The way out, economic, industrial, financial

Contents

CHAP. PAGE

I. Terms and Principles 7

II. Land 25

Preface

An Appeal and a Challenge.

The history of man presents a succession of fundamental social changes occurring at more or less irregular intervals. Each epoch is governed by laws applicable to the peculiar conditions and circumstances existing during such period. It is no more possible to retain in the new period the things that pertained only to the old than it is for the man of to-day to transform himself into the child of yesterday.

There are many indications that the world is now on the eve of tremendous social change. A new era is being born. The result is inevitable. Men have the alternatives of adjusting themselves to the coming order, or of resisting it to their detriment and perhaps to their destruction. The nameless graves of millions bear mute, but convincing testimony to the truth of this observation.

The hope of the world rests upon the assumption that men will become wiser and better ; that they will develop enough intelligence and character to adjust themselves properly to the environment which evolution creates for them.

The dominant purpose of this book is to examine analytically the fundamentals of the social order ; to discover and make plain the laws of social evolution. It is a search for truth in the faith that we shall know the truth and that the truth shall make us free.

Since mankind moves under leadership, it is my earnest desire to focus the attention of the leaders among all classes upon present problems, so that the combined intellectual and moral force of such leaders may be applied to the task of devising proper solutions. If the blind lead the blind, both will fall into the proverbial ditch. The right to lead rests upon the possession of superior capacity to see and make plain the better way and a willingness to discharge faithfully the duties which this better endowment imposes.

This work is intended both as an appeal and a challenge. An appeal to forward looking, progressive citizens to reexamine the underlying principles of social organization and to exert themselves to promote a better understanding and a more general acceptance of such principles as their judgments may approve. A challenge to those of reactionary and conservative tendencies to expose and refute the fallacies they may discover and thus prevent the acceptance of mistaken conclusions resulting from them.

In the treatment of the different subjects I have purposely avoided reference to any authorities, however eminent, because I desired to present the case solely upon its merits, leaving the readers to reach such conclusions as their unbiased judgments may approve.

In the preparation of the work I have received from many generous friends valuable suggestions and help, for which I am deeply grateful. With this general acknowledgment goes the wish that opportunity may arise for me to give to each of these friends more specific evidence of my appreciation of their kindness.

A. F. Thomas.

Lynchburg, Va., May, 1922.

ECONOMIC, INDUSTRIAL, FINANCIAL BY

A. F. THOMAS.

Chapter I. Terms And Principles

In view of the fact that such terms as Cooperation, Collectivism, Communism, Capitalism, Socialism, Individualism and the like have acquired meanings which give to them a more or less definitive and in some cases a malevolent significance it is necessary in the interest of clarity to define with some precision the sense in which they are to be used. If it were practicable it might even be desirable to coin anew the terms to represent the ideas which these terms are intended to convey, but such a course seems less practicable than to employ the present terms even at the risk of being misunderstood by some and misrepresented by others.

Communism The term Communism and its derivatives defined. w ]\\ no ^ ^ e use( j j n ^j g discussion to rep-

resent the economic theory that there shall be State ownership of all property and that the State shall control all means of production and distribution of the products of industry. The term will be used to convey only the idea of the common ownership of the particular property involved in an operation for the common benefit in which the contribution is made in proportion to ability and the distribution is effected according to need. In other words, the purpose is to discuss the principle of contribution according to strength, and distribution according to need as exemplified by such operations as may employ this principle with beneficial effects.

Socialism The term Socialism and its derivatives are

defined. intended to convey the idea of collective ac-

tion, the results of which are to be distributed according to contribution.

Individualism. Individualism will be used in a sense entirely negative of joint action. This principle admits of no organic relation between individuals or groups and hence there can be no controlling principle of relativity between individuals or classes of society in the things in which individualism is supreme.

Cooperation The proposition to be sustained is that there inclusive. j s j n eV ery social organism a proper sphere

for Communism, Cooperation, Socialism, and Individualism, and that the most perfect social organism is that which gives each of them its proper place in the scheme of general cooperation.

