Popular Science Monthly/Volume 74/January 1909/Commercialism

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COMMERCIALISM
By Professor JOHN J. STEVENSON

NEW YORK UNIVERSITY

THE pessimistic streak, woven into every man's nature, becomes a broad band in the community when industrial interests are prostrate. During the past year, the men who during prosperous times lived in the solitude of their sorrows have come forth and have found appreciative listeners as they denounce our country's sins and despair of its salvation. For a year they have gloated over the frailties of society, the corruption of politics, the degradation of business morals; they have pictured the gloomy future of a country sunk in materialism, a prey to commercialism; they have sung in minor key of the purer days when a man was counted for his worth, when mere wealth carried no weight, when mind was more than matter, when dishonor was unknown.

Every unprejudiced observer sees that affairs are sadly out of joint and he longs for some mighty surgeon to adjust them; but he sees no ray of hope, no cure for human woes in these jeremiads; he recognizes only the old wailing, the old discord, with here and there a new note to catch the ear of passers-by. It is as old as the race itself. Doubtless poor old Adam thought sadly of his bachelor days, untried by any Eve of speculative temperament. The Prisse papyrus, written during the twelfth dynasty and copied from one of the fifth, carries us back to at least 2500 B.C.; its aged author grieved over the degeneracy of his times and longed for those better days of the past. More than fifteen hundred years afterwards the author of Ecclesiastes, pessimist himself, rebuked querulous men who asked why the older days had been better than these; Greek and Roman literature is full of laments and the poets sang wearily of a golden age, long past and past forever. Our own Washington had little hope for his country as he considered the decadence of public and private honor, the selfish anxiety for advancement and the corruption prevailing everywhere toward the close of the eighteenth century. Yet that was our age of gold, when corporations were unknown, when railroads had not been conceived, when petroleum had not soaked the land with its slime and Wall Street had not come to crush the people's energies.

Commercialism is the superabounding cause of all troubles; a vague something is this term commercialism, eluding definition, but evidently including all that is evil. It is the spirit of business. To denounce commercialism is the duty of every "high thinker"; the defender of business men can rarely obtain fair hearing. If in modest position, he is liable to be treated with mingled pity and contempt; if in responsible position, he is likely to learn that he is biased by self-interest; if a college officer, he is cast out of court at once as a hireling, because at some time or other a business man has done something for the college. The "high thinkers" can be described only by Job's reply to his similarly self-sufficient and equally ill-informed friends—"No doubt but ye are the people and wisdom shall die with you."

These critics of our day in their denunciation of commercialism are merely plagiarists of not very high order. The ancient Persians avoided commerce as a baneful pursuit, fatal to integrity; the Roman held commerce in slight esteem and mocked the gold-worshipping Athenians with the sneer, Græcia semper mendax. Yet those peoples, seeing so clearly the mote in their neighbor's eye, were blind to the beam in their own; while they despised the arts of peace they saw no sin in the arts of war, the wiles of diplomacy or the treachery of conflict. One can understand the Persian's position, but it is difficult to understand how an educated Roman could fail to recognize that his nation's culture had been absorbed from Grecian colonies on the Italian coasts. The Roman contempt for merchants was ingratitude matched only by that of some would-be philosophers of our time. For, be it remembered, civilization and commerce are twin sisters, never antagonistic, but always advancing hand in hand.

The world's greatest debt is due to civilizations born on the Nile and on the Euphrates, six or seven thousand years ago, both of them commercial. The Babylonians, inhabitants of the lower Euphrates area and intermediaries of commerce between India and the Mediterranean peoples, attained to a civilization prior to 2500 B.C. apparently comparable to that of Great Britain in the eighteenth century. It was marked by studies in science, by literature, by a noteworthy system of laws and by prosperity of the common people as well as of the rich. It dominated the whole of southwestern Asia and by 1500 B.C. its language had become that of the court even in Egypt and Asia Minor. When the course of commerce was diverted to the Red Sea and Alexandria, the glory of the Euphrates departed, to return only for a little when commerce revived under the caliphs of Bagdad.

