in collaboration with
The Mutualist Associates
What is Mutualism?
CHAPTER I. PRIVILEGE AND AUTHORITY
In the consideration of any system that may be offered for the eradication of the evils that have grown up in the social and economic life of peoples, it is necessary to consider the beginning of those evils. When men became able to accumulate a surplus - that is, when the question of property arose - then the trouble began; and it has remained with the race to the present time.
The first trouble that arose from property was the attempt of one man (or group of men) to take the product of another's labour.
Since this started, it has been going on, in varying degree, continuously. From sheer violence or stealth, to the present refined means adopted by political institutions, the element of force has always been present, either directly and boldly, or indirectly and invisibly.
From the simple effort of one individual to overcome and rob another, there soon developed the attempt of one clan, tribe, or group to conquer and subjugate another group, thus not merely taking the occasional accumulation of property of a person or persons, but also carrying off and enslaving the persons themselves. From that first primitive act of conquest and subjugation - that first act of "governing" as it is known today - came what we now call the State. And through all the ages the State has retained the same old characteristic: it started in conquest, and that characteristic still dominates; it started, by plundering, and that (compulsory taxation) continues to be one of its chief activities.
The functions of the State, then, were to overcome and subdue persons, secure and maintain dominion over territory, preserve itself against revolt from within and aggression from without, and, in short, to insure its existence. To do this effectively, it has had to rob, not only the subjugated outsider, but its own component parts - under the euphemistic name of taxation; it has had to crush, not merely the invading enemy, but likewise its own subjects, through punishment for treason, when they too strenuously differ from its policies. In other words, it has become the chief aggressor of all history.
The State is symbolic of power; over its special domain, and, as far as its individual subjects are concerned, it is the embodiment of omnipotence, and from power naturally flows privilege. If the State may take, it may give; if it may punish, it may reward; if it may be tyrannical, it may be beneficent. So, in a rough way, its actions may be compensatory. It takes from one and gives to another; it oppresses one that it may favor another. Hence, under any State, no matter what its form, there are some persons and classes who are given privileges that all are not permitted to enjoy; in fact, and in almost all cases, they are privileges to prey upon the unprivileged persons or classes.
The modern State, with a king at its head, reached its highest development in France in the reign of Louis XIV (1643-1715), when he was able to say, "I am the State"; but in England, where the power of the king to rule over the whole country had been recognized earlier, it was first successfully challenged by the great Puritan chieftains, and Charles I lost his head (1649).
Forty years later came the great Revolution - bloodless, at that - and, with the advent of William of Orange, kingly autocracy in England was permanently curbed.
In France, where this centralization of power had come later, it lasted longer, and not until 1793 was the king of France beheaded.
The revolution which purged France did not stop with sweeping away the power of kings, but included killing and driving out the nobility, confiscating their lands and giving these lands to the farmers.
Thus, within a period of some two hundred years, political rulership, in the more advanced States of Western Europe, went from the king to the "people'', and economic rulership was transferred from the lords of the land to the employers of labour in the town.
While the condition of the worker has improved, the noble dream of the eighteenth century inventors - that machinery would take up all the burdens of labour and carry them like the genii in the Oriental story - has not yet been realized.
Authority is now more responsible and responsive to the people, but the largest part of the populace is still dominated by it. With its increasing multiformity authority has become more and more extended. It is no longer a despotic king, but an even more irresponsible majority, acting through its organ, the State, that wields political power, while the landlord and the capitalist exercise economic domination far greater than the king once arrogated to himself.
In the American Revolution, the kingly power was entirely thrown off and no 'nobility' ever ruled. So in the United States the capitalist has come to be the chief autocrat to reckon with.
With great natural resources and with an active and enterprising people, the growth of industry in America has gone on at a swifter rate than in the older countries, and, while all lines of business have built up large fortunes, each period in the history of the United States has marked certain kinds of business as making the super-fortunes.
