Social struggles. The fundamental facts and principles relative to values, prices, money and interest

Front matter

SECOND EDITION.

REVISED.

ENLARGED BY A CHAPTER ENTITLED:

Dedication

TO THE MEN WHOSE STEADFAST VALOR HAS BEEN OUR NATIONAL RELIANCE IN TIMES OF WAR, AND WHOSE PATIENT INDUSTRY HAS EVER BEEN OUR SUPPORT; TO THOSE WHOSE BUSINESS AND DAILY BREAD ARE VITALLY AFFECTED BY FLUCTUA- TIONS m PRICES, WAGES and INTEREST;

TO THE FARMERS, MECHANICS AND OTHER

HONEST CREATORS OF WEALTH, THIS

Preface

A WIDELY Spread feeling of dissatisfaction with the present organization of society exists in every civilized nation. In some countries this discontent has assumed the form of secret organizations, one of the objects of which is to destroy the lives of kings and other representatives of the present social system. Europe, in time of peace, is covered with vast standing armies, armed with the most deadly weapons ingenuity has created, and trained to use those arms with special reference to the destruction of human life. The ostensible necessity of these armies is to protect one nation from the aggressions of others. But another and a deeper intent lies behind those armed millions. That partially veiled purpose is to prevent the masses of the population from rebelling against their own governments and destroying the existing social fabric. The net result of what is called the " highest civilization " is the virtual admission that it is so hateful to the majority living under it, that huge armies of blood-hounds must be kept to compel submission. Many European thinkers believe that continent drifting into a terrible revolution.

Within a century this country has increased in population about sixteenfold. The increase in wealth, however, has been still greater. But it is a startling fact that every year the inequality between the amount of this vast wealth possessed by each individual grows wider and wider. We formerly supposed that our laws and institutions produced both political and social equality, and that the class distinctions and consequent bitter hatreds and jealousies of European society could not here flourish. But to-day, the smothered discontent, which in some countries makes the dominant classes feel as if a volcano were seething beneath yi PREFACE.

them, has obtained a firm lodgment in this country. Many of the conditions which exist in Europe are rapidly being developed here.

Only fifteen years ago it was generally i)elieved that dissatisfaction with our institutions was a transient feeling entertained by comparatively few persons. Resumption of specie payments was supposed an effectual panacea for such social disorder. At the enormous cost of much unemployed labor and industrial disorganization for several years, this remedy has been applied. But instead of being cured thereby, the inequality of wealth has grown greater, and the mutterings of discontent have grown louder and deeper. These mutterings are not yet formulated into a definite creed and purpose, but they have forced a recognition of their growth as a menace to public harmony and welfare in the future. Great numbers of people have one feeling in common. Without assigning a reason therefor, they instinctively feel that " something is wrong" in the present condition of affairs. They are not yet angry, but are annoyed by a vague sense of being the victims of some injustice and wrong, the exact source and nature of which perplexes them. At present this state of mind is chiefly expressed by trades unions and labor organizations of various kinds. To a considerable extent these bodies have imagined that those with whom they came in immediate contact were the chief cause of their troubles. Not under, standing the facts and principles involved in their situation, they have failed to see that laws and third parties, with whom they were not in direct contact, were the real source of difificulties and wrongs from which employers often suffered as much as themselves. Consequently, redress of grievances has been sought in warring against their employers by organized strikes. These have inflicted great losses on society, and generally have left the workmen in worse condition than before. Such misdirected and often pitiful efforts can only be prevented by a wider diffusion of information in regard to the principles which govern prices and wages.

PREFACE. Vii

In a free country, dissent from laws and conditions inevitably assumes, sooner or later, the form of political action. People with common interests naturally have thoughts in common, and whenever these sentiments are shared by a considerable number of persons, and become crystallized into a common desire for a definite change of policy or law, political action will follow. Either a new party will arise, or one of those existing will be dominated by new ideas. Thus far, there has not been sufficient unity of purpose among the dissatisfied multitude to organize and muster a large number of voters. But organization and leaders under some name will appear whenever those now uneasy, but doubtful what they want, become converted by further thought and events into persons with a settled purpose.

A revolt against permanently following the road we are now traveling will certainly occur. It is therefore important that every one should clearly understand that every evil, every wrong, and every error in our institutions, and every defect in their practical workings, can be cured by a peaceful revolution at the ballot-boxes. Such knowledge will prevent the folly of seeking redress of grievances by violent methods.

