"State Socialism" as I have described it will doubtless continue to be the guiding policy of governments during a large part, if not all, of the present generation. Capitalism, in this new collectivist form, must bring about extremely deep-seated and far-reaching changes in society. And every step that it takes in the nationalization of industry and the appropriation of land rent would also be a step in Socialism, provided the rents and profits so turned into the coffers of the State were not used entirely for the benefit either of industry or of the community as a whole, as it is now constituted, but were reserved in part for the special benefit of the less wealthy, less educated, and less advantageously placed, so as gradually to equalize income, influence, and opportunity.

But what, as matter of fact, are the ways in which the new revenues are likely to be used before the Socialists are either actually or practically in control of the government? First of all, they will be used for the further development of industry itself and of schemes which aid industry, as by affording cheaper credit, cheaper transportation, cheaper lumber, cheaper coal, etc., which will chiefly benefit the manufacturers, since all these raw materials and services are so much more largely used in industry than in private consumption.

Secondly, the new sources of government revenue will be used to relieve certain older forms of taxation. The very moderately graduated income and inheritance taxes which are now common, small capitalists have tolerated principally on the ground that the State is in absolute need of them for essential expenses. We may soon expect a period when the present rapid expansion of this form of taxation as well as other direct taxes on industry, building, corporations, etc., will be checked somewhat by the new revenues obtained from the profits of government enterprises and the taxation of ground values. Indirect taxation of the consuming public in general, through tariffs and internal revenue taxes, will also be materially lightened. As soon as new and larger sources of income are created, the cry of the consumers for relief will be louder than ever, and since a large part of consumption is that of the capitalists in manufacture, the cry will be heard. This will mean lower prices. But in the long run salaries and wages accommodate themselves to prices, so that this reform, beneficial as it may be, cannot be accepted as meaning, for the masses, more than a merely temporary relief. A third form of tax reduction would be the special exemption of the poorer classes from even the smallest direct taxation. But as employers and wage boards, in fixing wages, will take this reduction into account, as well as the lower prices and rents, such exemptions will effect no great or lasting change in the division of the national income between capitalists and receivers of salaries and wages.

A third way in which the new and vastly increased incomes of the national and local governments can be expended is the communistic way, as in developing commercial and technical education, in protecting the public health, in building model tenements, in decreasing the cost of traveling for health or business, and in promoting all measures that are likely to increase industrial efficiency and profits without too great cost.

A fourth way in which the new revenue may be expended, before the Socialists are in actual or practical control, would be in somewhat increasing the wages and somewhat shortening the hours of the State and municipal employees, who will soon constitute a very large proportion of the community. Here again it is impossible to expect any but a Socialist government to go very far. As I have shown, it is to be questioned whether any capitalistic administration, however advanced, would increase real wages (wages measured by their purchasing power), except in so far as the higher wages will result in a corresponding or greater increase in efficiency, and so in the profits made from labor. And the same law applies to most other governmental (or private) expenditures on behalf of labor, whether in shortened hours, insurance, improved conditions, or any other form.

The very essence of capitalist collectivism is that the share of the total profits which goes to the ruling class should not be decreased, and if possible should be augmented. In spite of material improvements the economic gulf between the classes, during the period it dominates, will either remain as it is, or become wider and deeper than before. On the ground of the health and ultimate working efficiency of the present and future generation, hours may be considerably shortened, and the labor of women and children considerably curtailed. Insurance against death, old age, sickness, and accident will doubtless be taken over by the government. Mothers who are unable to take care of their children will probably be pensioned, as now proposed in France, and many children will be publicly fed in school, as in a number of the British and Continental places. The most complete code of labor legislation is practically assured; for, as government ownership extends, the State will become to some extent the model employer.

A quarter of a century ago, especially in Great Britain and the United States, but also in other countries, the method of allaying discontent was to distract public attention from politics altogether by stimulating the chase after private wealth. But as private wealth is more and more difficult to attain, this policy is rapidly replaced by the very opposite tactics, to keep the people absorbed in the political chase after the material benefits of economic reform. For this purpose every effort is being used to stimulate political interest, to popularize the measures of the new State capitalism, to foster public movements in their behalf, and finally to grant the reforms, not as a new form of capitalism, but as "concessions to public opinion." At present it is only the most powerful of the large capitalists and the most radical of the small that have fully adapted themselves to the new policies. But this will cause no serious delay, for among policies, as elsewhere, the fittest are surely destined to survive.

Ten years ago it would have been held as highly improbable that we would enter into such a collectivist period in half a century. Already a large part of the present generation expect to see it in their lifetime. And the constantly accelerated developments of recent years justify the belief of many that we may find ourselves far advanced in "State Socialism" before another decade has passed.

