"It is based on the fact," said the lad Paul, "that countries differ in climate, natural resources, and other conditions, so that in some it is wholly impossible or very difficult to produce certain needful things, while it is very easy to produce certain other things in greater abundance than is needed. In former times also there were marked differences in the grade of civilization and the condition of the arts in different countries, which still further modified their respective powers in the production of wealth. This being so, it might obviously be for the mutual advantage of countries to exchange with one another what they could produce against what they could not produce at all or only with difficulty, and not merely thus secure many things which otherwise they must go without, but also greatly increase the total effectiveness of their industry by applying it to the sorts of production best fitted to their conditions. In order, however, that the people of the respective countries should actually derive this advantage or any advantage from foreign exchange, it would be necessary that the exchanges should be carried on in the general interest for the purpose of giving the people at large the benefit of them, as is done at the present day, when foreign commerce, like other economic undertakings, is carried on by the governments of the several countries. But there was, of course, no national agency to carry on foreign commerce in that day. The foreign trade, just like the internal processes of production and distribution, was conducted by the capitalists on the profit system. The result was that all the benefits of this fair sounding theory of foreign commerce were either totally nullified or turned into curses, and the international trade relations of the countries const.i.tuted merely a larger field for ill.u.s.trating the baneful effects of the profit system and its power to turn good to evil and 'shut the gates of mercy on mankind.'"

HOW PROFITS NULLIFIED THE BENEFIT OF COMMERCE.

"Ill.u.s.trate, please, the operation of the profit system in international trade."

"Let us suppose," said the boy Paul, "that America could produce grain and other food stuffs with great cheapness and in greater quant.i.ties than the people needed. Suppose, on the contrary, that England could produce food stuffs only with difficulty and in small quant.i.ties. Suppose, however, that England, on account of various conditions, could produce clothing and hardware much more cheaply and abundantly than America. In such a case it would seem that both countries would be gainers if Americans exchanged the food stuffs which it was so easy for them to produce for the clothing and hardware which it was so easy for the English to produce. The result would appear to promise a clear and equal gain for both people. But this, of course, is on the supposition that the exchange should be negotiated by a public agency for the benefit of the respective populations at large. But when, as in those days, the exchange was negotiated wholly by private capitalists competing for private profits at the expense of the communities, the result was totally different.

"The American grain merchant who exported grain to the English would be impelled, by the compet.i.tion of other American grain merchants, to put his price to the English as low as possible, and to do that he would beat down to the lowest possible figure the American farmer who produced the grain. And not only must the American merchant sell as low as his American rivals, but he must also undersell the grain merchants of other grain-producing countries, such as Russia, Egypt, and India. And now let us see how much benefit the English people received from the cheap American grain. We will say that, owing to the foreign food supply, the cost of living declined one half or a third in England. Here would seem a great gain surely; but look at the other side of it. The English must pay for their grain by supplying the Americans with cloth and hardware. The English manufacturers of these things were rivals just as the American grain merchants were--each one desirous of capturing as large a part of the American market as he could. He must therefore, if possible, undersell his home rivals. Moreover, like the American grain merchant, the English manufacturer must contend with foreign rivals. Belgium and Germany made hardware and cloth very cheaply, and the Americans would exchange their grain for these commodities with the Belgians and the Germans unless the English sold cheaper. Now, the main element in the cost of making cloth and hardware was the wages paid for labor. A pressure was accordingly sure to be brought to bear by every English manufacturer upon his workmen to compel them to accept lower wages so that he might undersell his English rivals, and also cut under the German and Belgian manufacturers, who were trying to get the American trade. Now can the English workman live on less wages than before? Plainly he can, for his food supply has been greatly cheapened. Presently, therefore, he finds his wages forced down by as much as the cheaper food supply has cheapened his living, and so finds himself just where he was to start with before the American trade began. And now look again at the American farmer. He is now getting his imported clothing and tools much cheaper than before, and consequently the lowest living price at which he can afford to sell grain is considerably lower than before the English trade began--lower by so much, in fact, as he has saved on his tools and clothing. Of this, the grain merchant, of course, took prompt advantage, for unless he put his grain into the English market lower than other grain merchants, he would lose his trade, and Russia, Egypt, and India stood ready to flood England with grain if the Americans could not bid below them, and then farewell to cheap cloth and tools! So down presently went the price the American farmer received for his grain, until the reduction absorbed all that he had gained by the cheaper imported fabrics and hardware, and he, like his fellow-victim across the sea--the English iron worker or factory operative--was no better off than he was before English trade had been suggested.

