Marx to-Day: Capitalism and Socialism
KARL MARX, the founder of materialistic socialism, is recognized by economists as one of the three or four greatest minds who have contributed to the progress of economic science. What he did was to take the theories of Ricardo, the founder of materialistic capitalism, and convert them from a political struggle between British landlords and capitalists, over the tariff and the rent of land, into a class struggle between all owners of property and all wage-earners, over the ownership of the whole product of industry. Ricardo had taken for granted the institution of private property, but Marx resolved property into exploitation of wageearners through the power of the State, which, it was believed, created the rights of property.
Ricardo’s theory did, in fact, leave the wage-earner in the position of a commodity or machine, from whose labor the capitalist derived his profits and interest. He looked upon the capitalists’ profits as the moving force of industry, and upon high wages as the cause of low profits, and therefore the cause of stagnation of business and unemployment. Marx inverted this and made high profits (including interest and rent) the cause of low wages, and low wages the cause of stagnation and unemployment, because the laborers were not able to purchase back from the capitalists the products which the increasing efficiency of industry enabled them to create.
It must be remembered that Karl Marx wrote bis Communist Manifesto at the end of the year 1847, following ten years of the lowest degradation reached by the working people of England and Europe since the time of the Napoleonic Wars. A prolonged depression of business, after the panic of 1837, with falling wages and unemployment, was just then about to precipitate the Revolution of 1848 in France and Germany, and similar but less violent distress in America. It was during these ten years that Marx revised the theories of Ricardo, and during the next twenty years he formulated his revision in monumental detail and published it in 1867.
There is much reason to conclude, had capitalism continued in the same direction after 1847 as it had during the thirty years after 1817, when Ricardo wrote his Political Economy, that Marx’s revision of Ricardo would have proven to be correct, for Marx described, in fact, what had actually been happening, and he predicted that it would continue to happen.
But there occurred, after 1850, and increasingly since that time, what may be named in part the self-recovery of capitalism, and in part its forced recovery, until to-day what may be named the stabilization of capitalism is apparently strengthening the system more than ever before.
The self-recovery of capitalism began with the general incorporation laws of the decade of the 1850’s. Prior to that decade, in America and Europe, a corporate charter could be obtained only by a special act of the legislature. This procedure, in America, plunged the capitalists into political struggles in order to obtain corporate charters, with the resulting political corruption and antimonopoly opposition. But, by means of general incorporation laws, the issue was taken out of politics, not by prohibiting corporations, as the antimonopolists demanded, but by making them universal. Since that time the capitalists, in order to incorporate, do not go to the legislature for a special act—they merely file their articles with the Secretary of State.
This universal freedom to incorporate has counteracted the prediction of Karl Marx, not by making it false, as a whole, but by splitting it into two parts, the concentration of capital and the deconcentration of ownership.
Marx was the first to establish the inevitable concentration of capital in large units, at least in manufactures, transportation, and banking, through the effects of competition in wiping out the inefficient competitors and converting them into wage-earners employed by their former huge competitors. But he assumed that concentration of capital would be concentration of ownership, and this might have been the result without general incorporation laws. It would follow that ultimately only a few persons would own all the capital, while the masses of the people would become a proletariat of wage-earners and salary-earners, so that the inevitable revolution would occur by mere weight of numbers.
But the general incorporation laws have diffused the ownership of capital while promoting its concentration. And now, since great corporations have discovered how important this diffusion is for the augmentation of their capital itself, they are consciously spreading their stocks and bonds into the hands of thousands of investors, and are consciously stabilizing values where formerly the ‘insiders’ employed the new device to exploit investors just as they exploited the laborers. To-day the spread of investments, of insurance and savings, has interested millions of Americans in the preservation of capitalism.
