of to promote social evolution.
They are proposals for the remodelling of society
on a high plane of intelligence and equity, without
the first conditions upon which such a society can be
possible. Like the effort to play Hamlet with Hamlet
left out, they are conspicuous for the absence of the
essential conditions upon which their success depends.
All propositions of this nature are based upon the idea
that not only the political government, but also the
industrial and commercial enterprises should become
the collective property and be under the control of the
collective management of the community.
If the advocates of these schemes would content
themselves with pointing out the fact that such is the
goal toward which all social development is tending,
and were willing to help to promote its natural move-
ment in that direction, there could be little ground for
taking exception to their position. Whether their
conclusions as to the goal of human progress are cor-
rect or not, if the movement of society is accelerated
along the line of its natural development, it will surely
move in the direction of its true end, whether that be
the one they have pointed to or not. The important
function of the social philosopher is not to discover
the extreme goal or final terminus of human progress,
nor to decide what will be the precise social relations
in the highest possible state of social development.
This, at best, must necessarily involve considerable
doubtful conjecture. The function of the true philos-
opher is to ascertain the laws by which the move-
ment of society from the simple to the complex is
governed. This being done, if we put ourselves in
correct relation with those laws, whether that goal is
216 WEALTH AND PROGRESS.
in accordance with our more or less fanciful specula-
tions or not, we shall be sure to move toward the
highest possible social eminence and perfection.
But this is precisely what the advocates of co-opera-
tion and state socialism do not do. They first satisfy
themselves as to what an ideal state of society should
and would be, and then instead of helping to promote
industrial and social progress toward the point where
such a state of society could be possible, they attempt
to anticipate all necessary growth and preparation, and
establish what they regard as a high state of society
upon low industrial and social conditions. In other
words, they want to arbitrarily inaugurate a high state
of civilization upon the conditions which will barely
sustain a modified state of barbarism ; than which
nothing can be more fallacious and impracticable.
A proposition for introducing an important change
into social institutions is just as unsound, for all prac-
tical purposes, if it is incorrect in relation to time, as
if it were incorrect in relation to principle. The first
and indispensable condition to the successful establish-
ment of an industrial and social democracy is intelli-
gence and character, not only in the leaders, but in
all, or nearly all, who participate in it, in order to un-
derstand and appreciate its principles, and harmo-
niously sustain its government in accordance therewith.
If intelligence and character is not general among its
members, the management and control of affairs must
naturally soon fall into the hands of the most capable
and successful members of the community. And
these, in the very nature of things, will become the
governing and, therefore, the fortunate and wealthy
classes.
That this condition is conspicuously absent as yet,
SOCIALISTIC INDUSTRY IMPRACTICABLE. 2IJ
not merely in the barbarous but in the most civilized
countries in the world, is too obvious to need stating.
Not only do the great mass of the laboring classes
lack the material conditions and intellectual and social
character necessary to sustain a truly industrial co-
operative commonwealth, but no considerable portion
of them are equal to any such an undertaking. This
is demonstrated by the almost universal failure of in-
dustrial co-operative undertakings. It should also be
remembered that these experiments have been under-
taken by the most intelligent and enthusiastic portions
of the community.
If we examine the history of co-operative or social-
istic enterprises we shall find that their failure or suc-
cess has been proportionate to the simplicity or com-
plexity of their undertaking. Thus, even in Eng-
land, where co-operative enterprises have reached their
highest success, all attempts to establish a purely
democratic form of industrial, not to say social, co-
operation have completely failed. There is scarcely a
single industrial enterprise in Europe or this country
that was started on the democratic plan which, in less
than twenty years, and generally in a quarter of that
time, has not been forced to assume the aristocratic — â–
" property qualification" — mode of government, or go
out of existence. In other words, they all failed as
democratic industrial undertakings, and either became
joint-stock companies or disappeared altogether.
