Every historian today owes much to Karl Marx for his development of the “Economic Interpretation of History.” Whatever that theory may fail to explain, it certainly succeeds in explaining the nature and growth of the Socialist movement. When the great attempt at real political and economic democracy made by the French people in their great Revolution had failed and left behind it as a legacy the memory of the Terror and the wars of Napoleon, every nation in Europe felt the reaction. Russia, Austria, Spain and non-industrial Europe generally reacted towards simple absolutism, noble against peasant. But in the countries within the boundary marked out by the industrial revolution, the wealth created by the new machines placed the balance of economic power in the hands of the commercial classes, and so forced the old landed aristocracy to admit them to political power as well. In the meanwhile the first shock of large scale production had widened the gap between the industrial workers and the employing class. Independent artisans were ruined or forced into factories, and in the wake of the new industry there trailed a network of industrial oligarchies which spread until they covered the civilized world. The already enfranchised classes refused to use their power to moderate the harshness of the competitive struggle, honestly believing that any interference with “economic law” could work nothing but ruin and hardship in the end.

In view of the facts as they existed in the days of the Communist Manifesto it was practically inevitable that an economist in sympathy with the economically powerless and politically disfranchised masses should interpret history as did the Marxians. In an age of coal, iron and steam (that potent trinity), of large scale production, of capitalistic agriculture, of economic tyranny, of sharpening class divergence and increasing poverty, it seemed that there was no way to realize democracy but to wait until industry had been concentrated into the hands of a few rich men, till the middle class and the free peasantry had been reduced to the proletarian ranks, and till the ever increasing misery of the workers taught them to combine and seize the means of production and distribution by a single revolutionary stroke. Private property could have appeared only as a tool for robbing the workers of the “surplus value” of their labor, religion as an ingenious means of sidetracking revolutionary activities, and patriotism as an excuse for standing armies and protective tariffs. This was a tenable explanation of the world—in 1848!

But the world has moved since the day of the Manifesto. Now manhood suffrage is the rule and not the exception. The worst forms of factory serfdom have been ended by legislative and economic changes. The various reform parties of Europe and America and even the Conservatives compete with each other for the workingman’s vote by programs of social amelioration which steadily grow more ambitious every year. Socialism itself has altered in a changing world. The “Revisionist” or common-sense wing of the party has abandoned both the “surplus value” metaphysics, and the prophecy, so happily falsified, of “increasing misery” and “cumulative panics,” and has moderated the class war dogma far enough to permit working hand in hand with the once hated bourgeoisie for immediate reforms. Other Socialists still repeat the old catchwords, but modify them by a process of “interpretation” analogous to that which makes Liberal Christians content to repeat the historic creeds. Of course some revolutionists have looked upon this readjustment with misgivings, and, as a result, we have sporadic and badly led revolts against party discipline, such as Syndicalism in France, Larkinism in England and the I. W. W. in America.

The main citadel of Socialist theory still remains intact, however, in the eyes of its defenders; and so the loss of unessential outposts harms the party very little. If it is true that industry conducted in large units is always in the end more efficient than if undertaken by many small units, sooner or later all the means of production and distribution will be concentrated either in the hands of a closely-knit class of industrial magnates or else in the hands of society as a whole. The only choice then open will be between control by the few, and control by the many: there will no longer be a choice between individualism and collectivism. This must be, because individualism always involves some measure of free competition, and under a system of competition the less efficient competitor is forced into the background by the more efficient. The one hope of saving both democracy and private property, then, lies in the chance that centralization beyond a certain point is not an economic gain.

The factors that undoubtedly do make for greater concentration are numerous and important, but they are so well known that a brief mention of a few of the more important will be sufficient here. The first cause of monopoly is the fact that nature is also a monopolist. Many valuable mineral deposits are found in quantity in a small area, and hardly at all outside of it. Coal, iron, timber, water-power and a ready access to market are not to be had everywhere. There are also economies in the greater size of a plant, especially where, as in the telegraph service or the railroad lines, there is an enormous initial expense in any case, and profits increase directly with the amount of business which can be done on the basis of a given amount of fixed capital. Standardization of commodities, especially of commodities used in production—such as machine parts, is an advantage to the consumer, and hence to the largest producer. In the large factory, moreover, the subdivision and specialization of labor can be carried farther—more processes can be handled under one roof, and more patents can be united into one machine. But the chief advantage of the great factory is that it can afford great quantities of power in place of using hand labor. The reason why “handicraft revivals” have had such limited success is that the most skilled of artisans, working by hand, cannot produce in quantity as can the engineer with his machine. So long as this difference exists, individual industry can only be a decorative border to the main fabric of industrial life. The type of power now generally used gives an added advantage to concentration. “For steam can only be generated in a fixed spot, and the motive power furnished thereby can only be distributed over a small area.”[1]

