“The former owners of these lands had now been practically dispossessed. Many of them had gone to the cities and engaged in more profitable business than farming. Many who were mortgaged had been sold out, bankrupted and ruined, and had settled down into the condition of peasants. The lands were now regarded as the property of the state. This process of the transfer of the lands to the state went further in Minnesota than the other states, because she was the first to adopt the new plan of taxation. After the other states adopted it, the advantage their farmers had over those of Minnesota was lost. Rents under the name of taxes were levied, farming rendered unprofitable and the uncultivated portions of the land abandoned by their owners. The few southern states that did not go into this new plan could not reap much advantage from their position, because their products were different from those of the northern states and could not replace those whose cultivation was repressed. “Agricultural products fell off to such an extent, that in a few years the United States ceased to be an exporter of them. The cities having gained control of the states, it came to be a political theory[94] that each state was a community, and that the lands abandoned or forfeited for taxes belonged to the Community and therefore came indirectly under the control of the cities. From this position it was an easy step to the idea that the taxes—or rents as they were designated—of the “people’s lands” might be spent where most beneficial to the majority, that is, in the cities. It was attempted to be pointed out by the more conservative that this was class legislation. But the radical progressives replied that it was in line with the theory of the single tax which was class legislation if anything could be. And they asserted that the adoption of the single tax carried with it an endorsement of the principle of class legislation when demanded by the interests of the majority. Whether their reasoning was sound or not they carried the day, and a great stride was taken toward the centralization of power and population. It now happened that when more money was wanted it was raised, not by increasing the rents of city lots, but those of farming lands, and after a time the principle revenues came to be derived from them. Although the exportation of grain, flour, beef etc., had practically ceased, still the people had to eat and their food had to be raised on the land. The business of farming gradually took on entirely new features. Large operators took large tracts on lease from the state at prices determined periodically by appraisement fixed in proportion to the needs of the state. Lands taken on these terms were guaranteed to be kept free from the competition of squatters, so that the lands remaining vacant[95] were cleared of squatters, or else the latter were restricted to a mere garden patch. Thus the country was no longer occupied by farmers residing on the lands with their families as in former times. The agricultural districts were inhabited only by a poor and thriftless class of peasants and during the summers by the employes of the large contract farmers who made their headquarters and resided with their families in the cities. In the winter, only such hands as were required to care for the stock remained in the country, the rest all flocking to the towns.
“One result of the increased rentals charged for the agricultural lands appears not to have been anticipated. That was the great rise in the cost of food. Of course the rents of the lands were simply added to the cost of the production of grain and other foods, and finally were paid by the consumer. It came to be seen after a time that the public revenues raised out of the agricultural lands were finally paid by all the people in proportion—not to their wealth or ability, but to their appetites and the amount they consumed—so that a laboring man with a vigorous appetite paid more to support the state than a dyspeptic millionaire. And a poor man’s family of six or eight ravenous offspring contributed many times as much as the scanty and sickly progeny of the exclusive aristocrat. It speedily became a cause of great dissatisfaction and disappointment when the poor and the working classes found out that the fine promises of the single tax had so far failed that instead of lightening their burdens it had increased them.[96] And that the confiscation of the lands of the farmers instead of adding to the prosperity of the common people had increased the already plethoric wealth of the rich. A school of politicians now arose who declared that the taxation of land was the taxation of the poor man’s bread and butter and was all wrong. Instead of farming land paying the bulk of the taxes they said it ought not to pay any. Every facility and encouragement ought to be given for the production of cheap food. People ought not to be taxed on what they consume, but on what they save. Neither labor nor the laborer should be taxed, they should be made as free and unhampered as possible for the production of wealth. But when wealth was once produced then it should be taxed wherever found and a necessary portion of it taken as the revenue of the state. The laboring classes were in a mood to listen to this logic whether sound or not. The lands having passed out of private hands, however, there was no disposition to allow them to pass back to them again. And the new party advocated state superintendence of the lands and free occupancy by private individuals of such amounts as each could actually cultivate to advantage. As the population and demand for land increased, the amounts allotted to individuals was to be cut down proportionally, and a grade or standard of cultivation and quantity of production was to be exacted, and the state was to fix the prices at which the products were to be sold. Eventually it was proposed that the state should be the purchaser and distributor of these products so that speculation[97] in them should be prevented. The advantage possessed by some on account of their nearness to market would be equalized by the state paying a less rate for their products than for those further away.