"But was he as well off? Was either the American or the English worker as well off as before this interchange of products began, which, if rightly conducted, would have been so greatly beneficial to both? On the contrary, both alike were in important ways distinctly worse off. Each had indeed done badly enough before, but the industrial system on which they depended, being limited by the national borders, was comparatively simple and uncomplex, self-sustaining, and liable only to local and transient disturbances, the effect of which could be to some extent estimated, possibly remedied. Now, however, the English operatives and the American farmer had alike become dependent upon the delicate balance of a complex set of international adjustments liable at any moment to derangements that might take away their livelihood, without leaving them even the small satisfaction of understanding what hurt them. The prices of their labor or their produce were no longer dependent as before upon established local customs and national standards of living, but had become subject to determination by the pitiless necessities of a world-wide compet.i.tion in which the American farmer and the English artisan were forced into rivalship with the Indian ryot, the Egyptian fellah, the half-starved Belgian miner, or the German weaver. In former ages, before international trade had become general, when one nation was down another was up, and there was always hope in looking over seas; but the prospect which the unlimited development of international commerce upon the profit system was opening to mankind the latter part of the nineteenth century was that of a world-wide standard of living fixed by the rate at which life could be supported by the worst-used races.

International trade was already showing itself to be the instrumentality by which the world-wide plutocracy would soon have established its sway if the great Revolution had tarried."

"In the case of the supposed reciprocal trade between England and America, which you have used as an ill.u.s.tration," said the teacher, "you have a.s.sumed that the trade relation was an exchange of commodities on equal terms. In such a case it appears that the effect of the profit system was to leave the ma.s.ses of both countries somewhat worse off than they would have been without foreign trade, the gain on both the American and English side inuring wholly to the manufacturing and trading capitalists. But in fact both countries in a trade relation were not usually on equal terms. The capitalists of one were often far more powerful than those of another, and had a stronger or older economic organization at their service. In that case what was the result?"

"The overwhelming compet.i.tion of the capitalists of the stronger country crushed out the enterprises of the capitalists of the weaker country, the people of which consequently became wholly dependent upon the foreign capitalists for many productions which otherwise would have been produced at home to the profit of home capitalists, and in proportion as the capitalists of the dependent country were thus rendered economically incapable of resistance the capitalists of the stronger country regulated at their pleasure the terms of trade. The American colonies, in 1776, were driven to revolt against England by the oppression resulting from such a relation. The object of founding colonies, which was one of the main ends of seventeenth, eighteenth, and nineteenth century statesmanship, was to bring new communities into this relation of economic va.s.salage to the home capitalists, who, having beggared the home market by their profit, saw no prospect of making more except by fastening their suckers upon outside communities. Great Britain, whose capitalists were strongest of all, was naturally the leader in this policy, and the main end of her wars and her diplomacy for many centuries before the great Revolution was to obtain such colonies, and to secure from weaker nations trade concessions and openings--peaceably if possible, at the mouth of the cannon if necessary."

"How about the condition of the ma.s.ses in a country thus reduced to commercial va.s.salage to the capitalists of another country? Was it necessarily worse than the condition of the ma.s.ses of the superior country?"

