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Problems in American Democracy

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Title: Problems in American Democracy

Author: Thames Williamson


        
Release date: September 1, 2004 [eBook #6460]
                Most recently updated: December 29, 2020

Language: English

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*** START OF THE PROJECT GUTENBERG EBOOK PROBLEMS IN AMERICAN DEMOCRACY ***




Etext prepared by Scott Pfenninger, Charles Franks and the Online
Distributed Proofreading Team.



PROBLEMS IN AMERICAN DEMOCRACY

BY

THAMES ROSS WILLIAMSON

ASSISTANT PROFESSOR OF ECONOMICS AND SOCIOLOGY IN SMITH COLLEGE;
EDITOR OF "READINGS IN AMERICAN DEMOCRACY."


_Problems are the growing pains of civilization, offering
opportunities for personal achievement and pointing the way to
national progress._





TO

My Mother

WHOSE NAME APPEARS IN NO HALL OF FAME, BUT WHOSE LIFE IS AN UNBROKEN
RECORD OF SERVICE TO HER HOME AND TO HER COUNTRY [Blank Page]





PREFACE

There is an increasing demand for a textbook which will bring the
student into direct contact with the great current issues of American
life, and which will afford practical training to those who soon must
grapple with the economic, social, and political problems of our own
time. It is with the hope of meeting such a demand that this text has
been prepared.

The plan of the book calls for a word of explanation. It is poor
pedagogy to expect the student to attack the defects of American life,
and at the same time to place in his hands a book which deals
predominantly with the mechanism of government. As well send a boy to
a hardware store to buy tools before he is told whether he is to make
a mouse-trap or a boat. Furthermore, to spend much more time on the
mechanism of government than on the actual problems of democracy is a
mistake in emphasis. Government is a means, not an end. It is a tool
by means of which we attack and solve our problems.

Therefore the student of this text begins, not with the mechanism of
government, but with the historical background of American democracy,
its origin, development, and promise for the future. Following this is
a brief survey of the economic life of the nation, because that
economic life constitutes the fundamental basis of our problems.
Considerable space has been devoted to a problem growing directly out
of economic conditions, _i.e._ the question of social justice or
industrial reform. This is the most pressing question before any
modern people, but strangely enough one which heretofore has been
neglected by our schools.

Because they tend to arise primarily from a bad economic situation,
such social problems as industrial relations, health in industry, and
immigration are next considered. From social problems the text passes
to the economic and social functions of government, and thence to the
question of making government effective. The mechanism of government
has been placed last, and for the reason already given, _i.e._ because
a knowledge of the framework of government is valuable only after the
citizen knows something of the needs which that mechanism must be made
to fill.

It has not been easy to compress into a single volume the most
important of our national problems. Obviously, a rigid selection has
been necessary. In this selection the aim has been to discuss the more
important issues of American life, whether economic, social, or purely
political. In dealing with these issues, the attempt has been made to
keep in mind the student's previous preparation; on the other hand,
the civic demands which the future will make upon him have not been
ignored. Some of the problems are difficult, but they are also of
vital importance. Very shortly the student will be confronted, in his
everyday activities, with such puzzling matters as socialism, the
control of immigration, and taxation reform. If the school does not
prepare him to grapple with these questions intelligently, he can only
partially fulfill the obligations of citizenship.

Throughout the text the aim has been to go directly to the heart of
the problem under consideration. The student is not burdened with a
mass of data which would prove confusing, and which would be out of
date before he is out of school. Instead, an effort has been made to
outline, first the essential nature of the problem, and second the
fundamental principles which affect its solution. Care has been taken
to cultivate the problem attitude, and to encourage the spirit of
independent investigation and open-minded judgment on the part of the
student.

It goes without saying that the success of this book will depend
largely upon the use which the teacher makes of it. The text aims to
supply the basic facts and the fundamental principles involved in
specific problems, but the teacher must interpret many of those facts
and principles, and ought, in addition, to furnish illustrative
material. The book is not intended to be an encyclopedia, but rather a
suggestive guide.

The text covers the fundamentals of three distinct fields: economics,
sociology, and government. Sufficient reference and topic work is
offered to enable teachers to expand the text along particular lines.
Thus Part II might serve as a nucleus around which to build up a
special course in economics, while Part III would serve as a basis for
a similar course in applied sociology, if for some reason it were not
feasible to take up other parts of the book.

Though the text is the result of the co÷perative efforts of a
considerable number of specialists, its treatment of the problems of
American life is neither dogmatic nor arbitrary. The effort has been
to treat all of our problems sanely and hopefully, but at the same
time to make it clear that many of these questions are still unsettled
and the best method of disposing of them is yet hotly debated. This
fact has strongly influenced the manner in which the problems have
been treated.


TOPICS AND READINGS

Following each chapter are suggestions for work to supplement the
text. These suggestions are of six kinds, and are intended to meet a
variety of needs.

A number of easy questions on the text is first supplied.

Following these is a number of required readings to supplement each
chapter of the text. The student may be asked to read a single chapter
from Williamson's _Readings in American Democracy_, collected and
arranged so as to furnish in compact form and in a single volume
supplementary material which otherwise the teacher would have to find
in a number of separate books. In case the use of the _Readings_ is
not feasible, some or all of the alternative required readings may be
available.

The required readings are followed by a number of questions thereon.
Questions on the material contained in Williamson's _Readings in
American Democracy_ will be found at the end of each chapter in that
volume; questions on the required readings cited as alternative to
this volume will be found at the end of each chapter in the text.

Topic work is provided in two groups. Topics in the first group form a
link between the text and the everyday experience of the student on
the one hand, and between the activities of the student's local
community and national problems on the other. The student is called
upon, for example, to investigate the attitude of the local press
toward controversial questions, or to examine the administration of
local charitable relief. Topic work of this sort not only quickens the
interest of the student, but it encourages original investigation and
independent thought. It lets the student know what is going on in his
community, and it informs individuals and institutions beyond the
school that this agency is beginning to connect with the problems of
the municipality, state, and nation. This sort of topic work also
allows the student to test the accuracy of the text, and to interpret
local conditions in the light of broad, national tendencies.

The second group of topics contains material for report work. In the
case of practically all of these topics, the student is referred
specifically to books and other publications.

Beginning with Chapter XVIII of the text, the topics are followed by a
series of questions for classroom discussion. Some of these may be
turned into classroom debates. Others allow the student to challenge
statements in the text. A few of these questions have never been
satisfactorily answered by anyone, yet the student must face them in
the world outside the school, and it cannot be time wasted to
understand their content now.


ACKNOWLEDGMENTS

In the preparation of this text the author has received valuable
assistance from a number of sources. Though such assistance in no way
diminishes his responsibility for the shortcomings of the book, the
author desires here to acknowledge the aid extended him.

The entire manuscript has been carefully worked over and criticized by
Clarence D. Kingsley, Chairman of the Commission on the Reorganization
of Secondary Education. Payson Smith, Commissioner of Education for
the State of Massachusetts offered valuable suggestions in connection
with certain parts of the manuscript. The thanks of the author are
also due to L. L. Jackson Assistant Commissioner of Education for the
State of New Jersey.

Invaluable aid has been received from numerous members of the faculty
of Harvard University. Parts of the text were read and criticized by
A. Lawrence Lowell, President; Roscoe Pound, Dean of the Law School;
and Paul H. Hanus, Dean of the Graduate School of Education.
Professors Edward Channing and F. J. Turner, and Dr. Marcus L. Hanson
offered valuable suggestions in connection with the historical
chapters.

In the Department of Economics, helpful criticisms were contributed by
Professors F. W. Taussig, T. N. Carver, O. M. W. Sprague, C. J.
Bullock, W. Z. Ripley, and E. E. Lincoln; and by Dr. E. A. Monroe and
Dr. Mixter.

Various chapters dealing with social problems were read and criticized
by Professors Richard Cabot, James Ford, R. F. Foerster, and Dr. Niles
Carpenter of the Department of Socials Ethics, as well as by Dr. John
M. Brewer of the Department of Education. Substantial aid was received
from Professors W. B. Munro, A. B. Hart, and A. N. Holcombe; and from
Dr. A. C. Hanford, in the preparation of the chapters on political
problems.

Professor Edwin R. A. Seligman of the Department of Economics, and
Professor Lindsay Rogers of the Department of Government, in Columbia
University, contributed helpful suggestions.

Professor Irving Fisher of Yale College read and criticized some of
the material on economic subjects. Professor John L. Silberling at
Dartmouth College went over the chapters dealing with the economic
problems and pointed out numerous opportunities for their improvement.

Professor Frederick A. Cleveland of Boston University read the
chapters on political problems. Professor Abbott P. Usher of the
Department of Economic History helped with several of the chapters,
while Professor Ernest R. Groves of the same institution kindly
criticized the chapter on Rural Life.

Henry Lefavour, President of Simmons College, and Sara H. Stites, Dean
of the same institution, read various of the chapters on economic and
social problems.

Stuart Queen, Director of the Boston School for Social Workers, read
the chapters on social problems, and strengthened especially the
chapter on Dependency.

At Smith College, the author is indebted to several of his colleagues,
especially, perhaps, to Professors J. S. Basset and Sidney B. Fay of
the Department of History, and to Professors Esther Lowenthal, Julius
Drachsler, Harriette M. Dilla, and to Miss McMasters, of the
Department of Economics and Sociology.

At Amherst College the author is under great obligations to Professor
J. W. Crook of the Department of Economics, and to Dr. John M. Gaus of
the Department of Government.

At the Massachusetts Agricultural College the author is indebted to
Kenyon L. Butterfield, President, and to Professor Newell L. Sims, for
help on the chapters dealing with social problems.

A number of teachers in the West kindly helped with various portions
of the book. At the University of Wisconsin the author is under
obligations to Professors John R. Commons and Donald D. Lescohier of
the Department of Economics.

A. S. Roberts of the University of Illinois read various of the
historical chapters.

At the University of Iowa, the author is especially grateful for the
help of Professor F. E. Horack of the Department of Government.

Professor Charles Ellwood of the University of Missouri read and
criticized the Chapter on the Family.

Especially valuable were the suggestions which Professor James E. Le
Rossignol of the University of Nebraska offered with respect to the
Chapters on Socialism.

At Leland Stanford University the author acknowledges his obligations
to Professor Eliot Jones of the Department of Economics.

In the United States Department of State, the author is indebted to
Arthur N. Young for a critical reading of the Chapter on Single Tax.

In the United States Department of Labor, the author is under
obligations to John B. Andrews for many suggestions on the Chapter on
Industrial Relations.

Gifford Pinchot, President of the National Conservation Association,
kindly read and criticized the Chapter on Conservation.

Edward R. Johnstone, Superintendent of the Training School at
Vineland, N. J., kindly read and criticized several of the chapters on
social problems.

Edward T. Devine of New York City offered valuable suggestions with
regard to the Chapter on Dependency.

Owen R. Lovejoy, Secretary of the National Child Labor Committee,
strengthened the Chapter on Health in Industry.

The Chapter on Crime and Correction was notably improved by the
suggestions of Reginald Heber Smith, member of the Massachusetts Bar,
and author of the admirable _Justice and the Poor._

J. P. Warbasse, President of the Co÷perative League of America, went
over the Chapter on Profit Sharing and Co÷peration painstakingly.

The Chapter on the Negro was criticized helpfully by Dr. W. E. B.
DuBois, Editor of the _Crisis._

W. M. Steuart, Director of the United States Census, kindly supplied
advance figures on the 1920 Census.

The author is also indebted to Houghton Mifflin Company, Ginn and
Company, and the Macmillan Company, either for advance information on
certain of their new books, or for permission slightly to adapt some
of the material appearing in books copyrighted by them.

Lastly, the author is grateful to his wife for valuable assistance in
correcting the proof.

THAMES ROSS WILLIAMSON.

_Cambridge, Mass._

February 7, 1922.





CONTENTS


PART I--FOUNDATIONS IN AMERICAN DEMOCRACY


CHAPTER

      I. The Background of American Democracy

     II. The Origin of American Democracy

    III. The Development of American Democracy

     IV. Essentials of American Constitutional Government

      V. The Problems of American Democracy


PART II--AMERICAN ECONOMIC PROBLEMS


A. ECONOMICS OF AMERICAN INDUSTRY

     VI. The Nature of American Industry

    VII. What is Meant by Production

   VIII. Exchanging the Products of Industry

     IX. Distributing the Income of Industry

      X. Bases of the Capitalistic System


B. PROGRAMS OF INDUSTRIAL REFORM

     XI. Single Tax

    XII. Profit Sharing and Co÷peration

   XIII. The General Nature of Socialism

    XIV. Militant Socialism: The I. W. W.

     XV. Militant Socialism: The Bolshevists

    XVI. The Case Against Socialism

   XVII. A Democratic Program of Industrial Reform


PART III--AMERICAN SOCIAL PROBLEMS


  XVIII. Industrial Relations

    XIX. Health in Industry

     XX. Immigration and Assimilation

    XXI. Crime and Correction

   XXII. The Negro

  XXIII. The Family

   XXIV. Dependency: Its Relief and Prevention

    XXV. Rural Life

   XXVI. Education


PART IV--AMERICAN POLITICAL PROBLEMS


A. SOME ECONOMIC FUNCTIONS OF GOVERNMENT

  XXVII. Public Interest in Business: Regulation

 XXVIII. Public Interest in Business Ownership

   XXIX. The Tariff

    XXX. Conservation

   XXXI. Credit and Banking

  XXXII. Taxation


B. MAKING GOVERNMENT EFFECTIVE

 XXXIII. Who Shall Share in Government

  XXXIV. The Political Party

   XXXV. Choosing the Agents of Government

  XXXVI. Honesty and Efficiency in Office

 XXXVII. The Extension of Popular Control

XXXVIII. Public Opinion


PART V--THE MECHANISM OF GOVERNMENT


A. THE FEDERAL GOVERNMENT

  XXXIX. The Federal System of Government

     XL. The President of the United States

    XLI. The National Administration

   XLIL. Nature and Powers of Congress

  XLIII. Congress in Action

   XLIV. The Federal Courts

B. STATE AND LOCAL GOVERNMENT

    XLV. Constitutional Basis of State Government

   XLVI. The State Executive

  XLVII. The State Legislature

 XLVIII. The State Courts

   XLIX. Municipal Government

      L. Rural Local Government

         Bibliography

         Appendix

         The Constitution of the United States

         Index





PROBLEMS IN AMERICAN DEMOCRACY





PART I--FOUNDATIONS IN AMERICAN DEMOCRACY


CHAPTER I

THE BACKGROUND OF AMERICAN DEMOCRACY


1. THE MEANING OF NATIONAL GREATNESS.--We apply the term greatness to
nations that have made substantial contributions to civilization. By
civilization is meant a well-rounded and highly developed culture, or,
to say the same thing in different words, an advanced state of
material and social well-being.

Civilization is so vast and so many-sided that it may receive
contributions in very diverse forms. The invention of the hieroglyphic
system of writing is among the leading achievements of ancient Egypt,
but the art and literature of Greece have been no less conspicuous in
the onward sweep of human progress. The promotion of the science of
navigation by the Phoenicians, and the development of law and
architecture by Rome, illustrate a few of the forms in which peoples
may confer marked benefits upon the world. The advancement of music
and painting by Italy, France, and other European nations, and the
application and expansion of the idea of parliamentary government by
England, are further examples of ways in which nations may earn for
themselves the title of greatness.

2. THE CONDITIONS OF NATIONAL GREATNESS.--In order that a nation may
become great, _i.e._ make some distinct contribution to civilization,
two conditions must be fulfilled.

The first condition of national greatness is that the land under that
nation's control must be encouraging to man's honest, helpful efforts.
[Footnote: As used in this chapter the term "land" is held to include
not only such natural resources as soil, minerals, forests, and bodies
of water, but climate as well.] The vigorous Scandinavians have made
great advances in inhospitable Iceland and Greenland, the French have
reclaimed an important section of Algeria, and the British have worked
wonders with some of the barren parts of Australia; nevertheless, it
is with great difficulty that prosperous communities are developed in
lands relatively barren of natural resources, or unusually severe in
climate.

A high and stable civilization has rarely arisen in the tropics,
because there the overabundance of Nature renders sustained work
unnecessary, while the hot, enervating climate tends to destroy
initiative and ambition. It is no accident that the greatest nations
of modern times are located chiefly within the stimulating temperate
zones, where Nature is richly endowed, but where, too, her treasures
are rarely bestowed upon those who do not struggle consistently for
them.

The second condition of national greatness is an intelligent and
industrious population, willing to abide by the law, and devoted to
the building of homes. The combination of an unpromising land and an
inferior population effectually prevents the rise of a high
civilization. And just as the choicest of men can do relatively little
in an unfriendly land, so the most promising of countries may be
despoiled or temporarily ruined by a slothful or lawless population.

From the standpoint of civilization, the best results are obtained
when a virile and law-abiding people exercise control over a land rich
in natural resources and possessed of a stimulating climate. France
and Great Britain in Europe, and Canada and the United States in North
America, are examples of great nations which have been built up in
such lands and by such peoples.

3. THE ATTRACTIVENESS OF NORTH AMERICA.--It will be interesting to
examine North America in the light of the two conditions of national
greatness discussed in the preceding section. We may note, first of
all, that by far the greater part of the territory now comprising the
United States and Canada is distinctly favorable to settlement. This
territory lies almost entirely within the temperate zone: it has
unattractive spots, but in general it is neither so barren of
resources as to discourage the home-maker, nor so tropical in its
abundance as to reward him without his putting forth considerable
effort. Particularly within the bounds of the United States is a well-
balanced national life encouraged by the diversity of soils and the
wide variety of climate. [Footnote: For a fuller discussion of the
natural resources of the United States, see Chapter VI.] Certainly the
continent of North America fulfills the first condition of national
greatness.

4. THE COMING OF THE EUROPEAN.--The discovery of America in 1492
opened a new era in world history. The nations of western Europe were
disappointed when their earlier explorers found the way to Cathay
blocked by a new land-mass, but the Spanish discovery of treasure in
Mexico and South America soon turned disappointment into keen
interest. No magic palaces or spice islands were found, but there were
revealed two virgin continents inviting colonial expansion on a scale
previously unknown. Of the European powers which at various times laid
claim to parts of the New World, Spain, France, Holland, and England
occupy significant positions in the background of American democracy.
We may briefly notice the influence of each of these four powers upon
America.

5. SPAIN.--Though the Spanish were the first in the field, the motives
of the colonists limited their ultimate success in the new land. The
earlier Spaniards were missionaries and treasure-seekers, rather than
home builders and artisans. The early discovery of great quantities of
gold and silver had the effect of encouraging the continued search for
treasure. In this treasure-quest, often fruitless, the Spanish
practically confined themselves to Mexico and the region to the south.
In these areas they did valuable work in Christianizing and educating
the natives, but little industrial progress was made. Except for the
missionary work of the Spanish, their earlier colonization was largely
transient and engaged in for the purpose of exploitation.

6. FRANCE.--France disputed the claim of Spain to North America soon
after the opening of the sixteenth century. The French attempted to
settle in Florida and in South Carolina, but the opposition of the
near-by Spanish forced the newcomers to leave. In 1524 Verrazano
explored the North Atlantic coast for the French, and ten years later
Cartier sailed up the St. Lawrence and founded the claim of France to
that section of the New World.

Following the example of Spain, France dispatched missionaries to the
New World to convert the Indians. Soldiers and trappers were sent out
to develop the valuable fur trade by the establishment of widely
separated forts and trading posts. But the French settlers had no
popular lawmaking bodies, being completely under the power of the
king. Only along the St. Lawrence, where agricultural colonies were
planted, did the French really attach themselves to the soil.
Elsewhere there were few French women and therefore few normal French
homes, and when in 1763 all of the French possessions east of the
Mississippi were ceded to England, it was largely true that the French
colonies had not yet taken root in the country. Infinite courage,
devotion, and self-sacrifice were ultimately wasted, largely because
of the lack of homes, the absence of self-government, and the failure
to develop an industrial basis of colonization.

