Our Benevolent Feudalism

III

The counter-tendency toward the persistence of small-unit farming and of small-shop production and distribution must not be lost sight of, nor must the great combinations be looked upon as necessarily a proof of individual concentration of wealth. That they generally so result is hardly to be disputed; but primarily, they mean the massing together of separately owned capitals, often small, for a particular use. There is every reason to suppose that the shareholders grow in numbers, and that they increase their holdings. So that while the magnates tend to become Midases, there is a concurrent tendency making for diffused ownership. The small investor is to be found in every stratum of society, and the number of shareholders in some of the great combinations reaches an astonishing figure. The “one touch of nature” which in Shakespeare’s eyes made the whole world kin was the love of novelty; in our day it is the passion for investing in shares.

Petty industries and small-unit farming persist, despite the movement toward combination. The recent census gives the number of manufacturing establishments in the United States as 512,726, an increase of 44.3 per cent. This is a larger percentage of increase than is shown for any other of the fifteen items in the census summary of manufactures, except capital, children’s wages, and miscellaneous expenses. Doubtless many of these establishments belong to the trusts; but with all allowances the numerical growth is remarkable. The undeveloped sections show the greatest increase, but even industrially settled States, such as Massachusetts, Connecticut, and Rhode Island, reveal marked gains. Professor Ely has pointed out several branches of industry in which small-shop production is increasing. Some investigations which the present writer made two years ago in two branches confirm this tendency. It is pronounced in the notion trades and in the manufacture of women’s ready-made wear. In the latter the industry has been revolutionized, the large houses being menaced with disaster and some of them with extinction. In dry-goods distribution the tendencies are confused and puzzling. While the number of general jobbing houses in New York City has decreased from thirty-five to five in twenty-five years, the remaining ones growing to enormous proportions, the number of smaller houses distributing special lines has either maintained its own or has grown. In Baltimore and St. Louis small jobbing houses persist in the face of the larger houses. In the retail trades, even in New York, despite the creation of a number of mammoth general stores, the dullest observer will note the continuance of thousands of small grocery, dry-goods, and furniture stores, confectionery and butcher shops; while custom and repairing work is still done in the little tailoring and shoemaking shops that speak a sort of defiance to the great emporiums. Through convenience of location to the community of customers about them – often, too, by the giving of credit – many of these little shops and stores furnish a social service that cannot be performed by the larger stores, which are mostly to be found massed in the central shopping district.

Something of the same nature is to be found in agriculture. Though the great estates are increasing in size, so also is the number of small holdings increasing. Nearly every State and Territory shows an increase in the number of farms, while the majority show a decrease in average acreage. The great stock-grazing farms of the West and the unproductive “gentlemen’s estates” of the East help to make the census figures misleading. It is probable that in every State real farming is done on a smaller average acreage than ever before.

Even independent capital in trading and manufactures shows an unexpected persistence. An interesting article in a recent issue of the New York Journal of Commerce puts the capitalization of the great trusts for the twelve years ending with 1901 at $6,474,000,000, of which it marks off $2,000,000,000 as “spurious common stock,” that is, stock not representing real capital in any form. Not more than $300,000,000 of new capital, it maintains, had been thrown into the consolidations. This would leave $4,474,000,000 as the sum of values already established by previous investment. On the other hand, it maintains that actual records show that in seventeen months from the beginning of 1901, in the four States of New York, New Jersey, Delaware, and Maine, the aggregate capitalization of newly organized companies with a capital of $1,000,000 and upwards is $1,969,650,000; and it calculates that for the whole country, including the large and small corporations, “the national industrial capital (exclusive of that for transportation appliances) must have increased approximately $5,000,000,000 since the end of 1900.” Several rather obvious demurrers might be made to the conclusions reached, but they need not now concern us. With all possible discounting, strong proof is given of the aggressive persistence of independent capital.

IV

Such facts, however, do not carry on the surface their real import. Independent capital persists as a force, but the units that compose it melt like bubbles in a stream. These companies are but the raw or “partly manufactured” material out of which the great combinations are made. Formation, growth, and absorption into a trust are generally the three terms in their life-history; or if, through ill environment or spirited warfare waged against them, they fail to get secure footing, they soon slip back into the slough of disaster. The fate of independent tobacco factories, sugar and oil refineries, railroads, independent companies of one kind or another, is constantly before us. If they are worth having, they are more or less benevolently assimilated; and if they are not worth having, they are permitted to struggle onward to the almost inevitable collapse.

Neither do small holdings in agriculture mean economic independence. As the late census reveals, they mean tenantry. The number of farms operated by owners is decreasing; tenantry is becoming more and more common, and so is salaried management of great estates. Of the 5,739,657 farms of the nation, tenants now operate 2,026,286. Owners operated 74.5 per cent of all farms in 1880, 71.6 per cent in 1890, 64.7 per cent in 1900. The tendency is general, and applies to all sections. Since 1880 tenantry has relatively increased in every State and Territory (no comparative data are given for the Indian Territory) except Arizona, Florida, and New Hampshire. Since 1890 it has increased in Arizona. In twenty years it has increased 49.4 per cent in Florida, though the unloading of “orange groves” and other tropical paradises on the too susceptible Northerner has increased ownership by a slightly greater ratio; while in New Hampshire, where 2857 farms have been given up in the last twenty years, tenantry has decreased by but five-tenths of 1 per cent since 1890, and but six-tenths of 1 per cent since 1880.