"That did not follow at all. We must constantly keep in mind that the interests of the capitalists and of the people were not identical. The prosperity of the capitalists of a country by no means implied prosperity on the part of the population, nor the reverse. If the ma.s.ses of the dependent country had not been exploited by foreign capitalists, they would have been by domestic capitalists. Both they and the working ma.s.ses of the superior country were equally the tools and slaves of the capitalists, who did not treat workingmen any better on account of being their fellow countrymen than if they had been foreigners. It was the capitalists of the dependent country rather than the ma.s.ses who suffered by the suppression of independent business enterprises."

BETWEEN THE DEVIL AND THE DEEP SEA.

"That will do, Paul.--We will now ask some information from you, Helen, as to a point which Paul's last words have suggested. During the eighteenth and nineteenth centuries a bitter controversy raged among our ancestors between two parties in opinion and politics, calling themselves, respectively, the Protectionists and the Free Traders, the former of whom held that it was well to shut out the compet.i.tion of foreign capitalists in the market of a country by a tariff upon imports, while the latter held that no impediment should be allowed to the entirely free course of trade. What have you to say as to the merits of this controversy?"

"Merely," replied the girl called Helen, "that the difference between the two policies, so far as it affected the people at large, reduced itself to the question whether they preferred being fleeced by home or foreign capitalists. Free trade was the cry of the capitalists who felt themselves able to crush those of rival nations if allowed the opportunity to compete with them. Protection was the cry of the capitalists who felt themselves weaker than those of other nations, and feared that their enterprises would be crushed and their profits taken away if free compet.i.tion were allowed. The Free Traders were like a man who, seeing his antagonist is no match for him, boldly calls for a free fight and no favor, while the Protectionist was the man who, seeing himself overmatched, called for the police. The Free Trader held that the natural, G.o.d-given right of the capitalist to shear the people anywhere he found them was superior to considerations of race, nationality, or boundary lines. The Protectionist, on the contrary, maintained the patriotic right of the capitalist to the exclusive shearing of his own fellow-countrymen without interference of foreign capitalists. As to the ma.s.s of the people, the nation at large, it was, as Paul has just said, a matter of indifference whether they were fleeced by the capitalists of their own country under protection or the capitalists of foreign countries under free trade. The literature of the controversy between Protectionists and Free Traders makes this very clear. Whatever else the Protectionists failed to prove, they were able to demonstrate that the condition of the people in free-trade countries was quite as bad as anywhere else, and, on the other hand, the Free Traders were equally conclusive in the proofs they presented that the people in protected countries, other things being equal, were no better off than those in free-trade lands. The question of Protection or Free Trade interested the capitalists only. For the people, it was the choice between the devil and the deep sea."

"Let us have a concrete ill.u.s.tration." said the teacher. "Take the case of England. She was beyond comparison the country of all others in the nineteenth century which had most foreign trade and commanded most foreign markets. If a large volume of foreign trade under conditions practically dictated by its capitalists was under the profit system a source of national prosperity to a country, we should expect to see the ma.s.s of the British people at the end of the nineteenth century enjoying an altogether extraordinary felicity and general welfare as compared with that of other peoples or any former people, for never before did a nation develop so vast a foreign commerce. What were the facts?"

"It was common," replied the girl, "for our ancestors in the vague and foggy way in which they used the terms 'nation' and 'national' to speak of Great Britain as rich. But it was only her capitalists, some scores of thousands of individuals among some forty million people, who were rich.

These indeed had incredible acc.u.mulations, but the remainder of the forty millions--the whole people, in fact, save an infinitesimal fraction--were sunk in poverty. It is said that England had a larger and more hopeless pauper problem than any other civilized nation. The condition of her working ma.s.ses was not only more wretched than that of many contemporary people, but was worse, as proved by the most careful economic comparisons, than it had been in the fifteenth century, before foreign trade was thought of. People do not emigrate from a land where they are well off, but the British people, driven out by want, had found the frozen Canadas and the torrid zone more hospitable than their native land. As an ill.u.s.tration of the fact that the welfare of the working ma.s.ses was in no way improved when the capitalists of a country commanded foreign markets, it is interesting to note the fact that the British emigrant was able to make a better living in English colonies whose markets were wholly dominated by English capitalists than he had been at home as the employee of those capitalists. We shall remember also that Malthus, with his doctrine that it was the best thing that could happen to a workingman not to be born, was an Englishman, and based his conclusions very logically upon his observation of the conditions of life for the ma.s.ses in that country which had been more successful than any other in any age in monopolizing the foreign markets of the world by its commerce.

