The Economic Problems

We have aimed to speak of the American as he appears in the economic
world—of the American in his actual economic life and strife—rather than
merely of his inanimate manufactures. That is, we have wished specially
to show what forces have been at work in his soul to keep him thus
busied with progress. And although we have gone somewhat further, in
order to trace the economic uplift of the last decades, nevertheless we
have chiefly aimed merely to show the workings of his mind and heart—not
the economic history of the American, but the American as little by
little he builds that history, has been the point of interest.

Seen from this point of view, everything which stands in the foreground
of the actual conflict becomes of secondary interest. The problems
leading to party grievances which are solved now one way, now another,
and which specially concern different portions of society, different
occupations or geographical sections, contribute very little to reveal
the traits that are common to all sections, and that must, therefore,
belong to the typical American character. If we have given less thought
to the political problems of the day than to the great enduring
principles of democracy, we need still less concern ourselves with the
disputes of the moment in the economic field. The problems of
protection, of industrial organization, of bimetallism, and of labour
unions are not problems for which a solution can be attempted here.

And nevertheless, we must not pass by all the various considerations
which bear on these questions. We might neglect them as problems of
American economy; and purely technical matters, like bank reform or
irrigation, we shall indeed not discuss. But as problems which
profoundly perplex the national mind, exercise its best powers, and
develop its Americanism, silver, trusts, tariff, and labour unions
require minuter consideration. The life and endeavour of the Americans
are not described if their passionate interest in such economic
difficulties is not taken into account; not, once more, as problems
which objectively influence the developing nation, but as problems which
agitate the spirit of the American. An exhaustive treatment is, of
course, out of the question, if for no other reason than that it would
distort our perspective of things. Had we only the objective side of the
problems to consider, we might, perhaps, doubt even whether there were
any problems; whether they were not rather simple events, bringing in
their train certain obvious consequences, whether deplorable or
desirable. These economic problems are, indeed, not in the least
problematical. The silver question will not be brought up again; the
trusts will not be dissolved; the protective tariff will not be taken
off and labour unions will not be gotten rid of. These are all natural
processes, rather than problems; but the fact that these events work
diversely on men’s feelings, are greeted here with delight and there
with consternation, and are accompanied by a general chorus of joy and
pain, gives the impression that they are problems. This impression
seizes the American himself so profoundly that his own reaction comes to
be an objective factor of importance in making history. It is not to be
doubted that the course of these much-discussed economic movements is
considerably influenced by prejudices, sentiments, and hobbies.

_The Silver Question_

Perhaps the power of mere ideas—of those which are clear, and, even
more, those which are confused—is shown in none of these problems more
strongly than in the silver question. If any problem has been really
solved, it is this one; and still no one can say that it has dropped out
of the American mind, although, for strategic reasons, politicians
ignore it. The sparks of the fire still glow under the ashes of two
Presidential campaigns. The silver schemes have too strongly fixed
public attention to be so quickly forgotten, and any day may see them
revive again. Just here the possibility of prejudices which would not
profit by experience has been remarkably large, since the question of
currency involves such complicated conceptions that fallacious arguments
are difficult to refute. And such a situation is just the one where the
battle of opinions can be waged the hottest: the silver question has, in
fact, more excited the nation than any other economic problem of the
last ten years. And there can be no doubt that many valid arguments have
been urged on the wrong side, and some untenable theses on the right
side.

The starting-point of the discussion lay in the law of 1873, which, for
the first time in the United States, excluded silver coin from the
official currency. There had already been differences of opinion before
the passage of this law. The friends of silver say that in 1792 the
United States permitted the coinage of both silver and gold without
limit, and that silver was the actual monetary standard. And, although
by accidents of production the relative value of the precious metals,
which had been 15 to 1, later became 16 to 1, nevertheless the two
metals continued to be regarded equally important until the
surreptitious crime of 1873. It was a secret crime, they say, because
the law was debated and published at a time when the nation could have
no clear idea of what it meant. The Civil War had driven gold coin out
of the country, every one was using paper, and no one stopped to ask
whether this paper would be redeemed in gold or silver, and no one was
accustomed to seeing gold coins in circulation. General Grant, who was
President at that time, signed the bill without any suspicion that it
was anything more than a technical measure, much less that it was a
criminal holdup of the nation on the part of the rich. And great was the
disaster; for the law demonetized silver, brought a stringency of gold,
lowered prices tremendously, depressed the condition of the nation, and
brought the farmers to poverty, so it was said.

The opponents of bimetallism recognize no truth in this story. They say
that in the first third of the nineteenth century the silver dollar was
counted equal to the gold dollar, at the ratio of 15 ounces to 1 ounce
of metal; but since this ratio did not continue to correspond with the
market price, and the gold of the country went to Europe, because it
there brought a better value, the official ratio was changed as early as
1834 to 16 to 1. This rate put a small premium on gold, and virtually
established a gold standard for American currency. The owners of silver
mines no longer had silver coined in the country, because they could get
more money for their silver bars abroad; and so, as a matter of fact,
during the next decade only 8 million silver dollars were coined, and
this denomination virtually went out of circulation. Only the fractional
silver currency could be kept in the country, and that only by resorting
to the trick of making the coins proportionately lighter than the legal
weight of the silver dollar.

The currency became, therefore, to all intents and purposes, a gold one,
and nobody was discontented with it, because silver was then less mined.
From 1851 to 1855, for instance, the average silver production of the
United States was only $375,000, while that of gold was $62,000,000.
Then came the lean years of the Rebellion. The government borrowed from
the banks, in the autumn of 1861, $100,000,000 in gold, and in the
following year issued $150,000,000 of unsecured greenbacks. Thereupon
the natural laws of exchange drove all sound currency out of the
country, and $150,000,000 more greenbacks were soon issued. The premium
on gold went higher and higher, and reached its highest point in 1864,
when the price was 185 per cent. of the normal value. After the war
confidence was restored, the paper dollar rose from 43 to 80 cents; but
the quantity of paper in circulation was so tremendous that metallic
money was never seen, and not until the early seventies did conditions
become solid enough for the treasury to take steps to redeem the
greenbacks.

But this was just the time when all the civilized nations were adopting
the gold standard—a time in which the production of gold had become
incredibly large. The two decades between 1850 and 1870 had brought five
times as much gold bullion into the world as the preceding two decades,
and the leading financiers of all countries were agreed that it was high
time to make gold the universal standard of exchange. The general
movement was begun in the conference of 1867 held in Paris. Germany led
in adopting the gold standard; the United States followed in 1873. The
gold dollar, which since the middle of the century had been the actual
standard of American currency, became now the official standard, and
silver coinage was discontinued. There was nothing of secrecy or
premeditated injustice, for the debates lasted through several sessions
of Congress.

If, nevertheless, the so-called crime remained unnoticed, and so many
Senators failed to know what they were doing, this was not because the
transactions went on in secret, nor because the use of paper money had
made every one forget the problems of metallic currency, but rather
because no one felt at that time that he would be injured by the new
measure, although the attention of everybody had been called to the
discussions. The owners of silver mines themselves had no interest in
having their mineral made into coin, and no one was disturbed to see
silver go out of circulation. All the trouble and all the hue and cry
about a secret plot did not commence until several years later, when,
for entirely independent reasons, circumstances had considerably
changed. The step had been taken, however, and the principle has not
been repudiated. The unlimited coinage of silver has not been permitted
by the United States since 1873.

Nevertheless, silver was destined soon again to become regular currency.
Hard times followed the year 1873, prices fell and the value of silver
fell with them, and bimetallic coinage had been discontinued.
Bimetallists connected these facts, and said that the price of silver
fell because the commercial world had stopped coining it. For this
reason the only other coined metal, which was gold, became dear, which
meant, of course, that prices became cheap, and that the farmer got a
low price for his harvests. And thus the population was driven into a
sort of panic.

A ready expedient was suggested: it was to coin silver once more, since
that would carry off the surplus and raise the price; while on the other
hand, the increased amount of coin in circulation would bring prices up
and restore the prosperity of the farmers and artisans. This is the main
argument which was first heard in 1876, and was cried abroad with
increasing loudness until twenty years later it was not merely preached,
but shouted by frenzied masses, and still in 1900, misled the Democratic
party. But the desire for an increased medium of circulation is by no
means the same as the demand for silver coinage. After the Civil War the
public had demanded more greenbacks just as clamorously as it now
demanded silver. It was also convinced that nothing but currency was
needed to make high values, no matter what the value of the currency
itself.

So far as these main facts are concerned, which have been so unjustly
brought into connection, there can be no doubt that the depreciation of
silver was brought about only in very small part by the coinage laws. To
be sure, the cessation of silver coinage by several large commercial
powers had its effect on the value of silver; but India, China, and
other countries remained ready to absorb large amounts of silver for
coinage; and in fact the consumption of silver increased steadily for a
long time. The real point was that the production of silver increased
tremendously at just the time when the production of gold was falling
off. From 1851 to 1875, $127,000,000 worth of gold on an average was
mined annually, but from 1876 to 1890 the average was only $108,000,000;
while, on the other hand, the average production of silver in those
first twenty-five years was only $51,000,000, but in the following
fifteen years came up to $116,000,000. The output of gold therefore
decreased 15 per cent., while that of silver increased 127 per cent. Of
course, then silver depreciated. Now the future was soon to show that
increased coinage of silver would not raise its price. Above all, it was
an arbitrary misconstruction to ascribe bad times to the lack of
circulating medium. Later times have shown that, under the complicated
credit system of the country, prices do not depend on the amount of
legal tender in circulation in the industrial world. The speed of
circulation is a factor of equal importance with the amount of it; and,
most important of all, is the total credit, which has no relation to the
amount of metallic currency. When more money was coined it remained for
the time being unused, and could not be put in circulation until the
industrial situation recovered from its depression.

Thus the bad times of the seventies were virtually independent of
coinage legislation: but public agitation had set in, and as early as
1878 met with considerable success. In that year the so-called Bland
Bill was passed, over the veto of President Hayes, which required the
treasury of the United States to purchase and coin silver bars to the
value of not less than 2 million, and not more than four million,
dollars every month. This measure satisfied neither the one side nor the
other. The silverites wanted unlimited coinage of silver; for, if a
limit was put, the standard was still gold, even though the price of
silver should be somewhat helped. The other side saw simply that the
currency of the country would be flooded with depreciated metal, and one
which was really an unofficial and illegal circulating medium. It was
known that the silver, after being coined into dollars, would be worth
more than its market value, and it was already predicted that all the
actual gold of the country would be taken abroad and replaced by silver.
The “gold bugs” also saw that this legislation would artificially
stimulate the mining of silver if there should actually be any increase
in its price.

The new law was thus a bad compromise between two parties, although to
many it seemed like a safe middle way between two dangers. Some
recognized in the unlimited coinage of silver the dangers of a
depreciated currency, but believed that the adoption of the gold
standard would be no less dangerous, because gold was too scarce to
satisfy the needs of the commercial world. It was said that free silver
would poison the social organism and free gold would strangle it, and
that limited silver coinage, along with unlimited gold coinage, would
therefore be the only safe thing.

But it soon appeared that such legal provisions would have no effect in
restoring the value of the white metal. Although the government
facilitated in every way the circulation of the new silver coins, they
nevertheless came back to the treasury. No matter how many silver
dollars were distributed as wages, they found their way at once to the
retail shops, then to the banks, and then to Washington. It appeared
that the nation could not keep more than sixty or seventy million
dollars’ worth in circulation, while there were already more than
$400,000,000 lying idle in Washington. The banks boycotted silver at
first; but the more important fact was that the price of silver did not
rise, but kept on falling. It was the amount produced and naturally
consumed, and not the amount coined, which regulated the price of
silver. In the year 1889 the relative values of silver and gold were as
22 to 1; and the true value of the silver dollar coined under the Bland
Bill was only seventy-two cents. Congress now proposed to take a more
serious measure looking toward a higher price for silver.

In July, 1890, a law was passed whereby the treasury was obliged to buy
four and one-half million ounces of silver every month at the market
price, and against this to issue treasury certificates to the
corresponding amount, which should be redeemable either in gold or
silver; since, as that law declared, the United States asserted the
equal status of the two metals. The law did not prescribe the number of
silver certificates which were to be issued, since the weight of silver
to be purchased was fixed and the value of it depended on the market.
Only a few months afterward it became clear that even this energetic
stroke would not much help the price of silver. The silver and gold
dollars would have been really equal to each other if an ounce of silver
had brought a market price of $1.29. In August, 1890, silver came up to
$1.21 an ounce, and fell the next year to $1.00, and in 1892 to $0.85.
But while the price of silver was falling, gold was rapidly leaving the
country.

In April, 1893, the gold reserve of the treasury fell for the first time
below the traditional hundred millions. It was a time of severe economic
depression. The silverites still believed that the rise of silver had
not commenced because its purchase was restricted to monthly
installments, and they clamoured for unlimited purchases of silver. But
the nation opposed this policy energetically. President Cleveland called
an extra session of Congress, and after a bitter fight in the Senate,
the law providing for the purchases of silver and issue of silver
certificates was repealed, in November of 1893. The Democratic party had
split on this measure, and then arose the two divisions, the Gold
Democrats who followed Cleveland, and the Silver Democrats who found a
leader a year later in Bryan, and dictated the policy of the Democratic
party for the following decade.

Looking on American economic history from the early seventies to the
middle nineties without prejudice, one cannot doubt not only that the
entire legislation relative to coinage has had scarcely any influence on
the price of gold and silver—since the price of silver has fallen
steadily in spite of the enormous amounts purchased—but also that the
general industrial situation, the movement of prices, and the volume of
business have been very little affected by these financial measures.

The strongest influence which they have had has been a moral one.
Business became active and foreign commerce revived as soon as the
confidence in the American currency was restored. This result, of
course, contradicted the expectations and wishes of the apostles of
silver. International confidence declined in proportion as a legal
tender standing for a depreciated metal was forced into circulation. It
was not the amount of silver, but the fear of other countries as to what
that amount might become, which most injured American commerce. And the
great achievement of Cleveland’s Administration was to reassure the
world of our solidity.

Otherwise the economic fluctuations depended on events which were very
little related to the actual amount of gold on hand. If, in certain
years, the amount of circulation increased, it was the result rather
than the cause of industrial activity; and when, in other years, a
speculative movement collapsed, less money was used afterward, but the
shortage of money did not cause the collapse. Then, too, harvests were
sometimes good and at other times bad, and foreign commerce changed in
dependence on quite external events in Europe. There were, moreover,
certain technical improvements in agricultural and industrial processes
which rapidly lowered prices and which took effect at independent times
and seasons.

The year 1893 was a time in which a great many factors worked in one
direction. The overbuilding of railways and a too great expansion of
iron industries had been followed by a terrible reaction; a surplus of
commodities on all the markets of the world caused prices to fall, and
the international distrust of silver legislation in the United States
made the situation worse. European capital, on which all undertakings
then depended, was hurriedly withdrawn; thousands of businesses failed,
and small men fell into debt. The actual panic did not last long, and
Cleveland’s successful move of 1893 restored the international
confidence. But the situation of the general public was not so readily
improved. This was the psychological moment in which the silver
question, which had hitherto interested relatively restricted circles,
so suddenly came to excite the entire nation that in 1896 the main issue
of the Presidential campaign was silver or gold currency. The silver
craze spread most rapidly among the farmers, who had suffered more from
overproduction than had the manufacturers. The manufacturer sold his
wares more cheaply, but in greater quantities, because he improved his
methods, and, moreover, he bought his raw materials more cheaply. But
the fall in the prices of wheat and corn and other agricultural products
which affected the farmer was only in small part due to more intensive
cultivation, but rather to the greater area of land which had been
planted. The farmer in one state was not benefited by the fact that
great areas in some other state were now for the first time laid down to
wheat and corn. As prices fell he produced no more, and thus agriculture
suffered more severely than industry. While the farmer was able to get
for two sheaves of wheat only as much as he used to get for one, he
thought, of course, that his patrons had too little money, and was
readily convinced that if more money could only be coined, he would get
good prices again.

There was another argument in addition to this, which could still even
more easily be imposed on the ignorant, and not only on the farmer, but
on all classes that were in debt. Silver was cheaper than gold, and if
debts were paid in it the creditor lost and the debtor won. It was at
this time that the conflict of interests between the great capitalists
and the labouring masses began to arouse political excitement. Distrust
found its way into a good part of the population, and finally a hatred
of capitalists and monopolies, and of the stock market most of all.

This hatred vented itself in a mad clamour for silver. If Congress would
authorize an unlimited silver coinage at the ratio of 16 to 1, while the
market ratio was down to 33 to 1—so that the silver dollar would be
worth hardly fifty cents, and so that the farmer could sell his wheat or
maize for a dollar when it was really worth but half a dollar—then at
last the robbers on the stock exchange would be well come up with. In
reality, these two arguments contradicted each other, for the farmer
would be benefited by more silver money only if the market value of
silver could be brought up to that of gold; while he would be favoured
in the payment of debts only if gold could be brought down to the value
of silver. But once let there be any sort of distress, and any ghost of
relief haunting the general mind, then logic is totally forgotten. A new
faith arises, the power of which lies in suggestion. The call for
free-silver coinage at the old ratio of 16 to 1 fascinated the
agricultural masses as well as the lower classes in cities, just as the
idea of a future state of socialism fascinates German working-men
to-day.

And just as one cannot understand the German people without taking into
account their socialistic delusions, so one cannot understand the
American masses to-day without tracing out the course of the silver
propaganda. It was the organizing power of a watchword which gave the
delusion such significance, and which, for perhaps the first time, gave
voice to the aversion which the masses felt toward the wealthy classes;
and so, like the socialistic movement in Germany, it took effect in far
wider circles than the points over which the discussion started would
have justified.

