HB 771 .R35 Copy 1 THE PROBLEM OF = HARD TIMES Price, Fifteen Cents THE DISTRIBUTION LEAGUE 21 Union Trust Building Indianapolis, Ind. Science of Value. No. 6. THE PROBLEM STATED OF DISTRIBUTION SECOND EDITION— REVISED AND ENLARGED by HENRY RAWIE " It is the fool who saith in his heart there is no God. But what shall we call the man who tells us that with this sort of a world God bids us be content ? — Henry George. Copyright secured by HENRY RAWIE. 1909 THE DISTRIBUTION LEAGUE Indianapolis, Indiana 21 Union Trust Building 1909 LiSHARY of CONGRESS Twy CoDies Seceived MAR 20 "i^O^ cuss O-^ ^>^c. No. ^ Tke Problem Stated. fJW rJW fJW t^ Wf0 t^ 1^ The problem of the distribution of wealth is entangled by so many other problems arising from the complexity of trade and from the movements of money that the chief difficulty has been to find the problem itself, to separate it from the intricate maze of facts and to set it out clearly so the reader may see what the writer is trying to solve. Is there one single problem at the foundation which will also solve the great number of other problems that arise in every detail of society and in each of the cur- rents of civilized life? Is the failure of the mass of the people to acquire pro- portionate shares in the rapidly increasing wealth the one fundamental problem, which will bring about equality in all directions? When each man, by his own efforts, may acquire his share of wealth, will he thereby also acquire social standing, freedom and independence, and the self respect which seems natural to a civilized man? Must a man, on the contrary, acquire character, social standing and freedom first, in hunger and poverty, before he may be allowed his share in wealth? At the very outset we are hampered by a vague and uncertain meaning as to what is commonly meant by shar- ing in wealth. We find wealth in two great divisions, which are quite distinct and which consist first of a great quantity and variety of consumable goods necessary to support life and which must be widely distributed. 4 THE PROBLEM STATED. The very nature of this primary wealth, the ease with which it may decay and is lost, the necessity for its rapid production and consumption, prevents any considerable part of wealth being made up from this class. The second great division, however, is capable of almost indefinite expansion and consists of the value of all natural resources of forests, farms, mines, rivers and lakes, sites for cities and towns, beside the multitude of improvements of every kind in buildings, factories, ships, railways and other forms of fixed property. In the first, or primary division of consumable goods we can each have but a relatively small share at any time and we are required to quickly restore the part consumed. If, for example, the value of goods consumed in one year at retail prices equal fifteen billion dollars and wages equal fifty million dollars a day, the share for each person is less than one dollar per day. It should be clear that however we may expand this primary wealth and however great the stores we may accumulate, we cannot expect to have more than a few days' supply on hand at any one time. But in the second division of fixed property, we do not have a fluctuating supply, but have a spring of wealth with almost incredible power of increase. It is very important to clearly distinguish between these two classes of wealth. It should be clear at a glance that the problem of sharing in wealth has two important parts ; in order to live we must each have at least a minimum share of food and shelter, but, if we are to enjoy liberty, to have security, to achieve social standing and develop self respect, we must also secure our share in the more per- manent and much greater volume of fixed property. THE PROBLEM STATED. MONEY AND WEALTH. We find our problem entangled by another complica- tion, for may we not have our wealth in money or in credit payable in money on demand. Aside from the fact that money is onh^ valuable because it may at any time be exchanged for a certain portion of any kind of prop- erty, the relation between money and property is of the very greatest importance in distributing wealth among the people. So important is the money question, Proudhon declared, that if anyone could always obtain the value of his property in money, and the value of his labor in money on demand, all other problems of civilization would be solved by nat- ural regulation. So great was his faith in the money ques- tion that he believed if all forms of labor or property could be made exchangeable for money on demand, equality would be so readily attained that government by Force would soon be replaced with government by Public Opinion. This proposition of Proudhon became the basis of Anar- chism. What we call prosperous seasons are periods of rising prices for goods; periods when property and labor readily exchanges for money. And conversely, what we call hard times are adverse periods when it is difficult or impossible to exchange labor or the value of property for money. It may follow that in this variation of the ease or difficulty with which we sell labor or property for money, the real problem may be hiding. Having a given volume of money, subject to no serious expansion or contraction, there are nevertheless periods of great variation ; times when money is obtained freely on demand and other times when it is difficult or impossible to get the value of labor or property in money. 6 THE PROBLEM STATED. This difference in exchange is plainly the result of the difference in value of money during rising or during falling prices. Prices are the names which money gives to different quantities of value and, while money is stationary in value other values alone are subject to change and the difficulties of exchanging property for money appear on the surface of trade. When prices are increasing and the value of money is stationary, the money must be exchanged for property, which is advancing in price or the owner of money fails to get a share of the increase. On the other hand, if prices are falling, the owner of property must exchange it for money which does not change, in order to avoid a loss. This law of circulation is quite clear when considering money as a measure of value only, but v/hen we add the more important function that money alone can accumulate and secure the gains from rising prices, the inducement to exchange property for money or to refuse to do so, is even more powerful. If, for example, A owns one thousand dollars in money and merely holds his money during a rise in prices, his money has lost purchase power. In order to escape this loss, A must exchange his money for some property, which he may sell for more money and then again exchange this money for something else that will sell for a higher price; and for this reason men become eager to buy and sell for money. But these are merely spasmodic movements depending upon a rising market, the speculation of which forces a reaction and the adverse condition obtains control ; is there no natural movement that would cause a continuous desire to exchange money for labor and property? THE PROBLEM STATED. 7 There is fortunately a natural condition wherein men would be eager to buy and sell for money, although prices were stationary or if they declined, within certain limits. The natural condition of trade where buyers would ever be eager to exchange money for labor and goods is found when the product can always be sold for more money than it cost. This situation would not require a shifting of buyers from one commodity to another depending upon a rise in price, but is the natural result of always having more money in circulation with which to buy goods than is required to be paid to produce them. Notwithstanding this important function of money, there is no mistake more general than that men of wealth command great sums of money and that such men may bring about periods of rising or of falling prices. Money is a time-saving device and, like any other tool, it must be in constant use in order to have value, and it is only useful when in circulation. Money cannot be monopolized or controlled because it has no inherent or intrinsic value and is only valuable because it has employed labor at some desirable work for a definite time, and repre- sents a cash credit which labor must redeem on demand. The condition which governs the value of money is also the condition that governs the circulation of money because a dollar when once spent must be newly earned and newly endowed with value before it may again be spent unless it is used merely as a measure to determine the value of exist- ing property. It is this necessity of earning its value by labor, working during a fixed time that prevents money from accumulating as wealth and keeps it divided and dis- tributed in small units among millions of people. Altho we may not be allowed to accumulate money without danger of loss we may accumulate what is nearly as 8 THE PROBLEM STATED. good; we may have credits, payable in money on demand. Thus, while laws of value may put straws in the way of hoarding money, we may accumulate credits calling for five or more times the money in existence and the frantic efforts of men to meet these calls for money will force a temporary corner in money and produce a panic. The problem will now become a little more distinct by bringing in credit and by demonstrating that prices also depend upon credit as well as upon money, for it is self evident that what a man buys on credit creates as an effective a demand as what a man buys for cash. But this credit buying will appear to' be spasmodic because every credit presupposes an equal debt which must be paid, and for every expansion of prices on account of credit, there must be a corresponding contraction of prices to pay debts. Such, however, is not a true statement of the case because it omits the vast accumulation of credits in stores of goods and in fixed property whose price is always depending upon a volume of secondary, or credit money in circulation. CREDITS. To get a clear understanding of credits, it is necessary to understand the relation between the two great classes of wealth and the two great classes of currenc3^ In order to carry forward our modern system of business where each man is working independently and buys what he consumes, we need a great' store of goods on hand to meet the enor- mous demands from tens of millions of consumers. Cash money is restricted by natural law to circulate in the pro- duction and distribution of primary goods because when once spent for goods, it must be newly earned before it may again be spent. THE PROBLEM STATED. 