CHAPTER LVI

THE CAPITALIST PROCESS

(How profits are made under the present industrial system and what becomes of them.)

We have next to examine the structure of the capitalist order, basing our argument on facts which are admitted by everyone, including the most ardent defenders of the present system.

All men have to have certain material things which we describe as goods. As these goods do not produce themselves, it is necessary that some should work. The workers must have tools; also they must have access to the land and the sources of raw materials. These means of production are owned by some individuals in the community, and this ownership gives them power to direct the work of the rest. Those who own the land and the natural sources of wealth we call capitalists, or business men, and those who do not own these things, or whose share in them is insignificant, are the proletariat, or working class.

If you state to the average American that there is a capitalist class and a proletariat in this country, he will point out that many who are now members of the capitalist class were originally members of the proletariat; they have worked hard and saved, and accumulated property. But this is merely confusing the issue. The fact that some proletarians turn into capitalists and some capitalists into proletarians is important to the individuals concerned, but it does not alter the fact that there are two classes, capitalist and proletarian. Consider, by way of illustrating, a field with trees growing on it; we have earth, and we have trees, and the distinction between them is unmistakable. The roots of the trees go down into the earth, and take up portions of the earth and turn it into tree. The leaves and the dead branches fall, and in the course of time are turned once more to earth. There are all sorts of stages between earth and tree, and between tree and earth; but you would not therefore say that the word "earth" and the word "tree" are misnomers.

The working men go to the business man and apply for work. The business man gives them work, and takes their product, and offers it in the market at a price which allows him a profit above cost. If he can sell at a profit, he repeats the process, and the worker has a job. If he cannot sell at a profit, the worker is out of a job. Here and there may be a benevolent business man who, rather than turn his workers out of a job, will sell his goods at cost, or even for a short time at a loss; but if he keeps the factory going simply for the benefit of his workers, and with no expectation of ever making a profit, that is a form of charity, and not the common system under which our business is now carried on.

So it appears that the worker is dependent for his wages upon the ability of the business man to make a profit. The worker's life is inextricably bound up with the profit of the capitalist-no profit for the capitalist, no life for the worker. The capitalist, going out to look for markets for his goods, is seeking, not merely profit for himself, but life for his workers.

Now, the business man pays a certain percentage of his total receipts for labor, another percentage for raw materials, another percentage for his overhead charges, and the rest is profit in various forms, rent to the landlord, interest to the bondholder, dividends to the stockholder. All this total sum goes to human individuals, and each has thus a certain amount of money to spend. They pay it over to other individuals for goods or services, and so the money keeps circulating, and business keeps going. That is as deep as the average mind probes into the process.

But let us probe a little deeper. It is evident that, in the course of all this exchanging of goods, some individuals get a larger share than other individuals. Our government collects an income tax, and thus we have statistics representing what people are willing to admit about the share they get. In 1917 it appeared that, speaking roughly, one family out of six had an income of over $1,000 a year, and one family out of twelve had an income of over $2,000. But there were 19,000 families which admitted incomes of over $50,000 a year, and 300 with over $1,000,000 a year.

Now the families that get less than a thousand dollars a year obviously have to spend the greater part of their income upon their immediate living expenscs. But the families that

get $50,000 a year do not need to spend everything, and most of them take the greater part of their income and reinvest it-that is, they spend it upon the creating of new machinery of production, railroads, mills, factories, office buildings, the whole elaborate structure of capitalist industry.

Exactly what proportion of the total product of industry is thus taken and reinvested no one can say; but this we know, our cities are growing at an enormous rate, our manufacturing power is increasing by leaps and bounds, we are perfecting processes which enable one man to do the work of a hundred men, which increase the product of one man's labor a hundredfold. All this goes on blindly, automatically; a Niagara of goods of all sorts is poured out, and we call it "prosperity."

But then suddenly a strange and bewildering thing happens. All at once, and without warning, orders fall off, values begin to drop, business collapses, factories are shut down, and millions of men are thrown out of jobs. Merchants look at one another with blanched faces; each one has been counting on paying his bills with the profits he was going to make, and now his profits are gone, and he can't pay. The newspapers and magazines keep insisting that it can't be true, that business is going to revive next week, that prosperity is just ahead. But the factories stay shut, and the millions of men stay idle.

