Capitalism vs. bolshevism

Contents

Chapter * Page

Introduction 1

I The System 6

Introduction

My previous booklet, CAPITAL, written and published in 1914, was accorded a reception which convinced me that great numbers of people were interested deeply in the analysis and explanation of our present system of industry therein presented. Recently there has been a strong revival of the demand for it. As the last edition has been exhausted, and as many of my friends have urged me to write again in the more brilliant light which the great war has thrown upon the economics of national life, I have violated the eight-hour regulation and turned out the material that follows.

It has been my plan to tell my story in language that all can understand, to employ a style conducive to easy reading and to write precisely what I know and believe to be true, without equivocation. The reader will not find it a-longdrawn-out argumentative discussion. If anything, it is too short. But I believed it best to keep it within the limit of a single evening's reading.

In these days when the extreme socialists, known there as the bolsheviki, are undertaking to force all Russians to accept their outrageous and impracticable social scheme by murdering those who disagree, and meanwhile dragging the whole population of Russia steadily downward from want to starvation; and when the propaganda of bolshevism is being carried on actively in this and every other country, it certainly is desirable that something be written and published which will make clear to the wage earner and the farmer, and also to the business man and the capitalist, the nature and character of the so-called capitalistic system of industry.

By devoting a great deal of my time during the past 20 years to the work of examining and valuing mining properties, and also a variety of other industrial enterprises, I have become impressed that the average man has a rather hazy knowledge of what is really going on in the world beyond the limits of his personal vision. Although I have become well acquainted with hundreds of miners, I never met more than two or three who had a clear idea of the value and

Introduction 3

importance of the mine in which they worked. The one employed in a rich stope is prone to think it the greatest mine in existence, and another who is helping drive a connection through barren rock usually is convinced that the property is well nigh valueless.

Capitalism has been camouflaged and misrepresented until hardly anybody knows where it is or what it is. It needs to be explained to the people who are the most intimately associated with it. When it is understood sane and rational thinking people never can be induced to exchange it for any other social and industrial system, there will be a general disposition to lose faith in the witch-doctor charms of the socialists and bolshevists and to turn to remedies that have been tried and proved.

Although a liar is almost as unpopular as a person with a contagious disease, the truth is not anywhere near as popular as might be desired. To illustrate, a library in a town near Boston, the report of which is now before me, circulated 28,743 books of fiction last year and only 2,330 of history. The appeal of the good story is largely responsible for the spread of bolshevism, the advocates of which, never permitting themselves to be restrained or even influenced by facts, always are ready to stretch, compress, bend or twist their doctrine if they thereby may hope to bring more converts to their fold.

Capitalism, however, is by far the most wonderful, astonishing and thrilling of all man's creations. Here in the United States where it has reached its highest development evidence is immediately at hand to confirm every truthful statement that is made concerning it. We Americans have the best of reasons to be proud of our capitalism, and the time has come for us to declare our faith. The tens of millions of socialist and bolshevik publications that are being circulated every year have made a diseased state of mentality more or less prevalent to which the tonic of truth must be administered.

I have every confidence in the great common people and in their high standard of intelligence. I know that they would be quick to discover it if I tried to fool them. All Americans are interested in the same things, personal liberty, increasing opportunities for the individual, continuous prosperity and steadily im-

Introduction 5

proving standards of living. I have written to promote these good objects and to resist the influences which are being exerted to destroy them.

THE AUTHOR.

Chapter I THE SYSTEM

Before we decide to join the bolsheviki the syndicalists or the socialists, we should make sure that we thoroughly understand a long list of things, the two most important of which are the present system, which they propose to throw into the discard, and the new system of society which those organizations are planning to establish.

It is not good business to throw anything away until you are satisfied that it is worn out, unfitted for the purpose intended, no longer in style or in every way valueless. On the other hand, it is not good judgment to give your all for something new merely because the demonstrator or salesman is a plausible talker. You first should make sure you are getting your money's worth, that the new thing or arrangement is certain to bring you great benefit and happiness.

The present system, called capitalism, is based upon personal initiative and effort, and the private ownership of property. It was a very simple system at the outset, but has grown more complicated as the wants and the purchasing power of the individual have increased. Now it has become difficult both to understand and to describe.

Every country must have its industrial system, and the three prime factors of every industrial system necessarily are production, distribution and consumption.

Ideals, theories, fads and all kinds of isms are secondary. First importance must be given to food, raiment and shelter, which make it possible for people to live on the earth. These necessities of life have to be produced and distributed before they are available for consumption.

