machine has any real value until it is put to use. It cannot be put to use until somebody buys it, and the number of buyers has been progressively decreased by the growth of unemployment. Just as profits increased during an earlier stage of the circle, so now they decrease.
What is the remedy? How are we to prevent the fulfillment of Marx's prophecy, in the Communist manifesto of 1848, that capitalism in the end will provide "its own grave diggers?" In the opinion of many thoughtful observers, there is only one possible answer: human greed must curb itself or be curbed. There must be shorter work hours, so that all who need work may find it, and this change must be effected not at the expense of wages but, as Senator Couzens and others have bluntly said, at tho expense of profits. It is not merely the wage scale that must be kept up but the amount of wages that a worker receives over the course of a year. This is only another way of saying that what we need, fundamentally, is a broader distribution of the profits of industry.
Let us take for ilustration the case of a pioneer farmer with four sons. They worked every available minute to make a living for the family and a modest surplus against misfortune. When the first machine came in, enabling the father to carry on with two sons, he did not turn the other two adrift. Father and sons all worked shorter hours and all enjoyed the virtues of the machine and escaped its evils. This is precisely what is being proposed to industry today by the advocates of shorter work hours. The owners of the machine are being asked to share more of its benefits with the workers. Theoretically, if the present ratio of distribution of benefits is continued, the owners will find themselves, in the final stage of the machine's evolution, with great plants on their hands and nobody to buy their products. The masses of the people, through the operation of unemployment, will have starved to death. With no "purchasing power" to give value to the machines, they will be no better than junk, and the owners will have to start grubbing a living out of the land. Capitalism will then have provided its own grave diggers.
When Wages Lagged.
It is sometimes argued that labor has nothing to complain of, since labor in the flush days before the depression was highly rewarded. However large was the proportion of profits taken by capital, runs this contention, labor also got a full share of benefits. Therefore, it is said, Iabor can have no just grievance now if its wages are cut. This is the typical banking argument for the reduction of wages.
There has been no better answer to this specious line of reasoning than that given by Senator Couzens in the interview to which we have referred. "Notwithstanding the general assumption that wages were high," he said, "all available statistics show that during the years preceding the depression the increase in productivity per man was greater than the increase in wages. In other words, although the worker got more money, he produced still more goods. Somebody got the difference, and we all know who it was. The strange thing is that the fellows who got it couldn't see that they were spoiling thelr own game."
Some Comparative Figures.
There are, as Senator Couzens says, ample figures to prove his point. William Green, president of the American Federation of labor. gave some of them in a speech before the Progressive Conference in Washington last spring. Between 1919 and 1929, he showed, the productivity of industry in the United States increased 50 per cent, while real wages paid the workers increased only 27.5 per cent. He challenged any economist to tell him how the country could continue on that ratio and still consume the products of industry.
He gave some other illuminating statistics. In 1899, the value of goods produced in the United States was $11,406,927,000. The wage bill was $2,808,361,000. Labor, that is, got 17.5 per cent of the value of the goods produced. In 1929, this value rose to $69,417,516,000 and the amount paid in wages rose to $11,421,631,000. The percentage of wages to the value of goods was 16.5, or less than it was in 1899.
VIII.—The wages of capital and the wages of labor—The balance between consumption and production can only be restored at the expense of dividends.
If the views of all those discussing the subject are distilled we find that they are in agreement as to the condition prevailing in the country today—relative overproduction and lack of purchasing power. This situation may be more accurately stated as the maldistribution of wealth, the primary cause of which is the disproportion between the wages of capital and the wages of labor. As this disproportion grows, it tends to aggravate overproduction, for the gains of capital are constantly being thrown into new industry and business in order to produce more capital. Thus the bubble of overexpanded industry is blown up till it breaks. From whatever angle we approach the problem, we are led inevitably to the conclusion that we cannot hope to prevent the recurring crises in the business "cycle" unless we are willing to attack the basic cause of the trouble. Any cure which does not probe to the bottom can have but temporary value.
