CHAPTER XXV UNSETTLED PROBLEMS IN THE ECONOMIC ORDER ( Continued ) 4. THE THEORY OF PUBLIC AGENCY AND CONTROL

The various theories of public direction, including socialism in the technical sense, are primarily interested in the just distribution of goods. It is not so much "How many goods can be produced?" as "Who is to get them?" Individualism was chiefly concerned in increasing public wealth, assuming (in the case of the democratic individualists) that all would get the benefit. Socialism is more concerned that the producing persons shall not be sacrificed, and that each member shall benefit by the result. Public agency and control might assert itself (1) as a method of production, (2) as a method of distribution of goods and returns, (3) as a method of property. It is important to note at the outset that all civilized peoples have some degree of social direction in each of these fields. (1) Practically all peoples collect taxes, coin money, carry mails, protect life and property, and supply such elementary demands as those for water and drainage, through State or municipal agency instead of leaving it to private initiative. And in every one of the instances the work was formerly done privately. (2) Under distribution, all progressive peoples give education through the State. Further, the benefits of the mail service are distributed not in proportion to receipts, but on other principles based on social welfare. (3) As a method of property-holding, all civilized peoples hold certain goods for common use, and in the United States, after a period in which it has been the policy to distribute for little or no compensation public lands, public franchises, and public goods of all kinds, the public policy is now not only to retain large tracts for forest reserve, but to construct irrigation plants, and to provide public parks, playgrounds, and other forms of property to be used for common advantage. Just as the individualist does not necessarily carry his doctrine to the extreme of dispensing with all social agency, at least in the matters of public protection and public health, so the socialist does not necessarily wish to abolish private property or private enterprise. We have, then, to consider briefly the ethical aspects of public agency for production, public control over distribution, public holding of wealth.

§ 5. SOCIETY AS AGENCY OF PRODUCTION

The advantage claimed for society as an agent of production is not primarily greater efficiency, although it is claimed that the present method is enormously wasteful except where there already is private monopoly. Nor is it in the social service rendered by providing great variety of goods, and of the kinds most wanted. It is rather (1) that in the case of public service enterprises, such as transportation or lighting, fairness to the various shippers, localities, and other users can be secured only through public control or operation. These services are as indispensable to modern life as air or navigation. Only by public agency can discrimination be avoided. (2) That the prizes to be gained are here so enormous that bribery and corruption are inevitable under private management. (3) That the profits arising from the growth of the community belong to the community, and can only be secured if the community owns and operates such agencies of public service as transportation, communication, and in cities water supply and lighting. (4) That the method of individualistic production is reckless of child life and in general of the health of workmen. Great Britain is already fearing a deterioration in physical stature and capacity. (5) The motive of self-interest, relied upon and fostered by individualism, is anti-social. How can morality be expected to improve when the fundamental agency and method of business and industry is contradictory to morality? (6) More complete socialism maintains that, under modern capitalism, a disproportionate share is sure to fall to the capitalist, and, more than this, to the great capitalist. Modern production is complex and expensive. It requires an enormous plant; the capitalist, not the workman, has the tools, and can therefore charge what he pleases. The small capitalist cannot undertake competition with the great capitalist, for the latter can undersell him until he drives him from business, and can then recoup himself by greater gains. Hence the only way to secure fair distribution is through social ownership of the tools and materials for production.

Private Interests and Public Welfare.—Touching these points it may be said that the public conscience is rapidly coming to a decision upon the first five. (1) The public has been exploited, the officials of government have been bribed, and individual members of society discriminated against. The process of competition always involves vÆ victis, but the particular factor which makes this not only hard but unjust, is that in all these cases we have a quasi-public agency (monopoly, franchise, State-aided corporation) used to give private advantage. This must be remedied either by public ownership or public control, unless the ethics of the struggle for existence is accepted. The corruption which has prevailed under (2) must be met either by public ownership or control, or by so reducing the value of such franchises as to leave "nothing in it" for the "grafter" and his co-operators. Vice—gambling, excessive use of drugs and liquors, prostitution—is no doubt injurious to its victims, and when leagued with public officials and yielding enormous corruption funds to debauch politics, it is a public evil as well. But its victims are limited, and its appearance not attractive to the great majority. The exploitation and corruption practiced by the more generally successful and "respectable" members of society, is far more insidious and wide-reaching. It demoralizes not individuals only, but the standards of society. As to (3) there is no doubt as to the rights of the matter. Gains due to social growth should be socially shared, not appropriated by a few. The only question is as to the best method of securing these gains. European States and cities have gone much farther than the United States along the line of public agency, and, while there is still dispute as to the balance of advantage in certain cases, there is a growing sentiment that the more intelligent and upright the community, the more it can wisely undertake. The moral principle is that the public must have its due. Whether it pays certain agents a salary as its own officials, or a commission in the form of a moderate dividend, is not so important.[240] But to pay a man or a small group of promoters a million dollars to supply water or lighting or transportation, seems no more moral than to pay such a salary to a mayor or counsel or superintendent of schools. Taxpayers would probably denounce such salaries as robbery. Such franchises as have for the most part been given in American cities have been licenses to collect high taxes from the citizens for the benefit of a few, and do not differ in principle from paying excessive salaries, except as the element of risk enters. What is needed at present in the United States is a larger number of experiments in various methods of agency to see which type results in least corruption, fairest distribution, and best service.

