"A glut of men," replied the boy Robert. "Lack of buying power on the part of the people, whether from lack of employment or lowered wages, meant less demand for products, and that meant less work for producers.

Clogged storehouses meant closed factories and idle populations of workers who could get no work--that is to say, the glut in the goods market caused a corresponding glut in the labor or man market. And as the glut in the goods market stimulated compet.i.tion among the capitalists to sell their goods, so likewise did the glut in the labor market stimulate an equally desperate compet.i.tion among the workers to sell their labor.

The capitalists who could not find buyers for their goods lost their money indeed, but those who had nothing to sell but their strength and skill, and could find none to buy, must perish. The capitalist, unless his goods were perishable, could wait for a market, but the workingman must find a buyer for his labor at once or die. And in respect to this inability to wait for a market, the farmer, while technically a capitalist, was little better off than the wage-earner, being, on account of the smallness of his capital, almost as unable to withhold his product as the workingman his labor. The pressing necessity of the wage-earner to sell his labor at once on any terms and of the small capitalist to dispose of his product was the means by which the great capitalists were able steadily to force down the rate of wages and the prices paid for their product to the first producers."

"And was it only among the wage-earners and the small producers that this glut of men existed?"

"On the contrary, every trade, every occupation, every art, and every profession, including the most learned ones, was similarly overcrowded, and those in the ranks of each regarded every fresh recruit with jealous eyes, seeing in him one more rival in the struggle for life, making it just so much more difficult than it had been before. It would seem that in those days no man could have had any satisfaction in his labor, however self-denying and arduous, for he must always have been haunted by the feeling that it would have been kinder to have stood aside and let another do the work and take the pay, seeing that there was not work and pay for all."

"Tell us, Robert, did not our ancestors recognize the facts of the situation you have described? Did they not see that this glut of men indicated something out of order in the social arrangements?"

"Certainly. They professed to be much distressed over it. A large literature was devoted to discussing why there was not enough work to go around in a world in which so much more work evidently needed to be done as indicated by its general poverty. The Congresses and Legislatures were constantly appointing commissions of learned men to investigate and report on the subject."

"And did these learned men ascribe it to its obvious cause as the necessary effect of the profit system to maintain and constantly increase a gap between the consuming and producing power of the community?"

"Dear me, no! To have criticised the profit system would have been flat blasphemy. The learned men called it a problem--the problem of the unemployed--and gave it up as a conundrum. It was a favorite way our ancestors had of dodging questions which they could not answer without attacking vested interests to call them problems and give them up as insolvable mysteries of Divine Providence."

"There was one philosopher, Robert--an Englishman--who went to the bottom of this difficulty of the glut of men resulting from the profit system.

He stated the only way possible to avoid the glut, provided the profit system was retained. Do you remember his name?"

"You mean Malthus, I suppose."

"Yes. What was his plan?"

"He advised poor people, as the only way to avoid starvation, not to get born--that is, I mean he advised poor people not to have children. This old fellow, as you say, was the only one of the lot who went to the root of the profit system, and saw that there was not room for it and for mankind on the earth. Regarding the profit system as a G.o.d-ordained necessity, there could be no doubt in his mind that it was mankind which must, under the circ.u.mstances, get off the earth. People called Malthus a cold-blooded philosopher. Perhaps he was, but certainly it was only common humanity that, so long as the profit system lasted, a red flag should be hung out on the planet, warning souls not to land except at their own risk."

EMILY SHOWS THE NECESSITY OF WASTE PIPES.

"I quite agree with you, Robert," said the teacher, "and now, Emily, we will ask you to take us in charge as we pursue a little further this interesting, if not very edifying theme. The economic system of production and distribution by which a nation lives may fitly be compared to a cistern with a supply pipe, representing production, by which water is pumped in; and an escape pipe, representing consumption, by which the product is disposed of. When the cistern is scientifically constructed the supply pipe and escape pipe correspond in capacity, so that the water may be drawn off as fast as supplied, and none be wasted by overflow.

