One of the commonest arguments in defense of the present business system runs as follows: The amount of money which is paid to labor is greatly in excess of the amount which is paid to capital. Suppose that tomorrow you were to abolish all dividends and profits, and divide the money up among the wage workers, how much would each one get? The sum is figured for some big industry, and it is shown that each worker would get one or two hundred dollars additional per year. Obviously, this would not bring the millennium; it would hardly be worth while to take the risk of reducing production in order to gain so small a result.

But now we are in position to realize the fallacy of such an argument. The tax which capital levies upon labor is not the amount which capital takes for itself, but the amount which it prevents labor from producing. The real injury of the profit system is not that it pays so large a reward to a ruling class; it is the "iron ring" which it fastens about industry, barring the workers from access to the machinery of production except when the product can be sold for a profit. Labor pays an enormous reward to the business man for his management of industry, but it would pay labor to reward the business man even more highly, if only he would take his goods in kind, and would permit labor, after this tax is paid, to go on making those things which labor itself so desperately needs.

But, you see, the business man does not take his goods in kind. The owner of a great automobile factory may make for himself one automobile or a score of automobiles, but he quickly comes to a limit where he has no use for any more, and what he wants is to sell automobiles and "make money." He does not permit his workers to make automobiles for themselves, or for any one else. He reserves the product of the factory for himself, and when he can no longer sell automobiles at a profit, he shuts the workers out and automobile-making comes to an end in that community. Thus it appears that the "iron ring" which strangles the income of labor, strangles equally the income of capital. It paralyzes the whole social body, and so limits production that we can form no conception of what prosperity might and ought to be.

Consider the situation before the war. We were all of us at work under the competitive system, and with the exception of a few parasites, everybody was occupied pretty close to the limit of his energy. If any one had said that it would be possible for our community to pitch in and double or treble our output, you would have laughed at him. But suddenly we found ourselves at war, and in need of a great increase in output, and we resolved one and all to achieve this end. We did not waste any time in theoretical discussions about the rights of private capital, or the dangers of bureaucracy and the destruction of initiative. Our government stepped in and took control; it took the railroads and systematized them, it took the big factories and told them exactly what to make, it took the raw materials and allotted them, where they were needed, it fixed the prices of labor, and ordered millions of men to this or that place, to this or that occupation. It even seized the foodstuffs and directed what people should eat. In a thousand ways it suppressed competition and replaced it by order and system. And what was the result?

We took five million of our young men, the very cream of our industrial force, and withdrew them from all productive activities; we put them into uniforms, and put them through a training which meant that they were eating more food and wearing more clothing and consuming more goods than nine-tenths of them had ever done in their lives before. We built camps for them, and supplied them with all kinds of costly products of labor, such as guns and cartridges, automobiles and airplanes. We treated two million of them to an expensive trip to Europe, and there we set them to work burning up and destroying the products of industry, to the value of many billions of dollars. And not only did we supply our own armies, we supplied the armies of all our allies. We built millions of dollars worth of ships, and we sent over to Europe, whether by private business or by government loans, some $10,000,000,000 worth of goods—more than ten years of our exports before the war.

All the labor necessary to produce all this wealth had to be withdrawn from industry, so far as concerned our domestic uses and needs. It would not be too much to say that from domestic industry we withdrew a total of ten million of our most capable labor force. I think it would be reasonable to say that two-thirds of our productive energies went to war purposes, and only one-third was available for home use. And yet, we did it without a particle of real suffering. Many of us worked hard, but few of us worked harder than usual. Most of us got along with less wheat and sugar, but nobody starved, nobody really suffered ill health, and our poor made higher wages and had better food than ever in their lives before. If this argument is sound, it proves that our productive machinery is capable, when properly organized and directed, of producing three times the common necessities of our population. Assuming that our average working day is nine hours, we could produce what we at present consume by three hours of intelligently directed work per day.

Let us look at the matter from another angle. Just at present the hero of the American business man is Herbert Hoover; and Mr. Hoover recently appointed a committee, not of Socialists and "Utopians," but of engineering experts, to make a study of American productive methods. The report showed that American industry was only thirty-five or forty per cent efficient. Incidentally, this "Committee on Waste" assessed, in the case of the building industry, sixty-five per cent of the blame against management and only twenty-one per cent against labor; in six fundamental industries it assessed fifty per cent of the blame against management and less than twenty-five per cent against labor. Fifteen years ago a professor of engineering, Sidney A. Reeve by name, made an elaborate study of the wastes involved in our haphazard and planless industrial methods, and embodied his findings in a book, "The Cost of Competition." His conclusion was that of the total amount of energy expended in America, more than seventy per cent was wasted. We were doing one hundred per cent of work and getting thirty per cent of results. If we would get one hundred per cent of results, we should produce three and one-third times as much wealth, and the income of our workers would be increased one or two thousand dollars a year.

Robert Blatchford in his book, "Merrie England," has a saying to the effect that it makes all the difference, when half a dozen men go out to catch a horse, whether they spend their time catching the horse or keeping one another from catching the horse. Our next task will be to point out a few of the ways in which good, honest American business men and workingmen, laboring as intelligently and conscientiously as they know how, waste their energies in keeping one another from producing goods.