Another and less democratic and less complex form
of productive co-operation, known as " profit-sharing,"
has been more widely adopted, and has been somewhat
more successful. Thatis to say, the experiments have
lasted longer in most cases where rich employers, while
keeping the management of the business in their own
ii
218 WEALTH AND PROGRESS.
hands, have divided a portion of the profits among
their employes, than in cases of purely democratic co-
operation, where the laborers shared equally in the
control of the business as well as in the profits accru-
ing from it. But while the experiments of profit-
sharing have been more general and continuous than
those of industrial co-operation, pure and simple, they
also have, with a few exceptions, proved failures. The
few successes like Leclaire, in Paris, and Godin's Fam-
ilistere, at Guise, stand almost alone amid the numer-
ous failures along this line, not only on the continent,
but in England and this country.
Furthermore, the success of these few, as the history
and methods of the enterprises clearly show, is mainly
due to the character and personnel of the individual
capitalists undertaking them.
Again, profit-sharing is impracticable as a general
scheme, because it is only the most successful or ad-
vantageously situated employers * who have any con-
siderable amount of profits to divide. A large propor-
tion of employers, instead of having any large amount
to divide among the laborers as profits, as is generally
supposed, are struggling on the verge of insolvency.
If, by any force of law or custom, profit-sharing should
become general, so that all employers were virtually
compelled to adopt it, one of two things would neces-
sarily follow — vis., either the general rate of stipulated
wages would fall or the price of products would rise in
the same ratio, and the actual income of the laborer
would, in the long run, be practically the same. In-
* Sueh, e.g., as those who have large capital, most improved ma-
chinery, situated near to the general market, or have some other
monopolistic advantage over the bulk of those engaged in the business.
INADEQUACY OF PROFIT-SHARING. 219
deed, it is impossible that it should be otherwise, for
the obvious reason that the capitalist can only divide
profits when he has profits to divide, which a large
portion of employers have not.
Profits can be increased only in one of two ways :
either by raising prices or reducing the cost of pro-
duction. A rise of prices would be a virtual reduction
of wages, and any division of profits by such means
would be simply " taking away with one hand in order
to give with the other." The cost of production can
only be permanently reduced by the use of large cap-
itals or labor-saving appliances, which implies a larger
aggregate production, and, consequently, an increase
in the general consumption of wealth. And this, as
we have fully explained elsewhere,* is governed by the
standard of living or social character of the masses,
which no amount of profit-sharing can materially affect.
In fact, whatever would enable the employer to give
the laborer a bonus in the form of profits would enable
him to raise wages, and, for the same reason, what-
ever would make it necessary to reduce wages would
render it impossible to divide profits.
It is a law in economics, which all industrial history
proves, that the income of the laborer is proportionate
to his social wants ; and if it is derived from one or
from several sources it will ultimately be substantially
the same. Accordingly, when the English laborer re-
ceived parish allowance in addition to his wages, his
income from both sources was no greater than from
wages alone, after the former was abolished. And so
it is to-day. Where the laborers have perquisites,
such as the privilege to keep a cow, small allotments
* Chapter II., Part I.
220 WEALTH AND PROGRESS.
of land, etc., in addition to their wages, the rate of
wages is correspondingly lower than where their whole
income consists of money. It is notorious that in
those industries where the income of the laborer's
family includes the earnings of the wife or children,
the wages of the man are, on the average, proportion-
ately lower than in those where the sustenance of the
family depends entirely upon his wages. * For the
same reason, if the income of the laborer was made up
of wages and profits, ultimately the two would be no
more than wages alone.