Growth of As the social body has evolved from its Communism. lowest state, Communism has developed in consonance with it. The more highly developed society becomes, the more extensive the application of the communistic principle. It may be shocking to many to learn that all people are communistic and, as between individuals, they all agree in principle, differing only in degree. Perhaps the earliest communistic organization was the family in which the stronger members combined to produce, distributing the results of their efforts according to the needs of all. It is according to this natural principle that the strong labor in order that they may take care of the weak. It is a provision of nature to insure the welfare of the genus. As social growth proceeds

with its multiplication of individuals and rgamza ion, i ncrease d complexity of relation, necessity,

the mother of invention, compels organization designed to promote social welfare. Like the social body it naturally becomes increasingly complex and its functions embrace an ever widening sphere of activity.

state service In so far as their purposes are to serve the communistic, state, all governmental activities are necessarily communistic. The effort to preserve the peace is but another expression of the purpose to protect the weak against the imposition of the strong. The establishment of a judicial system is designed to furnish means by which justice and protection may be afforded those who cannot protect themselves.

The legislative branch of government is charged with the duty of laying down the rules of decorous behavior and the executive branch of government has the duty of administering these laws and may call into play the entire force of society to compel obedience to them. The court houses, the capitols and their auxiliary buildings are constructed and maintained at the public expense. The salaries of all public officers, the costs of armies and navies are public charges collected from all in proportion to the individual ability to pay and the funds so derived, theoretically at least, are devoted to the service of those who stand in greatest need. The public free school system, open as it is to all, is sustained by collections ttt, « cj. made and disbursed in the same way. The

Why the State , ,,. . , . . J

educates controlling reason in this case is that gen-

eral education is necessary to the normal development of the social body, and that public support and operation of it is the most efficient method of accomplishing the desired end. Eleemosynary institutions, care of the deaf, dumb, and blind, provision for lunatics, penal and reformatory institutions, public health activities, public research for the promotion of production and many other activities of similar character form the ever increasing list of subjects that rest entirely upon the communistic principle.

Socialistic Socialistic action is confined to those cooper-

cooperation, ative operations designed to produce with highest efficiency, distributing the product according to the demand of equity based upon the contribution of the individual. In other words, the individual under this system must receive the equivalent of his contribution. All public utilities including the post office, private business and the wage system function on the socialistic principle. Public parks, free playgrounds, sewers or other facilities for the use of which no charge is made are strictly communistic, while water, heat, light and other service for which the individual pays in proportion to use is in accordance with the principles of socialism. Theoretically all socialistic service should be at cost, but business and the wage system, under private initiative, cannot fully meet this requirement.

Cooperative It will be observed that both communistic production. an( j socialistic operations employ cooperation in production whether under public or private initiative, therefore, on the productive side, there is no . difference in principle between them. When

the distribution of benefits begins, communism and socialism fall under diverse principles, the first having as its object the supplying of needs, the second devoted to equitable division between individuals. Com-

Love, munistic distribution finds its raison d'etre

the basis of j n ^ e emotional nature of man and has love

communism. ag itg bagig> Qn ^ other hand? socialistic

action is founded upon reason. Its purpose being to Justice, teach a standard of equal justice to all, it

the basis of demands that each shall receive not what he socialistic dis- may need but the equivalent of that which tribution. h e contributed to the production. The lan-

guage of the first is that the injury of one is the hurt of all, while the slogan of the other is equal and exact justice to all men. Surprising as it may be, the fact remains that both communistic and socialistic principles are extending their spheres of action in all cooperative operations whether conducted under public or private initiative. Especially is this true of the communistic principle Growth of m so called private business. The tremencommunism dous growth of welfare work and the inin private creasing assumption of risk of business

business. evidenced by provision to protect the indi-

vidual workers and to compensate them in case of accident furnish indisputable evidence that the social body is functioning at an ever increasing rate in accord with this principle.

It is hardly an exaggeration to say that human life completes a circle. It is called into being by cooperation, is welcomed and cared for by communism, the strong taking care of the weak. In its period of production it conforms to cooperation and socialism, and its declining years lead back to weakness and communism. Communism, then, may be said to welcome life's advent with smiles and endearments and to soothe its pains of parting with loving attention and tears.

Individualism, or that tendency of the human will to think and do that which the intellect determines without regard to any other being, has necessarily a sphere that is constantly circumscribed and narrowed as civilization

individualism advances - lt is the ri g ht of private judglimited. ment, the right to choose one's own course,

to think one's own thoughts and arrive at one's own conclusions. This principle in its simplest form has its widest application in the case of the lone savage wandering in the uninhabited wilderness where nothing he may think or do will affect others of his kind. As this wanderer emerges from his wilderness and begins to enter into contact with others he finds his opportunity for applying this principle growing increasingly less.

individualism It is not intended to say that in any well valuable. organized society this principle of individ-

ualism can or should be eliminated since it is the basis upon which individual initiative rests, a valuable help in securing the highest results in cooperative effort. It is this individual faculty that makes self orientation possible, without which it is inconceivable that a marked degree of human progress would be possible.