Close intercommunication and the interchange of products along fifteen hundred miles of the Nile, conjoined with a vast caravan and sea trade with Arabia, Asia Minor and Mesopotamia, as intermediaries of the whole region drained by the upper Niles, led to the development in Egypt of a civilization whose remains are even more notable than those along the Euphrates. Its character appears from the architecture, the engineering works, the agricultural operations as much as from the literature and the science. When one views the ruins at Karnak and considers that the rock on which the Egyptian sculptor labored is one of the most intractable granites known, he marvels at the sculptors' skill as much as he admires the genius of the architects who planned the gigantic structures. If instead of granite from Syene the material had been soft Pentelican marble, the dainties of Grecian architecture and the grandeur of Egyptian might have been united at Karnak.

The Greeks competed long with the Phœnicians for control of Mediterranean trade; their colonies were in Asia Minor, Italy and Sicily as those of the Phœnicians were in northern Africa and the west. When Psammetichus ended the seclusion of Egypt by opening her ports and by enlisting Greek mercenaries into his army, travelers from Grecian colonies found their way thither, gathered fragments of Egyptian philosophy, literature, science and art and carried them back to their own land to be fused with similar fragments from Arabia, Mesopotamia and Phœnicia, just as seventeen hundred years later the Crusaders brought home with them the knowledge of oriental civilization. The philosophy and literature of Greece originated in her commercial colonies. When Athens and her immediate allies, after the Persian war, wrested commercial supremacy from the Phœnicians, the Piræus was enlarged and Athens became at once the commercial and the intellectual center of the world. Then, the art and thought of other lands unfolded through Grecian genius into wondrous proportions—with a background of no history and a foreground of the dark ages, it seemed to be a veritable Melchisedec, without ancestor, without descendant. Only within the last thirty years has its true place been determined.

Those whose energies are expended in bitter sneers against commerce either forget or ignore the truth that Athens was preeminently commercial. They seem to think that the city was enveloped by an atmosphere of pure intellectuality amid which the necessary merchants moved in a state of semi-asphyxiation. Some years ago, a writer in a religious paper, lamenting modern degeneracy, asserted that in Athens the street boys competed in making verses whereas in New York the street boys play marbles. No doubt some Athenian boys engaged occasionally, just as some New York boys do now, in the possibly lofty game of verse-making, but from what is known of the Athenians and of the Greeks from the earliest times to our own day one may suppose with more probability that the Athenian boys' favorite sport was that of matching small coins. Commerce was never disreputable in Athens; Aristotle is said to have been an apothecary, and Plato an exporter of oil. That city at the time of her greatest intellectual splendor can be compared in modern times only with cities such as London and New York. Long centuries hence there will be men who too will grieve over decadence of the race and the love of pelf. They will hark back to the days when London, Boston and New York produced such marvelous intellects.

That commerce brings wealth and that wealth brings luxury with eventually moral and physical decadence are propositions which, separately, admit of no dispute; but they must not be united, for wealth, not commerce, is responsible for the luxury and in part for the decadence. Babylon, Tyre, Athens, Corinth and Alexandria were commercial cities; each, after reaching the zenith of prosperity, showed that decay which so delights some students. But the morality of Persia sank to wretched depths in the time of Xerxes, when the vast wealth of many lands had been gathered by conquest; Nineveh, alike commercial and warlike, was enervated by luxury in the time of Assurbanipal and soon sank into obscurity; while commerce-despising Rome, enriched by the spoils of war, became, even before the Christian era, a veritable sink of moral pollution. At the same time one must note the all-important fact that though luxury eventually brings about decadence, still its first fruits among commercial peoples have always been intellectual and esthetic growth. The grandeur of Egypt attained its maxima under luxurious Amenemhat, Thothmes III. and Rameses II.; luxurious, unwarlike Assurbanipal gathered the literature of ancient Babylonia and of Assyria into his vast library at Nineveh; luxury-loving Athens and Corinth, not luxury-hating Sparta, produced the Grecian sculpture and architecture; luxury-loving Bagdad and Cordova encouraged literature and science and, in Spain, built the Alhambra.