But the masses could hardly be stirred up to such a powerful agitation
merely on the basis of the specious arguments spread about by ignorant
fanatics, or even with the substantial support of the indebted farmer.
In the middle nineties the literature of the silver question swelled
enormously. A mere appeal to the passions of those who hated capital
would not have been enough, and even the argument that the amount of
money in a country alone regulates prices could have been refuted once
for all. A financial and an intellectual impetus were both necessary to
the agitation, and both were to be had. Distinguished political
economists saw clearly certain unfairnesses and evils in a simple gold
standard, and urged many an argument for bimetallism which the masses
did not wholly follow, but which provided material for general
discussion. And financial aid for the silver side flowed freely from the
pockets of those who owned silver mines. Of course, there was no doubt
that these mine-owners would be tremendously prospered by any radical
legislation for silver. In the days of the Bland Bill even the poorest
silver mines were in active operation, whereas now everything was quiet.
The discussions which ostensibly urged the right of the poor man against
the rich said nothing at all of the deep schemes of the silver-mine
owners. These men did not urge their claims openly, but they paid their
money and played the game shrewdly.

We have already fully compared the political traits of the two parties;
and it will be understood at once that the contest for silver, as a
movement for the rights of the poor man against those of the capitalist,
would have to be officially waged by the Democratic party, while the
Republican party would, of course, take the other side. The nation
fought out the great battle in two heated Presidential campaigns; and in
1896 as well as in 1900, the contest was decided in favour of the gold
currency. The currency legislation of the Republican Congresses has held
to a conservative course. In March, of 1900, the treasury was
instructed, on demand, to redeem all United States notes in gold, so
that all the money in circulation came to have absolutely the same
value. The old silver certificates, of which to-day $450,000,000 are in
circulation, can at any time be exchanged for gold coin, and the
Secretary of the Treasury was entirely right in showing in his last
annual report that it was this wise provision alone which obviated a
panic at the time when stock market quotations dropped so suddenly in
the year 1903. Thus the finances of the country are definitely on a gold
basis.

But, as we have said, we are not interested in the material aspects of
the currency situation, and still less shall we undertake a profound
discussion of bimetallism, as scientific circles are to-day considering
it. The significance of a limited double standard, especially in view of
the commerce with the East, and of the effect it will have in quieting
the international struggle to get the yellow metal, is much discussed by
thoughtful persons. The United States have sent a special commission to
visit other countries in order to persuade them that some international
agreement as to the monetary recognition of silver is desirable.

All this does not interest us. We care for the silver question only as a
social movement. No other problem has so profoundly moved the nation;
even the questions of expansion and imperialism have so far aroused less
general interest. It is only too likely that if hard times return once
more, the old craze will be revived in one form or another. The silver
intoxication is not over to-day, and the western part of the country is
merely for the moment too busy bringing its tremendous crops to harvest,
and carrying its gold back home, to think of anything else.

_The Tariff Question_

The silver question, which was of such great significance yesterday, was
very complicated, and only very few who discussed it knew all the
difficulties which it involved. This is not true of the tariff question,
which may at any time become the main political issue. As the problem of
protective tariff is generally discussed, it involves only the simplest
ideas.

The dispute has come from a conflict of principle and motive, but not
from any difference of opinion as to the effect of protective measures.
Here and there it has been maintained, as it has in other countries,
that the foreigner pays the tariff; and this argument has, indeed,
occasioned keen and complicated discussions. But, for the most part, no
academic questions are involved, rather conditions merely which are
obvious to all, but toward which people feel very differently, according
to their occupation, geographical position, and political convictions.
The struggle is not to be conceived as one between protective tariff and
free trade, but rather as between more or less protective tariff—since,
in spite of variations, the United States have, from the very outset,
enacted a tariff greater than the needs of the public treasury, with the
idea of protecting domestic labour from foreign competition.

Indeed, it can be said that the policy of protection belongs even to the
prehistory of the United States, and that it has contributed measurably
to building up the Union. While America was an English colony, England
took care to suppress American industries; agriculture and trade were to
constitute the business of the colonists. The War for Independence
altered the situation, and native industries began to develop, and they
had made a brave start in many states before the war was ended. But as
soon as the ties with England had been broken, the separate states
manifested diverse interests, and interfered in their trade with one
another by enacting customs regulations. It looked as if a tariff war on
American soil would be the first fruits of freedom from the common
oppressor. There was no central power to represent common interests, to
fix uniform revenues for the general good, and uniform protection for
the industry of the country. And when one state after another was
persuaded to give up its individual rights to the Federation, one of the
main considerations was the annulment of such interstate customs, which
were hindering economic development, and the establishment of a uniform
protection for industry. The tariff law of 1789 contained, first of all,
such provisions as ensured the necessary public revenue, tariff on goods
in whose manufacture the Americans did not compete; and then other
tariffs which were meant to protect American industries.

So, at the outset, the principle of protective tariff was made an
official policy by the United States; and since, through the highly
diversified history of more than eleven decades, the nation has still
held instinctively to this policy, we can hardly doubt that the external
and internal conditions under which the country has stood have been
favourable to such a policy. The tremendous natural resources,
especially of iron, copper, lumber, fur, cotton, wool, and other raw
materials, and the inexhaustible supply of energy in the coal-fields,
oil-wells, and water-falls, have afforded the material conditions
without which an industrial independence would have been impossible. The
optimistic American has found himself in this land of plenty with his
energy, his inventive genius, and his spirit of self-determination. It
was predestined that the nation should not only till the fields, produce
raw materials, and engage in trade, but that it should set stoutly to
work to develop its own industries. Therefore, it seemed natural to pass
laws to help these along, although the non-industrial portions of the
country, and all classes which were not engaged in industry, were for a
time inconvenienced by higher prices.

Once launched, the country drifted further and further in the direction
of protective duties. In 1804 a tariff was enacted on iron and on
glassware, with unquestionably protective intent. It is true that, in
general, the principal increases in the beginning of the century were
planned to accelerate the national income. The War of 1812 especially
caused all tariffs to be doubled. But this war stirred up patriotism and
a general belief in the abilities of the nation. Native industries were
now supported by patriotic enthusiasm, so that in 1816 the duties on
cotton and woollen goods and on manufactured iron were increased for the
sake of protection. And the movement went on. New tariff clauses were
enacted, and new friends won over, often in their own selfish interests,
until the early thirties. The reaction started in the South, which
profited least from the high tariff. Compromises were introduced, and
many of the heaviest duties were taken off. By the early forties, when
the movement lapsed, duties had been reduced by about 20 per cent.

At this time the divided opinions in favour of raising or lowering
duties commenced to play an important part in politics. Protective
tariff and tariff reduction were the watchwords of the two parties. In
1842 the Protectionist party got the reins of government, and at once
put heavy duties on iron, paper, glass, and cotton and woollen goods.
Four years later, tariffs were somewhat reduced, owing to Democratic
influences; but the principle of protection was still asserted, as is
shown by the fact that tea and coffee, which were not grown in the
country, were not taxed, while industrial manufactured articles were
taxed on the average 30 per cent. The Democrats continued to assert
their influence, and won a victory here and there. Wool was admitted
free in 1857. Then came bad times. After a severe commercial crisis,
imports decreased and therewith the customs revenues. The demand for
high tariff then increased, and the Republicans got control of Congress,
and enacted in the year 1861 the Morrill Tariff, which, although
strongly protective, was even more strongly a Republican party measure.
It aimed to discriminate in protecting the industries of those states
which the Republican party desired to win over. Then came the Civil War,
the enormous expense of which required all customs and taxes to be
greatly increased.

The war tariff of 1864 was enacted for the sake of revenue, but its
effect was decidedly protective. And when the war was over, and tariffs
might have been reduced so far as revenue went, industries were so
accustomed to the artificial protection that no one was willing to take
off duties. Some customs, even such as those on woollen and copper, were
considerably increased in the next few years, while those on coffee and
tea were again entirely removed.

In general, it was a time of uncertain fluctuations in the tariff until
the year 1883, when the whole matter was thoroughly revised. In certain
directions, the customs were lowered; in others, increased. Specially
the higher grades of manufactured articles were put under a higher
tariff, while the cheaper articles used by the general public were taxed
more lightly. A short time after this, President Cleveland, as leader of
the Free-Trade Democrats, came out with a famous message against
protection. The unexpected result was, that after the tariff question
had thus once more been brought to the front, the Republicans gained a
complete victory for their side, and enacted a tariff more extreme than
any which had gone before, and which protected not only existing
industries, but also such as it was hoped might spring up. Even sugar
was now put on the free list, because it had been taxed merely for
revenue, and not for protection. While, on the other hand, almost all
manufactured articles which were made in the country were highly
protected. This was specially the case with velvet, silk, woollen, and
metal goods. This was the well-known McKinley Tariff.

The Democrats won the next election, although not on the issue of
industrial legislation, and as soon as they came into power they upset
the high tariffs. Their Wilson Tariff Bill of 1894, the result of long
controversies, showed little internal consistency. Too many compromises
had been found necessary with these or those influential industries in
order to pass the bill at all. Yet, on the whole, customs were
considerably lowered, and for the first time in a long while raw
materials, such as wool, were put on the free list. But Democratic rule
did not last long. McKinley was victorious in 1896, and in the following
year the Dingley Tariff was passed in accordance with Republican ideas
of protection, and it is still in force.

The total revenues derived from this source in the year 1902 were
$251,000,000, and in 1903 were $280,000,000. Let us analyze the first
amount. Its relative importance in the total revenue may be seen from
the fact that the internal duties on liquor, tobacco, etc., amounted to
$271,000,000, and that the postal budget for the year was $121,000,000.
The customs duties of $251,000,000 are officially divided into five
classes. The first is live animals and breadstuffs, with sugar at the
head bringing in $52,000,000. The sugar duty had not existed ten years
before, but the Wilson Tariff of 1894 could not have been enacted if the
beet-sugar Senators from Louisiana had not been tossed a bone. In 1895
the revenue on sugar amounted to $15,000,000, and in 1901 to
$62,000,000. After sugar, in this year of 1903, came fruits and nuts
with 5, vegetables with 3, meat, fish, and rice with only 1 million
dollars each. The second class comprises raw materials. Wool yielded
10.9, skins 2.6, coal 1 million dollars, and every other class still
less. In the third class are the semi-manufactured products, with
chemicals yielding 5.4, tin plate 2.9, wooden-ware 1.8, silk 1.1, and
fur 1 million dollars. The fourth class comprises finished products.
Linen goods yielded 14, woollen goods 13, cotton goods 10, metallic
wares 6, porcelain 5.6, leather goods 3.1, and wooden and paper wares
each 1 million dollars. Articles of luxury make the last class, with
tobacco bringing 18.7, silk goods 16, laces 13, alcoholic drinks 10,
jewelry 2.4, feathers 1.4, and toys 1.3 million dollars. The total
imports for the year were $903,000,000, of which $396,000,000 entered
free of duty; but of these last only 10 per cent. were half or wholly
finished products, 90 per cent. being food or raw materials. The duty
was collected from imports worth $507,000,000, and 64 per cent. came
from manufactured articles. Thus the Dingley Tariff was a complete
victory for protection.

No one now asks to have the duties raised, but the Democratic party is
trying all the time to have them lowered, so that the question is really
whether they shall be lower or remain where they are. Of course, the
Republicans have a capital argument which looks unanswerable—success.
The history of American protection, they say, is the history of American
industrial progress. The years during which native industry has been
protected from foreign competition by means of heavy duties have been
the times of great development, and years of depression, disaster, and
panic have regularly followed whenever free-traders have removed duties.
The tariff has never been higher than under the McKinley and the Dingley
bills, and never has the economic advance been more rapid or forceful.
What is the use, they say, of representing to the working-man that he
could buy a suit so much cheaper if the tax on woollen goods were
removed? For if it were, and free-trade were to be generally adopted, he
would go about without employment, his wife and children would be turned
out into the street, and he would be unable to buy even the cheapest
suit. Whereas to-day, he is well able to pay the price which is asked.
The wealth of fancy with which this sort of argument is constantly
varied, and tricked out with word and phrase suited to every taste, is
almost overpowering. But the alternative between the high wage which can
afford to pay for the expensive suit, and the lower wage which cannot
afford to pay for the cheap suit, becomes still more cogent since the
fanatical protectionist is able to prove that under a high tariff wages
have in fact risen, while the price of the suit has not. Yet the extreme
free-trader can prove, with equal certainty, that under free-trade the
suit would actually be much cheaper, while wages would in the end be
even higher.

It cannot be doubted that a number of industries are to-day very
prosperous which could not have gotten even a foothold except by a
century of protection. And no Democrat denies this. But he doubts
whether the hot-house forcing of such industries has benefited the
country, and he believes that the artificial perpetuation of great
industrial combinations, which have been able, by means of a protective
tariff, to put an artificially high price on the food and other
necessary articles used by the masses, has worked infinitely more harm
than good.

It is undoubtedly true that many industries have not only been
protected, but have actually been created. The tin plate industry is,
perhaps, the best example of this. The United States used to obtain the
tin plates needed in industry from Wales, and at unreasonably high
prices. Twice the Americans tried to introduce the industry at home, but
were at once undersold by the English and “frozen out.” Then the
McKinley Tariff put a duty on tin plate of 70 per cent. ad valorem, and
the American industry was able to make headway. In 1891, 1,036 million
pounds of tin plate were imported, and none was produced at home; two
years later only 628 million pounds were imported, and 100 million
pounds manufactured at home; and ten years later only 117 million pounds
came over the sea, while 894 million pounds were produced in this
country. It has been much the same in the manufacture of watches. The
United States imported all their watches a few years ago. They were then
taxed 10 per cent. for revenue, being accounted articles of luxury, and
could not be profitably made inside the country. But when Congress taxed
them 25 per cent., the industry grew up. It produced at first watches
after European models; but American ingenuity soon came to be extended
to this field, improved machinery for the manufacture of watches was
devised, and now a tremendous industry provides every American
school-boy with a watch which is better and cheaper than the
corresponding European article. Even the silk industry may well be
considered the foster child of protection.

The free-traders reply, that all this may have been very well for a
period of transition from an agricultural to an industrial state; but
that the great change has now been completed, and the burdensome duties
which keep our prices high might perfectly well be dropped, since our
industries are now strong enough to compete with foreign industries.

But just at this point the Republican comes out less optimistically than
before. He says that American industry has indeed developed with
fabulous speed, and that the industrial exports of the country, which
now amount to 30 per cent. of the total, are a great showing, but this
is a symptom which ought not to be overrated. When prices throughout the
rest of the world fell, and England was paralyzed for the moment,
although the domestic demand had not yet reached its height, conditions
combined so favourably, it is true, as to cause the export trade in
American manufactured articles to increase rapidly. But this may not be
permanent. Industry is still not able to fill all the demands of the
home market; on the contrary, at the very time when American iron and
steel industries seemed likely to conquer foreign markets, it was found
that some sudden increase in domestic requirements necessitated large
importations. While the iron and steel exports decreased by $25,000,000
between 1900 and 1903, the imports during the same time increased
$31,000,000, and iron and steel include mostly unfinished products.

Thus even the strongest and most powerful industries greatly need
protection still against foreign competition. It is, Thomas Reed has
said, entirely mistaken to look on protection as a sort of medicine, to
be left off as soon as possible. It is not medicine, but nourishment.
The high tariff has not only nursed infant industries, but it is to feed
them through life. For it is not a happy expedient, but a system which
is justified by its results, and of which the final import is that the
American market is for the American people. Protection is a wall behind
which the American people can carry on their industrial life, and so
arrange it that wages shall be not only absolutely but relatively
greater than wages in Europe.

At a time when everything looked so prosperous as in the last few years
of industrial activity, it is difficult to contest the powerful argument
which the Republicans make in appealing to success. Every one is afraid
that a change in tariff might turn back this tide. And if there have
been reverses in the last few years it has been pointed out that
speculators and corporation magnates have been the chief sufferers, and
they are the ones who, least of all, would wish the tariffs removed.

It has been an unfavourable time, therefore, for the free-traders, and
their really powerful party has been rather faint-hearted in its fight
against the Dingley Tariff. Its satisfaction with the Wilson Tariff was
not unmixed, and although it could truthfully say that the law as
actually passed was not a Democratic measure since it received six
hundred and forty amendments in the Senate, nevertheless it realizes
that the legislative measures of the last Democratic régime pleased
nobody thoroughly and contributed a good deal to the subsequent
Republican victory.

Nevertheless, the Democrats feel that the Republican arguments are
fallacious. It is not the protective tariff, they say, which has brought
about American prosperity, but the natural wealth of the country,
together with the energy and intelligence of its inhabitants. The high
level of education, the free government, the pioneer ardour of the
people, and the blessings of quick and rapid railway connections have
made America great and prosperous. If, indeed, any legal expedients have
been decisive in producing this happy result, these have been the
free-trade measures, since the Republicans quite overlook the fact that
the main factor making for our success has been the absolute free-trade
prevailing between the forty-five states. What would have become of
American industries if the states had enacted tariffs against one
another, as the country does against the rest of the world, and as the
countries of Europe do against one another? The entire freedom of trade
from Maine to California, and from Canada to Mexico, that is, the total
absence of all legislative hindrances and the possibility of free
exchange of natural products and manufactures without payment of duties,
has made American industry what it is; and it is the same idea which the
Democrats cherish for the whole world. They desire to get for America
the advantages from free-trade which England has derived.

All the well-known free-trade arguments—moral, political, and
economic—are then urged; and it is shown, again and again, that every
nation will succeed best in the long run by carrying on only such
industries as it is able to in free competition with the world. It is
true, admittedly, that if our tariff were removed a number of
manufactures would have to be discontinued, and that the labourers would
for a time be without work, as happens whenever a new machine is
discovered, or whenever means of transportation are facilitated. The
immediate effect is to take labour from the workman. But in a short time
adaptation takes place, and in the end the new conditions automatically
provide a much greater number of workmen with profitable employment than
before. America would lose a part of the home market if she adopted
free-trade, but would be able to open as many more doors to foreign
countries as recompense. Her total production would in the end be
greater, and all articles of consumption would be cheaper, so that the
workmen could buy the same wares with a less amount of labour, and the
adjustment of the American scale of wages would better enable the
Americans to compete with the labour of other countries.

But no doubt the times do not favour such logic. The Americans are too
ready to believe the statement of Harrison, that the man who buys a
cheaper coat is the cheaper man. And quite too easily the protectionists
reply to all arguments against excluding foreign goods with the opposite
showing that, in spite of the high tariff, the imports from abroad are
steadily increasing. Under the Dingley Tariff, in the year 1903, not
only the raw materials, but also the half and wholly manufactured
articles, and articles of luxury, imported increased to a degree which
had never been reached in the years of the Wilson Tariff. The raw
materials imported under a Democratic tariff reached their high point in
1897, with $207,000,000; when the Dingley Tariff was adopted the figure
decreased to $188,000,000, but then rose rapidly and amounted in 1902 to
$328,000,000, and in 1903 to $383,000,000. Finished products declined at
first from $165,000,000 to $94,000,000, but increased in 1903 to
$169,000,000. Articles of luxury sank from $92,000,000 to $74,000,000,
but then mounted steadily until in the year 1903 they were at the
unprecedented figure of $145,000,000.