The work of production and distribution, regardless of the system or form of government, has to be done by the people. Nearly half of all the people now on the earth wrest their living from the soil almost with their bare hands, still using only the most primitive implements and tools; and approximately one-third of the world's people still depend upon muscle power, upon the backs and legs of mankind, for their transportation service.

When a primitive man comes to own a horse, an ox or other beasts of burden he is a capitalist. He has stored up an amount of personal effort, which he exerted in excess of that required to sustain life from day to day, and is able to draw upon that stored energy for assistance in the work of production and distribution.

After large numbers of men have obtained beasts of burden, fashioned vehicles, plows, etc., the productive capacity of the community in which they live is increased and transportation quickened. The capitalism of the United States is a higher development of this idea. To domestic animals it has added the most effective tools, machines of unending variety, and an immense volume of mechanical power, and has organized wonderfully efficient systems of production and distribution.

A few of the resulting benefits will be mentioned. First, it has added so greatly to the volume of production and so quickened transportation as to make it possible for several times more people to live and support themselves upon the earth; second, it has lightened human burdens and provided leisure and surplus which permit of the education of the young and the acquisition and enjoyment of a multitude of comforts, pleasures and luxuries, and third, it has opened up almost unlimited opportunities to the children of the most humble to rise to positions of influence and wealth.

Capitalism is a system that holds out strong inducements to the individual to strive for himself and family. It implants in the breast of every rational man a desire to earn save and accumulate property for himself and his children. Opportunities to accomplish these things are supplied galore. A great many men take advantage of some of the'se opportunities and as many more do not.

Those who have neglected or overlooked their chances and those who have spent their earnings as they have gone along are likely to see life and the system from an entirely different viewpoint than those who have practised alertness, industry, self-denial, and exercised good judgment in the conduct of their own affairs. Men of the first two groups want to blame something for their failure and they pick on the system. Those in the last group attend to their own business and don't bother to replyto the arguments or to deny the accusations put forth by the dissatisfied portion of the people, hence one side of the argument is heard from day to day and the other side rarely, if ever.

Briefly, the savings and accumulations of the rich, the middle-classes and poor are invested in a great variety of industrial enterprises. Men of genius and business capacity form organizations, chiefly corporations to employ these savings productively so that they will earn interest and profits. Approximately 90% of all interest and profits is reinvested in industry. This method of utilizing savings in its highest development multiplies the productive power of hand labor, at least seven times over. More than three-quarters of the increased product thus gained necessarily goes to labor.

When corporations are given encouragement and the principle of property right defended by the public, industrial expansion is rapid, labor is fully employed, wages are high, the people are prosperous and the volume of production is so large that the cost of living tends to decline gradually from year to year. During periods of reform agitation and legislation, of assaults by the constituted government upon the right of property ownership, of strikes and other labor disturbances, savings are invested less freely, there is reduced expansion, business interests hesitate, production does not grow as rapidly as population and thus the cost of living advances.

What the dissatisfied portion of the public doesn't understand is that interest and profits must be invested, that their investment increases the country's production, that the product must be sold and that a market for an evergrowing volume of output cannot be created except by permitting the prosperity and purchasing power of the working people to rise steadily from year to year. This increased purchasing power may come about through declining prices just as well as by wage advances.

Capitalism is an evolution. It is an aggregation of age-old and newer truths which have been demonstrated to be practicable and trustworthy. It comprises the workable principles, methods and processes that all generations of men from the beginning of time have discovered, developed and learned in their struggles for existence and in their dealings with one another. It is the concentrated business and social wisdom of all ages, the best of the experience of our ancestors, the part that could not be disregarded or discarded and which necessarily, therefore, has continued in use.

Of course it is inconceivable that anybody should expect superior social and economic wisdom to be evolved from the brain of "a seedy looking individual with unkempt hair and beard and clothing badly soiled who spent the most of his hours alone in the far corner of a lowceilinged saloon over a stein of ale;" but increasing numbers of people have shown a disposition to take their wisdom from such sources in recent years. Others are confident that true and trustworthy wisdom always is the child of experience.

For a score of years past large numbers of irresponsible agitators have been striving untiringly to teach the ignorant, the thoughtless, the weak-minded, the idle rich and the unfortunate poor to hate capitalism; and the efforts of soap-box orators have been ably seconded by the "academic bolshevists, of whom our colleges and universities are altogether too full."