The "Cut" of Capital.
At the risk of repetition, the problem may be restated in terms of the labor hour. This is the foundation on which rests the creation of wealth. A man is able in a work day to create wealth eguivalent to his necessaries for subsistence and something over. The employer gets together a number of laborers and receives all or part of this surplus for himself. His income is in proportion to the number of human labor hours which he controls and out of which he makes his profit. If the employer installs a machine which enables one man to produce in eight hours, let us say, the equivalent of 80 human labor hours, then the employer is in the same position with respect to income as if he had 10 men instead of one working for him.
Now the vital difference between the wages of capital and the wares of labor is this: The labor hour once expended is non-existent, but the product of the labor hour turned over to the employer and by him exchanged for capital goes on working forever. That is, the workman's labor hour does its share in supporting his life for a day and then expires. The employer takes his profits and invests them, and thereafter for the rest of his life, and the lives of his heirs and assigns forever, these profits are capable of working and producing more profits for whoever controls them.
Of course it will be objected that this is too simple a statement of the case, but fundamentally it tells the story. It will be objected, for one thing, that the laborer by thrift and industry can save money and graduate into the capitalist class. This is true, but only to a very small degree. And if everybody could become rich and retire to live on his profits, the whole capitalistic structure would collapse when the last worker laid down his tools. Why is this? Because as stated, only labor can create wealth, and enough labor must be in operation all the time to create the wealth—the goods—needed by all the people.
Production and Consumption.
Dropping fancies and considering only prospective realities, we see that a balance must be maintained between production and consumption. This, again, is a point on which all the debaters are in agreement. At this time, production exceeds consumption. Obviously, balance can be re-established or approximated, since there are only two factors in the problem, by subtracting from one and adding to the other. In practice, consumption, or purchasing power, must be maintained on the level of production, which latter can be controlled and stabilized by a progressive decrease in the number of labor hours as invention and improvements increase the output per labor hour. But this remedy will be effective to maintain purchasing power on a level with production only if wages are kept on a level that will give the worker, per year, a sufficient income for his reasonable needs. And this, as we have shown, can only be done at the expense of dividends.
IX.—The issue is drawn between labor and capital—Solution of the problem rests primarily with industry and not with the Government.
Within the last few weeks the issue has been clearly drawn between labor and capital. We see it crystallized in two statements—that of the American Federation of Labor at its Vancouver convention, and that of a special committee of the Chamber of Commerce of the United States.
In demanding the five-day week in industry, the federation adopts the slogan of "work for all." Through its spokesman, President Green, it says: "Labor will no longer subscribe to the doctrine that work and relief must be conferred; it now holds that the right to work is fundamental and is as sacred as the right to enjoy freedom, life, liberty and happiness." (Black letters are the writer's.)
This is radically new doctrine. In our Constitution, grounded as it is in property rights, nothing is said of the right to work; to the contrary, there are the fifth and fourteenth amendments, construed by the Supreme Court to cover a wide area, with their inhibitions against the taking of private property save by "due process of law." The question therefore arises: Can the Government under the Constitution compel private industry, through the five-day week, to reduce its share of the benefits of the machine?
Work Days and Constitution.
It has been held in numerous cases that efforts of state regulatory commissions to fix a lower return for public utilities than a "fair" return as defined by the courts were attempts at "confiscation." If the five-day week means anything, it means the five-day week without a cutting of the weekly wage. The American Federation does not say this, but it is implicit in the demand for shorter work hours. Anything else would be a mere palliative; it would not restore the balance between production and purchasing power that we have seen to be essential. This balance can only be restored and maintained at the expense of the profits of capital. Hence the five-day week, with its necessary concomitant in lower profits, would be an apparent invasion of property rights; in the meaning of the law it would be "confiscatory," and the courts, bound by the rules laid down by the Constitution, in all probability, would so hold.
