Frederic Clemson Howe.

Privilege and democracy in America online

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of the land, just as they have increased the value
of the land underlying New York, which now ex-
ceeds three and one-half billion dollars. The value
of the land will be more than doubled, it will prob-
ably be quadrupled. It is even now increasing in
value at the rate of from one to two billion dollars
a year. Land will have acquired a famine price
long before another generation has elapsed. And
rent will increase far more rapidly than population.
For land speculation is intensified by scarcity. In-
creased exertion, improved machinery, every con-
tribution of the arts and sciences, will but increase
the value of the land and the tribute which the
owner will demand for its use.

And while rent will increase, the incomes of all
other classes must fall. More rent will be demanded
from the tenant farmer and the city dweller. At
the same time the relative amount of land in use
will be diminished. Per capita production will, in
many lines, fall. Opportunities will be lessened,
while the cost of all commodities will be increased.
There will be fewer jobs to go around, and an in-
creased cost of living to all classes. From this
condition there is no escape. To this indictment



THE DISTRIBUTION OF WEALTH 199

there is no confession and avoidance. We cannot
limit the supply or increase the demand for any
commodity without increasing its price, and we
are both limiting the supply and increasing the de-
mand for land.

Herein is the real iron law of wages. It applies
to capital no less than to labor. It is the ten-
dency of all wages to fall to the amount which will
just support the worker and enable him to repro-
duce his kind. This is not a very generous law.
but neither is the law of the survival of the fittest.
But so long as land is an object of private prop-
erty it is a law, nevertheless. And from now on
the tendencies at work will lead to a constant and
rapid lowering of the standard of living in America.
There will be a gradual reduction in the scale
of expenditure of all classes; a limitation in the
outgo for education, for pleasure, for the comforts
of life. The effect of this change will not be con-
fined to the wage-earning or professional classes.
It will affect industry as well. For the manufactu-
rer is dependent upon the prosperity of the wage-
earner. Industry cannot flourish where wages are
low. Were the wages of America doubled, the coun-
try would enjoy a period of prosperity such as we
have never experienced. Then men would be able
to purchase twice as much as they do to-day. And
just as an increase in wages brings prosperity, so a
general reduction of wages by consumption taxes



200 PRIVILEGE AND DEMOCRACY

and rent checks prosperity. And in time rent will
increase to such a point as to bring about perma-
nent industrial depression. In time it will produce
national decay.

This is a question upon which the industrial life
of the nation depends. It is idle to look for any
improvement in the well-being of humanity so long
as the private ownership of the land prevails. The
adoption of sumptuary legislation, the erection of
model tenements or garden cities, the municipali-
zation of franchise corporations, even the organi-
zation of labor unions and the abolition of unjust
taxes, these reforms may bring temporary or local
relief. But so long as the private ownership of the
land remains, wages and interest must tend to fall
to the subsistence level, to the point where the wage-
earner can only sustain life.

Unfortunately even this cheerless comfort is not
left to those who look upon this as the best of all
possible worlds. For population pays no attention
to the laws of political economy. The birth rate
increases without thought of the checks and re-
straints which the economists of the early half of the
last century sought to have the laboring class impose
upon themselves. And when the land is all taken
up, when even the marginal land is under cultiva-
tion, humanity will still continue to crowd in upon
the earth and clamor for its chance to live. Then
the value of labor, like the value of any other com-



THE DISTRIBUTION OF WEALTH 201

modity produced in excess of the current demand,
will fall to zero. Then an increasing residuum
will not even receive a subsistence wage. Then
the monopoly of the land will bring famine. For
famine can exist in the midst of plenty; it can
exist where civilization has flowered to its highest.



CHAPTER XVII
THE ASCENDANCY OF PRIVILEGE

Humanity, as we have seen, has bound itself,
as the Lilliputians bound Gulliver, with a thousand
thongs. It is fettered by its own institutions; it is
bound by its own laws. Freedom is progressively
reduced by privilege and monopoly in every depart-
ment of life. Again, as under the ancient regime,
society is enmeshed with class-made laws, which
interfere, at every turn, with the production, dis-
tribution, and exchange of wealth.

