to the utmost extent and in the simplest way. It would preserve the competitive principle in so far as it can be preserved without abolishing the protective policy itself. It would disassociate the protective policy from the question of taxation, and would place such policy squarely upon its merits before the people. Bisocialism would ultimately discard such a plan as contrary to the economic impera- tive, but under the established order it would work a vast improvement. Bisocialism would at once adopt the economic standard 306 BISOCIALISM— POLITICAL ECONOMY of value, and would use the current credit-form as its basic medium of exchange. For all labor, services, and labor- forms purchased by the State it would issue current credit-forms in terms of dailors. These dailors would be redeemed by the State in the payment of ground value into the public treasury, and meanwhile would pass cur- rent anywhere, at home or abroad, that the stability of the government was recognized. For foreign exchanges gold might still be used, and would pass then, as now, by weight in all transactions of importance. For domestic use neither gold nor silver would be required as a standard of value, the economic standard having no more reference to gold or silver than to any other trade-form ; but as mere current money-forms gold and silver would be retained. The attitude of bisocialism toward the economic standard of value, the current credit-form as a medium of exchange, and gold and silver as current money-forms may be fully ascertained and understood by reference to former chap- ters which treat of those subjects. From the discussions of this chapter we may deduce the following definition of bisocialism: Bisocialism is that form of systemic socialism which seeks to destroy all forms of monopoly; to socialize all ground values and all public utilities; to establish and maintain equality of opportunity among all men, and to leave to private ownership, management, and control all of the distinctive results of individual ability, energy, and thrift CHAPTEE IX. OF EQUALITY OF OPPORTUNITY. It's hardly in a body's pow'r To keep at times frae being sour To see how things are shar'd. Ro'bert Burns. Many, indeed, fail with greater efforts than those with which others succeed, not from difference of merits, but difference of opportunities; but if all were done which it would be in the power of a good government to do, by instruc- tion and by legislation, to diminish this inequality of oppor- tunities, the difference of fortunes arising from people's own earnings could not justly give umbrage. John Stuart Mill. In our analysis of the competitive system of industry and exchange we learned that from an economic point of view the great desideratum of business life is the acquisi- tion of net value. Net value lies between two movable points, the point of positive utility and the point of ex- change. The point of exchange remaining the same, any- thing which will lower the point of positive utility to the individual producer, will, to that extent, increase his net values; and likewise, the point of positive utility re- maining the same, anything which will raise the point of exchange of particular products will lead to a cor- responding increase of net values in the hands of certain producers. In the course of the competitive system under the estab- lished order, some men have come to understand the fact 307 308 BISOCIALISM— POLITICAL ECONOMY that an increase of net value may result from the ability, energy, and thrift of the individual exerted in a fair field, with no detriment or disadvantage to his fellow-man, or to society as a whole; or it may result from the individual appropriation of a land-form having a superior advantage of fertility or of location, or both; or from a differential privilege, i. e., a franchise or a monopoly, created and enforced by the State for the benefit of a private individual, company or corporation. Stated in another way, men have learned that, where equality of opportunity prevails, differential net value can be acquired only by means of superior ability, energy, and thrift; but that under the established order it is possible for some men — not all men — to secure net values which do not result from individual ability, energy or thrift, but depend upon the differential qualities of opportunities specially enjoyed under the law. In an economic system which creates and dispenses differential opportunities in industry, exchange and land tenure, it is natural that men should strive to become the beneficiaries of such advantages. Men are wont to assume that anything that is legally right is economically correct; and under a system which encourages a struggle for differential opportunities, and rewards the successful man with prominence, riches and honor, while condemning the unsuccessful to obscurity, poverty and servitude, many men become utterly indifferent to questions of Economics, and even of ethics, and aim only to keep within the law in the acquisition of net values. The "captains of in- dustry'" and the "Napoleons of finance" of the established OF EQUALITY OP OPPORTUNITY 309 order have acquired their riches, prominence and power, not by the exercise of superior energy, skill and ability in overcoming the disutilities of matter, time and space in an open field, but in acquiring differential advantages, under the law, over their fellow men. If the established order is to continue, its glaring in- equalities and the sources of its differential privileges and advantages can no longer be concealed. Political Economy must come out into the open and discuss practical problems regarding the means of acquiring these advantages. The young man who is seeking a practical education must be shown that unless he acquires some differential privilege, he can lower the point of positive utility only by the exer- cise of superior labor-power or by the use of capital-forms in the ordinary manner; and that unless he acquires such a differential privilege, he can have no control whatever over the point of exchange. If the established order fur- nished him a field in which opportunities were equal and open to all, he might well rely upon his own efforts for success. But he should be led to understand that in the established order opportunities are not equal and open to all, and that he must either secure special advantages or become the victim of those who do. Every man in the United States of America is either the beneficiary of some differential privilege in industry, exchange, or land tenure, or pays tribute to some other person who is such a beneficiary. There is no man so rich through his own energy, ability and thrift, that he can escape the toll-gatherers of privilege, and none so poor that by these collectors of economic tribute he is not made 310 BISOCIALISM— POLITICAL ECONOMY to suffer. The very poor all live upon an artificially de- pressed economic margin, and are all despoiled of the normal marginal return. Theee have no opportunity to recoup their losses or any part thereof, and their spolia- tion is without mitigation and without recourse. Above the margin there is a chance that instead of being always a victim one may sometimes become a beneficiary; but there is no neutral ground. It is one of the greatest de- fects of the established order that it presents no way by which a man may escape the blighting effects of its dif- ferential privileges; no place where he can produce upon a normal margin; no place where he can be free from monopoly; no place nor manner in which he can satisfy his own desires with the least exertion, without inter- ference, or without interfering with the equal opportunity of some other man to do the same. If the established order is economically right, then it is right to teach the young to take advantage of its in- stitutions. If it is economically wrong, the wrong is in- stitutional, not personal, and institutional changes are necessary to its reformation. It is useless to decry the monopolist while maintaining monopoly; it is useless to attack the members of a trust monopoly as long as the trust furnishes the most available legal method of acquir- ing differential values. To eliminate the monopolist and the trust magnate it is necessary either to destroy or to socialize all legal differentials; it is necessary to establish equality of opportunity. It is not necessary, however, to establish equality of personality or equality of product among those who toil. OF EQUALITY OF OPPORTUNITY 311 Equality of opportunity is just as essential to the buyer as to the seller — to the customer as to the producer. In the established order the marginal consumer is artificially depressed to the same extent as the marginal producer. He has acquired his ability to purchase — his ordinary trade-forms or their equivalent money-forms — upon an abnormally depressed economic margin, so that at the outset he is despoiled of the full fruition of his labor. And when he enters the market with Ms scant supply of money-forms, he finds scarcely an article for sale except at a price artificially held above the normal margin through some form of differential privilege in the hands of others. In buying sugar he pays tribute to the sugar trust; flour, to the milling trust; oil, to the oil trust; fuel, to the coal trust ; lumber, to the lumber trust ; hard- ware, to the steel and iron trust; salt, to the salt trust; clothing, to the beneficiaries of a protective tariff ; and so on through the entire list not merely of the luxuries, but practically of all the necessaries of life. And at the same time that the purchaser is thus despoiled of his already decimated earnings, the supposed protected workingmen in the coal mines, iron and steel industries, etc., are strik- ing or threatening to strike for a 'living wage"; that is, for a bare subsistence — the wage of slavery. The wage- worker of to-day even as a labor unionist does not ask for economic freedom; he seeks only to make his serfdom more tolerable. When the economic equality of bisocial- ism becomes his goal, he will become invincible. Until then, despite the efforts of all those who simply attempt to resist or to mitigate the evils of the established order, tiie 312 BISOCIALISM— POLITICAL ECONOMY tragedy of the submerged element of society will go on and on — "a striving, and a striving, and an ending in nothing." The fact that there is a submerged element in the estab- lished order is universally conceded. Current literature abounds with references to these unfortunates, and writers upon sociological subjects vie with one another in discuss- ing the status of this element, its cause and the possibil- ity of a remedy for the evils which follow in its train. The generally accepted theory is that these people are submerged because of their personal weaknesses, shiftless habits, and moral delinquencies ; that there is no economic cause for their condition, and that as a class they need not exist except for the personal unfitness which they in- dividually and collectively exhibit; that whatever wrong is involved in their degradation is their own personal wrong, or the wrongs of their individual ancestors, and that society as a whole is guiltless of any offense in that respect. This being the verdict of its votaries, the estab- lished order treats this submerged element accordingly. It punishes their individual shortcomings with one hand and doles out individual charities with the other. It looks upon their shiftlessness and intemperance as the cause of their poverty; their natural inferiority as the cause of their servitude; and their inherent depravity as the cause of their crimes. Consequently it condemns their ways of life, bewails their weaknesses, and punishes their trespasses against the law. But civic consciousness in- stinctively feels that this is not enough, and social con- science instinctively recoils from such inhospitable views. OF EQUALITY OF OPPORTUNITY 313 Church and State contribute liberally to relieve the dis- tresses of poverty with charity, but no sooner has one case been relieved than there arises another more heart- rending than before. The diagnosis of bisocialisra concerning this submerged clement of civilized society is exactly opposite that of the established order. It maintains that as a class only those are economically submerged who are forced by present conditions to live below the normal economic margin ; that there is an economic cause for their condition, and that as a class they need not exist except for institutional wrongs for which society as a whole, and not the sub- merged as individuals, is responsible. It is true that if a submerged element must exist because of the artificial depression of the economic margin, the weak will naturally become the victims of such artificial conditions, and the weak, being depressed, will tend to become shiftless, in- temperate and even vicious in their habits and behavior. But tliese traits are primarily results, not causes, and crime is the concomitant, not the cause, of evil economic and social conditions among the lowly. The remedy of bisocialism for the poverty and degra- dation of the submerged element is quite as radical in its departure from the established order as is its diagnosis. Social righteousness is what it seeks; justice, not charity, is its remedy. It recognizes a clear line of demarcation between the voluntary and the involuntary poor. Before it condemns the individual it demands for him a fair trial — an opportunity second to none in the land to succeed and to live uprightly. If with equal opportunities some 314 BISOCIALISM— POLITICAL ECONOMY fail, justice will condemn the delinquent, or charity will relieve their unavoidable necessities, as the case may re- quire. But in thei established order Justice is helpless and charity is abortive because, in any given case, it is usually impossible to determine just how much, if any, the individual is to blame, and just to what extent, if any, he is entitled to receive a helping hand. The con- demnation which is the prerogative of justice, if mis- takenly imposed, degrades instead of punishing; and the gracious gift of charity, wrongly disposed, degrades in- stead of helping. Under the regime of bisocialism, justice and charity may walk hand in hand, each exercising its legitimate function, in normal conditions, to the common benefit and uplifting of all men. With equal opportunities to all — accident and affliction aside — no man need feel the pangs of poverty unless he chooses to be poor. With equal opportunities to all — accident and affliction aside — no man need starve unless he deserves to starve. These are the doctrines and the dreams of bisocialism. With a world in which these economic conditions were realized we might reasonably be content. But until we have such a world, and such a world is possible, we should be content — never. In order to determine which is right in its theory of the submerged element, it is only necessary to test the remedies proposed by the established order and by bisocial- ism, respectively. If all the individuals of this element should become energetic, thrifty and thoroughly temperate, the economic result would be an increased demand for land-forms upon which to exert their labor-power; and OF EQUALITY OF OPPORTUNITY Mo the improvement of their homes, their surroundings and social life would make it more desirable to live in their midst; hence ground rents and ground values would cor- respondingly increase. The men who owned the land- forms of the community would reap substantially the en- tire financial benefit. The augmented price of land-forms for home building would render it harder for the next generation to acquire homes in that locality, and the net result would be a reduction of the margin to a still lower level with a submerged class developing thereon. The established order proposes no remedy which will raise the economic margin. Its attitude confirms the suggestion of Tolstoi that the beneficiaries of privilege will consent to anything in the world for the relief of the poor except to get off their backs. The abolition of all monopolies as contemplated by bi- soeialism would not of itself finally solve the problem of the submerged element, for this, like every other im- provement either in the people or in the administration of their affairs, would ultimately be reflected in increased ground values. Ground value is the fundamental differ- ential based upon legal privilege, and tends constantly to absorb all the benefits of civilization. It is only when the full program of bisocialism is applied that equality of opportunity may be established by the socialization of all public utilities and of all ground values. It is urged by omnisocialists as a fundamental tenet of their economic doctrine that it is the owner of capital as employer and as usurer who submerges and keeps sub- merged the members of the lower strata of society, and 316 BISOCIALISM— POLITICAL ECONOMY that no remedy is sufficient which does not provide for the total extinction of the capitalist both as an employer of labor and as a lender of money-forms. Attention is called to the fact that among the poorer classes the highest rates of interest are always paid; that when the current rate of interest is 5 per cent per annum the very poor habitually pay 5 per cent per month, and upwards, for loans upon their scant supplies of jewelry, furniture and even clothing. It is also shown that these people in buying coal by the basket and even by the scuttleful are charged double the price paid by those who secure a season's fuel at the most advantageous time. These are given merely as examples of the wholesale exploitations of the poor. The answer of the bisocialist to this arraignment of the established order based upon well known and indis- putable facts is the same as its answer to the standard economist. These things are not the causes of poverty, but are its necessary concomitants when it is manifested upon a submerged economic margin. The men who loan these people money at exorbitant rates of interest did not originally make them poor; they simply take advantage of a situation which they can no more control than can the exploited borrowers themselves. In order to live these marginal masses must have an opportunity. Their natural opportunity having been removed by their expropriation from the soil upon its normal margin, they are driven to secure an artificial opportunity at what cost they may. They do not become borrowers because of the high rates of interest, but in spite of them. The loan shark and his victim are both the natural and necessary consequences OF EQUALITY OF OPPORTUNITY 317 of a system of land tenure and legal privilege which de- spoils large numbers of people of the normal marginal return. The same thing is true with reference to those who sell to the poor at exorbitant prices the very necessaries of life. They did not originally make these people poor. It was only after these unfortunates became poor that they had to buy in pittances and to patronize those who offer goods for sale in that manner at greatly increased prices. The student of economic questions must at all times clearly realize and fully consider the fact that all condi- tions which exist below the natural economic margin are abnormal, and hence phenomena there exhibited can not be taken as indicating the normal results of economic laws. In order that normal phenomena may be exhibited and true conclusions drawn therefrom, it is necessary, first, to restore the normal economic margin, and then to raise its level to the highest available point. When this is done (accident and affliction aside) none but those who are willfully poor need become the victims of the usurer. Let it be remembered that bisocialism contemplates not only the taking of all ground values in taxation, but also the expenditure of all these values and the administration of all public utilities for the common good. The taking of all ground values into the public treasury will com- pletely destroy the holding of desirable land-forms out of use, and will tend to put all land-forma to their best use. This will raise the marginal producer to the normal economic margin. On the other hand, the expenditure of public revenues in the extension and cheapening of pub- 'MS BISOCIALISM— POLITICAL ECONOMY lie utilities, such as railroad transportation, will greatlj' increase the utility of those land-forms which now lie upon the normal margin. Thus by the public collection of ground values the normal economic margin will be restored and the invol- untarily submerged classes will be no more; while by the public expenditure of ground values the condition of those who produce upon the normal margin will be vastly im- proved. The destruction of differential privileges with their consequent differential values is necessarily a level- ing process. But the leveling contemplated by bisocialism is largely a process of leveling up, not down, and in this respect it has a decided advantage not only over the established order, but also over omnisocialism. CHAPTER X. OF COMPENSATION. Men having got themselves into the dilemma by disobedi- ence to the law, must get out of it as well as they can; and with as little injury to the landed class as may be. Mean- while we shall do well to recollect that there are others besides the landed class to be considered. In our tender regard for the vested interests of the few, let us not forget that the rights of the many are in abeyance; and must remain so as long as the earth is monopolized by individuals. Let us re- member that the injustice thus inflicted on the mass of man- kind is an injustice of the gravest nature. Herbert Spencer* By the statement that bisocialism involves a process of leveling up rather than down, it is not meant that by its adoption all may be brought to the highest point of ef- ficiency or of enjoyment. It is not claimed that bisocial- ism will make any fundamental changes in human nature or do away with all of the disutilities of matter, time and space. Nor is it claimed that no substantial reduc- tions will be made in the net values now enjoyed by those whose interests will be directly affected by the abolition of all monopolies and by the socialization of all ground values and all public utilities. The effect of the socialization of ground values and public utilities as well as the destruc- tion of monopolies will necessarily result in the abolition of all differential privileges in industry, exchange and Social Statics: Chapter IX. (1850.) 