In spite of this, the Democratic outlook is improving; not because
people incline to free-trade, but because they feel that the tariff must
be revised, that certain duties must be decreased, and others, so far as
reciprocity can be arranged with other countries, abolished. Everybody
sees that the international trade balance of last year shows a movement
which cannot keep on. America cannot, in the long run, sell where she
does not buy. She will not find it profitable to become the creditor of
other nations, and will feel it to be a wiser policy to close commercial
treaties with other nations to the advantage of both sides. Reciprocity
is not a theory of the Democratic party merely, but is the sub-conscious
wish of the entire nation, as may be concluded from the fact that
McKinley’s last great speech voiced this new desire.

He had, more than any one else, a fine scent for coming political
tendencies; and his greatness always consisted in voicing to-day what
the people would be coming to want by to-morrow. On the fifth of
September, 1901, at the Buffalo Exposition, he made a memorable speech,
in which he said: “We must not repose in fancied security that we can
forever sell everything and buy little or nothing. If such a thing were
possible, it would not be best for us or for those with whom we deal. We
should take from our customers such of their products as we can use
without harm to our industries and labour. Reciprocity is the natural
outgrowth of our wonderful industrial development under the domestic
policy now firmly established. What we produce beyond our domestic
consumption must have a vent abroad. The excess must be relieved through
a foreign outlet, and we should sell anywhere we can and buy wherever
the buying will enlarge our sales and productions, and thereby make a
greater demand for home labour. The period of exclusiveness is past. The
expansion of our trade and commerce is the pressing problem. Commercial
wars are unprofitable. A policy of good will and friendly trade
relations will prevent reprisals. Reciprocity treaties are in harmony
with the spirit of the times. Measures of retaliation are not.

“If perchance some of our tariffs are no longer needed for revenue or to
encourage and protect our industries at home, why should they not be
employed to extend and promote our markets abroad?”

This was the same McKinley whose name had been the apprehension of
Europe, and who in fact more than any one else was morally responsible
for the high-tariff movement in the United States. The unique position
which his service of protection had won him in the party, would perhaps
have enabled this one man to lead the Republican party down from its
high tariff to reciprocity. But McKinley has unhappily passed away, and
no one is here to take his place.

His successor has not had, in the first place, a great interest in
questions of commerce. He has necessarily lacked, moreover, such strong
authority within his party as would enable him to bring opposing
interests into line on such a new policy. The young President was too
much suspected of looking askance on great industrial companies. If he
had placed himself at the head of the Republicans who were hoping to
reduce the tariff, he would have been branded as a free-trader, and
would not have been credited with that really warm feeling for protected
American industries which in the case of McKinley was taken as a matter
of course. More than that, the opponents deterred him, and would have
deterred any one else who might have come in McKinley’s footsteps, or
perhaps even McKinley himself, with the ghost of bad times which are to
come whenever a certain feeling of insecurity is spreading through the
commercial world.

Everybody felt that, if the question of tariff should be opened up,
unforeseen disputes might ensue. On questions of tariff every industry
wields a lever in its own favour, and the Wilson Tariff had sufficiently
shown how long and how tragi-comic can be the course from the law
proposed to the law accomplished. It was felt everywhere that if the
country should be brought into unrest by the fact that no industry could
know for some years what its future was to be or where Congress might
chance to take off protection, that all industry would be greatly
injured. There could be no new undertakings for years, and whatever the
ultimate result might be, the mere feeling of uncertainty would make a
crisis sufficient to turn the tide of prosperity. And American
reciprocity was after all only a matter of philanthropy; for the
experience with Canada and Hawaii, it was said, only showed that
reciprocity meant benevolence on the part of America.

If America is to be philanthropical, there is enough to do in other
ways; but if America is to preserve her commercial interests and her
prosperous industries, it is absolutely necessary not to stir up trouble
and push the country once more into tariff disturbances and expose
industry to doubts and misgivings. And this ghost has made its
impression. McKinley’s words have aroused only a faint echo in the
party. The need, however, which he instinctively felt remains, and
public opinion knows it. It is only a question as to when public opinion
will be stronger than party opinion.

There is another thing which gives the anti-protectionists a better
chance. Democrats say that high tariff has favoured the trusts. This may
be true or false, and statistics speak for both views. But here is a
watchword for the party which makes a deep impression, for the trusts
are popularly hated. This, too, may be right or wrong, and may be still
more easily argued for both sides, but the fact remains, and the
seductive idea that abolishing high tariff will deal a fatal blow to the
hated, extortionate, and tyrannical trusts gets more hold on the masses
day by day. In vain the protectionists say that there is not a real
monopoly in the whole country; that every instance of extortionate price
calls out competition at once, and injures the trust which charges such
price; that protection benefits the small and poor companies as much as
the large, and that an attempt to injure the large companies by
free-trade enactments would kill all small companies on the instant.
And, besides, politics ought not to be run in the spirit of hatred. But
the embitterment exists, and arguments avail little. It is incontestable
that, of all the motives which are to-day felt to work against
protection, the one most effective with the masses is their hatred of
the trusts. Herewith we are led from the tariff question to this other
problem—the trusts.

_The Trust Question_

“_Von der Parteien Hass und Gunst verwirrt_”—to be hated and to be
favoured by the parties is the fate of the trusts. But the odd thing is
that they are not hated by one party and favoured by the other; but both
parties alike openly profess their hatred and yet show their favour by
refraining after all from any action. And this inconsistency is not due
to any intentional deception.

To be sure, a good deal of it is political policy. The evils and dangers
of many trust formations are so obvious that no party would like to
praise them openly, and no party will dispense with the cheap and easy
notoriety of declaring itself for open competition and against all
monopolies. On the other hand, the power of the trusts is so great that
neither party dares to break with them, and each has its special
favourites, which could not be offended without prejudicing its campaign
funds. Nevertheless, the deeper reason does not lie in the matter of
expediency, but rather in the fact that no relief has been proposed
which promises to be satisfactory. Some want to treat the evil
superficially, as a quack doctor tries to allay secondary symptoms; and
others want, as President Roosevelt has said, to end the disease by
killing the patient. The fact that this inventive nation has still not
solved its great economic problem, is probably because the trusts have
grown necessarily from the organic conditions of American life, and
would continue to exist in spite of all legislative hindrances which
might be proposed against them.

When Queen Elizabeth, in violation of the spirit of Anglo-Saxon law,
distributed in the course of a year nearly fifty industrial monopolies,
and caused the price of some commodities to be doubled, the House of
Commons protested in 1601, and the Queen solemnly declared that she
would revoke all privileges which endangered industrial freedom; and
from that time on, monopolies were done away with. The American people
are their own sovereign, and the effect of monopolies is now about the
same as it was in England three hundred years ago. But the New World
sovereign cannot issue a proclamation revoking the monopolies which it
has granted, or at least it knows that the monopolies, if taken from
one, would be snatched by another. It is true that the present form of
trusts could be made illegal for the future, but some other form would
appear, to compass the same ends; and if certain economic departments
should be liberated by a free-trade legislation, the same forces would
gather at other points. We must consider the essence of the matter
rather than its outward form.

The essence is certainly not, as the opponents of trusts like to
represent, that a few persons are enriched at the expense of many;
that the masses are plundered to heap up wealth for a small clique.
The essence of the movement does not lie in the distribution of
wealth, but in the distribution of power. The significance of the
movement is that in recent times the control of economic agencies has
had to become more strongly concentrated. It is a mere attendant
circumstance that in the formation of the trusts large financiers have
pocketed disproportionately large profits, and that the leading trust
magnates are the richest men of the country. The significance of their
position lies in the confidence which is put in them. But the actual
economic endeavour has been for the organized control of larger and
larger undertakings. It has been very natural for the necessary
consolidation of smaller parts into new and larger units to be
accomplished by men who are themselves rich enough to retain a
controlling share in the whole business; but this is a secondary
factor, and the same result could have been had if mere agents had
been appointed by the owners to all the great positions of confidence.

Almost the same movement has gone on in other economic spheres than the
industrial. Railroad companies are all the time being consolidated into
large companies, controlled by fewer and fewer men, until finally a very
few, like Morgan, Vanderbilt, Rockefeller, Harriman, Gould, Hill, and
Cassatt, virtually control the whole railroad system. But this economic
movement in the railroad world would not really stop if the state were
to take over all the railroads, and a single badly paid secretary of
railroads should be substituted for the group of millionaires. The main
point is that the savings of the whole country are invested in these
undertakings, and are looking for the largest possible returns, and get
these only when leadership and control are strongly centralized.

The very obvious opulence of the leaders naturally excites popular
criticism, but it has been often shown that the wealth of these rich
people has not increased relatively to the average prosperity of other
classes, and the corporations themselves make it possible to distribute
the profits saved by concentration throughout the population. The famous
United States Steel Company had last year 69,000 stockholders, and the
shares of American railroads are owned by more than a million people.
For instance, the Pennsylvania Railroad alone has 34,000 stock and bond
holders, who intrust the control to a very few capitalists. In fact, the
whole railway system belonging to a million people is controlled by
about a dozen men; and the Steel Company with its 69,000 owners is
managed by twenty-four directors, who in turn are guided by the two
presidents of the administration and finance committees. The chief point
is thus not the concentration of ownership, but the concentration of
power.

This same movement toward concentration has taken place in the banking
business; and here the point is certainly, not that one man or a few men
own a main share in the banks, but only that a few men are put in charge
of a group of financial institutions for the sake of organized
management. In this way the public is more uniformly and systematically
served, and the banks are more secure, by reason of their mutual
co-operation.

Among the directors of the Bank of Commerce there are, for instance,
directors of two life-insurance companies which have a capital of
$750,000,000, and of eight trust companies; and the directors of these
trust companies are at the same time directors of other banks, so that
they all make a complete chain of financial institutions. And they stand
more or less under the influence of Morgan. There is, likewise, another
system of banks, of which the chief is the National City Bank, which is
dominated by Rockefeller; and these personal connections between banks
are continued to the industrial enterprises, and then on to the railroad
companies. For instance, the Rockefeller influence dominates not only
banks and trust companies whose capital is more than $400,000,000, the
famous Standard Oil Company with a capital of $100,000,000, the
Lackawanna Steel Company worth $60,000,000, and the gas companies of New
York worth $147,000,000, but also the St. Paul Railroad, which is
capitalized at $230,000,000, the Missouri, Kansas and Texas at
$148,000,000, and the Missouri Pacific at $212,000,000.

It is certainly true that such tremendous influence under present
conditions can be gotten only by men who actually own a huge capital.
And yet the essential economic feature is always the consolidation of
control, which is found necessary in every province of industry, and
which entirely overtops the question of ownership. It has been estimated
that the twenty-four directors of the United States Steel Company exert
a controlling influence in two hundred other corporations; that back of
them are the largest banks in the whole country, about half the
railroads, the largest coal, oil, and electric companies, and the
leading telegraph, express, and life-insurance companies, etc. They
control corporations with a capital of nine billions of dollars: and
such consolidation is not to be undone by any artificial devices of
legislation.

If economic life, by reason of the dimensions which it has assumed in
the last decades, requires this welding together of interests in every
department, then the formation of syndicates and trusts is only a phase
in the necessary development; and to prevent the formation of trusts
would affect the form, and not the essence of the movement. Indeed, the
form has already changed a number of times. The earliest trusts were so
organized that a number of stock companies united as such and intrusted
their business to a new company, which was the “trust.” That system was
successfully abolished; the trust itself seemed unassailable, but the
state could revoke the charters of the subsidiary companies, because by
the law of most states these latter might continue only so long as they
carried on the functions named in their charters; that is, so long as
they carried on the transaction of their affairs themselves. A stock
company has not the right, possessed by an individual, to intrust its
property to another. And if the stock companies which came together into
a trust were dissolved, the trust did not exist. In this way the State
of New York proceeded against the Sugar Trust, Ohio against the Standard
Oil Company, and Illinois against the Chicago Gas Company.

But the course of events has shown that nothing was gained by this.
Although it was recognized that corporations could not legally combine
to form a trust, nevertheless the stockholders controlling the stock of
separate companies could join as individuals and contribute their
personal holdings to a new company which was virtually a trust; and in
this form the trusts which had been demolished were at once reorganized.
Moreover, of course any number of stock companies can simply dissolve
and merge into one large company, or they may keep their individuality
but make important trade agreements with one another, and so indirectly
fulfil the purposes of a trust. In short, the ways of bringing assenting
industrial enterprises under one management and so of virtually making a
given industry into a monopoly, are manifold.

To promote the development of trusts, there was nothing necessary but
success at the outset. If the first trusts were successful, the device
would be imitated so long as there was any prospect of profit. It really
happened that this imitation went on finally as a sort of mania, where
no special saving of profits could be predicted; one trust followed
another, and the year 1903 saw 233 purely industrial trusts
incorporated, of which 31 had a capital of over $50,000,000 each, and of
which the total capitalization was over nine billions.

At first sight it might look as if this movement would be really
sympathetic to the American people in general. The love of size
generated in the nation by the lavishness of nature must welcome this
consolidation of interest, and the strong spirit of self-initiative
claiming the right of individuals to unite and work together must surely
favour all sorts of co-operation. As a fact now an opposite tendency
operates, which after all springs from the same spirit of
self-initiative. The freely acting individual must not be prevented by a
stronger force from using the strength he has. Everything which excludes
free competition and makes the individual economically helpless seems
immoral to the American. That is old Anglo-Saxon law.

The common law of England has at all times condemned agreements which
tend toward monopoly, and this view dominates the American mind with a
force quite surprising to the European who has become accustomed at
least to monopolies owned by the state. The laws of almost all the
separate states declare agreements tending toward a monopoly to be
illegal; and federal legislation, in its anti-trust measures of 1887 and
1890, has seconded this idea without doing more than formulating the
national idea of justice. The law of the country forbids, for instance,
all agreements looking to the restriction of trade between different
states of the country or with foreign nations. Senator Foraker, in
February, 1904, called down public displeasure by proposing a law which
permitted such agreements restricting commerce so long as the
restriction was reasonable. It was feared at once that the courts would
think themselves justified in excusing every sort of restraint and
monopolistic hindrance. And yet there is no doubt that the
interpretation of what should constitute “restriction” to commerce was
quite as arbitrary a matter as the interpretation of what should be
“reasonable.” Indeed, the economic consolidation of competing
organizations by no means necessarily cuts off the beneficent effects of
competition. When, for instance, the Northern Securities Company united
several parallel railway lines, it asserted justly that the several
roads under their separate corps of officials would still compete for
public favour. Yet the public and the court objected to the
consolidation. The one real hindrance to the propagation of trusts lies
in this general dread of every artificial check to free competition.

Many circumstances which have favoured the formation of trusts are
obvious. In the first place, the trust can carry on business more
cheaply than the component companies individually. The general
administration is simplified by doing away with parallel positions, and
all expenses incident to business competition are saved. Then, too, it
can make larger profits since when competition stops, the fixing of
prices lies quite with itself. This is of course not true, in so far as
other countries are able to compete; but here comes in the function of
the protective tariff, which permits the trust to raise its prices until
they equal those of foreign markets plus the tariff.

The good times which America has enjoyed for some years have also
favoured the development of trusts. When the harvests are good and the
factories all busy, high prices are readily paid. The trusts can do even
better than single companies by shutting down unprofitable plants and
adapting the various remaining plants for mutual co-operation. Then,
too, their great resources enable them to procure the best business
intelligence. In addition to all this came a series of favourable
external circumstances. First was the rapid growth of American capital
which was seeking investment. In the seventies, the best railroad
companies had to pay a rate of 7 per cent. in order to attract
investors; now they pay 3½ per cent. Capital lies idle in great
quantities and accumulates faster than it can find investment. This has
necessarily put a premium on the organization of new trusts. Then, too,
there was the well-known uniformity of the market, so characteristic of
America. The desire to imitate on the one side, and patience and good
nature on the other, give to this tremendous region of consumption
extending from the Atlantic to the Pacific Ocean a uniformity of demand
which greatly favours manufacture on a gigantic scale. This is in sharp
contrast with the diversity of requirements in Europe.



It has been, doubtless, also important that the American feels
relatively little attached to his special business. Just as he loves his
Fatherland really as a conception, as an ideal system, but feels less
bound to the special piece of soil where he was born and will leave his
own farm if he is a farmer and go westward in search of better land, so
the American passionately loves business as a method, without being over
attached to his own particular firm. If the opening is favourable, he
gives up his business readily to embark on another, just as he gives up
an old-fashioned machine in favour of an improved one.

Just this quality of mind is so different from the German that here
would be probably the greatest hindrance to the organization of trusts
in Germany. The German feels himself to have grown up in his special
business, which he may have inherited from his father, just as the
peasant has grown up on his farm, and he does not care to become the
mere employee of a large trust. Another contributory mental trait has
been the friendly confidence which the American business man puts in his
neighbour. The name is here appropriate; the trusts in fact repose to a
high degree on mutual trust, and trusts like the American could not
develop wherever there should be mutual distrust or jealousy in the
business world. Finally, the laws themselves have been favourable, in so
far as they have favoured the issue of preferred stock in a way very
convenient to trusts, but one which would not have been approved in
Europe. And, moreover, the trusts have made considerable use of the
diversity existing between the laws of different states.

There have been retarding factors, too. We have mentioned the most
important of all—the legal discountenance of all business agreements
tending to create a monopoly or to restrain trade. There have been
others, however. One purpose of the trusts is to put prices up and so to
make the necessities of life dearer. It is the people who pay the
prices—the same people who elect Congress and determine the tariffs and
the laws; so that every trust works in the knowledge that putting up
prices tends immediately to work back on business by calling forth
tariff revision and anti-trust laws.