9 But the truth must be carefully noted that prices of improvements, of fixed and income bearing property, are not determined by the volume of cash in circulation, but are determined, on the contrary, by a volume of credit money quite as exacting in its requirements as cash. No doubt, this may be a surprising statement as it is contrary to all theories of finance, but because this truth was not dis- covered, Proudhon failed in his scheme of free banking and all schemes of expanding the currency are doomed in advance to fail. It is a well known fact that a very large per cent of all business is done upon credit and it is remarkable that the significance of this fact should so long have escaped obser- vation. It may appear that when a man has been required to produce the cash to pay for a house and lot, the volume of money determines the value or price of such property but such is not the case. A man cannot buy property unless he has accumulated a credit in some form by which he secures the temporary use of cash to make the exchange and, in such case, money is purely a measure of value, and the value of the property itself is determined by the volume of credit available with which to buy it. The chief function of money in the modern business world does not go beyond the first great class of wealth. The volume of consumable goods on hand is generally very much less than the volume of fixed and income prop- erty, which may be ten times as great as the value of goods. It becomes a very important question then, if the price of goods is determined on one hand by the volume of cash in circulation and the price of income property on the other hand depends upon the volume of credit payable in cash. 10 THE PROBLEM STATED. This important truth is easily demonstrated because the volume of money in circulation is limited to the sums paid out in wages and to the wages spent for goods at retail prices. If we pay fifty miUion dollars a day in wages, we have but fifty millions to circulate, but cannot spend this money so quickly as to have the same money to pay the same wages the next day. For this reason the payment of wages requires a cer- tain volume of money that will enable us to pay for example fifty millions each day for as many days as may be necessary before the amount required for each succeeding day is re- leased by being spent. When this volume of money has been reached, the circle closes and a store of goods has developed to equal the value of money, and there is no method by which this volume of money may be increased which will not at the same time increase prices and absorb more money. If we should attempt to expand primary money by allowing merchants and property owners to secure new money with which to conduct business, to buy other prop- erty or to pay debts, we would at once encounter a law of value that limited primary money to primary circulation, and the greater volume of money would only increase primary prices, leaving secondary property where it was before the expansion. A merchant, for example, takes a supply of money, five thousand dollars, with which he builds a store building and then calls upon .his credit for another sum of five thousand dollars with which he buys a stock of goods. The money used in building and in buying goods is used for primary purposes, is paid out to labor and distributed, retaining the same value and performing a like service in other directions. THE PROBLEM STATED. 11 But a residue of wealth remains, which cost ten thous- and dollars and consists of a building and a stock of goods, an increase of wealth without an increase of cash. The reason this building and stock of goods must have its value fixed by secondary or credit money, is because it has never been completely paid for and represents a credit belong- ing to the merchant, which has been advanced to him out of the surplus not required to maintain life. There is also another, and equally important, reason why the value of this property cannot be sustained by the volume of cash in circulation; it must prove to be a true credit, to be worth more than it cost by being able to sus- tain itself from its own profits. It is on account of this law which limits primary money to primary prices and secondary money to secondary prices that we secure equality in wealth and prevent a building being valuable that has no other excuse for existence than the eccentricity of the owner. UNEQUAL DISTRIBUTION. Bearing in mind the wide general truth that property divides into two great classes of primary and secondary and that currency divides into two classes of primary and secondary, we may advance another step in clearing the way for our problem. In a general survey of the wealth of the world, we find find it consisting of a great volume of primary goods limited to present needs and a great volume of property accumulated from the past which is more or less intimately connected with the volume of goods. It seems quite nat- ural that the volume of primary property, being limited to temporary needs, should have its prices fixed by a lim- ited volume of primary money. But when we consider 12 THE PROBLEM STATED. the immensely greater volume of property upon which the labor of past generations has been spent, we are in the habit of regarding this property as having had its value piled up and accumulated from workmen no longer living. The laws of nature prevent such a heritage of value from past to present generations, for if there was a credit to some fortu- nate ones descending from the past, there would be an equal debt for other unfortunates. Property is an advantage to the owner whether inherited or otherwise abtained, but the advantage to the owner must be limited to some benefit the living workers derive from the property. This law operates to prevent past per- formance from being inherited as a debt by present work- ers and does so prevent by limiting the value of all property to the circulation of primary and secondary money of the present time. It is falsely assumed that present owners of property enjoy wealth which their ancestors were diligent in saving and accumulating, and who were of exceptional benefit to past generations.^' Such an assumption is true in a limited sense only and the law of heredity applies to social as well as individual inheritance and what we each get from the past, we get without cost as a necessary qualification to prepare us for the increasing demands made upon us by h'gher development. Beside this general statement of the case according to a general law, there are many particular instances in modern life where fortunes that overshadow any past wealth have been secured in a few years by present owners under pre- vailing systems of distribution. If wealth is now distrib- uted so unequally with our boasted gain of intelligence, it may be confidently affirmed that a system equally as bad THE PROBLEM STATED. 