It may be contended that the Supreme Court's favorable decision on the Adamson Act of 1916, which gave the eight-hour day to railroad workers, warrants a different conclusion. But it must be remembered that the railroads are not on the same footing as industry in general. The business of the railroads, as the Court has repeatedly said, is charged with a public interest, and the right of Congress to regulate them under the interstate commerce clause of the Constitution is beyond dispute. The Adamson law was rushed through Congress to meet the threat of a general railroad strike, and while it fixed the eight-hour day standard permanently, it fixed wages only for a limited term of months, to bridge the gap until the contending parties could arrive at a wage standard of their own.
Wages Private Matter.
The Court held that the power of Congress to establish an eight-hour day on the railroads did not beget the power to fix wages. "The right to fix by agreement between the carrier and its employes a standard of wages to control their relations," said the Court, "is primarily private." Notwithstanding the narrow application of the law, four of the nine Justices of the Supreme Court—Day, Pitney, Vandevanter and McReynoids, the latter two of whom are still on the bench—dissented from the majority finding on the ground that the act was an unconstitutional invasion of property rights.
Whether we like it or not, the conclusion must be that through no orderly political process short of amendment of the Constitution can we reasonably expect the Government to effect redistribution of wealth through the device of shorter work hours at a maintained wage.
The problem of restoring the balance between production and purchasing power is primarily the problem of industry itself. Our Government, as we shall show, cannot be absolved of responsibility; there is, indeed, a heavy burden of responsibility upon it; but it rests with industry to do the things most needful to be done if the disease at the root of the tree is to be cured. Will industry act to save itself? Will it curb the thirst for more profits that in the final analysis is the cause of our depression?
"The business leaders of the country," says Senator Couzens, "have the ability to solve the problems of the depression. The trouble is that they personally have not been hurt. True, their profits have fallen off, but they are living just as comfortably as they were. Let them face actual deprivation of the sort that the workers are undergoing, and they would put their heads together and pull the country out of this slump. Dan Willard told the truth when he said that what they lack is the will to do."
At least to a very large degree, industry could "adjust production to consumption" without Government intervention or any central planning board if it were so disposed. The control of the situation is in a remarkably few hands. As shown in a recent article in the American Economic Review, 200 corporations with fewer then 2000 directors control 35 to 45 per cent of the business wealth of the United States (excluding from business wealth that of the Government, agriculture and the professions), and these corporations are growing three times as fast as 300,000 smaller corporations.
What Industry Might Do.
Great industrial organizations could do what the crossroads merchant does—provide seasonally for the demand which experience has told him is to be expected. Instead, industry has followed the policy of steaming up production to the highest possible speed and then telling the sales manager to go out and sell the stuff. As we have seen, the great business peak of 1929 was made possible, in part, by the new market created by time payments and "frantic" advertising, and the collapse came when even that rich new market became quickly oversupplied. What has kept industry from putting on the brakes is, of course, the desire for larger and larger dividends.
Parenthetically, an interesting contrast between industrial conditions here and in France may be noted. The United States lives on the future and France on the past. That is to say, American industry is so overexpanded that it exists largely upon sales which can only be paid for out of the future earnings of the mass of the people.
French industry does business largely on a cash basis. The French pay for what they buy today with the savings of yesterday, and, as Mark Seguin, French Consul in St. Louis, said recently in a radio speech, French industry never expands in anticipation of increased demand, nor does it do much to stimulate demand. It follows the conservative policy of meeting current demand and really prefers that demand should exceed supply.
Modified Fascism.
In contrast with labor's manifesto are such proposals as those of the Chamber of Commerce and Gerard Swope, both of which look to a kind of fascism. Schemes of this sort would set up a business dictatorship with the Government as a benevolent overlord. They would require the scrapping of the antitrust laws, which are designed to protect the people against extortion, and the substitution of laws designed primarily to protect business from slumps. The welfare of the people, in this new philosophy, would be subordinated to the welfare of business. Mergers and combinations, on a scale ever more grandiose, would be the fount from which all blessings would flow. If this, as some say, is the destined next development of the machine age, it is well that we should recognize it frankly for what it is—the negation of our boasted individualism—and not let ourselves be taken in by the delusive terminology of the big-business propagandists. We should see that what is proposed is the Soviet Russian system, except that the profits which there go to the state would here be in the hands of private business.
