Popular Science Monthly/Volume 42/January 1893/Profits of Legitimate Business Not Too Large

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PROFITS OF LEGITIMATE BUSINESS NOT TOO LARGE.
By P. F. HALLOCK.

IN The Popular Science Monthly for November Mr. J. B. Mann discussed the question, "Are Business Profits too Large?" His article is a defense of those business methods which have made the Vanderbilts, the Stewarts, and the Goulds. It is our purpose to briefly examine the statements from which he draws his conclusion.

That labor is at a great disadvantage is admitted, but Mr. Mann says, "It is a disadvantage imposed by Nature, and so need not be discussed." If this were true, there would be greater need of discussion, but fortunately it is not. Nature provides bountifully for all—there is a surplus of everything, and no one is required to be a drudge; but, by following the "gospel of greed," a few have taken possession of the wealth produced by the many, and amid an abundance half our people are fighting for a bare living. The ability to legally take from the masses justifies the taking, in the opinion of Mr. Mann. This is the new version of that barbarous rule of conduct, "Might makes right." A commercial pirate is worse than the one who robs by force, for the former is protected in his robbery. No man, by honest methods, can make millions in a few years. Such a one must, in some way, accumulate without rendering an equivalent. There is no principle of economics clearer than this.

To show that the workingmen get their full share of what they produce, Mr. Mann states that "there is no business of recognized legitimacy that pays labor only a third. . . . There is no business that gives to capital and skill combined even ten dollars out of thirty." If these sentences mean anything, it is that labor gets more than two thirds of production. This is not true of the following industries: The manufacture of iron and steel, the mining of coal, the manufacture of boots and shoes, the manufacture of sewing machines, the petroleum industry as carried on by the Standard Oil Company, the lumber business, the manufacture of clothing, watches, matches, and salt, not to mention the numberless notions that are consumed in every household. The truth is that the actual labor cost of almost every staple is a small fraction of its selling price.

Mr. Mann says that only one in ten has a competency by his own exertions, and that one because he was energetic, faithful, competent, and thoroughly systematic from the start. Before the era of paternalism this was the rule, now it is almost an exception. There are at least a hundred men in the city of Pittsburg who have been more industrious, more economical, and who are fully as skillful as Mr. Carnegie, and yet are not worth ten thousand dollars apiece. How did it happen? They had to depend upon their own resources, while the Government gave Mr. Carnegie the power to tax every consumer of iron and steel. Another set of men are rich because they taxed the consumers of sugar, another made their millions by the duty on glass, another built railroads at the expense of the nation, and another swindled corporate stockholders and robbed the people generally. Yet, in the face of these facts, Mr. Mann would have us believe that great wealth is the product of honest industry and consummate skill, and that the millionaires are our real benefactors.

The way in which the middlemen and the railroad kings help the farmer is cleverly illustrated by Mr. Mann; but the farmer, he adds, is so unreasonable as to find fault with them, simply because they have made more money than he has. In other words, the farmers' complaints arise from envy—they have no real grievance.

A superficial knowledge of human nature, without being acquainted with the facts in the case, would discredit the statement. Men do not seriously complain without a reason; a person making a thousand dollars a year is not envious because a neighbor makes two or three thousand. The village merchant who by fair dealing has accumulated twenty or fifty thousand dollars is not hated by his customers and townsmen. The possessor of a legitimate fortune is invariably respected. Let us now turn to the facts. In 1860 there were practically no tenant farmers in the country, now twenty-five per cent are renters. Before the war, the farmers owned seventy per cent of the wealth of the nation; in 1890 they owned thirty-five per cent, and paid sixty-five per cent of the taxes. More than thirty per cent of the farms are mortgaged, and the average rate of interest will exceed eight per cent.

When the farmer could no longer be blinded by political prejudice, he realized his condition and forthwith discovered that, while he had been paying the taxes and growing poorer and poorer, another class had been growing richer and richer; they were few in numbers but all-powerful; they not only controlled the business of the country, but the legislation; they were the real rulers of the republic. Is it any wonder, then, that the farmers complain, that they have organized for protection? That they have been so slow to move in their own behalf and so conservative is certainly surprising.

Mr. Mann somewhat rashly assumes that the rich pay their portion of the taxes, and that their wealth would not be in existence had they not produced it. It is generally conceded that the rich do not pay their just share of the public burdens. All economic writers admit this, and I never heard it questioned before. Under the present system of taxation taxes are shifted from the landlord to the tenant, from the creditor to the debtor, from the manufacturer to the consumer, from the corporations to their patrons—in a word, from capital to labor.

The second proposition, that the rich create their wealth, is equally untenable. Manipulation and production are totally different. No person can add to the actual wealth of the nation, unless he be an inventor, a million dollars; it is beyond the power of production; but by manipulation, by donations, and by legislation, men may possess millions, but they never created them. Instead of the rich adding to the nation's wealth they take from it, by depriving the producers of the capital which they need to make their work effective; there is a limited amount of money, and when concentrated in the hands of a few the real workers are at a disadvantage, and the amount of wealth produced by them is perceptibly lessened. This applies to the farmers, to most manufacturers, and to business men generally.

Neither in the statement of the question nor in the argument is there a distinction made between business men. The tradesman who with difficulty keeps from insolvency, or actually fails, is classed by Mr. Mann with the Stewarts and the Vanderbilts. No one complains of the great body of business men. As a rule, their profits are not too large. They would make more money if the farmers and the wage-earners were prosperous. Those who are responsible for all the complaints, for all the injustice, for agricultural depression, are the seventy-five thousand who own more than half the wealth of the country, and whose wealth is due to class legislation, to a vicious system of taxation, to national and State donations, to swindling the people through the agency of corporations and limited partnerships, and to gambling in securities and the necessaries of life.

 


 
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