13 has promoted the historic inequality of wealth which has cursed the world since the dawn of civiUzation. We are required by laws of progress to discard all we get from the past that is not vital to the present as so much dead wood that is outgrown. We secure much property from the past that is now without price, and the cost to former generations is merged into the profit and loss account of civiUzation. If it is true that we have no concern with the labor of the past in considering the present distribution of wealth, we must infer that there should be rapid changes in distribution, not only in primar}^ property, but in the income property as well. The total wealth of the United States may be roughly estimated at one hundred billion dollars in value, one-half of which is value of land. The total wages paid in one year may also be roughly estimated at fifteen billion dollars, giving a low average of about five hundred dollars a year for each worker. If the value of land is omitted, which is not a part of the circulation paying wages, we find the total wealth produced by labor is only equal to the wages of labor for four years. At this rate, with proper laws to protect the small investments of the people, the entire wealth, land omitted, may easily change owners once every ten years. If the ground work so far laid out presents the true situation, the next step leads to the explanation of the interference with business that prevents a proper distri- bution of wealth. In order to bring the problem from deep obscurity into the half Ught, it was necessary to demonstrate two great divisions in wealth, and to account for prices, it was neces- sary to prove two corresponding divisions in the circulat- ing medium. Another step in advance now proves that 14 THE PROBLEM STATED. workers divide into two similar great classes of primary and secondary. The primary workers are the ones engaged in the production of food and shelter for all the people, which is the primary wealth. The secondary workers are the classes of builders, servants, merchants, clerks and pro- fessionals in many occupations. For the purpose of clearness in illustration, it will be assumed that the total value of the product and total wages divides into two equal parts. Primary laborers, altho more numerous, are paid less, but are paid half the total wage and the fewer secondary laborers being paid more, get half the wage fund. One-half of the laborers produce all the primary wealth consumed by all classes and which must be distributed to each to enable him to live. In the United States, generally speaking, this primary product is distributed among all the people with substantial equality. Altho we have a class of wealthy people and a large class of very poor people, yet the rich get no inordi- nate share of primary products and few among the poor suffer from actual want in normal times. On the other hand, the disparity in secondary wealth is amazing in its brutal injustice. In this class, not only is one-half the wealth taken away from labor as it is being created, but the entire property of past labor is rapidly going, not alone from the working classes, but from the merchant and pro- fessional classes as well, and the share of wealth heretofore owned by a large middle class is fast disappearing and is carrying the middle class away with it. It should be clear at a glance that distribution is having its unequal effect almost wholly upon the most desirable income property of the country, leaving the least desirable in the hands of the shattered middle class. THE PROBLEM STATED. 15 The extent to which this inequality may be carried is also easily explained because as long as the mass of the people may have primary wealth distributed to them, so they may live from day to day, the secondary wealth they create may all be taken away. Thus during all recorded history the common people upon whom the burdens of civilization fell, and whose strong arms carried the human race forward, have been robbed and despoiled by sharing in the pottage, while a few only had a share in the feast. It is also clearly evident how, in modern times, wealth becomes so much more rapidly unequal, while the portion of the mass is also much more abundant. The introduction of machinery greatly increased the quantity of primary stores and at the same time set free a much larger share of the population to create secondary wealth for the spoilers. For some time, therefore, wealth may concentrate in rapid and swollen streams to a few families, and there will be a positive increase in comfort among the millions of workers. It is only by direct and absolute chattel slavery that we can imagine a distribution so diabolical in its injustice from which the mass of mankind receive only food and shelter while a few may take the much greater and more important product, the product upon which the higher development of the soul of man depends. A system of direct chattel slavery, however, would have limitations to the increase in wealth which have been overcome in the modern S3^stem by allowing the greatest freedom among men to strive, to excel, to invent and discover, but nevertheless it takes from most of them all but a bare existence as slavery would do. What then, is the nature of the system whereby the mass have such freedom to work hard, to produce great 16 THE PROBLEM STATED. wealth, to do so much for the progress of the world but yet are held so firmly between fixed lines of want as to be utterly unable to share in the higher freedom and independence that fixed wealth will alone secure? Workmen of to-day are free as Roman athletes and gladiators were free; they are free to acquire knowledge, skill and endurance; free to strive, to excel and compete with others of their class and gain a small prize for success, but must be content with the social position, with the association, and with the portion of slaves. The modern system may be partially explained and accounted for if the slave or working class is given freedom of working, of receiving and exchanging primary money alone and, in some mysterious way, are cut off from all the benefits arising from secondary money. According to such a system the laborers would receive wages determined by demand and supply limited exclusively to primary wealth. Prices would necessarily include all moneys required for taxes for incomes and interest, while all the gains in wealth, all the accumulations would, by a similar law of demand and supply, be apportioned among the class who were struggling to control the secondary money. Or again this unequal system could arise if one class who controlled the property and was able also to control the price, and v/ith half the price would pay the laborers enough to enable them to live and with the other half could take all the surplus wealth for themselves. ■ NATURAL INEQUALITY. Before the more difficult problem may be fully explained there remains a knot to unravel which otherwise would confuse the student. There is a necessary inequality of wealth in operation all the time as one of the primary THE PROBLEM STATED. 17 inducements to urge men to win success against the resis- tance of Nature. This inequality being natural, is also temporary and in the end is beneficial; it is essential that one generation shall leave some gain in progress as an inheritance to the suceeding generation and also to encour- age the development of higher types of civilized man. Knowing in advance of this necessary inequality of wealth, excuses are easily made for the extension of this natural difference to unnatural and slavish limits. This failure to distribute wealth increases as we become more and more efficient, and have more of the benefits of accumulated knowledge, discovery and invention from which large gains arise. This surplus wealth may be said to be regarded by nature as a pure bonus contributed from her store house and it is lavishly distributed to deserving workers but without much regard to individual merit and almost wholly for purposes of advertising. As an example of such bonus, a man invents or puts to use a machine or process whereby the labor of one man is able to furnish a supply that is sought by a thousand men for which they freely pay one-tenth their wages. In this instance, there will arise a temporary inequality of one hundred to one, the wages of one man exchanging for the wages of one hundred men. In considering such an exam- ple it is usually claimed by writers on this subject that free competition will correct this difference and speedily reduce the price of the article to about the wages of one man. Even more than this is claimed by Adam Smith and Mill who hold that any price above the cost of production is an unnatural price and freedom of competition must continually tend to reduce all prices to costs of production which they call the Natural Value. That Adam Smith and 18 THE PROBLEM STATED. Mill were completely in error on this important point may easily be demonstrated by a reduction to absurdity. If it were true that the natural value was the cost of production to which all prices under free competition tend, then it would be true that all advance above the very lowest strata of society would have been impossible, and wealth other than daily food for daily wants could not come into existence. When society divides into two equal classes of workers, one-half producing food and shelter for all the people and the other half producing secondary wealth for all the people, it becomes absolutely necessary that the primary product shall sell for at least twice its cost of production, if all the people are to be fed and clothed. But, if each of the work- ers is to get a share in the secondary product as well as a share in the primary, then the secondary wealth must also sell for at least twice its cost of production and wages must equal four times the actual cost of subsistance at the pre- vailing standard of living. If primar}^ wealth, selling at a high price, will cause a rush of labor to increase the supph^ and abandon factories, railways and the like, it would prove that civilization moves backward instead of forwards. This error, that natural value is determined by the cost of production, arose from an error that labor was a commodity having a cost price determined by another error called a capitalist who em- ployed and paid him. Consider the former example of one man who produces to such an advantage that he supplies one thousand men with a necessary article, taking one-tenth their wages in return. This produces a natural difference in wages of one hundred to one, yet it is a difference that arises out of a general benefit. The buyers get the same product at less THE PROBLEM STATED. 