But capitalism has needed legislation for this purpose and continues to need it. Corporate charters are, after all, acts of the legislature, giving to private individuals the sovereign privileges of unity, continuity, and limited liability. But, with these privileges, there are often corrupt insiders who rob investors and menace the stability of capitalism. It is largely by legislation, such as public-utility laws, bluesky laws, watered-stock laws, and similar measures, that well-meaning capitalists can be protected in the main safeguard of capitalism, the confidence of millions of investors.
This is what I mean by self-recovery and forced recovery. Capitalists could not have recovered general support, since the time of the Communist Manifesto, without the aid of legislation, and legislation is, baldly speaking, nothing less than forced recovery coming to the aid of self-recovery.
Another application of forced recovery has come through labor legislation. In the very year, 1847, when Marx was writing his Communist Manifesto, the Parliament of England was enacting the first effective labor-law in the history of the world — the law limiting the work of women to ten hours per day. Labor legislation has now pushed forward in all capitalistic countries, supported by farsighted capitalists themselves, but opposed by the shortsighted. For competitive capitalism, in its grasp for profits and its fright of bankruptcy, pays no attention, on account of this very competition, to the health, leisure, or happiness of its employees, considered as human beings in contradistinction to profitable engines of production. When Bismarck was using all the power of the German Empire to suppress socialism and labor unions, he was, at the same time, introducing the most advanced legislation protecting labor against exploitation by capitalists; and, while this legislation has often been denounced as paternalistic, yet when it became evident that socialism and unionism could not be suppressed it was this very legislation that had its part in undermining the propaganda of Marxian socialism against the government of Germany and in furnishing to that country its healthy soldiers and patriotic armies.
Karl Marx, in 1847, could not predict this self-recovery and forced recovery of capitalism, either in England, in Germany, or in America, for he had no experience to go on. He knew only the cutthroat competition of individual capitalists, from the close of the Napoleonic Wars to the Revolution of 1848, and it was to that competition that he ascribed the increasing poverty of labor on which he based his forecast of revolution.
Another thing that Marx could not know about was the rise and progress of trade-unionism. It was not until the decade of the 1850’s in England and America, and not until the decade of the l880’s in France and Germany, that trade-unionism began to take on its modem form of concerted aggression upon the profits of capitalists. Prior thereto labor had experimented with various forms of coöperation under the leadership of humanitarians like Robert Owen in England and America; or had joined in political parties designed to accomplish by legislation what they could not do individually; or had pressed for universal education, on which they based their hopes of improvement. But, beginning in the decade of the 50’s, they turned to limitation of apprenticeship, to the systematic organization of strikes and boycotts, to the restriction of output, to the establishment of shop rules protecting members against discharge and regulating transfers and promotions, limiting the hours of work and forcing wages above the competitive level.
Here it was that the more intelligent and aggressive element of the wageearners was accomplishing immediately, within the capitalist system itself, the very appropriation of increasing profits which Marx predicted could come only through the destruction of capitalism. The outcome shows that the growth of trade-unionism, for sixty years following the Communist Manifesto, had a leading part in undermining the doctrines of the Manifesto among wage-earners. For when the Great War came it was the leaders of the trade-unions, men who had actually obtained short hours, high wages, and job protection within the capitalist system, who rallied instinctively and without waiting to think about it, in all countries, to the support of their governments, on which capitalism depended for property and profits. In Germany, even, it was a collective bargain between Stinnes, the business agent of the capitalists, and Legion, the Gompers of Germany, that set up both the Republic of Germany and the recognition of unions in the shops. In America it was the trade-unionists, who knew by experience the destructive philosophy and tactics of communism, who joined almost unanimously in backing the government that was willing to recognize them as partners, along with capitalists, in this dreadful struggle of war. I know the strong feeling and the shrewdness of capitalists in preventing the spread of unionism, but the history of our capitalist civilization shows that these unions are really the firing line of the proletariat defending capitalism against that other proletariat which Karl Marx would call forth from the factories.
