Hope in America online

cans gainfully employed (And a great many of the farmers
have the greatest difficulty in living like that.)

, Nowadays most people take it for granted

w ny Lan t we , , , . , ,

Q , that the only way to get a job is to get some-

Set Up JOT _ ,

~ j one to employ them. And so it is. But why?
Ourselves? J

Why can t everyone who is out of a job just

"set up for himself" in business of some sort? Why can't
he start weaving cloth or shoeing horses, or farming land
for himself, as his ancestors did?

Well, you know the answer. People can't get any land to
farm; they can't get a forge (and there are precious few
horses left to shoe!) They might find an old hand-loom in
some attic, but, if they did, they could only weave cloth at
about ten times the cost that the great power-looms of New
England or the South can produce it. Every now and then
some worker can get hold of a little shop and set up for him-
self that way. But that isn't easy, and it is getting more and
more difficult. Woolworth's and the other chain stores are just
round the corner.

19



HOPE IN AMERICA



r> :io And so it's work for wages for four Americans
Capital? * - - T ^ . .

of nyet is work for wages because the



means of work, the tools of the trade, the raw materials, the
land, have somehow got out of reach. The wage earners
haven't the capital to buy these things, without which they
cannot set up in business for themselves.

If these things the land, mines and factories the capital

of the country have got out of reach, where have they got

to? They have got into the hands of a smallish class of people,

commonly called capitalists.

M TV ATI Now some people suggest that this class of

r> * / * 9 capitalists does not really exist as a separate
Capitalists? J i , . . i

group 01 people who employ the thirty-eight

million American wage and salary earners. They suggest
that capital has become "widely diffused throughout the com-
munity," so that "really" we all, as capitalists, employ our-
selves, as workers.

On this point I must refer you again to my three invaluable
professors. They write, "With the masses ofjhejDopidatkm M
the income derived from investments is negligible."*

Incidentally they really are invaluable professors and their
work, like the work of the Brookings Institution generally, in
its two other volumes America 9 s Capacity to Produce and The
Formation of Capital, has been of great interest and impor-
tance. So it was very wrong of me to try to make fun of them
just now, and I hereby apologize. It is all because they will
announce with so solemn an air conclusions which are, shall

* America's Capacity to Consume, p. 26.

20



THE SECRET IN THE PAY ENVELOPE

I say, not exactly unexpected such as that poor people don't
buy more goods because they haven't enough money.

So the people who own the capital of the country really are
a separate and distinct class of person from those who do the
work of the country.

The Th ^ * S excee ^ m S^y ktfd to * ve an exact figure

for the number of people who compose the

capitalist class. But you can get an idea of the
size of that class if you consider these figures. There were,
according to the census of 1930, forty-nine million individu-
als who received incomes. As the population was 122 mil-
lion, each individual who received an income had to support,
on the average, between one and one and a half dependents.

Now, as we have seen, there were thirty-eight million wage
and salary earners. So, we can say that about ninety million
out of the 122 million Americans were dependent on wages
and salaries. Then there were about ten million independent
workers (six million of them farmers) who did not have to
depend upon wages or salaries, but who worked for them-
selves, with their own means of production, their own land,
or their own tools. Some of them employed hired help but
still they did work themselves. Put this class with its depen-
dents at about twenty-two million.

Finally (in 1929) there were two million income recipients
who were not reported as being gainfully employed. "Most of
them were presumably living on income from investments." * u
So we can put this class at, say, five

* America's Capacity to Consume, p. 26.

21




HOPE IN AMERICA

Here then are the three main classes of people which exist
in America today, and which must exist in any country which
organizes its economic life in the same way. First there are
the ninety million wage and salary earners who work for
other people. And then there are the twenty odd million "in-
dependent" people who work for themselves. And lastly there
are the, say, five million people who neither work for other
people, nor work for themselves, but for whom other people
work. These are the three fundamental classes of any country
which organizes its life in the way you do in America or we
do in Britain.