319 320 BISOCIALISM— POLITICAL ECONOMY land tenure, with the consequent elimination of the net values now individually acquired by means of these privi- leges. There is no question but that the people as a whole will profit by these changes of economic polity. The transparent equity of the proposals of bisocialism, when once fully understood, must appeal to every serious mind. If the transition to bisocialism could be made without disturbing the fortunes of those who have prospered un- der the established order, there probably would be but slight opposition to the change. But this can not be done. With the abolition of privilege must come the cessation of incomes derived from these privileges. Socially there w'ill be no loss, for what some must lose others must neces- sarily gain. Privilege has its victims as well as its bene- ficiaries. The laws of Economics are as immutable as the laws of the physical world, and if some enjoy without working, others must, to the same extent, work without en- joying. "In the sweat of thy face shalt thou eat bread" is a condition placed upon the race as a whole. If some escape this condition, it is only by putting upon others an additional burden. There is no other way. In spite of the absolute certainty of this fact, however, the demand is made that in case bisocialism shall be adopted, compen- sation shall be made to present beneficiaries for the loss of their special privileges. If this demand were recog- nized, there would be a change in the form, but not in the substance of the differential privileges now enjoyed. If all such privileges were bought in at their present cap- italized values, and interest bearing bonds issued therefor, the people at large would pay as much tribute as before. OP COMPENSATION 321 It is true that future increase of values would inure to the people as a whole and that the bonds might ultimately be paid off. But before adopting such a plan several cir- cumstances are worthy of consideration. The claim of present beneficiaries to compensation is based upon the argument that while existing conditions may be economically wrong, they are legally right, and that the law having induced people to invest in differ- ential privileges, it should protect them in these invest- ments regardless of the economic conditions which may prevail. This argument assumes that the laws of men have a higher sanction than the laws of nature, and that they are superior to the laws of progress. Let us suppose the case of three young men who begin life upon their own account at the same age, with equal abilities and un- der like conditions. One, relying upon the conditions then existing in a given trade, spends several years in acquir- ing a high degree of skill and proficiency in the manu- facture of a given article so that he now receives a good income from his efforts. When he has reached middle life and has made all his plans and conformed all his ways to the existing conditions and in expectation of their con- tinuance, a machine is invented which makes his skill practically worthless and puts him back into the class of common laborers with but little prospect of ever emerging therefrom. What has society ever done to compensate such a man? Nothing! The second young man works at a trade, saves his earn- ings, purchases an interest in a manufacturing concern, becomes sole owner of the same, and when he has reached 322 BISOCIALISM— POLITICAL ECONOMY middle life, has just equipped his factory with expensive machinery of the latest type, and has settled down to en- joy a steady income from an extensive business. Machines are invented and installed in competing plants which turn out the same product at half the former cost, and he is practically ruined, as it were, in a day. What has society ever done to compensate this man for being a victim of progress ? Nothing ! The third young man likewise works at a trade, saves his earnings, and invests them in a vacant lot or in a farm. The progress of society doubles the value of his holding, and when he reaches middle life he is enabled to quit work and to live in retirement upon his ground rents. A new and better form of taxation is discovered and adopted by the people by means of which the present worth of his ground rent — his ground value as reduced by changed conditions — is turned into the public treasury, and his income no longer supports him as before. Shall society compensate him for his loss and not the other two ? Are not all three equally the victims of progress, and if 60, may not economic progress as well as material progress be adopted for the good of all without compensation to the individual? And of the three men in question — are not the two who have invested their skill and capital in productive enterprises and are still in the harness, more deserving of compensation than the one who has ceased to work and is living from the sweat of other men's faces? There is another fact to be considered with reference to the question of compensating the beneficiaries of the established order. In speaking upon this topic it is cus- OF COMPENSATION 323 tomary to speak of compensating present owners, but the proper term is present beneficiaries; when this distinction is properly recognized the question really answers itself; for the beneficiary of a wrong can have no claim to com- pensation for the loss of his differential privilege. In so far as the owner of a land-form is without a differential privilege under the law, he would lose nothing by the proposed change in land tenure. As simple land user he would be as well off as before. If his land-form should become only about one-twentieth as valuable as before in the land market, it would produce just as good crops or would serve him just as well for a home. And if he should sell this land-form at a price greatly reduced, he could buy another at a price correspondingly low. It is true that his taxes upon his land-form would be increased; but he would be free from all other forms of taxation di- rect and indirect, and better than all, he and all his fel- lows would become economically as well as politically free. As long as he remained the actual user of this or any other equivalent land-form, the loss of its present capital- ized value would not be felt. Let us now consider the case of a man who by his own efforts secured twenty years ago a farm of 160 acres at a cost of $50 per acre. Since that time his farm has doubled in value, and he now receives a cash rental there- from of $5 per acre. Upon this annual income he can live as a retired farmer, or he can sell for $16,000 the farm which cost him but $8,000 and has yielded him a good return for twenty years. Instances of this kind have occurred frequently in the United States, and are com- 324 BISOCIALISM— POLITICAL ECONOMY monly referred to as beneficent outcomes of our system of land tenure. But let us investigate the matter further. Let us assume that the man in question has four children who have grown to manhood and womanhood during the period when he was acquiring the original price and en- joying the benefits of this farm. Each of these children is now in as great need of a farm as was their father twenty years ago. But what prospect have they, in the farming business, each to acquire 160 acres at $100 an acre with the price of land-forms still advancing? Do not the same forces which have made the father compara- tively rich tend to keep all his children poor? Suppose now that this father dies and leaves his farm to his four children as their only inheritance. In com- mon speech we say that he has done well by them, and so he has. But under modern farming processes these chil- dren can not divide their farm into 40-acre tracts and severally live thereon; nor can any one of them buy the shares of all the others in ordinary circumstances. So they sell the farm at $100 an acre and divide the pro- ceeds. If, now, one of them desires to own a farm of 160 acres, he can pay for but 40 acres at current prices. The remaining 120 acres will cost him $12,000, or 50 per cent more than his father paid for the original farm. The same cause which added $8,000 to the value of the father's farm has added a like amount to the value of the farm which the son now desires to buy. To the values of the farms desired by the other children the same in- crease applies, so that as land users they have secured an additional inheritance of $8,000 and an increased cost OF COMPENSATION 325 on four farms now desired by them of $33,000 in tlie twenty years in question. As a family they would have been much better off under a system of bisocialism in which all could have secured farms at their actual values for use without eiil-er the payment or the receipt by any person of that form of tribute involved in the private appropriation of ground rent. As a family of land users they would have been benefited if, at any time within the twenty years, bisocialism had been adopted without com- pensation to the father as a beneficiary of the established order. If compensation is to be made to the beneficiaries of the established order when its inequalities are abolished through the adoption of bisocialism, what shall we say of its victims? Are they not to be considered? It is true that when all ground values are paid into the public treasury and are expended for the good of all, the multi- tude now" submerged and despoiled will be raised to the normal economic margin and thus benefited beyond meas- ure. But to this they are now entitled ; to this they have been entitled these thousand years. Instead of recompens- ing the beneficiaries of this institutional wrong, should not the State in administering substantial Justice between man and man take from the former beneficiaries even that they have and give it to the former victims of this wrong? Eestitution and not compensation would seem to be the logical demand of justice under the new dispensation. But in the enjoyment and good will engendered by bet- ter things the past will doubtless be forgiven, and the 3'2(; BISOCIALISM— POLITICAL ECONOMY disinherited will be satisfied when happily they come into their own. A favorite problem propounded by those who argue in favor of compensation to present beneficiaries is this: Suppose that a poor widow owns a lot next door to the mansion of a multimillionaire. This lot with its humble improvements constitutes her homestead; is all that she has in the world. The lot of the millionaire is no larger nor better than hers, but upon it he has built a residence at a cost of $1,000,000. Along comes the assessor under bisocialism and assesses the property of each at the same amount, exempting the buildings and other improvements in both eases, and listing a tax against each lot equal to its ground value. Is this right? Let us analyze this problem. In the first place, a widow who, in present conditions, owns such a lot next door to a million-dollar residence is not poor, though she may live in a hovel. She could easily dispose of her lot at a price which would make her comparatively rich, and with the proceeds she could live comfortably in some other place. She deserves no sympathy on the ground of poverty. It must be conceded that from an economic point of view she is not putting this lot to its best use. She does not need such a lot for the kind of house in which she chooses to live. Bisocialism would compel her to put this lot to a better use or surrender it to some one who would. As it is, she is simply standing in the way of the progress of the commimity, and the community rewards her for doinor so. Under bisocialism she would seek the OF COMPENSATION 327 location most suited to her means and mode of life. No one could demand of her a farthing more for a building site than it is actually worth for present use, nor could she demand an artificial price for the land-form which she now owns. But this is not all. In dealing with institutions all the facts involved can not be applied to an exceptional case. For one widow who may own a home next door to the residence of a millionaire, there are a thousand, in the established order, who own no homes at all. Suppose that through the sudden advent of bisocialism, if that were possible, nineteen-twentieths of the value of this wid- ow's home was lost to her. Then by the same process the difficulty of securing a home would be only one-twentieth as great to the thousand other widows. The condition of these, also, should be considered. They are below, not above, the normal margin. The first duty of society is to succor them and to put all persons, rich and poor, upon a plane of equality of opportunity. Then, and not till then, individual cases may be investigated with the cer- tainty that things are what they seem. At present per- sonal merits and demerits are so hopelessly intermingled with institutional rights and wrongs that justice is baffled at every turn. The illustration which seeks to discredit the proposals of bisocialism by an appeal to the case of the poor widow is the logical successor of the illustration of the widow whose all was represented by the ownership of a single slave before the Civil War. In fact, there is not an argu- ment against the restoration of the common rights of the 328 BISOCIALISM— POLITICAL ECONOMY people in the ground values and public utilities of their common inheritance that was not worn threadbare in de- fense of human slavery. In the days of slavery it was pro- posed that if that institution was to be abolished at all, it should be done only by compensating the slave-owners for the loss of their investments in human flesh and blood. It is probable that if the slave-owners had favored the abolition of slavery on these terms, it might have been accomplished in that way. But they relied upon their supposed legal rights — and lost. There is no economic reason why the beneficiaries of the established order should be compensated for the loss of their investments in differential privileges any more than that the slave-owners should have been compensated. The question which Economics asks is this: Are ground values and public utilities rightfully the subject of pri- vate property, or should they be socialized? If they should be individualized, that is the end of the contro- versy. If they should be socialized, this can be true only on the theory that all ground values and public utilities belong of right to the public, and should be expended and used solely for the common benefit. Therefore, in this lat- ter view, to devote any revenues arising from these sources to private uses is economically indefensible. To take ground values from present beneficiaries in the form of taxes, and then to return it to them in the form of in- terest upon the capitalized value of their differential priv- ileges, would be an economic travesty. It would make a mockery of the fundamental economic reform. It is one of the cardinal doctrines of the law that pri- OF COMPENSATION 329 vate property shall not be taken for public purposes with- out due compensation. Hitherto it has not been customary to distinguish between property and privilege, and the beneficiaries of privih'ge are wont to refer to their privi- leges as their property. In this they have been sustained by standard Political Economy and by many interpreters of the law. There is all the difference in the world, from a legal point of view, between taking private property itself for public purposes by condemnation or proceedings in eminent domain, and the taking of property values for public revenues through the processes of taxation. The doctrine of due compensation always applies to the former, never to the latter. Even now, in theory, the revenues of the State are taken because they belong of right to the State and not to the individual, and for values taken in taxation there can be no compensation except the usual benefits of government. A valid claim for any private compensation in this regard is economically absurd and legally impossible. Even if the plan of compensating existing beneficiaries were tenable in the theory, it could never be realized as a fact unless the beneficiaries themselves in apt time should voluntarily offer to surrender to the State their differential privileges at appraised valuations. Some far- seeing railway officials now recognize the handwriting on the wall, and would willingly make such a proposition concerning the public utilities which they control. But as a class the beneficiaries of privilege will doubtless con- tinue to stand upon their supposed power to acquire a vested right in an economic wrong, and their opportunity 330 BISOCIALISM— POLITICAL ECONOMY to secure recognition for their claim for compensation will thus be lost through their own hostile acts and at- titude. The effect upon land owners of the decline in ground values brought about by bisocialism may be illustrated by reference to the decline in the price of gold between the close of the Civil War and the resumption of specie payments in 1879. At a time somewhat before the be- ginning of the war gold was at par in the stock exchange at New York. The agitation and unrest which preceded the breaking out of hostilities caused gold to go to a small premium prior to April, 1861. From that date until July, 1864, the premium on gold increased, with fluctuations more or less violent, until a maximum quotation of 285 was attained. The prospect for the ultimate success of the Union arms permanently checked the rise in gold, and the price gradually receded until at the close of the war the market quotation was 146. During all the period from the beginning of the war to the resumption of specie payments, the leading newspapers gave daily quotations of the price of gold as regularly as the prices of wheat laul corn. The quotation for gold gradually declined after 1864, the decline being accelerated by the act of congress for the resumption of specie payments, passed in 1875, until on or about January 1, 1879, gold was once more at par. In the years covered by this period, no one man, per- haps, saw his particular gold coins increase in value from 100 to 285; and no one man, perhaps, stood all the loss on any particular gold coins when the price receded from OF COMPENSATION 331 285 to 100. Taken as a whole, the gains of the ascend- ing series and the losses of the descending series were distributed day by day through the exchanges of the market, among many persons. Since the first settlement of the United States the values of its land-forms have gradually, though rapidly, in- creased from zero to their present status. With the ad- vent of a widespread and effective demand for the social- ization of all ground values, the selling prices of land- forms will cease to rise and then begin to decline. In the years necessary, under the most favorable conditions, for the complete socialization of ground values, the de- cline from the present price to the present worth of one year's ground rent in each case will be distributed among many persons. ISTo man who is not willfully blind to the signs of the times need suffer any great loss, if he exercises ordinary business prudence. As has been shown, only those will suffer a real loss who wish to hold land-forms simply as investors and not as real land users, and those who may wish to change from land ownership to some other form of investment. If these persons act with sufficient promptness and discretion, they can avoid serious loss by letting their land-forms pass early into the hands of actual users. In the study of the questions involved in the advent of bisocialism many — perhaps most — persons regard the question of compensation to present beneficiaries as most important of all. To most persons who cling to the estab- lished order and seek to justify it against the assaults of bisocialism, the question of compensation to present own- 332 BISOCIALISM— POLITICAL ECONOMY ers, as they put it, furnishes the argument of last resort. This will be the last ditch of the vanquished army of priv- ilege. And yet, as a matter of fact, this question is among the least important; least important upon its merits, least important because the beneficiaries themselves will not accept compensation while yet they may, and least important, also, because in the evolution of economic forces and of the distributing processes of the market this question will practically solve itself. CHAPTER XI. OF PUBLIC UTILITIES. There must be no private use of public power or public property. These are created by the ccmmon sacrifices of all and can be rightfully used only for the common good of all. Henry D. Lloyd. We have defined a public utility as an industrial enter- prise which necessitates the special use of public land- forms, or the acquisition and use of private land-forms under the special power of eminent domain, in supplying some product or service generally desired by the people. Such enterprises, in normal conditions, are not open to full and free competition among individuals, but require some public grant of unusual authority or power to make them effective in private hands. Such a grant we have called a public utility franchise, or, more briefly, a fran- chise. In the established order some public utilities are socialized, or practically so, while others are not. The business of carrying the mails is an industrial en- terprise which is everywhere conceded to be a proper public function. As now conducted this enterprise is largely socialized, but in the United States it contains a curious admixture of individualism. The employes of the postal department are nearly all directly employed by the gov- ernment, and in the larger cities the postoffice buildings are publicly owned. With the exception of these buildings 333 334 BISOCIALISM— POLITICAL ECONOMY and the mail bags and locks nearly all of the property used in the service is privately owned; and in some cases the carrying of the mails, instead of being by government em- ployes, is let by private contract to persons who furnish their own equipment and employ their own help. Nearly all the actual carrying of the mails is done by privately owned railroads under contracts with the government. The entire business of the railroads, under our definition, is a public utility since, in present conditions, it necessitates the acquisition and use of private property under the spe- cial power of eminent domain. All railroads are operated under public utility franchises granted by the several states and commonly called charters. Street railways are public utilities, but they differ from ordinary railroads in this : They necessitate a special use of public land-forms rather than the acquisition and use of private land-forms through the special exercise of a public power. A street is a public land-form open to all persons alike in the use of ordinary conveyances, but ordi- narily only one company can use a given street for street railway purposes. All street railways are operated under public utility franchises. Telegraph and telephone lines constitute another form of public utilities. Usually they are constructed along and upon public highways, although they may require the condemnation of private property for their special use. They also require public utility franchises to make them effective in private hands. Akin to railways and, to some extent, to telegraph and telephone systems is the industrial enterprise which now OF PUBLIC UTILITIES 335 seeks to transmit property and intelligence under and along the public streets by means of pneumatic tubes. This constitutes a public utility, and requires a franchise ac- cordingly. The other public utilities of importance consist of those industrial enterprises by virtue of which water and gas are conveyed to consumers, and electricity is conveyed and furnished for the purposes of heat, light and power. The transmission of hot water and steam for heating purposes under and along the public streets also constitutes public utilities. We have already noted that all public utilities require the special use of land-forms. We may also note that they all involve the element of transportation, the trans- mission of intelligence by telegraph or telephone being deemed a form of transportation. In the case of rail- roads, street railways, telegraphs, telephones and pneu- matic tubes, the element of transportation constitutes the entire service rendered; while in the case of all other pub- lic utilities enumerated there is the element of transpor- tation plus a product or service furnished or rendered in or by the thing transported. In the case of railroad ship- ments the property transported is furnished by a private owner at the shipping point, and is received by him or by another owner at the point of destination. The only func- tion of the railroad company is that of carrier. In the case of water works, on the other hand, the thing transported belongs to the transporter when it leaves the central source of supply, remains his property in transit, and changes ownership only as it is consumed. 