In none of the "stabilization" plans put forward by business is it conceded that the "right to work," as asserted by labor, is fundamental and sacred. The Chamber of Commerce, it is true, urges that work be "rotated" during the present emergency in order that employment may be spread among "the largest possible number of employes in accordance with their needs." But this falls a long why short of accepting labor's thesis. It is, in fact, a restatement of the doctrine of "conferred work and relief" to which labor specifically objects.
Jobs for All in 35-Hour Week
Average work hours—All industry
This chart, based on Government reports, American Federation of Labor statistics and the studies of Prof. Paul H. Douglas of the University of Chicago, shows the length of the work week in all industry in 1919 and 1930, compared with the actual work now available for all wage earners. Average work hours in all industry were 51 a week in 1919: notwithstanding vast improvements in machinery and methods during the following decade, the average in 1930 had been reduced only to 49. Business, says the federation, faces the problem of adjusting work hours to the actual work time needed in our industries. If the existing supply of work were spread out to cover the army of more than 6,000,000 unemployed, the average work week would be only 35 hours.
X.—But there are certain important things the Government can do—A possible program, covering taxation, the tariff (with a note on the plight of the farmer), the public utilities, the five-day week for Federal employes, prohibition, our part in world affairs.
We come now to the important question of what the Government, within the framework of the Constitution, can do toward ending our "panic of plenty" and preventing the recurrence of similar conditions in the future. What is the answer to the unthinking who cry out, at the appearance of each new symptom of a basic economic disorder, "Let the Government act?"
The question is not what might be done under a dictatorship, either of the proletariat as in Russia or a fascism as in Italy, but what can be done now, or in the not astronomical future, in the United States. Even the experience of Great Britain, in its groping for a tenable middle ground between communism and unregulated capitalism, provides but a partial analogy. For the British governmental system, in contrast with the rigidity imposed by our Constitution (the "rat trap rigidity," as Winston Churchill has called it), is highly flexible. The British Government can move quickly through orders in council, and new public questions, arising unexpectedly, can be submitted to the people and decided by them at the polls within a few weeks. British political leaders, moreover, appear to have moved farther than ours toward acceptance of the view that politics is "concentrated economics." They are willing to make temporary changes, as in the matter of the tariff, to meet emergencies, whereas American politicians tend to be hidebound in devotion to historic concepts of national policy.
Sources of Great Wealth.
It may be laid down as fundamental, before we proceed to an examination of specific remedies, that in the United States there are four great sources of wealth and income whose relation to the general public differs from that of other sources. These are: (1) natural resources, such as oil, minerals and water power; (2) transportation—the railroads; (3) other public utilities; (4) tariff-protected manufactures. There is here, of course, a certain degree of overlapping, but roughly the classification will stand. The reason why these sources of wealth differ from the others is that the government, in one way or another, intervenes in their affairs. It is possible within the space limits of this discussion to state only briefly the nature of this intervention. The Government permits (1) the exploitation for private gain of resources that belong naturally to the whole people. It undertakes (2 and 3) to assure a "fair" rate of return not only upon actual money investment but also upon values donated (as in the case of land grants to the railroads) or created by the people. And to certain manufacturers (4) it grants a tariff far in excess of any rates conceivably needed for "protection"; this tariff is a subsidy which the public pays for the benefit of a favored few.
Now if these four sources yield a considerable proportion of the income of the country—as they do—it follows that the withdrawal of Government intervention on their behalf, or its modification or employment in a different direction, would affect the distribution of wealth favorably to the general public.
We are confronted with an enormous paradox: The spectacle of the Government intervening with its anti-trust laws (which it is now being besought to modify or repeal) for the protection of the many against a predatory few, and, on the other hand, intervening with the high tariff laws for the benefit of a few at the expense of the many.
