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the past.

But why, it may be asked, will not communism work in a
large national group as it now works in a small family group ?
It does not seem to work particularly well in some families.
In those few abnormal cases where the members of the family
have no particular affection for one another, the question of
the division of the family funds is a difficult one. If the father
is selfish and cares nothing for the others, he becomes an
autocrat and spends all or the greater part of his income
upon himself. If the others feel the same way toward him
and one another, they quarrel among themselves. But in a
normal case, where an intense affection for one another pre-
vails, there is no quarreling and everything is shared in
common.

If it were possible for the members of a large national
group to feel toward one another as the members of a normal
family feel, communism or almost any other system might
work well. But the average man's capacity for affection is
limited. It would take one with a genius for friendship to
feel a warm affection for even a hundred separate individuals,
to say nothing of a hundred million. It would be practically
impossible for any of us to feel toward each and every one of
a hundred million people, only a few of whom we had ever
seen, precisely as we do toward our own brothers and sisters,
fathers and mothers, and other very near relatives. This is
sufficient reason why communism cannot be made to work well.



CHAPTER XLVI

SOCIALISM

Socialism and communism have shifted meanings. The term
socialism has a variety of meanings, though there are certain
elements common to every definition. During the last seventy-
five years the meanings attached to socialism and communism
have been shifted. That which is now known as socialism
was formerly known as communism. Karl Marx, who is re-
garded as the great apostle of modern socialism, called himself
a communist. On the other hand, socialism was applied to
general schemes for social amelioration which did not involve
any fundamental change in the organization of society. Com-
munism, however, fell into disrepute, and its followers discarded
the name and began calling themselves socialists.

There is a tendency on the part of partisans of any pro-
gram or movement to define their program in the most
favorable terms possible. This applies to socialists as well as
to other propagandists. Sometimes this tendency leads to a
definition of socialism which does not define, but which includes
the opponents as well as the proponents of socialism. When it
.is said, for example, that socialism teaches the doctrine that only
he who produces shall consume, it may be replied, " So also
does individualism," and practically every other ism that has
anything to do with the production and distribution of wealth.
When it is said that socialism teaches the doctrine of equality
of opportunity, it may be replied, "So also does individualism,"
and all the other isms.

The difference between a socialist and a nonsocialist. In
order to define socialism we must find something which will
completely distinguish the socialist from the nonsocialist. The



542 PRINCIPLES OF POLITICAL ECONOMY

only definition that will do this is the following : A socialist
is one who believes that the community, the public, or the gov-
ernment should own and operate the means of production,
leaving to individuals the ownership of most articles of con-
sumption. By the means of production are meant practically
all that is included under the names land and capital, farms,
factories, railroads, mercantile houses, and office buildings
would all be included ; under the program of socialism all
these things would be owned and operated by the community,
the public, or the government. This would mean that almost
every individual would be in the employ of the government
in one way or another. Since there would be no private enter-
prise, no one could start a farm, a factory, a store, or any busi-
ness enterprise of his own. Since no one could start any such
enterprise, no one could be employed by a private employer.
Since no one could be either in his own employ or in the em-
ploy of any private organization, almost everyone would have
to be in the employ of the government.

There is some difference of opinion among socialists as to
how far this principle of government ownership and operation
should extend. Some are willing to stop with trusts and mo-
nopolies. This, however, is populism rather than socialism. It
is based not on a theory of capital but on a theory of monopoly.
Many people who favor the private ownership of capital are
opposed to monopoly and believe that the best way to curb
monopoly is to turn all monopolistic enterprises over to the .
state. Such a person might utterly reject all socialistic theories
respecting capital. Moreover, every thoroughgoing socialist
really bases his conclusions on his theory of capital. The work
of Karl Marx, on " Capital," has been called the Bible of the
modern socialist. This book pays very little attention to the
question of monopoly ; it consists almost entirely of an analysis
of capital and capitalistic production. From Marx's point of
view it is not monopolized capital, but capital as such, that
gives its owner the power to exploit and defraud other



SOCIALISM 543

people. The capital belonging to a farmer as well as that
belonging to a great trust, to a small manufacturer as well as
to a large manufacturer, to the driver of a jitney bus as
well as to a street-car company, is to be owned and operated
by the public.

Socialism is not populism. On the other hand, the slogan
" Let the nation own the trusts " has nothing to do with capital
as such. Such a program is based entirely on a theory of
monopoly, which is the essence of populism rather than of
socialism. Those who hold to this doctrine may quite consist-
ently hold to the idea that capital which is not monopolized is
a help rather than a hindrance to labor, that he who accumu-
lates capital by consuming less than his income is benefiting
rather than injuring labor, and that therefore everybody ought
to be encouraged to accumulate capital and invest it in produc-
tive enterprises. From this point of view the individual who has
accumulated capital and invested it in a productive enterprise
has not only increased the productivity of the community but
is entitled to some reward for that service which he has per-
formed. This reward would be called interest. The populist,
therefore, would approve of the receipt of interest on the part
of the owner of unmonopolized capital.