In the opening paragraph of Protection and
Free Trade Henry George has symbolized the
condition of modern society in the following words:
''Near the window by which I write a great bull is
tethered by the nose. Grazing round and round
he has wound his rope about the stake until now
he stands a close prisoner, tantalized by rich grass
he cannot reach, unable even to toss his head to
rid him of the flies that cluster on his shoulders.
Now and again he struggles vainly, and, after piti-
ful bellowings, relapses into silent misery.

"This bull, a very tj^e of massive strength, who,
because he has not wit enough to see how he might

202



THE ASCENDANCY OF PRIVILEGE 203

be free, suffers want in sight of plenty, and is help-
lessly preyed upon by weaker creatures, seems to
me no unfair emblem of the working classes. "

We are the architects of our own misfortunes.
We have created the millionaire along with the pau-
per, the palace along with the slum, by laws in-
scribed on the statute books at Washington, in the
capitals of our states, and in the council chambers
of our cities. It is through legislation that America
has been divided into classes, the class which pro-
duces the wealth of the world and the class which
appropriates it. For classes have arisen in this
country, however much we may seek to disguise
it. But the line of division is not between the capi-
talist and the wage-earner; it is between those who
are encamped within and those who are encamped
without the citadel of laws which the ascendant
class has erected for its own advantage. For the
control of the government has been in the hands of
an economic class almost continuously from the
very beginning.

The struggle to control the government made
its appearance with the birth of the nation. The
protective tariff, the excise laws, the national bank
act, these, together with the assumption of the
debts of the states, as proposed by Hamilton, were
inspired by the interests of the commercial classes
of the seaboard, who saw in the new government
a means for promoting their interests.



204 PRIVILEGE AND DEMOCRACY

Hamilton was the protagonist of these classes,
just as he had been in the Constitutional Conven-
tion. He laid the foundations on which privilege
has ever since reared itself. In devising a revenue
system he adopted the models which the landed
aristocracy of England had evolved to shift the
burdens of government onto the poor. This, too,
was a heritage of feudalism. It came to us along
with the common law and our ideas of private
ownership of the land. And the models which
Hamilton used were the result of a conspiracy en-
tered into between Charles II and the land-owners
in Parliament in 1692. Prior to that time the needs
of the crown had been largely supplied by feudal
dues paid by the great land-owners, just as dues
and services were paid to them by their dependants.
It was over these grants to the crown that most
of the great constitutional struggles of England
took place. By an arrangement entered into in
the close of the seventeenth century, however, these
controversies were brought to an end. The barons
agreed that their lands should bear taxes to the
extent of two millions of pounds, at which point
their taxes were later irrevocably fixed. In addi-
tion to this the crown was to receive certain in-
direct taxes on consumption which were largely
paid by the poor. By this arrangement the com-
mon people were made to bear the bulk of the
taxes, while the barons were relieved of their feudal



THE ASCENDANCY OF PRIVILEGE 205

dues. In so far as the barons are concerned this
compact has never been disturbed. Their lands
have never been revalued from that day to this.
Their land taxes still remain as fixed at that time.
But the indirect excise and customs duties paid
by the poor have increased until to-day they
amount to $300,000,000 a year. By this arrange-
ment the king was assured a source of income which
could not arouse resistance, a source of revenue
which has ever since been used by privilege. " Since
that time there has been no serious conflict be-
tween king and Parliament. The control of the
purse-strings has passed to the territorial aris-
tocracy. There is no taxation by representation
in England even to-day, and it is the attempt to
establish that fact that precipitated the budget
fight of 1909. Great Britain is taxed by an eco-
nomic class, a class which has exempted its lands
and privileges from taxation just as it has in
America.

This was the system that Hamilton took as a
model. It has remained the basis of all subsequent
legislation. Under the first revenue measure of
Congress wealth as wealth was entirely relieved of
taxation. A national bank was provided for which
served the interests of the Eastern trading classes,
just as does the banking system to-day. It con-
centrated the available credit of the country in the
East.