One source of great profit to the trusts has been the possibility of
restricting output. This method promised gain where natural products
were in question, such as oil, tobacco, and sugar, of which the quantity
is limited, and further for all technical patents. Where, however, there
is no such limitation the most powerful corporation will not be able to
avoid competition, and if it tries to buy up competing factories to stop
such competition, still more are built at once, solely with the purpose
of extorting a high ransom from the trusts; and this game is ruinous. In
other departments again consolidation of business means very little
economy; Morgan’s marine trust is said not to have succeeded for this
reason. In short, not all industries are susceptible of being organized
as trusts, and the dazzling profits of certain favoured trusts too
easily misled those who were in pursuit of fortune into forgetting the
difference between different businesses. Trusts were formed where they
could not be profitable. Perhaps the real founders themselves did not
overlook the difference; but they counted on the great hungry public to
overlook it, until at least most of the shares should have been disposed
of.

As a fact, however, the reluctance of the great investing public has
been a decidedly restraining factor too. The securities spoiled before
the public had absorbed them; everywhere the complaint went up of
undigested securities. The public came early to suspect that the
promoters were making their profits not out of the legitimate economies
to be saved by the trusts, but by enormously overcapitalizing them and
taking large blocks of stock for themselves.

There was still another unfavourable influence on public opinion. The
main profits of a protected trust lie in its being able to sell more
dearly than it could if exposed to foreign competition. But now if the
consolidated industry itself proposes to sell to other countries, it
must of course step down to the prevailing level of prices. It must
therefore sell more cheaply abroad than at home. But this is soon found
out, and creates a very unfavourable impression. The American is willing
to pay high prices, as far as that goes; but when he has to pay a price
double what the same factory charges for the same goods when delivered
in Europe, he finds the thing wholly unnatural, and will protest at the
next election. Thus there have been plenty of factors to counteract the
favourable conditions, and the history of trusts has certainly not been
for their promoters a simple tale of easy profits.

Now, if we do not ask what has favoured or hindered the trusts, nor how
they have benefited or jeopardized their founders, but rather look about
to see what their effect on the nation has been and will be, some good
features appear at once. However much money may have been lost, or
rather, however fictitious values may have been wiped out in the market,
the great enterprises are after all increasing the productive capacity
of the nation and its industrial strength in the fight with other
peoples. They give a broad scope to business, and bring about relations
and mutual adaptations which would never have developed in the chaotic
struggling of small concerns. They produce at the same time by the
concentration of control an inner solidarity which allows one part to
function for another in case there are hindrances or disasters to any
part of the great organism, and this is undoubtedly a tremendous factor
for the general good. A mischance which, under former conditions, would
have been disastrous can be survived now under this system of mutual
interdependence: thus it can hardly be doubted that the combined action
of the banks in the year 1903 prevented a panic; since, when stocks
began to fall, the banks were able to co-operate as they would not have
been able previously to their close affiliation.

Furthermore, economic wealth can now be created more advantageously for
the nation. The saving of funds which were formerly spent in direct
competition is a true economy, and the trusts have asserted again and
again that as a matter of fact they do not put up prices, but that they
make sufficient profits in saving what had formerly been wasted in
business hostilities. Certainly the trusts make it possible to isolate
useless or superannuated plants, without causing a heavy loss to the
owners, and thus the national industry is even more freely adaptable to
changing circumstances than before; and this advantage accrues to the
entire country. The spirit of enterprise is remarkably encouraged and
the highest premiums are put on individual achievement. Almost all the
men who hold responsible positions in the mammoth works of the Steel
Trust have worked up, like Carnegie himself, from the bottom of the
ladder, and made their millions simply by working better than their
fellows.

On the other hand, the trusts have their drawbacks. One of the most
regrettable to the American mind is their moral effect. The American
distrusts such extreme concentration of power and capital; it looks
toward aristocracy, oligarchy, and tyranny. At the same time the masses
are demoralized, and in very many cases individual initiative is
strangled. There are, as it were, nothing but officials obeying orders;
no men acting wholly on their own responsibility. Work ceases to be a
pleasure, because everything goes by clock-work; the trust supersedes
the independent merchant and manufacturer just as the machine has
superseded the independent artisan.

The trusts have other demoralizing effects. Their resources are so
tremendous as in the end to do away with all opposition. The independent
man who hopes to oppose the great rival, can too easily be put in a
position in which he is made to choose between beggary and the
repudiation of all his principles. Everybody knows the shameless history
of the Standard Oil Company, which has strangled not merely weak
proprietors, but, much more, has strangled strong consciences. Then,
too, the whole system of over-capitalization is immoral. Large trusts
can hardly be formed except by purchasing the subsidiary companies at
fancy prices, and issuing stock which in large part represents the
premium paid to the promoters. Indeed, this whole system of community of
interests which puts thousands of corporations into the hands of a few
men who everywhere play into one another’s hands, must bring it about
that these men will soon grow careless and overlook one another’s
irregularities in a way which will threaten sober business traditions.
The whole country was shocked on hearing the revelations of the
Shipbuilding Trust, and seeing with what criminal carelessness the
organization went on in a little group of friends, and how the methods
of poker-playing were applied to transactions of great moment. The
fundamental objection, however, is always that it is immoral to kill
competition by agreements which create a monopoly.

Now, what can be done to obviate these evils? Apparently the first thing
would be a revision of the tariff; and yet even their opponents must
agree that there is only an indirect relation between the protective
tariff and the trusts. It is true that the high tariffs have helped to
create those industries which have now come together in trusts, and if
the industries were to be wiped out, of course there would be nothing
left of consolidations. But it is surely not true that the trusts are
the immediate effect of the tariff, and the more a revised tariff were
to let in foreign competition so much the more would the national
industries need to form themselves into trusts for the sake of the
benefits of consolidated management. All the business advantages and all
the moral evils of trusts would still remain, even though the dividends
were to sink. And the trusts would not be carried off the field unless
American industry itself should utterly succumb to the foreign enemy.

Most of all, however, it seems clear that any policy prejudicial to the
conditions of production and distribution would first of all, and most
sadly, hit the competitors of the trusts. There is no absolute monopoly
in any American industry. Indeed, even the Sugar Refining Company has a
few outside competitors, and there is a legion of independent producers
outside of the Steel Trust who are themselves in part organized in
groups, and in many industries the trusts do not comprise even half of
the manufacturers. Now, if the high tariff wall should be torn down so
that a flood of cheap foreign manufactures could come in, it is certain
that the first sufferers would be the small independent companies, which
would be drowned out, while the mighty trusts would swim for a long
time. Indeed, the destruction of such home competition would greatly
benefit the trusts. Some of the strongest of these would hardly be
reached at all by a reduction of the tariff—as, for instance, the
strongest of them, the Petroleum Trust, which does not enjoy any
protection. And it is also to be asked if trusts do not prosper in
free-trade England? So soon as the water is squeezed out of their
stocks, as has in good part lately happened, the trusts would still have
a great advantage after protective duties should be abolished. And at
the same time the necessary depression of wages which would result from
that movement would endanger the whole industrial fabric. Moreover, the
social and moral evils of the trusts would persist. Therefore the
Republican party, which is just now in power, will take no part in
solving the trust question by reducing the tariff.

Those Republicans who oppose the trusts are much more inclined to
proceed to federal legislation. President Roosevelt has, in a number of
speeches which are among the most significant contributions to the whole
discussion, pointed to this way again and again. The situation is
complicated and has shifted from time to time. The real difficulty lies
in the double system of legislative power which we have already
explicitly described. We have seen that all legislative power which is
not expressly conferred on the Union belongs to the several states;
specially has each state the right to regulate the commercial companies
to which it has given charters. But if the company is such a one as
operates between several states—as, for instance, one which transports
goods from one state to another—it is regulated by federal law. Now, as
long ago as the year 1890, in the so-called Sherman Act, Congress passed
draconic regulations against interstate trusts. The law threatens with
fine and imprisonment any party to a contract which restricts interstate
commerce. It can be said of this law that it entirely did away with the
trusts in their original form, in which the various companies themselves
composed the trust. At the same time the federal officials were strongly
seconded by the judicial doings of the separate states, as we have
already seen. But the effect has only been to drive industry into new
forms, and forms which are not amenable to federal regulations, but fall
under the jurisdiction of the separate states. Corporations were formed
which have their home in a certain state, but which by the tremendous
capital of their members have been able to acquire factories distributed
all through the country. Indeed, they are not real trusts any more, and
the name is kept up only because the new corporations have descended
from trusts and accomplish the same purpose.

Of course, this change would have been of no advantage for the several
companies if the stern spirit shown by Congress in this legislation had
been manifested once more by the separate states, that is, if each
separate state had forbidden what the Union had forbidden; but so long
as a single state in the whole forty-five permitted greater freedom to
business than the others, of course all new companies would be careful
to seek out that state and settle there. And, what was more important,
would there pay taxes—a fact which tended to persuade every state to
enact convenient trust laws.

Now, it is not a question between one state and forty-four others, but
rather between the diversities of all the forty-five. Almost every state
has its peculiar provisions, and if its laws are favourable to the
trusts this is because, as each state says, if it were to stand on high
moral grounds it would only hurt itself by driving away profitable
trusts, and would not benefit the whole country, because the trusts
would simply fly away and roost in some other state. More especially the
industrially backward Western States would be always ready to entertain
the trusts and pass most hospitable laws, for the sake of the revenue
which they could thereby get for their local purposes. And so it is
quite hopeless to expect the trusts to be uprooted by the legislation of
the separate states. If all forty-five states were to pass laws such as
govern stock companies in Massachusetts, there would be no need of
further legislation; and it is also no accident, of course, that there
are very few trusts in the State of New York. All the great trusts whose
directors reside in the metropolis have their official home across the
river in the State of New Jersey, which has made great concessions to
the companies.

If these companies are to be reached by law, the surest way seems to be
by taking a radical step and removing the supervision of large stock
companies from the single states, and transferring it to the federal
government; this is the way which President Roosevelt has repeatedly
recommended. In our political section we have explicitly shown that such
a change cannot be introduced by an act of Congress, but only by an
amendment to the Constitution, which cannot be made by Congress, since
it is in itself a product of the Constitution. Congress would be able
only to take the initiative, and two-thirds of both houses would have to
support the proposition to change the Constitution; and this change
would have to be ratified by three-fourths of the state legislatures
themselves. Now, it would be difficult to get a two-thirds majority in
both houses on any question hostile to trusts; but it is quite out of
the question to induce the three-fourths of the states to cripple their
own rights in so important a matter as the regulation of stock
companies; particularly as in economic matters local power is necessary
to local optimism, and the weaker states would never consent to give up
such rights, since they would be forced to see industrial laws framed
according to the requirements of the more highly developed states. Was
the President, then, in his speeches, like Don Quixote, tilting against
the windmills; or was he proposing, as some of his opponents said, quite
impracticable solutions in order to divert attention from such a handy
solution as that of tariff reduction? And was he declaiming loudly
against the trusts before the public in order really to help on the
friends of capital?

Perhaps another point of view may be found. It may be that President
Roosevelt proposed a constitutional amendment in order to arouse
discussion along certain lines, and in order specially to have the
chance of demonstrating that federal control of those overgrown business
enterprises is necessary, and that their control by the several states
is dangerous. It looks indeed as if such discussion would have been
highly superfluous if not insincere, if it were true that the sole way
of helping the situation were the quite impossible constitutional
amendment.

But such is not the case; there is another way of reaching the same end
without meeting the difficulties involved in changing the Constitution.
Of course, the President was not free to discuss this means, nor even to
mention it. This way is, we think, for the Supreme Court to reverse its
former decision, and to modify its definition of interstate commerce in
closer accord with the latest developments of the trusts. We have seen
that there are drastic laws relating to interstate commerce which have
overthrown all the earlier trusts; but a corporation claiming home in
New Jersey, although owning factories in different states and dependent
on the co-operation of several states for its output, is to-day treated
by the Supreme Court as a corporation pertaining to one state. If, now,
the Supreme Court were to decide that such a corporation transacts
interstate commerce, then all the severity of the existing federal laws
would apply to such corporations, and everything which could be
accomplished by an amendment to the Constitution would be effected by
that one decision. Of course, the President could not suggest this,
since the Supreme Court is co-ordinate with the Executive; yet if public
attention should be awakened by such a discussion, even the judges of
the Supreme Court might consider the matter in a new light.

To be sure, this would at the same time require the Supreme Court
somewhat to modify its previous interpretation of the Anti-Trust Law
itself, and not merely its application; since otherwise, if the trusts
come under federal jurisdiction, the law might wipe out the new trusts,
as it did the old, instead merely of regulating them. In view of the
recently published memoirs of Senator Hoar, there can be no doubt that
the Supreme Court has interpreted the law forbidding the restraint of
trade more strictly than was originally intended in the bill which Hoar
himself drew up. Congress meant to refer to agreements in restraint of
trade in a narrow, technical sense, while the court has interpreted this
law as if it were to apply to every agreement which merely regulates
production or sale in any place. But this unnecessarily severe
construction of the law by the unexpected verdict of the court can of
course be set aside by a further Congressional measure, and therefore
offers no difficulty.

The Administration might proceed in still another way. A good deal has
been said of greater publicity in public affairs, and in the last few
years energetic measures have already been taken at the instance of the
President. Many of the evils of trusts lie in their concealment of the
conditions under which they have been organized; and the new Department
of Commerce is empowered to take official testimony concerning all such
matters, and to demand this under oath. Whether this will be an ultimate
gain is doubted by many, since those acquainted with the matter say that
the secrets of modern book-keeping make it impossible to inspect the
general condition of a large industrial concern when its promoters
desire to conceal the truth. While if one were to go back of the books
and lay bare every individual fact to the public eye, the corporations
would be considerably injured in their legitimate business. And in any
case, this new effort at publicity has so far no judicial sanction. One
large trust has already refused to give the information desired because
its counsel holds the Congressional law to be unconstitutional, and this
matter will have to be settled by the Supreme Court.

The most thoughtful minds are coming slowly to the opinion that neither
tariff provisions nor legislation is necessary, but that the matter will
eventually regulate itself. The great collapse of market values has
opened the eyes of many people, and the fall in the price of commodities
manufactured by trusts works in much the same direction. People see,
more and more, that most of the evils are merely such troubles as all
infant organisms pass through. The railroads of the country were also at
first enormously overcapitalized, but the trouble has cured itself in
the course of time. The surpluses have been spent on improvements, and
railroad shares to-day represent actual values. Such a change has in
fact already set in among the trusts. Paternal regulation by the
government, which prescribes how industry shall go on, is always
essentially distasteful to Americans. Exact regulative measures which
shall be just cannot be framed beforehand by any government. Even Adam
Smith believed, for instance, that the form of organization known as a
stock company was suitable for only a few kinds of business. The
American prefers to submit all such questions to the actual business
test. All experimental undertakings are sifted by natural selection, and
the undesirable and unnecessary ones fall through. It is true that many
lose their property in such experiments, but that is only a wholesome
warning against thoughtless undertakings and against hasty belief that
the methods profitable in one field must be profitable in every other.
It is true that here and there a man will make large profits rather too
easily, but Roosevelt has well said that it is better that a few people
become too rich than that none prosper.

The development of affairs shows most of all that prices can be inflated
for a short time, but that they slowly come back to a reasonable figure
so long as there are no real monopolies. The experience of the last ten
years teaches, moreover, that the most important factor which works
against the trusts is the desire for independence on the part of
capitalists, who do not for a long time willingly subordinate themselves
to any corporation, but are always tempted to break away and start once
more an independent concern.

And comparing the situation in 1904 with that of 1900, one sees that in
spite of the seeming growth of the trust idea, the trusts themselves
have become more solid by the squeezing out of fictitious valuations;
they are more modest, content themselves with less profits, and they are
much less dangerous because of the competition which has grown up around
them. The trusts which originally ruled some whole industry through the
country are to-day satisfied if they control two-thirds of it. A single
fundamental thought remains firm, that the development of industry
demands a centralized control. This idea works itself out more and more,
and would remain in spite of any artificial obstruction which might be
put before it. But the opposite tendencies are too deeply rooted in
human nature, in Anglo-Saxon law, and in the American’s desire for
self-initiative, to let this centralization go to dangerous limits.

But those who will not believe that the trusts, with their enormous
capitals, can be adequately restrained in this way, may easily content
themselves with that factor which, as the last few years have shown,
speaks more energetically than could Congress itself—this is organized
labour. The question of capital in American economy is regulated finally
by the question of labour.

_The Labour Question_

As the negro question is the most important problem of internal
politics, so the labour question is the most important in American
economic life; and one who has watched the great strikes of recent
years, the tremendous losses due to the conflicts between capital and
labour, may well believe that, like the negro question, this is a
problem which is far from being solved. Yet this may not be the case.
With the negro pessimism is justified, because the difficulties are not
only unsolved, but seem unsolvable. The labour question, however, has
reached a point in which a real organic solution is no longer
impossible. Of course, prophecies are dangerous; and yet it looks as if,
in spite of hard words, the United States have come to a condition in
which labourers and capitalists are pretty well satisfied, and more so
perhaps than in any other large industrial nation. It might be more
exact to say that the Americans are nearer the ideal condition for the
American capitalist and the American labourer, since the same question
in other countries may need to be solved on wholly different lines.

In fact, the American problem cannot be looked into without carefully
scrutinizing how far the factors are peculiar to this nation. Merely
because certain general factors are common to the whole industrial
world, such as capital, machinery, land values, labour, markets, and
profits, the social politician is inclined to leave out of account the
specific form which the problem takes on in each country. The
differences are chiefly of temperament, of opinions, and of mode of
life.

It is, indeed, a psychological factor which makes the American labour
question very different from the German problem. This fact is neglected,
time after time, in the discussions of German theorists and business
men. It is, for instance, almost invariably affirmed in Germany that the
American government has done almost nothing toward insuring the labourer
against illness, accident, or old age, and that therefore America is in
this respect far inferior to Germany. It can easily be foreseen, they
say, that American manufacturers will be considerably impeded in the
world’s market as soon as the progress of civilization forces them to
yield this to the working-man.