The Simple Sometimes Complex.
Obviously, then, there are measures by which the Government, notwithstanding its constitutional limitations, can materially influence the flow of wealth. And by this we do not mean the picayunish things that are sometimes urged upon it as cure-alls by those who mistake the symptom for the disease, or confuse the Government's depression with the general depression, or merely feel that the Government "ought to do something." If the administration cuts expenses, there may be a bad effect upon business and individuals. If it buys less paper, for example, the paper industry is hurt; and if it lays off clerks, unemployment is increased, individuals suffer and business generally is adversely affected through the resultant decrease of "purchasing power." Things of this sort are merely robbing Peter to pay Paul.
We have recently seen the quandary in which the Interstate Commerce Commission found itself when the railroads asked for a general 15 per cent freight rate increase. The commission desired to help the railroads out of their undoubtedly serious predicament, but it could only do so, as soon became evident from its hearings, at the expense of other industries, especially agriculture, which is even worse off than the railroads.
Again, it has been proposed that the Government engage in a great public works building program, at a cost of three to five billion dollars, in order to aid general industry and provide employment. Economists are divided on this proposal. Some of them, including men of distinction in their field, believe that such a program would be appreciably helpful in lifting us out of the depression. But it would be, at best, a palliative, and it would immediately increase the operating costs of the Government, the excess of which over its income is the cause of what we have called the Government's depression.
First, the Tax Law.
What remedial measures of permanent value are open to the Government?
First, as already has been pointed out, the Government could help to check the drift of wealth into a few hands and at the same time obtain needed revenue for itself, by imposing heavy surtaxes on great fortunes, increasing death duties and reinstalling the gift tax. It could tax swollen individual incomes to such a point as almost to remove the incentive for piling up vast personal fortunes, a condition which has been approximated in the Scandinavian countries.
Second, it could reduce the tariff to schedules sufficient only to protect American business and American jobs from immediate destructive competition. The classic argument of the protectionists is that a high tariff is necessary to the maintenance of high wages. This is untrue. Wages are high in the United States, as compared with Europe, not because of our tariff wall, but because of the greater productivity of American labor, our superior manufacturing technique and our vastly greater natural resources. Reduction in the tariff would be reflected in lower prices to the consumer. It would be of particular benefit to the farmer, part of whose plight is due to the fact that he must buy in a protected and sell, by reason of the nature of his product, in an unprotected market. The resultant disparity in prices has long been an important factor in his depression. Reduction in the tariff would operate against the concentration of wealth, which has brought about the present overexpansion of industry and its consequent stagnation.
Help From Lower Tariffs.
Lowering of the tariff would hurt only a minute fraction of the people, and they would be hurt only to the extent of their excess profits above a reasonable return on investment. According to the estimate of the late Joseph S. McCoy, actuary of the Treasury, there are only about 3,300,000 individual stockholders in the United States, and the Post-Dispatch has shown (in an article Oct. 13, 1929) that not more than one-tenth of these are in tariff-protected corporations. They are the only persons who would suffer any direct loss from a downward revision of the tariff to a reasonable basis. Since the enactment of the Hawley-Smoot bill—enacted by Congress and signed by the President in plain violation of the President's call for a sharply "limited" revision—the reprisals of foreign nations have added new weight to the demand for lower duties. No one can doubt that the Hawley-Smoot law (which Senator Watson of Indiana sald would bring back prosperity in 30 days!) has played a leading part in the strangulation of world trade and in driving Great Britain to reconsider its historic free trade policy.
Not only the congenital advocates of low schedules but powerful leaders in big business, including Thomas W. Lamont, a partner in J. P. Morgan & Co., are demanding a revision. A characteristic view is that of Dr. B. M. Anderson, economist, in a bulletin issued by the Chase National Bank of New York. "American labor," he says, "has nothing to fear and everything to gain, by and large, from a lowering of the tariffs in the United States. I propose such a reduction as will avoid a further drift of population from country to city, and further abandonment of farms. I propose a reduction not in the interest of readjustment and change, but in the interest of stability."