It will be seen, then, that these principles of socialism, communism and individualism find their base in human __ nature and are essential parts of human

composite. organization, and the omission of any of them would necessarily impair the efficiency of the whole. Manifestly, then, the task before us is not to abolish them but to promote the development of a higher order of intelligence that will lead to the recognition of their vital importance, and to apply the power of Need for analysis to ascertain correctly the proper

greater spheres of each of them so that they may

intelligence. function normally and produce a harmonious result. God in His infinite wisdom has not created anything without beneficial purpose. Ignorance with

_ its resulting misapplication and abuse is

Ignorance , ., . f r ,.,,«, ,

dangerous. alone responsible for the ill effects that incite abortive attempts to destroy that which only needs enlightened treatment to become the source of public well-being.

Society an Man is a gregarious animal forming collec-

organization. tively an organism called society. Expressed mechanically, this social body functions as a machine. Its first form is of the simplest kind with its different parts loosely jointed, maladjustment being the rule rather than the exception. A low order of efficiency which such an imperfect organization insures makes the

existence of cooperation desirable only becobperation cause it is relatively more efficient than the

still more wasteful individual action which it supersedes. The savage hunter sustaining himself by preying upon the game inhabiting his vicinage finds that some brother savage divides the territory with him and this process continues until the tribe is evolved. Then it develops that under the form of cooperation demanding division of labor each may specialize so that the wants of the community may be supplied better than if each individual were left to do all things for himself. As this community enlarges and its wants multiply, the necessity

for closer cooperation and more efficient increased methods becomes imperative. As the minds

of the people develop, the first evidence of an advancing civilization, their wants multiply and the social relationships become increasingly complex. Reverting to the mechanical illustration, one may say that as the intensity of need comes apace the inventive faculty under this stimulus begins to devise methods by which wants may be more easily and plentifully supplied, resulting in a better readjustment of the social mechanism.

The extent of these improvements existing in the body stand rd f politic at any particular time may be acciviiization. cepted as a reliable index of the status of its civilization. The basic reason for cooperation is its power to give greater efficiency. If the individual could do by himself all the things that he wanted done as well and with the same expenditure of force and energy as he could do them in combination with others there would be no reason for cooperation and it would cease to exist.

Once introduced and its benefits perceived, cooperation can never be abolished so long as man retains his powers of perception. Resting upon the unshakable foundation of necessity, expanding with the growth of human need, it becomes more and more an indispensible condition to the normal life and growth of the social body. It then is a social instrument, and like all other instruments may be employed in either a instruments harmful or a beneficial way. The fact that it may be abused furnishes no reason for its destruction or the limitation of its use for right purposes any more. than the fact that the necessity for the execution of one man who had committed a heinous crime would make desirable the destruction of the entire human race. Manifestly the wise and prudent thing to do is to facilitate and promote in every permissible way the application of the cooperative principle to effect such purposes as society may deem to be desirable.

Cooperation begins when any two individuals work together to effect a common purpose and may be said to be both intensive and extensive. The former is best illustrated by the combination of individuals to effect definite purposes, while the latter is recognized in the effects that the sum of social activities have on the body units politic. Cooperation begins with the small

unit and in the first stage results in a general multiplication of these small units rather than in a more intensive growth of any particular unit. Hence, we find in newly settled communities that business is done by many small concerns rather than by a less number of larger operations. This process of small unit development continues until the field is crowded, when an economic loss results because the community is compelled to support more workers in a given service than are necessary for its performance. It is under such circumstances that competition arises, since it is only after the service required is less than that which can be performed by the agencies provided for such service that it can possibly arise. In such cases the larger reason for permitting competition is that society in order to prevent overcharge can afford the economic loss resulting from devoting more labor than the service requires.