336 BISOCIALISM— POLITICAL ECONOMY In the United States the most of these public utilities are conducted as private enterprises under franchises granted by public authority. There is no uniformity of plan in vogue concerning them. In nearly all cities water is furnished by the municipality, and gas by private com- panies. Some cities own and operate their own electric light plants, but the most of those using electricity for lighting purposes do not. Telegraph and telephone sys- tems are universally in private hands except as they may be used exclusively by fire and police departments. Sub- stantially all straight transportation facilities are in pri-' vate hands. Neither is there any uniformity in plan concerning the charges made for these public utilities when considered as a whole. Water, gas, electric light, hot water, steam or electric heat, electric power and similar utilities are usu- ally furnished at a fiat rate throughout the municipality for the same amount of product supplied or service ren- dered. In matters of straight transportation a flat rate is usually maintained on street railways, and uniform mile- age rates for passengers on steam railroads. Telegraph and express companies combine the flat rate and mileage plans and use a sort of zone system, making the zone limit instead of the mile the basis of the charge. In a city like Chicago a man, by using transfers, may ride one block or twenty miles for five cents. On a steam railroad he pays a fixed rate per mile, regardless of the distance, in ordinary circumstances. Under bisocialism, all these public utilities will be owned, operated, and controlled by the people in their OF PUBLIC UTILITIES 337 governmental capacity. All railroads will belong to the national government;, and all local enterprises to their re- spective municipalities. It is probable that what are now known as interurban electric lines will be owned and operated by the states in which they are located, except in so far as they involve interstate traffic. If in time elec- tricity wholly supersedes steam as a railway motor power, these local electric lines will merge into a part of the gen- eral railway system. It is necessary to socialize all these public utilities in order to carry out the mandate of the economic imperative. Experience is daily teaching us the necessity for this step, and is constantly preparing the public mind for definite action. In view of these facts the matter of a definite and uniform working plan for the socialization of these public utilities is worthy of careful consideration. In for- mulating such a plan it will be wise for us to keep con- stantly in mind those laws of the market which are as constant and inexorable as the law of gravitation, and quite as important within their spheres as is the law of gravitation in the physical world. In the field of industry, men are constantly endeavor- ing to comprehend and to take advantage of all the laws of nature. Experience has taught them that the physical world is governed by immutable laws, and that by ascer- taining these laws and acting in harmony therewith, man may now achieve results which would have been deemed miraculous in other days. In the field of Economics there are laws just as immutable and just as important, if wc would but seek them out and put not only ourselves, but 338 BISOCIALISM— POLITICAL ECONOMY also our institutions, into harmony therewith. For there is this difference between physical and economic laws: A single person may succeed in putting himself and his en- ergies into right relations with physical laws, and thus perfect an invention capable of physical demonstration by him acting alone. All others may be incredulous, but he may succeed none the less; but in the realm of Eco- nomies the environment of man is institutional. One man may realize the defects of a given institution and may discover a remedy which would increase the happiness of the race a thousandfold. But singly he can not put his remedy into operation. He must convert a majority of his fellows to his manner of thinking before he can fully set in motion those economic forces whose results he has foreseen. These facts have tended to keep the economic progress of the race far behind its industrial achievements. In the matter of the socialization of public utilities, an early attempt at which is now practically assured, a full understanding of the economic laws involved will make a whole step as easy to be taken as a half step; and in the absence of knowledge the half step may be taken in the wrong direction and, failing in its purpose, may ulti- mately prove to be a retrograde movement. In the con- sideration of the question of public utilities, the economic proposition of supreme importance is this : All the meas- urable benefits of the socialization of public utilities are and ever will be reflected in the values of the land-forms occupied by the community affected. This is true, re- gardless of the size of the territory involved. It is just as OF PUBLIC UTILITIES 339 true of the land-forms of a nation as of city or village, if the public utility socialized is national in its scope. We have already shown that if a given city should fur- nish natural gas to its inhabitants at the actual cost of maintaining and operating the requisite plant so that the price of gas to consumers might be reduced from $1.25 to 25 cents per thousand feet, the ground rents and ground values in such city would rise until the cost of living would be as great as before. In the same way, if freight charges upon corn were reduced one cent per bushel from a given community to the Chicago market, ground rents in that community would increase 50 cents per acre, if 50 bushels per acre was the average yield of corn. The tenant would be no better off than before. And if street car fares in any city were reduced from five cents a ride to three cents, the working people would receive no permanent gain. The price of building lots and the ground rents in the residence districts w'ould rise so as to swallow up the entire measurable gain. There is nothing capable of more certain demonstration, either from economic theory or from an appeal to actual facts, than that if all public utilities Avere socialized and the benefits thereof furnished to the people at the actual cost of maintenance and opera- tion, and the present system of private land tenure were preserved, the cost of living to the people as a whole would not be lowered in the least. More land than at present could be held out of use for speculative purposes, and the economic margin might be still further depressed as a result of the added impetus to the rise in land values. Let us assume, however, that contemporaneous with the 340 BISOCIALISM— POLITICAL ECONOMY socialization of all public utilities and the beginning of their operation at cost, all ground values were likewise so- cialized by being appropriated for public purposes and collected into the public treasury by means of taxation. As before, all the measurable benefits of the socialization of the public utilities would be reflected in ground values ; but these values would themselves be socialized and would be expended for the common benefit of all the people. This would relieve producers from all other forms of taxation and would put all land-forms upon the market at their current values for actual use. Such a system could have no special beneficiaries. All the measurable benefits of science, civilization and government would inure to the actual users of the soil, and not to persons whose owner- ship gave them control of land-forms which they did not use or occupy and which, perchance, they had never seen. Let us now assume that under the socialization of pub- lic utilities and their administration in the interests of the people at actual cost, as last above described, the rail- roads were conducted, as at present, at a given rate per mile for the carrying of passengers, and a given rate per hundred pounds, according to distance, for the carrying of freight. This plan would discriminate, as at present, against those living at a distance from the centers of trade. Under a system which socialized all ground rents there would be no economic reason why a man living ten miles from Chicago should be able to reach that city by rail at a cost of ten cents, while a man living one thou- sand miles away must spend ten dollars for railroad fare, if the rate be one cent per mile. The benefit to the man OF PUBLIC UTILITIES 341 living near the city would be reflected in the ground value of his land-form, and at the end of the year this benefit would be covered into the public treasury in the form of taxes. The same would be true of any advantages he might enjoy as to freight rates. This would ultimately place them upon an equal footing as individuals, and their net values would depend not upon the relative desirability of their respective land-forms, but upon their respective ex- ertions. Such a plan would give them substantial equality of opportunity and at the same time furnish the State a natural source of revenue. But in itself this plan would not tend to raise the more remote producer above the then existing normal margin, nor would it tend to raise the margin itself after it had been once normally established. Let us now assume that with the socialization of all ground values, public utilities were also socialized in such manner as to secure for all transportation in the United States a flat rate both for passengers and for freight traffic, after the manner of street car fares in cities where but one fare is charged regardless of the distance trav- eled. This would tend not only to equalize, but to elim- inate the element of distance in all the industrial and commercial affairs of the United States. It would tend to put the land-form upon the Pacific Coast within com- paratively few miles of Chicago. It would be a species of cooperative effort by means of which the people as a whole might overcome the disutility of space to a degree wholly impossible to the individual man, or to society un- der private ownership of public utilities. Let us now further assume that instead of a flat rate 312 BISQCIALISM— POLITICAL ECONOMY made to cover actual cost of maintenance and operation, all forms of transportation by means of public utilities in the United States were made absolutely free to the in- dividual, ground values as before to be turned into the public treasury. In such case the increased benefits of free transportation would be reflected in ground values, and would annually be absorbed into the public treasury to an extent sufficient to maintain and operate all public trans- portation facilities. As a mere business proposition it has the advantage of much greater simplicity and cheap- ness over the plan for a flat rate. The collection of trans- portation charges of all kinds as a part of the annual tax upon ground values would simplify the operation of trans- portation facilities to the last degi'ee, and economically all the purposes of socialization would be most fully sub- served. Free transportation in conjunction with the socializa- tion of all ground values would greatly raise the economic margin. We have seen that the utility of a land-form depends upon two things; its adaptability for use, and its location with reference to the centers of population and trade. If transportation were free, the disutility of distance would be eliminated except in so far as it conjointly involved the element of time. Even if transportation were free, the man who could reach a given market in one hour's journey would have an advantage over one who was com- pelled to journey for a day. There would be a correspond- ing advantage in the matter of shipments by freight. These advantages, however, would be reflected in the OF PUBLIC UTILITIES 343 ground value of the nearer land-form, and by its socializa- tion the two men would be put on a parity with reference; to their opportunities regarding the disutility of time. But the parity would be based upon the status of one more remote. With reference to the disutility of space they would not only be put upon a parit}^ but the status of the one nearer the market would be made the basis of their equality. The advantages of the one more remote would be raised to an equality with the other as to the element of mere distance. If the more remote land-form were upon the economic margin, the status of the marginal pro- ducer would be raised, barring only the disutility of time, to the level of the producer who has his market just at hand. There is not within the range of economic thought so good an illustration of the vast importance of conform- ing the institutions of society to the laws of the economic world. Obedience to the laws of the physical world has made man the master of his physical environment. Invention after invention, process after process, and skill upon skill have added prodigiously to the results of the exertion of labor-power. But despite all these, there remains an army of those who are compelled to toil below the normal mar- gin. To these victims of institutional wrongs the victories of man over the physical world bring no relief. There is still a realm of degradation and despair where women work harnessed with the ox, and in field, factory and mine little children toil their joyless lives away. And so it must remain until society shall understand and obey the laws of the economic world, and so arrange the institution 344 BISOCIALISM— POLITICAL ECONOMY of property that physical laws and economic laws shall work in harmony, so that both nation and individual may conform to the laws of life. When this is done the dread- ful doctrine of Malthusianism may be laughed to scorn, and the dread specters of want and the fear of want will disappear from every normal and industrious life forever. CHAPTER XIL OF ECONOMIC EVOLUTION. Oh, sometimes gleams upon our sight Through present wrong, the eternal Right; And step by step, since time began. We see the steady gain of man. John O. Whittier. Bisocialism presents to the world a definite and com- prehensive working plan. In order to bring about the condition of eqiialitj' of opportunity which it advocates and seeks to establish, bisocialism proposes that certain definite steps be taken in the transition from the old order to the new. It realizes that all these steps can not be taken at one time nor, probably, can they be taken in their logical and most effective order. In overcoming obstacles in the economic world men are prone, as in the physical world, to advance along the lines of least resistance. Local sit- uations and conditions greatly affect men's minds and tend to bring into prominence here one and there another of the phases of economic reform. For these reasons it is wellnigh certain that the socialization of public utilities will precede the more important and fundamental reform embraced in the socialization of all ground values. The steps to be taken in carrying out the plan of biso- cialism are few in number and simple in detail. They are not entire departures from conditions existing under 345 .'U6 BISOCIALISM— POLITICAL ECONOMY the established order, but are steps which can be taken in the course of economic evolution. For instance, we already derive part of the public revenue from the taxa- tion of ground values ; all that is necessary to bring about the fundamental economic reform is to increase the so- cialization of ground values by means of taxation until all ground values are taken and these become the sole source of public revenue. We now have a standard of value which recognizes one of the three economic disutil- ities — the disutility of matter. This standard may be extended until it recognizes also the disutilities of time and space. We already have greenbacks as currency. These are de facto credit-forms as long as they are receivable at par in payment of taxes, although they are issued as debit- forms. We could exchange these dollars for dailors, and thus have credit-forms in name as well as in fact. We now have public ownership, operation and control of some public utilities, notably water works in cities. We can extend this principle to all public utilities. We now have excellent examples of flat rate charges for public utility products and services in water rates, street car fares, and rates of postage. An extension of this principle is all that is necessary to work a partial evolution in respect to such charges. Finally, we have an excellent example of free transpor- tation and the reflection of its benefits in increased rents in the case of passenger elevators in modern office build- ings. What is a system of elevators in a twenty-story office building but a miniature railway system stood on end? Tenants, their customers and clients are carried OF ECONOMIC EVOLUTION 347 to any floor free of charge; but the expense of this service is counted in and becomes a part of the rent for every part of the building. To have a collector of fares in each ele- vator would be intolerable; but the landlord gets his in- come from the elevators none the less. So it might be if all public utilities were furnished by the government free of charge. All the benefits of the service would be re- flected in ground values and could he easily and inex- pensively collected as a part of the public revenue. Pat- ents and copyrights can be abolished by the mere repeal of a few statutes. If these steps were taken one after an- other, or cotemporaneously, as the case might be, a com- plete system of bisocialism would be evolved from the established order. We would then have: 1. Ground values for the sole source of revenue. 2. The current daily return to common labor-power upon the margin — the dailor — for the standard of all values. 3. Government credit-forms for currency. 4. The public ownership, operation and control of all public utilities. 5. The extension of the flat rate principle to all pub- lie utility charges : and, ultimately, 6. Free transportation and the free use of all public utilities. 7. The abolition of all forms of differential privilege. These are the steps in the evolution of bisocialism, which includes not only the socialization of all ground values and all public utilities, but the establishment of equality of opportunity in all things. The plan is simple. 348 BISOCIALISM— POLITICAL ECONOMY is it not ? Desirable, is it not ? Feasible, is it not ? Let "US see what, if anything, stands in the way. There is nothing in the laws of the physical world which says nay to any of these propositions. They are all in harmony with the laws of the economic world. Morality can not set its seal of disapproval upon a work- ing plan which will bring equality of opportunity to all men. Nothing in the world hinders the adoption of this beneficent plan except the institutions, laws and customs of the established order. These constitute not a physical, not an economic, not an ethical, but merely a social disutil- ity; a disutility made by man, the concentrated result of the mistakes of centuries. We are prone to believe, and to act upon the assump- tion, that all the institutions, laws and customs of the established order have their basis in nature and represent the highest and best thought of the ages upon economic subjects. The truth is just the opposite. All peoples have had higher and better conceptions concerning the institution of property, and particularly of land tenures, than those which dominate the world to-day. In Econom- ics, as well as in matters political, intellectual and spiritual, there was a retrograde movement which cul- minated in the fall of the Roman Empire. In other di- rections the lost ground has been regained and great ad- vances have been made in many fields of thought. Eco- nomically, however, the Benaissance has just begun. Economically, we are just emerging from the Dark Ages. Considering its time in the world's history and the traits and environments of the people for which it was intended, OF ECONOMIC EVOLUTION 349 the Jewish code as formulated by Moses furnished the best economic working plan which has ever been realized in actual practice. It came the nearest to giving to all men of a given tribe or nation equality of opportunity and a fair return for effort expended of any code which has dealt with the institution of property. It looked upon the land as the heritage of the Jews as a people, and, to prevent its falling into the hands of a few, this code pro- vided that every fifty years each man should come again into his possessions. "The land shall not be sold for- ever" * is the teaching of the Mosaic code. "The heaven is the Lord's ; but the earth hath He given to the children of men," sang the Psalmist.f "Woe unto them that join house to house, that lay field to field, till there be no place," t warned the prophet when the laws of Moses were forgotten and the land owners exploited the labors of the poor. And in portraying the blessed state of the new Jerusalem which was at all times the ideal of his race, the same prophet said in his final exhortation: "They shall build houses, and inhabit them ; and they shall plant vine- yards, and eat the fruit of them. They shall not build and another inhabit; they shall not plant and another eat." § And he among the Jews of olden time who was said to be wisest of all put into the mouth of the preacher these words: "It is good and comely for a man to cat and to drink and enjoy the good of all his labor * * * * Leviticus, xxv: 23. t Psalms, cxv: 16. t Isaiah, v: 5. § Isaiah Ixv: 21, 22. 350 BISOCIALISM— POLITICAL ECONOMY all the days of his life, which God giveth him; for it is his portion." * The people of the United States are largely of Anglo- Saxon, Teutonic, Celtic, and Scandinavian descent. Yet we maintain a system of land tenure which was foreign to the conceptions of all these peoples until it was forced upon them in the days of feudalism. Joseph Fisher, a Fellow of the Eoyal Historical Society of Loudon, Eng- land, in an essay read before that body in 1875, pointed out the fact that among all these peoples the earth was recognized as a common heritage and was originally treated by them accordingly. The same conception which the Jews expressed in the Mosaic account of the creation of man out of the dust of the earth the Celts expressed in a beautiful figure which recognizes the earth as "perpetual man." Mr. Fisher shows from an extensive historical review that our present system of land tenure is not based upon the conception that tlie earth is our common mother, but upon the harsh dictum of the Roman, rendered sav- age by the lust of conquest: "To the victor belongs the spoils." t William the Conqueror, following the Roman custom, parceled out the land of England among his chieftains to be held by them as tenants of the crown. Under the early feudal tenure the lands were charged with wellnigh the entire maintenance of the State which was then chiefly a military organization. Under this tenure each land owner was obliged to attend the king with a certain quota of men and a certain amount of military * Ecclesiastes v: 18. t History of Landholding in England. OF ECONOMIC EVOLUTION 351 supplies whenever called upon in time of war or local in- surrection. In time some of these military vassals became so pow- erful as to menace the throne; the land owners were all- powerful in parliament; and at the same time the com- mercial interests of the nation had greatly increased. Con- sequently, it so happened that when the king desired to reduce the military prestige of his landed lieutenants, they desired to relieve themselves of a great part of the cost of maintaining the crown. The result was that both king and under-lord worked together to reduce, and finally to abolish the military charges upon the land, and to sub- stitute instead a money charge against all forms of prop- erty and of business enterprise for the maintenance of the State. By means of this change and the adoption of the system of indirect taxation the greater part of the cost of government has been shifted from privilege (primi- tively and still chiefly represented by landholding) to production ; from ground rents to interest and wages. The system of land tenure which we have taken by adoption from the Eonian Empire caused the downfall of that empire itself. In all conquered countries the lands were parceled out to military chieftains and to fa- vorites of the emperor. In the original domain of the Eomans themselves the land was wrested from the peo- ple and concentrated in the hands of the beneficiaries of foreign conquest. The people as a whole then had little or no interest either in their government or in their na- tive land. The world knows the result. When the bar- barians came down from the Xortli and invaded the em- 352 BISOCIALISM— POLITICAL ECONOMY pire they found a people composed upon the one hand of the enervated beneficiaries of privilege, and upon the other of a mass of listless and artless slaves. All fell an easy prey to tlie brute force of the invading hosts. In the language of Pliny: "Great estates ruined Italy." Bisocialism does not appeal to lawlessness. It proposes to carry out its working plan in conformity with the doc- trine that order is the first law of earth as well as of heaven. But this does not imply that the established or- der is sacred. Bisocialism teaches that the established or- der from an economic point of view^ is neither sacred nor tenable; indeed, that it is no longer tolerable. But all the changes which it proposes are to be made in an orderly manner. They can all be made under the present forms of law. Not a new principle of administration need be adopted; not a new function of the State need be added. Bisocialism is radical, but not revolutionary. It advocates nothing but simple economic evolution. It does not pro- pose to abolish the State or to violate the law; but it does propose to better the State and to change the law without hesitation wherever it does not conform to the economic needs of the people. It believes with Emerson that "In dealing with the State, we ought to remember that its institutions are not aboriginal, though they existed before we were born; that they are not superior to the citizen; that every one of them was once the act of a single man; every law and usage was a man's expedient to meet a particular case; that they are all imitable, all alterable; we may make as good; we may make better."