Under the profit system of our ancestors, however, the arrangement was different. Instead of corresponding in capacity with the supply pipe representing production, the outlet representing consumption was half or two thirds shut off by the water-gate of profits, so that it was not able to carry off more than, say, a half or a third of the supply that was pumped into the cistern through the feed pipe of production. Now, Emily, what would be the natural effect of such a lack of correspondence between the inlet and the outlet capacity of the cistern?"

"Obviously," replied the girl who answered to the name of Emily, "the effect would be to clog the cistern, and compel the pumps to slow down to half or one third of their capacity--namely, to the capacity of the escape pipe."

"But," said the teacher, "suppose that in the case of the cistern used by our ancestors the effect of slowing down the pump of production was to diminish still further the capacity of the escape pipe of consumption, already much too small, by depriving the working ma.s.ses of even the small purchasing power they had before possessed in the form of wages for labor or prices for produce."

"Why, in that case," replied the girl, "it is evident that since slowing down production only checked instead of hastening relief by consumption, there would be no way to avoid a stoppage of the whole service except to relieve the pressure in the cistern by opening waste pipes."

"Precisely so. Well, now, we are in a position to appreciate how necessary a part the waste pipes played in the economic system of our forefathers. We have seen that under that system the bulk of the people sold their labor or produce to the capitalists, but were unable to buy back and consume but a small part of the result of that labor or produce in the market, the rest remaining in the hands of the capitalists as profits. Now, the capitalists, being a very small body numerically, could consume upon their necessities but a petty part of these acc.u.mulated profits, and yet, if they did not get rid of them somehow, production would stop, for the capitalists absolutely controlled the initiative in production, and would have no motive to increase acc.u.mulations they could not dispose of. In proportion, moreover, as the capitalists from lack of use for more profits should slacken production, the ma.s.s of the people, finding none to hire them, or buy their produce to sell again, would lose what little consuming power they had before, and a still larger acc.u.mulation of products be left on the capitalists' hands. The question then is, How did the capitalists, after consuming all they could of their profits upon their own necessities, dispose of the surplus, so as to make room for more production?"

"Of course," said the girl Emily, "if the surplus products were to be so expended as to relieve the glut, the first point was that they must be expended in such ways that there should be no return, for them. They must be absolutely wasted--like water poured into the sea. This was accomplished by the use of the surplus products in the support of bodies of workers employed in unproductive kinds of labor. This waste labor was of two sorts--the first was that employed in wasteful industrial and commercial compet.i.tion; the second was that employed in the means and services of luxury."

"Tell us about the wasteful expenditure of labor in compet.i.tion."

"That was through the undertaking of industrial and commercial enterprises which were not called for by any increase in consumption, their object being merely the displacement of the enterprises of one capitalist by those of another."

"And was this a very large cause of waste?"

"Its magnitude may be inferred from the saying current at the time that ninety-five per cent of industrial and commercial enterprises failed, which merely meant that in this proportion of instances capitalists wasted their investments in trying to fill a demand which either did not exist or was supplied already. If that estimate were even a remote suggestion of the truth, it would serve to give an idea of the enormous amounts of acc.u.mulated profits which were absolutely wasted in compet.i.tive expenditure. And it must be remembered also that when a capitalist succeeded in displacing another and getting away his business the total waste of capital was just as great as if he failed, only in the one case it was the capital of the previous investor that was destroyed instead of the capital of the newcomer. In every country which had attained any degree of economic development there were many times more business enterprises in every line than there was business for, and many times as much capital already invested as there was a return for. The only way in which new capital could be put into business was by forcing out and destroying old capital already invested. The ever-mounting aggregation of profits seeking part of a market that was prevented from increasing by the effect of those very profits, created a pressure of compet.i.tion among capitalists which, by all accounts that come down to us, must have been like a conflagration in its consuming effects upon capital.

"Now tell us something about the other great waste of profits by which the pressure in the cistern was sufficiently relieved to permit production to go on--that is to say, the expenditure of profits for the employment of labor in the service of luxury. What was luxury?"

