The sphinx catechism

Introduction

"Nothing is impossible to Industry," said one of the seven wise men of Greece more than twenty-five hundred years ago, and thousands of years before his time the same truth had doubtless been revealed to other wise men, and the problems of industry continue to perplex the wise men of today.

One nation after another has grown, from the bare earth to wealth and power, only to fall in ruin and decay. Industry was driven to hovels, while irresponsible power was enthroned in palaces and was worshiped in temples.

Over the ruins of Empire the brooding and Sardonic Sphinx has been propounding her riddle, offering to give to man a heaven upon earth if he answers correctly, but failing to answer he will be destroyed.

The cold shadow of this stone image of destruction is now beginning to cover the world with its desolation, and we must make haste or we will likewise perish. To her, to this

Sphinx of History, to this silent monument, over the graves of fallen Empires, we put questions that the riddle may be answered and our civilization may be saved,

Why does Industry itself become impossible, and why do its blessings wither and waste? Is it because Industry is never rewarded with wealth?

Chapter II. CLEARING THE GROUND

1 Q. What is the riddle of Industry?

A. That everyone may find profitable work.

2 Q. What do you mean by profitable work?

A. That common labor should receive wages which buys a comfortable living according to modern standards, getting the advantage of new machinery and inventions, and get an additional sum as wages which will enable it to buy its share of income-producing property.

3 Q. Do capitalists oppose laborers by reducing wages and thus take away the profits from work?

A. No ; capital comes into existence because new and more profitable work has been provided, and when capital opposes labor it does so on account of the riddle of industry.

4 Q. Will capital only employ labor when it is profitable to do so?

A. Capital employs labor only when it is profitable to do so, and any scheme which hopes to employ labor unprofitably is contrary to common sense. When labor is employed at tasks that do not pay, then something is taken from profitable labor to make up the loss.

5 Q. Is there a riddle of industry outside the laborer who is willing to work, and outside the capitalist who is as willing to employ him ?

A. Yes.

6 Q. Is this outside power made up of what Socialists call the capitalistic system of production for profit?

A. No ; production for profit is the only kind of production desirable or possible.

7 Q. If capitalists are wholly interested in making money, if labor is willing to have them make money, and if capitalists make more money when wages are high, there must be something wrong with money?

A. When labor and capital are idle, money is also idle, and if something is wrong with money is must be with the circulation of money and not with the kind of money or with the quantity of it.

8 Q. How about land which someone is required to buy and own before modern industry is possible? Is the land system responsible?

A. Perhaps.

Clearing the Ground. 9

9 Q. Why perhaps; is there something else?

A. Yes; there are laws of nature by which the distribution of wealth is regulated and controlled.

10 Q. But why do you say the land system, perhaps ?

A. Because land is also idle when labor, capital and money are idle, and the land system is responsible if it alone interferes with the natural laws which regulate the distribution of wealth.

11 Q. Have individual landowners the same interest in high wages that capitalists have?

A. Yes, because the gain to the landowner must arise from surplus wages above the cost of living.

12 Q. Don't landowners gain from the intrinsic quality or value of the soil ?

A. No; nature will not permit a price to be paid for something she furnishes without cost ; the price of land arises by taking price away from labor and capital.

13 Q. Land value does not then arise on account of the location or quality of land ?

A. No; land value arises from the unequal distribution of wealth by creating a price for land which would otherwise become higher prices for labor.

14 Q. Landowners, as a class, are more powerful than any other class in the community, because they control the earth itself, and may drive people off the earth, a few at a time, it is true, but they have such power if they chose greedily and ignorantly so to use it?

A. Landowners have some such power to a limited degree.

15 Q. How limited?

A. Limited by their own need for labor. They themselves would perish in seeking to thus injure labor, and they may only gain from the activity of labor.

16 Q. Do you mean that modern methods of production affect the individual landlord the same as the capitalist, and he is thereby prevented from directly interfering with labor?

A. Yes ; the single landlord may often oppress labor in seeking pay for the use of land, and in seeking more than labor may give, but such landlords are the exception and are not the rule in business.

Clearing the Ground. 11

17 Q. You hold that landlords have no personal interest in keeping labor from using land?

A. No more hope for gain than has a capitalist in shutting up his factory.

18 Q. But when factories close on account of bad markets, the idle men could restore the markets again if they could get access to land?