Why Farmers Would Benefit.
Since the tariff bears so intimately upon the farm problem, this is as good a place as any to mention the particular depression of agriculture. There is space for only a bare outline of that tragic story. The farmer has had depression with him for a decade. In that time his land values have shrunk from $66,000,000,000 to $48,000,000,000, his income has declined from $12,000,000,000 to $9,500,000,000, and his taxes have increased 172 per cent. In the five years from 1926 to 1930, inclusive, 682,850 farms, or more than one-tenth of the number in the United States, were lost to their owners through forced sales. The economic distress of the farmer is closely bound up with the general condition of the country. The Chamber of Commerce is within conservative bounds when it says: "This country cannot be permanently prosperous until it has a reasonably prosperous agricultural population. Ten million workers and 30,000,000 people are dependent upon the farm for their support. A large proportion, perhaps the majority, are receiving meager return for long and arduous labor."
Public Utilities.
Coming back to the matter of specific weapons which the Government has power to invoke against the increasing concentration of wealth, we reach, third, the privately owned public utilities. "Judicial orders and decrees," as Samuel Untermyer has said, have a deadly handicap on the regulation of public utilities by State commissions. If these utilities were publicly owned, the advocates of that policy argue, huge sums in profits would be diverted from the few hands into which they have been made to flow through the device of the holding companies. Profits could be distributed to the public through reduction in rates, or decreased taxes.
Congress has twice proposed Government operation of the Muscle Shoals power plant, only to have its action meet two presidential vetoes.
Dr. Coffman, president of the University of Minnesota, has said that "the chief weakness of a democratic people is its unwillingness or its inability to set up remote goals and to strive to attain them." If it wishes, the Government can set up the goal, remote or otherwise, of complete Government ownership of the railroads. The Government could take over the railroads with the proceeds of a long-term bond issue, cut out the waste and duplication in the present service, and charge rates sufficient to pay whatever net revenue on the investment it might decide upon. It is for the people, through their representatives, to say whether this shall be done.
Shorter Week Possibilities.
Fourth, the Government could make itself a model employer by establishing the five-day week for Federal employees without change of pay. Just as the Adamson law became a great weapon of persuasion in the hands of organized labor, so this reduction of working hours without reduction of pay by the Federal Government would have a progressive influence in private industry. Bills for the five-day week in the Federal service will be introduced in the coming session of Congress.
Fifth, the Government could repeal prohibition. It is unnecessary here to review the arguments for and against prohibition. Repeal would increase the revenue of the Government, decrease its expenses and aid general business and employment to some extent. In a business way, the principal if not the sole sufferer from repeal would be the bootleg traffic.
League of Nations.
Sixth, the Government could promote international stability, and thereby contribute to the improvement of general conditions at home, by joining the League of Nations. Former Premier Baldwin of Great Britain, with the guarded speech which marks the public utterances of British statesmen on the subject, said at a great peace meeting in London last summer: "It is not for us to cajole or advise the United States to get into the League of Nations, yet I tell you that every international problem since the Versailles Treaty has been made imponderably more difficult because of the absence of the United States from the League."
We have seen what are the costs of war to the American people. The expenditures of the other great nations are on a similar or larger scale. As President Hoover recently told the International Chamber of Commerce, five and a half million men are actively under arms in the world today and 20,000,000 more are in reserves. The world is spending on armaments the colossal sum of $5,000,000,000 annually. Some progress has been made toward decrease in naval disarmament since the war, but not much.
Prospects of Disarmament.
There is to be held at Geneva next February, under the auspices of the League of Nations, the first general disarmament conference. It will deal with the land, sea and air armaments of all the nations. The alternative to the success of this fateful conference, Viscount Cecil has said, "is too sinister for any man or woman of good sense and good will to contemplate." In the view of official Washington, the outlook for success is not bright. Can anyone doubt that it would be immeasurably better if the United States were in the League and not out of it?