These advantages are due to the size of a unit of production. But large industry is usually also rich industry (or it could not be very large), and there are other advantages due to the wealth of the owners. The wealthy concern can buy goods cheaply in quantity, and, if its demand is great enough, even exercise some control over the production of needed raw materials. It can afford the best machinery, the best labor, the best management. This advantage notoriously applies, even to such organizations as churches and universities, since the ablest pastors and professors are attracted by the largest institutions. A great saving can also be made by such factors as combining clerical forces, managers, salesmen and other employees of several firms into one, thus reducing salary costs, and preventing duplication of effort. Other advantages of the rich firm are diminished advertising costs, the abolition of premiums, the reduced need of borrowed capital and of extending credit to consumers, power over prices, middlemen, carriers and competitors, the ability to adjust supply to probable demand, and, as centralization approaches monopoly, the power to reduce wages without fear of losing employees to other firms. What then is left but to admit the contention of the Socialist that Socialism has no alternative except the undesirable one of a new feudalism differing from the old only in resting upon an industrial rather than an agricultural basis?

The first objection I would make to the positing of this dilemma is to the assumption that the farmer can be safely ignored. Socialists admit that concentration is proceeding more slowly in agriculture than in any other branch of production, but they say that as industry develops, the movement toward the city which is so strong today will become stronger than ever, until the manufacturing population will outnumber the agricultural many times. But there is a balance in these things. We must have food, and every person who leaves the country for the city subtracts one from the number of food producers, and adds a customer for other farmers to supply. Hence the growth of a large population divorced from the land means a continually augmenting profit for the agriculturist, and a growing inducement to go “back to the land.” Agriculture must then remain a cardinal factor in our economic life. To be sure, in the past the great estate has often triumphed over the small farm, and the Socialists maintain that it will again. If the causes which produced the “latifundia” of Rome, the feudal land ownership of the middle ages, the sheep farms of sixteenth century England, the capitalist farming of the early nineteenth century and the cotton plantations and “bonanza” wheat farms of America, were operative today, this contention would be right. But just the contrary is the case. The vast estates of eastern Prussia,[2] heavily mortgaged and hard pressed for labor, are being rapidly alienated by the landlords themselves, who are encouraging the government they dominate to establish a system of peasant proprietorships in their place. In France the small holder is triumphant economically, and he controls by his vote the political destinies of the Republic. In Australia and New Zealand, the squatters’ sheep farms have receded before the advance of selectors’ holdings, which in turn are being parcelled out under “Closer Settlement Acts.” In Ireland most of the landlords have already been bought out under the Wyndham act, and even in England, where the custom of primogeniture has tended to keep estates together, the Conservative or landlords’ party has promised to establish small holdings by a policy of government purchase from the present owners.

If the Socialist theory as regards agriculture holds good anywhere, it must be in America. But on turning to the census of 1910 what do we find? Over 62 per cent. of our farms are worked by their owners, and these include about 65 per cent. of the improved land, and more than that of total area! In 1850 the average number of acres to a farm was over 202; today it is 138.1. More significant yet, while the number of owned and rented farms increased, the number of farms worked by managers shows an absolute decrease in the decade since 1900. This was the type of farm that was going to supplant all others, according to the Marxian prophecy. In the words of the census:[3] “That the number of farms increased more rapidly than the acreage of land in farms, is accounted for partly by the fact that in some sections of the country considerable numbers of small truck, poultry and fruit farms have been established, but still more by the fact that in the West large numbers of farms of moderate size have been established where great cattle ranches were formerly found. Then, too, in the Southern states, the subdivision of many plantations into smaller tracts of land operated by tenants—a process begun soon after the Civil War—has continued, each of such tracts counting as a farm under the census definition.”