* * Politics : Essays, second series. OF ECONOMIC EVOLUTION 353 It is claimed by the advocates of omnisocialism that it, also, is an evolutionary doctrine; in fact, that it is the logical evolutionary outcome of the present tendencies in the established order. Consequently, omnisocialism does not view the concentration of industrial and commercial enterprises in the hands of what are commonly called "trusts" with disapproval, but with approval. Its plan is based upon the contention that this process of monopo- listic concentration will go on and on until all such en- terprises are absorbed by one giant monopoly; and that then the people in their collective capacity will absorb this trust monopoly and thereafter conduct its affairs for the good of all the people. The government will supersede all other monopolies; but it is claimed that in the benefits of its monopolistic features all will share. In other words, omnisocialism proposes to encourage the evolution of the worst feature of the established order and, finally, to base itself upon this feature wlien the latter be- comes so bad as to be unbearable. Bisocialism, on the other hand, proposes at once to abolish the evils of the established order, and out of its remaining features to evolve a system which has nothing but that which is eco- nomically right for its basis as well as for its purpose and its final goal. The standard economists also claim the benefits of the doctrine of evolution in defense of the established order. But as Political Economy under their elucidation has been called the "dismal science," so the view of evolution which they adopt is of that dismal and despairing variety which is stronfflv tinctured with ilalthusianism. 354 BISOCIALISM— POLITICAL ECONOYY According to Malthus the human race tends to increase at a geometrical ratio, while the means of subsistence can be made to increase only at an arithmetical ratio. Be- tween these two ratios there is the same difference as be- tween the results of a multiplication, which doubles a num- ber and then repeatedly doubles the product, and an addi- tion, which simply adds the same number time after time. For instance, the number 1, if used in geometrical pro- gression, gives as a result the series 1, 2, -i, 8, 16, 32, 64, 128, 256, etc.; while the same number, if used in arith- metical progression, gives as a result the series 1, 2, 3, 4, 5, 6, 7, 8, 9, etc. Assuming that in a new country popu- lation tends to double itself every twenty-five years, Mal- thus argued that at the end of two centuries the ratio of population to subsistence would be as 256 to 9, and in three centuries as 4,096 to 13. Consequently, according to this doctrine, the evils of the economic world are now and over have been caused by overpopulation. The only pos- sible remedy, in this view, is one which will check the growth of population, especially among the poor, where propagation has always been greatest. Malthus, who was a clergyman, taught that Providence has provided certain natural checks upon population, such as a result from the loss of life through famines, pestilences, and wars. And that aside from these there remains only the prudential check by virtue of which men and women, especially among the poor, may voluntarily and persistently refrain from propagating their kind.* * For a masterly and complete refutation of Malthusianism in its economic aspect, see Henry George's Progress and Poverty, Book II. OF ECONOMIC EVOLUTION 355 Since the days of Malthus, who published his work on population in 1798, the decimation of population by fam- ines, pestilences, and wars has largely ceased, and the remedy by means of the prudential check does not appear to have been extensively adopted, at least by the poor. Current writers, therefore, have merged the doctrine of Malthus into that phase of the doctrine of evolution which puts great stress upon the theory of the survival of the fittest. It is now maintained that the reduction of great classes of people to that state of poverty which disqualifies and exterminates its victims is but the working out of a natural law by means of which the weak are crowded to the wall in order that only the fittest may survive and perpetuate the race. This modern doctrine, like its predecessor, does not ex- actly serve its purpose when applied to economic phenom- ena. In too many cases this alleged providential working out of natural laws does not destroy the unfit, but simply disqualifies them from self-maintenance and throws them into poorhouses, jails, and asylums, there to become a burden upon those who have shown themselves to be fit to survive. This has led to a discussion among the pres- ent day defenders of the established order, looking toward the reduction of the number of those whom society may adjudge to be unfit, by means of such restraints, not only upon marriages, but upon their personal liberties as will prevent their bringing fellow-beings into a world already apparently overcrowded. But even this presumptuous, arbitrary, and tjTannical action by the State is not deemed sufficient by the more 356 BISOCIALISM— POLITICAL ECONOMY pronounced advocates of the elimination from society of those who are deemed to be unfit to survive and to per- petuate the race. The president of one of the leading uni- versities of the United States has given his approval to the plan of exterminating those who are deemed most un- fit by refusing to them even the hand of charity, and thus allowing them to die. He says : "One thing is certain, in the words of Dr. Amos G. Warner, that the 'function of charity is to restore to usefulness those who are temporarily unfit, and to allow those unfit from heredity to become extinct with as little pain as possible.' Sooner or later the last duty will not be less important than the first."* In this statement there is a suggestion not only that the State should allow these unfortunates to die for want of charitable assistance, but that it should affirmatively assist in their removal in some manner "as painless as possible." To this extremity will the special pleaders of privilege yet be driven in order to avoid recognition of the fact that a majority of these delinquents are simply victims of institutional wrongs which depress the margin and, consequently, oppress the poor. It is not that these people are so weak from heredity or any other cause that they can not cope successfully with their natural environ- ment. It is because their normal environment has been destroyed, and because from birth they are surrounded by conditions which no man, in normal conditions, needs * "Sources of Political Degradation": David Starr Jordan, LL. D., President of Leland Stanford University, in North- western Christian Advocate, June 24, 1894. OF ECONOMIC EVOLUTION 357 to meet, that they are reduced to such dire extremities. The remedy is not to kill them in cold blood, nor to let them die as painlessly as may be, nor yet to leave them to the hand of charity. It is to raise them to their normal level and then gradually to raise that level until no human being will dare to determine, much less to declare, that any man created in the image of his Maker is unfit to survive. It may seem to some, and especially to those who have been most thoroughly indoctrinated with the idea that for present economic evils there is no remedy, that even the full program of bisocialism with its consequent raising of the economic margin can not render unnecessary the terrible struggle for mere subsistence — a living wage — in which the masses of the people are now involved. Let such persons consider this proposition: Suppose that in a given community there are available nine jobs, on the average, for every ten men, with no chance of self-em- ployment. In this condition one man must always be idle, and a continuous struggle among these laborers for employment necessarily follows. They at once bid down to a mere living wage, and even then the struggle will not cease. The one unemployed man continues to be a disturbing factor, and the whole ten men live constantly in want or the fear of want. They are slaves working and living in the guise of free men. Suppose now that by the introduction of bisocialism conditions in that community are changed only to the extent of making ten available jobs for every nine men and of furnishing ample self-employment upon a normal 358 BISOCIALISM— POLITICAL ECONOMY margin. The laborers of that community at once pass from economic sLavery to economic freedom. Wages rise from mere subsistence to what can be made by self-employ- ment upon the margin. Instead of one man constantly seeking a job to the abasement of himself and the terror of his fellows, a job is always seeking an extra man. The man at the margin, not the employer, becomes master of the wage situation. If the tenth job finds a man, it must take him from the margin; it must induce him to give up profitable self -employment. The employer, however, can not be exploited by his laborers. He must so conduct his business that he can afford to pay the normal marginal wage, but that is all ; and of this he would have no reason to complain. The prosperity of the wage earners would furnish a brisk market for his products and he, as well as they, would be relieved of the terrible strain and un- certainty which attends production in the established or- der. The average employer would be infinitely better off under bisocialism than under the present system. Again, it may seem to some inequitable to take from the owner of a farm approximately one-half of the value of its produce in taxation, and take nothing from the in- come of a man who has a like sum invested in, for in- stance, the banking business. But it must be remembered that, once established, bisocialism would regulate values in such manner as to equalize all incomes resulting from equal investments and equal expenditures of the same grade of labor-power. Suppose that, under bisocialism, two men of equal ability, energy, and thrift, and with equal capital, should engage, the one in farming, and the OP ECONOMIC EVOLUTION 359 other in banking. The farmer invests $20,000 in land- forms. He knows in advance that the State will take each year the present worth of the rental value of his farm in taxes, and he pays a price based upon snch a system of taxation. If the current rate of interest is 5 per cent per annum, he buys at a price which will net him 5 per cent after the payment of the tax. Other things being equal, he could purchase about twenty times as much land with $20,000 as at present. In these circumstances the taking of the tax would not harm him a particle. On the other hand, the banker invests $20,000 in his business. He pays no tax at all upon this investment, but his income from it will not exceed 5 per cent in ordinary circumstances. Tf it did, other men would withdraw money from other forms of investment and go into the banking business. It is a mistake to assume that under bisocialism there will be any discrimination in favor of investments in bank stocks, bonds, etc., simply because these, in common with all other things except land-forms, will be exempt from taxation. Still other persons may object to bisocialism because it does not condemn the taking of interest, and eliminate this feature from our economic life. But ]:)liysi(al science might as well condemn the tides of the sea and undertake to eliminate them from the phenomena of nature. Eco- nomic interest arises out of the fact that labor-forms may be so circumstanced as to overcome or mitigate the di.«util- ity of time, and as long as time lasts economic interest will accrue. And as long as economic interest accrues it 300 BISOCIALISM— POLITICAL ECONOMY must be distributed in the processes of the market, and commercial interest will be received and paid. Xor is there the slightest reason for looking upon the payment of interest, in normal conditions, as an economic evil. On the contrary, it fulfills a beneficent function. In tlie natural order, a generation of young men come into the industrial field as a generation of older men seek to leave it. The latter may have accumulated labor-forms, or their economic equivalent in money, for much of which they have no present need. The younger men are so cir- cumstanced that they can use these accumulations to ad- vantage in overcoming the disutilities of time. By the payment of interest these two classes are brought to- gether and, in normal conditions, both are benefited. Tak- ing the community as a whole, there is a prevention of great economic waste, inasmuch as labor-forms, unused, rapidly deteriorate, and money-forms stored away deprive the people of their requisite medium of exchange. Under bisoeialism the rate of interest will probably be greatly reduced because of the removal of artificial disutil- ities which now compel many' men to borrows In normal conditions all borrowing will be purely voluntary, and the desire? of the marginal borrower will control the rate of interest. But under bisoeialism, also, a given income will give greater satisfaction of desire because of the lower- ing of prices wdiich will follow the abolition of all artificial disutilities. The current rate of interest may be reduced one-half, but if the cost of living is also reduced one-half, the lender will be relatively as well off as before. Under bisoeialism there will not arise and persist a OF ECONOMIC EVOLUTION 361 class of lenders not (at some time) laboring. Nor will there arise and persist a class of borrowers habitually ex- ploited becanso of their necessities. The evils of the pres- ent system of usury will disappear, 1)ut interest as an eco- nomic phenomenon will persist. The number of voluntary interest-payers will probably increase. If so, this will in- dicate an increase of economic opportunity and prosperity^ in the community so affected. The evolutionary program of bisocialism does not pur- port to be able to eliminate from human life all the struggle for subsistence. It recognizes that this struggle has its beneficent side, and that without it and the neces- sity for it, all progress would end. But it distinguishes between that struggle which is necessitated by nature for overcoming the disutilities of matter, time and space, and that fiercer struggle which is necessary only because of those institutions, laws and customs which conflict with the laws of nature and create false economic and social disutilities. Two men may go out together and unite their energies in overcoming some natural disutility for the satisfaction of their common desires; or they may expend an equal amount of energy in contending between themselves for the possession of some superior natural opportunity for satisfying their desires. The former struggle is economic; it uplifts, it ennobles. The second is barbaric ; it degrades, it disqualifies. The former is the struggle justified and contemplated by bisocialism; the latter is the struggle ex- emplified and encouraged by the established order. The one involves an evolution by which man overcomes the 362 BISOCIALISM— POLITICAL ECONOMY disutilities of the natural world by means which arc in harmony with his own highest physical, intellectual, social and moral development ; the other involves an evolution that exempts the successful from further physical struggle, while increasing the physical tasks of the unsuccessful; which gives to society as a whole a one-sided intellectual development, and which puts the institution of property and the entire field of industry and exchange upon a low moral plane. When the evolutionary working plan of bi- socialism is adopted, the struggle of man with man for mere opportunity will cease, those disutilities which are purely social will disappear, and all men will work to- gether in overcoming the disutilities of matter, time and space. CHAPTER XIII. OF THE INDIVIDUALIZATION OF VALUES. To own the source of labor products is to own the labor of others; to own what you produce from that source is to own only your own labor. Nature furnishes gold mines, but men fashion gold rings; the right of ownership is radically differ- ent. Louis F. Post. The most fundamental step in the program of bisocial- isra is the socialization in taxation of all ground values. As has been shown in former chapters, this step will make it possible to adopt the economic standard of value, and to maintain a system of currency issued in payment for labor, services and labor-forms furnished to the State, and redeemable in payment of taxes. It will solve the money question. It will also eliminate from our economic life the basic form of monopoly — the monopoly of natural opportunities. It has also been shown that the socializa- tion of all ground values will furnish the only true basis for the solution of the question of the ownership, opera- tion and control of public utilities; that it will solve the great question of transportation, and, above all, that it is the only economic policy that will raise the economic margin to its normal position and make it possible for all men, with equal opportunities, to satisfy their desires with the least exertion. In raising the economic margin this policy will give to the marginal laborer the full fruits of his labor-power and thus solve the wages question. 363 364 BISOCIALISM— POLITICAL ECONOMY But however important may be the socialization of all ground values and all public utilities, when this has been accomplished it will be no less important that all labor values and capital values shall be individualized to the highest degree. So important is this phase of the program of bisocial- ism that, at the present time, nearly all persons who fa- vor the appropriation of ground values for revenue and the municipalization of all public utilities class themselves as individualists rather than socialists. But any move- ment which seeks to overcome the evils of the established order must emphasize in every possible way the affirma- tive steps in its program. A negative doctrine does not move people to action. Xeither does laying the greatest stress upon the negative phases of a reform movement in- duce people to enlist under its banner. The two most fundamental, the all-inclusive steps in the forward move- ment in the realm of Economics, are distinctively social- istic. It is the socialization of ground values and of pub- lic utilities that gives character to the entire movement as a governmental policy, and that aptly gives to the movement as a whole the distinctive name of Bisocialism. It must at all times be recognized, however, that the final purpose of these socialistic steps, as of the whole movement, is to secure economic freedom for the individ- ual. Any form or phase of socialism which does not tend directly and j^ersistently toward the immediate freedom of the individual has no place in the program of bisocialism. True socialism and true individualism are not in any wise OF THE INDIVIDUALIZATION OF VALUES 365 antagonistic or incompatible. They are the two halves of a consistent whole. The doctrine that every man is entitled to all the values distinctively created, directly or indirectly, by his labor- power necessarily follows, if all men are entitled to per- sonal freedom. To say that a man is free is to say that he is sole owner of himself. But if any man owns himself, he is entitled as of right to his own labor-power, and to have exclusive control of its exertion. If this is true, then it also follows that he owns and is entitled to control all the distinctive results of his own labor-power. He can not own and control his labor-power, if another man, with- out his consent, can own or control the distinctive results of his labor; and he can not own himself, if another man, without his consent, can own or control his labor- power; nor can he own himself, if another man, either by force or by law, can own or arbitrarily control the land- forms upon which his labor-power must be exerted, or upon which he must stand in order to exert his labor- power at all. Property in labor-forms (including capital-forms) has its economic basis in the ownership by man of himself — in the inalienable economic freedom of the individual. If any other man or any number of men under the guise of government, or under the sanction of the law, can de- spoil him of any of his labor values or capital values, then to that extent is any man, so despoiled, a slave. In what- ever form economic slavery may appear, its essence is simply unrequited toil. The taxation of labor values and capital values is usu- 366 BISOOIALISM— POLITICAL ECONOMY ally defended upon the ground that the State protects man in the acquisition, use and enjoyment of labor-forms. But in a former chapter it was sho^vn that in the case of a labor-form there is no increment of its value to which the State may point and lay claim as having created it or caused it to accrue. It has also been shown that all the value of any labor-form directly accrues from the exer- tion of some particular person or persons who give to such labor-form its distinctive utility. So far as any fa- vorable action or protection of the State is concerned, the value of the labor-form is lessened by the extension and improvement of the market. On the other hand, all the measurable benefits derived from the protection of the State are directly and fully reflected in ground values. In this view it appears that the entire value of a labor-form should be left to the person or persons whose labor has given to it that distinctive utility which results in value; and that the State should resort to ground values for its sole source of revenue. It may be said, also, in opposition to the taking of labor values and capital values in taxation that the citizen owes the State no more than the State owes the citizen. From a civic point of view a good citizen is of as much benefit to society as society is to him. From an economic point of view the same thing is true of a producer either in in- dustry or in exchange. Every man who enters the market either as buyer or seller tends to make the market more general, and to increase those gains to society as a whole which result from the socialization of utility. Thus we see that both the benefits of the State to man as an in- OF THE INDIVIDUALIZATION OF VALUES oGl dividual and of man as an individual to the State are im- measurable. There is no more reason why the State should attempt to collect compensation for an immeasurable util- ity conferred by it upon a citizen, than that he should demand a bonus from the State for the immeasurable util- ity which he confers upon it by his participation in in- dustry and exchange. Economic Science is the science of measurable utilities, and its decrees limit the State in the latter's attempt to put a price upon the benefits which it confers, to the only values which reflect such benefits in measurable form, viz., ground values. The attempt of the State to measure in an arbitrary manner its immeasurable benefits, and to reap where it has not sown by taxing labor values and cap- ital values, is so contrary to the laws and principles of Eco- nomic Science that it has always resulted in failure and always must so result. No State has ever yet succeeded in taxing labor values and capital values with any de- gree of fairness, fullness, or success in any way. Such attempts have always been disappointing to the State and disastrous to large numbers of its citizens. Xo one who has ever honestly given this matter even a casual investi- gation has failed to realize that the taxation of personal property, so-called, is utterly unfair and ineffectual ; and no one who has even a passing knowledge of the true canon of taxation has failed to realize that to attempt such taxa- tion is an egregious economic blunder. One of the most comprehensive, thorough and trust- worthy exposures of the inequalities and iniquities of tax- ation under the present system may be found in the Eighth 368 BISOCIALISM— POLITICAL ECONOMY Biennial Report of the Bureau of Labor Statistics of Illinois (1894). This official report discusses not only facts, but also principles concerning the question of taxa- tion, and closes with a recommendation that, as soon as practicable, site, or ground values be substituted in taxa- tion for state purposes, the value of public utility fran- chises being treated as a form of site value. Among many other things, this report shows that for the year 189-4 Cook county, containing the City of Chicago, reported for taxation but 397 fire and burglar- proof safes, while Kane county, containing no large city, and but one-eighteenth as many people, reported 483 such safes for taxation. The average values, by counties, of