War of the Classes

THE QUESTION OF THE MAXIMUM

For any social movement or development there must be a maximum limit beyond which it cannot proceed. That civilization which does not advance must decline, and so, when the maximum of development has been reached in any given direction, society must either retrograde or change the direction of its advance. There are many families of men that have failed, in the critical period of their economic evolution, to effect a change in direction, and were forced to fall back. Vanquished at the moment of their maximum, they have dropped out of the whirl of the world. There was no room for them. Stronger competitors have taken their places, and they have either rotted into oblivion or remain to be crushed under the iron heel of the dominant races in as remorseless a struggle as the world has yet witnessed. But in this struggle fair women and chivalrous men will play no part. Types and ideals have changed. Helens and Launcelots are anachronisms. Blows will be given and taken, and men fight and die, but not for faiths and altars. Shrines will be desecrated, but they will be the shrines, not of temples, but market-places. Prophets will arise, but they will be the prophets of prices and products. Battles will be waged, not for honor and glory, nor for thrones and sceptres, but for dollars and cents and for marts and exchanges. Brain and not brawn will endure, and the captains of war will be commanded by the captains of industry. In short, it will be a contest for the mastery of the world’s commerce and for industrial supremacy.

It is more significant, this struggle into which we have plunged, for the fact that it is the first struggle to involve the globe. No general movement of man has been so wide-spreading, so far-reaching. Quite local was the supremacy of any ancient people; likewise the rise to empire of Macedonia and Rome, the waves of Arabian valor and fanaticism, and the mediæval crusades to the Holy Sepulchre. But since those times the planet has undergone a unique shrinkage.

The world of Homer, limited by the coast-lines of the Mediterranean and Black seas, was a far vaster world than ours of today, which we weigh, measure, and compute as accurately and as easily as if it were a child’s play-ball. Steam has made its parts accessible and drawn them closer together. The telegraph annihilates space and time. Each morning, every part knows what every other part is thinking, contemplating, or doing. A discovery in a German laboratory is being demonstrated in San Francisco within twenty-four hours. A book written in South Africa is published by simultaneous copyright in every English-speaking country, and on the day following is in the hands of the translators. The death of an obscure missionary in China, or of a whiskey-smuggler in the South Seas, is served, the world over, with the morning toast. The wheat output of Argentine or the gold of Klondike are known wherever men meet and trade. Shrinkage, or centralization, has become such that the humblest clerk in any metropolis may place his hand on the pulse of the world. The planet has indeed grown very small; and because of this, no vital movement can remain in the clime or country where it takes its rise.

And so today the economic and industrial impulse is world-wide. It is a matter of import to every people. None may be careless of it. To do so is to perish. It is become a battle, the fruits of which are to the strong, and to none but the strongest of the strong. As the movement approaches its maximum, centralization accelerates and competition grows keener and closer. The competitor nations cannot all succeed. So long as the movement continues its present direction, not only will there not be room for all, but the room that is will become less and less; and when the moment of the maximum is at hand, there will be no room at all. Capitalistic production will have overreached itself, and a change of direction will then be inevitable.

Divers queries arise: What is the maximum of commercial development the world can sustain? How far can it be exploited? How much capital is necessary? Can sufficient capital be accumulated? A brief résumé of the industrial history of the last one hundred years or so will be relevant at this stage of the discussion. Capitalistic production, in its modern significance, was born of the industrial revolution in England in the latter half of the eighteenth century. The great inventions of that period were both its father and its mother, while, as Mr. Brooks Adams has shown, the looted treasure of India was the potent midwife. Had there not been an unwonted increase of capital, the impetus would not have been given to invention, while even steam might have languished for generations instead of at once becoming, as it did, the most prominent factor in the new method of production. The improved application of these inventions in the first decades of the nineteenth century mark the transition from the domestic to the factory system of manufacture and inaugurated the era of capitalism. The magnitude of this revolution is manifested by the fact that England alone had invented the means and equipped herself with the machinery whereby she could overstock the world’s markets. The home market could not consume a tithe of the home product. To manufacture this home product she had sacrificed her agriculture. She must buy her food from abroad, and to do so she must sell her goods abroad.