It is further to be noted that the forces which have tended to bring about the triumph of the state and the plantation, are of less and less significance as we turn to the future, whereas the counter forces which make for agricultural decentralization increase with the progress of population, invention and popular education. Slave labor was alike the cause of the Roman manor and the Mississippi plantation, but the world will probably never see slavery extended again, for it is at once too inhumane for modern sentiment, and too wasteful for present-day scientific methods. On its economic side, the American Civil War was a fight to the death between the small farm run by free labor, and the slave plantation. So, virtually, is the present conflict in Mexico. Certainly in the first case, and probably in the second, victory belongs to the farm. Feudalism was partly a result of the disorders caused by barbarian raids, which forced men to put themselves and their holdings under the protection of some great lord, and partly of the exhaustion of the precious metals, which made it necessary for a king to pay his retainers in landed estates instead of money. Neither factor has been operative for centuries, or probably ever will be again. Nor is it probable that it will ever again pay to turn good arable land into pasture, as happened in Tudor England: the increasing density of population forbids it. Capitalistic farming in the eighteenth and nineteenth centuries rested upon the costliness of agricultural machinery, and the ignorance of the average farmer. Today the advance of industry puts cheap machinery within the pocket-range of the individual farmer, and scientific training is placed within reach of all by agricultural schools and colleges, state and national experiment stations, and the free distribution of information. Knowledge is no longer a monopoly: the farmer is becoming an engineer of intensive agriculture. What factors are now effective? The chief is the growth of population, the consequent increased value of land, and therefore the need for conservation rather than exploitation of its richness. Small diversified stock, fruit, poultry and dairy farms, where every acre can be watched over and put to its best use, yield a greater profit than where the land is covered with staple crops. The agricultural laborer or “hired man” is another factor in the situation. Few persons like to work for wages, some do not like agricultural life, almost no one enjoys the combination. Hence the laborer in the country will either buy a small holding of his own, if he can, or else go to the city. Whole provinces in Germany east of the Elbe have been depopulated just for that reason. No doubt the wholesaler has certain advantages in marketing his goods, but such voluntary systems of coÖperative credit and sales as are so popular in western Germany and Denmark, reduce this to a minimum.

Is agriculture a solitary exception to a general law of the indefinite concentration of industry? In many cases, such as the telephone, telegraph, cable (possibly not wireless telegraphy), railroads, steamship lines, certain kinds of mining, certain wholesale physical and chemical processes, and the making of standardized goods, no doubt concentration has advantages which do not tend to diminish. Such industries will be either socialistically owned, or quasi-socialistically controlled by the government. But this leaves a wide range of trade and manufacture where other centralizing factors operate, which are not permanent but temporary. If the largest plant, even today, is the most efficient, why do separate establishments increase in number so rapidly? In 1909[4] the number of establishments in the continental United States were no less than 268,491, representing an increase of 24.2 per cent. over the number in 1904. But the most remarkable fact is that the number of persons engaged in manufacture increased in the same period by only 23.6 per cent. and the number of wage workers, as distinguished from owners and salaried persons, only by 21.0 per cent. Of course the Socialist will reply that many different plants are really controlled by single corporations, openly or secretly, according to the degree of enforcement of “anti-trust” laws. This is perfectly true, but it belongs to another aspect of the problem. What the census figures indicate is that the maximum efficiency point of a plant has not only a definite limit, but may even decrease with the progress of industry. The truth is that Socialism is a phenomenon of the age of coal burning, the nineteenth century. Steam power is being more and more replaced by electrical power, which, generated in one place, can be used over an immense area. It is true that most electricity is still derived, at some loss of efficiency but an immense gain in availability, from the burning of coal or other fuel. But the coal beds are far from inexhaustible, and sooner or later we must supplement our supply by the “white coal” of the waterfalls. The Age of Electricity will usher in a second great industrial revolution. By putting power in quantity at the disposal of the independent artisan, it will for the first time in history enable him to compete with the great factory. Our tiny remnant of handicraftsmen may thus become a great army of artisan-engineers, combining the skill and personal attention of the old-fashioned master craftsman, with the technical training and machinery of modern engineering. And if the supply of energy within the atom is ever tapped to a sufficient degree, power will be as cheap as water, and the greatest advantage of the large producer be wiped out forever.

