Property

Contents

PAGE hr \

^ I Introduction 1

^v II The Average Fortune 28

II The Average Fortune

Mr. John D. Rockefeller is said to have a fortune of a billion dollars. That is probably an exaggeration, but whether he has a billion or half a billion answers as well for the purposes of the argument.

According to the Census Bureau the average wealth of each man, woman, and child in the United States in 1910 was $1,300.

Average person 1,300

Such statistical comparisons are easily and often made for the express purpose of arousing discontent and resentment, but — as will be found on analysis — the figures are quite misleading.

A distinguished political leader is quoted as having said, ''A man may fairly earn a million dollars."

The ideal millionaire $1,000,000

Average person 1,300

The Average Fortune 29

What is the difference between Mr. Kockefeller and the ideal millionaire"? Simply a difference in degree.

The political leader referred to is said to have accumulated a fortune of over one hundred thousand dollars.

Average person 1,300

The disparity is still enormous. To recapitulate:

Ideal millionaire 1,000,000

Political leader 100,000

Average person 1,300

It may be said once for all that names are used in this book solely for the purpose of making the argument more vivid and with no thought of reflecting upon any man.

The point of importance here is the simple statistical proposition that to the extent any individual in the country has a fortune of more than $1,300, to that extent must others have less — hence the seeming extremes of wealth and poverty.

The word "seeming'' is used advisedly for if the extremes of wealth and poverty were actually such as those indicated on the face of the statistics this country would be in the midst of a social upheaval such as the world has never known.

Or, to state the matter differently, it is inconceivable that a community of intelligent, selfgoverning people should tolerate social and economic conditions that permit one man to accumulate and absolutely control a million or a thousand times as much as another who is equally industrious and equally honest, but who may lack in executive ability.

Granting that executive ability, rare genius for invention or organization, is entitled to its reward, that it pays the community to encourage the exercise of such ability for the sake of the good reaped by the entire community, the proposition that such reward should be carried to the extent it seemingly is on the face of the statistics violates one's sense of justice.

Tlie Average Fortune 31

If the apparent extremes of great wealth and abject poverty sliocli every man's sense of ivhat is fair, why has the community tolerated the development of those seeming extremes'?

And why does not the community remedy conditions which on their face seem so outrageously inequitable?

There are two possible answers to those questions :

1. The inequalities are as real as the figures indicate, but the community is too apathetic and slothful to remedy the wrong.

2. Inequalities exist, but by no means to the extent indicated on the face of the figures ; the community is restless and eager for social and economic reform, but is not revolutionary and anarchistic in its demands because it feels without fully comprehending that somehow the figures are misleading and it sees that the actual inequalities between the rich and the poor are not so great as indicated.

Of the two hypotheses the first may be dismissed at once as not in keeping with the intelligence of this or any other civilized people. Inequalities in the distribution of wealth anything like those indicated on the face of the statistics would be remedied by revolution.

The very fact that nations pursue the fairly even tenor of their ways century after century is proof positive to the social philosopher that while things may be far from right they are not j so wrong as the radical socialist, communist, or anarchist, would have us believe.

Therefore it must he that the inequalities complained of are more apparent than real, and to the extent they ought not to exist the community is slowly but surely remedying them.

This last hypothesis is the only one that is consistent with our respect for the intelligence of mankind and with any plausible theory of the gradual evolution of all things social.

The very fact that social unrest in most countries, conspicuously in the United States, falls short of revolution is proof that the inequalities fall short of revolutionary magnitude. Per contra at the present moment the unrest in other countries since the World War, notably

The Average Fortune in Russia, has resulted in revolutions wherein the attempt is made to correct the inequalities of both wealth and power.

If the inequalities in the distribution of wealth were actually as great as indicated on the face of the figures quoted then Bolshevism not only would be, but should be rampant in the United States.

But if the conclusions regarding the real as distinguished from the apparent, or seeming, control and distribution of wealth are sound then it is certain that Bolshevism and the entire revolutionary propaganda — in so far as it attempts a redistribution of property — will subside after turning the limelight on many real evils, and after working many real reforms.

The man of philosophic mind watches with unprejudiced eye the spread of Bolshevism — i. e., radicalism — knowing that its vitality is measured by the truth it contains, and when that truth is exhausted — i. e. applied, demonstrated— the revolution, the movement, will necessarily come to an end.

The difference between the Bolshevik and the Menshevik — the radical and the moderate

'y

— lies in the extent to which each would go in overturning existing institutions.