fire and burglar-proof safes as reported in sixteen counties for that year ranged from $19.54 to $93.30, Cook county being next to the lowest in its valuations. In Cook county a watch or clock was reported for every 157 persons; while in Macon county a watch or clock was reported for every 12 persons, the average values also being higher in the lat- ter county than in the former. The pianos listed in the state ranged in average value from $28.39 in Cook county to $84.61 in Hardin, a county without a railroad, in the extreme southern part of the State. For the same year the value of all the diamonds listed for taxation in Cook county, with its population of 1,250,000, was but little more than $17,000, the law then requiring all property to be listed at its fair cash value. And yet it is sometimes argued that the present system must be maintained in order to prevent persons who wear diamonds from escaping taxation ! OF THE INDIVIDUALIZATION OF VALUES 369 Between the years 1872 and 1897 the laws of Illinois required all personal property to be listed for taxation at its fair cash value, and all real estate (not specially ex- empt) at its fair cash value^, estimated at the price it would bring at a fair, voluntary sale. From 1873 to 1893 the population of the State increased over 50 per cent. Yet the personal property of Illinois as listed for taxation in 1873 amounted to $287,292,809, as against $145,318,406 in 1893, a decrease in twenty years of $141,974,403. The valuation in 1873 was $113.11 per capita, against only $37.98 in 1893. It may be said in reply to this that by common acqui- escence the assessors of the State gradually changed from valuations based upon full fair cash values in 1873 to about one-third of such values in 1893 as the basis of their as- sessments. In a general way this is true, although such action was contrary to law, the statute during all that time remaining unchanged. But a further examination of the facts shows that upon this hypothesis the matter of un- dervaluation is in no wise improved, inasmuch as the re- ductions in value were far from uniform throughout the state. In Hardin and Calhoun counties (both without railroads but with people of a high grade of honesty — for which they were duly punished with high taxes) there was an actual increase of valuations of 3.56 per cent in the former and 13.06 per cent in the latter. In all other counties there was a decrease in valuations ranging from 8.18 per cent in Massac, to 70.84 per cent in Mason county, making an extreme variation in valuations of nearly 84 per cent among all the various counties of the 370 BISOCIALISM— POLITICAL ECONOMY State. As a rule the rate of decrease of valuation was greatest where the increase of actual value was greatest and vice versa; and as a rule the strictly agricultural counties paid more taxes according to population and to the actual value of their property than the counties re- porting other kinds of property. In the same term of years the process of changing (contrary to law) from the actual fair cash value to some fractional part of it as a basis of taxation was applied to real estate, and every county in the State showed a de- creased valuation for the twenty years, ranging from a decrease of 1.33 per cent in Winnebago to 60 per cent in Clay county. Under a system in which the entire ground value of every piece of real estate was taken in taxation every year no inequalities in the assessment of real estate would be possible. All buildings and other improvements would then be exempt from taxation instead of, as now, being assessed with all the inequalities of personal property. It is objected by many that the abolition of personal property taxation Avould permit bankers and others who have investments in stocks, bonds, and mortgages entirely to escape taxation. They practically escape taxation now. In 1894 all the bankers and brokers in the county of Cook (including Chicago), other than national banks, listed for taxation under the head of "moneys of banks (other than national), bankers, brokers, and stock Jobbers" the small sum of $43,925. This included money on hand and in transit, together with the amount of funds in the hands OF THE INDIVIDUALIZATION OP VALUES 371 of other banks, bankers, brokers or others, subject to check, and other cash items not included in the above. Less than one year before the date for the assessment of 1894, in order to allay the fears of the public concern- ing the financial condition of the country on account of the panic then developing, the state auditor of Illinois published a statement of the condition of 27 leading banks of Chicago (other than national) as shown by their sworn reports made pursuant to law. From this statement it appears that these 27 banks alone had on hand on June 5, 1893, cash to the amount of $7,877,637.97; due from other banks, $9,347,333.13; and checks and other cash items, $1,766,800.67, or a total of taxable moneys under these heads of $19,001,771.67. The amount listed by all banks in Cook county, other than national, eleven months later was only $43,925. What, in the meantime, became of the difference, $18,947,846.67? And yet we pretend to tax bankers and brokers to the same extent and in the same way as other people. We also pretend to tax the credits owned by the rich, but the illusion is just as great as in the case of the tax- ing of moneys. For the year 1894 all bankers, brokers, etc., in Cook county listed for taxation credits to tlic amount of $10,000 as reported by the state board of equali- zation. On June 5, 1893, the 27 banks of the City of Chicago above referred to reported to the state auditor the possession of taxable credits, after making all lawful de- ductions, of $1,058,105.25. Between that date and May 1, 1894, these taxable credits had shrunk to $10,000, the shrinkage in eleven months being $1,048,105.25. 372 BISOCIAUSM— POLITICAL ECONOMY As in the case of other forms of personal property, the evasion of taxation of moneys and credits is not uniform throughout the State. The evasions are greatest where there are the most moneys and credits subject to taxation under the law. At the time when the bankers, brokers, etc., of Cook County (including Chicago) reported for taxation only $43,925, the same classes in Peoria county reported $279,684. In Cook county the amount per cap- ita was less than four cents; in Peoria county it was nearly four dollars. In the case of credits the classes in question in Cook county reported $10,000, while in Win- nebago county the amount was $253,514. The amount per capita in Cook was less than one cent; in Winnebago, more than six dollars and a quarter. The conditions described in great detail in the official report, from which we have quoted facts and figures con- cerning only a few of the most flagrant abuses, are not confined to the assessments of 1893 and 1894, nor to the State of Illinois. In every State in the Union similar conditions now prevail. The tax evasions are greater in Chicago than in Peoria because the opportunities are greater, and because the pressure of artificial competi- tion for the use of land-forms drives men to such expedi- ents as evading taxes at the risk of the penitentiary in order to excel, and often in order to survive. In New York the evasions are greater and the inequalities more glaring than in Chicago; but local conditions considered, the in- equalities of personal property taxation everywhere are about as bad as they can be. The rich everywhere con- ceal their property and evade their taxes to a vastly greater OF THE INDIVIDUALIZATION OF VALUES 373 extent than the poor. The poor have so little that it can not well be hidden; it must be openly used all the while. In a similar way, the property of a farmer is open to the inspection of every one and its extent and value arc known to all around him; but in the city it is usually impossible to ascertain what any man is worth in personal property, if he chooses not to have it known. But in either city or country, the more a man is worth the easier it is for him to conceal a relatively large part of his personal property and effects from the assessor. In neither city nor country, however, can he conceal his land-forms. The primary fault is not in the people who evade their taxes; it is in the system of taxation. "This system is in its nature so easily evaded by actively conniving with assessors or passively accepting their fraudu- lent favors that it offers premiums for fraud and perjury, which must be paid by the honest and truthful. Such a sys- tem tends to suppress all honesty and good faith in connection with taxation; it demoralizes the whole community. Even the respectable rich seem to be no more proof against lawless- ness when the law pinches them at the pocket, than the poor when it pinches them at the stomach. "And why should personal property be taxed? Is the supply of personal property a thing to be kept in check, like the liquor traffic in some places by high license, or dogs in others by a high dog tax? Or is it something that the com- munity needs? something that the more of it there is in the community, the better off the people of that community may be? Is it a friend to be invited in, or an enemy to be driven out? No man would experience any difficulty in answering for himself. He wants personal property. The more he gets, the better he is satisfied. Neither he nor his family regard it as a nuisance to be suppressed. Yet every personal property tax increases his difficulty in getting and keeping personal 374 BISOCIALISM— POLITICAL ECONOMY property. Every such tax assists in driving that kind of prop- erty out of his household and keeping it out. Every such tax tends to lower the quality of the personal property he can alTord to own. And every such tax, by thus diminishing demand for personal property, tends to diminish opportunities for employment in making and selling it. "This species of taxation should be abolished."* Leaving now the question of the taxation of personal propert}'^ — labor values and capital values — let us examine, briefly, certain property values, complex in their nature, with reference to the question of their individualization or socialization. These are the values of mining properties, oil fields and similar land-forms. Although held under ordi- nary land tenure, these properties partake of the nature of monopolies since the territories which they collectively oc- cupy are limited in extent; yet they are not monopolies under the definition we have formulated, since their finallness territorially is not a limitation placed upon them by law but by nature. Neither are they public util- ities, since they require neither the private use of pub- lic property nor the special exercise of any public power to make them effective in private hands; no franchise is necessary for their use or operation. Subject only to the limitation of supply, the values of these land-forms do not differ from those of land-forms put to ordinary uses, and the application of the full program of bisocial- ism will completely socialize them through the socialization of their ground values, without making it essential for the State to enter upon their ownership, operation and control, as is necessary in the case of public utilities. * Report Illinois Bureau Labor Statistics, 1894, pp. 353, 354. OF THE INDIVIDUALIZATION OF VALUES 375 Let those to whom it may seem that the full program of bisocialism will not be sufficient to eradicate all the evils which now attend the mining, the oil and similar industries consider the following: If all the coal lands in the United States were open to use and operation, in normal conditions, there would be no scarcity of coal at reasonable prices. As it is, the coal fields have been bought up by great corporations, and more good mining opportunities are held out of use than are used. The corporations owning these coal lands are closely affiliated with railroad companies, so that the own- ers of the mines control the transportation of coal and can secure discriminations in freight rates favorable to themselves and highly unfavorable to "independent" com- peting mine owners and to the public. Monopoly of the natural opportunities for mining coal and of transporta- tion facilities forms the basis of all that is evil in the coal situation to-day. The same thing is true of the situation in all other mining industries and in the oil fields.* The full program of bisocialism will permanently cor- rect both of these evils. If the entire selling value of all natural opportunities were taken annually by the State in taxation, the price of mining lands and oil fields would fall to the present worth of one year's ground rent in each case. This would bring the price of raining properties within the reach of many more investors, but no man could afford, even for one year, to hold any valuable min- ing opportunity out of use. In every year he would lose * For a full demonstration of this fact see Henry D. Lloyd's Wealth against Commonwealth. 376 BISOCIALISM— POLITICAL ECONOMY the entire income from the value of the mine unless he put it to use, and this loss could never be recouped, as now, in increased future selling value. The tax would increase each year along with the value and ahsorb it sub- stantially all. Again, under bisocialism, all transportation facilities would be owned, operated and controlled by the State, and all freight charges would either be uniform at a flat rate regardless of distance or entirely free. This would practically eliminate all differences of location in miniug properties and put all mining enterprises upon an equal footing as to all markets in the United States. In sucli circumstances, and in the absence of any discriminating duties, it is impossible for mining enterprises of any char- acter to be monopolized, or for the prices of coal or other minerals, or of mineral oils, to be maintained above the prices arising in a normal market. The trust monopolies which exist to-day, and whicli have already reached their culmination for this decade, are doomed to almost immediate dissolution unless based upon one of the five primary sources of monopoly, viz. : Patents; tariffs; transportation rebates and discrimina- tions; the private ownership, operation and control of public utilities, including railroads; and the private ov,-n- ership, under present tenures, of natural resources anvl opportunities. Trust monopolies based wholly upon patents are rela- tively transient, being limited by the life of the patent or patents involved. Those based upon tariffs are more or less insecure because of tariff revisions, and of the fact OF THE INDIVIDUALIZATION OF VALUES 377 that so many may compete for the differential privileges involved as to reduce the advantages to a nominal basis. In order permanently and surely to profit by tariff dis- criminations^ the trust monopoly must become compound and include differential advantages in transportation, or, better than all, the control of the home supply of the ar- ticles covered by the tariff discriminations. A trust mo- nopoly based solely upon transportation franchises, re- bates, or discriminations is relatively transient, as fran- chises are nearly all limited in duration and rebates are more or less uncertain, as they may be disturbed by law or discontinued from many causes. But a trust monopoly based upon a monopoly of the natural sources of supply is built upon a rock and will endure as long as the estab- lished order is maintained. Such a trust monopoly, as the Standard Oil Company, naturally draws to itself railroad rebates and discriminations (the Standard Oil Company possessed these at the beginning), the ownership of fran- chises, the advantages of protective tariffs, and the differ- ential benefits of patents in the processes and contrivances of production. The trust monopoly in the anthracite coal regions is of the same nature, and the bituminous coal fiehls are fast falling into the hands of a similar all-inclusive trust monopoly. If the people really want to destroy these so-called "trusts," they must abandon the fiction of taxing the cap- ital stock, the bonds, and the working plants of these great corporations, and apply the whole power of taxation to the monopolistic feature that is the basis of them all. With the full program of bisocialism in force, with its 378 BISOCIALISM— POLITICAL ECONOMY absorption into the public treasury of the differential val- ues of the natural opportunities owned and controlled by them, not one of these trust monopolies could survive a single year. The exemption of the working plants and the products of such enterprises, together with the cheap- ened price of the natural opportunities, would create such an impetus in these fields of industry as the world has never seen. Labor-power would be in great demand, and coal and oil would be both plentiful and cheap. There is an economic reason for the complete socializa- tion of railroads and all other transportation facilities by means of governmental ownership, operation and control. It is in this way only that the disutility of distance may be overcome as between different communities, and that all producers, with regard to this disutility, may be put upon a plane of substantial equality. This is also the only means of progressively raising the normal economic margin after it has been restored through the socialization of all ground values. But there is no economic reason for the complete social- ization of mining and oil-producing enterprises in a man- ner involving governmental ownership, operation and con- trol. All of the equality of opportunity possible in these enterprises will be brought about when ground values and transportation facilities have been fully socialized. But if it be conceded for the sake of argument Ihat after such socialization of ground values and of the means of trans- portation, conditions may still arise which justify or de- mand governmental ownership, operation and control of mining and oil-bearing land-forms on the ground of ex- OF THE INDIVIDUALIZATION OF VALUES 379 pediency, yet the complete socialization of their ground values must first be accomplished. It is idle to talk of the government taking over either mining properties or private land-forms furnishing trans- portation facilities, until the prices of all land-forms have been reduced to their values for present use and occupa- tion. It would be economically unwarranted for society as a whole to pay to present beneficiaries of its special privileges the present values of land-forms. The present values of all land-forms are based, not upon their utilities for the present productive purposes alone, but also i;pon ihcir utilities for future monopoly and speculative pur- poses. Society as a whole by its institutions, laws and customs has given to land-forms all the values which they possess in excess of one year's ground rent in each case. By a change of its institutions, laws and customs to the extent of adopting the program of bisocialism, society can not acquire and retain the differential values of its land- forms; these values under bisocialism will simply disap- pear. When they have disappeared, and not till then, so- ciety can acquire land-forms for the purpose of direct socialization without buying from its beneficiaries that which it has distinctively created and given them without any consideration whatsoever. So that if public ownorsliip of mines and oil fields is eventually to be adopted, the full socialization of their ground values is necessarily the first step ; it can not be dispensed with in any event. But Eco- nomic Science clearly points to the individualization of all -uch productive enterprises, subject only to the socializa- tion of all ground values every year. CHAPTEE XIV. OF INADEQUATE REFORilS AND REMEDIES. National prosperity and rich crops have not thus far helped the widow and the orphan. High prices only make poverty more pinching. The hard-earned dollars buy so pitifully little. Isabelle Horton. From an economic point of view the supreme test of every proposed social reform or remedy is this: Does it tend to raise the economic margin? If it does, then to this extent it will permanently benefit the whole people. If it does not, its benefits are limited, at best, to a part of the people, and its ultimate effect is usually to depress the margin. While such a movement may benefit those who are immediately engaged in it, or are the direct ben- eficiaries of it, the condition of those who are below these in the economic scale is made relatively worse. It is the purpose of those engaged in a given social reform move- ment to obta,in better conditions for a certain class of peo- ple. But in spite of all that is done the differential priv- ileges which made these people its victims by depressing the margin still remain; and as long as they exist a part of their baleful effects may be shifted from some persons to others better able to bear them, but the burden as a whole is in no wise lifted. Since the Civil War there have been in the United States several movements of a reform nature that have attracted wide attention. Some of these have sought to 380 INADEQUATE REFORMS AND REMEDIES 381 benefit large numbers of people by reforming persons themselves, as in case of the temperance movement. Others have sought to benefit the same class of people by changing their environment in so far as it influences their personal habits, as in case of the crusade for the prohibition of the liquor traffic. Other reforms have sought to modify the laws of the State which affect certain economic condi- tions, without proposing any fundamental economic changes, as in case of the greenback, populist, free trade, and free silver agitations. While still other reforms seek to affect economic conditions by the cooperative action of certain classes of people, the personal habits and social environment of the people and the laws of the State re- maining substantially the same. These reforms are ex- emplified by the grange movement of the early 70's and by the present day organization of trade unions. None of these movements is devoid of merit, and all are the results of strivings for better things. Some of them are highly meritorious in themselves and have en- listed the sympathies and labors of many very commend- able men and women. But neither singly, nor in any com- bination, nor all together can they solve the economic prob- lem. Each involves a glimpse at least of a great truth, but not one of them has even paved the way for the vital and all-inclusive step which, when taken, will benefit all men by raising the economic margin. It is but a repetition of former discussion to say that the inculcation of temperate habits among the poor, while it benefits them morally and physically as individuals, does not tend to raise the economic margin, but rather to de- 382 BISOCIALISM— POLITICAL ECONOMY press it. Anything which renders a neighborhood more desirable for residence purposes tends to increase its ground rents. The higher the ground rents the greater the ground values to those who desire to own their own homes. Under the present system of taxation and land tenure a sober, thrifty, and industrious people are fined by increased cost of living for maintaining these virtues. It is a mistake to assume that drunkenness is a prime cause of poverty; rather is it true that poverty, or at least that economic condition which breeds poverty, is a prime cause of drunkenness. These facts are beginning to be understood and appreciated by some of those who have consecrated their lives to the temperance and pro- hibition movements. In her later years Miss Frances E. Willard stated over her own signature that "The present economic condition of the country, the misery of the mil- lions of our people, the vast number of the unemployed, and the still larger number forced into unnatural em- ployment at small wages, call for reforms which, if they could but be brought about, would vastly diminish the tendency to drink." And in speaking of the proposal of Henry George for the appropriation of ground rent for the sole revenue of the State, she said that she recognized in this movement "an effort to establish a principle which, when established, will do more to lift humanity from the slough of poverty, crime and misery than all else; and in this I recognize it as one of the greatest forces work- ing for temperance and morality." * * Letter to Chicago Question Club, September, 1894. Pub- lished by the Club. INADEQUATE REFORMS AND REMEDIES 383 In the first of these quotations Miss Willard grapliieally pictured the results of a depressed economic margin, and