But the struggle for commercial supremacy had not yet really begun. England was without a rival. Her navies controlled the sea. Her armies and her insular position gave her peace at home. The world was hers to exploit. For nearly fifty years she dominated the European, American, and Indian trade, while the great wars then convulsing society were destroying possible competitive capital and straining consumption to its utmost. The pioneer of the industrial nations, she thus received such a start in the new race for wealth that it is only today the other nations have succeeded in overtaking her. In 1820 the volume of her trade (imports and exports) was £68,000,000. In 1899 it had increased to £815,000,000, – an increase of 1200 per cent in the volume of trade.

For nearly one hundred years England has been producing surplus value. She has been producing far more than she consumes, and this excess has swelled the volume of her capital. This capital has been invested in her enterprises at home and abroad, and in her shipping. In 1898 the Stock Exchange estimated British capital invested abroad at £1,900,000,000. But hand in hand with her foreign investments have grown her adverse balances of trade. For the ten years ending with 1868, her average yearly adverse balance was £52,000,000; ending with 1878, £81,000,000; ending with 1888, £101,000,000; and ending with 1898, £133,000,000. In the single year of 1897 it reached the portentous sum of £157,000,000.

But England’s adverse balances of trade in themselves are nothing at which to be frightened. Hitherto they have been paid from out the earnings of her shipping and the interest on her foreign investments. But what does cause anxiety, however, is that, relative to the trade development of other countries, her export trade is falling off, without a corresponding diminution of her imports, and that her securities and foreign holdings do not seem able to stand the added strain. These she is being forced to sell in order to pull even. As the London Times gloomily remarks, “We are entering the twentieth century on the down grade, after a prolonged period of business activity, high wages, high profits, and overflowing revenue.” In other words, the mighty grasp England held over the resources and capital of the world is being relaxed. The control of its commerce and banking is slipping through her fingers. The sale of her foreign holdings advertises the fact that other nations are capable of buying them, and, further, that these other nations are busily producing surplus value.

The movement has become general. Today, passing from country to country, an ever-increasing tide of capital is welling up. Production is doubling and quadrupling upon itself. It used to be that the impoverished or undeveloped nations turned to England when it came to borrowing, but now Germany is competing keenly with her in this matter. France is not averse to lending great sums to Russia, and Austria-Hungary has capital and to spare for foreign holdings.

Nor has the United States failed to pass from the side of the debtor to that of the creditor nations. She, too, has become wise in the way of producing surplus value. She has been successful in her efforts to secure economic emancipation. Possessing but 5 per cent of the world’s population and producing 32 per cent of the world’s food supply, she has been looked upon as the world’s farmer; but now, amidst general consternation, she comes forward as the world’s manufacturer. In 1888 her manufactured exports amounted to $130,300,087; in 1896, to $253,681,541; in 1897, to $279,652,721; in 1898, to $307,924,994; in 1899, to $338,667,794; and in 1900, to $432,000,000. Regarding her growing favorable balances of trade, it may be noted that not only are her imports not increasing, but they are actually falling off, while her exports in the last decade have increased 72.4 per cent. In ten years her imports from Europe have been reduced from $474,000,000 to $439,000,000; while in the same time her exports have increased from $682,000,000 to $1,111,000,000. Her balance of trade in her favor in 1895 was $75,000,000; in 1896, over $100,000,000; in 1897, nearly $300,000,000; in 1898, $615,000,000; in 1899, $530,000,000; and in 1900, $648,000,000.

In the matter of iron, the United States, which in 1840 had not dreamed of entering the field of international competition, in 1897, as much to her own surprise as any one else’s, undersold the English in their own London market. In 1899 there was but one American locomotive in Great Britain; but, of the five hundred locomotives sold abroad by the United States in 1902, England bought more than any other country. Russia is operating a thousand of them on her own roads today. In one instance the American manufacturers contracted to deliver a locomotive in four and one-half months for $9250, the English manufacturers requiring twenty-four months for delivery at $14,000. The Clyde shipbuilders recently placed orders for 150,000 tons of plates at a saving of $250,000, and the American steel going into the making of the new London subway is taken as a matter of course. American tools stand above competition the world over. Ready-made boots and shoes are beginning to flood Europe, – the same with machinery, bicycles, agricultural implements, and all kinds of manufactured goods. A correspondent from Hamburg, speaking of the invasion of American trade, says: “Incidentally, it may be remarked that the typewriting machine with which this article is written, as well as the thousands – nay, hundreds of thousands – of others that are in use throughout the world, were made in America; that it stands on an American table, in an office furnished with American desks, bookcases, and chairs, which cannot be made in Europe of equal quality, so practical and convenient, for a similar price.”

