Business and Democracy

I

MANY important forms of the social fabric are to-day in the ‘melting pot.’ New proposals are legion. Opinion gathers quickly behind a taking novelty, and conditions are such that it spreads by some lateral absorption like water in a lump of sugar. Industrial democracy is receptive and expectant of change — even if only for the sake of change. Currents of impatient protest arise suddenly and flood with Daytonian ruin old established bulwarks of society, Old landmarks are submerged. Reverence for the authority of age and experience — and even of law — is slight. The independence of a strongly individualistic democracy is feeling the pride of new strength, and delights in its power without much thought of consequences. If the rising tide has lifted our anchors, where are we drifting? Are we throwing aside compass and quadrant, and sailing by caprice for a port closed in by fog?

Whether we like it or not, we must face the fact that large groups of men — and women —have found in democracy the opportunity and occasion to give expression to a raw, untrained pride of opinion on the most difficult questions of government and economics. Respect for authority, for those who have achieved something important, for experience and knowledge, has seemingly disappeared. Gross ignorance noisily reigns in the marketplace; and the man who refuses to ‘blow his own horn,’ and who bases his claims on his merits, is lost in the crowd. We have democracy growing rank; settling policies, not according to insight and merit, but according to their effect, in catching votes. An untrained, uneducated constituency, no matter how honest, is a very paradise for the demagogue. The confidence of conceit and passion is in direct ratio to ignorance. Why is it that the son seems to have more assurance than his father? ‘Cheek,’ brazen effrontery, cock-sureness, and unwillingness to hear criticism are the marks of men who guide other men of less force. These are some of the evident results of democracy; but they are as old as Socrates. The same characteristics that trouble us today showed themselves in Athens. And yet the world has progressed since those days in Athens.

On all sides we hear of ‘social unrest,’ of Socialism, of sabotage, and the Industrial Workers of the World. Many intelligent people seem to have acquired a stubborn conviction that no man can have become rich honestly.

It is doubtless true that many forms and opinions are undergoing change. Some things, to be sure, are certainly going by the board. But while changes are coming, the stars in their courses still show us the same firmament. Crews may mutiny against officers; but officers and discipline are still the rule of the sea. We may have eruptions of ignorance and passion; but sooner or later the shallow and the criminal give way before the inevitable, permanent forces of right and progress.

II

Democracy in its old significance bore on political relations and equality of treatment by the government. But now we hear of industrial democracy, and economic equality; that is, since one man’s vote is as good as another’s, it is assumed that one man’s wages should be as good as another’s. Right there is the break with logic and human nature: all men never were born equal in industrial capacity, and consequently have no right to equal industrial rewards. Indeed, the whole distribution system of wealth is necessarily based on the fact that some men are more efficient in productive industry than others.

There is, moreover, a further association with industrial democracy: it is assumed that the existing system of industry supplied by private capital and managed by individuals is unjust; that men are not getting ‘social’ and economic justice; and that, so long as there are poor men, large fortunes must have been unjustly accumulated. And so we are made aware that, when laborers in any field, having formerly received, say three dollars a day, are by virtue of strikes now getting five or six dollars, and for less hours in the day, yet they are not satisfied. They have no intention of stopping the campaign for higher wages; if they have already doubled wages, why not double them again? if they have gained five dollars a day, why not keep on until they have fifty? what is to prevent this consummation? The truth that increasing wages for the same effort increases expenses of production and consequently prices to the consumer is lightly ignored. As long as employers have palatial homes, fine horses and automobiles, and dine at tables of Levi, why should laborers not keep on demanding? In brief, industrial democracy assumes that wealth is unjustly distributed, and its avowed end is a new and different distribution. This purpose, every man who has capital invested in his own business must face. It is the purpose of growing numbers in our community; and these numbers, having votes, wish to use state and national legislation to aid in forcing their system on society. Then those who seek high office, and wish to secure these votes, are cleverly bidding for followers under the standard of ‘social justice.’ They have spread their sails to catch that particular slant of wind to gain their desired end.