A. Laborers on free land must have markets, and merely to increase the output from free land would make a bad market worse instead of better.

19 Q. But idle labor might use idle land to supply their own wants and thus escape beggary and starvation?

A. Idle labor, in considerable numbers, could not escape starvation on free land. The riddle of the centuries has a deeper meaning than to allow laborers to exist as well-fed animals.

20 Q. But would not a temporary escape to free land so relieve the market from idle labor as to start the wheels of industry in dull times ?

A. It would not, because there is not only idle land for labor at such times, but idle money and idle factories would be willingly put into free operation if the dull market could therebv be relieved.

21 Q. Is the problem one of markets which, must be fostered by protective tariffs and by special legislation for the benefit of capitalists and landowners who may thereby employ labor?

A. No.

22 Q. If labor had access to all unused land, would not poverty disappear?

A. It would not, unless it was temporary and among a few people, because the present population of the world can only escape poverty by maintaining and by extending our system of enormous production and transportation.

23 Q. If each landlord put his land to its best use, properly conserving our natural resources, would such a system solve the riddle of the Sphinx?

A. It would not.

24 Q. If capitalists, financiers and landowners, combined into one gigantic trust, were to use land to its best advantage, supply labor with the best appliances and furnish all the money that was required to pay the highest wages, would such a system solve the problem ?

A. It would not.

Clearing the Ground. 13

25 Q. Labor depends upon capital to be fully employed, and capital must have land first?

A. True.

26 Q. But capitalists and landowners will only employ labor when it is profitable to do so?

A. Yes.

27 Q. Then we seem to have the money question to deal with. Does money become so scarce on account of waste and extravagance that labor fails accordingly in finding employment?

A. No ; extravagance and speculation is limited by natural law to the guilty only, and the evil effects of speculation never reach the mass of mankind.

28 Q. But laborers, it is claimed, are becoming daily more lazy, inefficient and extravagant, are doing less work for the same money, and seem to be destroying the very foundations of industry ?

A. Laborers are doing all the work which is being done, and they create and sustain all the wealth in existence.

29 Q. But the fountain of money which employs labor must run dry in hard times ?

A. No; the fountain can not run dry if labor is employed, for it is being perpetually renewed each day by labor.

30 Q. If the fountain of money can always be kept full by employing labor, where does the trouble begin?

A. The trouble begins when profits run dry, which is another matter.

Chapter III. PROFITS

31 Q. Is the riddle of the centuries based upon profits? If they are permitted to fail, will civilization fail?

A. Yes; progress means an increase in wealth, and an increase in wealth means that a daily surplus above requirements is constantly created by labor, and unless this daily surplus is maintained, civilization is in danger of collapse.

32 Q. How is it possible for a civilization which requires centuries to build to be thus set upon its apex and fall, when the world is teeming with wealth?

A. The answer is, that the world has no vitality unless its wealth is fulfilling the purpose of civilization.

33 Q. But may not progress be carried on from day to day without profit ?

A. No ; progress implies tomorrow instead of today, and unless provision is being made each day for tomorrow and for the future, society must relapse into barbarism.

34 Q. Then the vitality of society is based upon its future, rather than upon its present existence ?

A. Yes ; we might live, for example, as though the world were to come to an end next week, and to do so would destroy the value of all property depending upon the future, while it would enhance the price of property, which would give to us a few more days of mad and whirling excitement.

35 Q. I gather from this that when profits run dry it is notice to civilization that its world is coming to an end ?

A. True.

36 Q. In a primitive society, where people barter their products, they are not so limited in their pursuits by profits, are they ?

A. The moment the laborer lays by a store of food for future use, and uses his spare time to build a shelter for his family, such an advance is derived from the surplus above his daily needs, and is wholly profit.

37 Q. Are profits vital because laborers who fail to share in them are forced to live from hand to mouth and have no hope for the future?

A. Yes.

Profits. 17

38 Q. Can you state in a few words how profit has become so vitally important?

A. By the introduction of money in place of barter.

39 Q. You mean that with barter there would naturally arise a fair distribution of profits, while, with money intervening, such distribution may be prevented?