, . It is very important to notice, however, two

Two Points . . . . ,-. r T T

,r things about this way 01 dividing up the popu-

lation into these three classes according to
their way of life. In the first place these three classes do not
exactly correspond to the poor, the moderately well off, and
the rich.

In the second place, the obvious fact that the bulk of the
capital of the country has got into the hands of the smallest
of these three classes (a class of, say, five million men, women
and children, who do not need to work at all because other
people work for them) is the fundamental reason why, by and
large, the rest of the population has stayed too poor to buy the
final output of industry, and so keep the whole system going.

Let us take the qualification first. It is perfectly true, for
example, that some of the big group of ninety million wage
and salary earners are better off than some of the twenty-
three million independent workers, and even than some of the

22



THE SECRET IN THE PAY ENVELOPE

five million owners. There are a few people, for instance, who
are in all essentials part of the class of owners but who live
on vast salaries. They merely prefer, for various reasons, to
take their money in the form of a salary paid to themselves
by a corporation which they control instead of by way of
dividends. But even apart from these exceptional cases there
are some skilled wage earners, both manual and intellectual,
who are considerably better off than are a majority, actually,
of the farmers, who form the backbone of the group of those
who own enough capital to be able to work for themselves.
And there are even, no doubt, individuals among the group
of those who live on investments who draw a smaller income
than some of those who live on wages.

Th F ntial Then again it is perfectly true that some
p. wage earners and a good many salary earners

own some capital, though not enough to pro-
vide them with an unearned income which they can live on
with an income derived from the work of others, that is to
say. However, as our professors concluded, "with the masses
of the population the income derived from investments is
negligible." So, take it all in all, these qualifications, though
they should be taken into account, do not substantially alter
the fact that the American people are divided into three great
classes according to whether they own no considerable amount
of capital, and therefore have to work for wages for those
who do; or whether they own just enough capital to be able
to work for themselves; or whether they own so much capital
that they can live by getting other people to work for them.

23



HOPE IN AMERICA

Nor do these qualifications alter the essential fact that in the
overwhelming majority of cases those who own the capital
draw the large incomes, and that those who do not own the
capital draw the small incomes.

7 7 Our invaluable professors will tell just how

Who Gets . . r . . . J .

, M o small are the incomes of those who do not
the Money r .

have capital, and just now large are the in-
comes of those who do. In 1929 out of the twenty-seven mil-
lion American families

6 million families (21%) had incomes less than $1,000 a year
12 million families (42%) had incomes less than $1,500 a year
20 million families (71%) had incomes less than $2,500 a year

And this was in 1929, mark you. What would have been the
result if our professors had started figuring for the year
1932?

But in 1929

2 million families (8%) had incomes of over $5,000 a year
600,000 families (2.3%) had incomes of over $10,000 a year

The twelve million families (42% of all American families)
in the two bottom lots got about ten billion dollars. But the
36,000 richest American families, which each had incomes of
over $75,000 a year, also got almost exactly ten billion
dollars.

"Thus it appears," write the professors, "that 0.1% of
the families at the top received practically as much as the
42% of families at the bottom of the scale."*

*America's Capacity to Consume, p. 56.

24



THE SECRET IN THE PAY ENVELOPE

m, , 7 Well, that's why the present economic sys-

1 hat s the , . JL , r . , .

yr , , tern won t work. I hat degree 01 inequality in

the distribution of income prevents the mass
of the population getting enough money to buy the final prod-
uct of industry and agriculture and so keep themselves in
jobs.

Moreover, and this is just as important, the above degree
of inequality is the direct and inevitable result of depriving I
four out of five American citizens the ninety million wage I
and salary earners of substantial ownership of capital. It \
is because they have to live on wages that these Americans /
can't buy the goods. As long as the capital of the country
is in the hands of a small class for whom most of the rest of I
the people have to work, the goods can't be bought. For the
people's wages can't be high enough to keep the system going.

The next few chapters are devoted to showing why this is
so. They will endeavour to explain in detail just why the
money in the pay envelopes of the people is never enough.