Commerce brings wealth; the possession of wealth leads to luxury; a luxurious community is corrupt. This, according to moralists, is the sequence, and the belief in its truth is of such hoary antiquity that to contest it is as though one doubted the law of gravitation. But the belief only proves poor human nature's readiness to shift the blame for its inherent weaknesses. The corruption of a wealthy community differs from that of a savage community not so much in kind as in degree. The clerk who pilfers from a cross-roads shop is in the same class with a bank officer who "appropriates" several millions of dollars. The difference is only in opportunity. Dishonesty in one form or another is so much part of human nature that its spores, so to speak, are breathed out into the atmosphere. A reformer, aggrieved by its constant reappearance, is as unreasonable as the amateur gardener who is perplexed by reappearance of weeds in his carefully tended garden. There will always be enough to give occasion for the philosopher's tears, enough to give a dull background to any picture; but that is not to say that when one compares this day with that of our fathers he must find reason for renewed sorrow.

Man can not pass at once from savagery to civilization; that change has been in process for millenniums and still it is far from complete. Equally slow is the passage from primeval grossness to ideal purity. The golden rule is a fundamental principle of the ethnic religions as much as of Judaism and Christianity. During more than three thousand years it has been urged as the rule of life, but war and rapine still fill the pages of man's history; yet it has not been ignored and, with the passing centuries, its hold on mankind becomes stronger. In the business world, each period of advance ends abruptly in a storm of stress and panic, by which all seem to be prostrated; but the recession never returns to the previous stage. So in the moral world, the tide flows and ebbs, but each rise advances farther up the slope than did the last—as much in this land as elsewhere.

Three years ago the community was startled by revelations of mismanagement in the great insurance companies and the matter was more than a nine days' wonder. Pulpit and press vied in condemnation of the wicked men. Yet the culprits had not looted their companies; they had not decreased the security of the policy-holders; they had merely utilized their positions for personal gain, making themselves partners with their companies in profitable ventures; they had been guilty of imperfect consecration to the interest of their trust and had shown what wholly unscrupulous men could do. One can well imagine the perplexity of a resurrected magnate of sixty years ago, when told of this crime. Surely he would think that times had changed. In his day such conduct would have passed unrebuked, nay, it might have been commended, as the companies had profited by the transactions. It is rebuked now because there is at last a public conscience which compels respect.

Even politicians recognize this and are not slow to turn it to their own advantage. Only a little while ago, the operations of a syndicate in connection with a western railroad were the subject of governmental investigation; the so-called exposure filled columns of the papers, was made almost a national issue, being utilized in political strife. Yet the whole transaction had occurred in full view of the public without attempt at concealment or deception. The syndicate which owned the property almost outright was charged with increasing the capitalization without equivalent expenditure, but there was no evidence that any one had suffered by the operation, though clearly some one had profited. Whether or not there was any wrong in this transaction is difficult for a layman to discover; but as presented in ex parte form, the matter sufficed to justify the astute politician's appeal to the public conscience. The existence of the wide-spread sense of justice secures attentive hearing to critics of "commercialism" when they denounce the methods of corporations; ex parte statements by prosecuting attorneys and statements by magazine writers are accepted as embodiments of undisputed fact. The development of a public conscience has not been accompanied by equal development of the judicial temperament.

Whether or not the methods employed by some corporations in efforts to overcome competition measure up to the popular conception of the golden rule is not open to discussion. In the original form that rule is "Thou shalt love thy neighbor as thyself"; and it would seem that the obligation is on all alike. But the popular conception is that the command is binding only on the corporations and that all individuals in the community are "neighbors." Yet corporations are merely copartnerships, so that in their case, as in the case of the individual, the standard of the rule is the love of one's self, which brings into consideration the question of self-preservation. A man is justified before the law if he take the life of another to protect his own or that of any under his charge; he may take life to protect his property; equally in business affairs, a man is justified in doing things for self-protection, which under other conditions would be unjustifiable.