Social-uplift, socialist and I. W. W. agitators — many of whom are innocently ignorant and the rest corrupt — have taught millions of working people to believe that capitalism robs the poor. Absurd as this proposition is on its very face, it has provoked widespread bitterness and antagonism and even been responsible for riots and revolutions. The penniless tramp declared that the only time he ever entertained fears that he might be robbed was when he was asleep and dreaming. A lot of our social reform agitators should try to wake up.

Of course capitalism doesn't rob the poor. It can't. The poor have nothing of which to be robbed. Capitalism urges and assists the poor to better their condition. Both the capitalist and the worker thrive best when a very large volume of business is being done on a narrow margin of profit. Therefore capitalism is interested in following a line of development and progress that gives all labor constant employment and large buying power.

It is impossible to demonstrate exactly how much capitalism contributes to the work, or the volume, of production or how far it assists in distribution; but Bulletin 102, part 5, issued by the Smithsonian Institution, contains these estimates, first, that the amount of power in use in the United States is about 150,- 000,000 horsepower, second, that this is equivalent to "the labor of three billion hard-working slaves."

That the number of people engaged in gainful occupations in the United States is 40,- 000,000 is a government estimate also. It would seem to follow, therefore, that capitalism is contributing 77 times more energy to the work of production and distribution than the wage earners are; yet it is impossible to show that capital receives as its share as much as 20% of the benefits accruing. If the government estimates are not more than 25 times too high, indeed, even though they are 77 times too high, capitalism clearly is not to be spoken of as robbing labor.

To follow this matter of power a bit further, it has been estimated that the farmers of America feed 40% of all they raise to their horses. For the limited benefit the farmers get from this rather awkward form of power they apparently give up twice the proportion of their product that capitalism withholds from labor. Horses supply only a portion of the power requirements of farmers, as they do not help weave the cloth for his clothing, mill his grain, saw his lumber or draw the wire for his fences.

Capitalism supplies power and facilities for which labor unhesitatingly would surrender half or two-thirds of its products provided they were unobtainable at lower prices. Capitalism also pays for the plans, the organization and the management that double the effectiveness of power and machinery, and charges only 10 or 20% of the product. Hasn't it been stated wrong all along? Isn't it labor robbing capital instead of capital robbing labor?

Everybody is aware that capitalism has reached its highest development in the United States. Before the great war more than a million poor people were coming here from other lands every year. There was no such volume of emigration to any other country. Capitalism was creating here a heaven on earth for the poor, and the poor of the outside world were coming to take advantage of it as fast as they could get together the money to buy steamship tickets.

One who has read and analyzed history has only to look about him to see and appreciate what capitalism has done for the people who work with their hands. It has made it possible for them to rise from slavery and serfdom to citizenship and independence, to obtain a continuous and abundant supply of the best foods that land and ocean yield, enabled them to dress comfortably and in accordance with personal tastes, to occupy dwellings equipped with all modern improvements, and- provided educational advantages and opportunities such as were not enjoyed even by the aristocracy as recently as a century ago.

Before the great war capitalism had brought almost everything worth while within the reach of the American wage earner, including newspapers, magazines, books, music, gas and electric lights, telephones, phonographs, moving pictures, theatres, baseball, golf, travel on steamships, railroad trains and electric cars, and ownership of his home; and thousands of wage earners were riding to and from their work daily in their own automobiles. The working people of no other country in the world enjoyed these things to one-fifth the extent that they did in the United States. Opportunities to rise from the ordinary walks of life to the most honorable and highly compensated positions and to acquire fortunes were multiplying and the sons of workingmen were foremost in taking advantage of them. Ambition was encouraged and industry rewarded.

Capitalism had accomplished all this while it was constantly under fire. The labor organizations claimed all credit for it, on the ground that their never-ending agitation and strikes for fewer hours and higher wages had made the working people prosperous. Every act of theirs had served to retard the progress of the American people toward a more uniform prosperity and a higher average standard t)f living.

Labor organizations or no labor organizations, the working people of the various countries of the world are prosperous or indigent in the ratio with which capitalism has been developed there. Proportionate to their national wealth and population the people of England and France were not as prosperous as ours ; but that was due to the fact that England and

France had invested a large proportion of their capital in foreign countries, while substantially all of the capital of the people of the United States had been invested at home, together with a very large amount of borrowed capital.