19 price than before and the money that before was being scattered among more laborers is now concentrated to one. But the one man who gains must necessarily spend his gain and must thereby increase the total demand which will be strengthened by the savings of one thousand men who buy cheaper from him. How, therefore, in this case, with demand increased and strengthened on every side, can there be free laborers without work rushing to compete and to reduce prices to costs of production? The manufacturer getting the extra profit uses it in constructing a building which could not have arisen with the same profit widely scattered among many men. When the building has been completed the distribution of this new wealth will begin which will again increase demand and will be independent of the profits made in manufacturing. The value of a newly created building is a credit value considered by laws of nature as a pure gift to the owner and he is expected to make this credit good by creating a build- ing that will be useful to others. If the building is useful and serviceable, it will have a value more or less than it cost, which may become the basis for an increase in credit money. It is not true that prices tend to return to the costs of production but on the contrary, all prices tend inevitably to advance to higher levels on account of machinery cheap- ening the costs and at the same time increasing wages. If a time comes in the future when all costs of production are eliminated by automatic machinery and wages are paid for personal services rendered each other, the natural limit of products and the limit in wages will continue to establish natural prices according to the law now prevailing and with little regard ^to" cost. 20 THE PROBLEM STATED. There is another deep error concerning savings which is called "a reward for abstinence" that should be uprooted. Nature must indeed have been considered a fool when economists claimed that all gains in wealth and all profits were the results of savings and that capital was a reward for abstinence. To glance only at the most obtrusive facts is to see the utter foolishness of believing that Nature was so short of sight as ever to depend upon so uncertain a factor as the savings or abstinence of workingmen. Profits arise in enormous quantities from the necessary operations of society and from the growth and circulation of credit. Under the growth of wealth, and of civilization there must reside some power to spur men to invent, to produce, to discover and to create; there must be a force of great vitality that may offer and pay rewards for success. Without such force the growth of civilization is inconceiv- able and moreover such force must increase with the growth and must support it and this force can be no other than the increase in value that increases prices by which alone civili- zation is sustained. The advance in civilization requires a gross profit of, at least, one hundred per cent on each trade in primary wealth as a fundamental and necessary condition before food can be distributed to all classes of laborers. If a farmer, for example, must sell his grain at its cost of production, his laborers can onty buy a scant living and he can buy but little more. In order that a farmer may pay wages above a mere living and have a surplus with which to build and improve and pay wages to secondary laborers so they may buy a living, he must be able to sell his grain for not less than twice its cost of production. Out of this tremendous supply of profits, a supply of capital is furnished which is limited only by our ability to THE PROBLEM STATED. 21 put it to use and we may secure capitalists more easily than skilled workmen are secured. No more mistaken doctrine was ever promulgated, none has produced more suffering and wrong than the theory of Adam Smith, supported by subsequent writers, that all commodity prices, under freedom of competition, tended inevitably to return to the cost of production. Every department store, for example, has a great variety of prices based wholly upon different classes of cus- tomers. In the basement will be found one strata of prices for a corresponding strata of buyers, who cannot bu}^ at all unless they do so upon the most narrow of margins. As the customer ascends from the basement, he finds every shade of price suitable to ever}' walk in life that may attract money from fat as well as from lean purses. So true is this fact about prices that trade has developed more than fif- teen varieties of eggs based upon no difference in cost but apportioned by the ingenuity of the trader to extract the last possible penny from each buyer according to the social eminence he imagines he holds by the strings of his purse. Taking a wider view of prices we find the greatest dis- parity between prices and costs of production. No two farmers produce at the same cost and get to market at the same expense and the same difference is found in every enterprise in the civilized world. Notwithstanding these remarkable differences in cost, each and every product is benefited by a price above cost when the market is reached and this increased price is a result of credit. In noticing the difference between costs and market price, the economic writers concluded that this level of price came from the cost price of the most expensive product, which high cost established a basis and lower costs must thereby gain the difference. This was getting the cart 22 THE PROBLEM STATED. before the horse. When the market once establishes a profitable price level, the activity of money seeking gain will move to more and more expensive fields until the price limit is reached. There is no "must sell" at any level of prices, which fact is well known from disastrous experience; there are times when not enough commodities may be secured to supply demand at a very profitable price and other times when the supply cannot be sold at the costs of production. There are always two prices to every product or prop- erty in the m-arket. One price is the cost price; the other is the selling price, and the difference between them gives rise to all exchange and to all the functions of money. As this difference increases, activity in the circulation of money increases so as to distribute the gains, and as this difference diminishes, activity diminishes and society tends toward barbarism. We do not have servants of various kinds because we have rich men to given them work, but, on the contrary, we have rich men because we have set free servants who earn more than a living requires and who spend the money from which riches spring. The less units of labor we need to sustain life, the more units of labor are set free for higher services. In addition to this increasing sum of wages for different classes of workers, there 'is another fund that may be used to raise prices high above the cost of production. This fund is the credit fund based upon the value of all secondary wealth. In the example of a manufacturer who sells to one thousand customers at a profit of one hundred to one, the gain is not a prime inequality because the thousand cus- tomers do not contribute ninety -nine wage units for one, but the machine displaced labor to off-set this difference. THE PROBLEM STATED. 23 In this example two lines are open whereby this excessive profit may be distributed to many more people. If the machine displaces thirty laborers and they are employed by the increased purchase power that the lower price en- abled the thousand buyers to save, the wage fund will remain normal and the purchase power will be increased for one thousand men by the new product of thirty men while the profit may continue to roll up a surplus of one hundred to one each day. But if the saving in price was not spent by the one thousand customers for labor, then the thirty men set free by the machine must compete and reduce the wages of the thousand by the amount they saved on the price. So far the exceptional profit to the owner, equal to the wages of ninety -nine men, has not been taken into the circulation, and if the other gains are taking place and this profit is spent for labor, the demand will be in- creased by ninety-nine wage units without increasing the number of laborers. If the manufacturer spends his profits in constructing a building, the money paid each day for labor and material is doing primary duty and when the building has been com- pleted the primary duty of money will also have been com- pleted. The house stands as a complete gain or bonus and the labor and material used in constructing it must be con- sidered as having been completely consumed as if the same labor and material has been devoted to food and clothing. The completed building, so far as society as a whole is con- cerned, has cost nothing; the profits of the manufacturer were pure gains and the building operation was the same as any other operation where no residue of fixed property remained. Consider another typical case of unequal distribution being in a class by itself. 