A. Yes.

40 Q. Upon what particular quality in money does profits depend?

A. Profits depend upon the fact that money itself is more desirable than any other thing.

41 Q. Can you explain this?

A. Money must be made more desirable than anything else, or it would not exchange with or be preferred to other things.

42 Q. But money came gradually into use, and this fact should have corrected any faults in its evolution?

A. This fact did correct faults in the evolution of money itself, but does not prevent our interference with the circulation of money at any time.

43 Q. You say, however, that profit is based upon the fact that the people desire money more intensely than they desire anything else?

A. Yes; and this demand for money is in itself an evolution of desire.

44 Q. Please explain the rise in demand for money, beginning with primitive society.

A. When trade made its first beginning one commodity was used as a medium of barter because it was more desirable than another.

45 Q. Because each one wanted that particular commodity and would always give up something else in order to get it?

A. Yes ; and upon this basis of desirability a commodity used for a time as money would be superseded by another more universal in its demand among the people.

46 Q. Then the commodity used as money became a measure of value to people who wanted the things they did not produce?

A. Yes, to a degree, but utility was the first idea to arise in the mind from the use of barter money. The commodity used as money acquired the usefulness of every other commodity for which it would exchange, and therefore this use idea, which is naturally confined to a defi-

Profits. 19

nite object, spread so as to include money, and the want of money embraced the want of every object for which it would exchange.

47 Q. The idea we have of value is merely an idea of the utility of each and every object which money will buy?

A. Yes ; a hungry man is driven to seek food, and among savages, when such hunger is once satisfied, they never stir until hunger again drives them.

48 Q. But how has this savage, with a single appetite, been induced to change?

A. Different tribes of savages had different environments, and hence they had different kinds of hunger.

49 Q. The mixing of savage tribes creates the first advance in desire ; that is to say, a savage wanting mere quantity in food advanced to a savage who had a desire for quality?

A. Yes; and as nature Was bounteous, savages could develop the beginning of new desires with but little work, and when new wants first began they multiplied with what they fed upon.

50 Q. The plan of nature is, then, to add to human hunger rather than to appease the appetite?

A. Yes; as new desires multiply and as the means to gratify them increase, new hunger is born in a myriad of forms, and at the same time money develops, takes upon itself an objective value, and becomes the only power by which each and every one of a thousand kinds of hunger may be speedily and easily supplied.

51 Q. So the modern commercial craze for money is wholly natural?

A. It does not follow that because men fight upon the deck of a sinking ship and trample down the women and children in order to save themselves, that such brutality is natural; so also with the modern struggle for wealth, the desperate need for money will revive all the savage instincts and creates a savage struggle to get money, which should be easily secured on account of industry and morality.

52 Q. Money comes into the problem because it alone provides the means to satisfy thousands of new desires, and the hope of securing money causes men to endure, to suffer and to labor in the modern world?

Profits. 21

A. Yes; and when common laborers are unable to gratify new and higher desires, and when they must be content with quantity rather then quality of satisfaction, nature forces them again to become indolent, careless and irresponsible savages.

Chapter IV. INTRODUCTION OF MONEY

53 Q. You answer that profit is the key to the arch of industry, and that the introduction of money has made the problem of profits the riddle of the Sphinx?

A. Yes; the circulation of money not only makes the problem of profits mysterious and complex, but it makes the growth of profits equally difficult to explain.

54 Q. How does it happen that profit depends upon money rather than upon goods sold?

A. Money being so much more desirable than any other particular commodity, the owner of money will not part from it unless he can get more money when he sells than when he buys.

55 Q. The profit proposition is based, therefore, upon the fact that everything labor produces must continually and regularly sell for more money than it cost?

A. Yes; or, to be more precise, there should be a greater demand from labor in every line than the cost of supply in each line, so that labor may always sell its product to other laborers in every market for more than it cost.

56 Q. If this condition could be made universal, and if prices were held to such a standard, it is hard to discover what more would be required to solve the labor problem. Is there a natural law by which everything labor can produce will always sell for more than it cost?

A. Yes, there is such a law.

57 Q. Will you state the law as simply as you can ?

A. It is the law of a division among laborers whereby a few laborers produce more than they need and have a surplus which will supply as many more laborers.

58 Q. If half the laborers produce the food and clothing which everyone must have in about equal quantity, then you have twice as many buyers as you have sellers, provided the buyers can get the money?