Trade-unionism is, as it were, another application of the forced recovery of capitalism from its anarchy at the time of the Communist Manifesto. And, in our own time, the foreseeing capitalists, who are opposed to unions of labor, are actually copying the shop rules which unions have established, wherever they could, for the protection of hours, wages, and jobs. This, in a way, is again the self-recovery of capitalism.
A serious oversight of Marx was that of the incompetency of labor, as a class, in managing business. It might truthfully be said that the work of one man like Ford, Carnegie, Rockefeller, or Harriman, is equal to the work of all his 50,000 or more employees put together. What he does is to change them from a mob into a going concern. The way in which these great organizers of labor have come forward, under the capitalist system, is the method which Darwin has taught us to name natural selection, distinguished from artificial selection. Artificial selection of leaders in industry, politics, or war, is the popular election by subordinates of their own commanders. But natural selection, in industry, is the self-election of commanders by survival in the competitive struggle for profits. They are elected by their own success, not by the votes of those whom they organize and command. This is the substance of capitalism as against socialism: the foremen, superintendents, executives, boards of directors, are not elected by the wage-earners who must obey their orders — they are selected from above by those whose sole consideration is the profits that they can deliver. Hence these commanders are not responsible to the wage-earners they command. They are responsible to the capitalists.
In every case that I know of, and in every country, where workingmen have formed the so-called producers’ coöperatives, in order to become, as they say, their own employers, and have thus elected their own foremen, superintendents, and directors, they have failed. Laborers, as a class, are incompetent to elect the boss. Individual laborers may rise out of the class, and even rise to be millionaires, but that is capitalism. Socialism requires that laborers shall rise as a class by becoming their own boss as a class. This is incompetency. Labor, as a class, is composed of conflicting religions, conflicting races, colors, sexes, ages, unequal abilities and intelligence, and all of these conflicts and inequalities show themselves in the competition for jobs and wages. When, therefore, they elect the boss, it is not on the ground of his efficiency and discipline, but on account of his sympathy.
The trade-unions have learned this cold fact, that they cannot manage business as a union or as a class. The unions know that they can get high wages, short hours, and job security only because it is the capitalists who take the first risk and who therefore must do the planning and managing. The leaders of the socialists are usually so-called ‘intellectuals’ and professional people, who flatter or idealize the laborers, but the unionists are laborers themselves and they know by experience that they can get more out of capitalism by bargaining with it collectively than they can by taking it over and managing it collectively.
It is charged by socialists that profitmaking is pure selfishness, the inference being that, if wage-earners were in control, public service and not self-aggrandizement would be the standard of business. It is difficult to see, however, any difference, in this respect, between profit-making and wage-earning. Both are the process of pure self-interest endeavoring to get as much as possible for self with as little as possible for others. From the public standpoint the real question is, how can this universal selfishness of mankind be so organized that, in pursuing his own selfinterest, everyone may incidentally, and without intending to do so, actually promote the common interest? Not much reliance can be placed upon protestations of serving the public. As Adam Smith, the great advocate of private property as the motive force of industry, has himself said in his Wealth of Nations: ‘I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.’
This, I take it, is the source of the strength of capitalism and the source of its efficiency. It is from the institution of private property that this strength is derived. Private property compels efficiency by the penalty of bankruptcy.
Yet the capitalists themselves do not always distinguish between productivity and efficiency. Productivity may seem to be increased by lengthening the hours of labor, or bringing in cheap immigrant labor, or substituting women and children for men. But efficiency consists in reducing the hours and getting a larger output per man-hour. Productivity seems to the capitalist to be measured by success in acquiring wealth. But efficiency is measured by success in producing wealth. Karl Marx was the first to make this distinction clear. It is private property that permits the confusion to exist, for private property is mere selfishness, and it is only because capitalism has devised, or has been forced to submit to, rules of the game laid down in the common interest that it is arriving at the distinction between getting rich by efficiency and getting rich by exploiting the laborers and consumers.