7. HOLLAND.--The Dutch became aware of the commercial possibilities of
the New World when in 1609 Henry Hudson discovered the river which
bears his name. Trading posts were soon established in the
neighborhood, and in 1621 the West India Company was given full
authority to plant colonies in New Netherland. A brisk trade in furs
developed, but though the Company grew rich, the colonists were not
satisfied. The agriculturists along the Hudson had the benefit of a
fertile soil and a genial climate, but they operated their farms under
a feudal land system which allowed an overlord to take most of their
surplus produce. Moreover, the Dutch governors were autocratic, and
the settlers had little voice in the government of the colony. Loyalty
to Holland waned as the Dutch saw their English neighbors thriving
under less restrictive laws and a more generous land system, so that
when in 1664 the colony passed into the possession of the English, the
majority of the settlers welcomed the change.

8. ENGLAND.--The Spanish had been in the New World a century before
the English made any appreciable impression upon the continent of
North America. In 1583 Sir Humphrey Gilbert had made an unsuccessful
attempt to found a colony on the coast of Newfoundland, and a few
years later Sir Walter Raleigh's venture at Roanoke Island proved
equally disastrous. Colonization was retarded until 1588, in which
year England's defeat of the Spanish Armada destroyed the sea power of
her most formidable rival. The English may be said to have made
serious and consistent attempts at colonization only after this event.

Like France, England desired to set herself up as a successful
colonizing rival of Spain. Impelled by this motive, the earlier
English adventurers sought treasure rather than homes. But the high
hopes of the early English joint stock companies were not justified.
Those who had looked to America for treasure were disappointed: no
gold was forthcoming, and such groups as the Jamestown settlers of
1607 very nearly perished before they learned that America's treasure-
house could be unlocked only by hard work. In spite of heavy
investments and repeated attempts at colonization, these first
ventures were largely failures.

9. THE COMING OF THE HOME-MAKER.--It may truly be said that the seeds
of national greatness were not planted in America until home-making
succeeded exploitation by governments and joint stock companies. Home-
making received little or no encouragement in the early Spanish,
French, and Dutch colonies. Almost from the first, England allowed her
colonies a large measure of self-government, but it is significant
that these colonies made little progress so long as they were
dominated by joint stock companies intent upon exploitation. It was
only when individuals, and groups of individuals, settled
independently of the companies that the colonies began to thrive. The
first really tenacious settlers on the Atlantic seaboard were groups
of families who were willing to brave the dangers of an unknown land
for the sake of religious freedom, economic independence, and a large
share of self-government. It was with the coming of these people that
our second condition of national greatness was fulfilled.

10. GROWTH OF THE ENGLISH COLONIES.--The English annexation of New
Netherland in 1664, and the concessions of the French in 1763, left
the English in undisputed possession of the greater part of the
Atlantic seaboard. The English colonies in this area grew with
astonishing rapidity. Cheap land, religious freedom, and the privilege
of self-government attracted settlers from all parts of northern
Europe. At the close of the seventeenth century there were 260,000
English subjects in North America; in 1750 there were approximately
1,000,000; and in 1775 there were probably 3,000,000.

Although in most sections the dominant element was of English
extraction, other nationalities contributed to the population. Along
the Delaware, Swedes were interspersed with the English, while in
Pennsylvania there were large groups of Germans. Numerous Dutch
settlers had continued to live along the Hudson after New Netherland
had passed into English hands. Some of the most frugal and industrious
of the settlers of Georgia and South Carolina were French Huguenots,
while along the seaboard and inland the Scotch-Irish were found
scatteringly in agriculture and trade. Such was the composition of the
people who were destined to begin an unexampled experiment in
democracy, an experiment upon the successful termination of which
rests our chief claim to national greatness.


QUESTIONS ON THE TEXT

1. What is meant by civilization?

2. What two conditions must be fulfilled in order that a nation may
become great?

3. In what way does America fulfill the first condition?

4. Discuss the character of the early Spanish colonization.

5. What were the chief reasons for the failure of the French in
America?

6. What were the chief defects of the Dutch colonial system in
America?

7. Compare the earlier English colonization with that of Spain,
France, and Holland.

8. When were the seeds of national greatness planted in America?

9. Who were the first really tenacious settlers on the Atlantic
seaboard?

10. Outline the growth of the English colonies.

11. Upon what does our chief claim to national greatness depend?


REQUIRED READINGS

1. Williamson, _Readings in American Democracy,_ chapter i.

Or all of the following:

2. Bogart, _Economic History of the United States,_ chapter ii.

3. Coman, _Industrial History of the United States,_ chapter i.

4. Huntington and Gushing, _Principles of Human Geography,_ chapters i
and xii.

5. Smith, _Commerce and Industry,_ introduction.


QUESTIONS ON THE REQUIRED READINGS

1. Discuss the statement, "Civilization is a product of adversity."
(Smith, page 2.)

2. What is the effect of tropic abundance upon civilization? (Smith,
page 2.)

3. What is the relation of efficiency to climate? (Huntington and
Cushing, page 6.)

4. In what way is civilization related to density of population?
(Huntington and Cushing, page 10.)

5. What is an ideal climate, and where is such a climate found?
(Huntington and Cushing, page 254.)

6. How does national progress depend upon beasts of burden? (Smith,
page 8.)

7. Name some of the political motives of colonization in America.
(Bogart, pages 29-30.)

8. Name the chief religious motives of colonization. (Bogart, page
30.)

9. What were the chief economic motives of colonization? (Bogart,
pages 31-34.)

10. Why did the English finally prevail in the struggle for the
Atlantic seaboard? (Coman, pages 19-21.)


TOPICS FOR INVESTIGATION AND REPORT

I

1. Check up your own experience carefully in order to determine during
what season of the year you work most effectively. What light does
your answer throw upon Topic 5?

2. To what extent is the climate of your section favorable to an
energetic life? To what extent, if to any, is it discouraging to
initiative and ambition?

3. Trace the influence of the geography of your section upon the
economic life of your community.

4. The nature of civilization.


II

5. Relation of civilization to climate. (Huntington, _Civilization and
Climate,_ pages 148-182.)

6. The relation of cheap food to the growth of population. (Carver,
_Sociology and Social Progress,_ pages 235-243.)

7. The effect of desert life upon health and spirits. (Carver,
_Sociology and Social Progress,_ pages 273-275.)

8. Effect of the climate of North America upon persons of European
descent. (Bullock, _Selected Readings in Economics,_ pages 1-22.)

9. The influence of the Appalachian barrier upon American colonial
history. (Semple, _American History and Its Geographic Conditions_
chapter iii.)

10. The Spanish in America. (Consult any standard history text.)

11. The French in America. (Consult any standard history text.)

12. The Dutch in America. (Consult any standard history text.)

13. The English in America. (Consult any standard history text.)

14. The qualities of an ideal people. (Carver, _Elementary Economics,_
chapter iv.)




CHAPTER II

THE ORIGIN OF AMERICAN DEMOCRACY


11. THE NATURE OF GOVERNMENT.--A government may be defined as an
agency through which the purposes of a state or nation are formulated
and carried out. This agency develops where men live in groups. One of
the chief objects of government is to adjust individual interests, or,
to say the same thing in slightly different words, to control members
of the group in their social relations.

Where groups are small and culture is at a low level, government may
consist in little more than the arbitrary rules of a self-appointed
chieftain. From this stage there are numerous gradations up to the
great complex governments of the leading nations of to-day. With the
origin and general development of government we are not here
concerned, and we may accordingly confine our attention to those types
of modern government which throw light upon the development of
American democracy.

12. THE ABSOULUTE MONARCHY.--An absolute monarchy may be defined as a
government in which supreme power or sovereignty is lodged in one
individual. This monarch holds his position for life, generally with
hereditary succession. Often the absolute monarchy arose out of the
ancient chieftainship, when, as the result of territorial expansion
and cultural development, the chief of a group of tribes became the
king of a settled and civilized people. The absolute monarchy existed
in most of the countries of Europe previous to the end of the
eighteenth century. In its most extreme form the absolute monarchy
rested upon the claim of the monarch that he ruled by "divine right,"
_i.e.,_ that God had authorized him to rule. France in the era of
Louis XIV is one of the best known examples of a modern nation ruled
by a "divine right" monarch.

13. THE LIMITED MONARCHY.--When a monarch has been restricted in his
powers a limited or constitutional monarchy is said to exist. Almost
always the establishment of a limited monarchy has been preceded by a
series of struggles between king and people. In many cases these
struggles have been precipitated or intensified by the monarch's abuse
of power. A striking example is offered by English history. As the
result of his arbitrary rule, King John was in 1215 obliged to sign
the Magna Charta, by which act he gave up many important powers. The
limits thus set upon the kingly power were affirmed and extended by
the Petition of Right of 1628 and by the Bill of Rights of 1689. A
similar limiting process has gone on in other countries, either by the
framing of constitutions, or by the enlargement of the powers of
legislatures, or by both methods. To-day the absolute monarchy is
practically unknown among civilized nations.

14. THE REPUBLIC.--The republic is a form of government in which
ultimate power or sovereignty resides with the people as a whole
rather than with a single individual. Instead of a monarch there is
generally an elective president, with varying powers. The republic is
a very old form of government, but in the republics of Greece, Rome
and Venice the powers of government were exercised by a class composed
of a small minority of the people. In modern republics a larger
proportion of the adult population participates in government.

A republic may arise in any one of several ways, but most of the
republics of modern times have grown out of monarchical conditions,
either directly or indirectly. Our republic arose as a reaction
against English monarchy, while the French republic came into being as
the result of the destruction of a monarchical government. Most of the
republics of Latin America date from the throwing off of the Spanish
yoke in the first half of the nineteenth century. More recently, the
World War has given rise to a number of European republics, composed
of peoples formerly under the control of monarchical governments.

15. DEMOCRACY AS A POLITICAL IDEA.--The term democracy is derived from
two Greek words which taken together mean "control by the people."
Strictly speaking, democracy is a _form_ of government only where a
small group governs itself directly, _i.e.,_ without making use of the
representative device. This "pure" democracy, such as existed in the
early New England town, becomes a representative democracy, or a
republic, when a greater population and an increasing political
complexity require the people to act through their representatives,
rather than as a body. In the sense that democracy is popular control,
the term democracy may conceivably be applied to any form of
government. The present government of Great Britain, for example, is
technically a limited monarchy, yet the gradual extension of popular
control has made it one of the most democratic governments in the
world. Nevertheless, the modern republic is so generally associated
with the democratic movement that many authorities speak of a
democracy as identical with a republic. For the time being we may use
the term democracy to describe a form of government in which
considerable control is exercised by the people. More briefly,
democracy may be thought of as self-government.

16. WHY DEMOCRACY DEVELOPED IN AMERICA.--There are four reasons why
democracy developed early in America.

The first is to be found in the conditions of pioneer life in the
colonies. The wilderness forced self-government upon the settlers.
Clearing the forests, subduing the Indians, and conquering animal foes
was stern work, which weeded out the indolent and inefficient, and
rewarded the capable and self-reliant. Pioneer conditions did not
encourage a cringing or submissive spirit, but fostered independence
and individualism. The spirit of equality tended to become a dominant
feature of American life, for despite the existence of social classes,
the great majority of the population had to rely for their living upon
their own efforts. Under such conditions self-reliance and self-
government were natural developments.

The selected character of the colonists is a second reason for the
rise of democracy in America. Restless spirits who had chafed under
the restraints of monarchy in Europe, thronged to the new land. Once
here they often found the older American communities intolerant, and
so struck out into the wilderness to found new and, to them, more
democratic colonies. The founding of Rhode Island by Roger Williams,
and the settlement of the Connecticut valley by Thomas Hooker,
illustrate this tendency.

It should be remembered, thirdly, that the English colonists brought
with them very definite ideas as to the rights of man. The concessions
granted by the Magna Charta were made an essential part of their
political philosophy. The belief that all men were born free and
equal, and that government derives its just powers from the consent of
the governed, became prominent in early American politics. Where the
democratic tendencies of the settlers were reinforced by such
traditions, an oppressive government could not last. In Carolina in
1670, for example, an attempt to set up an undemocratic government
failed, and when half a century later a similar attempt was made in
Georgia, the settlers objected so ardently that the founders of the
colony were obliged to grant the privilege of self-government.

A fourth explanation of the rise of democracy in America is that, left
to themselves, the settlers came to feel that self-government was
morally right. Largely removed from the traditions of monarchy, they
soon realized the elemental significance of government. Seeing
government as a device to help people get along together, they
concluded that that government is best which most helps the masses of
the people. The existence of a British monarch was a small factor in
the everyday life of the early settlers, and from this it was a short
step to asserting that his control over them was unjust. Living under
primitive economic conditions, the minds of the people turned
naturally to freely formed agreements as a basis of group action.
Under such conditions democracy appeared to the colonists as moral,
just, and natural.

17. APPLYING THE DEMOCRATIC IDEA.--Partly because of the isolation of
early American life, and partly because England was busy with European
politics, the settlers were left relatively free to work out their
ideas of democracy. The Pilgrims had not yet set foot upon the new
land when they drew up the Mayflower Compact, by the terms of which
they agreed to establish a pure democracy in their new home. In 1639
the inhabitants of three Connecticut towns came together in a mass
meeting, and drew up the Connecticut Fundamental Orders, which many
authorities regard as the first written constitution in this country.
Aside from the fact that the Orders created a small republic in the
heart of the wilderness, they are of importance because they issued
directly from the people, without suggestion from, or direction by,
any outside agency. Elsewhere in New England, too, local self-
government was a spontaneous growth. Usually the settlers grouped
themselves in small, compact communities known as towns, the freemen
coming together in the town meeting for the purpose of passing laws
and electing officials. The town meeting constituted a pure democracy,
in which the freemen governed themselves consciously and directly.

18. SPREAD OF THE REPRESENTATIVE IDEA.--The principle of
representative government appeared very early in English history,
expressing itself most clearly in the houses of Parliament. The
principle was early transplanted to America, for in 1619 we find the
London Company establishing in Virginia a House of Burgesses, the
first representative assembly in the New World. The representative
democracy spread rapidly through the colonies, in many cases replacing
the pure democracy as a form of local government. In Massachusetts
Bay, for example, the population of the colony became so dispersed,
and the complexity of its government so great, that it was necessary
for most freemen to remain at home, and to content themselves with
choosing a small number of individuals to represent their interests.
These representatives gathered in the General Court and transacted the
business of the colony.

19. THE SEPARATION OF POWERS.--As government develops in scope and
complexity, there is a tendency for the agents of government to
specialize in various types of work. A more or less recognizable
separation of the governmental machinery into legislative, executive,
and judicial branches had long been a feature of English government.
Early in the seventeenth century this principle was transferred to the
government of the English colonies in America. There was established
in each colony a legislative branch for the enactment of laws, an
executive branch to see that the laws were enforced, and a judicial
branch for the interpretation of the laws. This separation of
functions was more definite in America than in England because the
jealousy existing between colonial legislature and colonial executive
tended sharply to separate their powers. In America, too, the
judiciary was more clearly an independent branch of government than in
England.

20. THE COLONIES AS SELF-GOVERNING STATES.--It has often been said
that for a considerable period prior to the American Revolution, the
thirteen colonies were in reality self-governing states. For most
practical purposes they were independent, indeed, some American
patriots insisted that they were only nominally subject to England. In
each colony there was an assembly chosen by a restricted number of
voters. This popular assembly championed the cause of the colonists
against the governor, who in most of the colonies was primarily an
agent of the Crown. After the middle of the eighteenth century, the
struggles between assembly and governor increased in number and in
intensity, and victory rested more and more often with the assembly.
[Footnote: For the similarities existing among the various colonial
governments see Chapter XXXIX.]

21. EFFECT OF THE REVOLUTION UPON AMERICAN GOVERNMENTS.--The
Revolution did not greatly affect the character of American
governments. Democracy, at first weak and ill diffused, had been
spreading steadily during the preceding century, and when at last the
break with England came, it found the states trained in self-
government and able to conduct their own affairs. In many cases the
Revolution simply erased the name of the king from documents and
institutions already American in spirit and character. The states
either retained their old charters as constitutions, as in the case of
Connecticut and Rhode Island, or framed new constitutions based upon
the experience of colonial government. The popular legislative
assembly was everywhere retained. The common law of England continued
in force, and the system of courts was retained in practically its
pre-Revolution form. The basis of state government had been laid long
before the Revolution, the new states simply accepting the basic
political principles with which they, as colonies, had long been
familiar. The defeat of English claims was only an incident in the
irresistible progress of American democracy.


QUESTIONS ON THE TEXT

1. What is one of the chief objects of government?

2. What is the essential feature of the absolute monarchy?

3. Give an example of a country once ruled by a "divine right"
monarch.

4. Explain the difference between an absolute and a limited monarchy.

5. What is the distinction between a monarchy and a republic?

6. Name some modern republics and explain their origin.

7. Explain clearly the nature of political democracy, and show its
relation to the monarchy and to the republic.

8. What are the four reasons for the rise of democracy in early
America?

9. Trace the early application of the democratic idea in America.

10. Where in America was the representative principle first applied?

11. Explain the principle of the "separation of powers."

12. To what extent were the colonies self-governing states?

13. Explain the effect of the Revolution upon American governments.


REQUIRED READINGS

1. Williamson, _Readings in American Democracy,_ chapter ii.

Or all of the following:

2. Bryce, _Modern Democracies,_ vol. i, chapters i and xii.

3. Beard, _American Government and Politics,_ chapter i.

4. McLaughlin, _Steps in the Development of American Democracy,_
chapter i.

5. Turner, _The Frontier in American History,_ chapter i.


QUESTIONS ON THE REQUIRED READINGS

1. What was the extent of democracy in the world a century ago?
(Bryce, page 3.)

2. Why is the study of democracy increasingly important? (Bryce, pages
4-5.)

3. What is the fundamental significance of local self-government?
(Bryce, pages 131-133.)

4. In what way has the advance of the frontier meant a steady movement
away from the influence of Europe? (Turner, page 4.)

5. How did the frontier promote individualism? (Turner, page 30.)

6. What intellectual traits are fostered by pioneer life? (Turner,
pages 37-38.)

7. Explain the significance of the Virginia House of Burgesses.
(McLaughlin, pages 11-13.)

8. Discuss the character of the colonial governor. (Beard, pages 3-7.)

9. What were the chief powers of the colonial legislature? (Beard,
page 8.)

10. Describe the colonial judiciary. (Beard, pages 12-14.)

11. What was the extent of the suffrage in colonial times? (Beard,
pages 8-10.)


TOPICS FOR INVESTIGATION AND REPORT

I

1. Illustrate the nature of government by tracing the origin and
development of a club or society of which you are a member, or with
which you are familiar.

2. Early pioneer life in your community, with
particular reference to social and economic conditions. (Consult local
histories, or, where possible, interview an old settler in your
section.)

3. Origin and development of local government in your section.
(Proceed as with Topic 2.)

4. The origin of the first constitution of your State.

5. A classification of the present-day governments of the world on the
basis of their democratic character.


II

6. Genesis of the limited monarchy. (White, _The Making of the English
Constitution,_ pages 253-285.)

7. Origin and development of Parliament. (White, _The Making of the
English Constitution,_ pages 298-322.)

8. Origin and development of the English judiciary. (White, _The
Making of the English Constitution,_ pages 122-252.)

9. Historical evolution of democracy. (Bryce, _Modern Democracies,_
vol. 1, chapter iv.)

10. Theoretical basis of democracy. (Bryce, _Modern Democracies,_ vol.
1, chapter v.)

11. Difficulty of defining the term "democracy." (Bryce, _Modern
Democracies,_ vol. 1, chapter iii.)

12. American political theory before the Revolution. (Beard,
_Readings in American Government and Politics,_ pages 14-16.)