206 PRIVILEGE AND DEMOCRACY

From the election of Jefferson down to the Civil
War the government was in the hands of the Dem-
ocratic party. The functions of the Federal Gov-
ernment were limited, the tariff was reduced to a
revenue basis, and the government was tolerably
free from the control of the commercial classes.
The controversies over the tariff were a rancorous
issue in Congress, as were the repeated efforts to re-
establish the United States Bank. At no time,
however, did the business interests control the
government as they had under the Federalist party.
They were held in check by the South and the West.

During the generation w^hich preceded the Civil
War a new alignment of interests arose. On the
one hand were the manufacturing and trading
classes of the seaboard. On the other hand were
the cotton-planters and slave-owners of the South.
Both sought to control the government, and both
were animated by the same motive. The former
desired a protective tariff, designed to give them
a monopoly of the home market. But protection
was a menace to the South, interested as it was in
the production of cotton, tobacco, and sugar, and
desirous of the freest possible trade with the out-
side world. Between these two economic classes
there was no possibility of compromise. And the
South was supreme in the councils of the nation.
The slave-owning classes controlled the Presidency,
Congress, and even the Federal judiciary. The



THE ASCENDANCY OF PRIVILEGE 207

patriotism of the South reflected the interest of its
ascendant class. Men rallied to the call of South
Carolina, Virginia, and Mississippi for the preserva-
tion of an economic system, rather than for any
ideal of state sovereignty. And the commercial
classes of the North were inspired by no higher
ideals. They were, primarily, interested in the
tariff. They desired to share with the cotton-plant-
ers the privileges which only the Federal Govern-
ment could bestow.

To the trading classes of the East the Civil War
was opportune. The representatives of the slave
states retired from Congress. There was now no
economic class sufficiently cohesive to withstand
the aggressions of the manufacturers. At the same
time the cost of the war left the nation an easy
prey to the demands for protection. The needs
of the Treasury were insatiate. Unparalleled reve-
nues had to be raised. The manner of their collec-
tion could not be too closely scrutinized. The
maintenance of the Union was of paramount im-
portance. On the convening of Congress in 1861
the tariff was raised in an unexpected way. From
this time on the number of protected articles, as
well as the rates of duties, was constantly increased.
Scarcely a month of any session passed without
some change being made. The tariff acts of 1862,
1864, and 1865 violated every tradition of the
country, and every expectation of those who had



208 PRIVILEGE AND DEMOCRACY

supported the Republican party. The necessities
of the war engrafted the policy of protection so
completely upon us that neither of the great po-
litical parties has since been able to effect its re-
duction.

An elaborate internal revenue system was added.
Every conceivable commodity manufactured within
the country was taxed, as was every accessible
transaction. The excise was designed, as David
A. Wells has said, on the principle of the Irishman
at Donnybrook Fair: "Whenever you see a head,
hit it; whenever you see a commodity, tax it."
Many articles were taxed over and over again
before they reached the consumer. The duty on
distilled spirits was increased until it amounted to
a thousand per cent, on its cost. Taxes on cigars
and tobacco were repeatedly raised until revenue
evasion became a most profitable employment.
The high duties were responsible for all sorts of tax
frauds. The corruption of the Whiskey Ring,
which culminated in the disclosures of Grant's second
administration, grew out of the excise system.

Along with the bargaining over the tariff, the
excise system, and tax evasions went fraudulent
army contracts, collusion of officials and specula-
tors, and all of the corrupting influences which fol-
low in the trail of a great war. Privileges of every
sort forced an entrance into Congress, too much
engrossed with saving the Union to scrutinize



THE ASCENDANCY OF PRIVILEGE 209

the details of legislation or administration. In
these days of sacrifice on the part of the people,
the foundations of many princely fortunes were
laid, while private interests intrenched them-
selves in every department of the government.