The first element in the successful treatment of a sick man is a careful study of his disease. When what is at fault is known, the effect of different remedies on those wrong conditions must be considered before an appropriate prescription can be made. Both the facts and the principles relative to the case must be weighed ; else the patient is in more danger from his doctor than from the malady.

In like manner, when anything is at fault with the body politic, unless we first carefully study the matter, we may use remedies which will aggravate the trouble. Both the facts and the related principles must be considered before intelligent political action can be taken.

Those who desire changes in our social policy are mostly farmers, mechanics, and laborers. Examination shows that this fact is the direct or indirect result of considerable legviii PREFACE.

islation adverse to the interests of those classes. These persons are entitled to vote, and their numbers are so great that the control of law-making would at once be in their hands if they voted unitedly to protect their own interests. The chief obstacle to such a course has lain in the fact that the majority of the laboring classes have not studied true political economy. Consequently they have lacked clear convictions in regard to the effects of proposed legislation ; and, in this uncertain frame of mind, have been divided and misled by false and hypocritical cries into the support of measures intended for their own injury, and the benefit of persons, small in numbers, but very cunning and unscrupulous.

That the present condition of things will remain undisturbed is impossible. The laboring classes are slowly but steadily growing more conscious both of their political power and of the existence of defects and wrongs in our institutions and laws. Consequently greater political combinations and efforts to improve their own condition may be expected from those persons in the future. How much of this political action will be judicious and well calculated to promote the best interests of the whole community, no one can foretell. But with absolute certainty we do know that whoever helps his countrymen to more easily obtain and fully understand a single fact or principle of political economy, thereby contributes his mite toward properly directing the future national thought and action. With the hope of making such a contribution, this book has been written. Its aim is to dissect and illustrate by examples and historical references some of the fundamental principles of political economy, and to state them so fully, and in such a plain and familiar manner, that any person of ordinary intelligence who has never before read a line on the subject can easily understand them.

That the doctrines herein set forth should conform to the teachings of the majority of writers on such topics has been deemed of no consequence whatever. But it is important that correct principles should be elucidated. Therefore

PREFACE. ix

great pains and care have been taken to sift out common, but false, assumptions and theories, and to state nothing as truth which cannot be verified.

It will doubtless seem to some readers that apparently plain things are dwelt on with unnecessary and tiresome detail. Such persons should remember that an understanding of political economy can only be obtained by observing the same conduct we follow when learning any other subject or thing. A mechanic's apprentice who has fully learned to properly use half a dozen tools is well advanced in a knowledge of his trade. And in political economy, as in everything else, a knowledge of many complex things depends on first getting a clear comprehension of a few simple things. In arithmetic no progress can be made until the pupil has learned to add, subtract, divide, and multiply. When the alphabet of a subject is thoroughly learned, the hardest work is done. If the reader will patiently consider the full meaning of the few elementary facts and principles herein discussed, and pass none of them carelessly by as unimportant, he will soon discover that the " difficult and abstruse questions of political economy" which are constantly talked of, are, in reality, easy and simple questions.

It must be borne in mind, that whoever wishes to learn something about any subject whatsoever, must not begin his studies with the assumption that he is the incarnation of wisdom and already knows all about it. " Seest thou a man wise in his own conceit ? there is more hope of a fool than of him."

Those who have a special desire to examine the silver question may think too much space is devoted to elementary principles before reaching and discussing it. But it should be borne in mind that the topic of silver is only a fragment of the subject of money in general, and can only be properly understood in connection therewith.

And the subject of money can only be clearly comprehended by those who realize the great practical importance of such knowledge in the every day affairs of business and therefore are willing to slowly read and carefully consider

X PREFACE.

the facts and principles upon which the use of money rests.

In an editorial note, the Century Magazine for September, 1885, gives expression to the popular wonder that a country with such an industrious population and such vast and varied natural resources as the United States possess, should not have uninterrupted prosperity, and then says :

" What a strange spectacle this country presents at this very hour ! Money is plenty — fifty or sixty millions on deposit in the banks of New York City alone ! Food is plenty ; the granaries at the West are full of old wheat, and though the wheat crop of the present year does not promise well, the corn crop is likely to be larger then ever before ; there is no fear of scarcity. Manufactured goods are plenty ; the store-houses of the manufacturers and the shelves of the merchants are crowded with them. Labor is plenty ; live hundred thousand idle men are asking for work. Yet in the midst of this abundance a great industrial and commercial depression has overtaken us. At the time of writing this, workmen are selling their labor at the lowest prices, and many are unable to sell it at any price ; merchants and manufacturers find a dull market for their wares ; the railroads report losses instead of gains ; failures multiply.