This is the condition in which we find ourselves as I write this book. It has been happening regularly in our history every ten years or so, ever since America started; we have had a hundred years to reflect upon it and to probe into the causes of it, and such is business intelligence in the most enlightened country in the world, you may search the pages of our newspapers from the first column of millionaire divorce suits to the last column of "situations wanted," and nowhere can you find one word to explain this mysterious calamity of "hard times"-how it comes to happen to our social system, or what could be done to prevent it! To supply this deficiency in present day thinking is our next task.

CHAPTER LVII

HARD TIMES

(Explains why capitalist prosperity is a spasmodic thing, and why abundant production brings distress instead of plenty.)

Let us picture a small island inhabited by six men. One of these men fishes, another hunts, another gathers cocoanuts, another raises goats for clothing, and so on. The six men among them produce by their labor all the necessities of their lives, and they exchange their products with one another. The island is productive, and each of the men is free, and makes his exchanges on equal terms; on that basis the industry of the island can continue indefinitely, and there will never be any trouble. There may sometimes be over-production, but it will not cause anyone to starve. If the fisherman is unusually lucky one day, he will be able to take a vacation for a few days, living on his fish and the products he exchanges for his fish. For the sake of convenience in future reference, I will describe this happy island as a "free" society; meaning that each of the members of this society has access on equal terms to the sources of wealth, and each owns the product of his own labor, without paying tribute to any one else for the right to labor, or to exchange his products.

But now let us suppose that one of the men on the island is strong and aggressive; he takes a club and knocks down the other five men, and compels them to sign a piece of paper agreeing that hereafter he is the president of the land development company of the island, the chief stockholder in the goat-raising company, and owner of the fishing concession and the cocoanut grove; also, that hereafter goods shall not be bartered in kind, but shall be exchanged for money, and that he is the banker, and also the government, with the right to issue money. In this society you will find that the real work, the actually productive work, is done by five men, instead of by six, and these five do not get the full value of their labor. The fisherman will fish, but his product will no longer belong to himself; he will get part of it as wages, while the "business man" takes charge of the balance. So

when there is a lucky day, there will be prosperity in the fishing industry, but this prosperity will not benefit the fisherman; he will have only his wage, and when he has caught too many fish, he will not have a few days' vacation, but will be out of a job.

And exactly the same thing will happen to the goat-herd. He will probably have work all the year round, because goats have to be tended, but he will get barely enough to keep him alive, and the surplus skins and milk will go to the owner of the no-longer-happy island. Perhaps it will occur to the owner that the man who raises cocoanuts might also keep an eye on the goats, and so the goat-herd will be permanently out of a job, and will turn into what is called a tramp, or vagrant. Inasmuch as everything to eat on the island belongs to the owner, the ex-goat-herd will be tempted to become a criminal, and so it will be necessary for the owner to arm the cocoanut man with a club and make him into a policeman; or perhaps he will organize the fisherman and the hunter into a militia for the preservation of law and order. They will be glad to serve him, because, owing to the extreme productivity of the island, they will be out of jobs a great part of the time, and but for the generosity of the business man, would have no way of earning a living.

But suppose that the cocoanut man should invent a machine for gathering a year's supply of nuts in a week; suppose the fisherman should devise a scheme to fill his boat with fish in a few minutes; and suppose that as a result of these inventions the business man got so rich that he moved to Paris, and no longer saw his workers, or even knew their names. Under these conditions you can see that overproduction and unemployment might increase on the island; and also the business man might seem less human and lovable to his wage slaves, and might need a larger police force. It might even happen that he would discover the need of a propaganda department, in order to keep his police force loyal, and a secret service to make sure that agitators did not get into the schools.

The five islanders, having filled all the barns and storehouses, would be turned out to starve; and when they asked the reason, they would be told it was because they had produced a surplus of food. This may sound grotesque, but it is what is being said to 5,000,000 men in America as I write. There are clothing-workers who are going about in