These changes will make small production a possibility; there must be other causes to make it the general rule of industry. As wealth increases and the standard of living rises, quality in commodities will come to be considered as well as quantity. If the small productive unit cannot compete on even terms with the large in wholesale production, it may more than do so in retail production for an exacting market. “Finishing” industries, “assembling” industries and the like will absorb an ever increasing proportion of the industrial population. The future will have use for the expert, and only the expert; the mere laborer will be eliminated by the advance of education and the specialization of machinery. There will yet come a time when it will pay the manufacturer better to keep “cheap labor” in opulent idleness than to let its unskillful fingers touch the machines. Mere routine duties in commerce can be left in large measure to calculating and recording machinery. The great concerns will then run with a small office force and a staff of engineers, and release a host of supernumerary clerks and laborers for individual industry. The only “proletariat” will be one of cogs and wires and dynamos.

There still remains the problem of distribution. Will the great stores, banks and exchanges continue to control the economic life of the nation? Will competition in buying and selling crush the small producer, no matter how efficient his production? It must be admitted that this is a possibility. The last moral I should wish anyone to draw from this article is that “everything is bound to work out all right” because of certain beneficent economic laws. Certainly it will need all our statesmanship to realize the possibilities I have sketched. All I contend is that they are possibilities, that we are not hopelessly driven to the alternative of aristocratic or democratic collectivism, that the stars in their courses do not, as is so often contended, fight against the small producer. But I see no cause for despair in the matter of exchange and control. The small shop still continues to exist beside the big store; the individual concern may fail, but the type endures. Perhaps all middlemen, big and small, will in the end disappear as the connection between producer and consumer becomes more direct. Even the poorest classes of the future will, I think, buy more goods to order than ready made. As to the power of the big establishment over carriers and middlemen, these can be controlled in part by law, as in the extirpation of the railway rebate. The advantages of credit and capital on the side of the large concerns, can be offset by coÖperative credit and sales agencies, as readily in manufacturing as in agriculture. By ensuring a high level of competition unfair advantages can be eliminated, and the fight be purely one of industrial efficiency, which is not always on the side of the biggest battalions.

It is of the first importance to realize that each perceptible social change involves many other perceptible changes, that, in Spencer’s happy analogy, the social constitution is a web, no strand of which can be moved without moving others. The changes we have tried to forecast cannot come effectively before the subsidence of the wave of fierce competition which was partly smoothed down by the trusts. In many businesses, competition in drumming and advertising is still at the point where it costs more to sell goods than to make them and hosts of men accomplish only the neutralizing of each other’s efforts. The rationalizing of competition and the growth of a coÖperative spirit would release men for other pursuits; and the growth of intelligence in learning what is to be had and discriminating what is best, must diminish the billions spent on advertising. These additions to productive labor and capital must diminish the ills which have made Socialism seem desirable as well as inevitable.

Suppose we do our best to realize these possibilities to the full. Suppose a Socialist then revisits the earth two or three hundred years from now. He may see in full operation what he has always declared impossible, a democratic individualism. Instead of an impoverished and disappearing farming class, he will find a populous countryside divided into small homesteads, and run at a handsome profit by specialists in intensive agriculture. Instead of a factory or mining proletariat, hungry and rebellious, he will find great wholesale establishments owned and run by a handful of engineers, turning out pulp, cloth, metal and standard parts for machinery, turning the products over to millions of independent artisan establishments supplied with cheap and plentiful power, to be worked into countless articles of art and utility. He will look to the processes of exchange to find great financial magnates and railway barons on the one hand, and a horde of miserable clerks and small shopkeepers in difficulties on the other. Instead, he will discover a network of voluntary credit and sales associations, information bureaus, individually owned freight automobiles (and possibly airships); with perhaps a few regulated railway lines and pneumatic delivery tubes, run by a prosperous association of experts. He will look for the old-time “servant class,” and find that the scientifically trained housewife, with a power plant in the cellar, can run her own house, thank you, and consider it the most honorable of professions. Seeing everything so effectively managed for the happiness of the people, he will look to see in the government the universal owner and employer of his dreams, but he will find instead a clearing house of help and information, which puts its knowledge of efficient management, of technical processes, of economic and sociological conditions, at everyone’s disposal, and comes to the rescue in the rare case of poverty, failure or crime. Will he rejoice that the world is happy, or be sorry that it is not happy his way? If I know the Socialist, he will claim that he was right all along, and that this state of society is really Socialism. Let him claim the word; I call it democratic individualism, because it means the greatest possible distribution of economic power and function consistent with efficient production.