"Or," the lad went on, "take Belgium, that old Flemish land of merchants, where foreign trade had been longer and more steadily used than in any other European country. In the latter part of the nineteenth century the ma.s.s of the Belgian people, the hardest-worked population in the world, was said to have been, as a rule, without adequate food--to be undergoing, in short, a process of slow starvation. They, like the people of England and the people of Germany, are proved, by statistical calculations upon the subject that have come down to us, to have been economically very much better off during the fifteenth and early part of the sixteenth century, when foreign trade was hardly known, than they were in the nineteenth. There was a possibility before foreign trade for profit began that a population might obtain some share of the richness of a bountiful land just from the lack of any outlet for it. But with the beginning of foreign commerce, under the profit system, that possibility vanished. Thenceforth everything good or desirable, above what might serve for the barest subsistence of labor, was systematically and exhaustively gathered up by the capitalists, to be exchanged in foreign lands for gold and gems, silks, velvets, and ostrich plumes for the rich.

As Goldsmith had it:

"Around the world each needful product flies For all the luxuries the world supplies."

"To what has the struggle of the nations for foreign markets in the nineteenth century been aptly compared?"

"To a contest between galleys manned by slaves, whose owners were racing for a prize."

"In such a race, which crew was likely to fare worse, that of the winning or the losing galley?"

"That of the winning galley, by all means," replied the girl, "for the supposition is that, other conditions being equal, it was the more sorely scourged."

"Just so," said the teacher, "and on the same principle, when the capitalists of two countries contended for the supplying of a foreign market it was the workers subject to the successful group of capitalists who were most to be pitied, for, other conditions being equal, they were likely to be those whose wages had been cut lowest and whose general condition was most degraded."

"But tell us," said the teacher, "were there not instances of a general poverty in countries having no foreign trade as great as prevailed in the countries you have mentioned?"

"Dear me, yes!" replied the girl. "I have not meant to convey any impression that because the tender mercies of the foreign capitalists were cruel, those of the domestic capitalist were any less so. The comparison is merely between the operation of the profit system on a larger or smaller scale. So long as the profit system was retained, it would be all one in the end, whether you built a wall around a country and left the people to be exploited exclusively by home capitalists, or threw the wall down and let in the foreigners."

CHAPTER XXVII.

HOSTILITY OF A SYSTEM OF VESTED INTERESTS TO IMPROVEMENT.

"Now, Florence," said the teacher, "with your a.s.sistance we will take up the closing topic in our consideration of the economic system of our fathers--namely, its hostility to invention and improvement. It has been our painful duty to point out numerous respects in which our respected ancestors were strangely blind to the true character and effects of their economic inst.i.tutions, but no instance perhaps is more striking than this. Far from seeing the necessary antagonism between private capitalism and the march of improvement which is so plain to us, they appear to have sincerely believed that their system was peculiarly favorable to the progress of invention, and that its advantage in this respect was so great as to be an important set-off to its admitted ethical defects. Here there is decidedly a broad difference in opinion, but fortunately the facts are so well authenticated that we shall have no difficulty in concluding which view is correct.

"The subject divides itself into two branches: First, the natural antagonism of the old system to economic changes; and, second, the effect of the profit principle to minimize if not wholly to nullify the benefit of such economic improvements as were able to overcome that antagonism so far as to get themselves introduced.--Now, Florence, tell us what there was about the old economic system, the system of private capitalism, which made it const.i.tutionally opposed to changes in methods."

"It was," replied the girl, "the fact that it consisted of independent vested interests without any principle of coordination or combination, the result being that the economic welfare of every individual or group was wholly dependent upon his or its particular vested interest without regard to others or to the welfare of the whole body."