25



Chapt



er



How the Present System Works

y I* 1 *he year 1914 the Congress of the United

COTTITTI d't ? States P asse d the Clayton Act. This Act con-
tains the following declaration:

"The lahor of a human being is not a commodity or article
of commerce."

To this declaration the short answer is the rude, crude, but
expressive American phrase, "Oh yeah?" For under our pres-
ent economic system a commodity is just precisely what hu-
man labor is. A commodity is, briefly, something which is
bought and sold. And your labor, and my labor, as we both
know extremely well, are bought and sold every week on the
markets of the world; unless, indeed, we cannot find a buyer,
in which case it is very much the worse for us.

Now there is a very real sense in which our work, or
more exactly our capacity to work, is our very selves. Human
beings can live only by working.* In a sense, then, when people
buy and sell, not merely the products of their work, but their
actual, innate capacity to work, they buy and sell themselves.

Consideration of this fact of the buying and selling of

*0r, of course, by getting other human beings to work for them.

29



HOPE IN AMERICA

human labor will lead us to an understanding of what wages
are. This is the key to the secret in the pay envelope. This will
tell us why there is never enough money in that envelope to
keep the wheels of industry turning.

Money for Your wages are? l hope ' comin S in each

N th' ? week. That means that somebody gives you,

say, ten, twenty, thirty, forty dollars, or what-
ever it is, each week. But is this money a free gift? No, by
Jove, you will say, it is anything but that. But if it is not a
gift, it must be an exchange for something. It must be given
you in return for something you have given to your employer.
Of course, that is just what wages are. They are a payment in
return for something we have given our employers. And that
something is, precisely, our capacity, or power, to work for
so many hours during the week. Our wages are paid us in re-
turn for the work we have put in during that week. It does
not matter what kind of work it may have been, whether we
have used our hands or our brains, whether we have driven
quill or truck, whether we have hit a typewriter or an anvil,
whether we have worked in factory, in office, in mine or in
field. Whatever the kind of work may have been, it so many
hours of it is what we have given to our employers in re-
turn for the money in the pay envelope.

TT -MI r o At last we come to the key question of what
How Much? , r TT

settles the amount of our wages. How much

are we to get in return for so many hours of our work? What,
in other words, determines the rate of wages? This is the key
question because, as we saw in the last chapter, wages are in

30



HOW THE PRESENT SYSTEM WORKS

fact fixed so low that the mass of the population cannot buy
enough to keep the wheels of industry turning.

At this point in the argument, there rises one unanimous
cry from the employers: "We give you the full value of your
work; we pay you what your work is worth, no more and no
less."

Well, we all know better than to answer an employer back.
Therefore, for the moment at any rate, let us accept their ac-
count of the matter. Let us agree that our employers pay us
the full value, no more and no less, of the work which we
have done for them.

But what is the value of our work? What determines the
appropriate payment for, say, forty-eight hours a week of
weaving, of coal mining, of typewriting or clerking, of com-
mon laboring, of filling shells, or of what you will? Why,
the value of forty-eight hours of labor will be settled in just
the same way as the value of anything else. Jt will depend j>n_
what it costs to_jmidu^e^orty : eight hours of Jabor.^
jyi p That is a curious expression, you will say.

*m r> ' What on earth do you mean by talking about

what it costs to produce forty-eight hours of
labor? Why, I mean what it costs to keep a man or a woman
in a fit state to do forty-eight hours of labor. In other words,
if an employer wants forty-eight hours of labor done for him
in his office or his mine or his factory, he has got to pay
enough to produce that forty-eight hours of labor, or, more
exactly, to produce a man or woman capable of performing it.

