Private Fortunes and the Public Future

It is therefore a mistake to view private effort and governmental regulation as opposed to one another. Results are happiest when the two work together, when tolerance, education, and honest publicity prevail. What law can accomplish depends in large measure upon the state of public opinion, which in its turn is very largely the product of individual and cooperative effort. If, for example, law by itself could have enforced conditions against which public opinion ran, the South would have been reconstructed after the Civil War according to the ideas of Thaddeus Stevens. As a matter of fact, after some ten or fifteen years of effort to accomplish by law a result which ran against public opinion in the South, President Hayes withdrew the Federal troops from the states which had been in rebellion, and ever since they have done as they pleased. I should suppose there is no doubt in the mind of any human being that the relations between the two sections of the Union would even to-day be far better and the South would have been far more highly developed if the more generous and magnanimous policy of Lincoln and Johnson had been followed immediately after the close of the Civil War. So, in our own recent experience, no one questions the importance of temperance, and a minority has always believed in the efficacy of prohibition; but there is little doubt that the most disastrous attack upon both temperance and prohibition was made by the passage of the Eighteenth Amendment.

A democratic government is self-governmental in an extreme sense. Men engaged in business must make it absolutely impossible for others similarly engaged to indulge in practices that lower the tone of social life; otherwise government will intervene and it will not be deterred by asseverating that intervention will make matters worse — witness the situation in respect to child labor, public utilities, holding companies, and so forth. When ideals have, however, been established by those who have character, intelligence, ability, and public spirit, they can to a varying extent be incorporated in the law, but our main reliance ought in the first instance to be upon the quality of the individual, and we should be able largely to leave to him the means by which he can carry forward, as only groups of congenial and devoted men can locally carry forward, the pace-setting enterprises upon which the level of civilization actually depends. But let us not forget that one Kreuger may do more damage than a thousand honorable men can offset.

There is, however, another aspect in which private beneficence and governmental action become curiously intertwined. Surveying not only remote but recent history, one finds instances where something like private rapacity has cloaked itself under a philanthropic garb. I need not say that I am no apologist for the unsocial or antisocial acquisition of wealth, for sweatshops, child labor, the twelve-hour law, the seven-day week, or any other device which men have at one time or another believed to be necessary to the maintenance of a given industry. Indeed, an industry which needs such conditions for its maintenance had far better be allowed to perish.

A conspicuous example of the abuse of private power under the guise of rendering a public service is furnished by the so-called Duke Foundation. The Duke Foundation supports the Duke Endowment, the income of which goes to maintain education and public health in certain of the Southern States; the Doris Duke Trust, the income of which goes to an individual; and certain other beneficiaries. In 1933 the Duke Power Company paid out in dividends about four millions of dollars. Of this sum less than half a million went to the philanthropic purposes of the Duke Foundation, a little more than half a million went to the beneficiary of the Doris Duke Trust, and something upwards of three millions went to other persons or institutions. Under the present administration the local authorities of Greenwood County in South Carolina asked the Public Works Administration for a loan of approximately three million dollars with which to construct a power plant. This loan is opposed by the Duke Power Company on the ground that the income of the Power Company would be reduced and its benefactions would be largely effaced. No mention, however, so I am told, has been made of several important facts: —

1. That over 80 per cent of the new power would be sold to consumers who are not now served by the Duke Power Company.

2. That the total loss of business by the Duke Power Company would probably not exceed one third of 1 per cent of the business now clone by that company.

3. That the philanthropic contribution of the Duke Endowment is only about one third of the income derived from the Duke Power Company.

The private beneficence of the Duke Power Company is therefore hardly comparable to the good that might be accomplished if the citizens of Greenwood County of South Carolina were enabled to own and operate their own power company.