Conditions of Labor.—On the fourth point, the necessity of public control to regulate child labor, the labor of women, sanitary conditions, and the use of dangerous machinery, the public conscience is also awakening. Decisions of the courts on the constitutionality of regulating women's labor have been somewhat at variance. But the recently announced decision[241] of the United States Supreme Court in the "Oregon case" seems likely to be decisive of the principle that women may be treated as a class. Freedom of contract cannot be regarded as interfering with the right to establish reasonable precautions for women's health. Woman may be protected "from the greed as well as from the passion of man." The immorality of child labor under modern conditions is also becoming clear. For the public to see child life stunted physically, mentally, and morally by premature labor under the exhausting, deadening, and often demoralizing conditions of modern industry and business, is for the public to consent to wickedness. It cannot leave this matter to the conscience of individual manufacturers and parents, for the conscientious manufacturer is at a disadvantage, and it might with as much morality consent to a parent's starving or poisoning his child as to his injuring it in less violent manner. For a society pretending to be moral to permit little children to be used up or stunted under any plea of cheap production or support of parents, is not above the moral level of those peoples which practice infanticide to prevent economic stress. Indeed, in the case of a country which boasts of its wealth, there is far less justification than for the savage. In the case of provision against accident due to dangerous machinery, the ethical principle is also clear. To throw all the burden of the accidents incident to modern production upon the families of the laborers is entirely unjust. To impose it upon the conscientious manufacturer is no better, for it places him at a disadvantage. This is a necessary—except so far as it can be minimized by safety devices—part of the modern machine process. It ought to be paid for either by all manufacturers, who would then shift it to the consumers in the price of the goods, or by the public as a whole in some form of insurance. European countries have gone much farther than the United States in this direction. The theory that the employer is exempt if a fellow workman contributes in any way to the accident has been applied in the United States in such a way as to free employers, and thus the public, from any share in the burden of a large part of accidents—except as these entail poverty and bring the victim and his family into the dependent class.

Moreover, it is only by public action that fair conditions of labor can be secured in many trades and under many employers. For the single workman has not the slightest chance to make conditions, and the union has no effective means to support its position unless it represents a highly skilled trade and controls completely the supply of labor. It may go without saying that violence is wrong. But it is often ignored that for a prosperous society to leave the laborer no remedy but violence for an intolerable condition is just as wrong.

Motives.—(5) On the question of motives the collectivist theory is probably over-sanguine as to the gain to be effected by external means. It is difficult to believe that any change in methods would eliminate selfishness. There is abundant exercise of selfishness in political democracy, and even in families. Further, if it should be settled on other grounds that competition in certain cases performs a social service, it would then be possible for a man to compete with a desire to serve the public, just as truly as it would be possible to compete for selfish motives. That a process causes pain incidentally does not necessarily pervert the motive of the surgeon or parent. It does, of course, throw the burden of proof upon the advocate of the process. Rivalry need not mean enmity if the rivals are on an equal footing and play fair.

Exploitation of Labor.—(6) The question whether all capitalistic production first exploits the laboring class, and then tends to absorb or drive out of business the small capitalist, is not so easy of decision. It seems to be easy to make a plausible statement for each side by statistical evidence. There seems little doubt that the general standard of living for laborers is rising. On the other hand, the number of enormous fortunes seems to rise much faster, and there is an appalling amount of poverty in the great cities. This is sometimes attributed to thriftlessness or to excessively large families. A careful study of an English agricultural community, where the conditions seemed at least as good as the average, showed that a family could not have over two children without sinking below the line of adequate food, shelter, and clothing, to say nothing of medical attendance or other comforts. In the United States there has been such a supply of land available that the stress has not been so intense. Just what the situation will be if the country becomes thickly settled cannot be foretold. Professor J. B. Clark shows that the tendency in a static society would be to give the laborer more and more nearly his share—provided there is free competition for his services. The difficulty is that society is not static and that a laborer cannot shift at will from trade to trade and from place to place.

That sometimes capital exploits labor is merely to say that the buyer sometimes gets the advantage. That capital usually has the advantage in its greater resources may be admitted, but that it invariably must seems an unwarranted deduction. The multiplication of wants widens continually the number of occupations and thus increases the competition for the service of the more skilled. In such cases some, at least, of the sellers should be in a position to make a fair bargain. Indeed, recent socialists do not advocate any such complete assumption by society of all production as is presented in some of the socialistic Utopias. Their principle is "that the State must undertake the production and distribution of social wealth wherever private enterprise is dangerous or less efficient than public enterprise."[242]

It is for those who do not believe in public control to prove that in the great enterprises for the production of the necessaries of life, for transportation, banking, mining, and the like, private enterprise is not dangerous. The conduct of many—not all—of these enterprises in recent years, not only in their economic aspects, but in their recklessness of human life, health, and morality, is what makes socialism a practical question. If it is adopted, it will not be for any academic or a priori reasons. It will be because private enterprise fails to serve the public, and its injustice becomes intolerable. If business enterprise, as sometimes threatens, seeks to subordinate political and social institutions, including legislatures and courts, to economic interests, the choice must be between public control and public ownership. And if, whether by the inherent nature of legal doctrine and procedure, or by the superior shrewdness of capital in evading regulation, control is made to appear ineffective, the social conscience will demand ownership. To subordinate the State to commercial interests is as immoral as to make the economic interest supreme in the individual.

As regards the relations between capital and labor, it argues an undeveloped state of society that we have no machinery for determining controversy as to what is a fair wage. In the long run, and on the whole, supply and demand may give an approximately fair adjustment, but our present method of fighting it out in doubtful cases is barbaric. The issue is decided often by violence or the no less unmoral motive of pressing want, instead of by the moral test of what is fair. And the great third interest, the consumer, or the public at large, is not represented at all. New Zealand, Canada, and some of the states in the United States have made beginnings. The President undoubtedly commanded general support in his position during the coal strike, when he maintained that the public was morally bound to take some part in the struggle.