Less than 25% of the world's people live under full-fledged systems of capitalism. Capitalism expresses itself in power-driven machinery and highly efficient business organizations. Its purpose is to reproduce capital with capital, and then to go on reproducing capital in multiple, accomplishing this by multiplying the productive power of human labor.

In the earlier days of modern capitalism it was the habit of people to speak of "labor saving machinery," and also of "labor displacing machinery. ,, With feelings of uneasiness they pointed out that machinery enabled one man to do the work of several men, thus reducing the demand for labor. Later on it was stated in another way, that machinery enabled one man to produce as much as several men, thus increasing very greatly the supply of desirable products. Then machinery began to be looked upon in a new light.

Of course it was recognized then, as it should be now, that the end and aim of practically all labor were production and distribution. If more of these desirable results could be accomplished with less labor, so much the better. People never were as fond of work as of products.

Modern machinery was only fairly well along toward general adoption before it developed that its multiplication of the effectiveness of hand labor resulted in overproduction, which caused frequently recurring industrial depressions. This overproduction presented one of the most puzzling economic problems of all time.

How capitalism solved the problem of overproduction is told in another chapter. It was the crowning development of all economic history.

Although capitalism is one of the most remarkable, and doubtless the most vitally important, of man's creations, it is not the outgrowth of the acceptance of a carefully matured plan. No statesman, economist or philosopher of past generations left behind him a written line to indicate that he had any mental conception of an

20 Capitalis7n vs. Bolshevism

industrial future that tallied at all with the one that has developed.

It seems that primitive man must have been following the dictates of his own practical experience and common-sense judgment when he broke over the boundary line from barbarism to civilization. Evidently he continued to follow them and they led him to capitalism.

There are good reasons for the belief that man liyed on the earth for at least two hundred thousand years before he was able to take more than a very few steps forward industrially. After he had developed the ability to make crude stone implements, spears, bows and arrows, invented fish-nets and a few traps and snares to catch wild animals his progress appears to have stopped and left him stationary at that stage of his advancement for countless generations.

If man had grown wings and thus been able to fly rapidly back and forth from the north to the south, as some of the migratory birds do, visiting each and every spot on the earth's surface in nature's harvest time, he might have continued a benighted barbarian to this day. It is quite apparent., however, that the Creator had a very different plan in view when man was fashioned.

Man was made to be a worker. Unless he foolishly prejudices himself against it, work is one of the most pleasing occupations of his life. It is a game that is interesting every moment of the day. There are prizes for all of the players, and for those contestants who apply themselves most faithfully, never permitting their personal enthusiasm and ambition to relax, the prizes are very large.

Our ancestors of primitive times who were obliged to work with so few mechanical helps and to endure such severe hardships and privations, undoubtedly carried about with them a big fund of common-sense and were both resourceful and ambitious. Why they did not begin accumulating capital thousands of years earlier and using it to lighten their labors and to increase their productivity is not entirely clear. There is a great deal of evidence, however, that stealing and a general disregard for property rights prevented accumulation, and that man's progress toward a higher civilization did not begin until after property rights had become a generally accepted and established moral and social principle.

Early civilization was extremely strong for property rights. Until a few generations ago +he crime of theft was punishable by death. That custom probably did not bespeak a prevailing standard of cruelty so much as it did a popular determination to stamp out a tendency or habit which the people as a whole had come to consider as severe a crime against the public welfare as murder. It is evident, therefore, that the people of those generations that witnessed the emergence of mankind from barbarism to the borderland of civilization were convinced that the recognition of the individual's exclusive right to have, hold and use his savings and accumulations was to be the basis of human progress.

In recent times the people have been taught to believe that the one quick and certain way to improve the condition of the wage earners is to, give them a larger share of the profits of capital. If it can be demonstrated that this country has been making too rapid progress industrially than it will have been proved that profits have been too large. More than 90% of all savings, interest and profits remaining after taxes, have been reinvested in enterprise. Should we discontinue doing this and thus rob in advance the generations that are to come after us?

The most important of all products is the food crop ; but the annual crop of new capital, made up of interest, savings and profits, is a close second. This capital crop is a prime essential to the advance of civilization. It builds, extends and expands transportation systems, mills and factories, opens the mines and installs the machinery that enable man to produce and distribute, with constantly decreasing effort, an ever-increasing abundance and variety of the necessities and luxuries of life. It replaces fire losses and other unavoidable destruction, and makes it possible to scrap machines and even whole plants the moment something better has been developed to supplant them. To the extent that profits are cut down the progress of the people toward a higher standard of living and civilization necessarily must be delayed.