The Bolshevik sees little good in laws and institutions as they are and would overturn nearly everything. The Menshevik sees more good and would overturn less. It is idle to attempt to meet the arg-uments of either by denunciation. The only effective way is to listen dispassionately and analyze coolly but searchingly.

So far as inequalities in the distribution of wealth are concerned the Bolshevik — the radical, the revolutionist — would seem to have it all his own way on the face of the statistics.

A billion, or a million, or even a hundred thousand to the average of thirteen hundred is not a comfortable comparison; while a billion or a million to nothing is a direct incentive to revolution.

Do these figures accurately reflect the true conditions?

That is another of the questions we are going to try to answer.

Ill

Let us view the distribution of wealth from another angle.

Statistically and legally one man is a millionaire while another may have little or nothing.

The inequality between a million and one hundred or nothing is enormous, so enormous that only a mind accustomed to large figures can grasp it.

♦ 4> ♦

While the statistical inequality between a million and a few hundred is enormous, is it true that the inequality in real life between the man who ' ' o^,\ais ' ' a million and the man who has but a hundred or even nothing is as enormous as the figures indicate? We have already committed ourselves to the proposition that if it were there would be instant revolution; which is equivalent to saying that social conditions would not tolerate the development of such monstrous conditions.

In a profound sense the '^ millionaire " is an economic fiction; one of the illusions incidental to economic progress. He exists in theory rather than in fact ; he is a legal entity, rather than a living and breathing mass of gold, or wheat, or actual wealth of any kind. ♦ * *

Take the present instant, the particular moment you — the reader — are reading this paragraph.

Pause and think.

All the people in the United States are doing something, most of them working hard.

Imagine yourself seated on a cloud taking a bird's-eye view of this country of ours.

Would it not resemble an ant-hill in activity? Would it not be true that the idlers, the wasters, the fools and criminals, who loom so large and make such an impression when close to us, would be so few they would be lost in the mass of workers'?

Look more closely and try to distinguish, if you can, the millionaire from the thousandaire.

You do see that some dress better and live better than others, but these differences are

An Economic Fiction .IT

measured not by millions but by a few hundreds annually.

The best buildings you find are public buildings, and some of those who have thousands per year are public servants ; nearly all of the gorgeous uniforms, and many of the most extravagant entertainments, receptions, balls, parades, celebrations, etc., etc., are public functions, so that it is apparent the country — i. e., the conmaunity — not only countenances but estahlislies great inequalities in rank, power, office, salaries, comforts, luxuries, appearances, pleasures.

If you are of a reflective turn of mind you may ask yourself whether it may not be true that in these respects individuals simply ape the examples of states.

Surveying from your seat on the cloud the hiiman ants, who are, as a body, working so hard to accumulate wealth which each generation must leave behind, you notice all the economic inequalities in distribution and enjoyments above mentioned, and on the human side you observe physical, moral, intellectual differ-

58584

38 Propertij

ences which make certain economic inequalities inevitable. And the closer you look the more surprising it strikes you that individuals who differ so, one from another, in physical, moral and intellectual strength can get along so well together in one community.

4» ♦ *

Now turn from the living units to the results of their labors, to the total accumulated wealth of the connnunity from seed in the ground to finest finished products; from a path in the forest to an elaborately developed railway system ; from a log cabin to the White House.

Your first and absolutely correct impression is that all this wealth belongs to the community — to the human ant-hill. You see that individuals are born and die, generations come and go, but the economic progress and accumulations of the community go on without interruption; it is all an essentially community proposition, differing only in degree and not in kind from the accumulations of the ant-hill and the beehive; a more complex and elaborate development of the tribal stage of manldnd.

As a philosopher — particularly if a logical evolutionist — you conclude at once that — whatever the inequalities between individuals, the economic system followed has been well adapted to attain the results achieved. Given any material changes in rights and incentives it goes without sajdng the results would be materially different — whether better or worse no man can say, though the relentless logic of evolution requires you to argue that the results achieved are the best possible with an imperfect human factor ; as the human factor gains in physical, moral and intellectual strength, material results will vary accordingly. If the intelligence of some of the ants were doubled the proportions of the hill would be changed. ♦ ♦ ♦

On closer study you find that individual members and groups of the community assert claims to particular portions of the community wealth.

First of all the conmaunity itself is broken up into many divisions and subdivisions, political, religious, educational, industrial (such as public enterprises like gas, waterworks, irrigation schemes, harbors, etc.) and that each of these

40 Propertif

divisions asserts a claim to its special portion of the total wealth.