In the third quarter of the nineteenth century the dry-goods king was supreme. Dry-goods merchandising was the most successful as well as the most genteel business of that period, and the Stewarts and Claflins were the rich men of that day. Then came the booms of the western mining camps, with their bonanzas of gold, silver, and, later, copper - and a new flock of millionaires sprang up.
The railroad magnate followed, but he, in turn, had to yield first place to the oil and steel businesses, with the automobile finally supplanting the reign of them all.
The dry-goods merchant was merely selling finished products, which was a simple business compared to those that followed. The transcontinental railroads were subsidized by the government, receiving money and land grants of enormous value. Their methods of discrimination between shippers and localities, their fights against rivals, their wars against unions of their employees, and finally sharp practices among the members of the corporations themselves, until the roads went into the hands of receivers, make a history of exploitation and banditry almost unparalleled.
The oil business used many of the tactics of the railroads in crushing rivals and favouring others by secret rebates, and resulted in the growth of the Standard Oil companies, that now control one-half the oil production of the country.
The United States Steel Corporation, formed by the combination of over two hundred different companies engaged in manufacturing steel, turns out about one-half of the nation's steel products. The Ford Motor Company furnishes about the same proportion of automobiles.
The Growth of Monopoly (^)
This industrial structure represents a magnitude of wealth and power in this country that makes that of the old-time princes and nobles small in comparison.
It assembles a large amount of capital, it draws heavily on our natural resources, it is protected from foreign competition, and it has the exclusive use of many ideas, inventions, and processes. Simply stated, these features appear to be the stable pillars of a great civilization. Upon examination we find that within each are the sinews of a monopoly created and fostered by the State.
The first and most ruinous of these monopolies is the money monopoly, a privilege which allows the holders of the circulating medium (gold) to exact interest for its daily use.
Thousands of people are now deterred from going into business by the exorbitant rates they must pay for the necessary credit, and millions of consumers pay billions in interest added onto the prices of all the things they buy.
The land monopoly - or the enforcement by government of land titles which do not rest upon occupancy and use - maintains the usury of rent, which affects every man, woman and child in the country.
Finally, there are tariffs, patents, and copyrights - the first a monopoly which fosters production at high prices under unfavourable conditions, for which labour must eventually pay; the second a prevention of competitive enterprise in ideas and invention.
These monopolies should be particularly noted, as they will be referred to later, when the source of their power will be traced, the processes of its expansion examined, and, finally, the method of its dissolution outlined. We may here briefly examine that power as it is measured by its reward in dollars and cents in annual income in the United States.
No statistician has ever succeeded in dividing the annual income (produced wealth) of the United States between that income which results from individual effort and labour, and that which results from privilege and monopoly. The National (Bureau of Economic Research, a privately endowed organisation, and the Federal Trade Commission have compiled sufficient information to serve as a basis for an estimate. The report of the latter, National Wealth and Income, Washington, 1926 (page 199), separates the distribution of income into four divisions:
|Wages and Salaries||
|Profits of Business||
|Capital Gain, sale of real estate, securities, assets, etc.||
|Rents, Royalties, Interest and Dividends||
These are the averages of the percentages shown for the years 1918-1923.
The item, Profits of Business, includes that profit which comes from enterprise and efficiency in the management of business as well as that which results from the legal privileges and monopolies that individual business firms enjoy. We may call the first the Profit of Enterprise, and the second the Profit of Privilege, i.e. - the profits resulting from tariffs, franchises, and other special privileges. The amount of these two kinds of profit is not estimated by either of the organisations mentioned, but there are other data available through which we can make an approximate separation.
If we examine the tariff schedules in effect and those that have been in effect for the last fifty years, we observe that on the whole the tariff surcharge included in the price of consumers' goods has averaged about one-third of the total price. It seems safe to estimate that at least one-third of this, or 11 percent of the total price of goods manufactured and sold in the United States, is charged as a profit on the tariff privilege.
The schedules filed with the various public utility commissions; notably Illinois, Virginia, and New York, indicate that from one-eighth to one-tenth of the total rates paid for public utilities is paid as a charge for the "good will" and privilege that results from franchises.