The owner of a cross-roads shop, who has built up a good trade by close attention and honest dealing, would be thoroughly justified in bitterly antagonizing a rival who had secured the old stand that he might reap where he did not sow. If, however, success have made him negligent so that he serves his community indifferently, he should not complain against the invasion; he alone is responsible; he had thrown away his estate.

Both conditions are familiar. Corporations find themselves at times as the old, still energetic shopkeeper, fighting to hold his own; at others, as the sturdy newcomer invading an area occupied by sluggish men, satisfied with small business and large percentage profits. To illustrate.

Several men competing in the manufacture of some product combine, reduce working expenses and with the money thus saved secure competent scientific aid for improvement of methods. Few processes are discovered, cost of production is decreased, waste is prevented and by-products are utilized; the result being eradication of rule-of-thumb competitors while the innovators gain control of the business to their own great profit and to the great advantage of the consumers. They remain incessant in efforts to better processes and to make new industries; but eventually the earlier patents expire. Other men, in view of this, have been investigating and have discovered improvements in methods, to become available with expiration of the early patents. The men whose foresight made possible the vast extension now see their property placed in jeopardy by means of their own processes, discovered at great cost, and they struggle to retain their own. Under such circumstances the importance of the golden rule is made very prominent, each side charging the other with neglect; yet, whatever may be the shortcomings of the older manufacturer, one must concede that the newcomer usually regards himself as the neighbor and therefore unfettered.

On the other hand, combinations have invaded areas regarded by others as their preserves; and here is involved the question of a man's natural right to secure a living easily at the expense of his fellows—that which is involved in the department-store problem. A corporation, under heavy fire recently, was charged with the crime of owning its retail shops, while selling its goods to retailers. Yet any self-respecting man would resent an effort to prevent him from selling his own goods according to any one of the approved methods. If a manufacturer, on large or small scale, choose to establish his own retail store or stores, no one has any right to complain—it matters not what the goods may be, cigars, shoes, oil or meats. In any event, such a method would be advantageous to the greater number by leading to division of middlemen's profits between maker and consumer.

The cry in many quarters is for unrestricted competition in trade, but recent events prove the cry to be utter hypocrisy. In one state a suit for ouster was brought against a corporation because, owing to competition, it sold its products more cheaply in some localities than in others. A similar suit was brought in another state because the company had set its prices so low for some years that no competitor could do anything in the region. Evidently the only free competition desired is that which would remain after binding the one on the ground—an open market for the newcomer. The opponent of that company is anxious to have the government enter into conspiracy with him to increase the cost of necessaries of life.

That conditions in commercial circles are not ideal is beyond question—they are far from ideal in any circles and they will never be otherwise until man has passed away and has been succeeded by a superior race of beings. But one must recognize that very much of the wickedness upon which writers descant so vehemently consists merely in so-called evasion of law. It is certain that serious dangers to the commonwealth are inherent to vast combinations of capital; and it is equally certain that imperfect legislation in the past opened the way to abuse, of which selfish men have not been slow to avail themselves. Some form of governmental control is necessary to prevent excess. All recognize that a corporation, being a creature of the law, does not possess natural rights as does an individual; but once created it has the rights conferred on it and in all legislation those rights must not be forgotten. Unfortunately, most of the legislation against combinations is the offspring of men unfamiliar with the interlacing of business interests, so that while it may correct or destroy one wrong it creates a dozen others. Too often the statutes make criminal that which is ethically just. Such statutes, it is true, are the law of the land and every good citizen should obey them as far as in him lies. But the law requires him to obey the letter, not the spirit, for no created being can fathom the depth of the spirit or divine what was in the mind of those who conceived them. If the laws prove to be ineffective, the fault is not in the citizen, but in the ignorance of the lawmaker. Our country owes a debt of gratitude to those lawyers who, ascertaining the exact letter, have guided our great corporations through the labyrinth of statutes and enabled them to avoid pitfalls. Had not a merciful providence provided those lawyers, the country would have been the loser—and the statute-makers, most of all, should be grateful, for the evils of their work have not recoiled upon their heads. Controlled in most instances by men of great sagacity, combinations have lessened the cost and increased the output of manufactures while bettering the wage-earners' reward.