24 THE PROBLEM STATED. In a rapidly growing city like Chicago with its manifold advantages in production and commerce, large profits will necessarily develop in many directions. A merchant com- ing early in the history of the city will select a location suitable to his business as as near as may be to the center of trade. A growing city provides the same kind of multiplied gains as arise from new machines, new inventions and dis- coveries. There are ways without number in a city, by which time may be saved and where a given amount of labor will produce a greater result than elsewhere. As a basis for profits the city contains a very large number of secondary and highly paid laborers who produce no primary wealth but who create a great market at high prices. The mer- chant who has a central location will be in command of a very great and profitable trade and each year the city will attract a new population equal to a moderate city and the merchant will be limited in his sales only by the speed with which he may secure his supply. There is nothing in this business to indicate especial ability or genius when a mer- chant accumulates great wealth but there is everything to indicate the favors which shower upon him on account of the growth and development of the city. This inequality is one that should also be temporary and should be open to the competition of other merchants who would share in this exceptional profit. Two ways to correct this unequal wealth are open if the outside merchant may also cater to this trade ; one is to divide the profit and the other would be to cheapen the goods to the consumer. The self interest of the merchant is always at work to maintain his trade and increase it and for this reason the temporary gain in wealth has no evil effect. THE PROBLEM STATED. 25 In the competition, however, operating from the out- side to engage in the same business, there is a great and fundamental difference between the position of the mer- chant on one hand and the manufacturer on the other. COUNTERFEIT CAPITAL. The manufacturer who depends upon a newly invented machine cannot prevent other men from using like machines or if it is protected by a patent, the time is short and a bet- ter machine or an improvement may supercede it. But, for illustration, let it be supposed the manufacturer has a machine which cannot be duplicated and saves the labor of ninety men each day and suppose that above all costs the wages of ninety men equal to $150.00 a day is gained as net profit. In such case the machine would have what is called a capitalized value ; it would produce a net return $150.00 each day for all future time. The capitaUzed value in this case would be $150.00 for one day multipHed by the days of twenty years in the future, about six thousand times one day's profit or nine hundred thousand dollars. If the machine is sold to a corporation, the owner gets nine hun- dred thousand dollars in a lum.p sum which pays the profits of twenty future years and the company buying from him collects the profit from labor each day. Manifestly some one in this illustration pays twice for the same thing and labor, compelled to furnish goods for the nine hundred thousand dollars, gets absolutely nothing in return. This situation could not possibly arise unless counter- feit money in some way made its appearance with which to collect nine hundred thousand dollars from labor and yet fails to add anything to his wages. A man may issue counterfeit money which passes cur- rent and when such money buys equally with other money 26 THE PROBLEM STATED. it may seem that no harm is being done. Yet the harm is so great that no expense is spared by civiHzed governments to break up counterfeiting and to imprison false coiners. But we have a system of counterfeiting in daily use more disastrous and debasing than any counterfeiting ever broken up by governments. There is in constant circulation; under the guise of capitalized value, a volume of counterfeit money four or five times as great as the volume of good money, but since it does not take anything from any one but laborers, there is no profound reason for stopping it because the men who get the benefit are the leaders of society and compose its great and powerful classes. To get nine hundred thousand dollars as a present price for future profits, stock certificates would be printed and sold and such stock becomes an issue of counterfeit money which is redeemed in the market where said stock finds its cash buyers. This system will float a volume of counter- feit that will only be limited by the cash taken from labor to keep it redeemed and as only a small share is expected to be sold each day, a small volume of good money will keep in circulation a very large volume of counterfeit payable in good money. If primary money should be counterfeited in large vol- ume the increase in prices of all kinds would distribute the loss so it would be borne by all the property owners equally with the laborers. : fe! But the mvich more ingenious scheme of a counterfeit secondary money which leaves the primary measure,^of value unimpaired saddles all the loss upon laborers by fur- nishing a counterfeit money with which they are paid for all the secondary property they produce but which they do THE PROBLEM STATED. 27 not get in their hands because the wages of labor and prices of products are held within fixed lines by primary money. This counterfeit money increases and sustains prices like other money but it is the price of counterfeit capital v/hich is so sustained by money taken from wages of labor and from profits on goods. Of course, there is no machinery or improvement created by labor which labor cannot dupHcate, and hence the illustration of the capital- ized value of a machine is begging the question. In the example of the merchant, however, another mer- chant who wishes to share in the one hundred dollars a day finds the profit depends upon a certain space which commands the location and here is something that cannot be duplicated and will, therefore, be capitalized as illus- trated, with the machine. To acquire a location giving exceptional profit, be it a corner in a city, a mine or other land, the present owner must be displaced and there is no way now open except to buy him out at his own price. Thus the merchant who depends like the manufacturer, upon his sales, finds he has a machine giving him a net profit of one hundred dollars or more each day, which can- not be dupHcated and which he may sell at its capitalized value of six thousand times one day's net profit or six hun- dred thousand dollars. When a lot in a city sells for such price, the future profits from twenty years' busi- ness is paid in spot cash and the buyer continues to collect the daily profit as before and the labor which makes the money valuable pays twice, and can be made to pay twice, because the six hundred thousand dollars of land value gives rise to an equal volume of counterfeit money. When a lot is sold for six hundred thousand dollars not only has there been such an amount of wealth taken unequally which would have been otherwise distributed to 28 THE PROBLEM STAETD. labor, but improvements for twenty years have been fore- stalled by this tremendous cash price. The buyer cannot now devote a net bonus of one hundred dollars per day to future improvement, but must devote it to pay interest upon counterfeit capital which otherwise would be value- less. Unless there are other gains by increases in popula- tion, new discoveries and new inventions, this issue of counterfeit capital will at once throttle all enterprise and establish a system of debasing and inhuman slavery. To clearly understand what this farestalling of future distribution means, it is necessary to understand that merchant and manufacturer depend upon identically the same sources for profits, namely, the sale of goods to custo-' mers at profitable prices. In one case, future distribution cannot be forestalled because, altho the profits are large, they are limited to each day's service while in the other case, they are estimated for twenty years of the future and are sold as so much valuable land. All locations, for whatever purpose, are owned by some one who is either getting all the gain created by labor as a natural inequality in wealth, or else the owner is prevent- ing someone from using the land to get the same gain. If only the present, and not the future, gain was in question, it would soon be remedied by the very great profits, being used to employ labor to build and improve and thus increase wages and prices and scatter the advantage broadcast. But when millions and millions of such accumulations would employ labor, they find they must pay a very high price for land, a price which equals the advantage they hope to reap. An investor or business man must pay a given price for land equal to twenty years of the excess profit, but is free to do business with this handicap. A man must wait THE PROBLEM STATED. 