This assertion of claims by the community and by its various subdivisions, political and industrial, does not alter the fact that every building is used by and every public enterprise run by individuals.

4> ♦ ♦

By searching the records you ascertain the legal fact that the White House is '' owned'* by the nation, instead of by its occupant, but this legal title does not alter the social fact it is the home and office of an individual, the President, just as a house on Fifth Avenue may be the home and office of a well-kno^vn physician. The legal title to the house on Fifth Avenue may be in the physician, or in his father, or in a stranger, or a trust company, or in the City of New York ; it may change any moment without the physician knowing or caring, the economic fact remains that the house is a part of the sum total of community wealth and it is occupied by a certain individual unit as a convenient place to best serve the community.

After ascertaining the curious — from your bird's-eye point of view — fact that the community as a whole, and many divisions of the community, claim legal title to portions of the community wealth, even to hundreds and hundreds of millions of gold stored in public vaults, you probe deeper and find :

That, follomng the example of the community, individuals and groups of individuals — from partnerships of two up to corporations with thousands of security holders — claim legal title to particular portions of the total wealth.

In short you find that :

1. The all-important and fundamental facts are, the production, use, and control of all ivealth are by individuals ivorhing in harmony.

2. But, there are of record certain documents which give (a) the community, (b) political, religious, educational subdivisions of the community, (c) public corporations and enterprises, (d) semi-public corporations, (e) corporations, (f) associations of all kinds, (g) partnerships, (h) individuals, legal title to such portions of the total wealth as they produce or use, or ** own " as the phrase goes.

This is a very curious and highly artificial condition for it is at once apparent that if every legal record were burned and no attempt made to ascertain and restore the legal titles not a penny of actual wealth would be affected, and the only occupations of individuals that would be affected would be those which had to do with the preservation of these legal conditions and records. Aside from people engaged in these occupations the work of every individual in the community would remain precisely the same for a time.

You naturally ask, * ' Why not, then, wipe out this cumbersome legal machinery, and permit the community to go along simpler economic lines?"

The answer is twofold:

1. From the evolutionist's standpoint, it is

/ p^ain that cumbersome scheme of legal title, of

** o^\^lership " as distinguished from actual use

and control, would not have developed unless

there was good reason for it. All civilizations seem to have progressed in proportion to the extent they recognized and protected these paper property rights ; the more elaborate the scheme of paper property rights the higher the civilization, and vice versa.

History proves the truth of this; it also shows that the recognition of rights — particularly political — may be carried so far the system totters and falls either by its own weight or by revolutions.

2. Aside from the cold materialistic conclusions of the evolutionist, it is apparent — the more you probe the matter — that this legal notion of ownership is the most powerful incentive to individual effort ever devised.

Possession is the most powerful incentive known to the brute mind, but the human has made a great advance over the brute in that it separates the idea of oivnership from the hald fact of possession, and thereby multiplies indefinitely incentives to effort. ♦ ♦ ♦

The brute can possess but one or two things at a time; the human can '' own " — have legal title — to many.

True, the human does not possess — occupy, or physically control — more than one or two, or at most a few, but because the laiv — i. e. the ingenious device of the community — says he may " own *^ more, and gives him the right to take possession (though often under great difficulties and restrictions), he is satisfied and goes on working feverishly to accumulate paper titles to things other individuals possess and use.

Were it not for this invention of paper rights, all incentive to production and ac- 1 cumulation would end near the brute level, namely with the production and accumulation of only so much as each individual could physically hold to the exclusion of others.

With the recognition — the invention — of paper titles the incentive to produce and accumulate is extended indefinitely.

*•* *•* *2*

A most ingenious scheme to keep men at

^ work. It is a direct appeal to the speculative

instinct which is so powerful in — and peculiar

to — mankind. It fosters and encourages the

spirit of accumulation, permitting men to think

A71 Economic Fiction 45

they accumulate for themselves and their families, whereas in last analysis they simply swell the total accumulations of the community — the ant-hill.

It is a great game.

The total actual wealth of the community is one thing, the legal or paper wealth is quite another.

Take a farm, for instance ; there it is with its improvements and buildings. From your cloud loerch you see every foot of the land, you see a family living in the house and several men working in the fields; it is all quite plain — as plain as an ant dragging food to its hill — these individuals are working a given piece of land for their o"wn living and profit and thereby adding to the sum total of the wealth of the community.