Must not society be lacking in resources if its only resource is to permit exploitation, on the one hand, or carry on all industry and business itself, upon the other? To lose the flexibility, variety, and keenness of interest secured by individual or associated enterprise, would certainly be an evil. Early business was conducted largely by kinship organizations. The pendulum has doubtless reached the other extreme in turning over to groups, organized on a purely commercial basis, operations that could be more equitably managed by city or state agency. Most favor public agency in the case of schools. Railroads, gas companies, and other monopolies are still subject to controversy. But that an ideally organized society should permit associations and grouping of a great many kinds as agencies for carrying on its work seems a platform not to be abandoned until proved hopeless.

Collective Agency is Not Necessarily Social.—The socialist is inclined to think that if the agency of production were the government or the whole organized society this would give a genuine social agency of control. This by no means follows. Party government and city government in the United States have shown the fallacy of this. But even apart from the possibility of a corrupt boss there is still a wide gap between the collective and the socialized agency. For until the members of society have reached a sufficiently high level of intelligence and character to exercise voluntary control, and to coÖperate wisely and efficiently, there must be some central directing agency. And such an agency will be morally external to a large number. It doesn't matter so much what name this agent is called by—i.e., whether he is "capitalist," or "government,"—so long as the control is external. In general, individuals are still without the mutual confidence and public intelligence which would enable them really to socialize the mechanically collective process.

§ 6. THEORIES OF JUST DISTRIBUTION

Socialism as theory of distribution does not necessarily imply public operation of production. By graded taxation the proceeds of production might be taken by society and either held, used, or distributed on some supposedly more equitable basis. To give point to any inquiry as to the justice of a proposed distribution, it would be desirable to know what is the present distribution. Unfortunately, no figures are accepted by all students. Spahr's Present Distribution of Wealth in the United States estimates that seven-eighths of the families in the United States own only one-eighth of the wealth, and that one per cent. own more than the remaining ninety-nine per cent. This has been challenged, but any estimate made by the economists shows such enormous disproportion as to make it incredible that the present distribution can be regarded as just on any definition of justice other than "according to the principles of contract and competition."
Suppose, then, the question is raised, How can
we make a just distribution?

Criteria Proposed.—The simplest, and at the same time most mechanical and abstract, method would be to divide all goods equally. This would be to ignore all moral and other differences, as indeed is practically done in the suffrage. If all men are accounted equal in the State, why not in wealth? It may be admitted that, if society were to distribute, it would have to do it on some system which could be objectively administered. To divide wealth according to merit, or according to efforts, or according to needs, would be a far more moral method. But it is difficult to see how, in the case of material goods or their money equivalent, such a division could be made by any being not omniscient as well as absolutely just. If we are to consider distribution as administered by society, we seem reduced to the alternative of the present system or a system of equality.

1. The Individualistic Theory.—It is indeed supposed by some that the individualistic or competitive system distributes on a moral basis: viz., according to merit. This claim would have to meet the following criticisms:

(1) The first abstraction which this individualistic principle of reward usually makes it that it gives a man credit for all he achieves, or charges him with all his failures, without recognizing the threefold origin of these achievements or failures. Heredity, society, personal choice, have each had some share in the result. But, in considering the ethics of competition upon this maxim, there is evidently no attempt to discriminate between these several sources. The man born with industrial genius, presented by society with the knowledge of all that has been done in the past, and equipped by society with all the methods and tools society can devise, certainly has an advantage over the man of moderate talents and no education. To claim that the first should be justly rewarded for his superiority would imply that the reception of one gift constitutes a just claim for another.

(2) Secondly, the theory as applied to our present system is guilty of a further abstraction in assuming that the chief, if not the only, way to deserve reward is by individualistic shrewdness and energy.

(3) It measures desert by service rendered without taking any account of motive or even of intent. The captain of industry performs an important service to society; therefore, it is argued, he should be rewarded accordingly, quite irrespective of the question whether he was aiming at social welfare or at selfish gain. It may even be plausibly argued that to reward men financially for good motives would be bribing men to be honest. It is true that financial rewards will not make good citizens, but this is irrelevant. The point is that whatever other reasons,—expediency, difficulty of estimating intent and motive,—may be urged for abstracting from everything but the result, the one reason which cannot be urged is, such abstraction is just. A person has rights only because he is a social person. But to call a man a social person because he incidentally produces useful results, is to say that purpose and will are negligible elements of personality.[243]

2. Equal Division.—The system of equal division is liable to the following criticism. In their economic services men are not equal. They are unequal not merely in talent and ability; not merely in the value of their work; they are unequal in their disposition. To treat idle and industrious, useless and useful, slow and quick alike is not equality, but inequality. It is to be guilty of as palpable an abstraction as to say that all men are equally free because they are not subject to physical constraint. Real equality will try to treat like conditions alike, and unlike character, efforts, or services differently.

There is, moreover, a psychological objection which would weigh against an equal division even if such were regarded as just. The average man perhaps prefers an economic order in which there are prizes and blanks to an order in which every man draws out the same. He prefers an exciting game to a sure but tame return of his investment. He may call for a "square deal," but we must remember that a "square deal" in the great American game from which the metaphor is taken is not designed to make the game less one of chance. It is designed to give full scope to luck and nerve. A game in which every player was sure to win, but also sure to win just what he had put in, would be equitable, but it would not be a game. An equal distribution might rob life of its excitement and its passion. Possibly the very strain of the process develops some elements of character which it would be unfortunate to lose.

Is there no alternative possible for society except an equality which is external only, and therefore unequal, or an inequality which charges a man with all the accrued benefits or evils of his ancestry? Must we either recognize no moral differences in men, or else be more merciless than the old orthodox doctrine of hereditary or imputed guilt? The theological doctrine merely made a man suffer for his ancestors' sins; the doctrine of unlimited individualism would damn him not only for his ancestors' sins and defects, but for the injustice suffered by his ancestors at the hands of others. The analysis of the sources of a man's ability may give a clue to a third possibility, and it is along this line that the social conscience of to-day is feeling its way.