These rules of the game have a certain effect, if they are properly devised: they arouse in the mind of the capitalist that sense of responsibility in the pursuit of private gain which is coming to be known as business ethics.
There is no single source from which this so-called business ethics is derived. The most general source sometimes referred to is public opinion. But public opinion is ineffective unless backed by some kind of organization with power to inflict some kind of penalty that will be felt by him who otherwise is unmoved by this sense of business ethics. I take it that the amazing increase in numbers, in recent times, of trade associations, whether of business men or of farmers or of laboring men, is a promising source of these sanctions of public opinion.
Here is the culminating oversight of Karl Marx in his theory of socialism, and the one which comprehends all the others: namely, the failure to see the importance of custom, and what, in Anglo-American jurisprudence, is named the common law. The same oversight existed for Ricardo, for Adam Smith, and for the capitalistic as well as socialistic economists. For them there was no intervening principle of human behavior between the compulsory edicts and laws of sovereignty, on the one hand, and the individual bargains of private property, on the other hand. Private property, for them, was actually created by the sovereign, and it logically followed that the sovereign could abolish private property.
But if we recognize that private property — or rather the rights, duties, liberties, and liabilities of private property — is merely an historic custom of private property, superior even to the State itself, and not only quite recent in the history of the race, but also continually changing as economic conditions change, then we can see that between the individual and the State is a supreme principle of stabilization by custom which both regulates the individual proprietor, on the one hand, and overrides the arbitrary will of the State, on the other hand.
The term ‘property’ is sometimes distinguished as the object which is owned, and is thus set over against the phrase, ‘rights of property.’ From the economic standpoint, however, we should say that the term ‘property’ signifies the purely selfish interest of a person in the exclusive control by himself of any object, or even of any other person, whose supply, in general, is limited. Wherever there is unlimited supply which is expected to continue unlimited, there is no need of property. Property is, indeed, the scarcity aspect of commodities, and is just as applicable to slavery, based on the scarcity of labor, as it is to commodities based on the scarcity of food, clothing, and shelter. We may even call property the instinct of scarcity, and make it identical with what we might call the instinct of property, in order to distinguish it from that other phrase, the rights of property, based on custom.
The rights of property signify the rights, duties, liberties, liabilities, immunities, privileges, and so on, which, for the time being, the custom of his associates, or his community, or his nation, may be expected to apply to the individual in the promotion, liberation, or restraint of his instinct of property.
This is what is really accomplished by the trade associations and their standards of so-called business ethics. These associations are the rise of a new custom which tells the individual capitalist what he can, cannot, may, must, or must not do, in obtaining possession of things that are scarce. All customs, from the beginning of the human race, have originated in this way, and business ethics is but repeating for capitalism what custom has always done, from the time of primitive communism to that of capitalistic civilization, in regulating this instinct of property, which is the instinct of scarcity.
It is out of these customs that the common law arises. But we do not reach the need of a common law until disputes arise which must be decided promptly in order to keep the association, or community, or nation, in a peaceable frame of coöperation. In this sense, there is a common law that arises in all private associations without any intervention of the State, as when a board of arbitration is set up by the parties interested, or when factory rules are enforced by superintendents and general managers, or church rules enforced by ecclesiastical authorities. The peculiar common law of the State comes in only when a decision is made by a court which directs the use of the collective physical violence of the community. The capitalistic associations have their own common law, enforced by profit, loss, jobs, unemployment, bankruptcy, loss of patronage, and so on.
In all of these instances the common law authority, whether of the association, the community, or the nation, must decide between the practices of individuals or associations in their dealings with each other, as to which practices are good and which practices are bad, so that the common law of any institution has grown up by the artificial selection and approval of what are deemed good customs, and the rejection and disapproval of what are deemed bad customs. In the course of time these approved customs become so fully accepted and are deemed so obvious and commonplace that they acquire the name of ‘natural rights’ or even ‘divine’ and ‘sacred’ rights, as they were called by Adam Smith and Blackstone, a hundred and fifty years ago. Yet they are but the gradual evolution of approved practices through artificial selection by the courts, employed as standards in order to decide disputes in a world of limited opportunities.