If protection is secured to the individual by such method it nevertheless leaves society to pocket the economic loss, since there is never any compensation for wasted effort. Again, in every operation there is a maximum of possible efficiency and any unit whose volume is less than that required to produce such efficiency can be eliminated by some larger unit possessing a higher degree

of efficiency. After the field has become competition competitive, there necessarily follows in an

advancing civilization a period of elimination that results in the increase in the size of the units and in the diminution of their number. There are two principal methods by which this change is effected : viz., the collection of the small units into a combination, or the enlargement of a single unit, resulting in the destruction of the small ones. Hence, the natural ten- Ten ency dency of all service is toward monopoly, monopoly ^e economic limitation of the size of the

serving unit is the point at which enlargement and coordination cease to result in economic saving. It is so far assumed that the operation will take place in accordance with economic law and that the substitution of the larger unit for the more numerous smaller units has been entirely on account of its higher economic efficiency. No account has as yet been taken of such enlargement as may have resulted from the abuse of monopolistic power, which subject will receive subsequent notice.

We have but to look about us and select any line of service in manufacture or distribution in order to visualize correctly the process we have been attempting to describe. The greatly increased economic saving made possible by the invention of machinery has made it easy to eliminate the smaller units of production and has thereby given cooperation a tremendous impetus. As these larger operations concentrate in productive effort it becomes highly essential that greater specialization should follow. This change requires that the workman rather than do many things indifferently shall do a few things and do them well.

Use of Since competition is an essential stimulus

competition. implanted in human nature for the purpose of producing excellence, no use of it can be justified that results in economic loss. Its purpose is constructive, and when its use is at the public cost, there must of necessity be a misapplication of the principle. There is no antagonism between cooperation and competition when they are properly coordinated. The latter is the dynamic force that insures a high order of efficiency in the former. The desire to excel is a primal instinct carrying with it an effort to surpass the accomplishments of others. Whether it is in a game of marbles, a foot race, progress in studies or the effort to outdistance others in manufacturing, merchandising, banking, political life, or any other avenue of endeavor, this principle asserts itself. Man loves the test of strength or skill and each will strive to impress his prowess upon others. The higher the form of cooperation the better the opportunity for the exercise of this instinct. The general with his army of millions has greater opportunity to exhibit his powers of leadership and control than has the captain with his hundreds or the sergeant with his squad.

Economics of The advance of cooperation is effected by a cooperation. course of progressive elimination of the unnecessary. The formation of a large unit to take the place of a dozen smaller units would reduce the number of necessary heads by eleven. This process continued throughout the organization will greatly reduce the overhead cost. The larger number of operatives employed will enable the directing forces by specialization to utilize the productive power of the combined workers more efficiently, and thereby increase the sum of production so that each participant may receive a larger share. If the savings were divided between producers and consumers it would enable the large unit to offer its wares at lower prices than the smaller units could afford. Waiving the question of the large unit's advantage on account of the greater volume of its production, it may well afford to rest its case upon the possibility of selling its wares at a lower margin of profit and reaping its reward by selling more at a small profit rather than less at a larger profit.

m , , . In the last analysis the large unit can outof cooperation distance its smaller rival as long as the larger operation can effect an economic saving, but when the point beyond which this is possible is reached, nothing save arbitrary power can preserve it.

Society cannot afford for any reason to thwart the effort to reach the acme of economic and industrial evolution, neither can it permit abuse of power to maintain that which is economically inferior. The pathway of cooperation, in common with all other avenues of human progress, is not strewn with roses. It has its dangerous places, its pitfalls and snares to avoid. The Duty to ^y £ Q t rea( j ft, however, is plain and re-

oopera e f usa l to do so is a cowardly admission of

social incapacity. It should not be presupposed that firm adherence to the principle of cooperation in any way militates against a full recognition and a thoroughly healthy development of the competitive principle. The contest need not be between the units of operation Competition in in Qrder to develop the full expression of competition, as it can do so more completely by bringing its forces into play between the constituent elements of the large cooperative unit. To suppose that this competitive principle should be mainly used to protect the public from the rapacity of competing units is greatly to misunderstand and to underrate its true nature as a stimulus of social excellence. In the not very remote past the public mind was prepossessed with the idea of the service of competition as a police agent. The growing spirit of cooperation has destroyed its power for such service because those directing the activities of service have become sufficiently enlightened to realize that which predatory wolves long ago discovered, the simple fact that it is productive of better results to hunt in packs rather than alone.