The same thing is true in transportation rates, as shown in schedules filed by the railroads with the Inter-State Commerce Commission and approved by it.
Thus it appears that we shall be very conservative if we estimate that there is a 10 per cent profit on the gross income from operations of manufacture, trade and transportation, and the public utilities that may be classified under the heading of privileged profit.
The gross income for all industries is given in the Trade Commission Report, National Wealth and Income (page 217), only for the year 1922, but figures given there are in other respects not very different from the six years averages we are considering.
While there is also profit of legal privilege in agriculture, construction, mining, and other industries, we omit them so that our calculation may be perfectly safe. The gross income from operations of manufacture, trade and the transportation - public utilities group in 1922 was 90 billion dollars. Ten per cent of this amount is 9 billion - the annual "Profit of Privilege" in the United States. Nine billion is more than 14 per cent of the total national income for 1922. This, when subtracted from the 20 per cent designated by the Commission as "Business Profits" leaves 6 per cent as the "Profit of Enterprise".
The division of "Profits" calculated above is made in the following table, but all other figures in this table are taken directly from the Federal Trade Commission report (page 199).
National Income for United States (average 1918-1923) : $ 64,000,000,000
Distribution of income % Billions of $ Wages and Salaries 32.0 32,0 Profits of enterprise 3.6 3,6 Profits (of privilege) 9.0 9,0 Capital Gain, sale of assets, real estate, etc. 2.6 2,6 Rents, Royalties, Interest, Dividends 16.6 16,6 Total 100 64,0
(Hereafter in this book the term "profit" refers only to the "profits of privilege", and does not include any reward which goes to enterprise, to managerial ability, and to labor).
The items in the table above the thin line represent income that results from individual effort or labor. Every one of the items below the thin line represents income that results from legal privilege and monopoly. If we sum up the two sections of the table, we get the following result:
Distribution of income
Billions of $
|Income of effort and labor||
|Income of privilege||
The story is not quite complete. A charge, for taxes is made against the whole of this income. The total amount of government expense in the United States annually is well above 11 billion dollars, or between 8 and 10 per cent of the national income. Since the larger part of all taxes are finally paid by wage and salary earners as consumers, we can say with the utmost conservatism that 10 per cent of the annual income is taken from the income of effort and labor for support of non-productive activity of government. In other words, the income share of effort and labor is not even the generous 56 per cent which was just shown; the governmental tax burden brings it down to 46 per cent of the national income.
Our estimates have been conservative. Our figures are fair. They come from the best governmental and private sources. And the result is that we see that half of the annual income of the United States is paid as a tribute to privilege or as a tax for non-productive government. If the men and women engaged in productive effort in the United States received the full product of their labor, they would have every year just about twice their present income. There might still be inequality, but there would be plenty. And with the monopolies destroyed, such inequality would tend to disappear.
As has been seen in tracing its origin, the State arose as an act aggression. Its main function was to conquer its enemies, protect itself from their attacks, and maintain itself. That it might be of service in protecting its subjects individually was a secondary and later consideration. Yet it is true, at the present time, that this latter function is ostensibly the one on which its reason for being largely rests, and which cloaks its character as a despoiler and oppressor with some respectability.
It functions through what have come to be known as laws, and these, as is now patent to everybody, are the sources of the iniquity of the State, because their main purpose has come to be the denial of individual and associative liberty. Government has come to be - in fact, there always has been inherent in it - the institution of the greatest and most devastating form of privilege. It is the source of most of the inequalities of opportunity that now exist between man and man. Without it, none of these could exist.
Hence, intelligent people, who have given the matter thought, see that the way of relief is to limit the powers of the State. It should be shorn of its power for harm; but, so long as it exists in its present form, no matter how limited it be, it will still have the power for evil.
Whenever any proposal is made for such limitation, there is always the objection that the protective function of the State will be decreased, to the grave danger of the individual; the criminal is at once held up as the great menace from which nothing but government can protect the people.