A. You have hit upon the point where profit is linked up with the money, namely, the buyers must get money first before the price of goods has any meaning; goods must be able to sell, and in order to sell the buyers must get money first.

59 Q. Suppose the buyers get money by working for it, then there is twice as many dollars in the food and clothes market as was paid to labor for making them?

A. Yes ; and that situation provides a selling price higher than cost price for everything labor produces.

60 Q. So far we have a selling price that is double the cost price, provided there has been a previous distribution of money among consumers ?

A. The paradox of political economy arises on this account and is as follows : Labor must first produce goods before it can secure money to buy them, but goods must first be sold to labor before money may circulate to pay for them.

61 Q. The paradox appears to be a stone-wall difficulty; how is it explained?

A. It is explained by credit ; labor works for capital on credit, and produces about one month's supply of goods before it is paid. This lag in wages enables goods to be sold on credit and paid for as labor is being paid.

62 Q. This credit, however, involves a considerable quantity of money, and since goods sell for twice the first cost, there must be some law by which a corresponding volume of money goes into circulation before it returns from the consumer ?

A. The quantity of money in circulation is of the greatest importance, and is controlled by natural law.

63 Q. What is the first or primary set of facts one needs to understand before the quantity of money may be taken up?

A. The quantity of money is not easily explained, because the amount of money increases by a process of growth which is evidently controlled by the natural laws which bring about growth in the organic world.

64 Q. But we know that organic growth springs from seeds properly planted, without being required to know how or why. May it not be the same with money?

A. Yes; but money has been so mistakenly discussed that the main difficulty is to remove the old ideas.

65 Q. What is the first error concerning quantity of money?

A. It is that prices of goods are determined by the quantity of money.

66 Q. Is not this correct?

A. No, because the quantity of money is determined also by prices of goods.

67 Q. How can you affirm that prices depend upon the quantity of money, and then reverse the problem and say that the quantity of money depends as well upon prices?

A. It is like a chicken producing an egg and the egg produces another chicken. On this account the money question has caused an endless discussion over prices which in effect is discussing which comes first, the egg or the hen. Price is not a simple fact, but is a compound one, like weight, and depends upon the combined effect of the action and reaction of money, the egg and the hen and the hen and the egg.

68 Q. It is commonly believed that price is the result of demand and supply?

A. It would be more to the point to say that price was demand and supply. When demand and supply is coupled together you have the action of money in the hands of buyers and its reaction in the market establishing prices.

69 Q. That is clear so far, but to get to our point. A given volume of money in circulation will establish a given standard of prices for a certain volume of goods. Now it is maintained that this quantity of money is no more important than to help along trade. It is claimed that a greater volume of money would only change prices and require more money for the same result, while a lesser quantity would only reduce prices.

A. The weakness of such a theory is that credit is given no consideration as a circulating medium. Cash and Credit are attached to each other, and partake of each other's activity, like Siamese Twins ; they move together or fall in common.

70 Q. The advocates who hold quantity of money lightly should be asked to explain at what point the quantity gains or loses its importance. If less money merely reduces prices without interfering with industry, then the question is, how much less ? and if more money only changes prices and does not alter civilization, again where do we stop?

A. Yes, because there is an absolute standard upon which nature builds or destroys, and growth is governed by this standard. There is a given nucleus around which an increase grows until the size of the unit causes it to divide into two, and to each new unit a similar growth arises, and each again divides into two.

71 Q. Do you mean that money obeys some such law of fertility as exists throughout the organic world?

A. Yes; increase of money seems to be governed by a law of compensation or balance. Growth is built in uniform layers around a nucleus from the environment until the power of attraction in the nucleus is balanced by the quantity it may attract, and when the growth in size equals the attraction, the entire mass divides exactly into equal parts, also dividing the nucleus, and in so doing the attraction is restored until the weight or size again balances, to again divide.

72 Q. Has this anything to do with the quantity of money? Has a dollar of money such nuclear attraction by which it grows and divides into two dollars?

A. It has; and credit is the vital substance which continually rejuvenates the circulation or growth of money.

73 Q. However interesting this may appear, it gets away from the point to be explained, namely, the relation which the quantity of

Introduction op Money. 29

money bears to* the quantity of things to be purchased ?

A. The quantity of money establishes such relation; prices for labor change into money, and this money creates other prices, and returns to again become new wages, thus making money the undistributed middle of the system.