What does ‘social justice’ mean? Supposedly, it means the extension of justice not now obtainable by law to a field of economic rewards in which injustice is assumed. For instance, if wages in some sweated industries are very low, it would be ‘social justice’ to raise them. But, if wages should be equal among those of equal earning capacity, how can the wages of the less capable be made equal to those of the more highly capable? Certainly not by legislation. Such a position, however, is not inconsistent, with the belief that intelligent legislation may often change environment so as better to equalize opportunity and choice of occupation. But we do not need a new phrase, ‘social justice,’ to cover justice to men for acts included under accepted codes. For instance, a disease-breeding sweatshop is a violation of municipal health regulations and to be dealt with accordingly. ‘Social justice’ is a convenient phrase to the politician, because it appeals to most men’s sense of dissatisfaction with their material reward, and it is too vague to be concretely challenged.

III

The reason that some men are rich and some are poor has nothing to do with their goodness; a good man may be stupid, or he may have an artistic temperament unaccompanied by practical business sense; while another man, just as honest, may have foresight, good judgment, a cool head, executive ability, and great business sagacity. The former is likely to remain poor; while the latter may amass a great fortune. The former may be a great artist, and, from the side of culture, he may be a more valuable man to society than the latter: it all depends on whether we rate creative art higher than riches. It is no disparagement to be poor, if one can serve society in other ways than by gaining wealth; and many men gain wealth who do nothing for the wellbeing of others in society. Now, without attempting to grade the pursuits of men, whether the accumulation of wealth is higher or lower in value than other pursuits, most of us are obliged to face the practical problem of income. It is a purely material question; it concerns man’s capacity to get material rewards. To some people — fortunately not all — this is the sole problem. And it may here be observed that Socialism is a purely material philosophy; its objective is to overturn existing privately managed industry in order to obtain for the workers more material wealth to consume. They may not get it; but that is their end. It is not their aim to get more goodness, but more material wealth; unless by having more to spend they expect to grow in grace.

By unthinking persons discrimination is thrown to the wind. If they hear of one rich man who is evil, all rich men are evil. Without any economic examination, it is assumed that, if a man is rich, it can be only because he has got riches at the expense of others, and especially of his laborers. Hence the theory —already alluded to —that workmen are right in pressing for higher wages until all shall become equally rich. That is in essence the hope of industrial democracy.

Let us face this assumption. ‘All the fools are not dead yet,’ it is true; but it is equally true that the saving grace of common sense is still a characteristic of our American people. Let me give a concrete case, which after all is only typical of legions of others.

Among the cowboys on a Southwestern ranch was one quiet, silent fellow of eighteen; he rode well, knew the nature of a cow, took a joke on himself good-naturedly, and said nothing. At the end of the month the ‘bunch blew in’ the month’s wages at the saloons in the nearest town; but our young man, in a lonesome way, stayed on the ranch and did not go to town. He took the usual jibes, grinned, and said nothing. He was fed and found on the ranch, and at the end of the year he had $360 to his credit. This went on three or four years. Suddenly he was known to have preëmpted 160 acres of the best land in the region; he built his shack and stocked his farm from his savings. He was a good judge of horses and cattle, and worked indefatigably on his farm

— which was truly his ‘savings bank.’ In one year his wheat sold for $3500. His ‘ stand ’ of alfalfa was as good as any in the country. He needed more help, and he employed some of the boys he had known on the old ranch, and he paid them more than they had earned in the saddle. Then, after having paid for his farm, he had enough to buy an adjoining 160 acres for cash; he had a rapidly increasing herd on the open range. In a very few years he became the owner of 1200 acres of alfalfa in Texas, apart from his other farms and herds. His annual income at one time some years ago from wheat alone was over $10,000. Then he invested in more land, bought bank stock, helped build new railways, and was in recent years popularly acclaimed a millionaire.