"The term luxury, in referring to the state of society before the Revolution, meant the lavish expenditure of wealth by the rich to gratify a refined sensualism, while the ma.s.ses of the people were suffering lack of the primary necessities."

"What were some of the modes of luxurious expenditure indulged in by the capitalists?"

"They were unlimited in variety, as, for example, the construction of costly palaces for residence and their decoration in royal style, the support of great retinues of servants, costly supplies for the table, rich equipages, pleasure ships, and all manner of boundless expenditure in fine raiment and precious stones. Ingenuity was exhausted in contriving devices by which the rich might waste the abundance the people were dying for. A vast army of laborers was constantly engaged in manufacturing an infinite variety of articles and appliances of elegance and ostentation which mocked the unsatisfied primary necessities of those who toiled to produce them."

"What have you to say of the moral aspect of this expenditure for luxury?"

"If the entire community had arrived at that stage of economic prosperity which would enable all alike to enjoy the luxuries equally," replied the girl, "indulgence in them would have been merely a question of taste. But this waste of wealth by the rich in the presence of a vast population suffering lack of the bare necessaries of life was an ill.u.s.tration of inhumanity that would seem incredible on the part of civilized people were not the facts so well substantiated. Imagine a company of persons sitting down with enjoyment to a banquet, while on the floors and all about the corners of the banquet hall were groups of fellow-beings dying with want and following with hungry eyes every morsel the feasters lifted to their mouths. And yet that precisely describes the way in which the rich used to spend their profits in the great cities of America, France, England, and Germany before the Revolution, the one difference being that the needy and the hungry, instead of being in the banquet room itself, were just outside on the street."

"It was claimed, was it not, by the apologists of the luxurious expenditure of the capitalists that they thus gave employment to many who would otherwise have lacked it?"

"And why would they have lacked employment? Why were the people glad to find employment in catering to the luxurious pleasures and indulgences of the capitalists, selling themselves to the most frivolous and degrading uses? It was simply because the profit taking of these same capitalists, by reducing the consuming power of the people to a fraction of its producing power, had correspondingly limited the field of productive employment, in which under a rational system there must always have been work for every hand until all needs were satisfied, even as there is now.

In excusing their luxurious expenditure on the ground you have mentioned, the capitalists pleaded the results of one wrong to justify the commission of another."

"The moralists of all ages," said the teacher, "condemned the luxury of the rich. Why did their censures effect no change?"

"Because they did not understand the economics of the subject. They failed to see that under the profit system the absolute waste of the excess of profits in unproductive expenditure was an economic necessity, if production was to proceed, as you showed in comparing it with the cistern. The waste of profits in luxury was an economic necessity, to use another figure, precisely as a running sore is a necessary vent in some cases for the impurities of a diseased body. Under our system of equal sharing, the wealth of a community is freely and equally distributed among its members as is the blood in a healthy body. But when, as under the old system, that wealth was concentrated in the hands of a portion of the community, it lost its vitalizing quality, as does the blood when congested in particular organs, and like that becomes an active poison, to be got rid of at any cost. Luxury in this way might be called an ulcer, which must be kept open if the profit system was to continue on any terms."

"You say," said the teacher, "that in order that production should go on it was absolutely necessary to get the excess of profits wasted in some sort of unproductive expenditure. But might not the profit takers have devised some way of getting rid of the surplus more intelligent than mere compet.i.tion to displace one another, and more consistent with humane feeling than wasting wealth upon refinements of sensual indulgence in the presence of a needy mult.i.tude?"

"Certainly. If the capitalists had cared at all about the humane aspect of the matter, they could have taken a much less demoralizing method in getting rid of the obstructive surplus. They could have periodically made a bonfire of it as a burnt sacrifice to the G.o.d Profit, or, if they preferred, it might have been carried out in scows beyond soundings and dumped there."