If we turn from productive to what is commonly
called distributive co-operation, where the business is
simpler and more direct, where the industrial subtle-
ties and commercial fibres are less intricate and com-
plex, where the business is all done with the members,
and, therefore, a little bad judgment is less likely to
prove disastrous, a much larger per cent of successes
is to be found. And among these, much the largest
portion of successful undertakings is to be found in
the retail grocery trade, where the variation of prices,
qualities, and styles of goods is at the minimum, and,
consequently, where the smallest possible amount of
business skill, sagacity and shrewd financiering is
necessary. Again, if we examine the associations of the
laboring classes, such as trades unions, where still less
of these qualities of character are required, and where
the whole purpose of the association is centred upon
one or two simple, though important, objects, such as
* " For the same reason it is found that, cateris paribus, those
trades are generally the worst paid in which the wife and children of
the artisan aid in the work." — Mill's "Principles of Political Econ-
omy,'" Book II., ch. 14, §4, p. 4S8. See also Chapter VII., Part II.,
pp. 167-175.
DISTRIBUTIVE CO-OPERATION. 221
watching for the timely moment to demand an in-
crease of wages, a reduction of the hours of labor, or
other direct improvements in their industrial condi-
tions, the undertakings are far more numerous and the
percentage of successes is much greater. All experi-
ence thus shows that industrial co-operation has failed
just in proportion as the higher qualities of character
became necessary to its success
It may be urged that this is no argument against
co-operation, per se, because all the failures are due to
the inexperience and incapacity of those undertaking
them, and not to the principle itself. And the fact
that it is feasible in a few cases proves that it could be
a universal success, if the people were sufficiently
intelligent to carry it out. This may all be true, but
its universal failure conclusively demonstrates that
this indispensable condition is conspicuously wanting
among the great mass of the laboring classes to-day.
Therefore, co-operation, whatever would be its merits
in a more highly developed state of society, as a means
of abolishing the evils arising from our present indus-
trial and social conditions, must be practically inoper-
ative and hopelessly inadequate.
'Yes," replies the advocate of state socialism,
" but that does not apply to our proposition. What
we ask for is not that the most intelligent and capable
members of the community should band themselves
together in order to improve their own condition, re-
gardless of that of those below them. That is only
what capitalistic corporations are doing, which tends
to increase rather than lessen the burdens of the
poorest and weakest classes. What we want," he
adds, " is that all industrial co-operation shall be
undertaken by the state for the whole people. All the
22 2 WEALTH AND PROGRESS.
means of production, in the phrase of Marx, should
be in the hands of the government." And, as a
sample of the marvellous powers of state socialism,
we are referred to the phenomenal success of the gov-
ernmental management of the Post-Office.
Well, let us see. In the first place, the Post-Office
Department has not been a financial success — that is
to say, it has not been self-sustaining, and its deficien-
cies have had to be made up from time to time out of
the general taxes. If any private enterprise was in
that condition, instead of being called a great success,
it would be regarded as bankrupt. But, it may be
asked, could letters be sent across the continent for
two cents by private enterprise ? Certainly ! Why
not ? What does the government do toward making
it possible to send a letter three thousand miles for
two cents ? Nothing, positively nothing ! All the
government does in the mail service is to collect, as-
sort, stamp, and bag the outgoing and deliver the in-
coming letters, give out and receive money-orders, and
render a correct account of the business done. All of
this is purely clerical work, which, after being once
systematized, is simple and even monotonous. There
is nothing in it which calls for exceptional skill or
rare business capacity, such as is required to success-
fully manage large business enterprises, with their
close competition and ever-varying subtleties and
complications, where a slight error of judgment might
involve a loss of thousands of dollars, and perhaps
cause the ruin of many persons. When the letter-bags
leave the door of the Post-Office to start on their flying
trip across the continent, they enter into the hands of
private enterprise. It is the great railroads and steam-
ship companies that make it possible for the letter to
THE POST-OFFICE AS A PUBLIC ENTERPRISE. 223
go three thousand miles for two cents. The cheap
methods of travel and transportation which carry the
mails are in no way due to state influence, but en-
tirely to private enterprise. In fact, they are the nat-
ural outcome of the industrial and social progress of
the community.