The evolution has proceeded to a point where intentionally destructive competition is no longer possible, for regardless of law or other obstacles, the units of service thoroughly know that their best interest demands that

they must function in accord with the coop- Self-interest erative principle. Man will act as his own

self-interest dictates, and having sufficient intelligence to understand that the successful conduct of his enterprise depends upon cooperation with his fellow servitors, he proceeds to do it in the way presenting least difficulty. The recognition of a common interest between

servitors, thus introducing class or partial C1 * ss . cooperation, has in many cases had the vis-

coopera ion. .^ e ^? ec £ Q f c h ec kmg the cooperative evolution. The large unit, desiring to secure a higher margin of profit than its services are worth, based upon its own cost, refrains from passing the saving on to the public. If the cost to the public were lowered to a point at which the smaller units could not survive, the larger unit would make indisputable its monopolistic character, which would most likely have the effect of strengthening the demand that the evolution be carried to its logical ultimatepublic monopoly. For these two reasons the large unit cooperates with the smaller. The latter in times of scarcity takes advantage of the public needs, puts on all that the business will bear and sells at a higher price than the large unit, but when the public need abates it reduces its prices to that of the large unit or ceases operation until times become more auspicious.

These conditions can only be regarded as a passing stage of cooperative evolution. The many abuses that creep into the movement are likewise but temporary afflictions that society will eliminate as general intelligence develops and experience points the remedy. The pages of history are replete with examples of evils that have affected the body politic but it also furnishes indisputable proof that many forms of wrong have existed from age to age but to be made absolutely impossible in succeeding times. Evils first exist in grossest forms and become gradually refined until they disappear. We can, then, adhere with hope to any sound principle with the assurance that the good within it will overcome the evil that may attach to it. rres e Perhaps the greatest danger confronting

dangerous tne wor ^ to-day is that of arrested development. The safety and even the existence of the present civilization depends upon going forward. The evolution cannot rest. The choice left us is to proceed, insuring life and growth, or to recede again to the dismal depths from which man after ages of struggle is only now emerging.

Partial The thing above all others which has

cooperation aroused most opposition to the orderly deeve ops velopment of cooperation has been its par-

class interests. . , , . . _,. . . ,

tial application. This has given rise to class interests which operate under selfish incentive and inflict injustices upon the least organized elements of society. The abuses arising from this cause have prejudiced the public mind against the principle of cooperation itself. This antagonism has found its expression in the enactments of the legislatures and the congress of the country. These unwise attempts to stay the rising tide of combination have imposed upon the judiciary the Ju icia £ ag k f m aking law by strained construction

interference

in order to preserve the cooperative principle, and it may be regretfully said that in doing so it does not always eliminate the flagrant abuses that were provocative of the legislative attack on the principle.

Capitalism The term Capitalism will be used to express defined. ^he theory that capital or the available

supply of products loaned or invested is entitled to a return for its use, and the term Capitalist will be used to designate the owner of the capital, who in the capacity of capitalist contributes no labor directly or otherwise to the use of such capital. In other words, capitalist, as here used, is synonomous with investor. If the capitalist, in addition to investing, contributes to the operation either mental or physical labor he acts in a dual capacity both as an investor and as a worker.

Worker. The term worker will be used to describe

one who contributes his effort to the operation, and this effort will include all expenditure of energy both mental and physical. It is intended that both labor of direction and labor of execution shall be classed together.

land. The term land will embrace the natural cre-

ation, including all spontaneous growths. It excludes human effort.

Labor. Labor will be used to express the application

of mental and physical force to produce a result and the latter will be designated the product.

In order to reach reasonable conclusions regarding the

economic status an understanding of the laws underlying

it is indispensable. Political economy is

. con °^ lcs founded upon ethics. Basic right principle

founded upon it ., ■,-, m . T » , .

ethics. underlies it all. This moral foundation

gives stability to it. The task of the economist is to analyze the complex operations of society and to make plain the divine, immutable law that governs them and to point out the effects of both its observation and violation. This basic, ethical principle is absolute while man's relation to it is relative. The effects of conformity to this law we call good and the effects of non-

. . conformity we call evil. Man being in a

Man finite. , , « . « ,. a. j? n i

state of imperfection cannot fully comply

with the requirements of the infinite, therefore his existence and acts are a series of approximations.

Natural law. Natural law is perfect, hence has the inherent power of enforcing itself. It has its rewards for those who observe it and likewise its punishments for those who infract it. It is in this school with its rewards and punishments that man must work out his own salvation and learn from the bitter lessons of experience what cannot be taught him in any other way, that right living is fully in accord with that principle of self interest which seeks to acquire all that may be obtained of the things that contribute to one's well being.