The question that must now be answered by the statesman as opposed to the mere politician, by the publicist as opposed to the mere journalist, is, not how soon the program of "State Socialism" will be put into effect, but what is going to be the attitude of the masses towards it. A movement exists that is already expressing and organizing their discontent with capitalism in whatever form. It promises to fill this function still more fully and vigorously in proportion as collectivist capitalism develops. I refer to the international revolutionary movement that finds its chief expression in the federated Socialist parties. The majority of the best-known spokesmen of this movement agree that social reform is advancing; yet most of them say, with Kautsky, that control of the capitalists over industry and government is advancing even more rapidly, partly by means of these very reforms, so that the Machtverhaeltnisse, or distribution of political and economic power between the various social classes, is even becoming less favorable to the masses than it was before. The one thing they feel is that no such capitalist society will ever be willing to ameliorate the condition of the non-capitalists to such a degree that the latter will get an increasing proportion of the products of industry or of the benefits of legislation, or an increased influence over government. The capitalists will never do anything to disturb radically the existing balance of power.

While Socialists have not always conceded that the capitalists will themselves undertake, without compulsion, large measures of political democracy and social reform,—even of the capitalistic variety,—nearly all of the most influential are now coming to base their whole policy on this now very evident tendency, and some have done so for many years past. For instance, it has been clear to many from the time of Karl Marx that it would be necessary for capitalist society itself to nationalize or municipalize businesses that become monopolized, without any reference to Socialism or the Socialists.

"These private monopolies have become unbearable," says Kautsky, "not simply for the wage workers, but for all classes of society who do not share in their ownership," and he adds that it is only the weakness of the bourgeois (the smaller capitalist) as opposed to capital (the large capitalist) that hinders him from taking effective action. Indeed, one of the chief respects in which history has pursued a somewhat different course from that expected by Marx has been in the failure of capitalist society to attempt immediately this solution of the trust problem through government ownership. Marx expected that this attempt would necessarily be made as soon as the monopolies reached an advanced state, and that the resulting economic revolution would develop into a Socialist revolution. But this monopolistic period has come, the trusts are rapidly dominating the whole field of industry and government, and yet it seems improbable that they will be forced to any final compromise with the small capitalist investors and consumers for some years to come. In the meanwhile, no doubt, the process of nationalization will begin, but too late to fulfill Marx's expectation, for the large and small capitalists will have time to become better united, and their combined control over government will have had time to grow more secure than ever. The new partnership of capitalism and the State will, no doubt, represent the small capitalists as well as the large, but there is no sign that the working people will be able to take advantage of the coming transformation for any non-capitalist purpose. Nor did Marx expect national ownership to increase the relative strength of the workers unless it was accompanied by a political revolution.

Another vast capitalist reform predicted by Socialists since the Communist Manifesto (1847) is nationalization or municipalization of the ground rent or unearned increment of land. At first Kautsky and others were inclined to expect that nothing would be done in this direction until the working classes themselves achieved political power, but it has always been seen from the days of Marx that the industrial capitalists had no particular reason for wishing to be burdened with a parasitic class of landlords that weighed on their shoulders as much as on those of the rest of the people. Not only do industrial capitalists pay heavy rents to landlords, but the rent paid by the wage worker also has to be paid indirectly and in part by the industrial capitalist: "The quantity of wealth that a landlord can appropriate from the capitalist class becomes larger in proportion as the general demand for land increases, in proportion as population grows, in proportion as the capitalist class needs land, i.e. in proportion as the capitalist system of production expands. In proportion with all this, rent rises; that is to say, the aggregate amount of wealth increases which the landlord class can slice off—either directly or indirectly—from the surplus that would otherwise be grabbed by the capitalist class alone."[90]

The industrial capitalists, then, have very motive to put an end to this kind of parasitism, and to use the funds secured, through confiscatory taxation of the unearned increment of land, to lessen their own taxation, to nationalize those fundamental industries that can only be made in this way to subserve the interests of the capitalist class as a whole (instead of some part of it merely), and to undertake through government those costly enterprises which are needed by all industry, but which give too slow returns to attract the capitalist investor.

This enormous reform, in land taxation, which alone would put into the hands of governments ultimately almost a third of the capital of modern nations, was considered by Marx, in all its early stages, as purely capitalistic, "a Socialistically-fringed attempt to save the rule of capitalism, and to establish it in fact on a still larger foundation at present."[91] Indeed, I have shown in a previous chapter that radical reformers who advocated this single-tax idea, along with the nationalization and municipalization of monopolies, do so with the conscious purpose of reviving capitalism and making it more permanent, precisely as Marx says. The great Socialist wrote the above phrase in 1881 (in a recently published letter to Sorge of New York) after reading Henry George's "Progress and Poverty," which had just appeared. He calls attention to the fact that James Mill and other capitalistic economists had long before recommended that land rent should be paid to the State so as to serve as a substitute for taxes, and that he, himself, had advocated it in the Manifesto of 1847—among transitional measures.