“Taxes for revenue were then to be levied upon every piece of personal property that could be found of every sort whatever including buildings. In the cities a graded rent for lots was to be assessed according to locality, beginning at zero in the vacant suburbs and increasing toward the center of greatest activity and demand. A thoroughness in assessment and the employment of methods that were called by their critics, “odiously inquisitorial,” were to be adopted, but the fact was the mass of the people were drifting rapidly toward socialism in their ideas, and they asserted that the “inquisitorial methods” were alright. They said, it was high time to know how much wealth people had and how they came by it, and that reluctance to tell on the part of the possessors of it indicated that either they had acquired it by questionable methods, or wished to avoid the fair responsibility, that its ownership entailed. They went further and declared it was high time that more scientific processes were discovered and put into practice for the equitable distribution of wealth. A thousand men contribute to the production of $1,000,000 of wealth, all of which is gobbled up in a few weeks or months by the scheming of a single “financier.” The board of directors of a railroad, a mining company or a manufacturing company, may issue to themselves certificates of watered stock for which[98] they pay not a cent, and which represent wealth having no existence, but which they are in a position to compel the public to make good. A gang of speculators may get up a corner on wheat or cotton or stocks of some sort and artificially raise the price while they unload at the advanced rate thereby securing wealth they never earned. Combinations and trusts in oil or sugar, screws, nails, coal, whisky, gas-pipes or binding twine, arbitrarily advance the price of the articles whenever they want more money, and thus take as many thousands or millions from that patient ass, the public, as they see fit without a pretense of returning an equivalent. All these things the politicians of the new school declared must be stopped. They said people should not be allowed to secure wealth without in some way earning it, and if they had managed to secure it without rendering an equivalent for it, it would be no more than right to confiscate it for the benefit of the public at whose expense it must have been acquired. The party advocating these ideas rapidly came into power and proceeded to put their views into practice. It was found after much discussion and some experimenting that people would not work and do their best unless they were paid better for their best than for their worst. The experiment of making the state the buyer and wholesale seller of all articles that could be made the subjects of combines and trusts was found to work well. The state did not at first undertake to manufacture or produce anything, but monopolized its transfer from producer to consumer. For example the producers of anthracite[99] coal were required to sell their product to the government, and it was unlawful for them to sell to anyone else. The price of mining, handling and transportation and the selling rate were each fixed by a board of arbitration and remained fixed till the conditions changed. There was no such thing as striking among the hands, for if they were dissatisfied all they could do was to leave and allow others to take their places. If no others were willing to do the work it was an indication that the rate was too low and the board of arbitration raised it. It had been settled before this that the mine owner had no royalty rights. These were regarded as the property of the state. So if the mine owners attempted to combine to raise the price to the state or from perverseness refused to furnish the amount required their properties were placed by the state in the hands of receivers to be worked till such time as the matters in dispute were regulated.
“Other mining industries, and the production of coal-oil, sugar and other articles capable of control by trusts, were regulated and handled in similar manner by the state. As to railroad, telegraph and express properties, they all passed into direct government ownership before the middle of the twentieth century.”
The Professor pausing here for a moment to shift his profile, I ventured to say that I had in my day anticipated this move on the part of the government, but many people had been unable to see how it could be carried into effect without simple confiscation, because they said it would bankrupt[100] the country to buy the roads etc., and pay their value for them.
“There was no difficulty at all in the matter,” the Professor continued, “the owners of the roads received for them all they were worth, and yet they did not cost the country a dollar. First the government had the roads appraised on a capitalized basis, in which account was taken of the actual value in cash of the property as it stood regardless of the amount of stock and bonds outstanding against it. Next, account was taken of its power to earn money.
“The government now provided for the issue of consolidated railway bonds guaranteed by the government. These all bore the same rate of interest, three per cent payable annually. They were in five series, due in 20, 40, 60, 80 and 100 years respectively, an equal amount of each. They were in denominations of $20.00, $50.00, $100.00, and $1,000, with coupons for the interest attached, the lower denominations payable at the earlier dates.
“These bonds were issued in exchange for the railway securities on the following terms. Bonds at their face value were allotted to each road to the amount of its estimated cash value, plus its net earnings for that one year next preceding the passage of the act of purchase. Many roads earned only enough to pay their running expenses, and these received only the amount of their appraised valuation. For the purpose of the distribution of the allotment of the purchase bonds to the holders of the railway securities in any given case, account was taken of the market quotations of the[101] several sorts of stocks and bonds at a date one year previous to the act of purchase, and the value of each person’s holding thus ascertained. Then the purchase bonds were distributed to the individuals pro rata to these values. When seven-tenths in interest of the proprietors of any road accepted the terms of the government purchase the other three-tenths were obliged to accede or lose their interests.