3. A Working Programme.—A man's power is due (1) to physical heredity; (2) to social heredity, including care, education, and the stock of inventions, information, and institutions which enables him to be more efficient than the savage; and finally (3) to his own efforts. Individualism may properly claim this third factor. It is just to treat men unequally so far as their efforts are unequal. It is socially desirable to give as much incentive as possible to the full development of every one's powers. But the very same reason demands that in the first two respects we treat men as equally as possible. For it is for the good of the social body to get the most out of its members, and it can get the most out of them only by giving them the best start possible. In physical heredity the greater part is, as yet, wholly outside control, but there is an important factor which is in the sphere of moral action, namely, the physical condition of the parents, particularly of the mother. Conditions of food, labor, and housing should be such that every child may be physically well born. In the various elements included under social heredity society has a freer hand. Not a free hand, for physical and mental incapacity limit the amount of social accumulation which can be communicated, but we are only beginning to appreciate how much of the deficiency formerly acquiesced in as hopeless may be prevented or remedied by proper food, hygiene, and medical care. Completely equal education, likewise, cannot be given; not in kind, for not all children have like interests and society does not want to train all for the same task; nor in quantity, for some will have neither the ability nor the disposition to do the more advanced work. But as, little by little, labor becomes in larger degree scientific, the ratio of opportunities for better trained men will increase, and as education becomes less exclusively academic, and more an active preparation for all kinds of work, the interests of larger and larger numbers of children will be awakened. Such a programme as this is one of the meanings of the phrase "equal opportunity," which voices the demand widely felt for some larger conception of economic and social justice than now obtains. It would make formal freedom, formal "equality" before the law, less an empty mockery by giving to every child some of the power and knowledge which are the necessary conditions of real freedom.

Society has already gone a long way along the line of giving an equal share in education. It is moving rapidly toward broader conceptions of education for all occupations—farming, mechanics, arts, trade, business—as well as for the "learned professions." It is making a beginning toward giving children (see the Report of the New York Tenement House Commission) a chance to be born and grow up with at least a living minimum of light and air. Libraries and dispensaries and public health officials are bringing the science and literature of the world in increasing measure into the lives of all. When by the better organization of the courts the poor man has real, and not merely formal equality before the law, and thereby justice itself is made more accessible to all, another long step will be taken toward a juster order. How far society can go is yet to be solved. But is it not at least a working hypothesis for experiment, that society should try to give to all its members the gains due to the social progress of the past? How far the maxim of equal opportunity will logically lead it is impossible to say. Fortunately, the moral problem is to work out new ideals, not merely to administer old ones. Other possibilities of larger justice are noticed under § 8 below.

§ 7. OWNERSHIP AND USE OF PROPERTY

The public wealth may be controlled and used in four ways: It may be (1) Privately owned and used; (2) Privately owned and publicly used; (3) Publicly held, but privately used; (4) Publicly held and commonly used. The individualist would have all wealth, or as much as possible, under one of the first two forms. The tendency in the United States until very recently has been to divest the public of all ownership. The socialist, while favoring private ownership and use of the more strictly personal articles, favors the public holding of much which is now privately owned—notably the land, or the instruments of production—as versus the holding of these by private or corporate persons. Or, again, it may be maintained that while individuals should be allowed to accumulate as much property as they can, they should not be allowed to transmit it entirely to their heirs.

Value of Private Property.—The individualist may properly point to the psychological and historical significance of private property, which has been stated in a preceding chapter (p. 490). He may say that the evils there mentioned as attendant upon private property do not belong to the property in itself, but to the exaggerated love of it. He may admit that the present emphasis of attention upon the ownership of wealth, rather than upon intellectual or Æsthetic or social interests, is not the highest type of human endeavor. But he urges that the positive values of property are such that the present policy of placing no check upon property should be maintained. In addition to the indirect social value through the power and freedom given to its owners, it may be claimed that the countless educational, charitable, and philanthropic agencies sustained by voluntary gifts from private property, are both the best method of accomplishing certain socially valuable work, and have an important reflex value in promoting the active social interest of those who carry them on. Nor is the force of this entirely broken by the counter claim that this would justify keeping half the population in poverty in order to give the other half the satisfaction of charity. No system short of absolute communism can abolish the need of friendly help.

Defects and Dangers in the Present System.—The first question which arises is: If property is so valuable morally, how many are profiting by it under the present system, and how many are without its beneficent effects? Is the number of property-owners increasing or diminishing? In one of the morally most valuable forms of property, the number of those who profit is certainly decreasing relatively: viz., in the owning of homes. The building of private residences has practically ceased in New York and many other cities except for the very rich. With the increasing value of land the owning of homes is bound to become more and more rare. Only the large capitalist can put up the apartment house. In the ownership of shops and industries the number of owners has relatively decreased, that of clerks has increased. The wage-workers in cities are largely propertyless. The management of industries through corporations while theoretically affording opportunity for property has yet, as Judge Grosscup has pointed out forcibly, been such as to discourage the small investor, and to prompt to the consumption of wages as fast as received. The objection to individualism on this ground would then be as before, that it is not individual enough.

An objection of contrary character is that the possession of property releases its owner from any necessity of active effort or service to the public. It may therefore injure character on both its individual and its social side. Probably the absolute number of those who refrain from any social service because of their property is not very large, and it may be questioned whether the particular persons would be socially very valuable under any system if they are now oblivious to all the moral arguments for such activity and service.