distinctly showed that she realized that the depression was unnatural and caused by some force outside the victims themselves and beyond their control. In the second pass- age quoted she did not hesitate to recognize and advocate the adoption of the remedy that will do more than "all else" to extirpate poverty, crime and misery. This is strong language and shows that she fully appreciated the fact that the socialization of ground values in taxation is the fundamental economic reform. The temperance movement made its appeal to the in- dividual, and sought simply to change him and his habits. The prohibition movement goes further than this, and recognizes that the evil of intemperance has a social and economic aspect ; consequently its appeal is made not alone to the individual, but also to the makers of the law. For this reason the prohibition movement has entered the field of political action. Another agitation for reform which necessarily entered the field of politics was the greenback movement. This movement had behind it the great economic fact that the government can issue and maintain at par paper money to the amount of its current annual expenditures without any means of redemption other than the full and free acceptance of such currency in receipt of taxes. This fact, however, was never clearly seen by the greenbackers them- selves, and their party platforms and recognized literature were burdened with projects for the issuing of ton lame. and even of unlimited amounts of paper money without 384 BISOCIALISM— POLITICAL ECONOMY any feasible plan for redemption at all. Besides this, the greenbackers attempted to create a primary reform in a matter of secondary importance. The money question, however grave, is not the fundamental economic question. An improved or even a perfect currency system constitutes but an additional advantage of good government, and its measurable benefits will inevitably be reflected in ground rents and ground values, and will surely inure to those who are enabled by law to appropriate and enjoy these forms of value. This is also true of all the measurable benefits which would accrue from the remedies proposed by tariff reformers and by the advocates of the free and unlimited coinage of silver at the existing ratio of 16 to 1. It may be admitted that metallic money based upon two barter metals is less subject to monopoly and to private manipulation in various ways than if based upon a single metal, and that the parity of the two metals could be maintained indefinitely by arbitrarily making both an unlimited legal tender for all purposes public and private. But the bimetallic standard, if adopted and successfully maintained, would not conform to the true economic standard of value. It would still practically ignore the disutilities of space and time. In itself it would con- tain no distinct recognition of the greatest of all monetary principles — the principle of government credit-forms re- deemable in receipt for taxes. The distinguishing feature of the populist movement in addition to its demand for "fiat/' or practically irre- deemable paper money, is its demand for the loaning of this money to the people, particularly to farmers, at a rate INADEQUATE REFORMS AND REMEDIES 385 of interest much below the ordinary commercial rate. This was one way in which the large increase of paper money was to be put into circulation. Another way was through the erection by the government of great public works. Neither of these plans has any economic basis. If the money were loaned by the government, as demanded, upon the ordinary basis for security, those who needed money the most could get none at all, while those who needed it the least could get it readily. What the people need is not the loan of money by the government at any rate of interest, high or low, but an opportunity to pro- duce upon a normal margin. To the man upon an arti- ficially depressed economic margin the gift of a mere ad- vantage in interest rates would do no permanent good. The advantage would be taken from him in increased ground rents. The effect of government expenditures for public works is too well known to require statement. It is to increase the value of all land-forms in the vicinity of such works to the differential advantage of the land owners, as own- ers, and without any measurable benefit whatever to the land users, as users. The inevitable result is an increase of ground rents. Bisocialism would expend money for public works — much more than at present. But it would appropriate substantially all of the increased value of neighboring land-forms in the reimbursement of the State for its expenditures and for further improvements for the benefit of all the people. The agitation in favor of lower tariff does not involve any fundamental reform, On the other hand, it tends to 386 BISOCIALISM— POLITICAL ECONOMY perpetuate the established order by making it a little more tolerable for certain classes of producers. It calls for a tariff for revenue only; the true economic reform calls for no tariff at all. The working plan of bisocial- ism recognizes a natural source of revenue for the State, and provides a simple means by which this source may be utilized, A tariff for "revenue only" creates artificial differential privileges which some may enjoy at the ex- pense of others. The socialization of ground value for revenue not only fails to create any artificial differentials, but it serves to obliterate all natural differentials and to put all men upon a plane of equal external opportunities. It has been shown in a former chapter that neither the principles nor the working plan of bisocialism recognizes as beneficent the creation of differential privileges for the so-called protection or encouragement of home industry. If all the institutional shackles were removed from indus- try and exchange, and men were allowed to produce freely upon a normal and normally improved economic margin, home industry would need no further protection or en- couragement. In the meantime, during the transition pe- riod, if the people so desire, the so-called protective prin- ciple can be carried out as hereinbefore described without any reference whatever to the system employed in taxation. Aside from the temperance movement, which appealed to the individual, and the other movements mentioned, which have involved political action, two other movements of general interest have arisen in the United States since the Civil War. These differ from all the others in this: They seek to reach their respective ends neither by indi- INADEQUATE REFORMS AND REMEDIES 387 vidual effort and reform nor by direct political action : but by cooperative and concerted action to change eco- nomic conditions, the laws of the State remaining sub- stantially the same. These are the farmers' movement, known as the grange, and the movement among wage earn- ers by virtue of which they have formed themselves into trade unions. The grange had for its central thought and purpose the elimination of the "middle man." Instead of selling their grain to local buyers, farmers undertook to ship direct to Chicago and other great grain markets. And instead of buying their agricultural implements and other supplies of local dealers they sought to buy direct from the factory and the wholesale house at factory and wholesale prices. In doing these things the farmers ignored the fact that the so-called middle man has economic functions to per- form, chief among which is the function of overcoming, for others, the disutilities of space and time. With refer- ence to shipping their own grain the farmers met great obstacles in the matter of getting proper shipping facili- ties when needed, and reasonable prices in the grain markets for storage and other necessary charges. They were willfully discriminated against by railroads and warehouses and by grain buyers in the central markets. In the matter of purchasing supplies, cash had to accom- pany the order in most cases, so that comparatively few working farmers could take advantage of this plan. At its best the grange movement could do nothing for the marginal farmer, and if it had succeeded, it would have resulted in increasing ground rents and the prices of 388 BISOCIALISM— POLITICAL ECONOMY farms. The next generation would have found it just so much the more difficult to get access to the soil. Its at- tempt to eliminate the middle man and his net value from the economic field stamps the grange as a sporadic step in the direction of omnisocialism. The movement toward trade unionism is somewhat dif- ficult of economic analysis. Its principles have not always been definitely and clearly stated, and its working plan does not always harmonize with the statement of its prin- ciples. Nor is the attitude of trade unionism toward current economic conditions always the same. At some times the tendency is toward the strike as the first and most effective means for the enforcement of its demands; at other times it advocates arbitration as the chief means of attaining its ends. At some times it is headstrong, willful and even arrogant; at other times, moderate, con- ciliatory and even meek in the presentation of its claims for recognition. It is born of false economic conditions, and it adopts the means nearest at hand for opposing these conditions, without any considerable inquiry as to first causes or ultimate remedies. Many of its leaders adopt the views of the standard economists and look upon the conditions which now exist as the natural outcome of a necessary struggle for existence, and maintain that no permanent remedy is either possible or desirable. They utterly ignore the difference between the struggle of man with nature under normal conditions, which uplifts and ennobles him, and the struggle of man with man in abnormal conditions, which degrades and embrutes him. Tn the midst of a world in which millions are daily in INADEQUATE REFORMS AND REMEDIES 389 want or the fear of want, and in which human misery is so great as to convince Professor Huxley that the "advent of some kindly comet which would sweep the whole affair away" would be a desirable consummation in the absence of any other remedy, sonic of these leaders of labor are actually afraid lest the people might acquire the means of satisfying their desires with too little exertion. Says one of their number: "Whatever there may be of truth in any and all theories the trade unions will strive to attain, but that there is a final, a full solution of the labor question we deny. * * * To those men and those women who are seeking for a solution of this great labor question in its entirety I would advise that they turn their attention to the problem of perfecting a mechanism for perpetual motion, or seek the fountain of endless youth. I have no hope or even a desire that this great question shall be solved. For should that day ever come to humanity, all incentive for activity and progress would be at an end and the race would either go back to savagery or dis- appear from the face of the earth."* In all the realm of literature there is no better special plea for the preservation of the established order sub- stantially as it exists than this. And yet these words were spoken by a man who is the accredited representative of thousands of those victims of the established order who seek relief through trade unionism. His demands at pres- ent are higher wages and an eight-hours day. To-morrow and next year the demand will be different, perhaps, if these are attained, but care is to be taken to keep the laborers from acquiring too much leisure. * John B. Lennon, Secretary Journeyman Tailors' Union of America and Treasurer American Federation of Labor. 300 BISOCIALISM— POLITICAL ECONOMY The doctrine of the foregoing quotation is based upon the assumption that in order to settle the "great labor question" it is necessary entirely to overcome all the dis- utilities of matter, space and time, and to reduce all labor-forms to spontaneities. This is not true. Such an assumption fails to make any distinction between the problem of creating satisforms and the problem of dis- tributing them. Political Economy docs not exhaust itself with the creation of satisforms. This is primarily a ques- tion of industrial science. There has been no lack of progress and successful achievement on that score. The prime question of Political Economy is to determine in what manner satisforms which are created by modern in- dustry can justly be distributed and enjoyed. It is not possible now, and never will be, to produce all satisforms entirely without labor; it is possible now, and ever will be, to divide the products of labor in a just and proper man- ner. This is the "great labor problem" — to give to the laborer his due under the institutions, laws and customs of society. To hope that the real labor problem may never be solved is to hope that industrial wars shall never cease and that economic justice shall ne'er be done. The view of the labor problem stated in the above quota- tion may be that of a few trade unionists who draw salaries fully commensurate with their abilities and services, but it is not that of the rank and file of the men in the trade union movement. They feel, if they do not fully under- stand, that it is neither the "niggardliness of nature" nor the unalterable decree of evolutionary development that stands in the way of the enjoyment by them of the full INADEQUATE REFORMS AND REMEDIES 391 fruits of their labor, but that their condition is the result of institutions, laws and customs of society which are susceptible of change. Their leaders must offer them something more than a perpetual struggle for an eight- hours day and a living wage in order to retain their confi- dence and support. The great labor problem can be solved — ^must be solved — but it must be done in such manner as to give to the laborer his due as a matter of right, and not as the result of a continuous industrial war- fare with all its wastes, its hardships, and the surrender of individual liberties such as any form of warfare ex- acts from the members of an organized army. When the laborer has wrested from nature the products of his toil, he is entitled to his reward without engaging in a per- petual warfare with the beneficiaries of legal privilege, however successful he may be in carrying on such war. Success attained in such a struggle is after all an eco- nomic failure. As conducted at present, trade unions are military rather than economic organizations. Men who have no inclination toward them, and even those who are actually opposed to them upon principle are forced to join them in order to get or to retain work and to avoid social ostracism. The unions often enforce their demands by strikes which, even when no violence is used, are almost as destructive to property as war. Like the general of an army, the leader of great labor organizations is necessarily an autocrat. Like any other autocrat he may use his power and author- ity wisely or unwisely. But in spite of this autocracy where democracy should rule ; in spite of the warlike do- 393 BISOCIALISM— POLITICAL ECONOMY structivencss of strikes; in spite of the arbitrary rules by which trade unions limit the number of apprentices, the number of hours a man may labor each day, the amount which he may do in an hour or a day in a given vocation ; in spite of the ostracism of the non-union man, and of the boycott of the business man who, with or without just cause, falls into their disfavor; in spite of all these things and more, if trade unionism could ultimately solve the labor problem ; if it could bring about a state of equality of opportunity; if it could destroy all differential privi- leges; if it could raise the economic margin to its normal position and maintain it there; if it could do any or all of these things, its shortcomings could be overlooked and its methods condoned. But trade unionism alone can do none of these things. In a thousand years, unaided, it can accomplish not one of these ends. It can not bring about equality of oppor- tunity; for the present inequalities are created or main- tained by law, and laws can be changed only by political action. Trade unionism especially disclaims and eschews political action. For the same reason it can not destroy a single differential privilege ; at the best it can only make the beneficiary give up to his employes a part of his dif- ferential gain. The consumer would still suffer. Labor unionism can not raise the economic margin. The mar- gin has been depressed by conditions pertaining to land tenure, and land tenure is distinctively a matter of law. But aside from these things, trade unionism can never improve the condition of the man who receives the mar- ginal wage. His remuneration is controlled in the labor INADEQUATE REFORMS AND REMEDIES ;i93 market by the product of the self-employed laborer upon the margin, and can not artificially be increased and suc- cessfully maintained beyond the value of the product of this marginal laborer. No movement for the solution of the labor problem, or even for the amelioration of the laborers' condition can long succeed that does not extend to the marginal laborer. He is the marginal buyer and the marginal seller in every general market. He is the determiner of prices of all labor-forms and the ultimate arbiter of all wage questions. If the trade unionist seeks a permanent solution of the labor problem, let him support his organization as faith- fully as he may in all its laudable endeavors, but let him never lose sight of the fact that as a trade unionist he is opposing artificial condition with artificial condition, force with force, cunning with cunning. He is a warrior in a war not of his own making nor of his personal fault. While the war lasts it may be his duty to fight. If so, as a trade unionist, let him fight prudently and valiantly. But it is his highest duty as a citizen to enter the field of political action and by his vote to bring about a condi- tion of affairs in which industrial wars will be no more. Let him remember that all industrial wars are man-made, and that in the realm of economics, as in the realm of politics, "War's a game which, were their subjects wise. Kings would not play at." CHAPTER XV. OP SOCIAL DISUTILITIES. Man's inhumanity to man Makes countless thousands mourn. Robert Burns. The present wretched social arrangements are the only hindrances to the attainment by almost all of an existence made up of a few and transitory pains and many and various pleasures. John Stuart Mill. In the early part of our investigation we found that men seek to satisfy their desires with the least exertion ; that the problem of production is to devise ways and means by which all labor-forms may be reduced, as nearly as possible, to spontaneities. Economics gives no counte- nance to any theory which involves the idea that a given project is to be commended because it "makes work" for the people. In normal conditions all men may find plenty of work. The legitimate question of economic produc- tion is not how to make as much work as possible, but how to get the greatest results from a given expenditure of effort. To the satisfaction of man's desires through the exer- tion of labor-power nature interposes but three physical disutilities. The external world presents to him mate- rial substances suited to his needs, but seldom in the form of spontaneities. The matter which he proposes to put 394 OF SOCIAL DISUTILITIES 396 to use must first be changed in form; or it must be removed to another place; or a certain time must elapse before it can be utilized. Usually all of these elements are involved, though one or the other distinctively pre- ponderates. These natural checks upon enjoyment which would otherwise be spontaneous we have called, respec- tively, the disutilities of matter, space and time. ^ The distinctive problem of industry lies in overcoming the disutility of matter. By mastering the laws of mat- ter and force — two phases of the same thing, although apparently opposite in character — men may not only avoid many of the resistances of the physical world, but may even turn destructive forms and forces into beneficent agencies of production. The distinctive problem of exchange is to overcome, as nearly as possible, the disutilities of space and time. From an economic point of view the problem of industry is comparatively simple. It involves chiefly the laws and processes of the physical world. But exchange is more extensive in its scope and more complex in its details. It directly involves the question of interest, a question which, in the absence of the market, would never appear at all. It first brings into existence and then forces into the highest prominence the phenomenon of ground rent. As soon as men begin to cooperate in industry and to compete in exchange the disutilities of matter, space and time begin to assume a social aspect. In normal condi- tions one man ceases to produce upon his own account, and enters the employment of another. The question of his compensation at once arises. He naturally asks as 396 BISOCIALISM— POLITICAL ECONOMY much as he could obtain by self-employment, and need accept no less. The question of wages emerges, but at this stage it is simplicity itself. Soon one man loans certain labor-forms to another en- gaged in industry and thus enables the latter to overcome the disutility of time by eliminating the necessity of wait- ing for results in some process of production. Economic interest here emerges. Finally two men want to occupy the same land-form at the same time, and the disutility of space forbids. One of them gets possession and is powerful enough to retain it. The other offers him a price temporarily to surrender his advantage. Thus ground rent emerges. In all of these instances it will be noted that while the several disutilities have assumed a social aspect they are, at bottom, disutilities of nature. They are not of man's making. The association of men in production has occa- sioned the manifestation of wages, ground rent and in- terest, but has not primarily caused the disutilities of matter, space and time. When government has been instituted among men the State, by means of its institutions, laws and customs, may affect disutilities in three different ways. It may bring all men into such economic relations with one another and with their physical environment as to lessen all physical disutilities to all the people; or it may favor some men at the expense of others so that the disutilities of nature will be lessened as to the former and increased as to the latter; or it may create new disutilities by putting upon a part or all of the people burdens of which nature itself OP SOCIAL DISUTILITIES 397 is innocent. We shall discuss these attitudes of govern- ment toward people and property in inverse order. A man is born into the world, and in his infancy is not distinguishable from a ihousaiul others. His parents may be people of riches, of ordinary comfort, or of poverty ; of culture, of common education, or of ignorance. He grows to manhood in association with his fellows having, in com- mon with them, the heritage of all the history, the achieve- ments and the progress of the race. He is educated in the public schools. In his mature years he invents a ma- chine or a process which greatly diminishes the disutility of performing a certain task. In ordinary circumstances his invention would at once become common property, and all might equally benefit thereby. Nature says to this man that by his invention he has simply interpreted aright a natural law — a law which he did not create and which he is powerless to change. The accumulated wisdom and progress of centuries has enabled him to do this. His immediate environment led him to concentrate his thought upon it. In the desert of Sahara or the wilds of Siberia his feat would have been impossible. Having inherited from all the past, he, in his turn, is enabled to add to the legacy of the race. In normal conditions all men would be free to adopt this invention and thus obey the economic law of gravity by which they are impelled to satisfy their desires with the least exertion. But the State interposes an artificial disutility. It grants to this inventor a patent, by virtue of wliich he can prevent his generation from using this improvement in production at all unless he chooses to 398 BISOCIALISM— POLITICAL ECONOMY put it upon the market. If he puts it upon the market, he or his assigns — usually the latter — are enabled to erect and maintain an artificial barrier between the people and the greatest satisfaction of their desires. In justification of this