Capitalism in its hustle for profits carries the people up the hills of progress in palace cars, offers them every delicacy that appeals to the palate, takes every care of their comfort and health, and humors their every whim. The more it gives the less, in proportion, it takes for its services; and as it grows bigger and stronger and more all-pervading its power to domineer and to dictate steadily diminishes.

Nothing else, not even education, exerts the influence that capitalism does to develop the initiative, the self-reliance and personal confidence of the individual. It is an individualistic system of industry. Millions of individuals are watching constantly for evidence that one or more of thousands of commodities and services are in demand, and hastening to supply them the moment it becomes possible to do so with profit.

Not the human frailities of one, but the watchfulness and wisdom of millions are depended upon to see to it that all needs and legitimate desires are supplied. And what is the result? Except when the egotism and personal ambitions of politicians clothed for the time with the power of government, interfere with and attempt to regulate this wonderful individualistic system of production and distribution there always is enough of everything each day at all of the world's numberless centers of supply.

Capitalism is a plant of tender growth. It thrives only where the rights of property are recognized and respected, w T here stability of government exists and conservative thought prevails. Thievery, either private or public, whether it be called banditry, piracy, socialism, bolshevism or by any other name, is a preventive of capitalism, capitalists being unwilling to take the chance of their property being destroyed by insurrections, stolen by bandits or confiscated by the government, in addition to the business risk which always is present.

Contrast the condition of the working people in China, where capitalism never has developed beyond the primary stage, with that, of the wage earners in America. The Chinese have very little machinery, few tools and hardly anything in the way of modern transportation facilities. Although they work hard, 12 to 14 hours daily, they are able to produce only a trifle more than the bare necessities of life.

The Chinese cultivate the ground with pointed sticks, still weave about half of all the cloth used there on hand looms, saw boards from logs with elbow-grease and lug the water supply of considerable cities long distances in preference to piping it. The gross average production of the Chinese workingman is only a trifle more than the average American working man wastes. It is so small that the 10 to 25 cents a day they are paid when they work for wages constitutes no robbery.

Yet the Chinese are noted for their industrious habits, and as hand workers they are highly efficient. The trouble is that they have neither domestic animals nor power machinery to help them increase their productive power. They are opposed to capitalism. Somebody has told them it would deprive them of employment and exploit them.

Perhaps we shouldn't laugh at the silly objection of the Chinese to machinery. As recently as 50 years ago their white brothers in England and the United States were organizing strikes against the introduction of labor-saving machinery.

Our socialists and single-taxers haven't anything on the Chinese either. The government of China confiscated the large land holdings and distributed them to the people 2,000 years ago. It also loaned the farmers money at 2%. For once the Chinese rested. With plenty of land and money there was no occasion to work. As a result insufficient foodstuffs were raised to feed the people and they experienced a famine, hundreds of thousands dying of starvation. That particular famine was caused by social reform, not by nature — unless it was human nature.

Now the Chinese are awakening. They have overthrown the old government and are discarding their old ideas. If their new government takes an unqualifiedly firm stand on the right of the individual to own, acquire accumulate and defend property, the industrial progress of China during the coming 50 years will be likely to astonish the world.

What's the matter with Russia? Nothing, except that the people have been denied the benefits of capitalism. Before the great war 82% of all the Russians were engaged in agricultural pursuits. They raised comparatively little for export. Of course they were illiterate. The children had to help their parents cultivate the ground with pointed sticks. The whole country didn't earn enough to pay for education, or if it did, the people needed other things more than they did the ability to read, write and figure.

No one will deny that the Russian people were "exploited" by the government; but it was a foolish exploitation. Capitalism would have increased the productive capacity of the Russians seven-fold, given the people five times the amount they had been getting and returned adequate income to the government and big profits to capital. The capitalists of the world were afraid to establish industrial enterprises in Russia, because the revolution that now has come had been anticipated for many years.

The pet indictment of capitalism in the United States is the slum. What is a slum? It is a place where Russians and the peoples of other misgoverned and backward countries congregate when they come here. The cheaply constructed and crowded dwellings of the slums are more comfortable, cleaner and better ventilated than the sod huts from which such people emigrated. To them the slum is promotion progress. They save money, too, as is proved by the fact that 83% of all the deposits in the postal savings banks of New York City belong to people of foreign birth.