To be plain, he has got to pay enough for a man or woman

31



HOPE IN AMERICA

who is capable of doing the job to live on, and to produce

another man or woman capable of doing the job in the next
_^__^ ""*"*""""^ " *^^ " fcii i i

generation. That is the value ofJahor. To prove it, look at it

from the employer's point of view, and ask this simple ques-
tion: Why pay more? Why pay more than enough to secure a
supply of the article required? The article required is forty-
eight hours of work. Such and such a number of dollars per
week will enable a man or woman to furnish that number of
hours of work. Why pay more?

, C j , But, you object, am I not looking at the

A Shortage of . . . J ., , - %

r L p thing in a very one-sided sort of wayr What

happens if there is a shortage of labor? What
happens if there are so many employers, with so much work
to offer, in proportion to the number of workers available,
that there is a labor shortage? Then, of course, the fact that
a given sum, say twenty dollars a week, is enough to keep
a worker and his family on, will not prevent the actual
amount which the employer has got to pay from rising much
higher. For the employers will begin competing with each
other for the limited amount of labor available. The value of
labor will still be twenty dollars a week. But that will now
be unimportant. For the price of labor will be driven far
above its value as a result of the employers' competition.

Moreover, you will say, is not this very likely to happen?
The amount of capital in the country is always growing.
Capital consists of the factories, mines, offices, shops, rail-
ways, power plants and all the other means of production.
Will there not soon get to be so many of these means of pro-

32



HOW THE PRESENT SYSTEM WORKS

duction that there will not be enough workers to keep them
all going? Not enough miners to man the mines, not enough
office workers to sit at the desks, not enough factory workers
to keep the machines running? Then will not the happy time
have come when we can raise our wages indefinitely by mak-
ing the employers compete for our services?

rn_ r> , 7 It is obvious that there must be a catch in

ike Latch _ _ _ . _ p

. j it somewhere. Or else this happy state of

things would have come about long ago. Cap-
ital has been piling up for a long time now, and yet, far
from there being a labor shortage, unemployment is worse
nowadays than it has ever been before! Even at the height of
the period of recovery after the 1929-32 slump, unemploy-
ment by no means disappeared. And in every slump now the
figure goes up to between ten and twenty millions. Not much
sign here of a labor shortage forcing the employers to bid
up wages!

Well, we all know why it does not happen. It does not hap-
pen because of mechanization. Just as fast as capital piles
up; just as fast as new factories, mines and docks come into
existence, new machines are invented which dispense with
labor. There are hundreds of times more means of produc-
tion in existence than there were; but these new means of
production each employ a hundred times less workers. There-
fore the demand for labor does not go up in anything like the
proportion that capital accumulates.

This is the simple secret of why that longed-for time when
the demand for workers shall be so strong that wages will

33



HOPE IN AMERICA

rise of themselves, seldom or never comes about. On the con-
trary, what does happen, as we all know only too well, is that
there is almost always a pool of millions of unemployed des-
perately striving for jobs. This means that far from the com-
petition of the employers forcing wages up, the competition
of the workers for the available jobs forces them down to-
ward the minimum. And that minimum is just what I have
defined above namely, what will keep a worker and his
family in such a condition that he can do his job.

oi 'ii j j Observe the way I have put the matter in

Skilled and . J _

TT j -11 j th at last sentence. The employer has got to
Unskilled. r J &

pay the worker, no matter how much com-
petition for jobs there may be, not merely enough to keep
him alive, but enough to enable him to do the particular job
which the employer wants to get done. This is, basically, what
accounts for the different level of wages for different jobs.
A skilled worker gets considerably higher pay than an un-
skilled. At bottom, this is because it takes more to produce a
skilled worker than an unskilled. For one thing, you have got
to educate a skilled worker; he has got to be able, not only to
read and write, but, in engineering, for instance, to read and
understand a complicated blueprint. For most skilled jobs
nowadays the worker has got to have his mind as well as his
hands developed to a relatively higher degree. This means
that your skilled worker is a more costly product than your
unskilled. Naturally, therefore, the employer has to pay more
for him.