This, Mutualists insistently contend, is a delusion. If the invasive activities of government were absolutely eradicated, it could still act as the protector of the individuals who compose it, or over whom it has jurisdiction. Yet, if it had no invasive powers at all, it could not forcibly provide for its own maintenance. It would therefore become a purely voluntary association, and would have to depend for its existence upon the satisfaction it gave in the service it rendered.
Government, or authoritarian society, may have been suited to conditions where universal warfare was the chief occupation.
And the trouble is that government, the State (from the Latin word status-what stays fixed), is, or at least tries to be, precisely what its name implies: stationary, unchangeable, inflexible.
It represents the static rather than the dynamic forces in social life, it insists on the status quo, it abhors change, and rests utterly on precedent and tradition.
Industry and commerce, on the other hand, are the dynamic forces in society, developing and constantly changing with astonishing rapidity. From the inability of the State to keep step with the growth and change of Industrial conditions, from its persistence in outgrown semi-military political technique in the face of growing extension of voluntary and contractual relations in the industrial and commercial life of the people and from its use of political and military power in dispensing and upholding privileges to people of certain property, business or ideas; in short, from the atavism of the State has resulted the muddle of what is usually called "the present system."
Condensed and catalogued, the nefarious features of the present system are:
1. It interferes with personal liberty, preventing the non-invasive individual from living his life as he sees fit.
2. It interferes with the freedom of economic life through the monopolies mentioned above, resulting in the two cardinal defects of present economic life: exploitation of the workers, and artificial restriction of production
The latter defect is often forgotten, but it is really more disastrous to the workers than exploitation. It is shown in the constant presence of involuntary idleness (unemployment), strikes and lockouts, lack of mobile and cheap credit, and a growing horde of non-producing parasites and their servants.
It is true that, compared with medieval times, present civilization offers, on the whole, greater freedom in private relations. Slavery and serfdom have gone with feudalism.
In religion, art and science, liberty has increased. Free speech and the right to criticize political institutions exist, at least in principle. Civil rights have been extended, Compared with the workers of 100 years ago, the producers of today do have more leisure, they do work shorter hours, their standards of living are better. Whatever progress has been made in economic life - development of technical science, intensified division of labor, worldwide distribution of commodities, and immensely increased production - is all seen to be, in the final analysis, the result of the gradual liberation of man from the fetters of static institutions. Every step of progress meant a law broken and a rule disobeyed. As man made himself more free, in using his productive powers, from the laws and binding restrictions, of authority, representing superstition, tradition, and privilege, to that degree did he prosper and succeed economically. And the cause of the present iniquity is not too much liberty, but incomplete liberty; the lack of equal liberty in economic life.
Governments delegate utilization of credit, access to natural resources, use of patents, and other privileges to some, while denying the same liberty to others. Abolition of privilege would be equivalent to equal liberty and would eventually eliminate, exploitation.
In spite of the obvious fact that state-created monopolies are still strongly entrenched, it is also true that voluntary and contractual relations have, in many ways, supplanted authoritarian regulation by the feudal lord and his successor, constitutional authority. Wherever there has been an extension of economic freedom - i.e., the right of private contract - the power of authority and of its, beneficiaries has been correspondingly limited. And this is really the sum and substance of history; the growing limitation of authority and the increase of voluntary organization of social life; substitution of contract for status. A clear realization of this process will show the logical way of progress. Disaster has always been predicted of any proposed curtailment of authority; in reality, improved conditions and prosperity always have resulted. So no fear need be entertained that society will go to destruction if invasive institutions are more and more curbed.
However, let no one think for a moment that the present system is tottering. The social reformer who thinks "Capitalism" is going to fall soon is cruelly misled. Capitalism in modern industrial countries is strongly entrenched.
It is a going concern; going badly, it is true, but going never the less. On the whole, it is probably better than anything experienced heretofore. But it is changeable and actually changing all the time. Slowly, almost imperceptibly, with some temporary reverses, the continuous onslaught of proud manhood and womanhood against vested authority and feudal privilege is wearing away the prerogatives and shams of the colossus called the "State", and of its supporters and beneficiaries, the industrial and financial Lords.