13. Contributions of the West to American Democracy. (Turner, _The
Frontier in American History,_ chapter ix.)

14. Development of the General Court in Massachusetts. (Osgood, _The
American Colonies in the Seventeenth Century,_ vol. i, pages 141-166.)

15. A Boston town meeting. (Beard, _Readings in American Government
and Politics,_ pages 11-13.)

16. Local government in Virginia. (Bruce, _Economic History of
Virginia in the Seventeenth Century,_ vol. ii, chapter xx. Beard,
_Readings in American Government and Politics,_ pages 13-14.)




CHAPTER III

THE DEVELOPMENT OF AMERICAN DEMOCRACY


22. LOCAL VERSUS NATIONAL SPIRIT.--The outbreak of the American
Revolution proved that the colonies were so deeply attached to
democracy that they were willing to fight for it. But the spirit which
animated the Revolution was local, rather than national. The colonial
protests which in 1776 reached their climax in the Declaration of
Independence, had to do almost entirely with the rights of the
colonies as individual states, and with the determination of those
states to defend the principle of self-government. The war created
thirteen practically independent states, among which the spirit of
state sovereignty was much stronger than was the inclination to form
an indissoluble union. The Revolution emphasized local and state
interests rather than intercolonial co÷peration, and however much the
colonists appreciated local democracy in 1776, they had yet to learn
to think in terms of a national patriotism. A brief review of the
attempts at union before 1787 will serve to illustrate this important
point.

23. EARLY ATTEMPTS AT UNION.--The first notable attempt at union was
made in 1643, when Massachusetts Bay, Plymouth, Connecticut, and New
Haven formed a league, chiefly for the purpose of mutual defense. This
league was in force for forty years, and rendered effective service in
the Indian wars.

In 1754 delegates from seven of the colonies met at Albany and adopted
a plan of union proposed by Benjamin Franklin. The plan provided for a
colonial army, the control of public lands, legislation affecting the
general welfare, and the levying of taxes for intercolonial projects.
In America Franklin's plan was regarded with considerable favor, but
it was never given serious consideration by the British Parliament.
The project fell through.

Still later (1765) delegates from nine of the colonies met in the
Stamp Act Congress, for the purpose of drawing up a protest against
the taxation policy of the mother country.

The two continental congresses may also be regarded as steps toward
union. The first of these met in 1774 and concerned itself chiefly
with a declaration of rights and grievances. The second (1775-1781)
assumed revolutionary powers, and, with the consent of the people,
exercised those powers during the greater part of the war period.

24. THE ARTICLES OF CONFEDERATION.--Nothing so clearly illustrates the
sectional feeling of that era as the history of the Articles of
Confederation. The Articles were adopted by the Second Continental
Congress in 1777, but on account of the tardiness with which some of
the states ratified them, they were not put into actual operation
until March 1, 1781. By the terms of the Articles the states yielded
some of their powers, the central government being given the right to
declare war, borrow and coin money, establish post offices, and
otherwise act for the general good. On the other hand, the Articles
declared that "each state retains its sovereignty, freedom and
independence, and every power, jurisdiction, and right which is not by
this federation delegated to the United States."

Thus the new government was a confederation or league of states,
rather than a federal government such as we have to-day. There was no
national executive, and no judiciary. All authority was concentrated
in a one-chambered congress, in which each state was represented by
not fewer than two and not more than seven members. The delegates were
subject to recall by the legislatures of their respective states. Each
state had one vote, which was determined by a majority of the state's
delegates who were present when the vote was taken.

25. DEFECTS OF THE CONFEDERATION GOVERNMENT.--The government
established by the Articles of Confederation had a number of grave
defects. The fundamental difficulty was that the central government
had no real authority or power. The Congress of the Confederation
could reach individuals only through the action of the state
governments, and these it could not coerce. Thus the Congress could
declare war, and make requisitions upon the states for troops, but it
could not enlist a single soldier. It could make laws, but had no
power to enforce them. It could make treaties with foreign
governments, but could not oblige the states to respect those
agreements. The central government could not levy taxes, but was
obliged to accept whatever sums the states chose to contribute. The
Confederation government could not even protect itself, or the states,
against violence. It lacked force, and without the ability to exert
force, a government is a government in name only.

Not only did the central government fail to enlist the respect and
support of the states, but it could not induce the states to respect
or support one another. Congress had no power to regulate either
foreign or domestic commerce, each state being free to control the
commercial activities of its citizens as it saw fit In many cases the
states engaged in trade wars, that is, they levied heavy duties upon
the commerce of one another, or even refused to allow their citizens
to buy goods from, or sell goods to, persons in neighboring states.
Matters calling for unity of action and friendly co÷peration, such as
roads and canals, were ignored or neglected because of interstate
jealousy. Whereas they should have united against the grave dangers of
the period immediately following the war, the states often wasted time
and energy in controversy and strife.

26. FAILURE OF THE CONFEDERATION GOVERNMENT.--The Confederation
government, established in 1781, functioned weakly during the
remaining two years of the war, and then declined rapidly in power and
influence. The defects of the Articles could not be remedied, for
amendment was by unanimous consent only, and on every occasion that an
amendment was proposed, one or more states refused their assent.

According to John Fiske, the five years following the peace of 1783
constituted the most critical period in the history of the American
people. Business was demoralized. Most of the states were issuing
worthless paper money, and several of them passed laws impairing the
obligation of contracts. In a movement known as Shay's Rebellion
(1786-1787), a portion of the debtor class of Massachusetts attempted
to prevent the collection of debts. Paper money depreciated so greatly
that in many places it ceased to pass as currency. The central
government could not raise money to meet its ordinary expenses, and in
1783 Congress was forced to flee Philadelphia to escape the wrath of
some eighty Pennsylvania soldiers whom it could not pay.

Demoralization and civil strife at home were matched by ridicule and
suspicion abroad. Congress could not pay the interest on the national
debt. As early as 1783 our foreign credit was gone. Many European
statesmen scoffed at the American government. France denied the
existence of a general government in America. In England our
diplomatic representatives suffered numerous humiliations. They were
told, for example, that the British would not relinquish the western
forts promised us by the Treaty of Paris until our national government
was able to force the several American states to observe the treaty.

27. OBSTACLES TO UNION.--There are three important reasons why the
states failed to draw together into a firm union before 1787.

In the first place, each state considered itself a sovereign body, and
of governments above and beyond itself it was naturally suspicious.
Many of the Americans had regarded the British government as a super-
government, imposed against the will of the American people, and
maintained in spite of their protests. The Dominion of New England,
which, prior to the adoption of the Articles of Confederation, had
been the nearest approach to union, was recalled with anger and in
fear. This plan, forced upon the Americans in 1686 by the king, united
eight of the colonies under the rule of Governor Andros. The union was
dissolved by the Bloodless Revolution of 1688, but the arbitrary rule
of Andros was long cited by the Americans as proof of the despotic
character of any government beyond that of the individual states.

A second explanation of the failure of the states to unite before 1787
is to be found in the social and economic differences existing among
the states. Most of the inhabitants of New England were grouped in
small, compact communities, and were engaged in shipbuilding and
commerce, rather than in agriculture. There was an aristocratic group,
but most of the people belonged to the middle class, and were simple
and even severe in their tastes. In the middle colonies, on the other
hand, most of the people were small farmers of mixed religious and
racial character. Social classes existed to a considerable extent.
Finally, the South was devoted to large plantations, cultivated by
black slaves. Social lines were sharply drawn, and a genuine
aristocratic class was already well formed.

A third reason for the weakness of the co÷perative spirit among the
states is to be found in the lack of means of transportation and
communication. Travel was mostly confined to natural waterways, or to
rude paths over which horses proceeded with great difficulty. As late
as 1800 it often took a horseman longer to go from Boston to New York
than it now takes to go by rail from New York to San Francisco and
back again. There were no railroads in those days, no telephones, no
telegraph, and practically no postal service. Life was primarily
rural, even on the seacoast. Most interests centered about the local
community, or at farthest, about the colony or state. In many sections
there was little exchange of products or of ideas. From the resulting
isolation there developed a strong feeling of localism or
provincialism. Ignorance and suspicion of intercolonial affairs gave
rise to misunderstandings, and emphasized differences and disputes
which in themselves were unimportant. Thus jealousy and hostility
often sprang up where mutual confidence and co÷peration were sorely
needed.

28. NEGATIVE FORCES FAVORING UNION.--The failure of the Articles of
Confederation is one of the most discouraging chapters in the
development of American democracy. And yet it is an indispensable
chapter, for it demonstrated, far more convincingly than could any
theoretical argument, that there must be one great American nation
rather than thirteen or more unrelated republics. Six years of
practical experience with the Articles of Confederation taught the
absolute necessity of a strong central government. The weaknesses of
the Confederation government constituted the most spectacular of the
forces favoring union in 1787, and yet these forces were negative in
character: the states accepted the Constitution of 1787 not so much
because they were attracted by it, as because they saw little chance
of getting along without it.

29. POSITIVE FORCES FAVORING UNION.--It should be noted, on the other
hand, that for a long period previous to the adoption of the
Constitution of 1787, certain positive forces were impelling the
states toward union. In their Old World homes most of the settlers had
occupied somewhat the same social position, and had been used to
somewhat the same economic conditions. This common background
constituted, in their New World homes, a unifying force of great
importance. Long before 1787, too, the great majority of the settlers
were of English descent, speaking the English language, and, except
for the Roman Catholics of Maryland, professing some form of
Protestantism.

In spite of the numerous jealousies and rivalries among the various
sections of the country, there were at work forces which tended to
break down the spirit of localism or provincialism. Though the
Revolution established thirteen separate states, the war had
encouraged the Americans to feel that they were a single people with a
common destiny. The soldiers of various sections had rubbed elbows
with one another during the French and Indian wars, and during the
Revolution. This had served to encourage a feeling of comradeship
between the inhabitants of different communities. The population of
the country was doubling every twenty years, and groups previously
isolated were coming into contact with one another. Interstate
co÷peration was not only more necessary than ever before, but it was
less difficult to bring about. Highways were being improved, and the
postal service gradually extended, with the result that a more
wholesome social life was made possible.

In an economic sense the American people were increasingly
interdependent. Especially on the frontier many communities were still
economically self-sufficing, but to an increasing extent the
development of commerce and manufacturing was everywhere calling for a
closer co÷peration between various sections of the country. The
Annapolis Convention of 1786, indeed, was called for the purpose of
promoting commercial co÷peration among the states. According to
Professor Beard, the formation of the Federal Constitution itself may
in large measure be traced to the desire throughout the country for
interstate co÷peration in industry and commerce.

30. AMERICAN DEMOCRACY IN 1787.--The constitutional convention of 1787
expanded American democracy from a local idea to a political concept
of national proportions. But though this was an important step
forward, American democracy had not yet been fully developed.
Religious freedom, indeed, had been guaranteed by the Constitution,
but the suffrage was still narrowly restricted. The adoption of the
Constitution was due primarily to negative forces; the full
development of the positive forces, upon which the ultimate integrity
of the union rests, was to be delayed for almost a century. The states
technically abandoned state sovereignty when they accepted the
Constitution of 1787, but not until the Civil War had been won was
permanent union assured. Most important of all, American democracy was
in 1787 only a political concept. There was at that time no suspicion
that democracy was later to be expanded into a philosophy of life,
applicable not only to purely governmental affairs, but to the
individual in his economic and social relations as well.


QUESTIONS ON THE TEXT

1. Distinguish between local and national spirit in the Revolutionary
period.

2. Describe the first notable attempt at union.

3. What plan of union was proposed by Benjamin Franklin in 1754?

4. Name several other early attempts at union.

5. Outline the character of the Articles of Confederation.

6. What were the chief defects of the Confederation government?

7. Describe the failure of the Confederation government.

8. Outline clearly the three important reasons for the failure of the
states to unite before 1787.

9. Explain the phrase, "Negative forces favoring union."

10. To what extent was the constitutional convention of 1787 the
result of positive forces?

11. Explain clearly the statement that in 1787 American democracy had
not yet been fully developed.


REQUIRED READINGS

1. Williamson, _Readings in American Democracy_, chapter iii.

Or all of the following:

2. Becker, _Beginnings of the American People_, chapter v.

3. Fiske, _The Critical Period of American History_, chapter iv.

4. Guitteau, _Government and Politics in the United States_, chapter
xix.

5. McLaughlin, _The Confederation and the Constitution_, chapter xiii.


QUESTIONS ON THE REQUIRED READING

1. In what sense was Benjamin Franklin the first American? (Becker,
pages 190-200.)

2. Describe the commercial warfare carried on by the several states
during the critical period. (Fiske, pages 144-147.)

3. Explain why American credit in Europe failed during the critical
period. (Fiske, pages 155-157.)

4. Describe the attempts to patch up the Confederation government.
(McLaughlin, chapter xiii.)

5. Explain the statement that "division is sometimes the prelude to
more effective union." (Becker, pages 189-191.)

6. What did the Alexandria Conference of 1785 accomplish? (Guitteau,
page 215.)

7. What was the Virginia plan? (Guitteau, page 217.)

8. What was the New Jersey plan? (Guitteau, page 217.)

9. What was the "Great Compromise"? (Guitteau, page 218.)

10. What was the Three-Fifths Compromise? (Guitteau, pages 218-219.)

11. Describe the opposition to the ratification of the Constitution
(Guitteau, pages 222-224.)


TOPICS FOR INVESTIGATION AND REPORT

I

1. Trace the beginnings of railroad transportation in your section,
and describe the effect of improved methods of transportation upon the
ability of different communities in your section to co÷perate with one
another. (Consult local histories.)

2. To what extent does the newspaper help you to understand the
character and ideals of individuals beyond your community?

3. Contrast the telephone and the postal service as influencing the
development of the co÷perative spirit in the city. In rural districts.

4. To what extent would improved methods of transportation and
communication lead to a closer co÷peration between the rural and urban
districts in your state?

5. To what extent has the economic interdependence of different
members of your community led to a better understanding? To a closer
identity of interests?


II

6. Difficulties of travel in colonial times. (Crawford, _Social Life
in Old New England_, chapter _x_.)

7. Postal facilities in the colonial period. (Bogart, _Economic
History of the United States_, pages 82-83.)

8. Diversity of economic interests among the colonies. (Bogart and
Thompson, _Readings in the Economic History of the United States_,
pages 29-42.)

9. Union under the Continental Congresses. (Beard, _American
Government and Politics_, pages 21-25.)

10. The delegates to the Constitutional Convention of 1787.
(McLaughlin, _The Confederation and the Constitution_, pages 187-190.)

11. The work of the Constitutional Convention. (Beard, _American
Government and Politics_, pages 44-53. See also any other standard
text on American history or government.)

12. Madison's criticism of the Articles of Confederation. (Beard,
_Readings in American Government and Politics_, pages 38-43.)

13. Hamilton's plea for a strong national government. (Beard,
_Readings in American Government and Politics_, pages 47-49.)

14. The influence of economic interests upon the Constitution of 1787.
(Beard, _An Economic Interpretation of the Constitution of the United
States_, pages 324-325.)

15. The outlook for American democracy in 1789. (Bryce, _Modern
Democracies_, vol. ii, chapter xxxviii.)




CHAPTER IV

ESSENTIALS OF AMERICAN CONSTITUTIONAL GOVERNMENT


31. THE AIM OF THIS CHAPTER.--The form of government established in
this country by the Constitution of 1787 is known as a republic. A
republic may be defined as a representative democracy, or, in the
popular sense of the term, simply as a democracy. Now, to point out
that a government is democratic does not necessarily mean that it is a
sound government. Granting that self-government is morally right, the
fate of a democracy will depend, partly upon the character of the
people, and partly upon the nature of the governmental machinery
through which that people expresses its will. The proof of democracy
is in its workings. The aim of this chapter is not to pass judgment
upon democracy, but rather to outline the essential characteristics of
American constitutional government. When this background has been
secured we shall be in a position to begin a detailed study of applied
democracy, to point out its merits, to call attention to its defects,
and to consider how and to what extent it may be improved.

32. STRENGTH.--American constitutional government is a strong
government. The weaknesses of the Articles of Confederation were
avoided in framing the Constitution of 1787. Whereas the Confederation
government was really headless, the Constitution of 1787 provided for
a strong executive. The Confederation Congress could not levy taxes,
but the Congress of the United States has adequate powers in this
regard. There can be no recurrence of one of the chief financial
troubles of the Revolutionary period, for at the present time the
several states may neither coin money nor emit bills of credit. The
Federal government has exclusive control of foreign affairs, so that
no state may individually enter into any agreement with a foreign
power. The Federal Constitution is the supreme law of the land, and no
state action may contradict it. Unity has given us strength, and great
crises, such as the Civil War and the World War, have ended by
increasing that strength.

33. THE CHECK AND BALANCE SYSTEM.--A striking characteristic feature
of American constitutional government is the check and balance system.
By this system we mean all those constitutional provisions which
divide and subdivide governmental power among various sets of public
agents. [Footnote: For a fuller discussion of the check and balance
system see Chapter XXXIX.]

This division of powers is threefold. First, there is a division of
power between the Federal government and the governments of the
several states. The states are obliged to act in concert on most
questions involving the nation as a whole, but the Federal
Constitution safeguards the rights of the states by reserving to them
all powers not specifically delegated to the Federal government.
Second, in both Federal and state governments, power is still further
distributed among the executive, legislative, and judicial branches in
such a way that each branch constitutes a check upon the other two.
Third, in both Federal and state governments there is a division of
power within each of the three branches of government. Thus both the
President of the United States and the governors of the various states
are at least partially controlled by subordinate executive officials,
while in the legislative branch of both Federal and state governments
the upper and lower houses constitute a check upon one another. In the
case of both Federal and state judicial systems there is a division of
jurisdiction.

34. THE CHECK AND BALANCE SYSTEM SECURES STABILITY.--American
government is not only strong, it is stable. This stability is due
chiefly to the admirable way in which different governmental agents
are balanced against one another. The check and balance system renders
us safe from the danger of anarchy, for though ultimate control is
vested in the people, sufficient powers are entrusted to the
governmental mechanism to protect it against popular passion. The
system likewise protects us against despotism. So long as the
Constitution endures, neither the Federal government nor the
governments of the states may destroy each other. The undue
concentration of political power is likewise rendered difficult by the
division of power between the legislative, executive, and judicial
branches of both Federal and state governments.

The significance of a properly applied check and balance system
appears clearly when we compare our government with that of various
other republics. In many of the ancient republics, for example, the
powers of government were so unequally and so indefinitely divided
that republican government degenerated either to despotism or to
anarchy. Within the last century many Latin-American republics have
modeled their governments after ours, and yet some of these republics
are constantly threatened by either revolution or despotism. The
explanation of this, according to Elihu Root, is that these republics
have adapted our check and balance system so carelessly that they find
it difficult, if not impossible, to maintain a really stable
government. [Footnote: Here we are pointing out the fundamental merits
of the check and balance system; later (Chapters XXXIV, XXXV, and
XXXVI) we shall have occasion to notice some of the disadvantages of
this system.]

35. THE RIGHTS OF THE INDIVIDUAL.--We have not purchased strength and
stability at the expense of personal freedom, for both Federal and
state constitutions specifically safeguard the rights of the
individual. The fundamental guarantees set forth in the Magna Charta,
the Petition of Right, and the Bill of Rights were cherished by the
American colonists, and in 1791 they formed the basis of the first ten
Amendments to the Federal Constitution. Provisions similarly designed
to safeguard individual rights are found in the constitution of every
state in the Union. [Footnote: For an enumeration of these rights, see
the first ten Amendments to the Federal Constitution, Appendix.
Consult also the Bill of Rights in the constitution of your state.]
From the beginning of our national history a fundamental principle of
American government has been to allow the individual as much freedom
of thought and action as is compatible with the general welfare.