In 1893 and 1894, because of the distrust of foreign capital, the United States was forced to buy back American securities held abroad; but in 1897 and 1898 she bought back American securities held abroad, not because she had to, but because she chose to. And not only has she bought back her own securities, but in the last eight years she has become a buyer of the securities of other countries. In the money markets of London, Paris, and Berlin she is a lender of money. Carrying the largest stock of gold in the world, the world, in moments of danger, when crises of international finance loom large, looks to her vast lending ability for safety.

Thus, in a few swift years, has the United States drawn up to the van where the great industrial nations are fighting for commercial and financial empire. The figures of the race, in which she passed England, are interesting:

As Mr. Henry Demarest Lloyd has noted, “When the news reached Germany of the new steel trust in America, the stocks of the iron and steel mills listed on the Berlin Bourse fell.” While Europe has been talking and dreaming of the greatness which was, the United States has been thinking and planning and doing for the greatness to be. Her captains of industry and kings of finance have toiled and sweated at organizing and consolidating production and transportation. But this has been merely the developmental stage, the tuning-up of the orchestra. With the twentieth century rises the curtain on the play, – a play which shall have much in it of comedy and a vast deal of tragedy, and which has been well named The Capitalistic Conquest of Europe by America. Nations do not die easily, and one of the first moves of Europe will be the erection of tariff walls. America, however, will fittingly reply, for already her manufacturers are establishing works in France and Germany. And when the German trade journals refused to accept American advertisements, they found their country flamingly bill-boarded in buccaneer American fashion.

M. Leroy-Beaulieu, the French economist, is passionately preaching a commercial combination of the whole Continent against the United States, – a commercial alliance which, he boldly declares, should become a political alliance. And in this he is not alone, finding ready sympathy and ardent support in Austria, Italy, and Germany. Lord Rosebery said, in a recent speech before the Wolverhampton Chamber of Commerce: “The Americans, with their vast and almost incalculable resources, their acuteness and enterprise, and their huge population, which will probably be 100,000,000 in twenty years, together with the plan they have adopted for putting accumulated wealth into great coöperative syndicates or trusts for the purpose of carrying on this great commercial warfare, are the most formidable.. rivals to be feared.”

The London Times says: “It is useless to disguise the fact that Great Britain is being outdistanced. The competition does not come from the glut caused by miscalculation as to the home demand. Our own steel-makers know better and are alarmed. The threatened competition in markets hitherto our own comes from efficiency in production such as never before has been seen.” Even the British naval supremacy is in danger, continues the same paper, “for, if we lose our engineering supremacy, our naval supremacy will follow, unless held on sufferance by our successful rivals.”

And the Edinburgh Evening News says, with editorial gloom: “The iron and steel trades have gone from us. When the fictitious prosperity caused by the expenditure of our own Government and that of European nations on armaments ceases, half of the men employed in these industries will be turned into the streets. The outlook is appalling. What suffering will have to be endured before the workers realize that there is nothing left for them but emigration!”

That there must be a limit to the accumulation of capital is obvious. The downward course of the rate of interest, notwithstanding that many new employments have been made possible for capital, indicates how large is the increase of surplus value. This decline of the interest rate is in accord with Bohm-Bawerk’s law of “diminishing returns.” That is, when capital, like anything else, has become over-plentiful, less lucrative use can only be found for the excess. This excess, not being able to earn so much as when capital was less plentiful, competes for safe investments and forces down the interest rate on all capital. Mr. Charles A. Conant has well described the keenness of the scramble for safe investments, even at the prevailing low rates of interest. At the close of the war with Turkey, the Greek loan, guaranteed by Great Britain, France, and Russia, was floated with striking ease. Regardless of the small return, the amount offered at Paris, (41,000,000 francs), was subscribed for twenty-three times over. Great Britain, France, Germany, Holland, and the Scandinavian States, of recent years, have all engaged in converting their securities from 5 per cents to 4 per cents, from 4½ per cents to 3½ per cents, and the 3½ per cents into 3 per cents.