Now, did this man gain his fortune at the expense of others? Any other of those mad-riding, reckless cowboys could have done the same, if t hey had had the qualities that industrial success demands. Aye: there’s the rub. Industrial success is personal, not social. Society is not holding a man down; the existing social system is not keeping men at the bottom; it is their own personal deficiencies that keep them there. Industrial success can be won at a price; and the price is observance of the inevit able rules of t he game,

- namely, sobriety, industry, saving, avoidance of speculation, knowledge of human nature, good judgment, common sense, persistence, intelligence, and integrity. No social system ever keeps a man down who has these qualities. Is it not the best thing for the world to find out that industrial success can be won only by the display of these qualities? Is it ‘social justice’ to proclaim to the thriftless, or careless, that the social system is responsible for their scanty means, and that they should claim a share in the wealth of our rich and successful cowboy? He should be made to divide. On with ‘social justice’ to the unfortunate; down with the plutocrats! There is indeed much wrong in the world to be righted; but it does not avail to separate wrong from its personal nature and ascribe it to a vague thing like the social system.

IV

‘Yes: what you say is obvious,’ I hear some one remark, ‘ but how about the malefactors of great wealth?’ In the first place, size is no crime; if business, legitimately carried on, becomes very large, that is a mark of success and of the phenomenal opportunities of a new country abounding in natural resources, inhabited by a constantly growing population. Great fortunes honestly won are just as possible as small fortunes honestly won. ‘Very good; but look at the big rascals in high finance,’ says the suspicious man. Now let: us face that point directly. Here is the place to insist upon a significant distinction: robbery, cheating, stealing, falsehood, dishonesty are to-day under the ban of law; the laws of the land are sufficient to convict any perpetration of these wrongs, if there is proof; and we all insist that the law shall be enforced. This we are all agreed upon. But, on the other hand, if I am poor, and B is very rich, am I justified in declaring t hat B is thereby a ‘malefactor of great wealth.’ That assumes the economic proposition that no man could become very rich except at the expense of others, or by unfair practices. That proposition cannot be admitted for one moment. We may readily admit that some men may have become rich by rascality, by cheating others, by devices which escape the letter of the law, and which are dishonest and unmoral; but it is stupid to say that that is true of all rich men. It is the mark of the untrained mind that it can make no discriminations. Indeed, we are living in such a hysterical age that no discriminating judgments seem to be popular. Consequently the business world must face the fact that halfbaked teaching, and demagogic appeals to prejudice, have made masses of our people believe that if a man is very rich he is necessarily a bad man. It is assumed that no man ought to accumulate more than a certain amount; and there follows the corollary that the masses of voters, being poor, should force the rich to give up a portion of their accumulations; and one form of this contention appears in a demand for progressive taxes to pay a greater proportion of the expenses of government. Such a policy has no economic basis; it is solely the development of industrial democracy. A counting of noses settles that question, not a counting of economic arguments. As long as economic questions are settled, not by expert advice, but by universal suffrage, there is no help for the business world but the education of the voter.

V

The equality of political democracy, as I have said, is by facile logic transferred to industrial democracy; but these two realms of human actions are founded on radically different bases and conditions. What is true of one is not true of the other. All men have, and should have, equal rights before the law; each should have equal protection of life and property; but if A is sober and thrifty and saves up $10,000, and, if B is never sober and owns perhaps only his horse, then the state owes A the same protection over his $10,000 that it owes B over his one horse. And the principle is the same whether A has $10,000 or $100,000,000 — provided he does not violate the rights of others. In industrial democracy B ought to have no more right over A’s $10,000 than he has over my overcoat. Unless that is founded in adamant, what protection has B for his horse against the dishonest, powerful rich man? The Middle Ages is the answer to that.