36. CONTROL BY THE PEOPLE.--Under American constitutional government,
sovereignty resides with the people as a whole, though the people act
through their chosen representatives. There is no power in American
government beyond that created or permitted by the people themselves.
The suffrage, so narrowly restricted in the eighteenth century, has
since widened to include the great majority of adults, both male and
female. Elections are frequent, so that ill-chosen officials may not
long abuse their position. The Initiative, the Referendum and the
Recall are methods of popular control which in many sections are
spreading. Constitutional amendment in the United States is not easy;
on the other hand, if any considerable percentage of the voters evince
a sustained desire for change, an amendment is the normal
result. [Footnote: In Part IV of the text we shall consider the
dangers of an over-extension of popular control; here it is only
necessary to point out that American government is essentially
government by the people.]

37. EFFICIENCY.--The division of functions between the Federal and
state governments on the one hand, and between state and local
governments on the other, provides a solid foundation for the
economical administration of government.

The Federal government attends to most matters which are of national
importance, and which cannot properly be looked after by the states
individually. For example, foreign relations, the postal service, and
the coinage of money, are Federal functions. The separation of Federal
and state functions is not always clear, but such matters as
contracts, property rights, crime, and education are probably best
administered by the state. There is, similarly, no sharp dividing line
between the functions of state and local governments, but at present
it appears that the local authorities are the most efficient
administrators of roads and bridges, water and paving, the elementary
schools, and similar concerns.

The essential economy of this threefold division of functions is that
each of the three sets of officials tends to concern itself with those
matters with which it is best acquainted, and which are most
advantageously administered by it.

38. UNITY.--The earlier European critics of our government declared
that the division of powers between Federal and state governments
would encourage civil strife. It is true that this division of powers
has resulted in a decentralized rather than in a centralized form of
government. It is equally true that the quarrel over states' rights
was the fundamental cause of the Civil War. But that war settled the
question of states' rights once and for all, and there has never again
been any serious question as to the proper status of states and Union.
American democracy has been found compatible with unity.

Nor has the decentralized character of American government kept us
from presenting a united front in foreign wars. The concentration of
war powers in the hands of President Lincoln during the Civil War was
matched by the temporary dictatorship wielded by President Wilson
during the World War. In both cases, the national executive became,
for the period of the emergency, as powerful and as efficient as the
executive of a highly centralized monarchy. This ability to exhibit
unity of control and singleness of purpose in war-time enables us to
claim for our form of government one of the most important assets of
the centralized monarchy.

39. THE SPIRIT OF PROGRESS.--Certainly one test of good government is
the extent to which it renders the masses of the people happy and
prosperous. American government has not yet exhausted the
possibilities of helpfulness, but one of the chief aims of our
political system is to encourage the individual in every pursuit which
is legal and honorable. Lord Bryce has called America the land of
Hope, because in spite of the defects of American government, a
feeling of buoyancy and optimism is characteristic of our political
institutions. America might also be called the land of Sane Endeavor,
for we lend force and justification to our optimism by consistently
working for the attainment of our ideals. To improve every condition
of American life, and yet to work in harmony with the principles of
constitutional government, that is our ideal. Progress must come
through authorized channels, for, as Abraham Lincoln has said, "a
majority, held in restraint by constitutional checks and limitations,
and always changing with the deliberate changes of popular opinion and
sentiment, is the only true sovereign of a free people, and whoever
rejects it does of necessity fly to anarchy or despotism."


QUESTIONS ON THE TEXT

1. Upon what does the fate of a democracy depend?

2. Contrast the strength of our present government with the strength
of the government established by the Articles of Confederation.

3. What is the check and balance system? Explain clearly.

4. Show how the check and balance system renders American government
stable.

5. Why is stability not a feature of some of the Latin-American
republics which have adapted our check and balance system?

6. What can be said as to the rights of the individual under American
constitutional government?

7. To what extent is American government subject to popular control?

8. How does American government provide for a solid foundation for the
economical administration of government?

9. What charge did the earlier European critics bring against American
government? Has history substantiated or disproved this charge?
Explain.

10. Compare the American democracy with a monarchy with respect to
efficiency in war-time.

11. Why may America be called the land of Hope? To what extent may it
properly be called the land of Sane Endeavor?

12. What did Lincoln say as to the only true sovereign of a free
people?


REQUIRED READINGS

1. Williamson, _Readings in American Democracy_, chapter iv.

Or all of the following:

2. Beard, _American Government and Politics_, chapter viii.

3. Bryce, _The American Commonwealth_, vol. ii, chapters c and cii.

4. Cleveland and Schafer, _Democracy in Reconstruction_, pages 48-66.

5. Root, _Addresses on Government and Citizenship_, pages 98-117.


QUESTIONS ON THE REQUIRED READINGS

1. What is meant by the doctrine of limited government? (Beard, pages
145-147.)

2. What are the two classes of constitutional limitations upon the
Federal government? (Beard, pages 147-148.)

3. Describe the position of the judiciary in American government.
(Beard, pages 164-165.)

4. What was the attitude of the republics of Greece and Rome toward
the individual? (Root, page 98.)

5. Contrast this attitude with the "Anglo-Saxon idea." (Root, pages
98-99.)

6. Why is it important that a constitution be a written document?
(Cleveland and Schafer, pages 54-S5.)

7. Why is it dangerous to suspend the constitutional guarantees of
personal liberty? (Root, pages 114-115.)

8. What faults have philosophers and popular writers generally
attributed to democratic governments? (Bryce, pages 613-614.)

9. To what extent are these faults attributable to American democracy?
(Bryce, pages 614-629.)

10. Explain the capacity of our government to develop great vigor.
(Bryce, pages 650-652.)


TOPICS FOR INVESTIGATION AND REPORT

I

1. Make a study of a club or society of which you are a member, or
with which you are familiar. To what extent does its organization
illustrate the check and balance system?

2. Classify local or state officials in your commonwealth, in order to
show differences in term and differences in the method of choosing
them. To what extent do these differences constitute a check and
balance system?

3. Make a list of the guarantees of personal liberty which are
contained in the constitution of your state. Compare this list with
similar lists made from the constitutions of other states. Compare the
list with the first ten Amendments to the Federal Constitution.

4. Methods by which the constitution of your state may be amended.

5. Make a list of the chief public activities in your community or
section. Which are local, which state, and which Federal? Do you
believe that any of these functions could be more advantageously
performed by some other division of government than that which is now
performing it? Give reasons.


II

6. "Why democracy is best." (Tufts, _The Real Business of Living_,
chapter xxxvii.)

7. Philosophy of the American constitutional system. (Beard, _Readings
in American Government and Politics_, pages 49-53.)

8. The relation of Federal and state governments in the United States.
(Guitteau, _Government and Politics in the United States_, chapter
xxi.)

9. Framework of American government. (Bryce, _Modern Democracies_ vol.
ii, chapter xxxix.)

10. The check and balance system. (Bryce, _Modern Democracies_, vol.
ii, chapter lxiii. See also any standard text on American government.)

11. The theory of the separation of powers. (Beard, _Readings in
American Government and Politics_, pages 138-140.)

12. The supremacy of Federal law. (Beard, _Readings in American
Government and Politics_, pages 140-143.)

13. The meaning of liberty. (Bryce, _Modern Democracies_, vol. i,
chapter vi.)

14. The meaning of equality. (Bryce, _Modern Democracies_, vol. i,
chapter vii.)

15. A brief comparison of the American and European systems of
government. (Bryce, _The American Commonwealth_, vol i, chapter xxv.)

16. American democracy contrasted with other democratic governments.
(Bryce, _Modern Democracies, vol_. ii, pages 446-452.)

17. Democracy compared with undemocratic forms of government. (Bryce,
_Modern Democracies_, vol. ii, chapter lxxiv.)

18. Efficiency of American democracy in the World War. (West, _The War
and the New Age_, chapter x.)




CHAPTER V

THE PROBLEMS OF AMERICAN DEMOCRACY


40. NO GOVERNMENT IS PERFECT.--All government is a compromise, in that
it is adopted or created for the purpose of harmonizing the interests
of the individual with the interests of the group. The types of
government are numerous, varying with the character of the group, and
with the particular conditions under which it exists. But we know of
no government which is perfect: all have shortcomings, some very
serious, others less so. There is nothing to be gained, therefore, by
debating whether or not American government is imperfect. A much more
profitable question is this: What are the faults of American
democracy, and how may they be eliminated or minimized? The most
constructive work which the American citizen is called upon to do is
to grasp the character of the problems confronting his country, and
then to attempt their solution.

41. THE WIDENING CIRCLE OF PROBLEMS.--The last two centuries have
constituted an age of rapid change and development in all of the major
phases of civilization. There have been rapid shifts in population,
particularly in the younger countries of the world. Important
discoveries have greatly increased our knowledge of natural science;
epoch-making inventions have revolutionized manufacturing, commerce
and transportation. In every civilized land there have been
readjustments of political beliefs, as well as important changes in
intellectual, religious, and social standards. Such an age is
peculiarly an age of problems: it is a period of change and stress, a
time of readjustment, of adaptation to changed conditions, of growth,
and of development.

We in America are confronted by an ever widening circle of problems,
and this chiefly for two reasons. In the first place, we have felt the
impact of those forces which for the last two centuries have been
creating problems the world over. In the second place, the whole
period of our national development has fallen within this age of
change and readjustment This means that we have had to grapple with
the problems common to all modern countries during a period in which
the origin and development of American democracy have been creating
purely domestic problems. These facts at least partially explain the
growing importance of the problems of American democracy during the
past century.

42. EFFECT OF AN ENLARGED SOCIAL CONSCIENCE.--Many of the issues of
contemporary American life have come into prominence because we have
enlarged the concept of democracy within the last century. The term
democracy has come to imply, not merely a form of government, but
actually a philosophy of life stressing justice and happiness for the
individual, whether in his political, social, or economic capacity.
The more humanitarian our view, the more situations calling for remedy
fall within it. Child labor, to give a single example, was not
generally considered an evil a century ago, but to-day an enlarged
social conscience condemns it.

43. NECESSITY OF AVOIDING PATERNALISM.--The solution of many national
problems implies an extension of government control. Now, it is not
generally appreciated that while an enlarged social conscience has
increased the number of our problems, the individualistic strain in
the American nature resists that paternalism which at present appears
necessary to an effective treatment of certain problems. We are behind
Germany in legislation designed to prevent industrial accidents,
lessen the evils of unemployment, and otherwise protect the worker
against the risks of industry. But Germany has built up this system of
social insurance by restricting personal liberty, and by greatly
extending the power of government over the individual. The great task
confronting our government is to do as much for the individual as any
paternalistic government, without endangering his rights by an undue
extension of governmental control.

44. THE COMPLEXITY OF OUR PROBLEMS.--The mistake is sometimes made of
thinking that national issues can be nicely defined, and separated
from one another. The human mind has its limitations, and we are prone
to emphasize the outline and content of particular problems in order
to perceive their essential character the more clearly. But though
this is permissible for purposes of study, we must bear in mind that
the questions which we are to discuss are connected with one another
in a most baffling way. To understand the administration of charity,
for example, we ought to know the social, economic, and political
background of the community under observation. The thorough study of
this background would lead us to crime, education and other problems,
which in turn have their connections with issues still further removed
from the immediate problem of charity. The thorough understanding of a
specific question thus implies consideration of many inter-related
questions. Likewise, the solution of a particular question affects and
is affected by the whole mass of related phenomena.

45. IMPORTANCE OF THE ECONOMIC BACKGROUND.--It would be unwise,
perhaps, to claim that any definite group of problems is of greater
importance than any other group. But at least we may say that some
problems are primary in origin, while others appear to be secondary,
_i.e._ derived from those called primary. In the chapters which
follow, the attempt has been made to arrange the groups of problems
with some regard to their primary or secondary origin. Probably the
most fundamental problems which face us to-day are those of economic
organization. Properly to understand these problems the student must
first grasp the essential facts of American industry. We shall begin
our study of the problems of American democracy, therefore, with a
survey of the economic life of the nation. Only after we have mastered
the principles upon which American industry is based, shall we be in a
position to solve the problems which arise directly from the nature of
our economic organization.

46. INDUSTRIAL REFORM.--Our industrial life is so clearly based upon
certain fundamental institutions, such as private property, free
contract, and free competition, that an industrial "system" is said to
exist. Certain great evils, notably poverty, have accompanied the
development of this system. We shall discuss a number of programs
designed to eliminate these evils. The doctrine of single tax is of
interest as advocating the abolition or confiscation of land value.
The co÷perative conduct of industry is of increasing importance of
late years. We must also reckon with socialism as a movement which
seeks the redistribution of wealth. Under the general head of
socialism we shall have occasion to notice a small but active group
known as the Industrial Workers of the World, and the larger, though
related, group which recently conducted a socialist experiment in
Russia. The discussion of socialism completed, we shall sum up the
attitude of American democracy toward the whole problem of industrial
reform.

47. SOCIAL PROBLEMS.--Of the social problems which grow out of a bad
economic situation, none is more vital than the fostering of peace and
good will between labor and capital. Following the discussion of
industrial relations, we shall have occasion to notice a whole series
of social questions which have either been derived from, or
accentuated by, the rapid industrialization of our country. Grave
questions arise in connection with immigration, health, and the
cityward drift. The consideration of the problems of the city in turn
directs attention to the necessity of a normal rural life, and to the
importance of safeguarding the American home. Dependency is a familiar
problem, but one which, in the light of an awakened community spirit,
is now being studied from new and interesting angles. Last among
social problems is the fundamental matter of education. It is not too
much to claim that the ultimate fate of American democracy depends, to
a great extent, upon the vigor and intelligence with which we improve
and extend our educational system.

48. RELATION OF GOVERNMENT TO BUSINESS.--Since our material well-being
rests upon an economic basis, the public has a vital interest in
business. The rise of great corporations and the necessity of
safeguarding the public from monopolistic abuses make necessary a
careful examination into the relation of government to business. We
shall meet with this question: Shall the government regulate, or
actually own, businesses of vital importance to the public? Equally
knotty, but fully as interesting, is the tariff question. Should
Congress tax foreign goods entering this country, and, if so, upon
what principles should this tax be determined? This will bring us to
the general problem of taxation, a subject to which the American
people will probably devote an increasing amount of attention in the
next few decades. The question of conserving our natural resources
must also be discussed. Last in this group of problems may be
mentioned the question of money and banking. In discussing this
important subject we shall notice, among other things, the interesting
Federal reserve system, which, it is hoped, will protect us from
panics in the future.

49. PROBLEMS IN EFFECTIVE GOVERNMENT.--The economist has good reason
for declaring that the getting of a living is one of the most
fundamental concerns in life; on the other hand, no people can long
get a comfortable living without the aid of a helpful system of
government. Government must be made effective. This introduces us to
another series of problems. First of all, who shall share in
government? And how may we improve the methods by which we select the
agents of government? How may corruption and inefficiency be
eliminated from American government? What is the significance of the
Initiative, the Referendum, and the Recall?

These questions must prove of fascinating interest to those who think
of democracy as a living institution which is constantly growing,
developing, adapting itself to changed conditions.

50. WHAT IS THE PROMISE OF AMERICAN LIFE?--Rich in natural resources,
ample in extent, encouraging to man's helpful efforts, America
fulfills the first condition of national greatness. Intelligent and
industrious, law-abiding and, devoted to the building of homes, our
population fulfills the second condition.

Here we have all the raw materials out of which to build a great
nation. Already we have made marked contributions to civilization, and
yet it should not be forgotten that our chief claim to national
greatness rests upon the promise which we show of being able to
perfect American democracy.

To what extent will this promise actually be realized? As a nation we
are yet young, as a people we have scarcely begun the greatest
experiment in democracy which the world has ever seen. Shall we
endure, shall we attain to a half-success, shall we succeed
gloriously?

Much depends upon the extent to which each of us assumes the
responsibilities of citizenship. Those who have gone before us
conquered a wilderness, expanded and preserved the Union. But it is
not for us complacently to accept the result. Much has been done, but
much more remains to be done. Our goal is the greatest possible
perfection of our economic, social and political life. Each age may be
said to have its peculiar burdens and responsibilities: the prime task
of the colonist was to foster the tender shoot of democracy; that of
the western pioneer was to fashion homes out of a wilderness; the
burden of our generation is to grapple with the present-day problems
of American democracy. Without a high sense of personal
responsibility, coupled with an intelligent and consistent effort, we
can never reach the high goal admittedly possible.

51. THE POINT OF VIEW IN PROBLEM STUDY.--To see American democracy and
to see it as a whole should be our aim throughout the remainder of
this book. Now this is not easy. The danger is that the unwary student
will interpret the large amount of space devoted to "problems" as
meaning that American life is preeminently unsettled and defective.
This is a temptation to be guarded against. Though we shall uncover
many defects, it should be remembered that we are predominantly a
normal, healthy, prosperous people. But our virtues demand our
attention less urgently than do our defects. If we seem to be
overconcerned with the defects of American life, the student should
not conclude that American life is primarily defective. Rather, he
ought to realize that it is precisely because a situation involves a
problem that our attention is challenged.

Nor should problems be looked upon as something to be ashamed of.
Where life is dull and civilization static, there are relatively few
problems; where life is progressive and civilization steadily
advancing, problems are numerous and pressing. Problems imply
adjustment, development, the desire for improvement and advancement.
They are signs of progress, the growing pains of civilization. If we
bear this in mind, we shall be in a fair position to see American
democracy in true perspective, without undue distortion of our
viewpoint, and without prejudice to our judgment.


QUESTIONS ON THE TEXT

1. Why is there nothing to be gained by debating whether or not
American democracy is imperfect?

2. Why has the circle of our problems been steadily widening during
the last century?

3. Trace the relation between an enlarged social conscience and the
number of problems confronting us.

4. What is one danger of paternalism?

5. Give a definite example to illustrate the complexity of our modern
problems.

6. Discuss the importance of the economic background in problem study.

7. What problems may be included under the term "industrial reform"?

8. What problems arise in connection with public interest in business?

9. Name some of the problems arising in connection with the need for
effective government.

10. What is the importance of individual responsibility in studying
the problems of American democracy?

11. Outline clearly the point of view to be maintained in studying
these problems.


REQUIRED READINGS

1. Williamson, _Readings in American Democracy_, chapter v.

Or all of the following:

2. Bryce, _The American Commonwealth_, vol. ii, chapters ci, cxiv,
cxix, and cxxii.

3. Dunn, _The Community and the Citizen_, pages vii-xii.

4. McLaughlin, _Steps in the Development of American Democracy_,
chapter viii.


QUESTIONS ON THE REQUIRED READINGS

1. What, according to Lord Bryce, are the essential intellectual
traits of the masses of the American people? (Bryce, pages 825-826.)

2. Lord Bryce says that "there are elements in the life of the United
States which may well make a European of any class prefer to dwell
there rather than in the land of his birth." What are these elements?
(Bryce, pages 870-873.)

3. What comment does Lord Bryce make upon the quality of humor in the
American character? (Bryce, page 876.)

4. What three advantages does the United States have over European
countries in the matter of grappling with modern problems? (Bryce,
page 912.)

5. Explain the statement that "Democracy rests on faith." (McLaughlin,
pages 181-182.)

6. What is meant by the statement that "Democracy is fundamentally a
matter of human relationships"? (McLaughlin, pages 189-190.)

7. What, according to Lord Bryce, are the four chief defects of
American democracy? (Bryce, page 632.)

8. What are the essential qualities which civic education should aim
to cultivate? (Dunn, pages xi-xii.)


TOPICS FOR INVESTIGATION AND REPORT

I

1. Make a list of the problems which in any way affect you as a
citizen in the community. List these problems in the order in which
they occur to you, or are discovered by you. Comment upon the confused
and disorderly appearance of the problems so listed.