29 twenty years for a return of the price paid for land but may make the ordinary narrow profit on his building and busi- ness meanwhile, being upon the same plane and being cut off, as laborers are cut off, from sharing in the surplus. But, if other gains arise during the twenty years, he in turn can capitaUze the increase and have a profit in the higher price of his land. SECONDARY DISTRIBUTION. The distribution of food to all laborers requires a price high enough to permit a profit of one hundred per cent; food must sell at twice its cost so that two men may obtain the money with which to buy what only one man produces. The same proposition is true of all secondary property, of all improvements, of all building, factories, railways and the like. If the mass of laborers is to get the money from dis- tribution to buy secondary wealth, the property must sell for twice its cost for when it sells for cost, the sums so paid will not include money to buy the finished product, but only money for the labor and material that has been consumed in building. The money with which to pay twice the cost of second- ary property is furnished even more profusely and abun- dantly than primary money. The circulation of secondary money depends likewise on a price of twice the cost .of production and such prices would enable laborers to get wages with which to buy buildings as easily as they now buy food. That a sufficient volume of secondary money is maintained in circulation is self-evident because when land and improvements are considered as one property, they are equal twice the cost of the improvements alone. When private property in land, however, made a separ- ation in this natural price, it also divided the secondary 30 THE PROBLEM STATED. money in circulation into two parts, good credit money and fraudulent credit mone\^ To be able to see the full significance of this proposition, it is necessary to consider the result as if land could be had without price and as if the entire demand was limited to labor products alone. In such case the volume of second- ary money would not need to be increased because the sums now paying for land and improvement together would then pay an equal price for the improvement alone. With improvements selHng for twice the cost of production and selling for no more than land and buildings now cost, the whole effect of the change in demand would be to increase wages from an increased circulation based upon the higher price of improvements instead of the higher price for land. This is a very important difference, because in such case the higher price of improvements would continually sustain and enlarge the market, whereas when buildings sell for cost, the sum in circulation will only pay for primary demands, and the money spent for land creates a volume of counterfeit outside the earnings of labor and outside of general business. Counterfeit money based upon the value of land is redeemed by the cash received as rent which is included in the price of food and shelter, and by the cash paid for land, and by the cash loaned with land as security. When a land owner sells his land for a sum equal to one day's rent multiplied for twenty future years, he not only makes a temporary inequality in wealth permanent, but he doubles the inequalit}^ by getting present payment for twenty years of future profits and he can do this only by getting so much wealth for nothing and by fastening inequality of wealth upon the coming generation. If the future profits could not be capitalized into land value, the THE PROBLEM STATED. ' 31 correction of distribution would be very speedily and easily made, and the profits now taken from a rise in value of land would then be taken from a rise in value of improvements. Nature admits temporary inequality in wealth and countenances the payment to one man of the wages of one hundred men any day, but refuses to countenance the possibility of paying in the same unequal way for twenty future years, and violent^ opposes capitalizing these future expectations into cash. By this S3^stem from every three dollars labor earns, two dollars are taken to redeem counter- feit money and only one dollar is he permitted to spend for himself. Land value is based upon the utterly erroneous and absurd proposition that there may be such a thing as a cash value for future expectations. It is claimed that when a man sells land, he may spend the money for building and thus return it to circulation but the money so exchanged merely measured the value of land, and when the land was sold, a credit was taken from one circle of exchange into another entirely different circle and this credit has been changed into a counterfeit. There is a double process at work when credit is used to get money with which to build, the primary work of con- structing a building is exhausting credit and is distributing it back to labor from which it was received. But when the same credit calls upon money to buy land, it is exhausted as effectually as though it was spent for a building and the building had been deliberately destroyed by fire. Writers are unanimous in agreeing that prices depend upon the volume of money that can be maintained in circulation and the failure to explain the problem of distribution is found in the failure to appreciate the circu- 32 THE PROBLEM STATED. lation of credit or secondary money and its influence on prices. There are three great divisions in distribution; primary wealth, secondary wealth, and the value of land, whereas there should be but two such divisions. And there are three corresponding divisions of money by which prices in each division are governed, whereas there should be but two kinds of money. Primary money or cash circulates in primary markets and, in doing so, creates secondary money out of the profits realized when prices are higher than costs of production. The fixed limit in the volume of money requires its constant circulation because the value must be renewed daily which allows each individual worker to acquire a share. The limit in the volume of cash fixes a correspond- ing limit in the volume of secondary money because it must be redeemed in cash. For this reason the owner of income property of any given value will find his property is not by itself sufficient to give him credit and enable him to borrow money. The volume of secondary money is limited like the volume of primary money, and is based upon deposits of value created and earned by labor, which accumulate from prices of goods. The store of value from which secondary money draws its supply and which limits its volume consists of deposits in banks payable on demand in cash. Value cannot come into existence unless it makes its first appearance as a value of money and only so much value can remain in existence as may be exchanged for money on demand or on limited time. Deposits coming to banks must come as so much cash or as being payable in cash on demand and, therefore, such deposits create a supply of value pure and simple which ^ will not attach to anything but money. If bankers held THE PROBLEM STATED. 33 depositors' money for them as mere sums of money instead of sums of value created from money, all advance in civili- zation would be limited to primary development. Bankers learn from experience that depositors will not require their deposits in any one day, and each day's requirement of cash will average about ten per cent of the cash liabilities of the bank. The profit in banking requires that nine of the ten dollars of deposits on hand not called for each day may be loaned and bank deposits create and maintain a volume of checks or secondary money in circulation that may be four or five times greater than the cash in circulation, but every dollar of this expanded secondary money must be redeemed by banks with cash on demand. The volume of secondary money is subject to the same law of circulation as the volume of primary money and must be used to consume labor products in building and improving as cash must be used to consume primary products in living. If this law v/as not interfered with by counterfeit money, then a volum.e of secondary money would be distributed among the mass of the people in higher wages and they would share in secondary wealth with the same equality they share in prim.ary wealth. Primary money will refuse to circulate unless primary prices are at least twice the cost of production so that the owner of money will be eager to exchange money for labor or goods. Secondar}' money restricted by the same law will not circulate unless the selling price of secondary prop- erty is at least twice the cost of production. EQUAL DISTRIBUTION. When the selling price of goods is twice the cost price, the growth of profits will be very rapid and will be widely distributed and banks will have a very rapid accumulation 34 THE PROBLEM STATED. of deposits. These deposits in turn will supply an increas- ing number of checks and drafts which will further increase the volume of money and prices. This demand for goods will grow until it meets the entire supply of goods at profit- able prices, and demand will then seek to increase the supply; new houses will be in demand, higher rents will be paid, new factories, new office buildings, new hotels, rail- roads and all manner of secondary development will be undertaken, based upon high prices of goods which is con- stantly expanding the volume of credit money. If land which cost nothing could be had, as it should be had, without price, this secondary fund would begin imme- diately to bid up the prices of the existing secondary prop- erty, not only to the level of higher prices of labor and material, but also to the level where the same difference between cost price and selling price would give the same profits in secondary, as well as in primary, markets. In such event, there would be the same consumption of second- ary money in labor and material used in building as there is in spending primary mone}^ and there would be the same renewal of the sums spent and the same increase in profits, and the higher selling price of secondary property above cost would cause a great volume of secondary money to circulate. The fact must not be overlooked that altho production may deal with only one circle of exchange, distribution deals with the continuation of one such circle after another. The market, therefore, is not interested in a spasmodic and short period of good times, but in a system where the cause of the first circle of activity shall be required to return, to maintain, to widen and to increase the succeeding circles of activity. THE PROBLEM STATED. 