“A few roads held out for a short time, but after the ice was broken they all at once became eager to transfer their properties to the government. The railway consols at once became popular and were rated above par, the government guaranty making them in reality national bonds. A new cabinet office—secretary of transportation—was created. All the employes on the roads from the superintendents of transportation down, held their places under civil service rules, and this branch of the administration never came under political conditions, but was managed upon strictly business principles like the post office. The income from the roads, from the very first year not only paid the interest on the railroad consols, but yielded a handsome surplus that was annually laid aside in safe investments to serve as a sinking fund for the redemption and cancellation of the bonds as they should mature. Before the end of the twentieth century one-half of these bonds had been retired and great reductions had been made in passenger and freight rates and the service had vastly improved over what it was in your day. Strikes, freight and passenger rate wars with their terrific[102] waste and demoralization of business were things of the long past. Many other leaks of railway earnings were stopped when the roads became the property of the government. Many small pieces of road became consolidated under one superintendence; hordes of directors, presidents, vice presidents, general managers, general agents, solicitors of business and other officials were dispensed with; many of whom under the former regime, not only drew salaries for supposed services, but absorbed besides in various mysterious ways, vast wealth that of right should have gone to the stockholders.
The total mileage of the railroads of the U. S. in 1893 was 173,370
Total capital stock $5,021,576,551
Total bonds 5,510,225,528
Total actual cost $45,000 per mile 7,801,650,000
Total earnings, one year 1,208,641,498
Total net earnings 358,648,918
Amount of the railroad consols to be issued in payment of the R. R. 8,160,300,000
Annual interest on same at three per cent 244,809,000
Surplus of railway income after paying interest on railroad consols to be applied to sinking fund 113,839,918
Amount of sinking fund after twenty years to be used in the extinction of one-fifth of the consols 1,632,060,000
Net income of roads increased to 400,000,000
Surplus to be used in betterments 41,351,082
[103]
(The above figures I have worked out to accord with the Professor’s suggestions—as he did not give details. I have put the average value of the roads at $45,000 per mile which is much more than it would cost to replace them.)
“I suppose,” said I, “that these bonds, especially those of the lower denominations would circulate to some extent as currency.”
“They did, and those of the $1,000 denomination were used as the basis of paper currency. But now at the close of the twentieth century over half of these bonds have been retired and the currency based upon them withdrawn. The railroad, telegraph, transportation, express, and car companies have all disappeared and the entire business is conducted by the general government. All of the roads will soon have been entirely paid for and the rates for the transportation of passengers, goods and messages are reduced almost to actual cost of the service including wear and tear. You would doubtless be surprised by the schedule of prices. For example, passenger rates for ten miles or under three cents, 20 miles five cents, 50 miles ten cents, 100 miles fifteen cents, 200 miles 25 cents, 500 miles 50 cents and greater distances at the same rate provided it is a continuous ride in the same train.”
“In my time,” said I, “electricity was being introduced as the motive power on railways. Did it prove successful?”
“It did, eminently so, and entirely superseded steam locomotion, although steam stationary engines were used principally, throughout the century.[104] But when we come to look forward into the twenty-first century, we shall find some remarkable changes. But we have not reached that yet.”
“I am curious to know how the currency question was settled. After the retirement of the railway consols, I suppose they fell back on gold or paper based on it, did they?”
“The use of gold and silver money was never discontinued entirely, and both were coined. Near the close of last century, the free coinage of silver was strongly demanded by the people and strongly opposed by the financiers. Finally they compromised. The government gave up the task of maintaining the parity of the metals at any ratio, but coined both.