"It is easy to see," said the teacher, "that from a moral point of view such a periodical bonfire or dump would have been vastly more edifying to G.o.ds and men than was the actual practice of expending it in luxuries which mocked the bitter want of the ma.s.s. But how about the economic operation of this plan?"

"It would have been as advantageous economically as morally. The process of wasting the surplus profits in compet.i.tion and luxury was slow and protracted, and meanwhile productive industry languished and the workers waited in idleness and want for the surplus to be so far reduced as to make room for more production. But if the surplus at once, on being ascertained, were destroyed, productive industry would go right on."

"But how about the workmen employed by the capitalists in ministering to their luxuries? Would they not have been thrown out of work if luxury had been given up?"

"On the contrary, under the bonfire system there would have been a constant demand for them in productive employment to provide material for the blaze, and that surely would have been a far more worthy occupation than helping the capitalists to consume in folly the product of their brethren employed in productive industry. But the greatest advantage of all which would have resulted from the subst.i.tution of the bonfire for luxury remains to be mentioned. By the time the nation had made a few such annual burnt offerings to the principle of profit, perhaps even after the first one, it is likely they would begin to question, in the light of such vivid object lessons, whether the moral beauties of the profit system were sufficient compensation for so large an economic sacrifice."

CHARLES REMOVES AN APPREHENSION.

"Now, Charles," said the teacher, "you shall help us a little on a point of conscience. We have, one and another, told a very bad story about the profit system, both in its moral and its economic aspects. Now, is it not possible that we have done it injustice? Have we not painted too black a picture? From an ethical point of view we could indeed scarcely have done so, for there are no words strong enough to justly characterize the mock it made of all the humanities. But have we not possibly a.s.serted too strongly its economic imbecility and the hopelessness of the world's outlook for material welfare so long as it should be tolerated? Can you rea.s.sure us on this point?"

"Easily," replied the lad Charles. "No more conclusive testimony to the hopelessness of the economic outlook under private capitalism could be desired than is abundantly given by the nineteenth-century economists themselves. While they seemed quite incapable of imagining anything different from private capitalism as the basis of an economic system, they cherished no illusions as to its operation. Far from trying to comfort mankind by promising that if present ills were bravely borne matters would grow better, they expressly taught that the profit system must inevitably result at some time not far ahead in the arrest of industrial progress and a stationary condition of production."

"How did they make that out?"

"They recognized, as we do, the tendency under private capitalism of rents, interest, and profits to acc.u.mulate as capital in the hands of the capitalist cla.s.s, while, on the other hand, the consuming power of the ma.s.ses did not increase, but either decreased or remained practically stationary. From this lack of equilibrium between production and consumption it followed that the difficulty of profitably employing capital in productive industry must increase as the acc.u.mulations of capital so disposable should grow. The home market having been first, glutted with products and afterward the foreign market, the compet.i.tion of the capitalists to find productive employment for their capital would lead them, after having reduced wages to the lowest possible point, to bid for what was left of the market by reducing their own profits to the minimum point at which it was worth while to risk capital. Below this point more capital would not be invested in business. Thus the rate of wealth production would cease to advance, and become stationary."

"This, you say, is what the nineteenth-century economists themselves taught concerning the outcome of the profit system?"

"Certainly. I could, quote from their standard books any number of pa.s.sages foretelling this condition of things, which, indeed, it required no prophet to foretell."

"How near was the world--that is, of course, the nations whose industrial evolution had gone farthest--to this condition when the Revolution came?"

"They were apparently on its verge. The more economically advanced countries had generally exhausted their home markets and were struggling desperately for what was left of foreign markets. The rate of interest, which indicated the degree to which capital had become glutted, had fallen in England to two per cent and in America within thirty years had sunk from seven and six to five and three and four per cent, and was falling year by year. Productive industry had become generally clogged, and proceeded by fits and starts. In America the wage-earners were becoming proletarians, and the farmers fast sinking into the state of a tenantry. It was indeed the popular discontent caused by these conditions, coupled with apprehension of worse to come, which finally roused the people at the close of the nineteenth century to the necessity of destroying private capitalism for good and all."