"Please bring out your meaning by comparing our modern system in the respect you speak of with private capitalism."

"Our system is a strictly integrated one--that is to say, no one has any economic interest in any part or function of the economic organization which is distinct from his interest in every other part and function. His only interest is in the greatest possible output of the whole. We have our several occupations, but only that we may work the more efficiently for the common fund. We may become very enthusiastic about our special pursuit, but as a matter of sentiment only, for our economic interests are no more dependent upon our special occupation than upon any other. We share equally in the total product, whatever it is."

"How does the integrated character of the economic system affect our att.i.tude toward improvements or inventions of any sort in economic processes?"

"We welcome them with eagerness. Why should we not? Any improvement of this sort must necessarily redound to the advantage of every one in the nation and to every one's advantage equally. If the occupation affected by the invention happens to be our particular employment we lose nothing, though it should make that occupation wholly superfluous. We might in that case feel a little sentimental regret over the pa.s.sing away of old habits, but that is all. No one's substantial interests are in any way more identified with one pursuit than another. All are in the service of the nation, and it is the business and interest of the nation to see that every one is provided with other work as soon as his former occupation becomes unnecessary to the general weal, and under no circ.u.mstances is his rate of maintenance affected. From its first production every improvement in economic processes is therefore an unalloyed blessing to all. The inventor comes bringing a gift of greater wealth or leisure in his hand for every one on earth, and it is no wonder that the people's grat.i.tude makes his reward the most enviable to be won by a public benefactor."

"Now, Florence, tell us in what way the mult.i.tude of distinct vested interests which made up private capitalism operated to produce an antagonism toward economic inventions and improvements."

HOW PROGRESS ANTAGONIZED VESTED INTERESTS.

"As I have said," replied the girl, "everybody's interest was wholly confined to and bound up with the particular occupation he was engaged in. If he was a capitalist, his capital was embarked in it; if he was an artisan, his capital was the knowledge of some particular craft or part of a craft, and he depended for his livelihood on the demand for the sort of work he had learned how to do. Neither as capitalist or artisan, as employer or employee, had he any economic interest or dependence outside of or larger than his special business. Now, the effect of any new idea, invention, or discovery for economic application is to dispense more or less completely with the process formerly used in that department, and so far to destroy the economic basis of the occupations connected with that business. Under our system, as I have said, that means no loss to anybody, but simply a shifting of workers, with a net gain in wealth or leisure to all; but then it meant ruin to those involved in the change.

The capitalist lost his capital, his plant, his investments more or less totally, and the workingmen lost their means of livelihood and were thrown on what you well called the cold charity of the world--a charity usually well below zero; and this loss without any rebate or compensation whatever from the public at large on account of any general benefit that might be received from the invention. It was complete. Consequently, the most beneficent of inventions was cruel as death to those who had been dependent for living or for profit on the particular occupations it affected. The capitalists grew gray from fear of discoveries which in a day might turn their costly plants to old iron fit only for the junkshop, and the nightmare of the artisan was some machine which should take bread from his children's mouths by enabling his employer to dispense with his services.

"Owing to this division of the economic field into a set of vested personal and group interests wholly without coherency or integrating idea, each standing or falling by and for itself, every step in the advance of the arts and sciences was gained only at the cost of an amount of loss and ruin to particular portions of the community such as would be wrought by a blight or pestilence. The march of invention was white with the bleaching bones of innumerable hecatombs of victims. The spinning jenny replaced the spinning wheel, and famine stalked through English villages. The railroad supplanted the stagecoach, and a thousand hill towns died while as many sprang up in the valleys, and the farmers of the East were pauperized by the new agriculture of the West. Petroleum succeeded whale-oil, and a hundred seaports withered. Coal and iron were found in the South, and the gra.s.s grew in the streets of the Northern centers of iron-making. Electricity succeeded steam, and billions of railroad property were wiped out. But what is the use of lengthening a list which might be made interminable? The rule was always the same: every important invention brought uncompensated disaster to some portion of the people. Armies of bankrupts, hosts of workers forced into vagabondage, a sea of suffering of every sort, made up the price which our ancestors paid for every step of progress.