Adjoining this farm is another, then another and another ; then come forests, and mines, and factories, all worked by individuals who die and are succeeded by other individuals, and meanwhile the improvements go on, the sum total of the community wealth steadily increases until farms and mines and factories are exhausted then the individuals cannot produce so much during their lifetimes and the total wealth decreases.

All this is quite plain, but when you inquire closely why the individuals work so hard, why they try to produce so much more than each one consumes you hear of this scheme of ^' oivnership " this legal device which permits a man to say he ' ' owns ' ' what others actually possess and use.

The farm you first looked at is not ** owned " by the family or the men on it, it is ^* owned " by a man two thousand miles away, but while he — A — has the legal title paper; another man, B, has a mortgage paper of ten thousand dollars on the land and buildings; C has a chattel mortgage paper on the macnines used ; D has a contract for purchase paper; while E, the man with the family in the farmhouse, has a lease paper.

These are some of the ramifications of paper ownership — all legal creations as distinguished from economic.

Add together the various values placed upon these various interests and the sum total would far exceed the actual value of the farm and its improvements.

Theoretically the two totals should coincide, but in practice they do not, as is amply demonstrated in almost every foreclosure where all the legal interests are merged by actual sale of property; there is usually a radical scaling down of paper values, and individuals who thought they were rich find themselves poor.

Look at this great railroad running from New York to Chicago with its many tracks, stations, warehouses, cars, locomotives, etc. It is all in the actual possession of the thousands of employees, from president to flagman, who operate it.

Not one of those who actually control and operate the road could tell who the ''owners " are, nor do they care so long as the owners do not interfere with efficient operation.

On inquiry you find that the road is legally '' owned '' by thousands of stockholders and, ahead of the stockholders, thousands of bondholders, many of whom have never seen any part of the line, and many of whom are women, children, banks, insurance companies, and other corporations, all of whom have pieces of paper which are their evidences of title.

All these pieces of paper could be burned without destroying a penny of actual wealth and without affecting in the slightest degree the daily duties of a single man or boy actually engaged in working the road — excepting, of course, those whose duties have to do with the issuing, signing, transferring of the pieces of paper — they would suddenly find themselves with nothing to do — but every other employee would go about his work just the same.

Just the same?

Not quite, for sooner or later they would all know that private ownership of the property had been abolished, that no more pieces of paper would be issued, and the entire service would take on the atmosphere of state service, an atmosphere of listlessness and indifference, the atmosphere of routine, of work with no expectations save that of slow advancement by seniority.

When you add together all the issues of stocks, bonds, notes, and other forms of indebtedness, evidenced by outstanding pieces of paper, the total is so enormous the question at once arises, ''Is it possible the railroad is worth that much?"

Probably not, or if it is, it is due to the increased value of its franchise, right of way, terminals — land values — due to increase of population along the line rather than to actual labor and money put into the property, and besides much depends upon how "value" is defined, and by what rule " valuing" is done.

But whether the road is worth less or more than all its outstanding pieces of paper, the fact is obvious that there before your eyes is the physical property, the lines of rail, the stations, warehouses, cars, locomotives, etc., and there are the workers in actual possession.

In the hands of others, stockholders, bondholders, banks, etc., are pieces of paper which are bought and sold as valuable. One small stock certificate for two hundred shares may sell for more than a locomotive.

And because these pieces of paper do sell at

50 Propcrtij

high prices there is a constant temptation to print more and more and more until confidence is shaken and the great structure of credit and inflation collapses. A drastic period of reorganization and readjustment follows. Fortunes and savings invested in the pieces of paper are lost. People are impoverished. But the road goes on just the same. Not a wheel ceases to turn, not an employee is laid off. It often happens that during these periods of destruction of paper values the road is rehabilitated and operated better than ever before. While paper values are tumbling, actual values, represented by labor spent upon the property, are increasing.

We are so accustomed to paper evidences of wealth that we habitually confound them with actual wealth.

To the farmer the wheat stored in an elevator means more than the ivareJiouse receipt issued against it, but to the banker the piece of paper, the receipt, means more than the wheat. The banker could not use a bushel of the wheat, but lie will loan thousands of dollars on the piece of paper.

So it is with notes, stocks, bonds, mortgages, the pieces of paper take the place of the real properties in all commercial and financial transactions, and the world comes to look upon them as if they were actual wealth.

THEY ARE EEAL IN THEIR WAY.

That is the most important economic truth to get clearly in mind at the very outset of any investigation of real or apparent inequalities in the distribution of wealth.

There are enormous inequalities in the distribution of paper wealth.