It is for this reason that approved customs are so powerful both respecting the individual and respecting any effort of the State to change them. They do change gradually, but even these changes are also so powerful that neither can the State refuse to change its statutory law, nor can the judiciary persistently refuse to change its common law, to fit the changing customs.
It is this changing fact of custom and common law which has always set up the principle of stabilization. The common law established in early times, for example, the principles of the market overt, with its publicity, free access, and negotiability of commodities, so that men could know what to expect. The good customs of the market became the common law. The same is true to-day under the amazing changes brought about by a world market and the competition of business on narrow margins. Always the common law attempts to stabilize good practices by excluding the competition of bad.
This early stabilization of the market overt was followed, during the seventeenth and eighteenth centuries, by the stabilization of what has now become the most important of all business assets, the goodwill of a going business, and this turns out to be perhaps the greatest of all regulators of business in the public interest. For it sets up, as an inducement to the capitalist, the longtime future advantages of fair competition in place of the short-time cutthroat competition that Karl Marx knew about. Marx, indeed, knew nothing of the goodwill of a business, or of the way in which the judiciary, for three hundred years, has been constructing it out of what are deemed to be the good practices of business. Goodwill was not, in fact, a big factor in business until the corporation, instead of the individual or partnership, became the owner of goodwill.
This goodwill idea has been extending, in recent times, to wage-earners as well as customers and investors, and capitalism is learning that its own efficiency turns on maintaining the goodwill of the increasingly independent, free, and organized laborers, as against the old customs out of which the law of master and servant was constructed. Karl Marx could scarcely have imagined such an outcome of capitalism as he knew it. about 1847.
One thing to be noted about the evolution of good customs is that they do not advance equally with all capitalists, and this is the reason why courts, legislatures, and commissions are found necessary to assist the more progressive in bringing up the laggards. Karl Marx had before him the destructive effects of the ethically worst competitors in compelling their better competitors to come down to their level. He did not perceive that the State, either as legislature, executive, or judicial interpreter of the common law, might increasingly protect the good practices of capitalism and rest rain the bad practices. It has required and is requiring the State, either in its legislative, judicial, or administrative capacity, to perform this service, but in no case can either branch of government go very far ahead of what is customary and sanctioned by associations, though it may fail to go as far as better customs would already support.
This process of stabilization of capitalism through custom has been passing through two stages, a stage of conspiracy and a stage of regulation. The conspiracy stage reached its climax in the Sherman antitrust law of 1890, and the regulation stage can hardly be said to have had a beginning prior to the twentieth century.
It was in the year 1898 that the coalmine workers and coal operators, in the bituminous fields which marketed their products toward the Great Lakes, framed their collective agreement based on the principle of equalizing competitive conditions. They established, for the entire area, a complicated set of rules, fixing minimum wages, maximum hours, and mining conditions, so designed that every coal operator, no matter what the differences in the richness of the mines, could get into the market at practically the same cost, including wages, transportation, and mining-conditions. Prior to that time cutthroat competition had reduced profits and wages below the subsistence level for both capital and labor, but since that time a live-and-let-live policy has considerably stabilized competition, though many amendments have been required from year to year and are still required. Here is a notable example of self-recovery and forced recovery in a great industry, extending over four states and superseding, to a considerable extent, both the conflicting laws of the state legislatures and the commands of the judiciary.
In another field, that of railway transportation, the period of conspiracy did not come to an end until the Federal Congress enacted the law of 1906 which, for the first time, succeeded in fixing, by a commission, the actual rates, and permitting little or no deviation.