“The silver “dollar” with its fractions, half quarter and dime was coined in quantities to accommodate the business. Silver was made a legal tender for limited amounts. This gave silver the character of “fiat money,” or money that is legal and current at inflated values. They made gold the standard of value. In this they were right. There could logically be only one unit of value. But the debtor class strenuously opposed the plan. They said it worked great injustice to them, because their debts were contracted at times when money bore inflated values; when for example silver was intrinsically worth only half as much as gold. These debts were therefore now payable in money twice as valuable and twice as hard to get as that for which they had gone into debt. In other words they paid back twice as much as they fairly owed and the creditor received twice as[105] much as he fairly loaned. There can be no doubt this is true of debts of long standing. But most debts were not affected materially by the rise in the value of gold, because they were not contracted at its bottom value, but at various grades of value while it was on the ascending movement. However as long as it was rising the creditor class was reaping an unjust advantage over the debtors. The government issued bank notes; some based on silver and some on gold; each kind redeemable in the metal on which it was based. The quantity of this paper money was regulated by the national legislature so as to insure a circulation in proportion to the volume of business. The extended use of bank checks has furnished a substitute for or supplement to the currency. When the currency question was finally felt to be settled, the conditions were practically accepted and the producing class was set to work, and in an incredibly short time, replaced the wealth that had been abstracted from them and more. Then came an era of speculation and the scattering of wealth. Obligations rashly incurred in flush times, had to be met when times became tight. This led to panics and the whole routine had to be repeated about so often. But panics could not be entirely eliminated by doctoring the currency, because currency is not the only factor. No matter how much currency a man has, he is not likely to buy articles he does not want. If mechanics have spent their time in the production of something the public do not require or a surplus of what they do ordinarily require, there will be difficulty in disposing of the product.[106] If two classes of mechanics each make things with the expectation of selling them to the other class, and they turn out to be such things as are not wanted in either case, there is sure to be stagnation of exchange and consequent suffering. Where all are working in ignorance of the requirements of others there are sure to be produced many things for which there will be no demand. This had been partially recognized by the government in your day and commissioners were appointed to collect statistics and make estimates in regard to the production of and probable demand for certain farm products. As the government became more intimately the servant of the people its services in this direction were greatly extended and inquiries covered many other departments beside that of farming. The government itself became a large consumer in operating its railroads, telegraphs, etc. Additional mileage had to be constructed to meet the growing business besides the renewals on account of wear and tear. By the publication in advance of the probable demands on the various sorts of industry it became possible to estimate approximately what amount of and what kind of product could be disposed of. A still more fruitful source of financial trouble was to be found in the spirit of recklessness and extravagance with which people spent their money when times were prosperous or booming. It seemed so easy then to get money and to pay debts that many thought it hardly worth while to do it, if there appeared a chance for a profitable speculation, and so instead of paying old debts they were[107] very likely to incur fresh ones. But as the state became more and more involved in business affairs, it was able to advise what products would be in demand, when it was advisable to use caution and economy and when activity would be rewarded. The functions of the state as a medium of exchange between the producer and the consumer became rapidly extended, and before the close of the century it became the chief and in many things the only buyer and seller of the products in most common use, as well as the sole factor in all monopolies and in banking, insurance, and public amusements. It had not yet gone into manufacturing or farming except to the extent necessary to prevent combinations and private monopolies.”
“I think I can see the advantage of this,” said I, “they probably held to the principle that competition is necessary to keep men up to their best in exertion and industry.”
“That is correct,” he replied, “until work becomes an instinct it is necessary to stimulate exertion by the better rewards that extra industry can procure. The socialists in your day proposed no plan that calculated sufficiently upon the selfishness of the individual. They expected that everybody would accept the position assigned to him and work faithfully for the good of all. But it was too soon to expect this. Your race is very young. It is not so long since your ancestors ceased to depend on the spontaneous productions of the earth for their sustenance, and began to supplement them by their own exertions. With some of your races work is beginning to be instinctive,[108] but there are yet enough in every nation, who, by their hereditary aversion to exertion are ready to shirk out of labor and make the burden of the instinctively industrious intolerable. Your race is too young yet, here at the close of the twentieth century, to take on the purely instinctive socialistic conditions as we Lunarians have them.”
“You think then that socialism to be successful must be instinctive as it is with the bees?”
“To be permanently successful it must be founded upon such an instinct for industry, that makes it more agreeable for a person to work, than to be idle, or to be merely amused. That is, the individual must love work for the sake of the work rather than for the reward that is to come after it. It is indeed true that only the stimulation of the reward at the end could ever have created or kept up the habit of work until it became instinctive, and it is true that if this reward at the end should habitually cease to be realized to at least some degree, the instinct for the work would in course of time become undone—unwound as we might say. The expectation of the reward if it is as constant as the work, would naturally become a part of the instinct. But there are often disappointments as to the reward, while the work itself remains constant, so that this part of the instinct learns to be satisfied with smaller and smaller results until finally the necessaries of painless existence in which the working apparatus is kept in proper operating order are all the reward that the instinct requires.”