A more serious objection to the individualistic policy is the enormous power allowed to the holders of great properties. It has been estimated that a trust fund recently created for two grandchildren will exceed five billion dollars when handed over. It is easily possible that some of the private fortunes now held may, if undisturbed, amount to far more than the above within another generation. Moreover, the power of such a fortune is not limited to its own absolute purchasing value. By the presence of its owners upon directorates of industrial, transportation, banking, and insurance corporations the resources of many other owners are controlled. A pressure may be exerted upon political affairs compared with which actual contributions to campaign funds are of slight importance. The older theory in America was that the injury to the private character of the owners of wealth would negative the possible dangers to the public, since possession of large wealth would lead to relaxation of energy, or even to dissipation. It was assumed that the father acquired the fortune, the son spent it, and thus scattered it among the many, and the grandson began again at the bottom of the ladder. Now that this theory is no longer tenable, society will be obliged to ask how much power may safely be left to any individual.

It must be recognized that the present management of such natural resources as forests under the rÉgime of private property has been extremely wasteful and threatens serious injury to the United States. Individual owners cannot be expected to consider the welfare of the country at large, or of future generations; hence the water power is impaired and the timber supply of the future threatened.

Finally it must be remembered that many of the present evils and inequities in ownership are not due necessarily to a system of private property, but rather to special privileges possessed by classes of individuals. These may be survivals of past conquests of arms as in Europe, or derived by special legislation, or due to a perfectly unconscious attitude of public morals which carries over to a new situation the customs of an early day. Mill's famous indictment of present conditions is not in all respects so applicable to America as to the older countries of Europe, but it has too much truth to be omitted in any ethical consideration.

§ 8. PRESENT TENDENCIES

Individualistic Foundations.—The general tendency up to very recent time in the United States has been decidedly individualistic, both in the policy concerning the method of holding property, and in the legal balance between vested property rights and the social welfare. Public lands were granted on easy terms to homesteaders; mines as well as soil were practically free to the prospector; school fund lands were in most cases sold for a song instead of being kept for the public. So general has been the attitude that all wealth ought to be in private hands that it has been difficult to convict men who have fraudulently obtained vast tracts of public land. The magnitude of the operation has given "respectability" to the beneficiaries. The taxing power has done little to maintain adjustment. In this, as in many other respects, the policy of the United States has been far more individualistic than that of Great Britain. The latter has graded income and inheritance taxes. In the United States, on the other hand, the Federal taxation bears more heavily on the poor as they are the large body of consumers,—not, of course, in the sense that the individual poor man pays more than the individual rich man, but in the sense that a million of dollars owned by a thousand men pays more than a million owned by one man. Legally, the Constitution of the United States and certain of its amendments gave private rights extraordinary protection, especially when contracts were construed to mean charters, as well as private contracts. The public welfare was conceived to reside almost solely in private rights.[244]

Increased Recognition of Public Welfare.—Recent policy and legal decisions show a decided change. Reserves of forest lands have been established. Water-supplies, parks, and many other kinds of property have been changed from private to public ownership. The question as to mines has been raised. Graded inheritance taxes have been established in some states, and the question of graded income taxes is likely to be more generally considered unless some other form of taxation based on the social values given to land, or franchises, or other forms of property seems more equitable. The Supreme Court in recent decisions "has read into the constitution two sweeping exceptions to the inviolability of property rights."[245] One is that of public use. "Whenever the owner of a property devotes it to a use in which the public has an interest, he in effect grants to the public an interest in such use, and must to the extent of that use submit to be controlled by the public for the common good so long as he maintains the use." The second exception is that of the police power which in 1906 (204 U. S., 311, 318) was declared to extend "to so dealing with the conditions which exist in the state as to bring out of them the greatest welfare of its people." The application of this broad principle is still in an uncertain condition, but there can be no question that it recognizes a changed situation. When people are living in such interdependence as in the collective life of to-day, it is no longer possible to locate public welfare in any such preponderating degree in private rights as was justified under the conditions of a new country a century ago. Says Professor Smith:

If some of the means set forth above for securing juster distribution were adopted, the first step toward Mill's demand[246] would be met. If the community should reap the return for its own growth, if taxation should be so arranged as to fall most heavily on those best able to pay rather than on those who are most honest or least able to evade, it would seem rational to hold that society will find a way to continue the four forms of control now existing, making such shifts as changing conditions require.

Some of these shiftings are already evident and give promise of greater justice without loss of any of the benefits accruing from private property.

Social Justice through Economic, Social, and Scientific Progress.—Not all moral advance comes "with observation," or by political agency. The economic process is providing in certain lines a substitute for property. Science and invention, which are themselves a fine illustration of the balance and interaction between individual and social intelligence, individual effort and social coÖperation, are making possible in many ways a state of society in which men have at once greater freedom and greater power through association, greater individual development and greater socialization of interests, less private property but greater private use and enjoyment of what is common.

The substitute for property provided by the economic process itself is permanence or security of support. If the person can count definitely upon a future, this is equivalent to the security of property. And through the organization of modern industry supplemented by insurance and pensions, either state, institutional, or in corporations, or in mutual benefit associations, there has been on the whole, a great increase of security, although it is still unfortunately true that the wage-worker may in most cases be dismissed at any moment, and has virtually no contract, or even any well-assured confidence of continued employment.

It is a mutual coÖperation of economic, social, and scientific factors which has brought about a great increase of individual use and enjoyment through public ownership. This has placed many of the things which make life worth living within the enjoyment of all, and at the same time given a far better service to the users than the old method of private ownership. In this change lies, perhaps, the greatest advance of justice in the economic sphere, and a great promise for the future. There was a time when if a man would sit down on a piece of ground and enjoy a fine landscape, he must own it. If he would have a plot where his children might play, he must own it. If he would travel, he must carry his own lantern, and furnish his own protection from thieves. If he would have water, he must sink his own well. If he would send a letter, he must own or hire a messenger. If he would read a book, he must not merely own the book, but own or hire the author or copyist. If he would educate his children, he must own or hire the tutor. We have learned that public parks, public lighting and water works, public libraries, and public schools, are better than private provision.