In the field of manufactures the new policy of stabilization may be said to have started with the Steel Corporation about 1908, when it ceased the old Carnegie policy of killing off competitors, and adopted the new live-and-letlive policy. This new policy did not finally get judicial sanction until the dissolution suit of the Attorney-General against the Steel Corporation, decided in 1919. Here it was judicially found that although the practices of the Steel Corporation, along with those of its competitors, were plainly concerted movements similar in their effect on prices to those which formerly had been held to be restraints of trade, yet these concerted movements, in their new form, were to be approved because they showed that the Steel Corporation had not resorted to the destructive practices and price-wars that eliminated competition. The court declared that the Steel Corporation had not reduced wages, had not lowered the quality of its product, had not created artificial scarcity, had not coerced or oppressed competitors, had not undersold competitors in one locality and maintained prices in other localities, had not obtained customers by secret rebates or departures from published prices. Neither competitors nor customers, said the court, testified to any oppression or coercion on the part of the company, and they testified to a general satisfaction with the well-known and published policy of stabilization of prices and deliveries pursued by the Corporation.
It is plain, therefore, that the policy of stabilization through publicity, for labor, for transportation, for manufactures, has, within the past few years, become the policy, not only of capitalism itself, but also of unionism, of statute law, and of the common law as interpreted by the Supreme Court.
The most fundamental stabilization has been that of credit and prices through the coöperation of the banks organized in the Federal Reserve System. This policy can hardly be said to have been agreed upon before the year 1923, when the Federal Reserve Board, on the advice of the leading bankers, laid down the rule, in effect, that the operations of the banking system should no longer be left to the accidents of demand and supply of gold, but should be directed toward stability of credit, which means stability of the general price-level. The country had become prepared for this stabilization of business, credit, and prices, owing to experience with the effects of war inflation and post-war inflation and deflation. The stabilization was brought about by a system which, for the first time, permitted and authorized the bankers of the country to unite through their representatives, but under the supervision of a board representing the people, and to draw up their rules governing discounts and rediscounts, purchase and sale of securities, and other matters affecting credit directly, and indirectly affecting the volume of business and the general level of prices. For the past two years this stabilization has been surprisingly effective, preventing general inflation in spite of the surplus of gold, and, while there may be need of improvements in procedure or in representation of interests other than those of the bankers, which experience will reveal, yet no greater service toward the self-recovery of capitalism can be suggested than this stabilization of credit, business, and prices for America and the world.
We may infer from these specific cases something about the ultimate philosophy on which Karl Marx based his theory of socialism, in contrast to the actual historic process of stabilization through custom and law. Marx took his philosophy from Hegel, who had developed his famous theory of social evolution through the dialectic process of thesis, antithesis, and synthesis. This evidently is the process by which the human mind rises from the observation of a fact to the negation of that fact, and then makes a higher generalization, or synthesis, which includes both the positive and negative observations. In this way Hegel pictured the evolution of what he called the Idea, in the history of mankind, this idea starting with the thesis of primitive communism, then going over to its exact opposite, the extreme individualism of the French Revolution, then culminating in what he hoped would be the synthesis, a great German Empire that should afford the advantages of both the sovereignty of the State and the liberty of the individual.
But Marx inverted this process by changing the Great. Idea into tools, machinery, commodities, and social labor-power. It was, for him, the invention and evolution of methods of production of wealth that caused all changes to occur in religion, ethics, property, and the State. The thesis now remained primitive communism, as before, but the antithesis became individualistic capitalism, and the synthesis became, not the German Empire, but a new communism extending over the world.
The outstanding characteristic of both Hegel’s and Marx’s philosophy was the idea of an impelling force that worked out its evolution regardless of the will of man. The individual was helpless to push it on or hold it back. Consequently, in both cases, the actual historical evolution of collective wills was overlooked. The collective will was identified with sovereignty, or communism, whereas the collective will is really custom. And in Anglo-American history we find this collective will moving forward as the common law, including under this designation the law-merchant, or the custom of capitalists, as well as the law-agriculture, or the custom of feudal landlords and farmers, and the law-labor, or the custom of labor and trade-unions.