During these years of suffering on the part of
the people, Wall Street identified itself with Wash-
ington. Under the administration of Secretary
Cha^e the Treasury carried through its borrow-
ing operations with the aid of the New York banks.
BiJlions of securities were sold at home and abroad.
An intimacy was thus established which has con-
tinued ever since. With but slight and occasional
inteiTuptions, the Treasury portfolio has been in-
trusted to bankers whose instincts and interests
have led them unconsciously to identify the wel-
fare of the country with the business in which they
are engaged. The National Bank Act united the
government still more closely with the financial
interests. These, together with the complex mone-
tary system which has been created, have woven
the operations of the Treasury Department into a
close dependence upon the big financial institutions
of the country.

Upon the termination of the war all moderation
was thrown to the winds. Instead of being reduced,
tariff schedules were increased to suit whoever
wanted protection. Oppressive tax measures were
fastened upon the people with every show of pa-



210 PRIVILEGE AND DEMOCRACY

triotism. The revenue measures were framed by
the big business interests. Wealth was absolutely
freed from taxation. This was done with such an
assumption of patriotism that the fearful injustice
of it all has been concealed. Yet it is doubtful if
hereditary privilege in any country in Europe has
been more unscrupulous in the use of its power,
or gone further in exempting itself from taxation,
than have the privileged interests in control of
Congress. The entire burden of taxation has been
thrown upon consumption. No attempt has been
made to reach wealth in any form.

During the decade which closed with 1870 the
railways were invited to the feast. They took
what they wanted of the public land. In less
than a decade the Pacific railways alone secured
more than 100,000,000 acres of the public domain
as an aid to their construction. These magnifi-
cent grants, whose combined area equals that of
Maine, New Hampshire, Vermont, Massachusetts,
Rhode Island, Connecticut, New York, New Jersey,
and Pennsylvania, were supplemented by a loan
from Congress of $60,000,000 more. The consid-
eration for these subsidies was the construction
of the Pacific railways a few years in advance of
the natural development of the West.

Along with the railways were corporations, in-
dividuals, and syndicates which appropriated forests
and mineral resources, whose value is so great as to be



THE ASCENDANCY OF PRIVILEGE 211

merely a matter of conjecture. Members of Congress
saw no wrong in conveying to themselves, or to cor-
porations in which they were interested, the richest
lands of the West.

The Credit Mobilier grew out of the railway-aid
mania. This was a corporation with a French
name organized as a construction company for the
Union Pacific Railway. Its stockholders were the
same as those of the railway, which had secured
valuable land grants from Congress. The scandals
growing out of the ownership of its stock by public
officials involved the Vice-President, the Secretary
of the Treasury, the Speaker of the House of Rep-
resentatives, and many Congressmen who were
believed to have been influenced to vote for leg-
islation favorable to the railroad by virtue of the
stock which they held in the company.

Thus the necessities of the Civil War commer-
cialized the government. So absorbed was the
public in a struggle for self-preservation, that priv-
ilege gained an easy entrance into our politics.
The slave-owning oligarchy had been content with
the status quo. It was on the defensive. In the
years which followed the war, however, privilege
became arrogant. It came to believe that business
is the sole end of the government. The exhaustion
of the struggle left the people an easy prey to
such a philosophy, a philosophy from which they
are just beginning to be aroused.



212 PRIVILEGE AND DEMOCRACY

Following the close of the war, a revenue com-
mission was appointed to devise means for the re-
form of the revenues. An immediate reduction of
the tariff and internal taxes was recommended.
But Congress refused to reduce the tariff, although
an immediate abatement in the excise duties was
ordered. For the purpose of endearing the tarifif
to the wage-earner, a deadly parallel was drawn
to show the impoverished condition of labor under
free trade in England. Since that time the pro-
tection of American labor has been the wall behind
which the trusts have sheltered themselves. In
each successive campaign this argument has been
paraded to the exclusion of all other matters of
national concern. Finally, after years of agita-
tion, Mr. Cleveland was elected President in 1892,
on the platform of tariff reform. For the first time
since the war both houses of Congress, as well as
the Presidency, were in the hands of the Demo-
cratic party, and the programme of tariff revision to
which the party was pledged was ready for enact-
ment. But what was the outcome? We had sown
the wind; we were to reap the whirlwind. One
of the costs of protection appeared in the Wilson-
Gorman Bill, which was finally presented to the
country. This measure purported to reduce the
tariff, and in many instances did so, but so little
disguised was the policy of protection in it, and
so shamelessly had 'tariff reform" been aban-



THE ASCENDANCY OF PRIVILEGE 213

doned that the country repudiated the measure.
The contest before the people had been an honest
one. In Congress it was not one of principle, not
one of the country's well-being. It was a struggle
of warring interests which openly bought pro-
tection or secured control of the party in power.
At the next election the Democratic party was
defeated and discredited. It has never regained
the confidence of the people.