The fact is that such an opprobrium betrays a lack of understanding of
American character. The satisfaction felt in Germany with the laws for
working-men’s insurance is fully justified; for they are doubtless
excellent under German conditions, but they might not seem so
satisfactory to the average American nor to the average American
labourer. He looks on it as an interesting economic experiment,
admirable for the ill-paid German working-man, but wholly undesirable
for the American. The accusation that the American government fails in
its duty by not providing for those who have served the community, is
the more unjust, since America expends on the average $140,000,000 in
pensions for invalid veterans and their widows, and is equally generous
wherever public opinion sees good cause for generosity.

It cannot be doubted that the American labourer is a different sort of
creature from the Continental labourer; his material surroundings are
different, and his way of life, his dwelling, clothes and food, his
intellectual nourishment and his pleasures, would seem to the European
workmen like luxuries. The number of industrial labourers in the year
1880 was 2.7 million, and they earned $947,000,000; in 1890 it was 4.2
million earning $1,891,000,000; and in 1900 there were 5.3 million
labourers earning $2,320,000,000; therefore, at the time of the last
census, the average annual wage was $437. This average figure, however,
includes men, women, and children. The average pay of grown men alone
amounts to $500. This figure gives to the German no clear idea of the
relative prosperity of the working-man without some idea of the relation
between German and American prices.

One reads often that everything is twice as expensive in America as in
Germany, while some say that the American dollar is worth only as much
as the German mark—that is, that the American prices are four times the
German; and still others say that American prices are not a bit higher
than German. The large German-American steamships buy all their
provisions of meat in New York rather than in Hamburg or Bremen, because
the American prices are less. If one consults, on the other hand, a
doctor or lawyer in New York, or employs a barber or any one else for
his personal services, he will find it a fact that the American price is
four times as high as the German. The same may be said of articles of
luxury; for bouquets and theatre tickets the dollar is equal to the
mark. It is the same with household service in a large town; an ordinary
cook receives five dollars per week, and the pay of better ones
increases as the square of their abilities. Thus we see at once that an
actual comparison of prices between the United States and Europe cannot
be made. A dollar buys five marks’ worth of roast beef and one mark’s
worth of roses.

In general, it can be said that the American is better off as regards
all articles which can be made in large quantities, and worse off in
articles of luxury and matters of personal service. The ready-made suit
of clothes is no dearer in America than in Germany and probably better
for the price, while the custom-made suit of a first-class tailor costs
about four times what it would cost in Germany. All in all, we might say
that an American who lives in great style and spends $50,000 a year can
get no greater material comforts than the man in Germany who spends a
third as much—that is, 70,000 marks. On the other hand, the man who
keeps house with servants, but without luxuries, spending, say, $5,000 a
year, lives about like a man in Germany who spends 10,000 marks—that is,
about half as much. But any one who, like the average labourer, spends
$500 in America, unquestionably gets quite as much as he would get with
the equal amount of 2,100 marks in Germany.

But the more skilled artisan gets $900 on the average—that is, about
three times as much as the German skilled workman; so that, compared
with the wages of higher-paid classes, the working-men are paid
relatively much more than in Europe. The average labourer lives on the
same plane as the German master artisan; and if he is dissatisfied with
the furnishings of his home it is not because he needs more chairs and
tables, but because he has a fancy for a new carpet or a new bath-tub.
In this connection we are speaking always of course of the real
American, not the recent immigrants from Southern and Eastern Europe,
who are herded together in the worst parts of large cities, and who sell
their labour at the lowest rate. The native American labourer and the
better class of German and Irish immigrants are well clothed and fed and
read the newspapers, and only a small part of their wages goes for
liquor.

More important than the economic prosperity of the American working-man,
though not wholly independent of it, is the social self-respect which he
enjoys. The American working-man feels himself to be quite the equal of
any other citizen, and this not merely in the legal sense. This results
chiefly from the intense political life of the country and the
democratic form of government, which knows no social prerogatives. It
results also from the absence of social caste. There is a considerable
class feeling, but no artificial lines which hinder any man from working
up into any position. The most modest labourer knows that he may, if he
is able, work up to a distinguished position in the social structure of
the nation.

And the most important thing of all is probably the high value put on
industry as such. We have spoken of this in depicting the spirit of
self-initiative. In fact, the background of national conceptions as to
the worth of labour must be the chief factor in determining the social
condition of the working-man. When a nation comes to that way of
thinking which makes intellectual activities the whole of its culture,
while economic life merely serves the function of securing the—outward
comforts of the nation as it stretches on toward its goal of culture,
then the industrial classes must content themselves with an inferior
position, and those who do bodily labour, with the least possible amount
of personal consideration. But when a nation, on the other hand,
believes in the intrinsic worth of industrial culture, then the labour
by which a man lives becomes a measure of his moral worth, and even
intellectual effort finds its immediate ethical justification only in
ministering to the complex social life; that is, only so far as it is
industry.

Such now is the conception of the American. Whether a person makes laws,
or poetry, or railway ties, or shoes, or darning-needles, the thing
which gives moral value to his life’s work is merely its general
usefulness. In spite of all intellectual and æsthetic differences, this
most important element of activity is common to all, and the manual
labourer, so far as he is industrious, is equal to those who work with
their brains. On the other hand, the social parasite, who perhaps has
inherited money and uses it only for enjoyment, is generally felt to be
on a lower plane than the factory hand who does his duty. For the
American this is not an artificial principle, but an instinctive
feeling, which may not do away with all the thousand different shadings
of social position, but nevertheless consigns them to a secondary place.
One may disapprove of such an industrial conception of society, and like
better, for example, the æsthetic conception of the Japanese, who teach
their youth to despise mercantile business and tastefully to arrange
flowers. But it is clear that where such an industrial conception
prevails in a nation the working-man will feel a greater self-respect
and greater independence of his surroundings, since the millionaire is
also then only a fellow-workman.

Undoubtedly just this self-respect of the American labourer makes him
the great industrial force which he is. The American manufacturer pays
higher wages than any of his competitors in the markets of the world and
is not disconcerted at this load, because he knows that the
self-respecting working-man equalizes the difference of price by more
intense and intelligent labour. It is true that the perfection of
labour-saving machinery is a tremendous advantage here, but after all it
is the personal quality of the working-man which has brought about that
in so many industries ten American workmen do more than fifteen or, as
experts often say, twenty Italian workmen. The American manufacturer
prefers to hire a hundred heads rather than a thousand hands, even if
the wages are equal, and even the greedy capitalist prefers the labourer
who is worth thirty dollars a week to one who is worth only twenty. The
more the working-man feels himself to be a free co-operator, the more
intelligently does he address himself to the work. We hear constantly of
improvements which artisans have thought out, and this independent
initiative of theirs does not in the least impair the discipline of
industry. American discipline does not mean inferiority and the giving
up of one’s own judgment, but is a free willingness to co-operate and,
for the common end, to intrust the leadership to some one else. This
other person is exalted to the trustworthy position of leader by the
desire of those concerned, so that each man is carrying out his own will
in obeying the foreman.

Therefore, everything which in any wise savours of compassion is
entirely out of the question for him. In fact, the friendly benevolence,
however graciously expressed, intended to remind the workman that he is
after all a human creature, perhaps the friendly provision of a house to
live in or of some sort of state help for his family, must always be
unwelcome to him, since it implies that he is not able, like other
fathers of a family, to be forethoughtful and provident. He prefers to
do everything which is necessary himself. He insures himself in a
life-insurance company and, like anybody else, he looks out for his own
interests—tries to improve his conditions by securing good contracts
with his employer, by arranging organizations of his fellow-workmen, and
by means of his political rights. But whatever he accomplishes, he
enjoys it because he has worked in free competition against opposing
interests. Any material benefits which he might purchase by enduring the
patronizing attitude of capitalists or legislators would be felt to be
an actual derogation.

And thus it happens that social democracy, in the technical sense, makes
no advance among American workmen. The American labourer does not feel
that his position is inferior; he knows that he has an equal opportunity
with everybody else, and the idea of entire equality does not attract
him, and would even deprive him of what he holds most valuable—namely,
his self-initiative, which aims for the highest social reward as a
recognition of the highest individual achievement. American society
knows no unwritten law whereby the working-man of to-day must be the
same to-morrow, and this gives to the whole labour question in America
its distinction from the labour question in European aristocratic
countries. In most cases the superiors have themselves once been
labourers. Millionaires who to-day preside over the destinies of
thousands of working-men have often themselves begun with the shovel or
hod. The workman knows that he may set his ambition as high as he likes,
and to exchange his equal opportunity for an equality of reward would
mean for him to sink back into that social condition in which industry
is thought to be only a means to something else, and not in itself a
valuable activity. Although Bellamy may already dream of the common
umbrella, his native country is probably further from social democracy
than any country in Europe, because the spirit of self-initiative is
here stronger than anywhere else, and because the general public is
aware that no class distinctions cut it off from the highest positions
in the country. It knows that everything depends on industry, energy,
and intelligence.

This does not hinder the working-men, in their fight for better
conditions of labour, from adopting many socialistic tenets. The
American calls it socialism even to demand that the government own
railways, telegraph lines, express companies, or coal-fields, or that
the city conduct tramways, or gas or electric-light works. Socialism of
this sort is undoubtedly progressing, although the more extravagant
ideas find more wordy orators to support them than hearers to give
belief. It is also very characteristic that the labour leaders do not
make such agitation their life work, but often after a few years go over
to one or another civil occupation. The relation between working-man and
capitalist, moreover, is always felt to be temporary. A man is on one
side of the line to-day and on the other to-morrow. There is no firm
boundary between groups of men, but merely a distribution in temporary
groups; and this separates the American labour unions from even the
English unions, with which otherwise they have much in common.

Many other conditions by which the American working-man’s life is
separated from the Englishman’s are of an economic sort. It is
remembered, for instance, how successful the English unions have been in
establishing co-operative stores, while in America they have failed in
this. The department shops in the large cities have been able to sell
cheaper and better goods, and have been in every way more popular. But
enough of comparing America with the Old World—we must discuss the
actual situation in the New.

The labour movement of the United States really began in the third
decade of the last century. Of course, only the North is in question; in
the South slavery excluded all alliances and independent movements for
improving the condition of the manual labourer. There had been small
strikes as early as the eighteenth century, but the real movement began
with the factories which were built during the nineteenth.

From the very beginning the demand for shorter hours and higher wages
were the main issues. At the same time the American world was filled
more or less with fantastic notions of co-operation, and these
influenced the course of affairs. Boston and New York were the centres
of the new movement. As early as 1825 in New York there appeared the
first exclusively labour newspaper, the “Labour Advocate”; it commenced
a literature which was to increase like an avalanche. The labourers
figured independently in politics in 1830, when they had their own
candidate for governor. But all political endeavours of the working
people have been mere episodes, and the chief labour movements of the
century have taken place outside of politics; the leading unions have
generally found that their strength lay in renouncing political
agitation. Only when legal measures for or against the interests of
labourers have been in question, has there been some mixing in with
politics, but the American workmen have never become a political party.

At the beginning of the thirties, working-men of different industries
united for the first time in a large organization, such as later became
the regular form. But at the outset of the movement there appeared also
the opposite movement from the side of the capitalists. For instance, in
1832 merchants and shipholders in Boston met solemnly to declare it
their duty to oppose the combinations of working people which were
formed for the illegal purpose of preventing the individual workman from
making a free choice as regards his hours of labour, and for the purpose
of making trouble with their employers, who already paid high wages.

The organization of the working-man and that of the employer have grown
steadily, and the nation itself has virtually played the rôle of an
attentive but neutral spectator. In the case of direct conflict the
sympathy of the country has almost always been on the side of the
working-man, since in the concrete case the most impressive point was
generally not the opposition between capital and labour, but the
personal contrast of the needy day-labourer and the rich employer; and
the sentimentality of the American has always favoured the weaker
classes. The nation however, has shown an equal amount of sympathy
toward capital whenever a general matter of legislation was in question;
that is, whenever the problem has seemed more theoretical than personal.
In such cases the capitalists have always been felt to be the pioneers
of the American nation by putting their enterprise into all sorts of new
undertakings, applying their capital and intelligence to economic life;
so that they have seemed to a greater extent in need of national
protection than the workman, who may always be easily replaced by some
one else.

Considering the matter as a whole, it can be said indeed that the nation
has preserved a general neutrality, and let both parties virtually
alone. A change has very recently taken place. The new conditions of the
industrial struggle make it clearer day by day that there are three
parties to the conflict, rather than two; that is, not only capitalist
and labourer, but also the general public, which is dependent on the
industrial output, and therefore so immediately concerned in the
settlement of differences as to seem, even in concrete cases, entitled
to take active part. The turning-point came perhaps during the coal
strike in the winter of 1902–03, when the President himself stood out to
represent this third party. But we must follow the development more
minutely—must speak of the labour organizations as they exist to-day, of
the results of legislation, of the weapons employed by the labourers and
those used by the capitalists, of their advantages and disadvantages,
and of the latest efforts to solve the problem. Three forms of
working-men’s organizations can be discriminated to-day—the Knights of
Labour, the independent trades-unions, and the federated trades-unions.

The Knights of Labour are by principle different from both of the other
groups; and their influence, although once very great, is now waning.
Their fundamental idea is a moral one, while that of their rivals is a
practical one. This is, of course, not to be taken as meaning that the
labour unions pursue immoral ends or the Knights of Labour unpractical
ones. The Knights of Labour began very modestly in 1869 as a secret
organization, somewhat like the Free Masons, having an elaborate
initiation and somewhat unusual procedures. Their constitution began
with the motto, “Labour is noble and sacred,” and their first endeavours
were for the intellectual uplifting of the labourer and opposition to
everything which made labour mean or unworthy. The order grew steadily,
but at the same time the practical interests of different groups of
working-men necessarily came into prominence. In the middle eighties,
when they gave up their secret observances, the society had about a
million members, and its banner still proclaimed the one sentiment that
industry and virtue not wealth are the true measure of individual and
national greatness. Their members, they insisted, ought to have a larger
share of the things which they produced, so as to have more time for
their intellectual, moral, and social development. In this moral spirit,
the society worked energetically against strikes and for the peaceful
settlement of all disputes.

Its principal weakness was perhaps that, when the membership became
large, it began to take part in politics; the Knights demanded a reform
in taxation, in the currency, in the credit system, and a number of
other matters in line with state socialism. It was also a source of
weakness that, even in local meetings, working-men of different trades
came together. This was of course quite in accordance with the ethical
ideal of the society. As far as the moral problems of the workmen are in
question, the baker, tailor, mason, plumber, electrician, and so on,
have many interests which are identical; but practically it turned out
that one group had little interest in its neighbour groups, and
oftentimes even strongly conflicting interests were discovered. Thus
this mixed organization declined in favour of labour societies which
comprised members of one and only one trade, so that at the present time
the Knights of Labour are said to number only 200,000 and their
importance is greatly reduced. It is still undoubted that the idealistic
formulation in which they presented the interests of labour to the
nation has done much to arouse the public conscience.

At the present time the typical form of organization is the
trades-union, and between the independent and the federated
trades-unions there is no fundamental difference. There are to-day over
two million working-men united in trades-unions; the number increases
daily. And this number, which comprises only two-fifths of all
wage-earners, is kept down, not because only two-fifths of the members
of each trade can agree to unite, but because many trades exist which
are not amenable to such organization; the unions include almost all men
working in some of the most important trades. The higher the employment
and the more it demands of preparation, the stronger is the organization
of the employed. Printers, for instance, almost all belong to their
union, and in the building and tobacco trades there are very few who are
not members. The miners’ union includes about 200,000 men, who represent
a population of about a million souls. On the other hand, it would be
useless and impossible to perfect a close organization where new
individuals can be brought in any day and put to work without any
experience or training; thus ordinary day-labourers are not organized.
The number of two million thus represents the most important trades, and
includes the most skilled workers.

The oldest trades-union in America is the International Typographical
Union, which began in 1850. It is to be noticed at once that the
distinction between national and international trades-unions is a wholly
superficial one, for in the hundreds of so-called international unions
there has been no effort to stretch out across the ocean.
“International” means only that citizens of Canada and, in a few cases,
of Mexico are admitted to membership. It has been the experience of
other countries, too, that the printing trades were the first to
organize. In America the hatmakers followed in 1854, the iron founders
in 1859, and the number of organized trades increased rapidly during the
sixties and seventies. The special representation of local interests
soon demanded, on the one hand, the division of the larger societies
into local groups, and, on the other, the affiliation of the larger
societies having somewhat similar interests. Thus it has come about that
each locality has its local union, and these unions are affiliated in
state organizations for purposes of state legislation and completely
unified in national or international organizations. On the other hand,
the unions belonging to different trades are pledged locally and
nationally to mutual support. But here it is no longer a question, as
with the Knights of Labour, of the mixing up of diverse interests, but
of systematic mutual aid on practical lines.

The largest union of this sort is the American Federation of Labour,
which began its existence in Pittsburg in 1881, and has organized a
veritable labour republic. The Federation took warning at the outset
from the sad fate of previous federations, and resolved to play no part
in politics, but to devote itself exclusively to industrial questions.
It recognized the industrial autonomy and the special character of each
affiliating trades-union, but hoped to gain definite results by
co-operation. They first demanded an eight-hour day and aimed to forbid
the employment of children under fourteen years of age, to prevent the
competition of prison labour and the importation of contract labour;
they asked for a change in laws relating to the responsibility of
factory owners and for the organization of societies, for the
establishment of government bureaus for labour statistics, and much else
of a similar sort. At first the Federation had bitter quarrels with the
Knights of Labour, and perhaps even as bitter a one with socialistic
visionaries in its own ranks. But a firm and healthy basis was soon
established, and since the Federation assisted in every way the
formation of local, provincial, and state organizations, the parts grew
with the help of the whole and the whole with the help of the parts.
To-day the Federation includes 111 international trades-unions with 29
state organizations, 542 central organizations for cities, and also
1,850 local unions which are outside of any national or international
organizations. The interests of this Federation are represented by 250
weekly and monthly papers. The head office is naturally Washington,
where the federal government has its seat. Gompers is its indefatigable
president. Outside of this Federation are all the trades-unions of
railway employees and several unions of masons and stonecutters. The
railway employees have always held aloof; their union dates from 1893,
and is said to comprise 200,000 men.