Assertion that the existence of vast combinations of capital is the surest foundation of national prosperity is, for many, evidence of insanity or of dishonesty or of both. Yet no generalization could be more nearly true. A single illustration suffices.

When the business depression following 1873 ended abruptly in 1879, the iron and steel industry was wholly unprepared for the new conditions. A great part of the furnaces were out of blast and the metal required at once by railroads and other interests could not be supplied. Great combinations were unknown, there were many concerns—there was that unrestricted competition which some regard as Utopian. All had suffered severely during the depression and the few concerns still in operation set themselves at once to make good their losses. A veritable scramble for profits ensued on the part of both employers and employed. The price of pig iron increased so rapidly as to pass the point where the moderate tariff became unimportant and foreign makers unloaded their stocks of metal on us, glutting the market and prostrating the pig-iron industry. Meanwhile the cost of manufactured products had gone beyond what the "traffic could bear" and prosperity came quickly to an end.

The conditions of 1879 were repeated in 1899, but the outcome was wholly different, for the iron and steel interests were concentrated and the business was controlled by a few vast combinations. No one of them could increase the price without consent of all, but any one could hold the price down against opposition by all its rivals. The leading concerns, mindful perhaps of 1879 and 1880, determined that prices for manufactured products should not exceed a fixed scale, more being ruinous—and they maintained that scale in spite of greatly increased cost of pig metal. The result was almost uninterrupted prosperity until 1907, when the whirlwind of senseless attacks on corporations, as such, swept over the country. Even now the prostration is unlike that following 1873 and 1893. The great organizations, during their prosperity, laid aside a surplus for evil days. When disaster came a year ago, there was no wild rush to dispose of accumulated stocks; there was no crash in prices; there was no wholesale reduction in wages. While there has been want in the distributing centers, the country at large has known no such wide-spread distress as that which followed former business disasters.

But the wisdom of our rulers has made consolidation or combination of competing interests unlawful. A New York judge recently decided that consolidation, even though advantageous to the public, is illegal in case it involve stoppage of competition. If two grocers on opposite corners have waged war until both are threatened with bankruptcy, their friends would advise them to reach an understanding, might advise even union and the closing of one shop, that by reducing expenses and selling at a fair profit they might gain an honest living. Yet there is reason to believe that such a course might be adjudged contrary to law, being a conspiracy to increase cost of necessaries of life. Their customers would certainly express that opinion.

This is no exaggeration. Residents of New York City were well satisfied some years ago to buy coal at $4.50 per ton, wholly indifferent to the fact that the anthracite companies were engaged in reckless and unjustifiable strife. When the contest had gone so far that bankruptcy seemed inevitable for some of the companies, the officers awoke to their responsibility to the helpless stockholders, whose interests they were to guard. An agreement was made to mine no more coal than the market demanded and to charge a price which would enable them to pay fair wages, to meet their obligations and to earn interest on their investments. At once the customers were filled with indignation, the papers denounced the oppressive "coal barons" and agitation began which eventuated in legislation so drastic that, were it sustained by the courts and fully enforced, the companies, deprived of rights guaranteed them half a century ago, would be forced into bankruptcy and millions of persons would be plunged into misery. There is a strong popular feeling that live and let live is the only true policy; but clearly the popular interpretation of this doctrine is wholly one-sided, the policy must favor the consumer alone—in forgetfulness of the fundamental principle that all interests are mutually dependent, that one can not suffer alone; all must share.

The day of small things has passed; railroads, telegraphs, express steamships have changed the units of competition from individuals to nations. If Great Britain, Germany and the United States are each to have a fair share in the world's markets, they will do so only through the sagacity of men controlling the policies of great combinations. Even in our own country, the territory is so vast that, to secure internal prosperity, such combinations are essential in every department of activity, manufactures, colleges or transportation. Petty rivalries of neighbors are too costly, too wasteful; duplication of plants is folly, when by a slight increase in some portion of one it can be made to do the work of both. In view of this, men should recognize that vox populi as expressed in legislative enactments is not necessarily vox dei; that right can not be converted into wrong by the vote of an accidental majority; that exact obedience to law is not sin.