Marx says that he and Engels "inserted this appropriation of ground rent by the State among many other demands," which, as also stated in the Manifesto, "are self-contradictory and must be such of necessity." He explains what he means by this in the same letter. In the very year of the Manifesto he had written (in his book against Proudhon) that this measure was "a frank statement of the hatred felt by the industrial capitalist for the landowner, who seems to him to be a useless, unnecessary member in the organism of Capitalist society." Marx demanded "the abolition of property in land, and the application of all land rents to public purposes," not because this is in any sense the smallest installment of Socialism, but because it is a progressive capitalistic measure. While it strengthens capitalism by removing "a useless, unnecessary member," and by placing it "on a still larger foundation than it has at the present," it also matures it and makes it ready for Socialism—ready, that is to say, as soon as the working people capture the government and turn the capitalists out, but not a day sooner.[92] Until that time even the most grandiose reform is merely "a Socialistically-fringed attempt to save the rule of capitalism."

Other "transitional measures" mentioned by Marx and Engels in 1847, some of which had already been taken up as "Socialistically-fringed attempts to save the rule of capitalism" even before their death were:—

The heavily graduated income tax.

The abolition of inheritance.

A government bank with an exclusive monopoly.

A partial nationalization of factories.

(No doubt, the part they would select would be that operated by the trusts.)

Government cultivation of waste lands.

Here we have a program closely resembling that of "State capitalism." It omits the important labor legislation for increasing efficiency, since this was unprofitable under competitive and extra-governmental capitalism, and in Marx's time had not yet appeared; e.g. the minimum wage, a shorter working day, and workingmen's insurance. As Marx and Engels mention, however, the substitution of industrial education for child labor (one of the most important and typical of these reforms), they would surely have included other measures of the same order, had they been practicable and under discussion at the time.

There can be little doubt that Marx and Engels, in this early pronunciamento, were purposely ambiguous in their language. For example, they demand "the extension of factories and instruments of production owned by the state." This is plainly a conservatively capitalistic or a revolutionary Socialist measure entirely according to the degree to which, and the hands by which, it is carried out—and the same is evidently true of the appropriation of land rent and the abolition of inheritance. This is what Marx means when he says that every such measure is "self-contradictory and must be such of necessity." Up to a certain point they put capitalism on "a larger basis"; if carried beyond that, they may, in the right hands, become steps in Socialism.

Marx and Engels were neither able nor willing to lay out a program which would distinguish sharply between measures that would be transitional and those that would be Socialist sixty or seventy years after they wrote, but merely gave concrete illustrations of their policy; they stated explicitly that such reforms would vary from country to country, and only claimed for those they mentioned that they would be "pretty generally applicable." Yet, understood in the sense in which it was originally promulgated and afterwards explained, this early Socialist program still affords the most valuable key we have as to what Socialism is, if we view it on the side of its practical efforts rather than on that of abstract theories. Marx and Engels recognize that the measures I have mentioned must be acknowledged as "insufficient and untenable," because, though they involve "inroads on the rights of property," they do not go far enough to destroy capitalism and establish a Socialistic society. But they reassure their Socialistic critics by pointing out that these "insufficient" and "transitory" measures, "in the course of the movement, outstrip themselves, necessitate further inroads on the old social order, and are indispensable as a means of entirely revolutionizing the mode of production." (My italics.)

That is, "State Socialism" is indispensable as a basis for Socialism, indeed necessitates it, provided Socialists look upon "State Socialist" measures chiefly as transitory means "to raise the proletariat to the position of ruling class"; for this rise of the proletariat to the position of ruling class is necessarily "the first step in the revolution of the working class."

From the day of this first step the whole direction of social evolution would be altered. For, while the Socialists expect to utilize every reform of capitalist collectivism, and can only build on that foundation, their later policy would be diametrically opposed to it. A Socialist government would begin immediately an almost complete reversal of the statesmanship of "State Socialism." The first measure it would undertake would be to begin at once to increase wages faster than the rate of increase of the total wealth of the community. Secondly, within a few years, it would give to the masses of the population, according to their abilities, all the education needed to fill from the ranks of the non-capitalistic classes a proportion of all the most desirable and important positions in the community, corresponding to their numbers, and would see to it that they got these positions.

It is undoubtedly the opinion of the most representative figures of the international Socialist movement that there is not the slightest possibility that any of the non-Socialist reformers of to-day or of the near future are following or will follow any such policy, or even take the slightest step in that direction; and that there is nothing Socialists can do to force such a policy on the capitalists until they are actually or practically in power. Society may continue to progress, but it is surely inconceivable to any close observer, as it is inconceivable to the Socialists, that the privileged classes will ever consent, without the most violent struggle, to a program which, viewed as a whole, would lead, however gradually or indirectly, to a more equitable distribution of wealth and political power.