But industrial democracy openly attacks this system of property and its theory of justice. It is sometimes forgotten that the development of individual private property since 600 A.D. has been a large part of the growth of civil liberty and the acquisition of freedom and equality of the individual. It was not forced on the race by any great conqueror. Like all permanent law, it is an expression of the wishes and customs of the race. Our rights to property to-day are what they are because the race is what it is. Now comes Socialism, in all its varied forms, and proposes to put the control of capital and industry in the hands of the state. It is in pursuit of material rewards. If, in the open competition of men with men, in the industrial struggle, B is surpassed by A, he accepts his individual failure; but B asks the state to make A share the results of his skill with him. That is the essence of Socialism: as I have said elsewhere, it is a philosophy of failure. It is not likely to succeed in the ultimate end; but it is coloring industrial democracy through and through. Its practical form is governmental interference with industry. In the case of public utilities and monopolies there is a reason for the intervention of the state, but it is not a Socialistic reason. Whenever an industry is by nature more or less monopolistic, competitive conditions can be best preserved by the supervision of society. But, standing on the rock of civil and religious freedom, one must fight every attempt to regulate and restrict the freedom of individual initiative in industry wherever it may be shown that it does not infringe on the rights of others.

There is to-day being created a nebulous area in human activities in which the legislatures and the courts are being urged to interfere with the acts of individuals on the ground that the state knows better than the individual what is good for him; that you can make men better by legislation; and can prevent ‘ social power ’ from going to waste. There is danger in that attitude to the efficiency and virility of the race. On the other hand, while we urge altruistic ideals, we must preserve the soundness of the individual unit if society as a whole is to keep its vigor.

Yet men of note sometimes show a sort of intellectual strabismus on such a simple matter as the functions of capital — which comes into existence only by personal control over consumption, and is necessary to the very existence of modern production on its present scale and necessary to the very consumption of the laboring classes. We are told that ‘one of the greatest pieces of work mapped out for the workers of this century was to socialize steam as earlier inventions and discoveries had been socialized and made the property of the whole people in past centuries.... The nineteenth century saw the greatest revolution of the world — that of feudalism to industrialism. The twentieth century will see an even greater revolution, that from the control of capital to the control of men.’ To socialize steam! Why not socialize the spots on the sun, or the new River of Doubt in Brazil, or the serum of infantile paralysis? Furthermore, who now controls capital but men? Or is it meant that thriftless men who never accumulate any capital should be put in control of capital created by other men? The purpose could be more quickly accomplished by abolishing all laws against stealing.

VI

The analysis of the whole situation gives us a very clear understanding of what business must face. The essential idea of industrial democracy is equality of industrial rewards. What is being done to reach that objective? Left to purely economic processes, it would be impossible of realization; that is, in the give and take of actual business, it would never happen that the unskilled should receive the same wages as the skilled, or that men of no executive ability should be entrusted with important work of direction in positions of great responsibility, and be given similar rewards. Then, how does industrial democracy intend to gain its ends? Simply by introducing the machinery and methods of political democracy into industrial democracy; by treating all social and industrial grievances politically. Now, note what that means. It transfers the solution of an industrial difficulty from the realm of economics into t he realm of politics. By taking away such a thing, for example, as price-fixing from the realm of economic forces like demand and supply, it hands it over to decision by the political agencies of the state.

Let me illustrate. Railways supplied with capital by private persons serve a quasi-public service, and are properly subjected to governmental supervision. Railways, however, — leaving out of account fraudulent manipulation, — supply transportation supposedly at a price sufficient to cover legitimate expenses and a reasonable rate of dividend on the capital invested. In any ordinary business, when the cost of materials and wages rises, the manufacturer may raise the price of his product to the consumer. Not so with the railways under industrial democracy. The government leaves materials and wages to economic causes which have greatly increased the cost of operating the railways; but political agencies prevent the railways from correspondingly raising the rates for transportation.

Suppose the state were to say to men in private business, that, when wages, rents, coal, and materials rise, they must not raise the prices of their goods. How would they feel? They would think that was going a little too far; and yet very similar proposals are now before us. Let me illustrate by another instance the injection of political agencies into the industrial realm. Not realizing that wages must be paid in some proportion to earning power, our industrial democracy is proposing to enact a law fixing a minimum rate of wages. Although now introduced for women, it is well understood that it will be followed by similar laws for men. It introduces a new and unjustifiable basis of wages, — that wages shall be paid on the shifting basis of what it costs to live, — the thriftless to receive more than the competent.