Thus it is seen that all the important work in the
cheap and rapid transmission of the mails is due to the
social development of the people under the impetus
and control of private enterprise ; and that portion of
the mail service which is entirely in the hands of the
state, unlike all private enterprises of a similar char-
acter, such as express companies, etc., is a complete
monopoly, being entirely free from competition, and
almost free from responsibility ; at least so far as its
relation to the individual is concerned. If I send a
package through the United States mail, and it is
lost, I have no redress, whereas if I send it by any ex-
press company they are responsible to me for the full
value I set upon it when it is delivered to them.
And where the railroads are owned or the tariffs con-
trolled by the state, as on the continent, they are
more expensive, less efficient, and the rates of trans-
portation are higher and the wages of labor are much
lower than in this country, where they are all managed
by private enterprise.
Manifestly, then, there is nothing connected with the
management of the Post-Office or in the experience
of governmental control of railroads to sustain the
claim that state management of industries, especially
in the more complex branches of production, is neces-
sarily superior or even equal to those of private enter-
prise. Indeed, such a supposition is illogical and con-
trary to all known facts. If the most select and en-
224 WEALTH AND PROGRESS.
lightened members of the community lack the neces-
sary intelligence to sustain co-operative or socialistic
enterprises, except of the most simple character,
what right have we to assume that the whole com-
munity, with a much lower average intelligence, could
more successfully manage the most complex and diffi-
cult economic undertakings ? It is simply absurd.
To this it may be replied that if the industries of the
country were in the hands of the state, the same class
of persons would have charge of them as now, the
only difference being that they would then be man-
agers for the people instead of their being owners of
the plant, and managers for themselves, as at present.
But there is no reason to believe, and every reason to
disbelieve, that the same class of business capacity and
enterprise which now prevails in economic affairs
would be put in charge under state socialism to-day.
In fact, with the present state of average intelligence,
such a result would be practically impossible. De-
mocracy seldom elects the very best capacity to any
office ; nor, in the nature of things, can that be ex-
pected. Socialism, which means the broadest kind of
democracy, must necessarily be governed by represen-
tation through popular election and not by limited or
qualified selection. By this means public officers can-
not be drawn from the most capable nor from the
most incapable classes. The laborers would not vote
for a Vanderbilt, Gould, or a Field for railroad man-
agers, although they are the most competent men on
the continent for the business ; nor could an east-side
laborer obtain the votes of Fifth Avenue for any pub-
lic position. In order to obtain the popular vote in a
broad democracy, the representative must reflect in
the main the ideas, capacity, and character of the great
PUBLIC OFFICIALS SELDOM EXPERTS. 225
mean average of the community, which will always be
better than the poorest, and considerably inferior to
the best.
This explains why our legislative and executive
offices, with a few rare exceptions, are always filled by
men of the most commonplace type, the highest order
of executive and enterprising capacity being devoted
to trade and industry. Consequently, we find public
business is conducted with notoriously less economy
and ability than are private enterprises.
Thus, from whatever point of view we consider in-
dustrial co-operation or state socialism, we find them
wholly inadequate as a means of reforming the present
industrial and social conditions. They must neces-
sarily fail as a means toward establishing an ideal social
state, because they are the very ideal state (so claimed)
which we need the means to establish. It is because
" industrial co-operation," " association," or " social-
ism" implies a high social state that theyrequire a
high grade of intellectual and social development in
the people in order to sustain them. It is this very
weakness and incapacity among the laboring classes,
arising from their poverty and its social disadvantage,
so fatal to the establishment of " industrial associa-
tion," which makes industrial reformation necessary.
Therefore, while " mutual association" or " co-opera-
tion" may prove to be the most equitable, convenient,
and harmonious industrial system to adopt when suffi-
cient progress has been made to sustain it, manifestly
it can never be successfully adopted as a means to
that end.