The objection which comes from the individualist to this programme is that it does too much for the individual. It is better, urges individualism, to stimulate the individual's activity and leave his wants largely unsatisfied than to satisfy all his wants at the expense of his activity. But this assumes that what is done through public agencies is done for the people and not by the people. A democracy may do for itself what an aristocracy may not do for a dependent class. The greatest demoralization at the present time is not to those who have not, but to those who appropriate gains due to associated activity, complacently supposing that they have themselves created all that they enjoy.

Another Great Advance is the Change in What Makes Up the Chief Values of Life.—In early times the values of life were largely found in food, clothing, personal ornaments, bodily comfort, sex gratifications. Enjoyment of these involved exclusive possession and therefore property. But with the advance of civilization an increasing proportion of life's values falls in the mental realm of sharable goods.

Satisfaction in knowledge, in art, in association, in freedom, is not diminished, but increased when it is shared. The educated man may have no more property than the illiterate. He has access to a whole system of social values. He has freedom; he has a more genuinely independent type of power than accrues from the mere possession of things. The society of the future will find a part of its justice in so adjusting its economic system that all may enter as fully as possible into this more social world.

Methods of Social Selection.—Finally, recognizing all the value of the competitive process in the past as a method of selecting ability, it must be regarded as crude and wasteful. It is like the method of blind trial and error which obtains in the animal world. The method of ideas, of conscious use of means to secure ends, is the more effective and the more rational. Society now is gaining the scientific equipment which may allow the substitution of the more effective and less wasteful method. It should discover and educate capacity instead of giving merely a precarious encouragement to certain special types.

§ 9. THREE SPECIAL PROBLEMS

Three special problems may be noticed about which moral judgment is as yet uncertain: The open versus the closed shop, the capitalization of corporations, and the "unearned increment."

1. The Open versus the Closed Shop.—In certain industries in which the workmen are well organized they have made contracts with employers which provide that only union men shall be employed. Such a shop is called a closed shop, in distinction from an "open shop" in which non-union men may be employed in part or altogether. The psychological motive for the demand for the closed shop is natural enough: the union has succeeded in gaining certain advantages in hours or wages or both; this has required some expense and perhaps some risk. It is natural to feel that those who get the advantage should share the expense and effort, and failing this, should not be admitted to the shop. If the argument stopped here it would be insufficient for a moral justification for two reasons. First, joining a union involves much more than payment of dues. It means control by the union in ways which may interfere with obligations to family, or even to the social order. Hence, to exclude a fellow workman from the opportunity to work because he—perhaps for conscientious reasons—would not belong to the union, could not be justified unless the union could make it appear that it was maintaining a social and not merely a group interest. Second, in some cases unions have sought to limit output. In so far as this is done not for reasons of health but to raise prices, the union is opposing the interest of consumers. Here again the union must exhibit a social justification if it is to gain social approval.

On the other hand it may be noted that the individualist of the second sort—who believes in the competitive struggle as a moral process—has no ground on which to declare for "open shop." Exactly the same principle which would permit combination in capital and place no limit on competitive pressure, provided it is all done through free contracts, can raise no objection against combinations of laborers making the best contracts possible. When a syndicate of capitalists has made a highly favorable contract or successfully underwritten a large issue of stock, it is not customary under the principle of "open shop" to give a share in the contract to all who ask for it, or to let the whole public in "on the ground floor." Nor are capitalists accustomed to leave a part of the market to be supplied by some competitor for fear such competitor may suffer if he does not have business. When the capitalist argues for the open shop upon the ground of freedom and democracy, it seems like the case of the mote and the beam.

An analogy with a political problem may aid: Has a nation the right to exclude (or tax heavily) goods or persons from other countries? May it maintain a "closed shop"? The policy of the American colonists and of the United States has varied. The Puritans maintained a "closed shop" on religious lines. They came to this country to maintain a certain religion and polity. They expelled several men who did not agree with them. The United States excludes Chinese laborers, and imposes a tariff which in many cases is intended to be prohibitive against the products of other countries. This is done avowedly to protect the laborer, and in so far as it is effective it closes the shop. The maxim "This is a white man's country" is a similar "closed shop" utterance. On moral grounds the non-union man is in the same category as the man of alien race or country. What, if anything, can justify a nation or smaller group from excluding others from its benefits? Clearly the only conditions are (1) that the group or nation is existing for some morally justifiable end, which (2) would be endangered by the admission of the outsiders. A colony established to work out religious or political liberty would be justified in excluding a multitude who sought to enter it and then subvert these principles. If a union is working for a morally valuable end, e.g., a certain standard of living which is morally desirable, and if this were threatened by the admission of non-union men, the closed shop would seem to be justified. If the purpose were merely to secure certain advantages to a small group, and if the open shop would not lower the standard but merely extend its range of benefits, it is hard to see why the closed shop is not a selfish principle—though no more selfish than the grounds on which the tariff is usually advocated.

2. The Capitalization of Corporations, especially of public service corporations, is a matter on which there is a difference of policy in different states, owing probably to uncertainty as to the morality of the principles involved. The two theories held are: (a) Companies should issue capital stock only on the basis of money paid in; dividends then represent a return on actual investment. (b) Companies may issue whatever stock they please, or whatever they expect their income will enable them to pay dividends upon; dividends will then represent return for valuable privileges, or for some utility to be marketed. In behalf of this latter view it may be claimed that if the company pays dividends the investors have nothing to complain of, and if it sells its products or transportation at market rates, the consumer has nothing to complain of.