During the intervening years politics and privi-
lege have been merged. The Federal Government
has passed into the hands of an ascendant
economic class. The brain of this merger is in
Wall Street. From this nerve centre the outer-
most extremities of our social and political life
are controlled. In this merger the railway in-
terests predominate. For they are concerned with
state as well as Federal legislation. They are
perfectly catholic in their politics and identify
themselves with the Republican party in a Repub-
lican state and the Democratic party in a Dem-
ocratic state. In most instances the railways
control or constantly seek to control both parties.
Here and there the railway interests are subordi-
nate to those of the mine-owner, the franchise cor-
poration, or the land and timber interests of the
West. These great interests, with their capitaliza-
tion of from twenty-five to forty billions of dollars,
are concentrated in Wall Street. They respond



214 PRIVILEGE AND DEMOCRACY

sympathetically to any action which threatens
their political control or imperils their privileges.

These interests ramify back and forth into one
another much as the crowned heads of Europe are
united by marriage connections. They have com-
mon boards of directors. They are united by a
class-conscious instinct, and are in perfect harmony
as to their interests.

In every city may be found a group of lesser
feudal barons. They own the minor privileges.
Their instincts are the same as those of Wall Street.
They control the local press and the agencies of
public opinion. They corrupt the governments of
city and state. Between them and the great mass
of the people there is a natural line of cleavage.
On the one hand are those who control the gov-
ernment in their own interest. On the other hand
are those who do not.

It is by this process that the politics of America
have passed into the hands of an economic class.
Again, as in ante-bellum days, privilege is ascend-
ant. The class which rules is small in numbers,
but powerful in influence, as any one learns who
dares to touch the least of its preserves.

How costly this merger of politics and privilege
is to the people and the ideals of democracy will
be shown in the next chapter.



CHAPTER XVIII
AN OVERLOOKED CAUSE OF POVERTY

''Laws/' says Rousseau, "are always useful to
those who own, and injurious to those who do not."
A discerning political philosopher of the eighteenth
century has said: ''A man does not possess a de-
mesne because he is a prince, but he is a prince
because he possesses a demesne." This is but
another way of saying that whoever owns a nation
rules it, and whoever rules a nation will come in
time to own it as well.

It is not dishonesty so much as the myriad in-
fluences which mould men's minds that makes this
true. A government of bankers honestly believes
that the welfare of the nation is bound up in the
welfare of the banking interests; a government
of manufacturers honestly believes that the pros-
perity of the country is determined by the pros-
perity of its class; a government of railway-owners
measures national well-being by railway earnings;
while mine-owners, landlords, brewers, distillers,
saloon-keepers, peasants, workers, вАФ every class, in
fact, seeks to mould the government to its own
particular interest. This is the economic interpreta-
tion of politics.

215



216 PRIVILEGE AND DEMOCRACY

And the ascendant class in America is a law-
made class. It is not predominantly a landed class
as it is in Great Britain and Russia. Neither is
it a capitalist class as the socialist asserts. It is
a privileged class. It includes, first, the railways
and the transportation agencies; second, the pro-
tected industries, and third, the franchise and other
public service corporations. The combined capi-
talization of these industries is not far from twenty-
five billion dollars. This is more than one-fifth
of the total estimated wealth of America. From
one-half to two-thirds of this capitalization is the
direct creation of law. It arises from exclusive
grants, like city franchises, monopoly privileges
made possible by the tariff, exemptions from taxa-
tion obtained through a control of the government


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Online LibraryFrederic Clemson HowePrivilege and democracy in America → online text (page 13 of 19)