34



HOW THE PRESENT SYSTEM WORKS

rpi r There is another point. In particular

07- p countries and at particular times a definite

idea grows up among us as to what is the
minimum standard on which a family can live. Now human
beings can live, in the literal sense of keeping alive, by feed-
ing on a handful of rice a day, and sleeping in a one-room
hovel, as they are forced to do in the East. In such conditions,
it is true, they do not live very long, and they cannot do very
heavy work; but they can keep alive long enough to breed
children to succeed them.

Now even apart from the need of the American employers
to get heavier and more skilled work done, American workers
cannot in practice be driven down to such coolie standards as
these. A fixed idea has grown up as to what is the least Amer-
icans will work for. Anql American workers literally will
starve, as they have done in many great strikes and lockouts,
for many weeks at a time, rather than take less than this
minimum amount. Therefore wages in America cannot be
driven down below a certain partly conventional level. Or
rather, it could only be done over a long period and by chang-
ing the whole national conception of life.*

So you must not think that when I talk of the subsistence
wage, I necessarily mean what will buy just enough bread or
rice to keep body and soul together. I mean rather the mini-

* But this, I understand, is not true about every part of America. I have just
been reading a book called Preface to Peasantry, which describes the conditions
of the, mostly Negro, agricultural workers of the Southern States. And there
American workers, it seems, get no more than subsistence in the most literal
sense of the word.

35



HOPE IN AMERICA

mum standard which people will tolerate in America at the
present day. The figures I gave in the first chapter show
clearly enough how low that standard is. But there is no deny-
ing that it could be lower still without actually killing people
off before they had produced children to succeed them.

rri nr j > This idea that the minimum or subsistence
The Workers

r> level 01 wages diners according to the his-

Reaction. . ^

torical circumstances the whole traditional
way of life of a country, is bound up with the power of
workers to prevent wages being driven down to the sheer
physical minimum which will keep body and soul together.
In America, in the past, the ability of the workers to prevent
their wages dropping to this minimum depended, in the main,
on the existence of ways by which a man could get his living,
other than working for an employer. Indeed a hundred
years ago, as we have seen, working for wages for an
employer was the exception rather than the rule in Amer-
ica. By far the largest single group, or class, consisted, not
of wage earners at all, but of people working for themselves.
At that time this class, which we put at only twenty-odd
millions today, was much the largest single class in the
country. So long as that situation existed, those Americans
who did work for wages were in a relatively strong position.
If they thought that their wages were too low they could "set
up for themselves" as independent workers on their own
account. The thing which at bottom made this possible was
tTif> gYistpTipft jQf.freey unoccupied land, which wage workers
could take up and use for themselves. Moreover, until about

36



HOW THE PRESENT SYSTEM WORKS

the middle of the last century at any rate, much of industry
as well as agriculture was still carried on in America on a
small-scale, handicraft basis, so that an individual worker
had a real chance of setting up for himself.
< ( j,i It was the existence of these alternatives to

A . working for an employer which enabled the

American n. , i i r

j j American worker to establish a level of wages

which, for many workers at any rate, was well
above subsistence to establish the idea, and a very valuable
idea it is, that there is "an American standard of life" which
must be maintained.

The existence of this possibility made it unnecessary for ^
the American workers as a whole to combine in large-scale,
permanent trade-unions for the purpose of bargaining with
their employers; for they had the fundamental bargaining
power of free land behind them. But as everybody knows, the
last free land was allotted before the end of the last century,
This did not mean the immediate disappearance of oppor-
tunities for independence for the American people. But, in
the end, and taken together with the dying out of handicraft
production in industry, it has meant, as we have seen, that
four-fifths of the American people have become employees.
That is why today by far the largest single group of Amer-
ican citizens make their livings by working for wages, and,
what is more, cannot hope to make their livings in any other
way. Once that has happened to a people, its only hope of
keeping wages above the subsistence level is for it to organize
large, permanent and strong trade-unions. And this the Amer-

37



HOPE IN AMERICA

lean wage earners are now engaged in doing. For only so can
they have any chance of preserving "the American standard
of life."

Wh tth American workers need only look at the