"Afterward, when the victims had been buried or put out of the way, it was customary with our fathers to celebrate these industrial triumphs, and on such occasions a common quotation in the mouths of the orators was a line of verse to the effect that--

"Peace hath her victories not less renowned than those of war.

The orators were not wont to dwell on the fact that these victories of what they so oddly called peace were usually purchased at a cost in human life and suffering quite as great as--yes, often greater than--those of so-called war. We have all read of Tamerlane's pyramid at Damascus made of seventy thousand skulls of his victims. It may be said that if the victims of the various inventions connected with the introduction of steam had consented to contribute their skulls to a monument in honor of Stevenson or Arkwright it would dwarf Tamerlane's into insignificance.

Tamerlane was a beast, and Arkwright was a genius sent to help men, yet the hideous juggle of the old-time economic system made the benefactor the cause of as much human suffering as the brutal conqueror. It was bad enough when men stoned and crucified those who came to help them, but private capitalism did them a worse outrage still in turning the gifts they brought into curses."

"And did the workers and the capitalists whose interests were threatened by the progress of invention take practical means of resisting that progress and suppressing the inventions and the inventors?"

"They did all they could in that way. If the working-men had been strong enough they would have put an absolute veto on inventions of any sort tending to diminish the demand for crude hand labor in their respective crafts. As it was, they did all it was possible for them to accomplish in that direction by trades-union dictation and mob violence; nor can any one blame the poor fellows for resisting to the utmost improvements which improved them out of the means of livelihood. A machine gun would have been scarcely more deadly if turned upon the workingmen of that day than a labor-saving machine. In those bitter times a man thrown out of the employment he had fitted himself for might about as well have been shot, and if he were not able to get any other work, as so many were not, he would have been altogether better off had he been killed in battle with the drum and fife to cheer him and the hope of a pension for his family.

Only, of course, it was the system of private capitalism and not the labor-saving machine which the workingmen should have attacked, for with a rational economic system the machine would have been wholly beneficent."

"How did the capitalists resist inventions?"

"Chiefly by negative means, though much more effective ones than the mob violence which the workingmen used. The initiative in everything belonged to the capitalists. No inventor could introduce an invention, however excellent, unless he could get capitalists to take it up, and this usually they would not do unless the inventor relinquished to them most of his hopes of profit from the discovery. A much more important hindrance to the introduction of inventions resulted from the fact that those who would be interested in taking them up were those already carrying on the business the invention applied to, and their interest was in most cases to suppress an innovation which threatened to make obsolete the machinery and methods in which their capital was invested. The capitalist had to be fully a.s.sured not only that the invention was a good one in itself, but that it would be so profitable to himself personally as to make up for all the damage to his existing capital before he would touch it. When inventions wholly did away with processes which had been the basis of profit-charging it was often suicidal for the capitalist to adopt them. If they could not suppress such inventions in any other way, it was their custom to buy them up and pigeonhole them. After the Revolution there were found enough of these patents which had been bought up and pigeonholed in self-protection by the capitalists to have kept the world in novelties for ten years if nothing more had been discovered. One of the most tragical chapters in the history of the old order is made up of the difficulties, rebuffs, and lifelong disappointments which inventors had to contend with before they could get their discoveries introduced, and the frauds by which in most cases they were swindled out of the profits of them by the capitalists through whom their introduction was obtained. These stories seem, indeed, well-nigh incredible nowadays, when the nation is alert and eager to foster and encourage every stirring of the inventive spirit, and every one with any sort of new idea can command the offices of the administration without cost to safeguard his claim to priority and to furnish him all possible facilities of information, material, and appliances to perfect his conception."

"Considering," said the teacher, "that these facts as to the resistance offered by vested interests to the march of improvement must have been even more obvious to our ancestors than to us, how do you account for the belief they seem to have sincerely held that private capitalism as a system was favorable to invention?"