There is, however, a certain parallel between the dialectic of Hegel and Marx and the actual development of the common law. This parallelism may be distinguished as an early period of scarcity preceding the invention and use of the steam engine; then a period of abundance and even oversupply during the nineteenth century; and the period of stabilization, beginning with the twentieth century.
It was during this early period of scarcity that the common law developed its principles of the market overt, while the guilds of manufacturers and merchants were developing, in their own courts, their own rules respecting manufacturing, merchandising, and credit.
The period of abundance, which followed machinery and the steam engine, was the period of individualism and the abolition of many of the restrictions of mercantilism, of guilds, and of ancient customs. This period of abundance naturally became, at the hands of Adam Smith in 1776, the foundation of his doctrine of unregulated private property. According to this doctrine the instinct of property alone, without the aid of legislation or custom, was sufficient to augment the wealth of nations, while, at the same time, owing to this very abundance of wealth, the instinct of property could not injure anybody. But the nineteenth century, with its alternations of prosperity and depression, its overemployment and unemployment, its unregulated and cutthroat competition, showed the mistakes of this doctrine, and hence, at the close of this century, the period of stabilization began to take shape.
But this stabilization has not been an inevitable evolution of either Hegel’s Idealism or Marx’s Materialism — it has been the conscious activity of the collective wills of business men, of workingmen, of farmers, of the judiciary, of legislatures, and of public boards and commissions, endeavoring to adapt their customs, their rules and regulations, to the new industrial conditions by eliminating such practices as secrecy, extortion, discrimination, instability, and substituting such practices as publicity, security, and what in general may be known as the common-law concepts of reasonable value and reasonable practice. All of this is the conscious efforts of collective wills in thousands and millions of associated efforts, and the process is moving in a different direction from that prognosticated by Hegel or Marx. It is being developed through the age-old practices of custom. We can see these new customs getting themselves into the new common law, and it is not socialism toward which Western civilization is advancing—it is the stabilization of capitalism through custom and law.
Doubtless the most offensive of the theories of Karl Marx was his theory of class struggle between owners of property and non-owners, to be ended by a world-wide revolution, followed by a temporary dictatorship of the proletariat, and then a final harmony of all interests without dictatorship, after everyone has accepted the principles of communism.
The older economists, led by Adam Smith in 1776, had, in large part, accepted a principle of harmony of interests, provided that neither the State nor any guilds or other private associations should interfere with the natural workings of private property under the motive of pure self-interest. This alleged harmony of interests was plausible enough under the circumstances of the enormous increase of efficiency following the expansion of markets, the invention of machinery, and the application of science to industry, under the inducements of private property. It seemed to follow, since in an age of abundance the opportunities would be unlimited, that nobody could injure anybody else in his selfish pursuit of wealth, because everyone would have unlimited alternatives to which he could freely turn if not satisfied with the treatment he was receiving.
Karl Marx accepted that part of this theory which asserted the enormous increase in productivity of the capitalist system, and, indeed, he made it an essential part of his own philosophy. What he added was done merely by pointing out that this very increase in efficiency created a propertyless class of wage-earners, employed by the capitalists, whose lack of property prevented them from sharing in the increased efficiency of capitalism.
Thus Marx, like the economists, set up the idealism of a future harmony of interests, the one to come by perfectly free competition, the other by perfectly supreme communism.
But this entire idealism of harmony of interests, whether under capitalism or under socialism, falls to the ground if once we recognize that social conflict has always been and always will be a fundamental fact in the progress of mankind. It follows from the mere fact of increasing population and increasing wants and necessities, which, no matter how great the increase in efficiency, are continually pressing upon the natural resources of the world. It is not so much the food supply that is the limiting factor, at least in our Western capitalistic civilization, as Malthus and Ricardo predicted, as it is the coal, iron, oil, water power, and the limited landsites available for the congestion of population, all of which are required in order to accomplish this increase in efficiency. There has not been and never will be an automatic harmony of interests, because there always will be scarcity of essential resources and of privileged areas of land through increasing pressure of population. If harmony of interests is actually attained, it can be accomplished only as we go along, from day to day, dealing with each conflict as it arises, and settling it the best we know how.