The trades-unions are not open to every one; each member has to pay his
initiation fees and make contributions to the local union, and through
it to the general organization. Many of the trades-unions even require
an examination for entrance; thus the conditions for admission into the
union of electrical workers are so difficult that membership is
recognized among the employers themselves as the surest evidence of a
working-man’s competence. Every member is further pledged to attend the
regular meetings of the local branch, and in order that these local
societies may not be too unwieldy, they are generally divided into
districts when the number of members becomes too great to admit of all
meeting together. The cigarmakers of the City of New York, for example,
have a trades-union of 6,000 members, which is divided into ten smaller
bodies. Every single society in the country has its own officials. If
the work of the official takes all his time, he receives a salary equal
to the regular pay for work in his trade. The small organizations send
delegates to the state and national federations; and wherever these
provincial or federal affiliations represent different trades, each of
these trades has its own representative, and all decisions are made with
that technical formality which the American masters so well. In
accordance with this parliamentary rigour, every member is absolutely
pledged to comply with the decisions of the delegates. Any one who
refuses to obey when a strike is ordered thereby loses all his rights.

The rights enjoyed by the members of the trades-unions are in fact
considerable. Firstly, the local union is a club and an employment
agency, and especially in large cities these two functions are very
important for the American working-man. Then there are the arrangements
for insurance and aid. Thus the general union of cigarmakers of the
country, which combines 414 local unions having a total membership of
34,000 men, has given in the last twenty years $838,000 for the support
of strikes, $1,453,000 for aid to ill members, $794,000 for the families
of deceased members, $735,000 for travelling expenses, and $917,000 for
unemployed members; and most of the large unions could show similar
figures. Yet these are the lesser advantages. The really decisive thing
is the concessions which have been won in the economic fight, and which
could never have been gotten by the working-men individually.
Nevertheless, to-day not a few men hold off from the unions and get rid
of paying their dues, because they know that whatever organized labour
can achieve, will also help those who stay outside.

The main contention of these trades-unions refers to legislation and
wages, and no small part of their work goes in fighting for their own
existence—that is, in fighting for the recognition of the union labourer
as opposed to the non-union man—a factor which doubtless is becoming
more and more important in the industrial disputes. Many a strike has
not had wages or short hours of labour or the like in view, but has
aimed solely to force the employers officially to recognize the
trades-unions, to make contracts with the union delegates rather than
with individual men, and to exclude all non-union labourers.

The newly introduced contention for the union label is in the same
class. The labels were first used in San Francisco, where it was aimed
to exclude the Chinese workmen from competition with Americans. Now the
labels are used all over the country. Every box of cigars, every brick,
hat, or piano made in factories which employ union labour, bears the
copyrighted device which assures the purchasing public that the wares
were made under approved social and political conditions. The absence of
the label is supposed to be a warning; but for the population of ten
millions who are connected with labour unions, it is more than a
warning; it is an invitation to boycott, and this is undoubtedly felt as
a considerable pressure by manufacturers. The more the factories are
thus compelled to concede to the unions, and the more inducements the
unions thus offer to prospective members, and the faster therefore these
come in, the more power the unions acquire. So the label has become
to-day a most effective weapon of the unions.

But this is only the means to an end. We must consider these ends
themselves, and first of all labour legislation. Most striking and yet
historically necessary is the diversity in the statutes of different
states, which was formerly very great but is gradually diminishing. The
New England states, and especially Massachusetts, have gone first, and
still not so fast as public opinion has often desired. In the thirties
there were many lively fights for the legislative regulation of the
working hours in factories, and yet even the ten hours a day for women
was not established until much later; on the other hand, the employment
of children in factories was legislated on at that time, and in this
direction the movement progressed more rapidly.

A considerable step was taken in 1869, when Massachusetts established at
the expense of the state a bureau for labour statistics, the first in
the world; this was required to work up every year a report on all
phases of the labour question—economic, industrial, social, hygienic,
educational, and political. One state after another imitated this
statistical bureau, and especially it led to the establishment of the
Department of Labour at Washington, which has already had a world-wide
influence. During the seventies there followed strict laws for the
supervision of factories, for precautionary measures, and hygienic
improvements. Most of the other states came after, but none departed
widely from the example of Massachusetts, which was also the first state
to make repeated reductions in the working-day. Here it followed the
example of the federal government. To be sure, the reduction of the
working-day among federal employees was first merely a political
catering to the labour vote, but the Federation kept to the point and
the separate states followed. Twenty-nine states now prescribe eight
hours as the day for all public employees and the federal government
does the same.

The legislative changes in the judicial sphere have been also of
importance for trades-unions. According to Old English law at the
beginning of the nineteenth century, it was conspiracy for workmen to
unite for the purposes which the trades-unions to-day hold before
themselves. This doctrine of conspiracy, which to be sure from the
beginning depended largely on the arbitrary interpretation of the
judges, has been weakened from time to time through the century, and has
finally given away to legal conceptions which put no obstacles in the
way of the peaceful alliance of working-men for the purpose of obtaining
better conditions of labour. They especially regard the strike as lawful
so long as violence is not resorted to. Nearly all states have now
passed laws which so narrow the old conception of criminal conspiracy
that it no longer stands in the way of trades-unions. Other legal
provisions concern the company stores. In some mining districts far
removed from public shops, the company store may still be found, where
the company buys the articles needed by its employees and sells these
things to them at a high price. But nearly every state has legally done
away with this system; it was, indeed, one of the earliest demands of
the trades-unions.

There have been great improvements too in legislation relating to the
responsibility of employees. The Anglo-Saxon law makes an employer
responsible for injury suffered by the workmen by reason of his work,
but not responsible if the injuries are due to the carelessness of a
fellow-workman. The penalty fell then on the one who had neglected his
duty. It was said that the workman on taking up his duties must have
known what the dangers were. But the more complicated the conditions of
labour have become, the more the security of any individual has depended
on a great many fellow-labourers who could not be identified, so that
the old law became meaningless. Therefore, the pressure of trades-unions
has in the last half century steadily altered and improved the law in
this respect. American state law to-day virtually recognizes the
responsibility of the employer for every accident, even when due to the
carelessness of some other labourer than the one injured.

Thus on the whole a progress has been made all along the line. It is
true that some states have still much to do in order to come up with the
most advanced states, and the labour unions have still many demands in
store which have so far been nowhere complied with—as, for instance,
that for the introduction of the Swiss referendum, and so forth.
Government insurance is not on this programme—one point in which the
American working-man remains individualistic. He prefers to make
provision for those dependent on him, against old age, accident and
illness, in his own way, by membership in unions or insurance companies.
As a fact, more than half the labouring men are insured. Then too the
number of industrial concerns is increasing which make a voluntary
provision for their employees against illness and old age. This was
started by railroad companies, and the largest systems fully realize
that it is in their interest to secure steady labour by putting a
pension clause in the contract. When a workman takes work under
companies which offer such things, he feels it to be a voluntary
industrial agreement, while state insurance would offend his sense of
independence.

The state has had to deal with the labour question again in the matter
of strikes, lockouts, boycotts, and black-lists. During the last two
decades of the nineteenth century, there were 22,793 strikes in the
country, which involved 117,509 workers; the loss in wages to the
workmen was $257,000,000 and in profit to the employers $122,000,000;
besides that $16,000,000 were contributed to aid the strikes, so that
the total loss made about $400,000,000. The problems here in question
are of course much more important than the mere financial loss. About 51
per cent. of these strikes resulted successfully for the workmen, 13 per
cent. partially successfully, and in 36 per cent. the employers won.

Since 1741, when the bakers of New York City left work and were
immediately condemned for conspiracy, there has been no lack of strikes
in the country. The first great strike was among sailors in 1803, but
frequent strikes did not occur until about 1830. The first strike of
really historical importance was on the railroads in 1877; great
irregularities and many street riots accompanied the cessation of work,
and the state militia had to be called out to suppress the disturbances
in Cincinnati, St. Louis, Chicago, and Pittsburg. The losses were
tremendous, the whole land suffered from the tumults, and in the end the
working-men won nothing. When in the year 1883 all the telegraphers in
the country left their work and demanded additional payment for working
on Sunday, most of the country was in sympathy with them; but here too
the employers, although they lost millions of dollars, were successful.
In 1886 there were great strikes again in the railroad systems of the
Southwest.

The bitterness reached its highest point in 1892, when the Carnegie
Steel Works at Homestead were the scenes of disorder. Wages were the
matter under dispute; the company, which could not come to an agreement
with the labour union, proposed to exclude organized labour and
introduced non-union workmen. The union sought by the use of violence to
prevent the strangers from working; the company called for aid from the
state; the union still opposed even the militia, and actual battles took
place, which only the declaration of martial law by the governor, after
the loss of many lives, was able to suppress.

The Chicago strike in 1894 was more extensive. It began with a strike in
the Pullman factories in Chicago, and at its height succeeded in
stopping the traffic on a quarter of all American railroads. The
interruption of railway connections meant a loss to every person in the
country, and the total loss is estimated at $80,000,000. The worst
accompaniments of strikes soon appeared—riots, intimidations, assaults,
and murders. And again it was necessary to call out troops to restore
peace. Great wage disputes followed presently in the iron and steel
trades; but these were all surpassed in inner significance by the great
coal strike of the winter before last.

The conditions of labour in the anthracite coal mines of Pennsylvania
were unfavourable to the labourers. They had bettered themselves in a
strike in 1900, but the apparently adequate wages for a day’s labour
yielded a very small annual income, since there was little employment at
some seasons of the year. The working-men felt that the coal trusts
refused to raise the wages by juggling with arguments; the capitalists
tried to prove to them that the profit on coal did not permit a higher
wage. But the labourers knew too well that the apparently low profits
were due only to the fact that the trusts had watered their stock, and
especially that the coal mines were operated in connection with
railroads under the same ownership, so that all profits could be brought
on the books to the credit of the railroads instead of the mines. The
trades-unions thought the time was ripe for demanding eight hours a day,
a ten per cent. increase in wages, and a fundamental recognition of
trades-unions, along with a few other technical points. The organized
miners, under their leader, Mitchell, offered to wait a month, while the
points of difference might be discussed between both parties; Senator
Hanna, whose death a short time later took from politics one of the
warmest friends of labour, offered his services as mediator, and left no
doubt that the workmen would accept some compromise.

In spite of this moderation of the working-men, the representatives of
the mine owners refused in any way to treat with them. Their standpoint
was that if they recognized the trades-unions in their deliberations,
they were beginning on a course which they might not know how to stop;
if eight hours were demanded to-day by the trades-unions, seven hours
might be demanded in the same way next year. The employers thought it
high time once for all to break up the dictatorial power of the
trades-unions. President Baer explained that trades-unions are a menace
to all American industry. The strike continued. Now the anthracite
miners produce five million tons every month, which supply all the homes
in the eastern part of the country. A cold winter came on, and the lack
of coal throughout the country brought about a condition which resembled
the misery and sufferings of a time of siege. In many places it was not
even a matter of price, although this was four times what it ordinarily
is, but the supply of coal was actually used up. Schools and churches
had to be closed in many places. And now the public understood at last
perfectly clearly that, if the trades-unions wanted to exert their whole
power, the country would be absolutely helpless under their tyranny.
Nevertheless, the embitterment turned most strongly against the
employers, who still affirmed that there was nothing to arbitrate, but
that the workmen simply must give in.

The workmen then put themselves on the wrong side by threatening with
violence all men who came to take their places in the mines; indeed,
they forced back by barbarous methods the engineers who came to pump out
the water which was collecting in the mines. Troops had to be called,
but at that moment the President took the first steps toward a solution
of the problem by calling representatives of both parties to Washington.
A commission was finally appointed, composed of representatives of both
parties and well-known men who were neutrally inclined, and after
Pierpont Morgan on the side of the capitalists gave the signal to
consent to arbitration, the coal miners went back to work. The
commission met, and some time later in the year 1903 decided about half
of the points under dispute in favour of the miners, the other half
against them. This was by no means the last strike; the building trades
in many parts of the country, and specially in New York, were thoroughly
demoralized during the year 1903, the movement proceeding from the
strikes of 5,000 bridge builders: then too, the textile workers of the
East and miners of the South have been restless. And at the present
time, every day sees some small strike or other inaugurated, and any day
may see some very large strike declared. It was the coal strike,
however, which set the nation thinking and showed up the dangers which
are threatening.

The results of the coal strike had shown the friends of trades-unions
more clearly than ever the strength which lies in unity. They had seen
that results could be achieved by united efforts such as could never
have been gotten by the unorganized working-man. They had seen with
satisfaction that the trades-unions had taken a conservative part by
putting off the great strike as long as possible; and they had seen that
the employers would not have consented for their part to any
arbitration. In the end not only many of the union demands had been
granted, but, more than that, the policy of the trades-unions had been
put in the most favourable light. A whole country had to suffer, human
lives were sacrificed and millions lost, and in the end the
trades-unions won their point; if the mine owners had been willing in
the autumn to do what they had to do in winter, a great deal of injury
would have been spared. But the trades-unions could truthfully say that
they had been true to their policy and had always preferred peace to
war. The majority of votes within the trades-unions was against
thoughtless and unnecessary strife, against declaring a strike until all
other means had been tried. Many people felt that the interests of that
neutral party, the nation at large, were better looked out for by the
more thoughtful union leaders than by such capitalists as were the
Pennsylvania coal magnates.

On the other hand, it was felt that the most calmly planned strikes can
lead to embitterment and violence, and the tyrannical and murderous
suppression of the non-union working-man. And here the American sense of
freedom is touched. Every man has the right to decide freely under what
conditions he shall work; the strike-breaker was regarded as a hero, and
the trusts did their best to convince the world that the interference of
the trades-unions in the movements of non-union workmen is a menace to
American democracy. The unionists admit that it is unlawful power which
they have used, but pretend that they had a moral right; they say that
every working-man has a claim on the factory more than his weekly wage:
for he has contributed to its success; he has in a way a moral share,
which brings him no income, but which ought to assure him of his
position. And now, if during a strike an outside person comes in and
takes his place, it is like being robbed of something which he owns, and
he has the right of asserting his claim with such means as any man would
use on being assaulted.

Capitalists turned against the trades-unions with the greater
consternation, because these latter put not only the independent
working-man, but also the companies, in a powerless position. They
showed that their right to manage their own property was gone, and that
the capitalist was no longer the owner of his own factory the instant he
was not able to treat with the individual working-man, but forced to
subject himself to the representatives of trades-unions. It was easy to
show that while he, as undertaker of the business, had to take all the
risks and be always energetic and industrious, the working-men were
simply showing their greed and laziness by wanting shorter days, and
that they would never be really satisfied. It was affirmed that the best
workman was an unwilling party to the strike, and that he would more
gladly attend to his work than to trades-union politics, and that as a
fact he let his trades-union be run by irresponsible good-for-nothings,
who played the part of demagogues. Every man who had ever saved a cent
and laid it up, ought to be on the side of the capitalist.

But the public took a rather different attitude, and felt that the group
of capitalists had been revealed in a bad light by the strike, and when
their representatives came to instruct the President of the United
States, in a brusque way, on the rights of property, the public began to
revise its traditional ideas. The public came to see that such large
corporations as were here in question were no longer private enterprises
in the ordinary sense of the word; that a steel trust or coal trust
cannot be such an independent factor in the commonwealth as a grocery
shop in a country town. It was felt that the tremendous growth of the
business was the product of national forces, and in part dependent on
public franchises; wherefore, the business itself, although privately
owned, nevertheless had a semi-public character, so that the public
should not be refused the right to interfere in its management. Belief
in state socialism, in state ownership of railroads and mines, made
great progress in those days; and the conviction made still greater
progress that the working-man has a moral right to take an active hand
in managing the business in which he works.

And so public opinion has come round to think that violence on the part
of working-men, and refusal to treat with trades-unions on the part of
employers, are equally to be condemned. The community will hardly again
permit capital and labour to fight out their battles in public and make
the whole nation suffer. It demands that, now that labour is actually
organized in unions, disputes shall be brought up for settlement before
delegates from both sides, and that where these cannot come to a
solution the matter shall be brought before a neutral court of
arbitration which both sides agree to recognize.

Of course these disputes will continue to arise, since the price of
manufactured articles is always changing; the employer will always try
to lower wages in dull times, and the labourers will try to force wages
up during busy times. But it may be expected that the leaders of
trades-unions will be able to consider the whole situation intelligently
and to guide the masses of working-men carefully through their ambitions
and disappointments. Although the employers of labour continue to assert
that, so soon as they are handed over to the mercies of the
trades-unions, the spirit of enterprise will be entirely throttled and
capital will decline to offer itself, because all profit is sacrificed
to the selfish tyranny of the working people, nevertheless, experience
does not show this to be true. Trades-unions are convinced that, in
these days of machinery, too small a part of the profit falls to the
labouring man; but they know perfectly well that they themselves can
prosper only when the industry as a whole is prosperous, and that it
cannot prosper if it is burdened by too high wages. Trades-unions know
also that after all they will be able to gain their point in courts of
arbitration and elsewhere only so long as they have the sympathy of the
public on their side, and that every undue encroachment on the profits
of capital and every discouragement of the spirit of enterprise will
quickly lose them the sympathy of the American nation. If they really
attack American industry, public opinion will go against them. That they
know, and therefore the confidence is justified that, after all, their
demands will never endanger the true interests of capital. Capitalists
know to-day that they will always have trades-unions to deal with, and
that it will be best to adapt themselves to the situation. Many
thoughtful captains of industry admit that the discipline of
trades-unions has had some salutary effect, and that some of their
propositions, such as the sliding wage-scale, have helped on industry.

Thus both parties are about to recognize each other with a considerable
understanding. They instinctively feel that the same condition has
developed itself on both sides; on the one side capital is combined in
trusts, and on the other labour has organized into unions. Trusts
suppress the competition of capital, trades-unions kill the non-union
competitor. The trusts use as weapons high dividends, preferential
rates, and monopoly of raw material; the unions use the weapons of
old-age insurance, free aid during illness, the union label, strikes,
and boycotts. Both sides have strengthened their position by the
consolidation of many interests; just as the steel works are allied with
large banks, railroads, steamship lines, copper mines, and oil
companies, so the leaders of trades-unions take care to spread the
disputes of one industry into other industries.