IV

Civilization is forever on the horns of a dilemma. On the one hand, its very existence seems to be impossible without the existence somewhere in society of both abundance and leisure. On the other hand, through the whole history of the human race it is obvious that abundance and leisure have often been purchased at too high a price. Feudalism produced much that is absolutely invaluable in the history of human culture. As it happened, too little was known of public health and all other pertinent matters to procure widespread material welfare during the feudal era, but it is none the less a fact that the price paid by human beings for the beautiful things which we owe to the feudal system was far higher than most persons at present realize. Within the lifetime of many still living there existed similarly abundance and leisure and a charming type of civilized life in our own Southern States; but the country decided, rightly as all now believe, that slavery was far too high a price to pay for it. Slavery was abolished, and a particular type of culture and a particular way of living came to a sudden and total end. A not dissimilar problem faces us to-day. We value civilization and culture. We realize, as I have argued, that they cannot be obtained unless abundance and leisure exist. There are dangers on both sides of the road that we travel, as there are always ditches on both sides of every road. The middle road approved by the Greek philosophers is perhaps our safest and surest path. Complete governmental control involves the dangers of repression, red tape, partisanship, and these dangers become greater as the area of a country enlarges — witness Russia, Germany, Italy. On the other hand, uncontrolled private initiative has developed abuses that are absolutely incompatible with a high social and moral sense. At the moment it is important to this country to emphasize the fact that the role of private effort has not been exhausted and that, unless we are to abandon all our traditions in government, in philanthropy, and in education, it cannot be abandoned. While, therefore, I do not lose sight of the efforts made by municipal, state, and federal governments to improve our social life, I cannot forget the vast debt that we owe and must be enabled to continue to owe to those thousands and hundreds of thousands who have contributed small means as well as large to building up institutions of learning, museums, and hospitals which represent the high-water mark of our civilization.

These facts bear directly on the plausible and, I suspect, largely fallacious schemes for abolishing poverty and sharing wealth through sudden and drastic use of the power of taxation. The institutions which are indispensable to higher education and philanthropy rely largely on the benefactions of private individuals; if these are stripped of the results of honest accumulations by taxation, death duties, inheritance taxes, and so forth, where are Harvard and Yale and Princeton to procure the funds needed for their development?

I am not arguing in favor of 'malefactors of great wealth'; I am merely calling attention to a point of central importance, no mention of which I happen to have noticed: that, if sadden and revolutionary measures are to be taken, somehow leeway must be left so that the main agencies of education and civilization are not hamstrung where they now are. For civilization and education are both expensive and capricious. While the efficiency of city, state, and national government has probably improved, local interests and lobbies have also become more and more formidable. In a vast and diverse nation, the highest interests — social or intellectual — cannot safely be left either to government alone or to private agencies alone. Abuse must as far as possible be prevented at any cost; surely all that is humanly possible in this direction can be done without making it impossible for a future Johns Hopkins to enlarge or establish a future Johns Hopkins University! And the need, present and future, of increased endowments, managed, let us hope, with ever-increasing wisdom and devotion, is not likely to diminish in any future that can be foreseen by persons familiar with the activities and influences at work in the various states from Maine to California, from Wisconsin to Louisiana. As long as 'human integration is not complete' — I am quoting the words of Sir Henry Head society is likely to do best if various outlets and methods of expression and criticism are left open.

I should perhaps, in this connection, say a word about social and economic planning. It is obvious that in these days science, investigation, and industry cannot be allowed to run wild. The era of laissez faire, long since more and more modified, is forever closed. But let us do it justice. In a recent paper, Professor Wesley Mitchell writes as follows: —

After all detractions are made, the historical fact remains that, in the countries which have given wide scope to private initiative since Adam Smith presented his momentous argument for laissez faire, the masses of mankind attained a higher degree of material comfort and a larger measure of liberty than at any earlier time of which we have knowledge, or under any other form of organization which mankind has tried out in practice. These blessings of relative abundance and freedom arise from the rapid application of scientific discoveries to the humdrum work of the world, and that application has been effected mainly by men who were seeking profits. In societies organized on the basis of making money, laissez faire put the stupendous drive of private gain behind the industrial revolution. Further, the capital required for building machines, factories, railroads, steamships, electrical equipment, and the like, was accumulated mainly from profits made by business men and investors and used, not to satisfy their own wants, but to provide new equipment for production. As Adam Smith argued, in pursuing their private gain business-men were led to promote the public welfare.