So far as the relations between corporation and investor are concerned, the issues are simple. If the stocks are issued with no expectation that they will give any return, merely to "sell," it is pure dishonesty, of the same type which under cruder conditions sold spavined horses or made counterfeit money, and now assumes the more vulgar type of dealing in "green goods." The fact that fictitious capital can be publicly advertised, gives it a financial but not a moral advantage. This, however, would have such decided limitations, credulous as human nature is, that if fictitious capital paid no dividends it would soon have no market. Hence, for the far-seeing promoter, the pressure is toward making some at least of the fictitious capital pay dividends. What is the principle in this case? If we are dealing with a new and untried mode of production or public service, the case is simply that of any speculation. If a proposed product has a possible utility, but at the same time involves so much risk that in the long run only half of such enterprises will succeed, society may consider it worth offering a profit equal to fifty per cent. in order to pay for the risk. If, on the other hand, the income is to derive from valuable public franchises, or from the growth of the community and its necessities, the case is different. Here there is little, if any, risk for which it is fair for society to pay. The excessive capital beyond the cost is designed to disguise the rate of profit, and therefore conceal from the community the cost of the goods or service. If the public demands cheaper rates it is told that the company is now paying only a fair dividend upon its stock.[247] The usual method of capitalizing many enterprises of a quasi-public sort is to issue bonds to cover the cost of construction or plant, and then one or more series of stocks which are known as "velvet." In part these stocks may represent a work of organization which is a legitimate public service, but in many cases they represent devices for transferring public wealth to private property. Enormous sums have been taken from the public in this manner. The element which makes this method particularly obnoxious is that the quasi-public corporations are given a monopoly by the community and then take advantage of this to capitalize indefinitely the necessities of a growing community. In this case the conception of public service is lost sight of in the "dazzling possibility of public exploitation."[248]

Few methods of extorting wealth have equaled this. In some cases bribery of public officials has added an item of expense to be collected later from the public. When the various forms of public service or protected industry were first projected there was risk involved. It was necessary to offer inducements to capital to engage in them. It was desirable to have railroads, gas, water, express service. But as the factor of risk has been eliminated, the public tires of paying double prices, and a "fair" return must be estimated on the basis of actual rather than fictitious capital. The public has come to have a clear idea as to the morality of such practices as have been employed in letting contracts for public buildings at prices far above market value. The New York City courthouse and Pennsylvania capitol offer familiar examples. Does it differ materially from such practices when a company charges the public an excessive price for transportation or lighting, and when State or municipal authorities authorize by franchise or monopoly such excessive charges? Probably the conscience of the next century, if not of the next generation, will fail to see the superior moral quality of the latter procedure.

3. The "Unearned Increment."—This term is applied most frequently to the increase in land value or franchise value which is due, not to the owner, but to the growth of the community. A tract of land is bought at a price fixed by its value as farm land. A city grows up. The owner of the land may have been active in the building up of industry, but he may not. An increase of values follows, which is due to the growth of the community. Shall the owner have it all, or shall the community have it all, or shall there be a division? The growth in value of a franchise for gas, electric lighting, transportation, presents the same problem. It is not usually recognized, however, that the same principle is found in every increase of value due to increasing demand. The logical basis for distinction would seem to be that in some cases increase of demand calls out competition, and the price is lowered; the public thus receives its share in lower cost. In other cases, notably those first mentioned, there can be no competition, the price is therefore not often lowered unless by legislative action, and the whole benefit goes to the owner of land or franchise. As regards land, the case is much stronger in Europe, for land titles were originally gained there largely by seizure, whereas in America private titles have been largely through purchase.

Individualism, according as it argues from the platform of natural rights or from that of social welfare, would claim either that individuals should have all the increase because they have a right to all they can get under a system of free contracts, or that it is for the social welfare to allow them all they can get since private property is public wealth. From the standpoint of natural rights the reply would seem to be unanswerable: the community gives the increased value; it belongs to the community. From the standpoint of social welfare the answer is not so simple. It might, for example, be socially desirable to encourage the owners of farming land by leaving to them the increase in value due to the growth of the country, whereas city land-owners might need no such inducement. Investors in a new form of public service corporation might need greater inducements than would be fair to those in enterprises well established. But, although details are complex, the social conscience is working toward this general principle: the community should share in the values which it produces. If it cannot do this by cheaper goods and better service, it must by graded taxation, by ownership, or by some other means. The British government has already considered a measure for ascertaining the land values in Scotland as a preliminary step toward adjustment of this question.

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APPENDIX TO CHAPTER XXV

PROFESSOR SEAGER'S PROGRAMME OF SOCIAL LEGISLATION
WITH SPECIAL REFERENCE TO WAGE-EARNERS

In the conviction that in the field of social legislation the United States is behind the more progressive countries of Europe, Professor Henry R. Seager, of Columbia University, presented the following Outline for discussion at a meeting of the American Association for Labor Legislation, December 30, 1907. It is reproduced with his consent as giving concrete expression to several of the principles advocated in the foregoing chapters.

The ends to be aimed at in any programme of social legislation are:

I. To protect wage-earners in the continued enjoyment of standards of living to which they are already accustomed.

II. To assist them to attain to higher standards of living.

I. Measures to protect prevailing standards of living.

The principal contingencies which threaten standards of living already acquired are: (1) industrial accidents; (2) illness; (3) invalidity and old age; (4) premature death; (5) unemployment. These contingencies are not in practice adequately provided against by wage-earners themselves. In consequence the losses they entail, in the absence of any social provision against them, fall with crushing force on the families which suffer from them, and only too often reduce such families from a position of independence and self-respect to one of humiliating and efficiency-destroying social dependency. The following remedies for the evils resulting from this situation are suggested.