Because of the growing assumption that it is ‘ social justice’ for the state to take away wealth from those who have and give it to those who have not, we are having some remarkable developments in the practice of taxation. Such needs as roads, bridges, schools, asylums, hospitals, care of the poor, and the like have been generally regarded as desirable objects of taxation. But now we are undoubtedly confronted with a new theory on which taxation is to be extended. Since great numbers of men are poor and are receiving small industrial rewards, it is proposed that the state should by taxation take from the wealth of the country and expend it in ways that would practically increase the returns of the many. This is the fundamental reason for increasing taxes to meet ‘social needs.’ There is an important distinction to be drawn here. On the one hand are those objects which could be carried out only by the power of the state and by some social cooperation beyond the power of individual initiative; on the other hand are those expenditures which, however gracious and appealing, pauperize the classes relieved from desirable selfsacrifice. To-day, it is no exaggeration to say that public expenditures which are intended to catch the votes of the many under the pretense of ‘social justice ’ are becoming enormous. The increasing taxes on business are taking on the character of a portent. What is the end? Assuming the growing intention to expend for ‘social’ purposes, new taxes, like the income tax and the tax on land-value, are devised, but without in any way reducing the burden of existing forms of taxation.

VII

This vague area in which increasing action by the state is urged is the field wherein all the novel projects of the day arise. This vagueness is a paradise for dreamers, sentimentalists, and revolutionists. If I am not mistaken, one of the side-shows of industrial democracy is the ‘ Return of Government to the People.’ If any wrong is being done and the ‘law’ is silent, then the sooner a new law is made to cover a new situation the better; we are all agreed on that. However, it must be admitted that the face of the business world is changing; new methods of doing business are superseding old ones; centres of trade are shifting; distance is annihilated; international relations touch our daily transactions. The regulation of the rights of individuals in their new relations is a complex and serious matter. For instance, the development of irrigation and water-power has forced the creation of a new body of law. Also, for instance, the form of our government, with state and federal laws valid over the same territory, raises a whole series of new problems as to interstate commerce, and the regulation of monopolies. These problems are legion; they are at once new and difficult.

Now, with the history of the growth of civil liberty behind us, with the experience of centuries to warn us, to what kind of persons, and in what way, should we entrust the solution of these problems? The fine flower of AngloSaxon civilization — its gift to the rest of t he world— is representative government. What is implied in that? Simply that difficult matters of law-making should not be left to the untrained, to a hit-and-miss body of all citizens; but that the whole body should pick out the best trained, the best qualified, and tell them to give their whole time to this expert service, since the average citizen, busied in industry, has no time or capacity for specialized study. That is practical, intelligent government for the people and by the people. It is the application of the old principle of division of labor.

Now, on what ground is it advisable to take away the initiative in legislation from representatives of all the people and refer it to the people themselves? On the ground that representatives do not represent? Then, what is the difficulty in selecting those who do? If we say the whole body cannot do this, then we are effectively indicting the intelligence and motives of this general body of voters. If this be accepted, then they are certainly unfit to pass on legislation which requires specialized expertness. There is no satisfactory answer to this argument. Obviously, the only remedy for poor legislation is greater alertness and responsibility in choosing our representatives. That, in my judgment, is the pith of the whole matter raised by the advocates of the initiative and referendum. Popular voting on technical questions of money, banking, labor, price-regulation, and monopolies is the height of absurdity. If you have an attack of appendicitis you do not call in as surgeon the first stranger you meet on the street. Why do we not need the expert on legislation affecting industry as well as the expert in surgery? We are most truly returning the government to the people when we are placing government in the hands of honest and intelligent representatives, and taking it away from the bigoted and the ignorant, whoever they may be.