2. Classify the problems on your list according as they are economic,
social or political.

3. Classify the problems on your list according as they are local,
state or national.

4. Comment upon the complexity and inter-relationship of the problems
so classified.

5. What agencies, public, semi-public, or private, are studying the
problems on your list?

6. What difference of interest do the citizens of your community show
in local, state and national problems?


II

7. Defects of democratic government the world over. (Bryce, _Modern
Democracies_, vol. ii, pages 452-454.)

8. The background of the problems of American democracy. (Merriam,
_American Political Ideas_, chapter i.)

9. The hindrances to good citizenship. (Bryce, _Hindrances to Good
Citizenship_.)

10. The promise of American life. (Croly, _The Promise of American
Life,_ chapter i.)

11. Attitude of the individual in a democracy. (Hughes, _Conditions of
Progress in Democratic Government_.)

12. The power of ideals in American history. (Adams, _The Power of
Ideals in American History_.)

13. Ideals of citizenship. (Woodburn and Moran, _The Citizen and the
Republic_, chapter xx.)

14. The future of democracy. (Bryce, _Modern Democracies_, vol. ii,
chapter lxxx.)




PART II--AMERICAN ECONOMIC PROBLEMS


A. ECONOMICS OF AMERICAN INDUSTRY


CHAPTER VI

THE NATURE OF AMERICAN INDUSTRY


52. MAGNITUDE OF AMERICAN INDUSTRY.--In colonial times the major part
of American industry was concentrated along the Atlantic seaboard; to-
day it extends over a large part of the continent. A century and a
half ago our industrial system was still a relatively simple one,
giving rise to few pressing problems of national importance; at the
present time it is a vast and complicated affair, closely bound up
with many of the most vital problems which confront American
democracy. The activities which are commonly grouped under the head of
"American industry" are so numerous and so varied that a description
of all of them would carry us beyond the limits of this chapter.
Nevertheless, it is important that we secure some understanding of
these activities. A few pages may profitably be spent, therefore, in
discussing certain basic facts of American industry.

53. FAVORABLE LOCATION OF THE UNITED STATES.--Let us commence by
noting that the location of the United States is favorable to the
development of industry. Of the two American continents, the northern
has the greater natural advantages. Each continent is roughly in the
form of a triangle with the apex or smaller end pointing southward,
but whereas the larger end of the South American triangle is within
the tropic zone and only the tapering end is within the more favorable
temperate zone, the greater part of the North American triangle is
within the temperate zone. With regard to location for world trade the
northern continent again has the advantage: the ports of South America
face a relatively empty ocean on the west and the little-developed
continent of Africa on the east; the ports of North America, in
addition to being more numerous and more suitable for commerce than
those of the southern continent, face the teeming Orient on the west,
and the great markets of Europe on the east. Moreover, the United
States occupies the choicest portions of the North American continent.
Our neighbor Canada has a cold and snow-bound frontier on her north,
while on our south Mexico and the Central American countries lie near
the tropics. The heart of temperate America, on the other hand, is
included within the territory of the United States.

54. POPULATION.--Scarcely less important than the favorable location
of the United States is the character of the people occupying the
country. From less than four million in 1790, our population has
increased so rapidly that in 1920 there were 105,710,620 people within
the bounds of continental United States. As the population has
increased, it has spread over the Appalachians, into the great
Mississippi basin, and westward to the Pacific Ocean. Accompanying the
increase and westward spread of the population has come a greater
variety of racial types. Although our population was varied in
colonial times, the great majority of the settlers were from the
British Isles and northwestern Europe. In the latter part of the
nineteenth century immigration from northern Europe declined and more
and more immigrants began to come from southern and southeastern
Europe. So universal has been the attraction of America, that our
present population includes elements from every important country in
the world. From the industrial standpoint, the dominant
Characteristics of this composite American people are energy and
versatility.

55. NATIONAL WEALTH.--Generations of industrious people have helped to
make the United States the wealthiest nation in the world. It has been
estimated that in 1850 our national wealth amounted to $8,000,000,000.
By 1900 the remarkable progress of American industry had increased
this figure to more than $88,000,000,000. In 1912 our wealth was
probably in excess of $180,000,000,000. Industrial and financial
disturbances during the period of the World War make later estimates
hazardous, nevertheless it is interesting to note that in 1921 the
wealth of the United States was estimated as being between
$350,000,000,000 and $400,000,000,000. According to this estimate, the
wealth of this country exceeded, in 1921, the combined wealth of Great
Britain, France, Germany, Italy, and Belgium. In weighing the value of
this comparison, however, we must take into consideration the heavy
destruction of wealth in western Europe because of the World War.

56. WHAT THE AMERICAN PEOPLE ARE DOING.--A large percentage of the
inhabitants of the United States are engaged in some form of
productive work. According to the most recent estimates there are
approximately fifty million persons, male and female, over ten years
of age, engaged in gainful occupations in this country. Of these about
fourteen million are engaged in agriculture and allied industries,
while more than eleven million are busy in manufacturing pursuits.
Almost four million are found in some form of trade, and another four
million are employed in domestic and personal service. Transportation,
clerical work, and professional callings utilize the services of
several additional million. The great majority of those employed in
American industry are men, although the number of women in industry is
steadily increasing. Children have been found in industrial pursuits
since colonial times, but of recent years there is a growing movement
to restrict or prohibit the employment of children in gainful
occupations.

57. FORESTS AND MINERALS.--The natural resources of the United States
play a large part in our industrial life. One fourth of the territory
of the United States is still covered with timber. We are abundantly
supplied with coal and iron, the two most important industrial
minerals. Our coal deposits outrank, both in quantity and in quality,
those of any other country. Iron is found in most of the states in the
Union, the high-grade deposits of the Lake Superior area being of
special importance. We produce more than half of the world's supply of
copper, which, after coal and iron, is the most important industrial
mineral. Our supply of petroleum and natural gas is large, and in
spite of the waste which has characterized our use of these important
commodities, our production of both is still great. Gold, silver,
zinc, lead and phosphates are produced in the United States in large
quantities. Indeed, we have ample supplies of practically all of the
minerals of importance to industry, except platinum, tin, and nickel.

58. AGRICULTURE.--Until very recently, at least, agriculture has been
by far our most important industry. Of the two billion acres
comprising continental United States, approximately half are under
cultivation. In most sections of the country the quality of the soil
is good, and rainfall is ample. We have long led the world in the
value of farm crops grown. Our production of wheat, corn, oats,
barley, rye, and dairy products totals an enormous figure. The steady
enclosure of lands formerly used for grazing stock is restricting our
production of food animals, but we are still important as a producer
of meats. Most of the world's tobacco is grown in this country. The
world's supply of cotton is derived mainly from southern United
States. Finally, our soil is of such variety, and our climate so
diversified, that the danger of a general crop failure is slight. A
loss in one part of the country is almost certain to be offset by good
crops in another.

59. MANUFACTURING.--In colonial times American manufactures were
subjected to more or less restraint by Great Britain, but after the
Revolution these industries entered upon a period of free and rapid
development. Modern machinery was introduced rapidly after 1800, large
scale production was developed, transportation was fostered, and
larger and larger markets were supplied with the products of American
manufacturers. Particularly since the Civil War has the importance of
our manufactures increased. This increase has been due chiefly to the
large scale production of foodstuffs, including meats and flour;
textiles; iron and steel products; shoes; chemicals; and agricultural
machinery. According to recent census figures it would appear that we
are passing from a predominantly agricultural life to a stage in which
manufacturing is of relatively greater importance.

60. TRANSPORTATION AND COMMUNICATION.--The physical geography of the
United States encourages the development of adequate means of
transportation and communication. The St. Lawrence-Great Lakes system
gives easy access to the most fertile section of the continent. The
Mississippi and its tributaries drain a million square miles of farm
land. We have, in addition to 18,000 miles of navigable rivers, a
greater coast line available for commerce than has the whole of
Europe. New York is the world's greatest seaport.

Few mountain ranges hamper the development of transcontinental
railroads in this country, and of these only one, the Rockies, is a
serious obstacle to effective transportation. Our railroad mileage is
enormous, a half dozen transcontinental lines being supplemented by
numerous smaller roads and feeding lines. We have more than 2000 miles
of canals in operation. Cheap and rapid transportation between the
different parts of the country, supplemented by adequate means of
communication by telephone, telegraph, and the postal service,
undoubtedly has been one of the greatest factors in our national
prosperity.

61. DOMESTIC AND FOREIGN TRADE.--The great majority of our products
are not shipped to foreign markets, but are utilized within the
country. We are still so young and so undeveloped a country that our
manufacturers have been kept busy supplying the domestic market. This
fact, together with the American manufacturer's lack of knowledge
concerning the possibilities of foreign trade, explains our neglect of
foreign markets. In proportion as our manufacturers catch up with the
domestic market, and in proportion as their knowledge of foreign
markets increases, it is likely that they will give more and more
attention to customers in other countries.

But though a very small proportion of our products are sent abroad,
the foreign trade of the United States exceeds in value the foreign
trade of any other country. This predominance is due, not so much to
our search for foreign markets, as to the steady demand in other
countries for three classes of goods in the production of which we
have a distinct advantage. These three classes of goods are, first,
raw materials of which we have a great abundance, such as cotton and
copper; second, specialties invented and patented by Americans, such
as inexpensive automobiles, typewriters, and phonographs; and, third,
commodities which may be advantageously produced by large-scale
methods, such as agricultural machinery and the cheaper grades of
textiles.

62. SUMMARY AND FORECAST.--We have very briefly surveyed some of the
basic facts of American industry. On the one hand, the favorable
location and the rich natural resources of the United States have
furnished a substantial basis for industrial progress. On the other
hand, we must note that the American people are energetic and
versatile,--combining, to a happy degree, the qualities of initiative
and originality, perseverance and adaptability. The great wealth and
prosperity of the country as a whole have been the result of the
combination of a favorable land and an able people.

This is not the whole of the story, of course. It must be admitted
that, with all of our wealth, we continue to face serious charges of
poverty and industrial maladjustment. These charges are of great
importance, but it should be remembered that no problem can be solved,
or even intelligently attacked, until the essential facts are well in
hand. We have briefly described the nature of American industry. What
we have now to do, as a preliminary to considering the problem of
poverty and industrial reform, is to analyze the economic laws in
accordance with which American industry has developed. The essential
facts of the next four chapters cannot be weighed too carefully.


QUESTIONS ON THE TEXT

1. To what extent has the character of American industry changed in
the last century and a half?

2. Compare North America with South America with respect to natural
advantages.

3. Outline the changes which have occurred in the population of the
United States since 1790.

4. Trace briefly the increase in our national wealth since 1850.

5. What are the chief occupations of the American people?

6. Name three important industrial minerals, and comment on our supply
of each.

7. What are the chief characteristics of American agriculture?

8. Outline the growth of our manufacturing industries.

9. How are transportation and communication encouraged by the physical
geography of the United States?

10. Why is our domestic trade of relatively greater importance than
our foreign trade?

11. To what three types of goods is our predominance in foreign
markets due?

12. What qualities of the American people have contributed to their
industrial success?


REQUIRED READINGS

1. Williamson, _Readings in American Democracy,_ chapter vi.

Or all of the following:

2. Bishop and Keller, _Industry and Trade,_ chapters i and ii.

3. Bogart, _Economic History of the United States,_ chapter i.

4. Fetter, _Modern Economic Problems,_ chapter i.

5. King, _Wealth and Income of the People of the United States,_
chapter iii.


QUESTIONS ON THE REQUIRED READINGS

1. Describe briefly each of the six regions into which continental
United States may be divided. (Bogart, pages 11-12.)

2. Why has the animal life of the North American continent declined in
significance since colonial times? (Bogart, page 8.)

3. Into what five divisions may the forests of the United States be
classified? (Bishop and Keller, pages 27-28.)

4. What may be said as to the temperature of the United States?
(Bogart, pages 12-13.)

5. What may be said as to the extent of rainfall in the United States?
(Bogart, page 13.)

6. Explain the importance of water power in the United States.
(Bogart, pages 3-4.)

7. What changes in farm land values have been brought about in the
last century? (King, pages 22-27.)

8. Discuss the value of urban land in the United States. (King, pages
15-21.)

9. Why is it extremely difficult to measure the wealth of the United
States? (Fetter, pages 6-10.)


TOPICS FOR INVESTIGATION AND REPORT

I

1. Trace the growth in the population of your state since 1880. What
have been the chief sources of this increase?

2. To what extent has the population of your state been affected by
immigration from Europe? What attracts immigrants to your state? Have
there been any changes in the character of this immigration since
1880?

3. Classify the population of your state on the basis of occupation.
(Secure data from the State Board of Labor, or State Bureau of
Statistics.)

4. Estimate the material wealth of your community. What light does the
result throw upon the difficulties of summarizing the wealth of the
nation?

5. Discuss the importance in the economic life of your section of

(a) Agriculture,

(b) Mining,

(c) Forestry,

(d) Manufacturing.


II

6. The economic geography of your section. (Consult Dryer, _Elementary
Economic Geography_.)

7. A comparison of America three hundred years ago with the America of
to-day. (Price, _The Land We Live In_, chapters i and ii.)

8. Character of the American population. (Burch and Patterson,
_American Social Problems_, chapter ix.)

9. An analysis of the American character. (Bryce, _The American
Commonwealth_, vol. ii, chapters cxiv and cxv.)

10. Ways of getting a living. (Carver, _Elementary Economics_, chapter
xv.)

11. Geographical distribution of cities and industries in the United
States. (Semple, _American History and Its Geographic Conditions,_
chapter xvi.)

12. Agricultural industries in the United States. (Bishop and Keller,
_Industry and Trade,_ part ii. Smith, _Commerce and Industry,_
chapters i, in, iv, v, and vi.)

13. Animal industries in the United States. (Bishop and Keller,
_Industry and Trade,_ part iii. Smith, _Commerce and Industry_,
chapter ii.)

14. Power. (Smith, _Commerce and Industry_, chapter ix.)

15. Mineral industries in the United States. (Bishop and Keller,
Industry and Trade, part iv. Smith, _Commerce and Industry_, chapters
viii, xiii, xiv, and xv.)

16. Manufacturing industries in the United States. (Bishop and Keller,
_Industry and Trade_, part v.)

17. Trade routes of North America. (Smith, _Commerce and Industry_,
chapter xvi.)

18. The foreign trade of the United States. (Dryer, _Elementary
Economic Geography_, chapter xxxii. See also any other recently
published text on this general field.)




CHAPTER VII

WHAT IS MEANT BY PRODUCTION


63. WHY MEN WORK.--Ultimately everyone depends upon work for his
living. Young children commonly live upon the earnings of their
parents; most normal adults, on the other hand, depend upon their own
efforts for their living. Since every individual probably works
because of a combination of motives, it is possible somewhat to
analyze the reasons why men work. The most fundamental reason for
working is in order to preserve one's life. This assured, the
individual is in a position to work in order to preserve the lives of
those who are near and dear to him. When the necessities of life have
been provided, work is commonly continued for the sake of acquiring
comforts or luxuries.

Under a well-regulated legal system these efforts of the individual
also benefit the community, but until he is able to support himself
and his family, the average individual does not consciously make the
public interest the chief end of his labors. However altruistic a man
may be, he will not be able to labor consistently in behalf of others,
unless he will thereby serve his own interests as well, or unless his
personal needs have already been met.

64. THE OLD WAY OF GETTING A LIVING.--The economic history of
eighteenth century England illustrates two rather distinct methods of
getting a living, one of which may be called the old, and the other
the new. Up to about the middle of the century, the masses of
Englishmen, in common with the people of other countries, got a very
poor living. Most common necessities were made in the home and for
purely family use. Shoes, clothing, tools, and similar articles were
produced laboriously and on a small scale. In comparison with
industrial conditions in the nineteenth century, there was at that
time little industrial co÷peration [Footnote: By co÷peration is here
meant simply the working together of different persons or groups of
persons. Co÷peration in this sense is to be distinguished from
co÷peration as discussed in Chapter XII.], little division of labor,
little suspicion that men were, in spite of hard work engaged in for
long hours, getting a very poor living. The trouble was, partly, that
men had not yet fully realized the possibilities of helping one
another, and partly that they were ignorant of how to make Nature
really an efficient aid in getting them a living.

65. THE NEW WAY OF GETTING A LIVING.--After the middle of the
eighteenth century the invention of a series of remarkable machines
enabled Englishmen greatly to increase their productivity, first in
the manufacture of textiles, and later in numerous other industries.
By subdividing their labor more and more minutely, and by each
specializing in the particular type of work which he could do best,
men found that their total output could be greatly increased. This
complex division of labor, made possible by the use of water and steam
power to run machines and to move vehicles of transportation, reduced
the difficulty of getting a good living, that it constituted a
veritable revolution in industry. Indeed, this change is known in
history as the Industrial Revolution.

66. EFFECTS OF THE INDUSTRIAL REVOLUTION.--In the last century and a
half the Industrial Revolution has spread to every important civilized
country in the world, everywhere encouraging the application of
machine methods to more and more industries. This change from
production on a small scale, and often by hand, to large-scale
production in factories equipped with complex machines, has had
important results. It has so increased our control over Nature that
even the humblest workman of to-day enjoys many comforts denied kings
a few centuries ago. On the other hand, the Industrial Revolution has
tended to create a numerous class which depends entirely upon wages,
and to set off against this class an employing group which possesses
and controls most of the income-producing equipment of industry. The
significance of this last development will become clearer as we go
along.

67. NATURE OF MODERN PRODUCTION.--In the study of modern production
two fundamental facts confront us. The first is that the economist
does not define production as merely the making of material objects.
We desire material objects only if they will satisfy our wants. Since,
also, the satisfaction of wants is the important thing, it is clear
that the performance of a service, such as teaching or painting, may
be more important than the manufacture of a material object which no
one wants. Production may thus be defined as the satisfaction of human
wants. The manufacturer of a material object is productive only if
that object is wanted by someone; he who supplies personal or
professional service is productive if that service satisfies the wants
of someone.

The second fundamental fact which confronts the student of modern
production is the complexity of our industrial system. Three hundred
years ago most of the commodities in daily use were made, either in
the home and by the family members, or by small groups of artisans
working together under relatively simple conditions. To-day production
is a vast and complicated process. To the eye of the untrained
observer a great mass of factories, farms, railroads, mills, machines,
ships, and busy laborers appears without order and, often, without
purpose. The task immediately before us is to analyze this mass, and
to point out the nature of the various factors which contribute to the
productive power of a community.

68. NATURE A FIRST FACTOR IN PRODUCTION.--Nature is defined by the
economist as inclusive of all of the materials and forces furnished in
the form of land and its products, oceans, lakes, rivers, rain,
humidity, and climate. Since Nature is rather a vague term, and since,
also, the economist looks upon land as the most important element in
Nature, we may lump together all of the materials and forces of Nature
and apply the term "land."

Taken in this sense, land is clearly of great importance in
production. We build houses and factories upon it, we use it as a
basis of transportation, we harness its motive power, and we make
extensive use of the innumerable raw materials which it furnishes.
Without land there could be no production, in the sense in which the
economist understands the word.

69. MAN'S LABOR A SECOND FACTOR IN PRODUCTION.--Something besides
land, or Nature, is necessary before our wants can be satisfied.
Nature is often careless of our needs and desires. True, she offers us
berries, coal, firewood, and many other commodities which are
practically ready to use, but even these articles will not satisfy our
wants unless we go to the trouble to secure possession of them. In an
important sense Nature is passive, and if she is to furnish us with a
living, we must engage in labor. This labor may be mental or physical,
the important point being that it is effort undertaken to increase our
control over Nature. Savages are content to use products in
substantially the form in which Nature provides them; civilized
peoples work over the products of Nature until the utility or want-
satisfying power of those products has been greatly increased. Man's
living improves as he progresses from indolence to hard physical
labor, then from hard physical labor alone to a combination of
physical and mental labor intelligently directed.