" The situation is not only pitiful, it is absurd. What is the explanation of it } Who is responsible for it .'' "

True elementary principles furnish a complete answer to the foregoing questions. Either through ignorance, or selfishness, the fundamental principles of political economy have generally been misapprehended and wrongly stated. Hence, many honest inquirers have been perplexed by problems of comparatively easy solution. This difficulty has not arisen from defective reasoning, but by starting from false standpoints.

Contentment among all classes of good citizens and steady industry and economy are the prime requisites of a permanent national prosperity. Nothing promotes that condition and fosters those virtues more than a public policy of fair dealing with all persons. Nothing is so safe and profitable as simple Justice. In a country governed by the majority of voters, the best safeguard of the rights and inter-

PREFACE. xi

ests of each individual is his dear knowledge of the effect of legislation upon them. Such knowledge is possible only to those who fully comprehend the "nature of Value, how it is created, increased and diminished, and the methods by which legislation may affect it. Singular as it may appear, the majority of economic works have been written by persons who have neglected to first thoroughly study those vital topics. The necessary sequence of this omission has been failure to correctly define value and explain the causes of changes in prices and wages, and fluctuations in the rate paid as interest for money and rent of real estate. Although many have been misled and bewildered by pretentious crudity, an understanding of the aforesaid subjects simply requires average ability and careful thought.

No panacea for all social ills has been discovered. Mankind must slowly learn, in the future as in the past, chiefly by disastrous blunders and by painful groping after truth.

These pages are nevertheless presented with the earnest wish that they may shed some light on the great problems of the immediate future, viz.: What measures does impartial justice require shall be adopted to protect and preserve the equal rights and proper relations of creditor and debtor, of capital and labor ? What political action will best prevent the strong, the cunning, and the rich from. insidiously oppressing and robbing the weak, the simple, and the poor? How shall we displace that fruitful source of evils — a currency whose purchasing power is subject to frequent and great changes — by money convenient to use and of more uniform value than any we have heretofore employed ? Without encouraging laziness and waste, ignorance and vice ; without fettering industry and enterprise, thus hindering production, what measures will tend at once to diminish dangerous wealth and dangerous poverty and increase the numbers of those whose instincts and material interests alike link them to the preservation and development of liberty and order, virtue and intelligence ?

SOCIAL STRUGGLES.

INTRODUCTORY CHAPTER.

Natural Laws are not only Invariable but they apply Impartially to all things. — Common error of mistaking the Results of bad Statutory Laws for unavoidable Results of Natural Laws. — What Political Economy is. — A Mistaken Belief. — How Economic Laws should be Considered. — Mankind are Governed by many Emotions and Thoughts. — Common mode of writing Economic works. — Political Economy is an Imperfect Science. — A Confession. — Ignorance is the Mother of Credulity. — Why Mankind make such slow Progress. — Original Thought is not Common. — Mankind prefer Old to New Things. — Evils Perpetuate Themselves. — Need of Elementary Study. — Terrible Fruits of False Premises.

Nothing is permanently settled imtil eorrect principles are adopted. Public policy zvill be fixed zu/ien based on absolute truth. There may be a lull in the agitation of social topics, but, if so, sooner or later it will inevitably re-appear zvitJi increased volume and force. Eddies exist in human thougJit and Jiuman progress, but, nevertheless, they form a steady and continuous stream.

This is not a world of chance, but a world of law. It is not a world of accident, but a world of cause and effect. It is therefore folly to imagine that existing conditions have come upon us in a mysterious, miraculous way. Whenever a result is produced, we should feel certain that its parent, a cause, can be found, if we will but diligently search for it.

If we lift a stone from the ground and let go of it, the same thing always happens. It does not move upward or sideways ; it always falls directly toward the earth's center. This we call the law of gravitation. By the term "■ law "

I we mean the course and conduct invariably observed and followed by all things placed under the same circumstances. Therefore, when we speak of the " law " relative to a given thing, we mean the mode of action and the result which always take place and follow the existence of a certain combination of facts.

WHAT POLITICAL ECONOMY IS.