The inequalities in the distribution of actual wealth are slight in comparison.

We are getting close to the heart of the problem of the distribution of wealth.

The distribution of actual wealth is one thing.

The distribution of paper wealth is quite a different thing.

There are thousands and thousands of paper millionaires. There may be even a paper billionaire.

There is not and never has been an actual millionaire — except

A. In land

B. In luxuries

Both of which exceptions are fully considered in chapters ix and x.

It is a physical possibility for a man to ''own" and have in his exclusive possession paper representing millions — hence he is a millionaire on paper.

It is — with the exception of land and luxuries— a physical impossibility for a man to "own" and have in his exclusive possession more than a few hundreds of thousands in actual wealth — hence he is not a millionaire when it comes to actual use and control of wealth to the exclusion of others. ♦ ♦ ♦

The cry of the agitator, the argument of the socialist and communist are directed against the paper millionaire.

Little or no attention is paid to the actual — 1. e., the land or luxury millionaire.

It seems to be assumed that if a man is a paper millionaire he will also be a land or luxury (or both) millionaire.

It by no means follows.

If we exclude land millionaires who are in an economic class by themselves the luxury millionaires are comparatively few in numbers, so few they are very conspicuous in the cities where they live.

Most paper millionaires live in modest homes and are kno^\Ti only as exceptionally hard workers. They go on all their lives accumulating these pieces of paper or enlarging their enterprises, spending little on themselves and their homes.

The trouble is not in the distribution of paper wealth but in the distribution of actual.

True, inequalities in the distribution of paper wealth may and often do lead to inequalities in the distribution of actual, since paper wealth is power over actual, but this power is not exercised nearly so often as the agitator and the socialist think.

It is exercised so seldom that the cause of social, industrial, and commercial ills must be sought elsewhere.

And first of all in human nature itself.

That is the first great source of all our troubles — the weaknesses and vices of mankind.

Our institutions are no better than we are.

That is not quite true, for happily in a sense they are. Men preach better than they practice. Bad as they seem to be at times public — publicly professed — morals are always better than private. We profess and upJiold higher standards than we attain. In politics and business we condemn practices we secretly follow.

Every community has hundreds of laws it cannot enforce, laws against drunkenness and prostitution, laws against unfair business methods, against cheating, deceiving, and fraud ; pure food laws, laws for safety, hygiene, protection of women and children, and so on endlessly.

These laws are never enforced as fully as they should be — why ?

Because the community cannot triumph over the ingenuity and inherent waywardness of its individual members.

Every evil known to society has its origin in and derives its strength from the individual.

When employers and employees are in violent conflict, each side asserting the rigJitness of its cause and conduct, the thinking man knows that each side is made up of men equally greedy, equally unscrupulous, equally quick to fight, kill, burn — in short of men of the same day and generation, just average human heings; no white and spotless angels among them.

Conceding that the great source of all our troubles, ethic as well as economic, is our own imperfect human nature, still it does not follow that we should fold our hands and sit supine. On the contrary w^e have two tasks : First, to hammer away with all our strength at the weaknesses of our hum.an nature, and

56 Propertij

make ourselves better, so we may live up to our standards — that is the ethic, and, if you please, the physiologic task.

Second, to investigate profoundly and impartially social and economic conditions with a 2. view to understanding and remedying them in so far as imperfect human beings can remedy inequalities that are so largely due to inherent human imperfections — that is the economic and sociologic task.

Inasmuch as these two fundamentally distinct conditions are at the base of all our troubles it goes without saying that the reformer who promises his hearers perfection as the result of the adoption of his economic or social theories is promising something that cannot he.

The socialist who draws a picture of social contentment and happiness providing his suggestion of state ownership of capital, be adopted ignores completely the human factor, ignores the physical, mental, moral, differences that exist between man and man, nation and nation, race and race.

An Econoynic Fiction 57

His argument assumes that the adoption of an economic reform would instantaneously make imperfect men perfect. To bring the argument down to earth, it assumes that the moment the government takes over a given railway every employee instantly becomes an miselfish altruistic being whose sole thought is the welfare of humanity.

The hard cold fact is that labor unions in control of government enterprises are more selfish, more militant, more arbitrary, more aggressive than in privately conducted enterprises— as the recent experiment of government control of the railroads in this country has convincingly demonstrated. ♦ ♦ ♦

We have reached the conclusion that while the nominal or legal wealth of an individual may be very large,, the actual wealth controlled or consumed by him may be relatively small.