“Then,” said I, “in this supreme ideal of socialistic[109] instinct, I understand you, that the individual lays aside all expectation of personal enjoyment, or the possession of anything in the way of luxuries or superfluities. It seems to me such an existence must be a very narrow one.”
“The possession of superfluities,” said he, “does not contribute at all to enjoyment of life. That is why they are superfluities. A luxury, however, is something that gives or is supposed to give unaccustomed pleasure, and it presupposes conditions or times in the ordinary life of the individual in which he fails to get perfect returns of happiness or satisfaction. But suppose there are no such times or conditions, and that he has no possible desire that his habitual work does not satisfy. Then his work is his luxury and no diversion to any unaccustomed function would procure so great a luxury. As to such existence being narrow, it all depends on the breadth of the work. If the work is circumscribed, the life is narrow. If the work is wide, diversified and complicated, then so is the life, whether it be accompanied by the elements of contingency and uncertainty of mind as with you or the assurance of settled and triumphant success as with us.
“All the same however true socialistic conditions are not realized to a nearly perfect degree up to this close of the twentieth century, although the advance toward them has been what the conservatives of your day would have regarded as alarming. In all cases where honest competition in the production of anything can be maintained, it is the policy of government to refrain from interference;[110] but if the articles produced are necessary to consumers or are required as materials in the production of other goods that are, and the manufacturers of such things form trusts or combinations for the purpose of increasing the price, the government appoints receivers for such business and has it operated long enough to ascertain the cost of producing the article. The price is then fixed by the government.”
“But what if the parties decline to sell at the prices fixed by the state?”
“They do not decline unless they want to go out of business,” he replied, “because when the state interferes in such cases it amounts to notice to the parties that the state is ready, as an alternative, to undertake the business itself, when it speedily destroys extortion by furnishing the required product at a fair price.”
“It would seem then,” said I, “that the state has become a large factor in the business of the country, and there has been a great centralization of power.”
“That is true,” he answered, “there has been a remarkable evolution and yet a perfectly natural and logical one. The very first principle on which a state is organized is the defense and protection of all—the weaker as well as the stronger members—against a common external foe. The second principle which is easily derivable from the first is the protection of the members of the society from each other. Under this principle the weaker will be protected from the stronger, first in his person, second in his property. It was the theory of many[111] in all former times that the functions of the state ought to end there. Some said, that to go any further would contravene the wholesome natural law of selection, and interfere against the survival of the fittest. Nature left to herself, would put down and finally exterminate the weakest of the race mentally and physically, leaving always the strongest and best to survive, and so constantly improve the race. But if that consideration were to prevail there should never have been any protective organization of tribes and states in the first place. If when a community were attacked each individual ran away or hid as best he could, the enemy would catch and destroy the less swift and strong and the less shrewd and wary, and so select the best for survival. But under the organization, they stand together, and if the enemy is beaten off, the weak and inferior members are saved with the best. The only consideration on which this is right must be that the weaker members of the society are worth more to the state than they cost, and therefore to the extent that they are protected by the organization they are selected by nature in this roundabout way for survival, for the benefit of the state.
“The further defense of the weak against the strong within the social organization, must be on the same principle. And this principle having been admitted there is no logical end to it short of protection against every advantage the strong or the superior or the more wary can possibly take or attempt. In a civilized society the oppression of the weak is no longer so much from personal[112] violence or robbery, but it takes the more subtle form of absorbing their wealth under forms of law and business formulas, so that in such a society the weak and unwary are valuable to produce wealth, but are robbed of it, practically by a few.
“If the state would get the benefit of the exertions of its members, it must protect them from these depredations, whether they are perpetrated under the forms of highway robbery or of the laws of trade. In short the protection of the individual by the state cannot logically terminate till it prevents everyone from acquiring property he has not earned and rendered a fair equivalent for.”
“Then ought it not also to protect society against the extortions of anyone who would compel it to pay too much for something he alone could produce?”
“Of course that is included in the first.”
“Well then, does not that imply also that the state shall insure a fair return for the work of every individual to himself?”
“No,” said he, “that does not follow, unless the individual performs such work as the community wants. If a man is free to do as he likes, and he must be, he may sometimes choose to do something of no use to anyone else. Then of course no one else should be obliged to take the useless thing and pay for it. But if a man has nothing to do, the state should upon his application furnish him employment and pay him for his work when done under instructions.”