France demands additional treaty "security" before she will consent to any material reduction in her armament. This we have declined to grant. We have even refused to enter into a mild pact calling for "consultation" if war threatens in the Atlantic. France's demand is the great stumbling block in the way of success at Geneva. There is ground for her thesis. We may feel that ours is the better one—that security will follow reduction of armament—but we have got to admit the logic in the French position. There would be no logic in it if we were a member of the league.
If the United States, richest and strongest of the nations, were in the league, Article XVI of the covenant—the sanctions article—would mean something. As it is, the article has small virtue, perhaps none. Certainly the members of the league will hesitate to coerce a covenant-breaking state so long as the United States remains on the outside. This was plainly shown in a memorandum of the British Government in 1925, in which it was stated that any effort to enforce sanctions would put upon Britain the responsibility of cutting maritime communications between the offending nation and the United States. In view of the historic American doctrine of the freedom of the seas, this course would involve a risk of conflict with the United States which the British Government, said its memorandum, did not care to assume.
Bound to Be Involved.
The international police club placed in the covenant by Article XVI was in effect taken out of it when the United States refused to join the league. But the chances of our being drawn into war have not been reduced. We have a finger in every big financial pie in the world, and because of this fact we stand alert at the drum beats of war in any region.
We seek to use the league, as in the present Manchurian crisis, when it suits our convenience to do so. Should we not, then, accept a share of its responsibilities? One thing is certain: if another world cataclysm comes, our aloofness from the league will not make us immune. Everything else aside, our purse strings have tied us, even more inescapably than in 1917, to the rest of the world. The war changed us from a debtor to a creditor nation. Our stake abroad has gone up by great leaps; at the end of 1930 it stood at $17,500,000,000, exclusive of the war debts. Enlightened self-interest should take us into the league.
War Debts a Trading Point.
What of the war debts? A growing body of opinion holds we could well afford to trade them off for the armament reduction that would be made possible by our entrance into the league. The sum of them bulks large, but the annual payments to us are only 6 per cent of our normal budget. The saving to us in armament costs would offset the loss of these payments. Cancellation of the debts, with a reciprocal cut in German reparations by the former Allies, would hasten the economic recovery of Germany and the world. If, by the same means, we should effect a measurable reduction of armaments throughout the world, which reduction would be reflected in lower government costs and lower taxes, the total result would make the price, by comparison, infinitesimally small.
To say with Mr. Coolidge, of our debtors, that "they hired the money" and must pay it back is to ignore the plain facts. We are not going to war to collect the debts. Nicholas Murray Butler has said: "You might just as well try to make somebody pay the cost of the sunset as to pay the cost of the war. It cannot be done."
Anything we might buy with the debts in the way of world peace or prosperity would be clear gain. Unquestionably, the debts have a trading value.
XI.—Conclusion: Conceivably we can usher in a new prosperity through a readjustment of the distribution of the benefits of the machine—Amendment of men's economic and social ideals is the great need.
Restoration of world prosperity would help us, but there would remain the great underlying problem that this article has sought to outline: the problem of how to bring about the readjustment made necessary by the concentration of too great wealth, with the aid of the machine, in comparatively few hands. Is the machine to be the servant or the master of the people? This is a question that each nation must answer for itself.
Through a shorter work week without reduced pay, conceivably we in the United States could so diffuse the benefits of the machine among the people that "purchasing power" would be brought back to the production level and the nation set on the way to a new prosperity—a healthier prosperity than that of the vaunted Coolidge era. This, as we have shown, can only be done through the voluntary or enforced renunciation of excessive profits. The alternative is public or private relief, or both, for the workers displaced by the machine.
Justice Brandeis once said: "Instead of amending the Constitution, I would amend men's economic and social ideals." And that, whatever else we may do or try to do, clearly must be accomplished if we are to solve the problem of the great depression.