arbitrary action of the State, it is claimed that patent laws are necessary to encourage in- vention. There is nothing to support this contention. Inventors are born, not brought into existence by bribery. A real inventor needs no more incentive to bring forth the child of his brain than to propagate his race. But even if this claim were true, the existing patent laws are wholly unjustifiable. If the present generation is indebted to one of their number for giving concrete expression to a new thought, let the generation as a whole pay him a bounty, having some relation to the benefit which he confers. Or, let it fix upon a royalty which any one may pay or secure to the inventor, and then manu- facture or use the patented article or process to his heart's content. By the existing laws the State gives to the in- ventor letters of marque and reprisal against the industry and commerce of its own citizens. This is indefensible as a matter of politics as well as of economics. A patent right is an artificial disutility created by the State, and under bisocialism it would be destroyed entirely, or it would be socialized; it would not be allowed to interfere with the productive enterprise of any individual in an arbitrary manner. Another form of the same kind of artificial disutility created by the State is manifested in the law of copyright. Xo book of merit was ever written under the inspiration OF SOCIAL DISUTILITIES 390 of a copyright, nor ever will be. If the State is to mak(^ a discrimination in favor of authors, let it do so in the form of socialism. If their work is distinctively a com- mon benefit, let the disutility of maintaining this benefit be socialized like the cost of maintaining the public schools. Let us have systemic socialism — not sporadic socialism here, and the worst form of economic privateer- ing there, in regard to matters of the same economic import. Patents and copyrights do not constitute the only forms of social disutility, nor the worst. A man near the po- litical boundary of the State creates a labor-form or raises a crop and can get the greatest satisfaction of desire by exchanging his product for that of another producer across the border. But the State says. Nay! It erects between these two men a legal barrier which separates them as effectually as would a chain of mountains. The economic law of gravity bids them exchange their prod- ucts. If they obey its dictates, they are arrested and brought into the courts of their respective countries. Eco- nomics says to them, as they stand at the bar: "Well done, thou good and faithful servants. Go thou and cre- ate other utilities, and exchange thy products freely." But the State sends them to jail. A man earns a competence, and thinks that he can sat- isfy his desire for scenery and recreation better in a for- eign country than in his own. The State permits him to go. While there he sees manufactured products of his own country for sale much cheaper than at home. When he prepare^ to return he sees that he can satisfy hi? 4U0 BISOCIALISM— POLITICAL ECONOMY desire for certain articles of apparel, jewelry or whatnot, with less disutility by buying the desired articles abroad than by buying them at home. He obeys the economic law of gravity. But when he arrives at port in his own coun- try he is met by men who search his person, ransack his baggage, and often administer an oath with one hand while extending the other for a bribe. After such an expe- rience he goes forth feeling either that he has been un- justly despoiled, or that he has committed the crimes of perjury and bribery. Such a system constantly puts be- fore the custom house officers and employes the greatest temptations and incentives to venality, and leads men to the corrupt practices of perjury and bribery who would scorn such deeds in the ordinary affairs of business life. But even when honestly administered and scrupulously obeyed, tariff laws are a source of untold annoyances, hardships and extortions. "On the slightest suspicion that a passenger has concealed dutiable goods, the law gives absolute power to the customs officers to strip the suspected person naked; and this power is habitually exercised. * ♦ * The oppressions which have been practiced upon millions of poor immigrants arriving in the United States have never been even faintly described. For many years it was the uniform practice to make them pay enormous taxes upon every article, however trifling, which they had not actually used and soiled. Cases are well known in which a poor woman, who had only one pair of stockings (which she had kept clean for landing, going barefoot on the ship) was taxed 80 per cent on this pair; and men having only two suits of clothing have been taxed upon one suit more than it cost. Nine officers reported their names for honorable mention, on their joint seizure of two yards of flannel, which a poor Irish v.oman kept clean until her arrival. These are OF SOCIAL DISUTILITIES 401 but small Instances of vast numbers of similai' petty and contemptible extortions which are carried on, not from corrupt motives, but in zeal for the enforcement of crooked taxation."* But the iniquities of tariff legislation are not confined to those who live near the political border, those who go abroad, and those who immigrate. Every man and woman in the land is a victim. If a tariff is laid upon a satis- form which is not produced in this country, the disutility of satisfying a desire is artificially increased to all the people. If a tariff affects satisforms produced here, the competition of foreign trade is restricted and more must be paid for such satisform, whether domestic or im- ported. Two economic evils arise from this fact. The natural law of the market which reflects the price fixed by the marginal pair is interfered with, the price is arti- ficially maintained, and all the people lose the benefit of the socialization of utility which would otherwise result from a lower price. Again, the disutility to the people as consumers is not confined to the payment of higher prices for imported satisforms. All domestic satisforms of the same class are sold at a price artificially raised and maintained by the curtailment of full and' free competi- tion. It is not simply the amount of the tariff taxes that is taken from the people. The money paid out in higher prices for domestic satisforms is often double, and not infrequently is five or six times the amount received by the government as revenue. It is claimed that the money thus received by manufac- turers in the higher prices of domestic products is paid * Thomas G. Shearman: NaUiral Taxation, pp. 20, 21. 402 BISOCIALISM— POLITICAL ECONOMY out again to domeslie laborers in higher wages. If this were true, it would furnish no economic justification for the tariff system ; it does not pay to rob Peter to pay Paul. But it is not true. Wages are determined by the return to self-employed labor upon the economic margin, and every differential privilege granted to others tends to diminish the opportunity of the marginal producers. If there were any increase in the marginal return because of the tariff, it would be swallowed up in ground rent, ■under existing land tenure. In a new country, such as the United States, general wages may be relatively high in spite of tariff laws, but never because of them. The people of any country are entitled to receive and to pay the normal marginal wage for each respective kind and class of labor — no more, no less. Producers are en- titled to receive, and consumers to pay, the normal mar- ginal price for all trade-forms and satisforms — no more, no less. All the people are entitled to all the benefits of all the socialization of utility which a normal market af- fords. They are entitled to economic as well as to per- sonal and political liberty. They are entitled to apply their labor-power to their physical environment without the interposition of any artificial barriers; and having done this, they are entitled to exchange their products where and with whom they please. When they have over- come the disutilities of nature and have surmounted the barriers of mountain and sea, they have done all that economics or the law of evolutionary development demands. It is no defense of the tariff system to say that the OF SOCIAL DISUTILITIES 403 State is required to create and maintain these artificial disutilities in order to provide for itself a revenue. Na- ture has provided the State with a source of revenue dis- tinctively its own. The land-forms of every country are recognized as having been originally the property of the whole people. In the first instance, land-forms have always been held by the people in their collective capacity or by the government representing the sovereignty of the State. The value of the land-forms of any country is the concrete expression of the measurable benefits which so- ciety as a whole confers 11/ on its individual members. This value is unearned by the people in their individual capacities. It is a collective product, and belongs of right to the people as a whole. To take ground value from the individual who has distinctively done nothing to create it is not to add a single disutility to his pro- ductive efforts. It simply puts him upon a par with the man who produces upon the marginal natural opportunity. It equalizes the disutilities of production, leaving to the individual every increment of utility which is distinctively his own. Said John Stuart Mill : "Suppose that there is a kind of income which constantly tends to increase, without any exertion or sacrifice on the part of the owners; those owners constituting a class in the com- munity, whom the natural course of things progressively enriches consistently with complete passiveness on their own part. In such a case it would be no violation of the principles on which private property is grounded, if the State should appropriate this increase of wealth, or part of it, as it arises. This would not properly be taking anything from anybody; it would merely be applying an accession of wealth, created by circumstances, to the benefit of Foriety. instead of allowing; 404 BISOCIALISM— POLITICAL ECONOMY it to become an unearned appendage to the riches of a par- ticular class. "Now this is actually the case with rent. The ordinary progress of a society which increases in wealth is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were, in their sleep, without working, risking or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies?"* This language is used by Mill in an argument favoring the appraisal of all the lands in England with a view thereafter to take all increase of ground value for the pur- poses of public revenue. If this plan were adopted in the United States, then to the amount of the future increase of ground values taken for revenue, the disutilities of taxation upon labor values and capital values would cease. The evils of the tariff system would be lessened, but not destroyed. Such a step, if taken, would be in the right direction, but it would be only a step. It would tend to raise the eco- nomic margin, but it could not restore it to its normal position. It would afford no opportunity for the raising of the normal margin itself. In order to do this, all ground values must be socialized and public utilities must be conducted upon a flat rate basis covering only actual • Principles of Political Economy, Vol. II, Book V, Ch. 11, 8 6. OF SOCIAL DISUTILITIES 405 cost; or, better yet, all such utilities should be free in order to overcome, so far as possible, the disutility of space; for the element of transportation enters into all public utilities. Great as are the disutilities imposed upon production by the present system of taxation, their direct effects are small compared with the disutilities of the established system of land tenure. In order to satisfy his desires by the exertion of labor-power, a man must have access to the opportunities afforded him by nature — at least for standing room. No matter what may be his energy, abil- ity and skill; no matter to what extent these may be sup- plemented by the use of capital-forms, he is helpless un- less he can have access to some land-form. If he is de- nied all access to land-forms, he is confronted with an absolute disutility and must perish. If he is denied ac- cess to all desirable land-forms except upon payment of rent, then to this extent a disutility is placed upon the net effectiveness of his labor and capital; to this extent his labor values and capital values must be reduced. To a certain extent, however, this disutility is produced by nature. It can not be evaded entirely. Two men can not have the exclusive possession and use of the same land- form at the same time ; and under a commercial system the man who is permitted to possess and enjoy a desirable land-form must pay ground rent or ground value to some man, or to some body of men, for the differential privi- lege. Ground value is simply capitalized ground rent paid in advance. In a competitive system of industry, ground rent in one form or the other is a fixed charge upon 406 BISOCIALISM— POLITICAL ECONOMY production. It must be paid, and its payment reduces the rewards of labor and capital by just so much. Again, the expenses of government constitute a fixed charge upon the values created by the people, and must be paid out of the results of current production. In the established order the disutility of gi-ound rent is borne by the people, and is paid by them out of the rewards of their industry to the private owners of the land. The disutility of supporting the government is also borne by the people, and practically from labor values and capital values. The amount now contributed by land owners, as owners, is doubtless more than offset by the sums ex- acted from the people in indirect taxation which never reach the public treasury at all. So that, on the whole, labor and capital are now called upon to meet first the disutility of ground rent, and then the disutility of the maintenance of government. In the regime proposed by bisocialism labor and capital will be entirely relieved of one of these great disutilities. Producers will continue to pay ground rent, to the extent of its present worth, each year. But this will be paid directly into the public treasury in lieu of all other forms of taxation. Instead of supporting a class of landlords who, as stated by Mill, "grow rich as it were in their sleep, without working, risking or economizing," and also sup- porting and sustaining the government, capital and labor need only support and sustain the government and let the landlords seek investment in productive enterprises. The disutility of ground rent is natural and necessary; the disutility of government is natural and necessary. But OF SOCIAL DISUTILITIES 407 nature has so provided that these disutilities may bo met at one and the same time in one and the same way. Ground rent may be taken for revenue. Private land- lordism under the present tenure has no basis in nature; it is wholly an artificial disutility, unnecessarily created and maintained by law. It is a social disutility and should be abolished, even if its abolition did not involve the solution of the tariff question and furnish the only natural means of meeting the disutility of the mainte- nance of government. It is one of the greatest weaknesses of standard Polit- ical Economy that it is forced to maintain that there is no natural system of taxation; that there is no natural source of revenue for the State. As stated by Nordhoff, government is looked upon as a necessary evil. This is a conception beside which the anarchistic doctrine that gov- ernment is an unnecessary evil is logic itself. Professor Sumner has said that there are no natural laws of taxation. Professor Perry explicitly declares that there can be no science of taxation; and further, that "Nature has given no whisper, that we can hear, about any taxes."* To the same effect is the saying attributed to the cele- brated Colbert that the act of taxation consists in pluck- ing the geese in such manner as to secure the greatest quantity of feathers with the least possible amount of squawking. In exact opposition to these views, bisocialism teaches that government is not only necessary, but that, when rightly administered, it is also positively and unquali- ♦ Perry: Political Economy, 581 (20th Ed.). 408 BISOCIALISM— POLITICAL ECONOMY ficdly good; and that nature has been as beneficent to mankind as to the individual ; to the body politic as to the individual body ; to the social organism as to the organism of the individual man. Each body, each organism, has a natural source of sustenance. In normal conditions the State is neither a robber, a parasite, nor a mendicant. In normal conditions its economic function is not to create and maintain social disutilities, but to assist all its citizens, in every possible way, to overcome the natural disutilities of matter, space and time. CHAPTER XVI. OF SOCIAL SOLIDARITY. If you pass by the least considerable man, you pass by all the humanities and the divinities, and set your heart on what is transient and cheap. There is a wide ocean of difference between taking in the last man and leaving him out. It is not a question of one man, but of humanity. Charles Ferguson. From the time of the advent of man upon earth one question has persistently occupied his attention, and even now most insistently presses for solution. It is this: How can the problem of individual life be made to har- monize with the problem of social life? When a man in isolation undertakes to satisfy his de- sires by the application of his labor-power to the land- forms about him, the problem that he must ultimately solve is how to put himself into the best possible relations with his physical environment. At this stage only ques- tions of physical science press for solution. The eco- nomic laAv of gravity impels him to take advantage of all the laws and forces of nature so far as he is able to under- stand and control them. He seeks to satisfy his desires with the least physical disutility. This economic law of gravity is the basis of all physical progress and is re- sponsible for all growth in the development of physical processes and physical sciences. But in ordinary circumstances man does not satisfy his 409 410 BISOCIALISM— POLITICAL ECONOMY desires in isolation. As soon, however, as production and enjoyment in company with his fellows begins, man is confronted with a social environment of which he must take note either to his advantage or disadvantage. The problem now arising is how to put himself into the best possible relations with his physical environment and his social environment at one and the same time. The simple industrial question begins to assume both an economic and an ethical aspect. The introduction of his fellow men into his environment necessarily compels him to view the economic law of grav- ity in the light of the new condition. It does not readily occur to him that the new condition should place a limita- tion upon the law by which he seeks the highest satisfac- tion of desire with the least effort. Instead of applying the new condition to this law, he is prone to apply the law to the new condition, and to make of his social environ- ment an instrument for the better satisfaction of his own desires, regardless of the desires of his fellow men. He exercises his labor-power in reducing his fellows to sub- jection so that he may enjoy the fruits of their labor as well as his own; and finally, so that he may enjoy the fruits of their labor without any irksome effort of his own. In doing this, he may become their ruler as well as task master, and in such case there is introduced to the world a society based upon the lowest of all social ideals, viz., the ideal of self -enjoyment at the expense of others. Out of this ideal, evolved in this way, have grown the social disutilities of chattel slavery, serfdom, the social and eco- nomic enslavement of women, monarchy, military despot- OF SOCIAL SOLIDARITY 411 ism, modern wage slavery, private landlordism under the present tenure, protective tariffs, monopolies and all forms of differential power and privilege created and maintained by the institutions, laws and customs of society. But this barbaric ideal has not been permitted to exist wholly unquestioned and unchecked. Gradually there has come into the minds of men a higher ideal which has found its best expression in the golden rule. This is the ideal of self -enjoyment, not at the expense of others, but at the expense of self. "Do unto others as ye would that others should do unto you." If this ideal were engrafted upon the original ideal of individual selfishness it would change the economic, law of gravity into the economic law of equal freedom. The law of equal freedom is that in any state of society every man should be able to satisfy his desires with the least exertion, provided that he does not thereby interfere with the equal opportunity of every other man to do the same. The ideal of the golden rule — of self-enjoyment at the expense of self, of loving thy neighbor as thyself — was given to the world in its highest form nearly two thousand years ago. A few souls here and there have accepted this ideal and have actually conformed their lives to its teach- ing. To most men of to-day, however, the golden rule is but a maxim, Christianity is but a cult. As a whole men yet seek to satisfy their desires at the expense of others. The teaching for two thousand years of the sublimest truths within the statement and comprehension of man has resulted in a refinement of the means by which one man may exploit another, but in the realm of economics, men 412 BISOCIALISM— POLITICAL ECONOMY to-day no more conform to the teachings of the Just One than did the generation that nailed Him to the cross. Everywhere even now there exists want and the fear of want in the midst of plenty; a ceaseless unrest pervades the working classes; with every increase in wages goes an increase of the cost of living; and never in all the history of the world have there existed so many nor such gigantic fortunes based wholly upon differential privilege — upon pure and unmitigated greed — as exist to-day. But the laws of economic life can not be violated with impunity, even by those who seek to profit by such viola- tion. There is no gain to the beneficiaries of privilege except that which may be measured in dollars and cents, and in the ability to live upon the unrequited labor of others. Eiches acquired under the established order do not bring happiness, but power ; not pleasure, but leisure ; not the leisure of that restfulness which the soul craves, but of restlessness and ennui. The man who wears his life away in piling up a fortune for his family is con- stantly tortured by the thought that his children will lose their inheritance either through their own dissipation or through the knavery and cunning of others. Hard as is the lot of the child born to poverty, his chance of ultimate success in all that makes life worth living is better, on the whole, than that of the child born to wealth and reared in the lap of luxury. Nature has its punishments and its compensations. It were infinitely better for a man to die leaving a son without a dollar in a world of equality of opportunity, than with a million dollars in a world where all natural opportunities have been appropriated, and OF SOCIAL SOLIDARITY 413 where all sorts of differential privileges are created and maintained by the institutions, laws and customs of so- ciety ; where the whole people, instead of working together for the purpose of overcoming the disutilities of the natural world, are gathered into hostile camps, placing artificial disutilities in one another's way; where in a world in which all might have enough and to spare, the whole tendency of the times is toward the creation and perpetuation of the bitter struggle between those who thrive above and those who exist below the normal eco- nomic margin. As long as the institutions, laws and customs of the established order are maintained in their present form this condition of inequality and differential privilege will con- tinue and its exploitations will increase. The established order offers everywhere a premium upon selfishness; a pecuniary reward to the despoiler of the labors and to the destroyer of the opportunities of others. Not only private individuals, but separate communities look upon one an- other as legitimate prey in the great struggle for suprem- acy. Nations eye one another with jealousy mingled with hatred and fear, and enact into their laws