Moreover, both parties fight alike by means of artificially limiting the
market; and this is, perhaps, the most dangerous factor of all. While
the trusts are continually abandoning factories or temporarily shutting
them down in order to curtail production, so the trades-unions restrict
the offering of labour. Not every man who wants to learn a trade is
admitted to an apprenticeship; the trades-union does not allow young men
to come in while old men who have experience are out of work. The
regulation of the flow of labour into the trades which require training,
and the refusal of union men to work with non-union men, are certainly
the most tyrannical features of the situation; but the trades-unions are
not embarrassed to find high-sounding arguments for their course, just
as the trusts have found for their own similar doings.

Things will continue in this way on both sides, no doubt; and the nation
at large can be content, so far at least as, through this concentration
and strict discipline on both sides, the outcome of the labour question
is considerably simplified. As long as the mass of capitalists is split
up and that of working-men chaotically divided, arbitration is
difficult, and the results are not binding. But when two well-organized
parties oppose each other in a business-like way, with mutual
consideration and respect, the conference will be short, business-like,
and effective.

The next thing necessary is simply an arrangement which shall be so far
as possible automatic for appointing an unprejudiced court of
arbitration in any case when the two parties are not able to agree. In
this matter public opinion has gone energetically to work. In December,
1901, at the instigation of the National Civic League, a conference of
leading representatives of capital and labour was called, and this
appointed a standing commission to pass on disputes between employers
and labourers. All three parties were represented here—capital by the
presidents of the largest trusts, railroads, and banks, trades-unions by
the leaders of their various organizations, and the public by such men
as Grover Cleveland, Charles Francis Adams, Archbishop Ireland,
President Eliot, and others, who enjoy the confidence and esteem of the
whole nation.

It has been objected that the millions of unorganized working-men are
not represented, but in fact these neutral leading men of the nation are
at the same time the representatives of unorganized labour. If these
were in any other way to be represented by delegates, they would have to
organize in order to choose such delegates. But this is just what
unorganized labour does not wish to do. Everything looks as if this
permanent commission would have the confidence of the nation and,
although created unofficially, would contribute a good deal to prevent
the outbreak of real industrial wars. But there can be no doubt that the
nation is ready to go further, and that if the two well-organized
parties, together with the men in whom both sides put their confidence,
are still not able to come to harmonious agreement, nor even to the
appointment of a court of arbitration, then the nation will quite likely
appoint an official and legally authorized board for compulsory
arbitration.

The example of New Zealand is encouraging in this direction, although
the experience of a small country may not be immediately applicable to a
large one. Nevertheless, there is some wish to imitate that example, and
to disregard the outraged feelings of capitalists who predict that
American industry will collapse utterly if the country becomes
socialistic enough to appoint arbitrators with the power to prescribe to
capital what wages it shall pay, and how otherwise it shall carry on
business. The nation has learned a good deal in the last two or three
years.

A peaceable solution of the problem is promised also from another
direction. The dramatic wars have concerned generally very large
companies, which employ thousands of workmen. The whole thing has been
repeated, however, on a more modest scale, where thousands of working
people stood opposed not to large trusts but to hundreds of small
employers, who were not separated from the working-men by any social
cleft. Here the battles have often been more disastrous for the
employers and their helplessness before small unions more patent. Then
it became natural for them to imitate the example of the workmen and to
form organizations to regulate the situation.

The first employers’ union was formed in 1890 by the owners of
newspapers, for whom sudden strikes are of course especially disastrous.
For ten years very few trades followed this example; but in the last few
years trades-unions of employers have been quietly forming in almost all
trades, and here the situation has been much more favourable from the
outset for bringing employer and labourer to a mutual understanding.
While the employers were not organized, an understanding was hard to
arrive at; but now both sides are able to make contracts which must be
in all respects advantageous, and one of the most important clauses has
regularly been that disputes shall be submitted to a court of
arbitration.

Whether this solution will be a source of great satisfaction to the
public seems doubtful, since, as soon as local employers and working-men
close an agreement for offensive and defensive co-operation, the general
public is left in the lurch, and an absolute monopoly is created. When,
for instance, in a large city, all the proprietors in the electric
trades have agreed to employ only union workmen, and all workmen have
agreed to work for only such as belong to the employers’ union, it is
hardly possible for a new employer to step in as competitor and lower
prices, since he would have difficulty in getting workmen. The
consequence is that every house owner in the city who wants an electric
bell must pay such prices as the employers’ and workmen’s unions have
seen fit to agree on. Free competition is killed.

The problem of so-called economic freedom is thus opened up again.
Trades-unions are, of course, the product of free and lawful agreement,
but one of their most important achievements is to pledge themselves to
furnish the employers’ union with a certain number of workmen, which is
sufficient for all needs. In return for this they receive the promise of
the employers to hire only members of the working-men’s union. The
result is, then, that the workman himself becomes a mere pawn, and is
dealt about like a Chinese coolie.

It is clear that these latest movements are able to contribute a great
deal, and already have so contributed, to the reconciliation of capital
and labour and to an appreciation of their common interests. The right
is being more and more conceded to labour unions of controlling certain
matters which relate to the discipline and conditions of work, and more
assurance is given to the working-men of permanent employment, so that
they are able to bring up their families with more confidence and
security. And cases of dispute are more and more looked on as
differences of opinion between partners of equal rank.

A good deal may still be done on both sides; especially the labour
unions must be more strict in their discipline: they must become
responsible for seeing that their members refrain from every sort of
violence during wage wars, and that every violation of law, particularly
with regard to strike-breakers, is avoided. It is true that labour
unions have always preached calmness, but have nevertheless looked on
willingly when individual members or groups of members, in their anger,
have indulged in lawlessness and crime. This must be stopped. It was in
the wish to avoid such responsibility that labour unions have hitherto
struggled against being forced to become legal corporations; they have
not wished to be legally liable for damages committed by their members.
But such legal liability will be absolutely necessary if contracts
between the unions of employers and those of labourers are to become
important. It is perhaps even more necessary for both sides to learn
what apparently American public opinion has forgotten, that a court of
arbitration must really arbitrate judicially and not merely hit on
compromises.

The labour question is still not solved in America; but one must close
one’s eyes to the events of recent years in order to think that it is
unsolvable, or even unlikely to be solved soon. The period of warfare
seems in the East nearly over; both sides have found ways of asserting
themselves without impairing the progress of the nation’s industry. And
the nation knows that its progress will be more rapid in proportion as
both parties maintain their equilibrium and protect industrial life from
the tyranny of monopolies, whether of capital or labour.

There are three capital cities in the United States—Washington the
political capital, New York the commercial, and Boston the intellectual
capital. Everything in Washington is so completely subordinated to the
political life that even the outward aspect of the city is markedly
different from that of other American cities; buying and selling
scarcely exist. In spite of its three hundred thousand inhabitants, one
is reminded of Potsdam or Versailles; diplomats, legislators, and
officials set the keynote. Washington is unique in the country, and no
other large city tries to compete with it; unless, indeed, on a very
small scale a few state capitals, like Albany, which are situated away
from the commercial centres. Being unique, Washington remains isolated,
and its influence is confined to the political sphere. As a result,
there is a slight feeling of the unnatural, or even the unreal, about
it; any movements emanating from Washington which are not political,
hardly come to their full fruition. And although the city aspires to do,
and does do, much for art, culture, and especially for science, its
general initiative seems always to be lying under the weight of
officialdom. It will never become the capital of intellect.

In a like way, New York is really informed by but a single impulse—the
struggle for economic greatness. This is the meaning and the moral of
its life. In this respect, New York is not, like Washington, unique.
Chicago makes terrific strides in emulation of New York; and yet, so far
as one now sees, the city of three million dwellers around the mouth of
the Hudson will continue to be the economic centre of the New World. The
wholesale merchants, the banker potentates, and the corporation
attorneys set there the pace, as the senators and diplomats in
Washington, and dominate all the activities of the metropolis. Through
their influence New York has become the centre of luxury and fashion,
and wealth the most powerful factor in its social life. All this cannot
take place, and in such extreme wise, without affecting profoundly the
other factors of culture. The commercial spirit can be detected in
everything that comes from New York. On the surface it looks as if the
metropolis of commerce and luxury might perhaps be usurping for itself a
leading place in other matters. And it is true that the politics of New
York are important, and that her newspapers have influence throughout
the land. But yet a real political centre she will never become; new and
great political impulses do not withstand her commercial atmosphere. New
York is the chief clearinghouse for politics and industry; purely
political ideas it transforms into commercial.

This is still more true of strictly intellectual movements. One must not
be misled by the fact that there is no other city in the land where so
many authors reside, where so many books and magazines are published, or
so many works of art of all kinds are sold; or yet where so many
apostles of reform lift up their voices. That the millions of
inhabitants in New York constitute the greatest theatre for moral and
social reforms, does not prove that the true springs of moral energy lie
there. And the flourishing state of her literary and artistic activities
proceeds, once more, from her economic greatness rather than from any
real productive energy or intellectual fruitfulness. The commercial side
of the intellectual life of America has very naturally centred itself in
New York and there organized; but this outward connection between
intellect and the metropolis of trade has very little to do with real
intellectual initiative. Such association rather weakens than
strengthens the true intellectual life; it subjects art to the influence
of fashion, literature to the demands of commerce, and would make
science bow to the exigencies of practical life; in short, it makes
imminent all the dangers of superficiality. The intellectual life of New
York may be outwardly resplendent, but it pays for this in depth; it
brings into being no movements of profound significance, and therefore
has no standing as a national centre in these respects. As the
intellectual life of the political capital bears the stamp of
officialdom, so is that of the commercial capital marked with the
superficiality characteristic of trade and luxury. Intellectual life
will originate new thoughts and spread them through the country only
when it is earnest, pure, and deep; and informed, above all, with an
ideal.

The capital of the intellectual life is Boston, and just as everything
which comes out of Washington is tinged with politics, or out of New
York with commerce, so are all the activities of Boston marked by an
intellectual striving for ideal excellence. Even its commerce and
politics are imbued with its ideals.

It is surprising how this peculiar feature of Boston strikes even the
superficial observer. The European, who after the prescribed fashion
lands at New York and travels to Philadelphia, Washington, Chicago, and
Niagara, and then winds up his journey through the United States in
Boston, has in this last place generally the impression that he has
already come back from the New World into the Old. The admirable
traditions of culture, the thoroughly intellectual character of the
society, the predominance of interests which are not commercial—in fact,
even the quaint and picturesque look of the city—everything strikes him
as being so entirely different from what his fancy had pictured, from
its Old World point of view, as being specifically American. And no less
is it different from what the rest of his experience of the New World
has given him. Not until he knows the country more thoroughly does he
begin to understand that really in this Yankee city the true spirit of
the purely American life is embodied.

The American himself recognizes this leading position of Boston in the
intellectual life of his country, although he often recognizes it with
mixed feelings. He is fond, with the light irony of Holmes, to call
Boston “the hub of the universe.” He likes to poke fun at the Boston
woman by calling her a “blue-stocking,” and the comic papers habitually
affirm that in Boston all cabbies speak Latin. But this does not obscure
from him the knowledge that almost everything which is intellectually
exalted and significant in this country has come from Boston, that
Massachusetts, under the leadership of Boston, has become the foremost
example in all matters of education and of real culture, and that there,
on the ground of the oldest and largest academy of the country—Harvard
University—the true home of New World ideals is to be found. And the
intellectual pre-eminence of New England is no less recognizable in the
representatives of its culture which Boston sends forth through the
country; the artistic triumph of the Columbian Exposition may be
ascribed to Chicago, but very many of the men who accomplished this work
came from Massachusetts; the reform movement against Tammany belongs to
the moral annals of New York, but those workers whose moral enthusiasm
gained the victory are from New England. This latent impression, that
all the best æsthetic and moral and intellectual impulses originate in
New England, becomes especially deep the instant one turns one’s gaze
into the past. The true picture is at the present day somewhat overlaid,
because owing to the industrial development of the West the emigration
from New England has taken on such large proportions that the essential
traits of Massachusetts have been carried through the whole land. In
past times, her peculiar pre-eminence was much more marked.

Whoever traces back the origins of American intellectual life must go to
the fourth decade of the seventeenth century. Then the colonies in the
Southern and Middle States were flourishing as well as the Northern
colonies of New England; but only in these last was there any real
initiative toward intellectual culture. In the year 1636, only eight
years after the foundation of Boston, Harvard College was founded as the
first, and for a long while the only, school of higher learning. And
among the products of the printing-press which this country gave forth
in the whole seventeenth century such an astonishing majority comes from
New England that American literary history has no need to consider the
other colonies of that time. The most considerable literary figure of
the country at that time was Cotton Mather, a Bostonian. The eighteenth
century perpetuated these traditions. The greatest thinker of the
country, Jonathan Edwards, was developed at Harvard, and Benjamin
Franklin was brought up in Boston. The literature of New England was the
best which the country had so far produced, and when the time came for
breaking away politically from England, then in the same way the moral
energy and enthusiasm of Boston took front rank.

Not until these days of political independence did the true history of
the free and independent intellectual life of America begin. Now one
name followed close on another, and most of the great ones pertained to
New England. Poets like Longfellow, Lowell, and Holmes were Bostonians;
Whittier and Hawthorne also sprang from the soil of New England. Here,
too, appeared the intellectually leading magazines; in the first half of
the century the _North American Review_, in the second half the
_Atlantic Monthly_. Here the religious movement of Unitarianism worked
itself out, and here was formed that school of philosophers in whose
midst stood the shining figure of Ralph Waldo Emerson. Here sounded the
most potent words against slavery; here Parker, Garrison, Phillips, and
Sumner poured forth their charges against the South into the midst of a
public morally aroused. Here, also, first flourished the quiet work of
scientific investigation. Since the day when Ticknor and Everett studied
in Göttingen in the year 1815, there sprang up in Massachusetts, more
than anywhere else, the custom which caused young American scholars to
frequent German schools of higher learning. The historians Prescott,
Sparks, Bancroft, Parkman, and Motley were among this number. Here in
Boston was the classic ground for the cultivation of serious music, and
here was founded the first large public library. And all these movements
have continued down to this day. None of the traditions are dead; and
any one who is not deceived by superficial impressions knows that the
most essential traits of Boston and New England are the ones which, in
respect to intellectual life, lead the nation. Quite as the marble
Capitol at Washington is the symbol of the political power of America,
and the sky-scrapers of lower Broadway are the symbol of America’s
economic life, so we may say the elm-shaded college yard of Harvard is
the symbol of American intellectual capacity and accomplishment.

It may seem astonishing at first that a single vicinity can attain such
eminence, and especially that so small a part of the Union is able to
impress its character on the whole wide land. The phenomenon, however,
becomes almost a matter of course, if we put before ourselves how this
world-power slowly grew from the very smallest beginnings, and how this
growth did not take place by successive increments of large and compact
masses of people who had their own culture and their own independent
spirit, but took place by the continual immigration of wanderers who
were detached and isolated, and who joined themselves to that which was
already here, and so became assimilated. Then, as soon as a beginning
had been made, and in a certain place a specific expression had been
given to intellectual life, this way of thinking and this general
attitude necessarily became the prevailing ones, and in this way spread
abroad farther and farther. If in the seventeenth century, instead of
the little New England states, the Southern colonies, say, had developed
a characteristic and independent intellectual life, then by the same
process of constant assimilation the character and thought of Virginia
might have impressed itself on the whole nation as have the character
and thought of Massachusetts. Yet it was by no means an accident that
the spirit which was destined to be most vital did not proceed from the
pleasure-loving Virginians, but rather came from the severely earnest
settlers of the North.

The way of thinking of those Northern colonists can be admirably
characterized by a single word—they were Puritans. The Puritan spirit
influenced the inner life of Boston Bay in the seventeenth century, and
consequently the inner life of the whole country down to our time, more
deeply and more potently than any other factor. The Puritanical spirit
signifies something incomparably precious—it is much more admirable than
its detractors dream of; and yet at the same time, it carries with it
its decided limitations. For nearly three hundred years the genius of
America has nourished itself on these virtues and has suffered by these
limitations. That which the Puritans strove for was just what their name
signifies—purity; purity in the service of God, purity of character,
and, in an evil time, purity of life. Filled with the religious
doctrines of Calvinism, that little band of wanderers had crossed the
ocean in spite of the severest trials, in order to find free scope for
their Puritan ideals; had left that same England where, some time later
under Cromwell, they were to achieve a victory, although a short and
after all insignificant one. They much more cared for the spotlessness
of their faith than for any outward victory, and every impulse of their
devout and simple lives was informed by their convictions. Under these
circumstances it was no accident that here the intellectual and moral
ideals were not obscured by any economic or political preoccupations;
but from the very outset were accounted in themselves of prime
importance. Harvard College was founded as a school for the Puritan
clergy, and almost the entire American literature, which is to say the
literature of New England, of the seventeenth century is purely
religious, or at any rate is thoroughly permeated with the Calvinistic
way of thought.

Of course, externally this is all entirely changed, and it is almost a
typical example of this transformation, that Harvard, once a seminary
for ministers, to-day prepares not one-fiftieth part of its five
thousand students for the clerical calling. Indeed, as early as the year
1700, Yale University was founded in Connecticut, largely in the aim of
creating a fortress for the old faith, because Harvard had become too
much a place of free thought; and the great scholar of Harvard, the
preacher Jonathan Edwards, went away from Boston in anger because it
seemed to him, even in the eighteenth century, that the old Calvinistic
traditions had been lost. And then finally, in the nineteenth century,
appeared Unitarianism—a creed which became the most energetic enemy of
Calvinism. These changes and disruptions were, however, rather an
internal matter. They were actually nothing but small differences within
the Puritan community. From the meagre days of the Pilgrim Fathers down
to the time when Emerson in rhapsodic flights preached the ethical
idealism of Fichte, and Longfellow wrote his “Psalm of Life,” the old
Puritan spirit remained predominant.

One fundamental note sounded through the whole. Life was not to be lived
for the sake of pleasure, but for the sake of duty. Existence got its
sense and value only in ethical endeavour; self-perfection was the great
duty which took precedence over all others. Among the particularly
dogmatic tenets of the Calvinistic theology this self-searching became,
in the last resort, perhaps a somewhat dispiriting searching after inner
signs by which God was expected to show somewhat arbitrarily his favour.
More broadly taken, however, it signified rather a continual searching
of the conscience—a conscious suppression of impure, of worldly, and of
selfish impulses; and so in effect it was an untiring moral
purification. And if in this theological atmosphere it appeared as if
God had led a singularly large number of predestined spirits together
into the New England colonies, the reason was obviously this—that in
such a community of earnest, self-searching characters a moral purity
developed such as was to be found nowhere in the wild turmoil of the Old
World. When the entire life is so permeated by ethical ideals, there
indeed the nobler part of man’s nature cannot be conquered by lower
instincts or by the sordid demands of every-day life.