70. CAPITAL A THIRD FACTOR IN PRODUCTION.--Land to furnish raw
materials, and man to make use of those materials,--what more is
necessary? Nothing else would be necessary if all of Nature's gifts
were readily accessible, and if man unaided could make the best use of
them. But Nature hides or disguises many of her treasures, and man is
physically weak. Hence he has hit upon the device of making tools to
help him in his contest with Nature. During the period of the
Industrial Revolution many simple tools were supplanted by complicated
devices run by power and called engines and machines. To the economist
tools and similar devices are a form of capital, capital being defined
as inclusive of everything which man has created, or caused to be
created, in order to help in further production. [Footnote: Land has
not been created by man but is a gift of Nature. Land, therefore, is
not a form of capital.]

The fashioning of hammers and saws, the construction of railways, and
the manufacture of machinery, all these operations create capital. The
systematic creation and use of capital is one of the distinguishing
features of modern civilization. The laborer alone can produce little;
aided by capital he can produce much. Capital is not important if one
is willing to live like a savage; on the other hand, it is
indispensable if one wishes to enjoy the benefits of civilization.

71. COÍRDINATION A FOURTH FACTOR IN PRODUCTION.--Land, labor, and
capital are factors in production. Two hundred years ago nothing else
was essential to production. The average individual had his own land,
produced his own tools or capital, and relied chiefly or entirely upon
his own labor.

But the Industrial Revolution enlarged and complicated production. It
created an industrial system in which the individual is generally a
specialist, producing a surplus of his one product, but dependent upon
numerous other persons for most of the things which he personally
consumes. To-day, for example, there are numerous individuals raising
cattle, the hides of which are to be made into shoes; other
individuals are perfecting means of transportation so that those hides
may be carried to market; still other persons concern themselves only
with the building of factories or with the manufacture of machines
with which to work those hides into shoes. These various individuals
and groups may never see each other, nevertheless they aid one
another.

The secret of this often unseen and unconscious co÷peration is that
there are individuals who specialize in the work of connecting up, or
co÷rdinating, the other factors which are necessary to the production
of shoes. These individuals, about whom we shall have more to say in
the next chapter, constitute an important economic group. They
co÷rdinate, in the example given above, the cattle grower, the
railroad manager, the tanner, the factory builder, and the
manufacturer, and thus make possible a kind of national or even
international co÷peration which would otherwise be impossible. Those
whose function it is to promote this co÷peration are, therefore,
indispensable factors in modern production.

72. GOVERNMENT A FIFTH FACTOR IN PRODUCTION.--A cursory examination of
modern industry would convince the observer that land, labor, capital,
and co÷rdination are important factors in production. There is, in
addition, a factor which is so fundamental, and of such essential
value, that it is sometimes overlooked altogether. This is the work of
the government in protecting productive enterprises. Government aids
in production by suppressing theft, violence, and fraud; by allowing
individuals to engage in helpful businesses; by enforcing contracts
entered into legally; and by punishing many kinds of monopolistic
abuses. [Footnote: We shall take up the problem of monopoly in
Chapters XXVII and XXVIII.] The whole fabric of American prosperity is
built upon the foundation of law and order.

73. SUMMARY AND FORECAST.--Production in the economic sense consists
in doing that which will satisfy human wants. Modern production is a
vast and complicated process, involving the co÷peration of five
factors: land, labor, capital, co÷rdination, and government. In a
later chapter we shall find that there are wide differences of opinion
as to the relative importance of some of these factors. We shall find,
indeed, that the most vital economic problems which confront American
democracy depend for their solution upon a clear understanding of the
facts stated or implied in this chapter. The student ought not,
therefore, to accept hastily the statement that land, labor, capital,
co÷rdination, and government are necessary in production, but ought
rather to reason out just how and why each is actually helpful in
American industry.


QUESTIONS ON THE TEXT

1. What are the chief reasons why men work?

2. Describe the "old way of getting a living."

3. Just what is meant by the "new way of getting a living"?

4. What were the chief effects of the Industrial Revolution?

5. What is the economist's definition of production?

6. Just how does Nature help in production?

7. Explain the relation of Nature to land.

8. Show how man's labor is necessary in production.

9. What is the nature and function of capital?

10. Discuss co÷rdination as a factor in production.

11. Name a fifth factor in production.


REQUIRED READINGS

1. Williamson, _Readings in American Democracy_, chapter vii.

Or all of the following:

2. Carver, _Elementary Economics_, chapters ix-xiii.

3. Adams, _Description of Industry_, chapter v.

4. Ely, _Outlines of Economics_, chapter viii.

5. Smith, _Wealth of Nations_, Book I, chapters i and ii.


QUESTIONS ON THE REQUIRED READINGS

1. What instinct in man gives rise to the division of labor? (Smith,
chapter ii.)

2. Name and distinguish between the two kinds of division of labor.
(Carver, pages 77-82.)

3. How does pin making illustrate the principle of the division of
labor? (Smith, chapter i.)

4. How does the meat packing industry illustrate the principle of the
division of labor? (Ely, page 125.)

5. To what extent does the cotton mill illustrate the principle of the
division of labor? (Ely, pages 124-125.)

6. What are the three fundamental advantages which result from the
division of labor? (Smith, chapter i; Carver, pages 75-76; Ely, page
126.)

7. What are the effects of the complex division of labor upon the
worker? (Ely, pages 127-128.)

8. Describe the chief sources of power utilized by man. (Carver,
chapter x.)

9. Discuss the origin of capital. (Carver, chapter xi.)

10. What are the two factors which give value to land? (Carver, page
111.)

11. Explain the statement that thousands of individuals co÷perate to
furnish the humblest workman with food and clothing. (Smith, chapter
i.)

12. What is the secret of modern industrial efficiency? (Adams, page
87.)


TOPICS FOR INVESTIGATION AND REPORT

I

1. Visit a factory, mill or shop in your vicinity and study the
organization of the plant with regard to the application of the
principle of the division of labor. Secure the amount of output per
man by dividing the total product by the number of workmen co÷perating
in its production. Compare the output per man under these conditions
with the probable output per man if each workman were working
separately, without material assistance from other workmen.

2. Study, both by inquiry and by observation, the effects of the
division of labor upon the health and spirits of the workmen in the
factory, mill or shop visited.

3. Classify the industries in your locality on the basis of whether
they rely chiefly or entirely upon human, animal, water, steam or
electric power. Why does each industry not utilize some other form of
power than that actually used?

4. Classify some of the familiar occupation groups in your community
according as they derive their incomes chiefly or entirely from land,
labor, capital, or the process of co÷rdinating land, labor, and
capital. Test the productivity of each group by the standard advanced
in section 67 of the text.

5. Attempt to show to what extent each of the five factors of
production has contributed toward the erection and furnishing of your
schoolhouse.


II

6. The Industrial Revolution in England. (Ely, _Outlines of
Economics_, chapter iv. Cheyney, _Introduction to the Industrial and
Social History of England_, chapter viii.)

7. Colonial industries. (_Lessons in Community and National Life_,
Series A, pages 73-83; Series B, pages 17-25; Series C, pages 17-25.
See also Bogart, _Economic History of the United States_, chapter iv.)

8. The Industrial Revolution in the United States. (Bogart, _Economic
History of the United States_, chapter xii. Ely, _Outlines of
Economics_, chapter vi. Marshall and Lyon, _Our Economic
Organization_, chapter viii.)

9. The significance of the cotton gin. (Consult an encyclopedia.)

10. Cyrus McCormick and the reaper. (Consult an encyclopedia.)

11. The story of a loaf of bread. (Wood, _The Story of a Loaf of
Bread_. Additional material on this subject may be secured by writing
to the International Harvester Company, Chicago.)

12. The story of iron and steel. (Smith, _The Story of Iron and
Steel_, pages 23-126.)

13. Development of business organization. (_Lessons in Community and
National Life_, Series A, pages 169-178.)

14. Economic work of the United States government. (Dryer, _Economic
Geography_, chapter xxxiii.)




CHAPTER VIII

EXCHANGING THE PRODUCTS OF INDUSTRY


74. RELATION OF THE DIVISION OF LABOR TO EXCHANGE.--In the self-
sufficing stage that existed in industry a few hundred years ago,
there was generally little necessity for the exchange of products.
Each family produced most of the commodities which it needed, and
depended relatively little upon the products of persons outside the
family circle.

But the complex division of labor which developed out of the
Industrial Revolution has made the exchange of products increasingly
important. To-day the typical workman concentrates upon one particular
kind of work, and is content to exchange a share of his earnings for
the numerous goods and services which he cannot supply for himself.
Exchange thus increases the total output of the community or nation by
permitting individuals to specialize in those commodities which they
can produce most effectively.

75. RELATION OF TRANSPORTATION AND COMMUNICATION TO EXCHANGE.--
Exchange is largely dependent upon transportation and communication.
In the United States, for example, not only do the individuals of a
particular community specialize in various types of work, but the
different sections of the country are devoted to the production of
those commodities for which they are best suited. Thus it is largely
true that New England is best suited to manufacturing, the South to
the growing of cotton, and certain parts of the West to the production
of lumber and foodstuffs. The suitability of a region to a particular
class of products is due, partly to location, partly to the nature of
the soil and the climate, and partly to the inclination and training
of the people. But whatever its causes, this territorial division of
labor could not be carried out without an efficient system of
transportation and communication. Communication by mail, telephone,
and telegraph is necessary to allow producers and consumers in
different parts of the country to keep in touch with one another.
Transportation by land and water is necessary if the surplus products
of one section are to be exchanged for the surplus products of other
sections.

76. TYPES OF COÍRDINATORS.--Those who perform the work of co÷rdination
in industry are commonly referred to indiscriminately as business men,
middlemen, or entrepreneurs. [Footnote: the term "entrepreneur" is
awkward and little known, but no more satisfactory term is available.]
The meaning of these three terms is distinguished with difficulty, but
to avoid confusion later on the essential character of each should be
pointed out here. The term business man is very wide, and is commonly
inclusive of all who actively engage in any sort of business. The
primary function of the middleman is to act as a connecting link
between various industrial enterprises. The entrepreneur, on the other
hand, is primarily an individual who co÷rdinates land, labor, and
capital with the intention of initiating and conducting a business
enterprise. In so far as he acts as a connecting link between other
industrial agents, the entrepreneur is a middleman, but the middleman
is usually thought of as an individual who connects up existing
businesses, rather than initiating a new enterprise. To the functions
of the entrepreneur we shall return in the next chapter; here it is
the middleman proper who is our chief concern.

77. IMPORTANCE OF THE MIDDLEMAN.--The chief stages of shoe manufacture
may serve to illustrate the great importance of the middleman in
exchange. The middleman, anticipating a demand for beef and hides,
connects the cattle grower with the live-stock market. Still later it
is a middleman who offers raw hides to the tanner, and who sees that
the wholesale leather merchant comes into business contact with the
tanner. The banker or broker who connects the entrepreneur with the
money with which to set up a shoe factory may be called a middleman,
as may the individual who aids the entrepreneur in getting the
required amounts of land and labor with which to start manufacturing.
When, under the direction of the entrepreneur, the shoe has been
manufactured, it is often a middleman who connects the shoe wholesaler
with the finished product. The jobber who buys large quantities of
shoes from the wholesaler and sells them to the retailer in small lots
is a middleman. The advertising man whose description and pictorial
representation of the shoe causes the consumer to buy it of the
retailer is also a middleman.

78. NOT ALL MIDDLEMEN ARE SOCIALLY NECESSARY.--By co÷rdinating the
work of these various individuals, many of whom are themselves
middlemen, the middlemen whom we have been describing allow the
community to secure the full benefit of the division of labor and of
exchange. Where there exist just enough middlemen to co÷rdinate with
maximum efficiency the various industrial agents of a community, the
community gains. When, on the other hand, there are more middlemen at
work than are really needed to perform the work of industrial
co÷rdination, the community loses. This loss is a double one: first,
the working energy of the superfluous middlemen is wasted, or at least
is applied uneconomically; second, middlemen are paid, directly or
indirectly, out of the product which they handle, so that the handling
of a commodity by an unnecessarily large number of middlemen means
higher prices for the ultimate consumers of that commodity. [Footnote:
The existence of superfluous middlemen constitutes a grave problem, to
which more and more attention is being given. Various aspects of this
problem are discussed in Chapters XII and XXV.]

79. BARTER.--We have seen _what_ the middleman does; it remains to
point out _how,_ or by means of what mechanism, he performs his
functions. When savages, and civilized peoples living under primitive
conditions, wish to exchange their surplus goods, they generally
resort to barter, _i.e.,_ they exchange one commodity directly for
another. Where the division of labor has been so little developed that
the goods to be exchanged are relatively few, this may work very well,
but in modern industry barter would be inexpedient, if not impossible.
The farmer who had a surplus of cattle and desired a piano might have
great difficulty in finding a man who had a surplus piano and who also
desired cattle. Even though the farmer liked the piano in question,
and even though the owner of the piano were pleased with the farmer's
cattle, it might be impossible to measure the value of the piano in
units of cattle.

80. NATURE AND FUNCTION OF MONEY.--To facilitate exchange civilized
peoples make an extensive use of money. Money may be defined as
anything that passes freely from hand to hand as a medium of
exchange. [Footnote: The terms "money" and "capital" are often used
interchangeably. Strictly speaking, however, money is a form of
capital. Moreover, it is only _one_ form of capital] In modern times
gold, silver, nickel, and copper coins have been the most familiar
forms, though paper currency is also an important form of money. There
is nothing mysterious about money: it is simply a means of
facilitating exchange by saving time and by guaranteeing accuracy in
measuring the relative values of commodities.

Let us see how money actually aids in the exchange, say, of cattle and
pianos. The farmer disposes of his cattle to a middleman, receiving in
return money, the authenticity of which is guaranteed by the
government's stamp upon its face. There is no difficulty in making
change, for money can be so minutely divided as to measure the value
of an article rather exactly. The farmer does not fear that he could
not use the money received for the cattle, for money is generally
accepted in exchange for any commodity. The farmer now offers the
money to the piano-owner, who is probably a middleman. Again the fact
that money is finely divisible allows an accurate money measure of the
value of the piano. The owner of the piano, if he is satisfied with
the amount of money offered, does not hesitate to accept the farmer's
money, since he, too, realizes that he can use the money to purchase
the things that he in turn desires.

81. VALUE AND PRICE.--We have used the term "value" several times; as
part of our preparation for the study of the great problem of
industrial reform, we must understand precisely what is meant by the
term.

Suppose, for the sake of clearness, that we speak of a market as a
definite place where goods are bought and sold. Individuals take or
send their surplus products to the market for sale; individuals
desiring to buy commodities likewise resort to the market. In the
market commodities are said to have value, that is to say, they have
power in exchange. The power of a commodity in exchange is measured in
money, and the amount of money for which a commodity will exchange is
called its price. Price is thus a measure, in terms of money, of the
value of a commodity.

The value of a commodity in the market is dependent, partly upon its
utility, or want-satisfying power; and partly upon its scarcity. In
other words, the value of a commodity depends partly upon the
intensity with which it is desired by persons able and willing to
purchase it, and partly upon its available supply. Price is set as the
result of the interaction of the forces of supply and demand, this
interaction commonly taking the form of a bargaining process between
prospective sellers and prospective buyers.


QUESTIONS ON THE TEXT

1. Explain clearly the relation between the division of labor and
exchange.

2. To what extent is exchange dependent upon transportation and
communication?

3. Name three types of co÷rdinators, and distinguish between them.

4. Illustrate the functions of the middleman with reference to the
shoe industry.

5. Where there exist in a community more middlemen than are really
needed, what double loss results?

6. What is barter?

7. Why is barter not extensively used in modern industry?

8. Define money.

9. What is the primary function of money?

10. Give an illustration of the service performed by money.

11. Define value. Distinguish between value and price.

12. Upon what two factors is value dependent?

13. How is price set or determined?


REQUIRED READINGS

1. Williamson, _Readings in American Democracy_, chapter viii.

Or all of the following:

2. Adams, _Description of Industry_, chapter viii.

3. Carver, _Elementary Economics_, chapters xix, xx, xxi, xxii, and
xxiv.

4. Hayward, _Money, What It Is and How to Use It_, chapter viii.

5. Smith, _Wealth of Nations_, Book 1, chapters iii and iv.


QUESTIONS ON THE REQUIRED READINGS

1. Name some commodities which at one time or another have been used
as money. (Carver, pages 215-216.)

2. Why were precious metals first coined? (Smith, chapter iv.)

3. What is meant by the phrase "Time is money"? (Carver, page 183.)

4. What is the function of the bank check? (Hayward, pages 58-60.)

5. Explain the meaning of scarcity. (Carver, page 203.)

6. What are the characteristics of a modern market? (Adams, pages 139-
148.)

7. What is meant by the "higgling of the market"? (Adams, page 139.)

8. What is the "first law of the market"? (Carver, page 201.)

9. What are the four industrial agencies on which the organization and
practice of the modern market depend? (Adams, pages 148-152.)

10. What is meant by the "widening of the market"? (Carver, page 171.)

11. Explain the statement that "the division of labor is limited by
the extent of the market." (Smith, chapter iii.)


TOPICS FOR INVESTIGATION AND REPORT

I

1. In the production of what commodities do the people of your section
tend to specialize? To what extent is this specialization due to the
nature of the soil and climate? To geographical location? To the
training of the people?

2. What becomes of the surplus products of your section? Trace these
products as nearly as possible to the ultimate consumer.

3. List the articles of food which appear on your dinner table and
attempt to discover the source of each.

4. To what extent does the exchange of products in your section take
place by means of canals, inland waterways, ocean-going vessels, motor
truck, horse teams, railroads?

5. To what extent are the telephone and telegraph used to facilitate
exchange in your section?

6. Visit a near-by market and study the operations there, with
reference to the facts discussed in this chapter.

7. List and classify the middlemen of your community.


II

8. Internal trade and transportation in the United States a century
ago. (Bogart and Thompson, _Readings in the Economic History of the
United States_, pages 240-251.)

9. Transportation and communication in the United States since 1860.
(Bogart, _Economic History of the United States_, chapters xxiv and
xxv.)

10. Early forms of money. (Bullock, _Selected Readings in Economics_,
pages 387-399.)

11. Forms of money at the present time. (Adams, _Description of
Industry_, chapter x.)

12. Why coinage is necessary. (Bullock, _Selected Readings in
Economics_, pages 399-400.)

13. The minting of coins. (_Lessons in Community and National Life_,
Series C, pages 177-185.)

14. Paper money. (_Lessons in Community and National Life_, Series C,
pages 185-192.)

15. Functions of money. (Adams, _Description of Industry_, chapter x.)

16. The commercial bank. (_Lessons in Community and National Life_,
Series A, pages 187-192.)

17. An English fair in the eighteenth century. (Bullock, _Selected
Readings in Economics_, pages 325-333.)

18. The development of business organization. (Marshall and Lyon, _Our
Economic Organization_, chapters ix and x.)




CHAPTER IX

DISTRIBUTING THE INCOME OF INDUSTRY


82. THE PROBLEM PRIOR TO THE INDUSTRIAL REVOLUTION.--The distribution
of industrial income has to do with dividing the products of industry,
or the money which represents those products, among the various
individuals who have aided in their creation.

The problem of distribution has existed ever since men first combined
for purposes of production, but until the period of the Industrial
Revolution the question was relatively unimportant. When, three
hundred years ago, most necessities were produced within the family
circle, there was little or no question as to whether or not
individuals outside the family ought to be rewarded for having helped
in the production of those commodities. If one member of the family
made an entire pair of shoes, for example, he was clearly entitled to
those shoes, at least so far as economic principles are concerned.
Even where different members of the family combined to produce a pair
of shoes or an article of clothing, the small number of persons
involved, as well as the close identity of interests among the family
members, kept the problem of distribution from becoming a serious one.