There is another objection to this class of schemes
which is fatal to them as a means of reforming society,
and it applies with equal force to profit-sharing, land
226 WEALTH AND PROGRESS.
nationalization, co-operation, and all industrial phases
of socialism, as well as to efforts to arbitrarily manip-
ulate interest, profits, rents, wages, etc. It is that
they are efforts to enrich one class at the expense of
another, which is wholly uneconomic. Nothing can
permanently improve the economic condition of one
class in any industrial community which does not tend
to improve that of all classes. No change, however
equitable, in the distribution of the wealth now being
daily produced could make any important difference
in the well-being of the masses. There is nothing
more delusive than the rose-colored dreams about the
social advantages that would result from transferring
the profits, by means of profit-sharing, co-operation,
etc., from the capitalist to the laborer. The advo-
cates of these propositions, which have included some
of the most careful economists, both in England and
on the continent, as well as in this country, appear to
be unwittingly captivated by the delusive coloring of
their own picture. This delusion arises partly from
the mistake of estimating the amount capable of being
divided upon the basis of the profits of the most suc-
cessful enterprises, which constitute but a very small
per cent of the employing class. It would be just as
correct to estimate the profits of all newspaper enter-
prises on the basis of the earnings of the New York
" Herald," " World," and "Sun," or all railroads upon
that of those of Vanderbilt and Gould ; and it is partly
due to the fact of viewing the amount that can be thus
divided in the aggregate, instead of in the weekly
amount it would give to each laborer.
We have occasionally heard of ten, twenty, and
even fifty thousand dollars being divided among the
laborers by some exceptionally fortunate experiments
THE SOUND SENSE OF THE TRADES UNIONISTS. 227
at profit-sharing and other forms of co-operation.
These amounts have an imposing appearance to the
abstract theorist, who sees them only in the aggregate.
It has no such rose-colored seeming to the laborer,
however. He is interested not so much in that large-
sounding aggregate as he is in the portion of it which
will reach him, and that, from such sources, is always
very small, seldom amounting to more than a few
cents a week. Suppose it should be announced that,
in 1887, the employing classes in this country would
divide one hundred million dollars among the laborers.
Imposing as that amount may seem in the aggregate,
and important as it might be in reducing the cost of
commodities if employed as capital in improved meth-
ods of production, it would be of very little impor-
tance to the laborer, as it would give him less than
twenty cents a week, or about three cents a day, equal
only to a rise of about two per cent in wages. And
because the laborer does not evince a disposition to
abandon his trades union and forego all efforts to in-
crease his wages, and otherwise improve his condition,
for the privilege of participating in the present profits
at the rate of two or three cents a day, he is berated
as an economic blockhead. Even Professor Jevons,
one of England's most scientific economists, took this
view. In his chapter on profit-sharing* he cites the ex-
periment of the Briggs Brothers, which was one of the
most successful of its kind in England. He shows
that the laborers received in profits from two to five
pounds a year, according to their wages, and still they
finally went on strike, and broke up that beautiful ar-
rangement^?) If we look at the case from the laborer's
* " Problems of Social Reform."
228 WEALTH AND PROGRESS.
standpoint, which is the true economic view, it ap-
pears quite different. While a very few of the highest-
paid employes received five pounds (twenty-four dol-
lars), the bulk of them did not get more than three
pounds (fourteen dollars and forty cents). But sup-
pose they received four pounds — which they seldom
did, more frequently getting less than half that
amount — that would be less than six cents a day.
Thus while the distribution of that amount to each
employe may be regarded as an exceptionally gen-
erous act on the part of the Briggs Brothers, eco-
nomically it was a matter of small moment to the
laborer, being about one-third less than a permanent
advance of ten per cent in his wages would have given
him. The same is true of the nationalization of the
land.*
It is not surprising, therefore, that the laborers, who,
though they have never entertained very sound theories
on economics, have always displayed a much greater
degree of practical common-sense in regard to indus-
trial affairs than most social theorists, should prefer to