All the great authoritative books on socialism are funda-
mentally opposed to interest or to anyone's receiving any
income in the form of interest. If labor is the only pro-
ducer of wealth, the saver and accumulator is not a producer
and is therefore not entitled to any share in the product. Since
interest is the share which goes to the accumulator and inves-
tor, it cannot be justified under the socialistic philosophy.

Difference between a socialist and a liberalist. The defini-
tion of a socialist as one who believes in the common, public,
or government ownership of all the means of production sepa-
rates the socialist not only from the populist and the commu-
nist but from the liberalist as well. Moreover, this is the only
definition which will at all distinguish the socialist from the



544 PRINCIPLES OF POLITICAL ECONOMY

liberalist. The liberalist is quite as desirous of economic justice
and of equality of opportunity as the socialist is, but he believes
that the liberalistic program is better adapted to the securing of
those ends than the socialistic program. The liberalistic pro-
gram permits the private ownership of capital, and it also per-
mits the receipt of interest as a private reward, on the ground
that the accumulation of capital is a productive service, not
that it is philanthropic, but that it is useful to society.

In order to becloud the issue it is sometimes stated that the
socialist believes that men should be paid for doing things and
the liberalist that men should be paid for owning things. The
liberalist does not believe that men should be paid for owning
things, unless the ownership is a symptom of their having done
something which was useful. If two men, A and B, have been
doing equally good work with their hands and their heads, and
have earned equal incomes, they should be paid the same, accord-
ing to the liberalist as well as the socialist. If, however, A
consumes all his income, but B invests a part of his in the
tools of production, the liberalist believes that B has done better
than A. If everybody did as A does, the nation's stock of tools
would never increase ; if everybody did as B does, the nation's
stock of tools would increase rapidly. The more citizens it has
of the B type, the more prosperous will the nation become ; the
more it has of the A type, the less prosperous it will become.
It is very important that men should be encouraged to join the
ranks of the B's rather than of the A's. The liberalist there-
fore holds that there should be some inducement to men to do
what B has done ; namely, to invest a part of their income rather
than to consume it.

In the smartness of debate one might still say that B was
thereafter being paid for owning something, whereas A was
paid only for doing something ; but as a matter of fact that
which B appears to be paid for owning is only a deferred pay-
ment for that which he did before. When he refrained from
Using up his income in riotous living and devoted it to a useful



SOCIALISM 545

purpose he postponed the day of his enjoyment of his in-
come. It is virtually, therefore, deferred payment for his work.
The money which he received for his work was not final pay-
ment ; the final reward of every individual is that which he
consumes. When B decided to defer consumption, he was
really deferring the receipt of his wages.

There is no other definition of socialist or socialism which
will separate the socialist from the nonsocialist, or which will
particularly separate him from the liberalist. The term liberalist
is justified because the liberalist believes that, as far as possible,
each individual should be at liberty to start his own enterprise
if he is so disposed or to work for someone else if he prefers,
that he should be at liberty to work for private individuals or
to work for the government, according as he can make the most
satisfactory voluntary agreements. In short, the liberalist is
willing to trust men with the power of free contract, whereas
the socialist relies mainly on the government's power of
compulsion.

Socialism involves more use of the government's power of
compulsion than liberalism does. It has been said that the
power to tax is the only capital the government needs. But
the power to tax is compulsion. In order to carry out a social-
ist program the public would have to use its power of com-
pulsion in many ways. It would have to prohibit competition
by private individuals against the state as it now forbids pri-
vate individuals to compete with the post office in the carrying
of first-class mail. It would have to use its taxing power to
compel the payment of deficits whenever deficits occurred.
The liberalist, on the other hand, proposes to reduce to a
minimum the compulsion of the government over the indi-
vidual. An industiy which cannot be carried on without
any compulsion whatsoever had probably better be left to
die, unless it be one which is necessary for military pro-
tection. If an individual who desires to manufacture shoes
cannot manufacture them successfully without the power of



546 PRINCIPLES OF POLITICAL ECONOMY

compulsion, he should not manufacture them at all. If he can
buy his raw materials on the open market and hire his labor
on the open market and sell his product on the open market,
making use everywhere of voluntary exchange and voluntary
agreement, and can manage to make a profit out of his busi-
ness, he is entitled to remain in business. It shows that he
is efficient enough to assemble the various factors of production
in such a way as to produce an article which is worth more
than the cost of those factors of production. This is highly
economical. If, in order to make a living, he had to be paid
out of the public treasury, and the public had to make use of
its power of taxation in order to get the wherewithal to pay
his salary, there is a strong probability that the product would
not be worth as much as the factors which entered into it.
In that case the power to tax would have to be made use of
to keep the business going ; but the fact that compulsion was
necessary would be proof that it ought not to be used, but that
the business should die a natural death.