83. EFFECT OF THE INDUSTRIAL REVOLUTION UPON THE PROBLEM.--The
Industrial Revolution greatly increased the importance of the problem
of distribution. Indeed, the growth of the factory system, and the
greater and greater complexity of the division of labor, have made the
distribution of industrial income the basic problem in our economic
and social life. Many commodities are still produced by individuals
working independently, or by the joint efforts of the members of a
family, but the vast majority of commodities are now produced by the
joint efforts of numerous individuals who are not bound together by
family ties. The production of a factory-made shoe, for example,
involves large numbers of people, including the cattle grower, the
transportation agent, the tanner, numerous laborers, the individuals
who supply land and capital to the entrepreneur, and the entrepreneur
who conducts the enterprise. The welfare of millions of people is
involved in the distribution of industrial income among individuals
who co÷perate in such enterprises as this.

84. DIFFICULTY OF THE PROBLEM.--Under modern industrial conditions
most commodities are produced by the combined efforts of large numbers
of people. All these people help along the productive process, though
in different ways and to a varying degree. Since all help, all are
entitled to payment. But this is less simple than it sounds. How shall
we determine how much each one helps, and how shall we decide how much
each one is to receive?

At the outset of the discussion, we can be sure of at least one fact,
_i.e._ that since all the individuals involved in a given enterprise
must be paid out of the value of the finished product, the combined
sums received by them cannot long exceed the total value of that
product. Unfortunately, this fact is often overlooked. Many of the
individuals who aid in production often become so intent upon securing
their share, that they are over-ready to explain their contribution to
the product, but loath to give due credit to those who have co÷perated
with them. It is the belief that some individuals receive too little
of the joint income of industry, while other individuals receive too
large a share, which has given rise to the charge of injustice in the
distribution of wealth.

85. SIGNIFICANCE OF THE ENTREPRENEUR IN DISTRIBUTION.--For the sake of
clearness, let us continue to illustrate the nature of distribution by
reference to the shoe industry, carried on under conditions which are
not unduly complicated.

The individual having control of the actual manufacture of the shoes
is the entrepreneur. It is he who, in anticipation of a demand for
shoes, has initiated the enterprise. Suppose, for the sake of
simplicity, that the entrepreneur has secured land from the land-
owner, capital from the capitalist, and labor from the workmen.
Protected in a legitimate enterprise by the government, he has set
himself up as a manufacturer of shoes. Since he is in control of the
enterprise, it is he who pays the land-owner, the capitalist, and the
laborers, for their respective contributions toward the finished
shoes.

The amounts received by the individuals co÷perating with the
entrepreneur are not, however, arbitrarily determined. The
entrepreneur must bow to economic law, and give these individuals what
free competition in industry sets as a proper reward for their
respective services. Let us examine into this conformity to economic
law.

86. THE LAND-OWNER RECEIVES RENT.--The land-owner is rewarded because
he extends the use of land to the entrepreneur. A land-owner could not
be expected to, and will not, allow the entrepreneur free use of this
land. The land-owner must therefore be paid for the use of the land.
The entrepreneur, on the other hand, is able and willing to pay for
the use of the land because upon it he expects to build a factory in
which to manufacture shoes. He therefore pays the land-owner an amount
of money called rent. The amount of rent paid for a piece of land
depends partly upon how much the entrepreneur wants the land, and
partly upon the available supply of land of the type wanted. This is
equivalent to saying that rent is determined by the interaction of the
two forces of supply and demand.

87. THE CAPITALIST RECEIVES INTEREST.--Besides land, the entrepreneur
needs machinery, office equipment, raw materials, the services of
laborers, and numerous other aids in production. Let us assume that
the entrepreneur borrows of a capitalist the money required to procure
these necessities. The entrepreneur can afford to pay interest for the
use of this money, since with the aid of the goods and services which
it will buy, he can produce more shoes than would otherwise be
possible. Not only can he afford to pay interest, but he is obliged to
pay it, since otherwise he could not secure the required loan. Though
some people tend carelessly to overlook this fact, saving and
abstinence are necessary to the accumulation of money. The individual
who has money, therefore, cannot be expected to allow the entrepreneur
to use it without payment, especially not when, as we have just seen,
the entrepreneur can acquire wealth by the use of the goods and
services which that money will buy.

The amount of interest which the capitalist receives for the use of
his money will depend, as will rent, upon the law of supply and
demand. If there is a large amount of funds available for investment,
and at the same time few borrowers, then a given capitalist must be
content to accept a relatively low rate of interest, lest his refusal
cause the entrepreneur to close a bargain with a competing capitalist.
If, on the other hand, available funds are scarce and entrepreneurs
are greatly in need of money, then capitalists are at an advantage and
entrepreneurs must offer relatively high rates of interest.

88. THE LABORERS RECEIVE WAGES.--The payment which the laborers
receive for their part in the production of the shoes is called wages.
Since the laborers help in shoe manufacture, the employer can afford
to pay them. Not only can he afford to pay them, but he must pay them.
Otherwise the laborers would not work for this particular
entrepreneur, but, in a freely competitive market, would offer their
services to a competing employer.

Wages, like rent and interest, depend upon the conditions of supply
and demand. If, in comparison with other aids in production, the
services of laborers are wanted badly, and if, at the same time, there
is a scarcity of the desired type of labor, then wages will be high.
If, on the other hand, there is an over supply of laborers, and also a
small demand for that type of labor, then wages will tend to be low.

89. THE GOVERNMENT RECEIVES TAXES.--In addition to paying the land-
owner, the capitalist, and the laborers for their share in producing
the shoes, the entrepreneur must pay taxes to the government. These
taxes may be considered as payment for that maintenance of law and
order without which the economical manufacture of shoes would be
impossible. The share which goes to the government is determined by a
unique method: the government does not try to secure as large a share
of the product as possible, but strives, on the contrary, to exact as
little as possible, and still meet its expenses. The subject of
taxation requires special treatment [Footnote: See Chapter XXXII.] and
does not, therefore, call for further mention in this chapter.

90. THE ENTREPRENEUR RECEIVES PROFITS.--That share of the income
derived from the sale of the shoes which goes to the entrepreneur is
called profits. It is only fair that the entrepreneur receive some
reward, for it is he who conceived the idea of shoe manufacture and
then carried out the project. Without his efforts the land-owner, the
capitalist, and the laborers would not have combined in this
enterprise, with the result that there would have been fewer shoes in
the community. Fewer shoes would probably mean more expensive shoes.
And not only does the entrepreneur deserve some reward for thus adding
to the well-being of the community, but if he did not receive that
reward, he would not go to the trouble of initiating and maintaining a
shoe manufacturing establishment.

The share going to the entrepreneur is determined less exactly than is
the share of the land-owner, the capitalist, and the laborers. In
dividing up the income of the business, the shoe manufacturer must, in
an important sense, put himself last. Before there are finished shoes
to sell, he must pay the land-owner rent, the capitalist interest, and
the laborers wages. Before he is allowed to count out his own share he
must also pay taxes to the government, pay insurance on his plant, and
set aside an amount sufficient to keep his buildings and machinery in
repair. He cannot evade the payment of rent, interest, or wages on the
plea that these payments will diminish his profits. He has contracted
to pay the landlord, the capitalist, and the laborers, and he must
fulfill that contract. If, after paying all of his expenses, there is
anything left, the entrepreneur retains it as profits. Sometimes this
share is very large, sometimes it is so small as to force the
entrepreneur out of business. In any case, the chief risks and
responsibilities of the whole enterprise are concentrated upon the
entrepreneur, rather than upon the land-owner, the capitalist, or the
laborers.

91. THE DETERMINANTS OF EACH SHARE.--To sum up, the share of the joint
industrial income going respectively to the land-owner, the
capitalist, and the laborers is determined by the interaction of the
forces of supply and demand, operating under conditions of free
competition. The entrepreneur's demand for land, labor, or capital
will depend upon whether or not he sees an opportunity, under a
particular set of circumstances, to add to his product by the
employment of each or all of these factors. Where the supply of
laborers is large, relatively to demand, the promised product of any
one laborer is likely to be relatively small, and in this case the
entrepreneur or employer will be unwilling or even unable to offer a
particular laborer high wages. Under these circumstances the
competition of the many laborers for the few jobs will accordingly
bring about lower wages. Where, on the other hand, the supply of
laborers is small, relatively to demand, the chances that a particular
laborer will be able to add to the product are relatively great, and
the competition of employers for laborers will result in higher wages.
The same reasoning is applicable to rent and interest. The automatic
operation of the law of supply and demand, functioning in a freely
competitive market, determines the shares which go to land, labor, and
capital. The share going to the individual entrepreneur is, as has
already been pointed out, a residual share, _i.e._ what is left over.


QUESTIONS ON THE TEXT

1. What is meant by the distribution of industrial income?

2. Why was this distribution of relatively small importance prior to
the Industrial Revolution?

3. In what way did the Industrial Revolution accentuate the importance
of the problem of distribution?

4. What are the chief difficulties which confront the student of this
problem?

5. What belief has given rise to the charge of injustice in the
distribution of wealth?

6. Explain the significance of the entrepreneur in distribution.

7. What is the nature of rent?

8. Why does the capitalist receive interest?

9. Why does the laborer receive wages?

10. What is the government's share in distribution?

11. What is the nature of profits, and how are they determined?


REQUIRED READINGS

1. Williamson, _Readings in American Democracy_, chapter ix.

Or all of the following:

2. Carver, _Elementary Economics_, chapters xxx and xxxi.

3. King, _Wealth and Income of the People of the United States_,
chapter vii.

4. Thompson, _Elementary Economics_, chapters xx to xxiv inclusive.


QUESTIONS ON THE REQUIRED READINGS

1. What is meant by non-competing groups? (Thompson, page 296.)

2. What are the chief causes of the difference in wages in different
occupations? (Carver, page 268.)

3. Upon what factors does the efficiency of the laborer depend?
(Thompson, page 303.)

4. What is the functional theory of wages? (Carver, pages 261--262.)

5. Have wages increased or decreased since 1850? (King, page 173.)

6. What is the relation of risk to interest? (Thompson, pages 351--
353.)

7. What is meant by the term "unearned increment"? (Thompson, pages
335--337.)

8. Define profits. (King, pages 155--156.)

9. Have profits increased since 1880? (King, page 177.)

10. Name some of the characteristics of the business man. (Thompson,
pages 357--358.)


TOPICS FOR INVESTIGATION AND REPORT

I

1. Select for study some common commodity which passes through all or
most of the stages of manufacture in your community, as, for example,
a hammer, a shoe, flour or canned goods. Make a list of the various
individuals who are connected with the production of this commodity.
By whom are these various individuals paid? Does it appear to you that
their services bear a close relation to the sums which they receive?
Explain fully.

2. Select for study a plot of land which the owner has leased to a
tenant in your community. Why is the tenant willing to pay rent for
this plot? Why is he able to pay rent? Do you believe that under the
existing circumstances he would be able to pay an increase of 10% in
the rent? An increase of 50%? Explain.

3. Select for study an enterprise in your community in which the
employer utilizes various groups of workmen. Classify the workmen on
the basis of the amount of wages received. Why does the employer pay
some high wages and others low wages?

4. Select for study a successful entrepreneur in your community.
Outline, either as the result of hearsay, or personal interviews with
him, the qualities to which he apparently owes his success.

5. Make a study of an enterprise in your community which has either
recently failed, or which is not now in a thriving condition. Attempt
to discover the reasons for the failure to progress.


II

6. The law of variable proportions. (Carver, _Elementary Economics_,
chapter xxix.)

7. The nature of income. (King, _Wealth and Income of the People of
the United States_, chapter v.)

8. Relation of public education to income. (Thompson, _Elementary
Economics_, pages 299-303.)

9. Reasons for the scarcity of capital. (Carver, _Elementary
Economics_, chapter xxxvi.)

10. The productivity of capital. (Taussig, _Principles of Economics_,
vol. ii, chapter xxxviii.)

11. Historical changes in the rate of interest. (Bullock, _Selected
Readings in Economics_, pages 563-568.)

12. The rent of land. (Carver, _Elementary Economics_, chapter
xxxiii.)

13. Causes of the scarcity of labor. (Carver, _Elementary Economics_,
pages 270-271.)

14. Historical changes in the rate of wages. (Bullock, _Selected
Readings in Economics_, pages 533-543.)

15. The nature of profits. (Carver, _Elementary Economics_, chapter
xxxvi.)

16. Relation of profits to risk. (Taussig, _Principles of Economics_,
vol. ii, chapter xlix, section 1.)

17. Qualities of a successful entrepreneur. (Taussig, _Principles of
Economics_, vol. ii, chapter xlix, sections 3 and 4.)

18. Motives of business activity. (Taussig, _Principles of Economics_,
vol. ii, chapter xlix, section 6.)

19. The government's share in distribution. (Carver, _Elementary
Economics_, chapter xxxvii.)




CHAPTER X

BASES OF THE CAPITALISTIC SYSTEM


92. THE "CAPITALISTIC SYSTEM."--Modern industry is sometimes said to
be headless, because the numerous individuals engaged in it are not
systematically controlled or directed by a single agency. It is often
said to be planless, since laborers, employers, and other industrial
agents concentrate upon their individual desires and needs, rather
than upon the needs of the community or nation as a whole.

And yet there is in modern industry a certain regularity of outline,
and a general tendency to follow the economic laws discussed in the
preceding three chapters. This circumstance prevents us from
concluding that our industrial life is entirely a haphazard affair. It
may, indeed, be said that we have an industrial system. Because of the
great importance in it of capital, this system is commonly known as
the "capitalistic system." The underlying principles of this system
have already been mentioned or implied; nevertheless it will be to our
interest in this chapter to develop and organize these principles so
as to indicate just how they constitute the bases of capitalism.

93. ATTITUDE OF GOVERNMENT TOWARD INDUSTRY.--"It is the duty of the
government," Gladstone once said, "to make it easy for the people to
do right, and difficult for them to do wrong." According to the theory
of the capitalistic system, that is "right" which renders the
individual and the community stronger, happier, and more prosperous in
useful pursuits, while that is "wrong" which weakens or demoralizes
the citizen and the community. The chief economic function of
government is thus to discourage men from harmful and destructive
acts, and to encourage them in activities which are helpful and
productive.

Professor Carver points out that the method by which animals get their
living is either destructive, deceptive, persuasive, or productive.
Any one of these four methods may at least temporarily increase the
well-being of the individual, but only the productive method is
certain to benefit the community as well. A good government will
therefore seek to prevent people from advancing their individual
interests by killing, robbing, or deceiving their fellows. This
suppression of violence and fraud leaves open to individuals only the
productive method of getting a living, so that they cannot benefit
themselves without at the same time adding to the prosperity of the
community. From the standpoint of capitalism, thus, a good government
maintains an attitude toward industry which is primarily negative:
such a government hampers the economic activities of individuals very
little or not at all, so long as they do not practice harmful methods
of getting a living.

94. PRIVATE PROPERTY.--Most men are self-centered. In even a highly
developed society, men ordinarily will not work consistently except in
their own behalf, or in the behalf of a very few people for whom they
care intensely. This instinct of self-interest is the kernel of
industrial progress, but it can result in material prosperity only
when government suppresses violence and fraud. The lowest savages are
undoubtedly self-centered, but so long as they must rely upon brute
force to retain their possessions, there is little inducement to
acquire wealth. It is only when law suppresses robbery and fraud, and
otherwise protects the individual in his property rights, that the
acquisitive instinct will cause him to exert himself in productive
ways. Because it satisfies the individual's desire to secure the good
things of life, the institution of private property is the greatest
known spur to economic activity, It is only in those countries where
individuals are protected in their property rights that we find an
active, progressive, and prosperous people.

95. ENFORCEMENT OF CONTRACTS.--We have already seen that among the
members of a modern industrial society there is a high degree of
interdependence, corresponding, in an important sense, to the
interdependence between the parts of a machine. As we have seen, the
typical individual in industry is a specialist, concentrating upon one
particular kind of work, and depending upon his fellows to supply him
with goods and services which he cannot supply for himself. Now, such
a condition of interdependence could never have arisen were it not for
the fact that government fosters the spirit of confidence among
individuals. Many persons can be trusted to fulfill the agreements or
contracts which they make with their fellows, but many cannot. A prime
function of government, therefore, is to enforce contracts entered
into voluntarily and in legal form. This is clearly essential to our
material prosperity, for if men are to rely upon the word of those who
sell them goods or services, or to whom they sell goods or services,
all of the individuals concerned must be dependable.

96. COMPETITION.--A good government will shunt men into productive
activities, and it will insist upon the fulfilment of lawful
contracts. Subject to these two limitations, individuals are
relatively free to seek their own well-being. But an earmark of
economic goods is scarcity, that is, there are at a given time and
place fewer of them than are desired. Men must therefore compete with
one another for goods and services. The lower animals compete for food
with tooth and claw; among civilized men government tries to raise
competition to an ethical plane by tending to suppress all but the
productive methods of competition.

Where competition is so restricted and safeguarded, advocates of
capitalism assert that the results are overwhelmingly good. Where
there is free competition, _i.e._ free competition in productive
enterprise, employers commonly pay their laborers as high a wage as
they feel is justified under the particular circumstances, lest their
workmen abandon them for rival employers. Under similar conditions,
laborers will generally endeavor to render the best possible service,
so that the employer will prefer them to other laborers. This assumes,
of course, that competition is effective, _i.e.,_ that there is
neither an oversupply or an undersupply of either employers or
employees.

Where, again, there is free competition in productive enterprise, the
price of commodities produced by a given concern cannot rise too far,
for consumers will either buy those commodities of rival producers, or
will use substitutes. If, on the other hand, prices drop so low that
producers make little or no profits, they will withdraw from business.

Free and effective competition thus means rivalry in satisfying wants,
that rivalry being engaged in for the sake of private gain.
Competition tends to harmonize the interests of the individual with
the interests of the community, by making the success of the
individual depend primarily upon what he accomplishes for his fellows.

97. VALUE UNDER CONDITIONS OF FREE COMPETITION.--In a competitive
market, as we have seen, value depends upon scarcity and utility. No
one will ordinarily pay for a commodity unless it will satisfy his
wants, i.e. unless it has utility. But even though a commodity has
utility, no one will ordinarily pay for it unless it is so scarce that
he cannot get as much of it as he wishes without paying for it. Air,
for example, has great utility, but it is so abundant that it can
ordinarily be secured without payment. Hence it has no value.

Price, the measure of value in terms of money, will be determined,
under conditions of free competition, by the interaction of utility
and scarcity. Diamonds are high in price because they satisfy intense
desires and are scarce; bread is cheap because while possessing great
utility, it is relatively abundant. Skilled labor receives high wages
because in addition to its utility it is relatively scarce; unskilled
labor often receives low wages because while possessing utility it is
relatively abundant. This principle is of the very greatest
consequence, and in considering the programs of industrial reform we
shall come back to it again.

98. FREEDOM.--A large measure of personal liberty is a characteristic
of the capitalistic system, To an increasing extent, government is
restricting economic activity to productive channels, but with this
qualification, the individual is comparatively free to do as he likes.
The laborer is free to move about in search of work, free to seek a
better job, free to accept or to reject work offered him. He may
abandon his job when he chooses, and remain idle as long as he
chooses, or is able. He is repressed by no paternalistic government,
embarrassed by no feudal system. He is part and parcel of the
competitive system, guiding his own actions and accepting
responsibility for them. To a large extent, the employer is similarly
free to hire or discharge men as he sees fit, to initiate a new
business, or to withdraw from business altogether. In every case the
individual is free, so far as legal restrictions are concerned, to use
his money as he chooses. Whether it is hoarded, invested, or wasted is
largely a matter for him to determine.