So, too, with petty industries and the small retailers. M. Emile Vandervelde, in his sterling work, “Collectivism and Industrial Evolution,” has well shown how “small trade is the special refuge of the cripples of capitalism.” It is the particular refuge “of all who prefer, in place of the hard labor of production, the scanty gleaning of the middleman, or who, no longer finding a sufficient revenue in industry or farming, desire to add a string to their bow by opening a little shop.” But it would be a mistake, he continues, to suppose that these miniature establishments, which the census officials characterize as distinct enterprises, can be generally regarded as the personal property of those who carry them on. “A great number of them, and a number constantly increasing, as capitalism develops, have only a phantom of independence, and are really in the hands of a few great money lenders, manufacturers, or merchants.”

Though M. Vandervelde argues on the basis of these phenomena as observed in Belgium, France, Germany, and England, the same conclusions are applicable in the United States. Our national census figures are practically useless as illuminators on the subject, and one must get his data from the observation or investigation of himself or others. It is generally known that small industries the product of which is more or less ingenious or artistic manage to survive; that those the product of which is common or usual are sooner or later extinguished; and that the petty retailers represent so many heterogeneous elements that it is impossible to predicate anything of them as a class. Of these latter there is a moderate number who, by furnishing a needful social service, make profits; there is a large and constantly changing number who, through ease of credit, manage to obtain stock without capital, and who almost invariably succumb; there is then a larger number whose little shops are run by women and children, the husbands and fathers working at some trade or office job, and hopefully expending their weekly earnings in the vain attempt to “build up a business”; finally, there is a class, the numbers and relative importance of which it is impossible to estimate, whose businesses are owned, directly or indirectly, by other men or by companies.

V

Many of these so-called independent concerns find it possible, and some of them find it fairly profitable, to continue. But the more the large combinations wax in power, the greater is the subordination of the small concerns. An increasing constraint characterizes all their efforts. They are more closely confined to particular activities and to local territories, their bounds being dictated and enforced by the pressure of the combinations. The petty tradesmen and producers are thus an economically dependent class. Equally subordinate – and for the most part subservient – are the owners of small and moderate holdings in the trusts. The larger holdings – often the single largest holding – determine what shall be done. Generally, too, the petty investors are acquiescent to the will of the Big Men. But occasionally, as in the case of the transfer of the Metropolitan Street Railway stock, they rebel, and it becomes necessary to suppress them. At the meeting which determined this action, the protesting minority were emphatically ordered to “shut up”; when they still objected, the presiding officer declared, “We will vote first; you can discuss the matter afterward,” and the vote was promptly taken. The head of an American corporation, moreover, is often an absolute ruler, who determines not only the policy of the enterprise, but the personnel of the board of directors. It was a naïve letter which a well-known New York financier recently wrote to his “board of directors” on the occasion of his retirement from the presidency of a great trust company in favor of a retiring Cabinet minister. He had been looking about, he explained, for some time for a competent successor. Now he had found him and had chosen him. Of course the formal action of the board would be a welcome detail; and, equally a matter of course, it was promptly given. One of the copper kings recently testified in a legal action that he “didn’t want to call the board of directors together to obtain authority to buy adjacent properties.” He went ahead, did what he pleased, and let the board discuss the matter afterward. If there was ever so much as a question about it, it was but a profitless interference.

VI

The tendencies thus make, on the one hand, toward the centralization of vast power in the hands of a few men – the morganization of industry, as it were – and, on the other, toward a vast increase in the number of those who compose the economically dependent classes. The latter number is already stupendous. The laborers and mechanics were long ago brought under the yoke through their divorcement from the land and the application of steam to factory operation. They are economically unfree except in so far as their organizations make possible a collective bargaining for wages and hours. The growth of commerce raised up an enormous class of clerks and helpers, perhaps the most dependent class in the community. The growth and partial diffusion of wealth has in fifty years largely altered the character of our domestic service and increased the number of servants many fold. The professions, too, have felt the change. Behind many of our important newspapers are private commercial interests which dictate their general policy, if not, as is frequently the case, their particular attitude upon every public question; while the race for endowments made by the greater number of the churches and by all colleges except a few State-supported ones, compels a cautious regard on the part of synod and faculty for the wishes, the views, and the prejudices of men of wealth. To this growing deference of preacher, teacher, and editor is added that of two yet more important classes, – the makers and the interpreters of law. The record of legislation and judicial interpretation regarding slavery previous to the Civil War has been paralleled, if not surpassed, in recent years by the record of legislatures and courts in matters relating to the lives and health of manual workers, especially in such matters as employers’ liability and factory inspection. Thus, with a great addition to the number of subordinate classes, with a tremendous increase of their individual components, and with a corresponding growth of power in the hands of a few score magnates, there is needed little further to make up a socio-economic status that contains all the essentials of a renascent Feudalism.

CHAPTER III

Our Magnates