Where there is no free bargain and sale, where consumers
are not at liberty to turn from one producer to another and
buy whatever suits them best, where the producers of raw ma-
terial are not at liberty to sell to any manufacturer who will pay
them the highest price, and where labor is likewise not free to
bargain to its own advantage, there is no assurance that the
maximum economy will be secured.

Compulsion sometimes necessary. It is not to be inferred,
however, that the liberalist is an anarchist and therefore op-
posed to all exercise of compulsion or governmental power.
He is one who believes that a great many lines of pro-
duction can be safely and successfully carried on without
the use of compulsion, under voluntary agreements, free con-
tract and sale, and individual initiative. He also quite frankly
recognizes that there are many things which cannot be done
in this way. For example, the forestation of certain moun-
tain slopes would be undertaken by private enterprise only



SOCIALISM 547

when the enterprisers thought that it would be profitable
to them. But, although it might be unprofitable when con-
sidered by itself, it might still be highly profitable when
considered from the viewpoint of the nation as a whole. If
the deforestation of high mountain slopes results in the over-
flow of streams and the destruction of valuable land along the
lower watercourses, this is a matter which affects the country
as a whole but might not interest the individual owners of
the high slopes. If they found it profitable to cut off the
timber and sell it, they would do so even though property of
much greater value a few hundred miles away on the river
bottoms were destroyed. Here would be a clear case where
government enterprise would be superior to private enterprise.
But similar reasoning would in some cases prove the superiority
of international enterprise over government enterprise. It might
very well happen that the high mountain slopes were within
the territory of one nation, and the river bottoms in the terri-
tory of another. In that case the nation owning the high
mountain slopes would have no interest in protecting the
river bottoms. Nothing but an international arrangement could
solve that problem.

Again, take such an enterprise as the building of light-
houses. The private individual who built a lighthouse on a
rocky coast would scarcely be able to collect toll or to get
payment for the utility which he was furnishing. Not having
the power of compulsion, he could not force mariners to pay, nor
could he tax the public at large in order to build and maintain
lighthouses. The public alone has this power of compulsory
collection. In any other case (and there are many of them)
where it can be shown that freedom of contract will not suc-
ceed in getting an important work done or an important utility
produced, the liberalist is willing to see compulsion used.

Socialism, like vegetarianism, is an exclusive term. Liber-
alism is therefore not an exclusive term, as socialism seems
to be. In this respect socialism is like vegetarianism ancj



548 PRINCIPLES OF POLITICAL ECONOMY

certain other exclusive terms. One is not a vegetarian by
virtue of the fact that one sometimes eats vegetable food ;
one is a vegetarian only when one refuses to eat anything
else. A liberalist with respect to food is willing to eat any
kind which seems to him to be desirable. In a similar sense,
one is not a socialist by virtue of the fact that one is willing
that the government should do some things ; one is a socialist
only when one believes that private individuals should not
carry on any productive industry or own any productive capital.
The liberalist is willing that industry shall be carried on in
any way that seems to promise desirable results. If an indi-
vidual farmer can grow corn successfully, the liberalist is will-
ing that he shall do so and make a profit out of it ; if the
individual manufacturer can manufacture successfully, the liberal-
ist is willing that he shall do so and likewise make a profit ;
and so on. He perhaps goes a step farther and believes that
preference should be given to free and voluntary business
arrangements rather than to compulsion, and that compulsion
should be used only when the voluntary system fails to get
desirable things done.

Criticism always easy. As to the merits of the socialistic
program as compared with other programs, there will always
be considerable differences of opinion. It is not difficult to
point out with a great deal of particularity the evils that re-
sult from a liberalistic policy. The unfortunate condition of
those people who are not in a position to contract to their
own advantage is perhaps the strongest argument used by
the present-day socialists. It is very easy to find many com-
munities in which certain classes of laboring men find it
impossible to get good wages by the method of voluntary
agreement, whereas other people who use this method get
larger incomes than are necessary or desirable. This obser-
vation, however, is not confined to labor. Anyone who is try-
ing to sell something with which the market is oversupplied
is in a more or less helpless position. When more is offered