This is what is meant by the concepts of reasonable value and reasonable practice which guide the courts in deciding disputes. These are economic concepts growing out of a free, equal, and public balancing of conflicting economic forces in a world of scarcity, and depending upon a thorough investigation of all the contending interests.
The concepts of reasonable value and reasonable practice are acquiring new and larger meanings than ever before, owing to this new stabilization of capitalism which may involve secrecy, discrimination, and extortion. Their significance arises from the need of deciding economic conflicts as we go along, without waiting for ultimate ideals. But instead of a two-sided class conflict, as Marx predicted, we have actually millions of individual conflicts and thousands of class conflicts at every point where scarcity of resources places its limits of opportunity upon the individual, or class, or even the nations of the world. There is abundance in some directions, scarcity in other directions.
These conflicts over scarcity ultimately press upon the judiciary and the legislatures for decision. Yet these two branches of government have shown themselves often incompetent to decide class conflicts. The legislature does not accurately represent the parties to the dispute. It is the lobbies that are more truly representative of classes than the legislatures. The judiciary, on the other hand, while it is suited to decide individual conflicts where the rules of the game have previously been laid down, yet is unsuited to decide the conflicts of classes themselves where the rules themselves are developed.
This incompetency of legislatures and judiciary has led the people of various states and the nation to install a set of commissions designed to deal with the more urgent of these class conflicts. The Tax Commission deals with the conflict between taxpayers as to how the burden of taxes shall be shifted between farmers, business men, and laboring men. The Railroad Commission deals with the conflict between public utilities and the shippers of goods or the consumers of light, heat, water, and power. The Industrial Commission deals with the conflict between employers and employees. The Market Commission deals with the conflicts between buyers and sellers. These commissions differ from courts in that they deal primarily with classes, while courts deal primarily with individuals.
All of these commissions are not a recognition of Karl Marx’s two-sided class struggle between owners and nonowners, and certainly they are not an acquiescence in the older theory of harmony of interests. They are a recognition of the hard fact that conflict of classes is with us continuously, but that this conflict is as many-sided as there are classifications of the people according to their economic interests. It is not really a struggle between classes, as understood by Marx. It is a struggle between classifications — for no individual is tied up to a single class, as Marx contended, and as might be true in Europe, but every individual belongs to as many classifications as he may have conflicting economic interests.
In American states, if there is anything like an economic class-struggle, it is a three-cornered and not a two-sided struggle, for there seems to be a line-up separately of capitalists, farmers, and wage-earners, each rather highly organized, and each not only shifting its alliances back and forth with the others, but each continually shifting within its own membership. It is doubtful whether either our legislatures, our commissions, our judiciary, our politicians, our lawyers, or our professional men, can successfully deal with such an economic conflict. And it is evident that these several interests are already taking the matter in their own hands, dealing jointly and directly with each other through their own representatives, sometimes under the supervision of governmental bodies. The single rule of the game, that they should lay their cards on the table instead of playing a secrecy game, might lead to some agreement respecting the facts, at least, if not the policies, which then could be accepted by legislatures, commissions, and judiciary.
At any rate, when once it is recognized that there is no such thing as an automatic harmony of economic interests, either under capitalism or future socialism, and that economic conflicts are not merely conflicts between individuals, which can be decided in court after the damage is done or is imminent, but are conflicts between classifications of individuals, which might be adjusted before a break occurs, then some progress can be made toward approaching, not an ultimate ideal of harmony, but merely that series of next steps which will keep the concern improving from day to day — the Reasonable Stabilization of Capitalism.