Those who speak in general terms of social and economic planning seem to me in danger of forgetting how easily their calculations may be upset by scientific genius or by invention, not primarily driven by the profit motive, though often resulting in considerable fortunes — and also by the emergence of exceptional men. Planning might conceivably have been proposed in, let us say, the year 1910. How would it have been possible to bring together at that time a group of men, assuming that the wisest, most unselfish, and most farseeing could have been assembled under governmental authority, — itself an unwarranted and very improbable assumption, — how would it have been possible, I ask, to bring together in 1910 a group competent to devise any kind of plan that would not have become an almost insuperable hindrance long before the year 1935? Mr. H. A. L. Fisher calls attention to the 'play of the contingent and the unforeseen' in the 'development of human destinies.' To an extent greater than perhaps we realize, society lives from hand to mouth. In the field of ideas alone do we partially transcend improvisation, but even within the field of ideas our foresight has been greatly limited by the progress of science and by the development of high social ideals. The planner must deal with unknown contingencies at home and abroad, with future discoveries, with fallible as well as ideal human beings.

Mr. E. L. Woodward, in a recent and most illuminating book entitled French Revolutions, points out that what one learns from history is not 'lessons' but 'wisdom.' There are wise ways in which to deal with the problems, mostly unpredictable, which emerge from time to time, often with startling and unexpected suddenness and rapidity. It is not without significance that no Caesar or Napoleon has ever founded a government which lasted beyond his own lifetime. The Mussolinis, the Stalins, the Hitlers, find themselves compelled to suppress everything that America values most highly in order temporarily to accomplish their ends. How substantial and valuable these ends may be no one can now foretell, though there are many who would be willing to risk their reputation as prophets on the outcome. Within the last ten years there have been moments when democracies, all more or less inefficient, were thought to have had their day. I venture to believe that the autocracies created within the last few years have made the world safer for democracy than it ever was before. But democracy implies a sort of easygoing form of government which gives abundant elbowroom for tolerance, agitation, and individual effort as well as for action on the part of the state. There is a vast amount that we now know which can be put into effect partly by state and partly by private organization and initiative, but there are untold developments which neither a democracy nor an autocracy can foresee and for which there must be leeway in every modern state.

As far as our own history and the history of England prove anything, they show that institutions under private management are more apt to be immediately responsive to pressure and publicity than institutions which are governed by legislatures. To be sure, institutions under private management, such as universities, are not immune from failure or folly. Our own universities, for example, have wasted money and energy, but they have simultaneously attained the highest possible level in the search for truth and in devotion to the public good. Any governmental or economic policy which cuts short their development by destroying private wealth will in the long run cost civilization more than it can possibly achieve in any other direction.

The truth would seem to be that, on the one hand, the area of governmental activity, control, and inspection has largely grown with the increasing complexity of social and economic life, and is doubtless destined still further to increase; it is limited by the difficulties inherent in democratic and all other forms of government. The difficulties may be generally grouped under such terms as 'politics,' 'bureaucracy,' and 'internal friction.' Simultaneously, however, the area open to private initiative and benefaction has been similarly enlarged. As men become more civilized and more sensitive, there are always activities, interests, and duties which as individuals and in groups they will be increasingly eager to discharge in their own way. It might even be maintained that the level of a given civilization can perhaps be measured by the extent of private initiative, private responsibility, private organization in all the fields open to human culture.

If this or something like it be true, economic equalitarianism or anything approaching it, even if obtainable, might well be just as fatal to the highest interests of society as would be the suppression of individual effort through the needless and uncritical expansion of centralized governmental activities. Lord Haldane once remarked to the writer, 'In human affairs nothing is ever good or bad except in the balance.' These words may be applied to the current controversies between those who favor governmental action and those who favor private initiative. It is not necessary to be logical or consistent. Every case can be weighed on its merits. There are certain fundamental considerations that ought not in any event to be disregarded. Governments are apt to be open to political influence, and in a country like America all problems — private and public — are in danger of being too big. Justice Brandeis has rightly insisted that bigness taken by itself is really a curse. On the other hand, private beneficence may be the outgrowth of absolutely unsocial and unworthy activities pursued over a long space of time. Public opinion and governmental authorities have got in the last instance to judge whether individuals shall be allowed to pursue certain courses of activity which may result in the piling up of fortunes which may or may not be ultimately devoted in whole or in part to philanthropic enterprise. The accumulation of fortunes through foresight, unusual capacity, energy, thrift, and native honorable shrewdness is in itself no crime. On the contrary, as I have shown above, fortunes so accumulated may be made the sources from which great philanthropic, cultural, and beneficent enterprises ultimately flow, though at the same time one must beware of the practices that cost the community more than they return.

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