SOCIALISM 549

for sale than buyers care to buy, the seller is very dependent,
whereas the buyer is independent. Under the system of volun-
tary agreement the seller must take what he can persuade the
buyer to pay, and the buyer, can take his choice. If, however,
you reverse the conditions, you find buyers who want to buy
more than sellers are willing to sell. Then buyers are very de-
pendent ; they must take whatever they can persuade the sellers
to sell, whereas sellers are independent and can take their choice.
It happens that certain kinds of labor seem almost chroni-
cally to be in this position of dependence. They always, and
rightly, evoke sympathy. There are two ways, however, of
correcting the difficulty. One is to substitute the system of
compulsion for the system of voluntary agreement ; the other
is to make that kind of labor scarce and hard to find. Seeing
that these unskilled laborers are now beaten under the system
of voluntary agreement, it looks rather obvious to some people
that something else must be substituted. But the liberalists
maintain that labor is not necessarily, and not always, at a dis-
advantage under the system of voluntary agreement. If you can
redistribute the labor supply so that there will not be too much of
one kind in proportion to the other factors, then the laborers will
be in a position of great independence. It is not difficult to point
out instances where the laborer is independent and the cap-
italist dependent, where the preservation of the capitalist's
property where even his income itself depends on getting
labor when there is not enough labor to go around. In such
cases the capitalist must take whatever labor is offered, whereas
the laborer can take his choice of employers. There need not
be the slightest difficulty in creating such conditions for labor
in general ; but it will require the following of a program
radically different from that of the socialist. It looks much
easier merely to exercise the compulsory power of the state
and cure the difficulty at one stroke. Not many difficulties,
however, are permanently cured at one stroke or by the
exercise of compulsion.



550 PRINCIPLES OF POLITICAL ECONOMY

Why there are socialists. When the victim of a wasting
sickness goes to a physician for help, he is very likely to be
disappointed. The physician, if he is scientific and therefore
honest, can seldom promise him a definite cure. Being a
scientific man he can point out the causes which produce the
illness, and say that if at some time in the past the patient
had pursued different habits, he would not have become ill.
This, however, is cold comfort to the sick man who is suffer-
ing intense pain. Or the physician may prescribe a course
of treatment which, if rigidly followed for a period of time,
will tend to remove the causes of the illness and eventually
improve the patient's condition. This likewise is cold comfort
to the man in pain, who wants immediate relief. Such a man
is in a good frame of mind to lend a favorable ear to the
" doctor " with a specific remedy who promises him a specific
cure. This is why a certain type of unscientific practitioner,
commonly called a quack, flourishes.

Similarly, the man who is in the grip of poverty, as well as
his sympathizers, is likely to be disappointed with the pro-
gram of the economist. The economist, if he is a scientific
man and therefore honest, will be compelled to say that there
is no immediate relief which is not likely to produce worse
results in the future. Being a scientific man, he can point out
the conditions which tend to induce poverty, and can prescribe
policies which, if they had been pursued consistently for a
number of years, would have prevented the poverty which now
exists. This is cold comfort to the man who is already
suffering from poverty and longing for relief. Such a man
is in a condition to lend a favorable ear to the doctor with a
specific remedy. The obvious and specific remedy which is
commonly used is the compulsory power of the state or of the
mass over the individual. This is sometimes called democratic,
but there is nothing particularly democratic in compulsion.
One of the most democratic things in the world is freedom of
contract, freedom on the part of the individual to pursue



SOCIALISM 551

his own interests so long as they happen to coincide with
those of the public.

There is a close parallelism between the condition of the
laborer on the oversupplied labor market and the condition of
the producer of vendible commodities on an oversupplied
commodity market. In the early nineties of the last century,
farm products were greatly oversupplied. There had been a
rapid settlement of the fertile prairies of the West and a
rapid increase in the tillable area on all the farms. The result
was that a great flood of agricultural products was poured
upon the markets of the world, depressing prices not only
in this country but in Europe as well. In that situation the
farmers were in a dependent condition. They had much to sell
and there were apparently few buyers, few at least relatively
to the amount of produce that was offered. The average farmer
had to take what he could get. Naturally enough this situa-
tion created dissatisfaction, and demands were made by the
agricultural classes of the South and West for some kind of
compulsory action by the government. On the basis of free
contract they were at a great disadvantage, and not unnat-
urally desired to use some other method, for the time being
at least. Freedom, to them, frequently meant freedom to
become bankrupt and to go hungry.

At the time of the present writing (1918) the conditions
are reversed and the boot is on the other foot. The world is
experiencing a great shortage of agricultural products. Buyers
are everywhere asking for products, and there appear to be few
sellers, few at least relatively to the number of buyers and con-
sumers. The consumers are now in a position of great depend-
ence, but the farmers are in a position of great independence.
On the basis of free contract the farmer has the advantage and
the consumer the disadvantage. The farmer is not now calling
for a limitation upon the right of contract. He is not demand-
ing the substitution of compulsion for freedom. There are
demands, however, on the part of consumers for government



552 PRINCIPLES OF POLITICAL ECONOMY

action in the fixing of prices and the control of marketing
processes. Since he is at a disadvantage in the bargaining
process, the consumer feels that something else should be sub-



Online LibraryThomas Nixon CarverPrinciples of political economy → online text (page 44 of 48)