Political economy may be defined as a statement of the course relative to wealth, which human affairs will probably take under given conditions. In other words, it describes how men will think and act under certain circumstances. It is a description of some of the laws which regulate human conduct. The wealth of a squirrel consists of his house and his store of food. These satisfy his wants and make him rich. Whoever should write an accurate description of the conduct of this interesting little fellow in getting and using his riches, would write the political economy of a squirrel. A description of man's conduct when in quest of riches, when using riches already acquired, and the results flowing from his various modes of trying to accomplish these purposes constitute the political economy of man. The wants of man are rarely satisfied. Therefore he is seldom as rich as a squirrel. But he is continually occupied either in trying to get wealth, or in using it. In doing these acts his conduct resembles that of a squirrel : that is, he usually follows a certain course of action in order to obtain a certain thing, or produce a certain result. These actions and their results have a tendency to assume uniform and definite shape and character. They are the reflections of human thought from the mirror of varying circumstances and conditions. Want of discernment may, and often does, prevent its full recognition ; but the shadow must always be a correct image of the substance. The forces which have a constant tendency to produce these uniform results are called the laws of political economy.

HO IV TO STUDY MANKIND.

A MISTAKEN BELIEF.

It is a prevalent belief that the laws of political economy are so abstruse and mysterious that a life-time of prodigious study is required to understand them. Especially is it supposed that there is something peculiarly difficult about Finance, that special and supernatural laws preside over money, and that it is impossible for an average man to comprehend the subject. The common-sense principles which we every day apply to the solution of all other problems are presumed to be inapplicable to political economy. This belief has been put in circulation and fostered by those whose selfish interests would be advanced by the impression that only a few persons can understand political economy, and that they constituted those few. We shall hereafter show the gross nature of this imposition.

HOW ECONOMIC LAWS SHOULD BE CONSIDERED.

To state how a squirrel always gets and uses his wealth, would be a comparatively easy task. But man has a more complex mental organization ; he has a greater number of wants and a greater variety of means to gratify them. Man has a multitude of desires besides getting and using wealth, and the attempt to gratify these desires makes his conduct in greater or less degree different from what it would be if his wants were as simple as those of a squirrel. The conduct of a man with the mind of a squirrel would always be what some men call " economic " ; that is, it would be governed by a smaller number of laws than it now is. Man's conduct when in pursuit of wealth and the results of such conduct would be uniform. But in fact we cannot predict what the "economic " conduct of a man or a nation will be or what will result therefrom, under certain conditions, without estimating other dominant motives besides the desire to acquire wealth. We cannot study the anatomy of a man's muscles without examining his skeleton. We cannot understand the mechanism of his lungs or any other portion of the body without a reference to all other parts. The whole system must be considered. In like manner when we study the conduct of the human race, we must take into account all the causes which produce and modify it.

Man is not a mere machine or automaton. He is a living animal moved and directed by a cabinet of counselors more numerous and changeable than ever advised any king or other potentate. They are human passions, human emotions and human thoughts. All human affairs are due to some form of human action. All human action is due to the action of the human mind.

Therefore any student of political economy must observe imperfectly, and argue from false premises, just so far as he ignores human nature. His conclusions must necessarily be correspondingly defective and false.

The great majority of writers on political economy have imagined and assumed an ideal type of human nature and of human conduct flowing from this assumed type. This ideal man is governed purely and entirely by selfishness and avarice, — his whole purpose in life is the acquisition of wealth. Actions in harmony with the supposed feelings of this imaginary man they have styled " economic conduct, " and at the same time have conceded that mankind never act *' economically." This is merely a mode of obscuring the subject. We care nothing about the conduct of a being who exists only in the imagination ; but we are deeply interested in the actual conduct of the actual man.

MANKIND ARE GOVERNED BY MANY EMOTIONS AND THOUGHTS.

Selfishness is a dominant trait of the majority, but this has a hundred other objects besides wealth. Moreover, every man, no matter how selfish, has a greater or less streak of generosity in his nature. Every community has a minority of unselfish persons whose precepts and example exert a vast influence on the rest of society. Patriotism, religion, love of home and family, in short, every emotion of the human heart, has more or less influence on the conduct of each individual unit of society. The

THE NEED OF COMMON SENSE.

social tendencies and movements of a nation are a resultant of the combined and conflicting ideas of each and every individual member of that nation. Consequently, we cannot estimate the result of a given measure without taking into account all the forces with which it will be brought in contact. Every cause which materially tends to influence, modify, or direct human thought and human action in any respect is directly or indirectly a factor in the problems of political economy. Men arrive at different conclusions, largely because they begin to reason with a different bias.

COMMON MODE OF WRITING ECONOMIC WORKS.

The value of the majority of works on political economy is impaired by the fact that their authors have not, as they should, made the discovery of truth the sole object of their investigations. They have attempted to explain social tendencies and conduct in such a way as to defend the existing social and political institutions of their country. As most of these writers have been, and are, subjects of monarchical and aristocratic governments, and believers in them, much of what is called political economy is merely a special plea in favor of those governments and the conditions of society which they foster.