VIII

In this brief way the salient characteristics of recent thinking known as industrial democracy have been touched upon. Whither are we drifting? What is the meaning to business of this ‘new thought’? By business, of course, is meant legitimate business, thoughtfully and honestly conducted. It is obvious that such business is threatened with very serious misconceptions, with widespread delusions having no economic justification. It is not to the point to say these are illogical or mistaken; saying so does not change the fact of their existence. Fantastic proposals affecting business are urged upon legislatures in order to give the effect of law to some passing wave of sentiment. And we must remember, too, that a great many of these proposals are put forward by enthusiastic radicals who are often quite sincere and honest in their beliefs. Attacks are being made on established institutions; nothing is taken for granted; and the justification for established institutions must be given anew. In short we can hold the bulwarks of constitutional government only by fighting for them. Democracy gives an open forum for all shades of opinion from conservatism to radicalism—and worse; and that is as it should be. If established institutions are the best, they will survive without question; but we are undoubtedly in for a hot debate on fundamentals. I, for one, welcome that discussion; after a full and free discussion the American people have never gone far wrong. A state is dead that cannot bear free discussion. But the situation calls for serious and alert intelligence to watch that the rights of legitimate business are well defended and not weakened. Attacks are not to be regarded as a basis for discouragement, but rather as a stimulus to virile thinking and activity. A dead fish can float downstream; only a live fish can swim upstream.

There is no use disguising the fact of a tendency in modern industrial democracy to an exaggerated doctrine of equality; by that I mean a tendency to regard all men as having a right to equal shares of wealth, independent of the God-given differences in mind and body. Dissatisfaction with existing shares, as now distributed, is general; and few there are who are sufficiently trained to explain why rewards are what they are to-day. If dissatisfaction is general, and if economic insight and training are rare, you have the inevitable field for agitation. Educating the public intelligence is the obvious remedy; but widespread education in economics is a slow process. Meanwhile, gusts of popular opinion, no matter how wrong, are certain to break forth, and the kind of legislators we now choose are likely to follow public opinion in order to retain office. Hence, we are almost certain to have quixotic legislation on business concerns. If wrong, they will do damage. When the radicals are not influenced by reason and experience, there is no teacher so convincing as the merciless blows of disaster. ‘Experience is a dear school, and fools learn therein.’ There is probably no other schoolmaster likely to teach the millions of men unable to think correctly in economics. As to the final result there can be no doubt: the lightheaded agitator of the day and his followers, buoyed up by an inflated gas of passion, may have a brief flight of triumph, to be followed by a destructive fall to cold fact. In this process damage will be done; both conservatives and radicals will suffer; but the middle truth of common sense and right will always emerge, and the fads will sooner or later be forgotten. The extremes of these outbreaks will be diminished in violence just in proportion as public opinion is better educated and better regulated.

IX

The business man, as a rule, is a coward. He is usually willing to compromise in any serious emergency in order to protect his earnings; his credit is probably extended to the limit of the willingness of the banker to lend; his credit and his operations are dependent on his earnings, which are fully known to his banker. Consequently, it is unusual for him to stand out for a principle, or to fight for his rights. How can he as an individual oppose his hundreds or thousands of employees? But if disaster is the inevitable outcome of industrial democracy, he cannot escape it by procrastination. What can he do?

The man who carries on a legitimate business must do the same thing that the employee has done: he must organize, and resort to collective bargaining, for his own salvation. But, it is said, the laws forbid this; while labor unions are being excepted by Congress. A curious hysteria possesses our politicians. The chiefs of the labor organizations sat in the galleries of Congress to watch and mark the votes of members in the interest of the labor vote in coming campaigns for reëlection. To show how far this hysteria has developed, imagine the effect if the chief leaders of big business were to ask for special legislat ion and then openly gather in the galleries of Congress to ‘ spot ’ those who voted against their interests.

Meanwhile, every means should be used to further equality in industry. It should be the aim of every one to see that those of equal capacities should have, as nearly as possible, equal rewards. In the actual whirl of busy production this may not always be so; and our business men are in dut y bound to see that there is no cause for complaint on the score of a desire to get profits at the expense of another human being. The rich and successful are under a moral obligation to the poor and unsuccessful. Much may be done to show the workmen that they are regarded, not as machines to earn profit, but as human beings to be given greater comfort and happiness. In the sense of equal wages for equal capacities, industrial democracy can hope for industrial equality.