(1) Employers' liability laws fail to provide adequate indemnity to the victims of industrial accidents because in a large proportion of cases no legal blame attaches to the employer and because litigation under them is costly and uncertain in its outcome. Adequate indemnification must be sought along the line of workmen's compensation for all industrial accidents at the expense of the employer (the British system) or of compulsory accident insurance (the German system). The former seems to accord better with American ideas and traditions.

(2) The principle of workmen's compensation may be extended to include indemnity for loss of wages due to trade diseases. Provision against illness not directly traceable to the employment must be sought either in compulsory illness insurance or in subsidized and state-directed sick-insurance clubs. Trade unions may assume the functions of such clubs in organized trades. The latter plan seems better suited to present American conditions than compulsory illness insurance.

(3) Provision against invalidity and old age may be through compulsory old age insurance, or through state old age pensions. The latter, though more costly, are believed to be better suited to American conditions, when hedged about by proper restrictions, than compulsory old age insurance with the elaborate administrative machinery which it entails.

(4) Premature death may be provided against by an extension of the machinery for caring for the victims of industrial accident and of illness to provide for their families when accident or illness results fatally.

(5) Provision against losses due to unemployment is attended with great difficulties because unemployment is so frequently the consequence of incapacity or of disinclination for continuous labor. The most promising plan for providing against this evil appears to be through subsidizing and supervising trade unions which pay out-of-work benefits to stimulate this side of their activity. Public employment bureaus and industrial colonies for the unemployed may also help to alleviate the evil of unemployment.

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Adequate social provision against these five contingencies along the lines suggested, would, it is believed, go a long way towards solving the problem of social dependency. If these concessions were made to the demands of social justice, a more drastic policy towards social dependents than public opinion will now sanction might be inaugurated with good prospect of confining social dependency to the physically, mentally, and morally defective.

II. Measures to elevate standards of living.

The primary conditions essential to rising standards of living are energy and enterprise on the part of wage-earners and opportunities to make energy and enterprise count in the form of higher earnings. The principal contributions which social legislation may make to advancing standards of living in the United States are believed to be: (1) measures serving to encourage saving for future needs on the part of wage-earners by providing safe investments for savings; (2) measures protecting wage-earners from the debilitating effects of an unregulated competition; (3) measures serving to bring within the reach of all opportunities for industrial training. Standards of living will also be advanced, of course, by nearly all measures calculated to promote the general well-being, such as tax and tariff-reform legislation, laws safeguarding the national domain, the public regulation of corporations, especially those with monopolistic powers, etc., but these are not usually classed under the head of social legislation.

(1) The greatest present need under this head is for a postal savings bank like those of European countries. The advantages of a postal savings bank over privately managed banks are the wider distribution of places of deposit, post-offices being located in every section of the country, and the greater confidence depositors would feel in such a bank. Once established the postal savings bank might enter the insurance field, as has the British postal savings bank, not as a rival of privately managed insurance companies, but to bring to every wage-earner the opportunity to secure safe insurance. Next to providing itself opportunities for safe investment and insurance, the government has an important duty to perform in supervising the business of privately managed savings banks and insurance companies. Notwithstanding the progress made in recent years in the United States in this field, there is still something left for social legislation to accomplish.

(2) If energy and enterprise are to be kept at a maximum, wage-earners must be protected from exhausting toil under unhealthful conditions. Skilled wage-earners can usually protect themselves through trade unions, but unskilled workers, women and children, require legal protection. Under this head belong, therefore, the familiar types of protective labor laws. The following may be specified:

(a) Laws prohibiting the employment of children below fourteen in all gainful pursuits. Such laws should be uniform throughout the United States and rigidly enforced by means of employment certificates based on convincing evidence of age and physical examination to determine fitness. As provision for free public education is made more adequate to present needs the minimum age may be advanced perhaps to sixteen.

(b) Laws limiting the hours of labor of young persons over fourteen. Protection here should extend to eighteen, at least in factory employments, and employment certificates should be required of all under that age.

(c) Laws limiting the hours of labor of women. In the regulation of women's work in the United States the principal needs are uniformity and machinery for efficient enforcement. The last is facilitated by the plan of specifying in the law the working period for the protected classes, and American courts must be brought to see the reasonableness (administratively) of such prescriptions. The nine-hour day and prohibition of night work set a high enough standard until greater uniformity and more efficient enforcement shall have been secured.

(d) Prescriptions in regard to sanitation and safety appliances. General prescriptions in regard to ventilation, etc., need to be made more exact, and much more attention needs to be given to the special regulation of dangerous trades, the existence of which has been largely ignored thus far in American legislation.

(3) The chief reason for restricting the labor of children and young persons is to permit the physical and mental development of childhood and youth to proceed unhampered and to ripen into strong, vigorous, and efficient manhood and womanhood. To attain this end, it is necessary to provide not only for wholesome living conditions and general free public education, but also for special industrial training for older children superior to the training afforded in modern factories and workshops. The apprenticeship system now fails as a method of industrial training, even in those few trades which retain the forms of apprenticeship. There is urgent social need for comprehensive provision for industrial training as a part of the public school system, not to take the place of the training now given to children under fourteen, but to hold those between fourteen and sixteen in school. As this need is supplied the period of compulsory school attendance may gradually be extended up to the sixteenth year. The guiding principle of such industrial training should be that it is the function of free public education in the United States not only to prepare children to lead useful, well-rounded and happy lives, but to command the earnings without which such lives are impossible.

The above programme of social legislation is urged as a step towards realizing that canon of social justice which demands for all equal industrial opportunities. It is believed that it will also help to raise the standard of citizenship in the country by making both wage-earners and employers more intelligent, more efficient, and more truly democratic. Thus it will serve to prepare the way for such further industrial reorganization as may be found desirable.