35 When the accumulating profits seek to bid up prices of improvements on land, they are met by the demands of land-owners, and the bidding up of such prices becomes at once the bidding up of prices for land and the return of money spent for land is prevented and secondary wealth must continue to sell at the cost of production, while land gains the higher price. This failure to bid secondary prop- erty above its cost of production erects a stone wall against all increase in wages above primary demands and prevents all increase in profits above primary development by tak- ing up all surplus in higher prices for land. Bidding up prices for land instead of prices of improve- ments comes to an end w^hen all the free capital in banks has been spent for land and is changed into irredeemable loans and good credit has been changed into counterfeit credit. The failure of secondary property to advance stops all secondary progress in building and improving. The secondary workers cannot get an increase in wages because their product is stationary in price and they can no longer pay the high primary prices which in turn must then decline and force many thousands out of work. Property in land acts like a rat trap which tempts and forces the gains of industry into a trap from which they are only released to be loaned as counterfeit money. Land value draining the market of large sums of m.oney .continually causes the entire volume of money to pass into the rat trap, from which it is released as a loan to borrowers who then have no other way to get money. The entire volume of money once in the trap is released as a loan so it may again seek the trap where it is caged and loaned a second time. On being released the second time, it cannot possibly escape and is again corralled to be loaned the third time. Each of these loans requires the borrower to have a 36 THE PROBLEM STATED. credit, either in stores of goods or in property of some kind, and as the loans are being made, the credit of the borrower is being used up. There is a Umit to the number of times every dollar in circulation may be loaned and when this limit is reached, there is a very sudden and serious check to business. When credit has been exhausted and banks are loaned "full up," the business of the country nearest the margin of profit cannot continue; the volume must contract and prices fall to a basis where new credit may not be required for the time. If the reader will follow the daily routine of banking, he will learn that in prosperous seasons when prices are rising and when many men are making money, the banker will have more money coming in every day than he is called upon to pay out. When this excess is received from the sale of land in any form, it cannot return unless it is loaned by the banker and it is so loaned continually. The result of this continually loaning excess receipts over expen- ditures means that the entire sum of money in circulation passes over the bank counter many times. There is a limit to the number of times each dollar may be loaned and this limit is reached by the banker who loans the spare dollar every time he gets his hands on it and only fails to loan when the spare dollar fails to return to the bank. Suppose the entire sum of money that may be used by banks is equal to the sum of two billion dollars out of a total circulation of three billion dollars. We assume all this money is out among the people, and the profits made in bus- iness in one year will cause this money to pass in and out of the banks many times and will leave with the banks a new sum called a deposit which we estimate at two billion dollars each year. This deposit is a debt which the banks THE PROBLEM STATED. 37 owe to their customers; they will be required, therefore, to keep a sum of money on hand to meet the demands of customers and for this purpose a sum of cash equal, at least, to ten per cent of deposits must be retained as a cash reserve. After a year of business when deposits have grown from nothing to two billion dollars, the cash reserve must grow from nothing to two hundred million dollars, contracting the banking capital to that extent. But this contraction of money would not be apparent because the customers of the banks could then use the two billion dol- lars of credit as secondary money and they would issue checks in place of money and thus expand the currency. The second year we may estimate deposits to increase two billions more requiring a further contraction in cash outside of two hundred million dollars. The third year the process continues; deposits grew to six billions, reserves grow to six hundred millions and in the fourth and fifth years, deposits continue to eight and then to ten billions and reserves grow from eight hundred million to a billion dollars. When this point is reached, one-half the banking capital on the outside has been wound up inside the bank as reserve, and the scarcity of money coming into the bank will prevent any further increase in deposits. The situation which will then confront the people at the end of five years of the "most stupendous prosperity the world has ever witnessed," will be a panic with years of hard times following. Starting with money abundant and with most efficient banking facilities, business was making a net gain in wealth over and above demands for daily consumption of two billion dollars each year, after five years of making money, the country is prostrated because the prosperity process for some reason cannot be allowed to go on. 38 THE PROBLEM STATED. At the end of five years the situation has changed from a free field wherein all enterprises were daily making money to a field where most enterprises are daily losing money; credit has been exhausted, no more loans may be made and the circulation of money has been severely restricted. Not only has the business of the entire country been greatly reduced, but such reduction of business reduces prices and profits and does so at a time when bank loans reach their highest point and when interest charges on such loans are greater than the profits to be made in the narrow field then prevailing in the business world. What must happen under such circumstances is what has happened invariably at the end of every such season of prosperity; a panic occurs when wise men have agreed a panic could not occur, and hard times follow when there seems to be no excuse for hard times. What was taking place during the five prosperous years in the foregoing illustration was an increase in bank loans, keeping pace with the increase in deposits. This increase in loans was caused by an increase in value of land, the credit accumulating in banks furnished the money with which to buy land and advance its price. The money paid for land was merely a change of owners among depositors, but must now be loaned instead of being used again in the business from which it was taken. When this loaning pro- cess takes place, the credit made by the deposit in the first instance is used to buy land at an advance in price which process exhausts the credit and changes the owner of the money to a man who secures it for nothing from an increase in the price of land. The result is that the money made in business is made over again in real estate but in so doing exhausts the business credit, and in order to continue busi- ness, the money must be borrowed from the men who made THE PROBLEM STATED. 39 it by a rise in land values. The money that has been made out of nothing more substantial than a rise in price of land amounts to the same thing as allowing so much counter- feit money to be issued; the owner of the money gets its value, but all other people lose the value. When bank deposits and bank loans have reached the upper limit, and no more loans may be made, business must be greatly restricted, and since such loans cannot be paid the banks' depositors are the real owners of all the security pledged to secure the loans. If the entire deposit could at such time be wiped out by taking the property of the debtors, then the billion dollars of cash reserve would be released and the entire process may be repeated for a few more prosperous years on cheap land. But the new start must be made at a very low level of prices so that rising prices will furnish profits to make new deposits. But this wholesale contraction of loans and deposits could not be made without causing something of a revolution and riot; and therefore business will continue at a greatly reduced volume and the security for loans will be gradually changed by passing from weak to strong own- ers. In the panic of 1893 the loan and deposit account was reduced about fifteen per cent or eight hundred million dollars in that one year, and after 1893, there was no fur- ther reduction but the same general level was maintained during the dull years until 1898. But there was an increase of new money being added to the circulation commencing in 1897 and continuing until thirteen hundred million dollars of new money had been added to circulation at the time of the panic in 1907. New money coming into circulation at a time when all primary prices were at the very lowest level had the effect of