In the United States, ninth-tenths of those who are styled political economists are mere copyists and imitators of foreign books and their teachings. These persons regard European institutions as models to be admired and not criticised.

Theories which contain more romance than truth and common sense doubtless amuse and interest some persons ; but they are of no use in studying the various problems of political economy.

We must ponder human nature as it is. We must grapple with the facts as they actually exist. We must severely scrutinize all books written for the purpose of vindicating or supporting an existing form of government or state of society. Above all, we must remember that the truth is never dangerous. We must not shrink from it even though it seem in conflict with moss-grown and beloved institutions.

The majority of economic writers have made a curious error. They have looked around them and seen disorders which are the results of misgovernment, selfishness, and ignorance ; — evils which exist because the best of us are largely in ignorance of the true principles of civil government and social science. But under the delusion that our social and political institutions are perfect, or nearly so, they mistake these phenomena for the inevitable results of human association under all possible circumstances. The symptoms of a diseased social condition have been mistaken for those which would appear in perfect political and social health.

POLITICAL ECONOMY IS AN IMPERFECT SCIENCE.

The pretense is virtually made that Political Economy has reached a point where it can be called a perfect science. A science is a methodical arrangement of facts and of principles deduced from those facts relating to a particular subject. A science is perfect in proportion to the extent that all the facts and principles relating thereto are fully and accurately known. The sciences of law and medicine have been studied and written upon for thousands of years by the ablest men of every generation. They are constantly advancing but are still full of imperfections, and instead of claiming that they are perfect, the most eminent lawyers and physicians are foremost in pointing out, and in attempting to remedy, the defects of those sciences. But political economy is not an ancient study. The first systematic book on that subject was published by Adam Smith, in 1776. The next most important work was written by David Ricardo, in 18 17. Political economy embraces a wide range of facts and principles. It deals largely with that most complex of all things, human nature, and its manifestations and tendencies under certain conditions. It is not only a comparatively new science, but its study has hitherto engaged the attention of a relatively small num-

FALSE PRETENDERS. 7

ber of competent persons. Its few students differ widely in some of their conclusions, and many of its principles are in controversy. Therefore the air of perfect knowledge assumed by a few " Professors " who have thrust themselves before the public as infallible authorities on this subject is ridiculous. * The great majority believe that the subject of national finance is entirely different from other business matters, and governed by obscure and complex laws peculiar to itself. This error has been created and fostered chiefly by school-masters and bankers, who find a profit in such a public belief. In a variety of ways every one of those persons is frequently saying in substance :

" The masse's of the people can never understand the currency question, because its literature is so extensive and profound that years of careful study are required for its comprehension. But only look at me : I am a very learned man. I have studied this matter for many years and understand all its deep mysteries. Now, as it is impossible for you to grasp the profound and peculiar principles which underlie the financial question, I will tell you what to believe. If not so instructed, I am afraid you will take some political action which will injure yourselves."

By a singular coincidence these benevolent pieces of wisdom invariably direct the people to adopt the line of policy which favors their author's personal interest. Most of those who write financial articles pretend to be possessors of a vast amount of undivulged learning. They do not say : " I am stating the principles of finance as far as I understand them." They continually talk about stating the

* A considerable proportion of so-called " economists " are clergymen, who have quit preaching the sublime unselfishness of the Nazarene, and engaged in the business of proclaiming doctrines pleasanter to rich and privileged listeners. To this more congenial task they have mostly brought mental peculiarities which place them in affiliation with the majority of other " economists " ; viz., greater love of dogmas than of truth, and the inveterate habit of assuming statements true, without examination or evidence, and then basing arguments upon them as if the premises of the reasoning had been established.

elementary principles of finance and refer to the " conclusions arrived at by those who have fully explored the subject."

The insinuation is constantly made that what is stated is merely a fragment of great learning, and that every assertion contained therein is sustained by a mass of knowledge unknown to the public.

A CONFESSION.

As a full confession is said to be good for one's soul, I admit once supposing the above-named and kindred statements to be true. What was stated seemed so contrary to common sense that I failed to understand how it could be true, but supposed this arose from ignorance of undisclosed facts and principles. Impelled by a curiosity to know just what the hidden depths alluded to were, I carefully examined the writings of those called masters of this occult science, and found that an old artifice had been repeated. In all ages of the world, jugglers, priests and necromancers of various kinds have attempted, and generally successfully^ to magnify their own importance and accomplish their purposes by raising a smoke and affecting a special knowledge of some wonderful mystery. To this old trick I found myself the victim.