Such a place could not fail to be a favourable environment for any
intellectual undertakings. There serious books were more welcome than
the merely amusing ones which flourished in the rest of the colonies. In
New England more was done for education, the development of law and the
service of God, than for any outward show or material prosperity. In
short, the life of the intellect throve there from the very outset. And
yet of course this spirit of culture necessarily took a turn very
different from what it had been in the mother land, different from what
it was on the Continent, and different from what it would have been if
the Southern colonies had been intellectually dominant.

For the Puritan, absolutely the whole of culture was viewed from the
moral point of view. But the moral judgment leads always to the
individual; neither in the physical nor in the psychical world can
anything be found which has an ethical value except the good will of the
individual. No work of culture has any value in itself; it becomes
ethically significant only in its relation to the individual will, and
all intellectual life has ethically a single aim—to serve the highest
development of the individual. From this point of view, therefore,
science, poetry, and art have no objective value: for the Puritan, they
are nothing to accept and to make himself subordinate to; but they are
themselves subordinate means merely toward that one end—the perfection
of the man. Life was a moral problem, for which art and science became
important only in so far as they nourished the inner growth of every
aspirant. In the language of the newer time we might say that a
community developed under Puritan influences cared considerably more for
the culture of its individual members than for the creation of things
intellectual, that the intellectual worker did not set out to perfect
art and science, but aimed by means of art and science to perfect
himself.

Of course there must be some reciprocal working between the general body
of culture and the separate personalities, but the great tendency had to
be very different from that which it would have been had the chief
emphasis been laid on æsthetic or intellectual productions as such. In
Europe during the decisive periods the starting-point has been and
to-day is, the objective; and this has only secondarily come to be
significant for the subjective individual life. But in Puritan America
the soul’s welfare stood in the foreground, and only secondarily was the
striving for self-perfection, self-searching, and self-culture made to
contribute to the advance of objective culture. As a consequence
individual characters have had to be markedly fine even at a time in
which all creative achievements of enduring significance were very few.
Just in the opposite way the history of the culture of non-puritanical
Europe has shown the greatest creative achievements at the very times
when personal morals were at their lowest ebb.

But the spirit of self-perfection can have still an entirely different
source. In ethical idealism the perfection of personality is its own
end; but this perfection of the individual may also be a means to an
end, an instrument for bringing about the highest possible capacity for
achievement in practical life. This is the logic of utilitarianism. For
utilitarianism as well as for Puritan idealism the growth of science and
art, and the development of moral institutions, are nothing in
themselves, but are significant only as they work backward on the minds
of the individuals. Idealism demands the intellectual life for the sake
of the individual soul’s welfare, utilitarianism for the sake of the
individual’s outward success. A greater antithesis could hardly be
thought of; and nevertheless the desire for self-perfection is common to
both, and for both the increase of the national products of culture are
at the outset indifferent. It is clear that both of these tendencies in
their sociological results will always reach out far beyond their
initial aims. Puritanism and utilitarianism, although they begin with
the individual, nevertheless must bear their fruits in the whole
intellectual status of the nation. Ethical idealism aims not only to
receive, but also to give. To be sure, it gives especially in order to
inspire in others its own spirit of self-perfection, but in order so to
inspire and so to work it must give expression to its inner ideals by
the creation of objects of art and science. Utilitarianism, on the
contrary, must early set such a premium on all achievements which make
for prosperity that in the same way again the individual, from purely
utilitarian motives, is incited to bring his thought to a creative
issue. The intellectual life of the nation which is informed with
Puritan and utilitarian impulses, will therefore, after a certain
period, advance to a new and national stage of culture; but the highest
achievements will be made partly in the service of moral ideals, partly
in the service of technical culture. As the result of the first
tendency, history, law, literature, philosophy, and religion will come
to their flowering; in consequence of the second tendency, science and
technique.

In modern Continental Europe, both these tendencies have been rather
weakly developed. From the outset idealism has had an intellectual and
æsthetic bias. Any great moral earnestness has been merely an episode in
the thought of those nations; and in the same way, too, utilitarianism
has played really a subordinate rôle in their intellectual life, because
the desire for free initiative has never been a striking feature in the
intellectual physiognomy. The love of truth, the enjoyment of beauty,
and the social premiums for all who minister to this love and pleasure
have been in Continental Europe more potent factors in the national
intellectual life than either ethical idealism or practical
utilitarianism. And it is only because of its steady assimilation of all
European immigrants that the Puritan spirit of the New England colonies
has become the fundamental trait of the country, and that moral
earnestness has not been a mere episode also in the life of America.

There is no further proof necessary that, along with idealism,
utilitarianism has in fact been an efficient factor in all intellectual
activities of America. Indeed, we have very closely traced out how
deeply the desire for self-initiative has worked on the population and
been the actual spring of the economic life of all classes. But for the
American it has been also a matter of course that the successful results
of initiative presuppose, in addition to energy of character, technical
training and the best possible liberal education. Here and there, to be
sure, there appears a successful self-made man—a man who for his lack of
making has only himself to thank—and he comes forward to warn young
people to be wary of the higher culture, and to preach to them that the
school of practical life is the sole high-road to success. But the
exemplary organization of the great commercial corporations is itself a
demonstration against any such fallacious paradoxes. Precisely there the
person with the best training is always placed at the head, and the
actual results of American technique would be still undreamt of if the
American had preferred, before the solid intellectual mastery of his
problems, really nothing but energy or “dash” or, say, mere audacity.
The issues which really seriously interest the American are not between
the adherents of culture and the adherents of mere push, undeterred by
any culture; the material value of the highest possible intellectual
culture has come to be a dogma. The real issues are mainly even to-day
those between the Puritanical and utilitarian ideals of self-perfection.
Of course those most in the heat of battle are not aware of this; and
yet when in the thousandfold discussions the question comes up whether
the higher schools and colleges should have fixed courses of instruction
for the sake of imparting a uniform and general culture, or whether on
the other hand specialization should be allowed to step in and so to
advance the time for the technical training, then the Puritans of New
England and the utilitarians of the Middle States are ranged against
each other.

In fact, it is the Middle, and a little later on the Western, States,
where along with the tremendous development of the instinct of
individual initiative the pressure for the utilitarian exploitation of
the higher intellectual powers has been most lively. Also this side of
the American spirit has not sprung up to-day nor yesterday; and its
influence is neither an immoral nor a morally indifferent force.
Utilitarianism has decidedly its own ethics. It is the robust ethics of
the Philistine, with its rather trivial references to the greatest good
of the greatest number and citations of the general welfare. Benjamin
Franklin, for instance, preached no mean morality, along with his
labours for politics and science; but his words, “Honesty is the best
policy,” put morality on a level with the lightning-rod which he
invented. Both are means toward human prosperity. Although born and bred
in Boston, Franklin did not feel himself at home there, where for the
best people life was thought to be “a trembling walk with God.” For him
Philadelphia was a more congenial field of activity. To-day there is no
single place which is specially noted for its utilitarian turn of mind.
It is rather a matter of general dissemination, for the influence of the
entire Western population goes in this direction. But no one should for
a moment imagine that this utilitarian movement has overcome or
destroyed the Puritan spirit. The actual state of the national culture
can be understood only as a working together of these two types of the
spirit of self-perfection; and even to-day, the Puritan spirit is the
stronger—the spirit of New England is in the lead.

All that we have so far spoken of relates to that which is distinctly of
national origin; over and above this there is much which the American
has adopted from other nations. The most diverse factors work to make
this importation from foreign thought more easy. The wealth and the
fondness for travel of the American, his craze for collections, and his
desire to have in everything the best—this in addition to the
uninterrupted stream of immigration and much else—have all brought it
about that anything which is foreign is only too quickly adopted in the
national culture. Not until very lately has a more or less conscious
reaction against this sort of thing stepped in, partly through the
increased strengthening of the national consciousness, but more
specially through the surprisingly quick rise of native achievement. The
time for imitation in architecture has gone by and the prestige of the
English romance is at an end. And yet to-day English literature, French
art, and German music still exercise here their due and potent
influence.

Now, in addition to these influences which spring from the culture of
foreign nations, come finally those impulses which are not peculiar to
any one nation, but spring up in every country out of the lower
instincts and pleasures. Everywhere in the world mere love of diversion
tries to step in and to usurp the place of æsthetic pleasure. Everywhere
curiosity and sensational abandon are apt to undermine purely logical
interests, and everywhere a mere excitability tries to assume the rôle
of moral ardour. Everywhere the weak and trivial moral, æsthetic, and
intellectual appeals of the variety stage may come to be preferred over
the serious appeals of the drama. It is said that this tendency, which
was always deeply rooted in man’s nature, is felt more noticeably in our
nervous and excitable times than it was in the old days. In a similar
way one may say that it shows out still stronger in America than it does
in other countries. The reason for this is clear. Political democracy is
responsible for part of it; for in the name of that equality which it
postulates, it instinctively lends more countenance to the æsthetic
tastes, the judgment, and the moral inspiration of the butcher, the
baker and candlestick-maker than is really desirable if one has at heart
the development of absolute culture. Perhaps an even more important
factor is the purely economic circumstance that in America the masses
possess a greater purchasing power than in any other country, and for
this reason are able to exert a more immediate influence on the
intellectual life of the land. The great public is not more trivial in
the United States than elsewhere; it is rather, as in every democracy,
more mature and self-contained; but in America this great public is more
than elsewhere in the material position to buy great newspapers, and to
support theatres; and is thus able to exert a degrading influence on the
intellectual level of both newspaper and theatre.

In this way, then, the tendency of the lower classes toward those things
which are trivial may sometimes conceal the fine traits in the picture
of the national intellectual life; just as the readiness for imitation
may, for a time, bring in many a foreign trait. But nevertheless, there
is in fact a clearly recognizable, a free and independent intellectual
life, which everywhere reveals the opposition or the balance between
Puritanism and utilitarianism, and which is everywhere dominated by that
single wish which is common both to Puritans and to utilitarians—the
desire for the best possible development of the individual, the desire
for self-perfection.

Since, however, it remains a somewhat artificial abstraction to pick out
a single trait—even if that is the most typical—from the intellectual
make-up of the nation, so of course it is understood from the outset
that all the other peculiarities of the American work together with this
one to colour and shape his real intellectual life. Everywhere, for
instance, one notes the easily kindled enthusiasm of the American and
his inexhaustible versatility, his religious temperament and his
strongly marked feeling of decorum, his lively sense of justice and his
energy, and perhaps most of all his whimsical humour. Each one of these
admirable traits involves some corresponding failing. It is natural that
impetuous enthusiasm should not make for that dogged persistence which
so often has brought victory to various German intellectual movements;
so, too, a nice feeling for form grows easily impatient when it is a
question of intellectual work requiring a broad and somewhat careless
handling. Devotion to the supersensuous is inclined to lead to
superstition and mysticism, while a too sensitive feeling for fair play
may develop into hysterical sympathy for that which is merely puny;
versatility, as is well known, is only too apt to come out in fickle
dilettante activities, and the humour that bobs up at every moment
destroys easily enough the dignity of the most serious occasion. And yet
all this, whether good or bad, is a secondary matter. The spirit of
self-perfection remains the central point, and it must be always from
this point that we survey the whole field.

A social community which believes its chief duty to be the highest
perfection of the individual will direct its main attentions to the
church and the school. The church life in America is, for political
reasons, almost entirely separated from the influence of the state; but
the force with which every person is drawn into some church circle has
not for this reason lost, but rather gained, strength. The whole social
machine is devised in the interests of religion, and the impatience of
the sects and churches against one another is slight indeed as compared
with the intolerance of the churches as a whole against irreligion. The
boundaries are drawn as widely as possible, so that ethical culture or
even Christian Science may be included under the head of religion; but
countless purely social influences make strongly toward bringing the
spirit of worship in some wise into every man’s life, so that an hour of
consecration precedes the week of work, and every one in the midst of
his earthly turmoil heeds the thought of eternity, in whatever way he
will. And these social means are even stronger than any political ones
could be.

There is very much which contributes to deepen the religious feeling of
the people and to increase the efficiency of the churches. The very
numerousness of the different sects is not the least factor in this
direction, for it allows every individual conscience to find somewhere
its peculiar religious satisfaction. An additional impulse is the high
position which woman occupies, for she is more religiously endowed than
man. And yet another factor is the many social functions which the
churches have taken on themselves. In this last there is much that may
seem to the stranger too secular: the church which is at the same time a
club, a circulating library, and a place to lounge in, seems at first
sight to lose something of its dignity; but just because it has woven
itself in by such countless threads to the web of daily life, it has
come to pass that no part of the social fabric is quite independent of
it. Of course the external appearance of a large city does not strongly
indicate this state of things; but the town and country on the other
hand give evidence of the strong religious tendency of the population,
even to the superficial observer; and he will not understand the
Americans if he leaves out of account their religious inwardness. The
influence of religion is the only one which is stronger than that of
politics itself, and the accomplished professional politicians are sharp
to guide their party away from any dangerous competition with that
factor.

The church owes its power more or less to the unconscious sentiments in
the soul of the people, whereas the high position and support of the
public school is the one end toward which the conscious volition of the
entire nation is bent with firmest determination. One must picture to
one’s self the huge extent of the thinly populated country, the
incomparable diversity of the population which has come in, bringing
many differences of race and language, and finally the outlay of
strength which has been necessary to open up the soil to cultivation, in
order to have an idea of what huge labours it has taken to plant the
land from the Atlantic to the Pacific with a thick sowing of schools.
The desire for the best possible school system is for the American
actually more than a social duty—it has become a passion; and although
here and there it may have gone astray, it has never been afraid of any
difficulty.

The European who is accustomed to see the question of education left to
the government can hardly realize with what intensity this entire
population participates in the solution of theoretical problems and in
the overcoming of practical difficulties. No weekly paper or magazine
and no lecture programme of any association of thinking men could be
found in which questions of nurture and education are not treated.
Pedagogical publications are innumerable, and the number of those who
are technically informed is nearly identical with the number of those
who have brought up children. The discussions in Germany over, we may
say, high schools and technical schools, over modern and ancient
languages, or the higher education of women, interest a relatively small
circle as compared with similar discussions in America. The mere fact
that this effort toward the best school instruction has so deeply taken
hold of all classes of society, and that it leads all parties and sects
and all parts of the country to a united and self-conscious struggle
forward is in itself of the highest value for the education of the whole
people.

In the broad basis of the public school is built a great system of
higher instruction, and the European does not easily find the right
point of view from which to take this. The hundreds of colleges,
universities, professional schools, and polytechnics seem to the casual
observer very often like a merely heterogeneous and disordered
collection of separate institutions, because there seems to be no common
standard, no general level, no common point of view, and no common end;
in short, there seems to be no system. And nevertheless, there is at the
bottom of it all an excellent system. It is here that one finds the most
elaborate and astonishing achievement of the American spirit, held
together in one system by the principle of imperceptible gradations; and
no other organization, specially no mere imitation of foreign examples,
could so completely bring to expression the American desire for
self-perfection.

The topics of school and university would not make up one-half of the
history of American popular education. In no other country of the world
is the nation so much and so systematically instructed outside of the
school as in America, and the thousand forms in which popular education
is provided for those who have grown beyond the schools, are once more a
lively testimony to the tireless instinct for personal perfection.
Evening schools, summer schools, university extension courses, lecture
institutes, society classes, and debating clubs, all work together to
that end; and to omit these would be to give no true history of American
culture. The background of all this, however, is the great national
stock of public library books, from which even the poorest person can
find the best books and study them amid the most delightful
surroundings.

The popular educational libraries, together with the amazingly profuse
newspaper and magazine literature, succeed in reaching the whole people;
and, in turn, these institutions would not have become so large as they
are if the people themselves had not possessed a strong desire for
improvement. This thirst for reading is again nothing new; for
Hopkinson, who was acquainted with both England and America in the
middle of the eighteenth century, reported with surprise the difference
in this respect between the two countries. And since that time the
development has gone on and on until to-day the magazines are printed by
the hundreds of thousands, and historical romances in editions of half a
million copies; while public libraries exist not only in every small
city, but even in the villages, and those in the large cities are housed
in buildings which are truly monuments of architecture. As the influence
of books has grown, the native literature has increased and the arts of
modelling and sculpture have come forward at an equal pace, as means of
popular culture. Museums have arisen, orchestras been established, the
theatre developed, and an intellectual life has sprung up which is ready
to measure itself against the best that European culture has produced.
But the real foundation of this is even to-day not the creative genius,
but the average citizen, in his striving after self-perfection and
culture.

Once every year the American people go through a period of formal
meditation and moral reflection. In the month of June all the schools
close. Colleges and universities shut their doors for the long summer
vacation; and then, at the end of the year of study, according to an old
American custom, some serious message is delivered to those who are
about to leave the institutions. To make such a farewell speech is
accounted an honour, depending, of course, on the rank of the
institution, and the best men in the country are glad to be asked. Thus
it happens that, in the few weeks of June, hundreds of the leading
men—scholars, statesmen, novelists, reformers, politicians, officials,
and philanthropists—vie with one another in impressing on the youth the
best, deepest, and most inspiring sentiments; and since these speeches
are copied in the newspapers and magazines, they are virtually said to
the whole people. The more important utterances generally arouse
discussions in the columns of the newspapers, and so the month of June
comes to be a time of reflection and meditation, and of a certain
refreshment of inspiration and a revival of moral strength. Now, if one
looks over these speeches, one sees that they generally are concerned
with one of two great themes. Some of them appeal to the youth, saying;
Learn and cultivate yourselves, for this is the only way in which you
will arrive at becoming useful members of society: while the others
urge; Cultivate yourselves, for there is in life nothing more precious
than a full and harmonious development of the soul. The latter sentiment
is that of the Puritan, while the former is that of the utilitarian. And
yet the individualistic tendency is in both cases the same. In both
cases youth is urged to find its goal in the perfection of the
individual.