creat- 40 THE PROBLEM STAETD. ing the boom in the following years, because a very general and considerable rise in prices produced a rapid increase in bank deposits of not less than seven billion dollars on top of former deposits and an increase in loans of seven billion on top of former loans and when the new credit was exhausted the end of prosperity was reached. The panic of October, 1907, is at this writing, January, 1909, being succeeded by the historical hard times; money, amounting to thirteen hundred million dollars, has been contracted to bank reserves protecting deposits and loans of fifteen billion dollars and calling for interest payments of one billion dollars each year. The present demands for interest on bank loans, without other demands, would absorb all the net returns of business in good times and what will happen in the present case, time alone will tell. We are about to witness, however, a very remarkable experiment; there is going on continually an expansion of gold currency by the addition of new money of not less than one hundred and fifty million dollars each year which is most liable to double. Prices for most primary products consumed in living refuse to come down in spite of a contracted business and with many men out of work, but with a tremendous volume of idle money, if the money belonging to depositors is counted as it should be. History is full of demonstrations of the fact that the mere expansion of money may become an evil instead of a blessing and new floods of gold may do in the United States what in times past was done in Rome and Spain. When gold as money can no longer circulate, it has a brief life in increasing the magnificence of the feasts of Lucullus and passes away and disappears in the hands of Barbarians THE PROBLEM STATED. 41 That buying and selling land is so disastrous to business may not be clear when only one such transaction is consid- ered alone. If one man buys land from another which cost nothing, and he cannot recover his money, he has simply lost to the other man. But when land has a market value, which is more stable than other values ; when it has no cost price renewable by labor after each sale; when it sells at times for more money than all other property combined, then the question of land value becomes the most important question in the civilized world. We have been able to increase in wealth and prosperity and have seasons of amazing development because we have had a vast expanse of free land giving opportunity to the muscle and brain of any man in the civilized world. The value of land advanced when improvements were made, but such advance absorbed twenty years of future payments and no further profit was possible from further improve- ment. The movement of new population over free land offered tremendous gains from the increase in land value and of- fered no gains in any other direction unless they were tem- porary. If a new field of invention offered an exceptional profit of one hundred dollars a day, it must wait upon build- ings and improvements and markets and work day by da)^ to realize such profits and must be subject to competition and be forced to divide with others. To secure the land, however, without which the profit could not be made, the landowner in one day may gather six thousand times as much profit without spending a cent as the producer could :gather in a day after much money had been spent in improvements. The result of thus getting so much gain for nothing makes development a secondary consideration and makes it depend wholly upon the question of whether or not 42 THE PROBLEM STATED. it would be followed by a rise in the value of land and where no further rise in land value is to be expected, no further development will be made. The remarkable gains taken from free land, as much as six thousand times one day's gain, or two hundred times one month's gain or twenty times one year's gains of other business, allowed a succession of landowners to reap a suc- cession of crops, and allowed the builder of the first im- provements to get a large part of this gain for himself. Thus in railway, in mining and in manufacturing, the con- trol of lands offered a basis for gains which were capitalized b}^ stocks and bonds to secure money with which to pay for all labor and material leaving from one-half to two-thirds the selling price of railway and industrial systems as a bonus for the great financiers who could market the bonds. Each of the prosperous periods in our history have resulted from the rise in land value on new territory, from having a new population to exploit and enslave, and a new country to conquer and levy tribute upon. The adventur- ous leaders into new territory, reinforced by the financiers of settled countries who furnished cheap money, were not unlike the devastating armies of Rome under Pompey and Caesar. The Roman plan of plunder and slavery, to subdue and rob surrounding people and levy tribute upon them, fur- nished the new wealth with which new Patrician families invented new and expensive methods of personal magnifi- cence and barbarous display. During this remarkable age. Southern Italy became a vast garden with wonderful villas along the sea; a country filled with palaces and parks containing magnificent works of art, connected by wonder- ful roads and supplied with marvelous aquedticts. It was an age great in Art; great in achievement; great in wealth,. THE PROBLEM STATED. 43 in its temples, in the circus, in the Forum, and great in slavery. As long as slave labor could find employment in build- ing for the commanders, and for the new rich famiHes of sudden growth, as long as work continued, the age was glor- ious in spite of an increase in slavery. Many of the slaves were prosperous and some were wealthy. But a time came when the resource of robbery and war failed, when no new wealth could be obtained from devastated fields and plun- dered cities ; when the credit of the conquerors came to an end, and money could no longer circulate, not alone to con- tinue to build, but to maintain what had been built. The work for slaves grew scarce, slaves became valueless and the cost of keeping them alive became a burden. Great estates began to show the need of repair. Revenues to the State diminished. The government of Imperial Rome could not circulate gold and employ slaves and could not get the revenue to pay its soldiers and officers and maintain the State. When the Roman Legions were for sale to the highest bidder, the weakly defended wealth attracted the covetous eye of the surrounding Barbarians and inspired them with like desires for plunder. So also, under the more modern system of slavery, a system more free and more refined, but more cruel and relentless, so also must come a time when no new territory and new people will furnish new worlds of wealth to con- quer and subdue. A time when the failure to exploit by a rise in value of land will cause such a failure in business that millions of slaves without palaces to build, without railway systems and industrial empires to construct, will have no work. A time will come when a great panic will not be followed by a great recovery; when the loss of revenue cannot be 44 THE PROBLEM STATED. repaired by an increase in taxes. A time will come when the great railway and industrial systems will languish and fail for want of customers. A time when the millions out of work will remain out of work to be constantly increased by new millions. In that day the United States may keep company in the history of the world with Imperial Rome and hasten to her decline and fall. In that day a new race of Barbar- ians within her own borders of her own people, helpless and enslaved, fiesh of her flesh, can no longer be held back from plundering the wealth that may not be maintained and defended. Welch, West Virginia, January, 1909. .:) isa9 LIBRARY OF CONGRESS The Distribution League. The Distribution League is organized to secure for each individual his proportionate share in the wealth of the world. It is proposed to secure justice in the distribution of wealth by abolishing all taxes except one, and maintain a single tax upon what is now known as the value of land. By this method of taxation it is expected to prevent the buying and selling of land and allow the money spent for land to buy goods and employ labor. When a plot of land in a city sells for one million dollars, it means that such a bare lot rents for forty thousand dollars a year and sells for a lump sum equal to the rent of twenty- five years of the future. When a man having sold the lot, spends his million dollars, he compels labor to pay cash for future expectation, and pay future rent with present wealth, while the buyer of the lot continues to collect the same rent from labor day by day as it is being earned. Labor may be made to pay this price for land only because a surplus is being produced over and above the necessities for a living, and the buyer, in getting money for land, gets the surplus wealth for nothing that otherwise would be distributed as an increased share to labor. For further information address The Distribution League, 21 Union Trust Bldg., Indianapolis, Indiana. Send fifteen cents for a copy of "The Problem," by Henry Rawie. Send one dollar for "Distribution". Second edition, revised and enlarged. 200 pages. Cloth cover. 013 969 823 n ^ LIBRARY OF CONGRESS lllMlillill lilli! W Mill ill 013 969 823 A (^ Hollinger Corp.