so far as they dare the sentiment of Voltaire: "He who wishes the good of his own country must inevitably wish evil to other countries." This is the underlying principle of all so-called protective tariffs. By these tariffs the people of one country seek to satisfy their desires at the expense of the citizens of foreign countries. This is but a social exemplification of the lowest of all economic ideals, viz., self-enjoyment at the expense of others. A nation calling 414 BISOCIALISM— POLITICAL ECONOMY itself Christian should at least conform, in its national and international polity, to the ideal enunciated in the golden rule — self -enjoyment at the expense of self. For, mark you, the golden rule is not the basic con- ception of Christianity. The doctrine of the golden rule was stated, in negative form it is true, but none the less clearly, by Confucius four centuries before the Christian era, and again by Seneca at Rome about the time that Jesus taught in Palestine. The ideal which Jesus dis- tinctively gave to the world is far more sublime than the ideal of the golden rule. It is not satisfied with simple self-enjoyment at the expense of self. It is not based upon self enjoyment at all. It is this: Self-denial for the enjoyment of others; self-sacrifice in order that others may be saved. This is the highest conception of life that it is possible for man to attain. We have already stated the lowest con- ception — self-enjoyment at the expense of others. Be- tween these lies the ethical (not religious) conception of the golden rule — self -enjoyment at the expense of self; do as you would be done by. One or the other of these conceptions must distinctively govern every individual life. One or the other of these conceptions must distinct- ively govern the social and economic life of every people. The State must so create and maintain its institutions, laws and customs that individual life may harmonize with social life. How may this be done? It will at once be said by some that the State has noth- ing to do with the religious ideals and practices of its citizens — that in the United States, especially, any action OF SOCIAL SOLIDARITY 416 by state or nation in this behalf is forbidden by the con- stitution. But in guaranteeing religious freedom the con- stitution itself has something to do with religion. Any action of the State which tends toward religious freedom is within both the spirit and the letter of the constitution. The constitution of the United States, and the govern- ment under its sanction, now gives to every citizen full liberty to believe and to teach to others the sublime con- ception of Jesus of self-denial for the good of others; but the institutions, laws and customs of the established order prevent any man from living this ideal. No man can adopt Christianity — real Christianity as Jesus exemplified it — as a life, in present conditions, and socially survive. He will become an outcast, if he follows in the real foot- steps of the Master. He will be propertyless and will be cast into prison as a vagrant under the law. He will con- verse with the fallen woman at the public drinking place, and will say of the woman taken in adultery. Let him that is without sin cast the first stone at her. He will inveigh against the mad struggle for property and power, and advise the rich young man to sell all that he hath and give to the poor. Without hope or expectation of reward he will go about doing good. His words will give offense to those in power, and his mode of life will not conform to the accepted standards. He will lay bare the true in- wardness of the hypocrite and drive the modern money changers from the temple. Society will crucify him ; he can not live a life of self-denial and self-sacrifice and so- cially survive. The reason of all this is that our social life is based not upon the highest of our economic ideals, but upon the 416 BISOCIALISM— POLITICAL ECONOMY lowest. The conception that it shows more business abil- ity, more practical acumen, to acquire enjoyment at the expense of others than at the expense of self dominates our whole economic system. Out of this conception and the institutions, laws and customs of society based upon it, have grown numerous and flagrant institutional wrongs. Before there can be any permanent relief from existing conditions these social wrongs must be righted. It is not enough to convert the individual and to save him from his own sin as our churches now attempt to do. Laudable as is this attempt in itself, it is inadequate in its scope, and must largely prove unavailing and abortive as long as social wrongs are left untouched. The pulpit can not adequately reach the pew, if the occupant of the latter is either the beneficiary or the victim of an institutional wrong. In vain is preached on Sunday the uplifting doc- trine of the fatherhood of God and the brotherhood of man to men who, on week days, are engaged in a desperate struggle, either to take advantage of a social wrong or to escape its terrible injustice. And this is as it should be. Men must learn — not only out of the pulpit, but in it — that from social sin there is no individual salvation. Men must realize that on the voyage of life we are all in the same boat. In case of shipwreck upon the high seas we honor as a hero the man who does not attempt to save himself until all his shipmates have been provided with the best available means of safety; and, on the other hand, we brand as a coward a man who attempts to save himself regardless of others, and as a fiend one who attempts to take advantage of the weaknesses and misfortunes of OF SOCIAL SOLIDARITY 417 others in order to enhance his own chances of escape. So it must become in the great voyage of life. In a com- munity where injustice prevails and institutional wrongs constantly oppress the weak and unfortunate in this life, the man who selfishly seeks to save his individual soul for a life to come has a soul scarcely worth saving. Let him first seek social salvation at the altar of Justice; he may then with propriety present his individual soul for re- demption at the throne of Grace. Let him do what he can to harmonize social life with his highest conceptions of individual life. In the establishment of this harmony, however, the indi- vidual is not all in all. Social wrongs are institutional; the institution, not the individual, is primarily at fault. Social salvation must come through social endeavor. The State — the active agent of the social organism — must do its part. Its part is most important, but it is as simple as it is momentous. It must do three things, and do them completely and well : The State must prevent its citizens from acquiring self- enjoyment at the expense of others. The State must compel its citizens to acquire self-enjoy- ment only at the expense of self. The State must make it possible (not mandatory) for its citizens to practice self-denial for the good of others — to practice Christianity as a life, not simply to accept it as a cult — and economically and socially survive. The adoption of the principles and program of bi- socialism will enable the State to do all these things. The principles of bisocialism condemn without qualifica- 418 BISOCIALISM— POLITICAL ECONOMY tion or extenuation the conception that men should seek to satisfy their desires at the expense of others. It incorpo- rates into its economic law of equal freedom the concep- tion that among persons of normal ability and of mature years self-enjoyment should be based only upon self-en- deavor. And its ideal is to bring about such a state of society as will enable people to practice the highest virtues without punishment; to attune their lives to the aspira- tion of the Lord's Prayer: Thy kingdom come * * * on earth as it is in heaven. The program of bisocialism is in harmony with all these principles. It proposes to put all men upon a basis of equality of opportunity by the socialization of all the dif- ferential advantages of nature as fully reflected and measured in ground values. All men thus having equal access to natural opportunities, each must prosper ac- cording to his own endeavor. In industry all men will produce upon the level of the man who must occupy the margin. The differential gains of those above the mar- gin, resulting from the use of superior natural advan- tages, will be appropriated by the State in taxation and expended for the common good. Tenants of superior land-forms under the established order are compelled to pay the value of the advantages of location and fertility to their respective landlords, and thus to put themselves upon the economic plane of the marginal producer. Bi- socialism will extend the law of the margin to land owner as well as land user, and in this way all land differentialb, as among individuals, will disappear. Under bisocialism not only will the man who has the OF SOCIAL SOLIDARITY 419 exclusive use or control of a natural opportunity pay for the privilege, but all those who suffer the disutility of standing aside while he uses and enjoys will be recom- pensed through the socialization of ground values. The expenditure of these ground values in improved and cheap- ened — ultimately free — public utilities, particularly in the matter of transportation, will progressively raise the eco- nomic margin. This will improve the condition of the marginal producer, and through him all others will be benefited. Those who are above the marginal producer will not prosper at his expense as now, but only as he prospers and because of his prosperity. Throughout the entire field of industry there will be manifested the feel- ing of all-in-the-same-boativeness — the elevating influence of social solidarity. Under bisocialism no man can acquire any artificial ad- vantage over another under the sanction of the law. The State will destroy all existing artificial differentials except such as will expire by limitation within a reasonable time, and will refuse to renew or further to create such differ- entials. It will profit no man anything under bisocialism to attempt to acquire a differential advantage in the use of land-forms, because the full market value of such ad- vantage will be taken from him annually in taxation. Nor under bisocialism will it specially profit any com- munity to secure differential advantages in the way of public works or the erection of public buildings. The present day scandals of river and harbor bills and like laws by congress or legislature for the expenditure of public moneys will cease. The financial benefits to be 420 BISOCIALISM— POLITICAL ECONOMY derived from such expenditure will at once be reflected in the ground values of the favored community, and its peo- ple, in the course of years, will pay into the public treasury the full equivalent of all the financial or measurable bene- fits received. If one city prospers more than its neigh- bors, its prosperity will be exactly registered in its ground values, and in their socialization through national and State taxation all less fortunate cities will share. Under bisocialism the selfishness which now impels men to violate the economic law of equal freedom, and to sat- isfy their desires at the expense of others will have no sanc- tion in the institutions, laws and customs of society. That which a man may gain through inequality of opportunity will either be forbidden or it will be socialized through the public appropriation of ground value. In the same way the selfishness which now impels communities to se- cure differential advantages by means of national and state appropriations of public funds will be thwarted, and persons and communities alike will come to realize that, advantage or no advantage, appropriation or no appropria- tion, all must give an exact equivalent for what they get. When this is once perceived and thoroughly understood, people individually and collectively for selfish reasons will drop their selfishness, and will set themselves to in- quire how they can best do something for the benefit of those who occupy the margin. In the play and interplay of the forces governing the established order the sordid selfishness of man is dominant and generates untold individual suffering and social wrong. But when the laws of industry and exchange are OF SOCIAL SOLIDARITY 421 understood aright, the selfishness of man will save him — individually and socially. He can then become free with- out placing his fellows in bondage; he can put away care without becoming a vagabond and witli increase of seff- respect; he can cooperate with his fellows, live without strife, and laugh at want and the fear of want — and still be a human being. He can make the selfsame selfishness which curses him to-day bless him to-morrow. In order to attain the economic redemption of man it is not necessary to eliminate from his life the element of selfishness, nor to change human nature in the slightest degree. It is necessary only to realize the essential ele- ment in the law of economic life. The economic forces of tliis world are so ordered, and their benefits so bestowed, that true egoism and the highest altruism are extremes that meet. Constantly to increase the opportunities of the man who is at the bottom of the economic scale is at once the most selfish and the most unselfish of all eco- nomic polities. Even as Jesus said to His disciples, "He that is least among you all, the same shall become great," so Economic Science says to its votaries: Behold the MAN AT THE MAEGIN ! Let him reign ! INDEX Abnormal market, 79. Absolute disutility, 70. Absolute utility, 55. Aid-form, 71. Alternative cost, 99. Alternative cost, point of, 99. Anarchism, 17, 23. Anarchism, definition of, 20. Anarchists, 17, 259, 260. Anarchists, evolutionary, 18, 19. Anarchists, revolutionary, 18. Auxiliary capital, 130. Balance of trade, 275, 276. Banks and banking, 226, 227, 358. Banks, brokers, etc., taxation of, 370, 371. Bimetalism, 384. Bisocialism, 29, 30, 31, 293, 306, 316, 317, 318, 347, 364. 407. Bisocialism, definition of, 306. Bisocialism, working plan of, 300, 315, 345, 347, 352, 362, 386. Boehm-Bawerk, E. von, 189, 190. Bureau of labor statistics, re- port of, 162, 368. Buyer, capable, 66. Buyer, marginal, 84, 145, 146, 147. Canon of taxation, Adam Smith's, 250, 251, 253, 254, 273. Canon of taxation, true, 255, 256, 257. Capable buyer, 66. Capable seller, 74. Capital, 130. Capital, auxiliary. 130. Capital, differential. 155. 156. 295. 298. Capital, pure, 130. Capital-form, 57. Capital value, 131. Captains of industry, 308. Charity, 312, 313, 314. Collective ownership, 26, 27. Commercial disutility, 71. Commercial utility, 69. Common labor-power, 153, 196. Common marginal unit of dis- utility, 97. Common marginal unit of utility, 92. Compensation, 319. Competitive system, 31, 34, 117. Complex monopoly, 238. Compound monopoly, 238. Conflicting theories, 23. Copyrights, 304, 398, 399. Cost, 97, 301. Cost, alternative, 99. Cost of production, 124, 125, 140, 269. Cost of reproduction, 125, 140, 269. Current credit-form, 76, 211, 213. Current debit-form, 76, 211. Current trade-form, 76. Credit-form, 205. Credit-form, current, 76, 211. Credits, taxation of, 372, 373. Dailor, 217, 219, 223, 227, 346, 347. Debit-form, 204. Debit-form, current, 76, 211. Desire, 35. Differential capital value, 295. Differential labor value, 155, 295. Differential land value. 156. Differential privilege, 228, 230, 231. Differential values, 142. 155, 156, 228. Disutility, 42. 423 424 INDEX Disutility, Disutility, S9. Disutility, unit of, Disutility, Disutility, Disutility, Disutility, Disutility 193. 346, Disutility 193, 343, Disutility 193, 343. Disutility, Disutility, Disutility, Disvalue, absolute, 70. commercial, 71, 87, common marginal 97. industrial, 71, 87. immeasurable, 97. marginal, 53. measurable, 97, 106. of matter, 127, 128, 395. of space, 127, 128. 346, 395. of time, 127. 128, 129, 346, 395. point of, 43, 93, 94. relative, 70. social, 348. 94. Economic evolution, 345. Economic equivalents, 100, 129. Economic function of the State, 261. Economic imperative, 258, 259, 263. Economic law of equal free- dom, 300, 301, 411, 418. Economic law of gravity, 63, 276, 300. 399, 400, 409, 410. Economic margin, 144, 265, 269, 281, 294, 342. Economic margin, depression of, 264, 265, 266, 267, 268, 310, 380. Economic problem, 13, 16. Economics, 16, 105, 106, 126, 394. Economic science, 15, 16, 17, 35, 38, 80, 106. 126, 259, 291, 367, 379. Economic science, branches of, 16, 106. Economic science, definition of, 106. Economic standard of value, 193, 306. Economic standard of value, definition of, 196. Economic tests, 262. Economy, political, 106. Ely, Richard T., 113. Emerson, Ralph Waldo, 352. Equal freedom, law of, 300, 301, 411. Equality of opportunity, 300, 301, 307, 311, 347, 348. Established order, 16, 20, 24, 264, 309, 312, 314, 315, 318, 352. Established order, definition of, 278. Evolution, economic, 345. Exchange, 56. Exchange, point of, 101. Fisher, Joseph, 350. Flat rates, 341, 342, 346. Franchise, public utility, 234. Franchise differential, 156, 298, 397. Franchise value, 234, 252, 253, 303. Free silver movement, 381, 384. Free trade movement, 381. Free transportation, - 341, 342, 346. Freedom, law of equal, 300, 301. 411. George, Henry, 382. Government, reason for, 17, 23. Governmentalism, 17, 20. Governinent, economic func- tion of, 261. Grange movement, 381, 387. Greenback movement, 381, 383. Greenbacks, 213, 346. Ground rent, 162, 396, 407. Ground rent and ground value, 157. Ground rent, law of, 188. Ground value, 162, 170. Ground value of residence lots, 162. Ground value, socialization of, 29. 257, 383, 419, 420. Group, marginal, 81, 84, 144, 145. Huxley, Thomas H., 32. Illinois bureau labor statistics, report of, 162, 368. Immeasurable disutility, 97. Immeasurable utility, 92, 367. Inadequate reforms and reme- dies, 380. Industry, 56. Industrial disutility, 71. Industrial utility, 69. Individualism. 20, 21, 22. INDEX -125 Individualization of values, ?,63. Institution of property, 16, 17. Institutions, juridical, 79. Interest, 128, 129, 189. 190, 191, 359, 360, 396. Interest, law of, 188. Intermediate utility, 57. Irksomeness, 41, 42. Jevons, W. S., 112. Jordan, David Starr, 356. Juridical institutions, etc., 79. Justice, 313, 314. Labor, 39. Labor cost theory of value, 111, 119, 120, 145. Labor differential, 155, 295, 298. Labor-form, 40, 41, 71, 150. Labor-form, marginal, 53, 54, 90, 91, 95. Labor-power, 39. Labor-power, common, 153, 196. Labor-power, superior, 153. Labor-time checks, 26, 27, 280, 281. Labor-time, social, 26, 280. Labor value, 119, 120. Labor value, defined, 131. Labor value, differential, 155. Land differential, 156, 296, 298, 418. Land-form, 121. Land-form, marginal, 144, 294. Land-form, superior, 145, 158. Land tenure, 171, 173, 350. Land value, 123, 124, 137, 302. Land value, defined, 140. Land value, forms of, 158. Lennon, John B., 389. Malthus, 354, 355. Malthusianism, 38. 344, 353, 354. Margin, economic, 144, 265, 269, 281, 294. Marginal buyer. 84, 85, 86, 143, 145, 146, 147. Marginal disutility, 53. Marginal group, 81, 84, 144. Marginal group, definition of. 145. Marginal labor-form, 53, 54, 90, 91, 95. Marginal land-form, 144, 294. Marginal net value, 154. Marginal pair, 73, 84. 128, 150, 269, 281, 294. Marginal producer, 145, 147. Marginal return, 145, 197, 294, 310. Marginal satisform, 57. Marginal seller, 81, 85, 86. 142. 146. Marginal utility, 53. Marginal value, 142. Marginal wage, 402. Market, 35. Market, abnormal, 79. Market, normal, 79. Market price, 89, 95. 'Marx, Karl, 117, 285, 289. Matter, 127. Matter, disutility of, 127, 128, 193, 346, 395. Measurable disutility, 97, 106. Measurable utility, 92, 106, 367. Medium of exchange, 201. Middle man, 387, 388. Mill, John Stuart. 108, 111. Milton, John, 190. Mines, taxation of, 374. Money question, 196, 363, 384. Moneys, taxation of, 370. Monopoly, 234, 265, 266. Monopoly, complex. 238. Monopoly, compound, 238. Monopoly, simple, 238. Monopoly differential, 156, 297, 298. Monopoly value, 234. Net salvage, 99. Net value, 94, 95. Net values, differential, 155. Net values, marginal, 154. Nordhoff, Charles, 23. Normal conditions, 79. Normal market, 79. Oil lands, taxation of, 374. Omnisocialism. 26. 276, 279, 299. 315, 318, 353, 388. Omnisocialism, defined, 292. Onerous utility, 44. Order, established, 16, 20, 24. 264. 426 INDEX Origin of values, 127. Ordinary trade-form, 76. Patent rights, 231, 304, 397. Personal property, taxation of, 367. Perry, A. L,.. 112. Pliny, 352. Point of alternative cost, 99. Point of disutility, 43, 93, 94. Point of exchange, 101. Point of immeasurable utility, 101. Point of positive utility, 45, 93, 94. Point of spontaneity, 43. Political economy, 106, 309, 353, 390. Political economy, standard. 25, 240, 241, 269, 271, 329, 407. Populist movement, 381, 384. Positive theory of value, 114, 121. Positive utility, 45. Positive utility, point of, 46. Present conditions, 79, Present worth, 162. Price, 89, 100, 281. 301. Privilege, differential, 228. Producer, 56, 125, 301. Producer, marginal, 145, 147. Production, 56, 125. Prohibition movement, 381, 383. Property, basis of, 365. Property, institution of, 16, 17. Protective tariff, 274, 301, 304, 305, 386, 413. Public utilities, 231, 233. Pure capital, 130, 131, 149. Reforms and remedies, inade- quate, 380. Relative disutility, 70. Relative utility, 55. Rent, ground, 162. Rent, law of, 188. Residence lots, ground value of, 162, 282. Return, marginal, 145. 197, 294, 310. Salvage, net, 99. Satisform, 57. Satisform, marginal, 57. Schaffle, Dr. A.. 27. Seller, capable, 74. Seller, marginal, 81, 146. Seller is a producer, 116, 117. 125, 126, 160, 301. Senior, N. W., 285. Service, 39. Shearman, Thomas G.. 400. 401. Slavery, essence of, 365. Smith, Adam, 250. 251. 253, 254, 273. Socialists, Bellamy, 28, 29. Socialists. Christian, 28. Socialists. Marxian, 28, 29. Socialism. 20. Socialism, quintessence of. 27. Socialism, sporadic, 21. Socialism, systemic, 21, 26. Social disutility, 348, 361, 362. Social labor-time, 26. Social solidarity, 409, 419. Socialization of utility, 103, 230, 272. 277, 299, 366, 401, 402. Socialization of values, 246, 383 Space, disutility of, 127. 128, 193. 343, 346, 395. Sporadic socialism, 21. Spontaneity, point of, 43. Spontaneous utility, 44. Standard economists, 22, 24, 353. Standard of deferred pay- ments, 208, 209, 210, 220, 221. Standard of value, 196. Standing aside, 138, 139, 140, 419. State, the, 16. State, economic function of, 261, 262. State, economic effect of, 396. Submerged element, 312. Superior labor-power, 153. Superior land-form, 145. Systemic socialism, 21, 26. Tariff for revenue only, 384, 385, 386. Tariff, protective, 231, 274, 386. 413. Tariff system, 273, 399, 400, 401, 402. Taxation, 246, 407. Taxation of bankers, etc., 370, 371. INDEX 427 Taxation of credits, 371, 372, 373. Taxation of ground values, 370. Taxation of mines, 374. Taxation of moneys, 370. Taxation of personal prop- erty, 367. Taxation, Smith's canon of, 250, 251, 253. 254, 273. Taxation, true canon of, 255, 256. 257. Temperance movement, 381, 382, 383. Time, disutility of, 127, 128, 129, 193, 343, 346, 395. Tolstoi, Leo, 315. Trade-form, 71. Trade-form, current, 76. Trade-form, ordinary, 76. Transportation, 340, 363. Transportation, flat rate, 341, 342, 346. Transportation, free, 341, 342, 346. Trade union, 267. 388. Trust monopoly, 238. Utility, socialization of, 103, 230, 272, 277, 299, 366, 401. 402. Utility, spontaneous, 44. Utility, ultimate, 57. Utility, Utility, Utility, Utility, of, 92, Utility, Utility, Utility, Utility, Utility. 367. Utility, Utility. able. Utility, 40. absolute, 55. commercial, 69. common marginal unit immeasurable, 92, 367. industrial, 69. intermediate, 57. marginal, 53. measurable, 92, 106, onerous, 44. point of immeasur- 101. relative, 55. Value, Value, Value, Value, 196. Value, 303. Value, Value, Value, Value, Value, Value, Value, 121. Value, chise, Values, 363. Values, Values, 92, 108, 281, 301. capital, 131. differential, 142, 228. economic standard of, franchise, 234, 252, 253, ground, 162, 170. » labor, 131. land, 140. marginal, 142. monopoly, 228. net, 89, 94, 95. positive theory of, 114, public utility fran- 234, 252, 253. individualization of, origin of, 127. socialization of, 246. Wages, 185. 186, 188, 189, 197, 206, 294, 363, 396, 402. Wages, law of, 188. Walker, Francis A., 111. Wayland, Francis, 111. Willard, Frances E., 382. Working plan of bisocialism, 300, 315, 345, 347, 352, 362. 386. Working plan of individual- ism, 22. Working plan of omnisocial- ism. 280. Year's purchase, one, 237. Tears' purchase, meaning, 161. Dare D ue FORM 336 4SM 10 -41 i 330. 1 T863B 500408