74 Q. What are the factors controlling the quantity of money ?

A. There are four factors, the unit of money, the unit of labor, the unit of time and the object.

75 Q. That is simple enough ; labor must earn money by working during certain periods of time, and in doing so certain objects are produced which are bought with the money. Quantity of money is therefore fixed by labor and time, and by spending the money earned?

A. So far correct; but much labor works without the work resulting in a definite object, and in such case the money itself must contain the stored or expended labor force for a certain time.

76 Q. The quantity of money is therefore based upon labor time rather than upon the objects which result from a part only of this labor time?

A. No and yes ; the quantity of money must be increased by nuclear units of labor expended during certain units of time in desirable work, but this expenditure of labor needs an objective. Nature will not permit the volume of money to increase permanently unless the greater volume gives rise to greater wealth. The increase of money is similar to growth in the organic world, where seeds represent money, and nature can not permit the reproduction of more seeds except for growing more plants.

77 Q. You mean that wealth grows when money is properly spent and invested, rather than from the niggardly saving of seeds which are never planted?

A. Yes ; money is made up of units, and each money unit represents not only a labor unit, but also a unit of time, and from this fact springs all the difficulty in explaining the money question.

78 Q. Y'ou mean the difficulty of explaining the quantity of money, because the quantity depends upon two or more factors?

A. Yes; difficulty in explaining how money and credit must grow or decay in company with each other; money in the hands of the buyer is the force which puts all other forces into activity, the same as any other physical force, and a quantity of force depends upon a unit of force moving in a given direction during a given time.

79 Q. If quantity of money is governed by the laws which govern quantity of physical forces, it should not be difficult to make the subject clear?

A. It is difficult, nevertheless, because we really have no method of determining the quantity of physical force except by weight, and we have no conception of growth in physical forces like the problem confronting us in money.

80 Q. It is clear that physical forces depend, for example, on time and speed; that a given force, like a horse power, is computed in a certain weight lifted one foot in one minute, or half the given weight twice as far in the same time, or twice the weight in half the distance in the same time?

A. The illustration is correct; and in order to understand forces we must have fixed standards of weight and time and distance, while with money all standards are movable except alone the single units of money, represented by dollars, dimes and cents.

81 Q. Suppose a given value must move or be consumed by the circulation of money, where do the forces come in for the purpose of calculating quantity?

A. A given price represents the force to be overcome like weight, and an equal sum of money represents the force of labor exerted during a given time to overcome the price.

82 Q. That is to say, the price of wheat represents its social gravity or weight, and the wheat money represents the labor and time required to produce wheat and bring it to the market ?

A. No ; at this point error usually creeps in. The price of wheat, like the weight of iron, is determined not by wheat labor alone, but by labor and credit of all kinds all over the world, just like the weight of iron is counterbalanced in gravity by the weight of the earth.

83 Q. That would be clearer if it could be illustrated with a particular price, especially the price of labor itself?

A. Take two laborers, for example, getting different prices for labor at the same time, say, a ditcher getting two dollars a day and a lawyer at a trial of a case getting ten times as much, or twenty dollars a day.

Introduction op Money. 33

84 Q. This is an example of greater labor force exerted in the same time, and therefore the lawyer accomplishes more than the ditcher.

A. Your answer is the common one, that labor of one kind is superior to labor of other kinds, but the laws of nature seem to hold to the contrary, and they do not allow greater prices for labor because one kind of labor is superior to another, but require equal labor units to be measured in equal units of time, which means that lawyer time is paid and not lawyer labor.

85 Q. What is the difference if a lawyer gets ten times as much as a ditcher? Why split hairs about the results being a saving in time instead of a superiority of labor?

A. It is just this very splitting difference that investigators fail to see, and therefore they fail to solve the money question or the labor question.

86 Q. But if the ditcher at two dollars a day is paid for results, and the lawyer at twenty dollars a day is also paid for results, the ditcher may become a lawyer and thus even things up?

A. Not to lose sight of the division of a hair, nature makes time saving the distinction and refuses to consider the quality of labor, because the results secured by the lawyer over the ditcher may not be owing to lawyer labor at all, but may be owing to natural time-saving advances in civilization, in which the ditcher has a right to share without becoming a lawyer or without desiring to be one.