99. BENEFITS OF THE CAPITALISTIC SYSTEM.--The material prosperity of
the modern world has been attained under the capitalistic system of
industry. The system was not invented, but has developed and spread
from small beginnings because the experience of centuries has proved
it to be the best known system which is applicable to human industry.
The starting point of all material prosperity has been the gradual
development of government which suppresses violence and fraud, which
enforces contracts, and which makes possible the rise of the
institution of private property. The inception of the Industrial
Revolution, and its spread beyond England to Europe, America, and,
later, to Asia, were possible only because these bases of capitalism
were already laid. To a large extent, thus, the steam engine, the
railroad, the steamship, the electric light, and countless other
inventions which have helped to revolutionize the world we live in,
may be traced directly or indirectly to individual freedom and to the
protection of property rights. In so far as science, art, and
literature depend, to a considerable degree, upon material prosperity,
we may go so far as to say that capitalism is the most important
single basis of modern civilization.

100. DEFECTS OF THE CAPITALISTIC SYSTEM.--But capitalism is not
without its defects. The lack of centralized control in industry
allows of planless production. [Footnote: During our participation in
the World War, it is largely true that much of the productive energy
of the country was organized and directed as a unit. This was a
temporary expedient, however, resorted to for the purpose of winning
the war.] Entrepreneurs frequently produce without adequate knowledge
of demand, and without knowledge of rival production. When business is
booming and profits are high, it often happens that so many
individuals go into business that eventually there is over-production,
i.e. there are more goods at a particular time than can be sold at a
profit. Crises, unemployment, and "hard times" are often the direct
result of this over-production. Malnutrition, disease, vice, crime,
and pauperism are often its indirect results.

In still other ways the capitalistic system allows of an uneconomical
expenditure of labor and capital. There is no adequate method of
directing labor and capital toward the production of durable and
helpful commodities, and away from the production of luxuries and such
harmful commodities as have not been made illegal. Under competitive
conditions, too, a number of shops or stores may exist in a community
that might easily be served by a single firm. This is wasteful
duplication, just as advertising is a waste when it goes beyond the
point of informing the public as to whereabouts and character of
commodities. Still another source of waste is traceable to an
excessive number of middlemen, each of whom adds to the price of the
product as it passes through his hands.

101. THE INEQUALITY OF WEALTH.--In all of the great industrial
countries of the world, including the United States, the existing
distribution of wealth is roughly in the form of a pyramid, i.e., at
the top or apex of the pyramid there is a relatively small number of
persons who enjoy large incomes, while at the base there is a large
number with relatively small incomes. This inequality is explained by
Professor Taussig on two grounds: First, it is likely that some
individuals originally secured an economic advantage over their
fellows because of inborn superiority of some kind. Second, the
economic advantage thus secured has been maintained from generation to
generation by inheritance. Where, for example, wealth is invested so
that the principal remains intact while a large annual income is
thrown off as interest, the heirs may live in affluence, regardless of
ability or desert. Thus we have a leisure class emerging as the result
of inborn differences between men, supplemented by the accumulation of
wealth and its transmission by inheritance.

102. THE QUESTION OF INDUSTRIAL REFORM.--It goes without saying that
great inequalities in the distribution of wealth are undesirable. If
any improvement is humanly possible, we ought not to rest content so
long as millions of our citizens have too few of the good things of
life, while others have much more than is necessary for comfort and
happiness. The test of an economic system is whether or not it
provides a good world to live in, and so long as large numbers of
individuals have fewer necessities and comforts than it is possible to
give them, our economic system must be considered defective. The
people as a group are both the means and the end of progress.
Democracy cannot rest upon any other basis than the greatest good to
the greatest number.

103. APPROACHING THE PROBLEM.--In approaching the problem of
industrial reform it is necessary to cultivate a fair and sane
attitude. We must attack all of the problems of American democracy,
certainly. But in so far as some of these problems involve the
integrity of the capitalistic system, we should distinguish between
ills which are clearly traceable to that system, and defects which
obviously would exist under any industrial system. Capitalism cannot
be discredited, for example, by pointing out that crime exists in all
capitalistic countries. Though capitalism may accentuate some types of
crime, our knowledge of human nature leads us to suspect that a
considerable amount of crime would exist under any known system of
industry. Again, criticism should be constructive; it is easy to point
out the defects of an institution, but it is quite another thing to
provide a good substitute for that institution.

The problem before us is a double one: First, can we remedy the
defects of the capitalistic system? And, if so, by what method shall
we proceed? Second, if the defects of capitalism cannot be remedied,
what industrial system shall be substituted for capitalism? It is not
a question of whether or not capitalism is faulty, but of whether it
is more faulty than the system that would be substituted for it. The
virtues of capitalism, most authorities believe, clearly outweigh its
defects, and though some other system may eventually prove to have as
great virtues with fewer defects, the burden of proof is upon those
who advocate other systems than capitalism. Until the advantage is
clearly shown to be on the side of a rival system, it will be wise to
retain capitalism.


QUESTIONS ON THE TEXT

1. Is it correct to speak of a "capitalistic system"?

2. What is the chief economic function of government?

3. Name the four methods of getting a living. Which will be encouraged
by a good government?

4. To what extent is the attitude of a good government toward industry
a negative one?

5. What is the relation of government to the institution of private
property?

6. What is the importance of laws requiring the enforcement of
contracts?

7. Why is there competition?

8. How does competition tend to harmonize the interests of the
individual with those of the community?

9. Why are diamonds high in price? Why is bread low in price?

10. What is the relation of capitalism to economic freedom?

11. What can be said as to the benefits of capitalism?

12. What are the chief defects of capitalism?

13. Outline the existing distribution of wealth.

14. On what two grounds does Professor Taussig account for this
situation?

15. What facts should be borne in mind in attacking the problem of
industrial reform?


REQUIRED READINGS

1. Williamson, _Readings in American Democracy_, chapter x.

Or all of the following:

2. Ely, _Outlines of Economics_, chapter ii.

3. Fetter, _Modern Economic Problems_, chapter ii.

4. Hobson, _Evolution of Modern Capitalism_, chapter i.

5. Seligman, _Principles of Economics_, chapter ix.


QUESTIONS ON THE REQUIRED READINGS

1. Define capitalism. (Hobson, page 1.)

2. How has the development of mines affected the growth of capitalism?
(Hobson, page 6.)

3. What is the relation of colonization to capitalism? (Hobson, pages
10-12.)

4. What is the relation of capitalism to a large labor supply?
(Hobson, pages 13-14.)

5. Define private property. (Ely, page 21.)

6. Discuss the theories of private property. (Fetter, pages 18-20.)

7. What were the earliest forms of private property? (Seligman, page
126.)

8. What was the effect of the domestication of animals upon the
institution of private property? (Seligman, pages 126-127.)

9. What are the limitations of private property? (Fetter, pages 20-
21.)

10. What is meant by the term "vested interests"? (Ely, pages 25-26.)

11. What is "fair" competition? (Ely, pages 29-30.)


TOPICS FOR INVESTIGATION AND REPORT

I

1. Suppose an unscrupulous individual fraudulently secured possession
of property belonging to you. What steps would you take to secure
justice?

2. What penalties are inflicted in your state for highway robbery,
embezzlement, theft, forgery, and similar crimes against property?

3. Suppose that you are a florist and that you have ordered a large
quantity of flowers from a greenhouse keeper for your Decoration Day
trade. Assume that you could not sell the flowers at a profit if they
arrived later than Decoration Day. Assume, also, that you have reason
to suspect that the greenhouse keeper will not be prompt in delivering
the flowers ordered. Draw up a contract (to be signed by him) which
would protect you against his tendency to carelessness.

4. Select for study an isolated rural district, a small town, or a
section of a suburb in which the community secures its supply of a
given commodity from a single shop or store. Compare the price of the
commodity, and its quality, with the price and quality of a similar
commodity in stores located in communities served by several competing
stores. What do you conclude as to the value of competition?

5. Make a study of bill-board advertising, listing the number of
advertisements inviting purchase of competing commodities. Write to a
bill-board advertising company for advertising rates, and draw your
conclusions as to (_a_) the cost of advertising, and (_b_) the waste
involved in advertising competing commodities.

Make a similar study of magazine advertising, writing to the
advertising manager of the magazine selected for study, in order to
secure advertising rates.


II

6. Relation of good government to economic prosperity. (Carver,
_Elementary Economics_, chapter vii.)

7. Competition. (Seligman, _Principles of Economics_, chapter x.)

8. Methods of struggling for existence. (Carver, _Elementary
Economics_, page 40.)

9. The development of economic freedom. (Seligman, _Principles of
Economics_, chapter xi.)

10. Distribution of wealth in the United States. (Taussig, _Principles
of Economics_, vol. ii, chapter liv; King, _Wealth and Income of the
People of the United States_, chapter ix.)

11. Place of machinery in the capitalistic system. (Hobson, _Evolution
of Modern Capitalism_, pages 27-29.)

12. The impersonality of modern life. (_Lessons in National and
Community Life_, Series B, pages 97-104.)

13. The extent of poverty in modern life. (Burch and Patterson,
_American Social Problems_, chapter xvi.)




B. PROGRAMS OF INDUSTRIAL REFORM


CHAPTER XI

SINGLE TAX


104. DEFINITIONS.--The words "single tax" refer to a policy under
which all public revenue is to be raised by a single tax on land
value. All other taxes are to be abolished. By land value is meant the
value of the land itself, irrespective of all improvements, such as
ditches, drains, and buildings. Everything done on the land to
increase its value would be counted as an improvement, and would thus
be exempt from taxation. This would leave only location value and
fertility to be taxed. By location value is meant that value which is
due to the situation of the land. For example, land in a wilderness
has little or no location value, but if, later, schools, stores,
railroads, and other elements of community life develop in that
region, the land may take on great value because of its location in
the community. The fertility value of land is that value which is due
to natural endowment in the way of moisture, climate, and soil
elements.

105. HENRY GEORGE AND HIS WORK.--The doctrine of single tax is closely
associated with the name of Henry George, an American reformer who
died in 1897. His theory was best developed in his book, _Progress and
Poverty_, published in 1879. In this book George points out that in
spite of the progress of the world, poverty persists. This is due
chiefly, he contends, to the fact that land-owners take advantage of
the scarcity of good land to exact unduly high prices for its use.
According to George, this monopoly of the gifts of Nature allows
landowners to profit from the increase in the community's
productiveness, but keeps down the wages of the landless laborers.
"Thus all the advantages gained by the march of progress", George
writes, "go to the land-owner, and wages do not increase."

George proposed to use the single tax as an engine of social reform,
that is to say, to apply it with the primary view of leveling the
inequalities of wealth. Value due to improvements was to be exempt
from taxation, so that land-owners might not be discouraged from
making improvements on their land. On the other hand, it was proposed
that the single tax take all of the income due to location and
fertility. This, according to George, would "render it impossible for
any man to exact from others a price for the privilege of using those
bounties of Nature to which all men have an equal right."

106. RESULTS CLAIMED FOR THE SINGLE TAX.--George claimed that the
application of the single tax was highly desirable. If, through the
medium of this tax, the government were to take from the land-owners
all the location and fertility value of their land, two great benefits
were to result. First, rich landlords would be deprived of much
unearned wealth. Second, the wealth so secured, called the unearned
increment, could be used to make life easier for the poor. Ultimately,
George went so far as to claim, the single tax would "raise wages,
increase the earnings of capital, extirpate pauperism, abolish
poverty, give remunerative employment to whoever wishes it, afford
free scope to human powers, lessen crimes, elevate morals and taste
and intelligence, purify government, and carry civilization to yet
nobler heights." The steps by which George arrived at this gratifying
conclusion are obscure, and practically every modern economist agrees
that too much has been claimed for the theory. Nevertheless, there is
much to be said on both sides of this interesting question.

107. ARGUMENTS FOR THE SINGLE TAX.--Single taxers claim that it is
just to take from land-owners that land value which is not due to
their individual efforts. Fertility, on the one hand, is due
originally to the bounty of Nature, and as such belongs to all men
alike, rather than to particular individuals. Location value, on the
other hand, is due to community growth, and should therefore be taken
for the benefit of the community at large.

A very strong argument in favor of the single tax is that land cannot
be hidden from the tax assessor, as can stocks, bonds, jewels, and
other forms of personal property. A single tax on land would,
therefore, be relatively easy to apply.

A tax on the location and fertility value of land would not discourage
industry. Location value is largely or entirely due to community
growth, rather than to the efforts of the individual land-owner.
Fertility, of course, is largely a natural endowment, and as such
cannot be destroyed by a tax. The land would continue to have all of
its location value, and probably much of its fertility value, whether
or not the owner were taxed.

Another argument is that a single tax on land would eliminate taxes on
live stock, buildings, and all other forms of property except land,
and that this would encourage the development of the forms of property
so exempted. This would stimulate business.

It has also been said that the single tax would force into productive
use land which is now being held for speculative purposes. It is
claimed that many city tracts remain idle because the owners are
holding them in the hope of getting a higher price in the future.
According to the single taxer, a heavy tax would offset this hope of
gain, and would force speculators either to put the land to a
productive use, or to sell it to someone who would so employ it.

A last important argument in favor of the single tax is that it might
force into productive work certain capable individuals who are now
supported in idleness by land rents. Professor Carver has pointed out
that if the single tax deprived such persons of their incomes, they
would be forced to go to work, and thus the community would gain by an
increase in the number of its productive workers.

108. ARGUMENTS AGAINST THE SINGLE TAX.--The most important objection
to the single tax is that the confiscation of land, or, what amounts
to the same thing, the confiscation of the income which land yields,
is unjust. "Pieces of land," Professor Seager points out, "have
changed hands on the average dozens of times in the United States, and
present owners have in most cases acquired them not as free gifts of
Nature, nor as grants from the government, but by paying for them,
just as they have had to pay for other species of property." Where
individuals have acquired land in good faith, and under the protection
of a government which guarantees the institution of private property,
the confiscation of land value would be demoralizing to the community
and unfair to its land-owning citizens.

Another difficulty lies in the ease with which value due to permanent
improvements is confused with value due to location or fertility.
Where money has been expended in draining land, removing stones or
applying fertilizer, it is hard to tell, after a few years, what part
of the value of the land is due to improvements. The possibility of
this confusion would cause some land-owners to neglect to improve
their land, or might even cause them to neglect to take steps to
retain the original fertility. Thus the single tax might result in the
deterioration of land values.

It is also objected that the single tax would provide an inelastic
taxation system. This means that it would tend to bring in an equal
amount of revenue each year, whereas the revenue needs of government
vary from year to year. A good tax system will accommodate itself to
the varying needs of the government, always meeting the expenses of
government, but at the same time taking as little as possible from the
people. [Footnote: Some opponents of the single tax declare that the
heaviest possible tax on land would yield only a fraction of the
revenue needed to finance the government. Single taxers, however,
maintain that the tax would yield more than enough revenue to meet
public expenditures. The merits of this argument are uncertain.]

It is doubtful whether the single tax would force into productive use
land now being held by speculators. Even though a heavy tax were laid
upon such land, it would not be utilized unless there were an
immediate use to which it could profitably be put.

A last important argument against the single tax is that there is no
good reason for removing the tax burden from all except land-owners.
Land is only one form of wealth, and it is unfair not to tax
individuals who hold property in some other form. Some land value is
indeed unearned, but there are other forms of unearned wealth, as, for
example, monopoly gains and inherited property. Taxes ought to be
levied upon these forms of unearned wealth, as well as upon the
unearned income from land. It is desirable, too, to levy at least a
light tax upon the propertyless classes, in order to encourage them to
feel an interest in, and a sense of responsibility for, the conduct of
their government.

109. SERVICE RENDERED BY THE SINGLE TAX AGITATION.--Economists are
unanimous in agreeing that the single tax, as expounded by Henry
George, is too drastic and special a reform to find wide favor.
Nevertheless, the single taxers have performed a valuable service by
emphasizing the fact that in many cases the income from land is
largely or entirely unearned. It would be manifestly unjust to
dispossess present-day land-owners who have acquired land in good
faith; on the other hand, most economists agree that we ought to
reform our tax system so as to take for the community a larger share
of the future unearned increment of land values. As Professor Taussig
has pointed out, no one has a vested right in the indefinite future.
The taking of this future unearned increment, it is hardly necessary
to add, would not constitute a single tax, but rather a heavy land
tax. Many other taxes would continue to be levied. [Footnote: The
general problem of taxation is discussed in Chapter XXXIL]


QUESTIONS ON THE TEXT

1. Define the single tax.

2. What is location value?

3. Define fertility value.

4. Who was Henry George?

5. What benefits, according to George, were to result from an
application of the single tax?

6. Give the chief arguments in favor of the single tax.

7. Give the chief objections to the doctrine.

8. What service has been rendered by the single tax agitation?

9. What is the attitude of most economists toward the future unearned
increment of land?


REQUIRED READINGS

1. Williamson, _Readings in American Democracy_, chapter xi.

Or all of the following:

2. Carver, _Elementary Economics_, chapter xlv.

3. George, _Progress and Poverty_, book ix.

4. _International Encyclopedia_, vol. 21, article on "Single Tax."


QUESTIONS ON THE REQUIRED READINGS

1. Who were the Physiocrats? (Carver, page 372.)

2. What is the "ethical argument" in favor of the single tax?
(_International Encyclopedia_, vol. 21, page 136.)

3. What is the "expediency argument" in favor of the single tax?
(_International Encyclopedia_, vol. 21, page 136.)

4. What is meant by "mining" the soil, and what is the relation of
this practice to the single tax? (Carver, pages 375-376.)

5. What, according to George, would be the effect of the single tax
upon production? (George, book ix, chapter i.)

6. What, according to George, would be the effect of the single tax
upon the distribution of wealth? (George, book ix, chapter ii.)

7. What are the present aims of the single tax movement?
(_International Encyclopedia_, vol. 21, page 137.)


TOPICS FOR INVESTIGATION AND REPORT

I

1. Select for study a plot of farm or garden land in your locality.

(a) What is the market value of the land?

(b) Is it more or less valuable than similar plots in the same
neighborhood? Why?

(c) To what extent is the value of the plot selected for study due to
natural fertility?

(d) To what extent is the value due to location?

(e) To what extent is the value due to permanent improvements, such as
drains, ditches, hedges, fences, or the use of fertilizer to retain or
increase the natural fertility?

(f) If you were the owner of this plot, to what extent, if to any,
would your future use of this land be affected by the adoption of the
single tax program?

2. Select for study a plot of ground in your locality which has been
idle for a number of years.

(a) Why has this ground been idle so long?

(b) Do you believe that this land is being held for speculative
purposes?

(c) If so, suppose that a very heavy tax stimulated the owner to put
the land to some use. Do you know of a productive use to which it
could be put?


II

3. The life of Henry George. (Consult an encyclopedia.)

4. The economic background of Henry George's doctrine. (Young, _The
Single Tax Movement in the United States_, chapter ii.)

5. Is land-ownership a monopoly? (Seligman, _Principles of Economics_,
page 391.)

6. Tactics of the single tax movement. (Young, _The Single Tax
Movement in the United States_, chapter xii.)

7. Relation of the single tax to socialism. (Young, _The Single Tax
Movement in the United States_, pages 307-312.)




CHAPTER XII

PROFIT SHARING AND COÍPERATION


A. PROFIT SHARING

110. THE NATURE OF PROFIT SHARING.--The essence of profit sharing is
that the workmen in a given enterprise receive, in addition to their
regular wages, a share in the profits which would ordinarily go
entirely to the entrepreneur. The share going to the employees varies
with the establishment, but generally from one quarter to three
quarters of the profits are divided among them.

Distribution is by various methods. The workmen may receive their
share in cash at the end of the year. Sometimes the money is placed in
a provident fund for the workmen as a body; in other cases it is
deposited in savings banks to the account of the individual workmen.
In still other cases the workman's share is invested in the business
for him, the workman thereafter receiving dividends on this invested
capital.

In every case, however, the division of

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